Binding Financial Agreement – a dual purpose or “two-in-one”

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Can a single binding financial agreement (BFA)  be made between the parties to a relationship that covers both a de facto  relationship and a marriage between them,  providing how their property is  to  be dealt  with, upon  the breakdown of either of those relationships?  This was the issue before the Full Court of the Family Court of Australia in the case of Piper & Mueller [2015] FamCAFC 241.

The Court concluded that yes, a binding financial agreement (BFA) under the Family Law Act 1975 (Cth) can provide for  both the breakdown of a de facto relationship and the breakdown of a subsequent marriage.  This is because there is no necessary conflict between the operation of the two types of agreements. That is, because the relevant sections of the Act (S 90 B , S 90 UB, S 90C and S 90 UC) do not operate exclusively; rather they compliment each other so that it is open to  parties who are either contemplating a de facto  relationship or are already in a de facto  relationship, to enter in to a dual purpose  or two in one  binding financial agreement (BFA) that would provide for either eventualities namely a break down of their relationship in either form.

The law relating to Binding Financial Agreements

Part VIIIAB Financial agreements for de facto relationships

The Family Law Act (“the Act”) allows parties to a de facto relationship to enter into a BFA providing for the division of property in the event of the breakdown of the relationship. These provisions are covered under s 90UC of the Act. Section 90 UB makes similar provision for parties contemplating entering in to a de facto relationship. Pursuant to s 90UJ  the agreement ceases to exits upon the marriage of the parties

Part VIIIA Financial agreements before marriage (pre-nup)

Section 90B provides for a binding financial agreement between parties who are contemplating marriage,  providing for the division of property in the event of the breakdown of their marital relationship. This is commonly known as a Pre Nup..  Section 90 C makes similar provision for parties already married and still together or married and separated but not divorced..

Piper & Mueller is an important decision which explains the effect of the two BFAs operating jointly.

The Story

Mr Piper (“the appellant”) and Ms Mueller (“the respondent”) met in May 2003, began a relationship in May 2004 and were engaged in May 2005. The relationship ended in April 2010. The pair entered into a Part VIIIAB financial agreement under s 90UC of the Act.

On May 2 2012, the appellant filed an Initiating Application and sought a declaration that the financial agreement was not binding because it purported to be both an agreement under Part VIIIA and Part VIIIAB of the Family Law Act. The trial judge held that the agreement in question was one under section 90UJ (Part VIIIAB) of the Act.

The Appeal

The Appellate Court held that a financial agreement which provides for both the breakdown of a de facto relationship and the breakdown of a subsequently marriage was valid. The primary reason for the Court’s decision was that there is no necessary conflict between a de facto relationship and a subsequently marriage. As was the case at hand, de facto couples can later intend to marry. Thus there was no reason why couples could not create a single agreement which made provisions for both circumstances of de facto and marital breakdowns.

Importantly, whilst the two BFAs are clearly distinctive, they do not operate at the same time. A Section 90UC agreement relating to de facto relationships, is only valid until the couple get  married. On the other hand, for a s 90B agreement  to take affect, there must be a breakdown of the marriage which requires a  marriage to have occurred between the parties. Thus the two agreements are ‘complimentary, not exclusionary’ (at [34]).

Therefore the appellant’s appeal was dismissed and the distribution of assets pursuant to the original BFA was held to be binding on both parties.

Lessons

If you are in a de facto relationship and looking for financial security, it may be wise to consider having a binding financial agreement. The take home message of this case is that your binding financial agreement could be prepared on such terms that it can cover the breakdown of a de facto relationship between the parties  or a subsequent marriage the same parties  may have entered  into.

For more information regarding a Binding Financial Agreement in property settlements post-separation

Please contact our Business Development Team on (07) 3252 0011 to arrange an appointment with one of our experienced Family Lawyers today.