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Setting aside Binding Financial Agreements

The Family Law Act 1975 (“FLA”) provides for parties of a marriage or a de facto relationship to enter into a Binding Financial Agreement about financial issues. This agreement can be entered into prior to a marriage(commonly known as a “pre nup”), during a marriage or after divorce and deals with how a couple’s asset pool is to be divided in the event of a breakdown in the marriage and/or spouse maintenance. In relation to a de facto relationship, the agreement can be done before commencement of cohabitation, during cohabitation or after the end of the relationship.


A Binding Financial Agreement has the effect of ousting the Court’s jurisdiction to decide these issues. That means once parties enter into a Binding Financial Agreement, they give up their rights under the FLA for the Court to make such a determination.


A Binding Agreement

In order for a Binding Financial Agreement to be binding on the parties it must comply with specific provisions set out under the FLA.Section 90G(1) applies for agreements made before, during or after a marriage. Similarly, section 90UJ(1) applies to agreements entered into before, during or after a de facto relationship. The Agreement is binding on the parties to the agreement if and only if:

1.  the Agreement is signed by both parties; and

2.  before signing the Agreement, each party was provided with independent legal advice from a legal practitioner about:

  •  the effect of the Agreement on the rights of that party, and
  •  the advantages and disadvantages, at the time the advice was provided, to the party making the Agreement; and

3.  each party is provided with a signed statement by their legal practitioner stating that the advice (above) was provided to that party; and

4.  each party or their lawyer is also given a copy of the signed statement by the lawyer for the other party; and

5.  the Agreement has not been terminated or set aside by a Court.


Setting Aside the Agreement

Although Binding Financial Agreements have the effect of ousting the Court’s jurisdiction, they can be set-aside in limited circumstances where:

  • the Agreement was obtained by fraud or failure to disclose material information;
  • the Agreement is void, voidable or uneforceable.  Under contract law this can be established if the Agreement was obtained through undue influence, duress or unconscionable conduct;
  • the agreement being entered into to defeat or defraud a creditor, or with reckless disregard to the interest of a creditor;
  • changes in the parties circumstances have made the agreement impracticable;
  • since the making of the Agreement, a material change in circumstances has occurred relating to a child, and it would result in hardship for the child or a party if the agreement is not set aside;
  • the conduct of one of the parties in making the agreement was unconscionable;
  • a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement; or
  • the Agreement covers at least one superannuation interest that is an un-splittable interest for the purposes of Part VIIIB of the FLA.

If the Agreement is set aside, then each party is free to apply to the Court for orders in the usual way for property settlement or spouse maintenance. The Court has wide powers to set aside the Agreement where one or more of the above circumstances apply.

A Binding Financial Agreement can be a useful and cost effective instrument, which provides certainty and control to parties as to how their assets will be divided upon the breakdown of a relationship. It can save parties the cost of court proceedings if they separate. In order to be enforceable and binding however, such Agreements must be carefully drafted in accordance with the requirements of the FLA.

By Nicholes Family Lawyers


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