Binding Financial Agreement vs Consent Orders

When a married couple or de facto couple separate, the Family Law Act 1958 is clear that if the parties agree upon a property settlement, the only way to make that agreement binding is to either have sealed Family Court Consent Orders or a Binding Financial Agreement.  

If one of these options is not done, then either party can make an Application to the Family Court or Federal Circuit Court for a property settlement to take place.  There are time frames as to when those Applications to the Court can occur, that time frame is up to 12 months after a divorce for a married couple, or up to two years after separation for a de facto couple.

After that time, it is possible for a person to still make an Application to the Court if they can seek Leave from the Judge, and show that they would suffer hardship if that permission was not granted.

Therefore, it is always advisable that the parties do formalise their agreement properly by having a solicitor prepare either Consent Orders to be filed with the Family Court or a Binding Financial Agreement.   Not doing so leaves a great deal of risk.

What are Family Court Consent Orders?

In order to obtain Family Court Consent Orders, a solicitor needs to prepare two documents for you.  The first document is an Application for Consent Orders.  It includes details such as the dates of the relationship, a detailed list of all assets and debts that exist in either parties’ name and their current values.  It also includes details regarding what contributions or future need factors should be considered in making a property settlement fair.  

We then prepare Consent Orders, which are Court Orders setting out exactly what needs to happen for the settlement, such as deadlines for payments to be made, transfers to occur etc.  Both documents need to be signed by both parties, and their lawyers if they have them.  The documents are then sent to the Family Court with a filing fee for the Registrar to review.  That process can take approximately 1-8 weeks depending upon the Registrar’s workload at the time.  If the Registrar approves that the Consent Orders are just and equitable in the circumstances, they will stamp the Orders with the Court seal and send them back to both parties.  That agreement has then become binding.

Advantages of Consent Orders

• Once Court Orders have been made they are legally binding as they are Orders of the Court. This makes it easier if there are any enforcement issues.  
• It is very difficult for Court Orders to be overturned.
• It is a choice for each person whether they do or do not want to get independent legal advice. When they sign they do need to tick the box to confirm that they are aware of their right to seek independent legal advice.  However, it is a choice for them whether they actually obtain that independent legal advice or not.

Disadvantages of Consent Orders

• When filling out the Application for Consent Orders, a lot of detail is needed in regards to filing out the boxes relating to all assets.  Although it can be tedious to provide all of this information to your lawyer, it is certainly important that the lawyer has all relevant information to be able to advise the client properly.
• There is a Family Court filing fee to be paid (currently $165.00).  There is also a waiting time frame of potentially one to eight weeks depending upon the Court work load.  
• The Registrar at the Court will only approve Consent Orders if they deem it to be just and equitable, taking into account the relevant Sections of the Family Law Act 1958.

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What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) is prepared by a solicitor.   It includes the background to the relationship including what assets each party had at the commencement of the relationship, and what assets currently exist.  It then sets out what assets each party will retain.  

A Binding Financial Agreement does not have to be approved by a Court, however, in order for it to be enforceable it must be drafted properly.  There have been many Court cases where the Judges have given clear indication as to drafting do’s and don’ts.

Advantages of a Binding Financial Agreement

• The preparation of a Binding Financial Agreement can be quicker than an Application for Consent Orders.  
• If the parties have reached an agreement for a property settlement that would not be regarded as fair pursuant to the provisions under the Family Law Act, a BFA can still be made, and can still be binding.  As long as both parties have an independent lawyer who gives them the relevant advice in regards to advantages and disadvantages of signing the Agreement and the solicitor signs the certificate that the advice was given, then the Agreement will be binding.
• A BFA can be signed by parties, before living together, during cohabitation, after separation, or after divorce.

Disadvantages of a Binding Financial Agreement

• Both parties must be independently legally represented.
• There is a high threshold for the advice that should be given by the lawyer, therefore they are likely to put this advice in writing in a lot more detail than they would feel the need to do in Consent Orders, particularly if the lawyer is concerned that the Binding Financial Agreement may be unfair for their client.
• It is possible for a BFA to be unenforceable if it is not drafted properly, or if there are any issues with the solicitors’ advice certificates.  Therefore, it is important that both independent lawyers are experienced in family law, and give appropriate advice.
• If there is an issue with enforceability, ie one of the parties has not done what they are required to do pursuant to the agreement, then the recourse for the other party is to make an Application to the Court to have the BFA enforced.   This would be a slightly more complicated process than if Court Orders had been used, because we first need to have the Family Court confirm the validity of the BFA, and then take the next step in terms of enforceability.

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We are frequently finding that clients are attending our office, after doing some of their own independent research, and have a firm view on whether they need Consent Orders or a BFA.   Ultimately, there are advantages and disadvantages to both, but as long as they are both done properly by an experienced family lawyer, then they are both binding.

Generally, we would advise our client as to which option would be best for them given their individual circumstances.

With either option, we suggest that you only use a lawyer who is very experienced in family law, so that they can advise you appropriately in regards to whether the agreement is favourable to you or not, and so that they can ensure that the documents are drafted properly to give you full protection.

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If you need to formalise a property settlement to make sure it is binding, then please make an appointment to see one of our experienced family lawyers who can assist with preparing Family Court Consent Orders or a BFA for you.   Appointments can be made by telephoning our office on (03) 56235166.

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