Blackmore & Webber
[2009] FMCAfam 154
•6 April 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BLACKMORE & WEBBER | [2009] FMCAfam 154 |
| FAMILY LAW – Application to set aside Binding Financial Agreement – whether Agreement arises from duress or unconscionability – whether Agreement was obtained through fraud and in particular non-disclosure of a material fact – whether Agreement fails to comply with section 90G of the Family Law Act 1975. Application to dismiss the wife’s amended application for variation of children’s orders pursuant to the rule in Rice and Asplund. |
| Family Law Act 1975, ss.4(1), 90G, 90K, 90KA, 90MD |
| Williams v Bayley [1866] LR 1 HL 200 Blomley v Ryan (1956) 99 CLR 362 Rice and Asplund (1978) 6 Fam LR 570 In the Marriage of McEnearney (1980) FLC 90-866 Commonwealth Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Crescendo Management v Westpac (1988) 19 NSW LR 40 Suiker & Suiker [1993] FLC 92-436 Bridgewater v Leahy (1998) 158 ALR 66 Pelerman & Pelerman (2000) FLC 93-037 Ribchenkov v Suncorp-Metway Ltd and Others (2000) 175 ALR 650 Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 SH & DH (No.1) [2003] FMCAfam 330 C & C (2005) FLC 93-220 J and J [2006] FamCA 442 T and T (Pension Splitting) [2006] FamCA 207 Stoddard v Stoddard [2007] FMCAfam 735 B & B (2008) 216 FLR 422 SPS & PLS (2008) FLC 93-363 Tsarouhi & Tsarouhi [2009] FMCAfam 126 |
| Applicant: | MS BLACKMORE |
| Respondent: | MR WEBBER |
| File Number: | MLC 13387 of 2007 |
| Judgment of: | Bender FM |
| Hearing dates: | 25, 26 & 27 February 2009 |
| Date of Last Submission: | 27 February 2009 |
| Delivered at: | Melbourne |
| Delivered on: | 6 April 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Puckey |
| Solicitors for the Applicant: | Pearsons Barristers & Solicitors |
| Counsel for the Respondent: | Mr Robinson |
| Solicitors for the Respondent: | Holding Redlich |
ORDERS
The agreement between the parties dated 11 November 2004 be set aside.
The parties attend a Conciliation Conference with a Registrar of the Family Court of Australia at the Melbourne Registry on 18 May 2009 at 2.15 pm.
Unless by 27 April 2009 the parties having confirmed in writing an agreement as to the market value of the properties situate at Property F and Property R, then each party forthwith do all acts and things necessary to obtain a sworn valuation from an appropriately qualified person, such valuation to be filed with the court not later than 11 May 2009.
The parties ensure that no later than fourteen days prior to the date fixed for the conciliation conference, each party send to the other, and the nominated Registrar:
(a)valuations of any superannuation interests;
(b)a copy of the actual terms of orders required to give effect to their settlement proposal; and
(c)written confirmation by each party or his or her solicitor that:
(i) all relevant documents have been exchanged between the parties; and
(ii) the superannuation trustee of any fund that may be the subject of a splitting order has been accorded procedural fairness.
The applicant wife file and serve an amended application setting out the orders she seeks by way of final property orders, together with an updated financial statement 14 days prior to the date of the conciliation conference.
The respondent husband file and serve an amended response setting out the orders he seeks by way of final property orders, together with an updated financial statement 7 days prior to the date of the conciliation conference.
The matter be listed for final hearing on 9 June 2009 at 10.00am before Federal Magistrate Bender (with an estimated hearing time of one day).
The applicant wife file and serve any further affidavit to be relied upon by the applicant by 4.00pm on 26 May 2009.
The respondent husband file and serve any further affidavit to be relied upon by the respondent by 4.00pm on 2 June 2009.
By 4.00pm on 4 June 2009, each party file and serve an outline of case document including the following:
(a)a list of the documents to be relied upon;
(b)a brief chronology;
(c)a table listing all of the assets, liabilities and financial resources claimed to be part of the asset pool, with the values contended for by that party;
(d)a list of contributions claimed or contended for;
(e)a list of other factors relied upon (s.75(2) factors);
(f)the percentage adjustment contended for;
(g)the main contentions on disputes as to:
(i) what items are to be included in the pool; and
(ii) the value of each asset in the pool; and
(h)a statement of the precise orders sought.
The wife’s amended application filed on 15 December 2008 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Blackmore & Webber is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLC 13387 of 2007
| MS BLACKMORE |
Applicant
And
| MR WEBBER |
Respondent
REASONS FOR JUDGMENT
Introduction
This is the wife’s application to set aside a Binding Financial Agreement, being a Pre-Nuptial Agreement, dated 11 November 2004 which provided for the division of property in the event that the parties’ relationship ended, the parties separated after the date of marriage or one of the parties died. The wife argued that:
a)the Agreement is not binding because it failed to comply with the requirements of section 90G of the Family Law Act 1975 (“the Act”); and
b)the Agreement should be set aside on the grounds of fraud (non-disclosure of material matters), duress and/or unconscionable conduct under section 90K of the Act.
By way of an amended application filed shortly before the final hearing, the wife also sought orders varying the consent orders the parties had entered into on 14 December 2007 in relation to the parties’ son [X] born in 2005 (“[X]”). Those orders provided for [X] to live with his father and spend five days per fortnight with his mother. The wife’s amended application seeks orders that [X] live with her and spend two nights per fortnight with his father.
The husband seeks orders that the wife’s application in respect to the setting aside of the Binding Financial Agreement be dismissed. He also seeks that the wife’s amended application in respect to a variation of the arrangements for [X] be dismissed on the basis that the rule in Rice and Asplund (1978) 6 Fam LR 570 applies as there has been no change of circumstances since the parenting orders were made in December 2007.
The wife’s application came before Federal Magistrate Hartnett on
9 September 2008. The matter was listed for hearing on the issue of whether the parties Financial Agreement should be set aside. Her Honour noted in paragraph 5 of her orders that:“In the event that the wife is successful in setting aside the Financial Agreement the parties will then seek that the matter be listed for a Conciliation Conference and final hearing in respect of property settlement.”
Background
The wife is 37 years of age, having been born in Thailand in 1971. She is currently working part-time as a [occupation omitted] and is in a committed de facto relationship, living with her now partner, Mr P.
The husband is 38 years of age, having been born in Australia in 1970. He is an “ill health retired” [occupation omitted], having left the [workplace] in 2002 and is in receipt of an Emergency Services Superannuation Scheme (“ESSS”) disability pension.
The wife came to Australia from Thailand in mid 2001 to study English, travelling on a student visa.
The parties commenced co-habitation in late 2002 and lived together until mid 2003 when the wife returned to Thailand upon the expiration of her visa.
The parties became engaged to be married and the wife returned to Australia in mid 2004 on a “fiancé’s” visa, having been sponsored by the husband. This visa required the parties to marry in Australia by
9 January 2005.
In July 2004, the wife fell pregnant with the parties’ son, [X].
On 11 November 2004, the parties entered into a Binding Financial Agreement – the circumstances surrounding which will be discussed at length in this judgment.
The parties married on 14 November 2004.
On 16 November 2004, the wife returned to Thailand for six weeks to spend time with her family.
The parties’ son, [X] was born in 2005.
The parties separated on 4 April 2007.
Setting aside the Binding Financial Agreement
The wife argued that the Binding Financial Agreement entered into between the parties on 11 November 2004 should be set aside on four grounds:
a)
there was a failure to comply with the formal requirements of
section 90G;
b)that pursuant to section 90K(1)(a), the Agreement was obtained by fraud (including non-disclosure of material matter);
c)that pursuant to section 90K(1)(b) the Agreement is void, voidable or unenforceable. In this particular instance, that it was obtained under duress; and
d)pursuant to section 90K(1)(e), the husband engaged in conduct that was, in all the circumstances, unconscionable.
Section 90G
Section 90G of the Act provides that:
1.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; 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 spouse parties and a copy is given to each of the other parties.
Note:For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.
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.
In B & B (2008) 216 FLR 422, the Full Court of the Family Court considered section 90G(1)(b), albeit an earlier version of that section. The earlier version of that subsection required in addition to the matters set out above, the following further matters:
(iii)whether or not, at that time, it was prudent for that party to make the agreement; and
(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.
In B & B (supra), there was annexed to the Agreement, lawyer’s certificates obtained by each of the parties. The certificates stated that the solicitors had explained the following to their clients:
·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 the 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 light of such circumstances as were at that time reasonably foreseeable, the provisions of the Agreement were fair and reasonable.
However, the Agreement itself did not state that the parties had been given advice in compliance with section 90G(1). The Agreement contained recital R in the following terms:
“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.”
In addition, the agreement included a further clause 29 in relation to the husband in the following terms:
“The husband acknowledges that prior to entering into this agreement he received from a lawyer acting independently of the wife 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 in B & B (supra) held that:
43.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.
44.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.
45.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 (being J and J [2006] FamCA 442) 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.
46.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.
Recital K of the Binding Financial Agreement entered into by the parties in this matter states as follows:
“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.”
The wife argued that the addition of the words “to apply for orders under Part VIII of the Act” amounted to a technical defect similar to that in B & B (supra), and that accordingly, the Agreement should be set aside.
The decision of the Full Court in B & B (supra) does not, in my opinion, require that a Binding Financial Agreement reproduce the wording of section 90G(1)(b) verbatim. As noted earlier, their Honours held that sub-section 90(G)(1)(b) expressly requires 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 sub-sections 1 to 4, or in this case, sub-sections 1 and 2. I am satisfied that the Agreement that was entered into meets this requirement.
It was argued on behalf of the wife, that the decision of the Full Court in B & B (supra) has further ramifications. It was argued that even if there is a fully compliant certificate of independent legal advice, that does not of itself, demonstrate that the actual advice given was fully compliant with the intention of section 90G. It was argued that if the Full Court demands strict technical compliance with section 90G, then there is a requirement that there not only be an analysis of the form of the certificate of independent legal advice but also an analysis of the advice itself to ensure it complied with the requirements of the Act. I reject this argument completely.
It is the accepted law in Australia in relation to contract, that a party is entitled to rely on the certificate of the independent legal advisor (see Ribchenkov v Suncorp-Metway Ltd and Others (2000) 175 ALR 650 and Bridgewater v Leahy (1998) 158 ALR 66).
Further, the effect of adopting such an approach as that which was submitted by the wife’s Counsel would require the parties to Financial Agreements to violate legal professional privilege.
Taken to the extreme, parties would be required to obtain further legal advice on the quality of their initial legal advice before a court could be satisfied that an Agreement that has been entered into is valid.
In the event there are issues as to the quality of the legal advice given, a disgruntled client has recourse against the solicitor who gave that advice. It would not, of itself, void the Agreement.
Section 90K(1)(a) Fraud (including non-disclosure of a material matter)
Recital G of the Binding Financial Agreement entered into by the parties on 11 November 2004 sets out the following:
“As at the date of this agreement, [Mr Webber] is the sole owner and/or proprietor of the assets and real property set out in Schedule “A” hereto (“[Mr Webber]’s property”), the fair and reasonable value of which has been agreed by the parties.”
Schedule A to the agreement is as follows:
PropertyAgreed value
1. Real property situated at and known as Property F, $220,000.00
2. Real property situated at and known as Property R $220,000.00
3. Japanese sword collection and antiques $100,000.00
Recital E of the Binding Financial Agreement sets out the following:
“[Mr Webber] is a former [occupation omitted] who is retired because of ill-health, and he receives am (sic) Emergency Services Pension.”
In cross-examination, the husband gave evidence that his assets at the time of entering into the Binding Financial Agreement were as follows:
a)Real property situate and known as Property F, with an agreed value of $220,000.00, a mortgage of $145,000 and therefore a net equity of $75,000.00;
b)Real property situate and known Property R, with an agreed value of $220,000.00;
c)Japanese sword collection and antiques, with an agreed value of $100,000.00;
d)NAB Account, with a balance of $26,900.00; and
e)Two motor vehicles – value not given.
Liabilities:
a)Tax liabilities of $13,000.00; and
b)Credit loan of $8000.00.
Superannuation:
a)ESSS Superannuation taken as an ongoing indexed pension.
It was the husband’s evidence, which I accept, that when he instructed his solicitor to prepare the Binding Financial Agreement, he provided to him a completed statement of financial circumstances which disclosed all his assets as listed above. The assets listed in the Binding Financial Agreement were as chosen by his solicitor, and the husband did not question or challenge what was included or excluded. I am satisfied that the exclusion of certain assets and liabilities in the Binding Financial Agreement was not a deliberate omission perpetrated by the husband.
In Stoddard v Stoddard [2007] FMCAfam 735, Federal Magistrate Altobelli considered section 90K(1)(a) of the Act. In that matter, the husband was seeking to have a Binding Financial Agreement set aside on the basis of either fraud (non-disclosure of a material matter) or misrepresentation leading to voidness, voidability or unenforceability.
In that case, the wife had drawn down in excess of $80,000.00 on the mortgage secured against one of the properties, and had not disclosed this to the husband. The Agreement entered into by the parties made them jointly liable for the mortgage on that property.
In paragraph 44 of his decision, Federal Magistrate Altobelli held:
“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 & Kuriatek (1982) FLC 91-259 at 77456. 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. It is possible though, that in the context of section 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 section 90K(1)(a) fraud may be constituted by omission – ie. Non-disclosure of a material matter.” (my emphasis)
The obligation for full and frank disclosure of a party’s financial circumstances is fundamental to proceedings under the Family Law Act for the adjustment of property between the parties to a marriage.
The Full Court in Suiker & Suiker [1993] FLC 92-436 at paragraph 84,471 said:
“In our opinion, the necessity for full and frank disclosure of financial matters to the court and to the other party are basic to the process of the court and the fundamental aims of the financial legislation contained in section 79 of the Family Law Act.”
It was argued on behalf of the husband that in the absence of a deliberate deception consciously engaged in by the husband to gain advantage over the wife, there could be no fraud. I do not accept that this is the case.
I am satisfied that where there is a lack of disclosure of a material matter, whether by way of a deliberate intent to mislead or by inadvertent omission, can be a ground for the setting aside of a Financial Agreement.
As noted by the Full Court in B & B (supra), a strict interpretive approach and strict compliance requirements should be applied where legislation ousts the court’s jurisdiction to make adjustive orders under section 79.
It is common ground between the parties that the Financial Agreement entered into by the parties was drawn solely by the husband’s solicitors and was presented to the wife in completed form. At that time, the wife was not legally represented. There was no discussion or negotiation between the husband’s solicitors and the wife, or any solicitors acting on the wife’s behalf.
The solicitors attended upon by the wife for the purposes of obtaining advice in accordance with the requirements of the legislation were not previously known to the wife and in fact were a firm of solicitors recommended by the husband’s solicitors. This is not to infer that they were acting otherwise than independently on the wife’s behalf.
However, what this did mean is that the only knowledge the wife’s solicitors had of the financial circumstances of the husband were those as set out in the Agreement. They had no knowledge of the fact that the matrimonial home was encumbered, that there was cash assets and that there were motor vehicles and other chattels.
The amendments to the Family Law Act to incorporate Part VIIIB came into effect in December 2002. As is well known, this enabled the courts to make orders in relation to parties’ superannuation entitlements.
At the time of the making of the Agreement, family law practitioners were grappling with the thorny question of how to deal with defined benefit superannuation entitlements when they were in the payment phase. This was particularly so, when many of the trust deeds governing such funds did not allow for pensions to be split.
However, the regulations put in place formulae which enabled an actuarial calculation to be undertaken to place a capitalised lump sum value on such entitlements.
The Binding Financial Agreement entered into by the parties contains no information as to the periodic amount being received by the husband, nor its capitalised value as calculated in accordance with the regulations.
It was argued on behalf of the husband that recital E makes it clear that the husband is an ill-health retired policeman who is in receipt of an ESSS Pension. Further, the wife was fully cognisant of this fact, and had been since the commencement of cohabitation. However this does not cure its omission from the Binding Financial Agreement. The wife did not know, nor could her solicitors advise her of what her entitlements in respect to the husband’s superannuation may have been.
Further, it was argued on behalf of the husband that such a pension was not “property” as defined under the Act. It was argued it was merely an entitlement to money, and therefore did not need to be listed amongst the husband’s assets in schedule A.
The Full Court first looked at this matter in the case of C & C (2005) FLC 93-220.
Watts J in the matter of T and T (Pension Splitting) [2006] FamCA 207 analysed the manner in which the court dealt with superannuation interests of this kind since the making of the decision of C & C (supra). I found His Honour’s review of this law very useful. His Honour reported as follows:
105.The majority in C and C (2005) FLC 93-220 (Bryant CJ, Finn & Coleman JJ), declined to determine whether or not a superannuation interest, paid as a pension, was property saying that the approach of treating superannuation as “another species of assets” means “the Court will be relieved from having to determine in any particular case the question of whether “a superannuation interest”, which comes within the definition of that term contained in Section 90MD, may in fact also come within the definition of “property” in Section 4(1) (as was suggested in the submissions made in Hickey (being Hickey and Hickey and Attorney-General for the Commonwealth of Australia (2003) FLC 93-143) to which we earlier referred in paragraphs 24 – 26), or whether it is only a financial resource”.
106.O’Ryan J (in the minority) in C & C found that this type of interest was property as defined in Section 4(1) (see paragraph 136 of judgment). Warnick J refers to O’Ryan’s observation and says that as it was not argued before the trial judge nor before the Full Court he did not consider that it should be determined (see paragraph 119).
107.Writing ex judicially, Coleman J referring to C & C has said:
“On the majority’s approach, a superannuation interest which is in the payment phase would be likely to be “property within the meaning of the definition of property contained in s.4(1)” (see A Distinction without a Difference? Paragraph 13 of the paper presented by Coleman J, Central Queensland Law Conference, Rockhampton 26 August 2005).
Whilst it is still open to question as to whether an entitlement to a Defined Benefit Superannuation Scheme in its payment phase is “property” pursuant to section 4(1), there is no doubt in my mind it is an asset of the parties, about which there should be full and frank disclosure.
I am satisfied that in the circumstances of this case that because the Binding Financial Agreement did not fully disclose the husband’s financial circumstances, the solicitor who was advising the wife, was not in a position to properly advise the wife on the effect of the Agreement on her rights or the advantages and disadvantages of making that particular Agreement.
Accordingly, I consider that the Agreement should be set aside on the basis that it was obtained by fraud, arising from the non-disclosure of material information.
Section 90K(1)(b) and (1)(e)
Sections 90K(1)(b) and (1)(e) of the Act provide that:
A court may make an order setting aside a financial agreement…if, and only if, the court is satisfied that…
…
(b) the agreement is void, voidable or unenforceable; or
…
(e) …a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable…
Section 90KA of the Act provides that:
The question whether a financial agreement or a terminating 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…
Having determined that the Agreement is to be set aside pursuant to section 90K(1)(a) on the basis of fraud arising from failure to disclose material matters, I do not intend in this judgment to explore these issues at great length. However, as almost the entirety of the three days of the hearing of this matter was directed to these issues, I will consider them briefly.
Duress
It was argued on behalf of the wife that the Agreement should be set aside pursuant to section 90K(1)(b) on the basis it was entered into by the wife under a form of duress.
Duress is a contractual ground for the setting aside of a contract.
Both Counsel referred me to the decision of Federal Magistrate Ryan, as she then was, in the matter of SH & DH (No.1) [2003] FMCAfam 330. In that matter, Her Honour was asked to determine whether final property consent orders should be set aside pursuant to section 79A on the basis that there had been a miscarriage of justice by reason of duress.
After very careful consideration of the manner in which the Family Court had dealt with the issue of duress, Federal Magistrate Ryan concluded at paragraph 65:
“In my view, the Full Court’s reference to “the equitable concept of duress” in Pelerman (being Pelerman & Pelerman 2000 FLC 93-037) reveals that duress in a section 79A context is to be measured by reference to equity’s formulation of the principle… This means that the applicable test is that formulated by McHugh JA in Crescendo Management v Westpac (1988) 19 NSW LR 40.”
McHugh JA’s formulation of duress as set out in Crescendo Management v Westpac (supra) is:
“A person who is the subject of duress usually knows only too well what he is doing. But he chooses to submit to the demand or pressure rather than take an alternative course of action. The proper approach in my opinion is to ask whether that pressure went beyond what the law is prepared to countenance as legitimate? Pressure will be illegitimate if it consists of unlawful threats or amounts to unconscionable conduct. But the categories are not closed.”
Her Honour considered a number of recent decisions in relation to section 79A(1)(a) duress in paragraphs 71 to 76 of her judgment. It is not my intention to reproduce Her Honour’s summaries in this judgment, save to agree with the conclusion Her Honour reached in paragraph 69 which was as follows:
“It is apparent that in determining an application to set aside orders pursuant to section 79A on the grounds of duress the court is required to examine the circumstances of each case, the circumstances surrounding the alleged duress and the resolution of the proceedings.”
It was the wife’s evidence that when she and the husband first discussed marriage prior to her return to Thailand in 2003, he advised her that he would require her to enter into an Agreement whereby she would make no claim against property owned by him prior to marriage.
It was her evidence that she told him that she did not believe such an Agreement was necessary, that it was not the basis upon which to commence married life and that it showed that he did not trust her.
It was her evidence that she told him that such an Agreement would not be necessary as she would never make any claim against any property that he currently owned.
It was the husband’s evidence that whilst this was the wife’s response, he was adamant that he would not marry her without such an Agreement and that he was not prepared to sponsor her fiancé visa unless she agreed to the signing of such an Agreement.
The husband’s evidence was that she, albeit reluctantly, agreed at this time that she would sign such an Agreement.
The wife was not specifically cross-examined as to whether she did agree to enter into an Agreement in 2003 before she returned to Thailand, though it was her consistent evidence that she at all times told the husband that she did not believe such an Agreement was necessary, nor was she happy to enter into such an Agreement.
It was the wife’s evidence that she and the husband were booked to marry at the Registry Office on 4 June 2004, but that this date was cancelled as she had only returned to the country two days earlier. She discovered that she was pregnant in July 2004. She and the husband agreed that they would marry on 14 November 2004, and that she would travel back to Thailand on 16 November 2004 to spend time with her family.
Both parties were in agreement that in this period from July to November 2004, they were both unhappy. It was the wife’s evidence that she was depressed, that she believed the husband to be unhappy that she was pregnant and that there were continuous arguments between them.
The husband conceded that this was not a good time for them and that, unbeknownst to him at that time, he was exhibiting the symptoms that led to his diagnosis of cancer in December 2004.
It was the wife’s evidence that there was no further discussion of a
Pre-Nuptial Agreement until 9 November 2004, when the husband produced the Pre-Nuptial Agreement and told her that unless she signed it, the marriage was off.
It was her evidence that she was extremely upset and distressed by this, and that she told the husband that she would not sign it.
She indicated that some two days later, she agreed to sign the Financial Agreement and the husband took her to see a solicitor that he had arranged through his solicitor. Her evidence was that having initially seen the solicitor, she refused to sign the Agreement and told the husband accordingly. It was her evidence that he re-confirmed there could be no marriage and that an hour later she asked him to take her back to the solicitor where she did sign the Agreement.
It was common ground that she initially signed the document not using her normal signature. When the husband noticed that the wife had not signed the Agreement using her usual signature, he insisted that she
re-sign it in her usual signature, which she did. The parties contacted the wife’s solicitor to confirm that the document was still binding.
Initially the wife justified the false signature by saying that she was upset. Under cross-examination, the wife conceded that she had known what she was doing, but that it was not done in any attempt to try and have the Agreement disallowed.
It was the wife’s consistent evidence that she did not want to sign the Agreement, but that she felt she had no choice. She was pregnant, she was unmarried, she was due to return to her family in two days time and was humiliated by the thought that she would return to them pregnant, unmarried and without the father of her child, to use her words, “like so many other Thai women”. She was also aware that her “fiancé’s” visa expired on 9 January 2005, after which time she would be unable to remain in Australia.
It was the husband’s evidence that, at all times, he had advised the wife that he would not marry in the absence of a Pre-Nuptial Agreement.
His evidence was that he raised the issue of the Pre-Nuptial Agreement with the wife upon her return to Australia in June 2004 and that she became very upset about such an Agreement and re-iterated that she did not think it was necessary.
The husband was cross-examined in relation to his interactions with his solicitor in relation to the preparation of the Agreement. He conceded that his solicitor’s file showed that they had sent him a letter on
17 June 2004confirming they would prepare a Pre-Nuptial Agreement as requested, upon him completing a statement of financial circumstances. The husband completed the financial statement some time in September 2004 and on 12 October 2004, the husband received correspondence from his solicitors indicating they had prepared the draft Agreement, but awaited his instructions as to the division of post-marriage assets.
The husband contacted his solicitors on 27 October 2004 to advise that any post-marriage assets were to be divided equally between the parties.
When cross-examined as to the origins of that agreement, the husband indicated that this was what he and the wife had agreed when they first discussed the matter in 2003. He had not raised it again with his wife when he received his solicitor’s letter on 12 October 2004.
It was the husband’s evidence that he had wanted the wife to come with him to see his lawyers, but that every time he brought it up, she would blow up with him and that this made it very very difficult for him to approach his lawyers. It was his evidence she kept raising the issue of “trust” and that would make him feel guilty and he would put it aside.
The husband agreed that the first time the wife saw the Agreement was on 9 November 2004, and that she told him that she was not prepared to sign it. It was his evidence that he told her that the wedding was off, not that he would never marry her.
It was the husband’s evidence that on 11 November 2004, the wife did indicate she would sign the Agreement, that they went to the solicitors that had been arranged for her by his solicitors. On the first visit the wife came out of the solicitor’s office indicating that she hadn’t signed the Agreement, but that she went back an hour later and signed the Agreement. He confirmed that when he saw the signature that she had used to sign the Agreement he was concerned it was not her normal signature, and that he insisted she sign it with her usual signature. They then called the wife’s solicitor to confirm that there was no issue with amending that signature so that it reflected her usual signature.
It was the husband’s evidence that whilst at all times the wife had argued there was no necessity for there to be a Pre-Nuptial Agreement, that she had agreed in 2003 to signing such an Agreement, and that he always believed that she would sign the Agreement. It was his evidence that she was aware from 2003 that he was not agreeable to marriage in the absence of that Agreement.
In support of his case, the husband filed a number of supporting affidavits, and in particular from Mr R, Mr E, Mr M and Mr D. The wife’s Counsel did not require any of these witnesses for cross-examination. All witnesses confirmed that in the months leading up to the November 2004 wedding, the husband had advised them that the issue of the Pre-Nuptial Agreement was causing conflict between he and the wife, as she did not want to sign an Agreement.
The husband’s sister, Ms W, gave evidence on behalf of the husband. She confirmed that she had discussed a Pre-Nuptial Agreement with the wife on 27 October 2004, and that whilst the wife was adamant that she and the husband did not need one, she did not tell Ms W that she would not sign such a document.
Counsel for both parties placed great emphasis on the lack of credibility of the other party.
Counsel for the husband had admitted into evidence a DVD that the husband had taken, unbeknownst to the wife, of an argument that had taken place between his client and the wife whilst they were still living together. The husband had made particular reference to this argument in his affidavit, and in particular, he had accused the wife of raising her voice and of threatening to divorce him. These allegations she denied in her answering affidavit.
After viewing the DVD, it was apparent that at one stage the wife had raised her voice, and that she had said she would divorce the husband.
However, I will not criticise the wife for not having a clear recollection of what was exactly said or how it was said during a matrimonial argument. What was apparent from that DVD was the underlying difficulties in the parties’ relationship and their inability to listen to, respect or respond to each other’s underlying issues and concerns.
The husband was cross-examined at length about a “ceremony” he and the wife participated in in Thailand in early 2004. It was the wife’s evidence that this was a “marriage” ceremony under Thai law and she considered them to be “married” in Thailand. The husband was adamant this was not a marriage ceremony, albeit it was a very beautiful occasion. I am satisfied that from the husband’s perspective, this was not a lawful marriage.
Whilst both parties’ “recollections” of the events leading up to the signing of the Binding Financial Agreement are quite different, as are their recollections of their life together, I make no adverse findings in relation to either of them in respect to their credit. I am satisfied their evidence reflects their perspectives on that period in their lives.
Conclusions in relation to duress
On both parties’ evidence, when the parties first discussed marriage, the husband indicated that he was not prepared to marry, unless the parties had entered into a Pre-Nuptial Agreement that preserved his pre-marital assets.
On both parties’ evidence, when this was raised with the wife, she told the husband that she did not believe such an Agreement was necessary, that it was not the right way to start a marriage and that it was indicative that he did not trust her.
I accept that the husband did raise the issue of the Pre-Nuptial Agreement with the wife when she returned from Thailand in June 2004, and that when he did so, she made it very clear that she did not want to sign or enter into any such Agreement.
I found it a little disingenuous when the husband attempted, in his evidence, to differentiate between “didn’t want to sign” and “wouldn’t sign”.
I am also satisfied that the husband was perhaps overstating the number of times that he raised the issue of the Pre-Nuptial Agreement with the wife. He conceded in his own evidence that he kept putting off raising it with her because he knew what her reaction would be.
What cannot be disputed is that five days prior to the date set for the parties’ wedding, the husband produced to the wife, for the first time, the Binding Financial Agreement. The wife made it clear that she did not wish to enter into that Agreement. The husband told her that the wedding was off. Two days later, the wife attended upon a solicitor for the first time to seek advice in relation to the Agreement. She initially refused to sign the Agreement, but one hour later, returned to the solicitor where she signed the Agreement, albeit not with her usual signature. This was noticed by the husband, and at his insistence, the first signature was “whited out” and her usual signature attached to the document. This took place three days before the parties were due to marry, five days before the wife was due to fly to see her family in the Philippines and less than two months before her fiancé visa expired.
It was argued on behalf of the husband, that he was within his rights to require that the wife enter into a Pre-Nuptial Agreement before marriage, and that the wife had the option not to sign the Agreement.
The husband at no time offered a plausible explanation as to why a Binding Financial Agreement was not made available to the wife in the several months leading up to the planned marriage, particularly in circumstances where there was evidence that in July 2004, he had specifically asked his solicitors to prepare the documents with some urgency as he had discovered that his wife to be was pregnant.
At all times the husband knew the wife did not want to sign a
Pre-Nuptial Agreement. Producing the Agreement for signature less than five days before marriage, when she was four to five months pregnant, about to return to Thailand in circumstances where her family expected her to return as a married woman, and where she was faced with the real risk of not being able to remain in Australia, as her visa was about to expire, threatening her with no marriage placed the wife in a position where she has little to no choice but to sign the Agreement. In requiring her to do so in these circumstances, I find that the pressure placed on the wife by the husband to sign the Agreement was “illegitimate” in accordance with the test propounded by McHugh JA in Crescendo Management v Westpac (supra). Accordingly, I find that the wife signed the Agreement under duress, as defined in law.
I would therefore have found that in the event that the Agreement was not to have been set aside pursuant to section 90K(1)(a), that the Agreement would have had to be set aside for duress pursuant to section 90K(1)(b).
Unconscionability
The law in relation to unconscionability has been long established. In Commonwealth Bank of Australia Limited v Amadio & Anor (1983) 151 CLR 447 at 474, Dean J said:
“The jurisdiction is long established as extending generally to circumstances in which (i) a party to a transaction was under a special disability in dealing with the other party with the consequence that there was an absence of any reasonable degree of equality between them and (ii) that disability was sufficiently evident to the stronger party to make it prima facie unfair or “unconscientious” that he procure, or accept, the weaker party’s assent to the impugned transaction in the circumstances in which he procured or accepted it.”
Further at 474, His Honour said:
“The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued. In Blomley v Ryan (being Blomley v Ryan (1956) 99 CLR 362), Fullagar J listed some examples of such disability:
“Poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.”
As Fullagar J remarked in Blomley v Ryan (supra) at p. 405, the common characteristic of such adverse circumstances:
“seems to be that they have the effect of placing one party at a serious disadvantage vis a vis the other.”
In this matter, the husband argued that any special disability of the wife, or weakness in her position is redressed by her access to and use of independent legal advice.
Counsel for the husband in particular referred me to Ribchenkov v Suncorp-Metway Ltd and Others (supra) and Bridgewater v Leahy (supra) at paragraph 100.
I do not agree with the husband’s submissions in this regard.
In the unreported decision of Tsarouhi & Tsarouhi [2009] FMCAfam 126, Federal Magistrate Riley in paragraph 51 stated:
“Access to legal advice is not an absolute bar to relief in a case such as this. In Williams v Bayley [1866] LR 1 HL 200, a father, who was a wealthy businessman, entered into a mortgage to prevent his son being prosecuted for forgery and possibly transported. The mortgage was set aside even though the businessman had a solicitor present at all material times when the mortgage was being discussed. The House of Lords upheld that decision.”
Further, the legislature would not have specifically made provision for unconscionability to be a basis upon which Financial Agreements could be set aside in a regime that requires all persons entering into a Binding Financial Agreement to have proof of proper legal advice as to the legal ramifications of that Agreement.
Conclusions as to unconscionability
The circumstances under which the Financial Agreement was entered into have been set out in considerable detail earlier in this judgment.
There is no doubt that the wife was at a “special disability” vis a vis the husband. Whilst the wife’s command of the English language, when giving her evidence, was excellent, the Agreement was entered into over four years ago and I accept that at that time her command of the English language would have been much more limited. In addition, she was pregnant, lacking close family support and was faced with the possible expulsion from the country in the event that she was not married.
The husband argued that he was equally at a disadvantage because of his desire for a continuing relationship with the wife and because of his post-traumatic stress disorder. I do not accept this argument.
The husband further argued that even if the court finds that the wife had a special disability, putting her in a significantly weaker position, all the husband did was say that he was not prepared to enter into a marriage without a Financial Agreement, and that there was nothing against good conscience in this behaviour, far less was it morally culpable. I agree that the husband was more than entitled to seek that there be a Binding Financial Agreement entered into prior to marriage. What is the issue is the circumstances in which he sought that this take place.
The question is whether the husband took unconscionable advantage of the wife’s special disadvantage. In Commonwealth Bank of Australia Ltd v Amadio (supra), this question can be answered by determining whether:
“The other party knows or ought to know of the existence of that condition or circumstance and of its effect on the innocent party.”
The husband knew that the wife did not want to have a child out of wedlock, knew that the wedding was set some five days hence on
14 November 2004, knew that the wife was booked to fly to Thailand some seven days hence on 16 November 2004, and knew that her visa expired on 9 January 2005. There was some dispute in the evidence as to whether the husband told the wife, “the wedding is off” or “I won’t marry you”. In my view, very little rests on this. From the wife’s perspective, it would have meant the same thing and that is that the wedding on 14 November 2004 would not take place.
The husband argued that the wife did have a choice not to sign the Agreement and marry on 14 November 2004. I do not accept that argument. In addition to being pregnant and without family support in a foreign country, she was totally dependent upon the husband for her accommodation, food, financial support and for her very presence in the country.
I am satisfied that the husband was very much aware of the wife’s circumstances and that the manner in which he presented the Agreement and demanded it’s immediate signing so close to the wedding date is such that he took unconscionable advantage of the wife’s special disadvantage.
Accordingly, I find that the Agreement would also be set aside for reasons of unconscionability, pursuant to section 90K(1)(e).
Rice and Asplund
The parties entered into consent orders concerning the arrangements for their son [X] on 14 December 2007. Simply put, those orders provide for [X] to live with his mother overnight each Thursday in week one and from Thursday evening to Monday morning in week two, and for him to otherwise live with his father. The orders also make provision for holidays and for special days such as Christmas, birthdays, Mother’s Day, Father’s Day etc. The orders also enable the wife to travel with [X] to Thailand to visit his maternal family upon the wife giving the husband reasonable notice of her intention to so travel.
By way of an amended application filed on 15 December 2008, the wife seeks that those orders be discharged and that [X] live with her and spend time and communicate with the husband each alternate weekend from 5.00 pm Friday to 5.00 pm Sunday, and each Wednesday from 5.00 pm to 7.30 pm, as well as half school holidays and arrangements for the special occasions such as Christmas, birthdays etc.
The husband sought that the wife’s amended application in relation to a variation of the orders for the arrangements for [X] be discharged pursuant to the rule in Rice and Asplund 1979 FLC 90-725 on the basis that there had been no change in circumstances in the twelve months since the original consent orders were made.
In Rice and Asplund (supra), Evatt CJ held:
“The principles which, in my view should apply in such cases are that the court should have regard to any earlier order and to the reasons for and the material on which the order was based. It should not lightly entertain an application to reverse an earlier custody order. To do so would be to invite endless litigation for change is an ever present factor in human affairs. Therefore the court would need to be satisfied by the applicant that, to quote Barber J, there is some changed circumstance which will justify such a serious step, some new factor arising or, at any rate, some factor which was not disclosed at the previous hearing which would have been material.”
Her Honour then held:
“These principles apply whether the original order is made by consent or after a contested hearing.”
In SPS & PLS (2008) FLC 93-363, Warnick J considered the rule of Rice and Asplund (supra), and in particular, what the application of the rule can achieve if dealt with as a preliminary matter as opposed to it being dealt with at the end of a full hearing.
In paragraphs 57 to 59 of his judgment, His Honour said:
57. In In the Marriage of McEnearney (1980) FLC 90-866,
Nygh J moved beyond the general position of public interest in the finality of all litigation, to purposes more specific to family law. He said (at 75,499):
…the principle that there be an end to litigation has equal force in custodial disputes and in some respects may have even greater force in custodial disputes.
The last thing, of course, that this court would wish to see would be a perennial football match between parents, who, because the strict principles of res judicata are not applicable might seek to canvass again and again the question of custody of a child with the enormous psychological harm which they would be inflicting not only upon each other but especially upon the child. (emphasis added)
58. Another end served by the rule is that it avoids one judge substituting his or her opinion of what is in the best interests of a child for that of another judge, though both opinions are based on the same or similar facts. This “evil” is avoided by a requirement that the previous order should not be altered unless there has been a change of circumstances sufficient to justify that result.
59. If the rule is addressed as a preliminary matter and proves determinative of the application, all these purposes can be served.”
His Honour also confirmed that at whatever stage of a hearing the rule was applied, it’s application should remain merely a manifestation of the “best interest principle”. His Honour held at paragraph 81:
“Thus, in my view when the threshold question described in Rice and Asplund is determined as a preliminary matter, it remains a determination “on the merits”. Where an application is dismissed at a preliminary stage, it is not dismissed for some technical reason, such as the failure of a party to appear or some lack of compliance with form and procedure but rather because, assuming the evidence of the applicant is accepted, there is an insufficient change of circumstance shown to justify embarking on a hearing. Though sometimes unstated, the underlying conclusion will or ought be that the interests of the child in not being the subject of further litigation is more powerfully in the child’s welfare than to allow the application to continue.”
It was agreed by the parties that I would determine the wife’s amended application as a preliminary matter. It proceeded to be dealt with on that basis by way of submissions that were made by Counsel for the parties.
The husband submitted that the affidavit of the wife filed on
15 December 2008 in support of her application for the variation of orders disclosed no change in circumstances in relation to either the parties or [X] since the orders were made on 14 December 2007.
In paragraph 4 of the wife’s affidavit, the wife states:
“[Mr Webber] effectively forced me to sign those Orders because at the time I had made plans to travel overseas to Thailand with [X] and [Mr Webber] refused to allow me to do so unless I signed documents before I went agreeing to his terms in relation to [X]. I felt bullied and intimidated, and although I had legal advice at the time I felt I had no choice but to agree to [Mr Webber]’s demands so that he would allow me to take [X] overseas.”
The husband, in his answering affidavit that was filed on
16 February 2009, quite properly refers the court to the negotiations that took place between the parties over some three months leading up to the making of these orders. It is apparent that the husband put forward a number of proposals in relation to the possible care arrangements for [X], including proposals for [X] to spend equal time with both of his parents. The orders that were finally agreed to between the parties were in fact in accordance with a proposal that was put forward by the wife.
I reject the wife’s claim that she only entered into the orders of
14 December 2007because she felt bullied and intimidated or that it was the only way she could travel overseas with [X]. She was properly represented and clearly able to effectively negotiate. She had only recently visited Thailand in the September of 2007 and there was no pressing urgency for her to have to travel to Thailand in December 2007 if agreement could not be reached.
Paragraphs 7 to 17 of the wife’s affidavit detail what the wife alleges were the care arrangements for [X] prior to separation. Clearly, those were circumstances known to the wife at the time the existing orders were made.
Paragraphs 18 to 21 of the wife’s affidavit set out her current circumstances. It was conceded by the wife’s Counsel that they reflect the wife’s circumstances at the time that she entered into the orders in December 2007. It was his argument that at the time the orders were made, the wife had only recently commenced living with her now partner, and that what has changed is that she has confidence that the relationship is a committed and lasting one. I am not satisfied that this reflects a significant change in the wife’s circumstances.
The wife also argued that her affidavit raised significant welfare concerns in relation to [X]’s care by the husband.
In paragraph 24 of the wife’s affidavit, she deposes:
“[X] is in good health except that I am concerned that he is not putting on weight and has not put on weight since April of this year… I am concerned that from comments made to me that [Mr Webber] feeds [X] junk foods such as McDonald’s, biscuits and chocolate and soft drink rather than balanced and nutritional meals which I give him.”
The husband filed an affidavit from Dr L sworn on 13 February 2009. Dr L is [X]’s treating general practitioner and in the report annexed to his affidavit, Dr L states:
“Master [X], aged 3 yrs first consulted me on 8th Dec 2007… Since then, he has consulted me on a total of 8 occasions, the last on 20th Nov 2008… There is no serious problems noted and he always appear happy with dad. [X]’s body weight and height are spot on at just about the 50th percentile range.
There has been no issues of note with his diet and sleep pattern that was reported and he appears to be developmentally normal for his age.”
I am not satisfied that there are any issues in relation to [X]’s body weight, diet or achievement of developmental milestones.
In paragraph 32 of the wife’s affidavit, she deposes:
“[X] has nightmares almost every night.”
In his answering affidavit, the husband deposes that [X] does not suffer from nightmares when in his care and expressed concern that the wife’s affidavit was the first that he had been appraised of there being any issue with [X] whilst in the wife’s care.
The wife’s affidavit makes reference to [X] telling her that he loves her, that he misses her and that he wants to stay with her.
In his answering affidavit, the husband confirms that [X] does love his mother as she loves him, but that [X] exhibits no difficulty in separating from him to visit with his mother and from separating from his mother when it’s time for him to return to his father.
In her affidavit, the wife raises concerns about the ability of she and the husband to communicate in relation to arrangements for [X]. She alleges the husband enrolled [X] in daycare and at kindergarten without consultation with her.
There is no doubt that the parties’ relationship, both during the course of their marriage and currently, is a difficult one. This was graphically illustrated by the DVD that was admitted into evidence during the hearing of the property matters. However, in the husband’s answering affidavit, he deposed to the parties’ ability to make arrangements for [X] between themselves that varies the existing orders. In particular, during the last summer holidays it would appear that [X] passed back and forth between the husband and the wife without difficulty. Further, the husband gave examples of him arranging for the wife to attend at [X]’s kindergarten on special occasions as well as a day that they spent together as a family without incident.
I am satisfied the arrangements that both parties have for [X] whilst he is in their care are satisfactory and appropriate.
The wife argued that because these orders were made by consent, there had not been litigation per se, nor had there been a full and proper exploration by a judicial officer of all relevant material. In those circumstances, it was argued that the rule of Rice and Asplund (supra) was based had less efficacy.
I reject that argument out of hand. As referred to earlier in this judgment, Evatt CJ in Rice and Asplund (supra) made it very clear that the principles apply whether the original order is made by consent or after a contested hearing.
Conclusion
I am satisfied that there has been no material change in the circumstances of the parties and of [X] since the consent orders were entered into by his parents in November 2007 such as to justify litigation in relation to the arrangements for [X].
I am further satisfied, as noted earlier in this judgment, that the care provided to [X] by his parents when they are looking after him is most appropriate and that [X] continues to grow and develop in an age appropriate way.
In these circumstances, I am strongly of the view that it is not in [X]’s best interests for there to be further litigation in relation to the arrangements for his care and that, to the contrary, it would, to quote Warnick J in SPS & PLS (supra) be in the best interests of the child (in this case [X]) not to be the subject of further litigation.
Accordingly, I find that in accordance with the principles as set out in Rice and Asplund (supra), the wife’s amended application should be dismissed.
I certify that the preceding one hundred and fifty-six (156) paragraphs are a true copy of the reasons for judgment of Bender FM
Associate: Sarah Hession
Date: 6 April 2009
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