Tuesday, March 12, 2019

BFA’s - What does the High Court decision mean (to me)**?

As mentioned in last week’s post, the key issues undermining the validity of the BFA in this matter related to the conduct of the husband and the existence of unconscionable conduct and (by majority) undue influence.

Unconscionable conduct was summarised as follows:

‘a special disadvantage may also be discerned from the relationship between parties to a transaction; for instance, where there is ‘a strong emotional dependence or attachment’ … Whichever matters are relevant to a given case, it is not sufficient that they give rise to inequality of bargaining power: a special disadvantage is one that 'seriously affects' the weaker party’s ability to safeguard their interests.’

Undue influence is said to occur when a party is deprived of ‘free agency’ in entering into an arrangement. In other words, when there is something so strong that the influenced party is under the belief that while the document is not what they want, they feel compelled to sign it anyway.

The High Court listed the following six factors (noting that they are however not exclusive) relevant in assessing whether there has been undue influence in the context of BFAs:

1) Whether the agreement was offered on a basis that it was not subject to negotiation.

2) The emotional circumstances in which the agreement was entered, including any explicit or implicit threat to end a marriage or to end an engagement.

3) Whether there was any time for careful reflection.

4) The nature of the parties’ relationship.

5) The relative financial positions of the parties.

6) The independent advice that was received and whether there was time to reflect on that advice.

Admittedly, with the benefit of hindsight, arguably, the case does not significantly change the position in relation to the effectiveness of BFAs.

Indeed, the agreement may well have been held to be valid if some of the basic recommendations featured regularly in these posts were embraced.

In particular, if the arrangements had been put in place earlier in the relationship or at least not so approximate to the wedding, that would have increased the robustness of the agreement.

Similarly, if steps were taken to ensure that the independent lawyer was able to endorse the appropriateness of the agreement by way of a collaborative negotiation, then it would have almost certainly been the case that the arrangements would have been upheld.

This said, BFAs remain a stark reminder of a key asset protection mantra, that being the need to 'measure twice and cut once' if there is a desire for the arrangement to be enforceable.

  ** for the trainspotters the title of the post today is riffed from 1986 and Crowded House’s Mean to Me