The Pitfalls Of Financial Agreements – Australia
Financial Agreements are agreements made under the Family Law Act 1975 (Cth). There are 3 types of Agreements: one that can be entered into in contemplation of marriage, one entered into during the course of marriage or one after divorce. The same applies for de facto relationships.
The purpose of the Agreement is to enable the parties to privately agree on what should happen in the event of a break up. Its purpose is to oust the Courts jurisdiction to make orders in respect to property.
A client is at risk that the Agreement may be set aside by one party making an application to the Court to set aside the Agreement on the basis that no proper advice was given to them at the time of signing the Agreement.
Another ground for setting aside the Agreement can be that the Agreement wasn’t executed properly at the fault of the acting solicitor.
This can have great ramifications for a party who wishes to enforce the Agreement against a party whose interests is to have the Agreement set aside or declared not binding.
It is found that 70% of Law Cover claims against Solicitors are based on situations where the Courts have declared the Financial Agreement not binding due to a negligent act by the acting solicitor.
Section 90G of the Act sets out the factors that make a Financial Agreement binding. As a client, you do not need to be made aware of those provisions. This is because you would be relying on your solicitor to have adequate knowledge of this section.
A solicitor advising on a Financial Agreement however should know this section back to front. Most solicitors provide advice without taking notice of the implications imposed on a solicitor in this section.
This can be seen as the Courts have construed Financial Agreements not to be binding in cases where:
- the advice was given to the husband by a lawyer who was not an Australian lawyer; Ruane & Bachmann-Ruane [2009] FamCA 1101
- the agreement did not refer to the specific requirements detailed in s 90G. The Court construed that this omission meant that the agreement did not comply with s 90G and was not binding upon the parties; Full Court in Black & Black (2008) FLC ¶93-357
- an incorrect reference to the section was made in the agreement and in the certificate signed by the Legal Practitioner; in Balzia & Covich [2009] FamCA 1357 Collier J held that he could rectify the financial agreement so that it referred to s 90C rather than s 90B, but he could not rectify the certificates signed by the legal practitioners which referred to s 90B;
- one of the parties had not been properly advised; In Omar & Bilal [2011] FMCAfam 1430 an agreement entered into by the parties during the marriage was setaside as Henderson FM was not satisfied that the wife had been properly advised. The wife had left school at age seven and was illiterate in her native language, Arabic, which she spoke with a Lebanese accent. Her legal practitioner spoke Arabic with an Egyptian accent. The wife said she had difficulty understanding her legal practitioner and did not understand the advice given;
One particular case which stands out is the case of Hoult & Hoult (2011) FLC ¶93-489. In this case the wife argued that she was not given proper legal advice and therefore wanted the Agreement to be declared not binding. Her Husband wanted to enforce the Agreement. On cross examination His Honour found that the solicitor admitted that her file contained no diary notes, statements, correspondence or anything else in writing to which reference could be made in respect of the advice given to the wife. The solicitor also stated that she intended to write a letter of advice to the wife after the Agreement had been signed by both parties but did not get around to doing so. This conduct was found to be unsatisfactory and the agreement was found not to be binding. The Husband was not happy.
As a client, it is important to be aware of the implications of having an Agreement declared not binding at the fault of the conduct of solicitors. This can have a great burden to you if you wish to have the Agreement enforced to protect your interest. A lot of time and money is spent on making these Agreements suitable. It is therefore important that the right advice is given to you from the right person prior to entering into these Agreements.
Authors:
