When a Binding Financial Agreement Made Under the Family Law Act is Not Binding

The Family Law Act provides that the parties to a marriage may enter into a Financial Agreement that regulates what should happen with their property on the termination of the marriage. Similar provisions apply to de facto relationships. A binding Financial Agreement ousts jurisdiction of the Court provided it is a valid agreement.

To be valid the agreement must be entered into after independent legal advice has been given by a legal practitioner, with the advice dealing with the rights of the parties and the advantages and disadvantages of the agreement. The advice must be provided prior to signing the agreement. It is also a requirement that there is a signed statement by the legal practitioner providing that the advice has been given prior to the signing of the agreement.

The question of determining whether a Financial Agreement is valid and enforceable is determined by a Court, applying the principles of law and equity that are applicable in determining the validity and enforceability in affected contracts. This means that any agreement that was obtained by unconscionable conduct or undue influence or duress is liable to be set aside.

In a recent case, where the wife had in fact received advice not to enter into the agreement, the trial judge found that the wife had no choice but to enter into the agreement and set out six reasons for that conclusion. The trial judge concluded “(i) her lack of financial equality with her husband; (ii) her lack of permanent status in Australia at the time; (iii) her reliance on her husband for all things; (iv) her emotional connectedness to their relationship and the prospect of motherhood; (v) her emotional preparation for marriage; and (vi) the “publicness” of her upcoming marriage.” Thorne v Kennedy [2017] HCA 49 (8 November 2017). So, under those circumstances, the trial judge found that the agreement should be set aside for duress and undue influence and this decision was upheld by the High Court of Australia.

Contact Rita Derek of this firm for further advice.

Posted in: Derek Legal Blog at 11 December 17

Just and Equitable: A Condition Precedent to Making a Property Order Under the Family Law Act

Section 79 of the Family Law Act provides for a Court exercising jurisdiction under the Act, to make an Order altering the interests of parties to a marriage in property to which one or both of those parties are entitled.

In exercising that jurisdiction, the Court takes a tour step approach. Firstly, it assesses the extent of the property of the parties and determines its value. Secondly, it considers what contributions have been made by the parties including direct and indirect contributions of a financial character and non-financial character and contributions to the welfare of the family including contributions as homemaker and parent. Thirdly, it considers the circumstances which relate to the present and future needs of the parties and their means and resources, earning capacity both actual and potential. Fourthly, it considers, in relation to the findings in the first three steps, what Order is just and equitable in all the circumstances of the particular case.

Note that the last step requires that the finding is just and equitable. However, Section 79(2) of the Act provides that the Court shall not make an Order under Section 79 unless it is satisfied in all the circumstances that it is just and equitable to make the Order.

The High Court has held that Section 79(2) must be satisfied first before the Court can embark on the four-step exercise.

This means that there is not an absolute right to an Order altering property interests at the end of a marriage or a de facto relationship. In a short marriage the circumstances may be such that it would not be just and equitable to alter the parties’ property interests, for instance, where one party entered the marriage with all or most of the property and the other party contributed little during the course of the marriage. Alternatively, where in a long marriage, the conduct of the parties is such that may have kept their property and financial resources separate and not have made contributions towards the others parties’ property.

In many cases however, the requirement of being just and equitable is readily satisfied, for instance, where the parties have been together, jointly acquired and used the property and because of the breakdown of the marriage or the de facto relationship, the joint use is no longer possible.

Contact Rita Derek of this firm for further advice.

Posted in: Derek Legal Blog at 06 December 17