Deputy Commissioner of Taxation v Rodriguez

Federal Court of Australia|2016-07-29|Before: McKerracher J

Pursuant to section 196(2) of the Superannuation Industry (Supervision) Act 1993, the Respondent, as trustee of the Felix Superannuation Fund, in making the loans and giving financial assistance on the dates set out in the Schedule to these Orders, failed to ensure that the Felix Superannuation Fund was maintained solely for one or more of the purposes proscribed in section 62(1) of the Superannuation Industry (Supervision) Act 1993, in contravention of section 62(1) of the Superannuation Industry (Supervision) Act 1993.
Pursuant to section 196(2) of the Superannuation Industry (Supervision) Act 1993, the Respondent, as trustee of the Felix Superannuation Fund, in making the loans and giving financial assistance on the dates set out in the Schedule to these Orders, failed to ensure that the Felix Superannuation Fund did not lend money of the Felix Superannuation Fund or give any other financial assistance using the resources of the Felix Superannuation Fund to a member of the Felix Superannuation Fund, in contravention of section 65(1) of the Superannuation Industry (Supervision) Act 1993.
Pursuant to section 196(2) of the Superannuation Industry (Supervision) Act 1993, the Respondent, as trustee of the Felix Superannuation Fund, in making the loans and giving financial assistance on the dates set out in the Schedule to these Orders, did not comply with section 83 of the Superannuation Industry (Supervision) Act 1993 and as a consequence failed to take all reasonable steps to ensure that the provisions of Division 2 and Division 3 of the Superannuation Industry (Supervision) Act 1993 were complied with in respect of the Felix Superannuation Fund, in contravention of section 84(1) of the Superannuation Industry (Supervision) Act 1993.
Pursuant to section 196(2) of the Superannuation Industry (Supervision) Act 1993, the Respondent, as trustee of the Felix Superannuation Fund, in each of the years between 1 July 2009 and 30 June 2013 failed to prepare a written plan: 4.1. specifying the amount by which the in-house assets of the Felix Superannuation Fund exceeded the market value ratio of 5% at the end of each income year; and 4.2. the steps by which the trustee proposes to dispose of the in-house assets equal to or greater than the excess amount, and by that failure did not comply with section 82 of the Superannuation Industry (Supervision) Act 1993, and as a consequence failed to take all reasonable steps to ensure that the provisions of Division 2 and Division 3 of the Superannuation Industry (Supervision) Act 1993 were complied with in respect of the Felix Superannuation Fund, in contravention of section 84(1) of the Superannuation Industry (Supervision) Act 1993.

Each of the contraventions referred to in declarations 1 to 4 of the Orders above is a serious contravention within the meaning of section 196(4) of the Superannuation Industry (Supervision) Act 1993. Civil Penalty
The Respondent pay to the Commonwealth a monetary penalty in the sum of $40,000 pursuant to section 196(3) of the Superannuation Industry (Supervision) Act 1993 in respect of the contraventions referred to in declarations 1 to 4 of the Orders above. Costs
The Respondent pay the Applicant's costs fixed in the sum of $14,000. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. SCHEDULE The Felix Superannuation Fund made loans and gave financial assistance to the Respondent in the financial years 2009 - 2010 to 2011 - 2012, some of which remained outstanding in the 2012-2013 financial year. Details of the loans and financial assistance are set out in the tables below. Each table provides the following details: a. The date of the relevant transaction; b. Amounts advanced / loaned to the Respondent; c. Amounts repaid to the Felix Superannuation Fund; and d. The balance of loans owing to the Felix Superannuation Fund. Loans and financial assistance to the Respondent from 1 July 2009 to 30 June 2010 No. Date of transaction Advances Repayments Loan balance 1 03-07-09 $25,000.00 $180,738.67 2 03-07-09 $10,000.00 $190,738.67 3 08-07-09 $3,827.17 $194,565.84 4 04-08-09 $2,400.00 $196,965.84 5 04-08-09 $1,200.00 $198,165.84 6 16-09-09 $495.00 $198,660.84 7 16-09-09 $3,000.00 $201,660.84 8 16-09-09 $2,000.00 $203,660.84 9 10-11-09 $1,000.00 $204,660.84 10 13-11-09 $1,222.00 $205,882.84 11 22-03-10 $6,031.03 $211,913.87 12 22-03-10 $13,948.53 $225,862.40 13 13-05-10 $25,000.00 $200,862.40 14 13-05-10 $10,000.00 $190,862.40 15 13-05-10 $3,827.17 $187,035.23 16 13-05-10 $2,400.00 $184,635.23 17 13-05-10 $1,200.00 $183,435.23 18 13-05-10 $495.00 $182,940.23 19 13-05-10 $3,000.00 $179,940.23 20 13-05-10 $2,000.00 $177,940.23 21 13-05-10 $6,031.03 $171,909.20 22 13-05-10 $13,948.53 $157,960.67 23 13-05-10 $10,000.00 $147,960.67 24 13-05-10 $12,731.35 $135,229.32 25 13-05-10 $110,000.00 $25,229.32 26 25-06-10 $1,000.00 $24,229.32 27 25-06-10 $1,222.00 $23,007.32 28 25-06-10 $2,640.88 $25,648.20 29 25-06-10 $2,640.88 $23,007.32

Loans and financial assistance to the Respondent from 1 July 2010 to 30 June 2011 No. Date of transaction Advances Repayments Loan balance 30 08-07-10 $16,044.63 $39,051.95 31 09-08-10 $10,757.91 $49,809.86 32 09-08-10 $8,933.44 $58,743.30 33 23-09-10 $11,002.73 $69,746.03 34 23-09-10 $4,079.92 $73,825.95 35 08-10-10 $2,500.00 $76,325.95 36 08-10-10 $23,000.00 $99,325.95 37 08-10-10 $6,761.19 $106,087.14 38 08-10-10 $3,605.75 $109,692.89 39 22-11-10 $10,272.69 $119,965.58 40 22-11-10 $15,516.95 $135,482.53 41 10-01-11 $26,934.17 $162,416.70 42 17-05-11 $82,738.62 $245,155.32 43 28-06-11 $10,757.91 $234,397.41 44 28-06-11 $8,933.44 $225,463.97 45 28-06-11 $11,002.73 $214,461.24 46 28-06-11 $4,079.92 $210,381.32 47 28-06-11 $6,761.19 $203,620.13 48 28-06-11 $3,605.75 $200,014.38 49 28-06-11 $10,272.69 $189,741.69 50 28-06-11 $15,516.95 $174,224.74

Loans and financial assistance to the Respondent from 1 July 2011 to 30 June 2012 No. Date of transaction Advances Repayments Loan balance 51 19-07-11 $17,500.00 $191,724.74 52 14-12-11 $5,000.00 $196,724.74 53 03-01-12 $14,082.75 $210,807.49 54 03-01-12 $8,013.26 $218,820.75 55 23-01-12 $11,000.00 $229,820.75 56 24-01-12 $4,338.00 $234,158.75

Loans and financial assistance to the Respondent from 1 July 2012 to 30 June 2013 No. Date of transaction Advances Repayments Loan balance 57 17-09-12 $41,544.63 $192,614.12 58 12-02-13 $280,000.00 $87,385.88

MCKERRACHER J: 1 On 28 April 2016 I made orders and declarations in a civil penalty proceeding brought by the applicant pursuant to s 197(1) of the Superannuation Industry (Supervision) Act 1993 (Cth) (the SIS Act). These are my reasons for doing so. 2 The applicant acts as the delegate of the Commissioner of Taxation, being the 'Regulator' as defined in s 10(1) of the SIS Act. The Felix Superannuation Fund (the Fund) was established on or about 18 February 2005 when the respondent and his wife executed a trust deed. The respondent was a trustee of the fund, which was a regulated superannuation fund within the meaning of s 19 of the SIS Act. 3 The offence and penalty concerned relate to the unauthorised early release by the respondent of the Fund's superannuation benefits. The allegations are admitted. 4 It is accepted by both parties that the contraventions of the SIS Act were serious in this case and the agreed monetary penalty to the Commonwealth should be ordered. For the respondent it is stressed that he has cooperated with the Regulator's inquiry and that he was relevantly troubled at the time of the actual contraventions. I accept those submissions.

BACKGROUND 5 It is necessary to say something about the background facts without descending to the very considerable particularity the parties have agreed upon, and I have reviewed, for the purposes of determining the appropriate penalty. 6 The applicant relies on the following facts.

Events preceding the 2009/2010 financial year (a) The Fund was established on 18 February 2005 by a rollover from the respondent's employer's fund. It was registered as a regulated self-managed superannuation fund. The initial trustees were the respondent and his wife. (b) On 2 November 2005 the respondent, as trustee of the Fund, fabricated a loan contract to the effect that funds in the sum of $111,000 would be loaned by the Fund to 'Ms M Mizen'. The fabricated contract set out the terms of the alleged loan. On 3 November 2005 the respondent withdrew the sum of $110,178.90 from the Fund for his own personal benefit. (c) In the year ended 30 June 2006 the respondent, as trustee of the Fund, made a contribution to the Fund of the sum of $6,500. The purpose of the contribution was to cover a shortfall in the amount held by the Fund that was due to a problem experienced at that time by his employer in making superannuation contributions. The respondent withdrew the same sum, $6,500, from the Fund once his employer made a further contribution. The governing rules, nor the Act, authorised that act of withdrawal. (d) During the financial year ended 30 June 2007 the respondent made further unauthorised withdrawals, totalling $70,843.82, from the Fund for his personal benefit and use in circumstances where the governing rules did not authorise those withdrawals. (e) One withdrawal was of a cash sum of $5,000 made 27 December 2006. (f) The other two withdrawals were effected in the following way. First, on 22 January 2007 there was a cash withdrawal of $65,117.52 used to purchase four 20 ounce gold bars from the Perth Mint. Then, in the two months following that purchase the respondent sold the gold bars and deposited the proceeds of sale of $65,843.82 into his own bank account. (g) The respondent made repayments to the Fund during the 2007 tax year totalling $15,853.00. (h) There were six further withdrawals totalling $27,623.39 from the Fund for the benefit and use of the respondent in the years ending 30 June 2008 and 2009. Those funds were used to reduce the respondent's credit card debt and to purchase a scooter. The governing rules of the Fund did not authorise any of those withdrawals. (i) The respondent made repayments to the Fund during the 2008 and 2009 tax years totalling $37,054.44. (j) The withdrawals referred to in paragraphs (b) - (h) are not the subject of these proceedings, but the parties agree that these events are relevant to the imposition of penalty.

Events the subject of these proceedings: (a) During the financial year ended 30 June 2010 the respondent, as trustee of the Fund, made 13 unauthorised withdrawals from the Fund. Those withdrawals from the Fund totalling $72,764.61 were for his personal benefit and use in circumstances where the governing rules did not authorise those withdrawals. (b) At the time of these withdrawals (except the last withdrawal on 25 June 2010), the purported loan to Ms Mizen and most of the funds from sale of the gold bars were still outstanding, however, the respondent did make repayments during this tax year, totalling, $205,495.96. (c) In the year ending 30 June 2011 there were 12 further withdrawals from the Fund for the personal benefit and use of the respondent in circumstances where the governing rules did not authorise those withdrawals. (d) Most of the withdrawals were made in cash. The respondent also effected certain of the withdrawals through the device of the purchase on 13 July 2010 of four 20 ounce gold bars and six silver bars for a total sum of $114,517.72. A cheque for $123,694.44 was presented and change of $9,176.22 was given. (e) The gold bars were sold in two tranches on 7 January 2011 and on 16 May 2011 and the proceeds were deposited to the respondent's bank account. (f) The respondent made various repayments to the Fund in the 2011 financial year, totalling $70,930.58. (g) In the year ending 30 June 2012 there were six further withdrawals from the Fund totalling $59,934.01 for the personal benefit and use of the respondent in circumstances where the governing rules did not authorise those withdrawals. (h) The respondent did not make any repayments to the fund in the 2012 financial year. (i) In the year ending 30 June 2013 the respondent did not make any unauthorised withdrawals from the Fund. (j) The respondent made two final repayments to the Fund in the financial year ending 30 June 2013 consisting of a cash payment of $41,544.63 on 17 September 2012 and the transfer of one million shares in Poseidon Nickel Pty Ltd valued at $280,000 on 12 February 2013, which effectively repaid all outstanding amounts withdrawn since 2005 and which in effect included an interest component amounting to $87,385.88. (k) On 24 September 2012 the Fund auditor issued a qualified audit report for the 2010/2011 income year. The Fund auditor also lodged an Audit Contravention Report. (l) On 21 February 2013 the respondent was notified by the applicant that the Fund had been selected for audit for the period 1 July 2005 to 30 June 2011. (m) The respondent, in early March 2013, made disclosure to his accountants that there was no loan to Ms Mizen and soon after sent a voluntary disclosure letter to the Australian Taxation Office (ATO).

STATUTORY PROVISIONS 7 Section 62(1) of the SIS Act requires each trustee of a regulated superannuation fund to ensure that the fund is maintained solely for one or more of the specified 'core purposes', or for one or more of the core purposes and one or more of specified 'ancillary purposes'. The making of payments to one of the members not otherwise entitled to payment out of the Fund (by reason of having reached retirement), is not such a purpose. The making of the payments, to or for the personal benefit and use of the respondent, deprived the Fund of significant funds and caused it not to be maintained for any of the core or ancillary purposes. As trustee the respondent instead deliberately caused the Fund to be maintained as a source of unauthorised early access by the respondent's withdrawals which contravenes the governing rules of the Fund or provisions of the SIS Act. 8 In addition to contraventions of s 62(1) of the SIS Act, there was also contraventions of s 65(1)(b)(i) of the SIS Act, which prohibits a trustee of a regulated superannuation fund from giving any financial assistance using the resources of the fund to a member of the fund with certain exceptions which are not applicable. Contrary to that provision, the withdrawals described were financial assistance to the respondent in the form of monies used to meet the financial commitments of his everyday living. 9 There were also contraventions of s 84(1) of the SIS Act. In that regard, s 71 of the SIS Act provides that for the purposes of Pt 8 of the SIS Act an 'in-house asset' of a superannuation fund includes a loan to, or an investment in, a related party of the fund. Section 10(1) of the SIS Act provides that a member of a fund is a related party of a superannuation fund. The loans, therefore, constitute 'in-house assets' of the Fund. Section 84 requires each trustee of a regulated superannuation fund to take all reasonable steps to ensure that the provisions of Div 2 and relevantly Div 3 of the SIS Act are complied with. Section 83(2), which is contained within Div 3 of the SIS Act, provides that a trustee of the fund must not acquire an in-house asset if the market value ratio of the fund's in-house assets exceeds 5%. During the whole of the period between 1 July 2009 and 30 June 2012 by the making of the loans and provision of financial assistance, the Fund acquired in-house assets at a time when the market value ratio of the Fund's in-house assets exceeded 5%, thus contravening s 83(2) of the SIS Act. The respondent failed to take all reasonable steps to ensure that s 83 of the SIS Act was complied with, thus contravening s 84(1) of the SIS Act. Section 82, also a provision of Div 3 of the SIS Act, provides a trustee must prepare a written plan specifying: (a) the amount by which the in-house asset exceeds the market value ratio of 5% ('the excess amount') at the end of each income year; and (b) the steps by which the trustee proposes to dispose of the in-house assets equal to or greater than the excess amount. At no time was such a plan prepared.

PUBLIC POLICY 10 Parliament has, through the SIS Act, provided taxation benefits to trustees of superannuation funds and its members to encourage provision by Australians for their retirement. It is appropriate to recognise such a policy. I note that Logan J has in Deputy Commissioner of Taxation v Fitzgeralds [2007] FCA 1602 (at [25]). As observed by Logan J (at [26] and [27]) in Fitzgeralds, the particular benefit conferred by parliament on those who wish to make provision for their retirement and allow self-management is a privilege which should not be abused and such serious abuse requires the making of civil penalty orders.

SOME GENERAL CONSIDERATIONS 11 The maximum penalty for each contravention is now $360,000: s 196(3) read with s 4AA of the Crimes Act 1914 (Cth). 12 There is now a body of case law dealing with provisions or similar provisions to those now under consideration. The following principles relating to the fixing of civil penalties under s 196 emerge mainly from these cases: (a) A civil penalty needs to be sufficiently high to deter contravention by others, but no so high as to be oppressive: Australian Prudential Regulation Authority v Holloway [2000] FCA 1245 per Mansfield J (at [12]); Fitzgeralds (at [29]); Olesen v Eddy [2011] FCA 13 (at [18]). (b) General deterrence is a significant factor: Holloway (at [11]); Fitzgeralds (at [29]); other objectives include denunciation and punishment: Australian Prudential Regulation Authority v Derstepanian [2005] FCA 1121 per 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 who 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) When setting a penalty for multiple contraventions, the Court should consider a penalty for each contravention and then look at the totality: Director, Fair Work Building Industry Inspectorate v Construction, Forestry, Mining and Energy Union (2015) 229 FCR 331 (at [40]). (e) The total penalty should 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 [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; and (xi) any public policy position applicable. (See generally, Derstepanian (at [30]); Holloway (at [11]-[12]); Fitzgeralds (at [35] and [43]) and Eddy (at [18]).)

SPECIFIC CONSIDERATIONS IN THIS INSTANCE 13 It is common ground, as I have noted, that the contraventions are serious within the meaning of s 196(4) so as to warrant the imposition of a civil penalty. The object of the SIS Act is relevantly to make provision for the prudent management of regulated superannuation funds. As noted by Logan J in Fitzgeralds (at [41] and [42]): 41 The applicant contends that the contraventions are serious within the meaning of the Act, and, as I have indicated, I accept that. The submission is made that the object of the Act is, relevantly, to make provision for the prudent management of regulated superannuation funds. I respectfully agree. That, though, is what one might term an immediate object. The long-term object envisaged by the Parliament, to my mind, is to encourage Australians that they must make provision for their retirement, and to do that by the conferring of taxation benefits in return for responsible management of funds. In Holloway's case, to which I have made reference, Mansfield J made reference to this in relation to the in-house asset rule. Submission by a superannuation fund to be a regulated superannuation fund under the Act carries with it eligibility for concessional taxation treatment. Each of the relevant superannuation funds by their trustees elected to become regulated superannuation funds…Part 8 of the Act sets out rules about the level of in-house assets…Its intent is clearly to ensure that the investments of a regulated superannuation fund should not be exposed to the vagaries of the business of the employer-sponsor… 42 In the same way, the provisions of section 62 and section 65 can be seen to have a role to play in ensuring that the assets of a fund are indeed available for their members as and when they become eligible in terms of the governing deed, as opposed to being prematurely accessed for unauthorised purposes. 14 The purpose requirements of s 62 and the prohibition in s 65 against the giving of financial assistance to members are integral to the regulatory scheme. Contraventions by the respondent as trustee of the Fund commenced in the self-management process. On 18 February 2005 the Fund was established. On 3 November 2005, the sum of $110,178.90 was withdrawn. There was dishonesty associated with the concealing the purported Mizen loan when it was made in the subsequent years. The Mizen loan was not 'repaid' in full until the 2013 tax year. 15 Equally, there was dishonesty in the loans achieved using the device of the purchase of, later sale and diversion of the gold bars by the Fund. Together, the Mizen loan and the diversion of the funds for the gold bars were the largest components of the financial accommodation or loans made to the respondent. The loan documentation was designed to ensure that the arrangement had the indicia of a loan on commercial terms and at arm's length. The documentation and the purchase of the gold bars were designed to avoid the scrutiny of the Fund's auditor. This meant that the offending behaviour of the respondent could and did continue until the auditor made an adverse report.

Factors in mitigation 16 Specific factors that the respondent emphasises include: the degree of cooperation given by the respondent; the past record in terms of similar contraventions; absence of his financial position; any amounts already paid by way of compensation or legal costs; contrition; the business experience of the respondent; the respondent's personal history, particularly financial; the extent to which the respondent gained personally from the contravention; the relative impact of the contravention, in this case on the size of the Fund; steps taken to rectify the harm; any likelihood of repetition; and the character of the respondent. 17 In addition to the seriousness of the contravention to which the applicant refers, I take into account the matters on which Mr Monaco, counsel for the respondent, addressed the Court, including the fact that the respondent has been fully cooperative. He has dealt with the ATO, investigating officers, solicitors and the Court process, such that through the procedures invoked as a result of that intervention the Fund have been regularised. The respondent has been barred from acting as a trustee. Detailed information was provided as to the respondent's financial position. It is unnecessary to record that in these reasons, but suffice it to say the position has been taken into account. I accept that the respondent is contrite and apologetic. He is a person of good character, as his references reveal, although there may be some question as whether all referees fully understood all aspects of the contravention. It is also apparent from this material, including a psychological report, that the respondent was a troubled person at the time when these contraventions occurred. Nonetheless, he has made a full admission in relation to the contraventions and a compete apology.

OTHER AUTHORITIES 18 In 2007, in Fitzgeralds, the Court imposed a penalty of $20,000 and $10,000 in relation to Mr and Mrs Fitzgeralds respectively, where as trustees of a fund, the respondents misapplied in the order of $148,000 by selling the fund's principal asset and from those proceeds paying $48,738.69 to Mr Fitzgerald and the balance more than $99,000 to settle a claim by a liquidator against the Fitzgeralds in respect of the company formerly controlled by both of them. Although there was only one event, all of the assets were deliberately stripped out and were not repaid. The Court took into account the financial circumstances of the Fitzgeralds, their contrition and their former good behaviour. 19 In 2011, Gordon J in Olesen v Parker [2011] FCA 1096 imposed a penalty of $35,000 on Mr Parker and $15,000 on Mrs Parker for breaches of s 84(1) by failing to comply with the in-house assets provisions in s 83(2) of the SIS Act, breaches of s 84(1) by failing to take reasonable steps to prepare a written plan in compliance with s 82 of the SIS Act, failing to deal with entities in an arm's length manner in breach of s 109(1), and a failure to solely maintain funds for core and/or ancillary purposes breach of s 62(1). The penalties recognise different roles played by each of Mr and Mrs Parker and their financial positions including that they were then the subject of amended assessments by the ATO. Those contraventions were deliberate, repetitive and occurred over a three year period. There were a substantial number of loans made that breached the sole purpose test. 20 In the same year, in 2011, in Olesen v MacLeod [2011] FCA 229, the Court imposed a penalty of $12,500 on Mr McLeod for penalties for contravention of s 62(1) and s 65(1) of the SIS Act. There were numerous payments out of the trustee to Mr McLeod over a five year period. These payments depleted almost the entire fund. 21 In Olesen v Early Sunshine Pty Ltd [2015] FCA 12, the Court imposed penalties of $13,000 upon each of the directors of the trustee company for contraventions of the same provision for a series of loans totalling $551,568.20 over a four year period to a company associated with the directors, which in each case were usually repaid within a few weeks' time. There were full admissions and cooperation. 22 In Federal Commissioner of Taxation v Ryan [2015] FCA 1037, a penalty of $20,000 was imposed on each of the two respondents for contravention of ss 62(1), 65(1), 84 and 109. The total sum removed from that fund was $209,677, almost exhausting the fund. The conduct was deliberate, but there were no prior contraventions. Approved penalties were imposed. 23 In Eddy an agreed penalty of $15,000 in respect of contraventions of s 62 and s 65, with loans totalling $75,570 being made to Mr Eddy over a four year period. They were unrepaid and the entire fund was depleted. The contraventions commenced almost immediately on the fund being set up. 24 In Deputy Commissioner of Taxation v Lyons [2014] FCA 1353, the Court imposed agreed penalties of $32,500 with respect to contraventions arising out of the making of six loans totalling $190,000 to a relative of Mr Lyons in a ten month period. The contraventions were failing to maintain the fund solely for one or more of the purposes, lending the assets to a relative or family member, failing to take reasonable steps to ensure the loans were within the in-house asset market value ratio, and failing to deal at arm's length. Mr Lyons, however, had taken advice with respect to the transaction but the advice was incorrect. 25 The applicant says the following matters are specifically relevant to penalty in this case: (a) The respondent knew from the outset that the payments made in the year ending June 2006 were in breach of the SIS Act. (b) The respondent's behaviour continued over the period between late 2005 and 24 January 2012, although the period to which these proceedings relate is between 3 July 2009 and 24 January 2012. The course of conduct was over a substantial period of time. (c) In the period to which the proceedings relate, some 32 separate loans were made by the respondent resulting in each case in contraventions by the respondent of four provisions. Had the respondent not concealed the earliest behaviour then it is likely that it would have been discovered by audit much earlier than September 2012. The respondent benefited personally from the contraventions, by using the proceeds of the Fund for his personal benefit and use to meet everyday living expenses. (d) The contraventions were deliberate and of the most serious kind, involving a complete departure from the respondent's obligations as trustee of a superannuation fund. (e) No third parties suffered loss as a result of the contraventions. The respondent was not acting as trustee of other persons' retirement savings. (f) The respondent had reimbursed the fund for the sums borrowed. (g) The respondent has co-operated in the proceeding by agreeing the major facts constituting the contraventions. 26 No penalty can be imposed for the period before the 2008/2009 financial year, but the respondent's admitted behaviour for the period between 2005 and 30 June 2008 is irrelevant because it demonstrates that the behaviour in the later period was not isolated and unusual and that the respondent was dishonest and took steps to disguise his earlier behaviour. 27 The foregoing collection of cases reveals a range of Court imposed pecuniary penalties between $10,000 and $35,000. The Court is, of course, not limited to the top figure in that range.

CONCLUSION 28 In the particular circumstances of this case, I suggested that the parties in light of their general agreement and cooperation explore whether it was possible to agree a penalty. If I was satisfied that it was appropriate having regard to all of the material that had been filed on that topic, it would enable a degree of certainty and finality to be reached in the matter. After adjourning for some time, the parties reached agreement and, subsequently, that agreement was reflected in the orders I made shortly after the oral hearing but before publishing these reasons. 29 Having taken all those matters into account, the orders that were made are those agreed by the parties and reflected in the orders at the commencement of these reasons. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher.

Superannuation Industry (Supervision) Act 1993(Cth)ss 62(1), 65(1)(b)(i), 71, 84(1), 197(1)

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