Binding Financial Agreement Considered Not Binding Due to Lack of “Independent” Legal Advice

Background

In the recent case of Purdey & Millington [2018] FCCA 213 (7 February 2018) Judge Jones considered a Binding Financial Agreement (under the Family Law Act) between a 43 year old husband and a 33 year old wife. They married overseas in 2003, whereupon the husband returned to Australia. The wife immigrated here in 2005, studying English for a few months but ceasing when she became pregnant. The parties had two children together but separated on 26 September 2014. She had attempted to enrol in TAFE courses but was advised that she should first complete English lessons.

In the week before the wife left the parties signed a financial agreement made under s 90C of the Family Law Act. It recited that their separation occurred in July 2014; that the husband retain about $460,000 of property in his name; the wife retain about $5,500 of property in her name; and that the wife receive $25,000 from the sale of joint property. The wife received the $25,000 payment pursuant to the agreement but nevertheless sought a declaration that the financial agreement was not binding, arguing that she did not know that it was a Binding Financial Agreement when she signed it before her then lawyer (“Ms J”). The agreement contained statements of independent advice signed by Ms J and the husband’s solicitor “Mr K”.

Binding Financial Agreement Rules

In deciding whether a financial agreement is binding on the parties in the circumstances of this matter, there are two limbs to s 90G of the Act which the Court must consider. These limbs are:

1) whether the financial agreement and the circumstances in which it was made meet the mandatory provisions of s 90G(1) of the Act; and
2) in circumstances where the Court finds that the financial agreement does not meet one [or] more of the mandatory provisions as set out by s 90G(1)(b), (c) and (ca) of the Act, whether it would be unjust and inequitable if the financial agreement were not binding on the parties to the financial agreement pursuant to s 90G(1A)(c) of the Act.

The Wife’s Submission

The wife argued that the financial agreement was not binding on the parties because she was not provided with independent legal advice by a legal practitioner before she signed the financial agreement, as required by s 90G(1)(b) of the Act.

The wife’s case was that, after having some informal discussions, she went with the Husband to his Solicitor on 16 September 2014, to draw up what she believes to a separation agreement but that it was only to deal with some aspects of their property settlement not all of them. She believed that in Australia, you had to sign papers with a Solicitor to be considered formally separated.

Additionally, the wife argued that her English reading and speaking abilities were limited in September 2014. The wife further stated that she did not have the assistance of an interpreter during her meeting with Ms J on 16 September 2014 and therefore did not understand the contents of the financial agreement when she signed it. The wife said that she was not even aware that she was signing a financial agreement.

The wife’s evidence was that she only realised that she had signed a financial agreement when she went to Legal Aid in 2016 seeking advice in relation to the husband’s initiation of parenting proceedings.

Court Analysis

The Court found that the Wife’s Solicitor was not a witness of truth for the following reasons:
1. The firm at which the Solicitor was practising at the time had no file opened in the name of the Wife; and
2. She did not produce the file notes which she asserted in oral evidence were in existence.
Ultimately the Court found that the Wife had displaced the inference which could be drawn by the certificate annexed to the Financial Agreement and held:
• The arrangement for the Wife to receive legal advice was not made independently with the Wife, rather it was arranged by the Husband.
• The capacity of the Solicitor who acted for the Wife was questionable, given that no records existed with the firm at which she worked at the time, of the firm acting for the Wife.
• The meeting, which endured for a maximum of 20 minutes, was insufficient for appropriate advice to be given to the Wife in any circumstances, even more so when she had limited English skills.
• The Husband was responsible for and paid for the legal fees of the Wife.
• The Husband was present for the duration of the meeting between the Wife and the Wife’s Solicitor.
• In the absence of file notes to support an inference of proper engagement in the wife, it could not be found that the Wife received competent legal service or the provision of any advice at all.

Orders
The Court held that the financial agreement made between the husband and the wife on 16 September 2014 was not binding for the purpose of s 90G(1) of the Act.

Significance

This case highlights the utmost importance of obtaining proper and independent advice prior to signing a Binding Financial Agreement.

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