Binding Financial Agreements (“BFA”) are private agreements that may be entered into between a couple (married or de-facto) that sets out how their property and/or financial resources will be dealt with in the event of a future separation.
However, parties considering entering into a BFA need to be aware that there are very specific substantive and procedural requirements that must be followed, in order for the BFA to be “binding”.
The decision of Hoult v Hoult  FamCAFC 109 (“Hoult”) is considered one of the recent landmark BFA decisions which looks at a number of key issues relating to a BFA.
In Hoult, the Husband and Wife married in December 2004, after a number of years of cohabitation. It should be noted that English was not the Wife’s first language.
Prior to marriage, the parties entered into a BFA that conferred benefits on the Wife. However, in return, the Wife would be unable to commence proceedings under Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
Part VIII of the Act deals with Property, Spousal Maintenance and Maintenance Agreements. The effect of the BFA, should it be binding, the Wife would not be able to commence Family Law Proceedings seeking a Property Settlement or Spousal Maintenance.
It should be noted that the approximate value of the Husband’s assets at the time of entering the BFA was approximately $32 million.
In 2011, the parties separated, and the Wife commenced Property Settlement Proceedings pursuant to Part VIII of the Act. The Husband sought to rely upon the BFA as a bar to the Wife’s claim.
This resulted in a complex trial.
At first instance, the Trial Judge declared that the BFA was not binding, but that it would be unjust and inequitable if the agreement were to be held as “not binding”.
This led to both the Husband and Wife instituting their own respective appeals.
Issues in Dispute
The Family Court of Australia heard two respective appeals from the Trial Judge’s decision. These were:
- The Husband’s Appeal – Was the BFA binding?
The Husband appealed the Trial Judge’s decision that the BFA was not binding.
At first instance, the Trial Judge took the view that the BFA was not binding as the Wife was not provided with legal advice from a legal practitioner that was compliant with the requirements of the Act.
On appeal, the Court considered a number of issues, including the credibility of the Wife and her solicitor who gave the legal advice on the BFA (which occurred nearly 7 years prior to the dispute) as witnesses.
This appeal was successful.
- The Wife’s Appeal – Was it unjust and inequitable for the BFA not to be binding?
The Wife appealed the Trial Judge’s decision that it was unjust and inequitable for the BFA not to be binding.
On appeal, the Court took the view that the “point of the legislation is to allow the parties to decide what bargain they will strike, and provided the agreement complies with the requirements of [the Act] they are bound by what they agree upon.”
In this regard, the Court disagreed with the Trial Judge’s approach of applying a “broad” assessment using the Court’s discretion pursuant to Section 79 of the Act (regarding alteration of property interests).
This appeal was successful.
As a result of the Court finding merit in both respective appeals, the proceedings were remitted to the Family Court of Australia for re-hearing before a different Trial Judge.
We will provide a further update regarding the outcome of the rehearing in due course.
Our Concluding Comments
At this juncture, the decision of Hoult highlights the importance that the BFA is drafted correctly and that each party has obtained legal advice regarding the terms of effect of the BFA and its associated advantages and disadvantages before a BFA is signed.
Our Brisbane Binding Financial Agreement Lawyers can prepare and draft a BFA relevant to the circumstances of your case. We will ensure that the BFA is drafted to comply with all of the strict legislative requirements contained in the Act.
Our Binding Financial Agreement Lawyers also provide certificates of independent advice on BFAs prepared by other lawyers.
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Please call one of our Business Development Officers today to make an appointment if you wish to organise a BFA and/or have any further queries on (07) 3252 0011.