Saintclaire & Saintclaire
[2013] FamCA 491
•25 June 2013
FAMILY COURT OF AUSTRALIA
| SAINTCLAIRE & SAINTCLAIRE | [2013] FamCA 491 |
| FAMILY LAW – PROPERTY SETTLEMENT –Financial agreement – Where technical defects to agreement and certificate of legal advice – Where financial agreement can be rectified – Where wife established undue influence and unconscionable conduct – Agreement voidable and set aside |
| Family Law Act 1975 (Cth) Part VIII, ss 4, 75(2), 79, 79A, 90B, 90C, 90D, 90G, 90G(1A), 90K, 90KA Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 Property (Relationships) Act 1984 (NSW) |
| Black & Black (2008) 216 FLR 422 Hoult v Hoult (No 2) [2012] FamCA 367 In the Marriage of Whitford (1979) FLC 90-612 Johnson v Buttress (1936) 56 CLR 113 Kostres & Kostres (2009) 42 Fam LR 336 Louth v Diprose (1992) 175 CLR 621 Pascot & Pascot [2011] FamCA 945 Powell v Powell [1900] 1 Ch 243 Pukallus v Cameron (1982) 180 CLR 447 Re Lloyds Bank Limited [1931] 1 CH 289 Senior & Anderson (2011) FLC 93-470 The Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447 Winefield v Clark [2008] NSWSC 882 Hepburn “Principles of Equity and Trusts” Federation Press (4th ed, 2009) |
| APPLICANT: | Ms Saintclaire |
| RESPONDENT: | Mr Saintclaire |
| FILE NUMBER: | SYC | 7614 | of | 2010 |
| DATE DELIVERED: | 25 June 2013 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Ryan J |
| HEARING DATE: | 2 – 4 April 2012 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Nash |
| SOLICITOR FOR THE APPLICANT: | Kelly Hardie Solicitors |
| COUNSEL FOR THE RESPONDENT: | Mr Gould |
| SOLICITOR FOR THE RESPONDENT: | Norwest Family Law |
Orders
The agreement made between the parties on 28 September 2009 is set aside.
Within twenty one (21) days each of the parties is to file and serve a minute of the orders for property settlement they seek.
The parties are directed to attend a conciliation conference as soon as practicable.
Costs are reserved to the s 79 hearing.
That the application in a case filed by Mr Saintclaire on 3 May 2013 and the response to an application in a case filed by Ms Saintclaire on 29 May 2013 are adjourned with liberty to apply on seven (7) days notice following completion of:
(a) the conciliation conference; and
(b)provision of a certificate under section 60I of the Family Law Act 1975 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Saintclaire & Saintclaire has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT SYDNEY |
FILE NUMBER: SYC 7614 of 2010
| Ms Saintclaire |
Applicant
And
| Mr Saintclaire |
Respondent
REASONS FOR JUDGMENT
Introduction
Before the Court is an application concerning the validity of a financial agreement dated 28 September 2009. The issue arises in the context of an application for property settlement pursuant to s 79 of the Family Law Act 1975 (Cth) (“the Act”) brought by Ms Saintclaire (“the wife”). In response to her application, Mr Saintclaire (“the husband”) says notwithstanding a technical error, the financial agreement is binding and jurisdiction to make orders pursuant to s 79 of the Act is ousted. By way of oral application he asked that the Court enforce the financial agreement.
It is asserted by the wife that the financial agreement is vitiated through unconscionable conduct or undue influence by the husband and that it should be set aside. In the event that the Court finds the financial agreement is a binding financial agreement, it is argued by the wife that pursuant to s 90K of the Act, the financial agreement should be set aside. She argues that the financial agreement is voidable and that there has been a material change in circumstances relating to the care, welfare and development of the parties’ two children, such that she will suffer hardship if the financial agreement is not set aside.
It follows that the questions that need to be answered are:
·Is there a financial agreement?
·If that question is answered in the affirmative, should the financial agreement be set aside?
·If that question is answered in the negative, is the financial agreement binding?
·If in order to answer that question in the affirmative the Court is required to exercise its discretion pursuant to s 90G(1A), how do the principles of law and equity apply to it?
·If there is a binding financial agreement should it be enforced?
Where in this judgment reference is made to the parties’ financial agreement it is to be understood that this is reference to what is purported to be a financial agreement.
Background Facts
The wife was born in 1967. She is 46 years old.
The husband was born in 1968. He is 44 years.
In either 2005 or 2006, the parties commenced cohabitation. The wife was employed in the financial services industry earning a good income. The husband was employed in a senior executive role and also earned a good income. He had been previously married and was in the process of finalising a property settlement with his first wife.
The parties’ daughter, L was born in December 2006.
Having taken time off from work following L’s birth, the wife returned to work in early March 2007. Nannies were employed to care for L.
In early 2007 final property settlement orders were made between the husband and his former wife.
On 12 April 2007, the parties entered into a financial agreement (“the 2007 agreement”) pursuant to the Property (Relationships) Act 1984 (NSW). It is set out at annexure “A” to the wife’s affidavit. This is not the subject agreement. The key components of this agreement are:
·all property which the parties owned before the date of execution of the agreement would remain the sole and separate property of that person;
·property acquired during the period of cohabitation registered in a party’s sole name would remain the separate property of that party;
·if during cohabitation the parties purchase real estate together and subsequently separate, the property would be sold with a mechanism for distribution of the sale proceeds by reference to a formula which vary depending upon the amount of time L would live with the wife;
·similar treatment for the disposition of non-real property assets acquired in joint names during cohabitation; and
·a detailed regime for the payment of expenses which included the establishment of a joint bank account into which they would equally contribute for the payment of joint household expenses and all expenses associated with L.
The parties agree that the 2007 agreement was binding and that it operated in substitution of each party’s rights under Part 3 of the Property (Relationships) Act 1984 (NSW) to obtain adjustive property orders or maintenance.
In accordance with the 2007 agreement household budgets were arranged and a joint account was established. Those expenses which were not joint household expenses or expenses in relation to L were dealt with individually. Thus, pursuant to clause 3K of the 2007 agreement, the husband was solely responsible for “his clothes and other personal expenses” and pursuant to clause 4J the wife was responsible for “her clothes and other personal expenses”, private health insurance in her name (4H) and medical, dental, optical and other hospital expenses in her name (4I). Apropos the husband, there were equivalent provisions in the 2007 agreement for him to pay his expenses of similar category.
The parties conducted their financial affairs in accordance with the 2007 agreement albeit, from time to time, the husband assisted the wife with her personal expenses.
On 8 December 2007 the husband purchased a property at E Street, Suburb C. Although the wife said “we” purchased that property, she made no financial contribution to its acquisition. Suburb C became the parties’ home.
Although the wife claims that from about this time she started to struggle to meet her share of the joint expenses as well as her personal expenses this evidence needs to be evaluated in the context of her actual income. For the year ended 30 June 2008 the wife earned $362,244. If during that year the wife struggled, as the husband says, this was caused by personal expenditure, incurred without due regard for the income that remained after she contributed to the agreed joint expenses.
The parties’ daughter, G was born in February 2008.
Following G’s birth the wife took maternity leave until May 2008 and then a further eight weeks leave. This coincided with her suffering post natal depression in relation to which she attended a psychiatrist and took anti-depressant medication.
The wife returned to work fulltime in July 2008. A fulltime nanny (plus two others) was employed to care for the children. When issues arose with the children or the nannies responsibility for the problem fell on the wife.
During the five months the wife was away from work her work in progress was completed by others. Thus, she needed to rebuild. The effect of this was that it would be between 12-18 months before her income (which included bonuses) would possibly reach the same level as she earned prior to the commencement of maternity leave.
However, the wife misstated the details of her salary package. According to her she was on a $60,000 retainer and otherwise paid a commission. A payslip tendered in the husband’s case showed that her retainer was $85,000. The wife’s deteriorating financial position is a significant component of her case. Were it not so, this misstatement might have been inconsequential. Unfortunately it is necessary to observe that her evidence proved to be unreliable on a number of occasions. The nature and number of occasions on which this happened undermines the reliability of aspects of her evidence. However, as will be discussed on one important matter the husband’s evidence was wrong. In short this is not a case in which one party’s uncorroborated evidence can be entirely preferred to the other.
According to the wife, she continued to struggle to meet her obligations pursuant to the 2007 agreement and particularly struggled with her personal expenses. Her credit card expenditure increased, albeit the husband was unaware about the extent of her borrowings.
Contrary to the wife’s evidence that the terms of the second financial agreement “were negotiated over a short period of time between Lexington Law and Norwest Family Law with the initial draft deriving from [the husband’s] legal representative Norwest Family Law” (wife’s affidavit, par 90), both parties retained solicitors approximately seven months before they executed the 2009 agreement.
Essentially, having decided they would marry, the parties agreed to enter into a binding financial agreement pursuant to the Act. It was agreed that the new agreement would be similar to the 2007 agreement but updated to take into account that they were to be married.
Thus, on or about 16 March 2009, the husband contacted his solicitor who he instructed to prepare a new agreement which would exclude the power of court exercising jurisdiction under the Act to make orders between the parties in relation to property settlement and spousal maintenance.
A draft agreement (husband’s affidavit, annexure “B”) was provided electronically to the husband on or about 24 March 2009 which he gave to the wife. That agreement is described as “a financial agreement under Section 90C” of the Act. Attached to the agreement is a solicitor’s certificate which is described as being a certificate to a “Section 90B Binding Financial Agreement”.
A s 90B financial agreement is a financial agreement entered into by people who are contemplating entering into a marriage with each other (s 90B(1)(a)). Section 90C is the provision that deals with financial agreements entered into by parties to a marriage (s 90C(1)(a)). Thus, unless the financial agreement was entered into before the parties were married, the agreement needed to be entered pursuant to s 90C and not s 90B. When the financial agreement was eventually signed, the solicitor’s certificate erroneously referred to s 90B rather than s 90C. There is an issue about whether that error is fatal to the Court finding, that pursuant to s 90G of the Act, the agreement is a binding financial agreement.
Although the wife made no mention of it, she retained a partner at York Family Law to advise and represent her in relation to the completion of the subject financial agreement, which the parties agreed would be binding. Having discussed the matter with the husband, through her solicitor, the wife proposed the following amendments:
·all inheritances and gifts from family are to be excluded from the matrimonial pool of property;
·all assets acquired after the date of marriage form part of the matrimonial pool of assets, with the exception that the wife is entitled to purchase one parcel of real estate of a value not exceeding $500,000 and that that property not be included in the matrimonial pool of assets; and
·clauses 4.8 and 4.9 of the draft financial agreement be removed (husband’s affidavit, annexure “C”).
Clauses 4.8 and 4.9 provided that upon breakdown of the marriage, shared property and any separate property (both terms are defined in the draft agreement) held by the parties as tenants in common would be divided in accordance with their respective share in the asset, liability or resource and, agreement as to the method for realisation and transfer of those interests.
The husband’s solicitors responded to the wife’s solicitors that day. Simply put, the husband agreed to the removal of clauses 4.8 and 4.9 and to the amendment in relation to inheritances. Possible difficulties in relation to the proposal in relation to the purchase of a property in the wife’s name were identified with the wife’s solicitor invited to submit a draft clause proposed to achieve the second amendment.
With their wedding only days away the parties found themselves distracted and in the wife’s case, distressed about the negotiations concerning the financial agreement. Thus, they decided to defer consideration of the financial agreement until after the wedding. The husband instructed his solicitors accordingly and, without further ado, in April 2009, the parties married.
As a consequence of their marriage, the 2007 agreement had no effect.
On 21 October 2008, there was an incident between the parties that distressed the wife as a consequence of which she left with the children. She returned six days later.
There was an ugly domestic violence incident between the parties on 21 May 2009. Although the husband said that this incident occurred in 2008, the wife’s evidence about the date is corroborated by Police records (“exhibit H”). Police were unable to determine which version of the event to accept. Police observed scratch marks on the husband’s face and dirt on the wife’s clothes. These observations are consistent with both parties’ evidence about what occurred. Photographs of the husband’s injuries are in evidence (exhibit “G”). This incident will be discussed later.
Without further involvement by their legal advisors, in June 2009, the parties discussed what they wanted in the financial agreement. The husband remained content with the initial draft. His parents had passed away and he had no expectation of receiving any further inheritance. He understood and respected the wife’s desire to protect any inheritance she would receive from her family and confirmed he was content with her amendment. In relation to the wife’s proposal that a property to the value of $500,000 be purchased in her sole name, the husband told her that in order to do so it would be necessary to reduce spending, it was his expectation that they jointly service any loan raised to acquire the property and, if they separated, they would share the property. In other words he was willing to contribute to the acquisition of a property in her sole name but only on the basis that, should they separate he would receive a share of it.
The husband, in July 2009, instructed his solicitor to prepare a further draft financial agreement with additional terms along the lines of those matters referred to in the paragraph above. A further agreement was duly prepared (husband’s affidavit, annexure “F”) which was provided to the wife’s solicitor on 20 August 2009. Notably, clauses 4.8 and 4.9 remained and special provision was not made in relation to the wife’s potential inheritance or the acquisition of a property in her name. However, the effect of clause 4 was that if a property was acquired in the wife’s sole name (which is what she proposed), then as “separate property” the husband would not be entitled to claim an interest in it. Similarly, in the event she received an inheritance or gift which she retained in her sole name, property of that type would be protected from any claim by the husband.
The wife’s solicitor was unavailable, and thus, she consulted Lexington Law. On 28 August 2009, in accordance with the wife’s instructions, an electronic copy of a revised financial agreement was sent to the husband’s solicitor (husband’s affidavit, annexure “G”). As the wife was to undergo a hysterectomy the following day, she signed this draft agreement. In this draft recitals that concerned premarital intention (recitals H and I) and those which indicated that the deed was intended to exclude the Court’s power to make orders in relation to maintenance, property and financial resources were removed (recitals J – L). However, the amendments did not alter the description of the agreement in recital A as being “a financial agreement under Section 90C” and in recital B that the parties entered into “this Deed under the provisions of Section 90B of the Act”. Putting aside this infelicitous drafting, it was her clear intention that the agreement would be a binding financial agreement but that it would not oust jurisdiction to make an order for was intended to exclude other than in relation to separate property the Court would retain jurisdiction to make orders in relation to spousal maintenance and property settlement.
The definition of “separate property” was changed by deleting clauses 1.1(f)(ii) and 1.1(f)(iii) which were replaced by new similarly numbered clauses. The clauses removed are set out below:
(ii)Real property held by a party as the sole registered proprietor or that part of real property held as registered proprietor as tenant in common with the other party or another person or entity;
(iii)Savings, shares, term deposits or other investments held in the sole name of the party; (husband’s affidavit, annexure “F”)
The clauses which replaced them were:
(i)any property acquired upon sale of any item of property in Annexure A or B to the extent that the item sold contributed to the acquisition of the after acquired property;
(ii)any inter vivos gift, inheritance, or entitlement to a share of a deceased estate; and (husband’s affidavit, annexure “G”)
It can be seen that the wife sought to ensure that any property she acquired by way of inheritance or following disposition of assets identified in annexure “B” would remain hers. In short it was a very different financial agreement to that proposed by the husband.
The solicitor’s certificate attached to this agreement erroneously referred to s 90B.
After the wife was discharged from hospital, without involvement by their solicitors, the parties discussed the amendments suggested by their legal advisors in the various draft agreements. In the meantime, on 8 September 2009, the wife’s solicitor proposed that there be a joint conference on 11 September 2009 to see if an agreement could be reached. It was agreed that the joint conference would take place at the wife’s solicitor’s office on the date nominated.
In the meantime, on 10 September 2009, there were further discussions between the parties about the terms of an agreement. In this discussion the wife explained that her solicitor was concerned about the draft agreement, particularly if upon separation she moved back to Town D with the children. As the wife explained, were she to do this, she would be unable to maintain the same income or support herself. It was for this reason that the wife’s draft agreement (husband’s affidavit, annexure “G”) excluded spousal maintenance. The husband told the wife that he would agree to her requirement that the agreement not cover spousal maintenance.
In this regard there is no doubt that the parties were agreed that in the event they were to separate, if she wanted to the wife could (and made plain that she almost certainly would) move with the children to Town D.
The parties and their lawyers held a joint conference for three hours on 11 September 2009. As well as a round table negotiation at different times, the parties conferred privately with their solicitors following which the conference resumed. During the conference as the points of difference were resolved the wife’s solicitor made amendments to the wife’s draft financial agreement.
Two further draft agreements were provided by the wife’s solicitor to the husband’s solicitor on 11 September 2009. The first was provided electronically at 10.50 am (husband’s affidavit, annexure “H”) and a second at 12.04 pm (husband’s affidavit, annexure “I”). It is the agreement contained in annexure “I” to the husband’s affidavit which reflects the agreement reached at the joint conference.
Notably, it was agreed that the parties would enter into a binding financial agreement in relation to property but not spousal maintenance. The husband’s clause 3, which related to how the parties would share or contribute to joint expenses and living expenses, was omitted. In essence, the result of the parties’ discussions on 10 September 2009 and the outcome of the joint conference was that the draft agreement was significantly amended along the lines proposed by the wife.
Before that agreement was finalised, the wife conferred with her solicitor, as a result of which, on 18 September 2009, an additional term was proposed. Summarised, the wife said she required a cash adjustment of $100,000 which she would use to pay credit card and other debts. As can be seen from the various draft financial agreements presented by her solicitor, nowhere did she disclose credit card debts. It is accepted that until this amendment was proposed by the wife’s solicitor, the husband was unaware of the wife’s credit card liabilities.
For the reasons given at paragraphs 30, 31 and 32 of his affidavit, it is not difficult to understand why the husband was unhappy to discover the wife’s credit card debt. In any event, having been unsuccessful in having the wife produce copies of her credit card statements, he agreed to pay the $100,000. Although the wife said the husband paid $85,000 and not the required $100,000, he produced his Westpac statement (exhibit “F”) which shows that he transferred $100,000. Once again the wife’s evidence proved unreliable. Given her occupation it is troubling that she gave unreliable evidence in relation to a matter which required that she do no more than accurately summarise her own financial records.
As a consequence of this further agreement (the $100,000 payment), the draft settled at the joint conference was further amended. Relevantly, two new recitals were inserted which are set out below:
F.[The husband] acknowledges that [the wife’s] income has been substantially reduced since the parties commenced living together as a result of giving birth to their children and having the prime responsibility as homemaker and parent.
G.In acknowledgement of the reduction in [the wife’s] income as outlined above, [the husband] has transferred to [the wife] the sum of $100,000.00 (husband’s affidavit, annexure “J” [69 of 82])
There is no doubt that the wife’s income had reduced from $362,244 in the financial year ended 30 June 2008 to about $212,215 for the financial year ended 30 June 2009. Although the wife would now cavil with the accuracy of those recitals there is no doubt that she understood the agreement when she signed it. Thus, while the catalyst for her proposal that she receive a payment of $100,000 was to address her credit card debt, the recital would appear to reflect a common understanding that the reason she was indebted was because her income had fallen for which she should be compensated.
The wife signed the financial agreement on 21 September 2009.
The husband signed the financial agreement on 28 September 2009.
Their respective solicitors provided certificates of independent legal advice, both of which are dated on the day their respective clients signed the financial agreement. As was mentioned earlier, both provided certificates referred to s 90B and not s 90C. The certificates describe the agreement as a “Binding Financial Agreement” which is undoubtedly what the parties intended.
In the months that followed, the wife became increasingly unhappy at work. She was no longer provided with an assistant, had no professional support and was increasingly isolated. Without being told that it was so, the wife formed the view that she was being managed out of her position.
Without any pressure from the husband that she resigns, the wife decided to leave and discussed various options with the husband. One of these involved a position with a different employer on a higher base salary and lower incentive component. In the event, within two months of signing the financial agreement the wife resigned.
The husband’s stance was that he wanted the wife to be happy which included her being a fulltime parent if that was what she wanted. The wife decided she would not return to work. However, because the wife no longer worked, the family budget was rearranged. Prior to her resignation, the wife was allocated $5,000 a month for her personal expenses. Following her resignation, her personal budget was reduced by $3,000 per month to $500 per week. The husband paid the balance of the household expenses albeit a budget was set for joint expenditure. On a personal income of $500 per week, not unreasonably the wife decided she had no capacity to save to purchase property, shares and the like in her own name.
So as to secure her financial future, the wife approached people in the wife’s field about their possibly working together. They agreed to establish their own business. This involved the purchase of an existing book of business. The husband loaned the wife $200,000 to fund her one third share of the acquisition costs. The business was acquired in three parts, with the wife (via a corporate trustee) holding 100 of 300 units in a unit trust.
The wife’s role in the business was to service 120 funds and, in the first 12 months, to generate at least $100,000 in new business revenue. Her partners took responsibility for other aspects of the business. Within five years they hoped that the business would be worth $3 million (after payment of all debts including the initial capital). It would then be sold and each partner would thus receive $1 million.
The wife commenced work on 4 July 2010 and received her first salary payment on 4 August 2010. Working three days a week she earned $4,000 per month.
At the wife’s instigation, the parties separated on 3 September 2010.
The wife remained in occupation at Suburb C, albeit in the week after they separated she stayed with her parents in Town D.
Clause 3.11 of the financial agreement provided that if, at separation, the parties lived in a home of which the husband was the sole registered proprietor the wife would vacate the property within five weeks. To activate this clause, notice in accordance with paragraph 1(b) was required.
Notwithstanding that notice was not given, on 11 November 2010, while the wife and children were in Town D for her grandfather’s memorial service, the husband took possession of the home. He offered to pay six months rent on a property for the wife and children in Sydney and was willing to meet half the costs of a nanny. His point being that notwithstanding that he had put her out of the family home, she would be able to remain in Sydney and continue to work. He also offered to buy a property in Sydney in his name in which the wife and children could reside.
Having been told by the wife that she planned to move to Town D with the children, the husband said that when he found Suburb C unattended he assumed she had moved. Thus, he changed the locks and on 12 November 2010 his solicitor wrote to the wife’s solicitor and asked that she nominate a time to collect her furniture and contents and that she not return to the property without the husband’s permission. It is not accepted that the husband believed the wife had moved out. As the solicitor’s letter makes plain, many of her belongings remained and he clearly anticipated that she would return. The most likely scenario is that he saw an opportunity to reclaim which he took.
The wife left the children with her parents in Town D and returned to Sydney to search for accommodation. She found a townhouse in Suburb H. From discussions with the agent the wife understood her prospects of securing a rental property would be enhanced if the husband was a party to the lease. She asked him to co-sign the lease but he refused. There is no evidence that the wife informed the agent that the husband had agreed to pay six months rent and it is inferred she did not. In any event, the wife was unsuccessful in renting that property and the numerous other rental applications made by her failed.
Thus, the wife returned to Town D.
In the following few weeks the wife travelled to Sydney a couple of times for work. She said the children were unhappy about her leaving and her mother was unable to commit to extended care arrangements for the children. Thus, in December 2010, the wife resigned from the business. She received her last payment in the amount of $1,846 from the business on 4 January 2011.
The wife commenced these proceedings on 2 December 2010.
On 24 January 2011, the wife was served with process issued by the husband in the Local Court seeking that she repay him the $200,000 he loaned her to buy into the business.
Interim orders were made on 22 February 2011. Those orders are set out below:
1.That until further order the husband pay maintenance to the wife as follows:
(a)The sum of $777.00 per week to the wife or as she may from time to time in writing direct, the first payment to be made on or before 4.00pm 1 March 2011.
(b)In addition to Order 1(a) the sum of $400.00 per week or such lesser amount for rent to the wife or as she may in writing direct, the first payment to be made on or before 4.00pm seven (7) days after the wife has given the husband written notice of the amount of rent payable by her for premises in [Town D] for her and the two children of the marriage to be or which are specified by the wife.
(c)The sum of $20,000.00 to the wife or as she may in writing direct, payment being made on or before 4.00pm 8 March 2011.
(d)The husband pay or cause to be paid the amount of income tax payable by the wife over and above taxation instalments previously deducted from her salary for the year ended 30 June 2010 upon him being furnished by the wife with a copy of the Notice of Assessment issued by the Australian Taxation Office.
2.That the husband pay to the wife or as she may in writing direct the sum of $20,000.00 by way of interim costs on or before 4.00pm 8 March 2011.
3.That until further order the husband is restrained from selling transferring mortgaging or further encumbering his interest in the property situate at and known as [E Street, Suburb C] (“the former matrimonial home”).
4.That until further order the husband is restrained from molesting abusing harassing or in any other way interfering with the wife.
NOTATIONS:
A.Order 4 is made without admissions.
B.The parties have agreed in relation to provision to the wife of her personal belongings and effects in the former matrimonial home and the property controlled by the husband at [TownW] and the division of the furniture and other contents of each of those properties as well as the manner of delivery to or taking possession by the wife of all such items which are to pass to her.
Final parenting orders were made by consent on 3 April 2012. Those orders are set out below:
PARENTAL RESPONSIBILITY ORDER
1.The Mother and the Father are to have equal shared parental responsibility for the children namely [L] born … December 2006 and [G] born … February 2008 (“the children”).
DAY TO DAY CARE, WELFARE AND DEVELOPMENT
2.The Father has responsibility for decisions as to the children’s day to day care, welfare and development during periods when they are spending time with him and the Mother has that responsibility at all other times.
LIVE WITH ORDER
3.The children are to live with the Mother.
SPEND TIME WITH ORDER
4.The children are to spend time with the Father as agreed but failing agreement as follows:-
4.1 Every third weekend during each school term from Friday after the conclusion of school to 5:00 pm Sunday commencing from the second Friday of the term and alternating accordingly to the end of the term (with the exception of 2012).
4.2 During 2012 as follows:
4.2.129 April 2012, 10 June 2012, 28 July 2012, 2 September 2012, 20 October 2012 and 25 November 2012 from 10:00 am to 4:00 pm with changeovers to occur at [Town D] McDonalds (… Street).
4.2.2From:
4.2.2.118 May 2012 to 21 May 2012
4.2.2.210 August 2012 to 13 August 2012
4.2.2.32 November 2012 to 5 November 2012
4.2.2.413 December to 16 December 2012
4.2.2.526 December 2012 to 4 January 2013
with the Father to give the Mother four (4) weeks notice by way of email or SMS Text as to whether changeover takes place at [Town D] airport or [Town D] McDonalds (… Street) and at a time for changeover which shall not be earlier than the cessation of school at the commencement of the Husband’s time and not later than 6:00 pm at the conclusion of that time.
4.3 From:
4.3.128 June 2012 to 2 July 2012, and
4.3.222 September 2012 to 26 September 2012,
with changeovers to occur at Sydney airport or another mutually agreed venue not later than 12 Noon on the day the children’s time with the father commences and not earlier than 4pm on the day the children’s time with the father concludes with the mother giving the father four weeks notice of her preferred changeover times within those parameters.
4.3 Commencing in 2013 for one half of each school holiday period (excluding December / January Christmas holiday period), being the first half in odd numbered years commencing in the year 2013 and each alternate year thereafter, and the second half in even numbered years commencing in the year 2014 and each alternate year thereafter.
4.4 The “first half” of a school period means from 1pm on the first day following the last day of the school term until 1.00 pm on the Sunday falling closest to the midpoint of the holiday period and the “second half’ of a school holiday period means from 1.00 pm on the Sunday falling closest to the midpoint of the school holiday period until 1.00 pm on the final Saturday of the holiday period.
4.5 From December / January Christmas Holidays 2013 / 2014 from 12 noon Boxing Day for a period of fourteen (14) consecutive days.
4.6 The Father shall not have the children on the weekend which includes Mother’s Day but in substitution the Father will have the children with him on the following weekend at the same times as set out in Order 4.1 (if the time he was to spend with the children falls on Mother’s Day weekend).
4.7 On Father’s Day weekend from Friday after the conclusion of school to 5:00 pm Sunday (if falling on a weekend he is not spending time with the children).
4.8 At such other times as agreed between the parties.
5.The father may at his election reduce the time he spends with the children pursuant to Order 4 by providing the mother with at least four weeks notice of his intention to do so and will spend time with the children in accordance with the notice. For example the father may elect to spend time with the children between 10.00am and 4pm on the Sunday at [Town D] instead of a full weekend if he can’t fly them back to Sydney or may spend one week during the school holidays with them if he cannot organise more leave from work.
TRANSPORTATION
6.That for the purposes of the Father spending time with the children, unless specified herein and with the exception of the time the children are to spend with the father during mid-term holidays, the Mother will deliver the children to the Father and collect the children from the Father at the [Town D] Airport or [Town D] McDonalds (… Street) as the father shall elect by notice to the mother in writing by email or text. If the mother is to deliver the children to the father at [Town D] airport it shall be at a time nominated by him after 4pm on the Friday and provided the father has given the mother the information necessary to do so she will present any luggage for the children to be processed and pick up the boarding passes to enable the children to join the scheduled flight to Sydney. If the mother is to collect the children from the father at [Town D] airport it shall be at a time nominated by the father not later than 6.00pm on the Sunday.
7.For the purpose of the father spending time with the children during mid-term holidays the Mother will deliver the children to the Father and collect the children from the Father at Sydney Airport (Domestic Terminal) or an alternate venue agreed between the parties.
8.In relation to the operation of Order 6 the Father shall meet all associated costs of travel and in relation to Order 7 the Mother shall meet the costs of travel.
COMMUNICATION ORDERS
9.That the Father have electronic communication with the children at all reasonable times by agreement but failing agreement every Sunday and Wednesday at 6:00 pm together with Christmas Day, the children’s birthdays, the father’s birthday and [K]’s birthday, with the Father to initiate the phone call or SKYPE connection to the children and the Mother to have the children present to take the phone call / SKYPE connection and for the purpose of this Order the mother shall do all acts and things necessary to make a Skype connection available to the children.
10.That each party refrain from making critical or derogatory remarks in relation to the other parent in the presence or hearing of the children and that each party do all things necessary to ensure that no third party makes critical comments about the other party in the presence or hearing of the children.
11.That each party advise the other party and keep the other party advised of their current address and contact telephone numbers (including both landline and mobile phone number if applicable) and advise the other party of any changes to these details within seven (7) days of such change occurring.
CONSULTATION ORDERS FOR PEOPLE SHARING PARENTAL RESPONSIBILITY
Medical
12.That during any period referred to in these Orders, in the event of the children being hospitalised or receiving medical attention, the parent spending time with the children shall notify the other parent as soon as practicable after the first contact with either the medical practitioner, medical centre or hospital.
School Information
13.That within fourteen (14) days of the date of these Orders and within fourteen (14) days of the children’s subsequent enrolment at any school, the Mother do all acts and things and give all irrevocable authorities necessary to ensure that whichever school the children may attend from time to time, that school forward directly to the Father copies of all of each child’s school reports and merit cards, any written material pertaining to each child’s academic and extra-curricular activities.
14.That the Mother furnish to the Father within seven (7) days of receipt of same copies of all Order Forms for school photographs.
OTHER ORDERS
15.That the Father agree to follow the direction of the children’s doctor or any other professional which includes naturopaths and dieticians in relation to:
15.1 The children’s medication regime
15.2 The children’s diet (i.e.: the children’s allergies and the foods they should not consume)
16.The parties are to communicate with each other in relation to the children by way of text or email and a “Communication Book” that will travel with the children at all times. This will include all the children’s medical and dietary information.
17.The parties agree that in relation to the transportation of the children they will comply with all regulations / legislative requirements at all times i.e.: providing appropriate car seats for the children whilst in a vehicle, providing life jackets to the children whilst in a boat.
18.When the children’s passports are due for renewal the father shall execute all renewal and relevant forms and return them to the mother within seven days of the mother sending them to him by registered post.
19.The passports will thereafter held by the mother apart from times when that the children may travel overseas with the father at which times the mother shall provide them to the father at least two months prior to the trip and the father shall return the passports within seven days of the conclusion of the trip.
20.Any party proposing to take the children overseas shall provide the other party with at least 2 months notice including an itinerary and contact details during the trip. Neither party shall unreasonably withhold consent for the children to travel overseas with the other party for the purpose of a holiday not exceeding 3 weeks.
21.That the parties both attend the Parenting as Partners Training or equivalent training at a Family Relationship Centre within six (6) months of making of the orders. (original emphasis)
The parties’ divorce became effective in December 2011.
Is there a financial agreement?
The Act draws a distinction between agreements which are financial agreements (s 4, s 90B, s 90C and s 90D) and binding financial agreements (s 90G). This agreement was made pursuant to s 90C.
In order to determine whether a financial agreement is valid, it is necessary to consider s 90KA.
Section s 90KA is set out below:
The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a) subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b) has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c) in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
The first matter that requires consideration is the husband’s claim for rectification. This issue arises because in conflict with recital A that the financial agreement is an agreement entered into pursuant to s 90C, at recital B it is said that the financial agreement is entered into “under the provisions of s 90B.” In other words, the mistake made in the certificates is replicated in one of the two recitals.
Rectification in equity can be used to rectify instruments that purport to record an agreement (contract) so as to reflect the true intention of the parties to it. The point being, that the document contains a mistake such that it does not reflect the true intention of the parties. Pukallus v Cameron (1982) 180 CLR 447. In Senior & Anderson (2011) FLC 93-470, the majority concluded that the certificates of legal advice could not be rectified so as to include the correct section number. There is no doubt that the reference to s 90B in the certificate and recital B is a common mistake and that it was the parties’ mutual intention to enter into an s 90C agreement. Although more may be said about this topic, the effect of the majority decision in Senior & Anderson is that although the financial agreement is capable of rectification, absent the participation of the lawyers, the certificates are not.
If the enquiry into whether there is a valid financial agreement stopped here, the effect of this is that pursuant to s 90C the parties entered into a financial agreement. However, there is much more to this issue.
In relation to s 90KA, the wife relies on the equitable doctrines of undue influence and unconscionable conduct both of which are designed to achieve transactional fairness; that is to overcome the effect of unfair transactions. Undue influence is primarily focused upon the quality of the weaker party’s consent to the transaction rather than the existence of unconscionable conduct by the stronger party. On the other hand unconscionable conduct is primarily focused upon the conduct of the stronger party rather than consent. See Hepburn “Principles of Equity and Trusts” Federation Press (4th ed, 2009).
The wife particularised her claim as follows:
1.1The Wife’s execution of the Agreement was the result of undue influence exerted upon her by the Husband.
Particulars.
i.The Wife had been diagnosed as suffering from post natal depression.
ii.The Wife was in debt.
iii.The Husband was abusive to the Wife.
iv.The Husband was threatening to the Wife.
1.2Further and in the alternative the Wife’s execution of the Agreement was procured by the Husband’s unconscionable conduct towards the Wife.
Particulars.
See ii, iii and iv above. (Exhibit “A”)
A relationship of influence?
Turning then to the wife’s claim of undue influence. Some relationships are presumed to be relationships of influence. The relationship of husband and wife is not one of them. However, even if a relationship is not presumed to be a relationship of influence, a party may nonetheless establish that the relationship is one of influence:
… where one person has assumed a position of ascendancy or influence over the other person or the other person has reposed trust and confidence in the former, and the former has used that relationship to achieve a transaction in which the first person benefits ... (Winefield v Clark [2008] NSWSC 882 at 27 per Barrett J)
Thus rather than presumed undue influence this is proven undue influence, in relation to which, it must be shown that one party had the capacity to influence the other improperly and that this in fact happened as a consequence of which the transaction occurred. Johnson v Buttress (1936) 56 CLR 113 at [134]. In other words, that the transaction (execution of the agreement) is the direct result of undue influence. The third type of undue influence which may be relevant is actual undue influence. In the context of a proved relationship of trust and confidence there is proof of actual pressure exerted on the weaker party during the transaction. Hepburn ibid.
Once it is established that the relationship is one of influence, the stronger or ascendant party carries the onus of establishing that the transaction for his or her benefit was not procured by undue influence. This requires more than merely establishing that the other party knew what he or she was doing. Although that must be established, it must also be shown that the transaction was undertaken free of influence. In this regard the provision of independent legal advice is an important component of so doing. Re Lloyds Bank Limited [1931] 1 CH 289. However, the mere existence of independent legal advice does not establish that the transaction was undertaken free of undue influence. The point being that the same influence that procured the transaction may result in the weaker party failing to act on advice that he or she should not enter into the transaction/agreement. Powell v Powell [1900] 1 Ch 243.
It will be recalled that the parties’ younger daughter was born in February 2008. She was an unsettled baby who suffered from reflux. When at six weeks she commenced formula, the baby developed eczema. This required attendance at an allergy clinic following which G was prescribed special formula. It is the wife’s evidence that by the time G was about six weeks old (April 2008) she was stressed, lost her appetite and “was barely coping with the care of the children and my financial situation”. An additional nanny was employed to look after the children one night a week so that the parties could go out to dinner or the movies and each second Saturday so that they could have extra time together. However the wife remained stressed and she struggled.
On 8 April 2008, the wife consulted her general practitioner who diagnosed her with post natal depression. The wife was referred to a psychiatrist who she consulted immediately and for the following three to four weeks she attended twice a week. Thereafter, the wife attended the psychiatrist weekly for about six months. During that time the wife took antidepressant medication. The husband was aware about the wife’s health issues and indeed, more than once, accompanied her to see her psychiatrist.
As was referred to earlier, the wife did not return to work in early May 2008. Although the wife did not provide evidence from her general practitioner and psychiatrist about her health, her evidence that she felt unable to return to work because she felt depressed is accepted. As the wife explained, “[t]he medication I was taking helped to settle my mood swings and anxiety” and thus she felt able to return to work fulltime in July 2008.
Doing the best than one can with the wife’s evidence, it is inferred that the wife continued to take antidepressant medication until October 2008. That is to say, she stopped taking antidepressant medication about 11 months before the financial agreement was signed. It is inferred that the wife stopped taking antidepressant medication because her post natal depression had resolved.
Turning to the second of the wife’s particulars; namely, that she was in debt and under financial pressure. There is no doubt that in the period leading up to when the financial agreement was signed, the wife was in debt. As earlier referred to, she owed $100,000 on credit cards and other loans which she did not have the capacity to repay. Although she said the husband was aware of her indebtedness, this evidence has not been accepted. However, that the wife maintained that the husband knew she was indebted stands in the way of any notion that this information was withheld out of concern about how he might react. Nonetheless, there is no doubt that the wife felt burdened by the level of her indebtedness and was very worried about how she would ever clear it.
It is for this reason she asked the husband for the $100,000 he transferred to her the day she signed the agreement. In this regard timing is important and the nexus between her concern about her level of debt and the husband’s willingness to give her $100,000 if she signed the financial agreement is obvious. So that it is clear there is no evidence that he offered to pay out her loans if she failed to sign the financial agreement, which offer it is inferred was not made. In short, it is accepted that one of the considerations which influenced the wife to sign the agreement was that she would be able to clear her debts and that unless she signed she was in immediate and significant financial trouble.
It is noteworthy that disclosure of the wife’s indebtedness took place so late. Reference has already been made to there being no reference to this liability in the early drafts of the financial agreement presented by her solicitor. It is inferred that the wife probably withheld this information because she was worried about it and probably confused about how she might deal with it. There can be no doubt that this matter weighed heavily on her.
The particulars in relation to the husband’s behaviour will be dealt with simultaneously. There are two particularly ugly incidents discussed in the wife’s evidence. The first occurred on 21 October 2008. In her affidavit, the wife said she told the husband she was starting to struggle again and that she needed his support. She said “I explained to him the extra time off and the additional medical expenses were causing a financial strain”. An argument followed. The husband is unable to recall what they argued about.
In her oral evidence, the wife expanded on the substance of the argument and said it included how they would go forward with a binding financial agreement. Because the negotiations and discussions in relation to a binding financial agreement were central to this case, if that topic had been a matter under discussion one would have expected to have seen that fact referred to in the wife’s affidavit. Because her affidavit is silent on the point it is not accepted that on this occasion the parties discussed matters connected with a binding financial agreement. It is accepted that they argued about money and that the wife made it plain that she was not coping. In any event, the conversation became heated and they both raised their voices. The husband stood quickly, which at 6ft 3 inches tall, caused the table to tip. The glasses and dinner plates slid off and smashed.
It is the wife’s evidence that before the husband stood up he slammed his fist on the dinner table. She also said that the table tipped over, which the husband denied. After the glasses and dinner plates fell on the floor, the wife said the husband yelled to her “pack your shit and get the fuck out of this house”. The husband denied saying those words. He has a note that the wife wrote that night; it says “pack your shit and get the fuck out of this house”. The wife said that the note records what the husband said and that she left it for him. Although in an attempt to defuse the situation the husband offered to leave and go to a cottage he owned at Town W, the wife rejected his offer and thus at 11.00 pm with it raining heavily, she left with the children and stayed at a hotel. That she did this demonstrates her level of distress about what had occurred and supports her evidence that she felt abused by the husband.
On balance, I am satisfied that the husband did use the words which the wife recorded in her note. The circumstances of the wife’s leaving and that she stayed away for the following days, is more consistent with what she said occurred that night than the less serious version of events given by the husband.
The wife and children returned to the home six days later. During the intervening period the wife’s mother stayed with her and the parties discussed their future. As part of their agreement for the future, the husband said he would reduce his workload, travel less and be more family focussed. Basically take on a more active role in the family and thus alleviate some of the pressure on the wife. Although the wife said that from this point the husband agreed to control their finances, he took financial responsibility for their joint and his personal finances, but the wife had her own income and was responsible for her personal expenses. Her income had fallen and although she would still go on to earn a substantial income that financial year, at this point she was re-establishing herself and probably earning no more than her base salary.
The other incident relied upon by the wife occurred on 21 May 2009, the details of which have already been mentioned. However, the wife acknowledged in cross-examination there was another incident in which she was the physical aggressor and she slapped the husband across the face. He was uninjured.
In any event, returning to the 21 May 2009 incident, it was the parties’ practice that the husband would take L to swimming classes. On this occasion he arrived home late and rushed into the house. The wife said he was angry. He probably was. The wife said that she did not want him to take the child and tried to stop him. Over the wife’s objection, he took the child to the car. The wife followed and while he was putting the child into the car seat, she climbed into the back seat. The husband told the wife to get out and swore at her. When she refused the husband went around to the side of the car where the wife sat and opened her door. He says that she attacked him, and gouged and punched his face. As was mentioned earlier, photographs of his injuries are in evidence. According to the husband, when he pushed the wife away she fell to the ground on the driveway. There is no doubt that the wife ended up on the ground and it is accepted that she suffered bruised ribs as a consequence of which she took a few days off work. For the same reason for about six weeks she took pain medication.
It is the wife’s evidence that the husband flung open the car door, put one hand on her left arm and with the other picked her up by the leg and pulled her out of the car. She says that he threw her across the footpath onto the pavement. She stood up, verbally abused him and he pushed her back to the ground. She said it was when he went to grab her again that she scratched him.
It is agreed that the husband took the child inside and the wife called the police. The police were unable to determine which of them told the truth and no action was taken. Police spoke with the nanny. The nanny did not give evidence in these proceedings. In accordance with police advice, the husband spent the night away from the home. He returned the following day and the parties’ relationship continued.
The wife has established that there were three ugly incidents, two of which occurred within eleven months of when the financial agreement was signed. It is significant that the last incident was only four months before the financial agreement was signed. I do not accept that the husband was mistaken about when that last incident occurred. Rather he tried to persuade me that a much longer period elapsed between this very stressful event and the resumption of negotiations and execution of the financial agreement.
These incidents establish that the parties’ relationship was very volatile and on two occasions there was physical violence. On two of those occasions the wife was very distressed. When the other evidence in relation to the stress she was under, that she had recently recovered from post natal depression and that because of the wife’s distress, the husband called off the negotiations about the financial agreement shortly before their marriage in early April 2009, it is clear that the wife was emotionally vulnerable, vulnerable to influence from the husband who she loved and under a lot of stress.
As it turned out, the husband did not keep his promise to reduce his time away from home, the effect of which was that the wife struggled to balance parenting and work. It is no answer to her dilemma that the children had nannies. While, as the husband said, it was the wife’s choice to take the children to medical specialists and that this could have been undertaken by nannies, the wife’s stance that this was a sort of matter that they as parents should undertake was not unreasonable. That the husband maintained this position reinforces that the wife’s sense that she carried an unfair share of responsibility for the children and that if anyone’s career was to suffer as a consequence, it was hers, was not unreasonable. Nor is it unreasonable that she found this stressful.
It was within weeks of the 21 May 2009 incident that discussions and negotiations in relation to the financial agreement resumed. The history of those negotiations has already been recited to and was discussed at pars [32] to [51]. Of particular relevance to the wife’s stress and vulnerability to undue influence is that she underwent a significant surgical procedure approximately four weeks before the financial agreement was signed and that she was only released from hospital a few days before the round table conference. In short, during this period the wife remained emotionally vulnerable and, having undergone major surgery, she was also physically stressed, more vulnerable and more dependant upon the husband.
This vulnerability was not neutralised by her having legal advice. For example, there is no evidence that her solicitor was aware that she had reasonably recently recovered from post natal depression or the incidents in October 2008 and May 2009. It would appear she withheld from him until the last minute evidence of her indebtedness. It is accepted that the wife was very worried about the future of her marriage and her and the children’s future if she refused to sign a financial agreement which was binding. Given her and the children’s circumstances she had good reason to be concerned and stressed by her situation and the negotiations. In this regard the agreement she signed before she was admitted to hospital reveals the type of financial arrangement she was willing to accept. It is only because of the husband’s determination that they execute a financial agreement that would oust s 79 of the Act that this agreement came into being.
In short, even although the wife was able to negotiate better terms than the husband originally proposed, I am strongly satisfied that during the negotiations that occurred in 2009 and the situation that existed when the agreement was signed, constituted a relationship of undue influence and that this is why the wife signed this financial agreement. As will shortly be discussed there is no doubt that the agreement was to the husband’s advantage and the wife’s disadvantage.
On this basis the agreement is voidable.
Unconscionable conduct?
Although it is unnecessary to discuss the wife’s claim of unconscionable conduct or dealing, it is appropriate to do so. Simply put:
·if a stronger person enters into an improvident transaction with a weaker person who, in relation to the former, is in a position of special disadvantage that affects the weaker person’s ability to protect his or her own interests and:
·the stronger party either knows of the special disadvantage or knows of facts that would lead to constructive knowledge of that special disadvantage; and
·the stronger party takes advantage of the special disadvantage, either actively or by passively allowing the transaction to proceed; then
·the transaction may be set aside for unconscionable dealing or another equitable remedy may be applied. (The Commonwealth Bank of Australia v Amadio (1983) 151 CLR 447 per Gibbs CJ at [459]; Louth v Diprose (1992) 175 CLR 621)
When the facts recited above are considered through the prism of possible unconscionable conduct, there can be little room to doubt that throughout 2009, including when the agreement was signed, the wife was in a position of “special disadvantage” qua the husband. He had an intimate knowledge of the stresses under which she laboured yet he allowed the negotiations to continue and the financial agreement to be signed. There can be no doubt he was correct to discontinue the negotiations shortly before the parties married. However, the judgment he displayed on that occasion failed him when throughout June – September 2009 he continued to press for a binding financial agreement which would disentitle the wife from making a claim for property settlement.
He was in a vastly superior financial position and she was reliant on her being able to re-establish her career balanced with parental responsibilities, an eventual inheritance and him being willing (but not required) to settle property on her. There is no doubt that this transaction should not have proceeded. The wife has established that the husband knew of the facts that put her at a “special disadvantage”, which included her desire to continue the family unit and her love for him.
This financial agreement is tainted by unconscionable dealing.
The advice she received from her solicitor that the financial agreement was to her disadvantage was undoubtedly correct. That this agreement was to the husband’s advantage and the wife’s disadvantage is apparent from its terms. Notwithstanding that he made a far greater initial contribution (approximately $2 million compared to the wife’s $450,000), the far greater wealth he owned when the financial agreement was signed (as evidenced by the schedules attached to agreement), his superior income and income earning capacity, their respective contributions and the application of s 75(2) of the Act would have meant that she was entitled to expect a property settlement greater than is contained in the financial agreement.
There is thus established another basis upon which the agreement is voidable.
The effect of my findings that the financial agreement is vitiated by undue influence and unconscionable conduct is that at equity I would declare that there is no financial agreement. Nonetheless and for an abundance of caution I will address the arguments advanced by the wife that the agreement should be set aside.
Should the financial agreement be set aside?
In the event that the agreement was found to be a financial agreement, the wife argued that pursuant to s 90K it should be set aside. Section 90K is set out below:
(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.
(4) An order under subsection (1) or (3) may, after the death of a party to the proceedings in which the order was made, be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(5) If a party to proceedings under this section dies before the proceedings are completed:
(a) the proceedings may be continued by or against, as the case may be, the legal personal representative of the deceased party and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings; and
(b) if the court is of the opinion:
(i) that it would have exercised its powers under this section if the deceased party had not died; and
(ii) that it is still appropriate to exercise those powers;
the court may make any order that it could have made under subsection (1) or (3); and
(c) an order under paragraph (b) may be enforced on behalf of, or against, as the case may be, the estate of the deceased party.
(6) The court must not make an order under this section if the order would:
(a) result in the acquisition of property from a person otherwise than on just terms; and
(b) be invalid because of paragraph 51(xxxi) of the Constitution.
For this purpose, acquisition of property and just terms have the same meanings as in paragraph 51(xxxi) of the Constitution. (original emphasis)
In this regard the wife relied upon s 90K(1)(b) and (d).
I have already found that the financial agreement is voidable. To the extent it may be necessary to do so, the effect of those findings is that pursuant to s 90K(1)(b) the financial agreement will be set aside.
In the alternative, the wife relied upon s 90K(1)(d). There is no appellate authority in relation to s 90K(1)(d). Both counsel helpfully referred to Pascot & Pascot [2011] FamCA 945 where Le Poer Trench J discussed this provision.
I agree with Le Poer Trench J generally and that the provision is similar to s 79A(1)(d) of the Act, albeit the provision under discussion is not qualified by the word “exceptional” and the change in circumstances need only be “material”. His Honour formulated the test thus:
354.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.
There is no doubt that the wife has caring responsibility for the parties’ two children. As to the words “material change”, at [357], his Honour said that such a change would have to be “…substantial, significant and relevant…”; that is, relevant to the care, welfare and development of a child (of the marriage).
The material change upon which the wife relies is that she now lives in Town D with the children. There is ample evidence to establish that this circumstance was contemplated before the financial agreement was signed. Reference in recital “I” that it was the parties’ intention “… if the parties separate and if, at that time, the parties agree that it is in the children’s best interests for the children to live predominantly with [the wife], [the wife] may relocate outside the Sydney Metropolitan area”. Counsel for the wife submitted that there is a material difference between the possibility the mother would live “outside the Sydney Metropolitan area” and her living with the children in Town D. Self-evidently, Town D is outside the Sydney metropolitan area. It is clear from the recital that it was within the wife’s contemplation that the husband would agree that the children live predominantly with her and, if she chose to, she could live with them outside the Sydney metropolitan area. In this regard, before the financial agreement was signed the wife made it plain that in the event of separation, she would almost certainly move with the children to Town D. That she has done so cannot now be relied upon by her as constituting a material change in circumstances.
Turning then to the issue of hardship. Having referred to In the Marriage of Whitford (1979) FLC 90-612, Le Poer Trench J reasoned that it is the consequence of the loss of the right to seek a remedy under Part VIII of the Act which would otherwise be excluded with which the section is concerned. In this case, because the financial agreement does not cover spousal maintenance, it is the wife’s right to the adjustment of property that is under consideration. Consistent with Whitford, the wife would need to show a reasonable likelihood of success if her property settlement application were heard on the merits, in order to do so.
As has already been discussed there is sufficient evidence to establish that the wife is likely to secure a better outcome than she would achieve were she held to the agreement.
The third element is discretionary. However, because the wife has failed to establish that there is a material change in circumstances, it is unnecessary to consider the exercise of discretion.
Is there a binding financial agreement?
Self evidently the answer to this question is no. However, it is again appropriate to address the arguments advanced on the topic.
For a financial agreement to be a binding financial agreement, compliance with s 90G is required.
Section 90G as it operated on 28 September 2009 is set out below:
(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) the advantages and disadvantages, at the time that the advice was provided, to the party of 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; 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.
…
(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 can be seen that at that time, the requirements for a financial agreement to be binding were:
·the agreement is signed by both parties;
·it contains a statement that each party was provided with independent legal advice as to:
(i)its effect;
(ii)its advantages and disadvantages;
·a certificate signed by the independent legal advisors is annexed;
·the agreement has not been terminated or set aside; and
·a signed original has been provided to one party and a copy to the other.
The parties agree that each received independent legal advice as to the effect of the agreement on his or her respective rights, as well as the advantages and disadvantages, at the time that the advice was provided to him or her, of making the agreement.
The wife’s advice was that the agreement was disadvantageous to her and it was not in her interests that she signs it. The wife understood the advice and the terms of the agreement.
The question which requires consideration is whether the certificate of independent legal advice stands in the way of the financial agreement being a binding financial agreement. The certificate is set out below:
CERTIFICATE UNDER SECTION 90G OF THE FAMILY LAW ACT 1975
I, [name of solicitor] being a solicitor of the High Court of Australia of [name of firm and address of solicitor] and being independently instructed by [the wife] certify the following:
20.This Certificate is an annexure to the Section 90B Binding Financial Agreement entered into between [the husband] and [the wife].
21.I provided my client with independent legal advice prior to entering into this Deed as to the following matters:
(a) the effect of this Deed on the rights of the parties; and
(b)the advantages and disadvantages, at the time that the advice was provided, to my client of making this Deed.
Dated: 21st September 2009
………………………………
Solicitor
(husband’s affidavit, annexure “J” [82 of 82])
But for the reference to s 90B the certificate is in proper form and would comply with s 90G.
In Black & Black (2008) 216 FLR 422, the Full Court held that a financial agreement must strictly comply with s 90G for it to be binding. It follows, that were it not for later amendments to the Act, reference to the wrong section in the certificate of independent legal advice was fatal to the husband’s claim that the agreement was binding.
However, on 4 January 2010, the Act was amended by the Federal Justice System Amendment (Efficiency Measures) Act(No. 1) 2009. These amendments changed s 90G and inserted s 90G(1A) into the Act. It was common ground that the husband was able to rely on these amendments and relevantly, that whether or not the agreement is binding could also be determined by reference to this new s 90G.
In Kostres & Kostres (2009) 42 Fam LR 336 the Full Court explained, at [165] the effect of these amendments as follows:
The amendments were designed to overcome the effect of the Full Court’s decision in Black & Black (2008) FLC 93-357 where the Court applied a strict compliance test with relation to certain technical requirements for binding financial agreements made under the Act. One of 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 circumstances from the time the agreement was made) …
The new s 90G(1) inserted by those amendments is set out below:
(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 both 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.
The new s 90G(1) does not resolve the problem of reference to the wrong section in the certificate. It follows that the financial agreement did not comply with the s 90G as in place when the agreement was signed or newly inserted s 90G.
Section 90G(1A)
However, it is common ground that it is the remedial s 90G(1A) introduced as part of the 2010 amendments that is particularly significant. That provision is set out below:
(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.
(1B) For the purposes of paragraph (1A)(d), a court may make an order declaring that a financial agreement is binding on the parties to the agreement, upon application (the enforcement application) by a spouse party seeking to enforce the agreement.
(1C) To avoid doubt, section 90KA applies in relation to the enforcement application.
(original emphasis)
No argument was advanced against the retrospective application of the section to the financial agreement under consideration. It follows that the effect of these amendments is relevantly, that in relation to the provision of legal advice, the husband needed only to establish that both parties had received independent legal advice on the matters referred to in the section. As was explained earlier, it is agreed that they had. It follows that it does not matter that the certificates referred to the wrong section.
As to the proper interpretation of s 90G(1A)(c), there is a divergence of views about the meaning of the words “unjust and inequitable”. Namely whether it is limited to technical mistakes (per Strickland J in Senior v Anderson) or a more wide ranging provision (per Murphy J in Hoult v Hoult (No 2) [2012] FamCA 367). The paucity of argument on this issue means that it would be inappropriate to express an opinion about this interesting divergence in views.
However, before relief pursuant to s 90G(1A) could be given in favour of the husband, it would be necessary to consider the arguments made by each party in relation to s 90KA. That section brings into play principles of law and equity applicable to determining the validity, enforceability and effect of contracts. Because the wife has been able to establish grounds for equitable relief so as to set the financial agreement aside, then notwithstanding that the technical errors may no longer be fatal, because the financial agreement will be set aside the effect of s 90G(1A)(e) is that relief pursuant to s 90G(1A) would not be available.
Other matters
There remained one aspect of the parenting application which required consideration. Namely, whether the husband should be ordered to fence the property he owns on the J River. The wife’s point being that in order to keep the children safe while they spend time with the husband at this property, fencing was required. For his part the husband said he planned to renovate the property and better fencing would be part of the renovation.
As was made clear during submissions on this topic, the wife failed to establish a proper evidentiary foundation for the order she sought. Simply put, there was no evidence that the husband ignored the children’s safety or that that he could not be trusted to be attentive and act responsibly. At its highest the case for the wife was to the effect that such an order would quell the wife’s anxiety while the children are with their father. Although the family consultant provided her support to this being advantageous for the children, I am not persuaded that it is in the children’s best interests to make an order that would imply it was necessary for an order to be made to ensure that they are safe with their father.
It follows that the order sought by the wife in relation to the fence will not be made.
For these reasons orders will be made as set out at the start of this judgment.
I certify that the preceding one hundred and forty five (145) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Ryan delivered on 25 June 2013.
Associate:
Date: 25 June 2013
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