BFAs are "binding", but that doesn't mean they're bulletproof. Australian courts will enforce them… unless there's a good legal reason not to. Here's how courts approach BFAs, and the grounds on which they can be set aside.
The General Rule: Courts Respect BFAs (Sections 90G and 71A)
Two provisions do the work. Section 90G is the one that makes a financial agreement "binding on the parties to the agreement" once its requirements are met (s. 90UJ does the same job for de facto agreements under Part VIIIAB). For a married couple, s. 71A then takes Part VIII out of play, so the court's usual power to divide property does not reach the financial matters the agreement covers. Together, that means:
- The court cannot make property orders under s. 79 if a valid BFA exists
- The BFA overrides the court's usual jurisdiction
- Courts start from the presumption that parties who signed a BFA with legal advice knew what they were doing
In practice: If your BFA ticks all the boxes (legal advice, disclosure, no duress), courts will almost always enforce it, even if the outcome seems unfair in hindsight.
When Can a BFA Be Set Aside? (Section 90K)
Section 90K sets out specific circumstances where a court can set aside a BFA:
1. Fraud, Including Non-Disclosure (s. 90K(1)(a))
If one party obtained the BFA through fraud (lying about assets, forging signatures, or misrepresenting material facts) the court can void it. The paragraph says expressly that fraud includes the non-disclosure of a material matter, so hidden assets belong here rather than under a disclosure ground of their own.
Example: Husband claims he has no assets, then wife discovers he owns three investment properties in a trust. That's fraud. BFA is set aside.
What counts as non-disclosure:
- Hiding assets (property, bank accounts, super, business interests)
- Undervaluing assets (e.g., claiming business is worth $100k when it's worth $500k)
- Concealing debts or liabilities
Pro tip: Courts take non-disclosure seriously. Even an omission you didn't think mattered can expose the agreement to challenge, so disclose everything.
2. Defeating a Creditor (s. 90K(1)(aa) and (ab))
A party entered into the BFA to defraud or defeat a creditor, or with reckless disregard for a creditor's interests. Paragraph (ab) covers the same conduct aimed at another person in a de facto relationship with one of the parties.
3. Void, Voidable or Unenforceable (s. 90K(1)(b))
If one party signed the BFA because of pressure, threats, or coercion, the court can set it aside. Duress, undue influence and a failure to meet the formal requirements all work by making the agreement void, voidable or unenforceable, which is this paragraph.
Examples of duress:
- "Sign this or I'm leaving you"
- "Sign this or you can't see the kids"
- Presenting the BFA on the wedding day with no time to review
Example of undue influence:
- Elderly party pressured by adult children
- Party with limited English proficiency not given proper translation
Common formal defects:
- No legal advice certificate signed by lawyer
- Same lawyer advised both parties
- BFA not in writing or not properly signed
Result: The court can set the agreement aside.
4. Impracticable to Carry Out (s. 90K(1)(c))
Circumstances arising since the agreement was made mean the BFA, or part of it, can no longer be carried out. A property the BFA divides has since been compulsorily acquired, for instance.
5. Change in Circumstances: Hardship (s. 90K(1)(d))
This is the big exception. Even if your BFA was validly executed, a court can set it aside if:
- Circumstances relating to the care, welfare, and development of a child have changed since the agreement was made, and
- As a result, one party or a child will suffer hardship if the BFA is not set aside
Example:
- A child develops a serious disability requiring one parent to stop working
Important limitation: Hardship must be related to children. Financial hardship alone (e.g., "I made a bad deal") won't cut it.
6. Unconscionable Conduct (s. 90K(1)(e))
A party engaged in conduct that was, in all the circumstances, unconscionable in the making of the agreement. Courts look at the whole picture: bargaining power, timing, the quality of the advice, and how one-sided the terms are.
7. Superannuation Flags and Unsplittable Interests (s. 90K(1)(f) and (g))
Two technical grounds. A payment flag is operating on a superannuation interest covered by the BFA with no reasonable likelihood of being lifted, or the BFA covers a superannuation interest that cannot be split.
Note: "I didn't understand it" is not a ground of its own. It has to be run through one of the paragraphs above, usually undue influence or unconscionable conduct. Courts assume that if you got independent legal advice, you understood what you were signing.
What Courts Consider When a BFA Is Challenged
When a s. 90K challenge is brought, these are the matters a court looks at:
1. Was the Agreement Voluntary?
Did both parties enter into it freely, or was there pressure, time constraints, or inequality of bargaining power?
2. Was There Full Disclosure?
Did both parties exchange complete financial statements? Were all assets and liabilities disclosed?
3. Was the Advice Adequate?
Did each party's lawyer properly explain the legal effect, advantages, disadvantages, and alternatives?
4. Is the Outcome Unconscionable?
Does the BFA leave one party destitute or unable to support themselves? If yes, courts may intervene under unconscionable conduct principles.
Case Law: How Courts Apply Section 90K
Thorne v Kennedy [2017] HCA 49
Facts: Eastern European woman signed a BFA 4 days before her wedding to wealthy Australian. She received legal advice but felt pressured. BFA gave her almost nothing.
Outcome: High Court set aside the BFA for undue influence and unconscionable conduct.
Lesson: Signing under time pressure, with a heavy power imbalance, can amount to undue influence or unconscionable conduct even where independent advice was given. Grossly one-sided terms can be evidence of this.
What Happens If a BFA Is Set Aside?
If a court sets aside your BFA, it's as if the BFA never existed. The court then proceeds with standard s. 79 property division, working through five steps:
- Decide whether it is just and equitable to adjust the parties' interests in property at all
- Identify and value all the property of either party, wherever it came from and whenever it was acquired
- Assess each party's contributions: direct and indirect, financial and non-financial, including as homemaker and parent, and the effect of any family violence on a party's ability to make them
- Consider each party's current and future circumstances (the s. 75(2) factors, which include the effect of any family violence) and whether they should shift the split reached at step 3
- Check that the order it proposes to make is just and equitable in all the circumstances
All the time and money spent on the BFA? Wasted.
The Bottom Line
BFAs are binding, if you do them right. Courts will respect properly executed BFAs with full disclosure, independent advice, and no duress.
But if you cut corners, hide assets, or pressure your partner, expect a judge to tear up your BFA and start from scratch.
Get it right, or don't bother.
