Financial Agreements: Misrepresentation, Non-Disclosure and Unconscionable Conduct

In Adame & Adame [2014] FCCA 42 (16 January 2014) (per Judge Jarrett) the wife applied to set aside a financial agreement.

The wife claimed that:

• The wife had entered into a financial agreement “under duress” (para [5]);
• The pressure that was brought to bear upon her by the husband to sign the financial agreement was illegitimate because it amounted to unconscionable conduct. (Para [143]);
• The husband “did not properly disclose all of his assets to her when the agreement was made” (para [5])
• While a statement of independent legal advice had been signed, her legal practitioner had not given her “the advice as required by s 90G”; and
• The wife “received no copy of the certificate” (para [151])

The Doctrine of Unconscionable Conduct

• If a stronger person enters into an improvident transaction with a weaker person who, in relation to the former, is in a position of special disadvantage that affects the weaker person’s ability to protect his or her own interests and;
• the stronger party either knows of the special disadvantage or knows of facts that would lead to constructive knowledge of that special disadvantage; and
• the stronger party takes advantage of the special disadvantage, either actively or by passively allowing the transaction to proceed; then
• the transaction may be set aside for unconscionable dealing or another equitable remedy may be applied. 1 2 3 4

• To secure relief in Equity, the Applicant must establish that the pressure that was brought to bear upon her by the Respondent to sign the financial agreement was illegitimate, in all the circumstances. 5
• Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct: 6

• It is not necessary for a victim to prove that the illegitimate pressure was the reason for him entering into a contract.
• It is sufficient that the illegitimate pressure was one of the reasons for the person entering into the agreement.
• Once the evidence establishes that the pressure exerted on the victim was illegitimate, the onus lies on the person applying the pressure to show that it made no contribution to the victim entering into the agreement 7 8

Held – Judge Jarrett

• The financial agreement is voidable at the election of the wife because it was entered into by the wife on the basis of a misrepresentation by the husband as to his assets [128]
• There was not proper disclosure of all material matters between the parties
• There was non-disclosure of material matters by the husband [134]
• The husband brought pressure to bear upon the wife to sign the financial agreement [141]
• The conduct of the husband amounted to unconscionable conduct [148]
• In that sense, the pressure that the husband brought to bear on the wife to sign the financial agreement was illegitimate. [148]

• The signed statement provided for the purposes of s.90G(1)(c) must be given by the legal practitioner who gave the advice for the purposes of s.90G(1)(b) of the Act. [155]
• There was no certificate signed by a legal practitioner that gave the wife the independent legal advice on the subject financial agreement as required by s.90G;
• Accordingly the subject financial agreement was not binding on the parties [156]

1. Saintclaire & Saintclaire (2013) FamCA 491 at (108) per by Ryan J 
2. The Commonwealth Bank of Australia -v- Amadio (1983) HCA 14; (1983) 151 CLR 447 per Gibbs CJ at (459) 
3. Louth -v- Diprose (1992) HCA 61; (1992) 175 CLR 621 
4. Adame -v- Adame (2014) FCCA 42 per Jarrett at (144) 
5. Adame -v- Adame (2014) FCCA 42 per Jarrett at (142) 
6. Crescendo Management Pty Ltd -v- Westpac Banking Corporation (1988) 19 NSWLR 40 per McHugh JA , with whom Samuels and Mahoney JJA agreed. 
7. Crescendo Management Pty Ltd -v- Westpac Banking Corporation (1988) 19 NSWLR 40 per McHugh JA 
8. Hogan and Hogan (2010) FMCAfam 1255) per Neville FM