Kun & Gang
[2023] FedCFamC1F 389
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 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.
The first financial agreement also outlined that the husband was to be removed as a mortgagor of the Suburb F property and that the wife should then be “individually liable for all monies due and owing pursuant to any mortgage secured over the [Suburb F] Property, and all rates, tax and other relevant outgoings in respect of the [Suburb F] property”. After the proceeds of sale from the Suburb D property were transferred to the mortgage account of the Suburb F property, the mother and the child were to live at the Suburb F property, and the husband was to have no legal or equitable claim or entitlement to the Suburb F property.
The first financial agreement also stated that the husband was to be solely responsible for the repayment of loans of $50,000 received from family and friends during the marriage, including any interest accrued.
The first financial agreement further stated that neither party had an obligation to provide spousal maintenance. However, it did provide that the husband was to pay the wife $300 per week as child maintenance, and that the husband was entitled to spend one day per week with the child.
Regarding superannuation, the first financial agreement outlined that each of the parties would remain individually entitled to superannuation under their names. However, it also stipulated that the child would be entitled to one third of the husband’s superannuation upon his death.
The second financial agreement
The terms of the second financial agreement made 18 May 2018 can be summarised as follows.
The wife was to live in the Suburb D property with the child, and the husband was to transfer the whole of his right, title and interest in the Suburb D property to the wife. Where required for the transfer of title, the husband was also to become a party to the mortgage document, either as a joint mortgagor or guarantor, and sign all necessary documents to enable the wife to obtain loan approval for the transfer of title. Although the husband was to have no legal or equitable claim of entitlement to the Suburb D property, he was still to be “liable for and make due and punctual payment of all monies due under any mortgage for the [Suburb D] Property, for the term of the loan” for the benefit of the child.
The second financial agreement acknowledged that the Suburb F property is owned by the wife as sole tenant, but that the mortgage secured over the Suburb F property is in the parties’ joint names. When the husband required his removal from the mortgage documents, either as joint mortgagor or guarantor, the wife was to sign all documents to enable herself to become the sole liable party on the mortgage document.
The balance of the second financial agreement is identical to the first agreement, for example, regarding spousal maintenance, child maintenance and superannuation.
After the second financial agreement was signed, the Suburb D property was rented out between mid-2018 and late 2021, and it was subsequently sold in late 2021. Pursuant to orders made on 25 August 2021, the balance of the proceeds of sale of the Suburb D property were paid into a controlled money account held by the wife’s solicitors, G Lawyers, in the joint name of the husband and the wife, pending further orders.
The issue in dispute
The husband applies for a declaration that the second financial agreement is not binding, or alternatively that the second agreement be set aside pursuant to s 90K of the Act. The wife seeks for the husband’s application to be dismissed. The husband contended that if the second agreement was not binding, or was set aside, the first agreement was terminated as a matter of law.
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.
Section 90K of the Act provides as follows:
90K Circumstances in which court may set aside a financial agreement or termination agreement
(1)A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
(aa) the agreement was obtained by fraud (including non‑disclosure of a material matter); or
(aa) a party to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii)with reckless disregard of the interests of a creditor or creditors of the party; or
(ab)a party (the agreement party) to the agreement entered into the agreement:
(i)for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouse party; or
(ii)for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
(iii)with reckless disregard of those interests of that other person; or
(b) the agreement is void, voidable or unenforceable; or
(c)in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or
(d)since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or
(e)in respect of the making of a financial agreement—a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f)a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g)the agreement covers at least one superannuation interest that is an unsplittable interest for the purposes of Part VIIIB.
(1A)For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
(2)For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) a parenting order provides that:
(i) the child is to live with the person; or
(ii) the person has parental responsibility for the child.
(3)A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.
(4)An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(5)If a party to proceedings under this section dies before the proceedings are completed:
(a)the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and
(b) if the court is of the opinion:
(i)that it would have exercised its powers under this section if the deceased party had not died; and
(ii) that it is still appropriate to exercise those powers;
the court may make any order that it could have made under subsection (1) or (3); and
(c)an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(6) The court must not make an order under this section if the order would:
(a)result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.
For this purpose, acquisition of property and just terms have the same meanings as in paragraph 51(xxxi) of the Constitution.
Justice Aldridge in Abrum & Abrum [2013] FamCA 897 (“Abrum”) considered the relevant law at [33], and [35]–[43]:
33.Strict compliance s 90G is mandatory (Black & Black (2008) FLC 93-357; Senior & Anderson (2011) FLC 93-470).
…
35.Section 90G(1)(b) requires each party to obtain independent legal advice from a practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time the advice was provided, to that party of making the agreement.
36.A binding financial agreement deals with the parties’ rights in relation to the property or financial resources of the parties in a way that ousts the jurisdiction of the court to make orders in relation to that property or financial resource. Those rights thus ousted must be the rights that the parties had under s 79 of the Act to seek an order for the adjustment of the parties’ property rights. When making such an order the court takes into account the matters set out in s 79(4) of the Act (the parties financial and non-financial contributions to the property of the parties and their contributions to the welfare of the family) and the various matters set out in s 75(2) of the Act. The parties’ rights to obtain a property settlement thus depend on those factors.
37.It is true to say that a party does not have a “right” to a property settlement, or a “right” to a particular property settlement, because under s 79 the court is not giving effect to existing rights but rather is altering property interests in a manner that it considers is just and equitable and thus creates new rights. In doing so it evaluates and weighs many factors. It is necessarily an imprecise exercise.
38.Nonetheless, when s 90G(1)(b) speaks of “rights” it must be speaking of the entitlement to bring a case under s 79 and the factors that weigh in favour of that person’s case under ss 79(4) and 75(2) otherwise it would have limited meaning.
39.In order to give advice about the effect of an agreement on the rights of a party, that is their rights under the Act in relation to property, a legal practitioner must establish what those rights are at the time the advice is provided. This is because s 90G(1)(b) requires advice to be given on the effects of the agreement upon the rights of that party and the advantages and disadvantages of the agreement. If their rights are not known then it is impossible to advise as to the effect of the agreement on them.
40.It is unhelpful to advise a person that a financial agreement might adversely affect his or her rights if those rights are not identified. A party must know more than some unknown or undefined right is being given up. He or she must have some idea, at least in general, of his or her present entitlements or rights (to use the words of the section) with which he or she may compare the provisions of the proposed financial agreement. It is only in that way that there can be actual advice about the effect of the agreement on those present rights.
41.It is quite clear that a person may choose to enter into an agreement where he or she may very well be much worse off than if he or she were left to rely on their rights under s 79 of the Act. Thus, there is a requirement for specific legal advice to be given. That is the safeguard the legislature imposes when it permits the parties to deal with their property by agreement and without possible interference from a court.
42.Accordingly, the advice must be real and meaningful. It must be directed to the parties’ circumstances and their present rights.
43.Proper identification of a parties’ rights can only be done by identifying the property of the parties then held and a consideration of the parties contributions (financial and non-financial) to the acquisition of that property and to the welfare of the children. Any other relevant factors under s 79(4), including s 75(2), would then need to be considered. Only by doing so can advice be given that complies with the terms of s 90G(1)(b).
OBSERVATIONS ABOUT THE EVIDENCE GIVEN BY THE PARTIES
The husband presented as an unsophisticated person. He described himself as unemployed but appears by trade to work in the service industry. He gives no evidence about his education, but my impression gleaned from his evidence overall is that it must have been limited. He arrived in Australia in 2008. He trusted the wife with his finances. I accept his evidence, for example, at paragraph 9 of his affidavit filed on 2 September 2022, that he “…neither knew nor had the habit in managing my savings on the internet or by mobile phone apps…”. His trust of the wife extended to handing over his weekly income to her on the basis that she would then “…allocate funds to me at my request, from time to time, for my basic living expenses” (husband’s affidavit filed on 2 September 2022, paragraph 10).
The husband’s trust of the wife extended, for example, to the purchase of the Suburb F property in her sole name. The Suburb F property was purchased with a mortgage which was subsequently refinanced. I accept the husband’s evidence that the wife “…conducted these transactions without divulging much information to me…” (husband’s affidavit filed on 2 September 2022, paragraph 18). This was a recurrent theme of his evidence. The Court is satisfied that whilst the husband was aware of the general nature of the major transactions in the marriage, such as purchasing property and borrowing funds on mortgage, he entrusted the wife with the details.
The husband struck me as being a simple man when it came to personal and financial relationships and matters. He trusted the wife. As their relationship deteriorated, the husband became more and more intimidated by her whilst at the same time being dependent on her for financial management. The Court accepts that, at times, there were inconsistencies in his evidence. He was not a good historian in relation to past events. The Court does not accept that his evidence was wilfully wrong. There were occasions in cross-examination when he was unresponsive, but when the evidence is reviewed, in context, this seems primarily attributable to a lack of understanding of the question, rather than lack of cooperation in answering the question.
By contrast, the wife, who, like the husband, gave her evidence through an interpreter, presented as both intelligent and articulate. She enrolled in an English course when she arrived in Australia, the husband did not. She subsequently completed a vocational qualification. She worked part-time in the service industry, and later worked full-time until the birth of the child. The wife currently works part-time. The wife agreed at paragraph 16 of her affidavit filed on 9 December 2022 that the husband gave her his bank debit card and said to her:
16.“Can you manage my account for me. I don’t like to take care of these things. I am usually busy at work and want to take a nap during the afternoon break. If I need money, I will tell you, and you can go to the bank and withdraw cash for me.”
There is a cultural context to this case which is acknowledged by the wife at paragraph 17 of her affidavit, where she deposes:
17.“I did not find the above request unusual, as it is customary for [City H] men to ask their spouse to manage their financial affairs for them.”
The Court accepts the wife’s evidence that when she discovered that the husband was having an extramarital affair, she was both disgusted and upset. Her own evidence establishes that she was able to attain the high moral ground as regards the breakdown of the relationship. For example, at paragraph 37 of her affidavit, she deposes:
37. The following exchanges took place:
Me: How do you intend to deal with this?
[Mr Kun]: I have slept with her. I want to take responsibility for her.
Me: So you want to stay with her.
[Mr Kun]: Yes.
Me: How do you intend to deal with our properties then?
[Mr Kun]: I will give you the two properties. I will be responsible for all the debts.
In cross-examination, the wife was more assertive than the husband, although less cooperative at times. She had a better recall of historical facts than the husband, a matter unsurprising in relation to financial matters, as she largely controlled the same. She demonstrated a far more comprehensive grasp of the contents and meaning of the financial agreements. She was unresponsive at times, and occasionally showed impatience with the line of questioning.
Perhaps the most interesting exchange in cross-examination occurred in the following context. The wife was being cross-examined about whether she paid the fees associated with the husband obtaining independent legal advice in relation to the second financial agreement. The evidence indicates she clearly did, at a time well after separation, and the Court so finds. In the course of questioning about the legal fees, the wife answered:
“I pay all the fees, including the drugs for sex.” (Transcript 14 March 2023, p. 174 line 12)
At this point, the interpreter explained:
“For sexual drive. I think that’s what she said.” (Transcript 14 March 2023, p. 174 lines 16–17)
The wife then continued (Transcript 14 March 2023, p. 174 lines 19–21):
“Yes, I pay everything for him. And – I pay for everything, and include he come doing sex with the lady, and he ask can he pay for the medicine. I still pay this for him.”
The Court accepts that this was an unresponsive answer to the question. It was also insightful. According to the wife, the relationship between them ended in 2017. The cross-examination related to events that occurred in mid-2018. Where the wife stated, “I still pay this for him,” the Court does not interpret this literally. The wife was not saying that, at the time of cross-examination, she was still making payments on behalf of the husband. What she was saying, however, was that at the time of the signing of the second financial agreement, she still had control of their finances, such that even when the husband needed “drugs for sex”, he had to approach his wife, even though the sex was not with his wife, it was with “the lady”. This is, presumably, a reference to the husband’s sexual partner at the time, and presumably his girlfriend, Ms J, the mother of the father’s child, who is in his care.
There is no rule of law that an unresponsive answer must be ignored. This evidence is significant not just in establishing that the wife paid the cost of the husband obtaining independent legal advice, and that the wife continued to have control of the husband’s financial affairs after the date of separation, and at the time of the second financial agreement, but it goes further. In the broader context of the facts of this case, the husband’s financial and administrative dependence on the wife leads the Court to infer that he was also, to a limited extent, emotionally dependent on her.
The Court infers from the evidence of the wife above that there was an inequality in their relationship, notwithstanding the separation, indeed notwithstanding the entering into of the first financial agreement in 2017, such that the husband had to ask the wife for money to pay for “the drugs for sex”. The Court infers this must have been humbling, if not humiliating, for the husband. The Court further finds that the wife’s answer was in fact an attempt to humiliate him, which was met with castigation from the bench. It provides a level of insight into the nature of the relationship between them.
The husband’s evidence
During the husband’s evidence-in-chief (by leave) he told the Court that he did not wish to disclose his home address, as he was worried that the wife would harass him (Transcript 13 March 2023, p. 19 line 17). At this point in the evidence, the Court regarded the husband’s self-serving evidence as bordering on the histrionic. By the close of the evidence, however, a very different impression was formed. The Court finds the husband was genuine in his expression of concern that the wife would harass him if she knew where he lived. She was clearly the dominant, controlling one in the relationship, a domination and control that continued after the date of separation, and, indeed, after the first financial agreement in 2017.
The evidence that the husband gave in cross-examination about the first financial agreement was confusing. It was not assisted by the lack of clarity in the questions asked of him. For example, when the Court pointed out to the husband that he was being asked about his current knowledge about the first financial agreement, and not his knowledge in 2017, the clarity of his answers improved. Nonetheless, the thrust of the husband’s evidence was that, in effect, he did not understand the contents of the first financial agreement, even if he understood, in general terms, that it dealt with the property and debts of the husband and the wife.
The husband’s denials of his signature to the first financial agreement is plainly implausible. His denials about obtaining independent legal advice is not implausible. In any event, in cross‑examination the husband conceded that he did sign the first financial agreement, and that his affidavit was incorrect to have suggested otherwise.
When in cross-examination the husband explained that he did not recall the specifics of discussions with the wife leading up to the first financial agreement, the Court accepts this as plausible. This does not mean, of course, that the wife’s account is not true, but only that he does not recall. The husband’s poor recollection and confusion extended to his evidence about the circumstances in which he obtained advice about the agreement. A consistent theme of his evidence in cross-examination was that he felt compelled to agree to and sign the first financial agreement. He agreed, somewhat reluctantly, that he did so, whilst maintaining that it was unfair to him.
Indeed, the Court finds, the husband’s greatest concern was the unfairness of the terms of the first financial agreement, particularly that he retained the obligation to service the mortgage after transferring all of the properties to the wife. For reasons that will become apparent, the Court accepts the plausibility of the husband’s evidence that he was not aware of this ongoing obligation until he later obtained his own legal advice.
The first financial agreement required the husband to transfer the Suburb D property to the wife in the event that the Suburb D property was not sold after 31 May 2018. As a matter of fact, the Suburb D property was transferred to the wife on 13 July 2018, although the husband remained as a joint mortgagor. He denied understanding that was the effect of the document that he signed.
The cross-examination of the husband moved on to the signing of the second financial agreement, which is the focus of the present litigation. Once again, the husband’s evidence in cross-examination was confusing and, at times, inconsistent with his affidavit. This is another example of poor memory and lack of sophistication rather than obfuscation.
At paragraph 65 of the husband’s affidavit deposes as follows:
65.On our way to [Mr K’s] office, I asked [Ms Gang] words to the effect of “could I take the agreement back home and think about it/or a few days before I sign it?” I did not read the agreement because my skills in English reading were never really good. I wanted to give this document to someone else, like my elder brother, who has better English skills to read and to translate it to me.
He was cross-examined about this evidence. He insisted that he had told the wife the words set out at paragraph 65. He conceded that he had in fact read the agreement. Counsel suggested to him that his English reading skills were not very good, to which he responded words to the effect, “I cannot read [English] at all” (Transcript 13 March 2023, p. 74 line 17). The Court accepts this evidence. It was, in fact, corroborated by the evidence of Mr K, the solicitor who purportedly explained the agreement to him. In any event, counsel suggested to the husband that he knew, in substance, the terms of the agreement at that time. He denied this.
Counsel suggested to the husband that he was with Mr K for about an hour, but the husband insisted it was less than that. At the time of cross-examination, it was apparent that the husband had not read Mr K’s file note. The husband’s evidence was not challenged about this. The file note will assume some significance in this case, and will be dealt with below.
The husband accepted that he had signed and initialled the second financial agreement, as had Mr K. When he was cross-examined about the contents of Mr K’s file note, he disagreed with what was put to him, insisting that he had never seen it before this cross-examination. The husband likewise denied any knowledge of email correspondence between Mr K, and the conveyancer, Mr L, that had been engaged by the wife to prepare the relevant documents to implement the second financial agreement.
At one point in cross-examination the husband denied even knowing that he had to sign a second financial agreement on 18 May 2018. He insisted that he knew he had to sign a transfer of property document. That is implausible. It is more likely than not that the husband knew that he was being asked to sign another financial agreement and that it had something to do with the transfer of the Suburb D property. He may well not have fully understood the detailed transactions and the impact it would have on him. The Court accepts that, in all likelihood, both at the time, and certainly subsequently, he had concerns about the fairness of what he signed.
There was further cross-examination about the file note. The husband agreed that his conference with Mr K took place in the language of Country B. He disagreed that it was for about an hour. When it was suggested to him that the nature of the agreement was explained to him, the husband explained that he did not understand this. He did not recall a discussion about full and frank disclosure or an explanation of the terms of the agreement. He recalled that he was told something about the transfer of the Suburb D property to the wife’s name, but not that he remained responsible for the mortgage. He did not recall anything about the Suburb F property being in the wife’s name but he being responsible for the mortgage. He accepted, however, that this is what the financial agreement said. The Court observes, however, that in context the husband was not conceding that at the time of the interview he understood that this is what clause 8.2(c) of the second financial agreement said, he was merely confirming that he knew that now. The husband agreed that Mr K mentioned to him that he was to remain liable to repay the $50,000 personal loan. He did not know anything about the child living with his mother and being entitled to a third of the husband’s superannuation. He did not know anything about not having to pay spousal maintenance. All he knew about child support was that he had to pay the wife $300 per week. He agreed that he in fact paid this until late 2018 when he lost his job. He also agreed that he stopped making mortgage payments for the Suburb D property in mid-2018 and that the wife had met these payments since then. Of course, the evidence is that the wife rented out the property whilst she was in Country B between mid-2018 and early 2021.
The husband denied that Mr K had asked him why he had given up all the property but remained on the mortgages. The husband denied that Mr K had explained to him any principles of property distribution or that he would have a claim on the property but for the agreement. The husband denied that Mr K had warned him that the agreement was like a contract. He denied being asked if he still wanted to sign the agreement. He denied saying that he understood the agreement, but accepted that he did sign it. Counsel suggested to him that he did not need to sign the agreement if he did not want to, but the husband explained that he did have to if he wanted to get a divorce. He accepted that he signed an agreement that had something to do with property, that it dealt with the Suburb F property and the Suburb D property that were being kept by the wife, but insisted it was against his will.
The husband was cross-examined about other aspects of his evidence which, as it turns out, are irrelevant to the determination of this case.
The wife’s evidence
The wife was cross-examined about her evidence. She agreed that, in effect, she controlled and managed the finances of both of them and that the husband simply handed over all of his income to her. She insisted, however, that the husband knew everything that she did in this regard. She accepted that she had control of the finances but suggested that if he objected to anything in this regard, she would not take any action, but she also agreed that the husband rarely objected.
When the wife was cross-examined about the terms of the second financial agreement she insisted that the husband had asked that he be solely responsible to repay the loan of $50,000. This is implausible. It is implausible that the husband who, on the wife’s own evidence, had made substantial financial contributions to the purchase of the Suburb D property and the Suburb F property and who was the main breadwinner for the family during the relationship, would ask to take on an obligation to repay $50,000 of personal debt in circumstances where he was receiving nothing out of the second financial agreement.
The wife was cross-examined about her assertion that her parents had contributed $30,000 as asserted in her affidavit. When asked about her evidence for this assertion, the wife prevaricated. The Court finds her assertion hard to believe, as the wife could not produce any evidence in support of the $30,000 contribution she made through her parents, in circumstances where she has been able to provide ample evidence for other financial matters.
The Court found it curious that the wife did not disclose another significant financial transaction during the marriage when they purchased a property at Suburb M in 2015 for over $500,000 and then sold it in 2016 for over $600,000, with the balance of the sale proceeds going into the purchase of the Suburb D property. The wife explained in cross-examination that she had not disclosed it because the transactions had happened such a long time ago and that she did not think it had anything to do with this case. And yet, it demonstrates once again the financial acumen of the wife, and how quite substantial equity was built up over a relatively short period of time.
The wife agreed that as a result of the second financial agreement the Suburb D property came into her name alone. Between mid-2018 and mid-2021 she lived in Country B with the child. She agreed that this was contrary to clause 8.1(c) of the second financial agreement that refers to her living with the child at the Suburb D property. She agreed with the suggestion by counsel that at the time of signing she had no intention of residing there, explaining that she had no money to service the mortgage and thus had to return to Country B, presumably on the basis that the rental income from the Suburb D property would service the mortgage.
The wife also agreed that notwithstanding the provisions of clause 11(e) of the second financial agreement, providing that the child was entitled to spend one day a week with his father, this did not take place. It was suggested that she had no intention of complying with that and knew that it was impossible because she was travelling to Country D. The wife explained that it was not impossible because they planned to return to Australia. The Court finds this evidence disingenuous in circumstances where she then moved to Country D for almost three years shortly after the agreement was signed.
The wife agreed that she had the sole benefit of rental payments from both the Suburb F property and the Suburb D property and that this was used to pay the mortgage for the Suburb D property.
The wife was challenged about her evidence at paragraph 38 of her affidavit in which she deposed that she wanted a divorce. She conceded that in fact it was the husband who said he wanted a divorce from early October 2017. She denied the proposition that she said to him that she would give him the divorce in return for all of the property.
In cross-examination the wife conceded that, for all practical purposes, the financial agreements were prepared on her instructions. She insisted that the agreements represented the agreement between the husband and herself. There was cross-examination about the text message exchanges between them. The particular focus was the arrangement for the husband to obtain independent legal advice. Counsel for the husband suggested to the wife that the text messages indicated the high degree of dependency by the husband on her during the relationship. The wife replied words to the effect (Transcript 14 March 2023, p. 138 line 37):
Yes, I have been looking after him in his life.
Counsel suggested that was because he was not capable. The wife replies words to the effect (Transcript 14 March 2023, p. 138 line 43):
No. Because I think he works very hard.
Counsel pointed out that the husband had not studied English. The wife agreed, adding (Transcript 14 March 2023, p. 139 line 1):
…he dropped out.
The wife agreed that the agreements were in English and that she paid the lawyer’s fees.
THE EVIDENCE OF MR K
Mr K is the solicitor who provided the independent advice to the husband and witnessed the husband’s signature to the second financial agreement. Mr K was subpoenaed to attend court and produce documents as well as give evidence. The documents produced include email correspondence, a copy of the draft agreement, a copy of the tax invoice and a copy of the file note.
The file note is a one-page typed document prepared by Mr K. He explained that he took handwritten notes which were typed up immediately after the meeting. The handwritten notes were destroyed at the time. In cross-examination he confirmed not just once, but twice, that the file note had been typed up immediately after the end of the conference. The file note is undated and has no reference to time. It is common ground that the agreement was signed on 18 May 2018.
Mr K’s file note indicates that the draft agreement was sent to him by Ms N, who was the wife’s conveyancer and who occupied an office adjacent to Mr K. It is clear that Ms N did not prepare the document, but that it was prepared by Mr L, the wife’s solicitor. The email from Ms N to Mr K is dated 17 May 2018 at 5.43 pm. An email at 6.36 pm from Mr K to Mr L suggests that he was able to read the document because the email requests clarification of a number of matters. There is no suggestion in the evidence that there was any communication between Mr K and the husband at this stage. Indeed, Mr K indicated in cross-examination that the first time he met the husband was on the following day. In any event, at 8.43 pm, Mr L replied to the email from Mr K explaining that the copy of the agreement was a draft copy that was sent to the wife only and that he would draft a final version of the agreement for the wife’s signing on the next day, 18 May 2018. This must mean that the first time that Mr K could examine the document to be signed by the husband was when it was sent and that was the next day, 18 May 2018, by way of a letter that was hand delivered. Clearly he received an agreement together with a duplicate, both of which had been signed by the wife and duly witnessed.
The next significant document is an email dated 18 May 2018 at 11.35 am from Mr K to Ms N, copied in to Mr L, which states:
Please see attached financial agreement signed by all parties for you information. Both copies of the originals are already handed over to you.
This clearly indicates that by 11.35 am Mr K had completed his interview with the father, including signing and witnessing the document, had caused a copy of the agreement to be scanned, had somehow “handed over to” Ms N the original signed agreements, and then sent the email attaching the scanned copy of the financial agreement at 11.35 am.
The next document in the bundle is a tax invoice dated 18 May 2018 for a total of $330. It is addressed to the husband, care of P Company (Ms N’s business). The description of the service is as follows:
To our professional cost for acting in regards to the above matter, including perusal of the Agreement, conference and explaining the Agreement to you, providing legal advice and witnessing your execution of the Agreement, providing solicitor’s scertificate [sic] and all attendance incidental therein.
It is common ground that the wife paid this account.
Mr K was cross-examined by counsel for the husband. In cross-examination he agreed that Ms N had told him that she was meeting with the husband and the wife at 10.50 am. He accepted that the husband and the wife had first met with Ms N and that the two signed copies of the second financial agreement were brought to him at the time that he saw the husband. There was some uncertainty about whether it was the husband and the wife who came to see him together with the second financial agreement, but, on balance, it is more likely than not that it was Ms N and the husband who brought the original signed agreements to him. It is more likely than not that, certainly by that time, neither Mr K nor the wife had ever met each other.
Mr K confirmed that he spoke the language of Country B and that he explained “every paragraph” (Transcript 15 March 2023, p. 210 line 12) of the agreement to the husband in the language of Country B. He confirmed that it was “Right from the beginning…Right through the end” (Transcript 15 March 2023 p. 209 line 42–44). When counsel pressed Mr K, he acknowledged that he read the paragraphs to the husband and then explained them. He agreed that the financial agreement was 18 pages in length. When asked whether that took a long time, he responded with words to the effect of:
“Some paragraphs took a long time, but others I just explained in [the language of Country B] very quickly”.
A number of matters were put to Mr K, which he acknowledged, but not in the sense of accepting the accuracy of the same. He acknowledged that the wife’s evidence was that she had an appointment to see Ms N at 10.50 am and that in fact both she and the husband did not see her until 11.00 am for the purposes of signing the transfer documents. When it was suggested to him that the husband did not get to his office till 11.15 am, he disagreed.
Mr K explained in cross-examination that he did not recall a conversation with the husband about the fact that the wife was paying his legal fee, and did not recall even thinking that. Indeed, the effect of his evidence was that his instructions had come from Ms N to the effect that he, Mr K, was “just to help him and give independent advice” (Transcript 15 March 2023, p. 208 lines 45–46), referring to the husband.
Mr K was examined about his file note. This is the document that bears the heading “Independent Legal advice”. The client is described as “[P Company] – [Ms N] – [Mr Kun]”.
When asked how, as referred to in point 1 of the file note, he had explained the “nature of BFA” to the husband, he explained words to the effect: “Yes, that it was a contract” (Transcript 15 March 2023, p. 210 line 17). He then explained that he did explain that it ousted the jurisdiction of the Court and, indeed, the remaining matters listed in the file note. He was taken to specific clauses of the financial agreement, cll 8.1 (c), (d), and (e), and he said that he explained those clauses.
Counsel suggested to Mr K that he could never recommend to the husband that he sign the agreement. He agreed, saying words to the effect: “Yes, that’s why I warned him” (Transcript 15 March 2023, p. 212 lines 2–3). The Court notes that the only reference to a warning in the file note was in the fourth line from the bottom of the document which states: “I then warn him that the BFA is like a contract, once he signed it, he is bounded by the terms of the agreement and it does not matter the terms are fair, reasonable or not”. That is completely different, the Court finds, to recommending to the husband that he not sign the agreement. That was the question he was asked in cross-examination and his answer was in the affirmative – he could never recommend that the husband sign the agreement. The warning he gave was about something completely different – that signing the agreement was like signing a contract.
The cross-examination continued. Mr K believed that the husband seemed to understand what he was talking about.
Counsel suggested to him words to the effect: “You could have said to him, don’t sign it” (Transcript 15 March 2023, p. 212 lines 45–46). His response was words to the effect: “I alerted him about this” (Transcript 15 March 2023, p. 212 lines 46–47). The Court observes that the fact is that Mr K did not say to the husband that he should not sign the agreement. What he did do was attempt to explain the principles of distribution of property with a starting point which could be 50:50.
Counsel suggested to Mr K that the entire process of explanation and signing would have taken “quite some time”. Mr K answered words to the effect: “The total time was about an hour, at least” (Transcript 15 March 2023, p. 214 line 15). When asked to indicate how long the signing itself might have taken, he said words to the effect: “Perhaps five – seven minutes” (Transcript 15 March 2023, p. 214 lines 43–45). Counsel suggested that, in fact, the entire conference took no more than 20 minutes and possibly less. Mr K indicated that was untrue. When counsel suggested to him that his estimate of an hour for the conference was untrue, Mr K reiterated that he spent at least an hour with the husband. This is curious evidence which is inconsistent with Mr K’s email to Ms N on 18 May 2018 at 11.35 am.
The cross-examination of the wife satisfies the Court that the actual chronology of events that morning was as follows. She had signed the financial agreement with her solicitor, Mr L before 10.50 am that day. Both the wife and the husband had an appointment to see Ms N, the conveyancer, at 10.50 am. The wife acknowledged the correctness of paragraph 75 of her affidavit in which she deposed to arriving to Ms N’s office at a time when Ms N was attending on another couple and asked her to wait. When the other couple left, a short time later, Ms N met with both the husband and the wife.
Counsel suggested to the wife that the other couple left at 11.00 am, and the wife agreed.
The wife denied accompanying the husband to Mr K’s office, or meeting Mr K on that day, or beforehand.
The wife’s evidence at paragraph 76 of her affidavit is that after the various transfer documents had been signed, Ms N asked her to wait outside. The wife deposed to taking the child downstairs and waiting at a nearby coffee shop. In cross-examination the wife agreed that they had not finished with Ms N until about 11.10 am. The Court accepts that this is plausible given that the parties had to sign a transfer and a stamp duty exemption form and there must have been some explanation of the documents again, presumably in the language of Country B, so that the documents had to be translated, at least for the purposes of the husband.
In any event, as paragraph 77 of the wife’s affidavit establishes, the conference with Ms N must have been over by 11.13 am because that is when the wife received a message from Ms N, whilst the wife was at the coffee shop.
The wife deposed at paragraph 78 of her affidavit that about an hour later, meaning on the wife’s own evidence an hour after 11.13 am, she returned to Ms N’s office and then about 10 minutes later the husband walked out holding two original copies of the second financial agreement. It is highly unlikely that this is correct for several reasons. Mr K’s evidence indicates that the signed agreements were hand delivered to Ms N before 11.35 am. It is possible that the husband delivered the documents, and it is possible that the wife did see him holding the two original copies. The wife’s evidence about time is incorrect. It is more likely than not that the wife’s evidence was reconstructed in her mind to conform with her case that the husband’s conference with Mr K took an hour or so.
The totality of the evidence leads the Court to conclude as follows. The earliest time that Mr K could have met with the husband was 11.10 am. Even if the Court is wrong about this, on the evidence it could not have been earlier than 11.00 am. It is clear that no later than 11.35 am the signed agreements had already been returned to Ms N. Accepting Mr K’s evidence above that the signing of the second financial agreement by both the husband and himself took approximately five to seven minutes, any explanation and provision of independent advice could only have taken place within a maximum of 20 minutes in circumstances where an 18 page document, according to Mr K, was not only translated, but where “every paragraph” was explained.
Given the Court’s findings that the husband is a legally unsophisticated person who could neither read nor speak English, it is inconceivable that Mr K could have provided to the husband independent legal advice prior to the entering into the second financial agreement about the effect of this agreement on the rights of the husband and the wife, and the advantages and disadvantages of making the agreement.
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.
The second financial agreement entered into by the parties on 18 May 2018 is declared not to be binding on them.
OTHER ASPECTS OF THE HUSBAND’S CASE
The husband’s case was also framed, in the alternative, as an application under s 90K(1)(d) and (e). Whilst it is not, strictly speaking, necessary to adjudicate on these claims having regard to the Court’s findings above, the Court makes the following observations.
The husband’s claim that since the making of the agreement he has experienced a material change in his circumstances relating to their care, welfare and development of the child of the marriage, and thus he would suffer hardship if the agreement is not set aside is rejected. Whilst the Court accepts that the evidence establishes that the husband is responsible for the care of the child, it is not a child of the marriage to the wife, and thus sub-section (d) does not apply.
The husband’s claim that the wife engaged in conduct that was, in all the circumstances, unconscionable, and/or amounted to duress and undue influence is not made out. None of the evidence adduced by the husband establishes what he asserts, and thus sub-section (e) does not apply.
THE STATUS OF THE FIRST FINANCIAL AGREEMENT
The husband did not specifically seek an order in relation to the first financial agreement which was signed on 7 December 2017. It was clear from submissions made in his case, however, that he believed that the first financial agreement had been abandoned by both the parties, as a matter of law. The Court agrees.
The first financial agreement was entered into more than five years ago. If it was still in force, the reality would be that both parties are in breach. For example, the husband stopped paying the $300 per week in child maintenance contrary to cl 11(c); the child did not spend one day per week with the husband contrary to cl 11(e); and the husband remained as joint mortgagor of the Suburb D property (before it was sold) contrary to cl 8.1(e)(iv). Any contention about its ongoing operation is inconsistent with the fact that a second financial agreement was entered into. The entering into of the divorce agreement in Country B is also inconsistent with the continued validity of the first financial agreement. For all practical purposes, therefore, the parties have themselves treated the first agreement as being at an end. Objectively viewed, the parties, through their conduct, can be regarded as having abandoned the contract, regardless of whether this was their intention (see DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 434; CGM Investments Pty Ltd v Chelliah [2003] FCA 79 at [18]). Thus, the Court finds that they have abandoned the first financial agreement.
I certify that the preceding one hundred and one (101) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 19 May 2023
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