Financial Agreement or Creditor Shield?

When a couple separates, a financial agreement under the Family Law Act 1975 (Cth) can be a legitimate way to divide property. But what if the "separation" and the agreement are really a way to move a valuable property out of reach of a creditor?

On 3 November 2026, the NSW Court of Appeal upheld a decision that the transfer of a commercial property in Lindfield from a husband to his wife, made under a so-called financial agreement, could be undone because it was made to defeat his creditors.

In short

• Under s 37A of the Conveyancing Act 1919 (NSW), a transfer or other disposition of property made with intent to defraud creditors is voidable at the instance of anyone prejudiced by it. In practice, an affected creditor can ask the court to set it aside. "Intent to defraud" includes an intent to delay or hinder creditors, and it need not be the only purpose. The section does not affect a purchaser who acted in good faith without notice of that intent.

  
  

• A family law financial agreement (also known as a Binding Financial Agreement, BFA or Prenup) does not protect a transfer if the agreement is only a pretext. Here, the trial judge found the agreement was a "false pretext" for moving the Lindfield property to the wife, and that finding was not challenged on appeal.

  
  

• The appeal about the Lindfield property was dismissed with costs.

What happened

In 2008 and 2009, a Hong Kong lender advanced two loans to a Hong Kong company. The loans were guaranteed by two of the company's directors: a husband and his adult son. The company defaulted in April 2009, and the lender later obtained judgments in Hong Kong against both guarantors.

The Lindfield property. The husband owned a commercial property in Lindfield. In late 2009, after the defaults, he and his wife signed what was described as a "Financial Agreement" for the purposes of the Family Law Act, on the basis that they had separated. Under it, the husband transferred the Lindfield property to the wife. In return, she released a debt of HKD 9 million that he owed her from an earlier property deal in Hong Kong.

The son's property in Ultimo. The parties' son owned a property in Ultimo. In 2011, his mother, acting under a power of attorney he had given her, sold it for $2,380,000 plus GST. She used the money to pay off the remaining mortgage on a family property in Chatswood and to buy properties in her own name, in her daughter's name and in the name of a family company.

The husband died in 2019 without a will and, apparently, without assets. The son was made bankrupt in 2021, and his trustees in bankruptcy later assigned to the lender the claims relating to the Ultimo sale proceeds. The lender then sued to challenge both transactions.

The trial

In December 2025, the trial judge in the NSW Supreme Court found in the lender's favour on all its main claims. He found the Financial Agreement was "simply a pretext" to provide cover for the transfer of the Lindfield property, and ordered that receivers be appointed to sell it, with the net proceeds shared among the husband's creditors. He also found the mother had breached the fiduciary duties she owed her son as his attorney, and made wide-ranging orders over the properties bought with the Ultimo money.

The appeal: the Lindfield property

The wife argued that the transfer was simply the husband honouring the agreement, in exchange for her releasing the HKD 9 million debt, and that preferring one creditor over another is not enough to show an intent to defraud.

The Court of Appeal (Ball JA, with Ward P and Payne JA agreeing) rejected this. The key problem was the unchallenged finding that the agreement's purpose was to create a false pretext for the transfer. Once the only alternative explanation (a genuine property settlement after separation) was rejected, it was an "irresistible inference" that depriving creditors of the property was at least one purpose of the transfer. The Court noted that the agreement was signed after the loans had gone into default and that the couple continued to live together after their alleged separation.

So in relation to the Lindfield property, the appeal was dismissed and the trial judge's orders for the Lindfield property stand.

The final orders are not yet made. The lender must propose orders that fit the Court's reasons by 16 November 2026, the other side must respond by 27 November 2026, and the lender may reply by 4 December 2026. The Court will then decide the form of the final orders, and costs, on the papers.

Because the final orders and costs are still to be decided, the exact outcome for the properties bought with the Ultimo money is not yet known.

What this means for you

• A financial agreement must be genuine. Financial agreements are a legitimate tool after a real separation. But if the real purpose is to move assets away from creditors, the court may undo the transfer, even years later (here, the transfer was made in 2009 and challenged in 2020).

  
  

• Timing and conduct matter. Here, the court looked at when the agreement was signed, what was happening with the debts at the time, and whether the couple really separated.

If you are thinking about a financial agreement, see our page on financial agreements and our plain-language guide to property settlement after separation in NSW.

How Surge Legal can help

Our family law team in Parramatta can advise on financial agreements and property settlements, and on how debts and creditors can affect them.

Call (02) 8551 7851 or email info@surgelegal.com.au. New clients can book a free initial 20-minute consultation, by appointment, with one of our lawyers. You can also book online.

Case: Leung v On Sky Enterprise (HK) Limited; Leung v On Sky Enterprise (HK) Limited [2026] NSWCA 233 (NSW Court of Appeal, 3 November 2026) - This article is a general summary of the decision cited above for information purposes only. It does not constitute legal advice. Every case turns on its own facts. Please contact Surge Legal to discuss your individual circumstances.