Firstly, give yourself a pat on the back! It is great that you have reached agreement, as you will save the considerable legal costs involved in arguing over who gets what and ending up in court.
Once an agreement has been reached between you as to how you wish to divide your assets and liabilities in a family law settlement, you have the option of entering into a financial agreement or consent orders to formalise and finalise your agreement.
You will need to have either consent orders made or a financial agreement in place, to legally resolve the dispute once and for all (so that it can be used in resisting a court application in the future with respect to the same issues).
Consent orders or a financial agreement will also be required to obtain the stamp duty exemption for the transfer of any interest in property pursuant to your agreement.
Consent orders are often preferred over financial agreements, where a potential future breach of the terms of the agreement by one party is sensed as a serious likelihood by the other party. It is easier and less expensive to enforce compliance with consent orders than it is with financial agreements.
It is also often less expensive to both parties to formalise their agreement with consent orders, and consent orders are harder to set aside than a financial agreement.
I will explain both options to you further below:
We will draft any agreement reached in the form of consent orders, and file those orders in the Family Court with an Application for consent orders. It will be necessary for both parties to sign. Your spouse will not need a lawyer (if he or she chooses not to) for this process.
If the consent orders contain a superannuation split, flag or otherwise impose an obligation on the trustee of a superannuation plan, we must first serve written notice of the terms of the order on the Trustee of the superannuation plan in which the interest is held.
After the application for consent orders is filed, a Registrar of the Family Court will consider the application. If the Registrar is satisfied that the orders should be made, the Registrar will sign the proposed orders and sealed copies will be sent to us. Your court appearance for this process is not required, as the Registrar will decide the application in chambers in the absence of the parties.
If the Registrar is not satisfied that it is just and equitable for the orders to be made on the information before the court, a notice will be sent to us with a brief explanation as to what further information or evidence is required.
It may be necessary for the application to be ultimately heard in court, however this generally only occurs in rare cases where the orders appear to be grossly unfair to one party.
In a best-case scenario, the Registrar will make the consent orders, and sealed copies will be returned to us within 1-3 months of filing.
It may be preferable or necessary to prepare a financial agreement in certain circumstances instead of consent orders. These circumstances include:
- where the parties cannot wait for consent orders to be made (a financial agreement is binding as soon as it is signed by both parties);
- if the property settlement is unfair to one party, or
- assets or businesses are to be continued be jointly owned by the parties.
If a financial agreement is preferred, then we will draw up the required agreement. Once the terms are approved by you, we will send it to your spouse (or their lawyer) to review and settle the terms by negotiation.
A financial agreement aims to oust (remove) the jurisdiction and power of the family law courts in relation to all financial matters to which the financial agreement applies. The financial agreement is not filed in the court.
The financial agreement can deal with all or some of your property, and spousal maintenance and superannuation.
To be binding the financial agreement:
- Must be in writing;
- Must specify which section of the Act it is made in accordance with;
- Must be signed by both of you;
- There must be a Statement of Independent Legal Advice for each of you from a qualified legal practitioner setting out the matters referred to in the Family Law Act (“the Act”), and confirming that the advice was given to you each before you signed the financial agreement;
- The Statements of Independent Legal Advice must be exchanged;
- One party will retain the original financial agreement and the other will be given a copy;
- There should have been full and frank disclosure of all financial matters between both of you (however this is not strictly necessary under the Act); and
- All of the technical requirements set out in the Act must be complied with.
A financial agreement is a complex and technical document and takes a lot of time to prepare. There are schedules with all assets and liabilities. A comprehensive letter of advice to you is also required.
Your spouse will need a solicitor to advise him or her on the financial agreement and sign a certificate of advice, otherwise it will not be binding.
If either of the parties breach a term of the financial agreement, the other party can apply to a family law court to enforce the financial agreement. If the financial agreement is held to be valid and enforceable, the court can enforce the terms of the financial agreement as though those terms were orders of the court.
The Advantages and Disadvantages of a Financial Agreement Compared with Court Orders
The advantages to you of making a financial agreement may be summarised as follows:
- Entering into a financial agreement brings certainty to the outcome of the division of your property. This also applies to consent orders.
- Entering into a financial agreement also brings certainty to the payment of spousal maintenance, and unlike consent orders made by the court, the spousal maintenance clauses in the financial agreement (if binding) can be used to resist an application being made to the court for spousal maintenance by either party in the future.
- The terms of a financial agreement are generally not construed by the court to see if they are “fair” or “just and equitable”, unless they are grossly unfair to one party and that party was unduly influenced or coerced (forced) into signing the financial agreement by the other party directly or through some unconscionable (unreasonable or unacceptable) conduct, or duress.
- Because the agreement is not filed in the court unless one party wants to enforce it or set it aside, the court does not have the opportunity to see if the financial agreement effects a “once and for all” division of assets. A financial agreement therefore gives you more flexibility than a court order, as the court requires a final division of the party’s assets and looks to sever all financial ties between the parties.
- You will avoid the costs of protracted court litigation over a property settlement following separation, which in some instances can cost up to $120,000 (or more).
The disadvantages of making a financial agreement or consent orders include:
- You are contracting out of your right to have a court determine a just and equitable division of your assets and assess your entitlement to property and/or spousal maintenance following separation;
- The terms of the financial agreement might not be within the range of your likely entitlement, depending on the date of separation, your future needs at the time, the size of the asset pool at that time, and the contributions (both financial and non-financial) that you have made. At least with consent orders you have the security of a court registrar reviewing the terms and being satisfied that they are within your likely range of entitlements.
- Financial agreements are able to be set aside by a court if they are not drafted and executed in compliance with the Act, and for a number of other reasons including non-disclosure of a substantial asset, fraud, undue influence, unconscionable conduct, duress, mistake and where it is no longer possible or it is impracticable to carry out the terms of the financial agreement.
For any further advice and assistance with your family law property settlement matter, or which is the best way to proceed when you have reached an agreement, please contact our family law team at OMB.