Ruane & Bachmann-Ruane
[2009] FamCA 1101
•20 November 2009
FAMILY COURT OF AUSTRALIA
| RUANE & BACHMANN-RUANE & ANOR | [2009] FamCA 1101 |
| FAMILY LAW – PROPERTY - Financial agreement not binding - Strict compliance with s 90G discussed - Requirement that certificate be signed by an Australian lawyer - Discussion about distinction between recital and operative parts of a financial agreement - Principles of rectification discussed and rejection of the principle of estoppel applying |
| Acts Interpretation Act 1901 (Cth) Family Law Act 1975 (Cth) Judiciary Act 1903 (Cth) Legal Profession Act 2004 (NSW) Legal Profession Act 2007 (Qld) |
| ASIC and Rich and Anor (2003) FLC 93-171 Black and Black (2008) FLC 93-357 Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20 Codelfa Contruction Pty Ltd v State Rail Authority of New South Wales [1982] 56 ALJR 459 Cornall v Nagle [1995] 2 VR 188 Fevia and Carmel-Fevia [2009] FamCA 816 Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143 Kok Hoong v Leong Cheong Kweng Mines Limited [1964] 1 All ER 300 Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 Milne v Attorney-General (Tas) (1956) 95 CLR 460 Murphy v Murphy [2009] FMCAfam 270 O’Loughlin and Ors v Mount and Mount [1998] SASC 6672 Price and Underwood [2008] FamCAFC 46 Thornby v Goldberg (1964) 112 CLR 597 Todd and Todd (No 2) (1976) FLC 92-008 Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 Woodcock (1997) 21 Fam LR 393 |
| APPLICANT: | Mr Ruane |
| RESPONDENT: | Ms Bachmann-Ruane |
| 2ND RESPONDENT: | F Firm |
| FILE NUMBER: | SYC | 1991 | of | 2009 |
| DATE DELIVERED: | 20 November 2009 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 19 August 2009 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Glick QC with Mr Strum |
| SOLICITOR FOR THE APPLICANT: | Taussig Cherrie & Associates |
| COUNSEL FOR THE RESPONDENT: | Mr North SC with Dr Ingleby |
| SOLICITOR FOR THE RESPONDENT: | Gadens Lawyers |
| COUNSEL FOR THE 2ND RESPONDENT: | Ms Colla |
| SOLICITOR FOR THE RESPONDENT: | Wotton Kearney |
Orders
For the purposes of Part VIIIA of the Family Law Act 1975 (Cth), the financial agreement between the parties and dated 20 October 2008 is not binding.
IT IS NOTED that publication of this judgment under the pseudonym Ruane & Bachmann-Ruane is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: SYC 1991 of 2009
| Mr Ruane |
Applicant
And
| Ms Bachmann-Ruane |
Respondent
And
F Firm
2nd Respondent
REASONS FOR JUDGMENT
Mr Ruane (“the husband”) and Ms Bachmann-Ruane (“the wife”) ostensibly concluded the financial arrangements in their marriage by an agreement dated 29 October 2008. Each signed the agreement.
It was clear on the face of the document and by the subsequent actions of each of the parties, the marriage was at an end.
The document dated 29 October 2008 was described as, and endorsed with the words, “financial agreement for the purposes of Part VIIIA of the Family Law Act 1975”. I shall refer to the document as “the financial agreement”.
On 23 June 2009, the husband sought property division orders and an order that the Court declare the financial agreement was not binding for the purposes of the Act.
If such an agreement is binding on the parties, there is no jurisdiction for them to litigate financial issues because of s 71A of the Act.
On 4 August 2009, the wife responded to the husband’s application seeking its dismissal save for orders to enforce the financial agreement’s terms.
In addition to the orders sought against the husband, the wife joined F Firm (“the lawyers”) as a party. The wife’s position concerning the lawyers was to seek damages against them if she was unsuccessful in her claim for orders against the husband.
It was common ground that the lawyers drew the financial agreement.
The husband asserted and submitted that the lawyers acted for both he and the wife in relation to “asset protection”. It is not clear from the wife’s material just what her position was concerning the lawyers’ role. The wife maintains legal professional privilege. Her submission about the use to which the husband put the financial agreement is a matter of some conjecture.
Whilst there are a number of issues in this case to which I shall refer, the main questions for the determination are as follows:
1.If the statutory requirements of Part VIIIA must be strictly followed:
(a)does it matter that some requirements are set out, mentioned or detailed in, recital clauses rather than what are traditionally known as “operative clauses”?
In my view, No
(b)Does it matter that the precise language of the various sections in Part VIIIA is not used?
In my view, No
(c)Does it matter that the references to specific or particular sections are not used in the operative clauses?
In my view, No
(d)Does it matter that:
i.the certificate annexed to the agreement refers to “advice independent of” as distinct from “independent advice”?
In my view, No
ii.the said certificate is signed by a legal practitioner who is not an Australian legal practitioner?
In my view, Yes
2.If the financial agreement purports to be a financial agreement for the purposes of the Act, is there a distinction between a valid financial agreement and one that is binding?
In my view, No
3.If there is a dispute about whether a financial agreement is binding, is it simply sufficient to resort to the various statutory requirements of Part VIIIA as some sort of check-list?
In my view, No: Resort must be had also to s 90KA and the principles of contract law
4.Despite a finding that there is a flaw in the fulfilment of the requirements to make a financial agreement binding, can a party endeavouring to maintain the validity and enforceability of the agreement resort to principles of estoppel to prevent the other party withdrawing from the agreement?
In my view, No
Conclusion as to the financial agreement
Because of the strict requirements of the Act, in my view, the agreement dated 29 October 2008 is not binding for the purposes of s 90G such as would oust the jurisdiction of the Court.
The proceedings
The various disputes proceeded predominantly by way of written submissions although I also heard some argument. Whilst waiting for the written submissions, Young J heard argument about the sale of one of the properties and made orders about removal of a caveat and the dispersal of the sale proceeds. Those issues were determined on an urgent basis.
There was also an argument about whether any issue could be determined “on the papers” or whether they required a contested hearing.
The husband’s argument about the hearing was that the dispute could and should be determined on the face of the financial agreement; it either complied with the Act or it did not.
The wife’s argument was that save for one issue (the question of the certificate signed by the legal practitioner), matters could only be determined after a contested hearing.
The lawyers’ argument was that all that the wife had to do was to show an arguable case (to show that the financial agreement was binding) in fact or in law to resist the claim for summary relief sought by the husband.
I accept the husband’s submission but only in respect of the matters which can be clearly determined on the documents. For my purposes, the matter can be determined on the uncontroversial facts.
Background facts
The background facts for the purposes of this initial dispute are largely irrelevant save as to jurisdiction. The parties married in 1990, separated in 2006, have now divorced and there are no children of their union. The husband is a 43 year old developer and the wife is a 40 year old manager.
The financial agreement
The following are the “recital” features of the financial agreement:
1. It is described as a “financial agreement”;
2. It was “made” on 29 October 2008;
3. It was said to be made pursuant to s 90C;
4.It records under the introduction of “Where”, a variety of facts which might generally be said to be the overview required in the four step process required in Hickey & Hickey & Attorney-General for the Commonwealth of Australia (2003) FLC 93-143;
5.It sets out that the parties and their legal and financial advisers had had negotiations and that they wanted to “crystalise” all financial matters in dispute as a result of which they entered into the agreement “made” under s 90C;
6.Each party acknowledged receiving “separate legal advice” as certified by the certificates annexed to the document;
7.Each acknowledged that they had made adequate provision for the maintenance, education and advancement in life of the other and that neither required the support of an income-tested pension, allowance or benefit;
8.Each referred to their “financial circumstances” and each acknowledged that they “may have” assets and liabilities not intended to be included in the agreement.
In respect of the “operative” features, the financial agreement then goes on to record (quaintly) that “in pursuance of the premises and in order to give effect” to the agreement “so reached”, the parties do “mutually covenant” a number of things. Before turning to those things, it is helpful to look at the parties’ language because in my view, albeit quaintly put, it conveys the clear message as to what the parties had agreed.
“In pursuance of the premises” objectively means “proceeding according to things previously mentioned” which in turn must mean a reliance on the recitals.
“Mutually covenant” objectively means “creating an obligation to do something by each of two or more persons with respect to the other”. See Macquarie Dictionary, 4th edit, 2005).
The financial agreement then provides:
(a) each shall retain their superannuation entitlements;
(b)the husband acknowledges having no interest in real properties in the wife’s name;
(c)(clumsily) the husband was to transfer a European property (or its proceeds of sale) to the wife;
(d)the husband was to transfer to the wife his shareholdings in a variety of entities;
(e)the husband acknowledged the “provisions” of the financial agreement were in satisfaction of any monies said to be owing “from” the wife to him;
(f)the husband was to indemnify the wife in relation to any liability in respect of “the offices” held by him in the entities and in respect of income tax as a consequence of having been a shareholder or director of the companies amongst the entities or “payment” in respect of “income declared or payable to the husband”;
(g)the husband was to indemnify the wife in relation to liabilities of a partnership; and
(h)the parties said each was otherwise entitled to be the sole legal and beneficial owner of all other property (not included in the financial agreement) to the exclusion of the other party.
There then appear two indemnity clauses relating to liabilities “jointly and severally” incurred by the husband (other than those earlier mentioned). In the first, the wife indemnifies the husband for liabilities incurred by her. In the second, the husband indemnifies the wife for liabilities incurred by her. What that all means adds to the confusion.
There is also a clause relating to spousal maintenance.
At the end of the document there is an included execution clause which is preceded by the reference to the parties setting their “seals” to the document. Presumably, this was on the basis that it was to be treated as a deed.
The provisions of Part VIIIA.
A financial agreement is defined by the Act to mean an agreement specifically referred to in s 90B, s 90C or s 90D.
One of the three sections is applicable depending upon the time of the relationship at which the agreement was executed.
One purpose for entering into a financial agreement is to conclude financial arrangements without recourse to the various provisions of Part VIII of the Act. Another purpose is as a financial planning tool to ensure that in the event of a breakdown of a relationship, resort cannot be had to the provisions of Part VIII. This latter purpose is a direct endeavour to exclude the jurisdiction of a court exercising the powers in Part VIII. (See s 71A of the Act).
It is not to the point that the financial agreement purports to oust the jurisdiction of the Court but rather that the compliance with the requirements of the Act gives rise to the ouster of the jurisdiction.
If there is a dispute about whether the jurisdiction is excluded, the Court is obliged to carefully scrutinise what the parties have done. The exclusion is determined by the fulfilment of the statutory requirements.
Strict compliance with the statutory requirements is necessary. (See Black and Black (2008) FLC 93-357).
The statutory requirements for such an agreement where the parties are still married are set out in s 90C. To be a financial agreement for that purpose requires three things:
(a)there must be a written agreement with respect to any (but not necessarily all) of the following:
i.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 parties at the time when the agreement is made, or at a later time and during the marriage, is to be dealt with;
ii.the maintenance of either of them:
·During the marriage; or
·After divorce; or
·Both during the marriage and after divorce.
(b)the parties cannot be parties to any other “binding agreement” with respect to the matters in (a) above; and
(c)the agreement must be expressed to be made under s 90C.
Section 90C permits such an agreement to be with other persons than just the person’s spouse and may contain matters other than just those referred to in (a) above.
There is also a requirement that the financial agreement only becomes operative if one of the parties signs a separation declaration (s 90DA). However, as in this case, upon the parties divorcing, that is no longer an issue.
Submissions
THE RECITALS POINT
The husband argued that strict compliance with the statutory requirements was necessary to oust the Court’s jurisdiction to grant declaratory and adjustive relief. He referred to the requirement that the agreement had to arise out of the breakdown of the marriage as a constituent element or necessary integer. Counsel for the husband pointed to the fact that whilst there was reference to that in the various recitals, the important issues required by the Act were not covered in the operative part. The argument went on to say that recitals could not be deemed to be part of the operative agreement and did not set out or establish the rights and liabilities of the parties except where there was ambiguous language. The husband relied upon Codelfa Contruction Pty Ltd v State Rail Authority of New South Wales (1982) 56 ALJR 459.
The argument of the husband was refuted by counsel for the wife. The wife’s counsel pointed to the Full Court’s decision in Black (supra) where reference was made to recitals being relied upon or at least referred to.
The wife argued that recitals were part of the contract and that the only circumstances where they would have no relevance would be where the operative part of the contract was clear and the recitals were inconsistent with the operative clauses.
In respect of the recital argument, I accept the position of the wife for the reasons set out below.
THE POINT ABOUT THE PURPOSE OF THE FINANCIAL AGREEMENT
Counsel for the husband also pointed to the fact that the unchallenged evidence was that the agreement was entered into not because the marriage had broken down but for asset protection purposes. Whilst that may have been the husband’s evidence, in my view, it is not necessary for the financial agreement to do more than comply with each of the provisions of Part VIIIA. Each party may espouse a different reason for entering into the agreement but it is the compliance with the Act which is important. In this case for reasons set out below I am satisfied that those statutory matters were covered by the language of the financial agreement.
THE POINT ABOUT THE CERTIFICATE OF THE LEGAL PRACTITIONER
The husband’s argument was predominantly about the certificate of advice not being provided by an Australian lawyer. The argument was comprehensively set out in written submissions. In essence, it was argued that because the legal practitioner had no Australian law qualification and no knowledge of Australian law, he could not and did not give any advice of the type required by the Act. To consider that as satisfactory would defeat the purpose of the Act as well as contrary to construction principles used for interpreting legislation. The argument went on to say that the Judiciary Act 1903 (Cth) defined “legal practitioner” and reference could be had to that because the only similar definition in the Family Law Act was in s 4 and that was only inserted in 2006. The wife’s counsel responded by indicating that if the Judiciary Act definition of legal practitioner relied upon by the husband were to apply, parliament would have said so. In my view, notwithstanding the use of different words, the meaning is clear and the person intended to be referred to is someone who fits the description in s 4 of the Family Law Act. My reasons are set out below.
PART VIIIA OF THE ACT
The object of Part VIIIA is not set out in the Act.
Part VIIIA provides opportunities for people to enter into agreements about their financial arrangements before they marry, during their marriage and after they divorce. Sections 90C, 90D and 90E have a consistent provision namely how property and financial resources are to be dealt with. In the first two sections, the trigger for the implementation of the agreement is the breakdown of the marriage. In the third section, obviously, the breakdown of the marriage has already occurred. To ensure the trigger is the conclusion of the marriage in the first two scenarios, s 90DA requires a party to sign a separation declaration averring that separation has occurred and there is no reasonable likelihood of the resumption of cohabitation. That declaration is not necessary in the third scenario because the divorce confirms the conclusion of the marriage. (See s 90EA(1)).
When Part VIIIA is read along side Part VIII, the conclusion is that it is designed as an alternative to the litigious pathway of Part VIII. In addition, whereas Part VIII requires consideration of various factors to determine an outcome, Part VIIIA is about the parties coming to their own resolution.
Despite references in Part VIIIA (and in s 4 of the Act) for the need to establish matters to make the agreement a “financial agreement” (see s 90G) and how courts may intervene to set them aside (s 90K and s 90A), little more is obvious.
The answer lies in s 71A which is in Part VIII. It provides the exclusion of Part VIII to financial matters which are binding on parties because of Part VIIIA. A financial agreement which is binding ousts the jurisdiction of the Court to divide property and resources of the parties under the powers in Part VIII. Notwithstanding a view that Part VIIIA is a provision relating to private contractual law, it, and the issue of the ousting of jurisdiction, has been the subject of judicial comment. In ASIC and Rich and Anor (2003) FLC 93-171 O’Ryan J said:
73.The Family Law Act contains no prescription as to the matters which may be the subject of the contract. Financial agreements do not depend in any way on the powers under s 79. There is no express requirement that the provisions must be just and equitable. Further, in relation to a maintenance agreement under s 87 the Court had to be satisfied that “the provisions of the agreement with respect to financial matters are proper”.[1] However, there is no such requirement in relation to financial agreements. All that is required is that the provisions of s 90G are complied with.
74.Part VIIIA does not operate to give greater or lesser force or effect to the contract except in so far as it authorises that which is legally impermissible namely, in certain circumstances, to contract outside of the operation of Part VIII of the Act. The requirement that a maintenance agreement under s 87 had to be approved by the Court, and the Court satisfied that the provisions with respect to financial matters was proper, reflected important public policy considerations because the effect of the approval was that the agreement thereafter operated in substitution of rights under the Act. This important public policy consideration is not reflected in the provisions relating to financial agreements notwithstanding the effect of s 71A.
i)[1] Family Law Act 1975 (Cth) s 87(3).
In Black and Black (supra) the Full Court looked at the legislative history concerning property division between spouses and noted that parties had traditionally not been able to contract themselves out of the right to institute proceedings except where legislation specifically provided for that. One such example was in s 87 which still required the Court to approve the private arrangement. The Full Court then said:
40.…Care must be taken in interpreting any provision of the Act that has the effect of ousting the jurisdiction of the court. The amendments to the legislation that introduced a regime whereby parties could agree to the ouster of the court’s power to make property adjustment orders reversed a long held principle that such agreements were contrary to public policy.
The court then went on to say:
42.The underlying philosophy that had guided the courts in enunciating that principle was seen to place too many restrictions on the right of parties to arrange their affairs as they saw fit. The compromise reached by the legislature was to permit the parties to oust the court’s jurisdiction to make adjustive orders but only if certain stringent requirements were met.
After examining what had not been done in that particular case to meet all the requirements of Part VIIIA, the Full Court said:
45.…We are of the view that strict compliance with the statutory requirements is necessary to oust the court’s jurisdiction to make adjustive orders under s 79.
The statement of principle in Black and Black (supra) is clear but I do not read their Honours to mean that the document has to have particular style or formality. What their Honours said was that it had to be clear that all of the requirements of the Act had to be satisfied.
Is this a financial agreement?
The first question is whether the financial agreement is a valid, enforceable or effective financial agreement.
Section 90KA importantly provides that when a court is determining the validity of such an agreement it shall apply the principles of law and equity applicable to contracts. That provision therefore gives rise to issues of whether the parties had an agreement in a contractual sense.
Murphy J in Fevia and Carmel-Fevia [2009] FamCA 816 observed:
120.If an agreement purports by its terms to exclude the operation of Part VIII of the Act in respect of the matters the subject of the agreement, there is potential for there to be a collision between the principles of contract and equity applicable to the contract and principles of family law arising under, and from, the Act. The potential for there to be a collision between those principles occurs, though, only where one of the contracting parties asserts that, despite the terms of the contract, the court may make orders pursuant to Part VIII of the Act in respect of matters the subject of the agreement. In that event, the court can make orders if one or more of a number of matters can be established.
In respect to the reference to a collision, such a collision may not be apparent until one of the parties raises the agreement in a court application. That would occur:
(a)where there is a dispute about whether the agreement is a financial agreement. A financial agreement can only bind the parties if it is valid within the meaning of Part VIIIA; or
(b)where there is a need to enforce the provisions of the financial agreement.
For those purposes, the provisions of contract law referred to in s 90KA apply to validity and the principles of equity apply to the issues of enforcement.
In contract law, principles of estoppel arise in relation to the creation of rights where non-contractual promises and representations are made. Those matters are unlikely to arise in an agreement under Part VIIIA because there needs to be a written agreement in the first place. Representations as to what the parties were offering and intending are also catered for in Part VIIIA because of s 90K. That provision presupposes at least an agreement which can then be set aside on all of the bases well-known in contract law such as mistake, misrepresentation, deceptive conduct, duress, undue influence and unconscionability.
Estoppel is a concept known to the law and s 90KA provides that equity principles are to be applied in determining the enforceability of the agreement. Whether estoppel principles can override the statutory requirements in Part VIIIA is a vexed question. In this case, if there is a failure to strictly comply with a statutory requirement, does estoppel apply to preclude the party asserting the deficiency thereby abandoning the private arrangement? Does s 90KA extend to the principle of rectification so that the deficiency can be rectified? The principle of strict compliance with the statutory provisions does not sit comfortably with the equitable principle that parties to a contract cannot avoid their contractual obligations by claiming they entered the contract under the influence of a mistake. How much more so should they be able to avoid their contractual obligations only because of a statutory condition precedent particularly one which is not been completed, albeit not known to the parties at that time?
Contract principles
A contract is valid if:
(a)agreement is reached based on an offer and an acceptance of the offer;
(b)each party has provided consideration in return for the obligations undertaken by the other;
(c)the parties objectively intend the agreement to create legal relations between them; and
(d)the agreement is complete and certain.
As I indicated above, issues of estoppel can arise in contract cases particularly in circumstances where there are non-contractual promises and representations. However, in most conceivable situations of parties signing a financial agreement for the purposes of Part VIIIA, those situations will not arise. Even if they did, the provisions of s 90K would then arise.
In this case, there is one document and it was signed by both parties. It represents not so much evidence of their respective obligations but rather the obligations themselves in the shadow of an endeavour to exclude the jurisdiction of the Court.
The certainty or completeness of an agreement is a matter of degree. The parties have to agree on all of the essential terms. (See Thornby v Goldberg (1964) 112 CLR 597 at 607). In a financial agreement under s 90C of the Act, certainty and completeness means that there can be no dispute about what the parties expected to happen in the event of breakdown of the relationship. It is hard to imagine any other intention here than to have each party conclude their disputes by reference only to the terms of the agreement.
It is possible for courts construing contracts to imply obligations relating to each step necessary to complete a particular agreement between parties (See Cavallari v Premier Refrigeration Co Pty Ltd (1952) 85 CLR 20 at 27) but there are other times where the complexity of the circumstances would cause a court to decline to imply the terms of a contract as for example, where there is a series of documents said to contain the terms (see Milne v Attorney-General (Tas) (1956) 95 CLR 460).
On the face of this financial agreement, the parties had clearly negotiated (they said so in writing), had provided consideration in return for various obligations and had intended the agreement to create legal relations between them. The question is therefore whether the agreement is complete and certain.
Some uncertainty revolves around the question of the distinction between the “recital” clauses and the “operative” clauses. Both the husband and the wife relied upon Codelfa Constructions Pty Ltd v State Rail Authority of NSW (supra). The issue in that case was whether an implied term could be read into a contract. The construction contract provided that work would be done all night over a period of time and time was of the essence. When injunctions based on noise pollution were granted against the contractor, precluding night work, the company sought to have an implied term read into the contract that completion time would be extended or that additional money should be paid to it under the contract. The High Court of Australia refused to allow the implied term. Mason J (at page 463) said that evidence of surrounding circumstances was admissible to assist in the interpretation of the contract if the language was ambiguous or susceptible of more than one meaning but not where the language was plain. His Honour said that “generally speaking”, facts existing when the contract was made could not be used as an aid to construction of the contract unless they were known to both parties. Brennan J (at page 485) tightened the test and said that the meaning of a written contract could be “illuminated” by evidence of facts to which the written document referred because the language conveyed meaning according to the circumstances in which they were used. His Honour said that the necessity for a term to be implied had to appear from and in, the express terms of the contract not from the extrinsic circumstances.
In O’Loughlin and Ors v Mount and Mount [1998] SASC 6672 there was an argument about the use to which recital clauses could be put because there was an inconsistency between the recital and what was described as the operative part of the agreement. Lander J held that where the operative part was clear and unambiguous, those words were not to be read down even if inconsistent with the recital clause. That was because the recitals were subordinate to the operative part.
In a financial agreement for the purposes of the Family Law Act, specifically drawn for the purposes of achieving the ouster of jurisdiction offered by s 71A, the distinction between the recital and operative clauses is a distinction without a difference. What must be clear and unambiguous is that the parties objectively intended to oust the jurisdiction and put in place the methodology to resolve their financial affairs should the breakdown of the marriage occur. In Black and Black (supra) the Full Court referred to strict compliance with statutory requirements. The fulfilment of those requirements may be gleaned from the recitals if the whole of the document addresses those matters and is properly executed. (See also ASIC and Rich and Anor (supra))
Thus, if it is clear that the parties intended the document to be a financial agreement then the necessary statutory references required to make it binding can be set out in recital clauses. As a matter of precaution, the operative clauses should make clear that reliance is placed upon the recitals. However, even if the incorporation by reference is not made, a court can still read into the financial agreement, the reliance upon the recitals. The only time that could not occur would be if there was an obvious inconsistency between a recital clause and an operative clause. Such an inconsistency however would have to go towards a failure to incorporate one of the statutory requirements. What the parties also need to do is show that based upon satisfying all of the requirements of the Act, the operative part of the agreement deals with the division of property (and if necessary, spousal maintenance) and that there is an intention to oust the jurisdiction.
This agreement
I have already set out in some detail the features of the document. Its “recitals” clearly record that the parties wanted to rely on s 90C. They record by declaration, that they separated on 30 January 2006. The words used by the parties are inconsistent with the language of the Act namely the “breakdown of the marriage”. Two points need to be made about that however. The first is that the requirement to comply with s 90DA(4) and execute a separation declaration is overcome if the parties divorce. The parties had not divorced at the time of the execution of the agreement but they did so in the Federal Magistrates Court of Australia on 6 August 2009. The apparent purpose of the separation declaration was to ensure that financial agreements were only used between persons whose marriage was genuinely breaking down. The agreement becomes binding for that purpose when the separation declaration is executed or the parties divorce. In this case the latter occurred. The second consideration as to why precise language is not necessary is that the general import of the words used provides no confusion. “Breakdown of the marriage” is generally understood as meaning the destruction of the marital relationship. (See Todd and Todd (No 2) (1976) FLC 92-008 and more recently Price and Underwood [2008] FamCAFC 46). Thus, in respect of the requirement of strict compliance, precise language is not necessary so long as the import is clear. That is the case here.
IS A STRICT USE OF WORDS NECESSARY?
It is not necessary to use the words of the various sections to meet the requirements of Part VIIIA. However, the reader must be satisfied that each provision has been satisfied. One example of that is in s 90G(1) which requires the agreement to contain a certificate “to the effect that” certain advice has been given to each party.
INCORPORATION OF RECITALS IN THIS AGREEMENT
In my view, the words used in the recitals’ clause were part of the financial agreement whether incorporated by reference or simply by explicit indication that the parties had agreed on the purpose behind the formal rearrangement of their financial affairs and the exclusion of the jurisdiction of the court. The rearrangement of the financial affairs is set out in the paragraphs which begin with the words “NOW THIS AGREEMENT WITNESSES”. Those words are an introduction to what the parties agreed were their permanent financial rearrangement. It is clear therefore that the financial agreement is complete and save for the matters about the indemnities earlier mention, certain in contractual terms.
IS THE PURPOSE UNAMBIGUOUS?
Notwithstanding the husband’s assertion that this financial agreement was for asset protection purposes, on its face, the provisions are clear. There was to be a rearrangement of assets on a permanent basis and jurisdiction to otherwise deal with matters was otherwise to be denied save as to enforcement
INDEPENDENT LEGAL ADVICE FROM A LEGAL PRACTITIONER.
It is a requirement of s 90G that, to be binding, the financial agreement must contain:
(a)a statement that before the agreement was signed, independent legal advice was given “from a legal practitioner”; and
(b) an annexure certifying that the advice was so given.
Nothing turns on the phrase independent legal advice. The intention of the Act is clear and the expression of the parties is similarly clear. Both acknowledged in the recitals part of the financial agreement they had received “separate legal advice”. In respect of the statement as required by s 90G, that requirement was fulfilled.
The second of the two requirements is more difficult to satisfy in this case and is ultimately fatal to the financial agreement. The advice so given must be given by a “legal practitioner”. The advice given to the husband and the certificate annexed to the financial agreement was by an English lawyer who is not an Australian legal practitioner.
“Legal practitioner” is not defined in the Act.
Section 15AB of the Acts Interpretation Act 1901 (Cth) enables reference to explanatory memoranda in the event that a court is entitled to refer to extrinsic material. In respect of Part VIIIA, the memoranda stress not only the requirement of the parties to obtain independent advice but also that they have advice so they are aware of the implications of the agreement and not unknowingly enter into an agreement that was not in their best interests.
Section 4 of the Act provides that unless the contrary intention appears in the Act, “lawyer” but not “legal practitioner” is defined to mean a person enrolled as a legal practitioner of:
(a) a federal court; or
(b) the supreme court of a state or territory.
To argue the plain meaning of “legal practitioner” in the context of this Act and in particular Part VIIIA in its wide and generic sense does not sit comfortably with the seriousness of the object of the provision which is to oust jurisdiction.
In addition, the plain reading of s 90G is for parties to obtain legal advice. It does not follow that the advice has to be accepted or followed nor for that matter, for the advice to be correct. The purpose of the provision is to ensure the party understands not only the rearrangement of property and financial resources but also that rights are being affected. Those rights include exclusion of access to the courts subject to certain exceptions. It is this last point that requires consideration about whether the person giving the advice not only is competent in the sense of having access to the relevant knowledge but also accountable as an officer of the court so that the court could be reassured that the advice was directed to the exclusion of access as well as the explanation about the practical side of the settlement itself.
In Murphy v Murphy [2009] FMCAfam 270 Coates FM said legal advice was advice about the law of a particular jurisdiction. His Honour determined that legal practitioner meant a person entitled to practice in the jurisdiction. That would therefore exclude an Australian academic lawyer or an international lawyer who might have had significant experience in dealing with Australian law. This was the argument put by counsel for the third party lawyers. The husband says, adopting the reasoning in Murphy (supra), no other purpose appears on the face of the legislation or by inference, in the agreement. The wife rejects the argument. I think Coates FM was right but there are other matters that assist me.
In Black (supra) at first instance, Benjamin J took the view ultimately rejected by the Full Court that the purposive approach was the correct one. His Honour said in the course of a very reasoned judgment that the advice was intended to come from the broad church of legal practitioners rather than specialists in the family law field. With respect, I agree with his Honour that the intention of s 90G is not directed just to specialist lawyers. However, it is directed to lawyers who are subject to the controls of the state regulatory bodies as well as the courts because of the need to protect the public and ensure accountability. That will be evident from what follows. It seems to me that engaging an English lawyer was therefore not sufficient to met the stringent standards of s 90G.
Sections 55A, 55B and 55D of the Judiciary Act affords entitlement to legal practitioners under federal law to practice in federal courts and in state courts exercising federal jurisdiction. Thus, to so practice, a legal practitioner needs to be enrolled pursuant to the requirements of at least one state or territory. Why should it be necessary for a person contemplating a financial agreement to obtain legal advice from a practitioner entitled to practice in federal law? The answer lies in accountability.
To engage in legal practice which is defined in New South Wales as the practice of law, under the Legal Profession Act 2004 (NSW) a person requires to be a registered practitioner. That legislation sets out that its purpose is to protect the public interest in the proper administration of justice by ensuring that legal work is carried out only by those who are properly qualified to do so as well as to protect clients. Similar legislative provisions apply in Victoria. In Queensland, the Legal Profession Act 2007 (Qld) sets out (s 21) that the main purpose of the Act is achieved by providing that legal practice is engaged in only by persons who are properly qualified and hold a current practising certificate.
The giving of legal advice lies at the very heart of the practice of the law (see Cornall v Nagle [1995] 2 VR 188).
Thus, to achieve the fundamental purpose of Part VIIIA, consistent with the common purpose of various state legislation, the ordinary meaning of “legal practitioner” must be a person who fits the description set out in s 4 of the Family Law Act.
I find that the financial agreement is not valid because the certificate did not comply with s 90G.
The husband also raised the question of whether the wife received independent legal advice before signing the agreement. The certification by Ms A indicates she gave the advice to the wife. The husband said Ms A acted for him in a number of matters. Those were in the past. Albeit unusual, it is conceivable that the advice given to the wife was in fact independent. However, because there is a dispute about the issue and the wife relied upon the privilege to which she is entitled, I make no finding about the matter.
Rectification
Equity would normally intervene in a contractual dispute involving a mistake of fact where parties failed to accurately set out what they intended and order rectification so that the contract expressed a true intention of the parties. (See Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336).
In Black (supra) this issue was not discussed because the Full Court found the agreement itself was flawed by not having a reference to legal advice. In some cases, rectification may very well be open.
Unfortunately, I do not think the rectification principles here can cure the fundamental problem of the inadequacy of the certificate.
To endeavour to rectify the problem, the Court would be obliged to order the husband to get legal advice and have his solicitor provide the certificate. That is not the difficulty here. The Act requires the certificate to set out that the independent legal advice in respect of the matters in the agreement was given before the agreement was signed but it must be also from a legal practitioner.
Estoppel
The wife’s position as I perceive it was that even if there could be seen to be some flaw in the formalities of the financial agreement, equitable principles of estoppel would preclude the husband from endeavouring to walk away from what was the agreement.
In respect of the estoppel point, the wife’s counsel submitted that the equity in favour of the wife derives from avoiding the detriment suffered by her reliance on the assumption that there was a financial agreement that was binding and that she was induced into that assumption by the husband. In reply, the husband asserted that the wife could not rely upon principles of estoppel to contend that the agreement did not constitute a financial agreement that was binding. Both parties referred to Kok Hoong v Leong Cheong Kweng Mines Limited [1964] 1 All ER 300. This was a case about the question of a statute overriding or precluding reliance upon principles of estoppel. The fundamental principle from the law lords was set out by Viscount Radcliffe who said:
In their lordships’ opinion a more direct test to apply in any case such as the present, where the laws of money lending or monetary security are involved, is to ask whether the law that confronts the estoppel can be seen to represent a social policy to which the court must give effect in the interests of the public generally or some section of the public, despite any rules of evidence as between themselves that the parties may have created by the conduct or otherwise.
Viscount Radcliffe went on to say:
General social policy does from time to time require the denial of legal validity to certain transactions by certain persons. This may be for their own protection, as in the case of the infant or other category of persons enjoying what is to some extent a protected status, or for the protection of others who may come to be engaged in dealings with them, as, for instance, the creditors of a bankrupt. In all such cases there is no room for the application of another general and familiar principle of a law that a man may, if he wishes, disclaim a statutory provision enacted for his benefit, for what is a man’s benefit and what is for his protection are not synonymous terms. Nor is it open to the court to give its sanction to departures from any law that reflects such policy, even though the party concerned has himself behaved in such a way as would otherwise tie his hands.
Applying the direct test of whether the Family Law Act confronts estoppel, the question depends on whether Part VIIIA is viewed as intended to permit parties to privately contract amongst themselves to finalise their financial relationships with certainty or rather, to specifically oust the jurisdiction of the courts in particular circumstances.
Applying the direct test referred to, the provisions of Part VIIIA do represent a social policy in which the law has required the court to tread carefully and requires strict compliance with its provisions. Nothing that was urged upon me seems to have altered the position outlined by the Full Court in Woodcock (1997) 21 Fam LR 393. Woodcock was a decision of the Full Court (Murray, Baker and Kay JJ). It concerned the fact that parties had agreed upon property settlement and minutes of orders were to be drawn. Those orders were not made. One of the parties then issued proceedings seeking alteration of property interests and spousal maintenance. Frederico J stated a case for the Full Court on the question of whether the doctrinal principle of estoppel could be relied upon. Importantly, the decision of the High Court in Waltons Stores (Interstate) Limited v Maher (1988) 164 CLR 387 was considered. In that decision, a number of principles were clarified about estoppel. However, in contemplating the case stated in Woodcock, the Full Court said that the doctrine did not oust the jurisdiction of the court to make orders under Part VIII of the Act but noted that equitable concepts might operate when determining the various statutory components of Part VIII. Having contemplated the High Court’s decision in Waltons Stores (supra), the decision in Woodcock is a binding authority.
Thus, it may be that in the exercise of the jurisdiction created by Part VIII of the Act, a court would take into account that which the parties agreed in October 2008. However, for the purposes of Part VIIIA, estoppel as a principle cannot apply notwithstanding s 90KA. That is because in respect of Part VIII, the Full Court said that estoppel could not oust the jurisdiction of the court and the same principle must apply in respect of Part VIIIA as it also is a statutory provision which if strictly followed, would oust the jurisdiction of the court.
Accordingly, the wife’s argument that estoppel should deny the husband the right to rely upon the statutory imperfections of the agreement, cannot succeed.
Other matters
In passing, although not relevant to the decision I have to make, counsel for the husband also raised the imperfections in the agreement as drawn concerning spousal maintenance saying that the document did not comply with the provisions of s 90E. Counsel for the wife submitted, in my view correctly, there was no necessity for this issue to be ventilated because there was no spousal maintenance application before the Court. I agree. The question of whether or not a provision in an agreement that provides for “nil” spousal maintenance is for another day.
The husband’s application succeeds and I declare the financial agreement is not binding.
I certify that the preceding Ninety Six (96) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin
Associate:
Date: 20 November 2009
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