Xylander & Xylander

[2024] FedCFamC1F 550

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 1)

Xylander & Xylander [2024] FedCFamC1F 550

File number:

SYC 5938 of 2024

Judgment of:

AUSTIN J

Date of judgment:

19 August 2024

Catchwords:

FAMILY LAW – PROPERTY – Interim Application – Where the husband seeks an order to set aside a financial agreement – Where the financial agreement was procured by the wife unconscionably – Where the financial agreement is set aside – Where the husband seeks to set aside the transfer of the spouses’ property to the second respondent – Where the transfer of the property cannot be set aside when the property has since been sold to an innocent third party at arm’s length – Where the second respondent submitted to the injunctions sought against her by the husband – Where the three respondents submitted to disclosure orders sought against them by the husband – Orders made.

Legislation:

Family Law Act 1975 (Cth) Pt VIII, ss 90C, 90G, 90K, 106B

Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) r 6.27

Powers of Attorney Act 2003 (NSW) s 43

Division:

Division 1 First Instance

Number of paragraphs:

29

Date of hearing:

19 August 2024

Place:

Newcastle (via Microsoft Teams)

Counsel for the Applicant:

Mr Matthews

Solicitor for the Applicant:

John R Quinn & Co

Solicitor for the Respondents:

Mr Yakenian, Juris League

ORDERS

SYC 5938 of 2024

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)

BETWEEN:

MR XYLANDER

Applicant

AND:

MS XYLANDER

First Respondent

MS B XYLANDER

Second Respondent

MR C XYLANDER

Third Respondent

ORDER MADE BY:	AUSTIN J
DATE OF ORDER:	19 AUGUST 2024

THE COURT ORDERS THAT:

1.The Financial Agreement dated 2022, which purports to have been executed by the applicant, is set aside pursuant to s 90K of the Family Law Act 1975 (Cth).

2.The application by the applicant for relief under s 106B of the Family Law Act 1975 (Cth) is dismissed.

3.With the consent of the parties, it is ordered in accordance with the document signed by the parties and/or their legal representatives, dated 16 August 2024, which is marked Exhibit A and placed with the court file:

Proceeds of sale of Suburb D Property

3.1That the Second Respondent be restrained from dealing with the proceeds of sale of the Suburb D Property except with the written consent of the Applicant or as otherwise ordered by the Court.

3.2That within 48 hours of the date of these orders, the Second Respondent cause the proceeds of sale of the Suburb D Property to be paid into the trust account of John R. Quinn & Co Lawyers.

Disclosure

3.3That within 28 days the First Respondent provide to the Applicant the following documents by way of financial disclosure:

a.   Copies of the First Respondent’s individual taxation returns for the three most recent Financial Years.

b.   Statements for all bank and credit card accounts held in the name of the First Respondent or jointly with any other person, or in which the First Respondent has an interest for the period 1 July 2021 to date.

c.   Copies of all mortgage and/or loan agreements registered against the Suburb D Property in which the First Respondent has or had an interest for the period 2018 to date, together with applications for finance for such loans, including but not limited to the loans with the following lenders:

i.E Pty Ltd;

ii.F Pty Ltd; and

iii.G Pty Ltd.

d.   Statements for all mortgage and/or loan accounts registered against the Suburb D Property in which the First Respondent has an interest for the period 1 July 2021 to date.

e.   With respect to the company H Pty Ltd (trading as J Business, and K Business), of which the First Respondent was a director, copies of the following documents:

i.company taxation returns for the past 5 financial years;

ii.annual financial statements for the past 5 financial years;

a copy of the statements for each bank and/or credit card account held in the name(s) of the above entities for the past 36 months;

iii.the management accounts relating to the company including but not limited to the profit and loss account, the balance sheet and the general ledger and any loan account ledgers for last financial year.

3.4That within 28 days the Second Respondent provide to the Applicant the following documents by way of financial disclosure:

a.Copies of the Second Respondent’s individual taxation returns for the three most recent Financial Years.

b.   Statements for all bank and credit card accounts held in the name of the Second Respondent or jointly with any other person, or in which the Second Respondent has an interest for the period 1 July 2021 to date.

c.   Copies of all mortgage and/or loan agreements registered against the Suburb D Property in which the Second Respondent has or had an interest for the period 2018 to date, together with applications for finance for such loans, including but not limited to the loans with the following lenders:

i.E Pty Ltd;

ii.F Pty Ltd; and

iii.G Pty Ltd.

d.   Statements for all mortgage and/or loan accounts registered against the Suburb D Property in which the Second Respondent has an interest for the period 1 July 2021 to date.

e.   With respect to the Suburb D Property:

i.Copies of any lease on the property in which the Second Respondent has or had an interest;

ii.A copy of the contract for sale of the Suburb D Property;

iii.A copy of the settlement statement for the sale of the Suburb D Property sold by the Second Respondent in 2024.

f.    With respect to the Commonwealth Bank of Australia mortgage registered on the Suburb D Property in the name of the Second Respondent:

i.Copies of all statements for the period 2022 to date;

ii.Copies of the loan application together with all supporting documents;

iii.Copies of any correspondence between the Second Respondent and the Commonwealth Bank of Australia; and

iv.Copies of all documents relating to the discharge of the mortgage.

g.   In the event the Second Respondent has utilised or disposed of any of the proceeds of sale of the Suburb D Property, documentary evidence of how those funds have been applied.

h.   With respect to the company H Pty Ltd (trading as J Business, and K Business), of which the Second Respondent was a director, copies of the following documents:

i.company taxation returns for the past 5 financial years;

ii.annual financial statements for the past 5 financial years;

a copy of the statements for each bank and/or credit card account held in the name(s) of the above entities for the past 36 months;

iii.the management accounts relating to the company including but not limited to the profit and loss account, the balance sheet and the general ledger and any loan account ledgers for last financial year.

3.5That within 28 days the Third Respondent provide to the Applicant the following documents by way of financial disclosure:

a.   Copies of all documents executed by the Third Respondent under the Power of Attorney in 2020.

b.   Any and all correspondence between the Third Respondent and L Pty Ltd.

3.6[Intentionally Omitted]

4.The applicant shall file a typescript of Exhibit A within seven days.

5.Otherwise:

(a)the application for interim relief set out within the Initiating Application filed on 7 August 2024 is dismissed; and

(b)the application for final relief (comprising proposed final orders 2, 3 and 4) within the Initiating Application filed on 7 August 2024 is dismissed.

6.The residue of the proceeding (comprising proposed final orders 1, 5 and 6 within the Initiating Application filed on 7 August 2024) remains listed before the registrar on 2 September 2024 for further procedural directions.

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).

Part XIVB of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish an account of 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 Xylander & Xylander has been approved pursuant to subsection 114Q(2) of the Family Law Act 1975 (Cth).

EX TEMPORE
REASONS FOR JUDGMENT

AUSTIN J:

1. This proceeding comprises a financial cause between spouses under Pt VIII of the Family Law Act 1975 (Cth) (“the Act”), to which the applicant husband joined two of the spouses’ three adult children as the second and third respondents respectively. The wife is the first respondent.

2. The proceeding was instituted by the husband within the last few weeks and these reasons deal with his application for urgent relief.

   Background

3. The following chronological facts are taken from the husband’s affidavit, as his evidence was unchallenged.

4. The spouses lived for most of their married life in a home which they jointly purchased in 1978 (“the Suburb D Property”).[1]

   [1] Husband’s affidavit at [8], [17]

5. In 2018, a substantial loan given in favour of a corporation (“the corporation”) controlled by the wife and second respondent (the parties’ adult daughter) was secured by mortgage over the Suburb D Property.[2] The husband alleges he was unaware of the loan until late 2018, when he was served by a sheriff’s officer with a notice requiring him to vacate the property.[3] In 2019, the mortgagee commenced proceedings in the Supreme Court of NSW to exert its rights under the mortgage, which litigation the husband averted by drawing down on his superannuation interest to discharge the secured debt by the payment to the mortgagee.[4]

   [2] Husband’s affidavit at [21], [25], [26], [27], Annex H

   [3] Husband’s affidavit at [29]–[30]

   [4] Husband’s affidavit at [31]–[35], Annex I

6. In 2020 and 2022, two more loans granted in favour of the corporation were secured by mortgage over the Suburb D Property. The husband alleges he was unaware of those loans until 2023. He alleges those loans were facilitated by the third respondent (the parties’ adult son) signing the mortgages by using a forged power of attorney registered in 2020 (“the power of attorney”), supposedly authorising the third respondent to act on the husband’s behalf.[5] Soon after the husband learned of the power of attorney in 2024, he revoked it.[6]

   [5] Husband’s affidavit at [12h], [36]–[53], [78], [87]–[89], Annex D, J, K, L, M, N

   [6] Husband’s affidavit at [87], [90]

7. In 2022, a financial agreement (“the FA”) was supposedly executed by the spouses, reciting how they had separated shortly beforehand. In summary, the FA provided for the husband to pay the wife an agreed amount, for the spouses to transfer the Suburb D Property to the sole ownership of the second respondent, and for the spouses to otherwise retain their personal property and individual liability for their personal debts.[7]

   [7] Husband’s affidavit at [12b], Annex B

8. The husband alleges the FA was forged and that he neither signed nor received independent legal advice about it.[8] He alleges he did not even know of the FA until 2024. He alleges the FA was signed on his behalf by the third respondent in reliance upon the power of attorney.[9]

   [8] Husband’s affidavit at [12d], [71]

   [9] Husband’s affidavit at [12f], [12g], [69], [83], Annex D

9. The Suburb D Property was transferred to the second respondent pursuant to the terms of the FA very shortly after it was made, for no consideration, and was facilitated by the same solicitor who certified giving the husband independent advice about the FA.[10]

   [10] Husband’s affidavit at [12c], [12e], [54]–[58], Annex C

10. Almost immediately, the husband was served by an unknown person with a notice to vacate the Suburb D Property by late 2022,[11] which he duly did. Thereafter, the husband sought legal advice about his predicament,[12] though he did not institute this proceeding for another 18 months.

    [11] Husband’s affidavit at [9], [59], [63], Annex A

    [12] Husband’s affidavit at [11]

11. The Suburb D Property was sold by the second respondent in 2024.[13] At the request of the husband’s lawyers, the second respondent signed an undertaking not to dispose of the net proceeds of sale pending the disposition of this proceeding.[14]

    [13] Husband’s affidavit at [12j], Annex E

    [14] Husband’s affidavit at [12k], [12l], [94], [95], Annex F

12. All four parties have since moved into the same rental accommodation, the lease for which is in the wife’s name and for which the husband pays one-half the rent.[15]

    [15] Husband’s affidavit at [7], [92]

    Proposals and evidence

13. The husband sought the interlocutory relief set out within his Initiating Application. In summary, he wants:

    (a)a declaration the FA is not binding upon the spouses (Order 2);

    (b)alternatively, an order setting aside the FA pursuant to s 90K of the Act (Order 3);

    (c)an order setting aside the transfer of the Suburb D Property by the spouses to the second respondent in 2022 pursuant to s 106B of the Act (Order 4);

    (d)the restraint of the second respondent from dealing with the proceeds realised on the sale of the Suburb D Property (Order 5);

    (e)an order compelling the second respondent’s payment of the Suburb D Property sale proceeds into the husband’s solicitor’s trust account (Order 6);

    (f)orders compelling financial disclosure by the wife, second respondent and third respondent (Orders 7, 8 and 9);

    (g)permission for the husband to issue up to 10 subpoenas (Order 10); and

    (h)an order that the wife and respondents pay the husband’s costs of the interlocutory application (Order 12).

14. In support of his application, the applicant relies upon his affidavit (together with annexures thereto)[16] and financial statement, both filed on 31 July 2024.

    [16] Exhibit 1

15. The three respondents were duly served with the husband’s material.

16. By procedural orders made by the registrar on 7 August 2024, the respondents were obliged to file their Responses and supporting affidavits by 4.00 pm on Friday 16 August 2024, but they all failed to do so. Consequently, the husband’s application was undefended and his application was unchallenged.

17. At the hearing on Monday 19 August 2024, the parties proposed consent orders which only partially resolved the dispute. It was necessary to deal with the balance. As it transpired, that was easily done because of the absence of any contest.

    The FA

18. The FA purports to have been made by the spouses during their marriage pursuant to s 90C of the Act.

19. The FA could only be binding upon the spouses if it was signed by them (s 90G(1)(a)) and they independently received legal advice in respect of it (s 90G(1)(b)). The FA is not binding upon the spouses because, on the unchallenged evidence, the husband did not sign it and he was not legally advised about it.

20. The FA may be set aside if it was obtained by fraud (s 90K(1)(a)), it is void, voidable or unenforceable (ss 90K(1)(b) and 90KA), or a party to it acted unconscionably (s 90K(1)(e)). In this case, the FA was procured by the wife unconscionably, if not fraudulently, and it is void on account of it being a sham. It purports to be executed by the husband when it was not.

21. The FA is not saved by the third respondent’s execution of it, supposedly on the husband’s behalf, because the power of attorney under the authority of which he purported to act was itself forged and therefore a sham. The husband did not sign it either.

22. Even if the husband had executed the power of attorney, the Powers of Attorney Act 2003 (NSW) did not empower the third respondent to execute the FA for and on behalf of the husband for two reasons. First, an attorney is not permitted to execute any document conferring a benefit upon a third party unless the power of attorney expressly authorises it (s 13). The power of attorney did not expressly empower the third respondent to execute the FA, conferring a substantial financial benefit upon the second respondent. Secondly, the third respondent was only empowered to execute instruments on behalf of the husband using his own signature as the appointed attorney (s 43), but if the third respondent did sign the FA he did not sign it in that way.

23. The FA is therefore set aside, which axiomatically means it is not binding upon the spouses.

    The transfer of the Suburb D Property

24. The spouses’ transfer of the Suburb D Property to the second respondent in 2022 cannot possibly be set aside under s 106B of the Act in circumstances where the property has since been sold by the second respondent to an innocent third party at arm’s length.

    Injunctions

25. The second respondent submitted to the injunctions sought against her by the husband. The injunctions were made with her consent.

    Disclosure

26. The three respondents submitted to the disclosure orders sought against them by the husband. Such orders were made with their consent.

    Subpoenas

27. Rule 6.27(3) of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth) permits a party to request the issue of five subpoenas without permission of the Court.

28. The husband sought permission to issue 10 subpoenas, but without explaining to whom they would be issued or what documents they were designed to procure. Absent such evidence, there is no premise upon which to grant the application. The husband is confined to five subpoenas. He can apply for permission to issue more if and when the need arises.

    Costs

29. The husband acceded to the proposition that the costs of the interim hearing, which was essentially uncontested, should be costs in the cause.

I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice Austin.

Associate:

Dated:       22 August 2024