Are you considering entering into a Binding Financial Agreement (BFA)? Then you might like to take note of the outcome of a recent court case, where a wife made an application for spousal support which was opposed by the husband due to the existence of a BFA. The husband said the BFA dealt with spousal support essentially by omission, arguing that if the BFA was read as a whole, “the parties intended to deal with maintenance in the financial agreement by making no provision for it” (original italics). In other words, because the agreement didn’t discuss spousal support, the inference should be that it was agreed that spousal support would not be sought or paid. The husband was unsuccessful and the wife was allowed to pursue her spousal support application through the court system. What happened in this matter and why is it of relevance to anyone entering into a BFA? Let’s take a look.
[Important detail in BFA dispute over spousal support application…continued]
The question asked in the recent matter of Viswan & Parveen (court-appointed pseudonyms) was, did the BFA between the parties legally prevent the wife from pursuing a spousal support claim through the courts?
The husband argued spousal support or maintenance was contemplated in the Recitals of the BFA, which included:
“This agreement is conditional upon the marriage taking place and is intended to deal with the whole of the property and financial resources of the parties now and in the future and their maintenance in the event of the breakdown of their marriage without resort to litigation.”
But the court noted that “the ‘Operative Part’ of the financial agreement did not ‘deal with’ spousal maintenance at all….there was no express reference to spousal maintenance.”
“The operative part of the financial agreement simply fails to deal with prospective spousal maintenance Applications. Whilst the drafter of the financial agreement referred to the parties’ “maintenance” in the Recitals of the financial agreement, with certain of those Recitals stating that the parties intended to “deal with…their maintenance”, the drafter failed to deal with spousal maintenance in the operative part of the financial agreement.”
The husband’s counsel attempted to submit that when Recitals are clear in an agreement but the Operative part is not, then the Recitals should prevail. The counsel asked, rhetorically, what would be the purpose of the Recitals otherwise? The court did not respond to the rhetorical question.
But exactly what is the purpose of Recitals? In agreements, the purpose of Recitals is essentially to “set the scene” as a preamble to the agreement’s actual terms. However, they do not form part of the operative, legally binding agreement between the parties. Still, if interpretation of the operative part of the agreement is in dispute, Recitals can sometimes play a role in helping to clarify the interpretation. In this case, however, it seems that since the Operative part of the agreement was completely silent on spousal support, the Recitals could not exactly assist with the interpretation of a non-existent provision.
What’s the upshot for your BFA?
The key takeaway for those contemplating entering into a BFA? Leave nothing to chance. Under the provisions for financial agreements in the Family Law Act 1975, if your BFA doesn’t comprehensively deal with all aspects of your financial affairs, the court may still retain its powers to deal with those aspects. Therefore, spell out how all financial and property aspects will be dealt with, including whether or not spousal support is to be paid. Make sure it’s expressly clear in the agreement that the parties acknowledge that no provision of spousal support is needed or wanted, if that is what you have agreed with your spouse.
Further, if you do intend for spousal support or child support to be paid under the financial agreement, under section 90E of the Family Law Act 1975, provisions dealing with spousal support and child support in financial agreements are void, unless the provision specifies:
(a) The party, or the child or children, for whose maintenance provision is made; and
(b) The amount provided for, or the value of the portion of the relevant property attributable to, the maintenance of the party, or of the child or each child, as the case may be.
As such, when drafting a BFA, ensure all these details are included. And finally, make sure the Recitals and Operative part of your BFA are in sync!
You can read the above-mentioned judgment in full here.
Do you need assistance with a Binding Financial Agreement or any other family law matter? Please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.