Does a Combined Financial Agreement stand up in court?

Q: We are still interested in the combined* financial agreement. I just wondered if the relationship/defacto/& or marriage fails, what standing does this agreement have in court?

A: The agreement ousts the jurisdiction of the family court, which means to remove or exclude the Family Court’s legal authority to hear and decide a particular matter. In legal terms, “jurisdiction” refers to the power of a court to make decisions on cases brought before it. When a party to an agreement seeks to “oust the jurisdiction,” they typically aim to ensure that the Family Court cannot intervene in, or make rulings on, certain issues.

For example, in this context, the Binding Financial Agreement (BFA) includes a clause that prevents the Family Court from altering the terms of the agreement. This done to provide certainty and to ensure that the agreement between the parties is final and binding, without the risk of the court varying its terms later.

What this means in simpler terms is that once you and your partner sign a Binding Financial Agreement, it prevents the Family Court from making changes to it later, providing peace of mind that the terms you’ve agreed upon are final.

However, there are some exceptions where the court can step in and set aside the agreement which are outlined in section K of the Family Law Act. These include cases where:

• The agreement was obtained by fraud (e.g., hiding important information).
• A party entered into the agreement with the intent to defraud creditors or another person.
• The agreement is void, voidable, or unenforceable.
• It becomes impracticable to carry out the agreement due to changes in circumstances.
• There has been a significant change in circumstances related to the care and welfare of a child, leading to hardship if the agreement is not set aside.

Most of these circumstances essentially relate to honesty between the parties, and as long as you are open and honest with the other party when you make the agreement it’s very difficult to have the agreement set aside.

* A combined agreement is an agreement for de facto couples who plan to marry – it is made under two sections of the Family Law Act covering both de facto and married relationships.

Q: I’ve heard such agreements do not stand in Australia but wanting to seek your advice/knowledge on the subject before purchasing the kit – as I am the one with greater potential of financial loss should something go south.

A: Of course asking me if the agreements stand up is like asking a barber if you need a haircut 🙂 But jokes aside, there are people who say the agreements don’t stand up but they won’t be speaking from experience. We have personally assisted to put thousands of BFA’s in place (6500 at last count) taking great care to adhere to the guidelines set down by Section 90K above. It’s probable that one day we will have one set aside, but at this time (Aug 2024) I can say we have not had an agreement set aside.

Another factor to bear in mind, is that it is difficult to have a BFA set aside unless the party seeking to have the agreement set aside can prove that fraud, dishonesty or duress was involved. In addition, it is a very costly exercise to go to Court.

Remember, putting a BFA in place will certainly offer far more protection than having nothing at all. A written document shows that you have given considerable thought to the future and how you would like to deal with your finances. It does lessen the risk and more importantly offers some peace of mind.

We also have another article which answers this question is another way – Are prenups absolutely necessary?