Heads of Agreement: Resolving Financial Matters at Mediation

Where an application for an alteration of property interests is filed in the Federal Circuit and Family Court of Australia (FCFCA), the court will generally require parties to attend some form of mediation. If a person is negotiating a property settlement outside of the family courts, they may still choose to attend mediation in order to progress negotiations and maximise their chance of coming to a mutually acceptable resolution. This article outlines the purpose of Heads of Agreement in mediation for a financial matter.

Mediation or Conciliation?

Depending on the circumstances of a case, the court will list financial proceedings for either a private mediation or a Conciliation Conference. A Conciliation Conference is a court-ordered mediation conducted by a court registrar. A mediation relating to property interests, whether it is part of family law proceedings or not, will usually be conducted by a member of the Victorian Bar (a barrister).

If the parties agree to resolve the entirety of the financial proceedings at a Conciliation Conference, the Registrar can make Final Orders by consent and the proceedings can conclude at the Conciliation Conference. However, the situation is not the same at mediation. As a barrister is not a judicial officer, they do not have the power to make a court order. Accordingly, parties and lawyers alike will usually endeavour to document the agreement and in these circumstances, it is common for the parties to enter Heads of Agreement at Mediation.

What are the Heads of Agreement?

Where the parties agree at mediation to resolve a financial matter on a final basis, the Heads of Agreement will usually provide for the parties to enter into either an Application for Consent Orders or a Binding Financial Agreement immediately after the mediation. The Heads of Agreement should document with precision the terms to be included in the later Consent Order or Financial Agreement. On the other hand, if the parties do not agree to resolve the matter on a final basis but agree to various ancillary or procedural matters, the Heads of Agreement may address matters such as the exchange of financial disclosure or the obtainment of valuations for the assets of the marriage or relationship.

How are Heads of Agreement used to resolve a financial matter?

Considering the factual nature and the enforceability of Heads of Agreement outside of a family law context, we turn to the leading authority from the High Court of Australia in a contractual setting, Masters v Cameron (1954) 91 CLR 353. In that case, the High Court identified three possible outcomes of a negotiated agreement:

1. There is finality in arranging all the terms of the bargain and the parties intend to be immediately bound to the performance of the terms but, at the same time, propose to have the terms restated in a form that will be fuller or more precise but not different in effect.
2. The parties completely agree upon all the terms of their bargain and intend no departure from or addition to their agreed terms, express or implied, but nevertheless have made the performance of one or more of the terms conditional upon the execution of a formal document.
3. The parties do not intend to make a concluded bargain at all.

The High Court concluded that, in the case of the first two scenarios, there is a binding contract, but in the case of the latter, there is no binding effect. In a family law setting, however, a legally enforceable financial settlement can only be achieved by way of a Binding Financial Agreement or order of the court, executed or made pursuant to the Family Law Act 1975. To achieve that end and depending on the circumstances of your matter, it may assist to consider and document in the Heads of Agreement, the following matters:

• That the parties will promptly enter into either Consent Orders or a Financial Agreement consistent with the terms of the Agreement;
• Whether the Agreement reflects the complete agreement between them;
• Whether the performance of the Agreement is dependent on another matter – for example, the sale of real property or one party obtaining finance to facilitate a cash settlement;
• Whether either party has a right to terminate the Agreement and if so, in what circumstances;
• Whether the document is ‘open’ and capable of being produced to the court or is ‘without prejudice’;
• Whether the parties intend that any court having jurisdiction with respect to the parties’ financial matters should regard the agreement (even if terminated) as reflecting what each of the parties considered, at the date of making the agreement, to be a just, equitable and appropriate final settlement of the financial matter.

Accordingly, it is critical that after a Heads of Agreement is signed at mediation, the parties do all acts and things to ensure the terms of the agreement are included in an Application for Consent Orders or a Financial Agreement.

If you require legal advice or representation in any legal matter, please contact Armstrong Legal.