The case of Nyles & Nyles highlights the importance of giving full and frank financial disclosure at the time that terms of settlement are being entered into of any circumstance which may impact the future value of an asset even if that event has not yet occurred and its future worth is unknown.  

In this case the parties entered into consent orders and a Binding Financial Agreement  (“BFA”) dealing with the adjustment of property interests in 2004.

According to the terms of settlement the husband was to receive 60% of the net assets which were set out and annexed to Binding Financial Agreement. At the time the parties entered into the BFA and consent orders the wife was a director of a public company and the shareholding in that company was disclosed to the husband in the asset schedule attached to the BFA.

Floating of Company on Stock Market

At the time the parties signed the terms of consent and the Binding Financial Agreement however, the wife’s company was in the process of converting from a private company to a public company. The company floated on the stock market less than 2 months after the Agreement was signed, the wife sold her shares and made a large profit.
The Husband then sought to set aside the Binding Financial Agreement by making an Application to the Court under s79A of the Family Law Act for reason of non-disclosure of relevant information and the fact that he relied on the wife’s assertion as to the value of the assets in making the Agreement.

Full and Frank Financial Disclosure

Full and Frank financial disclosure is a fundamental element of justice and applies as much to out of court settlements as it does to contested proceedings.

The complicating factor in this case was that the wife’s shares were subject to strict confidentiality obligations. The wife was not able to provide the husband with any documents with respect to the pending commercial transactions due to confidentiality issues. The Husband’s evidence was that the Wife disclosed the floating of the shares at the time it was occurring but alleged the wife said that the float would not happen for a number of years and that the value of the shares would be minimal. The wife’s evidence was that she directly discussed with the husband the possibility of the shares being floated and made an offer of settlement during mediation in which her proposal involved the transfer of some of those shares to the husband which he failed to take up.

The husband was advised by his solicitors that it was not in his best interest to enter into the Binding Financial Agreement until further disclosure was to hand. The husband therefore failed in his Application to set aside the consent orders and the BFA as it could not be said that he was induced to enter into the BFA by the misconduct of the wife and he had made an informed decision.  This was despite the fact that the Court actually found that the wife had failed to make full and frank financial disclosure and to some degree acted fraudulently.

A Russian Bride's Binding Financial Agreement turns out not to be binding

The Facts around the Binding Financial Agreement

The husband is living on the north coast of New South Wales Australia.  He developed a relationship with a lady in Russia. He traveled to Russia, married her and brought her back to Australia as his wife.  The relationship was unstable.  The husband was the wife’s only sponsor and the relationship was the sole basis for the wife to be able to stay in Australia.

Upon return from Russia, the parties entered into a Binding Financial Agreement..  No copy was provided to the wife. The agreement was unfavourable to the wife and significantly varied entitlements that would otherwise be apportioned to her under the Australian Family Law Act.

After a turbulent 4 year marriage the wife separated from the Husband.

Action through Federal Magistrates Court

The Wife applied to the Federal Magistrates Court of Australia and sought to have the Financial Agreement signed by the Husband and herself set aside.  She maintained that the Financial Agreement was signed in circumstances in which she was under physical, mental and emotional pressures from the husband, notwithstanding that she had obtained independent legal advice prior to entering the agreement which had said there was almost no advantage to her to sign the agreement.

A copy of the Financial Agreement was not provided to the Wife but was kept in the “paperwork” at the house in which the Husband and Wife abided.

The Results / Decision

Federal Magistrate considered that the husband’s actions constituted duress and that this duress was such a level as to be unconscionable conduct and a basis, under the Family Law Act to set the agreement aside.

Furthermore there was a breach of section 90G(1)(e) noting that this section as a copy of the financial agreement had NOT been provided to the wife.

Having regard to the marked disparity of their financial positions and the fact that the wife was wholly successful in her application, the court ordered that the husband pay the applicant wife’s legal costs of $8,500 within 35 days of the judgment.

Comment from Mark Streeter - Sydney Family Law Lawyer

There were multiple grounds upon which this agreement was set aside. One of the basis was that the Wife had not been provided with a cop y of the Financial Agreement in contravention of section 90G(1)(e) Family Law Act 1975. This section was repealed effective 4 January 2010. Accordingly if this decision had been made after that date the failure to provide a copy to the Wife would not have been a ground for setting aside the agree ment and the repeal of this provision is intended to be retrospective.

This judgment confirms that the Court will ensure that the manner in which an agreement is signed and behaviours of the respective parties does not offend the general principles of “equity”. The Court will punish conduct which amounts to improper and inappropriate pressure from one party to the other and will consider this behaviour to constitute sufficient basis to set aside the agreement.

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Case reported as Moreno [2009] FMCAfam

Other articles and case studies on Prenuptial Agreements

Prenuptial Agreements
Independent legal advice required for prenuptial agreements
Case - Husband's fraud undermines Binding Financial Agreement
Prenuptial agreement changes for de-facto relationships

New wife wins case against forceful husband

Imagine being pregnant, facing deportation and being given a Binding Financial Agreement by your fiance five days before your wedding and told to sign or the wedding is off.

The Situation Blackmore and Webber [2009] FMCA FAM 154

The couple entered into a Binding Financial Agreement (under Section 90G of the Family Law Act 1975) on 11 November 2004 just days before being married on 14 November 2004.

This judgment arose following an application by the wife to set aside a binding financial agreement on the following grounds:

a)    There was a failure to comply with the formal requirements of section 90G
b)    That the agreement was obtained by fraud under 90K (1)(a) including non-disclosure of a material matter
c)    That pursuant section 90K(1)(b) the agreement was voidable or unenforceable in that it was obtained under duress
d)    That pursuant to 90K(1)(e) the husband engaged in conduct that was in all the circumstances unconscionable

The Decision about the Binding Financial Agreement

The Court agreed with the wife that the agreement should be set aside on the basis of the husband’s “fraud” due to the non-disclosure (in circumstances where he had a positive obligation to disclose) of the value of the husband’s pension.  Although not required to determine the ultimate question the court also would have found that there was duress where:

a)     The binding agreement was first produced to the wife 5 days before their wedding
b)    The husband told the wife the wedding would be off if she did not sign the agreement
c)    The wife was four to five months pregnant with the husband’s child
d)    There wife’s visa was due to expire had the wedding not proceeded the Visa would have expired and the wife would have to leave Australia

Comment from Mark Streeter - Sydney Family Law Lawyer

The Court also concluded that it would have been satisfied that the husband engaged in conduct that put the wife at a special disability.

The Court found that at the time of signing the Binding Financial Agreement the wife’s command of the English language was limited, that she was pregnant, that she lacked close family support and faced possible expulsion for the country if she did not marry.
 
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