Do I Really Need a Lawyer for my Binding Financial Agreements?
A Binding Financial Agreement (“BFA”), often known as a prenup, involves contracting out of the family law system. We often hear this misconception — that people consider BFAs as a cost-effective way to avoid court proceedings ad reduce legal costs.
However, BFAs are complex documents which require significant technical expertise and careful drafting if they are to be effective. The recent case of Shala illustrates this clearly. In Shala, five separate agreements signed over six years were ultimately found to be ineffective. As a result, the Court intervened, and the very outcome the parties had sought to avoid, became unavoidable.
Case of Shala: Five Attempts at Certainty that Fell Apart
In Shala, a married couple entered into five written agreements between 2014 to 2020, all intended to regulate how their property would be divided following separation. The agreements were signed at different stages of the relationship: on the day of marriage, after separation, and again years later as amendments.
When the relationship broke down, Mrs Shala asked the Court to set aside the agreements and determine property division in the usual way. Mr Shala argued that at least two of the agreements should be enforced. Before the Court could consider how the parties’ property should be divided, it first had to answer: were any of those agreements legally binding?
In short, the answer was “no” — not even one was legally binding.
Why Did the Agreements Fail?
The Court examined each agreement and found multiple problems.
Some of the agreements failed at the most basic level as they did not clearly state when they were made. This meant they did not meet key statutory requirements under the Family Law Act 1975 (Cth).
More significantly, the Court found that the agreement failed as Mrs Shala did not receive genuine independent legal advice, which is a strict requirement for BFAs.
Although the agreement appeared, on its face, to meet the formal requirements, the evidence told a different story. Emails showed the lawyer communicating with both Mr and Mrs Shala together, taking
instructions from the husband, and later acting only for the husband. From this, the Court concluded that Mrs Shala was not properly advised about the effect of the agreement, or its advantages and disadvantages.
Because independent legal advice is essential for BFA to be binding, the failure alone was enough to render the agreement ineffective, regardless of what the parties believed they had agreed to.
As later agreements relied on this agreement, the entire framework collapsed. Years of agreements, amendments and intentions were effectively undone.
Key Takeaways
BFAs are not just about putting an agreement in writing.
They involve strict legal requirements, careful drafting and genuine independent legal advice. What may appear to be a cost-saving exercise can quickly unravel if those requirements are not met.
This case is a reminder that engaging lawyers for a BFA is not just a formality, but it is central to ensuring the agreement does what it is intended to do. When BFAs are not handled properly, they can fail and the costs can far outweigh any perceived savings.
Voice Lawyers: Your Guide in Family Law Matters
This update is general in nature and is not legal advice. If you need legal advice on your family law matter or you are considering a Binding Financial Agreement, at Voice Lawyers, we hear you.
If you are experiencing or contemplating separation, we suggest you seek legal advice as early as you can, even if you do not intend to separate for a few months or even years. We offer a 90 minutes early separation strategy session Voice Lawyers — Divorce, Separation and Family Law to prepare and inform clients of the process. Every family’s situation is different, and advice tailored to your specific circumstances can assist you in achieving your best possible outcome. We can also assist if you would like a second opinion.
We help people navigate the complexities of family law and international family law with confident, practical advice. You can contact us at office@voicelawyers.com or call 02 9261 1954 to book a consultation to speak with one of our lawyers.