When separating, couples often need to divide their property, superannuation and other financial resources. A property settlement can be formalised either through a consent order or a binding financial agreement (BFA). While these two options appear to be similar, they serve different purposes and have different legal implications.
Consent Orders are formal agreements approved by the Federal Circuit and Family Court of Australia. The parties submit the proposed orders to the court with an application and if approved the court formalises the agreement as legally binding orders. One key advantage of consent orders is that they carry the authority of a court order, providing certainty and enforceability. Consent orders can also cover parenting arrangements, whereas a Binding Financial Agreement (BFA) is strictly limited to financial matters. However, the process for consent orders is generally longer, as an application must be completed in addition to drafting the orders and the court may take up to ten weeks to review the application. The court also has discretion to refuse approval or to issue requisitions, which are formal requests for further information or clarification from the parties.
A BFA is a private agreement made between the parties outlining the division of property including spousal maintenance and superannuation entitlements. As a BFA is a private contract, the parties have greater flexibility in deciding what to include. The drafting process of a binding financial agreement typically takes significantly less time compared to consent orders as they do not require court approval. While consent orders are less private, BFA’s offer greater flexibility and confidentiality.
It is a requirement of a BFA that each party receive independent legal advice before signing. The agreement includes a solicitor’s certificate confirming that both parties have received such advice. Failure to obtain independent legal advice in this manner can render the agreement invalid and unenforceable. When drafting a BFA, one party instructs a lawyer to prepare the agreement and provide independent legal advice, while the other party engages a lawyer solely to review the document and advise them before signing. It is the lawyer’s responsibility to ensure the client understands the implications, advantages and disadvantages of the agreement. In contrast, a consent order is drafted by a lawyer, but it is not mandatory for each party to obtain independent legal advice before signing. While the parties are welcome to seek legal advice regarding consent orders, it is not a requirement as it is with a BFA.
A BFA may be challenged by a party if a significant circumstance arises as stipulated under section 90K of the Family Law Act 1975 for marriages or section 90UM of the Family Law Act 1975 for de facto relationships. There are several grounds on which a BFA may be contested, broadly including fraud or unconscionable conduct, errors or lack of clarity, technical defects such as a failure by a party to obtain independent legal advice, issues relating to the wording of a superannuation splitting clause and circumstances causing hardship to a child. In contrast, consent orders are rarely challenged, as the threshold for setting aside or varying them is high and requires a specific and compelling reason. In the event that all protocols and responsibilities have been satisfied when entering into a BFA, it is uncommon for the agreement to be successfully challenged.
A consent order is ideal if the parties seek certainty and legal enforceability, giving you peace of mind that the agreement cannot be easily challenged. Additionally, it is valuable if the parties want the ability to include parenting arrangements alongside financial matters. A BFA is preferable if the parties seek flexibility and prefer a private financial plan. It is an effective way to resolve financial matters efficiently while maintaining confidentiality.
If you need help with consent orders or a binding financial agreement, please contact Jano Family Law.