Warburton v SAS Trustee Corporation

Case •

[2003] NSWSC 81

•

25 February 2003

No judgment structure available for this case.
CITATION: Warburton v SAS Trustee Corporation [2003] NSWSC 81
HEARING DATE(S): 13, 21 & 25 November 2002
17 December 2002
31 January 2003
14 February 2003
JUDGMENT DATE:
25 February 2003
JURISDICTION:
Common Law
Administrative
JUDGMENT OF: Sperling J at 1
DECISION: See paragraphs 74, 86 & 87 of the judgment.
CATCHWORDS: Statutes - interpretation - quantification of pension entitlement under Superannuation Act 1916 (as at 29 July 1975)
LEGISLATION CITED: Superannuation Act 1916 (as at 29 July 1975), s2, s11, s12, s12B, s14, s15, s21, s21B, s22, s27, s28A, s29, s30, s31, s91
CASES CITED: McCaffrey v SAS Trustee Corporation (Supreme Court, 19 December 1997, unreported)

PARTIES :

 Betty Mary Warburton
SAS Trustee Corporation
FILE NUMBER(S): SC 30044/02
COUNSEL: Mr A Ogborne for the Plaintiff
Mr AJ Meagher SC with Mr G Burton for the Defendant
SOLICITORS: AC Knibb Kaine & Associates Solicitors & Attorneys for the Plaintiffs
SAS Trustee Corporation for the Defendant

- 1 -

      IN THE SUPREME COURT
      OF NEW SOUTH WALES
      COMMON LAW DIVISION
      Administrative Law List

      Sperling J

      Tuesday, 25 February 2003

      30044/02 Betty Mary Warburton v SAS Trustee Corporation

      Judgment

1 His Honour: Alan George Wilson had been a public servant for many years when he died on 12 May 1974 at the age of 56. A pension thereupon became payable to his widow, Betty Mary Warburton, under the Superannuation Act 1916 (“the Act”).

2 Ms Warburton claims to have become entitled to a larger pension than that which has been paid. She has instituted these proceedings in prosecution of her claim.

3 In the case of McCaffrey v SAS Trustee Corporation (Supreme Court, 19 December 1997, unreported), Studdert J decided the same question as arises in the present proceedings. The decision was in favour of the claimant. I should follow that decision unless satisfied that it was clearly incorrect.


      The legislation

4 The statute provides for a contributory superannuation scheme for public servants.

5 The “unit of pension” is central to the scheme. It has, in effect, a cost and a value. The cost consists of contributions. The value is that pensions are payable by reference to the number of units of pension in respect of which the employee was contributing when the pension becomes payable. That, necessarily, is an over-simplification. The detail of the legislation requires examination.

6 The relevant edition of the statute is the reprint certified on 29 July 1975. The following review of the legislation refers only to those parts of the statute as are relevant to the resolution of the present dispute. Where the precise wording of a provision may be important I have quoted it verbatim.

7 As an aid to the review of the legislation which follows, I set out hereunder an extract of the relevant parts of the index in s2 of the statute. The Act is divided into parts. Part IV is divided into divisions. Throughout the Act, sections are grouped under headings, to which I will refer as subdivisions, whether they appear in a part with divisions or not.


      PART III: CONTRIBUTIONS (ss11-20A)
          Subdivision: Contributions by employees
          Subdivision: Scale of units
          Subdivision: Scale of contributions
      PART IV: PENSIONS AND BENEFITS (ss21-61A)
      Division 1: Retirement on pension (ss21-25)
          Subdivision: Age retirement
          Subdivision: Breakdown retirement
      Division 2: Grant of pensions and benefits (ss26-49A)
      Subdivision: Pension unit and benefits
          Subdivision: Normal pension of contributor
          Subdivision: Breakdown pensions
          Subdivision: Widow’s and children’s pensions
      PART VII: GENERAL PROVISIONS (ss85-94)

8 Part III of the statute is headed Contributions. It deals with contributions by employees and by the employer, being the government or a government agency. Part IV is headed Pensions and Benefits. It deals with pension entitlements.

9 The first subdivision in Part III is headed Contributions by employees. By s11(1), contributions by employees are prima facie compulsory. (There are provisions which excuse liability to contribute in specified circumstances.) An employee who makes contributions is referred to in the legislation as “a contributor”. Liability for contributions ceases when the contributor attains the age of 60 years: s11(2).

10 The second subdivision in Part III is headed Scale of units. Pursuant to s12(1), a specified number of units is prescribed for each salary bracket. The number of units per salary bracket increases with increases in salary. The number of units to which an employee is prima facie liable to contribute accordingly increases as the employee’s salary increases.

11 Before referring to other provisions of the subdivision, Scale of units, it is convenient to refer to the next subdivision of Part III which is called Scale of contributions. Under ss14 and 15 of this subdivision, tables of contributions are prescribed. Contributions are payable four-weekly and are quantified by reference to contribution tables. The four-weekly contribution payable in respect of a unit varies depending on the age of the employee when contributions in respect of the unit commence.

12 The concept behind the tables is that there is, broadly speaking, a fixed, aggregate contribution payable in respect of a unit. Accordingly, if contributions for a unit commence at an early age, the four-weekly rate of contribution is lower than in the case of contributions commencing at a later age. The table is so constructed that at age 60 the same aggregate contribution, or approximately so, will have been made irrespective of the age at which contributions in respect of that unit commence. (The tables are weighted somewhat in favour of early contributions, presumably because of the investment value of contributions in the hands of the fund, but that is a detail which does not require attention.) I will refer to the aggregate employee contribution as the contribution cost of the unit.

13 At the time, the relevant contributions table was Exhibit B in these proceedings (which had replaced Schedule VII of the Act). In that table (as in Schedule VII), there was special provision for calculating the contribution cost of a unit in the case of an employer who had reached the age of 55. The contribution payment required for each four-weekly period was, in that case, a specified amount divided by the number of four-weekly periods to age 60. The contribution cost of the unit was, accordingly, the specified amount, assuming that contributions continued to be made to age 60. (In relation to contribution liabilities accruing after age 55, there was no weighting in favour of earlier contributions, unlike contributions made in earlier years.)

14 Returning to the subdivision, Scale of units, s12(3) provides that an employee, whose salary is increased, may elect not to contribute in respect of the additional units of pension applicable to the increased salary and for which the employee would otherwise be liable. Units so abandoned are not, however, irretrievably lost. By s12(4), an employee may elect to recover such abandoned units at a later time. (The policy behind recoverability of abandoned units is, obviously enough, that liability for contributions accruing early in life, when family expenditure is high, may be postponed until later in life, when family expenditure is lower.)

15 By s12(5), no pension is payable in relation to abandoned units which have been recovered at a later time unless one of three specified conditions are satisfied.

16 The following are the parts of s12 which will require detailed consideration.

          12(3) Where an employee is actually paid a salary increase after he reaches the age of thirty years, he may elect not to contribute in respect of one or more of any additional units of pension in respect of which, but for this subsection, he would be required to contribute pursuant to subsection (1) by reason of that increase of salary.
          (4) Where an employee is actually paid a salary increase and the increased salary falls within a salary group that is higher than the salary group within which it fell immediately before the increase and the employee had, before payment of that increase, abandoned a unit, or units, of pension--
              (a) he shall, except to the extent that he makes an election under subsection (3) in consequence of that increase, contribute in respect of the number of units of pension that, pursuant to subsection (1), is appropriate for the increased salary, less the number of his abandoned units of pension at the time of the increase; and
              (b) he may elect to contribute in respect of one or more of the number of his abandoned units of pension at that time in addition to any additional units of pension in respect of which he is required to contribute pursuant to paragraph (a).
          (5) Pension is not payable in respect of a unit of pension to which an election by an employee under paragraph (b) of subsection (4) relates unless--
              (a) contributions in respect of the unit of pension have been paid for the period of three years that next succeeds the date from which he was required to contribute in respect of that unit of pension;
              (b) the contributions in respect of the unit of pension are payable under subsection (3) or (4) of section 16; or
              (c) the employee elects to retire under subsection (1), or is retired under subsection (2), of section 21.

17 Section 12B is a deferment plan for the payment of contributions in relation to additional units, whether the liability to contribute arises from an increase in salary or from the recovery of abandoned units. The plan is available to male employees aged 55 or older.

18 Section 12B works in the following way. As mentioned earlier, the table rate of contributions in respect of a unit increases with the age at which the contributions in respect of that unit commence, so that, broadly speaking, the same contribution cost is paid in respect of a unit irrespective of when contributions in respect of that unit commence. For an employee over the age of 55, the contribution cost of a unit taken up at that stage has to be paid in less than five years in order to complete payment of that cost by age 60. So the table rate of contributions for employees over 55 is very high. Under the plan, the contribution cost in relation to such an additional unit may, at the employee’s election, be paid over a period of five years, thereby extending the period of payment beyond the age of 60 years and easing the burden. There is provision for the payment of unpaid table rate contributions upon retirement or death occurring before the deferred contributions have been paid or, alternatively, for refund of contributions paid in respect of such additional units. In the latter case, no pension is, of course, payable in respect of those units.

19 The following are the relevant parts of s12B:

          12B(1) In this section “the prescribed age” means--
              (a) in the case of an employee who, being a woman contributor, elected to contribute at the rate prescribed for retirement at age fifty-five years, the age of fifty years;
              (b) in the case of any other employee, the age of fifty-five years.
          (2) Where, after the commencement of the Superannuation (Amendment) Act, 1972, an employee who has reached the prescribed age elects or is required to contribute in respect of an additional unit or units of pension he may, notwithstanding any other provision of this Act, elect to contribute the total amount of the contributions payable in respect of the additional unit or units of pension by not more than sixty-five four-weekly instalments commencing on the first day of the four-weekly contribution period in which he is required to commence to contribute for the additional unit or units, each such instalment being not less than an amount determined by the Board, being an amount that is, or is not less by more than a fraction of a cent than, one sixty-fifth of that total amount.
          (5) Where an employee who has made an election in accordance with this section ceases to be employed by the employer prior to completion of payment of contributions pursuant to subsection (2) the following provisions shall apply:--
              (a) where the employee retires after reaching the age of sixty years or, being a woman who has contributed at rates prescribed for retirement at the age of fifty-five years, after reaching that age, the total amount of contributions unpaid shall be paid within one month after the date upon which the employee ceases to be so employed, or within such further period as the Board may, in special circumstances, allow;
              (b) where the employee is retired in accordance with the provisions of section 22 or elects to retire on a pension calculated in accordance with the provisions of section 28A, the total amount of contributions up to and including the last day of the month or the four-weekly contribution period, as the case may be, preceding that in which such employee ceases to be employed shall be paid within one month after the date upon which the employee ceases to be so employed, or within such further period as the Board may, in special circumstances, allow;
              (c) where the employee dies and is survived by a widow to whom pension is payable in accordance with section 30, such widow shall within three months after the death of the employee, or within such further period as the Board may in special circumstances allow, pay the total amount of contributions unpaid at the date of his death.
          (6) Where the total amount of contributions required to be paid by paragraph (a), (b) or (c) of subsection (5) is not paid within the time prescribed, or within such further period as the Board may in special circumstances allow, the employee or the widow of the employee, as the case may be, shall be refunded the amount of the contributions paid in respect of the additional unit or units for which such employee elected to contribute in accordance with this section.
              Where any refund is payable under this subsection any rights in the fund in respect of such additional unit or units shall cease and determine.

20 Part IV is entitled Pensions and benefits. Division 1, Retirement on pension, is divided into a number of subdivisions, including Age retirement (ss21 and 21B) and Breakdown retirement (s22). (As will appear, the provisions of the legislation relating to breakdown retirement are the basis for computing a widow’s entitlement to a pension on the death of a contributor.)

21 Relevant provisions relating to Age retirement are as follows. Pursuant to s21(1), a male contributor who has served at least 10 years is entitled to elect to retire on pension on or after reaching the age of 60 years; a woman contributor, at or after age 55. Section 21(1B) provides that a male contributor may retire on the pension specially provided by s28A on or after reaching the age of 55 years, if he has continuously been a contributor during the preceding period of ten years.

22 Section 22, Breakdown retirement, provides that a contributor may be retired from service on the ground of invalidity or physical or mental incapacity to perform his duties.

23 Division 2 of Part IV, Grant of pensions and benefits, deals with computation of pension entitlement. It contains a subdivision entitled Pension unit and minimum. Section 26(1) provides the machinery for ascertaining the monetary value of a unit of pension in terms of an amount of pension per week.

24 The next subdivision of Division 2, Grant of pensions and benefits, is entitled Normal pension of contributor. Section 27 provides as follows.

          27(1) On the retirement of a contributor he shall (except where otherwise specially provided) be entitled to receive a pension according to the number of units for which he contributed at the time of his retirement: that is to say, the pension shall be in accordance with the following scale:--

      Then follows a table from which to quantify pension entitlement in terms of dollars on an annual basis, referable to the number of units in respect of which the employee was contributing at the time of retirement.

25 Section 28(1) provides as follows.

          28(1) On the retirement at or after the age of fifty-five years of a woman who has contributed for a pension payable on reaching the said age, the full pension for which she has so contributed shall be payable.

26 Section 28A(1) provides that, on the retirement of a male contributor under s21(1B) (that is, retirement on or after reaching the age of 55 years, after continuous contribution for the previous ten years), pension entitlement is determined in accordance with a formula in the subsection which operates by reference to the number of units for which the contributor has contributed for not less than three years at the time of retirement. Section 28A(2) provides that, where such a contributor has contributed for units for less than three years, there is to be a refund, on retirement, of the contributions paid in respect of such units.

27 Then follows a further subdivision of Division 2, Grant of pensions and benefits, entitled Breakdown pensions (s29). Section 29(1) provides as follows:

          29(1) If a contributor who is not a contributor for limited benefits and has contributed for at least five years be retired on the ground of invalidity or physical or mental incapacity to perform his duties, then--
              (a) If such invalidity or incapacity is in the opinion of the Board not due to his own fault he shall be entitled to the full pension for which he has been contributing at the time of such retirement; but
              (b) If such invalidity or incapacity is in the opinion of the Board due to his own fault he shall be entitled to such pension as is determined by the Board to be the equivalent of the contributor’s rights in the fund or, if the Board so determines, to refund of a sum equal to his contributions to the fund.

28 There is a third subdivision in Division 2 entitled Widow’s and children’s pensions (ss30-31A). Section 30(1) provides, so far as is material, that a pension is payable to a contributor’s widow on the death of a contributor dying before age 60, being two-thirds of the pension that would have been payable to the contributor had he been retired under s22 immediately before his death. The pension is payable, according to the subsection, during any period while the widow is not married. (Section 22, as previously mentioned, relates to breakdown retirement. Section 29, as previously mentioned, specifies the pension payable to a contributor in that event. Special provisions in relation to breakdown pensioners contained in Division 3 are not presently material.)

29 Section 30(1) provides, in terms, as follows, so far as is material:

          30(1) On the death of a contributor … pension shall … be paid to his widow as follows--
              (a) during any period while she is not married, two-thirds of the pension … that would have been payable to the contributor … where he died before reaching the age of sixty years, had he been retired under section 22 immediately before his death …

30 The special feature of an employee’s pension entitlement for breakdown not due to his own fault (s29(1)(a)) and the pension entitlement of a widow where the employee dies before turning 60 (s30(1)) is that the pension is computed, pursuant to s27(1), by reference to the number of units in respect of which the employee was contributing at the time, notwithstanding that the contribution cost of those units has not been paid in full. The pension entitlement is nonetheless “the full pension for which [the employee] has been contributing at the time of his retirement” or, per s30(1), at the time of his death. (The effect of s12(5) in the quantification of entitlement remains to be considered.) This aspect of the scheme makes contributions analogous to an insurance premium for an annuity payable in the event of premature retirement due to illness or to a nominated beneficiary in the event of premature death.

31 Part VII, General provisions, includes s91(1) which provides that an election under the Act shall be in writing. While there is provision in s91(2) for the waiver of failure to make an election within time, there is no corresponding waiver provision in relation to the requirement that an election shall be in writing.


      Agreed statement of facts

32 The following statement of facts has been agreed. Much of it relates to conditions of entitlement which cause no difficulty. I will nonetheless quote the agreed statement of facts in full.

          1. On 12 May 1974:
              A. Mr. Alan George Wilson (“Mr. Wilson”) was a contributor (within the meaning of that expression in s.30(1) of the Superannuation Act 1916 (as amended) (the “Act”));
              B. Mr. Wilson was not a contributor for limited benefits (within the meaning of that expression in s.30(2) of the Act);
              C. Mr. Wilson was aged 56 years, having been born on 21 July 1917;
          D. Mr. Wilson died;
              E. Mrs. Betty Mary Warburton, the plaintiff, was the widow of Mr. Wilson after his death; and
              F. Neither the plaintiff nor Mr. Wilson had any children who were under eighteen years of age.
          2. The plaintiff was not married during the period from 13 May 1974 to the commencement of the amendments made to the Act by Act No. 143 of 1978, which amendments removed the limitation that pension was only payable under s.30 of the Act during any period while the widow was not married.
          3. Since 12 May 1974, the plaintiff has not married a contributor or pensioner (within the meaning of those expressions in s.30(3) of the Act).
          4. Immediately before his death:
              A. Mr. Wilson was a contributor who was not a contributor for limited benefits (within the meaning of that expression in s. 29(1) of the Act);
              B. Mr. Wilson had been contributing (within the meaning of that expression in s. 29(1) of the Act) continuously since 1 July 1956;
              C. Mr. Wilson had been contributing in respect of 49 units of pension under the Act;
          5. On the assumption that Mr. Wilson had been retired under s. 22 of the Act on the ground of invalidity or physical or mental incapacity to perform his duties immediately before his death, then the opinion of the Board for the purposes of s.29(1) of the Act would have been that such invalidity or incapacity was not due to Mr. Mr Wilson’s own fault.
          6. Prior to 10 March 1973, Mr. Wilson had elected not to contribute in respect of 10 additional units of pension under s.12(3) of the Act (the “10 abandoned units”). That election had been made, in respect of 8 of those units, on about 18 November 1970 and, in respect of 2 of those units, on about 16 December 1972. Mr Wilson turned 55 on 21 July 1972.
          7. On 10 March 1973, Mr. Wilson elected to contribute in respect of the 10 abandoned units and was required to contribute for 3 additional units and elected to contribute the total amount of the contributions payable in respect of those 13 units by 65 four-weekly instalments (within the meaning of s.12B(2) of the Act). On 2 June 1973, Mr. Wilson was required to contribute for 1 further additional unit and elected to contribute the total amount of the contributions payable in respect of that 1 unit by 65 four-weekly instalments (within the meaning of s.12B(2) of the Act). On 18 November 1973, Mr. Wilson was required to contribute for 4 further additional unit and elected to contribute the total amount of the contributions payable in respect of those 4 units by 65 four-weekly instalments (within the meaning of s.12B(2) of the Act). The 10 abandoned units and the 8 additional units were part of the 49 units in respect of which Mr. Wilson was contributing immediately before his death.
          8. As a result of his death, Mr. Wilson ceased to be employed by the employer prior to completion of payment of instalments pursuant to s.12B(2) of the Act (within the meaning of that expression in s.12B(5) of the Act).
          9. After the death of Mr. Wilson, a predecessor in title of the defendant, the State Superannuation Board:
              A. Determined that pension was not payable in respect of the 10 abandoned units by reason of s.12(5) of the Act;
              B. Determined that Mr Wilson’s estate was entitled to a refund of the contributions made in respect of those 10 abandoned units as well as a further refund for overpaid contributions of $178.66;
              C. Deducted from the amounts in B an amount of $116.82, which was the difference between the total of the contributions (for each 4 week period) due on Mr Wilson’s 8 additional units (ie. not being part of the 10 abandoned units) at the normal table rate for the period to his death and the total of the instalment payments (for each 4 week period) made in respect of those additional units under s.12B of the Act for the same period and repaid the balance to Mr Wilson’s estate. The amount of $116.82 was treated as a payment by the plaintiff under s.12B(5)(c) in relation to those 8 additional units.
              D. commenced paying the plaintiff the spouse pension under s.30(1) of the Act as from 13 May 1974 at the rate of $143.00 per fortnight, being the pension payable under s.30(1) the Act on 39 units of pension; and
              E. periodically adjusted the pension by reference to the consumer price index in accordance with the Act.
          10. The pension which would have been payable under s.30(1) of the Act to the plaintiff based on 49 units of pension as from 13 May 1974 was $179.66 per fortnight.
          11. In 1983, on her attaining age 60 (date of birth 9 November 1923), the plaintiff was entitled to elect and did elect to commute to a lump sum all of the fortnightly pension she was eligible to commute at that time, being $123.00 out of a total pension of $331.81. On 18 November 1983, the plaintiff was paid $30,644.92 in respect of that commutation.
          12. In 1999, following an amendment to the Act, the plaintiff became entitled to commute the remainder of her pension and elected to do so. On 21 June 1999, the plaintiff was paid $78,516.08 in respect of that commutation.
          13. As at 13 November 2002, the difference between the pension payable to the plaintiff under s.30(1) of the Act on 49 units, as opposed to 39 units, amounts to $90,855.68. The commutation value of future pension on those units as at 13 November 2002 is $17,422.23.

33 The main elements in the agreed statement of facts are as follows:


      1 July 1956 Mr Wilson contributed continuously from this date.

      ca. 18 Nov 1970 Mr Wilson elected not to contribute in respect of eight units.

      21 July 1972 Mr Wilson turned 55.

      ca. 16 Dec 1972 Mr Wilson elected not to contribute in respect of two further units.

      10 March 1973 Mr Wilson became liable to contribute in respect of three additional units. He elected, pursuant to s12B(2), to contribute the total amount of the contributions payable in respect of those three units by 65 four-weekly instalments.
                  Mr Wilson also elected to contribute in respect of the ten abandoned units, and, pursuant to s12B(2), to contribute the total amount of the contributions payable in respect of those ten units by 65 four-weekly instalments.


      2 June 1973 Mr Wilson became liable to contribute in respect of one additional unit and elected to contribute by instalments as above.

      18 Nov 1973 Mr Wilson became liable to contribute in respect of four additional units and elected to contribute by instalments as above.

      12 May 1974 Mr Wilson died at the age of 56. Immediately before his death he had been contributing in respect of 49 units, including the 18 units in respect of which he was contributing pursuant to s12B(2) which, in turn, included the ten abandoned units recovered earlier.

      Agreed questions

34 The parties have agreed that the questions arising for determination are as follows:

          (1) Whether the plaintiff is entitled, and since 13 May 1974 has been entitled, to receive a pension under s30 of the Superannuation Act, 1915 (as amended) calculated on 49 units of pension including the 10 previously abandoned units of pension?
          (2) Whether, on paying to the defendant as successor in title to the State Superannuation Board, within such period as the defendant may allow as provided for in paragraph 12B(5)(c) of the Act, an amount of $3,969.00 under subsection 12B(2) of the Act in respect of the 10 previously abandoned units, the plaintiff is entitled to receive a pension under s30 of the Superannuation Act, 1916 (as amended) calculated on 49 units of pension including the 10 previously abandoned units of pension?

      The basic issue

35 The plaintiff’s entitlement to a pension arises under s30(1). That is an entitlement to two-thirds of the pension that would have been paid to Mr Wilson had he been retired “under section 29” immediately before his death. Strictly speaking, breakdown retirement occurs under s22 rather than under s29. It is, however, common ground that s30(1) proceeds on the hypothesis of breakdown retirement pursuant to s22 and of the pension entitlement then arising pursuant to s29(1).

36 In the present case, it is agreed that s29(1)(a) applies, not s29(1)(b). So, on Mr Wilson’s death, there was a notional entitlement to “the full pension for which [he had] been contributing at the time of such [notional] retirement”. The plaintiff’s pension entitlement was two-thirds of that.

37 The basic issue relates to the ten abandoned units in respect of which Mr Wilson elected to contribute on 10 March 1973, that is, within three years before his death on 12 May 1974 at the age of 56. The basic issue is whether, in these circumstances, the plaintiff’s pension entitlement was affected by s12(5), putting those ten units out of account.


      The plaintiff’s first argument

38 It is common ground that none of the conditions specified in paragraphs (a), (b) and (c) of s12(5) was satisfied in this case. The plaintiff’s first argument is, however, that, as a matter of statutory construction, s12(5) does not limit the operation of s29(1)(a).

39 The foundation of the plaintiff’s argument is that the words in s29(1)(a), “the full pension for which [the employee] has been contributing at the time of such retirement”, mean a pension entitlement calculated on the basis of the number of units in respect of which the employee was contributing at the time of his retirement without limitation. That would include any abandoned units to which the employee was contributing at the time. The argument recognises that this result would be contrary to s12(5) when none of the conditions in paragraphs (a) (b) and (c) is satisfied as in this case. Reasons were then advanced as to why s29(1)(a) rather than s12(5) should prevail.

40 In my view, the plaintiff’s argument fails for the following reasons.

41 It is necessary to recognise that s29(1)(a) does not quantify the pension entitlement arising upon breakdown retirement. That is not the scheme of the legislation. The scheme of the legislation is that Part IV, Pensions and benefits, provides for pension entitlement and provides the machinery for computing pension entitlement. Division 1 of that part, Retirement on pension, creates an entitlement to pension on retirement at or after age 60 (s21(1)), retirement at or after age 55 (s21(1B) and on breakdown retirement at any age (s22).

42 It is Division 2 of Part IV, Grant of pensions and benefits, which provides the machinery for computing pensions. Within that division and the subdivision, Normal pension of contributor, s27(1) provides the machinery for computing pension entitlement arising “on the retirement of a contributor”.

43 Section 27(1) is in general terms. It does not relate to any particular form of retirement. It operates “except where otherwise provided”. There is no other provision for computing pension entitlement in the case of s21(1) retirement, ie age retirement at or after age 60. So s27(1) computes the pension entitlement for that kind of retirement.

44 There is special provision in the sections which follow relating to other kinds of retirement. Section 28 relates to female retirement at or after age 55. Section 28A(1) computes the pension entitlement for s21(1B) retirement, ie, retirement at or after age 55. (These are “otherwise provided” provisions as referred to in s27(1).)

45 It is in this context that s29(1)(a) provides for pension entitlement for s22 retirement, ie, breakdown retirement. Where the retirement is not due to the employee’s own fault, the employee is entitled to “the full pension for which he has been contributing at the time of such retirement”. Where the retirement is due to his own fault, the employee is entitled to something less, as specified in s29(1)(b).

46 By contrast with s29(1)(b), s29(1)(a) does not quantify the pension entitlement where the retirement is not due to the employees own fault.

47 How then is pension entitlement under s29(1)(a) to be quantified? The signpost is in the wording of entitlement in s29(1)(a) itself, “the full pension for which [the employee] has been contributing at the time of such retirement”. That directs attention to s27(1). There is nowhere else to go for the quantification. Section 27(1) operates to quantify the pension entitlement under s29(1)(a) for breakdown retirement without fault. Unlike breakdown retirement with fault under s29(1)(b), computation of the entitlement is “not otherwise specially provided”, the qualification built into s27(1).

48 What then of s12(5)? Section 12(5) is a quantification provision. Insofar as it may limit the operation of other provisions in the statute, it is other quantification provisions that it limits. Section 12(5) is in terms of a limit on the units that count in the computation of pension entitlement. It does not bear upon s29(1)(a). There is nothing in 29(1)(a) about units to be taken into account. There is therefore nothing in s29(1)(a) for s12(5) to operate upon.

49 The correct question to be addressed is not whether s12(5) limits s29(1)(a), but whether it limits the quantification provision, s27(1).

50 It was common ground before Studdert J in McCaffrey that the relevant question was whether s12(5) limited s29(1)(a). He decided that s12(5) did not have that effect. I agree, but for the reason I have given, namely, that s12(5) is a quantification provision and s29(1)(a) is not.

51 What, to my mind, is the correct question then falls to be answered, namely, whether the s12(5) limits the operation of s27(1). I will now address that question. The arguments relating to s29(1)(a), which found favour with Studdert J, do not bear upon it.

52 The short answer to the correct question is that the operation of s27(1) is qualified by s12(5) by reason of the phrase in s27(1), “except where otherwise specially provided”. Those words, in their ordinary meaning, give priority to any provision, applicable to the case, which quantifies pension entitlement in a different way, as well as to any other provision which qualifies the quantification of pension entitlement pursuant to s27(1) itself. Section 29(1)(b) is an instance of the former kind of other provision. Section 12(5) is an instance of the latter.

53 The plaintiff sought to avoid this approach with the argument that s27(1) is in two parts, the first (to the colon) being an entitlement provision and the second (after the colon) being a quantification provision. It was then said that the quantification of pension entitlement under s29(1)(a) fell to be determined under the second part of s27(1) which, it was observed, did not contain the phrase “except where otherwise specially provided” and which was therefore, it was said, unaffected by s12(5).

54 I do not accept that s27(1) can be divided up in this way. It is, from first to last, a quantification provision. The incidences of entitlement to retirement on pension as such are to be found elsewhere. By contrast with such other provisions, s27(1) prescribes the integers for quantifying pension entitlement, of which one – the number of units for which the employee was contributing at the time of retirement – is actually specified in the first part of the subsection.

55 The plaintiff’s construction of s27(1) is also discordant with the phrase linking the two parts, “that is to say”. The phrase indicates that the second part of the subsection is an amplification of the first, not that it is of a different character as the plaintiff’s argument contends.

56 A further difficulty with the plaintiff’s approach is that if the second part of s27(1) is read without the phrase “except where otherwise specially provided”, there is then an inconsistency between that part of s27(1) and s12(5). Section s27(1) must then yield to s12(5) under the principle of statutory interpretation that, where there is conflict between a general and a specific provision, the specific provision prevails: see D C Pearce and R S Geddes, Statutory Interpretation in Australia, 5th ed, at [4.30].

57 The plaintiff also argues that unless the pension entitlement under s29(1)(a) is different from the pension entitlement referred to in the first part of s27(1), s29(1)(a) is otiose. The difference proposed is an entitlement to a “full pension” under s29(1)(a) as distinct from a pension subject to s12(5) under s27(1).

58 There are two answers to this argument. First, it was sensible for the legislature to specify the entitlement following breakdown retirement without fault in s29(1) as well as the entitlement with fault, so as to present the complete scheme for breakdown retirement clearly in the one place. Section 29(1)(a) is unnecessary but its presence is explained in this way. One cannot therefore infer that s29(1)(a) was intended to have a more extensive effect than s27(1) would have had in the absence of s29(1)(a).

59 Secondly, the phrase “full pension” necessarily means an entitlement unaffected in its quantification by a provision such as s12(5). As I said earlier, the phrase is appropriate to convey that the employee’s units are to count in the computation of pension entitlement notwithstanding that the full contribution has not been paid for them due to premature retirement. The phrase does not indicate a higher level of entitlement than in the case of, say, ordinary age entitlement quantified under s27(1).

60 The whole of s27(1) is subject to the phrase “except where otherwise specially provided”, which renders the quantification of pension entitlement under the subsection subject to s12(5).

61 There is no scope, in these circumstances, for giving s29(1)(a) the unrestricted reading for which the plaintiff contends. Section 12(5) qualifies s27(1). It follows that units abandoned pursuant to s12(3) and recovered by election pursuant to s12(4)(b) do not count in the computation of pension entitlement, by operation of s12(5), unless one or more of the conditions in paragraphs (a), (b) and (c) is satisfied.

62 A consequence of this interpretation is that, whereas abandoned units which have been recovered count in the case of age retirement (condition (c)), they do not count in the case of breakdown retirement unless contributed to for at least three years (condition (a)). That is not, however, so strange a result as to compel a different interpretation. It is consonant with considered legislative intent that an employee, who is retired early for breakdown and who will not have paid the full contribution cost of his units, or the widow of an employee who dies early, likewise without paying the full contribution cost of the employee’s units, should be on a different and less advantageous footing compare with that of an age retiree who has paid the full contributions cost of his units.

63 In McCaffrey, Studdert J read s27(1) as limited by s12(5), as I do. He said (at 21):

          Plainly because of the language of s27 and of s28A contributors who became eligible for pensions under those sections become entitled to a pension, the quantification of which is limited by s12(5).

      However, he read s29 as providing for pension entitlement on breakdown retirement in contradistinction with s27, which he apparently read as confined to age retirement. And he read s29 as unaffected by s12(5). I, on the other hand, have read s27 as providing the quantification machinery for both age retirement and breakdown retirement. Conformably, s27 relates in terms to “retirement” generally, rather than to “age retirement” in particular. Indeed, it is central to my understanding of the scheme of the statute in relation to breakdown retirement that pension entitlement quantified under s27 – albeit limited by s12(5) – is payable in relation to that kind of retirement.

64 I am sufficiently satisfied that my own view of the legislation in this respect is correct as to warrant implementing that view notwithstanding the decision in McCaffrey.


      The plaintiff’s second argument

65 The plaintiff’s second argument is that s12B(2) provides a method of recovering abandoned units which is a true alternative to the method specified in s12(4)(b). The consequence of this argument would be that abandoned units in respect of which payments are being made under s12B are not subject to the disqualification in s12(5). The gist of the argument is that, by entering the deferment plan under s12B, an employee avoids the effect of s12(5) on abandoned units which have been recovered.

66 The amended agreed statement of facts includes (in paragraph 7) an agreed fact that, on 10 March 1973, Mr Wilson elected to contribute in respect of ten abandoned units and elected to contribute in respect of those (and other) units according to the s12B deferment plan. The instrument or instruments by which the election or elections were made is not in evidence. The terms in which the election or elections were made could be relevant and might foreclose any argument of statutory construction. But the parties’ legal representatives agree that the question of statutory construction arises on the facts as agreed. I am content to proceed on that basis.

67 I have to say that the role of s12B relative to s12 seems to me to be clear and it does not accommodate the plaintiff’s argument.

68 Section 12B(2) refers to two elections. The first election is an election (so far as is relevant) to contribute in respect of an abandoned unit or units. The second is an election to contribute under the s12B deferment plan. The first election is a condition precedent to the employee’s capacity to make the second election.

69 The capacity to elect between statutory alternatives is given by the statute. The capacity to elect to recover abandoned units is given by s12(4)(b):

          … he may elect to contribute in respect of one or more of his abandoned units of pension.

      The capacity to elect to contribute under the deferment plan is given by s12B (2):
          he may, notwithstanding any other provision of this Act, elect to contribute the total amount of contributions payable by … [etc.]

70 Under this regime, an election to recover abandoned units is only ever made pursuant to s12(4)(b) and is, accordingly, always an election to which s12(5) relates, irrespective of whether a further election is then made to pay under the s12B deferment plan.

71 Studdert J did not accept the plaintiff’s argument on this point. I agree with him in that regard.

72 One argument in support of the plaintiff’s approach requires special mention. Reference is made to the words “notwithstanding any other provision of this Act” in s12B(2). It is said that these words preclude a finding that Mr Wilson’s election to take up the abandoned shares was made under s12(4)(b). That is not so. The words relate to the second election mentioned in the subsection, not the first. They ensure that the election to contribute under the s12B plan over-rides the liability which would otherwise exist to contribute according to the table rates. That exhausts their effect. They have nothing to do with the first election mentioned in the subsection.

73 I would add that avoidance of s12(5) by electing to go into the s12B deferment plan is not compatible with plausible legislative intent. Why would the legislature give that advantage to employees who deferred payment of contributions over employees who paid at the more onerous table rates to the benefit of the fund?


      Answer to question 1

74 In consequence of the failure of the plaintiff’s first and second arguments, the first question should be answered, “No”.


      The plaintiff’s third argument

75 This argument relates to the second question which the parties have formulated for my decision. It was not put in McCaffrey and, accordingly, does not feature in Studdert J’s reasons for decision.

76 By this argument, the plaintiff proposes a way in which the condition in paragraph (a) of s12(5) might be satisfied, thereby obviating what would otherwise be the effect of s12(5) in putting the ten abandoned units out of account. What is proposed is a payment pursuant to s12B(5)(c).

77 The agreed statement of facts shows that no such payment has been made. A determination is sought as to the consequence of such a payment as a basis for further legal action by the plaintiff.

78 The first matter to be decided in this connection is the meaning of “the total amount of contributions unpaid” in s12B(5)(c). The phrase is used in s12B(5)(a) and (b) also. The meaning of the phrase is to be ascertained by reference to the function of s12B(5) in the scheme of s12B.

79 The deferment plan in s12B(2) is available to a male contributor from age 55. It applies in relation to any liability to contribute incurred after reaching that age. Such a liability may arise where additional units accrue as a result of a salary increase (and no election is made to reject them) or where an election is made to recover abandoned units. In either case, there has, in effect, been the exercise of an option to take up the units. In either case, the employee may elect to pay the contribution cost in relation to such units over a period of up to five years in lieu of the shorter period that would otherwise apply at the table rate.

80 Section 12B(5) addresses the situation where the employee who has elected to pay under the deferment plan ceases to be employed before completion of the deferred payments regime, whether by retirement or death. The employee or, in the case of his death, a qualifying widow, may then pay “the total amount of contributions unpaid” when the employment ceased. Otherwise, s12B(6) operates to provide a refund of the contributions paid in respect of the subject units, in which case there is no pension entitlement arising from those units.

81 Subsections 12B(5) and (6) provide an option between paying the “total amount of contributions unpaid” in respect of the subject units or reversing the employee’s decision to take them up.

82 In this context, what is meant by the phrase, “the total amount of contributions unpaid”? It means the total amount of the table contributions due and payable, but unpaid, up to the time when the employee ceased to be employed. A payment so calculated, in effect, reverses the election to contribute under the plan. It brings about the same situation as would have existed if the election to contribute under the plan had not been made.

83 This makes sense. The subsection addresses the situation where an employee ceases to be employed, with table rate contributions which have accrued to that time partly unpaid because of the employee’s election to contribute under the plan. The subsection operates to bring that situation into line with the position of other contributors who have not so elected. Equity between contributors demands such a provision. That is its function.

84 The phrase “the total amount of contributions unpaid” does not mean the total contribution cost of the units in question which would have been paid but for the early cessation of employment. That would make no sense in the legislative context.

85 It follows that s12B(5) does not authorise a payment as proposed by the plaintiff. The only payment authorised by s12B(5) would be of no benefit to the plaintiff in the present case.


      Answer to question 2

86 For these reasons, question 2 should be answered, “No”.


      Orders

87 Counsel should bring in short minutes of order providing for determination of the proceedings in the light of the answers given to the agreed questions.

      -o0o-

Last Modified: 02/27/2003

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