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Court overturns Financial Agreement signed 2 days before marriage

Court sets aside s 90B agreement where it was signed 2 days before the wedding – Duress, undue influence and unconscionable conduct established

In the case of Parkes [2014] FCCA 102 (24 January 2014) Judge Phipps considered a s 90B financial agreement where the wife accepted “that all the relevant requirements under [Part VIIIA] were complied with and so it is binding unless set aside” but contended that the husband “exercised duress or undue influence or engaged in unconscionable conduct and that there ha[d] been a material change in circumstances relating to the care, welfare and development of a child of the marriage” such that she would suffer hardship if the Court did not set the agreement aside (para 46).

The Court said (from para 53):

“The wife’s evidence relied on for the claim that the agreement should be set aside for duress, undue influence or unconscionable conduct is straightforward. The parties became engaged to marry in December 2007 the wedding date was set for [omitted] 2008. As might be expected, by [omitted] 2008 all the arrangements were in place. The wedding reception was paid for by the wife’s parents and by [omitted] 2008 they had expended, according to the wife, in excess of $35,000, and according to the wife’s mother $40,000 or more. All the guests were invited including some from interstate. The wife describes the time immediately prior to the marriage as a very hectic period, evidence I readily accept.

[54] The wife says that the husband first raised the issue of entering into a prenuptial agreement on the evening of 12 November 2008, three days before the wedding. She says he handed her a copy of the proposed agreement already signed by him. She asked him what would happen if she did not sign it and she says that the husband said that if she would not the wedding was off.

[55] The wife then says that the husband made arrangements for her to attend on Mr C of [omitted] lawyers on the following day … Mr C’s office was in … Melbourne and the wife was driven there by the husband. The wife says that the husband’s mother was also in the car. The husband and his mother waited in the car while the wife attended Mr C. She says that the conference lasted only 15 or 20 minutes. She says that Mr C told her she would receive the items listed in Schedule 1 and the husband would retain the items in Schedule 2. She says she recalls Mr C making a comment about the agreement changing when the husband and she had children. She says he did not go through each paragraph of the proposed agreement. She says that Mr C concluded the conference saying to her that if she was his client he would tell her not sign the agreement and she says she replied that she was getting married in two days and she had no choice.

( … )

[65] In Pascot and Pascot [2011] FamCA 945 Le Poer Trench J examined the authorities on duress, undue influence and unconscionable conduct in the context of s 90K. At [266] His Honour refers to a passage by Brennan J in Louth v Diprose [1992] HCA 61; (1992) 175 CLR 621.

‘The jurisdiction of equity to set aside gifts procured by unconscionable conduct ordinarily arises from the concatenation of three factors: a relationship between the parties which, to the knowledge of the donee, places the donor at a special disadvantage vis-à-vis the donee; the donee’s unconscientious exploitation of the donor’s disadvantage; and the consequent overbearing of the will of the donor whereby the donor is unable to make a worthwhile judgment as to what is in his or her best interest …. A similar jurisdiction exists to set aside gifts procured by undue influence. In Commercial Bank of Australia Ltd. v Amadio … Mason J distinguished unconscionable conduct from undue influence in these terms:

In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position. Deane J. identified the difference in the nature of the two jurisdictions:

Undue influence, like common law duress, looks to the quality of the consent or assent of the weaker party … Unconscionable dealing looks to the conduct of the stronger party in attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscience that he should do so. Although the two jurisdictions are distinct, they both depend upon the effect of influence (presumed or actual) improperly brought to bear by one party to a relationship on the mind of the other whereby the other disposes of his property. Gifts obtained by unconscionable conduct and gifts obtained by undue influence are set aside by equity on substantially the same basis.’

[66] To have the agreement set aside for duress, undue influence or unconscionable conduct the wife needs to establish that she was in a position of special disadvantage known to the husband. The special disadvantage can arise from a particular situation.

[67] On [date omitted] 2008 the wife had been in a relationship with the husband for 6 years. She had been engaged to be married for 11 months and was to be married in three days. All the arrangements were made, all the guests had been invited, and the wedding reception had been paid for by the wife’s parents. The wife is then told by the husband that if she does not sign the prenuptial agreement the wedding is off. The wife was in the position of ‘special disadvantage’. If she did not sign the prenuptial agreement not only was the wedding cancelled but the likely result of such a traumatic event would be that the wife’s relationship with the husband would be over. This after six years and an 11 month engagement.

[68] The wife says she considered that she had no choice. She was clearly in a position of special disadvantage and the husband knew so. The prenuptial agreement was not to the wife’s advantage. It gave her no rights at all in the future to any of the husband’s property. She knew that it was to her disadvantage because Mr C told her so. Nevertheless, she signed it because she considered she had no choice.

[69] The husband knew that the wife was in a position of special disadvantage. The only inference from his late production of a completed and signed agreement is that he wanted to give the wife no choice and he knew that if it was presented to her days away from the wedding she would have no choice. I infer that the husband considered there was no risk that the wife would refuse to sign the binding financial agreement and cancel the wedding.

[70] The wife’s consent to the agreement was not independent and voluntary because it was overborne thus she was subject to duress and undue influence by the husband. In the words of Mason J “the will of the innocent party is not independent and voluntary because it is overborne”. The requirements of duress or undue influence are satisfied.

[71] In Pascot and Pascot Le Poer Trench J found duress and undue influence and did not consider it necessary to examine whether there had been unconscionable conduct. Similarly, I do not need to consider unconscionable conduct but I will do so. In this case, if the wife’s consent to the binding financial agreement was independent and voluntary she was at a special disadvantage, and to apply Mason J’s words, the husband as the stronger party is attempting to enforce, or retain the benefit of, a dealing with a person under a special disability in circumstances where it is not consistent with equity or good conscious that he should do so.

[72] If the requirements of duress and undue influence are not satisfied because the wife’s consent was independent and voluntary then the requirements for unconscionable conduct are satisfied.

[73] The requirements to set aside the agreement under either s 90K(1)(b) or (e) are satisfied.”

The Court was also satisfied (paras 74-92) that the agreement could be set aside under s 90K(1)(d) (material change in circumstances relating to the care, welfare and development of a child of the marriage such that the wife would suffer hardship if the agreement were enforced).

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