Under the Family Law Act 1975 (Cth) (Family Law Act), Binding Financial Agreements (BFA) are divided into several categories – those relating to marriages and those relating to de facto relationships.
Where these two relationships overlap with each other, parties may need to draft a new agreement to reflect the changed circumstances. For example, when partners in a de facto relationship become engaged, they must enter into a new BFA specific to marriage.
The Family Court ruled in December 2015 in Piper & Mueller  FamCAFC 241 (Piper & Mueller) that there can be two types of BFAs in one document. Below, we look at the law surrounding BFAs, the facts of this case and points for couples considering a BFA.
Types of BFAs
Currently under the Family Law Act, the types of BFAs that a couple may enter into include:
- Section 90B: Part VIIIA agreement – before marriage;
- Section 90C: Part VIIIA agreement – during marriage;
- Section 90D: Part VIIIA agreement – after divorce order;
- Section 90UB: Part VIIIAB agreement – before de facto relationship;
- Section 90UC: Part VIIIAB agreement – during de facto relationship;
- Section 90UD: Part VIIIAB agreement – after the breakdown of a de facto relationship.
Section 4AA of the Family Law Act specifically defines ‘de facto relationship’. Broadly speaking, a de facto relationship is two people of different or the same sex who “have a relationship as a couple living together on a genuine domestic basis”. A couple in a de facto relationship is expressly not married to each other.
Section 90G sets out when a binding financial agreement is binding, namely when:
- All parties sign the agreement;
- Before signing, each party was provided with independent legal advice (about the effect of the BFA and its advantages and disadvantages);
- Each party obtained a signed certificate stating they had received legal advice, and subsequently provided this certificate to the other party;
- A court has not terminated or set aside the agreement.
Section 90B states that this type of BFA would not be effective until parties are married, and this marriage breaks down. Similarly, section 90UJ says that a de facto BFA would cease to be effective once the parties marry.
Facts of the Case
Piper & Mueller concerned a dispute regarding a combined Section 90B and 90UC financial agreement. In this case, the parties met in 2003, began dating in 2004, became engaged in 2005 and ended their relationship in 2010. Mr Piper filed an application seeking a declaration that the BFA he and Ms Mueller entered into was not binding.
During the trial, the Court – with Judge Willis presiding – analysed Part VIIIA (relating to marriage BFAs) and noted that a condition was that parties must be “contemplating” entering into a marriage. In this case, the parties satisfied this since they were engaged to be married. The Court also found parties satisfied the condition under Part VIIIAB that they were in a de facto relationship.
With regards to the argument that a BFA could not be both under ss 90B and 90UC, the Court stated that the two provisions were not “mutually exclusive”, and that in this case, the matter fitted “squarely under each section”.
The other argument Mr Piper made was that he had not received sufficient legal advice for the purposes of entering the BFA. The Court took into account the following:
- Each party had signed agreements dealing with their property which stated the other could not make a claim;
- Mr Piper always had the upper hand in the financial affairs of the relationship; and
- Mr Piper had taken advantage of Ms Mueller’s naivety in business.
Judge Willis concluded that it would be “unjust and inequitable” if the BFA were not held to be binding since both parties saw solicitors, understood they would keep their own assets only, and had gone to the trouble of seeking advice.
Ultimately, the BFA was held to be valid and binding since it fulfilled all the conditions under section 90G of the Act, and Mr Piper appealed.
What Did the Appeal Court Decide?
The Appeal Court, consisting of Judges Ryan, Murphy and Aldridge, upheld all of the trial judge’s decisions. The Appeal Court reiterated that the two financial agreements, while different, can exist concurrently and in the one document. Judge Murphy also further clarified that under these circumstances, only one of these financial agreements will have operative effect at any one time (that is, section 90UC will become void upon marriage and section 90B will come into operation). The Appeal Court emphasised that the two agreements are complimentary as opposed to exclusionary as while both may be binding on the parties at execution, although only one can operate at any one time.
Further, the Appeal Court upheld the validity of both types of independent legal advice parties received before signing an agreement. Evidence showed that the advice given concerned whether making the BFA was “prudent”, which would have involved a consideration of whether the provisions were fair and reasonable as well as the advantages and disadvantages.
The Appeal Court stated that the BFA was not seen to be unjust and inequitable. As such, a BFA under both sections 90B and 90UC of the Act was binding on the parties, with adequate legal advice given.
Drafting one BFA rather than two can save cost and time, however, before doing so, couples should remember the following:
- Piper & Mueller has only held that a section 90B and section 90UC combined agreement can be valid as the two sections are complementary;
- If parties use such a combined agreement, it is important that the couple is entitled to enter into both types of BFA (that they are both in a de facto relationship and intend to be married);
- It is critical that both parties receive adequate independent legal advice in accordance with the Act before entering the BFA; and
- It is always best to get legal advice before deciding to draft this, or any, type of BFA.
If you need assistance drafting a binding financial agreement or require independent legal advice, get in touch with our business lawyers on 1300 544 755.
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