How to finalise property settlement once and for all
We occasionally hear people say they have done a “property settlement” with their spouse by way of a verbal agreement as they have viewed their separation as “amicable”. They may in fact have sold and divided assets of the marriage without legally formalising this arrangement.
Under the Family Law Act 1975, parties to a marriage or defacto relationship can apply for a property adjustment order from the Family Law Courts if such application is filed within 12 months after divorce becoming absolute, or within 2 years after separation in the case of defacto relationships.
This means that either party to a marriage that had not been dissolved can apply to the courts to divide property at any point in time in the future despite the oral settlement. This is bad news for those that accumulate significant wealth post separation or where the other party’s financial situation deteriorate over time, or where financial documents and records are destroyed or lost by passage of time. Also, informal settlements (such as an oral agreement) are not recognized by the Office of State Revenue when transferring matrimonial/relationship property, and hence the party receiving property may be liable to pay stamp duty on the transfer.
If you both agree on how to divide property, you may finalise property settlement in two ways. You can enter into a written agreement in a form of a deed called “Binding Financial Agreement”, or you can obtain a Consent Order of the Family Court by filing certain prescribed documents. Although you are required to file documents at the Family Court Registry, neither of you are required to appear in Court.
If an agreement cannot be reached between you, then either of you may apply to the court to obtain a “Property Adjustment Order”.
The major difference between a binding financial agreement and a consent order is that a binding financial agreement is not filed or registered in Court whereas the consent order is assessed, approved and issued by a Registrar of the Family Court. The binding financial agreement also requires both parties to obtain independent legal advice and the legal advisor must sign a certificate to evidence that the advice was given and the certificate must be attached to the agreement. Consent orders do not require (although recommended) legal advice to be obtained. There are strict rules that apply to binding financial agreements, and there will be a separate article on that topic soon.
Regardless of which way you may proceed. i.e. by way of a binding financial agreement or a consent order, there is very limited scope to challenge the agreement/order once they are made.
Under section 79A of the Family Law Act 1975, a party to a property adjustment order (including a consent order) must prove at least one of the following before the order can be set aside:
- That there was “miscarriage of justice” by reason of fraud, duress, suppression of evidence, giving false evidence or any other circumstance deemed by the court to amount to miscarriage of justice.
- That it is impracticable for the terms of the orders to be carried out.
- That a party defaulted on the terms of the order and it is just and equitable for the order to be set aside.
- That a hardship may result due to circumstances of exceptional nature in relation to the children.
- That a proceeds of crime order has been made against a party to the marriage.
Same restrictions apply in relation to defacto property adjustment orders, and they are listed under section 90SN of the Act.
Similarly, under section 90K of the Act, a party to a binding financial agreement must prove at least one of the following before the agreement can be set aside:
- That the agreement was obtained by fraud.
- That either party entered into agreement to defeat creditor, or with reckless disregard for creditor.
- That the agreement is void, voidable, or unenforceable.
- That the terms of the agreement are impracticable to be carried out.
- That there is material change in circumstances relating to children and hardship would result if the agreement was not set aside.
- That there had been unconscionability.
- That there is a payment flag operating in relation to a superannuation interest covered by the agreement and there is no likelihood of termination by a flag lifting agreement.
- That the agreement covers at least one unsplittable superannuation interest.
Same restrictions apply to financial agreements between defacto partners, and those are listed under section 90UM of the Act.
Properly drafted financial agreements and consent orders are very difficult to challenge, and they are the most effective ways to prevent your former partner from demanding further property distribution in the future.
Avoid the hassle of costly litigation. Contact our family law department today and find out more about Binding Financial Agreements and Consent Orders.
Readers are reminded that the purpose of this article is to provide general information only and is not to be taken as a substitute for independent legal advice.
For any enquiries regarding Attwood Marshall’s Family Law Departement, please contact the Department Manager Lesley Barnes, on direct line (07) 5506 8241 or by email on firstname.lastname@example.org.
With three offices conveniently located at Robina, Coolangatta – Tweed Heads and Kingscliff , you can also visit an office near you.