HUEY & HUEY

[2020] FamCA 354

FAMILY COURT OF AUSTRALIA

HUEY & HUEY [2020] FamCA 354

FAMILY LAW – BINDING FINANCIAL AGREEMENT – Where the parties entered into a valid Binding Financial Agreement – Where the husband wants it set aside – Where the depletion of assets is not a ground to set aside a Binding Financial Agreement – Application dismissed.

Family Law Act 1975 (Cth) s 90C, 90k

APPLICANT: Ms Huey

RESPONDENT: Mr Huey

FILE NUMBER: SYC 5581 of 2018

DATE DELIVERED: 13 May 2020

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Rees J

HEARING DATE: 13 May 2020

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Russell Kennedy Aitken Lawyers

COUNSEL FOR THE RESPONDENT: Mr O’Brien

SOLICITOR FOR THE RESPONDENT: Norwest Family Law

Orders

IT IS ORDERED

1. That the application of the husband to set aside the Financial Agreement entered into by the husband and the wife on 11 May 2007 be dismissed.

2. That leave be granted to the wife to file an amended initiating application by 4pm on 14 May 2020.

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 Huey & Huey 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 SYDNEY

FILE NUMBER: SYC 5581 of 2018

Ms Huey

Applicant

And

Mr Huey

Respondent

REASONS FOR JUDGMENT

1. On 11 May 2007, Mr Huey (“the husband”) and Ms Huey (“the wife”) entered into a Financial Agreement (“the Agreement”) pursuant to the provisions of Section 90C of the Family Law Act 1975(Cth) (“the  Act”). 

2. There is no dispute that the Agreement was regularly entered into by both of them and that all of the requirements necessary for the Agreement to be valid were met.

3. The husband now seeks to set aside the Agreement

4. The circumstances in which the Agreement van be set aside are circumscribed by the provisions of section 90K of the Act which is set out below:

   90K  Circumstances in which court may set aside a financial agreement or termination agreement

   (1)  A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:

   (a)  the agreement was obtained by fraud (including non‑disclosure of a material matter); or

   (aa)  a party to the agreement entered into the agreement:

   (i)  for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or

   (ii)  with reckless disregard of the interests of a creditor or creditors of the party; or

   (ab)  a party (the agreement party) to the agreement entered into the agreement:

   (i)  for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or

   (ii)  for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or

   (iii)  with reckless disregard of those interests of that other person; or

   (b)  the agreement is void, voidable or unenforceable; or

   (c)  in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or

   (d)  since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or

   (e)  in respect of the making of a financial agreement—a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or

   (f)  a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or

   (g)  the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.

   (1A)  For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.

   (2)  For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:

   (a)  the person is a parent of the child with whom the child lives; or

   (b)  a parenting order provides that:

   (i)  the child is to live with the person; or

   (ii)  the person has parental responsibility for the child.

   (3)  A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.

   (4)  An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.

   (5)  If a party to proceedings under this section dies before the proceedings are completed:

   (a)  the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and

   (b)  if the court is of the opinion:

   (i)  that it would have exercised its powers under this section if the deceased party had not died; and

   (ii)  that it is still appropriate to exercise those powers;

   the court may make any order that it could have made under subsection (1) or (3); and

   (c)  an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.

   (6)  The court must not make an order under this section if the order would:

   (a)  result in the acquisition of property from a person otherwise than on just terms; and

   (b) be invalid because of paragraph 51(xxxi) of the Constitution.

   For this purpose, acquisition of property and just terms have the same meanings as in paragraph 51(xxxi) of the Constitution.

5. In this case, the husband relies on the provisions of section 90K(1)(c) or in the alternate,  section 90K(1)(b).

6. It is the husband’s case that the parties “abandoned the agreement by way of our actions since separation”. Further he argues that the provisions of the Agreement are “unenforceable and or void as the assets we sought to protect have been depleted.”

7. There are two separate circumstances which, it is submitted, justify the setting aside of the Agreement and I will deal with each separately.

THE SELF MANAGED SUPERANNUATION FUND

1. The relevant provisions of the Agreement are found at Clause 2.3 which provides that the wife has no entitlement to the husband’s superannuation entitlement and at Clause 3.3 which provides that the husband has no entitlement to the wife’s superannuation entitlement.

2. Clause 9.2 provides that the wife will make no claim against the husband’s superannuation entitlement and 9.3 provides that the husband will make no claim against the wife’s superannuation entitlement.

3. Clause 9.9 provides that each of the parties will be entitled to retain their respective superannuation entitlements.

4. The husband deposed that the parties set up a self-managed superannuation fund, the Huey Self-Managed Superannuation Fund (“the SMSF”). Whether the entitlements of each of the parties were rolled into the SMSF is not clear.

5. At 30 June 2016, the last year that the SMSF submitted financial statements and a tax return, the husband’s balance in the SMSF was $277,404 and the wife’s balance was $56,794.

6. Both the husband and the wife have, improperly, drawn down the money in the SMSF so that almost nothing remains.

7. There is a dispute between them as to who has drawn what amounts. The SMSF is non-compliant and will have to be brought into compliance which will, no doubt, see tax, fines and penalties being incurred.

8. However, none of these events is affected by, or affects, the provisions of the Financial Agreement. 

9. The parties are free to take whatever steps they may be advised to bring the SMSF into compliance. If one owes money to the other as a result, that debt can be pursued. Nothing in the Financial Agreement stands in the way of that course.

10. I do not accept that the manner in which the parties have dealt with the SMSF renders the Financial Agreement impracticable to be effected or unenforceable.

SALE OF REAL PROPERTY

1. Clause 6.1 of the Financial Agreement provides that, upon the sale of real property, the husband is to receive an amount calculated to be $340,000 plus Consumer Price Index increases.

2. It appears to be common ground that, upon the sale of the jointly owned property, the husband should receive about $623,000.

3. Clause 6.2 specifies the amount to be received by the wife. Any balance is to be equally divided.

4. Clause 9.4 specifies the order and priority of the disbursement of the proceeds of sale. The payment to the husband takes priority over the payment to the wife.

5. It is not a matter in dispute that the sale of the property will probably not yield a sufficient sum to satisfy the whole of the wife’s entitlement.

6. It is also not a matter in dispute that there will be sufficient money to make the payment to the husband and to pay some, but not all, of the wife’s entitlement.

7. The wife deposed:

   I intend to be bound by the terms of the Financial Agreement even if those terms are to be to my detriment as to what I hoped to achieve by entering into it.

8. Thus there is no question that the husband will receive his full entitlements according to the terms of the Financial Agreement.

9. There is, therefore, no impediment to the terms of the Financial Agreement being put into effect.

10. The husband’s application will be dismissed.

11. The parties have agreed that the wife have leave to file an amended initiating application by close of business on 14 May 2020.

I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Rees delivered on 13 May 2020.

Associate:

Date:  13/05/2020