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IN THE SUPREME COURT OF THE ) No. ACTCA 19 of 2002

) No. SC 47 of 1995

AUSTRALIAN CAPITAL TERRITORY )

)

COURT OF APPEAL )

ON APPEAL FROM A JUDGE OF THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

BETWEEN: ERIC DONALD GLASS

Appellant

AND: THE COMMONWEALTH OF AUSTRALIA

Respondent

Judges: Higgins CJ, Crispin P, Madgwick J

Date: 31 March 2003

Place: Canberra

REASONS FOR JUDGMENT

THE COURT:

1. The appeal and cross-appeal in this case arises out of an action for damages for negligent advice brought in the Magistrates Court of the ACT.

2. The appellant claims that, before he accepted a commission as an officer in the Royal Australian Navy (“RAN”) in 1979, he was given negligent advice by Commonwealth officers that his prior service in the Royal New Zealand Navy (“RNZN”) would not permit him, in effect, to transfer an accrued retirement benefit to a pension fund available to him in the RAN under the Defence Force Retirement and Death Benefits Act 1973 (Cth) (“the Act”). Had he been able to transfer his entitlement, he would have been able to retire about two years and three months earlier. His case was that he would have so retired and would have commanded a higher remuneration package in a specialised field of private employment for which his Navy training and experience had fitted him.

3. At first instance, the learned Magistrate found that negligent advice had been given but that the appellant had not proven any consequent loss. Accordingly, his Worship entered judgment for the respondent. On appeal to a judge of this Court, his Honour dismissed a notice of contention by the respondent as to liability and upheld the appellant’s appeal. In the result, his Honour ordered that judgment be entered in the appellant’s favour for $15,000 together with the costs of the appeal and the trial. The appellant now appeals against the alleged inadequacy of that award of damages and the respondent cross-appeals against the finding that negligence was established.

Liability

4. It is convenient to deal firstly with the cross-appeal.

5. By reason of the appellant’s contributions to a New Zealand government superannuation fund, and its governing New Zealand statute, the appellant would have been able, among other things, to elect to surrender his right to up to one-fourth of a partially indexed lifetime retiring allowance and to receive, instead, a lump sum payment from the fund equal to nine times the amount of the annual allowance sacrificed by the surrender. The appellant’s case, as indicated, was that he was negligently told by the Commonwealth officers administering the Australian Defence Force, Retirement and Death Benefits Scheme (“DFRDB Scheme”) established by the Act, that he could not pay any such New Zealand lump sum into the DFRDB Scheme as deemed contributions thereto; had he known that he could do so, he would have done it. In consequence he would have been credited, for the purposes of the DFRDB Scheme, with an additional period of service of two years and 109 days and to that extent, would have been sooner able to take early retirement on an (reduced) Australian pension.

6. Whether he was entitled to pay such a lump sum in to the DFRDB Scheme depended on whether the lump sum met the definition of a “transfer value” used in s 68(1)(a) of the DFRDB Act: “a reference, in relation to a contributing member, to a transfer value payable to or in respect of the member under a superannuation scheme applicable in relation to any employment in which he was employed at any time before the date on which he became an eligible member of the Defence Force is a reference to a benefit by way of a lump sum payable to or in respect of the member under that scheme upon the termination of the employment otherwise than on the ground of invalidity or of physical or mental incapacity to perform the duties of the employment, being a benefit that was based wholly upon contributions under that scheme by the employer or was based partly upon such contributions and partly upon contributions under the scheme by the member”

7. In 1978, when the appellant was thinking about leaving the RNZN to join the RAN, he wrote to enquire whether his RNZN service could be “purchased” for DFRDB Scheme purposes and on what conditions. He was told that “relevant aspects of the information” received by the DFRDB Authority (“the Authority”) from the New Zealand authorities “will require clarification” and he would be advised as soon as possible. After some delay, the Authority on 19 January 1979 advised him: “The DFRDB Authority recently considered advice from the Superintendent, New Zealand Government Superannuation Fund regarding the payments made to New Zealand Service personnel on termination of their service, with particular regard to amounts payable as ‘terminal benefit’. The Authority determined that, since the ‘terminal benefit’ (End of Service Grant) is payable from the NZ Government’s Consolidated Fund, and has no connection with the provisions of the Government Superannuation Fund Act and regulations, then, as indicated in Para 2(a) above, this amount is not payable under the rates of the Scheme applicable to the employment, and cannot be regarded as a transfer value. It follows, therefore, on the basis of the advice received from the Superintendent NZ Government Superannuation Fund, that the refund of contributions payable from that Fund does not contain an employer component, and consequently does not constitute a transfer value.”

8. It remained open to the appellant under the New Zealand legislation to effect the commutation of part of his pension until the receipt of his first instalment of his retiring allowance, an event that occurred on 14 May 1979. On 7 March 1979 he joined the RAN and submitted to the Authority that: “the commuted portion of my pension would satisfy the requirements for establishing a ‘transfer value’ … in that it certainly contains an employer component”.

9. On 30 March 1979 an officer of the Authority advised him that “lump sums realised by commutation could not be regarded as Transfer Values”.

10. In consequence, the appellant elected not to commute any part of his New Zealand retirement allowance. Thus no amount became available to him which could be regarded as a “transfer value”.

11. Subsequently, in 1983, a former New Zealand soldier who had joined the Australian Army and whose situation was materially identical with that of the appellant asked the Authority to reconsider a like decision made in the soldier’s case. The Authority sought the advice of the Commonwealth Attorney General’s Department. The latter advised, and in 1984 confirmed its advice, that the Authority had incorrectly interpreted s 68(1)(a) of the Act.

12. The appellant learned of this in 1989 and embarked on a long train of litigation to try to have the decision in his own case overturned, but without success.

13. The respondent conceded its duty of care to the appellant, reliance by him on the advice given and (before us) that the advice given was wrong.

14. It was nevertheless argued that there was no breach of the duty of care. This contention relied on the following factors, namely, that at all relevant times no member of the Authority held any legal qualification; there was no person with legal expertise or the Authority’s staff; and no legal advice was sought as to the position of persons in the applicant’s situation. It was further contended, that this was not a case in which the failure to seek legal (outside) advice was unreasonable. The learned Magistrate applied a case with some similar elements, Rennie v Commonwealth (1995) 61 FCR 351. In that case Tamberlin J said at 359: “The … letter of advice was cast in definite terms with no qualification or warning that reliance should not be placed on it without obtaining independent advice: cf Lord Reid in Hedley Byrne at 486 as to the alternatives open to a supplier of information. A careful answer required qualification, warning or confirmation of the advice. The Authority was clearly on notice that the appellant would rely on it in making the significant decision whether to make an important career transition at a relatively advanced stage of his engagement with the Army. In these circumstances, more is required than to simply furnish an ‘honest’ opinion. It was incumbent on the Authority to check the position.” Similarly, Kiefel J said at 365: “In my respectful view his Honour was in error in the definition of the duty owed, which could only have been one to take reasonable care to ascertain the correct information and interpretation of the provisions and in communicating those advices. It is not without importance that the question arises in relation to the Authority which administered the pension scheme, and should have had access to the necessary information. It might reasonably be expected that the Authority would take advice, which was available to it, upon any doubtful matter of legal interpretation.”

15. The learned magistrate said: “In my view, the opinion of the Attorney-General’s Department was correct and the view held by the DFRDB Authority was wrong. This was clearly found to be the case, upon a concession made by the defendant, in Glass v Defence Force Retirement and Death Benefits Authority (1992) 38 FCR 534. However, that aside, as a simple matter of statutory construction, the opinion of the Attorney-General’s Department is clearly correct and at no stage could it have been otherwise. It is not necessary for me to set out here the two advices given by the Attorney-General’s Department. Suffice it to say that they reveal a detailed examination of the terms of the relevant provisions, approached upon well established principles of statutory interpretation. … Having concluded that the advice given to the plaintiff was wrong, the issue is whether the DFRDB Authority and its officers nevertheless acted reasonably in interpreting the legislation as they did. In my view they did not. I consider that the facts of this case are, for all intents and purposes, the same as in Rennie and that the finding of Kiefel J as to the breach of duty in that case is equally applicable to the facts of this case. … I infer, from the fact that there was … protracted correspondence, that the query the plaintiff was making had raised issues which were not without doubt. It had obviously required officers of the DFRDB Authority to make enquiries and give the matter close consideration. Given the persistence of the plaintiff’s enquiries, and his letter of 14 May 1979 which questioned a fundamental basis for the view expressed by the DFRDB Authority in its preceding letter, I am satisfied that those concerned must have appreciated that their view was not the only possible view; indeed the plaintiff through his letter was putting forward another. In the words of Kiefel J in Rennie at 365, ‘(T)hat reference to a lawyer was necessary for a properly informed advice is tolerably clear’.”

16. The learned primary judge dealt with the matter in this way: “It was submitted for the Commonwealth in the appeal that the duty imposed upon a public servant cannot extend beyond the duty to take reasonable care to determine the correct answer to an inquiry by a member of the public, and, in the event that a legal issue concerning the construction of a statute arises, then to seek appropriate legal advice or warn the member of the public of the uncertainty. It was also put for the Commonwealth, whether in addition to or in the alternative, that a public servant cannot be under a duty to seek legal advice when he or she is unaware that any legal uncertainty exists and when that lack of awareness does not arise out of a failure to exercise reasonable care.

Submissions of this nature, couched in the language of legal principle, are apt to confuse because they are really directed at the factual circumstances, and factual circumstances vary from case to case. In the present case the submissions raise the factual issue of the reasonableness of the conduct of the officers of the Commonwealth who were responsible for preparing and tendering the advice to the appellant. If the preparation and giving of that advice was in the circumstances done without reasonable care as to its accuracy, the appellant was entitled to succeed, subject to proof that the failure resulted in loss.

The Commonwealth's case in this regard relied essentially on long-standing practices in the office of the Defence Force Retirement and Death Benefits Authority (the Authority) based on interpretations of the Act which had never been challenged. More precisely, reliance was placed on the lack of any doubt on the part of any Authority officer as to the correctness of the established Authority's view that commuted pensions were not to be treated as "transfer values" for the purposes of the Act. Authority staff spent a lot of time on the appellant's case, particularly in getting information from New Zealand.

The Commonwealth sought to distinguish the situation in the present case from that in Rennie v Commonwealth of Australia (1995) 61 FCR 351 in which the Full Court of the Federal Court of Australia said at 365:

…

However that is a finding on the facts, not a statement of a principle of law. The facts depend on the evidence.

It may be, as was submitted on behalf of the Commonwealth, that the evidence in the present case about whether Authority staff knew that their view was not the only possible view is lacking or at least inconclusive. However, if that is so, either they should have been so aware or there was to be attributed to the Commonwealth the knowledge that the interpretation that its officers were putting on the legislation needed checking by someone competent to give legal opinion. In the circumstances, for a Court to so hold would not be to ‘compel public servants to obtain legal advice even when they are satisfied that their view of the legislation is the only view open and no contrary position had been put to them’ (as was put on behalf of the Commonwealth). In the present matter the appellant did challenge the established departmental standpoint. It was incumbent therefore on the Commonwealth through its staff to reflect upon the possibility that the appellant may have been correct. Furthermore, any such reflection would have then suggested to the Commonwealth that it would be advisable to get an opinion, from someone qualified to express it, on whether the Authority's practice was in accordance with the law. The arguments put by the appellant in letters written to the Authority on 19 November 1989 and 30 March 1991 in themselves should have put the Authority on notice that the departmental orthodoxy might be falsely based, and, further, if it was, then the Commonwealth stood to be liable in damages to the appellant.

In this respect the Commonwealth is hardly to be compared with an inexperienced litigant or potential litigant who may not recognise a problem as one of a legal nature, who does not know where to turn for advice of a legal nature and who may have difficulty in affording such advice or indeed difficulty in understanding the advice when given. Whether the Authority had a legal officer on its staff or any officer with legal qualifications with the capacity to express a view on the merit of the interpretation of the Act that the appellant was urging does not appear to be answered in the evidence before the Magistrate. However if the Authority did not have a legal officer on its staff, the Commonwealth should have had in place arrangements, as was once common with Commonwealth instrumentalities, for the Authority to be able to consult with and receive advice from the Attorney-General's Department or the Australian Government Solicitor. On the evidence before the Magistrate, such advice was available and was eventually sought and availed of, but not until long after the appellant had lost whatever right he had to commute his pension.” (emphasis added)

17. In our view, the approach of the primary judge was plainly correct. Whether there was a breach of the duty of care is a question of fact, as it was in Rennie. The Magistrate was, nevertheless, well entitled to judge the facts by reasoning analogous to that employed in Rennie. We agree with the conclusion that there was a breach of the respondent’s duty. It is common enough in public administration for a view as to the effect of legislation long-held by administrators to be turned on its head once recourse is had to a legal advisor. Whether legal advice should be sought depends on all the circumstances in which the administrator concerned and the affected person find themselves. Where that person has plausibly advanced a different understanding of the legislation and the administrator does not intend to qualify the advice given, those are of course factors which will tend to aid the view that legal advice should be sought. But, the matter being one of fact, no general rule can be propounded, as the learned primary judge was at pains to stress.

18. It should also be observed that the appellant had sought advice from the Authority and not merely from some individual for whose negligence the Authority was vicariously responsible. If the Authority chose to allocate the task of providing that advice to a particular officer who lacked the necessary knowledge and expertise to do so competently then his or her ignorance cannot be regarded as having relieved it of the duty of care which it owed to the appellant. Nor can the fact that this officer may have consulted other officers who also lacked the necessary knowledge or expertise or that he drew upon a long history of departmental confusion as to the effect of the relevant legislative provisions. If, as in the present case, the advice was logically indefensible it is no answer for the Commonwealth to assert that the officer who provided it followed a long line of colleagues in uncritically accepting the misconception of an unknown predecessor.

19. The cross-appeal fails. Quantum

20. It is obvious that either the appellant or, more likely, someone assisting him had a deal of legal knowledge. This, however, clearly did not extend to expertise in the presentation or assessment of negligently caused wage-loss claims let alone a claim involving assessment of the value of loss of a chance to earn a higher wage. Nor did the respondent approach the task with exemplary clarity. Masses of documentation, showing industrious assembly, minute calculation and painstaking presentation, but no great regard to the laws of evidence, were tendered on both sides. The focus shifted to one of a supposed possible precision of calculation which was, though urged by both sides, in reality quite spurious. Having regard to the way the parties presented their cases, both the learned Magistrate and the primary judge understandably sought to correct perceived errors of detail in the intensely detailed materials sought to be relied upon before them. It was either common ground or plainly demonstrated that, in so doing, both judicial officers themselves made some errors of detail, which it is unnecessary to recount. The wood, with respect, rather got lost for the trees.

21. Error having been shown, we approach the task of assessment of damages for ourselves. The matter calls, in our view, for a broad assessment, guided by simple arithmetic. The salient facts were these: · The appellant was born on 27 April 1941. · But for his inability to employ a “transfer value” of part of his New Zealand entitlements, the appellant would probably have retired from the RAN on 18 November 1991, aged 50 to take up similar employment. · There was then a very keen demand in industry for people with the appellant’s experience and capabilities as a technical expert on the electronics of maritime weapons delivery systems. · The learned Magistrate unexceptionably found that there was a “high probability that [the appellant] could have commanded a remuneration package of $90,000 per annum or more”. · Likewise, his Worship found that the probability of the appellant proving unsuited to the private sector, of him or his wife being discontented with absence from Canberra or of a trading downturn on the part of a potential employer was, in each case, low. · The appellant presents well and is, as the history of all the litigation between the parties shows, a determined person. · The appellant’s Navy salary in 1992-3 was of the order of $55,000 p.a. · By not resigning, the appellant’s New Zealand pension was higher than it otherwise would have been, his DFRDB pension was a little higher (for longer years service) than it would have been, and he received a slightly higher lump sum “productivity payment” on retirement from the RAN. · The appellant had the ability on and after 7 March 1994, when he was aged just under 53, only 2 years and 3 months later than the date when he should have had it, to take early retirement from his Navy employment with the reduced DFRDB Scheme pension available after 15 years of service, and to try his luck in private industry. · The appellant was promoted from the rank of Lieutenant Commander to Commander within the RAN on 1 January 1994 and ultimately retired from the Navy on 25 April 1996 aged 55.

22. The magistrate’s jurisdiction, leaving aside the question of interest, was limited to $50,000 (see s 5(1) of the Magistrates Court (Civil Jurisdiction) Act 1982 (ACT)) and the appellant waived any excess of his claim above that amount.

23. But for the way in which the appellant presented his case below, the matter might have been shortly decided. Viewing the matter reasonably conservatively, had the appellant taken the chance which was denied him, he would likely have been, at age 50, some thousands of dollars per annum better off. It is impossible, by reason of superannuation considerations, to make other than a very rough estimate of this differential but, on a conservative after-tax basis, about $12,000 p.a. does not appear unreasonable. Given that he was aged 60 at trial and is now rising 62, an assessment that he lost a chance at least worth $50,000 appears inescapable. It was, however, submitted for the respondent that any loss to the appellant ceased on 7 March 1994 when he was able to retire on the same terms as, but for the respondent’s negligent advice, he would have been able to do in December 1991. That however is conceptually incorrect. The appellant lost his 1991 chance and he thereby lost the chance of a continuing benefit. Thereafter, life moved on, in and outside the Navy. By 1994, for example, he had been promoted within the RAN. The suggestion really is that, in or soon after 1994, not to have resigned and found comparable employment to that available in 1991 was for the appellant not to have availed himself of a ready means of mitigation of his loss. The duty to mitigate loss only involves taking reasonable steps to do so, and the defendant bears the onus in relation to failure to mitigate. Whether by direct application of these principles or by analogy with them, it is by no means clear to us that the appellant failed in 1994 to behave reasonably to maximise his income.

24. These matters, however, need not be pursued to their conclusion. The appellant, as indicated, presented his case on a limited basis: he sought only the value of the loss of the chance to do better up to the time he was able to retire early and still obtain his DFRDB Scheme part-pension. In the light of this it is too late to ask us now to give full effect to the broader and more appropriate, conceptual basis. The respondent might clearly have been able to adduce further evidence e.g. to cross-examine the appellant about his failure in 1994-1996 or after that time to try the private sector, and to explore further the then relevant micro-economic climate in the defence industries. See generally Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833.

25. In consequence, we consider that leaving aside the question of interest, and eschewing an impossible attempt at precision, a case has been made only to increase the $15,000 awarded by the primary judge to $25,000.

26. There are two aspects to the question of interest on that sum. The first is that, in consequence of the limited way the appellant put his case, by the time of trial in 2001 he had been “out of his money” for about seven years and he should, as a matter of the assessment of damages, have also had interest on the amount of the loss at commercial rates, less an allowance for tax: see Grincelis v House (2000) 201 CLR 321. The rates of interest payable on judgments in this Court (see O 42A r 1) provide some guide to appropriate commercial rates (see Grincelis v House (1998) 84 FCR 190 per Madgwick J (joined by Mathews J): 1994 12% 1995 12% 1996 12% 1997 12% 1998 12% 1999 12% 2000 12% 2001 (1 May 2001) 11%

The learned Magistrate delivered judgment on 1 June 2001.

27. We think the appellant should accordingly have included in his judgment 12% on the said sum of $25,000 for seven years, less an appropriate allowance for the tax he would have had to pay, say 30%. That is, he should have $14,700. Judgment will therefore be given for $39,700.

28. The second aspect is that he should have had that last mentioned sum as at 1 June 2001 when the learned magistrate gave his judgment, so that he would be entitled to the statutory interest on his judgment (see s 234 of the Magistrates Court (Civil Jurisdiction) Act 1982 (ACT)) as from that date. Effect can be given to this view by ordering that the judgment we will enter is to be deemed, for the purposes of that section to have been given on that date.

29. The respondent will be ordered to pay the costs of the appellant of the trial and at both levels in this Court. I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.

Associate:

Date: 31 March 2003

Counsel for the Appellant: Appellant in person

Solicitor for the Appellant: -

Counsel for the Respondent: Mr D O’Donovan

Solicitor for the Respondent: Australian Government Solicitor

Date of hearing: 14 November 2002

Date of judgment: 31 March 2003

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