Makrolis & NSW Trustee & Guardian
[2022] FedCFamC1F 688
Federal Circuit and Family Court of Australia
(DIVISION 1)
Makrolis & NSW Trustee & Guardian [2022] FedCFamC1F 688
File number(s): SYC 5658 of 2021 Judgment of: ALTOBELLI J Date of judgment: 14 September 2022 Catchwords: FAMILY LAW – JURISDICTION – Where applicant sought to set aside binding financial agreement – Where the applicant’s wife died before institution of proceedings – Application dismissed for want of jurisdiction. Legislation: Family Law Act 1975 (Cth) ss 39, 44, 79, 80, 90H, 90K Cases cited: Radney & Radney [2022] FedCFamC2F 53
Simonds (Deceased) & Coyle (2019) FLC 93-895; [2019] FamCAFC 47
Division: Division 1 First Instance Number of paragraphs: 25 Date of hearing: 6 July 2022 Place: Sydney (via videoconference) Counsel for the Applicant: Ms Picker Solicitor for the Applicant: Otto Stichter & Associates Counsel for the Respondent: Mr Wong Solicitor for the Respondent: NSW Trustee & Guardian ORDERS
SYC 5658 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR MAKROLIS
Applicant
AND: NSW TRUSTEE & GUARDIAN
Respondent
order made by:
ALTOBELLI J
DATE OF ORDER:
14 SEptember 2022
THE COURT ORDERS THAT:
1.The application is dismissed.
2.The matter is removed from the list of cases awaiting finalisation.
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 Makrolis & NSW Trustee & Guardian has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
The discrete issue is whether, on the facts and circumstances of this case, the Court has jurisdiction to set aside a binding financial agreement dated 29 May 2019. This Court does not have jurisdiction and, accordingly, the application is dismissed.
Background
The background facts are uncontentious. Mr Makrolis (“the applicant”) is 44 years old. Ms Makrolis, the applicant’s deceased former wife (“Ms Makrolis”) would have been 42 years old. They commenced cohabitation in 2004 and married in 2006. They had three children who are currently aged 15, 13 and nine. The applicant and Ms Makrolis separated on a final basis on 1 October 2018. They entered into a binding financial agreement on 29 May 2019. They divorced in mid-2019. In late 2019, Ms Makrolis died intestate. In late 2020, letters of administration were granted to the NSW Trustee & Guardian (“the respondent”).
On 25 August 2021, the applicant commenced proceedings to set aside the binding financial agreement.
This matter came before me on 6 July 2022. Both parties were represented by experienced family law counsel.
It is common ground that the net total assets held by the respondent amounts to $746,349.09. These funds are held on trust for the three children who currently live with the applicant. The applicant and the children live in rented accommodation. He cannot afford to purchase a permanent residence for the children and himself without accessing Ms Makrolis’ estate, which in turn can only be achieved by setting aside the binding financial agreement. That there is hardship for the applicant is not in dispute. He spends all of his income in meeting the expenses of his family. The applicant does not dispute that he could approach the respondent for financial assistance in relation to the care of the children, but he considers this unwieldy, unfair and an additional burden of hardship on him as father to the children.
It is common ground that the binding financial agreement divided the property available for distribution between the applicant and Ms Makrolis as to approximately 39 per cent to him, and 61 per cent to her.
The applicant’s case as to jurisdiction
In terms of jurisdiction, the applicant relied on s 90K(1)(d) of the Family Law Act 1975 (Cth) (“the Act”) as empowering the Court to set aside the binding financial agreement. Section 90K states:
90KCircumstances 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:
(a)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.
…
(Emphasis in original)
The applicant submitted that there had been a material change in circumstances relating to the care, welfare and development of a child of the marriage, such that the applicant would suffer hardship if the Court does not set the agreement aside.
The applicant also relied on s 80 of the Act setting out the Court’s general power in the following terms:
80 General powers of court
(1)The court, in exercising its powers under this Part, may do any or all of the following:
(a)order payment of a lump sum, whether in one amount or by instalments;
(b)order payment of a weekly, monthly, yearly or other periodic sum;
(ba)order that a specified transfer or settlement of property be made by way of maintenance for a party to a marriage;
(c)order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs;
(d)order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as are necessary to enable an order to be carried out effectively or to provide security for the due performance of an order;
(e)appoint or remove trustees;
(f)order that payments be made direct to a party to the marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage;
(h)make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order;
(i)impose terms and conditions;
(j)make an order by consent;
(k)make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
(l)subject to this Act and the applicable Rules of Court, make an order under this Part at any time before or after the making of a decree under another Part.
…
Specifically, the applicant relied on s 80(1)(k) empowering the Court to make any other order which it thinks is necessary in order to do justice.
The Court observes that both provisions referred to above empower the Court to do certain things but assume, rather than confer, jurisdiction.
The Court was referred to s 90H of the Act dealing with the effect of the death of a party to a financial agreement. This section provides:
90H Effect of death of party to financial agreement
A financial agreement that is binding on the parties to the agreement continues to operate despite the death of a party to the agreement and operates in favour of, and is binding on, the legal personal representative of that party.
Section 90H grants power and confers jurisdiction, but only in relation to enforcing an agreement.
Counsel for the applicant referred the Court to s 44(3B) which states:
(3B)Despite subsection (3), if, whether before or after the commencement of Schedule 2 to the Family Law Amendment Act 2000:
(a)a divorce order has taken effect or a decree of nullity of marriage has been made; and
(b)a financial agreement between the parties to the marriage has been set aside under section 90K or found to be invalid under section 90KA;
proceedings of a kind referred to in paragraph (c), (caa), (ca) or (cb) of the definition of matrimonial cause in subsection 4(1) (not being proceedings under section 78 or 79A or proceedings seeking the discharge, suspension, revival or variation of an order previously made in proceedings with respect to the maintenance of a party) may be instituted:
(c) within the period of 12 months after the later of:
(i)the date on which the divorce order took effect or the date of the making of the decree of nullity, as the case may be; or
(ii)the date on which the financial agreement was set aside, or found to be invalid, as the case may be; or
(d)with the leave of the court in which the proceedings are to be instituted;
and not otherwise.
(Emphasis in original)
This provision also grants power and assumes, but not does confer, jurisdiction. Thus, where the Court otherwise has jurisdiction, the power is given to set aside a financial agreement under s 90K, notwithstanding the strict time limits set out in s 44 of the Act.
As with all of the sections referred to above, there is no conferral of jurisdiction on a court to hear a dispute between the applicant and the respondent, a trustee of Ms Makrolis’ estate, in the circumstances of this case.
The respondent’s submissions as to jurisdiction
The respondent pragmatically conceded that if the Court had jurisdiction, the Court would be satisfied for the purposes of s 90K(1)(d) that there had been a material change in circumstances. The respondent did not concede that the applicant would suffer hardship, but the Court may well have found this to be the case
The main argument on behalf of the respondent was that, whilst the Court had power, it lacked jurisdiction. At the time of death of Ms Makrolis in late 2019, the parties had both entered into a binding financial agreement and had been divorced. There were no proceedings on foot between them at the time. The respondent submitted that the Court did not have jurisdiction in these circumstances because no proceedings were on foot, and the other party to the financial agreement had already died. Thus, according to the respondent, s 44(3B) did not assist, as it did not confer jurisdiction after the death of Ms Makrolis. The respondent did concede that s 90H conferred jurisdiction, but only in the context of enforcing an agreement, and not setting it aside.
The respondent further contended that, even if the Court did have power to set aside the financial agreement, it would not have power under s 79 to make an order altering property interests, again for the reason that Ms Makrolis died at a time when no proceedings were on foot.
DOES THE COURT HAVE JURISDICTION IN THIS CASE?
The applicant’s Initiating Application was filed in the Federal Circuit Court (as it was then known) on 25 August 2021. At that time, s 39(1A) of the Act conferred jurisdiction on that court in relation to a matrimonial cause.
“Matrimonial cause” was defined in s 4(1). Almost universally, the definition refers to proceedings between the parties to a marriage. The exception is subparagraph (eaa) which states:
(eaa)without limiting any of the preceding paragraphs, proceedings with respect to a financial agreement that are between any combination of:
(i)the parties to that agreement; and
(ii)the legal personal representatives of any of those parties who have died;
(including a combination consisting solely of parties or consisting solely of representatives)…
That may appear to be a conferral of jurisdiction on the Court to set aside the financial agreement, but, as the respondent contended, that does not necessarily mean the Court is conferred with jurisdiction to then make a s 79 order. That is because s 79(8) states:
(8)Where, before property settlement proceedings are completed, a party to the marriage dies:
(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;
(b)if the court is of the opinion:
(i)that it would have made an order with respect to property if the deceased party had not died; and
(ii)that it is still appropriate to make an order with respect to property;
the court may make such order as it considers appropriate with respect to:
(iii)any of the property of the parties to the marriage or either of them; or
(iv) any of the vested bankruptcy property in relation to a bankrupt party to the marriage; and
(c)an order made by the court pursuant to paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
Thus s 79(8) provides for the continuation of proceedings commenced under s 79 where one of the parties subsequently dies. It does not provide for s 79 proceedings to be commenced after the death of one of the parties.
Section 44(3B) does not assist the applicant because of s 79(8). The Court’s jurisdiction depends on the terms of any legislative grant of jurisdiction. There is no statutory grant of jurisdiction providing for an application for leave to institute proceedings to be excluded from the principle that Ms Makrolis’ death prevented those proceedings from being instituted. For all practical purposes, the right to seek any property settlement abated when Ms Makrolis died. Section 44(3B) takes the matter no further (see, e.g., Radney & Radney [2022] FedCFamC2F 53 citing Simonds (Deceased) & Coyle (2019) FLC 93-895).
The Court lacks jurisdiction. It must follow that the application is dismissed.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 14 September 2022
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