Get the Facts on Whether a Binding Financial Agreement Needs to Go to Court
In Australia, a binding financial agreement (BFA) does not generally need to go to court. A BFA is a legally binding document between two parties, usually drawn up by lawyers, that outlines how assets and property will be divided if a relationship ends, whether a marriage or a de facto relationship.
According to the Australian Family Law Act of 1975, these agreements may be made by married couples (Part VIII) or de facto couples (Division 4 of Part VIIIAB) before, during, or after a relationship. Many couples find it a practical choice at the start of the relationship, as having an agreement in place can avoid emotional or lengthy property settlements if relationship issues arise.
They cover a range of situations, including property settlements, superannuation entitlements, and spousal maintenance arrangements. A child support or child maintenance order can also be made in the form of a Limited Child or Binding Child Support Agreement.
No Court Involvement: Private Agreements
When parties reach a mutual agreement and create a BFA, it is typically done privately, without requiring court proceedings. These agreements can be established at any stage of the relationship—before moving in together (Cohabitation Agreements), during the relationship (postnuptial Agreements), or when separating (settlement agreements or separation agreements).
A solicitor will draft the agreement to ensure it complies with the Family Law Act and is enforceable. For a BFA to be legally binding, both parties must receive independent legal advice, which ensures they fully understand the agreement’s implications.
After the agreement is signed, it generally remains a private matter, as long as both parties continue to abide by it. No court action is required unless there is a dispute.
When Court Intervention is Needed
However, there are circumstances where the court may become involved. If one party wants to challenge or set aside the BFA, they may file an application with the Family Court or Federal Circuit Court.
This usually occurs when one party argues that the agreement was signed under duress, there was a failure to disclose significant assets, or the terms are deemed unjust. The court will then review the BFA in line with legal principles, as seen in cases like Thorne v Kennedy.
Either party can request an alteration of the agreement or a termination agreement but must agree with each other on the terms to avoid litigation. Using family dispute resolution services or negotiating with the assistance of family lawyers may offer a resolution for parties that avoids court.
The court may also become involved if the BFA is deemed to have a significant impact on family law matters such as property division or superannuation fund distribution, especially if it conflicts with other arrangements such as consent parenting orders, or if family violence matters have been demonstrated.
In rare cases, particularly in Western Australia, the Supreme Court of Western Australia may hear certain family law disputes due to unique jurisdictional rules. A BFA may also be scrutinised if it doesn’t follow proper legal guidelines, as outlined in the Family Law Practice Direction or the Family Court Act.
Property and Asset Division
A BFA can address various aspects of the couple’s financial arrangement, including property distribution and division of the asset pool, which may consist of the family home, investments, and other property like family farms. If a significant asset structure is in place, including superannuation entitlements and income earner protections, careful drafting by a solicitor is essential to ensure fairness and compliance with the law.
In such instances, when a party disputes the market value of assets or other financial information (like taxation returns), they may take the issue to court for review, leading to possible court delays and court action to resolve the dispute.
Practical Advice and Legal Services
If you are considering a BFA, it is advisable to seek expert legal advice to ensure the agreement is sound and enforceable. If complex inheritance or family wealth matters arise, refer to the Attorney-General’s Department Guide – Property & Financial Agreements or consult a succession lawyer for further guidance.
Conclusion
A binding financial agreement is a flexible and private way to settle property arrangements without involving the courts. However, if one party challenges the agreement, or if there are legal concerns regarding its fairness or execution, the matter could end up in court. For this reason, it’s essential to have the BFA properly drafted and legally sound from the start.
If you want to understand more about when a Binding Financial Agreement (BFA) may need to go to Court, reach out to our team today.