Risks associated with challenging a Binding Financial Agreement

Section 90K(1) of The Family Law Act 1975 (“The Act”) provides for a number of grounds upon which the Family Court of Australia can set aside (alter or remove) a Financial Agreement, including the power to set aside an agreement that is “void, voidable or unenforceable”.

Quite often, separated couples who have entered into a Binding Financial Agreement will seek advice as to whether or not their Agreement could be set aside.

One matter, which is generally overlooked by a party seeking to apply to set aside a Financial Agreement, is the fact that, if that party was to make an allegation that the advice they received when entering into the Agreement was incorrect, or otherwise not satisfactory, the law of implied waiver of Legal Professional Privilege may apply. This means the former spouse will, in all likelihood, be able to obtain copies of the Applicant’s legal file from the Applicant’s previous lawyers. This would include any advice received to allow the adequacy of the advice to be tested in Court.

Given what could be disclosed to the Court and the other party by a waiver of Legal Professional Privilege, the decision to proceed with this type of an application should only be taken after considered discussion with the Applicant’s legal team.

Choosing to make a claim which could eventually waive your right to maintaining Legal Professional Privilege over any discussions you have had with your previous lawyers is a decision you should never take lightly. If you are deemed to have waived your right to maintain Legal Professional Privilege, matters which have been discussed openly with your lawyer, including all emails, file notes, and other documents contained in your file, will become part of the Court proceedings in which you are seeking to set aside the Binding Financial Agreement.

The High Court of Australia has, in its decision of Mann v Carnell (1999) 201 CLR 1 made the principles of the law of implied waiver of legal professional privilege very clear, and at paragraphs 28 and 29 of that Judgment, the majority of the High Court found that:

1. “At common law, a person who would otherwise be entitled to the benefit of legal professional privilege may waive the privilege”;
2.  The implied waiver of Legal Professional Privilege applies when a Court considers that there is an inconsistency with the maintenance of the confidentiality of the client and the conduct of that client, such as the course they have chosen to adopt in their matter; and
3. An implied waiver arises through the operation of law, even though the consequences of the waiver may not reflect any intention on the part of the person who would otherwise have had the benefit of the privilege.

It is also important to note that making a claim that a person lacked the capacity to provide proper instructions in relation to an Agreement or Consent Order, may also be considered to be an implied waiver of legal privilege. This was the case in the matter of Stamp v Stamp [2007] Fam CA 420, where the Full Court of The Family Court of Australia found that a party who seeks to put his or hers state of mind “in issue” in proceedings, will waive any privilege in relation to the legal advice which may have contributed to that state of mind.

Matters which have been discussed openly with your lawyer, including all emails, file notes, and other documents contained in your file, will become part of the Court proceedings.

In that matter, the majority of the Full Court concluded that because the wife in those proceedings was alleging that she was under a disability which affected her capacity to give instructions to her solicitor, then it would be inevitable that the role played by her solicitors, and any advice those solicitors had provided her, would have influenced the wife. The Court also found that having raised the issue of her inability to provide proper instructions to her lawyers, it would then be inconsistent, as a matter of law, to permit her usual right to Legal Professional Privilege.

Streeterlaw are experts in all Family Law matters. For further information or to discuss your personal circumstances and how we can help you, call us on 8197 0105 or email advice@streeterlaw.com.au.