Binding Financial Agreements - form matters

							                                                                                                          Issue No.38
                                                                                                          March 2008




     Newsletter of the legal PractitioNers' liability committee



Binding Financial Agreements - form matters
a full court decision in Black & Black [2008] famcafc 7, delivered in January 2008,
confirms that the formal requirements in section 90g of the Family Law Act 1975 (cth)
must be followed to the letter to ensure the validity of a binding financial agreement.
in Black & Black, even though the solicitor’s certificate annexed to the agreement was found to be
compliant, the wording in the body of the agreement fell short because it did not refer to the specific
requirements of section 90g (as it then stood). currently, under section 90g, binding financial
agreements must include a statement that before signing the agreement, each party has been provided
with independent legal advice as to:
•	 the	effect	of	the	agreement	on	the	rights	of	that	party;	
•	 the	advantages	and	disadvantages,	at	the	time	that	the	advice	was	provided,	to	the	party	of	
   making	the	agreement.

the full court was unequivocal about the need for formal compliance with the entirety	of section 90g,
noting: “we are of the view that strict compliance with the statutory requirements is necessary to oust
the court’s jurisdiction to make adjustive orders under section 79”. so ends debate in recent judgments
about whether substantial or total compliance is necessary!
given, that binding financial agreements are perilous at any time, practitioners are advised to consult
section 90g closely and to ensure both their agreement and certificate precedents mirror the exact
wording of the provision.




  VWA gateway remains ajar
  technical points taken by the Vwa about non-compliance with Vwa gateway provisions under
  the Accident Compensation Act 1985 (Vic) have provided the trigger for many claims against
  personal injury lawyers. a county court decision may offer some breathing space for plaintiff
  lawyers ‘looking down the barrel’ of a missed Vwa time limit.
  in Cockerill-Wright v State of Victoria & Anor [2007] Vcc 1015, the timetable had not been
  complied with by either party. although the Vwa had not responded within 120 days to the
  worker’s serious injury application, the worker’s lawyers did not realise that Vwa were out
  of time or the consequence – a deemed serious injury. when the parties went on to dispute
  the date when a serious injury was deemed to have accrued, Judge millane concluded that the
  worker was already deemed to have suffered a serious injury and dismissed the proceeding
  commenced by originating motion. the sting for the worker in this finding was that she was
  now out of time to commence common law proceedings.
  after the Vwa refused consent to issue late common law proceedings, the worker’s lawyers
  conceived another strategy – to start all over. Unsurprisingly, the Vwa disputed her right to
  do this. Judge strong ruled that it is possible to make a second application under subsection
  134ab(5) of the act. the court emphasised that there is no specific prohibition on the making
  of a further application under subsection (5) and that this is beneficial legislation. the court
  disagreed with a suggestion by the Vwa that the second attempt amounted to an abuse
  of process, because there had been no determination on the merits so far. the worker was
  therefore entitled to re-enter the ‘gateway’.
                                                               Litigation funders: they are
rate rises and the                                             not all the same
flow-on effects                                                we have recently been asked to comment on a litigation
                                                               funding application sent unsolicited to one of our
the increase in interest rates and the prediction of
                                                               lawyers. the application required the lawyer to give
more rises to come may trigger a cooling economy
                                                               advice to the litigation funder as to the likely outcome
and falling asset prices. this scenario should put
                                                               of the litigation and effectively vouch for the accuracy of
all practitioners on alert.
                                                               the client’s instructions and ability to repay the loan. it
in the past when economic conditions changed                   also required the client to acknowledge that he or she
and people needed to ‘get out’ of contracts,                   had given “irrevocable instructions” to the lawyer in
mistakes, particularly in loan documents,                      relation to the proceeding and that those instructions
mortgages, sale of real estate contracts and leases            could not be changed without written permission from
were found, resulting in an increase in claims!                the litigation funder.
Delays in lodging charges also caused claims when              this form of litigation funding carries with it several
companies went to the wall within 6 months                     risks. some of these include:
of the charge being lodged, but long after the
                                                               •	 The	possibility	that	privilege	may	be	waived	where	
charge was made.
                                                                  advice given by the lawyer is circulated to the
the prediction of further interest rates rises may                litigation funder.
trigger that reaction again.                                   •	 Assuming	responsibility	to	a	non-client	by	giving	
Now is a good time for practitioners who have                     advice to the litigation funder about the prospects of
landlord,	lender	and	mortgagee	clients to do                      success as well as advice about the client’s likely ability
an audit of their files to make sure that the                     to repay the loan, which does not appear to involve
documentation is in order and all charges have                    legal advice at all.
been lodged. Practitioners should also review                  •	 There	is	an	apparent	conflict	of	interest	in	relation	
office systems to ensure that all new charges are                 to advising the client as to the terms of the loan
lodged as soon as possible.                                       application, as the lawyer is getting a clear benefit
                                                                  from the arrangement. there is also a potential
Practitioners acting for vendors should review
                                                                  conflict in requiring the client to give irrevocable
their contracts and section 32 statements and
                                                                  instructions.
ensure that all necessary information is included.
history shows that when the economy starts to                  the lPlc has approached the specific litigation funder
                                                               whose application was directed to us to discuss
decline lawyers are often caught out by systems
                                                               these issues.
and documentation that are less than adequate.
Keep “ahead of the game” and act now.                          when faced with an application for litigation funding,
                                                               lawyers should always give careful consideration to what
                                                               is being asked of them and the risks it entails.




 Inactive owners corporations
 Practitioners needing to obtain an owners corporation certificate from an inactive owners corporation should look
 at lPlc’s column in the Law Institute Journal march 2008 for guidance on the topic. the article sets out steps that
 can be taken to ensure that the certificate is authorised by the members of the owners corporation.
 some might argue that the legislation does not require the certificate to be signed or sealed at all and it is only
 the information that needs to be correct to satisfy the legislation. Practitioners need to appreciate that the issue is
 far from clear. if clients wish to avoid the time and trouble of having the certificate authorised (or other members
 of the owners corporation refuse to agree to authorise it) the risk that the certificate may not comply and its
 consequences needs to be explained to the client.




Why risk management?                                      LegAL PrActItIoNers' LIABILIty coMMIttee

                                                          Level	10,	150	Queen	Street,	Melbourne,	VIC	3000
minimising your risk is the best way                      Telephone	(03)	9670	2001	Facsimile	(03)	9670	5538
to contain the cost of your insurance.                    www.lplc.com.au