By Tom Fletcher, Law Clerk & Antony Kahn, Principal
Full Court upholds trial judge’s decision to set aside financial agreement on the basis of undue influence and unconscionability
The de facto wife, Ms Corelli (the wife), sought orders from the court setting aside the financial agreement between her and the de facto husband, Mr Beroni (the husband), on grounds of undue influence and unconscionability. At first instance, Tree J accepted the wife’s arguments and made orders setting aside the financial agreement (Beroni v Corelli [2019] FamCA 911). The husband appealed Tree J’s decision.
The Full Court of the Family Court (Court) upheld the first instance decision and dismissed the husband’s appeal. Costs were awarded against the husband.
The Facts
Both parties were immigrants, the husband having arrived in Australia in 1952 when he was 20 years of age, and the wife in 2009 on a Student Guardian Visa. The wife could not speak English when she arrived in Australia. At the time of the hearing of the appeal, the husband was 88 years of age and the wife was 53 years of age.
Soon after the wife arrived in Australia, the parties commenced living together in a de facto relationship. In 2011, at the husband’s insistence, the parties entered into the financial agreement. The wife was not proficient in English at the time she signed the agreement. The terms of the agreement were most unfavourable to the wife. In essence, the agreement provided that neither party could make a claim on the assets brought into the relationship by the other, no matter how long the relationship lasted. The husband was a man of substantial means, whereas the wife had negligible assets and was reliant on the husband for income and accommodation.
The wife signed the agreement after a 30-minute consultation with her solicitor, who told her the agreement was unfair and advised against signing it. The wife proceeded with signing the agreement notwithstanding the advice provided by her solicitor. Crucially, the trial judge found that the wife was not proficient in English at the time she signed the agreement. The agreement was in English, and not translated for the wife.
Undue Influence
The husband sought to argue that having had the essential nature of the agreement explained to her and having received advice not to sign the agreement, the wife acted of her own free will when she signed the agreement contrary to the advice she received. The Court rejected the husband’s argument. The Court held that the solicitor’s advice as to the improvidence of the agreement did not preclude a finding of undue influence.
The facts that supported a finding of undue influence included the following: the wife could not speak, read or understand English well; she could not read the financial agreement; she had no understanding of the law of property division and likely did not know the agreement was manifestly unfair until she met with her solicitor to sign the agreement, by which time she had already made up her mind to enter into the agreement; and she was dependent upon the husband for income, accommodation and as a means of remaining in the country. It was also significant that the husband had insisted upon the agreement being signed without amendment.
Based on the above, the Court held that the husband was in a position of ascendency and the wife in a position of dependency, creating a presumption of undue influence. The husband was unable to rebut this presumption by relying upon the advice provided by the wife’s solicitor during a one-off, 30-minute consultation with the wife, given the language difficulties among other things.
The Court followed the High Court’s reasoning in Thorne v Kennedy that the signing of a financial agreement by the weaker party in the face of legal advice outlining its unfairness may be an ‘indicium of undue influence’ ([2017] HCA 49 at [56]). Therefore, the solicitor’s advice did not establish that the agreement was the product of the wife’s free will, but instead demonstrated the extent to which she was dominated by the husband’s influence.
Unconscionability
The facts that supported the Court’s finding of undue influence also lead the Court to uphold the trial judge’s finding that the wife was in a position of special disadvantage vis-à-vis the husband of which he took unconscientious advantage. Even though the wife had a perfunctory understanding of the agreement, she did not have sufficient understanding to protect her own interests. It would be unconscionable for the manifestly unfair agreement to be upheld in these circumstances.
Takeaway
This case provides a timely reminder that financial agreements are not appropriate in all circumstances and that (depending on the circumstances) advice provided by a solicitor to a party not to sign an agreement may not be sufficient to preclude the agreement from subsequently being set aside on grounds of undue influence and unconscionability.
While there is no requirement that a financial agreement replicate the likely financial outcome under the Family Law Act 1975 (Cth), a patently unfair agreement is vulnerable to being set aside in certain circumstances.
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