Thatcher and Thatcher and Ors
[2017] FCCA 3008
•6 December 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| THATCHER & THATCHER & ORS | [2017] FCCA 3008 |
| Catchwords: FAMILY LAW – Interpretation of orders – effect of heads of agreement – no matters of principle. |
| Legislation: Family Law Act 1975, s.79 |
| Cases cited: Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 |
| Applicant: | MS THATCHER |
| First Respondent: | MR THATCHER |
| Second Respondent: | MR A THATCHER |
| Third Respondent: | MR B THATCHER |
| File Number: | MLC 3480 of 2013 |
| Judgment of: | Judge Riethmuller |
| Hearing date: | 15 September 2017 |
| Date of Last Submission: | 15 September 2017 |
| Delivered at: | Melbourne |
| Delivered on: | 6 December 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr Moloney |
| Solicitors for the Applicant: | Peter Cahill |
| The First Respondent did not appear. |
| Counsel for the Second and Third Respondents: | Mr Cameron |
| Solicitors for the Second and Third Respondents: | Robertson Hyetts Solicitors |
THE COURT DECLARES THAT:
The Second and Third Respondents are not obligated to pay any interest to the First Respondent prior to the making of the Orders on 3 December 2014, nor after 3 April 2017.
THE COURT ORDERS THAT:
In the event that either the First Respondent fails, refuses or neglects to execute any deed, document or instrument necessary to give effect to these Orders or any other Orders made by this honourable Court that a Registrar or Deputy Registrar of the Federal Circuit Court be appointed to execute all deeds, documents and instruments in the name of the defaulting party and to do all acts and things necessary to give effect and validity, and operation to these Orders and any other Orders made by the Court in this proceeding as may be necessary.
Liberty to apply.
IT IS NOTED that publication of this judgment under the pseudonym Thatcher & Thatcher & Ors is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLC 3480 of 2013
| MS THATCHER |
Applicant
And
| MR THATCHER |
First Respondent
| MR A THATCHER |
Second Respondent
| MR B THATCHER |
Third Respondent
REASONS FOR JUDGMENT
The proceedings in this Court commenced as an application by the wife for a property settlement brought against the husband in May 2013. Proceedings had also been brought by the second and third respondents (their sons) against their parents in 2013 in the Supreme Court of Victoria. The parties attended a joint mediation, as any resolution to the two proceedings would necessarily involve all parties. At the conclusion of the mediation, written heads of agreement were struck containing brief recitals and eight operative provisions. These were signed by each of the applicant wife, respondent husband, and second and third respondents.
The recitals recount firstly that the applicant wife and respondent husband were parties to the current proceedings in the Federal Circuit Court of Australia; secondly, the mother and the sons were plaintiffs in the Supreme Court proceedings seeking declarations and orders relating to the farming company and over (omitted) acres of farming land; and thirdly, that in order to avoid the cost and expense and the risk involved in litigation, the parties agreed to resolve the proceedings on the terms and conditions contained in the heads of agreement.
The heads of agreement makes provision for the husband to transfer to the wife various parcels of land referred to in para.3B of her affidavit filed in this Court on 7 May 2013 and to relinquish all of his interests (and as required transfer them) in the family company as directed by the applicant wife. The agreement also provided for the sons to pay the husband $800,000 on or before 2 April 2017, with interest to accrue at 3.5 per cent per annum. As this clause is central to the argument that follows, it is appropriate to set it out in full:
3. That the First and Second Plaintiffs pay to the Respondent the sum of $800,000 on or before 2 April 2017 (“the settlement sum”) with interest at 3.5% pa payable quarterly on the balance of the payment outstanding.
The agreement goes on to make provision for the interests of the husband and wife in their superannuation fund to be equalised after “taking into account any distributions made from 1 July 2013”; certain vehicles to be transferred to the respondent husband; the respondent husband to have quiet enjoyment of his residence as long as he wishes; that both proceedings be dismissed; and:
8. That orders be made by consent to reflect these heads of agreement together with Section 81 declarations under the Family Law Act 1975 (as amended).
Following this agreement being reached, the solicitors for the wife drew a consent order and forwarded it to the other parties by email on 13 November 2014. The solicitors for the husband responded on 27 November 2014, requiring various amendments. Ultimately, a version of the orders was struck that all of the parties were content with, which was forwarded to the Court. Orders by consent in those terms were made by me as a judge of this Court on 3 December 2014. The Orders generally reflected the heads of agreement, although provided also for the transfer of the property (which was obviously intended but overlooked in the heads of agreement). Interest was provided for in the following terms:
4. That pending the making of the Payment in full to the Husband, the said Farming Sons:
(a) pay interest on any amount outstanding at the rate of 3.5% per annum calculated and paid quarterly from the date of the making of this order;
(b) shall have exclusive possession of the real property referred to in paragraph 2(a) of the orders, save for the residence referred to in clause 13 below; and
(c) shall have pursuant to these orders a caveatable interest in the said real property.
Whilst the heads of agreement ran for a page and a half, considerably more detail was provided for in the Court orders, which run for some five pages. There is no dispute between the parties, save as to the effect of the orders relating to interest.
Husband’s Claim
It was submitted by counsel for the husband, that interest began to accrue on the date of signing of the heads of agreement at the mediation on 2 October 2014, relying upon arguments that:
a)no reasonable construction of cl.3 would provide for the commencement of interest at some future time; and
b)the heads of agreement state “that orders be made by consent to reflect these heads of agreement” because, the cause of action as between the husband and wife was for a property settlement pursuant to s.79 of the Family Law Act1975 (“the Act”), whereas the cause of action by the sons (a cause of action in equity) admitted of an immediate contractual resolution in the heads of agreement, binding even if court orders had not been made.
Effect of Heads of Agreement
The appropriate starting point is to consider the effect of the heads of agreement to determine whether or not there was an intention by the parties to be bound by the heads of agreement at the time of signing them, or only at some later time: in this case relevantly when the consent orders were made. As the High Court identified in Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353, a number of situations may follow from a heads of agreement or an agreement made “subject to contract or other informal agreement process”:
a)The parties may intend to be bound immediately, although desiring to draw up their agreement in a more formal document at a later stage; or
b)They intend to be bound immediately, but do not intend to have the operation in various clauses take effect until the drawing up of a more formal agreement; or
c)They may intend to postpone the creation of contractual relations until a formal contract is drawn up and executed (see generally N Seddon, R Bigwood and M Ellinghaus, Chesire & Fifoot Law of Contract (LexisNexis Butterworths, Australia, 10th ed, 2012) 5.24).
As the authors of Cheshire & Fifoot Law of Contract point out, there has been some discussion of a fourth potential category, which is a variation of the first category, where parties intend to be bound by their agreement, but expect to make a further contract in substitution for the first contract which may have additional terms: see LMI v Baulderstone [2001] NSWSC 886 at [38] per Barrett J (and on appeal at LMI Australasia Pty Ltd v Baulderstone Hornibrook Pty Ltd [2003] NSWCA 74). The fact that a settlement agreement is informal, for example in a handwritten document, does not preclude it from being immediately binding: see Mermaids Café & Bar P/L & Elsafty Enterprises P/L [2010] QCA 271. Indeed, a settlement of a dispute, even if recorded in less than perfect terms, may be more likely to be immediately binding because of the policy of the law to encourage settlement of litigation (see the comments in Cheshire & Fifoot Law of Contract at 5.24). Ultimately, however, it is a matter for the Court to determine the parties’ intention on an objective basis having regard to the language used and their conduct.
In this case, it is apparent that there was an extended family dispute which involved not only the property settlement to be reached as between the husband and wife in reliance upon s.79 of the Family Law Act, but also the entitlements in equity of the sons with respect to the farming property. The interests of both the husband and wife were to be adjusted not only as between each other, but also as between them and the sons.
The settlement agreement reached at the mediation was incomplete, in that it made no provision for the transfer of the real property in exchange for the $800,000 referred to in para.3. This particular point does not appear to me to be of great moment, in that, on everybody’s version, it was clearly contemplated that the real property would be transferred in exchange for the sum of $800,000, and the failure to include it in the agreement would easily be corrected by way of rectification or under the slip rule (if in an Order).
Other parts of the agreement were imperfect, for example the agreement with respect to the adjustment of superannuation interests. It was not confirmed by the superannuation fund that it was able to be made into a court order or carried out by the superannuation fund at the time of the heads of agreement. Further, paras.7 and 8 contain an inconsistency in that para.7 required both proceedings to be dismissed, whereas para.8 required orders to be made by consent in the family law proceedings in the Federal Circuit Court of Australia reflecting the entirety of the heads of agreement.
Leaving aside the requirements of the Family Law Act, the agreement, whilst imperfect in form, was probably capable of being carried out, albeit with some additions and assuming the superannuation funds were able to put any consequential orders into effect. However, the relatively loose way in which it was recorded tells against it being intended by the parties to be a final and binding agreement as opposed to a record of the intended form of the agreement that they wished to reach to settle the matter.
The clause with respect to the payment of interest contains no commencement date even though the agreement contemplates that orders would be made by consent by the Court. Whilst ordinarily the signing of a contract would mark the commencement of obligations which do not have specific commencement dates, in this case, the payment of interest could also start on the date that court orders were made, being the point at which the entirety of the agreement became binding. If interest were payable to the husband prior to the date of the court orders being made (as argued for the husband), that would also alter the size of the matrimonial property pool of the husband and wife between the date of the agreement and the date of the Court orders. However, such alteration of the size of the pool would be very small and should not be given any great weight.
Most significantly, a contractual agreement between the husband and wife is not binding with respect to property settlement proceedings, unless it complies with the provisions of the Family Law Act relating to binding financial agreements. There is no possibility that the heads of agreement could be considered a binding financial agreement within the meaning of the Act. In these circumstances, the agreement cannot take effect, as a binding agreement at least as between the husband and wife, until such time as court orders were made.
Similarly, it is not open to the parties to contractually agree to adjust the benefits in a superannuation fund: they must rely upon the power of the Court under the Act to make such an adjustment.
The land, the subject of the agreement, was held in part by the wife, yet the payment was entirely to the husband. Without finalisation of the matrimonial proceedings, the wife was potentially required to transfer her interest in land (assuming that the heads of agreement were rectified to reflect this), in exchange (at least in part), for the husband to receive $800,000, but without any certainty that the agreement as between the husband and wife would become binding.
In these circumstances, I am not persuaded that the heads of agreement were a binding agreement as between the parties until such time as the court orders were made in the proceedings finalising the parties’ rights, binding under the Family Law Act as between the husband and wife.
If I were to be wrong in concluding that the heads of agreement were not intended to be a binding agreement, I must consider the effect of the agreement embodied in the court orders upon the heads of agreement. It is argued by counsel that the heads of agreement would remain in force in providing for interest up to the date of the court orders and that the court orders provide for interest thereafter. In the circumstances of this case, I am not persuaded that this is an appropriate reading of the operation of the two documents, even if the first were a binding agreement between the parties. It appears clear that the agreement made into Court orders was intended to replace the heads of agreement and become the operative document. In these circumstances, I am not persuaded that there is any room for the continued operation of the heads of agreement once the court orders were made. The agreement embodied in court orders entirely replaced the heads of agreement.
Jurisdictional distinction argument
It was further argued that, as the sons’ claim was originally in the Supreme Court and the husband and wife’s claim in the Federal Circuit Court, this in some way supported a bifurcated view of the heads of agreement and subsequent events. I am not persuaded that the questions of jurisdiction of the two Courts reasonably result in such a view. At the time that the orders were made in the Federal Circuit Court, the sons had been joined so that their claim could be disposed of (merging in judgment) at the same time as the matrimonial claim.
There is no question that the Federal Circuit Court has all of the powers of a court of law and equity, nor that the son’s claim would fall within the accrued jurisdiction of the Court in the circumstances of this case. Similarly, the Supreme Court would have had jurisdiction under the Family Law Act if the husband and wife had brought their claim in that Court. The fact that the two claims commenced in separate courts, but were ultimately resolved in the one court, appears to me to provide no guidance in determining the outcome of this case.
Application to Amend the Court Orders
I turn then to consider the further argument as to whether or not some form of amendment of the court orders is appropriate to alter the commencement date for interest. A significant difficulty presents itself to the respondent husband in this regard. It cannot be suggested that the court orders can be amended under the slip rule, as the heads of agreement were not provided to the Court, and therefore the fact that the court orders are in terms different to the heads of agreement cannot be considered a slip made by the Court in making orders in the terms that were made. As draft consent orders were the only terms put to the Court, they must reflect the intention of the Court at the time the orders were made. Secondly, the Court only has power to make orders of this type if the Court is satisfied that it is appropriate to do so under s.79 the Family Law Act, thus requiring an exercise of judicial discretion effectively approving the orders before they can be made. In these circumstances, an adjustment to the orders would require reconsideration by the Court as to whether or not to approve the altered terms of settlement.
If the agreement was simply a contract, arguably the respondent husband could bring a claim for rectification. In order to obtain rectification, the husband would need to show a common mistake in drawing the court orders. On the material filed, there does not appear to be any room for a finding of a common mistake. The court orders were drafted by the solicitors for the wife and exchanged between the parties. It was only when the parties were content with the orders (after amendments sought in November 2014 to the original drafted version) that the orders were provided to the Court. The sons do not accept that there was any mistake as to the date on which interest was to commence. In these circumstances, the respondent husband is not able to show that rectification would have been available to him, had this simply been a contract case.
Where a contract is embodied in court orders in a common law or equity claim, it appears likely that the Court would have inherent power to vary the court orders to allow an amendment in circumstances where rectification of the underlying agreement would be granted. Whether such broad powers are available under the Family Law Act is a more difficult question, given the very limited bases upon which a property settlement order under s.79A may be varied.
Given that I am not persuaded that there is material before me to justify a claim for rectification of the order, even if it were merely a contract, I need not deal with the more complex issues of the Court’s power to adjust property settlement orders in cases where rectification would be available if the Orders were a contract or deed.
In the circumstances, I find that the husband is not entitled to claim interest prior to the date of the court order and I make a declaration accordingly.
Interest after settlement date
The consequential issue that arises relates to interest payable after the date of the proposed settlement arranged on 3 April 2017. It is apparent from the material that the husband refused to settle on that date, as he was insisting upon payment of the interest prior to the date of the court order. The correspondence makes clear that the sons were ready, willing and able to settle and had arranged for settlement to take place at the (omitted) Bank at (omitted) (it being necessary to settle at the bank as there were various securities involved in the transactions).
Whilst the interest from the date of the court order to the date of settlement is not specifically discussed in the affidavits and letters that have been filed, it is clear from those letters that the only complaint about non-payment of interest was that of interest claimed to have accrued prior to the date of the court order. The correspondence shows that the right to interest had been assigned and that interest payments had been paid to the assignee (although with a mistake as to who it was paid to in June 2016 that was ultimately corrected: see letter 18 July 2016 that forms part of exhibit PWC-10).
On the material before me, I am satisfied that the sons were ready, willing, and able to settle, including tendering the correct amount, and that the settlement did not proceed, solely because the husband sought payment of interest calculated for a period prior to the date of the Court orders. In these circumstances, it is not appropriate that he be permitted to insist on interest being payable pursuant to the orders after 2 April 2017.
I therefore make orders accordingly by way of a declaration as to the period for which interest is payable and for the Registrar to sign on behalf of the First Respondent should he again refuse to execute the necessary documents to effect settlement. I will provide for liberty to apply should other consequential orders be required.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller
Date: 6 December 2017
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