By Lauren Callahan, Senior Associate
In the recent case of Whittle & Whittle (No 2), the Federal Circuit and Family Court of Australia (FCFCOA) ruled that a Binding Financial agreement (BFA) was binding despite the fact the parties had not received legal advice.
So, do you actually need a lawyer for your BFA, or can you and your partner finalise it between yourselves?
A BFA can be an excellent way to document your property settlement agreement with your current or former partner. A BFA can be entered into before or during a de-facto relationship or marriage (sometimes referred to as a “pre-nup”), or following separation to finalise your settlement. A valid BFA prevents your partner from making a property settlement claim against you in the Family Court.
In order for a BFA to be binding, the Family Law Act requires that each party receive independent legal advice from a legal practitioner about the effect of the agreement on their rights and the advantages and disadvantages of entering into the agreement. The respective lawyers must also sign a certificate confirming their provision of this advice.
The Court can however, exercise its discretion to declare a BFA to be binding if it does not meet all legislative requirements if the Court is satisfied it would be “unjust and inequitable” if the agreement were not binding.
In the matter of Whittle and Whittle, a Husband and Wife signed a BFA following their separation in May 2021. The Wife drafted the agreement, which set out the division of the parties’ assets and financial arrangements, using a template she found online. The parties exchanged a number of emails to refine the BFA, to ensure it accurately reflected their agreement and was “compliant with the law”. However, the agreement (signed incorrectly) stated that both parties had obtained legal advice.
After signing, the Wife and Husband carried out the agreement. The Husband transferred his share of the jointly-owned property to the Wife, along with a car, and separately, paid the children’s school fees.
In 2023, the Wife made an Application to the Federal Circuit and Family Court of Australia for property settlement. The Husband sought that the Application be dismissed, arguing that he was entitled to rely on the provisions of the BFA to prevent any further property settlement claim against him. The Wife argued that the BFA should not be binding, as the requirement to obtain independent legal advice “is a crucial legal safeguard given (a BFA) ousts the jurisdiction of the Court to make property orders”.
Ultimately, the Judge exercised their discretion to find the BFA was binding in these unique circumstances, meaning the Wife could not seek further property adjustment from the Court.
So what does this mean for your BFA? While Whittle & Whittle may give the impression legal advice is optional, the overwhelming bulk of the case law suggests the Court is far more likely to find a BFA to be non-binding if proper legal advice has not been obtained.
In fact, there are multiple cases where, even despite lawyer involvement, the Court has found the advice received to be insufficient to satisfy the requirements set out in the Act) and declared the BFA non-binding. For example, in the Court decision of Kaimal & Kaimal, the Court found a BFA to be non-binding, because the legal advice received by the Wife was not adequately “real and meaningful”. Similarly, in another Court decision of Raleigh & Raleigh, the Court refused to uphold a BFA where the Wife’s lawyer did not take sufficient instructions from the Wife to be able to advise her of her legal rights.
Therefore, while the Court can exercise its discretion to uphold a BFA where parties have not received legal advice, it is very unlikely it will.
The best option to avoid the stress and expense of a Court challenge to your BFA is to ensure it is drafted by an experienced lawyer, specialising in Family Law and that both parties obtain appropriate and independent legal advice.
Foster Johnson Family & Collaborative Lawyers has extensive experience in drafting and advising on BFAs. If you are considering a BFA, at any stage of your relationship, please get in touch with us on 6248 8477 or via email to hello@fosterjohnson.com.au
