J & J - [2006] FamCA 442

[2006] FamCA 442

FAMILY LAW ACT 1975

IN THE FAMILY COURT

OF AUSTRALIA

AT PARRAMATTA No. PAF.464 of 2005

BETWEEN:

J Applicant/Wife

AND

J Respondent/Husband

CORAM: The Honourable Justice D Collier

DATE OF HEARING: 29 March 2006

DATE OF JUDGMENT: 29 March 2006

JUDGMENT OF THE COURT

APPEARANCES: Mr Harrison, instructed by Lang Gellert & Noonan, Solicitors, appeared on behalf of the Applicant/Wife

Mr Kearney, instructed by Watts McCray, Solicitors, appeared on behalf of the Respondent/Husband

CATCHWORDS:

FAMILY LAW - PROPERTY - Binding financial agreements

Introduction

This matter came before me today by reference from the list Judge. The matter was listed before her as a reserve matter as to property. The issue that I have been asked to determine is whether a document described as a ‘binding financial agreement’ is in fact binding.
The agreement was entered into between these parties on 3 November 2004. A copy of it is before me and is agreed by the parties to be identical in all terms and all respects to the document that was executed by them. The document is described on its face as a Deed of Financial Agreement pursuant to section 90C of the Family Law Act (1975) as amended. The document comprises a number of paragraphs by way of recitals and background, including matters that were, on the face of it, agreed upon by the parties. It further then contains clauses of an operative nature, and it is executed by each of the parties as if it were a deed.
Attached are certificates by solicitors, Damian Ralph McKay, who certified that he gave advice to the wife, and David Sutherland Bannerman, who certified that he gave advice to the husband. I will return to those certificates later in these reasons for judgment.

The Applications Before Me

The wife, by her application filed on 30 March 2005, seeks that the agreement be enforced as though it were an order of the Court. She makes reference particularly to section 90KAC of the Family Law Act, and I note that section 90G(2) also seems to confer the power to enforce as though it were an order of the Court.
The husband, by his amended response of 28 March 2006, and before me so far as my part in these proceedings is concerned, seeks that the wife's application for enforcement be dismissed. I have discussed with both Mr Kearney and Mr Harrison what it is they would have me do if I come to the conclusion that the agreement indeed is not binding upon the parties, and I will endeavour to return to that later in these reasons for judgment.
On that basis I have treated the husband as the applicant before me in the limited issue that it falls to me to determine today, and that is whether the document constitutes a binding agreement within the meaning of the Act.

The Documents Relied Upon

The husband has relied upon documents being the agreement itself, and he also tendered to me a transcript of the further revised explanatory memorandum in respect of the Family Law Amendment Bill which dealt with the creation of these statutory creatures known as Binding Financial Agreements. To my mind, it is an appropriate starting point.
At paragraph 152 of the revised memorandum, the draft person deals with subsection 90G(1), setting out that which is required as:-
·     the agreement is to be signed by both parties
·     compulsory independent legal advice is to be obtained by each party to the agreement
·     the agreement is to contain a statement to the effect that each of the parties has been provided with independent legal advice as to the effect of the agreement on their rights – this is a truncated version
·     those who have provided the advice have signed a certificate
·     the agreement has not been terminated or set aside
·     after the agreement is signed the original is given to one party and a copy to the other.
Paragraph 153 goes on to say all of these criteria will have to be met in order for a financial agreement to be binding. If the agreement is binding, a Court will not be able to deal with the matters with which the agreement deals. If an agreement is not binding, a Court will be able to deal with the matters with which the agreement deals. A Court will be able to deal with any property or financial resource not dealt with by a Binding Financial Agreement.
Binding Financial Agreements have almost wholly replaced the earlier forms and methods whereby parties could reach their own agreement, as provided for by respectively sections 86 and 87 of the Family Law Act. A significant and indeed vital difference between section 87 agreements as they were called and Binding Financial Agreements is that, before a section 87 agreement had validity, it had to be approved by an appropriate judicial officer. That of course is not the case with a Binding Financial Agreement.
Section 86 did not require that level of approval but did require registration to be enforceable. The statutory enactments creating Binding Financial Agreements remove any supervisory requirement of the Court, or indeed any capacity of the Court, to exercise such a supervisory role before that which is described as a Binding Financial Agreement is capable of binding the parties to it.
What is required is that the regime prescribed by the Act – and I will come to that very shortly – is followed, and if that is done the agreement is binding upon the parties and ousts entirely the jurisdiction of the Court in respect of matters dealt with in the Binding Financial Agreement. Accordingly, if an agreement is binding it does away for all time with the intervention of any form of judicial intervention so far as the affairs of the parties as dealt with in that agreement are concerned.
It appears such agreements were given statutory birth because of Parliament's sense that this was what people wanted rather than having to place themselves before a Court and receive approval of a Court or at least be registered with the Court before that which they agreed was in fact put into effect, and was binding upon them. It can be said that the clear intention of the legislation in creating these agreements is to put in place a system whereby parties can act independently of the Courts, only coming to the Court in the event of difficulties. One of those difficulties could be enforcement, and indeed, it is in that manner that this matter presently comes before the Court.
It is in my view a matter where that which has been done in an effort or attempt to comply with the relevant sections and subsections requires close examination, and perhaps interpretation, to ascertain what is required by the legislation and what has been done in this present case.

Brief Background

Before turning to the law, a very brief background to this case may be set down as follows. The husband was born in March 1959 and the wife in May 1962. There is argument between the parties as to when they married, the wife asserting it was on 11 February 1998 and the husband asserting it was 5 June 1998. To my mind, nothing turns on the date and it is common ground that that marriage occurred in Korea. There are two children of the marriage, E, born in May 1996 and L, born in May 1999. The parties separated on 7 October 2004, the wife asserting that permanent separation occurred some three days later. The parties clearly executed a document on 3 November 2004, that document of course being the subject of this present stanza of proceedings. On 30 March 2005, as I have said already, the wife commenced her proceedings for enforcement.

The Law to be Applied

Binding financial agreements are dealt with in Part VIIIA of the Family Law Act, commencing at section 90A to section 90Q. Much of the argument I have heard today has been centred on section 90G and its subsections. Section 90G is in my view quite clear in its terms and deliberate in its intentions. The section provides as follows:-
“(1)       A financial agreement is binding on the parties to the agreement if, and only if:
(a)   the agreement is signed by both parties; and
(b)   the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i)the effect of the agreement on the rights of that party;
(ii)the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement; and
(iii)[repealed]
(iv)[repealed]
(c)   the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(d)   the agreement has not been terminated and has not been set aside by a court; and
(e)   after the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.
Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.
[subs (1) am Act 138 of 2003 s 3 and Sch 5 item 2 opn 14 Jan 2004]
(2)            A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.”
Prior to January 2004 there had been two further subsections, being subsections (b)(iii) and (b)(iv). I mention those subsections for reasons that will become apparent later in these reasons for judgment.
Subsection (c) provides for an annexure to the agreement containing a certificate signed by the person providing the independent legal advice, stating the advice was provided. Subsection (d) has no relevance. Subsection (e) provides that after the agreement is signed the original agreement is given to one of the parties and a copy to the other. Subsection (2) provides that the Court may make such orders for enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.

Discussion

To my mind, the words that appear in section 90G(1) ‘if and only if’, are words of real significance. They have a meaning. They import a requirement for a level of compliance, if the agreement is to be binding, that is clearly a standard or level above and beyond what might be described as substantial compliance. Those words ‘if and only if’ make it clear that each of the parties must ensure that that which is required to be contained and dealt with in the agreement, and the annexures to it, is in fact contained, appropriately and completely. Compliance must therefore be a full compliance, satisfying the statutory requirements.
Something approaching full compliance, or something that if looked at in a less than strict light, might come close to establishing compliance, is not enough. Clearly, the legislation intended that if this method of parties resolving their differences was to be used without any supervisory power of a Court, in a situation where parties’ rights were to be affected, then that which was to be done had to be done fully in compliance with that which the statute set out and required.
I will turn to deal with the various subsections. Subsection 90G(1)(a) is clearly met here. The agreement is signed by both parties.
Subsection 90G(1)(b) in its subsections is the hub of this present matter. The subsection requires that the agreement must contain, in relation to each party, a statement to the effect that that party has been provided, before the agreement was signed, certain advice.
It is submitted to me on behalf of the husband that the agreement simply does not contain such a statement. So far as the agreement is concerned, what I am left with is to be found in two particular paragraphs. Those paragraphs are 1.12 and 1.15. Paragraph 1.12 is in the following terms:-
“Both the Husband and the Wife have had independent legal advice and the opportunity of obtaining independent financial advice under and in relation to their respective rights pursuant to the Family Law Act 1975 and they have been informed of the provisions of Section 79 and Section 75(2) of the Family Law Act and of the consequences of entering into a Financial Agreement pursuant to Section 90C of the Act and have each sought and received advice from their respective legal advisors of the matters referred to in Section 90G of that Act and have relied on that advice in deciding to enter into this Deed of Agreement (“this Agreement”).”

What is made clear by that paragraph is that the parties have had independent legal advice and the opportunity of obtaining such advice. As to their respective rights pursuant to the Act, they have been informed of the provisions of section 79 and the consequences of entering into a financial agreement pursuant to section 90C of the Act. Each has sought and received advice of the matters referred to in section 90G of the Act.
Now, to my mind that presents a problem because I am satisfied that when one turns to the certificates and looks at the matters set out therein in numbered paragraphs 1, 2, 3 and 4, that which was explained to the parties was not that which was required pursuant to the provisions of subsection 90G(1)(b)(i) and (ii) at the time that the explanation was given. Rather the certificate asserts that what was explained to each of the parties was that which had been set out in subsection 90G(1)(b)(i), (ii) and (iii) and (iv) prior to the amendment in January of 2004.
I then turn to paragraph 1.15, that says that each party acknowledge he or she has been independently advised concerning the following matters:-
·     the effect of this agreement on the rights of the parties to apply for an order under Part VIII and various sections
·     whether or not at this time it is to the advantage financially or otherwise of each party to make the agreement
·     whether or not at the time it was prudent
·     whether or not it was fair and reasonable.
Mr Harrison very persuasively says that if I look at paragraph 1.15.2 particularly I can take that to mean that the advice that was given was whether or not the agreement was to the financial advantage or otherwise of the husband. He argues that those words in that form must mean, if the advice was given as to financial advantage or otherwise in a financial sense, that 'otherwise' must mean disadvantage. On the face of it there is some force in that argument. The certificate however omits commas that clearly appear in the repealed subsection. That subsection referred to advice as to whether the agreement was to the advantage, financially or otherwise, of the party receiving the advice. For what it is worth, the certificates annexed also contain the commas where I have indicated.
I am not able to be satisfied therefore that paragraph 1.15.2 of the agreement can of itself establish to me that the advice that was given was advice that meets the requirements of the existing subsections (1)(i) and (ii).
It was further put to me by Mr Harrison that the certificates themselves form part of the agreement and would overcome any difficulty or shortcoming if the agreement, not including the annexures, did not meet the required test. It was put that the annexed certificates set out that which is required to be set out, that is, a statement that the party had been provided requisite legal advice in compliance with the relevant subsections. To my mind, that which is in the certificates cannot cure a defect in the body of the document. I am satisfied, as I have already expressed, that the relevant subsection requires that there is contained in the agreement a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in the annexure, the relevant information. To my mind, that means that the certificate sets out that which has already been done. It cannot stand as independent evidence of the fact that something was contained in the agreement when the agreement itself is silent.
In any event, the certificates by each of the solicitors, as I have already indicated, deal with the requirements of section 90G(b) as it was prior to the Amendment Act which abolished subsections 90G(b)(iii) and (iv). The occurred in January 2004. The document and certificates the subject of these proceedings came into existence in November 2004. It seems that the solicitors, and I say this with the greatest of respect to them, were both working with and from precedents that were out of date at the time they provided those certificates, and indeed at the time the agreement itself was prepared. It seems that those precedents contained matters which may well have previously been required by the Act as it previously stood, which was, I suspect, the time at which the precedents were prepared.
The certificates as they appear leave me with some real concerns. I will deal with each of the matters set out in the certificates in order. Numbered subparagraph (1) to me, and with great respect to the authors of those certificates, is meaningless. Subparagraph (2) I have already dealt with to some extent. I am satisfied that what is meant by the certificate as to what was explained, was whether it was to the advantage, financially or otherwise, of the person to whom the certificate was supplied to enter into the agreement. It was obviously explained on the face of the certificate that it was prudent for the party to enter into the agreement. Finally, it was explained that at the time and in the light of circumstances foreseeable, the provisions of the agreement were fair and reasonable.
Even when one combines (2), (3) and (4), in my view, and regrettably, they fall short of me being able to be satisfied that at the time the husband signed the agreement there had been explained to him the advantages and disadvantages of him entering into the agreement. It may well be that the advice he received enabled him to form some views as to what should and should not be done. However, the certificate of each of the solicitors falls short of satisfying me that there has been full compliance with the requirements of the relevant subsections as to the advice that must be provided and must have been provided before the agreement was entered into, if the agreement was to be a Binding Financial Agreement.
A matter that causes me further concern and to some extent seems to lay a taint over the whole of the document, and by that I mean the agreement and the annexures, is the statement by each of the solicitors that they have explained the document to their client before their client signed the agreement ‘(although I did not personally witness him [her] sign the agreement)’. It is clear that Mr McKay has witnessed the signature of the wife on the ‘Deed of Financial Agreement pursuant to section 90C Family Law Act 1975 (as amended)’. It is clear that Mr Bannerman witnessed the signature of the husband on the same document. However on the face of the certificates, both solicitors certify that they did not witness the party for whom they were acting sign the agreement. The effect of that is that the solicitors are asserting that they witnessed signatures to a document that they did not see affixed to that document. Knowing both solicitors involved, I find that very difficult to believe.
However I am left in the position of having a very uncomfortable suspicion that the precedent that has been used has not been properly amended. I am further left unable to state with any certainty what was actually done and what was actually explained to each of the parties and the manner in which the document was actually executed and witnessed.

Conclusion

It must follow from what I have just said that I am not satisfied that in all the circumstances of this case the deed of agreement entered into between the parties on 3 November 2004 as to its contents and execution is binding upon them. Put another way, I am satisfied that the document entered into that day is not a binding agreement within the meaning of section 90G(1) of the Family Law Act (1975) (as amended).

There were a number of other arguments that were put to me. One dealt with the provisions of section 90DA and the requirement to execute a further agreement described in that section as a separation declaration. Having regard to the matters I have already dealt with I do not believe it is necessary for me to make a determination in respect of that matter, nor do I need make a determination in respect of the possession of the original and copies as put to me by Mr Kearney.
Now that means, so that there can be no misunderstanding, that I have found on the technical basis, that the agreement does not bind the parties. That to my mind, and subject to any correction I receive from Mr Kearney and Mr Harrison, means that no investigation pursuant to the provisions of section 90K of the Act is required and the matter proceeds from this point as a section 79 property application with no further preliminary steps required or necessary.

Orders and Directions

Accordingly, I direct that the parties attend upon the Listing Director to obtain a hearing for three days on the issues of parenting and property orders sought by each of the parties.
The wife's application for enforcement contained in her application filed on 30 March 2005 is dismissed.
I will reserve that application [for costs of the enforcement application of the wife], to be heard by the trial Judge. If the trial Judge is not content to do that and says I have created a situation and therefore I should determine it, I am more than happy to have the matter relisted before my by arrangement on that issue.

I certify that the 40 preceding

paragraphs are a true copy of the reasons for
judgment herein of
His Honour JUSTICE COLLIER

Associate

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as J & J