Case Overview
A 2023 decision of the Federal Circuit and Family Court of Australia declared a financial agreement binding on both parties, notwithstanding a finding that one party had not received the independent legal advice required under section 90G of the Family Law Act 1975 (Cth). The Yingke Sydney team acted for the successful respondent in these proceedings.
Under the Family Law Act, parties to a marriage may enter into a financial agreement, commonly known as a binding financial agreement or BFA, to determine how their property and financial resources will be divided in the event of separation. A BFA operates as an alternative to court-ordered property settlement and, if validly executed, ousts the jurisdiction of the court to make property orders.
For a financial agreement to be binding under section 90G(1) of the Act, strict requirements must be met. Most importantly, under s 90G(1)(b), each party must receive independent legal advice from a legal practitioner about the effect of the agreement on their rights and about the advantages and disadvantages of entering into the agreement before signing.
The central question in this case was whether a financial agreement remained binding where one party had not received independent legal advice that satisfied the requirements of section 90G(1)(b) of the Act.
The Court’s Decision
The Court found that the advice provided to the applicant did not meet the statutory standard. For advice to comply with section 90G(1)(b), it must provide the party with advice about the effect of the agreement on the rights of that party and the advantages and disadvantages of making the agreement to that party at the time the advice was provided. This requires the advising practitioner to have a thorough understanding of the parties’ assets, liabilities, and contributions, without which it is impossible to properly advise on the effect of the agreement or its advantages and disadvantages. In this case, no financial disclosure had been obtained, no balance sheet prepared, and the conference in which advice was purportedly given was of insufficient length to have covered the requisite ground.
Section 90G(1A)
Despite finding that the independent advice requirement had not been met, the Court declared the agreement binding under section 90G(1A) of the Act which allows a court to declare a financial agreement binding even where one or more of the section 90G(1) requirements are not satisfied, if the court is satisfied that it would be unjust and inequitable for the agreement not to be binding.
Two factors were decisive
First, the written advice provided to the applicant, while falling short of the full statutory standard, was in substance a clear and firm recommendation not to enter into the agreement. The applicant proceeded to sign the agreement regardless, responding in writing to confirm his agreement. The Court found that even had the applicant received fully compliant independent advice, he would have entered into the agreement in any event.
Second, the agreement had been substantially performed by both parties, each had acted on its terms and received the benefit of its provisions.
In those circumstances, the Court found it would be unjust and inequitable for the applicant to be permitted to resile from an agreement he had freely chosen to enter into, been advised against signing, and substantially performed.
Financial agreements are powerful instruments that permanently affect a party’s property rights. This case illustrates that courts will look beyond technical non-compliance where the circumstances make it clear that the agreement was freely entered into and substantially performed. It also serves as a reminder of the high standard required of legal practitioners providing independent advice. Parties considering entering into a financial agreement should ensure they receive thorough, well-documented independent legal advice before signing.
Disclaimer
This article does not give legal advice. It is intended to provide general information in summary form on legal topics, current at the time of first publication, for general information purposes only. The contents do not constitute legal advice, are not intended to be a substitute for legal advice and should not be relied upon as such. Formal legal advice should be sought in particular matters.