Saturday, 20 June 2009

Prenup signed 3 days before marriage set aside: FMC

In a recent Federal Magistrates Court case, Blackmore and Webber, the court set aside a prenup signed by the wife, a Thai national, 3 days before the wedding.

The wife was 4 or 5 months pregnant at the time of signing and had lived in Australia for about 5 months. She was due to return 2 days after the wedding to Thailand for a 6 weeks holiday with family. Her visa was due to expire two months after the wedding.

The wife argued that the Binding Financial Agreement entered into between the parties on 11 November 2004 should be set aside on four grounds:

  1. there was a failure to comply with the formal requirements of section 90G (the formal requirements for the agreement);
  2. that pursuant to section 90K(1)(a), the Agreement was obtained by fraud (including non-disclosure of material matter);
  3. that pursuant to section 90K(1)(b) the Agreement is void, voidable or unenforceable. In this particular instance, that it was obtained under duress; and
  4. pursuant to section 90K(1)(e), the husband engaged in conduct that was, in all the circumstances, unconscionable.


A recital of the Binding Financial Agreement stated :
“Before each party signed this agreement, he and she received separate independent legal advice from a legal practitioner as to the following:
the effect of this agreement on that party’s rights to apply for orders under Part VIII of the Act;
the advantages and disadvantages, at the time that the advice was provided, to the party of entering into this agreement
in accordance with the attached certificate from the parties respective legal practitioners.”


The wife argued that the addition of the words “to apply for orders under Part VIII of the Act” amounted to a technical defect similar to that in B & B (supra), and that accordingly, the Agreement should be set aside.

Bender FM held:


The decision of the Full Court in Black and Black (2008) does not, in my opinion, require that a Binding Financial Agreement reproduce the wording of section 90G(1)(b) verbatim.

Bender FM stated:


It was argued on behalf of the wife, that the decision of the Full Court in B & B (supra) has further ramifications. It was argued that even if there is a fully compliant certificate of independent legal advice, that does not of itself, demonstrate that the actual advice given was fully compliant with the intention of section 90G. It was argued that if the Full Court demands strict technical compliance with section 90G, then there is a requirement that there not only be an analysis of the form of the certificate of independent legal advice but also an analysis of the advice itself to ensure it complied with the requirements of the Act. I reject this argument completely.
It is the accepted law in Australia in relation to contract, that a party is entitled to rely on the certificate of the independent legal advisor (see Ribchenkov v Suncorp-Metway Ltd and Others (2000) 175 ALR 650 and Bridgewater v Leahy [1998] HCA 66; (1998) 158 ALR 66).
Further, the effect of adopting such an approach as that which was submitted by the wife’s Counsel would require the parties to Financial Agreements to violate legal professional privilege.
Taken to the extreme, parties would be required to obtain further legal advice on the quality of their initial legal advice before a court could be satisfied that an Agreement that has been entered into is valid.
In the event there are issues as to the quality of the legal advice given, a disgruntled client has recourse against the solicitor who gave that advice. It would not, of itself, void the Agreement.

The husband had not disclosed some property in the agreement. This had been done, apparently, by his soliciotr without the husband realising why certain items had not been included.

Bender FM stated:


It was argued on behalf of the husband that in the absence of a deliberate deception consciously engaged in by the husband to gain advantage over the wife, there could be no fraud. I do not accept that this is the case.
I am satisfied that where there is a lack of disclosure of a material matter, whether by way of a deliberate intent to mislead or by inadvertent omission, can be a ground for the setting aside of a Financial Agreement.
As noted by the Full Court in B & B (supra), a strict interpretive approach and strict compliance requirements should be applied where legislation ousts the court’s jurisdiction to make adjustive orders under section 79.
It is common ground between the parties that the Financial Agreement entered into by the parties was drawn solely by the husband’s solicitors and was presented to the wife in completed form. At that time, the wife was not legally represented. There was no discussion or negotiation between the husband’s solicitors and the wife, or any solicitors acting on the wife’s behalf.
The solicitors attended upon by the wife for the purposes of obtaining advice in accordance with the requirements of the legislation were not previously known to the wife and in fact were a firm of solicitors recommended by the husband’s solicitors. This is not to infer that they were acting otherwise than independently on the wife’s behalf.
However, what this did mean is that the only knowledge the wife’s solicitors had of the financial circumstances of the husband were those as set out in the Agreement. They had no knowledge of the fact that the matrimonial home was encumbered, that there was cash assets and that there were motor vehicles and other chattels.


The amendments to the Family Law Act to incorporate Part VIIIB came into effect in December 2002. As is well known, this enabled the courts to make orders in relation to parties’ superannuation entitlements.
At the time of the making of the Agreement, family law practitioners were grappling with the thorny question of how to deal with defined benefit superannuation entitlements when they were in the payment phase. This was particularly so, when many of the trust deeds governing such funds did not allow for pensions to be split.
However, the regulations put in place formulae which enabled an actuarial calculation to be undertaken to place a capitalised lump sum value on such entitlements.
The Binding Financial Agreement entered into by the parties contains no information as to the periodic amount being received by the husband, nor its capitalised value as calculated in accordance with the regulations. ...


I am satisfied that in the circumstances of this case that because the Binding Financial Agreement did not fully disclose the husband’s financial circumstances, the solicitor who was advising the wife, was not in a position to properly advise the wife on the effect of the Agreement on her rights or the advantages and disadvantages of making that particular Agreement.
Accordingly, I consider that the Agreement should be set aside on the basis that it was obtained by fraud, arising from the non-disclosure of material information.

Duress


It was the wife’s evidence that when she and the husband first discussed marriage prior to her return to Thailand in 2003, he advised her that he would require her to enter into an Agreement whereby she would make no claim against property owned by him prior to marriage.
It was her evidence that she told him that she did not believe such an Agreement was necessary, that it was not the basis upon which to commence married life and that it showed that he did not trust her. It was her evidence that she told him that such an Agreement would not be necessary as she would never make any claim against any property that he currently owned.
It was the husband’s evidence that whilst this was the wife’s response, he was adamant that he would not marry her without such an Agreement and that he was not prepared to sponsor her fiancé visa unless she agreed to the signing of such an Agreement.
The husband’s evidence was that she, albeit reluctantly, agreed at this time that she would sign such an Agreement.


It was the wife’s evidence that there was no further discussion of a Pre-Nuptial Agreement until 9 November 2004, when the husband produced the Pre-Nuptial Agreement and told her that unless she signed it, the marriage was off.
It was her evidence that she was extremely upset and distressed by this, and that she told the husband that she would not sign it.
She indicated that some two days later, she agreed to sign the Financial Agreement and the husband took her to see a solicitor that he had arranged through his solicitor. Her evidence was that having initially seen the solicitor, she refused to sign the Agreement and told the husband accordingly. It was her evidence that he re-confirmed there could be no marriage and that an hour later she asked him to take her back to the solicitor where she did sign the Agreement.
It was common ground that she initially signed the document not using her normal signature. When the husband noticed that the wife had not signed the Agreement using her usual signature, he insisted that she re-sign it in her usual signature, which she did. The parties contacted the wife’s solicitor to confirm that the document was still binding.
Initially the wife justified the false signature by saying that she was upset. Under cross-examination, the wife conceded that she had known what she was doing, but that it was not done in any attempt to try and have the Agreement disallowed.
It was the wife’s consistent evidence that she did not want to sign the Agreement, but that she felt she had no choice. She was pregnant , she was unmarried, she was due to return to her family in two days time and was humiliated by the thought that she would return to them pregnant , unmarried and without the father of her child, to use her words, “like so many other Thai women”. She was also aware that her “fiancé’s” visa expired on 9 January 2005, after which time she would be unable to remain in Australia.
It was the husband’s evidence that, at all times, he had advised the wife that he would not marry in the absence of a Pre-Nuptial Agreement.
His evidence was that he raised the issue of the Pre-Nuptial Agreement with the wife upon her return to Australia in June 2004 and that she became very upset about such an Agreement and re-iterated that she did not think it was necessary.
The husband was cross-examined in relation to his interactions with his solicitor in relation to the preparation of the Agreement. He conceded that his solicitor’s file showed that they had sent him a letter on 17 June 2004 confirming they would prepare a Pre-Nuptial Agreement as requested, upon him completing a statement of financial circumstances. The husband completed the financial statement some time in September 2004 and on 12 October 2004, the husband received correspondence from his solicitors indicating they had prepared the draft Agreement, but awaited his instructions as to the division of post-marriage assets.


What cannot be disputed is that five days prior to the date set for the parties’ wedding, the husband produced to the wife, for the first time, the Binding Financial Agreement. The wife made it clear that she did not wish to enter into that Agreement. The husband told her that the wedding was off. Two days later, the wife attended upon a solicitor for the first time to seek advice in relation to the Agreement. She initially refused to sign the Agreement, but one hour later, returned to the solicitor where she signed the Agreement, albeit not with her usual signature. This was noticed by the husband, and at his insistence, the first signature was “whited out” and her usual signature attached to the document. This took place three days before the parties were due to marry, five days before the wife was due to fly to see her family in the Philippines and less than two months before her fiancé visa expired.
It was argued on behalf of the husband, that he was within his rights to require that the wife enter into a Pre-Nuptial Agreement before marriage, and that the wife had the option not to sign the Agreement.
The husband at no time offered a plausible explanation as to why a Binding Financial Agreement was not made available to the wife in the several months leading up to the planned marriage, particularly in circumstances where there was evidence that in July 2004, he had specifically asked his solicitors to prepare the documents with some urgency as he had discovered that his wife to be was pregnant .
At all times the husband knew the wife did not want to sign a Pre-Nuptial Agreement. Producing the Agreement for signature less than five days before marriage, when she was four to five months pregnant , about to return to Thailand in circumstances where her family expected her to return as a married woman, and where she was faced with the real risk of not being able to remain in Australia, as her visa was about to expire, threatening her with no marriage placed the wife in a position where she has little to no choice but to sign the Agreement. In requiring her to do so in these circumstances, I find that the pressure placed on the wife by the husband to sign the Agreement was “illegitimate” in accordance with the test propounded by McHugh JA in Crescendo Management v Westpac (supra). Accordingly, I find that the wife signed the Agreement under duress, as defined in law.
I would therefore have found that in the event that the Agreement was not to have been set aside pursuant to section 90K(1)(a), that the Agreement would have had to be set aside for duress pursuant to section 90K(1)(b)....


The husband knew that the wife did not want to have a child out of wedlock, knew that the wedding was set some five days hence on 14 November 2004, knew that the wife was booked to fly to Thailand some seven days hence on 16 November 2004, and knew that her visa expired on 9 January 2005. There was some dispute in the evidence as to whether the husband told the wife, “the wedding is off” or “I won’t marry you”. In my view, very little rests on this. From the wife’s perspective, it would have meant the same thing and that is that the wedding on 14 November 2004 would not take place.
The husband argued that the wife did have a choice not to sign the Agreement and marry on 14 November 2004. I do not accept that argument. In addition to being pregnant and without family support in a foreign country, she was totally dependent upon the husband for her accommodation, food, financial support and for her very presence in the country.
I am satisfied that the husband was very much aware of the wife’s circumstances and that the manner in which he presented the Agreement and demanded it’s immediate signing so close to the wedding date is such that he took unconscionable advantage of the wife’s special disadvantage.
Accordingly, I find that the Agreement would also be set aside for reasons of unconscionability, pursuant to section 90K(1)(e).

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