Binding Financial Agreement v Consent Orders: Choosing the Right Option

When a relationship comes to an end, formalising your property settlement is crucial for ensuring that both parties have clarity and security regarding their financial arrangements. In Australia, separating couples can choose between two primary options: entering into a Binding Financial Agreement (BFA) or obtaining Consent Orders. This article aims to provide legal professionals and clients with a comprehensive understanding of these options, the legal framework surrounding them, key differences, and considerations for making an informed choice.

Understanding the Legal Framework for Property Settlements in Australia

The Family Law Act 1975 (Cth) and Its Provisions for Property Division

The legal foundation for property settlements in Australia is established by the Family Law Act 1975 (Cth). This Act provides the framework under which courts have the authority to divide property and financial resources upon separation or divorce. The Court considers various factors such as:

• Each party’s contributions to the relationship, both financial and non-financial
• The future needs of each party, including their health, age, financial resources, and care of children
• The overall justice and equity of the proposed division

For further reference, the Family Law Act 1975 (Cth) can be accessed here.

What Are Binding Financial Agreements (BFAs)?

A Binding Financial Agreement is a private contract entered into by two parties that outlines the division of their property and financial interests. Key features of BFAs include:

• They can be made before, during, or after a marriage or de facto relationship.
• BFAs allow parties to “contract out” of the court’s jurisdiction, which can provide more flexibility in terms of the arrangements made.

When Can You Enter a BFA?

Parties can enter into a BFA:

• Before the relationship: to define how assets will be managed in case of separation.
• During the relationship: to address changing circumstances or financial situations.
• After separation or divorce: to finalize property arrangements and settlements.

Key Requirements for a Valid BFA

A BFA must meet specific legal requirements to be considered valid:

• It must be in writing and signed by both parties.
• Each party must receive independent legal advice before signing the agreement.
• The agreement must not be inconsistent with the provisions of the Family Law Act.

A violation of these conditions may lead to the BFA being set aside by the court, as highlighted by the landmark case of Thorne v Kennedy [2017] HCA 49.

What Are Consent Orders?

Consent Orders are legally binding arrangements approved by the Family Court of Australia or the Federal Circuit Court. To obtain these orders, both parties must mutually agree on the terms of their property settlement and then file an application with the court. The process involves several steps:

1. Negotiation: The parties negotiate the terms of their financial settlement.
2. Drafting: Both parties, ideally with legal assistance, draft the proposed consent orders.
3. Application: The application is filed with the relevant court for approval.
4. Court Approval: The court reviews the application to ensure the orders are just and equitable before making them legally binding.

This rigorous process ensures that the terms agreed upon are subject to judicial oversight and align with the legal standards outlined in the Family Law Act.

Comparing Binding Financial Agreements and Consent Orders

Flexibility and Control

The primary advantage of a BFA is its inherent flexibility. Parties can tailor the terms to suit their circumstances, thereby avoiding possibilities of court-imposed solutions. In contrast, with Consent Orders, the court must approve the terms, which may limit the ability to make adjustments based on personal preferences or unique circumstances.

Privacy and Confidentiality

BFAs provide a level of privacy as they are not public documents. The terms of the agreement are confidential, which can be particularly appealing for parties who wish to avoid public disclosure of their financial matters. Consent Orders, however, become a matter of public record once filed, leading to diminished privacy for the parties involved.

Enforceability and Certainty

BFAs can be challenged in court under specific circumstances, such as if they were executed under undue influence or if a significant injustice would result from upholding them. Conversely, once a Consent Order is approved by the court, it gains a higher degree of certainty and enforceability, subject only to a limited number of grounds for variation or appeal.

Cost and Complexity

Drafting a BFA may require more complex legal input, possibly leading to higher initial costs, as each party must obtain independent legal counsel. On the other hand, the process for Consent Orders tends to be more straightforward, generally involving standardized forms and processes, which might lower legal expenses compared to negotiating and finalizing a BFA.

Choosing Between a BFA and Consent Orders

Assessing Your Unique Circumstances

Evaluating your specific situation is crucial when deciding between a BFA and Consent Orders. Consider the nature and complexity of your assets, the level of cooperation and trust between you and your ex-partner, as well as your desired level of privacy and control.

Considering Your Priorities

• Flexibility vs. Certainty: Do you prioritize having more control over the terms, or do you prefer the assurance that comes with judicial oversight?
• Privacy: Is it more important for you to keep the details of your settlement private, or are you comfortable with the public nature of Consent Orders?

Seeking Professional Legal and Financial Advice

Consulting with a family lawyer is essential, as they can provide personalized guidance based on your circumstances. Legal advice is critical for navigating the specific requirements associated with BFAs and Consent Orders, ensuring that your rights and interests are thoroughly protected.

Frequently Asked Questions About BFAs and Consent Orders

Legal Grounds for Setting Aside Binding Financial Agreements and Consent Orders

Binding Financial Agreements (BFAs) and Consent Orders, while designed to provide finality in family law matters, can be challenged under specific circumstances defined in the Family Law Act 1975. The threshold for setting aside these agreements differs substantially between the two instruments.

For Binding Financial Agreements, Section 90K of the Act outlines comprehensive grounds for judicial intervention, including:

• Fraudulent conduct: This includes deliberate non-disclosure of assets, misrepresentation of asset values, or concealment of financial information. In the landmark case of Thorne v Kennedy [2017] HCA 49, the High Court emphasized that deliberate concealment of significant assets constitutes fraud sufficient to invalidate a BFA.
• Unconscionable conduct or undue influence: Where one party exerts psychological pressure or takes advantage of a significant power imbalance. The Thorne v Kennedy case also established that presenting a BFA shortly before a wedding with an ultimatum can constitute undue influence sufficient to void the agreement.
• Impracticability due to changed circumstances: Particularly relating to the care, welfare, and development of children born after the agreement was made. In Fewster & Drake [2016] FamCAFC 214, the court set aside a BFA when the birth of children created circumstances not contemplated in the original agreement.
• Non-compliance with legal formalities: This includes failure to obtain independent legal advice or technical deficiencies in the drafting of the agreement. The Full Court in Sullivan & Sullivan [2011] FamCAFC 752 confirmed that substantial compliance with formalities is essential to a BFA’s validity.

Consent Orders face a different legal standard for variation or setting aside under Section 79A of the Act, requiring:

• Miscarriage of justice due to fraud, duress, suppression of evidence: The threshold for fraud in this context was examined in Janssen & Janssen [2016] FamCA 345, where deliberate non-disclosure of significant offshore assets justified setting aside consent orders.
• Changed circumstances making orders impracticable: In Stanford v Stanford [2012] HCA 52, the High Court clarified that changed circumstances must be extraordinary and unforeseeable at the time of making the original orders.
• Exceptional circumstances related to a child’s welfare: As demonstrated in Rice & Asplund [1979] FamCA 84, where substantial changes in a child’s living situation justified revisiting property arrangements.

Statistical data from the Family Court of Australia indicates that approximately 14% of BFAs are challenged, while only 7% of Consent Orders face subsequent legal challenges, reflecting the higher stability of court-approved arrangements.

Enforcement Mechanisms for Breaches of Financial Agreements and Court Orders

When parties fail to comply with legally binding family law agreements, Australian courts provide robust enforcement mechanisms that differ based on whether the breach involves a Binding Financial Agreement or Consent Orders.

For Binding Financial Agreements, enforcement follows principles of contract law under Section 90KA of the Family Law Act, granting courts discretion to:

• Issue specific performance orders compelling the defaulting party to fulfill their obligations
• Award compensatory damages for financial losses resulting from the breach
• Vary the agreement terms to facilitate compliance while maintaining equitable distribution
• Order payment of legal costs incurred in pursuing enforcement proceedings

The Full Court decision in Hoult & Hoult [2013] FamCAFC 109 established that courts can enforce BFAs even when circumstances have changed, provided the agreement remains fundamentally viable.

For Consent Orders, as formal court orders, breaches trigger more direct judicial sanctions under Division 13A of the Family Law Act, including:

• Contravention orders requiring immediate compliance
• Compensatory arrangements for the aggrieved party
• Make-up time or property transfers to address substantive losses
• Financial penalties up to 60 penalty units (approximately $13,320 as of 2025)
• Imprisonment for up to 12 months in cases of flagrant or repeated non-compliance

In Slater & Slater [2013] FamCA 934, the court imposed substantial legal costs and compensatory payments after repeated breaches of financial consent orders, demonstrating the serious consequences of non-compliance.

Recent amendments to enforcement provisions have introduced greater flexibility in compliance mechanisms, including:

• Court-supervised compliance regimes with regular reporting requirements
• Sequestration of assets to ensure payment obligations are met
• Appointment of receivers for complex asset management situations
• Garnishment of wages or other income streams for ongoing payment obligations

The Federal Circuit and Family Court Practice Direction – Enforcement (2022) has streamlined enforcement procedures, reducing the average time from application to enforcement hearing from 11.2 months to 6.8 months for straightforward cases.

Timeframes and Procedural Considerations for Financial Agreements and Court Orders

The process of finalizing Binding Financial Agreements and obtaining Consent Orders involves distinct procedural pathways with significantly different timeframes and administrative requirements.

Binding Financial Agreements

A BFA typically requires 4-12 weeks to finalize, though complex asset structures can extend this timeline. The process includes:

1. Initial drafting phase (1-3 weeks): The solicitor for one party prepares the agreement, detailing asset division, financial support arrangements, and future financial relationships. This phase includes comprehensive financial disclosure by both parties, with full asset schedules and supporting documentation.
2. Independent legal review (1-2 weeks per party): Each party must receive independent legal advice, certified in writing by separate solicitors. This statutory requirement, established in Section 90G of the Family Law Act, ensures informed consent. Recent court decisions, including Logan & Logan [2016] FamCAFC 170, have emphasized the substantive nature of this advice, requiring more than cursory review.
3. Negotiation and amendment cycles (variable): Complex agreements often undergo multiple revision cycles. The Australian Institute of Family Studies notes that BFAs typically undergo 2.4 revision cycles before finalization.
4. Execution and certification (1 week): Both parties and their respective solicitors must execute the agreement with appropriate certifications regarding independent advice.

Consent Orders

Consent Orders generally require 8-16 weeks from application to final approval, following this process:

1. Preparation of application (2-4 weeks): Parties must complete the Application for Consent Orders form and draft proposed orders. This includes providing the court with a comprehensive financial overview through Form 13A Financial Statement.
2. Court filing and processing (6-12 weeks): After submission to the Federal Circuit and Family Court, applications undergo judicial review. According to the court’s published performance metrics, the median processing time for consent order applications was 74 days in the 2023-2024 financial year.
3. Judicial consideration: A registrar or judge reviews the application to ensure the proposed division is just and equitable under Section 79(2) of the Family Law Act. In approximately 18% of cases, the court requests additional information or clarification before approval.
4. Finalization and implementation: Once approved, orders become immediately binding and enforceable.

Several factors can significantly impact these timeframes:

• Asset complexity: Business interests, trust structures, or overseas assets can extend timeframes by 40-60%.
• Cooperation levels: High-conflict situations typically double preparation time.
• Legal representation: Self-represented parties face average processing delays of 3.2 months compared to represented parties.
• Court backlogs: Regional registries sometimes experience longer processing times than metropolitan locations.

Dispute Resolution Pathways When Agreement Cannot Be Reached

When negotiations for financial settlements reach an impasse, Australian family law provides a structured multi-tier dispute resolution framework designed to encourage resolution without full litigation while providing escalation options when necessary.

Mandatory Pre-Filing Dispute Resolution

Before commencing property proceedings, Section 60I of the Family Law Act requires parties to attempt Family Dispute Resolution (FDR), with exceptions for urgent matters or cases involving family violence. This process involves:

1. Mediation with accredited FDR practitioners: Typically conducted over 2-4 sessions, with specialized financial mediators available for complex property matters. The Australian Institute of Family Studies reports a 70% full or partial agreement rate when financial disputes enter mediation.
2. Collaborative practice: An emerging alternative involving specially trained collaborative lawyers who work together with financial neutrals and family consultants. Research by the Australian Collaborative Practice Guidelines Committee shows this approach achieves resolution in approximately 93% of cases that enter the process.
3. Family Relationship Centers: Government-subsidized services offering up to three hours of property mediation at reduced cost, with sliding scales for additional hours based on income.

Legal Intervention Options

When alternative dispute resolution fails, legal pathways include:

1. Lawyer-led negotiation: Formalized exchange of offers through legal representatives. The Family Law Section of the Law Council of Australia reports this approach resolves approximately 60% of property matters that failed in mediation.
2. Arbitration: Private determination by a qualified family law arbitrator under Division 4 of Part VIIIB of the Family Law Act. This provides a binding decision with limited appeal rights but offers greater privacy and typically faster resolution (average 4.8 months versus 18.2 months for litigation).
3. Court proceedings: The final escalation option, involving:
   • Case assessment conference (mandatory first court event)
   • Conciliation conference with registrar (resolves approximately 41% of filed cases)
   • Trial preparation hearing
   • Final hearing (reached by only 5% of all property disputes)

The Federal Circuit and Family Court’s case management system places emphasis on early resolution, with Judge-led conciliation conferences now resolving approximately 38% of cases that reach this stage, according to the court’s 2023-2024 annual report.

Strategic Considerations

Several strategic factors influence the optimal dispute resolution pathway:

• Power imbalances: Where significant power disparities exist, shuttle mediation or court-supervised negotiation may offer greater protection.
• Disclosure concerns: When one party is reluctant to provide financial information, court processes with compulsory disclosure requirements may be necessary.
• Complexity threshold: Research by the Australian Institute of Family Studies suggests that property pools exceeding $3 million or involving more than two business entities show substantially lower resolution rates in mediation.
• Time sensitivity: Where business continuity or asset preservation is critical, expedited court applications for interim orders may be necessary while pursuing parallel negotiation.

Recent reforms to the family law system have emphasized a “resolution-focused” approach, with preliminary hearings now explicitly designed to narrow issues and encourage settlement, reducing the average time from filing to resolution by approximately 3.4 months compared to pre-reform data.

Next Steps for Formalizing Your Property Settlement

1. Gather Necessary Financial Documents: Create a comprehensive list of your financial information, including income, assets, and liabilities.
2. Negotiate Terms with Your Ex-Partner: Engage in open discussions about the property settlement and aim for a mutual agreement.
3. Engage a Family Lawyer: Consult a knowledgeable family lawyer to review your situation and draft either a BFA or Consent Orders.
4. Sign and Finalize Your Agreement or Apply for Court Approval: If you enter into a BFA, finalize with signatures after obtaining legal advice. For Consent Orders, submit your application to the court for review.

Conclusion

The decision between a Binding Financial Agreement and Consent Orders is significant and should be made with careful consideration of your specific needs and circumstances. Both options provide valid pathways to achieve a formal property settlement, each with its distinct benefits and drawbacks.

By understanding the legal implications, comparing the two, and consulting with qualified professionals, couples can navigate the complexities of property settlements effectively. Remember, the right choice will depend on your unique situation, your priorities, and the level of cooperation between you and your ex-partner.

For comprehensive information and support tailored to your individual needs, it is always recommended to seek legal advice. Your future financial security depends on making the best informed decision today.

References

• Family Law Act 1975 (Cth)
• Binding Financial Agreements, Family Court of Australia
• Consent Orders, Federal Circuit and Family Court of Australia
• Thorne v Kennedy [2017] HCA 49