Binding Financial Agreements (“BFAs”) were intended to provide some certainty and control to married and de facto spouses who want the option of determining, by agreement, how to deal with their property, financial and other issues in the event of a future separation (commonly known as “pre-nuptial agreements”), or directly after separation. However, it is becoming increasingly apparent from some of the court cases that the law surrounding BFAs continues to be complex and ever-changing. The effectiveness of BFAs is uncertain as the case law shows that they can be challenged and/or set aside by the Family Court, sometimes on fairly technical grounds (such as drafting errors within the document) and, at other times, because they are impracticable due to circumstances that have arisen since the BFA was made.
Whilst recently, there were certain changes made to the law aimed at making it more difficult to set aside BFAs on merely technical grounds, there continue to be cases which challenge how effective and final BFAs really are.
BFAs, particularly those dealing with future events (“pre-nuptial agreements”) can be problematic from a practical point of view. It is often difficult for a couple at the beginning of their relationship, to reach a suitable, fair and practical agreement as to the division and distribution of assets and liabilities at some undefined point in the future, as the circumstances of that particular couple may change, fairly dramatically over time, thereby necessarily affecting the practicality and fairness of the BFA, for example, due to the birth of children. A couple wishing to rely on a BFA would need to review the BFA and seek fresh legal advice as to its practicality and effectiveness where there is a significant change of circumstances, otherwise they risk that the BFA is not practicable or is set aside by the Court.
There are several other factors which could lead to a BFA being set aside, including a non disclosure of a material fact. It is of the utmost importance when preparing a BFA to ensure that there is a full and frank disclosure of all the parties’ assets, liabilities and financial resources. Parties often underestimate the importance of providing complete and accurate financial details. However a failure to provide a full and frank disclosure could be a factor in later having that BFA set aside by the Court on the application of one party.
Therefore before deciding whether to enter into a BFA, ensure that you obtain the appropriate legal advice and that you completely disclose all the relevant information to your solicitor to enable the provision of that advice, and to determine if a BFA is right for you. Please contact Nathan Avery-Williams of our office who would be more than happy to answer any questions you may have.