Nette v Howarth

53 CLR 55

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(Judgment by: Evatt J, McTiernan J)

Between: Nette
And: Howarth

Court:

Judges: Rich J
Starke J
Dixon J

Evatt J
McTiernan J

Subject References:
BANKRUPTCY
Superannuation fund
Contributions by bankrupt
Refund in lump sum
Capital receipt
Property divisible amongst creditors
Protection by State statute

Legislative References:
Superannuation Act 1916 (NSW) No 28 - ss 38, 88
Bankruptcy Act 1924 (Cth) No 37 - s 4; s 6; sub-s 60(1); sub-s 91(1); s 101

Hearing date: 29 March 1935, 1 April 1935
Judgment date: 30 April 1935

Melbourne (heard in Sydney)

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Judgment by:
Evatt J
McTiernan J

The first question for decision is whether a sum of money which is payable to the bankrupt under s. 38 (1) of the Superannuation Act 1916-1930 of New South Wales is "pay, pension, salary, or wages" under the proviso to s 101 of the Bankruptcy Act. The moneys as to which the question arises are a lump sum equal to the amount deducted by the Crown from the salary of the bankrupt under s 20 of the Superannuation Act of the State, and paid by it as his contribution to the fund established by the Act to provide pensions on retirement, and other benefits to contributors who cease to be members of the public service. Contributions are made to the fund by the Crown as well as by employees. Sec 38 (1) is in these terms:

"Where a contributor resigns or is dismissed or discharged from the service of an employer, there shall be paid to such contributor a lump sum equal to the contributions paid by him under this Act (but without interest), irrespective of the cause of such resignation, dismissal, or discharge."

The category in the proviso to s 101 is more limited than that in the principal part of the section. The word "pay" includes the remuneration granted to the holder of a rank or office in the case where he is relieved from the actual performance of the duties of the office. In this sense it includes the half-pay of a military officer. A characteristic of a payment which answers the description "pay" is that the payee receives it on account of the occupancy of some office, rank or employment. The payment to which the bankrupt is entitled lacks this characteristic. His title to it accrues upon his resignation from office. As distinguished from "pay" the word "pension" describes a payment to a person who has retired, in consideration of past services. While this may not be an exhaustive definition, it is impossible to say that the refund of the bankrupt's contribution, which is made because he does not become entitled to a pension under the Superannuation Act, is a pension.

Nor is the lump sum now in question "salary" or "wages." It is true that it is made up from deductions from his salary. But these payments are compulsory contributions made by him out of his salary. He is not entitled to receive the moneys so paid from the Crown as arrears of salary due and payable for his services. These moneys having become by force of the statute his contributions to the superannuation funds, he is entitled to a refund of them in their character as contributions. It follows that the lump sum to which the bankrupt is entitled is not "pay," "pension," "salary" or "wages" within the proviso.

The next question is whether this payment is within the wider category in the principal part of the section. Although it is a single lump payment, it would not be novel to regard it as within the category of payments which devolve upon the official receiver, subject to a provision similar to s. 101. (Cf. In re Lupton; Ex parte Official Receiver.) ^[F17] The category in the principal part of s. 101 is "pay, pension, salary, emoluments, profits, wages, earnings, or income." The payment now in question, having the characteristic of a reimbursement or refund of the bankrupt's contributions to the State Provident Fund, established under the Superannuation Act of the State, cannot be regarded as pay, pension, salary, emoluments, profits, wages, or earnings. But we think it is "income" within the meaning which that word bears in s. 101. (Cf. Stuart-Robertson v Lloyd.) ^[F18]

We are not satisfied that the word "income" is there used as the antithesis of capital receipts. In any event, the money is not paid in consideration of the bankrupt's retirement from office. It is not arrived at by capitalizing income. It was deducted from his salary for the purpose of being applied towards providing a pension, and, this purpose having failed, it is restored to him. But it is not a capitalization of arrears of salary. It is the bare equivalent of the total deductions made from his salary. It is a return to him by one payment of income which he earned but did not enjoy.

We agree with the decision of Judge Lukin that this payment is one of the benefits which the State Parliament intended to protect by s. 88 of the Superannuation Act 1916. That section is in these terms:

"Pensions and other benefits under this Act shall not be in any way assigned or charged or passed by operation of law to any person other than the pensioneror beneficiary, and any moneys payable out of the Fund on the death of an employee or beneficiary shall not be assets for the payment of his debts or liabilities."

But, in the view that the benefit payable to the bankrupt is "income" within the intendment of s. 101 of the Bankruptcy Act, a conflict arises between that section and s. 88 of the Superannuation Act 1916 of the State. Section 101 is a valid enactment with respect to bankruptcy, and its provisions must prevail. But the provisions of the statute are material matters for the consideration of the Court of Bankruptcy in deciding how much of the benefit to which the bankrupt is entitled should be ordered to be distributed amongst his creditors.

In our opinion, the appeal should be allowed and the matter remitted to the Court of Bankruptcy, so that it may act in accordance with the provisions of s 101.

Moverley, for the appellant.

O'Sullivan (with him Hidden), for the respondent.

Solicitors for the appellant, Clive Clarke & Co

Solicitor for the respondent, V. M. Pike.