Eastman, D.H. v Commissioner for Superannuation
[1987] FCA 292
•10 JUNE 1987
Re: DAVID HAROLD EASTMAN
And: COMMISSIONER FOR SUPERANNUATION
No. ACT G62 of 1986
Superannuation
COURT
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Neaves(1), Beaumont(1) and Ryan(1) JJ.
CATCHWORDS
Superannuation - Invalidity benefit - "Final annual rate of salary" - Higher duties allowance - Allowance not paid "on a regular basis" in defined sense - Whether allowance part of salary for superannuation purposes.
Superannuation Act 1976 (Cth), ss.3(1), 5(1), 66(2), 70(2)
Superannuation (Salary) Regulations, regs 4, 5, 6, 7
Public Service Act 1922 (Cth), s.51A
Public Service Regulations, regs 87, 116
Commissioner for Superannuation v. Carpenter (1983) 77 FLR 224; 48 ALR 230 distinguished
HEARING
CANBERRA
#DATE 10:6:1987
Counsel and Solicitors for Applicant: Applicant appeared in person
Counsel and Solicitors for Respondent: Mr. A. Robertson instructed by Australian Government Solicitor
ORDER
The appeal be dismissed.
The applicant pay the respondent's costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
JUDGE1
The applicant, a former officer of the Australian Public Service, is entitled to an invalidity pension under the relevant provisions of the Superannuation Act 1976 ("the Act"). A dispute has arisen as to the correct calculation of that entitlement. The amount of his entitlement is calculated by reference to his "final annual rate of salary" and a question has arisen as to the meaning of that phrase and its application in the present context. The applicant applied to the Administrative Appeals Tribunal for review of the Commissioner's decision on the question, the Tribunal affirmed that decision and the applicant now appeals to the Court on the question of law thus arising pursuant to s.44(1) of the Administrative Appeals Tribunal Act 1975.
On and from 11 October 1973, the applicant occupied the office of Clerk (Class 9) within the Service. He occupied that office until his retirement which took effect on 30 June 1977. During his period of service, the applicant was directed to perform temporarily the duties of a Clerk (Class 11) in a position designated Chief Finance Officer Grade 11 (CFO 11). For this he was paid a "higher duties allowance". The periods in which he so acted were as follows:
17 January 1974 - 4 February 1974 24 May 1974 - 12 June 1974 19 August 1974 - 11 October 1974 28 October 1974 - 8 November 1974 1 April 1975 - 23 April 1975 25 August 1975 - 29 August 1975 7 November 1975 - 7 October 1976 6 December 1976 - 17 December 1976 12 January 1977 - 3 March 1977
Thus, between 1 July 1976 and 30 June 1977, his last year of service, the applicant acted on higher duties during the following periods:
1 July 1976 - 7 October 1976 6 December 1976 - 17 December 1976 12 January 1977 - 3 March 1977
The material before the Tribunal showed that the applicant was, during the last year of his service, paid at the following annual rates:
"1.7.76 to 18.8.76 $18,863 Acting CFO 11
19.8.76 to 30.9.76 19,146 Wage indexation adjustment
1.10.76 to 7.10.76 19,787 Higher duties increment
8.10.76 to 24.11.76 17,217 Returned to substantive position
25.11.76 to 5.12.76 17,596 Wage indexation adjustment
6.12.76 to 17.12.76 20,222 Acting CFO 11
18.12.76 to 11.1.77 17,596 Returned to substantive position
12.1.77 to 3.3.77 20,222 Acting CFO II
4.3.77 to 30.3.77 17,596 Returned to substantive position
31.3.77 to 25.5.77 17,893 Wage indexation adjustment
26.5.77 to 30.6.77 18,091 Wage indexation adjustment"
(Before us, it was submitted by the applicant that the statement of the date "1.10.76" was a mistake and should have been "31.7.76". Being a question of fact only, the Court has no jurisdiction to consider whether any error arose in this respect).
In calculating the applicant's entitlement, the Commissioner used the figure of $18,091, i.e. the annual salary at 30 June 1977 for a Clerk (Class 9). It is the applicant's contention that the Commissioner erred in his interpretation of the relevant statutory provisions in so doing and that, instead, the Commissioner should have applied as the applicant's "final annual rate of salary" the figure of $20,222 being the highest rate at which he was paid between the anniversary of his birth last preceding his last day of service (29 September 1976) and his last day of service (30 June 1977) - see par.(c) of the definition of "final annual rate of salary" set out below.
It is common ground that the applicant is entitled to an invalidity benefit by virtue of s.66(2) of the Act; and that, by s.70(2), the annual rate of the pension to which the applicant is entitled is the prescribed percentage of his "final annual rate of salary".
Section 3 of the Act provides:
"'final annual rate of salary', in relation to a person who has ceased to be an eligible employee, means -
(a) if paragraph (b) or (c) does not apply in relation to him - his annual rate of salary on his last day of service;
(b) if the annual rate of salary by reference to which his final basic contribution was calculated is higher than the rate specified in paragraph (a) - that higher rate; or
(c) if his annual rate of salary was higher than the rate referred to in paragraph (a) or (b) at any time on or after -
(i) the anniversary of his birth last preceding his last day of service; or
(ii) where, on or after that anniversary, he made an election under section 47 in respect of a reduction in his annual rate of salary - the date of the election,
that higher rate;"
Section 5 provides:
"5(1) In this section, 'salary' means salary or wages, and includes -
(a) any allowance, or the value of any allowance, or any fee, that is an allowance or fee of a kind that, under the regulations, is to be treated as salary for the purposes of this Act; . . .
but does not include any part of any salary or wages that, under the regulations, is not to be treated as salary for the purposes of this Act. (Emphasis added)
(2) For the purposes of this Act but subject to sub-section (3), the annual rate of salary of an eligible employee on a particular day is an amount equal to the amount per annum of the salary payable to him on that day.
(3) The regulations may provide that, in a case specified in the regulations, the annual rate of salary of an eligible employee on a particular day shall, for the purposes of this Act or a provision of this Act specified in the regulations, be an amount equal to such amount per annum as is ascertained under the regulations."
Reference must also be made to the Superannuation (Salary) Regulations ('the regulations') which took effect from 1 July 1976. The relevant regulations provide:
"Interpretation
4. In this Part, a reference to an allowance of a prescribed kind shall be read as a reference to an allowance of one of the following kinds:
(a) an allowance that is payable to an eligible employee by reason that he temporarily performs the whole or a part of the duties of an office of a higher classification than the classification of the office occupied by him; (emphasis added)
(b) an allowance that is payable to an eligible employee by reason that he is rostered to perform, and performs, duties or work on a shift that falls, in whole or in part, outside the hours that under the terms and conditions of his employment are the normal hours of duty;
(c) an allowance that is payable to an eligible employee by reason that he is liable to be called upon to perform duties or work at any time during which he is off duty;
(d) an allowance that is payable to an eligible employee by reason that he is required in the performance of his duties or work to be in charge of staff, equipment or premises;
(e) an allowance that is payable to an eligible employee in lieu of payments for overtime or other extra duty work;
(f) an allowance that is payable to an eligible employee as compensation for the physical hardships or discomforts associated with the duties or work that he is required to perform;
(g) an allowance not otherwise referred to in this regulation that is payable to an eligible employee by reason that he is required to perform any special function as part of his duties or work.
Certain allowances to be treated as salary
5. Each of the following kinds of allowance is a kind of allowance that is to be treated as salary for the purposes of the Act: (Emphasis added)
(a) an allowance that is payable to an eligible employee as compensation for any loss of salary or wages incurred by the eligible employee while he is undergoing a course of training for the purpose of promotion to another office;
(b) an allowance that is payable to an eligible employee by reason that -
(i) he possesses a qualification (including the completion of a course of study or training, success at a particular level in an examination or the holding of any degree, diploma, licence or certificate); or
(ii) he has acquired a particular standard of proficiency in any skill related to the performance of his duties or work;
(c) an allowance that is payable to an eligible employee by reason of the length of his period of service and the standard of efficiency attained by him in the performance of his duties or work;
(d) an allowance that is payable to an eligible employee in respect of housing or quarters while he holds a particular office or performs particular duties or work;
(e) the rent-free use by an eligible employee of premises or quarters made available to him by reason that he holds a particular office or performs particular duties or work;
(f) an allowance that, pursuant to a law in force in the United Kingdom, is payable to an eligible employee, being a person who was engaged or appointed for employment in the United Kingdom and whose salary is fixed and payable in sterling, in order to compensate him for an increase in the cost of living;
(g) an allowance that is payable to an eligible employee, being a person who has not attained the age of 21 years, by reason -
(i) that he is married; or
(ii) that he is required to perform duties or work of a kind normally performed by a person who has attained the age of 21 years;
(h) an allowance that is payable to an eligible employee by reason that he is employed in the Public Service Board in the position of Chairman, Promotions Appeal Committee;
(j) an allowance that is payable to an eligible employee (being an eligible employee referred to in paragraph (ea) of the definition of 'eligible employee' in sub-section 3 (1) of the Act) in pursuance of -
(i) where the eligible employee is employed as a member of the staff of the Legal Aid Commission of Western Australia established under the Legal Aid Commission Act, 1976 of the State of Western Australia - the provisions of paragraph 4 in the Schedule to the agreement made on 12 January 1978 between the Commonwealth and that State in relation to the provision in that State of legal aid to which that agreement relates; . . . .
(k) an allowance that is payable to an eligible employee, being a person to whom sub-section 16 (3) of the Trade Union Training Authority Amendment Act 1978 applies, under sub-section 16 (5) of that Act;
(l) an allowance of a prescribed kind that is payable on a regular basis to an eligible employee. (Emphasis added)
Payment of allowance of a prescribed kind on a regular basis
6. (1) An allowance of a prescribed kind shall not, for the purposes of paragraph 5 (1), be taken to be payable to an eligible employee on a regular basis unless the allowance is payable in respect of duties or work performed by the eligible employee for a continuous period that commences -
(a) immediately after the eligible employee has performed for a continuous period of 12 months duties or work in respect of the performance of which an allowance of the same kind as that allowance has been paid or is payable to the eligible employee; or
(b) where a certificate in respect of the eligible employee has been given under sub-regulation (2) - on the day specified in the certificate.
(2) If a person authorized by the Commissioner for the purposes of this regulation is of the opinion that there is a likelihood that, from and including a particular day -
(a) an eligible employee will, for a continuous period of not less than 12 months, perform duties or work in respect of the performance of which an allowance of a prescribed kind will be payable to him; or
(b) where the eligible employee has, for a continuous period of less than 12 months immediately preceding the particular day, performed duties or work in respect of the performance of which an allowance of a prescribed kind has been paid or is payable to him - the eligible employee will, for a continuous period of less than 12 months that together with the first-mentioned period will not be less than a period of 12 months, perform duties or work in respect of the performance of which an allowance of the same kind as that allowance will be payable to him,
the authorized person shall give to the Commissioner a certificate to that effect specifying the day (not being a day earlier than the day on which the certificate is given) on which the period referred to in paragraph (a) or (b), as the case may be, in relation to the eligible employee will commence.
(3) - (4) . . .
(No certificate under reg.6 (2) was given here).
Part of salary or wages not to be treated as salary in certain circumstances
7. (1) Where -
(a) an allowance of a kind referred to in paragraph 5 (j) or (k) is payable to an eligible employee; and
(b) a part (in this sub-regulation referred to as the 'relevant part') of that allowance is payable to the eligible employee by reason of a reduction in, or the discontinuance of, the payment to the eligible employee of another allowance, not being an allowance of a kind referred to in regulation 5, that is or was payable to the eligible employee,
so much of the salary or wages of the eligible employee as is equal to the amount of the relevant part of that allowance shall not be treated as salary for the purposes of the Act . . ."
The temporary performance of duties is dealt with by s.51A(1) (as it stood at the relevant date) of the Public Service Act 1922:
"51A. (1) The regulations may make provision for or in relation to the temporary performance of the whole or a part of the duties of an office (whether vacant or not) in a Department other than an office in the First Division by an officer who occupies another office in that Department, including provision for or in relation to
(a) the selection of an officer to perform temporarily the duties of an office of a classification higher than the classification of the office occupied by him;
(b) appeals by officers in relation to such a selection of an officer; and
(c) the payment of allowances to officers temporarily performing duties in accordance with the regulations made for the purposes of this sub-section."
By reg.116 (1) of the Public Service Regulations, where, for any reason it is necessary to do so, the Chief Officer may direct an officer occupying an office in the Department to perform temporarily the duties of another office in the Department.
Higher duties allowances are dealt with by reg.87 of the Public Service Regulations, so far as relevant, as follows:
"87. (1) A reference in this regulation to an officer who performs the whole or a part of the duties of a higher office is a reference to an officer who performs, in accordance with a direction given under sub-regulation 116 (1), the whole or a part of the duties of an office of a classification higher than the classification of the office occupied by him.
(2) Subject to this regulation, an officer who performs the whole of the duties of a higher office shall be paid, in respect of the performance of those duties, an allowance at a rate equal to the difference between his rate of annual salary and the rate of annual salary payable to an officer occupying the higher office or, if a scale of rates of annual salary is applicable to the higher office, the rate of annual salary payable to an officer occupying that higher office and in receipt of salary at the minimum rate in that scale.
. . .
(23) An allowance granted under this regulation shall be regarded as salary for the purposes of calculating the amount of travelling allowance, meal allowance, payment for overtime, payment for Sunday duty, payment for holiday duty and payment for excess travelling time, payable to an officer."
Before the Tribunal and in this Court the applicant relied upon the decision of the Full Court (Bowen C.J., Woodward and Fitzgerald JJ.) in Commissioner of Superannuation v. Carpenter (1983) 77 FLR 224; 48 ALR 230. There, an employee to whom the Act applied worked under an industrial award which prescribed a basic rate of pay and shift allowances. He worked a four-week roster, partly during ordinary hours and partly during hours which attracted shift allowances. Although his earnings varied from week to week, they were constant for each four-week period. The Court rejected an argument advanced on behalf of the Commissioner (see at pp. 231-1 and ALR pp. 237-8) that the presence of s. 5(1)(a) revealed a legislative intention that no allowances, even those which would form part of salary or wages according to ordinary concepts, were to be regarded as "salary" for the purposes of the Act except those allowances which the regulations provided were to be treated as "salary". It was held that the allowances in question were "salary" according to ordinary concepts; and that since the regulations were silent on the subject of shift work which constitutes the employee's normal hours of duty, the allowances were part of the employee's "salary" for the purposes of s.5(1) of the Act.
Bowen C.J. and Woodward J. observed (at p.226; ALR pp.232-233):
"(5) When sub-s.5(1) says 'but does not include any part of salary or wages that, under the regulations, is not to be treated as salary for the purposes of the Act', Parliament is delegating to the Executive the power to exclude by regulation certain things otherwise included in the definition by the words 'salary or wages'.
(6) The power delegated to exclude by regulation is a power to exclude 'any part of salary or wages' thus picking up general words first used in the definition. This appears to require the words 'salary and wages' to be read in their ordinary sense . . .
(7) In its ordinary sense the phrase 'salary or wages' would cover the remuneration regularly received by Mr. Carpenter over the normal four-week structure of his duties.
Unless they were expressly excluded by regulation pursuant to the concluding words of sub-s 5(1) of the Act, we would thus regard continuing percentage variations to a salary, occurring on days when particular regularly-rostered shifts are worked, as falling within the ordinary meaning of a salary. The regulations refer only to allowances for shift work 'outside the hours that under the terms and conditions of his employment are the normal hours of duty' of an employee; they are silent on the subject of shift work which constitutes the employee's normal hours of duty (reg 4(b) of the Superannuation
(Salary) Regulations)."
Fitzgerald J. took a similar view (at p.231; ALR p.238). He also said (at p.230; ALR p.237) -
"Neither the Commissioner for Superannuation nor the Australian National Airlines Commission sought to develop an argument that the regulations ought be construed as impliedly excluding all allowances not expressly referred to from what is to be treated as 'salary' for the purposes of the Act. In my opinion, no such conclusion could properly be drawn. Although regs 4 and 5 do make detailed provision as to the kinds of allowance which are to be treated as 'salary', there is no sufficient basis for concluding from the terms of the regulations that it was intended to catalogue exhaustively what kinds of allowance might constitute or form part of 'salary' so as to exclude all other allowances, including those which are salary or wages according to ordinary concepts."
It was further held in Carpenter that the annual rate is to be determined by examining the employee's terms of employment as at a given day and calculating the amount of salary he would have earned in the following year on the assumption that no changes occurred in those terms of employment.
The Court rejected an argument advanced on behalf of the Commissioner that regard should be had to the employee's daily rate on his last day of work, or the contents of his last pay packet, as a basis for calculating his annual rate of pay (at p.229; ALR p.234).
In the present case, the Tribunal held that because reg.6 "dealt with the field" of higher duties allowances and because the applicant's allowances were not paid with the "regularity" required by the regulations, it should be inferred that the applicant's "irregular" allowances were intended to be excluded from the statutory concept of "salary".
The applicant now challenges this reasoning, contending that the only "field" dealt with by reg.6 is higher duties allowances paid on a "regular" basis; and that, as in Carpenter, the regulations are merely silent on the question whether higher duties allowances paid on a basis other than "regularly" fall within the ordinary concept of "salary". The applicant submits that the allowances paid to him were part of "salary" within the ordinary meaning of the word, and were not excluded from that ordinary meaning by the operation of the regulations. Consequently, it is said, the allowances were "salary" in the sense in which that word is used when it first appears in s.5(1) of the Act, and must be taken into account in calculating the invalidity pension which he receives. In support of his contentions, the applicant points out that he received higher duties allowances for some 39 per cent of the total time that he served in the service and for some 44 per cent of his last 12 months of service; that he received the allowances for one continuous period of over 11 months, and that in total, he received the allowances for more than 18 months; that he received the allowances at the upper level of the Class 11 salary; and that, consequently, his final annual rate of salary was the upper level of the salary of a Clerk (Class 11).
It will be remembered that s.5(1) of the Act defined "salary" to include -
"(a) any allowance. . . of a kind that, under the regulations, is to be treated as salary for the purposes of this Act. . . "
but does not include any part of any salary . . . that, under the regulations, is not to be treated as salary for the purposes of this Act."
As has been noted, by reg.5(1), an allowance of a prescribed kind (defined by reg.4(a) to include a higher duties allowance) that is payable "on a regular basis" to an eligible employee is a kind of allowance that is to be treated as salary for the purposes of the Act. By reg.6(1) (a), an allowance of a prescribed kind shall not, for the purposes of reg.5(1), be taken to be paid on a regular basis unless payable in respect of duties or work performed for a continuous period that commences immediately after the employee has performed for a continuous period of 12 months duties or work in respect of the performance of which an allowance of the same kind has been paid or is payable. The continuity required by reg.6(1)(a) did not exist here.
On behalf of the Commissioner it is submitted that even if some of the payments of higher duties allowances made to the applicant were sufficiently regular to qualify as salary in the ordinary sense (cf. Commissioner for Government Transport v. Kesby (1972) 127 CLR 374 per Barwick C.J. at p 378), regs. 4, 5 and 6, when read together, deprived the payments of the regularity required in order to qualify as "salary" for the purposes of the Act.
In our opinion, the Commissioner's contention is correct.
For present purposes, it is necessary to read the Act and the regulations together in order to understand what the legislative plan is. As Mason J. observed in argument in Brayson Motors Proprietary Limited (In Liquidation) v. The Commissioner of Taxation for the Commonwealth of Australia (1985) 156 CLR 651 at p 652 -
"One looks at regulations, not to construe an overall scheme or to throw light on ambiguity in a statutory provision, but to ascertain what the scheme is."
Reading the Act and the regulations together, the following scheme emerges: (a) if a payment falls within the ordinary concept of salary it will be regarded as salary for our purposes unless excluded under the regulations; (b) if a payment does not fall within the concept of salary within ordinary concepts it will be regarded as salary for present purposes only if so treated under the regulations.
The payments now in question are described as "allowances" and as Dixon J. noted in Mutual Acceptance Company Limited v. The Federal Commissioner of Taxation (1944) 69 CLR 385 at p 402 -
"'Allowance' is one of many words which take their meaning from a context rather than affecting or controlling the meaning of other words of the context in which they occur. For, considered alone and at rest rather than at work with other words, it means the allowing of a thing or a thing allowed. It is only by its application that you discover the kind of thing in mind."
The character of a higher duties allowance is indicated by reg.87(2) of the Public Service Regulations. The officer is to be paid, in respect of the performance of higher duties, an allowance at a rate equal to the difference between his rate of annual salary and the rate of annual salary payable to an officer occupying the higher office. But it does not necessarily follow that a higher duties allowance will always fall within the ordinary concept of salary. In Kesby, supra, Gibbs J. (with the concurrence of Menzies, Walsh and Mason JJ.) said (at p.388):
"The question what is the 'salary' in a particular case is purely one of fact. It does not simply depend on the terminology used to describe the amount payable. Thus in the present case it can hardly be doubted that the increments and the margins form part of the 'salary' of bus drivers. Similarly a payment referred to as 'a shift penalty' or as 'overtime' could be said to constitute part of the 'salary' of bus drivers if in fact it was an amount payable to bus drivers generally as remuneration for the services that bus drivers generally are regularly required to perform."
Whether the allowances paid to the applicant fall within the ordinary concept of salary is thus a question of fact and degree. We are inclined to think that they do not. However, if they do, they may still form a part of salary or wages that in terms of s.5(1) "under the regulations, is not to be treated as salary for the purposes of this Act." In our view, the regulations may indicate either expressly or by necessary implication that something within the ordinary concept of salary or wages is not to be treated as salary for the purposes of the Act.
It will be remembered that, by reg.5(1), an allowance of a prescribed kind (the present allowance is so prescribed) is to be treated as salary for the purposes of the Act if it is payable "on a regular basis", and that, by reg.6(1)(a), an allowance of a prescribed kind shall not, for the purposes of reg.5(1), be taken to be payable on a regular basis unless payable in respect of duties performed for a continuous period that commences immediately after the employee has performed for a continuous period of 12 months duties in respect of the performance of which an allowance of the same kind has been paid or is payable.
In our opinion, it is proper to construe these regulations as treating allowances paid on a regular basis as salary but also as requiring that there not be treated as salary allowances not paid on a regular basis. The first proposition is explicit. The latter arises by implication as a necessary elaboration intended by the legislator (see Bennion, Statutory Interpretation, at pp.239 et seq.). In discussing the "expressio unius" principle in the context of words of extension, Bennion (at p.846) says -
"Where it is doubtful whether a stated term does or does not include a certain class, and words of extension are added which cover some only of the members of the class, it is implied that the remaining members of the class are excluded."
Such an implication should be made here. It is always a question of fact whether a higher duties allowance is payable with a sufficient degree of regularity and uniformity to justify its description as salary in the ordinary sense. By singling out for treatment as salary allowances only if they are paid on a regular basis and by defining precisely what is "regular", Parliament must be taken to be saying, and to have intended to say, that allowances not paid on such a regular basis are not to be treated as salary.
Carpenter may be distinguished for our purposes. It was there held, in the case of a different type of allowance, that the regulations did not deal with the matter at hand in any fashion at all; and, in particular, did not, expressly or by implication, provide that the payments not be treated as salary for the purposes of the Act. In the present case, the regulations, on their proper construction, provide that the subject allowances are not to be treated as salary. There is nothing here inconsistent with the reasoning or decision in Carpenter. A different result is arrived at because the allowances are different and are differently dealt with by the regulations.
The appeal is dismissed with costs.
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