Adamidis and Adamidis
[2009] FMCAfam 1104
•22 October 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ADAMIDIS & ADAMIDIS | [2009] FMCAfam 1104 |
| FAMILY LAW – Property proceedings – application to set aside a binding financial agreement. |
| Family Law Act 1975, ss.90G, 90E, 90K |
| Australian Securities and Investment Commission v Rich and Another (2004) 31 FamLR 667 J and J [2006] FamCA 442 B and B (2008) 38 FamLR 503; FLC 93-357 Gardiner and Baker [2009] FMCAfam 1029 Tsarouhi and Tsarouhi [2009] FMCAfam 126 Blackmore & Webber [2009] FMCAfam 154 Kostres v Kostres (2009) 40 FamLR 228 |
| Applicant: | MR ADAMIDIS |
| Respondent: | MS ADAMIDIS |
| File Number: | SYC 7576 of 2008 |
| Judgment of: | Lapthorn FM |
| Hearing date: | 18 September 2009 |
| Date of Last Submission: | 18 September 2009 |
| Delivered at: | Newcastle |
| Delivered on: | 22 October 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Thomas |
| Solicitors for the Applicant: | Lapaine Pomare & Forster Solicitors |
| Solicitor for the Respondent: | Mr Fatches |
| Solicitors for the Respondent: | Fatches Jones Lawyers |
ORDERS
That the words: ‘and to the maintenance of the parties’ in Recital H of the Binding Financial Agreement dated 7 November 2006 be severed from that Recital;
That the words: ‘as well as spousal maintenance’ in Recital I of the Binding Financial Agreement dated 7 November 2006 be severed from that Recital;
Declaration that other than as provided for in these orders the Agreement entered into between the parties dated 7 November 2006 is a Binding Financial Agreement pursuant to Section 90G of the Family Law Act 1975;
That the husband have leave, within 21 days, to further amend his amended Initiating Application filed 6 April 2009 to seek an order for spouse maintenance.
IT IS NOTED that publication of this judgment under the pseudonym Adamidis & Adamidis is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT NEWCASTLE |
SYC 7576 of 2008
| MR ADAMIDIS |
Applicant
And
| MS ADAMIDIS |
Respondent
REASONS FOR JUDGMENT
Introduction
In November 2006 Mr Adamidis and Ms Adamidis entered into an agreement in relation to property settlement upon the breakdown of their marriage.
The wife says that this agreement is a binding financial agreement under the Family Law Act however the husband says that because of a number of irregularities the agreement should be set aside and that he be permitted to proceed with an application for property settlement.
Brief history
Both the husband and wife are 35 years of age. They commenced to live together in 1996 and married in 2002. They have two children [X] who was born in 2003 and [Y] who was born in 2005.
The parties had a number of separations during their marriage. The husband says that they separated on a final basis in August 2008 whereas the wife says that they separated in around February 2005.
The wife received around $980,000 as an inheritance from her uncle in 2005.
On 7 November 2006 the parties executed a document which was entitled “Financial Agreement under Section 90C of the Family Law Act 1975” and subsequently referred to as a deed. It appears from that document, and was not disputed at the hearing, that at that time the wife had net assets and financial resources amounting to $1,017,578.43 and the husband had $62,871.93.
Applications and Evidence
The husband relied on his amended application that was filed on
6 April 2009 along with his affidavit also filed on that date. In that application he seeks parenting orders in relation to the children and property orders that would provide for the wife to pay him the sum of $250,000.00.
The wife relied on her amended response filed on 5 June 2009 and an affidavit filed in support on 31 August 2009. The wife also seeks final parenting orders but in relation to the husband’s property claim she seeks that it be dismissed with costs.
The proceedings before the Court on 18 September were to determine the preliminary issue of validity of the binding financial agreement. The husband submitted that in the event that he was not successful on this preliminary point the court should grant him leave to amend his amended application to seek orders for the wife to pay him the amount of $250,000 as lump sum spouse maintenance.
The Agreement
The agreement entered into between the parties includes a number of recitals under the heading ‘Introduction’ followed by the terms of the agreement. Annexed to the agreement are four documents. The first two are tables as to the parties’ financial circumstances and the other two are certificates from solicitors purporting to comply with s.90G.
These certificates are in identical terms apart from the names and details of the solicitors. The solicitors certified the following:
1. This Certificate is an annexure to the Section 90C Binding Financial Agreement entered into between Ms Adamidis and
Mr Adamidis.2. I provided my client with independent legal advice prior to entering into this Deed as to the following matters:
(a) the effect of this Deed on the rights of the parties; and
(b) the advantages and disadvantages, at the time that the advice was provided, to my client of making this Deed.
The recitals read as follows:
Introduction
A. This is a financial agreement under Section 90C of the Family Law Act 1975 (Cth) and it is agreed by the parties to cover all financial matters between them including, but not limited to , a division of their property and financial resources as well as their maintenance.
B. In order to promote harmony between themselves, to reduce the possibility of resorting to litigation and to avoid and reduce any dispute between them in the future about spousal maintenance and about ownership, use and division of property and financial resources, the parties have decided to enter into this Deed under the provisions of Section 90C of the Act.
C. Ms Adamidis and Mr Adamidis married [in] 2002 and had separated in about September, 2003. At the date of the Deed,
Ms Adamidis and Mr Adamidis are still married and are considering a reconciliation.
D. There are two children of the marriage, namely [X], born in 2003 and [Y], born in 2005. on 5 December 2005, orders were made by consent in the Family Court of Australia at Newcastle in relation to the children of the marriage.
E. Ms Adamidis and Mr Adamidis consider there is a prospect their relationship may become permanent and wish to define their financial rights and responsibilities during the marriage in the event their relationship becomes permanent.
F.
G. Ms Adamidis and Mr Adamidis intend this Deed to apply irrespective of any children born to the parties or changes in parenting arrangements of children that each party respectively already has.
H. It is intended that this Deed will apply to the whole of the property and financial resources of the parties and to the maintenance of the parties now and in the future.
I. The parties wish to enter into a Financial Agreement to preclude claims of any nature relating to financial matters, both in relation to property and financial resources as well as spousal maintenance that either has, or may have against the other pursuant to the Act and otherwise at law and in equity.
Both Ms and Mr Adamidis desire and intend this Deed to be a means of minimizing all possible friction in the future and should not be a source of additional friction between them. In particular, Ms Adamidis and Mr Adamidis desire and intend the terms of this Deed be given effect by any Court called upon to adjudicate on all financial mattes (property and maintenance) in issue between Ms Adamidis and Mr Adamidis pursuant to the Act.
In the body of the agreement under the heading ‘Independent Legal Advice’ the following is noted:
8.1 Each party has sought, obtained and given due consideration to individual and independent advice from a separate qualified legal practitioner and prior to executing this Deed as to matters including but not limited to:
(a) the effect of this Deed on the rights of each party to apply for property and maintenance orders under the provisions of the Act as amended and otherwise to seek relief at law and in equity; and
(b) the advantages and disadvantages at the time the advice was provided, for each party to enter into this Deed.
8.2 Before executing this Deed each party has had regard to the possibility that one or both of them may be subject to a change of circumstances.
Provision 11 of the Deed provides:
11. Governing Law and Jurisdiction
11.1 This Deed is governed by the laws of New South Wales.
11.2 Each party irrevocably submits to the non-exclusive jurisdiction of the courts of New South Wales.
Provision 16 of the Deed purports to sever any part of the Deed that is invalid or unenforceable leaving the remainder of the Deed in full force.
Legal approach
Part VIIIA of the Family Law Act 1975 makes provision for parties to enter into financial agreements which, subject to a number of conditions being met, are binding on the parties.
The Court has power to set aside a financial agreement if, and only if, one of the factors set out in s.90K apply. It was argued, by the husband, in this case that the agreement was void or voidable and therefore should be set aside under s.90K(b).
Section 90G(1), which applies to this agreement provides:
A financial agreement is binding on the parties to the agreement if, and only if:
(a)the agreement is signed by all parties; and
(b)the agreement contains, in relation to each spouse party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i)the effect of the agreement on the rights of that party;
(ii)the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement;
(iii)[repealed]
(iv)[repealed]
(c)the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(d)the agreement has not been terminated and has not been set aside by a court; and
(e)after the agreement is signed, the original agreement is given to one of the spouse parties and a copy is given to each of the parties.
The question as to what extent parties must comply with this provision has been considered in a number of decisions. O’Ryan J in Australian Securities and Investments Commission v Rich and Another[1] said:
[64] Section 90G sets out the requirements that must be met for a financial agreement to be binding upon the parties. All the requirements must be satisfied for the agreement to be binding. These requirements are justified because the effect of a valid agreement is to oust the jurisdiction of the court. However, there is no requirement of registration in the court or approval by the court of a financial agreement. Further, I am of the view that the requirements of s.90G are not stringent. All that is required is that the agreement be signed by both parties, include a statement addressing the matters in s.90G(1)(b) and attach a certificate from a legal practitioner.
[1] (2004) 31 FamLR 667 at para [64]
That case involved an attempt by a third party to have a financial agreement set aside and the decision did not turn on the point quoted.
In J and J[2] Collier J took a more strict view of the requirements in s.90G holding:
[19]To my mind the words that appear in section 90G(1) ‘if and only if’ are words of real significance. They have a meaning. They import a requirement for a level of compliance, if the agreement is to be binding, that is clearly a standard or level above and beyond what might be described as substantial compliance. Those words ‘if and only if’ make it clear that each of the parties must ensure that that which is required to be contained and dealt with in the agreement, and the annexures to it, is in fact contained, appropriately and completely. Compliance must therefore be a full compliance, satisfying the statutory requirements.
[20]Something approaching full compliance, or something that if looked at in a less than strict light, might come close to establishing compliance, is not enough. Clearly, the legislation intended that if this method of parties resolving their differences was to be used without any supervisory power of a Court, in a situation where parties’ rights were to be affected, then that which was to be done had to be done fully in compliance with that which the statute set out and required.
[2] [2006] FamCA 442
In that case Collier J was asked to enforce an agreement where in the body of the agreement the clauses referring to the advice given to the parties did not follow the wording of the legislation.
The Full Court in B and B[3] considered the appropriate approach to be adopted in these cases disagreeing with the trial judge’s objective approach to interpreting both the legislation and the terms of the agreement. Faulks DCJ, Kay and Penny JJ said:
[40] The Act permits parties to make an agreement which provides an amicable resolution to their financial matters in the event of separation. In providing a regime for parties to do so the Act removes the jurisdiction of the court to determine the division of those matters covered by the agreement as the court would otherwise be called upon to do so in the event of a disagreement. Care must be taken in interpreting any provision of the Act that has the effect of ousting the jurisdiction of the court. The amendments to the legislation that introduced a regime whereby parties could agree to the ouster of the court's power to make property adjustment orders reversed a long held principle that such agreements were contrary to public policy.
[3] (2008) 38 FamLR 503; FLC 93-357
After referring to the jurisprudence in relation to ousting the court’s jurisdiction the Full Court went on to say:
[42] The underlying philosophy that had guided the courts in enunciating that principle was seen to place too many restrictions on the right of parties to arrange their affairs as they saw fit. The compromise reached by the legislature was to permit the parties to oust the court's jurisdiction to make adjustive orders but only if certain stringent requirements were met.
The agreement in B & B was signed in 2002 when an earlier version of s.90G(1)(b) applied. At that time the advice that had to be given had to cover the following provisions which have now been repealed:
(iii) whether or not, at that time, it was prudent for that party to make the agreement;
(iv) whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable.
Recital R of the agreement read:
Each of the parties acknowledges that they have received independent legal advice as to the effect of this agreement prior to the execution of this agreement as evidenced by the lawyer’s certificate appended hereto.
Two further clauses dealt with the advice given to the parties. Clauses 29 and 30 were in identical terms other than one related to the advice given to the husband and the other related to the wife’s advice. Clause 29 read:
[The husband] acknowledges that prior to entering into this agreement he received from a lawyer acting independently of [the wife] and in the absence of [the wife] advice explaining the legal implications of this agreement and including but not limited to his rights and obligations pursuant to the Act and that this agreement excludes those rights and/or obligations. [The husband] further acknowledges that he is not acting under coercion or undue influence in the execution of this agreement.
The Full Court noted that the agreement did not refer to the specific requirements detailed in s.90G although the certificates had done so. They held that the recital and clauses did not meet all the requirements of s.90G(1)(b) and in particular had not made reference to any advice as to whether the agreement was fair or prudent.
In preferring the approach of Collier J in J v J, the Full Court concluded that as such an omission meant that the agreement did not comply with s.90G it was not binding on the parties. Their Honours went on to hold:
[45] …………… We are of the view that strict compliance with the statutory requirements is necessary to oust the court’s jurisdiction to make adjustive orders under s.79.
I consider myself bound by this decision of the Full Court.
Federal Magistrate Coakes in Gardiner and Baker[4] recently held the omission of the word ‘disadvantages’ from the recital as to advice given did not comply with s.90G(1)(b)(ii) and as a consequence the agreement was set aside. That provision required the following:
the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement
[4] [2009] FMCAfam 1029
His Honour rejected the argument that the mere omission of the word ‘disadvantages’ did not change the meaning of the advice given or failed to comply with that required under the Act.
Federal Magistrate Riley also considered this issue in the decision of Tsarouhi & Tsarouhi.[5] In this case the relevant clause only spoke of:
[5] [2009] FMCAfam 126
the advantages and disadvantages of this agreement
Her Honour held:
[69] In my view, by simply saying advice was given as to the advantages and disadvantages of the agreement, the agreement did not comply with the requirement that the agreement contained a statement to the effect that the wife was given advice as to the advantages and disadvantages to her, at the time that the advice was provided, of making the agreement.
Discussion
There is no dispute that the document was signed by both parties, that an original was kept by one of them and they each have a copy. The agreement has not been terminated by any event or set aside by any court.
The primary argument relied upon by the husband was that the wording used in clause 8(1) did not reflect the requirements of s.90G(1). The certificates annexed to the agreement follow the wording of the legislation but clause 8(1) suggests the advice given included but was not limited to the rights of the parties to apply for property and maintenance orders and to seek relief at law and in equity.
Mr Fatches argued that the wording of the clause was ‘to the effect of’ that which was required under s.90G(1). He accepted that the decision in B & B meant there needed be strict compliance with the section but argued that the Full Court did not go as far as to find that the exact wording in the legislation was necessary.
I am satisfied that by the inclusion of the words ‘to the effect of’ the section does not require the precise wording of the legislation, although it would be a prudent approach to adopt. Having said that however the court must be satisfied that the wording used amounts to strict compliance with the section.
Although the annexures used the words of the legislation it is clear from the decisions in J & J and B & B that the certificates can not be incorporated into and adopted by the agreement itself.
What is the effect of the additional words: to apply for property and maintenance orders under the provisions of the Act as amended and otherwise to seek relief at law and in equity? Mr Thomas argued that it appeared to limit the advice to the rights of the parties to apply for orders in relation to property and maintenance and therefore the advice given was not in strict compliance with the section. Mr Fatches on the other hand argued that by including ‘and otherwise to seek relief at law and in equity’ the advice given was all encompassing amounting to a statement to the effect of that which was required by the section and therefore was in strict compliance with it.
Mr Thomas submitted that if the wife’s approach was adopted the court would fall into the same error the trial judge in B & B did. He argued that in that case the trial judge adopted an objective approach to the interpretation of the agreement by placing undue weight on the words ‘to the effect that’ which appear in s.90G(1)(b).
The words ‘to the effect that’ can not be ignored. This case is somewhat different from the other decisions referred to above in that they dealt with cases where words or whole provisions were omitted. In this case extra wording has been used. The Full Court found in B & B that the recital and clauses used there did not meet all the requirements of the section particularly as there had not been any reference to advice in relation to those mattes that have now been repealed but were applicable at the time of the agreement. The Full Court did not specifically refer to those terms of the clause that went further than that that was required under s.90G(1)(b)(i). In particular the words ‘…advice explaining the legal implications of this agreement and including but not limited to his rights and obligations pursuant to the Act and this agreement excludes those rights and/or obligations.’ The Full Court did not take the opportunity to criticise this wording or make any findings about it but rather suggested the lack of reference to the other provisions meant that it did not meet all of the requirements.
It is hard to imagine any advice that could be given to a party in relation to a financial agreement that would fall outside of ‘… the rights of each party to apply for property and maintenance orders under the provisions of the Act as amended and otherwise to seek relief at law and in equity.’ If the advice had ended after the word ‘orders’ the situation may have been different. Although I note the decision of Federal Magistrate Bender in Blackmore & Webber[6] where her Honour considered an agreement that had the following recital:
[6] [2009] FMCAfam 154
Before each party signed this agreement, he and she received separate independent legal advice from a legal practitioner as to the following:
· The effect of this agreement on that party’s rights to apply for orders under Part VIII of the Act;
· The advantages and disadvantages, at the time that the advice was provided, to the party of entering into this agreement;
in accordance with the attached certificate from the parties respective legal practitioners.
Her Honour concluded that the decision in B & B did not require such agreements to reproduce the wording of the section verbatim and was satisfied the addition of the words ‘to apply for orders under Part VIII of the Act’ were sufficient to meet the requirement of the section although for other reasons her Honour set the agreement aside.
I am satisfied in this case that the wording in clause 8(1)(a) is more encompassing than used in the decision of Blackmore & Webber and although the wording used was not identical to that required under s.90G(1)(b)(i) there has nonetheless been compliance with the provision.
Mr Thomas also argued that the inclusion of recital H in the agreement, together with a reading of clause 8.1(a) falls foul of the provisions of s.90E and therefore the court should find that the agreement can not stand.
Section 90E provides:
A provision of a financial agreement that relates to the maintenance of a spouse party to the agreement or a child or children is void unless the provision specifies:
(a) the party, or the child or children, for whose maintenance provision is made; and
(b) the amount provided for, or the value of the portion of the relevant property attributable to, the maintenance of the party, or of the child or each child, as the case may be.
There being no provision in the agreement for the payment of maintenance and no allocation of an amount or portion of property considered to be maintenance in the agreement it is clear that s.90E has not been complied with.
Mr Fatches argued that the reference to maintenance in the recitals did not form part of the agreement itself and could be severed from the agreement without voiding the whole of it. His argument was based on general contractual principles. That may be so.
I am satisfied that by enacting s.90E the legislature clearly intended for the possibility of voiding part of an agreement with out necessarily voiding the whole of it. The reference in that section to ‘A provision of a financial agreement that relates to maintenance ………. is void unless……’ suggests that the legislature considered there would be circumstances where such a provision could be severed.
Although recitals themselves do not form part of the terms of an agreement or contract they can not be ignored when considering the document as a whole. It is clear that the parties were intending to enter into an agreement based on advice received as to their rights in relation to applying for property and maintenance orders under the Act.[7] Mr Thomas argued, in effect, that whilst recitals H and I may be severable under s.90E and general contractual principles, to do so without voiding the whole agreement may leave one or both parties in a disadvantaged position having relied on the advice given as to maintenance such that they may not have entered into the agreement in the first place if such provision was not included. In other words the parties may have entered into the contract on a wrong premise.
[7] Clause 8.1(a)
In Kostres v Kostres[8] Federal Magistrate Wilson held:
[25] ……It is not open to a party to argue that the substance of the advice given was incorrect, or given on a false premise (unless perhaps, this was known to the other party to the marriage, who could be said to have acted unconscientiously in reliance on the mistaken belief of the other. That however, is a different matter, and is best addressed when consideration is given to s.90K of the Act). If the advice was wrong (in the sense of being given negligently, or in breach of retainer) the party to the marriage has rights elsewhere……….
[8] (2009) 40 Fam LR 228
Although that case related to a mistaken belief of a fact as to the husband’s status as an undischarged bankrupt I respectfully adopt the passage quoted.
I do not consider that the severing of the maintenance references in recitals H and I justifies voiding the whole document. Given there was no provision for the payment of maintenance I am satisfied that the integrity of the agreement as a whole as not been compromised. Further when one looks at where any disadvantage would lie in this case it would lie with the wife as by severing the references to maintenance the husband would be able to bring an application for spouse maintenance, a point conceded by Mr Fatches, and it is the wife that has argued for the severing of this provision.
The husband also argued that the provision at clause 11 purporting to apply the laws of New South Wales to the deed would warrant setting aside the argument. Mr Fatches argued that the purpose of that provision was to assist a court considering an application to enforce the deed as to which law of contract applied. I do not consider such a provision to be fatal to the deed’s validity as it does not purport to oust the jurisdiction of any court exercising jurisdiction under the Family Law Act 1975.
Conclusion
For the above reasons I am not satisfied that the agreement should be set aside but am satisfied that the references to maintenance in Recitals H and I are severable from the agreement.
Having made that finding I am also satisfied that the husband should be granted leave to amend his application to seek an order for spouse maintenance. This was conceded by Mr Fatches on behalf of the wife. The husband should be afforded 21 days in which to do so.
I certify that the preceding fifty-seven (57) paragraphs are a true copy of the reasons for judgment of Lapthorn FM
Associate: Helen Drysdale
Date: 22 October 2009
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