FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Kun & Gang [2023] FedCFamC1F 389
File number(s): SYC 3674 of 2021 Judgment of: ALTOBELLI J Date of judgment: 19 May 2023 Catchwords: FAMILY LAW – PROPERTY SETTLEMENT – Financial agreements – Where the husband signed two financial agreements – Where the husband applied for a declaration that the second financial agreement is not binding, or alternatively that the agreement be set aside pursuant to s 90K of the Family Law Act 1975 (Cth) – Where the wife seeks for the husband’s application to be dismissed – The financial agreement is declared not binding pursuant to s 90G. Legislation: Family Law Act 1975 (Cth) ss 90C, 90G, 90K Cases cited: Abrum & Abrum [2013] FamCA 897
CGM Investments Pty Ltd v Chelliah (2003) 196 ALR 548; [2003] FCA 79
DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423; [1978] HCA 12
Hoult & Hoult (2013) FLC 93-546; [2013] FamCAFC 109
Division: Division 1 First Instance Number of paragraphs: 101 Date of hearing: 19 September 2022, 13–15 March 2023 Place: Sydney Counsel for the Applicant: Ms Carr Solicitor for the Applicant: Juris Cor Legal Counsel for the Respondent: Ms Coulton Solicitor for the Respondent: Goh Lawyers & Accountants ORDERS
SYC 3674 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR KUN
Applicant
AND: MS GANG
Respondent
order made by:
ALTOBELLI J
DATE OF ORDER:
19 May 2023
THE COURT ORDERS THAT:
1.Pursuant to s 90G of the Family Law Act 1975 (Cth) the financial agreement signed by the Applicant husband and the Respondent wife on 18 May 2018 is declared not binding on the parties.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Kun & Gang has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
These reasons for judgment explain the orders the Court has made in a dispute between a husband and wife in relation to a purported financial agreement under s 90C of the Family Law Act 1975 (Cth) (“the Act”).
BACKGROUND
The applicant is the husband (“the husband”) and the respondent is the wife (“the wife”). The husband was born in 1976 and is currently 46 years old. The wife was born in 1982 and…
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CaseChat Overview and Summary
The case of Kun & Gang involved a dispute between a husband and wife over the validity of a financial agreement made under section 90C of the Family Law Act 1975. The husband, who was born in 1976, and the wife, who was born in 1982, married in 2008, separated in 2017, and divorced in 2018. They have one child born in 2016. The dispute centred around two properties: the Suburb D property, which was owned by the parties as tenants in common and subsequently sold, and the Suburb F property, which was owned solely by the wife. The wife and husband signed two financial agreements, one on 7 December 2017 and another on 18 May 2018. The latter agreement was the subject of the present proceedings.
The court had to decide whether the second financial agreement was binding on the parties. The husband argued that he did not receive proper independent legal advice before signing the agreement, which was a statutory requirement under section 90G of the Act. The wife argued that the agreement was valid and should be enforced. The court found that the husband did not receive the requisite independent legal advice, which was both necessary and significant for him to fully understand the implications of the agreement. The court also found that the agreement was fundamentally unfair, leaving the husband with liabilities and the wife with all the assets. The court concluded that it would be unjust and inequitable to enforce the agreement, and therefore, it was not binding on the parties.
The court's decision was based on the husband's evidence that he did not fully understand what he was committing himself to by entering into the second financial agreement. The court accepted that the second financial agreement was fundamentally unfair and that the husband suffered greater prejudice than the wife if the agreement were to be held valid. The court also noted that the parties later entered into a divorce agreement in Country B, largely to the same effect as the second financial agreement, which led the court to infer that both parties must have had some reservation about the validity of the second financial agreement. The court's decision was in line with the statutory requirements of section 90G and the principles of fairness and justice.
The court had to decide whether the second financial agreement was binding on the parties. The husband argued that he did not receive proper independent legal advice before signing the agreement, which was a statutory requirement under section 90G of the Act. The wife argued that the agreement was valid and should be enforced. The court found that the husband did not receive the requisite independent legal advice, which was both necessary and significant for him to fully understand the implications of the agreement. The court also found that the agreement was fundamentally unfair, leaving the husband with liabilities and the wife with all the assets. The court concluded that it would be unjust and inequitable to enforce the agreement, and therefore, it was not binding on the parties.
The court's decision was based on the husband's evidence that he did not fully understand what he was committing himself to by entering into the second financial agreement. The court accepted that the second financial agreement was fundamentally unfair and that the husband suffered greater prejudice than the wife if the agreement were to be held valid. The court also noted that the parties later entered into a divorce agreement in Country B, largely to the same effect as the second financial agreement, which led the court to infer that both parties must have had some reservation about the validity of the second financial agreement. The court's decision was in line with the statutory requirements of section 90G and the principles of fairness and justice.
Orders
Orders of the court
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Background
Background to the litigation
These reasons for judgment explain the orders the Court has made in a dispute between a husband and wife in relation to a purported financial agreement under s 90C of the Family Law Act 1975 (Cth) (“the Act”).BACKGROUND The applicant is the husband (“the husband”) and the respondent is the wife (“the wife”). The husband was born in 1976 and is currently 46 years old. The wife was born in 1982 and is currently 41 years old. Both parties were born in Country B. The parties married in Country B in 2008, separated in Sydney on about 2 November 2017, and divorced in Country B in July 2018. The husband moved to Australia in early 2008 and the wife moved to Australia in mid‑2009. There is one child of the marriage, X (“the child”), born in 2016, who is now six years old. There are two properties relevant to this dispute. The first is C Street, Suburb D NSW (“the Suburb D property”). This property was owned by the parties as tenants in common and has now been sold. The second is E Street, Suburb F NSW (“the Suburb F property”). This property is owned solely by the wife and the mortgage is in her name, although it was purchased with joint funds and the parties were joint borrowers. The wife and the husband signed two financial agreements, one on 7 December 2017 (“the first financial agreement”) and the other on 18 May 2018 (“the second financial agreement”), which is the subject of the present proceedings. Both agreements will be summarised below. On 25 July 2018, the parties also signed a divorce agreement in Country B, which stipulated that all the joint property of the couple in the marriage belongs to the wife, and all the joint debt in the marriage belongs to the husband. The wife was to have full custody of the child, with the husband to pay $300 per week in child support. No submission was made about the relevance or significance of this agreement. The first financial agreement The following represents findings of the Court. The terms of the first financial agreement may be summarised as follows. The first financial agreement made 7 December 2017 provided that the husband be “individually liable for all monies due and owing pursuant to any mortgage secured over the [Suburb D] property, and all rates, tax and other relevant outgoing in respect to the [Suburb D] property until 31 May 2018”. It further stipulated that upon repayment of the mortgage, and within three months of the first financial agreement, the Suburb D property was to be sold with the net proceeds to be paid towards the mortgage of the Suburb F property. If the Suburb D property was unable to be sold after 31 May 2018, the husband was to allow the wife to re‑finance the parties’ joint mortgage over the Suburb D property to the wife’s sole name, and the husband was to transfer to the wife all of his right, title and interest in the Suburb D property. The wife listed the Suburb D property for sale in early 2018, but was unable to sell the property. On 1 May 2018 the parties discussed and agreed that the husband would transfer his share of the Suburb D property to the wife, rather than dealing with the Suburb D property in accordance with the first financial agreement. The wife decided that the parties would need another financial agreement, because she now intended to lease out, rather than sell, the Suburb D property.
Evidence
Evidence Before The Court
The final hearing was adjourned on 19 September 2022, and the matter came before me for a three day final hearing commencing on 13 March 2023.THE EVIDENCE In support of his case, the husband relied upon:(a)Initiating Application filed 19 May 2021;(b)His affidavit filed 2 September 2022;(c)Financial Statement filed 2 September 2022; and(d)Three documents tendered and labelled as Exhibits A1–A3. In support of her case, the wife relied upon:(a)Response to an Application in a Proceeding filed 24 August 2021;(b)Her affidavit filed 9 December 2021;(c)Her affidavit filed 24 August 2021; and(d)Two documents tendered and labelled as Exhibit R1–R2.THE APPLICABLE LAW Section 90G of the Act provides as follows: When financial agreements are binding(1)Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:(a) the agreement is signed by all parties; and(b)before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and(c)either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and(d)the agreement has not been terminated and has not been set aside by a court.Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.(1A) A financial agreement is binding on the parties to the agreement if:(a) the agreement is signed by all parties; and(b)one or more of paragraphs (1)(b), (c) and (ca) are not satisfied in relation to the agreement; and(c)a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and(d)the court makes an order under subsection (1B) declaring that the agreement is binding on the parties to the agreement; and(e)the agreement has not been terminated and has not been set aside by a court.(1B)For the purposes of paragraph (1A)(d), a court may make an order declaring that a financial agreement is binding on the parties to the agreement, upon application (the enforcement application ) by a spouse party seeking to enforce the agreement.(1C)To avoid doubt, section 90KA applies in relation to the enforcement application.(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.
Decision
Reasons for decision
Mr K’s recollection of the events is faulty. The file note is also problematic and is not corroborative of his oral evidence. He was insistent in cross-examination that even though the file note was undated, it was typed up immediately after the end of the conference. That cannot be the case. The last line of the file note states: “I handed over the two original copis [sic] of the signed BFA to [Ms N] late that day”. That is inconsistent with Mr K’s email of 18 May 2018 at 11.35 am which confirmed that the originals had already been handed over to her by that time. Accordingly, notwithstanding the last line of the file note, it was not “late that day”. Moreover, on any version of the chronology, the file note could not have been prepared “immediately after the end of the conference” (Transcript 15 March 2023, p. 215 line 17–18) because, even on Ms Gang’s estimate of the conference taking at least an hour, it ended in the middle of the day, not late that day. And in any event, the file note could not have been prepared immediately after the conference given the last line which refers to “late that day”.DISCUSSION AND CONCLUSION ABOUT INDEPENDENT ADVICE Having regard to the findings made above, the Court concludes that it is not plausible that the husband received independent legal advice from Mr K. The Court cannot be satisfied that the husband received the requisite advice about the effect of the second financial agreement on his rights and about the advantages and disadvantages at the time that the advice was given to the husband of entering into the agreement. In reality, the husband received fleeting, superficial and very general advice about the agreement. He was not advised to not enter into the agreement. The husband’s evidence that he raised the issue of the fairness of the agreement is plausible and is accepted by the Court. The advice given to him by Mr K did not address what was, for the husband, a critical issue. The husband’s concern about fairness goes directly to the issue about the effect of the agreement on his rights. Where the evidence of the husband and Mr K conflicts, the Court prefers the evidence of the husband. Whilst it was not the first time that he had received independent legal advice about a financial agreement, it was still an unusual and significant event for him. Even allowing for the Court’s findings about the husband being a poor historian, the inconsistencies and irregularities in the evidence of Mr K lead the Court to prefer the husband’s evidence. In all fairness to Mr K, this advice was, in all likelihood, given in the context of a busy professional practice involving multiple clients in diverse contexts. Whilst the Court has found that the file note does not accurately depict what occurred, the Court does not find that it was an ex-post facto reconstruction prepared for a specific purpose. The Court must now consider the provisions of s 90G(1A). Specifically, the issue is whether the Court is satisfied that it would be unjust and inequitable if the agreement were not binding on the parties. The Court in fact finds to the contrary. It would be unjust and inequitable if this agreement were held to be binding on the parties, in the circumstances of this case. The non-compliance with the provisions of s 90G was not trivial or insignificant. The need for independent legal advice is a key statutory requirement, even though the Full Court in Hoult & Hoult [2013] FamCAFC 109 at [106]–[108] acknowledged that a lack of independent advice is not determinative. The Court accepts the husband’s evidence that he did not fully understand what he was committing himself to by entering into the second financial agreement. Noting that this is not determinative of itself, the Court accepts a cornerstone of the husband’s case that the second financial agreement was fundamentally unfair in that he was left with liabilities, and the wife took all the assets. When the prejudice to both the husband and the wife of the second financial agreement being held invalid is compared, the Court is satisfied that the husband suffers the greater prejudice. Moreover, the fact that the parties later entered into a divorce agreement in Country B, largely to the same effect as the second financial agreement leads the Court to infer that both parties themselves must have had some reservation about the validity of the second financial agreement.
Ratio Decidendi
Legal Principle Established
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