BRYSON & BRYSON - [2012] FMCAfam 197

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BRYSON & BRYSON

[2012] FMCAfam 197

FAMILY LAW – Setting aside a Binding Financial Agreement – property settlement consequent on the setting aside of the Agreement.

Family Law Act 1975

BP Refinery (Westernport Pty Ltd v Shire of Hastings) (1977) 52 ALJR 20
Kessey & Kessey (1994) FLC 92-495

Applicant:

MS BRYSON

Respondent:

MR BRYSON

File Number:

CAC 1485 of 2008

Judgment of:

Brewster FM

Hearing dates:

11 February & 28 February 2011

Date of Last Submission:

2 September 2011

Delivered at:

Canberra

Delivered on:

6 March 2012

REPRESENTATION

Counsel for the Applicant:

Ms Pender

Solicitors for the Applicant:

Wendy Evans Lawyer

Counsel for the Respondent:

Ms Petrie

Solicitors for the Respondent:

Hozack Clisdell Lawyers

ORDERS

That pursuant to section 90K of the Family Law Act 1975 the financial agreement between the parties dated 15 August 2002 be set aside.
That the husband take all steps to sell the property situated at [address omitted], [Suburb A] NSW (“the property”) at a price agreed between the parties.
That the proceeds of the sale after the usual rates adjustment after paying the conveyancing costs be divided between the parties in the proportions 41% to the husband and 59% to the wife.
That on completion of the sale and prior to a distribution to the parties the husband take all steps and do all things necessary to discharge the mortgage on the property from his share of the proceeds of sale.
That as between the parties each be entitled to retain the chattels in his or her possession and choses in action in his or her name.

IT IS NOTED that publication of this judgment under the pseudonym Bryson & Bryson is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT CANBERRA

CAC 1485 of 2008

MS BRYSON

Applicant

And

MR BRYSON

Respondent

REASONS FOR JUDGMENT

Introduction

This matter concerns an application by the wife to set aside a Binding Financial Agreement and, should that agreement be set aside, orders altering the parties’ property interests under section 79 of the Family Law Act 1975.
During the course of the hearing I ruled that the Binding Financial Agreement should be set aside and I gave brief reasons. I will expand on those reasons in this judgment. However given that I am sitting as a court of first instance I do not consider it necessary to embark on a lengthy exposition of the law as I see it.

Background

The husband is aged 73 and the wife 69.
The parties formed an association in 1984 or 1985 but it is common ground that they commenced to live together [in] 1989. I do not regard anything that occurred between them prior to that date as relevant to the issues in this case. They married [in] 1990. In 1996 they purchased a property at [address omitted], [Suburb A] (“the property”). They moved onto this property [in] 1996 after building a dwelling there. I will refer to this as the first house. In due course another dwelling was erected on the property. I will call this the second house.
The relationship broke down about 2001 or 2002. In 2002 the wife sold a property she owned at [Suburb B] and applied a part of the proceeds to discharge the mortgage on the property. She did this in anticipation of the parties entering into the agreement to which I have referred.
On 15 August 2002 the parties entered into the Binding Financial Agreement to which reference has been made. This agreement provided as follows:
a)The wife would transfer her interest in the property to the husband.
b)In consideration of this the husband was to pay the wife $20,000 by instalments of $50 a week over a period of 7 years and 10 weeks.
c)The husband would give the wife a licence to reside in the second house for as long as she chose to do so.
d)The wife would pay the husband a licence fee of $50 a week which would be set off against the $50 a week the husband was to pay her. That is no money would actually change hands. When the amount paid under the licence fee equalled $20,000 she would be entitled to reside in the second house without payment.
e)The husband would make a will leaving the property to the wife.
The last of these was contained in recitals to the agreement rather than in the operative provisions but in the context of this case I do not consider that anything hangs on this. In my opinion the agreement needs to be looked at and construed as a whole.
The agreement is most unusual and no court would ever of its own volition make orders of the type set out in the agreement. The wife made substantial contributions which will be referred to later in this judgment and would, had she sought them, have obtained orders giving her a substantial share of the property. However, whilst the agreement on its face would appear to be loaded against the wife, there were benefits, or potential benefits, for her in entering into that agreement. Had the matter been litigated the property may well have ended up being sold. There were two benefits to the wife which she might not have obtained had she insisted on her share of the property. The first was a right to occupy the property in effect rent free. The second was the right to become the sole owner of the property if she outlived the husband.
In June 2010 the husband obtained a loan from the Commonwealth Bank secured by way of mortgage over the property and drew down monies on this loan. As at the date of the trial the mortgage stood at $102,500. Prior to the husband’s borrowing this money the property was unencumbered. There is nothing in the agreement which would prevent the husband from borrowing money on the security of the property. However the husband’s encumbering the property substantially eroded one of the potential benefits which the wife might obtain from the agreement. As I have indicated one of the benefits the wife obtained from the agreement was her right, if she survived the husband, to have the property on his death.
The issue then arises as to whether or not a term should be implied in the agreement to the effect that the husband not encumber the property.
I adopt for this purpose the summary of the law in relation to implied terms as set out in the majority opinion of the Privy Council in BP Refinery (Westernport Pty Ltd v Shire of Hastings) (1977) 52 ALJR 20. At page 26 the majority of the Board said that five conditions must be satisfied if a term was to be implied in a written contract. These are:
a)The term to be implied must be reasonable and equitable;
b)It must be necessary to give efficacy to the contract, so that no term will implied if the contract is effective without it;
c)It must be so obvious that “it goes without saying”;
d)It must be capable of clear expression;
e)It must not contradict any expressed term of the contract.
It appears to me that all these conditions are satisfied. As I have indicated the benefits the wife was to receive under the agreement were first a right (although not an exclusive right) to occupy the property and secondly the right to ownership of the property if she outlived the husband. It would seem to me to be a reasonable expectation on her part that the property which she would, in those circumstances, end up owning would be a property in the same position as it was at the date of the agreement, that is an unencumbered property. This is especially so in light of the fact that she applied monies from the sale of her [Suburb B] property to discharge the mortgage on that property. It would seem to me to be necessary to imply a term in the agreement to the effect that the husband would not encumber the property.
The husband is in breach of that implied term and is not in a position where he can rectify that breach. It seems to me that under those circumstances I should set aside that agreement under section 90UM of the Family Law Act either under paragraph (e) in that the agreement is voidable or paragraph (f) that in circumstances which have arisen since the agreement was made it is impracticable for the agreement, or a part of the agreement, to be carried out.
There is another way of approaching the case. It is a well known principle that a grantor of an interest in land is not permitted to “derogate from his grant.” Derogation is an act that limits or impairs the utility of a previously granted right. It seems to me that the agreement gave the wife an interest in the property in the form of her rights of succession and that the husband’s encumbering the property limited and impaired that interest. Whilst the agreement referred to the wife transferring to the husband “all her right title and interest” in the property it seems to me that in context this means her interest in the fee simple, not any interest in the property at all. I am of the view that she was granted an interest in the property under the Agreement. Thus it would appear that this principle is applicable to the present case. It is not necessary for me to consider and opine as to whether or not this is a “stand alone” principle or only a matter of semantics in that it is simply an example of a circumstance where a term will be implied in the grant.
I now turn to the wife’s section 79 Application.

The Parties’ Applications

The wife seeks an order that the property be sold and the proceeds be divided 75% to her and 25% to the husband with the mortgage to be paid from the husband’s 25% share. I assume that were the husband’s 25% share to be less than the balance of the mortgage she would pay the balance from her share. The husband seeks an equal division of the property but concedes that the mortgage he raised post separation should be paid off from his share.

Discussion

The Full Court of the Family Court of Australia has indicated that in such matters a four stage approach should be adopted. The first stage involves making a finding as to the pool to be divided. The second stage involves a consideration of contributions made by or on behalf of the parties. If appropriate an alteration in their property interests may be made at this stage. The third stage involves, for the purposes of this case, a consideration of matters set out in section 75(2) of the Act. Again, if appropriate, an alteration in the parties’ property interests may be made at this stage. The fourth stage involves something of a “wood from the trees” exercise in that one looks at the overall result derived from any alterations made under the second and third stages to determine if that result is, in all the circumstances just and equitable.

The Pool

The only asset which I propose to include in the pool is the [address omitted] property. Given that the parties separated some nine years ago this is effectively the only property referrable to the relationship. Furthermore some of the chattels in the husband’s possession are referrable to the mortgage loan that I have referred to, that is they were acquired with borrowed monies.
I propose to disregard the mortgage on the property and treat it as unencumbered. The husband will be responsible for the whole of the loan and it will be repaid from his share of the property.
The property is valued at $400,000.

Contributions

When the parties commenced their relationship the wife was the owner of the property at [Suburb B] to which I have referred. She sold this property in 2002. She applied $41,600 to discharge the mortgage on the [address omitted] property. The wife also applied about $53,500 of these monies to improve the second house. Subsequently she spent about $16,000 from other monies in further improvements. These are relevant and will be reflected in the contribution based division but two matters need to be noted. First there is no evidence that any of these improvements were carried out at the request of, or with the approval of, the husband. The second is that there is no evidence of the extent to which they added to the value of the property. It would be appropriate that the wife’s share of the property be increased to the detriment of the husband if her contributions added to the value of the property. But if they were not reflected in any increased value but merely meant that she lived in a more comfortable house it would not be just to reduce the husband’s share. I can comfortably infer that they would have increased the value of the property but I have no idea of the extent of such an increase.
The wife also paid her daughter [X] $15,000 in recompense for her and her husband building the second house. I will discuss this later in this judgment.
The wife bought no other significant property into the marriage and neither did the husband.
During the marriage the wife generally was in employment. There is a dispute in relation to the husband’s employment. His evidence was he was essentially self-employed doing [omitted] work. The wife maintains that her income exceeded that of the husband. It is not possible to make precise findings as to the income that each earned and applied to the relationship and I am left to draw inferences from unsatisfactory evidence. The wife had a child [X], who was 14 years of age when the parties commenced their relationship and it appears that she lived with the parties until 1991. She would have been a drain on the parties’ finances during this time. Nevertheless I find it more probable than not that the wife earned more money than the husband during the relationship and that, even after the cost of maintaining [X] is taken into account, she contributed more to the relationship from her earnings than the husband. Moreover whilst the parties occupied the property the [Suburb B] property was leased and the wife’s income was supplemented from this source. The wife borrowed $13,000 by way of a mortgage to purchase that property but I can safely infer that the rent that was received would have been greater than the instalments on that loan.
In this respect I do not overlook the fact that in 1995 the parties moved to Canberra to help look after the wife’s father and during that time the husband worked whereas the wife did not. However the wife’s father gave them $10,000 and the [Suburb B] property was rented out. I am not prepared to make an adjustment either way with respect to this aspect of the case.
I am not satisfied that either party’s non-financial contributions should be accorded greater weight than the other’s.
In 1997 the wife’s daughter [X] and her partner moved onto the property. They lived in a caravan and built the second house. In accordance with the guidelines set out in Kessey & Kessey (1994) FLC 92-495 I regard this as a contribution made on behalf of the wife. As I have indicated the wife paid [X] $15,000 in recompense for her and her husband building the second house. However I do not take this into account, first because it appears to have been a gratuitous payment and not a payment made pursuant to an agreement between the wife and [X] and secondly because if I did there would be an element of double counting.
Except in relation to the improvements made by the wife to which I have referred I am not satisfied that any adjustment should be made in relation to post separation contributions. There is a dispute between the parties as to who paid the rates on the property at various times. It is apparent that for a time at least the husband did not pay those rates and the wife assumed the responsibility for them. I am not able to make a finding that there is a sufficient disparity in the parties’ contribution to rates as to justify an adjustment in either party’s favour.
It is apparent that a contribution based adjustment should be made in favour of the wife, both with respect to her income during the relationship and the lump sums she contributed from the sale of the [Suburb B] property. The most significant contribution she made was discharging the mortgage on the property. This contribution was made some 10 years ago and its significance has been eroded by the passage of time but offsetting this to a degree is the fact that the real value of $41,600 in 2002 was more than the same amount today.
It is important when making such an adjustment to relate it to the dollar value involved. The pool that I am dividing is valued at $400,000. A 10% adjustment would be equivalent of $40,000. However this is somewhat misleading. To make a 10% adjustment in favour of a party results in a 20% differential in the parties’ entitlements. A 20% differential is $80,000.
I make a 9% adjustment in favour of the wife. This equates to a $72,000 differential in the parties’ entitlements.

Section 75(2) Factors

There is nothing to indicate that an adjustment should be made in either party’s favour on this basis and neither party contended otherwise.

Conclusion and Overview

The end result is that the property is to be sold and the proceeds divided 41% to the husband and 59% to the wife. This will involve the wife receiving some $72,000 more than the husband. In effect the monies he has received by borrowing against the mortgage are added back to the pool and included in his share. I am satisfied that this is just and equitable.

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Brewster FM

Date: 6 March 2012