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Fewster & Drake [2016], FamCAFC 214

The appeal concerned the decision of Foster J to set aside a BFA and thereafter order interim spousal maintenance in the sum of $1,500 per week to the wife. The thrust of the appeal was the trial judge’s decision to set aside the BFA pursuant to s90K(1)(d) namely that there had been a material change in circumstances due to the birth of children after the execution of the agreement. It is to be noted that the wife was pregnant with the parties first child when signing the BFA.

Fewster & Drake [2016] FamCAFC 214 (4 November 2016)

The appeal concerned the decision of Foster J to set aside a BFA and thereafter order interim spousal maintenance in the sum of $1,500 per week to the wife. The thrust of the appeal was the trial judge’s decision to set aside the BFA pursuant to s90K(1)(d) namely that there had been a material change in circumstances due to the birth of children after the execution of the agreement. It is to be noted that the wife was pregnant with the parties first child when signing the BFA.

The Full Court (Strickland, Aldridge & Kent JJ) not only considered at length the trial judge’s reasons but also that of the court in Pascot & Pascot [2011] FamCA 945 (“Pascot”) a decision of Justice Le Poer Trench where His Honour, after noting similarities between s90K(1)(d) and s79A(1)(d), laid out the following test (at para 354):

For the purposes of sec 90K(1), it would be useful to adopt the test in the following terms:

  1. There must be circumstances that have arisen since the making of the Binding Financial Agreement, being circumstances of a material nature relating to the care, welfare and development of a child of the marriage;
  2. It must be demonstrated that the child or the applicant, if she has caring responsibility for the child, will suffer hardship if the court does not set the agreement aside;
  3. The court may set the agreement aside if it considers it appropriate and make such orders under sec 90K(3) as it deems appropriate.

An ancillary matter was whether an appeal with respect to the validity of a BFA was from an interlocutory decision and thus requiring leave to appeal. The Full Court resolved that aspect in the negative (see also Saintclaire & Saintclaire (2015) FLC 93-684).

The Full Court in Fewster observed a crucial difference between s90K(1)(d) and s79A(1)(d) in that the change in circumstances must be “of an exceptional nature” for the section to apply in s79A where the requirement was lower pursuant to s90K(1)(d) namely that the change was “material” (see para 48). The Full Court observed that the test above in Pascot omits the important words “as a result of that changelinking the changed circumstances to the hardship (para 50). In this aspect the Full Court considered the trial judge in Fewster had fallen into error by following Pascot (essentially the Full Court departed from the test in Pascot).

The Full Court also queried the definition of “material” as meaning “substantial, significant and relevant” preferring the plain words of the Act. At para 53;

In Sola Optical Australia Proprietary Limited v Mills [1987] HCA 57; (1987) 163 CLR 628 the High Court had to consider the phrase “facts material to the plaintiff’s case” that appeared in s 48 of the Limitation of Actions Act 1936 (SA). What the Court said there is relevant to the construction of the present section. The Court said at 636 - 637:

A fact is material to the plaintiff's case if it is both relevant to the issues to be proved if the plaintiff is to succeed in obtaining an award of damages sufficient to justify bringing the action and is of sufficient importance to be likely to have a bearing on the case. The Shorter Oxford English Dictionary defines the word “material”, inter alia, to mean “Of such significance as to be likely to influence the determination of a cause”. Although a definition attributed to the sixteenth century, in our opinion it provides an apt guide to the intention of the legislature in choosing to refer, without any elaboration, to “facts material to the plaintiff’s case”.

In observing (at para 62) that a birth of a child could be a material change in circumstances for the purposes of s90K(1)(d) and that whether it is in fact a change will depend upon the circumstances of the case, that an agreement does not contain any provision for the increased responsibility for a child does not inevitably cause hardship. The Full Court adopted the authority of Whitford when considering s44(4) applications for leave to extend the statutory time limits as providing guidance as to the “hardship” required to be established under s90K(1)(d).

In re-determining whether to set-aside the BFA the Full Court observed the correct test is to identify the essential link between the changed circumstances arising from the care of a child and that hardship is established. Further, the hardship must be a result of the change of circumstances. In dismissing the wife’s application the Full Court determined that “The evidence did not permit a comparison to be undertaken between the financial position of the child, or the wife, under the agreement and the position that would exist if the agreement was set aside. Thus there could be no determination that hardship would ensue if the agreement was not set aside.” (para 86).

There follows an interesting examination of urgent, interim and final spousal maintenance applications. As the BFA application was dismissed (i.e. the BFA was held to be valid) and the interim spousal maintenance appeal was upheld, the only remaining matter for determination was the wife’s final application for spousal maintenance. That issue was remitted to the FCC. 

 

Russo & Wylie [2016] FamCAFC 227 (9 November 2016)

Russo concerned an appeal in a property matter concerning the defacto husband’s Military Superannuation Benefit Scheme defined benefit (MSBS benefit). The Full Court (Thackray, Strickland & Aldridge JJ) delivered joint reasons in dismissing the appeal. The MBSB, being paid as an indexed pension, had been valued at $416,804 however neither party sought a splitting order and each proposed at trial different methods of dealing with the benefit (see Semperton). The de facto wife appealed the 57 % split in her favour.

Of interest in this appeal (and a discussion often raised in matters I mediate) was the Full Court’s support for the proposition that cash in the hand is more valuable than a pension over time. Per the Full Court (from 41);

The appellant’s submission under this ground was:

Although conceding at paragraph 220 that Mr [Wylie’s] access to a pension was “a significant factor when considering the financial resources and needs of the parties” this factor was not taken into account in his Honour’s consideration of section 90SF(3). That in itself ought to have led to an adjustment to the de facto Wife and to the extent that it was not taken into account the Learned Trial Judge fell into error.

The primary judge expressly took the respondent’s MSBS benefit into account at [216] - [221], in the course of considering the approach that he ultimately adopted. That consideration led to an adjustment of seven per cent in favour of the appellant under s 90SM(4), which of course includes s 90SF(3).

Further, given his Honour’s other findings, the only justification for an adjustment of seven per cent or $103,000 was so that the respondent could retain his MSBS benefit. It is to be recalled that his Honour made a finding that the parties had contributed equally to the acquisition of the benefit. While a cash adjustment of $103,000 is significantly less than 50 per cent of the valuation of the benefit ($416,804), it is to be recalled, as his Honour found, that $103,000 would be received in cash and would be immediately available to the appellant, whereas the payment of the benefit to the respondent could only ever be in the form of a pension. In doing so the primary judge clearly took into account the MSBS benefit, which led to a cash adjustment being made in favour of the appellant.

This ground has not been established.

 

Masters & Cheyne [2016] FamCAFC 255 (2 December 2016)

A differently constituted Full Court from that in Fewster above, was again called upon to consider “hardship” this time in a decision of Judge Terry to set aside a Binding Child Support Agreement (BCSA). The Full Court (Murphy, Aldridge & Austin JJ) upheld the appeal and dismissed the application to set aside the BCSA.

Murphy J however disagreed with Aldridge J (with whom Austin J agreed) in terms of the application and interpretation of s12 of the CSA as to what is a child support terminating event. When the parties executed the binding child support agreement in 2008, the relevant sub-paragraph of s 12(2) provided, that a “child support terminating event” happens if the “carer entitled to child support in relation to a child ceases to be an eligible carer”. Section 12 was amended with the new section commencing after the BCSA was executed. Because of the amendment, s 12 now provides that a “child support terminating event” happens in relation to a child if “both of the parents of the child are not eligible carers of the child” (s 12(2AA)).

Per Murphy J (from para 28);

Once it is appreciated that a binding child support agreement operates as an agreement but also operates, by reason of the provisions of the CSA, as a child support assessment (albeit in accordance with the terms of the agreement), it can be seen how s 80D of the CSA can operate exclusively and exhaustively so as to determine a binding child support agreement whereas s 12 and s 142 can operate so as to determine child support payable pursuant to an assessment under the CSA. There is no inconsistency between the two.

Taken together, the provisions of the CSA applicable in this case meant that the child’s child support was governed by an assessment in the form of a consent departure order whose terms could be found in the parties’ binding child support agreement. The terms of the agreement became an administrative assessment of child support in accordance with the terms of the agreement. Although not an order of the court as such, the terms of the agreement were to have effect as if they were. One of the effects of a court order – whether made by consent or otherwise – is that it is susceptible to cessation upon the happening of a child support terminating event as defined by s 12 of the CSA.

Accordingly, in my judgment the primary judge was correct in the effect attributed to s 12 of the CSA upon the parties’ agreement and the assessment deriving from it.

A separate question to which I now turn is whether it was open to her Honour to consider the amendment to s 12 as relevant to a determination of “exceptional circumstances within the meaning of s 136(2)(d) of the CSA.

 

(from para 37);

Making “private arrangements” in the form of a binding child support agreement brings with it a significant difference in the role that a court may play when compared to its potential role in respect of limited child support agreements. For example, a limited child support agreement is susceptible to being set aside if, for example, a court determines that the parties “private arrangements” are not what the court considers “proper or adequate” (CSA s 136(2)(c)(ii)). Thus, the synthesis of the CSA’s Objects in the case of a limited child support agreement sees the parties’ arrangements being required, in effect, to mirror the CSA’s other Objects including, as a particular example, the determination of the level of child support being referable to the parental capacity to meet the same (CSA s 4(2)).

That is to be contrasted sharply with the position which pertains to binding child support agreements.

While the terms of neither type of agreement can be varied (ss 80CA; 80F(1)), and while fraud, undue influence, duress, unconscionable or similar conduct can found the setting aside of either (s 136(2)(a),(b),(c)), binding child support agreements cannot be set aside by reference to a court concluding that the child support provided within them is not “proper or adequate”; nor can they be set aside because of a significant change of circumstances; nor because of idiosyncratic notions of “fairness” or “unfairness”.

The statutory Object permitting parties to make private arrangements and to “limit interference with their privacy” is given particular force by reason of the necessity to show “exceptional circumstances” before a court will intervene in them and the additional requirement to prove “hardship” if the parties are held to their agreement.[6]

The ordinary and natural meaning of each such expression must be seen within that statutory context.

Murphy J considered that the trial judge was obliged to and correct in considering the circumstances that existed when the BCSA was executed and the circumstances at trial in light of the amended s12 as a relevant factor in determining whether exceptional circumstances had arisen.

In terms of section 136(2)(d) and the ground of appeal upon which the Full Court were ad idem (but for different reasons) it is useful to note the terms of section 136(2)(d);

 (2) If a party has applied under subsection (1), the court may set aside the agreement in accordance with the application if the court is satisfied:

(d)            in the case of a binding child support agreement - that because of exceptional circumstances, relating to a party to the agreement or a child in respect of whom the agreement is made, that have arisen since the agreement was made, the applicant or the child will suffer hardship if the agreement is not set aside.

The Court reiterated the test in Simpson and Hamlin with respect to s79A(1)(d) matters and noted the trial judge had found the change of a 5 day a fortnight to 14 day a fortnight care arrangement was a significant change however Aldridge J (with whom Austin J agreed) determined that the change was sufficiently foreseeable so as to render it not exceptional (distinguishing Simpson and Hamlin). Further, the amendment to s12 was not an “additional factor” upon which the appellant could rely (noting Murphy J’s dissent upon this issue).

In terms of “hardship” Aldridge J determined (from para 159);

The primary judge found:

182. I am satisfied that unless the agreement is set aside the father will suffer hardship in the sense of being required to make a payment to the mother in circumstances not contemplated by the child support legislation.

183. He will also suffer hardship in not being able to obtain a contribution from the mother to the costs of caring for [the child]. This is not a financial hardship given his income but it is a hardship nevertheless because it is unjust that the mother should not make a contribution if she is capable of doing so.

In these passages the hardship described by her Honour is merely the consequence of the agreement and flows from its terms. It does not arise from the changed circumstances. As such, it does not fall within the terms of s 136(2)(d). It is quite clear from s 136 that the relevant hardship must flow from the exceptional circumstances themselves because of the use of the words “because of”.

There is no reason at all why a binding child support agreement should mirror the administrative child support assessments from time to time. What would be the point of such an agreement if that were so? On the contrary, the point of such agreements is to give the parties flexibility to agree on fixed and certain arrangements, often as part of a larger overall agreement. It is difficult therefore to assert that hardship arises merely because had there been no agreement, an administrative assessment would have resulted in different payments.

(and from para 166)

In any event, the evidence falls well short of establishing hardship. Hardship is “akin to such concepts as hardness, severity, privation, that which is hard to bear or a substantial detriment” and means “something more burdensome than ‘any appreciable detriment’”: Whitford and Whitford (1979) FLC 90-612 at 78,144-78,145.

It follows therefore that the father had not established hardship and this challenge also succeeds.

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