Whether the contract was against public policy (appeal ground 4)
24I shall commence consideration of the grounds of appeal with ground 4, it being the broader ground of appeal.
25The plaintiff submitted that her Honour erred in not finding that the agreement was unenforceable because it was against public policy, in that it was in effect an agreement of servitude. The plaintiff said that the effect of clause 11, and the requirement contained therein that he pay her $50,000 if he initiated separation and/or divorce, was to compel Mostafa to remain in a relationship with Neima. The plaintiff also submitted that it was against public policy for a court to determine which party had left a relationship. Finally, the plaintiff argued that clause 11 was a penalty clause, and was therefore void for illegality.
26To support this ground of appeal, the plaintiff referred to Cattanach v Melchior [2003] HCA 38; (2003) 215 CLR 1 in their written submissions. It was not explained how this case relates to the present case. In my view, this case does not offer support for the plaintiff's case that the agreement is against public policy. Quite the contrary. In Cattanach v Melchior, Hayne J observed at [235]:
"In the case of contract, it is well accepted that the law will seek to give effect to bargains that are struck between those of full age and capacity. To refuse to enforce a particular bargain on the grounds of public policy trenches upon the general policy favouring the enforceability of bargains."
27The plaintiff also referred to Wilkinson v Osborne [1915] HCA 92; (1915) 21 CLR 89 at 96 and A v Hayden [1984] HCA 67; (1984) 156 CLR 532. In Wilkinson, Isaacs J stated at 96-97:
"... It is not easy to collect or to reconcile all the observations on the subject of "public policy." But the judgment of Lord Halsbury LC, in Janson v Driefontein Mines Ltd, (1902) AC 484 at pp 490 and following, makes it clear that a court has not a roving commission to declare contracts bad as being against public policy according to its own conception of what is expedient for or would be beneficial or conducive to the welfare of the State. A court, says the Lord Chancellor, cannot invent a new head of public policy, and he enumerates some instances of undoubtedly unlawful things. Then, says the learned Lord at p 492 -
It is because these things have been either enacted or assumed to be by the common law unlawful, and not because a Judge or court have a right to declare that such and such things are in his or their view contrary to public policy. Of course, in the application of the principles here insisted on, it is inevitable that the particular case must be decided by a Judge; he must find the facts, and he must decide whether the facts so found do or do not come within the principles which I have endeavoured to describe - that is, a principle of public policy, recognised by the law, which the suggested contract is infringing, or is supposed to infringe.
He quotes with approval the words of Parke, B., in Egerton v Brownlow, 4 HLC at p 123, to the same effect. And this confirms my own reading of that case that the House did not necessarily reject all the fundamental principles enunciated by the majority of the Judges. In Janson's Case, (1902) AC at pp 504-5, Lord Robertson adopts the same reasoning and the general tenor of the judgments of Lord Macnaghten and Lord Lindley is confirmatory of the same view. In my opinion, the "public policy" which a court is entitled to apply as a test of validity to a contract, is in relation to some definite and governing principle which the community as a whole has already adopted, either formally by law or tacitly by its general course of corporate life, and which the Courts of the country can therefore recognise and enforce. The court is not a legislator, it cannot initiate the principle; it can only state or formulate it if it already exists.
The rule of law as to contracts against public policy is constant, namely, that every bargain contrary to such a social governing principle is regarded as prejudicial to the State, or in other words, contrary to "public policy," or, as it is sometimes called, "policy of the law," and the State by its tribunals refuses to enforce it. ..."
28Counsel for Neima referred to Granatino v Radmacher [2010] UKSC 42; [2011] 1 AC 534 in which the UK Supreme Court held that although it was the court and not any prior agreement between the parties which would determine the appropriate ancillary relief when a marriage came to an end, the rule that agreements providing for the future separation of the parties to a marriage was contrary to public policy was obsolete and no longer applied. The Court held, consequently, that it should give weight to an agreement made between a couple prior to, and in contemplation of, their marriage as to the manner in which their financial affairs should be regulated in the event of their separation in circumstances where it was fair to do so and that, in appropriate circumstances, the Court could hold the parties to the agreement even when the result would be different from that which the Court would otherwise have ordered. This case supports the view that the present agreement is not contrary to public policy and is not an agreement of servitude.
29The issue of the enforceability of agreements relating to the payment of "Moackar Sadak" is of some importance within our community and has recently been the subject of debate and discussion. See generally Ann Black and Kerrie Sadiq, "Good and Bad Sharia: Australia's Mixed Response to Islamic Law" (2011) 17 UNSW Law Journal 82.
30Neither counsel was able to find any cases in Australia as to what law is generally applied to this type of contract. Hence, it may be instructive to consider how other common law countries have approached Moackar Sadak agreements.
31Mahr is a required component of a valid Islamic contract of marriage, as it specifies the payment a wife will receive as a nuptial gift from her husband, which will be prompt (paid at the time of the marriage), or deferred (paid at the dissolution of the marriage by death or divorce), or a combination of both. It is a payment designed to provide for a wife when she is no longer required under Sharia law to be financially maintained by her husband, and as such has been an important security net in Muslim societies. A husband's unfettered right to pronounce divorce by talaq requires him to pay any remaining mahr and maintain his wife for the three-month iddah period (the time in which reconciliation can occur). His financial obligations to her then cease. Without legal fault grounds or without a contractual breach a wife can only terminate an unhappy marriage by a Sharia authority granting her a khula divorce. If granted, the husband is relieved of his obligation to pay mahr: Black and Sadiq, "Good and Bad Sharia" at 406. (Note that it appears that mahr is used in the excerpt above to refer to what the parties have referred to in their agreement as Moackar Sadak).
32Counsel for Neima referred to the following cases from the United States, England and Canada: Aziz v Aziz 127 Misc 2d 1013, 488 NYS 2d 123 (1985); Odatalla v Odatalla 810 A 2d 93 (2002); Akileh v Elchahal 666 So 2d 246 (1996); Shahnaz v Rizwan [1965] 1 QB 390; Nathoo v Nathoo [1996] BCJ No 2720; M (NM) v M (NS) (2004) 26 BCLR (4th) 80; Kaddoura v Hammoud [1998] OJ No 5054; Nasin v Nasin (2008) 2008 ABQB 219; and Bruker v Marcovitz [2007] 3 SCR 607.
33In Aziz v Aziz the defendant contended that a mahr was enforceable as a contract and that the court, as a court of general jurisdiction, may, in the interest of judicial economy, determine this claim. The Supreme Court of the State of New York determined the claim in accordance with common law, stating that the "document at issue" was "enforceable as a contractual obligation, notwithstanding that it was entered into as part of a religious ceremony".
34Turning to Canada, in Nathoo v Nathoo the British Columbia Supreme Court held at [25]:
"Our law continues to evolve in a manner which acknowledges cultural diversity. Attempts are made to be respectful of traditions which define various groups who live in a multi-cultural community. Nothing in the evidence before me satisfies me that it would be unfair to uphold the provisions of an agreement entered into by these parties in contemplation of their marriage, which agreement specifically provides that it does not oust the provisions of the applicable law."
35Counsel for Neima, however, conceded that the agreement in Nathoo v Nathoo otherwise satisfied the requirements of the applicable Canadian legislation and therefore the Court was not called upon to consider an agreement falling simply to be interpreted under the common law. Nathoo v Nathoo was cited with approval by Joyce J of the British Columbian Supreme Court in M (NM) v M (NS) at [29]. Joyce J stated at [31] that the agreement was "not unfair".
36In fairness, counsel for Neima also drew attention to the decision of Kaddoura v Hammoud in which Rutherford J of the Ontario Court of Justice held at [24]:
"While there may be much to some if not all of the contract and marriage contract law arguments raised by [counsel for the husband], I have concluded that the obligation sought to be enforced here is one which should not be adjudicated in the civil courts."
37However, counsel for Neima submitted that this decision should not be followed in light of the weight of countervailing authority, in particular subsequent Canadian authority. I agree with that submission. I note also that in Kaddoura v Hammoud the parties had not signed a contract akin to the agreement in this matter, but rather the mahr was referred to, in Arabic, on the parties' Islamic marriage certificate. There were also questions in that case as to whether each party had understood the obligations being assumed pursuant to the mahr; that question does not arise in this case.
38In Nasin v Nasin Moen J of the Alberta Court of Queen's Bench considered the enforceability of "Mahr agreements". The Court helpfully analysed the earlier Canadian case law (at [11]) and ultimately concluded at [24] that such agreements were enforceable as long as they complied with the formalities required by the applicable Canadian legislation and the contract was not "invalid for other reasons".
39In Nasin at [12]-[13] the Court also referred to the Supreme Court of Canada's decision of Marcovitz v Bruker in which the majority held that the fact that a dispute had a religious aspect did not make it non-justiciable. Nasin and Marcovitz undermine the precedential value of Kaddoura, in which the Court had refrained from enforcing an agreement on the basis that it did not wish to pronounce upon a religious topic.
40The Ontario Court of Justice, subsequent to Marcovitz, did not follow its earlier decision in Kaddoura: see Khanis v Noormohamed [2009] OJ No 2245 at [67]-[68] (Backhouse J).
41In Khanis the Court upheld a "maher" (sic) agreement even though it did not comply with the formalities required by the applicable Canadian legislation. Backhouse J stated at [73]:
"Setting aside a marriage contract under s. 56(4) of the Family Law Act is discretionary. This is not a case where the parties were opting out or giving up rights under the Family Law Act where understanding the legislative scheme and the other party's financial position were critical. The terms of the marriage contract were simple. Other than the payment of the maker (sic) amount of $20,000, the parties retained their rights under the Family Law Act. The evidence satisfies me that the husband understood the promise he made and understood that it was binding upon him. I am not persuaded that, in these circumstances, the court should exercise its discretion to set aside the contract."
42It was submitted that none of the Canadian case law would support a submission that contracts such as the agreement presently under consideration are contra bonos mores. This term is defined as "contrary to the accepted cannons of decent behaviour; against good morals" in the Encyclopaedic Australian Legal Dictionary (LexisNexis).
43Other cases also hold that such agreements are ordinarily enforceable. In Aziz v Al-Masri (2011) 2011 BCSC 985, Silverman J of the British Columbian Supreme Court rejected a claim for the payment of dowry because under the terms of the agreement the wife did not appear to be a party. The Court, however, stated at [3]:
"I have been referred to a number of cases where Canadian courts have upheld apparently similar contracts. It is clear that our courts have striven to be flexible in cases of this kind, seeking to recognize and accommodate the traditions of other countries and cultures where it is feasible and appropriate to do so. I start from the premise that this is the correct approach, generally..."
44Counsel also drew this Court's attention to the decision of Haque v Haque [1962] HCA 39; (1962) 108 CLR 230 in which the High Court (Dixon CJ, Kitto, Menzies and Owen JJ) stated at 249:
"It is only necessary to add that in the view expressed above an argument advanced against the effectiveness of the deed does not arise. The argument was that the deed was unenforceable in our Courts because it contemplated cohabitation between man and woman without lawful marriage, for the polygamous marriage celebrated within Western Australia had no effect as a marriage under our law. In the circumstances of this case it is by no means certain that a court would adopt such a position: for it was an attempt by Muslims honestly and genuinely to establish a relation which Muslim law would recognize although the ceremony was performed in Australia where the law would not recognize a polygamous marriage entered into within Australia."
45Counsel for Neima submitted that although this was an obiter comment, it does nevertheless evidence the Court's openness to other customs, particularly of a religious nature, even where those customs might otherwise be contrary to public policy. Counsel submitted that the only prerequisite is a knowing and voluntary use of such customs by the parties.
46In Haque v Haque the High Court referred to the Privy Counsel decision of Husain v Hasan (1937) 65 IA 119; (1938) 40 BOMLR 735. In Husain v Hasan, Sir George Rankin, delivering judgment for the Privy Council, upheld an appeal by the estate of a woman who had entered into a "mahr agreement" and had died during the course of the marriage, thus triggering, it was argued, the obligation to pay the dowry. The Board held that the rights under the agreement were enforceable by the estate. This appeal was from the Bombay High Court, and it could be argued that the Privy Council applied a different "moral standard" than it might have if the action had originated in England and Wales. However, the case is an early example of the common law courts upholding agreements such as the present one, without there being any suggestion that such an agreement might be contrary to public policy.
47It is clear that courts in other common law countries have not interpreted these types of agreements in accordance with Sharia law but have applied common law or the relevant legislation, if any, governing the relationship between the parties.
48As far back as 1964, in what we would now consider antiquated language, Winn J said in Shahnaz v Rizwan at 401-402:
"As a matter of policy, I would incline to view that, there being now so many Mohammedans resident in this country, it is better that the court should recognise in favour of women who have come here as a result of a Mohammedan marriage the right to obtain from their husband what was promised, than that they should be bereft of those rights and receive no assistance from the English courts."
49Winn J's view is echoed in Black and Sadiq's article "Good and Bad Sharia" at 406:
"Sharia family law cannot be delegated exclusively to a religious tribunal, court or other body to apply and enforce as it is the right of all citizens to bring family matters to the courts of law for determination and have the general law of the land apply."
50The authorities do not suggest that making a contract such as the agreement in this case would be against public policy. I am supported in this view by the caselaw outlined above and by the enacted of legislation providing for the making of agreements to regulate the financial affairs of individuals in the event their relationship or marriage breaks down (see, in particular, s 45 of the Property (Relationships) Act which explicitly excludes consideration of public policy when parties choose to enter into an agreement pursuant to that legislation). It is my view that the agreement is not contrary to public policy. Nor is the agreement a contract of servitude.
51I also reject the argument that it is against public policy for a court to determine which party left a relationship. Courts are often called upon, especially in family matters, to determine sensitive factual matters such as when a relationship has ended, or whether it was indeed a de facto relationship, and it could not be said that this in any way breaches a principle of public policy recognised by law or by the community. See, for example, Moss v Moss [1912] HCA 90; (1912) 15 CLR 538; Marando v Rizzo [2012] NSWSC 739.
52The plaintiff further submitted that clause 11 of the agreement is a penalty clause as the quantum is not referable to any damage or any settlement amount and merely penalised Mostafa for being the one who initiated separation or divorce. The plaintiff supported this proposition by reference to Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79.
53In Dunlop the House of Lords was considering a commercial contract and determining whether a sum of money was best characterised as liquidated damages or as a penalty. The case has very limited, if any, application to this case. In particular, the case predates legislation such as the Property (Relationships) Act and the Family Law Act which allow for parties to enter into financial agreements. Furthermore, clause 11 cannot be viewed in isolation. Rather, the agreement covers all the property of the plaintiff and the defendant so that clause 11 forms part of the greater bargain between the two parties and it cannot be said to impose a penalty on Mostafa. This ground of appeal fails.