M v D - [2007] SADC 123

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
M v D
[2007] SADC 123
Judgment of His Honour Judge Beazley
22 November 2007
FAMILY LAW AND CHILD WELFARE - DE FACTO RELATIONSHIPS
EQUITY - De facto relationship of fourteen years duration ending April 2001– parties execute in December 2002 a document purporting to be a certificated cohabitation agreement made pursuant to Part 2 of the De Facto Relationships Act 1996 – unconscionable conduct - whether defendant under a special disadvantage at the time of its execution - whether special disadvantage evident to the plaintiff - defendant makes payments until March 2005 and defaults thereafter – defendant threatens voluntary bankruptcy – plaintiff seeks payment of arrears pursuant to the said agreement and declaration that agreement still subsisting - defendant seeks order that agreement be declared unenforceable and for repayment of monies paid thereunder.
De Facto Relationships Act, 1996 (SA) ss 3, 5, 6 and 8, referred to.
Hogg v Roberts (2003) 87 SASR 248; Bridgewater v Leahy (1998) 194 CLR 457 at 479; Louth v Diprose (1992) 175 CLR 621 at 626; Commercial Bank of Australia v Amadio (1983) 151 CLR 447; Bromley v Ryan (1954) 99 CLR 362 at 415; ACCC v CG Berbatis Holdings Pty Ltd (2003) 197 ALR 153 at 167, 171; Frederick v South Australia (2006) 94 SASR 545; Williams v Maalouf [2005] VSC 346, applied.
Merritt v Merritt [1970] 1 WLR 1211; Black v Black [2006] FAMCA 972; Meagher Gummow & Lehane, Equity, Doctrines and Remedies, 4th Ed, 2002, Cht 16, considered.

DAMAGES
Breach of contract - the assessment of damages where some losses not precise or liquidated sums but substantially for reimbursement of expenses - where the losses avoided by conduct of the plaintiff - where dearth of evidence as to expenses actually incurred.
INJUNCTION - Order sought to restrain the defendant from presenting a debtors petition - no basis for order.
British Westinghouse v Underground Electric Railways Co of London (1912) AC 673 at 689-690; White and Carter (Councils) Ltd v McGregor (1962) AC 413; McDonald, Henry & Meek - Aust Bankruptcy Law & Practice (2001) Vol 1 Paras 55.0.10 and 55.8.05, considered.

M v D
[2007] SADC 123
Introduction

M (“the plaintiff”) and D (“the defendant”) lived together in a de facto relationship between 1987 and April 2001. There are three children of that relationship. On 12 April 2001, the plaintiff and the two younger children moved out of the family rented accommodation, and rented other premises. The defendant and the oldest child moved to cheaper accommodation. The defendant voluntarily paid all of the expenses of both households. The parties owned no real estate; and at that time possessed limited assets, in the nature of motor vehicles and furniture, most of which they divided amongst themselves. Approximately 20 months after the cessation of the relationship, the parties executed a written agreement, purportedly made pursuant to sections 5 and 7(2) of the De Facto Relationships Act 1996 (SA) (“the Act”)[1]. This document was described as a “De Facto Relationship Property Settlement Certificated Cohabitation Agreement”, and dated 17 December 2002.
[1] Since 1 June 2007 called the Domestic Partners Property Act 1996 (SA).
The draftsman used the expressions “Agreement” and “Deed” interchangeably throughout the document. Although many of the formalities for a deed were abolished by Parliament,[2] it is not clear that the parties in fact intended it to be a deed.[3] In the event nothing turns upon whether the document is a deed. I refer hereafter to it as an “Agreement”.
[2] See Law of Property Act 1936, SA, section 41.
[3] See Rose v Commissioner of Stamps (1979) 22 SASR 84.
The issue at trial was the enforceability of this agreement having regard to the circumstances leading to its execution by the defendant.
The preamble to that agreement provided that the parties were no longer in a de facto relationship and wished to outline their respective rights, duties, obligations and powers. Further they wished to exclude any relevant court of law from having the jurisdiction or power to set aside or vary the agreement. Annexed to the agreement were certificates executed by their respective solicitors purportedly under the provisions of the Act.
The agreement provided for each party to retain their own respective superannuation entitlements; for the rights to certain items of furniture; and for the resignation of the plaintiff from, and the transfer by her of shares in the defendant’s medical practice companies.
Substantially however the agreement related to the payment by the defendant of the plaintiff’s ongoing expenses until she reached the age of 55 years.[4]
[4] Exhibit P1, clause 3.
Such payments included the respective sums of $1300 per month, in advance, for her personal expenses; her reasonable accommodation costs then currently $360 per week; her rental of “art space”, $900 per month being lease payments on a motor vehicle; and other expenses, including groceries, petrol, utilities and insurance as detailed therein.
Those payments were required to be made irrespective of any changes to either party’s respective circumstances including the retirement of the defendant; the entry of either party into a marriage or de facto relationship; the reduction in the defendant’s income or the entry into employment by the plaintiff. Although no documentary evidence was tendered with respect to the expenses, it was an agreed fact that on an average basis, excluding the car lease payments, the payments totalled approximately $4,000 per month.
In or about August 2004 the defendant was admitted to the Royal Adelaide Hospital in consequence of a suicide attempt. He was diagnosed with severe alcohol dependence and depression. He returned to work after approximately two weeks. In March 2005, the defendant ceased making the monthly payments required of him pursuant to the Agreement.
The Act
The Act provides the mechanism by which de facto partners may obtain relief with respect to their proprietary rights; and does so in two ways. Firstly it ensures that “cohabitation agreements” entered into by the parties, have legal effect; and secondly it invests the Courts with jurisdiction to adjust de facto partners’ property rights.
Relevantly Part 2 of the Act provides for cohabitation agreements. Section 5 of the Act provides that a cohabitation agreement must be in writing and signed by the de facto partners. A de facto partner is defined to include a person who lives in such a relationship; who is about to enter into such a relationship; or those who have lived in a de facto relationship.
The Act does not distinguish between cohabitation agreements made in contemplation of a de facto arrangement; those made during the de facto arrangement, or those made upon the termination of the arrangement. In this respect it is to be contrasted with legislation in some other Australian jurisdictions, in which provision is specifically made for “separation” or “termination” agreements, as distinct from cohabitation agreements. In Western Australia a Court may set aside a financial agreement or termination agreement on a number of equitable grounds.[5]
[5] Property Law Act 1974 (Qld) s.265; Property (Relationships) Act, 1984 (NSW) s.47; De Facto Relationships Act, 1992 (N.T.) s.44; Family Court Act 1997 (W.A.) s.205ZP
Section 5(1) provides:
(1) De Facto partners may make an agreement (a cohabitation agreement) about -
“(a) the division of property on the termination of the de facto relationship
or
(b) other financial matters related to the de facto relationship” (my emphasis)
A question raised by the parties to the subject action is the proper construction of s 5(1)(b) of the Act; and in particular whether it extends to the payment of ongoing “partner” maintenance following the termination of the de facto relationship. The Act does not define “financial matters”, nor does it specifically refer to “maintenance”.
Section 6 provides for the enforceability of the cohabitation agreement, under the law of contract. This presumably was to overcome the public policy doctrine expressed by Lord Wright in Fender v St John Mildmay[6].
“The law will not enforce an immoral promise such as a promise between a man and a woman to live together without being married, or to pay a sum of money or give some other consideration in return for immoral consideration”.
[6] [1938] AC 1.
See however to the contrary Seidler v Schallhofer [1982] 2 NSWLR 80.
Section 8 of the Act provides that where a Court is satisfied that the enforcement of a cohabitation agreement would result in serious injustice then the same may be set aside or varied to avoid that injustice. Section 8(2) excludes that power of the Court in circumstances where the agreement, such as the subject agreement, is a certificated agreement as defined in s 3 of the Act, and which itself provides for the exclusion of the Courts power to set aside or vary the agreement.
Part 3 of the Act enables a Court, upon application by either of the de facto partners, to make an order, in a way that is just and equitable, adjusting or dividing the “property” of those de facto partners. An applicant may apply for such an order even where there is a subsisting cohabitation agreement. However where it is a certificated agreement, any order made by the Court must “be consistent with the terms of the agreement”. The application may only be made under this Part 3, if, inter alia, the de facto partners were resident in the State for the whole or a substantial part of the period of the relationship. In the subject case, it is arguable that their residency in the State was not a substantial part.
The definition of property includes a prospective entitlement or benefit under a superannuation scheme, and “any other valuable benefit”.
As to the question of “adjustment of property”, for the purposes of Part 3, in Hogg v Roberts,[7] Doyle CJ said:
“….I consider that it is not the role of the court to use the division of property to remedy any justified grievances one party may have against the other or to compensate one party for disappointed or unfulfilled expectations. The focus appears to me to be on a just and equitable distribution of property, after considering primarily contributions of the kind identified by s 11(1) of the Act. The task of the court is a narrower one than the task of the court under s 79 of the Family Law Act 1975 (CTH). The relevant considerations are more narrowly confined. Matters that are likely to be relevant are the length of the relationship and the immediate needs of the parties. I say “immediate needs” because the courts focus is on the division of property. In deciding what is “just and equitable”, the needs of the parties at that time will be relevant. However, the court is not dividing property with a view to providing, for example, for the continuing maintenance of the parties or taking into account their future financial prospects”.
[7] (2003) 87 SASR 248 at 250.
In the subject case it is submitted by the defendant that had the agreement not been executed by him, then no order could have been made under Part 3 of the Act, or alternatively that no order requiring ongoing payments in the nature of continuing maintenance could have been made.
The Pleadings
(1) The Plaintiff
The plaintiff’s case is a simple one. She relies upon the executed, and “certificated” agreement. She denies that there is any proper basis for a finding that the agreement is unenforceable. She asserts that the defendant has committed a serious breach of the agreement by refusing to pay monies due to the plaintiff from March 2005. She alternatively pleads enforcement of the agreement on the one hand, and acceptance of the breach as a repudiation by the defendant thus bringing the contract to an end, on the other.
As it transpired the plaintiff’s preferred position is for performance of the agreement, with consequential relief that arrears due under the agreement from March 2005 to the date of judgment and interest thereon, be paid on the bases that the Agreement is a certificated cohabitation agreement within section 3 of the Act, or alternatively upon common law principles of contract. She seeks a declaration that the agreement is valid, binding and subsisting. In addition she seeks an order restraining the defendant from petitioning for his own bankruptcy without the leave of the Court.
Although there was no formal election, I have concluded that the plaintiff has elected for enforcement of the contract.
(ii) The Defendant
At trial the defendant abandoned some of the pleadings in his defence to the plaintiff’s claim. These included the assertion that he was incapable, in consequence of his depression, of understanding the legal and accounting consequences of the agreement, and; further that the plaintiff was estopped from enforcing the terms of the agreement as and from 25 May 2005 because of her refusal to accept certain lesser payments offered by him.
Ultimately the defence concentrated upon the question of whether the agreement was unenforceable on the bases, inter alia; that:
·The defendant’s execution of the agreement was procured by the unconscionable conduct of the plaintiff in taking advantage of the defendant’s alcohol dependency and depression. In consequence of his depression and alcohol dependence the fact that he had engaged and obtained independent legal and accounting advice counted for nothing, as he was effectively deprived of an independent and voluntary will in making an improvident agreement.[8] The defendant had minimal assets, and was burdened by debt when he executed what was objectively an unfair if not improvident agreement.
·The subject matter of the agreement was, in essence, the provision of ongoing maintenance following the cessation of the de facto relationship and could not have been the subject of a Court order under Part 3 of the Act. Accordingly the agreement was not a “cohabitation agreement” as defined. The defence asserts that the parties made a mutual false assumption that the agreement was one within the ambit of section 5(1) of the Act.[9] Alternatively the obligation to pay maintenance was of moral and not legal force. In the further alternative there was no consideration for the agreement.
[8] Louth v Diprose (1992) 175 CLR 621.
[9] David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353.
The defendant seeks a declaration that the agreement is unenforceable and counterclaims for consequential relief for the repayment of all monies paid by him to or on behalf of the plaintiff since the date of execution of the agreement.
The defendant did not seek an order varying the agreement pursuant to section 8(1) of the Act on the basis that circumstances had arisen since the execution of the agreement that caused its enforcement to result in serious injustice. If the document was a “cohabitation agreement”, it clearly was a certificated such agreement.
Principal issues
The evidence in the trial was directed to what was said to be the improvident nature of the agreement insofar as it related to the defendant and as to whether it is unconscionable of the plaintiff to insist upon the terms of that agreement being carried into effect by the defendant.
The principal issues were:
·the true nature of the agreement.
·the state of the defendant’s finances as at the date of the execution of the agreement.
·the state of the defendant’s physical and psychological health.
·whether the agreement was an improvident one, from the defendant’s viewpoint.
·the knowledge of the plaintiff as to these matters.
·did any conduct of the plaintiff unconscionably influence the defendant to execute the agreement contrary to legal and accounting advice?
·whether the defendant was placed at a “special disadvantage” vis a vis the plaintiff.
·whether the plaintiff unconscientiously exploited the defendant’s alleged disadvantage so that the defendant was unable to make a worthwhile judgment as to what was in his best interests.
The witnesses
The only witnesses who gave oral evidence were the plaintiff, the defendant, and the defendant’s accountant Mr James Horwood. The defendant did not call as a witness his then solicitor, Mr Farmer, who had certified, inter alia, that the defendant: “gave me credible assurances that he was not acting under coercion or undue influence”. It was not in dispute that Mr Farmer had advised the defendant that he was not obliged at law to provide maintenance to the plaintiff; that he was being too generous as he would be committed to an onerous financial commitment for 13 to 14 years, and should not execute the agreement. Expert evidence by way of reports of the clinical psychologist Helen Tilley dated 23 November 2005; the treating psychiatrist Dr Rene Pols dated 29 November 2005, and the psychiatrist Dr Ewer dated 9 December 2005 were all tendered by consent. Unfortunately there were some differences in their opinions which I have had to resolve.
The background facts were, for the most part, not in dispute. The negotiations between the parties between approximately September 2001, and the execution of the agreement in December 2002, were sufficiently evidenced by the oral evidence of the parties and the correspondence between the solicitors, which was tendered by consent.
As to the financial position of the defendant, the evidence was somewhat limited as to his specific level of indebtedness at various times. In addition to the oral evidence of Mr Horwood, whose evidence I accept without reservation, and that of the defendant, the parties tendered the taxation returns of the defendant, his practice companies and the “D” Family Trust. A summary of the defendant’s financial position between the financial years ending 30 June 2000 and 30 June 2005 was also tendered. Although it would have been of assistance to sight the records of the defendant’s indebtedness, I am satisfied from the defendant’s evidence as to his general indebtedness. It is appropriate that I say something about the evidence of the plaintiff and the defendant. Both were asked to recall events which had occurred about 6 years previously. The subject of the evidence involved the breakdown in a longstanding relationship and the emotional toll that that brings. It would be hardly surprising if their respective memories are clouded by subsequent events. From the defendant’s point of view, much had changed after the execution of the agreement. Apart from his suicide attempt, he had been left with the care and control of all three children since October 2004. He sees the plaintiff having entered into a new relationship with no responsibilities. Generally I am sure that both for the most part did their best to recall and relate events relevant to the issues. There were however some significant differences between the parties particularly as to the state of the plaintiff’s knowledge of the defendant’s financial position and general health prior to the execution of the agreement. I was favourably impressed by the defendant as a witness. With one exception I accept all of his evidence. That exception related to what he referred to as an additional payment of $60 a week to the plaintiff beyond that contained in the agreement, (at transcript P 190). This evidence arose for the first time in cross-examination in reference to the alleged continued demands of the defendant for money. I cannot be satisfied that such payments were demanded or paid.

I was not, however, favourably impressed by the evidence of the plaintiff. She sought to distance herself from any understanding of the defendant’s financial circumstances, or depressive condition prior to the execution of the agreement. For the reasons, which appear hereafter I am, satisfied that she was aware that the defendant had liquidity problems at all times prior to the execution of the agreement. She asserted that she couldn’t remember ringing the plaintiff about there being no money available on her credit card on occasions prior to the execution of the agreement. She appeared to me to be anxious to restrict her knowledge to events which occurred only after the execution of the contract, stating:
“… if there was a time that there was any harassment it was after the signing of the contract where he was always in breach of the – you know, the not paying on time and being late and things like that”.[10]
[10] See transcript pages 41 and 53.
She denied in any way bringing pressure upon him to execute the agreement, and suggested that the negotiations were left exclusively to the solicitors. Indeed in respect of some of the more controversial terms of the agreement, she suggested, and I do not accept, that that it was her “lawyer” and not herself who initiated those clauses.[11] She prevaricated when asked about the defendant’s sole care of all three children since October 2004; and, similarly, when questioned about her accommodation since March 2005, and whether she had earned income from sales and paintings. She sought to paint the defendant in a bad light, suggesting that he intimidated her and had turned the children against her. She even suggested that her recent accommodation at a Women’s Shelter was his fault. In my opinion those suggestions had no basis in fact, and I reject them. I place little reliance upon her evidence where it serves her own interests, and there is no other evidence which confirms her evidence.
[11] See transcript page 83.
Background facts
It is necessary for me to set out in some detail the events leading to the execution of the agreement. This narrative represents my factual findings in the case.
The commencement of the de fact relationship
The plaintiff, and the defendant, were both born in New Zealand, and were aged 46 and 45 years respectively at the date of trial.
The plaintiff, then a dental nurse, and the plaintiff, a medical registrar, met in 1985 and commenced living in a de facto relationship in or about 1987. Two of their children, a son “H” and a daughter “N”, were born respectively in June 1989 and March 1992. He is now a highly competent physician. She ceased full time paid employment shortly before the birth of “H” in 1989.
While in New Zealand the defendant had been drinking excessive quantities of alcohol. The plaintiff, having been aware of this problem, had encouraged him to attend Alcoholics Anonymous which he did on one occasion only. In December 1994 they moved to Sydney, where he took up a clinical and research position at St Vincent’s Hospital, at what he described as a meagre salary. The relationship became strained. She learnt that he had sold his New Zealand home at a loss.
After 12 months he moved to Dubbo taking a position at the hospital. She was reluctant to join him, however did so approximately six months later. He purchased a house in Dubbo, and expended substantial monies in renovating it.
The plaintiff described the house at (T.29):
“Considerable improvements were done to the house. It was a bit of a dump when we bought it but I could see, as a creative person, that it had great potential, so we proceeded to do it up”.
A third child a son “O”, was born in November 1997. The plaintiff was aware that he continued to have problems with alcohol.
In March 1999 they decided to move to Adelaide. They rented a home in Childers Street North Adelaide at $600 per week. The defendant obtained a position at a public hospital, and established a private practice as a physician.
He was working approximately 50 hours per week. He continued to drink excessively however this level of drinking did not prevent him from working in a highly professional manner.
At this time the defendant had significant financial difficulties. He had sold the Dubbo house at a net loss, as it had been over capitalised in consequence of the renovation. Notwithstanding the absence of documentary evidence, I accept that the defendant left Dubbo with no asserts save for household effects; a 1997 Chrysler Voyager vehicle subject to lease; and a 1992 Falcon Sedan; and debts totalling approximately $30,000.
The plaintiff said in evidence that the defendant had told her that they were debt free after Dubbo. I reject that evidence. I accept that the defendant did inform her that he was in debt at that time.
While in New South Wales, the defendant had established corporate vehicles for future private practice. The income ultimately received by the plaintiff from 1999, and his potential earning capacity became a major focus of cross-examination at the trial. Mr Horwood’s description of the corporate vehicles was as follows:
“I.M” Pty Ltd - This is the incorporated medical practice which receives the income from his private practice; and pays income and superannuation benefits for the benefit of the defendant. It also pays a fee to the “D” Family Trust. It does not now nor ever has had any assets beyond the medical practice, and the shares in it are of negligible value.
The “D” Family Trust – This is a service entity which provides staff and other ongoing services to “I.M.” Pty Ltd. Its sole source of funds is the fee paid by “I.M.” Pty Ltd.
“M” Pty Ltd – This is a trustee company being the trustee of the “D” Family Trust.
The defendant was paid in his personal capacity for his work as a visiting medical officer by the public hospital.
The cessation of the relationship – April 2001
The relationship ceased on 12 April 2001. The plaintiff left the family home and moved into a rental property at Stanley Street North Adelaide, taking with her “N” and “O”. The older child, “H”, had behavioural difficulties, and remained with the defendant. The main reason for the plaintiff’s decision to terminate the relationship was “definitely alcohol”. It was particularly untimely as it occurred shortly after he had renewed the lease of the Childers Street property. It became necessary for him to obtain a release from that lease.
The plaintiff had the use of the Chrysler Voyager, and took whatever furniture she wished.
Upon separation the defendant told her that he would provide for her, and he did so. In addition to the rental on Childers Street, he paid the rent of $350 per week on Stanley Street, and all of her expenses, food requirements and utilities. He gave her a credit card. She wished to operate an Art Studio – he paid the rental on those premises, which, on the plaintiff’s evidence, was $40 per week. I have no doubt that he was emotionally fragile, blaming himself and his alcohol dependence for the breakdown of the relationship.
As he told Dr Ewer, “I didn’t want to avoid my responsibilities. I knew I had an obligation, and I’m a generous person … I felt guilty that I wasn’t in a better financial position”.
The defendant’s recollection is that he was paying the plaintiff’s personal expenses, which grew to a level well in excess of the sum of $1300 a month referred to in the agreement. I find that at the date of separation he was also paying $1,550 per annum to the plaintiff’s superannuation fund, and that he had debts on credit cards to the extent of $35,000.[12]
[12] Exhibit P.36 fax to solicitor.
At this time the defendant had not obtained legal advice. I find it probable that he did not turn his mind to whether he was legally obliged to make such payments. He felt morally obliged to provide for his de facto spouse of 14 years, particularly when she had the responsibility for the two younger children.
The Negotiations
These commenced on 18 September 2001. By then the plaintiff was aged 41 years. She had consulted solicitors. Her instructions as conveyed in their letter of that date to the defendant contained the essence of the ultimate agreement.
“….Property
With regard to property, your matter is covered by the De Facto Relationships Act. We are instructed by our client that she believes that there are little assets save and except for superannuation funds. Our client believes that money has over the years been placed into a superannuation fund for her but she is unaware of where those funds are being held or of the entitlements held for both you and herself.
Our client has no income although she is hopeful that she will earn some monies through the sale of her paintings but at this stage the amount will be nominal. We understand that you are currently paying all expenses in relation to our client and the children, and our client is accessing a joint account for these purposes. We believe that you have agreed to continue this arrangement indefinitely”.
The response from the defendant’s solicitors dated 19 October 2001, detailed an estimate of the plaintiff’s superannuation. Ultimately the agreement recorded superannuation at $58,239 for the defendant, and $14,859 for the plaintiff. The letter continued:
“Our client is willing to continue to pay reasonable expenses of your client and the children.
…What our client proposes is that various fixed expenses be paid by him including your client’s rent, car payments, grocery accounts, health insurance etc. In addition to the fixed expenses, our client is also willing to provide your client with a fixed sum for discretionary expenses on a monthly basis.
…Our client wishes to make it clear that whilst he is content to continue to support your client and the children, expenditure by your client cannot be on an unrestrained basis and a limit to the time that our client will be liable to maintain your client (quite apart from his child support obligations) will be stipulated. We would expect your client, over the next fourteen (14) years to make legitimate attempts to make provision for financial independence by seeking employment or by other means.
…Also we are instructed to request that all income from your client’s art that she sells be paid to our client until your client’s art profession becomes profitable and until our client’s current debts are extinguished” (my emphasis)
It appears that at least initially the defendant approached the negotiations on the basis of a continuation of the voluntary “spousal maintenance arrangement”. It is probable that he felt locked into continuing the same arrangement. It can also be seen that it was the defendant’s suggestion that payments be made to age 55 years.
In July 2001, he managed to obtain an early release from Childers Street, and moved to smaller and cheaper rental accommodation in Mann Terrace North Adelaide. He was obliged to employ babysitters to be able to meet his work commitments.
The defendant’s personal taxation returns disclosed a taxable income of $167,667 for the year ending 30 June 2001, from which tax of about $68,690 was to be paid. Reading back various figures from the combined tax returns it is probable that the net income was approximately $120,000. From this sum the defendant was obliged to pay the rent on Childers Street, the school fees of “H” and “N” which totalled approximately $23,000; service debt, pay approximately $4,000 a month to the plaintiff, as well as his living expenses.
Thereafter numerous versions of an amended “Child Support Agreement”, an amended “De facto Relationship Agreement” were exchanged over a period of 14 months to December 2002. Although there was a separate Child Support Agreement, in respect of which the defendant was to meet the younger childrens’ expenses, it was implicit in the early drafts that the plaintiff would have the responsibility for their care. Those drafts provided that if the plaintiff commenced residing with another person at any time, and that that other person did not pay their own expenses then the defendant was at liberty to reduce or cease making any payments.
They also provided that in the event that the plaintiff secured gainful employment then the payments to be made by the defendant would be reduced by her net income.
These proposals from the defendant, and his insistence that the personal expenses be capped at $1,300 a month indicate both, that the defendant had turned an independent mind to the transaction, and that he was aware that the parties intended the agreement to have legal effect.
Throughout the period of negotiation the defendant attended upon and gave instructions to his solicitor, Mr Farmer. He was sent drafts from time to time, and responded in an appropriate manner. He said he tried to keep his solicitors and accountants apart at this time. Although he did not attend as regularly upon his accountant Mr Horwood, he did attend a meeting with both Mr Farmer and Mr Horwood on 25 February 2002.
Mr Horwood said that the defendant’s position was not “strong”, and that at that time he still owed debt from the Dubbo property to the National Australia Bank. Because he owned no real estate this stifled his capacity to borrow. Although he could not recall the level of personal debt at that time he said “it was never a very buoyant situation. He always seemed to be catching up on back tax debts”. Mr Horwood advised him that the offer, as contained in the draft agreements “was too generous and he couldn’t afford it…he just didn’t have the cash flow”. The defendant estimated that his indebtedness had grown to $60,000 at the time of the execution of the agreement.
By 2 May 2002 the defendant had rejected the plaintiff’s demand for an additional monthly payment of $500 for superannuation. I accept the defendant’s evidence that the plaintiff told the defendant that “he was a total bastard – that she had been left with nothing and that she might not sign the agreement”.
By 21 June 2002 the plaintiff’s solicitors wrote that the plaintiff would not execute the draft agreement in its current form, stating:
“I note that the document fundamentally provides for the payment of monetary sums to my client over a period of time, these being akin to marital spouse maintenance payments. However in light of the fact that there is no concept of law of spousal maintenance payments between de facto spouses, my client is more than content to treat the subject payments as a property settlement entitlement paid to her by way of agreed instalments in lieu of a lump sum”.
It is obvious that the plaintiff’s solicitors had perceived a problem with the nature of the agreement. It was in substance a “spousal maintenance agreement”, albeit with some minor references to superannuation entitlements, a motor vehicle, and items of furniture.
By 30 June 2002 the defendant’s taxable income had grown to $199,116; again reduced to approximately $120,000 after tax.
On 24 July 2002 the defendant attended upon the Psychologist Ms Tilley. He told her that he had significant unresolved grief arising out of the separation and that he was not coping. He consulted her a total of 8 occasions ending on 10 October 2002. On several occasions he was reduced to tears.
The defendant continued to work approximately 50 hours per week. He increased his alcohol intake to a level of about two bottles of wine per day. He had difficulty sleeping, and was losing weight. I find that although the plaintiff was not told specifically that the defendant was consulting a psychologist, she was aware that he was depressed, drinking heavily and emotionally exhausted.
By 21 August 2002 the plaintiff’s solicitors sought further amendments to the draft agreement including that payments continue until she is 60 years of age; and that payments otherwise “cease only upon her marriage, and not upon her commencing or remaining in a de facto relationship”.
These amendments were rejected by the defendant.
By 9 October 2002 the draft agreement reflected the form of agreement ultimately signed by the parties. While the cut off date reverted to age 55 years, it included a term that payments must continue even if either party marries or enters into a de facto relationship.
I accept the defendant’s evidence that in the six-month period leading up to the execution of the agreement, the plaintiff contacted him direct “imploring him to sign the agreement”. However by about 4 September 2002, it was the defendant who was anxious to finalise the agreement, directing Mr Farmer to set a “deadline”. I accept that he was concerned to avoid hostility with the plaintiff. I accept the defendant’s evidence that he told the plaintiff on 8 to 10 occasions between April 2001 and December 2002 that he was having trouble maintaining two houses because of his debt level.[13] She responded with words to the effect: “You earn heaps, you can pay, live up to your responsibilities”. I reject the plaintiff’s evidence that she did not know of any debt problem until a letter was forwarded by the defendant’s brother to her on 21 February 2005.[14] From April 2001 to December 2002 the defendant was consuming alcohol which rose to two and a half litres a day.
[13] Transcript Page 120.
[14] Transcript Page 56.
On 11 November 2002 the defendant’s father died and he attended his funeral in New Zealand. I accept his evidence that when he rang the plaintiff to tell her what had happened, she told him “you need to get a grip and get on and sign the agreement”. Although sometimes late the defendant had met all of the plaintiff’s expenses until December 2002. He did not miss any time from work over this period.
On or about 17 December 2002 the agreement was signed by both parties and certificates in the form required by the Act were signed by their respective solicitors. I accept that the defendant read the agreement before he signed it, and that he understood the document, and its legal effect.[15] It was effectively in the same form as it had been for many months, and involved payments of no greater order than had been made by him post separation on 12 April 2001. I accept his evidence that he felt pressured to execute the agreement, as he interpreted the plaintiff’s telephone calls as calling in to question his morality.[16]
[15] Transcript Page 150.
[16] Transcript Page 128.
The significant difference was that the prior voluntary arrangement was to be replaced by a legally enforceable agreement with commitments for approximately 14 years, with no mechanism to allow for changed circumstances. I repeat that at all times the defendant had been advised by both his Accountant Mr Horwood and his solicitors Mr Farmer that he ought not sign the agreement because he could not afford to do so.
The medical evidence
Ms Tilley’s assessment of the defendant until the month of October 2002 was that he was depressed, with that depression boarding on the severe at that time.
It is somewhat unfortunate that Dr Pols and Dr Ewer were not called to give oral evidence about their different assessments of the defendant.
Dr Pols, who treated the defendant following his admission to the Royal Adelaide Hospital, assessed him as suffering then from severe alcohol dependence, a major alcohol withdrawal and depression. He opined that when the agreement was signed the defendant was suffering from “major depression with suicidal ideation” coupled with alcohol dependence; still mourning for his recently deceased father, and an excessive sense of guilt and personal responsibility.
Dr Ewer provided his report dated 9 December 2005. It appears that neither the report of Ms Tilley, nor that of Dr Pols was provided to him. He quite properly referred to the less than ideal position of the three-year delay between the date of the agreement, and his interview with the defendant. Of course it must be said that Dr Pols first interviewed the defendant some 16 months after the agreement was executed.

Dr Ewer noted that the defendant was depressed for most days in December 2002, had difficulty sleeping, and was often fatigued.
Dr Ewer concluded that there was insufficient evidence to convince him that the defendant was suffering from a Major Depressive Disorder in December 2002. He accepted that he was suffering from alcohol dependence at that time.
He referred to the defendant’s obsessional personality traits and longstanding low self-esteem. He had no doubt however that the defendant was able to comprehend the financial effect of the agreement.
On balance I accept the opinion of Dr Ewer. I do so despite the fact that Dr Pols was the treating psychiatrist. I accept the force of his opinion that the defendant was able to continue his busy practice, working full time to December 2002. Further as Dr Ewer noted, even during and after his admission some 18 months later in April 2004, the defendant was not prescribed anti depressants and returned to work quickly following his abstinence from alcohol.
Events after the execution of the agreement
Between December 2002 and March 2005 the defendant made the payments required of him pursuant to the agreement.
Evidence of subsequent events was led by the parties for different purposes. The plaintiff sought to show that the defendant had managed to make the payments effectively from April 2001 to March 2005 albeit with some delay, but without default; and that his income had increased significantly over the years as disclosed in the 30 June 2006 financial figures. The defendant led the evidence to establish that the suicide attempt in 2004 was the direct consequence of the cumulative financial pressure faced by the defendant since 12 April 2001, and so establishing the improvident nature of the agreement.
I approach the evidence of post contractual events with some caution. It is the defendant’s finances and health, as known to the plaintiff, during the period of negotiations which are of direct relevance. The fact that the defendant’s financial position, particularly since 2004, has improved considerably is of little relevance, save that it may have been in the parties’ contemplation at the time of contract.
Similarly, the conduct of the plaintiff, and her admission of post contract “harassment” for the defendant’s delays in making payments, is of little relevance.
I accept that the defendant continued drinking excessively throughout 2003, and continued to feel depressed. He continued his punishing workload, and met all of the expenses of both households, including the large school fees.
The defendant’s medical receipts dropped significantly in the year ending 30 June 2003, although his after tax income remained at approximately $120,000. Having met the plaintiff’s expenses, the school fees, and his own household expenses, he was unable to reduce his debts. By 30 June 2004, the after tax income was reduced to approximately $100,000. I find that he could not then meet the expenses without incurring further significant debt.
On 9 August 2004, the plaintiff and the children found the defendant in “near cardiac arrest”, following the attempted suicide. He was admitted to the Royal Adelaide Hospital, where he was detained. He missed two weeks’ work. He thereafter made significant changes to his life. He ceased drinking alcohol.
In October 2004, the two younger children went to live permanently with the defendant. The plaintiff described having an operation and that she was “gravely ill”. The defendant continued to make all of the payments under the agreement.
In February 2005, the defendant moved the children out of their respective schools, and enrolled them in less expensive schools. He moved to cheaper but larger rental accommodation in Mawson Lakes. The plaintiff’s lease on Stanley Street was due to expire in April 2005.
On 21 February 2005, the defendant’s brother wrote to the plaintiff alleging that the defendant’s personal debts had reached a level of $135,000, and asserted that he could no longer maintain payments under the agreement. An offer of a modest interim monthly payment for 2 years only was made with the intimation that the defendant might be obliged to petition for his own bankruptcy.[17]
[17] See Exhibit P6.
In March 2005, the defendant ceased making full payments to the plaintiff. He paid the plaintiff the respective sums of $1,000 on 15 March 2005, and 15 April 2005 and finally a further sum of $687 around that latter date. The plaintiff was forced to vacate Stanley Street. She sold the Voyager vehicle, and purchased a new vehicle. She moved from one friend’s place to another, including addresses at Wirrina, Seaton and Sydney. She vacated the art studio, but maintained an internet website to sell her paintings. In July 2005 she became obliged to pay child support at $9.97 per fortnight to the defendant, from her Centrelink payments. On 1 February 2006 she was notified that she had been terminated from the defendant’s health fund.
She has not incurred any accommodation or utility expenses since March 2005, because she has been forced to stay with friends. She has been in receipt of Centrelink benefits since that time.
By 30 June 2006, the defendant’s financial position had improved substantially; having ceased payments to the plaintiff, together with the reduction in school fees, the reduction in debt, and an after tax income of approximately $200,000.
Submissions and Discussion
Although the respective parties’ submissions were directed principally to the questions of undue influence and unconscionable conduct, the defendant submitted additional grounds upon which he asserted that the plaintiff’s claim ought not succeed. It is convenient to deal with those submissions first.
Status of Agreement
(a) Is it a cohabitation Agreement?
The defendant’s counsel Mr Tredrea, submitted that in substance the agreement was for the ongoing payment of “spousal maintenance”, no matter how the solicitors for the plaintiff had expressed it in their letter of 21 June 2002. He submitted that all “property matters”, strictly so called, including superannuation entitlements had been effectively divided by September 2001. Implicitly he submitted that the cohabitation agreement was a legal fiction. Further he submitted that section 5(1)(b) of the Act in its reference to “other financial matters related to the de facto relationship”, ought not be construed to cover post termination maintenance. He pointed to the conjunction “or”, and the temporal distinction between the division of property on termination under section 5(1)(a) and the wording in section 5(1)(b) of the Act. Mr Tredrea referred to the difficulties which would confront Courts attempting to supervise such an agreement. Rhetorically, he asked, what would happen if there was a dispute about the monthly quantum of expenses? Would Parliament expect that this be resolved by this Court on a supervisory basis? A contractual period of 14 years made it inevitable that there would be a change of circumstances, in respect of which section 8(2) of the Act denied any relief.
He also referred to the terms of the preamble to the agreement and the accompanying Certificates. They were directed to assets as opposed to the respective financial positions of the parties. For all of these reasons he submitted that the Act did not apply to what were, in effect, maintenance agreements. Mr Lazarevich for the plaintiff submitted that the wording in section 5(1)(b) extended to the subject arrangements, and, implicitly included maintenance agreements.
I readily accept that the proper construction of this section of the Act is not free from doubt. The issues addressed by Mr Tredrea were considered by the NSW Court of Appeal with respect to the common law, and in the absence of legislation, in Seidler v Schallhoffer (supra). Hurtley J.A. said in the context of whether the Courts ought recognise the enforceability of an agreement between the prospective de facto partners, as to property matters:
“If the parties do make agreements intended to have legal effect, I see, at present no reason why at least in relation to property rights the agreements should not be recognised. The extent to which the Court machinery can operate in this field can only be gradually tested as concrete cases appear”.
It is clear that the Act does not intend to confer general rights available to married couples under the Family Law Act.[18]
[18] cf. Black v Black [2006] FAMCA 972 at [110].
The Act is beneficial legislation and ought be construed broadly, consistent with the legislative purpose. The expression, “other financial matters”, is undefined and itself extremely broad. Prima facie it is wide enough to include the means for providing for a partner’s financial future, whether by arrangement for inter party loans; treatment of debts or spousal maintenance. The question is whether such a construction expresses the legislative purpose. I do not accept that there is a temporal distinction in the sense submitted by Mr Tredrea. True it is that property adjustment occurs at termination, but the agreement to so adjust at termination, may be entered into, before, during or after the de facto relationship. When the Court has regard, in Part 3 of the Act to such cohabitation agreements, the time limits in Part 3 have the practical effect, that those agreements as to property adjustments will likely have been made either before or during the relationship. In my opinion s 5(1)(b) does equally apply to cohabitation agreements relating to financial matters, whether they were entered into before, during or after termination of the relationship, and whether they relate to future payments. In the subject case the parties had limited assets. The defendant recognised that in the future he would be more financially secure and that these “financial arrangements” were the only way in which he could enable her to share in those rewards.
Here the solicitors chose to refer to the payments as “property settlement” because they had assumed that spousal maintenance was not covered by s 5(1)(b) of the Act. While Courts will not ignore the language to which the parties have assented, it must look to the pith and substance of the agreement. See Radaich v Smith (1959) 101 CLR 209 at 222, and Lewis v Bell (1985) 1 NSWLR 731. It was in substance for spousal maintenance.
There is nothing in the legislation which clearly indicates the legislative purpose. There is much force in Mr Tredrea’s implicit submission that one might have expected a means of supervision of ongoing maintenance and for relief in the event of changed circumstances.
However, in my opinion, the inclusion of “financial matters” in Part 2 as opposed to Part 3, reflects the legislative intention to enable ordinary people to enter into whatever property adjustments or financial arrangements they wish, and avoid the necessity of Court proceedings. Safeguards are in place because of the need for Certificated Agreements. It does not, in my opinion, matter whether they are for “spousal maintenance” or other financial arrangements for the future. Indeed one ought not attempt to concentrate on the expression “maintenance”. It has not been excluded by the Act.
In my opinion section 5(1)(b) does apply to the subject arrangements even if strictly they are substantially maintenance payments.
Even if I am in error in that construction, and maintenance payments do not fall within the scope of s 5(1)(b) of the Act, the agreement would in my opinion remain enforceable at common law. The making of such an agreement following the termination of a de facto relationship would not constitute an immoral purpose in breach of public policy for the reasons expressed in Seidler’s case. The Act itself has not in my opinion become a code so as to oust common law contracts. It is to be contrasted in that respect from provisions similar to that in s 27 of the Property (Relationships) Act 1984 (NSW) which specifically exclude a claim for maintenance at law, other than pursuant to that Act. The concept of maintenance in de facto relationships is now recognised in statutes in other States throughout Australia.
There does not appear to me to be a proper basis for not enforcing such an agreement at common law.
I appreciate that the construction which I have placed upon the Act is not free from doubt, and that reasonable minds might differ about it.
In my opinion however the agreement is a certificated cohabitation agreement for the purposes of the Act.
(b) Was there consideration for the agreement?
Mr Tredrea submitted that the defendant had no more than a moral obligation to maintain the plaintiff. Further if he had declined to execute the agreement, then the plaintiff could not have obtained orders to that effect under Part 3 of the Act. This was because Part 3 was confined to the adjustment of assets, and did not extend to “other financial matters”. Further the Court would have had no jurisdiction to entertain an application because of their relatively short residency in South Australia.
While those submissions are, in my opinion, undoubtedly correct, I conclude that there was consideration for the agreement at the least in terms of the finalisation of superannuation, furniture and vehicle entitlements, and the plaintiff’s transfer of shares and resignation as a director.
While it is correct to say that this consideration was minimal and, that the plaintiff was to receive sums totally disproportionate to that which she would have been legally entitled, under Part 3 of the Act, it is trite that at law that consideration need not be adequate.
(c) Did the parties intend to create legal relations?
While it is probable that in voluntarily meeting the plaintiff’s expenses in April 200, the defendant was simply discharging a moral obligation, and had no intention to create legal relations, there can be no doubt that by December 2002 he was well aware that the parties were indeed intending to create legal relations. He very properly conceded as much in his evidence.
In Merritt v Merritt (1970) 1 WLR 1211 Lord Denning, in a different context, said at 1213:
“the parties there were living in amity. In such cases their domestic arrangements are ordinarily not intended to create legal relations. It is altogether different when the parties are not living in amity but are separated or about to separate. They then bargain keenly. They do not rely on honourable understandings. They want everything cut and dried. It may safely be presumed that they intended to create legal relations”.
Was the defendant mistaken about the legal effect of the agreement?
Mr Tredrea submitted that when the parties had entered into the agreement, that they contemplated a contract to effect a property settlement, - namely a cohabitation agreement – pursuant to section 5 of the Act. He submitted again that it was of a different nature, namely a “spousal maintenance” agreement. He referred to Bell v Lever Bros Ltd (1932) AC 161, and by implication to David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 172 CLR 353.
He submitted that in consequence of that mutual mistake the agreement was unenforceable.
As I have already found, the parties knew by June 2002, the basis upon which the agreement was drawn. Even if I am wrong and it did not constitute a cohabitation agreement under the Act, in my opinion there was no such mistake by either party such as to vitiate the agreement.
Undue influence and unconscionable conduct
Mr Tredrea submitted that this was an appropriate case for the Court to exercise what he described as, “its equitable jurisdiction with respect to catching bargains with another at a disadvantage”. The principles have been well established by the Courts.
It is clear that equitable relief will not be granted simply because the defendant has made what objectively may be seen to be an imprudent bargain or has been too generous as to be foolish.
In Frederick v South Australia (2000) 94 SASR 545 at 577 to 583 White J detailed the equitable concepts of undue influence and unconscionability. He referred to the decision of Mason J in Commercial Bank of Australia v Amadio:
“Relief on the ground of “unconscionable conduct” is usually taken to refer to the class of case in which a party makes unconscious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of this advantage, eg, a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by an intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblence to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconsciously taking advantage of that position. There is no reason for thinking that the two remedies are mutually exclusive in the sense that only one of them is available and a particular situation to the exclusion to the other. Relief on the ground of unconscionable conduct will be granted when unconscientious advantage is taken of an innocent party whose will is overborne so that it is not independent and voluntary, just as it will be granted when such advantage is taken of an innocent party who, though not deprived of an independent and voluntary will, is unable to make a worthwhile judgement as to what is in his best interest”.
In Louth v Diprose (1992) 175 CLR 621 the plaintiff was emotionally dependent upon the defendant and therefore in a position of special disadvantage. The defendant had manipulated the plaintiff’s infatuation by manufacturing an atmosphere of crisis when in fact no such crisis existed. Although in that case the plaintiff was a solicitor the Court found that his emotional dependence upon the defendant was such that his professional qualifications and experience counted for nothing and that he was effectively deprived of an independent and involuntary will in making a most improvident transaction.
In Williams v Maalouf [2005] VSC 346 Hargrave J. gathered together the principles as to unconscionable conduct. I gratefully adopt that summary:
“The applicable law is not in doubt. In Commercial Bank of Australia Ltd v Amadio, the High Court considered the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct where a party to the transaction, who suffers detriment by reason of the transaction, is suffering from some special disability or is placed in some special situation of disadvantage at the time of the transaction.
Mason J, as he then was, stated the applicable principles as follows:
"It almost goes without saying that it is impossible to describe definitively all the situations in which relief will be granted on the ground of unconscionable conduct. As Fullagar J said in Blomley v Ryan:
‘The circumstances adversely affecting a party which may induce a court of equity either to refuse its aid or to set a transaction aside are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis à vis the other’.
Likewise Kitto J spoke of it as ‘a well-known head of equity’ which –
‘...applies whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands’.
It is not to be thought that relief will be granted only in the particular situations mentioned by their Honours. It is made plain enough, especially by Fullagar J, that the situations mentioned are no more than particular exemplifications of an underlying general principle which may be invoked whenever one party by reason of some condition of circumstance is placed at a special disadvantage vis à vis another and unfair and unconscientious advantage is then taken of the opportunity thereby created. I qualify the word ‘disadvantage’ by the adjective ‘special’ in order to disavow any suggestion that the principle applies whenever there is some difference in the bargaining power of the parties and in order to emphasise that the disabling condition or circumstance is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other parties knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party."
On the question of the degree of knowledge of the special disadvantage, short of actual knowledge, which is sufficient to enliven the jurisdiction of the Court to set aside a transaction on the ground of unconscionable conduct, Mason J said:
"As we have seen, if A having actual knowledge that B occupies a situation of special disadvantage in relation to an intended transaction, so that B cannot make a judgment as to what is in his own interests, take unfair advantage of his (A’s) superior bargaining power or position by entering into that transaction, his conduct in so doing is unconscionable. And if, instead of having actual knowledge of that situation, A is aware of the possibility that the situation may exist or is aware of facts which would raise that possibility in the mind of any reasonable person, the result will be the same."
Deane J expressed the relevant principle in the following way:
"The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or ‘unconscientious’ that he procure, or accept, the weaker parties’ assent to the impugned transaction in the circumstances in which he procured or accepted it. Where such circumstances are shown to have existed, an onus is cast upon the stronger party to show that the transaction was fair, just and reasonable...."
As to whether a special disability is "sufficiently evident" to the stronger party, in the sense discussed by Deane J, his Honour stated:
"It would, at least by that stage, have been plain to any reasonable person, who was prepared to see and to learn, that he was put on enquiry. The stage had been reached at which the bank ... was bound to make a simple enquiry as to whether the transaction had been properly explained to Mr and Mrs Amadio. The bank cannot shelter behind its failure to make that enquiry. The case is one in which ‘wilful ignorance is not to be distinguished in its equitable consequences from knowledge’... Mr and Mrs Amadio’s disability and the inequality between themselves and the bank must be held to have been evident to the bank..."
In Louth v Diprose, the defendant contended, as does the defendant in this case, that the proper conclusion to be reached on the evidence was that the plaintiff made the gift simply because he wished to do so, imprudent though the gift may have been. In this regard, Brennan J stated:
"If that be the right conclusion, so that the gift was not the result of unconscionable conduct on the part of the defendant, the plaintiff cannot recover the gift. As Lindly LJ pointed out in Allcard v Skinner: ‘Courts of Equity have never set aside gifts on the ground of the folly, imprudence or want of foresight on the part of donors. The Courts have always repudiated any such jurisdiction ... it would obviously be to encourage folly, recklessness, extravagance and vice. If persons could get back property which they foolishly made away with, whether by giving it to charitable institutions or by bestowing it on less worthy objects.’" (Citations omitted.)
As to the setting aside of gifts on the ground of unconscionable conduct on the part of the donee, Brennan J stated:
"Once it is proved that substantial property has been given by a donor to a donee after the donee has exploited the donor’s known position of special disadvantage, an inference may be drawn that the gift is the product of the exploitation. Such an inference must arise, however, from the facts of the case; it is not a presumption which arises by operation of law. The inference may be drawn unless the donee can rely on counter-veiling evidence to show that the donee’s exploitative conduct was not the cause of the gift. At the end of the day, however, it is for the party impeaching the gift to show that it is the product of the donee’s exploitative conduct. This is the final and necessary link in the chain of proof of unconscionable conduct leading to a decree setting aside the gift."
In Bridgewater v Leahy, the High Court again considered the equitable jurisdiction to set aside a transaction resulting from unconscionable conduct in circumstances where the weaker party to the relevant transaction was emotionally dependent on the other party. The case involved a sale of land by an elderly uncle to a nephew and his wife at an undervalue, in circumstances where the uncle had a strong emotional dependence upon the nephew. The deed of forgiveness, which had the effect of rendering the sale of land at an undervalue, was set aside on the ground of unconscionable conduct. The majority judgment was delivered by Gaudron, Gummow and Kirby JJ (Gleeson CJ and Callinan J dissenting).
In their joint judgment, the majority in Bridgewater v Leahy applied Amadio and Louth v Diprose. In the course of doing so, the majority approved the statement of Deane J in Amadio to the effect that unconscionable conduct may occur where, in the circumstances, it is unconscientious to "procure, or accept the weaker party’s assent to the impugned transaction." (Emphasis added).
On the question of unconscionable acceptance of the weaker party’s assent to the impugned transaction, the majority continued:
"It also should be noted that in Hart v O’Connor, an appeal from New Zealand, the Privy Council described unconscionable conduct which provided a basis for equitable relief as ‘victimisation, which can consist either of the active extortion of a benefit or the passive acceptance of a benefit in unconscionable circumstances’." (Citations omitted; original emphasis.)
On the authority of Louth v Diprose, the majority accepted that emotional dependence can amount to the special disadvantage for the purposes of the equitable jurisdiction to set aside a transaction on the ground of unconscionable conduct.
As to the argument on behalf of the nephew, that the transaction was merely an improvident one by the uncle, who was in full possession of his faculties, the majority approved a statement of Jacobs A – CJ in the Full Court of the Supreme Court of South Australia in Diprose v Louth that:
"It is an oversimplification to say that because the respondent acted as he did with his eyes open, and with a full understanding of what he was doing, he was not in a position of disadvantage, and therefore not the victim of unconscionable conduct."

More recently however the High Court of Australia said: in ACCC v CG Berbatis Holdings Pty Ltd (2003) ALJ 153 at 157; (in a case said to be of a “situational” type)
“a person is not in a position of relevant disadvantage, constitutional, situational or otherwise simply because of inequality of bargaining power. Many, perhaps even most, contracts are made between parties of unequal bargaining power and good conscience does not require parties to contractual negotiations to forfeit their advantages or neglect their own interest…..Unconscientious exploitation of another’s inability, or diminished ability, to conserve his or her own interests is not to be confused with taking advantage of a superior bargaining position”.
Application of these principles to the facts
There can hardly be any doubt that the terms of the agreement were objectively one sided, and unfair to the defendant. At the time he executed the agreement, he was not in a financial position to meet his commitments without incurring escalating debt. Thereafter he was committing himself to payments for 14 years without any legal obligation to do so and without any corresponding concessions by the plaintiff, even if his finances would be expected to improve.
In the present case the defendant asserts that the plaintiff unconscientiously procured or accepted the defendant’s entry into a legally binding document in circumstances of “the special disadvantage” which he had arising from his alcohol dependency and severe depression.
The plaintiff’s counsel submitted that the defendant was not acting under any special disadvantage. Even allowing for his depression, indeed severe depression, the defendant had initiated the payments basically in the same form in April 2001. He had managed to continue the payments until March 2005. It was obvious that in starting out a private practice from nothing, that there would be difficult financial times early on which would improve with his finances as time went on.
In effect, he submitted implicitly, this had the appearance of the defendant regretting having made his earlier decision for a variety of reasons, including the post contractual conduct of the plaintiff.
He referred to the dissenting judgment of Mason C.J. in a different context in Stern v McArthur (1988) 165 CLR 489 at 528, to the effect that “equity was not authorised to reshape contractual relations into a form the Court thinks is more reasonable or fair where subsequent events have rendered one sides situation more favourable”.
There is no doubt that the defendant had a great deal of time to reflect on the ultimate agreement. He had made payments for almost 20 months before he signed the agreement. The cohabitation agreement is not legally or conceptually difficult to comprehend. He had taken an active part in the negotiations over those 20 months.
Since about February 2002 he had sufficient time to reflect upon the advice given to him by his solicitor Mr Farmer and his accountant Mr Horwood.
The defendant was undoubtedly severely depressed; suffering from low esteem and alcohol dependent. He undoubtedly felt guilty, and blamed himself for the breakdown in the relationship. While the death of his father occurred about one month before the agreement was executed, he had already determined to sign it in September/October of that year.
While the agreement was improvident from his viewpoint it reflected his desire to ensure that his de facto of 14 years was adequately maintained. He knew precisely what he was doing when he signed the agreement. There is no comparable legislation in this State similar to the Contracts Review Act 1980 (NSW), where contracts which, may not be unconscionable, may yet be held to be unjust.
From the plaintiff’s point of view, I have no doubt that she was at all times prior to the agreement aware of his debt position, his alcohol dependency, his depression and low self esteem.
Having said that I equally have no doubt to paraphrase Doyle C.J. in Hogg’s case in respect of Part 3 relief, that she did genuinely believe that she had been hard done by and that the payments made to her after 2001 were little compensation for “disappointed or unfulfilled expectations”.
While I have found that she did constantly ring the defendant imploring him to sign the agreement, and that her personality and responsibility for the two younger children placed her in a strong bargaining position, I cannot conclude that she unconscientiously took advantage of him in the manner indicated in the authorities. I also cannot overlook the independent advice he received over a long time, and the terms of the Certificate signed by Mr Farmer. This case is far removed from the facts in Louth v Diprose, or Williams v Maalouf, despite the defendant’s poor health throughout this period.
It is hard not to have a great deal of sympathy for the defendant, particularly for his struggles to meet the financial commitments in those periods of depression after April 2001. His recovery from the events of August 2004 has been remarkable
In my opinion however for the reasons expressed above the agreement is enforceable against the defendant.
Had I concluded that the agreement was unenforceable on this basis I would have declined in the exercise of my discretion in this equitable jurisdiction to order the plaintiff to repay all or any of the payments received by her.
Quantum
I repeat that I have concluded that the plaintiff elected to enforce the agreement, rather than accept the defendant’s breach as a repudiation of the agreement. On either approach, in the event that the agreement is not otherwise unenforceable, the plaintiff is entitled to be compensated for the breach.
The plaintiff’s counsel submitted that on such a basis the quantum ought reflect arrears of $4,000 per month for the 32 months between 15 March 2005 and 15 November 2007, less payments made by the defendant.
There is no doubt as to the principle namely that “he who has proved a breach of a bargain [that] he contracted to get, is to be placed, as far as money can do it in as good a situation as if the contract had been performed”.[19]
[19] British Westinghouse v Underground Electric Railways Co of London (1912) AC 673, at 689-690.
There was no evidence led as to the expenses incurred by the plaintiff since March 2005. The plaintiff’s counsel submitted that as there was an agreement to the effect that the previous average monthly payments totalled $4,000, then this figure should represent the base quantum.
The defendant submitted that the payments under the agreement were not fixed. Implicit in that submission was that the plaintiff’s claim was not for the recovery of a liquidated sum,[20]but for reimbursement of expenses, even if she was not obliged to act reasonably and therefore principles of mitigation applied.
[20] c.f. White and Carter (Councils) Ltd v McGregor (1962) AC 413.
In this case by taking steps not reasonably required of her, the plaintiff has in fact avoided loss resulting from the defendant’s breach. In my opinion, even though it was the consequence of her impecuniosity brought about by the breach of the defendant, those non-liquidated sums so avoided cannot be recovered.[21]
[21] Chitty on Contracts (24th ed) Vol 1, para 1597.
The fixed sum of $1,300 for her personal expenses constituted a liquidated sum. The rental of $166 for art space, undoubtedly and the accommodation expenses of $360 per week, on balance, were not liquidated sums. It is clear from the evidence that she has not incurred any accommodation, rental costs, nor utility expenses since the breach. Obviously she must have incurred some expenses for sustenance and petrol at least. She had sold the Chrysler Voyager, and had purchased a new vehicle.
I am obliged to attempt to fix that loss despite the dearth of evidence. Although the two children were the subject of a Child Support Agreement, their presence with the plaintiff to October 2004 would have increased the general expenses.
Doing the best that I can, I fix a monthly loss of $2,300 being the respective sum of $1,300 fixed for her personal expenses, and $1,000 representing the general other expenses not avoided.
This leads to the following calculations:
1.     The arrears between 15 March 2005 and 15 November
                  2007 being 32 months at $2,300 per month  $73,600
Less the respective sums of $1,000 paid on
                  15 March 2005 and 15 April 2005, and $687 paid
                  in April 2005  $ 2,687
  ======
  $70,913
2.     Interest thereon at 6.5% gradually over the period to the
                  date of judgment, as rounded  $ 2,310
  ======
  $73,223
The quantum of the plaintiff’s claim including interest is therefore fixed at $73,223.
Injunction
The plaintiff sought an injunction to restrain the defendant from lodging a debtor’s petition in light of the correspondence from his brother to the plaintiff in 2005.
A great deal of time has elapsed since the events of 9 August 2004, and early 2005. The threat implicit in the correspondence has not eventuated. In any event the Bankruptcy Act 1996 (Cwth) vests jurisdiction in Bankruptcy in Federal Courts with powers to control abuse of those Courts’ processes. These include the power to grant injunctive relief against the presentation of a petition, and orders annulling any such bankruptcy.[22] It would not be a proper exercise of the discretion by this Court to frustrate the defendant in seeking whatever relief was appropriate to his circumstances in the future.
[22] See McDonald, Henry & Meek - Aust Bankruptcy Law & Practice (2001) Vol 1 paragraph 55.0.10 and 55.8.05.
I decline to grant any such injunctive relief.
Additional comments
As is apparent from these reasons, this case has raised some complex issues as to the proper construction of the Act in its application to financial arrangements between de facto parties.
As to the future it is clear that events have changed dramatically from the termination of the relationship. The plaintiff’s ongoing expenses will in all reasonable likelihood be reduced because of the change in responsibility for the children. Further her reasonable accommodation requirements will have been reduced for the same reasons. It is obvious that the terms of the agreement relating to the “reasonableness” of expenses could give rise to future disputes. It was not suggested that such clauses are vague. See Meehan v Jones (1982) 149 CLR 571. The changed relationship may, however, lead to greater scrutiny of the expenses. The next due date for the payment of the monthly sum of $1,300 in advance, and the other verifiable expenses, is 15 December 2007.
The unfortunate incident in April 2004 shows, poignantly why the parties ought to have mediated their differences to achieve altered arrangements. Nothing has changed in that regard. The parties have moved on, with parental responsibilities assumed now by the defendant.
It is in the interests of both parties that they avoid ongoing disputes as to the reasonableness of expenses. They ought reflect again on the benefits of mediation to allow for the payment of a satisfactory lump sum to resolve any ongoing problems.
Subject to hearing counsel for the parties on the question of costs, I propose to make the following orders:
1.That there be judgment for the plaintiff in the sum of $73,233 inclusive of interest.
2.I declare that the written agreement dated 17 December 2002 and described as a De facto Relationship Property Settlement Certificated Agreement” is valid, binding and subsisting.
3. I dismiss the defendant’s counterclaim.