Austin & Anor v Commonwealth of Australia

[2002] HCATrans 234

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Melbourne  No M10 of 2001

B e t w e e n -

ROBERT PETER AUSTIN

First Plaintiff

KATHRYN ELIZABETH KINGS

Second Plaintiff

and

THE COMMONWEALTH OF AUSTRALIA

Defendant

GLEESON CJ
GAUDRON J
McHUGH J
GUMMOW J
KIRBY J
HAYNE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 20 JUNE 2002, AT 10.05 AM

(Continued from 19/6/02)

Copyright in the High Court of Australia

GLEESON CJ:   Yes, Mr Nettle.

MR NETTLE:   May it please the Court.  There are five matters and I have 15 minutes in which to deal with them.  The first is an answer to Justice Hayne’s question asked yesterday as to whether one could say by reason of the Tasmanian scheme that there was at least in existence as at the date of the passage of the Constitutionally Protected Funds Act at least one fund, according to our analysis, of the meaning of “fund” to which section 7 of that Act would have applied, and the answer, your HonourS, is yes.  May we hand up to the Court copies of the Judges’ Contributory Pensions Act 1968 and of Part III of the Public Account Act 1986 of the State of Tasmania.

The sections of the Judges’ Contributory Pensions Act are 4 and 9 and they have the effect of establishing a fund into which contributions are to be paid and they direct that the fund is to be held upon trust in accordance with Part III of the Public Account Act.  Section 13 of that Act, in particular, subsection (1) and (6)(b) are apposite.  The result of all of that is that that fund, to that extent, is the same as the South Australian State Superannuation Fund which was the subject of the decision of this Court in the South Australian Superannuation Trust Case.

In the result, that fund is what we have called “a real fund”.  That fund is a fund of the kind which would be constitutionally and compositionally capable of generating income.  Indeed, the Act expressly provides for interest in the result, according to our analysis, of the meaning of Part IX of the Income Tax Assessment Act.  Part IX of the Income Tax Assessment Act would have applied to that fund but for the passage of section 271A.

It follows that, on our analysis, that fund is one to which section 7 of the Constitutionally Protected Funds Act would have applied on the date of the passage of that Act. So that, in short, there was in existence, as well as a potential for, a fund for which the Constitutionally Protected Funds Act had real work to do on the date on which it was passed and the real work which it had to do was to take the Tasmanian scheme into the realm of constitutionally protected to guard against the operation of section 114 upon the income of that real fund being property of the State.

KIRBY J:   That has the merit of ensuring that the Act does not completely misfire, on your construction.

MR NETTLE:   Correct.

KIRBY J:   It has the demerit of creating a second class of anomaly for the treatment of judges, Federal judges, Tasmanian State judges and the rest State judges and Territory judges.  It is not a very happy outcome.  It may be that that is what the law requires, but it does point up the anomaly that is then produced, does it not?

MR NETTLE:   I should say to your Honour – and you will see this, no doubt, when you read the provisions – that the judges pension scheme in Tasmania is such that there is a 5 per cent contribution required which yields a 50 per cent pension.  In addition, one may pay top-up amounts, if I may so describe them.  It is only those amounts which are paid into the fund which are the subject of the trust to which I have referred, otherwise the Tasmanian judges are in the same position as other State judges.

Your Honour is, with respect, correct.  It creates a difference between the position of Federal judges and State judges, but there is not that further dimension of difference, effectively, between Tasmanian judges and other State judges.

Just on the question of the Federal judges, can I say a second point.  Yesterday I put two arguments on the construction analysis, that the defined benefit member and the “accrued to” analysis were as much applicable to Federal judges as they were to State judges, and I put that on the basis that Federal judges are dealt with under the general Superannuation Contributions Tax Assessment Act and the application to the Commonwealth of that Act.  That was, I think, now incorrect, for the reason that section 19 of the Commonwealth Judges Pensions Act ‑ copies of which you do not have in that material, I think, but nonetheless, hopefully will have close to hand – provides its own definition for Federal judges of what are the contributed amounts.

You will remember, no doubt, that in section 8 of the general Superannuation Contributions Tax Assessment Act surchargeable contributions were calculated on contributed amounts on defined benefits members, but in order that there be the ability to calculate, it had to be shown, first, that the member was a defined benefits member and, secondly, that the benefit had “accrued to”.  I had put the point that that was as much applicable to Federal judges as it was to State. 

In contradistinction to the definition which is used in the general Act, section 19 gives its own definition and it is not dependent upon either conception of “defined benefit member” or “accrued to”.  It provides without reference to either of those terms that the surchargeable contributions of the Federal Judge shall be calculated in accordance with the formula there set out.

I guess I am bound to say, your Honour Justice Kirby, that that creates a further difference between Federal and State, but only this difference:  in the case of Federal judges, the position is that they are to some extent treated like members of funds to which contributions are paid with the result that their pension is to some extent actuarial reduced, leaving them with a pension of approximately 51 per cent, rather than the 60 per cent to which otherwise they would have been entitled.

GUMMOW J:   Mr Nettle, what you have just said about the distinction of the Chapter III judges, does that impact upon both your construction arguments?

MR NETTLE:   Only upon the defined benefit member and the “accrued to” argument, your Honour.  Both of those go, but the other point remains.

GUMMOW J:   What is the other point?

MR NETTLE:   The general construction point.  It is only the defined benefit member and “accrued to” point which are gone, and the only point about those which is gone is their application to Federal judges as much as to State judges.  The arguments remain, in both cases, in their application to State judges.

GUMMOW J:   Yes, I understand.

MR NETTLE:   The third point is in answer to Justice McHugh’s question yesterday about AC Television.  The point which we take your Honour to have referred to is dealt with in Australian Capital Television v The Commonwealth 1992 177 CLR at page 108.  First in the judgment of Chief Justice Brennan at pages 163 to 164 and, secondly, in the judgment of Justice McHugh at pages 242 to 244.  The point which we perceive, with respect, to have been made there is that there was discrimination against the State notwithstanding that ex facie the discrimination was in the first place directed at something else.  It had the effect of discriminating against the State, and that was sufficient to attract the operation of the Melbourne Corporation doctrine on the second leg.

The fourth point is to come back to something I left unfinished yesterday with his Honour Justice Kirby, which is the Hatter point.  Might we hand up to your Honours, in addition to the copy of Hatter, which you have already which is taken from a down load from the Net, the lexis‑nexus version which is better because it has the pages which will exist once it is ultimately recorded in the United States Supreme Court Reports, whereas the version that you have notes no pagination which will be preserved anywhere.

At page 10 of 17 of the print, might we direct the Court’s attention to what was said at page 572 of the United States report.  It is the third full paragraph of that page:

The Social Security tax is a different matter.  Respondents argue that the 1983 law imposing that tax upon then‑sitting judges violates the Compensation Clause, for it discriminates against judges in a manner forbidden by the Clause, even as interpreted in O’Malley, not Evans . . . After examining the statute’s details, we agree with the judges that it does discriminate in a manner that the Clause forbids.  Four features of the law, taken together, lead us to this conclusion . . . 

Second, the law, as applied in practice, in effect imposed a new financial obligation upon sitting judges, but it did not impose a new financial burden upon any other group of (then) current federal employees.

The contrast, if I may interpolate, being between the Federal judges, on the one hand, and the general class of persons which was the subject of the social security contributions legislation.

KIRBY J:   But this is on sitting judges, whereas this legislation is prospective.

MR NETTLE:   Your Honour is quite right, but it is the point of principle rather than the application which I am seeking to extract from this to show how a functionally similar distinction between the way in which two classes are treated translates into the case here.  Could I go to the very bottom line of the page:

The sole justification, according to the Government, is one of “equaliz[ing]” the retirement-related obligations that pre-1983 law imposed upon judges with the retirement-related obligations that pre‑1983 law imposed upon other current high-level federal employees . . . Thus the Government says that the new financial burden imposed upon judges was meant to make up for the fact that the judicial retirement system is basically a noncontributory system –

I pause to interpolate.  Thus in this case it is said by the government that the imposition upon the State judges is said to make up for the fact that their employer cannot be subjected to tax as a provider.  I jump over a paragraph and go to the next:

More importantly, the judicial retirement system is noncontributory because it reflects the fact that the Constitution itself guarantees federal judges –

I stop to interpolate.  Of course, that is not the case, relevantly, here, but what is important is that there is a constitutional guarantee which in this Hatter case is being sought to be got around by passing discriminatory legislation against judges.  I drop past about six lines: 

The 1983 statute consequently singles out judges for adverse treatment solely because of a feature required by the Constitution to preserve judicial independence. At the same time, the “equalization” in question takes place not by offering all current federal employees (including judges) the same opportunities but by employing a statutory disadvantage which offsets a constitutionally guaranteed advantage.

I drop to the next paragraph, first line: 

Nor does the statute “equalize” with any precision. 

Your Honour Justice Kirby, if I can go back to the passage just in the middle that I read there: 

The 1983 statute consequently singles out judges for adverse treatment –

I would make these submissions in answer to the question put to me yesterday. First, this Act does single out the State judges for adverse treatment in the fashion that we have identified. Secondly, the equalisation is sought to be justified in our case on the basis that the Commonwealth cannot treat the State employer provider in the way that it treats other employer providers. Thirdly, and critically, the prohibition against the Commonwealth treating the State employer provider like other employer providers is a constitutionally guaranteed prohibition in section 114. In the result, what is sought to be done in this case, in our case, is to avoid the constitutional guarantee of section 114 by singling out State judges and discriminating against them in a way by treating them in a fashion wholly different to the way in which other relevant employees are treated. It is submitted as a matter of principle on all fours with the analysis in the Hatter Case. 

Secondly, if I may, could I ask the Court to turn to what was said by Supreme Court of Canada in R v Beauregard, which you will find in tab 24 of the plaintiffs’ materials, grey volumes.  Your Honours, I will go if I may straight to page 77.

KIRBY J:   These are matters of detail. Could these not be put in a note? I think it is more useful for you to deal with section 55.

MR NETTLE:   If your Honour has them in a note already, may it please.

KIRBY J:   Speaking for myself, I had the same question as Justice Gummow asked you.

MR NETTLE:   Your Honour, may I go directly to section 55.

GUMMOW J:   I would prefer you to take us to page 77, actually.  You were taking us to page 77 of Beauregard.

MR NETTLE:   If the Court pleases.  The point which is being made here is that because the liabilities which were being sought to be imposed upon the judges were the same sorts of liabilities as were being imposed generally upon others under this regime of legislation, there was no discrimination which could be regarded as unconstitutional.  What is important is that the observation which follows is that were it different, had it been the case that the legislation singled out the judges and treated them differently to the other relevant employees within the class of which the legislation was aimed, then it would have been unconstitutional.  That fits, it is submitted, very much with the analysis in the first leg of the Melbourne Corporation doctrine to which reference was made yesterday.  May I make these observations.  At the top of page 77, left column:

These two liabilities are, of course, general in the sense that all citizens are subject to them whereas the contributions demanded by s. 29.1 of the Judges Act are directed at judges only.

I will leave out the parenthetical.

Conceding the factual difference that s. 29.1 of the Judges Act is directed only at judges, I fail to see that this difference translates into any legal consequence.

Could I go to line d, about halfway down the column:

It is very difficult for me to see any connection between these essential conditions of judicial independence and Parliament’s decision to establish a pension scheme for judges and to expect judges to make contributions towards the benefits established by the scheme.  At the end of the day, all s. 29.1 of the Judges Act does, pursuant to the constitutional obligation imposed by s. 100 of the Constitution Act, 1867, is treat judges in accordance with standard, widely used and generally accepted pension schemes in Canada.

GUMMOW J:   Anyhow, you rely on the last paragraph.

MR NETTLE:   I do:

If there were any hint that a federal law dealing with these matters –

The contrast, it is submitted, is between what is said at line f, that is to say, in accordance with standards applicable generally, and what is said at line i where there is a singling out and discriminating differently.  It is submitted that, again, is exactly on fours with the facts of this case.  The State judges and other members of State constitutionally protected funds are not treated in accordance with the generally applicable standard.  The generally applicable standard is to tax the provider, or if the provider is not taxed, not to tax at all, as would be the case, say, with the chief executive of a private corporation who has an undefined non‑contributory benefits scheme guaranteeing him or her a 60 per cent pension upon retirement.

KIRBY J:   But the foundation for the argument in Canada was the constitutional guarantee which extends to provincial judges as well as ‑ ‑ ‑

MR NETTLE:   There is no doubt there is no difference, but I seek to take that and recognise there is no constitutional guarantee of that kind for judges in this country.

GUMMOW J:   Well, no Federal guarantee.

MR NETTLE:   Apart from Federal judges.

GUMMOW J:   There are various provisions in State Constitutions which can only be changed by special procedures.

KIRBY J:   Specifically in New South Wales.

MR NETTLE:   If your Honour pleases. I was going to go on to say that. There is a constitutional guarantee here at work, namely, section 114, which guards the States against tax on its property. It is to avoid that constitutional guarantee, that is to say, that guarantee which stops the Commonwealth treating the State provider as it treats other providers, that the Commonwealth seeks to get around by imposing the burden discriminately on the State judge.

GAUDRON J:   And possibly a guarantee emanating from section 106, Mr Nettle.

MR NETTLE:   I am obliged to your Honour. May I move to section 55 very quickly. It is dealt with in paragraphs 89 to 95 of our submissions. The principles are, with respect, well known and well understood. In order to decide whether or not there have been two subjects of taxation dealt with in the one enactment one must test the matter by reference to common understanding and general conceptions and this because one is dealing with matters which are ordinarily within the political realm.

One throws into the pot all the matters which are properly the subject of the Act and also the thing which is questionable and ask whether there is, as a result, one class of thing, or properly understood on the basis of common understanding and general conceptions there are, indeed, two.  Applying the standard of the common man or woman, the question is would a tax upon contributions which is levied upon a provider or would a tax upon notionally accrued benefits which is levied upon a provider be regarded as being the same subject of taxation as a tax which is imposed upon the member for no better reason than there has been an actuarial calculation carried out about benefits which are supposed to have accrued.

The answer, it is submitted, is clearly, no.  One is a tax upon providers in respect of contributions which they either have made or it is supposed would need to make in order to fund an obligation which they owe to a member.  The other is a tax, at best conceived upon benefits which may possibly be received.  The two, it is submitted, are totally different.  The one is a tax upon contributed amounts, or notionally contributed amounts, the other is a tax upon benefits or is a tax upon death or is a tax upon income, but what it is not is a tax upon amounts contributed by the man or woman that is being taxed.  It is submitted, therefore, it must follow, as a matter of common understanding and general conception, that there are two subjects of taxation.

GAUDRON J:   I wonder if the surcharge in the first place is really a matter of taxation or a matter of reformulating deductions in any event, in which event there may not be two subjects of taxation?

MR NETTLE:   It is sought to be described as a surcharge historically because there had been one of the core promises that there would be no increase in tax in that year of income.  Therefore, to get around the political embarrassment, the consequence of that had had to be described by something else and it was called a surcharge.  If your Honour looks, however, within the Act you will see that variously it is referred to as a tax because the Democrats insisted that it be so described, presumably in order to keep the Lower House honest. 

It appears and it is submitted that it is in truth a tax, however described, but what it is is not a tax of the same nature when characterised according to common understanding and general conceptions as the tax which is sought to be imposed upon the members of constitutionally protected funds.  Your Honour had it yesterday, it is submitted, when you suggested, with respect, that it may be seen as being a tax, on one view, upon death or at least as a tax upon benefits which may be reaped by respect to death ‑ ‑ ‑

GAUDRON J:   What I am querying is whether the surcharge other than on ‑ I think it turns out to be the constitutionally protected funds or in my reference to the constitutionally protected funds, is a tax or simply a disguised politically clever way of disclosing the reduction of a deduction otherwise available?

MR NETTLE:   There is no doubt that the original imperative was to reduce deductions otherwise available.  As the Court saw yesterday, from the second reading speech, that was said to be the justification, to take away the excesses which were said to have arisen as a result of deductions under 82AAC and 82AAT ‑ ‑ ‑

GUMMOW J:   It runs into different years of income, I think.

MR NETTLE:   I am sorry, your Honour Justice Gummow?

GUMMOW J:   It runs into the significance of the different years of income.  The deductions made a long time ago.

MR NETTLE:   I see.  Indeed.  But it was sought to cut down the level of deductibility, in effect, by imposing a surcharge.  I mean, people who had the benefit of those deductions paid 15 per cent of tax going into the fund and paid 15 per cent of tax coming out of the fund, total roughly speaking, 30 per cent.  It was said these people are high income earners who should be paying something closer to the marginal rate which is about 50 per cent with the Medibank levy, therefore we will impose a surcharge above the tax threshold to make it more equitable for all Australians.

GUMMOW J:   But year by year of income?

MR NETTLE:   In the end, as it turned out, no.  It was not a tax upon income in the way it would have been by imposing a tax upon the pension benefit once it began to accrue and this for the reason, of course, that the government wanted the revenue up front.  We come back, if I may say so, to the question asked yesterday by Justice Kirby, “Why is there a distinction, why should it not be seen as an overall regime to get from members the benefits which they receive?”, and the answer is it is not to get the members’ benefits, it is to get revenue up front by way of an imposition upon the provider, to get it up front.  This is not a tax upon the pension as it accrues from time to time of the member after he or she retires.  This is the tax to get it up front and because it cannot be got from the provider, it is got from the member by the means which you have seen in the Constitutionally Protected Funds Act.

GAUDRON J:   I think the answer to my question, Mr Nettle, is that it is not necessarily a tax or a reduction of the deduction otherwise payable by an income earner but a tax of a superannuation provider.

MR NETTLE:   In its general application, yes.

GAUDRON J:   Yes.  So that it is distinct from reducing a deduction otherwise allowable?

MR NETTLE:   Your Honour, with respect, yes.  The general run is a tax upon the superannuation provider on the contributions which he or she has made or is taken to have made in order to fund a defined benefit.       The specific one here is a tax upon the member.

Your Honour Justice Gaudron does raise one further issue which is beyond the five that I said that I would mention and that is the question of whether by reason of the arbitrary and capricious nature of the way in which the matter is calculated it can properly be regarded as being a tax in accordance with the principles articulated in MacCormick.  That is a difficult case to make if only because of the sorts of considerations to which the Chief Justice referred yesterday when he spoke of the similarities as between the actuarial calculations used here and the actuarial calculations used generally in the superannuation industry and the life insurance industry.

Nevertheless, it is submitted, that whilst it might be acceptable, that there be such variances in life insurance and in superannuation when one is talking about benefits, it is wholly unacceptable when one comes to a compulsory exaction of a tax of this kind.  MacCormick demands, we submit, a greater degree of precision than the broad variations which are captured in paragraphs 82 to 88 of our written submissions before something will properly be regarded as the subject of the tax power.  Otherwise, it is so arbitrary, so capricious, that it cannot properly be regarded as the subject to the taxpayer and thus properly regarded as a tax.

Finally, back to section 55. In Mutual Pools the point was made by Justices Gaudron and McHugh that the prohibition upon dealing with two subject matters of tax in the one Act, or as in that case, of dealing with more than the subject of excise in one Act, cannot be got around by deeming something to be what it is not. The point is made in the judgment at page 469, the case being reported in 173 CLR 450. I am sorry, I said joint judgment of Justices Gaudron and McHugh. I should have said joint judgment of Justices Dawson, Toohey and Gaudron. At page 469, after making reference to MacCormick at line 4, their Honours continued at line 6:

It purported, contrary to the facts, to deem a person to be an owner of the land with the consequence that he became liable to pay land tax‑

making reference back to Waterhouse.  I go to the middle of the page

That case‑

that is to say Waterhouse’s Case ‑

is a difficult one but it illustrates the point that the Parliament cannot bring legislation within power by deeming facts to be as they are not or by deeming things to have a character which they do not bear.

Reference is made in the last two lines of the page to what was said by his Honour Mr Justice Starke in Resch.

GUMMOW J:   The question is, what is meant by fact?

MR NETTLE:   No doubt it is, your Honour, but we come to this in this case:  on the one hand, there are calculations of benefits by reference to contributions.  On the other hand, there is calculation of tax by reference to benefits that are deemed to have accrued because of some notional actuarial assumption, when as we know – putting aside whatever “accrued” means –nothing has yet come home and nothing necessarily ever will in respect of the surcharge which is being calculated.

That, it is submitted, is an exercise in deeming a fact which is not to be a fact which is for the sole purpose of making the two things that are being dealt with appear to be one subject of taxation rather than the two that have just been identified. Once you get to that point, it is submitted, it clearly is a contravention of section 55 because, although the fiction or the pretence through the deeming that there is one general subject of taxation being dealt with exists, it is one which is created by a deeming provision which pretends or deems that there is value in benefits which have accrued when they have not.

It would be otherwise if benefits really had accrued in the sense of coming home. Before then one might possibly say to put a tax on contributions made is functionally equivalent to put a tax upon the benefits which have accrued in the sense of coming home. But when nothing has necessarily or necessarily will come home, it is a false exercise, a deeming which takes the matter beyond section 55 to so define benefits accrued in terms of something which has not and never necessarily will come home.

KIRBY J:   You keep saying that, but the actuarial analysis would suggest and common experience confirm ‑ ‑ ‑

MR NETTLE:   That it might.

KIRBY J:   ‑ ‑ ‑ that in the ordinary case it will come home.

MR NETTLE:   No, that it might.

KIRBY J:   Let us be realistic.  It will come home in all but the unfortunate few who die early or do not live long enough to, as it were, overtake their up‑front payment.

MR NETTLE:   With respect, your Honour, I can think out of the last dozen Supreme Court judges that have retired in the State from which I come that there are three of them that have died within a few years of giving up the service.

McHUGH J:   I succeeded Justice Hutley on the New South Wales Court of Appeal.  He died within 12 months.

MR NETTLE:   One’s common experience and understanding is that unfortunately judges, presumably because of the workload, do not tend to last necessarily very long and certainly not long enough to get back all of the pension contribution benefit.

KIRBY J:   I do not think you should elaborate.

HAYNE J:   On that note you are sitting down are you, Mr Nettle?

GLEESON CJ:   Some of them do not even last until retirement.

MR NETTLE:   I mean it is an unhappy circumstance.  If I may so, your Honour, with respect, it just does not accord with experience and understanding that judges are going to go the 20 years or so which it takes to get back the pension which it has been assumed they will get.

KIRBY J:   It is a great argument for life tenure.  Keeping people busy.

MR NETTLE:   If your Honours please, those are our submissions.

GLEESON CJ:   Thank you, Mr Nettle.  Yes, Mr Solicitor for Western Australia.

MR MEADOWS:   May it please the Court, in light of what my learned friend has said, I can be relatively short.  Western Australia wishes to make three submissions today in addition to those which are contained in our written submissions.  The first of those is that on the basis of the argument put forward by my learned friend, not only does the Assessment and Collection Act and the Imposition Act infringe the discrimination limb of the Melbourne Corporation principle, but in its application it also infringes the impairment limb so far as it imposes a surcharge on State judges.  We also wish to draw attention to the implication ‑ ‑ ‑

KIRBY J:   How do you say it impairs their performance of their functions as judges?

MR MEADOWS:   No, we do not say it impairs their performance as judges.  What it does is to impair the capacity of the State to provide the services of judicial officers ‑ ‑ ‑

KIRBY J:   But how can we infer that?  I mean I know this is constantly stated, but I question the extent to which this surcharge is going to affect the capacity of States to secure appropriate people to judicial office.  In my opinion, it has not happened in the last two years.  I see no evidence of it having happened.

MR MEADOWS:   We can only rely on what is in the case stated, your Honour, and from the matters which are referred to in the case stated, as identified in the defendant’s submissions and in our submissions in paragraphs 28 to 33, the imposition of the surcharge tax does have an impact in relation to the second limb of the Melbourne Corporation principle. 

KIRBY J:   I could understand the argument that it is more difficult to recruit people who, at the threshold, will say, “Well, look, if I take this job, at a certain point of time, I may be up for $500,000 before I ever get a penny.”  I can understand that, but does that rise to the level of impairment of the State’s capacity to secure appropriate people as judicial officers? 

MR MEADOWS:   Well, not just to secure appropriate people, it is also to retain judicial officers.  If there is an incentive in this for judges to retire early, well, that impairs the capacity of the State to continue to provide a judicial service, and also one which is conducted by experienced judicial officers.  I will not take the Court through the particular paragraphs but, as I say, it is in paragraphs 28 to 33 of our submissions.  The nub of what we are seeking to say in this regard is, I would suggest, neatly encapsulated in what Justice Brennan said in State Chamber of Commerce and Industry v The Commonwealth (1987) 163 CLR 329 – the Second Fringe Benefits Tax Case – and what he had to say at page 362. 

Now, I would point out that his Honour was in dissent in this aspect of the case, although we would submit that what he said here is picked up by the Court in the Australian Education Union Case.  If I could take you to what he says at page 363, where he says: 

The existence and nature of the body politic depends on the attendance to their duties of the officers of the essential organs of government and their capacity to exercise their functions.  The emoluments which a State provides to the officers of the essential organs of government ensure or facilitate the performance by those organs of their respective functions, and a tax on a State in respect of the value of those emoluments is not merely a tax on an activity in which the State engages in the exercise of its powers; it is a tax on what is done to secure the continued existence and functioning of the government of the State. 

What we say here is that the tax which is imposed on the judges is an interference with the ability of the State to secure the continued existence and functioning of the judicial arm of government of the State.  That is because of the way in which the surcharge tax impacts on the emoluments which the State provides to its judges. 

Now, related to this submission is the submission which we put in paragraphs 34 through to 43 of our written submissions, and that is to draw attention to the implication which the Court has drawn from the Constitution about the inability of the Commonwealth to interfere with the State’s authority over its courts, the members of those courts, and the terms and conditions upon which the judicial officers of those courts are appointed.

Over a number of years and in a number of cases, this particular implication has been identified and it may well be an aspect of the Melbourne Corporation principle, although, in the context in which it is being considered, it has not been considered in the context of the Melbourne Corporation principle.  If one goes to what we say in paragraphs 38 and 42 of our written submissions, we draw attention to cases such as R v Murray and Cormie 22 CLR 437, what was said in Le Mesurier v Connor 42 CLR 481 at 495 to 496 and to what Justice Mason said in The Commonwealth v Hospital Contribution Fund 150 CLR 49 in his judgment at pages 61 to 62, where he noted that:

the Commonwealth Parliament has no power to alter the structure or organization of State courts –

and that the provisions of Chapter III do not disclose:

an intention to constrain the States’ freedom of action in the organization of their courts.

Along similar lines – and this is in paragraph 42 – I will not refer to the cases specifically, but they are set out in the footnotes to that paragraph.  It has been accepted that in investing State courts with federal jurisdiction, the Commonwealth Parliament must take the courts as it finds them.

In addition to that, we would draw attention to the judgments of the Court in Re Tracey; Ex parte Ryan 166 CLR 518 in the judgments of Chief Justice Mason, Justices Wilson and Dawson at page 547 and the judgments of Justices Brennan and Toohey at page 575. Similar sentiments recognising the autonomy of State courts from federal interference and the absence of legislative power on the part of the Commonwealth Parliament with respect to State courts other than for the purpose of investing federal jurisdiction were expressed by way of dicta in Kable v Director of Public Prosecutions 189 CLR 51. You will not often see the States referring to Kable for any support in a proposition which is put to this Court, but in this particular instance there are dicta in that case dealing with the autonomy of State courts.

Perhaps this is best encapsulated in what your Honour Justice Gaudron said at page 102 of that report, where your Honour said:

Once it is accepted that State courts are the creatures of the States and are constitutionally recognised as such, it follows that it is for the States and for the States alone to determine the appointment, tenure and remuneration of State judges and the structure, organisation and jurisdictional limits of State courts.  In that sense, it is correct to say, as it often is, that the Commonwealth must take State courts as it finds them.

McHUGH J: It is not merely that the Commonwealth must take State courts as they find them but section 106 of the Constitution continues in force the State Constitutions until they are altered in accordance with the State Constitutions. So, to that extent the existence of the State Constitutions with their judiciary and so on, are protected by the Constitution itself and the powers in section 51 are subject to the Constitution generally.

MR MEADOWS:   Quite so, and the passages to which I referred in Re Tracey made specific reference to section 106 in respect to the autonomy of the State courts and their immunity from interference from legislation on the part of the Commonwealth. We would see this as something which when aligned with the Melbourne Corporation principle would preclude the imposition of the surcharge tax in the way in which it is imposed on judges of State courts.

Before I go to the other issue that I wanted to raise, can I simply make the point that we would wish to stress that this case is not about the Superannuation Contributions Tax (Assessment and Collection) Act 1997 as it was enacted in its original form. It is not about the application of that Act to the States and the question whether if that Act did or does apply to the States as superannuation providers. It is not about whether, if it does all those things, it could do so validly, having regard to the provisions of section 114 of the Constitution, the Melbourne Corporation principle or any other relevant constitutional limitation.  Those issues are not raised by the case stated and are, perhaps, issues for another day.  In particular, we would submit that if those issues were at large in this case it would require the issue of a new section 78B notice directing attention to those issues.

The other matter that I wanted to address oral submissions on is in relation to the requirement that the States engage an eligible actuary in order to carry out functions for the Commonwealth in providing the information required for the imposition of the surcharge tax.  What the Assessment and Collection Act does, via sections 12(2), 9(4), (5) and (6), and Regulation 2L of the Assessment and Collection Regulations is to require that an eligible actuary perform the functions necessary to calculate the notional surchargeable contributions factor.  So, in order to comply with that requirement it is necessary for the State to either employ or engage the services of an eligible actuary which is defined to mean, “A fellow or a credited member of the Institute of Actuaries of Australia”, and it is so provided in section 38 of the Assessment and Collection Act.

In the Australian Education Union Case, 184 CLR 188, and particularly at page 232, the majority of the Court accepted that it was critical to the capacity of the State to function as a government to have the:

right to determine the number and identity of the persons whom it wished to employ, the term of appointment of such persons and, as well, the number and identity of the persons whom it wishes to dismiss . . . on redundancy grounds.

That is to say, it was recognised that a State’s capacity to control its own work force was critical to its functioning as a government.

So, that a law which directed a State to employ an eligible actuary or which directed that the State should require an eligible actuary in its employ to perform certain functions would be contrary to those principles recognised in the Australian Education Union Case.  The Assessment and Collection Act, in so far as it does require the States to either employ or engage an eligible actuary is invalid for that reason.  In this case, in the case of Victoria, they had to go out and engage the services of an independent actuary.

GAUDRON J:   That is in the stated case, is it?

MR MEADOWS:   It is.  It is referred to in the defendant’s submissions at paragraph 110 and paragraphs 119 to 120.  In the case of New South Wales where New South Wales does have an actuary – an eligible actuary – it effectively requires the State Actuary to perform these complicated functions in providing the information necessary to calculate the surcharge tax.  Another element of the Australian Education Union Case is, of course, that when you get to the higher levels of government it is said to be critical that the States should be able to determine not only the number and identity of the persons it engages but the terms and conditions on which they would be engaged.

As we point out in paragraph 18 of our submissions, the New South Wales Actuary is a person in the senior executive service of the New South Wales Government and would, in our submission, be a person who would fall within the category of a person at the higher levels of government.

McHUGH J:   Mr Solicitor, is there any reason why in this part of your argument you do not refer to Printz’ Case in the United States, or do you rely on it.  Printz’ is the case where the US Supreme Court held that Congress had invalidly enacted part of the Brady Hand Gun Violence Prevention Provisions which required the chief law enforcement officers in local jurisdictions to carry out checks, in effect, for administration of the Federal law and that was held to be invalid.

MR MEADOWS:   The reason that we have not relied on it, your Honours, is because we were not aware of it.

GUMMOW J:   Mr Selway relies on it.

MR MEADOWS:   Pardon?

GUMMOW J:   South Australia relies on it?

MR MEADOWS:   Yes, I know.  That is why it is not in our submissions but we certainly do rely on it.  There is no doubt that the States have to perform certain administrative functions in order to comply with general taxation legislation on behalf of the Commonwealth and there is no argument about that, but here you have to provide a specific service and to engage a person with specific qualifications and skills in order to really do the Commonwealth’s work.

So, we would say that the net result of all of that is that section 9(4), (5) and (6) and section 12(2) of the Assessment and Collection Act infringed the second limb of the Melbourne Corporation principle and are invalid to the extent that they require the States to engage or utilise the services of an eligible actuary.

KIRBY J:   Is there any clue in the case stated or the documents to which we can have access as to why the Commonwealth went around it this way instead of, say, providing some mechanism for the Federal Treasurer or an actuary engaged by the Commonwealth to do the work nationally?  Was this out of deference in some sense of deference to the State judiciary and the State administration that the Commonwealth is sensitive to such questions has left it to you to do it?

MR MEADOWS:   I cannot point to anything, your Honour.  We would rather ‑ ‑ ‑

KIRBY J:   It looks as though that is the reason that they have said, “Well, this is the State judiciary and therefore we will let the States do it themselves.”  And you are here complaining about it.

MR MEADOWS:   As far as I know, we cannot point to anything.  I am afraid we see it, to put it colloquially, as the Commonwealth picking our pocket, to do its own dirty work.

GLEESON CJ:   Mr Solicitor, has Western Australia enacted legislation similar to the New South Wales legislation that provides for a commutation of a pension?

MR MEADOWS:   Not at this time, your Honour.

GLEESON CJ:   So that a judge in the position of the first plaintiff in Western Australia would be obliged to pay the lump sum of $500,000‑odd upon retirement.

MR MEADOWS:   And from their own pocket.

GLEESON CJ:   From their own pocket and without any access to commutation or pension entitlements.

MR MEADOWS:   At this time.

GLEESON CJ:   Thank you.

KIRBY J:   And no statutory provision for interest, to cover interest either.

MR MEADOWS:   No, your Honour.

KIRBY J:   I think that has been provided in New South Wales.

MR MEADOWS:   No, no such provision.  May it please the Court.

GLEESON CJ:   Mr Solicitor for South Australia.

MR SELWAY:   If it please the Court, there are five matters beyond those in our written submissions that I wish to touch upon and then, time permitting, we will make a short comment about our written submissions.

The first comment is one where we are in agreement with my learned friend, the Solicitor for Western Australia.  In his first argument my learned friend, Mr Nettle, argued that there was no fund for judicial pensions, leaving aside Tasmania perhaps, with the effect that the Constitutionally Protected Superannuation Fund Assessment Act did not apply to judicial pensions.  Mr Nettle left it open at least as to whether the tax still fell upon the State under the SCT Act on the basis that the judicial pensions were an unfunded defined benefits scheme under that Act.

Your Honours, as to that we say, firstly, we make no submission on the question of the meaning of the word “fund”.  Second, we say in relation to this case stated it is unnecessary for your Honours to deal with the question of what happens if the Constitutionally Protected Superannuation Surcharge Acts do not apply.  Thirdly, we say if the point arose, South Australia at least would argue that the SCT Act would then be invalid in its application to judicial pensions, both because it was in breach of Melbourne Corporation and maybe section 114. As to the Melbourne Corporation, we would argue in that case that there would then be discrimination between unfunded private schemes which are not covered by the SCT Act and unfunded public schemes which on the definitions would appear to be. 

Secondly, we would argue that under section 16 of the SCT Act, which would then apply, there would be functions imposed upon the States which are even more onerous than the functions imposed under the Superannuation Surcharge Act in terms of administration.

What we say though, your Honours, is it is unnecessary to reach that point.  It is for another day.  But if the issue was to be dealt with, we say that it would be necessary to issue 78B notices.  In particular, those other States that are not here may well have an interest if they thought that they were liable for this tax going back some five years.

The second matter we wish to take your Honours to is to tab 9.7 of the attachments to the case stated.  That is the list of the constitutionally protected funds.  Your Honours have been particularly referred to the Victorian and New South Wales lists for obvious reasons.  I wanted to draw your Honours’ attentions to the South Australian, West Australian and Tasmanian lists.  Effectively, what happened after the SASFIT Case in 1992, it took a year or two to actually work out that that had been a bit of a victory for the States ‑ we did not think it was a victory at first instance ‑ but it appeared that it made the scheme relatively unworkable. 

The end result was that the option for constitutionally protected funds was put by the Commonwealth.  Some States did not pursue it with all their schemes, in particular, New South Wales, Victoria and Queensland reorganised most of their superannuation schemes to make them funded schemes and to take them outside of the constitutionally protected ambit.  So that for a couple of reasons, but most obviously that it gave the members the concessional tax treatment that was available if you had a taxed fund. 

KIRBY J:   Could I ask – I find this very helpful and I already indicated I found your written submissions helpful.  I am just a little worried as to whether it is going outside the stated case.  Is this stated in a text or do you understand there to be no objection to the Court proceeding ‑ ‑ ‑

MR SELWAY:   Could I perhaps say we take two positions.  A case stated certainly, but a case stated in a constitutional case has to be understood in the context of Gerhardy v Brown and that is to say that the Court has a broader context and can go outside the case stated.  Your Honours, we have put the cases on that proposition in footnote 27 of our written submissions, but the submission I am putting now is broadly the same as is in paragraphs 152 to 153 of the Commonwealth’s written submissions describing, if you like, the broader nature of some of the superannuation funds that are there.

It is unnecessary to go much further than to merely make the point that the superannuation fund that was the subject of the SASFIT Case is itself a constitutionally protected fund because it is the fund under the Superannuation Act 1988 which is dealt with in – it is one of the constitutionally protected funds in that Act. The only point of making this submission is so that your Honours will not think that the only funds dealt with as constitutionally protected funds are funds for judges, governors and such like. In South Australia the public service funds, and similarly in Western Australia and, I think, Tasmania, are also there. Similarly, it is not just the Tasmanian judges’ fund where there is a fund. In most of those employee ones, there is also a fund, though the fund does not contain employer contributions by and large. It is more likely to be employee contributions alone. The result is that those funds are called unfunded for the purposes of the SCT Act, even though there is a fund, because the employer does not fund them. It is the employee contributions.

The third point we wish to make is a qualification to our own written submissions and, if you like, an argument with the Commonwealth.  We would wish the Court to note that the Superannuation (Resolution of Complaints) Act 1993, Commonwealth, on our reading of it, gives a Commonwealth administrative appeal from decisions of the superannuation provider under the Constitutionally Protected Surcharge Assessment Act, under section 12 of that Act.

That appears to be an inadvertent result but it appears to be perfectly clear from the terms of the statute.  I do not need to take your Honours to it, but if I could just give your Honours the reference to section 3(2) and the definition of “superannuation provider” in that subsection, and also section 15(c)(a) of that Act.

Your Honour, that is contrary to paragraphs 23(f) and 25(c) of our written submissions where we say there is no appeal.  It is also contrary to paragraphs 117, footnote 212 of the Commonwealth submissions which suggest that there is only an appeal in relation to Western Australian and, I think, Queensland.  But as we understand the way that Act works there is an administrative appeal from a decision of the superannuation provider in providing the actuarial calculations to the Commonwealth.

Of course, that has ramifications as to the validity of the scheme.  If it was a State function, we would deny the Commonwealth could have an administrative review tribunal of a State function.  If it is a Commonwealth function, it assists the argument we put, which is that the Commonwealth cannot impose such a function, the Commonwealth arguing that it has not done so.

The fourth issue flows on from that.  In our submission, the superannuation provider in providing the information to the Commissioner under section 12 of the Assessment Act is also subject to review under the AD(JR) Act.  In our submission, the information provided is a decision, within the broad definition in that Act.  If it matters, it is a decision which does or can affect the rights of the members, and that can be seen in section 20(2) of the Assessment Act, which entitles the Commissioner to rely upon that information in an objection.

It is clearly a decision made under an enactment, namely section 12 of the Assessment Act, and we say, it makes no difference for this purpose that the function is imposed upon the State or its officials, and we refer to the Full Federal Court decision of Lamb v Moss (1983) 49 ALR 533 which your Honours will recall is a decision about AD(JR) review of State magistrates hearing Commonwealth committals. Your Honours, that analysis is contrary to paragraphs 115 to 117 of the Commonwealth submission, but nevertheless we say, on the face of it, the AD(JR) Act is applicable to that process.

The fifth thing we would wish to say, Your Honours, relates to the matter which your Honour the Chief Justice asked of my learned friend, Mr Nettle, yesterday of what legislative options were available to overcome the problem.  My recollection is that my learned friend said that there were “many” but he was somewhat coy as to identifying what they were.

GLEESON CJ:   He said there were “hundreds”, actually.

MR SELWAY:   Yes.  Your Honours, we are not quite so sanguine as my learned friend.  We say that there is no solution and that is because the premise upon which the Commonwealth legislation operates is false.  There are three fallacies within it.  The first, that the pension schemes are a mechanism for deferring income and thus avoiding tax.  That is the first premise upon which they operate.  Your Honours can see that at paragraphs 16 to 17 of their written submissions.  That is answered in various of the written submissions put, particularly by the plaintiff and Western Australia.

GLEESON CJ:   Well, that proceeds on the assumption that the best method of avoiding tax is not to derive income. 

MR SELWAY:   Yes. 

GLEESON CJ:   The most effective tax avoidance scheme is to die. 

MR SELWAY:   Yes.  With respect, your Honour, it is a nonsense.  Nevertheless, as we ask your Honours to note, it is there in paragraphs 16 to 17 of the Commonwealth’s submissions.  We have handed up to the Court a schedule headed, “Judicial Pensions v Income Tax”, which simply compares the dates at which judicial pensions were introduced in the various colonies in the Commonwealth and the dates of income tax.  Your Honours can see that, at least in Victoria and New South Wales, judicial pensions preceded income tax by some 40 years.  So clearly, there is a reason for judicial pensions beyond avoiding income tax and deferring income, and the arguments put by my learned friends that the real reason is to be found in separation of powers issues and such like probably have significantly more weight.  The second fallacy that the Commonwealth puts is that the economic and legal effect of promised future income is the same as vested current income. 

GUMMOW J:   Sorry, could you say that again? 

MR SELWAY:   The economic and legal effect of promised future income is the same as vested current income.  This cues back to your Honour Justice Kirby’s position about the actuary, that this is all basically the same.  Your Honours can see that at paragraphs 67 to 69 of the Commonwealth’s written submissions.  Again, one only has to think of the many examples that have been put in the last day or so to know that that is a nonsense.  The third fallacy is that a tax on a member of a fund is the same as a tax on the fund itself.  Your Honours can see that fallacy at paragraph 12 of the Commonwealth’s written submissions, and that was dealt with by my learned friend, Mr Nettle, yesterday. 

We say that each of those fallacies are untrue, and the discriminatory effect of this tax is a direct result of the fallacies.  Those fallacies cannot be overcome by a tax.  They could be overcome by doing what Victoria and New South Wales and Queensland did with their public service superannuation funds, and turn them into vested contributory schemes, which is the point your Honour the Chief Justice made yesterday, that if money was paid, and people had the option to go out and have a bet on the horses, or whatever, that would solve the problem.  The money would be up-front; the tax would then be an obvious tax; you could understand how it works. 

But whilst the State pension schemes are schemes which are unfunded and which only give rise to future rights, if and when they arise, then the problems cannot be overcome, because judges who receive pensions under those schemes do not get the same rights as someone who gets an employer’s contribution today.  They may be better rights, they may be worse rights, but they are not the same rights.  We say that is the fundamental problem that the Commonwealth has to deal with, and that there is no solution to it, if you are going to avoid ‑ ‑ ‑

KIRBY J:   It may be that it is entrenched in the Constitution, but it is a very hard thing to say, that there is no way that the Commonwealth Parliament can secure equity as between all persons. It being accepted that judges cannot be exempted from income taxation, there must be a way to do it.

MR SELWAY:   Your Honour, the question then becomes a question of what one means by equity, in this context. 

McHUGH J:   Well, exactly. 

GLEESON CJ:   The context being a context of a tax. 

MR SELWAY:   Your Honour, no judge – and certainly in South Australia ‑ has an obvious or easy mechanism of avoiding tax.  They pay tax on their income as it is earned, and when a judge retires and receives a pension, the judge pays tax on that pension, and unless the judge tells lies to the Commonwealth as to what the receipt is, or whatever, the tax is full tax at the proper marginal rate.  There is no avoidance, in that sense, by anybody. 

GLEESON CJ:   But all you are doing is demonstrating what an absolutely slippery concept tax avoidance is.

MR SELWAY:   Yes, your Honour, and the Judge has no control over this process.  It is not as if the Judge negotiates the Pension Act; it is there.

KIRBY J: I am not talking about that. I am talking about a view that is taken by the Federal Parliament that there has been inequity in the taxation of “superannuation benefits” and that judges’ pensions are a form of superannuation and that therefore you are saying that the Federal Parliament cannot introduce legislation which, in the same general manner as it deals with other citizens’ superannuation but taking into account the special features of judicial pensions, cannot introduce equity as between all persons at the end of the road. It may be that the road is a rather tricky one because of the Constitution, especially section 114, but it strikes me as an odd result that there is no way to do it.

MR SELWAY:   What we would say is two things.  Firstly, it is not obvious what the lack of equity is.  It may be my learned friend will explain it in due course.

McHUGH J:   With great respect to Justice Kirby, there just is not any question of equity because the ordinary private citizen, or a judge who has his or her own superannuation fund, is getting a tax deduction year after year.  If I pay 100,000 and if some private citizen pays $100,000 a year into a superannuation fund, it is a tax deduction and you are getting the benefit of it and it was because the government thought that people were getting too big a benefit that they brought in the 15 per cent, but the State judges are not getting any tax benefit year by year.

KIRBY J:   The question is whether they are getting in effect a benefit from it.  That is the issue.

HAYNE J:   But the benefit lies in this slippery notion of salary packaging.  You move from the notion of salary packaging, an optional exercise, to the notion that everything someone receives by way of remuneration is part of the package.  You have suddenly slipped from arguing from the tag into the content of the tag and applying this wonderful expression, “equity”.

MR SELWAY:   Your Honour, what we say is two things.  Firstly, the equity is not clear as far as we can see but, in any event, if one is applying ‑ ‑ ‑

KIRBY J:   It does not seem equitable that judges who are already high income earners should be able to escape burdens on their superannuation which other citizens have to pay.

MR SELWAY:   Your Honour, with respect, that begs the question of whether they are escaping or whether what is really happening here is a concession that no judge ever had, at least in South Australia, in relation to the funds.  They have no deduction, they are not taxed at 15 per cent when they receive their pension.  They are taxed at full marginal rate.  Whether those judges who do not have these concessions as others may have had are now to be treated in some circumstances worse and in some circumstances perhaps better than others in an attempt to put them in some sort of equality, in our submission, in its essence is that we are not talking apples and apples.  These are apples and oranges at their very best and that is the problem that the Commonwealth has to grapple with and has not yet done it.

GLEESON CJ:   Mr Solicitor, do we have in the case stated book an example of one of these assessments that the plaintiffs get?

MR BENNETT:   Yes, your Honour, yes, tabs 9.10 and 9.11 in volume 2 of the case stated book.

GLEESON CJ:   Thank you.

MR BENNETT:   Yes, it sets out the relevant numbers and there is a long explanation on the next page saying it does not have to be paid yet. 

GLEESON CJ:   And will never have to be paid if you do not qualify.

MR BENNETT:   That is the consequence.  It ‑ ‑ ‑

GLEESON CJ:   Now, there is a dispute resolution procedure about these assessments.

MR BENNETT:   If you are dissatisfied with the assessment, you may lodge an objection in the usual way and that then goes up the usual way the tax assessment ‑ ‑ ‑

GLEESON CJ:   What sorts of issues would arise under a disputed assessment?

MR BENNETT:   That one could argue almost any of the matters which my learned friend says are subjective to and we say are matters of extra actuarial evidence.

HAYNE J:   The taxpayer would have to demonstrate the assessment was excessive, would it not?

MR BENNETT:   Yes.

HAYNE J:   That is the ultimate issue?

MR BENNETT:   That is the issue, yes.

KIRBY J:   Is this estimate done on a case‑by‑case, individual‑by‑individual basis or is there an estimate which is made at large for the judiciary of the State generally?

MR BENNETT:   The factor which is used to calculate it, which was in the previous column on pages 102 and 103, is worked out for the judiciary, or for the particular group, which may be larger or may be smaller ‑ ‑ ‑

McHUGH J:   18.6, was it not? 

MR BENNETT:   Yes.  There may be a separate category for male and female because of different life expectancies ‑ ‑ ‑

GLEESON CJ:   Could you dispute an assessment by relying upon the fact that you had recently been diagnosed as having a terminal illness? 

MR BENNETT:   Your Honour – and I say this subject to correction – that may not be relevant to the surcharge debt account, but it is certainly relevant to the cap, and one could certainly dispute it on that ground.  One would call as one’s first witness the medical practitioner who would give the life expectancy.  The reason for that is that under section 9(5), the amount is referred to as actuarial value, whereas under section 15(6) dealing with the cap, it is just the value.  So there is no necessary actuarial element in calculating the cap.  If one can demonstrate that one has a life expectancy of six months, that trumps the actuarial figure which says that a man or woman of your age is likely to live for 16 years. 

HAYNE J:   Mr Solicitor, it is obvious this argument is going to go over.  I for my part would be much assisted by your note about the operation of 15(6)(b) before the argument resumes, because you seem to attach great weight to it, you seldom refer to the words of it, and you have given us no instruction yet, as far as I can discern it, about how it bears the weight that you attach to it.  So before we resume, I for my part would be much assisted. 

MR BENNETT:   Yes, certainly.  I will have that done, your Honour.  We submit that they are very simple words.

HAYNE J:   Then make your submissions very simple for the simple mind that must receive them, Mr Solicitor, and if you would be so kind as to attach them to the statutory words rather than other words which so many of your submissions in this regard seem to have done.

MR BENNETT:   Yes.  I will do that now, your Honour.  The 15 per cent is, of course, just a mathematical calculation.  The words:

of the employer‑financed component –

would be relevant in a case where there was some employee finance and some employer finance.  Here that just means of 100 per cent.  So, for the purpose of the judges those words have no effect on the provision.  Then of that part of something – I will come back to it – that accrued after 20 August 1996.  I have dealt with that.  It is the benefits payable to the member.  The benefits payable to the member are benefits payable by way of pension after retirement.  Ex hypothesi, one does not know what that figure is because one does not know, except, perhaps, in the case of the judge at death’s door, one does not know for how long that payment will continue.

In the normal course, therefore, one would calculate it actuarially but it is always open to the judge to say, “I bring to the court some additional evidence.  I bring to the court evidence that I am suffering from some disease, that I have a lower life expectancy than others, there is some reason why it is likely to terminate earlier.  My life expectancy is not the actuarial 16 years that applies to men of 62, or 18 years as applies to women of 62, or whatever the figure is, but six months because that is what my doctor says is my average life expectancy, at the moment”.

If that evidence is given, then that figure would be a very low figure, in my submission, because the benefits payable to the member would be very small, as a matter of fact.  The same logic that allows one to work it out actuarially, in the absence of other evidence, allows one to say, in the individual case, the taxpayer can insist on having it done that way.  That carries with it the consequence that if the doctor turns out to be wrong, and the judge is happy enough to live to 105 and get over the medical condition ‑ ‑ ‑

GAUDRON J:   My trouble with that is, Mr Solicitor, is that I cannot find the word “value” in 15(6)(b).

HAYNE J:   A word you have constantly used in referring to 15(6)(b).

MR BENNETT:   It is the benefits payable to the member.

GAUDRON J:   No, it is the employer‑financed component which I think is defined elsewhere:

Of that part of the benefits payable to the member that accrued after 20 August 1996.

If it was 15 per cent of the employer‑financed component of the value of the benefits payable on retirement to the member after ‑ well, you would not even need a date – I would take your meaning, but I cannot read it that way, I am sorry, Mr Solicitor.  I am not too sure how one should read it but one would need to track it through the definitions, I suspect.

MR BENNETT:   I was going to ask rhetorically how else one could read it.

GAUDRON J:   I read it in the same way as it has been calculated.

MR BENNETT:   Yes, because Justice Austin has not retired yet and he has not come forward with any particular evidence about state of health, obviously, and therefore it does not arise, it has not arisen.

GAUDRON J:   It seems to me why this happens is you make a calculation which includes interest, interest, interest, interest, and clearly enough – and one can imagine that in the case of a person who is appointed at a very young age – you might find interest accruing for 30 years perhaps, well, say 20 at least, which could be a very - somebody appointed at 36 ‑ ‑ ‑

KIRBY J:   Like Justice Evatt.

MR BENNETT:   Yes.

GAUDRON J:   Yes, you do your calculations – I presume you do it over 10 years or maybe you do it from there to 60.  I do not know.

MR BENNETT:   You do it to 60, as I understand it.

GAUDRON J:   So there would be no component until a judge reached 50, I do not know.  Anyway, it does not matter.  But it seems to me what this is designed to do is to simply prevent the accumulation of interest or the compounding of interest beyond a certain point and not to work out the value of the benefits to the beneficiary.

GLEESON CJ:   Perhaps it might be better, Mr Solicitor, if you took that on notice and you are going to give us some written submissions, say, not later than seven days before we resume.

MR BENNETT:   Yes.

GLEESON CJ:   We will resume the hearing of this matter at 10.15 on 2 September 2002 and we will adjourn.

AT 4.17 PM THE MATTER WAS ADJOURNED
UNTIL MONDAY, 2 SEPTEMBER 2002