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Does a BFA pursuant to s90UC only provide limited protection to assets acquired after a de facto relationship has broken down?

Clients often enter into a financial agreement to protect their assets in the event of the breakdown of the relationship, including inheritances that they anticipate receiving post separation. The Supreme Court of Victoria – Court of Appeal recently handed down a judgment in the case of Orwin v Rickards [2020] VSCA 225, which concerned a professional negligence claim brought in the Supreme Court of Victoria. Interestingly, the underlying issue of the case involves a binding financial agreement between Ms Orwin (the appellant) and her former de facto partner, Mr Sarah.

FACTS: Ms Orwin engaged her solicitor, Mr Rickards (the respondent) to advise her and prepare a binding financial agreement between herself and Mr Sarah in 2009. The financial agreement (pursuant to s90UC of the Family Law Act 1975 (“the Act”)) was subsequently signed by Ms Orwin and Mr Sarah in 2010. Ms Orwin and Mr Sarah separated on a final basis in 2011. Ms Orwin received a considerable amount of inheritance from her mother after separation. Mr Sarah brough an application in the Federal Circuit Court (“FCC”) in 2015 seeking to set aside the financial agreement on grounds of non-disclosure, duress, undue influence and unconscionable conduct, and seeking an order for the just and equitable alteration of property interests. At the date of trial in the FCC, Ms Orwin’s total property holdings including the inheritance were worth over $11 million. Following the hearing of the family law proceedings, Ms Orwin was required to pay a sum of $572,470 to Mr Sarah. Ms Orwin then commenced proceedings in the Supreme Court of Victoria seeking damages against her lawyer to compensate her for her payment of Mr Rickards’ fees in respect of the financial agreement and the settlement amount that she was required to pay to Mr Sarah in relation to the family law matters.

 Whilst the trial judge’s decision, which was upheld on appeal dismissed the application finding that the parties were not in a de facto relationship at the time they entered the agreement and noting other errors which would have rendered the Agreement voidable, the importance of this decision rests on comments made by the trial judge about Binding Financial Agreements generally and the Full Court having supported those comments.

Those comments made by the trial judge were that even if the s 90UC financial agreement was upheld it still would not have provided Ms Orwin full protection for her assets, particularly, the inheritance that she received from her mother after separation [at 229-230]. After all, the Family Court and Federal Circuit Court treat property acquired post separation at their discretion (Calvin & McTier [2017] FamCAFC 125 at [51]). The judge also referred to the judgment in Bonnici & Bonnici (1991) 105 FLR 102; 15 Fam LR 138; (1992) FLC 92-272 at [43] that:

“A property does not fall into a protected category merely because it is inherited. On the other hand if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as the entitlement of the party in question.

The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the husband or wife as the case may be or other particular services to protect a property.”

The trial judge’s comments raise the question of how to fully protect after-acquired assets, whilst there is an existing s90UC financial agreement on foot. Further,is a s90UC financial agreement alone sufficient, or is further documentation required.

 

 

Associations

  • The Law sociaty of NSW
  • Doyles - Family Law 2020
  • Family Law Section - Law Council of Australia - Member 2019/2020
  • Collaborative Professionals (NSW) inc

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