WHITFORD and WHITFORD
[2023] FCWA 15
JURISDICTION : FAMILY COURT OF WESTERN AUSTRALIA
ACT: FAMILY LAW ACT 1975
LOCATION: BUNBURY
CITATION: WHITFORD and WHITFORD [2023] FCWA 15
CORAM: BERRY J
HEARD: 17 - 20 OCTOBER 2022
DELIVERED : 30 JANUARY 2023
FILE NO/S: 7844 of 2020
BETWEEN: MS WHITFORD
Applicant
AND
MR WHITFORD
Respondent
Catchwords:
FINANCIAL PROCEEDINGS - Where there is a binding financial agreement - Whether the binding financial agreement should be set aside
Legislation:
Family Law Act 1975 (Cth)
Judiciary Act 1903 (Cth)
Limitation Act 2005 (WA)
Category: Reportable
Representation:
Counsel:
| Applicant | : | Ms Hossen |
| Respondent | : | Mr Rodda |
Solicitors:
| Applicant | : | HHG Legal Group |
| Respondent | : | Slee Anderson & Pidgeon |
Case(s) referred to in decision(s):
Daily & Daily (2020) FLC 93-999
Daily v Daily (2020) 61 Fam LR 75
Hoult & Hoult (2013) FLC 93-546
Johanson & Johanson [2022] FedCFamC1A 74
Re Chemaisse; Federal Commissioner of Taxation (intervener) (1990) FLC 92-133
Stanford v Stanford (2012) 247 CLR 108
Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 291
Thorne v Kennedy (2017) 263 CLR 85
Wallace & Stelzer and Anor (2013) FLC 93-566
WORDS IN SQUARE BRACKETS REPLACE WORDS USED IN THE ORIGINAL JUDGMENT – PARTIES' NAMES AND IDENTIFYING DETAILS HAVE BEEN CHANGED
IT IS NOTED that publication of this judgment by this Court under the pseudonym Whitford and Whitford has been approved by the Family Court of Western Australia pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
This copy of the Court's Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 312(b) Family Court Rules 2021 (WA)), or to record a variation to the orders pursuant to r 311 Family Court Rules 2021 (WA).
BERRY J:
Introduction
1 The Court is required to determine the wife's application to set aside a financial agreement made with the husband on 17 December 2014. Procedural orders made prior to trial reflected the agreement of the parties to conduct the trial on a bifurcated basis, such that this application was the sole issue for determination.
2 For the reasons which follow, the Court has decided that the financial agreement must be set aside.
Orders sought by the applicant wife
3 By her minute of proposed orders sought of 14 March 2022, the wife sought the following orders:
1. The Financial Agreement signed by the parties and dated 17 December 2014, but with the Statement of Independent Legal Advice for [MR WHITFORD] annexed thereto dated 22 December 2014, between the Applicant and the Respondent be set aside
2. That subject to paragraph 1 hereof, the financial proceedings be adjourned in respect of an alteration as to the property of the parties, including their superannuation benefits, pursuant to section 79 of the Family Law Act 1975 (Cth);
3. The Applicant have leave to further particularise the orders she seeks as to the appropriate alteration and division of the property of the parties within 28 days of the Respondent providing full and frank disclosure.
4 By way of particularising paragraph 1 of the orders sought in her minute, the wife, in her amended form 1 application filed 25 March 2022, applied for a final order (in paragraph 4) in the following terms:
4. The Financial Agreement signed by the parties and dated 17 December 2014, but with the Statement of Independent Legal Advice for MR WHITFORD annexed thereto dated 22 December 2014, between the Applicant and the Respondent be set aside on the grounds of:
(a) Pursuant to Section 90K(1 )(a) of the Family Law Act 1975 (Cth): The Financial Agreement was obtained by fraud on the part of the Respondent, including non-disclosure of a material matter,
Particulars:
The Respondent had not disclosed to the Applicant before, at or after the Financial Agreement was entered into by the parties that:
(i) The Respondent had sold the Farm Land being the "Farm A property" as defined in the Financial Agreement as [redacted] and being the whole of the land comprised in Certificate of Title Volume [redacted] (Farm Land), by a contract of sale entered into by the Respondent on or about 1 October 2014· and/or
(ii) The Respondent was intending to and did sell the farm plant and equipment, and sheep, sold at a clearance sale held on 18 February 2015 (Clearance Sale);
contrary to the understanding of Applicant and the Respondent's statements to the Applicant prior to and at the time of the Financial Agreement that the Farm Land and the farming business, including plant and equipment livestock and crop, (the Farming assets and enterprise) would not be sold so that it would in time be passed down to the parties children: and
contrary to the agreement of the parties as encompassed in the statement in Recital T of the Financial Agreement to the effect that the parties intended to allow and permit the Farming Assets and enterprise to be retained by either of them, and therefor by the Respondent. and not be sold, to preserve the same for their children.
(iii) The Respondent falsely represented in the Financial Agreement that the Farm Land, being his asset. was valued at an estimate of $2,217,000 whereas it was the subject of the sale contract referred to in subparagraph (i) at a purchase price of and sold for $2,600,000:
(iv) The Respondent falsely represented and grossly under-stated in the Financial Agreement. in Schedule 1, that his [Farming Business] was valued at $90,000, whereas at the Clearance Sale farming plant and equipment, some vehicles, and some furniture items were sold for a total of $543,913.70 (inclusive of GST), and 940 head of sheep were sold for $55,238.70 (inclusive of GST):
(v) The Respondent did not disclose and include in the Financial Agreement as assets owned by him at the date of the Financial Agreement. A Freightliner registration [redacted] and a Tipper registration [redacted], at a combined value of at least $75,000.
(vi) The Respondent falsely represented and grossly under-stated the total value of his Assets in the Financial Agreement. in Schedule 1, at $2,379,973 whereas the total value of his Assets was more likely around or in excess of $3,309,155.
(vii) The Respondent falsely represented and grossly under-stated the total net asset value in the Financial Agreement in Schedule 1, at $1,109,973 whereas the total net asset value was more likely around or in excess of $2,031,823.
(b) Pursuant to Section 90K(1)(b) and/or alternatively Section 90K(1)(e) of the Family Law Act 1975 (Cth): In respect of the making of the Financial Agreement the Financial Agreement is void, voidable or unenforceable, and the Respondent engaged in conduct that was in all the circumstances, unconscionable:
Particulars
(i) The Respondent required the Applicant to enter into a Financial Agreement when the Applicant was in an emotionally weak state and vulnerable with no support, knowing that to be so;
(ii) The Respondent initially arranged for the Applicant to attend on a solicitor chosen by him or his solicitors, for the obtaining of legal advice and the signing of the Financial Agreement by the Applicant, and to pay for that advice:
(iii) The Respondent pressured the Applicant to attend on the solicitor to sign the Financial Agreement:
(iv) The terms of the Financial Agreement were so unfavorable [sic] to the Applicant, given the relative financial position of the Applicant and the Respondent, and not offered by the Respondent on the basis that it could be negotiated:
(v) The Respondent did not provide the Applicant adequate time to consider the Financial Agreement:
(vi) The Respondent knew that leading up to and at the date of the Financial Agreement:
(A) the Applicant was not fully aware of the property, financial resources and financial circumstances of the Respondent, and contrary to Recital FF(a) of the Financial Agreement:
(B) disclosure had not been provided by the Respondent to the Applicant, and that the Respondent did not in fact provide disclosure to the Applicant, contrary to Recital FF(b) of the Financial Agreement:
(C) did not give the Applicant adequate opportunity to make enquiries concerning the property, financial resources and financial circumstances of the Respondent, and contrary to Recital FF(c) of the Financial Agreement:
(vii) The Respondent knew or ought to have known that the Applicant was, leading up to and at the date of the Financial Agreement, in receipt of an income tested benefit or allowance and that she was not able to support herself without an income tested benefit or allowance, contrary to the acknowledgement in Recital II of the Financial Agreement.
(c) The legal advice given by the Applicant's solicitor [Mr B] to the Applicant as regards the Financial Agreement, was inadequate and deficient in all the circumstances and contrary to the requirements of Section 90G(1)(b) of the Family Law Act 1975 (Cth):
Particulars
(i) Mr B did not advise the Applicant as the effect of the Financial Agreement on the Applicant's rights;
(ii) Mr B did not advise the Applicant as to the advantages and disadvantages, at the time of advising the Applicant, to the Applicant making the agreement.
Response of the respondent husband
5 The husband seeks to dismiss the wife's application and has articulated a response to each part of paragraph 4 of the final orders sought in the amended application in his Papers for the Judicial Officer filed for trial.
6 By way of summary, the husband contends:
(a) The sale of the Farm A property, as defined in the financial agreement (also known as [redacted] Farm), or the intention to sell the Farm A property was disclosed to the wife before and after the parties had executed the financial agreement.
(b) The intention to sell, and the actual sale of the plant, equipment and sheep, was disclosed to the wife before and after the parties had executed the financial agreement. Subsequently, there was a clearing sale on 18 February 2015.
(c) The husband signed a contract for the sale of the Farm A property for $2,600,000 prior to the execution of the financial agreement. The wife was aware that the Farm A property would be sold prior to the execution of the financial agreement and was also aware that it was later sold after the execution of the financial agreement.
(d) The husband sent an email attaching a schedule of plant and equipment to the wife in early December 2014. The items in the schedule had an approximate value of $423,000. The wife was aware from before the execution of the financial agreement that the Farm A property plus the plant, equipment and sheep would later be sold.
(e) The husband owned a Freightliner registration [redacted] and a tipper registration [redacted] when the financial agreement was executed. Details of these assets (and attached loans) were not included. Relevant disclosure documents in this respect were provided by the husband to his solicitors but not forwarded to the wife.
(f) There were inaccuracies in Schedule 1 of the financial agreement but not any gross, false or material misrepresentation having regard to the similarity between the asset pool reflected in Schedule 1 and Schedule 2 of the financial agreement and the asset pool which actually existed taking into account the inaccuracies.
(g) The husband did not require the wife to enter into the financial agreement. At the time, the husband was not aware that the wife was emotionally weak, vulnerable or without any support.
(h) The husband did not pressure the wife to attend upon the solicitor to sign the financial agreement. The wife attended upon 2 different solicitors and obtained legal advice from each.
(i) The husband denies that the terms of the financial agreement were unfavourable to the wife. Further, he denies that its terms were offered to the wife on the basis that they could not be negotiated. The husband denies that the wife did not have adequate time to consider the financial agreement and he was aware, before the financial agreement was executed, that the wife was receiving a Newstart allowance [an income tested pension, allowance or benefit of the Commonwealth].
Composition of the evidence
7 Subject to the Court's rulings on the admissibility of evidence, the wife relied upon the following evidence:
1.Wife's Further Amended Form 1 Application filed 25 March 2022;
2.Wife's Form 13 Financial Statement filed 14 March 2022;
3.Wife's Trial Affidavit filed 14 March 2022;
4.Index of Documents referred to in Wife's Trial Affidavit filed 14 March 2022;
5.Affidavit of [Ms A] filed 25 March 2022; and
6.Affidavit of [Ms C] filed 3 May 2022.
8 Mr B, the wife's former solicitor, who signed the certificate of independent legal advice in the financial agreement, attended Court pursuant to a subpoena to give evidence.
9 Subject to the Court's rulings on the admissibility of evidence, the husband relied upon the following evidence:
1.Respondent Affidavit filed 8 July 2022;
2.Form 13 of Respondent filed 12 August 2022;
3.[Ms D] Affidavit filed 8 July 2022;
4.[Ms E] Affidavit filed 8 July 2022; and
5.Respondent Affidavit sworn 14 October 2022 and filed 17 October 2022.
10 The Court otherwise took into account each party's most recently filed undertaking as to disclosure, annexing a list of disclosure documents.
Credibility of the witnesses
Ms Whitford (the applicant wife)
11 Subject to the later observation about the conflict between the evidence of the wife and Mr B, the wife presented to the Court as an unsophisticated witness, who did her best to provide truthful evidence. During cross-examination, the wife said that she could not open attachments to emails nor calculate 30% of $1,000,000 or 30% of $100. The Court accepts this evidence.
12 Where the wife's evidence conflicted with the husband's, the Court preferred her evidence, unless contradicted by contemporaneous documentary evidence (which did not occur).
Ms A
13 Ms A is a registered psychologist with over 30 years of experience and has been treating the wife since August 2018. She prepared a report regarding this treatment dated 11 March 2022, which is annexed to her affidavit. Ms A was not required for cross-examination. The husband accepts that the wife was sexually abused before his relationship with her.[1]
Ms C
[1] Husband’s trial affidavit, [5(e)].
14 Ms C is a general practitioner who was requested to provide a report of the wife's consultations at [Medical Practice A] from early September 2014, when the wife first attended as a new patient, to late October 2014. Dr C provided a report and confirmed that the wife's first attendance was [redacted] September 2014 and her last attendance was [redacted] October 2014.
Mr B
15 The wife subpoenaed Mr B to give evidence. Mr B was examined by the wife's counsel and cross-examined by the husband's counsel, in respect of his dealings with the wife in December 2014 and January 2015. The Court accepted Mr B as a truthful witness and preferred his evidence where it contradicted the evidence of the wife. Having regard to the content and circumstances, the Court considers the common ground between the evidence of the wife and Mr B, which is recounted later in these reasons, renders the evidence of Mr B on disputed matters more likely to be accurate.
Mr Whitford (the respondent husband)
16 The Court does not accept the husband's evidence where it contradicts the wife's evidence unless such evidence is otherwise corroborated by contemporaneous documentary evidence. As discussed below, the Court is satisfied that, in making the financial agreement, the husband failed to disclose highly material matters and such failure was pervasive and intentional. Further, the Court is also satisfied that the husband engaged in unconscionable conduct.
17 At the beginning of the trial, the Court granted the husband leave to rely upon an affidavit sworn 14 October 2022. That affidavit annexes, among of things, copies of [Telecommunications Company A] mobile phone accounts for the months of March 2014, December 2014 and September 2015. The husband deposes detailed recollections of telephone conversations with the wife on a day in March 2014 (251 minutes), a day in December 2014 (257 minutes), two calls on another day in December 2014 (40 minutes each), another day in December 2014 (24 minutes), another day in December 2014 (17 minutes) and a day in September 2015 (approximately 2 hours). The level of detail in the purported recollections is not only implausible due to the effluxion of time but also self-serving. The Court is not prepared to attach any significant weight to this evidence.
18 The husband gave evidence in his trial affidavit that he incurred capital gains tax (CGT) on the sale of the Farm A property (in September 2014 with settlement in February 2015) of $336,063. He relied upon a CGT worksheet, annexed to his trial affidavit for this amount. During his evidence in chief, he revised this amount. He deposed that from an amount of $133,212.97, which he paid to the Australian Taxation Office (ATO) on 13 February 2017, he was "told by his accountant" that $118,000 was for CGT and the balance was for income tax. By the end of his examination in the chief, the husband stated he was not sure whether the sum paid to the ATO on 13 February 2017 was referable to the sale of the Farm A property.
19 During cross-examination, the husband was referred to his 2015 income tax return, in which the net capital gain of $336,062 was included for calculation purposes. The husband's income tax liability was estimated at $58,498. The notice of assessment for 30 June 2015 was issued on 9 February 2017 in this estimated amount of $58,498. The husband accepted that his payment to the ATO on 13 February 2017 included his taxation liabilities for both the 2015 and 2016 financial years. The husband's 2016 income tax return and notice of assessment were not included in the list of documents annexed to his undertaking as to disclosure filed 15 September 2022.
20 The Court is satisfied that, when the husband swore his trial affidavit, he had documents available to him which clearly showed that his sworn evidence of a $336,063 CGT liability arising from the sale of the Farm A property was materially inaccurate. At the time of swearing his trial affidavit, he relied upon a document which maintained this materially inaccurate figure. The true position was only approached after corrections in evidence in chief and later in cross-examination.
Ms D
21 Ms D is the wife's sister and the husband's current wife. She was not required for cross-examination.
Ms E
22 Ms E is the wife's mother. She gave her evidence in a considered and careful manner, stating that "truth is the only thing that sets people free". Based upon some of her answers, she appeared to have a negative view of the wife. At least in one circumstance, she obtained information from a third party to inform her answer to a question as to when the Farm A property was sold (30 September 2014). After initially refusing to answer counsel's question as to the identity of the third party, after she answered, "I only just researched that", the Court directed her to identify the source of her knowledge. Reluctantly, she told the Court that Ms D, the husband's current wife, told her that information.
Background
23 The husband was born in March 1979 and the wife was born on in August 1981. The parties started dating in 1999 but did not live together prior to their marriage in March 2001.
24 During the marriage, the parties worked on the Farm A property. From about March 2001 until September 2002, the parties lived in a rented house about 10km up the road from the Farm A property.
25 On 22 November 2002, the husband acquired a 75% interest in the Farm A property from his parents, with the remaining 25% interest being retained by his parents, subject to the existing mortgage in favour of [Agricultural Business A]. The husband and his parents held their respective interests as tenants in common. At the same time, the husband executed a mortgage in respect of his 75% interest in the Farm A property in favour of his parents for $250,000.
26 There are three children of the marriage: Child A was born in June 2003; Child B was born in December 2004; and Child C was born in January 2013.
27 The parties separated on 5 October 2012. At this time the wife was 28 weeks pregnant with Child C. The wife left the Farm A property on 20 October 2012 and went to live in a unit in [Town A] owned by the husband's parents, until she attended hospital to give birth to Child C. The two children lived with the husband.
28 After Child C's birth in Town A Hospital, the mother rented a room in a friend's house for around two months. Then she was required to move out and lived in a caravan in a caravan park. This was a caravan purchased for the farm. The husband and her sister, Ms D, helped her move into the caravan. The husband paid the caravan park fee and paid the wife $150 per week for her and Child C's needs.
29 The wife first started receiving Centrelink benefits in May 2013, backdated to 18 April 2013. At or around this time, the wife was terminated as a partner with the husband in the farming business.
30 When Child C was 8 months old, around September 2013, he went to live with the husband, in disputed circumstances. The wife says she was isolated, helpless and abandoned, with no support from family.
31 The husband acquired the remaining 25% interest held by his parents in the Farm A property for $522,000 in June 2014. This was paid by payment of a deposit of $22,000, a loan from Financial Institution A in the sum of $252,439 (by effectively increasing the limit the existing loan to around $780,000) and on vendor terms from his parents as to $250,000.
32 The parties affirmed a joint application for divorce on 12 September 2014, which was filed on 16 September 2014.
33 The wife attended Medical Practice A between early September 2014 until late October 2014. On her first appointment in September 2014, it was found that situational stress was likely aggravating the dizziness she was experiencing. The wife was referred to undergo a CT scan on her head in mid-September 2014 and it was requested she not drive until a clear diagnosis was found. A Centrelink certificate was given. In late September 2014, the dizziness was recorded as continuing. The wife was unable to work and given a Centrelink certificate. In early October 2014, it was found that palpitations and dizzy spells were improved. Anxiety was recorded as the reason for visit. By late October 2014, the wife reported no further fainting episodes, which she felt were stress related.
34 In November 2014, the husband telephoned the wife and told her that his lawyer told him that the wife needed to obtain legal advice on the financial agreement.
35 In early December 2014, the wife attended upon [Law Firm A] and met with Ms F. The file produced by Law Firm A includes a note of the client information form, "Advice on BFA. Ref by: [Ms G]". Ms G was the husband's solicitor. This note is consistent with the wife's evidence, which the Court accepts, that Law Firm A was a firm identified for her by the husband or his solicitors and her referral to that firm was by the husband's solicitors.
36 The wife had one attendance with Ms F in early December 2014, in which a note was taken in part recording: "Agreement – 1) Paid out lump sum $50,000 over the next 5 years, 2) 3 sons 11 yrs, 10 yrs, 2 yrs – provided for in the future, 3) children live with father, mother spends time with them after school - Sat/Sun". On the Law Firm A file was a draft of the financial agreement. The husband's assets were recorded as having a net value of $1,299,973 (inclusive of a $50,000 liability to the wife for the husband's payment to her, but ignoring the $13,200 already paid), and the wife's assets were recorded as having a net value of $59,000 (inclusive of the $50,000 to be paid to her by the husband, of which $13,200 has already been paid). According to this draft, the wife was retaining 4.3% of the net assets of $1,358,973.
37 The wife did not proceed with representation by Law Firm A and terminated their services on 11 December 2014. The Court accepts the wife's evidence that she did not pay the account for Law Firm A and referred this account to the husband. The Court accepts the wife's evidence that the husband was putting pressure on her to sign the financial agreement. The wife searched for another solicitor and found Mr B. The wife's dealings with Mr B are discussed in further detail later.
38 On 17 December 2014, the parties entered into a financial agreement. As discussed below, the only amendment to the assets of the parties was the inclusion of an additional $190,000 liability of the husband, revising his net assets to $1,109,973. The wife's net assets remained at $59,000. The net assets of the parties amounted to $1,168,973. On these figures, the wife retained 5%. The Court accepts the wife's evidence that she did not pay Mr B's account and sent this to the husband to pay.
39 A divorce order was made on 19 December 2014 and became final on 20 January 2015.
40 From around Christmas Day in 2014 until late March 2015, the wife lived at her mother's home in [Town B].
41 On 18 February 2015, the husband held a clearing sale at the Farm A property. The Court accepts the wife's evidence that she has only obtained information about the sale proceeds received by the husband at the clearing sale as a result of these proceedings.
42 On 27 February 2015, settlements occurred in respect of the husband's purchase of the [Farm B] property and sale of the Farm A property. The sale price of $2.6 million for the Farm A property was applied to payments including (recorded in whole dollars only):[2]
1. Discharge of loans to Financial Institution A $1,170,897
2. Payment to husband $52,746
3. Discharge of loan to husband's parents $250,000
4. Purchase of Farm B property $1,036,205
[2] Husband’s trial affidavit; exhibit 11.
43 The discharge of the loans to Financial Institution A comprised the term loan in the sum of $783,250 and the [redacted] account in the sum of $387,647.[3]
[3] Ibid; exhibit 10.
44 During February 2015, the husband and Ms D moved into the Farm B property.
45 On 12 April 2015, the husband married Ms D, the wife's sister. The wife was not invited to the wedding.
46 In July 2018, the wife was diagnosed with post-traumatic stress disorder and depression (PTSD). These conditions were known to, and accepted by, the husband.[4]
[4] Wife’s trial affidavit, [88] – [89], annexure 10; husband’s trial affidavit, [9c]. The husband did not object to this evidence, although he objected to other evidence in the wife’s trial affidavit.
47 In August 2018, the wife started attending upon Ms A, psychologist, following a referral from her then general practitioner. In July 2018, the wife had scored in the "extremely severe" range on the Depression, Anxiety and Stress Scale. Ms A opines that these results are "indicative of an individual experiencing significant psychological distress."
48 In her report, Ms A describes the wife's background, as reported to her by the wife. The following is a selective summary of the mother's account, as recorded by Ms A. The wife was brought up according to very strict religious doctrine. Her core self-beliefs were that she was "stupid and dumb and unable to learn." These beliefs were reinforced by her father and oldest brother.
49 The wife was allegedly sexually abused by her father when she was 15 years of age (in around 1996), which persisted over a period of around 7 months. She felt physically frozen and emotionally detached when this was occurring. Her mother threatened to report her father to the police if the behaviour persisted and it stopped around a month later.
50 As a result of this conflict in the family, the wife left the family home at 18, married at 19 (to the husband) and became a mother at 21 years old.
51 The wife reported that her contact with her children was sporadic after separation and tightly controlled by the husband.
52 Ms A found the wife to be suffering from "a complex trauma history" which is then particularised in the report. The wife reported being withdrawn and socially isolated. The wife felt anxiety, guilt, anger, loss, grief, sadness, powerlessness, lack of self-confidence and belief, about major aspects of her life.
53 Ms A provided therapeutic intervention to the wife, including trauma-based cognitive behaviour therapy, to which the wife has responded well. The Court is satisfied that, even though the wife started seeing Ms A in August 2018, the issues affecting her day-to-day functioning and psychological well-being existed since her childhood.
54 The Court accepts the wife's evidence that she learned that the Farm A property was sold for $2.6 million, after undertaking internet searches in September 2020. The wife started proceedings to set aside the financial agreement on 25 February 2021, a little over six years after the agreement was signed.
Issues for determination
(a) Is the financial agreement binding?
55 In paragraph 4 of the final orders sought in her amended form 1 application, the wife claims that the financial agreement not being binding is a ground to set aside the financial agreement. The Court accepts the husband's submission that the financial agreement not being binding, if such is the case, is not a ground to set aside the financial agreement.
56 If the financial agreement is not binding then the parties are not excluded, by operation of s 71A, from bringing proceedings in relation to financial matters and financial resources dealt with by the financial agreement, under Part VIII of the Family Law Act 1975 (Cth) (the Act).
57 The wife claims that s 90G(1)(b) has not been complied with because Mr B did not advise her as to the effect of the financial agreement on her rights and did not advise her as to the advantages and disadvantages of making the agreement. This is the only ground on which the wife alleges that the financial agreement is not binding.
58 The onus of establishing that a financial agreement is binding falls on the party asserting that fact. [5] In the circumstances of this case, the husband must prove that the financial agreement is binding in respect of that particularly challenged by the wife, namely non-compliance with s 90G(1)(b). However, the husband relies upon the certificate of independent legal advice signed by Mr B. Therefore, there is a forensic obligation on the wife "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 clause 20 in the agreement to the same effect).[6]
[5] Hoult & Hoult (2013) FLC 93-546, [60] – [62], [254]; Johanson & Johanson [2022] FedCFamC1A 74, [21] – [22].
[6] Hoult, cited above, [62].
59 During his oral evidence in chief, Mr B was examined about his handwritten client attendance notes on his file. Those notes refer to "payout is low" and "advised would have done better in Court". In the same place in the notes the figures of $50,000 and $1,080,000 are referred to, together with reference to 4.62%, which is the percentage the wife would receive. Earlier in his notes, Mr B refers to a $50,000 cash payment to the wife, of which $13,200 had already been paid. Mr B accepted that $50,000 comprised 4.62% of $1,080,000, which he believed was the net property of the parties, based upon instructions or documents.
60 Mr B said that his notes referring to "s 79A", a "BFA" and "costs in court" related to a discussion about the advantages and disadvantages of the agreement. The reference to "costs in court" referred to a just and equitable requirement which a judicial officer would apply if required to make a decision. The reference to "BFA" referred to reaching an agreement privately and the contents of the agreement must be truthful and accurate otherwise the agreement may be set aside, possibly under s 79A of the Act.
61 The Court is satisfied that the reference to s 79A had no relevance or application to setting aside a financial agreement, but this particular inaccuracy in advice is not itself sufficient to demonstrate that advice, in the sense required by this provision, has not been given.
62 Mr B was cross-examined about the Statement of Claim filed by the wife on 22 March 2022 and also about his Defence filed 5 May 2022 in the Supreme Court of Western Australia. The Court accepts that Mr B and the wife have a different account of the instructions given by the wife and the advice given by Mr B. However, the wife's case, according to her defence, is that she was told by Mr B she was receiving around 4.6% of the joint net assets.
63 The Court accepts the wife's evidence, consistent with the notes and evidence of Mr B, that she thought the assets and liabilities as stated in the financial agreement were accurate, that she was given advice by Mr B that the payout was low and she would have done better in Court. The Court also accepts the wife's evidence, consistent with the notes and evidence of Mr B, that Mr B identified an additional liability which was required to be, and was, included in the final version of the financial agreement (the husband's solicitor notified him of this).
64 The Court also accepts that Mr B told the wife the BFA replaced her rights under the Act, that her worst-case scenario in Court was 30% of the asset pool and that she should not sign the agreement. The Court accepts Mr B's evidence that he was "not sure" if he converted his advice about 30% of the asset pool to a dollar figure for the wife's benefit. The Court accepts that Mr B told the wife at least about some advantages (saving legal costs in Court proceedings) and disadvantages (payment too low) of entering into the financial agreement.
65 The Court finds that the husband has shown that the requirements in s 90G(1)(b) have been satisfied in respect of the wife, given the certificate of independent legal advice signed by Mr B, clauses 7 and 20 of the financial agreement and the consideration of the evidence given by the wife and Mr B on this issue.
66 Further to the preceding paragraph, the only necessary enquiry is whether legal advice was given, not the content of the advice.[7] The Court is satisfied that legal advice was given by Mr B to the wife in the manner which the Court has found. As is apparent from these findings, the Court is not satisfied that the advice was so cursory or tangentially related to the financial agreement that it ought be found to be no legal advice at all.[8]
[7] Wallace & Stelzer and Anor (2013) FLC 93-566, [103].
[8] Daily v Daily (2020) 61 Fam LR 75, 96, [154]; appeal allowed on a different issue, see Daily & Daily (2020) FLC 93-999.
67 For these reasons, the financial agreement is binding.
(b) Are any grounds established to set aside the financial agreement?
68 The wife asserts that grounds are established pursuant to ss 90K(1)(a), 90K(1)(b) and 90K(1)(e).
• Fraud (including non-disclosure of a material matter) – s 90K(1)(a)
69 The following are examples which emerge from the evidence of non-disclosure of material matters by the husband, prior to the financial agreement being signed.
[redacted], Farm B
70 The husband entered into a contract to purchase the property situated at [redcated], Farm B, in the State of Western Australia on 21 September 2014, for $1 million (the Farm B property). The financial agreement makes no reference to the Farm B property.
71 The Court finds that the husband's entry into this contract was not disclosed to the wife prior to the financial agreement being signed and a copy of the contract was never disclosed to the wife, either before or after the financial agreement was signed. Settlement was effected on 27 February 2015.[9] This was the same date as settlement of the sale of the Farm A property. The sum of $1,036,205 was applied from the sale of the Farm A property to the acquisition of the Farm B property.[10]
The Farm A property (as defined in the financial agreement)
[9] Exhibit 24.
[10] Husband’s trial affidavit, annexure 11.
72 The value attributed to the Farm A property in the financial agreement is $2.217 million.[11] This value is derived from a market appraisal provided by [Real Estate Company] dated 8 August 2014.[12]
[11] Recital X, clause 4 read with Schedule 1 (Mr Whitford’s net assets and financial resources).
[12] Exhibit 22.
73 The husband was presented with two contracts of sale for rural land in respect of the Farm A property dated 30 September 2014, executed by [Trustee A] (the first offer) and [Trustee B] as trustee for the [Trust Company] respectively (the second offer). The first offer was for $2.5 million and the second offer was for $2.6 million.[13] The husband accepted the second offer prior to execution of the financial agreement and settlement was effected on 27 February 2015.
[13] Exhibit 23.
74 The Court finds that the first offer, the second offer and the husband's acceptance of the second offer were never disclosed to the wife before the financial agreement was signed. At the time the financial agreement was signed, the wife was unaware of these offers or that the husband was intending to sell the Farm A property. According to the schedule of documents annexed to his undertaking as to disclosure, the husband disclosed these offers on 4 April 2022.
75 The Court is satisfied that when the husband signed the financial agreement, he knew that the value attributed to the Farm A property of $2.217 million was materially inaccurate. The husband knew, at that time, that he was selling the property for $383,000 more than the value attributed in the financial agreement. The husband was prepared for the wife to sign the financial agreement under the belief that the market appraisal from Real Estate Company was an accurate reflection of its value. The husband was prepared for the wife to sign the financial agreement without disclosing more recent and material documents about the value of the Farm A property and its pending sale.
The Farming Business
76 The value attributed to the farming business in the financial agreement is $90,000.[14] The husband's evidence is that the assets covered by this item were sold at a clearing sale on 18 February 2015 for $457,782 (for plant and equipment) and $47,172 (for sheep), both sums are net of sales commission and GST. The sale proceeds of $504,954, net of sales commission and GST, for plant, equipment and sheep, are over five times greater than the value attributed in the financial agreement.
[14] Clause 4 read with Schedule 1.
77 The Court is satisfied that when the husband signed the financial agreement, he knew or ought to have known that the value attributed to the farming business of $90,000 was materially inaccurate.
Relevant terms of the financial agreement
78 Recital FF(a) of the financial agreement provides that (underlining added):
Mr and Ms Whitford each acknowledge that each is fully aware of the property, financial resources and financial circumstances of the other.
79 By clause 2 of the financial agreement, the recitals are incorporated into and form part of the agreement.
80 The Court is satisfied that the wife could not have been "fully aware", in the sense required by this provision, given the husband's deliberate non-disclosure of the material matters discussed above.
81 Clause 4 of the financial agreement provides as follows:
The parties agree that they shall each retain all other items of property and financial resources within their respective possession and confirm that they have disclosed to each other their assets, liabilities and financial resources as identified in Schedules 1 and 2 of this Agreement.
82 Counsel agreed that clause 4 must be construed to refer to the current property and financial resources of the parties at the date of execution of the financial agreement.
83 Schedule 1 is entitled "Mr Whitford's Net Assets and Financial Resources" and provides:
ASSETS AND FINANCIAL RESOURCES
Commonwealth Bank Account Debit Card
$577.00
[The Farm A Property] in Certificate of Title [redacted]
E$2,217,000.00
The Farming Business
$90,000.00
Inter Truck Registration No [redacted]
$12,000.00
Trailer Tandem Registration No [redated]
$3,000.00
Freight Trailer Registration No [redacted]
$2,000.00
Unregistered Caravan
$200.00
2 x [Vehicle A] Registration Nos [redacted] and [redacted]
$3,000.00
[Vehicle B] Registration No [redacted]
$12,000.00
[Vehicle C] Registration No [redacted]
$10,000.00
[Vehicle D] Registration No [redacted]
$18,000.00
2 x [Vehicle E]
$7,000.00
Furniture, contents and jewellery
$5,000.00
Tools
Nominal
Interest in Superannuation [redacted]
$196.00
TOTAL
$2,379,973.00
LIABILITIES
Mortgage to Financial Institution A
($780,000.00)
Mortgage to [Mr Whiteford's parents]
($250,000.00)
Seasonal Loan – Financial Institution A
($190,000.00)
Cash Settlement to be paid to Ms Whitford
($50,000.00)
TOTAL
$1,270,000.00
NET ASSET
$1, 109,973.00
84 The Court finds that the values attributed to the Farm A property and the "The Farming Business" are materially inaccurate. There is no reference to the Farm B property or the pending sale of the Farm A property anywhere in the financial agreement, including in Schedule 1, as property or a financial resource or as part of the husband's "financial circumstances" (see Recital FF(a), quoted above).
85 Schedule 2 is entitled "Ms Whitford's Net Assets and Financial Resources" and provides:
ASSETS AND FINANCIAL RESOURCES
Funds in Bank
$500.00
Cash Settlement to be received from Mr Whitford
$50,000.00
[Vehicle F]
6,000.00
Furniture, contents and jewellery
$2,500.00
Interest in Superannuation
Nil
TOTAL
$59,000.00
LIABILITIES
Nil
TOTAL
NET ASSETS
$59,000.00
86 The Court is satisfied that this ground has been established by the wife.
•In the making of the financial agreement, the agreement is void, voidable or unenforceable or the husband engaged in unconscionable conduct – ss 90K(1)(b) and 90K(1)(e)
87 In addition to earlier findings in connection with s 90K(1)(a), the Court is satisfied after hearing the parties and considering the evidence that:
(a) The payment of $50,000 to the wife by way of property settlement with no provision for spousal maintenance was dictated by the husband with no input by the wife. The Court accepts the wife's evidence that the husband told her words to the effect that this was all he could pay her and all she would get from him.
(b) The wife was in no financial position to pursue litigation in Court to seek a greater settlement and this was known by the husband.
(c) The wife's access to the children was controlled by the husband.
(d) The husband was anxious to have the financial agreement signed by the end of 2014, before settlement for the sale of the Farm A property, settlement for the purchase of the Farm B property and the clearing sale occurred. The husband had not, on the Court's finding, disclosed any of these pending transactions to his own lawyers nor the wife.
(e) The husband put pressure on the wife to obtain legal advice in order to sign the financial agreement, including by arranging her first lawyer at Law Firm A, and to enable the wife to do so the husband was prepared to, and did, pay for her legal advice.
(f) There was no motive or incentive to the wife signing the agreement in December 2014 (or at all), given the absence of evidence that such might prompt an accelerated payment of her paltry property settlement entitlement.
(g) The Court is satisfied that the wife felt powerless and that she had no choice but to sign the financial agreement, irrespective of the legal advice she might receive, because she would not get a "better deal". The wife did not have any reasonable time to reflect upon the legal advice she received.
(h) The husband's engagement in telephone conversations with the wife on a day in March 2014 for 251 minutes and on a day in December 2014 for 257 minutes (and later in December 2014 for shorter periods) was no proper way to convey information or obtain "consent" for the terms of an agreement, in light of the other findings the Court has made about the relationship between the parties and the psychological condition of the wife.
(i) The husband was aware of the wife's psychological vulnerabilities arising in part from her abusive childhood and exploited these vulnerabilities in dealing with her after separation, including in the manner set out in the preceding sub-paragraphs.
(j) The payment of $50,000 between March 2014 (when $13,200 was "paid") and December 2019, as provided for in the financial agreement, was grossly unfair and unreasonable given the background facts and this level of unfairness and unreasonableness is a relevant consideration in determining whether vitiating factors exist.[15]
[15] Thorne v Kennedy (2017) 263 CLR 85, [56].
88 The Court is satisfied that its findings about the husband's non-disclosure of material matters are relevant to the wife's claims pursuant to ss 90K(1)(b) and 90K(1)(e).
89 The Court is satisfied that the wife, at the time she signed the financial agreement and in the period since separation, was in a position of special disadvantage and the husband unconscionably took advantage of his much superior position relative to the wife.[16]
[16] Ibid, [37] – [40].
90 The Court is satisfied that in the making of the financial agreement, the husband engaged in unconscionable conduct.
(c) Are there reasons not to set aside the financial agreement, if any ground is established?
91 The husband advances three categories of reasons why the Court should exercise its discretion not to set aside the financial agreement, even if the Court found that grounds existed to do so.
•Is the application statute-barred?
92 The husband asserts that the wife's application should be dismissed in accordance with ss 3(1), 13 and 27 of the Limitation Act 2005 (WA), which relevantly provide as follows:
3. Interpretation
(1) In this Act —
action means —
(a) any civil proceeding in a court, whether the claim that is the subject of the proceeding or relief sought is under a written law, at common law, in equity or otherwise
…
13. General limitation period — 6 years
(1) An action on any cause of action cannot be commenced if 6 years have elapsed since the cause of action accrued.
…
27. Equitable actions (not analogous to other actions)
(1) An equitable action cannot be commenced after the only or later of such of the following events as are applicable —
(a) the elapse of 6 years since the cause of action accrued; or
(b) the elapse of 3 years since time started running, on equitable principles, for the commencement of the action.
93 The Court rejects this argument for the following reasons.
94 Reason 1: The Court is not satisfied that this Western Australian legislation applies to limit the wife's rights to make the s 90K application under the Act, which does not contain any such time limitation. The public policy of the Act in respect of such applications is reflected in:
(a) the omission of any time limitation to make an application under s 90K; and
(b) a successful applicant's right under ss 90K or 90KA to a 12-month extension of time to apply for financial relief under Part VIII of the Act, if that applicant would otherwise be time barred by the divorce of the parties from bringing such proceedings.[17] .
[17] s 44(3B)(c)(ii) of the Act.
95 Section 79 of the Judiciary Act 1903 (Cth) renders State laws binding on all Courts exercising federal jurisdiction in that State, "except as otherwise provided by…the laws of the Commonwealth". The Court is satisfied that the express provisions and public policy underlying s 90K of the Act, just referred to, implicitly exclude the application of the Limitation Act 2005 (WA). That is, s 90K (read in context, including taking into account public policy) "otherwise provided" (by implication) for there to be no limitation period on an application under the section.
96 Reason 2: In the alternative, if Reason 1 is incorrect, then:
(a) The earliest element of the wife's application pursuant to s 90K(1)(a) only accrued in September 2020, when she discovered the actual sale price of the Farm A property. The purchase of [redacted], Farm B and the sale price achieved for the Farming Business were only discovered after September 2020, well within the 6-year limitation period which the husband asserts is applicable. The limitation period only begins running when the facts underpinning the cause of action become known to the claimant;
(b) The wife's applications under ss 90K(1)(b) and 90K(1)(e) are informed by the facts discovered by the wife after September 2020 in connection with her s 90K(1)(a) application. In the context of these applications, the Court is satisfied that the limitation period should only begin running when all of the facts underpinning the cause of action under ss 90K(1)(b) and 90K(1)(e) are known to the claimant; and
(c) If the reason contained in the preceding sub-paragraph is incorrect, then the Court is satisfied that the wife suffered from a 'mental disability' (as defined in s 3 of the Limitation Act 2005) at a time after the cause of action accrued under ss 90K(1)(b) and 90K(1)(e). Therefore, the limitation period did not run during that time (in accordance with s 35 of the Limitation Act 2005). The Court refers to its earlier findings about the wife's diagnoses for PTSD and depression in July 2018.
•Does the doctrine of laches apply?
97 The doctrine of laches comprehends two themes: (1) delay implying not just quiescence but acquiescence and assent; and (2) delay involving prejudicial change of circumstances.[18] Mere delay is not of itself sufficient to engage the doctrine.
[18] Streeter v Western Areas Exploration Pty Ltd (No 2) (2011) 278 ALR 291, [635].
98 In respect of the first theme, the financial agreement is fully executed. The wife received payments prior to signing the agreement worth $13,200 and the remaining balance of $36,800 was required to be paid to her by 31 December 2019. The remaining balance was paid by eight instalments at the rate of two instalments per calendar year from 2015 to 2018 inclusive, between 9 September 2015 (almost nine months after the execution of the financial agreement) and 9 April 2018, each instalment falling between $3400 and $5000. On 3 April 2018, the wife emailed the husband giving him a "friendly reminder" that $10,000 was due within 7 days. The husband paid the balance due of $6,800 by two instalments of $3,400 on 5 April 2018 and 9 April 2018.
99 The circumstances giving rise to the wife's rights arising under ss 90K(1)(b) and 90K(1)(e) were known to her after signing the financial agreement. Almost three and a half years later, the wife wrote to the husband insisting on her rights under the same agreement to be paid out her cash entitlement.
100 However, the entire circumstances giving rise to the wife's claim under s 90K(1)(a) were not known to her until September 2020 and later, when the values ascribed to the sale of the Farm A property and the The Farming Business became known. The circumstances surrounding the husband's purchase of [redacted], Farm B only emerged at trial and in the documents filed for trial. The Court is satisfied that the wife was aware of the clearing sale after it was publicly advertised online and around the time it occurred. The Court is further satisfied that the wife could reasonably have inferred from the clearing sale that the husband was selling the Farm A property around the same time. However, the Court is equally satisfied that the wife's knowledge about both of these sales, or prospective sales, did not occur before she signed the financial agreement.
101 Subject to the wife's mental health, no cogent reason emerged in the evidence as to why the wife could not have undertaken the internet search to find out the sale price of the Farm A property earlier than September 2020, when she knew or ought to have inferred since February 2015 that a sale had occurred. Nor did any cogent reason emerge in the evidence as to why the wife did not make enquiries of the husband as to the prices achieved from the clearing sale and how closely they matched the $90,000 stated in the financial agreement. The Court does take into account the wife's 'mental disability' as earlier referred to, or alternatively (if the wife's mental condition does not satisfy that definition) the wife's psychological profile as evaluated by her general practitioner and treating psychologist.
102 In respect of the second theme, the Court does not accept that any evidence demonstrates that the husband will suffer a prejudicial change in circumstances if the financial agreement is set aside.
•Other relevant considerations
103 The husband advanced other arguments in his Papers for the Judicial Officer which are now evaluated (not in the same order as presentation).
Potential rights and entitlements of third parties
104 The husband argues that his wife Ms D has accumulated potential rights under the provisions of the Family Law Act and otherwise. The Court rejects this submission. No spouse has inchoate or accumulated rights under the Family Law Act prior to the Court making an order.[19] Ms D's rights in respect of property settlement, spousal maintenance or in equity are unchanged if the financial agreement between the parties is set aside.
Respondent's requirement to own a farm
[19] Re Chemaisse; Federal Commissioner of Taxation (intervener) (1990) FLC 92-133, 77,915 – 77,916; Stanford v Stanford (2012) 247 CLR 108, [35] – [40].
105 The husband argues that, since he currently owns a farm, his sale of the Farm A property is immaterial (given the terms of Recital T and clause 2). Recital T is in the following terms:
Mr and Ms Whitford acknowledge and confirm that by agreement and as a result of their sons expressing an interest in preserving the parties' farming property and farming business, both Mr and Ms Whitford intend in this agreement to capture this intention by allowing and permitting the farming property and farming business to be retained by either of them and not be sold.
106 Clause 2 of the financial agreement provides as follows:
The Recitals to this Financial Agreement are incorporated into and form part of this Financial Agreement.
107 The husband's ownership of a farm is one aspect of the wife's application. The Court accepts the wife's evidence that the husband told her, in the period immediately preceding the signing of the financial agreement, that he intended to retain the farming property and the farming business for the benefit of the children. The Court accepts the husband's submission that Recital T, in combination with clause 2 of the financial agreement, does not require either party to retain the farming property and farming business.
108 The Court notes the terms of the letter of advice given to the husband by his lawyer after he signed the financial agreement. The letter, dated 22 December 2014, provided in part as follows:
You explained that your children have expressed an interest in pursuing a farming career and it is your intention to provide them with that opportunity, hence the reason why you are retaining the farming property and business with all its debts.
109 The husband acknowledged in his evidence that prior to signing the financial agreement, he did not disclose relevant documents or advise his lawyers that he had sold the Farm A property and was intending to have a clearing sale. The Court is satisfied that, prior to signing the financial agreement, the husband told his lawyers exactly what he told the wife about his future intentions, which is recorded in the letter of advice extracted above.
110 The Court finds that the husband intentionally misled both his lawyers and the wife in respect of his intentions regarding the future ownership of the Farm A property and associated farming equipment.
The applicant's payment of minimal child support
111 The husband argues that he has provided primary support for the three children of the relationship since separation with no contribution from the applicant.
112 If the Court sets aside the financial agreement, this consideration is relevant to what orders, if any, should be made on any application which may be brought by the wife.
The terms of the financial agreement are just and equitable
113 The husband argues that the terms of the financial agreement were just and equitable at the time the agreement was made, by reference to s 79, and remain so at the present date, given what has transpired since the financial agreement was executed.
114 If the Court sets aside the financial agreement, the evaluation of the merits of this consideration will be relevant to what orders, if any, should be made on any application which may be brought by the wife.
Applicant's knowledge of the sale of the Farm A property, plant and equipment
115 This consideration is discussed in connection with the doctrine of laches.
(d) Discussion and conclusions in respect of setting aside the financial agreement
116 The Court has found that:
(a) the financial agreement is binding; and
(b) there are established grounds to set aside the financial agreement pursuant to ss 90K(1)(a), 90K(1)(b) and 90K(1)(e) of the Act.
117 Remaining for determination is the question whether the Court should exercise its discretion to set aside the financial agreement. The Court has carefully considered the husband's arguments. After considering the established grounds to set aside the financial agreement against the matters raised against doing so, the Court has concluded that the financial agreement should be set aside.
Proposed orders
118 For these reasons, the Court will order that the financial agreement between the parties dated 17 December 2014 is set aside. The Court will hear from the parties as to whether any further procedural orders are sought at this time in relation to financial matters, given the wife will now have a period of 12 months from the date of this order to commence property or maintenance proceedings, by virtue of s 44(3B)(c)(ii) of the Family Law Act 1975 (Cth).
I certify that the preceding paragraph(s) comprise the reasons for decision of the Family Court of Western Australia.
AP
Associate to the Judge
30 JANUARY 2023
0
6
0