Setting Aside Financial Agreements under the Family Law Act

Despite Financial Agreements sometimes being referred to as “Binding Financial Agreements” or “BFAs”, Financial Agreements are not always “binding” and can be set aside by a Court or mutually terminated by the parties.

Financial Agreement can be set aside by the Court if any of the following events occurred between, or by either party of the Financial Agreement:

1. Fraud (such as non-disclosure of a material matter); or
2. An intention to defect or reckless disregard of the interests of a creditor; or
3. For the purpose of defrauding another person who is a party to a de facto relationship (the other de facto relationship) with a spouse party, or with reckless discard for the interests of that other person (in the case of de facto relationships); or
4. For the purpose of defrauding another person who is a party to a marriage with a spouse party, or with reckless disregard of those interests of that other party (in the case of de facto relationships); or
5. Any duress, undue influence or unconscionable conduct (taking advantage of any weakness of a party); or
6. If the Financial Agreement is void, voidable or unenforceable; or
7. Circumstances have arisen making it impracticable for the Financial Agreement to be carried out; or
8. Since the making of the Financial Agreement, a material change in circumstances has occurred, being circumstances relating to the care, welfare and development of a child of the marriage, and as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the Financial Agreement will suffer hardship if the Court does not set the Financial Agreement aside; or
9. A payment flag is operating under Part VIIIB of the Family Law Act on a superannuation interest covered by the Financial Agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
10. The Financial Agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB of the Family Law Act.

Further, if the Financial Agreement includes a third party, an intention to defraud, or defect the property interests of that third party or the reckless disregard of those interest are grounds for the Agreement being set aside.

Also, a Financial Agreement operating as a release of Spousal Maintenance will be of no effect if a party is in receipt of an income tested pension, allowance or benefit.

In the recent Family Court case, Daily & Daily [2020] FamCA 486, the Court of Appeal considered an appeal to set aside a Financial Agreement pursuant to s 90K(1)(b),(d) and (e), namely, that a Financial Agreement entered into by parties can be set aside on the basis of:

1. the agreement being void, voidable or unenforceable;
2. that there has been a material change in circumstances relating to the care, welfare and development of the child since the making of the agreement, and this will cause a hardship to the person who has responsibility for the child; and/or
3. party to the agreement engaged in conduct that was, in all the circumstances unconscionable.

In the cases of Fewster & Drake (2016) FLC 93-745 and Frederick & Frederick (2019) FLC 93-900 provide the well settled test for hardship, which requires the Court to make a comparison of the position of the child, or the party with caring responsibility if the Financial Agreement is to remain in place, compared to their position, if the Financial Agreement is to be set aside.

In the case of Eaves & Eaves (No.2) [2020] FamCA 863, citing the case of Thorne v Kennedy (2017) 263 CLR 85, the Court discussed the concept of “unconscionability” as a factor of setting aside a Financial Agreement. For circumstances to be held to be “unconscionable conduct”, the innocent party must be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as its own best interests”. The other party must also unconscientiously take advantage of the innocent party’s special disadvantage. Further, this other party must also knew or ought to have known of the existence and effect of the innocent party’s special disadvantage.

Disclaimer: This publication provides general information of an introductory nature and is not intended and should not be relied upon as a substitute for legal or other professional advice. While every care has been taken in the production of this publication, no legal responsibility or liability is accepted, warranted, or implied by the authors or our firm, and any liability is herby expressly disclaimed.

Ge Wu is the solicitor director of Legal Point Lawyers & Attorneys.  He has been admitted to practise law since 2005.  Throughout his practice, Ge Wu predominantly practises in the areas of Property Law, Immigration Law, Commercial Law, Civil Litigation and Family Law.

His experience covers all aspects of property law, commercial/retail lease, immigration law and civil litigation, while at the same time, he also has experience in family law, criminal law and other areas such as will-drafting and general advice.

He has frequently been instructed by corporate clients in pre-acquisition due diligence reports, structuring property development, land/shopping centre acquisitions, G.S.T. and stamp duty advice for buying/selling businesses, as well as share transfers and company re-structures.

Ge Wu has been appointed as Notary Public since 2011 and started to provide Notary Public service to clients from different cultural backgrounds.

Email: ge.wu@legalpointlawyers.com.au