Family Law case note: Court sets aside Financial Agreement on the basis of undue influence and unconscionable conduct

Apr 12, 2022

In the recent case of Beroni & Corelli (2021) FLC 94-004, the Full Court of the Family Court of Australia on appeal upheld a decision made in the Family Court of Australia to set aside a Financial Agreement (commonly referred to as a 'pre-nuptial agreement') on the basis of undue influence and unconscionable conduct.

Background

Ms Corelli (the wife) was from 'Country G' and had been previously married. She arrived in Australia in 2009 and was living on a Student Guardian Visa. She was not proficient in the English language. Mr Beroni (the husband) was also born overseas and previously married, and arrived in Australia in his 20s. At the time of the proceedings, the husband was in his 80s, and the wife was in her 50s.

The parties met in 2009 and commenced a de facto relationship shortly thereafter. The parties communicated mostly in the husband’s first language.

In 2011, the husband insisted that the wife sign a Financial Agreement to limit the wife from making a claim on any assets the husband brought into the relationship. The husband made it clear that the continuation of the relationship was conditional upon her signing the Financial Agreement.

Despite her husband previously providing an interpreter to assist with her application to divorce her ex-husband due to her limited English proficiency, the wife signed the Financial Agreement without the assistance of an interpreter. She also did not have an interpreter when meeting with her solicitor.

Without instructions from the wife, the wife’s solicitor wrote to the husband’s solicitor expressing concern about the wife’s lack of financial recourse under the Financial Agreement regardless of the length of the relationship and suggesting amendments which the husband rejected.

In simple terms, the Financial Agreement provided that if the relationship came to an end, neither party would be able to make any claim on the assets which the other party brought into the relationship, regardless of the length of the relationship or the parties’ contributions.

Proceedings

After separating in 2016, the wife commenced proceedings seeking a property settlement from the husband, including orders setting aside the Financial Agreement on the grounds of, amongst other things, undue influence and unconscionability.

In the first instance, the primary judge made an order setting aside the Financial Agreement by reason of undue influence and unconscionable conduct. The primary judge concluded that the wife signed the Financial Agreement upon the husband’s insistence and without any real understanding of the agreement’s effect.

In the primary proceedings, the husband argued that it was indeed he who was a victim of the wife’s objective to gain permanent residency in Australia. This argument was rejected by Full Court of the Family Court of Australia. The primary judge stated:

“I reject that claim. It is fanciful to claim that the husband was emotionally vulnerable to the wife’s manipulation. If that were so, why insist on the BFA at all? Why become angry at the suggested changes? Why reject them and insist on it being signed unaltered? The answer to all those questions, I am well satisfied, is that the husband uses his money to manipulate and control others, and if it were at any risk, he would have terminated the relationship ...”

The husband appealed to the Full Court of the Family Court of Australia.

Findings

The husband’s appeal was dismissed, and the primary judge’s decision was upheld.

In determining the existence of undue influence or unconscionable conduct in this case, and in particular, that the wife was at a special disadvantage in dealing with the husband, the following factors were of significance:

  • The wife could not speak, read or understand English well, and was dependent upon the husband to assist her to do so.
  • The wife had no understanding of the law of property division upon the breakdown of a de facto relationship, whereas the husband did.
  • The wife could not read the Financial Agreement, whereas the husband could.
  • The wife was dependent upon the husband not informing immigration authorities of her breach of her guardian visa terms.
  • The wife was dependent upon the husband for her financial security in Australia. She was unable to work and her only form of income was an allowance which the husband was providing to her. She was also dependent upon the husband for her accommodation.
  • The wife likely did not know that the Financial Agreement was manifestly unfair until she was told that by her solicitor in a 30-minute consultation by which time she had already made up her mind to sign it.
  • The wife knew that if she did not sign the Financial Agreement the relationship would not continue.
  • The wife was fearful of returning to her home country because of her ex-husband, which the husband was aware of.

Lessons

Where there is a significant disparity in bargaining power a Financial Agreement may not be appropriate.

While every case is unique, the case also highlights the importance of considering a more balanced outcome for the other party in the event of a relationship breakdown. The terms of the Financial Agreement were found to be “manifestly unfair”, and that, combined with the surrounding circumstances weakened the husband’s ability to rely on the Financial Agreement. 

More information

For more information, or to discuss the issues raised in this case note, please contact Rebecca Goldman, Principal Lawyer, on (03) 8600 8838 or rgoldman@kcllaw.com.au or Dominique Mavroyeni, Associate, on dmavroyeni@kcllaw.com.au or (03) 8600 8838.

Author

This Family Law case note was authored by Dominique Mavroyeni, Associate.

Note: This update is a guide only and is not intended to constitute legal advice.

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