Squibb and Graham
[2018] FCCA 1906
•13 July 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| SQUIBB & GRAHAM | [2018] FCCA 1906 |
| Catchwords: FAMILY LAW – Property – financial agreement – application to set aside financial agreement- availability of rectification – failure to make reference to s.90B of the Act – whether the parties intended to enter in void agreement – rectification ordered. |
| Legislation: Family Law Act 1975 (Cth) ss.4(1), 71A, 79, 90B(2) 90G(1), 90G(1A), 90F(2), 90C(1), 90D(1), 90KA |
| Cases cited: Caltex Australia Petroleum Pty Ltd v Commissioner of Taxation (2008) 173 FCR 359 Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101 Euphoric Pty Ltd v Rydelar Pty Ltd [2006] NSWSC 2 Senior & Anderson (2011) FLC 93 – 470 ASIC v Fortescue Metals Group Ltd & Anor [2011] FCAFC 19 Sullivan & Sullivan [2011] FamCA 752 Thorby v Goldberg (1964) 112 CLR 597 |
| Applicant: | MS SQUIBB |
| Respondent: | MR GRAHAM |
| File Number: | MLC 9821 of 2016 |
| Judgment of: | Judge McNab |
| Hearing date: | 24 May 2018 |
| Date of Last Submission: | 24 May 2018 |
| Delivered at: | Melbourne |
| Delivered on: | 13 July 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr Bartfield QC |
| Solicitors for the Applicant: | Lander & Rodgers |
| Counsel for the Respondent: | Mr Lim |
| Solicitors for the Respondent: | Francis Lim Barristers & Solicitors |
ORDERS
Pursuant to s.90KA of the Family Law Act 1975 (Cth) (‘the Act’) the financial agreement executed by the husband and the wife dated 9 July 2008 (‘the financial agreement’) be rectified such that it is amended to express that the financial agreement is made pursuant to s.90B of the Act.
The court declares that the financial agreement is binding on the parties.
Pursuant to s.90KA of the Act, clause 17 of the financial agreement be rectified to express the applicable law governing the financial agreement is the Act and that clause 17 be amended to provide:
The parties agree that this agreement is governed by the Act and any dispute arising from or in connection with this agreement shall be determined by the courts exercising jurisdiction under the Act.Costs of the application be reserved.
IT IS NOTED that publication of this judgment under the pseudonym Squibb & Graham is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 9821 of 2016
| MS SQUIBB |
Applicant
And
| MR GRAHAM |
Respondent
REASONS FOR JUDGMENT
By an initiating application filed on 11 October 2016, the wife, aged 44 years, seeks a declaration from the court that the financial agreement the parties entered into on 9 July 2008 is binding on the parties. The wife relies on her affidavits filed 30 January 2018 and 9 May 2018.
The husband, aged 39 years, opposes the orders and seeks orders that the agreement be set aside. The husband relies on his affidavits filed
2 February 2018, 11 May 2018 and 21 May 2018.
Background
The wife was born on 1974. The husband was born on 1978.
In April 2008 the parties had conversations about entering into a financial agreement.
In early July 2008 the wife contacted Clifford Lawyers, spoke to a solicitor and gave instructions to draft a financial agreement.
In early July 2008 the parties attended Clifford Lawyers, the wife received independent legal advice and Jane Carlos of that firm signed a certificate of independent legal advice.
In early July the parties attended upon Francis Lim Solicitor & Barrister’s office. The husband received independent legal advice and Mr Lim signed a certificate of independent legal advice.
The parties signed a document styled “Pre-Nuptial Agreement” which states that it is made on 9 July 2008. Certificates of independent legal advice were signed by the lawyers of both parties (“the agreement”).
The parties married on 2008.
On 2013 the parties’ son, [X] was born.
On 23 November 2015 the parties separated.
Terms of the agreement
I set out below relevant parts of the agreement:
THIS AGREEMENT is made on the 9th day of July 2008
…
RECITAL
1.The Parties expect to be married in the near future. Each has separate property, the nature of which is fully disclosed in the statements of assets and liabilities set out in Schedule 1 and Schedule 2 of this contract.
2.The Parties hereby set forth the following:
(a)their respective rights in and to all property of either owned at the date of their marriage and in and to all property that may be acquired by either or both of them after their marriage: and
(b)their rights regarding spousal support or maintenance.
NOW THIS AGREEMENT WITNESSETH AS FOLLOWS
1.Effect of this agreement.
This agreement shall take effect only upon the solemnisation of the marriage between the Parties. Thereafter each of the parties shall separately retain all rights in the property he or she now owns, including all appreciation as well as property income acquired separately in the future (hereinafter referred to as “Separate Property”) and each of them shall have the unrestricted right to dispose of such Separate Property free and clear of any claim that may be made by the other by reason of their marriage and with the same effect as if no marriage had been consummated between them. Separate Property shall include substitutions and exchanges for such property now in existence, and income and property now in existence, and income and property acquired separately hereafter, and any proceeds therefrom, and from any income derived from such property, and any property purchased from the proceeds or income from such property. Separate Property shall also include gifts and inheritances one party receives from a third party.
2.Disposition of Property
In the event either party should desire to sell, encumber, convey or otherwise dispose of or realise upon his or her Separate Property or any part or parts thereof, the other will, upon request, join in such deeds, bills of sale, mortgages, renunciations of survivorship or other rights created by law or otherwise, or other instruments, as the party desiring to sell, encumber, convey or otherwise dispose or realise upon any request and as may be necessary and appropriate.
3.Joint Property, etc
This Agreement does not restrict, prohibit or condition any conveyance or transfer by the Parties, or either of them alone, of the Separate Property of either party into tenancy in common, joint tenancy, tenancy by the entireties or any other form of concurrent and/or undivided estate or ownership between the parties, or the acquisition of any property in any such form of ownership by the parties. The incidents and attributes of ownership and other rights of the parties with respect of any property so conveyed, transferred or acquired shall be determined under State law and not be governed by or otherwise determined with reference to this Agreement.
4.Separate Property.
The Parties agree that the rights and obligations created by this Agreement have monetary value to the Parties and each party agrees to make no claim to the Separate Property of the other party either during the joint lives of the parties hereto or thereafter, and if a party is not a prevailing party (as may be legally finally determined) with respect to any such claim, to indemnify the other party against all costs, fees and expenses arising from any such claim.
5.Waiver of rights.
Except as otherwise provided in this Agreement, each party hereby waives, releases and relinquishes any and all rights, title or interests whether arising by common law or present or future statute of any jurisdiction or otherwise, in the Separate Property and probate estate of the other, including but not limited to distribution in intestacy, the right of election to take against the will of the other party, any rights accruing by reason of events occurring prior to their marriage, and any such right to dower, courtesy, statutory allowance, and spousal support. Such waiver, release, and relinquishment shall not apply and is not effective with respect to any rights or entitlements a party may have as a surviving spouse under the Social Security laws or with respect to any other governmental benefit or governmental program of assistance. This Agreement shall not limit the right of either party to make such transfers of property to the other as he or she may wish during their respective lifetimes, or by will, or to acquire property jointly in any other form of ownership referenced in clause 3.
6.Dissolution/Separation/Annulment
Except as otherwise provided in this Agreement, each party specifically agrees that neither shall make any claim for it to be entitled to receive any money or property from the other as alimony, spousal support, or maintenance in the event of separation, annulment, dissolution or any other domestic relations proceeding of any kind or nature, and each of the parties waives and relinquishes any claim for alimony, spousal support or maintenance, including but not limited to, any claims for services rendered, work performed, and labour expended by either of the parties during any period of cohabitation prior to the marriage and during the entire length of the marriage. The waiver of spousal support shall apply to claims both pre and post-judgement.
7.Cohabitation
Each party waives any and all rights or claims existing now or hereafter existing with reference to any period of cohabitation, if any, prior to the marriage of the parties, including, but not limited to, any claim to real or personal property.
8.Exclusion of statutory rights
Each party specifically waives any rights, whether created by statue or otherwise, to pension, profit-sharing, or other retirement benefits earned by or credited to the other, including but not limited to any joint or survivorship rights and any right which might arise in the event of the parties’ separation or the dissolution of the marriage. Following the solemnisation of the parties’ marriage, each party shall execute such waivers or other documents as the other may reasonably request to evidence such waiver.
9.Financial Disclosure
Each party has attached a statement of assets and liabilities as exhibits to this Agreement. Each party acknowledges an opportunity to inquire further as to the financial information provided by the other, and each party specifically waives any right to any further disclosure of the property and financial obligations of the other beyond that provided by the exhibits to this agreement.
10. Right to Contest
Nothing contained herein shall limit the right of either party to contest any domestic relations sit between the parties or to file a countersuit against the other party. However in any hearing on such a suit, this Agreement shall be considered a full and complete settlement of all property rights between the parties. In such case, either part shall maintain any claim of demand whatsoever against the other for property, suit money, legal fees and costs which is either inconsistent with or not provided for in this Agreement.
11. Integration
This agreement sets forth the entire agreement between the parties with regard to the subject matter hereof. All prior agreements covenants representations covenants and warranties with respect to the subject matter hereof are waived merged and superseded hereby. This is an integrated agreement.
12.Binding on successors
Each and every provision hereof shall inure to the benefit of and shall be binding upon the heirs assigns personal representatives and all successors in the interest of the parties.
13. Severability
In the event any provision of this Agreement is deemed to be void invalid or unenforceable that provision shall be severed from the remainder of this Agreement so as not to cause the invalidity or unenforceability of the remainder of this Agreement. All remaining provisions of this Agreement shall then continue in full force and effect. If any provision shall be deemed invalid due to its scope or breadth, such provision shall be deemed valid to the extent of the scope and breadth permitted by law.
14. Paragraph headings
The hearings of particular paragraphs and subparagraphs are inserted only for convenience and are not part of this Agreement and are not to act as a limitation on the scope of the particular paragraph to which the headings refers.
15. Modification
This Agreement may be modified superseded or voided only by written agreement of the parties. Further the physical destruction or loss of this Agreement shall not be construed as modification.
16. Acknowledgements
Each party acknowledges that he or she has had an adequate opportunity to read and study this Agreement, to consider it and to consult with solicitors individually selected by each party, without any form of coercion duress or pressure. Each party acknowledges that he or she has examined the Agreement before signing it, and has been advised by their independent legal counsel concerning the effect of the agreement on the rights of that party and the advantages and disadvantages at the time that the advice was provided, to that party of making the agreement. In the light of such circumstances as were at the time of this agreement reasonably foreseeable the parties agree that the provision of this agreement is fair and reasonable.
17. Jurisdiction and proper law of contract
The parties agree that this agreement is governed by the laws of the State of Victoria, Australia and any dispute arising from or in connection with this agreement shall be subject to the exclusive jurisdiction of the courts in the State of Victoria, Australia.
…
SCHEDULE 1
PROPERTIES OF MS SQUIBB REFRRED TO IN THIS AGREEMENT
1.Commercial property at Property A in the State of Victoria
2.Business – The Business A at Property A Victoria
3.Superannuation
4.Bank accounts in her name
5.Shares in her name
6.Benefits from insurance policies
7.Motor Car
SCHEDULE 2
PROPERTIES OF MR GRAHAM REFRRED TO IN THIS AGREEMENT
1.Commercial property:
Joint owner: Property B (country omitted).
2.Residential Property:
Joint owner: Property C (country omitted).
The agreement contains signed Certificates of Independent Legal Advice. These are not dated. No issue is raised in relation to the certification process.
The Application
The wife filed an application in a case on 30 January 2018. For the purposes of these proceedings that application sought: (copied exactly)
1.That the Wife be relieved from her obligations to make further full and frank disclosure of her financial position until such time as the question of the validity, applicability or effectiveness of the binding financial agreement are heard and determined.
2.That pursuant to Rule 17.02 of the Federal Circuit Court Rules 2001, the Court shall determine all questions of the validity, applicability of effectiveness of the financial agreement of the parties dated 9 July 2008 as a separate issue and the proceedings be bifurcated for that purpose.
3.Such further and other interim orders as may be deemed appropriate by this Honourable Court.
4. That the Husband pay the Wife’s costs of an incidental to these proceedings.
In support of that application, the wife filed affidavits on 30 January 2018 and 9 May 2018.
The 30 January 2018 affidavit set out the wife’s version of the background, procedural history, terms of the agreement, background to entering the agreement, arrangements subsequent to entering into the agreement and attempts to settle the issue.
The 9 May 2018 affidavit repeated and expanded on the matters raised in the 30 January 2018 affidavit. The wife relied solely on the latter affidavit during the 24 May 2018 hearing.
At paragraph 16 of her affidavit sworn 9 May 2018 the wife stated in relation to the background to entering into the agreement: (copied exactly)
16.Starting in about 2008, in the context of talking about getting married, the Husband and I had had several lengthy discussions about entering into a Financial Agreement. I explained the following reasons as to why I wish to enter into a Financial Agreement to regulate our finances in the event of separation:
(a)I had invested all my money as well as borrowings from my father into the business, Business A and had worked hard to build a successful business and becoming financially secure and independent;
(b)I had the expertise in operating such a business and this personal expertise was what, I believed, made the business successful;
(c)As the business was my sole source of income I was concerned that it be protected for my future financial security should the relationship fail.
17.I recall that during these conversations the husband said to me words the effect “I love you as a person. I am not marrying you for your money”. He also said words the effect “the business is yours”.
18.The Husband and I had a number of discussions about what our Agreement would say, and how we wanted it to be drafted. I recall that in our negotiations the Husband said to me words to the effect “I have properties in (country omitted) that I would also like protected in the agreement” I responded words the effect “that’s fine. I agree”.
19.It was the mutual intention of the Husband and I that the Agreement would be put in place to set out the property that we would each receive in the event of separation and to waive our rights to property settlement or to seek spousal maintenance from each other.
There was no objection to the statement of the wife in paragraph 19 of her affidavit. The evidence of the pre contractual negotiations is admissible to establish the objective background facts known to both parties and is relevant to the claim for rectification: see Euphoric Pty Ltd v Rydelar Pty Ltd [2006] NSWSC 2 at [31]- [33].
The wife filed a Further Amended Reply on 9 May 2018 where she sought: (copied exactly)
1.That pursuant to Section 90KA of the Family Law Act (Cth) (Act) the Financial Agreement executed by the Husband and the Wife dated 9 July 2008 (Financial Agreement) be rectified such that it is amended to express that the Financial Agreement is made pursuant to Section 90B of the Act.
2. That this Honourable Court make a declaration that the Financial Agreement be and is hereby binding on the parties.
3. That pursuant to Section 90KA of the Act, Clause 17 of the Financial Agreement be rectified to express that the applicable law governing the Financial Agreement is the Family Law Act 1975 (Cth), and to give effect to this order clause 17 be expressed as follows:
The parties agree that this agreement is governed by the Family Law Act 1975 (Cth) and any dispute arising from or in connection with this agreements shall be determined by the Courts exercising jurisdiction under the Family Law Act 1875 (Cth).
In her outline of case filed 22 May 2018 the wife submits that the agreement is a binding financial agreement for the purposes of s.90B of the Act: (copied exactly)
24.The BFA when read in its totality and by reference to its operative terms, clearly displays an intention of the parties to enter into an agreement before their marriage in relation to their property and spousal maintenance issues.
She further submits that the agreement on its face provides that: (copied exactly)
…
10.The Financial Agreement provides that in the event of separation the Wife is to retain all assets, liabilities and financial resources in her ownership, possession and control at the time of entering into the agreement. Such items being:
(a)Commercial premises at Property A (business premises);
(b)Business known and operated as Business A operated out of the commercial premises (business);
(c)Her superannuation;
(d)Funds in accounts in her name;
(e)Shares held in her name;
(f)Any benefit from any insurance policies held in her name; and
(g)Her car.
11.Pursuant to the terms of the Financial Agreement, in the event of separation the Husband was to retain all assets, liabilities and financial resources in his ownership, possession and control at the time of entering into the agreement. Such items being:
(a)Commercial property, jointly owned by the Husband and another, located at Property B (country omitted).
(b)Residential property, jointly owned by the Husband and another, located at Property C (country omitted), ((COUNTRY OMITTED) properties).
12.The Financial Agreement also provides that there is to be no spousal maintenance payable by either of the parties.
The husband filed a response on 2 February 2018 and filed affidavits on 2 February 2018, 11 May 2018 and 21 May 2018.
The 2 February 2018 affidavit set out the factual background, parties financial contributions, purchase of properties and husband’s employment as (occupation omitted) of (employer omitted).
The 11 May 2018 affidavit addressed the circumstances of the parties work at the Business A business and the signing of the Agreement. At paragraph 5 of that affidavit the husband states: (copied exactly)
…
(b)We did not have many discussions in relation to the signing of an agreement before the marriage as the Wife alleges. The Wife just told me once that she wanted to protect her small Business A business as it was her only source of income and she wanted me to sign an agreement before our marriage and I agreed.
She asked me if I had any property in (country omitted) and I gave her the address of 2 properties in (country omitted) in which I had some interest together with my parents and my sister. I did not say those words she alleged in paragraph 18 of her Affidavit.
(c)I deny the allegations in paragraph 19 of the Wife’s affidavit.
(d)The Wife gave instructions to her Solicitors to draft the agreement and I do not know what she told them. I did not speak to her Solicitors.
(e)When the Agreement was drafted, I went with the Wife to see Mr Francis Lim with 2 copies of the Agreement signed by the Wife. Mr Francis Lim explained the terms of the Agreement to me and gave me advice and I signed it in his presence. I headed two copies of the Agreement to the Wife after I signed it.
The 22 May 2018 affidavit corrected a mistake in the 11 May 2018 affidavit.
In his outline of case filed 22 May 2018 at paragraph 2 the husband sought for the agreement to be set aside with costs for the following reasons: (copied exactly)
(a)The Pre-nuptial Agreement is governed by the laws in Victoria and the State Courts in Victoria have exclusive jurisdiction.
(b)Application in a Case did not seek rectification of the Pre-nuptial Agreement.
(c)No clear and convincing proof that there was a common intention that the Pre-nuptial Agreement is a Binding Financial Agreement made pursuant to section 90B of the FLA.
(d)Clear proof that the Pre-nuptial Agreement is in fact a Pre-nuptial Agreement.
(e)There is no “clear and convincing proof” that the Pre-nuptial Agreement does not embody or reflect the final intention of the parties because of a mutual mistake.
(f)Even if there was unilateral mistake on the part of the Wife, the Husband was unaware of it, the Pre-nuptial Agreement should be set aside and not rectified.
(g)The Pre-nuptial Agreement is void and unenforceable because it has many uncertain and ambiguous terms.
(h)The proper order to be made under section 79 of the FLA was not as set out in the Pre-nuptial Agreement as it does not take into account contributions of the parties in the acquisition, improvement and preservation of the properties as well as contribution to the welfare of the family.
(i)Events after the signing of the Pre-nuptial Agreement made it unjust and inequitable to the Husband if it is rectified to bring it under section 90B of the FLA and enforced against him because:
(i) The Wife used funds earned from their joint efforts to pay the loans to purchase the property situated at Property A (“Property A Property”) and the Business A.
(ii) The Property A Property and the Business A appreciated in value as a result of the Husband’s financial and non-financial contributions.
Procedural History
This matter first came before the Court on the initiating application filed by the wife on 11 October 2016.
I made Interim Orders in terms of the Minute of Consent signed by the parties on 16 October 2017 and listed the matter for final hearing on
10 May 2018.
In light of the wife’s application in a case filed 30 January 2018 regarding the enforceability of the agreement I made orders on 20 March 2018 vacating the 10 May 2018 hearing date and fixing the issue of enforceability of the agreement to a 1 day hearing on 24 May 2018.
The Relevant Parts of the Act
Section 71A in Part VIII of the Act provides that:
(1)This Part does not apply to:
(a)financial matters to which a financial agreement that is binding on the parties to the agreement applies; or
(b)financial resources to which a financial agreement that is binding on the parties to the agreement applies.
(2)Subsection (1) does not apply in relation to proceedings of a kind referred to in paragraph (caa) or (cb) of the definition of matrimonial cause in subsection 4(1).
“Financial agreement” is defined in s.4 of the Act as:
…an agreement that is a financial agreement under section 90B, 90C or 90D, but does not include an ante-nuptial or post-nuptial settlement to which section 85A applies.
The expression “financial matters” is defined in s.4:
“financial matters” means:
(a)in relation to the parties to a marriage - matters with respect to:
(i)the maintenance of one of the parties; or
(ii)the property of those parties or of either of them; or
(iii)the maintenance of children of the marriage; or … (otherwise not relevant)
Section 90B deals with pre-nuptial agreements and provides:
(1)If:
(a)people who are contemplating entering into a marriage with each other make a written agreement with respect to any of the matters mentioned in subsection (2); and
(aa) at the time of the making of the agreement, the people are not the spouse parties to any other binding agreement (whether made under this section or section 90C or 90D) with respect to any of those matters; and
(b)the agreement is expressed to be made under this section;
the agreement is a financial agreement. The people may make the financial agreement with one or more other people.
(2)The matters referred to in paragraph (1)(a) are the following:
(a)how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of the spouse parties at the time when the agreement is made, or at a later time and before divorce, is to be dealt with;
(b)the maintenance of either of the spouse parties:
(i) during the marriage; or
(ii) after divorce; or
(iii) both during the marriage and after divorce.
(3)A financial agreement made as mentioned in subsection (1) may also contain:
(a)matters incidental or ancillary to those mentioned in subsection (2); and
(b)other matters.
(4)A financial agreement (the new agreement) made as mentioned in subsection (1) may terminate a previous financial agreement (however made) if all of the parties to the previous agreement are parties to the new agreement.
A financial agreement becomes binding if s.90G is complied with.
That section provides:
(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 all 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.
Note:For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.
(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.
(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.
In relation to the application seeking rectification of the agreement, the Court has power to make any of the types of orders traditionally made by courts of common Law and equity in relation to contracts by virtue of s.90KA, which provides:
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.
Section 90F(2) is also relevant. It provides:
(2)To avoid doubt, a provision in an agreement made as mentioned in subsection 90B(1), 90C(1) or 90D(1) that provides for property or financial resources owned by a spouse party to the agreement to continue in the ownership of that party is taken, for the purposes of that section, to be a provision with respect to how the property or financial resources are to be dealt with.
Consideration
The wife’s principal contention is that read in its totality and in particular by reference to its operative terms, the document evinces an intention of the parties to enter an agreement prior to their marriage in relation to property and spousal maintenance issues. The applicant points to the defect in the document in that the document fails to state that it is made under s.90B of the Act and thereby fails to comply with the definition of a financial agreement in the Act.
As is noted in Senior & Anderson (2011) FLC 93 – 470 at [88] and [89], the term “binding financial agreement” is not defined in the Act rather, the Act refers to a “financial agreement”. Section 4 of the Act provides that “financial agreement” has two essential ingredients the first being that there must be “an agreement” and the second that there must be an agreement made under either ss.90B, 90C or 90D. Agreement is not defined and therefore carries its ordinary natural meaning and the principles of law and equity apply so as to vitiate the agreement if the relevant circumstances in order to do so are made out.
In that case, all the members of the Full Court agreed that the agreement could be rectified in accordance with legal and equitable principles to correct references to s.90C to become s.90D (the majority were of the view that the agreement could not be rectified to cure a defect in the certification process). As noted above, that issue does not arise in this matter.
It was therefore submitted by the wife that the ordinary principles of construction of a contract and rectification should be applied in order to rectify the agreement such as to make specific reference to s.90B and to sever those parts of the agreement which are plainly inapt. In particular that clause 17 should be rectified so as to provide that the parties agree that this agreement is governed by the Act and that any dispute arising from or in connection with the agreement shall be determined by the courts exercising jurisdiction under the Act.
Both parties agree that the financial agreement as drafted is not a model of clarity and it plainly has not been drafted by a person specifically on notice of the legislative provisions governing Financial Agreements as defined by the Act.
The document bears all the hallmarks of having been the subject of an internet search and then being downloaded and completed under the misapprehension that it complied with all the legal requirements to give effect to its terms.
According to the reasoning of Strickland J and Murphy J in Senior & Anderson (supra), quoted by Young J in Sullivan & Sullivan [2011] FamCA 752 at [54]:
…the preliminary questions for determination are:
Whether the Agreement between the parties purporting to be a financial agreement pursuant to s.90B is an “agreement” according to the principles of contract law and equity in view of 90KA; and
Whether the Agreement complies with the requirements of ss.90B and/or 90C of the Act.
In this case the agreement does not comply with ss.90B or 90C of the Act because it fails to state that it is made under s.90B of the Act and therefore fails to comply with the definition of financial agreement in s.90B.
This raises two questions:
a)Can the agreement be rectified to be a Financial Agreement; and
b)If so, is it a binding agreement pursuant to s.90G of the Act?
In Sullivan & Sullivan [2011] FamCA 752 Young J set out the relevant authorities and principles in relation to interpretation of and rectification of a financial agreement for the purposes of Part VIIIA of the Act.
At [82] he made reference to ASIC v Fortescue Metals Group Ltd & Anor[1] Keane CJ, Emmett and Finkelstein JJ agreeing in support of the proposition that strive to uphold bargains:
122.It is well-established that the courts strive to uphold bargains: Hillas & Co Ltd v Arcos Ltd (No 2) [1932] UKHL 2; (1932) 147 LT 503. To that end, the courts will construe the terms of an agreement with an inclination to give effect to the intention of the parties, even if that intention has been obscurely expressed: Australian Goldfields NL (in liq) v North Australian Diamonds NL [2009] WASCA 98, esp at [6]-[8]. Further, the courts may, where circumstances permit, apply objective standards of reasonableness to prevent the intention of the parties being defeated.”[2]
[1] [2011] FCAFC 19; (2011) 190 FCR 364
[2] Overturned on appeal but not on this point see Fortescue Metals Group Ltd v Australian Securities and Investments Commission [2012] HCA 39
The role of the Court is to interpret contracts to give effect to their discernible purpose. The court also proceeds on the basis that where two constructions of an instrument are equally plausible, upon one of which the instrument is valid, and upon the other of which it is invalid, the court should lean towards that construction which validates the instrument: Caltex Australia petroleum Pty Ltd v Commissioner of Taxation (2008) 173 FCR 359 at [170]. As is noted in “The Interpretation of Contracts in Australia”, Lewison and Hughes at [7.15]:
“…the principal is based upon the presumption is that “the parties are unlikely to have intended to agree to do something – – – legally ineffective” citing BCCI v Ali [2002] 1 AC 251 at 269 per Lord Hoffman.
In my view, on the face of the document the parties intended that they enter into a binding enforceable agreement before their marriage in relation to financial matters. It is stated that the agreement will take effect “only upon the solemnisation of the marriage between the parties”. As the parties intended the document to be a binding agreement I accept the submission that the parties intended this to be an agreement made under part VIIIA of the Act and not an agreement that was a void prenuptial agreement.
In my view rectification is available to cure what is plainly the legal nonsense created by clause 17 of the agreement in its current terms and rectification to make reference to the jurisdiction of the Act gives effect to the clear intention of the parties. I note the submission of the husband that the entitling of the document as a “Pre–Nuptial Agreement” may tend to indicate that is what the parties agreed here, however I am of the view that the parties intended to have an enforceable financial agreement and the use of that does not affect the substance of the submissions put by the wife. Similarly, rectification is available to amend the document so that it includes a reference to it being made pursuant to s.90B of the Act.
The evidence of the husband does not suggest that it was not intended that there be an enforceable financial agreement between the parties that would give effect to the terms of the agreement reached.
That the rectification is extensive is not a bar to the Court making the orders. The Court has the power to correct errors that go beyond minor verbal infelicities and errors of grammar and spelling: Chartbrook Ltd v Persimmon Homes Ltd [2009] AC 1101 at [25]:
What is clear from these cases is that there is not, so to speak, a limit to the amount of red ink or verbal rearrangement or correction which the court is allowed. All that is required is that it should be clear that something has gone wrong with the language and that it should be clear what a reasonable person would have understood the parties to have meant. In my opinion, both of these requirements are satisfied.
I accept the wife’s submissions as to content of the document (set out at paragraph 20) above and am of the view that it can and should be rectified to make reference to s.90B of the Act and to rectify paragraph 17 as noted above.
I do not accept the husband’s submissions, set out above in paragraph 2(g) of his outline of case, that the agreement is void and unenforceable due to uncertain and ambiguous terms. Adopting the language of Menzies J in Thorby v Goldberg (1964) 112 CLR 597 at 607:
…the language used is not so obscure and incapable of any precise or definite meaning that the court is unable to attribute to the parties any particular contractual intention.
I will briefly address the husband’s submissions in paragraph 2(h) and 2(i) of his outline of case. In the former the husband submitted that the agreement did not account for both parties’ contributions to the acquisition, improvement and preservation of the properties and contribution to the welfare of the family. This fails on the basis that it is not for the Court to make good a bad bargain. Having rectified the agreement, the fact that the outcome is disadvantageous to the husband is not enough of itself to preclude the agreement applying. In the latter, the husband submitted that events after the signing of the agreement mean it is unjust and inequitable to rectify the agreement. Counsel for the wife submitted that the question of what property is the subject of the agreement is a matter for trial and I accept this. Therefore, the events referred to in 2(i) are a matter for trial.
For these reasons the court will make the orders sought in the applicant’s application save that it will reserve the costs of the application to further hearing.
The proceeding will be listed for directions hearing for appropriate orders to be made for the efficient conduct of the trial.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Judge McNab
Date: 13 July 2018
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