The case of Beroni & Corelli1 concerns an appeal against an order made by the Family Court of Australia setting aside a Binding Financial Agreement (BFA) on the grounds of unconscionability and undue influence.
The Trial Judge found that the Wife’s limited grasp of English and her position of special disadvantage vis-à-vis the Husband meant that she did not exercise free will when executing the BFA. On appeal, the Full Court of the Family Court of Australia affirmed the decision of the Trial Judge and set aside the BFA.
Background
The Husband was 88 years of age and the Wife was 53 years of age at the time of the Trial. Both parties had adult children to prior relationships. The Husband migrated to Australia from his country of birth (“Country K”) when he was 20 years of age. The Wife came to Australia on a student guardian visa in 2009 to support her son to study in Australia. The parties were introduced in 2009 through the Wife’s immigration agent. Shortly thereafter they commenced a de facto relationship and the Wife moved into the Husband’s house around May 2010. Communication between the parties was challenging, the Wife spoke limited English and the Husband was unable to speak her native language. The Wife was however able to speak some of Country K’s language, and so the parties primarily conversed in the Husband’s native tongue.
From early in the relationship the Husband sought a Binding Financial Agreement be drafted to protect his assets. In 2011, the parties signed a BFA limiting the Wife from making a claim on any assets the Husband brought into the relationship. This clause would prevail regardless of how long the relationship continued, or what contributions either party made during the relationship. Pursuant to the BFA, assets acquired during the relationship were to be divided between the parties in accordance with their respective contributions. The Agreement was drafted in English, and was not translated to either the Wife’s native language, or the language of Country K.
In July 2011, the Wife applied for and received a spouse visa on the basis of her de facto relationship with the Husband. In May 2016 the parties separated on a final basis, and in December 2016 the Wife vacated the former matrimonial home. The Wife commenced proceedings seeking a property settlement from the Husband, including orders setting aside the BFA on the grounds of, amongst other things, undue influence and unconscionability.
Undue Influence
To satisfy the Court she was susceptible to undue influence, the Wife was required to establish that she acted in the absence of free will. In the decision of Thorne v Kennedy,2 the High Court considered that a person acts without free will when pressure “causes the person substantially to subordinate his or her will to that of the other party”. The party does not have to be so subordinated that they are a “mere channel through which the will of the defendant operate[s]”, rather it is enough to show that their judgmental capacity is “‘markedly sub-standard’ as a result of the effect upon the person’s mind of the will of another”. In Thorne v Kennedy,2 the High Court set aside a BFA on the basis of undue influence in circumstances where the Wife was pressured to sign the Agreement only 10 days before her wedding to the Husband.
Unconscionability
To satisfy the Court she was subject to unconscionable conduct when signing the BFA, the Wife was required to prove that she was at a special disadvantage vis-à-vis the Husband. In Thorne v Kennedy, the High Court also considered what constitutes “unconscionable conduct”. The Court found that, unconscionable conduct requires the innocent party to be subject to a special disadvantage ‘which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests’.
Corelli & Beroni (2017) 263 CLR 85 [38].
To establish unconscionability, the dominant party must also unconscientiously take advantage of the weaker party’s special disadvantage. There may be an element of “victimisation”, “unconscientious conduct”, or “exploitation”. It is also necessary to demonstrate that the dominant party “knew or ought to have known of the existence and effect of the special disadvantage”.3
Decision at First Instance
In Corelli & Beroni,4 the Trial Judge made findings that, upon the Husband’s insistence, the BFA had not been translated for the Wife, therefore she was not able to read the document prior to signing. The Husband had also told the Wife early in the relationship that she would need to sign the BFA, and that, if she refused to sign, he would not contemplate her to continue living with him for more than three years – “His wealth was far too important to him”.5
His Honour determined that the Husband downplayed the significance of the document to the Wife, while insisting that it was “practically compulsory” for her to sign it. The Husband was aware that the Wife was dependent upon him for her application to obtain permanent residency in Australia, and she was at immediate risk of deportation because she was not living with her son pursuant to the student guardian visa requirements. Moreover, the Wife was dependent on the Husband for accommodation and financial security, having limited working rights in Australia due to her visa.
While the Wife received independent legal advice that she should not enter into the BFA, it was only during a brief 30-minute consultation in rudimentary English, with no translator present. His Honour found that a proper explanation of the 14-page BFA and fulsome advice could not be achieved during this brief consult. Although the Wife was advised by her solicitor not to enter into the BFA, the Trial Judge was not persuaded that she had any real understanding of the value of the legal entitlements she was conceding.
Ultimately, the Trial Judge concluded that the Wife did not exercise free will when executing the Agreement,6 and instead she was subject to undue influence and unconscionability by virtue of the following factors:
(a) The general position of dominance which the husband had in relation to the wife;
(b) His insistence, over a considerable period of time, that the BFA be signed, and his later insistence it be signed without amendment;
(c) The wife’s fear that he may inform immigration authorities that she was in breach of her visa conditions;
(d) The husband and wife’s knowledge that, in order to obtain an [sic] permanent visa, the relationship needed to continue, but it could only continue if the BFA was signed; and
(e) The wife’s dependence upon the husband for accommodation and income in Australia.
Beroni & Corelli [2019] FamCA 911 (2 December 2019) [214].
The Trial Judge rejected the Husband’s assertion that he was the victim of the Wife’s scheme to obtain permanent residency in Australia. Instead His Honour concluded that the Husband used his money to control the Wife and that the Wife was fearful of him.7
The Trial Judge concluded that the Wife occupied a position of special disadvantage vis-à-vis the Husband and the “wholly inadequate” legal advice she had received in respect of the BFA was not sufficient to remedy her position of disadvantage.8
Decision on Appeal
On appeal to the Full Court of the Family Court of Australia,9 the Husband raised six grounds of appeal, all of which were dismissed by the Court as being without merit.
The Full Court reaffirmed the views of the Trial Judge to set aside the BFA. The Wife was awarded scale costs in the amount of $82,275 as a result of the Husband’s appeal being wholly unsuccessful.
Lessons Learned
It is imperative that parties obtain thorough and comprehensive legal advice before entering into a BFA.
If you wish to discuss a Binding Financial Agreement or your matrimonial property settlement in more detail, contact one of our experienced lawyers on (03) 8393 0144.
Sources:
[2021] FamCAFC 9 (10 February 2021).
(2017) 263 CLR 85.
Ibid.
[2019] FamCA 911 (2 December 2019).
Ibid [189].
Ibid [214]–[217].
Ibid [206], [217].
Ibid [208].
Beroni & Corelli [2021] FamCAFC 9 (10 February 2021).