Reading time: 3 minutes

At LegalVision, our team of family lawyers are very experienced in drafting Binding Financial Agreements (BFAs). We often get asked by both our clients and their financial consultants why the firm requires such a detailed record of the assets and liabilities of both parties. Without full disclosure between parties to a BFA, the agreement may not be legally binding.

The importance of full disclosure

In a recent case, the Judge decided that a husband had not sufficiently disclosed his own finances, and, as a result, the BFA was set aside. This case highlights the importance of providing a true and honest account of your financial positions to ensure the BFA continues to be binding on both parties.

The Judge decided that within the standard recitals of the BFA was an implied term that required both parties to provide the other with a full and complete disclosure of each other’s finances, including their debts and liabilities. As all details were intended to be included, and clearly some were omitted, the normally binding nature of the BFA became null and void.

In most cases, when a family lawyer is asked to draft a BFA, there are three separate Schedules attached to the BFA; one documenting the husband’s combined assets and liabilities, one for the wife’s assets and liabilities, and finally, one detailing any assets jointly held by both husband and wife. These assets usually have approved values attached to them. In this case, however, there was no valuation of any of the assets, making it difficult for the Judge not to set aside the BFA in its substantially incomplete form.

It should come as no surprise that the Judge set the BFA aside, as the husband succeeded in omitting certain assets and financial details regarding those assets. This amounted to not disclosing “a material matter”, which the Judge saw as sufficient misconduct to warrant voiding the BFA entirely. This is because the wife would not have entered the BFA but for the misrepresentations made by her husband regarding the status of his assets/finances.

Despite best practice, the Court made the point that valuation of assets was not essential to upholding the binding nature of the BFA. The Court concluded that spouses could ordinarily make their own enquiries into the values of assets (or detriment of liabilities) listed in a BFA and that it was not necessary that these values be included.

In other words, as long as all assets are identifiable and can be shown to exist, it doesn’t matter that the values are not individually attached to each asset.

Had the husband not withheld significant details about his true financial position, the BFA may not have been set aside. Unfortunately, however, he was not honest about his assets and liabilities and is now paying the price.

Conclusion

Instead of risking the personal assets you’ve accrued over time prior to entering a relationship, speak with a family lawyer about making the responsible choice and entering into a BFA with your partner.

Webinars

Preventing Modern Slavery: Your Business’ Legal Obligations

Thursday 9 September | 11:00 - 11:45am

Online
Are you an Australian business with $100m+ annual consolidated revenue? Learn how to determine if you are a modern slavery reporting entity and your obligations under the legislation with this free webinar.
Register Now

How to Expand Your Online Business Globally

Wednesday 15 September | 11:00 - 11:45am

Online
Understand your legal risk when expanding your online business overseas with our free webinar.
Register Now

Negative Online Reviews: What are the Legal Options?

Wednesday 22 September | 11:00 - 11:45am

Online
Negative or false online reviews of your business can be disheartening and damaging. Understand your legal rights and options with this free webinar.
Register Now

Australia’s Global Talent Visa: How to Attract Top Talent

Thursday 7 October | 11:00 - 11:45am

Online
Understand how to navigate Australia’s complex migration system to attract top overseas talent with our free webinar.
Register Now

5 Essential Contracts for your Online Business

Thursday 14 October | 11:00 - 11:45am

Online
Learn which key contracts will best protect your online business with our free webinar.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Our Awards

  • 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Winner – Australasian Lawyer
  • 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer