Henton & Henton (No 2)
[2022] FedCFamC1F 655
Federal Circuit and Family Court of Australia
(DIVISION 1)
Henton & Henton (No 2) [2022] FedCFamC1F 655
File number(s): PAC 1371 of 2018 Judgment of: RIETHMULLER J Date of judgment: 2 September 2022 Catchwords: FAMILY LAW – PROPERTY – Property settlement – Long relationship – Add-backs of legal fees – Whether debts will need to be repaid in full – No matters of principle. Legislation: Family Law Act 1975 (Cth) s 79 Cases cited: Benson & Drury (2020) FLC 93-998; [2020] FamCAFC 303
Henton & Henton [2022] FedCFamC1F 574
Kennon & Kennon (1997) FLC 92-757; [1997] FamCA 27
Division: Division 1 First Instance Number of paragraphs: 55 Date of hearing: 11–12 July 2022 Place: Parramatta Counsel for the Applicant: Mr Shaw and Mr Moran Solicitor for the Applicant: Jameson Law The Respondent: Self-represented litigant ORDERS
PAC 1371 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS HENTON
Applicant
AND: MR HENTON
Respondent
order made by:
RIETHMULLER J
DATE OF ORDER:
2 September 2022
THE COURT ORDERS THAT:
1.The monies held in the Court trust account be paid:
(a)$202,309.12 to M Lawyers in payment of the husband’s legal fees; and
(b)The balance paid in equal shares to the applicant wife and respondent husband.
2.The parties do all things and sign all documents necessary to enable the Court to distribute the monies held in trust in accordance with Order 1.
3.The parties otherwise retain, to the exclusion of the other, the property in their possession and their entitlements in any bank accounts.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Henton & Henton (No 2) has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
RIETHMULLER J:
Introduction
The applicant wife seeks property settlement orders against the respondent husband pursuant to s 79 of the Family Law Act 1975 (Cth) following the breakdown of their marriage in 2018.
Background
The wife was born in 1960 in Country D and is currently 62 years of age. The wife grew up in Country D not attaining a full high school education before leaving school. The wife's first language is Language N, however she speaks some English, although does not have a high level of English language skills.
The husband was born in 1945 in Australia and is currently 76 years of age. The husband grew up in Australia and does not speak Language N.
The parties first met in 1988 at a time when the wife was running a women’s clothing store in Country D and the husband was working in the Australian public sector. The wife was introduced to the husband by her brother-in-law and a relationship ensued.
The parties were married in late 1988 at the Australian Embassy in Country D, following which the husband returned to Australia and the wife embarked upon the immigration process. The wife arrived in Australia in mid 1989 and began living with the husband in his rental apartment located in Sydney. The wife came to Australia with around $8,000 in cash and says she applied $5,000 of that towards the credit card debt of the husband.
When the wife first arrived in Australia her English skills were "extremely limited" and she was dependent upon the husband in her first few years living in Australia. However, the wife obtained employment in 1992 (a position found by the husband for her), and thereafter worked as a factory worker at Company O. The wife says that neither party had any significant assets at the time they were married. The husband was a union worker and had no significant assets at that time.
In 1990 the parties purchased a unit located at P Street, Suburb F (“the [Suburb F] property”). The wife says the Suburb F property was purchased with the assistance of a $100,000 mortgage from Q Bank. The wife is not aware of where the remaining deposit funds came from for the purchase of that property, although, presumably, it was saved from their incomes. The parties moved into the Suburb F property shortly thereafter.
In 1997, the wife fell pregnant with the parties’ only child, a daughter named Ms E, who is now in her mid-twenties and sharing a home unit with the parties and her boyfriend.
In 1998 the husband located a property located at Suburb C NSW and arranged to purchase it with a mortgage from Westpac Banking Corporation (“Westpac”). The wife explains that, at that time, she did not speak English and could not read English, therefore, relied upon the husband to arrange the paperwork required to purchase the property. In or around early 1999, the parties purchased the property located at R Street, Suburb C (“the [Suburb C] property”) for $310,000, borrowing the entire purchase funds and stamp duty by way of a mortgage from Westpac for $325,000. They moved into the Suburb C property after settlement.
In 1999, the parties sold the Suburb F property for a profit of approximately $60,000. Thereafter, in late 2002, a unit located at J Street, Sydney NSW (“the [J Street] property”) was purchased as an investment, and in 2003, another unit located at S Street, Suburb T (“the [Suburb T] property”) was purchased as an investment. As a result, at one point, the parties had two investment properties.
It appears that the husband attended to all of the financial arrangements for these properties. On the wife's case at trial, the husband provided her with little information and was abusive when she sought further explanation as to the documents, telling her to simply sign the documents.
Ultimately, the two investment properties were sold (the J Street property and the Suburb T property), and the moneys were applied to the benefit of the family (according to the husband). The wife's case at hearing was that she was unaware where the moneys from the sale of the J Street property and the Suburb T property were applied and that she is deeply suspicious of what the husband may have done with the money. However, there is no evidence of any other asset that was purchased by the husband, nor any evidence of the money being applied to some other purpose.
In 2012, the Westpac mortgage secured over the Suburb C property was refinanced by B Bank. The husband arranged for B Bank to advance funds to discharge the Westpac mortgage and to provide an equity loan. At that time, the mortgage outstanding to Westpac was around $220,000, and an equity loan facility of $150,000 was obtained. The husband says that the wife received monthly bank statements addressed to her personally from B Bank for the mortgage and the equity loan, and was aware of these transactions. He says that the funds in the equity loan were used for the family, including travel overseas and for their child to travel overseas during her high school certificate. The parties also paid for their child to attend a private high school. In addition, maintenance work was done on the Suburb C property, including installing a new kitchen and appliances.
The wife complains that during the relationship the husband spent excessive amounts on frivolous items, pointing to luxury motor vehicles that the parties owned, although, as the husband points out, they were purchased second-hand. The wife also alleges that the husband purchased designer clothing and received gifts from various foreign property developers as he was a ...
The wife implies that the husband was assisting property developers … The wife also sets out a considerable number of suspicions about the conduct of the husband with respect to finances, however, no evidence of inappropriate application of matrimonial funds has been provided.
From 2008 to 2017 the husband drew upon his superannuation, exhausting the $137,513.29 that was present in 2008. This all occurred during the course of the relationship in eight different tranches across the years.
At one point, the husband had commenced working in an educational organisation. It appears that over $400,000 was misappropriated from the organisation, conduct for which he and another employee were convicted of criminal offences. The husband received a good behaviour bond even though half of the money appears to have been deposited into his bank account and used by him. The husband says that he was unaware that this had occurred as he was receiving funds from his employment and from a government employee and, thus, did not notice the additional moneys. The result of the criminal law proceedings did not include a requirement that he repay any moneys to the educational organisation and, therefore, his defaults in this regard did not cost the family any of its assets and, if anything, this conduct enabled them to have the benefit of an extra $200,000.
It appears from the wife's affidavit filed 18 June 2020 that she became convinced that the husband was having an affair with the other charged employee and she remains deeply suspicious in this regard. There is no evidence of any financial transactions or property moving from the husband to the other person. The husband denies that there was any intimate relationship between him and the other person.
The wife claims that the husband, at one point, purchased an apartment at Suburb U NSW, although no evidence of such a purchase was placed before the Court. She also points to their daughter having purchased a unit in Suburb V NSW (“the [Suburb V] unit”), implying that it was obtained at a low price because it came through a property developer with which the husband was associated. Similarly, there is no evidence of this. The husband says that he advanced to the daughter $30,000 to $50,000 to use as a deposit and that she borrowed the rest of the funds needed to purchase the Suburb V unit. The Suburb V unit is subject to a mortgage in favour of Organisation W which does not appear to be a company registered in Australia. There is no evidence of this company having any close association or having any association with the husband. The wife also alleges that the husband may have an interest in two additional apartments but, again, there is no evidence of any actual ownership or ownership by a person that the husband is connected with.
The husband denies the various alleges of the wife with respect to property and maintains that the only property that he owns is that which is identified in the proceedings, namely, the matrimonial home at Suburb C (the Suburb C property) which has now been sold. On the evidence before the Court, I am not persuaded that there are any hidden assets on the part of the husband.
It transpired, however, at trial that the wife must have had in excess of $250,000 at her disposal as her disclosure, with respect to the payment of legal fees, showed that she had already paid legal fees in excess of $249,000 prior to the trial. During the period from separation in 2018 until trial, the wife had no income and lived in the Suburb C property on social security. The husband has, similarly, incurred significant legal fees, in excess of $200,000, however, they remain outstanding and were the subject of a caveat over the Suburb C property.
The wife identified that two of the signatures that appear on documents, with respect to the B Bank home loans, appear to be forgeries. She says that the signatures are clearly forgeries as they were dated on days when she was travelling in Country D in 2012, which she proved by production of her passport with the relevant Country D entry and exit stamps. The husband maintains that the wife did sign the B Bank loan documents, although, curiously, does not maintain that he was present with her when she signed them. The documents concerned are the B Bank loan application documents, which have been witnessed by a third person. The third person was not called to give evidence. The purpose of the B Bank loan was to refinance the Westpac mortgage that the parties had obtained to purchase the Suburb C property, together with a home equity loan of $150,000. On the evidence before me, and as discussed above, the home equity loan was utilised for the benefit of the family.
The total amount owing to B Bank remained less than half of the value of the Suburb C property. This presented the wife with a number of difficulties in challenging the B Bank documents, namely:
(a)Whilst she had evidence she was overseas at the time when some documents of the B Bank loan application documents were signed on a date in early 2012, she did not have evidence she was overseas at the time when the mortgages themselves were signed, nor do her signatures as they appear on the mortgages have an appearance that is significantly different to that of her normal signature (unlike the documents that appear to have been signed when she was overseas);
(b)B Bank obtained indefeasible title as a mortgagee upon the registration of the loan documents regardless of the fraud by the husband (if there were, in fact, a fraud);
(c)Even if there were a fraud and it, in some way, voided the mortgage documents with respect to the wife, they would remain a valid charge on the Suburb C property as the husband could not be seen as avoiding the liability under the documents which he had signed, particularly given that the liability remained less than the value of his 50 per cent share in the Suburb C property;
(d)To the extent that B Bank discharged the Westpac mortgage, they would be entitled to restitution from the wife as they discharged her debt to Westpac, which remained an undisputed debt;
(e)At best, the wife would have had a claim through the equity of exoneration to ensure that the borrowings from B Bank (to the extent they exceeded the amounts owing to Westpac) were taken from the husband’s half share of the Suburb C property. However, such an examination is entirely academic given that the parties’ property must be divided between them pursuant to s 79 of the Act in any event.
The result of the issues relating to the B Bank mortgage was that the wife persisted with her claims against B Bank through lengthy court proceedings, resulting in significant legal costs being incurred by B Bank up to the point when judgment was given in their favour in March earlier this year: see Henton & Henton [2022] FedCFamC1F 574. The costs that the parties incurred in this regard was in excess of $160,000. These moneys were entirely wasted in the circumstances of this case. These proceedings were pursued entirely by the wife.
The assets of the parties
At the time of trial, the Suburb C property had been sold and the B Bank mortgage debt paid, leaving net assets of the parties as a cash sum of $982,429.96.
The husband has debts that remain from the relationship (and I note that, in this regard, the wife did not seek to tender any documents to show what, if anything, had occurred between separation and the date of trial with respect to these debts, accepting that these debts were owing). The husband's debts amount to $334,812.
The net assets of the parties, after deducting the husband's debts, comes to $647,617.96.This figure, however, must be seen in light of the fact that the wife has already paid legal fees of $249,721 and that the husband's legal fees (in the sum of $202,309.12) remain outstanding (the wife has since incurred further legal fees that have not yet been paid). The net sale proceeds of the Suburb C property also reflects the fact that $165,530 was paid in legal fees to B Bank as a result of the dispute with respect to the mortgage.
It is the usual course that legal fees would be added back to identify a notional pool of property to ensure that the parties met their legal fees from their own share of the property. No addback in this regard is necessary with respect to the husband's legal fees as they have not yet been paid. The wife's paid legal fees ought to be added back to the notional pool.
If the wife's legal fees were added back, together with the moneys wasted on the B Bank proceedings, the total pool would have been $1,397,680.96, from which the husband's debts would need to be deducted, leaving a net notional pool of $1,062.868.96.
The B Bank legal fees fall into a different category from legal fees usually incurred in property settlement proceedings as the dispute with B Bank was prompted by the apparent false signatures of the wife on B Bank documents. It appears to me that although this part of the litigation was, in substance, a waste of resources of the parties and largely caused by the wife, it is not appropriate to simply add it back mathematically. Rather than adding these back to the notional pool of assets, I propose to take them into account pursuant to s 75(2) of the Act.
I, therefore, conclude that the total notional pool of assets available (excluding legal fees owing by the husband and adding back the legal fees paid by the wife) is as follows:
Description
Value
Sale proceeds from sale of the Suburb C property
$982,429.96
Addback for wife’s legal fees
$249,721
Husband’s debts
($334,812)
Total Notional Asset Pool
$897,338.96
Contributions
The contributions of the parties are extensive given that they were together for 30 years, both of them worked, and they raised their daughter. I am persuaded that the wife worked early in the marriage outside of the home and thereafter worked within the home as a homemaker and child-rearer. The husband also exercised his earning capacity outside of the home throughout the marriage.
Neither party brought any significant assets to the commencement of the relationship.
At trial, the wife still had $7,900 in a bank account, however, given the period of separation, it appears to me to be likely that that is funds that she has kept aside from her social security payments since separation in 2018 and, therefore, will not take it into account in identifying the value of the pool of assets.
Whilst the wife alleges that the husband was extravagant in his expenditure, it does not appear to be an expenditure of a type beyond the range of the lifestyles that couples choose when together. In this regard, it does not appear to me that an adjustment in favour of the wife should be made when assessing contributions.
The wife also complains that there was considerable domestic violence when the parties were together and that she was largely excluded from participating in the financial affairs of the parties as a couple. I have had the benefit of seeing both of the parties in Court, which, in this case, was particularly instructive. The husband represented himself and was prone to garrulous, if not angry, outbursts that were followed by lengthy tirades. The wife, although initially more restrained, similarly, was prone to outbursts from the back of the Court. I did not find either of them particularly impressive witnesses.
The husband admitted in cross-examination that, on one occasion, he slapped the wife as he believed that she was destroying paintings on the wall in the Suburb C property, but otherwise denied the wife's allegations of domestic violence.
I accept that the relationship between the parties was particularly volatile. I also accept that there was some degree of physical violence as admitted by the husband. The wife's description of this incident is as follows:
On another occasion, [Mr Henton] hit me so hard in the face that it left a large red mark, which immediately began swelling. It eventually turned into a bruise. During this incident, I said, "I'm going to call the police." At this, [Mr Henton]responded, "If you report me to the police, I'll lose my Job and I'll be destroyed. But if you do, I'm going to do something to you. You will be surprised about what I can do; I'll give you big things".
(Wife’s Affidavit filed 16 June 2020, paragraph 99)
However, in the lengthy section of the wife's affidavit filed 18 June 2020 dealing with domestic violence, there were some allegations of physical violence. The other allegations were largely concerned with events occurring in 2017 when the parties were separating, including one event where the wife fell on the road when she was trying to open the car door while the husband was refusing to stop and was leaving, and another where the husband pushed her in the chest. She says the husband pushed her in the chest during a cruise that they took together. The latter incident was said to have been reported to medical staff on board the cruise ship, and included being scratched by the husband. However, this was denied by the husband and no material was subpoenaed from the cruise ship with respect to any reports made by the wife to medical staff.
The dynamic between the parties in this case is clearly complex. To the extent that the wife alleges that the husband stopped her from having friends or connections outside the relationship, this does not appear to be sustainable on the evidence. In particular, there was evidence from the husband that the wife's sister had lived across the road from them for a period of time, her father had come out from Country D to stay with them, the wife had travelled back to Country D from time-to-time, the wife had undertaken recreational classes, and at least early in the relationship there were some connections with a church. Further, the husband gave evidence that he could produce photos of the wife with friends and family, to which the wife’s counsel called for, and that the husband subsequently produced by way of email to the associate after the conclusion of the trial.
I am ultimately not persuaded that the nature of the relationship was such as to make her contributions considerably more onerous: see Kennon & Kennon (1997) FLC 92-757 and Benson & Drury (2020) FLC 93-998.
Importantly, however, the wife had the use of the Suburb C property from separation (2018) until she left that property recently (June 2022) without paying rent or outgoings. Free use of a property that ultimately sold for $1,397,680.96 is a matter of considerable value. Whilst the Suburb C property was a property of the parties jointly, the result was that the husband did not have access to his share of the property, despite having significant debts, and thus this was a matter of real benefit to the wife.
Ultimately, when considering the case as a whole, I am persuaded that the parties' contributions should be assessed as equal.
Section 75(2) factors
In this case, the most significant factor to consider is the expenses caused through the dispute with B Bank. But for that prolonged dispute, the parties would have been around $165,000 better off (the legal fees of B Bank). The amount involved represents around 16 per cent of the parties’ pool of assets.
I accept that the lack of information on the part of the wife about financial matters, and the appearance of fraud with respect to at least some of the B Bank documents, reasonably led the wife to pursue claims with respect to the B Bank mortgage. However, it must have been apparent early on that she could not succeed in this regard. The pursuit of these claims for such a long time led to considerable wasted legal expenses on the part of the parties. Whilst I am not persuaded that the wife should bear the entirety of these costs, I am persuaded that it is appropriate to take into account a considerable proportion of these costs as being waste caused by the conduct of the wife in the litigation.
Both of the parties are older. Whilst the wife has not yet reached the age for aged pension entitlements, the wife's language skills and time out of the workforce make it unrealistic to consider that she would gain employment in the future. This is not disputed by the husband. The husband is in his late 70s and about to commence cancer treatment. It is unrealistic to expect that he will earn an income in the future.
Whilst the husband is somewhat older than the wife, and has some health difficulties, he is also likely to have greater financial needs as a result of his health issues into the future.
I am not persuaded that the life circumstances of the parties call for any adjustment in favour of one or the other pursuant to s 75(2) of the Act.
I, therefore, find that the husband should receive around 45 per cent of the notional assets of the parties and the wife 55 per cent.
Just and Equitable Outcome
In this case it is important to consider how such a split would appear in terms of the distribution of the assets of the parties given the complex nature of the history of the matter.
The husband’s former solicitor had a charge over the Suburb C property and released the charge to allow the sale. There is no dispute that they should be paid their fees from the husband’s share of the monies held on trust, and I will make such an order.
Distribution of Notional Asset Pool
Value
Wife’s 55 per cent share
$493,536.43
Husband’s 45 per cent share
$403,802.53
Total Notional Asset Pool
$897,338.96
Of a notional pool of $897,338.96, a division of 55 per cent to 45 per cent division in the wife’s favour, results in the wife receiving $493,536.43 of which the wife has already paid legal fees of $249,721, leaving her a cash amount of $243,815.43.
The husband would receive a total of $738,614.53, however would be left with $403,802.53 (after payment of his debts of $334,812) from which he must pay his current outstanding legal fees of $202,309.12, leaving him a net amount of $201,493.41.
At the hearing the husband submitted that he was content to receive 50 per cent of the current monies held on trust, after payment of his legal fees. This would see him receiving only $390,060.42 and the wife the same amount. Specifically, the husband said he would be content with the results of this distribution, and “deal” with his creditors. During his submissions, the husband stated that he saw this proposition to be “fair”. It appears clear that whilst the wife did not challenge the husband’s debts at trial, he is confident that he will not have to pay the entirety of those debts.
As the husband’s proposal is more generous to the wife than I would have otherwise ordered, I find that it is just and equitable to make orders for property settlement as sought by the husband in his submissions.
I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Riethmuller. Associate:
Dated: 2 September 2022
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