How binding is a binding financial agreement?

The Family Law Act allows couples to decide in advance how their property will be split if they separate. Recently, the Family Court has set aside a number of these agreements. This leaves the parties to fight out property settlement through the Courts, which is exactly what they tried to avoid by signing the agreements. How can you avoid this?

A fight through the Family Court can be expensive and emotionally draining. This can generally be avoided by the parties entering into a Binding Financial Agreement (BFA) either before, during, or even after the end of the marriage. This gives peace of mind to couples, especially those entering a second marriage, where they wish to preserve the nest egg from their first marriage. Even a party whose assets are smaller than their partner will often prefer the certainty of a BFA than the possibility of a property dispute.

At one extreme is what came to be known as the “pole dancer case”. A 51-year-old man married a pole dancer, his second wife. He was then worth over $16 million, and she had no assets of value. They signed a BFA under which he agreed to give her $3.25 million if the marriage broke down. They separated after only two years.

The court found that the agreement was binding despite the husband’s arguments that it was grossly unfair, and that $3.25 million was far too much for a two-year marriage.

More recently, a number of BFAs have been set aside where a party, usually the husband, has bullied the other party into signing. There have also been cases where a party, again, usually the husband, has hidden financial information from the other.

The solution is to ensure that all significant financial information is fully disclosed in the agreement, and that each party has proper family law advice from an independent solicitor before signing. Also, if children are involved, the agreement must be fair between the parties. If so, the couple can enjoy their relationship, knowing that they will never be exposed to costly property settlement proceedings in the future.

For more information please contact Fiona Hoad, Lauren Moscovis or Layla Doumit





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