Glass, E.D. v Defence Force Retirement & Death Benefits Authority

[1992] FCA 265

Re: ERIC DONALD GLASS
And: DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY
No. ACT G75 of 1991
FED No. 265
Defence Forces
(1992) 15 AAR 405

COURT

IN THE FEDERAL COURT OF AUSTRALIA

AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Neaves J.(1)

CATCHWORDS

Defence Forces - Defence Force Retirement and Death Benefits - Member of Royal Australian Navy - Previous service in New Zealand Naval Forces - Statutory entitlement to payment from Government Superannuation Fund of New Zealand of annual retiring allowance upon termination of service in New Zealand Naval Forces - Provision in relevant legislation for election to surrender proportion of annual retiring allowance and receive lump sum instead - Right of election not exercised - Whether upon termination of New Zealand service a "transfer value" being a benefit by way of a lump sum "became payable" under a superannuation scheme applicable to such service.

Administrative Appeals Tribunal Act 1975 (Cth), s.44(1)

Defence Force Retirement and Death Benefits Act 1973 (Cth), ss.68, 69

HEARING

CANBERRA

#DATE 12:5:1992

The applicant appeared in person.

Counsel for the respondent : Mrs V.J. Bonsey

Solicitor for the respondent : Australian Government Solicitor

ORDER

1. The application be dismissed.

2. The decision of the Administrative Appeals Tribunal be

affirmed.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

Eric Donald Glass ("the applicant") has applied to the Court by way of appeal pursuant to s.44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal ("the Tribunal") given on 10 September 1991. The Tribunal affirmed the decision then under review, a decision which is identified in the reasons for decision of the Tribunal as "a decision of the Chairman of the Defence Force Retirement and Death Benefits Authority .... made on 6 March 1990, later confirmed on 16 November 1990 by the (Authority), that, as the applicant did not elect to commute his entitlement from the New Zealand Government Superannuation Fund, there was no amount that could be accepted as a transfer value payable to the Commonwealth pursuant to Sections 68 and 69 of the Defence Force Retirement and Death Benefits Act 1973 ...."

1. Part IX of the Defence Force Retirement and Death Benefits Act 1973 (Cth) ("the Act") comprises ss.66-84 inclusive and is headed "Preservation of Rights of Certain Members of the Scheme". Division 2 of that Part, which comprises ss.68 and 69, has the heading "Contributing Members Who Have Preserved Rights from Previous Employment". Section 69, so far as material for present purposes, provides:
   

"69. (1) Where a person who becomes a contributing member has, at any time before becoming a member, been in employment within or outside Australia upon the termination of which a transfer value became payable to or in respect of him on or after 25 May 1971 under a superannuation scheme applicable in relation to that employment, and:

(a) the member, by notice in writing given to the Authority within a period of 90 days after the date on which be becomes a contributing member, or within such further period as the Authority, in special circumstances, allows, elects to pay to the Commonwealth an amount equal to the amount of that transfer value or, if 2 or more transfer values became payable, the sum of the amounts of those transfer values; and

(b) that amount is, before the expiration of that period of 90 days or that further period, as the case may be, paid to the commonwealth;

the succeeding provisions of this section have effect.

(2) So much of the amount paid to the Commonwealth as is equal to the employee component of the transfer value, or to the sum of the employee components of the transfer values, as the case may be, shall, to the extent to which it was payable to the member upon the termination of the employment in respect of which the transfer value or any of the transfer values became payable irrespective of whether he engaged in further employment, be deemed, for the purposes of this Act, to be contributions paid to the Commonwealth by the member under section 17.

(3) The total period of effective service of a contributing member referred to in subsection (1) of this section .... shall be deemed to be increased by such period as is determined by the Authority, having regard to such matters as are prescribed for the purposes of this section, as being appropriate.

(4) ....

(5) For the purposes of this section:

(a) the employee component of the transfer value payable to or in respect of a person is the part (if any) of that transfer value that was based upon contributions made by the person; and

(b) the employer component of a transfer value payable to or in respect of a person is the part of that transfer value that was based upon contributions by an employer or employers of the person."

The references to "the Authority" are references to the Defence Force Retirement and Death Benefits Authority established by s.8 of the Act.

1. Section 68 of the Act, so far as material, provides:
   

"68. (1) In this Division:

(a) a reference, in relation to a contributing member, to a transfer value payable to or in respect of the member under a superannuation scheme applicable in relation to any employment in which he was employed at any time before the date on which he became an eligible member of the Defence Force is a reference to a benefit by way of a lump sum payable to or in respect of the member under that scheme upon the termination of the employment otherwise than on the ground of invalidity or of physical or mental incapacity to perform the duties of the employment, being a benefit that was based wholly upon contributions under that scheme by the employer or was based partly upon such contributions and partly upon contributions under the scheme by the member; and

(b) ...."

1. The basic facts are in a short compass. On 7 March 1979 the applicant joined the Royal Australian Navy and became a "contributing member" within the meaning of that expression in s.3(1) of the Act. Prior to becoming a member of the Royal Australian Navy, the applicant had served in the New Zealand Naval Forces and, prior to that, had been employed in a number of government departments in New Zealand. His service in the New Zealand Naval Forces terminated with effect from 20 April 1979, termination being on grounds other than the ground of invalidity or of physical or mental incapacity to perform his duties. Upon such termination, the applicant became entitled to benefits under the Government Superannuation Fund Act 1956 (N.Z.) as in force at that date.

2. The material placed before the Tribunal did not include a copy of the New Zealand statute. This seems surprising but appears to be explicable on the ground that the parties were in agreement as to the effect of its provisions in relation to the applicant. This remained the position on the hearing of the present application.

3. It is thus common ground that, upon the termination of his service with the New Zealand Naval Forces, the applicant became entitled to receive from the Government Superannuation Fund established under the New Zealand Act an annual retiring allowance for the rest of his life calculated by reference to his annual salary and the length of his contributory service. It appears that it would have been open to the applicant, at any time before accepting the first instalment of his retiring allowance, to have elected to accept a refund of the total amount of his contributions to the Fund instead of his retiring allowance. The applicant did not so elect but, in any event, a refund of contributions would not have answered the description of a transfer value in s.69 of the Act as such a refund would not have been based to any extent upon contributions under the scheme by the employer (see s.68(1)(a)).

4. It is also common ground that it would have been open to the applicant to elect to surrender his right to a proportion (not exceeding one-fourth) of the retiring allowance and to receive instead payment out of the Fund of a sum equal to 9 times the amount by which his annual retiring allowance was reduced pursuant to the surrender. Such an election was required to be made before the applicant received any instalment of his retiring allowance, an event which appears to have occurred on 14 May 1979. If such an election had been made, the annual retiring allowance otherwise payable would have been reduced by the same proportion as that elected to be surrendered. The applicant did not, within the time permitted, elect to surrender any proportion of the retiring allowance to which he was entitled and he commenced to receive, and continues to receive, an annual retiring allowance under the relevant provisions. He asserted before the Tribunal that his failure to make an election to surrender his right to a proportion of the retiring allowance to which he was entitled was due to his having received, in 1978 and 1979, advice from the Authority that a lump sum received by way of commutation of a right to an annual retiring allowance would not answer the description of a transfer value for the purposes of s.69 of the Act.

5. The question for determination is whether, in the events which happened, it can properly be said that, upon the termination of the applicant's service with the New Zealand Naval Forces, a benefit by way of a lump sum answering the description in s.68(1)(a) of the Act "became payable", within the meaning of that expression in s.69, to or in respect of the applicant under the relevant New Zealand legislation.

6. The applicant submitted that the word "payable" in ss.68 and 69 was to be read as meaning "capable of being paid" and that, as he was entitled upon the termination of his service in the New Zealand Naval Forces to elect to commute part of his annual retiring allowance to a lump sum, the lump sum ascertained in accordance with the New Zealand statute was capable of being paid and, therefore, "became payable" notwithstanding that no election to surrender a proportion of his annual retiring allowance had been made. The applicant sought support for this submission in the provisions of s.68(3) of the Act which provides:
   

"(3) Subject to subsection (4), a transfer value shall be deemed, for the purposes of this Division, to have become payable in respect of a person under a superannuation scheme upon the termination of any employment if, upon the termination of that employment, he had the legal title to a life policy, or was entitled to have the legal title to such a policy assigned to him, being a policy the premiums for which were, while he was employed in that employment, paid in whole or in part by his employer, and, in that case, the surrender value of the policy as at the date of the termination of the employment shall be taken to be the amount of the transfer value."

It was submitted that there is no requirement under that provision that the policy be actually surrendered in order to establish that a transfer value "became payable" upon termination of the previous employment and that this was consistent with the view that it was not essential that an election to commute a proportion of the annual retiring allowance be made before it can be said that a lump sum in lieu thereof "became payable". The applicant further submitted, drawing attention to the use of the words "payable" and "paid" in s.69, that the operation of that section did not depend upon whether the lump sum which, according to his earlier submission, "became payable" had, in fact, been paid to him.

1. I agree with the applicant's submission that the operation of s.69 does not depend upon it being established that a lump sum calculated in accordance with the relevant statutory provisions was, in fact, paid to the applicant by the New Zealand authorities. To the extent that the reasons for decision of the Tribunal may be thought to embrace the contrary view, I am unable to agree. I should add that the respondent did not argue to the contrary of the applicant's submission. However, to accept that actual payment is not necessary does not really advance the applicant's case.

2. In my opinion, the Tribunal was correct in concluding that, in the events which happened, no lump sum "became payable" to the applicant upon the termination of his service with the New Zealand Naval Forces. It cannot properly be said that an amount "became payable" within the meaning of that expression in s.69(1) of the Act unless, upon termination of the prior employment, the Fund was under an obligation to pay, and the applicant was entitled to receive, that amount. Such an obligation, and a corresponding entitlement, would not arise unless and until an effective election was made in accordance with the relevant statutory provisions. It is not sufficient for the applicant to show that he had a right of election: he must establish that he exercised that right. In this context, it is of some significance that, under the Government Superannuation Fund Act, an effective election would have required the applicant to nominate the proportion (up to a maximum of one-fourth) of the annual retiring allowance which was to be surrendered with the consequence that the amount of the lump sum which would have become payable could not have been ascertained until the election had been made.

3. I am further of opinion that s.69(3), which deems a transfer value to have become payable in the circumstances mentioned and quantifies its amount by reference to the surrender value of the life policy, does not support the construction of s.69(1) for which the applicant contends. Indeed, it tends to support the contrary view.

4. Some discussion took place during the course of argument whether it was necessary, in order to satisfy the requirements of s.69 read with s.68(1)(a), that the election to surrender a proportion of the annual retiring allowance be exercised prior to the date of termination of the previous employment notwithstanding that the New Zealand legislation permitted the election to be made within an ascertainable period after the date of such termination. I am inclined to the view that that is not a necessary requirement and that, in a case where the election was made after the date of termination of the employment but within the period allowed by the relevant statutory provisions, it would not be inapt to describe the lump sum as having become payable "upon the termination" of that employment. However, as the applicant did not exercise the right of election either before or after the date of termination of his service in the New Zealand Naval Forces, it is not necessary, in order to determine the present application, to express a concluded view on the question.

5. It remains to say that the Act provides no basis upon which the applicant can now be treated as though, contrary to the fact, he had elected to surrender a nominated proportion of the annual retiring allowance payable to him under the Government Superannuation Fund Act.

6. The application is dismissed. The decision of the Tribunal is affirmed.