PARKE & PARKE
[2015] FCCA 1692
•19 June 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PARKE & PARKE | [2015] FCCA 1692 |
| Catchwords: FAMILY LAW – Property – whether financial agreement is a binding financial agreement – whether financial agreement should be set aside – fraud – inducement – burden of proof – evidentiary onus – unconscionable conduct – undue influence – uncertainty – repudiation and rescission. |
| Legislation: Crimes Act 1900 (NSW), Part 15A Evidence Act 1995 (Cth) Family Law Act 1975 (Cth), ss.90B, 90G, 90K, 90KA, Part VIII, Part VIIIA Federal Circuit Court of Australia Act 1999 (Cth), s.8 |
| Ansett Transport Industries (Operations) Pty Ltd v Commonwealth of Australia (1977) 139 CLR 72 Briginshaw v Briginshaw (1938) 60 CLR 336 Bromley v Ryan (1956) 99 CLR 362 Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 Derry v Peek (1889) 14 AC 337 Johnson v Buttress (1936) 56 CLR 113 Kostres v Kostres [2009] FamCAFC 222 |
| Applicant: | MR PARKE |
| Respondent: | MS PARKE |
| File Number: | BRC 6354 of 2014 |
| Judgment of: | Judge Howard |
| Hearing dates: | 26 and 27 March 2015 |
| Date of Last Submission: | 24 April 2015 |
| Delivered at: | Brisbane |
| Delivered on: | 19 June 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Galloway |
| Solicitors for the Applicant: | Family Law Solutions |
| Counsel for the Respondent: | Ms Carew QC |
| Solicitors for the Respondent: | Keating Lehn Lawyers |
ORDERS
That each party shall provide a copy of a proposed Final Order to each other party and to the Court by no later than 4:00pm on Monday 22 June 2015.
Should the parties wish to make any submissions in relation to the matters referred in paragraph 109 of the reasons for judgment then they must do so in writing and such written submission shall be filed and served by no later than 4:00pm on Wednesday 24 June 2015.
The parties shall organise and attend (personally and with their legal representatives) at a mediation to be conducted within three (3) months of the date of this Order. The mediator’s fees shall be paid jointly by the parties.
IT IS NOTED that publication of this judgment under the pseudonym Parke & Parke is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRC 6354 of 2014
| MR PARKE |
Applicant
And
| MS PARKE |
Respondent
REASONS FOR JUDGMENT
The applicant in this case is Mr Parke. He was born on (omitted) 1942.
The respondent is Ms Parke. The respondent was born on (omitted) 1948.
The parties lived in a de facto relationship from 1974 until 1999. They separated in 1999. The parties have one (adult) child named X. X was born on (omitted) 1976. He is married with two children and lives, like his parents, in or near the town of (omitted), New South Wales. As at the date of the final hearing X was working with the applicant in the family business – a (business omitted) in (omitted).
In (omitted) 2001 the parties reconciled and, on (omitted) 2001, the parties were married in New South Wales.
The parties’ marriage broke down irretrievably in late 2013. The parties remained living separated under the one roof from (omitted) 2013 until 17 October 2014 in the former matrimonial home at Property N, New South Wales. On that date the respondent left the property in accordance with an order of the Court made on 22 September 2014. That order was made by the Court with the consent of the parties.
Three months before the respondent vacated the former matrimonial home, the applicant, on 18 July 2014, filed an initiating application seeking, inter alia, by way of final order, a declaration in the following terms:-
“1. That it be declared that a written agreement between the parties, made (omitted) 2001 is a financial agreement binding on the parties within the meaning of that expression in section 90G of the Family Law Act.”
The first mention of the matter took place before the Court on 22 September 2014. The Court was informed that the applicant had been diagnosed with cancer and the parties sought a priority listing. The matter was set down for determination on 26 and 27 March 2015 – “…for hearing on the validity and effect of the Financial Agreement entered into by the parties…” (Note paragraph 9 of the Order made 22 September 2014).
As part of the orders made by consent on 22 September 2014 the respondent was to supply to the applicant:-
“… in the form of Points of Claim full particulars of the matters she says should cause the agreement of (omitted) 2001 to be set aside pursuant to s90K(1)(b), (c) and (d) including a statement in each respect as to why the agreement is void, voidable or unenforceable, or why it is now impracticable for it or part of it to be carried out or how there has been a material change in circumstances relating to a child of the marriage.” (Note paragraph 1 of the Order made 22 September 2014).
In addition, it was also ordered by consent:-
“2. That if it (be) intended by the respondent to (rely) upon the provisions of s90K(1)(e), she supply particulars of the kind required by Order 1 hereof.”
The respondent had 21 days within which to supply the “Points of Claim”. The provision of “Points of Claim” (known as a “Statement of Claim” in other areas of civil law) has become a common practice in cases of this kind. It is not required by any rules of the Court but it is a sensible practice. A further sensible practice worth considering in future cases is a requirement for the provision of a “Defence” to the “Points of Claim”. This is a jurisdiction without pleadings. However, in cases such as this, “particulars” in the nature of pleadings are beneficial. On 26 March 2015 the Court granted the respondent leave to rely upon the “Respondent’s Amended Points of Claim” filed on 25 February 2015 (the “Respondent’s Points of Claim” or the “Points of Claim”).
Just prior to the parties’ first separation in 1999 the respondent had obtained an Apprehended Violence Order against the applicant after the applicant had assaulted the respondent and the respondent’s friend. The Apprehended Violence Order was made by the Local Court at Lismore, New South Wales on 24 February 1999. The order was made pursuant to Part 15A of the Crimes Act 1900 (NSW). A copy of the Apprehended Violence Order is annexure “P1” to the affidavit of the respondent filed 27 February 2015 (the respondent’s “trial affidavit”). The order remained in place for 12 months.
The name of the respondent’s friend is Ms M. During cross-examination of the applicant by Ms Carew QC (on behalf of the respondent) – the applicant admitted assaulting (pushing) Ms M. This appears at page 45 on day one of the transcript, Thursday 26 March 2015. The applicant denied assaulting the respondent. I do not believe the applicant. I had the opportunity to observe both the respondent and the applicant give evidence during the course of the hearing. I prefer the evidence of the respondent. I note that Ms M swore an affidavit on 26 March 2015. That affidavit was e-filed in the Court on that same day. The affidavit was not relied upon by the respondent and Ms M did not come to Court to give evidence – because counsel on behalf of the applicant (Mr Galloway) sensibly agreed not to ask the Court to draw a Jones v Dunkel[1] inference against the respondent for failing to call Ms M.
[1] (1959) 101 CLR 298.
After the incident of domestic violence which was the subject of the Apprehended Violence Order made on 24 February 1999 – the respondent decided to leave the applicant. The respondent’s decision coincided with the fact that X was leaving that year to travel to (country omitted). The respondent had to delay leaving the applicant – because she did not have sufficient money to do so. She needed to save money to pay for some relocation costs. The respondent asked the applicant to buy her a furnished unit to live in for $160,000 and she also asked him to buy her a car. The applicant told the respondent that she was “not entitled to anything”. The respondent took her personal belongings from the home at Property N and moved into a small rented flat for about six months. The applicant then spoke to the respondent at a 70th birthday party for the respondent’s father. At that time the applicant offered to rent to the respondent a property situated at Property R. That property had been purchased by the applicant in his own name during the de facto relationship. The respondent agreed and moved into that property and paid to the applicant rent in the sum of $160 per week.
The applicant denies that the respondent asked him to buy her a furnished unit for $160,000 and he also denies that the respondent asked him to buy her a car. (Transcript page 47 lines 5-10, 26 March 2015). I do not accept the evidence of the applicant. I accept the evidence of the respondent. I note that the respondent’s version accords with her evidence contained at paragraph 35 of her trial affidavit. When the applicant sought a reconciliation with the respondent in mid-2001 he specifically reminded the respondent about her earlier request (from 1999) for a furnished unit and a car. I have referred to these matters later in these reasons for judgment.
The applicant also denied that the respondent paid him rent during the time that she lived at Property R. The respondent states that she paid the applicant $160 per week by way of rent – which is the amount that the applicant had requested when he had the discussion with the respondent at the respondent’s father’s 70th birthday party. The applicant stated at page 47 of the transcript (from line 45), in relation to the $160 per week rent:-
“I deny that. I never got that money.”
I do not accept that evidence of the applicant.
The respondent remained living in the property at Property R until the parties reconciled in (omitted) 2001.
In May 2001 the respondent filed an “Application for Adjustment of Interests with Respect to Property” under the Property Relationships Act 1984 (NSW). Prior to initiating proceedings the respondent had consulted Grahams Lawyers of Lismore. That firm sent a letter to the applicant at his place of work, namely, the (business omitted) at Property R. The letter is dated 29 March 2001 and is annexure “P7” to the respondent’s trial affidavit. The first paragraph of the letter states:-
“We have been consulted by Ms Parke to assist with negotiations and hopefully finalise the division of the assets and resources you have acquired during the 25 year relationship.”
The applicant maintained during cross-examination that he did not receive that letter. I do not believe the applicant.
It was then put to the applicant during cross-examination that he had been to see a solicitor by the name of Christopher Hughes at a firm named Bondfield Riley in Lismore. The applicant stated that he could not remember consulting that solicitor. The applicant did not deny consulting Mr Hughes. The applicant (at page 51 of the transcript, lines 1-5) stated that he did not know that the respondent had commenced proceedings in May 2001. The applicant subsequently consulted a solicitor named David L Johnston.
The applicant denied knowing anything about the fact that the respondent had consulted lawyers and filed an application seeking de facto property settlement orders under the relevant New South Wales legislation. I do not believe the applicant. I make the following findings of fact in relation to these issues:-
a)that the applicant did receive a copy of the letter from Grahams Lawyers dated 29 March 2001 (annexure “P7” to the respondent’s trial affidavit);
b)that the applicant consulted a lawyer named Christopher Hughes from the firm Bondfield Riley in Lismore in relation to the matters raised in the letter which is “P7” to the respondent’s trial affidavit (namely the respondent’s proposed de facto property settlement proceedings); and
c)the applicant was aware that the respondent had filed the application for de facto property settlement in May 2001 and it is more likely than not that he did receive a copy of those proceedings – the same having been served upon his solicitors, Bondfield Riley, on about 17 May 2001.
The background, findings and inferences referred to in paragraphs 18, 19, 20 and 21 herein set out the factual scenario leading to the applicant’s decision to contact his son, X and seek X’s assistance in bringing about a reconciliation between the applicant and the respondent. It was indeed the applicant who sought a reconciliation with the respondent. I reject any assertion by the applicant to the contrary. I note paragraph 11 of the affidavit of X filed 26 February 2015. I accept the evidence of X. X was an impressive witness.
Approximately one month after the respondent commenced de facto property settlement proceedings pursuant to the Property Relationships Act 1984 (NSW) and served those proceedings on the applicant’s then solicitors (Bondfield Riley) the applicant (after initially enlisting the assistance of the parties’ son X) approached the respondent to ask her if she would agree to a reconciliation.
I note the following evidence from the trial affidavit of the respondent:-
“RECONCILIATION 2001
33. The applicant approached me in (omitted) 2001 to ask if we could reconcile. I was not in any paid employment at the time, although I was looking for work and had minimal savings. I was not receiving any financial support from the applicant or receiving any income from any of the assets built up during our de facto relationship. I told the applicant that I was no longer prepared to put up with his abuse and he asked me what he would have to do for me to agree to reconcile. He told me that he had been talking with our son, X, who was then back from (country omitted), and that he would like for me to move home. I recall informing the applicant that I would agree to reconcile with him, but only on the condition that we married. I did not expect the applicant to agree with my request to marry, as he had previously, during our lengthy de facto relationship, informed me on many occasions that he would never marry anyone as, if he did, he would “lose half of everything I own”. Almost all of the assets that were in his name in 2001 had been acquired during our de facto relationship. The applicant asked what else would make me happy and I said that I was sick of having no money and having to ask him for money. The applicant told me that he would give me a credit card, although he said “I don’t want you to go overboard”. He said that I could come and work with him and that would make me feel more involved.
34. I told the applicant that I just wanted a happy life and it wasn’t about the money as he had nothing much when I met him. Immediately after me telling the applicant I would reconcile if we could marry, he informed me that he had spoken with a Marriage Celebrant and she was able to marry us on (omitted) at (omitted). The applicant bought me an engagement ring, but then I recall him suggesting that we should “just stay engaged for 6 months” and decide whether or not we then should marry. I said no – I would only reconcile if we were to marry.
35. The applicant asked, if we were to separate again after our marriage, would I still agree to accept “a furnished unit and a new car”, and I said that I would. I recall the applicant asking me if I was “prepared to put that in writing?” and I said “do you mean an Agreement?” and he said “yes”. To the best of my recollection and belief, these conversations occurred between the applicant and me in (omitted) 2001. The next Mention date of my Local Court proceedings was to be 21 August 2001.”
I accept this evidence of the respondent.
The applicant instructed his solicitor, Mr David Johnston, to draft an agreement. This is confirmed by a letter from the respondent’s then solicitor to the applicant’s then solicitor. That letter is dated (omitted) 2001 and is annexure “P9” to the respondent’s trial affidavit. The first paragraph of that letter states:-
“We enclose herewith draft Agreement for your perusal. Our client provided us with the Agreement which you had drafted and given to your client, and we have amended this according to our instructions.”
The respondent in fact received advice from her then lawyers (Hosie and Partners) to the effect that she should not sign the agreement. As noted in paragraph 40 of the respondent’s trial affidavit – she told her lawyers:-
“…that I never wanted to go through the process that I had gone through over the last three years again where I had ended up with nothing, and that at least this way I knew what to expect and that I had no intention of leaving the marriage, and if the applicant and I could start again, surely we could work it out and end our lives together.”
I accept that evidence of the respondent.
I also accept the respondent’s evidence that she had no money and she was worn out (paragraph 40 respondent’s trial affidavit).
A copy of the Agreement (also showing the signature of the applicant’s solicitor as witness to the applicant’s signature) is annexure “P11” to the respondent’s trial affidavit.
There are two main headings within the Agreement itself. Those headings are, “RECITALS” and “TERMS OF AGREEMENT”. Under the first heading (“RECITALS”) there are 13 separate paragraphs noted as A to M inclusive. Under the second heading (“TERMS OF AGREEMENT”) there are 16 clauses.
The agreement then includes a one page document which comprises schedule 1 and schedule 2. Schedule 1 includes the applicant’s assets and schedule 2 includes the respondent’s assets. Within those schedules there are also agreed estimated values of those assets. After the one page comprising schedules 1 and 2 – there appears two final pages attached to the agreement being certificates of independent legal advice provided to the respondent (by Julie Ferguson, solicitor of Hosie and Partners) and to the applicant by his then solicitor Mr David Johnston. Both of those certificates of independent legal advice are dated (omitted) 2001. That is also the date upon which both parties signed the agreement.
Two days after the agreement was signed the parties married at (omitted), New South Wales on (omitted) 2001.
Under the heading, “RECITALS” the agreement signed by both parties states:-
“A. Mr Parke and Ms Parke intend to marry at (omitted), Australia on (omitted) 2001 and thereafter to reside permanently together in Australia. If the marriage does not take place as specified or within one (1) month of the date specified this agreement is null and void and of no effect.
B. Ms Parke was born on (omitted) 1948. She is presently unemployed, in good health and supports herself by utilising her savings.
C. Mr Parke was born on (omitted) 1942. He is self employed as a (business omitted) Proprietor and in good health.
D. Mr Parke and Ms Parke intend for their marriage to be permanent but nevertheless wish to define their financial rights and responsibilities during the marriage and if a breakdown of marriage occurs and they separate. During the marriage each intends to respect the other as to their ability and habits. Mr Parke is not a night person, Ms Parke is and that is understood. Mr Parke seeks love, happiness and respect, Ms Parke seeks an end to physical, emotional and financial abuse and for Mr Parke and Ms Parke to consider relationship counselling should minor difficulties arise.
E. Mr Parke and Ms Parke have previously resided together as husband and wife from 1974/75 until 1999.
F. There is one child of their union, X born (omitted) 1976.
G. Mr Parke is the owner of or otherwise entitled to the assets and resources set out in the first schedule, subject to clause 6 hereof.
H. Ms Parke is the owner of or otherwise entitled to the assets and resources set out in the second schedule, subject to clause 6 hereof.
I. Each party may, in the future, receive gifts or inheritances.
J. The parties desire:
as far as possible to contract out of the provisions of Part VIII of the Family Law Act if the marriage breaks down irretrievably to enter into a financial agreement under Section 90B of the Family Law Act providing how:-
(a) in the event of the breakdown of the marriage, their property and financial resources at the date of this agreement, or at a later time, and before the dissolution of the marriage, is to be dealt with; and/or
(b) the maintenance of either of them during their marriage is to be dealt with.
K. No other agreement is in force under Section 90B, 90C or 90D of the Family Law Act.
L. Before each party signed this agreement, they received separate independent legal advice from a legal practitioner as to the following:
the effect of the agreement on that party’s rights;
whether or not, at the time the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;
whether or not, at that time, it was prudent for the party to make the agreement;
whether or not, at that time, and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable.
M. For the purposes of this agreement the parties agree on the following definitions:
“Separation” – is when either party leaves the matrimonial home or either gives written, dated notice to the other to the effect that the marriage has finished. Separation includes the death of a party.”
Under the heading “TERMS OF AGREEMENT” the agreement signed by both parties states:-
“The parties agree as follows:
1. This agreement will continue to operate notwithstanding the death of a party to it and will be binding on their heirs, executors, administrators and assigns of each party.
2. Ms Parke agrees that:
2.1 She has no entitlement to Mr Parke’s assets and resources as set out in the First Schedule or any accretion to them or any income from them; apart from as provided in this Agreement.
2.2 She has no entitlement to any gifts or inheritances received, or which may at any time be received, by Mr Parke.
3. Mr Parke agrees that:
3.1 He has no entitlement to Ms Parke’s assets and resources as set out in the Second Schedule or any accretion to them or any income from them;
3.2 He has no entitlement to any gifts or inheritances received, or which may at any time be received, by Ms Parke.
4. The parties may each contribute financially and non-financially towards the acquisition, conservation and improvement of assets and resources (other than those referred to in paragraph 2 and 3 hereof) during their marriage to the best of their respective abilities.
5. Assets and resources acquired during the course of the marriage (other than those referred to in paragraphs 2 and 3 hereof) shall be deemed to be owned by the parties in the proportions described in any document evidencing title.
6. That prior to the date of the marriage Mr Parke will:
6.1 Pay to Ms Parke the sum of twenty five thousand dollars ($25,000.00);
6.2 Do all acts and things and sign all documents and give all authorities necessary to effect a transfer to Ms Parke of a one half share in the properties at Property N and “Property T” being Lot (omitted) in Section (omitted) in DP (omitted) at (omitted) and Property K, being Lot (omitted) in DP (omitted) at (omitted) so that the properties are owned by Mr Parke and Ms Parke as tenants in common in equal shares.
7. That during the marriage Mr Parke will:
7.1 Provide all necessary financial support for Ms Parke to a minimum of one hundred and fifty dollars (150.00) per week for food only and two hundred dollars ($200.00) per week for Ms Parke (with annual CPI increases) payable weekly in advance as nominated by Ms Parke.
7.2 In the event that Ms Parke works in any of Mr Parke’s businesses Mr Parke will pay Ms Parke at the usual rates of pay for such employees for the type of work or services provided, and Mr Parke will provide to Ms Parke all other benefits, allowances, holidays and leave entitlements in accordance with any relevant award as any other employer would be obliged to do.
7.3 Pay for all outgoings for any home in which the parties reside and will also meet all outgoings and other expenses relating to any property that was owned by him at the date of this agreement and/or acquired by Mr Parke during the marital cohabitation in his sole name or through any corporate entity in which he has an interest.
8. Both parties agree that they will not engage in any physical, emotional or financial abuse of the other and that they will each participate in relationship counselling and mediation in the event of there being any difficulties in the relationship.
9. Ms Parke will pay all outgoings and expenses in relation to any property owned by her at the date of this agreement and acquired by her during the martial cohabitation in her sole name.
10. That in the event that the parties separate, the parties agree:
10.1 Ms Parke shall retain her excluded property set out in Schedule Two;
10.2 Mr Parke will retain his excluded property set out in Schedule One subject to clause 6 and 10 hereof;
10.3 Neither party shall have any entitlement to any gift or inheritance received by the other in the course of the marriage;
10.4 Ms Parke will do all acts and sign all documents to transfer to X all of her right title and interest in the properties at Property T, Property N and Property K, within sixty (60) days of the separation.
10.5 Mr Parke will do all act and sign all documents and provide all funds necessary to give to Ms Parke within fourteen (14) days of separation a registered comprehensively insured unencumbered motor vehicle not more than four (4) years old in good working order, such motor vehicle to be as agreed by the parties, failing agreement to be as specified and chosen by Ms Parke.
10.6 (i) Mr Parke will do all acts and sign all documents to provide within thirty (30) days of the date of separation to pay an amount equal to 50% of the value at the time of separation of the property which then constitutes the matrimonial home.
(ii) In the event that the parties cannot agree on the amount to be paid pursuant to sub-clause (i) hereof, the parties shall jointly appoint a Licensed Real Estate Valuer, and shall be bound by the opinion of that valuer.
11. (a) That the mutual assets shall be divided in accordance with the terms of any document evidencing title or if there are no title documents the purchase receipt of that asset.
(b) In order to facilitate this division the parties agree to jointly appoint an appropriately qualified valuer and agree to be bound by the opinion of that valuer.
(c) In the event that the parties cannot agree on who is to retain the asset, the asset is to be sold within sixty (60) days for the best price available and the nett sale proceeds to be divided in accordance with clause (a) hereof.
12. This agreement shall continue in full force and effect for a period of five (5) years from the date of the marriage of the parties when it shall be reviewed.
13. That on the review date or such other date as the parties shall mutually and in writing agree they may elect to vary this agreement in such manner as they shall consider appropriate to reflect their then present circumstances and in default of such election, this agreement shall continue in full force and effect.
14. This agreement is made pursuant to provisions of Section 90B of the Family Law Act, 1975 and it is intended by the parties to define their rights and obligations toward each other under the said Act and likely legislation which may be in force from time to time governing the financial obligations of the parties towards each other and to stand in relation to its subject matter in substitution for the rights and entitlements of each party under such legislation to the extent permitted by Law.
15. That this agreement shall be binding upon the parties and their legal personal representatives.
16. That this agreement shall not be amended, modified or supplemented except by a written instrument executed by the parties with the same degree of formality as this Agreement.”
The emphasis (bold type) as noted in the transcribed portions of the agreement above has been added for the purposes of these Reasons for Judgment.
Financial Agreements
Part VIIIA of the Family Law Act 1975 (“the Act”) relates to financial agreements. Section 90B provides:-
“90B FINANCIAL AGREEMENTS BEFORE MARRIAGE
(1) If:
(a) people who are contemplating entering into a marriage with each other 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 people are not the spouse parties to any other binding agreement (whether made under this section or section 90C 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 . The people may make the financial agreement with one or more other people.
(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 before divorce, 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) A financial agreement made as mentioned in subsection (1) may also contain:
(a) matters incidental or ancillary to those mentioned in subsection (2); and
(b) other matters.
(4) A financial agreement (the new agreement ) made as mentioned in subsection (1) may terminate a previous financial agreement (however made) if all of the parties to the previous agreement are parties to the new agreement.”
In paragraph 14 of the respondent’s amended points of claim the respondent has pleaded:-
“14. On or about (omitted) 2001, the respondent and applicant entered into a Financial Agreement pursuant to section 90B of the Family Law Act 1975 (as amended) (“the financial agreement”).
It is therefore accepted by the respondent that she entered into a “financial agreement” as that term is used in s.90B of the Act.
Binding Financial Agreements
Section 90G of the Family Law Act1975 relevantly provides:
“90G 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.”
In Hoult & Hoult [2013] FamCAFC 109 the Full Court of the Family Court of Australia considered s.90G of the Act. Thackray J made reference to Black & Black (2008) FLC 92-357 and noted further at paragraph 18, inter alia:-
“18. The Full Court considered s 90G in Black & Black (2008) FLC 93-357 and concluded that strict compliance with s 90G was obligatory for a financial agreement to be binding.
19. Section 90G was again amended by the Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 (Cth) (“the 2009 amending Act”), which aimed to overcome problems in the Act exposed by Black & Black. Put briefly, the intention was to ensure a party could not avoid an agreement based on what was described as “a mere technicality”. The amendments had prospective and retrospective effect.
20. In its amended form, s 90G now requires that each party must have been provided with prescribed legal advice before signing the agreement. It is insufficient that a party was provided with a statement from their lawyer stating that the advice was given, or even that a copy of such a document was given to the other party (although these were made obligatory requirements). If the requisite advice was, in fact, not provided, the agreement is not binding. Crucially, however, this proposition is subject to s 90G(1A).
21. Section 90G(1A) was inserted by the 2009 amending Act. It empowers a court to declare that an agreement will be binding even if the s 90G(1) criteria have not been met. Importantly, such a declaration can only be made if the court is satisfied that it would be “unjust and inequitable” if the agreement was not binding.
22. The retrospective application of the 2009 amendments is not without complication, but does not require discussion as it is not the subject of controversy here. It is sufficient to say it is accepted that, for an agreement to be binding, each party must have been provided with the prescribed advice, even though that may not have been a requirement when the agreement was executed (albeit it was clearly expected that advice would have been given prior to lawyers certifying it had been).
23. This subtle change in the Act leaves all agreements open to challenge on the basis of absence of the prescribed legal advice, even though the lawyers have exchanged statements certifying the advice was given.”
In the present case the agreement is signed by all parties. Before the agreement was signed 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 of the agreement to that party. There are signed statements from legal practitioners stating that the requisite advice was provided to each of the parties to the agreement and a copy of those statements from the legal practitioners are in fact both attached to the agreement.
The formal requirements of s.90G of the Act appear to have been met and the “financial agreement” will be “binding” upon the parties unless the Court concludes that the financial agreement should be set aside.
The circumstances in which a Court may set aside a financial agreement are set out in s.90K(1) of the Act. That section provides:
“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:
(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.”
Section 90KA provides:-
“90KA VALIDITY, ENFORCEABILITY AND EFFECT OF FINANCIAL AGREEMENTS AND TERMINATION AGREEMENTS
The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a) subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b) has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c) in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
The respondent has pleaded (in paragraph 45 of the respondent’s points of claim) that:-
“45. …in the event that, the Financial agreement is declared to be binding, that the Financial Agreement entered into between the parties on (omitted) 2001 be set aside pursuant to section 90K(1)(a)(b)(c) and/or (e) of the Act.”
Section 90K(1)(a) Fraud Alleged
In paragraphs 22 and 23 of the respondent’s points of claim it is pleaded:
“22. At the date of entering into the Financial Agreement, the applicant failed to disclose a material matter, namely, relevant property in which he had an interest or control.
(a) Interests of both the applicant and the respondent in Parke Superannuation Fund, including:
(i) Storage Sheds – (omitted)
$215,989.79
(ii) 7000 (omitted) Shares $2,200.00
(iii) 375 (omitted) Shares $20.00
(iv) 400 (omitted) Shares $400.00
(v) (omitted) Shares $3,650.00
(vi) (omitted) Shares $11,520.00
(vii) Cash at bank $13,377.00
(viii) Other Debtors $6,380.00
(b)
ShareholdingsAssets of (business omitted) Pty Ltd, including but not limited to:(i) Personal Loan to Mr F $35,000
(ii) Personal Loan to Mr C $4,000
(iii) Personal Loan to Mr R $6,000
(iv)(omitted) Bank Account $125,376
(c) applicant’s Personal Assets, including:
(i) (omitted) Bank Cash Management Account
$14,386
(ii)Shareholdings, including but not limited to:
(1)2,200 (omitted) Shares $11,836
(2)500 (omitted) Shares $18
(3)5,000 (omitted) Shares $3,650
(4)8,000 (omitted) Shares $464
(5)6,000 (omitted) Shares $1,200
(6)4,800 (omitted) Shares $4.80
(7)(omitted) Shares
23. In the premises the Financial Agreement should be set aside pursuant to section 90K(1)(a).”
As Murphy J noted at first instance in Hoult & Hoult [2011] FamCA 1023-
“110.Fraud must be pleaded distinctly and with particularity and clearly proved. (Krakowski and Another v Eurolynx Properties Limited and Another (1995) 183 CLR 563 at 573; Magill v Magill [2006] HCA 51; (2006) 226 CLR 551 at 567, per Gleeson CJ). It is a very serious allegation and “inexact proofs” will not suffice (s140(2), Evidence Act; Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336).”
In the present case the respondent has pleaded that the applicant failed to disclose a material matter – namely, “relevant property in which he had an interest or control”. Further, in paragraph 22(a) of the respondent’s Points of Claim (where there are pleaded particulars of the applicant’s non-disclosure) – it is made clear that the applicant failed to disclose his interests in the Parke Super Fund but, it is also pleaded that the applicant failed to disclose the respondent wife’s interests in the Parke Super Fund.
The elements of fraud were stated by the House of Lords in Derry v Peek (1889) 14 AC 337. At page 374 Lord Herschell stated, inter alia:-
“I think the authorities establish the following propositions: First, in order to sustain an action of deceit, there must be proof of fraud, and nothing short of that will suffice. Secondly, fraud is proved when it is shewn that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground for one who knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or injure the person to whom the statement was made.”
The elements of fraud as stated in Derry v Peek explains the situation at common law. The Federal Circuit Court of Australia is, of course, a Court which administers both equity and common law (see s.8(3) of the Federal Circuit Court of Australia Act1999). As was stated in Demetrios v Gikas Dry Cleaning Industries Pty Ltd (1991) 22 NSWLR 561 at 573 per Meagher JA and Handley JA:-
“…a court of equity can grant relief for fraud which would not have been available to a court exercising purely common law jurisdiction.”
Not unexpectedly there are situations which arise whereby a plaintiff may be unable to prove fraud at common law – but, nonetheless, a Court of equity will still intervene. For instance, in equity, non-disclosure can constitute misrepresentation (note per Gibbs CJ in Commercial Bank of Australia Limited v Amadio (1983) 151 CLR 447 at page 458; also note Suters v Suters (1983) FLC 91-365 at page 78,458 per Strauss J, Full Court; note also Cheshire and Fifoot Law of Contract at paragraph 1.80[2]).
[2] 10th Australian Edition, LexisNexis Butterworths Australia 2012.
The financial agreement was drafted initially by the applicant’s solicitor. In paragraph G – contained under the head “Recitals” – it is stated:
“G. Mr Parke is the owner of or otherwise entitled to the assets and resources set out in the first schedule, subject to clause 6 hereof.”
Schedule One relevantly states: –
“SCHEDULE ONE – MR PARKE’S ASSETS
Asset
Agreed Estimated Value
1. Residence at Property N being Lot (omitted)
$150,000.00
2. One half share of property at Property K being Lot (omitted)
$90,000.00
3. Residence at Property R being Lot (omitted)
$260,000.00
4. Mini Shed, (omitted) being Lot (omitted)
$100,000.00
5. Leasehold interest in (omitted)
…
6. Property known as “Property T”, Lot (omitted)
$320,000.00
7. Business operating as (business omitted) , (omitted)
8. Residence at Property N, being Lot (omitted)
$350,000.00
Liabilities
$320,000.00”
The total value of the assets disclosed by the applicant when the agreement was drafted (and presented to the respondent) was $1,270,000.00. His total liabilities were $320,000.00 leaving a net position of $950,000.00.
The respondent’s list of assets in Schedule Two was as follows-
“SCHEDULE TWO – MS PARKE’S ASSETS
1. (omitted) Mazda motor vehicle – (omitted) registration
$7,000.00
2. (omitted) motor cycle – (omitted) registration
$8,000.00
4. Jewellery and Personal items
5. One half share as joint tenant of a property at Property K, being Lot (omitted)
$90,000.00
Liabilities
NIL
The total of the respondent’s assets at the time the agreement was drafted was $105,000.00.
Mr Galloway of Counsel, on behalf of the applicant, submitted that the applicant did not make a false representation concerning his assets and his resources. The submission on behalf of the applicant is that the applicant did not represent that “all” of his assets and resources are set out in the first schedule.
In paragraph 18 of the written submissions on behalf of the applicant Mr Galloway of Counsel has contended that “Recital G” – is not part of the operative deed. As a general proposition this is correct. However, in certain circumstances the Court can have regard to the recitals. Brett LJ in Leggott v Barrett (1880) 15 Ch.D. 306 stated at page 311:-
“If there is any doubt about the construction of the governing words of (the) document, the recital may be looked at in order to determine what is the true construction; but if there is no doubt about the construction, the rights of the parties are governed entirely by the operative part of the writing or the deed.”
In the present case, I note paragraphs 2.1 and 3.1 under the heading “Terms of Agreement” in the agreement dated (omitted) 2001. Those paragraphs state:-
“2. Ms Parke agrees that:
2.1 She has no entitlement to Mr Parke’s assets and resources as set out in the First Schedule or any accretion to them or any income from them; apart from as provided in this Agreement.
……
3. Mr Parke agrees that:
3.1 He has no entitlement to Ms Parke’s assets and resources as set out in the Second Schedule or any accretion to them or any income from them…”
In paragraph 12 of the applicant’s submissions reference is made to section 90B(2)(a) of the Act. That subsection has to be read with section 90B(1)(a). The two sections relevantly provide:-
“90B Financial agreements before marriage
(1) If:
(a) people who are contemplating entering into a marriage with each other make a written agreement with respect to any of the matters mentioned in subsection (2);…
(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 before divorce, is to be dealt with;…”
In my view, the agreement in paragraphs 2.1 and 3.1 unfortunately leaves room for ambiguity. For instance, is it the case that by paragraph 2.1 “Ms Parke” (the respondent) is only agreeing that she has no entitlement to “Mr Parke’s” (the applicant’s) assets and resources as set out in the first schedule? If so, does this mean that Ms Parke does have an entitlement to Mr Parke’s assets and resources that are not set out in the first schedule?
The Act says that the parties are allowed to make an agreement (under section 90B) with respect to “all or any” of their property. The agreement which is the subject of these proceedings (in its operative part) does not indicate whether or not the parties are dealing with “all” of their property or only “some” of their property.
To eliminate the ambiguity or uncertainty – part of the agreement could have included the following clauses – that the parties agreed:-
“(i) That pursuant to section 90B(2)(a) of the Family Law Act 1975 the parties agree that this agreement shall only operate with respect to such of Mr Parke’s assets and resources as are listed in the first schedule;
(ii) That Mr Parke is not obliged to list all of his assets and resources in Schedule 1.”
As it is, I consider that there is ambiguity in paragraph 2.1 (and in 3.1 for that matter but it is only 2.1 which is relevant for present purposes) and, accordingly, the Court is entitled to have regard to the recitals in order to determine the true construction of the agreement.
By Recital J the parties intended to “as far as possible” contract out of the provisions of Part VIII of the Family Law Act.
Further, in Recital J(a) it is clear that the parties intended to enter into an agreement with respect to “their property and financial resources at the date of this agreement…” .
The stated intention of the parties in Recital J was to deal with their property and financial resources at the date of the agreement – it was not the stated intention of the parties to deal with “some” of their property and financial resources at the date of the agreement. Having come to the conclusion that it permissible, in the circumstances of this case, for the Court to have regard to the Recitals I have also come to the conclusion that, when Recitals G and H are read in conjunction Recital J it is apparent that a reasonable person in the positon of the parties would have “intended or assumed”[3] that each of them was required to list in schedules 1 and 2 (respectively for the applicant and the respondent) all of – “their property and financial resources at the date of this agreement…”.
[3] Note Cheshire and Fifoot Law of Contract at paragraph 10.1, Australian Edition, LexisNexis Butterworths Australia 2012.
If my view in that regard is not correct then the Court is entitled to have regard to the Recitals in any event. I note what was said by Mason J in Ansett Transport Industries (Operations) Pty Ltd v Commonwealth of Australia (1977) 139 CLR 54 and page 72. Mason J (forming part of the majority) stated:-
“No doubt it is correct to say that, where in the recitals to a deed or an agreement it is acknowledged that the parties have agreed to do, or will do, certain acts, a promise to do those acts will be read into the agreement in the absence of an express promise to that effect. Then, there being no indication of a contrary intention, it may be safely inferred that the absence of a contractual provision was due to oversight or inadvertence. This is brought out in the judgment of Lord Denman CJ in Aspdin v Austin (1844) 5 Q.B. 671 at page 683 – where he speaks of the Courts in these circumstances having “inferred” a covenant to do the acts”.
In my view, the principle referred to Mason J in the Ansett decision is applicable in this case to Recital J. It seems to me that the parties did agree (by Recital J) to do a certain act – namely – as far as possible to contract out of the provisions of Part VIII of the Family Law Act 1975. The parties were, in my view, therefore obligated to take the required steps to do just that and this created an obligation in the parties in the present case to include in schedule 1 and schedule 2 a full list of all of their assets and financial resources. If the parties had wanted to indicate a contrary intention they could have done so. They could have indicated a contrary indication by, in the operative part of the agreement, including a clause which stated:-
“The parties agree that this financial agreement shall only be operative in relation to some (not all) of the party’s assets and the only assets affected by this agreement are those assets listed in schedules 1 and 2”.
In my view that is the way in which the parties would have indicated a contrary intention. They did not indicate such a contrary intention.
There is, of course, an objective approach to the construction of contracts (note Cheshire and Fifoot Law of Contract at paragraph 10.1[4]). In objectively construing the contract the Court (in this case and for the reasons stated in paragraphs 59-68 and/or paragraphs 69-71) is permitted to have regard to the words included in the Recitals. This assists the Court in determining what a reasonable person in the position of the parties would have intended or assumed – note Cheshire and Fifoot paragraph 10.1 and also note Byrnes v Kendle (2011) 243 CLR 253 at 100.
[4] Cheshire and Fifoot Law of Contract, paragraph 10.1 Australian Edition, LexisNexis Butterworths Australia 2012.
The net result of the conclusion which I have reached is that the parties, in this case, were obligated to provide a full list of their assets and financial resources. That, in my view, is what a reasonable person in the positon of the parties would have “intended or assumed”.[5]
[5] See Footnote 4
The list of property stated by the applicant in schedule 1 was not complete. For instance, the notice to admit facts filed by the respondent on 20 February 2015 and the applicant’s response to that document (entitled “Notice Disputing Facts” filed 10 March 2015) – when read together – confirm that both parties were members of the Parke Super Fund. The assets of the super fund as at (omitted) 2001 had a total value of $253,537. The respondent was not able to list her interests in that super fund because she was not aware that she had any entitlements in the Parke Super Fund until after the commencement of these proceedings.
I have not been taken to any evidence confirming the precise proportions of the entitlements of the applicant and the respondent to the assets contained in the super fund as at (omitted) 2001. There is evidence that as at 2008 the respondent’s interest was worth approximately $122,000.
Further, the applicant had approximately $14,386.26 in his (omitted) bank account and he also held shareholdings in his personal name. None of those assets were listed by the applicant in schedule 1 of the agreement.
In addition, both the applicant and the respondent held shares in Parke Pty Ltd. The assets of that company totalled approximately $170,376.43. I have not been taken to evidence which confirms how many shares either the applicant or the respondent held in that company. The respondent wife was aware that she was a shareholder in Parke Pty Ltd. The respondent became aware of that fact once she had commenced proceedings seeking a de facto property settlement under the New South Wales legislation. That was prior to the (omitted) 2001. It is, however, worth noting at this stage that the respondent still signed the financial agreement even though she was aware that the parties both held shares in Parke Pty Ltd – but those shares were not referred to in schedule 1 or schedule 2. I will return to this point later in these Reasons for Judgment.
There is no dispute that the applicant controlled the Parke Super Fund. I accept the submission made on behalf of the respondent in this regard.
Therefore, as at (omitted) 2001, the applicant controlled the Super Fund and the company, and I find, that he was obligated, pursuant to the financial agreement, to disclose those assets as well as other assets held in his own name as referred to in the notice to admit facts.
I have come to the conclusion that the applicant, in submitting a draft financial agreement to the respondent for her consideration which contained schedule 1 (a list of his assets) made a false representation to the respondent. He was representing that schedule 1 contained a list of all of his assets. That was untrue.
In my view this non-disclosure or suppression of facts by the applicant amounts in this case to a misrepresentation (note per Gibbs CJ in Amadio’s case at page 458 and per Strauss J in Suter’s case at page 78,458 and note Cheshire and Fifoot Law of Contract at paragraph 1.80). I note what Murphy J had to say in Hoult & Hoult [2011] FamCA 1023. His Honour noted:-
“It might be argued … that agreements that satisfy a definition within the Act ought to embrace a fundamental principle enshrined in this Court’s Rules made pursuant to the same Act, namely the duty of full and frank disclosure. But, rather than leave that issue for argument, the Act has made the position clear by the specifying that fraud for the purposes of section 90K(1)(a) can be constituted by material non-disclosure.”
That is not to say that material non-disclosure is fraudulent “per se” (note Murphy J in paragraph 125 of Hoult& Hoult [2011] FamCA 1023). But, in this case, I have also come to the conclusion that the applicant knew that the representation that he made was false. He knew that he had not provided a full list of his assets. At the very least he was reckless as to the truth or falsity of the list. That is, he was recklessly careless as to whether or not the list was a full list of his assets.
My view in relation to the finding that the applicant knew that he had made a false representation is strengthened by certain other facts.
The applicant had set up the Parke Super Fund. The respondent was a member of that super fund (unbeknown to her) and legally entitled to assets held in the fund.
As noted, the respondent only became aware of the existence of the super fund after the commencement of these proceedings. On 14 April 2014 the respondent’s solicitors wrote to the applicant’s solicitor enquiring about the existence of the super fund. The applicant’s solicitor responded – “I am instructed that my client’s superannuation fund was established subsequent to the making of the agreement.”
The applicant denies instructing his solicitor in those terms. I do not accept the evidence of the applicant. I consider it highly unlikely that a solicitor would communicate such information without instructions. There is no evidence that would lead this Court to question the professionalism of the solicitor involved.
On four occasions between 8 December 2014 and 10 February 2015 the respondent’s solicitors sought disclosure from the applicant’s solicitors concerning the Parke Super Fund. The applicant provided no disclosure. The respondent was compelled to and did in fact serve a subpoena upon the applicant’s accountants, (omitted). That firm has been the applicant’s accountant for 50 years. When that subpoena was returned it contained documentation confirming that the applicant and the respondent had an interest in the Parke Super Fund as at the date of the financial agreement. The documentation also revealed that in 2008 the respondent’s interest was worth $122,503.00 in the Parke Super Fund. By 30 June 2011 the respondent’s interest in that fund had been reduced to nil. At no time did the respondent receive any payment from that fund.
The facts and findings to which I have referred in paragraphs 84 to 87 lead to the inevitable inference that the applicant failed to make full and frank disclosure of relevant documentation during the course of this litigation. Further, it leads to an additional inference, namely, that the applicant failed to make full and frank disclosure of the documents relating to the superannuation fund because he did not want those documents to be brought out into the light of day and examined by the Court. These findings, in my view, lend weight to the conclusion which I have reached, namely, that the applicant knowingly failed to disclose a full list of his own assets as at (omitted) 2001. Further, he knowingly failed to disclose to the respondent the extent of the respondent’s entitlements in the Parke Super Fund (or indeed the existence of those entitlements) and he also knowingly failed to disclose to the respondent the extent of her entitlements in the company known as Parke Pty Ltd.
Further, the relevant evidence leads to an inference that the applicant knowingly withheld the information concerning the superannuation fund in July 2001 – because he saw no need to make the respondent aware of the existence of the superannuation fund. I find that the applicant did intend to deceive the respondent. His view was, all along, that any assets that he had built up during the 25 year de facto relationship were his assets alone and the respondent was not entitled to anything. He stated as much to the respondent.
Other Matters for Consideration
The findings and conclusions which I have reached and which have been referred to above (in particular from paragraphs 58 to 89 inclusive) are findings and conclusions which I have reached without reference to the evidence of the document examiner, Mr J.
The findings and conclusions reached (in particular between paragraphs 58 and 89) do not in any way depend upon these further matters for consideration raised by the evidence of Mr J.
The allegations against the applicant are, of course, extremely serious. The respondent alleges that the applicant forged her signature and essentially, asks the Court to infer that the applicant took for himself or in some other way utilised (without permission) the respondent’s financial entitlements as a member of the Parke Super Fund.
Given the serious nature of the allegations made against the applicant in this regard – I feel compelled to consider the allegations.
The respondent engaged a forensic document examiner, Mr J. Mr J examined the available documents and examined samples of the respondent’s signatures as well as examples of the applicant’s signatures. The applicant declined to answer most questions relating to this topic on the grounds that the answers to such questions could incriminate him.
The applicant did, however, during cross examination on Thursday 26 March 2015, admit that the document numbered 2 contained his signature above the name “Mr Parke”. Document number 2 is a “Trustees Declaration” in relation to the Parke Super Fund. It is included at page 93 of the second report of Mr J. The second report of Mr J is Annexure C to the affidavit of Mr J filed 19 March 2015. The second report of Mr J is in fact dated 18 March 2015.
In relation to the said “Trustees Declaration” at page 93 of Mr J’s report I note the question and answer from page 68 of the transcript of 26 March 2015 line 46:-
“Ms Carew QC: Do you see a signature above the name, Mr Parke?
Mr Parke: Yes, that’s my signature.”
Mr J provided his opinion that the respondent’s signatures on various documents were forgeries. In particular I note the document which is numbered 13 (which appears on page 113 of Mr J’s second report). That document is a letter dated 1 July 2009 addressed to the Parke Super Fund. It is a letter which purports to be from the respondent, Ms Parke. The letter purports to be signed by Ms Parke. The letter states, inter alia:-
“I hereby request that my existing Transition to Retirement Income Streams(s) being paid from Parke Super Fund be stopped, the proceeds combined with the balance in my accumulation account (if any) and then my benefit entitlement converted to a new pension entitlement, as detailed below.
……”
In the opinion of Mr J the signature contained on document number 13 (which purports to be the signature of Ms Parke) is a “false signature”. I note paragraph 20 of Mr J’s second report.
I also note paragraph 1 on page 76 of his second report where Mr J states:-
“With respect to A
1. The questioned signatures “Mr Parke” [original and copy] contained on documents 01 to 19 are false [simulated] signatures not written by the specimen provider – Ms Parke.”
Hence, Mr J’s conclusion is that the purported signature of the respondent on document number 13 is a false signature.
Further, I note paragraph 6 of the opinion of Mr J contained on page 76 of his second report where he notes:-
“With respect to B
6. The questioned signatures “Mr Parke” contained on the group 4 documents (13 to 19) were written by the writer of the “specimen” signatures “Mr Parke” contained on documents 02 and 13 to 19.”
On the same point, Mr J states his opinion in paragraph 22:-
“There is an abundance of evidence present to conclude that the questioned signatures identified as “group 4” are written by the author of the uncontested “specimen” signatures “Mr Parke” as described.”
I note the admission by Mr Parke (the applicant) that his signature appears above the name, “Mr Parke” on document number 2.
It was submitted on behalf of the applicant that the admission by the applicant that the signature on the document numbered 2 was his signature – is insufficient evidence for this court to conclude that the forgery was committed by the applicant. I disagree. For that submission to have any weight that question should have been put to Mr J. It was not. Mr J was not required for cross examination. Mr J’s opinion has not been challenged. I accept the evidence of Mr J and I accept his opinions.
In coming to this conclusion I am mindful of s140 of the Evidence Act 1995 (Cth). That section states: –
“140 Civil proceedings: standard of proof
(1) In a civil proceeding, the court must find the case of a party proved if it is satisfied that the case has been proved on the balance of probabilities.
(2) Without limiting the matters that the court may take into account in deciding whether it is so satisfied, it is to take into account:
(a) the nature of the cause of action or defence, and
(b) the nature of the subject-matter of the proceeding, and
(c) the gravity of the matters alleged.”
I note, in particular, section 140(2)(c) relating to “the gravity of the matters alleged”. I am also mindful of Dixon J’s comments in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362.
The circumstances surrounding this issue lend considerable weight to the finding that the applicant forged the respondent’s signature. To begin with, the applicant initially instructed his current solicitors that the Parke Super Fund was not established until after the date of the financial agreement. That was not true. Further, during the course of this litigation (and despite repeated written requests on behalf of the respondent) the applicant failed to comply with his duty of disclosure in relation to the documentation connected to the Parke Super Fund. This is despite the fact that the documentation relating to the Parke Super Fund was in the possession of the applicant’s long term accountants, (omitted).
I have come to the conclusion that, on the balance of probabilities (noting section 140 of the Evidence Act) that the applicant did indeed forge the respondent’s signature. At the very least, this finding can be made and is made in relation to the document which is numbered 13 in the second report of Mr J. Indeed, noting the report and the opinions of Mr J and noting the surrounding circumstances noted in paragraph 107, it is more likely than not that the applicant has, in fact, forged the respondent’s signature in all of the specific instances referred to by Mr J.
The Court will hear submissions from the applicant and the respondent as to whether or not these matters should be referred to the Commonwealth Attorney General and/or the Australian Federal Police and/or the New South Wales Police. I note the decision in Malpass & Mason (2000) FLC 93-061 and the more recent decision of Kent J in Stoian & Fiening [2014] FamCA 482 – in relation to these types of situations. There is, of course, a related issue upon which the Court will hear submissions concerning a possible referral to the appropriate authorities. The applicant had control of the Parke Super Fund. As at 2008 the respondent’s entitlements as a member of the super fund totalled approximately $122,000. The respondent no longer has any entitlements in the Parke Super Fund. There is no proper explanation from the applicant who, as noted, controlled the fund. I also draw attention to the findings referred to in paragraph 190 of these reasons for judgment. The parties will be given an opportunity to make a submission to the Court in relation to whether or not these (possibly related) issues should be referred to the appropriate authorities.
Inducement
I note what was stated by the learned authors of Cheshire and Fifoot[6] in relation to inducement. At paragraph 1.81 the learned authors state:-
“A misrepresentation gives rise to a right of rescission only if it induced the making of the contract. Although it need not have been the sole inducement, it cannot be relied on if the contract would have been made in any event.”
[6] Cheshire and Fifoot Law of Contract, 10th Australian Edition, LexisNexis Butterworths Australia 2012 (NC Seddon, RA Bigwood and MP Ellinghouse)
And, further, from paragraph 11.32:-
“11.32 A misrepresentation does not render a contract voidable unless it in fact caused the representee to make the contract. To be actionable it must have produced a misunderstanding in his or her mind, and that misunderstanding must have been one of the reasons that induced him or her to enter the contract. A false statement, whether innocent or fraudulent, does not by itself give rise to a right to rescind”.
The misrepresentation made by the applicant in the present case is not an actionable misrepresentation if the Court concludes that the respondent would have signed the financial agreement in any event – that is, even if the respondent had been told with certainty that the applicant had failed to disclose all of his assets and that the value of those assets was significant.
In Gould v Vaggelas (1984) 157 CLR 215 Wilson J[7] stated at page 236 that the rules relating to inducement are as follows:-
[7] With whom Gibbs CJ and Dawson J agreed
“1. Notwithstanding that a representation is both false and fraudulent, if the representee does not rely upon it he
has no case.2. If a material representation is made which is calculated to induce the representee to enter into a contract and
that person in fact enters into the contract there
arises a fair inference of fact that he was induced to
do so by the representation.3. The inference may be rebutted, for example, by showing that the representee, before he entered into the
contract, either was possessed of actual knowledge of
the true facts and knew them to be true or alternatively
made it plain that whether he knew the true facts or not
he did not rely on the representation.4. The representation need not be the sole inducement. It is sufficient so long as it plays some part even if only
a minor part in contributing to the formation of the
contract.”There are no written submissions provided on behalf of the respondent in relation to the question of inducement. Neither “inducement” nor “reliance” have been pleaded[8]. Further, I have not been taken to any evidence of the respondent which confirms or from which it could be inferred that, the respondent would not have entered into the contract if she had been told with certainty that the applicant had failed to disclose all of his assets and that the value of his undisclosed assets was significant. Notwithstanding the absence of a specific pleading or a specific submission – I feel compelled to consider these matters in any event. I note that this is a somewhat similar approach to the approach taken by Murphy J in Hoult & Hoult [2011] FamCA 1023 at 115.
[8] As to the requirements of pleading and proving fraud note Bullen and Leake and Jacob’s “Precedents of Pleadings” 12th Edition, published by Sweet and Maxwell, 1975.
As Wilson J stated in Gould v Vaggelas (at page 236) – if a false representation is made – a “fair inference of fact” arises that the representee was induced to enter into the contract by the representation. I also note the comments made by Lord Chelmsford LC in Smith v Kay (1859) 7 HL Cas 750 and 759:-
“Can it be permitted to a party who has practiced a deception, with a view to a particular end which has been obtained by it, to speculate on what might have been the result, if there had been a full communication of the facts?”
A full communication of the facts in the present case would have included the information relating to the parties’ superannuation interests and information relating to the party’s entitlements (namely the value) as shareholders in Parke Pty Ltd.
The question of the burden of proof becomes relevant at this point in time. As Wilson J stated in Gould v Vaggelas from page 237:-
“However, decisions of this Court leave no room to doubt that the ultimate onus of proving inducement rests upon the party seeking relief in respect of the fraudulent misrepresentation. In Holmes v. Jones (1907) 4 CLR, at p 1706, O'Connor J. makes it plain that before the plaintiffs can succeed in an action of deceit “[t]hey must show, not only that the representation was fraudulent, but also that that fraudulent representation induced the contract which was afterwards entered into”. Isaacs J., in the same case, was even more direct. He said, at p. 1710:
"The plaintiffs have the onus of proving that the
representations they complain of were material, and
that they were induced to act upon them."Likewise, in Potts v. Miller (1940) 64 CLR 282, at p 296, Dixon J. observed that the circumstances of the case were such as to place a heavy burden on the plaintiff in satisfying the jury that the false statement formed an operative inducement.
There is no reason to doubt the correctness of these statements. They accord with sound principle, namely, that a plaintiff carries the burden of establishing every element of his cause of action. At the same time, one can readily understand why it is in cases of deceit that a tribunal whose duty it is to find the facts may require a defendant to make some answer to the case that is put against him. Such cases are of a kind where in the general experience of mankind the facts speak for themselves. Where a plaintiff shows that a defendant has made false statements to him intending thereby to induce him to enter into a contract and those statements are of such a nature as would be likely to provide such inducement and the plaintiff did in fact enter into that contract and thereby suffered damage and nothing more appears, common sense would demand the conclusion that the false representations played at least some part in inducing the plaintiff to enter into the contract. However, it is open to the defendant to obstruct the drawing of that natural inference of fact by showing that there were other relevant circumstances. Examples commonly given of such circumstances are that the plaintiff not only actually knew the true facts but knew them to be the truth or that the plaintiff either by his words or conduct disavowed any reliance on the fraudulent representations. It is entirely accurate to speak of an onus resting on a defendant to draw attention to the presence of circumstances such as those I have described in order to show that the inference of the fact of inducement which would ordinarily be drawn from the fraudulent making of a false statement calculated to induce a person to enter into a contract followed by entry into that contract should not in all the circumstances be drawn. But it is no more than an evidentiary onus - an obligation to point to the existence of circumstances which tend to rebut the inference which would ordinarily be drawn from the primary facts. When all the facts are in, the fact-finding tribunal must determine whether or not it is satisfied on the balance of probabilities that the misrepresentations in question contributed to the plaintiff's entry into the contract. The onus to show that they did is a condition precedent to relief and rests at all times on the plaintiff.”
Even though the House of Lords stated in Smith v Kay that a party “who has practiced a deception” ought not be able to “speculate on what might have been the result if there had been a full communication of the facts” – in the case currently before the Court I do not consider that the applicant is merely “speculating” on what might have been the result if he had provided all of the necessary disclosure to the respondent prior to the signing of the contract.
Wilson J notes at page 238 in Gould v Vaggelas that there is an onus resting on a party in the position of the applicant in the present case, “to draw attention to the presence of circumstances” which would tend to rebut, “the inference which would ordinarily be drawn from the primary facts”. His Honour referred to it as an evidentiary onus.
There are, in the presence case, circumstances which exist which would tend to rebut the inference of inducement. The respondent’s solicitor warned the respondent (prior to the time that the respondent signed the financial agreement) that it could not be confirmed whether or not the applicant had disclosed all of his assets. The solicitor did not warn (because the solicitor could not have known) that the applicant was withholding information about the respondent’s superannuation interests. Exhibit 5 makes it clear that the warning provided to the respondent by her solicitor was unequivocal. Exhibit 5 contains a letter of advice from Hosie and Partners addressed to the respondent. The letter is dated 26 July 2001. On page 4 of the letter it is stated:-
“(v) We are therefore of the opinion that there is a high likelihood that Mr Parke has not given complete disclosure of his assets for the purposes of this agreement….”
A further complicating factor for the respondent is contained in paragraph 66 of the respondent’s own submissions filed on 3 April 2015. It is noted in that paragraph that, from the time that the respondent was preparing her claim against the applicant in the State jurisdiction she was aware that she was a director and a shareholder of Parke Pty Ltd and, further, the respondent was aware that the company had a bank account and other assets (including an outstanding personal loan) totalling $170,376. The applicant was also a director and shareholder of Parke Pty Ltd. Notwithstanding that the respondent knew that both she and the applicant were shareholders in the company with assets of approximately $170,000 – the respondent nonetheless failed to insist that those assets be listed in schedules 1 and 2 of the financial agreement.
The respondent must have known that the applicant would have had full knowledge of the shareholdings in Parke Pty Ltd. Notwithstanding the respondent’s knowledge in respect of that matter the respondent nonetheless signed the financial agreement.
In my opinion the fact that the respondent had been warned by her own lawyer that there was a “high likelihood” that the applicant had not made complete disclosure of his assets and further, noting that the respondent was aware that she and the applicant held shares in Parke Pty Ltd (and she was aware of the value of the company) but nonetheless she did not seek further information in relation to the shareholdings and did not insist that the shareholdings (of both the applicant and the respondent) in Parke Pty Ltd be included in the schedules – lends weight to a conclusion that – the respondent would, in any event, have signed the financial agreement even if she knew with complete certainty that the applicant had failed to disclose a complete list of his assets and that the value of those assets was considerable. I note the penultimate paragraph of the letter from the respondent’s lawyer to the respondent dated 26 July 2001 (contained in Exhibit 5) notes that the respondent gave to her lawyers “adamant instructions” that she wished, “to proceed with the marriage and with the arrangement as set out in the agreement”.
In my view, the respondent has failed to prove inducement. To put it another way, I have concluded that, on the balance of probabilities, that it is more likely than not that even if the respondent had been told with certainty that the applicant had failed to provide a full list of his own assets that she would, nonetheless, have still gone ahead and entered into the contract. In those circumstances the respondent’s case based on fraud must fail.
Unconscionable Conduct? – Section 90K(1)(b) and Section 90K(1)(e)
In the respondent’s points of claim filed 25 February 2015 – after noting that the parties had lived together in a de facto relationship for approximately 25 years and then separated before entering into the financial agreement and subsequently marrying – the respondent wife then pleads, inter alia:-
“6. During the de facto relationship, the applicant subjected the respondent to family violence.
Particulars
(a) Slapping her across the face.
(b) Pushing her against the wall.
(c) Grabbing her by the throat.
(d) Tipping a carton of milk over her head.
(e) Calling her derogatory names such as ‘fat’ and ‘useless’.
(f) Unreasonably denying her financial autonomy.
7. During the de facto relationship, property was purchased in the sole name of the applicant.
8. During the de facto relationship the respondent made direct and indirect financial and non-financial contributions to the acquisition, conservation and improvement of property acquired during the de facto relationship.
9. During the de facto relationship the respondent made contributions to the welfare of the family including as homemaker and parent.
10. During the period of separation between the respondent and applicant from in or about 1999 to in or about 2001, the respondent had no access to any property, bank accounts or income from property acquired during the de facto relationship apart from a period when the respondent lived in a property registered in the name of the applicant, but for which she paid the applicant rent.
11. During the said period the respondent was in a parlous financial state.
12. By reason of the matters pleaded, the respondent was in a position of special disadvantage and vulnerability in her dealings with the applicant.
13. The applicant was aware or ought to have been aware of the respondent’s special disadvantage and vulnerability.
14. One or about (omitted) 2001, the respondent and applicant entered into a Financial Agreement pursuant to Section 90B of the Family Law Act 1975 (as amended) (“the Financial Agreement”)
15. The terms of the Financial Agreement are unjust and unequitable.
Particulars
The Financial Agreement provides inter alia that on separation:
(a) The applicant would retain assets with a net value (as at the date of the Financial Agreement) and as set out in the Financial Agreement of approximately $750,000.
(b) The respondent would transfer her interest in property to X.
(c) The applicant would pay an amount equal to 50% of the value at the time of separation of the property which then constitutes the matrimonial home.
16. The applicant knew or ought to have known that the Financial Agreement was unjust and inequitable.
17. The applicant took advantage of the respondent’s desperation to seek some financial benefit in the event of a breakdown in their relationship.
18. The applicant’s conduct was unconscionable.
19. In the premises the Financial Agreement is void and/or voidable.
The terms of the agreement are ambiguous (particularly paragraphs 10.1 and 10.4) and create uncertainty.
In Kostres v Kostres [2009] FamCAFC 222 the Full Court of the Family Court of Australia reiterated the need to take an objective approach to the construction of a contract.
In Fitzgerald v Masters (1956) 95 CLR 420 Dixon CJ and Fullagar J stated at page 426:-
“Words may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency.”
I do not consider that is possible in this instance. I note that the Full Court in Kostres stated further:-
“[127] We are of the view that, while common law principles of construction undoubtedly apply and can be used to avoid absurdity, the terms of the agreement must accurately reflect the intention of the parties at the time of the making of the agreement, and be unambiguous. In other words, the meaning to be given to expressions used in the agreement must be clear and their meaning certain.”
And further, at paragraph 129 the Full Court in Kostres stated:-
“[129] While, for the purpose of construing the agreement a court should, as in the context of a commercial agreement, apply an objective test of a reasonable bystander to the construction of an agreement, it cannot give meaning to an agreement whose terms are so imprecise or ambiguous the parties’ intent cannot be discerned. This is particularly so when regard is had to provisions of Part VIIIA in the overall context of the Act.”
The principle referred to paragraph 129 of Kostres is directly on point in the case currently before the Court. This Court should “…apply an objective test of a reasonable bystander to the construction of the agreement”. However this Court “cannot give meaning to an agreement whose terms are so imprecise or ambiguous the parties’ intent cannot be discerned”.
The inclusion of paragraphs 10.1 and 10.4 in the agreement creates ambiguity and uncertainty. Further, in the context of this agreement the uncertainty created is of crucial importance because the respondent’s one half share in the property at Property K represents a very significant proportion of her entitlements pursuant to the financial agreement (if it were to be enforced).
I note that in Thorby v Goldberg (1964) 112 CLR 597 the High Court (per Menzies J) at page 607 stated:-
“I agree with and will apply the following statement of (the) law from the dissenting judgment of Sugerman J (Supreme Court of New South Wales). He said:-
“It is a first principle of the law of contracts that there can be no binding and enforceable obligation unless the terms of the bargain, or at least it’s essential or critical terms, have been agreed upon. So there is no concluded contract where an essential or critical term is expressly left to be settled by future agreement of the parties. Again, there is no binding contract where the language used is so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention”.”
The principle confirmed by Menzies J in Thorby was relied upon by Fogarty J in Weiss, MM v Barker Gosling (1993) FLC 92-399. At page 80,080 Fogarty J stated:-
“As to the test of uncertainty, a convenient point of reference is Cheshire and Fifoot's Law of Contract, 6th ed at p.97 et seq. It is stated there that a contract will be void for uncertainty only if its essential terms are uncertain or incomplete, unless the uncertain part can be severed, that is it is not essential, leaving the balance of the agreement intact. In determining what is essential and what is inessential, one looks to the intention of the parties. In cases where an essential term of the contract is alleged to be uncertain, such uncertainty may be because either the agreement is incomplete or because it is unclear.”
In the present case the parties intention was (as far as possible) to contract out of the provisions of Part VIII of the Family Law Act.
Paragraph 10 of the agreement sets out what is to happen to the property of the parties to the marriage in the event that the parties separated. Paragraphs 10.1 and 10.4 (and indeed all of paragraph 10) are essential terms of the contract. I have come to the conclusion that the essential terms contained in paragraphs 10.1 and 10.4 are uncertain and ambiguous. Paragraphs 10.1 and 10.4 are essential terms and they cannot be severed from the agreement.
Further, I note that X is not a party to the financial agreement. X has refused to accept the transfer of his mother’s one half interest in the properties. The agreement does not provide for what shall occur in these circumstances. I agree with the submission made by Ms Carew QC on behalf of the respondent in paragraph 83 of her written submissions filed on 3 April 2015 where it was stated:-
“To change the terms of the agreement to require, for instance, the husband to pay out the wife’s interest in those three properties would be to create a new contract, the terms of which were not contemplated by the parties at the time the contract was made.”
I note what Murphy J had to say in Fevia & Carmel-Fevia (2009) FLC 93-411. At paragraph 152 Murphy J was considering the remedy of rectification and His Honour stated – citing Sindel v Georgiou (1984) 154 CLR 661:
“Rectification is a remedy which cures the erroneous expressions of the party’s true intentions in a contract which is already binding. It is not a remedy which brings a contract into existence in a situation in which the parties have not by their own acts arrived at the concluded contract.”
The parties, in the present case, have not, in the financial agreement, set out what is to occur in the event that X refuses to accept a transfer of the respondent’s interests in the three relevant properties.
The intention of the parties was to enter into an agreement which (as per Recital J) set out how their property and financial resources are “to be dealt with” in the event of the breakdown of the marriage. The respondent’s one half interest in the three relevant properties has not been “dealt with”. Those properties and the respondent’s interest in those properties are left in limbo. It is not sufficient (as submitted on behalf of the applicant) for there to be some possible appointment of a statutory trustee for sale. Such a submission seems to concede that the financial agreement is imprecise, ambiguous, incomplete and/or uncertain – if, as submitted on behalf of the applicant, it is open to the parties (or indeed, incumbent on one of them) to pursue further litigation in order to ascertain or confirm the legal ownership of the property of the parties now that the marriage has come to an end.
For the reasons stated the agreement is uncertain and thereby void and should be set aside pursuant to s.90K(1)(b). Further, the circumstances give rise to a conclusion that s.90K(1)(c) is also applicable. Because of “the circumstances that have arisen since the agreement was made” it is now “impracticable for the agreement or part of the agreement to be carried out”. Paragraph 10.4 of the agreement cannot be carried out. X refuses to accept the transfers of the respondent’s interests in the three properties. The obligation upon the respondent, as noted earlier is to transfer her interest to X. In the events which have arisen that is now impracticable and the agreement should be set aside on that basis pursuant to s.90K(1)(c) of the Act (note Rohde & Rohde (1984) FLC 91-592 at page 79,768).
Further, it is important to note that another “circumstance” has arisen. The respondent’s entitlements in the Parke Super Fund have been reduced to nil. The respondent was not even aware that she had entitlements under that super fund (at least not until after the commencement of the current litigation). As noted earlier, the applicant concealed this fact from the respondent. The applicant has, at all material times, controlled the Parke Super Fund. In this regard I note the evidence of the applicant on pages 87 and 88 of day two of the transcript (27 March 2015). The applicant has provided no proper explanation as to the whereabouts of the wife’s superannuation money. He speculated on what might have happened to the money. He is the only person who could provide the evidence to explain what precisely has occurred. In my view the applicant bears an evidentiary onus in this regard. The respondent has proved on the balance of probabilities that the applicant dissipated the respondent’s entitlements in the superannuation fund. By 2008 the respondent’s entitlements totalled approximately $120,000 and by 2011 those entitlements had been reduced to nil. The respondent did not give to the applicant any authority to deal with her money or any of her entitlements pursuant to the Parke Super Fund. The financial agreement purports to be an agreement that will deal with the party’s “property and financial resources at the date of this agreement, or at a later time”. There are two things that can be said about this aspect of the case. Firstly, the agreement was silent in relation to the respondent’s superannuation entitlements. That is because the respondent’s superannuation entitlements were kept hidden from her by the applicant.
Secondly, the applicant is the only person who could explain to the Court what has happened to the respondent’s entitlements. In the absence of any proper explanation from the applicant, the respondent and the Court are left in the dark. It is noted that by 2011 the respondent’s entitlements had been reduced to nil. The inference is that they were reduced to nil because the applicant accessed those entitlements. He did so without the authority or knowledge of the respondent. Given that the entitlements apparently no longer exist and that they were dissipated without the knowledge or the authority of the respondent (who was legally entitled to such funds) I consider it is a reasonable conclusion to reach that in those circumstances it is “impracticable” for the agreement or part of the agreement to be carried out. The respondent cannot receive her entitlements that were contained in the Parke Super Fund because those entitlements are no longer there. The entitlements no longer exist. The applicant has not provided any evidence that he is willing to replenish the fund. The applicant has had plenty of opportunity to do so. The applicant’s counsel (Mr Galloway) made some submissions on day one of the hearing in relation to this issue. He indicated that the applicant might be in a position to replenish the fund. Mr Galloway submitted that the respondent would merely have to make a demand or, I infer, commence litigation against the trustee of the super fund. Whilst the Court has been told that the applicant “controls” the super fund – the Court has not been given the benefit of any detailed evidence on this issue. It is not known, for example, whether or not the applicant is personally the trustee of the super fund. It is not known whether, for instance the applicant “controls” the super fund through a corporate trustee. Here is an applicant who told the respondent (as long ago as 1999) that she was “not entitled to anything”. Here is an applicant who kept hidden from the respondent her superannuation entitlements in 1999 when she really needed them most. I reiterate at this point that the respondent needed to and did in fact gain access to her known superannuation (after the 1999 separation) in the sum of $11,000. I infer that this was allowed by the trustee of the relevant superannuation fund upon being satisfied of the respondent’s need. Here is an applicant who kept hidden from that respondent the fact that the respondent had entitlements in the Parke Superannuation Fund at the time that the financial agreement was signed by the parties. Here is an applicant who misled his solicitors and the respondent by advising that the Parke Super Fund was not established until after the financial agreement was signed. Here is an applicant who failed to comply with his duty of disclosure in these proceedings in this Court. Here is an applicant who has, on the balance of probabilities, forged the respondent’s signature on documentation relating to the respondent’s entitlements in the superannuation fund. Even if I am wrong in relation to the finding (on the civil standard) of forgery by the applicant – there is ample other evidence for the Court to conclude that this applicant has shown no inclination and has shown no intention of replenishing the fund. Surely, if this applicant had any intention of doing so – he would have replenished the fund well before now. Further, he would have provided some detailed evidence as to precisely what occurred and explained his actions to the Court. He has chosen not to do so. I reject Mr Galloway’s submissions in relation to this issue. It will be clear that I have concluded that the manner in which the respondent’s entitlements were dissipated by the applicant is a matter of significant concern and I have already made reference to that aspect in paragraph 109 of the reasons for judgment herein. In the circumstances that have arisen since the agreement was made it is impracticable for part of the agreement to be carried out. The financial agreement should be set aside pursuant to section 90K(1)(c) on that basis.
Alleged Breach of Essential Terms
The respondent has pleaded in the points of claim that clauses 5, 6, 7 and 8 of the financial agreement are essential terms of the contract. It is submitted that those terms have been breached by the applicant and that the respondent is therefore entitled to rescind the contract. In considering clause 5 of the agreement I am also of the view that clause 11(a) must be taken into account.
In essence, it is submitted on behalf of the respondent as follows:-
a)in breach of clause 5 of the agreement the applicant dissipated the respondent’s entitlements in the Parke Super Fund and the respondent was thus deprived of certain assets and resources that were to be retained by her (pursuant to clause 5 and 11(a));
b)the applicant, in breach of clause 6.1 of the agreement, paid to the respondent the sum of $20,000 and not the sum of $25,000 as required by clause 6.1 of the agreement;
c)the applicant, in breach of clause 7.1 stopped paying to the respondent the sum of $200 per week after 2002; and
d)in breach of clause 8 of the agreement the applicant continued, after the marriage (as had occurred during the de facto relationship) to engage in physical, emotional and financial abuse of the respondent.
I refer again to a comment made by Fogarty J in Weiss v Barker Gosling (supra) at page 80,080 where His Honour stated:-
“In determining what is essential and what is inessential, one looks to the intention of the parties.”
In Tramways Advertising Pty Ltd v Luna Park (1938) 39 SR (NSW) 632 Jordan CJ at pages 641 and 642 stated:-
“The question whether a term in a contract is a condition or a warranty, i.e., an essential or a non-essential promise, depends upon the intention of the parties as appearing in or from the contract. The test of essentiality is whether it appears from the general nature of the contract considered as a whole, or from some particular term or terms, that the promise is of such importance to the promisee that he would not have entered into the contract unless he had been assured of the strict or a substantial performance of the promise, as the case may be, and that this ought to have been apparent to the promisor.”
These aspects of Jordan CJ’s judgment in the Tramways decision were cited with approval by the High Court in Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd (2007) 233 CLR 115 at pages 136, 137 and 138. Applying the test laid down by Jordan CJ in the Tramways decision I have come to the conclusion that paragraphs 5 and 11(a) in the present case are both essential terms. The agreement was supposed to provide for how the assets and resources of the parties were to be distributed in the event of the breakdown of the marriage. Clause 5 of the agreement is a pivotal clause in evincing that intention. By dissipating the respondent’s superannuation entitlements the applicant has repudiated the contract by breaching clause 5 and, indeed, clause 11(a) of the agreement. This breach (repudiation) by the applicant of clauses 5 and 11(a) of the agreement entitled the respondent to rescind the agreement. It was said on behalf of the applicant that the agreement was not intended to cover superannuation. Superannuation was not specifically referred to in the agreement. I find that this occurred because the applicant kept hidden from the respondent the respondent’s entitlements in the superannuation fund. The intention of the parties was to deal with “their property and financial resources” – both at the date of the agreement and at a later time (note Recital J). Further, in clause 5 it is made clear once again that the intention of the parties was to deal with their “assets and resources acquired during the course of the marriage”. Reference to the word “resources” is sufficient proof that the parties’ intention was to cover all of their assets and all of their resources. This would have included superannuation. It was further submitted on behalf of the applicant that the respondent failed to act promptly in rescinding the contract. It is clear that, once the respondent became aware that she had entitlements in the superannuation fund which had been dissipated by the applicant (without her knowledge or consent) – then she (the respondent) did in fact quite promptly (by her actions including, for instance, by continuing with this litigation thereby clearly indicating to the applicant that she did not consider herself bound by the agreement) accept the repudiation and she was, by operation of law, discharged from further performance of the agreement. In this regard note the more detailed discussion later in these reasons for judgment – especially the reference to Shevill v Builders Licensing Board (1972) 14 CLR 620.
Further, I am of the view that clause 7.1 is also an essential term. The respondent (the promisee) would not have entered into the financial agreement unless she had “been assured of a strict or a substantial performance of the promise” made by the applicant (the promisor) to pay a minimum of $150 per week for food only and $200 per week for the respondent (with CPI increases) – with such amount to be paid weekly in advance. Once again, the respondent would not have entered into the agreement unless she had been assured of the applicant’s strict or substantial performance of that promise.
I accept the respondent’s evidence that the applicant stopped paying the $200 per week in 2002. There is no satisfactory explanation provided by the applicant as to why he stopped paying those sums.
Further, in relation to clause 8 of the agreement I am, once again, satisfied that the respondent would not have entered into the agreement unless she had been assured of a strict performance by the applicant of clause 8. I do not even consider that the respondent would have entered into the agreement if she had only been assured of “a substantial performance” by the applicant of the obligations cast upon him pursuant to clause 8 of the agreement. I note Recital D in this regard. I accept all of the respondent’s evidence in relation to physical, emotional and financial abuse by the applicant during the course of the marriage. The applicant himself concedes verbally abusing the wife during the marriage.
I have therefore concluded that clauses 5, 7 and 8 were essential terms of the contract. As noted, in addition to clause 5 – clause 11(a) was also an essential term of the contract. The applicant has breached clause 11(a) for the same reasons that he has breached clause 5 of the contract.
In relation to clause 6.1 I note that the respondent concedes that the applicant paid the sum of $20,000 to her. I reject the applicant’s assertion that he paid the respondent an initial amount of $20,000 and then subsequently paid $5,000 by way of cash. There did not appear to be any earlier assertion by the applicant that he had paid the sum of $5,000 as cash to the respondent. That is to say, no earlier assertion until he was in the witness box during the course of these proceedings.
Given that the applicant was supposed to pay to the respondent the sum of $25,000 pursuant to clause 6.1 – his failure to do so does amount to a breach of that term of the contract. Further, given that the respondent had made it abundantly clear that she was seeking financial security and some reasonable financial autonomy – I have come to the conclusion that the submission made by Ms Carew QC on behalf of the respondent is correct. That term was also an essential term of the contract and the applicant breached clause 6.1.
I do not consider it necessary in the circumstances of this case for the Court to consider whether any of the terms referred to are “intermediate terms” as referred to in the applicant’s submissions and the reference there to the decision in Koompahtoo Local Aboriginal Council v Sanpine Pty Ltd (2007) 233 CLR 115. It will be seen that, having applied the test laid down by Jordan CJ in the Tramways decision I have concluded that each of the terms contained in clauses 5, 6.1, 7, 8 and 11(a) are essential terms of the contract. That is so for the reasons already stated. In case I am wrong in relation to some of the conclusions I have reached in relation to the classification of the various terms of the contract – I would add that in relation to clauses 5 and 11(a) that those clauses undoubtedly contain essential terms of the contract. They are conditions of the contract. They are not “warranties” and they are not “intermediate terms”. The stated intention of the parties was to contract out of the provisions of Part VII of the Family Law Act and to divide their property and financial resources.
In Shevill v Builders Licensing Board (1982) 149 CLR 620 Gibbs CJ set out the relevant contractual principles relating to an innocent party’s right to rescind a contract and at the same time His Honour discussed the relationship between repudiation and rescission. His Honour stated from page 625:-
“As Lord Wright pointed out in Heyman v Darwins Ltd [1942] AC 356, at p 378, repudiation is an ambiguous word and is used in various senses. We are of course concerned only with a case in which it is admitted that there was a valid and binding contract. Such a contract may be repudiated if one party renounces his liabilities under it - if he evinces an intention no longer to be bound by the contract (Freeth v Burr (1874) LR 9 CP 208, at p 213 ) or shows that he intends to fufill the contract only in a manner substantially inconsistent with his obligations and not in any other way (Ross T. Smyth & Co. Ltd. v. T. D. Bailey, Son & Co. [1940] 3 All ER 60, at p 72; Carr v. J. A. Berriman Pty. Ltd. (1953) 89 CLR 327, at p 351). In such a case the innocent party is entitled to accept the repudiation, thereby discharging himself from further performance, and sue for damages: Heyman v. Darwins Ltd. [1942] AC, at p 399. It is convenient to say that the injured party in these circumstances rescinds the contract, although there is, of course, no rescission ab initio: Johnson v. Agnew [1980] AC 367, at pp 392-393 … However, if one party, although wishing to perform the contract, proves himself unable to do so, his default in performance will give the other party a right to rescind the contract, if the breach goes “so much to the root of the contract that it makes further commercial performance of the contract impossible”: Hongkong Fir Shipping Co. Ltd. v. Kawasaki Kisen Kaisha Ltd. [1962] 2 QB 26, at p 64 . There is high authority for treating such cases as a form of repudiation of the contract: Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967] 1 AC 361, at pp 421-422; Federal Commerce v. Molena Alpha [1979] AC 757, at pp 778-779 … A third situation in which a right to rescission arises is where there has been a breach of a fundamental or essential term of the contract. In Suisse Atlantique Societe d'Armement Maritime S.A. v. N.V. Rotterdamsche Kolen Centrale [1967] 1 AC, at p 422 , Lord Upjohn said:
“A fundamental term of a contract is a stipulation which the parties have agreed either expressly or by necessary implication or which the general law regards as a condition which goes to the root of the contract so that any breach of that term may at once and without further reference to the facts and circumstances be regarded by the innocent party as a fundamental breach ….””
The evidence gives rise to a conclusion that the breach by the applicant of clauses 5 and 11(a) is an example of a situation within the first class of cases referred to by Gibbs CJ in the decision in Shevill. Namely, the parties considered that there was a valid contract between them in the form of the financial agreement. But for the fact that this Court has concluded that the financial agreement should be set aside pursuant to s.90K(1) of the Act – that financial agreement would have been binding. But the applicant, by his actions (in particular by dissipating the wife’s superannuation entitlements), repudiated his liabilities under the contract. The applicant evinced “an intention no longer to be bound by the contract”. In addition, the applicant showed that he intended “to fulfil the contract only in a manner substantially inconsistent with his obligations and not in any other way”. I have adopted the wording of Gibbs CJ in Shevill. And to rely upon His Honour further “in such a case the innocent party (in the current case that is the respondent) is entitled to accept the repudiation (i.e. the repudiation by the applicant) thereby discharging (herself, namely the respondent) from further performance”. As Gibbs CJ stated the “injured party in these circumstances rescinds the contract”.
The applicant has depleted the respondent’s entitlements, assets and/or resources under the Parke Super Fund. His actions evinced a clear intention that he did not intend to be bound by the contract. The actions of the applicant only came to the attention of the respondent during this litigation. The innocent party in this situation is the respondent. By her actions and conduct she has accepted the repudiation of the agreement by the applicant. The respondent is therefore discharged from further performance of the agreement.
Gibbs CJ noted that in such a circumstance there is “no rescission ab initio”. It seems that the contract will be voidable at the election of the innocent party and that has occurred in this case. In any event, the net result is, from the respondent’s perspective that, having been entitled to accept the applicant’s repudiation and having accepted the applicant’s repudiation the respondent is discharged from further performance of the contract. The respondent is not bound by the contract and the financial agreement should be set aside (section 90K(1)(b)).
There is no need to consider further matters relating to this aspect of the case however for completeness I will in any event do so.
The breach by the applicant of clauses 5 and 11(a) by dissipating the respondent’s entitlements as a member of the Parke Super Fund – also amounts to an example of a situation within the third class of cases referred to by Gibbs J in Shevill’s case. There was, at the very least, a necessary implication in the agreement that the applicant would not take steps to deplete the respondent’s assets or resources. Having done just that and such matters having come to the attention of the respondent – the respondent was entitled to accept the repudiation (which she has) and the contract is rescinded. A party to a financial agreement cannot, secretly and without permission, sell or in any other way dissipate a substantial proportion of the other party’s assets or resources. To do so amounts to a repudiation of the contract by the first mentioned party.
In relation to the submission that the applicant has breached clauses 6.1 and 7.1 of the agreement – it will be noted that I have come to the conclusion that the applicant did indeed breach both of those clauses. In relation to the failure by the applicant to pay the sum of $25,000 it seems to me, though, that the respondent waived her right to rescind the contract on the basis of the applicant’s non-compliance with that term. The payment was to be made prior to the date of the marriage. If the respondent was prepared to go ahead with the marriage (as she did) even though the applicant had not paid the entire sum of $25,000 – it seems to me that the respondent has waived her right to now, some 14 years after the event, claim an entitlement to rescind the contract on that basis. I also consider that the respondent has waived her right to rescind on the basis of the breach of clause 7.1 by the applicant. The respondent in fact sought legal advice during the marriage in relation to the failure by the applicant to pay the money pursuant to clause 7.1 to the respondent. The respondent decided not to pursue that matter. It seems to me that the respondent has waived her right to rescind the contract (on that basis) by continuing with the contract after that point in time that she became aware of the applicant’s non-compliance with clause 7.1.
In relation to clause 8 I accept the evidence given by the respondent in relation to the family violence and domestic violence issues. Given that the respondent remained married to the applicant notwithstanding the applicant’s breach of clause 8 of the agreement – I am of the view that it is too late for the respondent to seek to rescind the contract on that basis after the end of the marriage. I consider that the respondent has waived her right to rescind on that basis .
Conclusion
I have come to the conclusion that the financial agreement should be set aside for the reasons stated. The respondent has satisfied the Court that the agreement should be set aside under s.90K(1)(b), (c) and/or (e).
The parties will be ordered to urgently attend a private mediation.
I certify that the preceding two hundred and twelve (212) paragraphs are a true copy of the reasons for judgment of Judge Howard
Associate:
Date: 19 June 2015
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