Coonara Superannuation Services Pty Ltd v Simons

REASONS FOR JUDGMENT 1 This is an appeal under s 46 of the Superannuation (Resolution of Complaints) Act 1993 ("the Act"). 2 The applicant is the trustee of the IBM Australia Limited Retirement Plan ("the Plan"). The respondent is a former member of the Plan, who made a complaint under s 14 of the Act to the Superannuation Complaints Tribunal ("the Tribunal"). His complaint was successful. 3 This appeal has not been defended by the respondent. Section 46(5) of the Act provides that, in those circumstances, the Court must not make an order awarding costs against him. However, the respondent's absence meant that, not only was there no contradictor at the hearing, but that the only documents included in the appeal papers were those proposed by the applicant. These comprise the respondent's written complaint to the Tribunal (but not the attachments to that complaint), the trust deed establishing the Plan (which incorporates its Rules), the Tribunal's determination and the written reasons for its determination. I shall now sketch the essential background to the present appeal, so far as may be gleaned from the appeal papers. 4 The respondent was born on 12 March 1940. He was employed by IBM Nederland NV between 1 July 1963 and 31 July 1982 and by IBM Australia Limited between 21 January 1985 and 31 March 1995. The respondent was, as I have mentioned, a member of the Plan. As a member who retired after he attained the age of 55 years and whose "IBM Service" as at his retirement on 31 March 1995 was "at least 10 years", he was entitled to receive an Early Retirement Pension under Rule 14.5 of the Plan. 5 Article 11 of the Rules operated so that the respondent's period of service with IBM Nederland NV was deemed to be part of his "IBM Service", which was a factor in the calculation of the annual rate of his pension under the Plan. Pension payments normally commenced after a member attained the age of 65 years, but a member could elect to have payment of an Early Retirement Pension commence forthwith at a reduced rate. The amount of such a reduced pension for the respondent was determined to be $20,516 per annum. A member could also apply under Rule 15.1 to have his pension entitlement commuted to a lump sum. The respondent made such a request. 6 The respondent was also entitled, as a result of his service with IBM Nederland NV, to be paid a pension by that company's pension fund. That pension was payable to him from 1 April 2005 after he attained 65 years of age. The value of his Dutch pension as at the date of his retirement from the service of IBM Australia Limited was $23,576 per annum. Furthermore, it was "indexed" at an annual rate of 2.5 per cent. This pension could not be commuted to a lump sum. If the respondent died, his wife was immediately entitled to 60 per cent of the Dutch pension. 7 On 19 April 1995 the applicant informed the respondent of its decision on the commutation of his pension entitlement. The pension of $20,516 would be converted, using a commutation factor of 12.792, to a lump sum of $262,440. However, there would be offset against that sum a further lump sum representing the present value of the Dutch pension to be paid to the respondent from 1 April 2005. The Plan's actuary had determined that amount to be $141,808. Accordingly, the applicant decided to pay the respondent a lump sum of $120,632, being the difference between these two amounts. The respondent complained about that decision, but on 22 August 1995 the applicant confirmed its decision. 8 The Tribunal received the respondent's complaint under s 14 of the Act on 17 October 1995. The respondent complained about several aspects of the applicant's decision. However, for the purposes of the present appeal, I am concerned only with his claim that "a substantial portion of my future Dutch retirement benefit has been confiscated in the determination of the current value to be deducted immediately from my Australian retirement benefit". 9 The applicant justified its decision by reference to Rules 11.3 and 3.1 of the Plan, which relevantly provided: "11.3 In no event will a Member be entitled to duplicate benefits under this Plan and similar Plans either of the Group or a Government with respect to the same period of Service. Any such benefits which become payable, or which have been paid as a result of such service, will be deducted from the amount otherwise payable under this Plan pursuant to Article 3." "3.1 There shall be deducted from the amount payable under this Plan any amount paid pursuant to this Plan or paid or payable to a Member or Beneficiary as a result of the same period of IBM Service, pursuant to any pension, retirement, severance, indemnity, provident fund or other similar plan whether in the form of instalments, or lump sum and whether private or sponsored by a government, . . . . . . For this purpose, the Actuary will determine the equivalent of any amount to be deducted and advise the Trustee accordingly." 10 On reviewing the applicant's decision, the Tribunal made a determination, which it subsequently recorded in its written reasons as follows: "On 27 February 1997 the Tribunal decided to set aside the decision of the Trustee and remit the matter back to the Trustee with the direction that the Dutch benefit has not been paid and nor is it payable to [the respondent]. Therefore no deduction can be made from [the respondent's] retirement income until the Dutch pension is paid or payable. This means that [the respondent's] complaint has been successful." 11 The Tribunal gave its written reasons on 28 April 1997. It noted (at p3) that the applicant was able to commute a member's pension under Rule 15.1, and then identified (at p4) the issue related to this appeal as: "Whether it was appropriate to offset any pension entitlement [the respondent] might be entitled to from Holland against the lump sum early retirement payment [the respondent] is entitled to in Australia". The Tribunal expressed its opinion (at p7) that it was "most appropriate" to refer to the rights and obligations of the respondent and the applicant under the Plan's Rules. It then referred to Rules 11.3 and 3.1 and said (at pp 8-9): ". . . the crucial issue in this matter is to decide whether the Dutch pension has been paid or is payable to [the respondent]. Clearly the Dutch pension has not been paid. Therefore the issue is whether or not it can be said that the Dutch pension is payable. The Tribunal has no hesitation in finding that the pension or lump sum payable to [the respondent] under the Trust Deed is paid at the rate it is, because of the period of service in Holland. It has also no difficulty in finding that as result of the period of service in Holland a Dutch pension will be paid to [the respondent] from the age of 65 years. Therefore two lots of benefits are to be paid to [the respondent] for the same period of service. The question is whether the Dutch benefit could be said to have become payable or paid, and thus should be deducted from the benefit paid under the Australian Plan pursuant to Article 3. The term "payable" has been considered by the courts both in England and Australia for several hundred years. It is a term often used in Wills, and thus it becomes necessary for the courts to interpret its meaning. At various stages the courts have stated that the word is ambiguous and elastic. Perhaps the best summary of the meaning of 'payable' is found in the case of Haydon v Rose (1870) LR 10 Eq 224 at 227. The court said: "Unquestionably, in the ordinary use of language, the words 'before it becomes payable' would mean before it comes into the hands of the person who is to receive it; but the inconvenience of such a construction, leading as it does to the postponement of the time at which an absolute interest is taken, is so great that the court has held, in a very long series of decisions that 'payable' shall mean 'vested'." If the word "vested" is substituted for the word "payable" in Article 11.3 and Article 3.1, then the meaning would be somewhat clearer. The word "vested" was used in superannuation law prior to the introduction of the Superannuation Industry (Supervision) Act 1993 (SIS Act). It was used in the context of a benefit which was accruing. The SIS Act introduced the term "accrued benefit" rather than "vested benefit", or [sic] term which also appears to lack precision. Because the word "vested" has been used so imprecisely in superannuation law, the Tribunal preferred to rely on the meaning given to "vested" in case law. That is, all contingencies must be met before the benefit becomes vested in a person. The person is given a present right to the immediate possession of property. In this case it would be necessary for [the respondent] to have either reached the age of 65 years, or for [the respondent] to have died and his wife survived him for the Dutch pension to have vested. That is, neither [the respondent] nor his wife have any present entitlement to the Dutch benefit. That benefit does not vest until he reaches 65, or he dies and his wife survives him. This would mean that the Dutch benefit has not become payable and it has clearly not been paid. Even though the Dutch benefit will be paid as a result of the same service, because it is not payable or paid it cannot be deducted pursuant to Article 11.3. Article 3.1 also makes it clear that the amount to be deducted will only be deducted if the benefit is paid or payable. Once again because the Dutch benefit is not payable it cannot be deducted. Therefore the Tribunal concludes that it is inappropriate to deduct an amount representing the Dutch pension from [the respondent's] entitlement under the Australian Trust Deed until [the respondent] reaches the age of 65. In the light of this interpretation of the Trust Deed it was not necessary for the Tribunal to go on to consider whether the present value given to the Dutch pension was appropriate. The Tribunal notes that the Trustee has an absolute discretion as to whether or not [the respondent] is paid a lump sum or a yearly pension. Given the above interpretation of the Trust Deed it would appear that any deduction in relation to the Dutch pension could only be made if [the respondent] continued to receive a benefit from the Australian Fund after he turned 65." (Emphasis supplied) 12 This appeal was instituted on 30 May 1997. It was not entered for hearing until after the decision of the High Court in Attorney-General (Cth) v Breckler (1999) 197 CLR 83. The appeal was then heard on 10 September 1999. However, the applicant was subsequently given leave to file further written submissions, in the light of the decision of Merkel J in Seafarers' Retirement Fund Pty Ltd v Oppenhuis (1999) 94 FCR 594, and those submissions were received on 23 December 1999. 13 A threshold question raised by the applicant on this appeal concerns what it described as "the power or authority conferred on the Tribunal by s 37(3) of the [Act]". The applicant submits that the Tribunal had no jurisdiction to entertain the respondent's complaint because it involved a decision that was "non-discretionary" in character. This submission rests on the holding of the Full Court of this Court in Wilkinson v Clerical Administrative and Related Employees Superannuation Pty Ltd (1998) 79 FCR 469. The applicant also refers to what the majority of the High Court said in Breckler at 104. Accordingly, it submits that, to the extent that Merkel J's reasoning in Oppenhuis is inconsistent, it ought not to be followed. A Full Court of this Court has most recently expressed the view that the holding in Wilkinson is not determinative of a case where the decision complained of involved the "the formation of an opinion as a result of a process of evaluation": National Mutual Life Association of Australia Ltd v Campbell [2000] FCA 852 at [21]-[35]. 14 However, notwithstanding the careful and detailed submissions of the applicant on this question, this case does not require me to decide whether the Tribunal is limited to the review of the exercise of discretionary powers. Here the ultimate decision, which is the subject of the respondent's complaint, was made under Rule 15.1. The decision whether "to refuse, approve, or approve only in part" any request to commute a member's "pension entitlement under these Rules" was expressed in Rule 15.1.3 to be a matter of "absolute discretion". The Tribunal correctly noted this provision in the final paragraph of its reasons. Furthermore, "the rate of conversion of each dollar of pension to a lump sum" is not fixed by the Rules, but is a matter for determination by the applicant as trustee of the Plan. In my opinion, the Tribunal had jurisdiction to determine the respondent's complaint. 15 The other questions of law raised on the appeal concern the correct construction of Rule 3.1 or, more specifically, of the word "payable" in the phrase "paid or payable" used in that Rule. The applicant submits that the Tribunal erred in construing that provision when it reached the opinion that I have highlighted in its reasons. 16 The applicant criticised the Tribunal's adoption of the meaning given to "payable" in Haydon v Rose (1870) LR 10 Eq 224. Such criticism is, in my view, well justified. That case concerned an established rule of that word's construction in gifts over under the law relating to wills. I accept the applicant's submission that Haydon v Rose does not establish any rule of universal application that the word "payable" should always be construed to mean "vested". 17 The meaning of the word "payable" depends, as the applicant correctly submits, on the context in which it appears. In the present case it occurs as part of the phase "paid or payable" in Rule 3.1. A most common meaning of the word "payable" is "to be paid". In that sense Rule 3.1 may be seen to distinguish between past ("paid") and future ("payable") payments pursuant to similar plans in identifying any amount to be deducted "from the amount payable under this Plan". Again, in this last phrase, the word "payable" plainly means to be paid. (Rule 14.11 provided that "each Member's pension under this Plan shall be payable to him by equal monthly instalments in arrears".) 18 Under Rule 15.1 the applicant had first to ascertain the respondent's "pension entitlement". That task required it to look to the future. So far as a pension under the Plan is concerned, the deduction of any amount "payable" pursuant to a similar plan, which Rule 3.1 requires, means that it will be necessary to determine each month whether such an amount was to be paid. In the respondent's case the deduction of the Dutch pension payable after 1 April 2005 will result in no amount being payable to him under the Plan after that date. 19 At his retirement the respondent was, therefore, entitled under the Plan to be paid a pension of a fixed sum for ten years only. The commutation of that entitlement to a lump sum by applying a factor of 12.792 to the annual value of the pension would appear at first blush to be quite generous. The appeal papers do not disclose how that commutation factor was determined. In any event, in my opinion, the Tribunal erred in holding that the Dutch pension was not payable within the meaning of Rule 3.1. Its determination will, therefore, be set aside. 20 The appeal papers do not include the parties' written submissions to the Tribunal. I can only guess at the basis upon which the applicant purported to offset the present value of the Dutch pension and how it made its calculation of that value. The actuary may have treated the Dutch pension as if it were an asset of the Plan. It may be doubted that such an approach is required by Rule 3.1, which is a provision that can most readily be applied to pension payments under the Plan. Once a member's "pension entitlement under these Rules" is calculated for the purposes of Rule 15.1, it is not easy to see how some notional lump sum (to which a member is not, in fact, entitled under the rules of the pension plan of another company in "the Group") can be used to offset the commuted value of a member's pension. It is not difficult to see how such a decision under Rule 15.1 would lend itself to a complaint that it was unfair or unreasonable. However, this topic has not been subject of the present appeal, and I shall refrain from further speculation. 21 I shall make a declaration as to the construction of the Plan's Rules and remit the matter to the Tribunal to be determined again in accordance with that declaration.