Wife’s Application for Order Setting Aside Binding Financial Agreement Dismissed

In a recent case of Kapsalis [2017] FamCA 89 (23 February 2017), Justice Rees heard the wife’s application for an order that a Binding Financial Agreement be set aside. In 2003, the parties began living together and made a “Cohabitation Agreement” on 19 March 2004. The parties signed an Agreement (under section 90B of the Family Law Act  (the “Act”)) on 4 May 2005, three days before their wedding.

The parties had two children, aged 7 and 5, who lived in the mother’s primary care after separation. The Agreement referred to the prospect of the parties having children together and purported to remain binding if the parties had children together in the future.

The wife argued that the Agreement was obtained by fraud and pursuant to s90K(1)(a)) of the Act there was non-disclosure of a material matter. According to the wife, a material change of circumstances had occurred and a result of the change she would suffer hardship s90K(1)(d) and be affected by unconscionability s90(1)(e). Therefore, she argued for the agreement to be set aside.

The Court stated that the Agreement stated that apart from the property (defined as the husband’s house), the husband owns shares in many corporations including Pty  Ltd and motor cars.

During the cross-examination, the wife agreed that she had every opportunity to ask the husband for information about his assets before she signed the Agreement but chose not to do so. When signing the Agreement, the wife understood that she would receive nothing if she and the husband separated. In addition, she revealed that she had been told that if the husband’s assets were worth twenty million dollars rather than three or four million dollars, she would still have entered into the Agreement.

According to the Court in this case, a Binding Financial Agreement is a private contract between parties into which there is no express statutory requirement that disclosure be made or valuations be obtained. A party may enter an Agreement, and such Agreement is capable of being binding, with or without knowledge of the other party’s financial position. This is consistent with the doctrine of freedom of contract.

The fact that a Binding Financial Agreement may result in a difference outcome to that which may have been awarded by a Court under s 79 and s 75 of the Family Law Act, is not relevant to whether the Agreement should be set aside (Hoult & Hoult).

It was clear from the wife’s evidence in cross-examination, that nothing in the husband’s disclosure of his assets induced her to enter into the Agreement. Therefore, s 90K(1)(a) was not made out.

The interpretation of s90K(1)(d) was considered by the Full Court in Fewster & Drake [2016] FamCAFC 214. Their Honours stated that the birth of a child, of itself, cannot be a material change relating to the care, development and welfare of a child. The material change in circumstance must be directed to the care, welfare and development of a child and not to this or her birth. This is because the birth of a child is within the ordinary realms of a expectation of a marriage.

In order for a Binding Financial Agreement to be set aside under  s90(k)(d) it is essential that the link between the changed circumstances arising from the care, welfare and development of a child  and the hardship suffered by person with the caring responsibility be established. The hardship must result from the change in circumstances for the requirements of a section to be satisfied.

The wife asserts that the hardship she suffers arises out of the fact that she no longer lives in the house owned by the husband, that she has to pay rent, and that she no longer has the use of the husband’s income. These are matters arising out of changed circumstances relating to the children but rather out of changed circumstances relating to the marriage and separation.

The Court also considered the wife’s argument as to unconscionability as per s 90K(1)(d). As per the case of Commercial Bank of Australia v Amadio [1983] HCA 14, there must be a difference in bargaining power, but also that the circumstances are such that the weaker party’s ability to converse their own interests must be impaired. Here, it was not accepted that the time frame between signing the Agreement and the marriage was such that impaired the wife’s ability to make a judgement as to her interests. The wife did have the opportunity to enquire as to the value of the husband’s assets and she did not do so.

The wife’s application was dismissed.

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