Consent Orders v Binding Financial Agreements
The distribution of martial assets can be one of the most stressful aspect of separating or divorcing your partner. To reduce the cost and frustration of a protracted family law litigation, parties can choose to either enter a binding financial agreement or file a consent order with the courts. While both the options allow you to settle the division of your property, there are some key differences between them.
Binding Financial Agreements
As the name suggests, a binding financial agreement (often referred to as pre-nuptial or post-nuptial agreements) is a contract between people in a relationship and is entered into to set out the manner in which your property will be distributed if you get separated or divorced from your partner. BFAs are enforced just like a contract and have the ability to exclude the other party from commencing a court proceeding seeking a different outcome. However, BFAs are regulated by the Family Law Act 1975 and are only binding if:
They are signed by all parties
Before signing the agreement, each party has obtained independent legal advice and was provided with a signed statement from a lawyer certifying the same.
It is also notable that unlike a consent order, a financial agreement may be made before, during or after marriage and can contain matters related to spousal maintenance.
Setting a BFA aside?
Under section 90K of the Family Law Act 1975, the court has the power to set aside the BFA and make orders for a property settlement. This can include instances where:
the agreement was obtained by fraud (including non-disclosure of a material issue).
one party signed the agreement to defraud or defeat a creditor’s interest in the property
one party signed the agreement to defraud a de facto partner or to defeat the interests of the de facto partner under the Family Law Act, or with reckless disregard of those interests.
the agreement is void, voidable or unenforceable under the general law
one party engages in unconscionable conduct to enter the agreement
For example, in the recent case of Thorne v Kennedy [2017] HCA 49, the High Court held that the financial agreement entered was void as the husband had exercised undue influence over the wife such that she was not a free agent when she signed the agreement. The case concerned a property developer, Mr. Kennedy was a 67-year-old, divorced, with assets of between $18M - $24M and Ms. Thorne, who was a 36-year-old woman living in the middle east. Two of them had met online and Ms. Thorne arrived in Australia to get married. A few days before the marriage, Mr. Kennedy asked her to sign a financial agreement that was substantially in his favor. He told her that she would either need to sign the agreement or the wedding was off. At this point, her parents had arrived from Eastern Europe, guests had been invited, her dress was made, and the reception was booked. In arriving at their decision, the High Court highlighted that there was significant power imbalance between the two individuals and the circumstances were such that Ms. Thorne had been deprived of her free will.
Consent Orders
If parties wish to make a consent orders, they will need to make an application to the court. Consent orders are made by a registrar without any court hearing and are enforceable in exactly the same way as if the orders had been made by a judge.
However, unlike a BFA, when deciding whether to make the order, the Registrar applies the law in relation to property and financial distribution. Having regard to the guidelines provided in the Family Law Act, the registrar will evaluate if the terms on which the parties have consented are ‘just and equitable’.
Although you can draft the consent orders by yourself, engaging experienced family lawyers will help you navigate the complexities of family law and ensure that your efforts are not wasted.
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• May be made before, during or after marriage or the de facto relationship
• Will need independent legal advice
• Can only include financial matters
• Can only be enforced if you have received independent legal advice
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• Can only be made after the separation or divorce
• Can draft it yourself but need to apply to the court for the orders to be finalised
• Can include both financial and parenting matters
• Can only be enforced if the court deems the order to be ‘just and equitable’.
