Ainsley and Lake
[2016] FCCA 2132
•26 July 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| AINSLEY & LAKE | [2016] FCCA 2132 |
| Catchwords: FAMILY LAW – Property – Binding Financial Agreement – agreement set aside due to wife’s failure to disclose the value of her superannuation at the time the Deed was signed. |
| Legislation: Family Law Act 1975 (Cth), ss.79, 90K |
| Cases cited: Stoddard & Stoddard [2007] FMCAfam 735 |
| Applicant: | MS AINSLEY |
| Respondent: | MR LAKE |
| File Number: | WOC 790 of 2014 |
| Judgment of: | Judge Henderson |
| Hearing date: | 15 July 2016 |
| Date of Last Submission: | 15 July 2016 |
| Delivered at: | Sydney |
| Delivered on: | 26 July 2016 |
REPRESENTATION
| Counsel for the Applicant: | Mr Rosic |
| Solicitors for the Applicant: | Kells The Lawyers |
| Counsel for the Respondent: | Ms Humphreys |
| Solicitors for the Respondent: | Rebecca Bailey & Associates |
ORDERS
The Binding Financial Agreement dated 1 March 2012 be set aside.
IT IS NOTED that publication of this judgment under the pseudonym Ainsley & Lake is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
WOC 790 of 2014
| MS AINSLEY |
Applicant
And
| MR LAKE |
Respondent
REASONS FOR JUDGMENT
The matter of Ainsley & Lake concerned the enforcement by the wife of a binding financial agreement the parties entered into on 1 March 2012. The husband seeks the agreement be set aside pursuant to section 90K of the Family Law Act[1]. Mr Rosic of counsel represented the wife and Ms Humphreys of counsel the husband.
[1] Family Law Act 1975 (Cth), s70K
The evidence led for the parties was as follows:
a)For the wife;
i)The Wife’s affidavit filed 2 February 2016;
ii)Her financial statement filed 26 August 2014;
iii)Case outline filed for the hearing; and
iv)The minute of order she sought which is effectively that the agreement be enforced;
b)For the husband;
i)The husband’s amended response filed 28 January 2016;
ii)His affidavit of 2 February; and
iii)An additional affidavit of 7 July 2016.
c)Both parties were cross-examined at the final hearing.
A short chronology of the matter is as follows;
a)The husband was born in 1972, the wife in 1976.
b)They commenced living together in 2000 and were married in (omitted) 2008.
c)They separated in October 2010.
d)They entered into a binding financial agreement on 1 March 2012.
e)The former matrimonial home was sold in March 2014.
f)They have two young sons who live with their mother and spend time with their father.
Section 90K of the Family Law Act
Circumstances in which court may set aside a financial agreement or termination agreement
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
a) the agreement was obtained by fraud (including non-disclosure of a material matter); or
(aa) a party to the agreement entered into the agreement:
i)for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
ii)with reckless disregard of the interests of a creditor or creditors of the party; or
(ab) a party (the agreement party) to the agreement entered into the agreement:
i)for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or
ii)for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
iii)with reckless disregard of those interests of that other person; or
b)the agreement is void, voidable or unenforceable; or
c)in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
d)since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
e)in respect of the making of a financial agreement--a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
f)a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
g)the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.
The binding financial agreement signed by the parties did not disclose the wife’s then superannuation which was around $35,000. This sum was not disclosed either in the body of the agreement or in schedule A to the agreement. Schedule A is described in the binding financial agreement at Recital K.
Recital K of the agreement is as follows:
“As at the date of this Agreement, the parties have assets and liabilities as set out in Schedule A of this Agreement.”
Recital L is as follows:
“Each of the parties, prior to the execution of this Agreement, have had the opportunity to inspect and values of the assets and liabilities set out in Schedule A to this agreement including obtaining any advice of an accountant. The parties are agreed as to the values set out in Schedule A and are agreed that the values are accurate to the best of their knowledge.”
Recital M:
“The parties agree they have each made a full and fair disclosure of their financial circumstances to the other party.”
The wife did not disclose the value of her superannuation in the agreement despite having told her lawyer of its value and having received a letter from her lawyer dated 9 December 2011, which letter is in evidence before me and which confirms her interest in her superannuation fund was then $35,000.
This figure was not only not included in schedule A, it was not referred to in the body of the binding financial agreement itself and that is a relevant fact for a debt of some $20,000-odd of the husband’s business being secured by an overdraft over the then matrimonial home was also not set out in schedule A. However that debt is referred to in clause 6(b) of the agreement and is, therefore, disclosed.
Mr Rosic submitted that the agreement was enforceable, that the wife had not failed to disclose a material fact and that I should so find.
I accept the following findings from the evidence I have heard:
a)The husband and wife did not seek to deal with each other’s superannuation and they each intended they would retain what superannuation they had.
b)There was no superannuation splitting order or reference to superannuation in the body of the agreement.
c)The wife did not put anything next to item 13 of schedule A which reads: “Ms Ainsley’s superannuation”; it was specifically left blank.
d)The husband knew the wife had superannuation at the time of entering into the agreement as in evidence he said he had seen a document in about 2000 showing she had a then balance of $6,000.
e)The husband believed the wife’s superannuation was at the time of signing the agreement some $6,000.
f)The husband is in serious default of his obligation under the binding financial agreement in two parts. He failed to comply with clause 8 and pay towards the mortgage the sum of $2,166 per month and at the date of the sale of the former matrimonial home he was in arrears of this clause in the sum of $17,806.
g)Secondly the husband breached clause 6(b) of the deed in that he failed to cause the overdraft of $20,439 of the business he retained pursuant to the deed which to be paid out of his own company funds or his own funds. That overdraft was paid out of the net proceeds of sale of the former matrimonial home thus reducing the monies paid to the wife at settlement of the sale as she was to retain all the net proceeds of sale pursuant to clause 6(c) of the deed.
h)The husband’s total default under the deed amounts to no less than $38,241 being the additions of my findings of the above paragraphs. The wife’s solicitors informed the husband that he was in arrears by a letter dated 28 April 2014 and the wife then sought to enforce the deed and have the sum of $38,241 paid to her.
i)The wife has complied with her obligations under the deed, in clause (6), in that upon determining she was unable to purchase the former matrimonial home from her husband which was an intention under the deed she ensured the home was listed for sale within 21 months of the date of the agreement.
j)The husband and his new partner purchased a home one month after the settlement of the sale of the former matrimonial home.
Mr Rosic has satisfied me from his cross-examination of the husband and from the cross-examination of the wife of these matters. However, they are not, as I see the law, relevant to the fact in issue. The fact in issue is whether the wife failed to disclose a material fact therefore falling within the definition of fraud under section 90K of the Family Law Act.
Clearly she did fail to disclose a material fact, albeit without any intention to defraud in the usual meaning of such a phrase. The wife failed to disclose to the husband the value of her superannuation at the relevant time namely the signing of the deed.
I reject any argument on behalf of the wife that she and her husband discussed her superannuation at the various round table conferences the parties had with the lawyers prior to signing the deed. The husband rejects any disclosure by her and I am not satisfied this occurred on the evidence.
There is not one independent piece of evidence to support the wife’s claim of disclosure. Although the wife may believe she disclosed her superannuation amount there is not one thing in writing sent to the husband’s solicitors confirming same and that is an important factor in this matter.
Looking at the decisions that are relevant to this matter, a decision of Judge Altobelli in Stoddard & Stoddard[2] is clearly on point. His Honour says there at paragraph 44 of his decision:
“I accept the definition of fraud as submitted on behalf of the wife. Her counsel referred me to the Full Court’s decision in Green and Kuriatek (1982) FLC 91-259 at 77,456. The essence of fraud is a false statement of fact made by one party to another knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false, with the intent that it should be acted on by the other party and which was in fact so acted on.”
[2] Stoddard & Stoddard [2007] FMCAfam 735
And in bold his Honour goes on to say:
“It is possible though, that in the context of s.90K(1)(a) fraud has a broader meaning in that it may be constituted by non-disclosure of a material matter. Thus whereas fraud at common law may require a representation, under s.90K(1)(a) fraud may be constituted by omission i.e. non-disclosure of a material matter.”
This must be correct for fraud has a much broader interpretation under section 90K(1) of the Act[3] by the inclusion of the words “including non-disclosure of a material matter” than it would have in the general understanding of the meaning of the word “fraud.”
[3] Family Law Act 1975 (Cth), s.90K(1)
In the decision of Blackmore & Webber[4] Judge Bender confirmed the well established authorities in binding financial agreements are that binding financial agreements are strictly interpreted. That is clearly a proper approach given that these agreements are made outside the purview of the court and are binding and give away potential future rights of a spouse under section 79 of the Act[5] and to spouse maintenance, for example.
[4] Blackmore v Webber [2009] FMCAfam 154
[5] Family Law Act 1975 (Cth), s79
As Judge Bender says in her decision, “The difficulty with a non-disclosure by one party to the other is that the solicitor advising the other party is deprived of a full and frank understanding of the totality of the financial position of each party including the other party on what their entitlements are and are thus giving advice on the advantages and disadvantages of a deed on incorrect information “ and thus the advice cannot be relied upon by he or she receiving same from their solicitor.
It would make a mockery of the certificate provided by a solicitor to a party in a binding financial agreement that the advice provided was sound when the other party had not fully disclosed their then total financial position. How could such advice be sound unless the error was of the most minor compass or a mere error in transcription or the like and thus not material.
To find that an agreement was binding when there has been a non-disclose of a material matter would make a mockery of section 90K(1)(a) and its clear intention. For parties to be able to rely upon this section there must be a full and frank disclosure by each of them of their total financial position as at the date of signing the deed. That is clearly the intention of section 90K(1) and the intention of the certificate so that there is confidence that advice given to a party is as best as it can be because all material facts have been disclosed.
In addition the wife’s failure to disclose her current superannuation at the time she signed the deed is in breach of recital K, recital L and recital M of the binding financial agreement.
The wife clearly failed to disclose a material fact the value of her superannuation and for all these reasons the deed is void and must be set aside. Either party is at liberty to file an application under section 79 of the Family Law Act in relation to property settlement. I have made the findings in respect of the husband’s conduct in an endeavour to have the parties reach a financial arrangement and enter into consent orders without filing in this court at further expense to them.
The asset pool is small and significant sums have already been spent on an application that on any reading of the material and the law was, as I see it, doomed to fail. What the husband knew of the wife’s superannuation at the time he signed the deed, his failure to comply with the terms of the deed although clear and obvious, is irrelevant to this discrete issue in this case.
It was the wife’s obligation to disclose her financial position. It was not the husband’s obligation to find it out. Further I reject entirely Mr Rosic’s position that as the husband did not waive his privilege and produce his then lawyer’s file I could draw an adverse inference that to have produced would not have assisted him and thus this supports the wife’s case. To so find would make a mockery of legal professional privilege and that cannot be correct.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Judge Henderson.
Date: 23 August 2016
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