June 9, 2022

Binding financial agreements: the importance of independent legal advice

Publications | Resources

By Christopher Ragozzino, Associate & Rocky Zhou, Lawyer

Three judges of the appellate division of the Federal Circuit and Family Court of Australia recently found against a husband who tried to get out of a financial agreement by saying he did not receive the required independent legal advice.

The background

The parties married in September 1989 and separated in February 2013. A divorce order was then made on 7 May 2014.

On 22 January 2014 the parties entered into a financial agreement pursuant to Section 90C of the Family Law Act 1975 (Cth) (“the Act“) to divide their property and superannuation assets. The agreement also provides for ongoing spousal maintenance for the wife by the husband. The husband was to pay the wife maintenance in the amount of $130,000 per annum, in monthly instalments, as well as the premiums for her life insurance policy until the husband turned 64, or his income fell below $260,000 in a financial year. Importantly, pursuant to Section 90G of the Act, the husband and wife both signed an acknowledgement in the agreement that before they signed the agreement they each received independent legal advice from a legal practitioner.

The husband eventually ceased making the spousal maintenance payments. On 3 July 2017, the wife filed an enforcement application to enforce the terms of the agreement.

The decision in the lower court

At first instance, in determining whether independent legal advice has been given, the primary judge considered evidence given by both the husband and his former solicitor. The husband’s former solicitor gave evidence that contradicted that of the husband, however the court found that the evidence from the husband’s former solicitor was more credible than that of the husband. As a result, the primary judge made the finding against the husband that the agreement was binding and that the solicitor provided the husband with the required advice.

The primary judge proceeded to hear the wife’s application for enforcement of the agreement.

The appeal court’s decision

On appeal, the court agreed with the decision of the lower court.

The court recited the relevant law confirming the burden, or onus, was on the husband to prove that he did not receive the legal advice. When considering the evidence of the husband and his former solicitor, the appeal court accepted the findings of the primary judge, that the solicitor had given the husband the required advice. Importantly, the primary judge was not required to ascertain the content of the legal advice provided. The primary judge only needed to be satisfied that the advice required by the Act, or section 90G, was provided.

Costs were awarded to the wife against the husband.

Take-away points
  • It is crucial to seek specialist advice from a family lawyer to explain the impact of the agreement on your rights and obligations. The court will not set aside a financial agreement merely because it is a “bad deal” for one party.
  • Any legal advice given by a solicitor to a client should be properly documented in writing. In Johanson, had written advice been provided, the proceedings could have been avoided as the husband may have better understood the advice from his solicitor.
  • It is prudent to always keep a record of all amended versions of the draft financial agreement in case disputes arise in future.

Signing a financial agreement is a serious endeavour. Once signed, and the requirements of the Act are followed, and in this case, once each party is provided with the requisite legal advice, it is highly likely that the court will uphold and enforce the terms of the agreement. Before signing an agreement, it is important that you receive specialist legal advice from a family lawyer to explain the impact of the agreement on your rights, and the obligations it imposes.

It appears in this case that the solicitor gave the husband verbal advice. If written advice was provided, this proceeding could have been avoided as the husband may have more clearly understood what his solicitor had advised him.