Suess & Suess
[2024] FedCFamC1F 175
•20 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Suess & Suess [2024] FedCFamC1F 175
File number(s): PAC 3016 of 2022 Judgment of: BERMAN J Date of judgment: 20 March 2024 Catchwords: FAMILY LAW – FINANCIAL AGREEMENT – Where the wife seeks that the financial agreement be set aside and orders be made pursuant to s 79 of the Family Law Act 1975 (Cth) – Where the husband seeks an order that the financial agreement be declared binding – Consideration of legal advice provided – Consideration of whether legal advice was so incompetent that it amounted to no advice – Consideration of s 90G(1)(b) of the Act – Consideration of whether the Court is required to have regard to the quality and accuracy of the advice – Consideration of valuation of an asset – Consideration of unconscionable conduct and undue influence – Initiating Application dismissed. Legislation: Family Law Act 1975 (Cth) ss 4, 71A, 90G, 90C, 90K
Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) rr 7.11, 7.20. 7.21
Cases cited: Abrum & Abrum [2013] FamCA 897
Anderson v Anderson (2000) FLC 93-016
Hoult & Hoult (2013) FLC 93-546
Kaimal & Kaimal [2020] FamCA 971
Kostres & Kostres (2009) FLC 93-420
Michaels & Vidal [2022] FedCFamC1F 252
Ruane & Bachmann-Ruane and Anor [2009] FamCA 1101
Thorne v Kennedy [2017] HCA 49
Wallace & Stelzer and Anor (2013) FLC 93-566
Division: Division 1 First Instance Number of paragraphs: 206 Date of hearing: 17-18 April 2023 & 16-19 October 2023 Place: Heard in Parramatta, delivered in Adelaide Counsel for the Applicant: Ms Clarke Solicitor for the Applicant: LCI Legal Counsel for the Respondent: Mr Dura SC Solicitor for the Respondent: Walkden Law and Mediation ORDERS
PAC 3016 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS SUESS
Wife
AND: MR SUESS
Husband
ORDER MADE BY:
BERMAN J
DATE OF ORDER:
20 MARCH 2024
THE COURT ORDERS THAT:
1.The Court declares that pursuant to s 90G(1B) of the Family Law Act 1975 (Cth), the financial agreement entered into between the applicant and the respondent on 11 December 2019 is binding on the parties.
2.The Amended Initiating Application filed 21 October 2022 be dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BERMAN J
INTRODUCTION
By Amended Initiating Application Filed 21 October 2022, Ms Suess (“the wife”) seeks a declaration that the Financial Agreement entered into between the parties on 11 December 2019 (“the financial agreement”) be declared non-binding and/or that it be set aside. The wife contends that the agreement is not compliant with s 90G of the Family Law Act 1975 (Cth) (“the Act”). As an alternative position, the wife contends that if the Court does consider that the financial agreement complies with s 90G of the Act, it should be set aside pursuant to s 90K(1)(a), (b) and (e) of the Act.
In the event that the Court sets aside the agreement, the wife seeks orders pursuant to s 79 of the Act for an equal division of the net non-superannuation assets.
By Amended Response to Initiating Application filed 28 October 2022, Mr Suess (“the husband”) seeks that the Initiating Application be dismissed, and the wife pay the husband’s costs on an indemnity basis.
The proceedings were bifurcated and the only aspect of the matter that was considered during the final hearing was the status of the financial agreement.
Pursuant to orders dated 18 July 2022, the wife annexed a Points of Claim to her Amended Initiating Application dated 21 October 2022 setting out the grounds and particulars of her claim.
There is no dispute that at all times throughout the settlement negotiations, the drafting, and executing of the financial agreement, the wife was legally represented by her previous solicitor, Ms B. It is also not disputed that s 90G(1)(c) of the Act has been properly complied with namely, that the parties were provided with a certificate by their solicitors as set out at annexure G and H to the financial agreement.
It is however contended by the wife that Ms B was not possibly able to provide her with proper advice about the effect of the agreement and the advantages and disadvantages in circumstances where the advice was based upon a balance sheet that was prepared by the husband’s finance professional (“Mr C”) together with assistance from D Pty Ltd’s finance professional (“Ms E”), and the parties’ three adult children.
The wife also submits that at the time of settlement negotiations, documents provided by the husband and Mr C were relied upon to reach a decision as to the value that should be assigned to various assets most notably, D Pty Ltd. The wife considers that the husband failed to provide full and frank disclosure and accordingly, there was a misrepresentation of the asset pool.
The wife brings the Courts’ attention to several assets that were excluded entirely from the agreement including a property situate at 1 F Street, Town G and a water license. She further submits that the value attributed to the parties’ business failed to consider any goodwill and further omitted several assets including plant and equipment.
In the circumstances, the wife argues that Ms B was not properly able to provide the relevant and necessary legal advice given that the advice provided was predicated upon an incorrect source document and incorrect, and incomplete, financial information provided by the husband and Mr C.
The issue for determination is whether the legal advice provided by Ms B could satisfy the requirements of s 90G of the Act.
As an alternative position, if the Court finds that the agreement should be binding, the wife considers that the agreement should be set aside in circumstances where the husband did not provide full and frank disclosure, the wife considers the husband and the parties’ three adult sons exerted pressure on her to agree to the settlement and that the husband misrepresented the asset pool.
The husband refutes the allegations made by the wife and maintains that the financial agreement remains valid, and that the wife has failed to demonstrate any basis to disturb the agreement.
The husband highlights that the wife had legal representation at all times throughout the process, the wife was the one who suggested the parties enter into a financial agreement and that Ms B drafted the agreement.
It is not in dispute that no goodwill was attributed to D Pty Ltd however, the husband argues that it is not a requirement that the parties obtained a formal valuation report and further, that the same was discussed between the parties, Ms B and Mr C but a decision was reached to forgo obtaining a valuation so as to resolve matters expeditiously.
BACKGROUND
The wife was born in 1972 and is now 52 years of age. The husband was born in 1969 and is 54 years of age.
The wife is presently self-employed. The husband is self-employed on a full-time basis in the parties’ former business, D Pty Ltd (“the business”).
The parties were married in 1990 and commenced cohabitation shortly thereafter. They separated on a final basis on 24 June 2018 and a divorce was granted in 2021.
There are four adult children of the relationship namely, Mr H born 1991, Mr J born 1993, Mr K born 1997 and Ms L born 2000 (collectively “the adult children”). The adult children are now involved in the parties’ business and were significantly involved in the settlement negotiations.
At the time of marriage, the wife had about $6,000 in savings and the husband owned a one third interest in a property situate at 2 F Street, Town G. The husband had purchased 2 F Street, together with his two brothers, in 1988 from the wife’s parents.
The parties commenced living together around about the time of marriage in a property that was owned by the wife’s parents. They resided there, rent free, for a period of about three years.
In 1993, the parties and the husband’s two brothers purchased a property situate at 1 F Street, Town G for approximately $300,000. The parties resided at 1 F Street until 2013.
In 1999 the parties purchased an investment property situate at N Street, Suburb M (“the Suburb M property”) for approximately $430,000 funded by way of borrowings from P Bank of approximately 217,000 and the remainder from the parties’ savings.
In 2005, the parties in partnership purchased another investment property at Q Street, Suburb R (“the Suburb R property”) for approximately $765,000. The purchase was funded by way of the parties’ savings together borrowings of about $612,000 from NAB Bank.
In 2013, the parties purchased a property at S Street, Town G (“the S Street property”). This property was purchased by the partnership, Suess Partnership. The parties moved into the S Street property at the time of purchase and it became the matrimonial home.
Between 1993 and 1995 several partnerships were established as between the husband’s parents, the wife and the husband and the husband’s two brothers together with their respective wives. All four partnerships operated the business and continued until 1995 when it became a corporate entity known as T Pty Ltd. At this time, all of the previous partners became Directors.
In 2003 the parties established the Suess Partnership (“the partnership”).
T Pty Ltd continued to operate until 2008 when the husband’s parents semi-retired and succession planning discussions commenced. Following discussions with an accountant, it was agreed that three new companies would be incorporated, and the assets of T Pty Ltd were equally distributed between the three companies. The effect being that the parties were separate and independent from the entities associated with the husband’s parents, brothers and their wives.
The Suess partnership incorporated D Pty Ltd. The partnership also owned the parties’ property portfolio and various shares.
Both parties worked in D Pty Ltd. The wife was responsible for attending to the administration, accounting, orders, stocktake and inventory and the husband ran the labour and dealing with clients.
D Pty Ltd employed the parties’ children who were paid a wage from the company. On advice from the parties’ finance professional, Mr C, the children were also given a distribution each month from the partnership.
The parties were paid a wage from the income received from D Pty Ltd and any profit was distributed between the parties by way of dividend. The wife considers that she would make a combined dividend payment to her and the husband of approximately $24,000 each month.
At the time of separation, the wife remained in the S Street property and the husband ultimately left and moved in with their son, Mr J. In December 2018, the wife moved in with her new partner at which time, the husband reoccupied the S Street property.
The wife contends that in or about July 2018, a finance professional working for D Pty Ltd, Ms E, gave her a business card for a lawyer, Ms B who the wife ultimately instructed. The husband considers that the wife approached him to discuss the division of assets and an agreement was reached to equally divide the property between the parties.
The parties instructed U Lawyers to provide legal advice in relation to the partnership, restructuring options and taxation implications. There were two meetings involving U Lawyers. The wife was not present at the first meeting.
The second meeting took place in or about March 2019. At the second meeting, the parties, U Lawyers, Ms B, Mr C, Mr V and the parties’ sons were present. The parties agree that discussions were had between the attendees as to how the assets would be equally divided such that the husband would retain D Pty Ltd and the wife would receive a settlement sum. The wife considers that Mr V reviewed the financial information and asserted that he would prepare a plan and advice for restructuring D Pty Ltd based upon the total asset pool being approximately $16,000,000. It was at this juncture that the wife considered that her expectation was that her half share of the asset pool would be approximately $8,000,000.
Between March 2019 and August 2019, Mr C was instructed to provide the parties with a balance sheet of the assets and liabilities. The husband considers that Mr C had contacted Ms B and was transparent about providing financial advice and assistance to both parties. The husband considers that numerous conversations were had as between the parties, Ms B and Mr C about the property division including, the development of a balance sheet that the parties ultimately used during their negotiations.
DOCUMENTS RELIED UPON
The wife relies upon the following documents:-
(1)Amended Initiating Application filed 21 October 2022;
(2)Affidavit of the wife filed 3 March 2023 (“the wife’s trial affidavit”);
(3)Affidavit of Mr W filed 3 March 2023;
(4)Affidavit of Ms X filed 3 March 2023; and
(5)Affidavit of Ms L filed 10 April 2022.
The husband relies upon the following documents:-
(1)Response to Initiating Application filed 28 October 2022;
(2)Affidavit of the husband filed 15 March 2023 (“the husband’s trial affidavit”);
(3)Affidavit of the husband filed 24 March 2023 (“the husband’s reply affidavit”);
(4)Affidavit of Mr Y filed 15 March 2023;
(5)Affidavit of Mr K filed 15 March 2023; and
(6)Affidavit of Mr J filed 15 March 2023.
Each party filed a Case Outline and written submissions that they sought to rely upon.
LEGISLATIVE PATHWAY
Section 71A(1) of the Family Law Act 1975 (Cth) (“the Act”) provides:
71A This Part does not apply to certain mattes covered by binding financial agreements
(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.
Accordingly, property and spousal maintenance orders made pursuant to s 79 of the Act are unable to be made if the parties enter into a financial agreement that is binding.
The consequence is that the Court does not have power to make orders for settlement of property pursuant to s 79 of the Act.
Pursuant to the definition of financial agreement in s 4 of the Act, a financial agreement means:
an agreement that is a financial agreement under section 90B, 90C or 90D, but does not include an anti-nuptial or post-nuptial settlement to which section 85A applies.
Pursuant to s 4 of the Act, 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 either of them; or
(iii) the maintenance of the children of the marriage; or
…
Part VIIIA of the Act provides for the provisions in respect of financial agreements.
The Court retains jurisdiction under Part VIII in respect of property and financial resources not dealt with by a financial agreement. See Kostres & Kostres (2009) FLC 93-420 at [64].
Although no contention was raised by the wife that there was property and/or financial resources not included in the financial agreement and therefore able to be considered pursuant to s 79, there is property situate at 2 F Street, Town G NSW together with the water licence in which the husband held an interest that was not included in the list of legal and equitable interests held by each of the parties as reflected in the schedules to the financial agreement.
By necessary implication, s 71A of the Act only has application if the financial agreement under consideration is binding.
Section 90G(1) of the Act provides for the circumstances when a financial agreement is binding. The present iteration of s 90G(1) provides a follows:
Section 90G When financial agreements are binding
(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.
Whether a financial agreement is binding is to be considered pursuant to s 90G(1A) and (1B) of the Act which provides that:
Section 90G(1A) [Binding nature of financial agreement]
(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.
Section 90G(1B) [Declaration financial agreement binding]
(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.
In the present case, the wife seeks a declaration that the financial agreement is not binding whereas the husband seeks by his enforcement application that the financial agreement is declared binding on the parties.
The parties separated on 24 June 2018, and entered into the financial agreement on 11 December 2019 which predates the divorce order made in 2021. Accordingly, the financial agreement was prepared pursuant to s 90C of the Act which provides that:
90C Financial agreements during marriage
(1) If:
(a)the parties to a marriage make a written agreement with respect to any of the matters mentioned in subsection (2); and
(b)at the time of the making of the agreement, the parties to the marriage are not the spouse parties to any other binding agreement (whether made under this section or section 90B or 90D) with respect to any of those matters; and
(c) the agreement is expressed to be made under this section;
the agreement is a financial agreement. The parties to the marriage 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 during the marriage 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.
The wife contends that the financial agreement entered into by the parties on 11 December 2019 is not binding in that it is not an agreement which complies with s 90G of the Act.
By regard to the Points of Claim set out in the Amended Initiating Application filed 21 October 2022, the wife contends that she was not provided with independent legal advice from a legal practitioner about the effect of the agreement on her rights, and the advantages and disadvantages of entering into a financial agreement.
There are a number of aspects to the wife’s particulars which rely on a contention that Ms B was either not able to provide proper advice in that she did not seek, or was not given necessary information, that would have enabled a consideration by the wife of the advantages and disadvantages of entering into a financial agreement as opposed to a Consent Order pursuant to s 79 of the Act. Alternatively, she contends that any advice given by Ms B was so incompetent that it could not be said that she had discharged her professional obligation and as such, and not withstanding that a certificate of advice was signed, it amounted to no advice.
If that argument is made out by the wife, then the husband relies upon s 90G(1A) of the Act for a determination that the financial agreement is binding even though one or more subsections of s 90G(1)(b), (c) and (ca) are not satisfied.
If the financial agreement is found to satisfy the requirements of s 90G, or is considered to be binding pursuant to s 90G(1A) of the Act, then the Court should set aside the financial agreement pursuant to s 90K(1)(a) of the Act on the grounds that the agreement was not just and equitable in all the circumstances and was obtained by fraud or misrepresentation. In support of the contention pursuant to s 90K(1)(a) the wife sets out the following particulars of claim:
A.The [husband] failed to make full and frank disclosure of the matrimonial pool of assets.
B.The parties separated in June 2019. The Financial agreement was signed on 12 December 2019.
C.The [wife] was, at the time of separation, denied access to the financial details of the matrimonial assets, which included the family business.
D.The [wife] was unable to conduct her own independent investigation of the matrimonial assets and relied upon the [husband] and [Mr C], [finance professional] for the family business, and joint personal [finance professional] for that information.
E.The following assets/contributions were not accounted for in the financial agreement:
i. $600,000 joint contribution, [1 F Street] property;
ii. $7,094 […] shares joint contribution;
iii. $134,000 [D Pty Ltd] plant and equipment not disclosed;
iv. $4,000 [Suess Partnership] asset;
v. Est $1,000,000 Goodwill for [D Pty Ltd];
vi. $303,162.23 cash in the bank (dividends);
vii. $675,500 dividends to family members;
viii. $2,000,000 in stock […];
ix. $177,002 loan to family members;
x. $500,000 loan from [D Pty Ltd] to [Z Pty Ltd];
xi. $500,000 Goodwill for [Z Pty Ltd];
xii. $230,000 loan repayment made prior to financial agreement.
In addition, a formal valuation of the family business was not obtained. The broad position of the wife was that she was not able to conduct her own proper investigation as to the assets, liabilities and therefore the value of the matrimonial assets and was persuaded by the parties’ finance professional to accept the valuation of matrimonial assets as presented during the negotiations between the parties.
As considered, to the extent that an asset has not been brought to account as part of the financial agreement, the wife does not lose the ability to bring Part VIII proceedings in respect of assets not caught by the agreement.
The wife also asserts that the agreement should be set aside as being void, voidable or unenforceable pursuant to s 90K(1)(b) of the Act. The particulars, as asserted by the wife, are that the husband misrepresented the matrimonial pool by not providing full and frank disclosure in the financial agreement. To that extent, there is the potential for some overlap in respect of the 90K(1)(a) claim.
In addition, the extent to which it is alleged that the husband misrepresented the matrimonial pool of assets is reflected in the disadvantage perceived by the wife in circumstances where the husband had the assistance of the company finance professional, not yet having available any separate valuation evidence and relying upon two of the parties’ sons to provide full and frank disclosure.
The wife is also critical of the involvement of Mr C, being the family and business finance professional.
The wife considers that she was coerced into signing the financial agreement by the representations of the husband and the finance professional by engendering a fear that her refusal to execute the financial agreement may place the business at financial risk and materially affect the financial prospects of the children. In any event, a further aspect was the deadline given to the wife to move out of the family home and purchase an alternate property upon an assurance from the husband that he would assist in obtaining or sourcing a loan for the wife. That purported representation was not fulfilled, and the property purchased by the wife was then sold with the wife suffering a financial loss.
The further basis for the setting aside of the financial agreement pursuant to s 90K(1)(e) of the Act is the contention of the wife that the husband engaged in conduct that was unconscionable and promoted that the wife sign the financial agreement knowing that it did not accurately reflect the property of the parties. An unfortunate aspect of the circumstances surrounding the signing of the financial agreement is the wife’s assessment that the husband involved the three sons of the parties with the threat that unless the financial agreement was concluded the wife’s ability to retain a relationship with them and their children would be placed at risk.
THE TERMS OF THE SIGNED FINANCIAL AGREEMENT
The financial agreement is dated 11 December 2019 however, it appears that the husband signed the agreement on 11 December 2019, and it was then returned to the wife who signed the agreement on 12 December 2019. In its original form, the financial agreement was prepared by Ms B of AA Lawyers upon the wife’s instructions.
The essential terms and provisions are as follows:
·That the parties intended to enter into a financial agreement in the form of a Deed.
·That recital G records that:
·In order to arrange their property affairs and avoid litigation the parties have agreed to enter into this agreement under the provisions of s 90C of the Family Law Act 1975 to deal with the division of their property and their financial resources in the event of the breakdown of their relationship.
·That recital H records that:
·This agreement is intended to deal with the whole of the property and financial resources of the parties now and in the future in the event of the breakdown of their marriage without resort to litigation.
·That recital L records that:
·The parties acknowledge that they are each mature adults who are both well versed in financial matters.
·That Recital M records that:
·The parties acknowledge that each of them has had the opportunity to satisfy himself or herself that the financial circumstances recorded with respect to each of them and this financial agreement and schedules to it are accurate.
·That recital N records that:
·The parties each acknowledge that they have entered into this agreement:
(a)After mature consideration and judgement of their own free will and volition, without any coercion, force or undue influence on the part of the other party or by any other person;
(b)With full understanding and appreciation of its terms, conditions and provisions; and
(c)Not relying upon any representation or promise or expectation except those expressed as stated herein; and
·That recital S records that:
·Mr Suess and Ms Suess each acknowledge that they have had the opportunity but have declined to exercise the opportunity to have the assets, liabilities and financial resources of the other party valued by an independent valuer with skills in either forensic accounting or real estate valuations.
·That the assets of the wife are set out in schedule A, the assets of the husband are set out in schedule B and the joint assets of the parties are set out in schedule C to the financial agreement.
·That paragraph 5 of the financial agreement provides for the method and manner by which the parties intend to divide their property and financial resources.
The gravamen of the agreement is that the parties would retain the assets and liabilities as set out in schedule A and B together with a transfer of assets set out in Schedule C (Joint Assets), as annexed to the agreement, with the focus that the husband would retain the following:-
Asset Agreed estimated value D Pty Ltd $2,400,000 S Street, Town G, NSW (“the S Street property”) $2,600,000 Cash in bank accounts $800,000 1/3 share in 1 F Street, Town G, NSW (“Town G property”) $600,000
The wife would receive the following:-
Asset Agreed estimated value Q Street, Suburb R, NSW (“Q Street property”) $1,100,000 N Street, Suburb M, NSW (“the N Street property”) $1,100,000
In addition, the parties agreed to sell the 925 shares held by the husband and to equally divide the proceeds.
The husband was also to pay the wife a total settlement sum of $1,200,000 upon the signing of the financial agreement which was considered to represent the wife’s share in D Pty Ltd with a further sum of $100,000 to be paid to the wife upon the registration of Z Pty Ltd with the local authority.
Under the heading of “independent legal advice”, the following paragraphs set out the parameters of the legal advice provided to each of the parties:-
That the parties each state and warrant to the other party that as recorded in this agreement and as certified in an annexure to this agreement that before this agreement was signed by him or her, he or she was provided with independent legal advice from a legal practitioner on the following matters:
(a)The effect of the agreement on the rights of that party; and
(b)The advantages and disadvantages, at the time that the advice was provided, to the party of making the agreement.
The lawyer’s certificates for each of the parties contain the following essential terms:
1.This statement is an annexure to the section 90C financial agreement entered into between [the wife] and [the husband].
2.I provided to my client with independent legal advice prior to entering into this agreement as to the following matters:
(a)The effect of this agreement on their rights; and
(b)The advantages and disadvantages, at the time that the advice was provided, to my client of making this agreement.
Ms B of AA Lawyers certified that she was independently instructed by the wife as was Mr Walkden of Walkden Law and Mediation for the husband.
The financial agreement was signed by the husband and his solicitor on 11 December 2019 and then given to the wife’s solicitor who attended upon the wife on 12 December 2019 when the agreement was signed.
There were two subsequent handwritten amendments to the agreement. The first appears at paragraph 5(a) where the reference to “5(v)” was amended to read “5(y)” and to clause “5(u)” where the words “equally divide” are deleted and the following words added at the end of the paragraph “sell forthwith… and immediately divide the sale proceeds equally between them.”
It appears that each of the parties initialled the handwritten amendments, although it is not certain what, if any advice, was given to each of the parties in respect of the amendments. The alterations to each of the affected clauses do not appear to have been initialled by the solicitors for each of the parties. Whilst potentially still problematic, I am satisfied that the amendments accord with the contractual requirements of offer and acceptance and that the alterations initialled by each of the parties demonstrate a clear intention that they are each to be bound by its terms and conditions. In any event, it could not be said that the clauses subject of amendment were fundamental terms.
THE WIFE’S SUMMARY OF ARGUMENT
The wife contends that the agreement is not binding on the parties because:[1]
19.The Wife submits that if the independent legal advice was provided based on an incorrect source document, or incorrect information provided by the Husband, or third party that acted upon the Husband's instructions, a question must arise whether the legal advice could adequately satisfy:
a. The effect of the Financial Agreement on the wife's' rights;
b.The advantages and disadvantages, at the time was provided to the wife of making the Financial Agreement.
Advice provided based on incorrect information cannot be said to satisfy the legislative requirements. If the fundamental basis on which the advice was provided was wrong, this would undermine the basic premise and foundation of the BFA. In these circumstances the Wife could not have received accurate advice on her legal entitlements, and could not therefore, have made an informed choice, or decision.
[1] Wife’s Case Summary Document filed 14 April 2023.
The agreement of the wife is based upon her estimate that assets to the value of $5,630,758.23 were either not included or omitted from the source documents or information provided to the wife prior to the signing of the financial agreement. This is based upon an assertion that the wife relied on the husband and the family finance professional, Mr C, to provide financial disclosure and accurate information as to the construct of the matrimonial pool but in particular, the value of the D Pty Ltd enterprise.
It is further argued by the wife that the agreement should be set aside on the basis of unconscionable conduct based upon the wife’s contention that the parties’ three sons had a financial interest in a settlement being reached between the parties given their involvement in the D Pty Ltd enterprise, were either consciously or unconsciously aligned with the husband and made representations amounting to a threat that if the financial agreement was not signed the wife would be excluded from their lives and those of her grandchildren.
It was also argued that the husband and the parties’ sons were aware of the wife struggling with mental health issues and in some way took advantage of her circumstances.
It is a reasonable assessment that at trial the primary focus of evidence adduced by the wife related to whether the financial agreement was binding arising out of an allegation of suppression of evidence as to value of D Pty Ltd and the nature and quality of the advice provided by her solicitor as opposed to whether the agreement should be set aside on the basis of unconscionable conduct or undue influence.
THE HUSBAND’S SUMMARY OF ARGUMENT
The husband opposes the orders sought by the wife and highlights the following:
(a)It was the wife’s solicitor that drafted the financial agreement;
(b)That at all times the wife was legally represented and presumably received appropriate advice;
(c)The wife had the same access to the D Group finance professionals and was able to obtain financial records, financial statements and necessary collateral documents at the same level as was available to the husband;
(d)The wife had representation leading up to the preparation and execution of the financial agreement whereas the husband only sought legal representation for a few weeks prior to the signing of the financial agreement on 11 and 12 December 2019; and
(e)The husband denies that he misrepresented the pool of assets or that either he and/or the parties sons coerced the wife into signing the financial agreement.
A further relevant consideration is that despite the wife’s assertion as to what should be the value of the property of the parties as opposed to that which is set out in annexure A, B and C to the financial agreement, the wife has not presented any evidence of same for reasons set out below.
Wife’s application to rely upon a business valuation report
By Application in a Proceeding sealed 11 September 2023, the wife sought procedural orders in respect of the final hearing to commence on 13 October 2023 but in particular, she sought the following order:
1.Leave to file and serve on the report titled “Business Value Assessment Report prepared for [D Pty Ltd] dated 22 August 2023” by [Mr DD] of [EE Financial Services].
The wife’s solicitor was the deponent to an affidavit filed 7 September 2023 in support of the application.
The affidavit annexes a report prepared by Mr DD who is described as a finance professional and business advisor with experience in business valuations.
The purpose of the application was to “provide the Court with a professionally estimated value of the business ([D Pty Ltd]) as at the date the parties entered into the Binding Financial Agreement dated 11 December 2019”.[2] The instruction to Mr DD to prepare a valuation report was not the subject of prior consent and the first that the husband knew of the wife’s instructions to Mr DD was when a copy of his report was served on the husband’s solicitors on 24 August 2023. The request was the subject of a prompt objection from the husband’s solicitors on 25 August 2023.
[2] Affidavit of Mr FF filed 7 September 2023, paragraph 6
At paragraph 14 of Mr FF’s affidavit filed 7 September 2023, the following reasons are given as to why no attempt was made to seek the appointment of a single expert witness:
14.…
a.There is a long history in this matter of the [husband] and [Mr C] failing to provide documentation to the [wife].
b.There is similarly a long history in this matter whereby the [wife]’s legal representative, [Ms B] of [AA Lawyers] ("[Ms B]") at the time of the signing of the BFA, either would not, or could not provide the [wife]’s complete file to me.
c.I was advised by Walkden Law, that [Mr C] and [Ms E] (the [finance professional]) did not intend to file an affidavit, nor did they intend, as was advised to the Court on 18 April 2023, to provide a proof of evidence to the [wife]. Further, it was advised that they did not intend to call [Ms B] to give evidence.
The husband’s objection is in part to a consideration of the application of part 7.1 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) (“the Family Law Rules”) and in particular r 7.11(g) namely, “whether there is any previous connection between the expert witness and the party”.
It is conceded that at the various trial management hearings no indication was given as to the intention or even the possibility that the wife would seek to rely upon valuation evidence.
Mr FF confirms that he made contact with Mr DD on or about 27 April 2023. Thereafter the wife’s solicitors sought and obtained information from Mr C which was then provided to Mr DD.
The gravamen of the wife’s application is that Mr DD considered that the value of $2,400,000 that had been attributed to the value of D Group was wholly inadequate in that it did not bring to account some plant and equipment, goodwill, substantial stock and cash at bank.
The application came on for hearing on 14 September 2023 at which time the husband maintained his objection to the orders sought.
It was argued by the husband’s counsel that the preparation of the report had not been the subject of prior notice and no input was given or sought from the husband. No explanation was provided for the delay and given that the application was not for the appointment of a single expert but rather for leave to enable the wife to rely upon separate adversarial evidence, the application should be dismissed.
Mr DD provides financial services for the wife and could not been seen to satisfy r 7.18 of the Family Law Rules. Simply put, Mr DD could not be considered as an independent expert witness.
To the extent that more is required, what was proposed by the wife would not comply with rr 7.20 and 7.21 of the Family Law Rules.
At a more fundamental consideration, the wife acknowledges that she was given an opportunity to undertake a formal valuation of D Pty Ltd at the time negotiations occurred, but she did not elect to do so. She was not prevented by the husband from undertaking such an exercise.
The wife’s counsel conceded that it was her responsibility to overcome the assumption that she had received independent legal advice in circumstances where the financial agreement is clear as to the opportunity given to each of the parties to conduct relevant enquiries as to the asset pool and ultimately, the value to be attributed to each of the assets as set out in the annexures.
I determined that leave should not be given to the wife to rely upon the evidence of Mr DD. I considered that the application was misguided in that there was no proper explanation given for the delay even though there was ample opportunity as and from the date of the making of trial directions.
Mr DD could not be considered as an expert pursuant to the Family Law Rules and if leave was given, then the trial would need to be adjourned to consider whether a single expert should be appointed or the parties should be given leave to rely upon their separate valuation evidence. I foreshadowed that following the evidence of Mr C, the extent to which further valuation evidence might be required could be further considered.
As matters transpired, the issue of a retrospective valuation of D Pty Ltd as at the date of the signing of the financial agreement was not revisited.
The orders as sought by the wife in her Application in a Proceeding were dismissed. The consequence is that there is some force to the argument put on behalf of the husband that there is no evidence before the Court as to the value of D Pty Ltd than appears in the financial agreement.
WAS EACH PARTY GIVEN ADVICE AS TO THE EFFECT OF THE FINANCIAL AGREEMENT ONCE SIGNED?
The wife’s position as to the consequence of the advice given to her by Ms B is somewhat mercurial. Initially the wife considered that Ms B’s advice, whilst well meaning, was significantly undermined by the lack of reliable information as to the assets of the parties and the proper value that should be ascribed thereto. In final submissions, the argument morphed to a submission that the conduct of Ms B was unprofessional and incompetent to a level that would enable the Court to find that the advice given could be considered as no advice at all.
The husband argues that he was not privy to the advice given by Ms B to the wife and that the wife sought legal advice early in 2019 which led to the wife’s solicitor preparing the financial agreement without any impediment to the wife conducting whatever inquiry or investigation as to the state of the asset pool as she may advised.
The wife acknowledges that she bears the burden of proof in establishing the basis for her contention that the husband was not entitled to rely upon the certificate of independent legal advice and the acknowledgement given by the wife in annexure H to the financial agreement that she received independent legal advice from Ms B before signing the financial agreement as to the following:
(a)The effect of the Financial Agreement on my rights; and
(b)The advantages and disadvantages, at the time that the advice was provided to me of making the Financial Agreement.
In addition, the wife acknowledged that she received the certificate of independent legal advice both from her solicitor and from the solicitor for the husband.
The Full Court in Wallace & Stelzer and Anor (2013) FLC 93-566 said as follows:-
103.Although there appeared to be some suggestion in the husband’s case before us that in a case such as the present the court is required to consider the accuracy of the legal advice provided, we did not understand that issue to be ultimately pressed. But in any event we note that in the recent Full Court decision of Logan & Logan [2013] FamCAFC 151, and relying on Hoult, it was held that the only enquiry necessary is as to whether advice was given, and not as to the content of that advice.
In Ruane & Bachmann-Ruane & Anor [2009] FamCA 1101, Cronin J considered that the only requirement was that the parties obtain legal advice as opposed to the quality or nature of the advice or even whether the advice was accepted.
I consider that whilst the correctness of the advice may not be a relevant inquiry, if the evidence supported a finding that notwithstanding a certificate, there had either not been any advice given or that it was so cursory or only tangentially related to the agreement, that may well allow a finding that no advice was given.
In Hoult & Hoult (2013) FLC 93-546 Thackray J said as follows:
61.I recognise the potential forensic difficulty faced by a party who seeks to uphold a financial agreement when the other party claims not to have received the prescribed legal advice. However, the fact there is difficulty in proving something within the knowledge of only the other party and their solicitor does not mean the legal burden of proof passes to the party who seeks not to be bound by the agreement.
62.Importantly, however, I consider that once the party seeking to rely upon the agreement produces in evidence the certificate signed by the other party’s solicitor, there is a forensic obligation on the other party to adduce evidence which would disprove, or at least throw into doubt, the inference or conclusion to be drawn from the certificate (especially when read with the recital in the agreement to the same effect).
In Kaimal & Kaimal [2020] FamCA 971 Alstergren CJ was required to determine whether the wife received legal advice, and if so, if the legal advice provided met the requirement of s 90G(1)(b) of the Act. His Honour stated that:
16.The requirement for legal advice is an important legislative safeguard. An effective binding financial agreement ousts the Court’s jurisdiction to make orders under Part VIII of the Act, allowing parties to deal with their assets without interference from the Court. Accordingly, the legal advice must be real and meaningful to satisfy s 90G(1)(b).
(Citations omitted)
As was recently quoted by Rees J in Michaels & Vidal [2022] FedCFamC1F 252 at [37], her Honour quoted from the decision of Abrum & Abrum [2013] FamCA 897 whereby Aldridge J considered what constitutes the required advice and said as follows:
39.In order to give advice about the effect of an agreement on the rights of a party, that is their rights under the Act in relation to property, a legal practitioner must establish what those rights are at the time the advice is provided. This is because s 90G(1)(b) requires advice to be given on the effects of the agreement upon the rights of that party and the advantages and disadvantages of the agreement. If their rights are not known then it is impossible to advise as to the effect of the agreement on them.
40.It is unhelpful to advise a person that a financial agreement might adversely affect his or her rights if those rights are not identified. A party must know more than some unknown or undefined right is being given up. He or she must have some idea, at least in general, of his or her present entitlements or rights (to use the words of the section) with which he or she may compare the provisions of the proposed financial agreement. It is only in that way that there can be actual advice about the effect of the agreement on those present rights.
The evidence of Ms B was not without controversy.
It was self-evident from an early stage in the proceedings that Ms B’s file was likely to contain information relevant to the proceedings. The file was called for and the proceedings were adjourned part-heard to enable it to be produced. It was apparent that Ms B was reluctant to engage in the proceedings. Ultimately, her evidence required a subpoena for her to attend and her presentation was such that she was declared to be an adverse witness and leave was given to the wife’s counsel to cross examine her.
In summary, Ms B’s evidence was that her file was in an electronic form and as such a password was required to open or access the legal software that contained her file. Ms B was not able to remember the password. Whilst the subject of further consideration, Ms B’s evidence as to her inability to either remember the password or to obtain assistance from the software provider that would enable the software to be opened, was unconvincing.
Ms B was able to produce telephone recordings of conversations concerning the advice provided. Those recordings comprise exhibit “4” in the proceedings.
In evidence, Ms B was first retained by the wife in January 2019. The wife was referred to Ms B by Ms E, a finance professional for D Pty Ltd.
I accept that Ms B understood that she was being retained by the wife to give advice on property settlement and division as between the parties but with an emphasis on retaining the substantial assets available to the parties to remain within the family.
Soon after the initial discussion with the wife, Ms B accompanied her to a meeting involving the husband, a representative from his commercial solicitors (being U Lawyers) and the parties’ three adult sons.
Mr C was also in attendance and this was the first occasion that Ms B came into contact with him. Ms B considered that there may be a conflict between Mr C and the parties but in particular the wife in circumstances where he was not just the company’s finance professional but also the parties’ personal finance professional.
Ms B’s concerns were assuaged by the wife’s assertion that given she had a financial role within the business, she had access to the parties’ records including bank account details.
Ms B recollected that at the meeting, the parties were considering the most tax effective way of bringing their three adult sons into the business with each to hold a 15 per cent share with the parties retaining the remaining 55 per cent.
It appears that Ms B may have had a conference with the wife either in person but more likely during lengthy telephone conversations. At no stage, in terms of Ms B’s earlier engagement with the wife, did she receive anything that could be considered as a balance sheet.
Ms B conceded that she did not have a clear recollection of what had occurred at the meeting at the S Street property. She acknowledged that she would have made detailed notes but that she was now not able to open the software with her old password. She acknowledged that it was an unsatisfactory situation and notwithstanding that she responded to the subpoena and downloaded whatever documents were available to her, she did not review them, in particular, any response made by her to emails from others including the wife.
Following an acknowledgment by Ms B that she had received a document that set out the financial structure of the parties both in respect of real property and also the D Group of entities, her recollection of any discussion in relation to the separate entities was poor. The following evidence demonstrate the extent of the ability of Ms B to recall the discussion and advice given to the wife:[3]
[Counsel]:Yes. All right. And then [D Pty Ltd] – when you look down on the tree, the other businesses – were you aware that there were a [transport] business, [CC Company]? Were you aware of that?
[Witness]: I can’t recall, sorry.
[3] Transcript dated 16 October 23, p. 23 line 20 to p. 23 line 22.
The evidence of Ms B contained several references to the wife expressing that she was not happy with the agreement but that she was prepared to compromise in order so that the adult sons were able to transition to a significant interest in D Group with the intention that eventually the business would be theirs.
Ms B conceded that the manner in which the agreement had been altered by hand was inappropriate. She could not remember when the handwritten amendments were made but conceded that it was not best practice for a solicitor to add something to a document after it had been signed by the parties. The matter was more critical in respect of a financial agreement given that if the amendments were of a substantial nature and might be considered as a fundamental term or condition then the financial agreement may be considered as a different document and should be the subject of fresh advice as to the advantages and disadvantages of entering into it.
On the issue of advice, the following exchange is important:[4]
[Counsel]:The effect of the binding financial agreement on [Ms Suess’] rights, what was your advice?
[Witness]:I recall I did tell Ms – I did inform [Ms Suess] that if this matter was to proceed further, that the agreement wasn’t completely fair to her; that if she was to take things further, she may end up with more, and she would likely end up with more if the matter was in court. But [Ms Suess] insisted that it is what it is and she just wanted to have it over with. So I did tell her the agreement was not completely in her best interests to enter into.
[Counsel]:And if you had that level of concern, wouldn’t you have put that in a letter to her and asked her to sign it – that she had received that advice?
[Witness]:I – I agree, I should have put it in a letter. But it – I believe it’s in one of the recordings as well.
[4] Transcript dated 16 October 23, p. 72 line 18 to p. 72 line 26.
Then at line 36:[5]
[5] Transcript dated 16 October 23, p. 72 line 36 to p. 73 line 19.
[Counsel]:And did you ever suggest to her that maybe she needed to go and get a second opinion from someone else?
[Witness]: No. I did not do – I did not put that suggestion.
[Counsel]:Now, the – so what advice did you give [Ms Suess] on the advantages of entering into this agreement?
[Witness]:The only advantage was that things would be wrapped up quickly and it would just be a lot quicker than going through costs orders, that was the only advantage.
[Counsel]: It was - - -?
[Witness]: That it was just a quicker method of finalising matters.
[Counsel]:And again, that was the only advantage, was that it would be finished off more quickly for her. Is that correct? Is that what you’re telling the court?
[Witness]:Well, I would have also explained that she wouldn’t have to go through the costs of legal proceedings, and by that stage, she had purchased another property, she needed the funds, so that was one of the ways of obtaining those funds for her.
[Counsel]: Again - - -?
[Witness]: So that was an advantage as well.
[Counsel]: Did you put that in writing to [Ms Suess]?
[Witness]:No, but I know it’s, again, in one of the recordings, that she needed the money for the property she was purchasing.
[Counsel]:[Ms B], are you saying to the court that you told [Ms Suess] that this agreement had one advantage – or two advantages. (1), that it would be processed further – more quickly, and (2), because of the property that she purchased. Are you saying to the court that, in good conscience, you were comfortable for [Ms Suess] to sign this deed?
[Witness]:I was comfortable that she knew exactly what she was signing. I was comfortable because that was something we kept going over and over. She – she gave me instructions – very explicit instructions – that she did not want to burden the children. She wanted things in the children’s best interests. She wanted the company to stay in the family, so she was very specific that, even though she was aware she was not getting her full rights, she chose to do so.
Ms B could not recall whether she had provided a written advice or caution to the wife that there should be an independent assessment of the value attributed to balance sheet items.
The theme of Ms B’s evidence was that the wife was aware that she had an option to value properties but that she did not wish to do so because she was in a hurry having already purchased another property and she considered that a valuation of all of the properties at that time might also reveal a higher value for her own property.
It is not controversial that a balance sheet had been provided for D Pty Ltd with a value of $2,416,157.65 under the title of “total equity”. Ms B was not able to recall how that figure had been arrived at other than it may have been agreed between the parties following discussion or input from Mr C.
Whilst Ms B’s file could not be accessed and therefore not made available, there were telephone recordings as between Ms B and the wife that commenced on or about 19 November 2019.
Ms B did concede that she kept a “black book” in which she made notes when she attended meetings with the wife. Her practice was apparently to tear the pages out of the book, scan them and then throw them away. Accordingly, there is limited records other than telephone recordings of any discussion as between the wife and her solicitor.
The following extract of evidence sets out the parameters of the advice given to the wife by her solicitor in respect of the financial agreement:[6]
[His Honour]: No, and you can’t even remember what your practice was. What was your normal practice? Don’t worry about this particular case?
[Witness]: Yes, your Honour.
[His Honour]: What was your normal practice?
[Witness]:Your Honour, my normal practice would be when a BFA – for instance, I recall we sat down, we went through the BFA paragraph by paragraph. I explained everything, every single paragraph. We would go through it together, and then when the client agreed, we would sign that BFA.
[6] Transcript dated 16 October 23, p. 50 line 21 to p. 50 line 27.
And then at line 34 the following appears:[7]
[7] Transcript dated 16 October 23, p. 50 line 34 to p. 50 line 46.
[Counsel]:[Ms B], did you explain the advantages of a financial agreement as opposed to consent orders?
[Witness]: I would have explained yes.
[Counsel]: All right. And what about the disadvantages?
[Witness]: Yes, I would have explained those as well.
[Counsel]:And – so just in relation to consent orders as opposed to a financial agreement, what were the advantages that you told [Ms Suess]?
[Witness]:From memory, the only advantage was that it was going to be quicker than consent orders.
[Counsel]:And do you recall what disadvantages that you would have or you did advise [Ms Suess] of a binding financial agreement, as opposed to consent orders?
[Witness]: Yes. I did tell her about the possibilities of it not being as binding.
Ms B acknowledged that in an email between the husband’s solicitor and Mr C the amount to be paid to the wife was $1,950,000. Ms B’s recollection is that the figure then reduced to $1.2 million because the wife accepted that the husband and the adult children could not borrow more than that amount.
Whilst Ms B insisted that she had raised the issue of a goodwill component to the value to be attributed to D Pty Ltd, her evidence was unconvincing.
The wife gave Ms B a document titled “[Mr Suess] and [Ms Suess] Assets” (“Exhibit 2”). The document asserted that the total assets of the parties was in the sum of $8,631,500 with real estate to the value of $6,700,00 and D Pty Ltd assets to the value of $1,883,500. There is no component in the balance sheet that could be considered as a goodwill component.
Under cross examination by the husband’s counsel, Ms B considered that the wife was happy to work with the current valuations subject to some relatively modest adjustments to notionally divide the property of the parties equally.
Ms B agreed that there was some urgency to the finalisation of the negotiations and the signing of the financial agreement given that the wife had already paid a deposit on a new property.
Ms B considered that the wife seemed to be well informed as to the financial arrangements and as to how they would affect her.
It is also a relevant consideration that prior to the signing of the financial agreement, the parties were considering a settlement as contained in a document titled “terms of settlement” found at page 112 of the wife’s tender bundle. It is not a coincidence that the terms and conditions of settlement, as appear in the settlement document, are similar to the terms contained in the financial agreement.
It is also a relevant consideration that the settlement discussions involved a comprehensive agreement as to the division of furniture and effects.
The detailed history of the matter, and the engagement of Ms B with the husband’s solicitors, enables a finding to be made that Ms B was advising the wife of the proposed settlement and that the husband could accept that the requirements of s 90G of the Act had been complied with.
The evidence of Ms B raises considerable misgivings as to the nature and quality of the professional services that she rendered to the wife. It was difficult to accept Ms B’s evidence as to her inability to access her electronic file in the absence of which she was not able to accurately remember the nature and extent of her interaction with the wife even though the events were as recent as December 2019.
I accept the wife’s evidence that she did not receive any formal written advice as to the advantages and disadvantages of entering into a binding financial agreement however I do not accept that there had been robust discussion between the wife and her solicitor as to matters of valuation. It is to be remembered that Ms B did not have to continue to represent the wife in both the negotiation, drafting, and signing of the financial agreement if she did not consider that in all the circumstances it was proper to do so or that she held the requisite skill.
A prudent way forward would have been for Ms B to advise the wife that unless there had been an appropriate inquiry as to the valuation of the property available for division between the parties, then she would decline to be further involved. Again, there is no communication to that affect or even to ask the wife to be cautious as to the resolution of the matter either orally and most certainly not in writing.
I do however find that the involvement of Ms B and the advice given to the wife did not fall below a basement threshold such that I should find that her advice was so lacking in integrity that it should be considered as no advice at all. Even though Ms B conceded that her advice and assistance rendered to the wife was not as would be expected of a legal practitioner holding him or herself out as having either the requisite skill in the area of property settlement or being able to satisfy the requirements of s 90G of the Act, I consider that the requirements of s 90G of the Act have been satisfied.
WAS THE WIFE MISLED AS TO THE VALUE OF THE ASSETS AVAILABLE FOR DIVISION?
As discussed, the wife’s contention is that if the Court found that Ms B had provided independent legal advice, then, if the advice was based upon incorrect information provided by the husband or a third party, the Court should consider whether the legal advice was adequate.
Simply put, incorrect information as to the value of the assets available for division would undermine the legislative requirements of s 90G of the Act and the financial agreement itself.
The wife is explicit in her allegation that there has not been full and frank disclosure. She considers that the husband knew, or ought to have known, that she was relying upon the information provided both by him but in particular, the family’s finance professional, Mr C. Whilst there were issues of discrepancy in respect of a range of assets, the significant area of focus is the value of the D Group.
Whilst the wife focuses on information provided by Mr C, she does not say that either the husband or Mr C, in concert or separately, set out upon a deliberate course of conduct designed to misrepresent the asset pool.
The wife cannot ignore the essential terms and conditions of the financial agreement as set out in recitals L, M, N, S and T which go directly to the parties each having the opportunity to have the assets, liabilities and financial resources valued.
The wife acknowledges the importance of the recitals and operative clauses of the financial agreement as placing the onus on her to satisfy the Court, on the balance of probabilities, that she did not fairly have an opportunity to either undertake her own valuations or was improperly persuaded that she did not need to do so.
The latter contention arises in respect of the further aspect of the wife’s case that the husband involved the parties’ three adult sons in financial discussions and that their threat to exclude the wife from their families, including grandchildren, amounted to unconscionable conduct.
As considered, exhibit “2” represents a balance sheet that had been prepared as part of the settlement negotiations.
Whilst there is some uncertainty on the evidence as to the provenance of the balance sheet, it is likely that the base information was put together by Mr K. By reference to his affidavit filed 15 March 2023, Mr K states that he wanted to be an honest broker as between his parents and was as concerned with assisting his father consequent upon the separation of the parties as he was uncertain about how the separation would impact upon his mother in particular, in respect of her future financial security.
Mr K was involved in a meeting at U Lawyers in January 2019. The meeting was an attempt to resolve property settlement and division, Mr K considers that whilst he was apprehensive about attending, he understood that his detailed knowledge of the business may add an important component to the settlement discussions.
Consistent with the wife’s case, Mr K confirms that his parents agreed to an equal division and as such, the focus then fell to constructing a balance sheet. The following paragraphs from Mr K’s affidavit are informative:
33.So, prior to the meeting I suggested to all parties that we need to have a current value of all assets held by [D Pty Ltd]. I helped mum. Mum and I did ours independent of [Mr H] and [Mr C’s]. I remember going to mum's house with [Mr J] and his wife. I remember mum having a copy of the asset balance sheet I had prepared because I knew the value of the machinery because I work in the workshop. [Mr J’s] wife had an argument with mum that night and left early. I stayed around talking to mum making sure she was ok. Mum told me she was ok. I think I left the asset balance sheet with mum that night to look over.
34.Mum changed a few things but mainly agreed with my balance sheet and brought the edited one to the meeting. To the best of my memory mum just added a few things.
35.All of the balance sheets were very similar. Copies of all three-balance sheet were provided to all parties which includes mum's solicitor [Ms B] prior to the meeting and there was adequate time to review the documents.
The wife conceded in evidence that the initial meeting with Ms B in January 2019, in preparation for the joint meeting with the parties’ solicitors, had two distinct purposes. The first was succession planning in respect of the adult children given that the parties had separated and were not likely to reconcile and the second was to consider how the parties would divide their property taking into account the potential future involvement of the adult children. Various items of property and the corresponding value as set out in exhibit “2” is demonstrably different to the property in the annexures to the financial agreement, but in particular annexure “C”. The wife conceded that there had been a number of versions of the schedule of assets and agreed that the issue of value was the subject of a number of discussions with Ms B.
In her trial affidavit, the wife refers to the value of the matrimonial pool and in particular, the concerns that she expressed to Ms B. The following paragraphs are relevant to the discussion:-
108.I raised with [Ms B] my concerns in relation to the value of the matrimonial pool. [Ms B] said to me, “[Mr C] has prepared a balance sheet and I will be working off that to draw up the documents.”
109.On 5 August 2019, I sent an email to [Ms B] which raised some of my concerns. A copy of my email is Index No. 3 at page 15 of my Tender Bundle. Following my email, [Ms B] and I had a telephone conversation in words to the following effect:
[Ms B]:I have received your email. I have seen the documents floated around. I don’t see any goodwill for the business.
Me: What’s goodwill?
[Ms B]:Goodwill is when you sell a business, and the new owners retain the client. That has a value and benefit.
Me:How do you work out what the goodwill value is?
[Ms B]:I am not [a finance professional] and that is a question for [Mr C]. I will question [Mr C].
The issue of goodwill was also raised at a meeting on 9 August 2019 conducted at the rural office. The parties, their children, Mr C and Ms B were present. The wife recollects that she asked her son Mr H “what is the goodwill value of [D Pty Ltd]?”. Mr H’s response was apparently that there was no goodwill and that D Pty Ltd is worth nothing without the husband and adult children running the business enterprise.
It was at the 9 August 2019 meeting that the wife recollects Mr C providing her with a balance sheet dated June 2019 with a net equity of D Pty Ltd totalling $2,416,157. Given that it appears the husband accepted that the assets should be divided equally between the parties, the wife contends that Mr C proposed that she receive $1,200,000 which was arrived at after a modest rounding down.
Pages 100 to 103 inclusive of the wife’s tender bundle contain a balance sheet for D Pty Ltd for the financial year ending 30 June 2019. The document highlights that the net assets are in the sum of $2,416,157.65.
To the extent that the 2019 balance sheet appears to be the prime document to determine the value of D Pty Ltd, the valuation methodology adopted was to consider the asset backing value.
The balance sheet does not contain any line item relating to goodwill but does contain values attributed to plant and equipment and it also brings to account cash at bank and inter-entity loans.
It is apparent that no attempt was made to value the plant and equipment resulting in the depreciation value being accepted as representative of current value.
Moreover, no consideration was given by either the husband, the wife or by way of advice from Mr C, that alternate valuation methods such as a capitalisation of future maintainable earnings could or should be considered.
The wife further acknowledged that after some initial settlement discussions, she instructed Ms B to negotiate a further payment of $100,000 to take into account the transfer of her interest in the D Pty Ltd business and a further adjustment of $27,500.
An important concession made by the wife was that in the August meeting she agreed that she did not want to include the husband’s interest in the property at Town G held jointly with his brothers.
On 9 December 2019, the husband’s solicitors forwarded an email to the wife’s solicitor copying in Mr C outlining the husband’s response to the further settlement proposals of the wife.
I do not propose to set out the contents of the document, but it is an appropriate observation that the detailed requests of the wife seeking a further $27,500 by way of dividend together with a further sum of $100,000 in payment for the transfer of the wife’s interest in BB Company and the resolution to outstanding credit card liabilities, is considered.
The wife’s evidence must be seen against the background of email communication passing between her and Ms B. It is to be remembered that whilst Ms B was not able to access her electronic file, she was able to download a number of emails and electronic communications with the wife.
The wife forwarded the following email to Ms B on 31 July 2019:
Hi [Ms B],
I have been messaging [Mr K] about how to go forward with the option of the boys and [Mr Suess] buying me out. We had a dinner with [Mr J] and [Mr K]and a lot was discussed. They are planning still to b uy me out of the business even though I don’t like the idea. I explained that I would like to get an independent valuation of everything at [S Street] and if they keep pressing about buying me out I will also get a value on the [rural property] as well. I will let [Mr K] get in touch with you to organize dates and times with [Mr C] as I’m [overseas] at the moment.
…
They are taking a large dividend of profits from [D Pty Ltd] which should have been done months ago so I agreed to leave money in [D Pty Ltd] to continue to run. See you when I return.
In a telephone conversation with Ms B on 28 November 2019, the wife sought advice from Ms B as to whether documents might be available for her to sign. In a telephone conversation on 29 November 2019 the wife discussed with Ms B that she had purchased a property and acknowledged that the husband was offering a settlement based upon a settled sum of $1,200,000 together with the Suburb R and N Street properties.
Included in that conversation is the following exchange between Ms B and the wife:[8]
[Ms B]:And, [Ms Suess], I just wanted to tell you that if you want me to investigate say, further, if this doesn't sound right to you I can bring out my other side and say to [Mr C], "You know what, [Mr C], like, you know, I - I appreciate that you want to help both parties. But, you know, I-you know, I - I need to look out for [Ms Suess’] best interests and I need to investigate those claims that you made, you know, not because I don't trust you, but, you know, like, it's my duty to [Ms Suess] to - to dig further and make sure that she's getting, you know, a fair settlement". So I - like, please, don't feel like just because [Mr C] told me this I'm going to take his word for it. Like, I - I respect everything he's done so far, but at the end of the day-
Wife:Yeah.
[Ms B]:- you are my client; not him.
Wife:Yeah.
[8] Exhibit 4, page 18.
In the same conversation, the wife agreed with the proposition of Ms B that she had two choices, either that she receives a settlement based upon what she wants or if the amount is below the wife’s expectation, then at the very least, they should acknowledge that she has made a significant concession in the husband’s favour.
It is apparent that the wife gave consideration to the matters raised by the Ms B and in a telephone conversation on 5 December 2019, the following exchange took place:[9]
[9] Exhibit 4, page 36.
Wife:Well, to be honest [Ms B], what I should say is right, 47 per cent, I want to be acknowledged that I've - I've said, okay, 47 per cent is what I've offered, like, to take without any argument but [Mr Suess] did say you're entitled to 50 per cent, we'll do everything fifty-fifty. So what would the figure be if it was fifty-fifty? And then that way we call it a day.
[Ms B]:So you want me to - to put in a cash amount that makes up that 3 per cent?
Wife:Yes.
[Ms B]:Okay.
Wife:So it’s actually fifty-fifty.
[Ms B]:So it's actually fifty-fifty, okay. So this is the rough calculations.
Wife:Because that's what he said to me verbally from day one.
[Ms B]:Yes. So, this is a rough calculation. If we said 1.2 mil' from the company.
Wife:Yes.
[Ms B]:One million, four hundred for [N Street]. One million, one hundred for [Suburb R], that's three million, seven hundred.
Wife:Yes.
[Ms B]:So, if that represents 47 per cent.
Wife:Yes.
[Ms B]:Okay. So then three per cent would be 236,000.
Wife:Yes. That's what I want. 50 per cent, that's it, done. And they'll never hear from me again.
[Ms B]:Okay. So you want 236,170 and that's to make up that three per cent.
Wife:Yes.
[Ms B]:To make it fifty-fifty and you're going to leave him [Town G].
Wife:Yes.
[Ms B]:Yes. Okay. Okay.
Mr C confirmed that he had attended several meetings initially with the parties’ joint solicitors and then with the parties’ separate solicitors. He considered that he had been asked by both parties to assist and acknowledged the balance sheet for the financial year ending 30 June 2019. The handwriting on the balance sheet was his.
Mr C did not consider that he was instructed to undertake a valuation but rather he took on the task himself in order to assist the parties.
It is apparent from the evidence of Mr C that he did not have any real regard to undertaking a formal valuation process. I am satisfied that Mr C was sufficiently skilled, that he understood the difference between the various methods of valuing interests of parties in a business or company and in particular, the difference between an asset backing valuation and a valuation based upon a capitalisation of future maintainable earnings.
Whilst I considered the evidence of Mr C to be poor and that he was likely protective of his ongoing relationship with the husband and the D Group, there is no evidence that he was acting in concert with the husband with the intention of deliberately misrepresenting and/or persuading the wife to accept a valuation of the D Group that he knew to be incorrect.
The email and telephone communication between the wife and Ms B enables a finding that whilst there may have been some acceptance of the balance sheet as a basis to determine the value of D Pty Ltd, it could not be said that the wife, and by implication Ms B, was in some way overborne by him. To the contrary, I do not find that the husband was particularly active in the negotiations at all.
It is likely that the wife accepted she was entitled to more but that her expectation of outcome was tempered by a desire to ensure that the business was able to transition to the adult children but remain financially viable.
As was considered in the decision of Anderson v Anderson (2000) FLC 93-016, I do not consider that the husband was under an obligation to provide either a valuation to the wife or to be pre-emptive in seeking that a formal valuation be obtained as to the value of D Pty Ltd.
The important consideration is whether there was anything done by the husband, or by someone under his direction, to misrepresent the value of the business or to dissuade the wife from having the opportunity to satisfy herself as to value.
The discussions between the wife and Ms B contemplated that more could have been done to value the assets of the parties but that the wife was ultimately prepared to accept a settlement based upon an equal division of an agreed asset pool.
Returning to the provisions of the financial agreement, the parties acknowledged that they had each been given an opportunity to separately value the property and assets of the parties but had declined to do so.
It should not be assumed that the value of D Pty Ltd, as determined by reference to the 2019 balance sheet, is necessarily incorrect. Whilst I have found that the reliance on the balance sheet excluded the possibility that a formal business valuation might have revealed a different overall valuation, what cannot be said is that it would necessarily have resulted in a higher value.
The wife had the opportunity to undertake the valuation process but chose not to do so. Whilst there may be a number of reasons for the wife’s decision to accept that the value of the business could be determined by reference to the 2019 balance sheet, the evidence also supports a finding that she was likely content with the overall settlement amount as reached, subject to further negotiation resulting in additional sums in her favour, and that her expectations were tempered by a desire to enable the parties’ adult sons to remain involved in the business.
To the extent that there is some information by way of email and telephone communication between the wife and Ms B, the totality of that evidence confirms that whilst Ms B did not display a high level of competency in the advice provided to the wife as to an appropriate valuation approach, nonetheless the topic was raised in a manner that gave the wife the option to undertake a more rigorous valuation of the assets of the parties in particular, the value of D Pty Ltd, however, she declined to do so.
The evidence does not support a finding that the husband or any other person under his direction misrepresented the value of D Pty Ltd or that the wife was in some way persuaded to accept a valuation that the husband knew was incorrect.
UNCONSCIONABILITY
The plurality of the High Court in Thorne v Kennedy [2017] HCA 49 discussed the relevant legal principles as follows:-
38.A conclusion of unconscionable conduct requires the innocent party to be subject to a special disadvantage “which seriously affects the ability of the innocent party to make a judgment as to [the innocent party’s] own best interests”. The other party must also unconscientiously take advantage of that special disadvantage. This has been variously described as requiring “victimisation”, “unconscientious conduct”, or “exploitation”. Before there can be a finding of unconscientious taking of advantage, it is also generally necessary that the other party knew or ought to have known of the existence and effect of the special disadvantage.
39.In Commercial Bank of Australia Ltd v Amadio, Deane J said that the equitable principles concerning relief against unconscionable conduct are closely related to those concerned with undue influence. The same circumstances can result in the conclusion that the person seeking relief (i) has been subject to undue influence, and (ii) is in a position of special disadvantage for the purposes of the doctrine concerned with unconscionable conduct. For instance, in Diprose v Louth [No 1], the trial judge, King CJ, observed that both doctrines were satisfied where the defendant "was in a position of emotional dominance which gave her an influence over the [plaintiff] which she exercised unconscientiously to procure the gift of the house". Before the High Court in that case, Mr Diprose relied only upon the ground of unconscionable conduct.
40.Although undue influence and unconscionable conduct will overlap, they have distinct spheres of operation. One difference is that although one way in which the element of special disadvantage for a finding of unconscionable conduct can be established is by a finding of undue influence, there are many other circumstances that can amount to a special disadvantage which would not establish undue influence. A further difference between the doctrines is that although undue influence cases will often arise from the assertion of pressure by the other party which might amount to victimisation or exploitation, this is not always required. In Commercial Bank of Australia Ltd v Amadio, Mason J emphasised the difference between unconscionable conduct and undue influence as follows:
"In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position."
(Citations omitted)
It is difficult to identify the evidence that supports a contention that the wife was either placed, or found herself, in a position of special disadvantage when dealing with the husband.
It is not suggested that the wife was in any way physically overborne by the husband. Further, the wife does not contend that she was in any way forced or compelled to enter into an agreement.
It is an important consideration that each of the parties had their own solicitors and received independent legal advice.
Whilst I accept that the parties’ three adult sons were keen to see an end to the settlement discussions between the parties and whilst there may have been overt animosity displayed by possibly two of the three adult sons, that did not amount to an advantage being taken by the husband of the disadvantaged position of the wife.
It was readily apparent that the parties’ three adult sons did not necessarily hold their mother in high regard. Having said that, I accept the evidence of Mr K who impressed as being emotionally affected by the breakdown of the marriage and was attempting to assist in the parties resolving their differences.
I am left in little doubt that the wife had strong regard to the possibility that her relationship with her children and grandchildren may be adversely affected if a timely settlement was not reached. However, the wife’s primary motivation was to consider a settlement which enabled the three adult children to become entrenched and remain involved in the D Pty Ltd business, but also to enable the settlement of a property she had recently purchased.
I do not consider that the evidence would support a finding that the husband engaged in unconscionable conduct or that in some way the adult children were being used by him to achieve that outcome.
Inherent in the consideration of duress, unconscionability or undue influence is that a party is at a special or significant disadvantage.
I do not consider that the wife was acting in accordance with the influence of the husband. The wife entered into the financial agreement by exercising her free will. She had independent legal advice and participated actively in the negotiations leading up to the concluded agreement.
For the reasons given, I do not consider that there should be a declaration that the financial agreement is not binding nor do I consider that it should be set aside on the basis of unconscionable conduct or undue influence.
I make orders as appear at the commencement of these reasons.
I certify that the preceding two hundred and six (206) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Berman. Associate:
Dated: 20 March 2024
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