FSS Trustee Corporation v Eastaugh
[2016] VSC 636
•4 November 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2016 00185
| FSS TRUSTEE CORPORATION | Plaintiff |
| v | |
| GARRY ROBERT EASTAUGH | First Defendant |
| - and - | |
| ALFRED HEALTH | Second Defendant |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 10 and 11 August 2016 |
DATE OF JUDGMENT: | 4 November 2016 |
CASE MAY BE CITED AS: | FSS Trustee Corporation v Eastaugh & Anor |
MEDIUM NEUTRAL CITATION: | [2016] VSC 636 |
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TRUSTS AND TRUSTEES – Whether payments made to members of defined benefit scheme recalled to duty when rostered on call are salary for the purpose of determining superannuation entitlements – Whether periods of recall duty to be included in formula for determining period of service – First State Superannuation Act 1992 (NSW); Supreme Court (General Civil Procedure) Rules 2015 rr 16.01, 18.01, 54.02.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D Robertson QC with Mr H Redd | Greenfields |
| For the First Defendant | Dr I J Hardingham QC with Mr P Bingham and Mr M P Barrett | Maurice Blackburn |
| For the Second Defendant | Mr H N G Austin and Mr O Wolahan | Lander and Rogers |
HIS HONOUR:
The plaintiff, FSS Trustee Corporation (‘FSS’) is the trustee of the First State Superannuation Scheme (‘Fund’) established by the First State Superannuation Act1992 (NSW). The Fund was formed in 2011 by a merger of a fund established in Victoria in 1965, the Hospitals Superannuation Fund, and the First State Superannuation Fund. The Fund currently has approximately 755,628 members of whom approximately 8,220 are Defined Benefits Scheme (‘DBS’) members. The Fund has 7,109 participating employers of whom 167 are participating employers for the purposes of the DBS. The first defendant, Dr Eastaugh, is an anaesthetist who was a member of the DBS between September 1986 and 29 August 2011, and a member of the Fund’s accumulation scheme from 30 June 1988. Alfred Health is a public health service provider from hospitals in Melbourne: The Alfred, Caulfield and Sandringham Hospitals. It has never employed Dr Eastaugh.
By a further amended originating motion dated 11 August 2016, FSS seeks answers to four questions regarding the construction of the Fund Rules (‘Rules’). The questions are attached to this judgment as Annexure ‘A’. The Court has power to grant the relief sought pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015.
The following matters are not controversial. In 1986 Dr Eastaugh applied for, and was accepted into, the DBS as a six per cent contributory member. Between 1986 and August 2011 Dr Eastaugh was employed by Box Hill Hospital, and subsequently Maroondah Hospital/Eastern Health. As a condition of his employment he was required to be available to be rostered ‘on call’ outside of his ordinary hours of duty. When rostered on call Dr Eastaugh was paid an on call allowance, irrespective of whether he was actually required to attend at work. If he was required to attend for duty whilst rostered on call, Dr Eastaugh would be paid a recall payment in accordance with the Relative Value Guide (‘RVG’) prepared by the Australian Society of Anaesthetists. The RVG includes a time component as well as a fee for service component. The RVG rate exceeds Dr Eastaugh’s ordinary time rate of pay.
Throughout his employment, both Dr Eastaugh’s six per cent contribution, and Eastern Health’s nine per cent superannuation guarantee charge contribution, were calculated by reference to remuneration which included Dr Eastaugh’s recall payments.[1]
[1]See Exhibit K: Affidavit of Dr Eastaugh sworn 11 July 2016, “GRE17”.
In August 2011, Dr Eastaugh applied to leave the DBS. He wished to transfer his DBS balance into the Fund’s accumulation scheme. On 29 August 2011, Dr Eastaugh was informed that his DBS balance as at 17 July 2011 was $1,494,688.[2] Subsequently, FSS paid Dr Eastaugh a DBS benefit rollover sum of $929,814.05.[3] The sum of $1,494,688 was calculated on the basis that Dr Eastaugh’s salary for superannuation purposes included recall payments. The sum of $929,814.05 was calculated on the basis that it did not. This discrepancy has given rise to proceedings in the County Court between Dr Eastaugh and FSS. Dr Eastaugh’s claim does not fall for determination in the present proceedings. However, it does provide factual context for the resolution of the construction of the Fund’s Rules.
[2]Exhibit I: Affidavit of Dr Eastaugh sworn 3 June 2016, [90](d).
[3]Ibid [94].
The primary issue in the present proceedings is the meaning of ‘salary’ in r 3B.11.1 of the Rules. In particular, whether recall payments made to members are included in salary. This question is to be answered in the affirmative. A recall payment is a roster related payment. As such, it is included in the definition of salary as an allowance which is ordinarily payable regularly and periodically. This conclusion renders it unnecessary to address the question of whether recall payments are salary by reason of being a ‘higher amount’ advised to FSS by an employer.
FSS’s application for representative orders
Before turning to the questions of construction, it is necessary to deal with FSS’s application for Dr Eastaugh and Alfred Health to be appointed as representative defendants: Dr Eastaugh as a representative of members, and Alfred Health as a representative of participating employers.[4] Neither Dr Eastaugh nor Alfred Health opposed the orders sought by FSS. I am satisfied that there is a community of interest between Dr Eastaugh and the other members of the Fund, and Alfred Health and other participating employers which justifies the making of representative orders.[5] The relevant community of interest is the interest which all members and participating employers have in the proper construction of the Rules. The Court has had the benefit of well researched submissions, ably presented by experienced counsel.[6] The Court has power to make a representative order in the terms sought under either r 16.01(2) or r 18.01 of the Supreme Court (General Civil Procedure) Rules 2015. The Court will make representative orders in the terms sought by FSS that:
1. The first defendant represents all of the past and present members of the First State Superannuation Scheme established by the First State Superannuation Act 1992 of New South Wales (‘the Fund’) within the meaning of the Deed of Variation dated 29 March 2006 (as amended) (‘the Trust Deed’) and the Rules made thereunder (as amended) (‘the Rules’).
2. The second defendant represents all of the past and present participating employers within the meaning of the Trust Deed and the Rules.[7]
[4]See Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T2 LL12-16.
[5]See McDonald’s Australia Ltd v Watson [2013] VSC 502, [47]-[49].
[6]See Clark v University of Melbourne [1978] VR 457, 477.
[7]See ‘Further Amended Originating Motion between Parties’ dated 11 August 2016.
The construction of the Trust Deed
The primary issue for determination concerns the meaning of ‘salary’ in r 3B.11.1 of the DBS, in respect of a member who is not a casual employee. The definition is as follows:
Salary means in respect of a defined benefit member:
…
(b) who is not a Casual Employee:
(i) the member’s Superannuation Salary; or
(ii)if there is no Superannuation Salary in respect of the member at the relevant time, the amount equal to that member’s ordinary time rate of pay, plus any allowances (not of a cost-reimbursement type such as an expense of office, uniform allowance, tool allowance, reimbursement for travel or other incidental expenses) which are ordinarily payable regularly and periodically (including shift and roster related payments), including certificate/qualification allowances and higher duties allowances for at least a 52 week period, but excluding any other allowances which are ordinarily not paid over a 52 week cycle or do not flow from regular rostered duty or any higher amount advised to the Trustee by the Employer from time to time…[8]
The definition of ‘Superannuation Salary’ is as follows:
Superannuation Salary means the amount advised to the Trustee by the Employer from time to time as the member’s salary for the purposes of the HS DB Rules (being an amount not less than the member’s Salary immediately before the Salary Amendment Date).[9]
[8]Exhibit A: Affidavit of Peter John Blight affirmed 20 January 2016, “I”, r 3B.11.1.
[9]Ibid.
In August 2011 when Dr Eastaugh requested the rollover of his DBS balance, there was no ‘Superannuation Salary’ within the meaning of paragraph (i) of the definition of salary. ‘Superannuation Salary’ was inserted into r 3B.11.1 by a Deed of Variation dated 30 June 2014.
Both FSS and Alfred Health accept that on call payments received by DBS members fall within the definition of salary.[10] They also accept that it is a condition precedent for a member to be able to be recalled to duty and receive a recall payment, that the member be rostered on call.[11] However, both FSS and Alfred Health submit that a recall payment is not salary as defined.[12]
[10]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T30 LL20-24; Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T122 LL6-11.
[11]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T38 LL2-10; Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T122 L21 – T123 L6.
[12]See ‘Plaintiff’s Proposed Form of Judgment’ [3](a); ‘Second Defendant’s Outline of Submissions’ dated 21 July 2016, [53]-[54].
Mr Robertson QC, who appeared with Mr Redd for FSS, submitted that recall payments do not constitute an allowance within the accepted meaning of that term, because the payment is for a service actually rendered.[13] He submitted that the accepted meaning of an allowance is in accordance with the statement of Latham CJ in Mutual Acceptance Co Ltd v Commissioner of Taxation (Cth):[14]
When the word is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service. Expense allowances, travelling allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of a service. Tropical allowances, overtime allowances, and extra pay by way of ‘dirt money’ are allowances as compensation for unusual conditions of service.[15]
Mr Robertson submitted that recall payments do not fall into any of the categories identified by Latham CJ.[16] On the other hand, he submitted that on call payments:
are within the concept of a payment in addition to ordinary wages for the purpose of meeting some particular requirement connected with the service, or they are a compensation for unusual conditions of service.[17]
[13]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T41 LL6-24.
[14](1944) 69 CLR 389 (‘Mutual Acceptance’).
[15]Ibid 396-397.
[16]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T144 LL5-25.
[17]Ibid T144 LL19-23.
Mr Robertson also submitted that a recall payment is not an allowance within the definition of salary because it is not ordinarily payable regularly and periodically.[18] He submitted that the nature of recall payments is such that the payment is contingent upon circumstances arising which require the attendance of a practitioner who is rostered on call.[19] He submitted that the payment is not roster related ‘because it does not come, in terms of point of entitlement, from being rostered to work; it comes from actually working’.[20] He submitted that ‘roster related payment’ is:
a compound expression and we would say that the word ‘related’ there should not be understood in the more general sense of related to the roster. A roster-related payment, we say, is payment for being rostered. So the payment for being rostered in the particular way – that is to say rostered on-call – that is the roster-related payment. That is the natural meaning of ‘related’ in that context. The remuneration for recall comes from a different circumstance – that is being actually called upon to attend and, what’s more, being paid, as the basis of entitlement in Dr Eastaugh’s contract, and typically as the more general evidence shows, being remunerated for particular types of work at what’s called in this case a ‘fee for service at RVG unit’. And it depends on time spent and it depends on the particular nature of what’s done. That’s the RVG scale.[21]
[18]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T36 LL18-21.
[19]Ibid T51 LL16-22.
[20]Ibid T31 LL21-23.
[21]Ibid T32 LL5-20.
Mr Austin, who appeared with Mr Wolahan for Alfred Health, joined with Mr Robertson in making the submissions set out above.[22] In addition, Mr Austin submitted that the phrase in the definition of salary ‘for at least a 52 week period’ excludes recall payments from being salary as defined. [23] Alfred Health submits that only allowances which are paid for at least a 52 week period can qualify as salary.[24]
[22]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T122 LL19-20.
[23]Ibid T124 L30 ― T125 L2.
[24]Ibid.
The principles applicable to the construction of superannuation trust deeds and rules are not controversial. As with any commercial document, the task of interpretation requires attention to the language used by the parties, the commercial circumstances which the document addresses and the objects which it is intended to secure.[25]
[25]Hannover Life Re of Australasia Ltd v Colella (2014) 47 VR 1, [3] (Beach JA citing McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579, [22]); Intergraph Best (Vic) Pty Ltd v QBE Insurance Ltd (2005) 11 VR 548, [27]; Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640, [35].
In Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd,[26] Warren J (as her Honour then was) stated:
The basic approach applied by the courts to the interpretation of pension schemes is practical and purposive. The courts pay heed to the fact that the beneficiaries under a pension scheme are not volunteers and that the rights of those beneficiaries are founded in the contract of employment.[27]
Her Honour cited with approval the judgment of the English Court of Appeal in Stevens v Bell,[28] where Arden LJ, with whom Auld and Waller LJJ agreed, stated:
In other words, it is necessary to test competing permissible constructions of a pension scheme against the consequences they produce in practice. Technicality is to be avoided. If the consequences are impractical or over-restrictive or technical in practice, that is an indication that some other interpretation is the appropriate one. Thus in the National Grid case, to which I refer below, where there was a choice of possible constructions, Lord Hoffmann held that the correct choice depended ‘upon the language of the scheme and the practical consequences of choosing one construction rather than the other’.[29]
[26](2002) 174 FLR 1.
[27]Ibid [215].
[28][2002] EWCA Civ 672.
[29]Ibid [28], quoting National Grid Co Plc v Mayes [2001] 1 WLR 864, [53].
All parties were in agreement that recall payments do not constitute part of a members’ ordinary time rate of pay. Plainly, this is correct. Ordinary time rate of pay has a well-established meaning: the rate of pay for the standard or ordinary number of hours of work, in contrast to the penalty rate of pay for hours of work additional to ordinary hours.[30]
[30]Scott v Sun Alliance Australia Ltd (1993) 178 CLR 1, 5; Catlow v Accident Compensation Commission (1989) 167 CLR 543, 555-6, 560.
Recall payments are ‘roster related payments’
A fundamental point of disagreement between the parties is whether recall payments are ‘roster related payments’. Both FSS and Alfred Health submit that recall payments are not roster related payments.[31] Dr Eastaugh contends to the contrary. Dr Hardingham QC, who appeared with Mr Bingham and Mr Barrett for Dr Eastaugh, submitted that whether recall payments are roster related payments ‘is the nub of this whole case’.[32] I accept this submission. If a recall payment is a roster related payment, such payments are included in ‘allowances… which are ordinarily payable regularly and periodically’. Further, if a recall payment is salary by reason of being an allowance ordinarily payable regularly and periodically, it is not necessary for the Court to conclude that such payments:
(i) fall within the accepted meaning of ‘allowance’; and
(ii) are, in fact, payable regularly and periodically.
The need to make such findings is obviated if roster related payments are included in the class of allowances payable regularly and periodically.
[31]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T66 LL2-9; Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T130 LL6-15.
[32]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T88 L1.
I have concluded that recall payments are roster related payments. A member can only be recalled, and thereby have an entitlement to a recall payment, when he/she is rostered on call. The fact that a member can only receive a recall payment if he/she has been rostered on call provides a direct nexus between a member being rostered on call and having an entitlement to being paid recall payments. Recall payments are therefore properly characterised as being roster related.
The phrase ‘related to’ is of the widest import and should not, in the absence of compelling reasons to the contrary, be read down.[33] Mr Robertson submitted that roster related payment ‘is a compound expression and we would say that the word “related” there should not be understood in the more general sense of related to the roster’.[34] I reject this submission. The test is whether there is a sufficient nexus between the member being rostered on call and the recall payment.[35] That test is satisfied because being rostered on call is a condition precedent for a member receiving a recall payment. Both Mr Robertson and Mr Austin submitted, in effect, that a roster related payment is confined to a payment which is directly referable to the relevant roster. Thus, in the case of an on call roster, the only payment which is roster related is the on call allowance.[36] I reject this submission. It is inconsistent with the well-established principle that the phrase ‘related to’ is not to be read down, absent compelling reasons for doing so.
[33]IBM Australia Ltd v National Distribution Services Ltd (1991) 22 NSWLR 466, 483 (Clarke JA); Fountain v Alexander (1982) 150 CLR 615, 629; PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301, 330-31.
[34]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T32 LL5-7.
[35]See PMT Partners Pty Ltd (in liq) v Australian National Parks & Wildlife Service (1995) 184 CLR 301, 330; Kennon v Spry (2008) 238 CLR 366, [217] (Kiefel J).
[36]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T122 L29 – T123 L6.
Recall payments are included in allowances ordinarily payable regularly and periodically
Having concluded that recall payments are roster related payments, it is necessary to consider the legal consequences which flow from this conclusion. The relevant part of the definition of salary relating to this issue is as follows:
any allowances … which are ordinarily payable regularly and periodically (including shift and roster related payments) …
It is necessary to focus attention on ‘(including shift and roster related payments)’ (‘the inclusive definition’). The use of the term ‘including’ extends the meaning of the phrase ‘any allowances… which are ordinarily payable regularly and periodically’ to include roster related payments. In Transport Accident Commission v Hogan,[37] the Court of Appeal stated:
The word ‘includes’ commonly signifies the extension or enlargement of the ordinary meaning of a word or expression but it may also be employed by way of clarification.[38]
In Corporate Affairs Commission (SA) v Australian Central Credit Union,[39] the plurality stated:
As the use of the word ‘including’ indicates (see example, Federal Commissioner of Taxation v St Hubert’s Island Pty Ltd (in liq) (11)), the sub-section is expansive of what would otherwise be included in the notion of an offer or invitation to the public. That does not, however, mean that none of the cases which the sub-section includes would have been included in that notion in any event. The function of such an inclusive ‘definition’ is commonly both to extend the ordinary meaning of the particular word or phrase to include matters which otherwise would not be encompassed by it and to avoid possible uncertainty by expressly providing for the inclusion of particular borderline cases.[40]
[37](2013) 41 VR 112.
[38]Ibid [47] (citations omitted).
[39](1985) 157 CLR 201.
[40]Ibid 206-7.
In Sherritt Gordon Mines Ltd v Commissioner of Taxation,[41] McInerney J stated:
In other cases the definitions are ‘inclusive’, e.g., ’”business” includes any profession, trade, employment, vocation or calling, but does not include occupation as an employee’.
In such case, the definition adds the meanings given in the definition clause to the natural meaning of the word. The added meaning is often one not otherwise within the natural meaning, so that the natural meaning of the word is to that extent amplified.[42]
[41][1977] VR 342.
[42]Ibid 353; cited with approval in Gardner v R (2003) 39 MVR 308, [5] (Sheller JA), [47] (O’Keefe J).
In Cohns Industries Pty Ltd v Deputy Federal Commissioner of Taxation,[43] a Full Court of the Victorian Supreme Court stated:
When the word ‘includes’ is used in a definition section, it is generally used to enlarge the meaning of the word it describes, that is to say to bring within the word something that would otherwise not be within it.[44]
[43](1979) 24 ALR 658.
[44]Ibid 660 (citations omitted).
In Beqiri v R,[45] Priest JA (Warren CJ and Vickery AJA agreeing) stated:
And usually the use of the word ‘includes’ in a statutory definition is intended to give an extended meaning to the ordinary meaning of a word.[46]
In Zickar v MGH Plastic Industries Pty Ltd,[47] the plurality stated:
That par (a) begins with the word ‘means’ and par (b) begins with the word ‘includes’, suggests that par (b) is designed to give an extended meaning to ‘injury’ by going beyond personal injury and to a disease in the circumstances prescribed.[48]
[45](2013) 37 VR 219.
[46]Ibid [28].
[47](1996) 187 CLR 310.
[48]Ibid 329-30; cited with approval in Coverdale v West Coast Council (2016) 330 ALR 424, [37].
Consistent with the authorities cited above, the definition of salary should be construed such that ‘allowances… which are ordinarily payable regularly and periodically’ includes shift and roster related payments.
A practical and purposive approach to construction
The conclusion set out above is consistent with a practical and purposive approach to the construction of the inclusive definition. Recall payments and on call allowances are interdependent. But for an employee being rostered on call, he/she cannot receive a recall payment. Both the entitlement to on call allowances and recall payments are founded in an employee’s contract of employment. All parties agree that an on call allowance is salary as defined. If payment received by an employee for being on call is salary, why shouldn’t the payment received for actually performing work when called upon also be salary? Mr Robertson and Mr Austin point to the fact that recall payments are for work actually performed as providing the rationale for disqualifying such payments from being within the definition of salary. This rationale is flawed. Whether on call or recalled to work, an employee is on duty.
Medical practitioners such as Dr Eastaugh are required to make themselves available to participate in rostered on call duty. For example, cl 40.1 of AMA Victoria – Victorian Public Health Sector Medical Specialists Enterprise Agreement 2013 provides: ‘All full time Doctors will hold themselves available to perform duty outside ordinary hours’.[49] Dr Eastaugh annexed to his affidavit of 3 June 2016 employment agreements between medical practitioners and Eastern Health. An employment agreement dated 16 February 2011 includes the following: [50]
The Practitioner’s oncall commitments are an integral component of his/her appointment to Eastern Health. It is expected that he/she will be available for oncall duties as rostered by the Health Service at least to the frequency as specified in Part 4 of Schedule 1.[51]
Throughout his employment with Eastern Health, Dr Eastaugh was subject to similar contractual provisions.[52]
[49]Exhibit G: Affidavit of Wayne John Mason sworn 4 May 2016, “WJM1”.
[50]Exhibit I: Affidavit of Dr Eastaugh sworn 3 June 2016, “GRE7”.
[51]Ibid 36.
[52]See Exhibit I: Affidavit of Dr Eastaugh sworn 3 June 2016, [34]-[41].
The nature of rostered on call duty evokes the observation of Dixon J in Automatic Fire Sprinklers Pty Ltd v Watson,[53] ‘[t]hey also serve who only stand and wait’.[54] This observation is apt to describe the nature of the service rendered by medical practitioners who are rostered on call. They must be available to attend at work at short notice when required. Plainly, their capacity to perform work cannot be impaired in any way by the consumption of alcohol. Although not required to be at work, the period during which an employee is rostered on call is properly described as a period of ‘duty’.
[53](1946) 72 CLR 435.
[54]Ibid 466.
The purpose of the definition of salary is to prescribe the basis for calculating a member’s superannuation benefits. The quantum of salary is not confined to ordinary time earnings. On call payments are an amount additional to ordinary time earnings which are included in the quantum of salary. Recall payments are also salary. Recall payments are roster related payments. Such payments are expressly included in the class of allowances paid regularly and periodically.
I reject the contention of FSS and Alfred Health that it is necessary to address the residual question of whether a roster related payment is in fact payable regularly and periodically. The phrase ‘(including shift and roster related payments)’ adds such payments to the class of allowances which are ordinarily payable regularly and periodically. No further inquiry need be undertaken to determine whether, in the case of an individual member, recall payments are in fact ordinarily payable regularly and periodically.
It is unnecessary for the Court to express any concluded view as to whether a recall payment falls within the accepted meaning of ‘allowance’ per Latham CJ in Mutual Acceptance. Mr Robertson submitted that a recall payment does not fall within the accepted meaning of an allowance as:[55] ‘something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service’.[56] Mr Robertson submitted that an on call allowance is within the accepted meaning of allowance because it is an additional payment to compensate for the inconvenience of an employee having to be available at short notice to attend at work.[57] Recall payments, on the other hand, are payments for services actually rendered.[58]
[55]See Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T41 LL6-12.
[56]Mutual Acceptance (1944) 69 CLR 389, 396-97 (Latham CJ).
[57]See Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T40 LL4-13.
[58]Ibid T41 LL13-24.
In order for recall payments to be salary as defined, it is not necessary to make a finding that the payments are within the accepted meaning of ‘allowance’. The accepted meaning of allowance is qualified by the express terms of the definition of salary. That definition includes a roster related payment within allowances ordinarily payable regularly and periodically. Although it is unnecessary to do so, I would, in any event, conclude that recall payments do fall within the accepted meaning of an allowance. Such payments are additional to ordinary wages to meet particular requirements of employment, or as compensation for unusual conditions of that service. The particular requirement is for an employee to be rostered on call, and to actually attend at work when the need arises.
Mr Robertson submitted that the point of distinction between recall payments and on call payments is that the former is payment for actual work. He submitted this takes the payment outside the ordinary meaning of an allowance. [59] The force of this submission is significantly diminished if, as I have found, periods during which an employee is rostered on call are properly characterised as periods of duty. The fact that recall payments are paid for services actually rendered does not take such payments outside of the meaning of an allowance as articulated by Latham CJ in Mutual Acceptance. Rather, the relevant criteria are:
(i) the grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee; or
(ii) as compensation for unusual conditions of that service.
[59]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T41 LL13-24.
Recall payments are additional to ordinary wages. The RVG rate is higher than the ordinary time rate of pay. This higher rate of pay compensates for a particular requirement connected with the service rendered and/or the unusual conditions of that service: the requirement to return to work outside of ordinary hours when rostered on call. Ultimately, however, whether recall payments are within the accepted meaning of allowance is not determinative of whether such payments are salary as defined.
The DBS operates in respect of 167 participating employers and 8,220 employees. The size and scale of the medical services provided by participating employers varies greatly. On the one hand, a large employer such as Alfred Health employs many full time specialist staff and has little need to recall practitioners who are rostered on call.[60] On the other hand, a small hospital in rural/regional Victoria or New South Wales may need to frequently recall a medical specialist who is rostered on call. This is what occurred with Dr Eastaugh whose specialist services have been in high demand outside of his part time ordinary hours of work.[61] It is necessary to test competing permissible constructions of the Fund Rules against the consequences they produce in practice.
[60]See Exhibit H: Affidavit of Lee Hamley affirmed 9 June 2016, [19]-[20].
[61]Exhibit I: Affidavit of Dr Eastaugh sworn 3 June 2016, [43].
I have concluded that recall payments are roster related payments. If it was necessary to undertake an examination of whether an individual member received recall payments regularly and periodically this would create significant practical difficulties for the administration of the Fund. In particular, unless recall payments are automatically included in the class of allowances payable regularly and periodically, a determination would have to be made in respect of each individual member as to whether his/her payment is ordinarily payable regularly and periodically. However, this administrative burden is avoided if:
(i) a recall payment is a roster related payment; and
(ii)the payment is salary by reason of it being automatically included in allowances payable regularly and periodically.
This approach to the construction of the Trust Deed is consistent with the practical and purposive approach endorsed by Warren J in Ansett Australia Ground Staff Superannuation Plan Pty Ltd v Ansett Australia Ltd,[62] and the Court of Appeal in Stevens v Bell.[63] It avoids an analysis having to be undertaken of an individual member’s recall payments to determine whether the frequency of such payments satisfies the criteria of being paid regularly and periodically.
[62](2002) 174 FLR 1.
[63][2002] EWCA Civ 672.
This approach also avoids the potential anomaly flowing from different modes of payment of recall payments. Most full time anaesthetists employed at the Alfred Hospital are on ‘rolled up rates’. Their entitlement to recall payments is included within their total salary and they do not have any additional entitlement to recall payments if required to attend work when rostered on call.[64] Mr Austin conceded that where an employee’s entitlement to recall payments is part of their rolled up rate, Alfred Health makes superannuation contributions based upon that rate.[65] It is anomalous if an employee’s compensation for recall duty is subject to superannuation contributions if incorporated into a rolled up annual salary, but not so if it is paid separately on each occasion recall work is performed.
[64]Exhibit H: Affidavit of Lee Hamley affirmed 9 June 2016, [16]-[19].
[65]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T117 L16-22.
Recall payments do not have to be paid for at least 52 weeks
Alfred Health contended that if, contrary to its primary submission, recall payments are roster related payments, such payments are not salary unless payable ‘for at least a 52 week period’.[66] FSS did not join in this submission. I reject it. The 52 week qualifying period criteria applies only to higher duties allowances which immediately precedes it. The attempt to extend the 52 week criteria to shift and roster related payments is inconsistent with the plain wording of the definition of salary. The temporal criteria in respect of roster related payments is that such payments be payable regularly and periodically. Roster related payments satisfy this criteria by reason of being included in the class of allowances which are ordinarily payable regularly and periodically. There is no basis for superimposing upon the temporal criteria of ‘regularly and periodically’ a further requirement that the payment be for at least a 52 week period.
[66]‘Second Defendant’s Outline of Submissions’ dated 21 July 2016, [53]; Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T124 L22 – T125 L2.
The definition of salary contains an exclusion in respect of ‘other allowances which are ordinarily not paid over a 52 week cycle or do not flow from regular rostered duty’. Mr Austin submitted that this exclusion should be read as ‘fleshing out the content of the inclusions rather than having some discrete field of operation’.[67] Mr Robertson submitted that the exclusion applies to any allowances, including those referred to earlier in the definition. He submitted that any allowance not ordinarily paid over a 52 week cycle is excluded from the definition of salary.[68] I reject these submissions. The exclusion operates in respect of ‘other allowances’. It has no work to do in respect of any allowances, including recall payments, which fall within the earlier part of the definition. First, the exclusion commences with the word ‘but’. This is consistent with the exclusion having a discrete field of operation, separate to those allowances which are included in the definition of salary by reason of the earlier part of the definition. Second, the phrase ‘other allowances’ should be given its ordinary meaning. ‘Other allowances’ means allowances different from those which are referred to earlier in the definition. The submissions advanced by Mr Robertson and Mr Austin are an invitation to ignore the plain meaning of ‘other’.
[67]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T130 LL27-28.
[68]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T46 LL19-28.
The relevance of the work patterns of individual members
Dr Hardingham submitted that the definition of salary requires consideration of a particular member’s individual circumstances. He pointed to the definition of salary:
Salary means in respect of a defined benefit member …
(b)(ii) … the amount equal to that member’s ordinary time rate of pay …[69]
[69]Exhibit A: Affidavit of Peter John Blight affirmed 20 January 2016, “I”, r 3B.11.1 (emphasis added).
It is clear that, in part, the definition of salary is based on an individual member’s ordinary time rate of pay. Plainly, this requires consideration of the individual member’s ordinary time rate of pay as prescribed by his/her contract of employment and any relevant industrial instrument. Dr Hardingham submits that consideration of whether a roster related payment such as a recall payment is payable regularly and periodically also requires consideration of an individual member’s circumstances.[70] He submits that the evidence establishes that Dr Eastaugh’s recall payments were paid regularly and periodically.[71] I accept that the evidence does establish that Dr Eastaugh was paid recall payments regularly and periodically. Neither Mr Robertson nor Mr Austin submitted otherwise. However, they submitted that irrespective of Dr Eastaugh’s personal circumstances, the nature of recall payments is such that they are not ordinarily payable regularly and periodically.
[70]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T87 LL6-17.
[71]Ibid T88 LL3-10.
I have concluded that the inclusive definition automatically includes recall payments within allowances payable regularly and periodically. As such, there is no requirement to consider the individual circumstances of a member in receipt of recall payments to determine whether, in fact, such payments were payable regularly and periodically. However, if I am wrong and the inclusive definition does not have the effect of automatically including recall payments within allowances payable regularly and periodically, it would be necessary to consider, in respect of an individual member, whether recall payments are ordinarily payable to that member regularly and periodically. The evidence before the Court establishes that recall payments were ordinarily payable to Dr Eastaugh regularly and periodically throughout his employment with Eastern Health.
Are recall payments a ‘higher amount advised to the Trustee’?
The conclusions set out above render it unnecessary for the Court to consider an alternative submission advanced by Dr Hardingham. Dr Hardingham submitted that if recall payments are not allowances as defined, such payments are nevertheless within the extended definition of ‘salary’ as being a higher amount advised by the employer to the Trustee. The Deed provides:
Salary means in respect of a defined benefit member:
…
(b) who is not a Casual Employee:
(i) the member’s Superannuation Salary; or
(ii)if there is no Superannuation Salary in respect of the member at the relevant time, … any higher amount advised to the Trustee by the Employer from time to time…[72]
Dr Hardingham submitted that the effect of the extended definition is that where an employer advises the Trustee of an amount which is higher than the member’s ordinary time rate of pay plus allowances as set out in the earlier part of the definition of salary, then that higher amount constitutes salary.[73] Thus, if contrary to Dr Hardingham’s primary contention, a recall payment does not constitute an allowance as defined, if the amount advised to the Trustee by an employer includes an amount referable to recall payments, that amount will constitute salary within the extended definition.[74]
[72]Exhibit A: Affidavit of Peter John Blight affirmed 20 January 2016, “I”, r 3B.11.1.
[73]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T21 L23 – T22 L6.
[74]‘First Defendant’s Outline of Submissions’ dated 21 July 2016 [68]-[72].
It is not in dispute that throughout his employment with Eastern Health, Dr Eastaugh’s recall payments were included in the amount of his salary for superannuation purposes which was advised to the Trustee.[75] However, FSS and Alfred Health contend that in order to fall within the extended definition of salary, it is necessary for any ‘advice’ to the Trustee to specifically identify that component of the salary which exceeds the member’s ordinary time earnings plus allowances as defined.[76]
[75]Exhibit K: Affidavit of Dr Eastaugh sworn 11 July 2016, “GRE17”.
[76]‘Trustee’s Outline of Submissions in Reply’ dated 4 August 2016, [28]; ‘Second Defendant’s Outline of Reply Submissions’ dated 4 August 2016, [21].
Rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 confers a broad discretion on the Court. The Court does not have to answer every question asked of it.[77] The question of whether or not recall payments constitute a ‘higher amount’ within the definition of salary is rendered moot by my conclusion that recall payments are roster related payments included in allowances paid regularly and periodically. In light of this conclusion, the present proceeding does not provide an appropriate vehicle for the determination of question (c)(i) raised by the plaintiff’s further amended originating motion.
[77]Fast v Rockman [2015] VSCA 61, [56].
I also consider it inappropriate to answer questions (c)(ii) and (d). FSS was granted leave to file a further amended originating motion to pose these questions on 11 August 2016.[78] Both questions relate to the legal consequences of ‘data provided to the plaintiff by an employer from time to time’.[79] I am not satisfied that the evidence and submissions before the Court provide a sufficiently clear foundation to answer these questions. The primary issue for determination is whether recall payments are salary as defined. The evidence and submissions before the Court do provide a proper foundation for the determination of this issue. The data provided to FSS by an employer, both in its form and content could vary widely. Questions (c)(ii) and (d) seek a uniform answer irrespective of the form and nature of the data provided.
[78]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T162 LL2-14.
[79]See ‘Further Amended Originating Motion between Parties’ dated 11 August 2016.
I accept that FSS and participating employers have a legitimate interest in having clarity regarding the question of whether recall payments constitute part of a member’s Superannuation Salary. This question does not arise in respect of Dr Eastaugh’s dispute with FSS in respect of the rollover of his DBS balance. This is because the rollover predated the introduction of the definition of Superannuation Salary into the Deed on 30 June 2014. Nevertheless, my findings in respect of recall payments for the purposes of paragraph (b)(ii) of the definition of salary, apply equally to the definition of Superannuation Salary. If the amount advised to FSS by an employer as being the member’s salary includes recall payments, the amount so advised will be Superannuation Salary. This will be so irrespective of whether the amount advised to FSS by an employer specifically identifies the recall payment.
Service fraction formula for Part Time Employees
Rule 2.6 of Division 3C and Rule 2.4 of Division 3D of the Rules prescribe a formula for calculating the service fraction of a member who is employed part time. Division 3C prescribes the rules which apply to a member who joined the DBS post-1988. Division 3D prescribes the rules which apply to members such as Dr Eastaugh, who joined the DBS prior to 1988.
Rule 2.6 of Division 3C provides:
Subject to Rules 3C.2.7 and 3C.2.8, if a member has any period of Service during which that member was a Part-time Employee or a Casual Employee, in determining any benefit payable under this Division 3C, the member’s total period of Service is adjusted on a pro rata basis as follows:
where:
A.is the total period of Service during which that member was a Part-time Employee or a Casual Employee
B.is the total period of Service which would have applied if that member had been a comparable full-time employee during the period that the member was a Part-time Employee or a Casual Employee.[80]
[80]Exhibit A: Affidavit of Peter John Blight affirmed 20 January 2016, “I”, r 3C.2.6.
Rule 2.4 of Division 3D provides:
Subject to Rule 3D.2.5 and Rule 3D.2.6, if a member has any period of Service during which that member was a Part-time Employee or a Casual Employee, in determining any benefit payable under this Division 3D, the member’s total period of Service is adjusted on a pro rata basis as follows:
where:
A.is the total period of Service during which that member was a Part-time Employee or a Casual Employee
B.is the total period of Service which would have applied if that member had been a comparable full-time employee during the period that the member was a Part-time Employee or a Casual Employee.[81]
[81]Ibid r 3D.2.4.
The issue which falls for determination is the extent to which, if at all, periods during which a member has been recalled, are to be taken into account when calculating a member’s period of service in accordance with the formulae set out above. All parties agree that the calculation should proceed on the basis that the numerator is the number of part time ordinary hours of the member, and the denominator is the number of full time ordinary hours of a comparable full time employee.[82] All parties agree that this calculation should exclude periods of service during which a member performed recall duties.[83]
[82]See Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 10 August 2016) T29 LL16-25.
[83]Ibid T29 LL13-16.
A part time employee is likely to have a significantly greater capacity than a full time employee to undertake recall duties. All parties agreed that this creates potential difficulties in identifying a ‘comparable full-time employee’ for the denominator in the service fraction.[84] This difficulty is illustrated by Dr Eastaugh’s history of undertaking significant amounts of recall duty on a regular basis. Often, Dr Eastaugh’s periods of recall duty exceeded his rostered ordinary part time hours.
[84]‘Trustee’s Outline of Submissions’ dated 7 July 2016, [51]; Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T116 LL6-12; ‘Second Defendant’s Outline of Submissions’ dated 21 July 2016, [56].
I accept FSS’s submission that the intention of the service fraction formula is to adjust the period of service of a part time employee on a pro-rata basis relative to a comparable full time employee.[85] As an employee of Eastern Health, Dr Eastaugh averaged seven ordinary part time hours per week. A comparable full time anaesthetist’s hours were 35 hours per week.
[85]Transcript of Proceedings, FSS Trustee Corporation v Eastaugh (Supreme Court of Victoria, S CI 2016 00185, McDonald J, 11 August 2016) T155 LL9-22.
If the service fraction formula is construed literally, ‘the total period of Service’ is determined by reference to years of service without any deduction referable to the hours of service actually worked. A literal construction would defeat the objective intention of distinguishing between the period of service of a part time and full time employee by reference to hours actually worked. The objective intention of distinguishing between the position of part time and full time employees is best achieved by comparing the ordinary hours of a part time employee with the ordinary hours of a comparable full time employee. I accept the submissions of the parties that this calculation should exclude any recall hours worked by either a part time member or a comparable full time member.
Conclusion
The orders I propose to make are as follows:
1.The first defendant represents all of the past and present members of the First State Superannuation Scheme established by the First State Superannuation Act 1992 of New South Wales (‘the Fund’) within the meaning of the Deed of Variation dated 29 March 2006 (as amended) (‘the Trust Deed’) and the Rules made thereunder (as amended) (‘the Rules’).
2.The second defendant represents all of the past and present participating employers within the meaning of the Trust Deed and the Rules.
3.The following questions concerning the construction of the Rules are answered as follows:
(a)Are recall payments made to members who are full time or part time employees (other than casual employees) for the provision of emergency services (whether full time or part time) included in ‘Salary’ (subparagraph (b)(ii) of the definition) within the meaning of r 3B.11.I? ― Yes.
(b)In calculating the ‘service fraction’ within the meaning of rr 3C.2.6 and 3D.2.4, is the numerator the number of part time ordinary hours of work of the particular member and the denominator the number of full time ordinary hours of work of a comparable full time employee (excluding from both the numerator and the denominator time spent providing recall emergency services) ― Yes.
4.The plaintiff’s costs and expenses of and incidental to this proceeding be retained out of the Fund;
5.The defendants’ costs of this proceeding be taxed on an indemnity basis in default of agreement between the plaintiff and the relevant defendant and be paid out of the Fund.
Annexure A
The Plaintiff seeks answers to the following questions as to the true construction of the Rules:
(a)Are recall payments made to members who are full-time or part-time employees (other than casual employees) for the provision of emergency services (whether full-time or part-time) included in ‘Salary’ (sub-paragraph (b)(ii) of the definition) within the meaning of rule 3B.11.1?
(b)In calculating the ‘service fraction’ within the meaning of rules 3C.2.6 and 3D.2.4, is the numerator the number of part-time ordinary hours of work of the particular member and the denominator the number of full-time ordinary hours of work of a comparable full-time employee (excluding from both the numerator and the denominator time spent providing recall emergency services) or, if not, how are the numerator and the denominator to be ascertained?
(c)Does data provided to the Plaintiff by employers from time to time which contains information about a member’s salary constitute:
(i)advice to the Plaintiff of a ‘higher amount’ within the meaning of sub-paragraph (b)(ii) of the definition of ‘Salary’ in rule 3B.11.1 (‘Higher Amount’) if the data does not specifically identify that information as communicating a higher amount for the purpose of that definition?
(ii)an ‘amount advised to the Trustee by the Employer from time to time as the member’s salary for the purpose of the HS DB Rules (being an amount not less than the member’s Salary immediately before the Salary Amendment Date)’ within the definition of ‘Superannuation Salary’ in rule 3B.11.1 (‘Super Salary’) if the data does not specifically identify that information as communicating an amount for the purpose of that definition?
(d)Where data provided to the Plaintiff by an employer from time to time contains information about a member’s salary which includes a recall payment by the employer is the amount communicated a Higher Amount or Super Salary for the purposes of the Rules?
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