Graham & Squibb

[2019] FamCAFC 33

FAMILY COURT OF AUSTRALIA

GRAHAM & SQUIBB [2019] FamCAFC 33

FAMILY LAW – APPEAL – FINANCIAL AGREEMENT – Where the parties executed an agreement before marriage purporting to deal with their pre-marital assets in the event of separation – Where upon final separation the wife commenced proceedings in the Federal Circuit Court of Australia seeking a declaration that the agreement was binding on the parties – Where the husband sought to have the agreement set aside – Where the primary judge correctly rectified the agreement to reflect its status as a financial agreement under s 90B of the Family Law Act 1975 (Cth) – Where it was open on the evidence for the primary judge to infer the parties’ common intention to execute a binding financial agreement – Where the primary judge was correct to make a declaration that the financial agreement was binding on the parties pursuant to s 90G(1) of the Family Law Act 1975 (Cth) – Where no merit to appeal – Appeal dismissed.

FAMILY LAW – APPEAL – LEAVE TO APPEAL – Whether the orders appealed are interlocutory or final – Where determination of the validity and binding nature of a financial agreement is a final order – Where leave to appeal is not necessary.

FAMILY LAW – APPEAL – COSTS – Where the wife sought indemnity costs or alternatively, costs calculated on a party/party basis – Where factors under s 117(2A) of the Family Law Act 1975 (Cth) considered – Where the wife contended she made a reasonable offer of settlement which the husband imprudently refused – Where appeal wholly unsuccessful – Discussion of principles governing fixing costs – Where the husband ordered to pay the wife’s costs on a party/party basis in a fixed amount.

Family Law Act 1975 (Cth) ss 4(1), 71A, 90B, 90C, 90D, 90G, 90K, 90KA, 94AA, 117
Family Law Rules 2004 (Cth) r 19.18(1)(a)
Family Law Regulations 1984 (Cth) reg 15A

Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119; [1995] FCA 1250
Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801
Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329
D & D (Costs) (No. 2) (2010) FLC 93-435; [2010] FamCAFC 64
Fewster & Drake (2016) FLC 93-745; [2016] FamCAFC 214
Fitzgerald v Masters (1956) 95 CLR 420; [1956] HCA 53
Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603; [2009] NSWCA 407
Hoult & Hoult (2013) FLC 93-546; [2013] FamCAFC 109
Jones v Dunkel (1959) 101 CLR 298; [1959] HCA 8
Kohan and Kohan (1993) FLC 92-340
Kostres & Kostres (2009) FLC 93-420; [2009] FamCAFC 222
Limousin v Limousin (Costs) (2007) 38 Fam LR 478; [2007] FamCA 1178
Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336; [1973] HCA 23
Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721
Messiter v Hutchinson (1987) 10 NSWLR 525
Muriti v Prendergast [2005] NSWSC 281
Pukallus v Cameron (1982) 180 CLR 447; [1982] HCA 63
Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603; [2007] NSWCA 65
Senior & Anderson (2011) FLC 93-470; [2011] FamCAFC 129
Stopford Malloy & Malloy (Costs) [2018] FamCAFC 6
Wilmer & Golding (No. 2) (2017) FLC 93-813; [2017] FamCAFC 213

APPELLANT: Mr Graham

RESPONDENT: Ms Squibb

FILE NUMBER: MLC 9821 of 2016

APPEAL NUMBER: SOA 57 of 2018

DATE DELIVERED: 27 February 2019

PLACE DELIVERED: Sydney

PLACE HEARD: Melbourne

JUDGMENT OF: Strickland, Kent & Austin JJ

HEARING DATE: 12 December 2018

LOWER COURT JURISDICTION: Federal Circuit Court of Australia

LOWER COURT JUDGMENT DATE: 13 July 2018

LOWER COURT MNC: [2018] FCCA 1906

REPRESENTATION

COUNSEL FOR THE APPELLANT: Francis Lim

SOLICITORS FOR THE APPELLANT: Francis Lim Barristers & Solicitors

COUNSEL FOR THE RESPONDENT: Mr M Bartfeld QC with Dr R Smith

SOLICITORS FOR THE RESPONDENT: Lander and Rogers Lawyers

Orders

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of and incidental to the appeal in the sum of $31,539.50.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Graham & Squibb has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT MELBOURNE

Appeal Number: SOA 57 of 2018
File Number: MLC 9821 of 2016

Mr Graham

Appellant

And

Ms Squibb

Respondent

REASONS FOR JUDGMENT

Strickland J

1. I have had the advantage of reading in draft the reasons for judgment of Kent and Austin JJ.

2. Although I agree with the reasons of their Honours as to the disposition of the appeal, namely that it should be dismissed, with respect, I do not agree with the order proposed by their Honours as to costs. I would order that the husband pay the wife’s costs of and incidental to the appeal with such costs to be as assessed in default of agreement.

3. There is no doubt that this Court can order costs in a specific amount (r 19.18(1)(a) of the Family Law Rules 2004 (Cth) (“the Rules”)), and that the policy of this Court is to do that whenever possible in order to avoid expense and delay (Stopford Malloy & Malloy (Costs) [2018] FamCAFC 6 (“Stopford Malloy”)). Plainly though there is a discretion, and in this case I do not consider that it is appropriate to fix costs in the amount sought by the wife.

4. The submissions of the husband as to costs were primarily directed to the claim by the wife for costs to be calculated on an indemnity basis, and indeed what counsel for the wife said about the alternative claim for party/party costs was that costs on that basis may be appropriate. Thus, it is readily apparent that the submissions of the husband as to the question of party/party costs were limited to say the least, but that does not provide a green light to this Court to simply make an order for the costs sought, without some consideration of those costs. And none of the authorities referred to by my colleagues suggest otherwise. Indeed, in Wilmer & Golding (No. 2) (2017) FLC 93-813 (“Wilmer”), Murphy J, with whom Ryan J and I agreed, felt that the costs sought exceeded that which he would be prepared to fix, and I have the same view in this case.

5. The costs sought are $31,539.50, and comprise senior counsel fees ($19,491.84), junior counsel fees ($6,375.77) and solicitor’s costs ($5,671.89).

6. First, given the nature of the appeal, I do not consider that it was reasonable for the wife to be represented by both senior counsel and junior counsel, and I would not certify for both.

7. Secondly, there were some items included in the work done by the solicitors which prima facie would appear to be unnecessary given the briefing of counsel, such as reading the transcript. Further, given the work done by counsel was not itemised, there is no way of telling whether there was any doubling up of work between counsel and solicitor.

8. Of course, applying r 19.18(1)(a) and the principles set out in the Full Court decision of Stopford Malloy, I could look to fix an amount for costs taking into account the issues that I have raised, but I consider the safer course is to not fix the costs and leave it for the parties to reach agreement about the same, but in default of agreement, the costs should be assessed.

Kent & Austin JJ

1. On 9 July 2008, the day before they were married, the husband and the wife executed an agreement entitled “Pre-Nuptial Agreement” (“the Agreement”), which the primary judge found failed to properly give effect to their mutual intention to retain the assets they each took into marriage in the event of their separation.

2. The parties married on 10 July 2008 and separated in November 2015. The wife commenced proceedings in the Federal Circuit Court of Australia in October 2016 and, by the time of the hearing to determine the status of the Agreement, she sought a declaration that the Agreement was binding on the parties, whereas the husband sought an order that the Agreement be set aside. The parties accepted that the Court’s determination would only resolve the dispute over the legal effect of the Agreement, which decision would then affect the overall property adjustment orders made between them. They both acknowledged a further hearing would be needed to resolve their respective entitlements to at least the assets accumulated after their marriage.

3. On 13 July 2018, Judge McNab rectified the Agreement and declared it to be binding upon the parties, which orders and declaration the husband appealed.

4. For the reasons which follow, the appeal should be dismissed with costs.

Settled facts and issues

1. Prior to marriage, the wife owned and operated a small business. Given her intention to imminently marry the husband, she was anxious to protect her proprietorship of the business in the event of their separation, since it was her sole source of income. At the time, the husband had assets of his own, including joint proprietary interests in two Southeast Asian properties.

2. In the months before their marriage, the parties discussed entering into a financial agreement and decided they would do so. In early July 2008, the wife instructed her lawyers to prepare the Agreement. Once prepared, the terms of the Agreement were not the subject of any negotiation or amendment.

3. The parties signed the Agreement in the presence of their respective lawyers. They first attended upon the wife’s lawyers, from whom the wife received independent legal advice about the effect of the Agreement and a lawyer certified the provision of the independent legal advice to her. She signed the Agreement in her lawyer’s presence. Afterwards, they attended upon the husband’s lawyers, where he received independent legal advice and his solicitor certified the provision of the independent legal advice. He signed the Agreement in his lawyer’s presence. The lawyers’ certificates comprised part of the Agreement. At the hearing before the primary judge, there was no evidence adduced by either party about the nature of the legal advice they were given and neither lawyer was called as a witness.

4. The Agreement was expressed to take effect only upon the solemnisation of the parties’ marriage, which occurred the following day.

5. The Agreement purported to oust any form of claim, including as to “alimony, spousal support or maintenance”, by one party against the other in respect of the property they each separately introduced to the relationship, which property was itemised in two separate schedules forming part of the Agreement. The Agreement did not purport to cover the parties’ respective entitlements to any property they acquired after marriage.

6. Although the evidence of the wife was that the Agreement was intended by both parties to dictate the parties’ retention of the assets they each introduced to the marriage upon its breakdown, which would thereby affect their overall entitlements pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”), it made no reference to s 90B of the Act. In addition, the Agreement purported (by clause 17) to be governed by “the laws in the State of Victoria, Australia” and stipulated that “any dispute arising from or in connection with [it] shall be subject to the exclusive jurisdiction of the courts in the State of Victoria. Australia”. The Agreement made no mention at all of the Act, which confers exclusive federal jurisdiction and power to determine any spousal dispute amounting to a “matrimonial cause” (defined in s 4(1) of the Act), as the parties’ disputes certainly were.

7. With respect to parties contemplating marriage, or married parties, or divorced parties, there are, respectively, three different sorts of financial agreements which are capable of affecting rights under the Act (ss 90B, 90C, 90D), but the parties were only concerned with whether the Agreement was a financial agreement made before marriage (s 90B).

8. Since the Agreement made no express reference to s 90B of the Act, it could not be a financial agreement (s 90B(1)(b)), and thus it could not be a binding financial agreement (s 90G), in which event it could not oust the operation of Part VIII of the Act (s 71A) and all of the parties’ assets would then be exposed and amenable to property adjustment orders in the pending litigation; not just the assets they acquired after marriage.

9. The wife’s senior counsel told the primary judge:

   …I would repeat that this is not the most felicitous draft of an agreement and, unless rectified, it is not a binding financial agreement…

   (Transcript 24 May 2018, p.4 lines 2–4)

   And further:

   …if your Honour were to find that the agreement is not to be rectified so as to include the expression that it is made under subsection 90(B)(1)(b) [sic], or that section not identified in the agreement, my client is doomed…

   (Transcript 24 May 2018, p.5 lines 38–40)

10. Hence, the wife’s application to rectify the Agreement as a preliminary step.

11. There was no dispute, either before the primary judge or in the appeal, that the power to rectify the Agreement sprang from s 90KA of the Act, which grants the Court wide remedial power by resort to principles of law and equity to determine the validity and enforceability of financial agreements. The issue was whether the power should have been exercised as the wife wanted.

The evidence, findings and decrees

1. The wife deposed in her affidavit sworn 9 May 2018:

   19.It was the mutual intention of the Husband and I that the Agreement would be put in place to set out the property that we would each receive in the event of separation and to waive our rights to property settlement or to seek spousal maintenance from each other.

2. The primary judge correctly observed the husband took no objection to the admissibility of that evidence, which evidence his Honour found was relevant to (and presumably probative of) the parties’ pre-contractual negotiations and, therefore relevant to the wife’s claim for rectification (at [19]).

3. In relation to that specific piece of evidence, the husband deposed:

   I deny the allegations in paragraph 19 of the Wife’s Affidavit.

   (Husband’s Affidavit, sworn 11 May 2018 at paragraph 5(c))

4. Thus, although the parties’ evidence-in-chief revealed a clear factual dispute about the intended effect of the Agreement and the nature of their antecedent discussion about it, neither cross-examined the other over the discrepancy.

5. Nonetheless, the husband acknowledged the Agreement was intended to protect at least the wife’s small business in the event of the breakdown of their marriage, because he deposed:

   We did not have many discussions in relation to the signing of an agreement before the marriage as the Wife alleges. The Wife just told me once that she wanted to protect her small [type of] business as it was her only source of income and wanted me to sign an agreement before our marriage and I agreed…

   (Husband’s Affidavit, sworn 11 May 2018 at paragraph 5(b))

6. In the event, the primary judge found:

   50.In my view, on the face of the document the parties intended that they enter into a binding enforceable agreement before their marriage in relation to financial matters. It is stated that the agreement will take effect “only upon the solemnisation of the marriage between the parties”. As the parties intended the document to be a binding agreement I accept the submission that the parties intended this to be an agreement made under part VIIIA of the Act and not an agreement that was a void prenuptial agreement.

   51.In my view rectification is available to cure what is plainly the legal nonsense created by clause 17 of the agreement in its current terms and rectification to make reference to the jurisdiction of the Act gives effect to the clear intention of the parties. I note the submission of the husband that the entitling of the document as a “Pre-Nuptial Agreement” may tend to indicate that is what the parties agreed here, however I am of the view that the parties intended to have an enforceable financial agreement and the use of that does not affect the substance of the submissions put by the wife. Similarly, rectification is available to amend the document so that it includes a reference to it being made pursuant to s.90B of the Act.

   …

   54.I accept the wife’s submissions as to content of the document (set out at paragraph 20) above and am of the view that it can and should be rectified to make reference to s.90B of the Act and to rectify paragraph 17 as noted above.

   (Original emphasis)

7. The decrees made by the primary judge rectified the Agreement in two respects.

8. First, the Agreement was amended to express that it was made pursuant to s 90B of the Act (Order 1), in consequence of which it was declared to be binding upon the parties (Order 2).

9. Second, clause 17 of the Agreement was rectified to state it was instead governed by the Act and not the laws of Victoria (Order 3).

10. His Honour found (at [53]) the need for extensive rectification of the agreement was no bar to the grant of the remedy, as there was power to correct errors which go beyond minor verbal infelicities and errors of grammar and spelling. The extent of the power was not an aspect of the husband’s appeal, so no more need be said about it.

11. His Honour rejected the husband’s submissions that the agreement was void and, even if valid, it would be “unjust and inequitable” to rectify it (at [55]–[56]).

Leave to Appeal

1. The husband did not seek leave to appeal the primary judge’s orders, but the wife contended it was necessary.

2. The resolution of that debate hinges on whether the appealed orders were interlocutory in nature. If so, leave to appeal is required (s 94AA of the Act; reg 15A of the Family Law Regulations 1984 (Cth)), but otherwise, leave to appeal is unnecessary.

3. The proceedings before the primary judge concerned two separate matrimonial causes: the preliminary dispute over the financial agreement (sub-para (eaa)(i) of the definition of “matrimonial cause”) and the wider dispute over the alteration of their property interests (sub-para (ca)(i) of the definition of “matrimonial cause”). The orders of the primary judge finally determined the first cause, but not the second. Although the interpretation of the assets covered by the parties’ agreement was expressly left open by the primary judge (at [56]), the import of which would influence the ultimate outcome of the broader property settlement dispute, the contest over the validity and binding nature of the Agreement was completely settled by the orders.

4. Consequently, as was similarly discussed in Fewster & Drake (2016) FLC 93‑745 (at [1], [8]-[15]), the orders determining the first matrimonial cause were not interlocutory in nature and so leave to appeal is not required.

Grounds of Appeal

1. The husband grouped his five grounds of appeal in two categories.

2. One ground of attack concentrated upon the rectification of the Agreement (Grounds 1, 2, 4 and 5).

3. The other ground of attack related to the declaration that the Agreement was binding (Ground 3).

Rectification of the agreement (Grounds 1, 2, 4 and 5)

1. The husband contended the Agreement’s rectification by the primary judge was erroneous – both by expressing it to be a financial agreement made pursuant to s 90B of the Act (Grounds 1, 2 and 5) and by amending the terms of clause 17 (Ground 4). Notwithstanding his differentiation of the two forms of rectification in the grounds of appeal, the husband’s arguments can only sensibly be considered compendiously because they ran together and were not segregated under the various grounds and sub-grounds of appeal.

2. A written contract is presumed to correctly record the agreement of the parties to it and, in order to displace that presumption, a party seeking rectification of the contract must advance “clear and convincing proof” it does not embody the final intention of the parties (see Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 at 345; Pukallus v Cameron (1982) 180 CLR 447 at 452, 456 (“Pukallus”); Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 at 350). For that purpose, the parties’ mutual intention is the relevant feature of the evidence, as there is no room for rectification of the contract if the contrary intention is not shared (see Franklins Pty Ltd v Metcash Trading Ltd (2009) 76 NSWLR 603 at 710; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 at 655, 660). The parties did not contest the correctness of those principles. Rather, their dispute concerned the application of the principles to the evidence adduced.

1. The husband contended the evidence did not admit of the finding that the parties mutually intended the Agreement would be a binding financial agreement which affected their rights upon separation by preserving the assets they individually introduced to the relationship.

2. It was submitted for the husband in the appeal:

   …When the Appellant signed the Agreement, he intended it to be as drafted by the Respondent’s Solicitors with no amendments and after receiving advice from his Solicitor. As far as the Appellant is concerned, there was no mistake and there can be no rectification.

3. However, the absurdity of that proposition is established by the corollary. If the husband did not intend the Agreement to be a binding financial agreement with full force and effect under the Act, he must then have pointlessly intended the Agreement would be a nullity since, in its unaltered form, the Agreement was unenforceable under State law in a State court; be it Victorian or any other. Jurisdiction to determine the matrimonial causes between the parties was exclusively conferred by and under the Act, which could not be ousted by an agreement purporting to be created and enforced under State law. The wife’s senior counsel was correct to describe the Agreement’s attempt to reserve jurisdiction and power under State law as “meaningless and without any effect whatsoever” (Transcript 24 May 2018, p.15 line 23).

4. If the husband did not intend to mislead the wife by executing the Agreement so as to induce her false belief he considered the Agreement was binding, the only rational alternative is that he signed the Agreement honestly believing (contrary to his lawyer’s submissions) the Agreement would bind the parties without realising it would fail to do so in the form it was executed.

5. The husband’s lawyer was mistaken when he informed the primary judge the Agreement in its unaltered form could be enforced in “the courts of the state” (Transcript 24 May 2018, p.27 line 23). To be clear, he was there referring to the Agreement’s stated dedication to its adjudication exclusively under Victorian law in a Victorian court. He could not have been referring to the prospective enforcement of the Agreement by a State court exercising federal jurisdiction under the Act, for two obvious reasons.

6. First, he asserted the agreement was not intended to impinge upon the parties’ matrimonial rights under the Act in any way, as he went on to explain:

   …the court’s jurisdiction is not ousted. It’s [the Agreement is] just one of the documents that the court can consider [in the property settlement proceedings].

   (Transcript 24 May 2018, p.22 lines 35–36)

   …There was no intention to exclude the jurisdiction of this court. So he has signed it, and the court can take into consideration what is stated here. But the court’s jurisdiction is not ousted…

   (Transcript 24 May 2018, p.23 lines 3–6)

   …all we say is that we agreed to enter into a prenuptial agreement as drafted in this manner and not a binding financial agreement that excludes the jurisdiction of the court.

   (Transcript 24 May 2018, p.27 lines 30–32)

7. Secondly, the litigation was already being entertained by the Federal Circuit Court and he was at liberty to try and enforce the Agreement in its unaltered form then and there. There was no need and, indeed, no jurisdictional scope to separately approach a State court to try and do so. However, not only did he not seek to enforce the Agreement against the wife, he sought an order from the primary judge to set it aside.

8. It should be noted that the husband’s application to set the Agreement aside was entirely irreconcilable with his written submissions filed in advance of the hearing, in which it was asserted:

   The parties have clearly chosen the applicable laws and have given the courts in Victoria exclusive jurisdiction to determine any dispute arising from the Pre-Nuptial Agreement. This Court has no jurisdiction to determine any dispute arising from the Pre-nuptial Agreement.

   (Emphasis added)

9. The husband could not explain how, on the one hand, he could contend the primary judge had no jurisdiction to hear and determine any dispute about the Agreement but, on the other hand, actually ask the primary judge to hear and determine his application to set the Agreement aside. It should also not escape attention that his application to set the Agreement aside pre-supposed its validity as a binding financial agreement under the Act, which characterisation of the Agreement he simultaneously denied. The illogicality of the husband’s position about the Agreement, its intended effect, and its enforceability was, thereby, clearly revealed.

10. During the hearing before the primary judge, the husband’s lawyer was driven to effectively concede he advised the husband upon, and allowed him to sign, an agreement which the lawyer contemplated would be ineffectual. The following exchange occurred between the primary judge and the husband’s lawyer:

    [COUNSEL FOR THE HUSBAND]: …this is a rubbish document…

    [HIS HONOUR]: Well, you advised on it.

    [COUNSEL FOR THE HUSBAND]: Pardon?

    [HIS HONOUR]: You gave advice about it.

    [COUNSEL FOR THE HUSBAND]: Yes. If the client wants to sign an agreement that’s non-binding, it’s as if it is…

    [HIS HONOUR]: Yes, but they’re relying on you for advice.

    [COUNSEL FOR THE HUSBAND]: Yes. All he has signed is a prenuptial agreement, if at all…

    (Transcript 24 May 2018, p.22 line 36 to p.23 line 3)

11. On the question of rectification, the husband submitted to the primary judge the parties had no common intention that the agreement would provide otherwise than as it stated. When pressed to explain why, the husband’s lawyer said:

    …There was no discussion regarding the terms that she put in [the Agreement]. And based on this, your Honour, there cannot be any rectification. There was no discussion regarding the terms of this agreement.

    (Transcript 24 May 2018, p.26 lines 33–35)

    …we say that the wife has not produced clear and convincing evidence to say that there was common intention because evidence showed otherwise; the agreement showed otherwise, the way it was drafted. And most important is the wife did not, in her own affidavit, say what the terms are supposed to be. She did not say what instructions she gave to her solicitor. Her solicitor did not come and say, “I have made a mistake. It should be a section 90B agreement.”…

    (Transcript 24 May 2018, p.28 lines 13–18)

12. The fact the terms of the Agreement, as drafted by the wife’s lawyers, were not thereafter negotiated was immaterial. Before the Agreement was prepared, the parties privately discussed its purpose and, as it transpired, the terms of the Agreement did not fulfil the intended objective. The wife was certainly unaware of the dissonance and, inferentially, the primary judge found the husband was probably also unaware of that fact.

13. Contrary to the husband’s submission to the primary judge, the wife did depose in her affidavit to the intended purpose of the Agreement. She said it was the parties’ “mutual intention” that the Agreement would “set out the property that [they] would each receive in the event of separation and to waive [their] rights to property settlement or to seek spousal maintenance from [the] other”. Although the husband denied the fact, he did not object to the admissibility of her evidence in that form and chose not to cross-examine the wife about it.

14. In the appeal, the husband’s lawyer conceded the parties did, at least initially, commonly intend that they would enter into a binding financial agreement, but then asserted the wife failed to prove their common intention subsisted until they executed the Agreement. It was uncontroversial that, for the Agreement to be amenable to rectification, the parties’ common intention for the Agreement to be a binding financial agreement must have subsisted until its execution (see Pukallus at 452, 456).

15. Three impediments obstruct acceptance of the husband’s submission. First, the wife’s evidence strongly implied their common intention subsisted until the Agreement was executed. Secondly, given the husband’s concession there was an initial common intention, he did not then give evidence expressing or even implying he recanted from their common intention prior to the Agreement’s execution. Thirdly, as was open, the primary judge inferred the continuation of the parties’ common intention and the husband’s lawyer was unable to identify any aspect of the evidence which demonstrated the finding was wrong.

16. The parties’ common intention to execute a binding financial agreement was evident from: the wife’s evidence about their “mutual intention”; the parties’ consistent evidence that they discussed and intended the Agreement to protect the wife’s small business against any claim by the husband in the event of their separation; the identification of the assets they each introduced to the marriage in separate schedules to the Agreement; and the terms of the Agreement itself, which purported to protect the assets they each introduced to the marriage against any matrimonial claim made by the other. The wife’s senior counsel submitted to the primary judge that the inference of the parties’ common intention to create a binding financial agreement was “inescapable”. Whether the inference was so strong is a moot point, but the inference drawn by the primary judge to that effect was certainly available on the evidence.

17. Because it was open to the primary judge to accept such evidence and to infer the parties’ intentions from it, the nature of the instructions the wife gave her lawyer, the nature of the advice she received from her lawyer about the Agreement, and her failure to call her lawyer as a witness at the hearing was of no consequence. There was no gap in the evidence which needed to be plugged by the wife’s lawyer and so there was no room for any adverse inference to be drawn from her lawyer’s absence as a witness (see Jones v Dunkel (1959) 101 CLR 298), for which inference the husband contended before the primary judge.

18. Having drawn the inference of the parties’ common intention to execute a binding financial agreement, that the Agreement did not embody the parties’ objective was an inevitable conclusion. No other device but a binding financial agreement could have carried the parties’ common intention into effect.

19. Since the Agreement did not, by reason of its omissions and inaccuracies, achieve the parties’ common intention, the wife submitted to the primary judge it was a “classic situation where rectification is available” (Transcript 24 May 2018, p.17 lines 38–39), which submission the primary judge was able to accept.

20. The primary judge referred (at [39]–[40]) to Senior & Anderson (2011) FLC 93‑470, where the Full Court held (at [34]-[36], [105]-[107], [110]-[112], [129], [132]–[133], [138]–[139], [143], [159]–[160]) there was power to rectify the financial agreement in that particular case by substituting correct references to s 90D of the Act for the erroneous references to s 90C, when the correct statutory provision manifested the parties’ common intention. That situation is analogous to the present. Here, the insertion into the Agreement of reference to s 90B of the Act would manifest the parties’ common intention to achieve a financial agreement within the meaning of the Act.

21. As was submitted for the wife in the appeal, the parties did not need to have a common intention about the precise words in which the terms of the agreement should be expressed; only that they had a common intention about the substance and detail of its intended effect (see Fitzgerald v Masters (1956) 95 CLR 420 at 426–427; Muriti v Prendergast [2005] NSWSC 281 at [137]). For that reason, the fact the parties did not specifically discuss s 90B of the Act in the context of what they agreed the Agreement should accomplish, is no bar to the Agreement’s rectification by insertion of reference to that provision.

22. Since the Agreement could not possibly be a financial agreement within the meaning of the Act without its express reference to s 90B (ss 4(1), 90B(1)(b)), the Agreement’s rectification to reflect the parties’ common intention could only be achieved by an order in terms of Order 1 made by the primary judge. Hence, the validity of the order.

23. Given the Agreement was rectified to reflect its status as a financial agreement under s 90B of the Act, any litigation over the Agreement was the exclusive province of a court exercising jurisdiction under the Act. State courts may, in certain circumstances, exercise federal jurisdiction under the Act, but it was impossible for any Victorian court to entertain and determine any litigation about the agreement under Victorian contract law. The provisions of clause 17 of the agreement were, therefore, nonsense and had to be rectified or severed to render the Agreement correct and intelligible, for which reason Order 3 was also correctly made.

Was the agreement binding? (Ground 3)

1. Once the Agreement was rectified by an order ensuring its express reference to s 90B of the Act, it attained the quality of a financial agreement with effect under Part VIIIA of the Act. The questions for the primary judge then became whether the financial agreement should be set aside (for which the husband contended) and, if not, whether it was a binding financial agreement (for which the wife contended).

2. The grounds upon which a financial agreement may be set aside are prescribed by the Act (s 90K). The written submissions made by the husband to the primary judge to justify his application to set aside the Agreement did not specifically refer to s 90K of the Act but, at least in one respect and despite expression in slightly different terms, did appear to engage s 90K(1)(b) of the Act. The husband asserted the terms of the Agreement were ambiguous and uncertain, such as to render it void or unenforceable. His Honour rejected the submission that the Agreement was void for uncertainty or ambiguity or that it should be set aside, holding it was not for the Court to make good a bad bargain and that the identification of the property which fell within and that which fell outside the Agreement would be determined at the final trial (at [55]–[56]). The husband was unable to demonstrate in the appeal why that finding was not open.

3. The husband made other submissions directed to the asserted deficiency of the Agreement, though not seemingly premised on s 90K of the Act.

4. The husband asserted to the primary judge that the Agreement ought to be set aside because it was not reflective of a just and equitable distribution of property under Part VIII of the Act, but such a submission had no statutory traction at all. It bore no correlation to any of the available grounds under s 90K of the Act and ignored the obvious consideration that parties choose to enter into financial agreements to intentionally oust the operation of Part VIII of the Act. Sometimes they choose to do so unwisely, as is their prerogative. As was recognised in Kostres & Kostres (2009) FLC 93-420 at [123], the practical effect of Part VIIIA of the Act is to remove the provisions in the financial agreement from the scrutiny of a court, ordinarily given under Part VIII of the Act, to ensure the provisions are just and equitable.

5. The husband also contended to the primary judge in writing:

   Events after the signing of the Pre-nuptial Agreement made it unjust and inequitable to [him] if it is rectified to bring it under section 90B of the [Act]…

6. The primary judge did not give discrete attention to this particular submission in the reasons for judgment, but that did not necessarily manifest error. If the husband thereby intended by his submission to engage s 90K(1)(d) of the Act as a consideration, he failed to do so satisfactorily because he needed to prove his sufferance of hardship by reason of an asserted material change in circumstances. He did not submit for his sufferance of hardship and so could hardly expect the primary judge to divine it. In any event, he only contended that the Agreement would become “unjust and inequitable” if it was rectified so as to ensure it was a financial agreement under s 90B of the Act; not that the terms of the Agreement in its proper rectified form were themselves “unjust and inequitable”. The reasons given by the primary judge were, as we have already attempted to demonstrate, more than sufficient to explain the proper need for its rectification in that manner.

7. The husband’s grounds of appeal contended the primary judge erred in fact and in law by declaring the Agreement was binding on the parties when certain circumstances, which were not reasonably foreseeable by the husband, arose after the Agreement was signed and, thereby, made the terms of the Agreement “not ‘fair and reasonable’” (Ground 3(h)). In his written Summary of Argument, the husband made submissions about why the Agreement was no longer “fair and reasonable”. He essentially contended the Agreement expressly provided that, in light of reasonably foreseeable circumstances at the time it was executed, the parties acknowledged the Agreement was fair and reasonable (clause 16) but, so the argument continued, that could not be correct because the Agreement could not be “fair and reasonable” without any consideration of the financial and non-financial contributions he made after their marriage. To that end, he relied upon his work in the wife’s business and the parties bearing and raising a son.

8. Although it was never made explicit, we infer the ground and the written submissions made in support of it were directed to his earlier submission made to the primary judge about subsequent events making it “unjust and inequitable” to rectify the Agreement, in which event the reasons for rejection of the appeal ground and his submissions may be succinctly stated.

9. The argument made before the primary judge about the unfairness of rectifying a financial agreement is quite different from the argument maintained in the appeal about the unfairness of declaring the financial agreement to be binding. The question of rectification pursuant to the principles imported by s 90KA of the Act, so as to ensure the Agreement reflects the parties’ common intention, is a separate and distinct question from whether, under s 90G of the Act, the Agreement constitutes a binding financial agreement. Consequently, there was no correlation between the submission to the primary judge and the complaint on appeal. The fact the husband relied on contributions he made after marriage to try and vindicate both arguments did not make the arguments the same. If, alternatively, no correlation was even intended by the husband then he was unable to press an argument on appeal which he did not make at first instance.

10. In any event, there was an inherent illogicality about the husband’s argument. Just because events which transpired after they executed the Agreement led him to retrospectively regard the Agreement as unfair, it did not objectively mean the Agreement inaccurately recorded their original concurrence about the fairness of the Agreement when they signed it in July 2008. There is no legal requirement for a financial agreement struck between independently advised parties to be just, equitable or fair (Hoult & Hoult (2013) FLC 93-546 at [310]). This Agreement was designed to protect their individual assets against claims by the other in the event of their subsequent separation and to leave open their rights to property adjustment orders in respect of assets acquired after their marriage. Axiomatically, they intended that events after their marriage, such as their various financial and non-financial contributions, would affect their respective entitlements to the property they accumulate after marriage.

11. Having rejected the husband’s arguments as to why the Agreement should be set aside, as was open to the primary judge, his Honour then had to find whether the Agreement in its guise as a financial agreement was binding upon the parties.

1. A financial agreement only transforms into a binding financial agreement if the conjunctive requirements of s 90G(1) of the Act are all met or, alternatively, the Court declares the financial agreement to be binding following satisfaction of the requirements of s 90G(1A) of the Act.

2. In this case, the elements of s 90G(1) were all met, about which there was no dispute.

3. The wife’s senior counsel informed the primary judge, without challenge or caveat by the husband’s lawyer:

   …But the agreement, if rectified in the way we propose, then becomes a binding financial agreement by operation of section 90G, because it is signed by all parties. There are certificates which indicate that the appropriate legal advice was given, and all the other matters are covered…

   (Transcript 24 May 2018, p.9 lines 17–20)

4. In reliance upon that concord, the primary judge recorded (at [13]):

   …No issue is raised in relation to the certification process.

5. Since the mandatory requirements of s 90G(1) of the Act were uncontroversially met, it inevitably followed the Agreement was a binding financial agreement. Hence, the primary judge was correct to so declare (Order 2).

Conclusion and costs

1. The appeal has no merit and must be dismissed.

2. In that event, the wife applied for an indemnity costs order, but alternatively a costs order calculated on an ordinary party/party basis.

3. The husband conceded he could not resist a costs order calculated on a party/party basis, but objected to any order calculated on an indemnity basis.

4. The authorities recognise that orders for indemnity costs are exceptional (Kohan and Kohan (1993) FLC 92-340 at 79,614; Limousin v Limousin (Costs) (2007) 38 Fam LR 478; D & D (Costs) (No. 2) (2010) FLC 93-435). Acknowledging that principle, the wife submitted two factors would warrant indemnity costs in this instance: the husband’s imprudent refusal of her offer to compromise and the appeal was misconceived.

5. The refusal of a reasonable offer of settlement is a relevant consideration under the Act in determining whether a costs order should be made (s 117(2A)(f)) and an imprudent refusal can sometimes warrant an indemnity costs order (Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234; Messiter v Hutchinson (1987) 10 NSWLR 525; Maitland Hospital v Fisher (No. 2) (1992) 27 NSWLR 721 at 724), but not in these circumstances.

6. Nearly two months before the appeal was heard, the wife offered to the husband, in writing, that he should discontinue the appeal until after the proceedings before the primary judge were concluded, at which point she would not oppose him re-instating the appeal if he then desired. She contended that it would save two appeals: one against the orders made in July 2018 and another against the final property settlement orders yet to be made. However, if the July 2018 orders went unchallenged, at least one appeal would certainly be needed because the binding financial agreement would inevitably affect the ultimate property settlement orders, with which the husband would always be dissatisfied. There may still be another appeal after the proceedings before the primary judge are complete, but there would then be little difference between a second appeal and the hearing of two consolidated appeals. With the husband’s grievance over the July 2018 orders now settled by these reasons, another appeal may be averted. We are not, therefore, persuaded by the wife’s first reason. The husband’s refusal of her offer was not unreasonable and, even if so, not so imprudent as to be egregious.

7. As to the second reason, the appeal was misconceived, but that is just another way of stating the appeal was wholly unsuccessful. That is a good reason for departing from the orthodoxy of each party bearing their own costs (s 117(1)) and making a costs order in the wife’s favour (s 117(2A)(e)), but falls short of justifying an indemnity costs order.

8. In the event that this Court was to allow the wife her party/party costs, the wife sought an order for costs in the specific amount of $31,539.50. That amount was supported by an itemised schedule of costs, referencing each item in the applicable scale of costs, which schedule was filed on 5 December 2018 and was provided to the husband in advance of the appeal hearing. Throughout the appeal proceedings the wife was represented by both senior and junior counsel. Given the legal issues involved, it was reasonable for the wife to engage both senior and junior counsel, but obviously that had the consequence of increasing the wife’s costs.

9. For his part, the husband did not concede the amount of party/party costs sought by the wife and contended that the costs should be assessed. However, notwithstanding having had notice of the calculation of the sum sought from the itemised schedule provided by the wife, the husband did not identify how any item claimed in the itemised schedule was not reasonable. Nor was it submitted that it was unreasonable for the wife to be represented by senior and junior counsel.

10. It is well settled that the purpose of r 19.18(1)(a) of the Rules, which provides for the Court to order costs in a specific amount, is to “avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation” (Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 at 120, cited with approval in Stopford Malloy).

11. The principles governing the approach the Court takes to fixing costs in a specific amount pursuant to the relevant rule are discussed in detail in Wilmer at [59]–[64] and Stopford Malloy at [9]–[13] and those principles need not be restated here.

12. On the material placed before the Court, in particular the itemised schedule of costs provided by the wife, none of which was the subject of specific challenge by the husband, and having regard to the legal issues involved in the case and the material as prepared on the appeal, we are satisfied that it is appropriate to fix the wife’s costs of and incidental to the appeal in the sum of $31,539.50 and we will so order.

I certify that the preceding eighty-seven (94) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Strickland, Kent & Austin JJ) delivered on 27 February 2019.

Associate:

Date: 27 February 2019