Kostres & Kostres

Case [2009] FamCAFC 222

FAMILY COURT OF AUSTRALIA

KOSTRES & KOSTRES [2009] FamCAFC 222

FAMILY LAW - APPEAL – PROPERTY – BINDING FINANCIAL AGREEMENT – Whether the Federal Magistrate erred in enforcing terms of parties’ financial agreement – Where agreement entered into prior to parties’ marriage – Where agreement purported to deal with inter alia assets acquired during the marriage – Where parties mistakenly thought husband bankrupt at time agreement executed – Where parties purchased business and real property in wife’s name and name of trust in mistaken belief assets could not be purchased in joint names – Where no challenge in respect of compliance with the formal requirements of s 90G of the Family Law Act 1975 – Where Federal Magistrate determined the parties’ financial agreement was binding and should not be set aside – Where there was inconsistency in the reasoning of the Federal Magistrate – Consideration of the terms of the binding financial agreement – Consideration of the meaning of “acquire” – Where neither party’s legal representative before the Federal Magistrate referred to relevant authorities in relation to the question of acquisition of property as distinct from contributions to purchase price – Decision of the High Court in Calverley v Green (1987) 155 CLR 242 considered – Where the parties’ relied on s 90KA of the Family Law Act 1975 – Where the interpretation of the agreement contended by both parties required broad interpretation of the terms of the agreement but where each relied on differing interpretations – Where s 32 of the Judiciary Act 1903 applied– Consideration of general principles of contract law and interpretation – Where there was ambiguity in the terms found in clause 6 of the agreement – Held the terms of the agreement must accurately reflect the intention of the parties at the time of the making of the agreement and be unambiguous – The expressions used in the agreement must be clear and meaning certain – Where it was not possible for the Court to supply or correct the terminology of the agreement with appropriate certainty to give effect to the parties’ agreement – Discussion  of the importance of precision in drafting of financial agreements – Where the terms of the agreement ineffective – Where the Federal Magistrate erred in enforcing the terms of the agreement – Appealable error established.
FAMILY LAW - APPEAL – PROPERTY – BINDING FINANCIAL AGREEMENT – Whether the Federal Magistrate erred in excluding trust property as an asset dealt with by agreement – Where the Federal Magistrate did not refer to jurisprudence concerning treatment of trust assets as property for the purposes of s 79 of the Family Law Act 1975 – Where wife had effective control of the assets of the trust – Where trust property could have been considered as property of the parties or either of them for the purposes of s 79 – Where the Federal Magistrate erred in failing to deal with trust property – Appealable error established.
FAMILY LAW - APPEAL – PROPERTY…

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Kostres & Kostres [2009] FamCAFC 222
Case
[2009] FamCAFC 222
Decision Date

CaseChat Overview and Summary

The appeal in Kostres & Kostres involved a dispute between the husband and wife regarding the enforcement of a binding financial agreement (BFA) entered into prior to their marriage. The agreement was intended to cover assets acquired during the marriage, but the parties mistakenly believed the husband was bankrupt at the time of execution. This led to the purchase of a business and real property in the wife's name and a trust, as they thought joint names were not permissible. The Federal Magistrate found the agreement binding and enforceable, but the husband contested this decision.

The legal issues before the court included whether the Federal Magistrate erred in enforcing the terms of the BFA, particularly concerning the assets and the misunderstanding about the husband's bankruptcy. The court also needed to determine if the agreement was void, voidable, or unenforceable. Furthermore, the court had to address whether the Federal Magistrate properly considered the trust property as an asset and whether the agreement was void for uncertainty.

The court held that the Federal Magistrate erred in enforcing the terms of the BFA due to significant ambiguities and uncertainties in the agreement. The court found that the terms of the agreement were ineffective and ambiguous, leading to an appealable error. The court also determined that the Federal Magistrate failed to consider trust property as an asset, which constituted another error. Additionally, the court concluded that the agreement was void for uncertainty, thus setting it aside. The appeal was allowed, and the cross-appeal was dismissed. The matter was remitted to the Federal Magistrates Court for a rehearing, and the court granted the husband's application to adduce further evidence. Finally, costs certificates were granted to both parties for the appeal and rehearing.

Orders

Orders of the court

1.

The appeal against the orders made by Federal Magistrate Wilson on 17 October 2008 is allowed.

2.

The cross-appeal is dismissed.

3.

Order 2 of the orders made by Federal Magistrate Wilson on 17 October 2008 be set aside.

4.

The husband’s application be remitted for rehearing before a Federal Magistrate other than Federal Magistrate Wilson.

5.

That the husband be at liberty to make further written submissions in respect of the costs appeal (appeal No. NA 22 of 2009) by filing such submissions at the Northern Region Appeal Registry of the Family Court of Australia and serving them on the wife within 21 days of the date hereof.

6.

That the wife have a further 14 days in which to make written submissions in answer thereto by filing such submissions at the Northern Region Appeal Registry of the Family Court of Australia and serving them on the husband.

7.

That the husband be at liberty to reply to an answer by way of written submissions by filing such reply at the Northern Region Appeal Registry of the Family Court of Australia and serving it on the wife within a further 7 days.

8.

That each party endorse on the cover sheet of any submissions filed pursuant to Orders 5, 6 and 7, the date upon which a copy of that submission was served on the other party.

9.

That the Court grants to the appellant husband a costs certificate pursuant to section 9 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the appellant in respect of the costs incurred by him in relation to the appeal.

10.

The Court grants to the respondent wife a costs certificate pursuant to the provisions of section 6 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to the respondent in respect of the costs incurred by her in relation to the appeal.

11.

The Court grants to each party a costs certificate pursuant to the provisions of section 8 of the Federal Proceedings (Costs) Act 1981 (Cth) being a certificate that, in the opinion of the Court, it would be appropriate for the Attorney-General to authorise a payment under that Act to them in respect of the costs incurred by them in relation to the rehearing.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

It is also relevant that we set out the powers of the High Court in its original jurisdiction. These powers are found in Part IV of the Judiciary Act 1903 (Cth). Sections 31 and 32 of Part IV provide as follows: 31Judgment and executionThe High Court in the exercise of its original jurisdiction may make and pronounce all such judgments as are necessary for doing complete justice in any cause or matter pending before it, and may for the execution of any such judgment in any part of the Commonwealth direct the issue of such process, whether in use in the Commonwealth before the commencement of this Act or not, as is permitted or prescribed by this or any Act or by Rules of Court.32Complete relief to be grantedThe High Court in the exercise of its original jurisdiction in any cause or matter pending before it, whether originated in the High Court or removed into it from another Court, shall have power to grant, and shall grant, either absolutely or on such terms and conditions as are just, all such remedies whatsoever as any of the parties thereto are entitled to in respect of any legal or equitable claim properly brought forward by them respectively in the cause or matter; so that as far as possible all matters in controversy between the parties regarding the cause of action, or arising out of or connected with the cause of action, may be completely and finally determined, and all multiplicity of legal proceedings concerning any of such matters may be avoided. Before proceeding to summarise the Federal Magistrate’s findings it is appropriate that we record the difficulties which he faced in hearing this matter. The case which the husband sought to pursue at trial was not readily apparent from his amended application, and a number of the submissions made to the Federal Magistrate during the hearing, when he sought to clarify the exact bases on which relief was being sought were, in our view, confusing. He was not assisted by the wife’s response which sought in paragraph 1 relief “by way of property settlement”. The Federal Magistrate noted the change in the husband’s position as to the relief sought at paragraph 3 of his reasons as follows:Although no amendment was made to the application, at the commencement of the final hearing, counsel for the husband handed to the Court a document that reads:That the financial agreement is not binding on the parties (or either of them) or is otherwise unenforceable because:i)At the time the parties entered into the financial agreement they both were of the belief that the husband was an undischarged bankrupt and such fact was not disclosed in the financial agreementii)The effect of the belief in the husband’s bankruptcy in terms of the financial agreement could not and or was not explained to him in the context of s90G of the Family Law Actiii)It would otherwise be unconscionable for the husband to be bound by the financial agreement given the matters in (i) and (ii) herein and the fact that the consequences of his signing the financial agreement with his belief of bankruptcy was not know [sic] to him nor explained to him.

Ratio Decidendi

Legal Principle Established

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