Family Case Study

This case  concerned a binding financial agreement between defactos under Part VIII AB Family Law Act 1975.  It  follows a long line of cases such as Ruane& Bachman-Ruane [2009] FamCA 1101  in which the harshness of the wording of a financial agreement, which has the same effect as any other contract under common law rights,  can be modified by the application of the rules of equity.

Summary

Where the Court finds  that one party procured the Agreement by way of unconscionable conduct, it is the  party against whom the allegation is made who carries the onus of establishing that the Agreement is fair, just and reasonable. Specifically, the party against whom the allegation is made carries the onus of establishing that, in light of the totality of benefits and obligations provided for in the Agreement, it was fair, just and reasonable to then deprive the  partly making the allegations  of the statutory entitlements that were otherwise available to him or her.

Although the facts in the case are not specifically referred to in any detail in this judgement,  it appears that there was a marked disparity of assets  with the mother  having far fewer assets then the father at the time  cohabitation commenced.  The mother alleged that she executed the Agreement under duress, that undue influence  was exercised over her and that the Agreement was procured by unconscionable conduct on the part of the father  . The  mother  alleged that the father  pressured her  to sign the Agreement in the period prior to her giving birth to the parties’ daughter who was born in 2005. The mother further alleges that, in the period immediately subsequent to the birth of the child, the father indicated to her that she would have to vacate the father’s  home if she did not sign the Agreement. At that time the mother was also employed in the father’s  business.

The father asserted that there is no evidence to support the mother’s  contentions of the Agreement being executed under duress.  To  some extent, therefore, this case turns on the ability of the respective litigants to establish, by appropriate evidence, the contentions they made.

Can a Court may set aside a financial agreement or termination agreement?

90UM FLA  allows acourt to make an order setting aside, for the purposes of this Act, a Part VIIIAB financial agreement or a Part VIIIAB termination agreement. Similar legislation allows for termination of financial agreements or termination agreements between married parties under part VIIIA.

In  order to make such an order, the court must be satisfied  either that the agreement is void, voidable or unenforceable; or  that one party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.

Mother’s argument

The mother  wanted the Agreement aside because, she argued,

a)             The father had repeatedly informed the mother that unless she executed the Agreement, she and the child would have to leave the father’s home;

b)             The terms of the Agreement were determined by the father  without discussion.

c)             At the time of execution of the Agreement, the mother was completely financially dependent on the father; and had no property, money, alternative accommodation,  source of financial support or support network from family and/or friends available to her.

d)             At the time of the executing of the Agreement, there was a material inequality in the bargaining power of each the parties, in circumstances where, to his knowledge, the mother was at a special disadvantage that the father took advantage of.

e)             The mother believed that, in the circumstances, she had no alternative but to sign the Agreement.

Father’s argument

The father argued that the agreement between the parties was one in which the parties had reached finality in arranging all the terms of their bargain,  so that it could not be set aside.

The Court’s analysis

Section 90UN of the FLA says that whether a financial agreement is “void, voidable or unenforceable” is to be determined according to “the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts”. The parties cannot by agreement contract themselves out of the right to institute such proceedings.  No party to a financial agreement cannot by his or her own covenant preclude herself from invoking the jurisdiction of the court or preclude the court from the exercise of that jurisdiction.  The Court will not permit an unconscionable - or, more accurately, unconscientious - departure by one party from the subject matter of an assumption which has been adopted by the other party as the basis of some relationship, course of conduct, act or omission which would operate to that other party's detriment if the assumption be not adhered to.

The relevant time for assessing whether the bargain is unconscionable is the time at which it was entered. The crucial circumstances are those which surround that time, although, of course, preceding circumstances may well comprise part of the latter picture.

Reason for the decision

 On the particular facts in this case,  the father had ensured that the mother was obliged, beholden and subservient  to him, and the court found that this  allowed him to her in a position  of special disadvantage.  For defactocouples,  the pressure of one upon the other must be more than simply influence -  it must be a relationship “involving dominion or ascendancy by one over the will of the other, and correlatively dependence and subjection on the part of the other”.  Whilst the Court found that, on the specific facts, the mother  had not proven on the evidence that she was not exercising her free and independent will  when she signed the agreement,  the court did not believe that  the mother was able to make a judgment as to her own best interests. This is shown by the fact that she signed the Agreement despite the clear advice of her lawyers not to do so.

The mother was able to prove that  she was under a special disadvantage  because of her (and she believed her child’s) precarious accommodation arrangements and vulnerable employment status -  both of which were ultimately controlled by the father,  to the father’s knowledge.