Independent Legal Advice for Financial Agreements

Independent Legal Advice is mandatory for a Financial Agreement to be valid and enforceable. Independent Legal Advice means that each party to a Financial Agreement must consult a qualified lawyer who:

1. Is not representing the other party;

2. Provides legal advice specific to their client's circumstances and interests; and

3. Explains the legal implications, advantages, and disadvantages of signing the Financial Agreement.

The lawyer must then sign a Certificate of Independent Legal Advice to confirm that this advice was given, and attach it to the Financial Agreement. The requirement for Independent Legal Advice exists to ensure that both parties understand the Financial Agreement and to and that the process is fair.

Independent Legal Advice is required for a Financial Agreement for several important reasons:

1. Protecting Against Coercion or Duress
   A Financial Agreement must be entered into voluntarily. The Court has set aside agreements where one party was pressured or misled into signing, so the requirement for Independent Legal Advice helps to ensure that each person understands their rights and isn’t acting under duress. For example, in the landmark case of Thorne v Kennedy, the Court invalidated a Financial Agreement partly because the wife had faced significant pressure to sign the Financial Agreement and she had also received inadequate legal advice before signing.

2. Informed Consent
   A Financial Agreement often involves waiving rights that a party would otherwise have under the Family Law Act, such as a claim to spousal maintenance or an equitable property split. Without understanding these trade-offs, a party cannot give true consent. The requirement of Independent Legal Advice obliges each party's lawyer to break down the terms of the Financial Agreement and to explain to their client what is being given up and what is being gained.

3. Making the Agreement Enforceable
   If a Financial Agreement doesn’t meet the legal requirements, including the requirement for Independent Legal Advice, then a Court can declare that the Financial Agreement is not binding. The result if that a client can be left exposed to costly litigation and a different outcome.

4. Fairness
   While there is no specific legal requirement for a Financial Agreement fair, the requirement for Independent Legal Advice helps to level out any power imbalance, for example in cases when there is a difference in wealth, education, or bargaining power between the two parties.

Why is Independent Legal Advice required for a Financial Agreement?

What Should Independent Legal Advice Cover?

Independent Legal Advice should cover the following:

• Review the Agreement: a comprehensive review of very clause in the Financial Agreement.

• Explain Your Rights: a summary of what the client would be entitled to if the case were to be decided by a Judge applying the Family Law Act without the Financial Agreement, so that the client can compare the two possible outcomes.

• Advantages and Disadvantages: an analysis of the good and the bad of the Financial Agreement for the client in the short, medium and long term.

• Provide Alternatives: suggest what changes should or could be made to improve the Financial Agreement, make it clearer or more fair and also explore the option of an Application for Consent Orders.

• Consider the Risks: discuss and explain the risks of entering into the Financial Agreement. For example, changes in circumstances like a deterioration in health, and inability to work or the care of children.

What is the process for getting Independent Legal Advice for a Financial Agreement?

The process for getting Independent Legal Advice for a Financial Agreement is as follows:

1. Draft the Financial Agreement: One party’s lawyer prepares the draft Financial Agreement, often after discussions between the parties.

2. Engage Separate Lawyers: Each party appoints their own lawyer separately and independently.

3. Provide Full Disclosure: Both parties must share complete financial information (e.g., asset values, debts) so the advice is based on accurate data. There is no legal requirement to exchange documents or obtain valuation reports, but each party has the right to request them.

4. Receive Independent Legal Advice: obtain written legal advice about the Financial Agreement and discuss it with your lawyer.

5. Sign the Certificate: Your lawyer signs a statement confirming they’ve provided Independent Legal Advice.

6. Finalize the Financial Agreement: Both parties sign the Financial Agreement, and it becomes a legally binding document, which ends the financial relationship.