Duffy v Commonwealth
[2013] ACTSC 239
•16 December 2013
RICHARD VINCENT DUFFY v COMMONWEALTH OF AUSTRALIA
[2013] ACTSC 239 (16 December 2013)
TORTS – Negligence – negligent misstatement – pure economic loss – negligent misstatement proven – common law negligence – breach of statutory duty – decided in accordance with Meredith v Commonwealth (No 2) [2013] ACTSC 221
DAMAGES – damages for negligent misstatement – where the negligent misstatement lead the plaintiff to not join a public sector superannuation fund when eligible – where subsequent competing superannuation scenarios arose as a consequence – use of competing actuarial reports in the assessment of damages in these circumstances – turns on its own facts
SUPERANNUATION – Public service funds – availability of public service superannuation funds to ‘temporary’ Commonwealth employees under the Superannuation Act 1976 (Cth) – application of s 3(3) of the Superannuation Act 1976 (Cth) – where an employee resigned but returned after a month – contract did not continue
TAXES AND DUTIES – tax on a judgment sum – whether tax liability will be assessed on a judgment sum – same approach as Guy v Commonwealth [2013] ACTSC 128 – leave granted to apply for award of additional damages if liability assessed
Superannuation Act 1976 (Cth), ss 3, 16, 66,
Superannuation Act 1990 (Cth)
McCarry G J, “Termination of Employment Contracts by Notice” (1986) 60(2) ALJ 78
Sappideen, Carolyn, Paul O’Grady and Geoff Warburton, Macken’s Law of Employment (Lawbook Co, 6th ed, 2009)
Australian Wool Selling Brokers Employers’ Federation v Federated Storemen and Packers Union of Australia (1976) 176 CAR 884
Birrell v Australian National Airlines Commission (1984) 5 FCR 447
Commissioner for Superannuation v Bayley (1979) 41 FLR 385
Emery v Commonwealth (1963) 5 FLR 209
Golden Eagle International Trading Pty Ltd v Zhang (2007) 229 CLR 498
Gunnedah Shire Council v Grout (1995) 89 LGERA 159
Guy v Commonwealth [2013] ACTSC 128
Inchiquin v Lyons (1887) 20 LR (IR) 474
Knight v Commonwealth [2013] ACTSC 238
Livingstone v Rawyards Coal Co (1880) 5 App Cas 25
Meredith v Commonwealth (No 2) [2013] ACTSC 221
New South Wales v Paige (2002) 60 NSWLR 371
Nominal Defendant v Gardikiotis (1996) 186 CLR 49
Re Marshall and Commissioner for Superannuation (1992) 29 ALD 69
Re Rattray and Commissioner for Superannuation (1980) 2 ALD 979
Re Rowe and Commissioner for Superannuation (1987) 14 ALD 216
Reseck v Federal Commissioner of Taxation (1975) 133 CLR 45
Re Wood and Commissioner for Superannuation (1989) 9 AAR 528,
Riordan v War Office [1959] 1 WLR 1046
Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287
Tobin v Commonwealth [2013] ACTSC 240
No. SC 678 of 2005
Judge: Refshauge J
Supreme Court of the ACT
Date: 16 December 2013
IN THE SUPREME COURT OF THE )
) No. SC 678 of 2005
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:RICHARD VINCENT DUFFY
Plaintiff
AND:COMMONWEALTH OF AUSTRALIA
Defendant
ORDER
Judge: Refshauge J
Date: 16 December 2013
Place: Canberra
THE COURT ORDERS THAT:
There be judgment for Richard Vincent Duffy against the Commonwealth of Australia.
The parties provide appropriate material in accordance with these reasons from which the damages payable can be quantified.
The parties be heard as to costs.
This is the proceeding commenced first in time in a series of cases associated with that in which I have given judgment in Meredith v Commonwealth (No 2) [2013] ACTSC 221.
The proceedings were heard together and almost all of the evidence admitted in the hearing of Meredith v Commonwealth (No 2) was admitted in the other cases, including this case.
Nevertheless, each case had some differences both in relation to liability and, inevitably, in relation to the quantum of any damages awarded.
It is, therefore, necessary to deal with each case separately but I do not need to restate much of the background factual material nor much of the general legal argument that I have resolved in Meredith v Commonwealth (No 2). For example, I described the Commonwealth superannuation schemes and their general operation at [23]-[26], which sets a context for these proceedings also. I shall also use the abbreviations for the schemes that I there defined: CSS for the Commonwealth Superannuation Scheme and PSS for the Public Sector Superannuation Scheme.
THE PLEADINGS
The pleadings are relevantly identical to those in Meredith v Commonwealth (No 2), which I have described in that decision (at [8]-[22]) with, of course, Mr Duffy substituted, as plaintiff, for Mr Meredith. I do not need to repeat them but rely on what I there said. There were also differences in some particulars, but I do not need to address that specifically.
THE EVIDENCE
The evidence of Mr Duffy
Mr Duffy set out his evidence in a comprehensive affidavit filed in the proceedings.
At the date the proceedings were heard, Mr Duffy was fifty-nine years old, turning sixty in the final days. He married in 1972 and had four children.
He and his wife divorced in 1985 and he remarried in 1988, the union resulting in one child.
In 1979, he applied for a job in ACT Forests, an agency I have described in Meredith v Commonwealth (No 2) at [4], and which I will, as in that decision, refer to as “ACT Forests”.
In November 1979, he went to a forestry depot operated by ACT Forests, the Uriarra depot, where he was interviewed by William (Bill) Bates and Graham McKenzie-Smith. Mr Bates was, at the time, Overseer at Uriarra depot and Mr McKenzie-Smith the Forester-in-Charge.
Mr Duffy said that he received some general information about the nature of his employment and the type of duties he would be expected to perform but did not recollect receiving any documents. He was told though he does not remember which of the interviewers told him, that “[i]f you get the job, you’re in for life if you want to”. He was, however, told that there would be a probationary period of, he thought, three months. He was not given any information about any eligibility to join a Commonwealth superannuation scheme.
About two weeks later, he was told he had the job and commenced on 19 December 1979.
There were three gangs at the Uriarra depot. Tree marking was carried out by Mr Attillio Padovan, but he mostly worked by himself; there was a logging gang; and there was a general forest work gang. Mr Wayne Meredith was the Ganger for the latter gang, to which Mr Duffy was mostly assigned to work at the time.
Mr Duffy said that the Overseer, Mr Bates, was the person he would speak to if he had any questions relating to employment, including issues such as payment errors, time off work and the like. Management tended to communicate with employees orally at the beginning of each day when the workers were gathered at the depot. There were, sometimes, meetings organised and there was a noticeboard in the office and one in the recreation room, on which various notices were posted from time to time.
Mr Duffy said that he did not check the noticeboards very often but did so occasionally. He said that not much went up on either noticeboard and what was up usually stayed for a fair time. He could not recall there ever being anything on the noticeboard about Commonwealth superannuation, though he does recall a notice at one time about private superannuation.
In early 1980, he heard other workers talking about superannuation and the fact that they could not join a Commonwealth superannuation scheme. He was told at some stage that three employees were members of a Commonwealth superannuation scheme, namely Mr Bates, Ashley Ritherdon (one of the truck drivers) and Mr Padovan. The latter two had, at the time Mr Duffy started working, been working at the depot for a long time.
Mr Duffy spoke to his father, who told him of the benefits of superannuation, and he decided to see if he could join a Commonwealth superannuation scheme. I shall use that generic term for the various schemes that were in operation during Mr Duffy’s employment. He said that, at that stage, he would have had no trouble contributing to superannuation from his wages.
Mr Duffy said that, in approximately March or April 1980, when he had completed his probation, he spoke to Mr Bates in his office. To the best of his recollection he said to Mr Bates, “I want to join super, am I able to join?” and Mr Bates replied, “I’ll find out and will let you know”.
A few days later he was waiting with some other workers in the morning preparing for their daily assignments. Mr Bates and Mr McKenzie-Smith were standing nearby and he went up to Mr Bates and said, words to the best of his recollection, “[h]ow did you go with the super, Bill?” Mr Bates replied, “[y]ou’re not entitled to join”. He then asked, “[w]hy not?” and Mr Bates then said “[b]ecause you’re blue collar worker”. He said, “[h]ow come you, Ashley and Padovan are in it then?” Mr Bates said “[w]e’re entitled because we’re permanent, the rest of you are only temporary”.
Mr Duffy felt annoyed because he considered himself a full-time worker and, to that extent, a permanent employee. He also intended to remain in government employment indefinitely.
He accepted, however, what Mr Bates had told him and believed that he was not eligible, though he did not think that was fair. Because of what he had been told, he did not make any further inquiries and did not make an application to join a Commonwealth superannuation scheme.
He had earlier, in 1969 or 1970, taken out a life insurance policy and he paid premiums on that life policy for a few years before cashing it in. He did so because he thought the policy was not performing well and was not worth the premiums paid. As a result, he felt distrustful towards private superannuation.
He had heard that government superannuation was a better investment and, if he had known that he was eligible when first he enquired about it, he would certainly have joined.
He was aware that insurance representatives came to visit at the Uriarra depot from time to time and recalled one occasion when a representative came to the depot to sell private superannuation policies, but he did not join. He was aware that the Overseer or acting Overseer was present and would have been aware that insurance representatives were also present.
Mr Duffy resigned his employment on 9 April 1984 (in some documents, it was said to be on 6 April 1984) because of personal difficulties. After about a month’s interruption following his separation from his first wife, Mr Duffy returned to work on 7 May 1984 at the Uriarra depot but rented a cottage at the Pierce’s Creek depot of ACT Forests.
He recalls that, sometime in 1985, he had a conversation with John Reardon, a machinery operator in the carpenter’s shop at Pierce’s Creek. Mr Reardon mentioned that he was a member of a Commonwealth superannuation scheme but “did not say much more about it”. This concerned Mr Duffy as he assumed that Mr Reardon would have the same eligibility as he had and he spoke to Mr Meredith one morning saying “John Reardon has told me he is in the superannuation fund. I was previously told that we were not eligible. What do you think about it?”
Mr Meredith replied, with the words to the effect “[w]e’re not entitled to it” and Mr Duffy then asked him: “[c]ould you find out about it?”
Mr Meredith agreed to do so and came back a few days later. Mr Duffy said “[w]hat did you find out about it?” and Mr Meredith replied “[w]e are not entitled”. This confirmed what Mr Duffy had previously been told and he assumed it was correct.
In the proceedings before me, Mr Duffy accepted that, when he first asked Mr Bates about eligibility, he was not in fact eligible because he had not then met the prior service required as a pre-condition for membership, but he would have been eligible on 19 December 1980 and said, had he received the correct information, he would then have applied to join.
In around late 1986, he joined a private superannuation scheme with a private insurer. He would not have joined that scheme if he had joined a Commonwealth superannuation scheme.
Mr Duffy said that he does not recall ever seeing or hearing any information suggesting that he was, in fact, eligible to join a Commonwealth superannuation scheme until around 1995 or 1996. He said that he could not recall seeing any pamphlets, newsletters, letters or notes advising of any eligibility and he believes that, had he received any such information, he would have applied to join immediately.
He was, at one stage, the representative for his union, the Australian Workers Union, at Pierce’s Creek and he would put up notices on the board, but he did not see any notices about Commonwealth superannuation.
On 9 September 1992, he signed a form headed “Industrial Wages Transfer – Personal Information”. On the form, he indicated that he was not a member of a government superannuation scheme but that he was a member of the Australian Government Employees Superannuation Trust (AGEST). He became aware subsequently that part of the form included the following: “If you would like to join the government superannuation scheme, please contact a member of your wages team prior to transfer”. He said that he could not recall reading that part of the form and he did not keep a copy of the form.
In October 1988, he remarried and, in 1991, his wife commenced casual work with the Commonwealth. She joined a Commonwealth superannuation scheme. Because she was an office worker and he was an “industrial employee” or “blue collar worker”, he did not consider that her membership was an indication that he might be entitled to join.
In approximately August 1993, Mr Duffy and his wife jointly purchased a house in Canberra for approximately $130,000, borrowing $123,000.
In 1994, he was transferred to another government agency, the ACT Fleet at the Fyshwick depot, where his duties involved truck driving and towing a chipper.
In about 1995 or 1996, he worked for Totalcare Industries Ltd, contracted out to undertake tree surgery at Kambah. A plant operator at the time advised him that he had recently discovered that they were entitled to join a Commonwealth superannuation scheme. At that time, however, he was already paying into a private superannuation account and his wife was not working due to a work injury. He could not afford to pay a contribution to a Commonwealth superannuation scheme and also the private superannuation. He made contact with the private insurer and discovered that if he cancelled his superannuation, his contributions would be returned but he would receive no other benefits. This was because if he cancelled within ten years of joining, he would not get any benefits other than the contributions he had made to date. He decided, accordingly, not to cancel the superannuation scheme, a scheme which he would not have taken out had he joined a Commonwealth superannuation scheme in 1980.
In early 1997, he had a conversation at his employer’s pay office about superannuation and was advised to join the PSS. He did so on 16 July 1997, contributing 5% of his salary. Because he had then been a member of the private superannuation scheme for more than ten years, he cancelled the policy without any penalty on 20 August 1997. His balance of $13,000 was rolled over into the PSS and on 7 May 1999, he transferred the accumulated funds of $19,900.16 in the AGEST into his account in the PSS.
He accepted a voluntary redundancy on 30 September 1999 and received a redundancy package from Totalcare Industries Ltd of $30,556.33. He also received $10,969 gross long service leave entitlement and $6,313 gross annual leave entitlement. He received a cash payment from the PSS of $8,602.63 (gross) and the remaining equity in PSS of $35,045.83 was rolled over into a private superannuation fund, as he was advised at the time that he could not make further contributions to the PSS if he was not a government employee.
He then went into business with a fellow worker, using his redundancy payout and a loan from his father to fund his portion of the purchase price of the business. Nineteen months later, he sold his share of the partnership business to his partner for the same amount, $60,000, as he had originally invested.
On 19 February 2000, his father died and he received $62,000 from the estate, which he put into a CPS Credit Union account.
In the same year, he and his second wife separated though they remained on good terms. She transferred her interest in the matrimonial home to him and he paid her $25,000 as a property settlement. He was required to reduce the mortgage and he used most of the proceeds from his father’s estate for these payments.
He and his second wife reconciled in August 2001; he sold the Canberra house for $175,000 and, after repayment of the mortgage, received $91,000. His wife had acquired a property after the separation and she sold that for between $120,000 and $130,000; the proceeds were received by both of them.
In 2001, they jointly purchased a farm in Queensland for $120,000, for which they paid cash.
In June 2002, Mr Duffy purchased a hair salon business in Canberra for $45,000, a sum which he borrowed using the Queensland farm as security. He invested another $35,000 to $45,000 in the business but it proved to be unsuccessful and he sold it in 2004 for $7,000.
He and his wife then purchased a property in Queensland for between $120,000 and $130,000. They then sold their original farm for $235,000 in August or September 2004, receiving net proceeds of $140,000.
In September 2004, they purchased another property in Queensland for $169,000, borrowing $123,000 for the purchase.
In February 2005, Mr Duffy received a payment from his private superannuation of his preserved PSS benefit amounting to $44,000.
In 2005, he and his wife purchased a further property in Queensland for $120,000 with a $92,000 mortgage from a bank.
In March 2007, they sold one of their Queensland properties for $145,000, receiving net proceeds of $42,000. He now owns jointly, with his sister, 1,420 shares in the Insurance Australia Group Limited.
On 18 November 2006, he was granted a Newstart Allowance due to illness and on 24 April 2008 he commenced receiving a disability pension which he continues to receive.
Mr Duffy gave some oral evidence. He was shown a document headed “Application for Employment – Industrial” which he had signed on 29 November 1979. On the second page of the document it has printed the words “Received Conditions of Service pamphlet” but there is no signature in the place where the employee should sign underneath. He said that he did not receive such a pamphlet.
He also indicated that he had divorced his second wife in September 2009.
When he first started working at the Uriarra depot, he lived in housing provided by ACT Forests, paying $15.00 per week rent. He had savings at that time and said that he always kept some savings. He did not borrow from any other workers while he was working at the Uriarra depot.
Cross-examination of Mr Duffy
In cross-examination, Mr Duffy said that he did not have a formal induction into employment in the head office at Civic and confirmed that when he started he was told that if he “got the job [he was] in for life if [he] wanted it”, so he considered himself a permanent employee.
He was asked about the initial conversation he had with Mr Bates and confirmed that he did not think that Mr McKenzie-Smith overheard the conversation, and that Mr McKenzie-Smith did not say anything.
He was aware that Mr Bates had sworn an affidavit saying that he did not recall any such conversation but denied that, even though the conversation was thirty years before he gave evidence, he could be wrong about it. He agreed that he did not really remember other conversations that he had with people thirty years ago.
He said that, in 2007 (but see below at [62]), he learnt that if he had had twelve months continuous service and a certification for three years of future service he would be eligible to apply for membership of a Commonwealth superannuation scheme.
Mr Duffy denied that Mr Bates might have actually told him that, because Mr Duffy had only just started at ACT Forests, his lack of prior service was the reason he could not join a Commonwealth superannuation scheme. Mr Duffy denied that Mr Bates told him that.
He said that, at the time Mr Bates used them, the terms “temporary” and “permanent” were just ordinary terms and it was not until 2007 (but see below at [62]) he realised what the legal implications were.
He said that he attended a meeting in about 1997, called by the Transport Workers Union. It was at a time when he, if he was not by then a member of a Commonwealth superannuation scheme, had actually applied to join.
He was reminded that he had commenced these proceedings in 2005 and said that the references to 2007 in his earlier evidence were probably to that date.
He said that, on divorce from his first wife, he had custody of two of the children and his wife had custody of the other two children.
He was certain that the conversation he had with Mr Reardon was in 1985 and was certain that it could not have occurred five years later in 1990.
He agreed that he did not check the information about his eligibility to join a Commonwealth superannuation scheme with anyone other than Mr Meredith because Mr Meredith was his supervisor and “he was the person you went to if you had any queries”.
He said in cross-examination, that, at the time of the conversation with Mr Reardon, he was not a representative for his union, the Australian Workers Union; he was a representative from 1985 to 1989 and then became a member of the Transport Workers Union in 1989.
He agreed that he would have posted union newsletters and notices on the noticeboard at the Uriarra depot but denied that he had ever read anything about superannuation on the noticeboard. He said that later, when he was a member of the Transport Workers Union, he found something about superannuation in one of their publications because they had a scheme but he was already in a private superannuation scheme at that stage.
He denied seeing any union newsletters between about 1984 and 1989 mentioning superannuation and he denied reading The Canberra Times. He did read the Sydney paper, The Daily Telegraph.
He agreed in cross-examination that he did not join the private superannuation scheme until about two years after the conversation with Mr Reardon and finding out from Mr Meredith that he was ineligible to join a Commonwealth superannuation scheme. He said that he did not “rush into” it because he “was sort of a bit apprehensive”.
He was shown a form that he had signed, headed “Industrial Wages Transfer – Personal Information” dated 9 September 1992.
His attention was drawn to a paragraph which stated “[i]f you would like to join the Government Superannuation Scheme please contact a member of your wages team prior to transfer”. He noted that there was an arrow beside that paragraph and agreed that it was not a “doodle”. His signature was underneath it.
He agreed that he signed this document about the same time his second wife had commenced casual work with the Commonwealth and had joined a Commonwealth superannuation scheme and agreed that he did not contact a member of his wages team.
He was also asked about his savings pattern and said that he always saved. He said it took him about three years to save the $7,000 that he put towards the purchase of his house in Canberra.
He denied ever seeing a “Conditions of Employment” document but he did have a booklet explaining the industrial award when he became a union representative. He said that it had no information in it about superannuation, whether private or government.
In addition to his evidence, Mr Duffy relied on the evidence that had been adduced in Meredith v Commonwealth (No 2) and it was admitted in this matter. Further, the evidence that had been led in earlier case, Tobin v Commonwealth [2013] ACTSC 240 and Knight v Commonwealth [2013] ACTSC 238 was also admitted. I do not need to repeat or even summarise that evidence here. I rely on it and take it into account in these reasons for judgment.
Additional evidence in Mr Duffy’s matter
There was, however, some additional evidence adduced by the Commonwealth from Mr Bates, as there was a specific conversation that Mr Duffy deposed that he had with him and also some additional evidence from Mr McKenzie-Smith. See [19].
The evidence of Mr Bates
Mr Bates deposed in his affidavit in these proceedings as follows:
48.I do not recall this conversation ever taking place. I do not recall ever talking to Richard [Duffy] about Commonwealth superannuation.
49.I did not know the rules about Commonwealth superannuation and it was not my job to tell Richard whether or not he could join Commonwealth superannuation.
50.I wasn’t a permanent employee. Apart from the Foresters, I didn’t think any of the workers at Uriarra Forest were a permanent employees [sic]. It was my understanding that the rest of the workers were there week by week and could be fired on one week’s notice. As I have stated before, I don’t know why I was able to join Commonwealth superannuation.
In cross-examination, Mr Bates said he recalled Mr Duffy, but confirmed that he did not remember the conversation with Mr Duffy. When asked whether he denied that it occurred, he said “I can’t remember that conversation”. He added, “I don’t remember talking to him about it”. I took “it” to be superannuation and Mr Duffy’s eligibility to join a Commonwealth superannuation scheme.
Mr Bates said he did not interview Mr Duffy for his forestry position when he applied, despite Mr Duffy saying that he and Mr McKenzie-Smith did so. He denied telling Mr Duffy anything about Commonwealth superannuation. He said he did not give him any information about eligibility and he said he gave him no documents about it. He said it was not his job and that he had not told him to ask the Forester about it.
The evidence of Mr McKenzie-Smith
As to Mr McKenzie-Smith, he recalled Mr Duffy; he had, however, no recollection of interviewing him for a position as a forest worker “but ... would have done so”. He did not recall the interview. He agreed that he would not have given Mr Duffy any information about superannuation at the interview.
He confirmed that he saw the forest workers at his depot regularly, at least once a week and additionally once a fortnight.
Mr McKenzie-Smith agreed that workers would approach Mr Bates for information about employment conditions, but also would seek such information from him. He believed that he knew that Mr Bates, Mr Ritherdon and Mr Padovan were members of a Commonwealth superannuation scheme.
He knew that Mr Bates, Mr Ritherdon and Mr Padovan were all temporary employees. He referred to them as “industrial” employees or “blue collar” workers. He also agreed that these three had been employed for long periods: 33 years in the case of Mr Bates. He did not, however, agree that there was “a gulf of difference” in his mind between these long-service employees and newer, temporary employees. He did not consider them “more permanent”.
Mr McKenzie-Smith did not recollect the conversation that Mr Duffy said he had had with Mr Bates in his presence, but not necessarily his hearing. He said that, if he had heard the conversation, he would have told Mr Bates that what he was telling Mr Duffy was incorrect, as he knew that temporary employees were, under certain conditions, eligible to join a Commonwealth superannuation scheme.
He said that he would have had a fair amount of contact with Mr Duffy over the time that he remained at the Uriarra depot. He also referred to a reputation that he said Mr Duffy had of being short of cash. Mr Duffy was not asked about that reputation in cross-examination.
CONSIDERATION OF THE EVIDENCE
There were two occasions when Mr Duffy said he was given advice about his eligibility to join a Commonwealth superannuation scheme. The first was that by Mr Bates (at [18]-[19]) and the second was that given by Mr Meredith who made inquiry on his behalf (at [26]-[29]).
The Commonwealth submits that I should not accept the evidence of Mr Duffy as I would be compelled to find that Mr Bates was blatantly dishonest in giving the answer Mr Duffy says he gave as he, Mr Bates, was himself a temporary employee and also a member of a Commonwealth superannuation scheme.
The Commonwealth also submits that Mr Duffy’s memory of the event some thirty years earlier cannot be accepted as reliable. It further points to the answer Mr Duffy gave in cross-examination that he did not remember any other conversation he had had thirty years ago.
While an appropriate forensic submission, I am not certain that this helps me. Memory is complex, and it may be that one might not remember a number of things that happen at a certain earlier period, but one is more likely to remember events that have some significance. Thus, I can accept that Mr Duffy does not, as he said when asked in cross-examination, remember other conversations he had a long time ago, but when asked about an event of significance, as was the denial of eligibility for superannuation, he may well remember it and then remember when it happened, rather than the other way around.
As to Mr Bates, I do not consider that he was dishonest. I accept that he honestly could not recall the conversation. He clearly had little understanding of superannuation and, indeed, his own position as how he came to join a Commonwealth superannuation scheme, which substantially negatives the submitted need for me to find he was blatantly dishonest in giving the alleged information because of his own position.
It was submitted that Mr Bates may have been misunderstood, for, at the time of this conversation, Mr Duffy would, by lack of prior service, not be immediately eligible. It may be, it was submitted, that this is what Mr Bates was saying.
If so, he certainly did not give that impression and would have been readily misunderstood, for he did not tell Mr Duffy that he was not now eligible, but could become eligible with the passage of time. Indeed, it is at least an oddity that, in the light of the clear interest at the Uriarra depot in the question of superannuation, this was never said to any forest worker.
This failure is partially explained by the general attitude described by Mr Fearnside, the preferences expressed by Mr Tye and the evidence of Ms Ivens about the knowledge of and dissemination of information about superannuation. The evidence of these three witnesses is set out in Meredith v Commonwealth (No 2) at [228]-[238] and [288]-[294].
Having carefully considered the evidence and heard both Mr Bates and Mr Duffy and having seen them given their evidence, I am satisfied that Mr Bates did communicate to Mr Duffy that he was not eligible to join a Commonwealth superannuation scheme. Given the evidence of Mr Meredith, I am also satisfied that he told Mr Duffy that he had been advised, again, by Mr Bates, that forest workers were ineligible to join a Commonwealth superannuation scheme.
While I did not form a view that any of the witnesses were dishonest and, indeed, I felt that all were trying to tell the truth, I formed the view that Mr Bates did not have a good memory of the relevant events, none of which would have been particularly significant to him. For example, Mr McKenzie-Smith, and the other evidence, made it clear that new forestry workers would be interviewed at the depot by the Forester-in-Charge and the Overseer, yet Mr Bates unaccountably denied that he had interviewed Mr Duffy.
That Mr Bates did not understand the circumstances of his own membership of a Commonwealth superannuation scheme reinforces the fact he is likely to have given incorrect advice. This is supported by the fact that very few forestry workers at the Uriarra depot had become members of a Commonwealth superannuation scheme, notwithstanding that a number had been urged to join by relatives who knew of its benefits.
The reliability of Mr Bates and his memory was not helped by his denial that he spoke to Mrs Sellars’ solicitor, despite an unchallenged affidavit of that solicitor stating that there had been such a conversation: Meredith v Commonwealth (No 2) at [345]; [356].
I am satisfied that Mr Bates did give Mr Duffy incorrect advice about Mr Duffy’s eligibility to join a Commonwealth superannuation scheme.
Given the apparent inconsistency between the evidence of Mr Duffy and of Mr Meredith about the date on which Mr Meredith became aware that Mr Reardon was a member of a Commonwealth superannuation scheme, I have carefully scrutinised the evidence of each. I have discussed this in detail in Meredith v Commonwealth (No 2) at [428]-[439]. I am satisfied that this is how I should accept the evidence. In the end, it does not, to my mind, undermine the reliability of either.
CAUSES OF ACTION
For the reasons set out in Meredith v Commonwealth (No 2), I do not consider that Mr Duffy has a claim in negligence nor in breach of statutory duty against the Commonwealth.
I do consider, however, that he has a claim against the Commonwealth for negligent misstatement, a claim I would uphold.
Negligent misstatement
The cause of action has been described in Meredith v Commonwealth (No 2) and I rely on what I there said (at [383]-[391]).
So far as the particular issues are concerned, I say as follows.
The position I found in relation to the relative positions of Mr Meredith and Mr Bates (Meredith v Commonwealth (No 2) at [393]-[404]) applies equally to Mr Duffy and Mr Bates and I adopt that approach. I accept, too, that it was reasonable for Mr Duffy to rely on the advice given by Mr Bates as well as that given her by Mr Meredith. In neither case was it social intercourse such that could not give rise to a legal claim.
I accept, too, that Mr Duffy actually did rely on the advice he was given. This is supported by his entry into private superannuation schemes, even though he felt that it was not as generous as Commonwealth superannuation.
It was submitted that the form headed “Industrial Wages Transfer – Personal Information” which, immediately above Mr Duffy’s signature, invited the signatory to inquire about superannuation and to which I have referred above (at [33]) broke any reasonable reliance that Mr Duffy could have had or the correct information he had been given.
I have addressed this issue in some detail in Knight v Commonwealth at [104]-[113]. Applying the reasoning in that case to the situation here, I do not consider that this told Mr Duffy anything that would have led him to believe that the information he had been given was incorrect.
In my view, this did not bring Mr Duffy’s reliance on the negligent misstatement that had been made to him to an end.
Accordingly, I am satisfied that the Commonwealth is liable to Mr Meredith for the negligent misstatements made to him by Mr Bates and Mr Meredith, and on which he relied to this detriment.
Contributory negligence
As in the other proceedings, the issue of contributory negligence did not loom large at the hearing. It was, however, not abandoned and, in accordance with the principle set out in Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287 at 348; [324], I must and will deal with it.
Thus, the Commonwealth claimed that Mr Duffy’s failure to join a Commonwealth superannuation scheme was caused or contributed to by his own negligence. I have set out the basis for such a claim in Knight v Commonwealth at [115]-[119], principles that are applicable here and which I will apply.
It is said that Mr Duffy failed to join at any time after 18 December 1980, when he knew about others in a Commonwealth Superannuation Scheme, or 6 May 1985, after the conversation with Mr Reardon. For the reasons I have earlier set out, I find that this failure was as a result of the negligent misstatements made to him.
It was then said that Mr Duffy failed to make any, or any adequate, inquiries from those periods and from 1 July 1990. There was no evidence of inquiries that Mr Duffy made. Given the relatively isolated location of his work and home, I do not consider that it would be reasonable for Mr Duffy to make any kind of wide-ranging inquiries. He had already made inquiries directly and through his Ganger who, it might reasonably be supposed, could get better information, were it to be had, than he as a forest worker. The statements he received, and which I accept he received, were absolute and unqualified. I do not consider that it was unreasonable for him to make other inquiries.
If I am wrong about that, the only inquiries that it would have been reasonable for him to make would have been to his union. This relates, too, to the allegation that Mr Duffy failed to check the correctness of the advice he had been given. The evidence was clear, however, that information from the union would also be incorrect and so not resolve the issue. There were no other persons whom the evidence suggested he should have known with whom he could check. I do not accept that Mr Duffy culpably failed to make such inquiries and I find that the allegation that he failed to make any or any adequate inquiries, thus causing or contributing to his loss cannot be sustained.
I accept that Mr Duffy did not, as alleged by the Commonwealth, join the PSS at any time. In my view, for the reasons already canvassed, I do not consider that he failed to meet the relevant standard of care that a reasonable and prudent person in his position would exercise to prevent exposing himself to loss and the allegation cannot be sustained.
The Commonwealth also alleged that Mr Duffy continued to rely on the incorrect advice after the PSS came into force on 1 July 1990. In the first place, there was no evidence of any event prior to that time that would render Mr Duffy’s continued reliance a breach of the standard of care which applied. There was no evidence on which I could find that correct advice was given or reasonably available to him. In my view, that would be necessary to render the claim for contributory negligence, under this particular, valid.
Failing to take advantage of opportunities provided by the Commonwealth for advising temporary employees of their superannuation entitlements was the next claim by the Commonwealth. The only opportunity that could be related directly to Mr Duffy was the form he signed on or about 9 September 1992. For the reasons referred to in Knight v Commonwealth at [126]-[130], I accept that this did make some derogation from the appropriate standard of care which he should apply, and I will reduce the damages to which Mr Duffy is entitled by 10%.
On 1 July 1994, Mr Duffy was transferred to the ACT Government. He had moved to the ACT Fleet at the Fyshwick depot assigned to City Parks Tree Surgery. The Commonwealth alleged that he had then become a permanent employee. There was, so far as I could see, no evidence on which I could rely to support this allegation. In any event, it would have been at least an obligation of those who appointed Mr Duffy permanently, if that occurred, to give him the necessary application form. There was nothing in the evidence or any reference in the Commonwealth’s submissions to support this allegation.
As a result, I am satisfied that Mr Duffy’s damages should be reduced by 10% to take account of the contributory negligence I have found.
DAMAGES
As with Mr Meredith, the question then is whether Mr Duffy has suffered any damages and, if so, the quantum of those damages.
Was there any damage?
To answer this question, I need to determine whether he would have applied and, if so, would he have been admitted as a member of a Commonwealth superannuation scheme, even if correctly advised as to his eligibility.
The answer to this relies on the following questions:
(a) Would he actually have applied to join if correctly advised of his eligibility;
(b) Would he have obtained the necessary certification of future employment prospects;
(c) Would he have successfully passed the medical examination; and
(d) Would the discretion be exercised to allow Mr Duffy to join?
I will answer each of these questions in turn.
(a) Joining the Scheme
As at 19 December 1980, one year after his employment, Mr Duffy would have been eligible to apply to join the CSS.
The Commonwealth submitted that, as a twenty-nine year old with a dependent wife and four children under seven, earning $186.72 gross a week, it is unlikely that Mr Duffy would have applied to join.
He had, however, taken out insurance, as noted above (at [22]) and so it cannot be said that he was not mindful of his future. As I have also noted above (at [30]) he joined a private superannuation scheme, but this was much later, in 1986. The premiums to that scheme exceeded the contributions he would have had to pay into a Commonwealth superannuation scheme.
It is also not irrelevant that Mr Duffy’s father had urged him to join a Commonwealth superannuation scheme. It is relevant that he heard other workers talking about superannuation which caught his interest initially, enough to make the inquiry he did of Mr Bates.
Mr Duffy said that he would have joined a Commonwealth superannuation scheme if, on inquiry, he was told correctly that (after a year) he would be eligible.
I note, too, his evidence that he had savings. He said as much in oral evidence to me. He denied borrowing money from anybody while at the Uriarra depot. Indeed, by 1993, he had savings of $7,000. He had saved that in about three years. He said he always saved.
Taking all these matters into account, I am satisfied that, had he been told the correct advise about his eligibility for a Commonwealth superannuation scheme, Mr Duffy would on or about 19 December 1980 have applied to join the CSS.
(b) Future employment
It was a condition of entry to the CSS that the temporary employee had been employed for a continuous period of one year and certified that his employment would be likely to be continued for a period of at least three years. He had, by 19 December 1980, been employed for a year so that element of eligibility was satisfied.
Mr Duffy, through his counsel, produced evidence to show that, by 1971, the requirement for a certificate as to future employment was a mere formality. A survey showed that in 1970-71, of 1336 applications, 3.59% were rejected on future employment grounds. That is, of course, a decade before Mr Duffy would have applied. This is confirmed by an admission in the answers to interrogatories that the Commonwealth were not aware of any application for membership of a Commonwealth superannuation scheme being rejected on these grounds in relevant workplaces for relevant periods.
Nevertheless, Mr Duffy’s evidence was that, when he was interviewed for the position he took, he was told, “[i]f you get the job, you’re in for life if you want to.”
Mr Bates denied interviewing Mr Duffy, but said that what Mr Duffy had been told would “probably be true”. Mr McKenzie-Smith said that a good worker would have a job for as long as he wanted it if he kept applying himself.
I also note that Mr Duffy was re-employed after he had resigned and was described as “a satisfactory employee”.
I am satisfied that, had Mr Duffy applied to join the CSS, he would have been certified as being likely to remain employed for at least a further three years.
(c) Medical grounds
The eligibility criteria for the CSS included a medical examination. Section 16 of the Superannuation Act 1976 (Cth) (the 1976 Act) requires that the Commissioner of Superannuation is required to consider a report of an approved medical practitioner and consider whether
the person is not likely, by reason of or for a reason connected with a physical or mental condition or conditions referred to in the report or reports, to continue to be an eligible employee until the person attains his maximum retiring age
Where such an opinion is not formed, however, the consequence is not that the person is ineligible to join the CSS, but it has a consequence for the amount of benefit payable where there is a cessation of employment on invalidity grounds (s 66(2) of the 1976Act).
In any event, there was no evidence to suggest that Mr Duffy would be likely to, following a medical examination, be unable to be subject of such an opinion.
He had taken out life insurance in 1969 or 1970. He managed to work until 1994 as a forest worker, work that was described as hard work. He worked until he took a voluntary redundancy at age forty-nine in 1999. He continued working thereafter, including operating a “yard tidying trash pack” business and then a hobby farm.
I do not consider there are any medical impediments to Mr Duffy’s claim.
(d) Admission to the Scheme
There is a discretion exercisable by the Commissioner of Superannuation in the 1976 Act, notwithstanding that Mr Duffy, I have held, met these eligibility conditions. This discretion must be exercised before a temporary employee can become a member of the CSS. In all the circumstances, nothing was put to me as to any likelihood that such a discretion would not be exercised in favour of Mr Duffy had he met the eligibility criteria. I accept that the discretion would have been so exercised
I conclude that Mr Duffy would have joined a Commonwealth superannuation scheme if he had been correctly informed and so he has suffered damage; the question then becomes how this damage is quantified.
Quantum
The purpose of an award of damages for the pure economic loss caused by a negligent misstatement is, in common with other claims in negligence, such as causing personal injury, to provide a full compensation for the loss sustained. That has been stated in the often cited passage of Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas 25 at 39:
I do not think there is any difference of opinion as to its being a general rule that, where any injury is to be compensated by damages, in settling the sum of money to be given for reparation of damages you should as nearly as possible get at that sum of money which will put the party who has been injured, or what has suffered, in the same position as he [or she] would have been in if he [or she] had not sustained the wrong for which he [or she] is now getting his [or her] compensation or reparation.
As McHugh J put it in Nominal Defendant v Gardikiotis (1996) 186 CLR 49 at 54:
The sum of money to be paid to the plaintiff is that sum which will put the plaintiff, so far as is possible, ‘in the same position as he [or she] would have been in if he [or she] had not sustained the wrong for which he [or she] is now getting his [or her] compensation’.
Expert actuaries were retained by both the Commonwealth and Mr Duffy to provide assistance in determining any damages payable by the Commonwealth.
Mr David Heath, an actuary of Cumpston Sarjeant Pty Ltd, Consulting Actuaries, gave evidence for Mr Duffy. Mr Peter Martin, also an actuary, employed with the Australian Government Actuary, gave evidence for the Commonwealth. Both had appropriate qualifications and experience, and their expertise and entitlement to give expert evidence was not in issue.
Mr Martin prepared six scenarios which depended on a variety of features of which there was no certainty. Thus, there were a range of factors on which the parties agreed and on which there was disagreement. There was also disagreement between the actuaries on a number of issues. Mr Heath prepared only one valuation though he did update it.
(a) Uncontroversial matters
Mr Duffy was born in 1950. He commenced employment with the Commonwealth on 19 December 1979 and became eligible to apply to join the CSS on 19 December 1980.
He joined the PSS on 16 July 1997 and was made redundant on 30 September 1999.
(b) Controversial matters
There were a number of matters about which there was no agreement between the parties and on which I shall have to make a decision. These were:
(i) the effect of Mr Duffy’s resignation on 2 April 1984 and re-employment or withdrawal of resignation;
(ii) whether Mr Duffy would have transferred to the PSS in 1990;
(iii) whether Mr Duffy would have, at age 55 taken a lump sum;
(iv) the differences in calculations by the two actuaries.
I will deal with each of these issue in turn.
(i) Mr Duffy’s resignation
Mr Duffy’s evidence about this issue was set out in his affidavit as follows:
On 9th April 1984, I separated from my first wife, Wendy. I decided to move away from her and stay at my father’s place at Tumbarumba, near Tumut, and my two eldest children came with me. Before I left Uriarra, I sent a letter of resignation to Tony Fearnside, who was the Acting Director of Forestry. Shortly after leaving, I realised that a custody battle could take place if I did not come back to the ACT. I went to see Tony Fearnside in Civic and asked him for permission to withdraw my resignation from my job as a forest worker. I believe that he told me to write a letter, requesting permission to withdraw my resignation, which I did on 7 May 1984. I was then reappointed and returned to work at Uriarra. Consequently, I returned to the ACT and rented a Cottage 206 at Pierce’s Creek. The following week, I began work as a forest worker at Pierce’s Creek. Wendy and I divorced in approximately June 1985.
When he withdrew his resignation, Mr Fearnside sent the following memorandum to the Director of Staffing:
Mr R Duffy resigned from his position as a Forest Worker at Uriarra Forest, on 6 April 1984, due to personal problems (family). He has requested to be re-employed in his old position and I have agreed to do so for the following reasons:
1.Mr Duffy has been a satisfactory employee in the past.
2.He has explained that he resigned due to severe family problems, and has since regretted the decision to resign.
3.The branch has not recruited anyone to take his place, and we are within our staff ceilings by re-employing Mr Duffy.
I also attach a written request from Mr Duffy, requesting withdrawal of his resignation. I also advise that I will start Mr Duffy on 7 May 1984.
There are two issues that are raised here. The first is the effect (if any) of withdrawing the resignation. The second is whether the provisions of s 3(3) of the 1976 Act apply. That provision is in the following terms:
(3)Where a person ceases to be an eligible employee and, immediately after so ceasing, again becomes an eligible employee, he shall, for the purposes of this Act, be deemed not to have so ceased.
As to the first issue, it is the common law that a resignation from employment is a unilateral termination of the employment and cannot unilaterally be withdrawn: Riordan v War Office [1959] 1 WLR 1046 at 1054; New South Wales v Paige (2002) 60 NSWLR 371 at 407-8; [277]. It appears, however, that a resignation can be withdrawn by the consent of the parties: Birrell v Australian National Airlines Commission (1984) 5 FCR 447 at 458.
The ordinary consequence of the modification of such a notice, however, is the creation of a new contract of employment: Australian Wool Selling Brokers Employers’ Federation v Federated Storemen and Packers Union of Australia (1976) 176 CAR 884.
In that case, an employer had given notices of termination of employment to a number of storeman and packers, and the employees’ union had imposed bans. The matter came before the Australian Conciliation and Arbitration Commission and the Commissioner recommended that the employer withdraw the notices of termination and the Union lifted the bans. The notices were withdrawn and the Commission had to consider the effect of this. Moore P held (at 884-5):
The legal situation is that where the contract of employment provides for termination as in this case by a week’s notice, the giving of notice by either side has the legal effect of informing the other party that the contract is to be terminated at the end of that notice, so that a contract which is not determinate in point of time then becomes determined.
If the party who gave the notice, be he the employer or the employee, wishes to reverse that situation and to endeavour to ensure continuation in employment, the giving of a document purporting to withdraw that notice of termination is in law no more than an offer to treat for a new contract. If the other person, again be he the employee or the employer, declines to accept that offered treating the original notice continues and the employment is terminated ...
The attempts by the employers to withdraw the notice of termination were not valid in law, they were merely an offer to the employees to enter into a fresh contract of employment which if accepted would have resulted in the employee being engaged on the same terms.
Despite this, in G J McCarry “Termination of Employment Contracts by Notice” (1986) 60(2) ALJ 78 at 84, the learned author argues persuasively that the preferred, but not finally concluded, view of Pape J in Emery v Commonwealth (1963) 5 FLR 209 at 217, should be accepted, namely, that where the parties mutually agree on the withdrawal of a resignation notice (or notice of termination by the employer), the original contract is continued.
No decision was cited to me and I was not able to find one where authority has decided the issue. It seems to me, however, that there is much to commend Mr McCarry’s approach, adopted in Carolyn Sappideen, Paul O’Grady and Geoff Warburton, Macken’s Law of Employment (Lawbook Co, 6th ed, 2009) at 280-1.
There are some suggestions that a resignation can only be withdrawn (and then by consent) during the notice period. While I can find no authority for this, one way or the other, it would be consistent with the cited authorities.
The argument made by Mr McCarry, to which I have already referred (at [158]), seems to be based on the inappropriateness of ending a contract that was on foot and which, because of the withdrawal, was to be continued. Indeed, he pointed (at 84) to the consequences of termination on issues, such as long service leave and superannuation, which would arise where the person was offered a new contract because the old had been terminated. That is clearly inappropriate where the withdrawal occurs during the period of notice; it is not at all so clear after that period when the contract has, in fact, already been terminated.
In Australian Wool Selling Brokers Employers’ Federation v Federated Storemen and Packers Union of Australia, the notice period was one week. The report does not say whether the notices were withdrawn during that week or after; it might be thought that it was more likely that they were withdrawn after that week had expired. That would make the preferred approach of Pape J in Emery v Commonwealth consistent, where his Honour relied on Inchiquin v Lyons (1887) 20 LR (IR) 474, a case where the notice to quit was withdrawn prior to its expiry.
Mr Fearnside’s memorandum is not at all unambiguous as to whether he is purporting to accept the withdrawal of Mr Duffy’s resignation. Mr Fearnside certainly refers to “re-employed” rather than, for example, “re-instated”, though “re-employed” may be itself ambiguous, On the other hand, he attached Mr Duffy’s request for withdrawal, suggesting that it was this to which he was favourably responding.
Mr Fearnside provided an affidavit in these proceedings and so could have been cross-examined. He was not. It is important to note that his affidavit did not address this issue.
I mention, briefly, one further matter, though not directly raised. Mr Duffy resigned due to “personal problems”. There was, however, no real suggestion that this meant that his decision was other than a rational and voluntary one. It seems there is an exception to the principle that a resignation cannot unilaterally be withdrawn, and that is where there is some duress or other reason to suggest it is not a genuinely voluntary decision. The bar for such an exception is high.
In Gunnedah Shire Council v Grout (1995) 89 LGERA 159 at 169-70, the Full Court of the Industrial Relations Court of Australia held that the decision to resign, which was sought to be withdrawn, must be shown not to be a considered or voluntary act and that, for example, the employee who acted in that case “to some extent, in a state of despair and was not in a state of emotional equilibrium” was held not to have sufficiently shown that the decision to resign was not considered or voluntary in the circumstances.
In my view, I am prepared to accept that Mr Duffy’s resignation was withdrawn, but after the expiry of any notice period of one week. It seems to me, then, that the withdrawal created a new contract, but on the same terms as the former. It would, therefore, re-instate the terms of the former contract. There would, however, be a hiatus in his employment.
The difficult issue, thus, is whether Mr Duffy can call in aid the deeming provision of s 3(3) of the 1976 Act. The purpose of the sub-section was described by Lockhart J, with whom Smithers and Keely JJ agreed, in Commissioner for Superannuation v Bayley (1979) 41 FLR 385 at 401-2 as follows:
It is intended to ensure that a person does not lose his status as an eligible employee merely because he ceases to be one and later becomes one again, provided the gap in time is not unreasonably large. It is designed to cover all cases where a person has a particular position or holds a particular office and ceases to do so, but ‘immediately’ thereafter takes another position or office, in each case being a person who satisfies the statutory denotation of a ‘permanent employee’. It matters not whether the interval of time is a second, a day, or a week provided the person again becomes an eligible employee ‘immediately’ after ceasing to be one.
The provision has been the subject of consideration by the Administrative Appeals Tribunal on a number of occasions.
In Re Rattray and Commissioner for Superannuation (1980) 2 ALD 979, the Tribunal dealt with a break of about 33 hours. The Tribunal referred (at 988; [27]) to a number of factors dealing with the question of what is “immediately”. The first factor was whether the person engaged in other non-eligible employment during the interim period. It also referred, apparently as a second factor, to the fact that the process for making the further appointment had started before the termination of the first had ceased. That was the case of an employee going from one job (which had been abolished) to another in a different agency.
The gap in Mr Duffy’s employment was a calendar month. That is much longer than in this case. On the other hand, he engaged, it appears, in no non-eligible employment in the meantime. The second factor had no counterpart here, for Mr Duffy was returning to his former job. It may, however, be relevant that no-one had been recruited to fill that position.
In Re Rowe and Commissioner for Superannuation (1987) 14 ALD 216, the applicant ceased to be an eligible employee on 31 December 1984, when the Repatriation Review Tribunal was abolished, but was appointed on 2 April 1985 to the Veterans’ Review Board. He had applied to be a member of the Board before abolition of the Tribunal and was initially appointed as a part-time member in October 1984. The gap in the appointment was 71 days and the Administrative Appeals Tribunal held that it was “too great to be regarded as short”. It was held that section 3(3) did not apply.
In Re Wood and Commissioner for Superannuation (1989) 9 AAR 528, the applicant resigned from the Department of Defence. He made preparations to commence a consultancy but, in fact, sought, prior to his resignation, a position with the ACT Electricity Authority (then a Commonwealth instrumentality).
His resignation took effect on 25 July 1986 and he was formally offered his new position on 30 July 1986, to commence on 4 August 1986. It was found that the applicant did not really intend to enter a consultancy, that it was “at best an idea with which he was toying” and he, in fact, carried out no “consultancy” work in the week between his employment with the two agencies. The Tribunal held that s 3(3) applied to make his employment continuous.
In Re Marshall and Commissioner for Superannuation (1992) 29 ALD 69, the applicant resigned from the Commonwealth Public Service on 27 April 1990 and, on 25 May 1990, received a lump sum payment under the 1976Act . On 29 June 1990, he sought to rescind his resignation and his superior officer purported to accept the rescission and reappointed him.
The Tribunal found that the purported acceptance of the rescission of the applicant’s resignation was ineffectual, and that the applicant had not, in fact, been reappointed. It further held that, even if this conclusion was not correct, the lapse of time between resignation and reappointment was too long to constitute “immediately after” within the meaning of section 3(3).
Reference was also made to dicta of Gibbs J in Reseck v Federal Commissioner of Taxation (1975) 133 CLR 45 at 50, but that related to the case of an employee ceasing employment on Friday and commencing employment with the same employer on the following Monday, a far cry from the circumstances here.
I have carefully considered this matter. It seems to me that Mr Duffy cannot rely on s 3(3) of the 1976 Act to show a continuity of his employment before and after his resignation and re-employment. The month period was simply too long to be categorised as “immediately”.
The consequences of this are, however, that he would have to have shown, after his re-employment, a further period of continuous employment of a year before he could be eligible for entry into the superannuation scheme.
He would, of course, also have to show that he was likely to be employed for a further three years. It may be thought that his resignation might put that in some doubt. In the end, I do not think so. It was not so submitted by the Commonwealth. He had a clear reason for the resignation; he sought to withdraw it fairly quickly; he was readily re-employed.
It does also mean, however, that he would be entitled to the interest that would have accrued on contributions which I find he would have been entitled to make in the period from 19 December 1980 and 6 April 1984. That interest would have been payable on that date and would, of course, attract pre-judgment interest until judgment.
Thus, apart from that interest, the damages to which Mr Duffy would otherwise be entitled would be for the failure to be contributing to a Commonwealth superannuation scheme from 7 May 1985 until he joined the PSS on 16 July 1997.
(ii) Transfer to the PSS
Had Mr Duffy joined the CSS again on 7 May 1985, which I am prepared to find, he would have had the option of transferring to the PSS in 1990.
When the PSS was established by the Superannuation Act 1990 (Cth) (the 1990 Act), members of the CSS had a chance to transfer to the PSS. If they did not do so, either after making a conscious choice not to do so or by simply failing to elect to transfer, they remained members of the CSS.
The evidence about what Mr Duffy would do is not substantial. In any event, it is a hypothetical issue on which direct evidence of what Mr Duffy may have done would be rather limited in value.
In his affidavit, Mr Duffy did state:
If I had been in Commonwealth superannuation from when I first became entitled to join, then I would have elected to deal with my superannuation in the way that was in my best interests and would be most beneficial to me on my ultimate retirement.
This is consistent with the approach he took to the private insurance and superannuation arrangements he had and considered. He seemed to be careful with money and did consider his interests. He initially had a life insurance policy, but terminated it because it was not performing well, as I noted above (at [22]). He was initially resistant to private superannuation (above at [24]) but did join such a scheme in 1986 (at [30]).
The decision whether to transfer was a very individual one. There were benefits in both schemes, largely dependent upon the views and expectations of the member at the time. Thus, Mr Martin submitted:
CSS retirement benefits are, for all but a small number of people, likely to be higher in actuarial value terms than standard PSS benefits (that is, assuming 5% contribution rate in the PSS). It follows that, if the decision was to be made on that basis, then virtually no-one would have transferred.
There were a number of differences which would be relevant to a person who had, as did Mr Duffy, to decide whether to transfer or not.
The first of these was that, on resignation, a CSS member did not retain an entitlement to a preserved employer component; such members had to preserve all their benefits to achieve this. PSS members, however, could receive a return of their member component on resignation and retain a preserved employer component in the fund.
The PSS permitted its members, on retirement, to take their entire retirement benefit as an immediate lump sum, possibly a more attractive option to older members at the date of conversion. Further, PSS members, on retirement, could take all or part of their benefit as a CPI indexed pension, which would have an actuarial value at least 60% higher than the lump sum benefit. To obtain the benefit from the employer component in the CSS, on retirement, members could not take a refund of their member component; they had to preserve all of their benefits in the fund.
Thirdly, there was a flexible contribution rate, so that PSS members could contribute up to 10% of salary, though they could choose a contribution as low as 2%.
Mr Martin further noted that ‘[m]any members were not engaged with their superannuation’. He acknowledged that there was likely to be some suspicion of the government’s intention in establishing the new scheme, and these forces may have led to an inertia against change.
George Hayes, a senior officer of the Commonwealth superannuation agency, gave evidence and, on the question of transfer to the PSS or not, concluded “it was pretty personal”.
The evidence of what Mr Duffy did when he was made redundant, as I have set out above (at [39]-[50]), is relevant. To me, it shows a fairly cautious person who did not spend wildly, if not always wisely. He did have an eye on the future, rolling over his PSS equity into his private superannuation fund.
It does not seem to me that there was any particular inducement in the PSS that would have particularly encouraged him to transfer. His caution seems to me to be likely to have meant he would have remained in the CSS.
(iii) Benefits at age 55
Both Mr Heath in his calculation, and Mr Martin in his comparable calculation assumed that, at age 55 in 2005, Mr Duffy would have elected to receive his benefits as an indexed pension together with a lump sum refund of his member and productivity components.
Mr Martin, however, commented that he had
no reason to believe that this scenario represents the most likely course of action that Mr Duffy would have followed, had he joined Commonwealth superannuation in 1980.
What Mr Duffy actually did is that, when made redundant on 30 September 1999, he was paid the maximum lump sum which he was permitted to take from his PSS benefit and rolled the balance into his private superannuation fund. That permitted him to continue making superannuation contributions.
When he reached age 55 in 2005, he could access his superannuation benefit and he did so.
Of course, he had only been a member of the PSS for a little over two years at the date of his redundancy.
By 2005, Mr Duffy had conducted a business, for which, on sale, he received exactly what he had originally paid for it; he had received an inheritance; he had sold property which gave him some significant capital; he had purchased another business which did not go well and for which he suffered a capital loss of at least $73,000; and purchased a farm, borrowing $123,000.
In the context where his superannuation capital was modest (he received $44,000 in 2005), I consider it is entirely understandable that he would have withdrawn it and put it towards reducing his debt and interest payments.
It did not prevent him from entering into a mortgage of $92,000, which he managed to pay and nearly double his equity in two years.
The calculations of Mr Martin and Mr Heath for their scenarios are very similar. Mr Martin calculated the lump sum entitlement to be $84,850, while Mr Heath calculated it to be $86,597. Mr Martin calculated that this would provide Mr Duffy with a CPI indexed pension of $15,611 per annum from 2005. Mr Heath calculated that at $15,588 per annum.
It seems to me that this pension would likely be attractive to Mr Duffy. If, as I have found, Mr Duffy could not include the contributions made prior to 7 May 1985, the CPI indexed pension would, according to my calculations, still exceed $11,000 from 2005, a sum that I consider Mr Duffy is likely to appreciate would be more valuable to him than would be the lump sum at that stage.
While the $44,000 would notionally have given him a pension of about $10,000 (that is, 0.0925 x 2.5 x 44,000), this amount would only be paid were it to be paid as a pension by a Commonwealth superannuation scheme, and, of course, would only be indexed if paid by such a scheme, so it is not relevant, since his private superannuation scheme pension would not provide an indexed pension, and would be unlikely to be for that amount in any event.
I am satisfied that, in the circumstances, Mr Duffy would have, had he preserved his pension rights on his redundancy, elected to receive his benefits as an indexed pension.
(iv) Differences between Mr Martin’s report and Mr Heath’s report
Mr Martin helpfully identified the differences between his approach and that of Mr Heath. A number were not material and do not need me to consider them. As to the others, I make the following findings:
Productivity Account
Mr Heath estimated this at age 55 as $19,188, while Mr Martin estimated it at $18,252. The difference appears to stem from the crediting rates applied by each which have some differences.
Mr Heath attributed the source of his rate to “a fax on 19/6/2007 by Tiffany Newson of the CSS Customer Service Centre, and from the relevant websites”. Mr Martin did not attribute his rates, but asserted, in his report, that the difference was “due to a possible minor error in Mr Heath’s application of CSS crediting rates”.
Given that I had no further information than this, I am prepared to rely on the attributed rates and so accept Mr Heath’s calculation.
Annuity Factor
For the future pension payments, Mr Martin applied an annuity factor of 16.096 while Mr Heath applied a factor of 16.401. The difference is not substantial.
Mr Heath’s rates were projected rates for annuities provided by the Australian Bureau of Statistics using projected life expectancies based on the Bureau’s publication “Population Projections Australia 2004-2101”.
In Meredith v Commonwealth (No 2) at [695]-[704], I considered this issue. In summary, it seemed to me that Mr Heath relied on “prospective tables” while Mr Martin relied on “historical tables”, and that the former was the preferred approach of the High Court in Golden Eagle International Trading Pty Ltd v Zhang (2007) 229 CLR 498 at 517; [70].
Accordingly, I consider that the annuity factor applied by Mr Heath is to be preferred.
Saved Member Contributions
Mr Duffy, of course, had the benefit of the use of the money he would otherwise have paid, by contribution, to a Commonwealth superannuation scheme. It is necessary to account for that use and to deduct it from the damages otherwise payable.
The amount of the contributions not made is easy to calculate, but there is an opportunity cost and this needs to be represented in an interest amount applied.
Mr Heath assumed the investment of the contributions not made would be best estimated using building society interest. Mr Martin also used building society interest rates, but using 12 month term deposit rates.
Although Mr Martin suggested that the difference between his calculation and that of Mr Heath was $8,000, it seemed to me that Mr Heath put the figure at $20,942 whereas Mr Martin put it at $49,448.
Given that contributions would be made fortnightly and in relatively small amounts, it does not seem to me that 12 month term deposit rates are appropriate. It seems to me that rates at call would be more appropriate.
Again, Mr Heath sourced his rates from the Reserve Bank of Australia. It is not clear from where Mr Martin’s rates were obtained.
In all the circumstances, I prefer in this instance, Mr Heath’s approach.
(c) Consideration
I am satisfied that, had he been given the correct advice, Mr Duffy would have joined the CSS in 1980. I am also satisfied that he ceased to be an eligible employee in 1984. He would then have received his contributions plus interest. That interest, together with pre-judgment interest on it from 6 April 1984, is part of his damages.
As to the balance of the damages, I find that Mr Duffy would have joined the CSS in 1985 and remained a member until he was made redundant on 30 September 1999. I find that he would then have preserved his benefits until age 55 and taken them as a CPI indexed pension thereafter.
As in the case of Mr Meredith, I do not consider that I have the actuarial calculations that are required to calculate the actual damages. Accordingly, I will require from the parties a re-calculation in accordance with these reasons so that judgment can be entered.
TAXATION
The parties took different views as to whether the damages would be taxed, whether as a capital gain or as income. The Commonwealth submitted that the damages were not taxable on either basis and Mr Duffy submitting that they would be taxable. As a result, Mr Duffy submitted that the damages should include a component to compensate him fully for any tax imposed other than that which would have been imposed if the receipts had been received in the ordinary way.
In Guy v Commonwealth [2013] ACTSC 128 at [90]-[93], I said:
90.The Commonwealth, however, referred to a number of cases where the Court did not rule on the issue but reserved leave to apply for additional damages in respect of any damages referable to income tax or capital gains tax. See Rabelais Pty Ltd v Cameron (1995) 95 ATC 4552; Turner v T R Nominees Pty Ltd (1995) 31 ATR 578; P M Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2001] NSWSC 798 at [114]-[119]. See also P M Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2008] NSWSC 683.
91.The Commonwealth submitted that it was appropriate to take the course adopted in those cases and reserve to the plaintiff leave to apply for additional damages should the award be assessed as liable to tax on any basis. At this time, argument would be permitted as to whether it is appropriate for there to be such an award and, if so, of what amount.
92.Mr Guy, through his counsel, suggested that such a proposal was apparently inconsistent with the ‘once and for all’ principle (Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 93 ATC 5101) but nevertheless adopted the Commonwealth’s proposal, which, his counsel submitted, ‘makes sense for a number of reasons’.
93.These include that Mr Guy has the comfort of knowing that if the Commissioner of Taxation were to levy tax, he could return to the court to recover damages for any loss thereby occasioned. It also provides certainty to the court to know whether tax would be levied and, if so, how much would be levied, so as properly to provide compensation for what is at law required to be compensated.
It seems to me that this is appropriate in this case also. I shall proceed in the same way.
CONCLUSION
As a result of the foregoing, I shall enter judgment for Mr Duffy on his claim in respect of negligent misstatement.
So far as damages are concerned, however, I shall invite the parties to provide me with appropriate material on which I can quantify the damages in accordance with these reasons. That would, desirably, be a report from an appropriately qualified actuary. Each party may wish to retain their own and provide separate reports. If so, I would wish that the actuaries confer to see if they could agree or, at least, narrow the extent of any disagreement.
The parties may prefer, however, simply to make submissions. Indeed, they may be able to agree on the quantity of the damages flowing from my decision.
Accordingly, I shall re-list the matter shortly to give the parties the opportunity to make submissions on how they wish to proceed.
I shall, also, hear the parties as to costs, though this may have to await the quantification of the damages.
DELAY
I sincerely regret that the pressure of business of the Court has delayed the delivery of judgment in this matter. Nevertheless, I have read carefully the entire transcript and the exhibits tendered at the trial as well as my contemporaneous notes. I have also had detailed and comprehensive written submissions from the parties which I have also carefully read. These have resulted in a good recall of the proceedings and of the witnesses giving evidence, notwithstanding the passage of time.
I certify that the preceding two-hundred and thirty five (235) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge
Associate:
Date: 2013
Counsel for the Plaintiff: Mr R Davis and Mr J Gordon
Solicitor for the Plaintiff: Sneddon Hall & Gallop
Counsel for the Defendant: Mr S P Estcourt QC and Ms C Dowsett
Solicitor for the Defendant: Australian Government Solicitor
Date of hearing: 18-19, 23-26, 30 November, 1-3, 8-11, 14 December 2009, 9-11 February 2010
Date of judgment: 16 December 2013
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