On this page:
- Settlement Options in Family Law Property or Financial Matters
- THE COURT’S APPROACH
- An informal agreement
- The three ways to make a legally binding property settlement in Australia:
01. Consent Orders
02. Financial Agreements (also known as Binding Financial Agreements – BFA)
03. Adversarial litigation in court
Settlement Options in Family Law Property or Financial Matters
Reaching an agreement with the other party offers many advantages.
Where a matter is settled, before or at any stage of the proceedings, the settlement can be recorded and implemented in several ways.
It is strongly recommended that every settlement be appropriately documented by consent orders.
THE COURT’S APPROACH
In the past, the court had determined that the proper approach to determining a property dispute involved four important steps:
- to identify and value the net property of the parties (usually at the date of the trial);
- to consider the contributions of the parties within paragraphs (a)–(c) of s 79(4);
- to consider the factors in s 79(4)(d)–(g) (In the Marriage of Lee Steere (1985) 10 Fam LR 431; (1985) FLC 91-626) including s 75(2) factors; and
- to consider whether the order proposed is just and equitable: Hickey v Hickey (2003) FLC 93-143 at 39; Omacini v Omacini (2005) FLC 93-218 at 46 and Manolis v Manolis (No 2) [2011] FamCAFC 105; BC201150283 at [65].
However, in Stanford the High Court majority did not refer to or expressly adopt the usual four-step approach to property matters but set out three fundamental propositions that “must not be obscured”.
First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property. So much follows from the text of s 79(1)(a) itself, which refers to “altering the interests of the parties to the marriage in the property” (emphasis added). The question posed by s 79(2) is thus whether, having regard to those existing interests; the court is satisfied that it is just and equitable to make a property settlement order.
Second, although s 79 confers a broad power on a court exercising jurisdiction under the Act to make a property settlement order, it is not a power that is to be exercised according to an unguided judicial discretion. In Wirth v Wirth, Dixon CJ observed [[1956] HCA 71; (1956) 98 CLR 228 at 231–232] that a power to make such order with respect to property and costs “as [the judge] thinks fit”, in any question between husband and wife as to the title to or possession of property, is a power which “rests upon the law and not upon judicial discretion”
Third, whether making a property settlement order is “just and equitable” is not to be answered by beginning from the assumption that one or other party has the right to have the property of the parties divided between them or has the right to an interest in marital property which is fixed by reference to the various matters (including financial and other contributions) set out in s 79(4). The power to make a property settlement order must be exercised “in accordance with legal principles, including the principles which the Act itself lays down” [R v Watson, Ex Parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 257]. To conclude that making an order is “just and equitable” only because of and by reference to various matters in s 79(4), without a separate consideration of s 79(2), would be to conflate the statutory requirements and ignore the principles laid down by the Act.
An informal agreement
You can reach an informal property settlement agreement with your former partner. An informal agreement is not legally binding.
To prevent the risk of either party claiming for property settlement later, it is important to formalise your settlement in a binding way.
This is strongly discouraged because of potential problems. For example, one party may change their mind or there may be a dispute about the terms or implementation of the agreement. If that occurs, leave under s 44(3) or (6) may need to be sought for further proceedings even many years after the event. It is strongly recommended that every settlement be appropriately documented by consent orders.
The three ways to make a legally binding property settlement in Australia:
- Consent Orders
- Financial Agreements (also known as Binding Financial Agreements – BFA)
- Adversarial litigation in court
01. Consent Orders
The Family Court of Australia has the power to make consent orders if both parties have reached agreement about financial/property arrangements and want to formalise the agreement to make it binding.
Where proceedings have not commenced, an Application for Consent Orders form is filed in the Family Court and both parties must make and sign a statement of truth set out in that form. Full and frank disclosure is required. An original plus three copies of the application and three certified copies of the consent orders must be filed.
Where superannuation is involved there are further requirements. Attendance at court is not required. Limited grounds for setting aside the consent orders are contained in s 79A FLA.
In pending proceedings, the court may make orders by consent of the parties finalising the issues between the parties. Such minutes of consent orders are drafted by the lawyers, signed by the parties and their lawyers and may be made by registrars in chambers;
Strict and Objective Interpretation of consent orders
The courts will generally interpret consent orders in a strict and objective manner so as to give effect to the parties intentions as determined by the orders. In Bass & Bass and Anor [2016] FamCAFC 64 the Full Court found [at 54].
The general principles for a court to settle financial disputes under the Family Law Act 1975 are based on:
- Working out your assets and liabilities; that is, what you’ve got (including superannuation) and what you owe; and what they are worth.
- Looking at the contributions made by both parties during the marriage or relationship including:
- direct financial contributions to the the acquisition, conservation or improvement of any of the property, such as wage and salary earnings
- indirect financial contributions to the the acquisition, conservation or improvement of any of the property, such as gifts and inheritance from families
- direct and indirect non-financial contributions to the the acquisition, conservation or improvement of any of the property.
- contributions to the welfare of the family, including any contribution made in the capacity as parent and homemaker
- The future needs of the parties having regard to things such as age, health, care of children, income and financial resources of the parties
Just and Equitable
The Court cannot make orders for the alteration of property interests unless it is satisfied that, in all the circumstances, it is just and equitable to make the order.
Section 75 and Section 79 and Part VIIIA of the Family Law Act 1975 (if you were married) or in Section 90SF and Section 90SM and Part VIIIAB of the Family Law Act 1975 (if you were in a de facto relationship) outlines Just and Equitable factors
In addition, the Court, as far as practicable, is to make orders which will finalise the financial relationship between the parties (Section 81 of the Family Law Act).
Not just and equitable
In circumstances where it appears on the face of the orders that they are not just and equitable, a requisition can be expected to issue from the registrar seeking further clarification, and it may then be necessary to file an affidavit of the parties setting out why they have agreed to the orders and the terms as they appear.
Proof of value of the interest is required to be filed with the application.
Drafted with precision
When drafting consent orders, practitioners must ensure that the orders are drafted with precision so there is no doubt as to who what must do, what is required, where and when. Orders should be drafted using the active voice and compelling a party to perform some act or thing or to refrain from doing some act or thing.
Property orders should also contain a default provision so that if there is non-performance by a party a course of action to be taken is set out.
It is also advisable to include an order, under s 106A of the FLA, appointing a registrar to sign documents if a party neglects or fails to do so.
How much will it cost and how long does it take?
Depending on your matter we may provide a fixed fee or an hourly rate or a combination of both fixed fee and an hourly rate.
These costs will vary according to the complexity of the matter, the attitude and the conduct of the other party, the issues that may arise and the stage at which a settlement may be reached. The fee estimation in a non-complex, non-time-consuming matter with a small asset pool may be around 3000 to 5000 Aud. This is an estimate only of the likely costs and is not a quotation. Costs will vary for each matter and there may be circumstances that arise where the costs may be substantially higher than our initial estimates.
There may be occasions when we advise you that it is necessary to instruct experts such as valuers, accountants, and child experts as well as barristers or specialists in particular areas. We will provide you with prior notice and seek confirmation of your instructions before engaging such experts.
It is usual in Family Law matters for each party to pay their own solicitor’s costs. We note however that the Court has the power to order one party to pay all or part of the other party’s costs as well as their own solicitor’s costs in situations where the court decides that a party has acted unreasonably, failed to comply with orders or directions of the court or refused to accept offers of settlement that were reasonable, thereby extending litigation and increasing costs.
From the date of lodging, you should expect it will take between 6 to 12 weeks for the Court to process your application and issue sealed Consent Orders.
This is a fraction of the time it takes to undertake adversarial litigation and grind through the Court system.
02. Financial Agreements (also known as Binding Financial Agreements – BFA)
The court is not involved.
Financial agreements can be entered into;
- before marriage: FLA s 90B;
- during marriage (before or after marriage breakdown): s 90C; or
- after divorce: s 90D.
It may be set aside by the court on grounds set out in s 90K or for de facto couples, s 90UM of the FLA (FCA s 205ZV) as such this is strongly discouraged. Recent Court challenges have adequately highlighted issues with financial agreements.
It could also challenge after many years. It is strongly recommended that every settlement be appropriately documented by consent orders.
A financial agreement is binding on the parties to that agreement only if:
- it is signed by both parties, and
- before signing, each spouse party is provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and the advantages and disadvantages, at the time the advice was provided, of making the agreement, and
- either before or after signing the agreement, each spouse party is provided with a signed statement by the legal practitioner stating that the advice referred to wasprovided to that party (whether or not the statement is annexed to the agreement); and
- a copy of that legal statement that was given to a spouse party is given to the other spouse party or the legal practitioner for the other spouse party.
Enforcement issues of financial agreements
Enforcement of financial agreements can be exceedingly difficult because it is not uncommon for a dispute about enforcement to be met with an argument by the party in default that the agreement is not binding or needs to be set aside
Next you will need to turn your ‘informal’ agreement into a ‘formal’ and legally binding property settlement.
03. Adversarial litigation in court
The option of last resort involves taking legal action against the other party in the Family Courts. By initiating court proceedings, you begin an adversarial process, which means each party is competing to convince the judge they are right, and the other party is wrong. The Court will decide the matter as per the Family Law Act.