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Why you need Independent Legal Advice on Binding Financial Agreements

Binding Financial Agreements

“I have a simple agreement, I just need it witnessed”.

If I had a dollar for every time I had heard that in the years since Binding Financial Agreements became part of the Family Law landscape in Australia.

One of the major protective measures for family law litigants proposing to sign a Binding Financial Agreement is the requirement for them both to have received independent legal advice prior to signing the agreement. This advice must truly be independent.

This requirement is provided for in the Family Law Act (the ‘Act”).  The advice that is required to be given by a party’s lawyer is specifically about:

  1. The effect of the agreement upon the rights of the party; and
  2. The advantages and disadvantages to the party, at the time the advice is being given, in signing the agreement.

If this advice is not given, then a BFA can be declared not binding upon the parties.

A very clear example of the effect of failing to receive such independent advice is the case of Purdey & Millington [2018] FCCA 213 – see full decision here

In this matter:

  • The parties married in 2003 and separated in or around 2014.
  • There were two minor children of the relationship who were living with the Wife.
  • The parties signed a BFA on 16 September 2014.
  • In August 2017 the Wife applied to have the BFA declared not binding upon the parties – thus giving rise to an ability to claim property settlement.

The Wife asserted that she did not receive appropriate independent legal advice despite the document certifying that the requisite legal advice was provided.

The Wife’s case was that, after having some informal discussions, she went with the Husband to his Solicitor on 16 September 2014, to draw up what she believed to a separation agreement but that it was only to deal with some aspects of their property settlement not all of them.  She believed that in Australia, you had to sign papers with a Solicitor to be considered formally separated.

After the meeting with the Husband’s Solicitor, the Husband then took the Wife to a meeting with a Solicitor who had been arranged for her.

The Husband asserted he took the Wife to the Solicitor as she “didn’t know how to get there”.

The Wife asserted that the Husband was present during the meeting with her Solicitor, which the Husband denied (saying he only came in at the start and at the end).

The Husband agreed that he paid for the Wife’s legal advice.

During her evidence, the Solicitor for the Wife stated as follows:

  • The Wife was referred to her by the Solicitor for the Husband.
  • She could not recall if the Husband was present during the meeting.
  • She had received a copy of the BFA two or three days before the meeting.
  • That during the meeting she went through the relevant provisions of the Act in relation to the effect of the document and went through each page so that the Wife would understand what was “going on”.
  • She spoke with the Wife in English during the meeting.
  • She did not ask the Wife if she required an interpreter.
  • She had kept file notes of the meeting with the Wife.

The Court found that the Wife’s Solicitor who was by then not practicing, was not a witness of truth for the following reasons:

  1. The firm at which the Solicitor was practising at the time had no file opened in the name of the Wife; and
  2. She did not produce the file notes which she asserted in oral evidence were in existence.

Ultimately the Court found that the Wife had displaced the inference which could be drawn by the certificate annexed to the Financial Agreement and held:

  • The arrangement for the Wife to receive legal advice was not made independently with the Wife, rather it was arranged by the Husband.
  • The meeting, which endured for a maximum of 20 minutes, was insufficient for appropriate advice to be given to the Wife in any circumstances, even more so when she had limited English skills.
  • The Husband was responsible for and paid for the legal fees of the Wife.
  • The Husband was present for the duration of the meeting between the Wife and the Wife’s Solicitor.
  • In the absence of file notes to support an inference of proper engagement in the wife, it could not be found that the Wife received competent legal service or the provision of any advice at all.

The Court referred the matter back for resolution through the usual litigation process.

This case highlights the utmost importance of obtaining proper and independent advice prior to signing a Binding Financial Agreement.

Best case practice requires that there be a number of discussions between a party and their lawyer prior to signing a Binding Financial Agreement and further that the independent legal advice be given in writing and acknowledged by the client as having been received. This is particularly important when the circumstances of the agreement are such that the client is being advised not to sign the document.  This practice is adopted irrespective of the manner in which the matter was referred to the family law team at OMB Solicitors.

Whilst this practice may seem unnecessary when parties are in agreement as to their property settlement, it is done to ensure that the Binding Financial Agreement is considered as binding as possible.

To ensure that your Binding Financial Agreement complies with all relevant legislative requirements and that you receive proper and independent legal advice, contact our Gold Coast Family Lawyers team for advice.

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