Maund v Crown in right of the State of New South Wales

Case •

[2013] NSWCA 226

•

18 July 2013

Court of Appeal


Supreme Court


New South Wales

Medium Neutral Citation: Maund v Crown in right of the State of New South Wales [2013] NSWCA 226
Hearing dates:1 July 2013
Decision date: 18 July 2013
Before: Meagher JA at [1];
Barrett JA at [2];
Leeming JA at [3]
Decision:

Within seven days, the parties to file agreed short minutes of order in accordance with these reasons if agreement can be reached, failing which the parties to file orders for which they contend and submissions not exceeding three pages.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Catchwords:

APPEAL - Appeal as of right because pre-judgment interest included in calculating $100,000 threshold

INTEREST - Pre-judgment interest under Civil Procedure Act 2005, s 100 - Applicable rate - Amount required to be repaid but withheld by employer and remitted to Australian Taxation Office - Applicable rate reduced to rate paid by Australian Taxation Office when making refund

INTERPRETATION OF INSTRUMENTS - Obligation to repay amount equal to amount received - Whether obligation extended to repayment of amount withheld by employer and remitted to Australian Taxation Office - Meaning of "received"
Legislation Cited: Civil Procedure Act 2005 (NSW)
Income Tax Assessment Act 1997 (Cth)
Supreme Court Act 1970
Taxation Administration Act 1953 (Cth)
Cases Cited: Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164
Falkner v Bourke (1990) 19 NSWLR 574
Forsyth v Perpetual Trustee Co (Ltd) (1951) 84 CLR 154
Graham v Proudfoot (1894) 11 WN 91
House v R (1936) 55 CLR 499
Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007] NSWCA 298
Pilcher v Logan (1914) 15 SR NSW 24
Mackay v Dick (1881) 6 App Cas 251
Schepis v Commonwealth of Australia [2012] NSWCA 398
Westfield Management Ltd v AMP Capital Property Nominees Ltd [2012] HCA 54; (2012) 87 ALJR 86
Category:Principal judgment
Parties: Deborah Maund (Appellant - In person)
The Crown in the right of New South Wales (Respondent)
Representation: Counsel:
J Hyde (Respondent)
Solicitors:
De Mestre and Company (Respondent)
File Number(s):2013/187023
 Decision under appeal 
Citation:
Crown in right of the State of New South Wales v Maund [2013] NSWSC 183
Date of Decision:
2013-03-21 00:00:00
Before:
Lindsay J
File Number(s):
2012/126353

Judgment

  1. MEAGHER JA: I agree with Leeming JA.

  1. BARRETT JA: I agree with Leeming JA.

  1. LEEMING JA: This is an appeal against some of the orders made by the primary judge on 21 March 2013 for reasons given on 12 March 2013 ([2013] NSWSC 183) after a final, concurrent hearing of two related proceedings. The issues on appeal are narrower than those at trial. The principal issue on appeal relates to a component of an employment termination payment which was withheld by Ms Maund's employer and remitted to the Australian Taxation Office (ATO). Ms Maund undertook in certain circumstances to "repay" to her employer "the amount received" by her, if she subsequently received a further (and larger) benefit, which she did. The question that arises is whether Ms Maund had to repay the amount withheld and remitted to the ATO independently of whether the ATO gave her a refund.

  1. For the reasons which follow, in my opinion the primary judge correctly dismissed all aspects of the proceedings, save in respect of the calculation of pre-judgment interest on part of the judgment amount.

Procedural background

  1. The first proceeding was brought by the respondent (State) against Ms Maund to recover a "Partial and Permanent Disability Benefit" of $467,856 (first payment) received by her in January 2010, following her subsequent receipt of a "Total and Permanent Disability Benefit" of $613,887 (second payment) in July 2010. There was ultimately no dispute that Ms Maund was liable to repay the whole of the first payment. In issue was when she was obliged to do so.

  1. The second proceeding was brought by Ms Maund against the trustee of the First State Superannuation Scheme, of which Ms Maund was a member, and an insurer (Metlife) which issued to the trustee an insurance policy in respect of its liability under that scheme. Ms Maund alleged that she was entitled to more than she had been paid by the second payment. Ms Maund had some success in the second proceeding, and obtained a judgment of $29,177. This appeal is confined to aspects of the first proceeding.

  1. Although Ms Maund originally sought leave to appeal, she enjoys an appeal as of right, because the orders made by the primary judge were final, and because the total amount she wishes to recover, including interest but excluding costs, exceeds $100,000. The appeal therefore involves a matter at issue amounting to or of the value of $100,000 or more: Supreme Court Act 1970, s 101(2)(r). It is settled law that in calculating the $100,000 threshold, costs are left out of account: Schepis v Commonwealth of Australia [2012] NSWCA 398 at [13] (Campbell JA) and Be Financial Pty Ltd as Trustee for Be Financial Operations Trust v Das [2012] NSWCA 164 at [12]-[13] (Basten JA) and the decisions there cited, but pre-judgment interest (without the inclusion of which the $100,000 threshold would not be attained) is included, in accordance with Graham v Proudfoot (1894) 11 WN 91, where Darley CJ, Windeyer and Innes JJ said:

"The amount involved in this case was not merely the verdict, but the interest in addition to the verdict, to which the plaintiff was entitled at the time when he signed judgment."

  1. However, in one respect the slight delay (from 17 June 2013 when Ms Maund's leave application was scheduled to be heard, until 1 July 2013 when the appeal was heard) was fortuitous. Tendered without objection on the appeal were documents indicating that the Australian Taxation Office (ATO) had on 24 June 2013 repaid to Ms Maund the whole of the $55,620 which had been withheld from her and remitted to it, together with interest in the amount of $4,942. At the hearing of the appeal, Ms Maund advised that she would pay over that amount to the State and it appears from an email sent by Ms Maund that $60,562 was paid over on 3 July 2013. (Those amounts, and some others in these reasons, have been rounded to the nearest dollar.)

  1. One consequence of those developments is that there no longer is any uncertainty as to the attitude of the ATO, the timing of a refund and what would be required in order to obtain it, which was something to which the primary judge was, with respect appropriately, sensitive in his reasons (see at [89] and [93]) and is reflected in the limited stay granted by him. Nor is there any dispute as to Ms Maund's obligation to repay the whole of the first payment. However, the question of when that obligation arose remains live.

Factual background

  1. Ms Maund was formerly a member of the New South Wales Police Force (NSW Police). The primary judge found that the last day on which she worked was 8 May 2007, and that she was medically discharged on 21 January 2010. The facts that give rise to this appeal occurred in the months prior to her medical discharge.

  1. By letter dated 24 November 2009, Ms Maund was told that her medical discharge had progressed to the Medical Discharge Review Panel, which would meet, review her case history and make a recommendation to the Commissioner of Police (Commissioner). The same letter enclosed three documents which were central to the appeal: a "Deed of Release and Indemnity", a "Deed - Undertaking to Repay" and a Claim Form. The documents had been drafted by the NSW Police. Ms Maund was encouraged to obtain independent legal and accounting advice before signing them.

  1. The Deed of Release and Indemnity recited that "the [NSW Police] has agreed to make the Payment to the Officer in relation to the termination of the Officer's employment with the [NSW Police]" and that "[t]he Officer has requested and the [NSW Police] has agreed not to deduct and remit to the [ATO] the Tax". It defined "Tax" to mean:

"the amount of tax not withheld and remitted to the Australian Taxation Office but paid to the Officer pursuant to section 82.150 of the Income Tax Assessment Act 1997 in relation to the Payment."

  1. It contained an acknowledgement that the NSW Police "had not remitted any tax" to the ATO at the Officer's request, that its decision "to not deduct and remit to the [ATO] any tax in relation to the payment is not binding on the [ATO]" and a release and an indemnity by the Officer from any claims in the future relating to "the Tax". Although the release and indemnity referred to the defined term "Tax", the acknowledgements referred to the failure to deduct and remit "any tax".

  1. The letter also enclosed the Deed - Undertaking to Repay. The deed recited that Ms Maund had become entitled to receive a benefit for partial and permanent disability pursuant to clause 9 of the Crown Employees (Police Officers Death and Disability) Award 2005 (Award), and that that Award provided that she could only receive one benefit: either a "partial and permanent disability benefit" or a "total and permanent disability benefit". The latter was a benefit under clause 7 of the Award, and is addressed in more detail below. Substantively, it provided that (original paragraphing):

1. The Recipient [that is, Ms Maund] (which, for the purposes herein, includes his/her estate or lawful assigns):
(a) hereby irrevocably authorises Metlife Insurance Limited to deduct and remit to NSW Police Force, or
(b) in the event that such deduction is not remitted to NSW Police Force, agrees to and hereby undertakes to repay to NSW Police Force an amount equal to the amount received by the Recipient pursuant to clause 9 of the Award, in the event the Recipient or his or her estate becomes entitled, at some future time, to receive benefits under clause 7 or clause 8 of the Award (for an "off duty" or an "on duty" death or total and permanent disablement).
2. The Recipient (including his/her estate or lawful assigns) agrees to and hereby undertakes to pay the amount referred to in clause 1(b) above to NSW Police within 14 days from receipt of benefits paid under clause 7 or clause 8 of the Award."

  1. The third document enclosed in the letter, the Claim Form, gave Ms Maund three options. She chose the option to delay the payment of her claim so that she could be provided with "an opportunity to seek consideration for a taxation benefit by obtaining letter/report from two (2) legally qualified medical practitioners".

  1. By letter dated 3 December 2009, Ms Maund was advised that the Medical Discharge Review Panel had recommended her medical discharge from the NSW Police. The primary judge found that Ms Maund executed both deeds on 18 December 2009 and returned them (at [84]). Although he made no finding, there was evidence before him which was not disputed that Ms Maund also obtained reports from two medical practitioners in accordance with the Claim Form.

  1. By letter dated 30 December 2009, the Commissioner advised that he had approved the payment of an on-duty partial and permanent disability benefit in the amount of $467,856.60.

  1. The reasons of the primary judge record (at [43]) that:

"On or about 22 January 2010 she received from the Police Force the sum of $467,856.60, less tax of $55,620.00, representing a net sum of $412,236.60 in payment of her claim for a Partial and Permanent Disability benefit. The gross amount of this payment ($467,856.60) is the principal sum sought to be recovered by the Crown, under the Deed, in circumstances in which on or about 3 August 2010 Ms Maund received the sum of $613,887.00 as a Total and Permanent Disablement benefit paid under the Scheme."

  1. It was plain on the face of Ms Maund's payslip dated 11 January 2010 that the amount of the first payment had been calculated on the basis that it comprised two components, of $176,570 and $291,285. Tax had been calculated on the first of those components at a rate of 31.5% in the amount of $55,620, and had been withheld by NSW Police and remitted to the ATO.

  1. As the primary judge found, Ms Maund received the second payment in August 2010. At least by the time of the appeal, there was no dispute that the receipt of that second payment triggered the obligation in the Deed - Undertaking to Repay to repay the first payment. However, notwithstanding a series of letters from NSW Police dated 4 August 2010, 22 October 2010, 22 November 2010 and 20 January 2011 prior to proceedings being commenced, she did not do so. Ms Maund queried whether she had received the correct entitlements, whether tax had been correctly deducted, and claimed that she had not received the full amount in the second payment to which she was entitled (as noted above, ultimately, she enjoyed a measure of success on that point). Further, Ms Maund has steadfastly maintained that she was not obliged to repay the $55,620 until such time as it was refunded to her.

Proceedings at first instance

  1. Proceedings were commenced by the State in July 2011. No point seems to have been taken at any stage as to the State being the proper plaintiff, and it may be noted that the Deed - Undertaking to Repay was to be executed by the Commissioner's delegate "for and on behalf of the New South Wales Police Force an agency of the Crown in the right of New South Wales".

  1. The essence of the principal dispute between the parties, and its resolution by the primary judge, emerges from [84]-[88] of his reasons:

"At the time Ms Maund executed and returned to the Police Force the Deed subsequently dated 18 December 2009 pursuant to which she was paid her entitlements, she also executed and returned to the Police Force a draft deed (not then duly completed or subsequently executed on behalf of the Police Force) entitled "Deed of Release and Indemnity".
That document, by paragraph B of the preamble, recited that "[Ms Maund] had requested, and the [Police Force had] agreed not to deduct and remit to the Australian Tax Office the Tax" payable on the (gross) sum of $467,856.60 paid out by the Police Force on Ms Maund's account in or about January 2010.
Ms Maund complains that the Crown seeks to recover from her the gross sum of $467,856.60 despite the fact that, contrary to the terms of recital B to the draft "Deed of Release and Indemnity", the Police Force deducted tax of $55,620.00 and only paid her the net amount of $412,236.60. She contends that she should not be required to repay the Crown any more than $412,236.00.
The Crown does not dispute that the Police Force did invite Ms Maund to execute and return the draft deed together with the Deed that became operative on or about 18 December 2009. It says, however, that it was obliged (by the Taxation Administration Act 1953 (Cth)) to withhold the tax and to pay it to the ATO on Ms Maund's account, which, it says, it did.
Ms Maund's submissions appear, at times, to be grounded upon an assumption that the liability for the tax paid to the ATO was, ultimately, a liability of the Police Force, not a liability of hers which the Police Force was obliged, vis á vis the ATO, to recognise. In this, she is mistaken."

  1. On appeal, Ms Maund took issue with the primary judge's description of the Deed of Release and Indemnity as a draft, to which I return below, and maintained her position that she was under no obligation to return funds which were withheld from her by NSW Police and remitted to the ATO.

  1. The primary judge rejected Ms Maund's submissions and entered judgment against her in the amount of $566,808.26, representing a principal amount of $467,865.60 plus interest pursuant to s 100 of the Civil Procedure Act 2005 of $98,951.66. His Honour ordered that enforcement of so much of the judgment as related to the sum of $55,620 be stayed for three months on condition that Ms Maund paid the balance of $511,188.26 within 28 days.

  1. Without intending any criticism, grounds 1 and 3 of Ms Maund's notice of appeal are merely introductory, and 10 and 11 are merely conclusionary. Each of the remaining grounds of appeal is addressed below, although in a different order from that in the notice of appeal.

Obligation to repay under the deed (ground 9)

  1. The deed on which Ms Maund was sued recited that she would repay NSW Police "all moneys paid to him/her by NSW Police Force under the Award" and the operative obligation was "to repay to [NSW Police] an amount equal to the amount received" by her pursuant to the Award. There was no dispute that the State was entitled to sue on that promise.

  1. By the time the appeal was heard, it had become common ground that the whole of the $467,856.60 had been "received by" Ms Maund, although she contended that she had only "received" the $55,620 component (and thereby become liable to repay it) in the days preceding the hearing of the appeal.

  1. It is plain that the three documents supplied by NSW Police to Ms Maund in November 2009 were drafted in light of the legislation governing the tax treatment of employment termination payments, and are to be construed in that context; cf Westfield Management Ltd v AMP Capital Property Nominees Ltd [2012] HCA 54; (2012) 87 ALJR 86 at [36]. It is convenient to identify the salient provisions immediately.

  1. Every employment termination payment includes a "taxable component" and a "tax free component", although the latter may be zero: see Income Tax Assessment Act 1997 (Cth), s 82-145. The tax-free component is the sum of the "pre-July 1983 segment" and the "invalidity segment": s 82-140. In the case of Ms Maund, there could be no pre-July 1983 segment as she became a member of the NSW Police in 1994. However, if and to the extent that she satisfied s 82-150, there would be an invalidity segment, being a proportion of the total payment that depended upon the number of days she had been employed and the number of days that would have been served had her employment continued until retirement. Two aspects of the formula matter. The first is that the tax-free component can never be the entire payment; there will always be a taxable component. The second is that it is possible that the taxable component will be the entire payment. In particular, only if two legally qualified medical practitioners had certified the matters specified in s 82-150(1)(d) (namely, that, because of the ill-health, it was unlikely that the employee could ever be gainfully employed in the future in a capacity for which he or she is reasonable qualified, judged by the employee's education, experience or training), will there be a tax-free component. It is clear that the reference in the Claim Form, which Ms Maund lodged in December 2009, to reports or letters from two medical practitioners reflected s 82-150.

  1. As noted above, the NSW Police calculated a taxable component of $176,570, to which tax was applied at the rate of 31.5% and $55,620 was withheld. On one view, this was contrary to the acknowledgement in the Deed of Release and Indemnity ("[NSW Police] has not remitted any tax to the [ATO]"). The primary judge found that that deed had never been executed on behalf of the Commissioner. Ms Maund disagreed with his Honour's description of it as a draft. However, the State does not sue on that deed; it sues on the Deed - Undertaking to Repay and it was common ground that that deed was executed and binding. The only present relevance of the Deed of Release and Indemnity is the extent to which, as a formal document supplied at the same time as the deed on which the State sues, it informs the construction of the operative obligation in the Deed - Undertaking to Repay.

  1. Does that language in the Deed - Undertaking to Repay require the repayment of the $55,620 withheld by NSW Police and remitted to the ATO before such time as Ms Maund obtains a refund? The force of Ms Maund's argument to the effect that it does not rests in the ordinary meaning of the words and the measure of unfairness in her having to repay funds which have never been received in her hands. It is perhaps assisted by the consideration that NSW Police supplied to her at the same time the Deed of Release and Indemnity, which contained an acknowledgement that it had not remitted any tax to the ATO at her request, and on which Ms Maund placed considerable reliance.

  1. In my view, the Deed of Release and Indemnity is a distraction from the issue arising on appeal. It is best addressed immediately.

  1. At all times NSW Police was subject to the obligation in s 12-85 of Schedule 1 of the Taxation Administration Act 1953 (Cth) to withhold tax, calculated by reference to the taxable component of any employment termination payment it made to an individual. It was not legally possible for the whole of Ms Maund's employment termination payment to be tax-free. At best, she would be entitled to a tax-free component, and tax would need to be paid on the balance.

  1. That is reflected in the language of the Deed of Release and Indemnity. It explains why the definition of "Tax" refers to s 82-150, because to the extent that an employment termination payment includes a s 82-150 invalidity segment, it is tax free and does not attract the obligation imposed upon NSW Police to withhold it and remit it to the ATO: see s 12-1(1).

  1. It is true that two of the acknowledgements in this deed refer to the decision not to remit "any tax" rather than the decision not to remit "the Tax". But if "any tax" is construed so as to refer to the tax on the taxable component of employment termination payment, that would amount to a request by Ms Maund to the NSW Police to break the law, acceded to by NSW Police, which is an intention not lightly to be imputed to either of them. The fact that NSW Police had been withholding tax and remitting it to the ATO must have been something of which Ms Maund was aware. It took place every time she was paid, including when she received the first payment, and was obvious on the face of every payslip she received.

  1. Rather, the language is to be construed as though references to "tax" are references to the defined term "Tax". So construed, the Deed of Release and Indemnity, found by the primary judge never to have been executed on behalf of NSW Police, would even if effective be confined in its operation to the tax-free component of the employment termination payment. As counsel for the State observed, even if that were not so, s 16-20 of Schedule 1 of the Taxation Administration Act discharged any liability to pay or account to Ms Maund for the amount withheld. It follows that the Deed of Release and Indemnity has no impact upon Ms Maund's obligation to repay the tax withheld on the taxable component of that payment.

  1. What then of the obligation to "repay to [NSW Police] an amount equal to the amount received" in the Deed - Undertaking to Repay? Clause 2 of that deed required that obligation to be performed "within 14 days from receipt of benefits paid under clause 7 or clause 8 of the Award".

  1. Counsel for the State expressly eschewed reliance on any statutory provision which deemed the remitter of the $55,620 to the ATO to be a (constructive) receipt by Ms Maund. The question falls therefore to be determined as a matter of contractual construction.

  1. Neither the primary judge nor this Court received the benefit of full submissions on this aspect of construction of the deed. "Receive" is a word which in analogous contexts sometimes means "actually get into one's hands" (as was said in Pilcher v Logan (1914) 15 SR NSW 24 at 27), and sometimes means "entitled to receive" or "receivable de jure" (see Forsyth v Perpetual Trustee Co (Ltd) (1951) 84 CLR 154 at 161). As Kitto J there said at 169 the question is "really not one of the primary or secondary sense of the word 'received'; it is of the intention disclosed by [the clause] considered in the context of the entire deed".

  1. The context of the deed discloses the following five matters. First, although it is not reflected in the way in which clauses 1(a) and (b) of the deed appear on the page, it is plain that (i) those clauses impose two distinct obligations in respect of the same subject matter, (ii) the latter is dependent upon the non-satisfaction of the former, and (iii) both are subject to the same contingency. Clause 1(a) confers authority upon Metlife, while clause 1(b) imposes an obligation to repay in the event that Metlife does not exercise that authority, and they are only enlivened in the event that Ms Maund or her estate becomes entitled to receive benefits under clause 7 or clause 8 of the Award.

  1. Although in the circumstances of this appeal the focus is on the obligation to repay in clause 1(b), in giving legal meaning to the clause it remains necessary for both clauses to be construed as a whole. It is plain that the thing which is to be deducted and remitted pursuant to clause 1(a) is the same thing which is to be repaid pursuant to clause 1(b), namely, "an amount equal to the amount received by the Recipient pursuant to clause 9 of the Award". That is to say, the clause should properly have been reproduced in the deed as follows:

"1. The Recipient (which, for the purposes herein, includes his/her estate or lawful assigns):
(a) hereby irrevocably authorises Metlife Insurance Limited to deduct and remit to NSW Police Force, or
(b) in the event that such deduction is not remitted to NSW Police Force, agrees to and hereby undertakes to repay to NSW Police Force,
an amount equal to the amount received by the Recipient pursuant to clause 9 of the Award, in the event the Recipient or his or her estate becomes entitled, at some future time, to receive benefits under clause 7 or clause 8 of the Award (for an "off duty" or an "on duty" death or total and permanent disablement).
2. The Recipient (including his/her estate or lawful assigns) agrees to and hereby undertakes to pay the amount referred to in clause 1(b) above to NSW Police within 14 days from receipt of benefits paid under clause 7 or clause 8 of the Award."

  1. There is an obvious difficulty in that the reference to "the amount referred to in clause 1(b) above" in clause 2 should, strictly, be a reference to "the amount referred to above, repayable in the circumstances in clause 1(b)", but the words could mean nothing else.

  1. Secondly, clauses 1(a) and (b) in the deed are to be construed in the light of clauses 7, 8 and 9 of the Award to which they refer. Clause 9 of the Award entitled a police officer who suffered an "on duty" injury leading to partial and permanent disability to the payment, in certain circumstances, of a lump sum based on a multiple of his or her salary. Clause 7 of the same Award also entitled a police officer who suffered an "on duty" injury leading to total and permanent disablement to a lump sum payment based on a different multiple of his or her salary. In every case (and unsurprisingly), the clause 7 multiple was greater than the clause 9 multiple. Thus, to give one example, an officer aged 45 who suffered a partial and permanent disability from an "on duty" injury would be paid 4.3 times his or her salary; the same officer would be paid 8.2 times his or her salary if an "on duty" injury led to his or her total and permanent disablement. Clause 8 dealt only with "off duty" injuries, and could never be relevant to Ms Maund. It may be put to one side for present purposes.

  1. Accordingly, the prospect contemplated by clause 1 of the Deed was the possibility that Ms Maund, having received a clause 9 lump sum, might become entitled to receive a clause 7 lump sum, which would inevitably be larger than the clause 9 lump sum.

  1. Thirdly, it is also plain on the face of the deed that the person obliged to pay any clause 7 lump sum (Metlife) was different from the person obliged to pay the clause 9 lump sum (NSW Police). That meant that it was not possible merely for there to be a payment of the outstanding difference which Ms Maund was owed. Provision had to be made for the person obliged to pay the clause 9 lump sum to be repaid in full.

  1. Fourthly, although the clause makes no express provision as to the tax treatment of the payments, both payments contemplated by it were employment termination payments, which would necessarily include a taxable component and thereby give rise to an obligation upon the payer to withhold some tax. More precisely, in the circumstances contemplated by clause 1, NSW Police would necessarily have been required to have withheld some amount as tax in respect of the clause 9 payment it made, and Metlife would also be required, to the extent that it made a clause 7 payment to Ms Maund, to withhold tax on that payment. It may be noted that the obligation in s 12-85 to withhold tax applies to any "entity" making an employment termination payment (which is to say, both Metlife and NSW Police), but only to payments made to an individual.

  1. Fifthly, the self-evident purpose of the provisions is to protect the NSW Police in the event that it becomes entitled to recover the whole of the clause 9 payment it has made by reason of the fact that Ms Maund has become entitled to a larger clause 7 payment from a different payer, Metlife.

  1. In light of the foregoing, how is clause 1(a) to operate at the time specified by it, namely, the time at which Ms Maund has become entitled to receive benefits under clause 7? From the perspective of NSW Police, it has withheld tax from its clause 9 payment and remitted it to the ATO, and paid the balance to Ms Maund. NSW Police is entitled to have returned to it the whole of the clause 9 payment, because the clause 7 payment is necessarily larger than, and is in the alternative to, the clause 9 payment. If Metlife exercises the authority conferred on it pursuant to clause 1(a) of the deed, then in my view the only possible construction of "an amount equal to the amount received by the Recipient pursuant to clause 9 of the Award" is the whole of the clause 9 payment, including the tax withheld by NSW Police. For if that is not so, then the deed fails to make provision for the very problem to which it is directed, namely, ensuring that NSW Police is repaid the clause 9 payment which as it turns out it need not have made.

  1. Because the clause 7 payment will necessarily be larger than the clause 9 payment, Metlife will still be obliged to pay an amount to Ms Maund. Metlife will be obliged to withhold tax on that payment, because it is a payment of an employment termination payment to an individual which includes a taxable component. However, since tax is calculated at a flat rate of 31.5%, when Metlife withholds that amount and pays the balance, Ms Maund will be left in the position where the correct amount of tax has been withheld in discharge of her taxation obligations.

  1. Now suppose clause 1(a) does not apply and Metlife pays the clause 7 payment to the trustee on behalf of Ms Maund, noting that nothing in the deed by itself could compel Metlife to pay an amount to the NSW Police. Metlife will have withheld tax on the whole of the amount, because the whole of the payment is an employment termination payment to an individual and therefore engages s 12-85. Ms Maund will have been paid after tax amounts of 68.5% of the clause 9 payment and 68.5% of the clause 7 payment. She is entitled to a refund of the 31.5% tax withheld on the clause 9 payment (plus interest), and it is common ground that she is obliged to repay the whole of the clause 9 payment to NSW Police.

  1. In my opinion, there is no sound reason to construe the deed so as to postpone part of her obligation to repay the clause 9 payment to NSW Police until such time as Ms Maund obtained a refund. There is no clear textual basis to do so, because the clause proceeds on the basis that there is a single obligation to repay. Further clause 2 appoints a single time - 14 days after receipt of benefits paid under clause 7 - for the repayment to take place. Finally, the premise of this scenario is that NSW Police should have paid nothing and is entitled to repayment in full, while Ms Maund has been overpaid; that is an unpromising foundation for construing a deed whose purpose is to prevent the NSW Police from being out of pocket in the events which it contemplated.

  1. In other words, the only possible alternative construction is that Ms Maund is required immediately to repay the 68.5% of the clause 9 amount in fact paid to her, but is only required to repay the 31.5% tax withheld on it after she has obained a refund. But that construction cannot be reconciled with clause 2, which unambiguously appoints a single time for the repayment to take place. Further, it is a construction which exposes NSW Police to a timing and solvency risk which cannot be reconciled with either the purpose or the language of the deed.

  1. It is true that the construction which in my view is the correct construction gives rise to the possibility that Ms Maund may have to repay to NSW Police the net amount of the clause 9 payment at a time when she will only have in her hands the gross amount of that payment, before the ATO refunds the tax withheld on that amount. However, three considerations soften the impact of that possibility. The first is that Ms Maund is entitled to interest from the ATO on the amount withheld from her when the refund is ultimately made. The second is that she will have in her hands to make the repayment the whole (net) amount of the clause 7 payment. The third is that in my view it is clear that NSW Police would be subject to an implied Mackay v Dick (1881) 6 App Cas 251 obligation to take such steps as were necessary to permit Ms Maund to obtain her refund.

  1. The primary judge pointed to the fact that the obligation to pay tax on the receipt of the employment termination payment was an obligation borne by Ms Maund: at [88]. His Honour observed that the problem was essentially a practical one, as to how Ms Maund might seek to obtain a refund of the tax paid by lodging an amended assessment: at [89]. Both those propositions are, with respect, correct. His Honour concluded that those considerations did not cause him to decline to enter judgment against Ms Maund for the full amount she had agreed to repay to the State: at [90]. It was at least implicit in his Honour's reasoning that as a matter of construction, the deed obliged Ms Maund to repay the entire (gross) amount received. In my respectful view, for the reasons set out above, his Honour was correct to proceed on that basis.

Interest (ground 6)

  1. Ms Maund disagrees with the award of interest, which was substantial (some $98,951) reflecting her having had the benefit of the first payment for some 30 months. She has complained in her affidavits about delays on the part of the State in preparing the proceedings for hearing. However, at no stage prior to judgment did Ms Maund offer to repay to the State the amount the subject of the judgment, nor even that amount which she has now repaid.

  1. It is true that Ms Maund offered by letter dated 17 September 2010 to repay $201,016.69, on which she relies as a reasonable offer of settlement. That offer was based in part on propositions that (a) a claim that part of the payment to her had been taxed at the incorrect rate and "the NSW Police [is] therefore responsible for retrieving any monies owed to them from the Australian Taxation Office", (b) Ms Maund was entitled to a further fortnight's pay, and (c) a substantial additional payment would be made by First State Super. Of course, that offer was substantially less than Ms Maund was in law required to repay.

  1. Subsequently, by letter dated 12 September 2011, Ms Maund made a more generous offer. She offered to return $412,236.50, which was the amount of the first payment less the amount taken in tax, with no provision for interest. That offer is nevertheless less than the primary judge held she was obliged to return. Moreover, by her cross-claim Ms Maund continued to claim $346,113.75 from the NSW Police Force. The primary judge dismissed that cross-claim, and there is no appeal from that dismissal. Ms Maund complains that her cross-claim was based on false information provided by NSW Police, but the fact remains that she maintained it throughout the trial. Similarly, although Ms Maund complains that the proceedings should have been resolved more promptly than they were (pointing to what she said was the failure of a mediation and non-compliance with procedural directions by the State), there is nothing in the evidence squarely establishing appellable error in the exercise of the discretion as to pre-judgment interest in this respect.

  1. The fact of the matter is that on any view Ms Maund enjoyed the benefit of the whole of the first payment (save perhaps for the $55,620) for the whole of the time. There is no evidence as to what use Ms Maund made of that amount, but that simply means that there is no principled basis for departing from the ordinary rules as to pre-judgment interest that interest should be included in an order unless good cause be shown: Falkner v Bourke (1990) 19 NSWLR 574 at 576 (Priestley JA, Clarke JA agreeing); Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007] NSWCA 298 at [10] (Giles, Ipp and Basten JJA).

  1. Interest under s 100 of the Civil Procedure Act is discretionary. No error sufficient to attract appellate review in accordance with House v R (1936) 55 CLR 499 is disclosed by an award of s 100 interest on the $412,596 paid directly to Ms Maund of which on any view she enjoyed the benefit and which she wrongfully refused to repay.

  1. However, in my view the $55,260 is in a different position. The State accepted that before Ms Maund could obtain a refund, it was necessary for NSW Police either to issue an amended payment summary, or to provide Ms Maund with a payment summary correction letter. That was consistent with what the ATO said in a "Fact sheet for employers" entitled "PAYG Withholding - repayment of overpaid amounts" which was provided to the primary judge. In any event, in evidence on the appeal (but not before the primary judge) was an affidavit made by the solicitor acting for the State which annexed a letter to the Commissioner of Taxation from the NSW Police dated 9 May 2013 requesting re-assessment of the payment summary issued to Ms Maund. The solicitor said of that letter:

"Ms Maund is now able to apply to the Australian Taxation Office for a refund of the taxation component of $55,620 which was deducted by the NSW Police Force and remitted to the Australian Taxation Office."

  1. In those circumstances, pre-judgment interest upon the $55,620 is to be calculated differently from pre-judgment interest on the amount actually received by Ms Maund. The primary judge treated the whole amount as bearing the same character. His Honour did so without the benefit of the additional evidence adduced on appeal concerning (a) the need for the NSW Police to write to the ATO in order for a refund to issue, and (b) the fact of that refund, including interest on it. Nevertheless, to treat all components of the first payment as identical for the purposes of pre-judgment interest was, in my respectful opinion, a failure to take into account a material consideration sufficient to fall within the principles in House v R (1936) 55 CLR 499 at 505. With the benefit of that evidence, the appropriate re-exercise of discretion is clear. The State should obtain pre-judgment interest on the $412,596 at ordinary rates, but should be confined to the interest actually paid by the ATO in relation to the $55,260.

  1. By my calculation, the judgment interest of $98,951.66 would reduce to $87,188.03 if confined to a principal of $412,236.60, although this should be checked by the parties. If so, it follows that judgment should have been entered for $499,424.63 in favour of the State, and Ms Maund should have been ordered to repay the whole of the amount refunded to her by the ATO (including interest) within 14 days of the refund being made.

  1. It seems that Ms Maund has now repaid the $55,260 plus all interest received from the ATO, as well as $511,188.26 in partial discharge of the original judgment debt. If that is common ground, then the appropriate orders would be to set aside the judgment of $566,808.26 and in lieu thereof (1) enter judgment for the plaintiff in the sum of $499,424.63 including interest, (2) order that Ms Maund pay to the State the whole of the amount refunded to her by the ATO (including interest) within 14 days of the refund being made, (3) note that orders (1) and (2) are separate, such that satisfaction of order (2) does not discharge any part of the judgment in (1). It should be noted in the orders made in this appeal that Ms Maund has now satisfied her obligations to repay both components of the first payment to the State. It should follow that Ms Maund will be entitled to a small refund from the State, subject to the working out of costs.

Factual errors (grounds 2 and 7)

  1. Ms Maund complains that there are some factual errors in the judgment of the primary judge. For example, she says that on 29 July 2010 she received a cheque for $558,253.64, not $613,887 as recorded in [53] of the judgment. There is material before us to suggest that she may well be right about this and other matters. However, appeals lie from orders, not from findings: at [117]. The only relevant question therefore is whether any of the factual errors made any impact at all upon the orders the subject of this appeal. Nothing I have read or heard suggests that the factual errors identified by Ms Maund had any impact upon any orders made. Likewise, Ms Maund complained about some procedural aspects of the way in which the two proceedings had been heard and determined by the primary judge, but (with respect properly) acknowledged that that did not have any bearing on the way in which any of the orders from which she appealed had been made.

  1. To the extent that this ground extends to the failure by the primary judge to recognise the offers of payment made by Ms Maund and what is submitted to be the delays on the part of the State, it has already been addressed.

Shortfall of annual leave (ground 4)

  1. Ms Maund seeks a reimbursement of $5,672.60 representing 127.79 hrs of annual leave accrued. There was a dispute at trial as to the amount of leave. The primary judge had sworn evidence before him adduced by the State as to the calculation of annual leave. His Honour recorded at [79] and [80] that those deponents were not cross-examined. Ms Maund points to other evidence (including her contemporaneous diary records) which supports a larger entitlement to annual leave. However, in my view it was plainly open for the primary judge to accept the State's evidence.

Missing fortnight's salary (ground 5)

  1. Ms Maund claimed at trial that she did not receive her last fortnight's pay. That claim was rejected by the primary judge as part of his Honour's acceptance of the unchallenged evidence of the State. The claim is repeated in this appeal. It may be noted that the State tendered the last and second last payslips for Ms Maund, which unambiguously included payments for the last fortnight. Ms Maund's argument to the contrary turns upon a PAYG payment summary, brought into existence nine months after her employment had ceased, which refers to gross payments for the financial year being the amount of $2,475 greater than amounts derived from Ms Maund's payslips. Ms Maund points out that $2,475 is precisely the net fortnightly amount she regularly received.

  1. On the material before us, there is a difficulty in reconciling the payslips and the PAYG payment summary. There was no attempt to reconcile what seems on the face of it to be the obvious error in the latter (in which case, it would follow that there was no underpayment). However, it is not necessary to express a concluded view on the point. It is sufficient to observe that it was open to the primary judge to accept the evidence of the payslips and the unchallenged testimonial evidence of the witnesses called by the State.

Ground 8

  1. Ground 8 is in these terms:

"Regarding the issues of short fall of annual leave, missing fortnights salary and interest the Court erred in fact by failing to recognise the requirement of close scrutiny of the appellant's evidence and exhibits identified relevant to the case.
a) Court erred in ruling that evidence was inadmissible and/or irrelevant;
b) Court erred in relying solely on vaguely and unspecific evidence.
c) Court failed to enquire into inconsistent evidence.
d) The trial judge's reasoning in support of the judgement is illogical."

  1. No separate submissions were made in respect of this ground, which overlaps with other grounds addressed elsewhere in these reasons.

Costs

  1. Ms Maund relies on provisions in the Deed that the parties shall bear their own legal costs in connection with the Deed and the matters relating to it. Those provisions do not extend to proceedings brought to enforce it for breach by the other party. There is no error shown in the exercise of the costs discretion by the primary judge in this respect.

Orders

  1. For those reasons, the appeal should be allowed in part, the judgment of $566,808.25 including interest should be set aside, and in lieu thereof orders in accordance with these reasons should be made.

  1. In all other respects, Ms Maund's grounds of appeal have failed. Costs should follow the event, namely, the substantial success of the State. However, those costs should not include the costs occasioned by the brief hearing on 17 June. That hearing, set down for the grant of leave, was unnecessary. Although it is true that Ms Maund wrongly proceeded on the basis that leave was required, it should have been obvious to the State that the interest which Ms Maund was challenging was almost $100,000, and the Court advised accordingly.

  1. There is no reason, given Ms Maund's very limited success on appeal, to alter the costs order made at first instance.

  1. The parties should within 7 days file agreed short minutes of order if agreement can be reached, failing which they should file orders for which they contend and submissions not exceeding 3 pages.

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Decision last updated: 18 July 2013

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