Barre & Barre (Superannuation)
[2021] FamCA 463
•19 August 2021
FAMILY COURT OF AUSTRALIA
Barre & Barre (Superannuation) [2021] FamCA 463
File number(s): SYC 6149 of 2016 Judgment of: HARPER J Date of judgment: 19 August 2021 Catchwords: FAMILY LAW – PROPERTY – Superannuation – Where the parties have interests in a self-managed superannuation fund – Where final judgment already delivered concerning enforcement of a binding financial agreement – Where Court has found it cannot make splitting orders and there is no enforceable superannuation agreement - Where the husband is bankrupt and removed as a director of trustee corporations – In circumstances where the self-managed superannuation fund owns real estate – Where Court sought further submissions and evidence concerning superannuation interests – Where wife obtains expert advice about how to manage superannuation interests. Legislation: Family Law Act 1975 (Cth) ss 90G, 114
Corporations Act 2001 (Cth) s 206B
Real Property Act 1900 (NSW) s 57
Superannuation Industry (Supervision) Act 1993 (Cth) ss 10, 17A, 67A, 106A
Cases cited: Barre & Barre [2021] FamCA 101
CSR Ltd v Chief Commissioner of State Revenue (2006) 68 NSWLR 440
SAS v Trustee Corporation v Arthur Cox [2011] NSWCA 408
Number of paragraphs: 47 Date of last submission/s: 2 August 2021 Date of hearing: On the papers Place: Sydney Solicitor for the Applicant: Swaab Attorneys The First Respondent: Litigant in Person ORDERS
SYC6149 of 2016 BETWEEN: MS BARRE
Applicant
AND: MR BARRE
First Respondent
BARRE PTY LIMITED
Second Respondent
MS GILLIAM (and another named in the Schedule)
Third Respondent
ORDER MADE BY:
HARPER J
DATE OF ORDER:
19 AUGUST 2021
THE COURT ORDERS THAT:
1.The First Respondent Husband (“the husband”) and the Third Respondent be restrained by injunction from doing any act or thing to:
(a)Cause a Caveat to be lodged against the Title to real property situate at and known as 2 G Street, Suburb B in the State of New South Wales (Folio Identifier …) ("2 G Street");
(b)Contact or approach prospective purchasers of 2 G Street or their Lawyers or the Agent acting on any sale of 2 G Street.
2.That within 7 days of the Applicant Wife (“the wife”) notifying the husband of the date of settlement of any sale of 2 G Street, the husband:
(a)Provide to the wife in her capacity as Director of the Barre Super Fund Pty Limited, as Corporate Trustee for the Barre Family Super Fund details of a compliant superannuation fund into which the Husband's member interests in the Barre Family Super Fund are to be rolled over; and
(b)Execute all necessary documents and provide all necessary authorities to facilitate and bring about the said roll over.
3.For the avoidance of doubt, all claims in the proceedings concerning superannuation interests are otherwise dismissed.
4.Any outstanding bankruptcy issues are stood over to a date to be advised.
5.The wife's costs of and incidental to the determination of the issues the subject of the judgment herein be reserved.
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 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to 17.02 Family Law Rules 2004 (Cth).
IT IS NOTED that publication of this judgment by this Court under the pseudonym Barre & Barre has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
Harper J
In these complex proceedings, final judgment was delivered and orders were made in respect of most issues other than issues relating to the parties' superannuation and issues arising out of or in connection with the bankruptcy of the First Respondent Husband (“the husband”): Barre & Barre [2021] FamCA 101 (“Barre”) at [313] - [368] ("the primary judgment"). The primary judgment was concerned with a range of issues but principally the enforcement of a binding financial agreement between the wife and the husband (“BFA”). It is unnecessary to repeat in any detail the findings and reasoning set out there. These reasons should be read with the primary judgment.
To recap slightly, as explained in the primary judgment, as regards superannuation, this Court does not, in my view, have jurisdiction to make orders regarding superannuation interests, other than splitting or flagging orders under Division 3 of Part VIIIB, where there are proceedings under s 79 or s 90SM, or splitting or flagging where there is a “superannuation agreement” enforceable under Division 2 of Part VIIIB: Barre at [313] - [356]. Neither circumstance was present in this matter. Furthermore, while there was evidence that the Applicant Wife (“the wife”) and the husband are members of a self-managed superannuation fund which owned 2 G Street, Suburb B ("2 G Street"), the identity of the trustee was at final hearing unclear. The husband was and is also bankrupt. He is therefore disqualified from managing a corporation by reason of s 206B(3) of the Corporations Act 2001 (Cth), including a corporate trustee. These factors made it inappropriate as a matter of discretion for the Court to make orders, for example, in the nature of mandatory injunctions compelling the husband to take any step in relation to the parties' superannuation fund or their interests therein: Barre at [357] - [365].
On 10 May 2021 orders were made for the wife to file and serve further evidence and written submissions concerning superannuation issues by 24 May 2021 with the husband to file and serve any responsive material by 14 June 2021. The wife filed and served her material on 31 May 2021. The husband filed and served no material by 14 June 2021. At that stage, no orders had been made for the third respondent, Ms Gilliam, who had been joined to the proceedings as a creditor of the husband, to make submissions concerning the superannuation interests of the wife and the husband. As described in the primary judgment, Mr Gilliam has her own part heard proceedings on foot seeking a declaration that she was in a de facto relationship with eh husband for a period of about two and half years.
The wife relied upon her Affidavit sworn 28 and filed 31 May 2021 and the Affidavit of Ms PP, Chartered Accountant sworn and filed 31 May 2021. Ms PP gave evidence of an expert nature.
The solicitor for the husband’s trustee in bankruptcy seemed to appear briefly for the husband in relation to bankruptcy issues. In this regard the husband filed and served a Case Outline, Affidavit and written submissions on 2 July 2021. I will return to the detail of these below.
Mr Gilliam then filed a “Minute of Orders Sought” on 12 July 2021. By this document, Ms Gilliam sought judgment in her favour in the amount of $108,000 against a number of companies, namely, Barre Pty Limited, the Second Respondent in the proceedings, Barre SMSF Pty Ltd, Barre Superfund Pty Ltd and F Pty Ltd (in administration), orders compelling the wife to cause a payment to be made to her, a range of orders regarding costs, including a dollar for dollar costs order in her favour, despite being self-represented, and various injunctions and stay orders. This minute of orders appeared to take up orders sought by Ms Gilliam in an application she claims was filed on 10 May 2021, although no such application appears on the Court file.
On 14 July 2021, the solicitor on the record for the husband’s trustee in bankruptcy also appeared for the husband in relation to superannuation issues. After hearing from the solicitor for the husband and Ms Gilliam, who was again self-represented, I made an order for both to file and serve any written submissions upon which they proposed to rely relating to superannuation issues by 21 July 2021. In relation to Ms Gilliam I did so because she contended orally that she had made contributions to the wife and husband’s superannuation fund, a matter I will return to below. On 21 July 2021 I extended the time to close of registry filing on 23 July 2021 for Ms Gilliam. Ms Gilliam filed and served an affidavit and Case Outline on 26 July 2021 followed by written submissions on 30 July 2021. I have considered this material.
No further material was received from the husband.
The wife filed and served her submission in reply and an updating affidavit on 2 August 2021, pursuant to leave granted on 27 July 2021.
The wife seeks limited orders in relation to the parties’ superannuation interests. On the basis that she is the only current capable director of the trustee corporations, she proposes to cause the relevant trustee to sell 2 G Street. The wife also seeks in summary only an order that the husband notify her of a proposed superannuation fund into which to roll his entitlements following such sale, and injunctions restraining the husband and Ms Gilliam from lodging any further caveats in respect of 2 G Street, or interfering with the proposed sale.
The wife's evidence discloses the following relevant matters.
The parties' self-managed superannuation fund ("SMSF") was established on 9 May 2012 pursuant to a Superannuation Deed of Trust ('Deed') and is called the Barre Family Super Fund. Pursuant to the Deed, the initial trustees of the SMSF were the wife and the husband. With effect from 30 April 2013 by a Deed of Amendment & Consolidation and Change of Trustees the wife and the husband were replaced as trustees by a corporate trustee named Barre Super Fund Pty Ltd (“corporate trustee”) of which the wife and husband were the only directors and shareholders, each owning one share.
2 G Street was acquired by the SMSF in the financial year that ended on 30 June 2013 for $490,000 by way of a Limited Recourse Borrowing Arrangement pursuant to s 67A of the Superannuation Industry (Supervision) Act 1993 (Cth) (“SISA”). Ms PP explained this structure as follows:
S.67A of SISA requires that where a SMSF borrows to acquire an asset, it must be held on trust for the SMSF and the trust holds a beneficial interest in the property. In practice this entity is commonly referred to as a bare trustee or a security trustee or a holding trustee and it holds the property on trust for the trustee of the SMSF pursuant to a deed for the duration of the loan.
Barre SMSF Pty Ltd (“security trustee”) that is, a corporation separate from Barre Super Fund Pty Ltd, is the relevant security trustee here. It is the registered proprietor of 2 G Street. Again the wife and the husband were the only directors and shareholders of the security trustee, Barre SMSF Pty Ltd.
As already pointed out, the corporate trustee and the security trustee are two of the companies against which Ms Gilliam claims judgment for $108,000.
The husband ceased to be a director of the corporate trustee on 24 June 2020, removed by the Australian Financial Security Authority. He ceased to be a director of the security trustee on 29 January 2021.
The evidence of Ms PP satisfies me of the following additional matters:
(1) The basic condition for a superannuation fund to meet the definition of a self-managed superannuation fund pursuant to SISA s 17A(1) is that all members of the fund are required to be trustees or directors of the corporate trustee of the fund. The removal of the husband as a director of the corporate trustee means the SMSF no longer meets the definition of a superannuation fund.
(2) In order for the SMSF to maintain its status as a self-managed superannuation fund the husband, having ceased to be a director of the corporate trustee, must also terminate his membership of the SMSF by transferring his benefits to a large APRA regulated superannuation fund such as an industry or retail fund. This was required to be done within six months of his removal as director of the corporate trustee, and this six month period ended on 24 December 2020. However, the husband remains a member of the SMSF.
(3) By reason of SISA s 45(1)(b) the SMSF remains at present a complying superannuation fund because the relevant Regulator has given the trustee, as trustee of a superannuation fund, a notice stating that the fund is a complying fund in a previous year, and has not given a notice stating that the fund is not a complying fund in any subsequent year. In other words, the SMSF is a complying superannuation fund until the relevant Regulator issues a notice stating it is not.
Ms PP also opined that the wife may act as the sole director of the corporate trustee for the Barre Family Super Fund, having notified the regulators both that the SMSF has ceased for the moment to meet the definition of a SMSF as required by s 106A of SISA and she has taken steps to rectify the fund's status as quickly as possible. No mention was made of the possible impact of s 120(2)(a)(ii) which provides that a body corporate is a disqualified person if the body corporate “knows, or has reasonable grounds to suspect, that a person who is, or is acting as, a responsible officer of the body corporate is…(ii) a disqualified person.” As Ms PP points out, the husband became a disqualified person upon becoming bankrupt (s 120(1)(b)). At the time he became bankrupt he was a “responsible officer” of the trustee because he was a director.
I also find it unnecessary to express any view about the opinion of Ms PP concerning the wife’s ability to act as sole director. The distribution of powers of management between different organs of governance in a corporation, specifically the board and the members in general meetings, is primarily determined by its constitution, but residual questions remain: Massey & Anor v Wales & Ors; Massey & Anor v Cooney & Anor [2003] NSWCA 212 at [43] to [65] and [68]. The constitution of neither the corporate trustee nor the security trustee was in evidence. A company’s constitution may authorise the board to appoint additional directors to fill a casual vacancy or s 201H of the Corporations Act 2001 (Cth) provides for a replaceable rule that allows directors to appoint a director to reach a quorum. But the wife seeks no orders which require me to make any finding or express any conclusion about these matters. She seeks no more than restraints on the husband and Ms Gilliam concerning caveats and interference with the sale of 2 G Street, and an order compelling the husband to nominate a fresh superannuation fund. It is sufficient for me to be satisfied, which I am, that the wife has taken steps to seek expert advice and has given evidence that she intends to act in accordance with that advice and the applicable superannuation legislation.
The SMSF is presently in default of the lodgement of annual returns for the financial years that ended on 30 June, 2018, 2019 and 2020. These defaults currently place the status of the SMSF in jeopardy with the regulatory authorities. There may also be other compliance issues including member loans.
The wife proposes that 2 G Street be sold. This was the common position of the parties as set out in the primary judgment. As the sole director of the corporate trustee, she has had negotiations with a neighbour who has expressed interest in buying the property. The wife has negotiated a sale price of $1,470,000 which is in excess of a valuation obtained by her which valued the property at $1,465,000.
I turn at this point to the submissions and proposed orders of the husband. By his Case Outline filed on 2 July 2021, the husband sought the following orders:
Final Orders Sought
1. That the Wife in her capacity as Director of the Barre Super Fund Pty Ltd as Corporate Trustee for the Barre Family Super Fund: -
a. Causes the real property situated at and known as 2 G Street, Suburb B, in the State of New South Wales (Folio Identifier …) (“2 G Street”) to be listed for sale by public auction;
b. b. Upon sale of the 2 G Street property, the Wife ensure the net proceeds of sale are retained within the Barre Family Super Fund pending determination by the Court of this Application.
2. That pursuant to Section 106B of the Family Law Act 1975 (Cth) the contributions for FYE 2013 in the amount of $22,401.15 and for FYE 2014 in the amount of $24,362.97 allocated to the Applicant Wife be set aside and reallocated to the member interest of the Respondent Husband in such fund.
3. That within seven (7) days of the reallocation of the member interest in accordance with Order 2 herein and the resulting, subsequent recalculation of the current member interest of the parties, the Husband direct the Wife in her capacity as Director of the Barre Super Fund Pty Ltd, as Corporate Trustee for the Barre Family Super Fund as to the compliant fund into which the Husband’s interest that will be rolled over to.
4. The Husband’s costs of and incidental to this Application be reserved.
Directions Sought
1. That the Respondent Husband cause to be filed any further affidavit material upon which he intends to rely within forty-five (45) days with a further written submission and Minute of Order;
2. The Applicant Wife be granted leave to file any Response affidavit material, further written submissions and any revised Minute of Order within a further fourteen (14) days;
3. The matter be listed for a one (1) day trial at a date to be determined by the Court.
None of these orders should be made.
Order 1 proposes a sale of 2 G Street by public auction. As already recorded, the wife gave evidence that she has negotiated a sale price with a neighbour above a valuation she obtained. The husband presses for a public auction because he gave evidence the price negotiated by the wife is an “undervalue”. The evidence he puts forward for this view is a market appraisal from Mr OO of QQ Real Estate, Suburb RR suggesting a market value for 2 G Street of $1,800,000. I do not accept this evidence. The wife obtained an updated valuation from Mr SS, Registered Valuer dated 15 July, 2021 which held to the valuation of $1,465,000. When the wife provided this to Mr OO, he sent to the wife an email withdrawing his valuation of $1,800,000. I do not accept a case of undervalue has been established.
Orders 2 and 3 invoke s 106B of the Family Law Act 1975 (Cth) (“the Act”) to set aside and reallocate superannuation contributions made in 2013 and 2014. This is misconceived. Quite apart from jurisdictional difficulties in this Court to make orders about reallocating contributions within superannuation funds, s 106B is directed to dispositions made to defeat an existing or anticipated order of this Court. The “dispositions” in question were said to be made in 2013 and 2014. These proceedings were commenced in 2016. There is no evidence which supports the drawing of any relevant connection between those dispositions and any existing or anticipated order of this Court.
The balance of the orders proposed by the husband seeks costs and procedural orders for further evidence and further hearing. I do not propose to make any of those orders.
The submissions and evidence of Ms Gilliam in relation to superannuation were confusing, and not very coherent. She appeared to argue that the corporate trustee and the security trustee had not been disclosed by the wife or the husband in the trial and therefore, “It’s arguably now open to the court to find the companies “left over” being dealt with by the wife in her sole capacity as Director are “residual” to the BFA”. This alleged non-disclosure was said to deny her the opportunity “to present a case enlivening the court’s jurisdiction possibly under s90KA(c)” although she appeared to accept the primary judgment held s 90KA(c) “cannot be called on in aid of a third party whose interests are affected or its submitted “entwined” in some “specified parts” of the BFA governing the division of “joint” property”. Ms Gilliam then made the following submission:
on the evidence before the court the interests of the propriety owner of the remaining real property being in fact Barre SMSF PTY LTD being in fact itself a third party were not considered according to contract law at all and remain to be dealt with under the terms of the BFA -so it follows that my claim as a third party creditor of the third party propriety owner of 2 G Street Rd being a third party held jointly by the husband and wife is also a buisness [sic.] carried on jointly by both the husband and the wife regardless of it being utilised in a recourse borrowing arrangement connected to a superannuation fund or otherwise.
I interpret this submissions to mean that Ms Gilliam was denied the opportunity to make a claim directly against the corporate trustee and security trustee on the basis she could, by reason of s 90KA(c), make such a claim through the BFA. If this is what was meant, I reject the argument for a number of reasons.
First, Ms Gilliam seems to contend that she has made contributions to the SMSF. But the position agreed between her and the husband, shows Ms Gilliam lent money to the husband, and, possibly, a number of his associated companies (which did not include either the corporate or security trustee), from time to time during her alleged de facto relationship with him. This was conceded by him. She is a creditor of the husband. This was the subject of consideration and findings in the primary judgment. Her payments constituted the debt of $228,000 owed to her by the husband, which was referred to in the primary judgment as agreed between her and the husband, and in respect of which she has received repayments during the proceedings leaving a balance owing of $108,000.
As I understood it, there was evidence from Ms Gilliam that during the alleged de facto relationship transfers were made from the husband’s accounts and some of the corporate accounts into the account held by the trustee corporation. But it is clear in my view that these payments were not made by Ms Gilliam but by other entities.
Secondly, there is no evidence that Ms Gilliam made any direct contribution into the SMSF, either by transfer to the corporate trustee or the security trustee or otherwise, apart possibly from an amount of $116 which I consider de minimis. In her affidavit Ms Gilliam contended that the wife was “jointly and severally liable” with the corporate trustee for a “commercial loan” of $318,000. The basis for this assertion was not clear. It seems to be a significant change from the agreed position at final hearing that the husband was liable for loan monies. Ms Gilliam appeared to think that the assets of the SMSF should be available to give her a remedy for repayment of the money owed to her by the husband. She made reference to payments by a company called TT Pty Ltd in to the SMSF. As best I could understand it, she appeared to argue that because she and the husband established this company and it paid employer superannuation contributions into the SMSF on her behalf for a time, the SMSF superannuation assets could be used to repay her debt.
I do not accept any of these contentions. Superannuation assets are not to be used to repay personal debts while they are held in a superannuation fund. Mr Gilliam’s superannuation entitlements are a matter she can explore in a different forum, or if she succeeds in establishing a de facto relationship with the husband, possibly under the Act. I express no view about this other than to note the possibility. But in any event none of these considerations are any reason to deny making the orders proposed by the wife.
Thirdly, as pointed out in the primary judgment, Ms Gilliam has no standing to challenge or enforce the BFA: Barre at [132] - [139], and it does not constitute any agreement dealing with superannuation interests in any event: see above at [2].
She also argued that the Court could have no confidence the wife, acting alone, would not dissipate superannuation trust funds. But according to my conclusions, Ms Gilliam has no interest or claim to superannuation assets. Beyond that, the evidence also shows that the wife has taken care to obtain advice about how to deal with the SMSF problems. There is no evidence that there is any risk the wife would dissipate superannuation assets.
In my view, Ms Gilliam has not established any basis for orders in her favour, to discharge a debt owed by the husband, against any of the named corporations or either the assets of the SMSF or the wife as the remaining capable director of either trustee. None of the orders sought by Ms Gilliam regarding superannuation should be made.
The wife submitted that it is only upon receipt of the sale proceeds for 2 G Street that the SMSF Accounts can be brought up to date to account for the profit on sale. At that point the outstanding expenses of the SMSF would also be brought to account so that each member's entitlement can be calculated accurately and once done, a Rollover Benefit Statement can be prepared for the husband to transfer his Superannuation entitlement from the SMSF to his nominated Superannuation Fund. The security trustee, Barre SMSF Pty Limited, can then be deregistered. I accept this as correct.
The mortgagee of 2 G Street, R Bank has issued a notice pursuant to s 57(2)(b) of the Real Property Act 1900 (NSW) (“the Real Property Act”), initiating the process to sell 2 G Street as mortgagee.
As noted, I am satisfied that the wife has taken steps to become properly informed as to her obligations as a sole director of the corporate trustee and proposes to effect a sale of 2 G Street and deal with the proceeds of sale in accordance with the legislation and rules governing self-managed superannuation funds. I am satisfied that an order should be made compelling the husband to nominate another complying superannuation fund as sought by the wife.
Some ancillary matters require comment.
The husband lodged a caveat over 2 G Street. The nature of the caveatable interest claimed is "as beneficial interest in Self-Managed Super Fund". The wife submitted that pursuant to section 10 of Superannuation Industry (Supervision) Act ("SISA"), a Member of the Fund retains an interest in the Fund, but not in the underlying assets of the Fund (SAS v Trustee Corporation v Arthur Cox [2011] NSWCA 408 (at [109]); CSR Ltd v Chief Commissioner of State Revenue (2006) 68 NSWLR 440; [2006] NSWSC 1380 (at [12]). I accept this submission. The caveat on its face discloses no caveatable interest.
The wife served a notice pursuant to the Real Property Act to lapse the husband's caveat, which expired on 1 June 2021.
I note here that Ms Gilliam previously lodged a caveat in respect of 2 G Street which has lapsed. As pointed out above, the evidence does not support a contention that Ms Gilliam has an interest, inchoate or otherwise, in 2 G Street. According to the evidence of the wife, Ms Gilliam in recent months has sent emails which appear to be predicated upon Ms Gilliam believing she has a claim to 2 G Street.
Although there is no evidence of existing caveats lodged by either the husband or Mr Gilliam in respect of 2 G Street, in the circumstances, there should be a restraint preventing the husband from lodging further caveats again before the property is sold.
I am also satisfied that orders in the nature of in personam injunctions should be made compelling the husband to nominate a fresh superannuation fund and restraining the husband from lodging any further caveats in respect of 2 G Street, or otherwise interfering with its sale. In the primary judgment I expressed the view that the Court had power to make the proposed in personam orders under either s 90G(2) of the Act, giving effect to a binding financial agreement or s 114(3), the broad power to grant an injunction in proceedings under the Act, "in any case in which it appears to the court to be just or convenient to do so": see Barre at [357] - [361].
I will also make an order restraining Ms Gilliam from interfering in the sale of 2 G Street. As noted the Court’s directions gave her an opportunity to make submissions about the wife’s proposed injunction. Ms Gilliam did contend that no orders should be made against her in relation to 2 G Street. I note the wife’s evidence shows the earlier caveat of Ms Gilliam has lapsed. Ms Gilliam has lodged no further caveat. But as these reasons show Ms Gilliam maintains a specious claim in respect of 2 G Street and does not appear to understand fully the limitations of her position or the primary judgment. I am satisfied that orders against Ms Gilliam are necessary.
For the foregoing reasons I make the orders sought at the commencement of these reasons.
Ms Gilliam made a number of submissions about bankruptcy issues which seemed to have no relevance to superannuation issues. However, I note that bankruptcy issues remain to be determined, once the sale of parcels of real property are completed in accordance with the orders of the primary judgment and the asset position of the husband’s sequestered estate can be ascertained. Questions of discharge from, or annulment of, the husband’s bankruptcy may need to be considered, although I express no concluded view.
I certify that the preceding forty-seven (47) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Harper. Associate:
Dated: 19 August 2021
SCHEDULE OF PARTIES
SYC 6149 of 2016 Respondents
Fourth Respondent:
MR UU AS TRUSTEE IN BANKRUPTCY FOR MR BARRE
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