Haddad & Assaf

Case [2023] FedCFamC1F 217

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Haddad & Assaf [2023] FedCFamC1F 217

File number(s): MLC 8768 of 2020
Judgment of: HARTNETT J
Date of judgment: 31 March 2023
Catchwords: FAMILY LAW – PROPERTY – Financial Agreement dated 24 November 2017 – Where the wife sought the Financial Agreement be declared binding and enforced as if an order of the court – Where the husband sought the agreement be set aside under s 90K of the Family Law Act 1975 (Cth) for common mistake and/or because the parties, by their subsequent conduct and agreement, had abandoned the Financial Agreement – Where the husband claimed the Financial Agreement voidable – Where there had been partial compliance of the Financial Agreement by the parties – Where the husband had given broad indemnities to the wife – Where the wife had sought compliance by the husband with the Financial Agreement– Where common mistake not made out – Where the application of the husband on the grounds of abandonment does not succeed – Financial Agreement upheld.
Legislation:

Evidence Act 1995 (Cth) s 140

Family Law Act 1975 (Cth) ss 71A, 78, 79, 90B, 90C, 90D, 90G, 90J, 90K, 90BB, 90KA, 90UC, 90UD, 90UL, Part VIII, Part VIIIA, Part VIIIAB

Payroll Tax Act 2007 (Cth)

Taxation Administration Act 1997 (Cth)

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)
Cases cited:

Balodis & Balodis [2021] FamCA 499

Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337

Commissioner of State Revenue v Optical Superstore Pty Ltd [2019] VSCA 197

Fewster & Drake (2016) 56 Fam LR 38

Graham & Squibb (2019) 59 Fam LR 299

Hoult v Hoult (2013) 50 Fam LR 260

Jafari v 23 Developments Pty Ltd [2019] VSCA 201

Kostres v Kostres (2009) FLC 93-420

Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451

Sanger v Sanger (2011) 46 Fam LR 275

Taylor & Johnson (1983) 151 CLR 422
Division: Division 1 First Instance
Number of paragraphs: 144
Date of last submissions: 31 October 2022
Date of hearing: 29 August 2022 – 2 September 2022
Place: Melbourne
Counsel for the Applicant: Mr Puckey KC and Dr Matta
Solicitor for the Applicant: Hargreaves Family Lawyers
Counsel for the Respondent: Mr Bartfeld KC and Mr Schmidt
Solicitor for the Respondent: VicLaw Lawyers

ORDERS

MLC 8768 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN:

MS HADDAD

Applicant
AND:

MR ASSAF

Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

31 MARCH 2023

THE COURT ORDERS THAT:

1.The Court declares that pursuant to s 90G(1B) of the Family Law Act 1975 (Cth) the financial agreement entered into between the Applicant and the Respondent on 24 November 2017 is binding on the Applicant and the Respondent as parties to the agreement and is to be enforced as if it were an order of the Court pursuant to s 90KA(c) of the Family Law Act 1975 (Cth).

2.The application of the husband to set aside…

Continue reading Haddad & Assaf

Sign in free to access the full text

Details
AGLC
Haddad & Assaf [2023] FedCFamC1F 217
Case
[2023] FedCFamC1F 217
Decision Date

CaseChat Overview and Summary

In the Federal Circuit and Family Court of Australia, the court addressed a dispute between Ms Haddad and Mr Assaf regarding the enforceability of a financial agreement executed on 24 November 2017. The wife sought to enforce the agreement, which outlined financial obligations between the parties following their separation and divorce, while the husband sought to have the agreement set aside on various grounds. The central legal issue was whether the financial agreement should be enforced as is or if the husband could successfully argue that the agreement should be set aside due to a common mistake or because the parties had effectively abandoned the agreement through their conduct.

The court found that the husband’s argument for setting aside the agreement on the basis of a common mistake was not substantiated. The evidence indicated that both parties were aware of the potential payroll tax liabilities when the agreement was signed, and there was no indication that they were under a mutual misconception regarding these liabilities. Furthermore, the husband's claim that the agreement had been abandoned was also rejected. The court noted that while there had been partial compliance with the agreement, this did not equate to an abandonment of the agreement’s terms. The husband’s attempt to avoid his indemnity obligations was seen as an attempt to escape an adverse term rather than evidence of mutual abandonment.

The court concluded that the financial agreement was binding and enforceable as per the provisions of the Family Law Act 1975. The husband's desire to avoid certain obligations did not warrant setting aside the agreement. The court emphasised that the agreement was a deliberate and informed decision by both parties, and the law does not permit setting aside an agreement merely because it is seen as unfair or inequitable by one party post-execution. The court upheld the agreement, ensuring that the wife would receive the financial entitlements specified therein. The husband's application to set aside the agreement and his request for orders under section 79 of the Family Law Act were dismissed.

The court ordered that the financial agreement be enforced as if it were a court order, dismissed the husband's application to set aside the agreement, and directed that the wife’s application for enforcement and costs be listed for a hearing. The matter was also listed for a mention to address any further procedural matters.

Orders

Orders of the court

MLC 8768 of 2020

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MS HADDAD

Applicant

AND:

MR ASSAF

Respondent

ORDER MADE BY:

HARTNETT J

DATE OF ORDER:

31 MARCH 2023

THE COURT ORDERS THAT:

1. The Court declares that pursuant to s 90G(1B) of the Family Law Act 1975 (Cth) the financial agreement entered into between the Applicant and the Respondent on 24 November 2017 is binding on the Applicant and the Respondent as parties to the agreement and is to be enforced as if it were an order of the Court pursuant to s 90KA(c) of the Family Law Act 1975 (Cth).

2. The application of the husband to set aside the Financial Agreement entered into between the husband and wife on 24 November 2017 is dismissed.

3. The application of the husband for orders pursuant to s 79 of the Family Law Act 1975 (Cth) is dismissed.

4. The application of the wife for enforcement and costs be listed for hearing on a date to be fixed.

5. The matter be listed for mention on 18 April 2023 at 9.30am before Justice Hartnett by Microsoft Teams.

6. The parties are at liberty to seek an alternate mention date by contacting chambers seeking such other date.

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

Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).

Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.

Background

Background to the litigation

The standard of proof in the proceeding is the balance of probabilities.[8] Statements of fact in these reasons are findings of fact unless the context indicates otherwise. [8] Evidence Act 1995 (Cth) s 140.BACKGROUND The husband was born in 1964 and was 57 years at trial. The wife was born in 1969 and was 53 years at trial. The husband is a health professional and company director. The wife is an office manager. The parties commenced their relationship in 1989 and were married in 1991 in City D, Country F. The parties emigrated from Country F to New Zealand in 1995 and then in 2000, they emigrated to Australia. During the marriage two children were born, namely, Ms G, born 1991 and Mr E, born 1998. Both are now adults. In December 2016, after a period of cohabitation approaching approximately 26 years, the parties separated on a final basis. In mid-2018, a Divorce Order was made. A short time later, in 2018, the parties Divorce Order took effect. The wife and the husband have both since remarried. During the marriage, relevantly: (a)in early 2007, the Assaf Family Trust was established by deed with H Pty Ltd as trustee. A short time later, in 2007, the parties purchased (through the company entity) the J Business in Suburb K; (b)in early 2012, the L Trust was established by deed with M Pty Ltd (“the company”) as trustee. The parties purchased (through the company entity) the M Business in N Town; and(c)in mid-2012, the P Trust was established by deed with P1 Business (the second company) as trustee. The parties purchased (through the second company entity) the P1 Business. The wife worked in the J Business, the M Business and the P1 Business (later trading as the P1 Business and the P2 Business) as the manager, and accounts officer. The husband worked in the three businesses as a health professional and was the sole company director until such time as he and the wife became co-directors of the three businesses. The parties considered the above entities contained in [24(a)-(c)] to be the “Assaf Group”. In late 2015, the parties purchased, through their company entity Q Pty Ltd, the trustee of the Q Family Trust, a 50 per cent interest in a vacant block of land at R Street, N Town, Victoria (“the N Town Land”) with a view to developing the land by the addition of a further business. The remaining 50 per cent interest was purchased by two third party companies. Q Pty Ltd secured the purchase of its 50 per cent ownership in the land with two loans, one with the Commonwealth Bank of approximately $249,000 and secured against the parties’ former matrimonial home in Suburb S, and the other as advanced by the National Australia Bank (“NAB”) of approximately $840,000 but as held jointly by the three registered proprietors such that the 50 per cent share of such liability of the husband and wife was $420,000. This liability was secured against the N Town Land. In late 2017, the settlement of the sale of the parties’ former matrimonial home at T Street, Suburb S occurred and, as set out in Clause 6 of the FA: The parties each agree and acknowledge that they have each received the sum of $875,738 being one half of the net sale proceeds of the property at [T Street, Suburb S].RELEVANT PARTS OF THE FINANCIAL AGREEMENT

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

What that submission really seems to be suggesting, is that there has been a variation of the FA that has fundamentally altered the terms of the FA such that the parties no longer intend to act in accordance with it, and in essence have made the FA incapable of practical effect. Because, in my view it is abundantly clear that the evidence does not support any suggestion of abandonment of the FA by the wife. Nor in fact the husband, who cannot claim abandonment with respect to the completed parts of the FA, nor in respect of the agreed to arrangements made by the parties to ensure the wife receives her entitlements pursuant to the FA. The husband seeks simply to be relieved of an obligation contained within the FA, adverse to him. None of this supports an abandonment claim.CONCLUSION I am satisfied that the requirements of s 90G(1A) of the Act are met. A financial agreement cannot be set aside simply because its terms are subsequently seen to be unfair to one of the parties,[44] or even because the terms of the agreement were unfair to one of the parties right from the start.[45] If they were. As the Full Court of the Family Court has said of parties agreeing to inequitable terms in a binding financial agreement, ‘Sometimes they choose to do so unwisely, as is their prerogative’.[46][44] Sanger v Sanger (2011) 46 Fam LR 275 at [86].[45] Hoult v Hoult (2013) 50 Fam LR 260 at [200], [310]; Fewster v Drake (2016) 56 Fam LR 38 at [65].[46] Graham v Squibb (2019) 59 Fam LR 299 at [70]. This proceeding arose from the husband’s desire to be released from his indemnity obligations as set out in the, as I find it, binding financial agreement. The wife should not suffer as a result of accommodations made by her to ensure the husband’s ultimate compliance with the FA as entered into between the parties. The husband should not benefit from his non-compliance. I shall accede to the application of the wife.

Ratio Decidendi

Legal Principle Established

On 26 August 2022, the wife’s solicitors, Y Lawyers, sent with the approval of the husband’s solicitors, a submission to the SRO objecting to the payroll tax assessment for the financial years 2014 to 2021. The purpose of the submission was to avoid or minimise the amount of payroll tax and any penalties required to be paid by the husband. The wife so acted to support the husband, but not to assume any liability which is his pursuant to the FACONSIDERATION What is contended by the husband is that the FA is affected by a common mistake of the parties such that it is voidable and/or unenforceable. Further, that a new agreement has been entered into between the parties, such that the parties have abandoned the FA and on this ground, it is also voidable. To the extent or if at all the husband asserted that the FA ought be set aside because it did not achieve a just and/or equitable distribution of the property of the parties, that submission cannot succeed. Both parties choose to enter into the FA to intentionally oust the operation of Part VIII of the Act. They made a commercial decision, as they were entitled to do. In some circumstances, parties choose to do so at their peril. They, or one of them, make a poor decision. If the Court is to uphold the FA, there is no dispute between the parties that a sum of approximately $1.737 million will be required to be paid by the husband to the wife (consisting of the remaining business payment, Country F payment and investment properties payment) as set out in the terms of the FA, plus interest since the date such payments were payable.Common Mistake Both parties at the time of entering the FA, recorded their agreement to be fair, just, reasonable and conscionable, and drafted so as to produce an approximately equal division of the parties’ assets. It is in that context, that the husband argues it would now be unjust and unconscionable for the wife to assert that she is entitled to be indemnified for the whole of the payroll tax liability as assessed against the Assaf Group. The husband argues that the parties acted under a common mistake in relation to the quantum of the payroll tax liability of the three businesses. Additionally, the husband argues that “the FA was conditioned upon the underlying assumption that it provided for an approximately equal division of the total value of the parties’ property.”[34] He submits that “by pressing for the indemnity, the wife is acting unconscionably.”[35][34] Husband’s written closing submissions filed 23 September 2022, paragraph 33.[35] Husband’s written closing submissions filed 23 September 2022, paragraph 43. At the time of entering into the FA, I find both parties were clearly aware of the Assaf Group’s potential exposure to liability for payroll tax in respect of service providers’ payments as made by the Assaf Group. From 2015, this potential liability was a matter of discussion between them and their accountants. In November 2017, the husband and wife wished to enter into a FA. The husband wanted to retain the businesses. The wife agreed to that course but required the husband to provide her with a complete – being an unlimited, unrestricted – indemnity with respect to any and all liabilities of the businesses of the Assaf Group. That included the possibility of a future liability, unquantified, for payroll tax on the payments made to service providers engaged in the businesses. As the factual history described above indicates, events occurred thereafter, namely the risk became a reality, which lead the husband, some years after the execution of the FA, and after significant partial compliance with it by the parties, to consider the FA as unjust and unfair. Whatever the husband may now think, or however he came to view the FA, the husband is bound by what it is the parties agreed upon in the FA, subject to their being any satisfaction by the Court that the parties have set aside and/or terminated the FA in accordance with the governing legislation.