Koch v Commissioner of the Australian Federal Police
[1999] FCA 1352
•1 OCTOBER 1999
FEDERAL COURT OF AUSTRALIA
Koch v Commissioner of the Australian Federal Police [1999] FCA 1352
STATUTORY INTERPRETATION - power of Police Commissioner under Australian Federal Police Act 1979 (Cth) to make "determinations" - determination made requiring members to elect between two different types of payment - whether determination beyond scope of power - whether unreasonable.
Australian Federal Police Act 1979 (Cth), s 4, s 30, s 30(1), s 30(2), s 30(4), s 32, s 39, s 39D, s 39D(1)(c), s 57, s 57(1)(b), s 57(2)(b), s 57(3)
Superannuation Act 1976 (Cth)
Australian Federal Police Legislation Amendment Act (No 2) 1989 (Cth)
Acts Interpretation Act 1901 (Cth), s 15AB(2)(e) and (f)Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381 distinguished
Westwood v Lightly (1984) 2 FCR 35 distinguished
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 referredRUSSELL KOCH v COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
AG 121 of 1998FINN J
1 OCTOBER 1999
CANBERRA
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY
DISTRICT REGISTRY
AG 121 OF 1998
BETWEEN:
RUSSELL KOCH
ApplicantAND:
COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
RespondentJUDGE:
FINN J
DATE OF ORDER:
1 OCTOBER 1999
WHERE MADE:
CANBERRA
THE COURT ORDERS THAT:
1. The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
AG 121 OF 1998
BETWEEN:
RUSSELL KOCH
ApplicantAND:
COMMISSIONER OF THE AUSTRALIAN FEDERAL POLICE
Respondent
JUDGE:
FINN J
DATE:
1 OCTOBER 1999
PLACE:
CANBERRA
REASONS FOR JUDGMENT
This application raises for consideration the scope of the power conferred on the Commissioner of the Australian Federal Police ("the Commissioner") under s 30 of the Australian Federal Police Act 1979 (Cth) ("the Act") to determine the eligibility of persons holding their positions under that Act to receive what is designated to be "an adjustment payment". To appreciate how this question arises it is necessary to refer in some detail to the Act and the mutations it has undergone as well as to "determinations" made under the Act prescribing terms and conditions of service of members of the Australian Federal Police ("the AFP").
The Statutory Setting
When the Act commenced in 1979 it empowered the relevant Minister, after taking designated advice, to determine the terms and conditions of service of members of the AFP: see ss 30 and 32. Section 39 of the Act of its own force retired members from the AFP upon their attaining the age of 60. Public servants in contrast were not obliged to retire until the age of 65.
At the time of the Act both AFP members and public servants participated in the superannuation scheme established by the Superannuation Act 1976 (Cth). Participants in that scheme became entitled to maximum benefits only upon reaching the age of 65. This worked to the disadvantage of AFP members given their retiring age of 60. On 23 December 1987, the Minister made determination No M32 under s 30(1) of the Act. It made provision for the payment of a "Cessation Payment" to a member either who retired on attaining the age of 60 or who elected to retire having attained the age of 55 years. That payment, calculated by reference to a formula providing a decreasing benefit the closer the member's age on retirement was to 60, was related to the differential impact the superannuation scheme had on AFP members on the one hand and public servants on the other. I merely note in passing, for example, that one of the factors to be used in the formula for computing a member's payment was the member's "final annual rate of salary" as defined in the Superannuation Act.
In 1989 a radical change in the basis of a member's service in the AFP was brought about by the Australian Federal Police Legislation Amendment Act (No 2) 1989 ("the Amending Act"). The centrepiece of this legislation was the abolition of tenure and its replacement with a fixed term appointment system for all police members of the AFP. The Attorney-General's Second Reading speech on the Bill for the Amending Act contained (inter alia) the following:
(i)"The very nature of policing lends itself to a fixed term tenure system. The stress of policing often leads to burnout among members who do not want or cannot progress to management positions. The fixed term appointment system will enable police members and staff members to leave the Australian Federal Police and enable the Commissioner not to reappoint police members or staff members who are not performing at the required level. There will be an administrative appraisal system to recommend whether a police member or a staff member should be reappointed on the completion of a term appointment."
(ii)"The Bill provides for the entitlement to an adjustment payment which recognises the fact that the person's appointment is for a fixed term. The Australian Federal Police adjustment payment will be 12½ per cent of accumulated salary over the period of the police member's or staff member's fixed term appointment or appointments, on the basis that it will be treated as an eligible termination payment. Police members or staff members will not be eligible for the adjustment payment where they resign from the Australian Federal Police prior to the end of their terms of appointment or where police members or staff members have their appointments annulled during the period of their probationary service."
(iii)"Currently the Australian Federal Police incurs very high invalidity costs. With the introduction of the unified work force there will be greater flexibility for redeployment of staff under the Comcare arrangements. Additionally, members will have the opportunity to make career changes with the financial support offered by the accumulated adjustment scheme, thereby avoiding the stress related illness so common in the force. Future cost benefits will accrue from reduction in invalidities and the absence of retrenchments provisions in the Australian Federal Police Act."
Some number of provisions of the Amending Act are relevant to this application.
First, the definition section of the Act (s 4) was amended to include as a definition:
"'adjustment payment' means a payment of an amount to a person under subsection 30(2), being a payment made in recognition of the fact that the person's appointment is for a fixed term."
Secondly, the Amending Act together with the Australian Federal Police Regulations prescribed the periods for term appointments; allowed for reappointment; but did not alter the compulsory retirement age of 60 years.
Thirdly, s 30 of the Act was repealed and replaced with a new s 30 in (inter alia) the following terms:
"Determinations by Commissioner
30. (1) Subject to this Part, the Commissioner may determine, in writing:
(a)the terms and conditions of service of members, whether within or outside Australia; and
(b)the terms and conditions of service of staff members, whether within or outside Australia.
(2) A member or a staff member is entitled to an adjustment payment, subject to and in accordance with a written determination by the Commissioner.
(3) An adjustment payment must not be made to a member or staff member unless he or she elects, in accordance with a written determination by the Commissioner, to receive it.
(4) The Commissioner may, in writing, amend or revoke a determination under subsection (1)."
The Explanatory Memorandum described the burden of these various sub-sections as follows:
"Subsection 30(1) enables the Commissioner to determine, subject to Part V, the terms and conditions of service of members and staff members inside and outside Australia. This power is subject to the jurisdiction of the Industrial Relations Commission under the Industrial Relations Act 1988, subject to the exclusions in proposed section 39D.
Subsection 30(2) provides that a member or a staff member is entitled, subject to and in accordance with a determination by the Commissioner, to an adjustment payment which recognises the proposed fixed term appointment system being introduced by the Bill. The determination is to contain the eligibility criteria for the adjustment payment. This entitlement, which will be unique to the AFP, will not be subject to the jurisdiction of the Industrial Relations Commission (see proposed section 39D).
Subsection 30(3) provides that an adjustment payment must not be made to a member or staff member unless he or she elects, in accordance with a determination of the Commissioner, to receive it. The reason why a member or staff member must elect to receive the adjustment payment is because he or she loses, by that election, any mobility rights under the Public Service Act 1922 if he or she elects to receive the adjustment payment (see proposed section 31).
Subsection 30(4) provides that the Commissioner may amend or revoke a determination under subsection 30(1)."
Fourthly, as the above Explanatory Memorandum foreshadowed, a new s 39D provided that a s 30(2) determination was:
"not a matter pertaining to the relationship between an employer and employee for the purposes of the definition of 'industrial dispute' in subsection 4(1) of [the Industrial Relations] Act, nor is it an industrial issue within the meaning of section 5 of that Act.
(2) The Australian Industrial Relations Commission must not, in exercising any of its powers in relation to an industrial dispute or industrial issue, take into account any entitlement of a member or staff member to an adjustment payment."
Finally, the new transition provision s 57, provided (inter alia):
"Existing members: terms and conditions
57. (1) Despite anything in the Principal Act, as amended by this Act, a member mentioned in subsection 56(1) holds his or her position:
(a)for the term determined in writing by the Commissioner, being a term not longer than the term that the Commissioner could have determined under section 26D of the Principal Act, as amended by this Act, if the member had been appointed under that Act, as so amended; and
(b)subject to the terms and conditions determined in writing by the Commissioner, being terms and conditions that are at least as favourable to the member as the terms and conditions which applied to the member immediately before that prescribed day.
(2) Despite anything in the Principal Act, as amended by this Act, a member mentioned in subsection 56(2) or (3) holds his or her position:
(a)for the term determined in writing by the Commissioner, being a term not longer than the term that the Commissioner could have determined under section 26D of the Principal Act, as amended by this Act, if the member had been appointed under that Act, as so amended; and
(b)subject to terms and conditions that are the same as those which applied to the member immediately before that prescribed day.
(3) The terms and conditions determined under paragraph (1)(b), or mentioned in paragraph (2)(b), are to be taken to have been determined under section 30 of the Principal Act, as amended by this Act, and that Act, as so amended, applies in relation to the terms and conditions accordingly."
The Explanatory Memorandum in its commentary on s 57(3) refers expressly to the new s 39D applying in relation to the terms and conditions determined under "paragraph 57(1)(b)" or mentioned in "paragraph 57(2)(b)".
On 22 December 1989, the Commissioner of the AFP made Determinations No 3 and No 5 under the new s 30 of the Act. These took effect from 1 January 1990. Determination No 3 continued the application to members of the AFP of a number of previous determinations referred to in an accompanying schedule. Determination No M32 (that dealing with the Cessation Payment) was so continued in its application.
Determination No 5, a provision of which is challenged in this application, requires to be set out at some length. Its preamble and general entitlement provision are in the following terms:
"AUSTRALIAN FEDERAL POLICE ACT 1979
DETERMINATION OF ADJUSTMENT PAYMENT FOR
MEMBERS AND STAFF MEMBERSWHEREAS the provisions of section 30 of the Australian Federal Police Act 1979 empower the Commissioner to determine the terms and conditions of service of members and staff members of the Australian Federal Police including of an Adjustment Payment in accordance with the said provisions of the said section of the Australian Federal Police Act.
NOW THEREFORE I, RONALD McAULAY, Commissioner of Police of the Australian Federal Police, in pursuance of section 30 of the Australian Federal Police Act 1979, HEREBY DETERMINE that a member or a staff member is entitled to receive, where he or she elects to receive, at the conclusion of the member's or staff member's service with the Australian Federal Police by fixed term appointment(s) an Adjustment Payment as an Eligible Termination Payment at the rate of twelve and one half per centum (12½%) of accumulated salary (base and higher duties allowance only) earned by the member or staff member over the period of his or her service of fixed term appointment(s) subject to the following conditions: … "
The Determination then specifies seven separate "conditions". Conditions 1 and 2 relate to varying causes for the making of an Adjustment Payment - management initiated retirement (Condition 1); death or invalidity retirement (Condition 2) - and prescribe the formula to be used in each instance for the computation of the payment. Condition 3 imposes a qualifying period of two years before a new member of the AFP will be entitled to an Adjustment Payment. Condition 4 prescribes how periods of leave and secondment are to be treated for the purposes of the accrual of time over the period of service of the member's fixed term appointment.
Condition 5 - which is challenged in this application - is in the following terms:
"ELECTION OF SUPERANNUATION PAYMENT OR ADJUSTMENT PAYMENT
5. Where an existing member elects, pursuant to superannuation options, to remain a contributor under the existing Commonwealth Superannuation Scheme (i.e. pursuant to the 1976 Act) such a member is required to elect at his or her retirement whether to receive the Cessation Payment (i.e. the extra amount because of being required to retire at 60 years in a Superannuation Scheme that is geared to retirement at 65 years) or to receive the Adjustment Payment pursuant to this determination": emphasis added.
The emphasis in the above is to draw attention again to the nexus between the Cessation Payment and the differential impact of the superannuation scheme on members of the AFP and on public servants.
Conditions 6 and 7 deal with circumstances in which an entitlement to an Adjustment Payment ceases. These reflect in part the two illustrations given in the Attorney-General's Second Reading speech (ie voluntary resignation prior to the end of a term of appointment and annulment of appointment during probationary service: see above).
In 1991 a new superannuation scheme - the Public Sector Superannuation Scheme - was introduced for what I will inaccurately call Commonwealth employees. It differed from the old scheme in its incidents, most notably in relation to the manner in which superannuation benefits were calculated. Under the old scheme calculation was by reference to years of service; under the new, by reference to contributions made. Members of the old scheme were entitled to elect to remain members of that scheme.
The Factual Circumstances
1. The applicant, Russell Koch, was born on 11 August 1942. He commenced employment with the then Commonwealth Police Service in 1970. On 1 November 1979 he was appointed a non-commissioned officer of the AFP.
2. Consequent upon the commencement of the Amending Act, Mr Koch was, on 21 June 1990, appointed for an initial fixed term expiring on 1 September 1997. On 13 January 1997 he elected to be considered for re-appointment and on 15 April 1997 he was re-appointed for a further term of 4 years 11 months and 9 days that period terminating on the date he would reach the compulsory retirement age of 60 years.
3. Insofar as his superannuation was concerned, on the introduction of the Public Sector Superannuation Scheme in 1991, Mr Koch elected to remain a member of the old scheme.
4. On 14 October 1998 Mr Koch advised of his intention to take early retirement to be effective as of close of business on 12 November 1998. In conformity with cl 5 of Determination No 5 he was invited to make an election whether to receive the Cessation Payment or the Adjustment Payment. He declined to do so. He was provided on retirement with the Cessation Payment only.
Submissions and Conclusions
Mr Koch's claims are that (i) cl 5 of Determination 5 is beyond the power conferred upon the Commissioner by s 30(2) of the Act; and (ii) he is entitled to receive both a Cessation Payment and an Adjustment Payment. These claims are put in a number of alternate ways all of which depend in the end upon the proper interpretation of the Act. Put shortly they are as follows.
(i) In relation to the Cessation Payment, Mr Koch's entitlement was statutorily preserved and entrenched by the transition provisions of the Act (ie s 57) that were introduced by the 1989 Amending Act. It could not be qualified by the exercise of the Commissioner's s 30 powers.
(ii) In relation to the Adjustment Payment, s 30(2) gave a member an absolute entitlement to such payment, the power given to the Commissioner to impose conditions not being such as would enable him to deprive a member of that absolute right. Alternatively, the purposes of Cessation Payments and of Adjustment Payments being so different in character, the exercise of the s 30(2) power in a way that required a choice to be made between the two payments is beyond the scope of what Parliament intended when conferring the power either for reasons of unreasonableness: cf Minister for Primary Industries and Energy v Austral Fisheries Pty Ltd (1993) 40 FCR 381 at 384; or because the effect of the choice is to effect a term or condition of employment beyond Adjustment Payments contrary to the scheme of the Act as evidenced by, for example, s 39D.
The respondent's submissions, again in short form, are that:
(a)the transition provisions do not entrench previously held entitlements (including to Cessation Payments), they merely carry them forward into the new fixed term environment but subject to the Commissioner's s 30(4) power to revoke or amend them by determination;
(b)section 30(2) does not confer an absolute right to an Adjustment Payment - the "right" is "subject to" the determination of the Commissioner - and, as the Attorney-General's Second Reading speech indicates was intended, it was for the Commissioner to impose eligibility criteria;
(c)the election contemplated by cl 5 of Determination No 5 is an eligibility criteria and that is what Parliament intended the Commissioner would impose.
As is so often the case, given the generality of the language in which legislation is commonly cast, the terms of the Act do not easily yield up an answer to the issue raised by the parties. Two elements of the applicant's case can, I consider, be disposed of without difficulty. First, as to the alleged entrenchment of pre-Amending Act terms and conditions by virtue of the effect of the transition provisions of s 57, it is in my view clear that on its proper construction s 57(2) - the provision applicable to Mr Koch - has as its purpose the identification of the terms and conditions on which a member will be employed on the "prescribed day". Notwithstanding that it is appropriate to give a transitional provision such as this a "beneficial construction": Westwood v Lightly (1984) 2 FCR 35 at 36; s 57(2), when read in light of s 57(3), cannot be said to do more than identify what on that day were to be those terms and conditions. In particular s 57(2) does not ascribe some additional character to those terms and conditions, let alone one that renders them immutable as at that time. The introductory words of s 57(2) ("Despite anything in the Principal Act, as amended by this Act" etc) serve, in my view, to aid the identification of the relevant terms and conditions that were to be operative on the prescribed day. Those words have no prospective effect beyond that day, and do not for the reason that from that day the Act, "as so amended [including s 30], applies in relation to the terms and conditions": see s 57(3). Accordingly I am of the view that s 57(3) does not put the Cessation Payment of Determination No M32 beyond the reach of the Commissioner's power to amend or revoke a determination under s 30.
Secondly, when regard is had (a) to the language of s 30(2), (b) to the Explanatory Memorandum and (c) to the Attorney-General's Second Reading speech, the sub-section ought not be construed as conferring an absolute entitlement to an Adjustment Payment on a member. The words "subject to and in accordance with a written determination of the Commissioner" could on their face be asked to bear rival possible constructions - the one being of a machinery character to give substance and effect to an absolute entitlement; the other, to specify eligibility criteria for an entitlement. But when considered in the light both of the Explanatory Memorandum (set out earlier) and of the Attorney-General's explicit reference to circumstances of ineligibility for the Adjustment Payment, the subsection must be construed as admitting of the imposition of eligibility criteria: Acts Interpretation Act 1901 (Cth), s 15AB(2)(e) and (f); see also CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384.
This, then, leaves for consideration the question whether the criterion imposed by cl 5 of Determination No 5 falls within the scope of the power conferred on the Commissioner. In considering this matter it should be stated at the outset that regard ought not be had for any purpose to the differences between the old and the new superannuation schemes. When Determination No 5 was made, the old superannuation scheme was the only operative one for members of the AFP.
As defined, an "Adjustment Payment" is a payment made "in recognition of the fact that the person's appointment is for a fixed term": the Act, s 4. Insofar as it is possible to discern a legislative purpose for recognising that "fact", and the Second Reading speech is the available source for this, the payment was designed both to meet needs considered to arise in consequence of the fixed term system and to provide incentives that were not provided under the prior tenure system. As to the meeting of needs, the adjustment payment was said to "provide the opportunity [to members] at the end of their fixed term appointments to make career changes with the financial support offered by the accumulated adjustment scheme". As to the provision of incentives, the payment was seen as affording a financial incentive to members to leave the service who did not or could not progress in the service. This incentive was seen as having the possible effect of reducing some invalidity costs for work-related stress.
To the extent that the Second Reading speech refers to ineligibility for the payment, it mentions only two situations - voluntary resignation prior to the end of a fixed term and annulment of appointment during the period of probationary service. The possible present significance of the first of these is that ineligibility for an adjustment payment is unrelated to the "fact" that the voluntary retiree's appointment was "for a fixed term".
The parties, understandably, have not sought to address me on the possible validity or otherwise of the remaining "conditions" of Determination No 5 beyond cl 5. I have earlier described their respective burdens. Here I would merely comment that the noteworthy conditions are Condition 6 (voluntary early termination) and Condition 7 (dismissal after conviction for corruption or for a relevant disciplinary offence) to the extent that they provide that, notwithstanding that "a person's appointment is for a fixed term", a payment will not be made "in recognition of [that] fact". The election provided for in cl 5 can contrive a like state of affairs if the election made is for the Cessation Payment.
The first of Mr Koch's submissions that cl 5 is beyond the scope of s 30(2) focuses on what are said to be the respective purposes of a Cessation Payment and an Adjustment Payment. The purpose of the former is said to be to compensate members of the AFP for the fact that the requirement that they retire no later than age 60 deprived them of the opportunity to accrue the full superannuation benefits available to public servants who could continue in service until age 65. The purpose of the latter, it is claimed, is to compensate members for the insecurity of being liable to termination at the end of a fixed term contract, in place of the relative (previous) security of being employed until 60.
Given these respective purposes it is said that a clause dealing with Adjustment Payments that requires a member to choose between an Adjustment Payment and a Cessation Payment when the member has suffered the distinct detriment envisaged by each payment is unjust, capricious and arbitrary, there being no rational basis for forcing a choice.
For my own part I would have to say that, having regard to the "stringency" of the unreasonableness requirement if subordinate legislation is so to be held invalid as beyond power: see generally Pearce and Argument, Delegated Legislation in Australia, para 21.4 (2nd Ed); I am unable to accept this submission. Having found that s 30(2) authorises the imposition of eligibility criteria, I am not satisfied that the criteria of cl 5 is beyond the scope of what s 30(2) authorised even if the purpose of an Adjustment Payment is to compensate for the insecurity of being terminated at the end of a fixed term contract rather than, at the latest, at sixty years of age. It is not so relevantly arbitrary, capricious or unjust for the Commissioner to determine that a member, who previously could retire between the ages of 55 and 60 and receive a termination payment having as its object the subsequent provision for the member (albeit as a supplement to the member's superannuation entitlement), should be required to elect to forego that payment after the age of 55 if he or she wished then to receive a new type of termination payment that was likewise aimed at making subsequent provision for the member (albeit for different reasons). Important in this, in my view, is that it is only when a member is 55 years of age or more that any question of election can arise. Against the background of the cushion the Cessation Payment scheme provided to a 55 to 60 year old member, such "insecurity" as the fixed term scheme occasioned to such a member could reasonably be said to be so diluted and mitigated as to justify the non-recognition of "the fact that that member's appointment was for a fixed term" - unless the member elected to have it recognised in the manner cl 5 envisaged.
I would add that I do not consider that the sharp differentiation between the types of "detriment" which it is said the two types of payment were respectively designed to cover, has the salience attributed to it by the applicant in the twilight period of service between ages 55 and 60.
The applicant's alternate submission is that cl 5 can operate as a disqualifying provision for one or other of the two types of payment. To the extent that it operates so as to disqualify a person from receiving a cessation payment, it goes beyond what s 30(2) authorises because in the scheme of the Act that subsection only authorises the Commissioner to deal with Adjustment Payments and not other terms and conditions. Relied upon in aid of this is s 39D which, it is submitted, indicates a legislative intent to confine the scope of s 30(2) to the subject matter of Adjustment Payments only, so precluding the use of that sub-section to curtail entitlements to Cessation Payments.
The short answer to this is that if cl 5 can properly be characterised as imposing a condition or eligibility criteria for the receipt of an Adjustment Payment - and I have held it to be such - its effect on other terms and conditions of appointment does not deprive it of the character of a condition or criteria imposed in the exercise of the s 30(2) power. As such cl 5 falls directly within the terms of s 39D(1)(c) whatever its practical effect on a member's possible enjoyment of an entitlement other than an Adjustment Payment.
In any event, given that Determination No M32 (Cessation Payment) could itself be amended or qualified by the Commissioner under s 30(4) of the Act, it is unlikely that Parliament intended that the Commissioner could only make a determination affecting Determination No M32 by resort to the s 30(4) power, when for the purposes of s 30(2) as I have indicated, cl 5 of Determination No 5 would otherwise be unobjectionable as a condition or criteria for the receipt of an Adjustment Payment despite its effect on Determination No M32. I should note that the respondent has submitted that Determination No 5 is authorised in any event by the combination of powers given the Commissioner by s 30(1), (2) and (4). If I am incorrect in the view I have taken of the scope of s 30(2), I would accept the above submission of the respondent. I would add I do not consider that s 39D would assist in any way in determining the validity of cl 5 in such circumstances. Its concerns are differently directed.
I would dismiss the application.
I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn. Associate:
Dated: 1 October 1999
Counsel for the Applicant: Ms R McColl SC and Mr C Erskine Solicitor for the Applicant: Porter Pilkington & Bradfield Counsel for the Respondent: Mr R Tracey SC and Mr P Hanks Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 24 September 1999 Date of Judgment: 1 October 1999
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