Olesen v Eddy

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FEDERAL COURT OF AUSTRALIA

Olesen v Eddy [2011] FCA 13

Citation: Olesen v Eddy [2011] FCA 13
Parties: NEIL OLESEN IN HIS CAPACITY AS THE DEPUTY COMMISSIONER OF TAXATION (SUPERANNUATION) v ANTHONY WADE EDDY
File number: SAD 87 of 2010
Judge: MANSFIELD J
Date of judgment: 14 January 2011
Catchwords:

SUPERANNUATION – contraventions of ss 62(1) and 65(1) of the Superannuation Industry (Supervision) Act 1993 (Cth)– civil penalties pursuant to s 197(1) imposed – contraventions deliberate and serious – consideration of personal circumstances relevant to assessment of appropriate penalty

PRACTICE AND PROCEDURE – power of Court to order periodical payments as part of order imposing civil penalty

Legislation: Superannuation Industry (Supervision) Act 1993 (Cth)
Crimes Act 1914 (Cth)
Trade Practices Act 1974 (Cth)
Cases cited:

NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285 cited
Secretary, Department of Health and Ageing v Pagasa Australiat Pty Ltd [2008] FCA 1545 cited
Raelene Vivian, suing in her capacity as the Deputy Commissioner of Taxation (Superannuation) v Fitzgeralds [2007] FCA 1602 discussed
Australian Prudential Regulatory Authority v Holloway (2000) 45 ATR 278 discussed
Australian Prudential Regulation Authority v Derstepanian (2005) 60 ATR 518 discussed
Schneider Electric (Australia) Pty Ltd v Australian Competition and Consumer Commission (2003) 127 FCR 170 cited
Australian Competition and Consumer Commission v High Adventure Pty Limited [2005] FCAFC 247 cited

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd (in liquidation) and Others (2007) 161 FCR 513 cited
Date of hearing: 17 December 2010
Date of last submissions: 23 December 2010
Place: Adelaide
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 35
Counsel for the Applicant: T Duggan
Solicitor for the Applicant: Australian Government Solicitor
Counsel for the Respondent: A Macdonald
Solicitor for the Respondent: Belperio Clark

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

GENERAL DIVISION

SAD 87 of 2010
BETWEEN:

NEIL OLESEN IN HIS CAPACITY AS THE DEPUTY COMMISSIONER OF TAXATION (SUPERANNUATION)
Applicant
AND:

ANTHONY WADE EDDY
Respondent

JUDGE:

MANSFIELD J

DATE OF ORDER:

14 JANUARY 2011

WHERE MADE:

ADELAIDE

THE COURT DECLARES THAT:

1.The respondent as trustee of the A Eddy Superannuation Fund (the Fund) caused the Fund to:

(a)allow the respondent unauthorised early access in the year ended 30 June 2006 of an amount of $59,650 from the Fund contrary to the governing rules of the Fund;

(b)allow the respondent unauthorised early access in the year ended 30 June 2007 of an amount of $6,003.60 from the Fund contrary to the governing rules of the Fund;

(c)allow the respondent unauthorised early access in the year ended 30 June 2008 of an amount of $5,866.63 from the Fund contrary to the governing rules of the Fund; and

(d)allow the respondent unauthorised early access in the year ended 30 June 2009 of an amount of $4,050.11 from the Fund contrary to the governing rules of the Fund

and thereby contravened:

(i)section 62(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the Act) by failing to ensure that the Fund…

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Details
Case
[2011] FCA 13
Decision Date

CaseChat Overview and Summary

The case of Olesen v Eddy involved a dispute under the Superannuation Industry (Supervision) Act 1993 (Cth), with the applicant, Olesen, seeking penalties against Eddy for contraventions of sections 62(1) and 65(1) of the Act. Eddy had established a self-managed superannuation fund and, as a trustee, misappropriated funds from the fund for personal use. The applicant argued that the contraventions were deliberate and serious and sought civil penalties pursuant to section 197(1) of the Act, as well as an order for Eddy to pay a monetary penalty to the Commonwealth. The primary legal issues before the court were the determination of the appropriate civil penalty and the method of payment, considering Eddy’s personal circumstances.

The court considered the nature of the contraventions and Eddy's personal circumstances in determining the appropriate penalty. It was established that Eddy had deliberately misused the funds, which constituted a serious breach of the statutory obligations. The court had the discretion to order periodical payments as part of the penalty, provided the agreed penalty was within the range of an appropriate penalty. The court accepted the parties' agreement on the penalty amount and the payment terms, ensuring they were fair and within the appropriate range. The court found that Eddy's capacity to pay the penalty was relevant and, upon reviewing the evidence, was satisfied that the agreed terms were appropriate.

In conclusion, the court imposed a monetary penalty of $15,000 on Eddy, to be paid over two years in weekly instalments of $192.31, with an immediate due date for the balance upon default of any instalment. The court also ordered Eddy to pay the applicant’s costs of $5,000. The decision reflects the court's consideration of the seriousness of the contraventions, Eddy's personal circumstances, and the agreement between the parties regarding the penalty and payment terms.

Orders

Orders of the court

2. The respondent pay to the Commonwealth of Australia a monetary penalty in the sum of $15,000.

3. The respondent pay the applicant’s costs of and incidental to the application, fixed in the sum of $5,000.

4. The respondent pay the monetary penalty and fixed costs over two (2) years by fifty two (52) weekly instalments of $192.31, the first instalment to be paid on or before 31 January 2011.

5. Upon default in the payment of any one instalment, the balance then remaining becomes immediately due and payable.

Note:

Background

Background to the litigation

The applicant further contends that the contraventions of the Act are serious and that the Court should order that the respondent pay a monetary penalty to the Commonwealth in respect of the contraventions pursuant to s 196(3) of the Act. The submissions of the parties have largely focused on the appropriate monetary penalty. In the course of the hearing, the question arose as to the respondent’s capacity to pay a significant monetary penalty, having regard to his personal circumstances. Subsequent to the hearing, the parties jointly presented a further written submission as to the appropriate monetary penalty in the circumstances, and the terms upon which it is to be paid. It is the responsibility of the Court to determine the appropriate civil penalty. However, the Court has power to give effect to, and generally should give effect to, such an agreement provided it is satisfied that the penalty agreed upon is within the range of an appropriate penalty in all the circumstances: NW Frozen Foods Pty Ltd v Australian Competition and Consumer Commission (1996) 71 FCR 285; Secretary, Department of Health and Ageing v Pagasa Australia Pty Ltd [2008] FCA 1545 at [33]-[38]. I respectfully adopt the observations of Flick J in those paragraphs.THE FACTS The following findings are based on the Statement of Agreed Facts and the uncontroverted affidavits of the respondent of 28 October 2010 and 7 December 2010 and of Raymond Rivieri dated 19 November 2010. Mr Rivieri is an officer of the applicant. The respondent procured the establishment of the Fund on or about 18 May 2005. It is in conventional terms for a superannuation fund, including that its trustees covenanted to comply with all relevant statutory provisions including the Act. The fund, as noted, was a superannuation fund under s 10(1) of the Act and a regulated superannuation fund under s 19 of the Act. Its primary purpose was the provision of old age pensions. The trustees (including the respondent) notified the Commissioner of Taxation under s 19(4) that the Act was to apply to the Fund. The Fund since 18 May 2005 was a “self-managed superannuation fund” within the meaning of s 17A(2) of the Act. Its only member was the respondent. The respondent and his brother were the two trustees. Neither trustee received any remuneration from the Fund for services provided to it. By 1 July 2005, two superannuation funds, Statewide Superannuation Trust and Australian Retirement Fund had made two rollover payments to the Fund, totalling $56,082 initially held by Superannuation Accounting Services Pty Ltd (SAS) on its behalf. After payment of some disbursements or fees totalling $2,400:1.on 19 July 2005, the balance of $53,682 was paid by SAS to a Commonwealth Bank account opened by the respondent as a trustee of the Fund; and2.on 22 July 2005, that account was closed and $48,182 was transferred to another Commonwealth Bank account in the name of the trustees of the Fund, and the balance of $5,500 was appropriated by the respondent for his personal use and benefit.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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