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Welcome to The OMB Law Board, the podcast where legal insights meet practical advice. Hosted by Simon Bennett, Managing Partner at OMB Solicitors, this show delves into what you can expect when engaging with OMB Solicitors. Specialising in property law and commercial law, OMB also boasts dedicated teams for estate planning, contested estates, body corporate matters, litigation, and family law.
Each episode features in-depth discussions led by experienced team leaders, some with over 20 years of expertise. You'll gain valuable knowledge on initial consultations, cost assessments, timelines, and the importance of clear communication and confidentiality in legal matters.
Join us to break down barriers and navigate your legal journey with confidence. Tune in for expert advice, client stories, and tips on how to prepare for your legal needs. The OMB Law Board is your trusted source for all things legal.
00:00:06:05 - 00:00:16:09
Unknown
Welcome back to the OMB Law board. I'm Simon Bennett, and today I've got OMB Family law partner Aleena Mills with me. Welcome back. Aleena. Thank you. Simon. Nice to be here.
00:00:16:09 - 00:00:17:14
Unknown
So
00:00:17:16 - 00:00:33:03
Unknown
family agreements. Binding financial agreements. Oh. So confusing. Let's consider a situation whereby I entered a relationship 15 years ago. I went to the trouble of getting a binding financial agreement.
00:00:33:05 - 00:00:38:11
Unknown
And my partner successfully got it overturned. Now, when we separated.
00:00:38:13 - 00:00:41:14
Unknown
Have I wasted my time? What's happening?
00:00:41:20 - 00:00:42:11
Unknown
good question.
00:00:42:11 - 00:00:48:09
Unknown
And you would be asking that question in that situation. So essentially these documents
00:00:48:11 - 00:00:49:07
Unknown
very complex.
00:00:49:07 - 00:00:58:23
Unknown
And they are not infallible. And they are essentially a contract like an insurance policy on your relationship. And as we know with insurance policy, sometimes there's loopholes.
00:00:59:03 - 00:01:21:18
Unknown
So if you're interested in binding financial agreements and you want to understand how they work and what can go wrong, you really need to listen to this episode. Let's drill down into it. Let's start by understanding what a binding financial agreement is, or a financial agreement in your family law space. So financial agreements are a tool that we use.
00:01:21:20 - 00:01:37:14
Unknown
We can use them pre cohabitation. We can use them during cohabitation or marriage. And we can use them to actually formalize the separation. So I think a lot of people confuse financial agreements with essentially a prenup style document.
00:01:37:14 - 00:01:53:05
Unknown
And they are largely used for that. And there's pros and cons to these documents, but they are essentially a document that says, if you're using it as a prenup, hey, when we get together, we're actually going to pre-designed how we're going to divide our assets if we separate in the future.
00:01:53:06 - 00:02:17:06
Unknown
So we all hear that term. We all watch a lot of American TV. A prenup. What's a prenup? That's kind of a financial in Australia. It's a financial agreement. That's right. And the prenup kind of refers to a financial agreement that we do before we formalize our relationship. Yes. So we can do it at a few stages. We can do it before we cohabitate or before we marry.
00:02:17:06 - 00:02:36:13
Unknown
So cohabitation and marriage under the Family Law Act have basically give rise to this idea that you can sue each other if you separate. So that's why it's important to make sure under which category are we making this document? Is it before cohabitation, before marriage or during? You can make them during as well. So I haven't missed the boat.
00:02:36:14 - 00:02:59:21
Unknown
No, I've already married. You can still do one now. Still do a financial agreement. Is that right? You can still do one now. And it is. It is still essentially a prenup style agreement. Okay, maybe too late for me, but it's good to know. And then I can also do a financial agreement when I separate. You can. There's actually two ways to document or formalize your separation agreement.
00:02:59:21 - 00:03:08:04
Unknown
And that is through either a court order, you get that by consent or actually going to court and having to fight it out. Or you can do it through these financial agreements.
00:03:08:06 - 00:03:08:14
Unknown
Okay.
00:03:08:14 - 00:03:09:02
Unknown
So
00:03:09:02 - 00:03:17:12
Unknown
the big question that I often hear, and I'm sure as a family practitioner, you hear this all the time, but are they worth the paper they're written on.
00:03:17:12 - 00:03:18:22
Unknown
Are they binding.
00:03:18:24 - 00:03:42:14
Unknown
Well it depends on how they were made. The, the act under which they're made their a statutory instrument sets out how to make them binding. And one of the essential features of that is that each party must receive independent legal advice as to the effects of the agreement on their rights under the act, and the advantages and disadvantages to them of entering into that agreement.
00:03:42:15 - 00:03:58:04
Unknown
Without that, it is essentially a void agreement. That's just one example of how an agreement is binding. Well, that's a great one, because again, one of the things I hear is why do we need lawyers? We've all agreed. That's right. And the fact is, is
00:03:58:07 - 00:04:03:12
Unknown
you simply don't know the law. And that's why you come and see a lawyer is to say, hey, I'm about to sign this document.
00:04:03:13 - 00:04:24:06
Unknown
Am I missing something here? Is am I missing out on my rightful entitlement by signing this? And don't get me wrong, plenty of people enter into these agreements where we're telling them, no, this isn't a good deal for you, but they choose, for whatever reasons, to enter into the agreement anyway. Just the fact that it's a bad deal for them is not sufficient to have that agreement set aside, because they were advised not to.
00:04:24:09 - 00:04:36:22
Unknown
You need the advice. Correct? That's right. Okay. And another one that we see a bit of I certainly hear about is maybe I could be super smart and not disclose some of my assets.
00:04:36:24 - 00:04:48:22
Unknown
Significant non-disclosure to the extent that it affects someone's, you know, willingness to enter into that deal. Like if I had known he had $1 million, I wouldn't have signed off on this deal.
00:04:48:24 - 00:05:12:16
Unknown
That is a ground under the legislation to have this agreement set aside. So if you if it is proven that you have significantly non disclosed good luck. Do I need to get valuations of my assets or will you just take my word. It's highly recommended to get valuations. And in fact sometimes parties will agree to values without going to the process of valuations.
00:05:12:20 - 00:05:31:06
Unknown
Usually in that case they're both quite aware of the actual value of that asset, and they don't want to go to the cost of valuations. And that's okay, provided you've disclosed to the best of your knowledge the value of that is accurate. That's a part of your disclosure obligation is to say, hey, I think it's worth this much.
00:05:31:08 - 00:05:39:15
Unknown
And if you've got that largely correct, then you're pretty well okay. But valuations are absolutely recommended. Okay. So what would you say
00:05:39:17 - 00:05:54:15
Unknown
the three key attributes to getting this binding financial agreement binding are. Oh there's so many assignments. Give me the three top ones I would say like I'll give you three. One of the biggest issues that I see is when people try to rush these documents.
00:05:54:20 - 00:06:09:00
Unknown
Give yourself enough time to get them done. Your lawyers need time. We have a lot. They are complex documents. They're often 30 odd pages long, sometimes longer. There's a lot in there that we have to create. We have to draft. We have to advise
00:06:09:06 - 00:06:10:01
Unknown
We have a lot of
00:06:10:03 - 00:06:12:05
Unknown
negotiation. We have to do with the other side.
00:06:12:10 - 00:06:37:08
Unknown
We need to avoid any element of undue pressure, because that is another ground. To set these aside is that someone felt pressured into entering into the contract. So there's a lot of significance around having enough time to get these done right. That's probably my biggest issue that I come across with people trying to rush these documents. Second is making sure you see a solicitor who really is a specialized family lawyer.
00:06:37:14 - 00:07:02:00
Unknown
We often see great good lawyers, but they sort of dabble a bit in family law and they sign a certificate of advice. And ultimately, if it's ever challenged that that party that got that advice could actually say they didn't receive appropriate advice and therefore they weren't appropriately advised. And that's another ground to set these aside. So, and you may not know that about your your partner and the quality of advice they're getting.
00:07:02:00 - 00:07:37:12
Unknown
So don't rush it. Get good legal from a good family lawyer. And finally, I would say, even though there's no necessary requirement of fairness in the agreement, do your best to make an agreement that may hold up to the courts justice and equity standard, because there is another ground to set these aside, which is hardship. Basically, a hardship would be cause to a child if there's a child born, and the agreement is just manifestly unfair to the primary care of that child, you may create a situation where the agreements set aside on that basis.
00:07:37:12 - 00:08:06:00
Unknown
So where you're considering children or you already have children, you really need to put a lot of thought into the arrangements that you're proposing under that agreement. Okay. And I guess we've touched on a number of things. But the fact is, in certain circumstances, these agreements can be set aside. Yes. Okay. What do we need to watch? Like what would someone listening or watching today says, look, I've got one.
00:08:06:02 - 00:08:33:08
Unknown
I wonder if I could challenge this, if I could set it aside, what would you recommend? They do? See, a lawyer is my first point of call. There. You'll need to revisit the circumstances around the making of that agreement. If you felt pressured into the agreement, that's a big red flag. There was actually a High Court decision a number of years ago, Thornton Kennedy, where the agreement was set aside because the wife in that matter felt pressured into the agreement.
00:08:33:13 - 00:08:50:18
Unknown
And what happens is, when you set it aside, you have another crack at running a property settlement, and who knows what the property pool looks like by that stage. That's a real risk, isn't it? It is a real risk because if you can't be done right at the start, the property pool is certain, but it could have doubled or tripled.
00:08:50:20 - 00:09:10:06
Unknown
That's right, that's right. So it's really important that we're hitting under the legislation the requirements for a binding, making it a binding agreement. And that includes making it under the right section of the act. As I said before, pre marriage, during marriage, post marriage and de facto have all different sections. You've got to make sure you're getting that right.
00:09:10:11 - 00:09:34:24
Unknown
There's a lot of technical drafting skills that go into these documents that need to be there. And while I said before, there's no real requirement of fairness in these agreements, you open up the door to dispute or challenge if it is manifestly unfair to someone. So it's a bit of a gray area. Unfairness will not set it aside necessarily, but it opens the door to the challenge.
00:09:34:24 - 00:09:55:15
Unknown
That's the problem. So there, like as I said before, they're like an insurance policy. They're not perfect, but they're the best instrument that we have to deal with these types of agreements. And the last bit I'd really want to touch on is on a separation or a finalization of a relationship, and you get a financial agreement at that time to finalize your settlement.
00:09:55:18 - 00:10:17:13
Unknown
Is that correct? Yep. So so if you've you've come to an agreement with your ex, you've separated, you've said this is what we think our pool is. We want to divide it this way. And you might have reasons for doing it in a financial agreement as opposed to a court order. Some of those reasons might be that in certain states in Australia, you can actually wave your rights under estate litigation.
00:10:17:13 - 00:10:36:00
Unknown
So you can say, look, I'll wave my right to not bring a claim against your estate if you die because spouses have certain rights, you can't do that in a court order. Also, things like waiving your spouse or maintenance rights very much easier to do in a in a binding financial agreement than trying to do that through a consent order with the court.
00:10:36:02 - 00:10:55:01
Unknown
It's not impossible, but there's a bit more of a, a bit more that they require. So there's definitely reasons why you would do it that way instead of a court order. Yeah. So we see commercial clients at times going, well, look, I've got a good relationship with my ex. Yes, we've already reached an agreement. I just don't understand why we need lawyers.
00:10:55:01 - 00:11:18:20
Unknown
And the point that you made earlier is, well, if you don't finalize it on the asset pool at that time and get it done correctly, you could win the lotto tomorrow, next week, and suddenly that's dropping into the pool. And your ex, who you thought you had an agreement with, may have a client. Absolutely. That's spot on. So the pool is going to fluctuate until you settle.
00:11:18:21 - 00:11:32:05
Unknown
When when you settle, that's when you have other run a hearing in court or you have come to a consent order or a binding financial agreement where you draw the line in the sand and you say, this is our pool and this is how we're dividing it, and you both sign it, that's effectively the end of the road.
00:11:32:06 - 00:11:55:02
Unknown
Otherwise your pool will continue to either go up or down up until you reach that point. The pool is the date you set or not the date you separated. So it is a risky, a risky thing to not get it, get it sorted. So for our listeners and viewers, get a binding financial agreement done by an expert family lawyer.
00:11:55:04 - 00:12:04:20
Unknown
Take all of the necessary steps to get it done right, to give yourself the best chance of that document protecting you in the future. Absolutely. Couldn't say it better myself.
00:12:04:20 - 00:12:23:00
Unknown
Well, thanks so much for joining us for season six of the OMB Law Board. We really appreciate your interaction with us. Keep giving us your comments and your viewership has been fantastic. We're absolutely overwhelmed with the success so far, and we look forward to seeing you in season seven.