Reynolds and Defence Force Retirement and Death Benefits Authority
[2001] AATA 599
•28 June 2001
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2001] AATA 599
ADMINISTRATIVE APPEALS TRIBUNAL )
) No W2000/302
GENERAL ADMINISTRATIVE DIVISION ) Re Gordon Cedric Reynolds Applicant
And
Defence Force Retirement and Death Benefits Authority
Respondent
DECISION
Tribunal Mr RD Fayle, Senior Member & Brigadier RDF Lloyd, Member Date28 June 2001
PlacePerth
Decision Pursuant to s43 of the Administrative Appeals Tribunal Act 1975, the decision under review is affirmed.
............(-sgd Mr RD Fayle-)............
Senior Member
CATCHWORDS
DEFENCE FORCE RETIREMENT BENEFITS - annual retirement pay – election to commute lump sum pursuant to s24 of Defence Force Retirement and Death Benefits Act 1973 – life expectancy factor – member exceeds life expectancy factor – whether member thereafter entitled to annual retirement pay at rate prevailing prior to election to commute (as adjusted).
Defence Force Retirement and Death Benefits Act 1973 – ss3, 23 & 24
Acts Interpretation Act 1901 – ss15AA & 15AB
REASONS FOR DECISION
28 June 2001 Mr R D Fayle, Senior Member & Brigadier RDF Lloyd, Member 1. Mr Gordon Reynolds (“the applicant”) retired from the Australian Defence Forces in April 1976 and elected to commute a portion of his retirement pay entitlement. The commuted lump sum amount was calculated pursuant to the Defence Force Retirement and Death Benefits Act 1973 (“the Act”). The calculation of the commuted lump sum amount used a life expectancy factor of 21.51 years. The applicant claims that as he has survived beyond that period then his entitlement to pension should revert to the pre-commutation entitlement. On 21 May 1999, the Defence Force Retirement and Death Benefits Authority (“the respondent”) rejected the claim. Following an internal review of its earlier decision, at the request of the applicant, the respondent, on 21 July 2000, affirmed the decision. The applicant then referred the matter to this Tribunal for review. It is the decision of the respondent of 21 May 1999 affirmed on 21 July 2000 which is the decision under review by the Tribunal.
2. The Tribunal had before it documents filed pursuant to s37 of the Administrative Appeals Tribunal Act 1975 (“the T documents”) and the following exhibits:
A1 - Extracts from the First Report to the Treasurer on the Administration of Part III, Defence Forces Retirement Benefits Act 1948-1973, Australian Government Publishing Service, Canberra 1973.
A2 - Report of the Joint Select Committee on Defence Forces Retirement Benefits Legislation, May 1972, The Parliament of the Commonwealth of Australia.
R1 - Extract from Australian Life Tables 1960-1952, published under instructions from the Right Honourable The Treasurer, by K M Archer, Commonwealth Statistician.
R2 – Calculation of Retirement Pay (Pre-commutation and Post-commutation), a document prepared by the respondent.
3. The applicant represented himself. He was sworn, in case he was to give evidence in the course of addressing the Tribunal. Ms Munoz represented the respondent.
4. The relevant facts were not in dispute. The applicant was born on 19 February 1924 and, having completed 32 years service in the Australian Defence Force, retired on 1 April 1976. Prior to his retirement, the applicant had requested details of his pension and lump sum commutation entitlements. These were provided in writing on 17 November 1975. That letter (T6) states inter alia:
“Retirement pay is based on the number of years of effective service completed by a member at retirement and is expressed as a percentage of the member’s pay for the DFRDB purposes.
The maximum lump sum that may be realised by commutation is four times the member’s retirement pay entitlement on termination of service. An election for commutation should be made within 12 months of retirement and must specify the amount required. Retirement pay is reduced from the date on which the election is received by the authority. Forms of election are available from this Office on retirement.
Listed below are your retirement pay and commutation entitlements based on current rates of pay.
Retirement date 1 March 1976 18 March 1976
Effective service 31 years 32 years
Including including
past service past serviceRetirement pay $7506.65 ($7823.84 p.f)
Lump sum on commutation $30,026.60 ($31,295.36 p.f)
Reduced retirement pay
following commutation $6110.71 ($6368.92 p.f)
In the event that purchase of past service is not completed at the time of calculating your retirement pay you will receive your initial payment at the lower rate with a retrospective adjustment to the higher rate when payment of $64.84 is received.”
5. Prior to his discharge on 1 April 1976, the applicant completed an “Application for Benefits” form. That form makes no reference to the commutation election. On 21 April 1976 a letter was written to the applicant (presumably by the respondent) setting out details of the amount of the applicant’s annual retirement pay ($8,290.59), the payer and the fortnightly amount ($318.00). It then states:
“The commutation provisions of the DFTDB Act entitle members, who are in receipt of retirement pay, to elect to commute portion of their retirement pay entitlement to realise a lump sum. The maximum lump sum which may be realised is four times the amount of the member’s annual retirement pay entitlement on termination of service; in your case this amounts to $33,162.36. Retirement pay thereafter would be at the rate of $6,748.87 per annum. …” (T9)
6. By letter of 22 April 1976, the applicant notified the “Secretary DF & DBA” that he intended “to request the full commutation of my retirement pay”, and requested the necessary forms for the election. These were duly received and on 27 April 1976, with a covering letter, the applicant returned the “completed Form DB 55A, in which I have elected to commute the sum of $33,162.36” (T11).
7. A copy of the applicant’s “Notice of Election for Commutation of Retirement Pay Section 24” is at T12. It is signed by the applicant and dated 27 April 1976. The following statements appear immediately before and above the signature:
“I hereby elect under the provisions of Section 24 of the Defence Force Retirements and Death Benefits Act 1973 (an extract of which appears below) to commute a portion of my retirement pay entitlement to produce a lump sum of $33,162.36 (specify exact amount).
I realise that under the provisions of Section 24 future retirement pay payments will be reduced as a consequence of this election on and from the date the election is received by the Authority.”
8. Section 24 of the Act is then set out in full and appears below for reference purposes:
Defence Force Retirement and Death Benefits Act 1973, No.81 of 1973
24 (1) A recipient member may, by notice in writing given to the Authority, within a period of one year after becoming entitled to retirement pay, or within such further period as the Authority, in special circumstances, allows, elect to commute a portion of his retirement pay in accordance with this section.
(2) An election under sub-section (1) shall specify the amount (not being an amount that, or an amount that, together with any amount or amounts specified in any previous election or elections by the member under this section, exceeds four times the amount per annum of the retirement pay to which the recipient member was entitled on retirement) that is to be payable to him, by virtue of the commutation.
(3) Where a recipient member makes an election under this section –
(a) there shall be paid to him by the Commonwealth an amount equal to the amount specified in the election as the amount that is to be payable to him by virtue of commutation; and
(b) the amount per annum of the retirement pay payable to him, on and after the day on which the election takes effect, is the amount per annum that, but for this paragraph, would be payable reduced by an amount calculated by dividing the amount referred to in paragraph (a) by the expectation of life factor that, having regard to the age and sex of the person on the day on which the election takes effect, is applicable to him under Schedule 3.
(4) For the purposes of this section, an election shall be deemed to have been made, and shall take effect, on the day on which the notice of election is received by the Authority.
9. It is common ground that the applicant, at the time of commutation, was a “recipient member” as that term is defined in s3(1) of the Act, being a member of the scheme who is entitled to retirement pay.
10. It is common ground that the Act (No.81 of 1973) replaced the predecessor legislation of 1948 following a report to Parliament in May 1972, known as the “Jess Report”[1]. The report sets out 20 recommendations. Paragraphs (a) and (b) of Recommendation 14 are relevant:
(14) COMMUTATION
(a) That provided that the option is exercised within twelve months from date of retirement a recipient member should be entitled to commute an amount not exceeding four times the amount of the annual retired pay entitlement payable to him in the first year of his retirement.
(b) That retired pay proportionately reduced in relation to commutation remain payable after commutation.
[1] Report from the Joint Select Committee on Defence Forces Retirement Benefits Legislation, May 1972, The Parliament of the Commonwealth of Australia (Ex. A2) The Chairman of the committee was Mr J D Jess CBE, MP, hence the reference to the report as the “Jess Report”.
11. The respondent wrote to the applicant on 12 May 1976 acknowledging receipt of the applicant’s election for commutation. It advised that a cheque for $32,509.27[2] would be forwarded as early as possible and that “your entitlement is now reduced to $6,748.87 per annum with effect from 29 April 1976, the date on which your election for commutation was received in this Office.” (T13)
[2] Being the commuted amount less a liability of $653.09 relating to a previous contribution shortfall, details of which are not relevant to these proceedings.
12. It is common ground that the respondent was correct in its calculations arriving at the maximum commutation lump sum amount of $33.162.36 and that when that amount is divided by his life expectancy factor of 21.51 years[3], also not disputed, the resultant amount is $1,541.72. It is also common ground that when that last mentioned sum is deducted from the applicant’s annual pre-commutation retirement pay entitlement[4] of $8,290.59, the reduced annual retirement pay is $6,748.87[5].
[3] See Ex. R1 and footnote 12 below.
[4] In terms of s23 of the Act.
[5] The relevant calculations are set out in Ex. R2.
13. The applicant made extensive oral and written submissions to the Tribunal. His contention essentially is that as 21.51 years have passed since his retirement (and entitlement to retirement pay), his entitlement should revert to the pre-commutation amount adjusted according to the Act as if no commutation had occurred. This contention is based on the argument that the lump sum commutation amount was a pre-payment of his otherwise future entitlements for a period of 21.51 years and now that the time has expired then the respondent (or the Commonwealth) have, in effect, recovered the pre-payment. Further, not to now adjust the ongoing entitlement to the pre-commutation retirement pay entitlement is to his detriment and to the advantage of the Commonwealth. The applicant has taken considerable time to prepare the basis of his submissions[6]. In the introduction to those written submissions the applicant states inter alia:
“I am unable to present my case simply by reference to the DFRDB Act 1973 which contains the ADF Retirement Scheme that applies to me.
That Act is the end product of two other documents – The DFRB Act 1948 and The Jess Report.
The DFRB Act 1948 contains the ADF’s initial Retirement Scheme which was discarded in 1973.
The Jess Report examines that 1948 Scheme and explains why it was discarded. It also provides the recommendations which formed the basis of the Current Scheme as it is contained in The DFRDB Act 1973.
It is therefore impossible to correctly read and understand the content and intent of the current Scheme without knowing something of these two documents – to have at least a basic understanding of them.”
[6] Which he handed up to the Tribunal for its convenience at the conclusion of the hearing. The file contains 26 separate tabs, each containing its own relevant submission and supporting documents.
14. With respect to the applicant, the Tribunal is limited to an examination of the factual matrix of each application and the application of the relevant law to those facts. In the opinion of the Tribunal, in considering the application of the relevant law, it cannot take into account any extraneous material except that it does so pursuant to sections 15AA and 15AB of the Acts Interpretation Act 1901:
SECT 15AA
Regard to be had to purpose or object of Act
15AA. (1) In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act (whether that purpose or object is expressly stated in the Act or not) shall be preferred to a construction that would not promote that purpose or object.
SECT 15AB
Use of extrinsic material in the interpretation of an Act
15AB. (1) Subject to subsection (3), in the interpretation of a provision of an Act, if any material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material:
(a) to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; or
(b) to determine the meaning of the provision when:
(i) the provision is ambiguous or obscure; or
(ii) the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act leads to a result that is manifestly absurd or is unreasonable.
(2) Without limiting the generality of subsection (1), the material that may be considered in accordance with that subsection in the interpretation of a provision of an Act includes:
(a) all matters not forming part of the Act that are set out in the document containing the text of the Act as printed by the Government Printer;
(b) any relevant report of a Royal Commission, Law Reform Commission, committee of inquiry or other similar body that was laid before either House of the Parliament before the time when the provision was enacted;
(c) any relevant report of a committee of the Parliament or of either House of the Parliament that was made to the Parliament or that House of the Parliament before the time when the provision was enacted;
(d) any treaty or other international agreement that is referred to in the Act;
(e) any explanatory memorandum relating to the Bill containing the provision, or any other relevant document, that was laid before, or furnished to the members of, either House of the Parliament by a Minister before the time when the provision was enacted;
(f) the speech made to a House of the Parliament by a Minister on the occasion of the moving by that Minister of a motion that the Bill containing the provision be read a second time in that House;
(g) any document (whether or not a document to which a preceding paragraph applies) that is declared by the Act to be a relevant document for the purposes of this section; and
(h) any relevant material in the Journals of the Senate, in the Votes and Proceedings of the House of Representatives or in any official record of debates in the Parliament or either House of the Parliament.
(3) In determining whether consideration should be given to any material in accordance with subsection (1), or in considering the weight to be given to any such material, regard shall be had, in addition to any other relevant matters, to:
(a) the desirability of persons being able to rely on the ordinary meaning conveyed by the text of the provision taking into account its context in the Act and the purpose or object underlying the Act; and
(b) the need to avoid prolonging legal or other proceedings without compensating advantage.
15. In the opinion of the Tribunal there is neither ambiguity nor obscurity in the relevant legislative provisions applied in this case. Further, the Tribunal understands that there is no dispute between the parties that s24 of the Act applies. The applicant, in asserting that the Act is an end product of the predecessor Act, the Defence Force Retirement Benefits Act 1948 (repealed on introduction of the Act in 1973) and the Jess Report, is no doubt correct in an historical sense. However, the Act is a separate piece of legislation requiring nothing else for its consideration (save ratio decidendi that may serve to guide administrators in interpreting particular provisions). In the opinion of the Tribunal, the literal meaning of the provisions of s24 of the Act do not produce a result that is manifestly absurd or unreasonable. They simply provide that once an entitled party makes the election to commute then they will receive a certain amount as a lump sum which amount is then taken into account to reduce the otherwise entitled annual retirement pay. When that person dies no liability (of their estate) arises. Whilst alive the person has an ongoing entitlement to be paid at the reduced rate.
16. It may well be that a citizen does not agree with the effect of particular legislative provisions on their particular circumstances. This, in the Tribunal’s opinion, is the present situation. In saying that, the Tribunal does not intend to diminish or dismiss as trivial, the arguments of the applicant which, in the opinion of the Tribunal have been put in earnest. In the opinion of the Tribunal however, it is not open for it to consider whether the legislation in question has been incorrectly framed. And, as in the present case, where the legislative provisions have a plain meaning consistent with the objects of the legislation[7] then that and nothing else is the meaning which must be attributed.
[7] As set out in the short title: “An Act to make provision for and in relation to a Scheme for Retirement and Death Benefits for Members of the Defence Force”.
17. The facts are clear. The applicant, upon completion of his Defence Force service on 1 April 1976 was entitled to annual retirement pay in accordance with s23 of the Act. That amount was determined to be $8,290.59 and not disputed. Pursuant to s24 of the Act the applicant elected to commute the maximum amount of his otherwise entitled retirement pay, the election being received by the respondent on 27 (or 29) April 1976. As a result, the provisions of s24 of the Act came into operation. Pursuant to that election the authority[8] (i.e. the respondent) made calculations[9] resulting in the lump sum commutation amount[10] becoming payable and, after a deduction for a related liability, not in contention, the lump sum being paid to the applicant. Sub-paragraph 24(3)(b) operated to determine the “amount per annum of retirement pay payable to [the applicant], on and after the day on which the election takes effect” (emphasis added). In the opinion of the Tribunal, s24(3)(b) clearly and unambiguously provides that the annual amount then payable is a reduced amount. The subparagraph sets out the basis of calculation[11] of the reduced annual amount of retirement pay payable to the member. In the applicant’s case that amount was calculated using as the divisor, the relevant “Expectation of Life Factor” set out in Schedule 3 of the Act. That factor is not in dispute and is 21.51[12]. The relatively simple calculation gives the amount deducted from the pre-commutation annual retirement pay entitlement to arrive at the amount of the future annual retirement pay payable – c/f s24(3)(b). In the opinion of the Tribunal there is no other reasonable interpretation that could be made of those provisions. It is not reasonable to say that the phrase “amount payable … on and after the day on which the election takes effect …” has a limitation based on the life expectancy factor used in a calculation to arrive at the amount. In the opinion of the Tribunal such an interpretation is simply untenable and would be counter to the plain words of the provision. In essence, those were the submissions of Ms Munoz, for the respondent and which this Tribunal respectfully adopts.
[8] “Authority” is defined in s3(1) of the Act to mean the Defence Force Retirement and Death Benefits Authority, the respondent in this case.
[9] As reproduced in Ex. R2, but see footnote 12 below.
[10] $33,162.36.
[11] As set out in Ex. R2 and not in dispute.
[12] It is noted that Ex. R2 uses the factor 21.51 correctly but only shows 21.5 (an error). The Tribunal is satisfied that the correct calculation was made using factor 21.51 not 21.5.
Decision
18. For the above reasons and pursuant to s43 of the Administrative Appeals Tribunal Act 1975, the decision under review is affirmed.
I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Mr R D Fayle, Senior Member & Brigadier RDF Lloyd, Member
Signed: ...................(-sgd W Treasure)...................
AssociateDate of Hearing 2 April 2001
Date of Decision 28 June 2001
Counsel for the Applicant unrepresented
Counsel for the Respondent Ms T Munoz
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