JOHANSON & JOHANSON
[2018] FamCA 355
•23 May 2018
FAMILY COURT OF AUSTRALIA
| JOHANSON & JOHANSON | [2018] FamCA 355 |
| FAMILY LAW – PROPERTY SETTLEMENT – Where the husband sought a declaration that the parties, by their conduct, have abandoned the Financial Agreement dated 24 January 2014 – Where the parties negotiated in good faith but were unable to resolve their current dispute – Where the wife did not abandon her rights pursuant to the 2014 Financial Agreement – Where even if the Court accepted a contract was entered into in January 2018 that agreement would not be enforceable pursuant to the Family Law Act nor under the equitable jurisdiction of the Supreme Court of Queensland – Concluded that the application of the husband for relief on the grounds of abandonment has not succeeded and should be dismissed – Ordered that the husband’s application that the parties have abandoned the financial agreement dated 22 January 2014 is dismissed – Ordered that the Wife’s Application and the balance of the Husband’s Response be reallocated trial dates | |
| Evidence Act 1995 (Cth) s 131 Family Law Act 1975 (Cth) ss 90D, 90E, 90J | |
| De Soysa v De Pless Pol (1912) AC 194 Garvey & Jess [2016] FamCA 445 Masters v Cameron (1954) 91 CLR 353 Summers v The Commonwealth (1918) 25 CLR 144 |
| APPLICANT: | Ms Johanson |
| RESPONDENT: | Mr Johanson |
| FILE NUMBER: | BRC | 6694 | of | 2017 |
| DATE DELIVERED: | 23 May 2018 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Cleary J |
| HEARING DATE: | 12 and 13 April 2018 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Linklater-Steele |
| SOLICITOR FOR THE APPLICANT: | Best Wilson Buckley Family Law |
| COUNSEL FOR THE RESPONDENT: | Mr Matthews QC and Mr Ferraro |
| SOLICITOR FOR THE RESPONDENT: | O’Shea & Associates Lawyers |
Orders
The application contained in the Amended Response of the husband filed 9 March 2018 [order 2] for a declaration that:
By their conduct the applicant and the respondent have abandoned the financial agreement dated 22 January 2014,
is dismissed.
The Amended Application of the wife filed 9 March 2018, and the balance of the Amended Response of the husband filed 9 March 2018, is referred to the case managing judge for reallocation of trial dates.
The Court Notes that
(A)The husband is not making payments in accordance with the terms of the Financial Agreement dated 22 January 2014 nor in relation to the agreement asserted by the husband to have been reached by the parties on 18 January 2018.
(B)The husband through his counsel expressed willingness to cooperate in doing everything he can to expedite a final hearing.
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 Johanson & Johanson 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.
| FAMILY COURT OF AUSTRALIA AT NEWCASTLE |
FILE NUMBER: BRC6694/2017
| Ms Johanson |
Applicant
And
| Mr Johanson |
Respondent
REASONS FOR JUDGMENT
Introduction
The application heard by me on 12 and 13 April 2018 was one brought by the husband for interlocutory relief. It was in these terms:
2. A declaration that, by their conduct, the Applicant [wife] and the Respondent [husband] have abandoned the Financial Agreement dated 24 January 2014.[1]
[1] Amended Response filed 9/03/2018
I have come to the conclusion that this application must fail for the reasons that follow.
The consequence of that outcome is that the competing final applications of the parties in relation to enforcement of the Financial Agreement [wife] and setting aside of that agreement [husband] remain to be heard.
The loss of these April 2018 hearing dates has created potential injustice for the wife. She filed her application for enforcement and declaration of validity in July 2017. Despite being amended in March 2018 [in order to correct mathematical calculation of money said to be owing to her by the husband] the application is unchanged in its intent.
Through her counsel the wife sensibly, in my view, did not oppose the application of the husband for the relief sought (namely, abandonment of agreement) being determined summarily and before the final hearing. The wife sought summary dismissal.
The final proceedings should now be heard as expeditiously as possible.
Counsel for the husband indicated at the conclusion of submissions that were the husband to be unsuccessful, senior counsel’s instructions were to, “cooperate in doing everything we can to expedite a hearing”.
Final Application and Response
By her Amended Initiating Application the wife Ms Johanson, seeks the following orders and declarations:
i)That, pursuant to section 90G(1) of the Family Law Act1975 (Cth) (the Act), it is declared that the Binding Financial Agreement entered between the parties dated 22 January 2014 (the financial agreement) is valid, binding and enforceable on the Applicant and the Respondent.
ii)That, pursuant to 90KA(c) of the Act, clause 4.2(a) of the financial agreement regarding the payment of spousal maintenance to the applicant by the respondent is to be enforced as if it were an order of the Court.
iii)That the respondent owes to the applicant an amount of $119,713 pursuant to clause 4.2(a) of the financial agreement together with the sum of $3,993.91 being interest calculated as follows: [subparagraphs (a) to (k) inclusive omitted here].
iii)That pursuant to section 90KA(c) of the Act clause 5.2(o) of the financial agreement regarding the payment of premiums for a life insurance policy in the Applicant’s name is to be enforced as if it were an order of the Court.
iv)That the Respondent pay the Applicant’s costs of and incidental to these proceedings.
v)Any other such order.
By his Amended Response filed 9 March 2018 the husband Mr Johanson, seeks an order which appears to conflate two declarations:
1. That, pursuant to section 90G of the Family Law Act 1975 (Cth), the Financial Agreement between the parties dated 22 January 2014 is declared void and unenforceable by the Applicant against the Respondent.
Probably the husband is seeking a declaration pursuant to s 90G(1)(b) of the Family Law Act 1975 (Cth) (“the Act”) that the financial agreement signed by the parties on 22 January 2014 is not binding on the parties, or if binding an order pursuant to s 90K(i)(b) of the Act that the Financial Agreement be set aside on the basis that it is void and unenforceable.
The Evidence
The documents relied on in respect of the application were as follows:
The [Applicant]
(a)Amended Initiating Application filed 9/03/2018;
(b)Affidavit of the wife filed 9/03/2018;
(c)Financial Statement of the wife filed 9/03/2018;
The [Respondent]
(d)Amended Response filed 9/03/2018;
(e)Affidavit of the husband’s current solicitor Thomas Daniel O’Shea filed 9/03/2018.[2]
[2] Exhibit 5
Chronology of Relevant Events
The parties were married for 23 years from 1989 to 2013. They have three adult children. The parties separated on 22 February 2013. Both parties are health professionals.
On 22 January 2014 the parties entered into a Financial Agreement pursuant to s 90C of the Act (“the 2014 agreement”).
The wife contends that the 2014 agreement is binding on the parties. The husband now asserts that it is not and should be set aside.
There were a raft of adjustments of interests in property[3] which were effected by the parties in accordance with the terms of the 2014 agreement.
[3] Affidavit of the wife filed 9/03/2018, par 13(a) to (i)
Areas of Default Regarding The 2014 Agreement
There was provision for payment by the husband to the wife of spouse maintenance in the sum of $130,000 per annum, monthly in the sum $10,833. These payments were to continue until the husband reached the age of 64 [in May 2026]. The husband made the payments for about three years. The last payment was on 28 March 2017.
There was also provision for the husband to pay premiums on a life insurance policy not to drop below $1 million until the husband reached aged 64. In November 2016 the husband ceased paying the premiums on the insurance policy. The policy lapsed three months later in February 2017.
In December 2016 the wife contacted the husband directly about the life insurance premiums. He responded directly to her that he no longer considered that the state of his health justified a life insurance policy, and bluntly stated he would no longer pay the premiums.[4]
[4] Affidavit of the wife filed 9/03/2018, Annexure SJ-3
Unsurprisingly, on 20 January 2017 solicitors for the wife initiated correspondence with the husband about non-compliance and arrears.
On 30 January 2017 the husband himself responded to the solicitor for the wife in these terms. He confirmed his intention to no longer pay the insurance policy and closed with this paragraph:
I request that either by consent/mediation or otherwise we vary the terms of the current Financial Agreement. In doing so you will be aware that I will need full financial disclosure from [Ms Johanson] and equally I will provide the same. This will enable a new Financial Agreement that is fair and reasonable to all parties to be made.[5]
[5] Affidavit of the wife filed 9/03/2018, Annexure SJ-5
The husband raised three matters in that letter:
(1) An adverse change in his own financial position;
(2) An assertion that the 2014 agreement was signed under duress by him; and
(3) A proposal for variation of the terms of the 2014 agreement.
On 3 July 2017 the wife filed an Initiating Application seeking orders for enforcement of the 2014 agreement and a declaration of validity.
On 27 July 2017 the husband filed a Response seeking declarations earlier referred to in relation to whether the agreement was binding and having it set aside.
On 17 August 2017 the parties agreed to mediation.
On 31 October 2017 a mediation was held. Whether or not it was done for that reason, mediation was in accord with the provisions of the 2014 agreement.[6]
[6] Financial Agreement dated 22/01/2014, par 8.3
The solicitor now instructed by the husband says this:[7]
At the mediation multiple offers were exchanged each of which involved the abandonment of the existing financial agreement and a new agreement to take its place.
[7] Affidavit of Thomas O’Shea filed 9/03/2018, par 8
It is agreed by the wife that she entered into negotiations for a new financial agreement. Crucially it was to replace the 2014 agreement. By law a new binding agreement would be necessary before any extant agreement could be terminated.[8]
[8] Family Law Act 1975 (Cth) s 90J(1) and s 90C(4)
There was no agreement reached in mediation.
In December 2017 proposals and responses were exchanged by the solicitors for each party. For the purposes of this application all this correspondence became part of the evidence.
An application pursuant to sections 131(2)(f) and 131(2)(i) of the Evidence Act1995 (Cth) was made and granted for the relevant documents [solicitor’s correspondence] to become part of the evidence. That was extended to the period after 18 January 2018 over opposition of the husband.
Those documents, later in time, were released for the same reason, that is, to understand what the negotiations were between the parties over that period.
The husband asserted that an agreement was formed by 18 January 2018 and following changes were variations only. On that basis it was argued there should be no further release of documents beyond that date. However, as the case for the wife was that there was a continuous negotiation post-mediation to March 2018 all documents were admitted into evidence.
I have therefore read, or had the opportunity to read, all of the correspondence including settlement offers.
On 15 December 2017 the husband made an offer as follows:
(a)He will pay your client $10,000 within 7 days of entering into a formal Financial Agreement recording these on terms satisfactory to the parties;
(b)Payment of identified credit card debt.
(c)Contribution to legal fees in a certain amount;
(d)Monthly payments.
The offer was said to be “entirely conditional upon finance approval which is satisfactory to my client in his unfettered discretion”.
Accordingly, the whole proposal was conditional on the husband borrowing from the bank on terms satisfactory to himself. The offer was expressed to be open until close of business on 5 January 2018.
It is an agreed fact that at all times the offers and counteroffers were for terms less financially advantageous to the wife than the terms of the 2014 agreement. This is a significant matter in assessing how likely it was that the wife’s behaviour was consistent with abandonment of that agreement.
On 10 January 2018 the wife’s solicitors responded. The [conditional] offer had by then, on its own terms, lapsed. This letter contained what was described as an “Offer of Settlement”. It was, however, a counteroffer quite different in its terms to the proposal of 15 December 2017. A response within seven days was requested.[9]
[9] Affidavit of Thomas O’Shea filed 9/03/2018, TDO-2
On 15 January 2018 solicitors for the husband responded.[10] There was a detailed response to each separate item. The offer was no longer “conditional on finance” as the finance for the husband had been approved. Importantly, this statement was made:
7.The parties will enter into a Financial Agreement and consent to orders recording these terms within 21 days of acceptance.
[10] Affidavit of Thomas O’Shea filed 9/03/2018, TDO-3
This appears to be a willingness to enter a further Financial Agreement pursuant to the Act (presumably s 90D) and/or to consent orders made by the Court presumably after a Termination Agreement (s 90J(i)(b)).
On 16 January 2018 there is a file note which refers to payments commencing, “… upon signing the BFA” and “she [the wife] proposes termination agreement, new financial agreement for revised maintenance and orders to deal with the other payments under the deal”. [11]
[11] Affidavit of Thomas O’Shea filed 9/03/2018, TDO-4
On 18 January 2018 the solicitors for the wife wrote in terms which were the subject of cross-examination and of lengthy and detailed submissions. Counsel for the husband submitted that it was this letter that identified an agreement such that the earlier 2014 agreement was thereafter abandoned by both parties. Great emphasis was placed on these words. The letter said this:[12]
It appears that the parties have now reached an agreement in relation to the terms of settlement to resolve the proceedings currently listed before the Family Court.
(The reference to “proceedings” was a reference to the wife’s enforcement application and the husband’s application to set the 2014 agreement aside).
[12] Affidavit of Thomas O’Shea filed 9/03/2018, TDO-5
In my view, the negotiation was still underway about some aspects of new arrangements. The final paragraph of that letter is as follows:
We will commence preparing the necessary settlement documents, namely, the Financial Agreement, (including the termination agreement) however await your response.
That closing statement is consistent with the position at law. The parties could not enter into a new agreement which would be binding on them unless one of two things happened. Either the making of a written Termination Agreement in respect of the 2014 agreement, or the making of a new Financial Agreement, which included a provision to the effect that the earlier agreement was now terminated.
Submissions on behalf of the husband were made that the agreement of 18 January 2018 was a contract and that the conduct of both parties entering into that contract was consistent with abandonment of the earlier agreement. I was taken to the decision of the High Court in Summers v The Commonwealth[13] a decision reported just 100 years ago.
[13] (1918) 25 CLR 144
The case involved a contract to supply Australian marble for the erection of new Commonwealth offices in London (Australia House). The plaintiff was unable to supply the necessary materials. Relevantly, his Honour Isaacs J said this:
Whatever the terms of a contract may be it is possible for the parties so to conduct themselves as mutually to abandon or abrogate it.
The case of De Soysa v De Pless Pol[14] was referenced. Nothing in the nature of rescission had occurred, neither repudiation nor refusal to perform. Lord Atkinson for the Privy Council said of that situation:
One party to a contract is not bound to give to the other unlimited time after a day named to do that which the other has contracted to do.
There must be some point of time at which delay or neglect amounts to refusal. In truth, the project seemed to a great extent, if not altogether, abandoned by all the parties concerned.
[14] (1912) AC 194
Isaacs J expressed the opinion that was the legal position for Summers & Commonwealth:
Informally, but effectively, the parties have so acted to each other as to abandon or abrogate the contract.
In the Summers’ case there was a period of two years after the agreement towards the end of which the Commonwealth department procured marble from another source. The decision does not, in my view, bear directly on this case.
Assuming that an agreement was reached on 18 January 2018 there was a period of less than two months following during which there was constant exchange of proposals and counter-proposals until the wife withdrew from the process on 9 March 2018. There was no delay or neglect of an agreement, if there was one.
The conduct of neither party is consistent with abandonment of a contract, if there was one, which, on the facts, does not appear to be the case. Rather there was agreement in principle. All subsequent correspondence during February 2018 was categorised by the husband in submissions as containing variations to the contract only.
I was referred to the decision of the High Court in Masters v Cameron.[15] That decision is authority for the principle that when an agreement was reached (in that case for the sale of real property) the words “Subject to the preparation of a formal contract of sale acceptable to the solicitors of the respondent on the terms and conditions set out and to the giving of possession”, did not render the agreement conditional.
[15] (1954) 91 CLR 353
In response to this submission the wife submitted as follows:
The 2014 agreement continued to operate unless the parties terminated that agreement in accordance with the provisions of the Family Law Act.
In that sense, the 2014 agreement was incapable of being abandoned without the legislative steps being taken. That is, the signing of a Termination Agreement, or a fresh agreement compliant with the Act specifically terminating the prior one. In my view, that must be correct.
To put it another way the best evidence of abandonment of the 2014 agreement would be the execution by both parties of a new Financial Agreement pursuant to s 90D of the Act (in this case where the parties have now divorced). Had it been the case that both parties had allowed significant time to elapse with non-compliance on one side and no step being taken on the other, then such conduct might fall within the authorities.
I further take into account that although the husband, through his counsel, stated himself to be ready, willing and able to proceed with the new agreement he is not making payments pursuant to its terms. The stated reason for not doing so was that the husband was waiting for the wife to sign the new agreement. The significance of her signature would be the termination of the 2014 agreement under which the husband has obligations which are not presently being met.
The submission was that the agreement was complete between the parties on 18 January 2018. Completeness is a factual matter for assessment by the Court.[16] Further it was contended that by reaching that agreement both parties had abandoned their rights pursuant to the 2014 agreement.
[16] Garvey & Jess [2016] FamCA 445
The evidence does not support that submission. At all relevant times the wife was clear to say that she was protecting her position under the 2014 agreement until new agreements were signed by both. She had valuable rights under the 2014 agreement. For instance, on 7 February 2018 the wife opposed the Court being notified that the matter had settled:[17]
Should, for whatever reason the agreement not be finalised, we would require the matter to proceed to the case management hearing and the hearing in April.
[17] Affidavit of Thomas O’Shea filed 9/03/2018, Annexure TDO-10
The matter reached the stage of a proposed agreement pursuant to ss 90D, 90E and 90J of the Act being prepared by the wife and signed by the husband. In relation to reduced maintenance for the wife the 2014 agreement was to be terminated. There were also to be consent orders in relation to other matters.
The issue of timing came up between the solicitors. For the husband it was contended, as it was in these proceedings, that the parties had:[18]
…entered into a binding agreement of the kind identified in the 2nd limb of Masters v Cameron. The agreement comprises a set of terms one of which is a term requiring them to enter into documents within the said 21 day timeframe.
[18] Affidavit of Thomas O’Shea filed 9/03/2018, Annexure TDO-11, email sent 7.02.2018 at 5.23 pm
On 8 February 2018 when the solicitors agreed to extend the date for execution of the documents the solicitor for the wife said this:[19]
Our client’s agreement to extend that date however should not be considered as a waiver by our client of her rights to proceed with the hearing in April if the settlement documents are ultimately not agreed to.
[19] Affidavit of Thomas O’Shea filed 9/03/2018, Annexure TDO-11, email sent at 9.10 am
This must be correct. What the wife had not done was to enter into a binding agreement to give up her existing rights in January 2018, that is, before a Termination Agreement. She was actively considering giving up her rights but had not given them up in January 2018 and ultimately did not do so.
Subsequently, there were further discussions between the parties’ legal representatives about superannuation and the inclusion of the husband’s new wife as a party.[20]
[20] Affidavit of Thomas O’Shea filed 9/03/2018, Annexures TDO-12, 13 and 14
On 19 February 2018 the solicitor for the husband quite properly asked the solicitor for the wife for a confirmation:[21]
Please confirm that your client remains in agreement.
[21] Affidavit of Thomas O’Shea filed 9/03/2018, Annexure TDO-15
On 21 February 2018 negotiations continued.
On 22 February 2018 the solicitor for the wife indicated that her client had “become quite animated” about repayments of debt. The perusal by the wife of the husband’s documents led her to a preliminary view that his financial position was stronger than he had represented to her in earlier discussions.
On 22 February 2018 there was a proposal that the figure for legal fees of the wife to be paid by the husband be increased by an amount of $7,000 from $53,000 to $60,000.[22] The husband did not agree.[23]
[22] Affidavit of Thomas O’Shea filed 9/03/2018, Annexure TDO-19
[23] Affidavit of Thomas O’Shea filed 9/03/2018, Annexure TDO-20
Thereafter, the negotiations ceased and the wife was put on notice of this application likely being made by the husband.
Conclusion
I conclude that the parties negotiated in good faith between November 2017 and 8 March 2018, but were unable to resolve their current dispute by entering into a further Financial Agreement and auxiliary consent orders or at all. I do not accept that the wife abandoned her rights pursuant to the 2014 agreement on 18 January 2018 or at all.
I do not accept that she could agree to abandon those rights. She could not agree to effectively abandon those rights until statutory legal advice had been given and the 2014 agreement then terminated. It is for that reason that there are statutory protections around parties who enter into Financial Agreements which oust the jurisdiction of this Court. That is no less true for parties proposing to enter into a second Binding Financial Agreement and terminating a first one.
If it were the case that the Court accepted that a contract was entered into on 18 January 2018 where would that agreement be enforceable? Not in this Court pursuant to the Family Law Act. It would not fall within the compliance provisions of the Act. The equitable jurisdiction of the Supreme Court of Queensland, or possibly under accrued jurisdiction in this Court?
In any event, there has not been any enforcement application by the husband to any Court. One explanation, there are others, is that the “in principle” agreement changed, very much, between 18 January 2018 and early March 2018. Enforcing what were described by counsel for the husband as “simple variations” could be problematic.
For all these reasons I conclude that the application of the husband for relief on the grounds of abandonment has not succeeded and should be dismissed.
Orders are made accordingly.
I certify that the preceding seventy-four (74) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cleary delivered on 23 May 2018.
Associate:
Date: 23 May 2018
2
3
3