Carmody v Superannuation Complaints Tribunal

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FEDERAL COURT OF AUSTRALIA

Carmody v Superannuation Complaints Tribunal [2020] FCA 291

File number: QUD 481 of 2018
Judge: COLLIER J
Date of judgment: 11 March 2020
Catchwords: SUPERANNUATION – appeal from determination of Superannuation Complaints Tribunal – whether decision of Commonwealth Superannuation Corporation to comply with Child Support Agency notices was fair and reasonable  – benefits payable under the Military Superannuation and Benefits Act 1991 (Cth) – benefits payable under Veterans’ Entitlements Act 1986 (Cth) - meaning of employer in s 45 of the Child Support (Registration and Collection) Act 1988 (Cth) - whether the Commonwealth Superannuation Corporation was an employer for the purposes of s 45 – meaning of “work and income support related withholding payments” in s 45 of the Child Support (Registration and Collection) Act 1988 (Cth) – meaning of a person who “holds, or may subsequently hold” in s 72A of the Child Support (Registration and Collection) Act 1988 (Cth) - whether the Commonwealth Superannuation Corporation was a person who “holds, or may subsequently hold” money on behalf of the applicant for the purposes of s 72A – whether compliance by the Trustee with a ss 45 or 72A notice altered the invalidity benefits of the applicant contrary to regulation 13.16 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) – regulation 13.12 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) - whether compliance by the Trustee with the ss 45 or 72A notices created an assignment of the invalidity benefits of the applicant – regulation 13.13 of the Superannuation Industry (Supervision) Regulations 1994 (Cth) - whether compliance by the Trustee with the ss 45 or 72A notices recognised, encouraged or sanctioned a charge over the invalidity benefits of the applicant – the proper machinery by which to object to decisions under the Child Support (Assessment) Act 1989 (Cth) – appeal dismissed
Legislation:

Child Support (Assessment) Act 1989 (Cth) s 5

Child Support (Registration and Collection) Act 1988 (Cth) ss 4, 45, 46, 72A, 120, Parts VII and VIIA

Corporations Act 2001 (Cth)

Family Law Act 1975 (Cth) s 90XB

Governance of Australian Government Superannuation Schemes Act 2011 (Cth) ss 3, 4, 5, 29A(a)

Income Tax Assessment Act 1997 (Cth) ss 55-5, 307-70

Income Tax Assessment Regulations 1997 (Cth) reg 995-1.01

Military Superannuation and Benefits Act 1991 (Cth) ss 13(b), 17, 45

Public Governance, Performance and Accountability Act 2013 (Cth) s 64

Superannuation Act 1990 (Cth) s 20

Superannuation Industry (Supervision) Act 1993 (Cth) ss 10, 31(1), 32(1), 58(1)

Superannuation Industry (Supervision) Regulations 1994 (Cth) regs 13.11, 13.12, 13.13, 13.16

Superannuation (Resolution of Complaints) Act 1993 (Cth) ss 37, 37(6), 46

Taxation Administration Act 1953 (Cth) Schedule 1, Subdivs 12-B, 12-C, 12-D, Div 13, regs 12-80, 12-85, s 12-110(1)(c)

Veterans’ Entitlements Act1986 (Cth) ss 24, 125

Cases cited:

Asgard Capital Management Ltd v Maher (2003) 131 FCR 196; [2003] FCAFC 156

Blacktown Concrete Services Pty Ltd v Ultra Refurbishing & Construction Pty Ltd (in liq) (1998) 43 NSWLR 484

Board of Trustees of the…

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Details
Case
[2020] FCA 291
Decision Date

CaseChat Overview and Summary

In the case of Carmody v Superannuation Complaints Tribunal, the primary issue was whether the Superannuation Complaints Tribunal (SCT) was correct in finding that the Commonwealth Superannuation Corporation's (CSC) decision to comply with notices issued by the Child Support Agency was fair and reasonable. The applicant, Mr Carmody, argued that the CSC's compliance with the notices was contrary to various legislative provisions and resulted in an alteration of his accrued benefits. The Court was tasked with determining whether the CSC's compliance with the notices was appropriate and if the SCT's decision was justified.

The legal issues involved interpreting various sections of the Child Support (Registration and Collection) Act 1988 (Cth), the Military Superannuation and Benefits Act 1991 (Cth), the Veterans' Entitlements Act 1986 (Cth), and the Superannuation Industry (Supervision) Regulations 1994 (Cth). Specifically, the Court had to consider whether the CSC was an "employer" under the Child Support (Registration and Collection) Act 1988 (Cth), whether the CSC was a person who "holds, or may subsequently hold" money on behalf of Mr Carmody, and whether compliance with the notices created an assignment or a charge over Mr Carmody's accrued benefits. Additionally, the Court needed to determine if the CSC's actions contravened any regulations and if the SCT's decision was in accordance with the law.

The Court found that the CSC was required to comply with the Child Support Agency's notices as it was considered an "employer" under the relevant Act. The Court further held that the CSC's compliance with the notices did not alter Mr Carmody's accrued benefits, nor did it create an assignment or a charge over his benefits. The Court concluded that the SCT's decision to affirm the CSC's decision to comply with the notices was fair and reasonable. As a result, the appeal was dismissed, and the determination of the SCT was upheld.

ORDERS:
1. The determination of the Superannuation Complaints Tribunal dated 21 June 2018 is affirmed.
2. The appeal is dismissed.

Orders

Orders of the court

1. The determination of the Superannuation Complaints Tribunal dated 21 June 2018 be affirmed.

2. The appeal be dismissed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

In summary, Mr Carmody acknowledges that he has incurred a debt in respect of child support, but objects to the compliance by the Trustee with the notices issued by the Child Support Agency. He claims that in so doing, the Trustee contravened various legislative provisions, and to that extent, the Tribunal erred in finding that the decision of the Trustee to comply with the notices was fair and reasonable.BACKGROUND The background to this matter is set out in the Trustee’s response dated 17 July 2017 to the s 17 of the SRC Act notice, the Tribunal’s Review Determination and Reasons for Determination dated 21 June 2018 and the submissions of the parties both in earlier proceedings and this appeal. Material facts can be summarised as follows. The applicant was born on 20 October 1972. The applicant joined the Royal Australian Air Force (RAAF) on 23 November 1989. On 17 December 1992, the applicant suffered a severe traumatic brain injury while serving in the RAAF. On 31 March 1994 the applicant was medically discharged from the Australian Defence Force. As a result of his discharge and s 6 of the Military Superannuation and Benefits Act 1991 (Cth) (MSBA), the applicant ceased to be a member of the Military Superannuation & Benefits Scheme (MSBS) of which the Commonwealth Superannuation Corporation is the trustee. After a period of assessment, Mr Carmody was determined to have a Class A incapacity for civilian employment, which is the highest level of incapacity (60% or more). Pursuant to rule 27(1)(a) in the Schedule to the Military Superannuation and Benefits Trust Deed 1991 (Cth) (MSBS Trust Deed), Mr Carmody became entitled to his “member benefit” from the MSBS fund as a lump sum. Pursuant to rule 27(1)(b) of the MSBS Trust Deed, his “employer benefit” from the MSBS fund was converted to a pension, known as an invalidity pension. At all material times, Mr Carmody has been in receipt of two pensions. The first pension emanated from his former employer, the Department of Defence - RAAF, and was a “special rate of pension” that the applicant claims is payable under s 24 of the Veterans’ Entitlements Act1986 (Cth) (VEA). I note that, in its decision, the Tribunal referred to this pension as “pension 1”. Mr Carmody has referred to pension 1 in his submissions as the “Special Rate of Pension” or the “TPI pension”. The Trustee makes no reference to pension 1 in its submissions. The second pension was the invalidity pension payable from the MSBS. I note that, in its decision, the Tribunal referred to this pension as “pension 2”. Mr Carmody has referred to pension 2 in his submissions as the “Invalidity Benefits”, while the Trustee has referred to pension 2 as the “invalidity pension” or the “invalidity benefit”. I will adopt the Tribunal’s references, being pension 1 and pension 2. It is the Trustee’s acts in respect of pension 2 which are the subject of these proceedings. With that said, the applicant has also sought to agitate issues concerning pension 1.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The Trustee’s position was:·The Trustee was required to comply with the Child Support Agency’s s 120 notice in circumstances where the definition of “person” in the CSRCA included a company. ·The Trustee is a body corporate pursuant to s 4 of the CSRCA.·Relevantly to s 45 of the CSRCA, “employee” is defined by s 4 of the CSRCA as “a person who receives, or is entitled to receive, work and income support related withholding payments”, while “employer” is defined as the person “who makes, or is liable to make, work and income support related withholding payments”.·“Work and income support related withholding payments” is defined in a Note to s 4 of the CSRCA as including “payments of superannuation benefits”.·As Mr Carmody was receiving a pension from the MSBS fund, he met the very broad definition of “employee” under the CSRCA, and the Trustee met the very broad definition of “employer” under that Act.·The Trustee never misled the Child Support Agency into thinking that Mr Carmody was employed by the Trustee in the sense of working for the Trustee. The Child Support Agency was always aware of the correct basis of the relationship between the Trustee and Mr Carmody.·In relation to the notice served by the Child Support Agency on the Trustee pursuant to s 120, the Trustee complied because “salary and wages” is defined by the CSRCA to include “work and income support related withholding payments”.·In relation to the Child Support Agency’s s 72A notice, the Trustee complied because “person” is defined in s 72A to “include a partnership and any Commonwealth, State or Territory public authority (whether incorporated or unincorporated)” and the Trustee is a body corporate.·In relation to Mr Carmody’s arguments concerning his receipt of two pensions and the Trustee acceding to the full monetary requests for payments inclusive of amounts which pertained to pension 1, that was an issue for Mr Carmody to raise with the Child Support Agency. Similarly, the argument that the amount specified in the s 72A notice exceeded the protected amount in the CSRCA guidelines was a matter for him to raise with the Child Support Agency.·The Trustee rejected the proposition that its actions breached reg 13.12 of the SIS Regulations or the prohibition against assignment in s 45 of the MSBA. The case law has established an assignment to be a transfer of an existing proprietary right, where a proprietary right is a right to absolute ownership and a financial interest in private property at common law. Mr Carmody continued to have the right to receive pension 2 – it had not been removed and given to any other person (including the Child Support Agency). ·Even if there had been assignment of part of pension 2 by the deductions made by the Trustee (which were redirected to the Child Support Agency), that assignment was not prohibited by either reg 13.12 of the SIS Regulations or s 45 of the MSBA as it would have been an assignment occurring by operation of law and not a voluntary assignment by Mr Carmody. Only a voluntary assignment was prohibited by s 45.·The Trustee had not recognised a charge over Mr Carmody’s benefit for the purposes of reg 13.13 of the SIS Regulations.DECISION OF THE SUPERANNUATION COMPLAINTS TRIBUNAL

Ratio Decidendi

Legal Principle Established

The Trustee submitted that the determination of the Tribunal ought be affirmed, in summary on the basis that no error of law was apparent from its reasons.CONSIDERATION As Kenny and Lander JJ explained in Board of Trustees of the State Public Sector Superannuation Scheme v Edington [2011] FCAFC 8 at [46], the Tribunal “stands in the shoes of the trustee and determines, based on all the information before it, whether or not the actual decision taken by the trustee was fair or reasonable in the circumstances”. The Tribunal must affirm the decision if it is satisfied that the decision was fair and reasonable: s 37(6) SRC Act. Their Honours continued:49.The [SRC] Act does not specify the considerations that the Tribunal is bound to take into account in deciding whether or not a decision of the trustee was fair or reasonable: see, in this regard, HEST Australia Ltd v Sykley (2005) 147 FCR 248 at 261 [49] (Crennan J). These considerations must therefore be determined by reference to the subject-matter, scope and purpose of the Act: see generally Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24 at 39–40. A purpose of the Act is “to ensure members and beneficiaries are not adversely affected by unfair and unreasonable decisions of insurers and trustees”: see HEST 147 FCR at 261 [49]. Considered in this light, the governing trust deed and insurance terms will necessarily be relevant considerations: see Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359 at 366 [28] (Allsop J) and Cameron 130 FCR at 131 [32]. This is because an essential part of the statutory scheme is that a determination under s 37(3) substitutes the Tribunal’s decision for the decision of the trustee; and in consequence, the substituted decision must itself be one that is authorised by the legal instruments governing the fund: compare Briffa v Hay 75 FCR at 443 (Merkel J). As I noted earlier, although the applicant formally relies on one ground of appeal, he alleged additional errors of law by the Tribunal in the course of submissions. Further, the applicant alleged errors on the part of the Tribunal by reference to identified questions of law, and findings of fact which the applicant asked the Court to make. In summary, these alleged errors, questions of law and findings of fact relate to the following issues:(1)The proper interpretation of reg 13.16(1) of the SIS Regulations, and whether the Trustee’s compliance with the notices breached that regulation by altering adversely to Mr Carmody his accrued benefits.(2)Whether, by complying with the s 45 and 72A notices, the Trustee breached s58 of the SIS Act. (3)The proper interpretation of s 45 of the CSRCA, particularly in its reference to an employer/employee relationship, and whether such a relationship in those defined terms existed such that the Trustee was obliged to comply with the notices served on it pursuant to s 45.(4)The proper interpretation of s 72A of the CSRCA, and whether the Trustee was a person who held money for or on account of Mr Carmody.(5)Whether the Trustee was legally allowed to comply with the 72A notices of the Child Support Agency by deducting amounts for child support referable to pension 1, and whether the Tribunal was correct to find that any dispute by Mr Carmody in relation to the question whether the calculation of the amount garnished exceeded the “protected earnings amount” applicable to s 46 of the CSRCA was a matter for him to take up with the Child Support Agency rather than with the Trustee.(6)Whether compliance with the s 72A notices created an assignment of, or a charge over, Mr Carmody’s accrued benefits.