FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Daily & Daily [2023] FedCFamC1F 222
File number(s): ADC 4606 of 2018 Judgment of: BERMAN J Date of judgment: 31 March 2023 Catchwords: FAMILY LAW – FINANCIAL AGREEMENT – Where the husband seeks orders for the financial agreement to be binding on the parties – Where the wife seeks orders for the financial agreement to be set aside pursuant to s 90K(1)(d) and/or s 90K(1)(b) and/ or s 90K(1)(e) – Where agreement was entered into prior to marriage – Where the financial agreement does not provide clarity of the parties’ intention and the provisions are not capable of reasonable meaning or credible alternative interpretation – Where if the Court severed the uncertain provisions, the BFA would have no effect and purpose – Where the material terms of the financial agreement cannot be enforced and accordingly, the agreement is void for uncertainty and is set aside – Orders.
FAMILY LAW – PROPERTY SETTLEMENT – Where the interests’ of the parties are now to be considered pursuant to s 79 of the Act – Just and equitable – Where the Court finds the parties have made equal contributions – Where the parties’ legal fees are an addback – Consideration of s 75(2)(o) factors – Where the husband has expended significant funds post separation – Where the Court determines that superannuation should be dealt with separately to the non-superannuation assets – Where orders cannot be made until the determination of the damages claim.
FAMILY LAW – JURISDICTION – Accrued jurisdiction – Where the financial agreement was found not to be binding within the meaning of s 90k – Where the husband seeks damages for negligence and/ or breach of contract against the second respondent solicitors who advised him in relation to the financial agreement – Existence of a common substratum of facts and a single justiciable controversy – Where the Court has accrued jurisdiction to hear the husband’s claim – Orders.
FAMILY LAW – LIMITATIONS OF ACTIONS – Tort – Breach of contract & negligence – Consideration of whether the claim is statute barred – Consideration of when the cause of action accrued – Consideration of when the damage was first suffered – Consideration of the ‘damaged asset’ or ‘contingent loss’ argument – Consideration of Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 and Burton v Thom [2009] 1 NZLR 437 – Consideration of s 48 of the Limitation of Actions Act 1958 – Consideration of how a damages claim might be brought to account in s 79 proceedings – Consideration of how the damages settlement sum should be categorised – Consideration as to the treatment of damages as property –Where the matter is listed for further submission on the question of quantum of damaged – Orders.
Legislation: Family Law Act 1975 (Cth) ss 4(1), 75(2), 75(2)(o), 79, 79(2), 79(4), 79(4)(a), 79(4)(b), 79(4)(c), 79(4)(e), 90G, 90G(1A), 90G(1)(b), 90KA, 90K(1)(b),(d),(e),(d)
Civil Liability Act 1936 (SA) s 41
Limitation of Actions Act 1936 ss 35, 48(3)(b)(i)
Cases cited: Antmann & Antmann (1980) FLC 90-908
Bevan & Bevan (2013) FLC 93-545
Burke & Burke (1993) FLC 92-356
Burton v Thom [2009] 1 NZLR 437
Chorn & Hopkins (2004) FLC 93-204
Clauson & Clauson (1995) FLC 92-595
Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1
Dickons v Dickons [2012] 50 Fam LR 244
F Firm & Ruane & Ors (2014) FLC 93-611
Gould & Gould (1996) FLC 92-657
Heydon v NRMA Ltd & Ors [2000] NSWCA 374
International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151
Jabour & Jabour (2019) FLC 93-898
JEL & DDF (2001) FLC 93-075
Kostres & Kostres (2009) FLC 93-420
Kouper & Kouper (No 3) [2009] FamCA 1080
Kowaliw & Kowaliw (1981) FLC 91-092
La Costa & La Costa [2007] 38 Fam LR 412
M & M [1988] FamCA 42
Mallett v Mallett (1984) 156 CLR 605
Norbis v Norbis (1986) 161 CLR 513
Orwin v Rickards v Ors [2019] VSC 375
Orwin v Rickards [2020] VSCA 225
Pierce v Pierce (1999) FLC 92-844
Ruane & Bachman-Ruane and Ors (Accrued Jurisdiction) [2012] FamCA 369
Stanford & Stanford [2012] 247 CLR 108
Stanford & Stanford (2012) FLC 93-495
Stinchcombe v Thomas [1957] VR 509
Todd & Todd [2014] FamCA 101
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Upper House County District Council v Australian Chilling and Freezing Company (1968) 118 CLR 429
Watson & Ling (2013) FLC 93-52
Wardley Australia Ltd v Western Australia (1992) 175 CLR 514
Weir & Weir (1992) 16 Fam LR 154
Woodland & Todd (2005) FLC 93-217
Division: Division 1 First Instance Number of paragraphs: 433 Date of hearing: 14 – 18 February 2022 & 12 August 2022 Place: Adelaide Counsel for the Applicant: Mr Robertson SC Solicitor for the Applicant: Jordan & Fowler Family Lawyers Counsel for the First Respondent: Ms Pyke QC Solicitor for the First Respondent: Norman Waterhouse Lawyers Counsel for the Second Respondent: Ms Barnett Solicitor for the Second Respondent: Sparke Helmore Lawyers ORDERS
ADC 4606 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR DAILY
Applicant
AND: MS DAILY
First Respondent
R LAWYERS
Second Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
31 MARCH 2023
THE COURT ORDERS THAT:
1.Pursuant to s 90K(1)(d) and/or s 90KA of the Family Law Act 1975 (Cth), the financial agreement entered into between the parties dated 21 July 2005 be set aside.
2.The matter be listed for further submissions on the question of the quantum of damages on a date to be determined in consultation with the parties.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Berman J
INTRODUCTION
By Further Amended Initiating Application filed 13 August 2021, Mr Daily (“the husband”) seeks the following orders:-
1.A declaration that the financial agreement made between the [husband] and the [wife] on 21 July 2005 is binding on the parties or that it would be unjust or inequitable if the said agreement was not binding on them and that the said agreement be enforced as if it was an order of the Court.
2.In the event that the said agreement is not binding on the parties then the Second Respondent pay damages costs and interest to the [husband] for breach of contract and/or negligence in accordance with the husband’s Statement of Claim against the Second Respondent annexed hereto and marked with the letter “C”.
In summary, the husband contends that he has, or will, suffer loss and damage by reason of a breach of contract in respect of the continuing retainer with the second respondent and in the alternative to the husband’s claim for breach of contract, that the second respondent was negligent by reason of their breach of duty of care to the husband.
By Further Amended Response to Initiating Application filed 11 December 2019, Ms Daily (“the wife”) seeks orders summarised as follows:-
(1)That a declaration pursuant to s 90G(1)(b) of the Family Law Act 1975 (Cth) (“the Act”), that the agreement made between the parties on 21 July 2005 is not a binding financial agreement and/or in the alternative, that the binding financial agreement made between the parties on 21 July 2005 be set aside pursuant to the provisions of s 90K(1)(d) and/or 90K(1)(b) and/or 90K(1)(e) of the Act.
(2)That thereafter, orders be made for settlement of property and alteration of property interest pursuant to s 79 of the Act.
The second respondents filed a Response to Initiating Application on 13 December 2021, seeking the following orders:-
1.In the event that this Honourable Court finds that the financial agreement between the [husband] and the [wife] on 21 July 2005 is not binding on the parties, a declaration that had the financial agreement been binding, this Honourable Court would have set aside the financial agreement pursuant to section 90K(1)(d) of the Family Law Act 1975 (Cth).
2. That the [husband]’s claim against the Second Respondent is statue barred.
3.That the [husband]’s Statement of Claim against the Second Respondent annexed to the [husband]’s Further Amended Initiating Application and marked with the letter “C” be dismissed.
REASONS FOR JUDGMENT DELIVERED 17 JUNE 2020
Following a final hearing heard between 27 April 2020 to 1 May 2020, judgment was delivered on 17 June 2020 (“the 2020 judgment”). The proceedings were bifurcated and the only aspect for consideration was the status of a financial agreement entered into by the husband and the wife dated 21 July 2005.
Consistent with the position promoted by the parties in the current tranche of the proceedings, the wife sought that the financial agreement entered into between the parties dated 21 July 2005 be set aside whereas the husband sought orders that the agreement entered into between the parties be enforced as an order of the Court.
At [193] of the 2020 judgment I found as follows:-
In circumstances where I cannot be satisfied that the wife received the advice as required under s 90G(1)(b) of the Act, there has not been compliance with the section and subject to a consideration of the provisions of s 90G(1A) of the Act I have determined that the agreement is not binding on the parties.
For the reasons that appear at [194] to [220] of the 2020 judgment, I found that by application of the provisions of s 90G(1A) of the Act, it would be unjust and inequitable if the agreement was not binding.
The wife then argued that pursuant to s 90K(1)(b),(d) and (e) of the Act, the financial agreement is void, voidable or unenforceable and that it be set aside. I did not find that the financial agreement should be set aside having regard to the common law and equitable principles, misrepresentation, undue influence, mistake, duress or unconscionable conduct.
I did however consider there was merit in the wife’s further claim pursuant to s 90K(1)(d) of the Act, which states that:-
since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
In summary, in the 2020 judgment I found that:-
(1)Since making the agreement, there had been a material change in the circumstances of a child of the parties;
(2)That as a result of the material change, either a child or a person who has caring responsibilities for a child, will suffer hardship if the Court does not set the agreement aside; and
(3)If the agreement is set aside, the Court may make such orders as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who are parties to the financial agreement and any other interested persons.
The gravamen of the 2020 judgment was a finding that the position of the wife at the time of hearing, would represent a significant hardship to her and that a consideration of settlement of property by the application of s 79 considerations and s 75(2) satisfied me “that the wife would likely be entitled to a more generous outcome than is considered by the husband to be her entitlement pursuant to the terms and conditions of the financial agreement”.[1]
[1]Daily & Daily [2020] FamCA 486 at [314].
The finding of hardship is encapsulated in the 2020 judgment as follows:-
315.Accordingly, I am satisfied that the wife’s ability to care for the children cannot be adequately satisfied by reference to the amount that she is likely to receive consequent upon a determination of her entitlement pursuant to the provisions of the financial agreement. It is also a relevant consideration that the parties are not agreed as to the wife’s entitlement, nor is it certain that the provisions of the agreement are capable of clear understanding.
The husband filed a Notice of Appeal on 14 July 2020 and sought the following orders:-
1. That the Order made by Hon Justice Berman on 17/6/20 be discharged.
2.That the financial agreement made between the parties on 21/7/05 be enforced as if it was an Order of the Court.
3. Costs.
The summary of the grounds of appeal was that I had erred in law or mixed fact and law in finding that:-
(1)The advent of children since the making of the financial agreement and following separation the arrangements for the care of the children would support a finding of material change in circumstances within the meaning of s 90K(1)(d) of the Act.
(2)That in the alternative, in the event that there was a material change in circumstances since the financial agreement was executed, I brought to account irrelevant considerations (ground 3.3 of the grounds of appeal) and failed to take into account relevant considerations (3.4 of the grounds of appeal).
(3)That I should have found that there was no change or no material change in circumstances or in the alternative, that the wife did not suffer relevant hardship by reason of any material change in circumstances.
The appeal was upheld and on 9 December 2020, the Full Court made the following orders (“the Full Court judgment”):-
BY CONSENT IT IS ORDERED:
1.The appeal from the order made by the primary judge on 17 June 2020 be allowed.
2. The proceedings be remitted to the primary judge for rehearing.
There was no challenge to my determination that the wife had not received the advice as required under s 90G(1)(b) of the Act and that subject to s 90G(1A) of the Act, the agreement was not binding on the parties.[2]
[2]Daily & Daily [2020] FamCA 486 at [193].
The wife did not file a Notice of Cross Appeal with respect to my finding that having considered the application of s 90G(1A) of the Act, it would be unjust and inequitable if the agreement was not binding.
The basis upon which the Full Court found error in the determination is apparent from the following paragraphs of the Full Court judgment:-
30.It is well settled that the test for hardship within the meaning of subsection 90K(1)(d) requires a comparison of the position of the child, or the person with caring responsibility, if the agreement remains in place and their position if the agreement is set aside.
(Citations omitted)
31.Whilst on appeal the husband challenges the primary judge’s finding of hardship, his challenge is framed on bases that differ from our determination that the primary judge erred in law by failing to apply the correct test to determine hardship. As was pointed out in the course of argument, we are bound, given the nature of an appeal to this Court by way of rehearing, to correct an error of law whether or not an appellant raises that specific error (see Warren v Coombes (1979) 142 CLR 531).
32.It is notable that at [272] of the reasons the primary judge correctly identified, by reference to Frederick and Fewster, the need for the identified comparison to be made as the test to be applied. However, in what follows in the reasons for judgment the primary judge reaches no requisite conclusions or findings as to the position if the agreement is upheld, nor any requisite conclusions or findings as to the positon if the wife’s s 79 entitlement were determined in the usual way.
…
36.It follows that in circumstances where his Honour made no relevant conclusions or findings about either the wife’s notional s 79 entitlement, nor her entitlement under the agreement, the comparison between them necessary to apply the test to determine hardship within the meaning of the subsection was not made.
In the Full Court judgment, Queens Counsel for the wife is recorded as not seeking to be heard in opposition to the appeal being allowed and together with senior counsel for the husband, they consented to the proceedings being remitted for hearing before me.
The Full Court considered the utility of a rehearing and expressed their concern in their judgment in the following terms:-
39.As we raised with the parties on the hearing of the appeal, a central aspect of this matter which gives us considerable disquiet about an order for rehearing of the proceedings, is whether the subject agreement will ultimately be found to be void for uncertainty. As already noted, at [315] of his Honour’s reasons the primary judge expressed reservations about whether the provisions of the agreement “are capable of clear understanding”. We share those reservations. At least, the proper construction of the financial agreement must be identified so as to be able to determine what assets the parties are to receive under it, a finding necessary for the consideration of the issue of hardship.
ISSUES FOR DETERMINATION
The claim as between the husband and wife should be determined prior to a consideration of the damages claim between the husband and the second respondent.
The wife’s contention that the financial agreement is not valid, enforceable or effective pursuant to s 90KA of the Act or is void, voidable or unenforceable pursuant to s 90K(1)(b) of the Act is the first logical consideration.
If the Court considers that the financial agreement is void and therefore should be set aside in circumstances where the severance of:
(a)Incomplete terms;
(b)Non-financial terms; and
(c)Unclear terms
does not result in contractual certainty and it would then require the Court to consider what orders, if any, should be made for property settlement pursuant to s 79 of the Act and thereafter a consideration of the husband’s claim against the second respondent.
If the Court determines that the financial agreement should not be set aside for uncertainty, then subject to the severance of terms, the Court would then consider the question of hardship pursuant to s 90K(1)(d) of the Act.
If hardship is established, then the agreement would be set aside and the Court would consider orders for property settlement.
If the claim for hardship fails and the financial agreement is binding on the parties, there would be no utility in the action as between the husband and the second respondents.
BACKGROUND AND CHRONOLOGY
The husband and wife met in 1996 and commenced cohabitation in 1997.
The parties moved to South Australia in early 1999 whereupon they separated. The parties recommenced their relationship in late 1999 (as asserted by the wife) or in late 2001 (as considered by the husband).
During their separation, the husband purchased a property in J Street, Suburb H and in late 2001, the wife purchased a property in K Street, Suburb H.
The parties lived in the K Street property until mid-2003 and then moved to the husband’s J Street property until it was sold in early 2004. The parties then purchased a property in L Street, Suburb M.
Following extensive renovations to the L Street property, it was sold in late 2005 with the parties agreeing to use the net proceeds of sale to purchase what was then the former matrimonial home in N Street, Suburb P in late 2005. It is uncontroversial that the parties had discussed a marriage and in those circumstances, the husband sought advice from Ms Q (“Ms Q”), a solicitor employed by the second respondent, to prepare a Binding Financial Agreement (“BFA”).
The apparent intention of the husband, in anticipation of a possible marriage in 2003, was to enter into an agreement such that each party would retain their separate property, equally share jointly acquired property and that there be no spousal maintenance payable by one to the other.
It is uncontroversial that the husband’s instructions resulted in a first and second draft of a document titled “Deed of Financial Agreement”. Following further amendments made by the husband, the agreement was signed by him on 11 November 2002 and whilst initially not accepted by the wife, the husband asserts that the wife was then given a copy of the signed amended document.
The wife did not sign the first BFA and the husband concedes that his next contact with Ms Q was on 24 May 2005 when he requested that she send him a copy of the draft agreement that she had prepared in 2002/2003.
There is some contention between the parties as to the extent of discussions between them concerning the husband’s requirement that marriage was conditional on the parties entering into a financial agreement that would be binding on them.
I found that on 27 June 2005, it was likely that the wife contacted the second respondents and requested a copy of the unsigned and incomplete document referred to as “the first BFA”. The document was then taken by the wife to Ms S (“Ms S”), a solicitor employed by T Lawyers.
The wife was advised that there were errors and omissions in the first BFA and that she should not sign it. Ms S was instructed to redraft the document referred to as “the second BFA” which was then provided to the husband and eventually by him, to Ms Q, on or about 9 July 2005.
On 12 July 2005, further instructions were given to Ms S such that she recommended changes to the second BFA relating to the manner in which property would be divided and changes to the treatment of the parties’ respective superannuation and pension entitlements to deal with any increase entitlements from the date of marriage. The wife signed the document referred to as “the third BFA” however, on presentation to the husband, he refused to sign it.
Further changes to the third BFA were required by the husband and following the wife’s instructions to Ms S, a redrafted document was prepared by Ms S and signed by Ms S and the wife on 15 July 2005 (“the fourth BFA”).
The husband took the fourth BFA to Ms Q on 21 July 2005 and observed what he considered to be key changes that had been made to the third BFA and incorporated in the fourth BFA.
That document was then amended by Ms Q in her own handwriting in accordance with the husband’s instructions, with the handwritten amendments being initialled by the husband and Ms Q. The now amended BFA or fifth BFA was signed on 21 July 2005 (“the BFA”).
IS THE FINANCIAL AGREEMENT VOID FOR UNCERTAINTY AND UNENFORCEABLE?
The contention of the wife is that the BFA is not valid, enforceable or effective for uncertainty. In particular, the wife makes reference to recital K, clause 3(a) and 9 of the BFA as discussed by the Full Court. The husband considers that the BFA can be properly construed and seeks that it be enforced.
The requirement of certainty was considered by the High Court in Upper House County District Council v Australian Chilling and Freezing Company (1968) 118 CLR 429 at [436-437] where Barwick CJ considered the extent to which a contract must be sufficiently certain to be binding as follows:-
9.But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co. Ltd. v. Arcos Ltd. ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G.) & Nephew Ltd. v. Ouston is not “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 contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved. (at p437)
(Citations omitted)
If there is a finding that the contract, at least as to what might be considered it’s the essential terms of the contract, are sufficiently uncertain such that the agreement is not capable of interpretation or meaning, then the contract is void. There is a right that remains with the parties to seek to render the agreement certain by the severance of particular terms under the law of restitution. (See Stinchcombe v Thomas [1957] VR 509)
The consideration of the intention of the parties is to be determined by the objective background or intention as opposed to the subjective intention of the parties. As was said by the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 (“Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd “) at [40]:-
… . References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
(Footnotes omitted)
That consideration was further refined as evidenced by the decision in International Air Transport Association v Ansett Australia Holdings Ltd (2008) 234 CLR 151 (“International Air Transport Association v Ansett Australia Holdings Ltd”) per Gleeson CJ:-
8.In giving a commercial contract a businesslike interpretation, it is necessary to consider the language used by the parties, the circumstances addressed by the contract, and the objects which it is intended to secure. An appreciation of the commercial purpose of a contract calls for an understanding of the genesis of the transaction, the background, and the market. This is a case in which the Court’s general understanding of background and purpose is supplemented by specific information as to the genesis of the transaction. The Agreement has a history; and that history is part of the context in which the context in which the contract takes its meaning. ...
(citations omitted)
In Kostres & Kostres (2009) FLC 93-420 (“Kostres”), the Full Court was required to consider on appeal whether a Federal Magistrate had erred in his consideration of whether a BFA was void, voidable or unenforceable. The Full Court determined that the BFA was “void for uncertainty” and the appeal was dismissed.
In Kostres (supra) at [127-129], the Full Court adopted the requirements for certainty as expressed in Toll(FGCT) Pty Ltd v Alphapharm Pty Ltd (supra) and International Air Transport Association v Ansett Australia Holdings Ltd (supra) as follows:-
127.We are of the view that, while common law principles of construction undoubtedly apply and can be used to avoid absurdity, the terms of the agreement must accurately reflect the intention of the parties at the time of the making of the agreement, and be unambiguous. In other words, the meaning to be given to expressions used in the agreement must be clear and their meaning certain. … These requirements are particularly important when the financial agreement is one made, as in this case, in contemplation of marriage, and deals with unidentified property or financial resources which may be acquired or contributed to by parties in the future and subsequently divided between them, or retained by one party, in the event their marriage breaks down irretrievably.
128.We accept that in determining whether the agreement is valid, enforceable or effective, the general law relating to contracts, as well as principles of equity, are to be applied. That must be done to give effect to the parties’ intentions at the time of the making of the agreement, and in the context of the statute. The legislature has been careful to include strict requirements if a financial agreement is to be binding, including the requirement of independent legal advice. In those circumstances it is clear the legislature envisaged, because of the nature of these agreements and the removal of the Court’s supervisory role, that parties would receive legal advice about the necessity for their intentions to be accurately and clearly reflected in the actual terms of the agreement.
Former High Court Justice, the Honourable Dyson Heydon AC QC, states in his academic treatise “Heydon on Contract”, the following:[3]
That three types of “uncertainty” exists at common law they are:
(a) Incomplete terms;
(b) Non-final terms; and
(c) Unclear terms.
[3] The Honourable Dyson Heydon AC QC, Heydon on Contract (Thomson Reuters, 2020), Chapter 3.
The decision of the High Court in Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd (2016) 260 CLR 1 expressed the test in the following terms:-
53.… The contractual intention required to provide contractual certainty… is not the subjective intention of either or both of the parties but such mutual contractual intention as the words and conduct attributed to the parties might convey to a reasonable person having the background knowledge reasonably available to both of them.
Hence, on analysis, uncertainty is produced where:-
(a)The language used lacks any meaning at all;
(b)The language used has too many meanings, is lacking in any clear and single meaning and thus is impossible for the Court to select the clear meaning; or
(c)The language does not give effect to the intention of the parties at the time of making the agreement.
The terms of the BFA
The intention of the parties in entering into the BFA, is set out in recital E as follows:-
E.The parties want so far as possible to contract out of the provisions of Part VIII of the Family Law Act as amended and to enter into a binding financial agreement under section 90B of the Family Law Act as amended.
The BFA provided that each party would retain free from claim or entitlement by the other, their separate property and entitlements as set out in paragraph 9(a) as to the husband and paragraph 9(b) as to the wife. Then paragraph 9(c) provides that “the net matrimonial assets will be split equally between the parties”. It is notable that the words “equally between the parties” replaces the original drafting containing the words “consistent with family law”. The evidence does not explain why the change was effected however, it is reasonable to find that the words “consistent with family law” are meaningless.
Paragraph 10 of the BFA provides as follows:-
10.Notwithstanding anything to the contrary in this Deed, [the wife] shall be entitled by way of settlement, subject to Clause 9 hereof, to a minimum of $50,000.00.
Paragraph 11 of the BFA seeks to give context to paragraph 9(c) and (d) as follows:-
11.[the husband] shall pay to [the wife] and/or, by agreement between the parties, transfer assets to [the wife] such as may be necessary to ensure that she owns in her sole name, assets to a value equal to her entitlement pursuant to paragraphs 9(c) and 10 above as soon as possible and in any event as follows:-
(a)As to 50% thereof, within three calendar months of the date of separation;
(b)As to the balance thereof within twelve calendar months of the date of separation.
Whilst there is some uncertainty as to what is intended by the application of paragraph 11, paragraph 12 under the heading of “Transfer Joint Assets” provides as follows:-
12.That [the wife] shall transfer to [the husband] contemporaneously with the payment referred to in Clause 12(a) above, all her estate and interest in any assets held jointly between the parties whether as joint tenants or tenants in common.
It is assumed that there is an error in the reference to “Clause 12(a) above” given that no such section exists. The only reference to a payment is in paragraph 10, although there is no corresponding paragraph that relates to the acquisition by the parties of jointly held assets. However, the reference to “joint tenants or tenants in common” would seem to suggest that, subject to the uncertainty as to what “Clause 12(a) above” relates to, it would be a consideration as to any real property that might be held by the parties.
The reference to “net matrimonial assets” in paragraph 9(c) of the BFA is defined as follows:-
Definitions
3. In this Deed, the following terms have the following meanings:
(a)“Net matrimonial assets” means the value ascribed to all the assets and financial resources of the parties at separation save and except the assets specifically excluded in Clause 9 sub Clauses (a) and (b) herein, less the value of the joint and several debts of the parties including any costs actually incurred in realising assets for the purposes of complying with the terms of this Deed whether related to conveyancing costs of any kind or consequential Government taxes or fees including but not limited to Capital Gains Tax liabilities of either party.
…
Schedule A to the BFA sets out the husband’s assets and liabilities as follows:-
Description Details Amount Bank accounts Westpac – Deposit …57 $52,319 Westpac – Savings …79 $99,183 Westpac – Savings …85 $243 Westpac – Cheque …39 $24 Westpac – Visa …31 $30 Direct Shares GG Company – 1,000 shares @ $4.83 $4,830 HH Company – 3,030 shares @ $6.46 $19,574 Managed Funds JJ Company – Account …48 Cash $876 MM Company – 11,968 units @ $2.21 $26,476 LL Company – 5,897 units @ $2.94 $17,386 NN Company – 16,483 units @ $1.82 $29,945 PP Company – 365 units @ $1.17 $427 Property L Street – Extra Equity $75,000 Wine Collection Various $10,000 Superannuation W Company Super Trust – …49 $67,017 KK Company Super Fund – …53 $952 Liabilities No liabilities $0 Total Net Assets $404,282
Schedule B to the BFA sets out the wife’s assets and liabilities as follows:-
Description Details Amount Bank accounts QQ Bank – …51 S1 $1,731 QQ Bank – …51 S8 $773 Superannuation TT Super – …83 $29,783 Liabilities No liabilities $0 Total Net Assets $32,287
Schedule C to the BFA sets out the joint assets and liabilities of the parties as follows:-
Description Details Amount Bank Accounts Westpac – Home Loan …45 ($268,757) Westpac – Savings …01 $1,489 Westpac – Visa …75 $29 Property L Street, Suburb M $450,000 Less [husband] extra equity ($75,000) House contents Furniture etc $25,000 Motor Vehicle Motor Vehicle 3 $10,000 Liabilities No liabilities $0 Total Net Assets $142,761
Recital K of the BFA provides:-
K.Entitlements to assets and gifts or inheritances under this Deed extends to any appreciation in value attributable thereto and whether or not the asset has been sold or dealt with such that it has changed character provided the asset held at separation is clearly traceable to the original asset, gift or inheritance.
The Full Court considered that clause 2 of the BFA makes the recitals operative.
At first consideration, it might be assumed that recital K, in some way, provides scope to the operation of recital J by referring to “gifts or inheritances”. Recital K however, goes further and refers to “assets”. Schedules “A” and “B” refers to the several assets of the parties, and “C” refers to the joint assets.
Recital K seems to focus on the “appreciation in value” that may have occurred in respect of “assets, gifts or inheritances”. The assumption is that the reference in recitals J and K to “assets, gifts or inheritances” is to be considered separately from clause 9(c) if what is intended is that the assets (and liabilities) in clause 9(a) and (b), together with any appreciation in value, are excluded.
A more focused interpretation on recital K highlights the complexity and inherent difficulty in giving clear interpretation to “whether or not the asset has been sold or dealt with such that it has changed character” and the uncertainty in being able to trace the asset potentially having been disposed of to an asset held at separation. The reference to “clearly traceable to the original asset, gift or inheritance” is likely to invite alternate but equally possible interpretations.
A further omission from the BFA is any guide as to the effect or consequence of either party earning or receiving income and whether any “appreciation in value” of purportedly quarantined assets, liabilities and entitlements as set out in 9(a) and (b), is also quarantined.
Recital K is silent as to the treatment of income received by each of the parties, either by addition to bank accounts identified in Schedule “A” and “B” or perhaps of greater importance, as may constitute a contribution to the work related entitlements, superannuation or pension entitlements of each of the parties.
A further aspect to be considered, is the reference in Schedule “A” to the “extra equity” pertaining to the property at L Street, Suburb M (“the L Street property”).
Whilst the objective intention of the parties was to avoid the operation of Part VIII of the Act, the agreement should be considered against the reasonable expectations of the parties embarking upon a marriage.
Each of the parties contemplated that there would be children. It is accepted that the husband’s evidence is that without a BFA he would not have entered into the marriage, although whether the husband made his position clear, is an issue in dispute. It is also reasonable to accept the wife’s position that children were contemplated. Significant issues were likely to arise in circumstances where the parties were in agreement that there would be children of the marriage. Whilst the wife’s intention that the BFA would not bind her if there were children of the relationship is clearly subjective, it is not unreasonable to expect that the BFA would have had provisions to contemplate such an outcome.
The submission on the part of the husband as to the circumstances of the parties and their attitude to the BFA if separation had occurred soon after marriage, was that there would have been no uncertainty.
As is properly observed, the controversy has arisen as a result of the changes in the parties circumstances over the period of the marriage. The wife contends that it is not a matter of perceived unfairness to her but rather as circumstances have changed, the provisions which if considered a day after the marriage that were uncertain and did not easily allow for an unambiguous interpretation were irrelevant because the circumstances of the parties had not brought the uncertain aspects of the BFA to prominence.
An important focus of the husband, is his “extra equity” (as is set out in schedule “A” to the BFA) in the L Street property in the sum of $75,000. Irrespective of the basis upon which the husband determined that his extra equity could be quantified in the sum of $75,000, the issue of contention is not an acknowledgment of the sum but rather how that should be treated.
The husband argues that the “extra equity” which originated from the purchase of the L Street property follows through to the acquisition of the N Street property. The idea that the “extra equity” can be traced is based upon the husband’s calculation that the N Street property was purchased in the following manner:
(1)$100,000 attributable to the husband arising from the “extra equity” of $75,000;
(2)$94,799 from the parties’ joint monies; and
(3)The balance of $612,000 by bank borrowing.
The husband relies upon recital K to support the contention that his “extra equity” of $75,000 is now reflected in his registered ownership of three undivided fourth parts of the N Street property.
The wife does not cavil with the proposition of the quantum of the husband’s contribution nor that the title of the N Street property was reflective of his greater contribution.
The wife does not accept that the tracing exercise promoted by the husband is available from a consideration of clause 9(a), as informed by recital K. The argument is, at least on one level, a consideration of whether the original $75,000 can be traced in the manner relied upon by the husband or whether the “extra equity” of $75,000 should be treated as an item of property and is not capable of a tracing exercise in circumstances where clause 9(c) provides that “the net matrimonial assets will be split equally between the parties” which brings to account the contributions of the parties, their efforts and the broad exigencies of life.
Clause 9(c) does not exclude or bring to account the different interests that the parties may have in an asset whether it be realty or personality. The point that the husband seeks to highlight, is that the acquisition of the N Street property could only have occurred as a result of the financial contribution the husband contends he made as is reflected in his greater share of the equity (traced back to the L Street property “extra equity” amount) and his superior payments towards the mortgage.
That arithmetical consideration ignores the reality that upon the children being born in 2006 and 2009, the wife ceased full-time employment and took on the role of homemaker and primary carer for the children, thereby enabling the husband to retain and remain in full-time employment.
The contention of the husband is predicated upon his view that the agreement between the parties and the terms and conditions of the BFA, if able to be interpreted, should determine the entitlements of the parties on a strict arithmetical basis. There is no acceptance by the husband of any other alternate intention of the parties whereas the wife does not accept the husband’s interpretation or calculations.
The husband contends that the words “work entitlements, … and other work related benefits including any superannuation or pension entitlement” accumulated after the date of the marriage, as appears in clause 9(a)(ii), should include the husband’s income.
As discussed, clause 3 purports to adopt a global approach to the net matrimonial assets which includes “all the assets and financial resources of the parties at separation save and except the assets specifically excluded in Clause 9 sub Clauses (a) and (b)”.
The first consideration is what is intended by the expression “financial resources of the parties at separation” and whether it is contrary to the concept of an asset.
The term “financial resources” is not defined in the Act however, property is defined in s 4(1) of the Act as follows:-
“property” means:
(a)in relation to the parties to a marriage or either of them -- means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion; or
(b)in relation to the parties to a de facto relationship or either of them -- means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion.
In Stanford & Stanford [2012] 247 CLR 108, the High Court said as follows:-
37.First, it is necessary to begin consideration of whether it is just and equitable to make a property settlement order by identifying, according to ordinary common law and equitable principles, the existing legal and equitable interests of the parties in the property…
(Emphasis in original)
Income would ordinarily not be considered as property or an asset but rather as a financial resource.
Long service leave and redundancy payments have not been considered as property unless a capital sum has been received. See Burke & Burke (1993) FLC 92-356 (“Burke”).
Other financial resources may fall under the following categories:-
(1)Superannuation before the commencement of the superannuation splitting provisions on 28 December 2002;
(2)Interests in trusts;
(3)Equitable interests; and
(4)Expectancy of an inheritance.
Past taxation losses may have a value in the sense that they could offset future income and as such, would not be property but rather a financial resource.
The definition of “property” or “asset” is likely to be given a broad meaning but would not include financial resources of the parties.
The husband acknowledges that his assets gained value by reason of his income and work related entitlements.
As considered by the Full Court in their judgment, the husband’s interpretation that his income derived during the course of the marriage is an asset, was not an interpretation that reasonably presents itself upon a consideration of the BFA.
The issue is not as easily resolved by a concession that if the wife’s interpretation is to be accepted, then her entitlement pursuant to the BFA is capable of determination.
The Full Court in Kostres (supra), said as follows:-
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.
I do not consider that the BFA provides clarity as to the intention of the parties and the outcome in the event of a separation. I accept that the intention of the parties was to contract out of Part VIIIA of the Act but how that is achieved, and the consequences of that intention, requires that the provisions of the BFA to be capable of reasonable meaning or at the very least, credible alternative interpretations. The material terms of the BFA cannot be enforced and accordingly, the agreement is void for uncertainty and should be set aside. To sever the uncertain provisions, would render the BFA as having no effect and purpose.
The interests’ of the parties are to be considered pursuant to s 79 of the Act.
PROPERTY SETTLEMENT
The husband contends as his primary argument, that the BFA is enforceable and not void for uncertainty nor should it be set aside by reason of hardship. There is also the further action between the husband and the second respondent whereby the husband seeks damages for breach of contract and/or negligence, as particularised in the husband’s Statement of Claim found at annexure “C” to the Further Amended Initiating Application filed 13 August 2021 (“the Claim”).
TREATMENT OF DAMAGE
It is conceded by all parties that the Court has accrued jurisdiction to determine the damages claim together with the challenge to the BFA and a determination of settlement of property pursuant to s 79 of the Act, as actions arising from a common substratum of facts in respect of one justiciable controversy.
There is however, disagreement as between the husband and wife as to how the separate actions should be heard and determined and the impact, if any, on the s 79 proceedings should there be a finding that the second respondents are liable to the husband for damages.
The wife submits that if the husband’s claim for damages is successful, then the quantum of damages should be considered as property of the parties. The wife argues that having the damages claim heard and determined in the one proceeding would, if successful, crystallise a sum specific. The entitlement would not be contingent and there would be no need to speculate on either the amount or the basis upon which quantum was determined.
The husband resists the wife’s position and argues that the Court is obliged to assess the property of the parties, both as to their legal and equitable interests, as at the date of trial.
In any event, the concern is that there would be a cycle of the property proceedings not being able to be determined until the assessment of damages in respect of any successful claim with then the further argument as to how the damages should be treated.
The wife’s counsel refers to the decision of the Full Court in F Firm & Ruane & Ors (2014) FLC 93-611 (“F Firm & Ruane & Ors”). The Full Court agreed with the approach of the trial judge that the focus should be on deciding whether there is one controversy and that there exists the necessary commonality or substratum of fact.
In F Firm & Ruane & Ors (supra) at [7], Thackray J agreed with the consideration of the treatment of damages as considered by the trial judge in Ruane & Bachman-Ruane and Ors (Accrued Jurisdiction) [2012] FamCA 369 at [65-66], where the trial judge said the following:-
65.I do not accept that the facts and circumstances pertaining to the issue of the damages potentially awarded to the “aggrieved party” (here the wife) are, insofar as they coincide with the s 79 claim, related only to the issue of whether those damages are “property” for the purposes of that section. Further, I reject the submission that the damages sought by the wife against the third respondent “are personal to her and will not lead to a further adjustment of property rights between her and the husband”. The ascertainment of the “property of the parties or either of them” is but a part of what is required of the Court by s 79. For example, the Court is also mandatorily required to consider s 79(4)(e), that is, “the matters referred to in s 75(2) so far as they are relevant”. The receipt, and the amount, of damages paid or payable to the wife from a party not the husband is, in my view, directly relevant to s 79(4)(e).
66.The Court is obliged to consider the relevant s 75(2) matters consequent upon an assessment of contributions. Once that assessment of contributions is made, it falls to consider, relevantly, for example, “the income, property and financial resources of each of the parties…” and, “any [other] fact or circumstance…”. In the absence of a “potential or crystallised” amount of damages, the wife needs to meet her s 79 obligation as assessed from her own assets and resources (i.e. without recourse to any damages). The availability of funds through an award of damages, both generally and as a means of wholly or partially meeting any s 79 order, is, as it seems to me, strongly arguable as an important and directly relevant s 75(2)(o) consideration.
(Citations omitted)
The wife’s counsel referred to F Firm & Ruane & Ors (supra) as authority for the proposition that damages, if assessed, should be included as assets.
There is some disagreement in F Firm & Ruane & Ors (supra) between the position adopted by Strickland J:-
215.On the one hand, it is necessary to “complete” the s 79 proceedings (on the basis that the financial agreement is not binding, as has been found to be the case here) in order to ascertain the damages to which the wife might be entitled under her claims against her solicitors. However, in order to “complete” the s 79 proceedings, the damages need to be ascertained because, although it is unlikely, they may be considered “property” for the purposes of the s 79 proceedings, or, far more likely, they would be relevant to be taken into account under s 75(2) of the Act.
Strickland J was concerned that if the s 79 proceedings were determined, then they would need to be reopened in order to bring to account the damages that might be awarded.
Thackray J did not consider that the determination would necessarily be mired in a never ending loop but rather, at paragraphs [97- 98], he provides an example of how a damages claim might be brought to account:-
97.In the third example, the resolution of the s 79 claim would necessarily proceed on the basis of a “pool” of assets which has been enhanced in value because of the payment of damages from the solicitors. This, in turn, might give rise to issues about how the additional asset should be taken into account. Arguments about “contributions” can be safely predicted, and Murphy J has highlighted the possibility of argument about how the damages could impact on s 79(4)(e).
Whilst there is significant uncertainty as to the treatment of damages as property, the plurality of the Full Court in F Firm & Ruane & Ors (supra), agreed that the more likely outcome would be a consideration of any award of damages to be a relevant factor under s 79(4)(e) of the Act thereby requiring a consideration of the factors pursuant to s 75(2) and for the avoidance of doubt, s 75(2)(o) of the Act.
IS IT JUST AND EQUITABLE TO ALTER THE PROPERTY INTERESTS OF THE PARTIES?
In Bevan & Bevan (2013) FLC 93-545 (“Bevan”), the Full Court considered at [73] that the decision in Stanford & Stanford (2012) FLC 93-495 (Stanford) could be reduced to “three fundamental propositions” summarised as follows:-
1.Determination of a just and equitable outcome of an application for property settlement begins with the identification of existing property interests (as determined by common law and equity);
2.The discretion conferred by the statute must be exercised in accordance with legal principles and must not proceed on an assumption that the parties’ interests in the property are or should be different from those determined by common law and equity;
3.A determination that a party has a right to a division of property fixed by reference only to the matters in s 79(4), and without separate consideration of s 79(2), would erroneously conflate what are distinct statutory requirements.
(Emphasis in original)
The parties commenced cohabitation in 1997, likely separated in 1999 and resumed cohabitation in 2001 until their final separation in 2018. There are two children of the relationship.
The wife seeks orders for settlement of property in circumstances where the BFA is found to be void for uncertainty. The husband acknowledges that in circumstances where the BFA does not determine the interests of the parties, then the Court should consider whether it is just and equitable to make an order pursuant to s 79 of the Act. The husband’s contention is that the parties did not intermingle their cash accounts or income and that other than the L Street and N Street properties, which were acquired during the marriage, no other property was jointly acquired.
The husband maintains that he was steadfast in his attempt to keep his finances separate even where the necessity and exigencies of their married life required him to engage in a financial relationship with the wife.
In Bevan (supra) at [31], the plurality of the Full Court said:-
… consideration of an application for property settlement should always begin with identification of the existing property interests of the parties….
At [74], the need to identify existing legal and equitable interests is emphasised in the following manner:-
… identification of existing legal and equitable interests in property, is nothing new, since “property” has always been understood as incorporating equitable, as well as legal, interests.
And at [77]:-
… However, where it is accepted that justice and equity require the making of an order, it would seem unnecessary to complicate proceedings by deciding whether one party has an equitable interest in property held by the other, since the ultimate outcome will not be determined by application of equitable principles but rather by reference to ss 79(4) and 75(2).
The plurality of the Full Court considered the extent of the enquiry required as follows:-
82.As we have noted, in many cases the preliminary question is effectively answered in the affirmative by the way the parties present their cases. Nevertheless, it is still necessary for it to be shown that the trial judge has expressly, or by clear implication, answered that question in the affirmative before making an order altering existing interests in property.
83.Answering this preliminary question clearly involves the exercise of judicial discretion since, as was said in Stanford at [36]:
The expression “just and equitable” is a qualitative description of a conclusion reached after examination of a range of potentially competing considerations. It does not admit of exhaustive definition. It is not possible to chart its metes and bounds.
Importantly at [84] their Honours considered that:-
…it is not possible to catalogue the “range of potentially competing considerations” that may be taken into account in determining whether it is just and equitable to make an order altering property interests. However, in our view, it would be a fundamental misunderstanding to read Stanford as suggesting that the matters referred to in s 79(4) should be ignored in coming to that decision. Indeed, such a reading would ignore the plain words of s 79(4), which make clear that in considering “what order (if any)” to make, the court must take into account the matters referred to in that subsection.
(Emphasis in original)
Whilst care must be taken to ensure that the issues in respect of ss 79(2) and 79(4) are not conflated, in most cases the just and equitable requirement is “readily satisfied”.
The relationship between the parties is lengthy and produced two children. Each of the parties had a common purpose in improving their financial circumstances, in particular, in anticipation of the advent of children and then the provision of financial security for the family.
The parties adjusted their lives and their employment opportunities to further their common goal; providing a secure financial foundation for the family.
I do not consider that the wife shared the same intention as the husband as to the preservation of their separate property and financial resources.
I consider that it is just and equitable for an order to be made pursuant to s 79 of the Act.
TABLE OF ASSETS
I find the agreed and disputed assets of the parties to be as follows: -
Assets
DESCRIPTION H/W W value as at 14.02.22 W value as at 30.06.22 H value as at 14.02.22 H value as at 30.06.22 Westpac bank account #...59 Jt $1,093,905 $1,094,804 $1,093,905 $1,094,804 ANZ bank account ending #...03 H $758 $36,898 $758 $36,898 D Family Trust H Financial resource Financial resource Financial resource Financial resource Other Westpac and ANZ bank accounts H Negligible Negligible Negligible Negligible Furniture & effects H $21,000 $21,000 $21,000 $21,000 Motor Vehicle 1 H $31,000 $31,000 Nil Nil Motor Vehicle 4 H Not in pool (but does not dispute H value) Not in pool (but does not dispute H value) 68,700 68,700 Motor vehicle, furniture & effects W $36,250 $36,250 $36,250 $36,250 QQ Bank account W $2,678 $2,678 $2,678 $2,678 Damages payable by the second respondent to Husband H NK NK Not in pool Not in pool Total Assets $1,185,591 $1,222,630 $1,223,291 $1,260,330 Addbacks
DESCRIPTION H/W W value as at 14.02.22 W value as at 30.06.22 H value as at 14.02.22 H value as at 30.06.22 Legal fees paid (including litigation funding) H $506,322 $642,983 $506,322 $642,983 Legal fees paid (including litigation funding) W $323,084 $323,084 $323,084 $323,084 Addbacks H TBA Nil Nil Nil Total Addbacks $829,406 $966,067 $829,406 $966,067 Liabilities
DESCRIPTION H/W W value as at 14.02.22 W value as at 30.06.22 H value as at 14.02.22 H value as at 30.06.22 Westpac credit card W ($16,751) ($16,751) ($16,751) ($16,751) Monies owed to H’s parents for Loan Agreement dated 1.10.21 H Nil Nil ($80,000) Nil
(repaid)UU Finance lease H Not in pool (but does not dispute H value) Not in pool (but does not dispute H value) ($98,257) ($98,257) Debt to Centrelink H ($2,856) ($2,856) ($2,856) ($2,856) Total Liabilities ($19,607) ($19,607) ($197,864) ($117,864) Total Net Non- Superannuation asset pool (including addbacks) $1,995,390 (Plus damages payable by the second respondent to husband) $2,169,090 (Plus damages payable by the second respondent to husband $1,854,933
$2,108,533
Superannuation
DESCRIPTION H/W W value as at 14.02.22 W value as at 30.06.22 H value as at 14.02.22 H value as at 30.06.22 RR Super H $696,500 $356,735 $696,500 $356,735 TT Super W $396,929 $373,789 $396,929 $373,789 Total Superannuation $1,093,429 $730,524 $1,093,429 $730,524 Financial resources
DESCRIPTION H/W W value as at 14.02.22 W value as at 30.06.22 H value as at 14.02.22 H value as at 30.06.22 D Family Trust (Parties agree that the husband as trustee will apply towards children’s private school fees) H $104,887 $104,683 $104,887 $104,683 Accrued Recreation and Long Service Leave as at 3.11.21 W Not relevant Not relevant 108.99 days 180.99 days Monies due to husband from VV Insurance H $53,370 Nil $53,370 Nil
(received and expended)
Total Financial Resources $158,257 $104,683 $158,257 $104,683 Other
DESCRIPTION H/W W value as at 14.02.22 W value as at 30.06.22 H value as at 14.02.22 H value as at 30.06.22 Reimbursement by W to H for N Street re: interim Order for sole use and occupation and related expenses as per H’s Financial Statement 28.10.21 H
Nil Nil $14,350 $14,350 Total Other Nil Nil $14,350 $14,350 Funds sourced and expended by the husband
By Affidavit filed 12 August 2022, the husband annexed an updated Balance Sheet with values as at 14 February 2022 and 30 June 2022 and he refers to annexure “B”, being a letter to the wife’s solicitors dated 13 July 2022 setting out funds sourced and expended by the husband since the February trial.
The husband’s schedule is set out as follows:-
DATE AMOUNT SOURCE COMMENT 14/02/22 $10,000 Loan from parents 7/03/22 $53,369 Payment from VV Insurance 11/03/22 $150,000 Withdrawal from RR Super of $150,000 less tax of $11,909 16/03/22 $82,083 Repay parents’ loans of $80,000 plus interest of $2,083 22-25/03/22 $54,285 Pay legal fees 25-26/05/22 $20,000 Loan from parents 6/06/22 $100,000 Withdrawal from RR Super of $100,000 less tax of $17,659 6/06/22 $20,000 Repay parents’ loan 14/06/22 $21,046.66 Pay legal fees 15/06/22 $20,000 Pay legal fees 16/06/22 $20,535 Pay legal fees 27/06/22 $50,000 Withdrawal from RR Super of $50,000 less tax of $3,895 28/06/22 $20,000 Pay legal fees 29/06/22 $795.35 Pay solicitors fees Feb-Jun 22 $2,340 Centrelink Family Benefit Feb-Jun 22 $4,181 Centrelink Jobseeker
The parties agree that their separate legal fees paid should be added back. (See Chorn & Hopkins (2004) FLC 93-204). As set out in the joint balance sheet, the parties agreed that as for the husband, the sum of $642,983 should be added back and as for the wife, $323,084.
However, prior to the hearing on 12 August 2022, the husband and wife each filed an updated Cost Notice setting out their total fees incurred and paid to date. The husband’s Cost Notice filed 2 August 2022, sets out that he has paid the sum of $675,864. The wife’s Cost Notice filed 5 August 2022 sets out that she has paid the sum of $320,264. I propose to addback the amounts that each party has paid to date, consistent with their most recent Cost Notices.
The wife highlights the extent of withdrawals by the husband from property and money held in various bank accounts as at the date of separation.
At paragraph 133 of the wife’s trial affidavit filed 2 March 2020, the wife sets out the bank accounts controlled by the husband together with shares in HH Company and SS Company totalling approximately $693,508.
In the husband’s Financial Statement filed 24 January 2019, the cumulative credit in various bank and investment accounts held by him totalled $819,388.
On 31 December 2018, the husband sold shares as to the sum of $79,385[4] and as at 10 September 2019, the husband disclosed savings in the total sum of $97,117. [5]
[4] Wife’s trial affidavit filed 2 March 2020, paragraphs 135-136.
[5] Annexure “A” to the husband’s trial affidavit filed 10 September 2019.
The wife acknowledged that she had received $250,000 but that the husband’s financial disclosure demonstrated since separation, he had spent approximately $347,619 of which $100,000 had been a reimbursement by the husband’s former employer.[6]
[6] Wife’s trial affidavit filed 2 March 2020, paragraph 137.
The husband accepts that his legal fees as at 14 February 2022 were in the sum of $506,322, and now the figure as at 30 June 2022, being the sum of $642,983, is to be added back.
In addition, the wife contends that the husband withdrew $510,000 from his superannuation entitlements.
To some extent, the broad thrust of the wife’s assertion is not denied by the husband.
The evidence supports the husband’s position that broadly speaking, the diminution of property can largely be attributed to the payment of his legal fees and represents the source for the payment to the wife of $250,000 on 31 December 2018 and a further $110,000 by Order on 25 May 2021.
The schedule of withdrawals from the husband’s superannuation and funds expended, are set out in a letter dated 13 July 2022 being Annexure “B” to the husband’s affidavit filed 12 August 2022.
In summary, the following represents the husband’s withdrawals from his superannuation entitlement:-
11 March 2022 $150,000 6 June 2022 $100,000 27 June 2022 $50,000 Total $300,000 Less taxation liabilities ($33,463) Net Balance $266,357
In addition, the husband has used funds by way of loans from his parents totalling $30,000 and a refund payment from VV Insurance.
From various funds received, the husband has repaid his parents in the sum of $82,083 and legal fees in the sum of $82,376.
The balance of his withdrawals has apparently been spent by the husband on lifestyle and other personal expenditure.
Whilst the husband admits that money has been spent on personal items, his recreational interests and holidays, the husband contends that his expenditure should be categorised as reasonable and not be considered as extravagant, wanton or reckless.
The wife’s focus on what she considers to have been the steady but deliberate diminution of property held by the husband as at the date of separation, is understandable given the significant total sum expended. However, the wife made no application to reopen the evidence and/ or challenge the husband in respect of expenditure incurred after 14 February 2022.
It was apparent that the wife was unaware of the further expenditure by the husband as disclosed in the letter forwarded to her solicitors dated 13 July 2022 which would have invited consideration of an application to reopen the evidence to require the further examination of the husband. No application was made nor was there a clear position adopted by the wife as to whether some or all of the husband’s post separation expenditure should be considered as an addback or whether it should be brought to account as a contribution or a s 75(2) factor.
In Woodland & Todd (2005) FLC 93-217, the Full Court was required to consider whether the trial judge failed to have regard to the identity of, the value of, and the contributions to property as they existed at the time of trial.
The Full Court found that:-
43.…The trial judge was required to refer to the asset pool at the time of the hearing and consider the contributions of both parties to that property.
It may be the case that issues of contribution arise but other than in unusual circumstances, it is an appropriate starting point to bring to account the assets and liabilities of the parties as they properly exist at trial and then give consideration to the behaviour of the parties in respect of the manner in which asset and liability may have been affected by their respective behaviour.
In Kowaliw & Kowaliw (1981) FLC 91-092 (“Kowaliw”), Baker J held at 76,644 as follows:-
As a statement of general principle. I am firmly of the view that financial loss incurred by the parties or either of them in the course of the marriage whether such losses result from a joint or several liabilities should be shared by them (although not necessarily equally) except in the following circumstances:
(a)where one of the parties has embarked upon a course of conduct designed to reduce or minimise the effective value or worth of matrimonial assets; or
(b)where one of the parties has acted recklessly, negligently or wantonly with matrimonial assets, the overall effect of which has reduced or minimised their value.
Conduct of the kind referred to in Kowaliw (supra) having economic consequences, may well be a relevant consideration under s 75(2)(o) of the Act.
It is now trite to observe that his Honour’s proposition represents an enduring and often relied upon statement of general principle.
In Todd & Todd [2014] FamCA 101, I said:-
92.Following Stanford, I consider that whilst it is still open to a Court to consider that the appropriate way forward is to add property back to the interests of each of the parties, such an outcome would be rarer and may well be restricted to those circumstances where there is a realistic possibility that the property might be retrieved. ...
Whilst the issue of addbacks is considered against the background of the decision in Stanford, this Court gave proper consideration to the controversy in La Costa & La Costa [2007] 38 Fam LR 412, following its consideration of Chorn & Hopkins (supra) and M & M [1988] FamCA 42, and said at [43]:-
2.10It is well settled that save in exceptional circumstances a trial Judge should deal with the property as at the date of the hearing and make adjustments taking into account the various matters set out under s.79. (Wells v Wells (1977) FLC 90-285; Wardman v Hudson (1978) FLC 90-466; In the Marriage of Geyl 7 Fam LR 219). However, the particular justice of the case may make it appropriate to notionally add back assets which have been demonstrated to have been dissipated either during the marriage or post-separation. Normally it is necessary to demonstrate an appropriate basis for doing so, for example by wastage such as gambling or extravagant living. (Kowaliw v Kowaliw (1981) FLC 91-092; … Additionally, because of the requirement for each party to bear their own costs, it is generally appropriate to add back to the pool of assets notionally any legal costs that have been spent on the litigation and to deal with the costs as a separate issue at the end of the litigation. (see Farnell (1996) FLC 92-681).
The issue arises because of the focus of the High Court in Stanford & Stanford [2012] 247 CLR 108 on the “existing legal and equitable interest of the parties in their property”.
In Watson & Ling (2013) FLC 93-527, Murphy J considered that even in those cases where “waste” or “premature distribution” is established, by necessary implication, title both legal and equitable will have passed.
Bryant CJ and Thackray JJ in Bevan & Bevan (2013) FLC 93-545 said:-
79.We observe that “notional property”, which is sometimes “added back” to a list of assets to account for the unilateral disposal of assets, is unlikely to constitute “property of the parties to the marriage or either of them”, and thus is not amenable to alteration under s 79. It is important to deal with such disposals carefully, recognising the assets no longer exist, but that the disposal of them forms part of the history of the marriage – and potentially an important part. …
It is not suggested by the wife that money withdrawn by the husband from his superannuation account or his bank and investment accounts has been retained and not spent. The issue is whether the conduct of the husband is so egregious, that his behaviour can be considered as wanton or deliberate and therefore, either the money expended should be added back or his overall expenditure should be considered as an issue relevant to contribution or s 75(2)(o) of the Act.
It is not suggested by the husband that the sums withdrawn by him were insignificant. Whilst I do not propose to undertake a mathematical exercise in attempting to calculate with precision how the husband spent his money, it is agreed that a substantial sum was used to pay his legal fees. The husband properly concedes that the amount expended on legal fees should be added back.
The wife contends that the husband had an obligation to advise her of the extent of his expenditure where it might reasonably have been considered to be more than reasonably expected. Some measure of what might be considered as reasonable expenditure, is the amount of $2,599 claimed by the husband in his Financial Statement sworn 28 October 2021 (Exhibit “20”). The wife would highlight that even if that amount of weekly expenditure was reasonable, noting that at $2,599 it amounts to $135,148 per annum, it is still a sum significantly in excess of the wife’s total income.
Even using the husband’s own assessment of expenditure, the amount expended by him significantly exceeds his own estimate of reasonable expenditure.
The husband’s explanation as to his decision not to inform the wife of his intention to withdraw funds from superannuation, lacks credibility. Given that the proceedings have been on foot since 2018, to suggest that he assumed the wife would not be interested and therefore, there would be no utility in advising her that he intended to withdraw substantial sums from his superannuation, is an unlikely conclusion.
Nonetheless, it is not a matter for me to look at the husband’s expenditure and apply the “as much as that” test.
Submissions of the wife’s counsel on the topic of the dissipation of assets by the husband is primarily contained in the wife’s Written Submissions filed 1 July 2022. The further dissipation of assets by the husband arises from his affidavit filed 12 August 2022.
The wife’s submission is broad and there remains uncertainty as to whether the wife’s contention is that there should be either an addback considered, the dissipation of assets brought to account as a contribution factor or whether it should be a consideration under s 75(2) of the Act.
As discussed, no application was made to reopen the evidence and interrogate the husband as to the nature and detail of his expenditure.
In the absence of any clear evidence, there is no support for the husband’s expenditure being considered as an addback.
The discussion is whether and if so how, the husband’s expenditure should be considered.
In Antmann & Antmann (1980) FLC 90-908, the Full Court said at 75,444:-
…In our view, there is no room for such a consideration in para. (a), (b) or (c) of sec. 79(4). It would be relevant in this context for this Court to take into account that the burden of contribution of one party was increased because the other party failed to make such contribution as was reasonably expected of him or her….
Therefore, the concept of negative contribution has not gained any support.
If there is evidence of “waste” then it may be a relevant factor or circumstance under s 75(2)(o) of the Act.
In Kouper & Kouper(No 3) [2009] FamCA 1080, Murphy J summarised the necessary consideration at [113]:-
Put another way, the task is not to examine conduct for the purposes of fitting it within a particular description, or to reward the prudent and punish the imprudent. Rather, the task is to examine and make findings about the particular circumstances surrounding expenditure and to determine, within that context, the manner in which overall justice and equity indicates the diminution in the pool ought be treated.
It is not suggested by the husband that the pool of assets has not been diminished.
The husband contends that his expenditure post separation was in all the circumstances reasonable and he denies that his expenditure was wanton, reckless or extravagant as alleged by the wife.
In evidence on 16 February 2022, the husband was questioned by the wife’s counsel concerning various items of expenditure.
In particular, the husband acknowledged that he had spent $2,700 for family photography, a significant sum for family holidays and $18,000 on a road bike.
The husband also purchased jewellery for his girlfriend to the sum of $5,495 and clothing to prepare for new employment to the sum of $2,800. The husband also purchased a new Motor Vehicle 4 with the justification that he was rewarding himself for returning to the work force after a hiatus of two years.
The cost of the vehicle was about $85,000. As at the date of trial, the payout figure on the lease of the vehicle was about $98,000. There is little doubt that the husband erred on the side of generosity with respect to expenditure on himself. It is also a reasonable finding that the husband knew that the pool of property would be diminished by his significant post separation expenditure.
The husband entered into two loans with his parents for the sum of $138,490 and then a further sum of $80,000. The husband contends that the loans were for legal fees and general living expenses. Those loans have been discharged from the initial withdrawal of $500,000 from the husband’s superannuation entitlement on 7 September 2020 and then subsequently on 16 March 2022 following a further withdrawal from his superannuation.
It is uncontroversial that the husband has little to show for the significant expenditure post separation. The Motor Vehicle 4 has a liability in excess of its value. The husband disposed of the Motor Vehicle 1 which had been valued at $31,000 as at October 2019 in order to fund the purchase of the Motor Vehicle 4.
The difficulty for the wife is that whilst the husband was cross-examined as to the first tranche of spending post separation, no application was made for the husband to be questioned in respect of his considerable expenditure post 14 February 2022.
Whilst the arithmetic is relatively clear, the reason for the expenditure (over and above the husband’s legal fees which he concedes should be the subject of an addback) can be categorised as generous living and life style expenditure. I do not propose to addback any sum arising out of the husband’s post separation draw down on property.
An important consideration is the extent to which the husband considered that his intended expenditure should be the subject of disclosure.
In Weir & Weir (1992) 16 Fam LR 154, the Full Court highlighted the importance of disclosure at 79,593:-
This Court has pointed out in a line of cases leading up to the recent decision of the Full Court in Black and Kellner (1992) FLC 92-287, that it is the duty of a party involved in property proceedings in this jurisdiction to make a full disclosure of their financial affairs. See also Giunti and Giunti (1986) FLC 91-759, and Mezzacappa and Mezzacappa (1987) 11 Fam LR 957. It is clear enough from his Honour’s findings in the present case that the husband had not done so and had in fact pocketed the proceeds of a substantial number of cash sales. It is obvious that in most cases of this nature it is difficult enough for the other party to establish that fact let alone establish the quantum of what has been taken.
It seems to us that once it has been established that there has been a deliberate non- disclosure, which follows from his Honour’s findings in this case, then the Court should not be unduly cautious about making findings in favour of the innocent party. To do otherwise might be thought to provide a charter for fraud in proceedings of this nature.
It is readily apparent that the husband did not intend to either disclose any intention to draw down on his superannuation entitlements nor to notify the wife following the draw down and expenditure. The assertion by the husband that he did not consider the wife would have been interested in his intention to draw down funds is fanciful and as suggested by the wife’s counsel, incredible.
The assumption of each of the parties, but in particular the husband, was that he had received competent legal advice that the BFA he entered into on 21 July 2005 would likely achieve the intended result. I have determined that the agreement was void for uncertainty and have previously determined that but for a consideration of s 90G(1A) of the Act, the BFA was not binding on the parties in circumstances where the provisions of s 90G were not satisfied.
It is now arguable that a finding of uncertainty would likely impact upon my earlier finding that pursuant to s 90G(1A) it would be unjust and inequitable if the BFA were to be set aside. I do not need to determine that question.
For 13 years, the parties more or less conducted their marriage and their joint and several personal and financial circumstances based upon an assumption that the BFA would resolve their differences in the event of separation.
It is likely that whilst the wife gave little or no consideration to the existence of the BFA and its potential implications upon separation as time passed, the actions of the husband in retaining the bulk of his income suggests that his financial conduct during the relationship was at least influenced by his understanding of the effect of the BFA.
If the parties had never separated, the BFA would have had no adverse impact even though there existed a fundamental breach of the agreement and therefore the potential for loss and damage to arise.
I therefore find that the important consideration is when the actual damage has been sustained and in this case, that was at the earliest, the date of separation when the parties may have considered the application of the BFA or certainly at the date of the notification and/or institution of proceedings by the wife. Either way, I find that the husband’s claim of negligence is within time.
Claim of negligence
The husband and the second respondent have helpfully settled upon a chronology in relation to the instruction and engagement of the second respondent by the husband of the preparation of a BFA in 2002 and 2003 and advice in respect to the BFA prepared by the husband’s solicitors.
It is not controversial that the husband instructed the second respondent in March 2023 to provide initial advice and then in September 2002, instructions were given to the second respondent to prepare a BFA.
In anticipation of the work to be undertaken by Ms Q for and on behalf of the second respondent, on 19 September 2002 the husband sought material, information and legislation that would assist him to better understand the role that a BFA could play in the event that his relationship with the wife broke down irretrievably.
Ms Q responded to the husband’s request on 30 September 2002 and forwarded to him what might be considered as a standard letter of advice which had as its focus, a warning to the husband that a BFA might not provide the certainty of outcome as sought by the husband should the parties separate.
The initial instruction resulted in Ms Q advising the husband on 1 November 2002, that a first draft of a BFA had been prepared.
It is not controversial that the second respondent forwarded to the husband a document setting out the firm’s fees policy and costs agreement.
It is also agreed that the ‘Client Services Agreement Family Law’ document signed by the husband and second respondent on 7 November 2022 provides express duty to act with “professional skill and diligence”.[15]
[15] Husband’s Book of Documents Volume 2, page 57.
Further discussion between the husband and Ms Q resulted in the first draft being amended as contained in the second draft BFA.
The correspondence between Ms Q and the husband acknowledges that a third draft would be prepared which would contain further provisions including an arbitration clause.
On 11 November 2002, the husband returned an executed BFA to Ms Q and authorised the payment of her fees. Again, further amendments were either contemplated or made to the third draft BFA. It appears that the husband advised Ms Q that either the wife intended to prepare her own draft BFA and that once received the applicant would then contact Ms Q or, as may be the case by reference to Ms Q’s hand written notes, that the husband would draft his own agreement.
Nothing further eventuated in terms of further instructions to Ms Q and by letter to the husband dated 15 October 2003, it appears that Ms Q closed the file and in any event, advised the husband that the file could be retrieved if he required further assistance.
Ms Q’s file also records a telephone attendance between her secretary and the husband wherein he sought a copy of the last BFA which was subsequently retrieved from archives and sent to him.
It is conceded that no further instructions were given to Ms Q until she was the subject of a request by the wife advising that she was now in possession of the draft BFA that had been prepared by Ms Q in 2003. Ms Q was further advised by the husband that the draft BFA had been provided to the wife’s solicitor and that due to changes in the legislation a new BFA would be prepared.
On 11 July 2005, it is reasonable to find that the husband sought to reinstruct Ms Q, on behalf of the second respondents, to provide legal advice on the BFA that had now been drafted by the wife’s solicitor.
It is agreed that the draft BFA was the subject of substantial amendment by Ms Q. The following summary of the events of 21 July 2005, as prepared by Senior Counsel for the respondent, does not appear to be the subject of challenge:
·Ms Q completes the “file re-opening form” with a matter description: “prenuptial agreement” date of new instructions 21/7/2005;
·Handwritten note of attendance of Ms Q on the husband for 30 minutes;
·No opportunity for Ms Q to review her notes from 2002 or 2003 nor advise on matters that the husband had instructed he wanted included in the BFA;
·Telephone attendance of Ms Q (in the presence of the husband) on the wife’s solicitor concerning changes to the BFA;
·Ms Q advises the husband that removing references to children would have no impact on the BFA;
·In cross examination, Ms Q concedes that the statement concerning the removal of any reference to children would probably be something she would have said;
·The BFA was amended in hand to reflect the three concerns identified by Ms Q, the amendments were initialled and the BFA was given to the husband to obtain the wife’s signature; and
·No further advice provided to the husband including the formalities of the creation of a BFA pursuant to s 90G of the Act.[16]
[16] Written submissions of the respondent filed 8/8/2022 – page 4
ISSUES FOR DETERMINATION
The issues for determination are:-
(1)Whether there was a continuing retainer or in the alternative, there was a fresh retainer as and from 21 July 2005;
(2)What consequences flow from a finding that the executed BFA is void for uncertainty;
(3)Whether Ms Q and consequentially, the second respondent, breached their duty of care in relation to her advice generally concerning the rights and obligations and advantages and disadvantages of the husband entering into a BFA and for failing to provide advice in respect of the scope of the 2005 retainer;
(4)If Ms Q breached her duty of care under the 2005 retainer, whether she acted in a manner provided for in paragraph 41 of the Civil Liability Act 1936 (SA) as follows:-
41 – Standard of care for professionals
(1)A person who provides a professional service incurs no liability in negligence arising from the service if it is established that the provider acted in a manner that (at the time the service was provided) was widely accepted in Australia by members of the same profession as competent professional practice.
(2)However, professional opinion cannot be relied on for the purpose of this section if the court considers that the opinion is irrational.
(3)The fact that there are differing professional opinions widely accepted in Australia by members of the same profession does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section.
(4)Professional opinion does not have to be universally accepted to be considered widely accepted.
(5)This section does not apply to liability arising in connection with the giving of (or the failure to give) a warning, advice or other information in respect of a death of or injury associated with the provision of a health care service.
(5)In the event that the husband establishes that there has been a breach of Ms Q’s duty of care, whether he has suffered loss or damage which can be quantified and would form the basis of any award.
As discussed, the second respondent raised a defence under the Limitation Act which has been considered and dismissed.
SECTION 90G OF THE FAMILY LAW ACT
The wife argued that before the agreement was signed, she did not receive independent legal advice as to the effect of the agreement on her rights and about the advantages and disadvantages at the time that the advice was provided.
The husband contended that if the agreement was found not to be binding in circumstances where the wife had not been provided with the appropriate independent legal advice, then the Court should find that pursuant to s 90G(1A) of the Act, it would be unjust and inequitable for the agreement not to be binding.
For reasons given in the 2020 judgment, I found that: -
167.It is likely that neither solicitor invested much time in considering the nature of the parties’ superannuation and pension entitlements and whether they could be dealt with in any meaningful way in terms of an increase in benefit post-marriage; and at
170.The handwritten amendments go to the heart of the agreement and are fundamental.
171.Whilst it could be said that the amendments simplified the arrangement between the parties …it could not be considered as a minor change or a drafting exercise but rather, one of substance.
172.I find that the handwritten amendments to the agreement fundamentally altered the document such that it could be considered as a new financial agreement.
My distillation of the relevant authorities is summarised at [203] of the 2020 judgment:
203.Accordingly, the application of the provisions of s 90G(1A) are to be determined by the application of judicial discretion that bring to account the circumstances in which the agreement was made as opposed to a more limited application of seeking to correct a technicality.
Ultimately, I considered that it would be unjust and unequitable if the agreement was not binding.
Whilst not the subject of any submission, it is reasonable to consider that a finding of uncertainty as to the essential terms of the BFA in circumstances where severance would render the agreement meaningless, could not have been saved by the application of s 90G(1A).
PARTICULARS OF CLAIM
As discussed, the husband contends that there was a continuing retainer that commenced in March 2002 when the husband retained the second respondent to provide him with legal advice in respect of a BFA in anticipation of an ongoing relationship and possibly, at that stage, in the event that the husband and the wife married. The contention is that the retainer continued until the conclusion of the BFA on 21 July 2005 with the subsequent solicitor’s file being closed soon thereafter.
I have determined that the attendance of the husband upon the second respondent by Ms Q in 2005 should be regarded as a fresh retainer. Significant time elapsed between the initial attendance in March 2002 and the subsequent attendance by the husband on Ms Q to consider the draft agreement that had been prepared by the wife’ solicitors.
It could not be said that Ms Q maintained an open file as and from March 2002. Broadly speaking, Ms Q sought to fulfil the husband’s instructions but it could not be said that the manner in which Ms Q conducted the file on behalf of the second respondents was a work in progress. It was not. It is reasonable to find that Ms Q’s conduct was such that the husband understood that she was prepared to accept further instruction from him but at every stage, it was a decision for the husband as to the advice that he required from Ms Q.
Whilst the husband provided a copy of the 2002/2003 BFA drafted by Ms Q to the wife in May 2005, with a demand that she obtain advice and sign the agreement, communication from the first respondent to the husband and the second respondent’s practice was that her solicitor’s advice was to the effect that the draft document provided by the husband was not satisfactory and needed to be redrawn by her solicitors.
Accordingly, the advice sought by the husband, from Ms Q, was not to draft a BFA but to provide advice on the agreement prepared by the wife’s solicitors and to fulfil the statutory requirements that would enable the financial agreement to acquire the status of a binding agreement.
It is conceded by the second respondents, that Ms Q was promoted as an accredited family law specialist.
Moreover, whilst I have found that the husband and the second respondent entered into a fresh retainer in June 2005, it is reasonable for the husband to assume that as part of the purported skill and expertise of a person holding a qualification as an accredited family lawyer, but also that Ms Q had prepared draft BFA’s in 2002/2003 which could have been executed by the husband and the wife, Ms Q held herself out not just as a person able to provide high level advice on matters integral to the efficacy of a BFA but also, that she possessed the skill set to draft an agreement that would at least be certain in its terms, conditions and purported outcome.
Breach of contract / negligence
The husband contends at paragraph 45 of the Statement of Claim that the second respondent was in breach of the fresh retainer in that the second respondent:-
45.1did not inform the [husband] that the terms of the Draft Agreement, The First Deed, the Second Deed or the Third Deed respectively would not result in the division of the assets of the parties in accordance with his instructions…;
45.2failed to advise the [husband] that the [Ms S] Certificate must be re-issued after specific advice was provided to the [wife] as to the effect of the Third Deed upon her rights under the Act and that it was, or might be, unenforceable pursuant to the Act if not re-issued;
45.3failed to advise the [husband] that cl. 17 of the Third Deed was void by reason of s 90E of the Act;
45.4did not advise the [husband] that the terms of the Third Deed were not specifically enforceable as a contract because they lacked certainty;
45.5did not to (sic) further amend the Second Deed such that the terms of the Third Deed were more certain and capable of specific enforcement; and
45.6failed to advise the [husband] that the effect of s 90KA(1)(d) of the Act was that “a material change in circumstances” was either/ or the birth of a child or separation, simpliciter.
The second respondent admits that they had a duty to perform the fresh retainer with professional skill and diligence. The second respondent contends that the duty was discharged and specifically rejects the husband’s position that he instructed Ms Q that without a binding agreement, he would not marry the wife and that there would not be children.
In evidence, the husband accepts that he had the draft BFA from about 11 July 2005. Whilst the husband would not accept that he received the agreement directly from the wife, I am satisfied from Ms Q’s evidence and a consideration of her file notes, that prior to the husband’s attendance upon her on 21 July 2005, she had not been in communication with either the husband, the wife or her solicitor, Ms S.
The following exchanges in cross examination are of assistance: [17]
[Counsel]:[Mr Daily], you said yesterday that you’re very particular with words. Did you take time to read the document?
[Husband]:Yes.
[Counsel]:And carefully consider it?
[Husband]:I actually can recall sitting in the office with [the wife] and we were both actually fairly frantically reading a document, so I don’t actually recall reading it prior to that, but I was frantically reading it and I detected that some clauses had been changed but weren’t in mark up. …
[17] Transcript 17.2.2022 page 50, line 22
Then, as appears at page 53 line 16 of the transcript:-
[Counsel]:And that is what I was suggesting to you, that you had had some time to carefully consider the earlier version of the document?
[Husband]:Yes.
[Counsel]:That you are able to identify that this was a change?
[Husband]:Yes. I – and that’s when I responded I don’t recall reading it earlier, but I recall being in the office and frantically – both of us were reviewing a document and I picked up these changes first, and I said to [Ms Q] what – you know, look at this, they’ve changed these things without mark up or even highlighting the changes to us, what’s going on. And as to your comment about the solicitors not talking, I don’t know how that could be possible because I recall they were actually the ones who were discussing whether the document should include references to children or not.
The husband was challenged on his purported recall of the solicitors for the wife and the first respondent discussing the terms and conditions of the agreement. The gravamen of the husband’s evidence was to underpin how it was that references to children were taken out of the BFA and that this occurred by negotiations between the parties’ solicitors. The specific allegation is that when the husband discussed with Ms Q his unhappiness that references to children had been removed from the BFA, Ms Q advised him that it would make no difference to the BFA “because under the law you couldn’t contract out children under the law”.[18]
[18] Transcript 17 February 2022, p.54 line 22.
The husband summarised his position at page 54, line 43:
[Husband]:I recall – yes her advice to me, because I wanted a reference to children, I wanted a full disclosure in the BFA to talk about all of our plans, no surprises, and that scenario of having children and anything else that might help to mitigate the risk if there are any risks associated with hardship or children, I wanted to deal with it upfront. We were planning to have children and if we needed to make provisions or other things to help, I was very uncomfortable with it not including children and [Ms Q] advised me, and I relied on that advice, that it was ok to take out the references to children because it made no difference to the BFA.
Ms Q was asked to reflect upon whether the husband had raised a concern that the final BFA under consideration on 21 July 2005, did not contain a paragraph or a provision as to what would happen upon the birth of a child.
The following extract of the evidence properly summarises Ms Q’s evidence on the point:[19]
[19] Transcript 18 February 2022 p.358 line 15.
[Counsel]:[Mr Daily] has given evidence that he raised a third issue with you on that occasion, and that it was his concern about there not being included a paragraph relating to what would happen in the event that one or other of them went on leave following the birth of a child, and that he, specifically, wanted a paragraph to that effect being reinstated into the document from the 2002 deed that you drafted?
[Ms Q]:There’s – sorry.
[Counsel]:I just want to ask you.
[Ms Q]:Yes.
[Counsel]:Is that something you discussed on 21 July 2005?
[Ms Q]:There’s nothing to indicate, in my file note, that that was discussed.
[Counsel]:If that was something that was discussed, would that be something that you would have made a record of?
[Ms Q]:Absolutely.
[Counsel]:[Mr Daily] says that, further to that, he now has a memory of you, during that meeting on 21 July, contacting the solicitor at [T Lawyers] office and negotiating the amendments to the document. Did you have a telephone conversation with anyone from [T Lawyers] office during that meeting?
[Ms Q]:I don’t believe I did.
[Counsel]:And why do you say that?
[Ms Q]:There’s no note of that. There’s no recording of that.
[Counsel]:If you had a telephone conversation with a solicitor acting for a party on the other side, is that something that you would have made a record of?
[Ms Q]:Absolutely. It’s important.
[Counsel]:[Mr Daily] says that in the course of your discussions with the wife’s solicitors – sorry, the wife’s solicitors agreed to the two amendments to the document, that is, the inclusion of super and the amendment to paragraph 9(c), and that the wife would not agree to amend the document to re-insert the clause relating to what would happen if a party went on leave following the birth of a child?
[Ms Q:]I don’t believe that happened.
[Counsel]:If those discussions had taken place, that is, you were negotiating something relating to a document, would you have made a note of it on your file?
[Ms Q]:Absolutely.
[Counsel]:He, [Mr Daily], further says that he raised with you at this meeting that he was concerned that the agreement did not make reference to children, and that you advised that didn’t matter because you can’t contract out of the Family Law Act. Is that something that you recall being discussed?
[Ms Q]:No.
[Counsel]:If that was something that was discussed, would you have made a note of it?
[Ms Q]:Absolutely.
Under cross examination, Ms Q conceded that inherent in the standard letter of advice that she provided to the husband, was an acknowledgment that for a financial agreement to be binding it required strict compliance with the Act.
Senior Counsel explored with Ms Q the concept that an agreement could be set aside if it was considered void, voidable or unenforceable. The following exchange is informative:[20]
[Counsel]:That would encompass, for example, that the agreement is unenforceable because it is uncertain in the meaning of its terms; correct?
[Ms Q]:Yes.
[Counsel]:Did you explain to [Mr Daily] that the – at any time, that agreement could be set aside as unenforceable because it was uncertain or could ---?
[Ms Q]:I certainly talked – I talked to him about – I subsequently talked to him about the document he presented, as it being uncertain, and that it could be set aside, but I don’t recall talking about it at that stage.
[Counsel]:And from a practitioner’s point of view, the risk that a document might be set aside as unenforceable for uncertainty, in a contractual sense, was a matter that was not unique to a binding financial agreement; it applied to every contract, didn’t it?
[Ms Q]:Correct. Correct.
[20] Transcript 18 February 2022 p.372, line 35.
Ms Q conceded that there was no note in her file concerning a risk that any term of the agreement had the potential to be uncertain, nor that there was a risk that the entirety of the agreement may be void for uncertainty. Ms Q did not have any recollection of giving that advice.
Ms Q made an important concession that whilst she considered the standard letter to be sufficient warning of the potential for a financial agreement to not gain the status of a binding financial agreement, that was qualitatively different to providing a warning of the effect or implication on the agreement of a particular clause, such as the specific issue of uncertainty.
Ms Q was consistent in her evidence that there was no substantive discussion about whether the draft agreement should contain a provision as to what would occur on the birth of a child and the implication and in particular, that the birth of a child might be considered as a material change in circumstances for the purpose of setting aside a BFA.
I find that Ms Q’s evidence regarding her denial of any conversation with the wife’s solicitors concerning a reference to children, and her denial that she had told the husband there was no need for any reference to children to be included in the agreement, is to be preferred over the evidence of the husband. However, it is significant that the topic of what would happen upon the birth of a child and whether that might represent a material change in circumstances was not raised by Ms Q and should have been the subject of specific advice.
I have regard to the evidence generally and it is a reasonable consideration that the events in question occurred on or before 21 July 2005 in circumstances where the evidence was being given by Ms Q in 2018.
The Court is assisted by the second respondent’s retention of documents, file notes and correspondence (Exhibit “2”).
What is apparent, is that whilst Ms Q may have gained or even retained some memory of her earlier involvement with the husband in 2002 and 2003, her engagement by the husband to assist in the consideration and if so advised execution of the final BFA, occurred over a period of 30 minutes duration.
There is nothing to suggest that Ms Q was compelled to conclude the matter in what might be considered an unnecessarily short period of time to properly allow a consideration of a draft agreement prepared by another solicitor, a consideration of what is required for the financial agreement to gain the status of a BFA pursuant to the Act, and to advise the husband as to the advantages and disadvantages of entering into the proposed BFA, including matters involving lack of compliance with s 90G of the Act and factors that might set aside an agreement pursuant s 90K and 90KA of the Act.
The advice given by Ms Q did not rise above the suggested pro-forma letter extracted from the CCH loose leaf reporting service. It is not suggested that the letter of advice to the husband was specific to the circumstances as presented by him.
I consider that Ms Q’s advice to the husband was cursory, nonspecific and as to whether the agreement could be the subject of handwritten amendment without further specific advice, it was wrong.
Whilst I find that the husband was aware of the risk of a BFA being set aside, I consider that if that was the extent of Ms Q’s advice to him, it falls significantly short as to what might be considered is a duty by Ms Q to take reasonable care in advising the husband given her representation of being an Accredited Family Law Specialist.
In Heydon v NRMA Ltd & Ors [2000] NSWCA 374, Malcolm AJA described the duty of care owed by a solicitor in the following terms:-
145.In my opinion the approach adopted in Rogers v Whitaker is applicable to the duty of care of legal practitioners and the standard of care. Both barristers and solicitors owe a duty of care to those whom they advise or for whom they act. In the present context, their duty is to exercise reasonable care and skill in the provision of professional advice. The standard of care and skill is that which may be reasonably expected of practitioners. In the case of practitioners professing to have a special skill in a particular area of law, the standard of care required is that of the ordinary skilled person exercising and professing to have that special skill….
Ms Q, and by necessary implication the second respondents, were required to exercise reasonable care but not necessarily to ensure any particular result.
Ms Q did not draft the BFA, although it could be said that her hand written amendments as to essential terms and conditions had the consequential effect of creating a new agreement that would attract compliance pursuant to s 90G of the Act.
It was not suggested by Ms Q to the husband that her ability to provide a professional service was limited to advice only pursuant to s 90G of the Act. The husband was entitled to assume that given Ms Q had previously drafted various financial agreements, he could have confidence that she could provide comprehensive advice not just in respect of the provisions of the BFA but also as to the integrity of the document namely, whether there was a risk that it could be considered as void for uncertainty.
Accordingly, I am satisfied that the husband has established a breach of duty with respect to the 2005 fresh retainer and that the second respondents have not made out a defence pursuant to s 41 of the Civil Liability Act.
Hardship
Notwithstanding that the asset pool has now changed and is diminished by the unannounced expenditure by the husband of money drawn from his superannuation entitlement, the second respondent contends that in any event, the agreement should be set aside pursuant to s 90K(1)(d) of the Act on the basis that the wife has suffered hardship as a result of a material change in circumstances.
I adopt paragraphs [257] to [315] of the 2020 judgment and I am satisfied there has been a material change in the circumstances relating to the care, welfare and development of the children and as a result, the wife, who has a caring responsibility for the children, will suffer hardship if the Court does not set the agreement aside.
I accept counsel’s submissions that there remains some uncertainty as to the current living arrangements for the children. Opportunity was given for further evidence to be called on the current arrangements however, the wife did not take up the opportunity to do so.
As considered, and subject to the potential for some further modest adjustment if damages are awarded to the husband, I have determined that the wife is entitled to a settlement sum of $741,634
There is some uncertainty as to the husband’s current position in respect of the wife’s entitlement pursuant to his interpretation of the BFA but by his own admission, calculations as set out in ‘Figure 1’ attached to the husband’s written submissions, it is proposed that on a pool as at 15 September 2018, the wife’s entitlement is a further $5,975 (in addition to the sum of $250,000 paid in 2018).
By reference to the adjusted balance sheet, the wife retains modest assets of $359,192 but they are predominantly comprised of legal fees added back. She also retains her superannuation entitlement with TT Super.
On the husband’s case, the wife would have available assets comprising of a few thousand dollars. This would be insufficient to provide financially for the children.
Accordingly, the wife would be significantly disadvantaged if the BFA, as interpreted by the husband, was enforced.
I consider that hardship has been established.
DAMAGES
There is no agreement between the husband and the second respondent as to how damages should be assessed in the event of a finding of breach of contract or negligence on the part of the second respondent. Broadly speaking, the husband would seek damages to be assessed on the difference between his expectation of the payment to the wife pursuant to the BFA and the settlement sum ordered following a consideration of the wife’s entitlement pursuant to s 79 of the Act.
The assessment of damages is made more complex by the uncertainty of the terms of the BFA and how that would translate or be capable of certain determination pursuant to the BFA. The husband sets out the calculations as to each of the husband and wife’s entitlements as follows:-
DESCRIPTION DETAIL TOTAL WIFE HUSBAND Separation Date 15 September 2018 Assets Parties sole net asset $2,862,450 $2,567,158 $295,092 Net matrimonial assets $409,514 $204,757 $204,757 Total net assets $3,171,964 $2,771,915 $500,000 Transfer of assets Cash payment $2,018 ($250,000) $250,000 Transfer joint assets (adjustment) ($5,975) $5,975
The difficulty however, is that the husband’s calculation to total net assets as at separation includes his superannuation interest in RR Super at $970,578. There is no concession between the parties that their separate superannuation entitlements should be brought to account or considered as property. The separate superannuation interests of the husband and the wife have not vested and will not be the subject to further order.
A further difficulty arises in that significant amounts have been withdrawn by the husband from his superannuation entitlement such that as at 30 June 2022, the balance in his superannuation account was $356,735.
The asset pool has also changed by the inclusion of the parties’ separate legal fees paid, which has been included as an addback.
Subject to the potential for further adjustment following a determination of any damages payable to the husband, the wife’s entitlement by way of a settlement sum is $741,634.
Neither the husband nor the second respondent made submissions in respect of quantum of damages and at least, the husband seeks that upon judgment being delivered, an opportunity is given for further submissions to be made.
I propose to fall in with that request.
I make orders as appear at the commencement of these reasons.
I certify that the preceding four hundred and thirty-three (433) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 31 March 2023
- AGLC
- Daily & Daily [2023] FedCFamC1F 222
- Case
- [2023] FedCFamC1F 222
- Decision Date
CaseChat Overview and Summary
The court also considered the interests of the parties pursuant to s 79 of the Act and found that the parties had made equal contributions. The court found that the husband's legal fees were an addback and considered the s 75(2)(o) factors. The court determined that superannuation should be dealt with separately to the non-superannuation assets and that orders could not be made until the determination of the damages claim.
The court had accrued jurisdiction to hear the husband's claim for damages for negligence and/or breach of contract against the second respondent solicitors who advised him in relation to the financial agreement. The court considered the limitations of actions for tort, breach of contract, and negligence and determined that the husband's claim was not statute-barred.
The court set aside the financial agreement entered into between the parties dated 21 July 2005 and listed the matter for further submissions on the question of the quantum of damages. The form of the order is subject to the entry in the Court’s records, and any minor typographical or grammatical errors may be reviewed and rectified. This copy of the Court’s Reasons for judgment may be subject to review to remedy such errors or to record a variation to the order. It is important to note that publishing proceedings that identify persons, associated persons, or witnesses involved in family law proceedings is an offence under s 121 of the Family Law Act 1975 (Cth), except in very limited circumstances.
Orders
Orders of the court
ADC 4606 of 2018
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:
MR DAILY
Applicant
AND:
MS DAILY
First Respondent
R LAWYERS
Second Respondent
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
31 MARCH 2023
THE COURT ORDERS THAT:
1. Pursuant to s 90K(1)(d) and/or s 90KA of the Family Law Act 1975 (Cth), the financial agreement entered into between the parties dated 21 July 2005 be set aside.
2. The matter be listed for further submissions on the question of the quantum of damages on a date to be determined in consultation with the parties.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
Background
Background to the litigation
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
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