Ruzic and Ruzic - [2007] FamCA 473

FAMILY COURT OF AUSTRALIA

RUZIC & RUZIC

[2007] FamCA 473

FAMILY LAW - PROPERTY - Binding financial agreement - Whether second certificate rectified inadvertent non-compliance of first certificate

APPLICANT:

MR RUZIC

RESPONDENT:

MRS RUZIC

FILE NUMBER:

PAF

432

2005

DATE DELIVERED:

1 April 2007

PLACE DELIVERED:

Parramatta

JUDGMENT OF:

STEVENSON J

HEARING DATE:

28 March 2007

REPRESENTATION

COUNSEL FOR THE APPLICANT:

Mr Lethbridge SC,
Mr Macpherson

SOLICITOR FOR THE APPLICANT:

Mr McKay, of Malouf Solicitors

COUNSEL FOR THE RESPONDENT:

Mr Kearney

SOLICITOR FOR THE RESPONDENT:

Mr Cohen of David H Cohen & Co

Orders

That, for the purposes of Part VIIIA of the Family Law Act, a binding financial agreement dated 27 February 2006 exists between the parties.

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAF 432 of 2005

MR RUZIC

Applicant

And

MRS RUZIC

Respondent

REASONS FOR JUDGMENT

THE PROCEEDINGS

On 27 February 2006 the parties entered into a written agreement, which was headed “Deed of Financial Agreement Pursuant to Section 90C Family Law Act 1975 (as amended)”. It would appear that the provisions of this agreement have not been carried into effect.
By his Application in a Case filed on 25 September 2006 the applicant, the husband, sought a number of orders including the following:
“That pursuant to Rule 20.02 of the Family Law Rules 2004, that an order be made under paragraph 90KA(c) of the Family Law Act, that the binding financial agreement be enforced as if it were an order of the court.”
By her Response to an Application in a Case filed on 20 November 2006 the respondent, the wife, sought the following orders:
“1.That the Application filed by the applicant husband filed on 25 September 2006 be dismissed.
2.That the binding financial agreement dated 27 February 2006 be set aside.
3. Such further or other orders the court deems fit.”
The proceedings came before me on 28 March 2007. It was agreed that I was to determine only whether the agreement is “binding” on the parties in accordance with section 90G of the Family Law Act.

BACKGROUND

The parties, who are both 41, commenced cohabitation in 1990 and married in November 1990. They separated under one roof in October 2004 and the wife vacated the matrimonial home in January 2005.
There are two children of the marriage:
The elder daughter born in June 1996 (10), and
The younger daughter born in March 2002 (5)
There has been litigation in relation to parenting arrangements for the children, including proceedings in the United Kingdom pursuant to the Hague Convention. It is not necessary that I canvass this aspect of the history between the parties for present purposes.
On 27 February 2006, when the parties entered into the agreement which is the subject of the present dispute, they were represented respectively by Mr Damien McKay and Mr David Cohen. Each of the solicitors signed a certificate in the following terms:
“I, --- of ---, [Solicitor], hereby certify that in relation to an agreement in writing proposed to be entered into between [the parties]. I advised [the husband]/[wife] independently of the other party and before the time at which my client signed the agreement as to the following matters:
1.The effect of the agreement on the rights of the parties to apply for an order under section 90C of the Family Law Act 1975;
2.Whether or not, at that time, it was prudent for my client to enter into the agreement;
3.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.
The events which occurred after the signing of the agreement are set out in the affidavit of Mr McKay sworn on 28 March 2007. In brief, Mr McKay said that the precedent certificate on his firm’s computer software system was designed to comply with the provisions of the 2000 form of the legislation relating to binding financial agreements. This precedent did not meet the requirements of the Act as amended by the 2003 legislation.
This defect came to Mr McKay’s attention when judgment in a matter of J & J was delivered by Collier J on 29 March 2006. Mr McKay was the solicitor for the wife in that case, which dealt with an issue as to whether a written agreement was a binding financial agreement for the purposes of the Act.
Mr McKay received a copy of the judgment in J & J on about 5 April 2006 and he then wrote to Mr Cohen. On 7 April 2006 Mr McKay forwarded to Mr Cohen a fresh certificate in a form which complied with the provisions of the 2003 legislation. Mr Cohen signed the new certificate and Mr McKay substituted the second certificates for the originals on the agreement. The later certificates were each dated 22 February 2006, which was the date upon which the parties signed the agreement.

THE SUBMISSIONS ON BEHALF OF THE APPLICANT, THE HUSBAND

The submissions on behalf of the applicant were succinctly set out in a written document prepared by Senior Counsel and Junior Counsel, in the following terms:
“The relevant agreement complies with all requirements necessary under the Act. In particular, section 90C and section 90DA:
·the agreement is written and between the parties to a marriage
·at the time the agreement was entered into, there was no other agreement made pursuant to section 90B or 90D of the Act
·the agreement which is annexure A to the husband’s affidavit affirmed 21 September 2006 is expressed to be made pursuant to section 90C
·paragraph 1.14 of the agreement complies with section 90DA(2) & (3)”
Further:
“The issue involving the certificate is an issue which requires certification that advice in specific terms was given. Provided the agreement annexes the certificate in appropriate terms it is immaterial when that certificate was generated. The issue is that the advice was given and that the solicitors or legal practitioners having given the advice have certified in appropriate terms that they have done so.”
Additionally:
“Even if it were the case that the agreement was defective in that the certification was in terms different from that specifically required under the terms of the Act it would be open to the court to rectify the agreement pursuant to well established equitable principles.”

THE SUBMISSIONS ON BEHALF OF THE RESPONDENT, THE WIFE

The written case outline prepared by counsel for the wife put the following submissions in respect of the section 90G issue:
“The agreement entered into on 27 February 2006 is not a binding financial agreement for the purposes of the Act because:
·the terms of the agreement do not comply with section 90G(1)(b)
·the certificate of advice executed at the time that the agreement was entered into does not comply with section 90G(1)(b)
·the further certificate of advice subsequently executed by the parties’ respective legal representatives does not comply with the requirements of section 90G(1)(c)”
In his oral submissions, counsel for the wife submitted that section 90G(1) “contemplates contemporaneous advice and certification”. It was further submitted that the second certificates cannot form part of the agreement because section 90J prescribes the method of variation or termination of these agreements. Further, it was submitted that the second certificates do not comply with section 90G whether or not they form part of the agreement.

CONSIDERATION

I am much indebted to my colleagues Justice Benjamin, with respect to his judgment in the matter of Black & Black of 15 September 2006, and Justice Collier for his reasons for decision in the matter of J & J dated 29 March 2006. I express my gratitude, in particular, for the extensive research obviously carried out by Justice Benjamin on the subject of statutory interpretation and construction in his reasons for decision in Black & Black.
The agreement between the parties clearly complies with section 90C in that:
·the agreement is written and is between parties to a marriage
·it deals with “how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of them at the time when the agreement is made, or at a later time and during the marriage, is to be dealt with”
·at the time when the agreement was entered into, no other agreement under section 90B, section 90C or section 90D existed
·the agreement was expressed to be made pursuant to section 90C.
The issue is whether the requirements of section 90G are satisfied, with the result that the agreement is a binding financial agreement for the purposes of the Act. The crux of this issue is whether there has been compliance with the provisions of subsections 90G(b) and/or (c). These subsections provide as follows:
“A financial agreement is binding on the parties to the agreement, if, and only if:…..
(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; (i)(i) the advantages and disadvantages, at the time that the advice was provided, to the party making the agreement, 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.”
In his decision in Black & Black, Benjamin J drew attention to the use of the phrase “statement to the effect that …..” each party has independently received advice as specified in section 90G(b). Clause 1.6 of the agreement between the parties provides as follows:
“Both the husband and the wife have had independent legal advice and the opportunity of obtaining independent financial advice under and in relation to their respective rights pursuant to the Family Law Act 1975 and they have been informed of the provisions of section 79 and section 75(2) of the Family Law Act and of the consequences of entering into a financial agreement pursuant to section 90C of the Act and have each sought and received advice from their respective legal advisers of the matters referred to in section 90G of that Act and have relied on that advice in deciding to enter into this deed of agreement.”
It seems to me that this provision of the agreement complies with the requirements of section 90G(1)(b). It is true that there is no specific reference in the agreement either to advice as to the effect on the rights of a party or to the advantages and disadvantages of entering into the agreement. There is, however, a specific statement that advice was provided “of the matters referred to in section 90G of the Act”. Section 90G sets out precisely what advice is required to be given independently to each of the parties.
That being so, it seems to me to be immaterial that clause 1.19 does not address fully the requirements of section 90G(1)(b), in terms of the advice which each party must receive prior to the execution of the agreement. The same observation can be made in respect of clauses 19 and 20.
There is no doubt that the original certificates by Mr McKay and Mr Cohen did not comply with the provisions of section 90G(1)(c), with reference back to section 90C(1)(b). I have referred above to the text of the original certificates.
Equally, there is no doubt that the second certificates did comply with the provisions of section 90G. These certificates read as follows:
“I,--- [Legal Practitioner,] of ---, certify that in relation to an agreement in writing proposed to be entered into between [the parties]I advised [the husband] /[wife] (my client)independently of the other party and before my client signed the agreement, of the following matters:
1.the effect of the Agreement on the rights of [the parties];
2.the advantages and disadvantages, at the time that the advice was provided, to her of making the agreement.
Both solicitors dated the second certificates 22 February 2006, which was the date of execution of the agreement by the parties. Mr McKay then substituted the second certificates for the originals as annexures to the agreement. The question is whether this substitution of the certificates has the effect that the agreement is not a binding financial agreement for the purposes of the Act.
Nothing in the Act expressly requires that provision of the necessary advice and certification by the lawyers for the parties must be contemporaneous events. Section 90G requires that such advice be provided before a party signs the agreement “as certified in an annexure to the agreement”. That being so, I am persuaded by the submissions on behalf of the applicant, the husband, that there has been compliance with the provisions of section 90G(1) and the agreement is therefore a binding financial agreement for the purposes of the Act.
If I am wrong in reaching this conclusion, I am also persuaded by the submissions on behalf of the husband as to the availability of the remedy of rectification of the agreement. Section 90KA provides as follows:
“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…..’
(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.”
During submissions I was provided with a copy of the parts of the explanatory memorandum for the Family Law Amendment Bill 2000, which were relevant to binding financial agreements. In particular, my attention was drawn to the following passage:
“The Bill provides for the determination by the court of issues of the validity, enforceability and effect of binding financial agreements. Existing subsection 87(11) makes provision for proceedings on the validity, enforceability and effect of an approved maintenance agreement to be determined according to the principles of law and equity, and similar provision will be made in respect of the new financial agreements. Common law and equitable doctrines of particular relevance to binding financial agreements include mistake, rectification, fraudulent, negligent and innocent misrepresentation, collateral contract, estoppel and damages for breach.”
The following analysis of the law in relation to rectification was set out in the written submissions of senior counsel for the applicant:
“ Rectification
2.1      Even if it were the case that the Agreement was defective in that the certification was in terms different from that specifically required under the terms of the Act it would be open to the Court to rectify the agreement pursuant to well established equitable principles.
2.2      Section 90KA provides in part as follows:
‘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…..’
2.3      The need for rectification will arise where the Court can discern from the document itself and surrounding evidence that ‘something has gone wrong’ which cannot be cured by construction. It follows that the effect of any degree of rectification is necessarily retrospective even if this involves the ex post facto validation of acts otherwise invalid done under the instrument in its original form.
2.4      The Court’s power to rectify mutual mistakes is exercisable notwithstanding the fact that the antecedent agreement may be unenforceable by reason of non-compliance with statutory provisions, for example, which required the contract to be in writing.
2.5      It has also been demonstrated by various cases that it is not necessary that there should have been a concluded antecedent agreement. More recently, His Honour Mr Justice Mason in Maralinga, said as follows:
‘It is now settled that the existence of an antecedent agreement is not essential to the grant of relief by way of rectification. It may be granted in cases in which the instrument sought to be rectified constitutes the only agreement between the parties but does not reflect their common intent.’
2.6      The trend of modern authorities was summarised by Street CJ in Equity in Australasian Performing Rights Assn Ltd v Austarama Television Pty Ltd in the following terms:
‘It seems rather that the true principle involves finding an identical corresponding contractual intention on each side, manifested by some act or conduct from which one can see that the contractual intention of each party met and satisfied that of the other. On such facts there can be seen to exist objectively a consentual relationship between the parties.’”
It is sufficient for me to say that I am persuaded that the original certificates were rectified by the second certificates as annexures to the agreement. I would be less comfortable in reaching this conclusion if the body of the agreement itself did not make it plain that the requisite advice was provided to each party independently, prior to the execution of the agreement.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Stevenson

Associate:

Date: 1 May 2007

IT IS NOTED that this judgment for all publication and reporting purposes be referred to as RUZIC & RUZIC