Grant v Grant
[2012] NSWSC 725
•28 June 2012
Supreme Court
New South Wales
Medium Neutral Citation: Merle Gwynneth Grant v Alan Grant [2012] NSWSC 725 Hearing dates: 10 May 2012 Decision date: 28 June 2012 Jurisdiction: Equity Division Before: Gzell J Decision: Wife entitled to specific performance of heads of agreement
Catchwords: FAMILY LAW AND CHILD WELFARE - The Family Law Act 1975 (Cth) and Related Legislation - breakdown of marriage - husband brought equity suit for declaratory and other relief with respect to the property of the parties - settled by heads of agreement with deed to follow during mediation - husband refused to execute deed - wife sought specific performance - whether in 1st or 3rd category under Masters v Cameron - maintenance agreement but not a financial agreement - whether s 86A of the Family Law Act rendered it unenforceable - whether validated by s 29(1) of the Civil Procedure Act 2005 - whether maxim that equity will not allow a statute to be used as a cloak for fraud applied Legislation Cited: Family Law Act 1975 (Cth)
Civil Procedure Act 2005
Statute of Frauds 1677 (29 Car II c 3)Cases Cited: Masters v Cameron (1954) 91 CLR 353
Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622
Cacace v Bayside Operations Pty Ltd [2006] NSWSC 572
Kostres v Kostres [2009] FamCAFC 22; (2009) 42 Fam LR 336
Maddison v Alderson (1883) 8 App Cas 467
Frame v Dawson (1807) 14 Ves 386 at 387; (1807) 33 ER 569
Nelson v Nelson (1995) 184 CLR 538;
Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215
Ash Street Properties Pty Ltd v Pollnow (1987) 9 NSWLR 80
Dent v Moore (1919) 26 CLR 316Texts Cited: Meagher, Gummow and Lehane's Equity Doctrines & Remedies, 4th ed (2002), Butterworths LexisNexis Category: Principal judgment Parties: Merle Gwynneth Grant (Plaintiff)
Alan Grant (Defendant)Representation: Counsel:
J Steele (Plaintiff)
F Assaf (Defendant)
Solicitors:
Lockhart Quinn & Co (Plaintiff)
Jackson Lalic Solicitors (Defendant)
File Number(s): SC 2011/366638
Judgment
The plaintiff, Merle Gwynneth Grant, and the defendant, Alan Grant, are an elderly married couple. Mrs Grant seeks orders to give effect to a settlement agreement reached in mediation.
Dr Grant brought proceedings against the NSW Registrar General of Lands and Mrs Grant in the Equity Division of this court seeking an injunction restraining the Registrar General from registering any transfer severing joint tenancy on the application of Mrs Grant in respect to three properties. He sought a declaration that Mrs Grant held a portion of her undivided share in the joint tenancy in the properties on trust for him in a percentage to be determined by the court, and a declaration that Mrs Grant held two other properties on trust for him in a percentage to be determined by the court.
In the alternative, Dr Grant sought orders that the properties be subject to orders under the Family Law Act 1975 (Cth), s 78 and s 79.
The former section empowers the court to declare the title or rights of the parties to a marriage in property in proceedings between them. The latter section, so far as is relevant, provides as follows:
"(1) In property settlement proceedings, the court may make such order as it considers appropriate:
(a) in the case of proceedings with respect to the property of the parties to the marriage or either of them - altering the interests of the parties to the marriage in the property."
Dr Grant commenced further proceedings in the Equity Division of this court seeking the extension of caveats over the two properties in Mrs Grant's name, declarations that he was the beneficial owner as joint tenant with Mrs Grant in the two properties or, alternatively, that Mrs Grant held on resulting or constructive trust for him the two properties to an extent to be determined by the court. Alternatively, Dr Grant sought a declaration that he was entitled to, and held, an equitable charge over the two properties to an extent to be determined by the court.
A mediation took place before a court appointed Registrar. Both parties had legal representation. A settlement agreement was negotiated and signed on behalf of the parties by their legal representatives. It was in the following terms:
"Heads of Agreement
No: 2011/165201
2011/183568
Alan Grant v Merle Gwynneth Grant
(Dr Grant) (Mrs Grant)
The parties agree to compromise this dispute and settle their entitlements to the matrimonial property on a full and final basis in the following manner:
1. The parties will consent to the following orders:
(a) An order that Dr & Mrs Grant own XX XXXX XX McMahon's Point and XX XXXX XX Killcare as tenants in common in equal shares.
(b) An order that the following joint tenancies be severed:
(i) XX XXXX XX McMahons Point
(ii) XX XXXX XX, Elizabeth Bay
(iii) XX XXXX XX Killcare
and Dr & Mrs Grant own those properties as tenants in common in equal shares.
(c) Proceedings dismissed
(d) Each party bear their own costs.
2. Once the transfers have been effected, all properties will be sold immediately.
3. Both Dr & Mrs Grant will each nominate an agent who will each co-list each property for sale subject to an agreement on the ale price between the parties.
4. Any agent nominated must not be related to the parties.
5. Once the agent is nominated, only the parties solicitors' will deal with the agent. Neither the parties, nor persons related to the parties, will communicate directly with the agent.
6. Liabilities incurred in respect of the properties and the sale of the properties (being those properties listed in 1(a) and 1(b)) to be shared equally between the parties and paid from the proceeds of sale of each property.
7. Each party retain the superannuation entitlements in his or her name.
8. Each party is entitled to retain any funds invested or held in his or her name.
9. Each party is entitled to retain any shares held in his or her name. Any shares in joint names are to be sold immediately and the proceeds divided between Dr & Mrs Grant.
10. Dr Grant is to do all things necessary to resign as the trustee of Mrs Grant's super fund.
11. Dr & Mrs Grant agree to provide copies of all correspondence in joint names or correspondence relating to the properties to their solicitors.
12. Dr Grant's solicitor for the purposes of this agreement is David Lalic of Jackson Lalic. Mrs Grant's solicitor for the purpose of this agreement is John Quinn of Lockhardt Quinn.
13. In the event that stamp duty or other tax is payable to transfer XX XXXX XX McMahons Point and XX XXXX XX Killcare as per clause 1(a), the parties agree:
(1) The properties will remain in Mrs Grant's name.
(2) The caveats will remain on the properties.
(3) The properties will be sold immediately in the same way as provided for above.
(4) The proceeds of sale will be divided equally and liabilities in relation to the properties will be jointly shared.
14. The parties to keep whatever personal property they have in their possession.
15. The parties intend to enter into a deed to reflect this agreement which is in full and final settlement not only of these proceedings but of the property accumulated during their marriage. The parties agree that they have no further claim against each other & will provide releases to that effect.
16. In relation to (3) above, the parties agree that the sale price will be set on the basis of the highest sale price set by the 2 agents. The parties may agree to accept a lower sale price for any particular property through their solicitors...[unreadable]
17. In the event that Mrs Grant is able to locate:
(a) books at Killcare
(b) a study board
she will return them to Dr Grant.
18. In the event that Dr Grant is able to locate:
(a) Tansn's sailing trophies
(b) music or music related books
he will return them to Mrs Grant.
[Signature] [Signature]
Counsel for Solicitor for
Mrs Grant Alan Grant
19/9/11 19/9/11
19. The parties agree to use their best endeavours to draw up deed and enter consent orders on or before 29 September 2011 when the matter is back before the equity registrar.
[Initial] [Initial]"
The Registrar's (mediator) record of proceedings noted that both matters had settled and that heads of agreement had been executed by both parties in both matters with a deed to follow.
A deed was drawn and executed by Mrs Grant. Its content was not before the court. Dr Grant refused to execute it. One of his grounds for doing so was an allegation of disentitling conduct on Mrs Grant's part.
One of the properties to be sold had been occupied by one of their sons as a principal place of business for approximately 40 years. What Dr Grant did not know, and of which he was not informed at the mediation, was that Mrs Grant had granted their son a lease of the premises. The lease was not in evidence.
Correspondence passed between the solicitors on this issue. Mrs Grant's solicitor said that, if required by a purchaser, vacant possession of the premises would be available and the son would surrender the existing lease. Subsequently, Mrs Grant's solicitor prepared a draft deed of variation of the lease that would ensure vacant possession on settlement of the sale of the property. Agreement to the terms of this document was sought from the solicitors for Dr Grant. It was not provided.
Dr Grant's solicitors served a notice to admit facts. Amongst other matters it sought admissions with respect to rent payable on jointly owned property. The opportunity was not taken to seek admissions with respect to the ability to obtain vacant possession.
I reject the contention of disentitling conduct by Mrs Grant. Quite apart from the fact that the property could be sold subject to the tenancy, Dr Grant had his opportunity to ensure vacant possession by agreeing to the variation of lease. There was no challenge to the statement that vacant possession would be given if required by a purchaser. In these circumstances any effect of the non-disclosure was spent and Dr Grant was not excused on that account from executing a deed formalising the heads of agreement.
In written submissions counsel for Dr Grant did not challenge the proposition that the parties were immediately bound by the heads of agreement as a document falling within the first category in the well known passage from Masters v Cameron (1954) 91 CLR 353 at 360 where the High Court said:
"Where parties who have been in negotiation reach agreement upon terms of a contractual nature and also agree that the matter of their negotiation shall be dealt with by a formal contract, the case may belong to any of three classes. It may be one in which the parties have reached finality in arranging all the terms of their bargain and intend to be immediately bound to the performance of those terms, but at the same time propose to have the terms restated in a form which will be fuller or more precise but not different in effect. Or, secondly, it may be a case in which the parties have completely agreed upon all the terms of their bargain and intend no departure from or addition to that which their agreed terms express or imply, but nevertheless have made performance of one or more of the terms conditional upon the execution of a formal document. Or, thirdly, the case may be one in which the intention of the parties is not to make a concluded bargain at all, unless and until they execute a formal contract."
At first instance in Baulkham Hills Private Hospital Pty Ltd v GR Securities Pty Ltd (1986) 40 NSWLR 622 at 628, McLelland J suggested that their was a fourth category in which the parties were content to be bound immediately and exclusively by the terms which they had agreed upon whilst expecting to make a further contract in substitution for the first contract, containing, by consent, additional terms.
In oral submissions, however, counsel for Dr Grant submitted that the heads of agreement was within the third category in Masters.
In Cacace v Bayside Operations Pty Ltd [2006] NSWSC 572 at [9], Brereton J stated the principles with respect to the determination of which class under Masters a preliminary agreement should be categorised:
"To which of those four classes a preliminary agreement belongs depends essentially on the intention of the contracting parties, objectively ascertained from their acts and statements. In ascertaining that intention, where there is a written document recording the preliminary agreement, that document will often be the starting point. However, the court may, and indeed must when it comes to ascertaining whether or not there was an intention to make a binding contract, have regard also to the factual context and any oral basis on which the preliminary agreement was made: see Branir v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424, [272]-[293]. At [293], Allsop J, with whom Drummond and Mansfield JJ agreed, said:
For my part, I think it unwise to express the principle in terms of presumptions. McHugh JA did not do so in State Rail Authority (NSW) v Heath Outdoor. In a sense, a document apparently contractual on its face may lead to the need for some cogent or persuasive evidence to enable a conclusion to be drawn that it was not intended by the parties to embody their bargain. (Or, it may be simply and easily explained.) However, to introduce the notion of presumptions, in my respectful view, risks a mechanical approach to the analysis. The better expression of the principle is reflected in the words of McHugh JA, as consistently applied by the New South Wales Court of Appeal and supported otherwise by courts of appeal in Queensland and South Australia, that the existence of an apparently complete contract is no more than an evidentiary foundation for a conclusion that the agreement is wholly in writing."
It was submitted that the heads of agreement was incomplete because it did not disclose the lease nor did it deal with an art collection, rental income and personal belongings. It was, therefore, merely an agreement to agree.
But it did deal with specified personal belongings in clause 17 and clause 18 and provided in clause 14 that the parties should keep other personal belongings in their possession. That dealt with the art collection.
It does not seem to me that the non-reference to rental income makes the heads of agreement an agreement to agree. It dealt with the physical assets of the parties. The question is whether the parties reached finality and intended to be bound forthwith by the heads of agreement but at the same time they intended that their agreement would be expressed in more precise terms. Alternatively, the question is whether the heads of agreement but an agreement to agree.
In Cacace the heads of agreement specified that they should take effect from the date of exchange of further agreements incorporating the heads of agreement.
It was submitted that clause 15 of the heads of agreement in this case was to the same effect.
I disagree. Clause 15 stated that "[t]he parties intend to enter into a deed to reflect this agreement which is in full and final settlement". The use of the present tense with respect to the settlement can only refer to the heads of agreement. No deed was in existence when the heads of agreement was signed. It could only be the heads of agreement that was in full and final settlement. If it was the intention of the parties that they would only be bound when a deed was executed, future tense was required such as "which will be" in full and final settlement.
Nothing in the subsequent conduct of the parties detracts from this interpretation of their intention.
In my judgment the heads of agreement fall within the first category in Masters.
Dr Grant's principal submission was that the heads of agreement was unenforceable as it did not comply with Part VIIIA of the Family Law Act (Cth).
Reliance was placed upon the decision of a Full Court of the Family Court in Kostres v Kostres [2009] FamCAFC 22; (2009) 42 Fam LR 336 where a pre-nuptial agreement, designed to oust the jurisdiction of the Family Court, provided for the manner in which property acquired during the marriage would be dealt with in the event that the marriage failed.
The court referred at [107] to the Family Law Act (Cth) s 79(4) and its mandate that a court determining a claim for property adjustment must have regard to the parties' financial and non-financial contributions to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them. The pre-nuptial agreement did not do that.
It was submitted that the heads of agreement in the instant litigation was unenforceable because it did not reflect those fundamental statutory concepts of contribution.
But the heads of agreement deals with a vastly different situation. It does not seek to deal with property acquired, conserved or improved in the future during a marriage. It seeks to settle a dispute by agreement as to the division of existing property after the marriage has broken down.
If the parties to a marriage execute a proper financial agreement they oust the jurisdiction of a court, whether state or federal, to entertain an application for property adjustment under the Family Law Act (Cth), s 79.
The term financial agreement is defined in the Family Law Act (Cth), s 4 to include a financial agreement under s 90C of the Act. That provision, so far as is material, is in the following terms:
"(1) If:
(a) the parties to a marriage make a written agreement with respect to any of the matters mentioned in subsection (2); and
...
(b) the agreement is expressed to be made under this section;
the agreement is a financial agreement. ...
(2) The matters referred to in paragraph (1)(a) are the following:
(a) how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of the spouse parties at the time when the agreement is made, or at a later time and during the marriage, is to be dealt with."
Section 90C(2)(a) applies to an arrangement with prospective force. It presupposes that when the agreement is reached the marriage persists. It provides for the future event of marriage breakdown and the application, then, of the agreement to the property or financial resources of the parties or either of them. The agreement may relate to the property or financial resources of the parties at the time the agreement is entered into or it may relate to property and resources at a later time during the marriage but it has no effect unless and until there is a marriage breakdown.
That is not the character of the heads of agreement. The marriage had broken down. There was no prospective force in the agreement in relation to other property. The heads of agreement had immediate effect and was not conditional upon the future breakdown of the marriage. It was not a financial agreement.
Furthermore, the absence of expression in the heads of agreement that it was made under the Family Law Act (Cth), s 90C meant that it was not a financial agreement within the meaning of that provision.
Section 90G(1) of the Family Law Act (Cth) provides that a financial agreement is binding on the parties to the agreement if and only if certain specified matters are satisfied. But that restriction does not apply to the heads of agreement because it is not a financial agreement for one or other or both of the reasons expressed above.
The Family Law Act (Cth), s 86A provides that a maintenance agreement that is not a financial agreement does not have any effect and is not enforceable in any way.
A maintenance agreement is defined widely in the Family Law Act (Cth), s 4(1) as an agreement in writing made between the parties to a marriage that makes provision with respect to financial matters. That term is defined in the same section to mean matters with respect to the maintenance of one of the parties, the property of those parties or either of them, or the maintenance of children of the marriage.
The heads of agreement does not provide for maintenance but it does make provision with respect to the property of the parties. If it is, therefore, a maintenance agreement it does not have any effect and is not enforceable in any way.
Counsel for Dr Grant submitted that the court should not make the declarations and orders sought, as they would lack utility.
It is a strange result if settlements reached at mediations in the Equity Division of this court between the parties to a marriage cannot be enforced.
The Civil Procedure Act 2005, s 29(1) provides:
"The court may make orders to give effect to any agreement or arrangement arising out of a mediation session."
It is in the public interest that that provision be given a wide operation. The just, quick and cheap resolution of the real issues in dispute required by s 56(1) of the Civil Procedure Act requires every effort to be made towards the finalisation of legal proceedings. Mediation is an important step in achieving this purpose. It would hamper its operation if each time a settlement agreement was reached at mediation with respect to the property of the parties to a marriage, one of the parties could argue that he or she was not bound by the agreement because of the Family Law Act (Cth).
When a settlement agreement is reached at mediation there is a lot to be said for the proposition that the parties have agreed that the court's jurisdiction will be exercised by the making of orders giving effect to the settlement.
Another way of regarding the matter is that equity will not allow a statute to be used as a cloak for fraud.
Lord Wilberforce described the maxim thus in British Railways Board v Pickin [1974] AC 765 at 795-796:
"The doctrine may well be admitted that equity, when faced with an appeal to a regulatory public statute, which requires compliance with formalities, will not allow such a statute (assumedly passed to prevent fraud) to be used to promote fraud and will do so by imposing a trust or equity upon a legal right."
The maxim was developed with respect to part performance to overcome the requirement of writing under the Statute of Frauds 1677 (29 Car II c 3) and its modern equivalents. Part performance being unequivocally referable to the contract in question, to the knowledge and benefit of the defendant, it would be fraudulent in the equitable sense for the defendant to rely on the statute (Frame v Dawson (1807) 14 Ves 386 at 387; (1807) 33 ER 569 per Sir William Grant MR):
"It is admitted, that supposing an agreement ever so clearly proved, yet, as a parol agreement, the Plaintiff is not entitled to have it executed. It is necessary therefore to shew a part-performance: that is, an act, unequivocally referring to, and resulting from, the agreement; and such, that the party would suffer an injury, amounting to fraud, by the refusal to execute that agreement."
Lord Selborne put it differently in Maddison v Alderson (1883) 8 App Cas 467 at 475:
"In a suit founded on such part performance, the defendant is really 'charged' upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the statute) upon the contract itself. If such equities were excluded, injustice of a kind which the statute cannot be thought to have had in contemplation would follow."
See also Nelson v Nelson (1995) 184 CLR 538; Fitzgerald v FJ Leonhardt Pty Ltd (1997) 189 CLR 215.
The learned authors of Meagher, Gummow and Lehane's Equity Doctrines & Remedies, 4th ed (2002), Butterworths LexisNexis at [12-105] express the view that the maxim is not confined to the Statute of Frauds, but will apply to any statute that requires observance by the parties of a particular form as a precondition to enforceability at law.
Fitzgerald was such a case. It was concerned with a provision of the Water Act 1992 (NT) that required a landowner to obtain a bore construction permit under the Act and a provision that made it an offence to construct a bore unless it was authorised.
In Ash Street Properties Pty Ltd v Pollnow (1987) 9 NSWLR 80, Priestley JA, with whom Samuels JA, agreed dealt with the question whether reliance upon the Stamp Duties Act 1920, s 29 would give rise to a fraud. So far as is material the provision was as follows:
"... no instrument executed in New South Wales, or relating (whersoever executed) to any property situate or to any matter or thing done or to be done in any part of New South Wales, shall, except in criminal proceedings, be pleaded or given in evidence, or admitted to be good, useful or available in law or equity for any purpose whatsoever, unless it is duly stamped in accordance with the law in force at the time when it was first executed."
His Honour concluded at 100, as was pointed out in Dent v Moore (1919) 26 CLR 316, that there is a public interest of the state to collect revenue and the purpose of the provision of the Stamp Duties Act was to deprive a transaction of effect as a sanction directed to achieving payment of stamp duties.
While there was no fraud, his Honour (at 101) did not regard it as untoward that the maxim that equity will not allow a statute to be used as a cloak for fraud should be considered in relation to a statute other than the Statute of Frauds.
Dr Grant might have sought relief in the Family Court. He might have prosecuted his alternative claim under the Family Law Act (Cth), s 79 in these proceedings. Instead he chose to evoke equitable remedies. By agreeing to a settlement of marital disputes ,he gave assurance that the heads of agreement immediately bound him and the court had jurisdiction to perfect that settlement. To raise the statute in defence of Mrs Grant's claim to specific performance is to use it as a cloak for fraud, which the court will not tolerate.
Mrs Grant is entitled to her relief, either because the maxim that equity will not allow a statute to be used as a cloak for fraud applies, or because the court may act under s 29(1) of the Civil Procedure Act 2005, or because, by agreeing to the settlement at mediation, Dr Grant agreed that the court's jurisdiction would be exercised by the making of orders giving effect to the settlement.
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Decision last updated: 29 June 2012
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