Defence Force Retirement and Death Benefits Authority v Mathews
[2011] FCA 160
•2 March 2011
FEDERAL COURT OF AUSTRALIA
Defence Force Retirement and Death Benefits Authority v Mathews [2011] FCA 160
Citation: Defence Force Retirement and Death Benefits Authority v Mathews [2011] FCA 160 Appeal from: Mathews v Defence Force Retirement and Death Benefits Authority [2010] AATA 548 Parties: DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY v NICHOLAS MATHEWS File number: NSD 1084 of 2010 Judge: MOORE J Date of judgment: 2 March 2011 Catchwords: ADMINISTRATIVE LAW – Retirement schemes – whether member of Defence Force remained an eligible member of the Defence Force Retirement and Death Benefits Scheme – meaning of "valid election" for the purposes of s 61B(3) of the Defence Force Retirement and Death Benefits Act 1973 (Cth) - whether respondent a member of the Military Superannuation Benefits Scheme and disentitled to retirement pay otherwise payable. Legislation: Defence Force Retirement and Death Benefits Act 1973 (Cth) ss 3, 5, 5A, 17, 23, 61B
Military Superannuation and Benefits Act 1991 (Cth) s 6
Naval Defence Act 1910 (Cth) s 32ACases cited: Chapman v Defence Force Retirement and Death Benefits Authority (2001) 108 FCR 537
Defence Force Retirement and Death Benefits Authority v Chapman (2001) 63 ALD 351
Defence Force Retirement and Death Benefits Authority v Gregory (2009) 179 FCR 535Date of hearing: 9 December 2010 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 43 Counsel for the Applicant: D O'Donovan Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: P R Callaghan SC and H P T Bevan Solicitor for the Respondent: Essex Legal
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1084 of 2010
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY
Applicant
AND: NICHOLAS MATHEWS
Respondent
JUDGE:
MOORE J
DATE OF ORDER:
2 MARCH 2011
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The appeal is allowed.
2.The decision of the Administrative Appeals Tribunal of 22 July 2010 is set aside.
3.The matter is remitted to the Tribunal for determination according to law.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1084 of 2010
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY
Applicant
AND: NICHOLAS MATHEWS
Respondent
JUDGE:
MOORE J
DATE:
2 MARCH 2011
PLACE:
SYDNEY
REASONS FOR JUDGMENT
This is an appeal from a decision of the Administrative Appeals Tribunal: Mathews v Defence Force Retirement and Death Benefits Authority [2010] AATA 548. The appeal raises a question of law concerning the payment of retirement pay to the respondent and whether the Military Superannuation and Benefits Act 1991 (Cth) operates to disentitle him to retirement pay otherwise payable under the Defence Force Retirement and Death Benefits Act 1973 (Cth).
Background
The respondent served in the Navy for over twenty years. He retired on 30 June 1997. He started receiving retirement pay under the Defence Force Retirement and Death Benefits Scheme (the old scheme) established by the DFRDB Act. It is common ground his entitlement to retirement pay at this point was not under the new scheme, the Military Superannuation and Benefits Scheme, established by the MSB Act in 1991.
On 6 January 2003 the respondent commenced a period of continuous full time service in the Reserves. That period of service was stipulated to be for more than twelve months. It ended on 31 December 2004. On 19 December 2002 the respondent made an election under the DFRDB Act effectively to remain a member of the old scheme. It is common ground that this election was effective.
On 11 November 2005 the respondent commenced another period of continuous full time service in the Reserves. That period was again stipulated to be for more than twelve months. It ended on 15 February 2007. On 11 October 2005 the respondent purported to make an election under the DFRDB Act effectively to remain a member of the old scheme. It is common ground that this election was unnecessary. I will discuss the precise terms of both the 19 December 2002 and 11 October 2005 elections later in these reasons.
On 18 February 2007 the respondent commenced another period of continuous full time service in the Reserves (the contentious period). In contrast to the preceding periods, the contentious period was stipulated to be for less than twelve months, commencing 5 February 2007 and concluding on 25 January 2008. He was offered the further service in a letter dated 18 January 2007. The letter said:
The purpose of this letter is to advise you that, subject to your acknowledgment to the Conditions of Service set out below, security clearance and medical fitness, you will be employed in a Permanent Navy position as a member of the Naval Reserves on Unprotected Continuous Full Time Service (CFTS) commencing 5 February 2007 to the expiration of 25 January 2008.
Reserve personnel serving on CFTS are entitled to the same remuneration and conditions of service, and subject to the same service obligations, laws, regulations and procedures as a Permanent Force member. These Conditions of Service include a liability for service at sea. Specific Conditions of Service relating to salary and superannuation are detailed at Annex A.
You are requested to sign the attached proforma and return it to the Directorate of Naval Officers' Postings as soon as possible. If you have any queries regarding this matter, please direct them to Staff Officer (Reserves), LCDR Lewis Gaha, Telephone: (02) 6265 3273, Facsimile: (02) 6265 1189, or E-mail: [email protected].
You should note that this CFTS is only for the period specified above and that an extension to this CFTS period cannot be guaranteed.
On 12 February 2007, the respondent executed an undertaking to serve for the period 18 February 2007 to 25 January 2008. The undertaking was in the following terms:
AUSTRALIAN NAVAL RESERVE
CONTINUOUS FULL TIME SERVICEI, T/Commander Nicholas James MATHEWS M8068678 declare that I am a volunteer to render Unprotected Continuous Full Time Service for a period of eleven months from 18 February 2007 [a typed "5" is crossed out in the original and replaced with "18" in handwriting] to the expiration of 25 January 2008 in the Permanent Navy and that, if accepted, I am bound under the Naval Defence Act to complete that period of Continuous Full Time Service. I further agree to the Conditions of Service referred to in Royal Australian Navy (Directorate of Naval Officers’ Postings) letter DNOP. 142/07.R dated 18 January 2007.
Civil Charges or Convictions
You are required, prior to your commencement of CFTS, to notify the Director Naval Officer’s Postings of any pending criminal charges that are currently outstanding and also to notify the Director Naval Officer’s Postings of any prior civil convictions that have been recorded against you. Failure to do so may result in your termination from Reserve naval service.Signature....(signed)… Name (Please Print)……..N J MATHEWS
Date………..12 FEB07 Rank/Category…………..CMDR SUWitness…………………. Name (Please Print)..M G DOHERTY
Date….12 FEB 07Naval Defence Act 1910 Part IV
Section 32A (3)A member of the Naval Reserve may at any time voluntarily undertake to render Continuous Full Time Service for a period specified by him and, if that undertaking is accepted, he is bound to render that form of service for that specified period, as the prescribed authority directs.
The reference in this document to the Naval Defence Act 1910 (Cth) is to the following provision:
s 32A(3)
A member of the Naval Reserve may, at any time, voluntarily undertake to render continuous full time naval service for a period specified by him and, if that undertaking is accepted, he is bound to render that form of service for that specified period, or for such period or periods within that specified period, as the Chief of Navy directs.Although the contentious period was to conclude on 25 January 2008, during the period an offer was made and accepted to extend it to end on 26 June 2009. Also in contrast to both the preceding periods, prior to commencing the contentious period the respondent did not make an election under the DFRDB Act. Rather, on 26 February 2007 he completed a form and ticked a box saying he had "previously re-entered the Defence Force and made such an election at that time". The respondent resigned effective 30 May 2008 when issues arose concerning his entitlements to retirement pay under the old scheme.
The respondent began a fourth period of continuous full time service on 1 December 2008 to 27 November 2009. During that period, an offer was accepted to extend it to conclude in January 2011.
The legislation
One matter concerning the legislative framework should be noted at the outset though it will be discussed in detail later. When the new scheme was introduced by the MSB Act in 1991, a number of amendments were made to the DFRDB Act by the MSB Act (Part 10). It is comparatively clear that these amendments to the DFRDB Act (including amending the definitions of "eligible member of the Defence Force" and "recipient member" together with the enactment of 5A, s 24(1A) and ss 61B, 61C and 61D) were intended to govern the interaction between the old scheme and the new scheme and create an harmonious pension system involving two schemes with the old being superseded by the new though continuing to operate in relation to then members of the Defence Force who wished to continue to be participants in that scheme.
In summary the legislation operates this way. Section 6 of the MSB Act declares who is in the new scheme. A person not in the new scheme and remaining in the old scheme is an "eligible member of the Defence Force for the purposes of the DFRDB Act" (see s 6(2) of the MSB Act). Individuals who wish to remain in the old scheme must, in certain circumstances, make an election in writing under s 61B of the DFRDB Act.
Turning to specific provisions, the DFRDB Act provides:
Section 3
contributing member means a member of the Defence Force who is making, or is required to make… contributions under section 17.
eligible member of the Defence Force means:
(a)a member of the Defence Force who:
(i)is serving on continuous full-time service under an appointment or engagement, or under a re-appointment or re-engagement, for a period of not less than one year; or
(ii)is serving on continuous full-time service, being service that is continuous with previous continuous full-time service that was, or included, service under an appointment or engagement, or under a re-appointment or re-engagement, for a period of not less than one year; or
(b)a member of the Defence Force:
(i) to whom paragraph (a) does not apply;
(ii) who is serving on continuous full time service; and
(iii) who, immediately before commencing to serve, was a recipient member, …
but does not include
(c)a person who, under section 5A, is excluded from this definition;
(d)a person to whom section 90 applies and who does not make an election under that section; or
(e)a person who has ceased, or is taken to have ceased, under section 134 or 138 to be an eligible member of the Defence Force.
recipient member means a member of the scheme who is entitled to retirement pay or invalidity pay, and includes:
…
(b)a member of the scheme who, but for the suspension of his or her retirement pay under subsection 61C(1), would be entitled to retirement pay.
...
Section 5
(2)Where a contributing member ceases to be on continuous full time service but continues to be a member of the Defence Force he shall, for the purposes of this Act, be deemed to have retired on the day on which he ceases to be on continuous full time service.
Sections 3 and 5 identify as a "contributing member" a person who currently contributes or previously contributed to the old scheme while serving full time as a member of the Defence Force. That person is treated as having retired when he or she ceases full time service. A recipient member is a person who is entitled to receive, relevantly, a pension under the old scheme.
Section 5A operates (together with the definition of "eligible member") to exclude from the old scheme any person who joined the Defence Force after 1 October 1991 or any Defence Force retiree who may return to full time service for twelve months or more who has not made a valid election to become a contributory member. I note parenthetically that there is not complete consistency of language with s 5A speaking of an election to become a "contributory" member in contradistinction to the expression "contributing member" in s 61B. However this is probably simply an inelegance of drafting. The section provides:
Section 5A
(1)Subject to subsection (2), a person who:
(a)becomes, on or after 1 October 1991, a member of the Defence Force; or
(b)being a member of a Reserve, commences on or after that day to render continuous full-time service for a period of not less than 12 months;
is excluded from the definition of eligible member of the Defence Force in subsection 3(1).
(2)Subsection (1) does not apply to:
…
(b)a person to whom section 61B applies and who has elected under that section to become a contributory member.
A person serving in the Defence Force, who is not excluded from the old scheme by s 5A, must pay fortnightly contributions, unless that person (such as a Defence Force retiree) was receiving benefits immediately prior to their current appointment and that appointment is for less than twelve months. By making contributions, the person engages the definition of "contributing member". Section 17 provides as follows:
Section 17
(1)Subject to sections 18 and 18A, an eligible member of the Defence Force shall pay to the Commonwealth fortnightly contributions in accordance with this Act.
(1A)Subsection (1) does not apply to an eligible member of the Defence Force who:
(a)was a recipient member immediately before he became an eligible member; and
(b)is serving under an appointment or enlistment for a period of less than one year that commenced after the commencement of this subsection.
(Emphasis added)
Section 23 creates an entitlement to a pension payment. It operates, relevantly, to entitle a contributing member in the old scheme who retires after serving at least twenty years to retirement pay. The section provides:
Section 23
(1)Where a contributing member retires and is not entitled to invalidity benefit and:
(a) on his retirement:
(i) his total period of effective service is not less than 20 years; or
(ii)his total period of effective service is not less than 15 years and he has attained the retiring age for the rank held by him immediately before his retirement; or
(b)he had previously become entitled to retirement pay under this Act or pension, other than invalidity benefit, under the previous legislation that was cancelled under section 62 upon his becoming an eligible member of the Defence Force;
he is entitled, on his retirement, to retirement pay at the rate applicable to him in accordance with this section.
…
Sub-sections 61B(1) and (2) operate to require, relevantly, a retiree receiving a pension under the old scheme, who intends to resume service in the Defence Force (including in the Reserves) for a period of twelve months or more, to elect whether to become a contributing member (cf. ss 3 and 5) of the old pension scheme or to join the new scheme. The election must be in writing and be made before the service is resumed. In the event a person does not make such an election, they will be excluded from the old scheme by operation of s 5A.
Sub-section 61B(3) operates to require, relevantly, a retiree receiving a pension under the old scheme, who intends to resume service in the Defence Force (including in the Reserves) for a period of less than twelve months, to elect whether to join the new scheme. The section provides:
Section 61B
(1) Where a person:
(a)who is a recipient member; or
(b)in respect of whom deferred benefits are applicable under section 78;
intends to resume full-time service:
(c)as a member of the Permanent Forces; or
(d)as a member of a Reserve for a continuous period of not less than 12 months;
the person must, before resuming service, in writing addressed to the Authority, elect:
(e)to become a contributing member; or
(f)to become a member of the MSB Scheme.
(2) Subsection (1) does not apply if the person has previously:
(a)made an election under that subsection; or
(b)made, under subsection (3), an election to become a member of the MSB Scheme.
(3) A recipient member who:
(a)intends to resume full‑time service as a member of a Reserve for a continuous period of less than 12 months; and
(b)has not previously made, under this section, an election to become a member of the MSB scheme;
must, before resuming service, in writing addressed to the Authority, elect whether or not to become a member of that scheme.
The MSB Act provides:
Section 6
(1)Subject to subsection (2), each of the following persons is, by force of this section, a member of the Scheme:
(a)a member of the Permanent Forces;
(b)a member of the Reserves who is rendering continuous full-time service under an undertaking to serve for period of not less than 12 months;
(c)a member of the Reserves who is rendering continuous full-time service under an undertaking to serve for a period of less than 12 months unless that member has elected not to become a member of the Scheme under section 61B of the DFRDB Act.
(2)In spite of subsection (1), a person is not a member of the Scheme if the person is an eligible member of the Defence Force for the purposes of the DFRDB Act.
The effect of section 6 is discussed later.
The Tribunal decision
It can be seen that both in s 61B(1) and (3) there is a reference to "intends to resume service" of a particular type. The Tribunal approached the matter on the footing that this expression raised for consideration what the individual (in this case the respondent) actually intended rather than simply the length of the period of service specified in the written undertaking to serve. It accepted that the respondent's intention when embarking upon the contentious period was to serve for more than twelve months, notwithstanding that the undertaking to serve expressed it to be for a period of eleven months. It found that the respondent's election on 19 December 2002 not to join the new scheme, in conjunction with his intention to resume service for more than twelve months when entering the contentious period of employment, rendered it unnecessary for him to make a further election. These conclusions are reflected in the following passage from the Tribunal’s decision:
24. I accept that CDR Mathews' intention was to undertake CFTS for a period of not less than 12 months. In coming to that view I accept that it was more than just CDR Mathews' preference to work in the Navy as much as possible until compulsory retiring age. He was very well-informed: he came to a view about his prospects, having regard to his background as Fleet HR manager, knowing of vacancies at his level, and the unlikelihood of sufficient replacements – either regular or reserves – in the foreseeable future. He was attuned to factors that might affect the likelihood of extension. Even on an objective test his intention of extension was a reasonable one.
25. I am also satisfied that s 61B(2) operates in such a way as to relieve CDR Mathews from the requirement of making a further election in relation to any service for continuous periods of greater than 12 months. I agree with the submission that if it were the intention of Parliament to require that each period of service be preceded by a new election, such a requirement would have been clearly articulated in the DFRDB Act. A valid election to maintain membership of the DFRDB Scheme remains extant until revoked by a subsequent election to opt into the MSB Scheme. Consequently, there is no requirement to continue making elections to remain a member of the DFRDB Scheme. …
The Tribunal found that the respondent did not cease to be a member of the old scheme as an election under s 61B(1) of the DFRDB Act to be a contributing member in the old scheme had already been made.
The application to this Court
In the notice of appeal filed 23 August 2010, the questions of law identified were, in terms:-
(1)Whether the Tribunal erred in law in determining that an election made for the purposes of s 61B(1) could and did constitute a valid election for the purposes of s 61B(3) when made prior to the Respondent resuming service for a continuous period of less than 12 months.
(2)Whether the Tribunal erred in law by having regard to evidence of the Respondent's subjective intentions in determining whether, for the purposes of s61B(3), he was a recipient member who intended to resume full time service as a member of a Reserve for a continuous period of less than 12 months.
The applicant indicated that it was running the proceedings as a test case.
The applicant contended that there were only two possible bases on which it could be argued that a person rendering continuous full time service under an undertaking to serve for a period of less than twelve months could avoid becoming a member of the new scheme. First, by making an election not to become a member of the new scheme under section 61B of the DFRDB Act (which excludes the operation of section 6(1) of the MSB Act). Alternatively, by satisfying the definition of "eligible member of the Defence Force" (section 6(2) of the MSB Act). The applicant contended that the respondent had not satisfied either requirement and consequently had not avoided becoming a member of the new scheme.
The respondent contended that the Tribunal did not fall into error by considering his "subjective intention". The finding concerning the respondent's intention was open to the Tribunal on the evidence available having regard to s 61B of the DFRDB Act. The Tribunal noted that the letter of offer to the respondent which included the phrase "an extension to the CFTS period could not be guaranteed" at least contemplates the possibility of an extension. This is supported by the evidence of the Director of Naval Officers' Postings that it is quite common for such a posting to be extended part way through the term. The surrounding circumstances relevant to an assessment of the respondent's intention under s 61B of the DFRDB Act were considered objectively by the Tribunal. It was correct in concluding that it was the intention of the respondent at 18 February 2007 that he would serve "for a continuous period of not less than 12 months" and that s 61B(1) did not apply to the respondent because he had earlier made an election under that subsection to be a contributing member in the old scheme and not become a member of the new scheme.
The respondent contended that the Tribunal correctly found that s 61B(3) did not apply to the respondent. It was submitted that the respondent did not cease to be a member of the old scheme nor fall within the scope of s 6(1)(c) of the MSB Act which would apply to exclude him from membership of the new scheme, irrespective of the construction of s 6(2) of the MSB Act and s 5A of the DFRDB Act. Section 61B(2) operated to relieve the respondent from making a further election and s 61B(3) has no application.
Consideration
It is convenient to commence by considering some of the authorities. The consequences of failing to make an election under s 61B of the old scheme were considered in detail in Defence Force Retirement and Death Benefits Authority v Gregory (2009) 179 FCR 535. In that case the respondent had served for more than twenty years in continuous full time service in the regular Army and retired on 28 October 2001. He transferred to the Army Reserve and was entitled to receive retirement benefits under the old scheme as a "recipient member" (s 23 of the DFRDB Act). Subsequently, on three separate occasions between 2003 and 2006, he resumed continuous full time service. When the respondent resumed service in 2003 he did not provide a written notice under s 61B(3) and, in default of notification he became by operation of s 5A(1)(a) of the DFRDB Act and s 6 of the MSB Act a contributing member of the new scheme. Due to an administrative error the respondent's pension was not suspended and he was paid $37,472. The respondent claimed that when he resumed service for four months he became an "eligible member of the Defence Force" under s 3(1) of the DFRDB Act and asserted that s 6(2) of the MSB Act operated to exclude him from the new scheme.
Justice Cowdroy held that the respondent's failure to make an election under s 61B(3) of the DFRDB Act resulted in the respondent not being excluded from the operation of s 5A(1)(a) of the same Act and therefore he ceased to be an "eligible member" from the time he recommenced service. It was held that the new scheme makes it clear that failure to elect under s 61B has the consequence of placing the respondent in the new scheme. While the respondent had made an election under s 132 of the DFRDB Act, this was held to be a different election to the one required by s 61B(3) and a fresh election was required. His Honour referred to the decision of the Full Federal Court in Chapman v Defence Force Retirement and Death Benefits Authority (2001) 108 FCR 537 and the reasoning of Weinberg J at first instance in Defence Force Retirement and Death Benefits Authority v Chapman (2001) 63 ALD 351 regarding the importance of s 5A(1)(a) of the DFRDB Act.
In Chapman the appellant did not remain in the old scheme because he did not become an "eligible member of the Defence Force" under s 3(1) of the DFRDB Act when he transferred from the Army Reserve to the regular Army. He was required to contribute to the new scheme after his application to rejoin the old scheme had been rejected. Justice Weinberg held at [75] that the effect of s 5A was to close the old scheme to all but a very limited classes of re-entrants specifically identified in s 5A(2) and at [25] referred to the second reading speech of the Minister for Defence Science and Personnel:
The Military Superannuation and Benefits Bill has the effect of making the existing Defence Force Retirement and Death Benefits (DFRDB) scheme a closed scheme. That is to say that the only persons who will be permitted to join the superseded scheme will be pensioner re-entrants who chose not to join the new Military Superannuation and Benefits scheme and a couple of rare classes of re-entrants.
His Honour observed at [44] that Parliament should be understood to have intended to close the doors on access to the old scheme as at 1 October 1991 and to have closed the door to persons who alter the nature of their service so as to commence rendering service on or after that date.
In the present case the form which might constitute an election for the purposes of s 61B(3) (or, for that matter, s 61B(1)) was lodged on 26 February 2007, eight days after the respondent had begun the contentious period of service on 18 February 2007. If the respondent had to make an election in writing for the purposes of s 61B (either s 61B(1) or s 61B(3)), it had to be made before he commenced the service. He did not make such an election. The critical question is whether a further written notice of election was necessary. It was not if the respondent had "intend(ed)" to resume full-time service for a continuous period of not less than 12 months and had, for the purposes of s 61B(2)(a), earlier made an election under s 61B(1) which had in fact been done.
The Tribunal found at [24] that the notion of intention can comprehend the respondent’s subjective intention. I do not agree. Rather, it is apparent from the statutory scheme the intention is to be gleaned from the instrument of appointment, namely the signed undertaking to serve. This, in my opinion, is clear from the MSB Act which not only established the new scheme but also amended the DFRDB Act.
Membership of the new scheme arises by operation of s 6 of the MSB Act which identifies two categories of members of the Reserve who might, by operation of the section, be members of the new scheme. The first category is "…a member of the… Reserve Forces who is rendering continuous full-time service under an undertaking to serve for a period of period of not less than 12 months" (emphasis added). So the characteristic that places a person in this category is that they are rendering continuous full-time service under an undertaking to serve for a period of not less than 12 months. The characteristic depends on the nature (and thus the terms) of the undertaking to serve, namely that it be for a period of not less than 12 months. So the characteristic placing a person in this first category is what the undertaking to serve identifies as the period of service.
However s 6(2) declares a person in this first category is not a member of the new scheme if they are an eligible member of the Defence Force for the purposes of the DFRDB Act. That is to be ascertained by reference to the definition of "eligible member of the Defence Force" in s 3 of the DFRDB Act introduced by the MSB Act which, in part, depends on the operation of s 5A(1) of the DFRDB Act (again introduced by the MSB Act). Because of s 5A(2) the operation of s 5A(1), in turn, depends on s 61B. That is to say a person potentially in this first category will be excluded from it if they have made an election under s 61B(1) to become a "contributing" member. It is in s 61B(1) that we find this notion of a member "intend[ing]" to resume service as a member of the Reserve for a continuous period of not less than 12 months. Yet this subsection will, by the statutory path just described, operate on a person who is potentially a member of the first category. That is, having the characteristic described earlier which depends on the terms of the instrument of appointment. It is difficult to accept that the intention referred to is to anything more than the "intention" manifest by the terms of the undertaking to serve.
That conclusion is reinforced by the way the second category is ultimately populated. The second category is, having regard to s 6(1)(c), a member of the Reserves who is rendering continuous full-time service under an undertaking to serve for a period of less than 12 months. Again the defining characteristic of membership of this second category is the terms on which the undertaking to serve is stated. Expressly excluded by s 6(1)(c) from this category is a person who has made an election under s 61B not to be a member of the new scheme. The way that exclusion is framed takes us directly to s 61B(3) which again refers to intention. There is, in my opinion, an absolute symmetry, deliberately created, between the way s 6 is structured and the categories it establishes and the way s 61B can operate to exclude people from the reach of s 6. That symmetry arises only if the intention referred to in both s 61(1) and (3) is viewed as no more than what is disclosed as the period of service in the undertaking to serve.
The other approach which would flow from the construction adopted by the Tribunal and advanced by the respondent involving an assessment that the subjective intention of the person involved (even if assessed objectively), is that s 61B could potentially operate differentially on a person potentially in the second category earlier discussed. That is a person potentially in that category (a person rendering continuous full-time service under an undertaking to serve for a period of less than 12 months) could either make an election under s 61B(1) or s 61B(3) depending on their subjective intention about whether they aspired to serve for 12 months or more and if the former, their need to do so would depend on whether they had earlier made the same election (which would engage s 61B(2)). It is improbable in the extreme, in my opinion, that the framework for the interaction between the two schemes was intended to have this flexibility, or putting it slightly differently, this level of uncertainty.
An alternative submission was made by the respondent on the assumption that he had been, in relation to the contentious period, a member of the Reserves rendering continuous full-time service under an undertaking to serve for a period of less than 12 months for the purposes of s 6(1)(c). It was said that the effective election on 19 December 2002 to remain a contributing member under the old scheme and the unnecessary election to the same effect on 11 October 2005 satisfied the expression "had elected not to become a member" (emphasis added) of the new scheme under s 61B for the purposes of s 6(1)(c).
The Authority contended that the respondent had never elected "not to become a member" of the new scheme. The essence of the argument was as follows. Both earlier elections were under s 61B(1) whereby the respondent elected, as a recipient member, to become a contributing member which, in practical effect, is an election to remain a member of the old scheme. The only occasion for electing not to become a member of the new scheme is the election made under s 61B(3) which speaks of an election “whether or not to become” a member of the new scheme. Under that provision a person can elect to become a member or elect not to become a member of the new scheme. The respondent did neither.
Before discussing the submission, it is desirable to describe what the applicant did on 19 December 2002 and 11 October 2005. On both occasions he completed a pro forma document. The 19 December 2002 document was headed "DFRDB RETIREMENT PAY AND MSBS PENSION RECIPIENTS RE-ENTERING THE ADF". Below the heading were spaces for the respondent to insert some relevant personal details which he did. Below that was a section headed "PART B -- ELECTION BY DFRDB RECIPIENT BEFORE RESUMING SERVICE". That section began with some notes. There then appeared three lines of text. They read (as completed by the respondent):
It can be seen that the respondent was required to choose between alternatives. His express choice (the tick) was not to become a member of the new scheme. As a matter of fact, he did what s 6(1)(c) speaks of when it says "has elected not to become a member of [the new scheme]".
Similarly on 11 October 2005 the respondent completed the top part of the form by providing personal details and then making an election in Part B of the form which was the section for "Election by DFFDB recipient". The form read (as completed by the respondent):
Again, as a matter of fact, the respondent did (when inserting the cross) what s 6(1)(c) speaks of when it says "has elected not to become a member of the [new scheme]".
It seems to me that the critical question is what is comprehended by the expression "has elected not to become a member of the [new scheme] under section 61B" (emphasis added). In the present case, the respondent will not have satisfied this condition only if the only mechanism of the making election under s 61B for the purposes of s 6(1)(c) is making an election under s 61B(3) and the election under that subsection has to have been made shortly before resuming service for a continuous period of less than 12 months. Regrettably, I think this is the way the legislative scheme was intended to operate.
For reasons discussed earlier, a person "intends" to return full-time service for a specified period by manifesting the intention in an undertaking to serve. Accordingly a recipient member will be obliged to make an election under s 61B(1) if the undertaking reveals that he or she is to be serving as a member of a Reserve a continuous period of not less than 12 months. The recipient member is relieved of that obligation if one of the two events referred to in s 61B(2) has already occurred. Both events concern earlier elections. However unless relieved of the obligation to elect in writing, a person on whom s 61B(1) operates, must do so "before resuming service". That plainly is, in my opinion, a reference to the service referred to in, relevantly, s 61B(1)(d). Accordingly the obligation to elect must be met between the time the undertaking to serve is given by a person and the time that person actually resumes the service.
In my opinion, s 61B(3) is intended to operate in the same way. A recipient member will be obliged to make an election under s 61B(3) if the undertaking reveals that he or she is to be serving as a member of a Reserve for a continuous period of less than 12 months. The recipient member is relieved of that obligation if the event referred to in s 61B(3)(b) has already occurred, namely an election had earlier been made to become a member of the new scheme. Because s 61B(3)(b) speaks of an election "under this section", it could have been an earlier election to become a member of the new scheme either under s 61B(1)(f) or s 61B(3). However unless relieved of the obligation to elect in writing, a person on whom s 61B(3) operates, must do so "before resuming service". As with the same formulation in s 61B(1), that is a reference to the service referred to in s 61B(3)(a). The obligation to elect must be met between the time the undertaking to serve is given by a person and the time that person actually resumes the service. Accordingly, the alternative submission of the respondent should be rejected.
Disposition
I acknowledge that the view I have taken of the legislative scheme provides little or no flexibility and can, as already arguably it has in the present case, operate oppressively on a given individual. However, that there is little or no flexibility, I think, is what Parliament intended.
The Tribunal erred in law in reaching the conclusion that the respondent had not failed to make an effective election prior to commencing service on 18 February 2007. The appeal should succeed.
I certify that the preceding forty three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore. Associate:
Dated: 2 March 2011
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