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A Binding Financial Agreement overturned can have serious consequences for separating couples in Australia. Often referred to as “pre-nuptial” or “post-nuptial” agreements, Binding Financial Agreements (BFAs) allow couples to outline how financial assets will be divided in the event of separation or divorce. However, these agreements aren’t iron-clad. Courts can overturn them under certain circumstances, radically altering the financial settlement couples expected.

What Is a Binding Financial Agreement?

A Binding Financial Agreement is a legally enforceable contract made under the family law regime in Australia. Spouses and de facto partners use BFAs to:

• Protect individual assets owned before the relationship
• Confirm who keeps the family home
• Allocate future inheritances or business interests
• Settle spousal maintenance obligations

BFAs are governed by Part VIIIA of the Family Law Act 1975. When properly drafted, they can save couples time, expense, and uncertainty by avoiding Court‑imposed property divisions.

Common Reasons a BFA Is Overturned

Even the most carefully drafted BFA can be set aside by a Family Court if certain criteria aren’t met. The leading case, Thorne v Kennedy (2017) HCA 49, highlighted key grounds on which a Binding Financial Agreement overturned might occur:

1. Unconscionable Conduct

If one party entered the agreement under undue pressure, emotional duress, or unequal bargaining power, the Court may find the BFA unconscionable. For example, if one spouse coerced the other into signing hours before the wedding, the agreement could be set aside.

2. Lack of Proper Independent Legal Advice

Each party must obtain independent legal advice on the effect of the BFA and its financial implications. Failure to provide proof of such advice for both parties is a common reason for a Binding Financial Agreement overturned.

3. Non‑Disclosure of Assets

Full and frank disclosure of all relevant assets, liabilities, and financial resources is essential. If one party hides or misrepresents their financial position, the agreement can be overturned for misleading conduct.

4. Significant Change in Circumstances

Although rare, if a drastic change occurs—such as serious illness, disability, or unexpected bankruptcy—after the BFA is executed, the Court may intervene to achieve a just outcome.

5. Unfair or Impractical Terms

If the BFA’s terms are so one‑sided that they produce an unfair outcome, the Family Court can overturn the agreement in the interests of justice.

Legal Process to Challenge a BFA

Challenging a BFA requires initiating Court proceedings. Key steps include:

1. Filing an Initiating Application

The party seeking to set aside the BFA files an Initiating Application in the Federal Circuit and Family Court of Australia, stating grounds for overturning the agreement.

2. Affidavits and Evidence

Both parties provide sworn affidavits detailing financial circumstances, legal advice obtained, and any relevant communications surrounding the agreement.

3. Interim Hearings

The Court may hold interim hearings to address temporary arrangements, such as spousal maintenance or living expenses, while the matter proceeds.

4. Final Hearing

At the final hearing, the Court assesses whether grounds exist to overturn the BFA. If successful, the BFA is set aside, and the Court applies the Family Law Act’s property division principles.

Implications of a BFA Being Overturned

When a Binding Financial Agreement overturned, couples lose the certainty they sought. The Court then divides assets under the Family Law Act’s “just and equitable” test, considering:

• The financial and non‑financial contributions of each party
• The future needs of each spouse, including care of children
• The length of the relationship and ages of the parties

This process can be lengthy, costly, and emotionally draining—far from the streamlined settlement a BFA intended.

How to Strengthen Your Binding Financial Agreement?

To reduce the risk of a Binding Financial Agreement overturned, consider these best practices:

• Engage Experienced Family Lawyers
  Both parties should obtain independent legal advice from practitioners specialising in family law.
• Ensure Full Disclosure
  Compile comprehensive financial statements, asset lists, and valuation reports before drafting the BFA.
• Allow Adequate Time
  Draft and review the agreement well before significant relationship events (e.g., wedding day) to avoid claims of duress.
• Review Regularly
  Revisit and update the BFA if your circumstances change—such as acquiring new assets or having children.

Conclusion

A Binding Financial Agreement overturned can upend expectations and force couples into a costly court process. Understanding the reasons Courts set aside BFAs—and taking preventive steps—can help ensure your agreement remains enforceable. If you’re considering a BFA or facing a challenge, seek specialised family law advice to protect your financial future.