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Financial Agreements & Unconscionable Conduct

Parties enter into Financial Agreements presumably because they have agreed to be bound by the terms within that agreement that set out how their property is to be divided in the event of separation.

As such Agreements are made outside of the Family Law Act 1975, it is open for one of the parties to commence court proceedings at a later date seeking orders that the Agreement be declared non-binding and be set aside.

Another issue is the fact that a Financial Agreement is often an attempt to “crystal ball gaze” into the future and predict what circumstances may exist at the time of a separation. There is also very little, if any, accounting for the parties’ future needs as they cannot be known until the time of separation.

Questions such as – how many children will the parties have? What ages will the children be at separation? What will the parties’ incomes be at the time? Will either party be suffering from a medical issue that limits their ability to work? None of these questions can be answered at the time of signing an agreement.

Nonetheless, people continue to enter into agreements, seeking some sense of certainty of outcome in the event of a future break up.

Section 90K of the Family Law Act sets out the circumstances in which a court may set aside an agreement with the reasons including that the agreement was obtained by fraud, including the non-disclosure of a material matter, or the agreement is unenforceable, there has been a material change in circumstances or a party to the agreement engaged in unconscionable conduct.

In the matter of Adame & Adame [2014] FCCA 42, Judge Jarrett found that the husband had made fraudulent misrepresentations to the wife and he had pressured his wife to sign the agreement. The wife was found to be entitled to the relief of having the agreement set aside.

The Agreement lacked full and frank disclosure of all relevant matters as it did not list the values of assets, liabilities and financial resources, it did not disclose the structure of companies and trusts, and it did not disclose the parties’ superannuation entitlements.

Further, the husband’s assets were not all listed in the Schedule, although the Agreement claimed that they were. For example, the husband had an interest in a property in the USA which was not disclosed. When the husband signed the Agreement he knew that he was misrepresenting his true financial position to the wife.

The evidence showed that the husband had arranged for the wife to meet with a solicitor and that he had paid for her legal representation. The husband also organized for both parties to meet with the one lawyer, such that the advice received by the wife was not independent.

The lawyer who had signed the Lawyer’s Certificate attached to the Financial Agreement stated in a letter that he had not provided any advice about the agreement but rather just witnessed her signing the Agreement and signed the certificate.

The Judge accepted the wife’s evidenced that she was under a lot of pressure to sign the Agreement and in the end she “gave in” (paragraph 115 of the judgment). That pressure was in the form of repeated requests for her to sign the document and the husband’s expression of anger towards her for not wanting to sign it.

The husband wanted there to be a financial agreement to protect his assets and he organized three lawyers to give his wife advice. He knew that at least two of the lawyers advised his wife not to sign the agreement and when that occurred, he organized for her to see a new lawyer. He paid for her to obtain advice, accompanied her to one of her meetings with a lawyer and organized and took her to the meeting where she signed the agreement. Ultimately it was in the husband’s interest for the wife to sign the documents. He knew that she did not want to do so and had been advised not to do so, yet he continued to pressure her until she did sign.

The husband’s conduct was found to be unconscionable and the Agreement was set aside.

Before signing a Financial Agreement, ensure that you have received independent legal advice and full and frank disclosure from the other person.

The cautionary tale is that if you want a Financial Agreement in place to protect your interests in property but you do not provide full disclosure of your financial position and you pressure the other person into signing the agreement, chances are they will seek to have the agreement set aside at the time that you try to enforce it and the Agreement may be set aside.

Image Credit – Daniel Jedzura ©

Written by Peter Magee on July 16, 2017

Peter is a partner of Armstrong Legal and head of our Family Law Division. He has over 15 years’ experience. His past experience dealing with large cases benefits his family law clients by providing insight into complex and tactical issues. As a result, Peter can often achieve settlements outside Court that may otherwise have not been achievable. View Peter’s profile

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