The relevant principles applying to financial agreements to determine the provision of independent legal advice to achieve compliance with s 90G and s90UJ of the Family Law Act.
The Family Law Act 1975 (Cth) governs the binding nature of financial agreements between parties in Australia, with particular emphasis on compliance with sections 90G and 90UJ. Central to this compliance is the provision of independent legal advice, which safeguards the understanding and consent of each party. This legal advice must address both the effects of the agreement on a party’s rights and the advantages and disadvantages of entering into such an agreement. These requirements underscore the importance of ensuring the agreement is entered into with full knowledge of its implications, including the exclusion of certain rights to seek court intervention.
This discussion explores the relevant principles surrounding the provision of legal advice in the context of financial agreements, emphasising the necessity for that advice to be real, meaningful, and tailored to the parties’ circumstances.
For a financial agreement to be binding, it is an obligatory requirement for each spouse party to the financial agreement to receive independent legal advice from an Australian Legal Practitioner regarding:
Firstly, the effect of the agreement on the rights of that party.
Secondly, the advantages and disadvantages to that party of making the agreement, at the time that the advice was provided.
A certificate of legal advice by a solicitor is prima facie evidence that the advice was given and may be relied upon by the party seeking to enforce the agreement. Further, the issue is not the content or correctness of the advice but whether it was given. In this respect, an incorrect advice gives rise to a separate cause of action.
The purpose of the provision is to ensure that the party understands not only the rearrangement of property and financial resources but also that rights are being affected, those rights including exclusion of access to the courts subject to certain exceptions.
The Court will pay regard to whether the advice given was real and meaningful. The legal practitioner must establish the rights of their client at the time the advice is provided, it being otherwise impossible to actually advise about the effect of the financial agreement on the rights at the relevant time.
Property Settlement under the Act
There are five steps the Court considers when determining a party’s entitlement to an adjustment of property interests as a result of the breakdown of a marriage. They are:Step 1: To determine whether or not it is just and equitable to adjust the parties interests in property held by either party to the relationship.Step 2: To identify and value all property held by either party to the relationship, irrespective of where it came from or when it was acquired;Step 3: To consider the direct and indirect, financial and non-financial contributions made by and on behalf of each party, including contributions in the role of the homemaker and parent. At this stage, a percentage apportionment reflecting those contributions is usually made (for example, 50% / 50% for equal contributions by both parties);Step 4: To consider, among other things:
the age and state of health of each party;
the income, property and financial resources of each party;
the physical and mental capacity of each party for appropriate gainful employment;
the disparity in the income earning capacities of each party;
any instances of family and/or domestic violence; and
any commitments that are necessary for each of each to support that party or any other person;and
to decide if these factors mean the apportionment in step 3 above should be varied.
Step 5: To consider if the specific order the Court proposes to make to implement the percentage division decided upon is “just and equitable” in all the circumstances of the particular case and make any necessary adjustments.
These principles do not apply for financial agreements.There is no requirement that the terms of a financial agreement be just. Parties are perfectly free to enter into a bad bargain by way of a financial agreement.
Legal Advice Requirements for Binding Financial Agreements
A binding financial agreement deals with the parties’ rights in relation to the property or financial resources of the parties in a way that ousts the jurisdiction of the court to make orders in relation to that property or financial resource.
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. This is because s 90G(1)(b) requires advice to be given on the effects of the agreement upon the rights of that party and the advantages and disadvantages of the agreement. If their rights are not known then it is impossible for a legal practitioner to advise as to the effect of the agreement on their client.
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 ( using the words of the section) with which he or she may compare the provisions of the proposed financial agreement. It is only in that way that there can be actual advice about the effect of the agreement on those present rights.
Accordingly, the advice must be real and meaningful. It must be directed to the parties’ circumstances and their present rights. Proper identification of a parties’ rights can only be done by identifying the property of the parties then held and a consideration of the parties contributions (financial and non-financial) to the acquisition of that property and to the welfare of the children. Any other relevant factors under s 79(4), including s 75(2), would then need to be considered. Only by doing so can an advice be given that complies with the terms of s 90G(1)(b).
In summary, the Family Law Act imposes stringent requirements for financial agreements to be binding, including the obligation for independent legal advice that addresses the rights, advantages, and disadvantages for each party. This ensures that parties are adequately informed of their current entitlements and the consequences of entering into the agreement, effectively balancing autonomy with legal safeguards. While financial agreements allow parties to forgo equitable property adjustments under the Act, the necessity of real and meaningful advice remains paramount to uphold the integrity and enforceability of these agreements. By adhering to these principles, the legal framework aims to protect both parties’ interests while respecting their right to contract freely.
To learn more about Financial Agreements and how they may benefit your situation, reach out to the experienced Brisbane Family Lawyers team at James Noble Law.
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