Edwards v Commonwealth Superannuation Corporation

1. The appeal be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 The outcome of these appeals depends upon the claim made by the appellant ("Mr Edwards") that payments made to his children pursuant to s 114 of the Superannuation Act 1976 (Cth) ("the Superannuation Act") ought instead to have been paid to him. His children had been found to be eligible to receive part of a payment payable to their mother ("Ms Harris") as the de facto spouse of the late Mr Paulusz, a deceased member of the Commonwealth Superannuation Scheme Fund ("the Fund") managed by the Commonwealth Superannuation Corporation ("the Trustee"). On 20 May 2013 it had been determined by the Superannuation Complaints Tribunal that Ms Harris was eligible for a spousal benefit under the Fund and that a portion of the pension would include the payment of arrears in respect of her children from 17 May 2009 (the date of Mr Paulusz's death) until the then next pension payday (then being 8 August 2013). On 29 July 2013 the Trustee decided that the portion of Ms Harris' pension referrable to her children be paid directly to them pursuant to s 114 of the Superannuation Act. 2 The payments in question related to a period during which the two children were in the care and control of and were dependant on Mr Edwards (their father) rather than their mother (Ms Harris) or the deceased superannuation member (Mr Paulusz). During that period Mr Edwards may be assumed to have expended money for the benefit of his children for their support and maintenance which could to some extent, if not wholly, have been met from the payments from the Fund had payments from the Fund been made at the time he incurred the expenses on behalf of his children. 3 On 29 July 2013 the Trustee decided that the portion of the amount payable to Ms Harris which represented the arrears of pension payments in respect of the eligible children "be paid directly to them" rather than to Mr Edwards. On 23 August 2013 he filed a complaint with the Tribunal which on 3 May 2016 affirmed the decision of the Trustee. That decision was the subject of an appeal to this Court under s 46 of the Superannuation (Resolution of Complaints) Act 1993 (Cth) ("the Complaints Act") and also an application for judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth), both of which were decided against Mr Edwards on 12 April 2017. It is from those decisions that Mr Edwards appealed to the Full Court. 4 Various grounds and issues were raised by Mr Edwards in his amended notices of appeal and submissions but all depend upon whether, in the circumstances, the Trustee's decision (affirmed by the Tribunal and subsequently by the primary judge) erred in deciding that the arrears of pension in respect of Mr Edwards' children be paid directly to them rather than to him. Oral submissions at the hearing of the appeals had at first been that the Trustee had failed to take into account whether the arrears of the pension payments referrable to Mr Edwards' children should have been paid to him, but it was clear that the Trustee had expressly taken that fact into account and had done so as had been submitted by Mr Edwards to the Trustee in 2013. It was also clear from the decision of the Tribunal, and from the decision of the primary judge, that whether the payments should be paid to him was taken into account, and rejected, by the Tribunal, and on appeal her Honour found no legal error in the Tribunal's reasoning. It was also argued, however, for Mr Edwards that the Trustee could not have decided that the amounts be paid directly to the children either as a matter of law or because the decision was one which ought to have been made on the assumption that it was being made at a time when they were not of an age able to receive payment directly. The complaint was expressed in ground 1(iii) in both appeals as being, in effect, that the decision about the payment ought to have been made as at the time of death (when the children were minors) rather than as at the date of the decision (when the children were older). 5 It is desirable to refer to the Trustee's decision to see how the issue arose and how the Trustee directly addressed the claim that Mr Edwards had made for payment to him of the arrears which was payable in respect of his children. The decision by the Trustee dated 29 July 2013 began by way of background to note that a request had been received from Mr Edwards "that arrears of children's pension be paid to him as the legal guardian of the children at the date of death of the member". The amounts of the arrears had not then yet been determined but the Trustee decided to consider immediately "the matter of to whom" the arrears should be paid. The decision under the heading "Discussion" dealt squarely with the question of whether the arrears payable in respect of the children should be paid to him. It quoted an email from him dated 10 July 2013 stating: As I have been the custodial parent during the whole of the period from 17 May 2009 until the children turned 16 years of age I believe the children's entitlements should be paid to me. With this is mind it is requested that the payment of arrears be made along this basis. The Trustee noted subsequently in the discussion that Mr Edwards had "requested payment of arrears" and the Trustee assumed, in Mr Edwards' favour, that he had "made some expenditure on their behalf, as their natural father, to support and maintain them over this period". The quantum of the payments by Mr Edwards on behalf of his children were not before the Trustee, but it was assumed in favour of Mr Edwards that he had incurred expenses on their behalf of the kind which, it may also be assumed, might otherwise have been met from payments from the Fund had there been payments from the Fund at that time. The Trustee was also informed that the children were still studying and would continue to require support. 6 The Trustee determined that the arrears of pension payment in respect of the eligible children were to be paid to them directly rather than to Mr Edwards. The decision-maker had details of their bank accounts and considered them to be sufficiently mature to receive pension payments in their own right given their age. The decision-maker also said: The purpose of the benefit is to provide for the well-being of any eligible children. While Mr Edwards may have expended money in this regard, the purpose of the benefit is not to recompense him for this expenditure which would have arisen regardless of the children being found eligible. Rather, the children can equally use the arrears of pension for their own wellbeing into the future, including their education and maintenance. Their claim is the stronger as being direct beneficiaries of the deceased member and there is no evidence offered as to why payment should not be made to them. With this in mind, the totality of the arrears should be paid directly to the children. In the absence of any evidence suggesting otherwise, it should be apportioned between them in the same manner as it is decided to apportion the benefit under s 109AB of the Act. It is clear, therefore, from the decision of the Trustee, affirmed by the Tribunal and by the primary judge, that in making the decision not to pay the pension payments to Mr Edwards the Trustee had undoubtedly considered whether the payments ought, instead, have been paid to Mr Edwards, and had expressly taken into account the matters which were relevant and necessary for the exercise of the discretion. The decision-maker had taken into account the fact that Mr Edwards was the children's father, that he had the custody, care and dependence of his children during the period to which the arrears related, that he had expended money for their benefit, and that there would be a continuing need to spend money for their benefit into the future. 7 The Tribunal in reviewing the decision of the Trustee was required by s 37(6) to affirm the decision of the Tribunal if satisfied that the decision in its operation "was fair and reasonable in the circumstances". The Tribunal expressly found that it was satisfied that the decision was fair and reasonable in the circumstances in its operation and affirmed the Trustee's decision pursuant to s 37(6) of the Complaints Act. The hearing before the Tribunal was de novo and its task was to determine whether the trustee's decision was fair and reasonable in the circumstances, rather than whether the Trustee had committed error. In Board of Trustees of the State Public Sector Superannuation Scheme v Edington (2011) 119 ALD 472 Kenny and Lander JJ said (with whom Logan J generally agreed) at [45]-[50]: [45] Various provisions of the Complaints Act show that, relevantly, a function of the tribunal is to conduct a form of administrative review of decisions made by trustees of regulated superannuation funds, which are challenged by relevant persons as unfair or unreasonable: see, for example, ss 12, 14, 37, and 41. A hearing before the tribunal is a hearing de novo, following which the tribunal makes findings of fact relevant to its deliberations: see Attorney-General (Cth) v Breckler (1999) 197 CLR 83; 163 ALR 576; [1999] HCA 28 at [87] (Breckler) per Kirby J; Lykogiannis v Retail Employees Superannuation Pty Ltd (2000) 97 FCR 361; 61 ALD 197; [2000] FCA 327 at [48] (Lykogiannis) per Mansfield J, citing Seafarers' Retirement Fund Pty Ltd v Oppenhuis (1999) 94 FCR 594; [1999] FCA 1683 at [19]-[23] (Oppenhuis) per Merkel J. [46] Under the Complaints Act, the tribunal is not called on to make the same kind of determination as the Administrative Appeals Tribunal under its governing legislation. That is, in contrast to the Administrative Appeals Tribunal, the tribunal under the Complaints Act is not called upon to determine whether the trustee made the correct or preferable decision: see, for example, Jevtovic at 322 ; Cameron v Board of Trustees of the State Public Sector Superannuation Scheme (2003) 130 FCR 122; [2003] FCAFC 214 at [38]-[43] (Cameron) per Whitlam, Kiefel and Dowsett JJ; and National Mutual Life Association of Australia Ltd v Scollary [2002] FCA 695 at [37] per Ryan J. Rather, the tribunal stands in the shoes of the trustee and determines, based on all the information before it, whether or not a decision taken by the trustee was fair or reasonable in the circumstances. In Jevtovic at 321, Sundberg J held that the words "the decision … was fair and reasonable" in s 37(6) were directed to whether the actual decision, rather than the process that led to it, was fair and reasonable, a proposition that has subsequently been accepted as correct: see, for example, Citicorp Life Insurance [2005] FCAFC 102 at [19] and Colonial Mutual Life Assurance Society Ltd v Brayley [2002] FCA 1333; at [31] per Branson J. [47] If the tribunal is satisfied that the decision of the trustee was not fair and reasonable, the tribunal makes a decision that is fair or reasonable in substitution for the decision of the trustee, always providing that the tribunal cannot do anything contrary to law, the rules of the fund, or the terms of insurance: see ss 37(3), (4), (5) and 41(3); also Briffa v Hay (1997) 75 FCR 428 at 437 ; 147 ALR 226 at 232 (Briffa); Breckler at [88] and, recently, Machin v Board of Trustees of the State Public Sector Superannuation Scheme (2010) 272 ALR 508; [2010] FCA 969 at [82] per Dodds-Streeton J. [48] As Kirby J said in Breckler at [88] , with respect to a decision made by the tribunal in substitution for that of the trustee ( at [89] ): [89] … The new decision, which might have retrospective operation, will speak from the time specified in the determination. What is involved is not a determination that the trustees misapplied the law to the facts. Nor that they mistook their powers and obligations under the governing rules of the fund. Rather it is a determination by the Tribunal of its own opinion that the trustees' decision is, or was, unfair, unreasonable or both. It is the reaching of that opinion which authorises the Tribunal, conforming with s 37(5) of the Complaints Act, to exercise its own determination-making power and to substitute a fresh decision. The object of the determination is to effect the purpose of removing the unfairness and unreasonableness which the Tribunal has determined to exist [s 37(4) of the Complaints Act]. If, however, the tribunal is satisfied that, in the circumstances, the decision of the trustee was fair and reasonable in its operation in relation to the complainant, it must affirm the decision: see s 37(2) and (6). [49] The Complaints Act does not specify the considerations that the tribunal is bound to take into account in deciding whether or not a decision of the trustee was fair or reasonable: see, in this regard, HEST Australia Ltd v Sykley (2005) 147 FCR 248; [2005] FCA 1381 at [49] (HEST) per Crennan J. These considerations must therefore be determined by reference to the subject-matter, scope and purpose of the Act: see generally Minister for Aboriginal Affairs v Peko-Wallsend (1986) 162 CLR 24; 66 ALR 299. A purpose of the Act is "to ensure members and beneficiaries are not adversely affected by unfair and unreasonable decisions of insurers and trustees": see HEST at [49]. Considered in this light, the governing trust deed and insurance terms will necessarily be relevant considerations: see Retail Employees Superannuation Pty Ltd v Crocker (2001) 48 ATR 359; [2001] FCA 1330 at [28] (Crocker) per Allsop J and Cameron at [32]. This is because an essential part of the statutory scheme is that a determination under s 37(3) substitutes the tribunal's decision for the decision of the trustee; and in consequence, the substituted decision must itself be one that is authorised by the legal instruments governing the fund: compare Briffa at FCR 443; ALR 240 per Merkel J. [50] Furthermore, since the tribunal hearing is a hearing de novo, the tribunal is not "restricted to the documents which were before the trustee, nor is it confined to the manner in which the applicant addressed the subject matter": see HEST at [40], citing Commonwealth Superannuation Scheme Board v Dexter [2004] FCA 1434 at [59]-[60] per Gray J, Crocker at [132]-[133], and Oppenhuis at [22]. It must be borne in mind, however, that, notwithstanding the tribunal has "all the powers, obligations and discretions that are conferred on the trustee" (s 37(1)(a)), the tribunal is primarily concerned with the question whether or not the decision of the trustee was fair and reasonable. The whole of its inquiry, including its fact-finding, is directed to answering this question. As Mansfield J said in Lykogiannis at [48]: [48] … Ultimately, whatever findings the Tribunal must make standing in the shoes of the trustee … s 37(6) requires the Tribunal to decide whether the decision under review, in its operation, was fair and reasonable in the circumstances. The focus of s 37(6) is upon the consequence or outcome of the decision in its practical operation, rather than upon the process by which the decision under review came to be made. In Hornsby v Military Superannuation and Benefits Board of Trustees (No 1) (2003) 126 FCR 484 ; 30 Fam LR 535 ; [2003] FCA 54 , Mansfield J also said ( at [19]-[20]): [19] [T]he Tribunal may have to make its own findings of fact for the purpose of determining whether, in its opinion, the decision under review in its operation was fair and reasonable in the circumstances. But it is necessary to make such findings of fact only for that purpose. It does not decide afresh all findings of fact of the primary decision-maker as if that decision had not been made. It does not, in that sense, simply stand in the shoes of the primary decision-maker. [20] Hence, under s 37, although the Tribunal is required to make its own decision in relation to the complaint, it is required to make only such findings of fact as are necessary for its decision. It must do so upon the evidence before it. In the light of such findings or conclusions as it has reached, the Tribunal must consider whether the decision it is reviewing, in its operation, was fair and reasonable in the circumstances: Military Superannuation and Benefits Board (No 1) v Stanger (2002) 68 ALD 12 ; [2002] FCA 671 at [21] . Section 37(6) requires that step. Ultimately the object of the Tribunal's review is to remove unfairness or unreasonableness in the decision under review … We agree with Mansfield J's approach as stated in these passages. The Tribunal's reasons identified at paragraph [11] that the resolution sought by Mr Edwards was that the arrears of the children's benefit up to August 2013 "ought to be paid to" him. The Tribunal noted Mr Edwards' arguments, including a complaint that the trustee had acted unfairly and unreasonably in relation to Mr Edwards by not having decided to make the payments when the children were younger. The Tribunal, however, decided that the decision of the Trustee was fair and reasonable on the basis of the circumstances as they were at the date of the decision rather than what they might have been at some earlier date. A claim that there had been a failure to take into account whether payments should have been made to Mr Edwards, therefore, has no foundation. 8 The Trustee had decided that the arrears of pension payments in respect of the children be paid to them pursuant to s 114 of the Superannuation Act which provides: Payment of part of spouse's pension etc. attributable to children (1) Where, in the opinion of CSC, payment of: (a) the part, or any portion of the part, of an instalment of spouse's pension attributable to an eligible child or eligible children or to an eligible child or eligible children and a partially dependent child or partially dependent children; or (b) an instalment, or any portion of an instalment, of extra spouse's pension attributable to a partially dependent child or partially dependent children or to an eligible child or eligible children and a partially dependent child or partially dependent children; should, by reason of the child or children not being in the custody, care and control of the spouse, or for any other reason which CSC thinks proper, be made to a person other than the spouse, CSC may authorize payment of that part, or a portion of the part, to be made to the other person, and payment shall be made to the other person accordingly. (1A) If: (a) CSC determines under Division 5 of Part VI that part of a lump sum benefit to which a spouse is entitled is attributable to an eligible child or eligible children or a partially dependent child or partially dependent children; and (b) because of the child or children not being in the custody, care and control of the spouse, or for any other reason that CSC thinks proper, CSC is of the opinion that payment of that part, or a portion of that part, of the lump sum benefit should be made to a person other than the spouse; CSC may authorise payment of that part, or a portion of the part, to be made to the other person, and payment must be made to the other person accordingly. (2) A payment of the part, and a payment of a portion of the part, of an instalment of pension or of a lump sum benefit that, under this section, is paid to a person other than the child to which that part or portion is attributable, must be applied for the maintenance, education or other benefit of the child. (3) For the purposes of this section, where there is one, or more than one, child of a deceased eligible employee or pensioner who is a partially dependent child: (a) the part (if any) of an instalment of spouse's pension that, but for this subsection, would be attributable to an eligible child or eligible children of the deceased eligible employee or pensioner is taken to be attributable to that eligible child or those eligible children and the partially dependent child or partially dependent children; and (b) an instalment of extra spouse's pension is taken to be attributable to the eligible child or eligible children (if any) of the deceased eligible employee or pensioner and the partially dependent child or partially dependent children. This provision permitted the payment of a portion of a pension to a person described as the "other person". It was submitted for Mr Edwards that the payment of the arrears of pension in respect of his children at the date of Mr Paulusz's death could only have been paid to him as the only person "other" than Ms Harris as the relevant spouse contemplated by s 114. Her Honour correctly rejected such a submission and correctly construed "other person" in s 114 to be sufficiently wide to encompass a payment directly to a child. Her Honour said at [124]-[132]: 124 As I understood it, Mr Edwards made two connected contentions about the terms of s 114. They are set out in his AD(JR) Act application in this proceeding where he extracts a submission he made to the second Tribunal: c.2 It is contended that had the children been in the custody, care and control of the eligible spouse -- [Complainant 3] -- that 'Payment of part spouse's pension etc attributable to children' would have been paid to the eligible spouse because she would have been the eligible member and the custodial parent. The very purpose of Section 114 is to provide for the payment of children's benefits to 'the other person' in whose custody, care and control the children are in. Whilst the children may become eligible children at age 16 -- definition of eligible child -- under the law they are not entitled to receive direct benefit payments until such child or children attains the age of 18 years. [Reference the Wills Act and the Status of Children Act. The exception to this rule is contained in the Industrial Relations Act because children may leave school at age 16 and commence work]. (Emphasis in original.) [125] Thus, Mr Edwards relies on the fact of minority, rather than any special definition of the word "child" as part of his argument about why s 114 did not authorise the CSC to pay the monies directly to Adam and Ashley. I do not consider that argument has any force. Section 114 uses the term "eligible child" as do the entitlement provisions in the Superannuation Act 1976 (such as s 109AB) for the purpose, as the name of the term suggests, of determining which categories of children will be covered by a benefit. The age of 16 years is chosen by the legislature as the point at which payment of benefit should cease, unless the child is in full time education, so as to indicate what the legislature considers to be sufficient justification for an entitlement to ongoing support through the payment of a benefit. [126] For that reason, s 114 continues the use of the term "eligible child", because that term is the necessary link between a child and an entitlement to payment of a spousal benefit attributable to that child. Where s 114 uses only the term "child" in my opinion it means the eligible child. [127] The real question of construction, and one that in my opinion was not easy to resolve, was whether the eligible child herself or himself was intended by the Parliament to be comprehended by the term "other person" in s 114. [128] Both s 114 and s 109AB(5) speak of portions of the spousal benefit being "attributable" to an eligible child. Plainly, what that means is that those portions of the benefit, as provided in the table in s 109AB, are intended to assist the spouse beneficiary to care for the child, there being a sufficient relationship between the child and the deceased member to justify attribution of that portion. It is for that reason that the restriction on use of the funds is imposed by s 114(2). [129] The terms of s 114(2) make it clear, in my opinion, that the legislature contemplated a payment might be made directly to a child. Otherwise, there is no work for the exclusion in s 114(2) -- "other than the child to which that part or portion is attributable". [130] The purpose of s 114 as a whole is to cater for circumstances where the eligible spouse does not, in fact, face expenses associated with the care and education of an eligible child. It authorises the trustee to redirect that portion of the spouse benefit attributable to the eligible child to another. To the extent that Mr Edwards' submissions involve the proposition that one such person might be the legal guardian of the eligible child, and the individual who has custody of the child, he is correct. However, it is incorrect to read s 114 as mandating or requiring payment to such a person. An eligible child may be living with someone other than her or his legal guardian and someone other than the person in whose favour a custody order is made. The complexities of family life mean one does not need much imagination to see how such circumstances may arise. A parent of an eligible child divorced from the eligible spouse may have custody but the child may, in fact, reside with a grandparent: perhaps because of relationship reasons, perhaps because of practical reasons (for example, that the custodial parent is working interstate regularly). Section 114 would authorise the trustee to direct payment to the grandparent. [131] All these matters will be fact dependent. [132] It may well be the case that an eligible child (even one under 16) may be living independently, and out of home. It would frustrate the purpose of s 109AB and the attribution of portions of spousal benefit to eligible children if the trustee were not able, in an appropriate case, to redirect payment to the child herself or himself. Whether or not the trustee had the probative material before it which would make such a decision open, and make such a decision fair and reasonable (using the language of review in the Tribunal) is another question. Those matters do not go to the existence of the power but to its exercise. And any such exercise is reviewable by the Tribunal, as occurred in the present case. There is no reason to depart from her Honour's conclusion. Section 114 confers a power to make a payment to a person other than the spouse otherwise entitled to receive a portion of a pension for the benefit of children in certain circumstances. The "other" person contemplated by the provision is a person other than the spouse. Ms Harris was entitled to be paid a pension which included a portion in respect of her children who were found to be eligible children. That portion in respect of her children which was payable to her, however, could be paid to another person (that is to a person other than her) pursuant to s 114 in the circumstances contemplated by that section, including "for any other reason which [the Trustee] thinks proper". The Trustee when exercising that discretion was required to take into account the facts and circumstances at the time of making the decision. The Tribunal in turn, in reviewing a decision of the Trustee, was required by s 37(6) to determine whether the operation of the decision in relation to the children "was fair and reasonable in the circumstances". Those circumstances necessarily contemplated those as at the time of making the decision even though the decision might have retrospective operation. In Attorney-General (Cth) v Breckler (1999) 197 CLR 83, Kirby J observed at [89] that a new decision by a tribunal might have "retrospective operation, [but] will speak from the time specified in the determination"; see also Board of Trustees of the State Public Sector Superannuation Scheme v Edington (2011) 119 ALD 472 at [45]-[48], [53]. Neither the Trustee nor the Tribunal were required to decide whether to exercise the power in s 114 upon the assumption that they might have been paid to Mr Edwards if the decision had been made at an earlier date. At the time when the Trustee made its decision, and when the Tribunal affirmed the Trustee's decision, it was permissible under s 114 for the arrears of pension payments in respect of the eligible children to be paid directly to them rather than to Mr Edwards. 9 Having regard to the rejection of Mr Edward's central complaint it is unnecessary to determine the issues of interest on the arrears paid to his children and his standing. It follows that the appeals should be dismissed with costs. I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Griffiths, Pagone and Davies.