Understanding your own binding financial agreement and how to avoid DIY legal mistakes

Video transcript

Hello, hello, everyone I’m Justine Woods I’m the family law partner at Cooper Grace Ward and today our topic is understanding your own binding financial agreement and as a side note, don’t be your own family lawyer.

Case of Birdwood and Gravino

Now, looking at this through a very interesting case of Birdwood and Gravino that’s just been decided in 2023 I think it illustrates some very important points. So, in this case, the parties had separated the husband was what was described as an experienced family lawyer. He did engage his own lawyer to prepare a binding financial agreement to document their property settlement. And both he and his wife were appropriately advised by independent solicitors about the agreement in its initial drafts. The husband then made six sets of amendments to the document. It was finally signed, and it recorded a deal whereby the wife was to transfer 75% ownership of a property to the husband. She was to live in that property for no longer than three years. The husband was to pay certain outgoings for the property and at an agreed time, the property was to be sold and the agreement said and divided 50/50. Signed, certified, one gets the original, one gets the copy. All of the formal requirements under the Family Law Act complied with.

Can binding financial agreements be rectified?

There was no suggestion it wasn’t binding. What happened is that when it was time to sell the property, the husband said, no, no the proceeds ought to be divided 75% my way, not 50/50 as appears in the agreement I want it rectified. And that’s a contractual term about if you can find a common intention that a document should reflect some particular outcome, but a mistake or some other occurrence has arisen you can rectify that document. Now, the trial judge took the husband’s position and said that the binding financial agreement could be rectified and ought to be rectified for the proceeds to be divided as to 75% to the husband, 25% to the wife and that the clauses in the agreement where it said 50/50 should be fixed basically. The wife appealed and her appeal was upheld. So, there’s a long discussion in the judgment, quite dull but very important about does rectification really apply to a binding financial agreement, given that the advice is supposed to be given in advance of the agreement being signed. But finally, the court said, well, yes, assuming rectification does apply, we don’t think it should do so here.

Common intention not reflected

And they gave a different construction to an important piece of evidence that had gone in the husband’s favour. So, before the house was sold, the wife had written an email to the husband basically saying, if you let me keep the house, I’ll pay you out and I’ll pay you out 75% of its value and then there was a dispute about value, etcetera. But so that was found by the trial judge to reflect a common intention that the proceeds should be divided, that they couldn’t conclude the agreement on the basis of that of the wife’s offer and the house was sold. But the trial judge said what that indicates to me a common intention to divide the value of the house 75/25. The full court found that that was not admission by the wife against her own interest, and it did not reflect a common intention which must be ambiguous and what they called utterly clear and convincing about what the common intention had been. So, they interpreted the wife’s email to mean at a certain point in time after the agreement she was trying to retain the house and pay the husband out and concede that she would pay him 75%, but that did not reflect a common intention at the time the agreement was signed to divide the proceeds in any other proportion other than what was specifically stated in the agreement, more than once, and that is equally.

Final outcome

So, the original agreement was held to stand, and the proceeds of sale were divided equally, and the husband had to pay the wife’s fixed costs. So, it’s an interesting factual scenario and it does fascinate me that people, including lawyers, can read documents and say, no, no, that’s not what we meant or no, no, that shouldn’t apply. But I do see it, I do see it quite often. So, it’s incredibly important whether you’re entering into a binding financial agreement or indeed any document particularly in your family law matter, to understand what it means and if you don’t understand, keep asking questions until you do. Because more often than not, and that’s a very broad sweep but more often than not, you’ll be held to what you signed. If the formalities have been complied with, if you sign up a document that says 50/50, that’s what’s going to happen to you unless there are exceptional circumstances. And this will sound a little snooty but the smarter you are, the harder the test is going to be to be relieved of your obligations and what you can read in black and white and sign. There used to be some old cases in family law matters where, for example and this sounds very gendered, and things are changing, but in the old days it was women who were at home, had no involvement in the business various documents would be put before them they would simply sign anything that the husbands gave them. The older cases would sometimes relieve those wives of the obligations created by the documents they had signed. But as time has gone by, that is changing as well. So, everyone really ought to think, if I’m signing it, I’m going to be stuck with it. And so, the time to really have the argument to ask the questions is before it’s executed.

If you’d like to talk about this issue or any other family law matter, please don’t hesitate to contact Cooper Grace Ward.