Report 113 (2006) - Relationships - Law Reform Commission : Lawlink NSW

12.1 People in domestic relationships in New South Wales, like their counterparts in other Australian jurisdictions, are permitted to contract out of the Property (Relationships) Act 1984 (NSW) (“the PRA”), by entering into a financial agreement that sets out how they wish their assets to be divided in the event that they separate.¹ Many de facto couples will want to organise their own financial affairs without having to resort to costly litigation and the court’s discretionary powers under s 20 and 27 of the PRA. Such agreements are binding on the parties and on the court, provided they satisfy the criteria set out in the PRA to ensure that they are made voluntarily and fairly. Financial agreements under the PRA are subject to the general laws of contract, and may also be set aside or varied by the court if to enforce the agreement would create injustice or hardship.

12.2 In this Chapter, the Commission examines whether the provisions of the PRA dealing with financial agreements are appropriate. In particular, the Commission seeks to establish whether the provisions have struck a correct balance between, on the one hand, giving people the freedom to order their own financial affairs if they wish to do so, and on the other hand, ensuring that adequate safeguards are in place to ensure that the enforcement of financial agreements under the PRA does not create hardship or injustice. The Commission has also taken into account the impact of private law on public resources. Provision for one family member to maintain another may mean that the dependent family member has less need to rely on public financial support. In formulating its recommendations, the Commission has taken into consideration more recent State and federal legislation that now all make provision for parties to enter into binding financial agreements. The Commission has also taken into account submissions received in response to DP 44 and the views expressed in targeted consultations with members of the gay and lesbian community.

12.3 Financial agreements between couples cohabiting outside marriage were once held to be unenforceable on the grounds that they were immoral and thus contrary to public policy.² They were considered to promote “immoral” relationships outside marriage and to dissuade people from marrying. However, as the incidence and community acceptance of people living together outside marriage grew, the courts began to suggest that the public policy principle no longer applied.³ The courts noted that many areas of law had begun to recognise cohabitation outside marriage, including for example, Commonwealth laws that gave rights to “de facto widows” and New South Wales legislation that prohibited discrimination on the basis of marital status, defined to include a man and a woman living together otherwise than in marriage.⁴ De facto partners could also by then bring proceedings under the Family Provision Act 1982 (NSW) and had access to the same remedies as married victims of domestic violence under the Crimes (Domestic Violence) Amendment Act 1982 (NSW). As Justice Hutley noted in Seidler v Schallhofer “judges can hardly characterise what legislation encourages as immoral”.

12.4 Indeed, by the 1980s, as more and more property disputes between de facto partners came before the courts, it was increasingly felt that both the parties and the court would benefit if the parties were encouraged to regulate their own financial affairs by agreement.⁵

12.5 In recognition of the growing community and judicial support for private ordering, the Commission recommended in its 1983 review that any new de facto relationship legislation should make express provision for enforceable cohabitation and separation agreements, and that these agreements should not be open to challenge on public policy grounds.⁶

12.6 The Commission adopted the widely held view that people who chose not to marry should be free to regulate their own financial affairs if they wished to do so. In particular, the Commission thought it was desirable that people who did not want the new laws to apply to them should be able to opt out of the legislative regime for property adjustment.⁷

12.7 The Commission accepted that certain safeguards needed to be put in place to ensure that the enforcement of cohabitation and separation agreements did not cause hardship or injustice to either of the parties. Those safeguards included requiring parties to obtain certified independent legal advice before signing the agreement, and allowing agreements to be challenged under general laws of contract, matters which are covered in more detail below. The Commission considered that the court should give effect to the parties’ intentions as expressed in the agreement provided the parties were properly advised before signing it.

12.8 The Commission’s recommendations in Report 36 were implemented in the De Facto Relationships Act 1984 (NSW). The 1999 amendments to the Act (renamed the Property Relationships Act 1984), extended the coverage of the Act to include same sex cohabiting couples and persons living together in close personal relationships.⁸ Persons covered by the legislation may choose to contract out of the provisions of the Act by making a domestic relationship agreement, either before or during the relationship, or a termination agreement, on separation or in anticipation of separation.

12.9 Until recently, the shift towards private ordering had almost exclusively been limited to couples cohabiting outside marriage.⁹

12.10 Over the last ten years, however, the move towards private ordering within marriage has also gathered pace in the federal arena. This was in no small measure due to the increasing divorce rate and a corresponding increase in the number of property disputes under the Family Law Act 1975 (Cth) (“ the FLA”). Although previous recommendations by various bodies to introduce binding financial agreements into the FLA were unsuccessful,¹⁰ the Commonwealth eventually moved amendments to the FLA in 1999. These amendments, which came into effect on 27 December 2000, now allow married couples to make legally binding financial agreements,¹¹ both before and during marriage, as well as after marriage breakdown.¹² Provided they comply with the procedural requirements set out in the FLA, these agreements are binding on the Family Court.¹³ Prior to the enactment of these provisions, the only agreements that ousted the jurisdiction of the court were maintenance agreements made after separation and approved by the court under s 87.

12.11 The reference of State powers to the Commonwealth will mean that financial matters arising out of the breakdown of de facto relationships between opposite sex couples (including the effect of domestic relationship and termination agreements in that context) will be governed by Commonwealth law.¹⁴ Part 4 of the PRA, which deals with domestic relationships and termination agreements, will continue to be relevant where such agreements are considered for purposes other than the breakdown of the relationship in question. Part 4 of the PRA will also continue to apply as the only legislative regulation of financial agreements relating to domestic relationships between persons of the same sex or in close personal relationships.

12.12 The Commission considers it appropriate that Part 4 should continue to operate in these circumstances. In particular, we are of the view that financial adjustment orders that can be made under Part 3 of the PRA should only constitute a default regime. Subject to appropriate safeguards, parties should, in principle, be able to continue to regulate by contract the financial aspects of their domestic relationships in a manner that they consider more accurately reflects their financial needs and circumstances. This applies regardless of the stage in their relationship when the agreement is entered into – whether in contemplation of its termination of after its termination. We believe that this applies equally to couples in opposite sex, gay, lesbian and close personal relationships.

12.13 Moreover, we are of the view that there is no distinction in this respect between parties who are married and those who are not. Just as parties to a marriage may wish to vary or exclude by agreement the operation of the property regime applicable during marriage or on divorce, so may parties to a domestic relationship. The only real difference is that the parties who marry may reasonably be taken to accept that they will be subject to laws governing matrimonial property and spousal maintenance. If the Commission’s proposal for a registration system is adopted,¹⁵ a similar supposition may come to be made about parties who register their relationships. No such supposition can, however, presently be made where parties enter into an unregistered de facto relationship. In such cases, there may simply be no appreciation of the need for a financial agreement to achieve a result other than that of the default regime, notwithstanding the fact that in New South Wales, attempted regulation of such relationships in various forms dates back to 1984. This lack of appreciation of the consequences of entering a de facto relationship can only be cured by education.

12.14 There is very little empirical evidence in New South Wales, or indeed elsewhere,¹⁶ documenting how often cohabitation agreements are entered into or how effective they are in producing outcomes that the parties consider fair. The little evidence that there is, mostly anecdotal, suggests that few cohabiting couples make agreements. In its submission in response to DP 44, the Women’s Legal Resource Centre, which handles a large number of cases annually, said that it very rarely comes across people who have entered into domestic relationship agreements under the PRA. What it has found, in the rare case where a domestic relationship agreement exists, is that:

12.16 Similar outcomes were revealed in data gathered from responses to the Commission’s questionnaire, which also targeted the gay and lesbian community. Only 20% of respondents said that they knew they could make a binding financial agreement under the Act, and less than 17% of these respondents had actually entered into one. The majority did not enter into an agreement with their partner because it was too expensive; or it seemed to undermine trust in the relationship; or they simply never got around to it.¹⁸

12.17 These figures reflect the study conducted by the Australian Institute of Family Studies (“AIFS”) in 1997 involving married couples and pre-marital agreements.¹⁹ As part of the detailed research into the financial arrangements made by separated couples, those surveyed were asked whether they had made a pre-nuptial agreement. Of the 650 people surveyed, only 13 said that they had entered into an agreement. The data also revealed a general perception among respondents that pre-nuptial agreements did not help them, or would not have helped them, reach a fairer or more equitable settlement.²⁰ Given that, at the time, pre-nuptial agreements were not binding under the FLA,²¹ it is not surprising that the research suggests that married couples rarely made pre-nuptial agreements.²² Even now that they are binding, however, there is speculation that many couples will continue to avoid making financial agreements as there are no capital gains tax concessions for assets transferred under a financial agreement, as opposed to assets transferred under consent orders.²³

12.18 The Act provides that notwithstanding any rule of public policy to the contrary, two persons who are not married to each other may enter into a domestic relationship agreement or a termination agreement.²⁴

12.19 A domestic relationship agreement is defined as an agreement made by two people, either before or during their relationship, that makes provision for financial matters. This includes matters such as maintenance for either or both parties to a domestic relationship and property and financial resources belonging to each or both of them. Parties can, for example, set out what property or financial resources each of them owns and how such property and financial resources should be divided in the event that the relationship breaks down.²⁵ They can stipulate which property should be completely excluded from division, or agree that the value of a particular asset (such as a business) will be included in the total pool of assets but cannot be divided. Parties can also set out in the agreement who has responsibility to pay which debts.

12.20 Agreements can also cover non-financial matters.²⁶ They might include for example, what accommodation arrangements should apply if the parties separate, how furniture and gifts are to be divided and who keeps the pets. “Lifestyle clauses”, such as who is responsible for various household tasks and how often holidays are taken, can also be included. However, such clauses can be easily breached, which raises questions about the validity of the more significant financial provisions. To avoid such questions, it is possible to add a clause in the agreement that preserves the validity of the rest of the agreement even if one or other of the provisions is void or voidable.

12.21 People in a domestic relationship can also enter into a termination agreement,²⁷ either after the relationship ends or in contemplation of the relationship ending. Termination agreements can deal with any financial or other matters. But if the relationship does not end within three months of the parties entering into a termination agreement, the agreement is treated as a domestic relationship agreement.²⁸

12.22 The procedural requirements that apply to domestic relationship and termination agreements are outlined below. They differ in one major respect: while a court may set aside or vary a domestic relationship agreement on the ground that enforcement of all or part of it would lead to serious injustice, no similar power applies to termination agreements. Section 44(2) is therefore a safeguard against the making of termination agreements early in the relationship, thus avoiding the court’s special power under the Act to set aside an otherwise properly made domestic relationship agreement.

12.23 In this Report, the Commission adopts the umbrella term “financial agreements” to indicate all such agreements, whether or not they also deal with non-financial matters except where the law distinguishes between the two.

12.24 In order for an agreement to be binding and enforceable under the PRA, the agreement must be in writing and signed by each of the parties, and the parties must have obtained independent legal advice,²⁹ proof of which must be attached to the agreement in the form of a solicitor’s certificate. This was one of the more contentious issues explored in DP 44, and is dealt with in more detail below.

12.25 A binding agreement does not necessarily exclude altogether the court’s jurisdiction to make orders redistributing property interests, but it prevents the court from making an order that is inconsistent with the agreement.³⁰ For example, if a valid and binding agreement provides that the home in which the couple resides is to remain the sole property of one partner, the court cannot alter this by ordering that it be transferred to the other, or that it be sold and the proceeds divided between them. This is because the court cannot make an order about the home that is inconsistent with the terms of the agreement. But the court could make other orders about the parties’ financial affairs, for example re-allocating other assets.

12.26 Although the Court has power to depart from the agreement where it does not satisfy one or more of the conditions contained in s 47(1), it may nonetheless have regard to the terms of the agreement when making its order.³¹ In these circumstances, the Court is not precluded from making an order because of a stipulation in an agreement intended to remove its jurisdiction.³²

12.27 The PRA provides a limited number of grounds on which a court can set aside or vary an otherwise binding agreement. Basically, a financial agreement can only be varied or set aside according to:

12.28 Under the CRA, contracts that are found to be “unjust”, including unconscionable, harsh or oppressive, can be rendered unenforceable or void or their terms can be varied by a court.³⁴ Section 9(2) of the CRA provides a list of factors for the court to look at when determining whether a contract is unjust, including:

12.30 A major disadvantage of the CRA, however, is that an application to challenge an agreement under the CRA must be brought within two years of the making of the contract.³⁹ This limitation period somewhat curtails the application of the CRA to domestic relationship agreements since the agreement is most likely to become relevant and be challenged when the relationship breaks down. Many years may have elapsed between the making of the agreement and the parties’ decision to separate.

12.33 Duress occurs where one partner applies unlawful pressure on the other either in the form of actual or threatened violence,⁴⁰ or by threatening to destroy the plaintiff’s property⁴¹ or threatening to cause him or her financial difficulties.⁴² If it is proved that the first person applied unlawful pressure and because of this pressure⁴³ the other partner signed the contract, the agreement is voidable. The plaintiff can then choose to affirm it or have the agreement set aside.⁴⁴

12.34 Evidence of domestic violence at the time that a financial agreement was made may constitute duress to the person, either to a partner or a third party, such as a child of the relationship. There may also be grounds for economic duress where one spouse threatens to withhold financial support from the other partner and/or their children. But because these forms of duress were developed in the context of commercial contracts, they may not be able to respond to all the different forms of duress that might arise in the context of domestic financial agreements.

12.35 Another type of pressure is emotional pressure. A case in the Northern Territory described a situation where a form of “emotional duress” was suffered by the female spouse. The judge stated that “[she] acted under duress in the sense that she felt substantial pressure from the [appellant] to sign the document, in order to secure the custody of her children.”⁴⁵

12.36 Emotional pressure is much more likely in a domestic scenario than in most commercial contracts. The question is whether proof of emotional pressure amounts to duress and is therefore sufficient to warrant setting aside an agreement.

12.37 In general terms, undue influence was developed to protect a person who has entered a contract due to a relationship of trust and dependence with another party. Undue influence can either be presumed or actual. If proved, either will render a contract voidable, which means that, as in the case of duress, the court will have the discretion to set the contract aside.

12.38 Presumed undue influence. Undue influence is presumed where there is a recognised prior relationship of trust between the parties, such as between a doctor and patient or a parent and child, but not, it has been suggested, between a husband and wife.⁴⁶ This exclusion would appear to extend to unmarried partners. However, some commentators suggest that rather than categorise relationships,⁴⁷ what is important is that one party trusts and depends upon the other.⁴⁸ In other words, it may be desirable to abandon presumptions that arise from defined relationships and instead rely on what can be demonstrated in each individual case. This is particularly important when considered in the context of the PRA, which recognises a range of relationships.

12.39 Once the presumption of undue influence is established the onus shifts to the defendant who must rebut it and show that the contract was freely, voluntarily and knowingly entered into by the plaintiff.⁴⁹ The factors used in determining this include evidence of independent legal advice, literacy, state of mind and consideration.⁵⁰ In the case of financial agreements this last factor would probably translate into an examination of any disparity between what each party receives under the agreement.

12.40 Actual undue influence. If a party to a domestic relationship cannot claim presumed undue influence, they may be able to claim actual undue influence. While there is no need to prove a prior relationship of trust, the defendant must be shown to have influenced the plaintiff, who was unable to exercise independent judgment in entering the contract. The plaintiff must prove “actual influence on the mind at the time of contract”.⁵¹

12.41 Unconscionability arises when one party has exploited or taken advantage of the other party’s weaker position. A two-part test has been formulated in order to determine whether a contract is unconscionable.⁵² First, there has to be evidence of a special disability affecting the weaker party. This may be poor literacy or English skills, age or infirmity. One party’s weaker financial position or lesser knowledge of financial or business matters may also constitute a special disability.⁵³ This has clear application in many domestic relationships. Research by the AIFS has shown that, in relation to superannuation for example, many people had no idea if their partners had superannuation or what its value was.⁵⁴

12.42 Emotional dependence can also constitute a special disability. In one case, the Court found that the plaintiff had bought the defendant a house because he was so in love with her that he was “vulnerable by reason of infatuation”, which she manipulated.⁵⁵ It is likely that emotional dependence could be a relevant factor in many domestic financial agreements simply because of the nature of the personal relationship between the parties. However, because of the added requirement to show manipulation, which could be difficult to prove, the doctrine may not be as widely used in the context of financial agreements as it might otherwise have been.⁵⁶

12.43 Second, the stronger party needs to have had knowledge of the weaker party’s disability, making it prima facie unfair or unconscionable for them to accept the weaker party’s consent. The level of knowledge need not be great; only just enough to put the stronger party on notice.⁵⁷ Once both of these points have been proved, the onus is on the stronger party to show that the transaction was “fair, just and reasonable”.⁵⁸ The remedies available for unconscionability are equitable in nature and include partially or wholly setting the contract aside.

12.44 Under the FLA, unconscionable conduct is expressly included as a ground for setting aside an agreement.⁵⁹ Its insertion was moved as a last-minute amendment by the Democrats. Although the Attorney General did not agree that it was necessary to include it as an added ground (as it is covered within s 90K(1)(b) which invokes the common law grounds of contract), it was passed unopposed. How the statutory concept of unconscionability will be interpreted by the court remains to be seen. Although it seems to add nothing to the common law concept, Patrick Parkinson has commented that it is questionable whether “a court can legitimately conclude that Parliament intended to enact a redundant provision” and hence it may find that there are cases of unconscionable conduct that fall under the statute but fall short of the common law ground of unconscionability.⁶⁰

12.45 There are four basic elements of misrepresentation. First, the misrepresentation must be a false statement. The misrepresentation usually consists of positive statements or conduct, but can also be a ‘half-truth’, a statement that, although technically true, creates a false impression of the facts.⁶¹ A half-truth in the context of a domestic financial agreement may arise where one party discloses only a portion of their assets and liabilities. This half-truth may create the false impression in the other party’s mind that the disclosure included all that the party owned and owed.

12.46 Secondly, the misrepresentation must be a false statement of existing fact, as opposed to mere opinion or promises or assurances for the future.⁶² Thirdly, the statement must be calculated to induce the party into contracting.⁶³ Hence, the party cannot be shown to have relied on his or her own judgment.⁶⁴ Lastly, the onus is on the party claiming misrepresentation to prove that they were in fact induced by the misrepresentation to enter the agreement.⁶⁵ However, if they can prove that the statement was calculated to induce and that they did enter the contract, the court can infer that they were in fact induced and the onus then shifts to the other party to prove otherwise.⁶⁶

12.47 Section 49 of the PRA allows the court to set aside or vary an otherwise unenforceable domestic relationship agreement where it believes that circumstances between the parties have so changed since the agreement was made that to enforce it would lead to serious injustice. It does not however apply to termination agreements. The issues surrounding the application of section 49 are dealt with in more detail below.

12.48 A number of issues were considered in DP 44, mainly dealing with improving the provisions of Part 4 to ensure that the enforcement of domestic relationship agreements and termination agreements does not create injustice or hardship.

12.49 At the forefront of the Commission’s considerations is the primary object of the PRA, namely, to facilitate a just and equitable distribution of the parties’ financial affairs when a domestic relationship breaks down.⁶⁷ Alongside this fundamental consideration is an affirmation of the Commission’s view in 1983 that people in domestic relationships should be free to regulate their own financial affairs if they wish to do so provided that the PRA contains certain safeguards to protect the weaker party (where there is a power imbalance) from being held to an unfair bargain.

12.50 The Commission acknowledges the concern of some groups, particularly women’s advocates, that domestic relationships are often characterised by significant power imbalances. The Women’s Legal Resource Centre, for example, has submitted that they remain strongly sceptical of domestic relationship agreements as they tend to favour the interests of men.⁶⁸ They submit that men hold the bargaining power in the great majority of heterosexual relationships, particularly in relationships where there is domestic violence. Their concern is that domestic relationship agreements will increase the feminisation of poverty. In other words, women and children will be left without access to assets or financial resources at relationship breakdown and will be more reliant on social security.⁶⁹ For this reason, the Women’s Legal Resources Centre submitted that there ought to be stringent safeguards to ensure agreements are fair.

12.51 The focus of the PRA on gay, lesbian and close personal relationships means that these concerns may not be as compelling in a general sense. Gender inequality resulting in inequality of bargaining power is, in itself, absent from gay and lesbian relationships. Inequality of bargaining power in close personal relationships is as likely to be attributable to the frailty of age as to any gender inequality.

12.52 In its original form, the PRA required the solicitor to advise the client on the following matters:

12.54 In DP 44, the Commission proposed that the PRA should be amended to provide that solicitors be required to provide legal advice only. Many submissions received by the Commission agreed that it was inappropriate to require a solicitor to give financial advice and that a solicitor’s certificate should be limited to the provision of legal advice only.⁷² Justice Young of the Supreme Court submitted that implementing this proposal was a practical and realistic solution as it recognises the type of advice solicitors are prepared to give and would not cause injustice to the parties. He noted a practical difficulty in that the Law Society advises against solicitors giving out the type of certificates required under s 47, and yet failure to obtain adequate financial advice and the extent to which this was separate from the legal advice are factors which could provide the basis for the court setting aside a financial agreement under s 46.⁷³

12.55 Following publication of DP 44, the New South Wales Parliament passed the Financial Services Reform (Consequential Amendments) Act 2002 (NSW) which removes the s 47(1)(d) requirement for a solicitor to provide financial advice. In the words of the provision now, the parties must obtain a certificate from a solicitor, prior to signing the agreement, which states that the solicitor provided the party with legal advice as to:

12.57 Obtaining legal advice is, and should remain, a prerequisite for making the agreement enforceable. Where negotiations between parties to a domestic relationship are marked by power imbalances, it is essential that both parties understand that by signing the agreement, they are waiving their legal rights under the PRA to make a claim on property held in the other party’s name. That is not to say that independent legal advice will necessarily provide an absolute protection to the weaker party, especially in relationships marked by domestic violence or abusive behaviour. In such relationships, the requirement for independent legal advice may not offset the pressure on the weaker party to sign agreements.⁷⁵

12.58 In DP 44, the Commission asked whether the PRA should also require parties to obtain financial advice in order to make the agreement binding. Very few submissions addressed the issue. One submission expressed concern that omitting the requirement to obtain financial advice may further disadvantage women, who are, in the main, already disadvantaged because of their relative lack of bargaining power.⁷⁶ The Women’s Legal Resources Centre submitted that the PRA should continue to require the parties to obtain independent legal and financial advice.

12.59 A potential disadvantage of requiring parties to obtain both legal and financial advice, however, is that the added cost of having to obtain financial advice may deter people from entering into financial agreements. In response to this argument, the Women’s Legal Resource Centre submitted that by retaining a requirement to obtain financial advice might incline the party with more property at stake to pay for the other party’s independent financial advice.⁷⁷

12.60 The NSW Law Society agreed with the Commission’s proposal in DP 44 that while it was advisable for parties to obtain financial advice, it should not be mandatory to do so.⁷⁸

12.61 In the submission from the Equity Division of the Supreme Court, Justice Young commented that it is difficult to draw a precise distinction between legal advice and financial advice in this area of law. Even in the provision of legal advice, a solicitor cannot discharge his or her duty by providing such advice in the abstract; a solicitor has to relate such advice to the client’s particular personal and financial circumstances.⁷⁹

12.62 One might expect, consequently, that solicitors and accountants will work together more closely in this area, particularly in those cases where the parties hold valuable assets, such as business enterprises, real estate and superannuation. Solicitors would do well in appropriate cases to recommend that their clients seek financial advice on the current value of their assets and expected capital growth.

12.63 The practical reality, in the Commission’s view, is that parties will tend to see both a solicitor and a financial expert where there are significant assets. The benefit will be twofold. Not only will the client be better informed as to how he or she may expect to fare if they were to obtain a court order under the Act, but the agreement is less likely to be varied or set aside under s 46 if the court is satisfied that the parties were fully aware of both the legal and financial consequences of signing the agreement. Accordingly, the Commission does not recommend a requirement for financial advice. This is also consistent with the position under the FLA. However, the Commission does recommend that section 47 of the PRA be amended to provide that solicitors should have a duty to draw the attention of parties to the desirability of seeking financial advice in addition to providing legal advice as to the effect of the agreement and the advantages and disadvantages of making the agreement.

12.64 The second major issue discussed in DP 44 concerned the continued appropriateness and adequacy of the current grounds for setting aside or varying domestic relationship and termination agreements. In DP 44, the Commission also asked whether there should be other grounds for varying or setting aside an agreement, such as fraud and impracticability, which are contained in other State laws and in the FLA. Specifically, Issue 12 of DP 44 proposed a new discrete provision containing all the grounds on which an agreement could be set aside or varied by the court. In the next section, the Commission discusses each of these grounds.

12.65 A domestic relationship agreement or a termination agreement under the PRA is open to challenge under the CRA.⁸⁰ This enables a court that finds an agreement to be “unjust” to vary the terms, decline to enforce it, or set it aside. As parties to a financial agreement cannot contract out of the provisions of the CRA, it confers on courts a potent supervisory jurisdiction over agreements. However, one significant limitation is that an application must be brought within 2 years of signing the agreement. This requirement renders the CRA irrelevant in many cases because domestic relationship agreements may have been signed long before the relationship breaks down, which is when the agreement is most likely to be challenged.

12.66 The Victorian Bar Association submitted that the provisions of the CRA could be imported into the PRA and that the statutory time limit for invoking the CRA provisions could be aligned to the general time limit for institution of proceedings, currently two years after separation.⁸¹ The New South Wales Law Society submitted that the provisions for varying or setting aside financial agreements under the Act should generally mirror the FLA provisions. It also stated that the PRA should prescribe the nature and range of remedies available to vary or set aside agreements so as to avoid a smorgasbord of laws which may or may not apply given various time limitation periods.

12.67 Under the FLA, one of the grounds on which a financial agreement may be set aside is if the Court is satisfied that the agreement is void, voidable or unenforceable. This merely imports the common law grounds for setting aside or varying contracts. It does not bring within reach the provisions of the CRA which are arguably wider than the common law grounds.

12.68 In the Commission’s view, all that is required in relation to s 46 is to amend the limitation period within which a claim may be brought under the CRA so that, when dealing with a domestic relationship or termination agreement under the PRA, the limitation period of two years runs from the date of separation. To effect this change, the Commission recommends that the PRA be amended.

12.69 Another issue discussed in DP 44 was whether s 49 of the PRA should apply to termination agreements as well as domestic relationship agreements. This provision allows the court to set aside or vary an otherwise enforceable domestic relationship agreement where it believes that circumstances have so changed since the parties entered the agreement that it would cause serious injustice to enforce any or all of the agreement’s provisions. Section 49 effectively provides another layer of protection against otherwise binding agreements that would be oppressive to enforce against one partner. For example, the agreement may have been made a number of years before separation, and in the interim, children may have been born, one partner could have suffered a serious injury or illness, property may have been damaged or wealth may have been acquired through inheritance or a lottery win.

12.70 Section 49, however, currently applies only to domestic relationship agreements. In DP 44, the Commission pointed out that a similar section could be found in the Northern Territory and ACT legislation, where it applies to both domestic relationship and termination agreements. An analogous, though more restrictive provision, also features in the FLA. The Family Court may set aside an agreement where a material change in circumstances has occurred since the making of the agreement relating to the care, welfare and development of a child to the marriage and serious hardship will ensue to the child or the party with caring responsibility for the child if the agreement is not set aside.⁸² This provision would appear only to cover the arrival of a child to the relationship, and would not cover, for example, cases where a party has been injured. As such, it is irrelevant to gay, lesbian and close personal relationships. In comparison, the serious injury of one party would likely be enough to set aside an agreement under s 49 of the PRA.

12.71 The Commission’s view, supported by submissions which addressed this issue,⁸³ is that s 49, as it is currently worded, should be extended to cover termination agreements as well as domestic relationship agreements. Termination agreements must be made within three months of separation, or they take effect as domestic relationship agreements.⁸⁴ It is possible for events to occur within those three months, such as a serious accident or redundancy, which would cause serious injustice to a party to the agreement if any or all of the terms of the agreement were to be enforced.

12.72 In DP 44, the Commission discussed whether the current provisions for setting aside or varying an agreement adequately protected parties to an agreement where there was domestic violence or whether domestic violence should be a specific ground for setting aside a financial agreement under the PRA.⁸⁵ Currently, agreements where violence is a factor can be challenged under the CRA as being unjust or on the common law grounds of duress, undue influence or unconscionability.⁸⁶

12.73 Physical violence at the time a financial agreement is made may constitute duress to the person. The Family Court, for example, has held that a marriage contract can be void for duress where “threats, pressure, or whatever it is, is such as to destroy the reality of consent and overbears the will of the individual”.⁸⁷ However, the Court added that evidence is required to show that the duress was operating at the time of the wedding ceremony. Whilst this can be induced by threats or pressure that occurred prior to the wedding, the extent of any time lapse between this event and the ceremony will be a relevant consideration.⁸⁸ This approach does not acknowledge the fact that domestic violence can affect the level of control one party has over another in a relationship even when there is no evidence of violence at the time the contract was made. Domestic violence can be inflicted in varying forms over a long period. Evidence of physical assault or explicit threats that occurred after the contract was made may still be indicative of pressure that the party was under when he or she signed the agreement earlier in time.

12.74 Domestic violence can also amount to actual undue influence. This ground was used in one case to challenge various contracts in which the wife guaranteed her ex-husband’s business debts.⁸⁹ The judge found that:

12.76 While courts appear likely to use general principles of law to set aside agreements made in fear of physical violence, agreements may be more difficult to vary or set aside under general law where domestic violence takes the form of threats of violence or emotional harassment. As stated above, the emotional and personal nature of financial agreements does not fall squarely within doctrines that have been developed in a more commercial context.

12.77 It has also been argued that using general law principles to challenge a contract where there is domestic violence furthers the risk that it will continue to go unnoticed in many cases.⁹¹ Domestic violence is a distinct issue, which raises factors specific to it. These issues include silencing of the victim and the fact that the violence generally occurs over a long period of time and may not always be in the form of separate instances of physical violence.⁹² By making domestic violence an express ground of relief, the law will be specifically recognising it as a serious issue and will perhaps allow the court greater scope to develop an approach that takes account of its complexities.⁹³

12.78 Although it is not explicit, the FLA provides that a financial agreement can be set aside where, in respect of the making of the agreement, a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.⁹⁴ In Tasmania, the court may set aside or vary an agreement if it thinks that the agreement was entered into under duress or by fraud.⁹⁵

12.79 The New South Wales Law Society submitted that the common law grounds of duress, undue influence, unconscionability and misrepresentation are enough to support an action that an agreement be varied or set aside where domestic violence is a factor.⁹⁶ The Victorian Bar Association similarly submitted that where domestic violence has been a part of the circumstances causing a party to enter into an agreement, the existing common law of duress is generally sufficient to encompass the circumstance of domestic violence so that specific reference in the legislation to domestic violence is unnecessary. It opposes the suggestion to include a section similar to s 43 of the FLA that outlines the principles to be applied by the court when exercising the jurisdiction under the Act, arguing that s 43 has had an erratic history.⁹⁷ One of the principles that the Family Court is to have regard to when exercising jurisdiction under the Act is the need to ensure safety from family violence.⁹⁸

12.80 The Women’s Legal Resources Centre submitted that there should be a rebuttable presumption that agreements should be set aside if there has been domestic violence either at the time of signing the agreement or at any stage after which the agreement was signed.⁹⁹ It states:

12.83 The Equity Division of the Supreme Court submitted that allowing the court to set aside an agreement where it was satisfied that the agreement was “void, voidable or unenforceable (including where one of the parties has made the agreement under fear of domestic violence)” adds nothing to the current s 46, except for the reference to domestic violence. The Equity Division submitted further that if fear of domestic violence will form an alternative ground for setting aside or varying a domestic relationship or termination agreement, as distinct from or beyond the scope of duress or undue influence, then there needs to be further and clearer definition of the circumstances in which this could be used.

12.84 The existence of domestic violence, or even just the threat of it, creates a power imbalance where the abused party is placed in an extremely precarious bargaining position. Many victims of domestic violence are, as a result, incapable of negotiating equitable property settlements with their violent partners.¹⁰² This is equally true of their capacity to negotiate fair and reasonable financial agreements during their relationships. Research has shown that women with violent partners feel pressured to make agreements with their partners to end the violence and protect the children.¹⁰³ As discussed in Chapter 9, family violence is not limited to heterosexual families. It also occurs in same-sex relationships and, although perhaps not as well documented, occurs also in close personal relationships.¹⁰⁴ The same concerns apply.

12.85 In a preliminary submission to the Commission from the Department for Women, it was suggested that the PRA should provide for the screening of agreements for instances of domestic violence.¹⁰⁵

12.86 To the Commission’s knowledge, there is no instance, in any area of law, where the contents of agreements are screened for evidence of domestic violence. In federal family law, to the extent that there is a ‘screening process’ it is one that goes to the procedures and process by which matters are resolved. Where there is evidence of family violence, parties are strongly discouraged from using mediation to resolve their dispute. Screening of agreements for their content raises issues of practicality. Since it would be impossible to identify those agreements where violence may be a factor, it implies that all agreements would need to be ‘approved’ and perhaps also registered by (probably) a court when they are first made. This would require the court to assess whether the agreement is fair and in order to make this assessment, evidence would have to be called. Such screening will inevitably add to the cost and complexity of making agreements. It will also make revising or revoking the agreements when circumstances change inordinately difficult. An unintended effect of such screening is that it would discourage people from making agreements. For these reasons, the Commission is not persuaded that screening of agreements is a feasible option. Most of the submissions that addressed this issue were opposed to screening on practicality grounds.¹⁰⁶

12.87 A major issue in property proceedings on relationship breakdown is ensuring that each of the parties has disclosed all their assets and liabilities. Frequently, and particularly where there are businesses, farms, trust structures and superannuation accounts, the party with the weaker economic resources has little idea of the other party’s finances.¹⁰⁷

12.88 There is presently no statutory duty to make full disclosure when negotiating a financial agreement. In some (albeit limited) areas, such as insurance, the law has imposed a duty to disclose so that complete or partial non-disclosure constitutes a misrepresentation.¹⁰⁸ In fact, some earlier cases had held that property agreements between family members also entailed a duty to disclose.¹⁰⁹ Currently, the only way in which a financial agreement can be challenged for non-disclosure of assets is by invoking the common law principles of misrepresentation, discussed above.¹¹⁰

12.89 In some jurisdictions, however, a partner’s failure to make full disclosure of all his or her assets at the time the agreement was signed is sufficient to render the agreement unenforceable.¹¹¹ In South Australia, for example, a “certificated agreement” must contain a warranty of asset disclosure.¹¹² After criticism of the Family Law Amendment Bill 1999, the Federal Government moved an amendment that expressly provides that non-disclosure of a material matter will constitute fraud,¹¹³ and thus give grounds for setting aside the financial agreement. Fraud has been defined by the Family Court as “conscious wrongdoing or some form of deceit”¹¹⁴ A false representation made knowingly, without belief in its veracity, or recklessly or carelessly as to whether it is true or false, will constitute fraud. In DP 44, the Commission proposed that a similar provision be inserted in the PRA.

12.90 Submissions agreed with the Commission’s proposal.¹¹⁵ The Equity Division of the Supreme Court, said fraud should be a ground on which an agreement can be set aside or varied “provided that the question is whether the discretionary power of the court to set aside or vary a domestic relationship or termination agreement should be anchored to the grounds listed”. The New South Wales Young Lawyers submitted that it would be wise to have a statutory provision that required a full and frank disclosure of assets, liabilities and financial resources at the time when the agreement was made.¹¹⁶ The Women’s Legal Resource Centre made the point in their submission that disclosure should relate to all assets and liabilities, including financial resources such as superannuation, of which partners are often completely unaware.¹¹⁷

12.91 Contracts negotiated where one party deliberately conceals or only partially reveals the extent of all that he or she owns (or owes) or any other relevant fact, amounts to fraud in the ordinary person’s understanding of that term. However, the common law notion of fraud generally only catches a non-disclosure that is deliberately or negligently made (rather than innocently made). This is unsatisfactory in this context. In our view, regardless of whether the non-disclosure was a deliberate omission, a reckless or careless omission, or an innocent mistake, the result should be the same. An agreement was reached based on incomplete or false information. If private ordering is to be encouraged and gain widespread community support, agreements need to be made honestly and fairly. The Commission believes that the PRA should be amended to give the court power to vary or set aside contracts on the ground of fraud expressly defined to include failure to disclose a material fact. This accords with the FLA and with our recommendations in regards to disclosure in the context of Part 3 orders.¹¹⁸

12.92 Another issue discussed in DP 44 was whether the PRA should allow the court to set aside or vary an agreement where circumstances have arisen since the time when the agreement was made making it impracticable for its provisions, or any of them, to be carried out.¹¹⁹ This is intended to cover those situations where, for example, the agreement makes provision for the division of a particular asset that no longer exists. Similar provision can be found in the Northern Territory legislation and in the FLA.¹²⁰

12.93 Currently, a party may be able to set an agreement aside under s 9(2)(d) of the CRA where a court considers compliance with the contract “unreasonably difficult”. The agreement may also be able to be set aside under the common law doctrine of frustration,¹²¹ which allows contracts to be set aside when a supervening event that was not reasonably foreseeable¹²² has rendered it incapable of being performed. Hence, it would only apply to the rare cases where assets are destroyed by earthquake, accidental fire or a similar exceptional event.¹²³ Merely liquidating an asset constitutes self-induced frustration, for which there is no relief under the doctrine of frustration.¹²⁴ Further, as with other common law doctrines, the case law and established principles regarding frustration are commercially-based and are sometimes difficult to translate to agreements made between parties in a domestic situation.

12.94 Early Family Court cases held that “impracticable” does not mean “impossible”,¹²⁵ but rather it is a term that imports a question of fact and degree.¹²⁶ In more recent cases, the term “impracticability” has been given a meaning that is fairly narrow in scope, similar to that of “frustration”. In Cawthorn and Cawthorn,¹²⁷ the Family Court considered the interpretation of “impracticable” as a ground for setting aside a property order. The Court cited a passage from the judgment of Kay J in La Rocca and La Rocca:

12.97 If the term “impracticability” is used in the PRA, there is a risk that this ground for setting aside financial agreements may be construed narrowly. While a narrow interpretation promotes finality in agreements, it may not provide adequate relief for parties who find themselves in a situation where fulfilling their obligations under the agreement would be unreasonably difficult. To avoid this, the legislation should include a note with a non-exhaustive list of the contingencies that the impracticability ground is intended to cover,¹³¹ such as those listed in the last paragraph. However, the definition of impracticability should not be widened to the extent that mere difficulty in complying with the agreement would suffice in setting it aside. The courts have avoided taking such a wide interpretation as the stability of agreements would be so threatened that there would be little advantage in entering one.

12.98 Those submissions which addressed this issue were generally in favour of including impracticability as a ground for setting aside or varying a domestic relationship or termination agreement. The Equity Division of the Supreme Court submitted that the addition of the ground of impracticability could be of value as it would apply to cases where one of the main assets that underpinned an entire arrangement has since disappeared. At a broader level, the New South Wales Law Society submitted that the provisions of the PRA should generally mirror the FLA provisions. Although some members of the Bar Association of Victoria see the impracticability ground as having an unsatisfactory history under the FLA, and have reservations about the effectiveness of statutory illustrations, the majority supports the retention of impracticability in relation to setting aside consent orders, and, therefore, to promote consistency, support its application in relation to financial agreements made under the Act.

12.99 The Commission agrees with the submissions that impracticability should be a ground for varying or setting aside domestic relationship or termination agreements. As the Equity Division pointed out, a provision to this effect would be of particular value in cases where a main asset that has formed the basis of such an agreement has since disappeared.

12.100 The case of ASIC v Rich¹³² highlighted a number of significant issues in relation to the interaction of bankruptcy law and family law, not least of which was the apparent potential of parties to a marriage to make binding financial agreements under the new Part 8A of the FLA with the purpose of putting assets out of the reach of creditors. In particular, the case raised two questions. The first was whether the FLA permitted a third party to challenge a binding financial agreement made between the parties to a marriage. The second was whether the court had jurisdiction to set aside or vary an otherwise binding agreement where there was a reasonable suspicion that one of the motivating factors for making the financial agreement was as a vehicle to quarantine assets from creditors.

12.101 On the first issue, Justice O’Ryan held that the Family Court had no jurisdiction under s 90K to hear an application by a third party to set aside a financial agreement made by the parties to a marriage unless there were pending or completed proceedings under the FLA.

12.102 The situation would have been different if ASIC were seeking to challenge an order made under s 79, or a s 87 maintenance agreement, which is no longer available.¹³³ A third party creditor whose interests would be adversely affected by a s 79 order (whether by consent, or following a contested hearing) and who had not been given notice of the proceedings or the consent orders could challenge the order and seek to have it set aside under s 79A. Likewise, a third party creditor could also have challenged a maintenance agreement under s 87 if they had been given no notice of the agreement because such agreements were required to be registered and approved under the FLA.

12.103 The new Part 8A provisions replaced the old maintenance agreement provisions. Under Part 8A, financial agreements made before or during the marriage, or termination agreements made at the end, or in contemplation of, the end of the marriage do not require any order or approval of the Court. All that is required is that they comply with s 90G. Therefore, as Justice O’Ryan noted:

12.105 The Court also found that dispositions of property pursuant to the terms of s 87 maintenance agreements were afforded considerable protection under the Bankruptcy Act. Although this Act permits a trustee in bankruptcy to seek to have certain transactions by the bankrupt declared void under the Bankruptcy Act,¹³⁶ the Act also provided that nothing invalidated a conveyance or transfer of property made pursuant to a maintenance agreement.¹³⁷ It defined “maintenance agreement” to include financial agreements.¹³⁸

12.106 As previously mentioned, s 87 maintenance agreements (which are no longer available since the introduction of Part 8A financial agreements) were subject to the approval of the Family Court. The new financial agreements require no such vetting or approval by the Court. As it was considered unreasonable to shield agreements that were not subject to Court approval or supervision from the reach of the Bankruptcy Act, subsequent amendments to the Bankruptcy Act excluded financial agreements from the definition of maintenance agreement.¹³⁹

12.107 ASIC v Rich¹⁴⁰ also prompted a number of amendments to the FLA.¹⁴¹ The definition of “matrimonial cause” in s 4(1) was amended to give the court jurisdiction in an application by a third party to set aside a financial agreement the terms of which would have the effect of defeating the claims of creditors or potential creditors. Section 90K was also amended to allow a court to set aside or vary a financial agreement or a termination agreement where it is satisfied that either one of the parties entered into the agreement either for the purpose of defrauding or defeating a creditor,¹⁴² or with reckless disregard for the interests of a creditor of the party.¹⁴³

12.108 As the PRA makes no provision for the setting aside or variation of a domestic relationship agreement entered into for the purpose of defeating the claims of third parties, the only grounds for attacking such agreements arise under the Bankruptcy Act 1966 (Cth) and under the Conveyancing Act 1919 (NSW).

12.109 Bankruptcy Act. A transfer of property pursuant to a domestic relationship agreement can generally be set aside under the Bankruptcy Act where its purpose is to defeat the claims of third parties.¹⁴⁴ While the Act otherwise protects “maintenance agreements” against the doctrine of relation back in bankruptcy law,¹⁴⁵ the definition of the phrase does not cover domestic relationship agreements under the PRA.¹⁴⁶

12.110 Conveyancing Act. A legitimate third party creditor may currently challenge transfers of property pursuant to a domestic relationship agreement under s 37A of the Conveyancing Act 1919 (NSW). This provides that every alienation of property made with intent to defraud creditors shall be voidable at the instance of any person thereby prejudiced.¹⁴⁷ The range of property covered by s 37A is broad, defined as “real and personal property, and any estate or interest in any property real or personal, and any debt, and any thing in action, and any other right or interest.”¹⁴⁸ However, s 37A is not available to creditors to challenge transactions where a debtor opts to pay one creditor in preference to, and to the detriment of, other creditors,¹⁴⁹ “unless the general conduct involved alienation with intent to defraud creditors generally”.¹⁵⁰ Nor is recourse to s 37A possible in relation to the transfer of goods of value which are not classified as real or personal property, such as cash.

12.111 The limitations of the section are illustrated in the following scenario:

12.113 The PRA has a few provisions aimed at preventing or undoing transactions that seek to defeat claims. Section 42 empowers the court, in the context of an application for an order under Part 3 of the Act, to restrain or set aside an instrument or disposition that would (regardless of intention) defeat an existing or anticipated order relating to the application. Section 43 requires the court to have regard to the interests of a bona fide purchaser or another person interested in exercising its powers under Part 3, and also empowers it to make an order necessary to protect those interests.

12.114 The issue remains whether the PRA should mirror the FLA by empowering the court to set aside or vary a domestic relationship (or termination) agreement entered into for the purpose of defeating a creditor’s claims. The Commission is of the view that, while a creditor should ordinarily assert such a claim under the Bankruptcy Act, there may be cases in which the existence of a more general power would be useful even where bankruptcy is not an issue.

12.115 The PRA makes no provision for setting aside or varying the terms of a domestic relationship agreement where the agreement was entered into in order to defeat the claims of third parties. Section 49 of the PRA only allows for the variation of domestic relationship agreements by a party to the relationship pursuant to an order under Part 3.

12.116 Section 50 of the PRA allows the court to disregard an agreement if it finds that the parties have revoked the agreement or consented to its revocation by words or conduct. Conduct required to revoke an agreement includes agreeing to and then embarking upon a property division or maintenance scheme different from the one outlined in the agreement. For example, in one case the defendant submitted that the deed containing the separation agreement between himself and the plaintiff had been revoked due to her acceptance of a lesser amount of maintenance.¹⁵¹ The court held:

12.118 In the new Part 8A of the FLA, there is no specific provision for the revocation of binding financial agreements. The grounds on which a binding financial agreement can be varied or set aside have been outlined above.¹⁵³ Binding financial agreements are also expressly subject to the principles of law and equity, including estoppel.¹⁵⁴

12.119 A similar provision applies to s 87 maintenance agreements.¹⁵⁵ In relation to these, the Family Court has held that they can be revoked by the parties’ conduct.¹⁵⁶ Such conduct could include:

12.121 The Commission has come to the conclusion that s 50 should not be repealed. This section empowers a court to disregard an agreement, which, in its opinion, has come to an end through revocation or otherwise ceasing to have effect. As is implicit in the submission of the Victorian Bar Association, this expands the notion of when an agreement comes to an end through the lens of the law of contract (that is, by agreement) or through the lens of the law of estoppel (that is, through inducement and detrimental reliance). It does not, however, create intolerable uncertainty. Rather, it injects a desirable flexibility into the revocation of domestic relationship agreements that neither contract nor estoppel may reach. For example, it would allow a court to determine that, in the circumstances of a particular case, a domestic relationship agreement had ceased to have effect because, independently of one another, both parties had ceased to have regard to, or rely on, it over a long period of time.

Table of contents

1. Since the 1999 amendments, this provision was extended to all people covered by the Act including same sex de facto couples, and people in close personal relationships.

3. Seidler v Schallhofer (1982) NSWLR 80 (Hutley J). See also Hagenfelds v Saffron (Supreme Court, Equity Division, 1914 of 1985, McLelland J, 12 August 1986, unreported) where it was held that it was “not abundantly clear that, even in 1961, a contractual consideration of the kind in question would invalidate an otherwise enforceable contract”: at 4.

5. Jardany v Brown (NSW Supreme Court, Powell J, 1 July 1981, unreported) cited in NSW Law Reform Commission, Report on De Facto Relationships (Report 36, 1983) (“Report 36”) at para 11.7.

6. Report 36 at para 11.26-11.29. The Commission rejected the proposition that such agreements should be held invalid on the ground that they promoted immorality: see para 11.14.

9. In SA, NT and ACT, there are provisions for the making of binding agreements in similar terms to those in the NSW Act. In contrast, Part 9 of the Property Law Act 1958 (Vic) has no provisions for making cohabitation agreements. However, the court is able to have regard to any agreement which may exist between the couple when determining what property order, if any, to make (see for eg, Lesiak v Foggenberger (1995) DFC 95-167 (per Hedigan J)). Under the Family Law Amendment Act 2001 (WA), parties to a de facto relationship may make binding financial agreements under provisions that mirror those recently inserted in the Family Law Act 1975 (Cth).

10. Legally binding pre-nuptial agreements were first recommended by the Australian Law Reform Commission in 1987: see ALRC, Matrimonial Property (Report 39, 1987) at para 443 and then by a Joint Select Parliamentary Committee in 1992: see Australia, Joint Select Committee of Inquiry into Certain Aspects of the Operation and Interpretation of the Family Law Act, Family Law Act 1975: Aspects of its Operation and Interpretation (AGPS, 1992).

11. In 1999, the federal government introduced the Family Law Amendment Bill 1999 (Cth). Schedule 2 of the Bill makes provision for the introduction of legally binding pre-nuptial agreements.

13. FLA s 90G: In order to be legally binding, an agreement must be in writing, signed by both parties and each party must have received independent legal advice, a certificate of which must be annexed to the agreement. Two added clauses, namely that the agreement cannot have been terminated by a court and one party is to retain the original and the other a copy, are not included in the PRA.

16. In jurisdictions where pre-nuptial agreements are legally binding, such as the United States, Canada and New Zealand, there is, according to anecdotal evidence, little take up of them. Unfortunately, there is a dearth of empirical evidence internationally as well as locally.

19. The Australian Divorce Transition Project was a random national telephone survey of divorced Australians (excluding Western Australia due to legislative differences), which examined the divorce transition and its consequences for parents.

20. B Fehlberg and B Smyth, “Binding pre-marital agreements: Will they help?” (1999) 53 Family Matters 55 at 57.

21. Under the FLA, at the time of the survey, only those agreements made after separation and approved by the Family Court under the FLA s 87 or via consent orders ousted the Court’s power to make property adjustment orders. Agreements made before marriage were considered by the Family Court when making orders relating to property and/or maintenance, but they did not exclude or limit the Court’s powers: see In the Marriage of Plut (1987) FLC 91-834.

22. Defined as agreements made prior to marriage which set out how the property should be divided in the event of marriage breakdown: see B Fehlberg and B Smyth, “Binding pre-marital agreements; Will they help?” (1999) 53 Family Matters 55 at 56.

23. A Horin, “Divorcing couples run scared from out-of-court deals” Sydney Morning Herald (23 August 2001).

26. PRA s 44(1)(b). But see, in relation to the FLA, A Dickey, “Problems concerning financial agreements” (2002) 76 Australian Law Journal 89.

30. PRA s 47(1). See also Crellin v Robertson (ACT, Supreme Court, SC34/2001, Crispin J, 22 September 2004, unreported) where the Court held that even though an agreement did not satisfy all the conditions to make it binding under the Domestic Relationships Act, (and therefore the Court was not bound to make an order consistent with it), this did not mean that it was just and equitable to ignore the agreement; the Act permitted the court to take the agreement into account notwithstanding the fact that it was not binding.

31. PRA s 47(2). See for example, Daly v Dicker [2001] NSWSC 215, (Master McLaughlin); and Ossedryver v Fordree (1998) DFC 95-210.

33. PRA s 46. This is similar to FLA s 90K(1)(b) which states that an agreement can be set aside if it is void, voidable or unenforceable, which effectively invokes the common law grounds for setting aside a contract.

34. CRA s 7(1). The relief sought should only be that which specifically avoids the unjust consequences of the contract: see West v AGC (Advances) Ltd (1986) 5 NSWLR 610 (Kirby J) and Melverton v Cth Development Bank of Australia (1989) ASC 55-921 (Hodgson J).

36. T Carlin, “The Contracts Review Act 1980 (NSW) - 20 Years On” (2001) 23 Sydney Law Review 125 at 127.

38. T Carlin, “The Contracts Review Act 1980 (NSW) - 20 Years On” (2001) 23 Sydney Law Review 125 at 136.

42. North Ocean Shipping co Ltd v Hyundai Construction Co Ltd [1979] 1 QB 705; Crescendo Management Pty Ltd v Westpac Banking Corp (1988) 19 NSWLR 40.

43. But it need not be the only reason: The Universe Sentinel [1983] 1 AC 366.

44. For an affirmation to be effective, the plaintiff must know of the wrong done, that they have a right to rescind and then must communicate their affirmation unequivocally: Hawker Pacific Pty Ltd v Helicopter Charter Pty Ltd (1991) 22 NSWLR 298.

45. Jole v Cole [2000] NTSC 18 at para 21. It should be noted though, that the agreement in that case was not set aside on the ground of duress as known in contract law, but instead was used as a factor to prove that enforcing the agreement would lead to “serious injustice” under the De Facto Relationships Act 1991 (NT) s 46(2(a).

46. Midland Bank Plc v Shephard [1988] 3 All ER 17; P Parkinson, “Setting aside financial agreements” (2001) 15 Australian Journal of Family Law 26 at 40; Mackenzie v Royal Bank of Canada [1934] AC 468. Note the rule in Yerkey v Jones (1940) 63 CLR 649, confirmed in Garcia v National Australia Bank (1998) 194 CLR 395, which is based on a presumption that wives repose trust and confidence in their husbands. However, the rule is confined to the very specific case of wives providing surety for their husband’s business transactions. It does not neatly fall under the general law of undue influence and was actually described in Garcia v National Australia Bank in terms of unconscionability: see para 31 (Gaudron, McHugh, Gummow and Hayne JJ).

47. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 485.

49. See Allcard v Skinner (1887) 36 Ch D 145 and Johnson v Buttress (1936) 56 CLR 113.

51. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 487.

53. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 where the Amadios’ limited knowledge of business and finance was a seen as part of their “special disability”.

56. See L Sarmas, “Storytelling and the law: A case study of Louth v Diprose” (1994) 19 Melbourne University Law Review 701 at 722-3 where it is suggested that had “emotional dependence” alone been prima facie evidence of a special disability then more people, especially women, could have used unconscionability to set aside transactions entered for their partner’s benefit.

57. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 (Mason and Deane JJ).

58. Fry v Lane (1888) 40 Ch D 312, as approved in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447.

60. P Parkinson, “Setting aside financial agreements” (2001) 15 Australian Journal of Family Law 26 at 49.

62. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 335-6.

65. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 341.

68. Women’s Legal Resources Centre, Submission at 10. Their views are based on their 20 years’ experience dealing with family law disputes, together with research they cite from the Australian Bureau of Statistics and the Office of the Status of Women among others, (see also ALRC, Equality Before the Law (Report 69, 1994)).

69. Women’s Legal Resources Centre, Submission, 25 October 2002 at 10 citing Mitchell v Mitchell (1995) FLC 92-601.

72. Victorian Bar, Submission at para 25, Law Society of NSW Submission at 3, Gay and Lesbian Rights Lobby Inc, Interim submission at 3. The NSW Young Lawyers, Submission at 5, suggested that solicitors could advise their clients to seek and obtain independent financial advice before providing any legal advice, and that the solicitor should inform them that it is not to the client’s advantage to execute an agreement without this independent advice. This approach enables solicitors to meet their obligations under the legislation without attempting to provide advice beyond their realm of expertise.

75. Women’s Legal Resources Centre, Submission at 10 (in relation to women). See also A Nicholson, Proposed changes to property matters under the Family Law Act, (Address to the Bar Association of NSW, Sydney, 20 May 1999).

80. PRA s 46. See Chapman v Batman (2004) DFC 95-293 where the plaintiff sought relief against a termination agreement under the CRA. Although all the formalities had been complied with, the Court held that the agreement was void. The plaintiff had been in a car accident some time before the agreement was made and she presented medical evidence to show that she did not understand the agreement when she signed it. Evidence also showed that the defendant did much better financially under the agreement than he might have done if he had made an application to the court.

87. Hirani v Hirani (1983) 4 FLR (Eng) 232 at 234, cited with approval in Teves and Campomayor (1995) FLC 92-578 at 81,738.

97. Victorian Bar, Submission citing Soblusky (1976) 2 FamLR 11,528 and Fisher (1990) 13 FamLR 806.

101. At 11. See FLA s 60CC for the factors in revised form as amended by the Family Law Reform (Shared Parental Responsibility) Act 2006 (Cth).

102. See H Astor, “The Weight of Silence: Talking About Violence in Family Mediation” in M Thornton (ed), Public and Private; Feminist Legal Debates (Oxford University Press, Melbourne, 1995); G Sheehan and B Smyth, “Spousal Violence and Post-Separation Financial Outcomes” (2000) 14 Australian Journal of Family Law 102; Illawarra Legal Centre “A Human Right to Justice: Experiences of Women in the Illawarra region” (Prepared by J Stubbs, 1993) cited in ALRC, Equality before the law: women’s access to the legal system, (Report 67, 1994).

103. R Graycar, “Matrimonial Property Law Reform - what lessons have we learnt?”, (Family Court of Australia Second National Conference, Sydney, 20 -23 September 1995) at 94.

106. Law Society of NSW, Submission at 4, Equity Division of the Supreme Court of NSW Submission at 16, Victorian Bar, Submission at para 33. Women’s Legal Resources Centre, Submission at 12, in favour.

107. See, for example, P McDonald (ed), Settling Up: Property and Income Distribution on Divorce in Australia (AIFS and Prentice Hall, Sydney, 1986) at 222 and 230.

108. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 339.

109. Greenwood v Greenwood (1863) 46 ER 1339; Tennent v Tennents (1870) LR 2 Sc & Div 6.

115 Victorian Bar, Submission at para 33, Law Society of NSW, Submission at 4, Equity Division of the Supreme Court, Submission at para 39, Women’s Legal Resources Centre, Submission at 12.

117 J Dewar, G Sheehan and J Hughes, Superannuation and Divorce in Australia (AIFS, Melbourne, 1999).

120. FLA s 90K(1)(c). This resembles s 87(8)(d) which states that the court can set aside maintenance agreements on the ground of impracticability.

122. Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337.

123. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 716.

124. J W Carter and D J Harland, Contract Law in Australia (4th edition, Butterworths, Sydney, 2002) at 734 to 735.

126. Rohde and Rohde (1984) FLC 91-592; Jayne v National Coal Board [1963] 2 All ER 220.

131. Note that, depending on the width of the terms, “impracticability” may overlap to an extent with “serious injustice”, discussed above at para 12.69 – 12.70.

136. For example, a trustee could seek to have declared void transactions that are undervalued (s 120), or where the transferee offers little or no consideration for the transfer, or which have the effect of giving a creditor a preference, priority or advantage over other creditors (s 122) and those which had as their main purpose the intention to deprive creditors access to the property.

156. But note that the cited cases concern agreements made prior to the provisions for binding financial agreements under the FLA.

158. (1985) FLC 91-601 at 79,863; see also In Marriage of Wray (unreported, Family Court, S6691/88, 26 February 1990).