Full Court of the Family Court upholds Binding Financial Agreement

28/04/2016

In a recent case in December 2015 the Full Court of the Family Court of Australia upheld an Appeal against the decision of the initial Judge in the Family Court of Australia.  The initial Judge set aside a Binding Financial Agreement which had been signed by the parties. The terms of the Binding Financial Agreement was signed:

1.         after extended negotiations between the Husband and Wife in which some amendments were negotiated; and

2.         5 months after the husband’s and wife’s wedding; and

3.         after the birth of a child.

In the initial Family Court case and in the Appeal the Wife through her lawyer argued that the Binding Financial Agreement should be set aside as a result of either undue influence exerted upon the Wife by the Husband or because the Wife’s execution of the Agreement was procured by the Husband’s unconscionable conduct towards the Wife.  

The Wife relied upon facts such as:

1.         The Wife had been diagnosed to suffer from post-natal depression.

2.         The Wife was in debt.

3.         The Husband was abusive to the Wife.

4.         The Husband was threatening to the Wife.

The initial Judge held that the Financial Agreement should be set aside as “the Financial Agreement was obtained by undue influence and was subject to unconscionable dealing by the Husband and accordingly was not binding within the meaning of Section 90G of the Family Law Act 1975”.

The decision of the initial Judge was overturned on Appeal. 

The Full Court of the Family Court of Appeal considered the issue of the “undue influence” and distinguished between the concept of “actual undue influence” and “presumed undue influence”.  The Full Court indicated that for actual undue influence to be established it is critical that the person asserting “undue influence” must prove it was a “suborning of the parties free will”.  The Full Court correctly indicated that in any form of Agreement/Transaction whether between parties for example to a marriage or proposed marriage or in commercial matters are affected by different pressures and influence and that not all of such different pressures and influences attract the intervention of equity so as to be held to be an agreement tainted by undue influence.  The Full Court commented that if that was the case then there would be no certainty of any binding agreement. 

The Full Court held that the evidence before the Family Court in the particular case being considered falls a long way short of establishing a requisite “influence of the mind” of the Wife by the Husband.

The Second ground relied upon by the Wife and accepted by the Judge at first instances was that the Wife’s execution of the Financial Agreement was procured by the Husband’s unconscionable conduct towards the wife.

The Full Court considered the question of “unconscionable conduct” and found that there was no basis upon which such a finding of unconscionable conduct by the husband could be held by the original Judge.  For there to be such there would need to be “special disadvantage”.  The facts in this case did not amount to any special disadvantage. 

The Full Court reviewed the position in relation to whether the Financial Agreement was binding within the meaning of Section 90G of the Act and found that the Judge at first instance was incorrect in finding that the Financial Agreement was not binding within the meaning of Section 90G of the Act

In this case it appears that the outcome based on the Binding Financial Agreement being binding rather than set aside was less favourable to the Wife than would otherwise have occurred if there was no enforceable Binding Financial Agreement.  This of itself is no reason to set aside a Binding Financial Agreement. 

Not only was the outcome of the Court case after the appeal unfavourable to the wife, there would have been very significant costs including costs of Senior Counsel incurred by each of the husband and wife.

This case confirms even though winning a case at first instance is most important and critical it is not beneficial if the case and outcome is founded on the wrong principles and the judgment is set aside on appeal.

The parties’ expectations should be based on a review by experienced lawyers practising in the area of family law and ascertaining of the outcome of the proceedings. 

If you have entered into a Financial Agreement the first issue is the effect of the Financial Agreement, and for a very careful consideration as to whether that Financial Agreement will be upheld by the Court or is the Court likely to set aside the Financial Agreement and consequences thereof.  This cannot be determined absolutely as there will most likely be disputes as to what the surrounding facts were at the time of the entering into the Financial Agreement.  In the above case there were significant objective facts which had the effect of supporting the Husband’s proposition that the Agreement was in fact a Binding Financial Agreement.  

Richard Watson and Watson & Watson’s team of experienced family lawyers have great experience to be able to properly consider the issues and advise as to the appropriate resolution as against the likely outcome of Court proceedings having regard to the time and cost involved in relation thereto. 

Please telephone Richard Watson or his Personal Assistant to arrange a discussion in relation to your very important matters.

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