Binding Financial Agreements: when do they cease to be binding?

Date: Oct 08, 2009
Document Type: Article

The Full Court decision of Black v Black (2008) 38 Fam LR 503 (“Black v Black”) on financial agreements continues to impact on family law decisions being cited in the recent Federal Magistrates Court decision of Fitzpatrick & Griffin [2008] FMCAFAM 555 (“Fitzpatrick & Griffin”).

Black v Black involved an appeal to the Full Court. The judge in the Court below held that a binding financial agreement should stand even though the assumptions on which the agreement was based turned out to be wrong.

While the parties were married they entered into an agreement that the husband would sell his house and the proceeds of the sale would be deposited into a joint bank account. The wife was to deposit into the same joint bank account money she was to receive from her personal injuries compensation claim. The funds in the joint bank account were then to be used for the purchase of the matrimonial home. In the event that the parties separated the agreement stipulated that the matrimonial home was to be considered joint property and would be sold with the profits divided equally between the husband and the wife.

The wife settled her personal injuries compensation claim for a smaller amount than expected and accordingly, did not contribute as much to the purchase of the matrimonial property.

On cessation of the relationship between the husband and the wife the husband argued that the property should not be divided equally as stipulated in the agreement as the wife had not contributed an equal amount.

At the initial hearing of the mater the trial judge found that the binding financial agreement should stand even though the assumptions on which the parties entered into the agreement turned out to be wrong.

The husband appealed the decision to the Full Court on the basis that Section 90G of the Family Law Act (“the Act”) governing binding financial agreements should have been interpreted strictly.

The Full Court agreed with the husband and held that Section 90G of the Act needed to be strictly adhered to - meaning that binding financial agreements must be in accordance with the Act in order to explicitly exclude the Court’s jurisdiction in the matter. Since the certificate annexed to the Binding Financial Agreement did not strictly comply with the provisions of Section 90G at the time it was signed, the Agreement was set aside and it left open a claim for property division using ordinary principles. 

The decision of Neville J in Fitzpatrick & Griffin involved a binding financial agreement where the parties had failed to receive independent legal advice. Neville J found that he was bound by the authority of Black v Black in that a flawed financial agreement will fall by the wayside.

It appears that the decision in Black v Black will continue to impact on the law in relation to binding financial agreements.

For assistance with Family Law matters, phone Dominic Wilson, Managing Partner of Craddock Murray Neumann, on (02) 82684000. We have Family Lawyers who are certified by the Law Society of New South Wales as Accredited Experts in Family Law. 

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