Macombe & Jagels
[2021] FedCFamC2F 427
Federal Circuit and Family Court of Australia
(DIVISION 2)
Macombe & Jagels [2021] FedCFamC2F 427
File number(s): NCC 2726 of 2019 Judgment of: JUDGE CARTY Date of judgment: 23 November 2021 Catchwords: FAMILY LAW – interim property application – discharge of order for injunction – wife’s superannuation interest to be resigned and member account balance rolled out to wife’s nominated fund - partial property settlement - interlocutory injunctions restraining husband from dissipating assets of self-managed superannuation fund pending final hearing Legislation: Family Law Act 1975 (Cth) ss 79, 80(1)(k), 90XS, 90XT, 106B , 114
Superannuation Industry (Supervision) Act 1993 (Cth) s 17A
Cases cited: In the marriage of Burridge, A.B and Burridge, M.J (1980) FLC 90-902;
Strahan & Strahan (Interim property orders) (2009) 42 FamLR 203; [2009] FamCAFC 166
Division: Division 2 Family Law Number of paragraphs: 49 Date of last submission/s: 10 November 2021 Date of hearing: 10 November 2021 Place: Newcastle Counsel for the Applicant: Mr Weightman Solicitor for the Applicant: Parting Ways Law Respondent: Self-Represented ORDERS
NCC 2726 of 2019 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MR JAGELS
Applicant
AND: MS MACOMBE
Respondent
order made by:
JUDGE CARTY
DATE OF ORDER:
23 november 2021
THE COURT ORDERS THAT:
1.Order 1 made by the Federal Circuit Court of Australia on 30 April 2020 is discharged.
2.Until further order the husband be and is hereby restrained by injunction from doing the following:
(a)Withdrawing funds from any bank account held by B Pty Ltd except to:
(i)Pay creditors, and to this effect all invoices and receipts of payments to creditors are to be provided to the wife within 7 days of payment;
(ii)Transfer the wife’s Withdrawal Benefit in B Pty Ltd Superannuation Fund, (as calculated by Mr C of D Pty Ltd on the date the husband resigns the wife’s membership of B Pty Ltd Superannuation Fund), to the wife’s F Super Fundannuation account.
(b)Disposing of any real property held by B Pty Ltd Superannuation Fund without the written consent of the wife; and
(c)Admitting any additional member to the B Pty Ltd Superannuation Fund.
3.As soon as is reasonably practical following the husband resigning the wife’s membership of B Pty Ltd Superannuation Fund, each party shall do all such acts and things required (in respect of the husband in his personal capacity and his capacity as director of B Pty Ltd Pty Ltd) to release the wife from any and all loans and personal guarantees to which the wife is a party with E Bank.
NOTATION
A.It is noted that the husband will, as soon as is practical, in his capacity as the director of B Pty Ltd, resign the wife’s membership of B Pty Ltd Superannuation Fund and roll the wife’s Withdrawal Benefit into the wife’s superannuation account held with F Super Fund.
B.The husband agrees that he will, within 7 days of the rollout and transfer of the wife’s member account balance to the wife’s F Super Fund account, provide to the wife a copy of each source document upon which the calculation of the value of the wife’s membership in B Pty Ltd Superannuation Fund is based.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under a pseudonym Macombe & Jagels has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
JUDGE CARTY
INTRODUCTION
This is an interlocutory application by the husband to discharge an interim injunction made on 30 April 2020 which restrains him, without the written consent of the wife, from resigning the wife’s membership in the self-managed superannuation fund, B Pty Ltd Superannuation Fund (“the B Pty Ltd Fund”).
A discharge of the interim injunction would enable the husband to resign the wife’s membership in the B Pty Ltd Fund, without her consent, and rollout the balance in the wife’s member account into a superannuation fund nominated by the wife.
In response, the wife seeks orders that:
(a)the sum of $215,438.36 is rolled out of the B Pty Ltd Fund into a fund nominated by her;
(b)the husband remove the wife as a personal guarantor for mortgages secured over two real properties held by the B Pty Ltd Fund, within 14 days;
(c)the husband indemnify the wife in respect of the B Pty Ltd Fund;
(d)after the funds are released to the wife, and she is removed from the mortgages, then the wife and the husband do all things to aid in the removal of the wife from all association with the B Pty Ltd Fund; and
(e)the superannuation aspect of the financial settlement be considered full and final.
It is apparent from the respective application in a case and response that the parties each seek that the wife is extracted from the B Pty Ltd Fund and the issue is what amount is due to the wife from the Fund.
BACKGROUND
The parties commenced a relationship in 2008 and were married in 2013. They separated finally on 13 February 2018. The relationship endured for 10 years.
On or about 17 December 2013 the parties established a self-managed superannuation fund styled “B Pty Ltd Superannuation Fund”. Both parties were appointed as directors of the corporate trustee for the B Pty Ltd Fund.
The wife filed an Initiating Application on 30 August 2019 seeking final property orders including that “…the Husband releases the funds to the Wife of the the funds contributed to the Superannuation Fund, together with eighty (80) per cent of the total total growth being the sum of $350,724 (sic)”, and an order that the wife exit the B Pty Ltd Fund.
The husband filed a Response to Initiating Application on 9 October 2019 seeking final property orders including that “The sum of $61,940 be transferred from the self-managed superannuation fund to a superannuation fund nominated by the wife for her exclusive ownership”, and otherwise for the wife to resign her membership in the B Pty Ltd Fund and transfer all property in the fund to the husband “…for his exclusive ownership”.
For reasons that are in dispute, and which cannot be determined at an interim hearing, at a meeting of directors of the trustee held on 10 February 2020 the wife was removed as a director of the corporate trustee. The wife had notice of, but did not attend, the meeting.
The wife filed an Application in a Case seeking to be reinstated as a director of the corporate trustee. The wife’s application came before the court on 30 April 2020. The court did not make an order for reinstatement of the wife as a director of the corporate trustee. Interim orders were made on 30 April 2020, including a restraint on the husband from resigning the wife’s membership in the B Pty Ltd Fund, without her consent, which restraint the husband now seeks to discharge.
The husband was further restrained from withdrawing funds from the B Pty Ltd Fund’s bank account, except to pay creditors, and from disposing of any real property held by the B Pty Ltd Fund without the written consent of the wife.
The husband contends in the current interim proceedings that it is necessary to resign and rollout out the wife’s membership in the B Pty Ltd Fund because:
(a)In contravention of s.17A of the Superannuation Industry (Supervision) Act 1993 (Cth) (“SIS Act”) the wife is a member of the B Pty Ltd Fund but she is not also a Director of the corporate trustee, as required by the SIS Act;
(b)The Australian Taxation Office (“the ATO”), by letter dated 28 June 2021, has notified the trustee for the B Pty Ltd Fund that it must rectify reported contraventions of superannuation laws; and
(c)The ATO threatens compliance action if the trustee does not rectify all reported contraventions, or breaches the obligations of the trustee in the future.
The substantive property matter between the parties is listed for final hearing on 24 February 2022 at 10.00am (allocating 2 days).
LEGAL PRINCIPLES
The substantive proceedings for alteration of property interests are brought under Part VIII of the Family Law Act 1975 (Cth) (“the Act”) and, in particular, s.79 of the Act.
Section 80(1)(k) of the Act provides that, in exercising its powers under Part VIII, the court may “make any other order….which it thinks it is necessary to make to do justice”. A partial property order may be made under s.79 in reliance upon s.80(1)(k) if the justice of the case requires.[1]
[1] In the marriage of Burridge A.B and Burridge M.J (1980) FLC 90-902
Whilst there is only one exercise of the power under s.79 of the Act, the power may be exercised by a succession of orders until the power is exhausted, and the power is exhausted when there remains no property.[2]
[2] Strahan & Strahan (Interim property orders) (2009) 42 FamLR 203; 241 FLR 1
Pursuant to s.114 of the Act the court may, in proceedings between the parties to a marriage for an order or injunction arising out of the marital relationship, make an order or grant an injunction “as it considers proper” with respect to the matter to which the proceedings relate, including an injunction in relation to the property of a party to the marriage.
Section 17A(1) of the SIS Act provides, relevantly, that:
17A Definition of self managed superannuation fund
Basic conditions--funds other than single member funds
(1)Subject to this section, a superannuation fund, other than a fund with only one member, is a self managed superannuation fund if and only if it satisfies the following conditions:
a.it has no more than 6 members;
b.if the trustees of the fund are individuals—each individual trustee of the fund is a member of the fund;
c.if the trustee of the fund is a body corporate—each director of the body corporate is a member of the fund;
d.each member of the fund:
i.is a trustee of the fund; or
ii.if the trustee of the fund is a body corporate--is a director of the body corporate;
e.no member of the fund is an employee of another member of the fund, unless the members concerned are relatives;
f.no trustee of the fund receives any remuneration from the fund or from any person for any duties or services performed by the trustee in relation to the fund;
g.if the trustee of the fund is a body corporate—no director of the body corporate receives any remuneration from the fund or from any person (including the body corporate) for any duties or services performed by the director in relation to the fund.
THE EVIDENCE
The husband relies upon the following documents:
(1)Outline of Case Document (Interim hearing) filed 10 November 2021;
(2)Application in a Case filed 23 September 2021;
(3)His affidavit filed 1 November 2021; and
(4)Minute of Order filed 10 November 2021 (Exhibit ‘B’).
The wife relies upon the following documents:
(1)Response to application in a case filed 22 October 2021; and
(2)Her affidavit filed 22 October 2021.
CONSIDERATION
The evidence establishes that the ATO considers that the B Pty Ltd Fund is currently contravening superannuation law and has written to the trustee notifying that action is required to rectify the Fund’s contraventions[3].
[3] Annexure A to Affidavit of husband
Section 17A(1)(d) of the SIS Act provides, relevantly, that it is a basic condition of a self- managed superannuation fund with more than 1 member, as in this case, that:
“…each member of the fund:
i.is a trustee of the fund; or
ii.if the trustee of the fund is a body corporate--is a director of the body corporate.”
The wife maintains that there was no legal reason why the husband caused her to be removed as a director of the corporate trustee in February 2020. On 30 April 2020 the court considered the wife’s application to be reinstated as a director of the corporate trustee and declined to make the order sought by the wife. In the current interim proceedings neither party seeks an order that the wife be reinstated as a director of the corporate trustee.
The husband deposes[4] that if the breach is not rectified then the ATO will apply a penalty to the B Pty Ltd Fund. The letter from the ATO states that if the trustee does not rectify reported contraventions, or the ATO discovers that the B Pty Ltd Fund has breached its obligations in the future, “We may take action which may result in serious outcomes and place your fund’s compliance status at risk”.[5]
[4] Paragraph 17 of Affidavit of husband
[5] Annexure “A” to Affidavit of husband
PKF Lawler, who are the accountants for the B Pty Ltd Fund, note in an email[6] that clauses in the Trust Deed of the B Pty Ltd Super Fund:
“… on a simple reading appear to allow the Trustee to remedy the breach without further correspondence with … [the wife]… or having to obtain her consent. The co-operative approach for her to comply with the Deed by resigning as a member and assisting with the rollover of her member account balance has not been successful to date.”
[6] Annexure B to Affidavit of husband
Absent the current injunction restraining the husband, the court is satisfied that the trustee can remedy the breach by resigning the wife’s membership without her consent. If the present injunction is discharged, no further order is required to resign the wife’s membership, and rollout her member account balance.
The wife’s affidavit annexes correspondence between her then solicitors, West Tamworth Legal, and the B Pty Ltd Fund accountants, in the period leading up to her removal as a director of the Fund on 10 February 2020[7], and also correspondence between the wife and the B Pty Ltd Fund accountants in the period following the making of the orders on 30 April 2020[8].
[7] Annexure E to Affidavit of wife
[8] Annexure F and Annexure G to Affidavit of the wife
The correspondence indicates that:
(a)In July 2020 the wife sent a request to the B Pty Ltd Fund accountants requesting the trustee to rollover her member account, and notifying that her nominated superannuation fund is F Super Fund. The wife did not provide the trustee with the necessary request and consent to complete the rollover;
(b)In July 2020, the B Pty Ltd Fund accountants informed the wife that in order to calculate the wife’s current member account balance in the B Pty Ltd Fund, the accountants would need to prepare the financial statements for the B Pty Ltd Fund for the Financial Year ended 30 June 2020;
(c)The wife accused the B Pty Ltd Fund accountants of being in breach of the SIS Act, which accusation the accountants denied, and she threatened to use her email to them as “evidence to the Australia Tax Office (ATO)” (sic);
(d)There is a high level of mistrust and anxiety on the part of the wife as to compliance with the SIS Act and Regulations on the part of the husband and the Fund accountants; and
(e)There is currently a stalemate between the wife and the trustee of the B Pty Ltd Fund in relation to the resignation of the wife’s membership in the Fund.
The wife submitted that she believes the husband has not been transparent in his dealings as trustee of the B Pty Ltd Fund, and she accuses the husband of denying her access to details relating to the Fund and of breaching superannuation laws. The wife submits that she feels vulnerable and that she is concerned that the husband’s interest in the B Pty Ltd Fund will be dissipated before trial, compromising her claim to entitlement to part, if not the whole, of the husband’s member account in the B Pty Ltd Fund.
The issues raised by the wife, concerning whether or not the husband and the Fund accountants have acted in good faith and in compliance with their obligations under superannuation laws, are matters that cannot be determined at an interim hearing, and likely will be ventilated by the wife at trial. Each party alleges that the other is responsible for compliance issues affecting the B Pty Ltd Fund.
The wife seeks an order for a liquidated sum to be rolled out of the B Pty Ltd Fund and into a superannuation fund nominated by her. She provides no evidence as to how the liquidated sum she seeks is calculated. The wife currently does not seek a splitting order, which would require an amount to be calculated and paid from the husband’s member account into a fund nominated by the wife.
Neither party provided evidence of the current balance of the wife’s, nor the husband’s, member accounts in the B Pty Ltd Fund. The amount sought by the wife could only be achieved, on the current state of the evidence, by a splitting order affecting the husband’s interest in the B Pty Ltd Fund, which neither party seeks in the interim proceedings.
In circumstances where neither party seeks a splitting order currently, and where the value of each party’s member account in the fund is unknown[9], and where the wife is yet to establish an entitlement to the funds held in the husband’s member account, the court cannot accede to the application of the wife that she receive an amount of $215,438.36 from the B Pty Ltd Fund rolled over into a fund of her choice.
[9] S.90XT(2)
It is apparent from the wife’s response that she is not opposed to a rollout of her membership account in the Fund, but rather the dispute is about the amount due to the wife, which amount will need to be calculated on the basis of her membership in the Fund. Any entitlement the wife may have in the husband’s membership in the Fund is a matter for final hearing.
In the event that the wife can establish at a trial that it is just and equitable, in all the circumstances, to make a splitting order in her favour from the husband’s interest in the B Pty Ltd Fund, the court has jurisdiction to make such an order pursuant to s.90XS of the Act.
In the event that the wife can establish at a trial that the husband has made an instrument or disposition to defeat an existing or anticipated order in these proceedings, or one that is likely to defeat such order, then the court may, in its discretion, set aside or restrain the making of such instrument or disposition pursuant to section 106B of the Act.
The husband’s counsel submits, and the court accepts, that the safeguards which the husband proposes, namely the interlocutory restraints sought by him in Exhibit B, will serve to protect any legitimate claim the wife may prove to a share of the husband’s member account in the B Pty Ltd Fund. The wife’s current claim cannot be determined, absent agreement between the parties, until final hearing of the property matter when all relevant evidence is before the court and able to be tested.
The wife expresses her concern that if her membership in the B Pty Ltd Fund is resigned, the husband may admit another member to the fund and that this might complicate the property pool at the trial. The court is satisfied that an injunction, until further order, in terms offered by the husband’s counsel during submissions, restraining the husband from admitting any other member to the B Pty Ltd Superannuation Fund, will adequately address the wife’s concern.
CONCLUSION
The court is satisfied on the evidence that prompt action is required to rectify the trustee’s contravention of superannuation law. The Court takes judicial notice that a penalty applied by the ATO to the B Pty Ltd Fund will likely have a negative impact on the value of the member account balances in the Fund, and ultimately decrease the value of the Fund.
The court accepts the husband’s submission that the compliance issue must be rectified without delay, and that the appropriate way to rectify that issue is for the wife’s interest in the B Pty Ltd Fund to be resigned and her member account balance in the B Pty Ltd Fund rolled out into a superannuation account nominated by the wife.
The husband’s counsel submits, and the court accepts, that the husband is confident that he can secure the resignation of the wife from the fund and roll out her member account without her consent. Discharging the restraint in order 1(a) of the orders made on 30 April 2020 will permit the husband to undertake this work.
The wife confirmed in her submissions at the interim hearing that F Super Fund is her nominated fund for rollover.
The court is satisfied that the restraints proposed by the husband, until further order, are proper to protect any interest that the wife claims in the husband’s member account in the B Pty Ltd Fund, and to preserve the husband’s membership in the Stickird Fund until the final hearing.
The issue of whether the wife is entitled to funds from the husband’s member account is one that remains for determination at the final hearing and, in the meantime, it is proper that the husband is restrained from acting in a manner likely to diminish the value of his interest in the B Pty Ltd Fund.
The husband consents to the wife’s application that she be released from liability in respect of loans and the personal guarantees affecting the real property in the B Pty Ltd Fund. The wife retains no control over the B Pty Ltd Fund. It is appropriate in such circumstances that the parties do all things required to release the wife from liability for loans and personal guarantees affecting the assets of the B Pty Ltd Fund.
No order pursuant to s.79 of the Act is required to achieve the resignation of the wife’s membership in the Fund. Once the wife’s membership is resigned, and her member account balance is rolled out, the wife will have achieved what might be characterised as a partial settlement of property in her favour. She will control the assets in her superannuation fund, subject to the superannuation regulations of such fund, to the exclusion of the husband. The court considers that such a result, at this interim stage, does justice in the circumstances of the case, for the reasons already outlined.
The court notes that the husband agrees to provide the wife with a copy of each source document upon which the calculation of the value of the wife’s member account balance in the B Pty Ltd Superannuation Fund is based, within 7 days of the rollover.
Rule 6.01 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 makes it abundantly clear that each party has a duty to the court, and to the other party, to give full and frank disclosure of all information relevant to the proceedings in a timely manner, and such duty of disclosure applies from the start of the proceedings and continues until the proceedings are finalised.[10]
[10] Federal Circuit and Family Court of Australia( Family Law) Rules 2021 Rule 6.01
Accordingly the court makes the orders and notations set out at the beginning of these reasons.
I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Carty. Dated: 23 November 2021
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