Pascot & Pascot
[2011] FamCA 945
•21 December 2011
FAMILY COURT OF AUSTRALIA
| PASCOT & PASCOT | [2011] FamCA 945 |
| FAMILY LAW - PROPERTY SETTLEMENT - Financial Agreement – Whether a binding financial agreement existed – Where one party had received incorrect legal advice relating to the binding nature of the agreements – Whether the agreement was void, voidable or unenforceable due to mistake – Whether the agreement was void, voidable or unenforceable due to undue influence – Whether the agreement was void, voidable or unenforceable due to unconscionable conduct – Whether the Agreement could be set aside due to a material change in circumstance FAMILY LAW – PROPERTY SETTLEMENT - Superannuation Agreement – Whether there was a valid superannuation splitting agreement – Where the Agreement was made prior to the commencement of the 2002 Amendments to the Family Law Act inserting superannuation splitting agreements. |
| Family Law Act 1975 (Cth) |
| Alati v Kruger (1955) 94 CLR 216 Australian Woollen Mills v Commonwealth (1954) 92 CLR 424 Black & Black (2008) FLC 93-357 Blomley v Ryan (1956) 99 CLR 362 Bridgewater & Ors v Leahy & Ors (1998) 194 CLR 457 Clifton & Stuart (1991) FLC 92-194 Commercial Bank of Australia v Amadio and Anor (1983) 151 CLR 447 Dupont & Dupont (1980) FLC 90-881 Fevia & Carmel-Fevia (2009) FLC 93-411 Gardner & Gavin (No. 2) [2010] FamCA 125 Goldsborough Mort & Co v Quinn (1910) 10 CLR 674 Green & Kwiatek (1982) FLC 91-259 Holland & Holland (1982) FLC 91-243 Kostres & Kostres (2009) FLC-420 La Rocca & La Rocca (1991) FLC 92-222 Louth v Diprose (1992) 175 CLR 621 Lowe & Harrington (1997) FLC 92-747 Newlands v Argyll General Insurance Co Ltd (1958) 59 SR(NSW) 130 O’Brien & O’Brien (1981) FLC 91-094 Public Trustee (as an executor of the estate of Gilbert) & Gilbert (1991) FLC 92-799 Rolfe & Rolfe (1979) FLC 90-629 Ruane & Backman-Ruane [2009] FamCA 1101 Senior & Anderson (2011) FLC 93-470 Simpson & Hamlin (1984) FLC 91-576 Sullivan & Sullivan [2011] FamCA 752 Taylor v Johnson (1983) 151 CLR 422 Turner v Wendover [1993] NSWSC 1147 Upper Hunter County District Council v Australian chilling & Freezing Co. (1968) 118 CLR 429 Whitford & Whitford (1979) FLC 90-612 |
| APPLICANT: | Mr Pascot |
| RESPONDENT: | Ms Pascot |
| FILE NUMBER: | SYC | 3678 | of | 2007 |
| DATE DELIVERED: | 21 December 2011 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Le Poer Trench J |
| HEARING DATE: | 30 June and 27 July 2011 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | John Lloyd SC |
| SOLICITOR FOR THE APPLICANT: | Doolan, Wagner & Callaghan |
| COUNSEL FOR THE RESPONDENT: | R Maurice |
| SOLICITOR FOR THE RESPONDENT: | Parry Carrol Lawyers |
Orders
The Agreement made between the parties on 28 March 2001 is set aside.
Each of the parties is to file and serve by the end of January 2012 a minute of the orders for property settlement they seek.
The matter is to be listed by the Docket Registrar for further directions and a conciliation conference as soon as practicable.
When the Docket Registrar is satisfied that the matter is ready to proceed further before me she is to arrange for a further listing.
IT IS NOTED that publication of this judgment under the pseudonym Pascot & Pascot is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC3678/2007
| Mr Pascot |
Applicant
And
| Ms Pascot |
Respondent
REASONS FOR JUDGMENT
Introduction
Ms Pascot (hereafter “the wife”) seeks a declaration that the agreement entered into between herself and Mr Pascot (hereafter “the husband”) on 28 March 2001 (hereafter “the Agreement”) is not binding on the parties as it is not a Financial Agreement made pursuant to Part VIIIA of the Family Law Act. Alternatively she seeks the Agreement be set aside pursuant to either, secs 90K(1)(b), 90K(1)(d) or 90K(1)(e).
There are a number of limbs to the wife’s case as the application forewarns. These include allegations that the wife’s solicitor gave her incorrect advice as to the effect of entering into the agreement. Annexed and marked “A” to the affidavit of the wife’s former lawyer Mr D is a copy of a letter dated 9 February 2001 in which paragraph 4 states as follows:-
Generally speaking, this type of Agreement, commonly referred to as a Pre-Nuptial Agreement, is entered into between a prospective husband and wife prior to their marriage being an agreement to determine how financial matters are dealt with during the marriage or in the event of a separation. The Family Court will not allow such agreements to bind the Court’s discretion although such agreements will certainly operate so as to influence a Court in relation to the financial relationship between husband and wife.
It is the wife’s case that the effect of providing that advice establishes a failure to comply with sec 90G(1)(b).
At the time of signing the agreement the wife was pregnant with the parties’ second child. Following the signing of the agreement there were two further children born. The marriage continued until January 2007. The parties lived under the same roof until 2009.
An unusual facet of the agreement is that its effective date of commencement of the Agreement is stated to be 22 February 2001. As will be seen, that was a date selected by the husband as the day before the settlement of the purchase of the property at C Street, Sydney Suburb W (hereafter “the W property”). That property became the family home. The acquisition of that property is central to both parties’ reasons for entering into the Agreement.
The wife mounts a case in the alternate that the agreement is void, voidable or unenforceable. The basis upon which she contends the agreement should be set aside on those grounds is that she says there is evidence to support a conclusion that there has been unilateral mistake; undue influence; misrepresentation and unconscionability. There also appears to be suggested a case, on behalf of the wife, that there never was a contract between the parties as the agreement the wife offered was not accepted by the husband.
It is the wife’s case that the amendments to the Act contained in sec 90G(1A) and 90G(1B) should not operate to save the Agreement and cause the court to make a declaration as provided for in sec 90G(1B).
The wife challenges the Agreement’s operation under sub-sections 90K(1)(e) and 90K(1)(d).
The wife contends there are provisions of the agreement which are unenforceable. In particular she points to a provision in the agreement which provides for the parties to split any future superannuation. The wife says that following the legislation which amended a raft of superannuation legislation and the Family Law Act, it is impossible to implement that provision without an order of the court made pursuant to sec 90MT of the Act. If the agreement is a valid financial agreement pursuant to the Act then the wife argues that there is no jurisdiction for the court to exercise power under part VIII of the Act. I note sec 90MT is found in Part VIIIB. The scope for the making of an order under sec 90MT may lie within the provisions of secs 90G(2) or 90KA of the Act. I will consider those matters as I proceed to determine the matter should it be necessary to do so.
I note, in relation to the superannuation provisions of the Agreement, sec 90MH was introduced as an amendment to the Act by Act number 61 of 2001, becoming operational on 28 December 2002. The section was amended again in 2008. A question arose as to whether the section applies retrospectively to a date prior to the making of the subject agreement on 28 March 2001. Later in these reasons I consider this matter and specifically have regard to the transitional provisions within the amending Act. Those provisions excluded any application of the section to Financial Agreements entered into prior to the amendment coming into force.
The Husband moves on his Amended Application for Final Orders filed 4 August 2008. In that application the husband seeks orders relating to property and financial matters. His primary application is that the wife’s application to set aside the Binding Financial Agreement entered into by the parties on 28 March 2001 be dismissed. In the alternative the husband seeks property orders as set out in his application.
It is the husband’s case that the wife has not made out a case for the Court to set aside the Financial Agreement entered into between them.
The matter was listed for hearing on the threshold point, namely the wife’s application to set aside the financial agreement. The parties agree that if the wife is successful in her application then directions should be made to prepare the matter for hearing as a defended property hearing.
The documents relied upon by each party
The wife in her case summary document, filed 27 June 2011, identified the following documents she relied upon:
·Further Amended Response of wife filed 15 January 2009
·Affidavit of wife filed 15 January 2009
·Financial Statement of wife filed 23 February 2010
·Affidavit of wife filed 16 January 2009
·Affidavit of Mr D filed 15 January 2009
·Amended notice of particulars, filed 15 January 2009
The husband in his case outline document relied upon the following documents:
· Amended Application for Final Orders filed 4 August 2009
· Affidavit of the husband sworn 9 February 2009
· Affidavit of Ms G sworn 4 March 2009
In the husband’s case outline document filed 20 June 2011 he provided a response to the wife’s amended notice filed 15 January 2009. I note from the husband’s response that there is no admission of substance.
Orders Sought by each Party
The wife sought orders relative to property matters. She seeks as her first order a declaration that the agreement dated 28 March 2001 is not binding upon the parties. Otherwise she seeks that the agreement be set aside. If she was successful in either of those primary applications, the wife would then press for orders to be made pursuant to sec 79. She then sets out the orders she would seek pursuant to sec 79 of the Act.
The husband in his Amended Application for Final Orders seeks primarily that the wife’s applications be dismissed. If that application is unsuccessful the husband seeks orders pursuant to sec 79 of the Act.
Analysis Of The Pathway to be Followed by the Court in Determining the Orders Sought by Each Party.
The Full Court decision in Senior v Anderson (2011) FLC 93-470 provides guidance as to the manner in which a case such as the present is to be approached. I draw from that decision a sequence of issues to be addressed in order. Those are:
(a)Is there an agreement (contract) between the parties?
(b)Is there an agreement which qualifies as a “financial agreement”? In this case that requires compliance with section 90C of the Act.
(c)Is the “financial agreement” binding on the parties and the court as set out in section 71A(1)? To qualify for that description the financial agreement must comply with section 90G.
The segments of the Full Court decision in Senior v Anderson which give rise to the above conclusion by me are set out below. In Senior v Anderson the Full Court split with Strickland J delivering a judgment, with which Murphy J agreed in all but one respect, May J dissenting. Murphy J and Strickland J did not agree in relation to the transitional provisions relative to the amendments made to section 90G with Murphy J saying:
I respectfully differ from his Honour in only one respect, namely the view expressed at paragraph 91 of his Honour’s reasons as to the relevance of a consideration of the transitional provisions of the Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 (Cth) (“the Amending Act”) to the determination of this appeal.
Between paragraphs 83 and 94 of the judgment of Strickland J, he set out the legislative framework applicable to the creation of a financial agreement which is binding. I do not repeat that framework in these reasons.
At paragraphs 94 to 96 inclusive Strickland J set out a discussion dealing with the relevant sections. I here set out those paragraphs.
94. The Act in effect draws a distinction between agreements which are financial agreements (s 4, s 90B, s 90C, s 90D) and those financial agreements which are binding (s 90G). Financial agreements can, like any other agreement, govern the actions of the parties to them and bind the parties to obligations, but do not oust the jurisdiction of the court. Parties to an agreement that satisfies the definition of “financial agreement” are bound by its terms (or not bound as the case may be), just as they would be bound (or not bound) by any other agreement (s 90KA) (see generally Australian Securities and Investment Corporation and Rich & Anor ).
95. Section 90G is irrelevant to the contractual rights and remedies of the parties to an agreement that satisfies the definition of “financial agreement”. That section only becomes relevant when the issue is whether an agreement that satisfies the definition of “financial agreement” is effective for a specific statutory purpose, namely to operate as a bar to claims by either party pursuant to Part VIII of the Act (s 71A). It will be so, if and only if, it is “binding” within the meaning of s 90G.
96. If an agreement, including an agreement that satisfies the definition of “financial agreement” under the Act, fails to effectively bar Part VIII claims (because of its failure to comply with the requirements of s 90G and, as a result, is not “binding” within the meaning of that section) the financial agreement can nevertheless have an affect. However, an agreement’s failure to be “binding” in the s 90G sense renders its use in Part VIII proceedings to be very limited; specifically it does not operate as a bar to orders made under that Part (see e.g. Woodland and Todd at paragraphs 37 – 39).At paragraph 106 and 107 Strickland J said:
106. In my view, the “principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts …” (s 90KA) are applicable in deciding whether (a) there is an agreement and (b) the application of s 90B, s 90C and s 90D to that agreement. Thus, as an example, principles familiar to the law of contract relating to the sufficiency of a written note or memorandum emanating from Statute of Frauds requirements may well apply to the requirements of s 90B, s 90C or s 90D for a written agreement. Specifically I am of the view that the doctrine of rectification can apply, in circumstances when its requirements are made out, to the agreement and to the requirements of s 90B, s 90C and s 90D. Thus I consider that to this extent his Honour was in fact correct.
107. It is true that those sections can be said to be central to the question of whether a financial agreement as defined exists. However, that is no bar to the remedy; rectification is available “where the debate is whether a contract exists at all” (R Meagher, D Heydon and M Leeming, Meagher, Gummow and Lehane’s Equity Doctrines & Remedies, 4th ed. 2002 at [26-035] citing Sindel v Georgiou (1984) 154 CLR 661 and Heyward v Planet Projects Pty Ltd [2000] NSW SC 1105).Justice Strickland at paragraphs 110 and 111 set out the following:
110. As previously set out, for there to be a financial agreement there must be an agreement, and to determine that, the principles of law and equity apply, and such an agreement is subject to equitable remedies such as rectification. This is reinforced by s 90KA, but noting again that that section refers to “financial agreements” as to distinct to “agreements”. However, that does not affect the force of the argument.
111. The relevance of this is that in applying the principles of rectification the intention of the parties is all important, ( Pukallus v Cameron (1982) 180 CLR 447 per Brennan J at 456; Australian Gypsum Ltd v Hume Steel Ltd (1930) 45 CLR 54 ; Ryledar Pty Ltd & Anor v Euphoric Pty Ltd [2007] 69 NSWLR 603 per Campbell JA at 660), and thus it was quite appropriate for his Honour to have regard to this, but only so far as his Honour was dealing with the mis-description of the section pursuant to which the financial agreement was made (i.e. s 90C instead or s 90D).Earlier, in the decision of Fevia & Carmel-Fevia (2009) FLC 93-411 Murphy J had outlined an approach which he considered was required in that case, dealing with validity of and the binding nature of a Financial Agreement which had been entered into in 2001. He outlined the approach he considered appropriate as follows:
121. First, by reference to the principles of contract (or equity), there may, in fact, be no agreement between the parties (despite claims to the contrary by one of the parties). That there must be an agreement before there can be a “financial agreement” is made clear by the definition of “financial agreement” in s 4 of the Act. The ordinary and natural meaning of “agreement” is, in my view, an agreement which is otherwise effective and enforceable at law. That this meaning of “agreement” is contemplated by the Act is, in my view, underscored by s 90K(1)(b) and s 90KA.
122. Secondly, the court can make Part VIII orders in the face of an agreement if, by reference to the Act, there is no “financial agreement”. These particular forms of agreement are creatures of the Act, provided for in the circumstances set out in ss 90B, 90C and 90D (relevantly s 90B). An agreement otherwise valid, effective and enforceable at common law may be a “financial agreement” for the purposes of the Act if the conditions of those sections, relevant to the circumstances (here s 90B) are met.
123. The relevant pre-conditions for an agreement otherwise valid and effective at law being a “financial agreement” for the purposes of the Act, are contained within (relevantly) s 90B. The section prescribes who may be parties to such an agreement (“people who are contemplating entering into a marriage with each other” and “one or more other people”); the form of agreement (it must be “a written agreement”) and the matters which must be the subject of the agreement (“the matters mentioned in [s 90B(2)”]. Further, the section excludes certain people from being parties to such an agreement (“spouse parties” who are parties to another agreement pursuant to ss 90B, 90C or 90D with respect to any of the specified matters).
124. Thirdly, the court can make Part VIII orders in the face of an agreement that is a “financial agreement” if conditions specified by the Act are met (s 90K) and the financial agreement is set aside by the court.
125. It will be appreciated that, in each of the situations just described, the court’s power to make Part VIII orders occurs independently of the provisions of s 90G of the Act.
126. The court’s power to make orders arises in each case from factors connected with matters referable to contractual (or equitable) principles and/or the provisions of the Act independent of s 90G. Such a result emanates from the fact that if a contract is not “binding” within the meaning of s 90G it can, nevertheless, be an “agreement” and a “financial agreement” within the meaning of the Act. So much is made clear by the provisions of ss 4 and (relevantly) s 90B and, conversely, by the fact that, although s 90G specifies when a “financial agreement” is “binding”, there is, in terms, no such thing under the Act as a “binding financial agreement”.
127. If a contract, or agreement is a “financial agreement”, but is not “binding”, it can, if valid and effective as such, have the effect, in relation to Part VIII of the Act, as set out in Woodland and Todd (2005) 33 FamLR 177.
128. If the agreement is a “financial agreement” within the meaning of s 4 and, relevantly, s 90B, and is “binding” within the meaning of s 90G, it precludes the court applying Part VIII to the extent that the financial agreement deals with those matters (s 71A).
To the extent it is relevant, it should be noted that the decision in Fevia & Carmel-Fevia pre-dated the amendment to section 90G which inserted sub-section (1A).
Background Facts
The husband’s evidence is, and the Financial Agreement recites at cl. 3, that the parties commenced cohabitation in November 1996 in a rental property in Sydney Suburb B. The wife asserts cohabitation commenced in 1997.
The parties were cohabiting by April 1998. They lived overseas from April 1998 until December 1998 in accommodation provided by the husband’s employer, I Company.
On returning from overseas in December 1998, the parties resided in the Wife’s property in Sydney Suburb A from December 1998 until about May 1999.
The parties were married in May 1999.
About the time of the marriage the parties moved to a rental property at R Street, Sydney Suburb W.
The first child of the parties, L, was born in September 1999.
When the wife was pregnant with the parties’ second child the parties looked at properties to purchase as a home for the growing family. They looked at the W Property. The husband proposed to buy that property.
The parties are at issue in their recollection of discussions between them leading up to the purchase of the W Property. I will refer to those matters later as I consider each party’s case.
The husband exchanged Contracts to buy the W Property on 1 December 2000.
The husband’s evidence is that he engaged Mr M, solicitor, on 5 December 2000 to represent him in the drawing and execution of a Financial Agreement. The agreement was to be signed prior to his purchase of a property for the family to reside in. As stated earlier, exchange of contracts for the W Property had occurred on 1 December 2000. This may be an important matter to consider given the wife’s evidence as to the representations the husband made to her prior to the execution by her of the Agreement. The exchange of contracts created legal obligations on the husband and failure on his part to complete the contract may have led to the forfeiture of the deposit paid or a suit for specific performance or other remedy. If the contract was the subject of “cooling off” conditions which enabled the husband to change his mind and withdraw from the contract, it is clear that he chose not to exercise those rights after he saw his lawyer on 5 December 2000.
On 4 February 2001 the husband handed the wife a draft form of “Financial Agreement” for her to consider. Sometime between that time and 9 February 2001 the wife instructed Mr D, solicitor, to act for her in relation to the agreement.
On 9 February 2001 Mr D signed a letter which was addressed to the wife and was later received by her. The fourth paragraph of that letter stated the following:
Generally speaking, this type of Agreement, commonly referred to as a Pre-Nuptial Agreement, is entered into between a prospective husband and wife prior to their marriage being an agreement to determine how financial matters are dealt with during the marriage or in the event of a separation. The Family Court will not allow such agreements to bind the Court’s discretion although such agreements will certainly operate so as to influence a Court in relation to the financial relationship between husband and wife.
As will be seen later there is contradictory oral evidence from Mr D as to whether he ever changed the advice given to the wife by him in the abovementioned paragraph of his letter to her. It will be seen the advice was wrong in two important areas.
The letter of 9 February 2001 from Mr D to the wife also details reservations he had in relation to the agreement. In particular, the absence of acknowledgement of the wife’s contributions in the Agreement; the need for future property to be dealt with in the agreement; and the fact that the husband had listed his superannuation as his property. The letter concludes:
We believe that there should be some considerable compromise with regard to the Agreement and unless the foregoing matters are properly addressed we could not properly discharge our professional responsibility to you by advising you to enter into the agreement.
The wife met with Mr D on 7 occasions between 9 February 2001 and 28 March 2001 in relation to the proposed Financial Agreement. This evidence is derived from paragraphs 6 and 10 of the Affidavit of Mr D sworn 13 January 2009. I note there is an apparent disconnect between some of the provisions of paragraphs 6 and 10 of the affidavit and the detail contained in annexure “B” to the affidavit. Annexure “B” is a copy of the invoice issued by Mr D for the work performed on behalf of the wife.
Mr D set out in paragraph 5 of his affidavit the following:
In the first meeting [the wife] presented as a stressed style of person and on numerous occasions throughout the conferences that I had with her she said things to the effect:
“My husband is insisting.”.
“He’s preparing to sell his home and purchase another one but he did not want to finalise that until there was a Binding Financial Agreement.”.
“If I don’t sign this he says he won’t buy us a home.”.
On 23 February 2001, the husband completed the Contract to acquire the W Property. The husband and wife moved into this property between 23-25 February 2001. The Agreement recites in paragraph 9 that “[The husband] has contracted to purchase property known as [W] (“the[W Property]”) in the sum of $610,000 and settlement of that purchase is due to occur on or about 23 February 2001.” Notwithstanding that provision, as will be seen later, it is the wife’s assertion that at that time she still accepted the husband’s assurances that he would cancel the purchase if she did not sign the Agreement.
The Agreement is dated 28 March 2001. Annexure “B” to the affidavit of Mr D demonstrates the Agreement was signed by the wife on 23 March 2001. The “Certificate of Independent Legal Advice” was signed by Mr D on 28 March 2001. The Agreement was specified to be effective from 22 February 2001. The husband in his oral evidence explained why that was the case. That date was the day before the husband completed the purchase of the W Property.
The second child of the parties, A, was born in May 2001.
The wife’s evidence is that, at the time she signed the agreement, she had not anticipated having a third child.
The third child of the parties, Y, was born in December 2005.
During the cohabitation it is the wife’s case that she cared for the children almost exclusively. The husband was not prepared to concede that was the case, however, he did concede that at the time the agreement was signed the wife was the primary homemaker and parent to the children and she wished to remain so.
The wife has set out detail of the contributions she made to a property at P Street, Sydney Suburb W between 1974 and 1998. She set out detail of the work she carried out to the W Property from the time of the purchase of the property to the date she left the property in 2007.
During the period from 2001 to the date the wife left the property in 2007 she worked from time to time and earned income. That income was spent in part on the education of the children. The wife paid $27,776 for the children’s schooling at S School over 4 years.
The husband worked throughout the cohabitation and submits he was the principal breadwinner.
Each party asserts they have made contributions falling for consideration within sec 79(4) of the Act.
The parties separated 1 January 2007, but remained living under the same roof until 17 September 2009, at which time the wife and children moved out of the W Property.
The Amended Application for Final Orders was lodged by the husband on 4 August 2008. It sought orders in relation to both parenting and financial matters. The orders sought in relation to the Agreement were:
4.That the wife’s Application to set aside the Binding Financial Agreement entered into by the parties on 28 March 2001 (“the Agreement”) be dismissed.
The husband also sought orders for property settlement in the alternative.
The Agreement
The Financial Agreement entered into on 28 March 2001 was marked as exhibit X1. The important provisions of the agreement for the purpose of this case are as follows.
The agreement firstly recited what was described as “agreed facts”. One of the stated agreed facts included in paragraph 14 was the following:
“Before [the husband] and [the wife] each signed this Agreement, each received separate and independent legal advice from a legal practitioner as to the following:
14.1 The effect of the agreement on that party’s rights.”
There are two matters of particular note under the heading “Purpose of this Agreement”.
16. [The husband] and [the wife] wish so far as is possible to contract out of the provisions of Part VIII of the Act if the marriage breaks down irretrievably, and to enter into a Financial Agreement under Section 90C of the Act providing how:
16.1 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;”
17. [The wife] took voluntary redundancy on 19 December 1997; she began to study for a Post Graduate Masters degree in February 1997 and [the husband] has supported her fully since April 1998.”
Under the heading “Effective Date” the following appears:
“The parties agree that the agreement set out in this document takes effect from 22 February 2001.”
Thereafter the following provisions particularly noted :
·The property owned by each party individually will remain that parties property and the other can make no claim in relation to same nor are they to be required to make any contribution to the others property.
·In relation to the W Property, that is to be the home for the parties and their children. That home may be sold and another home purchased. The home is to be provided by the husband. It is to be his financial responsibility. The wife can only make a financial contribution with the agreement of the husband. Any such contribution will be treated as a debt between the parties.
·The wife was to be primarily responsible for caring for the children and the domestic aspects of family life. She was permitted to work with the underlying stipulation that she continued to be responsible for the care of the children. Conversely the suggestion is that the husband would financially support the wife and the children. However no detail is given of same and it is not clearly spelled out. The only words which may be interpreted to show this are:
“[The husband] will give her every support and encouragement in that regard” [at paragraph 23]
·The wife was clearly expected to put a hold on her career advancement to care for the children. No requirement of similar nature was specified for the husband yet the agreement makes no provision to compensate the wife for that sacrifice.
·Upon separation each of the parties is to retain their separate property and divide equally any “future property”.
·If the “relevant legal provisions governing family law matters and superannuation have been amended to allow for equal division of superannuation funds” then the parties are to split superannuation so as to divide equally any total increase in the parties collective superannuation entitlements from the effective date of the Agreement.
·Each was required to execute a will in favour of the parties’ children. The wife was to be permitted occupancy of the home during her lifetime upon conditions.
Having regard to the content of the Family Law Act and the jurisprudence associated with the implementation and application of the Act by the court at the time the agreement was entered into the agreement appears to favour the husband considerably. The wife’s case has highlighted the aspects of the Agreement which are said to be very unfair to her. The wife says the Agreement is such that any experienced family law lawyer reading of the document would ask “Why would the wife enter into such a one sided agreement?” There are a number of provisions which stand out as particularly unfair. Those are as follows:
·There appears to be no provision which allows for the type of adjustment a party to property proceedings in the court might normally expect to receive from a court considering a sec 79 application, namely an adjustment found to be appropriate after consideration of the provisions of sec 75(2).
·There is no provision for spouse maintenance.
·There is no provision which would have regard to indirect contributions by the parties.
·There is no provision to compensate the wife for sacrificing her career prospects to enable the husband to pursue his. The Agreement provides for the wife to be primarily responsible for the care of the children and the domestic aspects of the family.
Ultimately the relevance of this perceived unfairness within the agreement may not be relevant to the considerations the Court needs to take into account in determining an application to set aside such an agreement. After all, the fact that a party would enter into an agreement which treated them unfairly, notwithstanding the legislative requirement to have a mandatory provision of legal advice before signing, is also a matter for consideration. On the other hand, the very fact that such a circumstance exists may add to a party’s claim of duress, undue influence and/or unconscionable conduct.
Parties’ Credit
Each of the parties gave oral evidence, as did the wife’s former lawyer Mr D.
The wife gave her evidence with a very flat, quiet and expressionless presentation. She looked troubled. A lay observer of the wife in the witness box may well have said she looked as if she might be suffering from some form of depression. There is no medical evidence before the Court relating to the wife. She appeared to carefully consider the questions she was asked and appeared to answer the questions to the best of her ability. She said she had clear memories of some matters about which she was questioned and no recollection of other matters. I did not consider the wife was being dishonest in her oral evidence nor did I consider she was attempting to evade questioning.
The presentation of the husband in the witness box was diametrically opposite to that of the wife. He presented as a confident, assertive and clear minded businessman. He gave his evidence in a professional manner. By that I mean he had a presentation which the Court might expect to see from an expert witness who was very accustomed to giving evidence in court proceedings. There is nothing in the evidence to suggest the husband is accustomed to giving oral evidence in court cases.
There was nothing about the presentation of the husband or the content of his oral evidence which caused me to consider he was not being truthful with the court or that he was seeking to evade questions. There were some questions he could not answer because he said he did not recall. I accept that was the case. He was careful not to specifically deny allegations unless he had a clear recollection in relation to same. He answered a number of questions with the words “I don’t remember that” or like words to indicate he had no recollection of such event occurring.
The wife’s former solicitor Mr D gave oral evidence. He appeared to me to give his evidence in an honest manner. I did not think he was endeavouring to mislead the Court. His answers to some questions caused me to be concerned he may be guarding his own position and vulnerability to future litigation from each of the parties.
I was concerned about the evidence given by Mr D. Firstly, he gave evidence about events which occurred a decade ago in a matter where he gave no reason to suggest that he would have remembered fine detail of same. One annexure to his affidavit was his memorandum of fees which he sent to the wife. That memorandum was dated 22 July 2003. That is more than two years after the work was performed for which the charges were made. As can be seen from a letter annexed to the husband’s Affidavit of 9 February 2009, the rendering of an account to the wife for the work which had been performed by Mr D had been overlooked by him. I think it a reasonable inference that he would have had to construct the account from a combination of searching the file he kept for the transaction and whatever recollection he could summon.
The deed itself was signed at a time when the amendments to the Act which recognised and enforced financial agreements, of the nature described in sections 90B and 90C of the Act, were only months old. Section 90G was inserted in the Family Law Act by Act number 143 of 2000. That section became operative on 27 December 2000.
The advice given in writing by Mr D in his letter to the wife of 9 February 2001 was, so far as paragraph 4 thereof is concerned, is clearly in error. Notwithstanding that clear error Mr D would have the court accept that he had corrected that error by oral advice. It is clear that at no time did he provide a written confirmation of that changed or corrected advice.
I cannot accept that a competent lawyer would firstly give clearly wrong advice in writing and then, having apparently discovered his error, fail to correct that advice by further written communication. As can be seen later in these reasons when I review his evidence, he gave contradictory evidence. He stated (I believe accurately) at times that he had no recollection of certain events about which he was questioned, yet, he stated he had an independent recollection of having given specific advice. I regret to say I have no confidence that his evidence was accurate in those respects.
I was further concerned by the apparent contradictions in the oral evidence of Mr D. In his oral evidence in chief he confirmed that the advice he gave the wife at the time she signed the agreement on 28 March 2001 was consistent with the written advice he had given her via letter to her dated 9 February 2001. That is that he had reiterated to her what he had set out in the last sentence of the fourth paragraph of that letter. He also said he had advised the wife at the time she signed the agreement that “it treated her fairly harshly”.
In cross-examination he was asked “Notwithstanding your response to my learned friend in respect of paragraph 4, the passage commencing “Generally speaking” did you, nonetheless, give specific advice to [the wife], that, in her instance, in relation to the agreement that you considered it was fair and reasonable, that she was entering into a binding financial agreement?” To which he replied “yes”. In relation to that question and answer I cannot accept, given some of his other oral evidence where he clearly could not remember distinct details of conversations with the wife, that he could distinctly remember the matter referred to and, giving him the benefit of the doubt, I am prepared to believe that he was relying, for the answer he gave, on his recall of customary professional advice and behaviour which he might adopt in current times, when he answered the question.
Should it be the case that he really did consider that the provisions of the agreement the wife was to enter into on 28 March 2001 was, in light of the circumstances which were at that time reasonably foreseeable, fair and reasonable, then it calls into question his ability to give competent advice to clients in Family Law matters. Details of this last conclusion are set out later in these reasons.
Mr D’s independent recollection of the facts surrounding the signing of the agreement by the wife was further tested in cross-examination. It was clear to me from his answers that his recollection was poor in relation to that time. I accept that he may remember very distinctive and unusual aspects of the transaction such as a client who was asking him to assist her entering into an agreement which she said she did not wish to enter into.
In the circumstances of this case I consider it would be unsafe for the Court to accept the evidence of Mr D otherwise than where it is corroborated in writing (such as the letter to the wife of 9 February 2001) and to the facts set out in paragraphs 1 to 6 inclusive and paragraphs 10 and 11 of Mr D’s affidavit. I also consider the oral evidence he gave in chief that the advice he gave the wife, at the time she signed the agreement, was no different to the advice he had set out in paragraph 4 of his letter to her dated 9 February 2001, was most likely correct.
Wife’s Case
The wife submitted a case summary, received by the Court 27 June 2011.
In that document the wife set out the orders she is seeking:
·A declaration that the Agreement between the husband and wife dated 28 March 2001 (“the Agreement”) is not binding on the parties as it is not a Financial Agreement made pursuant to VIIIA of the Family Law Act 1975.
·Alternatively, that the Agreement be set aside pursuant to sec 90K(1)(b); and/or
·Alternatively, that the Agreement be set aside pursuant to sec 90K(1)(d); and/or
·Alternatively that the Agreement be set aside pursuant to sec 90K(1)(e).
In her Case Summary Document the wife identified four issues for determination. They are as follows:
a. Whether the subject document is a Financial Agreement pursuant to Part VIIIA of the Family Law Act 1975 as asserted by the husband – s 90G(1)(b);
b. If validly made, whether the Agreement is void voidable or unenforceable (s 90K(1)(b)) and/or;
c. Whether a party (the husband) to the Agreement engaged in conduct that was, in all the circumstances, unconscionable, and so the agreement should be set aside (s 90IK(1)(e) and/or;
d. Whether since the making of the agreement, a material change in the circumstances have occurred relating to the care, welfare and development of a child and, as a result of the change, the child or Applicant having care and responsibility for the child (the wife) will suffer hardship if the Court does nor set aside the Agreement (s 90K(1)(d).
I will deal with each of these identified issues later in these reasons although, for the reasons stated earlier, I will deal with those matters in a different sequence, as suggested by the Full Court in Senior v Anderson.
The wife submits that the question of whether a financial agreement is valid, enforceable or effective is determined according to principles of law and equity which are applicable in determining the validity, enforceability and effect of contracts. In this case the wife says the Court will need to consider the principles relative to unilateral mistake, undue influence, misrepresentation and unconscionability.
In my view there is another important matter to determine. It relates to the provisions of section 90G and its subsections. Section 90G has been amended since the parties’ agreement was signed in 2001. It is necessary to consider the transitional provisions, in relation to those amendments, in order to determine which of the provisions of the section, as it is presently stated, apply to an agreement entered into in March 2001. I will address this later in these reasons.
Section 90G(1)(b) requires, as part of the necessary steps to render a financial agreement binding, that each spouse, before signing the agreement, is to be provided with “independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party”. Because of the particular facts of this case the following issues are also raised, by the wife, for determination:
(i)What rights needed to be addressed in the legal advice?
(ii)If the advice given is wrong in relation to a very significant right of a party, what is the consequence so far as compliance with section 90G(1)(b) is concerned? Does it render the agreement not binding and thereby not exclude the court from making orders under Part VIII of the Act?
The wife drew the Court’s attention to the case of Black and Black (2008) FLC 93-357 and in particular, the strict requirement that all elements of sec 90G(1) be met. The wife argues that the Financial Agreement is binding “if, and only if,” the dual requirements of advice being provided and a certificate being given are satisfied. She submits that the advice she was given, by her solicitor Mr D, in relation to the binding nature of the agreement was incorrect and as such this strict requirement is not met. The wife says the words “legal advice” must, in the circumstances be read as “correct legal advice”. It is clearly her case that to consider the words as having any other meaning would be to circumvent that which the legislature is clearly intending to create, namely, where people enter into arrangements which oust the jurisdiction of the court they have been provided with independent advice as to the legal consequences of entering into such an agreement.
The wife submits, in relation to the declaration sought by her, that the agreement is not binding, the Court must be satisfied that the wife received accurate advice from Mr D in relation to the binding nature of the agreement and her rights under that agreement, or otherwise, before declaring the Agreement was a binding financial agreement. The wife submits that this did not occur. The Court’s attention was drawn to the evidence of Mr D, and in particular his evidence:
So prior to the wife signing the agreement, did you say anything different to her to the advice which appears in paragraph 4 of the letter being annexure A? … Did you give any advice different to that set which is set out in paragraph 4? --- No.
The wife further submits that the mandatory legal advice, which is required as one of the ingredients necessary to oust part of the Court’s jurisdiction, must be accurate advice and that incorrect legal advice should be seen as no advice having been given.
Husband’s Case
The husband has submitted limited material in relation to the case he is putting forward, other than an itemised response to documents relied upon by the wife.
In the Orders the Husband is seeking, he included an order that:
4.That the wife’s Application to set aside the Binding Financial Agreement entered into by the parties on 28 March 2001 (“the Agreement”) be dismissed
The husband submits that, in relation to sec 90G, there is no justification for a finding that the wife was mistaken as to the effect of the agreement into which she was entering.
Relevant Law
The Act provides in Part VIIIA that parties may enter into Financial Agreements. The Part provides for differing types of Financial Agreements. The agreements can be entered into before marriage (sec 90B), during marriage (90C) or after divorce (90D). There are other limitations imposed on the effectiveness of Financial Agreements in certain circumstances by sections 90DA, 90DB, 90E and 90 F. Such agreements may become “binding” if they comply with section 90G of the Act. Financial Agreements which are “binding” have the effect of ousting the courts jurisdiction to make orders under part VIII of the Act. It is sec 71A of the Act which causes that ousting.
FAMILY LAW ACT 1975 - SECT 71A
This Part does not apply to certain matters covered by binding financial agreements
(1) This Part does not apply to:
(a) financial matters to which a financial agreement that is binding on the parties to the agreement applies; or
(b) financial resources to which a financial agreement that is binding on the parties to the agreement applies.
(2) Subsection (1) does not apply in relation to proceedings of a kind referred to in paragraph (caa) or (cb) of the definition of matrimonial cause in subsection 4(1).
I have referred earlier to the description by Strickland J in Senior v Anderson (see paragraphs 83 to 94 of that decision) of the framework of the relevant legislation and I will not repeat that here.
The following addresses the sections relevant to this dispute.
Section 90C
The particular type of Financial Agreement purported to have been entered into in this case is described in section 90C of the Act. That section provides as follows:
FAMILY LAW ACT 1975 - SECT 90C
Financial agreements during marriage
(1) If:
(a) the parties to a marriage make a written agreement with respect to any of the matters mentioned in subsection (2); and
(aa) at the time of the making of the agreement, the parties to the marriage are not the spouse parties to any other binding agreement (whether made under this section or section 90B or 90D) with respect to any of those matters; and
(b) the agreement is expressed to be made under this section;
the agreement is a financial agreement . The parties to the marriage 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 during the marriage, is to be dealt with;
(b) the maintenance of either of the spouse parties:
(i) during the marriage; or
(ii) after divorce; or
(iii) both during the marriage and after divorce.
(2A) For the avoidance of doubt, a financial agreement under this section may be made before or after the marriage has broken down.
(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.
Section 90G
In considering whether a financial agreement is binding, section 90G of the Family Law Act is relevant.
Section 90G(1) 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.
As stated earlier, not all of the provisions of section 90G(1), as it currently stands, are applicable to an agreement signed in March 2001.
Part VIIIA, which deals with financial Agreements, was inserted in to the Family Law Act in 2000, coming into effect on 27 December of that year. That Amendment included not only the provisions contained in 90G but also a definition of “financial agreement” in sec 4 of the Act. In its original form, sec 90G provided:
90GWhen financial agreements are binding
(1)A financial agreement is binding on the parties to the agreement if, and only if:
(a)the agreement is signed by both parties; and
(b)the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i)the effect of the agreement on the rights of that party;
(ii)whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;
(iii)whether or not, at that time, it was prudent for that party to make the agreement;
(iv)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; and
(c)the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(d)the agreement has not been terminated and has not been set aside by a court; and
(e)after the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.
Note:For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.
(2)A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary
It is under these provisions that the agreement between the parties was signed.
There has since been an amendment (commencing 14 January 2004) to the provisions in sec 90G, in which the matters relating to legal advice necessary to meet requirements were amended. This amendment is not relevant to the current matter. Of significance is the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009, which came into effect on 4 January 2010.
Item 8 of Sch 5 of that Amending Act emphasises that the pre-2004 provisions of sec 90G(1) are to be applied when considering financial agreements entered before the commencement of the 2004 Amendments. The relevant paragraph of that item states:
For a financial agreement made before 14 January 2004, paragraph 90G(1)(b) of the Family Law Act 1975, as inserted by item 2 of this Schedule, does not apply and the following paragraph 90G(1)(b) of that Act is taken to have been inserted by that item and to apply instead:
(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about:
(i) the effect of the agreement on the rights of that party; and
(ii)whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement; and
(iii) whether or not, at that time, it was prudent for that party to make the agreement; and
(iv) 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; and
In considering sec 90G(1), the Court has placed emphasis on the phrase “if, and only if”, the position being that the section should be construed narrowly as a result of this phrase. In Black and Black (2008) FLC ¶93-357, the Court held that as Agreements under secs 90B, 90C and 90D acted to oust the jurisdiction of the Court, the Court required a higher standard of compliance to the legislation in regard to these provisions. The Court in Black stated:
[40] The Act permits parties to make an agreement which provides an amicable resolution to their financial matters in the event of separation. In providing a regime for parties to do so the Act removes the jurisdiction of the court to determine the division of those matters covered by the agreement as the court would otherwise be called upon to do so in the event of a disagreement. Care must be taken in interpreting any provision of the Act that has the effect of ousting the jurisdiction of the court.
In spite of the amendments to the Family Law Act by the Federal Justice Systems Amendment (Efficiency Measures) Act (No.1) 2009, the court has continued to follow the narrow interpretation set out in Black. The amendment of the legislation has effectively served to insert remedies that the Court may exercise in certain circumstances, rather than relax the standards by which Financial Agreements are assessed.
Section 90G(1A)
Following the Full Court’s decision in Black & Black, the Family Law Act was amended by the Federal Justice Systems Amendment (Efficiency Measures) Act (No.1) 2009 (Cth), which introduced a significant change to sec 90G. The amendment introduced subsection (1A), which provides:
(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.
The Explanatory Memorandum of the Amending Legislation set out the government’s intention in introducing the new subsection. The purpose of the amendment was to:
“…relax certain technical requirements that must be strictly satisfied for financial agreements and termination agreements to be binding. These amendments will respond to the concerns about the binding financial agreement provisions of the Act that have arisen following the decision of the Full Family Court in Black v Black.”
The court is empowered, by the inserted subsection (1A), to declare any non complying agreements to be Binding Financial Agreements. The Full Courts decision in Kostres v Kostres (2009) FLC 93-420 states [at 165]:
One of the effects of the amending Act is to provide additional protection for parties who enter into financial and termination agreements by enabling a court to declare, in enforcement proceedings, that an agreement is binding despite a failure to meet the procedural requirements relating to the making of the agreement if the court is satisfied that it would be unjust and inequitable if the agreement did not bind the spouse parties (disregarding any change in circumstance from the time when the agreement was made).
Section 90K
In the event that the agreement is found to be a Financial Agreement and/or declared to be a Binding Financial Agreement under sec 90G, the wife submits the Agreement should be set aside on grounds specified under sec 90K(1). This subsection deals with the circumstances in which court may set aside a financial agreement.
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.
(1A) For the purposes of paragraph (1)(aa), creditor, in relation to a party to the agreement, includes a person who could reasonably have been foreseen by the party as being reasonably likely to become a creditor of the party.
(2) For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) a parenting order provides that:
(i) the child is to live with the person; or
(ii) the person has parental responsibility for the child.
(3) A court may, on an application by a person who was a party to the financial agreement that has been set aside, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.
Section 90KA
Section 90KA is a section which provides for the application of a specific body of law to the determination of disputes relating to the validity, enforceability and effect of a financial agreement or a termination agreement. The wife in this case also relies on the powers contained in this section in the order she seeks.
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.
DISCUSSION
In determining whether a Binding Financial Agreement is in fact a binding or a Financial Agreement, the Full Court in Senior & Anderson, as stated earlier in these reasons, set out the three questions that must be satisfied. They are, in summary:
(a)Is there an agreement (contract) between the parties?
(b)Is there an agreement which qualifies as a “financial agreement”? In this case that requires compliance with sec 90C of the Act.
(c)Is the “financial agreement” binding on the parties and the court as set out in section 71A(1)? To qualify for that description the financial agreement must comply with sec 90G.
The questions are progressive, in that it would not be possible to consider the latter questions unless the preceding questions have been answered in the affirmative.
THE EVIDENCE IN THE CASE
The wife’s case is that in 2000 she and the husband commenced looking for a “home” for the family. A number of properties were looked at. The W Property was chosen by them as the most suitable, in the circumstances, for them. The wife says that the husband said to her about that property : “I really like the house but I won’t settle on it unless we’ve got an agreement in place”. The evidence does not establish when that conversation took place relative to the exchange of contracts for the purchase of the property in the husband’s sole name which occurred on 1 December 2000. He engaged his solicitor Mr M to act on the preparation of a Financial Agreement on 5 December 2000.
The wife says that the husband also said to her “I won’t put a roof over the children’s head and I will pull out of the settlement on [the W Property] if you don’t sign.” Again it is unclear exactly when this statement was made other than it occurred after an exchange of contracts for the purchase of the W Property and the signing of the Agreement on 28 March 2001.
It is the wife’s case that the parties moved into the property on about 25 February 2001, it being an agreed fact that the husband completed the contract on about 23 February 2001.
The wife’s evidence is that between the date the parties moved into the house and the date of the signing of the agreement by her the husband had said to her words to the effect: “I will pull out of the settlement of [the W Property] if you don’t sign.”
In cross-examination it was put to the wife that at the time she first saw Mr D in early February 2001 she knew the husband had already exchanged contracts on the purchase of the W property. She denied that was the case. She now knows that was the case. She first learnt of that fact when she read the draft Financial Agreement.
The wife agrees that when she signed the Agreement she was living in the W Property. She denied, however, that she knew at that time the purchase had been completed. She believes from documentation provided by the husband for this litigation that she had been living in the house for about two weeks.
In cross-examination the wife conceded she had purchased property in 1985 and 1997. She agreed she understood the process of exchange of contracts and completion. She also agreed that through reading a draft of the Financial Agreement she learnt the purchase of the W Property had been settled on 23 February 2001. Consequently she knew the sale had been settled at the time she signed the Agreement. She was then asked about the “cooling off period” referred to in her affidavit evidence. She said the husband had spoken to her about that concept during January, February and March 2001. She had not sought any advice from Mr D about the contract for the purchase of the property.
In relation to the signing of the final Agreement, in her cross-examination the wife said Mr D “didn’t go through it in great detail.” She denied he had explained the effect of that agreement on her rights in respect of the Family Law Act. She said he had not clearly explained the advantages and disadvantages of entering into the agreement. She did not ask him to make it clear. She denied he had explained whether it was prudent for her to enter the final Agreement. She did think that she had left him with the impression she had understood whatever he said about the Agreement. She did deny he had told her he thought the agreement was fair and reasonable for her.
The wife was asked about her assertion in an affidavit sworn by her that on the night of 28 March 2001 when the husband returned home he asked her “Have you signed the Agreement?” She said “yes I have”. She had said in the affidavit that in response to her answer “He literally danced a jig”. It was put to her that he did not “literally dance a jig” however she insisted that he did.
The wife was asked when she and the husband decided to have a third child. She said “probably mid 2003”. She confirmed that the husband spends time with the children pursuant to Court Orders and that he is paying child support as assessed by the Child Support Agency. The children are well apart from the eldest who suffers from a condition for which he receives treatment.
When asked directly whether she understood the Agreement was binding on her at the time she signed it she replied that she understood it was not binding. She confirmed she was mistaken about the effect of the agreement. She had believed the agreement was not binding upon her. When asked why in those circumstances she would be concerned about having to sign the agreement she said “because he was at me every night.”
The wife conceded there was correspondence between Mr D and the husband’s solicitor relating to alterations to the first draft of the Agreement. She agreed she had spoken to Mr D about provisions in the agreement which she was not happy with. She claimed that many of the matters Mr D sought incorporated in the Agreement were not incorporated in the Agreement which she signed.
The wife agreed she had signed the Agreement in the presence of her solicitor. When asked if she expressed to him at that time her desire not to sign the document she said “All I expressed to him was that I have to sign it”.
The wife agreed that she had complained about the Agreement after the marriage broke down.
It was put to the wife that immediately before she signed the Agreement she knew she had rights under the Family Law Act. She said she was not familiar with those rights. She said they had not been conveyed to her in detail. At the time of signing the Agreement she said Mr D had said to her “it’s still not acceptable, in terms of the document; it still needs to be negotiated”. The wife said she told him “I have to sign it”. She said he had told her, in words to the effect, many aspects of the Agreement were still unjust and unfair. At the time he signed the certificate attached to the Agreement the wife said Mr D had read it out to her. She denied he had told her at that time he considered the Agreement “fair and reasonable”.
The wife was asked what she understood by the term “cooling off period” as related to contracts for the purchase of land at the time the W Property was purchased. She said it was “a term used for being able to withdraw from the point of sale.” She agreed it was a period following exchange of contracts to purchase.
It was put to the wife that she knew, post 23 February 2001 that she had an opportunity to not execute the Agreement. She said “No not given the circumstances.” She said that although she was in the W Property home she did not understand that was secure. She said she was told that if she did not sign the Agreement “there would be no roof”.
The wife’s evidence was that at the time the acquisition of the property was occurring she was pregnant with the parties’ second child. She says she was unwell at the time. There was no medical evidence led to establish that was the case, however, the husband, who was absent during some of the period travelling with work, did not dispute that she may have been unwell.
At the time the Agreement was entered into the wife had not been working for some months and was financially dependant upon the husband.
The wife’s evidence also states that she did not know the dates of the exchange of contract for the W Property and as such was reliant on the husband’s representations in relation to the purchase.
Mr D’s evidence tends to support the evidence of the wife. At paragraph 5 of his affidavit, he says:
In the first meeting [the wife] presented as a stressed style of person and on numerous occasions throughout the conferences that I had with her she said things to the effect:
“My husband is insisting.”.
“He’s preparing to sell his home and purchase another one but he did not want to finalise that until there was a Binding Financial Agreement.”.
“If I don’t sign this he says he won’t buy us a home.”.
The evidence of the wife contradicts the facts in some respects. It is agreed by both parties that the husband exchanged contracts for the purchase of the W Property on 1 December 2000, with the purchase completed on 23 February 2001. The parties agree that they moved into the property at about that time, and that they signed the Agreement on 28 March, over one month after moving into the property.
The husband denies making the representations alleged by the wife, but his evidence is also that he does not remember conversations between the parties at the time that the Agreement was made. The evidence of Mr D tends to support the wife’s allegation that he did make such representations.
The wife said:
“I was told the cooling off period on the settlement was about to expire. I was of the clear understanding that there was a cooling off period on the settlement despite the fact that we had moved into the home.
[The husband] continued to tell me: ‘I can still pull out of this – there is a cooling off period.’”
The wife’s evidence is that at the time that the Agreement was being created, she was quite isolated from her family and friends as she felt that she was unable to talk to anyone about the Agreement. She said “I did not tell my family what was going on”, and “I was scared, I was two months away from giving birth and I had a medically demanding one year old with no family or friends local to me, no job and the threat of insecurity”. The husband’s evidence is that the wife spoke often on the telephone with her family, but he did not recall what the wife spoke of with her family. He was also absent from the family for periods at about that time because of work commitments.
The husband gave oral evidence and was cross-examined. He freely conceded that entering into the Financial Agreement was his idea. He agreed his solicitor had recommended Mr D as a solicitor to act for the wife.
The husband agreed that in relation to the purchase of the W Property the wife had no contact with the solicitor who acted for him on that purchase. He agreed the wife had no involvement with the funds used to acquire the property. He agreed that his intent in entering into the Agreement was to keep the W Property and the other assets he had brought to the marriage out of the reach of any claims by the wife in the event of a marriage breakdown.
The husband agreed that at the time of the Agreement being signed the wife was the primary carer of their child and she was pregnant with their second child. He agreed he had travelled at about that time with two overseas trips. He agreed he left for a three week overseas trip on 4 February 2001.
The husband denied the wife was under stress at the time. He now knows that around that time she had seen a counsellor at a hospital because she was feeling depressed. He said it was not apparent to him. He claimed the wife had about 100 calls per month to her family. He was unaware of what she discussed.
The husband agreed he had told the wife at the time that he would fund her legal representation for the signing of the Agreement. The husband did not deny he said to the wife when she raised the question of the Agreement with him “It’s the only way it’s going to happen”. He did not remember the words.
The husband agreed that on the day he left for a three week trip overseas (4 February 2001) he handed the wife a copy of the draft Agreement. He denied she cried when he did that. He said she was just “matter of fact”. He agreed he said to her words to the effect of “we can negotiate changes through our solicitors”. He denied that suggested she was unhappy with the form of the agreement.
The husband disputed that the wife was upset by the presentation of the Agreement to her and that she demonstrated that by refusing to takes his calls from overseas although he stated he did not know whether she was pleased or displeased by his requirement for a Financial Agreement.
It was put to the husband that three days after he provided the Agreement to the wife she had told him in a telephone conversation she was so upset about that matter that she did not know if she would be there when he returned. It was put he had responded to those words with words to the effect “Don’t leave me. It will be okay. I’m just protecting my interests”. He initially answered that question by saying “I would have said something but I don’t recall that was- that were-that those were my words”. When the question was put to him again he replied “I don’t recall that. I don’t think it is the truth.”
Pausing there, I record a finding that I accept the evidence of the wife on this aspect. That is the circumstances of how she came to be given the draft agreement, her reaction to it, her words to the husband in the days thereafter and what she says his response was. In the confines of an apparently happy marriage on the point of acquiring a home for a growing family, the husband would have the Court believe that either the wife showed no emotion when presented with the draft Agreement nor did she express any emotion or opposition to the requirement for her to sign it in the days that followed.
The husband conceded he could have said words to the effect of “I promise everything will work out okay. We can negotiate the terms of the agreement”.
The husband denied he made the provision of the home dependant on the signing of the Agreement. He said “The intent was for the financial agreement to document what assets were [the wife’s] going into this agreement and what assets were mine.” He denied the agreement had its operative date back dated as something he wanted. He said it was something his solicitor wanted. He said his solicitor had told him it was “too hard to change the schedule”.
The husband conceded he wanted the agreement to protect his assets including the home. He denied he wanted it back dated for that purpose. He agreed that prior to 23 February 2001 he did not own any real estate.
The husband agreed that it did matter to him whether or not his W Property could be the subject of a claim by the wife on a marriage breakdown. He said that if the wife had not signed the agreement “I don’t know what course of action that we could have taken.” He denied he had pressure on the wife to sign the agreement.
In relation to the Agreement itself the husband was asked about the provision for the division between the parties of any increase in their superannuation. He agreed the Agreement provided for an equal division of any increase in their superannuation entitlements. He agreed on that basis he would have to pay some funds to the wife. He agreed he had done nothing to comply with that provision. He claimed that was because the wife had disputed the agreement.
The husband was asked about the provisions of clause 24 of the agreement. In particular it was put that the words “she will be responsible during the marriage for homemaking duties and parenting duties and tasks in relation to the home and [the wife] will not seek compensation for those tasks from [the husband]” were inserted in the Agreement at his instigation. He denied that and initially sought to suggest it had come from the wife. He then conceded it didn’t “sound like her” and it may well have come from him.
I pause here to note the significance of paragraphs 23 and 24 of the agreement. It is trite to say that in many property cases, heard by this court, the significance placed by the court on a parties contributions to the marriage, as a homemaker and parent, (as required by sec 79(4)(c)) is notorious. In this regard see Rolfe & Rolfe (1979) FLC ¶90-629 at pp 78,272–78,273 per Evatt CJ (approved by Wilson J Mallet v Mallet
(1984) 156 CLR 605):
“The purpose of s 79(4)(b) [the precursor to s 79(4)(c)] in my opinion, is to ensure just and equitable treatment of a wife who has not earned income during the marriage, but who has contributed as a homemaker and parent to the property. A husband and father is free to earn income, purchase property and pay off the mortgage so long as his wife assumes the responsibility for the home and the children. Because of that responsibility she may earn no income or have only small earnings, but provided she makes her contribution to the home and to the family the Act clearly intends that her contribution should be recognised not in a token way but in a substantial way. While the parties reside together, the one earning and the other fulfilling responsibilities in the home, there is no reason to attach greater value to the contribution of one than to that of the other. This is the way they arrange their affairs and the contribution of each should be given equal value.”
Subsection (1B) and (1C) of sec 90G were also added by the 2009 amendments, however, there is no reason to consider those provisions as part of this case.
Given that there is no technical departure from sec 90G(1) which could lead to the type of situation faced in Black and Black there is no reason to further consider the provisions of sec 90G(1A).
Whether since the making of the agreement, a material change in the circumstances have occurred relating to the care, welfare and development of a child and, as a result of the change, the child or Applicant having care and responsibility for the child (the wife) will suffer hardship if the Court does nor set aside the Agreement aside (sec 90K(1)(d).
I turn now to whether the Agreement could be set aside. Again, as I have found that there is no Agreement, and consequently no Binding Financial Agreement, this consideration is not necessary, however, I shall canvass this topic in order to address all of the grounds submitted by the wife.
Subsection 90K(1)(d) provides:
(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:
…
(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;
Sub-section (2) is as follows:
(2) For the purposes of paragraph (1)(d), a person has caring responsibility for a child if:
(a) the person is a parent of the child with whom the child lives; or
(b) a parenting order provides that:
(i) the child is to live with the person; or
(ii) the person has parental responsibility for the child.This section is very similar in nature and wording to sec 79A(1)(d), although it is noted that this provision is:
“…wider [than sec 79A(1)(d)] in that the change in question need not be “exceptional”, but “material”” (LexisNexis Australian Family Law)
There is no guiding case law on this subsection as yet, therefore in order to gain insight into how this subsection may be construed, it is necessary to draw from case law on sec 79A(1)(d) for guidance, as sec 90K(d) is modelled on that section. In the judgment of Garden and Gavin (No. 2) [2010] FamCAFC 125, the Full Court set out the following test:
[46.] It is clear that three elements must be satisfied before an order can be made setting aside property orders pursuant to s 79A(1)(d). First, there must be circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child. Secondly, it must be demonstrated that the applicant (not the child) will suffer hardship if the court does not vary the order or set the order aside and make another order in substitution of the order. Thirdly, what might be described as a further discretionary element, that is, the court may vary the order if it considers appropriate and make another order under s 79 in substitution for the order so set aside.
For the purposes of sec 90K(1), it would be useful to adopt the test in the following terms:
a)There must be circumstances that have arisen since the making of the Binding Financial Agreement, being circumstances of a material nature relating to the care, welfare and development of a child of the marriage;
b)It must be demonstrated that the child or the applicant, if she has caring responsibility for the child, will suffer hardship if the court does not set the agreement aside;
c)The court may set the agreement aside if it considers it appropriate and make such orders under sec 90K(3) as it deems appropriate.
In relation to the first element, it is clear that the court must substitute the broader standard of sec 90K(1)(d) for the narrower sec 79A(1)(d) and be satisfied that that a material change in circumstances has occurred, being circumstances relating to the care, welfare and development of a child of the marriage.
There is no definition, in sec 4 of the Act, of the term “material change”, so it is necessary to look beyond the Act for clarification. The term “material”, according to Butterworths Legal Dictionary, is defined as being “important, essential or relevant”; while “material alteration” is defined as being “a substantial or significant alteration”.
Given these definitions, we may adapt the first element of the test to suit the different standard outlined in sec 90K. The first element of the test would now be that the court must be satisfied that a substantial, significant and relevant change has occurred, being circumstances relating to the care, welfare and development of a child (of the marriage).
In this instance, the Financial Agreement between the parties was created at a time when the parties were the parents of one child and the prospective parents of a second. No consideration was given in the Agreement to the possibility of the parties having a third child, nor is there any evidence that this possibility was discussed during the negotiations between the parties.
The birth of a third child cannot be dismissed as an insignificant or unsubstantial change in circumstances. There are significant costs associated with an additional child in terms of time and emotional investment as well as the financial cost that would most certainly affect the care, welfare and development of the children of the relationship. The change is certainly relevant to the agreement, as there is specific provision that the wife is to be primarily responsible for the children and she is not permitted by the Agreement to claim any compensation from the husband for that effort. It is open to the Court to find that there has been a material change in circumstances.
It also needs to be remembered in this case that at the time the Agreement was signed the parties only had one child, although the fact of the pregnancy of the wife with the second child was set out in the recitals. The impact upon a parent of having the care of three children as opposed to two is significant in many ways. Not the least are the cost of supporting the child, the effort involved in caring for three young children, the time involved in caring for three, the additional cost of day care if the parent has work outside the house.
The second element of the reformulated test is that the court must determine whether a child of the marriage or the applicant if she has the caring responsibility for the child will suffer hardship if the agreement is not set aside.
In this case I am satisfied that the wife does have caring responsibility for all three children as defined by subsection (2) of sec 90K(1).
In this case the hardship focused upon is that of the wife.
In Garden and Gavin (No. 2) [2010] FamCAFC 125, the Full Court followed the leading case of Simpson and Hamlin (1984) FLC 91-576 in relation to the second element of the test, hardship:
[56.] As their Honours in Simpson and Hamlin said this conclusion is fortified by the operation of s 81 of the Act. At p.79,659 their Honours said:
The importance of bringing an end to litigation remains an important consideration and the remarks of Mason J. remain applicable to para. (d) mutatis mutandis . To paraphrase his Honour's remarks: it is not sufficient that it appears that circumstances have arisen of an exceptional nature resulting in hardship to the applicant, the Court must consider in the exercise of its discretion whether that hardship is of such a serious nature and results in such inequity that it can only be rectified by the extreme step of setting aside or varying an existing order of the Court. We leave aside the question of whether special considerations apply to consent orders. (emphasis added)
The judgment of In the Marriage of Whitford (1979) FLC 90-612 discusses what “hardship” is (in relation to sec 44(3) of the Act and making an application for property orders out of time). This discussion, though on another section of the Act, is relevant in the discussion as it deals with the reopening of financial matters which would otherwise be considered closed:
The loss of the right to institute proceedings is not the hardship, to which the sub-section refers. It is with the consequences of the loss of that right, with which the sub-section is concerned. The requirement, that the court must be satisfied that hardship would be caused if leave were not granted, implies that it must be made to appear to the court that the applicant would probably succeed, if the substantive application were heard on the merits. If there is no real probability of success, then the court cannot be satisfied that hardship would be caused if leave were not granted. Further, the matter with which the court is concerned is not whether the applicant or a child is suffering hardship, but the question is whether the applicant or a child would suffer hardship if leave were not granted. If the probable result of the hearing on the merits is that the hardship is not likely to be alleviated, then the court cannot be satisfied that the applicant or a child would suffer hardship if leave were not granted.
…
Hardship may be caused to an applicant if leave were not granted to institute proceedings, although the applicant is not in necessitous circumstances. Whatever the financial situation of an applicant may be, his or her loss of a prospective entitlement to property including money, or his or her inability to have the financial and property relations of the parties adjusted or resolved, may constitute hardship. In some cases, where a resolution of the property or financial relationships of the parties is desired, it might be, that the applicant would receive no more or even less, than he or she already owns at law or in equity. Nevertheless, hardship might be caused to the applicant if leave were not granted so as to facilitate such resolution. (emphasis added)
In this instance, the evidence of the husband is that he wished to remove from the wife’s reach the W Property. The agreement between the parties is backdated so as to commence before the completion of the purchase of the property, in order to effect that purpose.
The Financial Agreement also provides that the wife will be primarily concerned with home-making and parenting duties while the parties live in their home. In her evidence, the wife says that in conversations relating to the agreement, the husband said “I’ll look after you and the children”. These facts together indicate that the wife and children were financially dependent on the husband.
Nevertheless, the Agreement makes the assumption that in the event of separation, both parties would be able to financially support themselves independent of the other party. The wife is also precluded from compensation for her non-financial contributions throughout the relationship.
There is no provision in the Financial Agreement as to the future support of the children should the parties separate. Paragraphs 33-35 provide that the father would pay “appropriate child support … as required from time to time” and that the parties will make wills in favour of the children. The conclusion which may be drawn from that paragraph in the agreement is the wife would remain the primary care-giver to the children if separation were to occur. That has proved to be the case since the separation.
Given the facts, the Agreement, as it stood in 2001, makes the assumption that if the parties were to separate, each party would be able to financially support themselves, independent of the other party. The Agreement also assumes that the wife would be able to financially support two children in addition to herself with only “appropriate child support … from time to time” from the husband.
Since the formation of the Agreement, the parties’ second and third children have been born. This material change in circumstance, being the birth of the third child in particular, has a major impact on the assumptions made in the Agreement. There is no provision for the birth of future children in the Agreement, so the wife’s financial responsibility under the Agreement grows substantially with the advent of this change, while her entitlement diminished, at least proportionately.
This outcome under the agreement inevitably creates hardship for the wife. The support of three children is a significant financial burden, one which has not been dealt with adequately under the Agreement. Further, the Agreement has denied the wife the ability to seek orders in the Family court under secs 72 and 79.
The husband submits that the wife is fully capable of obtaining full-time employment due to her qualifications and that she enjoys the income obtained from leasing her property in Sydney Suburb A that is not subject to any mortgage. He further submits that he spends time with the children five of every fourteen days and pays child support to the mother. The nature of this child support was never fully disclosed in these proceedings, but has included contributions to schooling fees.
The ability of the wife to support herself has little bearing on the question of whether she would suffer hardship. The hardship of the wife is the consequences flowing to the wife if the Agreement is not set aside. It is not necessary to look at the resources currently at the wife’s disposal, but the effect of denying her access to the Family Court for adjudication of the property matters.
This Agreement has departed from the Act in the manner in which the parties were to divide the assets of the parties under the Agreement. Considerations that are common in deciding property division under secs 72 and 79 of the Act are completely absent in the Agreement. The wife is barred from claiming compensation for non-financial contributions made throughout the marriage, she is not able to claim compensation for future need. Further, the division of the property is not made by pooling assets brought to, and acquired in the course of, the marriage and dividing them equally, but rather divided on a ‘mine’ and ‘yours’ basis.
The husband stated that he wished to maintain control over his largest resource or asset, the J Trust (and the property he bought with the proceeds from that trust), which he brought into the relationship. As the parties had been in a relationship for several years and had started a family together, the husband wanted to prevent the ‘erosion’ of his contribution that was inevitable over the course of the marriage.
If the Agreement is not set aside, the wife would remain in a position in which she is financially responsible for three children under an agreement that does not adequately provide for such a responsibility, as well as her contributions. The terms of the Agreement contain a number of inequities that are increased by the addition of a third child to her financial responsibility.
If the Agreement is set aside, the wife would be able to make an application for orders under secs 72 and 79 of the Act. It is safe to say that the outcome of such an application is likely to be very different to that brought about by the Agreement.
In light of this, I would find that hardship on the part of the wife is established, and that setting the Agreement aside is the only remedy.
The third element is discretionary. Having decided that there is a material change in circumstance and that the change has created serious hardship to the wife.
I consider in all the circumstances that the only just course in this case is to set the agreement aside on the ground set out in sec 90K(1)(d). In such a circumstance the court may make orders under sec 90K(3).
SUPERANNUATION
I turn now to the superannuation provisions of the Agreement. The wife submits that the purported superannuation agreement contained within the Agreement is not a valid agreement.
The Agreement provides (at paragraph 28.2):
If at the date of such a breakdown the relevant legal provisions governing family law matters and superannuation have been amended to allow for equal division of superannuation funds, then both parties must:
a)Obtain written advice from his and her fund manager as to the amount of increase in each fund from the date of this Deed until the date of separation;
b)Obtain written advice from each fund manager as to the net after tax amount applicable to such funds excluding the amounts presently credited;
c) Supply to each other the written evidence referred to in (a) and (b) above;
d)Cause such payment to be made as will ensure that each party has available to him and her one half of the total net increase in each superannuation fund from the amount referred to in each Schedule to the date of separation.
The first question to be answered is whether there is a superannuation agreement that would be a valid agreement under the Act.
The wife submits that the agreement does not fall under the blanket of sec 90MH, being uncertain in its terms. As will be seen later there is also a problem with the commencement date for that section and its non-retrospective operation.
The husband submits that to achieve the parties’ agreement as to a division of the increase in their respective Superannuation Funds, a Splitting Order is not required.
In the husband’s submissions, the Agreement requires that the parties ascertain the exact net increase of each party’s superannuation between the date of the Agreement and the date of separation. Once that amount is ascertained, the parties must then split the increase equally and make available to each other the relevant sums of money to ensure that equal division. The question posed by that submission is whether such action would be permissible pursuant to Commonwealth Superannuation Legislation. The provisions of sec 90MT work as an exception to the provisions of the other Commonwealth Superannuation legislation. Without an order under sec 90MT a trustee of a superannuation fund is not permitted to split superannuation so as to pay it to a third party’s fund.
The Agreement does not require that the funds to be made available be taken from their superannuation funds, the Agreement requires that the parties “[c]ause such payment to be made as will ensure that each party has available to him and her one half of the total net increase in each superannuation fund”.
The Law
Superannuation agreements are dealt with under sec 90MH of the Family Law Act. Prior to that date, there was no legislative framework that dealt with Agreements relating to Superannuation.
Section 90MH relates to superannuation agreements within financial agreements:
90MH Superannuation agreement to be included in financial agreement if about a marriage
A financial agreement under Part VIIIA may include an agreement that deals with superannuation interests of either or both of the spouse parties to the agreement as if those interests were property. It does not matter whether or not the superannuation interests are in existence at the time the agreement is made.
The part of the financial agreement that deals with superannuation interests is a superannuation agreement for the purposes of this Part.
A superannuation agreement has effect only in accordance with this Part. In particular, it cannot be enforced under Part VIIIA.
A superannuation agreement that is included in a financial agreement under section 90B (in contemplation of marriage) has no effect unless and until the spouse parties marry.
In applying sections 90B, 90C and 90D for the purposes of this Division, a superannuation interest of a spouse party to a financial agreement is treated as being acquired at the time when that party first becomes a member of the eligible superannuation plan in respect of that interest.
Section 90MO outlines limits to the Court’s powers to make a Superannuation Agreement:
90MO Limitation on section 79 or 90SM order
A court cannot make an order under section 79 or 90SM with respect to a superannuation interest if:
(a)the superannuation interest is covered by a superannuation agreement that is in force; or
(b) the non-member spouse has served a waiver notice on the trustee under section 90MZA in respect of the interest; or
(c)a payment flag is operating on the superannuation interest.
Note:Under section 90MM, the court can terminate the operation of a payment flag in certain circumstances.
Subsection (1) does not prevent the court taking superannuation interests into account when making an order with respect to other property of the spouses.
Section 90MS is the empowering provision for superannuation orders:
90MS Order under section 79 or 90SM may include orders in relation to superannuation interests
In proceedings under section 79 or 90SM with respect to the property of spouses, the court may, in accordance with this Division, also make orders in relation to superannuation interests of the spouses.
Note 1: Although the orders are made in accordance with this Division, they will be made under either section 79 or 90SM. Therefore they will be generally subject to all the same provisions as other orders made under that section.
Note 2: Sections 71A and 90MO limit the scope of section 79.
Note 3: Subsections 44(5) and (6) and sections 90SB, 90SK and 90MO limit the scope of section 90SM.
A court cannot make an order under section 79 or 90SM in relation to a superannuation interest except in accordance with this Part.
Section 90MT details the types of superannuation orders that the Court may make:
90MT Splitting order
(1) A court, in accordance with section 90MS, may make the following orders in relation to a superannuation interest (other than an unsplittable interest):
(a)if the interest is not a percentage-only interest—an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
(i) the non-member spouse is entitled to be paid the amount (if any) calculated in accordance with the regulations; and
(ii) there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(b)an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
(i) the non-member spouse is entitled to be paid a specified percentage of the splittable payment; and
(ii) there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(c)if the interest is a percentage-only interest—an order to the effect that, whenever a splittable payment becomes payable in respect of the interest:
(i) the non-member spouse is entitled to be paid the amount (if any) calculated in accordance with the regulations by reference to the percentage specified in the order;
(ii) there is a corresponding reduction in the entitlement of the person to whom the splittable payment would have been made but for the order;
(d)such other orders as the court thinks necessary for the enforcement of an order under paragraph (a), (b) or (c).
Before making an order referred to in subsection (1), the court must make a determination under paragraph (a) or (b) as follows:
(a)if the regulations provide for the determination of an amount in relation to the interest, the court must determine the amount in accordance with the regulations;
(b)otherwise, the court must determine the value of the interest by such method as the court considers appropriate.
(2A)The amount determined under paragraph (2)(a) is taken to be the value of the interest.
Regulations for the purposes of paragraph (2)(a) may provide for the amount to be determined wholly or partly by reference to methods or factors that are approved in writing by the Minister for the purposes of the regulations.
Before making an order referred to in paragraph (1)(a), the court must allocate a base amount to the non‑member spouse, not exceeding the value determined under subsection (2).
Note:The base amount is used to calculate the entitlement of the non‑member spouse under the regulations.
Before moving on I set out the provisions of sec 90G(2) which are relevant to this consideration:
(2)A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
Discussion
There are several issues that arise in relation to the purported superannuation agreement, quite separate from the questions relating to the Financial Agreement.
The first question is whether there is a purported superannuation agreement, and whether that agreement is in fact a superannuation agreement under sec 90MH of the Family Law Act. The determination of this question affects not only the validity of the agreement, but affects the remedies the court may employ in order to give effect to the agreement of the parties.
Insofar as the husband’s submission as to the meaning of paragraph 28.2 of the Agreement, I turn to the question of whether the parties purported to create a Superannuation Agreement within the Financial Agreement. The husband submits that the paragraph 28.2 does not purport to split superannuation per se, but rather that paragraph 28.2(d), which sets out that the parties must:
“cause such payments to be made as will ensure that each party has available to him and her one half of the total net increase in each superannuation fund from the amount referred to in each Schedule to the date of separation.”
The husband submits that the wording of this subparagraph does not intend that the parties split superannuation, but that they exchange money to the equivalent value of their superannuation. The wife does not agree, submitting that the parties purported to create a superannuation splitting clause in the Agreement.
It is true that (d) does not explicitly set out that the parties are to draw the funds to make such payments, as envisaged in the subclause, from their superannuation funds. The differing interpretation by the parties, as to the meaning of this section, is evidence that the subclause is open to an uncertainty that requires resolution.
Any ambiguity in the meaning of the subclause need not derail the Agreement in any way. In the event of uncertainty, the court’s approach is to seek to uphold the contract by determining what the unclear statement means. Barwick CJ in his judgment in Upper Hunter County District Council v Australian Chilling and Freezing Co. (1968) 118 CLR 429 (at 436-7) neatly encapsulated this principle:
…a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning … the court … will decide its application
In this instance, it is not necessary to import extrinsic evidence to support the finding that the paragraph purports to be a superannuation splitting agreement. The explicit reference in the paragraph to the prospective amendments to the Family Law Act is, of itself, a powerful indication of the intent of the parties to the Agreement. Further, paragraph 28.2 does not exist in a vacuum. Although it anticipates new legislation, it also makes provision for the possibility that the Amendments to the Family Law Act do not go ahead. Paragraph 28.3 sets out:
If the relevant laws have not been amended so as to facilitate the arrangements set out in the preceding subclause, then both parties must use their best endeavours to bring about the same effect by transfer from one complying fund to another complying fund of the relevant amount referred to in the preceding subclause, or upon the relevant party becoming entitled to draw down the sum referred to from the relevant fund. (Emphasis added)
The intent in subclause 28.3 is quite clear. The subclause seeks to cause the splitting of the parties’ superannuation. It is explicitly stated to be the case. It would therefore be somewhat disingenuous to argue that this intention was not also extant in subclause 28.2 merely because the subclause does not use the specific words. Subclause 28.2 looks forward to the introduction of superannuation splitting laws, subclause 28.3 provides for a situation in the event that those laws are not introduced. The overall intent of the parties is to create a superannuation splitting agreement.
That intent, however, does not mean that a superannuation agreement exists.
Paragraph 28.2 of the Agreement purports to look forward to the enactment of legislation dealing with superannuation in a property settlement, stating
“If at the date of such a breakdown the relevant legal provisions governing family law matters and superannuation have been amended to allow for equal division of superannuation funds”,
The Agreement between the parties was formed on 28 March 2001, over a year before the 28 December 2002 commencement date of Family Law Legislation Amendment (Superannuation) Act 2001 (Act 61 of 2001), which inserted Part VIIIB into the Act to deal with superannuation splitting. Prior to this date there was no set scheme as to how to treat superannuation in a property matter.
It is clear in the Agreement that the solicitors for the parties were aware that Amendments to the Family Law Act in respect of superannuation were in train, and that the parties wished to adopt any such laws which might eventuate.
The transitional provisions of the Amending Act note at sec 5:
(5) Part VIIIB of the Family Law Act does not apply in relation to a financial agreement that was made before the startup time.
The fact of the agreement’s date being over a year before the commencement of the Amending Act, and the transitional provisions contained in the Amending Act, preclude the parties from adopting the provision of sec 90MH into paragraph 28.2 of their agreement. Paragraph 28.2 is contingent on the commencement of the Amending legislation coming into force, so cannot be dealt with outside the terms of the Family Law Legislation Amendment (Superannuation) Act 2001, and as the Amending Act excludes financial agreements made before its start date in 2002, there is consequently no valid superannuation agreement within the terms of the parties’ financial agreement.
The fact of the commencement of the Amending Act further precludes the provisions of paragraph 28.3 being enforced, as it is contingent on the legislation relating to superannuation not coming into force.
In light of this, I find that there is no valid superannuation agreement within the parties’ financial agreement.
I move on to the next question to be addressed in relation to superannuation. Given that there is no valid superannuation agreement within the terms of the Agreement, is the Court able to apply remedies under sec 90G so as to enforce the provisions of the Agreement?
The court has power, under sec 90G(2), to make additional orders so as to give effect to the terms of a financial agreement:
(2)A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
At first glance, this section would appear to give the Court the power to make any orders it thinks necessary. The use of the phrase “such orders … as it thinks necessary” are non-restrictive in their meaning. The only restriction within the subsection, being that the orders are for “the enforcement of a financial agreement that is binding on the parties”.
In this instance, the binding financial agreement includes an invalid superannuation agreement. It would seem that the Court has the ability to make such an order.
Part VIIIA, however, is a part that restricts the operation of other parts of the Family Law Act. The effect of a financial agreement that is binding on the parties is that it ousts the jurisdiction of the court in relation to certain financial matters. Section 71A of the Act provides that:
(1) this part [Part VIII] does not apply to :
(a)financial matters to which a financial agreement that is binding on the parties to the agreement applies; or
(b)financial resources to which a financial agreement that is binding on the parties to the agreement applies.
In essence, a binding financial agreement ousts the jurisdiction of the Court to make orders under Part VIII in relation to financial matters and resources dealt with within the terms of the financial agreement. Thus the court is not precluded from making orders under any other part. Section 90MT appears in Part VIIIB.
The annotation to this section in LexisNexis’ Australian Family Law notes:
Where a binding agreement does not deal comprehensively with the all aspects of the parties’ financial affairs, the court’s powers under Pt VIII remain, but the terms of any such agreement will be relevant to the exercise by the court of its powers under Pt VIII
It is therefore clear that there are certain bars to the financial orders that a court may make in matters where there is a binding financial agreement. Part VIII must be treated with caution when seeking to make orders pursuant to sections in that part where there is binding financial agreement in place.
Superannuation Orders and Agreements are covered under Pt VIIIB of the act, which is not covered by the ousting provision of sec 71A. There is therefore an initial assumption that superannuation orders are not beyond the Court’s powers to make an order pursuant to sec 90MT.
However, the empowering provision for the creation of sec 90MT superannuation orders, sec 90MS, states specifically that superannuation orders fall under the banner of property orders under sec 79, which is limited by the terms of sec 71A. It is therefore necessary to examine whether the court has the power under sec 90G(2) to make a superannuation order that would enforce the terms of the superannuation agreement located within the terms of the Financial Agreement.
Superannuation, following the commencement of the Family Law Legislation Amendment (Superannuation) Act 2001, is now deemed to be property for the purposes of sec 79, and as such the court has the power to make orders in relation to its distribution between parties.
The section which gives the court power to make such orders relating to superannuation may be found at sec 90MS. The section states:
(1)In proceedings under section 79 or 90SM with respect to the property of spouses, the court may, in accordance with this Division, also make orders in relation to superannuation interests of the spouses.
The proceedings before the court at this time are not proceedings under secs 79 or 90SM.
As I have discussed above, the purported superannuation agreement contained within the financial agreement signed by the parties is not valid due to the transitional provisions of the Family Law Legislation Amendment (Superannuation) Act 2001. The superannuation agreement, lacking validity, is unenforceable, and therefore lacks that binding quality which attracts the ousting powers of Pt VIIIA.
The explanatory memorandum of the Family Law Legislation Amendment (Superannuation) Act 2001 sets out the following in relation the Court’s powers to deal with property not dealt with under binding financial agreement. The Explanatory memorandum states:
If an agreement is not binding, a court will be able to deal with the matters with which the agreement deals. A court will be able to deal with any property or financial resources of the parties that has not been dealt with by a binding financial agreement between them.
The superannuation is not “property” dealt with under the Agreement. There is no valid superannuation agreement. The Court is therefore empowered to deal with the property unencumbered by the terms of sec 71A. However, as seen earlier, the power under sec 90MT can only be exercised when there are proceedings before the court under secs 79 or 90SM. Thus that pathway would appear to be blocked for the court to make the orders which the parties envisaged may be made when the legislation changed to allow “superannuation splitting”.
However, subsection 90G(2) provides the court with a direct power to make orders to enforce the terms of the agreement, in a situation in which, presumably, the terms of an agreement are insufficient to enable the agreement to be enforced otherwise.
The court is empowered by sec 90G(2) to make orders which may be required to give effect to an otherwise valid financial agreement. In the circumstances of this case it is clear what the parties wished to achieve by the agreement so far as superannuation is concerned. It seems to me the court could make an order under sec 90G(2) to give effect to the agreement. Such an order could be a superannuation splitting order.
If I be wrong as to the Court’s power to make such an order with respect to superannuation under sec 90G(2) to enforce paragraph 28.2 by making orders similar to splitting orders, then, there is nothing in the Act or Agreement which would prevent the parties seeking superannuation splitting orders.
If the Court was to consider making a splitting order, in circumstances such as this, it appears to me that the Court’s discretion would be at large again and therefore the making of any splitting order would be subject to the Court’s requirement to make orders which are just and equitable.
Determinations
As can be seen from the above determinations there are many circumstances in which I have considered the agreement should be set aside. I have considered all of the areas of challenge raised by the wife not only as a requirement of this case but also in the hope it might provide assistance to the legal profession who are facing the challenge of seeking to enforce or escape from a Financial Agreement.
Orders of the Court
Orders of the Court will provide for the agreement to be set aside and the matter then to be returned to the docket registrar for directions.
I certify that the preceding four hundred and thirty two (432) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Le Poer Trench
Associate:
Date: 21 December 2011
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