Can a binding financial agreement be repudiated?

The Full Court of the Family court is frequently asked to consider whether a binding financial agreement entered into by parties during their marriage can be upheld following the end of their marriage.

The recent case of Donald & Forsyth was one such instance.

The 2005 agreement provided that the parties would sell a property in "Town A" (acknowledged to have been the wife's and 50% sold to the husband for $132,000 which he had repaid $82,000 by July 2005 and was to repay the remaining $50k in $1k instalments) with the net proceeds to be divided equally - save for any outstanding amount owed by the husband which was to be paid to the wife from his share. The agreement also stated that the parties otherwise retained their separate property.

Judge Demack had made orders setting aside the agreement - the husband appealed those orders and the wife opposed the appeal.

Before Judge Demack the wife sought to set aside the agreement arguing that the agreement had been obtained by fraud (non-disclosure of material matters by the husband) and that the agreement was impracticable (that due to her ill health it was no longer practical that she keep the other property she owned and sell the Town A property). Additionally, the wife argued "that in any event, the contract [had] been rescinded by the husband's repudiation."

Judge Demack did not agree with the first two arguments but decided that the agreement had been repudiated and therefore must be rescinded. In answering this question her Honour found the husband's actions in seeking orders, that "move away from the provisions of the financial agreement", namely seeking "that he not be responsible for the good repair of the property in the equal terms that the agreement required" and seeking that the wife pay one half of the equivalent market rent for the Town A property pending its sale where acts of repudiation. In conclusion though her Honour found that "...the [agreement] has been repudiated by the acts of the husband" and it must be rescinded.

The Husband advanced 7 grounds of appeal but only 1 and 5 were addressed by the Court: The principal complaint in Ground 1 appears to be that her Honour failed to consider, and make all of the findings necessary, to be able to conclude that the husband had repudiated the agreement and that it could be rescinded on that basis. That clearly brings into play Ground 5, where the complaint is that her Honour failed to provide adequate reasons for her decision in that it is not possible to discern the path that her Honour followed.

Justice Strickland & Ryan stated that there can be no dispute as to the principles that are to be applied in determining whether a party to a contract has repudiated that contract so that the other party can terminate the same. Those principles are:

• there must be either a breach or an anticipatory breach of an essential term of the contract, or a sufficiently serious breach of a non-essential term; and 
• the other party must be ready and willing to complete the contract. 

The accepted test in relation to anticipated breach is whether or not the words or conduct of the party would lead a reasonable person to conclude that the party did not intend or was unable to perform the contract. The submission of the husband was that the words or acts of the husband were ambiguous or equivocal, and thus could not be said to constitute an anticipatory breach. The Full Court said: "Applying that test we are comfortably satisfied that the words used in paragraph 19 of the affidavit are clear and evince an intention not to be bound by Clause 18.3.2 of the agreement. Accordingly, although her Honour did not address this issue expressly, we find no error in her Honour effectively finding anticipatory breach by the husband."

Given that finding her Honour was obliged to then consider whether the relevant term of the agreement was an essential term, or if not, whether the anticipatory breach was a sufficiently serious one to justify termination of the agreement. However, the Full Court found that her Honour failed to address either of these requirements, and this alone provides a basis for appellate interference.

Justice May said "plainly there is no express statement by the parties that that term is to be treated as an essential term of the contract ... The essential term in this regard was that the house be marketed in good repair, and this is not a term that the husband sought to breach; he was challenging the deduction of the costs of repair from the proceeds of sale."

Further, the Full Court noted that in order to rescind the agreement the wife relied on paragraph 19 of the husband's affidavit filed on 4 May 2011. It was then on 14 November 2011 that the wife through her solicitors terminated the contract. However, the incontrovertible facts are that from the time of the breakdown of the marriage (29 February 2008), the wife had not been prepared to sell the Town A property as required under the terms of the agreement. Thus the wife was not ready and willing to complete the contract herself.

The Full Court concluded "For these reasons we find that there has not been a repudiation of the agreement by the husband such that the wife is entitled to rescind the same, and we propose to set aside her Honour’s orders. The effect of this is that the husband is able to pursue his application in the Federal Circuit Court of Australia to enforce the agreement."

Yet another update on Court fees

The third - and hopefully final - update on Court fee increases.

The Family Law (Fees) Regulation 2012 has been amended by the Family Law (Fees) Amendment (2015 Measures No. 1) Regulation 2015 to increase and introduce new fees with effect 13 July 2015. Changes include:

• An increase in the divorce fee to $1,200
• An increase in the fee for consent orders from $155 to $240
• An increase in the fee to issue subpoena from $55 to $125
• A new fee for filing amended application of $125; and
• An increase in all other existing fees by an average of 11%

Further update: Court fee increase disallowed

The Federal Courts Legislation Amendment (Fees) Regulation 2015 which was to increase fees in the family law courts was disallowed by the Senate on 25 June 2015.

The fee increase set out in my previous post will therefore not be implemented.

Update: New Court fees

I posted a week or so ago about the announcement in the budget that Court fees will be increasing as at 1 July 2015.

The Federal Courts Legislation Amendment (Fees) Regulation 2015, assented on 28 May 2015, sets out the new fees. The most common are:

• The filing fee for an Application for Divorce is increasing from $845 to $1195;  
• The Initiating Application fee increases from $320 to $350;
• The fee to issue a Subpoena increases from $55 to $120;
• An Application for Consent Orders fee increases from $155 to $235; and
• The setting down for hearing fee increases from $805 in the Family Court and $590 in the Federal Circuit Court to $885 and $650 respectively. 

There is also a new fee that has been announced - for filing an amended Initiating Application or Response. The fee is $120. Previously there was no fee to file an amending document. 

Amalgamation of Tribunals

The Tribunals Amalgamation Act 2015, passed by Parliament on 13 May 2015, will come into effect on 1 July 2015. From that date the Social Security Appeals Tribunal, along with the Migration Review-Refugee Review Tribunal will join the Administrative Appeals Tribunal.

The amalgamation is expected to generate efficiencies and savings through sharing financial governance, IT and human resources.

For the large part the current processes for each Tribunal will be maintained and the legislation provides for the work of the existing Tribunals to be conducted by a special division within the Administrative Appeals Tribunal. Existing applicants will not need to submit a new application as all undecided reviews will automatically be transferred to the new Tribunal.

However, of note in family law matters is some changes in relation to child support matters - currently conducted by the Social Security Appeals Tribunal. Judicial reviews will now be to the Federal Circuit Court and the Federal Court rather than to the Family Court. 

Budget announces increase to Court fees

Last week's federal budget announced expected changes to the fees in the Family Court and Federal Circuit Court. The changes, likely to take effect from 1 July 2015, are expected to raise around $87 million in the federal courts.

While no specific fee changes have yet been announced media reported last week that the fee for divorce applications, currently $845, would rise to $1,200, and the fee for an Application for Consent Orders would rise from $150 to $240. According to the Sydney Morning Herald the Attorney General George Brandis confirmed that fees will increase but said that details would not be known until July.

The Australian quotes the head of the Law Council of Australia's family law section, Rick O'Brien, who said "We have not yet been told what the proposed fee increases will be, but we would be extremely concerned that any fee increases would severely restrict access to the courts by people most in need." The paper went on to quote the immediate past head of the section, Mr Sinclair, who expressed concern that the increase to the consent order fee would discourage parties from trying to resolve their dispute by proper process which could lead to problems later on.

When will a tax liability not be a joint liability?

The recent case of Adair & Milford [2015] addressed a number of issues, as is usually the way, but of particular interest was a question that arose in relation to the husbands tax liability.

In the first trial the Judge had found that the husband had an outstanding tax liability at the time of separation in 2012 of $220,000 and at the time of the trial in 2014 of $419,000. The husband had ceased to pay PAYG instalments in 2011. Despite this the husband had given evidence that he was paying PAYG instalments of $4,230 per week as well as $287 per week in withholding tax at the time of the trial. The effect of the husband's evidence was to mislead the wife and the Court and to wrongly inflate his expenses so that they exceeded his income - which was not the case. The trial Judge then went on to examine the husband's income and expenses and found that the husband did have the capacity to have been paying the tax liability. The Judge held: "I accept that he was making a significant contribution to the wife, the children and the mortgages but at the same time, he made no arrangement with the Australian Tax Office notwithstanding the Court was under the impression that amounts were being set aside on a weekly basis. In my view, it would not be fair now to attribute the debt to the wife."

On appeal the husband argued that the trial Judge was in error in concluding the amounts of tax owing. The Appeal Court noted that "it is beyond dispute that the husband's evidence on this topic [at the trial] was imprecise and that no criticism can be levelled at his Honour's decision to accept the husband's evidence that as at separation he was indebted to the ATO in that amount."

The Appeal Court noted that there is no principal of general application that merely because a taxation debt accrued prior to separation it must be brought to account as a joint matrimonial liability: Trustee of the Property of G Lemnos, a Bankrupt & Lemnos and Anor (2009). The Appeal Court went on to say that to their view the facts of the case amounted to "compelling circumstances" - as announced by the Full Court in Johnson and Johnson [1999] - which would enable the Court to leave one party solely responsible for his own taxation debt.

The Appeal Court stated that it would have been necessary, in order for the appeal to succeed, for the husband to have successfully challenged the weight which the trial Judge placed on the husband's misleading evidence concerning the payment of his outstanding tax and to the cavalier manner in which he conducted his finances post separation.

The Appeal Court said: "The wife having been unaware prior to separation of the husband's failure to pay his taxation liabilities as they fell due and then after separation misled into believing payments were being made, it was entirely reasonable for his Honour to focus on how after separation the husband approached this debt and to ultimately conclude that the husband could and should have paid his accrued debt and tax as it fell due."

The husband was wholly unsuccessful on his appeal. The husband was ordered to pay the wife's costs of the appeal.