Herold & Kay - [2012] FMCAfam 1071

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HEROLD & KAY

[2012] FMCAfam 1071

FAMILY LAW – Financial agreements – party applying for orders to enforce obligations in binding financial agreement – other party resisting application and seeking orders setting aside or refusing to enforce agreement on grounds that agreement unenforceable or impracticable – whether doctrine of frustration applies to bring agreement to an end – meaning of “impracticability” in s.90UM(1)(f) of the Family Law Act1975 – whether events subsequent to entering into agreement amounted in this case to “impracticability.”

Words and phrases – “impracticability.”

Family Law Act 1975, ss.79A(1)(b), 90SM, 90UM(1), 90UM(1)(e), 90UM(1)(f), 90UN

Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143
Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337
In the Marriage of Cawthorn (1998) 23 Fam LR 86
In the Marriage of La Rocca (1991) 14 Fam LR 715
Rohde & Rohde (1984) FLC 91-592
Sanger & Sanger (2011) 46 Fam LR 275

Applicant:

MR HEROLD

Respondent:

MS KAY

File Number:

BRC 367 of 2011

Judgment of:

Jarrett FM

Hearing dates:

2, 23 February, 22 March 2012

Date of Last Submission:

22 March 2012

Delivered at:

Brisbane

Delivered on:

4 October 2012

REPRESENTATION

Counsel for the Applicant:

Mr Brown

Solicitors for the Applicant:

Browns Lawyers

The Respondent appeared in person

ORDERS

The application filed on 29 September, 2011 is dismissed.
The Response be adjourned to 25 October 2012 at 9.30 a.m. for directions in the Federal Magistrates Court of Australia sitting at Brisbane.

IT IS NOTED that publication of this judgment under the pseudonym Herold & Kay is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT BRISBANE

BRC 367 of 2011

MR HEROLD

Applicant

And

MS KAY

Respondent

REASONS FOR JUDGMENT

Mr Herold seeks orders for the enforcement of a Part VIIIAB, Division 4 financial agreement, which is to say, a binding financial agreement made between two de facto spouses, entered into between he and
Ms Kay on 22 June, 2011.
Mr Herold seeks orders as follows:
a)that paragraph 17 of the binding financial agreement dated 22 June, 2011 between Mr Herold and Ms Kay be enforced as if it were an order of this Honourable Court pursuant to s.90UN of the Family Law Act 1975;
b)that Ms Kay pay Mr Herold’s costs of and incidental to this application fixed in the sum of $6,009.00.
Ms Kay opposes the orders sought by Mr Herold. Although in her response she seeks that the binding financial agreement is set aside because it was entered into “under extreme duress” on 2 February, 2012 Ms Kay informed the Court that she withdrew her application to set aside the binding financial agreement on that ground. However, she presses the balance of her application, namely to have the financial agreement set aside:
a)pursuant to s.90UM(1)(e) of the Act – the agreement is void, voidable or unenforceable; and
b)pursuant to s.90UM(1)(f) of the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Herold & Kay

Details

AGLC: HEROLD & KAY [2012] FMCAfam 1071
Case: [2012] FMCAfam 1071
Decision Date: 4 October 2012

CaseChat Overview and Summary

In the Federal Magistrates Court of Australia, Herold & Kay involved a dispute regarding a binding financial agreement made under the Family Law Act 1975. The husband, Mr. Herold, sought enforcement of the agreement against the wife, Ms. Kay, who argued that the agreement was unenforceable or impracticable due to unforeseen circumstances that occurred after the agreement was signed.

The central legal issues in the case were whether the doctrine of frustration applied to render the agreement unenforceable and whether the concept of "impracticability" under s.90UM(1)(f) of the Family Law Act encompassed the events that had transpired post-agreement. The court had to determine if the failure of Ms. Kay to secure necessary finance to meet her obligations amounted to an impracticability that justified setting aside the agreement.

The court examined the doctrine of frustration, distinguishing between mutual mistake and frustration. It noted that frustration occurs when an unforeseen event radically changes the nature of the contractual obligation, making performance a fundamentally different task. The court applied the principles outlined in Codelfa Construction Pty Ltd v State Rail Authority of NSW and the Davis Contractors Case, focusing on whether the contract, as truly construed, was wide enough to cover the new situation created by the frustrating event. The court found that the failure of Ms. Kay to secure finance was not due to default and did not foreseeably alter the fundamental nature of her obligations under the agreement.

Consequently, the application to enforce the financial agreement was dismissed, and the response was adjourned for further directions. This decision underscored the importance of distinguishing between events that are truly unforeseeable and those that could reasonably have been anticipated by the parties when entering into the agreement.

Orders

Orders of the court

The application filed on 29 September, 2011 is dismissed.

The Response be adjourned to 25 October 2012 at 9.30 a.m. for directions in the Federal Magistrates Court of Australia sitting at Brisbane.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

In Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 Mason J explained the difference between a mutual mistake of fact extant at the time of formation of the contract and the failure of the parties’ assumption or expectation about a future fact that has failed to come to pass. His Honour said (at p.360):The doctrine of frustration is closely related to the concept of mutual mistake. However, in general, relief on the ground of mutual mistake is confined to mistakes of fact, not of law. If the common contractual assumption is of present fact it is a case of mutual mistake; if the assumption is of future fact it is a case of frustration (Bell (1932) AC at, pp 225-226 , per Lord Atkin), the distinction being that in one case the contract is void ab initio and in the other it is binding until the assumption is falsified. (my emphasis) Whether Ms Kay would secure finance so that she could meet her obligations under the financial agreement was a future fact which both parties took as a given. Certainly on Mr Herold’s case, no thought whatsoever was given to the proposition that finance would not be available. Ms Kay thought that, perhaps with her parents’ help, she would secure the necessary finance. But the assumed state of facts failed to materialise. Ms Kay cannot secure the necessary funding, and Mr Herold has not demonstrated that alternative sources are available to her. It is not a situation where the parties expected that Ms Kay would discharge Mr Herold’s liability to the Commonwealth Bank from her own resources. Apart from her ability to apply for finance, it was not suggested that she had any other source of funding from which she might do so. Stephen J’s discussion of the relevant authorities dealing with the doctrine of frustration as it applies to contracts in Brisbane City Council v Group Projects Pty Ltd (1979) 145 CLR 143 is generally seen as the leading formulation of that doctrine for modern Australian purposes. His Honour’s summary was referred to with approval by Mason J, with whom Aickin, Stephen and Wilson JJ agreed, in Codelfa Construction Pty Ltd v State Rail Authority (NSW) (above) at 356. In Brisbane City Council Stephen J said at 160:In Port Line Ltd. v Ben Line Steamers Ltd. Diplock J. said: “It would appear to be the fate of frustration cases when they reach the highest tribunals that either there should be agreement as to the principle but differences as to its application, or differences as to the principle but agreement as to its application.”This was said despite, or perhaps in the light of, what is the leading modern authority in the field, the decision of their Lordships in the Davis Contractors Case, pronounced in 1956. Such divergency of principle as commentators have extracted from their Lordships’ speeches do not, I think, affect the present case. In the Davis Contractors Case Viscount Simonds and Lord Morton offer no guide to principle, although they do reflect the general disinclination to allow much scope to the operation of frustration. Lord Somervell agrees with Lord Reid’s conclusion upon “the proper basis of frustration”. It is in the speeches of Lord Reid and Lord Radcliffe that extensive discussion of principle occurs.Lord Reid rejected the notion of the implied term as the basis of the doctrine. He says that the task for a court, confronted with the partie’ contract, is to determine, on the true construction of the terms of the contract, read in the light of the nature of the contract and of the relevant surrounding circumstances when the parties made it, “whether the contract which they did make is, on its true construction, wide enough to apply to the new situation: if it is not, then it is at an end.” Frustration he describes as “the termination of the contract by operation of law on the emergence of a fundamentally different situation”. What I understand his Lordship’s approach to involve is, then, a comparison between the contemplated situation, as revealed by the terms of the contract on its true construction, and the situation in fact resulting from the frustrating event. If they be “fundamentally different” the contract is frustrated subject, of course, to the frustrating event not being the fault of the party seeking to rely upon the doctrine.Lord Radcliffe considers those cases which treat frustration as involving an implied term, cases which involved diverse approaches, sometimes subjective and sometimes objective, in ascertaining the content of the term to be implied. His Lordship suggests that “frustration occurs whenever the law recognizes that without default of either party a contractual obligation has become incapable of being performed because the circumstances in which performance is called for would render it a thing radically different from that which was undertaken by the contract. Non haec in foedera veni. It was not this that I promised to do.” This is close to the views of Lord Reid and together they represent the approach which I would apply in the present case. It should, however, be noted that Lord Radcliffe tends rather to concentrate on a change in obligation. Thus he says: “it is not hardship or inconvenience or material loss itself which calls the principle of frustration into play. There must be as well such a change in the significance of the obligation that the thing undertaken would, if performed, be a different thing from that contracted for.” Lord Radcliffe also introduces the limitation that the frustrating event must not be one which the parties could “reasonably be thought to have foreseen”. As already mentioned, the “change in obligation” test proposed by Lord Radcliffe, no doubt apt enough in most frustration situations, seems to be inapplicable here, as it was in the so-called Coronation cases, of which Krell v Henry is the leading example. But I do not understand his Lordship to say that without change in obligation there can be no frustration: it is “the occurrence of any unexpected event that, as it were, changes the face of things” that give rise to frustration. His Lordship’s emphasis upon change in obligation is, I think, to be understood in the context of the factual situation under discussion in the Davis Contractors Case.(emphasis in the original, citations omitted)