Hart and Hart

[2013] FCCA 2201

FEDERAL CIRCUIT COURT OF AUSTRALIA

HART & HART [2013] FCCA 2201

Catchwords:
FAMILY LAW  ̶  Variation of consent property orders  ̶  non-disclosure by wife of claim for superannuation guarantee against husband’s company  ̶  failure by husband to cause his company to pay superannuation guarantee charge  ̶  whether a husband or wife should be responsible for paying superannuation guarantee charge  ̶  whether husband’s failure as sole director and shareholder to cause company to pay superannuation charge a relevant public policy consideration.

Legislation:  

Family Law Act 1975 (Cth), ss.79, 79A(1), 79(1A), 79(4), 90MT

Superannuation Guarantee (Administration) Act 1992 (Cth), ss.16, 19, 46
Superannuation Guarantee Charge Act 1992 (Cth), ss.5, 6

Morrison & Morrison (1995) FLC 92-573
Malpas & Mason [2000] FLC 93-061, [2000] FamCA 1253
Pisani & Pisani [2012] FamCA 532

Applicant: MR HART

Respondent: MS HART

File Number: DGC 2481 of 2011

Judgment of: Judge Phipps

Hearing date: 24 October 2013

Date of Last Submission: 24 October 2013

Delivered at: Dandenong

Delivered on: 19 December 2013

REPRESENTATION

Counsel for the Applicant: Mr Puckey

Solicitors for the Applicant: Plaza Legal

Solicitor for the Respondent: Mr Delahunty

Solicitors for the Respondent: Morley Naughton Pearn & Cook

ORDERS

1. That the husband do all things necessary to cause (business omitted) to pay to the Australian Taxation Office the amount of the Superannuation Guarantee Charge in respect of superannuation not paid to the wife. 

2. That upon the Australian Taxation Office paying to the wife’s superannuation fund the amount due as a consequence of the husband complying with paragraph 1 of this order (“the payment”) the wife give to the husband’s solicitors and the chambers of Judge Phipps written notice of the amount of the payment, the name of the fund into which the payment has been made, the name of its trustee and the number or other identification of her superannuation fund and the husband do all things necessary to:

   (a)Prepare a minute of proposed order providing for a splitting order pursuant to s.90MT of the Family Law Act 1975 (Cth) of the wife’s superannuation with a base amount allocated to the husband of the payment;

   (b)provide procedural fairness to the wife’s superannuation fund;

   (c)Submit the proposed minute of order together with evidence of procedural fairness to the chambers of Judge Phipps.

3. That each party has liberty to apply on reasonable notice.

4. Otherwise the application is adjourned to 27 March 2014 at 10.00am.

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

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT DANDENONG

DGC 2481 of 2011

MR HART

Applicant

And

MS HART

Respondent

REASONS FOR JUDGMENT

1. The parties agree that consent property orders between them made on 25 June 2012 be varied pursuant to s.79A(1) and/or (1A) of the Family Law Act 1975 (Cth). The reason for this is that after the consent order was made the Australian Taxation Office notified (business omitted) (the Company) that an amount of some $35,000 was due as a Superannuation Guarantee Charge. With interest the amount has now increased to over $37,000. The wife is the beneficiary of the charge. It is for a period of employment prior to the date of the order and mostly, if not wholly prior to the date of separation.

2. The charge is payable pursuant to ss.16, 19, and 46 of the Superannuation Guarantee (Administration) Act 1992 (Cth) and ss.5 and 6 of the Superannuation Guarantee Charge Act 1992 (Cth). These provisions mean that the Company not having paid the required amounts into a complying superannuation fund in the wife’s name at the end of each quarter the amount not paid is now a charge payable to the Commonwealth. The wife cannot waive the amount.

3. The parties married on (omitted) 1990 and separated on (omitted) 2010.  They have two children, both now adults.  Throughout the marriage the husband was the director and sole shareholder of the Company.  The Company owned a (omitted) and the husband worked as an (omitted).  Both parties were employed by the Company and paid salaries for the purpose of reducing taxation.  The parties did not have separate finances and money earned was used for normal family expenses.

4. The parties make common ground that the Superannuation Guarantee Charge was not paid for the wife when she was employed by the Company, that the charge was not taken into account when the parties reached agreement for the purpose of the property orders, and that now it must be paid and then, minus a small administrative charge by the Australian Taxation Office, it will be paid into a superannuation account for the benefit of the wife. 

5. The husband proposes an order that the wife pay the charge and that she retain for her own benefit the superannuation which will result.  He also proposes that the wife pay to him an amount of $1,100 he spent on accounting fees to prepare the returns required by the Australian Taxation Office. 

6. The wife proposes that the husband pay the charge and that there then be a superannuation splitting order so that the whole of the amount paid by the husband be allocated to him as a superannuation fund.  Thus, the husband proposes that the wife pay the amount of the charge and receive the benefit of an equal amount of superannuation.  The wife proposes that the husband pay the charge and receive the benefit of an equal amount of superannuation.  The problem is that while the net asset position of each party will not change with either proposal, each wants the asset now not later.

7. The earlier proceedings commence with the wife’s application on 12 August 2011. The parties reached agreement in principle at a conciliation conference with a Registrar on 17 November 2011, but could not prepare agreed minutes of orders because the superannuation fund where a splitting order was proposed had not been given procedural fairness.  It may also have been because the amounts in the superannuation funds of each party were not known.

8. It took until 25 June 2012 to prepare and agree on the minutes of orders and for the order to be made.  Apparently this was because of time spent in obtaining information about superannuation funds.  The order provided for the wife to pay the husband the sum of $61,666.50, retain the former matrimonial home and refinance the mortgage debt of $60,000 with (omitted) Bank.  There was the usual order for sale if the wife was unable to make the payment and refinance the mortgage.

9. The wife was unable to refinance the home and it was sold.  When the parties filed their financial statements the wife had an amount of $219,762 in a bank account and the husband $115,000.  I was informed at the hearing that the wife had subsequently purchased a property and had no money in the bank and a substantial mortgage.

10. The basis on which the parties settled was that non-superannuation assets were divided 60% to the wife, 40% to the husband and superannuation was divided equally.  The letter dated 10 May 2012 from the wife’s solicitors to the husband solicitors set out the information about the parties’ superannuation.  The superannuation was:

    Husband

    (omitted) Fund      $73,699.84

    (omitted) Fund      $13,210.11

    Total     $86,909.95

    Wife

    (omitted) Fund      $11.073.04

    (omitted) Fund      $37,879.03

    Total     $48,952.07

11. The accompanying statements showed that the husband’s (omitted) Fund statement was as at 19 April 2012 and the others in November 2011.

12. The wife’s affidavit alleged that the husband had not disclosed the proper value of his superannuation in his affidavit and financial statement in that proceeding.  However, the letter and accompanying documents from the wife’s solicitors on 10 May 2012 show that up-to-date information had been obtained and the wife did not pursue this point at the hearing before me.

13. The wife’s evidence in cross examination was that she made enquiries of the Australian Taxation Office about superannuation due to her from the Company before the conciliation conference in November 2011.  She acknowledges that she did not disclose to the husband or his solicitors or the Registrar conducting the conciliation conference her enquiries about superannuation or her intention to claim it.  A reasonable inference is that she did not disclose this to her solicitor.

14. The wife says that she spoke to the Australian Taxation Office before the consent orders were made.  She says that the Australian Taxation Office told her to wait until the property orders were settled before writing to them about the superannuation.  This is what she did.  I do not need to make a finding whether or not an officer of the Australian Taxation Office did say what the wife claims.  The significant thing is that the wife’s evidence is that she deliberately waited until after the consent order was made before making the formal claim or complaint to the Australian Taxation Office.

15. Subsequently the Australian Taxation Office required the Company to prepare quarterly superannuation returns and the notification of the Superannuation Guarantee Charge followed. 

16. Section 79A(1) of the Family Law Act 1975 (Cth) provides:

    (1)  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:

    (a)  there has been a miscarriage of justice by reason of fraud, duress, suppression of evidence (including failure to disclose relevant information), the giving of false evidence or any other circumstance; or

    the court may, in its discretion, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.

17. Section 79A(1A) provides:

    A court may, on application by a person affected by an order made by a court under section 79 in property settlement proceedings, and with the consent of all the parties to the proceedings in which the order was made, vary the order or set the order aside and, if it considers appropriate, make another order under section 79 in substitution for the order so set aside.

18. In Morrison & Morrison (1995) FLC ¶ 92-573 at 81,670-81,673 the Full Court of the Family Court of Australia discussed the meaning of miscarriage of justice in the context of failure to disclose information. The Court say at 81,670:

    The constant emphasis of the cases is that in order for there to be a just and equitable and an appropriate order altering the interests of parties and their property there must be a full and frank disclosure between them of all circumstances which may be relevant to the determination of the true financial position both presently and in the foreseeable future.

19. Clearly there has been a failure to disclose relevant information.  The parties had conducted their financial affairs during the marriage for many years on the basis that none of the family income, the Company earnings, was paid into superannuation for the wife.  Minutes of proposed consent orders were signed and the consent order was made on the basis that all assets and liabilities were disclosed.

20. The superannuation assets are set out above.  The non-superannuation assets were the former matrimonial home at Property O and a half share in an investment property at Property R.  For the purpose of the property proceedings the former matrimonial home was valued at $475,000 and the investment property at $405,000. 

21. The husband says that he lost his (omitted) contract and had to sell his half share in the investment property.  The property was valued for the purpose of the proceedings at $405,000 but was sold for $387,500.  The husband says that means he lost $8,750 which is neither here nor there in the current proceeding.

22. Had the possibility of a superannuation entitlement to the wife from the Company been disclosed by the wife when the property proceedings were settled it would have had to be taken into account.  Payment of the superannuation by the Company is a statutory requirement which cannot be waived by the beneficiary of the superannuation.  The parties would have had to use some of the value of their properties to pay the superannuation which would have resulted in a different adjustment of superannuation.

23. What the parties might have done is a matter of speculation.  Now one or other of the proposed orders needs to be made.

24. A complete reconsideration of the s.79 property requirements is not possible nor sought by the parties. The application would seem to come under s.79(1) rather than s.79(1A) because, while both parties consent to a variation of the original order, they do not consent to the terms of the variation. The power under s.79(1) is expressed as “the court may, in its discretion, vary the order”.

25. The husband’s argument is that the problem is caused by the wife’s non-disclosure of her intention to make the claim.  The wife’s argument is that the problem is caused by the husband, a sole director of the Company, not ensuring that it had satisfied its superannuation obligations.

26. These are proceedings under the property provisions of the Family Law Act 1975 (Cth), and it is to the principles of such proceedings that I must apply. The duty of full disclosure required the wife, prior to the order being made, to disclose that she intended claiming the superannuation. Had she done so the parties, with the assistance of the lawyers, would have taken steps to ensure that the current situation did not arise and the parties would have reached agreement that satisfied them both or a court would have made a decision with all relevant information, including the wife’s entitlement to the superannuation and the Company’s obligation to pay it.

27. While I am not applying the full property process under s.79 I must look to that section for guidance. Little assistance is obtained from considering the matters under s.79(4). Applying the full four step property process would mean looking at the property the parties have now, which is different to what was held at the time of the order and includes superannuation where there has been a splitting order. That is not what the parties want. They want one or other of the orders proposed. I consider that the guidance I can find in s.79 is in s.79(2), that is I should make an order that I am satisfied, in all the circumstances, is just and equitable to make.

28. The situation the parties are now faced with would not have happened if the wife had satisfied her duty of disclosure.  On the other hand, it would not have happened if the husband had complied with his obligations as a company director and ensured that the Company complied with its statutory obligation to pay the superannuation guarantee charge.

29. A brief background is as follows.  The husband was born on (omitted) 1962 and the wife on (omitted) 1958.  They married in (omitted) 1990, separated on 6 March 2010 were divorced on 12 October 2011.  There are two adult children of the marriage.

30. The husband is, and at all times was, the sole shareholder and director of the Company.  He therefore had a duty to ensure that the Company complied with its legal obligations.  These included paying the superannuation guarantee.

31. Courts have a duty to ensure that the parties before them have complied with their legal obligations.  The issue is usually discussed in the context of parties to litigation who have not met their taxation obligations-See Malpass & Mayson [2000] FLC 93-601, [2000] FamCA 1253 and Pisani & Pisani [2012] FamCA 532.

32. The purpose of the superannuation guarantee legislation is to provide for citizens’ retirement and to lessen the burden of age pensions on government revenue.  Thus, there is a public policy consideration in courts taking into account obligations such as the husband in this case to ensure that the Company complied with its superannuation guarantee obligations.  Although not stated as a public policy argument that is essentially what the wife argues.

33. Arguably the wife does have some responsibility because she obtained the benefit of the Company structure.  It enabled the parties to legitimately reduce their taxation liability by splitting the income earned by the husband’s work as an (occupation omitted).  Nonetheless, the legal obligation was on the husband.

34. There is a public policy consideration in ensuring that parties to Family Law property proceedings comply with their obligation of disclosure.  There has been a clear breach by the wife.

35. These public policy considerations must be looked at together with the other circumstances.  The significant ones here are the age of the parties, both in their 50s and their financial situation.  The husband puts his income as $692 a week from his (omitted) business and $126 a week from interest. The wife puts her income as $460 from her salary plus family tax benefit, rent assistance and child support by the husband for the younger child.  The wife’s financial statement is dated 22 May 2013 shortly prior to the younger child turning 18 on (omitted) 2013.  She includes an amount from interest but since she has now purchased a property she will not be receiving it.  The evidence does not disclose whether she is still receiving child support or government payments.

36. While everything must be taken into account, the public policy consideration of ensuring that legal obligations, particularly financial obligations affecting government revenue, are complied with is, the balancing factor.  Everything must be taken into account and doing so I conclude that the just and equitable order is the one which gives the husband the detriment of having superannuation rather than immediate cash benefit.

37. I will order that the husband take all steps necessary to cause the Company to pay the amount of the superannuation guarantee charge and that upon that being done the husband and wife take all steps necessary for the making of a splitting order of the wife’s superannuation using a base amount equal to the amount of superannuation paid into her superannuation fund by the Australian Taxation Office.

38. Since the superannuation order cannot be made until the amount of the charge has been paid, I will adjourn the application for three months with liberty to apply.

I certify that the preceding thirty-eight (38) paragraphs are a true copy of the reasons for judgment of Judge Phipps

Date:  19 December 2013