The case of LOGAN is an example of where the Court has upheld a Binding Financial Agreement (BFA). This case provides some reassurance and guidance to both parties wishing to uphold Binding Financial Agreements and parties looking to set one aside.
Binding Financial Agreements are an alternative to making an Application for Consent Orders and is not subject to any pre-execution review or approval process by the Court.
The pre-requisites for entering into such agreements are prescribed by the Family Law Act 1975 (the Act) and are strictly applied.
A fundamental principle of such agreements is that the parties obtain independent legal advice BEFORE executing the agreement, as evidenced in a solicitor’s certificate.
The Binding Financial Agreement in Logan was signed in November 2008 – only 2 months after the parties’ separation in September 2008. The parties’ solicitors each signed a certificate confirming that independent legal advice was provided and it was exchanged.
The husband took steps to perform the agreement paying a sum to the wife and in return, the house was transferred to him. So far so good.
In 2010, the wife who had agreed to receive only 15% of the property pool in the settlement, had a change of heart. 3 years after the Binding Financial Agreement was signed and the terms put into effect she filed proceedings to have the Binding Financial Agreement set aside as she said she:
a) Didn’t have the benefit of independent legal advice;
b) Signed the agreement because of the husband’s unconscionable conduct and/or under duress.
Two very good reasons if proven, to set the agreement aside pursuant to s.90K and section s.90KA of the Act.
The wife claimed that she was not given independent legal advice before signing the BFA as she asserted that the lawyer she engaged was not truly independent and that he did not explain to her what her potential entitlements might be pursuant to the Act, the value of her contributions during a long marriage or the binding nature of the document.
However, she did not relate to the Court what advice her solicitor gave her in conference on the day she signed the Agreement or during the conferences prior. She relied upon the short file notes the solicitor had made but did not herself give evidence about the advice she received. She did not call her former solicitor to give evidence.
As to her assertion that she signed the agreement under duress – she alleged that the circumstances of the breakup including her conducting a relationship with another person made her feel very guilty. Her son asked her if she was going to ‘kick us out’ of the house and she asserted that the husband reinforced and emphasised this guilt during negotiations so that he held a more powerful negotiating position than her. She said her husband’s conduct was unconscionable and that he threatened to publish unflattering emails she had authored about the relationship ending and that this was unconscionable.
The Court noted that the parties had been married for 23 years at the time they separated in 2008. They had 2 children, one was autistic. They had shared the parenting duties and operated a business together (that the wife still worked in). They had built up the assets of the relationship together in the course of the marriage.
It was acknowledged by the Court in these circumstances that the contributions of the parties to the marriage were probably equal and that the division of assets pursuant to the BFA was probably not just and equitable.
However, there is no requirement at law that a settlement subject of a Binding Financial Agreement be ‘just and equitable” . The Court found that the wife had not proven the assertions in either instance and refused to set aside the Binding Financial Agreement. Message from the decision in Logan:
Binding Financial Agreements (BFA’s) can be a very attractive and flexible tool for parties to give effect to a consent agreement in the event of the breakdown of a marriage. However, there are many factors that come to bear when drafting and negotiating such agreements and it is important to seek legal advice about your rights and entitlements when negotiating and settling a BFA – including appropriate financial disclosure.
The information in this article is of a general nature and is not intended to address the circumstances of any particular individual or entity and does not constitute specific legal advice.
Author: Vanessa Steinfelder, JV Legal, Sydney, NSW, Australia