Winter and Winter
[2011] FMCAfam 1242
•9 November 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WINTER & WINTER | [2011] FMCAfam 1242 |
| FAMILY LAW – Property – Binding Financial Agreement – further child of marriage born after putting agreement into effect – whether ‘hardship’ has ensued to the wife. |
| Family Law Act 1975, ss.44(3), 79A, 79A(1)(d), 90K, 90K(1)(c), 90K(1)(d) |
| Cawthorn & Cawthorn (1998) FamCA 37 La Rocca & La Rocca (1991) FMC 92-222 Frampton & Frampton [2007] FMCAfam 914 Gavin & Garden [2011] FamCA 190 Whitford & Whitford (1979) FLC 90-612 |
| Applicant: | MS WINTER |
| Respondent: | MR WINTER |
| File Number: | BRC 13787 of 2007 |
| Judgment of: | Demack FM |
| Hearing date: | 8 November 2011 |
| Date of Last Submission: | 8 November 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 9 November 2011 |
REPRESENTATION
| The Applicant appeared on her own behalf |
| The Respondent appeared on his own behalf |
ORDERS
That the application filed by the wife on 16 November 2010 seeking to set aside the binding financial agreement made between Mr Winter and Ms Winter and dated 5 February 2007 be dismissed.
IT IS NOTED that publication of this judgment under the pseudonym Winter & Winter is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRC 13787 of 2007
| MS WINTER |
Applicant
And
| MR WINTER |
Respondent
REASONS FOR JUDGMENT
This is a decision arising from an application filed as an amended initiating application on 16 November 2010 by the wife wherein she seeks, in part, that the binding financial agreement made between
Ms Winter and Mr Winter on 5 February 2007 be set aside. The husband has not formally responded to that through a response document but, through affidavit material filed subsequently, he seeks that this part of the application by the wife be dismissed. I confirmed with him yesterday in Court that that was his position. Both of the parties have appeared for themselves in this part of their proceedings.
Along with this application to set aside the binding financial agreement, the parties have parenting proceedings. Both parenting and property were listed for final hearing at the commencement of this week. For reasons which are not relevant to this application, the parenting proceedings were adjourned. There is an Independent Children’s Lawyer appointed in those proceedings. The parties both considered that they would seek to use the time which was available to have the Court determine as a preliminary issue whether the financial agreement should be set aside. So to that end, yesterday the evidence and submissions were taken on this issue only. Of course, the Independent Children’s Lawyer was excused from this part of the proceedings.
Both the husband and wife appear in person and the wife has earlier had legal representation but her material with respect to this issue has been prepared by herself. The wife relies upon her amended initiating application, an affidavit filed by her on 16 November 2010 and an affidavit filed by her on 11 October 2011, being the affidavit filed on that day which relates to the financial agreement, there being another affidavit also filed on that day which relates to parenting matters only upon which she does not rely. And she also relies, as far as is needed, on a financial statement, said to be amended, filed 18 October 2011. The wife has also prepared a one-page document which she heads “Statement outlining basis for setting aside financial Agreement” which was filed 11 October 2011.
The husband, who appears on his own behalf and has prepared his own material, relies upon a case outline prepared by him and filed 2 November 2011, only insofar as it relates to the financial agreement at this stage. He also relies upon an affidavit filed by him on 25 October 2011 which relates to the financial agreement, it being one of two affidavits filed by him on that day, the other relates only to parenting matters, and he says that there is nothing within that affidavit upon which he relies for the financial agreement argument. The affidavit that he refers to has handwritten on the front page the word “amended” but I do not believe that to be of any particular consequence. He also has a financial statement filed on 18 October 2011.
The parties were both asked as to whether they sought to have this matter dealt with on the papers or if either of them required the other for cross-examination. The husband indicated that he required the wife for cross-examination and he did cross-examine the wife. The wife indicated that she did not require the husband for cross-examination. The husband, as the respondent, made his submissions first. Neither of them are able to be here today to hear my decision as they both have work commitments which they are unable to change.
Background facts
The mother was born in 1968 and the father was born in 1968. They married [in] 2001 and their first child, [X], was born [in] 2003. They separated on 27 July 2005. They entered into a financial agreement on 5 February 2007. That agreement is exhibited as annexure 1 to the affidavit of Ms Winter filed 16 November 2010.
There is no contest before me that the financial agreement is deficient in any material way. The financial agreement includes the certification by the separate solicitors for each party. Nobody contends before me that there is any technical or legal deficit in the financial agreement.
Paragraph 3.3 under the heading Division of Property reads:
The husband and the wife agree to divide their assets, liabilities and financial resources as follows:
5. That subject to the clauses below, the Husband retain as his sole property the house and land situated at Property K (“the Property K property”) and the Wife relinquishes all right, title and interest in such property;
6. That subject to the clauses below, the Husband shall retain as his sole property the house and land situated at Property J (“the Property J property”) and the Wife relinquishes all right, title and interest in such property;
7. The Husband is to indemnifies [sic] the Wife and shall keep her indemnified in relation to any mortgage secured over the Property K property or the Property J property;
8. The Husband is to retain as his sole property the business [omitted] and the Wife relinquishes all right, title and interest to such business;
9. That until the child turn [sic] 18 years of age or until the Wife permanently vacates the Property K property, whichever is the earliest event, the Husband shall:
(i)permit the Wife and the child to reside in the residence on the property at the Property K property;
(ii)Allow the Wife quiet enjoyment of the residence at the Property K property;
(iii)Pay for all reasonable repairs and maintenance to the Property K property and residence excluding any costs associated with general gardening at the Property K property.
10. The Husband agrees not to sell or develop the Property K property whilst the wife and the child reside there and the Wife shall permit the Husband to use the front area of the land for car parking for the purposes of carrying out his business in the adjoining property;
11. Notwithstanding the provisions of sub-paragraph(e) hereof, the Wife shall be at liberty to vacate the Property K property at any time and she shall give at least four weeks notice in writing to the Husband of her intention to so vacate the property;
12. For so long as the Wife continues to reside permanently in the Property K property pursuant to this Agreement:
(1)The Husband shall ensure that the Property K property and dwelling is insured at all times and, save for the contribution of the Wife as detailed below, the Husband shall pay all the local authority rates, the housing insurance premiums and the mortgage instalment of principal and interest payable with respect to the Property K property as and when they become payable from time to time;
(2)For the first three years from the date of this Agreement, the Wife shall pay the sum of $50.00 per week to the Husband as a contribution towards his payment of the local authority rates and housing insurance premiums, the first of such weekly payments to be made seven (7) days from the time the Wife commences to reside at the Property K property;
(3)After the third anniversary of this Agreement, the weekly amount to be paid by the Wife to the Husband as a contribution towards his payment of the local authority rates and housing insurance premiums at the Property K property such sum to be indexed to the Consumer Price Index as it varies on an annual basis, such variation to be reviewed on each and every anniversary of the signing of this Agreement by the parties.
13. The Husband’s provision of spousal maintenance for the Wife pursuant to this Agreement for the purposes of section 90E of the Family Law Act 1975 shall be that amount that is equal to the difference between the weekly rental value of the Property K property (as might be, shall it be necessary, determined by a registered valuer appointed by the President for the time being of the Real Estate Institute of Queensland) at any point in time during the Wife’s occupation of the Property K property pursuant to the terms of this Agreement and the amount of the weekly contribution payable by the Wife to the Husband at that same time pursuant to the provisions of subparagraph 3.3(h) of this Agreement;
14. The Husband’s obligation to provide spousal maintenance to the Wife pursuant to the terms of the Agreement shall cease upon the Wife permanently vacating the Property K property or upon the eighteenth birthday of the child, whichever is the earlier of those events.
15. That within 45 days of the date of this Agreement, the Husband pay to the Wife the sum of $140,000.
Paragraph 3.4 then reads:
That subject to the terms of this Agreement, each party do otherwise retain absolutely to the exclusion of the other all property held by that party or to which that party is beneficially entitled, including but not limited to superannuation, savings, insurances, furniture and personal effects.
When this document was signed the child [X] was aged four so it might be understood that it was contemplated that this agreement, allowing the wife and child to live in this property, might last for another 14 years until the child reached the age of 18.
It is important to understand that the properties seem to be adjacent to each other and, it would seem, around a corner from each other and that the husband’s business was located in the same premises as where he seemed to be living. As I understand it, he had some sort of flat attached to the Property J property. Between the two properties there was a fence in which a gate was installed which meant that the child [X] was able to move between her mother and father’s homes.
On 7 September 2009 the parties together had another child, [Y], known by his parents as [Y]. The parties seemed to be of the same mind, that, notwithstanding the fact that a child was conceived, there was no ongoing relationship between them: there was no de facto relationship and the marriage, although they had not divorced and still have not divorced, was not continuing in any practical way. It would seem, if the pregnancy was of a usual duration, that conception must have been at around about December 2008/January 2009. This is around a little less than two years after the financial separation agreement has been entered into.
The house at Property K is a two-bedroom property. There is a sleep-out at the front which also doubles as the front entrance to the home. Some improvements were effected to the house at Property K by the husband whilst the wife and [X] and then [Y] lived in the home. Those improvements went to some renovations of the kitchen, the flooring and some painting.
The wife was of the view that a two-bedroom home was not suitable accommodation for her and the two children, that the children needed to have separate bedrooms and that the baby, [Y], could not remain sleeping in her room.
The parents had discussions about what way, if any, the house at Property K could be extended to provide a third bedroom. There was no successful outcome to those discussions. The relationship between the parties had once again deteriorated.
The wife does not assert and was clear about this in cross-examination that she was not asserting that the husband did anything contrary to 3.3(e)(ii) of the financial agreement of 5 February 2007, which requires that the husband shall allow the wife quite enjoyment of the residence at the Property K property.
And on 27 July 2010, when [Y], the baby, was only about 10 months of age, the wife formed the view that the accommodation at Property K was not suitable for the needs of her and the children. She permanently vacated the premises.
On vacating the premises, she had purchased a three-bedroom villa. She had sold a rental property which she had purchased, as I would understand it, subsequent to the financial agreement being signed. She says that she had purchased that rental property so that she would have a place to move into when [X] was 18 and she was no longer able to live at Property K, pursuant to the agreement.
This is an application pursuant to s.90K of the Family Law Act 1975 (“the Act”). The wife states in her written short statement that the provisions of the Act upon which she relies as the basis for setting aside the binding financial agreement as s.90K(1)(c) and (d). Section 90K(1)(c) reads:
(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:
…
(c) in the circumstances that have arisen since agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; …
And section 90K(1)(d) reads:
(d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside.
The written submissions, or statement, filed by the mother on 11 October 2011 contains only really one line of submissions and that is paragraph 7:
The change in circumstances has created a substantial disparity to my financial status.
The parenting arrangements as they currently are have the children living with the mother and spending time with the father. The parenting arrangements are subject to a final hearing, which is to occur in the first half of 2012, having been adjourned from the commencement of this week. The Independent Children's Lawyer during this adjournment period is arranging for the mother and the father and the child [X] to all be psychiatrically assessed. The father seeks to have much more time with the children than is presently provided for and the mother seeks to, as I would understand it, not have the children spending more time with the father.
As both the parties have represented themselves, they have not taken me to any legal authorities with respect to the provisions of the Act and what might be meant by s.90K(1)(c) or (1)(d). It would seem to me, on my review of the authorities, that there are few matters which specifically assist me with respect to those provisions of s.90K. Section 79A has similar provisions and I have taken some assistance from cases which relate to s.79A.
It seems to me that it is sensible to go through the two separate sections that the wife relies upon with respect to the setting aside of the agreement. The first in line would clearly be s.90K(1)(c):
(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out.
There are no cases that I could find under s.90K which were of any assistance in this issue and there are few reported decisions on the same section under s.79A. The matter of Cawthorn & Cawthorn (1998) FamCA 37 appears to be the best one in terms of assistance. The Full Court there reviewed La Rocca & La Rocca (1991) FMC 92-222, which was a decision of Kay J. Kay J had looked at the section and likened it to the doctrine of frustration in contractual matters. The Full Court in Cawthorn & Cawthorn agreed with His Honour’s approach and said that:
On a case by case basis, reliance upon authority relating to the contractual doctrine of frustration in its various facets may at times prove to be of assistance. In so doing however, care must be taken and it must remain at all times in the forefront of the Court’s deliberations that the task before the Court is to interpret and administer a section of the Act.
And the Full Court went on to talk about that ‘impracticable’ as referred to in the Act is something different from the word ‘impossible’. The Full Court said[1]:
(a) It is not enough that circumstances have arisen since the order was made which make it unjust for the order or part of the order to be carried out; the onus is upon the applicant to establish to the reasonable satisfaction of the Court, that in the circumstances that have arisen it is impracticable for the order or part of the order to be carried out.
(b) The word ‘impracticable ‘means gleaning a definition from the Shorter Oxford Dictionary, ‘not practicable’, ‘that cannot be carried out or done’; ‘practicably impossible’; ‘unmanageable’; or ‘intractable’.
[1] When stating exerts from Rohde and Rohde (1984) FLC 91-592
It seems to me that I should also take into account that the Full Court in Cawthorn & Cawthorn also formed a view that the default by one party cannot be relied upon then to support an argument that it is now impracticable to carry out what is an order under s.79A applications unless the circumstances are beyond their control.
In this case, the parties had an agreement which allowed the right to use a property and the fact which would cause the end of that use was either a point in time when the child [X] turned 18 or upon the wife vacating the premises. By vacating the premises in July 2010, the wife has taken steps which ends that part of the financial agreement having any further effect.
There was no external factor which impinged upon the practicability of the arrangement, for example, the house is still standing; it has not been resumed by any government or local authority; there has not been some damage to the house to make it uninhabitable. The view of the wife that three persons, a girl child, a boy child and a mother, cannot reside in a two-bedroom, one-sleepout house does not, it seems to me, amount to it being not practicable or being unmanageable, intractable or practically impossible.
It seems to me that that is no more than a matter of subjective view of comfort and matters which are of a lesser nature than practicability and I am mindful that it was on the wife’s own motion of moving out that she has taken the defining step, which means that that part of the agreement no longer has any force or effect.
I also take into account that she specifically denies any assertion that the husband interfered with her quiet enjoyment of the property.
The house remained in the ownership of the husband and any works expended on the house were his expense alone.
The fact that they go on to have a second child, which subjectively may mean that a third bedroom in the house is a perceived need, does not, it seems to me, take the matter to a further level of impracticability. The fact that the second child was not in anybody’s mind or intention at the time that the arrangement was entered into does not, it seems to me, amount to a circumstance which makes it impracticable for the order to be carried out. There were 14 years ahead of the wife under this arrangement if she wanted to remain living in that house for the maximum length of time possible. It seems to me that the circumstances which have arisen are not so far beyond the vicissitudes of life which may arise for which the wife should be properly expected to make an appropriate adult response.
Taking all of those matters into account, I do not consider that there are circumstances which have arisen since the agreement was entered into that make it impracticable for the agreement to be carried out or impracticable for a part of it to be carried out.
If I was wrong about that, in any event, I would not exercise my discretion under this head because the wife has taken steps presumptuously in the moving out, and by doing that, there has been subsequent changes that the husband has made to his finances – renting the property to other persons.
The wife has made arrangements for her finances by selling an investment property and purchasing a property over which she has a mortgage. And in particular, because it was the wife’s default not due to circumstances beyond her control, but as a result of an adult choice that she made. And I am satisfied that a default by a party – in this case, the wife – cannot be later relied upon by the wife to support her argument that it is not impracticable to carry out the agreement. The wife’s application insofar as she relies upon that section has not been met.
I move now to her alternative argument under s.90K(1)(d). Baumann FM considered this particular part of the Act in a decision of Frampton & Frampton [2007] FMCAfam 914 – an unreported decision delivered by his Honour on 2 November 2007. I was unable to find any other helpful authority with respect to what this section might mean, except under decisions which refer to s.79A(1)(d). There are some differences, though, in the wording of those two provisions. Section 79A(1)(d) requires that
(d)in the circumstances that have arisen since the making of the order, being circumstances of an exceptional nature relating to the care, welfare and development of a child of the marriage…
Section 90K(1)(d) requires that:
(d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage)…
It is clear that [Y] is a child of the marriage; the parties have not divorced. Much of the authority which relates to this part of s.79A relates to the notion of the circumstances of an exceptional nature. Section 90K, though, requires only a material change in circumstances, and I am satisfied that that is a less stringent test.
Here, the material change in circumstances, being circumstances relation to the care, welfare and development of a child, is the new existence of a child. At the time the agreement was entered into, there was only one child, and two years after the agreement was entered into, or thereabouts, a second child was born. That is plainly, on the face of it, a material change in circumstances. Section 79A – the next element that needs to be satisfied is that the child – or where the applicant has caring responsibilities for the child, then the applicant – will suffer hardship. Section 90K(1)(d) phrases it that:
… the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship…
So both of them seem to cover that it will be either the child or the applicant who suffers hardship, although I note there seems to have been some earlier discussion in the s.79A cases as to whether it was the child or the applicant who might suffer hardship. And so the hardship must arise if the court does not set the agreement aside. There is no provision to vary the agreement. All that I could do is set the agreement aside, and upon setting the agreement aside, then the matter would come to the court as a s.79 application.
The test for hardship under this head of either ss.79A or 90K has not been discussed in any particularly useful or authoritative way. Baumann FM in the decision which I have referred to looked to the definition of hardship as explored in s.44(3) cases. They are cases with respect to the extension of time for the commencement of property adjustment proceedings. Mushin J in the matter of Gavin & Garden [2011] FamCA 190, delivered on 21 March 2011 at Brisbane, likewise looked at s.44(3) cases in helping to understand what hardship might mean.
Both of their Honours looked at the way that Whitford & Whitford (1979) FLC 90-612 looked at the definition of hardship. There the Full Court held that the meaning of hardship was:
… Akin to such concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment…
They later went on to say:
…In ordinary parlance, hardship means something more burdensome than “any appreciable detriment”. We consider that in subsec 44(4), the word should have its usual, though not necessarily its most stringent, connotations…
As a result of the steps taken by the wife, she has changed her personal financial circumstances. Whilst living in the house at Property K, for the first three years she only had to pay $50 per week, effectively, as her rent. After that, it would increase pursuant to the CPI. This was clearly very inexpensive accommodation for a woman who has care responsibilities, but also has the capacity to earn an income; she is a [occupation omitted]. The benefit to her, then, was over a period of another 14 years from when it was entered into and another around about 11 or 12 years from when she left. A substantial benefit if she did not need to accommodate herself in the open market, either in a rental or in a principle place of residence over which she had a mortgage.
Clearly, her financial position was sufficient that she was in a position to borrow money to purchase the investment property that she had as her prospective place of residence upon the child turning 18. And with that being tenanted, she was able to take the benefits that were available to her in a taxation manner from that, as well as having a place to live which was inexpensive and for which she was not responsible for upkeep and maintenance and the general expenses of owning real property.
She had the quiet enjoyment of the residence, and the residence was adjacent to the residence where the child’s father lived, so in terms of any practical arrangements for the child moving between the parents’ homes, that was reduced as much as it ever could be.
The wife sets out in her most recent affidavit, with some particularity, the changes in the financial situation for her as a result of her moving out of the house. She says that she now has to work four days a week instead of three days a week, to increase her personal finances. She says that she now pays mortgage payments on a weekly basis of $318, and as she used to only have to pay $50, this is an increase of $268 for living accommodation.
The Property M property was providing her with $225 per week rental income, which went directly to pay the mortgage of that property. She doesn’t tell me, though, in that affidavit, how much the mortgage was on the Property M property, and how much she was therefore having to pay above and beyond what was being received by her by way of a rental income, if anything. So what the wife tells me is that she now pays an extra $268 a week for where she lives, but she doesn’t tell me whether there has been any lessening of outgoings as a result of her owning a rental property, or purchasing the rental property.
The wife’s financial statement tells me that her weekly income before tax is $1,176. She receives child support for both children in the amount of $212 per week. She also receives some family tax benefit, both A and B, which I do not consider to be matters which I should be factoring into any real equations. She pays $347 per week income tax. Within her financial statement most recently filed, her personal expenditure, she lists at being $1,052, which is a less amount than what she has coming into her bank account. The hardship, then, would seem to be the need to work one extra day per week to cover her financial position, and some notion expressed by her in her statement, filed 11 October 2011, that:
7. The change in circumstances has created a substantial disparity to my financial status.
A disparity in financial status between the husband and the wife does not, it seems to me, on face value, be something which has a sufficient nexus to the concept of hardship on the wife or the child. It is acknowledged by the wife that the husband is assessed to pay child support and pays his child support, and it would seem that the amount of child support paid by the husband on a monthly basis is in the order of $926. It is accepted that the husband has been able to maintain living in the house that he was living in, and that the wife, through her own choice, has changed her financial responsibilities in terms of the accommodation for her and the children when they’re in her care.
If I go back to whether there was a hardship being suffered by her whilst they remained living in the Property K property, the fact that it was a two-bedroom home with three persons living in it does not, it seems to me, amount to hardship. The wife’s view as to whether the children were able to share a room and what it might mean in terms of their sleeping arrangements or their comfort or their privacy or their personal development don’t seem to me to make the grade as to an argument for hardship.
And on the wife’s own material, she fails to provide information as to what the real changes are to her financial position, and it would seem from her own financial statement that she is not experiencing such hardship, for example, that her outgoings on a weekly basis exceed her incomings.
The hardship of a wife who has the primary care of two children working either three days a week or four days a week does not seem to me to be a matter which falls with any connotation of hardship, and it should be remembered that any change in financial burden for her accommodation has arisen from her own choice to leave the home at Property K, and her subsequent purchase of the place in which she now lives.
The onus is on the applicant, as the person seeking to have the financial agreement set aside. I am not satisfied that she has established that there is a hardship that she or the children have experienced as a result of the subsequent birth of [Y].
If I am wrong about that, it is a matter for my discretion, in any event, and I would not exercise my discretion, taking into account that the extra child is the responsibility of both of the parents, and that the husband, it is admitted, is paying his child support as assessed, and that that is an appropriate assessment.
I also take into account that the circumstances which the wife would say creates the hardship are the circumstances which she has, in fact, effected herself, by leaving the property and arranging her accommodation in the manner that she has. So even if I was wrong about the hardship, I would still not exercise my discretion.
The only two grounds upon which the wife sought to set aside the financial agreement were s.90K(1)(c) and (d). I have found that she has not satisfied the requirements under either head, and her application to set aside the binding financial agreement is dismissed. The application that the binding financial agreement made between
Ms Winter and Mr Winter on 5 February 2007 be set aside is dismissed.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Demack FM
Date: 17 November 2011
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