Consent Order v Binding Financial agreement

Both Consent Orders and Binding Financial Agreements (BFAs) are legal tools in Australian family law that allow separating couples (and those entering or in a relationship) to formalise agreements about financial matters, primarily property division and spousal maintenance. However, they operate differently, have distinct requirements, and offer varying levels of court oversight and flexibility.

Here’s a comparison of Consent Orders vs. Binding Financial Agreements:

Consent Orders

• What are they? Legally binding orders made by the Federal Circuit and Family Court of Australia (FCFCOA) based on an agreement reached between parties.
• Court Involvement & Scrutiny:
  • Yes, significant. Parties jointly file an Application for Consent Orders, which is reviewed by a Court Registrar or Judge.
  • 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.
• 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).
• 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).
• Formal Requirements:
  • Parties must make full and frank financial disclosure.
  • The application needs to be in the prescribed form with supporting documentation.
  • While independent legal advice is not strictly mandatory for the Court to make the orders, it is very strongly recommended, and the Court will note whether advice has been obtained. The Court needs to be satisfied the parties understand the orders.
• 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.
• Enforceability: Legally binding and enforceable as court orders. Breaches can lead to enforcement proceedings.
• 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).
• Flexibility & Certainty: Offers good certainty once made. Less flexible to change than a BFA might appear, as variations usually require a fresh application to the Court and demonstrating a significant change in circumstances or mutual agreement leading to new consent orders.
• Cost: Generally, if agreement is reached, the process of applying for Consent Orders can 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)

• What are they? Private contracts between parties that can oust the jurisdiction of the Court to deal with financial matters, provided specific strict requirements are met. Also known as “prenuptial agreements” (if made before marriage), “postnuptial agreements” (if made during marriage), or agreements made during or after a de facto relationship or after separation/divorce.
• Court Involvement & Scrutiny:
  • Minimal to none at the time of signing. BFAs are not typically filed with the Court when made (unless enforcement or setting aside is sought later).
  • The Court does not review a BFA for fairness (“just and equitable”) at the time it is made. The focus is on whether the strict legal requirements for its validity have been 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 have received independent legal advice from a legal practitioner about the effect of the agreement on their rights and the advantages and disadvantages of making the agreement.
  • Each party must be provided with a signed statement from their lawyer confirming this advice was given.
  • A copy of the lawyer’s statement must be given 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:
  • Despite being “binding,” BFAs can be set aside by a court on various grounds, which are more extensive than 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.
• Flexibility & Certainty: Aims to provide certainty and a “clean break” by ousting court jurisdiction. However, the complexity of the requirements and the various grounds for setting them aside mean they can sometimes be less certain than Consent Orders if not impeccably drafted and executed.
• Cost: Can be expensive to draft and finalise due to the mandatory requirement for independent legal advice for both parties and the detailed work involved in ensuring compliance with strict legal formalities.

Key Differences Summarised:

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Which is Better?

Neither is inherently “better”; it depends entirely on the specific circumstances, the complexity of the financial situation, the level of trust between parties, and the desired level of certainty and court involvement.

• 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.
• BFAs may be considered when parties want to keep their financial affairs entirely private from the court at the time of agreement, wish to explicitly oust court jurisdiction, or are entering into agreements before or during a relationship to protect specific assets, provided they are willing to meet the strict legal requirements and associated costs.

Given the complexities, it is crucial to obtain independent legal advice from a specialist family lawyer to determine which option is most appropriate for your individual situation. When formalising agreements about property, finances, and sometimes spousal maintenance after a relationship breakdown in Australia, the two main legal pathways are Consent Orders and Binding Financial Agreements (BFAs). They have distinct features, requirements, and implications. Here’s a comparison:

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When Might You Choose One Over the Other?

Consent Orders may be preferred if:

• 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 generally more robust and less easily challenged mechanism for finalising your affairs.
• The agreement is relatively straightforward, and parties are amicable.
• Cost is a significant factor, and the matter is simple (though legal advice is still recommended).

A Binding Financial Agreement (BFA) may be considered if:

• 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 terms 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).

Key Considerations:

• 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 understand 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.

The choice between Consent Orders and a BFA depends heavily on your individual circumstances, the complexity of your affairs, the level of agreement with your former partner, and your priorities regarding court oversight, privacy, and certainty.