If you agree?

Consent Order: Many separating couples divide their property without Family Court action. They reach agreement between themselves or with the help of solicitors or mediators. The Family Court can formalise the agreement so that it makes the agreement legally binding. Either party can apply to the court for Orders to be made by consent. If the court agrees that the division is fair; it will make a ‘Consent Order’.

BFA: There is another way of securing a final and binding settlement in property matters. In appropriate circumstances, and with the assistance of legal advice, you and your spouse might agree to enter into a Binding Financial Agreement. There are times where such an agreement is more advantageous than entering into a Consent Order. Among other things, the Binding Financial Agreement can resolve spousal maintenance issues. Also, a settlement which is outside of what the Court would think was a fair divison can be made using a Binding Financial Agreement.

When deciding whether or not the agreement is fair, the court will take into account your circumstances and your spouse’s circumstances. It is not always the case that an equal division of property will be fair in all cases. The court has the discretion to determine the issue of whether the proposed division is just and equitable.

If you can’t agree?

If you and your spouse can’t agree on a settlement, then either of you can apply to the Family Court or to the Federal Circuit Court for an order on any issues that you disagree about. You can make the application any time after a marriage has broken down. If you have already divorced, you must apply within 12 months after the divorce, as otherwise you will need the permission of the Court to proceed with your application. Even after the legal proceedings have started, many disputes can be settled by negotiation between the couple and their lawyers. Unfortunately, the longer it takes to resolve a matter, the higher the legal costs.

The Family Court’s mediation service may help when you and your spouse cannot agree on how to divide up property. Mediation can help you explore possible solutions.

A Financial Agreement is a contract which also complies with requirements set out in the Family Law Act. All contracts can be set aside if very specific circumstances exist. The Family Law Act also sets out particular circumstances under which a Financial Agreement may be set aside. However, the agreement will not be set aside just because one of the persons who signed it now considers it to be unfair.

Consent Orders are normally made only after a marriage has ended. A Financial Agreement may be entered into before a marriage (a “Pre-Nup”), during or after a marriage.

A party might consider a Financial Agreement:-

To quarantine assets owned at the start of a relationship
To quarantine specific or sentimental assets
To provide for certainty
To save the significant emotional and financial cost of disagreement if the marriage does not succeed
To avoid appearances at Court
To avoid disclosure of financial information in Court
To obtain concessions from stamp duty and certain taxes
As “insurance”

Financial Agreements are technical documents which require specific independent legal advice.

Separated couples are often able to reach an agreement about how they wish to divide their assets. In most circumstances, it is in the interest of each party to formalise the agreement reached. In simple terms, formalising an agreement means taking steps to ensure that the agreement is binding and enforceable. If done properly, this ensures that the parties are able to “draw a line in the sand” about their financial relationship. It prevents either party from coming back for more money or assets from the other in the future.

There are sometimes horror stories when separated spouses do not formalise their financial separation. An example is the decision of Damiani. The parties separated but did not divorce. Fourteen years after their separation, one spouse applied for a property settlement. The other spouse’s assets and business had been worth about $1,000,000 at separation. They had grown to about $4,000,000 by the Court hearing 14 years later. The Applicant who would have received about $100,000 at separation was awarded over $1,300,000.

A small, once off “insurance premium” of a few thousand dollars in legal fees may give great peace of mind.

There are two options to legally formalise an agreement:-

1. Consent Orders; or

2. A Financial Agreement.

Generally, it is preferable for parties to enter into Consent Orders to be filed with the Family Law Courts. This involves drafting two documents to be filed with the Family Court. Once lodged, the documents will be considered by a Registrar of the Court. The parties do not need to attend Court. Assuming that the Registrar considers that the agreement is fair and appropriate given the specific circumstances of the relationship, the Registrar will make binding Court Orders in the agreed terms.

In some situations, it may be preferable for the parties to enter into a Financial Agreement. A Financial Agreement is prepared by lawyers. It is essentially a contract entered into between couples. It seeks to formalise the agreement reached by the parties and prevent either party from making an Application to the Family Court. Each of the parties must receive independent legal advice about the Financial Agreement. If drafted carefully, the Financial Agreement should act as a bar to the Court making any Orders inconsistent with it.

In most situations Consent Orders are preferable. They are generally cheaper and easier to prepare. It is important that parties seek legal advice about the best approach for their particular circumstances.