CORDING & OSTER

FAMILY COURT OF AUSTRALIA

CORDING & OSTER

[2010] FamCA 511

FAMILY LAW – PROPERTY – Financial agreement – Part VIIIAB of the Act – Language of the parties to be assessed objectively – Requirement for parties to have legal advice: standard of advice not necessarily a matter for the Court – Agreement executed in Victoria before commencement of Part VIIIAB but contemplating its operation – Agreement found to be binding – Discussion about property of corporate entity of which one party is director – property covered by definition in agreement – Notwithstanding the removal of the corporate veil, property is still defined by shareholding or loan account

Family Law Act 1975 (Cth)
Family Law Amendment (De Facto Financial Matters and Other Measures) Act 2008 (Cth)
Property Law Act 1958 (Vic).
Relationship Act 2008 (Vic)

Blomley v Ryan (1956) 99 CLR 362
Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
Fevia & Carmel-Fevia (2009) FLC 93-411
Kokl and Kokl (1981) FLC 91-078
Kostres and Kostres [2009] FamCAFC 222
Meehan v Jones (1982) 149 CLR 571
Tasmania v Commonwealth (1904) 1 CLR 329

APPLICANT:

Ms Cording

RESPONDENT:

Mr Oster

FILE NUMBER:

MLC

9248

2009

DATE DELIVERED:

26 May 2010

PLACE DELIVERED:

Melbourne

PLACE HEARD:

Melbourne

JUDGMENT OF:

THE HONOURABLE JUSTICE CRONIN

HEARING DATE:

22 MARCH 2010

REPRESENTATION

COUNSEL FOR THE APPLICANT:

DR KOVACS AND MS TEICHER

SOLICITOR FOR THE APPLICANT:

STIDSTON & WILLIAMS WEBLAW

COUNSEL FOR THE RESPONDENT:

MR NORTH SC

SOLICITOR FOR THE RESPONDENT:

RICHARD CALLEY FAMILY LAWYERS

Orders

The agreement dated 7 October 2008 between MS CORDING and MR OSTER is a valid and binding financial agreement for the purposes of Part VIIIAB of the Family Law Act 1975 (Cth).
That there is no property of the parties which is not covered by the financial agreement.
All extant injunctive orders are forthwith discharged.
Save as to issues of costs, all outstanding applications of the parties are dismissed.
Any issue as to costs shall be determined upon written submission filed and served by 4.00pm on 14 June 2010 and to which any reply must be filed and served by 21 June 2010 and thereafter determined in chambers.
Certify for the attendance of counsel, including senior counsel.

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

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 9248 of 2009

MS CORDING

Applicant

And

MR OSTER

Respondent

REASONS FOR JUDGMENT

In determining whether a document executed before the commencement of Part VIIIAB of the Family Law Act 1975 (Cth) (“the Act”) by parties who did not marry, is a financial agreement as defined under the Act, reference needs to be made to the principles of contract and equity.
For the parties’ document to be a financial agreement, the legislature has clearly and carefully required that there be strict compliance with the Act. (See Kostres and Kostres [2009] FamCAFC 222).
In Kostres, the Full Court at paragraph 129 said:
129.While, for the purpose of construing the agreement a court should, as in the context of a commercial agreement, apply an objective test of a reasonable bystander to the construction of an agreement, it cannot give meaning to an agreement whose terms are so imprecise or ambiguous the parties’ intent cannot be discerned. This is particularly so when regard is had to provisions of Part VIIIA in the overall context of the Act.
In this case, if this is first of all an agreement between the parties, the reasonable and objective bystander test must be applied. Could it thereafter be said to comply with all of the provisions of the Act such as to enable it to be declared a financial agreement? If it is so declared, is the jurisdiction of the Court to divide property entirely excluded because of s 71A of the Act? Alternatively, is there property between the parties that is not covered by their financial agreement?
This case is made more than unusually complex because of the timing of the execution of the document itself. At that time, 2008, in Victoria, legislation was changing from a position where courts could take agreements into account to that which followed requiring courts to act upon agreements that fulfilled legislative requirements.
Whilst Victoria was moving to a new legislative regime in 2008, so was the Commonwealth for de facto spouses.
The legal practitioner who drafted the document for the parties anticipated all of these legislative changes. In that setting, on 7 October 2008, Mr Oster and Ms Cording executed a document they called an agreement. With that background, I address the questions set out above. Before doing so, it is important to note that this determination was made:
(a)on the affidavit material of Ms Cording; her factual assertions not being disputed by Mr Wster;
(b)after hearing oral argument from Dr Kovacs with Ms Teisher of counsel for Ms Cording and Mr North SC for Mr Oster; and
(c)after reading all of the written submissions filed by the parties’ respective counsel.
The circumstances that gave rise to the dispute are set out below.
Ms Cording and Mr Oster agree they lived together in a “de facto relationship” between March 1999 and September or October 2009.
During that time, they signed the document referred to.
Ms Cording applied for an order that the document was not a financial agreement and was not binding for the purpose of the Act. Mr Oster said it was valid and binding as a financial agreement.
If it is a financial agreement within the meaning of the Act, the document itself determines the entitlements to the division of property. If it is not, Ms Cording has a right to pursue a division of property.
The thoroughly researched submissions of each party highlight the technicality with which this legislation is shrouded. That would certainly not assist ordinary Australians wishing to give certainty to their lives nor I suspect, was it so intended by parliament.
In my view, the agreement dated 7 October 2008 is a valid and binding agreement within the meaning of Part VIIIAB of the Act. Further, it is all-embracing, covering all property of the parties to the extent that there is no jurisdiction for this Court to determine a division of property other than by enforcement of the agreement.
The background of the parties only otherwise needs to be briefly stated. Ms Cording described herself as a 39 year old business manager. Mr Oster is a 48 year old company director.
The parties began living together at Mr Oster’s address in 1999 and remained together in Victoria until late 2009. Ms Cording said consistently that they separated on 22 September but Mr Oster said it was 22 October 2009. Nothing turns on the point.
The parties did not marry each other and there are no children of their relationship. The evidence upon which Ms Cording relied was set out in various affidavits. In respect of the agreement, she said that on about 23 September 2008, Mr Oster approached her and requested that she sign a financial agreement on the basis that the parties could then proceed with what she described as “marriage plans”.
Ms Cording and Mr Oster provided her with a short list of lawyers whose names he had obtained from the internet and that he had checked to the extent that he circled two names from which she should choose. She said she called Mr C and made an appointment for 25 September 2008.
Ms Cording said that Mr Oster told her at the time that he did not want the agreement to cost a lot of money and that she had to be careful and ignore anything the lawyer said. She said he specifically told her not to allow the lawyer to redraft the agreement and that they just needed it witnessed.
She said that on 24 September 2008, Mr Oster again told her what to say and even wrote it on a piece of paper in point form to remind her to tell the solicitor that the agreement was a means for them to continue their relationship as husband and wife. She said another point was to the effect that she did not need to know anything else from the lawyer and just needed to have the agreement “witnessed”. She said that Mr Oster told her that she was not to show the piece of paper to the lawyer but to ensure that she told the lawyer of the points because otherwise they would spend thousands of dollars unnecessarily.
Ms Cording said that on 25 September 2008, she attended upon Mr C but he told her that it would take some time before he could advise her about the agreement and that once he had been through it with her, it might need things “added”. She said she told Mr C not to worry about that as she just wanted the agreement witnessed as she had promised Mr Oster. She said there was no discussion about what she owned or what Mr Oster owned or of any of their finances and that she was with Mr C for approximately ten minutes and paid his fee of $85.
Having left Mr C, Ms Cording said that Mr Oster requested the documents back and she gave him the agreement and the note.
A year later, when their relationship was ended, Ms Cording applied on an ex parte basis for various injunctive relief. Orders were made on the basis of an undertaking as to damages.
Importantly, on 15 October 2009, as well as the injunctive relief, Ms Cording sought orders as follows:
(a)a declaration that the agreement made 7 October 2008 between the parties was null and void;
(b)and/or in the alternative that the said agreement be set aside;
(c)and/or in the alternative that the said agreement be declared unenforceable.
Ms Cording’s position as to the issues in dispute can be set out in the following points drawn from the submissions of her counsel Dr Kovacs. They were:
1.The agreement is void for uncertainty in that it fails to identify with particularity the property of the respondent which is the subject of the agreement;
2.In the alternative, the lack of particularity constitutes a failure by Mr Oster to comply with his obligation of disclosure;
3.In the alternative, the agreement cannot oust the jurisdiction of the Court under Part VIIIAB of the Act because it was made under Part IX of the Property Law Act (Vic);
4.The agreement is not a financial agreement under the Family Law Act nor is it “taken to be” a financial agreement under the Family Law Act;
5.The agreement is not binding because Ms Cording was not provided with independent legal advice (if the agreement is one under the Family Law Act);
6.If the agreement is a financial agreement under Part VIIIAB of the Act, it is not binding because it does not comply with s 90UJ(1)(b) of the Act requiring that “each spouse party was provided with independent legal advice” because the recital to the agreement refers to “each party” but it does not refer to Mr Oster and Ms Cording specifically;
7.The Court should not make an order declaring the agreement binding because it would not be unjust and inequitable if the agreement were not binding;
8.In the alternative, if the agreement was found to be a financial agreement and was binding then it ought to be found not to have ousted the court’s jurisdiction to award maintenance nor to oust the jurisdiction in relation to the property of four corporate entities;
9.In so far as it was such an agreement, the jurisdiction of the Court was not ousted in relation to property acquired by the parties jointly “prior to the making of the agreement”; and
10.The agreement was of no effect because no separation declaration had been made under s 90UF.
To the extent that it is necessary to refer to it, in respect of the maintenance issue, it was common ground between the parties that the agreement did not oust the jurisdiction of the Court. That was not a matter that needed to be argued.
Dr Kovacs on behalf of Ms Cording put, as one of the grounds of invalidity, that the required advice was not given to her client. Having regard to the evidence of Ms Cording, and despite the concession of Mr Oster about the facts, it is hard for me to see how that submission has any basis. Attached to her affidavit, apart from the agreement itself was a letter dated 26 September 2008 signed by Mr C. It said that he confirmed that Ms Cording was provided advice regarding the benefits and disadvantages of her signing the agreement and noted that she was “satisfied” with the advice. His letter said that he confirmed that she understood the agreement in that was “designed to waive” her rights under legislation to seek any division of property with Mr Oster save as otherwise provided in the agreement.
As to any inconsistency between Mr C’s letter and the position adopted by Ms Cording, I accept on her own evidence that she was given advice but she is now complaining about the quality of that advice. Nothing in the Act requires a court to consider the quality of, nor extent of, the advice. That might be for another forum.
Another issue relates to s 90OUJ(1)(b) which requires that for an agreement to be binding, before it was signed, each spouse party was to be provided with independent legal advice. “Spouse party” is defined in s 4 to mean a party to the relevant relationship or agreement. Recital P to the agreement refers to “each” party receiving “separate independent legal advice”. There is no need for the parties to be further defined than as occurred here. It is quite clear what the Act intended; that is, that each person receive advice. Objectively, it is clear from the agreement that each party did receive the relevant advice. Specifically naming them as individuals was therefore unnecessary.
Senior counsel for Mr Oster queried whether the evidence of Ms Cording was adduced to prove some form of duress. It was not argued by Dr Kovacs on behalf of Ms Cording that that was the case. In my view, on any view of the authorities in relation to duress[1], the evidence could not be said to show that as a basis to set aside the agreement.
[1] See Kokl and Kokl (1981) FLC 91-078; Crescendo Management Pty Ltd v Westpac Banking Corporation (1988) 19 NSWLR 40
Dr Kovacs submitted that in relation to item 8 in paragraph 25 above, because the agreement did not refer to the property of four corporate entities, the jurisdiction of the Court was not closed to the division of that property. That depends upon the finding as to the extent to which the agreement, if valid and binding, covers the whole of the parties’ property.
In respect of the final point in item 10 in paragraph 25 about the separation declaration, the Act is clear. One of the parties has to sign the separation declaration to give effect to the agreement. Dr Kovacs conceded that Mr Oster had provided the requisite document just prior to her submissions being put to the Court. The Act does not require the declaration to be provided at any particular point in time but the agreement cannot be operative until such time as that has been done. In this case therefore, that matter is no longer relevant.
There is therefore no substance to the points of the submissions I have numbered 5, 6, 8 and 10 in paragraph 25 above.
Insofar as matters for determination became relevant, Mr North submitted:
1.There was no uncertainty about the particulars in the agreement. He said that provided the language enabled the property to be identified, it did not matter that it was not specifically particularised by description;
2.Insofar as there was a complaint about the definition in the agreement as to joint property, the words within the definition were capable of construction;
3.If it was suggested, as it was by Dr Kovacs, that there existed property in which Ms Cording had an equitable interest because of a constructive trust, implied trust or simply because of the operation of equitable principles, those principles had been expressly waived. In addition, Ms Cording did not point to any such interest in her evidence;
4.As for the obligation to disclose, there was no evidence of a complaint by Ms Cording nor was there any statutory obligation to do so outside the context of litigation;
5.The parties’ intention was for their agreement to take effect under the relevant legislation;
6.The property interest of Mr Oster in the corporate entities could only arise either as a shareholder or creditor. The interest he had was covered by the definition of individual property in the agreement. Specifically in relation to an item of property known as the hyperbaric chamber, there was no confusion in the evidence of Ms Cording as to her description of the owner.
Mr North’s written submission on the legislation and relevant authorities is not recorded here but I have contemplated all of the matters to which he referred. Dr Kovacs provided a submission in reply and I have also included those matters in my determination. In respect of the statutory construction giving rise to the Court’s jurisdiction, I have accepted the position put by Mr North for the reasons mentioned below.
I turn first to the agreement itself.
The agreement is divided into recitals and an operative part. The relevant recitals are:
G.[Mr Oster] has superannuation interests in his name (hereinafter referred to as “[Mr Oster’s] superannuation.”)
H.[Ms Cording] has superannuation interests in her name (hereinafter referred to as “[Ms Cording’s] superannuation.”)
I.In consideration of the property and entitlements to be received by each of [Mr Oster] and [Ms Cording] pursuant to the provisions of this Agreement, and in order to promote harmony within their relationship, each of [Mr Oster] and [Ms Cording] have agreed to waive for all time any and all rights they may respectively have or may respectively acquire or attain, one against the other pursuant to Part IX of the Property Law Act (1958) (Vic), Part 3.3 of the Relationships Act 2008 (Vic) and or otherwise arising by reason of any constructive or implied Trust or by operation of equity.
J.This Agreement is intended to constitute a written agreement pursuant to section 285(1)(c) of the Property Law Act 1958 and a Relationship Agreement pursuant to the Relationships Act 2008. As the parties take into account as a contingency the prospect of their marriage, this Agreement is also intended to be a Financial Agreement pursuant to the provisions of section 90B of the Family Law Act 1975 (and or pursuant to any amendment to that Act brought about by the Family Law Amendment (De Facto Financial Matters and Other Measures,) Bill 2008.)
…
M.In the event of the breakdown of the domestic relationship, the parties intend that the provisions of this Agreement shall operate to define and delineate the division or distribution of the property and resources of the parties (whether held individually or jointly) between them.
N.The term “individual property” where it otherwise appears in this Agreement is defined to mean any real, personal, tangible or inchoate property which is:
(i)for [Mr Oster], [Mr Oster’s] real property in Australia and overseas, [Mr Oster’s] superannuation, [Mr Oster’s] business interests in Australia and overseas, including his interests in [N] Pty Ltd, [B] Pty Ltd, [A] Inc, and [O] Ltd, and [Mr Oster’s] bank accounts in his name;
(ii)for [Ms Cording], [Ms Cording’s] superannuation and [Ms Cording’s] personal effects listed at Schedule A annexed to this Agreement;
(iii)acquired by gift or inheritance from a third party to one but not both of [Mr Oster] or [Ms Cording], and shall be deemed the sole property of the recipient;
(iv)acquired jointly by gift or inheritance from a blood relative of either [Mr Oster] of [Ms Cording] (unless there is clear evidence that the gift or inheritance was intended to be to the benefit of both) and such gift or inheritance shall be deemed the sole property of the party who is the blood relative of the donor or testator;
(v)acquired by a party in direct exchange for any other individual property (as otherwise defined in this Agreement);
(vi)acquired by a party by way of compensation for pain and suffering as a result of a personal injury and shall be deemed to be the sole property of that party;
(vii)any income and other gain derived or to be derived by a party from individual property (as otherwise defined in this Agreement) whether by sale, exchange, investment, disposition or other dealing, or otherwise attributable to the enhancement or appreciation of such individual property due in whole or in part to market conditions or to the services, skills or efforts of a party; and or
(viii)property which is defined as individual property by further written agreement between the parties.
O.The term “joint property” where it appears in this Agreement is defined to mean any real or personal property acquired by the parties whether jointly or solely subsequent to the making of this Agreement, other than by reason of Recital N(iii) to (vii) inclusive hereof.
P.Before each party signed this Agreement, they received separate independent legal advice from a legal practitioner as to the following:
(a)the effect of the Agreement on that party’s rights pursuant to Part 3.3 of the Relationships Act 2008 (Vic), Part VIIIA of the Family Law Act 1975 (Vic) and the powers of a Court under the said legislation; and
(b)the advantages and disadvantages at the time of providing such advice to that party in making this Agreement.

Importantly, paragraph 1 of the operative part of the agreement incorporated the recitals into the agreement itself.
The relevant clauses of the operative part of the agreement can be summarised as follows:
2.In the event of the breakdown of the domestic relationship (or the breakdown of any marriage of the parties), then the following provisions shall apply:
2.1.[Mr Oster] shall be entitled to his individual property as defined in Recital N hereof as and from the date of the breakdown of the domestic relationship or marriage;
2.2.[Ms Cording] shall be entitled to her individual property as defined in Recital N hereof as and from the date of the breakdown of the domestic relationship or marriage.
…
5.As and from the date of the breakdown of the domestic relationship or marriage, the joint property of the parties (as defined in recital 0 hereof) shall be divided between them as follows:
5.1.For each item of joint property for which a party is registered as owner or proprietor with any government or statutory body (to the exclusion of the other party) such items are to be retained by the party registered as owner or proprietor;
5.2.For each item of joint property for which the parties are registered as owners or proprietors with any government or statutory body, such items are to be transferred to one of the parties by agreement, and in default of agreement, a sale will take place and the net proceeds from the sale divided in the proportions of such registered ownership unless otherwise agreed by the parties;
5.3.For each item of joint property for which there is no document evidencing title or ownership registered with any government or statutory body, such items shall be divided equally between the parties (whether overall in specie or by way of division of the proceeds of the sale of each individual item.)
6.That unless otherwise specified in this Agreement
6.1.each party hereby foregoes any claim they may have to any superannuation benefits belonging to or earned by the other;
6.2.each party be solely liable for and indemnify the other against any liability encumbering any item of property to which that party is entitled pursuant to the terms of this Agreement.
…
8.If the whole or any part of a provision of this Agreement is void, unenforceable or illegal in any jurisdiction, it is severed for that jurisdiction. The parties intend that the remainder of this Agreement shall have full force and effect in that jurisdiction.
In what follows, I will deal with each of the remaining contentious issues.

Is the agreement void for uncertainty because the property and financial resources of Mr Oster are not identified with particularity?

Section 90UN of the Act provides that the question is to be determined according to the principles of law and equity applicable in determining the validity, enforceability and effect of contracts and purported contracts.
The law in Australia provides that for a contract to be deemed uncertain, the court must be unable to attribute to the language of the parties a clear and precise meaning such as would enable it to identify the scope of the respective rights and obligations under the contract. (Meehan v Jones (1982) 149 CLR 571).
Halsbury’s Laws of Australia (paragraph 110 onwards) expands and clarifies that to say that as long as it is capable of a meaning, it will ultimately bear that which the court decides is its proper construction. The learned authors suggest that the language of the parties should be interpreted broadly and fairly. They then say:
If the language employed is so obscure and so incapable of any definite or precise meaning that the court is unable to attribute to the parties any particular contractual intention, the agreement will not be enforceable. However, so long as it is not utterly impossible to place a reasonable meaning on the language used and to discern the parties’ intention, the agreement will be enforced.(my emphasis)
I earlier referred to the objective test set out in Kostres and Kostres [2009] FamCAFC 222. In my view, the construction is clear.
It is not just the intention of the parties as to the terms of the definition of the property that must be considered but also whether as a whole, it was their intention to enter into an agreement that had the effect of excluding both of them from seeking orders for the division of property in an appropriate jurisdiction under the Act.
In Fevia & Carmel-Fevia (2009) FLC 93-411, Murphy J said
152.As the High Court said in Sindel v Georgiou [1984] HCA 58; (1984) 154 CLR 661 at par 13 (per Mason, Murphy, Wilson, Brennan and Dawson JJ):
Rectification is a remedy which cures erroneous expression of the parties' true intention in a contract which is already binding. It is not a remedy which brings a contract into existence in a situation in which the parties have not by their own acts arrived at a concluded contract.
153.Whilst it may be true that the parties each had an intention to enter an agreement that was intended to operate in the manner envisaged by s. 90G and s. 71A, that is not the end of the necessary inquiry as to the mutuality of their intention.
154.In some cases, it is possible to discern the true intention of the parties despite the existence of two parts of the agreement. In those cases “[t]o treat the discrepancies between the two parts as producing a different result is to impute to the parties an intention that they did not have. (Sindel v Georgiou at par 16). Equally, however, if the discrepancies are such that the intention that the parties had cannot be properly discerned, treating the two parts as forming a contract is to attribute a mutuality of intention not revealed in the two documents.
155.In my view, the latter is the case here. Here, the inclusion, or exclusion, of specified property must be central to the intention of the parties. If the core intention of the parties is to exclude matters the subject of agreement from the operation of Part VIII, mutuality of intention about (relevantly) the specific property to be excluded is central to the true intention of the parties. (my emphasis).
A careful and objective examination of recitals I, J and M makes clear an agreed intention by both parties to waive rights at law and in equity and for the agreement to be a contract which excludes access to courts for division of property. The agreement contemplates not only the legislative changes then occurring in Victoria but also those at the Commonwealth level. Recital M sets out how the division of property was to occur. Other recitals point to the agreement being a specific bar to litigation. There can be no doubt what the parties were contracting about in respect of their rights to a determination of property division by the courts.
A careful examination of the Recital provisions also shows a lack of specificity of detail but it could not be said that the clauses lack particulars. The property described is all-encompassing and as such, specificity of detail is unnecessary unless there could be said to be confusion about what was intended. Save as to one issue about a hyperbaric chamber, there is no evidence from Ms Cording indicating any confusion about property let alone Mr Oster’s property.
Dr Kovacs submitted the agreement referred to joint property acquired subsequent to the agreement but no reference had been made to “joint property acquired prior” to the agreement. Specifically, Dr Kovacs was referring to the hyperbaric chamber. She submitted that the chamber was acquired for the parties’ joint use in 2006 and sold in May 2008. In Kostres, the Full Court observed at para 130 and thereafter:
The differing arguments of the legal representatives in this case as to how the terms “acquired”, “assets”, “joint funds” and “from their own moneys” should be construed brings into sharp focus the ambiguities in those terms found in the drafting of clause 6 of the agreement.
We think it is particularly relevant that this agreement, which the parties entered into with the intention of dealing with their property and financial resources during their marriage and if it broke down, did not reflect the terms of the section (s 79) which it sought to bypass. Clause 6 does not refer to “contributions”, either financial or non-financial, nor does it, except in clause 6(d), refer to “property” or “financial resources”. These terms are ones which are well known and the subject of a considerable body of case law as to their interpretation.
We are satisfied that the construction each party asserts should be given to the terms of clauses 6(c) and (d) goes beyond that which can be objectively construed or implied to give effect to the parties’ intentions at the time the agreement was made. This is readily apparent from our re-construction of the agreement inserting the words which the parties’ respective legal representatives assert must be read into clause 6 to give efficacy to it. The differing interpretation of the expressions “joint funds” and “from their own moneys” starkly illustrates our concern.
I agree with Senior Counsel for Mr Oster that Kostres is distinguishable. First, the argument in relation to the hyperbaric chamber does not give rise to any ambiguity. The chamber either falls within the description in the agreement or it does not. The evidence points to the fact that the chamber was sold prior to the execution of the agreement and that some or all of the money remains in an account in the name of B Pty Ltd. If there is a contentious issue, it arises from the fact that Ms Cording sought an order that Mr Oster and/or B Pty Ltd hold that money on trust for the parties. The extent of any declaratory power in the Act relating to property of the parties is affected by whether or not the jurisdiction is excluded by the finding that the agreement is valid and binding. In respect of anything owned by the company, to the extent that this Court can deal with that issue, it seems to me caught by the fact that either or both of the parties cannot own the company but rather its shares. Similarly, any indebtedness by way of any loan account in a party’s name would be property which would fall within the definition that the parties used when executing the financial agreement. I return to the equitable property interest issue below.
Secondly, all other terminology used by the parties as to property owned by them or acquired by them after the execution of the agreement is quite clear albeit lacking in specificity.
Thirdly, neither party argued that the agreement required specific words to be added to give it their proposed meaning. The position of Ms Cording was that property was just left out or ignored.
In her reply to the submissions of Mr North, Dr Kovacs submitted that recital N suffered the same uncertainty problem as that relating to the definition in the agreement of “individual property”. She referred specifically to the Court rarely being able to say how gains in property occurred. She gave as an example, real estate in the name of Mr Oster having increased in value in part due to improvements made by Ms Cording. How she asked, could that still be seen as the “individual property” of Mr Oster. Hence, the argument about equitable interests arose.
I reject the argument of Dr Kovacs again on the basis of the language of the agreement. If it is accepted that the property is defined by its legal interest, the execution of the agreement must amount to a waiver of any equitable rights. To the extent that after the execution of the agreement, a contribution is made by Ms Cording such as might give rise to an equitable claim, the definition in Recital N (vii) precludes it. That Recital refers to the services, skills or efforts of “a party”. “A party” in that context could mean the legal title holder thereby not excluding a constructive trust arising but in the context of the words “gain derived or to be derived by a party”, it must mean “services, skills or efforts by either or both of the parties”. Whilst that might be seen as unfair or unreasonable from an equitable point of view, that is the reason why the Act requires the parties to receive legal advice before the agreement is executed. Even if that might be said not to exclude the intervention of equity, it must then be seen that the parties intended its exclusion because of Recital N (viii).
In my view, the language of the agreement is neither obscure nor ambiguous but has precise meaning. The contractual intention was clear that the parties wanted to avoid the jurisdiction of courts having the responsibility or opportunity to divide their property. In so finding, I am applying the objective bystander approach as to the parties’ intentions. I find that the parties did intend to contract accordingly. It is clear on the face of the agreement that there was no intention to exclude any specific or general property interests.

Is there an obligation upon a party to a financial agreement prior to its execution, to make comprehensive disclosure

Dr Kovacs conceded that there was no obligation directly enacted in Part VIIIAB of the Act. She submitted however that it was incorporated by general principles of common law and equity which apply to contracts as a result of s 90UN. She pointed also to s 90UM(1)(a) which provides that a court may set aside an agreement obtained by fraud which is defined to include non-disclosure of a material matter.
Mr North on behalf of Mr Oster pointed to the fact that Ms Cording’s application made no complaint of a material non-disclosure. He said alternatively, the complaint was no more than an argument about the description of assets within the body of the agreement. There was certainly nothing in any affidavit by Ms Cording complaining about the fact that there had been a failure by Mr Oster to disclose to her his financial position prior to the execution of the agreement.
In Kostres, the Full Court noted that the legislature had been careful to include strict requirements if a financial agreement was to be binding including the requirement of independent legal advice. The Full Court went on to say it was clear that the legislature envisaged, because of the nature of the agreement and the removal of the supervisory role of the Court, that parties would receive legal advice about the necessity for their intentions to be accurately and clearly reflected in the agreement. The Full Court was focussing on the importance of parties getting legal advice prior to the execution of the agreement because the advice would be expected to cover a myriad of issues. The advice referred to in s 90UJ(1)(b) refers to the effect of the agreement on the rights of that party and about the advantages and disadvantages of entering in the agreement. As the Full Court said, the object of the legislation is to remove the supervisory role of the Court. The onus therefore reverts to the legal advisor, as an issue of the advantages and disadvantages for the client, to contemplate whether disclosure has been made comprehensively and sufficiently to justify that client entering into the agreement.
Section 90UN provides for the Court to set aside a financial agreement based on non-disclosure of a material matter in the sense of a fraud upon the party. In Blomley v Ryan (1956) 99 CLR 362, McTiernan J described fraud as occurring where an advantage was taken of weakness, ignorance or other disabilities on the side of the respondent and the contract having been derived from such behaviour making it an unfair bargain. His Honour used phrases such as “getting bargains by taking surreptitious advantage of person unable to judge for themselves by reason of weakness, necessity or ignorance”. He said the word “surreptitious” would imply that the bargain was “snatched”.
Section 90UM(1)(a) refers to the non-disclosure being of a material matter. To reach the standard of a fraud, the non-disclosure must amount to a misrepresentation whether it is intended or otherwise. That is because the recipient of the information, is entering into the agreement on the basis of the representations. To prove a misrepresentation of a material fact, one of the parties to the agreement must be able to show that he or she was contracting about something other than that referred to in the contract and in the circumstances, it would be unconscionable for the agreement to stand.
In this case, Ms Cording did not point to anything amounting to a misrepresentation let alone a material one. She had the benefit of seeking legal advice as to the advantages and disadvantages of entering into the financial agreement. The argument really revolved around the lack of specificity as to the description of what each party had and was retaining. There was no fraud established on the papers.

If the agreement was executed prior to the commencement of the Family Law Amendment (de Facto Financial Matters and Other Measures) Act (2008) (Cth), was it a financial agreement under the Act?

When the agreement was executed in October 2008, the law in force in Victoria was the Property Law Act 1958 (Vic). On 1 December 2008, the Relationship Act 2008 (Vic) came into force. It repealed the relevant part of the Property Law Act relating to the property of domestic partners.
Section 74 of the Relationships Act 2008 provided that any right or entitlement that a person had under the relevant provisions of the Property Law Act immediately before the new provision came into operation was to be a right or entitlement under the new Act.
Section 90UC(1) of the Family Law Act provides that if during a de facto relationship, the parties make a written agreement about certain financial matters and what is to occur in the event of breakdown of their relationship then, subject to the parties meeting other criteria which are not relevant here, the agreement is expressed to be made under the Family Law Act.
The transitional provisions of the Family Law Amendment (De Facto Financial Matters and Other Measures) Act (2008) (Cth) overcome the requirements of s 90UC by virtue of the matters set out in Schedule 1 Part 2 of the amending Act. That provision applies to parties to a de facto relationship who have entered into a financial agreement before the commencement of Part VIIIAB of the Act.
Item 88 of the transitional provisions reads as follows:
88 Pre-commencement agreements – made during de facto relationships
(1) This item applies if:
(a)before commencement and while in a de facto relationship, the parties to the de facto relationship ( the couple) made a written agreement, signed by both of them, with respect to any of the matters (the eligible agreed matters) mentioned in subitem (3); and
(b)the agreement was made under a preserved law of an earlier participating jurisdiction; and
(c)a court could not, because of the preserved law, make an order under that law that is inconsistent with the agreement with respect to any of the eligible agreed matters; and
(d)immediately before commencement:
(i)the agreement was in force under the preserved law; and
(ii)the de facto relationship had not broken down; and
(iii)the couple were not married to each other.
Paragraph (a) extends to an agreement made with one or more other people.
(2)For the purposes of the new Act, the agreement is taken, on and after commencement, to be a Part VIIIAB financial agreement made as mentioned in subsection 90UC(1) of the new Act to the extent that the agreement deals with the eligible agreed matters.
(3)The matters referred to in paragraph (a) of subitem (1) are the following:
(a)how all or any of the:
(i)property; or
(ii)financial resources;
of either member, or members, of the couple at the time when the agreement is made, or at a later time and during the de facto relationship, is to be distributed in the event of the breakdown of the de facto relationship;
(b)the maintenance of either member of the couple in the event of the breakdown of the de facto relationship;
(c)matters incidental or ancillary to those mentioned in paragraph (a) or (b).
(4)For the purposes of paragraph (c) of subitem (1), disregard whether the preserved law permits the court to make such an order if the court varies or sets aside the agreement.

Section 3 of the Relationships Act 2008 (Vic) defines a relationship agreement as having the meaning set out in s 35(1) of that Act. Section 35(1) describes an agreement as one made before, on or after the commencement of the Relationships Act. The Relationships Act came into operation on 1 December 2008.
The agreement dated 7 October 2008 covered the eligible agreed matters referred to in item 88(3)(a).
Item 88 requires that the agreement was made under a preserved law of an earlier participating jurisdiction and that a court could not, because of the preserved law, make an order under that law inconsistent with the agreement.
What do the words “made under” mean? It was conceded by Mr North that the word “made” carried with it a temporal connation that was unhelpful for the construction that he was arguing. However, when one looks at the interpretation that best promotes the purpose or object underlying the Act, it is clear that the meaning contended for by Mr North is correct. If the words are plain in the Act, effect must be given to them. If they are doubtful, the intention of the legislature can be gathered from other provisions. (See Tasmania v Commonwealth (1904) 1 CLR 329 and s 15AA of the Acts Interpretation Act 1901).
The explanatory memorandum of the Family Law Amendment (De Facto Financial Matters and Other Measures) Act Bill 2008 discussed Item 88. It said that the item replicated the effect of Item 87 for agreements made in contemplation of a de facto relationship prior to the commencement of the Commonwealth legislation. The problem at that time was that not all States and Territories of the Commonwealth had agreed to participate in the jurisdiction that the Commonwealth wanted to enact.
It is clear when one looks at the desire of the Commonwealth to unify the laws relating to parties who were in a de facto relationship (of various types) the purpose was to simplify the law. The Commonwealth law was clearly intended to give everyone in the participating States consistency. The legislation went further and provided for non-participating States to subsequently join the scheme.
It is clear when one considers those matters that the Commonwealth was intending to bring into its fold, agreements made during the existence of de facto relationships notwithstanding they were executed prior to the commencement of a variety of legislation. In my view, the agreement dated 7 October 2008 by its wide use of the language in recitals I and J was made and intended to be so made under the preserved laws of the State of Victoria.
Senior counsel for Mr Oster argued that the terms of the agreement between the parties made clear that they intended the Commonwealth Act to apply to their agreement once it commenced. Dr Kovacs argued that it was not the intention of the parties but a matter of law. It is clear when one examines Recital J of the agreement that the parties intended their agreement not only to take into account as an contingency, the prospect of their marriage but also the prospect of the Commonwealth taking over the field of financial agreements in de facto relationships. I agree with Dr Kovacs that it is not a matter of intention but rather a question of law. In this case, for the reasons I have earlier set out, I am satisfied that the agreement is one made under a preserved law of Victoria and as such, the agreement is one to which Item 88 applies.

Can the court deal with the hyperbaric chamber under VIIIAB Division 2?

This particular division in the Act is simply the power of the Court to divide property between the parties to a de facto relationship in circumstances where the jurisdiction is not ousted by a financial agreement. That is, where the parties have left something out of their agreement.
It is clear that any property not included in an agreement is susceptible to the jurisdiction of the Court for the purposes of division.
For reasons to which I earlier referred, any argument about the hyperbaric chamber or its consequent cash proceeds, together with the interests in various corporate entities, were sufficiently clearly defined in the agreement. If there is any argument about property of those entities which falls outside the description of property of either of the parties, it is not relevant here. To argue that this Court lifts the corporate veil to look at property owned by a company which is solely controlled by Mr Oster does not advance the argument at all because the interest of the individual is still the right to the equity of the company arising from being the shareholder.
On the basis of what I have set out above, I find that requirements of s. 90UJ(1) have been met.
However, the recent amendment to the Act created s 90UJ(1A). It provides that an agreement is binding if:
(a) the agreement is signed by all parties; and
(b)one or more of the following is not satisfied in relation to the agreement:
(i)before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; or
(ii)either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to was provided to that party (whether or not the statement is annexed to the agreement); or
(iii)a copy of the statement referred to that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
(c)a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and
(d)the court makes an order declaring that the agreement is binding on the parties to the agreement; and
(e)the agreement has not been terminated and has not been set aside by a court.
To determine whether or not an agreement is binding, one has to look to the matters above. I find that the agreement was signed by all parties. None of the matters referred to in (b) above applies. (c) above is not relevant because I am prepared to make an order under (d). The evidence indicates clearly that the agreement has not been set aside or terminated.
I declare the agreement to be binding.
For the reasons set out, I find there is no property on the evidence which is not covered by the financial agreement.

I certify that the preceding Eight Two (82) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin

Associate:

Date: 26 May 2010

[2010] FamCA 511

26 May 2010

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