Financial Agreement | Consent Order

In Australia, Financial Agreements and Consent Orders are two legal mechanisms used to resolve financial and property matters between parties, typically following the breakdown of a relationship, such as divorce or the end of a de facto relationship. Both provide legally binding ways to divide property, manage spousal maintenance and address other financial issues. However, there are significant differences between them in terms of their process, enforceability and requirements.

Financial Agreement

A financial agreement is a written document that states how your property is to be divided. It can be made before, during or at the end of your relationship. It does not have to be approved by a court, but there are strict rules about financial agreements.

There are strict requirements before a financial agreement can be considered legally enforceable. Both people must sign it. It must also contain a statement that each person has received independent legal advice about:

• How the agreement will affect their rights
• Whether or not the agreement is in their best interests

The financial agreements can cover:

• How your property is divided
• Ongoing financial maintenance
• Other related issues

Binding Financial Agreements (BFAs)

In Australia, Binding Financial Agreements (BFAs) are legal agreements that can be made by couples (whether married or de facto including same-sex couples) to settle financial matters in the event of a relationship breakdown. These agreements can be made at various stages of a relationship and are governed by the Family Law Act 1975 (Act). BFAs can cover matters like the division of assets, property and spousal maintenance. The BFAs are legally binding, but they must comply with specific legal requirements such as receiving independent legal advice and full financial disclosure.

There are three main types of BFAs, based on the stage of the relationship:

• Pre-Nuptial (Before Marriage/Relationship)

It is drafted under section 90B of the Act for married couples and section 90UB for de facto couples.

These agreements are made before a couple enters into a marriage or de facto relationship and outline how finances, assets and liabilities will be divided if the relationship ends in the future.

• During Marriage/Relationship

This concern section 90C of the Act for married couples and section 90UC for de facto couples.

These BFAs can be entered into while the couple is still married or in a de facto relationship. They serve to plan how financial matters will be handled either during the relationship or in the event of a separation.

• Post-Separation/Divorce

This is made under section 90D of the Act for married couples and section 90UD for de facto couples.

These agreements are made after a couple has separated or divorced. They formalize the division of financial assets and liabilities after the end of the relationship.

Importance of Binding Financial Agreements (BFAs)

The main factors to clarify expectations and protect interests:

• Clarity on Financial Settlements as a BFAs sets out how property, assets, liabilities and financial resources will be divided between the parties if their relationship ends also provides certainty and clarity, reducing the risk of disputes over finances.
• Avoiding Court Proceedings as BFAs allow couples to bypass the Family Court by agreeing to their own terms for financial division and this can save significant legal costs, time and emotional stress involved in lengthy court battles.
• Flexibility as parties can tailor the terms of the BFAs to suit specific circumstances and can decide on how assets will be divided, arrangements for spousal maintenance and other financial matters, as opposed to leaving these decisions up to the court.
• Asset Protection as BFAs are often used by people entering relationships with significant personal or family wealth and it helps to protect those assets from being divided or claimed in the event of a separation where it is important in cases involving family businesses, investments or inheritances.
• Financial Independence as BFAs can help protect the financial interests of both parties by ensuring that each retains ownership of their respective pre-relationship property and earnings, and it promotes fairness by allowing individuals to define the terms of their financial separation.
• Spousal Maintenance is protected as BFAs can include provisions for spousal maintenance, outlining how and under what conditions one party might provide financial support to the other and this is particularly relevant in cases where there is a significant disparity in earning capacity between partners.
• Prevention of Future Disputes as by agreeing to a BFA, both parties can prevent future disagreements about financial matters in the case of separation and this reduces uncertainty and can minimize the emotional and financial strain of a breakup.
• Security for Second Marriages as in second marriages or de facto relationships, where there may be children from a previous relationship, BFAs can be used to protect the financial interests of children or other dependents from earlier relationships.

Cancel Financial Agreement

The Court may set aside or invalidate the agreement under following situations:

• Fraud like if one party fails to disclose assets or liabilities, the agreement may be invalidated.
• Duress or Pressure like if one party was forced or pressured into signing the agreement, it may be set aside.
• Unconscionable Conduct like if the agreement is deemed grossly unfair or one party took advantage of the other’s vulnerability, the court may invalidate it.
• Changed Circumstances like if there is a significant change in circumstances concerning major health issue or financial hardship that makes the agreement impractical or unfair, the court may choose to modify or set it aside.

Changing or Cancelling Financial Agreements

In order to cancel or change a financial agreement both parties have to:

• Get another document from their lawyer to show that legal advice has been given
• Sign another written agreement, called a Termination Agreement

Consent Order

A consent order is a written agreement that is approved by the court. When a consent order is made, it has the same effect as a court order made after a hearing.

The consent orders can cover:

• How your property is divided
• Ongoing financial maintenance

The court must be convinced that the agreement is fair before it will make a consent order and the arrangements for children are in the best interests of the children.

Consent Order Types

The following are the types of consent order:

• Parenting Orders like covering living arrangements, visitation, decision-making responsibility and other parenting matters for children.
• Financial and Property Orders like outlining the division of assets, liabilities, superannuation and possibly spousal maintenance.

Fairness Process

Before approving the order, the Court will consider whether the agreement is fair.

The Court applies following four-step process to work out what is fair:

• Consider whether it is just and equitable (fair) to divide property.
• Identify and value the property to work out how much there is. Property can include things you got before your relationship started or after you separated.
• Consider the contributions made by both sides, including financial contributions such as earnings, savings, gifts, inheritances and home improvements, and non-financial contributions such as being a homemaker and care provider for children.
• Consider other factors set out by law including:

• • How much each person could earn in future
  • The age and health of each person
  • The care and financial support of children
  • Responsibility for supporting other people
  • Length of relationship

Changing Consent Orders

One of the court’s aims in making consent orders in property disputes is to ensure they are final and avoid the need for further proceedings.

It is very difficult to change orders made in property disputes.

Cancelling Consent Orders

In order to set aside or cancel consent orders in property disputes you need to prove that:

• There was ‘fraud’ (dishonesty)
• The orders are not practical to carry out (not just inconvenient)
• There is a major change in the care and welfare of your child or children that was unforeseen at the time of signing the agreement
• The other person has acted in an ‘unconscionable’ (unethical or unfair) way
• The other person has failed to comply with an obligation under the order
• The property is confiscated (seized) by the government because it was gained through criminal activity