Woodby-Chatterjee and Chatterjee

[2016] FamCA 902

FAMILY COURT OF AUSTRALIA

WOODBY-CHATTERJEE & CHATTERJEE [2016] FamCA 902

FAMILY LAW – PROCEDURE – Leave to amend grounds to challenge a Binding Financial Agreement – Where there had been no notice of the amendment – Where there had been a previous denial of reliance on such a ground – leave refused.

Garcia v National Australia Bank (1998) 72 ALJR 1243
Johnson v Buttress (1936) 56 CLR 113
Saintclaire & Saintclaire [2015] FamCAFC 245
Yerkey v Jones(1939) 63 CLR 649;

Family Law Act 1975 (Cth)

APPLICANT: Ms Woodby-Chatterjee

RESPONDENT: Mr Chatterjee

FILE NUMBER: SYC 3822 of 2013

DATE DELIVERED: 26 October 2016

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Le Poer Trench J

HEARING DATE: 25-28 July 2016

REPRESENTATION

COUNSEL FOR THE APPLICANT: Ms Obrart

SOLICITOR FOR THE APPLICANT: G & D Lawyers

COUNSEL FOR THE RESPONDENT: Ms Bridger

SOLICITOR FOR THE RESPONDENT: Bricknell Legal

Orders

1. The wife is restrained, pending further order, from further pursuing in this hearing a claim of presumed undue influence as a ground upon which the court may grant the remedy sought by her should such claim be established.

2. The court notes that the parties have been advised by it, during the argument advanced by each, that the order now made may be one of the orders available to the court upon the determination of the husband’s application and consequently thereon, each party should consider whether any further application might be made.

3. The court will hear any further application which might be made by either party arising from this determination following the luncheon adjournment or at any time thereafter prior to the conclusion of the proceeding.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Chatterjee & Woodby-Chatterjee has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT SYDNEY

FILE NUMBER: SYC 3822/2013

Ms Woodby-Chatterjee

Applicant

And

Mr Chatterjee

Respondent

REASONS FOR JUDGMENT

Introduction

1. Before the Court is an application made by the husband, who is the applicant for Final Orders enforcing the provisions of a Binding Financial Agreement entered into between the parties and dated 28 January 2003. The application under consideration arises in respect of the application pursued by the wife, seeking the subject Financial Agreement be set aside.

2. The wording of the application the husband seeks, is as follows:

   The wife be restrained from pursuing a case that the Financial Agreement be set aside on the ground of established “presumed undue influence.

3. The husband submits that the wife has been required to provide particulars of her case. That is not an issue and the wife annexed to her affidavit (sworn 12 June 2015) a copy of a request for particulars received from the husband’s solicitors and dated 21 January 2014 (annexure “M”). She also annexed her answer to that request and marked the answer as annexure “N”. That answer was provided on 11 March 2014 (see exhibit H1). The request for particulars was generated by reference to the Response to the Initiating Application filed 31 December 2013.

4. On 15 April 2015 the wife filed a “Further Amended Response to Initiating Application”. It is that document upon which she now relies in this hearing. Consequent to the service of that document the husband served a further Request for Particulars dated 21 April 2015 (annexure “O” to the wife’s affidavit). The wife answered that request by letter dated 8 May 2015.

5. The husband submits that by answering a request issued by him, the wife defined and restricted the case being pursued by her so as to provide the husband with the opportunity to meet that claim, and consequently be able to achieve his required outcome, namely, the enforcement of the subject Binding Financial Agreement.

6. In her Amended Response filed on 31 December 2013 the wife, in paragraph 12(b)(ii), sought the Court determine the Binding Financial Agreement be “set aside pursuant to:

7. …

   (b) Section 90K(1)(b)

   ii.the undue-influence upon the wife by the husband at the time the wife signed the Financial Agreement due to the wife’s suffering from depression and low self-esteem, her lack of understanding of financial matters, her sister-in-law’s physical health, he job prospects and dependence upon the husband and/or the pressure that the husband was putting on her to sign the Financial agreement the wife, and/or

8. In the first written request for particulars of the wife’s case the husband asked, inter alia,

   Paragraph 12(b)(ii)

   20. Is it alleged the undue influence was actual or presumed?

9. The wife provided the answer to that request in succinct form. She said “Actual undue influence is alleged.”

10. There is nothing in the later answer to the further request for particulars (annexure “O” to the wife’s affidavit or the answer thereto in annexure “P”) to alert the husband that there had been any deviation from the wife’s intent to rely on “actual undue influence” as opposed to or inclusive of “presumed undue influence”.

11. In the Case Outline document provided to the Court by the wife and dated 19 July 2016 the wife said that part of the “Bases of Application” pursued by her was “(ii) the equitable doctrine of presumed undue influence.” Consequent upon that statement, the husband sought the order set out earlier in these reasons to restrain the wife from being able to seek her remedy based upon that ground.

12. The wife argued that the use of the term “undue influence” in her Further Amended Response to Initiating Application, identified above, was broad in its notice and included both actual and presumed undue influence. She further argued that actual and presumed undue influence were intertwined and when she gave notice that she was pursuing actual undue influence the husband must have understood as a matter of law that it included a claim for presumed undue influence.

13. The husband submitted the difference between actual and presumed undue influence is significant and depending upon which of the two bases is being pursued against him, there is a difference in the burden of proof cast. In actual undue influence the primary burden rests upon the wife to establish same, however, with presumed undue influence the burden would be upon the husband to establish that he did not take advantage of the relationship which existed between he and the wife at the time the agreement was entered into, namely that of partners engaged to be married.

14. It is not in issue that at the time the parties entered into the subject Binding Financial Agreement they were engaged to be married.

Matters of Law

1. Counsel for the husband relies on Johnson v Buttress (1936) 56 CLR 113 to establish the requisite onus of proof for each allegation of actual and/or presumed undue influence. This case, although in relation to a gift rather than a contract, remains the leading authority as to the distinction between actual and presumed undue influence. In his separate judgment, Dixon J relevantly says the following as to actual undue influence:

   The basis of the equitable jurisdiction to set aside an alienation of property on the ground of undue influence is the prevention of an unconscientious use of any special capacity or opportunity that may exist or arise of affecting the alienor's will or freedom of judgment in reference to such a matter. The source of power to practise such a domination may be found in no antecedent relation but in a particular situation, or in the deliberate contrivance of the party. If this be so, facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act. (emphasis added)

2. His Honour continues, discussing the doctrine of presumed undue influence:

   But the parties may antecedently stand in a relation that gives to one an authority or influence over the other from the abuse of which it is proper that he should be protected. When they stand in such a relation, the party in the position of influence cannot maintain his beneficial title to property of substantial value made over to him by the other as a gift, unless he satisfies the court that he took no advantage of the donor, but that the gift was the independent and well-understood act of a man in a position to exercise a free judgment based on information as full as that of the donee. This burden is imposed upon one of the parties to certain well-known relations as soon as it appears that the relation existed and that he has obtained a substantial benefit from the other. A solicitor must thus justify the receipt of such a benefit from his client, a physician from his patient, a parent from his child, a guardian from his ward, and a man from the woman he has engaged to marry. The facts which must be proved in order to satisfy the court that the donor was freed from influence are, perhaps, not always the same in these different relationships, for the influence which grows out of them varies in kind and degree. But while in these and perhaps one or two other relationships their very nature imports influence, the doctrine which throws upon the recipient the burden of justifying the transaction is confined to no fixed category. It rests upon a principle. It applies whenever one party occupies or assumes towards another a position naturally involving an ascendancy or influence over that other, or a dependence or trust on his part. One occupying such a position falls under a duty in which fiduciary characteristics may be seen. It is his duty to use his position of influence in the interest of no one but the man who is governed by his judgment, gives him his dependence and entrusts him with his welfare. (emphasis added)

3. The above extracts from Dixon J's judgment summarise the essential difference between actual and presumed undue influence. It appears from Dixon J's obiter dicta, that not only does there need to be the existence of an antecedent relationship between the parties, but it also needs to be demonstrated that the party against whom the undue influence is alleged "has obtained a substantial benefit from the other" in order for presumed undue influence to be established.

4. Such a distinction has been upheld in subsequent cases in various contexts. A recent, relevant example is the case of Saintclaire & Saintclaire [2015] FamCAFC 245, particularly at paragraphs [12] to [19], where the Full Court of the Family Court discussed undue influence as a basis for setting aside a financial agreement. It is clear from this case, being the only recent Full Court decision dealing with undue influence, that the doctrine has two distinct branches, actual and presumed undue influence.

5. Strickland, Murphy & Kent JJ relevantly say:

   12. The law distinguishes between “actual undue influence” and “presumed undue influence”. The former arises where “undue influence is proved as a fact”. The husband’s forensic task is there directed to the words and actions said to infect the agreement or transaction: “facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act

   …

   15. Presumed undue influence on the other hand does not depend upon proof of facts in respect of the transaction. Rather, its application derives from proof of the nature of the relationship between the parties to the transaction or agreement. In some recognised categories of relationships, all that must be proved is the existence of the relationship itself for undue influence to be presumed, unless rebutted. The relationship of solicitor and client is one such relationship; the relationship of husband and wife is not. Outside of those recognised relationships, including in the case of transactions between husband and wife, more about the relationship must be proved. (emphasis added) (footnotes omitted)

6. Further in relation to actual undue influence, their Honours relevantly encapsulated the doctrine as follows:

   58. If the wife was to succeed in a case founded in actual undue influence, it was necessary for her to prove facts that established that in making the agreement, she was not exercising her free and independent will. In our view the evidence before her Honour falls a long way short of establishing the requisite “influence over the mind” of the wife by the husband. Indeed, we are unable to see any evidence led before her Honour from which any such conclusion could be drawn reasonably.

7. It follows that actual undue influence places the onus on the party alleging the influence to prove that the undue influence occurred as a fact (see also Johnson v Buttress at 119 per Latham CJ). On the other hand, presumed undue influence creates a presumption that undue influence has occurred where an antecedent relationship exists between the parties, and the onus then rests on the other party to rebut the presumption. In rebutting the presumption, the party against whom the allegation is made must establish that he or she is "'emancipated' from that influence" (Saintclaire at [19] per Strickland, Murphy & Kent JJ).

8. It is important to note that in Saintclaire, the Full Court found difficulty in discerning the trial judge's approach to the issue of undue influence, as her Honour did not make a clear distinction as to whether the relevant cause of action was actual or presumed undue influence. At [31], the Full Court noted that if the case was one of presumed undue influence, her Honour would have had to address the question of the rebuttal of that presumption in her reasons.

9. Their Honours concluded as follows in relation to presumed undue influence:

   59. If the wife was to succeed in a case founded in presumptive undue influence, it was necessary for her to prove facts which established that the antecedent relationship between her and the husband was such that the making of their agreement involved the exercise by him of dominion or ascendancy over her will and a concomitant dependence by her upon him or subjection to his will.

   60. We are unable to see any evidence led before her Honour which alleged, much less proved, that the wife was “beholden [or] obliged” to the husband, or “disadvantaged” with respect to him or, indeed, that he exercised any “dominion” over her. Similarly, we are unable to discern any evidence by which the wife alleged, much less proved, that she reposed any trust or confidence in the husband in and about the agreement and its negotiations.

10. In this case there is no issue that the relationship between husband and wife was that of fiancé and fiancé at the time the subject Financial Agreement was entered into. As such it is one that is listed as an antecedent relationship to which the presumption attaches (see Yerkey v Jones(1939) 63 CLR 649; Garcia v National Australia Bank (1998) 72 ALJR 1243, [23]).

11. The onus of proof shifts to the party against whom the allegation of undue influence is being made when a pre-existing relationship of undue influence exists. One of these relationships, as specified in Dixon J's obiter dicta in Johnson v Buttress is the relationship of fiancé and fiancé. It has been suggested in English cases that presumed undue influence should no longer attach to the relationship between fiancé and fiancé (Zamet v Hyman (1961) 3 All ER 933 per Lord Evershed MR), however, such a departure has not occurred in Australian law, thus the relationship between fiancé and fiancé continues to give rise to presumed undue influence as per Dixon J’s dicta in Johnson v Buttress, unlike the relationship between a husband and wife (Yerkey v Jones(1939) 63 CLR 649; Garcia v National Australia Bank (1998) 72 ALJR 1243, [23]).

Determination

1. The exercise required for the Court in this determination is to weigh the prejudice to each party of either allowing or refusing the application. The Court will consider whether the award of a costs order would remedy any prejudice found to exist from either result.

2. The prejudice to the wife of granting the husband’s application is to remove one of the grounds upon which she could clearly rely in seeking to establish her case for a determination that the Binding Financial Agreement was entered into by her under the influence of undue influence from the husband. Further, to cut off such an avenue for the wife is particularly onerous because, as the authorities above show, once she establishes that she and the husband were engaged to be married at the time the Binding Financial Agreement was entered into, then the onus moves to the husband and it falls to him to establish to the satisfaction of the Court that the existence of the relationship, coupled with any act, word or action, undertaken by him in the lead up to the execution by the wife of the agreement did not take “advantage of the wife at that time such that she was unable to exercise free judgment based on information as full as that of the done.”

3. The extent of the evidence required to be provided by the wife about the relationship, as it then existed, has not been the subject of specific submission in this determination. It is simply sufficient to note what the Full Court said as above recorded: “In some recognised categories of relationships, all that must be proved is the existence of the relationship itself for undue influence to be presumed, unless rebutted”.

4. In this case the wife was requested to provide particulars of whether she relied upon actual or presumed undue influence. Such a request was reasonable at the time it was made. I accept it was important, for the reasons set out above, for the husband to know whether the onus to establish a “rebuttal case” in relation to presumed undue influence, rested upon him or not. The wife was represented by a lawyer at the time she answered the requests for particulars. She clearly considered the distinction between actual and presumed undue influence in providing the clear answer that she relied upon actual undue influence. In those circumstances she must be seen to know the consequence to the husband of her answer. Consequently, it seems fair, as between the parties, that the wife should be restricted to the case she has given notice of.

5. The prejudice to the wife is that she is robbed of an avenue of pursuing the remedy she seeks. The prejudice to the husband of refusing the application is to force him to deal with the inadequacy of his evidence now before the court being the commencement of the trial. That prejudice might be overcome if he was given an adjournment to remedy the evidence. Such adjournment might necessitate the consideration of making a cost order in his favour.

6. The husband opposes any adjournment of the trial. The matter has already been listed for trial at an earlier time and the time allocated for that trial was lost as the parties attempted on that occasion to settle the case.

7. Given the stage that the trial has reached I propose to grant the husband’s application and impose the restriction as sought pending further order.

8. I will not prevent the wife from renewing her application, should the trial not be completed in the time allocated by the Court. Such a statement should not be seen as indicative of the determination the court would make if any such application was to be made by the wife.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench delivered on 26 October 2016.3

Associate: 

Date:  26 October 2016