Grant and Grant-Lovett
[2010] FMCAfam 162
•19 March 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| GRANT & GRANT-LOVETT | [2010] FMCAfam 162 |
| FAMILY LAW – Application to set aside a binding financial agreement – application to enforce agreement – non-compliance with s.90G – non-disclosure under s.90K(1)(a) – defence of estoppel. |
| Family Law Act 1975 ss.79, 90B, 90C, 90G, 90K, 90KA |
| Black & Black [2008] FamCAFC 7 Kostres & Kostres [2009] FamCAFC 222 Fevia v Carmel-Fevia [2009] FamCA 816 Kennon v Spry (2008) 83 ALJR 145 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 |
| Applicant: | MR GRANT |
| Respondent: | MS GRANT-LOVETT |
| File Number: | WOC 1152 of 2008 |
| Judgment of: | Altobelli FM |
| Hearing date: | 9 November 2009 |
| Date of Last Submission: | 9 November 2009 |
| Delivered at: | Sydney |
| Delivered on: | 19 March 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr Maurice |
| Solicitors for the Applicant: | RMB Family Law |
| Counsel for the Respondent: | Mr Moss |
| Solicitors for the Respondent: | Marriott & Oliver Solicitors |
ORDERS
The document which purports to be a binding financial agreement dated 28 June 2002 is set aside.
The parties attend a conciliation conference on 23 April 2010 at 11am in Wollongong with a view to settling the claim.
The parties comply with rule 24.04 of the Federal Magistrates Rules by serving on each other copies of the documents listed in that Rule by no later than 4.00 p.m. on 8 April 2010. Namely:
(a)Copies of 3 most recent taxation returns;
(b)Copies of 3 most recent taxation assessments;
(c)If the party is a member of a superannuation plan:
(i) if not already filed or exchanged – the completed superannuation information form for any superannuation interest of the party;
(ii)for a self-managed superannuation fund- the trust deed and copies of the 3 most recent financial statements for the fund;
(d)If the party has an ABN, copies of the last 4 business activity statements lodged, if any, and:
(e)The 3 most recent financial statements and the last 4 business activity statements of any partnership, trust or company (other than a public company) in which that party has an interest.
The matter be adjourned for mention to 5 May 2010 at 9.30am in Wollongong.
The Respondent wife file an Amended response within 28 days.
IT IS NOTED that publication of this judgment under the pseudonym Grant & Grant-Lovett is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
WOC 1152 of 2008
| MR GRANT |
Applicant
And
| MS GRANT-LOVETT |
Respondent
REASONS FOR JUDGMENT
Introduction and Background
This is an application by the applicant husband to set aside a binding financial agreement that he entered into with the respondent wife, and which is dated 28 June 2002. The matter was set down for hearing before me on the discrete issue as to the validity of the binding financial agreement and on the basis that if the agreement was set aside, any hearing of matters arising under section 79 of the Family Law Act would be dealt with at a later time.
The applicant husband is 55 years old, and the respondent wife
43 years old. They married [in] 1990 and separated in either 2007 or 2008. In this regard, nothing turns on which is the correct date of separation. They thus so cohabited for a period of either 17 or 18 years. They have two children who are now aged 17 and 13, and who reside with the respondent wife.
In their respective affidavits both the husband and the wife agree that the husband had, at various times during cohabitation, a gambling addiction problem. There is disagreement about the nature and extent of that problem and it is not something that needs to be determined in the present context. However, the existence of the gambling problem was an issue that both parties agree led to the wife instructing her solicitors to prepare a binding financial agreement, to submit the same to the husband, and ultimately to enter into the same.
The binding financial agreement was prepared by the wife’s solicitors. She signed the same on 30 May 2002. The date of 30 May 2002 is the date of the certificate provided by the wife’s solicitor pursuant to section 90G of the Act. In the present context, however, nothing turns on the precise date on which the wife signed the agreement.
By way of a letter dated 29 May 2002 the wife’s solicitor caused to be forwarded by mail to the husband the binding financial agreement, presumably signed by the wife. Whilst the husband does not specifically recall receiving the letter, it was exhibit W1 in the proceedings, and I am satisfied that the letter was sent, or conveyed to the husband, that he received it, and that the binding financial agreement accompanied the letter.
On 24 June 2002 the husband appears to have signed the agreement. That is the date noted on the certificate of independent advice pursuant to section 90G annexed to the agreement. In all likelihood after the agreement was signed, the husband gave it to the wife, who then sent it to her solicitors. The agreement itself bears a date of entry as 28 June 2002.
The parties separated either in 2007 or 2008. Between the date of the agreement, and the date of separation, there are a number of transactions that will be referred to in these reasons for judgment, where necessary.
The agreement is actually entitled “Deed of Financial Agreement” and purports to be under section 90C, part VIIIA of the Family Law Act. It contains a number of recitals, seven operative provisions and two certificates under section 90G of the Act. It is of course signed by the husband and the wife, and appears to be witnessed by the same person who provided their respective section 90G certificates.
Recital I contains an acknowledgement that the husband makes to the effect that the property at Property W is at the date of the agreement registered in the wife’s sole name. The next recital, recital J, refers to the said property being transferred to the wife as a distribution from the Lovett family trust, with no consideration being paid by either the husband or the wife, and that the transfer is in consideration of the wife’s family’s natural love and affection for her.
Indeed, the next recital, recital K, refers to a further distribution to be made to the wife from the Lovett family trust in order to provide her with sufficient funds to enable her to construct on the property a house in accordance with plans and specifications approved by the husband and the wife. The last recital, recital L, acknowledges that the husband is to perform some of the labour involved in constructing the house and improving the grounds.
Paragraph 1 of the operative part of the agreement provides as follows:-
“1)Mr Grant agrees that he will make no claim to any ownership of the said property referred to in clause I above but that he acknowledges that this property is wholly the property of
Ms Grant-Lovett and will remain so even if the parties separate or the marriage proposed between them is resolved or never takes place.”
Paragraph 2 contains an acknowledgement by the husband that he and the wife intend to live together in the said property, that he will contribute to general maintenance, insurance, rates and the general upkeep of the property during any period in which he lives there. Further he agrees to make no claim for compensation for any of these payments and acknowledges that any such contribution made by him will be recompensed by his living rent free in the property.
Paragraphs 3 and 4 provide by follows: -
“3) That should the parties separate then they agree that
Mr Grant shall vacate the property referred to in clause I or any other property acquired in Ms Grant-Lovett’s sole name from the proceeds of sale of the said property or from any other source within 21 days of him being formally requested by Ms Grant-Lovett to so vacate.
4) Ms Grant-Lovett shall pay to Mr Grant by way of lump sum property settlement the sum of $50,000, such sum to be paid within 12 months of the date that Mr Grant vacates the house pursuant to the preceding clause.”
The effect of paragraph 5 of the agreement is that each party would otherwise keep all other items in their name as well as be responsible for any debts incurred in their name.
Finally, paragraph 7 of the operative part confirms that the agreement was not intended to cover “any other property acquired by them jointly during the course of the relationship”. In this regard, the parties agreed that part VIII of the Family Law Act would apply to the division of this property.
In his application filed 18 December 2008, the husband seeks an order that the binding financial agreement dated 28 June 2002 be set aside, and then some ancillary orders for property settlement.
By way of her amended response filed 17 June 2009, the wife seeks an order that the husband’s application be dismissed and that, pursuant to section 90G, subsection (2), the deed of financial agreement be enforced. In the wife’s case she did not articulate, however, precisely how the agreement was to be enforced but, as it turns out, nothing turns on this.
In short, the husband seeks to set aside the agreement, and the wife seeks to uphold it.
The husband’s case for setting aside the agreement is framed in the alternative. Firstly, he asserts that the agreement does not comply with section 90G, subsection (1), and is therefore invalid. In addition, or in the alternative, he asserts that it should be set aside under section 90K, subsection (1)(a) (fraud including non‑disclosure), subsection (b) (the agreement is void, voidable or unenforceable) or subsection (e) (the wife engaged in conduct that was, in all the circumstances, unconscionable). In short, apart from the argument that the deed does not comply with the formal requirements of section 90G, the husband’s case is that he entered into the agreement as a result of the wife’s duress, that she provides no or no satisfactory disclosure about her assets and liabilities and, indeed, misrepresented the same, and that he did not in any event obtain independent legal advice. These are the issues that I need to decide, in the present case.
Applicable Law
There are two sections of the Act that are specifically relevant in the context of this case: sections 90G, and 90K. In each case, the relevant provision is that which was in existence at the time that the agreement was entered into in 2002. Particularly in the case of section 90G, this section was amended by the Family Law Amendment Act 2003, effective from 14 January 2004. Section 90G was then again amended by the Federal Justice System Amendment (Efficiency Measures) Act 2009, which received Royal Assent on 7 December 2009 and came into effect on 4 January 2010. Accordingly, section 90G which I reproduce below, is the provision in effect at the relevant time, ie, prior to the 2003 amendments to the Act: -
(1) A financial agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by both parties; and
(b) the agreement contains, in relation to each 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) whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;
(iii) whether or not, at that time, it was prudent for that party to make the agreement;
(iv) whether or not, at that time and in the light or such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable; and
(c) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(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 parties and a copy is given to the other.
(2) A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.The other relevant provision is section 90K, which has not been amended:
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(a) the agreement was obtained by fraud (including non-disclosure of a material matter); or
(aa) either party to the agreement entered into the agreement:
(i) for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii) with reckless disregard of the interests of a creditor or creditors of the party; or
(b) the agreement is void, voidable or unenforceable; or
(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(e) in respect of the making of a financial agreement—a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f) a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g) the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.(1A) For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
(2) For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) the person has a residence order in relation to the child; or
(c) the person has a specific issues order in relation to the child under which the person is responsible for the child's long-term or day-to-day care, welfare and development.(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.
(4) An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(5) If a party to proceedings under this section dies before the proceedings are completed:
(a) the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and
(b) if the court is of the opinion:
(i) that it would have exercised its powers under this section if the deceased party had not died; and
(ii) that it is still appropriate to exercise those powers;
the court may make any order that it could have made under subsection (1) or (3); and
(c) an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.(6) The court must not make an order under this section if the order would:
(a) result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.For this purpose, acquisition of property and just terms have the same meanings as in paragraph 51(xxxi) of the Constitution.
The Full Court of the Family Court in Black & Black [2008] FamCAFC 7 discussed at length when financial agreements are binding at paragraphs 29‑46. In short, the Full Court rejected the purposive approach to interpreting section 90G, and stated that section 90G required strict compliance. The relevant provisions are at paragraphs 40‑45 of the Full Court’s reasons:
40. 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.
41. As discussed by the Full Court in Naughton and Naughton (1983) FLC 91-327; (1983) 9 Fam LR 47, the statutes, namely the Matrimonial Causes Act 1959 (Cth) to 1975 and the Family Law Act 1975 (Cth) since that time, gave to parties of a marriage or former marriage certain rights of application in respect of property and maintenance. The parties could not by agreement outside the confines of that legislation contract themselves out of the right to institute such proceedings: see generally Hyman v Hyman [1929] AC 601; Davies v Davies [1919] HCA 17; (1919) 26 CLR 348; Brooks v Burns Philip Trustee Co Ltd [1969] HCA 4; (1969) ALR 321; Wright and Wright [1978] HCA 4; (1977) FLC 90-221; (1977) 3 Fam LR 11,150; Burgoyne and Burgoyne (1978) FLC 90-467; (1978) 4 Fam LR 204; and Candlish and Pratt (1980) FLC 90-819; (1980) 6 Fam LR 75 and the cases therein referred to.
42. 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.
43. Sub-section 90G(1)(b) (as it was prior to the 2004 amendments) expressly required that the agreement must contain a statement from each party that, before they executed the agreement, they received independent legal advice from a legal practitioner in relation to the matters referred to in (i) to (iv). The section went on to provide that the agreement must also annexe a certificate executed by that legal practitioner stating that the advice in relation to the matters referred in (i) to (iv) was provided to that party.
44. The agreement entered into by the parties in this case did not refer to the specific requirements detailed in s 90G, although the certificate did.
45. Recital R and clause 29 of the agreement, set out at paragraphs 23 and 24 above, dealt predominantly with advice in relation to the legal implications of the agreement and each party’s rights and obligations. These statements did not meet all the requirements set out in sub-section 90G(1)(b), particularly there was no reference to advice in relation to whether the agreement was fair or prudent. In our view, such an omission meant that the agreement did not comply with the provisions of s 90G and was not binding upon the parties. It follows that we prefer the approach taken by Collier J in J and J (above) to that taken by the trial judge in this case. 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 s 79.
The decision of the Full Court in Kostres & Kostres [2009] FamCAFC 222 also confirms this strict approach to interpretation. I will refer to other relevant law as it becomes necessary, in the reasons below.
Compliance with section 90G
Section 90G(1)(e) clearly provides that after the agreement is signed, the original agreement is to be given to one of the parties, and a copy is to be given to the other. As the Full Court indicated in its decision in Black & Black, these provisions must be strictly construed. There is no scope for a purposive interpretation of the Act, or even for substantial compliance. The husband submits that there was no compliance with section 90G(1)(e) in this case. He says he did not receive a copy of the agreement after it was signed. He says, indeed, that he did not receive a copy of the agreement until after separation when his wife’s solicitors provided the same to him. There is no real dispute about this fact. Indeed, paragraph 43 of the wife’s affidavit filed 17 June 2009 confirms that there was only one copy of the signed agreement which she obtained from the husband, then took to her solicitors. She confirms that her solicitors gave her a copy, but there is no assertion anywhere in the wife’s case that a copy was provided to the husband. I note that recital F contains an acknowledgment by the parties that clearly is not correct in this regard.
Accordingly, there has not been strict compliance with section 90G(1)(e), and this in itself is grounds for setting it aside under section 90K(1)(b) as the agreement is void, voidable or unenforceable.
I note that there were other bases for the husband’s claim under section 90G, but I don’t think it’s necessary to deal with those arguments, and I must say that I certainly do not regard them to be as strong as the paragraph (e) argument referred to above. Insofar as the husband’s case was based on not receiving independent legal advice, I do not think that the evidence would support such a finding.
I record that I have specifically given consideration to the provisions of the Federal Justice System Amendment (Efficiency Measures) Act 2009 (Cth) which came into effect on 4 January 2010. I gave consideration to relisting this matter to hear argument about whether the retrospective re-write of s.90G would save the agreement in question, particularly since s.90G(1)(e) is retrospectively revoked. I have decided not to, given the findings I have made under s.90K of the Act. In addition I would not have exercised my discretion under these new provisions to save this agreement because the defect, if I may refer to it as such, is so fundamental. The evidence indicates that there was only one copy of the agreement, that the wife retained it, and that the husband did not then get a copy until after separation. I do not regard this as the type of defect that should be remedied, even pursuant to amendments that are clearly remedial in nature. I would not be satisfied that this is a case where it would be unjust and inequitable if the agreement did not bind the spouse parties.
I will proceed to deal with the husband’s submission under section 90K, just in case I am wrong about section 90G.
Setting aside the agreement under section 90K
The husband submits that there was no disclosure, or certainly no adequate disclosure of the financial circumstances of the wife, such that the agreement was obtained by fraud and/or nondisclosure of the material matter on her part. Indeed, on the face of the agreement little or no attempt is made to record any disclosure that was entered into by either of the parties, about their respective financial affairs. True it is that they had been married for 12 years, but that fact of itself does not mitigate the quite onerous duties of disclosure that, in my opinion, arise in a case where as a result of entering into a binding financial agreement the parties seek to invoke section 71A of the Act, and thus exclude the application of part VIII to the property covered by the agreement. In a situation where there is plainly no disclosure evident either from the agreement, or in the evidence generally, it becomes difficult for the wife to resist an argument for nondisclosure.
Specifically, the husband’s case is that the wife failed to disclose to him her shareholding and directorship in [Y] Pty Ltd, and the fact of her interest as a discretionary beneficiary in the Lovett Family Trust pursuant to a deed of settlement dated 26 September 1980. The significance of this is that [Y] Pty Ltd was the transferee to the wife of the property referred to in paragraph 1 of the operative provisions in the agreement. Indeed, she continued in this role until 21 February 2003. The wife’s own evidence is that she received a distribution of $431,855 from the capital profits reserve of the trust in accordance with the resolution of the trustee on 28 June 2002. Hence, it could not be said that her interest as a discretionary beneficiary of the trust, or as a shareholder of the trustee company, had no value whatsoever. This is particularly the case given the very wide meaning that has been afforded to the term “property” in the recent High Court decision of Kennon v Spry (2008) 83 ALJR 145, and to the much broader recognition provided to an interest of the discretionary beneficiary in a trust by that decision.
Hence the wife’s failure to make any disclosure of her financial circumstances, let alone the significant disclosure of her shareholding in [Y] Pty Ltd and interest as a discretionary beneficiary in the Lovett Family Trust, does point to nondisclosure on her part. There was not even an attempt on her part to assert that husband was aware of these matters.
In the husband’s case, other issues were raised under section 90K. For example it was argued, somewhat lightly, that there had been unconscionability on the wife’s part, and/or duress arising in the circumstances by which the agreement was entered into. The evidence before me does not support a finding of duress or as to whether there was some conduct justifying the finding of unconscionability. The Full Court in its recent decision of Kostres & Kostres [2009] FamCAFC 222, a decision handed down 15 December 2009, indicated an acceptance for section 90K purposes of the High Court’s decision in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447. In order for there to be unconscionability I would have to find that the husband was in a position of special disadvantage as well as that there was conduct on the part of the wife directed to the husband and referable to the formation of the agreement. There is no such evidence in this case.
The wife’s estoppel defence
The wife’s main argument by way of defence was that an equitable estoppel operates in her favour in that she had been led by the husband to believe that she had a proper and enforceable financial agreement. Specifically, the evidence of the husband indicated that he had been told by the Chamber Magistrate who provided the certificate of independent advice that the agreement was worthless, he signed it purportedly relying on this advice, but was then content to return it to the wife and create a situation where she might reasonably apprehend that he had no concerns about the enforceability of the agreement. Her argument, therefore, is that this creates an equitable estoppel entitling her to rely on section 90KA of the Act.
Counsel for the husband submits that no equitable estoppel arises. Firstly, he submits that section 90KA could not operate to rectify any formal defects found under section 90G. In any event, it is not entirely clear how it is asserted that the wife’s position changed as a result of her reliance on the agreement. This is particularly evident in circumstances where the property referred to in recital I had already been transferred by [Y] Pty Ltd to the wife before the agreement was entered into. I consider the onus to have been on her to establish what she would not have done if she had known that her husband believed the agreement not to be binding. There is no evidence to this effect.
In any event a more serious obstacle to the estoppel argument is found in the decision of Murphy J in Fevia v Carmel-Fevia [2009] FamCA 816. At paragraphs 269-277 of his Honour’s reasons for judgment, his Honour explores how the equitable and contractual principles found in section 90KA intersect with other provisions in part VIIIAA, and in particular section 90B. In short, his Honour held that estoppel cannot operate so as to preclude reliance by a party on section 90G. If I have understood his Honour’s reasons in this regard, he asserts that section 90KA deals with whether an agreement, “is valid, enforceable or effective” after it has been validly created, but not the preliminary question of whether it is an agreement. In short, non-compliance with section 90G means that there is no statutory agreement that attracts the benefit of 90KA, and hence any equitable argument including the question of estoppel cannot be used to overcome a section 90G defect.
I note that there are parallels between the argument of Murphy J in Fevia v Carmel-Fevia, and the submissions made by counsel for the husband to the effect that section 90KA could not possibly justify a statutory form of rectification of the problems identified under section 90G.
I believe there is force in the arguments of both counsel, and his Honour, Murphy J. However, I note the critique of the decision in Fevia v Carmel-Fevia by Timothy North SC in a paper entitled, “Setting aside financial agreements: binding the validity distinction,” delivered at the Law Institute of Victoria, CPD Family Law Conference, 16 October 2009.
Despite this critique, I accept and adopt the decision of Murphy J and the submission of counsel for the husband. The estoppel argument, therefore, does not provide a defence to the wife.
Conclusion
Having regard to the matters set out above, the document which purports to be a binding financial agreement dated 28 June 2002 is set aside. The husband’s claim under s.79 of the Family Law Act will need to be dealt with at a later date. I will make directions for the wife to amend her response to deal with the s.79 issue. That should take place within 28 days. I will direct the parties to attend a conciliation conference with a view to settling the claim.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Altobelli FM
Associate: Monique Robb
Date: 19 March 2010
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