In November 2017, the Family Court of Australia delivered a judgement in the longest running financial case in Australian history (Strahan & Strahan). Party A entered into the 12-year marriage as a successful business owner, who owned several valuable assets. Conversely, Party B entered the relationship with an interest in one property, which they owned with their sibling. This property was significantly less valuable than Party A’s assets. During the relationship, Party A made overwhelming contributions at the start, and throughout the relationship. Despite this, by the conclusion of the court proceedings, Party A had paid Party B approximately $23 million by way of partial settlement, or court orders. In effect, Party B’s financial contribution to the marriage was minimal, yet Party B walked away from the marriage with a large sum of Party A’s earnings.
Entering into a BFA will protect your assets from an unfair settlement, as seen in Strahan & Strahan.
BFAs are agreements between spouses or de facto couples whereby they determine the division of assets and liabilities in the event of separation. BFAs can be entered into before, during or after a relationship.
BFAs allow parties to determine how their assets and liabilities will be handled, without intervention from the court. This provides security, and will ultimately save money on legal fees in the event of separation. BFAs can also address, amongst other things: how property will be owned in the future, the distribution of income and spousal maintenance.
Although it can be difficult to consider separation from your partner, leaving it up to the courts to determine how to deal with your assets and liabilities is much more stressful and costly.
For a BFA to be binding, the following requirements must be met:
- the agreement must be signed by both parties;
- both parties must obtain independent legal advice regarding the effect of the agreement on their rights and obligations;
- the lawyers providing the advice provide an annexure to the agreement confirming that they provided advice compliant with the legislative requirements;
- the agreement must not have been terminated or set aside by the court; and
- one party receives the original agreement, and the other receives a copy.
A BFA can be terminated either by written consent of both parties, or by entering into another BFA with a provision that expressly terminates the prior one. This BFA will be subject to the same stringent requirements as the prior one.
The court can set aside a BFA under the following circumstances:
- where one party engages in fraudulent or unconscionable conduct;
- where the agreement is void;
- where the circumstances make it impractical to enforce the agreement;
- where there is a material change in circumstances that would result in one party suffering from hardship; or
- where the agreement covers an unsplittable superannuation interest.
Therefore, it is important that both parties receive competent legal advice, to ensure that the BFA remains binding on the parties except in circumstances that cannot be controlled. Given the strict requirements in entering BFAs, and the assumption that parties intend to be legally bound, courts are generally reluctant to set aside BFAs.
Please note that the above is general information and should not be relied upon as legal advice. All situations are different and legal advice must always be tailored to the specific situation.