Saintclaire & Saintclaire
[2015] FamCAFC 245
•21 December 2015
FAMILY COURT OF AUSTRALIA
| SAINTCLAIRE & SAINTCLAIRE | [2015] FamCAFC 245 |
| FAMILY LAW – APPEAL – Property – Binding Financial Agreement – Where the trial judge found that the financial agreement was vitiated by undue influence and tainted by unconscionable conduct – Where the trial judge found that the financial agreement was not binding – Where the trial judge set aside the financial agreement – Where the trial judge confused the principles of undue influence – Where a finding of undue influence was not reasonably open to the trial judge – Where the evidence before the trial judge could not sustain a finding that the parties’ relationship gave rise to a presumption of undue influence – Where no “special disadvantage” existed on the part of the wife – Where the trial judge erred in finding that the parties’ financial agreement was attended either by undue influence or unconscionability – Where the trial judge erred in finding that the financial agreement was not “binding” within the meaning of s 90G of the Family Law Act 1975 (Cth) – Appeal allowed and the trial judge’s orders set aside – Costs certificates granted to both parties. |
| Family Law Act 1975 (Cth) Part VIII, ss 4, 44(3), 71(A), 79, 90B, 90C, 90G, 90K, 94AA(1), 117 Family Law Regulations 1984 Reg 15A |
| Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170 Bruce F McLaren Holdings Pty Ltd & Ors v McLaren (2000) FLC 93-030 |
| APPELLANT: | Mr Saintclaire |
| RESPONDENT: | Ms Saintclaire |
| FILE NUMBER: | SYC | 7614 | of | 2010 |
| APPEAL NUMBER: | EA | 101 | of | 2013 |
| DATE DELIVERED: | 21 December 2015 |
| PLACE DELIVERED: | Brisbane |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Strickland, Murphy & Kent JJ |
| HEARING DATE: | 27 April 2015 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 25 June 2013 |
| LOWER COURT MNC: | [2013] FamCA 491 |
REPRESENTATION
| COUNSEL FOR THE APPELLANT: | Mr Beaumont SC |
| SOLICITOR FOR THE APPELLANT: | Blanchfield Nicholls Partners |
| COUNSEL FOR THE RESPONDENT: | Mr Kearney SC |
| SOLICITOR FOR THE RESPONDENT: | Broun Abrahams Burreket |
Orders
The appellant husband have leave to rely on his supplementary summary of argument filed on 21 April 2015 and his supplementary list of authorities filed on 23 April 2015.
If necessary, leave is granted to the appellant husband to appeal.
The appeal be allowed.
Paragraph 1 of the order made on 25 June 2013 be set aside.
The appellant husband be granted a costs certificate pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 (Cth) in respect of his costs of and incidental to the appeal.
The respondent wife be granted a costs certificate pursuant to s 6 of the Federal Proceedings (Costs) Act 1981 (Cth) in respect of her costs of and incidental to the appeal.
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).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 101 of 2013
File Number: SYC 7614 of 2010
| Mr Saintclaire |
Appellant
And
| Ms Saintclaire |
Respondent
REASONS FOR JUDGMENT
The parties executed a financial agreement on 28 September 2009, some five months subsequent to their wedding. Mr Saintclaire (“the husband”) appeals orders made by Ryan J on 25 June 2013 by which her Honour set aside that financial agreement. Ms Saintclaire (“the wife”) opposes the appeal.
Her Honour found that the parties’ financial agreement was vitiated by undue influence. Her Honour also found that the “…financial agreement is tainted by unconscionable dealing”.[1] In addition her Honour found that the financial agreement was not “binding” by reason of not meeting the requirements of s 90G of the Family Law Act 1975 (Cth) (“the Act”).
[1] [111].
The husband asserts that her Honour “confused the test for actual undue influence in a particular transaction … with the test for whether or not a particular relationship, not presumptively one of influence, is as a matter of fact, one of undue influence…”. Her Honour’s order, it is argued, “…proceeds from [a] fundamental misunderstanding of the correct principle.”[2] It is also contended that the finding of undue influence was not open to her Honour on the evidence before her and that her Honour’s reasons were not adequate to explain her conclusions.
[2] Appellant husband’s Supplementary Outline of Argument, filed 21 April 2015, at [5] - [6].
The husband’s challenge to the finding of unconscionable conduct is also contended to have not been open to her Honour on the evidence before her. Alternatively it is said that her Honour’s reasons are inadequate to explain any such finding.
The separate challenge relating to her Honour’s finding in respect of s 90G asserts that her Honour erred in law in “…finding (if she did so) that the [erroneous] reference to s 90B … in the certificates to the subject agreement resulted in the agreement not complying with s 90G”.
Is Leave to Appeal Required?
If her Honour’s order setting aside the financial agreement is an “interlocutory decree”, it is, in turn, a “prescribed decree” from which leave to appeal is required.[3] The husband’s notice of appeal assumes that leave is required. The written summary of argument drawn by senior counsel on his behalf queries whether this is so.
[3]Family Law Regulations 1984, Reg 15A; the Family Law Act 1975 (Cth) (“the Act”), s 94AA(1).
The test for whether a judgment or order is final or interlocutory is stated as: “Does the judgment or order, as made, finally dispose of the rights of the parties?”[4] In applying that test, the High Court has said that the court should have regard to the “legal rather than practical effect of the judgment”. Expression of the principle is one thing; its application is another. It has been said by the High Court that the question is “productive of much difficulty”.[5]
[4] Gibbs J (as he then was); Mason J agreeing in Licul v Corney (1994) 180 CLR 213.
[5]Carr v Finance Corp of Australia Ltd (1981) 147 CLR 246, at 248 per Gibbs CJ – see also discussion of relevant principles by this Court in Bruce F McLaren Holdings Pty Ltd & Ors v McLaren (2000) FLC 93-030.
An example of that difficulty in this court arises in relation to s 44(3) of the Act. Existing authority is to the effect that an order granting leave under that sub-section is interlocutory, but some commentary at least, suggests that an order refusing leave may be final.[6] An analogous dichotomy might be argued as applicable to orders that set aside, or hold binding, a financial agreement. The legal effect of an order setting aside a financial agreement is to allow the court to exercise its power to make orders in respect of the matters contained within the agreement and might, as a consequence, be argued to be interlocutory. If the agreement is binding, the court has no such powers,[7] and a judgment or order to that effect may be argued to be final.
[6]As to the former, see In the Marriage of Emamy and Marino (1994) FLC 92-487 (Kay J dissenting); as to the latter, see Chisholm, R; Christie, S; Kearney, J, Annotated Family Law Legislation, 3rd Ed, Lexis Nexis, 2015, 972.
[7] The Act, s 71A.
However, “proceedings with respect to a financial agreement” are a separate matrimonial cause to “proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them…”.[8] The trial judge’s orders can be seen to finally determine the parties’ rights with respect to their financial agreement, even if the consequence of those orders is that proceedings under Part VIII can be brought. As a consequence, we incline to the view that her Honour’s order is a final order and that leave to appeal is not required.
[8] The Act, s 4 – definition of “Matrimonial Cause”.
If we are wrong in that conclusion, we are nevertheless of the view that, as was effectively properly conceded before us, the appeal involves questions of principle and, as will emerge, the order visits a substantial injustice on the husband.[9] Accordingly, if, contrary to our conclusion, leave is required, we are in any event of the view that it ought be given.
[9]See Rutherford and Rutherford (1991) FLC 92-255, where this Court applied Adam P Brown Male Fashions Pty Ltd v Phillip Morris Inc (1981) 148 CLR 170.
Relevant Principles
Given that the primary thrust of the challenges to her Honour’s order involves an assertion that her Honour erred in identifying and/or applying the relevant principles, we consider it important that we set out what we consider the applicable principles to be.
Undue Influence
The law distinguishes between “actual undue influence” and “presumed undue influence”. The former arises where “undue influence is proved as a fact”.[10] The husband’s forensic task is there directed to the words and actions said to infect the agreement or transaction: “facts must be proved showing that the transaction was the outcome of such an actual influence over the mind of the alienor that it cannot be considered his free act”.[11]
[10] Johnson v Buttress (1936) 56 CLR 113, at 119 per Latham CJ.
[11] Ibid, at 134 per Dixon J.
The suborning of a party’s free will is crucial. Negotiations for any form of agreement or transaction, be they commercial or between marriage partners, are frequently attended by a plethora of different pressures and influences. Plainly enough, not all such pressures and influences will attract the intervention of equity; were it otherwise finalised agreements could never be much more than temporary or provisional.
It is unsurprising, then, that equity requires more to be established than that a party was under pressure or subject to influences in entering into the agreement. What is required is proof of “influence over the mind” of the other party such that their actions in executing the agreement or entering the transaction cannot be viewed as their free and independent act: some “importunity and pressure, to the point at which the plaintiff can no longer exercise an independent will…” is required.[12] By way of contrast, it has been said that “the fact that … choices apparently open are unpalatable does not indicate that [the] will was overborne”.[13]
[12] G E Dal Pont, Equity and Trusts in Australia, 5th ed, Thomson Reuters, 2011, [7.49].
[13] Frederick v State of South Australia (2006) 94 SASR 545.
Presumed undue influence on the other hand does not depend upon proof of facts in respect of the transaction. Rather, its application derives from proof of the nature of the relationship between the parties to the transaction or agreement. In some recognised categories of relationships, all that must be proved is the existence of the relationship itself for undue influence to be presumed, unless rebutted. The relationship of solicitor and client is one such relationship; the relationship of husband and wife is not.[14] Outside of those recognised relationships, including in the case of transactions between husband and wife, more about the relationship must be proved.
[14] Yerkey v Jones (1939) 63 CLR 649, 675.
What must be proved has been described in various ways including, for example, that a party “is in a position to exercise dominion over [the other party] by reason of the trust and confidence reposed in [the first party]”.[15] In Tulloch (deceased) v Braybon & Ors (No 2),[16] Brereton J undertook an analysis of decisions in which the requisite indicia of the relationship were described,[17] and concluded:
In my opinion, these authorities show that more than mere confidence and reciprocal influence is required to establish a “special relationship of influence” from the existence of which undue influence will be presumed unless rebutted; for a relationship to be brought within the doctrine, it must go beyond one of mere confidence and influence to one involving dominion or ascendancy by one over the will of the other, and correlatively dependence and subjection on the part of the other…[18]
[15] Johnson, above, per Latham CJ op cit.
[16] [2010] NSWSC 650, at [37] – [51].
[17]Including: Dent v Bennett (1939) 41 ER 105 (referred to by Latham CJ in Johnson, above, at 119); Johnson, above, at 134 per Dixon J; Jenyns v Public Curator (Qld) (1953) 90 CLR 113, at 133; Bester v Perpetual Trustee Company Ltd [1970] 3 NSWR 30, at 34 per Street J; Quek v Beggs (1990) 5 BPR 11,761, at 11,765; Watkins v Combes (1922) 30 CLR 180.
[18] [51].
By way of contrast, a presumptive relationship is not raised by “…the mere fact that one party to a transaction who is of full age and apparent competency reposed confidence in, or was subject to the influence of, the other party… [.] Observations which go to that extent are too broad”.[19]
[19] Watkins v Combes (above) per Isaacs J, quoted in Tulloch (above), at [50] by Brereton J.
His Honour also observed:
A husband and a wife obviously are vis-a-vis each other in positions of trust and confidence and influence, but one does not ordinarily have over the other such authority as to make such relationships a presumed relationship of influence, nor (without more) a special relationship of influence. It is where the relationship is such that one party is seen or supposed to be in some way beholden, obliged, or disadvantaged in relation to the other, that such relationships are presumed or can be proved, and dominion or ascendancy is at least usually an important factor.[20]
[20] Tulloch (above), at [51] per Brereton J.
If “particular aspects of a relationship cause undue influence to be inferred”,[21] a presumption is raised which requires rebuttal by the other party. The receipt of independent legal advice is an important consideration in a court assessing if the presumption is rebutted but is not determinative of that issue. What is crucial is establishing that the party is “…‘emancipated’ from that influence”.[22]
[21]Meagher, Heydon, Leeming, Equity Doctrines and Remedies, 4th Ed, Lexis Nexis Butterworths, 2002, [15-005].
[22] Ibid, at [15-125].
Unconscionability
Equity might set aside a transaction or agreement:
…whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired faculties, financial need or other circumstances affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity thus placed in his hands.[23]
[23] Blomley v Ryan (1956) 99 CLR 362, at 415 per Kitto J.
Importantly:
Mason J in Amadio’s case … was at pains to emphasise that the mere circumstance that there was some difference in the bargaining power of the parties was not enough; “the disabling condition or circumstance [must be] one which seriously affects the ability of the innocent party to make a judgment as to his own best interests”.[24]
[24]Equity Doctrines and Remedies (above), at [16-010], citing Mason J in Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447, at 462.
Recently, the principles were reiterated this way:
The doctrine of unconscionability will intervene to prevent a donee from retaining the benefit of a gift where a person under a special disability has transferred it to them in circumstances where it would not be in good conscience to do so. A special disability is an attribute of the donor, which renders them incapable of making a judgment as to his or her own interests. Equity will intervene when the donee has actual knowledge or knowledge of the facts that would raise a question in the mind of a reasonable person that the donor suffers from a special disadvantage and takes advantage of it.[25]
[25] Mahoney v Mahoney [2015] VSC 600, at [185] per MacMillan J.
The Wife’s Case As Pleaded And Argued at Trial
Prior to the commencement of the trial, her Honour ordered the wife to file “particulars of claim” – in effect a pleading. The manifestly inadequate document filed by the wife was in these relevant terms:[26]
[26] Quoted by her Honour at [81] of the reasons.
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 postnatal 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.
Her Honour’s identification and determination of the issues in the case was not assisted by these “particulars of claim” which were anything but. The generalised statements of unparticularised and undated conduct and circumstances are neither an assertion of words and actions connected temporally to the agreement nor do they assert how it is alleged that the relationship between the husband and the wife was attended by the requisite dominion, ascendancy and dependence. Importantly, as a result, the purported particulars never made clear whether the wife’s case was founded in actual undue influence or was founded in the existence of a relationship attended by indicia from which influence would be presumed.
In addition the husband submits, accurately as it seems to us, that “no submission was made on behalf of [the wife] [at trial] in relation to relevant categories of undue influence”.[27] Not only was her Honour not assisted by that omission, the lack of clarity in that respect saw submissions which, with respect, merged and confused elements of each of those different categories of undue influence.
[27] Husband’s Summary of Argument, filed 6 February 2014, at [7].
Similar considerations apply to the wife’s case founded in unconscionable conduct. Nothing within her “particulars of claim”, nor as far as we can see the arguments on her behalf, identified the “special disability” upon which the wife relied (or, absent a description of the disability, the identification of asserted indicia). Equally, nothing within her “particulars” nor any argument on her behalf identifies how any asserted special disability rendered the wife “incapable of making a judgment as to his or her own interests” or how the wife’s “ability to make a judgment as to [her] own best interest” was “seriously affect[ed]”.
Undue Influence: Her Honour’s Approach And Findings
Did Her Honour Confuse or Misapply the Correct Principles?
Her Honour’s discussion of the relevant principles and her findings is preceded by the heading “A relationship of influence” – something which, plainly enough, would appear to indicate a delineation of the case before her from one of actual undue influence. Further, her Honour said specifically that “[s]ome relationships are presumed to be relationships of influence. The relationship of husband and wife is not one of them” and goes on to recognise that “…a party may nonetheless establish that the relationship is one of influence”.[28]
[28] [82].
Having said that, her Honour then however turns to the facts of the instant case and says:
83.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. (emphasis added)
Her Honour appears to be referring initially to the need to prove both “the capacity to influence the other improperly” and “that this [i.e. the influence] in fact happened”. The latter point is then seemingly reinforced by her Honour making clear that the agreement is “the direct result of undue influence”. That seems to us to be a reference to actual undue influence, notwithstanding the immediate reference to a “third type” of undue influence being specifically identified as “actual undue influence”.
Later in the judgment, having made a number of findings by reference to the wife’s pleaded “particulars of claim”, her Honour concluded:
105.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.
106.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.
107. On this basis the agreement is voidable.
We have, with respect, considerable difficulty in discerning for ourselves whether her Honour approached the case as one of actual undue influence or as one in which the proof of a relationship attended by relevant indicia gave rise to a presumption with the consequence that the husband need rebut it. That difficulty is exacerbated because, as the husband in our view correctly contends, if her Honour intended to deal with the case as one of presumption arising from the parties’ relationship, she does not anywhere in the reasons address the question of the rebuttal of that presumption.
It follows that we consider that her Honour’s reasons evidence a confusion in the application of the relevant principles. Further, if, as the relevant heading in the reasons would suggest, her Honour treated the case before her as one whereby the parties’ relationship gave rise to the need for the husband to rebut a presumption of undue influence, her Honour erred in not at all dealing with the latter question.
Notwithstanding those errors, her Honour’s order might survive appellate intervention if we determined that, notwithstanding the confusion referred to, the evidence leads to the conclusion that her Honour’s order was plainly correct. We are unable to reach that conclusion. We do not consider that any finding of actual undue influence was reasonably open on the evidence before her Honour, nor do we consider that the evidence before her Honour could sustain reasonably a finding that the parties’ relationship gave rise to a presumption of undue influence.
We turn to a consideration of why that is so by reference to her Honour’s findings and their factual context.
The Trial Judge’s Findings
Her Honour considered the issue of undue influence by addressing in turn each of the matters purportedly particularised by the wife.[29]
[29] [85] – [105].
Her Honour found in respect of the “diagnosis” of “postnatal depression” that “in April 2008” the wife “was stressed, lost her appetite and ‘was barely coping with the care of the children and [her] financial situation’”. Her Honour found that at that time, the wife consulted her general practitioner and subsequently, until about October 2008, a psychiatrist. Neither the general practitioner nor psychiatrist gave oral or written evidence.
Her Honour found that the wife returned to full-time work in July 2008 and, using the wife’s evidence that she both ceased seeing her psychiatrist and taking antidepressant medication, inferred that “about 11 months before the financial agreement was signed” the wife’s “post-natal depression had resolved”.
Her Honour found that, “[i]n 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.”[30]
[30] [90].
Her Honour went on to find that “…the wife probably withheld this information [about the level of her indebtedness] because she was worried about it and probably confused about how she might deal with it”.[31] We agree with the husband’s contention on appeal that there is no sufficient evidentiary foundation for that inference drawn by her Honour.
[31] [91].
The unparticularised assertions in the wife’s particulars of claim of the husband being “abusive to the wife” and being “threatening to the wife” are dealt with together in her Honour’s reasons. Her Honour notes “two particularly ugly incidents”, the first which occurred on 21 October 2008, some 11 months prior to the agreement being signed, and the second on 21 May 2009 some five months prior to its execution.
As to the first incident, her Honour observed that the wife’s oral evidence “expanded on the substance of [the parties’] argument” which “included how they would go forward with a binding financial agreement”. For reasons which her Honour gave, her Honour found that, during this argument, the parties did not “discuss[ ] matters connected with a binding financial agreement” but they did “argue about money and [ ] the wife made it plain that she was not coping”.[32] The wife and children left the home for about six days after this incident and, subsequently, the parties “discussed their future”.
[32] [93].
Her Honour found that:
96. 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.
As to the second incident, although there is no specific finding, it appears her Honour accepted the wife’s account which was that:
99.…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.
Her Honour found that “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” and “…for about six weeks she took pain medication”.[33] No part of the account of this incident is said to involve the mooted agreement or financial matters more broadly.
[33] [98].
Her Honour also accepted that “…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”.[34]
[34] [97].
Her Honour summarised her findings in respect of this issue by saying that:
102. 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.
Her Honour also identified two matters additional to those particularised by the wife to which her Honour apparently attached significance:
103. 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.
104. It was within weeks of the 21 May 2009 incident that discussions and negotiations in relation to the financial agreement resumed.[35] 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. (Footnote added)
[35] It is uncontroversial that they continued for another four months.
The Trial Judge’s Findings in their Factual Context
Prior to their marriage, the parties had resided in a de facto relationship for about two years. The parties’ financial relationship was then governed by a formal agreement entered into between them in 2007 pursuant to the provisions of the relevant New South Wales legislation.
That agreement operated in substitution of rights in respect of both property and maintenance. There was no evidence before her Honour of any suggestion by the wife that this agreement was affected by any undue influence or unconscionability. Nor was there any evidence before her Honour of the wife having made any complaint about that agreement, nor evidence by which the wife suggested that she did not understand the terms of that agreement or its effects. Her Honour found specifically that “[i]t 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”.[36]
[36] [24].
The parties are both educated professionals. The wife was a financial professional of considerable experience. The husband was employed in a senior executive role. Her Honour found that the care of the parties’ two children (which was also undertaken by one, and subsequently two, nannies) fell predominantly to the wife who had taken time off work for some months when each of the children were born.
The wife deposed in her affidavit of evidence in chief that at the time she executed the financial agreement “…it was my strongly held belief that I would remain in the full-time employ of [a financial institution] and rebuild my career back to my initial income pre children of some … $300,000 per annum”. She also deposed that when she executed the agreement she believed that within 12 to 18 months thereafter she “…would be able to exclusively purchase in [her] sole name a property worth approximately … $500,000”.[37]
[37] Wife’s Affidavit of Evidence in Chief, filed 14 March 2012, [85], [86].
Each of the husband and wife was represented by a legal practitioner for the whole of the approximately seven months over which the terms of the financial agreement were negotiated.
During those negotiations, the wife proposed a number of changes to the agreement, all of which were accepted by the husband. Her Honour observed that the financial agreement “…was a very different financial agreement to that proposed by the husband”[38] and that “…the draft agreement was amended along the lines proposed by the wife”.[39]
[38] [40].
[39] [47].
Included among those amendments was the payment of a $100,000 cash sum to the wife. That amendment was requested by the wife, for the first time, ten days prior to the execution of the agreement.[40] The sum was intended to discharge liabilities in the wife’s name in that approximate amount. The extent of those liabilities had not earlier been referred to by the wife during the parties’ negotiations.
[40] Transcript of proceedings, 2 April 2012, p. 20 ff.
The wife successfully negotiated the exclusion of spouse maintenance from the agreement. The effect was to preserve her rights to same and, as such, was clearly to her benefit – a position different, and more beneficial than that which had pertained in the parties’ de facto financial agreement. In the course of argument, her Honour recognised that the negotiation of those amendments “…does not bespeak a situation of pressure; unequal bargaining…”.[41] To similar effect, during closing submissions her Honour commented that the wife was “…negotiating quite robustly it seems to me”.[42] Each of those comments by her Honour is, in our view, well supported by the evidence before her Honour.
[41]Ibid, at p. 142 – Her Honour also commented there that “…the wife negotiates successfully the exclusion that the agreement would address spousal maintenance, so she retained those rights. She retained the rights to receive child support, and retained the rights in relations to property acquired during the course of the relationship with the parties to decide piece-by-piece how ownership of that would be reflected”.
[42] Transcript of proceedings, 4 April 2012, p. 141.
The negotiations for the financial agreement commenced prior to the parties’ marriage. The wife asserted that she was “distracted” and “distressed about the negotiations concerning the financial agreement” as the marriage approached. The husband instructed his lawyers to “defer consideration of the financial agreement until after the wedding”.
There was no evidence before her Honour that the wife had ever suggested that any term of the agreement was not understood by her or that the agreement as a whole did not reflect her then intentions or that the agreement did not contain any term sought by her.
Conclusions As to the Trial Judge’s Findings
If the wife was to succeed in a case founded in actual undue influence, it was necessary for her to prove facts that established that in making the agreement, she was not exercising her free and independent will. In our view the evidence before her Honour falls a long way short of establishing the requisite “influence over the mind” of the wife by the husband. Indeed, we are unable to see any evidence led before her Honour from which any such conclusion could be drawn reasonably.
If the wife was to succeed in a case founded in presumptive undue influence, it was necessary for her to prove facts which established that the antecedent relationship between her and the husband was such that the making of their agreement involved the exercise by him of dominion or ascendancy over her will and a concomitant dependence by her upon him or subjection to his will.
We are unable to see any evidence led before her Honour which alleged, much less proved, that the wife was “beholden [or] obliged” to the husband, or “disadvantaged” with respect to him or, indeed, that he exercised any “dominion” over her. Similarly, we are unable to discern any evidence by which the wife alleged, much less proved, that she reposed any trust or confidence in the husband in and about the agreement and its negotiations.
Unconscionable Dealing
Despite referring to it as “unnecessary” her Honour nevertheless made a specific finding that the agreement should be set aside by reason of asserted unconscionable conduct on the part of the husband. We repeat that the “particulars of claim” pleaded by the wife provide no asserted basis for any such finding.
The essential findings made by her Honour in respect of this issue are:
109.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.
110.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.
111. This financial agreement is tainted by unconscionable dealing.
With respect to her Honour, we are unable to discern the evidentiary foundations for concluding that “the wife was in a position of ‘special disadvantage’ qua the husband”. In particular:
· There could be little doubt that the husband “had an intimate knowledge of the stresses under which [the wife] laboured” but nothing about those “stresses” amounted to a “special disadvantage” and nothing about his negotiating with knowledge of them amounts to unconscionable conduct;
· The evidence was that both parties through their respective solicitors were negotiating to achieve an agreement both parties desired. Indeed, that desired position sought to duplicate that which applied to their antecedent de facto relationship;
· There was no evidence of any conversations between the wife and the husband to the effect that she was not just as desirous of agreement being reached as was the husband;
· There was no evidence which suggested that prior to, or at the time of, the execution of the agreement (including in the period after negotiations were suspended at the time of the wedding) the wife had suggested that she did not want the agreement to proceed;
· There was no evidence before her Honour that, subsequent to the husband agreeing to suspend negotiations in the lead up to the parties’ wedding, the wife ever sought to suspend negotiations or that she instructed her solicitor to that effect.
We also, with respect, fail to understand the relevance of the finding that the agreement would “disentitle the wife from making a claim for property settlement” (or the implication apparently inherent within it). Both parties negotiated over seven months, each with the benefit of independent legal advice, for a financial agreement designed to replace a previous agreement to similar effect. If the agreement that both had negotiated and executed was binding, the axiomatic outcome for both parties is that each would be disentitled from making a claim for property settlement. The husband was entitled to press for settlement of the agreement that both parties had sought.[43] In addition, during that time, the wife sought, and ultimately achieved, amendments to the draft agreement which, on her Honour’s findings, were beneficial to her.
[43]Transcript of proceedings, 4 April 2012, p. 141 – A fact which her Honour accepts in the course of argument: “It seems pretty clear the momentum for this is from [the husband], and assume I accept a degree of pressure from him to sign, it’s a matter of degree isn’t it”.
We are unable to discern any specific finding sustaining her Honour’s conclusion that “there is no doubt that this transaction should not have proceeded”, save for the findings we have otherwise referred to. We do not, with respect, agree that those findings, or the evidence before her Honour more generally, sustain any such conclusion.
Nor it seems can her Honour’s conclusion of “special disadvantage” be referenced to the findings made in support of her Honour’s finding of undue influence to which we have earlier referred. [44] We repeat what we have earlier said in respect of those matters.
[44] Certainly the wife’s “particulars of claim” would suggest that is the case.
In our view, they do not, either alone or together, constitute “a special disadvantage” on the part of the wife as that expression is understood in the authorities. We note specifically in respect of postnatal depression, that her Honour found that the wife’s depression had resolved some 11 months prior to the agreement being executed.
In our view, the evidence before her Honour fell a long way short of establishing that the wife was “incapable of making a judgment as to … her own interests” or that she was suffering from any condition, disability or circumstance which “affect[ed] [her] ability to conserve [her] own interests”. Not only did neither the wife’s general practitioner nor psychiatrist give evidence, but neither did the solicitor who represented her during the course of the negotiations and who signed the certificate attached to the executed agreement. Plainly the solicitor could not have done so, nor could he have continued to negotiate on her behalf if he or she had a foundation for any concerns as to the wife’s capacity.
Her Honour also said:
112. 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.
113. There is thus established another basis upon which the agreement is voidable.
Leaving aside the issue of the correctness or otherwise of her Honour’s apparent conclusion as to the justice and equity of the agreement in s 79 terms, we are, with respect, unable to discern the additional basis upon which the agreement is said to be voidable arising from the findings there contained.
In our respectful view, her Honour’s conclusion that the agreement should be set aside for unconscionable conduct was not open to her.
Section 90G – Whether the Agreement is Binding
The husband asserts in his relevant ground of appeal (Ground 9) that her Honour erred:
…in principle in finding (if she did so) that the reference to s 90B of [the Act] in the certificates to the subject agreement resulted in the agreement not complying with s 90G.[45]
[45]The financial agreement was made pursuant to s 90C. See the findings at [27] of the reasons. The erroneous reference to s 90B was repeated in the Recitals to the agreement.
The written summary of argument on behalf of the husband in respect of this aspect of the appeal contends:
The trial judge then considered her third question, namely, whether there was a binding financial agreement.[46] Her Honour observed “[s]elf evidently the answer to this question is no”. However, her Honour proceeded to consider s 90G of the Act and ultimately may have made no finding because she did not have to. If the appeal succeeds in relation to s 90K issues, and the appellant is unsuccessful on ground 9, then the question under s 90G(1A), which her Honour did not determine, will remain extant. These fell with the last two questions posed by her Honour, which she did not address, because of her conclusion on s 90K.[47] (Emphasis added)
[46] [124].
[47] Husband’s Summary of Argument, at [4].
Her Honour found:
78. 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 [(2011) FLC 93-470] is that although the financial agreement is capable of rectification, absent the participation of the lawyers, the certificates are not. (Emphasis added)
Later in the reasons, when her Honour returned to consider specifically the issue of whether the agreement was “binding” within the meaning of s 90G of the Act, her Honour said, “[t]he 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”,[48] and went on to find that “[b]ut for the reference to s 90B the certificate is in proper form and would comply with s 90G”.[49]
[48] [131].
[49] [132].
Her Honour’s reasons make reference to s 90G in both its original and amended forms. By reference to the former, her Honour found that “…reference to the wrong section in the certificate of independent legal advice was fatal to the husband’s claim that the agreement was binding”.[50] However, her Honour said that it was uncontroversial in the proceedings before her that the amended form of the section had retrospective effect and applied to the case before her Honour,[51] but nevertheless, “[t]he new s 90G(1) does not resolve the problem of reference to the wrong section in the certificate”.
[50][133] relying on the so-called “strict compliance test” emanating from the decision of this Court in Black and Black (2008) 216 FLR 422.
[51] See now, in confirmation of that approach, Wallace & Stelzer and Anor (2013) FLC 93-566.
Her Honour went on to conclude that “…the financial agreement did not comply with the s 90G as in place when the agreement was signed or newly inserted”,[52] (emphasis added). However, that finding is succeeded by her Honour’s finding that:
139. 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. (Emphasis added)
[52] [137].
The emphasised passages give rise to the appellant’s apprehension as to the finding made by her Honour apparent in the ground of appeal quoted earlier.
Subsequent to the passages from the reasons just quoted, her Honour referred to a divergence of views in this Court as to the proper interpretation of s 90G(1A)(c) and, in particular, the expression “unjust and inequitable” contained within that paragraph. Of course, that remedial provision is engaged only if the relevant requirements of s 90G have not been complied with.[53] Her Honour’s reference to it lends weight to a conclusion that her Honour did find ultimately that the parties’ financial agreement was not binding within the meaning of s 90G and that this conclusion was founded on the mis-description of it as a s 90B financial agreement in the certificates attached to the agreement.
[53] The Act, s 90G(1A)(b).
If that be her Honour’s finding, we consider it erroneous.
Section 90G requires, relevantly, the provision of a “signed statement” by a “legal practitioner” stating that advice of a prescribed kind was given to “each spouse party” to the agreement. Whatever might have been the status of the certificate required by the earlier iteration of s 90G, the applicable post-amendment iteration makes it plain that the signed statement is separate to the agreement and need not be attached to it. While s 90C requires the agreement itself to be expressed as made under that section,[54] no part of that section, nor s 90G, requires the signed statement (or, in this case, certificate) to make any such reference.
[54] The Act, s 90G(1)( b).
We observe that her Honour referred in this context to the Full Court decision in Senior & Anderson where the mis-description in the certificates was fatal to whether the financial agreement was binding or not. However, that case is distinguishable in that there the mis-description was not as to the category of financial agreement, but the parties were named incorrectly in the certificates of the solicitors, and thus the court could not be satisfied that the required legal advice was given to the parties to the agreement. Thus, that case cannot support her Honour’s apparent finding.
The wife’s senior counsel also mounted an argument before this court that because the certificates referred to a different category of financial agreement, namely a s 90B financial agreement, rather than a s 90C financial agreement, the court could not be satisfied that legal advice was given as required by s 90G. That is because, it is argued, the legal advice required is different depending on whether it is a s 90B or a s 90C financial agreement. However, there are two difficulties with this argument. First, it is apparent from the wording of the certificates, and confirmed in the agreement itself at clause 7.1, that the legal advice given was as to the effect and the advantages and disadvantages of the deed to which the certificates were attached, regardless of whether the agreement was described incorrectly as a s 90B financial agreement. Thus, we are not persuaded that the onus of establishing that the requisite legal advice was provided was not satisfied here.
The second difficulty is, as conceded by the wife’s senior counsel, that this submission was not raised before the trial judge. Certainly, as counsel attempted to argue, where the submission agitated first on appeal is a pure question of law, it is able to be raised[55], but we agree with the submission of the husband’s senior counsel that the question of what advice is given is a question of fact, or at the least, a mixture of fact and law, and on that basis it cannot be argued first on appeal.
[55] Metwally v University of Wollongong (1985) 60 ALR 68 and Water Board v Moustakas (1988) 180 CLR 491.
The Recitals to the agreement also erroneously describe the agreement as a s 90B agreement. Absent a remedy otherwise available to the parties to the agreement, that error might found an argument that the agreement is not a “financial agreement” as defined by the Act.[56]
[56]A question which is, in any event, separate from the question of whether the agreement is binding under s 90G – see Senior v Anderson (2011) FLC 93-470.
However, her Honour’s clear finding as to the “mutual mistake” and “common intention” of the parties is not challenged before us and, as it seems to us, was entirely open on the evidence before her Honour.[57]
[57]The mistake arose because, when negotiations commenced, the parties were intending to marry but not yet married. A s 90B financial agreement pertains to those circumstances. However, negotiations were suspended and the agreement was concluded post-marriage. A s 90C agreement pertains to those circumstances. While substantive clauses changed as the draft agreements progressed, the reference to the section of the Act in the drafts, and ultimate agreement, did not.
That being so, in our view the principle referred to by the High Court in Fitzgerald v Masters[58] pertains. That principle was expressed this way, for example, in Ex Parte Whelan:[59]
The present case is not one which requires the evidence tests and procedures of rectification to be pursued, as the meaning of the lease is already sufficiently clear. It is sometimes overlooked that “words may generally be supplied, omitted or corrected in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency” (Fitzgerald v. Masters (1965) 95 C.L.R. 420, 426–27). The Court there inferred that the word “inconsistent” must be read as if it were the word “consistent”. This salutary exercise is sometimes referred to as the correction of an absurdity or error … [I]n Re United Pacific Transport Pty. Ltd. [1968] Qd.R. 517, 523, … W. B. Campbell J. (as he then was) made the following observations:
An instrument is to be construed according to the intention of the parties appearing from the whole of its contents and to that end corrections may be made which a perusal of the document shows to be necessary.
[58] (1956) 95 CLR 420, at 426-7 per Dixon CJ and Fullagar J.
[59] [1986] 1 Qd R 500, at 503 per Thomas J (Kneipp and Shepherdson JJ agreeing).
Here, there could be no doubt, and her Honour found, that the parties each and both intended that the agreement was to be made pursuant to s 90C and the reference to s 90B was a mutual mistake. The true intention of the parties is plainly evident. As a result, the reference to s 90B in the recital should clearly be read as s 90C. That construction is obvious and necessary to reflect the parties’ true agreement and the uncontroversial circumstances in which it was made.
The correction of that error does not impact upon whether the agreement is “binding” within the meaning of s 90G or, as a result, the so-called “strict compliance test” applicable to the requirements of that section, because s 90G contains no requirement to which the erroneous reference pertains.
In our view, the agreement, properly construed as a “financial agreement”; complies with s 90G and is “binding” within the meaning of that section.
Conclusion
In our view, her Honour erred in finding that the parties’ financial agreement was attended either by undue influence or unconscionability.
We are also of the view that her Honour erred in finding that the financial agreement was not “binding” within the meaning of s 90G of the Act.
The appeal should be allowed and her Honour’s order set aside.
Our finding has an obvious effect on the wife's application for property settlement by reason of s 71A of the Act. However, as s 90C(2)(a) makes clear, a s 90C agreement may make provision for how "…all or any of the property or financial resources..." of the parties is to be dealt with. Neither the record before us, nor any arguments advanced on behalf of the parties would allow us to conclude that all of the property or financial resources of the parties was dealt with in the parties' agreement (although that appears likely). Accordingly, we consider that the safer course is to leave the wife's s 79 application to be dealt with by such applications to a trial judge as the parties might consider appropriate.
Costs
The wife has been “wholly unsuccessful” in defending the appeal.[60] “While costs do not ‘follow the event’ any more on an appeal than they do in any other proceedings (s 117(1)), it is often said that a party being wholly unsuccessful in an appeal, which by definition seeks to deny the other party the ‘fruits of their judgment’, can be of great significance”.[61] The parties’ financial circumstances as revealed by the record before us are now somewhat dated but they indicate no particular financial difficulty or impecuniosity. The appeal has succeeded on an error of law to which no conduct of the wife contributed.
[60] The Act, s 117(2A)(e).
[61]Trask & Westlake (Costs) [2015] FamCAFC 214, at [4]. See also Limousin & Limousin (Costs) (2007) 38 FamLR 478 at [60].
In our view, the circumstances of this case do not justify departure from the s 117(1) prescription that each party bear their own costs of and incidental to the appeal.
Each of the parties apply for a costs certificate. We repeat that the appeal has succeeded on an error of law not contributed to by any conduct of the parties. We consider it appropriate that each be awarded a costs certificate: the appellant husband pursuant to s 9 of the Federal Proceedings (Costs) Act 1981 and respondent wife pursuant to s 6 of that Act.
I certify that the preceding ninety-seven (97) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court delivered on 21 December 2015.
Associate:
Date:21 December 2015
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