Yun & Qiao
[2023] FedCFamC1F 396
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 1)
Yun & Qiao [2023] FedCFamC1F 396
File number(s): SYC 2362 of 2020 Judgment of: ALTOBELLI J Date of judgment: 19 May 2023 Catchwords: FAMILY LAW – FINANCIAL AGREEMENT – Where the husband seeks a declaration that the financial agreement is not binding pursuant to s 90G of the Family Law Act 1975 (Cth) (“the Act”) – Where it is determined that the husband did not receive independent advice pursuant to s 90G(1)(b) of the Act – Despite the lack of independent advice, whether the financial agreement should be considered binding as it would be unjust and inequitable for it not to pursuant to s 90G(1A)(c) of the Act – Where it is determined that the financial agreement is binding. Legislation: Family Law Act 1975 (Cth) ss 90C, 90G Cases cited: Abrum & Abrum [2013] FamCA 897
Hoult & Hoult (2013) FLC 93-546; [2013] FamCAFC 109
Division: Division 1 First Instance Number of paragraphs: 47 Date of last submission/s: 17 April 2023 Date of hearing: 26–27 May 2022, 17 April 2023 Place: Sydney Counsel for the Applicant: Mr Havenstein Solicitor for the Applicant: Gordon & Barry Lawyers Pty Ltd Counsel for the Respondent: Mr Gardiner Solicitor for the Respondent: Yingke Law Firm ORDERS
SYC 2362 of 2020 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MR YUN
Applicant
AND: MS QIAO
Respondent
order made by:
ALTOBELLI J
DATE OF ORDER:
19 May 2023
THE COURT ORDERS THAT:
1.Pursuant to s 90G of the Family Law Act 1975 (Cth) the financial agreement signed by the Applicant husband and the Respondent wife on 23 November 2017 is declared binding on the parties.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Yun & Qiao has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
ALTOBELLI J:
INTRODUCTION
These reasons for judgment explain the orders the Court has made in a dispute between a husband and wife in relation to the purported financial agreement under s 90C of the Family Law Act 1975 (Cth) (“the Act”) that they entered into on 23 November 2017.
BACKGROUND
The applicant is the husband (“the husband”) and the respondent is the wife (“the wife”). The husband was born in 1980 and is currently 42 years old. The wife was born in 1980 and is also 42 years old. They commenced cohabitation when they were married in 2006 and the date of separation is contested between the parties. There is one child of the relationship named X who is currently 12 years old. She lives with the wife and spends time with the husband for three hours each Sunday in accordance with final orders made by consent on 4 May 2021.
In October 2017, the parties lodged consent orders with the then Family Court of Australia attempting to finalise the division of assets between the parties. On 24 October 2017, the parties received a requisition letter from the Court. They subsequently abandoned the consent orders and entered into a financial agreement on 23 November 2017.
The husband applies for a declaration that the financial agreement signed by the wife and himself on 23 November 2017 (“the agreement”) is not binding within the meaning of s 90G of the Act. The husband abandoned the alternative order that he sought to the effect that the said agreement be set aside because of fraud (nondisclosure), undue influence and unconscionability.
The terms of the agreement may be summarised as follows. The agreement provided for the distribution of sale proceeds of a jointly owned property located in Suburb B (“the Suburb B property”) and the sale of another property at Suburb C (“the Suburb C property”). The Suburb B property sale proceeds were initially to be held with D Solicitors’ Trust Account and within five days of the completion of sale be divided 35 per cent to the husband and 65 per cent to the wife. The Suburb C property was to be sold by April 2018 and the sale proceeds divided 30 per cent to the husband and 70 per cent to the wife. The husband was also to execute any necessary documents to enable the wife to lodge a caveat on the Suburb C property on the execution of the agreement. All other assets and liabilities were to be retained by each respective party.
The sale proceeds were, in fact, distributed in accordance with the terms of the agreement. The Suburb C property was sold but the net sale proceeds were deposited into a trust account. Despite the husband’s concerns about the agreement, it is common ground that it was performed, at least in part as set out above.
The Court is not required to delve any further or closely examine the content of the agreement made between the parties as it has been determined that the content of the agreement has no relevance to considerations under s 90G of the Act (Abrum & Abrum [2013] FamCA 897 at [310]) (“Abrum”).
In essence, the husband’s case is that he did not receive the requisite advice under s 90G of the Act, and thus the agreement is not binding. By the time of closing submissions the husband conceded that he had signed the agreement. The Court notes that even if this concession had not been made, a clear finding would have been made to that effect.
The husband’s case was to the effect that the solicitor he consulted, Mr E, did not: take him through the agreement; explain the terms of the agreement to him; ask any questions about assets and liabilities; did not issue a letter to him explaining the agreement; did not explain why he would be entitled to a greater percentage of the asset pool; and did not discuss with him the advantages and disadvantages of the agreement nor its financial consequences.
The husband’s case, was, therefore, that the purported agreement was not binding because the provisions of s 90G(1)(b) of the Act was not satisfied and, moreover, that s 90G(1A)(c) of the Act did not apply because it was not unjust and inequitable if the purported agreement did not bind the parties.
The wife asked the Court to dismiss the husband’s case with costs.
THE EVIDENCE
In support of his case, the husband relied on the following material:
(1)Amended Initiating Application filed 4 August 2020;
(2)His affidavit filed 9 May 2022;
(3)Financial statement filed 9 May 2022;
(4)His affidavit filed 27 July 2022;
(5)Case outline filed 19 May 2022; and
(6)Various documents tendered during the proceedings, marked as Exhibits A1–A16.
In support of her case, the wife relied on the following material:
(1)Amended Response filed 21 August 2020;
(2)Affidavit of Ms F filed 31 March 2021;
(3)Her affidavit filed 5 May 2022;
(4)Further updated financial statement filed 25 May 2022;
(5)Case outline filed 25 May 2022; and
(6)Various documents tendered during the proceedings, marked as Exhibits R1–R7.
During the course of the proceedings, the following people were cross examined:
(1)The husband;
(2)The wife; and
(3)The husband’s solicitor purported to have provided independent advice for the agreement, Mr E.
Following the proceedings, the Court tendered the following documents itself:
(1)Two letters dated 23 November 2017 from Mr E to the husband and the wife, marked as Exhibit C1.
APPLICABLE LAW
Section 90G of the Act provides as follows:
When financial agreements are binding
(1)Subject to subsection (1A), a financial agreement is binding on the parties to the agreement if, and only if:
(a)the agreement is signed by all parties; and
(b)before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement; and
(c)either before or after signing the agreement, each spouse party was provided with a signed statement by the legal practitioner stating that the advice referred to in paragraph (b) was provided to that party (whether or not the statement is annexed to the agreement); and
(ca)a copy of the statement referred to in paragraph (c) that was provided to a spouse party is given to the other spouse party or to a legal practitioner for the other spouse party; and
(d)the agreement has not been terminated and has not been set aside by a court.
Note:For the manner in which the contents of a financial agreement may be proved, see section 48 of the Evidence Act 1995.
(1A) A financial agreement is binding on the parties to the agreement if:
(a)the agreement is signed by all parties; and
(b)one or more of paragraphs (1)(b), (c) and (ca) are not satisfied in relation to the agreement; and
(c)a court is satisfied that it would be unjust and inequitable if the agreement were not binding on the spouse parties to the agreement (disregarding any changes in circumstances from the time the agreement was made); and
(d)the court makes an order under subsection (1B) declaring that the agreement is binding on the parties to the agreement; and
(e)the agreement has not been terminated and has not been set aside by a court.
(1B) For the purposes of paragraph (1A)(d), a court may make an order declaring that a financial agreement is binding on the parties to the agreement, upon application (the enforcement application ) by a spouse party seeking to enforce the agreement.
(1C)To avoid doubt, section 90KA applies in relation to the enforcement application.
(2)A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.
Justice Aldridge in Abrum considered the relevant law at [33], and [35]–[43]:
33.Strict compliance s 90G is mandatory (Black & Black (2008) FLC 93-357; Senior & Anderson (2011) FLC 93-470).
…
35.Section 90G(1)(b) requires each party to obtain independent legal advice from a practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time the advice was provided, to that party of making the agreement.
36.A binding financial agreement deals with the parties’ rights in relation to the property or financial resources of the parties in a way that ousts the jurisdiction of the court to make orders in relation to that property or financial resource. Those rights thus ousted must be the rights that the parties had under s 79 of the Act to seek an order for the adjustment of the parties’ property rights. When making such an order the court takes into account the matters set out in s 79(4) of the Act (the parties financial and non-financial contributions to the property of the parties and their contributions to the welfare of the family) and the various matters set out in s 75(2) of the Act. The parties’ rights to obtain a property settlement thus depend on those factors.
37.It is true to say that a party does not have a “right” to a property settlement, or a “right” to a particular property settlement, because under s 79 the court is not giving effect to existing rights but rather is altering property interests in a manner that it considers is just and equitable and thus creates new rights. In doing so it evaluates and weighs many factors. It is necessarily an imprecise exercise.
38.Nonetheless, when s 90G(1)(b) speaks of “rights” it must be speaking of the entitlement to bring a case under s 79 and the factors that weigh in favour of that person’s case under ss 79(4) and 75(2) otherwise it would have limited meaning.
39.In order to give advice about the effect of an agreement on the rights of a party, that is their rights under the Act in relation to property, a legal practitioner must establish what those rights are at the time the advice is provided. This is because s 90G(1)(b) requires advice to be given on the effects of the agreement upon the rights of that party and the advantages and disadvantages of the agreement. If their rights are not known then it is impossible to advise as to the effect of the agreement on them.
40.It is unhelpful to advise a person that a financial agreement might adversely affect his or her rights if those rights are not identified. A party must know more than some unknown or undefined right is being given up. He or she must have some idea, at least in general, of his or her present entitlements or rights (to use the words of the section) with which he or she may compare the provisions of the proposed financial agreement. It is only in that way that there can be actual advice about the effect of the agreement on those present rights.
41.It is quite clear that a person may choose to enter into an agreement where he or she may very well be much worse off than if he or she were left to rely on their rights under s 79 of the Act. Thus, there is a requirement for specific legal advice to be given. That is the safeguard the legislature imposes when it permits the parties to deal with their property by agreement and without possible interference from a court.
42.Accordingly, the advice must be real and meaningful. It must be directed to the parties’ circumstances and their present rights.
43.Proper identification of a parties’ rights can only be done by identifying the property of the parties then held and a consideration of the parties contributions (financial and non-financial) to the acquisition of that property and to the welfare of the children. Any other relevant factors under s 79(4), including s 75(2), would then need to be considered. Only by doing so can advice be given that complies with the terms of s 90G(1)(b).
THE EVIDENCE
What follows represents the findings of the Court.
The main evidence on the relevant issue in this case came from the husband, Mr E, and various documents.
The Court found the husband to be a relatively poor historian of past events. For example, he was clearly wrong about the date of separation. His affidavit filed 9 May 2022 asserts that this occurred on 19 July 2019 when the wife left the Suburb C property. This, of course, is almost two years after the agreement was entered into. The weight of the evidence clearly indicates that the marriage broke down on 1 August 2016, as contended by the wife, and that between that date and 20 July 2019, the husband and the wife lived separately albeit under the same roof at the Suburb C property. The corroborative evidence advanced in the wife’s case included the agreement itself, a statutory declaration made by the husband, police records, and evidence given at apprehended domestic violence order proceedings in the Local Court. In cross-examination, the husband could not plausibly explain away his own representations in these documents.
The husband was also clearly wrong about the length of his conference with Mr E, the solicitor who explained the agreement to him. He said that it was only a few minutes, but as the Court will find below, the conference was at least 18 minutes.
Mr E gave evidence in a matter-of-fact manner doing the best he could in circumstances where he was being asked about an event that occurred over five years ago in the course of a legal practice where he would have seen many clients in any one year. His evidence was supplemented by what records he still had of the advice he gave to the husband.
Nonetheless, Mr E’s evidence was sometimes vague. His record keeping was somewhat disorganised. He admitted in cross-examination that it was not his usual practice in every case to make file notes when he had conversations with clients or solicitors, but rather, if he thought it was an important issue, he would send an email to confirm. He admitted that he did not recall the exact exchanges between the husband and himself during their telephone conversations or face-to-face meetings. He agreed there was no file note of the meeting at which the agreement was signed. He agreed that it was possible that he did not retain the whole of his file, and thus, the Court notes, the documents he did produce may not be reflective of the entire record.
Mr E could not recall asking the wife’s solicitors for her financial disclosure. He could not recall preparing a balance sheet for the purposes of the agreement. When asked about receiving financial disclosure from the husband he answered: “…I cannot remember” (Transcript 27 May 2022, p. 81 line 19). He acknowledged in cross-examination that he was aware of the requirement for disclosure. He also acknowledged that the agreement itself did not contain a balance sheet. This is one indicia, the Court finds, that disclosure was neither sought nor given. This means he neither knew what assets or liabilities were held by the husband, nor by the wife.
After he received the draft agreement from the wife’s solicitor he does not recall whether he proposed any changes to the agreement. He had a conference with the husband during which he contends:
I went through sentence by sentence and read in [Country G] language to [Mr Yun].
He continued:
I explained every sentence contained in the financial agreement to [Mr Yun]. And I especially ask him to confirm whether he understood. And he said yes. And I especially ask him to say that – whether he thought it was fair or…. And he said yes. Then I said yes. If so you can sign.
(Transcript 27 May 2022 p.82 line 46–p.83 line 2)
He agreed, however, that he did not make a file note of that conversation and there was only one email sent to the husband that “… contained my advice” which was marked exhibit R1. That email is dated 23 November 2017 at 10.31 am and states:
Dear [Mr Yun],
I have carefully read the financial agreement drafted by [Ms Qiao's] solicitor, which attached for your reference.
I do still have strong reservations as to the shares of the property division, especially the overall property division is heavily in favour of [Ms Qiao], which is very unfair to you.
I understand from our telephone discussions in the past few days that you are inclined to accept it, but I think that you are entitled to get a larger share from the property division than that contained in the current agreement.
If you have any questions, please do not hesitate to contact me or coming to my office for discussions.
(As per the original)
The evidence establishes that at 1.52 pm on the same date the husband replied as follows:
Hi [Mr E],I agree the financial agreement. Please release Real estate agent fundwhole to [Ms Qiao] .I will take my 35% from your side.Thanks [Mr Yun]
(As per the original)
Mr E acknowledged that there might be other emails that he was not able to find. Indeed, he accepted that there could be other relevant documents in electronic form that he was not able to produce.
Mr E said in cross-examination that he thought that the email was sent before the agreement was signed but, the Court observes, this evidence was not given with any degree of conviction. The husband insists that the email was received after the agreement was signed.
The day of the signing of the agreement was a day on which other significant events occurred. It emerged in cross-examination that Mr E was also acting on behalf of both the husband and the wife on the sale of the Suburb B property, referred to in the agreement. Settlement of the sale also took place on this day, and documents produced from Mr E’s file indicate that the sale proceeds were divided that day, in accordance with the agreement. These documents were not tendered by either party, but have been tendered by the Court.
On the same day, Mr E confirmed in writing to the husband that both he and the wife had signed the agreement. The husband’s evidence is that he was under some financial pressure to access his share of the sale proceeds to pay an overseas supplier’s invoice. It is unclear when Mr E received the draft agreement from the wife’s solicitors. The fact that the agreement bearing the signature of both the husband and the wife, and both solicitors statements under s 90G are dated 23 November 2017 suggests very strongly that he received it on that date. It is possible, the Court acknowledges, that he received an un-signed draft before 23 November 2017. This possibility is corroborated by Mr E’s tax invoice dated 23 November 2017 which became exhibit A16. This document indicates that on 21 November 2017 Mr E received the agreement from the wife’s lawyers and read the same. The tax invoice records three units of time, at six minutes each unit, meaning that Mr E read the agreement in 18 minutes. It is plausible, the Court finds, that an experienced lawyer could read the agreement in question, in 18 minutes. As the tax invoice does not refer to any communication with the wife’s lawyers after receiving the agreement on 21 November 2017, the Court finds that there was no attempt to negotiate the terms of the agreement.
The tax invoice is also useful because it records the following items, in this chronological order. On 23 November 2017 the first entry is an email to the husband providing advice on the draft agreement, noting one unit of time. The second entry states: “Conference and execution of financial agreement”, noting three units of time. The Court finds, therefore, that it is more likely than not that the email was sent to the husband before the conference with Mr E. It is also clear, however, that the conference between Mr E and the husband took no more than 18 minutes. Given that Mr E asserts it took him 18 minutes to read the agreement, the evidence that he gave about reading and explaining the entire agreement sentence by sentence to the husband in 18 minutes is plainly implausible. It is more likely than not that the husband’s account of the conference as per [9] above is correct.
DISCUSSION
Notwithstanding the findings the Court has made above about the conference between Mr E and the husband, the Court recognises that the legal question before it is whether, on the evidence, the husband was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of the husband and about the advantages and disadvantages, at the time that the advice was provided, to the husband.
The Court notes that no submission was made that Mr E lacked independence arising from the fact that he also represented the wife in the conveyancing transaction that settled on the same day as the signing of the agreement. The potential division of loyalties that that created for Mr E was, therefore, not an issue for the Court to decide.
The Court notes that in the cross-examination of Mr E, it was not put to him that he did not advise the husband “about the effect of the agreement” on his rights, or “about the advantages and disadvantages” to the husband of making the agreement. This is not an obstacle to the husband’s case because the clear thrust of his case was in substance precisely that. Indeed, a very strong inference arises from the evidence that is before the Court that the independent advice required by s 90G(1)(b) of the Act was not provided, and the Court so finds. The basis of this is as follows:
(a)Without a detailed history of the marriage between the husband and the wife, including instructions about contribution and future needs, it would neither be possible to provide advice about the effect of the agreement on the husband’s future rights, nor about the advantages and disadvantages of the agreement;
(b)Consistent with the above, in the absence of disclosure by either the husband or the wife, and in the absence of the balance sheet especially in relation to liabilities, it would be impossible for advice to be given about the advantages and disadvantages to the husband of entering into the agreement; and
(c)Putting aside the above informational, or qualitative issues, it beggars belief that the requisite advice could have been given in an 18 minute conference in the circumstances of this case.
The Court finds, therefore, that no independent legal advice was given for the purposes of s 90G(1)(b) of the Act.
IS THE AGREEMENT NONETHELESS BINDING?
Section 90G(1A) of the Act nonetheless provides that a financial agreement is binding on the parties if a Court is satisfied that it would be unjust and inequitable if the agreement were not binding on them.
The applicable law was again discussed by Aldridge J in Abrum. At [78]–[79] and [309]–[310], his Honour stated:
78.The court must be 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 the circumstances from the time the agreement was made).
79.What are the relevant factors to be taken into account? Some of them were identified by Strickland and Ainslie-Wallace JJ in Hoult & Hoult [2013] FamCAFC 109:
307. We have referred to the fact that his Honour in paragraph 57 provided a range of factors that it would be appropriate to consider when exercising the discretion. The only factor that we would suggest is not available is the last one, but if there is to be a list of the factors identified we would prefer the following, all of which are to be found in his Honour’s reasons:
•The terms of the section, the nature of a financial agreement as a creature of the Act, and the place of Part VIIIA within the overall scheme of the Act.
•The nature and extent of the non-compliance with the requirements of s 90G(1).
•The facts and circumstances surrounding the making of the agreement including, in particular, if one of the parties has complied with all of the mandatory requirements necessary to render the agreement binding.
•How the parties have acted subsequently in relation to the agreement (bearing in mind that changes in circumstances cannot be considered).
…
309. … [It] is suggested that “[a]lthough the Act now undoubtedly allows parties to enter into bad or grossly unfair bargains it is perfectly consistent for the legislation to permit consideration of the fairness of the bargain (judged to the date of execution) in cases where the safeguards in s 90G(1) have not been met”.
310. Again with the greatest of respect to his Honour we fail to see how that can be. The point of the legislation is to allow the parties to decide what bargain they will strike, and provided the agreement complies with the requirement of s 90G(1) they are bound by what they agree upon. Significantly, in reaching agreement, there is no requirement that they meet any of the considerations contained in s 79 of the Act, and they can literally make the worst bargain possible, but still be bound by it. Thus, again, rhetorically, how can the fairness of the bargain be an enquiry that the court can make when it is seized of a matter under s 90G(1A)? Furthermore, it is not the case that to fail to consider the fairness or injustice of the bargain does not mean that the “discretion is exercised in a vacuum”. The factors set out in paragraph 307 above will be those that are addressed.
The Court accepts that in this case the non-compliance with s 90G of the Act is not a trivial one but, as the Full Court in Hoult & Hoult [2013] FamCAFC 109 at [106]–[108] acknowledged, lack of independent advice is not determinative.
That is particularly important on the facts of this case where the email chain of 23 November 2017 reveals the following. Mr E’s email to the husband is, in substance, advice not to enter into the agreement. The language used by Mr E was firm and clear: “… strong reservations… property division is heavily in favour of…… which is very unfair to you…. I think that you are entitled to get a larger share…”. Mr E did not need to explicitly tell the husband not to enter into this agreement, as that was the substance of the advice. The husband responded by way of an email sent at 1:52 pm indicating that he agreed with the agreement.
The closing submission made on behalf of the wife was to the effect that the Court would be entitled to find on the evidence, particularly the evidence referred to in the preceding paragraph, that even if the husband had received the independent advice required under s 90G he would have entered into the agreement anyway. The Court accepts this submission. It is now inappropriate for him to raise issues of justice and equity about the enforceability of an agreement that he so willingly entered into.
In any event, the agreement has been partially performed, by both the husband and the wife.
The husband himself gives evidence at paragraph 19 of his trial affidavit filed 9 May 2022 that the sale proceeds of the Suburb B property “…. were paid to [Ms Qiao] and me in accordance with the terms of the Agreement signed by us on 23 November 2019…”. He explains that he “…used the funds to pay the overseas supplier’s invoice and kept the rest for daily living”.
At paragraph 41(b) of his trial affidavit the husband acknowledges that the agreement provided for the Suburb C property to be sold with the sale proceeds to be distributed as to 70 per cent to the wife and 30 per cent to him. At paragraph 49, however he deposes that he did not want to sell the Suburb C property. Contracts for sale of the Suburb C property were exchanged on in mid-2019 and settled in late 2019. The dispute between the parties about the distribution of the sale proceeds resulted in, firstly, funds being retained in a trust account and secondly, litigation between the parties initially in the Supreme Court, and then in the District Court.
The wife sold and moved out of what was for her the family home at Suburb C. She deposes that she moved from a home with four bedrooms and three bathrooms, to a rented property.
The Court finds that the provisions of s 90G(1)(b) of the Act was not satisfied and that, to that extent, the husband did not receive the independent legal advice contemplated by the legislation. However, the Court finds that s 90G(1A)(c) does apply and that it is unjust and inequitable if the purported agreement did not bind the parties. This is because the substance of the advice the husband had received was not to enter into the agreement but he proceeded to do so in any event. Moreover, the key obligations contained in the agreement had been substantially performed. The agreement between the parties is thus binding notwithstanding the issue about independent legal advice.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Altobelli. Associate:
Dated: 19 May 2023
0