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Binding Financial Agreements: Important Considerations Including the Impact of Section 90E

Binding Financial Agreements

At Nicholes Family Lawyers we understand that going to court can be a daunting experience. This is why we are committed to settling matters outside of court if possible and appropriate. A key option for clients involved in family law property disputes is to enter into a binding financial agreement (‘BFA’) with respect to the division of property between them.

BFAs, also referred to as prenuptial agreements, are legally binding agreements that specify what will happen to a couple’s property and finances in the event of a relationship breakdown. When executed properly they operate to exclude the jurisdiction of the court and prevent the parties from making applications for property orders. Although they are most commonly entered into by parties prior to or at the commencement of their relationship, they can be entered into during or even at the conclusion of the relationship. They are available to de facto couples as well as same sex couples.

Effect of Unconscionable Conduct

It must be remembered that where a BFA is entered into in circumstances of unconscionable conduct the agreement will not be considered valid and enforceable. Unconscionable conduct refers to conduct that it so harsh or unreasonable that it defies good conscience. This encompasses unfair practices like exerting duress or undue influence upon the other party to obtain their consent to the BFA.

In the landmark High Court case of Thorne v Kennedy [2017] HCA 49 this point was discussed at length. In this case the husband pressured the wife into signing a particularly unfair agreement by threatening to cancel the wedding if she did not sign the BFA. Although the wife was warned by her lawyer not to sign the agreement, given her precarious financial situation she felt that there was no choice but to sign the agreement. It was held by the High Court that the husband took advantage of the wife’s vulnerable position to obtain an inappropriate agreement. As the agreement was entered into as a result of undue influence and unconscionable conduct on the part of the husband it was set aside as unenforceable.

A similar situation occurred in the recent case of Corelli & Beroni [2019] FamCA 911 in which the circumstances of unconscionability were very clear. Firstly, the wife was not proficient in English at the time of signing the BFA and the husband took advantage of this to secure an advantageous outcome. Secondly, the husband threatened to report the wife to immigration if she did not sign the BFA.

Formal Requirements: Section 90E

There are a number of strict formal requirements that must be met when drafting BFAs, one of which is set out under s 90E of the Family Law Act 1975 (Cth). This section states that any provision in a BFA relating to the financial maintenance of a spouse who is a party to the agreement or a child will be void unless:

  1. The provision specifies the party or child for whose maintenance provision is made; and
  2. The provision specifies the amount of maintenance provided for.

In the matter of Guild & Stasiuk [2019] FamCA 167 this technical requirement was discussed. In this case the Court had to determine the validity of a provision in a BFA that sought to exclude the Court’s jurisdiction in considering the wife’s claim for spousal maintenance of $1,000 a week after separation. The wording of the relevant section was that the wife “will make no claim for maintenance for herself and will accept the provisions of [the] Agreement in full and final settlement”. It was held by the court that the absence of a specific mention of the amount provided for the maintenance of the wife meant that condition (b) of s 90E was not met. Even though the parties both intended that the wife would make no claim for maintenance, because the technical requirements of s 90E were not met the BFA was found to be void for uncertainty.

A further demonstration of this principle can be found in Cooper v Fernihough [2019] FCA 727. In this matter the relevant clause referred to the wife relinquishing “all and any right that she may have to claim spousal maintenance against [the husband] either now or in the future”. As the clause did not specify the amount provided or the value of the portion of the relevant property attributed to the maintenance of the wife it did not fulfill the strict requirements of s 90E.

Given the strict formal and substantive requirements that apply when drafting valid BFAs, it is essential that the parties obtain sound legal advice before entering into any agreement. This is in fact another formal requirement of entering into a BFA as each party to the relationship must have obtained independent legal advice prior to entering the agreement.

Nicholes Family Lawyers possesses expertise in preparing BFAs and providing the requisite advice to clients to ensure their enforceability.

By Nicholes Family Lawyers

 

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