Commissioner of Superannuation v Carpenter, Arnold Australian National Airlines Commission v Carpenter, Arnold

[1983] FCA 147

Re: COMMISSIONER OF SUPERANNUATION
And: ARNOLD CARPENTER
Re: AUSTRALIAN NATIONAL AIRLINES COMMISSION
And: ARNOLD CARPENTER AND COMMISSIONER FOR SUPERANNUATION (1983) 77 FLR 224
Nos. G20, G21 of 1983
Statutes - Public Services
5 IR 178

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Bowen C.J.(1), Woodward(1) and Fitzgerald(2) JJ.

CATCHWORDS

Statutes - Interpretation - Superannuation Act 1976 - Final annual rate of salary - Whether shift allowances part of salary.

Superannuation Act 1976, ss. 3(1), 5, 67

Superannuation (Salary) Regulations, reg. 4(b)

Public Service - Superannuation - Calculation of employee's rate of salary - Final annual rate of salary - Whether penalty payments for shift work to be treated as part of salary - Superannuation Act 1976 (Cth), ss 3(1), 5, 67 - Superannuation (Salary) Regulations, reg 4(b).

HEADNOTE

The respondent, Carpenter, had been employed by the second-named applicant, Australian National Airlines Commission, as a maintenance engineer and had been required to work regular rostered shifts in respect of which shift allowances were paid pursuant to the requirements of an industrial award. Section 67 of the Superannuation Act 1976 provided that a person in the position of the respondent was entitled to a pension equal to 70 percent of his final annual rate of salary. Section 3(1) defined this latter phrase as meaning "his annual rate of salary on his last day of service". The Administrative Appeals Tribunal held that the shift allowances received by the respondent were to be brought into account in the calculation of his pension under the Act.

Held: (a) The shift allowances received by the respondent were part of his salary and part of his final annual rate of salary. Section 5(1) of the Superannuation Act 1976 which defined salary covered everything within the ordinary meaning of salary and wages.

(b) Regulation 4(b) of the Superannuation (Salary) Regulations only excluded allowances for shift work outside regular rostered shifts.

Commissioner for Government Transport v Kesby (1972) 127 CLR 374 at 388; Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389 at 397, referred to.

HEARING

Sydney, 1983, June 7, 8; July 21. #DATE 21:7:1983

APPEAL

The appellants appealed from a decision of the Administrative Appeals Tribunal.

J S Wheelhouse, for the Commissioner of Superannuation.

J Stowe, for the Australian National Airlines Commission.

M Holmes, for the respondent.

Cur adv vult

Solicitor for the Commissioner of Superannuation: B J O'Donovan, Commonwealth Crown Solicitor.

Solicitors for the Australian National Airlines Commission: Clayton Utz.

Solicitors for the respondent: Walker, Gibbs & Donald.

TJG

ORDER

The appeals be dismissed with costs.

Order accordingly

JUDGE1

The short point for the Court to consider in these appeals is whether payments for shift work performed by the respondent on a regular basis for some thirty years before his retirement on 16 September 1977 are to be treated as part of his salary for purposes of the Superannuation Act 1976 ("the Act").

The Commissioner for Superannuation ruled that they were not, and the Administrative Appeals Tribunal reversed that finding. The Commissioner and the employer have appealed to this Court, seeking to have the Commissioner's ruling restored.

The respondent, along with all other foremen similarly employed by the Australian National Airlines Commission ("TAA") at Adelaide Airport, worked a four week roster which included totals of 6 days on day shift, 7 on afternoon shift, 7 on night shift and 8 days off. In accordance with those provisions of the relevant industrial award which, in practice, were applied at Adelaide airport, the currently prescribed rate of pay for foremen of his class was increased by 15% when he was on afternoon shift and 22 1/2% when he was on night shift. He received only the prescribed rate of pay when he was on day shift. His earnings thus varied from week to week, but were constant over any given four week period. The percentage variations were referred to in the award as 'shift allowances', a fact central to the appellants' arguments, as will be seen.

Section 67 of the Act provides that a person in the position of the respondent is entitled to a pension equal to 70% of his "final annual rate of salary". Section 3(1) defines this phrase as meaning (in the respondent's case) "his annual rate of salary on his last day of service".

Section 5 of the Act defines 'salary', and makes further provisions, in the following terms -

"5(1) In this section, "salary" means salary or wages, and includes -

(a) any allowance, or the value of any allowance, or any fee, that is an allowance or fee of a kind that, under the regulations, is to be treated as salary for the purposes of this Act; and

(b) partial invalidity pension,

but does not include any part of any salary or wages that, under the regulations, is not to be treated as salary for the purposes of this Act.

(2) For the purposes of this Act but subject to sub-section (3), the annual rate of salary of an eligible employee on a particular day is an amount equal to the amount per annum of the salary payable to him on that day.

(3) The regulations may provide that, in a case specified in the regulations, the annual rate of salary of an eligible employee on a particular day shall, for the purposes of this Act or a provision of this Act specified in the regulations, be an amount equal to such amount per annum as is ascertained under the regulations.

(4) Where the rate of salary, or of a part of the salary, of an eligible employee is not an annual rate, the amount per annum of that salary, or of that part of the salary, as the case may be, shall, for the purposes of sub-section (2), be ascertained -
(a) where the rate is a weekly rate - by multiplying the weekly rate by 52;

(b) where the rate is a monthly rate - by multiplying the monthly rate by 12; and

(c) in any other case - in such manner as is prescribed."

Counsel for the appellants argued in effect that the phrase 'salary or wages' in sub.s. 5(1) should be given a restricted meaning which (apart from the special case of partial invalidity pensions) could only be extended by regulation. They contended that the respondent's shift payments were 'allowances' because they were so described in the award; and because there was an expressed intention in the legislation that certain allowances and fees would be included by regulation, this meant that no allowances or fees could be comprehended by the phrase 'salary or wages' without the aid of regulation. We are unable to accept this submission.

Our approach to the interpretation of sub.s. 5(1), for present purposes, can be conveniently stated in the following propositions -

1. When sub.s. 5(1) says "salary means salary and wages" it covers everything within the ordinary meaning of salary and wages.

2. When sub.s. 5(1) adds that salary includes "partial invalidity pension" (para. (b)) it is extending the definition to something which would not be within the ordinary meaning of salary and wages.

3. When sub.s. 5(1) also adds that salary includes "any allowance or the value of any allowance or any fee that is an allowance or fee of a kind that under the Regulations is to be treated as salary for the purposes of this Act" it is not enumerating an exhaustive list of things which are to be regarded as within the meaning of "salary"; on the contrary, it is stating no list at all; Parliament is delegating to the Executive the power to prescribe by regulation what further allowances or fees shall be included. These are clearly words of extension.

4. The use of "means" and "includes" in the one definition is a contrasting use of these two words. In this collocation of words it is difficult, if not impossible, to read the word "includes" as in effect covering the same ground as if the word "means" had been used.

5. When sub.s. 5(1) says "but does not include any part of salary or wages that, under the Regulations, is not to be treated as salary for the purposes of the Act", Parliament is delegating to the Executive the power to exclude by regulation certain things otherwise included in the definition by the words "salary or wages".

6. The power delegated to exclude by regulation is a power to exclude "any part of salary or wages" thus picking up general words first used in the definition. This appears to require the words "salary and wages" to be read in their ordinary sense and not in any sense confined by reading "includes" where it is earlier used as the practical equivalent of "means".

7. In its ordinary sense the phrase "salary or wages" would cover the remuneration regularly received by Mr. Carpenter over the normal four week structure of his duties.

Unless they were expressly excluded by regulation pursuant to the concluding words of sub.s. 5(1) of the Act, we would thus regard continuing percentage variations to a salary, occurring on days when particular regularly-rostered shifts are worked, as falling within the ordinary meaning of a salary. The regulations refer only to allowances for shift-work "outside the hours that under the terms and conditions of his employment are the normal hours of duty" of an employee; they are silent on the subject of shift-work which constitutes the employee's normal hours of duty (Regulation 4(b) of the Superannuation (Salary) Regulations).

We are of opinion that for the purposes of regulation 4(b) the normal hours of duty would cover the hours regularly worked by the respondent on his four week roster throughout his period of service, including the hours of the afternoon and night shifts. It is true that the award which forms part of the arrangements governing the terms and conditions of his employment, in referring to 'ordinary hours for day workers' and 'ordinary hours for shift workers', approaches the matter in a different way appropriate to the purposes of the award. However, in the context of the Act and regulations, the different wording in regulation 4(b), namely, 'normal hours of duty' and the purpose of the Act and regulations to fix superannuation, support the view which we take as to interpretation of regulation 4(b).

We find some support for the approach we have outlined in the judgments of the High Court in Commissioner for Government Transport v Kesby (1972) 127 CLR 374. There the Court had to consider the meaning of the word 'salary' in the context of legislation providing for continuation of earnings during periods of incapacity. Gibbs J., with whom Menzies, Walsh and Mason JJ. agreed, said at p.388,

"The question what is the "salary" in a particular case is purely one of fact. It does not simply depend on the terminology used to describe the amount payable. Thus in the present case it can hardly be doubted that the increments and the margins form part of the "salary" of bus drivers. Similarly a payment referred to as "a shift penalty" or as "overtime" could be said to constitute part of the "salary" of bus drivers if in fact it was an amount payable to bus drivers generally as remuneration for the services that bus drivers generally are regularly required to perform."

In a separate but concurring judgment, Barwick CJ, at p.378, referred to "the sense of regularity and uniformity which is, in my opinion, implied in the concept of a salary payable to an officer."

To the same effect is the judgment of Latham CJ in Mutual Acceptance Co. Ltd. v Federal Commissioner of Taxation, (1944) 69 CLR 389 at p.397. Speaking of the relationship between allowances and wages in the context of pay-roll tax legislation, the Chief Justice said,

"Expense allowances, travelling allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of a service. Tropical allowances, overtime allowances, and extra pay by way of "dirt money" are allowances as compensation for unusual conditions of service.

The latter class of allowances represents higher wages paid on account of special conditions, and may fairly be described as part of wages in the ordinary sense."

Because of the view which we take about the ordinary meaning of the words 'salary of wages' and our opinion as to the interpretation of regulation 4(b), we do not find it necessary to follow counsel through the labyrinth of regulations designed to extend that ordinary meaning.

In order to ascertain the respondent's 'final annual rate of salary' within the meaning of the Act, it is necessary to turn to s.5(2) which provides, so far as is relevant for present purposes, that "the annual rate of salary of an eligible employee on a particular day is an amount equal to the amount per annum of the salary payable to him on that day".

We take this to mean simply that the annual rate is to be determined by examining the employee's terms of employment as at a given day and calculating the amount of salary he would have earned in the following year on the assumption that no changes occurred in those terms of employment. To assist in this process, s.5(2) provides for salary rates expressed in weekly or monthly terms to be converted to annual rates. However the respondent's salary, as prescribed by the relevant industrial award, was expressed as an annual rate, subject only to appropriate percentage variations for days of shift work.

We do not accept the arguments for the appellants to the effect that regard should be paid to the employee's daily rate on his last day of work, or the contents of his last pay packet, asa basis for calculating his annual rate of pay.

A minor difficulty does arise in relation to the 365th day of the respondent's year, which falls outside the 13 sets of four-week rosters. In our view it would be consistent with the policy of the Act, and with common sense, if this day were allowed for as part of the prescribed annual rate, unaffected by shift allowance.

It only remains for us to say that we believe the Administrative Appeals Tribunal was entirely correct in the conclusions it reached and in its reasons for those conclusions; its order should stand. These appeals should be dismissed with costs.

JUDGE2

These are two appeals from a decision of the Administrative Appeals Tribunal dated 14 January 1983. The order sought by each appellant is that a decision made by the Commissioner for Superannuation pursuant to sub-s. 154(4) of the Superannuation Act 1976 ("the Act") be restored.

Mr Arnold Carpenter, who is a respondent to each appeal, was formerly a foreman maintenance engineer employed by the Australian National Airlines Commission at Adelaide airport. He was one of a number of foremen maintenance engineers employed at Adelaide airport, all of whom were shift workers within the meaning of the award under which they worked, the "Foreman's (T.A.A.) Consolidated Award 1974". By clause 4 of the award, annual rates of salary were prescribed for different categories of foreman with different periods of service. Clause 4(b) provided:

"(b) For the purpose of calculating weekly or fortnightly amounts of salary, the annual salary shall be divided by 52 or 56 respectively".

Clause 6 fixed the ordinary hours of foremen who were not shift workers. Clause 8 made provision for the ordinary hours of shift workers and provided for additional payments, referred to as shift allowances, in respect of shifts other than those which started and finished between 7.30 am and 6 pm. The shift rosters of Mr Carpenter and his colleagues each related to a four week period which included six consecutive days when the hours worked did not entitle the employee to a shift allowance but otherwise provided for shifts of one type or another in respect of which shift allowances of differing amounts were payable.

The present dispute concerns whether amounts paid to Mr Carpenter as shift allowances are to be brought to account in the calculation of his pension under the Act.

By sub-s. 67(1A) of the Act, the annual rate of pension to which Mr Carpenter is entitled is 70% of his "final annual rate of salary". Sub-section 3(1) of the Act defines an employee's "final annual rate of salary" as "his annual rate of salary" on one of a number of possible days. By sub-s. 5(2) of the Act, that amount is equal to "the amount per annum of the salary payable to him on that day". Sub-section 5(1) provides -

"5.(1) In this section, 'salary' means salary or wages, and includes -

(a) any allowance, or the value of any allowance, or any fee, that is an allowance or fee of a kind that, under the regulations, is to be treated as salary for the purposes of this Act; and

(b) partial invalidity pension,

but does not include any part of any salary or wages that, under the regulations, is not to be treated as salary for the purposes of this Act."

By virtue of sub-s. 5(1), the regulations play a central role in the legislative scheme. Irrespective of whether Mr Carpenter's shift allowances would otherwise form part of his "salary", it is necessary to see what, if any, provision is made by the regulations.

Regulation 5 provides -

"5. Each of the following kinds of allowance is a kind of allowance that is to be treated as salary for the purposes of the Act;
. .
(1) an allowance of a prescribed kind that is payable on a regular basis to an eligible employee."

Regulation 4 provides -

"4. In this Part, a reference to an allowance of a prescribed kind shall be read as a reference to an allowance of one of the following kinds:
. . .
(b) an allowance that is payable to an eligible employee by reason that he is rostered to perform, and performs, duties or work on a shift that falls, in whole or in part, outside the hours that under the terms and conditions of his employment are the normal hours of duty;
. . . "

Sub-regulation 6(1) provides -

"6(1) An allowance of a prescribed kind shall not, for the purposes of paragraph 5(1), be taken to be payable to an eligible employee on a regular basis unless the allowance is payable in respect of duties or work performed by the eligible employee for a continuous period that commences -

(a) immediately after the eligible employee has performed for a continuous period of 12 months duties or work in respect of the performance of which an allowance of the same kind as that allowance has been paid or is payable to the eligible employee; or
. . . . "

Regulation 5 lists ten kinds of allowance which, although not payable on a regular basis, are to be treated as salary for the purposes of the Act. Regulation 4 lists seven kinds of allowance which are to be treated as salary for the purposes of the Act only if payable on a regular basis. The only kind of allowance which may be directly relevant in these proceedings is that dealt with in regulation 4(b).

In the course of arguing to diametrically opposed conclusions, counsel for Mr Carpenter and counsel for the Australian National Airlines Commission each submitted that regulation 4(b) had no application to Mr Carpenter's shift allowances. According to Counsel for Mr Carpenter, the consequence was that such allowances are "salary" as defined in sub-s. 5(1) of the Act because they are "salary or wages" according to ordinary concepts. Counsel for the Australian National Airlines Commission contended for the opposite conclusion, asserting that para 5(1) (a) of the Act revealed a legislative intention that only those allowances which the regulations provide are to be treated as salary are to be so treated.

Counsel for the Commissioner for Superannuation disagreed with the proposition that regulation 4(b) did not refer to Mr Carpenter's shift allowances. He developed his argument by reference to the award. However, irrespective of the terms of any particular award, there is at the threshold a question as to the meaning of regulation 4(b).

In my opinion, the basic argument for the Commissioner for Superannuation on this aspect cannot be accepted. The presently relevant language of regulation 4(b) seems to me to be plain. A reference to the normal hours of duty under the terms and conditions of an employee's terms of employment cannot sensibly relate to other than the normal hours of duty of the particular employee.

The regulations therefore make no express provision in respect of allowances for shifts which fall wholly within an individual employee's normal hours of duty. Consequently, in my opinion, the regulations do not expressly refer to the shift allowances paid to Mr Carpenter. The evidence clearly established that the shifts which attracted such shift allowances did not fall in whole or in part outside the hours which were Mr Carpenter's normal hours of duty under his terms of employment. For many years, such shifts formed part of his normal working life. That was entirely in accordance with the award under which he worked insofar as it related to shift workers.

Neither the Commissioner for Superannuation nor the Australian National Airlines Commission sought to develop an argument that the regulations ought be construed as impliedly excluding all allowances not expressly referred to from what is to be treated as "salary" for the purposes of the Act. In my opinion, no such conclusion could properly be drawn. Although regulations 4 and 5 do make detailed provision as to the kinds of allowance which are to be treated as "salary", there is no sufficient basis for concluding from the terms of the regulations that it was intended to catalogue exhaustively what kinds of allowance might constitute or form part of "salary" so as to exclude all other allowances, including those which are salary or wages according to ordinary concepts.

If the appellants are to succeed, therefore, they must do so by reference to s.5 of the Act.

Section 5 of the Act is difficult to interpret. Sub-section 5(1) is set out in full above. The remainder of s.5 provides as follows:-

"(2) For the purposes of this Act but subject to sub-section (3), the annual rate of salary of an eligible employee on a particular day is an amount equal to the amount per annum of the salary payable to him on that day.

(3) The regulations may provide that, in a case specified in the regulations, the annual rate of salary of an eligible employee on a particular day shall, for the purposes of this Act or a provision of this Act specified in the regulations, be an amount equal to such amount per annum as is ascertained under the regulations.

(4) Where the rate of salary, or of a part of the salary, of an eligible employee is not an annual rate, the amount per annum of that salary, or of that part of that salary, as the case may be, shall, for the purposes of sub-section (2), be ascertained -

(a) where the rate is a weekly rate - by multiplying the weekly rate by 52;

(b) where the rate is a monthly rate - by multiplying the monthly rate by 12; and

(c) in any other case - in such manner as is prescribed."

The primary argument for the Commissioner of Superannuation and the Australian National Airlines Commission as to why, as a matter of interpretation of the Act, Mr Carpenter's shift allowances did not constitute "salary" as defined in sub-s. 5(1) turned on the terms of that sub-section. It was argued that the presence of para 5(1) (a) revealed a legislative intention that no allowances, even those which would form part of salary or wages according to ordinary concepts, were to be regarded as "salary" for the purposes of the Act except those allowances which the regulations provided were to be treated as "salary".

I cannot read sub-s. 5(1) of the Act in this way and indeed, in my opinion, the legislative intention is plainly to the contrary. It would be curious indeed if "includes" was synonomous with "means" in sub-s. 5(1). The entire structure of the provision - ". . . 'salary' means . . . and includes . . . but does not include . . . " seems inconsistent with such a construction. A clear distinction emerges between the word "means" and the word "includes" in the particular provision, in which they are used by way of contrast. Further, the terms "salary" and "wages" are not terms of art. It seems to me indisputable that the introductory part of sub-s. 5(1), that is "In this section 'salary' means salary or wages", uses the words "salary" and "wages" in the phrase "salary or wages" in their ordinary sense. It is perfectly consistent with this that the sub-section should then go on to provide that "salary" for the special purposes of the Act should also include partial invalidity pension and might also be further extended by regulations to additional allowances or fees. The word "includes" is, in the context, plainly expansive. It cannot be read as merely descriptive of elements which would otherwise constitute salary or wages in the ordinary sense. Such an approach would be inconsistent with para. 5(1)(b) "partial invalidity pension", and would also rob of full effect the primary provision made by sub-s. 5(1) that "'salary' means 'salary or wages'". The paragraph introduced by the word "includes" makes no attempt at legislative definition but merely delegates to the Executive the power to prescribe by regulation what further allowances or fees shall be added to what otherwise constitutes salary or wages. The latter part of sub-s. 5(1) of the Act is also perfectly consistent with the construction which I prefer. Again, Parliament has delegated to the Executive the power to alter what is salary for relevant purposes. Just as regulations may extend what is "salary" for the purposes of the Act, they may also provide that any part of what is "salary or wages" is not to be treated as "salary" for the particular statutory purpose. Obviously, the words "salary" and "wages" are again here used in their ordinary sense. The regulations may not provide that partial invalidity pension is not to be treated as "salary" for the purposes of the Act, nor may they provide that any of the additional allowances or fees covered by para 5(1)(a) are not to be treated as salary for the purposes of the Act, although of course any regulation which provides that they are to be treated as salary for the purposes of the Act may be repealed.

The shift allowances payable to Mr Carpenter were regularly payable to him and his colleagues as an element of the remuneration received by them in respect of their ordinary employment. I agree with the Administrative Appeals Tribunal that, according to ordinary concepts, the amount of Mr Carpenter's salary or wages in respect of any period during which shift allowances were payable to him under the Award included the amount of the shift allowances: cf. Commissioner for Government Transport v. Kesby (1972) 127 C.L.R. 374; Mutual Acceptance Co Ltd v. Federal Commissioner of Taxation (1944) 69 C.L.R. 389.

An additional argument which was addressed by both Counsel for the Commissioner for Superannuation and Counsel for the Australian National Airlines Commission was that, on the construction of sub-s. 5(2) for which they contended, anomalies could result in the calculation of the annual rates of salary of employees if shift allowances, such as those which were payable to Mr Carpenter, formed part of an employee's "salary" for the purposes of the Act. I am by no means convinced that the threatened anomalies are a real possibility, particularly when regard is had to the definition of "final annual rate of salary" in sub-s. 3(1) of the Act. Further, if any such problems could arise, they might also arise in respect of a number of the kinds of allowance which, by regulation 5, are to be treated as salary for the purposes of the Act; for example those provided for in sub-regulations 5(a) and 5(h). There is no requirement in the regulations that the kinds of allowance specified in sub-paragraphs (a) - (k) of regulation 5 must be payable on a regular basis if they are to be treated as salary. Sub-section 5(4), which is a curious provision which seems to add little, if anything, appears to overlook that the only reason for calculating the "amount per annum of an employee's "salary" is because the employee's annual "rate of salary" which is required for the purposes of s.67 of the Act, is defined by reference to the "amount per annum" of his "salary" in sub-s. 5(2). In any event, the meaning and operation of sub-s. 5(2) of the Act itself is so unclear, particularly when taken with sub-s. 5(4), that those provisions form a wholly unreliable foundation for an argument that the construction which another provision would otherwise bear should be influenced by the effect which that construction would have upon the operation of sub-ss. (2) or (4) of s.5.

The conclusion at which I have arrived, namely that shift allowances in respect of shifts falling wholly within an employee's normal hours of duty are "salary" for the purposes of the Act, accords to the Act and regulations a symmetry which would otherwise be missing. There is no reason, in logic or policy, to exclude from what is "salary" allowances in respect of shifts which fall wholly within an employee's normal hours of duty but to include, by regulation 4(b), allowances in respect of shifts that fall in whole or in part outside the employee's normal hours of duty provided that there is a sufficient degree of continuity. On the other hand, regulation 4(b) has a perfectly sensible and beneficial operation if, as I think, no regulation was called for in those cases in which shifts by reference to which allowances are paid fall wholly within an employee's normal hours of duty. Regulation 4(b) then ensures that allowances in respect of other shifts are also brought to account, provided that there exists the requisite degree of continuity.

Additional questions which were raised by Counsel for the Commissioner for Superannuation only arose if the shifts which attracted shift allowances to Mr Carpenter fell in whole or in part outside the normal hours of duty under the terms and conditions of his employment so that the shift allowances were allowances of a prescribed kind under regulation 4(b). Having regard to the view which I have expressed, it is unnecessary for me to decide such matters.

No question was raised as to the form of order made by the Administrative Appeals Tribunal. In the circumstances, the appropriate order is that the appeal should be dismissed with costs.