Smart and Smart
[2008] FMCAfam 341
•14 April 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| SMART & SMART | [2008] FMCAfam 341 |
| FAMILY LAW – Property – binding financial agreement – need for strict compliance with legislative regime. |
| Family Law Act 1975, s.90G |
| J & J [2006] FamCA 442 Black and Black [2008] FamCAFC 7 |
| Applicant: | MR SMART |
| Respondent: | MS SMART |
| File Number: | SYC 1308 of 2007 |
| Judgment of: | Kemp FM |
| Hearing date: | 2 November 2007 |
| Date of Last Submission: | 28 February 2008 |
| Delivered at: | Sydney |
| Delivered on: | 14 April 2008 |
REPRESENTATION
| Counsel for the Applicant: | Mr R Schonell |
| Solicitors for the Applicant: | Broun Abrahams Burreket |
| Counsel for the Respondent: | Mr G Richardson SC |
| Solicitors for the Respondent: | Barkus Edwards Doolan |
ORDERS
The matter is adjourned to 20 May 2008 at 9.30am.
The Court declares:
(a)That the financial agreement entered into between the parties on 15 April 2002 is not binding on the parties pursuant to s.90G of the Family Law Act 1975.
IT IS NOTED that publication of this judgment under the pseudonym Smart & Smart is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYC 1308 of 2007
| MR SMART |
Applicant
And
| MS SMART |
Respondent
REASONS FOR JUDGMENT
Background
By way of an application filed on 26 February 2007, the husband sought various parenting orders with respect to the two children of the relationship.
The wife in her response filed on 5 April 2007, sought both competing parenting and property orders. The property orders were, inter alia, to the following effect:
a)That the Financial Agreement be set aside pursuant to s.90K of the Family Law Act (“the Act”);
b)Further, or in the alternative to order a), the Financial Agreement be declared invalid, unenforceable or of no effect pursuant to s.90KA of the Act;
c)Further, or in the alternative to orders a) and b), the Financial Agreement be declared to be not binding on the parties pursuant to s.90G of the Act.
On 23 August 2007, the parties agreed to have determined as a distinct question in the proceedings the issue as to whether or not the said Financial Agreement signed by the husband and the wife on 15 April 2002 constituted a binding agreement in accordance with the provisions of s.90G(1) of the Act. That was the limited nature of the matter listed for hearing before the Court on 1 November 2007.
The wife’s essential argument was that the said Financial Agreement did not contain, 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 matters set out in sub-paragraphs (i) to (iv) of s.90G(1)(b) of the Act and, accordingly, was not binding on the parties. This was made clear by the wife’s further and better particulars dated 20 June 2007.
The husband submitted that should he be successful, in opposing the orders sought by the wife, he would otherwise be entitled to a declaration that the said Financial Agreement constituted a binding financial agreement that complied with s.90G(1) of the Act.
The husband was born in Germany in 1972 and the wife was born in Switzerland in 1967.
The parties commenced cohabitation in June 2000 and were married in January 2002.
The parties had two children being V born in October 2001 and N born in December 2005.
The parties on the husband’s assertion separated in December 2005 and on the wife’s assertion sometime between March and 21 April 2006. It is not necessary to make a finding about this matter at this time.
Evidence
The said Financial Agreement which the parties entered into on
15 April 2002, is said to be a Financial Agreement entered into between the parties pursuant to s.90C of the Act.
The said Financial Agreement was made Exhibit A in the proceedings.
The essential parts of s.90C of the Act (Financial Agreements during marriage) are that the parties to the marriage make a written agreement with respect to how their property is to be dealt with in the event of a marriage breakdown.
Section 90G of the Act sets out the requirements for a Financial Agreement.
The Law
The Family Law Amendment Act 2000 which commenced on
27 December 2000inserted Part VIIIA into the Family Law Act and provided for the first time, judicial recognition of the ability to contract out of the obligations of the Family Law Act, without the necessity for judicial approval
Section 90G of the Act was inserted by the said amending Act. Its present form was amended as a consequence of the Family Law Amendment Act 2003 which was effective from 14 January 2004 to replace sub-sections 90G(1)(b)(ii), (iii) and (iv) with a new sub-section 90G(1)(b)(ii).
When the said Financial Agreement was executed on 15 April 2002, however s.90G was in the following terms:
“90G When financial agreements are binding
(1)A financial agreement is binding on the parties to the agreement if, and only if:
(a)The agreement is signed by both parties; and
(b)The agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided , before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:
(i)The effect of the agreement on the rights of that party;
(ii)Whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;
(iii)Whether or not, at that time, it was prudent for that party to make the agreement;
(iv)Whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable; and
(c)The annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and
(d)The agreement has not been terminated and has not been set aside by a court; and
(e)After the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.”
It is implicit from a reading of s.90G of the Act that there are five requirements:
a)The agreement is signed by both parties;
b)The agreement contains a statement in relation to each party to the agreement that they had been provided with independent legal advice before they signed the agreement about certain things;
c)That an annexure to the agreement contains a certificate identifying the person who provided the independent advice and stating the advice was provided;
d)The agreement has not been terminated; and
e)That after the agreement is signed, the original is given to one party and a copy given to the other party.
For the purpose of these proceedings, both parties submitted that there is no dispute between them that:
a)For a financial agreement entered into for the purposes of s.90C of the Act to be binding it must meet the requirement of s.90G(1) of the Act; and,
b)Full compliance with s.90G(1) of the Act is required. This is to be contrasted with the regime under the legislation applicable to de facto couples where consideration of “substantial compliance” may leave an agreement with part or full operation, subject to a discretion (e.g. s.47(2) Property (Relationships) Act (NSW).
Submissions of the Wife
The wife contends that:
a)The said Financial Agreement fails to comply with s.90G(1)(b) in that the agreement (as opposed to the annexures) does not contain 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 with independent legal advice from a legal practitioner as to the matters required to be certified upon. It is submitted there is a clear distinction to be drawn between the agreement and the certificates annexed to it.
b)That the introductory words to s.90G(1) , namely “if, and only if” impose a statutory requirement of strict compliance so that a failure to comply with any of the conditions of s.90G(1) has the effect that the Financial Agreement is not binding. The language as identified in the introductory words to s.90G(1) is, it is submitted, plainly on its face prescriptive and mandatory. The words in bold in the Act identify those obligations by identifying them as “requirements for binding agreement”.
c)The said Financial Agreement entered into between the parties does not contain any statement to the effect required by s.90G(1)(b). Indeed the closest that the agreement comes to anything to that effect is provided by Clauses 13 and 17.
d)Clause 13 is to the following effect:
“The parties have both had the opportunity to obtain independent legal advice in relation to the effect of this agreement and have obtained such independent legal advice.
e)Clause 17 is to the following effect:
“This Deed is intended to operate in substitution for the rights of either party pursuant to Part VIII of the Family Law Act 1975. The parties accept the benefits conferred upon them by this Deed in full and final discharge and satisfaction of all or any existing right for each of them respectively and all and any rights which but for these provisions might here and after be in each of them respectively to make any claim or demand or to bring any action or suit, or to recover or to receive any monies, damages, or other property or benefits whatsoever from the other of any nature whatsoever, and the parties further agree to accept such benefits so conferred upon each of them in lieu of any right now, or which other than for these provisions might here and after be in each of them respectively to seek any order against each other in law or in equity and in the event that either party should hereinafter make or bring in any claim, demand action or suit contrary to the provisions hereof against the other, then this Deed may be pleaded as an absolute bar thereto.”
f)The wife submitted that the above clauses go nowhere towards satisfying the requirements of s.90G of the Act.
g)The drafters of the legislation clearly intended that the agreement and the certificates be two completely independent documents. That is self-evident from the terms of s.90G and s.90C in that the only parties to the agreement are the parties to the marriage. The independent solicitors who provide the certificates are not parties to the agreement and thus, it is submitted there is no privity of contract between them and each of the parties to the marriage. It is clear that the legislators required two things in the terms of s.90G(1)(b) and (1)(c) in the Agreement, namely that the parties to the agreement in relation to each of them, had to record that they had each received the independent advice in the form required by the Act and the independent lawyers had to certify in an annexure to the agreement that they had given that advice. The annexures to the agreement simply records something that one of the parties has been told.
h)When the matter came on for hearing, there were no relevant Full Court decisions on Part VIIIA of the Act which dealt with Financial Agreements. There were, however, three decisions of Judges at first instance in relation to the provisions of s.90G being O’Ryan J in ASIC and Rich & Anor 2003 FLC 93-171, Collier J in J & J [2006] FamCA 442 and Benjamin J in Black and Black [2006] FamCA 972. For present purposes, the Court will concentrate on the last two decisions.
i)In J & J Justice Collier determined that the obligations imposed by s.90G(1) were mandatory and prescriptive. His Honour said at paragraph 19:
“To my mind, the words that appear in s.90G(1) “if and only if” are words of well significance. They have a meaning. They import a requirement or a level of compliance, if the agreement is to be binding, that is clearly a standard or level above or beyond what might be described as substantial. If those words “if and only if” make it clear that each of the parties must ensure that that which is required to be contained and dealt with in the agreement, and the annexures to it, is in fact contained, appropriately and completely. Compliance therefore must be a full compliance, satisfying the statutory requirements.
Something approaching full compliance, or something that looked at in a less than strict light, might come close to establishing compliance is not enough.”
j)As Justice Collier also stated at paragraph 20:
“Clearly, the legislation intended that if this method of parties resolving their differences was to be used without any supervisory power of the court, in a situation where the parties’ rights were to be affected, then what was to be done had to be done fully in compliance with that which the statute set out and required”.
k)The wife submitted that the approach of Justice Collier was clearly consistent with the plain English language of the Act and to be preferred.
l)In Black and Black, Justice Benjamin, however, took a contrary view. His Honour referred to the observations of Justice Collier and concluded at paragraph 93:
“the court makes it clear in J & J that compliance with Section 90G ought to be strict. The argument in that case seemed to have focused upon the words “if and only if” at the commencement of Section 90G(1). The argument did not seem to focus on the words in sub-section 90G(1)(b)”.
m)Justice Benjamin then went on to say:
“It does not seem that the words “to the effect that” were argued before the Court in J and J. Furthermore it did not appear that the impact of S90KA of the Act was argued before His Honour.
The strict interpretation approach takes away the legislative meaning and the better approach is the objective approach, which has been the subject of consideration by the High Court in a number of decisions.”
After discussing various decisions of the High Court and other Courts, his Honour concluded at paragraph 110:
“The intention of Part VIIIA is to enable ordinary people to enter into financial agreements which will deal with property and spousal maintenance and avoid the necessity of court proceeding. The agreements can be made before marriage and after marriage, whilst the relationship subsists or they can be made following the breakdown of marriage. The explanatory memorandum observes that it is the legislative intent to encourage the use of financial agreements under this Part of the Act. To enable such agreements to be binding the legislation requires that each of the parties to the agreements must have independent legal advice. If courts require strict interpretation of the legislation then this would have the effect of making such agreements less available to the broader community. It would positively discourage the use of financial agreements and it would limit the pool of legal practitioners who are equipped and willing to draft and/or advise in relation to such agreements. Such strict and inevitably narrow construction would add to the cost of such agreements and may put the cost to prepare and advise on them outside the financial means of the general community. That is not the legislative intent. The legislation does intend that the legal advice ought to be available Australia wide through the broad church of legal practitioners, whether specialist or not, whether in major capital cities, or in the suburbs or in the regions. Courts should not make the legal practitioners and the parties cross all of the “t’s” and dot all of the “I’s” to enter into and give effect to financial agreements. The form should not defeat the substance. The Act does not create a regime of strict compliance and there is a requirement on courts to give purpose to legislation. Accordingly, I will not be adopting a strict interpretive approach in terms of both the construction of the legislation and construction of the terms of the agreement. I will adopt the objective approach.”
n)His Honour then went on to deal with the certificate annexed to the agreement and concluded at paragraph 114:
“Adopting a purposive construction approach there seems to be no reason why the statement contained in the certificate is not contained within the agreement. The certificate is annexed to the agreement and forms part of it and in my view it is thus “contained within the agreement”, within the meaning of s90G(1)(b). The sub-section provides that the agreement contains a statement to the effect that a party, to whom the statement relates, has been provided with independent legal advice. The form of certificate in this case contains such a statement, and that certificate is part of the agreement. The legislative intent is that each of the parties has the benefit of independent legal advice and the structure of the sub-section ensures that that requirement is met. It is not designed to set up word traps for the unwary, it is designed to ensure that each party has independent advice, and that such advice addresses the matters set out in the sub-section.”
o)The wife submitted that the decision of Justice Benjamin was unsustainable in light of the decision of Justice Collier, High Court authority and the principles of statutory interpretation. The Court was referred to passages from Pierce & Geddes Statutory Interpretation in Australia, the decisions of the Court of Appeal of the Supreme Court of Queensland in Butler Rains Menzies & Co (a firm) v Devine (1992) 8ACSR 579. The NSW Court of Appeal in Inasmuch Community Inc v Bright [2006] NSWCA 99, and the High Court of Australia in News Ltd v South Sydney District Rugby League Football Club Ltd [2003] HCA 45 13 August 2003 Unreported Judgments.
p)The object of s.90G was to make agreements binding “if and only if” they complied with certain requirements. The wife submitted that a reading down of those requirements would be inconsistent with the object and purpose of the legislation.
q)In the event that the agreement itself does not contain a statement consistent with s.90G(1)(b), the wife argued, it could not be saved by resort to the annexures to the agreement.
Submissions of the Husband
The husband submitted that the Court should adopt the approach articulated by Justice Benjamin.
The husband further submitted that the agreement and the certificates were not two completely independent documents as the certificates were an integral part of the document (the document being the agreement itself and the certificates) and it is submitted this is made clear by use of the term “annexure”. That is, the drafters of the legislation clearly contemplated (and the section requires) that the certificates shall form an attachment to the agreement and not something sitting independently of it.
It was further submitted that it was a matter of common day practice for annexures to an agreement to form part of the agreement and the annexures in the present case identify the nature of the advice (in the relevant terms required by the Act at the time of execution) and most importantly, were signed by solicitors to fulfil the requirement of certification that the advice had in fact been given prior to the agreement being signed.
The husband therefore submitted that the requirement of the section (and the intent of the legislature) was fulfilled in that the agreement contained to the effect….. as certified in annexure to the agreement independent legal advice…….as to each of the matters listed in that annexure.
Conclusion
As set out above, when the case came on for argument, the Court had before it principally the two competing authorities being that of Justice Benjamin in the decision of Black and Black and that of Justice Collier in the decision of J & J.
When the matter was argued before me, both Counsel were aware that Justice Benjamin’s decision in Black and Black was on appeal to the Full Court of the Family Court of Australia and that the matter had been heard on 4 June 2007 with judgment reserved. At the conclusion of submissions before me both parties submitted that if the Full Court’s decision came down, further submissions would be made.
The Full Court handed down its decision on 24 January 2008 and as a result I had my Associate contact Counsel concerned to invite further submissions. Both Counsel made the following joint submission on
28 February 2008:
a)On the facts of the present case, the Court in these proceedings is bound to conclude this case by following the Full Court’s decision in Black and Black [2008] FamCAFC 7.
b)The above submission was made after the relevant appeal period to the High Court of Australia had lapsed, without leave to appeal being sought.
This Court accepts it is bound by the decision of the Full Court of the Family Court of Australia in Black and Black [2008] FamCAFC 7, which is to the following effect:
a)The Full Court preferred the approach of Justice Collier referred to above to that taken by Justice Benjamin.
b)Strict compliance with the statutory requirements is necessary to oust the Court’s jurisdiction to made adjustive orders under s.79 of the Act.
The said Financial Agreement did not contain within its terms a statement directly acknowledging that the parties had received legal advice in relation to all the matters set out in s.90G(1)(b) and a reference to such matters as are referred to in the annexures in Exhibit A is not sufficient.
Accordingly, the said Financial Agreement is flawed and does not meet the statutory requirements and the wife is entitled to the declaratory relief sought to the effect that the said agreement be declared to be not binding between the parties pursuant to s.90G of the Act.
I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Kemp FM
Associate: Joanne Balson
Date: 14 April 2008
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