· 2021-10-12T07:17:48+0000 · 750 posts

Wife Opposes Enforcement of Financial Agreement

Beckstead & Beckstead [2021] FedCFamC2F 136 (6 October 2021)

The parties entered into a financial agreement stating that if both parties acquire an asset jointly then both parties have agreed to either liquidate the asset or offer each other the option to buy out the other party. However, the wife seeks a declaration that such agreement is not binding as she did not receive requisite legal advice. The husband seeks a declaration that the agreement is a binding financial agreement. The Court, in ruling on whether or not the agreement is binding, assessed whether it would be unjust and inequitable if the agreement were not declared binding.

Facts:

The parties met in June 2000, shortly following the establishment of F Pty Ltd, where the husband is the sole director of. The wife purchased the Suburb I property in approximately December 2000.

The parties commenced cohabitation in mid-2001 and were married in 2006. The parties separated in May 2017 and there were no children of the marriage. Both parties have adult children from their previous marriage. The parties divorced in January 2019.

On 17 July 2019, the husband filed an initiating application seeking a declaration that the financial agreement the parties entered into on 24 June 2006 is a binding financial agreement (“BFA”).

The wife seeks a declaration that the financial agreement is not binding. The husband unsuccessfully sought to join Ms B, the wife’s former lawyer, to the proceedings prior to the preliminary hearing to determine whether or not the financial agreement should be declared binding or not. On 26 June 2002 with the husband’s business partner, Ms B, as the witness, the parties signed a cohabitation agreement, for the purpose of agreeing to not make a claim against the other party’s pre-existing assets, which includes the husband’s business, if they were to separate.

The agreement states that all income derived by either party shall remain the income of the person who earns the income and that both parties as agreed shall pay day to day living expenses incurred collectively by the parties.

In the event both parties acquire an asset jointly then both parties have agreed to either liquidate the asset or offer each other the option to buy out the other party. The BFA provides for each of the parties to retain property they owned individually prior to the marriage. The wife seeks to set aside the agreement asserting that she did not receive the requisite independent legal advice, that the agreement contains several errors, and that it is void. She claims that it should be set aside due to fraud and unconscionable conduct by the husband.

The husband argues that the financial agreement is binding. He says they both received independent legal advice as evidenced by the certificates. The BFA is not vague and uncertain and the errors can be rectified. He further argues that in the event the Court is satisfied that s 90G(1)(b) has not been complied with, the Court should find that it would be unjust and inequitable if the agreement were not binding and relies on s 90G(1A). He argues that both parties acted consistently with the terms of the BFA.

Issues:

I. Whether or not the wife received the requisite legal advice.

II. Whether or not the financial agreement signed by the husband and the wife on or about 24 June 2006 is binding.

Applicable law:

Evidence Act 1995 (Cth) s 131

Family Law Act 1975 (Cth) Pt VIII, Pt VIIIA, ss 90B, 90C, 90G, 90K, 90KA, Pt VIIAB, Pt XIII,

Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth)

Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 r 11 - deals with conflicts of duties concerning current clients and states the following.

Supplementary Explanatory Memorandum to the Federal Justice System Amendment (Efficiency Measures) Bill (No. 1) 2008 - stated that the Government amendments proposed to the Bill will address issues that have arisen in submissions to the inquiry of the Senate Standing Committee on Legal and Constitutional Affairs into the provisions of the Bill and following consultation with key stakeholders.

Abrum & Abrum[2013] FamCA 897 - provides that a binding financial agreement deals with the parties’ rights in relation to the property or financial resources of the parties in a way that ousts the jurisdiction of the court to make orders in relation to that property or financial resource.

Balzia & Covich[2009] FamCA 1357 - relied upon by the wife in support of her submission that the fact the husband made and attended the first appointment and paid the legal fees does not mean Ms B was not independent.

Black v Black [2008] FamCAFC 7; (2008) FLC 93-357 - preceded amendments which provides a pathway for how binding financial agreements can be saved.

Daily & Daily [2020] FamCA 486 - Berman J considered whether the wife, in that case, was given adequate advice as to the effect of the financial agreement in question on her rights and the advantages and disadvantages of entering into the agreement in the context of handwritten amendments having been made to the agreement.

Graham & Squibb [2019] FamCAFC 33 - relied upon by the husband in his submission that the reference to the incorrect section can be rectified as it was clearly the parties’ common intention to contract out of the Actand the reference to the wrong section does not reflect their common intention.

Hoult & Hoult [2013] FamCAFC 109; (2013) 50 Fam LR 260 - Strickland and Ainslee-Wallace JJ stated that "we are firmly of the view that the content of the bargain has no relevance to the exercise of discretion under s 90G(1A)(c) and we base that on the plain words of the paragraph."

Kaimal & Kaimal [2020] FamCA 971 - the requirement for legal advice is an important legislative safeguard. An effective binding financial agreement ousts the Court’s jurisdiction to make orders under Part VIII of the Act, allowing parties to deal with their assets without interference from the Court.

Legal Profession Conduct Commissioner and Brook [2015] SASCFC 128 - involved lawyers taking instructions for wills through intermediaries and not verifying the instructions were the testator’s.

Legal ServicesCommissioner and Lawson [2002] QCAT 100 - a case example of lawyers failing their conduct obligations in the context wills and estate.

Piper & Mueller [2015] FamCAFC 241 - held that whilst it is clear legal advice does not need to be correct it does need to go beyond the legal interpretation of the terms of the agreement and address the practical implications for entering into the agreement.

Senior & Anderson [2011] FamCAFC 129 - discussed amendments to the Act made by the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (Cth).

Vance & Vance [2012] FMCAFam 599 - relied upon by the wife in support of her submission that the fact the husband made and attended the first appointment and paid the legal fees does not mean Ms B was not independent.

Wallace & Stelzer and Anor [2013] FamCAFC 199 - the Full Court at [103] cited with approval the earlier decisions of Logan & Logan[2013] FamCAFC 151 and Hoult & Hoult[2013] FamCAFC 109 (“Hoult”) in which the Full Court held that “the only enquiry necessary is as to whether advice was given, and not as to the content of that advice.”

Analysis:

The evidence does not support the wife’s contention that the dynamic of the relationship between the husband and wife was such that she was meek and mild and the husband was a dominant, sophisticated businessman. Ms Fisken says the husband is familiar with family law processes as a result of his separation from his former wife and his business background. In this regard and in her closing submissions, Counsel properly conceded that the evidence did not support a case for unconscionability.

Ms Fisken indicated that whilst it is Ms B’s signature on the certificate of independent legal advice on behalf of the wife, the evidence suggests that the husband had the initial meeting with Ms B and that his own evidence suggests he believed she was acting on his behalf. However, the fact that the husband paid Ms B’s bill, arranged the first appointment and took the wife to the second appointment, in and of itself, does not raise the concern about Ms B not being independent. The covering letter is addressed to both the husband and wife and refers to work completed with respect to a binding financial agreement, wills and power of attorney. Ms B obtained instructions for the wills during the initial appointment with both parties present.

At times Ms B was mindful of the wife being her client but other times was treating them as joint clients at best. A solicitor cannot rely on client perceptions and assume that the client is in a position to be aware of the existence or the prospect of conflict. The case is not the situation where the clients have given informed consent for the solicitor to act for both of them in spite of this conflict.

Acting for both parties with respect to their wills and power of attorney, whilst at the same time acting for one of them with respect to the BFA is highly problematic because with respect to something like a financial agreement the parties’ interests differ.

Conclusion:

The Court is satisfied that the wife did not receive independent legal advice. The Court declared the financial agreement signed by the husband and the wife on or about 24 June 2006 not binding within the meaning of s 90G of the Family Law Act 1975 (Cth). The proceeding is adjourned for Directions Hearing on 16 November 2021 at 9.45AM.

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