The Role of Binding Financial Agreement Lawyer in Family Law

Binding Financial Agreements (BFAs) play a critical role in family law as it offers couples the opportunity to settle financial matters outside of court. However, drafting and executing BFAs can be complex and challenging. What happens when BFAs are set aside? This issue and the Court rulings are illustrated by the recent case Suess & Suess [2024]. It is therefore essential to seek advice from a binding financial agreement lawyer.

At Rowan Skinner & Associates Lawyers, we are experienced family law experts particularly in relation to drafting and reviewing binding financial agreement. Rowan can provide the guidance you need for your pre-nuptial and post-nuptial agreements or other family law matters.

 

The Case | Binding Financial Agreement Lawyer Melbourne

The couple’s marriage in Suess & Suess [2024] lasted 38 years, producing four adult children.

During the marriage, the parties established a company and entered into several partnerships with the husband’s parents, though the nature of the company is thought to be a pastoral company.

By Amended Initiating Application filed on 21 October 2022, Ms. Suess, the wife, seek a declaration that the Binding Financial Agreement, entered on 11 December 2019, is to be declared non-binding and/or set aside. The wife argued that the agreement is not compliant with s 90G of the Family Law Act 1975 and sought orders pursuant to s 79 of the Act for an equal division of the net non-superannuation assets.

It is undisputed that throughout the settlement negotiations, as well as during the drafting and execution of the financial agreement, the wife was legally represented by her previous solicitor, Ms. B. Additionally, there is no contention regarding compliance with section 90G(1)(c) of the Family Law Act 1975 (Cth), as both parties received the required certificates from their solicitors, which were included as annexures G and H to the financial agreement.

The wife further contended that during the settlement negotiations:

• The valuation of various assets, particularly D Pty Ltd, was based on documents provided by the husband and Mr. C.
• The wife believed that the husband failed to provide full and frank disclosure, leading to a misrepresentation of the overall asset pool.

The wife also asserted that the agreement should be set aside as being void, voidable or unenforceable pursuant to s 90K(1)(b) of the Act. The particulars, as asserted by the wife, are that the husband misrepresented the matrimonial pool by not providing full and frank disclosure in the financial agreement.

The couple engaged U Lawyers for legal advice concerning the partnership, restructuring options, and tax implications. Two meetings were held with U Lawyers, but the wife was not present at the first meeting.

Key issues alleged by the wife

Although no contention was raised by the wife that there was property and/or financial resources not included in the financial agreement and therefore able to be considered pursuant to s 79, there is property situate at 2 F Street, Town G NSW together with the water licence in which the husband held an interest that was not included in the list of legal and equitable interests held by each of the parties as reflected in the schedules to the financial agreement.

Furthermore, the wife asserted that the agreement was not just and equitable in all the circumstances and was obtained by fraud or misrepresentation. In support of the contention pursuant to s 90K(1)(a) the wife sets out the following particulars of claim:

1. The [husband] failed to make full and frank disclosure of the matrimonial pool of assets.
2. The parties separated in June 2019. The Financial agreement was signed on 12 December 2019.
   1. The [wife] was, at the time of separation, denied access to the financial details of the matrimonial assets, which included the family business.
   2. The [wife] was unable to conduct her own independent investigation of the matrimonial assets and relied upon the [husband] and [Mr C], [finance professional] for the family business, and joint personal [finance professional] for that information.
3. The following assets/contributions were not accounted for in the financial agreement:

1.  $600,000 joint contribution, [1 F Street] property;
2. $7,094 […] shares joint contribution;
3. $134,000 [D Pty Ltd] plant and equipment not disclosed;
4. $4,000 [Suess Partnership] asset;
5. Est $1,000,000 Goodwill for [D Pty Ltd];
6. $303,162.23 cash in the bank (dividends);
7. $675,500 dividends to family members;
8. $2,000,000 in stock […];
9. $177,002 loan to family members;
10. $500,000 loan from [D Pty Ltd] to [Z Pty Ltd];
11. $500,000 Goodwill for [Z Pty Ltd];
12. $230,000 loan repayment made prior to financial agreement.

In addition, a formal valuation of the family business was not obtained. The broad position of the wife was that she was not able to conduct her own proper investigation as to the assets, liabilities and therefore the value of the matrimonial assets and was persuaded by the parties’ finance professional to accept the valuation of matrimonial assets as presented during the negotiations between the parties.

Terms and Provisions

The essential terms and provisions of the BFA were as follows:

• That recital H records that:
  • This agreement is intended to deal with the whole of the property and financial resources of the parties now and in the future in the event of the breakdown of their marriage without resort to litigation.
• That recital L records that:
  • The parties acknowledge that they are each mature adults who are both well versed in financial matters.
• That Recital M records that:
  • The parties acknowledge that each of them has had the opportunity to satisfy himself or herself that the financial circumstances recorded with respect to each of them and this financial agreement and schedules to it are accurate.
• That recital N records that:
  • The parties each acknowledge that they have entered into this agreement:
  • (a) After mature consideration and judgement of their own free will and volition, without any coercion, force or undue influence on the part of the other party or by any other person;
  • (b) With full understanding and appreciation of its terms, conditions and provisions; and
  • (c) Not relying upon any representation or promise or expectation except those expressed as stated herein; and
• That recital S records that:
  • Suess and Ms. Suess each acknowledge that they have had the opportunity but have declined to exercise the opportunity to have the assets, liabilities and financial resources of the other party valued by an independent valuer with skills in either forensic accounting or real estate valuations.

Handwritten Amendments

There were two subsequent handwritten amendments to the agreement. The first appears at paragraph 5(a) where the reference to “5(v)” was amended to read “5(y)” and to clause “5(u)” where the words “equally divide” are deleted and the following words added at the end of the paragraph “sell forthwith… and immediately divide the sale proceeds equally between them.”

Whilst potentially still problematic, I am satisfied that the amendments accord with the contractual requirements of offer and acceptance and that the alterations initialled by each of the parties demonstrate a clear intention that they are each to be bound by its terms and conditions. In any event, it could not be said that the clauses subject of amendment were fundamental terms.

Was each party given advice as to the effect of the financial agreement once signed?

The wife’s position as to the consequence of the advice given to her by Ms B is somewhat mercurial. Initially the wife considered that Ms B’s advice, whilst well meaning, was significantly undermined by the lack of reliable information as to the assets of the parties and the proper value that should be ascribed thereto. In final submissions, the argument morphed to a submission that the conduct of Ms B was unprofessional and incompetent to a level that would enable the Court to find that the advice given could be considered as no advice at all.

In order to give advice about the effect of an agreement on the rights of a party, that is their rights under the Act in relation to property, a legal practitioner must establish what those rights are at the time the advice is provided.

It is unhelpful to advise a person that a financial agreement might adversely affect his or her rights if those rights are not identified. A party must know more than some unknown or undefined right is being given up. He or she must have some idea, at least in general, of his or her present entitlements or rights (to use the words of the section) with which he or she may compare the provisions of the proposed financial agreement.

The important exchange in cross-examination of ‘B’ Lawyer on the issue of advice

[Counsel]: The effect of the binding financial agreement on [Ms Suess’] rights, what was your advice?

[Witness]: I recall I did tell Ms – I did inform [Ms Suess] that if this matter was to proceed further, that the agreement wasn’t completely fair to her; that if she was to take things further, she may end up with more, and she would likely end up with more if the matter was in court. But [Ms Suess] insisted that it is what it is and she just wanted to have it over with. So I did tell her the agreement was not completely in her best interests to enter into.

[Counsel]: And if you had that level of concern, wouldn’t you have put that in a letter to her and asked her to sign it – that she had received that advice?

[Witness]: I – I agree, I should have put it in a letter. But it – I believe it’s in one of the recordings as well.

Quality of advice given by a lawyer

Thus, the Court found that:

• The evidence of Ms B raises considerable misgivings as to the nature and quality of the professional services that she rendered to the wife. It was difficult to accept Ms B’s evidence as to her inability to access her electronic file in the absence of which she was not able to accurately remember the nature and extent of her interaction with the wife even though the events were as recent as December 2019.
• The involvement of Ms B and the advice given to the wife did not fall below a basement threshold such that I should find that her advice was so lacking in integrity that it should be considered as no advice at all. Even though Ms B conceded that her advice and assistance rendered to the wife was not as would be expected of a legal practitioner holding him or herself out as having either the requisite skill in the area of property settlement or being able to satisfy the requirements of s 90G of the Act, I consider that the requirements of s 90G of the Act have been satisfied.

Misleading the wife on value of assets for division

The wife had the opportunity to undertake the valuation process but chose not to do so.

Unconscionable conduct

The Court held:

“I am left in little doubt that the wife had strong regard to the possibility that her relationship with her children and grandchildren may be adversely affected if a timely settlement was not reached. However, the wife’s primary motivation was to consider a settlement which enabled the three adult children to become entrenched and remain involved in the D Pty Ltd business, but also to enable the settlement of a property she had recently purchased.”

 

Contact A Binding Financial Agreement Lawyer Today

This case underscores the importance of ensuring that all assets are fully disclosed and accurately valued in a BFA. The failure to do so can lead to the agreement being challenged and potentially set aside, as nearly happened in this case. It also highlights the necessity of expert legal advice before signing BFAs.

Given the legal complexities and challenges involved in drafting and enforcing BFAs, it is crucial to engage an experienced binding financial agreement lawyer. If you’re considering entering into a BFA, working with a skilled binding financial agreement lawyer is essential to protect your financial future.

Rowan Skinner is a highly experienced binding financial agreement lawyer and Accredited Family Law Specialist in Melbourne, ready to help you navigate BFAs and assist you in any other family law matters.

Contact our office at (03) 999 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.

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Case: Suess & Suess [2024] FedCFamC1F 175 (20 March 2024)