Munstermann v Rayward; Rayward v Munstermann (No 2)
[2017] NSWSC 455
•31 March 2017
Supreme Court
New South Wales
Medium Neutral Citation: Munstermann v Rayward; Rayward v Munstermann (No 2) [2017] NSWSC 455 Hearing dates: 31 March 2017 Decision date: 31 March 2017 Jurisdiction: Equity Before: Stevenson J Decision: Final orders made, including that defendant repay loan account of $114,283
Catchwords: CORPORATIONS – oppression suit – first defendant to sell shares in third defendant to plaintiff – first defendant to repay loan account in third defendant – quantum of loan account – whether first defendant agreed that his FBT liability for use of car be debited to loan account Legislation Cited: Income Tax Assessment Act 1936 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133 Category: Consequential orders (other than Costs) Parties: Marcus Otto Munstermann (Plaintiff/First Cross-Defendant)
Mark Lindsay Rayward (First Defendant/Cross-Claimant)
Mazmark Industries Pty Limited (Second Defendant/Cross-Claimant)
QIA Group Pty Limited (Third Defendant/Third Cross-Defendant)
Fuseworx Pty Limited (Fourth Defendant/Second Cross-Defendant)Representation: Counsel:
Solicitors:
A S McGrath SC (Plaintiff, Fourth Defendant and Cross-Defendants)
D K L Raphael (First and Second Defendants and Cross-Claimants)
Henry Davis York (Plaintiff, Fourth Defendant and Cross-Defendants)
Etienne Lawyers (First and Second Defendants and Cross-Claimants)
File Number(s): SC 2015/339876
EX TEMPORE Judgment
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This is an oppression suit which, for the reasons set out in my judgment of 24 February 2017 (Munstermann v Rayward; Rayward v Munstermann [2017] NSWSC 133) I have determined in favour of the plaintiff, Mr Munstermann.
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I shall use the same abbreviations in these reasons as in that judgment.
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In that judgment, at [94], I indicated the effect of the orders that I proposed to make and said, at [95], that I would hear submissions as to the precise orders to be made.
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On a number of occasions since 24 February 2017, I have heard submissions about what those orders should be.
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Subject to what is set out below, agreement has now been reached as to the form of those orders.
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It is common ground that one of the orders must be that Mr Rayward repay to QIA the amount of his loan account. According to QIA's records, that amount is $114,283. Mr Rayward does not dispute that of that amount, he owes $82,241 and that sum must now be repaid.
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There has, however, been debited to Mr Rayward's loan account, two further amounts which are said to be for Fringe Benefits Tax for the years ended 30 June 2016 and 30 June 2017. Those two amounts bring the amount of the loan account to the figure I have mentioned.
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The FBT relates to Mr Rayward's use of a motor vehicle. Mr Rayward agrees that this motor vehicle must now be returned to QIA. This will be the subject of one of the orders to be made.
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Mr Rayward has agreed that the FBT that is owed by QIA in respect of his private use of the car should be added to his loan account.
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Thus, Mr Munstermann, in an affidavit sworn on 15 March 2017, gave evidence of the following conversation which he said took place between him, Mr Rayward and Mr Nikola Bilic, QIA's accountant, in November 2012:
“[Mr Bilic]: QIA is going to have to pay a large amount of FBT this year for private use of your company cars. The company pays this amount even though the usage is not work related. It is common that as directors, you agree to make a contribution to QIA for the FBT the company has to pay for your private use.
[Mr Rayward]: Ok.
[Mr Bilic]: You can each make that contribution by applying the amount to your loan accounts every year. If you’re happy with this arrangement, I will do that from now on?
[Mr Rayward]: Yep.
[Mr Munstermann]: Yes.”
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Mr Bilic gave a similar account in the affidavit to which I have referred.
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That evidence is not contested by Mr Rayward.
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Mr Raphael, who appeared for Mr Rayward, submitted that in fact, Mr Rayward's use of the car did not attract FBT, that no amounts should have been debited to Mr Rayward's loan account for FBT, and that Mr Bilic, was in error to the extent that he gave advice to QIA and to Messrs Munstermann and Rayward to the contrary.
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Mr Raphael advanced detailed submissions concerning the relevant provisions of the Income Tax Assessment Act1936 (Cth) and relevant authorities on this question, seeking leave to cross-examine Mr Bilic (who has sworn an affidavit of 22 March 2017, to which I will refer below) to establish, he said, that Mr Bilic had given incorrect advice to QIA on this question.
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I pressed Mr Raphael as to the implications that would follow if that matter were established. It emerged that what would be contended was that the agreement of November 2012 could thereby be impugned on some basis, perhaps because it was entered into as a result of a mistake by both Mr Rayward and Mr Munstermann as to a matter of law.
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I do not think it necessary or appropriate for me, in the course of working out the orders that should be made to give effect to my reasons of 24 February 2017, to embark on an enquiry as to whether the agreement of November 2012 should be impugned on any such basis; particularly in circumstances where there is no application before me to set aside that agreement.
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Accordingly, I refused to grant Mr Raphael leave to cross-examine Mr Bilic.
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Mr Rayward has agreed that his loan account be debited for the FBT and that should be, so far as I am concerned, the end of the matter.
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Mr Raphael submitted that it was unfair of Mr Munstermann to seek to agitate this matter when, Mr Raphael submitted, the matter had not been raised as an issue in the proceedings and he had not, thus, had an opportunity to cross-examine Mr Munstermann about that matter.
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However, the fact is that in the course of submissions as to what orders should be made to give effect to my reasons, the question of the proper matter of the loan account was raised as an issue.
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When this matter was before me on 22 March 2017, I expressed diffidence about engaging in what I feared might be a satellite dispute involving the loan account. Nonetheless, I was invited by both counsel, as part of my duty to endeavour to resolve the issues between the parties in a just, quick and cheap manner, to do the best I could to resolve the matter.
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The matter can be resolved by reference to the agreement made between Mr Munstermann and Mr Rayward in November 2012.
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My conclusion is that for the purpose of giving effect to my reasons, I should take the loan account to be in debit in the sum of $114,283.
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If Mr Rayward wishes to agitate any issue concerning the manner in which FBT has been dealt with in the books and accounts of QIA, then he can take separate proceedings to do so.
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I make the following orders:
By 6 April 2017, the first defendant and the second defendant do all such things and execute all such documents as are necessary to:
transfer their shares in the third defendant to the plaintiff;
cause the first defendant to resign as a director of the third defendant;
remove the first defendant as a signatory and/or authorised person to operate any accounts held by the third defendant with any bank or financial institution; and
pay to the third defendant by electronic funds transfer into the third defendant's bank account, BSB XXX, account XXX the first defendant's director's loan in the amount of $114,283.
By the end of the next business day after the first and second defendants have complied with order 1 above, the plaintiff pay $155,000 to the first defendant and the second defendant by electronic funds transfer into the first defendant's nominated bank account for the transfer of the shares referred to in Order 1(a).
By 6 April 2017, the first defendant deliver to the third defendant the following property of the third defendant:
motor vehicle Mazda CX9 registration number XXX; and
Samsung Galaxy S6 mobile telephone.
By 6 April 2017, the plaintiff and the third defendant do all such things and execute all such documents as are necessary to procure that the first defendant be removed as guarantor of any liability of the third defendant.
Liberty to apply on short notice, including for an order pursuant to r 40.8 of the Uniform Civil Procedure Rules 2005.
Order that the cross-summons be dismissed.
Order that the first and second defendants pay the costs of the plaintiff of the proceedings, including the cross-summons.
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Mr McGrath SC, who appeared for Mr Munstermann, stated that Mr Munstermann would seek a special costs order.
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In that regard, I make the following further orders:
Parties to confer and agree on a timetable for evidence and submissions in relation to any special order as to costs. Those short minutes to be sent by email to my Associate to be made in chambers.
Note the agreement between the parties that the question of any special costs order may be decided on the papers unless either party makes an application for an oral hearing.
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Decision last updated: 20 April 2017