Vivienne Crawshaw: Unjust marital property contract thrown out by court

COMMENT

Last column I wrote about Marion who had signed an agreement contracting her out of her rights under matrimonial property law. Pete had instructed his lawyers to draft the agreement and although she did not really understand it, Marion signed and they carried on in their marriage.

Years later Marion could no longer endure Pete's criticism and constant ridicule. To everyone's surprise she left him.

The lawyer she consulted was concerned when she informed her of the agreement she had signed years before. Although Marion was an intelligent woman she had no idea what it was she had signed.

She certainly had never received a copy of the agreement so the first thing that her new lawyer did was to obtain a copy of it. Surprisingly, the original lawyers had not opened a file of advice and correspondence with Marion and held only a bare copy of the agreement itself.

The details of the agreement also alarmed her lawyer. Marion had agreed that all Pete's property (including the family home) was to be his separate property, to which she would have no claim.

It contained a list of Pete's property, which included two rental properties, a considerable parcel of shares, some shares in a business that was now booming, artworks inherited from his artist aunt, his share of his family bach (beachfront) and the family home. It also provided that any property bought to substitute that property was also Pete's separate property.

Marion's property was also earmarked as her separate property, but this amounted only to a Honda Civic and $25,000 of savings that she had put aside before her marriage and which she used for her own needs because Pete was quite tight-fisted.

Marion's lawyer issued proceedings and obtained full disclosure of the origins of the property that Pete had tried to screen off under the agreement. It turned out that the two rental properties were bought after the couple were married and should have been relationship property.

Although they were bought with small deposits and big mortgages they had now increased hugely in value and the tenants had paid much of the original mortgages.

The same applied to the shares in the business, because Pete put money into this just after the couple had married.

The parcel of shares was a mixture of gifts from Pete's father and some trading that Pete entered into after the marriage. The artworks were heirlooms and would never have been Marion's, agreement or no agreement.

The share of the family bach was a gift solely to Pete and, again, Marion could not touch that anyway.

The family home in Meadowbank was Pete's and Marion's second home and was worth $850,000. There was no mortgage. All in all there was a total pool of $1. 6 million worth of relationship property.

If Marion had not entered into the agreement she was entitled to half of that, at least, leaving aside the question of a claim against Pete because of her limited earning capacity following the marriage.

Marion's lawyers applied to the Family Court to set aside the agreement. The court took into account the close relationship between Pete's lawyers and the firm that originally acted for Marion, the friendly letter of referral between them and the fact that the lawyers had not even opened a file to record their advice to Marion.

The original lawyer was cross-examined about his advice and could not honestly say that he had ever tried to analyse whether any of the property subject to the agreement was matrimonial or separate property.

He had simply taken Marion through the wording of the agreement and had not advised her what she would be entitled to under the law if she had not signed the agreement. That omission was crucial, the court said.

The judge also noted that Marion was under duress when she signed. Pete was present at the lawyer's office when she saw her lawyer and he had reminded her that having their first child was entirely contingent on her signing.

The poor advice, the duress and the huge disparity between Marion's entitlement under the law and under the agreement led the court to the inescapable conclusion that the agreement should be set aside.

Contracting out agreements were seldom set aside but the law permitted the court to take this step in cases of serious injustice. The judge found on the evidence that this was one of those cases.

Marion was entitled to share in all the relationship property that she would have shared had she not signed the agreement.

Pete's connections had really let him down. He ended up having to share half of the property he had so confidently assumed was entirely his.

Marion's diffidence and vulnerability had been sorely taken advantage of and the court was not going to see her and the children being left high and dry in such a blatant case of injustice.

* Vivienne Crawshaw is a family law specialist with Gubb and Partners, Auckland. She can be reached through the Herald by email.