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Olesen v MacLeod [2011] FCA 229 (17 March 2011)

Last Updated: 18 March 2011

FEDERAL COURT OF AUSTRALIA


Olesen v MacLeod [2011] FCA 229


Citation:
Olesen v MacLeod [2011] FCA 229


Parties:
NEIL OLESEN SUING IN HIS CAPACITY AS DEPUTY COMMISSIONER OF TAXATION (SUPERANNUATION) v MARK ANDREW MACLEOD


File number:
WAD 328 of 2010


Judge:
BARKER J


Date of judgment:
17 March 2011


Catchwords:
SUPERANNUATION — where contraventions of s 62(1) and s 65(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) have been admitted — where declarations are sought that would reflect those admissions.

SUPERANNUATION — consideration of the imposition of a civil penalty order pursuant to s 196(3) of the Superannuation Industry (Supervision) Act 1993 (Cth) — whether the conduct amounts to a serious contravention — whether a monetary penalty should be ordered – consideration of other principles and factors relevant to the assessment of an appropriate penalty.


Legislation:


Cases cited:
Australian Prudential Regulation Authority v Derstepanian [2005] FCA 1121
Australian Prudential Regulation Authority v Holloway [2000] FCA 1245
McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29
Olesen v Eddy [2011] FCA 13
Raelene Vivian, suing in her capacity as the Deputy Commissioner of Taxation (Superannuation) v Fitzgeralds [2007] FCA 1602


Date of hearing:
14 March 2011


Place:
Perth


Division:
GENERAL DIVISION


Category:
Catchwords


Number of paragraphs:
81


Counsel for the Applicant:
Ms W Gillan


Solicitor for the Applicant:
Australian Government Solicitor


Counsel for the Respondent:
The respondent appeared in person
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 328 of 2010

BETWEEN:
NEIL OLESEN SUING IN HIS CAPACITY AS DEPUTY COMMISSIONER OF TAXATION (SUPERANNUATION)
Applicant
AND:
MARK ANDREW MACLEOD
Respondent

JUDGE:
BARKER J
DATE OF ORDER:
17 MARCH 2011
WHERE MADE:
PERTH

THE COURT DECLARES THAT:

  1. The respondent, as a trustee of the MAM Superannuation Fund (the Fund) contravened:

(a) section 62(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) (Act) by failing to ensure that the Fund was maintained solely for one or more of the purposes set out in s 62(1) of the Act; and

(b) section 65(1) of the Act by giving financial assistance using the resources of the Fund to a member of the Fund, namely the respondent,

by causing the Fund to pay the following sums from the Fund to himself without authorisation under the governing rules of the Fund:

(i)
9 September 2005
$20,028.00
(ii)
19 September 2005
$3,000.00
(iii)
3 October 2005
$5,000.00
(iv)
26 October 2005
$2,000.00
(v)
11 November 2005
$1,000.00
(vi)
8 December 2005
$1,000.00
(vii)
23 February 2006
$2,000.00
(viii)
4 May 2006
$1,000.00
(ix)
5 May 2006
$1,000.00
(x)
4 July 2006
$2,000.00
(xi)
9 August 2006
$2,000.00
(xii)
11 September 2006
$1,500.00
(xiii)
13 September 2006
$2,000.00
(xiv)
25 October 2006
$1,500.00
(xv)
28 November 2006
$500.00
(xvi)
6 March 2007
$700.00
(xvii)
17 September 2007
$500.00
(xviii)
23 January 2008
$47.00
(xix)
16 April 2009
$120.00
(xx)
16 April 2009
$500.00
(xxi)
16 April 2009
$600.00
(xxii)
16 April 2009
$100.00
(xxiii)
27 April 2009
$100.00
(xxiv)
27 April 2009
$100.00
(xxv)
29 April 2009
$168.00
(xxvi)
29 April 2009
$500.00
(xxvii)
6 May 2009
$215.25
(xxviii)
19 May 2009
$6,000.00
(xxix)
22 May 2009
$3,000.00
(xxx)
22 June 2009
$69.28
(xxxi)
22 June 2009
$127.22
(xxxii)
08 July 2009
$1,600.00
(xxxiii)
17 July 2009
$740.00
(xxxiv)
1 February 2010
$1,000.00
(xxxv)
8 February 2010
$400.00
(xxxvi)
9 February 2010
$500.00
(xxxvii)
15 February 2010
$200.00
(xxxviii)
4 March 2010
$10.00
(xxxix)
30 April 2010
$772.07
(xl)
4 May 2010
$400.00
(xli)
06 May 2010
$80.00

THE COURT ORDERS THAT:

  1. The respondent pay to the Commonwealth of Australia a monetary penalty in the sum of $12,500.
  2. The respondent pay the applicant’s costs of and incidental to the application, to be taxed if not agreed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 328 of 2010

BETWEEN:
NEIL OLESEN SUING IN HIS CAPACITY AS DEPUTY COMMISSIONER OF TAXATION (SUPERANNUATION)
Applicant
AND:
MARK ANDREW MACLEOD
Respondent

JUDGE:
BARKER J
DATE:
17 MARCH 2011
PLACE:
PERTH

REASONS FOR JUDGMENT

APPLICATION FOR DECLARATIONS AND CIVIL PENALTIES

  1. In this proceeding, the Deputy Commissioner for Taxation (Superannuation), the applicant, pursuant to delegated authority from the Regulator under the Superannuation Industry (Supervision) Act 1993 (Cth) (Act) seeks declarations that Mark Andrew MacLeod, the respondent, contravened s 62(1) and s 65(1) of the Act, and an order that the respondent pay to the Commonwealth a monetary penalty in respect of the contraventions, together with costs.
  2. The respondent admits the contraventions alleged.

THE ISSUES

  1. The principal issues to be determined in this proceeding are:
    1. Whether the single course of conduct, represented by the contraventions, is a “serious one”, as that expression is used in s 196(4) of the Act.
    2. Whether it is appropriate to make a civil penalty order under s 196(3) of the Act.
    3. If so, what the monetary penalty should be.

AGREED FACTS

  1. The MAM Superannuation Fund (Fund) was established on or about 5 August 2005.
  2. A Trust Deed for the Fund was executed on 5 August 2005.
  3. On or about 5 August 2005, the respondent made an application to be admitted as a member of the Fund pursuant to cl 6.4 of the Trust Deed and was admitted as a member of the Fund on that date. At all material times no other person was a member of the Fund.
  4. The Fund had, at all material times, two trustees, namely the respondent who was the member and Donald MacLeod, who was the father of the respondent.
  5. The Trust Deed included the following terms:
  6. The governing rules of the Fund provided the primary purpose of the Fund was the provision of old age pensions.
  7. The trustees of the Fund did not receive any remuneration from the Fund or from any person for any duties or services performed by the trustees in relation to the Fund.
  8. The Commissioner received notice in the approved form for the purposes of s 19(4) of the Act that the trustees elected that the Act was to apply to the Fund:
  9. The Fund was at all material times since August 2005:
  10. The Fund was established with a rollover payment on 7 September 2005 from MLC Investments of $40,032.26 into an ANZ bank account (account number 4963-55939) in the name of the respondent and Donald MacLeod as trustees for the MAM Superannuation Fund (ANZ account).
  11. Further amounts were rolled over from the respondent’s Pattersons PSL Super Fund into the Fund as follows:

21 October 2005 $1,060.74

15 February 2006 $2,095.00

26 October 2006 $1,970.10

  1. Total amounts rolled into the Fund as at 30 June 2007 were $45,158.10.
  2. On or about each of the dates set out below the respondent made payments or arranged for payments to be made in the following amounts from the ANZ account to himself or for his own personal benefit and use:
Year ended 30 June 2006
(i)
9 September 2005
$20,028.00
(ii)
19 September 2005
$3,000.00
(iii)
3 October 2005
$5,000.00
(iv)
26 October 2005
$2,000.00
(v)
11 November 2005
$1,000.00
(vi)
8 December 2005
$1,000.00
(vii)
23 February 2006
$2,000.00
(viii)
4 May 2006
$1,000.00
(ix)
5 May 2006
$1,000.00


$36,028.00
Year Ended 30 June 2007
(x)
4 July 2006
$2,000.00
(xi)
9 August 2006
$2,000.00
(xii)
11 September 2006
$1,500.00
(xiii)
13 September 2006
$2,000.00
(xiv)
25 October 2006
$1,500.00
(xv)
28 November 2006
$500.00
(xvi)
6 March 2007
$700.00


$10,200.00
  1. At all material times since 16 October 2007, the respondent knew that the payments made in the year 30 June 2006 were outside the superannuation guidelines.
  2. On or about 6 November 2007, David Fong, the auditor of the Fund, lodged with the Australian Taxation Office (ATO) Auditor Contravention Reports (ACRs) for the income years ended 30 June 2006 and 30 June 2007.
  3. On or about each of the dates set out below the respondent made further payments or arranged for payments to be made in the following amounts from the ANZ account to himself or for his own personal benefit and use:
Year ended 30 June 2008
(xvii)
17 September 2007
$500.00
(xviii)
23 January 2008
$46.99
  1. On 28 May 2008 the ATO issued a “Notification of Audit” letter care of the Fund’s tax agent requesting additional information in respect to the reported contraventions by the Fund for the 2007 year.
  2. Following the audit the ATO advised the trustees of the Fund by letter dated 24 July 2008 that it had concluded that the payments were by way of an illegal early release of preserved superannuation benefits in the fund.
  3. On 15 September 2008 the ATO advised the respondent by letter that an amended income tax return would be issued to the respondent.
  4. On or about 10 November 2008, David Fong, the auditor of the Fund, lodged a further ACR with respect to the year ended 30 June 2008.
  5. On or about each of the dates set out below the respondent made payments or arranged for payments to be made in the following amounts from the ANZ account to himself or for his own personal benefit and use:
Year ended 30 June 2009
(xix)
16 April 2009
$120.00
(xx)
16 April 2009
$500.00
(xxi)
16 April 2009
$600.00
(xxii)
16 April 2009
$100.00
(xxiii)
27 April 2009
$100.00
(xxiv)
27 April 2009
$100.00
(xxv)
29 April 2009
$168.00
(xxvi)
29 April 2009
$500.00
(xxvii)
6 May 2009
$215.25
(xxviii)
22 May 2009
$3,000.00
(xxix)
22 June 2009
$69.28
(xxx)
22 June 2009
$127.22


$5,599.75
Year Ended 30 June 2010
(xxxi)
08 July 2009
$1,600.00
(xxxii)
17 July 2009
$740.00
(xxxiii)
1 February 2010
$1,000.00
(xxxiv)
8 February 2010
$400.00
(xxxv)
9 February 2010
$500.00
(xxxvi)
15 February 2010
$200.00
(xxxvii)
4 March 2010
$10.00
(xxxviii)
30 April 2010
$772.07
(xxxix)
4 May 2010
$400.00
(xl)
06 May 2010
$80.00


$5,702.07
  1. On 27 April 2009, the Fund opened a further account with Bankwest (account number 306-089 905666-8) in the name of the respondent and Mr Donald MacLeod as Trustees for the MAM Super Fund (Bankwest account).
  2. On or about 19 May 2009, the respondent made a payment or arranged for a payment to be made in the amount of $6,000 to himself or for his own personal benefit or use.
  3. None of the payments set out in paragraphs 13, 16, 21 and 23 were authorised by the governing rules of the Fund.
  4. The respondent made the following repayments to the Fund:
  5. No other repayment has been made to the Fund by the respondent.

RESPONDENT’S STATEMENT OF MITIGATING CIRCUMSTANCES

  1. The respondent states that there were mitigating circumstances relating to his contraventions of the Act and asks the Court to take them into account.
  2. He says that he is generally a law abiding citizen and that the contraventions are totally out of character.
  3. The respondent further says he is extremely apologetic for his actions and disappointed that he has been put in this situation and will in future ensure that his actions are in accordance with the laws of this country.
  4. The respondent produces three references, one undated, one dated 23 February 2011 and another dated 2 March 2011. None of the referees appears to have been expressly advised of the purpose to which the reference was to be put, as no referee makes mention of this proceeding or the admitted contraventions of the Act by the respondent. This unfortunately reduces the weight that can be placed on the references provided, which otherwise speak to the respondent’s good character.
  5. In other respects, the respondent by his statement of mitigating circumstances admits to the improper use of the Fund and confirms his admission of the facts set out in the statement of agreed facts. Importantly, the respondent admits that when faced with stressful financial circumstances following the threat of legal action against him by a former client of the stockbroking business in which he worked, the breakdown of his marriage and his financial obligations to the secondary private school at which his son was then attending, he determined to take the steps he did.
  6. The respondent formally states his decision-making process in these terms:
After much soul searching and finding out that the only way I could legally get access to my superannuation monies was to be unemployed and on the dole, I decided that the only course of action was to access my superannuation monies and pay my client the balance of his money. I rationalised that I would either get back on my feet financially and pay back the money or that I would reach a settlement with my ex-wife and pay back the money from the settlement. Despite the business having some cashflow problems, I had been involved for many years and knew that it was a good business and could be worth $500,000 - $700,000 at some stage in the future. In my mind was also the fact that the amount of money I had in superannuation was negligible and would not affect any future government pension support financially (although I do not envisage seeking support). I also appreciated that I had worked on commission only since 1988 and that almost all the money I had in superannuation had come from my earnings alone without any contribution from my employer and no allowance made on the level of commissions to compensate.
  1. The respondent also explains that his personal tax returns have now been amended through the assistance of his accountants and arrangements made with the ATO for repayment of overdue tax and penalties. These have been calculated on the basis that the funds he took from the Fund should be treated as income in his hands. It appears, after all necessary adjustments, that he is repaying the ATO a sum in the vicinity of $10,000-$11,000.
  2. In January 2010, the respondent wrote to the ATO stating that he had closed the Fund and all assets had been transferred to the Asgard Managed Superannuation Fund (Asgard). He says that all superannuation contributions have since gone into Asgard and he will continue to do that in the future.
  3. He has also received a letter from the ATO disqualifying him as a trustee of the Fund.

WHETHER THE CONTRAVENTIONS ARE “SERIOUS”

  1. The respondent, by his affidavit filed in the proceeding and by acknowledging the statement of agreed facts filed in this proceeding, accepts that by the unauthorised early release by him of the Fund’s superannuation benefits, he contravened s 62(1) and s 65(1) of the Act in relation to the fund.
  2. In that regard, s 62(1) makes it plain that each trustee of a regulated superannuation fund must ensure that the fund is maintained solely for one or more of one of the core purposes specified in (a), or for one or more of the ancillary purposes specified in (b). The expenditure of those funds by the respondent for his own personal use or benefit was not for any of those purposes.
  3. By s 65(1), a trustee of a regulated superannuation fund is prohibited from lending money of the Fund to a member of the Fund, amongst others or from giving other financial assistance using the resources of the Fund to a member of the Fund amongst others. By giving money from the Fund to himself, the respondent, as a member of the Fund, the respondent as trustee contravened that prohibition.
  4. By s 193 of the Act, each of s 62(1) and s 65(1) is a “civil penalty provision”.
  5. Section 196(1) makes s 196 applicable if the Court is satisfied that a person has contravened the civil penalty provision, whether or not the contravention also constitutes an offence because of s 202. In this case, the Court is satisfied that the respondent has contravened both s 62(1) and s 65(1).
  6. By s 196(2), the Court is to declare that the person has, by a specified act or omission, contravened that provision in relation to a specified superannuation fund, but need not do so when such a declaration is already in force under Div 4 of the Act.
  7. By s 196(3), the Court may also make against the person an order that the person pay to the Commonwealth a monetary penalty of an amount specified in the order that does not exceed 2,000 penalty units. Taking account of the Crimes Act 1914 (Cth), each penalty unit equates to a sum of $110.00. A maximum monetary order of $220,000 may therefore be ordered.
  8. Section 196(4) makes it clear that the Court is not to make a monetary penalty order unless it is satisfied that the contravention “is a serious one”.
  9. The expression “serious one” or the word “serious” is not defined in the Act and should be given its ordinary meaning. In this particular context, where the word “serious” describes the nature of the contravention, the most pertinent definition would appear to be “not trifling or superficial”: see Shorter Oxford English Dictionary 5th Edition; Macquarie Dictionary, 4th Edition. That appears to be the meaning ascribed to the word in decided cases: see, for example Olesen v Eddy [2011] FCA 13 (Eddy) at [21] – [22], per Mansfield J.
  10. The contraventions here are plainly serious. The principal asset of the Fund was almost completely disposed of, other than in accordance with the governing rules of the Fund. A deliberate decision was made to establish a self-managed superannuation fund in order to access the funds and in each case a deliberate decision was made to remove the funds.
  11. As the statement of agreed facts shows, the Fund was established with a rollover payment of $40,032.26 into an ANZ bank account. On 9 September 2005, shortly thereafter, $20,028 was withdrawn in order to settle the threatened legal proceedings by the respondent’s former client. Thereafter the funds were used for a variety of personal purposes. The respondent used the Fund as though it were his personal bank account.
  12. There was some 41 separate payments, thus contraventions, although 11 of those were in respect of payments in relation to which the respondent says he immediately appreciated contravention or error in making the payment and refunded the Fund soon afterwards. The fact of the refund is not disputed by the applicant.
  13. Whether one states that there were 30 contraventions or 41 is, in a number of respects, not particularly material in the overall context of this case. The fact is there was a contravening course of conduct, as the applicant accepts, in respect of which the conduct constituted a serious contravention of the trustee’s responsibilities.

WHETHER A MONETARY PENALTY SHOULD BE ORDERED

  1. Under s 196(3), the Court may make against the person an order that the person pay to the Commonwealth a monetary penalty; but the Court is not obliged to make such an order. By virtue of s 196(4) the Court cannot make the order unless it is satisfied that the contravention is a serious one. In this particular circumstance, I am satisfied that a monetary penalty should be imposed. As Logan J concluded in Raelene Vivian, suing in her capacity as the Deputy Commissioner of Taxation (Superannuation) v Fitzgeralds [2007] FCA 1602 (Fitzgeralds) at [27], and Mansfield J found in Eddy at [17], this is a case in which the making of civil penalty orders is appropriate and, indeed, necessary.
  2. As I have found, the conduct is serious. The respondent undertook a deliberate sequence of steps designed to give him access to the Fund in order to use it to meet pressing personal financial needs. He plainly knew that he should not have been applying the funds in that way.
  3. The respondent knew from the outset and acknowledged to the auditor of the Fund, as early as October 2007, that the payments made in the year ending 30 June 2006 were outside the guidelines for the management of the Fund.
  4. On or about 6 November 2007, the auditor of the Fund reported contraventions of the Fund for the financial year ended 30 June 2006. Notwithstanding this, the respondent continued to make unauthorised withdrawals in the years ending 2008, 2009 and 2010.
  5. He benefited personally from the contraventions, by using the proceeds of the Fund for his personal benefit and use to meet everyday living expenses.
  6. Only very limited repayments, as noted earlier, have been made to the Fund.
  7. The contraventions had the effect of depleting the Fund of almost the totality of its assets, thereby impairing the Act’s objective that people build their own retirement savings rather than rely on social security benefits.
  8. The respondent further benefited from the availability of concessional tax treatment as a result of operating the Fund, which the legislation confers in return for compliance with the Act.
  9. In other respects, it is noted that no third parties suffered loss as a result of the contraventions, the respondent being not only the trustee but the beneficiary of it.
  10. In all of those circumstances, as I have noted, it is not only appropriate but also necessary that a civil penalty order be made in this case. The respondent must be sanctioned for his conduct and a message must be sent to the community that such conduct is unacceptable.

THE EXTENT OF THE MONETARY ORDER TO BE MADE

  1. It is appropriate that a monetary penalty order be sufficiently large to constitute a specific deterrent for the respondent against engaging in any like conduct in the future, as well as a form of punishment for his contravention in this case. Importantly, the order needs to send a message to persons in a like position to that of the respondent that generally deters contravening conduct of this sort.
  2. In this regard, I agree with comments made in Fitzgeralds at [25] by Logan J, to which Mansfield J subscribed in Eddy at [16], that the Act provides for taxation benefits to trustees of superannuation funds and its members to encourage prudent provision by Australians for their retirement. It is appropriate that the Court should give effect to that policy purpose. The respondent’s conduct here, as in those cases, has totally thwarted that purpose. The order made by the Court should ensure that the privilege of maintaining a self-managed superannuation fund is not abused.
  3. As to the setting of a monetary penalty, there are a number of general principles that should be regarded, including:

(a) A civil penalty needs to be sufficiently high to deter contravention by others, but not so high as to be oppressive: APRA v Holloway [2000] FCA 1245 (Holloway), Mansfield J at [12]; Fitzgeralds at [29]; Eddy at [18].

(b) General deterrence is a very significant factor: Holloway at [11]; Fitzgeralds at [29]; other objectives include denunciation and punishment: APRA v Derstepanian [2005] FCA 1121 (Derstepanian), Weinberg J at [26]; Fitzgeralds at [29]; Eddy at [18]. Contravening conduct under the SIS Act may be difficult to detect and its investigation can be complex and expensive: Holloway at [21]; Fitzgeralds at [29]; Eddy at [18].

(c) Those that take advantage of the utilisation of a self-managed fund have a responsibility to manage that fund in accordance with the terms of the Deed and the legislation: Fitzgeralds at [30] and Eddy at [18]. Any trustee is obliged to discharge his or her duty according to the terms of a governing Trust Deed.

(d) The maximum penalty for any contravention is $220,000: s 196(3), read with s 4AA of the Crimes Act 1914.

(e) The total penalty must not exceed what is proper for the conduct of the person in respect of all the contraventions: Holloway at [19]; Fitzgeralds at [31]-[33], Eddy at [18].

(f) Relevant factors in determining an appropriate penalty include:

(i) the nature and extent of the contravening conduct;

(ii) the amount of any loss or damage caused;

(iii) the size of the organisation;

(iv) the deliberateness or otherwise of the contravention(s);

(v) the period over which the contravention(s) extended;

(vi) the degree of cooperation of the person concerned, either in the investigation or the subsequent hearing;

(vii) the past record of the person;

(viii) the person’s financial position;

(ix) any amounts already paid by way of compensation or legal costs;

(x) contrition;

(xi) any public policy position applicable

: see generally, Derstepanian at [30]-[37]; Holloway at [11]-[12], [32]; Fitzgeralds at [35] and [43] and Eddy at [18].

  1. In the case of Fitzgeralds, penalties of $20,000 and $10,000 were imposed on the first and second respondents, who were a husband and wife, in respect of their misapplication of the sum of $148,000 from a self-managed fund to settle a claim by a liquidator against them in respect of a company formerly controlled by them.
  2. In Eddy, the parties, at the invitation of the Court, submitted an agreed penalty proposal of $15,000 payable by instalments, which received the Court’s endorsement having regard to the financial impecuniosity of the respondent in that case.
  3. In Holloway, by contrast, a penalty of $40,000 was imposed on the company respondent and $12,000 on the individual as a result of the wrongful application of $130,000 from a self-managed fund. The total penalty for multiple breaches including a large number of funds advised by the respondents in that case was $222,000 for the company and $35,000 for the individual.
  4. In Derstepanian an agreed penalty of $100,000 was endorsed by the Court, in circumstances where the trustees of a superannuation fund with 17 members (including trustees) effectively misapplied in the order of $160,000 for the use of themselves and a company they controlled, but had subsequently paid compensation in the sum of approximately $226,000.
  5. It is well understood that there is no “tariff” when it comes to the imposition of penalties in civil penalty cases, whether under this Act or like legislation, and that the Court must necessarily have regard to the facts and circumstances of each case. Ultimately, the Court should apply the process of “instinctive synthesis” in arriving at the appropriate penalty, having regard to all relevant factors: see, for example, in relation to the application of pecuniary penalties under the Building and Construction Industry Improvement Act 2005 (Cth), McDonald v Australian Building and Construction Commissioner [2011] FCAFC 29 at [12], [50].
  6. The situation here is that the numerous contraventions constitute a single contravening course of conduct, as the applicant submits. This ensures that in applying what is often called the “totality principle”, the final penalty is proportionate to the overall contravening conduct.
  7. The total amount of funds misapplied by the respondent in this case is in the order of about $64,000. I am prepared in the circumstances to deduct the 11 particular transactions identified by the respondent as errors in relation to which he soon after refunded to the Fund. They total a little over $3,400. Accordingly, the amount on any view misapplied by the respondent is in the order of $60,000.
  8. It is pertinent to note that this virtually exhausted the total amount of the funds in the Fund.
  9. At the same time, and without in any way excusing the behaviour of the respondent, the total amount involved is not as large as the sums involved in the cases of Holloway, Derstepanian, Fitzgeralds or Eddy.
  10. Also important to note is that the respondent was very much the controlling trustee. The other trustee, who has since passed away, was his father.
  11. I have already noted above that the contravention extended over a period of times, notwithstanding that the respondent was aware of the fact that he should not have been so conducting himself.
  12. In other respects the respondent is not a person who has previously contravened this Act, or for that matter, any other Act or laws so far as the Court is aware.
  13. The respondent’s general financial position is such that, while he found himself in straightened circumstances at the time he hatched his plan to gain access to his superannuation funds, it has since improved. He continues to be employed as a stockbroker. His son is no longer at school and he is no longer incurring educational expenses on his behalf. Following the death of his father, the respondent has received some funds which have generally improved his financial position. He has disclosed his financial position to the applicant.
  14. I also note that the respondent has been obliged to pay, and has agreed to the payment of, assessed taxes and penalties and is repaying that debt to the ATO.
  15. This last comment is more an acknowledgement that at all material times since he was approached by the applicant in respect of the contraventions, the respondent has acknowledged them, has cooperated with the applicant and has done nothing to hide his contravening conduct. When the matter first came on for direction in this Court, the respondent immediately indicated his intention to admit the contraventions alleged. All of that is to his considerable credit.
  16. Indeed, in general terms, I accept that the respondent is contrite, even though he did deliberately develop this scheme in order to gain access to his superannuation. He accepts now that his scheme was foolhardy.
  17. Taking all these factors into account, I consider that, absent the respondent’s acknowledgement and admission of his contraventions from the outset of the inquiry and proceedings against him on behalf of the applicant, a monetary penalty in the order of $15,000 to $17,000 would have been appropriate. Taking into account the admissions and cooperative conduct of the respondent, for which he should receive credit, I consider the monetary penalty should be fixed at $12,500. This penalty constitutes both a suitable specific and general deterrent to such conduct, taking into account the circumstances of the respondent in this particular case.

DECLARATIONS AND ORDERS

The Court Declares That:

  1. The respondent, as a trustee of the MAM Superannuation Fund (the Fund) contravened:

(a) section 62(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) (Act) by failing to ensure that the Fund was maintained solely for one or more of the purposes set out in s 62(1) of the Act; and

(b) section 65(1) of the Act by giving financial assistance using the resources of the Fund to a member of the Fund, namely the respondent,

by causing the Fund to pay the following sums from the Fund to himself without authorisation under the governing rules of the Fund:

(i)
9 September 2005
$20,028.00
(ii)
19 September 2005
$3,000.00
(iii)
3 October 2005
$5,000.00
(iv)
26 October 2005
$2,000.00
(v)
11 November 2005
$1,000.00
(vi)
8 December 2005
$1,000.00
(vii)
23 February 2006
$2,000.00
(viii)
4 May 2006
$1,000.00
(ix)
5 May 2006
$1,000.00
(x)
4 July 2006
$2,000.00
(xi)
9 August 2006
$2,000.00
(xii)
11 September 2006
$1,500.00
(xiii)
13 September 2006
$2,000.00
(xiv)
25 October 2006
$1,500.00
(xv)
28 November 2006
$500.00
(xvi)
6 March 2007
$700.00
(xvii)
17 September 2007
$500.00
(xviii)
23 January 2008
$47.00
(xix)
16 April 2009
$120.00
(xx)
16 April 2009
$500.00
(xxi)
16 April 2009
$600.00
(xxii)
16 April 2009
$100.00
(xxiii)
27 April 2009
$100.00
(xxiv)
27 April 2009
$100.00
(xxv)
29 April 2009
$168.00
(xxvi)
29 April 2009
$500.00
(xxvii)
6 May 2009
$215.25
(xxviii)
19 May 2009
$6,000.00
(xxix)
22 May 2009
$3,000.00
(xxx)
22 June 2009
$69.28
(xxxi)
22 June 2009
$127.22
(xxxii)
08 July 2009
$1,600.00
(xxxiii)
17 July 2009
$740.00
(xxxiv)
1 February 2010
$1,000.00
(xxxv)
8 February 2010
$400.00
(xxxvi)
9 February 2010
$500.00
(xxxvii)
15 February 2010
$200.00
(xxxviii)
4 March 2010
$10.00
(xxxix)
30 April 2010
$772.07
(xl)
4 May 2010
$400.00
(xli)
06 May 2010
$80.00

The Court Orders That:

  1. The respondent pay to the Commonwealth of Australia a monetary penalty in the sum of $12,500.
  2. The respondent pay the applicant’s costs of and incidental to the application, to be taxed if not agreed.
I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Barker.

Associate:


Dated: 17 March 2011


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