by | Nov 28, 2023

Financial Agreements – Back to Basics

This Webinar looks at the basics of drafting and advising on a financial agreement and minimising the risk of a financial agreement under the Family Law Act 1975 (Cth) (FLA) being found not to be binding or being set aside. It covers:

  1. Ensuring compliance with the relevant sections of the FLA
  2. Subject matter
  3. When is an agreement binding?
  4. Independent Legal Advice
  5. Drafting for clarity and to avoid uncertainty
  6. Separation Declarations
  7. Child maintenance and child support
  8. Maintenance
  9. Third parties
  10. When can an agreement be set aside?
  11. Thorne v Kennedy (2017) FLC 93-807
  12. Property acquired after divorce or separation
  13. Other drafting tips

Ensuring compliance with the relevant sections of the FLA

There are three primary areas of risk in relation to financial agreements. These are:

  1. Getting the subject matter right. This is dependent upon the type of agreement being entered into and varies largely due to the type of relationship the parties are in or are entering ie whether it is a married relationship or a de facto relationship.
  2. Is the agreement binding? If the requirements for an agreement are not met, it will not be binding. The requirements are set out in:
  • s 90G(1) for married relationships; and
  • s 90UJ(1) for de facto relationships

However, there is a chance that a defective agreement may be able to be saved under s 90C(1A) or s 90UJ(1A) if the court is satisfied that it is unjust and inequitable for the agreement not to be binding.

  1. Will the agreement be set aside? There are a multitude of grounds in s 90K(1) and 90UM(1). They can be broadly placed in the following categories:
  • Pre-contractual dealings
  • Fraud in relation to third parties
  • Errors and lack of clarity in the contractual terms
  • Hardship relating to the welfare of a child
  • Impracticability

The first step is to work out what type of a financial agreement is required. There are two broad categories:

  1. Agreements between married couples; and
  2. Agreements between de facto couples.

Agreements between married couples must meet the requirements of s 90G(1) of the Family Law Act 1975. Agreements between de facto couples must meet the requirements of s 90UM(1).  There are sub-categories of each type of financial agreement. These are:

  1. For married couples:
  • Entered into before a marriage — s 90B
  • Entered into after a marriage but before separation — s 90C
  • Entered into after marriage and after separation — s 90C
  • Entered into after a divorce — s 90D
  • Termination agreement entered into to terminate an earlier agreement — s 90J
  • Superannuation agreement. This can be contained within a s 90B, 90C or 90D financial agreement or solely deal with superannuation — s 90XH
  1. For de facto couples:
  • Entered into before a de facto relationship — s 90UB
  • Entered into after a de facto relationship commences but before it breaks down — s 90UC
  • Entered into after a de facto relationship breaks down — s 90UD
  • Entered into under State law which is covered by the transitional arrangements — s 90UE
  • Termination agreement entered into to terminate an earlier agreement — s 90XUL
  • Superannuation agreement. This can be contained within s 90UB, 90UC or 90UD

Subject matter

The agreement needs to comply with one of s 90B, 90C, 90D, 90UB, 90UC, 90UD, or be a termination agreement under s 90J or 90UK, so it is important to check the relevant section against the agreement. A financial agreement can include an agreement splitting or flagging superannuation and these are made under s 90XH or s 90XHA as well as, say s 90C. Financial agreements made under Pt VIIIAB, which deal with de facto relationships, cannot contain “other matters” or deal with property and financial resources acquired after separation or deal with maintenance during the relationship. Those made under Pt VIIIA can contain “other matters” and deal with maintenance during the relationship, but cannot deal with property and financial resources acquired after divorce.

With respect to Pt VIIIAB agreements, a de facto relationship under the FLA is required for the agreement to be effective. If it is a s 90UB agreement, the planned de facto relationship needs to commence or the agreement will not operate. The parties must be ordinarily resident in a participating jurisdiction (i.e. not in Western Australia or overseas) when they make the agreement (s 90UA). 

The breadth of matters which can be covered by s 90B agreements, as an example of a Part VIIIB agreement, is extended by s 90B(3), which states:

“A financial agreement made as mentioned in subsection (1) may also contain:

(a) matters incidental or ancillary to those mentioned in subsection (2); and

(b) other matters.”

There is very little case law on the meaning of the phrases “incidental or ancillary” and “other matters” in the context of financial agreements.

The cases suggest that if a “matter” is sufficiently autonomous, important in its own right, multifaceted, self-contained, etc., then it is not ancillary or incidental. 

Bloomfield & Grainger [2018] FamCA 36

The parties and their lawyers overlooked the fundamental and preliminary point of the subject matter of the agreement in the long-running Bloomfield & Grainger litigation which commenced in 2014 and ended in 2018. A creditor of the wife sought to set aside a financial agreement on the ground that a purpose of the agreement was to defraud creditors (s 90K(1)(aa)).

There were many hearings at which no issue was taken as to whether or not the litigation was about a financial agreement. In an earlier case, the Full Court of the Family Court upheld the standing of the creditor’s ability to make the application (Grainger & Bloomfield & Anor (2015) FLC 93-677; [2015] FamCAFC 221).

In the 2018 case, Justice Hogan finally determined that the agreement in question was not a financial agreement, because it did not deal with the subject matter set out in s 90C although it purported to be an agreement under s 90C.

The parties’ intention was to transfer the wife’s interest in the property to the husband prior to the wife’s imminent bankruptcy. 

After executing the agreement the transfer of the property was effected and the husband relied on the agreement to obtain an exemption from stamp duty. Notably, the agreement did not provide for how the T Street property would be dealt with in the event of a breakdown of the marriage, but only how it would be dealt with immediately upon the execution of the agreement.

Whilst a financial agreement under s 90C may deal with incidental or ancillary or other matters (including possibly, property dealings during a marriage although this has not been decided) it must deal with one or both of the matters in s 90C(2), and it didn’t.

Justice Hogan held that the agreement was not a financial agreement as defined by s 90C FLA because it did not deal with either:

  1. How, in the event of the breakdown of the marriage between the parties, their property or financial resources (or the property of each of them and their respective financial resources) are to be dealt with; or
  2. The maintenance of either party.

The effect of this finding was that the transfer of the wife’s legal and beneficial interests in the property was not done pursuant to a financial agreement. The agreement did not need to be set aside to attack the transaction. Four years of litigation in the family law courts was unnecessary.

When is an agreement binding?

An agreement is binding if it complies with s 90G(1) (or s 90UJ(1)):

“Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:

(a) the agreement is signed by all parties; and

(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and

(c) either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and

(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and

(d) the agreement has not been terminated and has not been set aside by a court.”

In the original version of s 90G the wording of the advice required was different to the current version and that wording had to be reflected in the wording of a clause in the body of the agreement (Black & Black (2008) FLC 93-357). This is no longer the case, but a clause stating that the advice has been provided, repeating the wording of the current s 90G(1)(b), is usually included in the body of an agreement.

To mitigate the strict technical interpretation of s 90G following Black & Black and to make it more difficult for financial agreements to be found not to be binding, remedial sections were introduced relieving against the consequence of an agreement not meeting the requirements of s 90G(1)(b), (c) and (ca) (or s 90UJ(1)(b), (c) and (ca)). Section 90G(1A)–(1D) allows certain agreements which do not comply with s 90G(1) to be “saved”. Section 90UJ is similarly worded.

The effect of s 90G(1A) is that an agreement which does not meet all the other requirements of s 90G(1) but is signed by all parties may be saved “if a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties”. In considering this, any changes in circumstances after the agreement was executed are irrelevant. 

Independent Legal Advice

Each spouse party must receive independent legal advice for a financial agreement to be binding under s 90G(1)(b) (s 90UJ(1)(b) is worded similarly). The legal advice must be given about:

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

The advice must be given by an Australian legal practitioner (Ruane & Bachmann-Ruane and Anor [2009] FamCA 1101). There is no legal requirement for third parties (who are not spouse parties) to be given legal advice but in practice this usually occurs. 

Burden of proof

The nature of and burden of proving independent legal advice was considered by the Full Court of the Family Court in Hoult & Hoult (2013) FLC 93-566. Justice Thackray’s clear explanation (at [60]-[63]) has been generally accepted. The burden can shift:

“… the onus of establishing that an agreement is binding falls upon the party asserting that fact.

Importantly, however, … once the party seeking to rely upon the agreement produces in evidence the certificate signed by the other party’s solicitor, there is a forensic obligation on the other party to adduce evidence which would disprove, or at least throw into doubt, the inference or conclusion to be drawn from the certificate…”

Nature of the advice 

Different judicial views have been expressed as to the nature of the advice that must be given and whether it needs to be correct and comprehensive, but the test seems to be tighter than it once was. Somewhat controversial at the time was the approach taken by Justice Aldridge in Abrum & Abrum [2013] FamCA 897 and not an approach taken by most judges including the Full Court. He said (at [42]-[43], [45]):

“Accordingly, the advice must be real and meaningful. It must be directed to the parties’ circumstances and their present rights.”

More recently, and perhaps taking a more cautious approach following Thorne v Kennedy (discussed below), the requirement for “real and meaningful” advice expressed by Aldridge J in Abrum seems to have been given greater weight.

In Daily & Daily [2020] FamCA 486 Berman J said (at [154]):

“I consider that whilst the correctness of the advice may not be a relevant inquiry, if the evidence supported a finding that notwithstanding a certificate, there had not either been any advice given or that it was so cursory or only tangentially related to the agreement, that may well allow a finding that no advice was given.”

Justice Berman found that the wife was not given meaningful advice on handwritten amendments which fundamentally altered the document so that it was a new financial agreement and found that the agreement was not binding on the parties under s 90G(1). He then considered s 90G(1A) and found that it was unjust and inequitable if the agreement was not binding because:

  • The amendments were not a surprise to the wife;
  • The wife had the opportunity of obtaining legal advice;
  • It was reasonable for the husband to assume that the wife obtained the updated advice;
  • The issue as to whether the agreement was binding was only raised 13 years later after the parties separated.

In Kaimal & Kaimal [2020] FamCA 971 the legal advice given to the wife did not meet the requirements of s 90G(1) FLA. Under cross-examination, the wife’s legal practitioner readily conceded that he did not give her the requisite advice and he saw his role was only to be a witness of her signature and explain the terms and conditions, although to do the latter he only read out the agreement to the wife and told her it was binding. He said he didn’t have the expertise to advise the wife on the matters required by s 90G(1)(b) and would have required her to go elsewhere for that advice. Chief Justice Alstergren noted (at [16]):

“The requirement for legal advice is an important legislative safeguard. … Accordingly, the legal advice must be real and meaningful to satisfy s 90G(1)(b).”

Chief Justice Alstergren also quoted favourably the above passage from Daily & Daily (which was appealed on other grounds). He said this passage was consistent with the Full Court in Hoult, and that he was fortified in his finding that the wife did not receive the requisite legal advice by the significant errors and inconsistencies in the agreement. He said (at [48]):

“In circumstances where the errors in the Financial Agreement relate to the proportions the parties were each to receive under the agreement (and the Financial Agreement itself was internally inconsistent in those proportions), I am not satisfied that Mr B identified these errors such that he could have, in any event, properly explained them to the wife pursuant to the requirements of s 90G(1)(b).”

Chief Justice Alstergren refused to save the agreement under s 90G(1A) FLA because of the importance of the advice requirement and the blatant errors in the agreement.

In Beroni & Corelli (2021) FLC 94-004 the Full Court of the Family Court considered the issue of the nature of the advice required in the context of a finding of undue influence and unconscionable conduct. It held that those findings could not be displaced by legal advice if the advice was inadequate. Justice Aldridge was a member of the Full Court and was also the trial judge in Abrum.

The trial judge found that a rudimentary explanation of the agreement was given to the wife in English, and although the legal practitioner had identified that an interpreter was required there was no interpreter. The wife had not been given a copy of the agreement previously and in any event was unable to read it. The advice could not therefore have been “fulsome” about a 14 page agreement as the advice was given only in a 30 minute discussion. The wife could not in those circumstances have had any real understanding as to the value of the claim she was giving up.

In Purdey & Millington [2018] FCCA 213, the wife had limited English and the husband’s legal practitioner suggested a legal practitioner for the wife. There was a dispute as to who made the appointment for the wife to see the legal practitioner, but the trial judge found that the husband probably made the appointment and that he was present when the wife saw the legal practitioner. There was no interpreter when she was given legal advice. The agreement was held not to be binding. Judge Jones found that the evidence before the court was sufficient to throw into doubt the inference which could be drawn from the wife’s legal practitioner’s statement attached to the financial agreement certifying that the wife was given independent legal advice, for the following reasons:

  1. The arrangement for the wife to be provided with legal advice was not independently made by the wife. Rather, the husband arranged for the wife to attend on Ms J on the recommendation of Mr K, his legal practitioner, who drew up the financial agreement;
  1. There was no record held by Sydney Legal House, the firm Ms J worked for when she met with the wife, of the wife as a client. The capacity in which Ms J acted was questionable;
  1. Ms J received the financial agreement at the commencement of her meeting with the wife and the meeting took no longer than 20 minutes. In Judge Jones’ opinion, this was insufficient time for Ms J to have explained to the wife, who had limited English speaking skills, the wife’s rights under the relevant statute, the effects of the financial agreement on her rights and the advantages and disadvantages of the financial agreement. Judge Jones referred to Abrum & Abrum [2013] FamCA 897, where Aldridge J set out the obligations upon a legal practitioner purporting to give legal advice under s 90G(1)(b) of the Act (at [35]-[45]). In Judge Jones’ opinion, it would not have been possible for Ms J to have complied with these obligations in a time period of 10 to 20 minutes;
  1. The husband was responsible for and paid the fee for the meeting between Ms J and the wife. This is not normally fatal;
  1. The husband was present for the duration of the meeting between Ms J and the wife;
  1. The absence of any file notes of the meeting supported an inference that there was a lack of proper engagement by Ms J with the wife, a lack of competent legal service and a lack of provision of any legal advice at all.

In the circumstances it was not appropriate for the agreement to be held binding under s 90G(1A).

Drafting for clarity and to avoid uncertainty

A financial agreement is a contract. To draft a contract the following questions must be considered first:

  • What is the goal?
  • How is it to be done?
  • Who is to do it?
  • When is it to be done?
  • How is it to be enforced if it is not done?

Both the agreement and any letters of advice should be easy for the client to read and understand. The agreement needs to be enforceable as a contract, not as a set of orders. For this, the clauses of the agreement should be drafted as a contract and not just copied from orders, as the style is different. If the terms of the agreement are drafted in the same form as orders they may not be enforceable and may lack clarity and certainty. Precedent clauses can help with the first draft of an agreement. The draft must, however, be checked carefully and altered to fit the precise and unique facts of the particular case.

Care should be taken in using precedent agreements. The terms need to be adapted to the particular circumstances of the parties and the agreement as a whole must be drafted to ensure there are no inconsistencies or gaps.

  • SEPARATION DECLARATIONS

A separation declaration may be needed. These are required for: 

  1. Provisions which deal with how property and financial resources are dealt with in the event of a breakdown of a marriage. These provisions are of no force and effect until a separation declaration is made (s 90DA(1)). The situation is similar for de facto relationships (s 90UF). 
  2. Superannuation provisions. Where the superannuation interest is over the low rate cap amount of $230,000 in 2022/2023 the parties must have been separated for 12 months if a superannuation agreement is used, other side they can only have splitting orders. See ss 90XP and 90XQ.
  • CHILD MAINTENANCE AND CHILD SUPPORT

Child maintenance and child support are not specifically referred to as matters which can be covered by a financial agreement. However, they appear to be able to be covered under both Pt VIIIA and Pt VIIIAB agreements as “matters incidental or ancillary to”. This is supported by the fact that:

  • Child maintenance is referred to in s 90E and 90UF — discussed below.
  • Section 84(5) of the Child Support (Assessment) Act 1989 provides that “nothing in this Part is to be taken to prevent the same document being both a child support agreement and … a financial agreement”. However, it seems sensible to keep them as separate documents. Child support arrangements are usually more fluid than property settlements as parenting arrangements and circumstances can change. The ground for setting aside binding child support agreements due to changes in circumstances relating to parenting arrangements appear more difficult to establish than the ground for setting aside financial agreements. The law is still developing.
  • MAINTENANCE 

Sometimes, agreements made before separation are drafted so as to oust the jurisdiction of the court to deal with property but allow maintenance claims to still be made. Of course, the weaker party must still establish a need for maintenance, but retaining the weaker party’s the right to apply for maintenance may mean that the agreement can be more simply drafted and the agreement is not as much at risk of being considered a “bad bargain” (and set aside if there are vitiating factors, such as undue influence), than if the right to apply for spousal maintenance is ousted.

The important sections are ss 90E and 90F.

Section 90E provides:

“A provision of a financial agreement that relates to the maintenance of a spouse party to the agreement or a child or children is void unless the provision specifies:

(a) the party, or the child or children, for whose maintenance provision is made; and

(b) the amount provided for, or the value of the portion of the relevant property attributable to, the maintenance of the party, or of the child or each child, as the case may be.”

Section 90UH is similarly worded.

The usual outcome of non-compliance with s 90E is any spousal maintenance provision will be considered void and severed. The rest of the agreement stands.

In Guild & Stasiuk [2019] FamCA 167 Justice Cronin ordered interim spousal maintenance to be paid to the wife. The prenuptial agreement purported to oust the jurisdiction of the court to make a spousal maintenance order in favour of the wife. The wife agreed to “make no claim” for spousal maintenance. Justice Cronin found that the requirements of s 90E were not met. 

Justice Cronin said (at [29]):

“In my view, the words “the amount provided for” maintenance must refer to an identifiable quantum. To argue otherwise opens up debate about the extent of that possible quantum.” 

Section 90F

In summary, s 90F(1) provides that a financial agreement cannot exclude or limit the power of a court to make a maintenance order if s 90F(1A) applies. 

Section 90F (excluding s 90F(2)) states:

  1. No provision of a financial agreement excludes or limits the power of a court to make an order in relation to the maintenance of a party to a marriage if subsection (1A) applies.

(1A) This subsection applies if the court is satisfied that, when the agreement came into effect, the circumstances of the party were such that, taking into account the terms and effect of the agreement, the party was unable to support himself or herself without an income tested pension, allowance or benefit.

Section 90UI is similarly worded for de facto relationships.

  1. THIRD PARTIES 

Third parties can be parties to the agreement so their rights can be protected, but this is not the only option. The options are:

  • Make third parties (such as parents lending money) parties to the agreement. For example, s 90B(1) states “The people may make the financial agreement with one or more other people”;
  • Make it clear in the agreement that third parties who are not parties to the agreement have disadvantaged themselves in reliance upon the agreement. Abrum & Abrum [2013] FamCA 877;
  • Annexe an agreement between the parties to the financial agreement and the third parties to the financial agreement and refer to the annexed agreement.

 

When can an agreement be set aside? 

An agreement which is otherwise binding can be set aside on any of the grounds in s 90K (s 90UM). Section 90K provides that:

“(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:

(a) the agreement was obtained by fraud (including non-disclosure of a material matter); or 

(aa) a party to the agreement entered into the agreement:

  1. for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
  2. with reckless disregard of the interests of a creditor or creditors of the party; or

(b) the agreement is void, voidable or unenforceable; or

(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or

(d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or

(e) in respect of the making of a financial agreement — a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or

(f) 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 under that Part; or

(g) the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.

 (1A) For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.

(2) For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:

(a) the person is a parent of the child with whom the child lives; or

(b) a parenting order provides that:

(i) the child is to live with the person; or

(ii) the person has parental responsibility for the child.”

Section 90K(1)(b) is very broad and includes contractual principles which might mean the agreement is void, voidable or unenforceable such as:

  • uncertainty
  • unconscionable conduct (also in 90K(1)(e))
  • undue influence
  • mistake 

A particularly common ground in relation to agreements between couples who may have children is s 90K(1)(d) — the hardship ground in relation to children.

Lessons from THORNE V KENNEDY

The wife was aged 36 and the husband was 67 when they met on a bride website in mid-2006. The wife was living overseas, spoke Greek and very little English. She had no job and no assets of any substance, no family in Australia and her visa was due to expire unless she married. The husband was an Australian property developer with assets worth at least $18 million. 

During their courtship the husband promised the wife that he would look after her like “a queen”. In February 2007 the wife travelled to Australia with the husband and moved into his penthouse. The husband made it clear to the wife prior to her coming to Australia that he wanted to protect his wealth for his children and that, if they were to get married, she would have to sign a legal agreement to that effect. The wife, however, did not learn the terms of the first agreement until 10 days before the wedding. By that stage, the wife’s parents and sister had arrived in Australia from Eastern Europe for the wedding. The husband told the wife that if she failed to sign the first agreement, the wedding was off.

When presented with the draft first agreement, the wife’s only concern was with the testamentary provisions — not the separation provisions. Her solicitor advised the wife orally and in writing not to sign the first agreement, saying that it was all in the husband’s favour. Some minor changes to the testamentary provisions of the first agreement requested by the wife’s solicitor were agreed to by the husband. The wife received further advice on the amended first agreement and her solicitor again advised her not to sign it. The wife understood her solicitor’s advice to be that it was the worst agreement that the solicitor had ever seen. 

Under the separation provisions, the wife was to receive a total payment of $50,000 plus CPI in the event of a separation after at least three years of marriage, which the wife’s solicitor described as “piteously small”. In the event of the husband’s death, the wife would receive an apartment worth up to $1.5M, a Mercedes and a continuing income. The wife nevertheless signed the first agreement 4 days before the wedding. 

The first agreement contained a recital that within 30 days the parties would sign another agreement in similar terms. The wife signed the second agreement, after the marriage, revoking the first agreement but otherwise in the same terms. The wife’s solicitor urged her not to sign the second agreement. During the meeting the wife received a telephone call from the husband asking her how much longer she would be. The wife’s solicitor had the impression that the wife was being pressured to sign the second agreement.

The husband signed a separation declaration after the couple had been cohabiting for about 4½ years. It was slightly less than 4 years after the first agreement was signed.

The High Court plurality upheld the finding of the trial judge and said that the agreement should be set aside for undue influence and unconscionable conduct. Justices Nettle and Gordon held that the agreement should be set aside for unconscionable conduct.

If the time seems too short between the date the agreement is entered into and the date of the marriage then it might be tempting to recommend that the parties enter into another agreement after the marriage. This strategy may not, however, work. It did not work in Thorne v Kennedy. The defects of the first agreement were carried through to the second. In relation to the second agreement, the trial judge found that “the marriage would be at an end before it was begun if it wasn’t signed”, and that the wife “plainly had no choice that she could reasonably see, but to sign the agreement”. 

Following the High Court judgment in Thorne v Kennedy, whilst there are many uncertainties, there are some lessons for drafting financial agreements: 

  1. The High Court listed six factors (which were not intended to be exclusive) which are prominent in assessing whether there has been illegitimate pressure amounting to undue influence in the particular context of pre-nuptial and post-nuptial agreements. They need to be considered when taking instructions, negotiating, drafting and advising on financial agreements. They are repeated here because of their importance:
    1. Whether the agreement was offered on a basis that it was not subject to negotiation;
    2. The emotional circumstances in which the agreement was entered including any explicit or implicit threat to end a marriage or to end an engagement; 
    3. Whether there was any time for careful reflection; 
    4. The nature of the parties’ relationship;
    5. The relative financial positions of the parties; and
    6. The independent advice that was received and whether there was time to reflect on that advice.
  2. An agreement which is fair and reasonable, perhaps close to a party’s s 79 entitlements, is more likely to be upheld.

Key drafting tips and traps

The basis matters to be considered are:

  1. Check the subject matter and that it:
  • Is within s section of the FLA; and
  • Deals with at least one of:
    • Property and financial resources?
    • Maintenance?
  1. If dealing with property, does it deal with all of the property of the parties?
  2. Does it purport to deal with property acquired after separation or divorce?
  3. Draft a letter of advice at the same time as the agreement is drafted.
  4. Provide the client with a detailed letter of advice before the agreement is signed in relation to the final version of the agreement which covers:
  • The parties’ property settlement and maintenance rights under the FLA if the agreement did not exist
  • The requirements of ss 90G(1)(b) or 90UJ(1)(b)
  • The specific matters under ss 90G(1)(b) or 90UJ(1)(b)
  • The grounds for setting agreements aside under ss 90K(1)( or 90UM(1)
  1.  Ensure that the parties sign and are advised on the whole concluded agreement including any annexures.

Conclusion

Financial agreements are a fertile ground for litigation. The proposed terms of the agreement or the circumstances of the parties may put a legal practitioner on notice that it is too risky to act unless the terms are re-negotiated, and less pressure placed on the weaker party to sign. There are steps a legal practitioner can follow to ensure as much as possible that an agreement is binding and to reduce the risk of it being set aside.

A major issue to consider is that the law of financial agreements is still changing and developing. So there are many risks for lawyers and parties.

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