DONALD & FORSYTH
[2015] FamCAFC 72
•5 May 2015
FAMILY COURT OF AUSTRALIA
| DONALD & FORSYTH | [2015] FamCAFC 72 |
| FAMILY LAW – APPEAL – PROPERTY – BINDING FINANCIAL AGREEMENT – Where the trial judge set aside a binding financial agreement made between the appellant husband and the respondent wife pursuant to s 90C of the Family Law Act 1975 (Cth) – Where the trial judge found that the acts of the husband in seeking that the costs of repairs of a property that the agreement contemplated be sold be met by the respondent wife instead of shared equally by the parties amounted to a repudiation of the agreement entitling the respondent wife to rescind the agreement – Where the trial judge did not err in effectively finding an anticipatory breach of a term of the agreement by the appellant husband – Where the trial judge failed to consider and make findings as to whether the relevant term of the agreement was an essential term or whether if not, the anticipatory breach was sufficiently serious such that the agreement may be terminated – Where the trial judge also failed to consider and make findings as to the willingness and readiness of the wife to complete the agreement at the time of the rescission of the agreement – Where the trial judge’s reasons were inadequate – Merit in the grounds of appeal – Appeal allowed. FAMILY LAW – APPEAL – PROPERTY – RE-DETERMINATION – Where the clause of the agreement providing for the parties to share the costs of placing the property in “good repair” for the purposes of sale was neither an essential term nor a sufficiently serious breach of a non-essential term justifying rescission of the agreement – Where the respondent wife was not ready and willing to complete the agreement and she was not therefore entitled to rescind it – Where the agreement was not repudiated by the appellant husband. FAMILY LAW – APPEAL – COSTS – Where the appeal was successful – Where the appellant husband sought an order for costs – Where the respondent wife did not oppose an order for costs – costs ordered in favour of the appellant husband. |
Family Law Act 1975 (Cth) – ss 90C, 90K and 90KA
Family Law Regulations 1984 (Cth)
Bennett & Bennett (1991) FLC 92-191
D.T.R. Nominees Pty Ltd v Mona Homes Pty Ltd and Anor (1978) 138 CLR 423
Foran v Wight (1989) 168 CLR 385
Koompahtoo Local Aboriginal Land Council and Anor v Sanpine Pty Limited and Anor (2007) 233 CLR 115
Laurinda Pty Limited and Ors v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623
Rawson v Hobbs (1961) 107 CLR 466
Shevill v Builders Licensing Board (1982) 149 CLR 620
Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632
| APPELLANT: | Mr Donald |
| RESPONDENT: | Ms Forsyth |
| FILE NUMBER: | LEC | 423 | of | 2009 |
| APPEAL NUMBER: | NA | 64 | of | 2013 |
| DATE DELIVERED: | 5 May 2015 |
| PLACE DELIVERED: | Adelaide |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | May, Strickland & Ryan JJ |
| HEARING DATE: | 6 August 2014 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
| LOWER COURT JUDGMENT DATE: | 9 October 2013 |
| LOWER COURT MNC: | [2013] FCCA 1577 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Smart |
| SOLICITOR FOR THE APPELLANT: | Paul Denmeade & Co |
| COUNSEL FOR THE RESPONDENT: | Mr Hunter |
| SOLICITOR FOR THE RESPONDENT: | David Hunter Law |
Orders
The appeal be allowed.
The orders made by Judge Demack on 9 October 2013 be set aside.
Upon the sale of the property at T Street, Town A the respondent wife pay to the appellant husband the costs of and incidental to the appeal with such costs to be assessed in default of agreement.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Donald & Forsyth has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 64 of 2013
File Number: LEC 423 of 2009
| Mr Donald |
Appellant
And
| Ms Forsyth |
Respondent
REASONS FOR JUDGMENT
May J
I have had the considerable benefit of reading the reasons for judgment of Strickland and Ryan JJ. It is unnecessary for me to repeat the background to this matter, or the reasons of the primary judge.
I agree the appeal should be allowed. I also agree with the statement of the relevant principles contained in the reasons of Strickland and Ryan JJ in [67] and the reference to absence of reasons by the primary judge in [73].
I would add the following reasons.
The controversial paragraph of the agreement between the parties namely paragraph 18.3, is as follows:
The property situated at and known as [T Street, Town A] shall be placed on the market and sold, in a state of good repair, at a price agreed upon between the parties and failing such agreement to be determined by the President of the Real Estate Institute of New South Wales or his nominee and that the proceeds of the said sale be disbursed as follows:
18.3.1To pay the agents commission and advertising expenses and legal expenses on the sale;
18.3.2To pay any costs of repairs or placing the property in good repair prior to sale;
18.3.3The balance to be divided equally between [the wife] and [the husband];
18.3.4From [the husband’s] one-half share of the proceeds he shall pay to [the wife] the outstanding balance owed by him for the purchase of his one-half share in the property at [T] Street;
(emphasis added)
The agreement did not otherwise specify how the house at T Street was to be put in a state of “good repair” or in any respect how this was to be effected.
The issue on appeal is whether, as found by the primary judge, the agreement dated 6 July 2005 should be set aside as unenforceable pursuant to s 90K(1)(b) of the Family Law Act 1975 (Cth) (“the Act”).
The questions which arise (as they appear in Ground 1 of the Notice of Appeal) are:
1.Whether Mr Donald (“the husband”) repudiated the contract; and
2.Whether Mrs Forsyth (“the wife”) validly terminated the agreement.
There is no doubt that in determining whether the agreement is binding, the general law in relation to contracts, as well as principles of equity apply.
The wife does not want to sell the house. She wants to remain living there. The husband does want to sell the house, but said that he would not expend moneys to put it into “good repair”.
In the proceedings before the primary judge, the husband (at first) asked that part of clause 18.3(2) be, in effect, varied, that is the reference to good repair (Husband’s affidavit filed 4 May 2011):
19.I am now seeking that the agreement entered into between [the wife] and I pursuant to Section 90C of the Family Law Act on 6th July 2005 be enforced other than with respect to Clause 18.3(2) and its terms carried out. Alternatively I am seeking that the property at [T Street, Town A] be sold and the net proceeds be divided equally.
20.With respect to Clause 18.3(2) I say that it is unfair that I am made to pay for the cost of repairs when [the wife] has been residing in the property rent free since the date of our separation without having to incur any costs of alternative accommodation which I had to incur.
21.In addition I am seeking that [the wife] pay one half of the equivalent market rent for the property pending its sale. Based on the current market value I would estimate this to be at least $300 per week, so $150 for half.
On 14 September 2010, prior to the proceedings being commenced, the husband wrote to the wife proposing that she pay him a sum of money representing his half share of T Street upon her selling another property also referred to in the agreement located at Town B.
It was not as a result of this correspondence, but the husband’s position contained in his affidavit, that he would not contribute to the cost of attending to the repairs, that led the primary judge to conclude that the husband had repudiated the contact. The judge decided that it then followed that “the financial agreement is rescinded” [52].
This conclusion overlooked the position of the husband at trial which was that he asked the agreement be enforced. Before deciding the question of repudiation, in these circumstances, it is first necessary to consider whether the condition of good repair was essential to the agreement.
It was submitted on behalf of the wife that the circumstances surrounding the preparation of the agreement demonstrated that the “good repair” was an essential term.
It seems that prior to the agreement being signed by the parties the wife requested this clause be inserted on the basis that it reflected discussions between herself and the husband. In an email to her solicitors the wife said, referring to the husband:
It was also his express wish that the terms and conditions “sold in good repair”, and “Any costs of repairs, legal and real estate fees be shared equally” could these points be added to section 18.3.
Secondly, it was contended by the wife, the husband having said in the proceedings that he did not intend to comply with one of the terms of the contract, that this was an anticipatory breach. Thirdly, the wife maintained she was entitled to repudiate the contract on 14 November 2011.
The letter written by the wife’s solicitors asserting that the agreement was at an end is as follows:
I refer to the above matter, and in particular your client’s affidavit filed 4 May 2011.
At paragraph 19 of your client’s affidavit he seeks to repudiate the contract (being the Financial Agreement dated 6 July 2005.)
My client accepts that repudiation, and therefore considers the Financial Agreement as having been validly terminated according to common law principles of frustration.
Accordingly, I am instructed to file a Reply to your Response, seeking an Order pursuant to section 90K(c) of the Act, and consequent orders for a division of the asset pool in accordance with s79 of the Act.
Discussion
The provisions of s 90KA are important:
The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a)subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b)has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c)in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
The right to terminate a contract and the question of whether a term is essential was considered in Koompahtoo Local Aboriginal Land Council and Anor v Sanpine Pty Limited and Anor (2007) 233 CLR 115 to which Strickland and Ryan JJ have referred.
Reference was made by counsel for the wife to Tramways Advertising Pty Ltd v Luna Park (NSW) Ltd (1938) 38 SR (NSW) 632 for the proposition that the good repair provision was an essential term of the contract. The relevant parts of the judgment are that of Jordan CJ at pages 641 and 642. Reliance was placed on the email sent prior to the preparation of the agreement to her solicitors to which reference has been made.
Reference was also made to Shevill v Builders Licensing Board (1982) 149 CLR 620 where Gibbs CJ said [625]:
Such a contract may be repudiated if one party renounces his liabilities under it – if he evinces an intention no longer to be bound by the contract or shows that he intends to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way.
(footnote omitted)
It was submitted that by indicating his unwillingness to repair the property the husband had repudiated. However, it is no doubt correct, as submitted on behalf of the husband, that a threatened breach of a non-essential term does not give the other party a right to terminate the contact.
It was also submitted that the essential terms of the contract are:
·the husband is to pay the agreed sum for his half share in T Street (as to whether he did this there is dispute); and
·the property is to be sold and the proceeds divided equally should the marriage come to an end.
In my view, it is correct that the provision in relation to repair can be seen in the overall context of the agreement as a non-essential term. Thus, the wife was not entitled to terminate the contract on the basis of the husband indicating he would not contribute to the cost of repairs.
In any event, what was the effect of the husband’s actions? The answer must be that there was an anticipatory breach. This is notwithstanding the husband’s submissions at trial, where he subsequently asked that the Binding Financial Agreement be enforced (Transcript 15 November 2012, p 49, 1.1).
It was open to the wife to effect repairs herself and then seek that sum be deducted from the sale proceeds or, if not agreed, by way of damages. The wife was not entitled to rescind, she did not intend to have the house readied for sale by attending to repairs, rather she intended to continue living in the house.
This conclusion is supported by established principles. See D.T.R Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 where Stephen, Mason and Jacobs JJ said at p.433:
…A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach, and indeed could profit from his misinterpretation of the contract, as the appellant seeks to do in this case when it claims forfeiture of deposit and damages.
The appeal should be allowed, and the parties should comply with the terms of the Binding Financial Agreement. Should there be any further dispute the husband would be entitled to seek enforcement.
costs
The background to the litigation is the drafting of a clause which is unworkable. The husband properly sought enforcement of the agreement. The primary judge was wrong to order that it be set aside. The husband has successfully appealed.
Mr Hunter, the solicitor for the wife, properly conceded that if the appeal is allowed and the agreement found to be enforceable, the respondent would be bound to pay the appellant’s costs. If the matter were to be remitted for re-hearing, Mr Hunter submitted there should be orders for certificates allowed by the Federal Proceedings (Costs) Act 1981. This submission is related to the proper concession made by Mr Hunter that the primary judge discussed the factual background but failed to then apply relevant contract law principles (Transcript p.15 l. 18-19). In my view there is no need to remit the matter for re-hearing for the reasons explained by Strickland and Ryan JJ.
Despite the limited financial circumstances of the wife, she should pay the husband’s costs of the appeal. It was asked that the payment of such costs be delayed until the sale of the house and be paid from the proceeds.
In the circumstances, I agree with Strickland and Ryan JJ that an order be made that the wife pay the husband’s costs, such payment to be made from the sale proceeds of the house.
Strickland and Ryan JJ
Introduction
By Amended Notice of Appeal filed on 6 March 2014 Mr Donald (“the husband”) appeals against orders made by Judge Demack setting aside a binding financial agreement (“the agreement”) made pursuant to s 90C of the Family Law Act 1975 (Cth) (“the Act”) by the husband and the respondent, Ms Forsyth (“the wife”). The wife opposes the appeal.
Background
The husband was born in 1956, and was aged 56 years at the time of the hearing before her Honour. The wife was born in 1956, and was aged 55 years at the time of that hearing.
The parties commenced their relationship in 2000 but they did not commence cohabitation until their marriage in 2003.
There was a period of separation in 2005, and the parties finally separated on 29 February 2008. They were divorced in 2010.
The agreement was entered into on 6 July 2005, namely two and a half years after the marriage.
On 17 March 2011 the wife filed an application seeking spousal maintenance.
On 4 May 2011 the husband filed a response seeking dismissal of the application for spousal maintenance and enforcement of the agreement, or that a house property at Town A, which was a subject of the agreement, be sold and the proceeds divided equally.
On 21 December 2011 the wife filed a reply seeking that the agreement be set aside and thereafter a property adjustment be made pursuant to s 79 of the Act.
The hearing before the trial judge took place on 14 and 15 November 2012 and her Honour delivered her reasons for judgment and made her orders on 9 October 2013.
The relevant terms of the agreement
The agreement entered into by the parties on 6 July 2008 acknowledged that on a date in 2003 (the date of the parties’ marriage) the wife agreed to sell to the husband a one half interest in the Town A property owned solely by her for $132,000 (Clause 11). The agreement then recorded (Clause 11) that as at 29 June 2005 the husband had paid to the wife all but $50,000 of the amount of $132,000, and that that balance would be paid at that rate of $1,000 per month.
The agreement provided for the parties to retain their separate property, and for the Town A property to be sold. Clause 18.3 provided as follows:
The property situated at and known as [T Street, Town A] shall be placed on the market and sold, in a state of good repair, at a price agreed upon between the parties and failing such agreement to be determined by the President of the Real Estate Institute of New South Wales or his nominee and that the proceeds of the said sale be disbursed as follows:
18.3.1To pay the agents (sic) commission and advertising expenses and legal expenses on the sale;
18.3.2To pay any costs of repairs or placing the property in good repair prior to sale;
18.3.3The balance to be divided equally between [the wife] and [the husband];
18.3.4From [the husband’s] one-half share of the proceeds he shall pay to [the wife] the outstanding balance owed by him for the purchase of his one-half share in the property at [T] Street;
The reasons for judgment delivered on 9 October 2013
After her Honour noted that she was only addressing whether the agreement should be set aside, her Honour recorded the recitals of the agreement in full at [6]. Those recitals set out the assets and liabilities of each party and their respective contributions at the time of entering into the agreement, and at the commencement of the relationship.
The trial judge then set out Clause 18 of the agreement (at [8]) which dealt with what was to happen to the property and financial resources of the parties if the marriage broke down. Relevantly, in regard to the property at Town A, the agreement provided for it to be sold, and for the net proceeds to be distributed between the parties after, inter alia, deducting the costs of repairs to prepare the property for sale.
The trial judge noted that the wife suffered from a number of physical and mental health difficulties which, on her evidence, arose from physical, verbal and psychological abuse by the husband during the marriage. As a result of these health issues, the wife claimed that she could not leave the property at Town A and move to her other property at Town B.
In relation to the Town B property, which the wife was to retain in the event of the marriage breaking down, the trial judge recorded that it was located in a remote coastal area in northern New South Wales, it was rented out from time to time, and there were difficulties involved with the sale of this property as “… the local authority has identified the property at being at risk from coastal erosion … [and that] has adversely affected the value of the property and has made it less attractive to prospective purchasers” (at [12]).
The trial judge also noted that the remoteness of the Town B property made it unsuitable for someone to live there who has health problems such as the wife, given the need for attendance on medical practitioners.
After identifying the application, the response, and the reply filed by the parties, at [17] to [19], the trial judge turned to the evidence of the parties noting that:
a)the husband did not seek orders for property adjustment should the agreement be set aside, however, if the agreement was found to be enforceable, machinery orders would be required; and
b)the husband was not required for cross examination, but the wife was cross examined. The trial judge found her evidence “generally believable” and that no issues of credit arose.
Turning to the law, the trial judge recorded that although the application was made pursuant to s 90K of the Act, and that the wife sought to set aside the agreement pursuant to s 90K(1)(a) and (c), the wife argued “that in any event, the contract [had] been rescinded by the husband’s repudiation” (at [24]).
As to the wife’s argument pursuant to s 90K(1)(a) of the Act, the trial judge found that the allegation of fraud was not made out on the evidence before the court.
As to the wife’s argument pursuant to s 90K(1)(c) of the Act, namely “the question of impracticability”, the trial judge cited Cawthorn & Cawthorn (1998) FLC 92-805, and La Rocca & La Rocca (1991) FLC 92-222. Relevantly, her Honour considered the statements of Kay J in La Rocca instructive, and that impracticability could be likened to “the doctrine of frustration in contractual matters” (at [26]).
The trial judge then recorded the wife’s submission that due to her poor health it was no longer practical that she keep the property that the agreement contemplated that she retain (Town B), and sell the property that was to be disposed of (Town A). On the other hand the trial judge recorded the submission by the husband that a change of personal circumstances does not allow the court to set aside a financial agreement, save in the application of s 90K(1)(d) of the Act, which the trial judge found irrelevant to the circumstances here.
The trial judge then noted as follows (at [36]):
[The court] was not taken to any case law which supported the proposition that a change in personal circumstances (for example, a deterioration in health) of either of the parties may result in the circumstances to be considered impracticable as to the carrying out of the agreement or part of the agreement.
However, without then finally dealing with the wife’s claim under s 90K(1)(c), and for reasons which are not readily apparent, the trial judge set out a lengthy quote from the Full Court decision in Sanger & Sanger (2011) FLC 93-484 where the Full Court identified the principles governing the interpretation of contracts and confirmed that the law of contract is relevant to the interpretation of the terms of a financial agreement (see [37]).
The trial judge then posed the question “Has the financial agreement been repudiated?” In answering this question her Honour first set out paragraphs 19, 20 and 21 of the affidavit of the husband filed on 4 May 2011, and then recorded the “acts by the husband, which may be considered as potential repudiating conduct” (at [39]), including a letter that the husband wrote to the wife on 14 September 2010. There, as a result of changes to the wife’s circumstances, the husband raised alternative ways of achieving “an outcome in line with the agreement” (at [41]). Her Honour found that those “attempts” did not amount to a repudiation of the contract. However, her Honour then found otherwise in relation to the husband’s actions in seeking orders, particularly in paragraph 19 of his affidavit, that “move away from the provisions of the financial agreement”, namely seeking “that he not be responsible for the good repair of the property in the equal terms that the agreement required” (at [44]), and in paragraph 21 of the affidavit seeking that the wife pay one half of the equivalent market rent for the Town A property pending its sale. Her Honour then said this:
45.The financial agreement is silent as to the paying of monies by one party to the other in the event that they have sole occupancy of the property for any period of time.
46.The Orders that are sought by the husband in this regard are not Orders required to put the agreement into effect, but are Orders which seek to vary the conditions of the contract unilaterally.
47.The husband’s position is that he will not participate in his share of attending to the cost of repairs.
48.It seems to me that this conduct amounts to repudiation of the contract. If the husband will not do the necessary acts to put the contract into effect, he has repudiated the contract and the contract is rescinded.
Her Honour then returned to the issue of impracticability and found that although the wife’s health and her capacity to support herself were relevant considerations for the spousal maintenance order that she sought, they did not amount “…to impracticability for the purposes of the setting aside of the financial agreement” (at [51]).
In conclusion though her Honour found that “…the [agreement] has been repudiated by the acts of the husband” (at [52]) and it must be rescinded.
Grounds of Appeal
The husband, in his Amended Notice of Appeal filed 6 March 2014 advances the following grounds of appeal:
1.That Her Honour erred in law in finding that the Binding Financial Agreement (contract) dated 6th July 2005 was repudiated by the appellant and validly terminated by the respondent and in particular;
i.Her Honour erred in failing to consider and make a finding that the alleged reputitive words used or acts done by the appellant were unambiguous or unequivocal.
ii.Her Honour erred in failing to consider and make a finding as to whether or not the reputative words or acts of the appellant went to the “very root” of the contract so as to constitute an anticipatory breach of an essential or fundamental term.
iii.Her Honour erred in finding that the respondent had a legal right to treat the contract as terminated by way of repudiation.
iv.Her Honour erred in failing to take into consideration that there was no actual breach of the Binding Financial Agreement.
v.Her Honour erred in failing to consider and make a finding that the respondent was not willing or disposed to complete the Binding Financial Agreement (contract) at the time the respondent treated the contract as terminated by way of the appellants (sic) alleged repudiation.
vi.Her Honour erred in failing to take into consideration that after the appellant had paid significant monies to the respondent under the terms of the Binding Financial Agreement, the respondent was motivated to treat the Binding Financial Agreement (contract) as terminated by way repudiation for her own financial advantage.
vii.Her Honour failed to consider the applicability of the doctrine of “unjust enrichment”.
2.That Her Honour allowed irrelevant considerations to influence her decision to set aside the Binding Financial Agreement.
3.That Her Honour erred in reaching her final conclusion that the Binding Financial Agreement was repudiated by the “acts of the appellant” and to recind (sic) the financial agreement.
4.That Her Honour erred in ordering that the financial agreement be set aside.
5.That Her Honour failed to give adequate reasons for setting aside the Binding Financial Agreement.
6. That the orders subsequently made by Her Honour were wrong.
7.The appellant reserves the right to ammend (sic) his grounds of appeal after the receipt of the transcripts of the proceedings.
In relation to these grounds of appeal, clearly we can ignore Ground 7, and Grounds 3, 4 and 6 are not proper grounds of appeal; they are mere assertions without identifying any appealable errors made by the trial judge.
With Ground 2 the husband sought to explain and amplify that ground in his summary of argument. However, it is not readily apparent from that summary what the “irrelevant considerations” are that it is said her Honour took into account. Instead, unlike what the ground of appeal complains of, the summary purports to mount an argument that the trial judge was “not impartial” and was biased. It is submitted that that is demonstrated by her Honour not only failing to exclude, but also by requiring the parties to canvass issues that related to the wife’s spousal maintenance application.
We are not satisfied that these claims are made out, and in any event they are complaints that needed to be raised at the time that it is said they occurred, and an application made for the trial judge to disqualify himself or herself. That did not happen here.
We find that Ground 2 is a ground of appeal that is so confused that it is impossible for us to address, and we do not propose to do so.
That leaves Grounds 1 and 5, and we propose to address these grounds together. The principal complaint in Ground 1 appears to be that her Honour failed to consider, and make all of the findings necessary, to be able to conclude that the husband had repudiated the agreement and that it could be rescinded on that basis. That clearly brings into play Ground 5, where the complaint is that her Honour failed to provide adequate reasons for her decision in that it is not possible to discern the path that her Honour followed.
Orders Sought
The husband seeks the following orders on appeal (with original emphasis):
1.That the binding Financial Agreement dated 6th July 2005 be upheld and not set aside.
2. That the orders made subsequently by Her Honour be set aside.
3.That the appellant seeks leave to appeal in the event leave is required.
4.That the matter be dealt with in the Federal Circuit Court according to law by a judge other than Judge Demack.
5. Costs.
We note that the husband seeks leave to appeal in the event that that is required. We consider that the order setting aside the agreement is a final order, and thus the husband is able to appeal as of right and does not require leave (see s 94AA of the Act and reg 15A of the Family Law Regulations 1984 (Cth)). We also observe that that outcome is not affected by the fact that the balance of the orders made by the trial judge are clearly interlocutory; they are consequential to the order setting aside the agreement and effectively fall away if that order itself is set aside.
Discussion
Grounds 1 and 5
Subject to one submission made by the wife that we will refer to later in these reasons, there can be no dispute as to the principles that are to be applied in determining whether a party to a contract has repudiated that contract such that the other party can terminate the same. Those principles are:
a)there must be either a breach or an anticipatory breach of an essential term of the contract, or a sufficiently serious breach of a non-essential term (Koompahtoo Local Aboriginal Land Council and Anor v Sanpine Pty Limited and Anor (2007) 233 CLR 115); and
b)the other party must be ready and willing to complete the contract (Foran v Wight (1989) 168 CLR 385).
The effective complaint then about her Honour’s decision is that she failed to consider and make findings as to all of these necessary elements (Ground 1). Or, put another way, her Honour failed to provide adequate reasons for the decision (Ground 5).
As referred to above, her Honour identified the husband’s actions in seeking orders in paragraphs 19, 20 and 21 of his affidavit filed on 4 May 2011, as amounting to repudiation of the agreement. In those paragraphs the husband deposed as follows:
19.I am now seeking that the agreement entered into between [the wife] and I pursuant to Section 90C of the Family Law Act on 6th July 2005 be enforced other than with respect to Clause 18.3(2) and its terms carried out. Alternatively I am seeking that the property at [T Street, Town A] be sold and the net proceeds be divided equally.
20.With respect to Clause 18.3(2) (sic) I say that it is unfair that I am made to pay for the cost of repairs when [the wife] has been residing in the property rent free since the date of our separation without having to incur any costs of alternative accommodation which I had to incur.
21.In addition I am seeking that [the wife] pay one half of the equivalent market rent for the property pending its sale. Based on the current market value I would estimate this to be at least $300 per week, so $150 for half.
We observe at this point that although it is clear that the husband was seeking that the wife pay an occupation rent for the property, it was the issue of the costs of repairs that became the subject of her Honour’s decision and the topic of this appeal.
To put this issue in context, the effect of Clause 18.3.2 of the agreement was that the Town A property was to be placed on the market and sold in a state of good repair, and the costs of those repairs were to be met from the proceeds of sale prior to distribution to the parties.
In relation to this issue, the totality of her Honour’s consideration of the same is comprised at [44], [46], [47] and [48] of her reasons as follows (noting that we have previously set out [46], [47] and [48] at [22] above):
44.The husband also seeks to move away from the provisions of the financial agreement of 2005 in that he now seeks that he not be responsible for the good repair of the property in the equal terms that the agreement required. The agreement does not place any time frame upon the property being sold and there is no reason why the cost of repairs or placing the property in good repair prior to sale would solely be the wife’s costs.
…
46.The Orders that are sought by the husband in this regard are not Orders required to put the agreement into effect, but are Orders which seek to vary the conditions of the contract unilaterally.
47.The husband’s position is that he will not participate in his share of attending to the cost of repairs.
48.It seems to me that this conduct amounts to repudiation of the contract. If the husband will not do the necessary acts to put the contract into effect, he has repudiated the contract and the contract is rescinded.
It is arguable that in these paragraphs her Honour found that the actions of the husband constituted an anticipatory breach of the agreement (although it is suggested by the husband that her Honour erred in that regard), but significantly, nowhere did her Honour address either the question of whether the relevant term of the agreement was an essential term, or whether the other party (the wife), was ready and willing to complete the agreement when she treated the alleged repudiation as entitling her to rescind the agreement.
As to the question of an anticipatory breach, the submission of the husband is that the words or acts of the husband were ambiguous or equivocal, and thus could not be said to constitute an anticipatory breach. In other words, in using the expression that he was “now seeking” that the agreement be enforced other than with respect to Clause 18.3.2, he was leaving that issue open for discussion as compared with saying for example, “I will not comply with Clause 18.3.2”.
The accepted test is whether or not the words or conduct of the party would lead a reasonable person to conclude that the party did not intend or was unable to perform the contract (Laurinda Pty Limited and Ors v Capalaba Park Shopping Centre Pty Limited (1989) 166 CLR 623, at 647-648, 657). Applying that test we are comfortably satisfied that the words used in paragraph 19 of the affidavit are clear and evince an intention not to be bound by Clause 18.3.2 of the agreement. Thus, we do not agree with the submission of the husband as to the use of the expression “now seeking”. Further, we find that it is no less an anticipatory breach because by the time of the hearing before the trial judge the husband had changed his mind and was prepared to comply with Clause 18.3.2. This was a submission put by the husband, but the fact of the matter is the wife acted on the anticipatory breach on 14 November 2011 and repudiated the agreement well before the husband altered his position.
Accordingly, although her Honour did not address this issue expressly, we find no error in her Honour effectively finding anticipatory breach by the husband.
Given that finding her Honour was obliged to then consider whether the relevant term of the agreement was an essential term, or if not, whether the anticipatory breach was a sufficiently serious one to justify termination of the agreement. However, to repeat, her Honour failed to address either of these requirements, and this alone provides a basis for appellate interference.
As to the final step, namely whether the other party was ready and willing to complete the agreement at the time of the rescission, the wife suggests there is some controversy as to the extent to which that must be demonstrated.
The husband relies on what Dawson J said in Foran v Wight (at 452), namely that, “…it is now clear that in cases of repudiation as well as actual breach, readiness and willingness on the part of the plaintiff is part of his cause of action”, and what was clearly stated by the High Court in D.T.R. Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 433 namely:
… A party in order to be entitled to rescind for anticipatory breach must at the time of rescission himself be willing to perform the contract on its proper interpretation. Otherwise he is not an innocent party, the common description of a party entitled to rescind for anticipatory breach …
However, the wife suggested that Deane J took a different position in Foran v Wight, and that it was also significant that Dawson J in that case quoted with approval what Dixon CJ said in Rawson v Hobbs (1961) 107 CLR 466 (at 481) namely:
… One must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness. On the other hand it is absurd to treat one party as tied to the performance of an executory contract although the other has neither the means nor intention of performing his part when his turn comes, simply because his incapacity to do so is not necessarily final or logically complete.
It is plain that the weight of authority supports the husband’s submission here. For example, apart from what Dawson J said in Foran v Wight, the same position was taken by Brennan J in that case. His Honour said this at page 424:
Where a party claims to be entitled to rescind an executory contract on account of the other party’s repudiation (whether by way of anticipatory breach or incapacity), the first party must show not only the other’s repudiation but his own readiness and willingness up to the time of rescission to perform his essential obligations under the contract: …
As for what Dixon CJ said in Rawson v Hobbs, that clearly does not assist the wife’s argument. What his Honour was there doing was not challenging the principle but expressing a caution against lightly finding a party not to be ready and willing. As to that caution, here it is beyond doubt that the wife had a “definitive resolve or decision against doing in the future what the contract requires” (Rawson & Hobbs at 481). Nor is it the case that the husband “has neither the means nor intention of performing his part when his turn comes” because he has performed his obligations under the agreement, and the issue of the cost of repairs is moot until the wife sells the property, which it is clear she will not do.
As for what Deane J said in Foran v Wight, that needs to be read in context. His Honour said this at 437:
… it is strictly unnecessary that I express any view on the question whether one party to a contract is precluded from rescinding it by accepting a repudiation of the contract by the other party if he is not in a position to prove that he is, or but for the repudiation would have been, ready, willing and able to perform the contract. However, in view of the discussion of that question in other judgments, it would seem desirable that I indicate that, notwithstanding some statements of authority to the contrary, I do not accept the proposition that a party must incur the expense necessary to put himself in a position where he can positively demonstrate actual or potential readiness and willingness to perform a contract before he can accept the repudiation of the other party and thereby rescind. In my view, that proposition is unjustified by either principle or common sense. Absence of actual or potential readiness or willingness to perform a contract will prima facie preclude a successful action against the other party for specific enforcement of the contract or for the recovery of damages for its breach. It does not, of itself, preclude rescission of the contract by acceptance of the other party’s repudiation. Were it otherwise, the law would require the useless and futile expenditure by an innocent party of whatever time, effort or money was necessary to place himself in a position where he could positively demonstrate actual or potential ability to perform a contract in order to be able to bring it to an end on the ground that it had already been repudiated by the other party. …
Plainly, his Honour was addressing far different circumstances than the circumstances in this case, or indeed the circumstances in the authorities referred to above. Here, it was not a case of the wife being required to unnecessarily expend time, effort and money to place herself in a position where she could demonstrate that she was ready and willing to perform the contract. She had for some time indicated that she was not prepared to comply with the requirement to sell the Town A property.
Indeed, Dawson J in Foran v Wight explained how statements such as those made by Deane J cannot be seen to have general application. His Honour said this at 452:
The error in these cases lay, I think, in attempting to carry too far the principle that the repudiation by one party of a contract may absolve the other party from the obligation of tendering useless performance. No doubt that principle, when it applies, may reduce the extent, or alter the nature, of the readiness and willingness which a plaintiff is required to show, but there is no reason why it should eliminate the requirement entirely. A party should not be able to sue for breach if he is unable or unwilling to carry out his part of the bargain; where, in other words, he is not the innocent party. Even where a party has been absolved by the repudiating party from performing his future obligations under the contract he must show that at the time of the repudiation he was ready and willing to complete the contract had it not been repudiated. But in proving his readiness and willingness where he has been absolved from tendering performance he may not have to prove a great deal. …
To emphasise the point again, in order to rescind the agreement here the wife relies on paragraph 19 of the husband’s affidavit filed on 4 May 2011. It was then on 14 November 2011 that the wife through her solicitors terminated the contract. However, the incontrovertible facts are that from the time of the breakdown of the marriage (29 February 2008), the wife had not been prepared to sell the Town A property as required under the terms of the agreement. In her affidavit filed on 21 December 2011 at paragraph 51 she deposed:
I have not taken any steps to sell the [Town A] property. My strong preference is to remain living at [Town A]. It is impossible for me to live in the house at [Town B]. …
Then, in cross-examination at the hearing before her Honour on
15 November 2012 the following exchange occurred:
MR SMART: It’s the case that you’re just not willing to sell your house, is that correct?---I don’t want to, it’s my home. It’s not just a house or a piece of real estate; it’s my home.
…
MR SMART: The situation is that you just don’t want to sell your house, is that correct? Or the house that you sold a half share to your husband?---That’s true, it’s my home.
MR SMART: Right?---And it was my home when I met [the husband] and I want to stay there.
(Transcript 15.11.12, page 45, lines 22-23, page 46, lines 26-29)
These statements were of course made after the alleged anticipatory breach by the husband and the wife’s termination of the agreement on that basis, but they are confirmatory of the wife’s position throughout, and which position led the husband to seek enforcement of the agreement.
In any event, the error by her Honour was in failing to consider this issue at all, and that provides another basis for appellate interference.
As can be seen, we have found merit in Grounds 1 ii. and 1 v. We are not persuaded that her Honour erred in the way suggested in Ground 1 i., and with Ground 1 iii. we do not see that as a separate ground of appeal to those we have already addressed. Further, in the circumstances of finding merit in Grounds 1 ii. and 1 v., we consider it unnecessary to address Ground 1 iv., and Ground 1 vi. Finally, with Ground 1 vii., that was put as an alternative ground in the event that none of the other grounds of appeal were found to have merit. In those circumstances we also do not consider it necessary to address this ground of appeal.
As to Ground 5, in the circumstance of her Honour failing to consider and make findings as to two of the essential elements in establishing a basis for rescinding the agreement relying on anticipatory breach, it is plain that her Honour has failed to provide adequate reasons for her decision. It is now well settled that an appellate court must “…be able to discern either expressly or by implication the path by which the result has been reached” by the trial judge (Bennett & Bennett (1991) FLC 92-191 at 78,267). Thus, there is also merit in Ground 5.
Conclusion
Given that we have found merit in parts of Ground 1 and in Ground 5, the appeal must be allowed. The question then is whether we can re-determine the matter or whether we must remit the proceedings to the Federal Circuit Court of Australia for rehearing by another judge.
Where there is an absence of relevant findings by a trial judge there is usually little choice but to remit the proceedings for a rehearing, and that was the submission made by the husband here. However, this is not a case involving the exercise of a discretion, and there is also no challenge to her Honour’s fact finding. Thus we consider that we are able to apply the law to the facts of this case and re-determine the matter. In undertaking that exercise we will be “making such … decision as … ought to have been made in the first instance” (s 94(2) of the Act).
Re-determination
We have found that what the husband said in paragraph 19 of his affidavit filed on 4 May 2011 evinces an intention not to be bound by the term of the agreement effectively providing for the parties to share the cost of placing the Town A property in “good repair” for the purposes of its sale. However, is this an anticipatory breach of an essential term, or a sufficiently serious breach of a non-essential term to justify rescission of the agreement? We do not accept that either the relevant term was an essential term or that the anticipatory breach was sufficiently serious.
In Koompahtoo Local Aboriginal Land Council, Gleeson CJ, Gummow, Heydon and Crennan JJ held first, that an essential term is one which the parties have agreed will always justify termination if breached. The common intention of the parties, expressed in the language of the contract, and understood in the context of the contractual relationship it creates, and the commercial purpose it serves, determines whether a term is essential. Secondly, their Honours held that where a sufficiently serious breach of a non-essential term justifying termination has occurred, it is to be determined primarily upon a construction of the contract, after which a judgment about the seriousness of the breach and the adequacy of damages is made. Breaches of this kind are described as “going to the root of the contract”.
There is no doubt here that applying these tests the term effectively requiring the parties to share the cost of placing the property in good repair does not fit either of the categories needed to justify rescission of the agreement.
Plainly there is no express statement by the parties that that term is to be treated as an essential term of the contract, and we agree with the husband’s counsel that it “is merely a provision in the contract that provides a mechanism for the shared payment of the costs of putting the property at [Town A] in good repair for the purposes of sale” (see husband’s summary of argument at paragraph 8). The essential term in this regard was that the house be marketed in good repair, and this is not a term that the husband sought to breach; he was challenging the deduction of the costs of repair from the proceeds of sale.
Further, as a non-essential term, its breach cannot be viewed as a sufficiently serious breach justifying rescission. If the husband had maintained his resistance to having his half share of the costs of repair deducted from the proceeds of sale, then the obvious remedy for the wife was in damages.
Finally, as is apparent from our earlier reasons, we consider that at the time of the purported termination of the agreement, the wife was not ready and willing to complete the agreement and thus she was not able to rescind it.
For these reasons we find that there has not been a repudiation of the agreement by the husband such that the wife is entitled to rescind the same, and we propose to set aside her Honour’s orders. The effect of this is that the husband is able to pursue his application in the Federal Circuit Court of Australia to enforce the agreement.
Costs
At the conclusion of the hearing of the appeal we sought the submissions of the parties as to the question of costs depending upon the result of the appeal.
If the appeal was successful the husband sought an order for costs. The wife conceded that there should be an order for costs in the event that the appeal was successful. However, the wife’s counsel in effect submitted that such a costs order should not be enforced until the Town A property is sold. In the circumstances we propose to make an order for costs but provide for those costs to be paid upon the sale of the Town A property.
I certify that the preceding one hundred and two (102) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (May, Strickland & Ryan JJ) delivered on 5 May 2015.
Associate:
Date: 5 May 2015
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