HIGGINS & MORUBA
[2018] FamCA 467
•21 June 2018
FAMILY COURT OF AUSTRALIA
| HIGGINS & MORUBA | [2018] FamCA 467 |
| FAMILY LAW – PRACTICE & PROCEDURE – Financial agreement – where the husband and wife executed a financial agreement pursuant to s 90B of the Family Law Act 1975 (Cth) the day before the marriage – where the parties dispute who should be applicant for the threshold hearing – order that the wife be the applicant – where the wife seeks full discovery akin to an application under s 79 – no order made for full and frank disclosure – where the wife seeks that her application to set aside the financial agreement be heard at the same time as her application for property settlement, and other financial orders – where the issues are to remain bifurcated. |
| Family Law Act 1975 (Cth) ss 79, 90B, 90G, 90K, 90KA |
| Balzia & Covich [2009] FamCA 1357 Saintclaire & Saintclaire (2015) FLC 93-684 | ||
| APPLICANT: | Mr Higgins | |
| RESPONDENT: | Ms Moruba |
| FILE NUMBER: | MLC 9032 of 2015 |
| DATE DELIVERED: | 21 June 2018 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Thornton J |
| HEARING DATE: | 11 April 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Rozeta Stoikovska SC and Dr Anna Parker |
| SOLICITOR FOR THE APPLICANT: | Keith Cameron Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Patrick O’Shannessy and Mr Jeff Stanley |
| SOLICITOR FOR THE RESPONDENT: | Cottier Stenning Lawyers |
Orders
IT IS ORDERED THAT
Paragraphs 2 and 6 of the wife’s Amended Response to an Application in a Case filed 9 April 2018 are withdrawn.
The wife’s Amended Response to an Application in a Case filed 9 April 2018 is dismissed.
The wife be deemed the applicant for the purposes of the hearing of the wife’s application to set aside the financial agreement signed by the parties on 7 December 2012.
The husband’s Application in a Case filed 30 January 2017 is otherwise dismissed.
The matter be placed in the list of cases awaiting allocation to a judicial docket with priority from the date of this order.
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 Higgins & Moruba 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).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC
| Mr Higgins |
Applicant
And
| Ms Moruba |
Respondent
REASONS FOR JUDGMENT
The parties bring competing interim applications seeking to vary procedural orders made pending a trial. The husband’s Application in a Case and the wife’s Amended Response to an Application in a Case were heard before me in a Judicial Duty List on 11 April 2018.
The trial was originally listed on 15 March 2017 for determination of a threshold issue of the validity of a prenuptial financial agreement signed by the parties on 7 December 2012. The trial was adjourned pending the outcome of a relevant High Court decision in the case of Thorne & Kennedy (2017) 350 ALR 1 (“Thorne & Kennedy”). The parties are now in dispute about the procedural orders previously made.
The husband had filed an Initiating Application on 24 September 2015 in the Federal Circuit Court seeking parenting orders only. The wife filed a Response to Initiating Application on 9 October 2015 seeking that the financial agreement be set aside.
The husband filed an Amended Application on 22 April 2016 and on 6 May 2016 in this Court seeking a declaration that the financial agreement is a valid and binding agreement in full and final settlement of property/spousal maintenance claims between the parties made pursuant to s 90B of the Family Law Act 1975 (Cth) (“the Act”).
Included in the wife’s Amended Response, filed 6 May 2016, was an application to set aside the financial agreement pursuant to s 90K of the Act.
I made trial directions on 20 May 2016 for the filing of material with the husband named as the applicant. The trial directions were made on the basis of the Amended Application and Amended Response filed at that time.
By the time of this interim hearing before me and on the day of the hearing on 11 April 2018, the husband filed a Further Amended Initiating Application no longer seeking that declaration.
The Applications
The husband brings an Application in a Case filed 30 January 2017 in which he seeks that the respondent wife be deemed the applicant for the purposes of the trial which has not yet been listed for hearing. He also seeks that the wife’s Amended Response to an Application in a Case filed 9 April 2018 be dismissed and that the trial directions be varied.
The wife in her Amended Response to an Application in a Case filed 9 April 2018 seeks that the husband’s Application in a Case be dismissed and seeks that the threshold issue be listed for hearing together with all applications for parenting, property, spousal maintenance and child support orders at a date to be determined.
Further and in the alternative, the wife seeks that the husband’s Application in a Case be dismissed and that the parties jointly instruct a single expert witness to value the assets constituting the matrimonial asset pool within 30 days, that the husband pay the costs of the valuations necessary to establish the value of the parties’ interests at first instance, and that the parties make full and frank disclosure as to their financial position within 21 days.
Further and in the alternative the wife seeks that the husband’s Application in a Case be dismissed, that the husband file his affidavit evidence in chief forthwith, that the wife file her affidavit evidence in chief 28 days after the husband and that the husband pay the wife’s costs of and incidental to the Response.
Background
Procedural background
It is important to set out the procedural background to these applications because the orders sought by the parties have changed.
The husband initiated parenting proceedings in the Federal Circuit Court in September 2015. The wife in her Response to Initiating Application sought parenting orders and that the financial agreement be set aside pursuant to s 90K of the Act. The wife also sought other orders including spousal maintenance, a child support departure order and a property settlement pursuant to s 79 of the Act.
Numerous procedural orders had been made after this matter was transferred to this Court from the Federal Circuit Court in December 2015.
Pursuant to orders made in this Court by Cronin J on 6 April 2016, the applicant husband was to file and serve an Amended Application setting out with precision the orders to be sought at trial by 22 April 2016. The husband filed an Amended Initiating Application on 22 April 2016 and again on 6 May 2016 seeking amongst other things a declaration that the financial agreement is a valid and binding agreement in full and final settlement of property/spousal maintenance claims between the parties.
The wife filed an Amended Response to Initiating Application on the 6 May 2016 seeking amongst other things a property settlement pursuant to s 79 of the Act, spousal maintenance, a child support departure order and an application to set aside the financial agreement.
Accordingly when the matter was listed before me on 20 May 2016 as a first day hearing, trial directions were made on the basis that the husband was the applicant. An order was made that the threshold issue in relation to the validity of the s 90B Financial Agreement executed by the parties on 7 December 2012 be adjourned for hearing before me on 14 March 2017. Both parties were represented by Counsel and neither counsel raised any objection to the timetable for the filing of material. It is these trial directions that the husband seeks to vary.
After the trial directions were made the husband filed an Application in a Case on 30 January 2017. The Application in a Case was adjourned for hearing on 15 March 2017. The trial was also adjourned to 15 March 2017.
On 15 March 2017 I made orders adjourning all extant applications including the husband’s Applications in a Case to a date to be fixed pending the decision of the High Court in Thorne & Kennedy.
The wife ultimately filed an Amended Response to the Application in a Case on 9 April 2018. The husband’s Application in a Case and the wife’s Response to that Application in a Case are the matters for determination in this hearing.
Significantly, on the day of this hearing being 11 April 2018 the husband filed a Further Amended Initiating Application which no longer sought a declaration that the financial agreement was a valid and binding agreement in full and final settlement of property/spousal maintenance claims between the parties.
Circumstances of the parties
The parties began living together in October 2012, married in 2012 and separated on the husband’s case on 24 April 2015 and on the wife’s case on 13 June 2015. There is one child of the marriage aged three, who is living with the wife. The parties divorced in 2016.
It would appear that the parties lived together for a period of approximately two and a half years.
The parties met online and at the commencement of the relationship, the wife resided in Africa and the husband in Australia. The parties met in person for the first time in Asia in September 2009. Between December 2009 and February 2012, the wife travelled to Australia on tourist visas to spend time with the husband on four occasions.
On 14 April 2012, the wife travelled to Australia on a prospective marriage visa. As discussed, on 30 October 2012 the parties commenced living together and on 7 December 2012 they entered into a financial agreement. In 2012 the parties were married at the Registry of Births, Deaths and Marriages in Melbourne.
The financial circumstances of the parties are in issue. However the husband concedes that he has considerable means and has estimated his net wealth to be in excess of $20 million. Paragraph 57.1 of the husband’s submissions dated 9 April 2018 states that “he has estimated his net wealth to be in excess of $20 million”. In the husband’s affidavit filed 20 April 2016 at paragraph 37, the husband states that his net assets were in the order of $24 million as at January 2015.
The wife filed a Financial Statement on 15 December 2016 deposing to an average weekly income of $136 and weekly expenditure of $1,676. She deposed to property owned by her being estimated at a value of $928,194.
The husband deposed in his affidavit filed 11 April 2018 in support of his Application in a Case, at paragraph 2, that he has provided the wife with the following sums of money since separation:
Litigation funding $40,000
Relocation expenses $10,000
Motor vehicle repairs $5,000
Motor vehicle $10,000 to $15,000 (estimate)
8 April 2016 $1,155,000 (to be classified by the trial judge, if necessary)
Fortnightly payment $13,000
since separation until
11 April 2016
Total$1,233,000 to $1,238,000
Evidence
The matter proceeded by way of submissions only in the Judicial Duty List and the evidence remains untested.
The applicant husband relied upon the following documents:
·Application in a Case filed 30 January 2017;
·Affidavit of the husband’s solicitor filed 30 January 2017;
·Affidavit of the husband filed 20 April 2016;
·Further Amended Initiating Application filed 11 April 2018;
·Affidavit of the husband filed 11 April 2018.
The applicant husband also relied upon written submissions tendered at the hearing by his counsel.
The respondent wife relied upon the following documents:
·Amended Response to an Application in a Case filed 9 April 2018;
·Affidavit of the wife filed 9 April 2018;
·Paragraphs 1 to 69 of the affidavit of the wife filed 9 November 2015;
·Affidavit of the wife’s solicitor filed 31 January 2017;
·Financial Statement of the wife filed 15 December 2016;
·The husband’s summary of issues filed 13 May 2016.
The respondent wife also relied upon the following submissions:
·The wife’s “Issues Assessment” document filed 13 May 2016;
·The wife’s “Summary of Argument for 15 March 2017” filed 20 February 2017 (“Summary of Argument”);
·The wife’s “Outline of Reply” filed 9 March 2017.
The wife’s submissions were filed prior to the decision of the High Court in Thorne & Kennedy.
Legal Principles
Section 90K of the Act provides for the circumstances in which the Court may set aside a financial agreement. A financial agreement is defined relevantly as an agreement that is a financial agreement under ss 90B, 90C or 90D of the Act.
Section 90B of the Act relates to financial agreements before marriage. The financial agreement the subject of dispute was entered into the day before the parties were married.
The wife’s case is that the financial agreement should be set aside on a number of bases, but in particular she relies upon s 90K(1)(d) of the Act.
Section 90K(1)(d) of the Act provides that a Court may make an order setting aside a financial agreement if, and only if the Court is satisfied that 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, a party to the agreement will suffer hardship if the Court does not set the agreement aside. A person having caring responsibility for a child is defined under s 90K(2) of the Act to include the person who is a parent of the child with whom the child lives.
The wife also relies upon a further ground for the setting aside of the financial agreement on the basis that the husband engaged in conduct that was in all the circumstances unconscionable. Pursuant to s 90K(1)(e) of the Act a Court may make an order setting aside a financial agreement, if and only if, the Court is satisfied that in respect of the making of a financial agreement – a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.
To the extent that the wife’s submissions originally referred to the presumption of undue influence, counsel for the wife conceded that this is now no longer relied upon since the decision in Thorne & Kennedy.
Pursuant to s 90KA of the Act, the question of whether a financial agreement is valid, enforceable or effective is to be determined by the Court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts.
Subsection 90G(1) of the Act provides the requirements for when financial agreements are binding on the parties. A financial agreement is binding on the parties “if, and only if” :
(a)the agreement is signed by all parties; and
(b)before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on their rights and about the advantages and disadvantages at the time that the advice was provided; and
(c)either before or after signing the agreement each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to was provided to that party (whether or not the statement is annexed to the agreement); and
(ca) a copy of the signed statement by the legal practitioner that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
(d) the agreement has not been terminated and has not been set aside by a court.
Section 90G(1A) of the Act provides:
A financial agreement is binding on the parties to the agreement if:
(a) the agreement is signed by all parties; and
(b)one or more of paragraphs (1)(b), (c) and (ca) are not satisfied in relation to the agreement; and
(c)a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and
(d)the court makes an order under subsection (1B) declaring that the agreement is binding on the parties to the agreement; and
(e)the agreement has not been terminated and has not been set aside by a court.
Discussion
It is accepted by the husband that he bears the onus of proving compliance with the requirements of s 90G of the Act (Hoult & Hoult (2013) 276 FLR 412 (“Hoult & Hoult”); Balzia & Covich [2009] FamCA 1357).
Counsel for the husband maintains that in the present case the initial onus has been met on the evidence already filed with the Court which includes the certificate of legal advice.
The certificate must be treated as at least prima facie evidence of compliance with the requirement to provide legal advice but that is not to say that it is not open to the wife to go behind that certificate (Hoult & Hoult).
Thackray J (with whom Strickland and Ainslie-Wallace JJ agreed) said in Hoult & Hoult at [62]:
Importantly, however, I consider that once the party seeking to rely upon the agreement produces in evidence the certificate signed by the other party’s solicitor, there is a forensic obligation on the other party to produce evidence which would disprove, or at least throw into doubt, the inference or conclusion to be drawn from the certificate (especially when read with the recital in the agreement to the same effect).
Following the principles of Hoult& Hoult the husband bears the initial burden of proving the existence of the prescribed matters in s 90G(1) of the Act because of the words “if and only if”.
In Logan & Logan [2013] FamCAFC 151 the Full Court (May, Thackray and Strickland JJ) (“Logan & Logan”) confirmed the position in Hoult & Hoult and at [50] said:
Applying the principles emanating from Hoult, what the reliance by the husband on the certificate, and the recitals, does is satisfy the initial onus on the husband, and passes the evidentiary burden to the wife. The certificate gave rise to “an inference, a presumption of fact or a presumptio hominis” (paragraph 97) that the requisite advice has been. The question then becomes whether the wife has adduced sufficient evidence to displace that inference.
However as the Full Court pointed out in Logan & Logan at [55]:
Thus, the question becomes whether this evidence satisfies the forensic obligation thrown on the wife by the presentation of the certificate. In answering that question it must be remembered that the obligation was not to prove that the advice had not been given, but to throw the matter into doubt, leaving the onus of satisfying the court that the advice had been given on the husband.
The husband has produced the certificate signed by the wife’s solicitor. The forensic obligation is on the wife to produce evidence that would “disapprove or at least throw into doubt the inference or conclusion to be drawn from the certificate”. Accordingly the evidentiary burden shifts to the wife.
The wife in her “Issues Assessment” document filed 13 May 2016 at page 7 asserts unconscionable conduct pursuant to s 90K(1)(e) of the Act and also refers to undue influence. The factual circumstances that she relies upon are set out there.
There is also a reference to s 90K(1)(b) of the Act which essentially provides that an order setting aside a financial agreement may be made if, and only if, the court is satisfied that the agreement is void, voidable or unenforceable. In the same document the wife relies upon s 90G(1)(b) of the Act. In that document the wife concedes that the party alleging non-compliance bears the burden of adducing sufficient evidence that puts compliance in doubt although the signed certificate should be treated as prima facie evidence of compliance with s 90G(1) of the Act.[1]
[1] Issues Assessment filed by the wife on 13 May 2016, page 10.
However if the wife asserts undue influence the wife bears the burden of proving that undue influence occurred as a matter of fact (Saintclaire & Saintclaire (2015) FLC 93-684). This appeared to be conceded by the wife at page 9 of her “Issues Assessment” document.
In Thorne v Kennedy at paragraph 34 the plurality said:
There are different ways to prove the existence of undue influence. One method of proof is by direct evidence of the circumstances of the particular transaction. That was the approach relied upon by the primary judge in this case. Another way in which undue influence can be proved is by presumption. This presumption was relied upon by Ms Thorne in this Court as an alternative. A presumption, in the sense used here, arises where common experience is that the existence of one fact means that another fact also exists. Common experience gives rise to a presumption that a transaction was not the exercise of a person’s free will if (i) the person is proved to be in a particular relationship, and (ii) the transaction is one, commonly involving a “substantial benefit” to another, which cannot be explained by “ordinary motives”, or “is not readily explicable by the relationship of the parties”. Although the classes are not closed, in Johnson Latham CJ described the relationships that could give rise to the presumption as including parent and child, guardian and ward, trustee and beneficiary, solicitor and client, physician and patient, and cases of religious influence. Outside recognised categories, the presumption can also be raised by proof that the history of the particular relationship involved one party occupying a similar position of ascendency or influence, and the other a corresponding position of dependency or trust. In either case, the presumption is rebuttable by the other party proving that the particular transaction or transfer, in its particular circumstances, was nevertheless the result of the weaker party’s free will.
(emphasis added)
(citations omitted)
As the High Court pointed out in Thorne & Kennedy at paragraph 40, “one way in which the element of special disadvantage for a finding of unconscionable conduct can be established is by a finding of undue influence” and that although undue influence and unconscionable conduct will overlap, they have distinct spheres of operation.
The wife in her Summary of Argument filed 20 February 2017 appeared to rely on the presumption of undue influence and submitted at paragraph 35(i) that the husband in the circumstances of the parties being affianced, bears the onus that the financial agreement was not procured by undue influence. This however was not pursued.
In relation to the presumption, counsel for the wife conceded that following the High Court decision in Thorne & Kennedy it cannot properly be asserted on behalf of the wife that a presumption of undue influence arises by virtue of the fact that the parties were engaged to be married at the time of entering into the financial agreement.
The High Court (Kiefel CJ, Bell, Gageler, Keane and Edelman JJ) in Thorne & Kennedy at paragraph 36 said:
…Common experience today of the wide variety of circumstances in which two people can become engaged to marry negates any conclusion that a relationship of fiancé and fiancée should give rise to a presumption that either person substantially subordinates his or her free will to the other.
As discussed, the wife also seeks to set aside the financial agreement on the basis of s 90K(1)(d) of the Act. The wife bears the onus of proof under this provision.
Who should be the applicant?
I accept the submissions made on behalf of the husband that the wife should be formally recognised as the applicant in relation to the threshold issue for the following reasons:
·The wife first raised the question of the validity of the financial agreement in her Response to Initiating Application filed 9 October 2015 in the Federal Circuit Court.
·Amongst other things, the wife relies upon sub-s 90K(1)(d) of the Act, in relation to hardship, which can only be invoked if she is the applicant.
·Section 90KA of the Act provides that the question of whether a financial agreement is valid, enforceable or effective is to be determined by the Court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts. This requires the party seeking the relief of the Court to plead their case with specificity and adduce all relevant evidence before the other party is required to respond. It is akin to an application made in a civil dispute.
·The husband cannot anticipate on what basis the wife asserts hardship or unconscionable conduct. There may be a forensic disadvantage to the husband and he may suffer procedural unfairness if he is required to adduce evidence to meet the wife’s case without the wife first being required to put her case regarding her application pursuant to sub-ss 90K(1)(d) and (e) of the Act. It is a principle of natural justice that a party must know the case that they are required to meet.
·The wife will not suffer any prejudice if required to put her case and adduce the evidence upon which she relies prior to the husband being required to do so. The wife will no doubt be given an opportunity to file an affidavit in reply.
·The fact that the husband who was represented by counsel has not raised the issue of the wife being the applicant at an earlier time does not preclude him from doing so before the matter is listed for trial. When the trial directions were made the husband was seeking a declaration that the financial agreement is a valid and binding agreement in full and final settlement of property/spousal maintenance claims between the parties made pursuant to s 90B of the Act. The husband’s position has changed and he has now filed a Further Amended Initiating Application which no longer seeks that declaration.
Extent of discovery for the threshold issue
The other issue for determination is the extent of discovery required for the threshold issue.
The wife relied on the decision of Fewster & Drake [2016] FamCAFC 214 (“Fewster & Drake”) in support of her argument. This judgment was of course delivered before the High Court judgment in Thorne & Kennedy.
I reject the wife’s submissions about the extent of disclosure required by the husband because I do not accept counsel for the wife’s interpretation of the decision in Fewster & Drake.
I reject the submission of counsel for the wife relying on the decision of Fewster & Drake, that the Court in determining hardship under s 90K(1)(d) of the Act is required to embark on a comparison between the likely outcome of an application under s 79 of the Act and the circumstances in existence in the absence of such an application. The Full Court explicitly rejected that approach by the primary judge and allowed the appeal on the basis that hardship could not be established on this basis.
At paragraph 67 of Fewster & Drake, Aldridge and Kent JJ said:
We turn now to the second aspect of this challenge. The concluding words of s 90K(1)(d) are “if the court does not set the agreement aside”. Logically and inevitably those words require the court to undertake some comparison between the position of the child, or the person with caring responsibility, if the agreement remains in place and the position of that child or person if the agreement is set aside. It is only by doing so that the court can place itself in a position to determine whether there will be hardship if the agreement is not set aside. The primary judge did not undertake such a comparison.
Their Honours went on to find that the hardship required by the section is “something more than unfairness”. Using the analogy of the concept of hardship applicable for applications for leave to institute property proceedings under s 44(4) of the Act their Honours referred to, at paragraph 68, what was said In the Marriage of Whitford (1979) FLC 90–612 (“Whitford”) at 78,144-78,145, where the Court said that hardship is:
…. akin to such concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment….
….
In ordinary parlance, hardship means something more burdensome than “any appreciable detriment”. We consider that in subsec 44 (4) the word should have its usual, though not necessarily its most stringent, connotations.
The Full Court found at paragraph 69 that there is nothing in the terms of s 90K of the Act that suggest a different approach should be taken.
The wife asserts that the hardship to her is:
·The very different outcome pursuant to s 72 and s 79 as compared with the binding financial agreement;
·The husband made representations to the wife and the Commonwealth of Australia that they propose to share their financial resources once they marry and the husband ought not be able to evade those representations;
·The extent of the husband’s wealth is not known and the hardship is the loss of opportunity for the Court to determine her application for a property adjustment.
While I am not required to determine the hardship at this interim stage, the wife’s arguments of hardship are relevant to the question of the extent of the discovery that is necessary, because if the discovery will not support the wife’s arguments for hardship, then it may not be necessary to the extent the wife seeks.
Referring to the decision of Pascot & Pascot [2011] FamCA 945 (“Pascot & Pascot”) at paragraphs 70-71 Aldridge and Kent JJ found in Fewster & Drake:
It is convenient to repeat the findings made by the primary judge in Pascot, which were adopted by the primary judge in this matter in relation to hardship:
378.If the agreement is set aside, the wife would be able to make an application for orders under secs 72 and 79 of the Act. It is safe to say that the outcome of such an application is likely to be very different to that brought about by the Agreement.
379.In light of this, I would find that hardship on the part of the wife is established, and that setting the Agreement aside is the only remedy.
The Full Court in Fewster & Drake concluded that “those findings do not establish hardship as it is correctly understood”. In the wife’s submissions, as outlined above, she relies specifically on the very same argument that was made in Pascot & Pascot, which was rejected by the Full Court in Fewster & Drake.
The decision of the Full Court in Fewster& Drake does not support the proposition that either a detailed examination of the financial circumstances of the husband or an assessment of the likely outcome of any potential s 79 application is required for the determination of an application to set aside a financial agreement on the basis of s 90K(1)(d) of the Act.
The Full Court found that s 90K(1)(d) of the Act required the Court to undertake “some comparison” between the position of the child or the person with caring responsibility, if the agreement remains in place and the position of that child or person if the agreement is set aside. The evidence was not available for the Court to make some comparison in that case.
It is for the wife to adduce the evidence of the hardship. The fact that the Court referred to “some comparison” as opposed to a comprehensive comparison does not support the wife’s position regarding disclosure. I accept the submission of counsel for the husband that the decision does not import a requirement that there be a detailed enquiry into the parties’ respective assets and liabilities or a comprehensive assessment of their competing entitlements under s 79 of the Act should the financial agreement be set aside.
Counsel for the wife relied upon paragraphs 85 to 86 of Fewster & Drake for the proposition that hardship cannot be determined without complete disclosure and evidence of the assets of the husband for the purposes of a property settlement under s 79 of the Act. The wife asserts that the husband should be required to make full and frank disclosure of all of his assets, notwithstanding that he has made a concession that “He has estimated his net wealth to be in excess of $20 million”.[2]
[2] Submissions on behalf of the application husband for hearing on 11 April 2018, par 57.1.
In Fewster & Drake the Full Court found that the evidence was limited to the financial position of the wife and that “there was no evidence as to how those circumstances had changed as a result of the birth of or the care, development and welfare of the second child”.[3] The Court found in those circumstances that the evidence did not permit a comparison to be undertaken between the financial position of the child, or the wife, under the agreement and the position that would exist if the agreement was set aside.
[3] Fewster & Drake [2016] FamCAFC 214 at [85].
I accept the submission of counsel for the husband that the Full Court in Fewster & Drake emphasised that what must be proven is a causal link between the asserted material change in circumstances relating to the carer of a child and the alleged hardship.[4] It is not, as asserted by the wife, between the circumstances of the applicant with the agreement in force compared to what the circumstances of the applicant would be if an application under s 79 of the Act was pursued. Nor is it between the circumstances of the husband and those of the wife.
[4] Ibid at [79], [84]-[85].
The Court in Fewster & Drake explained at paragraphs 85 and 86 that there was no evidence as to the present circumstances of the wife to establish hardship and if so, how the hardship resulted from the changed circumstances because there was no evidence as to how those circumstances of the wife had changed as a result of the birth of or the care, development and welfare of the second child. These are matters for the wife to adduce in evidence.
The Court in Fewster & Drake made it clear at paragraph 63 that individuals are free to enter into binding financial agreements as they see fit and there is no statutory provision which enables one to be set aside merely because it is unfair. The wife’s argument, that there is hardship because she would obtain a different outcome under a s 79 application under the Act compared to the binding financial agreement is therefore not relevant to the Court’s consideration of whether there is hardship. Therefore, the order the wife seeks for full disclosure is not justified on this basis.
I accept the submission of counsel for the husband that neither the terms of the legislation nor the judgment in Fewster & Drake provide authority for the proposition that either a detailed examination of the financial circumstances of the husband or an assessment of the likely outcome of any potential s 79 application under the Act is required for the determination of an application to set aside a financial agreement on the basis of s 90K(1)(d) of the Act.
In the event that this interpretation is not correct, in my view the husband has made the concession that his wealth is in excess of $20 million[5] which should be sufficient for the court to make some comparison.
[5] See Submissions on behalf of the applicant husband for hearing on 11 April 2018, par 57.1.
In addition, the wife in submissions has also referred to the need to identify and establish the “pool” of assets. Counsel for the wife submitted at paragraph 13 of the wife’s Outline of Reply filed 9 March 2017:
The reality is that the husband will assert that the wife’s current assets (noting the husband made a large gift to the wife shortly after the 6 April 2016 orders) are equivalent as to what she would receive if the agreement were set aside and therefore no hardship flows from the change of circumstances. Thus a proper identification of the pool is all the more important to make the comparison.
Further in her Summary of Argument document filed 20 February 2017 the wife submitted that the only way to undertake the comparison of the positions required by the Full Court in Fewster & Drake was to establish the current legal and equitable interests of the parties, to establish a “pool” and to then attempt to demonstrate the comparison that underpins the claim for hardship.
The interpretation contended for by the wife would defeat the major purpose of Part VIIIA of the Act which is to enable parties to avoid extended litigation as to their s 79 entitlements under the Act by entering into financial agreements, unless and until such agreements are set aside. I accept the submission of counsel for the husband that the test under s 90K(1)(d) of the Act is concerned with whether a hardship will be suffered, and not whether the party with caring responsibility for the child will be in a worse position than that in which she would have been but for the existence of the financial agreement. The interpretation contended for by the wife has the effect of substituting such a test for the one which in fact appears in the statute.
I do not accept that the decision in Fewster & Drake is authority for the proposition that it is necessary to establish a “pool” to the extent that would occur in a full hearing of an application under s 79 of the Act. The approach contended for by the wife was specifically rejected by the Full Court as outlined above.
Should the financial agreement be set aside as a result of the threshold determination, the parties will be required to provide the usual disclosure of property interests for an application under s 79 of the Act.
Should the threshold issue be heard with the other applications of the wife?
The trial was originally listed on the basis that the threshold issue should be determined and there is no reason to vary that decision. As the solicitor for the wife in his affidavit filed 31 January 2017 at paragraph 47 pointed out, the wife had previously consented to orders for a bifurcated final hearing for the declaration/setting aside issue to be determined first as a discrete matter and without disclosure or the ascertainment of the extent of the matrimonial asset pool. There is no comment in the High Court decision of Thorne & Kennedy about procedural matters concerning the bifurcation of proceedings or touching upon the question of whether an application pursuant to s 90K of the Act should be determined as a threshold issue.
The wife seeks to inspect various properties and value the underlying assets of the husband’s entities. The financial circumstances of the husband in this case appear to be complicated and the cost of obtaining up-to-date valuations and litigating over the extent of any potential asset pool is likely to be substantial. The cost involved in preparing for such litigation might be entirely avoided in the event that the wife is unsuccessful in her application to set aside the financial agreement.
If the wife is successful there may still be a negotiated outcome between the parties which would avoid these costs. Of course on the other hand, the costs may ultimately have to be incurred for the purposes of a final hearing on property and financial matters but whether such litigation is necessary is yet to be determined. For this reason I do not propose to accede to the wife’s alternative proposal that the parties jointly instruct a single expert witness to value the assets constituting the matrimonial asset pool within 30 days and that the husband pay the costs of the valuations necessary to establish the value of the parties’ interests at first instance.
Accordingly for the reasons outlined earlier I consider it appropriate to make orders providing for the wife to be deemed the applicant in accordance with paragraph 1 of the husband’s Application in a Case filed 30 January 2017.
I do not propose to vary the orders for bifurcation of the proceedings in order to determine the threshold issue concerning the financial agreement before hearing any application pursuant to s 79 of the Act or the wife’s applications for spousal maintenance and child support departure orders. The husband does not concede that the wife’s spousal maintenance and child support departure order applications will survive if she is unsuccessful in setting aside the financial agreement.
The Orders
I propose therefore to dismiss paragraph 3 of the wife’s Amended Response to an Application in a Case filed 9 April 2018.
I do not propose to make any further orders for disclosure by the husband or for the parties to jointly instruct a single expert witness to value the assets constituting the matrimonial asset pool at the expense of the husband at first instance. A number of paragraphs in the wife’s Amended Response to an Application in a Case filed 9 April 2018 were duplicated. Accordingly paragraphs 1, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13 and 15 of the wife’s Amended Response to an Application in a Case filed 9 April 2018 will be dismissed.
I propose to make an order that the wife be deemed the applicant for the purposes of the hearing of the application to set aside the financial agreement as sought by the husband in paragraph 1 of his Application in the Case filed 30 January 2017.
Paragraphs 2 and 6 of the wife’s Amended Response to an Application in a Case were withdrawn.
Paragraph 2 of the husband’s Application in a Case filed 30 January 2017 sought a variation of the trial directions orders made 20 May 2016 as amended on 18 November 2016 for the filing of affidavit material. Those orders referred to the wife as the applicant. The parties complied with those orders before the trial listed for 15 March 2017.
I propose to make an order that the matter be placed in the list of cases awaiting allocation to a judicial docket with priority from the date of this order.
Paragraph 14 of the wife’s Amended Response to an Application in a Case sought costs for the interim hearing. The question of costs has not yet been pursued at this stage, but the wife has not been successful in her application. I propose to dismiss the wife’s Amended Response to an Application in a Case filed 9 April 2018 so that the matter can take priority from the date of the order, but note that this does not preclude any application for costs.
The husband’s Application in a Case filed 30 January 2017 is otherwise dismissed.
I certify that the preceding one hundred (100) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Thornton delivered on 21 June 2018
Associate:
Date: 21 June 2018
0
5
1