Black & Black
[2008] FamCAFC 7
•24 January 2008
FAMILY COURT OF AUSTRALIA
| BLACK & BLACK | [2008] FamCAFC 7 |
| FAMILY LAW - APPEAL – FINANCIAL AGREEMENT – Parties had a short marriage of 18 months during which they entered into a financial agreement – Husband sought to have the financial agreement set aside on the basis that it did not comply with the statutory requirements for a binding financial agreement pursuant to s 90G as it was prior to the 2004 amendments – The trial judge adopted a purposive approach to interpreting the requirements of s 90G and held that the financial agreement was binding – Held on appeal: the financial agreement did not meet the requirements of s 90G(1)(b) in that it failed to include a statement that the parties had received independent legal advice in relation to all matters set out in the then s 90G(1)(b); a strict interpretive approach and strict compliance requirements should be applied where legislation ousts the court’s jurisdiction to make adjustive orders under s 79 – Appeal allowed, financial agreement set aside and retrial of the parties’ property settlement claims ordered |
| Family Law Act 1975 (Cth) Federal Proceedings (Costs) Act 1981 (Cth) |
Australian Securities & Investments Commission and Rich & Anor (2003) FLC 93-171
Brooks v Burns Philip Trustee Co Ltd (1969) ALR 321
Burgoyne and Burgoyne (1978) FLC 90-467; (1978) 4 Fam LR 204
Candlish and Pratt (1980) FLC 90-819; (1980) 6 Fam LR 75
Davies v Davies (1919) 26 CLR 348
Hyman v Hyman [1929] AC 601
J and J [2006] FamCA 442
Naughton and Naughton (1983) FLC 91-327; (1983) 9 Fam LR 47
Wright and Wright (1977) FLC 90-221; (1977) 3 Fam LR 11,150
| APPELLANT: | Mr Black |
| RESPONDENT: | Ms Black |
| FILE NUMBER: | HBF 1755 of 2004 |
| APPEAL NUMBER: | SA 65 of 2006 |
| DATE DELIVERED: | 24 January 2008 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Hobart |
| JUDGMENT OF: | Faulks DCJ, Kay and Penny JJ |
| HEARING DATE: | 4 June 2007 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 15 September 2006 |
| LOWER COURT MNC: | [2006] FamCA 972 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Williams |
| SOLICITOR FOR THE APPELLANT: | Cann Legal |
| COUNSEL FOR THE RESPONDENT: | Mr McVeity |
| SOLICITOR FOR THE RESPONDENT: | McVeity and Associates |
Orders
The husband’s appeal be allowed.
Orders 1, 2 and 3 made by the Honourable Justice Benjamin on 15 September 2006 be set aside
The financial agreement entered into between the parties on 3 September 2003 be set aside.
The parties’ respective claims for alteration of property interests be remitted for retrial.
The Court grants to the appellant a costs certificate pursuant to the provisions of s.9 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by the appellant in relation to the appeal.
The Court grants to the respondent a costs certificate pursuant to the provisions of s.6 of the Federal Proceedings (Costs) Act 1981 being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by the respondent in relation to the appeal.
That the Court grants to the respondent/husband a further certificate pursuant to the provisions of s.8 of the said Act being a certificate stating that in the opinion of the Court it would be appropriate for the Attorney General to authorise a payment under that Act to the parties in respect of such part as the Attorney General considers appropriate of any costs incurred by the parties in relation to the new trial granted by these orders.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of the Full Court delivered this day will for all publication and reporting purposes be referred to as Black & Black.
| FAMILY COURT OF AUSTRALIA AT HOBART |
Appeal Number: SA 65 of 2006
File Number: HBF 1755 of 2004
| Mr Black |
Appellant
And
| Ms Black |
Respondent
REASONS FOR JUDGMENT
Introduction
This was an appeal against orders made by Benjamin J on 15 September 2006 dismissing an application to set aside a financial agreement.
The parties were married for a period of 18 months. In the course of their marriage they signed an agreement that envisaged that:
· the husband would sell his house;
· the monies from the sale of the house would go into a deposit account;
· the wife would put into the deposit monies that she was about to receive from a personal injuries claim;
· they would acquire another house;
· in the event their marriage broke down the new house would be deemed to be joint property; and
· it would be sold and divided equally between them.
The parties bought a house before the wife’s personal injuries settlement was finalised. The settlement, when it came through, was smaller than the husband had hoped for, the result of which is that he put significantly more into the pool of assets than the wife yet was limited by the agreement to recovering only half the value of the house. He saw this as an unfair result.
He sought to either have the agreement declared void or set aside and to have an 80/20 division in his favour. The wife sought to protect her 50/50 result brought about by the agreement.
The trial judge concluded there was a binding agreement and that none of the matters raised by the husband that might allow him to interefere with the agreement were proven. As a passing comment his Honour said if he was wrong about all of that than a 2/1 division in favour of the husband was a fair result.
Whilst the grounds of appeal were voluminous it seems to us that the matter turns only on one issue which requires an interpretation of s 90G of the Family Law Act1975 (Cth) (“the Act”) and the provisions of the agreement itself.
Background
At the time of the trial the husband was 43 years of age and the wife 42. The parties met in 2001 and married in April 2002. They separated in May 2003, the relationship lasting only some 18 months.
There are no children of the marriage although the husband has two children from a previous relationship and the wife has three children also from a previous relationship.
At all times relevant to this appeal neither party was in full time employment, both having suffered injuries through accidents which reduced their working capacity. The husband settled his compensation claim for $103,000 in 1998. The wife received her injuries at the beginning of the parties’ relationship had only just instituted proceedings for damages.
At the commencement of their relationship the parties lived in a house owned by the husband in South Australia. The parties discussed purchasing a house together, but before doing so decided to enter into a financial agreement which set out the manner in which the home would be purchased and what would happen to the property if they separated.
The relevant provisions of the agreement were:
(a)the husband was to sell his property in South Australia and the proceeds of the sale were to be deposited into an interest bearing account in the names of the husband and wife;
(b)the wife was to contribute into the account the monies she was to receive from her personal injuries compensation claim (excluding some monies to be used to purchase a motor vehicle);
(c)the wife was to sell her current motor vehicle and the proceeds of the sale were to be deposited into the account;
(d)the funds in the account were to used for the purchase of a matrimonial home; and
(e)in the event the parties separated, after the purchase of a matrimonial home, the home would be considered joint property of the parties and divided equally between them.
The husband sold his house in South Australia in December 2002. The net proceeds of the sale were approximately $180,000. The parties then moved to Tasmania and entered into a contract in December 2002 to purchase a house for $220,000. The purchase was completed in March 2003 and the property was registered in the joint names of the parties.
The wife did not receive any money in relation to her personal injuries claim until September 2004 after the parties had separated. The amount she received was significantly less than the amount anticipated by the husband. The wife settled her claim for $78,739.85, and after paying debts, was left with only $41,000. These funds were not contributed to the purchase of the home, but were placed in a separate account. The husband asserted that the wife told him that she was hoping to receive approximately $200,000 by way of damages. The wife denied this saying she was unaware of the amount she was to receive. The trial judge preferred the wife’s evidence concerning her expectations. In the end result the husband’s contribution to the purchase of the Tasmanian home was much greater than the wife’s.
The husband initiated proceedings seeking to set aside the financial agreement made between the parties and sought consequential orders in relation to the parties’ property, particularly in relation to the property in Tasmania which is the subject of the financial agreement. He sought orders that the assets of the parties be divided 80/20 in his favour to take into account the significantly larger financial contribution made by him.
The wife sought a 50/50 division of the parties’ assets which were agreed to be:
Tasmanian property $330,000.00
Husband’s motor vehicle $3,500.00
Husband’s house contents $5,000.00
Wife’s motor vehicle $12,000.00
Tasmanian deposit account $43,760.00
Proceeds of sale of the wife’s former motor vehicle $500.00
Wife’s house contents $5,000.00
Total $399,760.00
Less Liabilities
Mortgage (approximately) $52,000.00
Total pool of assets as at hearing $347,760.00
The trial judge found that the parties’ relationship was unsettled and punctuated by acts of violence perpetrated by the husband against the wife. His Honour found that in the turmoil of the relationship the husband wanted the parties to enter into a financial agreement, the judge finding that the husband was hoping to share in the fruits of the wife’s compensation claim. His Honour said:
40.I find that the husband, at all relevant times prior to the making of the agreement, wanted an agreement between the wife and himself. I find that he wanted a pre-nuptial agreement before the parties married and that they had three or four discussions about a pre-nuptial agreement before being married. The husband says that the agreement was his wife’s idea, I do not accept his evidence in that regard is truthful.
41.The husband says that the agreement was wholly drawn by the wife’s solicitors. This is not accurate, that agreement was at least revised by the husband’s solicitors. It may well be that the agreement was retyped by the husband’s solicitor, but this is not clear.
42.In terms of the sequence of events with regard to the agreement the evidence of the husband was that the parties had separated for about five weeks when the wife came to [South Australia], bringing with her an agreement. He took it to his lawyer’s office on 2 September 2002. He had refused to sign an earlier version and the wife had said words to him to the effect “I will not come back to the relationship unless it is signed”. He said that the wife then went with him to his solicitor’s office … but remained outside in the car. The agreement was signed, handed to her and she took it to her solicitor. The inference sought by the husband was of a dominant wife determined to have the agreement executed. I do not make that inference and I find that it was not the case.
43.The next day the husband says that the wife told him that he needed to initial every page and made an appointment for either 4, 5 or 6 September to initial every page and the alteration to clause 17. He did so and the wife took the agreement away. He was not given a new certificate after the one given on 2 September 2002, by his solicitor. He said he did not recall what the wife did with the agreement except that she told him that she would give it to her lawyers.
His Honour concluded that that the financial agreement between the parties was binding and the Court had no jurisdiction under Part VIII of the Act to adjust the property as sought by the husband.
The Appeal
In his Notice of Appeal the husband set out a number of grounds of appeal. Whilst the Notice of Appeal sought to raise several issues, the oral argument focussed on whether the financial agreement between the husband and wife complied with the provisions of s 90G of the Act. As we propose to uphold the appeal on the ground that the agreement did not comply with those requirements we find it unnecessary to address all the grounds of appeal put forward by the husband. We comment however that the balance of the grounds appear to have little merit.
The husband asserted that the trial judge erred by rejecting the proposition that statutory requirements for financial agreements should be strictly construed. The husband contended that the Act:
· required his solicitor at the time he signed the final amended version of the financial agreement on or about 6 September 2002 to re-certify in accordance with s 90G(1)(c), which the solicitor failed to do despite making notes about the changes; and
· required the agreement to be in accordance with the wording then used in s 90G(1)(b).
The Legislation
Although it has been subsequently amended by the Family Law Amendment Act 2003 (Cth) effective from 14 January 2004 which replaced sub-sections 90G(1)(b)(ii), (iii) and (iv) with a new sub-section 90G(1)(b)(ii), at the time the parties signed the agreement the relevant legislation provided as follows:
90G
(1)A financial agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by both parties; and
(b) the agreement contains, in relation to each 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)whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;
(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 or such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable; and
(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 parties and a copy is given to the other.
(2)A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
The Agreement
The agreement dated 3 September 2002 was signed by both parties, although it was amended a few days later.
It was apparent from the evidence that prior to entering the agreement both parties received independent legal advice. The agreement contains clauses acknowledging the receipt of this independent legal advice.
Recital R of the agreement provides a general acknowledgement by the parties:
Each of the parties acknowledges that they have received independent legal advice as to the legal effect of this agreement prior to the execution of this agreement as evidenced by the lawyer’s certificate appended hereto.
Clause 29 more specifically provides in relation to the husband:
[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.
Clause 30 of the agreement provides a mirror clause to the above clause in relation to the independent legal advice received by the wife.
Annexed to the agreement are the lawyer’s certificates obtained by each party. The certificate in relation to the advice provided to the husband states that the solicitor has explained the following:
·the effect of the agreement on the rights of that party;
·whether or not at the time when the advice was provided it was to the advantage financially or otherwise of that party to make the agreement;
·whether or not at that time it was prudent for that party to make the agreement; and
·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.
After the parties executed the agreement it was amended a few days later to exclude a sentence in clause 17 in relation to the maintenance of the parties and their children. The amendment itself is not an issue for the purposes of our determination, however the husband argued that it was problematic because his solicitor did not re-certify the agreement after the amendment was made.
After executing the original agreement the husband, on or around 6 September 2002, brought the amended agreement back to his solicitor and initialled the changes to clause 17.
When Financial Agreements Are Binding
A binding financial agreement which is valid under the relevant provisions of the Part VIIIA has the effect of ousting the jurisdiction of the court in respect to certain matters covered by the agreement. Section 71A specifically states that Part VIII of the Act which, inter alia, empowers the court to alter property interests, does not apply to financial matters or financial resources to which a binding financial agreement applies.
At issue in this appeal is whether the provisions of the agreement between the parties meet the requirements of s 90G so as to preclude the court’s jurisdiction to make adjustive property orders.
The trial judge concluded that he was satisfied that (emphasis added):
17.… [T]he agreement contains, in relation to each 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 the annexure to the agreement, with independent legal advice from the legal practitioner as to the matters set out in the sub-section …
The husband argued that the requirements in s 90G should be strictly adhered to and as such the agreement between the parties did not satisfy the requirements as it did not contain the required statements. The wife submitted that his Honour properly construed the relevant legislation using a purposive approach.
There have been few decisions dealing with the interpretation of s 90G. In J and J [2006] FamCA 442, a decision involving an application to enforce a financial agreement, Collier J in considering the wording of s 90G said:
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.
In Australian Securities & Investments Commission and Rich & Anor (2003) FLC 93-171 O’Ryan J took a less stringent approach to the interpretation of the requirements in s 90G:
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 is signed by both parties, include a statement addressing the matters in s 90G(1)(b) and attach a certificate from a legal practitioner.
The trial judge referred to the decision in J and J (above) and acknowledged that Collier J made it clear that compliance with s 90G should be strict. His Honour said that the judge in J and J (above) based this argument on the use of the words “if, and only, if” at the commencement of s 90G and did not focus on the use of the words “to the effect that” in sub-section 90G(1)(b).
The trial judge went on to say:
101.The strict interpretation approach takes away from the legislative meaning and the better approach is the objective approach, which has been the subject of consideration by the High Court in a number of decisions.
After reviewing numerous authorities in relation to statutory interpretation, the trial judge adopted an objective approach in interpreting s 90G and concluded that the agreement was binding. His Honour said:
110.The intention of Part VIIIA is to enable ordinary people to enter into financial agreements which will deal with property and spousal maintenance and avoid the necessity of court proceeding. The agreements can be made before marriage and after marriage, whilst the relationship subsists or they can be made following the breakdown of marriage. The explanatory memorandum observes that it is the legislative intent to encourage the use of financial agreements under this Part of the Act. To enable such agreements to be binding the legislation requires that each of the parties to the agreements must have independent legal advice. If courts require strict interpretation of the legislation then this would have the effect of making such agreements less available to the broader community. It would positively discourage the use of financial agreements and it would limit the pool of legal practitioners who are equipped and willing to draft and/or advise in relation to such agreements. Such strict and inevitably narrow construction would add to the cost of such agreements and may put the cost to prepare and advise on them outside the financial means of the general community. That is not the legislative intent. The legislation does intend that the legal advice ought to be available Australia wide through the broad church of legal practitioners, whether specialist or not, whether in major capital cities, or in the suburbs or in the regions. Courts should not make the legal practitioners and the parties cross all of the “t’s” and dot all of the “i’s” to enter into and give effect to financial agreements. The form should not defeat the substance. The Act does not create a regime of strict compliance and there is a requirement on courts to give purpose to legislation. Accordingly, I will not be adopting a strict interpretive approach in terms of both the construction of the legislation and construction of the terms of the agreement. I will adopt the objective approach.
His Honour rejected the husband’s argument that the lawyer’s certificate annexed to the agreement was not a statement as was required pursuant to s 90G(1)(b). His Honour considered that in adopting the purposive approach there was no reason why the statement contained in the certificate is not contained within the agreement:
114.… The sub-section provides that the agreement contains a statement to the effect that a party, to whom the statement relates, has been provided with independent legal advice. The form of certificate in this case contains such a statement, and that certificate is part of the agreement. The legislative intent is that each of the parties has the benefit of independent legal advice and the structure of the sub-section ensures that the requirement is met. It is not designed to set up word traps for the unwary, it is designed to ensure that each party has independent advice, and that such advice addresses the matters set out in the sub-section.
His Honour went on to say at paragraph 115 that in the event his analysis was incorrect then the statement required under s 90G(1) was imported into the main body of the agreement by virtue of recital R of the agreement. With respect to his Honour, we do not agree.
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.
As discussed by the Full Court in Naughton and Naughton (1983) FLC 91-327; (1983) 9 Fam LR 47, the statutes, namely the Matrimonial Causes Act1959 (Cth) to 1975 and the Family Law Act1975 (Cth) since that time, gave to parties of a marriage or former marriage certain rights of application in respect of property and maintenance. The parties could not by agreement outside the confines of that legislation contract themselves out of the right to institute such proceedings: see generally Hyman v Hyman [1929] AC 601; Davies v Davies (1919) 26 CLR 348; Brooks v Burns Philip Trustee Co Ltd (1969) ALR 321; Wright and Wright (1977) FLC 90-221; (1977) 3 Fam LR 11,150; Burgoyne and Burgoyne (1978) FLC 90-467; (1978) 4 Fam LR 204; and Candlish and Pratt (1980) FLC 90-819; (1980) 6 Fam LR 75 and the cases therein referred to.
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.
Sub-section 90G(1)(b) (as it was prior to the 2004 amendments) expressly required that the agreement must contain a statement from each party that, before they executed the agreement, they received independent legal advice from a legal practitioner in relation to the matters referred to in (i) to (iv). The section went on to provide that the agreement must also annexe a certificate executed by that legal practitioner stating that the advice in relation to the matters referred in (i) to (iv) was provided to that party.
The agreement entered into by the parties in this case did not refer to the specific requirements detailed in s 90G, although the certificate did.
Recital R and clause 29 of the agreement, set out at paragraphs 23 and 24 above, dealt predominantly with advice in relation to the legal implications of the agreement and each party’s rights and obligations. These statements did not meet all the requirements set out in sub-section 90G(1)(b), particularly there was no reference to advice in relation to whether the agreement was fair or prudent. In our view, such an omission meant that the agreement did not comply with the provisions of s 90G and was not binding upon the parties. It follows that we prefer the approach taken by Collier J in J and J (above) to that taken by the trial judge in this case. 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.
The husband raised the issue that the certificate provided by the husband’s solicitor predated the amendments made to the agreement and therefore the agreement should be set aside. It is not necessary to determine this issue, as regardless of the failure to re-certify the agreement after the amendment, the agreement itself was flawed as it did not meet the statutory requirements.
Conclusion
The agreement between the husband and the wife did not contain a statement directly acknowledging that the husband, or for that matter the wife, received legal advice in relation to all the matters set out in s 90G(1)(b). The husband’s appeal is therefore allowed. The agreement should be set aside and there should be a retrial in relation to the parties’ competing applications for property settlement.
I certify that the preceding forty seven (47) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court
Associate:
Date: 24 January 2008
26
3
2