Olesen v Early Sunshine Pty Ltd
[2015] FCA 12Neil Olesen, Deputy Commissioner of Taxation (Superannuation)
v. Early Sunshine Pty Ltd
Brent Christopher Jameson
Erron Douglas Jameson
Blaine Kenneth Macdonald
Judge:
Foster J
Subject References:
SUPERANNUATION
Legislative References:
Evidence Act 1995 - 191
Superannuation Industry (Supervision) Act 1993 - 62(1); 65(1); 84(1); 109(1); 196; 197
Case References:
Minister for Sustainability, Environment, Water, Population and Communities v Woodley - (2012) 194 LGERA 290
Olesen v Eddy - [2011] FCA 13; (2011) 81 ATR 763
Olesen v MacLeod - [2011] FCA 229; (2011) 85 ATR 107
Olesen v Parker - [2011] FCA 1096; (2011) 85 ATR 387
Judgment date: 23 January 2015
Sydney
THE COURT DECLARES THAT:
Contravention of s 62(1) by failing to ensure Fund maintained for prescribed purposes
1. The first respondent, as trustee of the George MacDonald & Sons Pty Ltd Superannuation Fund (the Fund), contravened s 62(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the Act) by failing to ensure that the Fund was maintained solely for one or more of the purposes prescribed in s 62(1) of the Act, in that the first respondent made the loans in Annexure A to these Orders for the purpose of providing financial accommodation to George MacDonald & Sons Pty Ltd in order that George MacDonald & Sons Pty Ltd could overcome deficiencies in its working capital, and failed to obtain interest on the outstanding amount of the debt owed by George MacDonald & Sons Pty Ltd.
2. The first respondent, as trustee of the Fund, contravened s 62(1) of the Act by failing to ensure that the Fund was maintained solely for one or more of the purposes prescribed in s 62(1) of the Act, in that the first respondent made a loan in the amount of $2,000 in the year ended 30 June 2007 for the purpose of providing financial accommodation to Vertu Pty Ltd.
Contravention of s 84(1) by breaching in-house asset rules
3. The first respondent, as trustee of the Fund, contravened s 84(1) of the Act by failing to take all reasonable steps to comply with s 83(2) of the Act, in that those loans listed in Annexure A to these Orders and annotated "1" were loans made by the first respondent, as trustee of the Fund, to George MacDonald & Sons Pty Ltd which increased the market value ratio of the Fund's in-house assets, which ratio was immediately prior to the making of each relevant loan already above the maximum market value ratio of 5% allowed under the Act.
4. The first respondent, as trustee of the Fund, contravened s 84(1) of the Act by failing to take all reasonable steps to comply with s 83(3) of the Act, in that those loans listed in Annexure A to these Orders and annotated "2" were loans made by the first respondent, as trustee of the Fund, to George MacDonald & Sons Pty Ltd which increased the market value ratio of the Fund's in-house assets, which ratio was not immediately prior to the making of each relevant loan already above the maximum market value ratio of 5% allowed under the Act, but which immediately after the making of each relevant loan was above the minimum market value ratio of 5% allowed under the Act.
5. The first respondent, as trustee of the Fund, admits that it contravened s 84(1) of the Act by failing to take all reasonable steps to comply with s 83(3) of the Act, in that a loan made in the year ended 30 June 2007 by the first respondent, as trustee of the Fund, to Vertu Pty Ltd increased the market value ratio of the Fund's in-house assets, which ratio was not immediately prior to the making of each relevant loan already above the maximum market value ratio of 5% allowed under the Act, but which immediately after the making of each relevant loan was above the minimum market value ratio of 5% allowed under the Act.
Contravention of s 109(1) by failing to deal with entity at arms' length
6. The first respondent, as trustee of the Fund, made investments in its capacity as trustee of the Fund in circumstances where the first respondent and the other party to the transactions (namely, George MacDonald & Sons Pty Ltd) failed to deal with each other at arms' length in respect of each transaction, and the terms and conditions of those transactions were more favourable to George MacDonald & Sons Pty Ltd than those which it is reasonable to expect would have applied if the trustee was dealing with George MacDonald & Sons Pty Ltd at arms' length in the same circumstances, in contravention of s 109(1) of the Act, in that the first respondent made the loans in Annexure A to these orders to George MacDonald & Sons Pty Ltd on interest-free terms.
Involvement of the Second, Third and Fourth Respondents in the Contraventions
7. The second, third and fourth respondents, pursuant to s 194 of the Act, contravened ss 62(1), 84(1) and 109(1) of the Act by reason of their involvement in the contraventions of those sections by the first respondent in relation to the loans by the Fund to George MacDonald & Sons Pty Ltd, in that the second, third and fourth respondents were the directors and shareholders of the first respondent and of George MacDonald & Sons Pty Ltd.
8. The third respondent, pursuant to s 194 of the Act, contravened s 62(1) and s 84(1) of the Act by reason of his involvement in the contraventions of those sections by the first respondent in relation to the loans by the Fund to Vertu Pty Ltd, in that the third respondent was a director and shareholder of Vertu.
AND THE COURT ORDERS THAT:
Civil Penalties
9. Pursuant to s 196(3) of the Act, within 28 days of the date of this order (subject to order 12) the second respondent pay to the Commonwealth of Australia a monetary penalty of $13,000 in respect of his conduct in contravention of the Act referred to in paragraph 7 above.
10. Pursuant to s 196(3) of the Act, within 28 days of the date of this order (subject to order 12) the third respondent pay to the Commonwealth of Australia a monetary penalty of $13,000 in respect of his conduct in contravention of the Act referred to in paragraphs 7 and 8 above.
11. Pursuant to s 196(3) of the Act, within 28 days of the date of this order (subject to order 12) the fourth respondent pay to the Commonwealth of Australia a monetary penalty of $13,000 in respect of his conduct in contravention of the Act referred to in paragraph 7 above.
12. Each of the second to fourth respondents has liberty to apply to the District Registrar to pay his monetary penalty by such time and by such instalments as the District Registrar may allow.
Costs
13. The second respondent pay a contribution to the applicant's costs of and incidental to this proceeding fixed by agreement in the amount of $5,000, such costs to be paid within 28 days of the date of this order (subject to order 16).
14. The third respondent pay a contribution to the applicant's costs of and incidental to this proceeding fixed by agreement in the amount of $5,000, such costs to be paid within 28 days of the date of this order (subject to order 16).
15. The fourth respondent pay a contribution to the applicant's costs of and incidental to this proceeding fixed by agreement in the amount of $5,000, such costs to be paid within 28 days of the date of this order (subject to order 16).
16. Each of the second to fourth respondents has liberty to apply to the District Registrar to pay his costs by such time and by such instalments as the District Registrar may allow.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.