Introduction
Q1: If my house or business lost a lot of value after we signed the BFA, can I tear it up?
A: Almost certainly not on that basis alone. The starting position is that you accepted the value risk when you signed, and the court will hold you to the bargain even when assets collapse. Reference: Sanger & Sanger [2011] FamCAFC 210
Q2: Is unforeseen asset depreciation a recognised ground under section 90K?
A: It is not, by itself. Section 90K(1) sets out a closed list of narrow grounds: fraud or non-disclosure, defrauding a creditor or de facto third party, void or voidable agreements, impracticability, hardship relating to a child, unconscionable conduct, and two superannuation-specific grounds. A simple change in market value is not on that list. Legal basis: Section 90K of the Family Law Act 1975 (Cth)
Q3: What if my spouse knew the asset was about to collapse and did not tell me before we signed?
A: That is a different conversation. Hidden information about asset value at signing is non-disclosure under section 90K(1)(a), and the court treats it as a separate ground from later market loss. The question becomes what your spouse knew at the time, not what happened next. Reference: Pagani & Pagani [2023] FedCFamC2F 805
What does section 90K say about setting aside a BFA?
A Binding Financial Agreement is a private contract under Part VIIIA of the Family Law Act 1975 (Cth). Once it is signed and properly witnessed, courts treat it as binding unless one of a narrow set of statutory grounds applies.
Section 90K(1) is the gatekeeper. The court can only set aside a BFA if at least one of the following grounds is made out:
- The agreement was obtained by fraud, including non-disclosure of a material matter (s 90K(1)(a)).
- A party entered into the agreement to defraud or defeat a creditor, or with reckless disregard for a creditor's interests (s 90K(1)(aa)).
- A party entered into the agreement to defraud or defeat a person with whom a spouse is in a de facto relationship, in connection with a property settlement application (s 90K(1)(ab)).
- The agreement is void, voidable or unenforceable (s 90K(1)(b)).
- Circumstances arising since the agreement was made have rendered it impracticable for the agreement (or part of it) to be carried out (s 90K(1)(c)).
- A material change in circumstances relating to the care, welfare and development of a child of the marriage has occurred since the agreement was made, and the child or a party with caring responsibility will suffer hardship if the agreement is not set aside (s 90K(1)(d)).
- A party engaged in unconscionable conduct in respect of the making of the agreement (s 90K(1)(e)).
- A payment flag is operating on a superannuation interest covered by the agreement, with no reasonable likelihood of it being lifted (s 90K(1)(f)).
- The agreement covers a superannuation interest that is unsplittable under Part VIIIB (s 90K(1)(g)).
Notice what is not on the list. There is no ground that says an asset turned out to be worth less than the parties assumed. That gap is deliberate. Parliament treats the BFA as a contract that allocates financial risk between the parties. When asset prices later move in a way one party did not expect, that movement is a contract risk the parties accepted, not a ground for the court to step in.
The grounds most often run in property disputes like yours are 90K(1)(c) (impracticable), 90K(1)(d) (hardship relating to a child), and 90K(1)(e) (unconscionable conduct). The procedural grounds in 90K(1)(a) (fraud, including non-disclosure) and 90K(1)(b) (void, voidable or unenforceable) attack how the agreement was made, not what happened to assets afterwards. The remaining grounds in (aa), (ab), (f) and (g) only bite in narrow factual settings (insolvency planning, defeating a third party in a parallel de facto relationship, or locked superannuation interests). The sections below work through how each ground connects to a value loss argument, and where the door is genuinely open.
Why a fall in asset value alone won't overturn your BFA
If the house, business or investment you signed over (or signed away) has dropped in value, the law starts from the position that you accepted that risk when you signed. The agreement is the deal, and the court will not redo it because the numbers turned against one of you.
The leading case is Sanger & Sanger [2011] FamCAFC 210. The husband tried to set the agreement aside because the assets it relied on collapsed in value soon after signing. The Full Court rejected him.
The parties signed a BFA in October 2007. Under the agreement the husband was to pay the wife $350,000. The agreement valued the former matrimonial home at $750,000 (subject to repairs the husband had to perform) and his company R Pty Ltd at $400,000. Sixteen months later the company entered voluntary liquidation and became worthless. The home eventually sold for $649,000, which was $101,000 below the agreed value.
The husband applied to set the agreement aside under section 90K(1)(c), arguing it was impracticable to carry out because the funds he had relied on to pay the wife had vanished. The wife responded that the BFA placed a personal obligation on him to pay $350,000 regardless of what happened to the assets, so the agreement could still be performed. He owed the money even if he had to find it elsewhere.
Outcome: The Full Court (Coleman, May and Thackray JJ, on appeal from Federal Magistrate Kemp) dismissed the husband's appeal. The agreement was not impracticable, it was simply more expensive for him than he had hoped. The risk of value movement was a risk the parties had each accepted at signing, and section 90K is not a route out of a bad bargain.
The Full Court was direct about why a worse-than-expected outcome cannot, on its own, support a set-aside:
"As is not in doubt, the provisions of s 90K are not designed to, and do not facilitate a party escaping from what proves, or is perceived to be a 'bad bargain'."
This sets the baseline for every subsequent depreciation argument. If your only complaint is that the asset is now worth less than you thought, you are asking the court to renegotiate the deal for you. Section 90K does not do that.
When does the impracticable ground (section 90K(1)(c)) actually apply to asset value changes?
The impracticable ground sounds promising for someone whose asset has lost value, because the argument seems to write itself: the BFA assumed the asset was worth X, the asset is now worth a fraction of X, so the agreement cannot be carried out as planned.
Sanger & Sanger draws a sharp line here. The court distinguished between an agreement that genuinely cannot be performed and one that simply produces a different result than a party hoped for:
"There is a material distinction between an agreement which is unable to be put in practice, and is thus impracticable, and an agreement which, although producing a potentially different outcome to that for which a party hoped, is able to be implemented, or put into practice."
If the agreement requires the husband to pay the wife $350,000 and he still owes $350,000, the agreement is not impracticable. The funding source he had in mind disappeared, but his obligation did not. The shortfall is his problem to solve, not the court's reason to intervene.
The impracticable ground tends to apply where the agreement has become legally or physically impossible to perform. Examples include a specific asset being destroyed before it can be transferred, an asset being expropriated by the government, or a party dying before performance. A drop in value, no matter how large, is not impossibility.
If you are weighing this argument, the question is not whether your asset lost value. It is whether there is genuinely no way to do what the agreement requires. Most depreciation cases fail that test before they get started.
When does an asset value dispute count as unconscionable conduct (section 90K(1)(e))?
Unconscionable conduct under section 90K(1)(e) looks at the conduct around the making of the agreement, not at what happened later. So a value change, by itself, is not the trigger. The court asks whether one party exploited a serious disadvantage of the other when the BFA was being negotiated and signed.
Laconi & Cosgrove [2017] FCCA 1179 illustrates the same idea in reverse. The husband ran the case as an equitable constructive trust claim under the Muschinski v Dodds principle rather than directly under s 90K(1)(e), but Judge Harper's reasoning on unconscionability applies the same way to both. The asset went up, not down, and the disappointed party still lost.
The parties signed a BFA in 2006 after they separated. The agreement said the former matrimonial home would be sold and the wife would take the net sale proceeds. At signing the property was worth around $700,000 with a $270,000 mortgage, so the wife expected roughly $430,000. The sale never happened on the original timetable. By mutual agreement the parties left the property on the market and the wife continued to live there. When it eventually sold in 2014, eight years later, the price had risen to $1,350,000, leaving the wife with a $650,000 capital gain that nobody had foreseen at signing.
The husband argued it would be unconscionable for the wife to collect the extra $650,000, particularly because he had serviced the mortgage during the long delay. He framed the situation as a failed joint enterprise and pressed the case as a constructive trust claim under the Muschinski v Dodds principle.
Outcome: Judge Harper rejected the claim. The BFA was a clean-break instrument, not a profit-sharing arrangement, and the parties' shared intention had always been that the wife took the net proceeds whenever the sale happened. Holding the husband to that bargain was not unconscionable. The application was dismissed.
Judge Harper put the principle directly:
"This case remained at all times a case of common intention, expressed in the BFA. Despite the fact that the parties did not adhere to its terms regarding sale after the failed auction the BFA continued to express their common intention about the proceeds of sale of the property."
The takeaway works both ways. If a value increase a party never expected at signing is not enough to make holding them to the bargain unconscionable, neither is a value decrease. Unconscionability has to come from the negotiation conduct itself: pressure, exploiting a power imbalance, hiding material facts, denying genuine independent legal advice. Family violence at the time of signing is one of the strongest examples; in Malone & Malone [2022] FedCFamC1F 784 the wife relied on family violence and undue influence as the foundation of her set-aside application, and those were the live issues, not asset value movement.
If your asset has fallen in value but the agreement was signed in a fair process with proper independent advice, section 90K(1)(e) is not a way in.
What if your spouse hid the asset's true value? Non-disclosure under section 90K(1)(a)
This is where asset value can become legally relevant, but the focus is on what your spouse knew at signing and did not tell you, not on what happened to the asset afterwards.
Section 90K(1)(a) covers fraud, including non-disclosure of a material matter. If at the time of signing your spouse already knew the asset was worth far less than the agreement assumed, or knew of facts that made a collapse highly likely, and they failed to disclose that, you may have a non-disclosure argument. The same is true if assets were left off the agreement schedules entirely.
The parties entered into a BFA around 2011. Schedules 1 and 3 of the agreement, which were supposed to list the husband's assets and liabilities, were left blank. The most significant gap was a property the husband had purchased for $530,000 (referred to in the judgment by a placeholder address) which never made it onto the schedule. The wife knew about the property informally but proceeded with the agreement while it remained undisclosed in the final document. Signatures were also falsely witnessed.
When the wife later applied to have the BFA declared binding, the husband resisted on the basis of the procedural defects. The wife in turn carried the burden of showing the court should overlook the missing schedules and the witnessing problem under section 90G(1A).
Outcome: The court refused to declare the agreement binding. The combination of false witnessing and the wife's failure to come to equity with clean hands over the incomplete schedules meant the agreement could not be saved. The non-disclosure of asset detail at signing was central to the outcome.
Pagani actually turned on the s 90G(1A) compliance discretion rather than a stand-alone s 90K(1)(a) application, but the underlying issue is the same one s 90K(1)(a) is designed to police: information that should have been on the table at signing was not. Compare this with Sanger & Sanger, where the value drop happened after signing and was a real-world risk both parties had accepted. What separates the two cases is when the asset problem arose and what your spouse knew about it at the time.
| Comparison | Sanger & Sanger [2011] | Pagani & Pagani [2023] |
|---|---|---|
| When the asset issue arose | After signing (assets later collapsed) | At signing (schedules left blank, property omitted) |
| Was hidden information alleged? | No | Yes |
| Section 90K ground engaged | s 90K(1)(c) impracticable | s 90G(1A) discretion refused (witnessing defects + non-disclosure) |
| Outcome | Set-aside refused | Not declared binding |
Decisive factor: The court asks what your spouse knew before the ink dried. If the asset was disclosed and valued in good faith at signing and only later lost value, non-disclosure will not help you. If your spouse left assets off the schedule, undervalued them with information they were sitting on, or knew about an imminent loss they did not share, that is a different conversation and worth getting independent legal advice on quickly.
What should you do if your BFA's asset values have collapsed?
The honest starting point is that section 90K is a narrow door, and value loss alone almost never opens it. There are still concrete things to check before you decide there is nothing to do.
Read the agreement first. A well-drafted BFA spells out who carries the risk if a particular asset loses value. Sometimes the answer is in the contract itself, before you ever reach section 90K. (Sanger & Sanger turned partly on a clause requiring the husband to pay any shortfall.)
Pinpoint when the value dropped and why. If the loss happened after signing and reflected ordinary market or business risk, the depreciation-alone rule applies. If the loss was already in motion at signing and your spouse knew about it, the picture changes. That is closer to the non-disclosure pattern in Pagani & Pagani.
Look at the conduct around signing, not just the conduct after. Section 90K(1)(e) is about how the deal was made: pressure, no genuine independent advice, exploiting a vulnerable party. Laconi & Cosgrove shows the court will not import a fairness assessment from later events into that test.
Check for anything that triggers a different ground. A material change relating to a child's care, welfare or development can engage section 90K(1)(d), but the hardship has to be felt by the child or by a party caring for the child, not just by your wallet.
Get advice before you do anything else. BFAs are technical documents and the negligence tail can be long. The recent High Court decision in R Lawyers v Mr Daily [2025] HCA 41 confirmed that a negligence cause of action against the lawyer who drafted the BFA can survive for years, but it only opens up if the agreement is later shown to be defective. Do not assume your only option is set-aside. Get the agreement reviewed.
For a fuller walk-through of every section 90K ground, see When Can a Financial Agreement Be Set Aside in Australia?. If part of your concern is that a failed business investment dragged the asset pool down, see Is a Failed Investment Wastage in Australian Family Law?. If you want to understand how property would be divided without a BFA, see How Australian Courts Divide Property: The Four-Step Process (2026).
| Correct | Wrong |
|---|---|
| Read the BFA's specific risk allocation clauses before assuming you can challenge it | Treating any large value drop as an automatic ground to set aside |
| Distinguish loss that happened after signing from loss your spouse knew about and hid | Mixing the two together as one general unfairness argument |
| Get the BFA reviewed by a family lawyer before filing any application | Filing under section 90K(1)(c) on the strength of value change alone |
| Gather evidence of pre-signing knowledge, hidden assets or pressure tactics | Relying on hindsight about how the asset performed |
