Binding Financial Agreements - The drafting of Binding Financial Agreements has always been a process designed more to resolution that to litigation. The very nature of a BFA is to provide certainty to the parties should they, at some time in the future, decide to separate. That certainty should save costs, time and the degree of angst that each of those parties would go through if an Agreement was not in place.
A recent Family Court case, reported as Kostres & Kostres [2009] FamCAFC 222 demonstrates how important it is to ensure that the Agreement is drafted in simple prudent terms with the intention of the parties obvious. Mrs Kostres sought to uphold a financial agreement but dispute arose regarding the interpretation of the agreement.
The Court, on appeal, struck down the agreement due to the inability of the Court to conclusively determine the intentions of the parties. What was it that the Agreement sought to achieve. The Full Court commented, amongst other things that:
"...care in establishing the mutual intention of the parties and drafting terms of the financial agreements with precision assume the utmost importance."
“As this unfortunate case demonstrates, agreements designed to avoid costly litigation can have expensive consequences if the intention of the parties is not readily discernible from the drafting of the agreement."
“...substantive clauses of such agreements [must be] drafted with precision to ensure effectiveness, especially as they may be dealing with future acquired property or other interests in property."
There have also been recent amendments to the Family Law Act to relax the compliance measures for BFA. A previous case of Black and Black, that directly led to the amendments, required there to be strict compliance with the terms of the legislation insofar as solicitors certifications were concerned and delivery of the signed document to the other party. The legislation was amended to ensure that, retrospectively, there remained the enforceable nature of Binding Financial Agreements, despite the lack of substantial compliance with the requirements of the legislation as then applied.
In circumstances where a client wants to engage in the drafting of a BFA to protect themselves from uncertainty in the future, it is important that a BFA is drawn with precision and particularity so as to ensure that the motives for the Agreement are not lost.