William Keith Tobin v Commonwealth of Australia (No 2)
[2013] ACTSC 271
•20 December 2013
WILLIAM KEITH TOBIN V COMMONWEALTH OF AUSTRALIA (NO 2)
[2013] ACTSC 271 (20 December 2013)
DAMAGES – damages for negligent misstatement – where the negligent misstatement lead the plaintiff to not join a public sector superannuation fund when eligible – where there would have been a transfer from the CSS to the PSS – whether the plaintiff would have taken the benefit as a lump sum, pension, or combination – turns on its own facts
Meredith v Commonwealth (No 2) [2013] ACTSC 221
Tobin v Commonwealth of Australia [2013] ACTSC 240
Young v Rothin [2009] ACTSC 71
No. SC 751 of 2008
Judge: Refshauge J
Supreme Court of the ACT
Date: 20 December 2013
IN THE SUPREME COURT OF THE )
) No. SC 751 of 2008
AUSTRALIAN CAPITAL TERRITORY )
BETWEEN:WILLIAM KEITH TOBIN
Plaintiff
AND:COMMONWEALTH OF AUSTRALIA
Defendant
ORDER
Judge: Refshauge J
Date: 20 December 2013
Place: Canberra
THE COURT FINDS THAT:
Mr Tobin would, on retirement at age 60, have taken his final PSS benefit as a 50% lump sum and 50% pension.
On 16 December 2013, I entered judgment for William Keith Tobin, the plaintiff, against the Commonwealth of Australia, the defendant, because, I found, it was responsible for negligent misstatements that had been made to him about his eligibility to apply for and be admitted into a Commonwealth superannuation scheme. See Tobin v Commonwealth of Australia [2013] ACTSC 240.
Because the expert evidence that had been carefully prepared and presented did not, however, provide me with the precise details needed to calculate the damages that should be awarded, I identified the relevant considerations, some of which were controversial and which, therefore, I had to decide from the evidence I heard. I requested the parties to take steps to quantify the damages.
This necessitated some further actuarial calculations to be undertaken, but the considerations I had set out would, it appeared to me, provide a sufficient basis to make such calculations uncontroversial and I expected that, after the calculations had been done, a single agreed amount for the damages would be provided to me for which sum I could then enter judgment.
Regrettably in this case, I omitted to decide an important factor which is needed in order to complete the calculations. As best as I can recall, the issue was originally considered by me but omitted from the reasons for judgment by editorial zeal on my part.
THE ISSUE
In the decision (at [182]), I found that, more likely than not, Mr Tobin would have, on 1 July 1990, transferred from the Commonwealth Superannuation Scheme (CSS) to the Public Sector Superannuation Scheme (PSS). For a description of these Schemes, see Meredith v Commonwealth (No 2) [2013] ACTSC 221, especially at [23]-[26].
On retirement, members of the PSS, unlike members of the CSS, had a choice to take their entire benefit as an immediate lump sum. In submissions made by the Commonwealth, in the context of whether members of the CSS would choose to transfer to the PSS, the issue was explained as follows:
In the PSS, members have the choice upon retirement to take part or all of their benefit as a CPI-indexed pension.
The pension conversion terms available in the PSS are ‘generous’. In approximate terms, a member who chooses to take their benefit in pension form will receive a benefit which has an actuarial value at least 60% higher than the lump sum benefit that they would receive. Bluntly, members are faced with a choice between a benefit worth, say, $100 and a benefit worth $160. If the decision was rational, everyone would choose the $160 benefit. In reality at least 50% of people take the $100 benefit.
It follows that the opportunity to receive the entire retirement benefit as a lump sum provided a motivation to transfer to the PSS.
Accordingly, I needed to decide whether, on retirement, Mr Tobin would have taken some or all of his benefits as a lump sum or some or all of his benefits as a pension.
THE FACTS
As with many of the factors that had to be decided, the evidence for one decision or another was thin. The issue was highly hypothetical and so direct evidence had limited value.
While at an extreme, I could, perhaps, find that Mr Tobin had not satisfied me of any particular choice; I should avoid that outcome, if at all possible, for my findings show that he is entitled to damages.
It does not seem to me that the alternative, that can sometimes be used in personal injury litigation where a factor is speculative, that is, the awarding of a buffer (see Young v Rothin [2009] ACTSC 71 at [267]-[281]), is available.
The issue is somewhat complicated because Mr Tobin asserted, and I so found, that had he been a member of a Commonwealth superannuation scheme from the time he was first eligible, namely on 1 July 1976, he would not have taken a redundancy offered to him on 4 July 2001. Instead he would, I found (at [178]), have continued in government service until age 60.
Thus, while I have evidence of his actual approach to his retirement benefits as at 4 July 2001, it may not necessarily be the approach he would adopt in the events as I have found they would have been.
After accepting the redundancy, Mr Tobin commenced a cleaning business. Had he retired at 60, I do not consider that he would have gone into business. In 2002, he withdrew funds from the retirement plan into which he had rolled over his PSS benefits. Again, this does not seem relevant.
Since July 2008, Mr Tobin has been receiving an invalidity pension from Centrelink.
The only direct evidence was given during the oral evidence he gave about whether he would have accepted the redundancy and when he would have retired. The relevant part of the evidence is as follows:
If I would have had say, $400,000 or $500,000 or $600,000 whatever it was, knowing that the super was building up each year I would have kept on going in the super fund and not accepted the redundancy package because I would have known that each year that super fund would have been gaining in interest and interest and interest and I had the possibility of putting maybe 7 to 10% in to build up and build up for my retirement that I could have got a pension, your Honour.
If, and this is a hypothetical question, but if you had remained working in Forestry, do you know when you would have likely retired? --- Most probably, not knowing I found out I got cancer, but 60. I would have said 60 because me and the wife had been talking about it that it would probably be worth taking it at 60 because we both worked from when we left school and very rarely we ever took a holiday. So I would say 60.
I consider that I can draw from this that Mr Tobin would have been interested in a pension and likely to have wanted that option. The reference to a holiday also suggests that he would have sought a lump sum amount to provide for some of the benefits he and his wife had been denied.
In addition, Mr Tobin varied his contributions to the PSS when he ultimately did join it because he had a preference for paying cash for items, such as the purchase of a car and house related expenses. This suggests to me that he would have been interested in access to some funds on retirement.
THE SUBMISSIONS
Neither party made direct submissions on the issue.
Mr Tobin, through his counsel, had submitted that he would not have transferred to the PSS, so he did not directly address that issue. As to how he would have taken his CSS benefits when he retired, the submissions were:
[W]hen Mr Tobin turned 60 years of age, he would then have accessed his CSS – taking the employer component as a fully indexed pension and the employee and productivity components as a lump sum – which was the most beneficial option at that time.
There are two elements of this: the taking of some benefits as a lump sum and some as a pension, and taking the most beneficial option at the time. They may not be the same for the relevant circumstances.
I did not have evidence of what would be most beneficial to Mr Tobin in respect of the PSS final benefits, though the Commonwealth’s submissions referred to above strongly suggest that a pension was good value in the PSS.
For obvious reasons, the Commonwealth’s submissions did not address this issue. It submitted that Mr Tobin’s claim that he would not have taken the redundancy, was “nebulous” and “speculative”. I did find that it was made out but not unreasonably the Commonwealth did not address the alternative scenario.
CONSIDERATION
As I have noted, the evidence on which I can make a finding on this issue is not very clear. There are, however, enough pointers to suggest that Mr Tobin would have wanted, on retirement, some funds but also a pension.
It would be entirely speculative to suggest what proportion of his benefits he would have applied to each. In those circumstances, it seems to me that I should use a somewhat arbitrary half and half split between the two.
I am somewhat fortified by the fact that the parties, in pointing out (for which I am grateful) that I had not addressed this issue, sought clarification of whether I considered “the appropriate hypothetical benefit option to be:
1.a 50% lump sum and 50% pension
2.a lump sum only OR
3.a pension only.”
Accordingly, I find that Mr Tobin would, on retirement at age 60, have taken his final PSS benefit as a 50% lump sum and 50% pension.
I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.
Associate:
Date: 2013
Counsel for the plaintiff: Mr R Davis & Mr J Gordon
Solicitor for the plaintiff: Snedden Hall & Gallop
Counsel for the defendant: Mr S P Estcourt QC & Mr C Dowsett
Solicitor for the defendant: Australian Government Solicitor
Date of hearing: 18, 19, 23-26, 30 November 2009, 1-3, 8-11, 14 December 2009, 9-11 February 2010
Date of judgment: 20 December 2013
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