Henton and Henton

[2020] FamCA 247

FAMILY COURT OF AUSTRALIA

HENTON & HENTON [2020] FamCA 247

FAMILY LAW – PROPERTY – Where application for interim property orders – Where consideration of applicable principles – Where not appropriate to make orders as sought – Where costs of the application reserved to final trial.

Family Law Act 1975 (Cth) s 79

Harris & Harris (1993) FLC 92-378
Strahan & Strahan [2009] FamCAFC 166

APPLICANT: Ms Henton

FIRST RESPONDENT: Mr Henton

SECOND RESPONDENT: B Bank

FILE NUMBER: PAC 1371 of 2018

DATE DELIVERED: 17 April 2020

PLACE DELIVERED: Parramatta

PLACE HEARD: Parramatta

JUDGMENT OF: Foster J

HEARING DATE: 26 February 2020

REPRESENTATION

COUNSEL FOR THE APPLICANT: Mr Gardiner

SOLICITOR FOR THE APPLICANT: King & York Lawyers

COUNSEL FOR THE FIRST RESPONDENT: Ms Druitt

SOLICITOR FOR THE FIRST RESPONDENT: Anderson Boemi Lawyers

SOLICITOR FOR THE SECOND RESPONDENT: No appearance

Orders

1. That the husband’s application for interim property orders be dismissed.

2. That costs of such application reserved to final hearing.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Henton & Henton has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT PARRAMATTA

FILE NUMBER: PAC 1371  of 2018

Ms Henton

Applicant

And

Mr Henton

First Respondent

And

B Bank

Second Respondent

REASONS FOR JUDGMENT

1. In the present interim application the husband seeks an order for sale of the parties’ jointly owned matrimonial home at Suburb C in circumstances where the wife has remained in occupation of the property since separation in January 2018 and where mortgage payments due and payable to the mortgagee the B Bank were in arrears by about $48,000 as at November 2019. He seeks that from the net proceeds of sale each receive $20,000 and the balance be held in trust pending further order.

2. The wife seeks that the husband’s interim application be dismissed.

3. The B Bank, a party to the proceedings, did not wish to be heard in respect to the husband’s application and it appears at present that the bank has taken no steps to enforce a Notice of Default dated 12 November 2019 by seeking possession of the property or by seeking its sale.

4. The wife, the applicant in the primary proceedings, commenced proceedings for property settlement orders by Application filed 29 March 2018 in the Federal Circuit Court of Australia.  In that application she somewhat inelegantly seeks final property orders in the following terms:

   a)That the respondent pay 60 per cent of profit derived from the settlement of the properties and assets; and

   b)The respondent is held accountable for any other properties and assets he has sold and compensate the applicant for these properties.

5. In her further Amended Initiating Application filed 2 October 2019 the wife, more appropriately and having joined the B Bank in the proceedings, sought orders that, in summary, provided:

   a)That the mortgage in favour of the B Bank dated 8 May 2012 be set aside;

   b)That in the alternative there be a declaration that the wife is not liable to the B Bank in relation to the mortgage; and

   c)That the husband do all acts and things necessary to transfer to the wife unencumbered the property at Suburb C.

6. For his part, the husband in his Amended Response filed 30 October 2018 seeks, in summary, property orders that the funds on trust by the husband’s lawyers, representing the proceeds of sale of the home after discharge of the B Bank mortgages, be paid as to 50 per cent to the husband and 50 per cent to the wife.  

7. The proceedings remained in the Federal Circuit Court until they were transferred to this Court by order on 16 October 2019 with the present interim application still unresolved after 19 months in that court.

8. In the present application the husband relies on:

   a)His Amended Response filed 30 October 2018;

   b)His affidavit filed 27 March 2019;

   c)His affidavit filed 11 October 2019;

   d)His affidavit filed 21 February 2020; and

   e)His Financial Statement filed 2 April 2019.

9. The wife relied on:

   a)Her further Amended Initiating Application filed 2 October 2019;

   b)Her affidavit filed 28 October 2019;

   c)Her affidavit filed 25 February 2020; and

   d)Her Financial Statement filed 29 March 2018.

Context

1. The husband is aged 74 and in receipt of the aged pension and the wife 59.

2. The parties married in Country D in December 1988 and commenced cohabitation in March 1989.

3. There is one child of the marriage Ms E born in 1998 and now aged 22. The wife remained out of the work force from 1997 shortly before the birth of the child. The husband thereafter was the sole income earner in the household.

4. The parties initially lived in rented premises and in 1991 purchased a home unit at Suburb F.

5. In early 1999 the parties jointly purchased the home at Suburb C with the purchase price of $330,000 comprising mostly a mortgage advance from the G Bank with security being taken over both the home and the home unit.

6. It is the wife’s understanding that the Suburb F unit was later sold in 2001 for $176,000 as evidenced by the transfer of that date.  The wife asserts that $60,000 was paid into the parties’ account at this time. The mortgage over the home was in July 2002 refinanced with the mortgagee being the Westpac Bank in the sum of $325,000.

7. The wife asserts that during the marriage four investment properties were bought and sold. She asserts that she signed no documents in relation to them, the inference being that they were in the husband’s name.  She has no knowledge of the transactions related to these properties nor does she recall signing any documents. Regrettably, the wife’s solicitors undertook no searches as to acquisition or sale of any such properties in the name of the husband or his co-accused referred to below.

8. In late 2014 and in early 2016 the husband purchased two motor vehicles for a total of $250,000 with the purchase funded by H Vehicle Finance. In September 2018 the husband defaulted under the two loans. The vehicles were later surrendered and sold with funds still owing totalling about $92,000.

9. In June 2016 the wife found that the home at Suburb C had been refinanced with the B Bank in 2012 with the Westpac Bank mortgage being discharged in March 2012. A fresh mortgage was secured in favour of the B Bank securing the sum of $408,000. At the time of the refinance the Westpac Bank home loan had an outstanding balance of $220,000. The application for finance with the B Bank sought funds to payout the home loan, $30,000 for home improvements and $100,000 for property investment, totalling $350,000.

10. The B Bank ultimately approved loans totalling $400,000 being a home loan facility of $250,000 and an Equity Facility of $150,000. Bank documents refer to the existence of a second property at J Street, Sydney.

11. The wife asserts that she signed no documents relating to the refinance. A forensic examiner has expressed the opinion that B Bank documents were not signed by the wife.

12. The parties separated in January 2018 and the wife and adult child have remained in the home. The husband moved to rental accommodation.

13. Subsequent to separation, mortgage payments went into default as referred to above.

14. In June 2018 the wife made complaint to the B Bank alleging that funds had been borrowed by the husband fraudulently without her knowledge and consent. This complaint relates to the present two mortgages secured over the home. Although notwithstanding the allegation of fraud, part of the B Bank advance simply paid out the then home loan balance of about $220,000.

15. As at March 2019 the total mortgage liability to B Bank was about $400,000 including arrears. The husband as at that time asserted credit card liabilities of $60,000, a personal loan obligation of about $38,000 and a Local Court judgment liability of $223,000 owing to the Liquidator of K Pty Ltd.

16. In early 2018 the husband was charged by NSW Police with “Dishonestly Obtaining Financial Advantage by Deception”. The husband pleaded guilty to conduct whereby he fraudulently paid to himself from September 2011 and October 2017 a total of $223,000 from his then employer K Pty Ltd accounts. The husband’s co-accused had misappropriated about $221,000 to herself. The husband was sentenced to 12 months imprisonment suspended on condition that the husband be of good behaviour. The husband represented to the sentencing Judge that restitution would be made from his family law property settlement.

17. The husband’s co-accused Ms L was also employed at K Pty Ltd and the wife asserts that the husband was in a relationship with her from 2000 to 2018. Their interactions are likely to be the subject of evidence at a final trial. The husband proffers no evidence as to what he and his co-accused did with the misappropriated funds.

18. The wife has little work skills and complains that in the event that the property is sold she would be put to the expenses of relocating.

19. Clearly, in the event of a sale the wife would need to be put in funds to live and relocate appropriately.

Interim Property

1. The principles as to applications for interim property provision are well settled, (Strahan & Strahan [2009] FamCAFC 166) and require a two-step process.

2. In Strahan (supra), the Full Court said:

   132.In relation to the first stage, in our view, when considering whether to exercise the power under s 79 and s 80(1)(h) of the Act to make an interim property order the “overarching consideration” is the interests of justice. It is not necessary to establish compelling circumstances. All that is required is that in the circumstances it is appropriate to exercise the power. In exercising the wide and unfettered discretion conferred by the power to make such an order, regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

3. Firstly, there must be circumstances enlivening the power to make an interim order. The test is not limited to “compelling circumstances” but whether it would be “appropriate” to make an interim order, with the “overarching consideration” being the interests of justice.

4. Secondly, the Court is to have regard to relevant matters in s 79 of the Family Law Act 1975 (Cth) (“the Act”). It needs to be kept in mind that the final outcome of property settlement should not be compromised by an interim property order. Either the remaining property needs to be adequate to meet the legitimate expectations of both parties at the final hearing or the order that is contemplated needs to be capable of being reversed or adjusted if it is subsequently considered necessary to do so.

5. A detailed inquiry is not required, but there must be some assessment of s 79 factors.

6. In Strahan the Full Court went on to say:

   137.Once a court proceeds to exercise the power in s 79 of the Act, being in the substantive phase, a court is required to undertake consideration of the matters in s 79(4) including by reference to s 79(4)(e) the matters in s 75(2) so far as they are relevant. However consideration of such matters may be brief and if it is established that “it seems likely to the Court that ... the applicant ... will be likely receive by way of property settlement a sum sufficient to cover the advance, that would seem to be sufficient to enable the order sought to be made”: Zschokke; Polletti and Polletti per Nygh J and Wenz v Archer. As senior counsel for the Wife submitted, “provided scope can be found within the assets of the parties for an order of the size sought ... then that should be the end of the matter”. In other words, in such circumstances the applicant would only be receiving what he or she was entitled to receive when the power was exhausted.

   138.The legislation does not prescribe what the Full Court in Zschokke at 83,218 described as “preconditions” and nor would we seek to exhaustively prescribe matters that may be relevant to take into account in the exercise of the discretion under s 80(1)(h) of the Act. As to the three “criteria” identified by the Full Court in Zschokke, we accept that an inability on the part of an applicant for an interim property order to defray the costs of litigation to meet his or her litigation costs would be a relevant matter to take into account at the procedural or first stage. Senior counsel for the Wife submitted that it may be relevant at the substantive or second phase in reviewing the “necessarily limited and impressionistic budget for costs” to ensure that the application is bona fide. We are of the view that it may be that any issue about the bona fides of an application is relevant at the procedural phase in the context of considering if in the interests of justice it is appropriate to make an order before the final hearing.

   139.We also emphasise that in order to establish an appropriate case for an interim property settlement order more is required than the mere fact that upon a final hearing the applicant would receive the property being sought (or an amount in excess of the funds being sought) from the other party.

   140.As to the other matters being a position of relative financial strength on the part of the respondent to an application and the capacity of the respondent to meet his or her own litigation costs, there is no doubt that the financial circumstances of both parties are relevant at the substantive stage and may also be relevant at the procedural stage. Senior counsel for the Wife submitted that all of the matters discussed by the Full Court in Zschokke are self-evident and we accept that this is so in relation to at least two of the matters being the need for funds and the financial circumstances of both parties.

   141.As to the various matters discussed by Brereton J in Paris King Investments which we have discussed above, we do not propose to deal with all of what his Honour said, however we make the following observations about some of the matters. Obviously the applicant should have “at least an arguable case for substantive relief which deserves to be heard”. Further, in determining at the procedural stage whether to exercise the jurisdiction there may need to be evidence of the applicant’s “likely costs of the litigation” given that the need for funds to defray litigation costs and expenses is the circumstance propounded as to why it is appropriate that an order be made. We also accept that “it is not an essential precondition” that the applicant’s legal representatives will not continue to act unless the costs are paid or secured on an ongoing basis.

7. It is important to have regard to an overall caution. In Harris & Harris (1993) FLC 92-378, the Full Court said:

   As a generality, the interests of the parties and the Court are better served by there being one final hearing of s 79 proceedings.

8. In Strahan (supra), the Full Court said at [132]:

   … regard should be had to the fact that the usual order pursuant to s 79 is a once and for all order made after a final hearing.

9. It is now well settled that in property cases the Court must identify the existing legal and equitable interests of the parties in the property, the liabilities and financial resources of the parties at the time of the hearing and then determine whether it is just and equitable to make a property settlement order.  Such a consideration should not be guided by an assumption that the parties’ rights to, or interests in, property are, or should be, different from those that then exist. The question is whether those rights and interests should be altered or adjusted.

10. Both parties seek disparate property orders in relation to the major asset of the marriage that stands in joint names. It is appropriate that the jurisdiction under s 79 is enlivened.

11. There is nothing before the Court that would suggest that contributions overall by the parties should be other than equal. The real issue is what actually comprises the final pool after evidence. Otherwise, the subjective needs of the parties will need to be determined.  It must be said that at the moment the final outcome is shrouded in doubt.

12. The property pool of the parties at least as is presently known and subject to the discussion above is set out in the draft joint balance sheet Exh “C”. Primarily, the pool comprises the home with an estimated value of $1,200,000 with secured debt of about $411,000. Otherwise, the liabilities comprise of motor vehicle debts referred to above and a raft of debts owed by the husband with no evidence that they are matrimonial in nature such that the wife should bear any liability therefore. As at March 2018 the wife has superannuation of about $6,500 with the husband at hearing disclosing no superannuation.

13. The position of the B Bank is perplexing. It has a mortgage liability in significant default, yet neither supports nor opposes any orders as sought by the parties.

14. The wife has no demonstrated capacity to acquire the husband’s interest in the home nor does she contend such capacity. Clearly, part of the B Bank refinanced in 2012 was the then home loan as to which the wife can have no complaint in a financial sense. That home loan has a present balance of about $245,000.

15. The property remaining as is will simply see the equity gradually depleted as the mortgage balances continue to increase. That risk is a matter for the wife who seeks to retain the property.

16. Importantly, final trial directions were made on 28 February 2020 with the matter listed for readiness callover in late May 2020 with prospective hearing dates about four months thereafter in late 2020.

17. The B Bank is a party and should it move to realise its security it will need to make application to this Court as its security is being impugned in these proceedings. Should it do so, any application for sale would be difficult to resist provided that significant net proceeds remained undistributed to be able to meet the wife’s claim.

18. It is not appropriate to make interim property orders. The husband’s interim application will be dismissed. Costs of the application will be reserved to final trial.

I certify that the preceding forty six (46) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Foster delivered on 17 April 2020.

Associate: 

Date:  17 April 2020