Commissioner for Superannuation v Scherer, Peter Andrew

[1998] FCA 259

FEDERAL COURT OF AUSTRALIA

SUPERANNUATION - Right of “eligible employee” to transfer membership to Public Sector Superannuation Scheme - Whether transfer effective if made after termination of employment.

Superannuation Act 1976 (Cth) s 244
Superannuation Act 1990 (Cth)

COMMISSIONER FOR SUPERANNUATION (Applicant) v PETER ANDREW SCHERER (Respondent)
ACT G43 of 1997

FINN J
CANBERRA
11 MARCH 1998

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACT G43  of   1997

BETWEEN:	COMMISSIONER FOR SUPERANNUATION APPLICANT
AND:	PETER ANDREW SCHERER RESPONDENT
JUDGE:		FINN J
DATE OF ORDER:		11 MARCH 1998
WHERE MADE:		CANBERRA

THE COURT ORDERS THAT:

1. The application be allowed.

1. The decision of the Tribunal be set aside.

1. The matter be remitted to the Tribunal to be heard and decided again.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY	ACT G43 of 1997

BETWEEN:	COMMISSIONER FOR SUPERANNUATION APPLICANT
AND:	PETER ANDREW SCHERER RESPONDENT

JUDGE:	FINN J
DATE:	11 MARCH 1998
PLACE:	CANBERRA

REASONS FOR JUDGMENT

The short point in this appeal from the Administrative Appeals Tribunal (“the Tribunal”) is whether an ex-employee of the Commonwealth who has remained a member of the Commonwealth Superannuation Scheme (“the CSS”) can by election and declaration within the period of grace given by s 244(3)(c) of the Superannuation Act 1976 (Cth) (“the Act”) transfer to the Public Sector Superannuation Scheme (“the PSSS”) established under the Superannuation Act 1990 (Cth) (“the 1990 Act”). The Tribunal by a majority decided that the respondent in this appeal, Dr Scherer, could so transfer. The Commissioner for Superannuation (“the Commissioner”) claims that in so doing the Tribunal has wrongly construed the Act.

Factual Background

The relevant facts are agreed and can be shortly stated. 

(i)Dr Scherer joined the Australian Public Service in 1979 and became an “eligible employee” for the purposes of the Act on 21 February of that year. As such, he became a member of the CSS.

(ii)From 24 September 1986 to 18 August 1993, Dr Scherer was absent on leave without pay from his employment in the Department of Employment and Industrial Relations.

(iii)In 1993 he returned to duty with that Department for two days, ie 19 and 20 August.

(iv)On 20 August he tendered his resignation with effect on close of business on that day.  On the same day, by notice to the Commissioner, he elected to preserve in the CSS all of his superannuation rights.

(v)On 19 November 1993, Dr Scherer requested that he be permitted to join the PSSS.

(vi)The Commissioner advised him on 24 January 1994 that he could not so elect.  On Dr Scherer’s request that decision was reconsidered.  It was confirmed by a delegate of the Commissioner on 22 November 1995.

The Legislative Framework

Insofar as presently relevant s 3 of the Act defines “eligible employee” to mean:

“(b)     a person who is a permanent employee.”

Section 137 of the Act prescribes the circumstances and manner in which a person “who ceases to be an eligible employee” may elect that Division 3 of Part X of the Act (“Preservation of Rights”) applies to him or her. It is unnecessary to do other than note this provision.

Section 244 of the Act, relevantly, provides:

“Election to join Superannuation (1990) Scheme

244.     (1)       Subject to this section, an eligible employee who is not precluded by or under the Superannuation Act 1990 (other than by paragraph 6(2)(a) of that Act) from being a member of the Superannuation (1990) Scheme may in writing addressed to the Commissioner:

(a)declare that he or she wishes to become a member of that scheme;  and

(b)       elect to cease to be an eligible employee.

(2)       An eligible employee may not make an election and declaration under subsection (1) during any period when the eligible employee is absent from duty on leave of absence without pay.

...

(3)       An eligible employee may not make an election and declaration under subsection (1):

...

(c)if the eligible employee is precluded under subsection (2) from making the election and declaration during a period that ends after 31 March 1991 - after the period of 3 months commencing immediately after the termination of that period;  or”

For its part s 245 of the Act stipulates:

“Effect of election

245.     A person who makes a declaration and election under section 244 is taken to have ceased to be an eligible employee at the end of the day on which the declaration and election are made.”

Finally s 6 of the 1990 Act provides (inter alia):

“Membership of Public Sector Superannuation Scheme

6.        (1)       Subject to subsection (2), each of the following persons is, by force of this section, a member of the Public Sector Superannuation Scheme:

(a)       a permanent employee;

...

(2)       In spite of subsection (1), a person is not a member of the Public Sector Superannuation Scheme if the person:

(a)is an eligible employee for the purposes of the Superannuation Act 1976; or “

The Construction Question

With the greatest of respect to the majority of the Tribunal, it seems clear beyond argument that for a person in Dr Scherer’s situation to have effectively transferred from the CSS to the PSSS he needed to have remained as a permanent employee of the Commonwealth at the time of his election and declaration under s 244(1) of the Act. To be an “eligible employee” for the purposes of the Act and of the CSS (as opposed to a person who has elected to preserve benefits under Division 3, Part X of the Act), Dr Scherer needed to be a permanent employee; see the Act, s 3. Having ceased to be such an employee on 20 August 1993, he ceased to be an eligible employee for the Act’s purposes - hence his entitlement to make the s 137 election given to persons who have ceased to be eligible employees that he made on that date. And having so ceased to be a permanent employee, hence an eligible employee - and having done so by resignation not by s 244(1) election : cf s 245 - he ceased (i) to be able to make the particular declaration and election conferred on eligible employees by s 244; and (ii) to be qualified in any event for membership of the PSSS: the 1990 Act, s 6(1).

The majority in the Tribunal in reaching a contrary view seemed to have reasoned as follows:

(a) s 244(1) requires the distinct steps of election and declaration to be taken;

(b)s 244(3)(b) grants a three month period in which to take these steps to an eligible employee returning from leave without pay and on taking up duty; and

(c)provided both steps occur within the three months, it matters not that they are not taken as a composite decision.

Dr Scherer, so the Tribunal reasoned, ceased to be an eligible member on 20 August 1993 so, seemingly, satisfying s 244(1)(b). And by his declaration of 19 November 1993 he ceased to be a member of the CSS and became a member of the PSSS.

For my own part I cannot accept the construction so placed on the Act. Nor, I would add in passing, is it obvious to me why a resignation from the Public Service equates with the type of election posited by s 244(1)(b). Section 245 suggests to the contrary. That election, in my view, seems premissed upon a person in Dr Scherer’s position remaining as a permanent employee and it is made necessary because of the bar in the 1990 Act s 6(2)(a) on “eligible employees” being members of the PSSS notwithstanding they are permanent employees.

It doubtless is the case that s 244(3)(c) gives a period of grace to persons returning from leave without pay within which they can make their s 244(1) declaration and election. But s 244(3)(c) does not purport to, and in my view clearly does not, affect in any way the status of the person on whom the right to declare and elect is conferred. That person is, and must be, an eligible employee.

While it is unnecessary for me to express concluded views on the following I incline to the view that the two steps required by s 244(1) are predicated on both being emanations of a composite decision. It would not matter that there was some time lapse as between them provided they actually related to that composite decision. I do not consider that the actual order of their making is of significance. Neither do I consider that s 245 of the Act would preclude these eventualities. The transfer could only be effective once both steps were taken. And as I have indicated the person taking them must be an eligible employee at both times. If the s 244(1) election is in fact the step first taken, it has no operative effect under the section and can have no operative effect until the second step is taken: see s 245. What is important for a person in Dr Scherer’s situation is that he be, and remain throughout, a permanent employee. It is this which, in his case, gives him the required status for s 244(1) purposes of “eligible employee”.

I mean no disrespect to counsel in this matter in not adverting to their respective submissions.  The majority’s error is a clear one.

I would allow the application. As there may be a question whether, on a reconsideration, s 157 of the Act may be able to be invoked by the respondent - I express no view on this - I will remit the matter to the Tribunal to be heard and decided again.

I certify that this and the preceding five (5) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn

Associate:

Dated: 10 March 1998           

Counsel for the Applicant:	Hanks
Solicitor for the Applicant:	Australian Government Solicitor
Counsel for the Respondent:	Churches
Solicitor for the Respondent:	Gary Robb & Associates
Date of Hearing:	18 December 1997
Date of Judgment:	11 March 1998