Michael James Hammerton v Comcare Australia
[1995] AATA 63(Decision by: S. A. Forgie (Deputy President))
Michael James Hammerton
vComcare Australia
Member:
S. A. Forgie (Deputy President)
Legislative References:
Defence Force Retirement and Death Benefits Act 1973 - s 24
Commonwealth Employees' Rehabilitation and Compensation Act 1988 - s 20
Administrative Appeals Tribunal Act 1975 - s 37
Income Tax and Social Services Contribution Assessment Act 1936 - sub-paragraph 23(j)(i)
Superannuation Act 1976 - s 153AB
Equal Opportunity Act 1984 (SA) -
Income Tax Assessment Act 1936 - s 26A
Naval Defence Act 1910 -
Defence Act 1903 -
Air Force Act 1923 - s 4
Bankruptcy Act 1924 - s 101
Superannuation Act 1916 (NSW) - s 88
Army Act 1881 - s 141
Pay-roll Tax Act 1971 (NSW) - s 3
Safety Rehabilitation and Compensation Act 1988 - s 20
Case References:
Buckland v Federal Commissioner of Taxation - (1960) 34 ALJR 60
Clowes v Federal Commissioner of Taxation - [1954] HCA 10; (1954) 91 CLR 209
Crowe v Price - (1989) 22 QBD 429
Federal Commissioner of Taxation v J Walter Thompson (Australia) Pty Ltd - [1944] HCA 23; (1944) 69 CLR 227
Hobson v Kingston-Upon-Hill Corp - (1855) 24 LJ B 251
Investment and Merchant Finance Corporation Ltd v Federal Commissioner of Taxation - [1970] HCA 1; 120 CLR 177
Khoury (M and S) v Government Insurance Office of NSW - [1984] HCA 55; (1984) 54 ALR 639
M Steinberg and Others v Commissioner of Taxation - [1975] HCA 63; (1973) 47 ALJR 255
Mahony v Commissioner of Taxation - (1967) 41 ALJR 232
Melville v Mutual Life and Citizens Assurance Co Ltd - [1980] FCA 114; (1980) 31 ALR 649
Meulman and Others v OTC Ltd - (1990)96 ALR 223
Morris Steinberg v Commissioner of Taxation - (1976) 545 ALJR 43
Nette v Howarth - [1935] HCA 22; (1935) 53 CLR 55
Premier Automatic Ticket Issuers Ltd v Federal Commissioner of Taxation - [1933] HCA 51; (1933) 50 CLR 268
Scott v Commissioner of Taxation (Cth) - (1966) 40 ALJR 265
Trustees Executors and Agency Co Ltd v Reilly - [1941] VicLawRp 22; (1941) VLR 110
Tubemakers of Australia Limited v FCT - (1992) 93 ATC 4
Williams and Others v United Dairies Ltd - (1986) 10 ACLR 406
Wright v City of Brighton - (unreported, Judgment No 3074, 24 October, 1991)
XCC Proprietary Limited v Commissioner of Taxation - (1971) 45 ALJR 460
XCO Pty Ltd v Federal Commissioner of Taxation - [1971] HCA 37; (1971) 124 CLR 343
Decision date: 10 March 1995
Brisbane
Decision by:
S. A. Forgie (Deputy President)
DECISION
[1] On 4 November, 1993, the applicant, Colonel Michael James Hammerton, applied for review of a decision of a delegate of the respondent, Comcare, made on 16 September, 1993. That decision affirmed an earlier decision of another delegate dated 29 October, 1992 that Colonel Hammerton's weekly compensation payments were to be made in accordance with section 20 of the Commonwealth Employees' Rehabilitation and Compensation Act 1988, since renamed as the Safety Rehabilitation and Compensation Act 1988 ("the 1988 Act"). The delegate then went on to set out the specific amounts to which she had determined Colonel Hammerton to be entitled.
[2] At the hearing, Colonel Hammerton represented himself and Mr Logan of Counsel represented Comcare. The documents lodged pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 were admitted in evidence together with a letter from the Department of Defence ("the Department") to the Defence Force Retirement and Death Benefits Authority ("the DFRDB") dated 5 September, 1994, three letters from the DFRDB to the Department, two of which are dated 6 September, 1994 and one of which is dated 8 September, 1994, an Election for Commutation signed by Colonel Hammerton on 5 March, 1990, Determination No. 13 of 1994 of the Defence Force Remuneration Tribunal, a table prepared by Comcare of the payments made to Colonel Hammerton and a letter from the Office of the Commissioner for Employees' Compensation dated 24 October, 1973.
BACKGROUND
[3] Certain matters were not in dispute between the parties and, with that in mind and on the basis of the evidence before us, we will set out the findings of fact we have made.
[4] Colonel Hammerton was born on 10 April 1940. While serving in the Australian Regular Army, he contracted glandular fever which led to his developing chronic fatigue syndrome. He retired from the Army on 9 April 1990 as he had reached the maximum age for his rank. On his retirement, Colonel Hammerton would have been granted a full pension of $16,783.76 gross per annum under the Defence Force Retirement and Death Benefits Act 1973 ("the DFRDB Act") had he elected not to commute it. As it was, he had on 5 March, 1990, signed an election form electing to commute an amount equal to his maximum entitlement (Exhibit 6). This meant that he was paid an amount of $73,009.36 and a pension. The pension to which he was entitled after commutation was $13,627.28 gross per annum or $522.69 per fortnight (Exhibits 3 and 5). Since his retirement, Colonel Hammerton's pension entitlements have increased slightly so that, at 24 June, 1994, he received $15,239.21 per annum (Exhibit 3). Shortly before he retired, Colonel Hammerton lodged a claim for compensation in respect of glandular fever and chronic fatigue syndrome (T documents page 8). Liability to pay Colonel Hammerton compensation in respect of both of those conditions was ultimately accepted on 10 April, 1991.
[5] Following the delegate's decision accepting liability, Comcare turned its attention to the amount of weekly compensation that should be paid to Colonel Hammerton. It sought details of his pension entitlements under the DFRDB scheme. While it was doing so, it paid him compensation at the statutory rate of $234.52 to alleviate any financial hardship (T documents 86-88). Those payments were made for the period 25 April, 1991 to 31 July 1991 (T documents, pages 92-93). It was subsequently determined that Colonel Hammerton was entitled to fortnightly compensation payments of $954.26 from 1 August, 1991. He was also entitled to retrospective payments of various amounts for various periods from 10 April, 1990 to 31 July, 1991. Those retrospective payments totalled $31,212.92. He was advised of the payments and of his current entitlement in an undated letter (T documents, pages 92-93).
[6] Payments continued to be made to Colonel Hammerton on a consistent basis for some time. Suddenly, in August, 1992 he discovered that his compensation payments had been reduced by almost $100 per fortnight. He did so when his bank returned a cheque because there were insufficient funds to cover the amount. He had not received any notification that the amount of his compensation payments would be reduced or had been reduced. Colonel Hammerton made repeated inquiries of the Department. He did not receive any explanation until the delegate wrote to him on 29 October, 1992 (T documents, pages 94-95). In the letter the delegate advised him that a review of his weekly compensation payments had been conducted in July, 1992. During that review, it had been discovered that he had been incorrectly paid at a rate calculated in accordance with section 19 of the 1988 Act. He should have been paid at a rate of compensation calculated under section 20 of that Act. The delegate also noted that the calculations made under section 20 must be made on the pre-commutation amount of benefits paid under the DFRDB scheme as the commutation is an advance of future benefits. As a result, Colonel Hammerton's weekly compensation payments were varied on 26 June, 1992 from $477.13 per week to $413.98 per week. On a fortnightly basis, that meant that his entitlement was reduced from $954.26 to $827.96 (T documents, pages 94-95).
THE ISSUES
[7] By letter dated 21 December, 1992 Colonel Hammerton requested a reconsideration of the delegate's determination. The particular matters on which Colonel Hammerton took issue with the delegate's decision were summarised when he said:
" 3. I wish to take issue with the Delegate's decision on two specific points:
- a.
- The Calculation of Normal Weekly Earnings. This calculation does not take into consideration the general superannuation payment of three percent which was paid in lieu of a payrise (and which I presume continues to be paid).
- b.
- The Use of my Pre-commutation Pension.
I do not believe there can be any justification for the use of a pre-commutation pension figure as opposed to an actual pension figure in determining the SA portion of the equation AC-(SA+SC), particularly as the SC portion relates to a nominal superannuation payment (which I do not actually make. Alternatively, does this mean that I will in future also be entitled to an additional superannuation payment in respect of the deduction that is being made from my weekly payments" (T document pages 96 and 97).
[8] The delegate's decision was subsequently affirmed as we have already said (see paragraph 1 above). At the hearing, the issues continued to be those raised by Colonel Hammerton and set out in the previous paragraph. There was also a further issue as to whether the payments under the DFRDB scheme are a pension under a superannuation scheme as set out in section 20 of the 1988 Act. The hearing proceeded on the basis that, if they are a pension under a superannuation scheme, then section 20 applies. If they are not, consideration would need to be given to whether another section of the 1988 Act is applicable. Section 19 of the 1988 Act, under which Colonel Hammerton was originally paid, is only applicable if certain named sections, including section 20, are not applicable.
[9] While considering the matter, another issue arose and I asked the parties whether they wished to make further submissions. Mr Logan lodged further submissions on 2 February, 1995 and Mr Hammerton on 7 March, 1995. The further issue relates to whether section 20 can apply to a person in Mr Hammerton's position i.e. a person who has received both a commutation of a portion or his or her retirement pay and a pension.
LEGISLATIVE FRAMEWORK
[10] Section 19 of the 1988 Act sets out the amount of compensation payable for injuries resulting in incapacity. It applies to an employee, such as Mr Hammerton, who is incapacitated for work as a result of an injury. It does not apply, however, to an employee to whom section 20, 21 or 22 applies. Sections 20 and 21 apply to employees who are in receipt of certain superannuation benefits. Section 22 applies to employees who are maintained in a hospital and, as Mr Hammerton is not in that situation, is not relevant in this case.
[11] Section 20 of the 1988 Act:
"... applies to an employee who, being incapacitated for work as a result of an injury, retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a pension under a superannuation scheme." (Sub-section 20(1))
[12] Section 21 applies to
"... an employee who, being incapacitated for work as a result of an injury retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives a lump sum benefit under a superannuation scheme." (sub-section 21(1))
[13] Although sections 19, 20 and 21 are the only sections which were in operation at the relevant times, I note that a further provision affecting the payment of compensation was introduced by the Commonwealth Employees' Rehabilitation and Compensation Amendment Act 1992 ("the Amendment Act") came into operation on 24 December, 1992. That is section 21A which
"... applies to an employee who, being incapacitated for work as a result of an injury, retires voluntarily, or is compulsorily retired, from his or her employment at any time after the commencement of this section and, as a result of the retirement, receives both a pension, and a lump sum benefit, under a superannuation scheme." (sub-section 21A(1))
CONSIDERATION
[14] The commutation payment and the pension which Mr Hammerton received are paid under the DFRDB Act. If either section 20 or section 21 is to apply to Mr Hammerton, those payments must be payments (be they a pension or lump sum) "under a superannuation scheme". Therefore, the first issue is whether the payments made under the DFRDB scheme are payments under a superannuation scheme.
Is the payment under the DFRDB Act a "payment" under a superannuation scheme within the meaning of the 1988 Act?
[15] The expression "superannuation scheme" is defined in sub-section 4(1) to mean:
"... any superannuation scheme under which the Commonwealth, a Commonwealth authority or a licensed corporation makes contributions on behalf of employees and includes a superannuation or provident scheme established or maintained by the Commonwealth, a Commonwealth authority or a licensed corporation."
It follows from the definition that there are two main issues to look at. The first is the meaning of "superannuation scheme" and whether there is a superannuation scheme under the DFRDB Act. The second arises if there is such a superannuation scheme. That is whether the Commonwealth makes contributions to the scheme or whether it is established or maintained by the Commonwealth.
[16] Mr Logan submitted that the definition in sub-section 4(1) offered little assistance as to what is meant by the expression "superannuation scheme". I agree with his submission. The definition is given in terms of "means and includes" in that the term is said to mean one type of scheme and to include another. Generally, a definition in that form is an exhaustive definition (Pearce and Geddes, Statutory Interpretation in Australia, paragraph 6.39). I have no reason to find that it is anything other than exhaustive in this context. The definition, however, does not greatly assist me for, apart from expressly placing certain limitations upon the types of superannuation schemes encompassed by the definition the term is defined by reference to itself. That is to say, a superannuation scheme is defined to mean and include a superannuation scheme with certain limitations.
[17] Mr Logan submitted that assistance in interpreting the expression can be found in to the judgement of Kitto J in Mahony v Commissioner of Taxation (1967) 41 ALJR 232 where he was considering a provision in the Income Tax and Social Services Contribution Assessment Act 1936 exempting from tax, in certain circumstances, the income of "a provident, benefit or superannuation fund". Kitto J said at page 232:
"There was no definition in the Act of 'a provident, benefit or superannuation fund', and the meaning of the several expressions must therefore be arrived at in the light of ordinary usage and with only one piece of assistance to be gathered from the immediate context. Since a Fund, if its income was to be exempt under the provision, was separately required to be one established for the benefit of employees, each of the three descriptive words 'provident', 'benefit' and 'superannuation' must be taken to have connoted a purpose narrower than the purpose of conferring benefits, in a completely general sense, upon employees. Precise definition may be difficult, and in any case is unnecessary for present purposes. All that need be recognised is that just as 'provident' and 'superannuation' both referred to the provision of a particular kind of benefit - in the one case a provision against contemplated contingencies, and in the other case a provision, to arise on an employee's retirement or death or other cessation of employment, of a subvention for him or his estate or persons towards whom he may have stood in some kind of relation commonly giving rise to a legal or moral responsibility - so 'benefit' must have meant a benefit, not in a general sense, but characterised by some specific future purpose. A funeral benefit is a familiar example."
[18] No disagreement with Kitto J's views is to be found in the judgments of Taylor J and Windeyer J. Those views would seem, however, to be wider than those previously expressed by Windeyer J in Scott v Commissioner of Taxation (Cth) (1966) 40 ALJR 265. In considering whether there was a "superannuation fund established for the benefit of employees" within the meaning of sub-paragraph 23(j)(i) of the Income Tax and Social Services Contribution Assessment Act 1936-1962, Windeyer J concluded:
"...that there is no essential single attribute of a superannuation fund established for the benefit of employees except that it must be a fund bona fide devoted as its sole purpose to providing for employees who are participants money benefits (or benefits having a monetary value) upon their reaching a prescribed age. In this connection 'fund', I take it, ordinarily means money (or investments) set aside and invested, the surplus income therefrom being capitalised. I do not put this forward as a definition, but rather as a general description. The Act carries the matter somewhat further, because it (in ss 66 and 82) suggests that a superannuation fund is made up of contributions. Doubtless a 'contribution' properly speaking has the sense of Dr Johnson's definition: 'that which is given by several hands for some common purposes'. But in the sense that the word has in the Act, contributions to a superannuation fund may I think all be made by one hand, that of the employer. Ordinarily no doubt contributions, whether from one or more contributors, are amounts furnished from time to time; but I am not to be taken as saying that a superannuation fund could not be a single sum set aside for the purpose. I think it could be."
[19] Scott's case was considered by Bryson J of the Supreme Court of New South Wales in Meulman and Others v OTC Ltd (1990)96 ALR 223 together with the cases of Hobson v Kingston-Upon-Hill Corp (1855) 24 LJ B 251 at 253 and Case 70 decided by a Commonwealth Taxation Board of Review (18 CTBR (NS) 546 at 597). Bryson J was considering whether certain payments provided for in the applicant's contacts with the respondent were "superannuation benefits" within the meaning of section 153AB of the Superannuation Act 1976. The term "superannuation benefits" was defined in section 153AA but his Honour decided that he should consider the ordinary and natural meaning of the term in addition to the meanings ascribed to it in the definition. He said:
"In my understanding of the ordinary and natural meaning of 'superannuation benefits' (leaving the definition of inclusion to one side for the moment) there is no precision in that meaning and a very wide range of kinds of benefits would fall within that meaning, including benefits in the nature of annuities and pensions, continued salary at full or reduced rates, possibly with continued obligations to work for or assist the former employer, and payment of gratuities and lump sums; and payment of amounts to compound for pensions and annuities. There could be many other classes; accommodation or housing, access to supply of the employer's goods at concessional rates; and many others. Although the connotation is extremely wide, it is my view of the ordinary meaning of the word 'superannuation' and related words, that benefits are provided for the purpose of enabling or assisting an employee or office holder to give up work and retire from economic activity if he wishes to, on reaching an age where it is appropriate to do so. The meaning does not necessarily involve any idea that there is compulsion to give up economic activity; in ordinary usage people collect their superannuation pensions but enter into fresh employment when they wish to do so; but they have reached an age or state of health where a choice not to do so is appropriate. A contractual provision or scheme or a payment of a lump sum or annuity on giving up employment while in good health would not fall within the ordinary meaning of 'superannuation' unless the employee or office holder had reached an age where that was appropriate; what that age is would depend on the nature of the occupation but it is rarely under 50 years of age and is sometimes much older. A scheme which provides annuity or gratuity to younger persons is not within the ordinary concept of superannuation as I understand it; such a scheme would be spoken of as a golden handshake and regarded as an unusually advantageous concession, and not as superannuation. I would say, with respect, that I find Windeyer J's observations in Scott's case on a related concept of value. Although his Honour was dealing with statutory construction and with the expression 'superannuation fund', the reference to benefits on reaching a prescribed age is, I think, close to the heart of what these expressions connote. I also regard Mr AM Donovan's observations in 18 CTBR (NS) Case 70 as significant indications of what references to superannuation connote.
A number of characteristics to which Mr Jackson referred do not seem to me to be essential to the general concept of superannuation. It is very usual for employers to make participation compulsory, at least after a specified period of service; but this is not an essential characteristic. It is very usual for there to be contributions by employees, contributions by the employer, or both, and for there to be a fund which is in some way employed towards paying superannuation benefits; but these are not essential characteristics of the general concept, which is quite consistent with there being no more than a contractual obligation of the employer to make payments when they fall due. Of course these are very clear characteristics of the benefits under the Superannuation Act and there is nothing at all in the plaintiff's contracts in any way analogous to the charge on the consolidated revenue fund which gives persons entitled under the Superannuation Act a fair certainty of payment in the cases where there is such a charge. In the cases of refund of contributions with interest there is not such a charge, but the existence of the superannuation fund fives practically complete protection. A contractual obligation of the Overseas Telecommunications Commission does not give the same complete degree of safety, although there can be little risk about it, in the absence of legislative changes. I do not regard as correct Mr Healy's submission to the effect that the focus of a superannuation scheme or a superannuation is the provision of benefits upon or by reason of cesser of office. Cesser of office can take place in many different circumstances, and it is common enough to provide contractually for benefits in that event; unless there is an association with retirement for age or invalidity, a benefit is not within the connotation of 'superannuation'." (pages 237-238)
[20] The words with which I am concerned in the sub-section 4(1) of the 1988 Act are not "superannuation benefits" as in Meulman's case, a "superannuation fund established for the benefit of employees" as in Scott's case or a "superannuation fund" as in Malony's case but a "superannuation scheme". Looking still at the ordinary meaning of the terms and not at the definition in sub-section 4(1), does the word "scheme" have any particular meaning? It is not separately defined in the 1988 Act.
[21] The Macquarie Dictionary (2nd edition, 1991) defines it, in so far as it is relevant, as:
"1. a plan or design to be followed, as for building operations etc; a program of action; a project. 2. a policy or plan officially adopted by a company, business, etc, as for pensions, loans, etc."
Again in so far as it is relevant, the Shorter Oxford (3rd edition, reprinted with corrections 1964), defines it in similar terms as:
"5.a. A plan, design, a programme of action 1647. b. Hence, A plan of action devised in order to attain some aid; a project, enterprise. ..."
[22] In Wright v City of Brighton (unreported, Judgment No 3074, 24 October, 1991) Olsson J of the Supreme Court of South Australia considered the meaning of the word "scheme". He did so in the context of the Equal Opportunity Act 1984 (SA). Section 85p of that Act provided that "...an act done for the purpose of carrying out a scheme or undertaking for the benefit of persons of a particular age or age group in order to meet a need that arises out of, or that is related to, the age or ages of those persons." The question was whether a land management agreement restricting the ownership of houses in a certain area to those aged 55 years and over, was a scheme or undertaking within the meaning of section 85p.
[23] Olsson J referred to judgments of the High Court in XCC Proprietary Limited v Commissioner of Taxation (1971) 45 ALJR 460, M. Steinberg and Others v Commissioner of Taxation [1975] HCA 63; (1973) 47 ALJR 255 and an appeal to the Full Court of The High Court, Morris Steinberg v Commissioner of Taxation (1976) 545 ALJR 43. Each of the cases was concerned with what was meant by "profit arising from the sale by the taxpayer of any property acquired by him for the purposes of profit-making by sale, and for the carrying on or carrying out of any profit-making undertaking or scheme." (section 26A of the Income Tax Assessment Act 1936). Olsson J went on to quote pertinent passages from the judgments in those cases. In relation to the judgments of the Full Court of the High Court in the second Steinberg case, he said:
"On appeal Barwick CJ discussed the concept of section 26(a) in these terms at pp 47-48:
'...The concept underlying the first limb is that in an Act confined to the taxation of income there are some circumstances in which what are isolated and not repetitive transactions, which in other circumstances would yield a capital gain, can properly be regarded as producing income. One circumstance is the acquisition of property by the taxpayer with the purpose of its resale at a profit in what is in truth a commercial dealing: that is the first limb of the section. The second limb, in my opinion, is founded upon the same notion but provides for the case where the property acquired is not itself the subject of resale but is intended at the time it is acquired to be the vehicle for making a capital gain, again in the course of an isolated or single though perhaps complex transaction in the nature of a commercial dealing. For there to be a scheme there must be a plan: it must be the taxpayer's plan and it must exist, in my opinion, at the time of the acquisition of the property: indeed, that acquisition, in my opinion, must be itself part of the scheme and the property acquired the intended vehicle for carrying the scheme into execution. Whilst it need not be fully conserved in all its details at the time of acquisition it must exist as a scheme which in principle embraces all the details yet to be worked out.'
He later went on to comment:
'...Of course, a scheme, entertained at the point of acquisition, may contemplate alternatives in its execution and, having determined the principles of the scheme, leave details for later decision. But, with due respect to what Sir Owen Dixon said in the Premier Automatic Ticket Issuers Ltd v Federal Commissioner of Taxation [1933] HCA 51; (1933), 50 CLR 268, there must be an identifiable specific scheme existing at the date of the acquisition of the property which is to be used to execute the scheme to make a profit.' Gibbs J expressed the view that a profit making scheme is a plan, design programme of action devised and put into effect for the purpose of making a profit. He went on to make the point that schemes may be precise or vague; every detail may be arranged in advance, or the working out of the plan may be left for decision in the light of circumstances as they arise. It is no objection to a plan that it allows room for manoeuvre. Stephen J dealt with the concept in these terms at p 57: 'It is true that an undertaking or scheme must involve a programme or plan of action - per Kitto J in Clowes v Federal Commissioner of Taxation [1954] HCA 10; (1954), 91 CLR 209, at p 255, and per Gibbs J in XCO Pty Ltd v Federal Commissioner of Taxation [1971] HCA 37; (1971), 124 CLR 343, at p 349; it presupposes, as Windeyer J has said, activities which are co-ordinated by plan and purpose - Investment and Merchant Finance Corporation Ltd v Federal Commissioner of Taxation [1970] HCA 1; (1970), 120 CLR 177, at p 189. However, as emerges from the judgment of Windeyer J in Buckland v Federal Commissioner of Taxation (1960), 34 ALJR 60, it may involve no more than a settled purpose on the part of those concerned 'to turn their purchase to profitable account as best they could when they got possession, depending on how the undertaking then developed' - at p 62, although it must necessarily have as its object the making of a profit ...' These dicta need to be read in light of the point made by Gibbs J in the XCO Case that due regard must be had to the phrase 'carrying on or carrying out'. He was of opinion that: '...The word "scheme" simply means plan, design or programme of action (cf. Clowes v Federal Commissioner of Taxation (1953054)[1954] HCA 10; , 91 CLR 209, at p 225). It is not necessary, to constitute a scheme within s 26(A), that the action planned should involve a series or repetition of acts. 'The alternative 'carrying on or carrying out' appears to cover, on the one hand, the habitual pursuit of a course of conduct, and, on the other, the carrying into execution of a plan or venture which does not involve repetition or system'...'"
[24] Olsson J went on to consider the meaning of the word "undertaking" and referred to a judgment of Lockhart J in which he had stressed that the word varies according to its context (see Melville v Mutual Life and Citizens Assurance Co Ltd [1980] FCA 114; (1980) 31 ALR 649). He then considered its variety of meanings and concluded generally:
"Having regard to the foregoing conceptual approaches and the particular statutory setting of section 85p of the Equal Opportunity Act I consider that the word 'scheme', as there employed, must be taken to embrace the concept of identifiable programme or plan of action, which is coherent and has some unity of conception (Williams and Others v United Dairies Ltd (1986) 10 ACLR 406 at 409), directed to the type of end result contemplated by the section. By virtue of its deliberate contrast with the word 'undertaking' I am of opinion that what is in contemplation is a significant plan, conceived at the time of commencement of the relevant project, involving a future series or system of activities, normally of an ongoing nature, in accordance with reasonably developed guidelines or concepts. Thus the creation of a retirement village of the nature of those encompassed by the Retirement Villages Act would clearly fall within that type of definition, but so also would a range of other initiatives not necessarily of that type. What is in issue is a question of fact and degree in each case and any attempt to draw precise, definitive boundaries, would seem an impossible endeavour. By way of contrast it appears to me that the word 'undertaking' is employed to comprehend a discrete project, more limited in scope to a specific enterprise, which may or may not have finite life and is of a potentially less sophisticated structure in administrative terms. It may be apt to describe either a commercial or business enterprise or something which may not necessarily have a profit orientated goal. I am of opinion that it would be stretching the meaning of the word 'scheme' to an unacceptable degree to include within its aegis a project of the type here under contemplation. This was not, in the true sense, a plan of action or systematic arrangement designed to achieve a clearly defined ongoing objective. It was merely a 'one off' development aimed at a specific commercial market. On the other hand it seems to me beyond doubt that it was manifestly an undertaking of the nature of an enterprise carried out for the type of purpose to which section 85p directs its attention. These were cottages specifically designed and built to provide relatively low cost housing to meet the identified needs of a particular age group of retired and elderly people." (pages 9-10)
[25] This brings me back to the meaning of the words "superannuation scheme" as they are used in the 1988 Act. Some assistance in their interpretation is found in sections 20, 21 and 23 of the 1988 Act as it applies to this case. Both sections 20 and 21 apply to a person who is in receipt of a payment under a superannuation scheme be it a payment of a pension or a lump sum benefit. Both the sections apply to an employee who is incapacitated for work as a result of an injury and who "retires", either voluntarily or compulsorily, from his or her employment. In the context in which it is used, the ordinary meaning of "retire" is "to withdraw from office, business or active life" (Macquarie Dictionary) or "to withdraw from office or an official position; to give up one's business or occupation in order to enjoy more leisure or freedom (esp. after having made a competence or earned a pension)" (Shorter Oxford Dictionary). Although the ordinary meanings of "retire" given in the dictionaries focus upon a person's withdrawal from his or her occupation by reason of his or her age, the concept of withdrawal from an occupation and so of retirement is equally applicable to withdrawal by reason of his or her lack of capacity to work. That it is intended to apply to retirement for reasons other than the fact that a person has reached the "usual" retirement age of 65 years is apparent from sub-section 23(1) which provides that compensation is not payable under, among others, sections 20 or 21, to a person who has reached the age of 65 years.
[26] Taken in the context of the 1988 Act and in light of the authorities to which I have referred, I have concluded that a "superannuation scheme" within the meaning of the 1988 Act is an established plan or arrangement which provides for the provision of benefit to a person (who comes within a pre-determined class of persons) or to his or her dependants, be they in the form of pensions, lump sums or some other form, upon that person's ceasing to engage in employment by reason of his or her having reached an age when it has been pre-determined that it is appropriate that he or she cease that occupation or by reason of his or her being unable to work because of death, illness or injury. The plan or arrangement must be administered according to a set of guidelines or rules. Provided a plan or arrangement has these elements it is a superannuation scheme within the meaning of the 1988 Act. The details of the plan or arrangement are not of any consequence and it is not relevant to look at the precise details of the plan or arrangement. Equally, it is not relevant to consider whether a person can leave the scheme prior to his or her retirement or death or the basis on which he or she may leave the scheme before that time.
[27] Are Colonel Hammerton's payments, which are made under the DFRDB Act, made under a superannuation scheme? The long title of that Act states that it is "An Act to make provision for and in relation to a Scheme for Retirement and Death Benefits for Members of the Defence Force". Under sub-section 17(1) of the DFRDB Act an "eligible member of the Defence Force", as defined in sub-section 3(1), is required to pay to the Commonwealth fortnightly contributions in accordance with the Act. The amount of fortnightly contributions he or she pays is specified in sub-section 19(1). Special provision is made for such matters as contributors under previous schemes (Part X), the preservation of the contributor's rights should he or she cease to be an eligible member of the Defence Force (Part IX, Division 3) and for the refund of a person's contributions if he or she is not entitled to any other benefit under the DFRDB Act (section 56). Sub-section 23(1) provides that where a member of the scheme retires and meets certain specified conditions, he or she is entitled to retirement pay at the rate specified. Different rates of retirement pay apply to different groups of contributors according to when they became contributors.
[28] For the purposes of the DFRDB Act, the retiring age for the rank held by a member of the Defence Force is ascertained by reference to the compulsory retiring age for that member specified either in, or in accordance with Regulations made under, the Naval Defence Act 1910, or the Defence Act 1903 or the Air Force Act 1923 (section 4). Upon his or her retirement, he or she may elect to commute a portion of his or her retirement pay in accordance with sub-section 24(1). Where he or she is retired on the ground of invalidity or of physical or mental incapacity to perform his or her duties, he or she is entitled to an invalidity benefit (section 26). Where a person does not meet the conditions specified for retirement pay because he or she does not have the required period of effective service or the required period given the retiring age for the rank he or she held immediately before his or her retirement, he or she is entitled to a refund of his or her contributions (section 56). Any payment of benefit under the DFRDB Act must be paid by the Commonwealth from its Consolidated Revenue Fund (section 125).
[29] Looking at the DFRDB Act, I am satisfied that it establishes a coherent and cohesive plan administered according to a clear set of rules to provide for benefits to be paid to people who are encompassed by the plan and who retire from a particular field of employment having reached an age when retirement is considered appropriate or upon their becoming incapacitated to undertake that employment. That is to say, there is a superannuation scheme established by the DFRDB Act. The scheme does not become something other than a superannuation scheme simply because the rules provide that a person must fulfil certain criteria to be paid retirement benefits under the scheme or that a person may obtain the refund of his or her contributions if he or she does not fulfil those criteria by, for example, leaving his or her employment with the Defence Force with fewer years of service than required under the scheme. Nor does the scheme become something other than a superannuation scheme because those belonging to it are able to obtain benefits under it, provided they have satisfied all of its criteria, at an age somewhat younger than the age at which people generally retire from paid employment. Such a consideration could be relevant in another circumstance so that a payment under the scheme becomes a "golden handshake" but, in the context of the scheme established by the DFRDB Act, the factor of age does not alter my finding that the Act has established a superannuation scheme.
[30] Although I am satisfied that the DFRDB Act has established a superannuation scheme, does the scheme satisfy the additional criteria set out in the definition of a superannuation scheme set out in sub-section 4(1)? It does not come within the first limb of the definition in sub-section 4(1) for the Commonwealth does not make any contributions to it. To come within the definition, however, it is not necessary that the Commonwealth make contributions. It is sufficient if it comes within the second limb. This is the effect of the manner in which the definition is framed. The meaning in the first limb is expanded to include superannuation schemes that might not fall within that former meaning but which are established or maintained by the Commonwealth (see generally the discussion concerning the words "means" and "includes" in Pearce and Geddes, Statutory Interpretation in Australia, 3rd edition, 1988, paragraphs 6.34-6.41). The DFRDB scheme is established under legislation of the Commonwealth, benefits are paid from the Commonwealth's Consolidated Revenue and the scheme is administered by a Commonwealth body (the Defence Force Retirement and Death Benefits Authority). This is sufficient to bring it within the definition of a "superannuation scheme" in sub-section 4(1) for, provided the scheme is established or maintained by the Commonwealth and it is not necessary that the Commonwealth also make contributions to it.
[31] It follows that the payments made to Mr Hammerton under the DFRDB Act are payments made under a superannuation scheme within the meaning of sub-section 4(1) of the 1988 Act. I must now consider the nature of the payments which he received under that superannuation scheme and whether they may be described as a "pension" under a superannuation scheme within the meaning of section 20 or a lump sum benefit under a superannuation scheme within the meaning of section 21.
What is a pension under a superannuation scheme?
[32] The word "pension" is not defined in the 1988 Act. The Macquarie Dictionary defines it, in so far as it is relevant, as
"1. a fixed periodical payment made in consideration of past services, injury or loss sustained, merit, poverty etc.
2. an allowance or annuity ..."
A similar meaning is given in the Shorter Oxford Dictionary where it is defined, in part, as
"4. An annuity or other periodical payment made, esp. by a government, a company, or an employer of labour, in consideration of past services or of the relinquishment of rights, claims or emoluments. ..."
[33] The word "pension" has also been considered in a number of cases and in the context of various legislative frameworks. The High Court has considered it in Nette v Howarth [1935] HCA 22; (1935) 53 CLR 55 (Rich, Starke, Dixon, Evatt and McTiernan JJ) in the context of the Bankruptcy Act 1924 and the Superannuation Act 1916 (NSW). On his retirement from the State public service, a bankrupt became entitled to receive a refund of the contributions paid by him under the Superannuation Act 1916 (NSW). The Official Receiver applied for an order that the money be vested in him. The case turned on the interpretation of section 101 of the Bankruptcy Act 1924 which provided generally that a bankrupt's pay, pension, salary, emoluments, profits, wages, earnings or income were available for distribution among his or her creditors but that any pay, pension, salary or wages which was by any Act exempt from attachment or incapable of being assigned or charged was excluded. Section 88 of the Superannuation Act 1916 (NSW) stated that pensions and other benefits under the Act could not be assigned, charged or passed by operation of law to any person other than the pensioner or beneficiary. The Court decided the issue either on the ground that the sum was a capital receipt not subject to any exclusionary qualifications and so vested in the Official Receiver (Rich, Starke and Dixon JJ) or that it so vested as it was income and not subject to any exclusion (Evatt and McTiernan JJ).
[34] In the course of their reasons, each of the Judges referred to the payment of the refund of contributions as a lump sum. In doing so, Dixon J considered the nature of that lump sum in the following way:
"The lump sum payable to a contributor on his retirement is to be equal to his contributions, and those contributions were deducted from his salary. But the contributions ceased to be salary when they were made to the fund. The lump sum cannot be considered deferred salary or pay. It may be regarded as a refund perhaps, but, even so, the money refunded is received not as remuneration, but as a lump sum payable on a contingency. If it is a refund, at least it is a fund. In the receipts enumerated in sec.101 the words 'pay', 'salary' and 'wages' refer to remuneration earned by present service." (pages 64-65)
Dixon J went on to consider the meaning of "pension" when he said:
"'Pension' refers predominantly to payments which follow service. The time has passed when the idiomatic use of the word extended to non-recurring payments. But it may perhaps include in this section a succession of payments which are not the consequence of past service or the like." (page 65)
[35] The word "pension" has also been considered by Hill J in Tubemakers of Australia Limited v FCT (1992) 93 ATC 4,207. Tubemakers of Australia Limited ("Tubemakers") had established a medical and hospital fund for its employees and former employees and paid the contributions for all eligible retired employees. There was a question whether the payments of the contributions constituted a pension to the retired employees. Hill J referred to the dictionary meanings and concluded that they showed that it is a necessary characteristic of a pension that it be periodical (see page 4,212). He repeated that later in his reasons when he said
"In my view, the essential characteristic of a pension (which may of course be voluntary and need not be paid because of some legal obligation) is only that there be periodical payments and not a series of lump sum payments, albeit that those lump sum payments may be paid on a periodical basis." (page 4,213)
[36] Hill J then went on to speak of the quantum of the payment and to consider its relevance:
"In the present case, it seems to me that once it is possible to characterise the payment as being a periodical payment, and that is clearly the case in the second period, then the fact that the quantum of the payment may vary at the discretion of the payer does not affect the characterisation of the payment. But if I be wrong on this and it be a criterion of a pension that the amount, if capable of variation, be fixed by reference to some independent criterion, that requirement is satisfied here. I see no reason why a periodical payment might not be a pension where the yearly rate is determined by reference, for example, to the annual contribution rate of, for example, Medibank Private. If that be the case, it can scarcely matter that the contribution rate chosen is not Medibank Private, but the rate charged by Phoenix. After all, Phoenix is a separate legal entity from the applicant and in fact is controlled independently of the applicant." (page 4,213)
[37] Returning to the 1988 Act with which I am concerned, and taking into account the dictionary meanings and cases to which I have referred, it seems to me that I should give the word "pension" as it appears in section 20 its ordinary meaning in the sense that it comprises periodical payments. This conclusion is supported by the reference in the definition of "superannuation amount" in sub-section 4(1) to "... a pension received by an employee in respect of a week". The implication I draw from that definition is not only that, in order to be a pension, payments must be weekly but that they must be periodic. It is not enough, however, that the payments be periodic. They must not be a series of lump sum payments even if those lump sum payments are made on a periodic basis. In addition they must also be made under a superannuation scheme.
What is a lump sum benefit under a superannuation scheme?
[38] The term "lump sum benefit" is not defined in the 1988 Act and so I will look first at the meaning of "lump". The Shorter Oxford Dictionary includes among the meanings of "lump" that of "To put together in one lump, mass, sum, or group; to consider or deal with in the lump without regard for particulars or details ...". The Macquarie Dictionary adopts a similar meaning and, in doing so, refers specifically to a lump sum. It includes among its meanings that of "including a number of items taken together or in the lump: a lump sum." Black's Law Dictionary (5th edition, 1979) specifically defines a "lump-sum payment" as
"A single amount in contrast to installments (sic); e.g. single premium payment for life insurance; a single lump sum divorce settlement; or single worker's compensation payment in lieu of future monthly installment (sic) payments."
[39] The 1988 Act refers to payment of a "lump sum" to employees in sections 30 and 31 in relation to redemption of compensation. Section 30 provides that when Comcare is liable to make weekly payments under section 19 amounting to $50 per week or less and Comcare is satisfied that the degree of the employee's incapacity is unlikely to change, it may determine "that its liability to make further payments to the employee ... be redeemed by the payment to the employee of a lump sum." (sub-section 30(1)). The amount of the lump sum is calculated pursuant to a formula.
[40] The DFRDB refers to lump sum payments in certain instances. Section 48, for example, provides for a lump sum payment when a member of the scheme dies before retirement with only one period of effective service and no pension is payable under Part VI. Provision is also made for lump sum payments where a member dies with more than one period of effective service but no pension is payable under Part VI (section 48A). Where a person is entitled to retirement pay or to a pension benefit such as a spouse's pension under the DFRDB Act, that person may, in certain circumstances commute that retirement pay or pension benefit. The amount paid to the recipient as a result of the commutation is not described as a lump sum, lump sum payment or lump sum benefit. It is referred to simply as an "amount" (e.g. section 24 and section 41A). The Superannuation Act 1976 also provides for benefits such as additional age or early retirement pensions to be commuted. It describes the amount which becomes payable as a result of the commutation as a lump sum benefit (e.g. section 64). The Superannuation Act 1976 also refers to the payment of lump sum benefits not merely as a result of commutation of benefits but as the primary benefits. Depending on the circumstances, for example, a person may be paid an invalidity pension under section 67, an invalidity pension and a lump sum benefit under section 68 or a lump sum benefit under section 69. Each of sections 67, 68 and 69 sets out a formula for the calculation of the lump sum.
[41] In each of the legislative examples and definitions I have referred to, the essential features of a lump sum, be it further described as a payment or benefit, is that it is a single amount paid as a once and only payment whether it be in respect of a liability (as, for example, in the case of an insurance premium) or an entitlement (as, for example, in the case of a person's pension or benefit entitlements under a superannuation scheme or a designated portion of those pension or benefit entitlements).
[42] Is this the meaning that should be adopted in section 20 of the 1988 Act? The precise expression to be considered is "lump sum benefit" and there is no question that the lump sum benefit must be paid under a superannuation scheme. A "benefit" is anything that is for the good of a person." (Macquarie Dictionary), an "advantage, profit (or) good" (Shorter Oxford Dictionary or an "advantage; profit; fruit; privilege; gain; (or) interest" (Black's Law Dictionary). In the context of the 1988 generally and of section 21 in particular, I see no reason other than to adopt the ordinary meaning of "benefit". Therefore, a lump sum benefit under a superannuation scheme is an amount paid for the advantage or good of a person pursuant to a superannuation scheme and is paid as a once and only payment whether or not it is made in one or more than one payment (but distinct from on-going payments) in respect of a person's entitlements, or some of them, under that scheme.
Is Mr Hammerton in receipt of a pension, lump sum or both?
[43] Mr Hammerton is entitled to and receives payments each fortnight under the DFRDB Act. They are characterised as "retirement pay" under that Act. As they are made fortnightly after the date of his retirement and continue indefinitely after that date, they have the nature of periodic payments. They are not instalments of a single lump sum intended to pay once and for all the DFRDB Authority's liability, or part of its liability, to pay him an amount each fortnight. It follows that I am satisfied that Mr Hammerton receives a pension within the meaning of section 20 of the 1988 Act.
[44] Mr Hammerton has also commuted a portion of his retirement pay and has received an amount of money for it. Is that a lump sum or does it retain its character as a pension. When regard is had to the ordinary meaning of a lump sum benefit (see paragraphs 38-42 above), the commuted retirement pay certainly appears to fall within that description. It is an amount paid in accordance with the provisions of a superannuation scheme and is paid as a once and only payment in respect of a portion of Mr Hammerton's on-going entitlements to receive a fortnightly pension and in extinguishment of his rights to receive that portion in the future.
[45] That the commuted retirement pay is indeed a lump sum payment and not a pension is supported by reference to the case of Crowe v Price (1989) 22 QBD 429. Lord Coleridge CJ considered whether a pension paid to a retired military officer and a sum paid in respect of a portion of his pension which he had been allowed to commute could be used to pay his creditors in his bankruptcy. The case turned on the interpretation of section 141 of the Army Act 1881 which
"removed the distinction drawn by the common law between pensions awarded to servants of the Crown entirely as a compensation for past services, and allowances, such as half-pay, in which a part of the consideration was the liability of the recipient to service the Crown again. The former class of allowances the common law regarded as alienable, the latter as inalienable, because granted for the express purpose of enabling persons who might be again employed in the service of the Crown to maintain a decent position and to avoid falling into poverty. Under the section 'every assignment of and every charge on ... any deferred pay or military reward, or any pension, allowance or relief,' is declared to be void." (page 431)
[46] Lord Coleridge considered that the pension payments fell clearly within section 141 and so were inalienable in bankruptcy proceedings. He considered, however, that the lump sum paid on commutation did not. Commutations, he said, were not mentioned and it followed that they did not come within the words of section 141 (see page 432). He went on to say:
"As regards the intention of the section its effect is, as I have said, to remove the distinction which had existed at common law between two classes of pensions, and to render both classes equally inalienable. When the Army Act, 1881 passed, commutation of pensions, which had been established by the Pensions Commutation Act, 1871, must have been a well-known process. The silence of s.141 shews, as it seems to me, either that the legislature deliberately did not place commutation money on the same footing with the allowances which it specifies, or that the legislature in altering the law did not take commutation money into consideration. The result is that commutation money is alienable, and is consequently liable to be taken in execution." (page 432)
[47] Lord Coleridge's judgement was applied by the Court of Appeal. It is implicit in this case that the commutation has had the effect of changing the essential nature of periodical pension payments into something else. That seems to me to accord with what happens when a single payment takes the place of an on-going periodic payment of pension. It also accords with the normal meaning of "commute" i.e. "to exchange for another or something else ... interchange 2. to change (one kind of payment) into or for another as by substitution ... to make a collective payment, esp. of a reduced amount, as an equivalent for a number of payments ..." (Macquarie Dictionary).
[48] It follows that Mr Hammerton has received a lump sum benefit under a superannuation scheme as well as being in receipt of ongoing pension payments.
Should Mr Hammerton's entitlements be calculated under section 20 or section 21 of the DFRDB Act or under neither of them?
[49] This is a question which has caused me much concern and one on which I asked for further submissions by the parties. Section 20 refers to a person who has received a pension and section 21 to a person who has received a lump sum. On their face, Mr Hammerton comes within the terms of each section. He both receives a pension and has received a lump sum. The difficulty is not that he does come within those sections for he does, but that those sections do not specifically cover a person in his situation. Neither specifically refers to a person who has received both a pension and a lump sum benefit as has Mr Hammerton.
[50] Section 21A, which does not apply to this case as it did not come into operation until 24 December, 1992, does apply to a person who receives a pension and a lump sum benefit (see paragraph 13 above). The temptation has been to say that, as the subsequent, and therefore inapplicable section 21A, applies to a person in Mr Hammerton's position, neither section 20 nor section 21 applies. This would accord with the Explanatory Memorandum which sets out the reasons for the introduction of the new section 21A in the following terms:
"The great majority of employees covered by the Act receive their superannuation entitlements either in the form of a lump sum or a weekly pension. However, a number of Commonwealth employees are members of superannuation schemes to which the Commonwealth or a Commonwealth authority contributes on their behalf under which benefits may be paid by way of a lump sum and a weekly benefit. Neither section 20 nor section 21 can have any application to employees whose superannuation benefits are paid in this manner, and proposed new section 21A would provide rules for the calculation of weekly compensation benefits to them."
[51] I am mindful, however, that I cannot construe the terms of sections 20 and 21 by reference to the terms of the non-retrospective section 21A (see Khoury (M and S) v Government Insurance Office of NSW [1984] HCA 55; (1984) 54 ALR 639 at 650, Mason, Brennan, Deane and Dawson JJ).
[52] I am also mindful that I must have regard to the purpose and object of the Act. That purpose was made clear when the Minister for Social Security said in introducing the Bill on 27 April, 1988:
"The Bill will also seek to reduce the unreasonable costs associated with work-related injuries by introducing measures to prevent double dipping by employees using sick leave payments or superannuation entitlements while on compensation. For example, many employees who have been retired on invalidity grounds under the current legislation enjoy benefits under both compensation and superannuation schemes at a rate considerably in excess of their previous income. Special transitional provisions relating to the combined superannuation and compensation benefits payable to employees who have been invalided out of employment are contained in this Bill." (Hansard, House of Representatives, 27 April, 1988, page 2194)
[53] Colonel Hammerton has submitted that the wording of sections 20 and 21 show that they are intended to apply only to those employees whose retirement, whether compulsory or voluntary, is resultant from the injury and its effect of incapacitation on the employees. This, Colonel Hammerton has argued, is implicit in sub-section 20(1) and 21(1) which state that the section concerned applies to an employee "... who, being incapacitated for work as a result of an injury, retires voluntarily, or is compulsorily retired, from his or her employment." By way of contrast, sub-section 19(1) applies to an employee "who is incapacitated for work as a result of an injury".
[54] Had he retired because he was incapacitated as a result of the injury he received, Colonel Hammerton said that he would not have retired under the provisions of the DFRDB Act. His compulsory retirement was as a result of his attaining the mandatory retiring age of 50 years for the rank of Lieutenant Colonel and had no regard to his medical state at the date of his retirement.
[55] Unlike any other industry or employment, the Defence Force sets mandatory retiring ages which vary from 42 to 55 years of age depending upon the rank attained. Provision is also made for voluntary retirement after 20 years of service. The rates of pay, Colonel Hammerton said, do not generally allow for the cessation of paid employment, and it is anticipated that retiring personnel will commence a second career in another area. The Department of Defence has a number of training and assistance programmes to facilitate the transition and it is generally recognised that the skills and experience gained during the years of military service will enable many retirees to obtain employment in the new area at a similar level to that from which they have retired. The fact that they will subsequently receive full pay in addition to their retirement benefits, Colonel Hammerton continued, is not seen as "double dipping" but as a reward for the years of arduous and hazardous service which they have given their country. Consequently, payments made to compensate a person for an incapacity to earn an income similar to that enjoyed by his peers should not be regarded as "double dipping" in relation to any other retirement pay or other pay he may receive.
[56] Looking at the words of sub-sections 20(1) and 21(1), it seems to me that neither is providing that there must be a causative link between the incapacity for work as a result of an injury and retirement. Rather, they are providing only a temporal link between the incapacity and the retirement. The retirement comes after the incapacity and may be either compulsory or voluntary retirement. The only causative link in the two provisions is between the retirement and the receipt of a pension under a superannuation scheme. The receipt of the pension must be received because of the retirement. This interpretation of the words of sub-sections 20(1) and 21(1) is consistent with the words of section 19 which sets out the benchmark, as it were, for employees who are incapacitated as a result of an injury but does not relate to those who are provided for by sub-sections 20 and 21.
[57] Sections 20 and 21 do not distinguish among superannuation schemes. They do not make different provisions for different schemes. Colonel Hammerton has, as he says, been compulsorily retired because of his age and, as a consequence of his retirement is receiving retirement pay, or a pension, under the DFRDB scheme. While I accept that many retired servicemen go on to other employment and a second career as they are young enough to do so and are highly skilled, sections 20 and 21 do not set to one side the provisions of the DFRDB scheme and do not give any recognition to Colonel Hammerton's argument that it is appropriate that the retirement pay received under that scheme should be regarded as being for past service and that the compensation should be regarded as payment for the work which, were it not for his incapacity, he could now expect to be performing. I do not consider that the ordinary meaning of the words can be "read down" by reference to the particular circumstances of an employee under a particular superannuation scheme. It follows that, although I am sympathetic to Colonel Hammerton's position as he finds himself in it by a combination of events and legislation provisions beyond his control, I consider that he comes within the terms of sections 20 and 21.
[58] Neither section 20 nor section 21 entirely covers Colonel Hammerton's situation although he does, as I have said, come within both. It is apparent from the sections and from the scheme of the Act that each intends that the Commonwealth will not pay an amount, by way of compensation in respect of a period of time, when it (the Commonwealth) is already paying an equivalent amount for the same period of time but in respect of a different matter (i.e superannuation). Section 20 does so on a weekly basis. Section 21 does so on the basis that the lump sum will be invested for a return of 10% per annum and that the return is divided equally among each of the 52 weeks of the year. Only the amount attributable to contributions made by the Commonwealth is deducted as the superannuation amount. The basis of sections 20 and 21 is, in my view, more accurately described as being to prevent the Commonwealth's paying twice than to prevent an employee's "double dipping". The term "double dipping" carries with it unfortunate overtones which are not in any way applicable to Colonel Hammerton.
[59] As the legislation is intended to prevent double payment and purely on that pragmatic basis, I consider that I should apply the section that best reflects his payments under the Act and the contribution made by the Commonwealth. That section is section 20 for it provides for the deduction of the amount of the weekly pension from the amount of compensation that would otherwise be payable to Mr Hammerton. In reaching this conclusion, I have made no reference to the deduction from the amount of compensation of the amount of superannuation contributions that Mr Hammerton would have been required to pay if he were still contributing to the superannuation scheme. That is because it is a deduction common to the calculations under both section 20 and 21 and makes no difference to the overall result. On this point, Colonel Hammerton has submitted that the Department is "double dipping" in the present assessment of compensation payments in that the amount received is further discounted by the amount of superannuation payments a person would be required to make if he were still employed. It does not, however, make any provision for the increase in the rate of retirement pay that such further contributions would earn. The Explanatory Memorandum does not explain why this amount has been deducted. In the absence of that explanation I prefer to refrain from proffering possible explanations. I can only note Colonel Hammerton's submission and say that Parliament has adopted a particular stance on the subject and I am bound to apply it.
Does section 20 take account of the pre or post commutation amount of the pension?
[60] Mr Logan submitted that I should take account of the amount of Mr Hammerton's pension before he commuted a portion of it. This, he submitted, is the only proper interpretation to take account of the Act's purpose. He also submitted that I should take into account the pre-commutation amount as section 20 refers to that which an employee receives "as a result of retirement". That which he receives is an entitlement to retirement pay under section 23 of the DFRDB Act. He is able to commute part of the retirement pay under section 24 of the DFRDB Act but that is not as a result of his retirement but as a result of his election to commute. Therefore, no account need be taken of the commutation and regard is had to the whole of the pension which Mr Hammerton would have received had he not commuted.
[61] Had section 20 referred to a person's being, as a result of the retirement, "entitled to receive a pension" under a superannuation scheme, I would possibly have accepted Mr Logan's submission. As it is, section 20 applies where, as a result of the retirement, the person "receives a pension" under a superannuation scheme. The word "receives" is defined, in part, in the Macquarie Dictionary as "1. to take into one's hand or one's possession (something offered or delivered" and in similar terms in the Shorter Oxford Dictionary. It is difficult then to read the words "receives a pension" as anything other than takes into one's hands or possession a pension. I do not consider that I can read into the words "receives a pension" the word "entitlement" so that they mean "receives an entitlement to a pension.
[62] That I should look only to the pension actually received rather than to the amount actually paid is confirmed by the definition of "superannuation amount" in sub-section 4(1). That amount is used in the formula set out in section 20 and is, in part, calculated by reference to "a pension received by the employee in respect of that week". The clear emphasis is upon the pension actually received in respect of a week and not upon the pension he would have been entitled to receive had he not commuted.
[63] Looking at the definition of a "superannuation amount" only in respect of the lump sum payment, it is not possible to attribute any portion of it to each week. It is calculated pursuant to a formula but is not calculated according to the amount of weekly pension multiplied by the number of weeks Colonel Hammerton will actually live. As I have already found, the commuted portion is no longer a pension but a lump sum.
[64] This means that the pension which Mr Hammerton receives in respect of a week is the amount he receives after he has commuted a portion of his original pension entitlement and not the amount he would have received had he not commuted. I acknowledge that this conclusion means that Colonel Hammerton is in a better position than if he had retired after section 21A came into operation on 24 December, 1992. In addition, I acknowledge that the purpose of the Act is to prevent double dipping. The stated purpose, however, allows elasticity in its interpretation but even elasticity has its limitations and cannot be used to add meanings to plain and unambiguous words.
Should account be taken of the productivity bonus?
[65] Sub-section 20(3) provides that
"The amount of compensation is an amount calculated under the formula: AC-(SA + SC) where: AC is the amount of compensation that would have been payable to the employee for a week if: (a) section 19, other than subsection 19(6), had applied to the employee; and (b) the week were a week referred to in subsection 19(3): SA is the superannuation amount; and SC is the amount of superannuation contributions that would have been required to be paid by the employee in that week if he or she were still contributing to the superannuation scheme".
[66] When reference is made to section 19, it is found that the weekly amount of compensation payable to an employee under that section is 75% of his or her normal weekly earnings ("NWE"). NWE is defined in sub-section 8(1) which provides:
"For the purposes of this Act, the normal weekly earnings of an employee (other than an employee referred to in subsection (2)) before an injury shall be calculated in relation to the relevant period under the formula: (NH X RP) + A where: NH is the average number of hours worked in each week by the employee in his or her employment during the relevant period; RP is the employee's average hourly ordinary time rate of pay during that period; and A is the average amount of any allowance payable to the employee in each week in respect of his or her employment during the relevant period, other than an allowance payable in respect of special expenses incurred, or likely to be incurred, by the employee in respect of that employment.
[67] Colonel Hammerton submitted that the normal weekly earnings should include an amount representing a three percent productivity payment, awarded in lieu of a pay rise in the National Wage Increase. Mr Logan submitted that section 19 represents a decision by Parliament as to how much should be paid by way of compensation to an employee. He submitted that the formula providing for the calculation of an employee's normal weekly earnings in sub-section 8(1) does not accommodate, as a matter of construction, an additional amount paid by an employer by way of an extra superannuation contribution. In particular, an increase in superannuation contributions by an employer could not be regarded as part of an employee's ordinary rate of pay or an allowance payable to an employee.
[68] The amount of normal weekly earnings calculated in accordance with the formula in sub-section 8(1) turns primarily on what is meant by an employee's "average hourly ordinary time rate of pay" and "any allowance payable to the employee ... in respect of his or her employment" during the relevant period. Sub-section 9(1) provides that the relevant period is the last period of two weeks before the date of the injury and during which the employee was continuously employed by the Commonwealth.
[69] The normal weekly earnings of an employee can be adjusted, if the minimum amount payable to an employee, would have increased if he or she had continued in employment, because of an increase in salary, wages or pay or by way of an increment in a range of salary, wages, or pay applicable to the employee. This is the effect of sub-section 8(6). Account must also be taken of changes in the minimum amount per week payable in respect of a class of employees (including the employee concerned) if the change results from
- "(a)
- the operation of a law of the Commonwealth or of a Sate or Territory; or
- (b)
- the making, alteration or operation of an award, order, determination or industrial agreement, or of the doing of any other act or thing under such a law".
[70] As the 3% productivity bonus came into effect after Colonel Hammerton had retired, I do not look at his normal rate of pay during the relevant period but at sub-sections 8(6) and 8(9). Can that productivity bonus be described as salary, wages or pay within the meaning of sub-section 8(6) or does it come under sub-section 8(9)?
[71] Looking first to sub-section 8(6) it is framed in terms of the "the amount per week payable to an employee". On its face the words "payable" to the employee indicate that what is meant is money paid to an employee and not money paid on behalf of an employee. If that is so, then a productivity bonus which is not paid to an employee could not be taken into account. That this is the proper interpretation is supported by the specific reference to salary, wages and pay in paragraph 8(6)(c). Colonel Hammerton does not come within paragraphs 8(6)(a) or (b).
[72] The words "salary" and "wages" were considered at length by the Tribunal in relation to whether compensation payments could be characterised as "salary" or "wages" for the purposes of the Superannuation Act 1976 (see Re McLennan and Commissioner for Superannuation [1990] AATA 301; (1990) 12 AAR 586 (Deputy President Forgie, Senior Member Beddoe and Mr Horrigan, Member)). I will not repeat that consideration at pages 595 to 598 of the report but adopt its main conclusions. The first is that the distinction between the words "salary" and "wages" is blurred (see Federal Commissioner of Taxation v J Walter Thompson (Australia) Pty Ltd [1944] HCA 23; (1944) 69 CLR 227 per Latham CJ at pages 233-234).
[73] The second relates to
"What may be described as the 'essential features' of a salary were considered in Re Shine; Ex parte Shine (1892) 1 QB 522 where the Court of Appeal (Lord Esther MR, Bowen LJ and Fry LJ) was considering a provision in the Bankruptcy Act 1883 (UK) enabling a court to order that any part of a bankrupt's salary or income be paid to the trustee in bankruptcy who would then apply it in accordance with the Court's direction. Bowen LJ said that '"salary", I think, must mean a definite payment for personal services arising under some contract, and (to borrow an expression of my brother Fry) computed by time' (page 529). Fry LJ was more expansive when he said at page 531 'Whenever a sum of money has these four characteristics - first, that it is paid for services rendered; secondly, that it is paid under some contract or appointment; thirdly, that it is computed by time; and fourthly, that it is payable at a fixed time - I am inclined to think that it is a salary, and not less so because it is liable to determination at the will of the payer, or that it is liable to deductions. I do not mean to say that that is a complete definition of "salary", or that it includes every kind of salary; but I think that, whenever these four circumstances concur, the payment is a salary.'" (McLennan, page 595)
[74] The third relates to the character of certain benefits enjoyed by employees. The relevant passage is at 596 to 597 of the McLennan report:
"... London County Council v. Henry Boot and Sons Ltd (1959) 3 All ER 636 dealt with a building contract which provided that if wages payable for labour increased above, or decreased below, the rates in force at the date of the tender, the amount payable to the contractor would increase or decrease correspondingly. Under an annual holidays scheme and a public holidays scheme operated under agreement between the associations of employees and the trade unions each workman was credited by his employer (in this case the contractor) with a weekly sum. He was not credited with any money but by having a card stamped with stamps which the contractor purchased from a management company. The amount credited to a person would be paid by whoever was his employer (whether or not it was the contractor) at the time he took his holidays and the management company would reimburse that employer. During the term of the building contract, the credits were increased and the contractor claim this as an increase in wages and so payable as an additional amount under the contract. Viscount Simonds, with whom Lords Radcliffe, Cohen and Keith of Avonholm agreed, said that there was 'no doubt that what the workman gets from the operation of the holidays agreements is a benefit to him. It might, perhaps, be loosely called part of his remuneration. But to me it seems an essential element in a "wage" that it should be paid to the workman for work done by him, and it is just this element which is lacking in the holiday credit. It is neither paid by the employer to him nor related to the work which he does for the employer. I would say emphatically that it would not occur to an employer, being asked what wages he paid his workmen, or to a workman, being asked what wages he was paid, to refer in his answer to the holiday credits. They might, indeed, say that, in addition to his wage, he got the benefit of the holiday credits. But that would no more be a wage than would the benefit of a payment by the employer to a pension, superannuation, or sick fund.' Lord Denning said at pages 640-641: 'The case turns on the meaning of the phrase in the rise-and-fall clause: "the rates of wages payable for any labour employed in the execution of the works." Some things are clear enough. This phrase includes the standard rate of 3s. an hour (or whatever the figure may be) payable for work done by the men. If that is increased, the builder can get the increased cost from the appellants. So, also, it includes the rates payable to apprentices, youths and women for their work. And it includes the rates payable for overtime. But it does not include such payments as tool allowances, travelling allowances or the employer's contribution to an insurance fund or a superannuation fund. The reason is because those are not payments "for labour". They are, it is true, payments to or for the benefit of a workman - and maybe they are payments made under the contract of service - but they are not payments for work done by him. The phrase "labour employed" in the clause does not, to my mind, mean "labourers employed". It means "labour done by workmen" employed in the execution of the works. So interpreted, it is clear to my mind that the phrase does not include the cost of these holiday stamps. They are not payable for work done."
[75] The final aspect of the McLennan decision to which I shall refer is that in which it said:
"In a more recent Australian case, Terry Shields Pty Ltd v. Chief Commissioner of Pay-roll Tax (1989) 17 NSWLR 493, Lee CJ considered section 3 of the Pay-roll Tax Act 1971 (NSW) which defined wages upon which pay-roll tax is payable as '... any wages, salary, commission, bonuses or allowances ... paid or payable in cash or kind'. The issue in the case was whether the provision by an employer of the use of a motor vehicle for the use of the employee was within the definition of 'wages' and 'salary', Lee CJ said at page 501 '... I am of the view that the definition of "wages" in the Act is not intended to attribute to the words of "wages, salary" used in the definition a meaning other than their ordinary meaning and that the meaning is one which contemplates an agreement between employer and employee that an agreed amount of money shall be paid as wages. The definition of "wages", as I have said, in using the words "paid or payable (... in cash or in kind)" in no way alters the meaning of the remuneration for the work done by the employee."
[76] The result of these cases is that to be salary or wages, an amount must at least be an amount of money actually paid or payable by an employer to an employee for labour or personal services. The payment is made pursuant to an agreement between the employer and the employee. Looking at sub-section 8(6) of the 1988 Act with which I am concerned, I have concluded that this is the meaning of "salary" and "wages" which I should adopt. This is not only because it seems to be their normal meaning but also because the sub-section makes it quite clear that it is the amount actually paid or payable to an employee and not on his or her behalf or for his or her benefit and actually received by that employee. So, for example, it speaks of the "amount per week payable to an employee" (emphasis added) and to the "receipt by the employee" (emphasis added) of an increase in salary or wages.
[77] I have not overlooked the word "pay". Its ordinary meaning is that of "payment, as of wages", "wages, salary or stipend" (Macquarie Dictionary). Taken in the context in which it appears and the company which it keeps with "salary" and "wages", I cannot interpret that to mean anything other than an amount paid in money to an employee by an employer pursuant to an agreement between them and in return for the employee's labour or services.
[78] The productivity bonus does not come within the concept of salary, wages or pay. It is not paid to Colonel Hammerton and is not received by him. It may be paid for the ultimate benefit of employees in the class to which Colonel Hammerton belonged but does not amount to salary, wages or pay. This mirrors the situation in the case of London County Council v. Henry Boot and Sons Ltd to which I have referred above (see paragraph 67).
[79] Does the productivity benefit come within sub-section 8(9)? On its face, that sub-section appears wider than sub-section 8(6) for it speaks of the amount "payable in respect of employees included in a class" (emphasis added) and not simply payable to an employee in respect of his or her employment. The words "in respect of" have been said to have the "... widest possible meaning of any expression intended to convey some connection or relation between the two subject matters to which the words refer." (Trustees Executors and Agency Co Ltd v Reilly [1941] VicLawRp 22; (1941) VLR 110 at 111 per Mann CJ). While bearing that in mind, I must also look at the sub-section in its context. All the provisions of section 8 link in with the notion of NWE and that in turn is dependent upon time among other matters, the employee's ordinary rate of pay. Sub-section 8(6) focusses, in effect, upon how the minimum amount payable to the employee could have varied because of particular events that could have occurred by virtue of an employee's employment with the Commonwealth. Such matters as precise scales of salary and increments by virtue of age may be unique to employment in the Commonwealth and it is these particular features to which, in general terms, sub-section 8(6) has regard. Sub-section 8(9) focusses upon the way in which the minimum amount payable to the employee could have varied because of events extraneous to, but affecting, the employee's employment by he Commonwealth i.e. by operation of law or an award perhaps having a wider impact than those matters referred to in sub-section 8(6) but still having an effect upon a person in the Commonwealth's employment. An example might be an order made by the Australian Industrial Relations Commission which affects employees generally and regardless of who their particular employers may be.
[80] A productivity benefit is, on a wide interpretation, paid "in respect of employees included in a class of employees" to which Colonel Hammerton belonged. Sub-section 8(9), however, narrows the interpretation which the words "in respect of" would otherwise be given. It narrows it by linking it back to the NWE. The NWE rise or fall according to the tenor of the change. NWE does not acquire a particular meaning for the purposes of sub-section 8(9) but must be given a meaning that accords with that it is given in the remainder of section 8 and, in particular, in sub-section 8(1). An essential feature of sub-section 8(1) is that NWE is based on hourly ordinary time rate of pay, average number of hours worked and any allowances paid (other than those payable for special expenses incurred in respect of the employment). I have already decided that "pay" must equate with wages and salary paid to an employee (see paragraph 77 above). It is also clear from the words of sub-section 8(1) that any allowance taken into account must be payable to the employee and not on behalf of the employee. There is no room in the concept of NWE in sub-section 8(1) for money payable on behalf of an employee. As sub-section 8(9) is so clearly linked with the concept of NWE in sub-section 8(9) an interpretation which is inconsistent with sub-section 8(1) cannot be adopted. Therefore, I find that the variations in "the minimum amount per week payable in respect of employees" in sub-section 8(9) must be read as a variation in the amounts payable to employees in the class of employees. Therefore, I do not consider that I can read sub-section 8(9) so as to include the 3% productivity bonus. It is not an amount paid to an employee although it certainly would be for his or her benefit.
Decision
[81] I would normally remit this matter to the respondent to calculate the amount of compensation payable to Colonel Hammerton. Should there be difficulties in doing so, I would prefer that the parties be able to return directly to the Tribunal rather than go through a new review process. Consequently, I will adjourn the matter to enable the parties to reach agreement on the calculations if they are able or, if they are not, to come back to the Tribunal for a decision on that aspect.
[82] For the reasons I have given I
- 1.
- set aside the decision under review;
- 2.
- substitute a decision that:
- (1)
- the respondent is liable to pay compensation to the applicant in accordance with section 20 of the Safety Rehabilitation and Compensation Act 1988; and
- (2)
- in calculating the amount of compensation payable, the respondent is:
- (a)
- to take account of the amount of pension actually received by the applicant from time to time and to disregard the amount of the pension which he would have received had he not commuted part of his pension pursuant to section 24 of the Defence Force Retirement and Death Benefits Act 1973; and
- (b)
- to take no account of the 3% productivity bonus; and 3. adjourn further consideration.