Malone & Malone
[2022] FedCFamC1F 784
Federal Circuit and Family Court of Australia
(DIVISION 1)
Malone & Malone [2022] FedCFamC1F 784
File number: CAC 2765 of 2021 Judgment of: GILL J Date of judgment: 19 October 2022 Catchwords:
FAMILY LAW – PROPERTY – Where the applicant husband seeks to split proceedings regarding the parties’ Binding Financial Agreement (“BFA”) – Where the respondent wife seeks for the BFA issue to be heard as part of one combined proceeding which includes substantive determination on spousal maintenance and property adjustment – Where the wife contends there are vitiating factors of undue influence and unconscionable conduct, in context of family violence, which necessitate the setting aside of the BFA – Where the possible overlap of preparation, evidence and factual determinations regarding the nature of the BFA and issues within the main substantive proceeding is weighed against potential of disposing of whole proceedings if the BFA holds – BFA issue to be heard separately.
Legislation: Family Law Act 1975 (Cth) ss 75, 79, 90F, 90G, 90K, 90SF
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 1.04, 10.10
Division: Division 1 First Instance Number of paragraphs: 45 Date of hearing: 13 October 2022 Place: Canberra Counsel for the Applicant: Mr Kearney, SC Solicitor for the Applicant: Swaab Attorneys Counsel for the Respondent: Mr Othen Solicitor for the Respondent: Farrar Gesini Dunn ORDERS
CAC 2765 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR MALONE
Applicant
AND: MS MALONE
Respondent
order made by:
GILL J
DATE OF ORDER:
19 october 2022
THE COURT ORDERS THAT:
1.Pursuant to Rule 10.10 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth), the proceedings be split for this Honourable Court to determine as a threshold issue:
(a)whether the financial agreement dated 10 April 2019 is binding pursuant to s 90G of the Family Law Act 1975 (Cth);
(b)whether the financial agreement dated 10 April 2019 ought to be set aside pursuant to s 90K of the Family Law Act 1975 (Cth); and
(c)whether clauses 4.1 to 4.3 of the financial agreement dated 10 April 2019 are void pursuant to s 90F of the Family Law Act 1975 (Cth).
2.The matter is transferred to Senior Judicial Registrar for the making of further directions including for the future determination of any spousal maintenance issues before me.
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 Malone & Malone has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
GILL J:
Introduction
The parties are currently in dispute as to whether, by virtue of a Binding Financial Agreement (“BFA”) entered into on 10 April 2019, the jurisdiction of this Court to make an adjustment of property interests, and to order spousal maintenance, is ousted. In aid of dealing with this issue, the parties have filed points of claim documents that function as pleadings in relation to the application to set aside the BFA.
The present application concerns the process as to how that issue, and any subsequent issue of property adjustment and spousal maintenance, may be resolved.
The husband seeks that the proceedings be split up pursuant to r 10.10 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Rules”) so that the issue of whether the BFA is in fact binding be dealt with in a hearing that deals only with that issue, and as the precursor to any potential consideration of property adjustment or spousal maintenance. The wife seeks that all matters be dealt with in the one trial, although accepting that the first issue to be resolved remains whether the BFA is binding.
MATERIAL RELIED UPON:
Applicant Husband
As per the Case Outline Document filed on 12 October 2022, the husband relies upon:
(a)Application in a Proceeding filed 28 August 2022;
(b)Affidavit filed 26 August 2022;
(c)Financial Statement of Respondent filed 16 December 2021;
(d)Financial Statement filed 19 May 2022;
(e)Respondent’s points of claim filed 21 June 2022; and
(f)Points of defence filed 21 July 2022.
Respondent Wife
As per the Case Outline Document filed on 12 October 2022, the wife relies upon:
(a)Initiating Application filed 16 December 2021;
(b)Affidavit filed 16 December 2021;
(c)Financial statement filed 16 December 2021;
(d)Points of claim filed 21 June 2022;
(e)Response to Application in a Proceeding filed 27 September 2022; and
(f)Affidavit filed 27 September 2022.
Applicable law
As noted above, the husband relies upon r 10.10 of the Rules, which is in the following terms:
(1) A party may apply for a decision on any issue, if the decision may:
(a) dispose of all or part of the proceeding; or
(b) make a trial unnecessary; or
(c) make a trial substantially shorter; or
(d) save substantial costs.
(2)An application under this rule must be made by filing an application in accordance with the approved form.
Rule 10.10 occurs within the broader context of r 1.04(1) of the Rules, which is in the following terms:
(1)The overarching purpose of these Rules, as provided by section 67 of the Federal Circuit and Family Court Act, is to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible.
Note 1:These Rules must be interpreted and applied, and any power conferred or duty imposed by them must be exercised or carried out, in the way that best promotes the overarching purpose (see subsection 67(3) of the Federal Circuit and Family Court Act).
Note 2:See sections 190 and 191 of the Federal Circuit and Family Court Act in relation to the overarching purpose of the Rules of the Federal Circuit and Family Court (Division 2). See also the Federal Circuit and Family Court of Australia (Division 2) (Family Law) Rules 2021 which applies these Rules with modifications.
The positions of the parties
The husband argues that the splitting of proceedings carries with it the prospect of a significant shortening of the proceedings. If he is successful in resisting the wife’s challenge to the BFA, then there will be no need to move onto the aspects of the parties’ dispute that pertain to property adjustment or spousal maintenance. He contends that not only will the hearing time be reduced, but that the steps necessary to prepare the matter will also be significantly reduced, allowing the issue to come on earlier and with less expense than the preparation of the case for all matters at issue between the parties.
The husband estimates that if the challenge to the BFA is split off, it is a matter that will take two days of trial time rather than seven days if all of the matters are dealt with together.
Without tying herself to an estimate, the wife contests such a differential. She contends that there is so significant an overlap in the factual issues to be dealt with in relation to the setting aside of the BFA and the property adjustment and spousal maintenance matters that she will pursue if successful in relation to the BFA, that splitting the proceedings will not result in the benefits to the extent contended by the husband. She further contends that if she is successful in respect of the BFA, that splitting will then require the revisiting of factual matters pursued on the setting aside application in the substantive proceedings.
The wife, in particular, points to the following issues as being overlapping.
Family violence
The wife has, in respect of her application to set aside the BFA, pleaded instances and patterns of family violence alleged to have been perpetrated by the husband upon her.
These matters are asserted to vitiate the BFA. The wife pleads that these matters lead to a conclusion that the wife was under the undue influence of the husband in relation to the entry into the BFA, or that the wife was at a special disadvantage known to the husband that seriously affected her ability to make a judgment as to entering into the BFA, such that the husband has engaged in unconscionable conduct in making the agreement with the wife.
In property proceedings that would follow a successful application to set aside, the wife points to the family violence matters as bearing upon an assessment of the wife’s contributions and whether they were rendered significantly more arduous by such conduct by the husband.
Against this, the husband submitted that the preponderance of the allegations are in relation to a period shortly prior to the end of the relationship, reducing their significance as matters bearing upon the nature of the wife’s contributions at an earlier stage of the relationship.
However, the pleaded matters extend to a point well prior to the end of the relationship and it may be taken that a number of the instances pleaded have the capacity to potentially bear upon the assessment of contributions.
This constitutes an area of factual overlap.
The property pool as at the time of separation
The wife contends that the content of the pool at the time of the entry into the BFA will form a necessary component of the consideration of whether the BFA should be set aside. Identifying the pool at that time is an essential component to the wife’s case that the bargain struck in the BFA was manifestly unfair, with such manifest unfairness forming a basis for inferring a relevant inequality of bargaining position, in turn supporting inferences in relation to undue influence and unconscionability.
It was also contended that establishing the extent of the pool at the time of entry into the BFA is a necessary component of the wife’s case as to material non-disclosure on the part of the husband as a ground for setting aside the agreement.
The husband contends that there is limited overlap in relation to issues concerned with the value of the pool at the time of the entry into the BFA, as opposed to the issue at trial which will be concerned with the pool of property at the time of trial.
While the wife accepts that the court will, on a s 79 of the Family Law Act 1975 (Cth) (“the Act”) determination, be concerned with the pool as at the time of the trial, she contends that understanding the pool at the time of entry into the BFA will form a necessary background to consider the significance of post separation dealings with property.
A further overlap arises in that where assets have been retained from the time of entry into the BFA until the trial, efforts in relation to valuation at the time of entry into the BFA may be helpful to, and form a part of a valuation as at the time of trial. The husband appropriately conceded that where an asset, such as a business, has remained static (presumably in the sense that the same asset has been retained in a like form) over a period, that an earlier in time valuation can be of assistance in establishing value as at the time of trial.
In relation to this point, the husband observed that assets have been disposed of post separation, and further assets acquired, particularly in relation to the husband’s involvement in a number of start-ups.
It may however be seen that the husband has retained interests in a significant proportion of the entities that were in existence at the time of the entry into the BFA, as seen in a comparison of [21] and [22] of his affidavit filed 26 August 2022 with the listed entities in the BFA, and in the limited disposals of property disclosed in his Financial Statement. Almost all of the entities listed at [21] and [22] of his affidavit, were listed in the schedule to the BFA, indicating a general commonality of the corporate and trust assets from the entry into the BFA until now.
This is a matter that is an area of overlap, in terms of both the preparation and the evidence that would be led, in both the setting aside and substantive matters.
Disclosure
The wife contends that the husband did not make adequate disclosure of his financial circumstances at the time of entry into the BFA.
While the wife initially contended that the issue of non-disclosure at the time of entry into the BFA was germane to a s 79 of the Act adjustment, she accepted that the relevant issues of non-disclosure (if any) on a s 79 trial would be derived from the state of any non-disclosure at the point of trial rather than being established by non-disclosure at the time of the entry into the BFA.
Other matters
The wife further contended a potential saving arising from conducting the proceedings together is that it would place the parties in a better position to resolve all matters through mediation, on the basis that the parties would have a fuller understanding of the factual matters underpinning their dispute.
This can be considered a benefit that may aid resolution without trial.
The husband pointed to the wife’s pursuit of orders for spousal maintenance in reliance on s 90F(1A) of the Act, in advance of dealing with the balance of the setting aside as a tacit acceptance that it is appropriate to deal with setting aside aspects in advance of the balance of the potential dispute between the parties. The wife disputed this characterisation, asserting it was interlocutory relief that was pursued. It is not clear that this is so. However, the point made by the husband carries little weight, given the differential in the issues that require consideration between setting aside the BFA as a whole and making an order for maintenance based on s 90SF(1A).
Consideration
It may be observed that there are areas of overlap between the application to set aside the BFA and any consequential substantive proceedings for property adjustment of spousal maintenance relief. There is an overlap in respect of the determination of the factual allegations of family violence and the impact that such, if established, had upon the wife. There is an overlap in establishing the pool as at the time of the entry into the BFA, both in respect of determination of how property has been dealt with since then, and as a practical component of establishing the value of the pool at trial, much of which appears to have been in existence at the time of the entry into the BFA.
It is also reasonable to anticipate that a full understanding of the pool given by preparation for a substantive trial also prepares the parties better to participate in meaningful mediation.
At the same time, it is important to also observe that there are distinct differences between the proceedings to set aside the BFA and proceedings relating to property adjustment and spousal maintenance more generally.
Unlike the broader proceedings, the setting aside is constrained by the points of claim documents functioning as pleadings, such that the factual scope of the trial of the setting aside is closely defined. Further, the nature of the two types of proceedings is different, the principles governing the setting aside being distinct from those governing the substantive applications.
Some of this difference is potentially lessened by the wife’s pursuit of the manifestly unfair point, as this may require some assessment in the light of the principles governing a substantive application to understand whether the bargain struck was in fact manifestly unfair. However, even then there is a sharp factual difference between the two types of proceedings arising from the point in time that the pool of property would need to be reckoned at in respect of each.
It may be accepted that were the setting aside and substantive matters run together, there would be some areas of commonality, and that running them together would eliminate some duplication. However, running them together necessarily imposes upon the threshold question a significant overburden of evidence, disclosure and days of hearing that are unnecessary to its determination.
I do not consider that it is yet possible to discern the difference in the number of days of trial between the two options, despite the efforts of the husband to do so. I do not accept his estimate of two days for the setting aside as realistic, given the scope of the factual matters identified in the points of claim documents. However, I do accept that there are significant differences between running the setting aside as a threshold hearing as opposed to taking evidence on all matters, and also in pursuing disclosure relevant to the substantive matters versus disclosure relevant to setting aside.
Further, although not determinative, prima facie the husband is entitled to the benefit of the BFA, and the course proposed by the wife marks a significant erosion of that benefit prior to any determination that the BFA should be set aside.
Even if the difference between the two options cannot be yet measured or estimated as a difference in terms of the days of trial, or days of preparation, the difference is significant enough to warrant the splitting of the proceedings in the pursuit of the ends supported by r 10.10 and the overarching purpose of the Rules.
Such a step carries with it the potential to dispose of the whole proceedings, if the BFA holds firm, rendering a substantive trial unnecessary in respect of s 79 or s 75 relief.
Such an outcome will also significantly reduce the preparation requirements.
It may be taken that determining whether the BFA is binding has the potential to save significant costs, if the BFA is found to be binding.
While it may also be taken that there may be an increase in costs if the BFA is found not to be binding, by virtue of the overlapping areas, that potential is outweighed by the matters set out immediately above.
Conclusion
In pursuit of the facilitation of a just resolution as quickly, inexpensively and efficiently as possible, the proceedings should be split to resolve whether the BFA is binding as a threshold matter in a hearing that precedes the determination of the substantive matters that may follow if the BFA is set aside.
Further directions will be required, on hearing from the parties, to facilitate this course.
I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Gill. Associate:
Dated: 19 October 2022
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