FREDERICK & FREDERICK
[2018] FCCA 1694
•28 June 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FREDERICK & FREDERICK | [2018] FCCA 1694 |
| Catchwords: FAMILY LAW – Property – financial agreement – where the husband seeks a declaration that the 2007 financial agreement is binding – where the wife contends that the agreement is not binding for failure to comply with s.90G of Family Law Act1975 – whether financial agreement should be set aside for material change in circumstances since the making of the financial agreement (s.90K(1)(d)) – whether the financial agreement was vitiated by undue influence, and “void, voidable or unenforceable” (s.90K(1)(b)) – whether in respect of the making of the financial agreement, the husband engaged in conduct which was in the circumstances unconscionable (s.90K(1)(e)). |
| Legislation: Family Law Act 1975, ss.4AA, 71A, 75, 90B, 90F, 90G, 90K, 90KA & 117 |
| Cases cited: Blomley v Ryan (1956) 99 CLR 362 Hoult & Hoult [2013] FamCAFC 109; (2013) 50 Fam LR 260 Huguenin v Baseley (1807) 14 Ves Jun 273 |
| Applicant: | MR FREDERICK |
| Respondent: | MS FREDERICK |
| File Number: | WOC 24 of 2017 |
| Judgment of: | Judge Harper |
| Hearing dates: | 30 November 2017 & 1 December 2017 |
| Date of Last Submission: | 1 December 2017 |
| Delivered at: | Sydney |
| Delivered on: | 28 June 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Othen |
| Solicitors for the Applicant: | H A Miedzinski Solicitors |
| Counsel for the Respondent: | Ms Clarke |
| Solicitors for the Respondent: | J S Pinto & Co |
The Court Orders
That the separate questions be answered as follows:
(a)The document entitled “Pre-nuptial Financial Agreement” dated 5 February 2007, and executed by the parties, is a binding financial agreement within the provisions of Part VIIIA of the Family Law Act 1975.
(b)The document, as a binding financial agreement, should not be set aside pursuant to s.90K(1)(b), (d) or (e).
The Court Declares
That the document entitled “Pre-nuptial Financial Agreement” dated 5 February 2007 is a binding financial agreement within the provisions of Part VIIIA of the Family Law Act1975.
The Court Orders
The proceedings are adjourned to 6 August 2018 at 9:30am for mention.
No later than 3 days prior to the adjourned date, the parties, or if legally represented, their legal representatives, confer, and use their best endeavours to produce agreed directions and orders by consent for the further conduct of the proceedings.
IT IS NOTED that publication of this judgment under the pseudonym Frederick & Frederick is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
WOC 24 of 2017
| MR FREDERICK |
Applicant
And
| MS FREDERICK |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application brought by the husband, Mr Frederick (“the husband”) seeking a declaration that the financial agreement entered into by the parties in 2007 is binding (“the financial agreement”). The respondent wife, Ms Frederick (“the wife”) seeks an order that the agreement be set aside.
Procedural history
The husband filed his Initiating Application on 11 January 2017 with the Wollongong Registry of this Court.
The wife filed her Response on 3 May 2017. The wife filed an Amended Response on 4 August 2017.
The matter first came before Judge Harman on 15 May 2018 and on this occasion, was transferred to the Sydney Registry of this Court.
On 10 July 2017, the matter first came before me however was adjourned.
On 11 August 2017, the matter again came before me and Orders were made for the matter to be listed for Final Hearing on the question of the validity of the financial agreement dated 5 February 2007 and any basis upon which the binding financial agreement may be set aside.
It was common ground that the question of the validity of the financial agreement should be determined as a threshold issue. On 1 December 2017, I made an order by consent for the determination of separate questions in the following terms:
a.Whether the document entitled “Pre-nuptial Financial Agreement” dated 5 February 2007 is a binding financial agreement within the provisions of s.90B and s90G of Part VIIIA of the Family Law Act, 1975.
b.If so, whether the document, as a binding financial agreement, should not be set aside pursuant to s.90k(1)(b), (d) or (e) or the general law.
The answers to the separate questions will not dispose of the proceedings completely. They have the prospect however of substantially narrowing the area of debate. As will become clear later in these reasons, the terms of the financial agreement did not cover increases in the value of the husband’s assets since the date it was signed. Therefore if the financial agreement is upheld as binding, under its terms there will remain for determination the wife’s application for property adjustment in relation to those assets excluded from its operation. If the financial agreement is set aside, the wife’s application for property adjustment will be determined in relation to a larger pool of assets.
On 30 November 2017 & 1 December 2017, the hearing of the separate questions took place.
Background
The husband was born 1961 in Australia and at the time of trial was 56 years of age.
He describes himself as self employed as a (occupation omitted). He works from home.
The wife was born 1979 in the (country omitted) and at the time of trial was 38 years of age.
The wife works part time as a (occupation omitted) for (employer omitted).
The parties met whilst the husband was on holidays in the (country omitted) and from 2003 onwards commenced a relationship.
From 2003 until 2006, the husband travelled regularly to the (country omitted). He leased an apartment in (country omitted) where the parties lived when he travelled to the (country omitted).
On 2005, the parties’ first child, namely [X], was born in the (country omitted). [X] was 12 years of age at the time of trial.
In 2006, the wife arrived in Australia with [X], under a bridging visa which expired on 14 April 2007.
On 5 February 2007, the wife had a conference with a solicitor, Mr Michael Soulos.
The financial agreement is dated 5 February 2007.
The parties married on 2007. They lived at the matrimonial home at Property A (“Property A”).
According to the husband the parties separated in about July 2007. The wife disputes this. She gave evidence that after that date the parties remained living under one roof and conducted themselves as a married couple, including maintaining sexual relations. It is, however, common ground that the husband commenced divorce proceedings by filing an Application for Divorce on 7 June 2013. The wife filed a Response on 23 July 2013 contesting the application on the basis that the parties had lived together as husband and wife until 22 July 2013, thereby disputing the Court’s jurisdiction to make a divorce order. No divorce order has been made.
The parties remain living under one roof at Property A.
The parties’ second child [Y] was born on 2007 and at the time of trial was 10 years of age.
Material relied upon
The husband relied upon:
a.His Initiating Application filed 11 January 2017;
b.His Affidavit, sworn 30 November 2016 and filed 11 January 2017;
c.His Affidavit, sworn and filed 7 August 2017;
d.Affidavit of Michael Soulos, sworn 10 August 2017 and filed 25 August 2017; and
e.Case Outline, dated 27 November 2017.
The husband and Mr Soulos were cross-examined.
The wife relied upon:
a.Her Response, filed 3 May 2017;
b.Her Financial Statement, sworn 1 May 2017 and filed 5 May 2017;
c.Her Affidavit, sworn 1 May 2017 and filed 5 May 2017;
d.Her Affidavit in reply, sworn 30 May 2017 and filed 2 June 2017;
e.Her Affidavit, sworn 27 September 2017 and filed 28 September 2017;
f.Her Amended Response, filed 4 August 2017; and
g.Case Outline, dated 27 November 2017.
The wife’s affidavit sworn 1 May 2017 also annexed an affidavit sworn by the wife on 14 August 2013 in proceedings. These were divorce proceedings brought by the husband. In these reasons I will refer to this affidavit as “affidavit sworn 14 August 2013”.
The following documents were tendered and placed into evidence:
Exhibit Label
Document
Tendered by
A
Paragraph 13 of Affidavit of Mr Frederick sworn 24 May 2013 and filed 7 June 2013 in proceedings
Husband
1
Document entitled ‘Pre-nuptial Financial Agreement’
Wife
2
Affidavit of Mr Frederick dated 9 October 2014 and filed in the Supreme Court of New South Wales proceedings
Wife
B
Frequent Flyer Visa Card Statement of Account for the period 11 January 2007 to 11 February 2007 – Mr Frederick
Husband
C
Credit Card Statement of Account dated 7 March 2007 – Mr Frederick
Husband
Competing proposals
In summary, by his Initiating Application filed 11 January 2017, the husband seeks declaratory relief which would, if granted, put beyond argument the validity of the financial agreement. The husband also seeks property orders in the alternative pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
By her Response filed 5 May 2017 and her Amended Response filed 4 August 2017, the wife seeks parenting and property orders pursuant to the Act, including sale of Property A.
In her Amended Response, the wife seeks no orders directly in relation to the financial agreement. However, the hearing of the separate questions was conducted on the basis that, if the husband established entitlement to the declaration he seeks, the wife sought orders that the financial agreement be set aside.
The wife seeks to impugn the financial agreement on three bases. The first is that a failure to comply with the requirements of s.90G means the financial agreement is not binding. The consequence of such a conclusion would be that the husband’s proposed declaration would be refused. If the financial agreement is not binding, this Court’s jurisdiction over the matrimonial assets of the parties pursuant to Part VIII would not be ousted (s.71A of the Act). In such circumstances the financial agreement would remain on foot but its effect would be limited: DW & GT [2005] FamCA 161; (2005) 33 FamLR 177 at [37]-[39; Seniorv Anderson [2011] FamCAFC 129; (2012) 45 FamLR 540 at [96]. However, the wife also seeks to set the agreement aside on either of two bases.
The second basis is that since the making of the agreement, a material change in circumstances has arisen relating to the care, welfare and development of [X], the parties’ eldest child, and, as a result of the change, the wife, who has caring responsibility for the child, being a party to the agreement, will suffer hardship if the court does not set the agreement aside; (s.90K(1)(d)). The material change in question is said to be constituted by the disabilities suffered by [X], and the level of care she requires.
The third is that the financial agreement is vitiated by undue influence, such that the financial agreement is “void, voidable or unenforceable” (s.90K(1)(b)) or a party to the agreement, being the husband, engaged in conduct in respect of making the agreement which was in the circumstances unconscionable (s.90K(1)(e)). These two bases overlap. The mother argues that on either of the second and third bases, the financial agreement should be set aside.
Relevant Statutory Provisions
Part VIII of the Act applies to property of the parties to a marriage. However, s.71A provides that Part VII does not apply to “financial matters” or “financial resources” to which a financial agreement that is binding on the parties to the financial agreement applies.
Part VIIIA of the Act allows couples to make regulated financial agreements, prior to a marriage, during a marriage and post-separation, to determine how their property will be distributed in the event their relationship was to come to an end.
Specifically, section 90B of the Act provides:
Financial agreements before marriage
(1) If:
(a) people who are contemplating entering into a marriage with each other make a written agreement with respect to any of the matters mentioned in subsection (2); and
(aa) at the time of the making of the agreement, the people are not the spouse parties to any other binding agreement (whether made under this section or section 90C or 90D) with respect to any of those matters; and
(b) the agreement is expressed to be made under this section;
the agreement is a financial agreement . The people may make the financial agreement with one or more other people.
(2) The matters referred to in paragraph (1)(a) are the following:
(a) how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of the spouse parties at the time when the agreement is made, or at a later time and before divorce, is to be dealt with;
(b) the maintenance of either of the spouse parties:
(i) during the marriage; or
(ii) after divorce; or
(iii) both during the marriage and after divorce.
(3) A financial agreement made as mentioned in subsection (1) may also contain:
(a) matters incidental or ancillary to those mentioned in subsection (2); and
(b) other matters.
(4) A financial agreement (the new agreement ) made as mentioned in subsection (1) may terminate a previous financial agreement (however made) if all of the parties to the previous agreement are parties to the new agreement.
Section 90G of the Act provides:
When financial agreements are binding
(1) Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by all parties; and
(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
(c) either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and
(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
(d) the agreement has not been terminated and has not been set aside by a court.
Note: - For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995 .
(1A) A financial agreement is binding on the parties to the agreement if:
(a) the agreement is signed by all parties; and
(b) one or more of paragraphs (1)(b), (c) and (ca) are not satisfied in relation to the agreement; and
(c) a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and
(d) the court makes an order under subsection (1B) declaring that the agreement is binding on the parties to the agreement; and
(e) the agreement has not been terminated and has not been set aside by a court.
(1B) For the purposes of paragraph (1A)(d), a court may make an order declaring that a financial agreement is binding on the parties to the agreement, upon application (the enforcement application ) by a spouse party seeking to enforce the agreement.
(1C) To avoid doubt, section 90KA applies in relation to the enforcement application.
(2) A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
Section 90K of the Act provides:
Circumstances in which court may set aside a financial agreement or termination agreement
(1) 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 (including non-disclosure of a material matter); or
(aa) a party to the agreement entered into the agreement:
(i) for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii) with reckless disregard of the interests of a creditor or creditors of the party; or
(ab) a party (the agreement party ) to the agreement entered into the agreement:
(i) for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or
(ii) for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
(iii) with reckless disregard of those interests of that other person; or
(b) the agreement is void, voidable or unenforceable; or
(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 (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(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; or
(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.
(1A) For the purposes of paragraph (1)(aa), creditor , in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
(2) For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) a parenting order provides that:
(i) the child is to live with the person; or
(ii) the person has parental responsibility for the child.
(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.
(4) An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(5) If a party to proceedings under this section dies before the proceedings are completed:
(a) the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and
(b) if the court is of the opinion:
(i) that it would have exercised its powers under this section if the deceased party had not died; and
(ii) that it is still appropriate to exercise those powers;
the court may make any order that it could have made under subsection (1) or (3); and
(c) an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(6) The court must not make an order under this section if the order would:
(a) result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.
For this purpose, acquisition of property and just terms have the same meanings as in paragraph 51(xxxi) of the Constitution.
Section 90KA of the Act provides:
Validity, enforceability and effect of financial agreements and termination agreements
The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a) subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b) has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c) in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
The parties
The wife was cross examined. The reliability of her evidence is important in this matter. Her case based on undue influence and unconscionable conduct relies in large measure upon acceptance of her version of the events surrounding the execution of the financial agreement. I observed her closely in the witness box. I formed the view that she was an unsatisfactory witness. For example, I observed that the wife often made long pauses before answering difficult questions, and she often failed to give responsive answers. Her evidence was characterised by exaggeration and reconstruction. In particular, her evidence about the circumstances in which the financial agreement was signed was unconvincing and implausible in important respects. These problems are discussed in more detail later in these reasons. I do not consider the wife to be a reliable witness. I treat the wife’s evidence with caution.
The husband was cross examined. He generally answered questions directly. Overall I found him to be a satisfactory witness.
The Financial Agreement
It is necessary at this point to set out some relevant terms of the financial agreement.
“B. The parties intend to marry within two (2) months hereof and wish to enter into a financial agreement before marriage to preclude claims of any nature relating to financial matters that either party has or may have against the other pursuant to :
(a) The Property (Relationships) Act 1984 (NSW);
(b) The Family Law Act 1975 (Cth); and
(c) The Family Provision Act 1982 (NSW)
in the event that the relationship ends, the parties separate after the date of marriage or one of the parties dies.
…
D. The deed relates to all property and financial resources of either of the parties and relates to spouse maintenance of Ms Frederick both during and after the relationship or marriage. It is an agreement pursuant to s 90B of the Family Law Act.
E. At the date of this agreement Mr Frederick is the owner of the assets and financial resources specified in Sch 1, which is attached to this agreement.
F. At the date of this agreement Ms Frederick has no assets of any significant value.
G. Each of the parties has received separate legal advice before executing this agreement concerning the following matters:
a) the effect of this agreement upon the rights of the parties to apply for orders under the Property (Relationships) Act, the Family Law Act and the Family Provision Act in respect of property, spousal maintenance and the effect of this agreement upon the rights of each party to make an application in relation to the other party’s estate or notional estate upon the death of the other;
b) the advantages and disadvantages, at the time that each party received the advice, to that party of making the agreement.
H. The parties have decided to finalise all financial matters which may cause a dispute in the future and have reached agreement as set out below.
I. Before executing this agreement, each party has had regard to the possibility that one or both may be subject to a change of circumstances inclusive of any or all of the following:
a) Separation;
b) Divorce;
…
g) Significant increase or decrease in the value of the assets referred to in the schedule attached to this agreement
In addition to the Recitals, Clause 3 in in the following terms:
“3. Ms Frederick agrees that she has made no contribution of a financial nature to the acquisition, conservation or improvement of the assets of Mr Frederick and that she is not entitled to any benefit from any of the assets or financial resources set out in Sch 1 other than any increase in asset or the matrimonial home or replacement asset or assets purchased from the sale or refinance of that property, which is attached to this agreement. She also agrees that she has no entitlement to any gifts or inheritances which are received from time to time by Mr Frederick and that she will make no claim at law or in equity in relation to such gifts or inheritances.”
It is important to note that Clause 3 as originally drafted did not include the underlined words. These words were added by Mr Soulos in conference with the wife. I consider the circumstances in more detail below.
Clause 9 is in the following terms:
“9. Mr Frederick shall pay all household expenses including Ms Frederick’s personal needs and the living expenses of Ms Frederick and the children of the relationship during the relationship and the subsequent marriage (including family holidays) except for loan repayments referred to in cl 7, which are to be equally shared.”
The underlined words in Clause 9 were also added by the solicitor advising the wife, and agreed to by the husband.
Clauses 11 and 13 were struck through. These deletions were also amendments suggested by the solicitor advising the wife, and ultimately agreed to by the husband. They were in the following terms;
“11. If the parties separate and at that time they are residing in a residence owned by Mr Frederick prior to the date of this agreement Ms Frederick shall vacate the said residence within 30 days of receiving a written demand from Mr Frederick that she do so.
…
13. If the parties separate the party leaving the residence where they have been living shall be entitled to remove his or her personal property (including furniture and contents which have been divided between them) within 7 days of vacating the property.”
Schedule 1 to the financial agreement listed assets of the husband and their values, as follows:
1.Property A NSW - $2,200,000.00 (unencumbered).
2.Trust A/C No. - $254,976.00
3.Vehicle A. - $40,000.00 (unencumbered).
4.2 of 2 shares in Business A which corporate entity owns the following properties:-
a.Property B, NSW - $1,700,000.00 mortgaged to Bank 1 - $159,846.00;
b.Property C NSW - $500,000 mortgaged to Bank 2 - $102,745.00
After some initial resistance, all the handwritten amendments were agreed to by the husband.
The Signing of the Financial Agreement
The circumstances leading to the execution of the financial agreement are central. The parties gave significantly different versions of what took place.
The husband gave evidence that in January 2007 he had a conversation with the wife, set out in paragraph 85 of his affidavit sworn 30 November 2016 as follows:
“85.In January 2007 I had a conversation with Ms Frederick during which we each said words to the following effect:
Me: “As you know we have spoken about a pre-nuptial document that you and I can sign that will protect my assets if something were to go wrong between us”.
Ms Frederick: “Yes I understand. You explained this before. I have no problem signing any document. I do not want your assets anyway”.”
The husband gave evidence that he did not need to apply pressure to the wife because “she willingly agreed, on a number of occasions including the day in question, to sign the BFA.” He stated the parties had discussed his desire for a financial agreement “more than once” and that he would not have married her without a binding financial agreement (paragraph 26, affidavit sworn 7 August 2017).
It was common ground that the husband’s solicitor, Mr Abelitis, prepared a form of financial agreement for the parties to sign (paragraph 86 of Husband’s Affidavit sworn 30 November 2016). It was also common ground that the husband suggested the wife consult Mr Michael Soulos, for the purpose of receiving independent advice about the financial agreement. The name of Mr Soulos had been provided to the husband by Mr Abelitis, as one name on a list of three. At paragraphs 87 and 88 the husband deposes:
“87. Not long after I returned home from my appointment with Mr Abelitis I had another conversation with Ms Frederick during which we said words to the following effect:
Me: “The reason why I’m getting a pre-nuptial agreement is to protect my assets”
Ms Frederick: “I understand. I have no problem with that. As I have said to you on many occasions, I do not want your assets”.
Me: “What we need to do then, is that I will get my solicitor to draw the pre- nup and then you will need to have your own solicitor so that you can have the agreement explained to you and sign the document”.
I then informed Ms Frederick of the names of the firms of solicitors Mr Abelitis had provided to me and I noticed that one of the firms was located in Suburb G. I said to Ms Frederick words to the effect “There’s a firm at Suburb G which seems to be the closest. Would you like to go there”? Ms Frederick replied by saying words to the effect “Yes, that will be fine”.
88. On or about 5 February 2007 I drove Ms Frederick to Spanko Soulos & Co Solicitors. I accompanied Ms Frederick inside the building but did not go with her inside to the solicitor’s conference room. I had [X] with me. She was about 2 years old at the time. I took [X] to the park next door while Ms Frederick was at the appointment.”
It was common ground that the husband drove the wife and [X] to the offices of Mr Soulos on 5 February 2007. The husband says he left the wife there for about two hours. At the end of the appointment Mr Soulos gave him the signed financial agreement. The husband stated the wife “did not appear upset after the appointment.” He says he, the wife and [X] “went to Shopping Centre and had something to eat and did some shopping.”
The wife gives an entirely different version. Her affidavit evidence about the signing of the financial agreement was presented in a disordered, repetitive and confusing fashion (see paragraph 13 of her affidavit sworn 14 August 2013, which was annexure “C” to her affidavit sworn 1 May 2017; paragraphs 87, 88, 89, 90 and 91 of her affidavit sworn 30 May 2017; paragraphs 5, 6 and 7 of her affidavit sworn 27 September 2017).
The wife denies the husband’s version of the conversation at paragraph 85 of his affidavit sworn 30 November 2016. She maintained that she asked “What is a pre-nuptial” and that the husband said words to the effect “My solicitor will fix that and if you don’t sign there will be no marriage and I will send you back home and I will keep [X] because she is an Australian citizen already.” Shortly before 5 February 2007, the husband had said to her that she had to “sign the paper and if you don’t sign it I will not marry you and you will have to go back home and [X] stays with me” and “If you don’t sign…No marriage is happening and you will be kicked out of the country because I won’t marry you” and “If you do not sign, I will send you back home and [X] will stay with me.” (See also the wife’s affidavit sworn 27 September 2017, paragraphs 5, 6).
There was no dispute that the wife’s visa was due to expire on 14 April 2007. There was also no dispute that unless she married the husband before this date she was at risk of being unable to remain in Australia.
In other respects, the wife’s version can be summarized and paraphrased as follows:
a.As at 2007, the wife had a limited command of English;
b.She was pregnant with the parties’ second child, [Y];
c.She was never provided with a copy of the financial agreement before or after 5 February 2007;
d.She suffered extreme morning sickness during the pregnancy and, on the morning of 5 February 2007, she had barely slept the night before;
e.The husband told her to “get ready” because he was taking her “somewhere”, to which the wife replied “can’t you see I am sick with your baby I don’t want to go anywhere.” According to the wife, the husband said “I don’t care. You have to come with me” and he dragged her out of the house;
f.She was so ill on 5 February 2007 she was crying and felt very sick in the car on the way to Mr Soulos’ office. She had not been able to eat;
g.When they arrived at Mr Soulos’ office the wife said to the husband, “I am so sick and can’t even get out of the car.” She was in shock;
h.She was stressed and scared because she thought she was going to lose her husband and [X];
i.She was being pushed to sign something she had never seen, had never had the opportunity to read or take to someone who could translate it for her or take to a solicitor of her choice;
j.She was in obvious distress and crying;
k.Mr Soulos asked the wife if she had read the document, to which she replied “Yes” because, even though she had not read the document, she just wanted to get home;
l.Mr Soulos dealt with her in a brief and perfunctory manner, and did not explain what he was doing;
m.Mr Soulos made changes to the document which he did not explain and which the wife did not want; and
n.After the appointment with Mr Soulos the husband was angry about the changes made to the document. But he agreed to them.
Her evidence about the events on 5 February 2007 is central to her arguments to set aside the financial agreement. The evidence of the wife concerning what transpired in her conference with Mr Soulos is of particular importance.
The wife had never met Mr Soulos before. This was undisputed. She said she was never asked by the husband to go to see a solicitor of her choice.
The evidence is unclear whether the wife saw the financial agreement prior to the conference with Mr Soulos. In cross examination the husband agreed he had not provided her with a copy. The wife gave evidence that she had not seen it before the conference with Mr Soulos. Her answer to Mr Soulos, confirming she had read it, suggests she may have seen a copy. It would certainly have lead Mr Soulos to believe she had read the document. Thus according to the wife’s own evidence, Mr Soulos would have reasonably understood that the wife not only had read the financial agreement, but was sufficiently proficient in English to be able to read it.
In other respects, the wife’s evidence about what transpired between her and Mr Soulos requires close attention. It appears several times in her affidavits.
First, in paragraph 13 of her affidavit sworn 14 August 2013 she said:
“13. As to paragraph 13, I say that shortly before we got married my husband said to me:
“I want you to sign up the pre-nuptial.”
I said: “I don’t know what that means.”
He said “It’s to keep you and [X] in Australia, you have to do it.”
He said further “If you don’t sign it you will be sent back to the (country omitted) and you won’t be with me…”
He also said “No marriage is happening and you will be kicked out of the country because I won’t marry you.”
I was stressed and scared because I was going to loose (sic) my husband and my daughter [X] and I love them both very much.
I said “Yes I will sign but I don’t know what I am signing and I haven’t read all the documents.”
My husband took me to lawyers and I don’t know how I got there. I was crying in front of the lawyer. The lawyer said to me:
“Did you read all of this (sic) while I cried and just wanted to go home, so I said:
“Yes”
The lawyer said “I will make some changes but I don’t know what these changes were. I just wanted to go home to rest because I had been looking after all night and day that whole week because she couldn’t sleep and Mr Frederick refused to get up to care for her.
On the way home Mr Frederick said:
“I don’t like the changes the lawyer made, he said:
“You want security.”
I said: “No I love you that’s why I am here and nothing else.”
He said ”I will buy an apartment or a property for you in the (country omitted).”
I said: “I don’t want an apartment in the (country omitted), I just want to be with you and our children.””
In paragraphs 88 and 89 of her affidavit sworn 30 May 2017, the wife deposes:
88. When we got to the solicitor’s office the Applicant took me inside and told the girl something then the Applicant left with [X].
I told the solicitor: “I am sorry but I am very sick with morning sickness, I can’t stay here long.” I was crying and he could see there was something wrong. I just wanted to go home to rest.
The solicitor said: “Do you understand what this paper is?”
I said: “Yes” but the fact is I never read the paper and I don’t know anything about what the paper said. All I was thinking is that I wanted to be with the Applicant and my daughter. I didn’t want to be sent back to the (country omitted) pregnant with no husband. I did not want to be away from [X] or the Applicant as I loved him very much.
The solicitor didn’t read the agreement to me or explain it to me. Even if he had I wouldn’t have understood what he said. He didn’t give me a copy. The copy was given to the Applicant.
89. In respect to paragraph 89, I deny the contents as therein set out. It wasn’t two hours. The Applicant came back minutes later and I (sic) was waiting for me in the reception with [X] when I came out. On the way home the Applicant was very upset and said: “What did you do. What did you say to the Solicitor.”
I said: “I said nothing. I have done nothing and he said in the paper something changed.”
The Applicant said: “if you want I will pay you $300,000.00 for your security. You must want money anyway.” I was shocked and said nothing. I was really sick and didn’t want to argue.
The solicitor didn’t explain the agreement to me and I didn’t ask for changes.
The solicitor said: “It needed changes” and he made them.”
In paragraphs 22 and 23 of her affidavit sworn 27 September 2017, the wife deposes:
“22. As to paragraph 29, I say that Mr Frederick made the appointment with Mr Soulos without my knowledge or consent. Mr Frederick drove me with [X] in the car to Mr Soulos (sic) office and he escorted me into Mr Soulos office and he even we to speak to the Receptionist and then he sat down and waited until Mr Soulos came out. All this time I was being pushed to sign something I had never seen and have never had an opportunity to read the paper or take it to someone who could translate for me or take it to a Solicitor of my choice.
23. As to paragraph 30, I deny the appointment with Mr Soulos took two (2) hours. [X] has a very short concentration span and she would not stay at the park for two hours plus Mr Soulos was very quick. A lot of big words he was using I could not understand. I was still in shock at the ultimatum that Mr Frederick had given me earlier. I did not understand what I was told I had to sign. He spent a lot of time making changes but I didn’t understand what he was doing or saying. In the end the changes meant nothing when he should have said is “Don’t sign it’s completely unfair and this is why it’s unfair, etc, etc, etc.” He did not do this. All I know is that if I did not sign Mr Frederick would not marry me and I would be sent back home without [X] and I never want to be separated from [X]. I love her very much.”
Although there is a degree of consistency between the wife’s versions in her various affidavits, it can be seen that there is also some internal inconsistency. In particular, in two places the wife denies the time taken with Mr Soulos was two hours: “It wasn’t two hours. The [husband] came back minutes later…” (paragraph 89, 30 May 2017) and “Mr Soulos was very quick..” (paragraph 23, 30 May 2017)). However, she also says in the same paragraph Mr Soulos “spent a lot of time making changes…”
The wife asserts a number of times that she was crying, in obvious distress, and Mr Soulos could see she was in “great distress”. She asserts he could see she was “(nationality omitted) and that English was not my first language” and made changes, which she did not ask for and she did not understand what he was doing.
In short, according to the wife, she presented as a crying, highly distressed, and unwell person, who obviously could not understand English properly, but nonetheless maintained she had read the financial agreement. According to the wife, faced with such a client, Mr Soulos not only gave her no advice about the document or its effect, but also pressed ahead to make changes to the draft financial agreement without discussing them with her, even though they were in her favour.
Mr Soulos gave evidence in the husband’s case. He was cross examined. I found him to be a credible witness.
At the time he met the wife he had been in practice as a solicitor for some 30 years. He had no recollection of the wife or meeting her in conference. However, based on his usual practices, he denied providing advice to a client who was in shock, crying, with whom he was unable to communicate, or for whom something was obviously wrong. He denied making any changes without instructions. In cross examination he maintained his denials, explaining that “there was no way” he would have forgotten “a woman coming in to sign a document crying and not wanting to sign it.” At the time he gave evidence, he said he had never encountered such a situation in 40 years of practice. It was not surprising that Mr Soulos would not remember the wife, given he met her only once, over ten years before, unless there was something extreme or unusual about her presentation.
Mr Soulos also gave evidence that according to his usual practice, his file had been destroyed after 7 years. He was however able to retrieve copies of three relevant letters from his LEAP digital file. These were Annexure “A” to his affidavit. They have some significance.
The first is a letter dated 5 February 2007 addressed to Mr Abelitis, who had drafted the deed and acted for the husband. The letter stated that it enclosed “a copy of the Deed as amended signed and certified by myself and [the wife].” The letter adverts to the amendments to paragraph 3, 9, 11 and 13 and notes “one of the two deeds have not been certified by you.”
The second is a letter dated 13 February 2007 addressed to the wife from Mr Soulos. He confirmed the conference on 5 February 2007 and states “I explained to you the terms and conditions of the Pre-nuptial agreement prepare (sic) by Ian Abelitis on the instructions of your future (sic) Mr Frederick.” The letter notes that “there were certain provisions in the Deed that were to be amended in accordance with our discussions.” The letter also states “We enclose a copy of the Deed as signed by you and returned to Ian Abelitis with amendments to clause 3, 9, 11 and 13.”
The third is a letter dated 19 February 2007 again addressed to the wife from Mr Soulos. This letter states:
“We refer to our letter the (sic) 13 February 2007 we have now received a completed and initialled amended Pre-nuptial Agreement from Ian Abelitis and enclose herewith a copy together with a further copy of our tax invoice for your attention.”
On their face the letters were authentic business records created in the ordinary course of Mr Soulos’ practice. Their authenticity was not called into question by the wife. It was not suggested to Mr Soulos that any of the factual assertions in any of the letters were inaccurate or false. At paragraph 95 of his affidavit sworn 30 November 2016 the husband gave evidence that he had an appointment with Mr Abelitis on 6 February 2007 and afterwards he had two copies of the financial agreement with him, which he put in a filing cabinet after showing the wife. The husband was not cross examined about this evidence. Although this evidence may appear hard to reconcile with the letters of Mr Soulos, it is not clearly inconsistent. Several copies of the financial agreement could have been made at the time.
Therefore I accept that the letters are evidence confirming several important facts:
a.on 5 February 2007, Mr Soulos explained the terms and conditions of the financial agreement to the wife, and that they discussed the amendments and the wife agreed to them;
b.as at 5 February 2007, there were two copies of the financial agreement in existence; and
c.an executed and initialled copy of the financial agreement was sent to the wife at Property A, which was her address at the time.
The wife gave evidence that she never received the letters dated 13 and 19 February 2007.
After careful consideration of the evidence, I am unable to accept the wife’s evidence concerning the events surrounding the execution of the financial agreement. Her evidence gave the strong impression of overstatement and exaggeration, as well as self serving reconstruction.
In order to accept her version, it would be necessary to find that Mr Soulos, who had been in practice for 30 years at the time, having never met the wife before, but faced with her as a client manifestly crying and distressed, ill and unable to speak English properly, gave her either no, or at best cursory advice, unilaterally formulated amendments without explaining them to her, then sent out correspondence containing false factual assertions about what transpired at their conference. There is no obvious reason why Mr Soulos would conduct himself professionally in such an irresponsible fashion. The wife’s evidence did seem to make faint suggestions that Mr Soulos somehow lacked independence, or was in some sort of collusive relationship with the husband or his solicitor or both. However, apart from these allusions by the wife, there is no basis for such possibilities in the evidence. No such suggestion was put to Mr Soulos in cross examination. No submissions were made contending anything of that nature. I give no weight to this possibility.
Therefore the wife’s version entails accepting that Mr Soulos consciously acted in a manner which could seriously compromise his professional integrity for no apparent purpose. The letters (Annexure “A”) sent by Mr Soulos to the wife cannot be reconciled with her version.
There are other problems with the wife’s evidence. She was clear that she told Mr Soulos she had read the financial agreement, because she just wanted to get home. This was even though, according to the wife, she was crying, shocked and disoriented on 5 February 2007, because the husband was suddenly and unexpectedly demanding, at the eleventh hour before the wedding, she sign a financial agreement, which she had never seen. If this was true, the wife’s response to Mr Soulos, saying she had read the financial agreement, was remarkable. Apart from a desire to “get home”, no reason was given by the wife as to why she could not have explained her situation to Mr Soulos, if it was true, but instead actively mislead him. This reinforces the impression that her version of events is not convincing.
She gave evidence in a number of places that, after leaving the offices of Mr Soulos, the husband was not happy with the proposed changes to the financial agreement, and he offered to buy her an apartment in the (country omitted) or give her money, in exchange for removing the changes. In her affidavit sworn on 14 August 2013, paragraph 13, the wife gave evidence that she responded: “I just want to be with you and the children. I don’t want an apartment.”
Counsel for the husband cross examined the wife about this issue. The wife’s answers were often unresponsive. She made a number of lengthy pauses before answering. It was put to her that when she said “I just want to be with you and the children. I don’t want an apartment”, she knew the parties were discussing “the prenuptial agreement.” The wife denied this, maintaining that she did not understand anything, she just wanted to be with the husband and she rejected the money because “I don’t want to live back there, back home.”
In her affidavit sworn 27 September 2017 paragraph 26, the wife gave further evidence that after the conference with Mr Soulos, and in discussion with the husband about the amendments to the financial agreement, the husband offered her money, to change the “paper back to original.” The paragraph continues:
Mr Frederick said words to the following effect “…you want security then I will give you 300-350,000 so you can help your family back home.” He actually believes the changes protected me and so did I because otherwise I probably would have taken his offer of money.”
The wife was also cross examined about this paragraph. It was put to her several times that this evidence showed she rejected the offer of an apartment or money because she believed the changes to the financial agreement were to her advantage, and she preferred “the agreement in its amended form”. She prevaricated about this. Her answers were again unconvincing. She maintained she did not understand. However, in my view, the words “He actually believes the changes protected me and so did I because otherwise I probably would have taken his offer of money” involve an admission that the wife knew the effect of the changes made by Mr Soulos, and believed they protected her. That was at least part of the reason why she refused money or an apartment.
This is a further indication that the wife’s version of her emotional state and interactions with Mr Soulos on 5 February 2007 should not be accepted. It also undermines her evidence that she did not understand the effect of the financial agreement.
The wife’s command of English as at 5 February 2007 is an important question, but presents some difficulties. She maintained in cross examination that she knew only “simple English” or “basic English” not “legal English” at that date. This evidence is difficult to accept. As already discussed, the wife’s evidence was generally implausible at critical points, and characterised by self serving reconstruction. More particularly, the husband annexed copies of text messages passing between him and wife in the years 2004 to 2008 (Annexure “NN” of Husband’s Affidavit sworn 30 November 2016). These show a reasonable grasp of English in that period. As already observed the wife swore an affidavit on 14 August 2013 and three affidavits in 2017. None was sworn with the assistance of an interpreter. Her English may well have improved between 2007 and 2013. However, in her affidavit sworn 14 August 2013, paragraph 13, the wife states that, prior to the conference on 5 February 2007, she told the husband “I haven’t read all the documents” (meaning the financial agreement), which implies she thought she could read them. As noted above, according to her own evidence, she told Mr Soulos she had read the financial agreement, even though in truth she had not. This would have been a doubly puzzling thing to say if she believed she could not read and understand the financial agreement. I find that on the balance of probabilities the wife’s command of English was sufficiently strong as at 5 February 2007 that she could comprehend the terms of the financial agreement, and she could understand advice given by Mr Soulos, and his explanation of the terms. I am also satisfied that the wife’s command of English did not appear so deficient to Mr Soulos that it was obvious either that she could not, or there was a risk she could not, understand what he was saying.
I accept that the husband said to the wife words to the effect “If you don’t sign a BFA, I won’t be able to marry you.” Although it was known to both parties that her visa would expire on 14 April 2007, I do not accept that the husband threatened to send the wife back to the (country omitted) and keep [X]. I do not accept that he badgered the wife in a hectoring fashion. The wife gave evidence that the husband expressed a desire to keep both the wife and [X] in Australia. I find it is more likely than not that the wife knew the husband wanted a financial agreement and accepted this as a reasonable request.
I prefer the husband’s evidence concerning the preparation and execution of the financial agreement. I accept it is more likely than not that he told the wife he wanted to protect his assets, and that a financial agreement was necessary from his point of view prior to 5 February 2007. I do not accept that the husband made a sudden and unexpected demand for the signing of the financial agreement at the eleventh hour before the wedding.
The wife may have been unwell or sleep deprived on 5 February 2007. I am unable to form a view about the extent of this as a possibility on the evidence. However, on balance I find it is unlikely she was obviously ill or tired. I do not accept the husband dragged her out of the house to see Mr Soulos. I do not accept she presented to Mr Soulos crying or obviously distressed. I am satisfied it is more likely than not that the wife spent about two hours with Mr Soulos. I am satisfied the wife made statements to Mr Soulos to the effect that she had read the financial agreement, and that she received an explanation of the terms and conditions of the financial agreement from Mr Soulos, discussed the amendments with him and agreed that they should be included.
I am also satisfied that it is more likely than not that the wife received the copy of the financial agreement on or about 13 February 2007 and a further copy executed by the husband on or about 19 February 2007 by mail.
Is the financial agreement binding?
The person who seeks to establish that a financial agreement is binding carries the onus of proof: Hoult & Hoult [2013] FamCAFC 109; (2013) 50 Fam LR 260; Wallace & Stelzer and Anor [2013] FamCAFC 199; (2015) 51 FamLR 115 at [101]. This onus fell on the husband. Its discharge relies on satisfaction of the requirements of s.90G. I discuss this onus further below. It was the wife who put in issue a failure to comply with s.90G. The onus then fell on the wife to rebut a prima facie case that s.90G was satisfied: Hoult at [62] and [261]; Wallace & Stelzer at [102]. I deal with the wife’s arguments in the course of the following discussion.
Since the financial agreement was signed in 2007, it is initially necessary to consider the wording of s.90G at the date of signing. The provisions of s.90G in their current form are set out earlier in these reasons. At the date of signing they were different.
The legislative history of s.90G was set out at length and discussed by the Full Court in Wallace & Stelzer at [21]-[41]. I respectfully adopt that discussion. Relevantly, I observe that the provisions of s.90G were first introduced into the Act in 2000. S.90G has been amended twice since then: in 2003 by the Family Law Amendment Act2003, with the relevant amendment coming into effect from 14 January 2004 (“the 2003 amendments”); then in 2009 by the Federal Justice System Amendment (Efficiency Measures) Act (No. 1)2009 with effect from 4 January 2010 (“the 2009 amendments”). The 2009 amendments inserted the present form of s.90G into the Act.
The financial agreement was executed on 5 February 2007. It therefore fell between the 2003 and 2009 amendments.
The Full Court in Wallace & Stelzer at [28] set out the terms of s.90G(1) after the 2003 amendments but before the 2009 amendments, as follows:
(1) A financial agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by both parties; and
(b) the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i) the effect of the agreement on the rights of that party;
(ii) the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and
(c) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(d) the agreement has not been terminated and has not been set aside by a court; and
(e) after the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.
However, the transitional provisions in Schedule 5 to the 2009 amendments also must be considered. Item 8(1) of Schedule 5 provides:
(1) The amendments made by items 1A to 7A apply in relation to financial agreements, and termination agreements, made on or after 27 December 2000.
Items 1, 2, 3, 4 and 4A of Schedule 5 amended s.90G, with some retrospective operation. This was conceded by both parties. However, the retrospective operation is relevantly attenuated by other Items in Schedule 5.
Item 2 of Schedule 5 affected ss.90G(1)(b) and (c). It inserted s.90G(1)(b) in the following terms:
(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
Item 2 also repeals s.90G(1)(c) as it stood when the 2009 amendments came into effect. Item 8(6) of Schedule 5 makes clear that paragraphs s.90G(1)(c) and (ca) in their current form, do not apply to financial agreements made before the commencement of the 2009 amendments. This was confirmed by the Full Court in Wallace & Stelzer, after holding that item 8A(3) in Schedule 5, which was wholly inconsistent with item 8(6), should be construed as having no effect: at [66]-[71].
S.90G(1)(e) was repealed by item 4 of Schedule 5 of the 2009 amendments. The transitional provisions in Schedule 5 do not otherwise deal with s.90G(1)(e) at all. Therefore, s.90G(1)(e) as it existed in February 2007 has been repealed without replacement.
Consequently, by reason of the 2009 amendments, none of ss.90G(1)(c) and (ca) in their current form, or ss.90G(1)(c) or (e) in their 2007 form, have any application to the financial agreement for the purpose of deciding this case.
Therefore, by reason of the 2009 amendments, the remaining operative terms of s.90G(1) became as follows:
(1) A financial agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by both parties; and
(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and:
(c) (repealed);
(d) the agreement has not been terminated and has not been set aside by a court; and
(e) (repealed).
In construing the effect of the 2009 amendments Wallace & Stelzer at [72] made clear items 8 and 8A established separate alternative approaches by which a financial agreement, falling between the 2003 and the 2009 amendments, could be held binding.
The first approach was by satisfying the terms of s.90G(1) as set out above at paragraph [99]. The Full Court upheld the conclusion of the trial judge that a financial agreement falling between the 2003 and the 2009 amendments would be binding if it was signed by both parties, had not been terminated or set aside, and met the requirement that each party received independent legal advice from a legal practitioner as to “the effect of the agreement on the rights of that party” and “the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement.” By reason of item 8(6) it was unnecessary for the requirements of ss.90G(1)(c) and (ca), concerning legal advisers’ certificates, to be met.
I observe here that it must also follow that this reasoning applies equally to s.90G(1)(e) which was repealed by item 4 of Schedule 5 of the 2009 amendments. It was also unnecessary for the husband to establish its requirements had been met in order for the financial agreement to be binding.
The second approach relied upon the application of items 8A(1), (2) and (3) of Schedule 5. Neither party directed any submissions to these items. It is not necessary to set them out in detail. Their effect was construed in Wallace & Stelzer, above. The Full Court construed sub-item 8A(2), in accordance with the Explanatory Memorandum, as providing for “additional circumstances” in which a financial agreement, falling between the 2003 and 2009 amendments, will bind the parties: see Wallace & Stelzer at [62]-[65]. As already noted, the Full Court also held sub-item 8A(3) should be construed as having no effect. I respectfully follow these conclusions.
On the view I take, the financial agreement was binding on the basis of the first approach. It is not necessary to consider the application of the second approach.
On the facts of this matter, there is no dispute the financial agreement was signed by both parties. It had not been terminated or set aside.
I am also satisfied that the requisite legal advice was received. The financial agreement contains Recital G. On its face this recital was a statement intended to meet the requirements of the 2007 version of s.90G(1)(b). It is a statement contained in the agreement “to the effect that each party has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner” as to the matters in subparagraphs s.90G(1)(b)(i) and (ii), namely, “the effect of the agreement on the rights of that party” and “the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement.”. Although, as has been pointed out, the husband did not have to prove compliance with s.90G(1)(b) in its 2007 form, Recital G constitutes quite separately part of the evidence that the necessary legal advice was given.
I am satisfied by a combination of my findings about what took place on 5 February 2007, Recital G, and the evidence of, and the letters sent by, Mr Soulos that the wife received the requisite independent legal advice, about the effect of the agreement and the advantages and disadvantages to her of making the financial agreement. I am also satisfied the husband did. There was no evidence or submission to the contrary.
Therefore all the requirements for the first approach identified in Wallace & Stelzer were met in this case. I accept the same evidence satisfies the husband’s onus on a prima facie level.
The wife made various submissions which were directed to rebutting this prima facie position.
I repeat here that I have already rejected the wife’s version of what took place on 5 February 2007, and her evidence that she received no legal advice. Therefore, her evidence in this regard can provide no basis for rebutting the prima facie position.
The wife also submitted there was no evidence that “the legal practitioner provided the mother with a signed statement as required by s.90G(1)(c)”. This appears to be a reference to s.90G(1)(c) in its current form, which, as already noted, does not apply.
The wife also seemed to argue that a conclusion of non-compliance should be reached because the copy of the financial agreement annexed to the Initiating Application contained a certificate, partially completed by Mr Soulos, solicitor, but not signed by him. It bears the date 5 February 2007. The original of this copy of the financial agreement became Exhibit 1.
I do not accept this submission. As already discussed, after the 2009 amendments there was no longer any requirement for certificates from legal advisors for an agreement executed in 2007. In any event, as already observed, there was a second copy of the financial agreement. It became part of the evidence as annexure “A” to Exhibit A, the husband’s affidavit in his divorce proceedings. This copy has a certificate signed by Mr Soulos. The wife devoted significant cross examination time to this document. However, this was largely beside the point. Since the 2009 amendments, the absence of a certificate would not cause a financial agreement to be non-binding. The existence of such a certificate could on the other hand, stand as evidence that legal advice was given.
The wife also submitted that there was no compliance, at the time the financial agreement was signed, with s.90G(1)(e). She submitted that the 2009 amendments “cannot act retrospectively to amend, correct or withdraw a physical requirement that was in place at the time the agreement was entered into.” Both submissions are answered by the transitional provisions, discussed above. S.90G(1)(e) had no application after the 2009 amendments. Logically, after the 2009 amendments, past acts or omissions relating to s.90G(1)(e) became devoid of legal consequence.
The wife accepted that the court had a discretion to dispense with the formal requirements of s.90G, under s.90G(1A). On the view I have taken, it is not necessary to embark on a consideration of any such question.
I am satisfied that the husband has proved that the financial agreement is binding. The wife’s arguments to the contrary fail.
It follows that I am satisfied that the husband is entitled to the declaration he seeks, subject to the question of alleged vitiating factors, to which I now turn.
Material Change of Circumstance, and Hardship
The wife relies first on s.90K(1)(d) to set the financial agreement aside. The terms of this paragraph are set out above.
The wife’s case based on s.90K(1)(d) can be simply stated. She argued that the diagnosis of [X]’s disabilities, made since the financial agreement was signed, was a material change of circumstance relating to [X]’s care, welfare and development, which would cause the wife hardship if the financial agreement was not set aside, because under the financial agreement the wife stood to receive a property adjustment from assets worth at most $100,000.
To recap, the parties commenced their relationship in 2003. The child [X] was born on 2005. The financial agreement was entered into on 5 February 2007.
It was undisputed that [X] has severe disabilities. She has been diagnosed with Atypical autism, and mild functional/adaptive impairment, and PICA. Although the evidence shows that some developmental problems were observed in [X] before 5 February 2007, Annexure “GG” to the husband’s affidavit sworn 30 November 2016 is an extensive diagnostic report on [X] dated 2 March 2009. It details a range of serious developmental delays and disabilities. Annexure “B” to the mother’s affidavit sworn 1 May 2017 is comprised of a number of medical reports in 2012 and 2013 indicating [X] has also developed unsafe behaviours, sleep disturbances, challenging behaviours, and a period of chronic diarrhoea. The report dated 13 September 2012 showed that [X] was not toilet trained at age 7 years, and was still non-verbal.
The wife gave evidence and the husband agreed in cross examination that the care for [X] was expensive. She will require a high level of care for the rest of her life.
The wife argued that these factors met the description of “material change in circumstances” within s.90K(1)(d). In Fewster & Drake [2016] FamCAFC 214; (2016) FLC ¶93-745 at [53] the majority of the Full Court (Aldridge and Kent JJ) held that “substantial, significant and relevant” was not an inapt way of describing “material”, when commenting on the decision of Le Poer Trench J in Pascot & Pascot [2011] FamCA 945 at [345]. However, the Full Court also adopted the dicta of the High Court in Sola Optical Australia Proprietary Limited v Mills (1987) 163 CLR 628 at 636 – 637 where it considered the phrase “facts material to the plaintiff’s case” in s 48 of the Limitation of Actions Act 1936 (SA), as follows: “…The Shorter Oxford English Dictionary defines the word “material”, inter alia, to mean “Of such significance as to be likely to influence the determination of a cause”…in our opinion it provides an apt guide to the intention of the legislature in choosing to refer, without any elaboration, to “facts material to the plaintiff’s case”.
Applying these judicial comments, I am satisfied that the diagnosis of [X]’s disabilities, the presentation of challenging behaviours and the costs of care were material changes of circumstance “since the making of the agreement” and that these are changes “relating to the care, welfare and development of a child of the marriage.”
I note that in Fewster at [62] the Full Court said: “We do not see why a birth cannot be a material change in circumstances for the purpose of s 90K(1)(d). Whether it in fact is such a change will depend on all of the circumstances.” In the present matter, the birth of [X] did not take place “since the making of the agreement”, but two years before the agreement was made. However, the birth of [Y] happened on 2007, which was after the agreement was made. Although the mother did not specifically rely upon these facts, in my view, the birth of a second child in combination with a severely disabled older child constituted a material change of circumstance in this matter.
As already noted, the parties are separated but live under one roof at Property A. It is undisputed that the mother has caring responsibilities, although the husband gave evidence that he too cares for both children, primarily when the wife is at work. The husband gave detailed evidence about his own health problems since 2005. The wife submitted that this evidence showed he would be restricted in the care he could give the children. I am unable to form a view about this submission on the available evidence. There are at present no parenting orders. I accept that both parties satisfy the definition of “a person having caring responsibility for a child” in s.90K(2).
The more difficult question is whether, as a result of the identified changes, [X] or, since the wife has caring responsibility for [X], the wife, being a party to the agreement “will suffer hardship if the court does not set the agreement aside.”
The wife did not argue that [X] would suffer hardship if the financial agreement was not set aside. Rather the wife argues that she herself will suffer hardship because of the changes, if the financial agreement is not set aside.
In Fewster at [65] the Full Court said:
The husband correctly submits that the words “as a result of the change” indicate that the relevant hardship with which the section is concerned is the hardship which is caused by the change in circumstances. It is the changed circumstances which must give rise to the hardship, and not the agreement itself. It is to be recalled that, subject to compliance with the statutory requirements, people are free to enter such binding financial agreements as they see fit. There is no statutory provision which enables a binding financial agreement to be set aside merely because it is unfair: Hoult & Hoult (2013) FLC 93-546 at 87,283 and 87,296 - 87,298.
I am satisfied that the identified changes have caused and will continue to cause hardship to both parties, by reason of much more onerous care responsibilities and increased cost.
However, the final words of s.90K(1)(d) also have to be satisfied, ie, the hardship must also arise from the relevant changed circumstances “if the court does not set the agreement aside”. In Fewster at [67] the Full Court held:
“… The concluding words of s 90K(1)(d) are “if the court does not set the agreement aside”. Logically and inevitably those words require the court to undertake some comparison between the position of the child, or the person with caring responsibility, if the agreement remains in place and the position of that child or person if the agreement is set aside. It is only by doing so that the court can place itself in a position to determine whether there will be hardship if the agreement is not set aside.”
If the financial agreement is set aside, the wife’s application for property adjustment will fall to be considered pursuant to Part VIII of the Act in respect of all available assets. On the available evidence the most significant assets are Property A, said to be worth about $2,300,000 by the husband in cross examination, and the husband’s shares in Business A. In cross examination the husband agreed these shares were worth about $1,800,000. On the basis of this evidence, the assets likely to comprise the assets pool would be valued in excess of $4,000,000.
If the financial agreement is binding and not set aside, the asset pool may be more limited. The wife’s argument seemed to assume that in effect she would be entitled to nothing, or very little, and hardship would inevitably follow.
However it is not that simple. As already pointed out above, under clause 3 “any increase in asset or the matrimonial home or replacement asset or assets purchased from the sale or refinance of that property” are excluded from the operation of the financial agreement. It was common ground that this wording covers increases in the value of any of the husband’s assets since 5 February 2007. Such increases are “financial matters” or “financial resources” to which Part VIII of the Act would continue to apply, even if the financial agreement is binding.
So in order to undertake some comparison between the position of the wife, if the financial agreement remains in place, and her position if it is set aside, the Court requires evidence of not only the current value of the assets that would fall into the available pool if the financial agreement is set aside, but also, as the husband submitted, there must be some evidence of the current value of the assets or “financial resources” excluded from the operation of the financial agreement.
The husband raised this issue at the commencement of the hearing. He pointed out that reliance on s.90K(1)(d) was raised late by the wife, after expiry of the timetable for filing evidence for the hearing. He pointed that there was no evidence from the wife going to asset values. In cross examination the wife agreed she had known for most of 2017 that the financial agreement allows her to make a claim on an increase in the value of the husband’s assets. She agreed she had taken no step to value Property A or any other asset.
There was no valuation evidence or other evidence of value of any assets as at the date of the hearing, apart from some estimates of the value of Property A given by the husband, as already pointed out. These estimates ranged from $2,200,000 to $2,300,000 over the period between 2007 and 2017. There was evidence that in 2014, for the purposes of proceedings under the Succession Act, 2006 (NSW) in the NSW Supreme Court, the husband valued Property A at $1,800,000. On that basis Property A fell then rose in value over a decade. As noted $2,200,000 was the value given for Property A in the financial agreement. The husband attributed the same value to the property in his Financial Statement filed 11 January 2017. In cross examination, the husband estimated $2,300,000 as the value. Thus if this evidence were to be accepted, it would also entail accepting that the value of Property A had either not changed in over a decade, or had risen by $100,000 only. The wife relied on this evidence to submit that she could expect to share at most in a capital gain of $100,000.
In the Schedule to the financial agreement, values were given for a bank account and motor vehicle. The husband gave evidence he no longer held the bank account. There was also a value given for shares owned by the husband in a company called Business A. This company held real estate, so the value of the shares would most likely be derived on the basis of the assets owned by the company. In Schedule 1 it is specified that the company owned two properties with a total net value of $1,937,409. In his financial statement filed 11 January 2017, the husband estimated the value of these shares to be $1,809,457 which was less than the value in the schedule. But, as already noted, there was no evidence of the current value of any of these assets. It is not possible to form a view about whether their value has increased or not since the date of execution of the financial agreement.
The wife bears the onus of establishing that, she or [X] would suffer hardship if the financial agreement was not set aside. It will be obvious that the husband’s evidence of value of Property A, such as it is, could be seen as supportive of the wife’s argument of hardship if the financial agreement is not set aside. The wife submitted that I should accept the husband’s evidence of value. I do not accept this submission. Such evidence seems to be little better than conjecture. Even if treated as an opinion, no basis for it was given. The problem is that there is no evidentiary basis upon which to form a view about the possible movement, or stability, in the value of any assets, including Property A. The wife adduced no evidence herself of the value of any assets, despite bearing the onus. As the husband also submitted, the claim based on s.90K(1)(d) was raised only shortly before the hearing. This was well after the time for filing of evidence had passed. Consequently, the court is unable to undertake any meaningful comparison between the different positions, if the financial agreement was, or was not, set aside.
There are two other significant areas where the evidence is deficient. First, the wife’s argument assumes that she will suffer hardship because she cares for [X] and [Y] on “almost a full time basis” with no financial support from the husband so that she has to work part-time. However, there is no evidence of child support assessments nor does the wife’s Amended Response seek child support departure orders. On the available evidence it is not possible to form a view about the relative care responsibilities between wife and husband if the financial agreement is set aside, apart from inferring they are likely to be heavier for the wife. These would be matters relevant to the necessary comparison identified in Fewster, above.
Secondly, the wife makes no claim for spousal maintenance. Under s.75(2)(c) a factor to be considered is whether a party has care and control of a child under 18 years of age.
Thirdly, no submissions were directed to s.90F of the Act, which is in the following terms:
(1) No provision of a financial agreement excludes or limits the power of a court to make an order in relation to the maintenance of a party to a marriage if subsection (1A) applies.
(1A) This subsection applies if the court is satisfied that, when the agreement came into effect, the circumstances of the party were such that, taking into account the terms and effect of the agreement, the party was unable to support himself or herself without an income tested pension, allowance or benefit.
(2) To avoid doubt, a provision in an agreement made as mentioned in subsection 90B(1), 90C(1) or 90D(1) that provides for property or financial resources owned by a spouse party to the agreement to continue in the ownership of that party is taken, for the purposes of that section, to be a provision with respect to how the property or financial resources are to be dealt with.
Although no argument was directed to s.90F, the husband agreed in cross examination that as at 5 February 207 the wife had no income and she relied on him financially. It may be that the circumstances of the wife satisfied s.90F(1A) when the financial agreement came into effect. This possibility may be relevant to the question of hardship. However, in the absence of any submissions or clear evidence, I can express no view about whether the wife was unable to support herself without an income tested pension, allowance or benefit when the financial agreement came into effect.
The wife’s reliance on s.90K(1)(d) fails.
Undue Influence
In her third attack upon the financial agreement the wife argues that it is “void, voidable or unenforceable” within s.90K(1)(b) or vitiated by conduct of the husband which was in the circumstances unconscionable within s.90K(1)(e). She based her argument on undue influence and unconscionable conduct with heavy reliance on the decision of the High Court in Thorne v Kennedy [2017] HCA 49.
It is well recognised that, although distinct, the doctrines of undue influence and relief against unconscionable dealing are closely related: Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 474-5; Thorne at [39]. Undue influence looks to the character of assent or consent: Amadio, at 474. It protects a person who has “no free will” and is not a free agent. The doctrine focuses on how the intention of a party to enter a transaction was produced: Huguenin v Baseley (1807) 14 Ves Jun 273 at 300; Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 at [118]; Thorne at [86]-[96] per Gordon J.
In Thorne the plurality said at [32]:
“The question whether a person's act is "free" requires consideration of the extent to which the person was constrained in assessing alternatives and deciding between them. Pressure can deprive a person of free choice in this sense where it causes the person substantially to subordinate his or her will to that of the other party. It is not necessary for a conclusion that a person's free will has been substantially subordinated to find that the party seeking relief was reduced entirely to an automaton or that the person became a "mere channel through which the will of the defendant operated". Questions of degree are involved. But, at the very least, the judgmental capacity of the party seeking relief must be "markedly sub-standard" as a result of the effect upon the person's mind of the will of another.” [references omitted]
The plurality in Thorne at [36] also held that there was no presumption of undue influence arising from a relationship of fiancé and fiancée.
At [60] they set out the following factors which “may have prominence” in the particular context of pre-nuptial and post-nuptial agreements for the purposes of undue influence:
“…(i) whether the agreement was offered on a basis that it was not subject to negotiation; (ii) the emotional circumstances in which the agreement was entered including any explicit or implicit threat to end a marriage or to end an engagement; (iii) whether there was any time for careful reflection; (iv) the nature of the parties' relationship; (v) the relative financial positions of the parties; and (vi) the independent advice that was received and whether there was time to reflect on that advice.” [reference omitted]
The wife relied upon these factors in relation to undue influence. They can provide a useful framework for discussion. However, I do not understand these factors constitute a necessary checklist to be followed in every case. The plurality in Thorne at [43] made clear that the role of the trial judge is to make an evaluative judgment in determining whether vitiating factors have been established and in assessing whether the extent to which a person’s will has been subordinated to another’s is sufficient to characterise the person as lacking free will. It appears that in determining whether any of the identified factors have “prominence” in a given case, a trial judge must evaluate all the relevant circumstances.
There are some factual similarities to Thorne in the present matter. I accept that there was limited time for careful reflection, the husband stood in a much stronger financial position to the wife and she relied upon him for financial support. Although the evidence is not clear, I also accept that there was a risk that the wife may have been compelled to return home to the (country omitted) once her visa ran out on 14 April 2007, unless she married the husband. I accept that the terms of the financial agreement are very favourable to the husband.
However, there are critical differences. The evidence in the present matter does not establish that the financial agreement was offered on the basis that is was not the subject of negotiation. The wife gives no evidence to that effect. It is true that such a conclusion could be inferred from the husband’s statement that he would not marry the wife unless she signed the financial agreement. However, in other respects the facts do not support this conclusion. I have found that the parties discussed the need for a financial agreement prior to 5 February 2007. The wife argued she was not in a position to negotiate improved terms. However, improved terms were in fact negotiated, against resistance by the husband. Despite her evidence to the contrary, I have made findings above that the wife did know of the amendments made by Mr Soulos and accepted them. Her evidence is clear that the husband reacted badly to the amendments, but took advice and accepted them. The wife argued that the amendments “could not be said to be favourable or satisfactory”. Even that submission is questionable. Although the terms of the financial agreement clearly favoured the husband, the changed terms were favourable and an improvement. On her own evidence, as discussed above, the wife perceived the amendments to be more favourable to her than a payment of $300-350,000 or an apartment in the (country omitted).
As to the emotional circumstances, I accept that the husband stated he would not proceed with the marriage unless the wife signed the financial agreement. In other respects, as already discussed above, the wife gave extensive evidence of some of the emotional circumstances in which she says the financial agreement was executed. I did not accept that evidence. Rather I preferred the evidence of the husband, which indicated the financial agreement was entered into shortly before the wedding but in circumstances in which the need for a financial agreement had been discussed prior to 5 February 2007, the wife was not agitated and was prepared to accept it.
The wife in the present matter submitted that the terms of the financial agreement “are and were grossly unacceptable”. I understood this to be, in effect, a submission that the fact that the wife had entered into an agreement containing “grossly unacceptable” terms to be a factor which of itself indicated undue influence.
In Thorne, knowledge of the effect of the terms of the financial agreement was central to the finding of undue influence. The knowledge in question was that the agreement was “grossly unreasonable even for agreements of this nature”. Such knowledge formed a critical element of the subjective state of mind of the wife, and therefore a measure of her free will, or lack thereof. The plurality said at [56]: “However, despite the usual financial imbalance in agreements of that nature, it can be an indicium of undue influence if a pre-nuptial or post-nuptial agreement is signed despite being known to be grossly unreasonable even for agreements of this nature.” (emphasis added) In light of that knowledge, the failure of the wife in Thorne to take her solicitor’s advice, and insist upon substantive changes recommended by the solicitor, was taken as an indicium that “the circumstances in which Ms Thorne found herself appear so seriously to have affected her state of mind as to have rendered her incapable of making a judgment in her own best interests.”: at [76] per Nettle J, interpreting the reasoning of the plurality.
The reasons of the plurality in Thorne suggest that the relevant knowledge of the “grossly unreasonable” effect of the terms of the agreement was gained from two sources. One was the legal advice given to the wife. She received legal advice to the effect that the financial agreement was the worst the solicitor had ever seen, that it was entirely inappropriate and the wife should not sign it: Thorne at [12].
The other was an objective construction of the terms themselves. At [55] the plurality said: “Even without [the solicitor’s] evidence, it is plain that some of the provisions of the agreements could not have operated more adversely to Ms Thorne. For instance, the agreements purported to have the effect that if Ms Thorne and Mr Kennedy separated within three years then Ms Thorne was not entitled to anything at all.” At [56] they held it was correct “to consider the unfair and unreasonable terms of the pre-nuptial agreement and the post-nuptial agreement” as matters relevant to the consideration of whether the agreements were vitiated.”
The evidence about legal advice in the present matter is entirely different to the situation in Thorne. The wife, as discussed already, gave no evidence of the advice she received. Her evidence was that she received no advice and, even if she had, would not have been capable of understanding it. I did not accept that evidence.
Mr Soulos had no recollection of the advice he gave. However, based on the available evidence, I have found that it is more likely than not that the wife received an explanation of the terms and conditions of the financial agreement from Mr Soulos, discussed the amendments with him and agreed that they should be included. To recap, I was satisfied by a combination of Recital G, the annexed certificates, and the evidence of, and the letters sent by, Mr Soulos that the wife received independent legal advice, about the effect of the agreement and the advantages and disadvantages to her of making the financial agreement. Consistently with those findings, it must be further concluded that knowing the advantages and disadvantages, the wife chose to sign the financial agreement. According to the evidence already discussed, the wife must also be taken to have known that the advantages included a share of the increase in value of the husband’s assets listed in Schedule 1. As already observed, the wife believed the amendments protected her, otherwise “I probably would have taken his offer of money.” In the present case, there was no legal advice to similar effect as the advice in Thorne. It cannot be concluded the wife signed the agreement despite advice not to.
I do not understand the plurality in Thorne to suggest that grossly unreasonable terms could, in themselves and without more, support a finding of undue influence. There is a well-recognised scope for significant imbalance between the parties in the terms of financial agreements. In Hoult, above, at [310] Strickland and Ainslie-Wallace JJ said: “The point of the legislation is to allow the parties to decide what bargain they will strike, and provided the agreement complies with the requirements of s 90G(1) they are bound by what they agree upon. Significantly, in reaching agreement, there is no requirement that they meet any of the considerations contained in s 79 of the Act, and they can literally make the worst bargain possible, but still be bound by it.” Their Honours also held that the “fairness” of the terms of a financial agreement is not relevant to exercise of the discretion under s.90G(1A): Hoult at [310]. In Thorne at [56], the plurality said “Of course, the nature of agreements of this type means that their terms will usually be more favourable, and sometimes much more favourable, for one party.”
Rather in Thorne it was the combination of grossly unreasonable terms with clear legal advice that the terms were so unreasonable the financial agreement should not be signed, which together formed the relevant elements of the wife’s knowledge of the terms of the financial agreement, and hence an assessment of her free will, so as to constitute the indicium of undue influence. The plurality upheld the primary judge’s conclusion that the wife had no choice or was powerless other than to enter the agreements, and was not a free agent: at [59]. This underpinned the finding of undue influence.
The plurality in Thorne pointed out at [47] the trial judge had relied on six factors which in combination showed the wife was powerless:
(i) her lack of financial equality with Mr Kennedy; (ii) her lack of permanent status in Australia at the time; (iii) her reliance on Mr Kennedy for all things; (iv) her emotional connectedness to their relationship and the prospect of motherhood; (v) her emotional preparation for marriage; and (vi) the "publicness" of her upcoming marriage.(citations omitted)
These factors meant that if the relationship had ended, the wife in that case would have had nothing: “No job, no visa, no home, no place, no community.” She had no choice but to sign.
In the present matter, at times the evidence from the wife was to the effect that the husband threatened there would be no ongoing relationship unless the agreement was signed. I accept the husband may have refused to continue the relationship if the wife had not signed. However, that is not certain. An inference of equal weight is available, namely that he would have continued the relationship in any event. By 5 February 2007, the parties had one child and the birth of another was imminent. Other evidence from the wife suggests that the parties were in love at the time the agreement was signed. I am not able to conclude that there would have been no ongoing relationship if the financial agreement had not been signed.
Moreover, even if the relationship had been terminated by the husband for failure to sign, the evidence does not support a conclusion that the wife would have had nothing, or no options. Rather it establishes a number of options were likely available. The wife herself gave evidence that if she did not marry the husband and get a visa, she could have gone to (country omitted) (affidavit sworn 14 August 2013, paragraph 11). The husband offered to buy an apartment in the (country omitted) for the wife or give her $300-350,000, acknowledging she wanted security. This was offered by the husband initially to encourage the wife to forego the amendments to the financial agreement. The wife refused because she did not want to “live back there, back home”, that is, she did not want to return to the (country omitted), although the husband’s offer would have given her that opportunity. However, the offer itself supports an inference that as at 5 February 2007, the husband was prepared to make substantial financial offers to the wife. Since the parties had been in a relationship since 2003, already had a child and another close to birth, it is equally likely that the husband may have provided some financial support for the wife. If he did not, in the absence of a signed agreement, the facts supported the existence of a de facto relationship between the parties satisfying s.4AA of the Act and wife had the right to make application pursuant to Part VIIIAB of the Act.
Finally I note that the wedding between the parties was not a large or public affair. The wedding here took place at a Registry Office. A “few people” were present according to the wife in cross examination. There were no relatives in attendance. It lacked the element of “publicness” which was one element found by the trial judge in Thorne to support a conclusion of undue influence: Thorne at [47].
In light of the factual findings I have made, there are insufficient factors either alone or in combination which lead to the conclusion the wife had no option but to sign the financial agreement, or was otherwise the victim of undue influence. I am not satisfied that in all the circumstances the fact that the wife signed the financial agreement is an indicium that her circumstances so seriously affected her state of mind “as to have rendered her incapable of making a judgment in her own best interests.” Rather the findings I have made lead to the conclusion that the wife formed a view that the financial agreement, as amended, gave her some protection, not that it was “grossly unreasonable”. I am satisfied that the wife was not powerless and remained a sufficiently free agent to act in her own interests.
I reject the wife’s case based on undue influence.
Unconscionable Conduct
The wife also argued that the financial agreement was vitiated by unconscionable conduct on the part of the husband, through his conduct in taking unconscientious advantage of the wife’s special disadvantage.
There is no exhaustive definition of what amounts to special disadvantage: Thorne at [113] per Gordon J, citing Blomley v Ryan (1956) 99 CLR 362 at 415; Amadio at 462. The High Court has emphasised a number of times that position of disadvantage which renders one party subject to exploitation by another such that the benefit of an improvident disposition by the disadvantaged party may not in good conscience be retained may arise not only “from physical frailty and enfeeblement with diminished knowledge” but “may stem from a strong emotional dependence or attachment.”: Bridgewater v Leahy [1998] HCA 66; (1998) 194 CLR 457 at [115], [116] citing Louth v Diprose (1992) 175 CLR 621; Thorne at [39]; [113].
This element of the wife’s case was based on the proposition that the wife suffered a special disadvantage, in the sense explained in Amadio at 462, namely, not a mere difference in bargaining power but “an inability for a person to make a judgment as to his or her own best interests.”
The plurality in Thorne at [64] held that the finding of undue influence pointed inevitably to the conclusion that the wife was subject to a special disadvantage for that very reason. The plurality also pointed out that the husband in that case knew of the special disadvantage which had, in part, been created by him.
Gordon J dissented from the conclusion of the plurality in Thorne that the wife suffered undue influence (see the discussion at [98]-[107]). Her Honour reasoned that “the fact that Ms Thorne’s options were narrow, even eliminated, were not to the point” when considering her will or whether her entry into the agreement was a free act. Nevertheless, Gordon J agreed with the plurality that the financial agreement in Thorne was vitiated by unconscionable conduct: the paucity of options was relevant to special disadvantage.
In the present matter, I have found that the wife’s command of English was sufficient to understand any advice given to her, and the explanation of the terms of the financial agreement. I have concluded already that the wife in the present matter was not subject to undue influence, or unable to make a judgment in her own best interests. She formed the view that the financial agreement gave her some protection. She may have been able to return home or receive money from the husband. Whatever limitations there were upon her options, they were not eliminated or as severely confined as in Thorne. This leads to the conclusion that she was not subject to a special disadvantage for those reasons.
It is true that in Thorne, for the purposes of undue influence, the plurality at [47] upheld the reasoning of the trial judge in relying upon the wife’s “emotional connectedness” to the relationship and the prospect of motherhood as a factor, in combination with other factors, which supported the finding that the wife was “powerless” and “without options.” As the reasoning of Gordon J demonstrates, this factor can also be relevant to special disadvantage.
In the present matter the evidence about the emotional connectedness between the parties is difficult to evaluate, in light of the view I have formed about the reliability of the wife’s evidence. Her evidence suggested the parties were in love at the time of marriage, and they already had a child. The husband’s evidence was not inconsistent with this. I am satisfied there was a close emotional connection. In light of the matters set out in paragraph [178] above, I am not satisfied the connection was of such a nature as to render the wife sufficiently vulnerable to create a special disadvantage.
My conclusions about the absence of a special disadvantage are sufficient to dispose of the wife’s argument based on unconscionable conduct. However, in case the matter goes further I should express a view about the conduct of the husband.
In Amadio at 461, Mason J explained that for the doctrine of unconscionable conduct, the will of the innocent party may be “independent and voluntary” but nonetheless disadvantaged or the result of a disadvantageous position of which the other party takes unconscientious advantage. In Bridgewater at [75] Gaudron, Gummow and Kirby JJ cited extra-curial remarks of Sir Anthony Mason that “Unconscionable conduct, as the term suggests, focuses more on the unconscientious conduct of the defendant.” Their Honours also followed the Privy Council’s description of unconscionable conduct as "victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances": Hart v O'Connor [1985] AC 1000. Such conduct may be otherwise lawful: Louth v Diprose; Thorne at [118].
My factual conclusions about discussion between the parties concerning a financial agreement prior to, together with the events on, 5 February 2007, preclude a finding that the husband extorted a benefit from the wife. Nor did he passively accept a benefit in unconscionable circumstances. For the reasons given in paragraphs [178] to [180] above, the circumstances were not unconscionable.
I reject the wife’s case based on unconscionable conduct.
Conclusion
In light of these reasons and the conclusions reached, I answer the separate questions as follows:
a.The document entitled “Pre-nuptial Financial Agreement” dated 5 February 2007, and executed by the parties, is a binding financial agreement within the provisions of Part VIIIA of the Family Law Act 1975.
b.The document, as a binding financial agreement, should not be set aside pursuant to s.90k(1)(b), (d) or (e).
Since it was common ground that there are financial resources which fall outside the terms of the financial agreement, it remains for the wife’s application in respect of those resources to be finalised. The proceedings shall be listed for mention to make directions for their further conduct.
Costs
Section 117 of the Act sets out that each party shall bear his or her own costs, subject to the considerations in s.117(2) of the Act.
Any order for costs must also be determined in light of the substantive judgment and the relative success or failure of the parties. This is naturally something that can only be addressed after judgment has been delivered.
The Court proposes to make the orders and directions in relation to any application for costs that might be made as set forth in the orders at the commencement of these reasons.
I certify that the preceding one hundred and ninety (190) paragraphs are a true copy of the reasons for judgment of Judge Harper
Date: 28 June 2018
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