Financial agreements from 27 December 2000

Part VIIIA — Financial Agreements was inserted into the Family Law Act 1975 (Cth) (FLA) in 2000 and sets out the provisions that govern the making of private agreements, called “financial agreements” or “binding financial agreements”, between parties. In 2009 Pt VIIIAB — Financial Agreements was inserted to extend the application of financial agreements to those either considering entering into or exiting a de facto relationship.

Section 4AA of the FLA outlines the factors which may indicate the existence of a de facto relationship where a couple lives together on a genuine domestic basis.

Every financial agreement must clearly identify under which provision it is made, although following Piper and Mueller (2015) 54 Fam LR 369, it is possible that one document may incorporate an agreement made under two different sections. In that case, the parties were in a de facto relationship but intending to marry and the agreement referred to ss 90UC and 90B.

The significant provisions are:

• • Pt VIIIA — Financial agreements between heterosexual and same sex couples:
• • ◦ intending to marry (s 90B);
• • ◦ who are married and who may either be not separated, or have separated (s 90C); or
• • ◦ who are divorced (s 90D); and
• • Pt VIIIAB — Financial agreements between heterosexual and same sex couples who are intending:
• • ◦ intending to enter into a de facto relationship (s 90UB);
• • ◦ in a de facto relationship (s 90UC); or
• • ◦ are separated: s 90UD.

Financial agreements oust the jurisdiction of the court to make orders with respect to matters dealt with in them. The jurisdiction is not ousted in the same way under Pt VIIIA as under Pt VIIIAB. Division 2 of Pt VIIIAB, which deals with maintenance, and property of de facto couples does not apply to the following matters listed in s 90SA(1) if they are dealt with in the agreement:

Financial agreements between married parties

Part VIII of the FLA which deals with property and spousal maintenance of married couples, does not apply to:

• • financial matters to which a financial agreement that is binding on the parties to the agreement applies; or
• • financial resources to which a financial agreement that is binding on the parties to the agreement applies. See s 71A(1) of the FLA.

The phrase “financial matters” is defined in s 4(1) as:

• • in relation to the parties to a marriage — matters with respect to:
• • ◦ the maintenance of one of the parties;
• • ◦ the property of those parties or of either of them; or
• • ◦ the maintenance of children of the marriage; and
• • in relation to the parties to a de facto relationship — any or all, of the following matters:
• • ◦ the maintenance of one of the parties;
• • ◦ the distribution of the property of the parties or of either of them; or
• • ◦ the distribution of any other financial resources of the parties or of either of them.

The matters which can be dealt with in a financial agreement are different under Pts VIIIA and VIIIAB as a consequence of the different wording and construction of the ousting provisions. Section 90SA reflects those financial matters which a court may not consider in a binding financial agreement between de facto parties. However, a party is not prevented from commencing proceedings if the agreement is found not to be binding. Notably the s 90SA, FLA provisions do not deal with the maintenance of children of the relationship.

Practice Tip: Financial agreements are frequently known as “binding financial agreements” (BFAs) even though that term is not used in the legislation. Although there are many instances of courts setting aside agreements, having found them to not bind the parties, provided all the requirements under s 90G, FLA are met, parties signing such a private financial agreement should understand that they will be bound by the terms of their agreement.

Under s 90KA, FLA a party can seek to enforce the terms of an agreement and a court can find that it would be unjust and inequitable to enforce the terms if the agreement were not enforced.

Financial agreements between de facto partners

Part VIIIA was substantially expanded in 2009 by the insertion of Pt VIIIAB. Division 4 of that part relates specifically to financial agreements. The division extends coverage of the FLA in relation to financial agreements to include financial agreements between de facto partners in all states except Western Australia. It applies to couples who are in a relationship, or whose relationship ended, after 1 March 2009 (or 1 July 2010 in the case of South Australia). The provisions allow for the making of a financial agreement between de facto couples who:

• • are contemplating a de facto relationship (s 90UB);
• • are in an existing de facto relationship (s 90UC); and
• • have separated on or after 1 March 2009: s 90UD.

For a Pt VIIIAB financial agreement to be binding it must meet the requirements of s 90UJ(1), which are similar to the s 90G(1) requirements for Pt VIIIA financial agreements. If a financial agreement does not meet the requirements of s 90UJ(1) it may still be binding under s 90UJ(1A), (similar to s 90G(1A)) if the court finds it is unjust and unequitable for the agreement not to be binding.

The recitals of a Pt VIIIAB financial agreement usually include the commencement date of the relationship and, if relevant, when it ended. As one party may later challenge the length of the relationship, (or even the existence of it), the recitals ought to ideally address the circumstances of the relationship. Even if a Pt VIIIAB financial agreement is later set aside, the recitals may still be useful.

The FLA specifically provides that “a de facto relationship can exist even if one of the persons is legally married to someone else or in another de facto relationship”: s 4AA(5), FLA. It is more difficult, but not impossible, for a de facto relationship to be established whilst another de facto relationship is on foot. For example, it is harder to show mutual commitment to a shared life under s 4AA(2)(f) and the public aspects of the relationship under s 4AA(2)(i). See Jonah and White [2012] FamCAFC 200; (2012) 48 Fam LR 562.

Unlike married couples, when commencing proceedings, de facto parties are required to have a geographic connection with the jurisdiction under ss 90RG and 90SD in respect of any claim.

In Western Australia, de facto partners may enter into financial agreements pursuant to Pt 5A, Div 3 of the Family Court Act 1997 (WA), which allows for agreements between couples who:

• • are contemplating a de facto relationship (s 205ZN);
• • are in an existing de facto relationship (s 205ZO);
• • have separated on or after 1 December 2002: s 205ZP.

The definition of “de facto relationship” includes same sex couples: ss 4AA(1) and 13A Interpretation Act 1984 (WA). See De facto law under the Family Law Act. See also De facto law — state based.

Practice Tip: The Family Court of Western Australia will only have jurisdiction to determine the property settlement and maintenance rights of couples in a de facto relationship if:

• • one or both of the parties were resident in Western Australia on the day the application was made;
• • either both parties have resided in Western Australia for at least one third of the duration of the relationship or substantial contributions (of the kind mentioned in s 205ZG(4)(a)) have been made in the state by the person making the application; and
• • one of the following applies:
• • ◦ there has been a de facto relationship between the parties for at least 2 years;
• • ◦ there is a child of the relationships (under the age of 18) and failure to deal with the matter would result in a serious injustice to the partner caring or responsible for that child; or
• • ◦ the person making the application has made substantial contributions (of the kind mentioned in s 205ZG(4)(a), (b) or (c)) and failure to make an order would result in serious injustice to that person.

Statutory requirements for all financial agreements

The statutory requirements for a financial agreement to be binding on the parties in marital relationships are identical and are found in s 90G, FLA. The statutory requirements for a financial agreement to be binding on the parties in de facto relationships (in all states except Western Australia) are identical and are found in s 90UJ, FLA. The statutory requirements for financial agreements to be binding on the parties in de facto relationships in Western Australia largely mirror the provisions in the FLA and are found in s 205ZS of the Family Court Act 1997 (WA).

An advantage to a financial agreement is that no court proceedings are required; however, to ensure that parties are not coerced into entering into an agreement that is not favourable to them and is less than they would obtain should the matter proceed through the court, the FLA and Family Court Act 1997 (WA) require strict compliance with a number of procedural matters including (generally) the requirements that:

• • the agreement must be in writing;
• • independent legal advice be provided to each party about the effect of the agreement on the rights of that party and about its advantages and disadvantages; and
• • the legal advisor for each party certify that legal advice has been provided to their client. See s 90G, FLA.

Although a legal practitioner must give the appropriate advice on the effect of the agreement on their client, they no longer need to be satisfied that they believe the agreement is fair and equitable.

A financial agreement that is held to be binding will oust the jurisdiction of the court in so far as the provisions of the financial agreement allow. The relevant statutory provisions are s 90K (s 90UM in relation to de facto relationships) and s 205ZV of the Family Court Act 1997 (WA) in relation to de facto relationships in Western Australia. A financial agreement that is not held to be binding can be set aside by the court see ss 90G and s 90K in relation to marital relationships; ss 90UJ and 90UM in relation to de facto relationships; ss 205ZS and 205ZV in relation to de facto relationships in Western Australia.

Financial agreements that are binding only oust the court's jurisdiction with respect to financial matters or resources expressly dealt with in the agreement unless the relevant statutory provisions apply. Those provision are:

• • s 90F (in relation to marital relationships);
• • s 90UI (in relation to de facto relationships); or
• • s 205ZR (of the Family Court Act 1997 (WA) in relation to de facto relationships in Western Australia).

For example, some financial agreements only deal with spousal maintenance, not property, or if they do deal with property it may only deal with some of the parties’ property (eg it is common for a financial agreement to seek to exclude a particular asset from a property settlement with the balance of the parties’ asset pool to be determined by the court). A financial agreement that is set aside has the effect of not affecting the jurisdiction of the Family Court to make whatever orders for maintenance or property settlement is has the power to do. Sometimes the financial agreement may be relevant to proceedings, eg the recitals may be evidence of the parties’ income, contributions or property pool was at a certain time or the terms of the agreement may be relevant when the Court is considering whether it is just and equitable to make orders pursuant to s 79 of the FLA.

There have been many cases heard in the Full Court of the Family Court in relation to what “strict compliance” is. Almost all cases heard deal with agreements not complying with s 90G of the FLA or complying with an outdated s 90G.

In the matter of Black v Black (2008) 38 Fam LR 503, the Full Court overruled a previous decision of single judge not to set aside a financial agreement where there had not been strict compliance with s 90G. The basis of this decision was that the effect of the agreement was to oust the jurisdiction of a Family Court to make financial orders and therefore strict compliance with the formal requirements of s 90G of the FLA was required.

After the decision of Black v Black, amendments to s 90G came into effect as a result of the introduction of the Federal Justice System Amendment (Efficiency Measures) Act 2009 (Cth) on 4 January 2010. The amendments provided that even if there is not strict compliance with the requirements of s 90G(1), as long as the agreement is signed by all parties and it would be unjust and inequitable if the agreement was not binding, then the court may make an order under s 90G(1B) declaring that the agreement is binding on the parties to the agreement.

Below is a comparative table of the main provisions relating to financial agreements in relation to:

• • married couples in all states and territories;
• • de facto couples in all states and territories except Western Australia; and
• • de facto couples in Western Australia.

See Compulsory advice and Definitions and recitals.