WOODHAM & ERICKSON (No.2)
[2019] FCCA 1201
•15 May 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WOODHAM & ERICKSON (No.2) | [2019] FCCA 1201 |
| Catchwords: FAMILY LAW – Binding Financial Agreement – whether should be set aside – Construction of Agreement. |
| Legislation: Family Law Act 1975 (Cth), ss.90B, 90C, 90D, 90G |
| Cases cited: Graham & Squibb [2019] FamCAFC 33 Parker & Parker [2012] FamCAFC 33 Senior & Anderson (2011) FLC 93-470 Hoult v Hoult (2013) FLC 93-546 ASIC v Fortescue Metals Group Ltd & Anor [2011] FCAFC 19 Australian Broadcasting Commission v Australian Performing Right Association LTD (1973) 129 CLR 99 |
| Applicant: | MS WOODHAM |
| Respondent: | MR ERICKSON |
| File Number: | BRC 13010 of 2016 |
| Judgment of: | Judge McGuire |
| Hearing dates: | 28, 29, 30 November 2018 & 13 December 2018 |
| Date of Last Submission: | 21 February 2019 |
| Delivered at: | Melbourne |
| Delivered on: | 15 May 2019 |
REPRESENTATION
| Counsel for the Applicant: | Ms McCardle |
| Solicitors for the Applicant: | Cherry Family Lawyers |
| Counsel for the Respondent: | Mr Lawrence |
| Solicitors for the Respondent: | P M Lee & Co |
ORDERS
That the Court declares pursuant to Section 90G(1B) of the Family Law Act 1975 that the co-habitation & Binding Financial Agreement is a Binding Financial Agreement.
That the proceeds of sale of the former matrimonial home situate at Property A in Queensland be distributed as follows:
(a)As to the payment of any outstanding costs and disbursements on the sale;
(b)As to the sum of $240,000 to the wife; and
(c)As to 50% of the balance to the wife and 50% of the balance to the husband.
IT IS NOTED that publication of this judgment under the pseudonym Woodham & Erickson (No.2) is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRC 13010 of 2016
| MS WOODHAM |
Applicant
And
| MR ERICKSON |
Respondent
REASONS FOR JUDGMENT
Applications
These parties litigated both parenting and financial issues in a trial of four days duration between 28th November 2018 and 13 December 2018. At the conclusion of the evidence, Ex-Tempore reasons were delivered in respect of the children's matters and the Court determined to receive written submissions in relation to the financial issues by February 2019.
The wife seeks the following orders:
i)That a Binding Financial Agreement from 2006 be set aside;
ii)That the husband receive a sum of $80,000 from monies held in trust on behalf of the parties being the net proceeds of sale of the former matrimonial home;
iii)That the wife receive the balance funds from monies held in trust;
iv)That otherwise each of the parties retain those assets, liabilities and financial resources currently in the possession or control of that party and indemnify the other accordingly.
Alternatively, and in the event of the Binding Financial Agreement not being set aside, then the wife proposes that the husband receive a payment of $170,866.94 from the net proceeds of sale from the former matrimonial home with the then balance of funds to be paid to the wife and otherwise ancillary orders set out above.
The husband proposes, firstly, that there be a declaration that the Financial Agreement is binding and that consequently the respondent be entitled to receive $314,335.30 being one half of what he says should be the net sale proceeds of the property at $628,670.60.
Alternatively, the respondent proposes, dependent upon the construction and validity of the Financial Agreement, that he also receive a splitting order equivalent to 43% of the applicant's superannuation interest of $291,956.19 (minus $15,000 as preserved under the Financial Agreement) whilst retaining his own superannuation entitlement of $806.99 together with a half share of remainder joint property valued at $34,330 ($17,165).
Still further alternatively, the respondent husband argues, in the event of the Binding Financial Agreement being set aside, that there be a distribution of the property pool, inclusive of superannuation, as to 57% to the applicant and 43% to himself.
The Issues
The issues can be summarised as:
a)Whether or not a Binding Financial Agreement be set aside;
b)If not set aside then the parties argue the interpretation of the Agreement; and
c)If the Binding Financial Agreement be set aside then the orders which constitute just and equitable property settlement between the parties.
Background
The husband was born in Country B on … 1972. He is 46 years of age.
The wife was born … 1975 and is 43 years of age.
The parties met in London in 1999 or 2000. The husband says they commenced a de facto relationship in London in 2000. The wife concedes that they lived together in about 2001 but says that the relationship ended when she returned to Australia in 2002. It appears, however, that the relationship continued in some form and that the husband moved to Australia in about 2004.
The parties were married in Australia on …2007.
The wife says that the parties separated in September 2013 but remained living under the one roof although the husband was substantially absent from the home until July 2017 when the husband permanently left the home pursuant to an order of this Court. The husband says that the parties separated in January 2015 following a family holiday.
There are three children of the marriage being [X] (aged 15 years), [Y] (aged 10 years) and [Z] (aged 10 years). Pursuant to my orders delivered ex-tempore at the conclusion of the evidence in this matter, the children live primarily with the wife and she was given permission to relocate their primary place of residence from Brisbane to Town C in Queensland.
The wife works as a customer service officer and discloses an income of approximately $100,000 per annum. The husband has historically worked in the customer service business but now works as tradesman and appears to have had a taxable income of $11,478 for the year ending June 2017.
There is no evidence that the wife is re-partnered. Whilst the husband's evidence was somewhat vague in respect of his personal circumstances, I cannot be satisfied that the husband is in any form of dependent domestic relationship although his own evidence suggests him to be frequently the beneficiary of generous financial benefactors.
Upon her return to Australia in 2002, the wife purchased a home unit at Property D funded by a gift of $240,000 from her grandfather.
The wife returned to London for only approximately one month in … 2003 during which period she fell pregnant with [X].
The husband moved to Australia in 2004 and the parties lived in the wife's home unit at Property D.
In 2004 the parties jointly opened a business known as ‘…’ at Suburb E. The wife took leave from her employment at the Employer to assist in running of the business. She says that she took six months leave at half pay and 18 months leave without pay.
The parties took a loan from the Westpac bank to fund the acquisition and setting up of the business and using the wife's otherwise unencumbered home unit as security for the loan.
The business was ultimately unsuccessful and, after being unable to sell it as a going concern, the business was closed on … 2006. The wife says that the parties recouped $11,500 from a fire sale of fittings and equipment. The husband says that the parties received about $115,000 from the sale of furniture and equipment.
The parties agree that in … 2005 the wife received a $1.2m gift from her grandfather, Mr F.
The wife says that the business closed with two significant debts being firstly, an amount of $204,727.53 owing to the Westpac bank on account of the initial loan and which she says was satisfied by a payment in that amount to Westpac bank on … 2005 from the monies received by her grandfather. The wife says a further outstanding debt of $225,000 had accumulated and in respect of the business by … 2007 that debt was subsequently transferred to the ANZ bank and ultimately satisfied from the proceeds of sale of the former matrimonial home in July 2018.
The wife says that the gift from her grandfather of $1.2m was primarily utilised by the following: –
a)the payment of the Westpac access loan in respect of the business satisfied on … 2005 in a sum of $204,727.53; and
b)The sum of $960,000 ultimately deposited into an ING savings maximiser account in her name.
The wife says that the balance of the monies from her grandfather were utilised in the purchase of two vehicles in … 2006 totalling $66,501.99.
In May/June 2006 the parties entered into a written Agreement entitled ‘Co-Habitation & Binding Financial Agreement' purporting to be pursuant to the ‘Family Law Act 1975 Part VIII Section 90C' and ‘Property Law Act (Qld) 1974 Part 19’. That document carries the signatures of the parties but is undated. The document carries certificates of independent legal advice asserted to be given to each of the parties and dated as to 22 May 2006 in respect of the husband's legal advisor and 14 June 2006 in respect of the wife's legal advisor.
In … 2006 two blocks of land were purchased at Property A1 and A2. The block at Property A1 was registered in the names of both the husband and the wife as joint tenant, and it is agreed between the parties that they planned to and did build a residence on that block. The block of land at Property A2 was registered solely in the name of the wife and remained vacant. The purchase prices were $250,000 and $255,000 respectively. It is clear that the funds for the purchases of the two blocks of land came from the monies preserved by the wife from the gift from her grandfather.
In … 2007 the parties purchased a property at Property G. The purchase price was $356,000. The husband says that the title was registered as tenants-in-common in equal shares. The intention was to utilise the property as an investment. The parties agree that the purchase was fully financed by a loan from the Westpac Banking Corporation with security provided by the aforementioned Property A properties. The Property G property was sold in … 2009 for $399,000 and, given the costs of purchase and sale, without apparent equity.
A residence was built on the property at Property A1. Property A2 remained vacant land.
In … 2013 the wife sold the home unit at Property D.
In or about 2008 or 2009 the husband commenced two businesses being a … business and a … business through Country H and perhaps to Country B. The wife says that her involvement in the businesses was minimal and limited effectively to completing the husband's tax returns and creating a spread sheet. The husband asserts that the wife was more practically involved. The wife says that the businesses failed with considerable debt of around $190,000. The husband's evidence was more vague as to the financial success or otherwise of the businesses. The wife says that the proceeds of sale of her home unit at Property D were used to pay the debts of these failed businesses.
The parties agree the property pool in so far as assets and superannuation is concerned as follows:
Proceeds of Sale of Property A1
$ 581,733.87
Property A2
$ 450,000.00
Motor Vehicle (Wife)
$ 21,500.00
Contents (Wife)
$ 9,390.00
Wife’s superannuation PSS
$ 291,956.00
Clothing in container (Husband)
$ 3,430.00
Husband’s superannuation
$ 806.00
TOTAL
$1,358,815.87
The parties remain in substantial disagreement as to the existence of and status of various liabilities.
Credit
As noted at [19] and [21] of my reasons in the parenting matter, I had the advantage of watching and hearing both parties give their evidence. I found the wife to be an impressive witness. She was subjected to vigorous and lengthy and intrusive cross-examination in respect of financial matters. As with her evidence generally, the wife gave informed, considered and detailed responses. She remained of calm demeanour in the witness box. She gave her responses in an assertive, candid and direct fashion. I saw the wife to be a good historian.
To the contrary, the husband was not a good witness. He did not present as good an historian as did the wife. He was reluctant to make admissions against interest even when confronted with evidence contrary to his initial assertions. He was often unable to give plausible explanations to discrepancies in his evidence as, for example, when confronted with the fact that he apparently had claimed taxation deductions in respect of a property where his name did not appear on the title. His attempted explanations were generally unconvincing. Consequently, in discrete issues of credit between these two parties, I generally preferred the evidence of the wife.
The ‘Co-Habitation & Binding Financial Agreement'
The wife at [71] and following submits that the relevant Agreement 'is void or voidable or unenforceable'. She relies on the fact that the Agreement is not dated, refers to incorrect provisions of the relevant legislation, and at clause 7.3 is uncertain and/or ambiguous in its meaning and interpretation. The wife supports this argument by observing that the husband himself leaves open multiple interpretations on the document and the provisions of the Agreement are therefore uncertain and unclear.
The husband fundamentally argues that the Financial Agreement is valid and binding.
The relevant Agreement is undated as to the day and month of 2006.
Recital A states:
The parties intend that this Co-habitation and Financial Agreement, hereinafter referred to as 'the Agreement’, be binding on both Ms Woodham and Mr Erickson in accordance with and pursuant to Section 90C of the Family Law Act 1975, and pursuant to Part 19 Division 3 of the Property Law act (QLD) 1974.
Recitals D and E provide:
The parties understand that whether their Co-habitation Agreement. Financial Agreement, Termination Agreement, Separation Agreement is valid, enforceable or effective, is to be determined by the Court according to the principals (sic) of the Law and equity that are applicable in determining the validity, enforceability and effect of Contracts and purported Contracts (Section 90KA of the Family Law Act) (Section 272 of the Property Law Act).
No other Agreement is in force under Sections 90B, 90C or 90D of the Family Law Act 1975 or under Part 19 of the Property Law Act.
Recitals F, G and I note that the parties commenced a relationship in … 2000, commenced cohabitation on or about … 2004 and were not married at the time of entering into the Agreement.
The operative part of the Agreement provides at [1.1 – 1.2):
Ms Woodham and Mr Erickson mutually covenant and acknowledge that they both intend this Agreement to govern their rights in relation to their financial matters during their relationship, and upon any separation occurring in their relationship, or if they later marry, their rights to property settlement and spousal maintenance under the FLA upon breakdown of the marriage.
Ms Woodham and Mr Erickson both intend this Agreement to create a legal enforceable Agreement between themselves.
The Agreement at [1.3.2] provides:
If in the future the parties marry, this Agreement is to continue to be binding and this Agreement is a Binding Financial Agreement under Part VIII Section 90C of the FLC.
Paragraph [7] under the heading ‘Property Rights of Parties upon Separation During the Marriage’ is directly relevant to my determination here and provides:
Ms Woodham and Mr Erickson acknowledge that upon separation during marriage: –
7.1 Ms Woodham’s Property and liability listed in Schedule 1 as well as all property and income acquired after the date of this Agreement by Ms Woodham by gift (including gifts from Mr Erickson), trust distribution, company dividend or payment; devise, bequest or inheritance or out of the proceeds of sale and/or arising from the disposal of an/or income derived from the property or resources referred to in Schedule 1 shall belong to Ms Woodham absolutely and Mr Erickson shall have no right, claim, title or interest to and in Ms Woodham’s Property.
7.2.Mr Erickson's Property and liabilities listed in schedule 2, as well as all property and income acquired after the date of this Agreement by Mr Erickson by gift (including gifts from Ms Woodham), trust, distribution, company dividend or payment devise, bequest or inheritance or out of the proceeds of sale and/or arising from the disposal of an/or income derived from the property or resources referred to in Schedule 2 shall belong to Mr Erickson absolutely and Ms Woodham shall have no right, claim, title or interest to and in Mr Erickson's Property.
7.3 The parties shall dispose of and discharge the jointly owned properties and liabilities as listed in schedule 3 and any jointly owned property and liabilities acquired or incurred after the date of this Agreement in such a manner as they may agree, and failing agreement within one calendar month of separation, the Jointly Owned Property should be placed on the market for sale on such terms and conditions as agreed and failing agreement then as determined by the president for the time being of the Queensland Law Society and upon the sale and after payment of all liabilities associated with the subject property and sale costs, the net proceeds shall be distributed equally between the parties subject to:
(i) the parties acknowledge and agree that Ms Woodham has contributed $240,000 more than Mr Erickson by way of separate contribution from the joint purchase of the business known as … (‘the business') located at Suburb E, Qld and then;
(ii)the parties acknowledge and agree that upon the sale of the business, all debts of the business shall be paid including the balance of the Equity access loan due and payable at that time and the balance monies then remaining shall be divided equally between Ms Woodham and Mr Erickson.
Schedule 1 sets out the wife's then assets, liabilities, and superannuation as follows:
Super
Super Fund J: Value: $15,000
Other
Cash or Investment
Monies held in Ing Bank Value: $960,000
Real Property:
Residential Unit at
Property D, Qld Value: $300,000
Liabilities
Car loan owed to Ms K Value: $15,000
Schedule 2 provides the husband's then assets but without any reference to superannuation or liabilities being the following:
Bank Accounts:
Westpac savings account value: $1,000
London 800 pounds
Schedule 3 references 'jointly owned property' as follows:
The business known as '…’ located at Suburb E, Qld equals body = Value: $140,000
motor vehicle:
motor vehicle
Registered Number: ….. value $15,000
Miscellaneous Furniture:
located at Property D, Qld
Joint Liabilities
Equity Access Loan – Westpac bank = $205,000
Business loan – Westpac bank = $20,000.
The document carries a certificate of independent legal advice for the wife by Peter Anthony Campbell of Campbell's Legal Services, solicitors dated 22 May, 2006. The document carries a certificate of independent legal advice for the husband by Shelley Lynn Johnson of Brideaux, solicitors dated 14 June 2006.
Is the Financial Agreement binding and valid?
The applicant wife argues that the Financial Agreement is not binding or be set aside. The respondent husband argues that the document constitutes a Binding Financial Agreement and is valid subject to permitted rectification.
Section 90G of the Family Law Act1975 ‘the Act’ provides for when Financial Agreements are binding as follows:
90G(1) – subject to subsection (1A), a Financial Agreement is binding on the parties to the agreement if, and only if:
(a) the agreement is signed by all parties; and
(b)before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
(c)either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party ( whether or not the statement is annexed to the agreement); and
(ca) a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
(d)the agreement has not been terminated and has not been set aside by a court.
S90G(1A) - a Financial Agreement is binding on the parties to the agreement if:
(a) the agreement is signed by all parties; and
(b)one or more of the paragraphs (1) (b), (c ) and (ca) are not satisfied in relation to the agreement; and
(c)a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and
(d) the court makes an order under subsection (1b) declaring the agreement is binding on the parties to the agreement; and
(e)the agreement has not been terminated and has not been set aside by a court.
90G(1B) - for the purposes of paragraph 1 (a)(d), a court may make an order declaring that a Financial Agreement is binding on the parties to the agreement, upon application (the enforcement application) by a spouse party seeking to enforce the agreement.
90G(1C) - to avoid doubt, section 90KA applies in relation to the enforcement application.
The wife relies in part on the relevant document referring to it being made 'pursuant to Section 90C of the Family Law Act 1975 when, in fact, the parties were not married are at the time of the agreement.
Section 90C references in particular 'Financial Agreements during a marriage'. The section provides:
90C(1) If:
(a) the parties to a marriage make a written agreement with respect to any of the matters mentioned in subsection(2); and
(aa) at the time of the making of the agreement, the parties to the marriage are not the spouse parties to any other binding agreement (whether made under this section or section 90B or 90D) with respect to any of those matters; and
(b) the agreement is expressed to be made under this section;
the agreement is a Financial Agreement . The parties to the marriage may make the Financial Agreement with one or more other people.
The wife correctly argues that the agreement should properly have referred to section 90B of the Act which references 'Financial Agreements before marriage’.
By way of completion, 'Financial Agreement’ is defined in S4 of the Act as:
… An agreement that is a Financial Agreement under section 90B, 90C or 90D, but does not include an ante-nuptial or post-nuptial settlement which section 85A applies.
Secondly, the applicant wife correctly points out that the Agreement is not dated as to day and month although does carry the year, 2006.
Notably, however, each of the certificates of independent legal advice provided separately to the parties do carry dates being 22 May 2006 in respect of the wife and 14 June 2006 in respect of the husband. There is no argument before me that the certificates of independent legal advice are otherwise other than proper in form and content.
Thirdly, the wife argues that clause 7.3 is uncertain and unclear in its meaning on a plain and ordinary reading. Further, the wife argues that the husband himself, by offering various alternative interpretations of clause 7.3, corroborates the wife's argument as to the clause being uncertain and unclear.
The wife in her evidence does not argue other than it was the intention of the parties to enter into a Binding Financial Agreement. She now argues only as to the form and what she says is the ambiguity of the agreement.
The husband's primary argument appears to be that the Financial Agreement is binding and able to be rectified. Nevertheless, the husband's evidence arguably reveals a dispute, at least from him, about the intended effect of the agreement and any relevant antecedent discussions. At [21] – [25] of the of the husband's affidavit of 20 February 2017 appears the following: –
In about December 2005 at the business we were talking about financial matters when the wife said to me that her grandfather is going to pass away, and he is going to give us some money to us as a family. I said that is nice and that would help us. She said she didn't want most of the money to go to the father and younger brother and clearly indicated it was money for the family.
In February, 2006 the wife told me that her grandfather was afraid that if I left her, the family would need some money. I told her that was absurd because I would not leave her – we already had a child together.
In or about April 2006 the wife said to me that before her grandfather would give the family money, a prenuptial agreement had to be signed.
In May and June 2006 the wife asked me on several occasions to sign a cohabitation and Binding Financial Agreement so that her grandfather would give us money. The amount of money was never disclosed to me. The only reason for signing such an agreement that we discussed was so that we might get some money from the wife's grandfather.
In June 2006 I signed a Cohabitation and Binding Financial Agreement which the wife's solicitors had prepared (which is an annexure W – 1 to the wife's affidavit). She said to me that only after an agreement was signed would her grandfather transfer the money. I remember this distinctly because we had an argument after being at a restaurant discussing it. I felt she put some amount of pressure on me.
In his trial affidavit of 22 October 2018, the husband does not reference the above but says only at [15]:
We signed a Cohabitation and Binding Financial Agreement dated 14 June 2006 annexure 9 to this affidavit is a copy of that agreement.
There was a little or no cross-examination at the trial in respect of the antecedents of the agreement.
I am satisfied that the parties intended the agreement to be a binding agreement. In this respect I note recital A to the document stating the intention of the parties being that the agreement be binding on both of them and also paragraph 1.1 of the operative part of the agreement as set out above in these reasons.
Section 90K(1) of the Act provides:
A court may make an order setting aside a Financial Agreement or a termination agreement if, and only if, the court is satisfied that:
(a)the agreement was obtained by fraud (including non- disclosure of a material matter); or
(aa) a party to the agreement entered into the agreement:
(i) for the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
(ii) with reckless disregard of the interests of a creditor or creditors of the party; or
(ab) a party (the agreement party) to the agreement entered into the agreement:
(i) for the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de facto relationship with a spouseparty; or
(ii) for the purpose, or for purposes that included the purpose, of defeating the interests of that other person in relation to any possible or pending application for an order under section 90SM, or a declaration under section 90SL, in relation to the de facto relationship; or
(iii) with reckless disregard of those interests of that other person; or
(b) the agreement is void, voidable or unenforceable; or
(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; or
(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; or
(e) in respect of the making of a Financial Agreement - a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable; or
(f) a payment flag is operating under Part VIIIB on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a flag lifting agreement under that Part; or
(g) the agreement covers at least one superannuation interest that is an unsplittableinterest for the purposes of Part VIIIB.
In the matter now before me, neither party now argues that the Financial Agreement was entered into by reason of fraud, non- disclosure, unconsciousability, or that circumstances have rendered the carrying out of the agreement to be impracticable. Notably, the husband who may have raised evidence in these respects in earlier affidavits does not now pursue any such arguments. As such, the wife argues discreetly that the Financial Agreement is void, voidable or unenforceable for the three reasons set out above. In these respects the respondent husband argues that the defects can be rectified by virtue of section 90KA of the Act empowering a Court to engage principles of common law and equity. That section provides:
90KA The question whether a Financial Agreement or a termination agreement is valid, enforceable or effective is to be determined by the court. According to the principles of the law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:
(a)subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and
(b)has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and
(c)In addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.
The Full Court in Graham & Squibb[1] noted the general principle in respect of rectification as follows:
A written contract is presumed to correctly record the agreement of the parties to it and, in order to displace that presumption, a party seeking rectification of the contract must advance 'clear and convincing proof' if it does not embody the final intention of the parties (see Commissioner of Stamp Duties (NSW) v Carlenka Pty Ltd (1995) 41 NSWLR 329 @ 345; Pukallus v Cameron (1982) 180 CLR 447 @ 452, 456 (“Pukallus”); Maralinga Pty Ltd v Major Enterprises Pty Ltd (1973) 128 CLR 336 @ 350. For that purpose, the parties’ mutual intention is the relevant feature of the evidence, as there is no room for rectification of the contract as the contrary intention is not shared (see Franklins Pty Ltd v Metcash trading Ltd (2009) 76 NSWLR 608 @ 710; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603 @ 6055, 660.
[1] [2019] FamCAFC 33
Counsel for the respondent helpfully referred me to a decision of Murphy J in Parker v Parker[2] where his Honour succinctly summarises the jurisprudence considered by other Full Courts in matters such as Senior v Anderson[3] and Hoult v Hoult[4] as follows and where the former rests on a factual platform not dissimilar to that now before me:
The amending legislation’s purpose is stated to be, in part, to prevent people who have made an informed decision to enter a Financial Agreement 'later avoid [ING] or get [TING] out of the agreement on a mere technicality, resulting in court battles that the agreement was designed to prevent'. It would, to my mind, be a curious result of the legislation if the central remedial section in those amendments (i.e. s.90G(1A) was defeated because of a failure in the form of the application. That is all the more so when it is considered that the issues to which s.90G(1) and s.90G (1A) in particular, relate, very frequently arise (as here) in the context of a s.79 application which is met by a responsive pleading that a Financial Agreement is binding, as a result ,Part VIIIP is rendered inapplicable to the matters to which the agreement pertains.
[2] [2012] FamCAFC 33
[3] (2011) FLC93-470
[4] (2013) FLC 93-546
Consideration
Firstly, it is clear to me that the document on its face shows a joint intention of the parties that they enter into a binding and enforceable Financial Agreement. Again, recital A states as much as follows:
The parties intend that this Co-habitation Financial Agreement, hereinafter referred to as 'the Agreement’ be binding on both Ms Woodham and Mr Erickson in accordance with, and pursuant to section 90C of the Family Law Act 1975, and pursuant to part 19 division three of the Property Law Act (Qld) 1974.
Similarly, the operative part of the agreement at [1.1] provides:
Ms Woodham and Mr Erickson mutually covenant and acknowledge that they both intend this Agreement to govern their rights in relation to their financial matters during the relationship, and upon any separation occurring in their relationship, or if they later married, their rights to property settlement and spousal maintenance under the FLA upon breakdown of the marriage.
The wife, before this Court, did not argue contrary to any such mutual intention. The husband's primary argument is that the document can be rectified to be a Financial Agreement and is then binding pursuant to s.90G of the Act.
The wife argues, firstly, that the document is undated and, secondly, that it erroneously references assets base s.90C of the Act.
The full Court in Senior & Anderson (supra) [88] – [89] (Strickland J) helpfully notes:
88 - Despite its wide circulation as a term of convenience, the expression 'Binding Financial Agreement' is not defined in the Act. Rather, as can be seen, the Act refers to and defines a particular form of agreement called a 'Financial Agreement’. Further, as s.4 makes plain, a 'Financial Agreement' has two essential components. It must first be 'an agreement', and it must also be an agreement that is made 'under section 90B, 90C or 90 D'.
89 - 'Agreement' is also not defined and thus carries its ordinary and natural meaning. Accordingly, just as with any agreement, principles of law and equity will apply so as to vitiate the agreement if the relevant circumstances are made out. So it is, in my view, with an agreement that purports on its face, to be a 'Financial Agreement'. That interpretation is reinforced by s.90 KA, noting that this section refers to 'Financial Agreements' as distinct from ‘agreements'.
The wife argues that the relevant agreement to is undated. Although the certificates from the legal representatives are appropriately dated. Quite simply, s.90G which sets out the requirements for a binding agreement does not stipulate that the document be dated although, of course, it clearly obligates the parties to sign the document. It follows, in my view, that the absence of a date on the face of the document is not fatal to it being a 'Financial Agreement' and a 'Binding Financial Agreement' within the provisions of s.90G.
Secondly, the wife argues that the document purports to be made pursuant to s.90C of the Family Law Act 1975. Section 90C is applicable to parties to a marriage. Section 90B is applicable to parties who are contemplating entering a marriage. Clearly, the parties to this agreement were not married at the time of the agreement as noted in the recitals where the contemplation of marriage is also noted. Consequently, unless rectified, the agreement could not be a Binding Financial Agreement. However, given that I am entirely satisfied that the document evidences a common intention of these parties to enter into a Binding Financial Agreement, it follows that rectification be available to cure what is clearly an error in the careless reference to s.90C rather than s.90B and therefore principles of equity permit and allow the rectification as a cure to give effect to the clear intentions of the parties.
Thirdly, the wife argues that clause 7.3 of the document is uncertain in its meaning and is therefore void, voidable or unenforceable and the purported Financial Agreement should be set aside accordingly. In this respect the wife places some store on the fact that the husband himself, who asserts the document to be a Binding Financial Agreement, offers three interpretations as to clause 7.3.
I do not accept the applicant's argument in this respect. The Full Court of the Federal Court in ASIC v Fortescue Metals Group Ltd & Anor[5] noted the role of the Courts thus:
It is well – established that the courts strive to uphold bargains: Hillas & Co Ltd v Arcos Ltd (No.2) [1932] UKHL 2; (1932) 147 LT 503. To that end, the court will construe the terms of an agreement with an inclination to give effect to the intention of the parties, even if that intention has been obscurely expressed: Australian Goldfields NL (INLIQ) v North Australian Diamonds NL [2009] WASCA 98, ESP @ [6] – [8]. Further, the court may, where circumstances permit, apply objective standards of reasonableness to prevent the intention of the parties being defeated.
[5] [2011] FCAFC 19 @122
Consequently, I intend to declare that the financial agreement is binding and an agreement pursuant to s.90B of the Family Law Act (1975).
Put simply, the question here, at its highest, is one of construction and interpretation and commonly the role of Courts to give effect to the intention of parties to contracts.
The parties then disagree as to the construction of the relevant clause. The wife argues that the Agreement at [7.3] must be read in full and within context with reference to the mutual intentions of the parties. She says that [7.3] contemplates 'jointly owned property' to be sold and the net proceeds to be distributed equally between the parties but ‘subject to' sub-clauses (i) and (ii). She says, relevantly, that sub-paragraph (i) provides that the equal distribution be subject to the acknowledgement of her superior contribution of $240,000 which is to be read in accordance with the parties’ intention of acknowledgement of and an actual separation of sole property as distinct from jointly owned property. The wife says that the proceeds of sale of the former matrimonial home constitute the parties' 'joint property' and that the distribution of those funds is therefore 'subject to' she first receiving the sum of $240,000. The implication of the wife's argument is that clause [7 (ii)] is no longer relevant or active given the status of the business where the parties effectively ‘walked out' rather than sold the investment.
The husband argues a completely different construction of clause 7. He agrees that the proceeds of sale of the former matrimonial home constitute 'joint property' pursuant to clause [7 3]. He argues that the Court should read the clause on its literal or primary meaning in order to show the objective meaning and intent of the clause and with careful observance of the parol evidence rule. He says that clause 7.3 provides unambiguously for the disposal of jointly owned property with the net proceeds to be distributed equally. The husband says that clause 7.3 (i) is to be read as a pure acknowledgement and does not of itself provide for 'reimbursement' of the wife's superior contribution. The husband says that it is only clause 7.3 (ii) that attends to the reimbursement to the wife. He continues, however, to argue that clause 7.3 (ii) cannot be activated here because the business was never 'sold'. That is, the parties 'walked out' of the business for a net loss and hence the acknowledgement of the wife's contribution at 7.3 (i) together with the conjunction 'and' to 7.3 (ii) are not and cannot be triggered. The husband then emphasises that the agreement itself provides no other mechanism for the reimbursement to the wife of $240,000. Specifically, the husband says that the Agreement nowhere provides for any other 'joint property' to give such reimbursement and including the proceeds of sale of the former matrimonial home.
On consideration, I agree with the husband in that I am to apply an objective, ordinary and literal reading of the document to its construction. Secondly, I must be mindful that here mine is not an exercise in finding 'justice and equity' between the parties as I would in a section 79 consideration under the Family Law Act. Rather, the fundamental rationale of Binding Financial Agreements is to permit parties to themselves reach agreement outside of the Act and where such agreements might plausibly (and often are) divergent from what would be seen as 'a just and equitable' result under the Act.
Where the primary object of the construction of any contractual document must be to determine the intention of the parties and where such intention may be expressed or implied, I must enter into an objective enquiry but with a common sense approach with an eye also to the inelegant or imperfect drawing of the document and from the perspective of a reasonable and informed person reading that document. In this respect I am grateful for Counsel helpfully referring me to the observations of the High Court (Gibbs J) in Australian Broadcasting Commission v Australian Performing Right Association LTD[6] where his Honour said:
It is trite law that the primary duty of a Court in construing a written document is to endeavour to discover the intention of the parties from the words of the instrument in which the contract is embodied. Of course, the whole of the instrument has to be considered, since the meaning of any one part of it may be revealed by the other parts, and the words of every clause must if possible be construed so as to render them all harmonious one with another.
[6] (1973) 129 CLR 99 @ 109
Firstly, I am of the view that the entirety of clause 7.3 must be read so as to give proper context. Undoubtedly that clause provides for the equal distribution of the net proceeds of sale of jointly owned property which in this case primarily, if not solely, constitutes the proceeds of sale of the former matrimonial home importantly though that provision is not unconditional. Rather, it provides a 'subject to’ condition. I am of the view that this phrase contextually is crucial to the argument here and therefore to the construction of clause 7.
The Cambridge dictionary offers an acceptable definition of 'subject to' being ‘if an action or event is subject to something, it needs to happen before it can take place.’ Another definition of the clause might be ‘dependent upon something else.’
Therefore, on a full and contextual wording of clause 7, I understand the joint intention of the parties to be that the proceeds of sale of joint property are to be distributed equally, but only dependent upon the acknowledged repayment to the wife of $240,000. Whilst the drawing of the document might be unrefined or lacking precision, the fact of the reference to the wife's superior contribution and acknowledgement thereof would be unnecessary and irrelevant unless it referenced the intention of the parties to the equal distribution being 'subject to' she first receiving the acknowledged $240,000. Further, such a construction is entirely consistent with the clear intention of the parties generally as evidenced by clause 7.1 and 7.2.
In applying this construction to clause 7.3, I reject the husband's argument that it is only clause 7.3 (ii) that offers the wife repayment of her contribution of $240,000. Such an interpretation/construction, in my view, reads the conjunction 'and' between 7.3 (i) and 7.3 (ii) without contextual reference to the phrase 'subject to'.
In conclusion, therefore, I accept the wife's argument generally that the proceeds of sale of the former matrimonial home constitute the only 'joint property' captured by the agreement. Those funds sit in two trust accounts totalling $581,733.86 (although perhaps not yet taking into account the legal fees on the sale?) which should, on my calculations, leave a sum of $341,733.86 given first a reimbursement to the wife of the $240,000. This would give each of the parties an entitlement of $170,186.93. That distribution should be subject to the proper and shared payment of any outstanding costs on the sale of the former matrimonial home.
The husband then mounts a second argument in that Schedule 1 of the Agreement preserves only the wife's superannuation entitlement as at the date of the Agreement of $15,000. Her entitled now is revealed at $291,956.19. The husband has only a minimal superannuation entitlement in his own name.
Clauses 7.1 and 7.2 purport to define the property of each of the parties such to belong to each absolutely and, importantly, as distinct from 'jointly owned' property as considered in clause 7.3. In respect of the of the wife, clause 7.1 states:
Ms Woodham and Mr Erickson acknowledge that upon separation during marriage: –
7.1 Ms Woodham’s Property and liability as listed in Schedule 1 as well as all property and income acquired after the date of this Agreement by gift (including gifts from Mr Erickson), trust distribution, company dividend or payment; device, bequest or inheritance or out of the proceeds of sale and/or arising from the disposal of and/or income derived from the property or resources referred to in Schedule 1 shall belong to Ms Woodham absolutely and Mr Erickson shall have no right, claim, title or interest to and in Ms Woodham’s Property.
The husband argues that the Financial Agreement is valid and binding and at clauses 7.1 and 7.2 preserves the property of the applicant and the respondent respectively but with reference to the schedules thereto. The husband says that 7.1 purports to define such preserved personal property which the applicant will retain for her own use and benefit, including '.… and property and income acquired after this date by Ms Woodham' but, he argues, then continues to specify the character or type of property with precision as '… by gift…, Trust distribution, company dividend or payment; device, bequest or inheritance out of the proceeds of sale and/or arising from the disposal of and/or income derived from the property or resources referred to in Schedule 1…' The husband says that the above is a limitation or qualification on the property preserved for the applicant and pursuant to Schedule 1, Superannuation is limited and defined at $15,000.
I do not accept this argument on two bases. Firstly, the clear intent is that it is the property of the party that is preserved by the Agreement and not the values. By way of analogy, Schedule 1 references the wife's Residential Unit at Property D and attributes a then value of $300,000. It could not be, and indeed the husband has not argued, that the preservation of the unit is limited to its then value of $300,000. Notably, the wife sold that unit in … 2013 for $411,000 and the husband mounts no argument in respect of the appreciated value.
Secondly, and a logically connected argument, is that the wife's superannuation entitlement existed as at the date of the agreement and is noted at Schedule 1. The phrases quoted above reference and describe only property (and income) acquired after the date of the Agreement. The husband is correct in that the superannuation is not ‘income’ and is not an item of 'property' acquired ‘after the date of this Agreement'. That is, the wife's superannuation entitlement is noted and preserved per se by the Agreement and the Schedule to the Agreement.
Finally, the husband's Counsel in his helpful written final submissions references at 1.0 a loan liability to … Pty Ltd in the sum of $47,698.20. I understand, however, that this reference is relevant only to the husband's alternative argument should I not have upheld the validity of the Financial Agreement as a binding document and where such a loan is in the name of the respondent husband only.
I certify that the preceding ninety two (92) paragraphs are a true copy of the reasons for judgment of Judge McGuire
Date: 15 May 2019
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