Financial Agreements – It’s important both sides have good lawyers!

What is it about car accidents?  Why does everyone have to slow down and look?

I struck a case recently which was the equivalent of coming across a car accident, only this time it did not include two motor vehicles, but an incompetent lawyer and a Husband seeking to do things on the cheap.  The decision I am referring to is Purdey & Millington [2018] FCCA 213 (7 February 2018), where Judge Jones of the Federal Circuit Court of Australia at Melbourne presided over the matter.

The facts

The facts were:

  1. The Husband is disabled;
  2. The Wife is not so great with English skills;
  3. 2 children were born to a short marriage of 3 years;
  4. The Husband owns a  house prior to the marriage, with a relatively modest mortgage;
  5. The Wife wants to leave the marriage but doesn’t know that in Australia you do not need the permission of the other spouse to separate;
  6. The Husband finally agrees to separate on the basis that the Wife signs a Financial Agreement.  He agrees to pay the equivalent of the Government entitlements she received as a carer of him for the 3 years they were together, which was calculated to be $25,000;
  7. The Husband’s lawyer provides the details of another lawyer for the Wife to attend upon to have the Financial Agreement signed; and
  8. The Husband takes the Wife to an appointment with the lawyer and the Financial Agreement is signed at that appointment.

 

The law

The law (very briefly stated) is:

  1. Parties who are contemplating marriage, or in a marriage, or already Divorced, may enter a Financial Agreement setting out what each are entitled to in terms of property division and spousal maintenance;
  2. If the Financial Agreement meets certain criteria provided for in the Family Law Act 1975 (“the Act”), the Financial Agreement will be deemed binding; and
  3. If a Financial Agreement is deemed binding, and not otherwise set aside by the Court, the Court’s power is to only enforce the terms of the Financial Agreement (i.e. the Court cannot make property alteration Orders or spousal maintenance Orders).

One of the requirements under the Act to make the Financial Agreement binding is that both parties have received independent legal advice about certain matters.

The Wife contended that she was not provided with independent legal advice.

 

What did the Judge do?

The Judge held that a party seeking to rely upon the Financial Agreement (in this case the Husband) bears the onus of proving that the requirements under the Act had been met.  In this case, the only asserted deficiency was the legal advice and the Husband was able to show on a prima facie basis that the Wife had received Independent Legal Advice by producing the Certificate and there being provisions of the Financial Agreement itself confirming legal advice had been provided to the Wife.

The Judge held that on the face of the documents, the legal advice had been provided.

In those circumstances, the Judge contended that the onus then shifted to the party seeking to assert the legal advice had not been provided (in this case the Wife).

And this is where the case got interesting…

The lawyer who purportedly provided advice to the Wife was referred to as Ms J.  The Wife had sought to obtain the file maintained on her behalf by Ms J.  When she did so, she was informed by the legal firm who employed Ms J that:

  1. Ms J was no longer a Solicitor employed by the Firm; and
  2. There was no file or record of the Wife having been a client of the Firm.

During the proceedings Ms J was located and it was revealed that she was no longer a practising lawyer.  Ms J was ordered by the Court to make an Affidavit and produce the file for the Wife.  She made an Affidavit but did not produce any file.  Her oral evidence (under cross-examination) was recorded as follows:

  1. Ms J signed and executed the Certificate of Advice on 16 September, 2014;
  2. On 16 September, 2014 she was a Solicitor employed by Sydney Legal House and held a valid practising certificate at the time;
  3. The Wife made an appointment directly with her to attend upon her to discuss a “deed”;
  4. The Wife said the Husband’s Solicitor had referred her to Ms J because she needed independent legal advice regarding the Financial Agreement;
  5. The Wife attended the offices of Sydney Legal House on 16 September, 2014 with another person. Ms J could not recall if the Husband was in her office during her meeting with the Wife;
  6. She had received a copy of the Financial Agreement 2 or 3 days prior to the meeting;
  7. At the meeting with the Wife, Ms J went through the relevant provisions of the Act in relation to the effect of the deed and went through each page of the deed so that the Wife would understand what was “going on”. The Wife agreed to execute the Financial Agreement at that meeting, which Ms J witnessed;
  8. Ms J spoke to the Wife in English during the meeting. Ms J said that as the Wife had an accent, she spoke slowly. Ms J did not ask what language the Wife spoke as she formed the view that the communication between the Wife and herself was comfortable. Ms J did not ask the Wife whether she required the assistance of an interpreter at the meeting for the same reason;
  9. At the meeting the Wife confirmed she had separated from the Husband;
  10. Ms J kept file notes of the meeting with the Wife which she estimated took around 30 to 40 minutes;
  11. Ms J could not recall how payment for the meeting was effected, that is, what the fee was or who paid the fee; and
  12. Ms J did not have a current practising certificate at the time of the hearing as she had taken a break from work as a Solicitor.

The Judge noted that Ms J’s oral evidence conflicted with her written evidence (in her Affidavit) and specifically referred to:

  1. Ms J having deposed to “the Wife came to our office seeking to receive independent legal advice on her Financial Agreement under section 90C of the Family Law Act 1975. She was in the room with me and not accompanied by anyone at the time when legal advice was provided.”
  2. Ms J further deposed that “the Wife spoke English well…she understood what the documents were all about and agreed to execute it against my advice not to accept the terms and conditions contained in the deed. I had offered her to make changes but refused as she was happy to accept it.”
  3. Ms J also deposed that “the Wife paid me a fee of an agreed amount of $250 in cash and a hand written receipt was provided”. The Judge observed that a copy of said receipt was not annexed to Ms J’s Affidavit.

The Judge noted that Ms J’s evidence conflicted with the evidence of the Husband and Wife and gave the following examples:

  1. Ms J deposed that the Wife paid her a fee for the meeting they had on 16 September, 2014 in the amount of $250 cash and that the Wife was provided with a handwritten receipt. Ms J failed to produce a copy of said receipt. Ms J’s evidence is also contrary to the evidence of the Husband who says that he was the one who paid the fee for the meeting.
  2. Ms J deposed that the meeting went for a period of 30 to 40 minutes. The Wife says the meeting went for approximately 10 minutes and the Husband says approximately 20 minutes.
  3. Ms J gave oral evidence that she received a copy of the Financial Agreement 2 or 3 days prior to her meeting with the Wife on 16 September, 2014. This evidence is inconsistent with the evidence of both the Husband and the Wife, which is that the Financial Agreement was drawn up by the Husband’s Solicitor, Mr K, on 16 September, 2014 a copy of which was then subsequently taken to the offices of Sydney Legal House and given to Ms J at her meeting with the Wife.
  4. Ms J gave oral evidence that she could not recall if the Husband was in her office during her meeting with the Wife. In her Affidavit, however, she deposed that the Wife was not accompanied by anyone when Ms J provided her legal advice. The Wife gave evidence that the Husband was present at all times during the meeting and the Husband conceded in cross-examination that he was present at the commencement and at the end of the meeting, although the Husband said that he was not present when the Wife was given legal advice or when she signed the Financial Agreement.

No surprises that the Judge found Ms J to be an untruthful witness, but went further by commenting that Ms J skated “on the edge of proprietary” as a Solicitor, specifically noting:

  1. Ms J met with the Wife to provide legal advice, yet Sydney Legal House, for whom Ms J worked, has no record on their comprehensive electronic and physical databases of the Wife ever being a client of their Firm;
  2. Ms J gave sworn evidence that she retained the Wife’s file when she ceased working for Sydney Legal House; and
  3. Ms J did not comply with the Court’s Orders for the production of the file notes. The Judge formed the view that either Ms J failed to take any notes of her meeting with the Wife or she subsequently destroyed them.

The Judge was satisfied that the Wife, despite the Certificate of Advice and the references in the agreement signed by the Wife confirming she had received legal advice, concluded that the Financial Agreement was not binding on the parties because the Wife had not received independent legal advice.

Lessons Learned

Clearly in the matter above, the Husband got his just deserts.  He clearly was trying to deprive the wife of what she was entitled and take advantage of her lack of understanding of English and the law in Australia.

However, it is a lesson that if you want to rely on a Financial Agreement – you need to make sure that no only do you have competent legal advice/representation but that the other party does too.  It is not enough that the other party sees a lawyer and has the Certificate signed.  You can do everything correct.  The document could be perfectly drafted.  But if the other lawyer does not do their job, the Financial Agreement will likely be set aside.

It is important to note that  you have no recourse against the other lawyer – despite the fact that it could end up costing you significantly.

This is a compelling reason to have your property settlement formalised by Consent Orders rather than Financial Agreements.

There are still genuine reasons for entering a Financial Agreement, for instance to protect yourself from a future spousal maintenance claim, something a Consent Order cannot do.

In the event that you have reached agreement with your spouse, you still need to make sure that you both attend upon competent family lawyers.  Evans and Company Family Lawyers would be happy to assist.

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