Tsarouhi and Tsarouhi - [2009] FMCAfam 126

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TSAROUHI & TSAROUHI

[2009] FMCAfam 126

FAMILY LAW – Application to set aside binding financial agreement – whether agreement the result of duress or unconscionability – whether agreement fails to comply with s.90G of the Family Law Act 1975.

Family Law Act 1975, ss.90G, 90K, 90KA
Evidence Act 1955, s.140

Bloomingdale Holdings Pty Ltd and Anor v 63 Buckley St Pty Ltd [2008] VSC 168
Flower v Sadler (1882) 10 QBD 572 at 576
Scolio Pty Ltd v Cote (1992) 6 WAR 475
Windhill Local Board of Health v Vint 45 Ch D 351 at 363
Public Service Credit Union v Campion (1984) 75 FLR 131
Mutual Finance Ltd v John Whetton & Sons Ltd [1937] 2 KB 389 Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 461 to 462
Australia and New Zealand Banking Group v Karam and Others (2005) 64 NSWLR 149 at 162
Kostres & Kostres (2008) 40 Fam LR 228
Williams v Bayley [1866] LR 1 HL 200
Sterling Winthrop Pty Ltd v Boots Company (Australia) Pty Ltd (1995) 33 IPR 266; (1996) 18 ATPR 41-452
B & B (2008) 216 FLR 422
Westpac Banking Corporation v Tanzone Pty Ltd (2000) BPR 17, 521

Applicant:

MS TSAROUHI

Respondent:

MR TSAROUHI

File Number:

MLC 260 of 2008

Judgment of:

Riley FM

Hearing dates:

17, 19 & 21 November 2008

Date of Last Submission:

28 January 2009

Delivered at:

Melbourne

Delivered on:

27 February 2009

REPRESENTATION

Counsel for the Applicant:

Robert Weir

Solicitors for the Applicant:

John D Snodgrass & Associates

Counsel for the Respondent:

John Werner

Solicitors for the Respondent:

Bogunovic Lawyers

ORDERS

The agreement between the parties dated 4 October 2006 be set aside.

IT IS NOTED that publication of this judgment under the pseudonym Tsarouhi & Tsarouhi is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MLC 260 of 2008

MS TSAROUHI

Applicant

And

MR TSAROUHI

Respondent

REASONS FOR JUDGMENT

Background

This is the wife’s application to set aside an agreement dated

4 October 2006
which provided for a distribution of the property of the husband and the wife (“the agreement”). The wife argued that:
a)the agreement should be set aside on the grounds of duress or unconscionability under s.90K of the Family Law Act 1975 (“the Act”); or, in the alternative,
b)the agreement is not binding because it does not meet the requirements of s.90G of the Act.
The parties married in February 1983 and separated on 15 April 2006. The agreement was made six months after separation, on 4 October 2006. There are three children of the marriage, namely [X], who is now 22 years old, [Y], who is now 17 years old, and [Z], who is now 10 years old. [X] and [Y] live with their father. [Z] lives with his mother.
It was common ground that the wife had repeatedly taken money from the parties’ joint home loan account by forging the husband’s signature. A summary of charges at annexure BT-7 to the affidavit sworn by the wife on 11 November 2008 shows that she was charged with

42 offences involving forgery and obtaining property by deception arising from 14 withdrawals from the home loan between February 2004 and February 2006. The summary says that the sums taken by the wife amounted to $21,480. The husband asserted that the sums taken by the wife actually amounted to about $32,000 but did not argue the point. For the purposes of this application, I take it that the wife took $21,480 by deception from the parties’ joint home loan account.
In her affidavit sworn on 21 December 2007, the wife claimed that she entered into the agreement on 4 October 2006 because the husband:
threatened that he would go to the police and have me charged unless I agreed to transfer the matrimonial home into his sole name.
Because I was afraid of him doing this and afraid to disobey the husband I signed a Financial Agreement on 4 October 2006 transferring the matrimonial home into the husband’s name.
The wife said the same thing in her affidavit sworn on 28 May 2008. However, the husband had been to the police on 19 April 2006, about six months before the husband and wife signed the agreement. The wife was interviewed by the police on 9 August 2006, about two months before the husband and wife signed the agreement.
In a later affidavit, sworn on 11 November 2008, the wife gave somewhat different reasons for signing the agreement on

4 October 2006
. She said that, during the marriage, the husband physically, verbally and mentally abused her, and frequently raped her. She then said:
Because of this behaviour by the husband I was extremely afraid of him at the time of signing the agreement dated 4 October 2006 which is the subject of these proceedings. With respect to the threat of police prosecution I had already been interviewed by the police at the time I signed the agreement. The husband said repeatedly that he would have the charges dropped only if I signed the agreement. As I had already been in the police station which I had found a terrifying ordeal I was desperate to do anything to avoid being prosecuted. The husband had told me that if I did not sign he would make sure I was prosecuted and would go to prison.
In his affidavit sworn on 5 November 2008, the husband said (complete with grammatical and spelling errors):
10.    Approximately one month after separation [that is, in about May 2006] The Applicant attended the matrimonial home to collect furniture and personal items. I said to her on that occasion: “Give me the kids and a car and give me money back $32,000.; I will give you the house and the mortgage” She told me she did not want to do that. She said “Do not touch me any more; do not contact me any more, give me a car, forget any money I withdrew and I will transfer the home to you. She further said: “The mortgage on the home is your problem, and I will pay mortgage for the car”. I said: “If you wish to do it in that way, I agree”. I deny that I told or threatened that I will go to the police if she will not transfer the home to my name.
11.    After this conversation took place I gave instructions to my nephew to contact police to withdraw any claim for withdrawn money and that I not asked for any money. The police responded: “We accept that you are not asking any money, but we will obey the law”. …
12.    On or about October 2008 [actually, 2006] the Applicant attended the office of Stojakovic Solicitors ….
13.    … I did not know that the Applicant had been convicted and the Applicant did not tell me about being charged.
In his affidavit sworn on 14 November 2008, the husband said:
The Applicant initiated the property dealings, not me. I said to the applicant: “Give me my money back, give me the kids, the house is yours”. She rejected.
I strongly deny that I ever threatened or told the applicant that I will go to the police and have her charged for fraud if the Applicant does not transfer the house to my name. The Applicant told me later: “Leave me alone; forget about forging signature and the money withdrawn; give me the car and I will transfer the house on your name”.
This conversation took place at the matrimonial home when the applicant came back to collect furniture on or about May 2006.
In cross-examination, the wife said that both of her versions of the conversations with the husband about the prosecution were true. She was told that, as at 4 October 2006, when she signed the agreement, she had not been charged, and the charges could not have then been dropped because they had not been laid. The wife said that she did not understand that. In re-examination, the wife said that she did not understand exactly what a charge is.
The wife conceded in cross-examination that she had seen a solicitor three times in connection with the agreement. She conceded that, on the first occasion, the solicitor advised her not to sign the agreement. She said that she attended the solicitor on the second occasion to look at the agreement and on the third occasion, on 4 October 2006, to sign it.
[1] Wife’s affidavit sworn 21 December 2007 at paragraph 15.
Notwithstanding that she had signed the agreement, on 23 July 2007, the wife was charged with the offences outlined above. All of the offences were indictable. The wife pleaded guilty to the charges on

21 November 2007[1]
. She was convicted and ordered to do 50 hours of community service. The wife filed her application to set aside the agreement on 11 January 2008.
There was no evidence before this court about whether the criminal court was advised of the terms of the agreement or whether the terms of the agreement were taken into account by that court in determining the penalty that it imposed on the wife. The summary of charges mentioned that the husband sought restitution in respect of the $21,480. However, there was no evidence in this proceeding about whether the wife was ordered to make restitution.

The effect of the agreement

The agreement provided for the husband and wife to receive certain assets by way of a property settlement and set out agreed values for the various assets of the parties. The agreement provided for the husband to receive:
a)the matrimonial home, valued at $250,000.00 less a $50,000.00 mortgage;
b)a 1990 Ford Fairmont, valued at $1,000.00; and
c)his superannuation, valued at $43,787.00.
This amounted to assets with a total agreed value of about $245,000.00 for the husband.
The agreement also provided for the wife to receive:
a)a 2002 Mitsubishi Lancer, valued at $30,000.00; and
b)her superannuation, valued at $15,000.00.
This amounted to assets with a total agreed value of about $45,000.00 for the wife.
As a consequence, the wife received about 15.5% of the agreed value of the matrimonial property, being $290,000, and the husband received about 84.5%. If the $21,480 taken by the wife from the home loan account were to be added back, the property pool would have been about $311,500. If the wife were to be treated as having received the $21,480 she took from the home loan account, as well as the $45,000 under the agreement, she would have received about $66,500 from an asset pool of $311,500. That would mean the wife would have received about 21% of the pool and the husband about 79%.

The legislation relating to setting aside agreements

Section 90K(1) of the Act provides that:
The court may make an order setting aside a financial agreement … if, and only if, the court is satisfied that
…
(b) the agreement is void, voidable or unenforceable; or
…
(e)… a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable … .
Section 90KA of the Act provides that:
The question whether a financial 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 ….

The standard of proof

In general, contractual questions are to be determined on the balance of probabilities. However, the husband argued that the Briginshaw standard should be applied in this case, because the husband was accused of serious wrongdoing, namely, blackmail. The husband also relied on s.142 of the Evidence Act 1995 which specifically requires the court to take into account the gravity of the matters alleged in determining issues in proceedings. The wife did not dispute these contentions. I accept them.

The law relating to duress

It is clear that a contract may be set aside where it was entered into under duress. In Bloomingdale Holdings Pty Ltd and Anor v 63 Buckley St Pty Ltd [2008] VSC 168, Hargrave J in the Supreme Court of Victoria said, in relation to duress, at [427] and [428]:
The legal principles to be applied are not in doubt. It is for the party alleging duress to prove it. Proof of duress involves proof of two essential elements. First, that one of the reasons for the affected party entering the transaction was pressure. Second, that the pressure was of an illegitimate kind, so as to vitiate the consent of the affected party. Mere commercial pressure to act is not enough.
The question of whether threats and promises in connection with a possible prosecution amount to vitiating duress has been considered by the courts on a number of occasions. In Flower v Sadler (1882) 10 QBD 572 at 576, Cotton LJ held that:
“A threat to prosecute is not of itself illegal … [and] does not necessarily vitiate a subsequent agreement by the debtor to give security for a debt, which he justly owes to his creditor.”
In the present context, that would mean that an agreement by the wife to repay the money taken from the home loan account would not have been vitiated by a threat to prosecute her in relation to taking that money. However, the agreement in the present case did not concern only the money in respect of which the wife was liable to be prosecuted. The agreement concerned all of the property of the husband and the wife. That is, the agreement concerned amounts beyond those which the wife “justly owe[d] to [her] creditor”. Counsel did not refer me to any cases which concerned exactly the type of situation that arose in this case, and I have been unable to find any.
Counsel for the husband relied on the decision of the Full Court of the Supreme Court of Western Australia in Scolio Pty Ltd v Cote (1992) 6 WAR 475. In that case, a director of a company had misappropriated company funds. The auditor of the company discovered the misappropriation and negotiated an agreement with the director to repay the misappropriated amount. The director sought to have that agreement set aside. The court at first instance set aside the agreement on the grounds of duress, consisting of a threat to prosecute. On appeal, the Full Court overturned that decision.
Ipp J, with whom Seaman J agreed, said at 484 and 485 that:
In considering whether a threat to inform the police amounts to improper and unacceptable coercion, a relevant factor is whether the amount, which the person under threat in consequence agrees to pay, is in fact owing. …
A further relevant factor is whether the person who is threatened receives valuable consideration for entering into the contract sought to be set aside.
It has long been accepted that the threat of prosecution alone will not vitiate a contract containing an undertaking to pay where the amount to be paid is already owing and where valuable consideration is given.
…
Accordingly, some other element of impropriety is needed, apart from the threat of prosecution, before there could be said to be duress resulting in the respondent becoming entitled to avoid the deed. The element that is normally sought to be established in cases of this kind is an agreement not to proceed with the prosecution. Such an agreement is illegal and is therefore void: see Kerridge v Simmonds (1906) 4 CLR 253. Further, the existence of such an agreement introduces a quality of impropriety into a transaction induced thereby so as to render it voidable for duress: Kaufman v Gerson [1904] 1 KB 591.
The impropriety was explained by Cotton LJ in Windhill Local Board of Health v Vint 45 Ch D 351 at 363 in the following terms:
the court will not allow as legal any agreement which has the effect of withdrawing from the ordinary course of justice a prosecution when it is for an act which is an injury to the public.[2]
[2] Cited with approval in Kerridge v Simmonds (1906) 4 CLR 253.
It was not argued in this case that obtaining property by deception and forgery are anything other than injuries to the public. They are crimes of a similar nature to larceny, which was held in Public Service Credit Union v Campion (1984) 75 FLR 131 to be an injury to the public. Accordingly, I proceed on the basis that the wife’s crimes were injuries to the public.
In Scolio, the court considered the decision in Mutual Finance Ltd v John Whetton & Sons Ltd [1937] 2 KB 389. In that case, a relative of a forger gave a guarantee in circumstances where the forger had been threatened with prosecution. It was held that guarantee should be set aside. Porter J said (at 395):
Not only is no direct threat necessary, but no promise need be given to abstain from a prosecution. It is enough if the undertaking was given owing to a desire to prevent prosecution and that desire were known to those to whom the undertaking was given. In such a case one may imply (as I do here) a term in the contract that no prosecution should take place … .
At 487 in Scolio, Ipp J distinguished Mutual Finance on the basis that, in Scolio:
a)it could not be said that the parties had the prosecution in mind when they were negotiating; and
b)the circumstances did not enable an inference to be drawn that the auditor promised that by entering the agreement the prosecution would be averted.
Moreover, Ipp J noted that, in Mutual Finance:
The third party had bound itself to pay a debt which it did not otherwise owe, solely to protect the person threatened. In such circumstances a finding that the threat constitutes improper pressure will more readily be made.
Ipp J found in Scolio that valuable consideration had been given in the form of time to pay and found that the agreement sought to be set aside concerned an amount that was already owed. The present case is obviously quite different. The agreement in this case did not concern an amount that could be said to be already owed. The agreement concerned the entire asset pool of the husband and the wife.
In summary, the relevant law seems to be that an agreement to repay an existing debt owed by one of the contracting parties to the other will not be vitiated by a threat to prosecute the debtor. However, such an agreement may be vitiated by a creditor promising not to prosecute in return for the debtor entering the agreement. Moreover, in accordance with Mutual Finance, where a third party contracts to repay a debt owed by another, even if there is no threat to prosecute, and no express promise to abstain from prosecution, the contract will be vitiated if the third party, to the knowledge of the other party, entered the contract to avoid the debtor being prosecuted.
Following the hearing, I invited the parties to make submissions on whether, among other things, the rule in Mutual Finance should apply to an agreement in which a debtor, rather than a third party, agrees to pay more to the creditor than is already owed. The parties indicated that they wished to file written submissions and did so.
The wife made brief submissions saying the question posed by the court should be answered in the affirmative.
The husband conceded that there was no separate test that applied to agreements involving the existing debtor as opposed to a third party. The husband conceded that inadequacy of consideration, resulting in an agreement to pay more than was already owed, was a circumstance which could enable the court to more readily accept the evidence of the person seeking to avoid the contract. The husband submitted that:
… for the defence to be made out on the basis of an implied term, the Court must be able to find, in the course of the exchanges between the parties, that the threat and promise were clearly understood by the parties as unwritten terms which underpinned the real bargain between them.
That submission seeks to somewhat alter the import of Mutual Finance. What Porter J actually said was:
It is enough if the undertaking was given owing to a desire to prevent prosecution and that desire were known to those to whom the undertaking was given. In such a case one may imply (as I do here) a term in the contract that no prosecution should take place … .
Accordingly, if the court finds that the agreement was entered into because the first party wished to avoid prosecution and the second party knew the first party wished to avoid prosecution, the court may imply that there was a term of the agreement that no prosecution would take place, and may set aside the agreement on the basis of the implied and improper promise that the prosecution would be stifled.

The husband noted that in Mutual Finance, and in the similar case of Campion, the evidence of the conversations leading to the relevant findings was detailed and particularised. However, the husband did not submit that the relevant findings could only be made where the evidence was detailed and particularised. Obviously, all that is required is that the relevant findings be properly made in accordance with the appropriate standard of proof.
The husband further submitted that the agreement in this case was supported by consideration consisting of a mutual release to seek adjustment of property interests. The husband submitted that the wife’s case was that there was an express promise not to proceed with the prosecution. The husband submitted that, as there was no evidence of a conversation from which the relevant term could be implied, the court should not set aside the agreement.

Conclusions in relation to duress

On the husband’s own affidavit evidence, in May 2006, the wife proposed a property settlement that required the husband to forget the money the wife had withdrawn from the home loan and to forget about the wife forging his signature. The husband said that, after that conversation, he instructed his nephew to tell the police that he, the husband, was withdrawing the claim for the money.
When the wife proposed that the husband forget about the money withdrawn and forget about the forgery, she clearly meant, in context, that the husband should halt the prosecution in exchange for her entering the agreement. The fact that the husband, through his nephew, told the police that he was withdrawing his claim for the money clearly shows, in context, that the husband understood that the wife proposed a particular agreement because she wished the prosecution to be halted.
I have considered whether the husband’s instruction to the police that he was withdrawing the claim for the money withdrawn might have been confined to a withdrawal of the claim for restitution. However, in context, that interpretation is not open on the evidence. The summary of charges indicates that the husband maintained his claim for restitution until at least shortly before the hearing. Moreover, it is extremely unlikely that the police would have said “we will obey the law” if the husband had meant only to withdraw his claim for restitution. Restitution is a matter that is primarily between the parties.
Accordingly, the case falls within the rule stated by Porter J in Mutual Finance:
Not only is no direct threat necessary, but no promise need be given to abstain from a prosecution. It is enough if the undertaking was given owing to a desire to prevent prosecution and that desire were known to those to whom the undertaking was given.
The relevant conversation took place in May 2006. The charges were laid against the wife in August 2006. The agreement was signed in October 2006. There is nothing to suggest that the wife understood, or the husband believed the wife understood, that the police would not halt the prosecution. It is immaterial that the prosecution had already commenced. Ipp J in Scolio referred to:
an agreement not to proceed with the prosecution.
Cotton LJ in Windhill Local Board of Health referred to
any agreement which has the effect of withdrawing from the ordinary course of justice a prosecution.
In these circumstances, the husband knew that the wife signed the agreement on 4 October 2006 “owing to a desire to prevent prosecution”. This conclusion is based on the husband’s own evidence and is in accordance with the Briginshaw standard. Accordingly, I reject the husband’s submission that there was no evidence of a conversation from which the relevant term could be implied. The agreement was entered into under duress. It should be set aside.

The law relating to unconscionability

In relation to unconscionability, Mason J (as his Honour then was) said in Commonwealth Bank ofAustralia Ltd v Amadio (1983) 151 CLR 447 at 461 to 462:
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 Fullager 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 Fullager 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 circumstances is placed at a special disadvantage vis-à-vis another and unfair or 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 emphasize that the disabling condition or circumstances is one which seriously affects the ability of the innocent party to make a judgment as to his own best interests, when the other party knows or ought to know of the existence of that condition or circumstances and of its effect on the innocent party. (Citations omitted.)
In Australia and New Zealand Banking Group v Karam and Others (2005) 64 NSWLR 149 at 162, the New South Wales Court of Appeal said that:
In relation to unconscionable conduct, it will usually be necessary to have regard to the knowledge of the stronger party and his or her awareness of the situation of the weaker party. Further, it is not necessary to find that the will of the weaker party was overborne, so that there is no independent and voluntary act.
The husband relied on the decision of Wilson FM in Kostres & Kostres (2008) 40 Fam LR 228 in which an agreement was held not to be voidable or unenforceable. At [39], his Honour said:
Simply because one of the parties made a bad bargain does not mean that it would be unconscionable for the other party to enforce the agreement. … In reality, the husband (and the wife) made the agreement, and entered into transactions because of the husband’s belief that he was still a bankrupt. Enquiry by the husband would have corrected his erroneous belief. He failed to make any such enquiry.

Conclusions on unconscionability

The husband argued that the wife presented in the witness box as assertive, confident, argumentative, and determined to say what she wanted to say regardless of the questions that were put to her. That is an accurate description of the wife’s presentation in the witness box. However, there were also matters put to the wife that she simply did not understand. She demonstrated a hazy understanding of criminal process, although she had recently been personally involved in it.
The husband noted that the wife speaks fluent English while the husband does not and noted that the wife saw her own solicitor three times in connection with the agreement. It may also be noted that the wife was married at 17. She worked as a cleaner, among other things, and the husband worked as a machine operator in the textile industry. Neither of them has had the benefit of an extensive education. Both of them could be regarded as being at a disadvantage in relation to most other people in Australia.
However, the question is whether the wife was at a special disadvantage vis-à-vis the husband. The wife faced prosecution on serious criminal charges. I accept her claim that she was fearful of the consequences. While there are many reasons to doubt the wife’s credibility in general, there is no reason to doubt her claim to fear prosecution.
Amadio makes it clear that the circumstances leading to a special disadvantage are not limited to those listed in that case. I consider that the wife’s fear of prosecution, combined with her limited education, caused her to be at a special disadvantage vis-à-vis the husband.
The next question is whether the wife’s fear and limited education seriously affected her ability to make a judgment as to her own best interests. The wife said in oral evidence that she saw a solicitor three times in connection with the agreement. However, there is nothing to suggest that she sought advice on the effect of the agreement on her criminal prosecution.
Access to legal advice is not an absolute bar to relief in a case such as this. In Williams v Bayley [1866] LR 1 HL 200, a father, who was a wealthy businessman, entered into a mortgage to prevent his son being prosecuted for forgery, and possibly transported. The mortgage was set aside even though the businessman had a solicitor present at all material times when the mortgage was being discussed. The House of Lords upheld that decision.
In my view, the wife’s limited education resulted in her not seeking advice on the effect of the agreement on the criminal prosecution, or, more particularly, the prospects of the husband being able to halt the criminal prosecution. I infer that the wife simply assumed that if she signed the agreement, the prosecution would not proceed. Proper enquiries would have disabused her of that notion. However, her special disadvantage prevented her from making those enquiries.
Finally, the question is whether the husband took unconscientious advantage of the wife’s special disadvantage. As Amadio sets out, that question is answered by considering whether:
the other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.
I consider that the husband did know that the wife was fearful of prosecution and had a limited education which resulted in her believing that the prosecution would be halted if she signed the agreement. I also consider that the husband knew when the wife signed the agreement that the prosecution would not be halted. That is because the husband said in his affidavit sworn on 5 November 2008 that, after his conversation with the wife in May 2006, he instructed his nephew to tell the police that the husband withdrew the claim for the money and the police said they would obey the law. I take it that this conversation with the police occurred before the signing of the agreement, because the husband’s affidavit evidence about these matters appears to state the facts in chronological order.
In these circumstances, I consider that the husband knew that the prosecution would not be halted and knew that the wife signed the agreement in the expectation that it would be. Accordingly, I consider that the husband took unconscionable advantage of the wife’s special disadvantage.
The wife’s claim based on unconscionability, unlike the claim based on duress, is an equitable claim. Therefore, the husband may have had a defence consisting of the wife’s failure to come to court with clean hands. However, the husband did not take the point. That approach was correct. The defence is limited by a number of matters, one of which is that the misconduct of the wife must have had an immediate and necessary relation to the equity she claimed: Sterling Winthrop Pty Ltd v Boots Company (Australia) Pty Ltd (1995) 33 IPR 266; (1996) 18 ATPR 41-452. The wife’s misconduct in taking money by deception from the parties’ home loan account did not have an immediate and necessary relation to the agreement. Accordingly, the clean hands defence could not have been made out.
All in all, I consider that the agreement should be set aside for reasons of unconscionability.

Section 90G

Section 90G of the Act provides that:
(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.
(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.
In B & B (2008) 216 FLR 422, the Full Court of the Family Court considered an earlier version of s.90G(1)(b). That version required, in addition to matters set out above, two further matters:
(iii) whether or not, at that time, it was prudent for that party to make the agreement;
(iv) whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable.
In that case, certificates annexed to the agreement said legal advice had been provided to each party in accordance with s.90G(1) of the Act. However, the agreement itself did not state that the parties had been given advice in compliance with s.90G(1). The agreement included the following recital R:
Each of the parties acknowledges that they have received independent legal advice as to the effect of this agreement prior to the execution of this agreement as evidenced by the lawyer’s certificate appended hereto.
The agreement included Clause 29, regarding the husband:
[The husband] acknowledges that prior to entering into this agreement he received from a lawyer acting independently of [the wife] and in the absence of [the wife] advice explaining the legal implications of this agreement and including but not limited to his rights and obligations pursuant to the Act and that this agreement excludes those rights and/or obligations. [The husband] further acknowledges that he is not acting under coercion or undue influence in the execution of this agreement.
The agreement also included Clause 30, which was identical to

Clause 29 set out above, except that it concerned the independent legal advice provided to the wife.
The Full Family Court in B & B held that:
[44]The agreement entered into by the parties in this case did not refer to the specific requirements detailed in s 90G, although the certificate did.
[45] Recital R and cl 29 of the agreement, set out at [23] and [24] above, dealt predominantly with advice in relation to the legal implications of the agreement and each party’s rights and obligations. These statements did not meet all the requirements set out in s 90G(1)(b), particularly there was no reference to advice in relation to whether the agreement was fair or prudent. In our view, such an omission meant that the agreement did not comply with the provisions of s 90G and was not binding upon the parties. It follows that we prefer the approach taken by Collier J in J v J (above) to that taken by the trial judge in this case. We are of the view that strict compliance with the statutory requirements is necessary to oust the court’s jurisdiction to make adjustive orders under s 79.
In the present case, Clause 10 of the agreement states:
10. INDEPENDENT LEGAL ADVICE
10.1Before each party signed this Agreement, they received separate independent legal advice from a legal practitioner (as certified in the certificates annexed to this agreement) as to the following:
(a) the effect of this Agreement on that party’s rights; and
(b) the advantages and disadvantages of this Agreement.
That is, the agreement does not state that the wife was given advice as to the advantages and disadvantages, at the time the advice was provided, to her of making of the agreement.
The husband said it is obvious that advice was given to each party about the advantages and disadvantages to them of the signing the agreement. He said there is nothing else the advice could have been about. In the alternative, the husband argued that the court was empowered to and should insert the words necessary to avoid an absurdity. The husband relied on Westpac Banking Corporation v Tanzone Pty Ltd (2000) BPR 17, 521.
The wife said the advice to the wife could have been about the advantages and the disadvantages of the agreement to the husband. It seems to me that that is at least theoretically possible.
In considering this question, B & B indicates that I cannot consider what advice the certificate says was given or the oral evidence of the parties. The agreement must stand or fall on its own. B & B said very clearly that strict compliance with legislative requirements was necessary to oust the jurisdiction of the court
In my view, by simply saying advice was given as to the advantages and disadvantages of the agreement, the agreement did not comply with the requirement that the agreement contained a statement to the effect that the wife was given advice as to the advantages and disadvantages to her, at the time that the advice was provided, of making the agreement.
I do not consider that the agreement as it stands contains an absurdity. The agreement makes sense. The present case is far removed from the sort of absurdity that occurred in Tanzone. Accordingly, I do not consider that it is appropriate to read any words into the agreement. I am inclined to the view that the agreement does not comply with s.90G of the Act. However, in view of my other findings, it is unnecessary for me to decide this point. By way of general comment, I note that it is always prudent for documents to follow the precise wording of the applicable legislation. It is also very straightforward to draft documents in that way.
I note that the certificates signed by the lawyers referred to “the Agreement dated ____________ 2006”. That is, the Agreement was not identified by date. It was identified by the names of the parties. That was probably not enough. As B & B demonstrates, the parties might enter into more than one agreement, or more than one version of an agreement. However, I consider that this defect is not fatal, as the agreement tendered to the court was a bound version, with the certificates included in the bound document. The result is that the agreement referred to in the certificates was adequately identified.
I will hear the parties on the further disposition of the proceeding.

I certify that the preceding seventy-two (72) paragraphs are a true copy of the reasons for judgment of Riley FM

Associate: Alexandra Sidoti

Date: 27 February 2009