What is a binding financial agreement?
What is a binding financial agreement? Referred to in various sections of the Family Law Act 1975 (Cth) as a ‘financial agreement’, it is an agreement made between parties either before their marriage or de-facto relationship, during their marriage or de-facto relationship or post-separation.
Agreements made prior to a marriage or de-facto relationship can also be referred to as ‘pre-nuptial agreements’ though this term is not used in the legislation.
The law on these agreements, no matter when they are drafted, insists that both parties must receive independent legal advice as to the advantages and disadvantages of the agreement and the effect the agreement has on the parties’ rights and obligations. This advice must then be evidenced in the agreement via a Certificate of Independent Legal Advice that is annexed to the agreement.
It is becoming more common for financial agreements to be used to document post separation property settlement agreements between the parties. This, however, is not always the most efficient, effective or cost effective means by which to formalise a settlement agreement.
When do I need a binding financial agreement?
Strictly speaking, a binding financial agreement is used predominantly for setting out the financial arrangements that will apply when parties separate, entered into whilst the relationship is still on foot or before marriage. This is the use for which the Act anticipates financial agreements.
Though financial agreements can be used post-separation, the requirement for independent legal advice for both parties can mean that this process is more costly than alternate settlement formalisation processes, such as an application for consent orders that is lodged with the court. Further, a financial agreement is not viewed or ratified by a court at any stage, unless a dispute arises as to the meaning, effectiveness or validity of the agreement.
Given the lack of oversight by the court about the contents of any given financial agreement, they can be used to bind parties to what would otherwise be unfair settlement arrangements that the court, given the opportunity, would not approve. This can, in some circumstances, lead to the agreements being litigated and in rarer cases still, set aside as they are unfair.
When do I need an application for consent orders?
An application for consent orders is an application parties lodge with the court after their separation in order to formalise their property settlement agreements. The Application does not require that both or indeed either of the parties have legal representation. The finalised application documents are then reviewed by the court and the court retains the absolute discretion as to whether the application and orders are granted. The court must be satisfied that in the circumstances, the orders sought in the application are just and equitable.
An application for consent orders is often, though not always, a much cheaper way to formalise a property settlement agreement post separation. The Orders, once made by the court become binding court orders that have the same effect as they would have if made after a trial or court decision. Given this, once made, they are hard to overturn or to alter.
How do I know which way is right for me?
Each family law case is different and so there is no ‘hard and fast’ rule about which process is best for any given case. Your lawyer will advise you as to which option is best in your circumstances, taking into account the nature of the agreement, the financial means of both you and your former partner and the speed with which the agreement needs to be formalised.
It is important to receive comprehensive family law advice about any proposed property settlement arrangement before entering any binding agreement or other settlement paperwork.
Call our team now on (03) 9793 7888 to book an appointment and discuss your options with one of our expert family law solicitors.