Munoz and Xavier and Ors

[2017] FamCA 1122

FAMILY COURT OF AUSTRALIA

MUNOZ & XAVIER AND ORS [2017] FamCA 1122

FAMILY LAW – PROPERTY – Where the husband seeks orders against the wife, the parties’ daughter, the wife’s mother and the trustee of the superannuation fund to restrain them from selling or encumbering property or artwork held within a superannuation fund – Where the wife, the wife’s mother and the trustee of the superannuation fund are not present in Court – Where the husband also seeks orders restraining two companies (including the trustee for the superannuation fund) from removing him as a director, transferring shares, amending the constitution, resigning as trustee or winding up the company – Where the Court does not regulate superannuation funds – Where the ultimate issue relates to the disbursement of the assets of the fund between members – Where the husband is concerned that if the assets are sold the wife will retain or misappropriate the funds – Where the husband is concerned that the proceeds will not be protected from creditors – Where the Court cannot change the rights of creditors –Where the husband and wife are unable to be cooperatively involved in the sale of the assets – Where the assets are to be sold provided the proceeds are paid into the bank account of the superannuation fund with restraints placed on disbursing these funds.

Family Law Act 1975 (Cth) ss 79, 106B, 114
Superannuation Industry (Supervision) Regulations 1994 (Cth)

APPLICANT: Mr Munoz

RESPONDENT: Ms B Xavier

SECOND RESPONDENT: Ms M Xavier

THIRD RESPONDENT: Ms Munoz

THIRD PARTY: Xavier Pty Limited

FILE NUMBER: SYC 5198 of 2010

DATE DELIVERED: 1 December 2017

PLACE DELIVERED: Sydney

PLACE HEARD: Sydney

JUDGMENT OF: Loughnan J

HEARING DATE: 1 December 2017

REPRESENTATION

APPLICANT HUSBAND: Mr Munoz appeared in person

RESPONDENT WIFE: No appearance

SECOND RESPONDENT: No appearance

THIRD RESPONDENT:	Ms J Munoz appeared in person
THIRD PARTY	No appearance

Orders

1. The proceedings are adjourned and leave is granted to any party or any person affected by the proceedings to restore the proceedings to the list on giving seven days’ notice to the Court and each other party.

2. In the event that substantive orders are sought in relation to that leave, the leave is to be exercised by the filing of an Application in a Case supported by an affidavit.

3. Of the Court’s own motion, it is ordered that the wife, Ms M Xavier and Xavier Pty Limited as trustee for the C Pty Limited Pension Fund be restrained from disbursing the net proceeds of sale of the property at D Street, Suburb E in the State of New South Wales or of any artworks owned by the Pension Fund other than to pay those proceeds into the National Australia Bank BSB… Account No. …69 and to not further disburse those funds without the written consent of the wife, Ms M Xavier and the husband or an order of this Court.

4. This listing on 6 December 2017 before a Registrar is vacated.

NOTATION:

A.The Court notes that Order 3 has been made without notice to any of the persons restrained and that they are at liberty to restore the proceedings to the list on 24 hours’ notice in relation to that injunction.

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 Munoz & Xavier 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 SYDNEY

FILE NUMBER:  SYC 5198 of 2010

Mr Munoz

Applicant

And

Ms B Xavier

Respondent

And

Ms M Xavier
Second respondent

And

Ms Munoz
Third respondent

And

Xavier Pty Limited
Third party

REASONS FOR JUDGMENT

1. These are interlocutory proceedings, commenced by the husband, seeking injunctions in substantive proceedings between himself and the wife. He seeks orders in accordance with an Application in a Case filed 31 October 2017, that two companies (one of them a trustee of a superannuation fund) be restrained from:

   (a)taking steps to remove him as a director;

   (b)registering or giving effect to a transfer of his shares in the company;

   (c)taking steps to amend the constitution of the company;

   (d)resigning as trustee of the superannuation fund or substituting another trustee; and

   (e)resolving or winding up the company, including voluntary appointment of a liquidator. 

2. He also seeks orders against the wife, their daughter, Ms Munoz and the wife’s mother, Ms M in relation to:

   (a)selling or encumbering or further encumbering, a property at D Street, Suburb E (“the Suburb E property”) without his consent;

   (b)selling, assigning or further encumbering any assets, including artworks by some named artists, owned by the superannuation fund, except with his written consent or by an order; and

   (c)withdrawing any amount from a bank account with the National Australia Bank (“NAB”) at Suburb F, being an account of the fund. 

3. Those orders were expressed to be orders sought pursuant to s 106B of the Family Law Act 1975 (Cth) (“the Act”), which I do not really understand.

4. Making the best of it – I think they are orders sought by way of injunction, in aid of a case the husband wants to make in respect of property settlement proceedings. The wife filed a Response on 8 November 2017 seeking that:

   (a)the husband’s Application be summarily dismissed, with no order as to costs;

   (b)she sought orders under s 79 of the Act for the sale of the Suburb E property;

   (c)for the net proceeds of sale to be paid into the nominated NAB account;

   (d)for the sale of the same artworks and for the proceeds of that sale to be paid into that account; and

   (e)for the balance of the account to be disbursed to industry superannuation funds accounts of the members of the superannuation fund in the proportions 84 per cent to her and 16 per cent to the husband.

5. The parties have filed some affidavits and it is apparent that I have come late to a very sad and long-running story. I do not have a full set of documents, but it appears by way of background that the husband and the wife are 64 and 59 years of age, respectively. They were married in 1986, separated in August or September 2009, and their divorce was granted on 18 March 2011. They have two adult daughters, Ms Munoz, who is a party to these proceedings, and Ms G Munoz. The wife’s mother, Ms M Xavier, is also a party to the proceedings, but, from things that have been said, it is possible that she has is under a disability.

6. The husband and the wife are both employed in  professional occupations. The wife says that she worked in her own business or as a consultant until late 2002. The wife and husband are directors of the trustee company, which is the trustee of a pension fund, which is the self-managed superannuation fund of the husband and the wife.

7. The shareholders of the trustee company are the husband as to three shares, the wife as to three shares, and the wife’s mother, Ms M Xavier, as to one share. The assets of the superannuation fund are the Suburb E property, some artworks and cash at bank. The husband says the artworks are worth $350,000, and the wife says $39,400. The cash at bank is about $37,000 and the Suburb E property is thought to have a value of $650,000.

8. On 9 October 2017, the husband and wife received a letter from Ms M Xavier, asking them to call a meeting of the trustee company to vote on a resolution that the husband be removed as director, because of irreconcilable differences between himself and the wife and because of him having received improper benefits from the Suburb E property over the years.

9. It is common ground that the husband and wife have been engaged in bitter litigation since 2010. Their daughter, Ms Munoz, is a party because both her parents allege that she removed $800,000, or some part of that sum, from an account.

10. On 5 October 2017, Ms Munoz sent an email to the effect that she did not steal $800,000 but removed a lesser sum and placed it offshore and out of the husband’s reach. She purportedly did that because she asserts that the fund belonged to her grandmother, Ms M Xavier, and that she, Ms Munoz, had the right to do that under a power of attorney executed by her grandmother. It is common ground that some years ago Ms M Xavier lent the parties $800,000 to assist with property development.

11. The husband contends that the money lent by Ms M Xavier to the parties was mostly lost in building a duplex at J Street, Suburb K, three legal cases involving builders and consultants and private school fees for the daughters of the husband and wife, as well as some living expenses.

12. The husband contends that, if the injunctions are not granted, the superannuation assets will be sold, and the proceeds will be exposed to creditors. As to those creditors he nominates the St George Bank as to $1.2 million, Ms L as to $300,000, N School as to $17,000 and the Australian Taxation Office (“ATO”) as to $87,000. He is otherwise concerned that the funds will be dissipated or removed from Australia in order to defeat his claims under s 79.

13. The wife says she brought to the marriage a business with premises at Suburb O that those premises were sold and the proceeds were used to buy larger premises at Suburb P. She contends that the husband made no contribution to either property. She agrees about the trustee company and the shareholding. She agrees about the assets of the fund, noting the difference in her valuation of the artworks. She says that the superannuation fund has member accounts that are held as to 84 per cent to her and 16 per cent to the husband, and in that regard she refers to a copy of accounts that the husband has annexed to his affidavit.

14. On 28 August 2017, the husband proposed conditions for the sale of the Suburb E property. On 14 September 2017, he suggested that the property be painted before sale. Through an agent he obtained a quote of $1,280 for that work. On 15 September 2017, Ms Munoz communicated the wife’s agreement to that quote to the agent. The husband subsequently reneged on the agreement to sell the property. On 5 October 2017, the agent terminated his role with the property, citing as his reason the impasse between the directors, the husband and the wife. On 6 October 2017, Ms Munoz communicated to the husband the wife’s insistence that the property not be re-leased. The lease had come to an end, and the communication was he was not to cause it to be leased again. On 9 October 2017, the husband told the wife that he had re-leased the property, and the argument on behalf of the wife is that he sought thereby to frustrate the sale of the property.

15. The wife is concerned that the husband has rendered the superannuation fund noncompliant. She says that he has done that, among other things, by:

    (a)failing to lease all of the Suburb E property, reserving a store room and a lock up garage, and using those for his own storage purposes;

    (b)that he directly accessed the fund’s bank accounts; and

    (c)that he was responsible for a raft of other superannuation industry regulation misdemeanours.

16. The husband deposed that he saw Ms Munoz’s partner with a firearm in May 2017. The police obtained an Apprehended Violence Order (“AVO”) against Ms Munoz on 26 October 2017. Ms Munoz’s partner has provided an affidavit. He says that he has never owned a firearm, and he speculates that the husband’s intention was to interfere with Ms Munoz attending the company meeting that had been called for 31 October 2017.

17. The wife says that her mother was convinced to call a meeting of the company, and because Ms Munoz could not attend, her partner attended the meeting as proxy for Ms M Xavier or the wife. The meeting proceeded to remove the husband as director. Ms Munoz has notified the ATO and ASIC. She has also written to the tenants of the Suburb E property, warning them about a plan to sell the property. 

18. The wife says that she understands that the husband sold assets from his business in 2012 for $250,000 without informing or accounting to her. She says that in 2002, the family investment company, Q Pty Ltd, bought J Street, Suburb K, that her mother lent the parties $800,000 under a deed of agreement. She says that the loan funds were used to buy R Street, Suburb S for $750,000, that the parties spent $400,000 to rent the property, and that it ultimately sold for $2,100,000, making for Q Pty Ltd a $1.2 million profit.

19. She says that her mother was not repaid her advance. There was a further property bought at Suburb T for $900,000. It was renovated and sold for $1.28 million. Despite those two sales, Ms M Xavier was not repaid but some moneys were put in trust or put aside against the obligation, the wife would say, that the parties had to Ms M Xavier.

20. The wife says that after these proceedings started, she discovered that the funds held in trust for Ms M Xavier were missing. She says that she and her daughter Ms Munoz were estranged for about two years, the inference being that Ms Munoz took the funds. 

21. The wife and her younger daughter, as I understand it, are living with her mother, Ms M Xavier, and their living expenses, among other expenses, have been subsidised by a borrowing – in effect, a reverse mortgage on Ms M Xavier’s property. The amount of $290,000 is owing to U Bank in relation to that.

22. The wife says that she and her daughter Ms Munoz have both been stressed and hospitalised in relation to the problems associated with these proceedings. She contends at paragraphs 93 to 114 of her affidavit that the husband misappropriated a total of $2 million in matrimonial funds between 2004 and 2009. That was during the marriage. 

23. The husband and wife owned a property at 2/J Street, Suburb K (“2 J Street”). At separation, Ms L owned 1/J Street, Suburb K (“1 J Street”). The wife prepared to sell 1 J Street , and Ms L complained about an illegal attic in the property, saying that she should be compensated or that the attic be removed. By July 2011, Ms L had orders from a civil tribunal and requirements from the V Council that the attic had to be removed. The husband and the wife agreed to take action in the New South Wales Supreme Court to block those orders.

24. I gather that the mortgagee took action. The husband agreed to sell the property and then reneged on the agreement, says the wife, and ultimately the property was voluntarily surrendered to the mortgagee in June of 2013. Then the wife and Ms G Munoz moved into Ms M Xavier’s apartment.

25. There was litigation in the New South Wales Supreme Court in 2015 with Westpac. Ms Munoz acted on the wife’s behalf under a power of attorney in those proceedings. She has also represented the wife at times under that power of attorney in respect of a trustee company. Her partner, Mr X, is a lawyer, and he has assisted in respect of the superannuation fund.

26. The parties have not provided evidence of the foundation of their property settlement case. There is reference in the husband’s affidavit to a deed being entered between husband and wife. I gather whatever one might say about that, it is contended by at least one of the husband and the wife that they have not concluded a settlement of property. 

27. Turning to the issues before the Court today. Today, there is no appearance by or on behalf of Ms M Xavier, and there is no appearance by or on behalf of the wife. Ms Munoz understands that Ms M Xavier is unwell. She had been in hospital or rehabilitation, had returned home, and has now gone back into a hospital. The wife is assisting her, and that is why she is not at Court.

28. What can be done today? The Court’s power under s 114 of the Act is to make a proper order. One would need to be satisfied that there is a strong prima facie case for the relief that is sought to be protected, and then the Court could make an order by way of injunction to restrain the conduct.

29. I spent much of today in a very frustrating dialogue, or perhaps a series of monologues with the husband, trying to understand why he wanted to interfere with the sale of the Suburb E property and the artworks. The only answer he could give me was that he wanted to retain the proceeds of those assets, and he did not want his wife to retain them or to misappropriate them.

30. He says in his affidavit that he is concerned to protect the proceeds from the creditors. I cannot change the rights of those creditors. Either those assets are vulnerable to creditors, or they are not. In my view, there is nothing about realising the Suburb E property or the artworks that changes the rights of creditors in relation to them. To be less oblique about it, if those assets are protected because they are assets of a superannuation fund, then they will be protected whether they are in specie or in cash.

31. Ultimately, the husband said he would agree to the assets being sold, provided that – this was my suggestion –the proceeds of sale after the costs of sale are paid into the NAB account of the fund. Then he withdrew that concession and said that he wanted some other things, including that he have a say in the reserve price of either the artworks and/or the Suburb E property, that he be able to attend at the auctions and that certain specified payments (I think he mentioned something about the ATO) be made out of the net proceeds of sale. 

32. The problem with those things is that the wife is not here and therefore I cannot impose those conditions on her. It is obvious that the husband and wife cannot possibly be cooperatively involved in any venture. The last time it is asserted they cooperated was in relation to them taking proceedings in the New South Wales Supreme Court to frustrate Ms L’s efforts, and that did not work out well. It is a nonsense to suggest that they could have any role together in a sale that was likely to achieve anything other than more litigation.

33. Therefore it is not possible to make orders about those sales, even though they would appear to be in the interests of both the husband and the wife.

34. Otherwise there are allegations of fraud reaching back into the marriage and since the marriage. There are inconsistent allegations about conduct in respect of the superannuation fund assets, each of the husband and the wife making reciprocal allegations about the other having the carriage of either the assets of the fund or the fund itself. There are allegations that funds were misappropriated, that accounts were not taken, that tax returns were not completed, and as I referred to earlier, that the Suburb E property was not used in accordance with the requirements of the Superannuation Industry (Supervision) Regulations 1994 (Cth).

35. There is no evidence before me today as to what that means. I am not sure whether the fund being noncompliant has any effect on the assets of the fund beyond taxation effects. It will certainly have that. I would imagine if the fund is not compliant, then there will be a substantial bill from the tax office in relation to any latitude the parties had in respect of income, for example, for the leasing of the Suburb E property. I have no idea what that income was. I have no idea what the tax might be. I think there is a significant concession in relation to the earnings of a compliant fund, and it might be that the parties are exposed to a more normal tax rate and perhaps even penalties. I am not sure.

36. It is possible that the fund being non-compliant means that the assets lose their protection from other creditors. I am not sure about that, either. But as to the application the husband makes, he does not have a strong prima facie case. He does not have a principled argument for stopping the assets of the fund being sold. He too wants the assets realised. He agreed to that at an earlier time, so it is a nonsense to say that he was opposing the sale per se. 

1. What he was really opposing – and that was revealed in his submissions – was his ex-wife receiving any or all of the proceeds of sale. It is not practicable to sell real property immediately, so there is likely to be time to worry about the fate of the sale proceeds. I imagine that the other parties would agree that the Suburb E property cannot be efficiently sold before Christmas. There will be issues about when it can be adequately marketed, what work has to be done to it and so on.

2. The husband is worried that the artworks will be sold under-value. At various times there have been proposals for a formal valuation of the artworks. Again, the problem is I do not have the wife here and in my view I should not lightly interfere with the decision of the company. A decision has been made by the trustee company, apparently on a sound basis for the removal of a director. There was gridlock between the directors of the company. The company has made a decision about the sale of assets. Although the husband said he opposed the sale that is far from clear. Therefore there is no basis for interfering with the decision made by the company.

3. Beyond that, it has proved impossible to reach an agreed position about the preservation of the proceeds of sale.

4. As to the orders sought by the wife, she is not here to press them. However, she does not need the Court’s permission for any of the orders except for the last one. This Court does not regulate superannuation funds. A decision has been made by the fund to do the things that she wants permission to do in the orders. The only order that is controversial is a final order, not an interim order, and that is for the ultimate disbursement of the net proceeds of the assets fund between the members. That order cannot be made at this stage.

5. To keep the peace, the sensible course would be to restrain the disposition of any sale proceeds other than to apply them to the bank account of the fund, unless there is the written consent of the directors of the fund and the husband until further order. That might keep the peace and allow the parties to think of what might happen next. 

6. In the long term, as I have tried to explain to the husband today, this Court’s role is to change interests in property. It is not clear that the husband and the wife have any net property. If they do not have any net property, this Court will have final role to play. The husband says that he wants to prosecute fraud allegations in relation to his ex-wife. She makes a raft of allegations against him. I do not think she wants to prosecute them anywhere. She just wants the thing over. They are issues for another jurisdiction.

7. Sometimes, the Court might exclude some debts for the purposes of establishing a pool for division. However, at the end of the day, a division can only be effectively made out of assets. It is no use dividing assets that do not exist. I am concerned that there may be no net assets here and the parties are just causing themselves terrible misery, involving the wife’s mother, involving the parties’ daughter, all to no avail. But that is a matter for another day.

I certify that the preceding forty-three (43) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Loughnan delivered on 1 December 2017.

Associate: 

Date:  9 January 2018