Knowles, W.R.G. and Knowles, M.D.

[1987] FamCA 5

In the marriage of KNOWLES, W.R.G. and KNOWLES, M.D.

(1987) FLC ¶91-811

Full Court of the Family Court of Australia at Perth.

Judgment delivered 24 March 1987.

Before: Simpson, Barblett and Strauss JJ.

Simpson, Barblett and Strauss JJ.: We have before us an appeal and cross-appeal from a decree of Anderson J. made on 22 December 1986.

By that decree his Honour ordered the dismissal of an application of the husband filed 16 September 1986 whereby the husband sought:

(i) the revocation of the approval of a maintenance agreement dated 25 March 1980 under sec. 87 of the Family Law Act (``the Act'') pursuant to subsec. (8)(b) and/or (c) of that section;
(ii) a determination pursuant to subsec. (11) of the same section that the maintenance agreement was ``not a valid and enforceable contract'';
(iii) the obligation of the husband pursuant to an agreement dated 2 March 1982 and registered pursuant to sec. 86 of the Act on 3 May 1982 be varied by reducing the quantum of periodic maintenance thereunder; and
(iv) the discharge of any arrears of maintenance pursuant to the last-mentioned agreement.

By his amended notice of appeal the husband sought in lieu of the decree appealed against that the approval be revoked and that it be determined that the agreement dated 25 March 1980 was not a valid and enforceable contract.

By her notice of cross-appeal the wife sought to set aside the order made by his Honour that there be no order for costs and to have an order for costs in her favour substituted in lieu thereof.

The relevant facts are within a narrow compass.

The parties were married on 14 April 1956 and separated on 17 December 1977. A decree nisi for the dissolution of the marriage was pronounced on 15 April 1979.

On 25 March 1980 the parties and G. Knowles Pty. Ltd. (``the company'') executed a maintenance agreement (``the sec. 87 agreement'') and a copy of the sec. 87 agreement is annexed hereto and forms part of these reasons for judgment.

The Family Court of Western Australia approved the sec. 87 agreement on 27 March 1980 pursuant to sec. 87 of the Act.

On 2 March 1982 the parties and the company entered into a deed (``the sec. 86 deed'') and a copy of that deed is annexed hereto. The sec. 86 deed was registered in the Family Court of Western Australia pursuant to sec. 86 of the Act on 3 May 1982.

On 5 September 1986 the wife filed an application by which she sought, inter alia, to enforce the payment by the husband of arrears of maintenance pursuant to the sec. 87 agreement. In response the husband on 16 September 1986 filed the application to which reference has already been made. It was the latter application which was determined by the trial Judge.

After reviewing the relevant history and making detailed reference to the provisions and the construction of both the sec. 87 agreement and the sec. 86 deed his Honour went on to say:

``The argument of the husband is that by implication the parties desired the revocation of the first deed approved under Section 87 of the Act and substituted therefor a second deed registered under section 86 of the Act. The matter is important from the husband's point of view because if the maintenance is payable pursuant to a deed registered under section 86 it can be varied by the court. However if it is a payment under a deed approved under section 87 of the Act, it can only be varied if the court revokes the approval of the deed. For the court to revoke the approval of the deed it must be satisfied that the approval was obtained by fraud, the parties desire the revocation of the approval, the agreement is void, voidable or unenforceable, or, in circumstances that have arisen since the deed was approved it is impracticable for the agreement or part of the agreement to be carried out. The only way that the husband could, in the circumstances of this case, obtain the revocation of the approval is to the court that it is desired by both parties. The wife is adamant that she does not desire the revocation of the approval, and it was argued on her behalf that the agreement registered under section 86 of the Act was not a rescission of the earlier agreement but merely a variation which did not affect the substance of the agreement in that it merely brought forward the time for payment of the lump sums due under the agreement with an appropriate calculation to take into account the early payment.''

The trial Judge then reviewed a number of authorities in the light of the circumstances of the proceedings before him and then expressed the following views:

``The argument of the husband is that execution of the second deed by the parties is evidence of a desire for the revocation of the approval. If that was their desire it is surprising that they did not express it specifically.

In Halsbury's Laws of England 4th Edition Vol. 9 para. 570 it is stated:

`Whether the parties intend to rescind or vary is to be determined in the light of all the circumstances of the case; but the parties will be presumed to have intended to rescind the old contract and to have substituted a new one wherever the new agreement is inconsistent with the original contract to an extent which goes to the very root of it.'

I was referred also to Chitty on Contracts and a number of other cases which while in point do no more than re-state the position.

As I see the matter a payment by the husband of the lump sum of money referred to in the second deed was in a sense a variation of the first deed although in terms of the benefits to be received by the wife there was no change at all. After payment of the lump sum the husband could in my view, have successfully pleaded accord and satisfaction if the wife had sought to enforce payment of the periodical amounts. This part of the deed was in my view, severable from that part that covered periodical maintenance. Other clauses were inserted to cover the consequences of the wife receiving her money sooner than contemplated by the original deed. In my view clause 6 is merely a re-affirmation of the maintenance provisions of the first deed. That the second deed is merely a variation of the first deed and not evidence of an intention to revoke it is confirmed by recital I of the second deed which says: `The parties have agreed to vary the terms of the deed as set out hereunder.'

When a court pursuant to the provisions of sec. 87 of the Family Law Act approves a deed, it is making a determination that it `is satisfied that the provisions of the agreement with respect of financial matters are proper'. (Section 87(3).)

An amendment to a deed that does not affect the finances of either party is not an amendment that in my view requires the approval of a court. If my view that clause 6 of the second deed is not merely a re-affirmation of the maintenance provisions of the first deed is wrong, and it was intended as a provision to make the maintenance variable by a court, that part of the deed apart from any other parts, would need the approval of the court in order to become effective. A regular maintenance variable according to the Consumer Price Index that is payable regardless of the financial circumstances of the husband is a financial matter. The fact that the payment can only be varied in the terms of the deed and that section 83 of the Family Law Act does not apply is a possible benefit to both parties. The wife is protected in the event that the husband's finances undergo a change for the worse, and the husband is protected from further applications by the wife in the event of her position deteriorating, or his position strengthening. If it is the intention of the parties to allow the court to vary the maintenance, that in my view, is a variation of which the court would have to approve in an application supported by both parties to revoke the approval of the first deed and approve the second. The application to revoke the approval of the first deed is not supported by both parties.

I am bound to say I find myself with some sympathy for the husband in the position in which he finds himself, but I have no alternative but to dismiss his application.''

It is to be noted that his Honour did not make specific reference to the alternative argument advanced on behalf of the husband before the trial Judge and before us, namely that the sec. 87 agreement is void, voidable or unenforceable by reason of the parties' execution, and the registration, of the sec. 86 deed according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts.

It was contended on behalf of the husband that in the result, after the execution and registration of the sec. 86 deed, the parties could then rely only on the sec. 86 deed in relation to both the property settlement and the maintenance obligation.

In regard to the effect of the approval of a maintenance agreement pursuant to sec. 87 of the Act counsel for the husband referred us to: Knight v. Knight (1967) 9 F.L.R. 484 at p. 486; Vandyke v. Vandyke (1976) FLC ¶90-139 at p. 75,657 (per Renolds J.A.) and pp. 75,661-75,662 (per Hurley J.A.); Drew and Drew (1985) FLC ¶91-601 at pp. 79,861-79,864; and Kokl and Kokl (1981) FLC ¶91-078 at p. 76,556.

We do not find it necessary to give detailed consideration to those authorities because they were cited to us merely in support of the proposition that, on approval, a maintenance agreement to which sec. 87 of the Act applies is ``just a contract'' and has no special quality in so far as it is relevant to the effect thereon of the sec. 86 deed.

It was then submitted on behalf of the husband that there had been rescission of the sec. 87 agreement and not a mere variation thereof.

Reference was made to Chitty on Contract (25th ed.) Vol. 1, para. 1485 where the following passage appears:

``Substituted contract. A rescission of the contract will also be implied where the parties have effected such an alternation of its terms as to substitute a new contract in its place. The question whether a rescission has been effected is frequently one of considerable difficulty, for it is necessary to distinguish a rescission of the contract from a variation which merely qualifies the existing rights and obligations. If a rescission is effected, the contract is extinguished; if only a variation, it continues to exist in an altered form. The decision on this point will depend on the intention of the parties to be gathered from an examination of the terms of the subsequent agreement and from all the surrounding circumstances. Rescission will be presumed when the parties enter into a new agreement which is entirely inconsistent with the old, or, if not entirely inconsistent with it, inconsistent with it to an extent that goes to the very root of it. The change must be fundamental and the question is whether the common intention of the parties was to `abrogate', `rescind', `supersede' or `extinguish' the old contract by a `substitution' of a `completely new' or `self-subsisting' agreement.''

We were then taken through a number of authorities including Morris v. Baron and Co. (1918) A.C. 1 at pp. 25-26 (per Lord Dunedin), p. 31 (per Lord Atkinson) and p. 38 (per Lord Parmoor); Tallerman and Co. Pty. Ltd. v. Nathan's Merchandise (Victoria) Pty. Ltd. (1956-1957) 98 C.L.R. 93 at pp. 112-113 (per Dixon C.J. and Fullagar J.), pp. 123-124 (per Williams J.), p. 135 (per Kitto J.) and p. 144 (per Taylor J.); and Williams Bros. v. Agius Ltd. (1914) A.C. 510 at p. 527 which do not appear to us to be of particular relevance.

In this matter the intention of the parties should be gathered from the documents themselves, namely the sec. 86 deed read in the light of the sec. 87 agreement.

In so far as the former document is concerned we refer to recital I which is in the following terms: ``The parties have agreed to vary the terms of the Deed as set out hereunder'' by which the parties themselves speak of a variation of the sec. 87 agreement. Then cl. 2 of the sec. 86 deed makes provision for payment to the wife of a specified sum ``in full satisfaction'' of the husband's obligations under cl. 2 of the sec. 87 agreement. That provision appears to us to prescribe a mode of satisfaction of the relevant property settlement obligations undertaken by the husband under the sec. 87 agreement.

Clause 3 of the sec. 86 deed seems to do no more than repeat the obligation which was placed on the wife by the provisions of cl. 6 of the sec. 87 agreement.

On payment of the amount specified in cl. 2 of the sec. 86 deed the husband and the company became entitled at law to the discharge of the mortgages given by them as security for the payment of the amount of the property settlement under the sec. 87 agreement and accordingly cl. 4 of the sec. 86 deed is merely declaratory of the legal position.

In so far as cl. 5 of the sec. 86 deed is concerned the obligation of the wife under cl. 8 of the sec. 87 agreement came to an end on the payment of the specified sum as before mentioned. The obligation of the wife under cl. 7 of the sec. 87 agreement to serve the company as a consultant had not expired as at the date of the sec. 86 deed and to that extent cl. 5 of the latter document contained a provision different from the terms of cl. 7 of the sec. 87 agreement. Nevertheless we do not consider that in itself is evidence of an intention to rescind the sec. 87 agreement. In any event there must be doubts as to the effectiveness of cl. 7 of the sec. 87 agreement because it is an agreement to agree. If that provision is ineffective it would be severable.

For present purposes cl. 6 of the sec. 86 deed is of considerable importance. That provision is in the main merely declaratory of the continuing operation of the maintenance provisions of cl. 10 of the sec. 87 agreement. However it also makes it clear that the provision for the suspension of maintenance by reason of substitute payments in cl. 12 of the latter document had ceased to be applicable. Once again we do not consider that provision evidences any intention on the part of the parties to rescind the sec. 87 agreement. Rather it is strong evidence to the contrary.

If cl. 7 of the sec. 86 deed is capable of bearing an effective meaning it is merely declaratory of the provisions of cl. 14, 15, 16 and 17 of the sec. 87 agreement.

Finally, cl. 8 of the sec. 86 deed in itself does not appear to us to carry with it any inference or evidence of intention to rescind the sec. 87 agreement. However, we will return to a consideration of sec. 86 of the Act and the effect of the agreement set out in cl. 8 of the sec. 86 deed that the latter agreement ``is a Maintenance Agreement for the purposes of Section 86 of the Family Law Act'' at a later stage.

We will now turn to a detailed consideration of the grounds of appeal.

As amended ground 1 reads as follows:

``The Learned Judge was wrong in law in holding that the only way that the husband could obtain the revocation of the approval of the S. 87 Deed is to (establish to the satisfaction of) the court that it is desired by both parties. The Learned Judge should have held that the husband could — subject to the proper exercise of the court's discretion — obtain the revocation of the S. 87 Deed by (inter alia) establishing that the S. 87 Deed was void, voidable or unenforceable within the meaning of S. 87(8)(c) of the Family Law Act 1975.''

We have already noted that the trial Judge did not make specific reference to the alternative argument advanced on behalf of the husband. Nevertheless the comments made by the trial Judge were at least to some extent relevant to the argument pursuant to sec. 87(8)(c), namely that the sec. 87 agreement is void, voidable or unenforceable.

In any event the failure on the part of the trial Judge to deal specifically with that aspect of the matter is no longer of any real moment.

Ground 2 of the amended notice of appeal reads as follows:

``2. The decision of the learned Judge that the Section 86 Deed is merely a variation of the Section 87 Deed and not evidence of an intention to revoke it was wrong in law and in fact.

Particulars

The learned Judge placed excessive reliance upon the words contained in Recital I of the Section 86 Deed and failed to take any or sufficient account of: —

(a) The repetition of Clause 10 of the Section 87 Deed in Recital G of the Section 86 Deed;
(b) The variation of the Appellant's obligation to pay moneys to the Respondent effected by Clause 2 of the Section 86 Deed when compared with Clause 2 of the Section 87 Deed;
(c) The release of the Respondent from her obligations under Clauses 7 and 8 of the Section 87 Deed contained in Clause 5 of the Section 86 deed;
(d) The reiteration in Clause 6 of the Section 86 Deed of the Appellant's obligation to pay maintenance for the wife as provided in Clause 10 of the Section 87 Deed;
(e) The provision in Clause 6 of the Section 86 Deed that all further payments by the Appellant to the Respondent shall be by way of maintenance;
(f) The provisions of Clause 8 of the Section 86 Deed, pursuant to which the parties agree that the Section 86 Deed is a maintenance agreement for the purposes of Section 86 of the Family Law Act and is registerable as such;
(g) The registration by the Respondent of the Section 86 Deed in the Family Court of Western Australia on the 3rd day of May, 1982; and
(h) The failure of the parties to affirm the provisions of the Section 87 Deed in the Section 86 Deed.''

If the sec. 86 deed is an enforceable agreement it is our view that it is a variation of the sec. 87 agreement. We are not persuaded that the trial Judge ``placed excessive reliance'' on recital I of the sec. 86 deed, nor do we think his Honour failed to take sufficient account of the factors otherwise particularised under that ground of appeal.

We will not elaborate further on that ground of appeal because it seems to us that the real issue on the appeal may be more conveniently dealt with in a consideration of the subsequent grounds of appeal.

The real question for determination on the appeal is raised by ground 3 which is in the following terms:

``3. The learned Judge erred in fact and in law in failing to hold that: —

(a) The Section 87 Deed has been rescinded by the parties and, accordingly, is void, voidable or unenforceable within the meaning of Section 87(8)(c) of the Family Law Act, 1975; and
(b) Further or in the alternative, the entry of the parties into the Section 86 Deed, and its subsequent registration in the Family Court of Western Australia, manifested a mutual desire on the part of each of them to be no longer bound by the provisions of the Section 87 Deed and, accordingly, the parties at all material times desired the revocation of the approval of the Section 87 Deed by the Family Court of Western Australia.

Given these findings, and given the learned Judge's comment that he finds himself with some sympathy for the husband in the position in which the husband finds himself, the learned Judge ought to have exercised his discretion in favour of revoking the approval of the Section 87 Deed pursuant to Section 87(8) of the Family Law Act, 1975.''

In essence the husband has to rely on the sec. 86 deed to establish rescission of the sec. 87 agreement. We have already made some comments in relation to the question of rescission. In that regard it is important to bear in mind the primary purpose of seeking a court's approval of a maintenance agreement under sec. 87 of the Act, namely:

``... no court having jurisdiction under this Act may make an order (other than an order under this section or an order in connection with the enforcement of the agreement) with respect to those financial matters unless the approval of the agreement is revoked.''

In our opinion, by entering into the sec. 86 deed, none of the parties to the agreements, that is the husband, the wife and the company, evidenced any intention to deprive the husband and wife of the protection afforded by the sec. 87 agreement, namely that both the husband and wife accepted the financial matters dealt with in the sec. 87 agreement in full satisfaction of all claims each had or may have against the other for maintenance or alteration of property interests.

We do not consider that on their proper construction the provisions of the sec. 86 deed evidenced an intention on the part of the parties thereto to rescind the sec. 87 agreement.

To this stage of these reasons we have assumed that the sec. 86 deed is an enforceable contract. However, despite the express provision contained in cl. 8 of that document to the effect that it is a ``Maintenance Agreement for the purposes of Section 86 of the Family Law Act'' it may well be a maintenance agreement to which sec. 87 of the Act applies.

The sec. 86 deed must be read together with the sec. 87 agreement. If we are correct in our view that the former agreement is a variation of the latter then the sec. 86 deed forms part of an agreement which makes provision ``to the effect that the agreement shall operate, in relation to the financial matters dealt with in the agreement, in substitution for any rights of the parties to the agreement under this Part'' (sec. 87(1) of the Act). It follows that the sec. 86 deed would have ``no effect, and is not enforceable in any way, unless it has been approved by the court'' (sec. 87(2) of the Act).

That difficulty in the path of the husband was referred to by the trial Judge when he made the following comments:

``I was also referred to by counsel for the husband to the 4th Edition of Guide to the Family Law Act by Nygh J. of the Appeal Division of the Family Court of Australia. In relation to modification of deeds approved under section 87 he says:

`Once the agreement is approved the parties cannot by mutual agreement vary its terms. If they wish to do so they must first obtain the revocation of the approval by consent under section 87(8)(b) and then have the new agreement approved containing the clauses they wish to have amended. If the parties rescind the agreement either expressly by mutual agreement or tacitly by conduct such as the resumption of cohabitation, which is inconsistent with the continuance of agreement or one party breaks an essential term of the agreement which breach is accepted by the other party as a repudiation the court may revoke its approval of the agreement under section 88(8)(c).''

We also refer to ¶30-740 in the CCH Australian Family Law & Practice Vol. I:

``The parties to a sec. 87 agreement may attempt to vary its terms by another agreement. For example, they may agree to delay maintenance payments for several months, or to replace periodic payments with a single lump sum, or to transfer money instead to a car. The legal effect of such variations is very unclear. For example, if the variation is a major or substantial one, then at least the following interpretations are possible:

• The substantial variation amounts to a mutual desire to revoke the agreement which in turn implies a desire to revoke the approval of the original agreement under sec. 87(8)(b). This leaves both parties free to apply for further financial orders under Pt VIII of the Act or mutually to apply to have the written variation approved under sec. 87.
• A substantial oral variation can be enforced pursuant to common law principles in the Family Court under sec. 87(11) or under the accrued jurisdiction of the Family Court (contraHennessy and Dunne (1984) FLC ¶91-583).
• The substantial variation if `in writing' can be ignored as having no effect under sec. 87(2). Thereby the original approved agreement remains in effect.
• Either party who seeks court assistance to enforce the original sec. 87 agreement contrary to the terms of the substantial variation will be denied such assistance.

Thus it is submitted (JHW) that any attempt to vary a sec. 87 agreement should itself be embodied in a sec. 87 agreement and immediately be submitted to the court for approval. Any other course of action leaves the legal interpretation of the variation open to too many possibilities.

Attempted variations may be subject to such legal uncertainty that one party may seek to resolve the stalemate by seeking revocation of approval for impracticable performance under sec. 87(8)(d).

As can be seen from the preceding examples, if sec. 87(8)(b) is given broad interpretation to include situations where there is an implied desire to revoke, then it may be used with some frequency.''

To return from the general to the particular, it seems to us that the sec. 86 deed amounted to no more than the recording of arrangements which both parties were prepared to accept in satisfaction in part of the obligations of the husband and wife under the sec. 87 agreement.

In so far as the suggested ``mutual desire'' of the parties for the revocation of the approval of the sec. 87 agreement is concerned we agree with the submission by counsel for the wife to the effect that the ``desire'' must be a present desire, that is, at the time of the application for revocation of the approval. It is clear enough that the wife did not desire the revocation at the time of the application nor at the time of the hearing.

In any event, for the reasons we have already outlined we do not consider that by entering into the sec. 86 deed, and by registering it in the Family Court of Western Australia, the parties exhibited a mutual desire not to be bound by the sec. 87 agreement. Accordingly it is not necessary for us to consider whether such an implied contractual desire for revocation would remain in effect despite the subsequent stance of one party opposing the revocation.

Ground 4 reads as follows:

``4. The learned Judge erred in law and in fact in holding that the part of the Section 86 Deed dealing with the payment of a lump sum to the Respondent was severable from that part of the Section 86 Deed dealing with periodical maintenance for the Respondent. The learned Judge should have held that the said provisions were not severable.''

We do not consider that there is a real question of severability in this matter. We reiterate our opinion that the provision in the sec. 86 deed dealing with the payment of an immediate lump sum to the wife was merely a method of satisfaction of the instalment payments in cl. 2 of the sec. 87 agreement.

Ground 5 reads as follows:

``5. The learned Judge erred in fact and in law in holding that Clause 6 of the Section 86 Deed is merely a reaffirmation of the maintenance provisions of the Section 87 Deed. The learned Judge ought to have held that the spousal maintenance provisions of the Section 86 Deed were fundamentally inconsistent with the provisions, purpose and approval of the Section 87 Deed and that Clause 6 of the Section 86 Deed creates a separate and valid and enforceable obligation to pay spousal maintenance, which obligation is susceptible of variation pursuant to the provisions of Section 83 of the Family Law Act, 1975.''

In our view his Honour was not in error in construing cl. 6 of the sec. 86 deed in the manner he did. The maintenance provisions in the sec. 86 deed were not ``fundamentally inconsistent'' with the maintenance provisions of the sec. 87 agreement.

In the section 86 deed the parties merely put on record what they considered adequate performance of the obligations undertaken in the sec. 87 agreement.

It follows that the bar on the Court making an order in respect of the maintenance of the wife continues in force.

Ground 6 reads as follows:

``6. The learned Judge was wrong in law in holding that the approval of the Family Court is required to give effect to a provision in a maintenance agreement made pursuant to Section 86 of the Family Law Act, 1975 which purports to vary a provision for spousal maintenance contained in an antecedent maintenance agreement made pursuant to Section 87 of the Family Law Act, 1975 and approved by the Family Court. The learned Judge ought to have held that such a provision in a maintenance agreement made pursuant to Section 86 of the Family Law Act, 1975: —

(a) Is valid and enforceable; and
(b) Is susceptible of variation pursuant to Section 83 of the Family Law Act, 1975.

The learned Judge ought also to have held that such a provision in a maintenance agreement made pursuant to Section 86 of the Family Law Act, 1975 rescinds the said provision for spousal maintenance contained in an antecedent maintenance agreement made pursuant to Section 87 of the Family Law Act, 1975.''

We have already disposed of this ground in our earlier general remarks and in particular in dealing with ground 3 of the amended notice of appeal.

Accordingly we do not consider there was any relevant error on the part of the trial Judge.

For the foregoing reasons we consider that the appeal of the husband should be dismissed.

In so far as the wife's cross-appeal in relation to the costs of the hearing before the trial Judge is concerned, we do not consider it has any merit. In our view his Honour's decision to make no order for costs in favour of either party was within the proper exercise of discretion. We would dismiss the cross-appeal.

In relation to the costs of the appeal we consider the wife should have her costs.

The orders of the Court are as follows:

1. That the appeal of the husband is dismissed.

2. That the cross-appeal of the wife is dismissed.

3. That the husband pay the wife's costs of the appeal.