DLW Health Services Pty Ltd v H.E.S.T Australia Limited
[2009] VCC 329
•22 April 2009
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
Case No. CI-08-03961
| DLW HEALTH SERVICES PTY LTD (A.C.N. | Plaintiff |
| 096 959 170) as trustee for the DLW HEALTH SERVICES TRUST trading as ESSENDON AGED CARE | |
| v | |
| HEST AUSTRALIA LTD (A.C.N. 006 818 | Defendant |
| 695) as trustee of the HESTA SUPER FUND |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 31 March 2009, 1 & 2 April 2009 |
| DATE OF JUDGMENT: | 22 April 2009 |
| CASE MAY BE CITED AS: | DLW Health Services Pty Ltd v H.E.S.T Australia Limited |
| MEDIUM NEUTRAL CITATION: | [2009] VCC 0329 |
REASONS FOR JUDGMENT
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Catchwords: Superannuation- whether plaintiff employer entitled to a return of “late payments” of superannuation contributions to the defendant’s fund in circumstances where the plaintiff has become liable to pay, and has paid, superannuation guarantee charge (SGC) under the Superannuation Guarantee (Administration) Act 1992 (Cth) in respect of the period - Counterclaim - whether defendant entitled to claim outstanding payments in respect of quarters in 2006 in circumstances where the plaintiff will also be liable to pay SGC
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr. P. Lovell | Harwood Andrews Lawyers |
| For the Defendant | Mr. A. Broadfoot | Dwyer & Co Solicitors |
| HER HONOUR: |
1 The plaintiff employer has made “late payments” of superannuation to the
defendant’s fund in an amount of $132, 975.24 and has become liable to pay, and has paid, superannuation guarantee charge (“SGC”) under the Superannuation Guarantee (Administration) Act 1992 (Cth) (“SGA Act”). The plaintiff claims a return of the payments based on an implied term of its agreement with the defendant or alternatively based on its construction of clause 13 of a certified agreement. It claims these payments based on mistake and/or misleading and deceptive conduct and/or restitution.
2 The defendant says that the plaintiff’s obligations to it, as compared with its
obligations under the SGA Act, are separate and independent. It claims that the plaintiff was obliged to make monthly payments to it and, in particular, denies the existence of the implied term contended for by the plaintiff. It further counterclaims that amounts for superannuation contributions in respect of 2006 are outstanding in an amount of $117,249.40.
ISSUES
3 The issues that arise are therefore as follows:
(a) what were the terms of the agreement between the plaintiff and the
defendant, and more particularly:
(i) whether they included an implied term as alleged by the plaintiff;
(ii) how clause 13 of the relevant certified agreement operates in
relation to the other terms;
(b) whether the plaintiff has established a claim based on mistake and/or
misleading and deceptive conduct and/or restitution;
(c) whether the defendant has established an entitlement under its
counterclaim.
BACKGROUND
4 The plaintiff (DLW) is a trustee of a trust known as the DLW Health Services Trust and operates an aged care facility at Essendon. It employs nurses and other staff to work at that business. The business was acquired from a receiver in February 2002.
5 The defendant is a trustee of the Health Employees Superannuation Trust
Australia (“the Hesta fund”).
6 On about 4 February 2002 DLW applied to become a participating employer in the HESTA fund which application was accepted in May 2002.
7 Both parties agree that the parties entered into an agreement in respect of the plaintiff’s membership as a participating employer in the Hesta Fund which is governed by the Application, the trust deed and the Fund’s Rules (“the agreement”).
8 However the precise terms of the agreement are in dispute.
9 More particularly the plaintiff alleges that there was an implied term of the
agreement to the effect that “the plaintiff was not obliged to pay a superannuation contribution to the defendant in respect of a period if the contribution would not be effective to reduce or eliminate the plaintiff’s superannuation guarantee shortfall in respect of that period”[1].
[1] Paragraph 7A of Plaintiff’s Further Amended Statement of Claim dated 30 January 2009 (FASC)
10 Put another way, the plaintiff alleges it is not obliged to pay contributions to the
defendant whenever a payment will be “late” such that it will be liable to pay the
SGC in any event.
11 The defendant denies this allegation and alleges that the plaintiff was obliged
by the terms of the agreement to make monthly contributions to the Hesta fund
independently of its obligations under the SGA Act.
12 However the plaintiff further submits that at least from 22 September 2003 theprevailing terms of clause 13.1 of the Health and Allied Services Certified Agreement of 2002 states, inter alia, that the relevant superannuation legislation, including the SGA Act “governs the superannuation rights and obligations of the parties.” By reason of this clause the plaintiff alleges that there was no express requirement for DLW to make contributions to Hesta on a monthly basis.
13 This construction of clause 13.1 is rejected by the defendant.
14 During each of:
(a) the financial year ending 30 June 2003;
(b) the quarter ending September 2003 and
(c) the quarter ending December 2003
the plaintiff accepts that it failed to pay superannuation contributions required within the time frames specified by the relevant award, industrial agreement, legislation or agreement between the parties.[2] However in closing submissions Mr Lovell, who appeared for the plaintiff, alleged that at least from 22 September 2003 there was no express requirement for monthly payments. Further that, prior to that time, the plaintiff was entitled to rely on the implied term as alleged.[3]
[2] Paragraph 8 of FASC
[3] Plaintiff’s written closing submissions at paragraph 20
15 By four letters dated from 24 June 2003, Dwyer & Co, solicitors for the Fund,
demanded outstanding superannuation contributions.
16 The plaintiff then paid to the defendant various amounts allegedly in the belief
that doing so “satisfied its obligations to pay the unpaid contributions.”[4]
[4] Paragraph 14 of FASC
17 Of these payments, amounts totalling $132 975.24 were paid to the Hesta fund
as follows (hereafter “the late payments”):
| Period | Amount Paid | Date Paid |
| October 2002 | $264.76 | 5 January 2004 |
| April – November 2003 | $6,300.00 | 5 January 2004 |
| April 2003 | $14,078.96 | 5 January 2004 |
| May 2003 | $13,261.64 | 10 February 2004 |
| June 2003 | $12,554.85 | 10 February 2004 |
| July 2003 | $13,007.42 | 17 March 2004 |
| August 2003 | $18,963.37 | 17 March 2004 |
| September 2003 | $12,717.98 | 17 March 2004 |
| October 2003 | $12,881.20 | 7 April 2004 |
| November 2003 | $13,494.08 | 7 April 2004 |
| December 2003 | $15,450.98 | 7 April 2004 |
18 After the making of these late payments the Australian Taxation Office (“ATO”)
commenced an audit of the plaintiff’s remittance of superannuation contributions and issued assessments against the plaintiff for SGC in respect of the year ended 30 June 2003 (on 1 October 2004); the quarter ended 30 September 2003; and the quarter ended 31 December 2003 (both on 4 April 2005). These periods were subsequently the subject of amended assessments on 15 February 2006.
19 The plaintiff alleges that it was only as a result of the audit that it became aware
that it was liable to pay an SGC payment of $199,285 which amount was paid to the
Commonwealth over the period 2 May 2006 to 16 April 2007.
20 The parties are in agreement that the said amount of SGC was constituted by:
(a) $132,491.30 for superannuation guarantee shortfall;
(b) $5470.00 for administrative charges;(c) $24,800.70 for nominal interest;
(d) $36,522.80 general interest charges.
21 The plaintiff alleges that the ATO subsequently paid the shortfall component to
the defendant.
22 The plaintiff therefore seeks return of the sum of $132, 975.24 paid to the Hesta
fund. This claim is made on the basis of mistake and/or restitution.[5]
[5] No point was made by the defendant as to the slight difference between the amount paid to Hesta of $132, 975.24 and the amount paid to the ATO for the shortfall at $132, 491.30
23 Further and in the alternative the plaintiff seeks the same amount as damages
for misleading conduct. Thus it says that in making the demands the defendant represented that the unpaid contributions were due and payable which was incorrect and in breach of s52 of the Trade Practices Act 1974 (“TPA”) or s12DA Australian Securities and Investments Commission Act (“ASIC Act”).
24 In terms of the Counterclaim dated 6 February 2009, the defendant alleges that
the plaintiff has failed to pay superannuation contributions it was obliged to make in respect of its employees between 28 April 2006 and 28 December 2006. It seeks these payments in an amount of $117,249.40.
25 By its reply and defence to counterclaim dated 4 March 2009 the plaintiff alleges
that between July and December 2006 various representations were made to the plaintiff to the effect, inter alia, that if the plaintiff chose to remit the SGC to the ATO directly then it would not be obliged to pay superannuation contributions to the defendant.
26 It further relied on the fact that the ATO has now issued assessments in relation
to the quarters ended 30 June 2006, 30 September 2006 and 31 December 2006 for SGC. These assessments were issued on 24 January 2008 and amended on 17 July 2008.
27 The plaintiff says that it is now liable to pay these assessments to the
Commonwealth and that, by reason of the defendant’s representations, the defendant should be estopped from seeking the unpaid 2006 contributions.
28 Alternatively if the plaintiff is liable to pay then it claims that the defendant’s
representations were false. The defendant has thereby allegedly engaged in misleading and deceptive conduct in breach of s52 of the TPA or s12DA of the ASIC Act.
EVIDENCE
29 Although oral evidence was adduced by both parties, very little of it was
probative on the issues in dispute.
30 Mr Weir and Mr Danby, were called on behalf of the plaintiff. Both were
directors of DLW.
31 Ms Higginbotham was called on behalf of the defendant. She was a client
relationship manager with the Hesta fund.
32 Mr Weir was the central witness as Mr Danby was not involved in the payment
of superannuation.
33 However, as will be seen below, Mr Weir appeared to have little understanding
of the defendant’s obligations in relation to superannuation. This was notwithstanding that he had previously been a partner in a chartered accounting firm for 25 years. For example, he had no knowledge or understanding of superannuation guarantee shortfall matters until after an audit of the ATO. He was also unaware of any requirements in any awards or certified agreements. At one stage in his evidence he also indicated that he did not know what quarterly superannuation guarantee reporting meant.
34 This ignorance, and the plaintiff’s problems generally, may have been
exacerbated by the ill health of Mr Weir which led to him being absent from work at various times. However, Mr Danby acknowledged that in Mr Weir’s absence it “probably wasn’t really clarified” as to who in the organisation would look after superannuation.
35 In any event, both Mr Weir and Mr Danby acknowledged that the agreement
with Hesta, and, more particularly, the application document (which will be referred
to below) required the making of monthly contributions.
STATUTORY PROVISIONS
General
36 In resolving the various contesting claims it is important to set out the legislative
scheme.
37 In 1992, the Commonwealth Parliament enacted the Superannuation Guarantee (Charge) Act 1992 (Cth) (“SGC Act”) and the SGA Act. An explanatory memorandum stated, amongst other things, that the scheme was intended to encourage employers to provide a minimum level of superannuation support for employees. Under the scheme, a tax was imposed on an employer who provided superannuation support to employees below a minimum level.
38 The SGC Act imposes a charge on any “superannuation guarantee shortfall” of
an employer in respect of the relevant period. The charge is the amount of the
shortfall (ss5 and 6).
39 According to s17 of the SGA Act immediately prior to 1 July 2003, a
superannuation guarantee shortfall for a year is worked out by adding together: (1) the total of the employer’s individual superannuation guarantee shortfalls for the year; (2) the employer’s nominal interest component for the year; and (3) the employer’s administration component for the year.
40 With effect from 1 July 2003 the SGA Act was amended so that the
superannuation guarantee shortfall was calculated on a quarterly basis. This then applied to the late payments made in this case in respect of periods from 1 July 2003. In this case the superannuation guarantee shortfall was worked out by adding the shortfall, nominal interest and administrative components “for the quarter” rather than “for the year” (see s17 from 1 July 2003).
41 In terms of the superannuation guarantee shortfall, this was to be calculated for
each employee as a percentage of the total salary or wages paid by the employer to the relevant employee during the period in question (s19). The percentage to be applied was 9 per cent unless reduced by an employer by ss22 or 23.
42 The effect of ss22 and 23 was that the charge percentage was reduced by the
employer’s actual contribution rate to the relevant fund in respect of each employee. In other words if the employer contributed 9 per cent of each employee’s total wages to a fund the charge percentage would be reduced to nil and accordingly the employer would not be subject to a SGC. In order to avoid the charge in respect of the period prior to 1 July, contributions had to be made by 28 July 2003 (s23(6A)). After 30 June 2003, only those contributions made within the period of 28 days after the end of the relevant quarter could be taken into account (s23(6)).
43 The SGA Act also required an employer who had a superannuation guarantee
shortfall in a year to lodge a superannuation guarantee statement on particular
prescribed dates (s33).
44 If lodged, this statement acted as a self-assessment of the liability of the
employer to pay a charge to the Commissioner for the relevant period and SGC for
a period was payable on the lodgement day (s46).
45 However, if, as in the present case, no statement was lodged and instead
default assessments were made, then SGC was payable on 14 August in the following year (in the case of an amount payable for the period up to 1 July 2003) or (for periods after 1 July 2003) was payable on the day on which the assessment was made (s36(3)).
46 Once received or recovered by the Commissioner, a particular amount of charge
must be dealt with in accordance with Part 8 of the SGA Act. By way of summary, after the “shortfall” is calculated (which excludes the administration component), it must in most cases be applied by the Commissioner for the employee’s benefit in accordance with s65. Generally this was to pay the amount of the component to a retirement savings account, an account with a complying superannuation fund or an account with a complying approved deposit fund that was held in the name of the employee (s65).
47 However, various other options were available depending, for example on
whether the employee retired due to incapacity (s66) or was deceased (s67).
48 In this case, Ms Higginbotham gave evidence that she was unable to identify
whether and what the Hesta fund had received from the ATO as a result of the plaintiff’s charge payments since the defendant was given no information regarding the relevant employer and period to which the payments relate. Nevertheless, she fairly conceded that it was far more likely than not that money had come from the ATO by reason of the SGC paid by Essendon Aged Care.
Offsetting
49 Prior to the introduction of s23A, there was limited opportunity for employers
who made late contributions to offset their contributions against their SGC. An exception to this was s23(7) which made provision for certain contributions made before the relevant period (whether yearly or quarterly) to be taken into account in the succeeding period.
50 A form of offsetting was allowed by reason of the insertion of s23A with effect
from 1 January, 2006.[6] However this was limited in its operation to circumstances where an employer made a contribution to a fund within one month after the due date.
[6] Tax Laws Amendment (Loss and Recoupment Rules and other Measures) Act 2005, s3 and Sch 6
51 In 2008, the scope of s23A was further expanded by the passing of the Tax
Laws Amendment (2008 Measures No. 2) Act 2008 (“the 2008 Measures Act”).52 In the Explanatory Memorandum which accompanied the 2008 amendments it was stated:
“2.5...Amending the SGAA to extend the late payment offset for employers who make a contribution after the due date, will reduce the incidence of employers being forced to pay the same amount twice for a quarter for the same employee...
2.8 These amendments ensure that employers who fail to make sufficient
contributions by the due date, but subsequently made a contribution directly to the employee’s fund, do not have to pay the same amount twice (once to the fund and once to the ATO). This is achieved as the amended late payment offset allows employers to use a late contribution to offset part of their SG charge for the employee.”
53 As will be seen below, Mr Lovell submitted that the terms of the explanatory
memorandum supported the plaintiff’s case.
54 Pursuant to s8(1) of the 2008 Measures Act, if a SGC became payable under an
assessment before the commencement of the Schedule to the Act (24 June 2008) but was not paid before that time then the new form of s23A applied as if the outstanding charge became payable on 24 June 2008.
55 Section 23A provided that a contribution to a fund was offset against the
employer’s liability to pay SGC (insofar as it relates to nominal interest and shortfall) if the contribution was made after the end of the period of 28 days after the end of the quarter and the employer elected in an approved form that the contribution be offset. Where there was no superannuation guarantee statement, such election must have been made within four years after the SGC for the quarter became payable (s23A(2)(b)).
56 Given that the original assessments were issued on 24 January 2008 (prior to
24 June 2008) [7] and that the period of 4 years had not yet expired, it may well have been that the plaintiff could have utilised these provisions in the event the defendant was successful on its counterclaim.
[7] SGC under an amended assessment is taken to have become payable on the day on which the charge under the original assessment became payable: s37(7)
57 However, after the Court had reserved its decision, it received advice from the
solicitors for the defendant that there had been recent amendments to s23A of the SGA Act which took effect on 26 March 2009 (being five days prior to the commencement of the hearing).
58 The court then gave both parties the opportunity to make further submissions.
59 The amending legislation is the Tax laws Amendment (2008 Measures Act No. 6) Act 2009 (“the 2009 Act”). It applies to a valid election made by an employer to use the offset on or after 26 March 2009.
60 Critically, schedule 3 of the 2009 Act provides that offsetting is only available
where the contribution is made before the employer’s original SG assessment for
the relevant quarter (see item 1, subparagraph 23A(1)(a)(ii)).
61 It therefore appears that - as conceded by the defendant - the plaintiff will not be
entitled to an offset under these provisions if payments in respect of 2006 are now
made.
62 By written supplementary submissions, the plaintiff accepted that no offset
would be available and that, “there will not be any amelioration of any unfair effect of any order in favour of the defendant on its counterclaim.” [8] It was further submitted that the court should dismiss the counterclaim “because the payment of the contributions shortfall and nominal interest via the 2008 charge assessments will be onforwarded to HESTA by the ATO in any event.”[9]
[8] Plaintiff’s Supplementary Submissions, 20 April 2009 paragraph 10; this was contrary to an earlier submission of the defendant to the effect that there would be some amelioration by the offset
[9] Plaintiff’s Supplementary Submissions, 20 April 2009 paragraph 13
THE TERMS OF THE CONTRACT
63 Both parties proceeded on the basis that the relevant terms of the agreement
were set out in the application and the Health Employees Superannuation Trust
Australia Consolidated Rules as at 5 December 2002.
Application
64 The application in the name of DLW was dated 4 February 2002. Mr Weir
accepted that a blank form of the application was included in an administrative
guide brochure entitled “Ready Set Go” dated December 2001.
65 Page 146 of the said brochure contains a note to the effect that “Hesta requires
contributions on behalf of your employees to be made monthly.” At page 150 it is explained that “this is in the best interests of your employees as it ensures they receive the correct return on their super, and facilitates death and disability insurance.”
66 Mr Weir agreed that he signed the attached application. In a declaration at the
end of this application, it is declared that “this agreement is between the employer and Hest Australia Limited.” DLW further agreed that in consideration of being admitted to the Fund, the employer and its employees by becoming members of the fund agreed to become bound by the terms and conditions of the Trust Deed and Rules of the Fund. The employer further covenanted with the Trustee:
“1 To promptly on a regular basis (within and no later than 14 days of becoming due) remit to the Trustee all employer compulsory and employee voluntary contributions retained by the employer out of remuneration paid to the member for all members of the fund employed by the employer;
2 To immediately pay on demand any debt accumulated under clause 1 including all outstanding contributions, interest at the earning rate of the Fund as nominated by the Trustee, and all legal costs associated with the recovery of the debt.”
67 Part 4 of that application also contains the statement that “contributions are
payable to Hesta each month” (emphasis added).
68 The application was accepted by correspondence on behalf of the Hesta fund of
20 May 2002.
Rules
69 As indicated above, by the terms of the application, DLW agreed to become
bound by the terms and conditions of the Trust Deed and Rules.
70 Clause 37.1(a) of the Rules provided:
“37.1(a) The Employer of a Member shall in respect of that Member contribute to the Plan such amounts and at such times or within such periods as may be specified by:
(i) an award of an industrial tribunal or a registered or unregistered
agreement; and/ or(ii) the Guarantee Act[10] so that the Employer does not incur an individual superannuation guarantee shortfall (as defined in the said Act) in relation to the Member; and
[10] Defined as the SGA Act or the SGC Act or such other legislation as may be substituted for those Acts or may be appropriate in the context- rule 1.1
(iii) any agreement in writing between the Trustee and the Employer
including an Agreement to Become a Participating Employer.”
Relevant awards
71 The court was informed that the Nurses (Victorian Health Services) Award 2000
(“the nurse’s award”) governed those employees who were nurses.
72 Clause 32.9.3 of the nurse’s award read:
“32.9.3 Superannuation Payments (Non-Public Extended Care Sector only)
An employer shall pay employer superannuation contributions on behalf of each employee in accordance with the terms of the Agreement between the Employer and the relevant Superannuation fund.
32.9.3(a) Where an employer is a participating employer with the Health Employees Superannuation Trust Australia (HESTA) the employer shall remit employer contributions promptly on a regular monthly basis to the Trustee on behalf of any employee/s who are members of HESTA no later than 14 days after or following the month to which the contributions relate; or
32.9.3(b) equivalent monthly contributions at such other time and in such manner as may be agreed in writing between The Trustees of the fund and the employer.” (emphasis added)
73 The Health and Allied Services – Private Sector – Victoria Award 1998 generally governed those other employees not covered by the nurses award. Mr Danby gave evidence that the nurse’s award and this award covered “all bar maybe one of our staff.”
74 Clause 24.5 of the Health and Allied Services award dealt with employer contributions on behalf of each employee and clause 24.5.1 of that award provided that a respondent employer shall contribute to the fund such contributions as required to comply with the SGA Act and the SGC Act.
75 Clause 24.5.2(a) reads:
“24.5.2(a) Such contributions shall be made monthly by the last day of the month following, the total of the weekly contribution amounts accruing in the previous month in respect of each employee.“ (emphasis added)
76 Prima facie then the application document together with the relevant awards
expressly provided for monthly payments.
Certified agreement
77 The plaintiff relied on the certified agreement which was entered into by DLW
with the Australia Nurse’s Federation and the Heatlh Services Union of Australia
which was operative from 22 September 2003 (“the certified agreement”).
78 Pursuant to clause 6 of the certified agreement that agreement was to be read in
conjunction with the awards cited above, but was to prevail to the extent of any
inconsistency.
79 As indicated already, the plaintiff in particular relied on clause 13 which read as
follows:
“13 Occupational Superannuation
13.1 The subject of superannuation is dealt with extensively by legislation including the Superannuation Guarantee (Administration) Act 1992, the SGC Act 1992, the Superannuation Industry (Supervision) Act 1993 and the Superannuation (Resolution of Complaints) Act 1993. This legislation, as varied from time to time, governs the superannuation rights and obligations of the parties.
13.2 The employer shall make occupational superannuation contributions to the
Fund. ‘The Fund’ for the purpose of this Agreement shall mean:
(i) Health Employees Superannuation Trust of Australia (‘HESTA’) established and governed by a trust deed 23 July 1987, as may be amended from time to time, and includes any superannuation scheme which may be made in succession thereto;
(ii) Health Super, or
(iii) Any other complying fund upon a request from the employee and with the
consent of the Employer.
13.3 The Employer shall participate in accordance with the trust fund deeds.”
(emphasis added)
80 As well as alleging the existence of an implied term, the plaintiff’s case was that
clause 13.1 was inconsistent with the terms of the awards in providing that the superannuation legislation generally governed the superannuation rights and obligations of the parties. This was said to be inconsistent with an obligation to make monthly payments. Given clause 13.1 prevailed, it followed that there was no express requirement from 22 September 2003 for DLW to make contributions on a monthly basis. Rather, the plaintiff’s only obligation was to make superannuation guarantee contributions “ by the due dates specified in the SG Legislation.”[11]
[11] Plaintiff’s Closing submissions at page 4
81 The plaintiff had not in fact made contributions to Hesta in accordance with the
dates “specified in the SGA Act.” However, the tenor of the submission appeared to be that clause 13 somehow excused the plaintiff from its contractual obligations to Hesta if amounts of SGC relating to the same period were paid to the ATO.
Effect of clause 13
82 The plaintiff’s case proceeds on a fundamental misconception that the legislative
scheme actually imposes an obligation on the employer to make a superannuation contribution. This is not the case. Rather, the scheme provides for the imposition of a charge on an employer and for the liability for that charge to be reduced to the extent that the employer makes contributions at the defined rate by a particular specified time.[12]
[12] Master Painters Association of Victoria v Rathner (2004) 211 ALR 316 at [7]
83 Thus in the case of Master Painters Association of Victoria v Rathner[13] the Commissioner had lodged a proof of debt relating to SGC in relation to a company under a deed of arrangement. This proof had been rejected by an administrator on the basis of the rule against double proof given the company had already made late superannuation contributions to the relevant fund.
[13] Ibid
84 Mandie J rejected the administrator’s approach and held that the Commissioner
was entitled to have the proof of debt accepted.
85 Firstly, His Honour held that the rule was not invoked since there were no rival
claims and no possibility of payment being made twice out of the limited fund.
86 Secondly, dealing with an alternative submission that the contributions and the
charge represented “substantially the same debt” Mandie J dealt with the scenario wherein the company had a contractual obligation to make superannuation contributions which it subsequently made. He then stated:
“…Concededly, that contractual obligation is not the “same” debt as the SGC liability (in whole or in part). The tax liability is not discharged by the company’s “late” payment of contributions. Moreover the tax liability arises under the SGA Act whether or not the employer has any such contractual obligation to make superannuation contributions (either before or after 28 July). There is thus no necessary relationship between the existence of the contractual obligation and the imposition or existence of the tax liability.”[14]
[14] Ibid at [33]
87 The case has further been applied in the case of DP Excavation & Haulage Pty
Ltd v Commissioner of Taxation.[15]
[15] (2005) 54 ACSR 274
88 In that case, Barret J was concerned with whether or not the amount claimed by
the Commissioner as a priority in a liquidation for SGC was equivalent to “wages” or “superannuation contributions” as provided in s556 (1)(e). If it was this meant that the priority was subject to s556(1A).
89 Barret J rejected this proposition stating:
“But even if a payment of SGC can, on this basis, be said to be made ‘in respect of’ identified employees, it does not follow that the payment has the character of “superannuation contributions”. This is because a “superannuation contribution” is a “contribution by the company to a fund” (emphasis added) for the purposes described in the s 556(2) definition. By paying a SGC, a company does not make a “contribution” to any “fund”. It discharges a debt created by statute, which debt is imposed because of the company’s failure to make a “contribution” to a “fund” of the kind referred to in the s 556(2) definition of “superannuation contribution”[16]
[16] Ibid at [28]
90 Further His Honour applies the observations of Mandie J that a contractual
obligation to make superannuation contributions is “not the same debt” as the SGC
liability. [17]
[17] Ibid at [32]
91 The above authorities therefore support the defendant’s case that the plaintiff’s
obligations under the SGA Act to the Commonwealth are separate and distinct from
its contractual obligations to the defendant.
92 The plaintiff’s case further ignores the express terms of clause 13.3 that the
Employer is obliged to participate in accordance with the trust fund deeds.
93 It is not appropriate in such circumstances to speak of the obligations under the
certified agreement as being “inconsistent” with the obligations under the awards.
94 In any event, it is possible to comply with all of the plaintiff’s obligations - and
avoid the imposition of a charge - if the plaintiff made superannuation contributions
by the 14th of the month following the month to which the contributions relate.
95 The terms of clause 13 of the certified agreement do not assist the plaintiff.
Whether there was an implied term[18]
[18] The alleged implied term being already set out at paragraph 9 above.
Principles
96 The High Court has repeatedly endorsed[19] the following statement of principle taken from the majority opinion of the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings20:
[19] See, for example, cases referred to in Cheshire & Fifoot’s Law of Contract, 9th edition at 10.55
“For a term to be implied, the following conditions (which may overlap) must be
satisfied:
(1) it must be reasonable and equitable;
(2) it must be necessary to give business efficacy to the contract, so that no
term will be implied if the contract is effective without it;
(3) it must be so obvious that it “goes without saying”;
(4) it must be capable of clear expression;(5) it must not contradict any express term of the contract.”
Application of principles
Reasonable and equitable
97 I do not accept that the implication of the alleged term is reasonable and
equitable. As indicated already the terms of the contract clearly contemplated a monthly payment. There is no good reason to ignore this requirement in circumstances where the plaintiff becomes liable to pay a SGC.
98 The gravamen of the plaintiff’s complaint was that it was effectively and, in
substance, “paying twice.”
99 However, as is apparent already, the payments related to distinct and separate
liabilities.
100 Moreover there is good reason to uphold an obligation wherein an employer
must make monthly payments. The making of such payments not only protects the interests of the employer in preventing exposure to liability for the charge, it also protects employees and ensures they receive payments in a timely manner.
101 Further although it appears that the Commissioner will effectively repay the
shortfall for the benefit of an employee in the ordinary case, this will not necessarily
footnote 527
(1977) 180 CLR 266 at 283
be so in all cases. Thus, for example, the Commissioner may never become aware of the employer’s failure to make payments. For example, where no guarantee statement is lodged and no audit occurs it is possible that no subsequent assessment is ever raised. An employer may also become insolvent prior to the recovery of the surcharge.
102 I am not satisfied that it is reasonable and equitable to imply the term alleged.
Necessary to give business efficacy
103 The contract is effective without the implication of the term.
104 Moreover, as indicated already, the monthly obligation supplies a mechanism
whereby the plaintiff pays contributions in such amounts and at such times to
ensure that no shortfall arises.
105 There is no reason to imply the term on the basis of business efficacy.
So obvious it goes without saying
106 Given the distinct nature of the obligations, the implied term is not obvious.
107 The purport of the term is really an attempt to gain the benefit of an offset for
SGC in circumstances where none was available under the legislation at the time of entry into the contract (it is also not available under the current legislative regime).
108 Thus, as indicated above, section 23A was inserted and amended in 2008
circumstances where the legislature sought to “reduce the incidence of employers
being forced to pay the same amount twice for a quarter for the same employee.”[21]
[21] See paragraph 52 above
109 In recognising that such an “incidence” occurred the legislature clearly
contemplated that the circumstances such as those the subject of this proceeding
could occur.110 Mr Lovell submitted that the word “forced” suggested that parliament had
recognised that there was a forcing of an employer to pay contributions twice which
was not a desired outcome.
111 There may have been such a recognition in 2008 but the fact that there were no
such offset provisions prior to that time is instructive. Thus, given an amendment was thought to be necessary, the legislature appears to have contemplated the very outcome the plaintiff seeks to avoid.[22] Moreover, as has already been noted, the legislature has further narrowed the scope of the availability of any legislative offset by the 2009 Act so as to encourage employers to make contributions closer to the original due date.[23]
[22] Grain Elevator’s Board v Dunmunkle (1946) 73 CLR 70
[23] Explanatory Memorandum to the 2009 Act at 3.5
112 If the parties had contemplated the term contended for they could have readily
provided for it. Given the legislative context it can hardly be said that the term was
an “obvious” one.
Whether capable of clear expression
113 The term as alleged is capable of clear expression (as set out in paragraph 7A
of the FASC) but may have unintended consequences.
114 Thus, as set out previously, the statutory obligation to pay a charge does not
necessarily arise immediately on the expiry of the date fixed for payment of the charge. Where, as here, an audit took place, the obligation did not arise in respect of quarters after 1 July 2003 until after the date of the assessment.
115 The consequences of the plaintiff’s construction would therefore be that there
could be a “vacuum period” wherein the employer would escape liability for making
contributions at all.
116 When this was raised with Mr Lovell he submitted that the plaintiff’s obligation
should cease on the due date for payment of the SGC notwithstanding that liability
for the charge depends on a subsequent assessment.
117 However, such a term could have undesirable consequences, as alreadymentioned, where no subsequent assessment ever takes place. In such a case the employer may avoid both the making of superannuation payments and the payment of the charge.
118 Such a consequence can hardly have been intended by the parties to this
agreement and should be rejected.
Contradiction of express terms
119 To imply the term alleged contradicts and is fundamentally inconsistent with the
clear obligation to make monthly contributions to the fund as well as being inconsistent with the ability of Hesta to sue for arrears as referred to in the application document above.
120 Moreover rule 10.8(a)(i) specifically provides that the trustee may accept
“Mandated employer contributions.” Part (a)(i) of the definition of “Mandated Employer Contributions” (in clause 1.1) defines such contributions as those that reduce the Employer’s potential liability for superannuation charge. However, part (a)(ii) also includes payments that are equal to shortfall components under the SGA Act. This latter seems to contemplate that payments can be received in circumstances where the plaintiff has become liable also to pay shortfall to the Commissioner. This is directly inconsistent with the implied term alleged.
121 In circumstances where the DLW has agreed to be bound by the Rules, it is not
appropriate to imply a term which is inconsistent with other terms of the Rules in
this way.
122 For all the above reasons I therefore reject the existence of the implied term
alleged.
123 Instead, I accept the submissions of Mr Broadfoot, Counsel for the defendant,
that the parties objectively intended to contract on the basis that monthly payments were to be made to the Hesta fund. This is expressly provided for in the application as well as being contained in the relevant awards as described, above.
WHETHER MISTAKE AND/ OR MISREPRESENTATION AND/ OR RESTITUTION
Mistake/Resitution
124 The plaintiff alleges[24] that the “late payments” were made under a mistake
being:
(a) that it was obliged to pay the late payments directly to the defendant;
(b) that paying the late payments “would satisfy the plaintiff’s then outstanding obligations in respect of the payment of superannuation contributions for its employees”;
(c) that paying the late payments “would reduce or eliminate the plantiff’s superannuation guarantee shortfall” in respect of the relevant periods and thereby “reduce or eliminate its liability to make a superannuation guarantee payment” in relation to the unpaid contributions.
[24] FASC paragraph 20
125 The evidence as to the plaintiff’s belief is best described in evidence given by Mr
Weir as follows:
“It’s been my understanding from the commencement of operations at Essendon- at the nursing homes- that I had to pay superannuation to Hesta. I did not become aware that I had to pay superannuation-late superannuation- to the Tax Office until after the audit notifications which I think was June 2004. I had heard of SGCs etc and had heard of the legislation but did not believe at any stage it applied to our circumstances.”
126 The evidence therefore establishes that the belief at (a) above was held to the
effect that the plaintiff was obliged to pay the unpaid contributions to Hesta. However given the matters set out already the belief was correctly held and no mistake is established on this basis.
127 In terms of (b) and (c) above, as is apparent from the passage above, Mr Weir
appeared to have little knowledge of the plaintiff’s “obligations” to the ATO. The
evidence of Mr Danby was to similar effect.
128 In these circumstances the alleged mistaken belief at (b) and (c) above is
simply not substantiated on the evidence.
129 However, even if, contrary to this finding such a belief was actually held, it would
not provide a foundation for a mistake where moneys are in fact owing.[25] Indeed
this was fairly conceded by Mr Lovell on behalf of the plaintiff.
[25] See David Securities Pty Ltd v Commonwealth Bank (1992) 175 CLR 353 at 380, 392 and 405
130 The allegation of mistake is therefore not made out in the circumstances of this
case.
131 The plaintiff has based its claim for restitution on the basis of the alleged
mistake. [26] Again, there is simply no foundation for this remedy in restitution where
the plaintiff has paid money to discharge a debt owed to the defendant.[26] And see Plaintiff’s written closing submissions at para 72
132 The plaintiff sought to rely on the case of Personalised Transport Services Pty Ltd v AMP Superannuation Ltd & Anor [27] where an order was made that money mistakenly paid to a fund should be repaid. However, the case is clearly distinguishable since in that case the employer had no obligation to make superannuation payments in respect of the relevant drivers who were independent contractors rather than employees.
[27] [2006] NSWSC 5
133 Similarly the case the SCT D06-07/129 is distinguishable since the trustee had
no contractual entitlement to the mistaken rent it received.
134 The claims based on mistake and/or restitution are thereby rejected.
135 It was also accepted that the contributions received have now been credited to
member retirement accounts. Ms Higginbotham further gave evidence that the money to satisfy any court order in favour of the plaintiff would come out of investments reserves which affect all members so the net result would be that the already negative return members would be getting would be “further negative.”
136 In the light of this evidence, there may well have been scope for the defendant’s
submissions to the effect that it had changed its position in good faith in reliance on the payments. [28] However, given my findings above it is unnecessary to consider this matter further.
Misleading and deceptive conduct
[28] David Securities v Commonwealth Bank (1992) 175 CLR 353 at 385;
137 The letters demanding arrears relied upon were not misleading or deceptive
because the amounts sought were owing.
138 There is also no evidence to establish reliance. Thus, Mr Weir generally stated
that he made superannuation payments when it was “convenient” and when asked why the superannuation payments were paid when they were said that there was “no specific reason.” Mr Danby was unaware that payments had not been made and did not take the matter further for the plaintiff.
139 The allegation of misleading and deceptive conduct also fails.
Conclusion regarding plaintiff’s claim
140 The plaintiff has not established any entitlement to relief.
141 Accordingly the plaintiff’s proceeding should be dismissed.
COUNTERCLAIM
142 The plaintiff has admitted that it has not paid the superannuation contributions it
was obliged to make in respect of its employees between 28 April 2006 and 28
December 2006.143 The defendant’s counterclaim is based on the total of the shortfall amounts in
respect of these assessments being the sum of $117,249.40. The plaintiff did not
dispute the quantum of the defendant’s claim.
144 However, the plaintiff claims that it is not liable to make the contributions the
subject of the counterclaim by reason of estoppel/ misleading and deceptive
conduct and further, pursuant to the principles “proscribing double recovery”[29]
[29] see paragraphs 23-25 of the plaintiff’s Defence to counterclaim dated 4 March 2009.
145 In terms of the defence based on the principles “proscribing double recovery” it
is possible that payment of the shortfall and nominal interest may not be “onforwarded to Hesta” in the event of insolvency as previously described.[30] More significantly, the plaintiff’s submissions misconceive the plaintiff’s obligations under the contract as compared with those under statute. These obligations are independent and separate for reasons already given.[31] Further it is no defence to a contractual claim that a statute does not provide “amelioration of an unfair effect” [32] (by reason of the absence of any offset).
[30] See paragraph 101 above
[31] See in particular paragraphs 82-91 above
[32] Plaintiff’s supplementary submissions, 20 April, 2009, paragraph 10
146 The claims based on estoppel/misleading conduct are based on alleged
representations in a number of letters sent by the defendant. The central allegation was that a representation was made to the effect that if the plaintiff chose to remit the SGC to the ATO directly then it would not be obliged to pay superannuation contributions to the defendant.
147 I have examined each of the letters referred to in the plaintiff’s reply and defence
to counterclaim dated 4 March 2009.
148 Taking each in turn, the correspondence dated:
(a) 20 July 2006: notes that the plaintiff was late and requests payment. It further puts the plaintiff on notice that there were potential consequences of non-receipt of payment including failure to comply with the Superannuation Guarantee Legislation payment due date. This letter cannot provide the basis for any estoppel;
(b) 14 August 2006: advises that payment for the period 28 April to 25 May 2006 had not been received. The letter also contains the following: “Hesta will accept any payments that you make to the Fund but you are reminded that these may not satisfy your separate Superannuation Guarantee obligations to the ATO.” It continued: “You may instead wish to remit the SGC to the ATO and advise us that no payment will be made directly to Hesta for the period” (hereinafter referred to as the “relevant statement”). However, it also reminded the reader of the separate obligation to pay monthly under the trust deed.
(c) 19 October 2006: informs the reader that the payment for 28 July to 31 august 2006 had not been received and that Hesta would accept payment. It further suggested that it was important that the reader was aware of and complied with SG requirements. It gave three options (payment to Hesta; a reply that nil contributions were due or notification that the reader had ceased contributing to Hesta). It then again made the relevant statement.
(d) 14 November 2006: this also contains the relevant statement and provides the same three options as given in the correspondence of 19 October, 2006. It further reminds the reader of the monthly obligation under the trust deed;
(e) 13 December 2006: contains correspondence from the defendant’s solicitors seeking a response in relation to outstanding contribution payments for 1 September to 28 September. The correspondence contained the relevant statement and requested the payment or other advice;
(f) the 20 December 2006 correspondence states: “that under ATO guidelines the December quarter payments are due by 28 January. If they are not forwarded to the fund by 28 January payment should be made to the ATO for the quarter and the SGC incurred.” It also said: “I urge you to make the current superannuation payments for your staff to Hesta. Payment for current contributions to the ATO does not fit within their guidelines. You would be aware that the payments that you have been making to the ATO are being applied to the Superannuation charge debt incurred in 2003.”
(g) the letter of 29 January 2007 sought to assist the plaintiff in relation to
s23(7) and also contains the following statement:“As these periods (June and September 2006 quarters) are now overdue if you forward the payments directly to Hesta the ATO may charge you again by way of SGC. It is advisable that late payments are forwarded directly to the ATO. As discussed on 23 January if the December quarter 2006 payment was not received by 28 January ( Monday 29 in this instance), then the SGC must be paid to the ATO for the quarter.”
149 In my view the statements contained in the above correspondence are
insufficiently certain and unequivocal to constitute a representation to the effect that if the plaintiff chose to remit the SGC to the ATO directly then it would not be obliged to pay superannuation contributions to the defendant. The defendant never renounced its rights to superannuation contributions and never stated that superannuation contributions would not continue to be required. To the contrary, it regularly reminded the plaintiff of its obligations to make monthly contributions consistent with the plaintiff’s separate obligation to the defendant.
150 In any event, even if the correspondence did contain some unequivocal
representation that Hesta would forgive certain superannuation contributions owing to it in respect of 2006, no payments were actually made to the ATO. Rather Mr Weir accepted that the payments to the ATO in 2006 were being applied to discharge an instalment arrangement in relation to outstanding SGC from the 2003/04 period. Moreover, even if such payments were made they would be made to satisfy a pre-existing obligation incurred to the Commonwealth pursuant to statute.
151 In these circumstances, there is therefore no detriment on which any estoppel
can be based.[33]
[33] And see Commonwealth v Verwayen (1990) 170 CLR 394
152 There is also no evidence that the statements in these letters were relied upon
so as to entitle the plaintiff to a remedy under s52 of the TPA or s12DA of the ASIC Act. Mr Weir’s evidence was that he did not recall any direct correspondence in relation to the 2006 arrears. Further, consistent with the terms of the monthly bulletins[34], and much of the correspondence, the evidence of both Mr Weir and Mr Danby was that they understood that monthly contributions were required.
[34] Ms Higginbotham gave evidence that a bulletin entitled “Hesta News” was sent out to employers each month.
153 Mr Lovell suggested that it was sufficient detriment for the plaintiff to be liable on
the assessments which have already been raised.
154 However, as indicated already, the plaintiff has a pre-existing liability to pay the
Commonwealth by reason of the operation of a statute. Its liability does not arise consequent on any representation made by the defendant.
155 In these circumstances the plaintiff has not established that it acted in reliance
on any representation nor that it suffered any detriment.
156 The defence of estoppel and/or misleading conduct is not established.
157 It follows that the defendant is entitled to judgment on its counterclaim.
CONCLUSION
158 The plaintiff’s proceeding should be dismissed.
159 The defendant will be entitled to judgment on its counterclaim in the amount of
$117,249.40.
160 I will hear further from the parties as to the appropriate form of final orders.
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