Manuel v Health Super Pty Ltd
[2010] VCC 180
•30 March 2010
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-09-02636
| MARIO V. MANUEL | Plaintiff |
| v | |
| HEALTH SUPER PTY LTD | Defendant |
| (ACN 084 162 489) |
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| JUDGE: | HER HONOUR JUDGE KENNEDY |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 9,10 and 22 March 2010 |
| DATE OF JUDGMENT: | 30 March 2010 |
| CASE MAY BE CITED AS: | Manuel v Health Super Pty Ltd |
| MEDIUM NEUTRAL CITATION: | [2010] VCC 0180 |
REASONS FOR JUDGMENT
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Catchwords: Superannuation - whether correct amount paid in respect of claim for a disability benefit
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the Defendant | Mr J.P. Slattery | Holding Redlich |
| HER HONOUR: |
1 Mr Manuel was employed by the Royal Children’s Hospital between 1985 and 2001. He subsequently claimed and obtained a Disability benefit approved by Health Super Pty Ltd as trustee of the Health Super Fund (“the fund”). This was on the basis of a medical diagnosis of paranoid schizophrenia. On 4 October 2002, Health Super determined that the amount of the plaintiff’s disability entitlement under the relevant trust deed was $56,006.78.
2 Mr Manuel complains that the amount paid was incorrect. At the commencement of the trial, Mr Slattery, counsel for the defendant, accepted that a further amount of $27,146.94 was, in fact, owing to Mr Manuel. The primary issue in the case was whether this amount is, in fact, now correct.
Background[1]
[1] This background is generally taken from the facts recited at paragraphs 1-24 in the Amended Defence dated 9 March 2010 which facts were adopted by Ms Murnane, Defined Benefit Manager, in her oral evidence
3 Mr Manuel was employed at the Royal Children’s Hospital from 15 April 1985 until 27 December 2001.
4 On 1 January 1988, Mr Manuel joined the Health Super Fund which was then governed by the Hospital Superannuation Act 1988. The fund was then known as the Hospital Superannuation Fund. By operation of sections 31 and 40 of the Superannuation Acts (Amendment) Act 1998, the Hospital Superannuation Act was repealed with effect from 1 January 1999 and the fund commenced to be governed by a trust deed made by the defendant. As at the date of cessation of Mr Manuel’s employment, the fund was governed by an amending trust deed dated 24 November 1999 (the “trust deed”).
5 On about 31 October 2001, Mr Manuel notified the fund of his intention to lodge a claim for a Disability Benefit under the trust deed.
6 On or about 4 October 2002, the defendant determined that the amount of Mr Manuel’s Disability benefit under the trust deed was $56,006.78. This benefit comprised three separate components as follows:
(a)
an amount of $9,371.51 being the amount in the “Member’s Account Balance” under the Accumulation Scheme;
(b)
an amount said to be an “insurance component” of $20,272.28 (also under the Accumulation Scheme) being the amount that would have been payable under the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SG Act) up to the age of 60 years, absent a disability; and
(c)
a “Defined Benefit” lump sum in an amount of $32,595.44 (Mr Manuel had requested this be paid as a lump sum).
7 This amounted to $56,006.78, after tax and Mr Manuel collected a cheque for this amount on 14 October 2002.
8 After a request for a review by Mr Manuel’s former solicitors, the defendant notified the plaintiff’s then lawyers in 2007 that an additional amount was payable calculated on the basis of salary shown in Mr Manuel’s group certificates and was constituted by an additional amount for the “insured benefit” together with investment earnings. However, this position was not accepted by Mr Manuel.
9 In any event, the defendant has subsequently performed a recalculation of Mr Manuel’s entitlements and has admitted:[2]
[2] In its Amended Defence of 9 March 2010 paragraph 45
(a) that Mr Manuel should have been paid an extra $12,442.71 in respect of his Member’s Account Balance; (b) that Mr Manuel should have been paid an extra $2,317.33 for his “insured benefit”; and
(c)
that Mr Manuel was paid $9,462.95 more than he was strictly entitled to under the Defined Benefit Scheme, although it makes no claim in respect of that sum.
10 The defendant further concedes that penalty interest should be payable on the Member’s Account Balance in an amount of $10,442.15, giving Mr Manuel an entitlement in respect of his Member’s Account Balance of $22,884.86. It further concedes that interest on the insured amount amounts to $1,944.75, giving a total of $4,262.08 in respect of that amount.
11 In the result, as indicated already, the defendant conceded that an amount was payable to Mr Manuel of $27,146.94.
Claims of Mr Manuel
12 Mr Manuel was an unrepresented person. However, on the first day of hearing he gave evidence in the witness box wherein he adopted a handwritten statement. He also called his wife in support of his claim and made oral submissions on the first day of hearing. He did not return on the second day of hearing after advising court staff that he was unwell whereupon the case was adjourned until 22 March.[3]
[3] Mr Manuel subsequently filed material at the court which included a medical certificate from Dr McMahon of 10 March certifying him as unfit for work for 3 days
13 On 22 March, Mr Manuel was given the opportunity to cross-examine the two witnesses called for the defendant: Mr Hayman the actuarial analyst at Health Super who had recalculated Mr Manuel’s entitlements, and Ms Murnane, the Defined Benefits Manager, who was able to provide an overview of the matter. Both witnesses were able to provide cohesive and careful explanations as to Mr Manuel’s entitlements. Their evidence was not effectively challenged and I have generally accepted their evidence.
14 Mr Manuel also made further submissions in closing.
15 The original handwritten statement of claim in the matter dated 12 June 2009 cited a number of details to support Mr Manuel’s claim, including the following:
• that misleading information had been given to him; •
that he had not been shown the breakdown of his yearly benefit statement accounts from 1985 to 2001; and
•
that he did not receive his insurance payment for his total permanent disability.
16 In both submissions to the Court and in his evidence, Mr Manuel emphasised similar matters to those set out in the statement of claim. He emphasised in particular the alleged failure of the trustee to pay an amount for “insurance” and, in closing submissions supported this allegation by reference to an extract from the Law Handbook (2002) and by reference to a document dated 3 October 2002 [4] which referred to his application “for disability benefits, full cover and trustee discretion” being “approved.”
[4] The document had not been formally tendered or put to Ms Murnane but appeared to be a Disability
17 Mr Manuel also made various other complaints during the course of the hearing. Although it was not always clear he appeared to submit:
(a) that the trustee had utilised some incorrect formula;
(b) that there had been some (unspecified) non-compliance with the
Superannuation Industry (Supervision) Act 1993 (the SIS Act); and(c) that he had joined the fund in 1985 rather than 1988.
18 Prior to the proposed delivery of judgment this morning, Mr Manuel also sought to place two further sets of documents before the court:
(a) a group of documents with a cover sheet of “statement of claim”; and
(b) a document containing handwritten calculations.
19 Mr Manuel was also given leave to speak to these documents and to treat them as submissions, notwithstanding their late production to the court and the fact that they had not been put to the defendant’s witnesses.
Insurance
20 In terms of the allegation that an insurance amount was payable, the evidence of Ms Murnane was that there was no provision for income protection insurance applicable to all members of the Health Super Fund at the time Mr Manuel was a Member. This position has been different since 2004 (after Mr Manuel ceased employment) wherein the fund has provided for income protection insurance cover.
21 However, there was an amount described as an insurance component under the Accumulation Scheme (described in clause B6.1(d)(2) of the trust deed). Ms Murnane’s evidence was that the 3.5% premium Mr Manuel had paid had been paid in relation to this component.
22 I accept this evidence which suggests that no insurance beyond that prescribed in clause B6.1(d)(2) was payable to Mr Manuel.
23 The entry in the Law Handbook also does not assist Mr Manuel as there is nothing therein to suggest that the trustee should have provided the extra insurance cover Mr Manuel alleged should be so provided.
24 Moreover, the reference to “cover” in the October 2002 document does not establish an entitlement to any further insurance cover.
25 Unfortunately, Mr Manuel appeared to remain convinced that he was entitled to further insurance despite the evidence adduced in Court. However, in the light of that evidence, his concerns are misconceived.
Other matters
26 In terms of the alleged misleading statement, it is no doubt true that there had been some inaccurate statements made by the trustee as to Mr Manuel’s entitlements. On its own case, the amount originally paid in respect of his disability was not correct. However, no formal relief or independent cause of action appeared to be pursued in respect of these statements. Moreover, any failure to pay the correct amount has been taken into account by reason of the concession to pay penalty interest from 14 October 2002.
27 In terms of the failure to provide yearly statements, Ms Murnane conceded that the trustee had not retained yearly benefit statements prior to 1999. However, she maintained that the trustee was able to perform calculations from the data (which included salary data sourced directly from the employer). It would be better if Mr Manuel had been provided with his yearly statements (which has occurred since 1999) but no consequence flows from such non- provision.
28 In terms of the formula alleged to apply by Mr Manuel, the trust deed makes specific and detailed provision as to Mr Manuel’s entitlement to benefits. Pursuant to Clause A22.1 the amounts and circumstances of payments of benefits must be determined in accordance with the relevant division of the trust deed. Clause A22.4 of the trust deed also provides that no person is entitled to require a payment from the Fund except in accordance with that deed. The crucial issue then is whether the formulae in the trust deed have been applied in the calculation now performed by the trustee.
29 Notwithstanding that Mr Manuel was asked to provide an alternative figure in the course of the hearing he was unable to do so, although, as indicated already, he provided some calculations this morning. However, the calculations now produced by Mr Manuel this morning appear misconceived on a number of important bases, including:
(a) in relation to the insured benefit the calculation makes no allowance for the benefit already paid. It is also based on a time period of 11 years one month. However, the benefit is to be calculated on the basis of what would be paid under the SG Act for each year between the date of disability and the date the Member would attain 60. As calculated by Mr Hayman, this is 10.5 years (126 months) (being the difference between the date of disability taken as 1 June 2001 and the date Mr Manuel would turn 60 of 13 November 2011); and
(b) in relation to the Defined Benefit the Adjusted Final Fund Salary figure prescribed in the deed and provided by Mr Hayman has not been utilised. More significantly, the figure arrived at has been again multiplied by 11 years and 1 month. However, as will be seen below, the trust deed does not provide for this calculation. Rather, it provides that the accrual rate should be changed to reflect the particular year of service (clause C4.1(b)). This is further confirmed by clause C4.1(c) which provides that the retirement benefit must not exceed 7.2 times the Member’s Adjusted Final Fund Salary figure.
30 As indicated already, Mr Hayman was also not generally challenged in his calculations and nothing provided in this calculation document, nor in Mr Manuel’s further submissions, suggests any error on Mr Hayman’s part.
31 The alleged non-compliance with the SIS Act was not specified but seemed to again relate to insurance. Moreover the SIS Act generally provides for the supervision of entities engaged in the superannuation industry. As indicated by Ms Murnane, the trust deed was required to abide by the provisions of the SIS Act and the regulations. Mr Manuel was unable to point to any provision wherein the SIS Act had been breached and did not establish any grounds for complaint on this basis.
32 Mr Manuel’s complaint that he had joined the Fund in 1985 appeared to be based on a screen dump from the Fund’s former administration system which records that he “joined Service” on 15 April 1985. However, the evidence of Ms Murnane was that this referred to Mr Manuel having commenced employment with the Hospital and that the reference to him “joining HSF” on 1 January 1988 correctly recorded the time from which he joined the Heath Super Fund. I accept this evidence with the result that this complaint was also not substantiated.
33 Finally, the documents produced behind the statement of claim document provided today do not assist Mr Manuel:
(a) the further handwritten statement tends to reiterate matters such as
complaints about insurance which have already been dealt with;(b) the Product Disclosure Statement appears to originate from both Health Super and AIG Life, and is readily explicable on the basis that it came into effect after 2004 when there was extra insurance;
(c) the 2002 document appears to be the same as the October 2002
document already discussed; and(d) the Defined Benefit Statement takes the case no further, nor do the further
extracts from the Law Handbook.34 As such, there seems no basis for Mr Manuel’s complaints. However, given the history of the matter, and given that Mr Manuel did not appear to accept the trustee’s calculations, I will consider whether the correct amount has now been identified as payable by the defendant in accordance with the provisions of the trust deed.
Whether amount conceded is now correct
Background to trust deed
35 Prior to the repeal of the Hospital Superannuation Act 1988, Mr Manuel’s benefits were to be determined under Part 6 of that Act and he was entitled to a “basic benefit” under Part 6. Pursuant to Clause A.16.5 then, he was initially characterised as a member of Division B effective 1 January 1999: Division B containing the accumulation scheme provisions.
36 Further, on 15 July 1996, he elected to become a member of Division C with the result that Division C also applied to him.[5]
[5] Clause C.1.1(b)(3)
37 In terms of Division B, given Mr Manuel ceased to be an employee because of Disability, a lump sum benefit was payable to him of an amount equal to the sum of:
[6] Clause B 6.1(d)
“(1) the Member’s Account Balance; (2) the percentage of Annualised Salary necessary to fund the Member’s benefit under the SG Act for each year between the date of death or Disability (as applicable) and the date the Member would have attained the age of 60 years (the “insurance component”); and (3) if the Member has elected to have insurance cover, any proceeds of insurance in respect of the Member subject to any maximum insured amount determined by the Trustee from time to time either generally or in any particular case.”[6]
38 As indicated already, additional insurance was not available at the time Mr Manuel was a member. Accordingly, as explained by Ms Murnane, Mr Manuel was unable to, and did not, make any election to have additional insurance cover (as provided for under clause B6.1(d)(3)).
39 However, Mr Manuel was entitled to a third component pursuant to the Defined Benefit Scheme provided for in Division C, being the benefit payable to him on the basis of disability pursuant to Clause C4.3.
40 It is therefore important to set out the provisions and the evidence as to the calculations in respect of each of these three components.
Member’s Account Balance
41 The Member’s Account Balance means in relation to any Member as at any particular date the credit balance (if any) in the Member’s Account after all relevant credits or debits have been made to that account.[7]
[7] Clause B.1.2
42 Pursuant to Clause B.3.2, various amounts are to be credited to a Member’s account including Employer contributions and any contributions by the Member. There is also provision for debits to the Member’s Account of amounts such as tax, fund expenses and insurance.
43 Using this formula, an amount was initially determined of $9,371.51. However Ms Murnane explained that the plaintiff’s account balance of $5,981.60 in the Accumulation Scheme as at 30 June 2005 together with net contributions of $1,295.82 made during the financial year to 30 June 1996 had not been correctly transferred when the accumulation scheme commenced use of a new computer system (“K200”) during 1996. According to Mr Hayman, by applying the medium growth investment returns within the fund from 30 June 1995 to this additional amount a balance of $12,442.71 is obtained.
44 Ms Murnane also gave evidence that the closing balances for the subsequent years were correctly transferred which evidence was supported by the documentation.
45 In these circumstances I am satisfied that Mr Manuel is entitled to a further sum of $12,442.71 together with penalty interest of $10,442.15 giving a total of $22,884.86 as now correctly calculated by the defendant.
“Insured” benefit
46 As indicated already, the second accumulation component constitutes the percentage of Annualised Salary necessary to fund the Member’s benefit under the SG Act for each year between the date of Disability and the date the Member would have attained the age of 60 years.
47 An important concept is the concept of “Annualised Salary” which is defined in clause B.1.2 as “the annual equivalent of the average of Salary paid to the Member since the commencement of the previous financial year”.
48 The concept of “Salary” is further defined in relation to a Member who is not a casual employee as:
“the amount equal to the Employee’s ordinary time rate of pay, plus any allowances not of a cost-reimbursement type such as an expense of office, uniform allowance, tool allowance, reimbursement for travel (or other incidental expenses) which are ordinarily payable regularly and periodically (including shift and roster related payments), including certificate/ qualification allowances and higher duties allowances for at least a 52 week period, but excluding any other allowances which are ordinarily not paid over a 52 week cycle or do not flow from regular rostered duty or any higher amount advised to the Trustee by the Employer from time to time.”[8]
[8] Clause A.1.1
49 At the time of corresponding with Mr Manuel’s lawyers in 2007 to 2008, the insured benefit was calculated by reference to the plaintiff’s gross salary stated in his group certificates. This figure is not consistent with the definition of Annualised Salary under the trust deed since such certificates would include amounts such as overtime which are not ordinarily payable regularly.
50 Mr Haymen’s recalculation of the amount using current available salary data arrived at an amount of $26,892.39 for the average annualised salary figure. This was then multiplied by the total of the years until 60 (being 126/12) with a SGC rate of eight per cent to give a figure of $22,589.61 as at 4 October 2002.
51 I accept this calculation with the result that an amount of $2,317.33 ($22,589.61 less the amount paid of $20,272.28) is owing to Mr Manuel in respect of the insurance component which, together with penalty interest of $1,944.75, results in an entitlement of $4,262.08.
Defined benefit
52 Pursuant to Clause C4.1, the ordinary benefit on retirement was a lump sum benefit equal to the sum of 11 per cent of the Adjusted Final Fund Salary of the Member for each year of Service after 1 July 1988 in which year the Member contributed four per cent of salary to the fund.[9] That is the prima facie position for Mr Manuel.
[9] Clause C.4.1(a)(3)
53 This prima facie position is further amended by Clause C4.1(b) in respect of periods of service in which the SG Act applied to the Member such that the applicable percentage accrual rate is to be changed in respect of the relevant years as follows:
1995-1996 7.1 per cent 1996-1998 7.1 per cent 1998-2000 6.2 per cent 2000-2002 5.3 per cent 2002-2003 and later 4.5 per cent
This is to be calculated cumulatively or on an aggregate basis. However, as already indicated the retirement benefit must not exceed 7.2 times the Member’s Adjusted Final Fund Salary (clause 4.1(c)).
54 Pursuant to Clause C.4.3, the benefit on disability retirement was further prescribed to be an annual pension for life at the rate of one-twelfth of the benefit that would have been payable under clause C4.1(a) if:[10]
[10] The provision actually provides that it is to be the greater of options prescribed in C4.3(a) (1) or (2) but (2) is inapplicable given Mr Manuel had no benefit prior to 1 January 1994 as he only elected to become a Member of division C in 1996
“…(A) the Member’s date of Disability was the date of the Member’s
retirement; and(B) the Member was contributing at 4% of Salary from the date of Disability for each prospective year of Service until the date the Member would have attained the age of 60 years; and (C) the Member’s Adjusted Final Fund Salary at the date of Disablement remained the same until the date the Member would have attained the age of 60 years.”
55 Thus the entitlement in a case of Disability where a lump sum is payable is determined on the basis that the Member continued to work until 60 and continued to contribute four per cent of salary.
56 It is also necessary to refer to the definition of “Adjusted Final Fund Salary” which, in relation to a member with two or more years of service is said to be “an amount equal to one half of the Member’s total Salary during the two years of Service immediately preceding the Member’s last day of Service”.[11] However, if that period includes a period of leave without pay, the Member’s salary will be deemed to be the greatest of:
[11] Clause C.1.2(b)
“(c) the rate of Salary the Member was receiving immediately prior to the
commencement of the period of leave without pay; or(d)
any higher Salary approved by the Trustee for the purposes of this Deed; or
(e)
if the Member was a member of the Fund on 1 January 1994, the Member’s Salary on 1 January 1994.”[12]
[12] Clause C.1.2(c) – (e)
57 Mr Hayman calculated Mr Manuel’s defined benefit entitlement by calculating both the accrued benefit multiple and the Adjusted Final Fund Salary.
58 The accrued benefit multiple accrued to age 60 was calculated at 78.6%. This was achieved by adding the accrual rates referred to in clause C4.1(b) cumulatively until 13 November 2011(when Mr Manuel would turn 60).
59 The Adjusted Final Fund Salary figure was calculated using actual salary figures for the two year period June 1999 to June 2001 and adjusting for periods in which the actual salary was less than usual (because of, for example, leave without pay). This total two years of salary figure ($58,861.30) was then divided by two giving a total of $29,430.65.
60 The Adjusted Final Fund Salary of $29,430.65 is then multiplied by the accrued benefit multiple of 78.6% to give a total of $23,132.49.
61 I accept this calculation. This meant that an amount was overpaid ($32,595.44 was actually paid) although the trustee does not seek this overpayment.
62 Accordingly no order is appropriate in relation to this component.
Conclusion
63 The calculations now presented by the trustee are justifiable and correct on the evidence before me pursuant to the trust deed.
64 Accordingly, there will be judgment for $27,146.94 ($14,760.04 plus penalty interest of $12,386.90) in favour of the plaintiff.
Benefit table dated 3 October 2002 annexed to an affidavit of a Mr Tim Dillon of 6 August 2009
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