Knight v Commonwealth
[2013] ACTSC 238
RAYMOND JOHN KNIGHT V COMMONWEALTH OF AUSTRALIA
[2013] ACTSC 238 (16 December 2013)
TORTS – Negligence – negligent misstatement – pure economic loss – negligent misstatement proven – common law negligence – breach of statutory duty – decided in accordance with Meredith v Commonwealth (No 2) [2013] ACTSC 221
DAMAGES – damages for negligent misstatement – where the negligent misstatement lead the plaintiff to not join a public sector superannuation fund when eligible – where subsequent competing superannuation scenarios arose as a consequence – use of competing actuarial reports in the assessment of damages in these circumstances – turns on its own facts
SUPERANNUATION – Public service funds – availability of public service superannuation funds to ‘temporary’ Commonwealth employees under the Superannuation Act 1976 (Cth)
TAXES AND DUTIES – tax on a judgment sum – whether tax liability will be assessed on a judgment sum – same approach as Guy v Commonwealth [2013] ACTSC 128 – leave granted to apply for award of additional damages if liability assessed
Limitation Act 1985 (ACT)
Superannuation Act 1976 (Cth) ss 11, 16
Superannuation Act 1990 (Cth)
Astley v Austrust Ltd (1999) 197 CLR 1
Commonwealth v Cornwell (2007) 229 CLR 519
Commissioner of Railways v Ruprecht (1979) 142 CLR 563
Daniels v Anderson (1995) 37 NSWLR 438
Duffy v Commonwealth [2013] ACTSC 239
Golden Eagle Trading Pty Ltd v Zhang (2007) 229 CLR 498
Guy v Commonwealth [2013] ACTSC 128
Haines v Bendall (1991) 172 CLR 60
JEB Fasteners Ltd v Marks, Bloom & Co (a firm) [1981] 3 All ER 289
Jones v Livox Quarries Ltd [1952] 2 QB 608
Meredith v Commonwealth (No 2) [2013] ACTSC 221
Pennington v Norris (1956) 96 CLR 10
Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287
Tobin v Commonwealth [2013] ACTSC 240
Watt v Bretag (1981) 27 SASR 301
Watt v Bretag (1982) 41 ALR 597
No. SC 503 of 2008
Judge: Refshauge J
Supreme Court of the ACT
Date: 16 December 2013
IN THE SUPREME COURT OF THE )
) No. SC 503 of 2008
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:RAYMOND JOHN KNIGHT
Plaintiff
AND:COMMONWEALTH OF AUSTRALIA
Defendant
ORDER
Judge: Refshauge J
Date: 16 December 2013
Place: Canberra
THE COURT ORDERS THAT:
There be judgment for Raymond John Knight against the Commonwealth of Australia.
The parties provide appropriate material in accordance with these reasons from which the damages payable can be quantified.
The parties be heard as to costs.
This is a further case in the series of cases associated with that in which I have given judgment in Meredith v Commonwealth (No 2) [2013] ACTSC 221. The proceedings were heard together with that case and others in the series and the evidence admitted in the hearing of Meredith v Commonwealth (No 2) was admitted in the other cases, including this case. In this case, the evidence in the hearing of Tobin v Commonwealth [2013] ACTSC 240 was also admitted.
Nevertheless, each case had some differences both in relation to liability and, inevitably, in relation to the quantum of any damages awarded.
It is, therefore, necessary to deal with each case separately but I do not need to re-state much of the evidence nor many of the legal principles and the issues that I have resolved in Meredith v Commonwealth (No 2).
For example, I described the various Commonwealth superannuation schemes also in that decision (at [23]-[26]) and rely on that description. I also use the abbreviations there defined, CSS for the Commonwealth Superannuation Scheme and PSS for the Public Sector Superannuation Scheme. Where they are referred to generally, I call them a Commonwealth superannuation scheme.
The pleadings
The pleadings are relevantly identical to those in Meredith v Commonwealth (No 2) which I have described in that decision (at [8]-[22]). I do not need to repeat them but rely on what I there said. References to Mr Meredith there are, of course, to Mr Knight here, and some of the particulars are clearly different, but it is not necessary to detail the differences at this time.
In summary, there were three causes of action pleaded: negligent misstatement, negligence and breach of statutory duty.
Each of those causes of action were denied by the Commonwealth and certain defences pleaded, including that all claims were barred by statute, being the Limitation Act 1985 (ACT).
THE EVIDENCE
The evidence of Raymond John Knight – evidence-in-chief
The plaintiff, Raymond John Knight, was born in 1948. He is not and has never been married and has no dependants.
In 1972, he purchased a small block of land in Queensland; it was marginal land and has lost value since he purchased it.
He obtained qualifications as a spray painter and then worked as a driver and labourer for a company in Queanbeyan between 1973 and 1977.
In 1977 he sought employment with ACT Forests. I have described that agency in Meredith v Commonwealth (No 2) (at [4]) and I will, as I did in that decision, refer to the agency as “ACT Forests”, notwithstanding some changes of name and status.
Mr Knight filled out an application for employment, he says, on 4 April 1977, though it was signed on 5 April 1977, and subsequently saw an officer of the relevant Commonwealth Department at an office in the city. He was told to report to a depot operated by ACT Forests, the Uriarra depot, which he did, commencing work on 5 April 1977. Nothing material turns on the discrepancy in dates.
At that time, he was interviewed by Graham McKenzie-Smith, who he understood was the Forester-in-Charge of the depot. During the interview, there was only discussion about the job and nothing about the conditions of employment.
He has no recollection of receiving any paperwork at the time either of making his application or his interview. It appears, however, that, on the application form, it is recorded that he “received Conditions of Service pamphlet”. He does not recall doing so.
When he commenced work as a forest worker, he had no understanding of any eligibility to contribute to superannuation.
At the time of his commencement of work, the Overseer was William ‘Bill’ Bates and the Leading Hand was Wayne Meredith. Mr Meredith later became the Ganger in charge of the gang in which he worked.
While working for ACT Forests, Mr Knight lived in Uriarra until 1983. Many of the other forest workers also resided there.
Mr Knight was union member for “pretty well all [his] working life”.
Mr Knight’s recollection is that information to be communicated by management to workers was done so by word of mouth or, on occasions, by a notice on a noticeboard outside the office at the depot. He does not recall ever seeing any information about superannuation on the noticeboard. He does not recall ever attending a seminar or meeting at the depot relating to superannuation.
He recalls that, after he started work, there was some discussion amongst some of the members of his gang about whether the forest workers were entitled to join a Commonwealth superannuation scheme. The group asked Mr Meredith to approach the Overseer to find out whether members of the gang were entitled to join such a scheme.
Mr Knight recalls that, on that day or the next day, Mr Meredith came back to the gang and said words which, to the best of his recollection, were as follows: “[w]e are not eligible to join the fund because we are not public servants”. Mr Knight assumed that he had been told the correct position because the information had come from his superiors, either Mr Bates, Gary Croston (apparently at that time the Second-in-Charge), or Mr McKenzie-Smith, the Forester-in-Charge, to whom Mr Meredith had apparently directed his inquiries.
After about a year of working as a forest worker, Mr Knight says that he came to know Mr Bates quite well. Mr Bates remained as Overseer at the Uriarra depot. He said that, at some time after that, he spoke to Mr Bates about joining a Commonwealth superannuation scheme. Mr Bates said to him, to the best of his recollection: “[y]ou are not eligible to join the fund”.
As a result of that information, Mr Knight made no further inquiries because he understood he was not eligible.
Mr Knight gave evidence that his father worked “in Defence and then he joined the public service probably about 1980”. He also said that his brother was a public servant. He said, however, that he did not consider himself to be a public servant and that neither of them discussed superannuation with him.
Mr Knight said that he was counselled for arriving late for work on 11 June 1979; in fact, he was counselled twenty times in the twelve months to June 1979, but on no other occasion was there any evidence that he was subject to any disciplinary action.
During the course of his employment, he acquired skills using chainsaws, undertaking fire fighting duties, measuring trees, log measuring, timber grading, planting, scrubbing and also attending to clerical duties.
In April 1983, he transferred to work as a forestry log measurer at the Department’s Weighbridge. In November 1983, he transferred to the assessment section at the Stromlo Forest depot.
During the course of his employment and up to about 1992, he was in good health and did not suffer from any medical condition which would have affected his capacity to work. At all times, he was required to, and did, give the whole of his work time to the duties of his employment.
In 1983, he left the Uriarra settlement, though he continued to work at the Uriarra depot. He moved to Holder, where he shared a flat for a time, before moving in 1985 to his current residence in Kambah. He purchased the property at Kambah at that time and still retains ownership of it. About this time, he started reading The Canberra Times more regularly, about at least once a week.
In answer to interrogatories, Mr Knight indicated that he did not have a lot of spare funds, especially when he purchased the Kambah house. He said:
Most of my income was consumed in general living expenses. I had an account with PSE and Community Credit Union, and later the Commonwealth Bank to which I contributed each fortnight by payroll deduction.
I purchased a house in Kambah in 1985 so much of my income went to saving for the house and related expenses.
Mr Knight acted temporarily in the position of Ranger in 1991 but suffered from significant knee problems in 1992 and was effectively redeployed into office duties, with a position in the industrial relations and rehabilitation section.
Subsequently, after Self-Government for the ACT, he carried out various jobs in the ACT Department of Urban Services and was seconded to nurseries to do retraining.
He first became aware that he could have been entitled to join a Commonwealth superannuation scheme in about 1995 when he attended a meeting arranged by some unions at Deakin, ACT, and he received that information.
He said that, from 1978, he would have been able to make compulsory contributions to a Commonwealth superannuation scheme if he had been a member. He also said that he understood that the benefits from membership of such a scheme were significant, partly because the returns upon retirement were guaranteed. He said that he did, from 1977, want, at all times, to be a member of such a scheme.
He said that, as a result of being unable to join a Commonwealth superannuation scheme, he arranged to take out a series of insurance and superannuation policies with private insurers. He did not, however, take out a superannuation policy with Zurich Australian Insurance Ltd until June 1989 and MLC life policy until July 1990, though he had had an insurance policy with AMP Insurance Co Ltd from 1971. He held the superannuation policy until 2002.
He was aware that monies were being paid on his behalf into an account with the Australian Government Employees Superannuation Trust (AGEST) in circumstances described in Meredith v Commonwealth (No 2) (at [25]-[26]), and his private insurance policies were rolled over into his AGEST account.
He arranged for an account in 2004 to be opened with ASGARD, apparently a superannuation adviser which is part of the Westpac Group, and retains that account. He also received some shares as a result of the float of the Insurance Australia Group. He invested in a Colonial managed fund from about April 2003.
He has continued to suffer from ongoing problems with both knees, resulting in ongoing treatment and eventually knee replacement.
He was offered a voluntary redundancy over a period of time and eventually elected on 19 February 2002, to cease work and take a voluntary redundancy though it appears that he actually ceased work on 19 July 2002. As a result of that retirement, he received a payout representing severance pay and payment of leave entitlements, being a gross sum of $77,168.32 (net $69,249.32).
Since his retirement, he has been in receipt of a Centrelink disability pension but which ceased in October 2007.
Cross-examination of Mr Knight
Mr Knight was cross-examined on his evidence. He confirmed that he recalled discussions with his fellow workers where it was noted that “people who seemed to be senior industrials” were members of a Commonwealth superannuation scheme.
He agreed, however, that while union organisers were involved in the discussion, he approached the union directly about the issue of superannuation. He referred to a number of union organisers by name. They told him he was ineligible. It was as a result of those discussions that he and others asked Mr Meredith to make inquiries.
He took no action, apart from those steps, to investigate further his eligibility for superannuation. In particular, he did not seek advice from a lawyer, accountant or financial adviser. He knew superannuation was governed by law but did not know what the law was called.
It was suggested to Mr Knight that he was sent an application form in 1987 to join a Commonwealth superannuation scheme. He did not recall that happening.
Nevertheless, an extract from his personnel file appeared to show that he made an inquiry in or about June 1987 about “becoming an eligible super employee”. It was contained on a sticky note on a page in his file which suggested that the “Form S 20” (which, it appears, is an “Application [for Temporary Employee] to become an eligible employee”) was sent to him, which he was to complete and return, with a copy of his birth certificate.
The note, however, is problematic. It appears to be inscribed on a sticky note affixed to a page which does not seem to have anything to do with superannuation. It refers to a change of payment from his salary into the PSE Credit Union.
The note, which is itself undated, states that “Folios 31 & 32 have been sent back to depot” but folios 31 and 32 are, in fact, intact in the file. The note goes on to describe the folios as follows:
32 = Form S 20
31 = letter about becoming an eligible super employee
In fact, folios 31 and 32 are nothing of the kind; they relate to a claim by Mr Knight for a first aid allowance with the relevant certification in first aid and from St John’s Ambulance Australia. They were annexed to an affidavit of Mr Knight’s solicitor, Richard Faulks, in reply.
Kim-Marie Ivens was, between 1985 and 1996, the team leader in the area responsible for pay and conditions of industrial employees. She was referred to this note. She confirmed that the “Form S 20”, was an application form for industrial (that is, temporary) employees to complete when applying to join a Commonwealth superannuation scheme.
She explained why a form may have been returned to a depot:
51.If there was something wrong with the form, for example, if it was not filled in correctly, or if the employee did not attach a copy of his birth certificate, then we would send the form back to the depot.
52.Often when the form was sent back to the depot it wouldn’t be returned to the payroll section.
Significantly, Ms Ivens added information about the keeping of the files when such advice was taken. She deposed:
53.We had set procedures for the superannuation forms. If the form was returned to the payroll section for processing we would have copied the form, written ‘actioned’ on the copy, placed the copy on the personnel file and the original would have been sent to ComSuper.
It seems to me that, in the circumstances, if forms had been received and marked Folio 31 and 32, but then returned to the depot, they would most likely have been copied so as to preserve the pagination, and not simply replaced, especially as they could later be returned thus providing two documents bearing the same folio numbers.
The note’s reference to Folio 31 and 32, therefore, seems to be quite odd and an available inference is that the affixed sticky note simply found its way onto the incorrect file. In any event, it does not seem to me to be safe to conclude, on that basis, that Mr Knight sought, in or about 1987, to join a Commonwealth superannuation scheme.
Subsequently, in 1989, Mr Knight arranged to be covered by a private superannuation policy, as I have noted above (at [35]). This was, as pointed out, some eleven years after his first inquiry about superannuation, although he did have a life insurance policy, taken out in 1971. He never did join a Commonwealth superannuation scheme, however, even after he found out he could.
It was suggested to Mr Knight that he was, in prosecuting these proceedings, “jumping on the bandwagon”; that is, he was joining the series of claims made by forest workers and others without a valid claim himself. He denied that and pointed out, though, that, by the time he found out he could join a Commonwealth superannuation scheme, he had other funds, being a deposit with AGEST, his private superannuation fund and his savings.
Mr Knight said that he knew that Mr Bates was a member of a Commonwealth superannuation scheme. He also knew Mr John Reardon, another forestry worker, was a member.
The evidence of William Bates
Mr Bates said in his affidavit that he did not recall ever having the conversation with him that Mr Knight alleged. He denies that he told him that he was not entitled to join a Commonwealth superannuation scheme as, he says, he did not know whether Mr Knight was entitled to join or not.
Mr Bates also states that he did not recall the conversation he is alleged to have had with Mr Meredith that was later relayed to Mr Knight.
He expressed surprise that Mr Meredith would ask about superannuation on behalf of workers and, indeed, that forest workers would ask about it themselves.
In the light of the evidence I have heard, I cannot accept this evidence. There was clearly an interest in superannuation amongst the forest workers, some of it driven by friends and relatives of the workers and then generated amongst the workers themselves.
The Commonwealth submitted that I would have to find that Mr Bates was dishonest if I accepted the evidence of what Mr Knight and Mr Meredith, and others, said he had told them on the subject, since he, Mr Bates, was himself a temporary employee and also a member of a Commonwealth superannuation scheme.
That is, however, a somewhat odd position to take, since Mr Bates deposed in his affidavit, and the Commonwealth answered an interrogatory, that Mr Bates did not know whether they were eligible or not, and did not know the eligibility criteria. Given that he was a member himself, this lack of apparent knowledge, even about how he himself joined, tends to support the view that he saw a difference between himself and the other forest workers. It also shows that he is unlikely to have been dishonest, for he did not know his own eligibility.
For this and the reasons I referred to in Meredith v Commonwealth (No 2), I prefer the evidence of Mr Knight and Mr Meredith and reject the evidence of Mr Bates.
Further cross-examination of Mr Knight
In cross-examination, Mr Knight was shown a form, the “Industrial Wages Transfer – Personal Information” form he signed on 13 September 1992. He agreed that he signed the form. Immediately above his signature were the words “[i]f you would like to join the Government Superannuation Scheme please contact a member of your wages team prior to transfer.”
He suggested that he may have asked his supervisor who “probably” informed him that it had nothing to do with him, though he did not actually recall speaking to his supervisor about it. He denied making up that explanation.
He then said that he did not actually remember reading the words on the form, but he emphatically asserted that he knew that, as a temporary employee, he was not eligible to join a Commonwealth superannuation scheme.
Mr Knight was also asked about where he first signed up for employment in April 1977. He thought he did so in an office in South Building, Civic, but could not be sure. He was fairly certain that he spoke to a man who arranged the signing of the relevant documents.
He was then taken to the Application for Employment he had completed. On the first page, it shows that he signed immediately under the words on the form “The information I have given above is true and correct to the best of my knowledge and belief” and on the second page immediately under the words “Received Conditions of Service pamphlet”. The signature of the Employment Officer, also on the form, appears to be J Wilson.
The “Conditions of Service” form used at that time included the following section:
Superannuation/Provident Fund
After not less than three years or previous employment involving membership of a Superannuation or Retirement Benefit Scheme continuous employment and provided you are aged less than 58 years at the time, you may apply for admittance to the Commonwealth superannuation Fund.
Application forms are available on request from the Industrial Section.
This form was, in fact, out-of-date and itself contained incorrect information for at the time he joined ACT Forests, the Superannuation Act 1976 (Cth)(the 1976 Act) had commenced and the period of prior service was only one year.
I accept that this was part of the form, which was only two pages long. There was another form (which did not have the section quoted above (at [69])) and to which it appears to have been attached; it is not clear whether at all times both documents were handed to new employees.
The suggestion was made to Mr Knight that, when he signed this form and the 1992 Transfer Form, he had no interest in Commonwealth superannuation because, if he had an interest, he would have made further inquiries if he had such an interest. He denied both suggestions. He repeated that he thought “[i]t was just common knowledge, we weren’t eligible”.
Re-examination of Mr Knight
In re-examination, Mr Knight said that he found out that Messrs Bates, Reardon, Ritherdon and Padavan were members of a Commonwealth superannuation scheme because “after a few years, word just got around”. He said he found this out four or five years after he commenced his Commonwealth employment. He said he found out from “general talk” including “talking with them”.
He also said that when he initially applied for employment as a forest worker, he remembered talking to a male at the office. He said he saw him the next day in the street and they greeted each other. He said the male then asked how his application for employment was going. He had a clear recollection and gave a description.
The evidence of Jane Wilson
There was some additional evidence from the Commonwealth in this case. It came from Ms Jane Wilson. An affidavit she made was read. Most of it was also read in the matter of Tobin v Commonwealth, but additional material was read because it appeared Ms Wilson may have been the person who arranged for Mr Knight to be employed.
Ms Wilson commenced as a member of the typing pool in the Commonwealth Department of Interior in the early 1970s and, shortly after, became an Employment Officer in the Industrial Section of the Department.
Ms Wilson described the process for signing up new employees. She recalled that she would hand out a pamphlet “Conditions of Service” to new employees. She said, however, that sometimes her section ran out of copies of the pamphlet and could not provide a copy. She did not know whether copies would later be supplied to the new employee.
As a permanent public servant, she was a member of a Commonwealth superannuation scheme. She did not know whether temporary or industrial employees could join. She did not recall ever being asked about Commonwealth superannuation.
Ms Wilson gave oral evidence and was cross-examined. She acknowledged that she was not the only person who saw and “signed up” temporary employees, though she was the only person with the designation “Employment Officer” and, therefore, presumably, with the authority to sign the relevant application forms.
Ms Wilson agreed that she had nothing to do with superannuation and was unaware of a superannuation manual. She also agreed that she did not tell new employees anything about superannuation. If she had received any queries about superannuation, she would have referred them to the wages section.
She described herself as a careful person who would ensure forms were properly completed. She did not, however, recall any “check boxes” on the form, though she did say that, if there had been, she “probably would have” completed them. If something that was on the form required completion, she would have completed it.
Although, curiously, Ms Wilson was not asked to identify her signature on the two forms relevant to Mr Knight’s employment, the “Application for Employment – Industrial” and the “Notice of Engagement”, I am satisfied that it was she who signed them.
I note that on the latter, there is, in fact, a series of “check boxes” printed on the back of the form, though, again curiously, Ms Wilson was not taken to it.
While the check box beside “Distribute Conditions of Service brochure” is not marked, it is noticeable that none of the other boxes are marked, such as “Notice of engagement to wages section”, which action must have been done for Mr Knight was paid. I do not regard the failure to check the boxes in the circumstances to be particularly helpful in this case, though it is consistent with Mr Knight’s evidence.
It is an available inference that someone else actually processed Mr Knight’s application with him and that Ms Wilson, as the designated officer, signed off afterwards. That is reinforced by the evidence given by Mr Knight that he had a chance meeting the next day with the male officer who “signed him up”.
I am not satisfied, as a result of the evidence, that Mr Knight did receive a copy of the “Conditions of Service” pamphlet. Even if he did receive a copy, he may, of course, have not read it. Further, the information in it was out-of-date and incorrect.
Even if he did receive and read it, however, it would not have been immediately relevant, for he had to wait a year (though told in it that it would be three years) before becoming eligible. In the meantime, of course, he had been told a number of times that he was not eligible.
It is a counsel of perfection, which I do not consider that the law requires, for Mr Knight to be expected to have first remembered and secondly accepted what was said in general terms on the pamphlet instead of what Mr Meredith and later Mr Bates had expressly told him. That is to say, the pamphlet was a broad invitation, with a clear indication of the possibility of application, but no certainty of admission, to a Commonwealth superannuation scheme. It was also incorrect and out-of-date.
CAUSES OF ACTION
For the reasons set out in Meredith v Commonwealth (No 2), I consider that Mr Knight cannot make out a claim against the Commonwealth in negligence or in breach of statutory duty. See Meredith v Commonwealth (No 2) at [479]-[563] for the former and [564]-[603] for the latter.
I do consider, however, that he may, subject to the evidence, maintain a claim against the Commonwealth for negligent misstatement.
For the reasons set out in Meredith v Commonwealth (No 2) at [504], I reject the defence of the Commonwealth that the claim for negligent misstatement is statute-barred. See Commonwealth v Cornwell (2007) 229 CLR 519.
Negligent misstatement
This cause of action has been described in Meredith v Commonwealth (No 2) and I rely on what I there said (at [383]-[391]).
So far as particular issues relating to Mr Knight are concerned, I say as follows.
The relative positions of Mr Meredith and Mr Bates (at [393]-[404]) applies also to the relative position of Mr Knight and Mr Bates, and I adopt that approach. In this case, neither of the queries made by Mr Knight could reasonably be described as mere social intercourse and not for a serious purpose which, I accept, Mr Bates must have known.
While Mr Knight did not immediately join a private superannuation scheme (he did, in fact, not join one until 1989), he did maintain the policy until he accepted a voluntary redundancy in 2002.
It was suggested that, because Mr Knight had no idea how much of his salary he would have had to pay for his membership of a Commonwealth superannuation scheme, he was not, in reality, interested in joining, or would not have joined if he had learnt he was not eligible.
Further reliance was placed on his financial situation at the relevant time, as set out above (at [30]). Part of the difficulty is that matters such as living expenses and savings are flexible amounts and depend heavily on personal priorities, such that, at one time, the amount spent on living or saved can be reduced without difficulty if money is needed for other purposes, such as payment of superannuation contributions, if considered sufficiently valuable.
In order to evaluate whether Mr Knight would have been prepared to join and pay contributions to a Commonwealth superannuation scheme, I take into account that he appears to have been able to accrue enough savings to purchase a house, which purchase would ordinarily require him to save enough for a deposit. I take into account, too, that he had a life insurance policy from 1971, showing that he had given some thought about future protection. I take into account that he did purchase a private superannuation plan and have other insurance at times, though I accept that this was some time after he would first have become eligible to join a Commonwealth superannuation scheme.
The Commonwealth also relied on the fact that Mr Knight did not “have any idea what was involved in superannuation. He did not know how much of his salary he would have had to pay in each week if he had joined in 1978”. Those are relevant factors which need to be considered.
Nevertheless, his ignorance of these matters would have greater force if the amount payable were to be a very substantial sum, not the relatively modest sum they, in fact, were. Although the evidence is not as clear as would be desirable, there is no suggestion that Mr Knight could not afford such contributions. He was not married and had no dependents. He did have an insurance policy. He managed to purchase a house in 1985. I am satisfied that, had Mr Knight been told that he was eligible to join a Commonwealth superannuation scheme, the level of contributions would not have prevented him from joining; he may as well have removed anything that constituted an impediment.
As to reliance, it was submitted by the Commonwealth that Mr Knight made inquiries of the union organisers whom he named. That, it was submitted, meant that, as they were the last people to whom he spoke, it was on them that he relied. That did not seem to be the evidence, however, for he suggested that inquiries with the union led to his request of Mr Meredith as noted above (at [42]).
In any event, I dealt with this issue in Meredith v Commonwealth (No 2) at [440]-[453]. I rely on the principles I set out there and do not need to repeat them.
I accept that, while Mr Knight may have relied on what the union organisers told him, he sought confirmation of what he had already been told by people who were authoritative so far as his employment was concerned and I am satisfied that his reliance on them was operative, for the purpose of his decision not to apply at that time for admission to a Commonwealth superannuation scheme. In any event, he seems to have had the conversations with Mr Meredith and with Mr Bates after he had spoken to the union officials.
I referred above (at [64]) to Mr Knight signing on 13 September 1992 a form headed “Industrial Wages Transfer – Personal Information”. Above his signature was a reference to Government Superannuation and an invitation to contact the wages team.
There are some competing inferences to be drawn from this form and Mr Knight signing it. In the first place, it makes no mention of eligibility or criteria for eligibility. In this, it is to be contrasted with the “Conditions of Service” pamphlet which, in the paragraph reproduced above (at [69]), did make some reference (though incorrect) to at least one criterion. Nevertheless, I note that the form is, apparently, designed for industrial workers, a term commonly used for temporary workers.
Mr Ivens made specific reference to this form in her affidavit. She explained its purpose and genesis as follows:
42.I recall that in about 1992 we started using a new payroll system which required every worker to have a position number.
43.To make sure each worker’s details were included on the system we sent out a form entitled ‘Industrial Wages Transfer Form’. A copy of this form is annexed to this affidavit and marked with the letter F. Teams from the payroll section took turns to load a number of workers into the new system. It was that team’s responsibility to send the forms out to the workers they were dealing with. The forms were designed by the payroll section because we knew that we did not have current information for all of the workers. We received some completed forms back from the depot clerk and the others we received through the post.
44.I remember that it was important that all of the workers sent back a completed form - if they didn’t do so they didn’t get paid.
She then made specific reference to the statement about superannuation, deposing:
46.I remember the section about superannuation. We didn’t worry too much if the workers didn’t have any superannuation because the compulsory superannuation guarantee was not in place at this time. I don’t think we received any phone calls from the workers asking to join Commonwealth superannuation after we sent out the forms.
In Mr Knight’s case, he had already been told that he was not eligible to join a Commonwealth superannuation scheme. A brief statement of the kind to be found on the form, when inquiry had already been made of an apparently authoritative source and an answer given, does not seem to me to provide a break in the effect of the statements already made to Mr Knight.
The Commonwealth, however, relied on some other evidence to show that this was not a reasonable response.
One of the witnesses in the proceedings was Mr Peter Seal. His evidence is referred to in Meredith v Commonwealth (No 2) at [167]-[184]. His evidence was that he was also told by Mr Bates that he could not join a Commonwealth superannuation scheme because he was “a temporary employee”. He subsequently left to become a full-time organiser with the Federated Engine Drivers and Fireman’s Association. When he returned to government service in 1992, he became aware that he was able to join a Commonwealth superannuation scheme and immediately applied to be admitted. He was admitted.
During his oral evidence, he was shown a copy of the “Industrial Wages Transfer –Personal Information” form that he had signed. He said that this document had brought to his attention that he may be able to join, which led to his application for admission to a Commonwealth superannuation scheme.
It is, of course, always problematic to use an example of what one other person did as a yardstick of what is reasonable. Mr Seal’s experience is certainly a counter-example properly to show that the statement on the relevant form could not be said never to have been read, understood or acted upon by an industrial worker. I do not consider that this is enough, however, to show that every signatory was so unreasonable if they did not similarly rely on it, that this answers the claim based on the negligent misstatement.
Mr Seal, after all, had had some experience of superannuation through his army service and, indeed, had earlier received a payout from the Defence Force Retirement and Death Benefits Board: Meredith v Commonwealth (No 2) at [169]. He was also active in employment affairs, having taken time off to become a union organiser. I am not satisfied that his experience is an appropriate yardstick to apply to a person such as Mr Knight.
CONTRIBUTORY NEGLIGENCE
The Commonwealth claimed that Mr Knight’s failure to join a Commonwealth superannuation scheme was caused or contributed to by his own negligence.
Although pleaded, this claim did not play any real part in the proceedings. Nevertheless, applying the principles set out by Pullin JA in Southern Properties (WA) Pty Ltd v Executive Director of the Department of Conservation and Land Management (2012) 42 WAR 287 at 348; [324], namely that, unless a cause of action is expressly abandoned, it must be dealt with by the trial judge, I need to consider this matter of defence.
It is now clear that contributory negligence is a proper matter of defence to a claim for pure economic loss caused by a negligent misstatement. See JEB Fasteners Ltd v Marks, Bloom & Co (a firm) [1981] 3 All ER 289 at 297; Daniels v Anderson (1995) 37 NSWLR 438 at 567.
What must be shown, however, is not that the plaintiff, in this case Mr Knight, owed some duty of care. As Mason J said in Commissioner of Railways v Ruprecht (1979) 142 CLR 563 at 570:
Contributory negligence differs from negligence. There is no duty of care owed to another person (Nance v British Columbia Electric Railway Co Ltd [[1951] A.C. 601 at 611]); and contributory negligence involves conduct which exposes the actor to the risk of injury without necessarily exposing others to risk. None the less it has been repeatedly asserted that the standard of care in contributory negligence, like the standard of care in negligence, depends on foreseeability and is that of the reasonable and prudent [person], so that a defendant is guilty of contributory negligence if he [or she] ought reasonably to have foreseen that, if he [or she] did not act as a reasonable and prudent [person], he [or she] would expose himself [or herself] to risk of injury – see, e.g. Sungravure Pty Ltd v Meani [(1964) 110 CLR at 37].
The finding of contributory negligence depends on a factual investigation of whether the plaintiff contributed to his or her own loss by failing to take reasonable care of his or her own person or property. What is reasonable care depends on the circumstances of each case: Astley v Austrust Ltd (1999) 197 CLR 1 at 14; [30]. The question of causation is one to be approached with common sense: Jones v Livox Quarries Ltd [1952] 2 QB 608 at 616. No account is taken, in the case of contributory negligence, of moral blameworthiness, for there is no breach of duty: Pennington v Norris (1956) 96 CLR 10 at 16.
The apportionment of responsibility for this purpose is a matter of discretion for the trial judge, weighing up all the relevant factors, and it must be just and equitable from the point of view of both the plaintiff and the defendant. See Watt v Bretag (1981) 27 SASR 301 at 312 and on appeal (1982) 41 ALR 597 at 599.
It was said that Mr Knight had other sources of information which he should have sought. These included workmates, union officials, his brother and a range of legal or financial advisers.
The evidence is that Mr Knight’s workmates were very largely ignorant of superannuation, especially details of eligibility. Even senior officers, such as Mr Mckenzie-Smith and Mr Murray, had little understanding of the details of eligibility. Evidence of people such as Mr Seal showed the same picture in the unions.
There is no evidence to suggest that Mr Knight’s brother was any more knowledgeable about the eligibility of Mr Knight to join a Commonwealth superannuation scheme than was Mr Knight himself.
As to professional advisers, it is easy from a white-collar professional perspective to see that such people are an appropriate and accessible source of advice. That cannot necessarily be transferred to someone in Mr Knight’s position where, at least initially, he was living in an isolated location, until his move to Kambah, and in industrial circumstances where such advice seems to me much more likely to be sought from a union official than a paid professional adviser.
I am satisfied that Mr Knight did not cause or contribute to his loss by failing to join a Commonwealth superannuation scheme because of his failure to ask any of the suggested persons for advice.
It was also suggested that, as he had read the Canberra Times and that there were articles in it about superannuation, this should have alerted him to the question of his eligibility. I have addressed this issue in Meredith v Commonwealth (No 2) at [462]-[465], which I do not need to repeat. I am satisfied that the Canberra Times was not a relevant source of information such as to amount to any contributory negligence on Mr Knight’s part.
I have dealt above with the issue of the “Industrial Wages Transfer – Personal Information” form (at [104]-[113]) in the context of reliance. As a matter of contributory negligence, the issue is somewhat different.
It seems to me that there were some differences to the earlier “Conditions of Service” pamphlet and Mr Knight’s earlier advice in that, while there was no reference to eligibility criteria, there was a reference to inquiry of “your wages team”, which was clearly not Mr Bates.
In my view, Mr Knight was required, in order to look after himself, to follow that up and make an appropriate inquiry. It is difficult to know what the result would have been, but it seems likely that, based on the evidence of Ms Ivens, he would have been provided with the relevant information.
It is hard to assess the relative contributions, however, that this failure made to his loss. I consider that the reference in the document was somewhat opaque in the context and could have been more informative as was the statement in the “Conditions of Service” pamphlet, especially in the light of the widespread ignorance of the relevant information.
However, having regard to all the circumstances, I consider that the damages suffered by Mr Knight should be reduced by 10% as a result of his failure to follow up the invitation.
Other than this, I consider that no other allegation of contributory negligence can be sustained.
THE LIMITATION DEFENCE
As mentioned earlier (at [7] and [91]), the Commonwealth pleaded that Mr Knight’s claim was barred by the Limitation Act. That defence was held in Commonwealth v Cornwell not to apply in a case such as this. It is a decision that is applicable and binding on me. The Commonwealth did not press that defence and it is not made out.
DAMAGES
Having found that Mr Knight was negligently and culpably misinformed about his eligibility to join a Commonwealth superannuation scheme which caused him not to join, I must determine whether he is entitled to damages and, if so, the amount of those damages.
Mr Knight would have become eligible to join the CSS on 5 April 1978. At that time, a temporary employee would be required:
(a) to have been a temporary employee, or a temporary employee and a permanent employee of the Commonwealth, for the immediate period of one year; and
(b) to have satisfied the Commissioner for Superannuation that the person is likely to be a temporary employee for a further period of at least three years after the date on which he or she requests the person to be treated as an eligible employee.
See s 11 of the 1976Act.
Causation
The Commonwealth submitted that I could not be satisfied that Mr Knight would meet these criteria. He was, it was submitted, a 29 year old single man with no dependents and one year’s service as a forest worker, being temporary employment. It was submitted that the necessary certification of employment for a further three years was by no means certain.
Further, it was submitted that, given the description, cited above (at [30]), of how Mr Knight used his funds, his continued membership of a Commonwealth superannuation scheme was by no means certain.
While I accept that the eligibility criteria were somewhat of a challenge for a person in the position of Mr Knight to meet, the evidence did not really support the Commonwealth’s position; rather it supports that of Mr Knight’s position to the requisite degree.
I set out in Meredith v Commonwealth (No 2) at [632]-[643] some of the material that addressed the future employment criterion with the Public Service. That shows that:
(a) by 1971, the future employment criterion had become somewhat of a formality; and
(b) the number of applicants rejected on this ground was very small.
Other evidence supported this. The tenor of the evidence, again set out in Meredith v Commonwealth (No 2) at [634]-[640], was that good workers were likely to be continuously employed for long periods, as were Mr Meredith, Mr Duffy (Duffy v Commonwealth [2013] ACTSC 239) and Mr Tobin (Tobin v Commonwealth).
Indeed, Geoffrey McVeigh, a former Controller of Wages for the Department of Territories, gave evidence that he had never heard of an industrial employee being told they could not join a Commonwealth superannuation scheme. In addition, his evidence was that there was a need for such employees, which is strongly suggestive that those who showed a commitment, which a wish to join a Commonwealth superannuation scheme would evidence, would be likely to remain employed.
I am satisfied that Mr Knight would have met the eligibility criteria.
As to Mr Knight continuing to contribute, the evidence is, of course, not easy to identify, for it is a hypothetical which can only be shown by inference from proved facts.
Certainly at the beginning, he would have had little difficulty in making payments; he had no dependents and he lived in low rent accommodation at the Uriarra depot. As I have noted earlier (at [29]), he then purchased his own house, showing that, despite having an insurance policy on which he was paying premiums from 1971, he was able to accumulate a deposit.
Despite purchasing a house in 1985, Mr Knight was able, within less than five years, to contribute to private insurance and superannuation policies. He, therefore, can be said to have had sufficient funds available to him for contributions to a Commonwealth superannuation scheme.
I am satisfied that he would have been able to contribute to a Commonwealth superannuation scheme and would have done so.
For completeness, I refer to two other matters not really the subject of much controversy in these proceedings.
(a) Medical grounds
Part of the statutory requirements for the CSS included a medical examination. Section 16(4) of the 1976 Act required that the Commissioner for Superannuation consider a report of an approved medical practitioner and consider whether
the person is not likely, by reason of or for a reason connected with a physical or mental condition or conditions referred to in the report or reports, to continue to be an eligible employee until the person attains his maximum retiring age
Where such an opinion is not formed, however, the consequence is not that the person is ineligible to join the CSS but it has a consequence for the amount of benefit payable where there is a cessation of employment on invalidity grounds (s 66(2) of the Act).
In any event, there was no evidence to suggest that Mr Knight would be likely, following a medical examination, to be unable to be subject of such an opinion.
He had taken out life insurance in 1971. He managed to work until 1991 as a forest worker, work that was described as hard work. He then became a Ranger but experienced knee problems, though there is no suggestion that they became evident any earlier. Indeed, his evidence was that, until this time, he enjoyed good health and did not suffer from any medical condition that would have affected his capacity to work. I do not consider there are any medical impediments to Mr Knight’s claim.
(b) Actual admission
There is a discretion exercisable by the Commissioner of Superannuation notwithstanding Mr Knight meeting the statutory eligibility conditions, which must be exercised before a temporary employee can become a member of the CSS. In all the circumstances, nothing was put to me as to any likelihood that such a discretion would not be exercised in favour of Mr Knight had he met the eligibility criteria. I accept that the discretion would have been so exercised.
(c) Length of time the misstatement applied
There is one other matter that is relevant to the issue of causation, namely the period during which the negligent misstatement had an effect.
The Commonwealth submitted that it should have ended in 1992 when Mr Knight signed the “Industrial Wages Transfer – Personal Information” form. I have rejected that, though I have found that this was an occasion where Mr Knight failed to take care of his own interests and that his damages should be reduced by 10%.
The evidence was, however, that, at a meeting in 1995, he found out that he was entitled to apply to join a Commonwealth superannuation scheme. He originally said in his affidavit that this meeting was held in 1997, but in his oral evidence he said “I’m pretty sure it was 1995”.
At that time, however, he did not join a Commonwealth superannuation scheme. He explained why when he said
No, you didn’t ever in fact join Commonwealth Superannuation? --- No.
Even after you knew you could? --- Well I had the other funds.
That’s right, isn’t it, you considered your AGEST and your private super, and your private funds, to be enough. That’s what you said when you were here a couple of days ago? --- Yes, and I also had as ASGARD.
AGEST you mean? --- AGEST, yes sorry.
So you considered AGEST and your own private funds to be enough, that was your evidence, and you’re sticking to that? --- Yes.
While that may be a rational decision in his own interests, it seems to me that it does not justify a continuation of the damages suffered by Mr Knight caused by the negligent misstatement. That is to say, once he knew that he had been given false information, he could either have joined or decided not to but then making his own autonomous decision not affected by incorrect information given to him. There is no suggestion that, for example, he could not then have afforded to join because of these commitments entered into or a result of the negligent misstatement.
There is one other matter I need to consider. By this time, he had suffered problems with his knees; that may have resulted in the expression of opinion in the medical examination as to whether he could continue as an eligible employee until retirement. See my comments above (at [148]).
Mr Knight, however, was made redundant in 2002 and there was no evidence to suggest that this was retirement on invalidity grounds. Thus, his benefits would not have been affected even had he applied to join a Commonwealth superannuation scheme in 1995. That means that his damage from failing to join earlier would not have continued and cause loss to his final benefits.
I had no date for the meeting in 1995. There would, in any event, have been some delay before his admission to the scheme. He should, also, have had a reasonable time to consider his position.
A date for the end to the effect of the negligence misstatement must, to an extent, be arbitrary in these circumstances. I will set 1 January 1996 as the relevant date in all the circumstances.
Quantum
An award of damages for a tort, including that of negligent misstatement, is compensatory. As the High Court said in Haines v Bendall (1991) 172 CLR 60 at 63
The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed ... Compensation is the cardinal concept. It is the ‘one principle that is absolutely firm, and which must control all else’: Skelton v Collins [(1966) 115 CLR 94 at 128], per Windeyer J. Cognate with his concept is the rule, described by Lord Reid in Parry v Cleaver [[1970] AC 1 at 13], as universal, that a plaintiff cannot recover more than he or she has lost.
Both the Commonwealth and Mr Knight presented reports from actuaries who calculated the damages said to be payable.
Mr David Heath, an actuary of Cumpston Sarjeant Pty Ltd, Consulting Actuaries, gave evidence for Mr Knight. Mr Peter Martin, also an actuary, employed with the Australian Government Actuary, gave evidence for the Commonwealth. Both had appropriate qualifications and experience, and their expertise and entitlement to give expert evidence was not in issue.
Mr Heath prepared two reports, though each used the same basic methodology. In his second report, he updated the date to which the loss would be recoverable. This will need updating, since some years have passed since that time. It also conceded “a minor [but unidentified] error in the first period of member contributions”, changed the salary amounts used originally and removed a provision for the withdrawal of a lump sum of $22,000 which Mr Knight actually made in 2005 but which could not have been made from the CSS.
Mr Martin prepared six scenarios which depended on various factors of which there was no certainty in the evidence. Mr Heath prepared one scenario which was generally along the lines of one of those prepared by Mr Martin, though still with some differences.
Thus, there were a range of factors that were relevant to the calculation of the quantum of the damages payable. There were some factors that were relevant which were uncontroversial and some that were controversial. I shall deal with each and decide, where I need to do so, as to the controversial factors.
(a) Uncontroversial matters
Mr Knight was born in 1948. He commenced employment with the Commonwealth on 5 April 1977 and so became eligible to apply to join a Commonwealth superannuation scheme on 5 April 1978. He ceased employment with the Commonwealth on 19 July 2002 at age 53.
(b) Controversial matters
There are a number of matters on which the Commonwealth and Mr Knight disagree and which, therefore, I need to decide in order to specify the relevant factors to be taken into account when calculating the damages.
(i) The start and end date of the relevant period
Mr Knight’s position was that, had he been given the correct information, he would have joined on 5 April 1978. The Commonwealth submitted that he would not have joined at all, but I reject those submissions, based on the evidence I have already set out. He made inquiries on a number of separate occasions, and he took out his own private superannuation. He was interested in joining and he had sufficient resources to meet the contributions.
The Commonwealth then submitted that he should have joined in 1987 when he applied for an application form. I have also rejected that above (at [53]). Finally, it submitted that he should have joined in 1992, which again, I have rejected above (at [113]).
I have found, however, that the effect of the negligent misstatement had ended by 1 January 1996. Of course, his interest in a Commonwealth superannuation scheme would then be preserved until available to him and would continue to increase through interest, but not by further contributions.
(ii) Transfer to the PSS
When the PSS was created by the Superannuation Act 1990 (Cth), members of the CSS, which I have found Mr Knight would then have been, had he been given correct advice, had a choice as to whether to transfer to the PSS or to remain in the CSS.
If a member of the CSS did not expressly elect to join the PSS, he or she remained a member of the CSS.
As in the other cases, the evidence about what Mr Knight would have done is quite thin. It is, of course, a hypothetical question about which I can only decide by inference.
Unlike some of the plaintiffs (see Duffy v Commonwealth), Mr Knight did not address the issue in his affidavit or in his oral evidence.
I have addressed the issue in some detail in Meredith v Commonwealth (No 2) at [666]-[678] and I rely on that background material.
The submissions for the parties were not particularly helpful on this issue. For Mr Knight, his counsel merely submitted “Mr Knight would likely have remained in the CSS after the commencement of the PSS in 1990.”
The Commonwealth submitted:
There is however in our submission nothing about his personal circumstances, notwithstanding his private superannuation investments from 1989, that would assist your Honour in determining what choices Mr Knight might have made had he been a member of Commonwealth superannuation as to transferring to the PSS or not and as to taking superannuation benefits as a lump sum or a pension and a lump sum.
It is clear from the evidence that the decision whether to transfer was a very individual one. There were benefits in both schemes, and the choice was largely dependent upon the views and expectations of the member at the time.
Again, I have referred to a number of the issues in Meredith v Commonwealth (No 2) at [672]-[679] and do not need to repeat them here.
There seems to me to be a few matters on which I can rely. Mr Knight did take out private insurance and superannuation policies and purchased his own house, suggesting someone who had some interest in the future protection of his financial interests.
When he received his redundancy payment, he appears to have ceased working. Thus, he did not need capital to protect his interests such as buying a house or starting a business. Further, he had no dependents for which he may have wished to have a lump sum to help in their support or to leave them in his will.
Further, the evidence of Mr Bates is that he remained in the CSS, and I have found that Mr Meredith would have done so also. Thus, insofar as there may have been what Mr Martin described in the Commonwealth’s submissions on this issue as “workplace-centric decision making”, it seems likely that it would have favoured remaining in the CSS.
Mr Martin also described “inertia and suspicion” tending to persuade people to remain in the CSS.
On balance, I consider that in 1990, Mr Knight would not have transferred to the PSS.
(iii) Salary
Mr Martin calculated the salary received by Mr Knight on the basis of his instructions. These were, he understood, taken from Mr Knight’s personnel file where available and “interpolated in between”. This was contrasted with Mr Heath who relied on group certificates and tax returns in the earlier years and then indexed the salaries at a constant growth rate in his first report.
As Mr Martin commented, there are a number of reasons why a person’s superannuation salary would be less than gross earnings shown on a group certificate. This may be why Mr Heath altered the salary for his second report, indicating that they were based on “payroll records”.
In the absence of any further detail of the source of Mr Heath’s salary figures, it seems to me that Mr Martin’s figures represent what is more likely to be the correct salary amounts and should be used.
(iv) Annuity Factor
Mr Heath used an annuity factor of 16.846 for the indexed pension; Mr Martin used the factor of 15.503.
The basis for the distinction was not entirely clear in the reports in this matter. The issue was, however, canvassed in more detail in Meredith v Commonwealth (No 2) at [695]-[704]. There, I held that the basis on which Mr Heath identified the annuity factor seemed more to accord with authority, relying on Golden Eagle Trading Pty Ltd v Zhang (2007) 229 CLR 498.
In the circumstances, I consider that, in this case, I should rely on Mr Heath’s annuity factor.
I consider, however, that the appropriate discount rate should be 3.5% for the reasons also referred to in Meredith v Commonwealth (No 2) at [705].
(v) Saved contributions
Deducted from Mr Knight’s loss, of course, must be the contributions that he did not have to pay to a Commonwealth superannuation scheme as he was not a member.
In order to assess the loss, these contributions, and also the value to which they would reasonably have been put, must be calculated and deducted from the loss otherwise suffered by Mr Knight.
There did not seem to be any significant disagreement on the amount of those saved contributions; in any event, having decided on the appropriate basis for the superannuation salary, these can be easily calculated.
The issue, however, is the basis on which the value to which Mr Knight can be assumed to have put the sums should be calculated. Mr Heath used building society rates from 1978 to 1994 and, thereafter, cash management rates. Mr Martin assumed that the saved contributions would have been invested wholly in private superannuation and life insurance policies, and so used the implied actual returns and actual AGEST crediting rates.
Again, there is not a great deal of evidence on which to base an answer to this question.
Mr Knight did have an insurance policy taken out in 1971. He did not have a private superannuation policy, however, until 1989. In the meantime, he purchased a house.
That suggests to me that Mr Knight is more likely to have saved his unpaid contributions towards his house initially, that is, until 1989. Accordingly, I consider that from 5 April 1978 to 31 December 1989, building society rates should be used. From 1 January 1990 to 31 December 1995, I consider that the approach of Mr Martin is to be preferred.
(c) Conclusion on Damages
I have found that the effect of the negligent misstatement ended by 1 January 1996. Neither of the experts prepared a calculation on this basis. It will, therefore, be necessary to recalculate the damages in accordance with that and the other findings I have made above.
Having made these findings, however, I do not consider that I have the actuarial evidence that permits me to quantify the damages that Mr Knight should receive. Therefore, the following the scenario should be calculated:
(a) Mr Knight would have continued as a contributor to the CSS until 31 December 1995;
(b) Mr Knight would not have joined the PSS;
(c) Mr Knight would have preserved his benefits in the CSS until age 60;
(d) Mr Knight would have made no additional contributions though he would have received the statutory employer contributions from 1 January 1996;
(e) the employee contributions saved would have been only up to 31 December 1995; and
(f) there would be pre-judgment interest in accordance with the Court Procedures Rules 2006 (ACT) from 23 November 2008 to the date of judgment.
The other criteria would be as I have found above and earlier in these reasons.
Accordingly, it will be necessary for recalculations or submissions to be made so that I can determine the damages payable.
TAXATION
The question of whether the damages would be taxed, whether as a capital gain or as income, was a live issue.
The Commonwealth submitted that the damages were not taxable on either basis while, to the contrary,
Mr Knight, through his counsel, submitted that they would be taxable. Mr Knight further submitted that the damages should include a component to compensate him fully for any tax imposed other than that which would have been imposed if the receipts had been received in the ordinary way.
In Guy v Commonwealth [2013] ACTSC 128 at [90]-[93], I said:
90.The Commonwealth, however, referred to a number of cases where the Court did not rule on the issue but reserved leave to apply for additional damages in respect of any damages referable to income tax or capital gains tax. See Rabelais Pty Ltd v Cameron (1995) 95 ATC 4552; Turner v T R Nominees Pty Ltd (1995) 31 ATR 578; P M Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2001] NSWSC 798 at [114]-[119]. See also P M Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2008] NSWSC 683.
91.The Commonwealth submitted that it was appropriate to take the course adopted in those cases and reserve to the plaintiff leave to apply for additional damages should the award be assessed as liable to tax on any basis. At this time, argument would be permitted as to whether it is appropriate for there to be such an award and, if so, of what amount.
92.Mr Guy, through his counsel, suggested that such a proposal was apparently inconsistent with the “once and for all” principle (Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 93 ATC 5101) but nevertheless adopted the Commonwealth’s proposal, which, his counsel submitted, “makes sense for a number of reasons”.
93.These include that Mr Guy has the comfort of knowing that if the Commissioner of Taxation were to levy tax, he could return to the court to recover damages for any loss thereby occasioned. It also provides certainty to the court to know whether tax would be levied and, if so, how much would be levied, so as properly to provide compensation for what is at law required to be compensated.
It seems to me that this is appropriate in this case also. I shall proceed in the same way.
CONCLUSION
As a result of the foregoing, I shall enter judgment for Mr Knight on his claim in respect of negligent misstatement.
So far as damages are concerned, however, I shall invite the parties to provide me with appropriate material on which I can quantify the damages in accordance with these reasons. That may be a report from an appropriately qualified actuary. Each party may wish to retain their own and provide separate reports. If so, I would wish that the actuaries at least confer to see if they could agree or, if not agree, then narrow the extent of any disagreement.
The parties may prefer, however, simply to make submissions. Indeed, they may be able to agree on the quantity of the damages flowing from my decision.
Accordingly, I shall hear the parties and, if requested, adjourn for a short period to give them the opportunity to make submissions on how they wish to proceed.
I shall, also, hear the parties as to costs, though this may have to await the quantification of the damages.
DELAY
I sincerely regret that the pressure of business of the Court has delayed the delivery of judgment in this matter. Nevertheless, I have read carefully the entire transcript and the exhibits tendered at the trial as well as my contemporaneous notes. I have also had detailed and comprehensive written submissions from the parties which I have also carefully read. These have resulted in a good recall of the proceedings and of the witnesses giving evidence, notwithstanding the passage of time.
I certify that the preceding two hundred and fifteen (215) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge
Associate:
Date: 2013
Counsel for the Plaintiff: Mr R Davis and Mr J Gordon
Solicitor for the Plaintiff: Sneddon Hall & Gallop
Counsel for the Defendant: Mr S P Estcourt QC and Ms C Dowsett
Solicitor for the Defendant: Australian Government Solicitor
Date of hearing: 18-19, 23-26, 30 November, 1-3, 8-11, 14 December 2009, 9-11 February 2010
Date of judgment: 16 December 2013
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