DALMANS & FARBER

[2018] FCCA 2636

FEDERAL CIRCUIT COURT OF AUSTRALIA

DALMANS & FARBER [2018] FCCA 2636

Catchwords:
FAMILY LAW – Superannuation – where orders were made by consent in 2011 pursuant to s90MT(1)(a) of the Family Law Act 1975 (Cth) – where the husband’s superannuation fund was required to pay a sum of $34,550 to the wife when a splittable payment became payable to the husband – where the trustee of the super fund was not afforded procedural fairness due to the misconduct of the wife’s former solicitor – where the husband rolled over previous super fund into a self-managed fund – where the husband was unaware of the former solicitor’s misconduct – where orders cannot be complied with due to frustration – where the wife seeks a variation of consent orders made some 7 years ago pursuant to s79A of the Family Law Act 1975 (Cth).

Legislation:

Acts Interpretation Act1901 (Cth), s.2C

Family Law Act 1975 (Cth), ss.79, 79A, 90MD, 90ME, 90MT, 90MZD, 105

Family Law (superannuation) Regulations 2001 (Cth), pt. 6

Superannuation Act1990 (Cth)

Superannuation Industry (Supervision) Regulations1994 (Cth), regs. 1.03, 6.06, 6.15, 7A.01, 7A.03, 7A.03A, 7A.03B, 7A.03C, 7A.03D, 7A.03E, 7A.03F, 7A.03G, 7A.05, 7A.06, 7A.07, 7A.10, divs. 7A.01A, 7A.1A, 7A.2, 7A.3, sub-divs. 6.3.1, pt. 7A

Cases cited:

Commonwealth v Cornwell [2007] HCA 16; (2007) 234 ALR 148Fountain v. Alexander [1982] HCA 16; (1982) 150 CLR 615
Henry v Leighton Admin Services Pty Ltd & Anor [2015] FCCA 1923

La Rocca & La Rocca (1991) FLC 92-222

Mackah & Mackah [2017] FamCAFC 62
O’Grady v Northern Queensland Company Ltd (1990) 169 CLR 356

Pendleton & Pendleton [2017] FamCAFC 108

Rohde & Rohde (1984) FLC 91-592
Sanger & Sanger (2011) 46 Fam LR 275

The Zamora (No 2) [1921] 1 AC 801

Warden & Warden [2011] FamCA 1029

Applicant: MS DALMANS

Respondent: MR FARBER

File Number: SYC 7429 of 2010

Judgment of: Judge Harper

Hearing date: 15 March 2018

Date of Last Submission: 12 April 2018

Delivered at: Sydney

Delivered on: 21 September 2018

REPRESENTATION

Counsel for the Applicant: Ms Young of Counsel

Solicitors for the Applicant:  Family Law Group Pty Ltd

Counsel for the Respondent: Ms Haughton of Counsel

Solicitors for the Respondent: Family Focus Legal Pty Ltd

THE COURT ORDERS THAT:

1. Pursuant to s.79A(1)(b) of the Family Law Act 1975 (Cth) for orders 12 & 14 made on 15 June 2011 to be varied to read as follows:

   12. “that pursuant to section 90MT (1)(a) of the Family Law Act 1975 (Cth) that whenever a splittable payment becomes payable to the husband, Mr Farber out of his interest in Super Fund 2, the wife, Ms Dalmans, be paid the amount of $34,550 in accordance with Part 6 of the Family Law (superannuation) Regulations 2001 (Cth) and that there be a corresponding reduction in the entitlement of the husband to whom this splittable payment would have been made but for these orders”

   14.“That the operative time for these orders is four (4) business days after a certified copy of the sealed orders is served on the trustee of Super Fund 2.”

IT IS NOTED that publication of this judgment under the pseudonym Dalmans & Farber is approved pursuant to s.121(9)(g) of the Family Law Act 1975 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYC 7429 of 2010

MS DALMANS

Applicant

And

MR FARBER

Respondent

REASONS FOR JUDGMENT

1. This is an application pursuant to s.79A of the Family Law Act 1975 (Cth) (“the Act”) in respect of orders made by what was the Federal Magistrates Court of Australia on 15 June 2011 (“Prior Orders”).

2. The applicant wife (“the wife”) and the respondent husband (“the husband”) were married on 2010 and were divorced on 17 March 2012.

3. The wife’s application relates to those parts of the Prior Orders which dealt a superannuation split, specifically Orders 12, 13 and 14.  The wording of these orders is set out below.

Procedural History

1. The proceedings were originally commenced by the husband by way of Initiating Application filed on 24 November 2010.

2. The wife subsequently filed her Response on 14 December 2010.

3. The matter was first before the Court on 24 December 2010, before his Honour Judge Kemp.

4. On 15 June 2011, the Prior Orders were entered into by the parties and were made by Judge Kemp in Chambers. 

5. The wife filed an Initiating Application on 16 March 2017 and an Amended Initiating Application on 18 July 2017 seeking variation of the Prior Orders. 

6. The matter first came before me in a duty list on 15 May 2017. On that occasion, procedural orders to progress the matter were made by consent. This included the direction to file a Response and for the husband to provide the wife with disclosure documents with respect to his superannuation fund.

7. In her application, the wife seeks to vary the Prior Orders so far as they relate to a superannuation split. The wife relies upon ss.79A(1)(b) and (c) of the Act which provide:

   Where, on application by a person affected by an order made by a Court under section 79 in property settlement proceedings, the Court is satisfied that:

   …

   (b)  in the circumstances that have arisen since the order was made it is impracticable for the order to be carried out or impracticable for a part of the order to be carried out; or

   (c)  a person has defaulted in carrying out an obligation imposed on the person by the order and, in the circumstances that have arisen as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for the order;

8. The husband filed a Response on 2 June 2017. The husband only seeks that the wife’s application be dismissed.

9. The matter was next before the Court on 13 June 2017, and on that occasion the matter was adjourned.

10. The matter was next before the Court on 6 July 2017, and on that occasion the husband was ordered to provide documents in answer to requests for disclosure.

11. The matter was adjourned to 7 August 2017, and on that occasion the matter was set down for final hearing on 15 March 2018 for an estimate of one day.

12. The wife’s application required a consideration of facts in a relatively narrow compass. 

13. However, it also required a consideration of the Superannuation Industry (Supervision) Regulations1994 (“the Regulations”), and raised some difficult issues of interpretation.  Regrettably, the approach of the parties did not address some of the obvious complexities raised by the application.

14. As will be discussed further below, the parties seemed to make assumptions about the operation and applicability of the Regulations. Both representatives acknowledged how difficult the provisions were to understand. Orders were made for further submissions in writing from the parties at the close of the hearing, in relation to the applicable Superannuation Regulations. The court specifically asked for “accurate and helpful” submissions. Although both parties provided further written submissions, overall the assistance provided to the Court left many questions unaddressed. 

15. This is a prime example of the type of matter involving the great legal complexity arising from prolix and densely worded statutory provisions and regulations, in respect of a relatively modest amount, which frequently require judicial determination in this Court.  The chronic lack of resources given to the Court and the unreasonable workload expected of individual judges combined with a cursory approach of the parties, to make some delay in delivery of judgment inevitable.

16. I will first set out the necessary facts.

Relevant Facts

1. The basic facts can be simply stated.

   a)The Prior Orders were final property orders made by consent, following the breakdown of the parties nearly 9 year marriage.  At the time the Prior Orders were made and as at 1 July 2010 the husband’s interest in his then superannuation account, Super Fund 1, was valued at $177,245.10.

   b)Order 12 of the prior orders provided:

   “that pursuant to section 90MT (1)(a) of the Family Law Act 1975 (Cth) that whenever a splittable payment becomes payable to the husband, Mr Farber (member) out of his interest in Super Fund 1, the wife, Ms Dalmans, be paid the amount of $34,550 in accordance with Part 6 of the Family Law (superannuation) Regulations 2001 (Cth) and that there be a corresponding reduction in the entitlement of the husband to whom this splittable payment would have been made but for these orders”

   c)Orders 13 and 14 of the Prior Orders were in the following terms:

   13.    “that these orders have effect from the operative time.

   14.    “That the operative time for these orders is four (4) business days after a certified copy of the sealed orders is served on the trustee of Super Fund 1.”

   d)It was common ground that after the Prior Orders were made, the then solicitor for the wife failed to serve upon the trustee of Super Fund 1 a sealed copy of the Prior Orders.  The trustee of Super Fund 1 was never served with the Prior Orders.

   e)In September 2012, the husband caused his accountants to establish a self-managed superannuation fund called “Super Fund 2” (“Super Fund 2”) and roll over his Super Fund 1 entitlements to the Super Fund 2. 

   f)At the time the husband caused the Super Fund 2 to be brought into existence, he assumed the wife’s former solicitor had acted upon the “payment split” after making inquiries of his own solicitor.

   g)As I understand the husband’s evidence (Annexure “G”), the trustee was and is Company A Pty Ltd (“Company A”).  The husband is the only member of the Super Fund 2.

   h)On or about 10 September 2012, Super Fund 1 sent to the husband a “rollover cheque” for $186,613.16 made payable to the Super Fund 2.  This figure constituted the husband’s preserved amount held by Super Fund 1 (Annexure “B”).

   i)Between 2013 and 2014 the wife sought information from her solicitors concerning the whereabouts of her superannuation payment.  She was told in summary that her former solicitor had received and held the split amount, $34,550, but it could not be paid into her superannuation fund until his accountant had completed a calculation of the applicable super guarantee levy which would be available by 30 June 2013.  These representations were false.

   j)On 13 June 2013 the wife emailed the husband advising him that her superannuation amount of $34,550 was held by her former solicitor.

   k)On 29 September 2015 the Super Fund 2 purchased Property A, Queensland (“Property A property”).

   l)On 1 December 2015, after a complaint to the Legal Services Commissioner, the wife’s former solicitor conceded in writing that he had taken no steps to ensure the transfer of the “split amount” into the wife’s nominated superannuation fund.

   m)The wife’s present solicitors wrote to the husband by letter dated 25 May 2016, advising him that there had been no compliance with Orders 12 to 15 of the Prior Orders.

   n)In text messages between the husband and the wife between June and December 2016, the wife told the husband she intended to sue her former solicitor.

The Splitting Order and the Regulations

1. It is convenient at this point to consider the Regulations. The submissions of the parties assumed the Regulations would have applied to Order 12. As will become apparent, this assumption may be correct, but the difficulties of interpretation do not make it certain and were not analysed by the parties.

2. In any event, any exercise of the discretion in s.79A to vary Order 12, if the criteria for its application are satisfied, will of necessity be informed by an understanding of the application of the Regulations.

3. Although the evidence did not make this clear, it appeared to be common ground, and I will assume, that the Super Fund 1 and Super Fund 2 were both regulated and complying superannuation funds.

4. By reason of Regs.6.06 and 6.15 the husband’s preserved benefits in the Super Fund 1 remained preserved benefits in the Super Fund 2. As at September 2012, no conditions for release were satisfied to permit cashing of the husband’s preserved benefits pursuant to Subdivision 6.3.1 of the Regulations.

5. Part 7A of the Regulations deals with splitting orders. It has the heading “SUPERANNUATION INTERESTS SUBJECT TO PAYMENT SPLIT”. As discussed further below, the phrase “subject to a payment split” is central to the application of Part 7A. This is a precondition to the application of not only Division 7A.1A, but Divisions 7A.2 and 7A.3. If a superannuation interest is not subject to a payment split, Division 6.7 of Part 6 may have application: Reg.6.43(2).

6. Reg.7A.01 sets out the purpose of Part 7A as follows:

   The purpose of this Part is:

   (a) to facilitate the payment splitting arrangements established under Part VIIIB of the Family Law Act 1975 ; and

   (b)  to provide for additional options that may be exercised in relation to superannuation interests that are subject to a payment split under that Act.

7. Although Divisions 7A.01A, 7A.2 and 7A.3 of Part 7A are relevant to payment splits, the wife submitted that Reg.7A.03A(2) would be have been engaged and applicable to the husband’s interest in the Super Fund 1. It is in the following terms:

   (2)  Subject to sub-regulation (3), this Division also applies in relation to a superannuation interest (the original interest ) in a regulated superannuation fund, if:

   (a)  the original interest is subject to a payment split; and

   (b)  the original interest is an accumulation interest in the growth phase; and

   (c)  the trustee:

   (i)  has not received a request under regulation 7A.05, 7A.06 or 7A.07; and

   (ii)  has not taken an action under regulation 7A.10 in relation to the original interest.[1]

   [1] Sub-regulation 1 applies where an allocated pension, market linked pension or account-based pension is being paid in respect of a superannuation interest and Sub-regulation 3 deals with a partially vested accumulation interest.  Neither sub-regulation is relevant to this discussion.

8. If Division 7A.1A applied and the trustee of Super Fund 1 had been served, it appears likely that the following steps would have taken place:

   a)Under 7A.03(3) the trustee would have been required to give a notice in writing to both the husband and the wife, in relation to the superannuation interest the subject of the payment split, stating the date on which it is given, by the later of:

   i)The end of 28 days after the operative time for the payment split; and

   ii)The end of 28 days after the trustee receives a copy of the order.

   b)Thereafter, the trustee could have created a new interest in the Super Fund 1 for the wife as the non-member spouse (reg. 7A.03B).  The value of this interest would have been $34,550 “less the amount of any fees payable by the non-member spouse in respect of the payment split”: reg. 7A.03B(3)(b) of the Regulations.

   c)The wife could have requested the trustee to retain her non-member spouse interest in the Super Fund 1 (reg. 7A.03C) or to roll her interest over into another complying fund to be held for her benefit (reg. 7A.03D).  It was conceded by the wife that there were no conditions of release satisfied permitting her to request a lump sum payment under reg. 7A.03E.

   d)The wife would have had 28 days from receiving the trustee’s notice pursuant to reg. 7A.03 of the regulations to choose to request the trustee to retain her non-member spouse interest in the Super Fund 1 or roll it over to another regulated or approved fund.

   e)The trustee would have been compelled to comply with the wife’s request (reg. 7A.03F) unless an earlier request for rollover was extant (reg. 7A.03G(2)(a)), the target fund has less than five members (reg. 7A.03G(2)(b)) or the target fund refused to accept the rollover (reg. 7A.03G(2)(c))

9. This putative application of Reg.7A.03A(2) in relation to Order 12 exposes some of the intricacies in the interpretation of the Regulations.

10. The wife’s submissions assumed the Super Fund 1 was “an accumulation interest in the growth phase”. The husband made no submission about this question.  I will make the same assumption. It was not in dispute that the trustee had received no requests under any of regulations 7A.05, 7A.06 or 7A.07 nor taken an action under regulation 7A.10 in relation to the husband’s interest. Sub-regulation (3) was not relevant. 

11. It is a surprisingly difficult issue to determine whether, by reason of Order 12, the husband’s Super Fund 1 interest was “subject to a payment split”. As already noted, this is a precondition to the application of not only Division 7A.1A, but Divisions 7A.2 and 7A.3.

12. The parties’ submissions assumed, but did not analyse why, the husband’s interest in the Super Fund 1 fund was relevantly “subject to a payment split”.

13. The expression “subject to a payment split” is not defined in the Act or the Regulations.

14. Section 90MD of the Act provides the definitions of a number of the other relevant terms and phrases which bear on the meaning of a “payment split”:- 

    a)A “payment split” is defined as “the application of a splitting order in relation to a splittable payment.”

    b)A "splitting order" means an order “mentioned” in subsection 90MT(1). An order mentioned in s.90MT(1) is an order in relation to a superannuation interest “to the effect that, whenever a splittable payment becomes payable in respect of the interest” a non-member spouse becomes entitled to an interest or payment.

    c)The definition of “splittable payment” in s.90ME(1) is “a payment in respect of a superannuation interest of a spouse” and includes, relevantly, “a payment to the spouse”(s.90ME(1)(a) and “a payment to another person for the benefit of the spouse” (s.90ME(1)(b)). The use of the definite article “the” makes clear that the payment referred to is a payment to the spouse who holds the superannuation interest.

15. Reg.1.03 of the Regulations incorporates these definitions into the Regulations. They are obscure and involve a degree of circularity.

16. The parties made no submissions about the meaning of “subject to a payment split”, or “application of a splitting order in relation to a splittable payment” in the context of the Regulations. There appears to be no judicial interpretation of the Regulations. Some observations are necessary nonetheless.

17. The definition of “splittable payment” means such a payment refers to a payment payable to the member spouse, here the husband, which is to be split, not the portion of that payment which is to be paid to the non-member spouse, here the wife. By reason of the definition of “payment split”, in determining whether a particular superannuation interest is “subject to” a payment split, it would be first necessary to establish whether a splitting order has “application” to that interest “in relation to” a splittable payment. If so, the further difficulty is determining when this application takes place so that the superannuation interest becomes “subject to” a payment split.  For an order in terms of Order 12, three possibilities suggest themselves: either when the order is made, when it is served upon a trustee bound by it or when the splittable payment, referred to in the order, becomes payable.

18. The terms of Order 12 (“whenever a splittable payment becomes payable to the husband”) clearly focus attention on the third possibility. In Commonwealth v Cornwell [2007] HCA 16; (2007) 234 ALR 148; 81 ALJR 933 the High Court considered the question of when a cause of action in negligence accrued in circumstances where an employee had received negligent advice about which superannuation fund to join. The case involved a defined benefits scheme. Under the relevant legislation the employee’s entitlements were prospective and contingent upon the falling in at a future time of certain statutory criteria. The High Court held that the employee had not suffered any damage until the statutory contingencies contained in the Superannuation Act 1990 (Cth) were enlivened upon his retirement in 1994, so his action was brought within the relevant limitations period. At [34] the High Court commented on “splitting orders”, in the Act, as follows:

    “Further, "splitting orders" may be made which operate whenever "a splittable payment becomes payable in respect of the [superannuation interest in question]" (s 90MT(1)(a)). The reference to that which is "payable" is also significant. The provisions of Pt VIIIB thus provide no indication that the respondent's cause of action for negligent advice "first accrue[d]" (within the meaning of s 11(1) of the Limitation Act) before his retirement at the end of 1994.

1. Although not giving an interpretation of the expression “whenever a splittable payment becomes payable”, the comments of the High Court highlight the futurity inherent in the word “payable”. The decision in Cornwell suggests, even if it does not decide, two possible conclusions of importance: (i) a splitting order made pursuant to s 90MT(1)(a) of the Act does not operate until the splittable payment becomes payable to the superannuation interest holder and (ii) the relevant payment becomes “payable” when the interest holder becomes eligible to receive his or her entitlements under the relevant superannuation fund.

2. The second conclusion seems consistent with the wording of s.90ME(1) of the Act. Section 90ME(1)(a)-(e) specifies the five types of payment which are splittable payments. The first two, (a) and (b), have already been referred to, being payments “to the spouse” or “to another person for the benefit of the spouse”. The remaining three types are payments which all arise after the death of a spouse or a reversionary beneficiary, who receives a payment after the death of a spouse. These considerations favour construing s.90ME(1) as referring to payments made upon the accrual of entitlements to payment under superannuation legislation and the rules of a relevant fund. Often the point of accrual will be retirement, but it will depend upon the terms of the superannuation, and it may be upon the death of the spouse holding the interest.

3. If a splitting order made pursuant to s 90MT(1)(a) does not operate until the splittable payment becomes payable, the question is whether such an order can result in the relevant superannuation interest being “subject to a payment split”.

4. It would appear this question could only be answered by considering the terms of the order itself and its operation.  There are at least two reasons why Order 12 may be said not to have become operative.

5. First, Order 14 specified an “operative time”.  It is difficult to see how Order 12 could operate before that time. The operative time could not arise until the Prior Orders had been served on the trustee of the Super Fund 1. If the wife’s solicitor had served a sealed copy of the Prior Orders on the trustee of Super Fund 1, the “operative time” under Order 14 would have crystallised.  However, that did not happen. It may be that a superannuation interest cannot become “subject to” the application of an order in relation to that interest, before the order itself comes into operation, or at least until the relevant superannuation trustee becomes bound by it.

6. Secondly, Order 12 itself is expressed in such a way that, applying the ordinary meaning of its wording, the wife has no entitlement to receive a payment until a splittable payment becomes “payable to the husband”. No submissions were directed to the implications of these words. They are however central to understanding the operation of Order 12, and therefore would be central to the operation of any order in the same terms, but which specified a different superannuation fund, as sought by the wife. Again, construed in accordance with the ordinary meaning of its terms, the order means a payment to the husband personally. The wording of Order 12 follows the wording of s.90MT(1) to the extent that it uses the expression “whenever a splittable payment becomes payable…”. It should therefore be construed in a manner consistent with s.90MT(1), taking account of the comments of the High Court in Cornwell. This appears to favour the construction that Order 12, if served on the trustee, would nonetheless have no “application” in relation to a splittable payment until that payment becomes payable to the husband. That point in time may not be reached for a number of years.

7. Thus for either reason, where Order 12 never came into operation or did not have “application” in relation to a splittable payment, it is possible the husband’s Super Fund 1 interest did not become “subject to a payment split” by reason of Order 12. 

8. If so, Division 7A.1A would not have become engaged in relation to the Super Fund 1 Superannuation interest. There would be wider implications. For example, there would appear to be significant problems in understanding how the regulations in Division 7A.1A operate in relation to an order made in terms such as Order 12.

9. A situation where a trustee is not served with an order is a straightforward reason for an order not to become operative.  However, the possibility that a superannuation interest may not become “subject to a payment split” until the relevant splittable payment of that interest becomes “payable” to the member spouse, has implications for the relief the wife seeks in her application.  If the second reason is correct, a mere substitution of the Super Fund 2 for Super Fund 1 would raise the same issues.

10. An obvious difficulty with the construction just discussed is that it would delay the engagement of Division 7A of the Regulations and may mean a non-member spouse such as the wife could not request a rollover of their interest until the member spouse was entitled to be paid their benefits. It also raises questions of how a non-member spouse could bring about a rollover of their interest before the member spouse’s interest becomes payable.

11. However, I am unable to reach a concluded view on these difficult issues, in the absence of argument or submissions from the parties. Despite the opportunity to do so, the parties made no submission on the question of when the splittable payment to the husband became, or would, if the trustee had been served, have become, “payable”.

12. I observe without deciding, since it was not the subject of any argument, that one possibility is that a splittable payment became payable to the husband upon the rollover to the Super Fund 2. A rollover to the trustee of another superannuation fund trustee may arguably fall within s.90ME(1)(b), as a payment “to another person for the benefit of the spouse”. By s.2C of the Acts Interpretation Act1901 (Cth), “person” is taken to “include a body politic or corporate as well as an individual”.  This would include the corporate trustee of a self-managed superannuation fund, such as Company A: Mackah & Mackah [2017] FamCAFC 62 at [45], [46].

13. However, this analysis would appear to falter because, as already noted, Order 12 does not specify payment “to a person on behalf of the husband”. It specifies payments to the husband personally. The rollover payment was made to Company A, not the husband. The rollover to the Super Fund 2, even if a splittable payment, was thus not a payment which conformed to the terms of Order 12.

14. An alternative construction of “subject to a payment split” would rely upon a construction of the wording “application of a splitting order in relation to a splittable payment” as meaning a splitting order applies when it is made and served upon the trustee of the relevant superannuation interest. At that point, Division 7A would be engaged. It is to be observed that such a construction is difficult to reconcile with the words “whenever a splittable payment becomes payable in respect of the interest.”  It would mean, as the parties seemed to assume, that the non-member spouse could request a rollover of the “split amount” to another superannuation fund well before the splittable payment became payable to the member spouse.

15. This appears to be the construction assumed or adopted by the parties.  Since this is a common position, and there is no binding authority to settle the question of construction, and in light of the manner in which the hearing was conducted, I will adopt the position of the parties, with some misgiving, and assume that the husband’s interest in the Super Fund 1 would, if the Prior Orders had been served on the trustee, have become “subject to a payment split” by reason of Order 12.  It follows that if the Super Fund 2 is substituted for the Super Fund 1, the husband’s interest therein would be become subject to a payment split.

Section s.79A

1. In light of the facts and the above analysis of the Prior Orders and Regulations, I turn to consider the wife’s application under s.79A of the Act.

2. In oral submissions the wife relied primarily on s.79A(1)(b) of the Act. The wife contends that s.79A(1)(b) is enlivened because the terms of Order 12 are now plainly frustrated and cannot be carried out: there is no longer any possibility of a splittable payment becoming payable to the husband out of his interest in the Super Fund 1, since such an interest no longer exists.

3. The concept of “impracticality” in s.79A(1)(b) has been construed by reference to the contractual doctrine of frustration: La Rocca & La Rocca (1991) FLC 92-222 at [26]; Cawthorn v Cawthorn (1998) 144 FLR 255 at 262; Sanger & Sanger (2011) 46 Fam LR 275 at [87]. Supervening events rendering a court order impossible of compliance can satisfy the notion of impracticality. In Rohde & Rohde (1984) FLC 91-592 at79,769 Gee J said:

   The word `impracticable' means gleaning a definition from the Shorter Oxford Dictionary, `not practicable', `that cannot be carried out or done'; `practicably impossible'; `unmanageable'; `intractable'.

4. Kay J in La Rocca at 78,539 also introduced the concept of reasonable foreseeability, saying,

   “Now, in my view, what the appropriate application of s.79A(1)(b) ought to be is that circumstances that have arisen in which it becomes impracticable to carry out the orders are circumstances that could not reasonably have been contemplated and that in such circumstances, whilst impossibility is not the test and impracticability is, it may then become just and equitable to change the orders.”

5. I am satisfied the discretion in s.79A(1)(b) is enlivened. The husband appeared to concede the efficacy of the Prior Orders was no longer possible. I do not accept the husband’s submission that the circumstances could reasonably have been contemplated. Service of the order on the trustee was crucial. That it may not take place would not be reasonably contemplated. The failure to serve the trustee of the Super Fund 1 before the rollover to the Super Fund 2 has rendered it impracticable for Order 12 to be carried out in its current terms.

6. The wife’s reliance on s.79A(1)(c) is more difficult. It is not clear what person is said to have defaulted in carrying out an obligation imposed on the person by Order 12. Order 12 imposes no obligation on either party expressly. There was no order to the effect that until such time as the superannuation split to the wife pursuant to the Prior Orders could be rolled over into a separate account of the wife, the husband was restrained from doing any act or thing which would prevent the wife from receiving the superannuation benefits pursuant to the Prior Orders: cf Warden & Warden [2011] FamCA 1029. The wife argued that the husband’s conduct in effecting the rollover into the Super Fund 2 stymied the Prior Orders. No argument was directed to the possibility that Order 12 may be construed to contain an implied restraint to take no step which would prevent the trustee of the Super Fund 1 from carrying out the requirements of Order 12.

7. Orders in the nature of Order 12 bind the nominated trustee and impose an obligation on the trustee to carry them into effect. That is one reason for the requirement for procedural fairness to be afforded to the trustee: s.90MZD of the Act. Since the trustee was never served with the Prior Orders, it was not bound by them and could not have defaulted in carrying out an obligation imposed by them.

8. I am not satisfied s.79A(1)(c) is enlivened.

Variation of the Order 12

1. Since s.79A(1)(b) of the Act is engaged, the question becomes what variation to the Prior Orders should be made in the exercise of discretion.

2. Although the discretion in s.79A of the Act is wide, if a variation to existing orders constitutes in truth a new order, then the relevant factors in s.79(4) of the Act must be considered: Pendleton & Pendleton [2017] FamCAFC 108.

3. The wife submitted that there was no bar to such an approach because the “contribution evidence” of the parties was before the court. I reject that submission. The evidence does not permit such an exercise in this matter. The submissions made only perfunctory reference to s.79(4) of the Act. Consequently, I am confined to consideration of a variation to the Prior Orders, or specifically, Orders 12, 13 and 14.

4. The wife made submissions that Order 12 could be amended to remove reference to Super Fund 1 and insert in lieu thereof reference to the Super Fund 2.

5. The husband resisted any order in those terms on the basis that such an order would inevitably result in the sale of the Property A property. 

6. As observed above, on the wife’s construction of the Regulations, if a variation to the Prior Orders was made as she submits, Division 7A.1A would become engaged. By reason of Reg.7A03(2)(b)(i), since the Super Fund 2 has less than 5 members, under Reg.7A.03(3)(a) the trustee, Company A, must either retain a new non-member spouse interest in accordance with the request of the wife; or (b) or under Reg.7A.03(3A) roll over or transfer the withdrawal benefits to another regulated fund. The practical consequence of this would be to require Company A to retain a separate non-spouse interest in the Super Fund 2 with a value of $34,550, if the wife so requested, or rollover that amount into another regulated fund, if the wife requested that option.

7. It can be seen that if the wife requested the retention of a non-member spouse interest by Company A, no payment would be required.

8. The parties made a number of submissions in which each accused the other of bringing about or contributing to the present situation. 

9. The wife submitted the husband knew, or should have known and turned a blind eye to, the fact that $34,550 had not been removed from his rollover benefit in the Super Fund 1.  The husband denied this and claimed he was unaware. 

10. The husband was cross-examined.   He was asked questions specifically about Annexure B to the wife’s Affidavit which was a member statement from Super Fund 1 for the period 1 July 2011, just after the Prior Orders were made, to 30 June 2012, just before the rollover into the Super Fund 2. This statement showed that the fund balance rose over the twelve month period by about $3,000.  Thus husband denied this information showed he should have known that no split had been made.  He gave evidence that in some years the balance had risen over 12 month period by up to $15,000 and that “Some years it goes up; some years it went down”. He also gave evidence that at the time of the rollover he “was in the middle of a fight for my children” which was more important than money.  He also said that, at the time of roll over, he assumed that Super Fund 1 would not let him roll over any of his fund if a splitting order was outstanding.  I consider that assumption reasonable.

11. I do not accept the husband was subject to an obligation to ascertain whether his superannuation entitlements had been split prior to procuring the rollover into the Super Fund 2. I observe that the email from the wife to the husband on 13 June 2013 was consistent with his understanding that the split amount had been deducted from his Super Fund 1 entitlements prior to the rollover into the Super Fund 2. There is no evidence that the husband knew anything more prior to the purchase of the Property A property by the Super Fund 2. I accept that he acted in good faith.

12. I am not satisfied that the husband deliberately refrained from asking questions or making inquiry such that his claimed ignorance about the non-removal of $34,550 was “a mere affectation and disguise”, as the wife submitted, referring to the decision of Lord Sumner in The Zamora (No 2) [1921] 1 AC 801 at 812-3, and subsequent authorities.

13. The undisputed facts are that the former solicitor of the wife failed to serve the trustee of the Super Fund 1 with the Prior Orders. The problem for both parties stems from this default. In exercising the discretion in s.79A of the Act, the question is which party should bear the consequences of this failure.

14. The husband submitted that the wife had delayed in bringing the proceedings. I note here that the wife made reference to s.105 of the Act, which deals with enforcement of orders, in the context of the husband’s submissions about delay. However, as already pointed out, Order 12 did not impose any express obligations on the parties. The obligation was imposed on the trustee of the Super Fund 1, if it had ever been served. The wife is not seeking enforcement, but variation. In any event, I am satisfied that the wife was misled, apparently deliberately, by her former solicitor. The evidence establishes that her present solicitors discovered on about 6 July 2016 that the wife’s former solicitor had deceived her. She contacted the husband in December 2016. She sought a negotiated outcome before approaching the Court. I am satisfied the wife’s delay was reasonable in the circumstances.

15. The husband submitted that if the wife became a non-spouse member of the Super Fund 2 there would be additional costs of compliance.  The evidence of the husband does not support this submission.  His evidence did not give any details of compliance costs.  His written submissions filed 12 April2018 at paragraph 7 refers to loss and expense on paragraph 20 of his Affidavit filed 2 June 2017.  However, that paragraph refers to expenses on a putative sale of the Property A property.

16. The central contention of the husband was that any variation of Order 12 to substitute Company A for the trustee of the Super Fund 1 would compel the sale of the Property A property. 

17. This contention was based on the evidence that the husband does not himself have sufficient funds to make a cash contribution to the Super Fund 2 to satisfy a rollover request by the wife, nor does the Super Fund 2 itself have sufficient liquid funds.  I accept this is likely on the evidence before me.

18. The husband also submits that there has been no capital growth in the value Property A property, “based on my research of other similar properties”.   No details of this research were given. This evidence is not convincing and I do not accept the husband’s submission in this regard.  There is no evidence upon which to reach any view about the current value of the Property A property.

19. This submission also seemed to assume that absence of capital growth would make it unfair to the husband to bring about a sale of the Property A property at present. I reject this. It is in the nature of superannuation funds that they fluctuate in value.  The husband’s own evidence demonstrates this in relation to the Super Fund 1 (paragraph 16 of the husband written submissions filed 12 April 2018). Also, according to the husband’s own evidence, the Super Fund 2 is losing money holding the Property A property, to the extent of some $23,511 for the financial year ended June 2018.  The husband’s decision to invest the Super Fund 2 in real estate, rather than a more liquid asset class, does not alter the fact that all superannuation funds are subject to the market forces operating on their investments. If the Property A property is sold, the Super Fund 2 will retain the surplus proceeds of sale.

20. The husband submits there is no evidence that he could borrow money himself to make a contribution to the Super Fund 2. His evidence does not permit a conclusion on this question.  He also submitted there is no evidence that Company A as trustee of the Super Fund 2 could borrow the necessary funds.  However, on his own evidence it appears Company A borrowed $200,000 from Bank 1 to purchase the Property A property.  I infer there has been a capacity to borrow. There was no evidence from the husband, apart from his assertions, to support a conclusion that no further borrowing was possible.

21. For these reasons, the husband in his evidence and in the tenor of his submissions, argues that if Order 12 is varied as sought by the wife, he will be penalised unfairly as an innocent party. However, as discussed above, I have not accepted the submissions made by the husband concerning the factors said to constitute this penal outcome and it is undisputed that he has benefitted to the extent of $34,550, in the sense that in September 2012 the rollover amount into the Super Fund 2 was greater to that extent than it should have been. That benefit, whether or not knowingly received, I infer must have played some part in enabling the husband to purchase the Property A property.

1. I do not accept that substituting Company A for the trustee of Super Fund 1 will penalise the husband.  It will result in the diminution of the value of his present superannuation fund to the extent intended by the Prior Orders, which were made by consent. 

2. If the Property A property is sold and other costs are incurred as a result, this is no different to any superannuation fund incurring the costs of disposing of assets, resulting in the fluctuation in the value of the fund.

3. The husband submitted that the wife has another remedy available against her former solicitor.  That may be true, but on the evidence presented, I am not in a position to form a view about the prospects of success of any claim by the wife against her former solicitor, whether based upon negligence or breach of fiduciary duty, including the nature and quantification of damage.

4. There presently exists another regulated fund, the Super Fund 2, with a known trustee, Company A, upon which a varied order can operate.

5. If the Order 12 is varied  by removing a reference to Super Fund 1 and inserting in lieu thereof reference to the Super Fund 2, each party will receive entitlements as similar in nature as possible in the circumstances, to those which were embodied in the Prior Orders as part of a just and equitable outcome.

6. I have given consideration to an immediate lump sum payment to the wife.  Such an order for a lump sum payment to the wife would not only compel the husband to find funds to pay her outside of any superannuation fund, but it would also mean the wife receives a cash amount rather than a superannuation entitlement. This appears to put her in a more advantageous position than she would have been if the Prior Orders had been carried into effect.  It would also constitute a new order, which as I have said, the evidence does not permit me to make.

7. Accordingly, in the exercise of my discretion, I will vary Order 12 to remove reference to Super Fund 1 and insert in lieu thereof reference to the Super Fund 2, with consequential amendments to Order 14. There is no requirement to vary Order 13.

I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of Judge Harper

Date: 21 September 2018