Financial Agreements

Binding Financial Agreements (BFAs)

PART ONE

AN INTRODUCTION

The terms “financial agreement”, “binding financial agreement” or “BFA” are often used loosely by lawyers and non-lawyers alike in reference to contractual agreements which parties may enter under the Family Law Act (1975) and other legislation such as the Child Support Assessment Act (1989).

As described below, there are maybe ten different variations of BFAs which parties may sign up to.

Among the most popular BFAs, there are two categories:

  1. Cohabitation agreementswhere parties make a contract about the future regarding their property and how it may be divided if they separate;
  2. Property settlements – where parties have already separated and wish to formalise legally the division of their assets.

A definition of a BFA

A possible, general, definition of a BFA is:

A private deed or a contract that parties enter into in writing under the Family Law Act (1975) or the Child Support (Assessment) Act (1989) to formalise an agreement about their property or child support, either because:

  1. they are about to marry or commence a de facto relationship and they want to make provision about how their assets will be divided between then if they separate;
  2. they are in a marriage or a de facto relationship and they want to make provision about how their assets will be divided between then if they separate;
  3. they separated, and they wish to formalise a property settlement for the division of their assets;
  4. they are separated, and they wish to make provision for child support for their children as an alternative to an assessment for periodic payments under the Child Support (Assessment) Act (1989).

However, the above definition does not do justice to all the various alternative BFAs that parties may sign between themselves. For example, parties may enter a BFA about:

  1. Spousal maintenance;
  2. Superannuation;
  3. A relationship which is not a marriage or a de facto relationship but a “domestic relationship” as understood under the Domestic Relationships Act (1984). This may include, for example:
  4. two persons in a personal relationship although they are not living together; or
  5. a carer and a patient such as a daughter and her mother or persons who are not related.

Ten Alternative Versions of BFAs

I counted ten possible variations of BFAs which parties may sign up to:

  1. A “pre-nuptial” agreement, that is, an agreement between two parties before their marriage in contemplation of their marriage about how they will divide their assets in future if they separate;
  2. An agreement between two parties before they commence to live together in a de facto relationship, in contemplation of their relationship, about how they will divide their assets in future if they separate;
  3. An agreement between two parties after they marry about how they will divide their assets in future if they separate;
  4. An agreement between two parties after they commence their de facto relationship about how they will divide their assets in future if they separate;
  5. A private agreement, after a married couple have separated for a property settlement, instead of consent orders to be made by a court, that provides how their assets must be divided between them;
  6. A private agreement after a de facto couple have separated for a property settlement, instead of consent orders to be made by a court, that provides how their assets must be divided between them;
  7. A spousal maintenance agreement – a private agreement which parties sometimes enter into after they separated (whether they were married or in a de facto relationship) normally in addition to a property settlement which makes provision about future periodic payments or lump sum spousal maintenance which one party will pay to the other;
  8. A superannuation agreement is a private agreement for a property settlement which parties sometimes sign up to after they separated (whether they were married or in a de facto relationship) making provision about how to split their combined superannuation entitlements between them;
  9. A Child Support Agreement – an agreement which parties may enter under the Child Support Assessment Act (1989) about child support for their children including for periodic payments and such other things as child care fees, school fees, medical expenses, orthodontal expenses etc;
  10. A domestic relationship agreement – an agreement which parties to a “domestic relationship” may enter between themselves under the Domestic Relationships Act 1984 (ACT).

Why sign up to a BFA?

There are many reasons why people choose to enter BFAs.

When it comes to a property settlement, parties have no choice but to formalise legally their agreement for division of their assets. Parties may do this by signing a BFA or consent orders. There are two main reasons why their property settlement must be formalised legally:

  1. A BFA will end the parties’ financial relationship, and neither will have a claim against the other under the Family Law act in future;
  2. There are various exemptions in relation to stamp duty fees for the transfer of title to real property, shares and motor vehicles if parties may produce a BFA which reflects their property settlement. There is also roll over relief regarding capital gains tax which otherwise may be payable by a party.

With regard to cohabitation agreements the most common reason why parties choose to sign a BFA is to ensure clarity and certainty about the division of their assets in the event that they separate in the future.

Requirements for a BFA to be valid

There are various specific requirements under the Family Law Act which must be followed for a BFA to be valid.

In every case, for a BFA to be valid and enforceable:

  1. It must be made in writing;
  2. It must be signed by all parties;
  3. Each party must obtain independent legal advice from his/her solicitor and:

a) Each solicitor must sign a statement or certificate of legal advice;
b) The solicitors’ certificates must be exchanged between the parties and normally they are attached to the BFA.

In drafting the agreement, the lawyers and the parties must be aware that BFAs are sometimes challenged in court in the future after parties separated if one of party no longer wishes to abide by the agreement. The Family Law Act lists various reasons why a BFA may be set aside including:

a)  If it was obtained by fraud;

b)  If the agreement was created to defraud or defeat a creditor or another person;

c)   If circumstances have changed since the BFA was signed:

i)    relating to the care, welfare and development of a child of the parties and hardship would be caused to a party as a result and, as a result of the change, the child or, if the applicant has caring responsibility for the child or

ii)   and it has become impracticable for the agreement to be carried out.

Cut and Paste Jobs and Templates

Far too frequently, BFAs which parties have entered into are subsequently challenged in court and set aside by the courts for various reasons, sometimes because basic errors have been made by the drafter and/or the clients.

Parties’ motivation to sign a BFA in the first place is often sound and it is a good idea to have a contract between themselves about their joint assets if they were to separate is a good idea and it normally ensures that there will be clarity and certainly when they separate and a BFA avoids future disputes in Court.

However, it is important for the parties and their lawyers to have a healthy respect for the necessary process to draft a good BFA. The errors which are sometimes made relate to the fact that the drafter did a cut and paste job and the agreement was not adjusted and refined to address the needs of the parties.

Precedents and templates (some which may be obtained in the internet) may be dangerous unless used wisely and carefully and adapted to the parties’ needs. There is a need for the parties and the lawyers themselves to apply themselves to the task of drafting a comprehensive agreement, in particular, about cohabitation agreements.

Obviously, there are many uncertainties about the future. It is impossible to predict all possible vicissitudes of life. However, it is important to reflect about all likely future events and to address those between the parties and the lawyers and make appropriate provision in the cohabitation agreement including, for example:

  • one party is likely to survive the other;
  • one or both parties may not have the capacity to make decisions about their affairs at some stage before death;
  • the children of the party who lost capacity may wish to make decisions which affect the other party adversely;
  • should the cohabitation agreement make provision for the surviving party to have the right to live in the other’s property for live if he/she survives the other?

These are matters which may be addressed simply by the original drafter applying appropriate care and precision.

If you are considering singing up into a BFA…..

 

 

 

What is a cohabitation agreement and why should I get one?

What are “financial agreements”, “binding financial agreements” or “BFAs”?

The terms “financial agreement”, “binding financial agreement” or “BFA” are often used loosely by lawyers and non-lawyers alike in reference to contractual agreements which parties may enter under the Family Law Act (1975).  When using these terms, maybe one specific meaning is intended. However, there are various alternative agreements which may be entered under the Act.

In this article we look at one specific type of BFAs: “cohabitation agreements”.

Cohabitation agreements

A cohabitation agreement may be defined as a contract between two parties which makes provision about how to divide their assets if they separate in the future.

Parties to a cohabitation agreement are contracting out of the provisions under the Family Law Act which would otherwise give them rights and entitlements against each other for a property settlement. Instead, they wish for their contract to provide what are their rights and entitlements against each other.

A cohabitation agreement may cover all assets of the parties or some of their assets.

If you would like more information or to make an appointment in either our Canberra or Queanbeyan office please contact Carlos Turini:

+61 2 6206 1300 | e: cturini@elringtons.com.au

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[1] https://elringtons.com.au/2011/03/prenuptial-agreement/

[2] Frequently, parties agree to a clause in the agreement that if they acquire real property jointly, they will own it as tenants in common (not joint tenants) and each party’s entitlement to the real property will be equivalent to the share of title – 30%, 40% etc;

[3] Thorne v Kennedy [2017] HCA 49 (8 November 2017) at Paragraph 56;

[4] Thorne v Kennedy [2017] HCA 49 (8 November 2017) was a case where the Trial Judge declared a pre-nuptial agreement void and set it aside as she concluded that the husband applied undue influence on the wife to sign it. The Judge described, among other things: the wife’s “…emotional preparation for marriage, and the publicness of her upcoming marriage.” Significantly, the High Court sided with the Trial Judge decision and, in the process, overruled the Full Court fo the Family Court which would have allowed the cohabitation agreement to stand;

[5] Family Law Amendment Act 2000 (which took effect from 27 December 2000);

[6] See Thorne v Kennedy [2017] HCA 49 (8 November 2017) referred to in (2) above; see also Wallace & Stelzer and Anor [2013] FamCAFC 199 (‘the pole dancer case’);

[7] See section 90G and section 90UJ of the Act;

[8] See section 90K and section 90UM.

Adoption News

Adoption has been in the news recently with changes to the NSW adoption laws and recommendations for a national adoption law.

Currently the laws for Adoption in Australia vary from state to state rather than an Australia wide law that is easily navigated. The adoption system as it stands in Australia does not guarantee a stable healthy environment for the more than 47,000[1] children living in out-of-home care.

Adopting a child is a very sensitive topic; there are many reasons why a child could be in “out of home care” and may become available for adoption. The situation can be very stressful for both birth parents and those wishing to adopt.

Changes to NSW Adoption Laws

Recently the NSW government changed the adoption laws to allow Adoption without parental consent. The changes impose two-year deadlines on permanency decisions and narrow the grounds for these decisions to be varied or challenged.

The changes are outlined below.

The changes to the Adoption laws were approved by the NSW Government on Thursday 22nd November amidst amongst much consternation from community organisations. Aboriginal leaders and community members say the changes will lead to another stolen generation. Aboriginal children and young people make up almost 40% of those in the out-of-home care system.[3]


Federal Parliamentary Committee [4]

An Inquiry into local adoption was opened in March 2018 by the Commonwealth Social Policy and Legal Affairs Committee. Its report was released today the 26th Nov 2018. The Committee has recommended the Federal Government work with the States and Territories to enact a national adoption law, after committing to a national adoption framework. “The system, as we currently have it in Australia, is trapping many of these children into an unhealthy cycle,” Julia Banks the Liberal MP said while launching the report in Canberra on Monday.[5]

A national adoption law would make the current state-based system less complex, more consistent and lead to more adoptions.

At elringtons we have significant experience in adoptions for children under 18, adults and all other family matters regarding parenting issues. If you would like legal advice on any of these issues please contact our family law team.

For more information on or to make an appointment in either our Canberra or Queanbeyan office please do not hesitate to contact Carlos Turini:

+61 2 6206 1300 | e: info@elringtons.com.au


[1] https://www.sbs.com.au/news/committee-recommends-establishing-national-adoption-law

[2] https://legislation.nsw.gov.au/#/view/bill/8b9dcb7d-133a-4db3-ad71-fe82fb7d6111

[3] https://www.theguardian.com/australia-news/2018/nov/23/adoption-without-parental-consent-legalised-in-nsw

[4]https://www.aph.gov.au/Parliamentary_Business/Committees/House/Social_Policy_and_Legal_Affairs/Localadoption

[5] https://www.sbs.com.au/news/committee-recommends-establishing-national-adoption-law

Court should become the last resort for resolving family parenting and property disputes!

The Crisis in the Family Court System

There are numerous media reports about the fact that the Family Court system is in a state of crisis. There are long delays in the resolution of parties’ disputes by the Court and this causes much angst for the parties and their children often resulting in mental health issues for all involved but is especially concerning in children. One recent article on the topic is from Katherine Gregory entitled Judges go public: Family Court shouldn’t be ‘making do’ . Fingers are pointed in various directions to cast blame depending on who you listen to including that there is a chronic lack of funding and resources, that the aggressive attitude of some lawyers is to blame and so on.

As a significant measure, in an attempt to address the existing crisis in the Family Court System, the Federal Attorney General announced some months ago, quite unexpectedly and without much apparent consultation, the merger of the Family Court with the Federal Court. There has been substantial criticism about this measure, for example by the Law Council of Australia President, Morry Bailes who stated:

“Our current understanding is the Australian Government will not make any new appointments of judges to the specialised Division 1 of the new court, meaning the quality of the family law justice system would reduce under this change. Australians may no longer have access to a court that specialises in family law.”

The message from various Judges and other people involved in the Family Court system is that a Court having to resolve a family law dispute should be the last resort.[1]

Alternative Dispute Resolution

Former Federal Circuit Court Judge, now barrister, Stephen Scarlett suggested that alternative dispute-resolution methods, like mediation and arbitration should be more prevalent so only matters needing a judicial decision made it to court in the first place:

“Only those that can’t be resolved that way should go to a hearing.” [2]

This would not only reduce the load on the courts but offer faster and often more effective means to achieve suitable outcomes for the parties in dispute. Alternative dispute resolution offers many ways to resolve family matters quickly, fairly and inexpensively through mediation and negotiation.

In some circumstances the ADR process cannot be applied:

  • There always must be a level playing field between the parties involved in the process.
  • Sometimes, the parties are not suitable.
  • There may be a history of domestic violence in a case which makes the prospect of parties having to negotiate via an ADR process inappropriate.

However, in the clear majority of cases, about ninety-five per cent (95%) parties want to resolve their dispute and they manage to resolve their family law dispute before the matter reaches a final hearing. [7]

The family lawyers at elringtons are committed to following all avenues of negotiation and mediation before suggesting court proceedings.  Elringtons has two family lawyers, Carlos and Anya, who are nationally accredited mediators , Carlos is also a NSW Family Law Accredited Specialist.

To contact Carlos or Anya or to make and appointment in either our Canberra or Queanbeyan office:

Carlos Turini: Accredited Specialist Family LawSpecialist accreditation and Nationally Accredited Mediator

e: cturini@elringtons.com.au  | p: +61 2 6206 1300

Anya Aidman: Family Law Solicitor and Nationally Accredited Mediator

e: aaidman@elringtons.com.au | p: +61 2 6206 1300

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[1] https://www.lawcouncil.asn.au/media/media-releases/as-it-stands-merging-courts-unlikely-to-alleviate-family-law-crisis

[2] https://www.abc.net.au/news/2018-10-31/judges-go-public-family-court-shouldnt-be-making-do/10450514

[3] https://www.ag.gov.au/LegalSystem/AlternateDisputeResolution/Pages/default.aspx

[4] https://elringtons.com.au/2018/11/family-law-dispute-resolution/

[5] http://www.mondaq.com/australia/x/170796/Arbitration+Dispute+Resolution/Alternative

[6] Ibid.

[7] https://elringtons.com.au/2011/03/family-law-settle-out-of-court/

Family Law Dispute Resolution

Resolving family disputes without going to court!

Parties involved in a family law disputes are encouraged to attempt to negotiate a solution to parenting arrangements  and property settlements between themselves without resorting to taking their matter to court.  This process is called Family dispute resolution (“FDR”).  FDR, before parties commence court proceedings, may take many forms:

  1. Parties negotiating by themselves;
  2. Parties negotiating with the assistance of a mediator;
  3. Parties negotiating with the assistance of their lawyers and a mediator;
  4. Parties negotiating with the assistance of their lawyers without a mediator (“four-way meeting”);
  5. Parties engaging on collaborative law;
  6. Parties engaging an arbitrator to rule on their dispute.

In all cases, parties should obtain legal advice about their rights, obligations and prospects before they embark on the FDR process.

Is Family Law Dispute Resolution compulsory?

Whilst it is not compulsory for parties to engage in FDR before people commence family law property proceedings in court, it is compulsory to do so for parenting matters before starting court proceedings unless the matter falls under some specific exceptions as, for example, in urgent cases or domestic violence cases. It is also a requirement for those seeking changes to an existing parenting order.

Dispute resolution has many advantages and it’s a better method to resolve family law disputes because it is normally:

  • Cheaper
  • Quicker;
  • More flexible
  • The range of outcomes available to parties in FDR is wider ranging than what a court may do
  • Parties involved in FDR are only limited by their own imagination with regard to the possible outcomes that may be achieved

Two of our solicitors at elringtons’ Lawyers, Carlos Turini, Director and Anya Aidman, Associate, are specialist family lawyers and are also accredited as mediators by the Resolution Institute under the National Mediator Accreditation Standards (NMAS).

Carlos and Anya are experienced litigators and court advocates. They engage in the FDR process at times as mediators and at times advising their clients and representing them in the process. They find the discipline of dispute resolution satisfying as practitioners as they are able to assist their clients to advise them and represent them and to devise together with their clients tactical and strategic considerations during the dispute resolution process.

To contact Carlos or Anya or to make and appointment in either our Canberra or Queanbeyan office:

Carlos Turini: Accredited Specialist Family LawSpecialist accreditation and Nationally Accredited Mediator

e: cturini@elringtons.com.au  | p: +61 2 6206 1300

Anya Aidman: Family Law Solicitor and Nationally Accredited Mediator

e: aaidman@elringtons.com.au | p: +61 2 6206 1300

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