Wilson McClelland v Telstra Corporation Limited
[2014] AATA 719
•2 October 2014
[2014] AATA 719
Division GENERAL ADMINISTRATIVE DIVISION File Number
2014/1872
Re
Wilson McClelland
APPLICANT
And
Telstra Corporation Limited
RESPONDENT
Decision
Tribunal Deputy President P E Hack SC
Date 2 October 2014 Place Brisbane The decision under review is affirmed.
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Deputy President P E Hack SC
CATCHWORDS
COMPENSATION – Compensation for incapacity – Employees in receipt of lump sum benefit – Whether ‘member contributions’ should be deducted from incapacity payments – Whether applicant ‘required’ to make contributions initially – Decision under review affirmed
LEGISLATION
Safety, Rehabilitation and Compensation Act 1988 (Cth) s 21
CASES
Telstra Corporation Limited v Peisley (2006) 151 FCR 275
SECONDARY MATERIALS
Explanatory Memorandum to the Safety, Rehabilitation and Compensation and Other Legislation Amendment Bill 2006
REASONS FOR DECISION
Deputy President P E Hack SC
2 October 2014
The applicant, Mr Wilson McClelland, is a former employee of the respondent,
Telstra Corporation Limited. Mr McClelland commenced employment with what was then the Postmaster General's Department in January 1970. In 1992 Mr McClelland became a member of what was then called the Telecom Superannuation Scheme, a superannuation fund created by a trust deed dated 13 June 1990.
That Scheme permitted employees to make "member contributions" as well as providing a defined benefit to those employees. The issue in this case is whether Mr McClelland’s entitlement to compensation by way of weekly incapacity payments is to be reduced to take account of member contributions that Mr McClelland was making at the time of the cessation of his employment with Telstra in 1998.
There is no dispute about the factual background. When Mr McClelland commenced employment with the Commonwealth in 1970 he became a member of the Commonwealth Superannuation Scheme. On 27 August 1992 his membership of that Scheme was translated into membership of the Telecom Superannuation Scheme
(now called the Telstra Superannuation Scheme) in a manner that is not presently material. The trust deed of 13 June 1990 provided for member contributions in these terms:
Part 2.2
Member contributions
2.2.1 Contribution Rate Options.
A Member must contribute to the Fund during the Member's Fund Membership at whichever of the permissible Contribution Rate Options is selected or deemed to be selected by the Member in accordance with this part 2.2.
2.2.2 Initial selection of Contribution Rate Option.
Subject to clause 2.2.4, upon first becoming a Member of the Fund a Member must select which of the permissible Contribution Rate Options is to apply to the Member with effect from the commencement of Fund Membership. Unless otherwise agreed between the Member, the Trustee and the Principal Employer, a Member who does not make an effective selection when first eligible to do so is deemed to have initially selected the 0% Contribution Rate Option.
2.2.3 Change of Contribution Rate Options.
Subject to clause 2.2.4, a Member may change the Member's rate of contributions by selecting another of the permissible Contribution Rate Options which the Member wishes to apply with effect from the next following Contribution Review Date but, if no effective selection is made by the Member with effect on a Contribution Review Date, the Member's rate of contributions remains unchanged.
[clause 2.2.4 deals with the mechanism for selecting a rate of contribution]
Subsequent amendments have been made to the trust deed but not in a way that either party suggested had any present relevance. When Mr McClelland joined the
Telecom Superannuation Scheme in August 1992 he elected to make a member’s contribution of 6%. He reduced his contribution rate to 5% on 1 July 1993 and continued to contribute at 5% until his employment with Telstra ended in May 1998.
In April 1993 Mr McClelland was injured in the course of his employment with Telstra. It thereafter accepted liability to pay him compensation pursuant to the
Safety, Rehabilitation and Compensation Act 1988(Cth) (the SRC Act) for a permanent impairment of degenerative changes to the lumbar spine. Mr McClelland was able to return to full-time employment in mid-1994.
Mr McClelland ceased employment with Telstra on 20 May 1998 and, at the same time, received a lump sum payment of his superannuation benefits. After the cessation of his employment Mr McClelland has continued to receive compensation by way of incapacity payments under Division 3 of Part II of the SRC Act. On 29 January 2014 Telstra made a determination of the amount of compensation for incapacity payments to which
Mr McClelland was entitled for the period from 30 January 2014 to 23 April 2014. On
26 March 2014 Mr McClelland sought a reconsideration of the decision on the footing that Telstra was wrongly reducing the amount of incapacity compensation by deducting an amount for superannuation payments. On 2 April 2014 the decision was affirmed on reconsideration. These proceedings were commenced on 11 April 2014.
It is common ground that Mr McClelland’s entitlements to incapacity compensation fall to be determined in accordance with s 21 of the SRC Act. That is so because he is retired from his employment and received a lump sum benefit under a superannuation scheme as a result of his retirement. Section 21(3) of the SRC Act sets out the formula to be applied ordinarily. It provides:
(3) The amount of compensation is the amount worked out using this formula:
where:
amount of compensation means the amount of compensation that would have been payable to the employee for a week if:
(a) section 19, other than subsection 19(6), had applied to the employee; and
(b) in the case of an employee who was not a member of the Defence Force immediately before retirement—the week were a week referred to in subsection 19(3).
weekly interest on the lump sum means the amount worked out by:
(a) multiplying the superannuation amount in relation to the lump sum benefit received by the employee by the rate specified in an instrument made under subsection (5); and
(b) dividing the result of paragraph (a) by 52.
There is, though, a modification of the formula in s 21(4) of the SRC Act for employees, like Mr McClelland, who retired before the amendments made to the SRC Act in 2007. That subsection provides,
(4)In using the formula in subsection (3) to calculate an amount of compensation for an employee who retired before the day on which item 22 of Schedule 1 to the Safety, Rehabilitation and Compensation and Other Legislation Amendment Act 2007 commenced, use "SC" instead of "5% of the employee's normal weekly earnings". For this purpose:
SC means the amount of superannuation contributions that the employee would have been required to pay in that week if he or she were still contributing to the superannuation scheme.
The result is that it is agreed that Mr McClelland’s compensation is to be determined by the formula in subsection (3), modified in this way. The first integer, the "amount of compensation", is agreed as is the "weekly interest on the lump sum". The issue that divides the parties is that of "superannuation contributions” – what was the amount of superannuation contributions that Mr McClelland would have been required to pay were he still contributing to the superannuation scheme.
Mr Black, counsel for Mr McClelland, submitted that no sum for superannuation contributions ought be deducted. That was so because Mr McClelland could not have been "required" to pay any superannuation contributions had he remained in employment – it was open to him to elect to pay 0%, that is, to make no contribution. In such circumstances it could not be said that Mr McClelland was required to pay contributions and thus would not have been required to pay contributions had he continued as a member of the scheme. Use of the word "required" imported an obligation or an imperative. And, given that Mr McClelland was not obliged to pay any sum because he could elect to make no payment, he could not be regarded as being required to pay superannuation contributions had his employment continued. Reference was made to this passage in the Explanatory Memorandum to the Safety, Rehabilitation and Compensation and Other Legislation Amendment Bill 2006, by which s 21(4) was introduced:
The policy intention of the SRC Act is for retired employees on incapacity benefits who are in receipt of superannuation amounts to receive 70% of their normal weekly earnings. When the SRC Act commenced, employees contributed a minimum of 5% of their normal weekly earnings (NWE) to the Commonwealth Superannuation Scheme. The reduction in retirees' incapacity benefits from 75% to 70% of NWE was based on the rationale that had the recipient not retired, he or she would have been required to continue making the 5% superannuation contribution. The 5% contribution was taken as the benchmark so all retired employees' weekly compensation payments were reduced by this amount, referred to as the `notional superannuation contribution'.
The level of the notional superannuation deduction depends on the minimum amount the employee is required to contribute to their superannuation fund. Since the introduction of this provision in 1988, Commonwealth public servants and those covered by the SRC Act now belong to a range of superannuation schemes under which different minimum contributions may be made. The Public Sector Superannuation (PSS) scheme requires a minimum 2% employee contribution up to a maximum of 10%. Therefore, employee contributions under the PSS scheme may vary from 2% to 10% at the employee's discretion. Other employees covered by the Act may be members of funds which do not require a minimum contribution. Retired employees do not have any deduction made from their incapacity payments.
Mr Black placed particular emphasis upon the final sentence. Additionally, he emphasised that the legislation is in the nature of social legislation and that ambiguity ought be resolved in favour of the employee.[1]
[1]Telstra Corporation Limited v Peisley (2006) 151 FCR 275 at [35] was relied upon.
Telstra, for whom Mr Dube appeared, argued that an amount of 5% of normal weekly earnings was required to be deducted. There was no indication that Mr McClelland sought to reduce his contribution prior to leaving the scheme thus 5% was the level of contributions he would have been "required" to make were he still in the scheme.
Whilst the argument for Mr McClelland has some superficial attraction I do not accept that "required" is to be construed in that way. The subsection requires consideration of the amount of superannuation contribution that Mr McClelland would have been required to pay each week if he were still contributing to the superannuation scheme. The word "required" in my view is used in the sense of the obligation that would have existed had membership not ceased. Immediately prior to Mr McClelland ceasing his membership of the scheme he was "required" to make contributions of 5%. That was so because he had elected to make contributions at that level. Clause 2.2.1 of the trust deed bound him to pay at that rate unless and until he made a fresh election to pay contributions at some other rate. It is not to the point that he could elect to make no contributions; he did not make that election.
The passage from the Explanatory Memorandum does not assist in the construction question. The "policy intention" of the SRC Act as originally enacted remains with the amendment however the evident purpose of the amendment was to cater for the range in permissible contributions given that there was no longer a common requirement for
5% deductions. The final sentence in the passage, on which particular reliance is put, refers to the undoubted fact that retired persons no longer make contributions to superannuation. It does not assist Mr McClelland’s argument.
In the result the decision under review will be affirmed.
I certify that the preceding 12 (twelve) paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC ............................[Sgd]........................................
Associate
Dated 2 October 2014
Date of hearing 26 September 2014 Counsel for the Applicant Mr M Black Solicitors for the Applicant Think Legal Solicitors for the Respondent Sparke Helmore
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