Birdwood & Gravino
[2023] FedCFamC1A 114
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1) APPELLATE JURISDICTION
Birdwood & Gravino [2023] FedCFamC1A 114
Appeal from: Gravino & Birdwood (No 2) [2023] FedCFamC2F 65 Appeal number(s): NAA 37 of 2023 File number(s): BRC 15058 of 2020 Judgment of: ALDRIDGE J Date of judgment: 14 July 2023 Catchwords: FAMILY LAW – APPEAL – Appeal from orders made rectifying a binding financial agreement so that instead of the net proceeds of sale of a property being divided equally as the document originally provided, they were to be divided so that the appellant received 25 per cent and the respondent 75 per cent pursuant to the rectified term – Consideration of whether rectification is available to correct binding financial agreements – Findings of fact – Whether a document sourced from the appellant established a common intention – Whether that document established an admission by the appellant that her intention at the time of executing the binding financial agreement was that there be a 75/25 split – Where, given the entire document, it could not be seen as establishing an admission by the appellant as asserted by the respondent – Where the finding made by the primary judge was therefore unsupported – Error established – Appeal allowed – The order rectifying the relevant term of the binding financial agreement to be set aside – Respondent to pay the costs of the appellant in a fixed sum. Legislation: Family Law Act 1975 (Cth) ss 90C, 90D, 90G, 90K, 90KA
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 9
Further Revised Explanatory Memorandum to the Family Law Amendment Bill 2000 (Cth)
Snell, Edmund Henry Turner, Snell’s Equity (Sweet & Maxwell, 24th edition, 1954)
Justice Brereton, “Binding or Bound to Fail? Equitable Remedies and Rectification of Financial Agreements” (2012)
Cases cited: Black and Black (2008) FLC 93-357; [2008] FamCAFC 7
Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353; [1956] HCA 28
Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337; [1982] HCA 24
Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53
Graham & Squibb (2019) FLC 93-89; [2019] FamCAFC 33
Lee v Lee (2019) 266 CLR 129; [2019] HCA 28
Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550; [2016] HCA 22
Senior & Anderson (2011) FLC 93-470; [2011] FamCAFC 129
Sindel v Georgiou (1984) 154 CLR 661; [1984] HCA 58
Number of paragraphs: 82 Date of hearing: 13 June 2023 Place: Sydney Solicitor for the Appellant: Brisbane Family Law Services Counsel for the Respondent: Ms Tabbernor Solicitor for the Respondent: Barry Nilsson Lawyers ORDERS
NAA 37 of 2023
BRC 15058 of 2020FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
DIVISION 1 APPELLATE JURISDICTIONBETWEEN: MS BIRDWOOD
Appellant
AND: MR GRAVINO
Respondent
order made by:
ALDRIDGE J
DATE OF ORDER:
14 July 2023
THE COURT ORDERS THAT:
1.The Application in an Appeal filed on 29 May 2023 is dismissed.
2.The appeal is allowed.
3.Order 2 made on 31 January 2023 by the primary judge is set aside.
4.The respondent pay the costs of the appellant fixed in the sum of $20,000 within 28 days.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Birdwood & Gravino has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALDRIDGE J:
INTRODUCTION
On 31 January 2023, a judge of the Federal Circuit and Family Court of Australia (Division 2) rectified a binding financial agreement (“the BFA”) entered into by the parties on 22 August 2019 so that instead of a division of the net proceeds of sale of a property being divided equally, as the document originally provided, they were to be divided so that the appellant receive 25 per cent and the respondent 75 per cent, pursuant to the rectified term.
Although it was not raised by the parties, I have concerns as to whether rectification is available at all to correct binding financial agreements.
Section 90K of the Family Law Act 1975 (Cth) (“the Act”) empowers a court to set aside a financial agreement “if and only if” it is satisfied that one or more of the subsections has been established. These grounds include fraud (which includes failure to disclose a material matter), if the agreement is void, voidable or unenforceable, or a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.
Section 90KA then provides:
Validity, enforceability and effect of financial agreements and termination agreements
The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a)subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b)has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c)in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
It would be odd, given the words “if and only if” in s 90K, that s 90KA could be read as expanding the grounds on which a financial agreement could be set aside beyond those provided for in the earlier section. Rather, its task is to give flesh to bones of s 90K by expanding upon, for example, the words “fraud”, “void”, “voidable or unenforceable”. It is therefore arguable that s 90KA is subservient to s 90K.
In terms, s 90KA applies when there is a question as to whether a financial agreement is valid, enforceable or effective. None of those immediately encompasses rectification, unless the rectification is necessary to save such an agreement from invalidity (rectification can be available where there is a doubt that there is a contract at all (Sindel v Georgiou (1984) 154 CLR 661)). However, that rectification is a remedy the High Court might grant, and there question of whether all of the powers of the High Court in relation to contracts are picked up or only those that relate to the validity, enforcement and effect of contracts. I incline to the latter because that is what the s 90KA clearly states.
Therefore, in order for rectification to be available under s 90KA, it must fall within the issue as to whether the agreement is effective or as part of the “effect of contracts”. I have concerns as to whether that is so in this appeal.
The court may also have a general power to rectify documents as a court of law and equity (s 9(1)(b) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) but that must be seen in light of the statutory scheme which includes s 90K and s 90KA.
Such an understanding of the limited nature of the provisions is confirmed by the relevant portion of the Further Revised Explanatory Memorandum to the Family Law Amendment Bill 2000 (Cth) which introduced s 90K and s 90KA into the Act:
160.Subsection 90K(1) provides that a court will be able to set aside a financial agreement if the court is satisfied that:
•the agreement was obtained by fraud (including non-disclosure of a material matter);
•the agreement is void, voidable or unenforceable including whether the agreement is obtained by the unconscionable conduct of one of the parties. These grounds reflect the principles of common law and equity, under which an agreement would fail because of lack of certainty, lack of intention to enter legal relations, or because the agreement is affected by duress, undue influence, unconscionability, misrepresentation or operative mistake. The inclusion of unconscionability as a separate ground is simply to make it clear that this ground is included within the grounds for setting aside an agreement. Unconscionability will retain its ordinary meaning within the law of contract. The provision is modelled upon the provisions of section 87(8)(c) of the Act and the Government expects it to be interpreted in a similar way (see for example the decision of the Full Court of the Family Court in Blackman v Blackman (1998) FLA [sic] 92-791); or
•circumstances have arisen since the agreement was entered into that make it impracticable for the agreement, or part of it, to be carried out.
…
163.Section 90KA provides that the validity, enforceability and effect of a maintenance agreement shall be determined by the court according to the principles of law and equity. Common law and equitable doctrines of particular relevance to maintenance agreements include mistake, rectification, fraudulent, negligent and innocent misrepresentation, collateral contract, estoppel and damages for breach. The new provision reflects a like provision in existing subsection 87(11) of Part VIII of the Act.
The question arises as to whether the words chosen by the legislature give effect to the intention set out in the last paragraph.
There is a further and, perhaps, more important difficulty which arises from s 90G of the Act. A financial agreement is only binding where each party has received the advice set out in s 90G(1)(b) and written statements to that effect are provided from each practitioner (s 90G(1)(c) and s 90G(1)(ca)).
The effect of rectification is to amend the terms of a document to accord with the actual intention of the parties. Thus, rectification changes the binding financial agreement so as to accord with that intention which it has failed to record. Yet, the requisite advice and certificate was based on the original and unrectified version. There would be no advice and certificate on the binding financial agreement as rectified, which is a precondition to its enforceability.
I leave aside for present purposes that the legal advice was mistakenly given on the basis of what the agreement should have said, as opposed to what it actually provided.
Thus, on either view, there is a difficulty as to how compliance with s 90G is achieved when a document is rectified some time later. Justice Collier noted this very difficulty in Black and Black (2008) FLC 93-357.
Nonetheless, there is Full Court authority as to the ability of the court to rectify binding financial agreements.
In Senior & Anderson (2011) FLC 93-470 (“Senior”), Strickland J, with the agreement of Murphy J on this point, found that s 90K extended to include rectification (at [101]–[106]). The above points were not, however, canvased.
This case is interesting. Justices Strickland and Murphy agreed that the financial agreement should be rectified by changing a reference from s 90C to s 90D, but not to rectify the certificates so as to change the name of the person to whom the advance was given. Justice May also permitted the rectification from s 90C to s 90D, but found that further rectification was unnecessary because general principles of the construction of contracts solved the issue. Her Honour relied upon the following well-known passage in Fitzgerald v Masters (1956) 95 CLR 420 at 426–427 per Dixon CJ and Fullagar J:
There is a superficial difficulty in cl. 8, because it purports to incorporate a set of conditions so far as they are inconsistent with what has been specifically agreed upon. No real difficulty, however, is created. Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency. Here it would be indeed absurd to suppose that the parties, having expressed their agreement on a number of special and essential matters, should intend to incorporate by reference terms inconsistent with what they had specially agreed upon. What they must clearly have intended is to incorporate a set of general conditions except so far as they were inconsistent with what they had specially agreed upon, and cl. 8 must be read as if it said “consistent” or “not inconsistent”.
(Emphasis in original)
It is not clear to me why this principle did not solve both the difficulties in Senior, because it was quite obvious that the errors were minor technical ones and there could be no dispute as to what was meant.
Senior was followed by a subsequent Full Court without any elaboration: Graham & Squibb (2019) FLC 93-892 at [63].
Writing extra-judicially, Brereton J as he then was, took the view that in proceedings “to set aside, salvage or enforce a financial agreement, the Court’s armoury includes the full range of remedies available to a court of law or equity”, which includes rectification (Justice Brereton, “Binding or Bound to Fail? Equitable Remedies and Rectification of Financial Agreements” (2012)). Again, the above points were not discussed.
None of the above issues was raised in this appeal so any consideration of them must await another day. It is not necessary to do so for the determination of this appeal.
BACKGROUND
In order to understand the appeal it is necessary to dwell on the factual matrix somewhat and to refer to some aspects of the primary judge’s reasons.
The parties separated on 26 August 2016 and were divorced in 2018. They entered into a BFA which is dated 22 August 2019.
The respondent is a solicitor who has managed his own legal practice for many years. He engaged another firm of solicitors to draft the BFA, which they did. Thereafter, the respondent acted for himself until the document was executed, when he attended on the same solicitors for the provision of the statutory advice and issue of the certificate. In the course of negotiations, he amended the BFA on six occasions.
It appears that the appellant acted for herself during negotiations.
The BFA was described as being entered into pursuant to s 90C of the Act. A consent order was made on 7 December 2022 rectifying the document so as to change all references to s 90C to s 90D (as it happened in Senior). At the same time, it was noted that the parties agreed that the BFA was binding and an order to that effect was made on 31 January 2023.
The parties had two properties, the relevant one for present purposes, was a property in Suburb B which, at the time of the negotiations, was registered in the sole name of the appellant and in which she lived.
As to the division of this property, the BFA recorded:
7.On or before the settlement date, [the appellant] will do all things and sign all documents necessary to transfer 75% of her right, title and interest in the [Suburb B] property to [the respondent] (provided that any necessary documents by prepared by [the respondent] at his expense).
(Appellant’s affidavit filed on 7 February 2022, Annexure “A”)
Pursuant to cl 9, the respondent was to be responsible for the payment of the interest and principal on the mortgage over the Suburb B property, council rates and reasonable water charges for a period of three years. The appellant was to be responsible for the building insurance.
Clause 11.8 granted the appellant the sole right to occupy the Suburb B property. Clauses 11.1–11.7 dealt with its sale. As to the balance of the proceeds of sale, cl 11.7.5 provided:
11.7.5. The balance to be divided equally between the parties; …
(Appellant’s affidavit filed on 7 February 2022, Annexure “A”)
Clause 24 recorded that the property the appellant was to retain included a 25% interest in the Suburb B property subject to the mortgage.
As I have said, the primary judge rectified cl 11.7.5 so that it provided for the appellant to receive 25 per cent of the proceeds of sale and the respondent 75 per cent.
The respondent did not, either before the primary judge or on appeal, argue that on the proper contemplation of the document as discussed earlier, cl 11.7.5 should be read as the appellant receiving 25 per cent and the respondent 75 per cent. The matter proceeded as a case of rectification only.
After execution of the BFA, the appellant transferred 75 per cent of her interest in the Suburb B property to the respondent. After three years it was sold and the net proceeds were held pending determination of the rectification question, save for an agreed payment of $50,000 to each party.
The original draft BFA provided for an equal division of the Suburb B property but a transfer of 50 per cent to the respondent at the time of settlement with the occupation period being two years, not three.
The respondent asserted that the change to a 75/25 split was agreed in a telephone call on 25 July 2019. The appellant disputed this.
A further version of the agreement was sent to the appellant on 26 July 2019. Clause 7 required the transfer of 75 per cent of the Suburb B property. The parties were to be equally liable for all outgoings (cl 9). The balance of the sale proceeds were to be divided equally (cl 11.7.5) and the parties were described as each retaining 50 per cent of the Suburb B property (cl 22.1 and cl 23.1).
The primary judge identified the principles to be applied to rectification in the following terms:
26.In his submissions the legal representative for [the appellant] placed heavy emphasis upon the judgment of Justice Mason P, Tobias JA and Campbell JA in Ryledar Pty Ltd t/as Volume Plus & Anor v Euphoric Pty Ltd [2007] NSWCA 65. At paragraph 122 of that judgment is a reference to a portion of Meagher Gummow & Lehane Equity, Doctrines & Remedies as follows:
it is of the upmost importance for a proper appreciation of the basis of the equitable doctrine of rectification to realise that the court, by its orders, merely reforms the instrument in which the parties have mistakenly expressed their agreement. The learned authors then cite the following passage from the judgment of Denning LJ in Frederick E Rose (London) Ltd v William H Pim Jnr & Co Ltd [1053] 2 QB 450 at 461:
In order to get rectification it is necessary to show that the parties were in complete agreement on the terms of their contract but by an error wrote them down wrongly …
27.In Ryledar cite at paragraph 124 is a portion of a judgment of Mason J in Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350:
What is of importance is that the purpose of the remedy is to make the instrument conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately. And there has been a firm insistence on the requirement that the mistake as to the writing must be common to the parties and not merely unilateral …
28.Later in paragraph 134 of Ryledar is a reference to Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345:
In general, the remedy of rectification of an instrument is available where it is established by clear and convincing proof that at the time of execution of the instrument the relevant party or parties as the case may be had an actual intention (if more than one party, a common intention) as to the effect which the instrument would have which was inconsistent with the effect which the instrument as executed did have in some clearly identified way, in this context ‘effect’ means the legal and factual operation of the instrument according to its true construction …
29.In Carran (supra) Judge Turnbull cites the High Court judgment in Simic v New South Wales Land and Housing Corporation (2016) 260 CLR 185 (sic) 85:
Rectification is an equitable remedy, the purpose of which is to make a written instrument “conform to the true agreement of the parties where the writing by common mistake fails to express that agreement accurately”. For relief by rectification, it must be demonstrated that, at the time of the execution of the written instrument sought to be rectified, there was an “agreement” between the parties in the sense that the parties had a “common intention”, and that the written instrument was to conform to that agreement. Critically, it must also be demonstrated that the written instrument does not reflect the “agreement” because of a common mistake. Unless those elements are established, the “hypothesis arising from execution of the written instrument, namely, that it is the true agreement of the parties” cannot be displaced.
The issue may be approached by asking – what was the actual or true common intention of the parties? There is no requirement for communication of that common intention by express statement, but it must at least be the parties’ actual intentions, viewed objectively from their words or actions, and must be correspondingly held by each party.
30. Turning then to apply the law to the facts of this case.
31.[The respondent] as the applicant [at first instance] bears the onus of establishing the need for rectification on the civil standard, being on the balance of probabilities. Words such as “clear and convincing proof” in Commissioner of Stamp Duties (supra) add no gloss nor higher standard of proof; as sought to be submitted for the respondent. It means the evidence must be clear as to what was intended by the parties…
His Honour’s identification of the principles to be applied was not challenged. I would simply add that the proof of the common intention must be “clear and convincing” so that the common intention of the parties is completely clear. Any ambiguity in what was intended falls short of the requisite standard.
The primary judge discounted the evidence called by both parties as to their common intention as follows:
31.… I have to assume, because [the respondent] did not call to give evidence the solicitor that witnessed his signature and provided the explanation certificate annexed to the BFA that the solicitor pointed out to [the respondent] the possibility of the internally inconsistent statements in clauses 11.7.5, 24.1 and 25.1 of the BFA. Having heard from the solicitor who provided the certificate to [the appellant], I am not convinced despite his written and oral evidence he pointed out to her the possibility of the above inconsistencies. It is implausible three years later when he swore his affidavit for the final hearing that he remembered that level of detail without any contemporaneous file notes to refer back to. His oral evidence when cross examined was not persuasive.
32.It is an agreed fact [the appellant] complied with clause 7 of the BFA, such that [the appellant] transferred 75% interest of her then 100% ownership in the property at [C Street Suburb B] to [the respondent].
33.Thus as at a date shortly after the 22 August 2019 (the date of the BFA) [the respondent] in effect had ownership of the assets and liabilities specified in clause 25.1 and [the appellant] had ownership of the assets and liabilities specified in clause 24.1 was accurate.
34. Turning then to the wording of those particular clauses. Clause 24 states:
24. [The appellant] shall retain as her property:-
24.125% interest in the [Suburb B] property subject to the mortgage secured on title to the National Australia Bank;
…
35.Clause 25 has a slightly different, but important difference, in wording. It provides:
25.[The respondent] shall retrain as his property without further claim from [the appellant]:
25.1 75% interest in the [Suburb B] property;
…
36.The written affidavits of the parties in their contents display no common intention between them about the terms of clause 11.7.5.
37.As to proving the clear intention of the parties relevant to clause 11.7.5, [the respondent] in his evidence only points to correspondence his solicitors had with the respondent dated 28 September 2021, which is correspondence making assertions just over 2 years after the date of the BFA.
38.[The respondent’s] other evidence about the clear intention of the parties is contained in paragraphs 49 and 57 of his affidavit. At (j) of paragraph 49 he wrote:
(j)Upon becoming aware of the error, I raised the issue with [the appellant] and, as outlined below, at times [the appellant] has acknowledged that the proceeds of sale of the [Suburb B] property should be divided 75% to me and 25% to her, however she does not concede this point at this time; …
39.[The respondent] doesn’t say when or how the respondent made the concessions he alleges.
(Footnote omitted)
None of these findings was challenged in the appeal. In short, to this point, the primary judge found that the evidence did not persuade him that there was a common intention of the parties as to the fate of the proceeds of the Suburb B property.
His Honour then turned his attention to a document known as “MG11” which was a document given to the respondent by the appellant on or about 11 August 2020, over a year after the BFA was executed. I shall refer to its terms when discussing the grounds of appeal.
At [41]–[48], his Honour discussed and rejected the appellant’s assertions that the “MG11” was not a genuine document.
This led to the following conclusion:
49.Ultimately, I am persuaded that the document annexed as [MG11] to [the respondent’s] affidavit is, for reasons earlier referred to, a document authored by the respondent and evidences the common intention of the parties. It is also a document that is in harmony with clauses 24.1 and 25.1 of the BFA. It is a document which provides proof of the parties’ common intention.
50.Having established a clear common intention for a division of the nett proceeds of sale of the [Suburb B] property, the BFA will be rectified at clause 11.7.5 to read 75% to [the respondent] and 25% to [the appellant].
Thus, the only evidence relied on by the primary judge to establish the common intention of the parties was “MG11” and the respondent’s asserted actual intention.
THE APPEAL
Ground 1
Ground 1 reads:
His Honour erred in finding that there was a clear and common intention of the parties for a division of the net proceeds of sale of the [Suburb B] property be divided with 75% of the proceeds to [the respondent] and 25% to go to [the appellant] where:
a.there was insufficient evidence, or alternatively no evidence to support such a finding; and
b.there was evidence to support clause 11.7.5 of the signed Agreement reflected the clear and common intention of the parties.
As can be seen, this ground is in two parts.
The first part can be dealt with easily. As explained earlier, his Honour found that the evidence, with exception of “MG11”, fell short of establishing a clear common intention. The reliance on that annexure is the subject of Ground 2.
The balance of the ground is directed to the failure of the primary judge to find that the common intention of the parties was for there to be an equal division of the parties’ property. This was because:
·The respondent, as an experienced family lawyer, apparently overlooked the equal division of the proceeds of the Suburb B property in cl 11.7.5 (or its various iterations) in the draft deeds prepared by him;
·The respondent did not tender any version of the draft deeds with the parties’ handwritten notes on them even though he had them in his possession;
·There are no notes, or files notes of the conversation in which the 75/25 split was agreed;
·In his oral evidence, the respondent said he could not be sure that the appellant said to him “an extra 25% of any sale proceeds of the Suburb B property to stay another year is outrageous as it means I am paying tens of thousands of dollars to live in my own house” (Appellant’s Summary of Argument filed on 5 May 2023, paragraph 18) and
·In the absence of any evidence from the solicitor who explained the agreement to the respondent and provided the certificate it must be assumed that he explained the equal division of the proceeds of sale of the Suburb B property.
The first three points support a submission that the respondent’s evidence as to his intention should not have been accepted. Evidence of a party’s actual intention is not admissible for the purposes of the proper construction of a written agreement. Codelfa Construction Pty Ltd v State Rail Authority of New South Wales (1982) 149 CLR 337 (“Codelfa”) at 347–348 states:
The broad purpose of the parol evidence rule is to exclude extrinsic evidence (except as to surrounding circumstances), including direct statements of intention (except in cases of latent ambiguity) and antecedent negotiations, to subtract from, add to, vary or contradict the language of a written instrument (Goss v. Lord Nugent). Although the traditional expositions of the rule did not in terms deny resort to extrinsic evidence for the purpose of interpreting the written instrument, it has often been regarded as prohibiting the use of extrinsic evidence for this purpose. No doubt this was due to the theory which came to prevail in English legal thinking in the first half of this century that the words of a contract are ordinarily to be given their plain and ordinary meaning. Recourse to extrinsic evidence is then superfluous. At best it confirms what has been definitely established by other means; at worst it tends ineffectively to modify what has been so established.
(Footnote omitted)
As to the respondent’s actual intention, it is clear that the primary judge relied only on what he regarded as a clear admission by the appellant in “MG11”. Absent that admission, the respondent’s evidence had fallen short. Again, the relevant ground is Ground 2.
As to the fourth point, that may be so, but the respondent’s evidence immediately continued by denying that the appellant said that she wanted an equal division of the Suburb B property.
The fifth point seeks the drawing of a slightly different inference from that drawn by the primary judge, which was that “the solicitor pointed out to the [respondent] the possibility of the internally inconsistent statements in clauses 11.7.5, 24.1 and 25.1 of the BFA” (at [31]). In the absence of other evidence, that is the appropriate inference. On the material before the court, the solicitor giving the advice had no means of knowing whether there was, indeed, an error in the document or, if there was, the nature of the error.
Whilst there was no apparent reason for the appellant having to transfer three quarters of the interest in the property only to receive one half on sale that may have been the intention of the parties. One would have thought that an astute solicitor would have raised this issue with their client but on the evidence before the court this was not so. The respondent did not call his solicitor and the evidence of the appellant’s solicitor was not accepted.
Although the respondent’s solicitor created the original draft, the respondent himself prepared the six subsequent versions. There is a clear discrepancy between cl 11.7.5 and cl 24.1 and cl 25.1. That however, could have been intentional. If not, it is difficult for the reader of just the BFA to determine which of these clauses did not reflect the intention of the parties.
Thus, the inference that the evidence of the respondent’s solicitor would not have assisted the respondent was correctly drawn.
The upshot of this is that there was real reason to doubt the correctness of the respondent’s evidence. However, these were also sound reasons to discount the evidence of the appellant, as the primary judge explained at [40]–[48].
However, to repeat, his Honour found the affidavits of the parties displayed no common intention. By reference to the reasons as a whole, it is clear that the primary judge took the same view of the oral evidence. There can be no doubt as to that because he regarded “MG11” as the only evidence of common intention.
In Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550, the High Court said:
43.… A court of appeal conducting an appeal by way of rehearing is bound to conduct a “real review” of the evidence given at first instance and of the judge's reasons for judgment to determine whether the judge has erred in fact or law. If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings. But a court of appeal should not interfere with a judge's findings of fact unless they are demonstrated to be wrong by “incontrovertible facts or uncontested testimony”, or they are “glaringly improbable” or “contrary to compelling inferences”. In this case, they were not. The judge’s findings of fact accorded to the weight of lay and expert evidence and to the range of permissible inferences. The majority of the Court of Appeal should not have overturned them.
See also Lee v Lee (2019) 266 CLR 129 at [55].
None of the above demonstrates error on the part of the primary judge. Nothing “glaring” or “improbable” has been established.
This ground does not succeed.
Ground 2
Ground 2 states:
His Honour erred in finding that the document annexed as [MG11] to [the respondent’s] affidavit evidences the common intention of the parties where:
a.there is nothing in the document that refers or relates to any percentage split between the parties of any sale proceeds from the [Suburb B] house.
This ground clearly raises the meaning of “MG11”. Its provenance was contested but the primary judge found it was a document from the appellant.
It is appropriate to set it out in full.
11.8.2020
Draft Financial Plan Post BFA
BFA ends […] August 2022
Mum […] August 2020
Mum […] August 2022
Mum […] August 2028
SIX YEAR PROPOSAL August 2022 to August 2028
Continue cash financial support but reduce from $280 to $150 = $7,800 pa
Multiplied by 6 years = $60,840 IOU plus interest
Continue to pay [the Suburb B property] mortgage after we sell [E Street property] deposit equity into [the Suburb B property] this should reduce mortgage which I think will be down to about $450k by then, to about $250k so:
Repayments should be about $200 a week which over 6 years = $62,400 IOU plus interest
Total I owe you: $123,240k plus interest
Of course your equity in [the Suburb B property] is yours and I will buy you out.
Our calculations on equity etc will now have changed as you are only paying interest (which once again is too high we should be paying 3 per cent or thereabouts and we should do something about this soon to save money)
So at some stage we have to do a recalculation.
(Respondent’s affidavit filed on 28 October 2022, Annexure “MG11”) (Emphasis in bold added)
Counsel for the respondent submitted that the emphasised words were an admission by the appellant that her intention at the time of executing the BFA was that there be a 75/25 per cent split.
That must be so for the document to have any effect at all.
In Charles Marshall Pty Ltd v Grimsley (1956) 95 CLR 353 at 356, the High Court quoted approvingly the following passage from Edmund Henry Turner Snell, Snell’s Equity (Sweet & Maxwell, 1954) at p.153:
… “The acts and declarations of the parties before or at the time of the purchase, or so immediately after it as to constitute a part of the transaction, are admissible in evidence either for or against the party who did the act or made the declaration… But subsequent declarations are admissible as evidence only against the party who made them, and not in his favour.” …
This document was written one year after the agreement was executed. Unless it can be construed as an admission by the appellant that at the time of execution, her intention was that there be a 75/25 per cent split, it carries no probative value whatsoever.
It is obvious that the document is a proposal to settle the then differences between the parties. That, of course, does not mean that it could not contain relevant admissions. However, care must be taken to distinguish between proposals for the future and statements expressing the appellant’s state of mind at the time of entry into the BFA.
The respondent submitted that the emphasised words did constitute such an admission, because there is a recognition that the respondent had a 75 per cent equity in the property. The most that can be said that it is, is an acceptance that the respondent had an equity in the Apsley property, which had always been the case. The question was the extent of the equity.
The point of the submission, however, is that there would be no need to buy out the respondent’s equity if the appellant was to receive 50 per cent on the sale in any event. I do not accept that. The evident purpose of the proposal is for the appellant to acquire the Suburb B property in its entirety, which would require her to buy out the respondent’s interest whatever it maybe.
The reference to “your equity” may be a reference to the actual 75 per cent then held by the respondent, but it could also be regarded as a reference to his 50 per cent interest after sale.
That phrase, is coloured by what follows. Immediately it is said “our calculations on equity etc will now have changed” followed by “so at some stage we have to do a recalculation”.
The reference to “your equity” cannot be read in isolation from these qualifying words and must be taken to be a reference to “your equity” as recalculated by the parties in the way outlined in the offer. So understood, the statement is not an admission against interest as to the respondent’s intention at the time the BFA was executed but a proposal to acquire the recalculated equity from the respondent.
As it is not such an admission, it is not evidence which can be taken into account.
There is a further difficulty. At the least, the sentence relied upon from “MG11” is ambiguous. As such it cannot be the “clear and convincing proof” required for rectification.
It follows that this ground has been made out.
I was asked to re-exercise the relevant discretion in the event that the appeal was allowed. This was not an appeal from the discretionary decision so that there is no scope for such a course.
The respondent filed an Application in an Appeal on 29 May 2023 seeking to adduce further evidence where the appeal was allowed. As explained above, this was not an appeal from a discretionary decision and the further evidence cannot be taken into account. As such it will be dismissed.
It may have been intended that I should embark on a process of construction of the BFA as discussed earlier and thereby resolve the disconformity between the provisions for transfer of the interest in the Suburb B property and the division of its proceeds. It is however, not at all clear from the terms of the BFA whether that disconformity was what was intended or not. Importantly, if it was not, there is no way of determining from the BFA itself the true meaning – it could be either that there be division of 50 per cent of the proceeds or 75 per cent. The various drafts and the sequence of amendments cannot be used for this purpose (Codelfa, as earlier quoted).
CONCLUSION AND COSTS
It follows that the BFA must take effect according to its actual terms. The appeal will be allowed and the application seeking rectification dismissed.
In these circumstances, it is appropriate that the respondent pay the appellant’s costs. She sought a sum of $24,137.76 but there is merit in the respondent’s submission that the appellant’s schedule is so lacking in detail that it is difficult to assess the reasonableness of that sum. Doing the best I can, the respondent will pay the appellant’s costs fixed in the sum of $20,000 within 28 days.
I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Aldridge. Associate:
Dated: 14 July 2023
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