Documenting agreements in family law – parenting plans, consent orders and binding financial agreements
Recently we published the article Five good reasons to try to resolve your family law property and parenting disputes through private mediation. Today we assume that you have had a successful mediation and tell you of the ways you can have your settlement formally documented in accordance with the Family Law Act 1975 (Cth) (“the Act”).
The Act prescribes three primary ways of formally documenting a settlement in family law. These are parenting plans, consent orders and binding financial agreements.
Which avenue you choose depends very much on your particular circumstances, as each document has a different set of rules governing its implementation and enforceability.
Documenting a parenting agreement with a written parenting plan
As the name suggests, parenting plans relate only to arrangements concerning children.
Parenting plans are a popular means of documenting a parenting agreement reached during mediation, as they are documents which can be relatively easily drafted, signed and implemented by each of the parties immediately following the mediation.
Parenting plans are less formal documents than consent orders or binding financial agreements, as they are not scrutinised by the court or a legal practitioner and cannot be enforced by a court or third party (eg the police). As such, parenting plans are only effective as long as both you and your ex-partner agree to honor the agreement contained in the parenting plan.
Having a parenting plan converted into consent orders
Parenting plans are a good starting point, as they give you the opportunity to test the practicality of a parenting arrangement before fully committing to it via an enforceable document, ie consent orders, in the future. This is particularly helpful where young children and infants are concerned, as it is difficult to determine what will be in the children’s best interests and how their routines will develop when they are so young.
Once the children are older and you and your ex-partner have determined that the agreement documented in the parenting plan is both practical and in your children’s best interests, we highly recommend that you have that document converted into consent orders, which are legally binding.
Parenting plans are also relevant as evidence of a prior agreement in the event that a dispute regarding parenting arises.
Consent orders made by court are effective and enforceable
Consent orders are the most effective means of documenting an agreement reached regarding both property and/or parenting arrangements. As the title suggests, they are formal court orders that are made by the consent of the parties.
While there is no legal requirement that the consent orders be prepared by a solicitor, we recommend that you obtain legal advice regarding the agreement that has been reached to ensure that the consent orders are practically enforceable.
An Application for Consent Orders must also be prepared, which outlines the history of the relationship and your respective circumstances. Once both documents are finalised and signed off by both parties, they are filed in the Family Court of Australia (or a local court of NSW).
Court will scrutinise consent orders to assess their fairness to each party
Once filed in the court, they are reviewed internally by the Registrar of the Court. You are not required to attend court.
Consent orders do not come into effect until the court has approved them. The court will not make consent orders unless it is satisfied that the orders are “just and equitable” in all of the circumstances.
Given that they are subject to the court’s scrutiny, consent orders are difficult to overturn and the court will only make an order to vary or set aside consent orders in very limited circumstances.
Binding financial agreements not scrutinised by a court
Binding financial agreements are an alternative way of documenting a property agreement. Part VIIIA and Part VIIIAB of the Act prescribe the strict legal requirements that must be met before a binding financial agreement is considered binding upon the parties.
Unlike consent orders, binding financial agreements are not scrutinised by the court and so there can be more flexibility in terms of the content of the agreement reached and the way that it is drafted.
For example, agreements can include clauses precluding the parties from making a claim against each other’s estates in the event of death. A similar order cannot be made by the court via consent orders. A binding financial agreement may also include agreements with third parties (such as co-owners of property).
Obtaining independent legal advice before signing a binding financial agreement
In order to become binding, both parties to a binding financial agreement must have obtained independent legal advice prior to having signed the agreement, witnessed by their solicitor.
This requirement provides a means for the court to be assured that both parties have received advice regarding their legal rights, specifically the advantages, the disadvantages and the effect of the agreement reached.
Binding financial agreements and the illusion of certainty
Like many teams working in family law around the country, my law firm recommends exercising caution in the use of binding financial agreements. This is because in recent years there has been a string of Family Court decisions in which such agreements have been set aside.
What this means is that while binding financial agreements are designed to give people certainty about the future, in practice the current uncertainty of the law means they may not produce that outcome.
Agreements can be set aside if they do not comply strictly with requirements
One problem is that there is no such thing as a “precedent” financial agreement. Each one is unique and involves not just a detailed and comprehensive assessment of the client’s specific financial affairs, but a comprehensive and current knowledge of the principles of family law, contract law, succession law and equity.
Another problem is that the requirements as to the form of a binding financial agreement are numerous and a failure to comply strictly with these requirements can result in the agreement being set aside by the court. There are still significant differences between judges as to how the laws and agreements are interpreted, causing continued uncertainty.
Clients seeking to formalise their arrangements by way of a binding financial agreement would be well advised to seek out legal practitioners with particular experience in this specialist area.
Formalising the arrangements you have agreed upon
Regardless of which mode of formalising the agreed arrangements best suits your circumstances, we highly recommend that you seek independent legal advice to formalise your arrangements. Not doing this can cause problems in the future if one of the parties does not honor a verbal agreement.