A Binding Financial Agreement (BFA) can provide finality and certainty following separation, but not every agreement will ultimately remain binding and enforceable.
Despite the name, a binding financial agreement is not always guaranteed to remain binding forever.
Under the Family Law Act 1975 (Cth), the Court has power in certain circumstances to declare a BFA not binding or to set it aside. This usually occurs where there are serious issues surrounding the legal advice provided, the financial disclosure exchanged, or the circumstances in which the agreement was signed.
If you are concerned that a BFA was entered into unfairly or without proper advice, it is important to obtain legal advice early. Challenges to financial agreements are often complex and highly dependent on the individual circumstances of each case.
What is a Binding Financial Agreement?
A binding financial agreement is a private agreement dealing with financial matters between parties to a marriage or de facto relationship.
BFAs are commonly used to:
- finalise property settlement matters;
- deal with spousal maintenance obligations;
- protect assets or inheritances;
- avoid future Court proceedings; and
- formalise financial arrangements following separation.
If properly prepared, a BFA can prevent either party from later bringing a claim for property settlement or spousal maintenance through the family law courts.
However, strict legal requirements apply before a financial agreement will be considered binding and enforceable.
When can a BFA be set aside?
The Family Law Act allows the Court to set aside a binding financial agreement in a range of circumstances.
Some of the more common issues include:
- inadequate or incomplete financial disclosure;
- problems with the legal advice provided;
- pressure or unfair conduct surrounding the signing of the agreement;
- fraud or non-disclosure;
- unconscionable conduct; and
- situations where the agreement is otherwise impracticable or unjust.
Importantly, a BFA will not be set aside simply because one party later regrets the outcome or considers the agreement to be unfair.
The Court will usually examine the broader circumstances surrounding the negotiation and execution of the agreement.
Problems with legal advice
One of the most common issues raised in BFA disputes is whether proper independent legal advice was provided.
Under the Family Law Act, each party must receive independent legal advice before signing the agreement. That advice must address:
- the effect of the agreement on the party’s rights; and
- the advantages and disadvantages of entering into the agreement.
Many people assume that signing a certificate from a solicitor automatically means the agreement is valid and enforceable. That is not always the case.
Recent decisions have confirmed that the Court may look beyond the signed certificates and examine the substance of the advice actually provided.
For example, in Dragomirov & Dragomirov [2024] FedCFamC1A 187, the Full Court confirmed that the Court may consider the surrounding circumstances, including file notes, oral discussions, written advice and whether the party genuinely understood the practical effect of the agreement.
Similarly, in Abrum & Abrum [2013] FamCA 897, the Court stated that legal advice must be real and meaningful and directed to the party’s actual circumstances and rights, rather than simply advising in a general sense that rights are being waived.
The Court may therefore consider matters such as whether the party understood the rights they were giving up, whether they were given sufficient time to review the agreement, and whether the solicitor had enough financial information available to properly advise them.
What if disclosure was incomplete?
Financial disclosure is a critical part of any property settlement process.
A person entering into a BFA should generally have enough information available to properly understand the other party’s financial position before signing the agreement.
Issues can arise where:
- assets are not disclosed;
- supporting financial documents are not provided; or
- one party does not properly understand the financial position they are agreeing to.
Importantly, not every disclosure issue will automatically invalidate a BFA.
The Court will often look at the broader factual circumstances, including whether opportunities existed to seek further information, the level of legal representation involved, and whether the alleged non-disclosure was material to the agreement itself.
In Suess & Suess [2024] FedCFamC1F 175, the Court considered allegations of inadequate disclosure and deficiencies in the legal advice process. Despite concerns regarding aspects of the advice and file management, the Court ultimately upheld the agreement after considering the totality of the circumstances.
Pressure, duress and unconscionable conduct
Some financial agreements are signed in circumstances involving significant emotional or financial pressure.
This may occur where:
- one party feels rushed into signing;
- the agreement is presented as effectively non-negotiable;
- there is financial or emotional dependency between the parties; or
- there is insufficient time to obtain proper legal advice.
The High Court decision of Thorne v Kennedy [2017] HCA 49 remains one of the leading authorities in this area.
In that case, the Court examined issues including pressure, inequality of bargaining power, dependency and whether the wife had any real practical choice but to sign the agreement.
The High Court ultimately set aside the agreement after finding that the circumstances amounted to undue influence and unconscionable conduct.
Importantly, pressure alone will not automatically invalidate a BFA. However, when combined with inadequate advice, poor disclosure or unequal bargaining power, those issues may become highly significant.
Will the Court automatically set aside an unfair agreement?
No.
A BFA is not automatically set aside simply because the outcome appears more favourable to one party.
The Court will generally examine:
- the negotiations leading to the agreement;
- the parties’ understanding of the agreement;
- the legal advice provided;
- the disclosure exchanged; and
- the overall circumstances in which the agreement was signed.
Even where deficiencies exist, the Court may still decide that the agreement should remain binding depending on the broader factual circumstances.
Why early legal advice matters
Disputes involving binding financial agreements can quickly become complicated, particularly where there are disagreements about legal advice, financial disclosure, or the circumstances in which the agreement was signed.
The strength of any challenge may depend heavily on the available evidence, including solicitor file notes, correspondence exchanged during negotiations, disclosure documents and the surrounding circumstances at the time the agreement was signed.
In many cases, obtaining the former solicitor’s complete file is an important first step.
An experienced family lawyer can help assess:
- whether the agreement is likely to remain binding;
- whether there are grounds to challenge the agreement;
- whether the matter may be resolved through negotiation; and
- the risks and costs involved in Court proceedings.
Speak with an experienced family lawyer
If you are concerned that a BFA was entered into unfairly, without proper advice, or without full financial disclosure, it is important to obtain legal advice tailored to your circumstances.
At The Family Lawyer, we assist clients with:
- reviewing binding financial agreements;
- advising on whether a BFA may be challenged;
- negotiating revised financial settlements; and
- representing clients in family law proceedings involving BFAs.
Every matter depends on its own facts. Obtaining early legal advice can help you understand your options and protect your position moving forward.