Can a Binding Financial Agreement be challenged?

This is a common question when deciding on what route to take in finalising property matters at the end of a relationship, or seeking to sure up the outlook during or before a relationship (pre/during de facto or marriage Binding Financial Agreement).

In broad terms, the answer is yes.

However, the agreement cannot be challenged in the future just because it is a ‘bad deal’ for one of the parties. This was considered and confirmed in the 2018 Case of Frederick v Frederick.

The Court upheld the Binding Financial Agreement as sought by the Husband. Referring to the

Agreement being heavily in the Husband’s favour, the court referred to the “usual financial

imbalance in agreements of that nature”, and quoted from the case of Hoult v Hoult [2013]

Fam CAFC 109 wherein the Court said:

“The point of the legislation is to allow the parties to decide what bargain they will strike, and

provided the agreement complies with the requirements of section 90G(1) they are bound by what

they agree upon. Significantly, in reaching agreement, there is no requirement that they meet any of

the considerations contained in section 79 of the Act, and they can literally make the worst bargain

possible, but still be bound to it”

Sections 90K(1) & 90UM(1) of the Family Law Act 1975 (Cth) outline the limited circumstances whereby the agreement may be set aside, these include;

·         The agreement was obtained by fraud (including the deliberate non-disclosure of a material matter).

·         The agreement is void, voidable or unenforceable (eg written incorrectly, too complex, etc).

·         Circumstances have arisen since the agreement was made that make it impractical for the agreement, or part of the agreement, to be carried out. (eg disability to one party, etc).

·         Since the agreement was made, there has been a material change in circumstances relating to the care, welfare & development of a child of the relationship and, as a result of the change, the child, or a party to the agreement who has caring responsibility for the child, will suffer hardship if the court does not set aside the agreement.

·         If during the making of the agreement a party engaged in conduct that was an all circumstances unconscionable (including duress, manipulation, lack of bargaining power, etc).

·         The agreement includes at least one superannuation split or superannuation flagging that is invalid or unworkable.

·         A party entered into the agreement to defraud or defeat a creditor.

·         A party entered into the agreement to defraud or defeat the interests of another party that is/has been married to or is/has been in a defacto relationship with that party.

Disclaimer

This information is general in nature and is not intended to be relied upon as, nor to be a substitute for, tailored legal advice.