Consent Order vs Binding Financial Agreement (BFA):

Consent Orders

1. Court Involvement & Scrutiny:

Court involvement: Significant. Parties jointly file an Application for Consent Orders, which is reviewed by a Court Registrar or Judge.

1. • The Court must be satisfied that the proposed orders for property division are “just and equitable” (fair in all the circumstances).
   • For spousal maintenance orders, the Court must be satisfied they are “proper.”
   • This judicial oversight provides a “safety net” to ensure fairness.
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2. Legal Basis: Primarily under the Family Law Act 1975 (e.g., Section 79 for property orders for married couples, Section 90SM for de facto couples, Section 77A for spousal maintenance).
3. Scope:
   • Division of property and liabilities.
   • Spousal maintenance.
   • Superannuation splitting.
   • Can also include Parenting Orders (though the assessment for these is based on the “best interests of the child” and is separate from financial considerations).
4. Formal Requirements:
   • Parties must make full and frank financial disclosure.
   • The application must be submitted in the prescribed form, along with supporting documentation.
   • Independent legal advice is not mandatory for making orders. However, it is strongly recommended, and the Court will note if advice was obtained. The Court must be satisfied that the parties understand the orders.
5. When Can They Be Made?

• Typically, after separation. There are time limits for applying:
• Married couples: Within 12 months of a divorce order becoming final.
• De facto couples: Within 2 years of separation.
• Leave of the Court is required to apply outside these times.
• 6.Enforceability: Legally binding and enforceable as court orders. Breaches can lead to enforcement proceedings.
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• 7.Grounds for Setting Aside:
  • More limited  than BFAs once made, as the Court has already assessed their fairness.
  • Can be set aside in specific circumstances such as fraud, non-disclosure of a material fact, duress, unconscionable conduct, a later BFA overriding them, or if they are found to be impracticable.
  • Also, if there has been a significant change in circumstances for children (if parenting orders are included) or in relation to spousal maintenance provisions (e.g., a significant change in financial circumstances making the order no longer appropriate).
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  • 8.Consent Orders offer certainty once made. They are less flexible than a BFA, as changes usually require a new court application and proof of a significant change in circumstances or a new agreement.
  • 9.Cost: Generally, if agreement is reached, applying for Consent Orders may be more cost-effective than negotiating and drafting a BFA with two sets of lawyers or proceeding to a contested trial.

Binding Financial Agreements (BFAs)

• BFAs are private contracts that can exclude the Court from financial matters if strict requirements are met. They are called prenuptial agreements if made before marriage, postnuptial if made during marriage, or simply agreements after de facto relationships or separation/divorce.
• Court Involvement & Scrutiny:
• • Court involvement: Minimal to none at the time of signing. BFAs are not usually filed with the Court when made (unless enforcement or setting aside is sought later).
  • The Court does not review a BFA for fairness when it is made. Its only focus is whether strict legal validity requirements are met.
• Legal Basis: Specific provisions in the Family Law Act 1975 (e.g., Part VIIIA for marriages, Part VIIIAB Division 4 for de facto relationships).
• Scope:
• 1. Division of property and liabilities.
  2. Spousal maintenance (can be excluded or included).
  3. Superannuation splitting (though this often needs separate mechanisms or orders for implementation).
  4. Cannot include parenting matters
• Formal Requirements:
• • Extremely strict and complex. Failure to comply precisely can render the BFA not binding.
  • Must be in writing and signed by all parties.
  • Before signing, each party must receive independent legal advice from a lawyer. The advice must cover the agreement’s effect on their rights and the pros and cons of making the agreement.
  • Each party must be provided with a signed statement from their lawyer confirming that this advice was given.
  • A copy of the lawyer’s statement must go to the other party or their lawyer.
  • The agreement must not be terminated, and (if made before divorce) must contain a separation declaration if seeking to finalise property division after divorce.
• When Can They Be Made?
• • Before a marriage or de facto relationship (s90B, s90UB).
  • During a marriage or de facto relationship (s90C, s90UC).
  • After divorce or the breakdown of a de facto relationship (s90D, s90UD).
• Enforceability: If validly made, they are binding and enforceable as a contract. Enforcement actions can be taken in court.
• Grounds for Setting Aside a BFA:
• • Despite being “binding,” BFAs can be set aside by a court on grounds broader than those for Consent Orders. These include:
  • • Fraud (including non-disclosure of a material matter).
    • If the agreement was made for the purpose of defrauding or defeating creditors.
    • If the agreement is void, voidable, or unenforceable as a contract (e.g., duress, undue influence, unconscionable conduct).
    • If circumstances have changed since the agreement was made that make it impracticable for the agreement, or parts of it, to be carried out.
    • A material change in circumstances relating to the care of a child of the relationship, making it unjust if the BFA is not set aside.
    • One party engaged in unconscionable conduct when making the agreement.
    • Issues with superannuation splitting.
• BFAs aim to provide certainty and a “clean break” by ousting the court’s jurisdiction. But their strict requirements and grounds for setting aside can make them less certain than Consent Orders, if not drafted and executed properly.
• Cost: Can be expensive to draft and finalise due to the mandatory requirement for independent legal advice for both parties and the detailed work required to ensure compliance with strict legal formalities.

Which is Better, a Consent Order or a Binding Financial Agreement (BFA)?

• Consent Orders are often preferred when parties have reached an amicable agreement and want the reassurance of court approval regarding fairness, or when parenting orders need to be included with financial orders.

• Choose BFAs for maximum privacy, to keep financial matters from the court, to explicitly oust court jurisdiction, or to make agreements before or during a relationship to protect specific assets. This is recommended only if you accept strict legal requirements and the related costs.

• You are not yet separated (Pre-nups and Post-nups)

• Consent Orders can generally only be made after a relationship has broken down. They are a tool for “cleaning up” the financial side of a divorce or separation.
• • A BFA is the only way to protect assets before or during a relationship. Whether you are about to get married or are already living together and want to protect an inheritance or business, a BFA lets you set how your assets will be split if you separate.
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• 2. The agreement is “unfair” by Court standards

• When you submit Consent Orders, a Court Registrar checks that the deal is “just and equitable” to both parties based on legal principles. If one person gets 90% of the assets and the other 10%, the Court may reject the application.
• • The BFA Advantage: A BFA is a private contract. It does not require court approval and need not be “fair.” As long as both parties are completely informed and have independent legal advice, you can enter deals the Court might find lopsided or unconventional.
• 3. Maximum Privacy and Flexibility for Complex Assets

• Consent Orders require you to file a detailed “Application for Consent Orders” with the Court, which becomes a part of the Court record. This application requires an exhaustive list of all assets, liabilities, and financial resources held by both parties.
• • A BFA is private and kept between the parties and their lawyers. It is never filed with a court. BFAs are also more flexible for complicated financial structures such as family trusts, companies, or self-managed super funds, which can be difficult to include in standard Court application forms.
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• You want the reassurance of court oversight and approval that the agreement is “just and equitable.”
• You need to include legally binding parenting arrangements alongside financial matters.
• You prefer a more robust, less easily challenged mechanism for finalising your affairs.
• The agreement is fairly straightforward, and the parties are amicable.
• Cost is a significant factor, and the matter is simple (though legal advice is still recommended).

• You want to make an agreement before or during a relationship (e.g., a prenuptial agreement).
• You want to keep the terms of your agreement entirely private and out of the court system (unless a dispute arises later).
• You and your partner agree to agreements that might not strictly meet the “just and equitable” criteria a court would impose (e.g., protecting specific assets or a different percentage split for particular reasons).
• You are outside the time limits for applying for Consent Orders and need a mechanism to finalise property matters (though obtaining leave from the court for Consent Orders might still be an option).

• Complexity and Risk: BFAs are complex legal documents with strict technical requirements. An error in drafting or the advice process can render a BFA invalid.
• Full Disclosure: Both processes require full and frank disclosure of all financial circumstances. Failure to do so can be grounds to set aside either Consent Orders or a BFA.
• Legal Advice: Regardless of the path chosen, obtaining thorough independent legal advice is crucial to understanding your rights, obligations, and the implications of the agreement you are entering into. This is highly recommended for Consent Orders and absolutely mandatory for BFAs.