The intricate web of family law in Australia has once again been brought to the spotlight, this time through the prism of the 2023 Western Australian case, Whitford & Whitford. A case that highlights the potential pitfalls in preparing Binding Financial Agreements (BFAs) in Western Australia, and beyond.
The case centered around a couple, Mr. and Mrs. Whitford, who had entered into a binding financial agreement in December 2014 after their separation.
The financial agreement sought to settle the property and financial matters between the parties, including the distribution of assets and liabilities. The agreement stated that the husband would pay the wife a total of $50,000 by way of property settlement, with no provision for spousal maintenance.
During the proceedings, it was revealed that the husband had not disclosed certain material matters to his own lawyers or the wife. This included the pending sale of the Farm A property and the purchase of another property, Farm B. The values attributed to the properties and the farming business in the financial agreement were also found to be inaccurate.
The wife argued that the financial agreement should be set aside on several grounds, including non-disclosure, unconscionable conduct, and a lack of independent legal advice. The Court found that the husband had engaged in unconscionable conduct, taking advantage of the wife's vulnerable position. The Court also concluded that the wife did not have a reasonable opportunity to reflect on the legal advice she received, and that the agreement was unjust and unreasonable.
Furthermore, the Court rejected the husband's argument that the wife's application was statute-barred, citing the provisions of the Family Law Act and the absence of a time limitation for making applications under Section 90K.
In light of the findings, the Court determined that the financial agreement should be set aside, providing the wife with an opportunity to pursue a fair and just settlement. The Court ordered that the financial agreement between the parties, dated December 2014, be set aside.
Walking the Tightrope: BFAs Post-Whitford Case
The Whitford case has demonstrated that when it comes to BFAs, the devil is indeed in the details. As a legal practitioner in Western Australia, the case reiterates the importance of ensuring BFAs adhere to the following principles:
Understanding the Legislative Framework: Familiarize yourself with the relevant provisions of the Family Law Act that govern BFAs. This includes Section 90G, which outlines the requirements for financial agreements, and Section 90K, which allows for the setting aside of agreements.
Formalities and Execution: Ensure that the BFA meets the necessary formalities specified in the Act. For example, the agreement must be in writing, signed by all parties, and each party must receive independent legal advice before signing. Failure to comply with these formalities can weaken the enforceability of the BFA.
Full and Frank Financial Disclosure: The Act emphasizes the importance of full and frank financial disclosure between parties entering into a BFA. Both parties must disclose all relevant financial information, including assets, liabilities, income, and financial resources. Failing to provide accurate and complete financial disclosure can undermine the validity of the agreement.
Avoiding Unconscionable Conduct: BFAs must not be tainted by unconscionable conduct or exploitation of one party by the other. Ensure that the agreement is entered into freely, without any undue pressure, and that both parties have a genuine understanding of the terms and consequences.
Independent Legal Advice: Each party must obtain independent legal advice from a qualified family law practitioner. Legal practitioners have a duty to fully explain the implications of the BFA to their clients, including the advantages and disadvantages, and any potential risks associated with the agreement.
Inclusion of Spousal Maintenance: Following the Whitford case, it's become clear that excluding spousal maintenance from a BFA could have the agreement declared invalid. Make sure that spousal maintenance is considered.
The Whitford case has set the stage for a renewed focus on the preparation of BFAs in Western Australia. The case underscores the necessity of adhering to the Family Law Act 1975 (Cth) and ensuring future changes are considered while preparing these agreements. The case serves as a timely reminder that ensuring BFAs are airtight is not just a good practice; it's a legal necessity.