A recent judgment by the Full Court of the Family Court of Australia has clarified the test for having a Financial Agreement set aside on the grounds of duress.
In this case,1 the husband was an Australian citizen and the wife a foreign national. The couple initially met online. Following a subsequent face-to-face meeting in the wife's home country, arrangements were made for her to move to Australia so the couple could marry. Just prior to their marriage the couple completed a Financial Agreement prepared by the husband's solicitor. During this process, the wife became aware of her husband's lucrative financial position, which included assets of $18 million that he intended to leave to his three adult children.
The wife's solicitor strongly advised her against signing the Financial Agreement, however she elected to sign it. The wife's lack of English proficiency was not regarded by the court as being the reason for her signing the Agreement against her solicitor's advice. Shortly after the couple was married, the wife agreed to sign a second Agreement, which replaced the first Agreement. This was despite her solicitor again advising that it "was terrible and she shouldn't sign it."
The trial judge attributed the wife's acquiescence in signing the Agreements to her powerlessness to negotiate, noting that, "Every bargaining chip and every power was in the husband's hands" and "if the relationship ended, she would have nothing." For the trial judge, this inequality of bargaining power was sufficient to establish duress.
However, the decision was overturned by the Full Court, which determined the correct test to be the presence of "threatened or actual unlawful conduct" where the pressure was "illegitimate" or "unlawful."
Special Counsel Rachell Davey said that, "This case reinforces the law's tolerance for the application of pressure in making Financial Agreements, and therefore the fact that the wife was overwhelmed and void of choice was not considered to be sufficient grounds for duress.
"Of critical importance to the Full Court was that the husband had made clear to his wife that his money would go to his children, and that his wife was aware of this from the outset of their relationship. In addition, the wife's main interest was in what provision would be made for her in the event of her husband's death, not in what she would receive upon separation. And, in fact, both the agreements provided for the wife to receive what she sought if her husband was to pre-decease her. As such, the Court found that the Agreement was valid and enforceable."