Rectification of BFAs | Binding Financial Agreement Lawyers Melbourne

In the recent case of Birdwood & Gravino [2023] FedCFamC1A 114, the complexities surrounding the rectification of Binding Financial Agreements (BFAs) were brought to the forefront. This case highlights the challenges that can arise in property settlements, particularly when high-value assets and disputes over agreement terms are involved.

At Rowan Skinner & Associates Lawyers, we are binding financial agreement lawyers Melbourne, dedicated to help our clients understand how these agreements can be interpreted and potentially altered in court.

 

Facts of the Case | Binding Financial Agreement Lawyers Melbourne

• The parties separated in 2016 and were divorced in 2018. They entered into a BFA on 22 August 2019.
• The BFA records it being an agreement pursuant to s 90C of the FLA (financial agreements during marriage).
• On 7 December 2022, a consent order was made rectifying the BFA to change references from s 90C to s 90D. It was also noted that the parties agreed the BFA was binding.
• The BFA dealt with the distribution of the parties’ property including, relevantly, the Suburb B property.
• At the time the parties negotiated the BFA, the Suburb B property was registered in the wife’s sole name and she was living in it (at [27]).

The BFA contained the following terms:

• On or before the settlement date, [the wife] will do all things and sign all documents necessary to transfer 75% of her right, title and interest in the [Suburb B] property to [the husband] (provided that any necessary documents by prepared by [the husband] at his expense).
• By Clause 11.8 of the BFA, the wife had the right to occupy the Suburb B property.
• On the sale of the Suburb B property, clause 11.7.5 of the BFA provided that the proceeds of sale were to be divided equally between the parties.
• Clause 24 of the BFA provided that the property the wife was to retain included a 25% interest in the Suburb B property subject to the mortgage.

After the execution of the BFA:

• The wife transferred 75% of her interest in the Suburb B property to the husband.
• The Suburb B property was sold 3 years later, and the proceeds of sale were held on trust pending a determination of the dispute.
• The husband applied to rectify the BFA to reflect a distribution of proceeds of sale of 75% to him, and 25% to the wife, rather than the equal distribution provided by clause 11.7.5.

 

Court Findings on Rectification of Binding Financial Agreements

The trial judge rectified which led to the following conclusion:

• Ultimately, I am persuaded that the document annexed as [MG11] to [the respondent’s] affidavit is, for reasons earlier referred to, a document authored by the respondent and evidences the common intention of the parties. It is also a document that is in harmony with clauses 24.1 and 25.1 of the BFA. It is a document which provides proof of the parties’ common intention.
• Having established a clear common intention for a division of the nett proceeds of sale of the [Suburb B] property, the BFA will be rectified at clause 11.7.5 to read 75% to [the respondent] and 25% to [the appellant].

The wife appealed. However, on appeal, Aldridge J disagreed with the trial judge.

• His Honour cited with approval the decision of Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 356, wherein the High Court quoted the following passage from Edmund Henry Turner Snell, Snell’s Equity (Sweet & Maxwell, 1954) at p.153
• : … “The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration… But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.”
• … His Honour continued, “[u]nless [MG11] can be construed as an admission by the appellant that at the time of the execution, her intention was that there be a 75/25% split, [MG11] carries no probative value whatsoever” (at [68]).
• His Honour was not satisfied that it could be. Specifically, he referred to the possible meanings of “your equity” (as [72] – [74]) including the 75% he actually held at that time, or any interest he held after the sale;

MG11 clearly reflecting a proposal for the wife to acquire the Suburb B property in its entirety. It said:

“Of course your equity in [the Suburb B property] is yours and I will buy you out.”

This led to:

• Counsel for the respondent submitted that the emphasised words were an admission by the appellant that her intention at the time of executing the BFA was that there be a 75/25 per cent split.
• Furthermore, his Honour observed that the reference to “your equity” could not be read in isolation from other qualifying words in the document. A
• Aldridge J concluded the terms of MG11, and the sentence upon which emphasis was placed by the husband, was ambiguous. They could not, therefore, be the “clear and convincing proof” required to satisfy the court of rectification.

While not asked to decide the matter on the appeal, his Honour expressed concern about the availability of rectification to correct financial agreements. Particularly, his Honour identified a tension between s 90G, requiring advice to be received by each party for a financial agreement to be considered binding, and the fact that rectification changes the terms of the agreement; thereby leading to no advice being offered on the rectified agreement.

 

Contact Binding Financial Agreement Lawyers Melbourne Today

This case underscores the importance of clarity and precision in drafting BFAs. It also highlights the potential difficulties in rectifying such agreements once they have been executed, particularly when the parties’ intentions are not clearly documented.

At Rowan Skinner & Associates Lawyers, we are experienced binding financial agreement lawyers Melbourne, will help you with your family law and financial settlement disputes. Our team of accredited family law specialists is here to help you achieve a fair and just outcome.

If you’re navigating a financial settlement or have concerns about a Binding Financial Agreement, contact us at (03) 9995 9155 for a non-obligatory consultation. We service clients in Melbourne, Melbourne Northern Suburbs, such as Northcote, Alphington, Carlton, Fitzroy, North Fitzroy, Kew and Heidelberg, as well as South Melbourne and South Yarra.