TO BFA OR NOT TO BFA, THAT IS THE QUESTION
Brynne and Geoffrey Edelsten. Another expensive relationship and undoubtedly, another expensive divorce. It may interest you to know despite Geoffrey’s failed first marriage and rumored worth of $100 million at the commencement of the relationship, the couple did not sign a Financial Agreement (“FA”), formerly known as a Binding Financial Agreement, or ‘Pre-nup’, as the media loves to call them. In fact, it was Geoffery’s decision to forgo the FA, who was once quoted saying, "you go into these things thinking they're permanent. It's a risk I'm prepared to take".
Some may scoff at Geoffrey’s romantic optimism and wonder, particularly given his much younger wife, vast wealth and flashy lifestyle, why in the world did he not ‘protect’ himself?! However, the FA isn’t just a quick fix for a failed relationship. The process is fraught with risk, particularly for practitioners who fear the exposure to claims for professional negligence. Perhaps Geoffrey’s ‘romantic optimism’ was simply a guise for his lawyer telling him “sorry mate, I’m not touching this one with a 20 foot pole”.
The risks associated with drafting a FA arise because:
- The Courts expect a very high standard of care to be adopted by practitioners when drafting FAs;
- Practitioners often face client pressure to prepare them quickly and cheaply without comprehensive instructions;
- Practitioners will be held accountable for any failure to strictly comply with all of the legislative requirements for the FA to be binding and enforceable;
- It is almost impossible to anticipate, with sufficient certainty, all of the scenarios regarding the acquisition and disposal of property during a marriage or de facto relationship so as to definitely ensure that the FA will be held to be binding if the marriage or de facto relationship breaks down and a dispute arises;
- It will almost always be in the interests of one part to set aside the FA where the FA is made pursuant to s 90B (before marriage), s 90C (during a marriage), s 205ZN (before a de facto relationship or s 205ZO (during a de facto relationship; and
- If a party is unsuccessful in attempting to have the FA set aside, he or she may look to the practitioner, who provided the advice, for damages on the basis that he or she would not have been entered into the FA if they had been properly advised. Alternatively, if a party does succeed in having a FA set aside, the other party may claim against his or her own solicitor.
In light of the above, Geoffrey’s decision ‘not to FA’ may suddenly seem sensible. However, it’s important to note that the deficiencies in FAs that have emerged from the case law have provided guidance on how to minimise the risks involved in preparing a FA.
In light of these developments, perhaps Geoffrey may reconsider his position. Third time around.
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