LOTTA & LOTTA

[2015] FamCA 360

FAMILY COURT OF AUSTRALIA

LOTTA & LOTTA [2015] FamCA 360

FAMILY LAW – PROPERTY – Binding financial agreement – where financial agreement purports to be an agreement under s 90C of the Act – where no reference to s 90C in the financial agreement – where agreement fails to comply with the provisions of s 90G of the Act as to the provision of independent legal advice before the signing of the agreement and no signed statements to that effect provided by any legal practitioners – where no application under s 90G(1A) in respect to the defects in the agreement  - where agreement not a financial agreement for the purposes of the Act – where the agreement not a binding financial agreement for the purposes of the Act.

Family Law Act 1975 (Cth) Part VIIIA, ss 90C, 90G

APPLICANT: Mr Lotta

RESPONDENT: Ms Lotta

FILE NUMBER: PAC 3435 of 2013

DATE DELIVERED: 18 May 2015

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 2 April 2015

REPRESENTATION

SOLICITOR FOR THE APPLICANT: Samuel Jones Legal Services

COUNSEL FOR THE RESPONDENT: Ms Beck

SOLICITOR FOR THE RESPONDENT: Thurlow Fisher Lawyers & Consultants

Orders

1. That the husband’s application in a case filed 12 February 2015 seeking a declaration that the agreement between the parties dated 14 April 2009 is a binding financial agreement for the purposes of Part VIIIA of the Act be dismissed.

2. That any application for costs be by way of application in a case supported by affidavit filed within one month from the date of these orders.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Lotta & Lotta has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 3435  of 2013

Mr Lotta

Applicant

And

Ms Lotta

Respondent

REASONS FOR JUDGMENT

1. The application before the Court for determination is a discrete one.

2. The husband seeks a declaration that the “financial agreement” signed by himself and his former wife on 14 April 2009 is a binding “financial agreement” for the purposes of Part VIIIA of the Family Law Act 1975 in that it precludes any financial application including spousal maintenance being made to the Court by the wife.

3. The wife contends that the agreement is not a “financial agreement” for the purposes of the Act nor is it a binding “financial agreement”.

Context

1. On 17 March 2015 directions were made listing the husband’s application in a case filed 12 February 2015 for hearing on 2 April 2015. Each party was ordered to file and serve one consolidated affidavit of their evidence in chief and one affidavit from each of the witnesses on which they rely in support of the orders sought by them by no later than Tuesday 31 March 2015.

2. The husband relied upon his consolidated affidavit filed on 13 March 2015.

3. The wife relied upon her consolidated affidavit filed on 31 March 2015.

4. The wife is presently 42 years old. The husband is 43 years old. The husband is a solicitor in private practice. The parties married in 1993 and there are three children of that marriage aged 19, 18 and 11. The parties separated in September/October 2008.

5. The wife contends that during the marriage it was the husband that controlled and managed the family finances.

6. Subsequent to separation the wife remained residing in a property at Suburb B owned in her name. It was a large property which the wife contends was isolated and a distance from her friends and family. The wife in December 2008 purchased a home for herself and the three children at C Street, Suburb D for $525,000.

7. The wife financed the purchase with a bridging loan from St George Bank secured over the property at Suburb B and the new home at Suburb D that was registered in her name. The husband says he was unaware of the transaction.

8. In February 2009 the husband was injured in a motorbike accident and subsequently stayed at the wife’s property at Suburb D for four weeks while he recovered. During that time the parties spoke about the wife’s borrowing secured against the Suburb B property that facilitated the purchase of the Suburb D home. The mortgage borrowing from the St George Bank was $570,000 (“the Suburb D loan”).

9. The wife’s bridging finance became due for repayment in about March 2009. The wife says that husband represented to her that with money available from savings and otherwise the Suburb D loan could be discharged.

10. On 2 March 2009 the wife attended at the husband’s legal practice to sign documents.  The husband requested her to sign the documents so that “he could arrange for the loan to be paid off”. The wife signed the documents as requested without reading them and the husband informed her that he would have the documents witnessed at a later time by his friend. The documents signed by her were a guarantee and indemnity given by the wife in favour of the Westpac Banking Corporation in respect of monies advanced to the husband with the wife’s guarantee being secured over her new home at Suburb D by way of mortgage. It appears that the guarantee and indemnity was for $246,451.

11. On 8 April 2009 the husband facilitated a payment of $400,000 by way of bank cheque to the Suburb D loan. He now says that these funds were advanced to him by his brother. Subsequently other significant deposits were made to the credit of the Suburb D loan by the husband and or the wife and on 3 February 2010 a final payment of $17,000 was paid to discharge the loan.

12. Notwithstanding the discharge of the Suburb D loan the wife still remained liable under the guarantee and indemnity signed by her on behalf of the husband. The wife contacted the Westpac Bank and as a consequence it appears that the husband’s capacity to further access to loan facility was restricted. The wife’s property at Suburb D remained subject to the mortgage to the Westpac Bank securing her guarantee and indemnity in favour of the husband.

13. In early November 2010 the wife received correspondence from Centrelink in relation to a review of benefits received by her. The benefits represented the wife’s sole source of income. The husband, she says, suggested that he prepare and they sign a document that will assist in the review.

14. Later the husband attended at the wife’s home at Suburb D. He had prepared some documents. The wife asserts that he suggested to the wife that the documents be backdated to 14 April 2009 for Centrelink purposes. The husband contends that the agreement was signed on the date that appears on it:  14 April 2009.

15. The wife signed the two documents put to her by the husband. The documents comprised a parenting plan and a “financial agreement for the purpose of dividing matrimonial property”.  He contends somewhat ingenuously that the documents were prepared jointly by them and similarly says he was not aware that independent legal advice was necessary. This notwithstanding the very terms of the agreement referred to below (Clause 7).

16. The parties’ signatures on the documents are not witnessed. The wife asserts that she signed the documents not understanding what if any legal consequences might flow from them. It is common ground that the wife was not provided with any legal advice as to the documents or their consequences nor did she receive any independent legal advice as to the documents or their consequences.

17. Pursuant to the “financial agreement” the husband facilitated the transfer of the Suburb B property from the wife to himself to a transfer that was marked exempt from stamp duty on 21 December 2010.

18. The wife complains that the husband duped her into signing the documents in particular the “financial agreement” which he assured her had no weight or value.

19. Notwithstanding the terms of the “financial agreement” the husband refused to transfer to the wife the motor vehicle that she was to retain the use of and indeed in later after the “agreement” attempted to take possession of that vehicle from the wife.

20. It is the wife’s contention that the estimated assets of the parties in November 2010 were as follows:

    Wife  Suburb D property  $   545,000

    Wife  Superannuation  $     38,000

    $   583,000

    Husband                   One half share Suburb E property $   700,000

    Husband                   Suburb B property  $1,000,000

    Husband                   Superannuation  $     70,000

    Husband                   IAG shares  $     8,132

    Husband                   AMP shares  $     3,941

    Husband                   Motor vehicle 2  $    40,000

    Husband                   Motor vehicle 1  $    15,000

    Husband                   Westpac term deposit  $  276,260

    Husband                   AMP policies  $    65,000

    Husband                   Cattle  $    30,000

    Husband                   Two motorbikes  $    50,000

    $2,258,333

21. At the commencement of cohabitation the wife contends that the only asset of significance was the husband’s one third interest in vacant land at Suburb E. The husband contends he had significant other real estate property.

22. Subsequently and in October 2013 the Westpac security secured over the wife’s Suburb D property was discharged by the husband. The wife has no knowledge as to how he procured the discharge. It appears that this was facilitated by the husband providing to Westpac security over the Suburb B property once it was transferred to him.

23. Subsequently in September 2014 the wife sold the Suburb D property for $802,000.

Is the agreement a “financial agreement” under the Act?

1. Section 90C(1)  of the Act provides:

   (1)  If:

   (a)  the parties to a marriage make a written agreement with respect to any of the matters mentioned in subsection (2); and

   (aa)  at the time of the making of the agreement, the parties to the marriage are not the spouse parties to any other binding agreement (whether made under this section or section 90B or 90D) with respect to any of those matters; and

   (b)  the agreement is expressed to be made under this section;

   the agreement is a financial agreement.

2. Section 90C(2) prescribes the matters that can be the subject of a financial agreement

   (2)  The matters referred to in paragraph (1)(a) are the following:

   (a)  how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of the spouse parties at the time when the agreement is made, or at a later time and during the marriage, is to be dealt with;

   (b)  the maintenance of either of the spouse parties:

   (i)  during the marriage; or

   (ii)  after divorce; or

   (iii)  both during the marriage and after divorce.

3. The requirements of s 90C(1) are mandatory. The husband bears the onus in that he propounds the agreement as a financial agreement under the Act. He concedes that agreement does not comply with s 90C.

4. The subject agreement is headed “Financial agreement for the purposes of dividing matrimonial property”.

5. The agreement contains, inter alia, the following provisions:

   Recital F: in order to arrange their property affairs the parties have agreed to enter into this agreement to deal with the division of their property, financial resources and maintenance.

   Recital G: it is the party’s intention by entering into this agreement they will avoid litigation in relation to the division of their property and financial resources and maintenance.

   Recital H: the parties intend the terms of this agreement will be given effect by any court having jurisdiction to determine financial matters (property and maintenance) in issue between [Mr Lotta] and [Ms Lotta] pursuant to the Family Law Act 1975.

   Clause 7: that the parties each state and warrant to the other party that as recorded in this agreement that before this agreement was signed by him or her he or she was provided with independent legal advice from a legal practitioner on the following matters (i) the effect of the agreement on the rights of that party and (ii) the advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement.

   Clause 8: the parties agree that they will sign all documents and do all things including the making of consent orders to ensure that the burden of any stamp duty or taxes is minimised and rollover relief when applicable obtained.

6. It is common ground between the parties that neither party received independent legal advice contrary to the assertions in Clause 7 of the agreement.

7. The agreement itself contemplates application for orders as to property to facilitate the minimisation of stamp duty or other taxes.

8. However, nowhere in the agreement is the agreement expressed to be made under section 90C of the Act.

9. The husband sought no other relief in relation to the agreement nor did he adduce any evidence on any such issue in relation to the deficiencies of the agreement.

10. The agreement thus cannot be a “financial agreement” for the purposes of the Part VIIIA of the Act.

11. Accordingly it cannot operate to exclude the wife’s ability to seek property or spousal maintenance orders.

12. Section 90G makes provision as to certain financial agreements being binding on the parties:

    (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.

13. For the provisions of s 90G to operate they must relate to “a “financial agreement” as defined in the Act: that is an agreement that is a financial agreement under section 90B, 90C or 90D, but does not include an ante-nuptial or post-nuptial settlement to which section 85A applies”.

14. The subject agreement does not comply with s 90C of the Act. The husband’s application fails at that point.

15. Otherwise it is noted that the purported agreement in any event fails to comply with the provisions of s 90G(1) in most substantial aspects including s 90G(1) (b), (c) and (ca). Notwithstanding such non-compliance, had the agreement satisfied the provisions of s 90C, which it does not, the husband adduced no evidence save for his complaint that he had paid funds under the terms of the agreement that would have assisted the court in determining whether it would be unjust and inequitable if the agreement were not declared binding.

16. There will be an order that the husband’s application for a declaration that the subject agreement is a binding financial agreement be dismissed.

I certify that the preceding forty-two (42) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 18 May 2015.

Associate: 

Date:  18 May 2015