PROPERTY - AN OVERVIEW OF 2011 CASES SOFITEL MELBOURNE 2 MARCH Jacqueline Campbell Forte Family Lawyers {000177/ }

Transcription

1 PROPERTY - AN OVERVIEW OF 2011 CASES SOFITEL MELBOURNE 2 MARCH 2012 Jacqueline Campbell Forte Family Lawyers {000177/ }

2 Introduction My brief is to speak about recent cases on property matters. Fortunately, de facto matters are dealt with in another session so that limits the breadth of the topic a little, and the complexity of the topic as I do not need to deal with proclamations, voidable orders and other territory which are fortunately foreign to family lawyers. However, financial agreements and superannuation are still in my session. Most of the cases I will discuss are decisions of the Family Court and particularly the Full Court, although the Federal Magistrates Court delivers interesting and important judgments. They cannot be ignored. It was an obvious further restriction to put on my paper, although a couple sneaked in. Interim property In a further Full Court decision in the Strahan and Strahan litigation saga, the main one being Strahan and Strahan [2009] FamCAFC 166;(2011) FLC , the Full Court in Strahan and Strahan (leave to appeal interim orders and appeal against costs order) [2011] FamCAFC 126 dismissed the wife's application for leave to appeal against orders dismissing her application for an interim property settlement and ordering interim spousal maintenance at a lower rate than she sought. She was given leave to appeal against the costs order. In lieu of costs of $825,000, the husband was ordered to pay her $1,687,250. A brief history gives a better idea of the scale of the proceedings, although perhaps merely stating that as of 10 February 2012 there are 34 judgments on Austlii, is enough. The parties separated after 11 years of marriage in January Since that time they have been involved in Family Court litigation regarding financial matters and parenting issues with respect to their one child aged 14 who had special needs. A brief chronology is: 27 July Consent order for a payment by the husband to the wife of $1.25 million by way of interim property settlement. 31 October Consent order that the husband pay $375,000 to the wife with the question of whether it constituted spousal maintenance or an interim/partial property settlement to be determined by the trial Judge. 25 March Further payment of $850,000 by the husband to the wife by way of interim property settlement. 24 September After a contested hearing, the husband was ordered to pay the wife $1 million by way of an interim property settlement. 14 September Full Court upheld the wife's appeal and ordered the husband to pay $5 million to the wife by way of interim property settlement. 31 May The wife's application for an interim property settlement was {000177/ } 2

3 dismissed. Her reasonable needs were assessed at approximately $6,254 per week, and as the husband had the capacity to pay a lump sum he was ordered to pay $325,000 calculated until the completion of the final proceedings. The wife had claimed $69,500 per week and an interim property settlement of $24 million. On appeal she had a fall back claim of $9 million being a conservative estimate of the balance of her property entitlements on the husband's figures. 13 August The trial judge ordered that the husband pay $750,000 on account of the wife's anticipated legal expenses. She had sought $3.8 million. On appeal from the 31 May 2010 and 13 August 2010 orders, the Full Court found that: The wife's Financial Statement did not support her claim that her current expenditure was $69,500 per week. In her Affidavit the wife alleged that her standard of living was significantly lower than before separation but she did not identify or quantify the expenses which she did not have the means to pay or the reduction in her standard of living. Each party had spent $10 million on costs. The trial Judge did not give adequate reasons for ordering only $750,000. The husband was correct that the matter should perhaps be reheard before a single Judge, but the Full Court had sufficient evidence for it to re-exercise the trial Judge's discretion and therefore not further delay the finalisation of the proceedings. A figure of $1,612,250 should be substituted for $750,000. In Spencer and Marks [2011] FamCA 174, Rose J made interim property orders that: The boat be sold as it was "of more benefit for the children in maintaining stability of their residence than the enjoyment of the boat" (para 91) The proceeds of sale of the boat be applied toward mortgage arrears. Rose J refused to order that the wife receive $45,000 to purchase a new vehicle. There was no source of funds or asset to realise to facilitate this. Although the husband was likely to receive a bonus that month, the likely amount could not be the subject of a finding. General property principles In Stanford and Stanford [2011] FamCAFC 208 the Full Court had to determine whether or not an order for property settlement could be made where the marriage was still intact but there had been a physical separation. The wife was 89 years of age and the husband was 87 years of age. The parties were {000177/ } 3

4 married in 1971 and had therefore been married for 40 years. They had both been married before and each had adult children from their first marriages. For 37 years they lived in the husband's home. The wife suffered a stroke, was later admitted into full time residential care and could not return to reside in the home with the husband. She also suffered from dementia. The husband continued to reside in the home and wanted to continue to do so. Although a physical separation was forced upon them, the husband submitted that the parties were still in a marital relationship. He continued to provide for the wife and had placed $40,000 into an account for her use. He visited her 3 times a week at the care facility. The application for property settlement was initiated by the wife's case guardians. The Federal Magistrate ordered that the husband pay to the wife the sum of $612,931, accepting this order was likely to result in the husband having to sell the home. The Full Court allowed the husband's appeal. Although the Federal Magistrate clearly had the power to make a final property order, she failed to consider the alternatives and had wrongly exercised her discretion. The Full Court concluded (at para 122) that in such cases it is important for the Court: to be clear that there is no requirement that the Court make a final order for property settlement that would alter the interests of parties in property on a final basis especially when the marriage itself is not at an end. The Full Court found that, in determining what was just and equitable in the circumstances, the Federal Magistrate did not give sufficient regard to: The effect on the husband of requiring him to sell his home of 48 years The potential effect on the husband of the wife predeceasing him Why the financial issues of the parties needed to be finally determined when the proceedings could be adjourned without prejudice and continued later Why an order for periodic maintenance was not appropriate The postscript to this was reported in Stanford & Stanford [2012] FamCAFC 1. The wife died and the proceedings were continued by the wife's daughters under s 79(8)(a). The husband wanted either the wife's application for property settlement to be dismissed under s 79(8) or that the application be stayed permanently. The wife asked the Full Court to reexercise the discretion, and make orders that the husband pay to the wife's legal representatives the sum of $612,931 (42.5% of the agreed asset pool), with payment due on {000177/ } 4

5 the first of either the sale and settlement of the former matrimonial home or the death of the husband. The Full Court relied on Fisher v Fisher (1986) 161 CLR 438 saying (at paras 53-4, 55-60): We are mindful of the fact that this is a case in which the marriage of the parties had not broken down when the proceedings were commenced and that the wife s claims were brought in order to provide her with access to funds which it was asserted she required for her support. Her death now removes the need for those funds. But in the course of the proceedings, the wife established that she had made contributions to the assets enjoyed by the parties during their long marriage, particularly the former matrimonial home, and in our view it continues to be appropriate to allow the wife s estate the benefit of a share of the property in which she has established an interest. Other particular factors that pertain to this case are the fact that the house was in the name of the husband and the wife had no legal interest to leave to her estate, and that orders can be made which will enable the husband to enjoy the assets of the parties until his death. The husband sought an adjustment on account of various factors in s 75(2). As he will, pursuant to the orders we intend to make, have use of the property until his death, in our view there is no need for a further adjustment... In the circumstances of this case we are of the view that although an order for property settlement requiring a payment to the wife s estate should be made, the timing of such disposition is important in order to do justice and equity to the husband under s 79(2) of the Act. The proper order in this case is that the wife s legal personal representatives should receive a fixed sum of $612,931 upon the death of the husband. It is then a matter for the husband and his family to decide whether they wish to retain the home after his death, sell it earlier or at any other time pay the sum ordered to the personal representatives for the wife. Obviously, this order protects the husband from a need to move from his home earlier than he would wish, would allow for a capital sum to be provided should it become necessary for his care and avoids an incorrect assessment of the husband s current and future needs. The fixed sum order avoids any further arguments in relation to the value of the home. The Full Court in Lenova & Lenova (2011) FLC considered whether the trial Judge could vary a final order. Consent orders provided for the creation of a lease of land by the husband which gave him the sole use and occupation of a portion of a real property. The trial judge later made orders amending the terms of the lease. The Full Court relied on Mullane v Mullane (1983) FLC and confirmed that the trial Judge had no power to vary a final order save on a s 79A application. In Davida & Davida [2011] FamCAFC 38 the Full Court considered whether the Federal Magistrate erred in the assessment of s 75(2) factors. The children spent approximately 40% of their time with the husband who remained living in the former matrimonial home. {000177/ } 5

6 The Federal Magistrate found equality of contributions and then made a 10% adjustment in favour of the wife in relation to s 75(2) factors. The husband appealed, challenging the 10% adjustment as being unreasonable and a misconception of "the intention and effect of s 75(2)". Their Honours found that the adjustment was overly generous to the wife as it was only based on the care of the children. The net pool was approximately $658,000. The Full Court reduced the s 75(2) adjustment to 5%. Coventry & McNamee [2011] FamCAFC123 was an appeal from the Federal Magistrates Court heard by a single Judge. The parties lived together for 10 years. The 3 children resided with the wife. The husband had been in the RAAF since about 7 years prior to cohabitation. The wife was not in paid employment at the date of the trial. There were two major assets, being the equity in the matrimonial home of about $252,000, and the husband's superannuation of about $581,000. The husband sought that only his superannuation accrued during the marriage be taken into account, namely $134,735. The wife wanted the husband's interest in the matrimonial home to be offset against her interest in his superannuation fund, that she retain the home and in addition receive a split of $157,000 from his superannuation fund. Mead FM made orders in accordance with the wife's proposals. She assessed contributions to the home as 60% in favour of the wife and the wife's contribution to the husband's superannuation at 40%. She made an adjustment of 10% in favour of the wife under s 75(2) factors which was not challenged. The husband's appeal was dismissed. In Manolis & Manolis [2011] FamCAFC 105 the Full Court considered the "fourth step". The Full Court concluded that the Federal Magistrate had erred in not making an order which provided for distribution of interest and/or monies held in trust. Instead, it was ordered that a fixed amount be paid to the husband and the balance of funds held in trust be paid to the wife. The Federal Magistrate made an initial assessment of contributions and then "revisited" her findings on the basis that the overall result taking into account the s 75 (2) factors was not just and equitable. There was also a dispute as to how initial contributions should have been assessed. The Full Court considered the extent to which the fourth step allowed the introduction of matters not previously considered. It held (at paras 65-66): It can be seen that power to make orders in regard to property is not exhausted after {000177/ } 6

7 the third step. It is not until orders are made that the power is exhausted. The exercise of power pursuant to s 79 of the Act remains subject to the overarching requirement of justice and equity imposed by s 79(2) until it is exhausted. Therefore, we cannot accept that the Federal Magistrate lacked the power to revisit the outcome to which she had been led by her consideration of s 79(4) and s 75(2) factors by reference to s 79(2) of the Act. If so doing persuaded her Honour that her proposed outcome was not just and equitable, she could not properly make orders in those terms. Having regard to the nature and extent of the matters which had been evaluated pursuant to s 79(4) and s 75(2) of the Act prior to her consideration of s 79(2), the Federal Magistrate s scope for varying the substance of the outcome resulting from that exercise would have been limited. It is difficult to discern specific matters impacting a consideration of s 79(2) which are not articulated in either s 79(4) or s 75(2) of the Act. The section does however oblige the court to stand back from its preliminary determination, and consider its impact. So doing may inform the terms of the orders appropriate to produce a just and equitable outcome in those terms. It may result in a re-consideration of s 79(4) and or s 75(2) factors, and a different outcome. Whatever the scope of s 79(2), the court s determination with respect to it cannot be dependent upon findings or conclusions which are irreconcilable with those recorded in the context of a consideration of s 79(4) or s 75(2). Regrettably, that is what occurred in this case... The appeal was allowed for three reasons: 1. The trial judge misdirected herself about s 79(2) and in particular the use of the fourth step 2. The inconsistency in the reasons in relation to the parties contributions 3. The error in not making an order which allowed for the distribution of accumulated interest rather than attributing to one party a fixed sum. After a 26 year marriage the total property pool was found to be over $4 million. The Federal Magistrate found that contributions were equal and gave the husband an extra 5% on the basis of "justice and equity". The Full Court re-exercised the discretion and concluded that the husband's business at the time of marriage provided a "spring board" to later businesses. The parties' contributions were assessed as 55% in favour of the husband. The Full Court agreed with the Federal Magistrate that there was no reason to make any s 75(2) adjustment. The interest in the trust account was divided on the same basis as the rest of the pool. In Mayne & Mayne [2011] FamCAFC 192 the Full Court disagreed on the proper approach to add-backs. Faulks DCJ found that the Federal Magistrate: 1. Initially included the parties' superannuation interests in the asset pool 2. Assessed the respective contributions of the parties to the asset pool (including to the superannuation interests) 3. Assessed the relevant s 75(2) factors (including taking into account the {000177/ } 7

8 superannuation interests) 4. Excluded the superannuation interests at the fourth step of his considerations 5. In an unexplained way, applied the percentages arrived at previously by consideration of the parties contributions and s 75(2) factors to the reduced pool, which excluded the superannuation interests Among other things, the Federal Magistrate failed to adjust for contributions made by each party, either directly or indirectly, to the superannuation. With respect to add-backs Faulks DCJ (with whom Strickland J disagreed and May J did not completely agree) said (at paras 78-9, 84, 93-4): It seems that human experience (and common sense) shows that while parties are together, each might, from time to time and with the consent of the other, either express or implied, apply or appropriate assets or funds to his or her own purposes. When the relationship is good, no-one is likely to care let alone keep records. Individual amounts may stand out, as is the case here, but many small transactions in combination may exceed, in total value, one large transaction. It is not the Court s function to conduct an audit of the marriage or of the relationship finances. The parties remedies for resolving disputes about expenditure while they are together are centred on them and them alone. Choosing one transaction from many prior to separation for different treatments, specifically to be added-back or notionally included in the pool of property may make doing justice and equity between the parties difficult.... It may be that the proper place for consideration of adjustments to property division in the nature of add-backs is in the fourth step of the Court s consideration. If one party has unjustly appropriated funds or assets to himself or herself it will be inequitable to disregard that fact.... The... Magistrate should have made an adjustment pursuant to s 75(2)(o) rather than to add-back to the asset pool...in my view, this would mean that the $173,841 dissipated by the wife should have been taken into account as an adjustment in favour of the husband under s 75(2). Faulks DCJ referred favourably to Shimizu & Tanner [2011] FamCA 271 and particularly to Bryant CJ's endorsement of the approach taken by Murphy J in Kouper & Kouper (No 3) [2009] FamCA 1080 (at para 108) where he distilled the Full Court's principles on add-backs by reference to five questions: (a) (b) (c) Is it contended that property (including money), that would otherwise be available for distribution between the parties if a s 79 order is made, has been dissipated with a consequential loss to the property otherwise potentially divisible between the parties at the date of trial? If so, is it alleged that the dissipation of property was in respect of things other than what, in the particular circumstances of this particular marriage, can be classified as reasonable living expenses? If it is asserted that any loss to the divisible property results from dissipation of property other than in respect of such expenses, why is it asserted that the result should be a sharing of that loss by the parties other than equally? {000177/ } 8

9 (d) (e) If it is contended that this be the result, why should there be an add back (which brings to account, dollar for dollar, such past expenditure in current dollars) as distinct, for example, from there being an adjustment being made pursuant to s 75(2)(o)? How should either any add back, or adjustment pursuant to s 75(2)(o), be quantified? May J said she agreed with Faulks DCJ except with respect to the add-back of the inheritance, saying (at para 108): Even if it was not an error to add back the sum of $173,841, it was an error to also take it into account by reference to s 75(2)(o) of the Act. Strickland J said that he did not agree with Faulks DCJ's analysis of the errors made by the Federal Magistrate in calculating the pool and the division, but the Federal Magistrate made errors. He departed from the reasons of Faulks DCJ, and to a lesser extent from the reasons of May J, regarding the notional add-back and found that the Federal Magistrate was entitled to notionally add back the amount of $173,841. He did not agree that the decisions of Shimizu & Tanner and Kouper & Kouper (No. 3) added anything new or definitive, saying (at paras , 185) Whether his Honour dealt with this issue under the banner of waste or nondisclosure, his Honour had two options available, namely to take into account the actions of the wife under s 75(2)(o) of the Act or to notionally add back the amount of money involved to the asset pool...., his Honour unfortunately erred by in fact doing both, but it is beyond doubt that both of those courses were open to him. Two inter-related issues arise for discussion... In relation to the first issue, there is no warrant in any authority, in logic or otherwise to find that funds that have been expended by one party prior to separation cannot be notionally added back simply because the actions occurred prior to separation, and that is the case whether the basis for adding back is a finding of waste or nondisclosure. It is not the case that the only basis for notionally adding back assets is that one party should not benefit from a premature distribution. As has often been said it is also appropriate to notionally add back assets where there is financial misbehaviour or financial misconduct which has the effect of reducing the assets available for distribution (Omacini & Omacini [2005] FamCA 195; (2005) FLC ). Of course, individual circumstances may not justify the notional adding back, but that does not say anything about the ability to do that where warranted. This is not a case where the Federal Magistrate conducted an audit of the finances of the relationship or where in the normal course of the marriage one party in the knowledge and with the consent of the other party has simply expended funds for their own purposes. The evidence was that a significant amount of money had not been accounted for by the wife. In relation to the second issue, it is suggested that where there is a finding of waste by the application of the principles emanating from Kowaliw that the only option is to take the conduct into account under s 75(2)(o)....It is beyond doubt that notionally adding back assets is the exception rather than the rule (Cerini & Cerini [1998] FamCA 143 at 46). However, it is also beyond doubt that the exception applies, for {000177/ } 9

10 instance where there is conduct of the nature identified by Baker J in Kowaliw. Thus, in those circumstances it is open... to notionally add back assets or take the conduct into account under s 75(2)(o). Superannuation Wilson & Estate of the Late J Wilson [2011] FamCA 469, whilst not a decision of the Full Court, is a useful reminder of the importance of carefully checking the type of policy. At issue was the interpretation of orders made in October 2006 where the trial Judge ordered that the husband pre-pay his life insurance premiums with Tower Life. The husband was ordered to execute all necessary documents to ensure that the beneficiary of that policy was the wife. After the orders were made the husband re-married and subsequently died. The wife believed that the husband had converted the life policy into cash just prior to his death and assumed that the money had been given to his new wife whom she believed was an undischarged bankrupt. It also appeared as if the husband may have been bankrupt. The wife discovered that the policy was not a life insurance policy but a superannuation policy. She sought an order restraining the husband's second wife from disposing of, transferring or diminishing the value of all in any way dealing with any monies received from the Tower Life policy and that these orders be made without notice to her. Cronin J found that the wife, her legal advisors and the Court appeared to have been misled by the husband in 2006 as to the type of policy held by the husband. He made the order. Another decision of Cronin J which is a reminder of the need for caution when dealing with superannuation is Hughes and Hughes [2011] FamCA 455. The wife sought an order that the husband authorise the trustee of two superannuation funds to pay her all payments due to him arising out of orders made by the Court in Prefacing paragraph 3 of the 2000 Orders were the words "Upon my husband becoming eligible to receive any further benefit or payment...". His Honour said (at para 3): The difficulty with that particular provision is that there is no evidence before me that would suggest that the triggering event has occurred that would mean that the husband would be entitled to those funds. Under paragraph 4 of the Orders the husband was required to sign an irrevocable authority requesting the trustee and his employer to pay to the wife all monies due to him by way of a retirement, termination, long service leave, sick leave or holiday payment on his termination or retirement for any employment, as may become due to him from time to time. This meant that over about 15 years, every time he retired and collected his sick leave or long service leave in cash that money was to be paid to the wife. There was no evidence that a request {000177/ } 10

11 was made for the husband to sign an irrevocable authority or whether every employer and every trustee of any superannuation fund had been served with an irrevocable authority. His Honour declined to make an enforcement order, noting (at para 4) that the "remedy is in the wife's hands". In Wheeldon & Wheeldon [2011] FamCA 40 Fowler J followed Watts J in Trott & Trott (2006) FLC The facts were similar and the superannuation schemes were the same. The wife argued that Watts J's assessment as to contributions to the pension were incorrect and the assessment of 15% as the wife's contribution to the husband's pension was much too low and should be adjusted to 50%, that being the same contribution-based adjustment as to the other superannuation. The wife conceded that an adjustment in the husband's favour ought to be made under s 75(2) as she was presently working whereas the pension was the husband's only source of income. The wife proposed that the adjustment be 10%, resulting in the wife receiving 40% of the husband's pension. In Trott the parties were not together at the time that the husband became hurt on duty and the husband was not nursed or attended to by the wife in relation to his injuries. The wife's post separation contributions in relation to the parties' two children increased due to the husband's injuries. There were additional burdens placed on the wife through the marriage as a result of the husband applying for promotions and the parties relocating. In Wheeldon, the parties were separated for 6 years before the husband was medically retired on the ground of permanent incapacity. The husband said he was entitled to receive a lump sum benefit but it was not his intention to do so and he intended to continue to claim the pension. The wife had indirectly contributed to the husband maintaining his superannuation entitlements. The parties' children were both adults. His Honour made a 15% adjustment under s 75(2) in favour of the husband in relation to the net assets excluding superannuation. He ordered that whilst the pension was paid to the husband, the wife receive 15% of it but if the husband received a lump sum in whole or in part, the wife receive 38.5% of the lump sum. The lump sum calculation was calculated by assessing an equal division of the parties' notional lump sum superannuation entitlements. Manwaring & Manwaring [2011] FMCAfam 50 was a decision of Willis FM. It is interesting for a number of reasons. It dealt with a relatively modest asset pool, in this case only superannuation. Cases dealing with modest pools of superannuation are often much more difficult than cases dealing with significant non-superannuation pools. Courts usually look at contributions to superannuation but overlook (or refuse to look at) the s 75(2) factors. {000177/ } 11

12 However, Willis FM applied the four step process to the superannuation pool. The Court did not accept the husband's argument that s 75(2) factors were irrelevant to the splitting of superannuation. The parties married in 2002 and separated 5 years later. At the time of trial they had two children aged 9 and 7. After the marriage ended, all that remained of the parties' nonsuperannuation assets was a negative pool. Their debts were around $28,000 and each assumed about half. The wife had paid off her share of the liabilities but the husband had about $3000 remaining. The post separation period of November 2005 to the trial in September 2010 was as long as the relationship itself. In that period, each party continued to be employed and made regular contributions to their own superannuation. Post separation, the two children remained living with the wife in Far North Queensland and the wife was solely responsible for them. The husband moved to Canberra and only spent physical time with his children for four limited periods in five years. A single expert valued the superannuation funds. They were not valued as at the time of trial as it was not possible to calculate a 2010 value for the husband's superannuation. The figures required for the complex calculations were not available. His Honour, therefore, when comparing the respective values, used the common date of 29 September The husband argued that the wife was not entitled to the usual weight for s 75(2) factors for having two young children in her sole care as she received no current benefit from any superannuation split. The split only occurred when the wife retired. By that time the children would be well over 18 years of age. The husband sought that the wife be paid 70% of his superannuation either accumulated during the course of the relationship or during the marriage. His proposal resulted in the husband retaining $373,270 of his own superannuation and the wife retaining her own superannuation of $292,816 plus the $67,000 split being a total of $359,816 or about 49% of the superannuation pool. The wife sought that the sum of $220,139 be split from the husband's superannuation which gave her about 70% of the total superannuation pool. There was an argument about the liabilities at the date of marriage. The wife argued that the husband bought in a negative pool whereas she had a car and furniture with an insurance value of $40,000 and no debts. She argued that the real value of the husband's superannuation at the date of marriage should be offset against his debts. At the date of the marriage the wife's superannuation was valued at $66, and the husband's was valued at $127,690. The husband's interest was in a defined benefit fund {000177/ } 12

13 and the wife's interest was in an accumulation fund. The single expert valued their respective superannuation entitlements as: Wife: As at the beginning of the relationship on 1 October 2000: $66,243 As at separation on 19 November 2005: $229,428 As at trial (using 29 September 2009): $292,816 Husband: As at the beginning of the relationship on 1 October 2000: $127,691 As at separation on 19 November 2005: $223,344 As at trial (using 29 September 2009): $440,278 His Honour looked at the growth of each fund, saying (at paras 59-60): Whilst the husband s superannuation fund was worth almost twice that of the wife s at the commencement of the relationship (and in making this observation I accept the that wife s case is that the husband brought other debts which diminish the real value of assets the husband brought into the marriage) the wife s superannuation grew at a greater rate than did the husband s during the relationship as is apparent from their respective values at separation. Thereafter the husband s defined benefit superannuation fund, which is drawing closer to the retirement date of the husband, has escalated at a greater rate than the wife s. At separation, the wife s superannuation had increased to $229,428 and the husband s had increased to $223,344. Mr S has calculated the respective increases of $153,620 for the wife s fund and $77, for the husband s fund... Mr S states in his report that the wife accumulated $76, more superannuation than the husband during the same period, ie. the marriage period. Mr S has shown a calculation to account for interest from the date of separation to the current date, to reflect the current day value of that increase. Mr S said that the figure of $89, represents the current day value of the superannuation referable to the marriage period after applying the appropriate interest rates to... a balanced accumulation account held by the wife. His Honour ordered that a base amount of $183,695 be split from the husband's superannuation interest to the wife. This was almost 3 times the split sought by the husband and meant that she received about 65% of the superannuation (57.5% for contributions and 7.5% for s 75(2) factors) The s 75(2) adjustment was justified (in paras 127-8): The wife in my view will also be paying significant funds for the child rearing costs of the children, notwithstanding that the husband is paying child support. As I have mentioned elsewhere, the costs at this time in the children s lives of supporting them in their normal child hood pursuits of basketball, AFL and karate... is a substantial cost. In addition, the wife continues to work and therefore the adjustment in relation to income earning capacity is not a serious consideration, whereas, if the wife chose to be a stay at home mother, the comparison in income earning capacity would be significant whilst the mother directed her efforts solely into parenting and remained out of the paid workforce. Another issue which also arises is that the mother in order {000177/ } 13

14 to earn her income, has to pay for after school care weekly and also vacation care during the holidays to enable her to work. The husband... does not even have the children in his physical care for holidays. Whilst it is the husband s prerogative to forego these precious years with his children, his choices have financial ramifications for the wife. Whilst the wife is providing for the children and incurring all these expenses, she is foregoing the opportunity to contribute additional funds to her own superannuation or retirement and as she will inevitably have less income that she would if the father was paying all of these costs. His Honour found the outcome to be just and equitable under the fourth step. Financial Agreements The state of the law with respect to financial agreements was meant to be clearer since the Federal Justice System Amendment (Efficiency Measures) Act (No 1) 2009 ("2010 amendments") came into force on 4 January This legislation sought to overcome the "strict compliance" test imposed by Black and Black (2008) FLC Since 4 January 2010, s 90G(1) and (1A) provide: (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. (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. Decisions which have considered the effects of the changes include the three Senior and {000177/ } 14

15 Anderson cases and Parker and Parker (2010) FamCA 664. In May 2011, an appeal was heard in Parker by a differently constituted Full Court than in Senior and Anderson (2011) FLC , but has not yet been delivered. As it is likely that Parker will be handed down this year and perhaps in the month between me submitting this paper and the date I speak on it, you may find a summary of the trial judgment helpful. It is also difficult to talk about the 2011 cases without first discussing the 2010 cases of Senior & Anderson and Parker. In Parker, Strickland J found that a s 90C agreement entered into on 11 November 2004 was not binding. He was not satisfied that the effect and implications of an amendment were explained to the wife in the same way that the terms of the agreement were explained to her when she signed the original agreement. Advice of a general nature was insufficient. The interpretation of the transitional provisions was not in dispute but was presumably discussed in the Full Court. The wife was advised by her solicitor not to sign the agreement. She decided to do so. She met with her solicitor about 3 weeks later to sign the agreement. At that meeting, changes were made to the agreement by hand by her solicitor. The agreement was executed and sent to the husband's solicitor. A further handwritten amendment was made requiring the husband to pay $10,000 and the wife to pay $60,000 in reduction of a joint liability if they resumed cohabitation. The agreement was executed by the husband and sent back to the wife's solicitor. The wife and her solicitor initialled the change but the certificate was not amended. On 16 September 2009 Strickland J reserved his judgment. He listed the matter for delivery of reasons on 21 December The husband sought an adjournment until after 4 January 2010 when the relevant provisions of the Amendment Act commenced. This was opposed and further argument was heard on an adjourned date. Strickland J applied the 2010 Amendments. The wife's application to set aside the agreement was opposed by the husband. Strickland J found that: When she initially signed the agreement, the wife received advice on it. The solicitor's file note recorded that the wife's solicitor went through the agreement with the wife and discussed the implications with her. No advice was given to the wife on the husband's amendment. The wife said she initialled the amendment in a short meeting at which no advice was given. In her affidavit, the wife's solicitor did not address the advice given. In cross examination {000177/ } 15

16 she said she gave the advice she was required to give. However, her file note was less detailed than the file note of the previous meeting, stating only that the amendments were discussed, agreed to by the wife and initialled. No further certificate of a legal practitioner was given nor was the previous one amended. Neither the relevant terms of the agreement nor the certificate of the husband's legal practitioner positively indicated that he received the necessary legal advice before signing the agreement In the circumstances, Strickland J found that the s 90G(1) requirements were not met. There was a dispute between the parties as to whether the Black & Black "strict compliance" test had survived the 2010 amendments. Strickland J said the failure to give advice meant the s 90G(1) requirements were not met. He turned to whether the agreement could be "saved" under s 90G(1A). The parties had opposing views as to the effect of s 90G(1A). Counsel for the wife submitted (at para 105): that s 90G(1A)(c) requires the Court to consider the efficacy of the settlement and the entitlements that the parties are to receive pursuant to the agreement. Counsel for the husband contended (at para 106): that the unjust and inequitable requirement of s 90G(1A)(c) invites the Court to refer back to the nature of the complaint, not the efficacy of the agreement. [He] contended that the provision requires the Court to look at the justice and equity of the circumstances surrounding the lack of compliance with the requirements of s 90G and that if [the wife's] submission was accepted regarding the need for the Court to be satisfied that the agreement was just and equitable, it would return the Court to a situation akin to the approval of old s 87 agreements, which is was submitted was not the intent of the legislature. Strickland J noted that the legislature deliberately chose the words "unjust and inequitable" rather than "just and equitable". He considered (at para 110) that he was required: to determine whether, given the circumstances surrounding the making of the financial agreement in this case, it would be unjust and inequitable for the agreement not to be binding on the parties. He said further (at paras 114-5): In these circumstances, I am not satisfied that it would be unjust and inequitable if the financial agreement was not binding. If the only issue of non-compliance with s 90G was that, for example, one of the parties had not been provided with a copy of the relevant statement from their solicitor or a copy of the statement from the other party s solicitor, the court may indeed be satisfied that it would be unjust and inequitable in such circumstances for the parties to not be bound by the agreement due to a so-called technical omission. However, the receipt of independent legal advice by all parties to a financial agreement is an essential requirement. Indeed, it could well be unjust and inequitable to the wife if she was bound by the financial agreement in circumstances where I have found she was not fully advised of the implications of the amendment to clause {000177/ } 16

17 15. In Senior and Anderson [2010] FamCA 601 Young J found there were errors in the agreement and the certificates. These included: 1. In parts of the agreement it was expressed to be an agreement under s 90C. The parties divorced before the agreement was executed so it ought to have been made under s 90D. 2. Both the wife s certificate and the husband's certificate correctly identified them but also described them by incorrect first names. Young J distinguished the facts from Balzia and Covich [2009] FamCA 1357 where Collier J refused to rectify an agreement which incorrectly referred to s 90B rather than s 90C. Collier J said he could not rectify the incorrect reference to s 90B in the certificates, saying (at paras 40-41): If I were to accept that rectification can be carried out to the deed, then there exists an agreement referring to s 90C. However,.. the certificates refer to s 90B. To my mind the 90B certificates can only clearly be understood and interpreted to mean that advice was given at the time the agreement was entered into that was incorrect. What it does not indicate, and cannot indicate on the face of the rectified document on one hand, and the certificate on the other, is that either party had explained to them what were the advantages and disadvantages of entering into the agreement now that they were married, rather than at a time they were contemplating marriage. I cannot be satisfied as to the fact that either party was advised as to specific matters that might arise as a result of them being married, and no longer simply in a relationship, and contemplating marriage. So far as I am concerned, it would need be properly demonstrated that the certificate satisfied any reasonably minded observer that the parties had been advised of their rights, having regard to their status as married persons. Clearly the Act draws a distinction or difference between premarriage, post-marriage, and post-divorce agreements. I am satisfied that because that distinction is drawn by the Act itself the nature of the advice to be given in respect of each such situation must reflect the actuality of the situation at the time the advice is given. Young J said that rectification was possible in Senior and Anderson because (at para 94): On the facts of this case the parties negotiated and concluded an agreed contract for a division of their property. They were in complete agreement at the time of execution of that contract as to its terms. The mistakes were of a legal or identification issue unknown to the parties and of a kind that should have been known to their solicitors... The subjective and common intention of the parties was properly expressed within the agreement... After Young J rectified the agreement, he found that it was binding. A majority of the Full Court in Senior and Anderson (2011) FLC upheld the appeal {000177/ } 17

18 against the trial Judge's finding that the agreement was binding, but for different reasons. May J, dissenting, found the agreement to be binding. A significant part of the case dealt with the transitional provisions of s 90G. There are 3 distinct periods: 27 December 2000 to 13 January 2004, 14 January 2004 to 3 January 2010 and 4 January 2010 onwards. A different transitional provision applies to s 90UJ which applies to Part VIIIAB financial agreements, for the period 9 March 2009 to 3 January Murphy J considered that the trial Judge applied the incorrect wording of s 90G(1) and his judgment usefully sets out the consolidated transitional provisions. Strickland J held that the agreement did not comply with s 90G(1), but he refused to apply a strict compliance test to s 90G(1). He distinguished between agreements which comply with s 4 and s 90B, 90C or 90D and those which are binding under s 90G. He said (at para 103): I consider that there is a distinction between on the one hand, the formation, validity and enforceability of an agreement that is a financial agreement, to which contractual and equitable principles apply, and, on the other hand, the statutory precondition for making an agreement binding within the meaning of the Act. He said the 2010 changes did not affect that distinction. Like Murphy J in Fevia and Carmel- Fevia (2009) FLC , he considered s 90KA (and therefore the doctrine of rectification) applied when deciding whether there is an agreement and the application of s 90B, 90C and 90D to the agreement. Section 90G is irrelevant to the contractual rights and remedies of the parties to the agreement (at para 95) and therefore s 90KA cannot be used to make a financial agreement binding under s 90G. With respect to rectification, Strickland J said (at para 138): I do not consider that rectification is available to a court so as to correct noncompliance with any or all of the requirements of s 90G. Those requirements do not pertain to matters of agreement as between the parties in respect of which clear intention can sound in rectification. May J said that the careless reference to s 90C rather than s 90D could be rectified but that the erroneous names were in a different category. They were a failure to observe the requirements of s 90G and so could not be rectified under s 90KA. As the facts pointed to a careless error by the solicitors with no impact on the parties, it was appropriate to correct the error using principles of construction. Although all three Judges in Senior and Anderson held that rectification of the agreement was possible, it is arguable that the advice required before marriage (under s 90B) and prior {000177/ } 18

19 to separation (under s 90C) is different than after separation (under s 90C) and after divorce (s 90D). For example, s 90D(2)(a) refers to "how all or any of the property or financial resources that either or both of the spouse parties had or acquired during the former marriage is to be dealt with", thus excluding the ability of the Agreement to deal with assets acquired post-divorce. Also, if a s 90B agreement is set aside or found not to be binding and the parties have not married, provided they meet the gateway requirements of Part VIIIAB, that Part will apply not Part VIII. The wording and effect of many sections of Part VIIIAB is similar but not the same as Part VIII and VIIIAB. Interpreting s 90G(1A)(c), the Judges again took different approaches. May J said that if she was wrong and rectification of the agreement was not possible, it was unjust and inequitable for the agreement not to be binding. Strickland J repeated his statements in Parker that it was unclear precisely what s 90G(1A)(c) meant, giving two alternatives (at para 154): In other words, does s 90G(1A)(c) require the Court to consider the efficacy of the settlement and the entitlements that the parties are to receive pursuant to the agreement or does it simply invite the Court to refer back to the nature of the complaint. Murphy J agreed that there was uncertainty about the meaning of s 90G(1A)(c). Young J re-heard the matter. He agreed with the reasoning in [2011] FamCA 802 of Murphy J rather than Strickland J. He considered the Full Court's views and found further defects in the transitional provisions. He concluded (at para 117):...In other words in circumstances where the requisite advice in s 90G(1)(b) is provided to each spouse party but the certification or statement in s 90G(1)(c) does not comply with that subsection, s 90G(1A)(b) cannot be satisfied and the discretion in s 90G(1A)(c) cannot be exercised and the financial agreement cannot be declared binding pursuant to s 90G(1A)(d) and s 90G(1B). In Sanger & Sanger (2011) FLC the Full Court dismissed the husband's appeal against orders that the financial agreement entered into after separation be enforced. The husband sought that the whole of the financial agreement be set aside or, in the alternative, that a number of clauses within the agreement be set aside or severed. The husband's counsel conceded that there was no material distinction between setting aside the financial agreement in its entirety and severing and setting aside only clauses 59A to 62 of the agreement. Severing those clauses left a meaningless agreement. One of the two events which the husband sought to rely on was the shortfall on the sale {000177/ } 19

20 price of the former matrimonial home. This sold for $101,000 less than the $800,000 envisaged. Under the agreement the husband was to retain a business he owned and conducted, R Pty Ltd, which was worth $400,000. After the agreement was entered into, R Pty Ltd was placed in involuntary liquidation and had no value. The agreement contained a general provision that the parties intended to effect a 60/40 division of property. The Full Court concluded that the specific provisions should prevail over the general provision, holding (at para 70): In the event of the fund being insufficient to pay the wife $350,000, the husband personally covenanted to pay the wife the shortfall. To the extent that the fund exceeded $350,000, the husband was to have the whole of it. It is clear from the covenants that each party accepted a risk. The wife accepted the risk that the fund might be worth more than $350,000 in which case she would not share in any such excess. The husband accepted the risk that the fund might not realise $350,000, in which case he would be liable to have to pay the deficiency to the wife. The husband also argued that the agreement was impracticable. The Full Court compared s 90K(1)(c) to the similarly worded s 79A(1)(b). It said (at para 86): As is not in doubt, the provisions of s 90K are not designed to, and do not facilitate a party escaping from what proves, or is perceived to be a bad bargain. The Full Court concluded that the evidence failed to establish that it was impracticable for any provision of the agreement to be implemented or that declining to set aside the agreement in whole or part was unconscionable. In Sawyer & Sawyer [2011] FMCAfam 610 Cassidy FM followed Parker v Parker [2010] FamCA 664 and was satisfied that the wife received legal advice. However, he accepted that the wife signed the agreement before receiving legal advice. This was clear on the face of the document and meant that s 90G(1) had not been complied with as s 90G(1) required that the agreement not be executed until the advice was obtained. His Honour also accepted that the wife was not provided with the original agreement or a copy of the agreement. Noll & Noll [2011] FamCA 872 is a decision about which we will unfortunately hear much more. It has been appealed. The husband asked the Court to invoke its accrued jurisdiction to hear a claim by him against a firm of solicitors who acted for the wife when she entered into a financial agreement with him. In the principal proceedings the wife sought to have that agreement set side and/or other associated remedies. The law firm did not oppose being joined as a party to the proceedings. {000177/ } 20