Binding Financial Agreement vs Consent Orders

When a married couple or de facto couple separate there are two ways in which the parties are able to formalise their property/financial settlement without commencing proceedings in the Federal Circuit and Family Court of Australia. These two options are either Consent Orders or a Binding Financial Agreement.

It is always advisable that the parties formalise their agreement properly by having a lawyer prepare either Consent Orders or a Binding Financial Agreement. Not doing so leaves a great deal of risk.

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What are Consent Orders?

In order to obtain Consent Orders, there are two documents that need to be completed and filed with the Federal Circuit and Family Court of Australia. Neither party is required to attend Court, however the documents are submitted and the Court will then consider whether what is proposed is just and equitable (fair and reasonable).

The first document that needs to be completed is an Application for Consent Orders. This includes details such as the dates of the relationship, a comprehensive list of all assets and debts that exist in either parties’ name and their current values.  It also includes details regarding what contributions or future needs factors should be considered as is required by the Family Law Act 1975.

The second document is the proposed Orders themselves, known as a Minute of Proposed Orders, which set out exactly what needs to happen for the settlement, such as deadlines for payments to be made, transfers to occur etc.  

Both documents need to be signed by both parties, and their lawyers if they have them.  The documents are then filed electronically with the Federal Circuit and Family Court of Australia for a Registrar to review.  That process can take approximately 1-8 weeks depending upon the how busy the Court is at the time.  If the Court approves that the Application for Consent Orders and considers them just and equitable in the circumstances, they will stamp the Orders with the Court seal.  That agreement has then become binding.

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Advantages of Consent Orders

• Once Court Orders have been made they are legally binding as they are Orders of the Court.  This makes it easier if there are any enforcement issues.
• It is very difficult for Court Orders to be overturned.
• It is a choice for each person whether they do or do not want to get independent legal advice.  When they sign they do need to tick the box to confirm that they are aware of their right to seek independent legal advice.  However, they are not required to have obtain their own legal advice if they choose not to.

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Disadvantages of Consent Orders

• When filling out the Application for Consent Orders, a lot of detail is needed in regards to filing out the boxes relating to all assets.  Although it can be tedious to provide all of this information to your lawyer, it is certainly important that the lawyer has all relevant information to be able to advise the client properly.
• There may be a Court filing fee (currently $200.00 but may increase from time to time)
• There is also a waiting time frame of potentially one to eight weeks depending upon the Court work load.  
• The Registrar at the Court will only approve Consent Orders if they deem it to be just and equitable, taking into account the relevant Sections of the Family Law Act 1975. As such if the proposal is far outside the range that the Court considers reasonable, they may refuse to grant the Orders.  

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What is a Binding Financial Agreement?

A Binding Financial Agreement (BFA) should be prepared by a lawyer. It includes the background to the relationship including what assets each party had at the commencement of the relationship, and what assets currently exist.  It then sets out what assets each party will retain.

A Binding Financial Agreement does not have to be approved by a Court, however, in order for it to be enforceable it must be drafted properly. In addition, both parties are required to obtain their own independent legal advice in order to make these Agreements binding.

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Advantages of a Binding Financial Agreement

• The preparation of a Binding Financial Agreement can sometimes be quicker than an Application for Consent Orders.
• If the parties have reached an agreement for a property settlement that would not be regarded as fair pursuant to the provisions under the Family Law Act, a BFA can still be made, and can still be binding.  As long as both parties have an independent lawyer who gives them the relevant advice in regards to advantages and disadvantages of signing the Agreement and the lawyer signs the certificate that the advice was given, then the Agreement will be binding.
• A BFA can be signed by parties, before living together, during cohabitation, after separation, or after divorce.

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Disadvantages of a Binding Financial Agreement

• Both parties must be independently legally represented.
• There is a high threshold for the advice that should be given by the lawyer, therefore they are likely to put this advice in writing in a lot more detail than they would feel the need to do in Consent Orders, particularly if the lawyer is concerned that the Binding Financial Agreement may be unfair for their client.
• It is possible for a BFA to be unenforceable if it is not drafted properly. Therefore, it is important that both independent lawyers are experienced in family law, and give appropriate advice.
• If there is an issue with enforceability, ie one of the parties has not done what they are required to do pursuant to the Agreement, then the recourse for the other party is to make an Application to the Court to have the BFA enforced.   This would be a more complicated process than if Court Orders had been used, because we first need to have the Federal Circuit and Family Court of Australia confirm the validity of the BFA, and then take the next step in terms of enforceability.

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Ultimately, there are advantages and disadvantages to both options, but as long as they are both done properly by an experienced family lawyer, then they are both binding.

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Generally, we will advise our client as to which option would be best for them given their individual circumstances.

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If you need to formalise a property settlement to make sure it is binding, then please make an appointment to see one of our experienced family lawyers who can assist with preparing an Application for Consent Orders or a Binding Financial Agreement. Appointments can be made by telephoning our office on (03) 56235166.

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