· 2021-08-12T16:54:52+0000 · 750 posts

Wife Opposes Enforcement of Financial Agreement with Husband

Ismael & Ismael [2021] FCCA 1581 (21 July 2021)

The parties are in dispute over a financial agreement they entered into in 2011. The Wife filed an application for adjustment of interests in property and likewise asserts that the Husband exhibited unconscionable conduct during the execution of the financial agreement because she was at a special advantage. The Court, in ruling on whether or not the financial agreement should be set aside, was guided by the Family Law Act 1975 (Cth).

Facts:

The Wife sought a declaration that the financial agreement entered into by the parties dated 2011 be set aside. The Husband seeks an order that the Wife’s application be dismissed and that she pay his costs. The Wife attended a solicitor, Mr F, to receive legal advice about the financial agreement in 2011. The Wife alleges that from her arrival in Australia in 2014 until the separation five years later, she was the victim of domestic and sexual violence at the hands of the Husband. The Wife commenced proceedings on 16 May 2019 for an adjustment of interests in property and spousal maintenance. The Respondent asserts that the parties have entered into a Binding Financial agreement in the nature of a prenuptial agreement which would, unless that agreement is successfully impeached, preclude the Court’s exercise of jurisdiction at least with respect to property adjustment.

The Wife filed a Points of Claim asserting that the financial agreement is unenforceable, was entered into in circumstances of unconscionable conduct by the Husband, because at the time of signing the Wife was at a special disadvantage, and therefore the agreement is voidable, and that the Husband engaged in unconscionable conduct.

Issue:

Whether or not the financial agreement should be set aside.

Applicable law:

Family Law Act 1975 (Cth) ss 90B, 90G, 117 - provides for the means by which spouses are to deal with the division of their property, financial resources, liabilities and their maintenance in the event of the breakdown of their relationship.

Family Law Act 1975 (Cth) s 90K - provides for the circumstances in which the court may set aside a financial agreement or termination agreement.

A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:

(a) the agreement was obtained by fraud;

(b) the agreement is void, voidable or unenforceable;

(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or

(d) since the making of the agreement, a material change in circumstances has occurred and, as a result of the change, the child or, if the applicant has caring responsibility for the child a party to the agreement will suffer hardship if the court does not set the agreement aside;

(e) in respect of the making of a financial agreement – a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable;

(f) a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or

(g) the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.

Abrum & Abrum [2013] FamCA 897 - where the legal practitioner’s failure to advise the Wife on her general right to claim spousal maintenance, or claim a division of property under s 79A of the Act in the event of separation, represented a substantial failure to comply with the Family Law Act 1975.

Australian Securities and Investment Commission v Kobelt [2019] HCA 18 - it was confirmed that while it was not possible to identify exhaustively what would amount to a special disadvantage, “the essence of the relevant weakness is that it ‘seriously affects’ the innocent party's ability to safeguard their own interests.”

Beroni & Corelli [2021] FamCAFC 9 - where the Full Court considered the failure to call a solicitor in a case concerning the setting aside of a binding financial agreement and how the Wife expressly waived privilege in her communications with the legal practitioner and invited the Husband to call him instead in agreeing that the legal practitioner had “refused to co-operate with the wife”.

Commercial Bank of Australia Ltd v Amadio [1983] HCA 14 - established equitable principles that apply to unconscionable conduct.

Daily & Daily [2020] FamCA 486 - provided what constitutes adequate advice for the purposes of s 90G(1)(b) of the Family Law Act 1975.

Hoult v Hoult [2013] FamCAFC 109 - where the Full Court held at [100] – [101] and [279] that the only enquiry necessary is whether advice was given, and not the content of that advice.

Kakavas v Crown Melbourne Limited [2013] HCA 25 - where the High Court suggested at [161] that one needed to prove the existence of a “predatory state of mind” of the party in the stronger position as a threshold for unconscionable conduct.

Kaimal & Kaimal [2020] FamCA 971 - provided that while the statement signed by each of the lawyers requires them to certify that they were independently instructed and provided independent legal advice, it is not determinative evidence of independent legal advice being provided.

Pascot & Pascot [2011] FamCA 945 - where the issue of unconscionable conduct pursuant to the “common law”, as submitted by the Wife, and unconscionable conduct pursuant to s 90K(1)(e) will be dealt with together because it was not considered necessary to determine whether the test for unconscionable conduct arising under s 90K(1)(b) differed from that under 90K(1)(e).

Scott & Scott (No 3) [2019] FamCA 936 - where the Court is satisfied that the Husband has discharged the burden of proving compliance with the Act, the evidentiary burden shifts to the Wife to demonstrate some deficiency in the nature of the advice that she received.

Thorne v Kennedy [2017] HCA 49 - provides that a conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage ‘which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests’. The other party must also unconscientiously take advantage of that special disadvantage.

Analysis:

It is the Wife’s case that at the time of signing the financial agreement in 2011, she was subject to a “special disadvantage” which seriously affected her ability to make a judgment as to her own best interests. While the Wife asserts that as there is no evidence that Mr F provided advice to her on key aspects of the financial agreement, the Wife had a poor recollection of the events and her recollections were unreliable. The Wife’s command of English was not proficient but sufficient to understand the advice given to her and to ask questions where she was unsure. Including an explanation of the terms of the financial agreement.

The Wife argues that the financial agreement is voidable at common law because her execution of the financial agreement was obtained by the Husband’s unconscionable conduct. The unconscionable conduct is said to be constituted because the Wife was at a special disadvantage.

Conclusion:

The Court held that the binding financial agreement is valid. The Court ordered that the Wife’s application to set aside the financial agreement dated 2011 be dismissed. All other applications are to be dismissed. Leave is granted to the Husband to seek a relisting of the matter within 21 days should he wish to pursue an order for costs.

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