There are 3 options when undertaking financial separation as follows.
1. The BFA (Binding Financial Agreement)
2. Consent orders - by agreement of the parties made in court.
3. No agreement of the parties - we go to court and seek court orders but only after the pre-action procedures below.
This section will consider specifically the use of a BFA, however to determine if a BFA is the right option for you, you would need to consider the other two alternatives which may provide a better solution. Our senior lawyers would be pleased to discuss the differences and undertake a free case assessment for you.
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What is the difference?
- If you decide to use a BFA, both of you will need to get independent legal advice. You can get your lawyer to give you legal advice and draft up the BFA and your partner can have their lawyer review the BFA and provide them with legal advice.
- A BFA can only deal with financial or property matters whereas consent orders can deal with parenting matters as well.
How certain is a BFA ?
Many lawyers are reluctant to draft BFA and prefer to use consent orders for financial separation matters between couples that are in agreement.
This largely stems from a number of court decisions where BFA's have been set aside or varied. It is important to note that the BFA is a technical document that must refer to certain sections of the Family Law Act; but more importantly the document must be drafted in a way to consider what may happen in the future between the parties.
It is not as simple as filling in the blanks. It is important to use experienced senior lawyers that understand financial and asset protection matters can advise you properly on a BFA.
Grant Hackett's wife successfully sets aside the BFA
- Hackett's lawyers prepared a pre nup (BFA) rior to his marriage to Candice Alley.
- The agreement was later amended during his wife's pregnancy with their twins.
- According to the newspaper article at the time "Hackett sued the two law firms over the allegedly botched agreement, claiming their negligence caused him financial loss because it was found to be not binding."
- Both law firms denied negligence and earlier this year the case was settled privately between the parties.
- Candice Alley claimed that that she did not receive the appropriate legal advice before signing the agreement; and the way in which the agreement may have been modified at a later date.
Grounds for setting aside a BFA
Misrepresentation or fraud
- To establish fraud can involve some failure to disclose something a court considers relevant to enter the BFA.
- Misrepresentation; it must be shown that there was a false statement that effectively induced the other partner to enter into the BFA.
Change of circumstances in relation to children
- Any circumstantial changes relating to the best interest of the child or children that the court regards as "material", such as wellbeing, child development and health are paramount when the court considers setting aside a BFA.
- For instance, when the BFA was entered into, the child may have originally lived with the mother, but later moved to live with the father. This might form grounds for the court to set aside the BFA.
- If the child becomes disabled or sick requiring expensive medical treatment, the BFA may be set aside if it runs contrary to the interests of the child.
Fraud against 3rd parties such as creditors
- For example, if assets are transferred prior to a BFA prior to bankruptcy in circumstances the trustee in bankruptcy and/ or the family court may investigate and set aside the BFA.
Uncertainty and incompleteness
- It would be unreasonable to enforce the agreement and so a court will have it set aside.
Unconscionable Conduct, Duress and Undue Influence
- Unwarranted pressure on the other partner to take part in a BFA. Violent threats, intimidation and bullying are common examples of undue influence and duress.
Splitting Orders and 'unsplittable interests'
- It will not, however, be possible to split a superannuation account with very little money.
- Other types of interest have been deemed unsplittable.
Fair and reasonable?
- A court will only make orders on your consent orders if they think that what you have agreed on is fair and reasonable to both parties.
- A BFA may not necessarily be fair to both of you and it is possible that you or your partner may have a more advantageous settlement.
- A lawyer may also prepare a "Letter of Advantage/Disadvantage" when they review a BFA so that their client is aware of the effect of the BFA.
- If a BFA is prepared without this independent legal advice, the BFA is void and unenforceable.
- A "Certificate of Independent Legal Advice" is required to be prepared and signed to show that both of you have received independent legal advice.
Full disclosure a must
- In both cases the parties must disclose all assets, whether in their name or not, and liabilities. The documents may be overturned and contempt of court penalties may apply if full disclosure is not made.
What assets are covered in a property settlement
- All of the parties current assets, liabilities and financial resources are considered. This will include both parties superannuation and pension entitlements.
- Any property held in one name;
- Jointly owned assets;
- Business interests;
- Shares or interests in a company;
- Family trusts as well as other trust interests;
- Funds or interests over which a party has either control or influence;
- Assets owned prior to the commencement of the relationship or accumulated during the relationship;
- Assets acquired post-separation; or
- Prospective entitlements i.e. inheritances, redundancy payments and long service leave may even be included in certain circumstances.
- Liabilities are also considered in the same way and they will include both parties, debts, credit cards, loans, tax and stamp duty obligations and that is irrespective of whether they are in joint names or the name of one party.