Gardiner and BAKER
[2009] FMCAfam 1029
•18 September 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GARDINER & BAKER | [2009] FMCAfam 1029 |
| FAMILY LAW – Property – validity of binding financial agreement – costs. |
| Family Law Act 1975 (Cth) – Part VIII & VIIIA |
| Black & Black [2008] FamCA FC 7; (2008) 38 FamLR 503 J & J [2006] FamCA 442 (unreported) Norton & Norton [2009] FamCA 359 Ramsay v Aberfoyle Manufacturing Company (Aust) Pty Ltd (1935) 54 CLR 230 at 25 |
| Applicant: | MS GARDINER |
| Respondent: | MR BAKER |
| File Number: | NCC 63 of 2008 |
| Judgment of: | Coakes FM |
| Hearing date: | 18 September 2009 |
| Date of Last Submission: | 18 September 2009 |
| Delivered at: | Newcastle |
| Delivered on: | 18 September 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr Duane |
| Solicitors for the Applicant: | Mark Evans & Associates |
| Counsel for the Respondent: | Mr Tregilgas |
| Solicitors for the Respondent: | Braye Cragg Solicitors |
ORDERS
It is declared that the financial agreement executed by the husband and the wife and dated 24 August 2005 is not a financial agreement for the purposes of Part VIII and Part VIIIA of the Family Law Act1975, and the provision of the Act do not apply.
The financial agreement entered into between the husband and wife pursuant to s.90C of the Family Law Act 1975 and dated 24 August 2005 is set aside pursuant to s.90K(1)(b) of the Act.
The husband pay the professional costs of the wife of today assessed at $4950.00 inclusive of GST, payment to be made not later than 12.00noon on 16 October 2009 to the Solicitors for the wife, Mark Evans and Associates at Suite 7, 87 Frederick Street Merewether NSW 2291
The matter is adjourned to 10.00am on 8 September 2010 at Newcastle for a final hearing, two days allowed.
That the parties and their Solicitors are to attend a conciliation conference at 9.15am on 2 October 2009 with a Registrar.
Each party is required to complete, file and exchange the financial questionnaire for submission to the Registrar by 25 September 2009.
IT IS NOTED IN CONNECTION WITH THESE ORDERS that the judgment of Federal Magistrate Coakes delivered this day will for all publication and reporting purposes be referred to as Gardiner & Baker.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT NEWCASTLE |
NCC 63 of 2008
| MS GARDINER |
Applicant
And
| MR BAKER |
Respondent
REASONS FOR JUDGMENT
(Ex Tempore)
(Edited from the transcript)
Introduction
In these proceedings I now deliver an ex tempore judgment following the hearing of this matter early today and which proceeded by way of submission, as was agreed by counsel for the respective parties.
The application before me today is brought by the wife. She seeks to set aside a binding financial agreement (“the agreement”)entered into between the parties pursuant to section 90C of the Family Law Act on 24 August 2005. The husband opposes that application.
The agreement
Before me is an agreement between the husband and the wife entered into on 24 August 2005. The agreement comprises a number of clauses set out under the subheading Background and then a number of clauses under a subheading The Operative Part and then attached to or annexed to the agreement are two certificates for the purposes of section 90G, one by the solicitor on behalf of the husband and the other by the solicitor on behalf of the wife. The certificate on behalf of the husband is dated 24 August 2005; that on behalf of the wife is dated 23 August 2005.
The wife says that this agreement is not an agreement that satisfies the provisions of Part VIII and Part VIIIA of the Act and seeks an order that it be set aside. The husband says that the document is a financial agreement for the purposes of Part VIIIA of the Act and is binding upon the parties, and pursuant to those provisions precludes the parties from asking the court to make any further application pursuant to section 79 of the Act. The husband relies upon section 71A of the Act. What I am required to determine today is whether the agreement is valid for the purposes of Part VIIIA or not.
The evidence
As to the evidence, I was asked to read the agreement itself, dated 24 August 2005, and the certificates attached to it and I was asked to read the submissions made on behalf of the wife by Mr Duane of counsel and I was asked to read the wife’s amended application filed on 3 July 2009. It was common ground as between counsel and sensibly so, if I may say, that there were no other documents required to be read. I was referred to case law and in particular to the decision of the Full Court in a matter of Black and Black[1]. I was also referred to an unreported decision of his Honour Collier J in the Family Court at Parramatta, known as J & J[2], heard in 2006. Mr Duane also referred me to a decision of Norton & Norton [2009][3], a decision of his Honour Cronin J at FamCA 359. I have read those decisions.
[1] Black & Black [2008] FamCA FC 7; (2008) 38 FamLR 503
[2] J & J [2006] FamCA 442 (unreported)
[3] Norton & Norton [2009] FamCA 359
Short History
The wife is 46 years of age. She is employed as a [manager]. She lives with her mother in a suburb of Newcastle. The husband is 58 years of age. I am not certain of his present occupation. He lives in a different suburb of Newcastle. The parties commenced their relationship in about April or May of 1999, were married in 1999 in Cairo in Egypt. Later that year the wife migrated to Australia and took up residence here permanently. The parties separated for the first time on 17 June 2005 or thereabouts and recommenced their relationship on either 10 August or 12 August 2005, a short time after separation, and separated on a final basis on 9 December 2006.
On 9 January 2008 the husband filed an application for a divorce which was listed for hearing on 26 February 2008. On that day, as I understand it, an order was made for a divorce to become effective in one month; that is, at the end of March 2008.
On 24 August 2005 the parties entered into the financial agreement, to which I have referred, pursuant to section 90C, during the currency of their marriage.
On 14 October 2008 the wife brought an application pursuant to section 90K to set aside the financial agreement and sought payment to her of a sum of money, and in default that certain real property be sold. On 3 July 2009 the wife filed her amended application to which I have referred and in that application and in addition to the order to set aside the agreement the wife seeks other orders in relation to alteration of property interests.
The wife’s case
The wife’s case is that the agreement does not comply with section 90G of the Act and for these reasons. The wife says that recital K and subparagraphs (i) to (iv) of the agreement are no longer the matters which are required to be set out in such an agreement in compliance with section 90G and that such omission is fatal. It is common ground and not an issue that section 90G in its present form, as it were, came into being on about 14 January 2004 and that there has been no further amendment since that time. It is not in dispute that the wording referred to in recital K(i) to (iv) inclusive is the wording of the former section 90G prior to its amendment. I will return to that in more detail later in these short reasons for judgment.
The husband’s case
The husband's case, in effect, is that the court must have regard to the effect of the recital in subclauses (i) to (iv) inclusive of recital K and that, in effect, it does comply with the present requirements of section 90G(1)(b). Counsel for the husband says that the Full Court decision in Black & Black should really be distinguished and that the court can look at this particular agreement in a different light when one looks at the intent of the recital.
Mr Tregilgas conceded, and quite correctly, that it was the agreement itself that was the contentious issue or the issue to be decided, and not the certificates.
Recital K is in these terms:
“The parties have been provided before the agreement was signed by them as certified in annexures “A” and “B” with independent legal advice of a legal practitioner as to the following matters:
(i)the effect of the agreement on their rights;
(ii) whether or not, at that time when the advice was provided, it was to the advantage, financially or otherwise, of them to make the agreement;
(iii) whether or not, at that time, it was prudent for the parties to make the agreement; and
(iv) whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable.”
The relevant law
Section 90G as it is currently and as it was when the parties entered into this agreement is in the following terms. Subsection (1):
“A financial agreement is binding on the parties to the agreement if and only if:
(a)the agreement is signed by all parties; and
(b)the agreement contains in relation to each spouse party to the agreement a statement to the effect that the party to whom the statement relates has been provided before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i)the effect of the agreement on the rights of that party;
(ii)the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and”
Now, whilst the word “and” remains, subclauses (iii) and (iv) were repealed by the amending legislation at the end of 2003 and which came into effect on 14 January 2004. The subsections continue:
“(c)the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided;
(d)the agreement has not been terminated and has not been set aside by a court; and
(e)after the agreement is signed, the original agreement is given to one of the spouse parties and a copy is given to each of the parties.”
The matters referred to in subsections (c), (d) and (e) are not relevant in the matters I am required to determine today.
The decision of his Honour Collier J in J & J to which I have referred involved the enforcement of a binding financial agreement entered into between the parties on 3 November 2004, again subsequent to the amending legislation made effective in January 2004. His Honour in that case at paragraphs 19 and 20 said this:
“19.To my mind the words that appear in section 90G(1) - “if and only if” - and I emphasise the words “if and only if”; are words of real significance. They have a meaning. They import a requirement for a level of compliance - if the agreement is to be binding that is a clearly a standard or level above and beyond what might be described as substantial compliance. Those words “if and only if” make it clear that each of the parties must ensure that that which is required to be contained and dealt with in the agreement, and the annexures to it, is in fact contained appropriately and completely. Compliance must therefore be a full compliance satisfying the statutory requirements.
20.Something approaching full compliance, or something that if looked at in a less than strict light, might come close to establishing compliance, is not enough. Clearly, the legislation intended that if this method of parties resolving their differences was to be used without any supervisory of a Court, in a situation where parties' rights were to be affected, then that which was to be done had to be done fully in compliance with that which the statute set out and required.”
That decision was considered by the Full Court in Black & Black. After referring to Collier J’s decision their Honours Faulks, Kay and Penny at paragraph 40 in Black & Black said this:
“The Act permits parties to make an agreement which provides an amicable resolution to their financial matters in the event of separation. In providing a regime for parties to do so the Act removes the jurisdiction of the court to determine the division of those matters covered by the agreement as the court would otherwise be called upon to do so in the event of a disagreement. Care must be taken in interpreting any provision of the Act that has the effect of ousting the jurisdiction of the court. The amendments to the legislation that introduced a regime whereby parties could agree to the ouster of the court's power to make property adjustment orders reversed a long held principle that such agreements were contrary to public policy.”
Then at paragraph 42 their Honours said:
“The underlying philosophy that had guided the courts in enunciating that principle was seen to place too many restrictions on the right of parties to arrange their affairs as they saw fit. The compromise reached by the legislature was to permit the parties to oust the court's jurisdiction to make adjustive orders, but only if certain stringent requirements were met. (My emphasis)”
In paragraph 45 at the end of that paragraph, after referring to the agreement the subject of that case, their Honours said this at page 512:
“We are of the view that strict compliance with the statutory requirements is necessary to oust the court’s jurisdiction to make adjustive orders under section 79.”
The submissions
I listened very carefully to the submissions made by Mr Tregilgas of counsel on behalf of the husband. Essentially, those submissions were to this effect, that Black & Black, the decision of the Full Court which of course binds me, needs to be looked at closely for the reason that that decision related to a financial agreement entered into prior to the amending legislation to which I have referred and the paragraphs or the recitals or that part of the agreement of which complaint was made was clearly not in compliance with section 90G as it then was. Mr Tregilgas urges upon me that that is a distinguishing factor which I should take into account. Mr Tregilgas then refers me to subsection (b) of section 90G(1) and submits that because of the words in the second line – “a statement to the effect that the party to whom the statement relates has been provided” - that requirement has been discharged by the wording contained in the agreement between the parties made on 24 August 2005.
That merits closer inspection. Subclause (1) of section 90G(b) is a little different from the recital in K. Section 90G(1)(b)(i) says this:
The effect of the agreement on the rights of that party -
whereas the recital (i) says:
“The effect of the agreement on their rights.”
It is therefore deficient by omission of the word “party”.
Subclause (ii) of s.90G(1)(b) and to which I have referred earlier is in these words:
“The advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement.”
Whereas subclauses (ii), (iii) and (iv) of Recital K are in the terms which I read out earlier in these reasons.
Nowhere in the terms of the recital is the word “disadvantage” used.
Mr Tregilgas urges upon me that the effect, though, of the words used in the agreement is to amount to the same thing. His submission is that the words, in effect, as I understand his submission, in subclause (ii) of the recital:
It was to the advantage, financially or otherwise of them to make the agreement -
amounts to the same thing and that subclauses (iii) and (iv) read together with subclause (ii) effectively set out for the parties what is now required by the present legislation.
Mr Tregilgas submits that in spite of the Act and the wording employed in the agreement the parties had the benefit of legal advice and independent legal advice within the meaning of the current legislation. Mr Tregilgas submits, in effect, that as a consequence of the wording, the strict compliance prescribed in effect by the Full Court decision of Black & Black is not necessary because what I am required to do in this case is to look at the effect of the words in the recital.
Findings and conclusion
I do not accept those submissions and for these reasons. The words used in the recital do not include the word “disadvantage”. It is not open to me, in my view, and even if it were I would not, to depart from the findings and reasoning in Black & Black and which approved the decision of Collier J in J & J.
I find on the evidence before me that recital K does not include the words prescribed by section 90G(1)(b) and the significance, and perhaps I should emphasise this, is that there is no statement in the recital or anywhere else in the agreement, in the form prescribed by s.90G(1)(b). For that reason alone I find that the agreement does not satisfy the requirements of the provisions of s.90G(1)(a) and (b) because, quite simply, it does not contain the provision that the advantages and disadvantages at the time the advice was provided was given to the parties to the financial agreement.
Consequently, the wife must succeed with her application and the husband must fail.
Mr Tregilgas then urges upon me that if I find that the agreement does not comply that I have a discretion pursuant to section 90K(1)(b) as to whether the agreement should in fact be set aside. I find in all the circumstances that even if that discretion were to exist, and it is not necessary for me to make a finding in that respect, it would be inappropriate for me not to set aside the agreement.
On the face of it, the agreement provides for a division of property which, having regard to the length of the relationship and on the other material set out in the recitals and the length of the relationship, would not be, on any interpretation, an outcome which is likely, but I hasten to add I make no finding in that respect. That observation, and it is only an observation, is based upon the recitals alone. It is for the parties subsequently to adduce evidence in relation to those matters which the court is ordinarily required to determine in a case for alteration of property interests.
I should add, and whilst I have given reasons earlier today rejecting the husband's application for an adjournment, that I notice in the judgment of Cronin J in Norton & Norton, to which I have referred, and I quote this passage from paragraph 31 of his Honour's judgment, that the proposed amending legislation is not operative. His Honour said this:
“Insofar as it might be thought that parliament's intention has or will ameliorate that position the proposed Bill, the Federal Justice System Amendment (Efficiency Measures) Bill (No1) 2008 which is currently before the Senate does not assist.”
His Honour then went on to refer to the decision in Ramsay v Aberfoyle Manufacturing Company (Aust) Pty Ltd (1935) 54 CLR 230 at 253. It is not necessary for me to make any further reference to the cases which his Honour quoted. Suffice to say his Honour quoted that and another case.
In all the circumstances the only order which it is open to me to make is that sought by the wife in her amended application and it seems to me also that I should make a declaration, as indeed Cronin J made in that case, and that was a matter which I canvassed with counsel prior to giving these reasons. I therefore make the following declaration and order.
(1)It is declared that the financial agreement executed by the husband and wife and dated 24 August 2005 is not a financial agreement for the purposes of Part VIII or Part VIIIA of the Family Law Act and the provisions of the Act do not apply;
(2)That the financial agreement entered into between the husband and wife pursuant to section 90C of the Family Law Act and dated 24 August 2005 is set aside pursuant to section 90K(1)(b) of the Act.
In these proceedings I appoint a conciliation conference for 9.15 am on 2 October 2009, the parties and solicitors to attend, or counsel as the case may be. The parties are required to complete, file and exchange a financial questionnaire sheet as required by the Registrar by 25 September 2009.
Costs
In these proceedings the wife now brings an application for costs pursuant to section 117 of the Act. The Court has a discretion in relation to costs but I am satisfied in this case that the provisions of section 117(2) apply and it is appropriate and there are circumstances that justify the Court in making a costs order in favour of the wife, subject to the matters I am required to consider in section 117 subsection (2A).
(a) The financial circumstances of the parties. I am referred to the financial statements filed by each of the parties, the husband in March of this year and the wife in October of last year. I accept Mr Tregilgas’s submission that there is no current financial information before me but that which is available gives some indication of the parties’ circumstances. I take into account also the circumstances set out in the recitals to the deed of 24 August 2005 as to the property but not its value.
The husband is in a much stronger financial position than the wife.
The husband derives an income from rent by way of investment income from a source, which is not identified. The husband is a self employed business man by way of occupation. He sets out his assets and liabilities. He asserts that the property described in the financial agreement, as it was, at Property W now has a value of $400,000.00 and the unit in Property N now has a value of $600,000.00.
Mr Duane refers me to liquid assets in the husband’s name in the form of cash at the time he swore his financial statement of something in the order of $70,000.00 plus other personal assets. The only liability the husband has relates to a mortgage of about $107,000.00. The husband has modest superannuation, as does the wife. The husband also has some shares.
The wife on the other hand, while she is working earns an income of about the same amount and is employed as a manager. Her assets are quite insignificant. She rents a home. She lives with her mother, who is 69 years of age. She has ordinary outgoings of a recurring nature. The wife has no significant assets exceeding value in total of about $6000.00 in the form of liquid moneys. She has a motor car which is worth approximately $28,000.00 and a loan from the Newcastle Permanent Building Society of about $21,000.00. I do not know if they are related. On any interpretation, the husband is in a much stronger financial position. I do not know whether the husband works and derives an income from his own endeavours or employment.
Subsection (b) is not applicable; subsection (c) not applicable; subsection (d) is not relevant; subsection (e) is relevant in these proceedings. The husband has been wholly unsuccessful in the proceedings. (f) is not relevant. I am not told of any relevant offer or correspondence in relation to this particular issue which I was required to decide today.
It seems to me that, as Mr Duane submitted, it was more or less inevitable that the husband’s opposition to the wife’s application would not be successful given the current case law, and whilst it is true that Mr Tregilgas mounted a spirited argument and whilst it was not entirely without merit, on any ordinary application of the Full Court decision of Black & Black and Collier Js decision in J & J and the subsequent decision of Cronin J in Norton, it could be seen that given the combination of those cases strict compliance is required and there was not, on any interpretation, strict compliance and it fell short of, in effect, compliance for the reasons that I have given.
Consequently this is a matter where, in my view, the husband should be required to pay the amount of costs assessed by the wife which are inclusive of the solicitor’s costs. It is a modest amount for the amount of work which, in my view, is required for a case of this nature both in preparation of the argument found in the submissions which I required be filed and in the relevant law.
Rule 21.02 of the Federal Magistrates Court Rules provides for an application for costs to be made at any stage in the proceedings and in making the order for costs in a proceeding I may set the amount of the costs or set the method by which the costs are to be calculated or a further cost, which is inappropriate in this case, and set a time for payment of costs. In so doing, I find that rule to apply to these proceedings to enable me to make the order as sought.
I certify that the preceding nine (43) paragraphs are a true copy of the reasons for judgment of Coakes FM
Associate: J Manners
Date: 6 October 2009
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