Thurston & Loomis

[2018] FamCA 1187

FAMILY COURT OF AUSTRALIA

THURSTON & LOOMIS AND ORS [2016] FamCA 1187

FAMILY LAW – PROPERTY – Superannuation – Where superannuation fund was non-compliant – Where Court appointed expert accountant requires the parties to sign financial statements – Where the husband is to be paid a Transition to Retirement Pension from which money owed to the superannuation fund is to be repaid.

Family Law Act 1975 (Cth)

APPLICANT: Ms Thurston

FIRST RESPONDENT: Mr Loomis

SECOND RESPONDENT: L Limited

THIRD RESPONDENT: C Pty Ltd

FILE NUMBER: BRC 1010 of 2012

DATE DELIVERED: 22 December 2016

PLACE DELIVERED: Brisbane

PLACE HEARD: Brisbane

JUDGMENT OF: Forrest J

HEARING DATES: 19 December 2016

REPRESENTATION

THE APPLICANT: In Person

THE RESPONDENTS: In Person

Orders

IT IS ORDERED UNTIL FURTHER ORDER

1. That Mr Loomis and Ms Thurston as directors of R Pty Ltd as trustee of the R Superannuation Fund forthwith, but by no later than close of business on Wednesday 11 January 2017, do all things and sign all documents as directed by Mr BG of E Accountants that are necessary to cause the financial statements and tax returns of the R Superannuation Fund to be submitted to the Australian Tax Office on behalf of that superannuation fund.

2. That should either or both of Mr Loomis and Mr Thurston refuse to sign any such documents as directed by Mr BG pursuant to paragraph 1 of these orders by close of business on Wednesday 11 January, 2017, the Senior Registrar of the Brisbane Registry of this Court is authorised pursuant to s 106A of the Family Law Act 1975 to sign any such documents in lieu of either or both of Mr Loomis and Ms Thurston on the written request of Mr BG.

3. That Mr Loomis as a member of the R Superannuation Fund do all things and sign all documents as directed by Mr BG of E Accountants that are necessary to cause the R Superannuation Fund to pay to him a Transition to Retirement Pension payment for the current financial year in the form of a payment equal to 10% of his member account balance and for such amount to be paid to him and then immediately repaid in full to the R Superannuation Fund in part repayment of the outstanding debt of Mr Loomis and Ms Thurston or either of them to the said self-managed superannuation fund.

4. That should Mr Loomis refuse to sign any such documents as directed by Mr BG pursuant to paragraph 3 of these orders by close of business on Wednesday 11 January, 2017, the Senior Registrar of the Brisbane Registry of this Court is authorised pursuant to s 106A of the Family Law Act 1975 to sign any such documents in lieu of Mr Loomis on the written request of Mr BG.

5. That Mr RO, as trustee for the trustee of the R Superannuation Fund, shall follow all directions of Mr BG in order to give effect to paragraph 3 hereof and advise Mr BG when all those steps are completed.

6. That Mr Loomis and Ms Thurston sign all documents and take all steps necessary to cause the funds still standing to the account of the R Pty Ltd as trustee of the R Superannuation Fund in an account held with the ANZ Bank and in an account with HI Group to be withdrawn and immediately deposited to the account held by Mr RO as trustee for the trustee of the R Superannuation fund where it shall be held pending further order of this Court and the said account held with the ANZ Bank shall be closed.

7. That if and when HI Group repay any money to the HI Group account of R Pty Ltd as trustee of the R Superannuation Fund in accordance with any direction of the Financial Ombudsman, Mr Loomis and Ms Thurston shall sign all documents and take all steps necessary to cause that money to be withdrawn and immediately deposited to the account held by Mr RO as trustee for the trustee of the R Superannuation fund where it shall be held pending further order of this Court and, thereafter, the said account held with HI Group shall be closed.

8. That the delivery of judgment and the making of final orders in these property adjustment proceedings is stayed pending completion of the review currently being conducted by the Australian Tax Office into the operation of the R Superannuation Fund currently expected to be completed by mid-March 2017.

9. That Mr BG shall inform the Court in writing when he is aware that the review being conducted by the Australian Tax Office referred to in paragraph 8 is completed and he shall also provide a short final report as to the status of the R Superannuation Fund which includes details as to the balances of the member interests of Mr Loomis and Ms Thurston.

Note: The form of the order is subject to the entry of the order in the Court’s records.

IT IS NOTED that publication of this judgment by this Court under the pseudonym Thurston & Loomis has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).

Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).

FAMILY COURT OF AUSTRALIA AT BRISBANE

FILE NUMBER: BRC1010/2012

Ms Thurston

Applicant

And

Mr Loomis

First Respondent

And

L Limited

Second Respondent

And

C Pty Ltd

Third Respondent

REASONS FOR JUDGMENT

1. On 9 May, 2016, I delivered reasons and pronounced orders on an interim basis in these property adjustment proceedings between the parties, having concluded a trial in the matter in December 2015.

2. By those orders, Mr BG of E Accountants was appointed as an expert to assist the parties in finalising the accounts of their self-managed superannuation fund so that I could proceed to finalise my reserved judgment in the proceedings knowing that the SMSF’s accounts were finalised and correct and that the fund, which I was satisfied was not a complying fund (as that term is understood within the superannuation regulatory regime), was restored to complying status, or as well as it could be, in any event.

3. Mr BG was given liberty to apply to the Court for any further direction or orders he considered necessary in order to properly discharge the duties assigned to him pursuant to those Orders.

4. On Monday 19^th December, 2016, at the request of Mr. BG, the matter was listed before me for consideration of some remaining issues that needed to be dealt with before finalisation of the interim matters pertaining to the SFSM of the parties. Mr BG appeared to speak to his report of 1 December 2015. Mr Loomis appeared and Ms Thurston appeared.

5. I admitted Mr BG’s report just referred to into evidence as Exhibit 1 in the day’s proceedings. It is best understood read in context with Mr BG’s initial report that was in evidence at the trial. That report was exhibited to his affidavit filed on 9 December, 2015. It should also be read in context with my judgment of 9 May, 2016.

6. The financial statements of the parties’ SMSF had previously only been completed up to 30 June, 2012. They showed the members’ superannuation interests as at that date at $238,250 for Ms Thurston and $236,758 for Mr Loomis. Mr BG has now finalised the financial statements of the SMSF for the 2013, 2014, 2015 and 2016 financial years. They have also been audited as required. They need to be sent to the ATO. The parties have not agreed to sign off on them because of different views that they have about them. I gave the parties the opportunity to be heard on this and am satisfied that they should be ordered to sign the documents so that they can be submitted to the ATO. I will give each party a few weeks to sign them but will make an order pursuant to s 106A of the Family Law Act 1975 (Cth) for the Senior Registrar in this Registry to sign in lieu of either or both Mr Loomis and Ms Thurston if he is requested by Mr BG to do so at the end of that time in the event of default. The history of this case and the conflict between the parties informs me that such an order is necessary.

7. Mr BG further reported in Exhibit 1 that, pursuant to my orders of 9 May, 2016, that he had instructed Mr RO, solicitor, to transfer the total of $370,773.38, being money he held on trust for the parties, into the account in which he holds money on trust for the trustee of the parties’ SMSF. Mr BG said that he had determined that the amount owed to the SMSF by Mr Loomis and Ms Thurston, including interest calculated using the ATO deemed interest rate, was $404,472.62.

8. All of the money held on trust for the parties outside the SMSF was transferred into the SMSF account leaving a shortfall of $33,699.24 still owing by the parties to the SMSF to restore it to compliance.

9. Mr BG recommended that this outstanding amount be dealt with by Mr Loomis electing to withdraw in this financial year from his superannuation interest an amount equal to 10% of his interest account balance as a Transition to Retirement Income Stream and then for this amount to then be deposited back into the SMSF as repayment of debt owed to the SMSF still. There would be no adverse tax impact for Mr Loomis or Ms Thurston in doing this.

10. Mr BG explained this is necessary for two reasons. Firstly, the parties both say they do not have access to any money to otherwise be able to repay the remainder of the debt. Secondly, Mr Loomis, although 61 years of age, not presently working, and eligible to retire from the workforce, has not said he has retired or that he is prepared to retire. If he had or did, of course, he could draw some or all of his member interest account balance as a tax free lump sum. Until he does, the Transition to Retirement Pension of up to 10% of his total member interest account balance is nevertheless available to be accessed by him.

11. Mr BG pointed out that 10% of Mr Loomis’s member interest account balance would be $30,240 and, that therefore, there would remain $3,459.24 still to be repaid to the SMSF to make it totally compliant. Mr BG explained that the ATO could simply elect to deal with that by treating it as drawn by one or both of the parties as income to be assessed along with any income earned in this financial year. Mr BG told the Court that the ATO has been involved in the process since my orders of 9 May and is reviewing the SMSF’s actions and accounts. The ATO is, the Court was told, aware of what is going on and has indicated the review should be completed by 15 March, 2017.

12. Ms Thurston pressed an alternative course of treating some of the money previously withdrawn from the SMSF by Mr Loomis (that has been treated by Mr BG as part of the funds loaned to the members that required repayment with interest) as a Transition to Retirement Pension already received by Mr Loomis. However, as I pointed out to Ms Thurston, Mr BG had already ruled that out as an inappropriate option due to the problems presented by retrospective reclassification of actions that did not display the requisite intention when they occurred. I accepted that.

13. Mr Loomis continued to oppose the recommended course, and maintained arguments on matters that Mr BG had already considered and determined against Mr Loomis. Ultimately, Mr Loomis told the Court that whilst he is presently not working, he had not yet retired and he was not prepared to say that he would retire. He did that clearly appreciating, I am satisfied, that this left only Mr BG’s recommended course of Mr Loomis taking a Transition to Retirement Pension of 10% of his member balance in this financial year and repaying it directly to the SMSF account as the only immediate option available. Mr Loomis acknowledged that when that was pointed out to him and simply reminded the Court, correctly, I accept, that same must be taken into account in the final determination of the appropriate property adjustment orders that are just and equitable.

14. It was also pointed out to me by Ms Thurston that there are two bank accounts of the SMSF still open outside the account controlled by Mr RO as trustee. She correctly pointed out that they should be closed, though she told the Court, with some reasonable justification I am satisfied on the evidence I have seen, that one of those accounts may have an amount of $4,800 returned to it by the company who controls it as a consequence of an investigation conducted by the Financial Ombudsman’s Office on the complaint of Ms Thurston. If that sum is returned to the account by the company that controls the account as a result of that investigation that will resolve the problem with the remaining outstanding debt of the parties to the SMSF in the amount of $3,459.24 already referred to. Whether it is repaid or not is currently simply a matter of expectation rather than a matter of certainty though.

15. I am satisfied that orders should now be made for the parties to sign off on the financial statements prepared for the SMSF for the last four financial years by Mr BG, that Mr Loomis should sign the necessary documents to cause the Transition to Retirement Pension equal to 10% of his member balance to be paid to him and then immediately repaid to the fund and that all necessary steps be taken to cause the SMSF’s funds remaining in other bank accounts to be paid to the account  controlled by Mr RO pending further order of this Court and for any further funds received into the HI Group account to be paid to the account controlled by Mr RO as well.

16. I will also stay the delivery of my final judgment in the proceedings pending completion of the review of the parties’ SMSF being conducted by the ATO at which time the affairs of the SMSF should be finalised to a point at which final judgement is able to be delivered. As I have told the parties, I will give them the opportunity to make further submissions as to the final orders to be made at that point in time.

17. I make the orders set out at the commencement of these written reasons.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Forrest delivered on 22 December 2016.

Associate: 

Date:  22 December 2016