Guy v Commonwealth of Australia [2013] ACTSC 128

Supreme Court of the ACT|2013-07-04|Before: Refshauge J

1. There be judgment for the plaintiff in the sum of $303,582.00.

2. The plaintiff have leave to apply for an award of additional damages, should that be maintainable, in the event that that the judgment sum or any part of it, and interest on that sum or part of it, is assessed for a tax liability in respect of any income or capital gain of the plaintiff.

1. Although there has been in Australia the form of savings for retirement known as superannuation for over a century, access was initially quite limited. An understanding of it, its workings and its value as an employment benefit was not widespread until it became an important issue promoted particularly by unions in the 1960s and 1970s; it finally, of course, became compulsory in 1992.

2. In the early days, superannuation was, apart from generally higher paid white collar staff in large corporations, a particular benefit available only to public servants and members of the Defence Force, being an added attraction to employment in those sectors.

3. On 24 April 1984, the plaintiff, Martin Guy, commenced work for the Commonwealth Department of Administrative Services as a forklift driver and truck offsider. After about six weeks, he was offered a full-time but temporary position as a forklift driver. As he was then the only employee with a forklift licence, he was told that he would have the job permanently. His work for the Department included some truck driving and courier work in the period from 1984 to 1987.

4. Mr Guy said that when he was first employed he did not attend any interview, he simply reported to his workplace. He was not given any documents about the terms and conditions of his employment, including anything about superannuation.

5. During his employment, he heard other employees and their supervisors at the depot where he worked discussing superannuation and its benefits. He decided to explore for himself the possibilities.

6. In late 1984 or early 1985, he made some inquiries and, although there was some dispute in the hearing, I am satisfied that he pursued these inquiries but was unable to get any helpful advice from the people he approached. He finally approached the personnel manager whom he regarded as the appropriate source of the information but who told him:

As you are not a public servant, because you are a temporary employee, you are not entitled to join the fund.

He later said that the personnel manager had described him as "a temporary blue collar employee" but the manager denied not only the conversation but ever using the phrase "blue collar".

7. In fact, under certain conditions, Mr Guy was eligible to join the Commonwealth's superannuation fund at the time. Having been told he was not eligible, however, he did not pursue the matter further. He said that, until 1995, he was provided with no further information about superannuation.

8. In 1986, Mr Guy worked overtime driving Commonwealth cars and in 1987 transferred full-time to the Commonwealth's car fleet operator, Comcar. It operated out of the same depot so the location of his employment did not change.

9. In about 1990, the Commonwealth, through Comcar, started contributing to a fund for Mr Guy's benefit with an organisation called AGEST. He understood that this was because of the passage of the superannuation guarantee legislation. He was, however, not provided with any advice about superannuation at that time and he did not make any contributions.

10. In 1995, Mr Guy attended a meeting at the depot from which he worked. The meeting was addressed by an officer from the Commonwealth's superannuation agency, ComSuper. The officer told the drivers that they were eligible to join the Commonwealth's then superannuation scheme and had been eligible at least since Mr Guy was first employed.

11. As a result of the information he received at the seminar, Mr Guy joined the Public Sector Superannuation Scheme (PSS) in December 1995 and contributed at the maximum rate of 5% of his salary until he retired from Commonwealth employment. The funds that had accumulated to his benefit in the AGEST fund were rolled into his PSS account.

12. Throughout his employment, Mr Guy had been regularly assessed for fitness at a medical examination and was on each occasion found fit to carry out his duties. This was despite having to wear a prosthesis following the below-knee amputation of his left leg when he was a child.

13. On 29 December 2000, Mr Guy was declared an excess officer and was offered, and accepted, a voluntary redundancy from Commonwealth employment.

14. On retirement, he received a lump sum from the PSS and paid that into what he described as "Questor - The Portfolio Service - Superannuation Plan" on the advice of his financial adviser.

15. On 6 December 2006, Mr Guy commenced proceedings in this Court against the Commonwealth of Australia for damages for negligent misstatement, negligence and breach of statutory duty arising out of the incorrect advice he says he was given in 1984 or 1985 about his entitlement to superannuation.

• that he was informed that he was ineligible to join the Commonwealth's Superannuation Fund;

• that the person who told him that he was ineligible to join firstly, knew or ought to have known that he wished to join the Fund and secondly, was a person making the statement in a capacity that made the Commonwealth vicariously liable for any negligent misrepresentation;

• that he reasonably relied on the statement which was, in fact, incorrect, and provided negligently;

• that, had he not relied on the negligent misrepresentation, he would have joined the Commonwealth Superannuation Fund; and

• that because he did not do so, he had suffered loss and damage

• that the Commonwealth knew or ought to have known that its employees were unaware or confused about their eligibility to join the Commonwealth's Superannuation Fund and were not informed of details of their options or entitlement;

• that the failure to advise these employees of those matters in a timely manner may result in loss to its employee; and

• that the Commonwealth negligently failed to ensure that its officers were properly informed of the eligibility of employees such as Mr Guy and failed to ensure that Mr Guy was properly informed of his eligibility to participate in the Fund.

As a result, Mr Guy claimed that he had suffered loss and damage.

18. Finally, as to breach of statutory duty, Mr Guy pleaded:

• that the enactment of each of the Superannuation Act 1976 (Cth) and the Superannuation Act 1990 (Cth) imposed a duty on the Commonwealth to inform Mr Guy of his right, first, to request that he be treated as an eligible employee under the Acts and, second, to elect to join the appropriate superannuation scheme.

• that the Commonwealth did not discharge that duty; and

• that, had it done so, Mr Guy would have been found eligible to join the Commonwealth Superannuation Fund.

Mr Guy claimed that, as a result, no contributions were made on Mr Guy's behalf and so he suffered loss and damage.

19. The Commonwealth, in its defence, denied or declined to admit certain facts pleaded by Mr Guy. In particular, it did not admit the alleged misrepresentations, though it said, if made, they were correct. It denied that Mr Guy relied on any representations as alleged and further said that, if he did so, it was unreasonable for him to have done that without making further inquiries, especially as correct information was readily available. The Commonwealth further pleaded that any eligibility of Mr Guy to join the Superannuation Fund was discretionary and that, although he knew he could join the PSS in May 1992, he did not do so until 13 December 1995. It denied the claim for damages for negligent misstatement or misrepresentation.

20. It similarly denied that Mr Guy had a claim in negligence, denying any duty of care to advise Mr Guy of his eligibility to join the Commonwealth's Superannuation Fund or, if there was such a duty, denying that the Commonwealth breached it because it took reasonable steps to bring Mr Guy's eligibility to join the Fund to his attention.

21. Finally, the Commonwealth denied that the pleaded Superannuation Acts imposed a duty on the Commonwealth to inform Mr Guy of his right to request that he be treated as an eligible employee and thereupon to become a member of the appropriate Superannuation Fund, as he alleged. It pleaded that payments were made under the Superannuation (Productivity Benefit) Act 1988 (Cth) and the Superannuation Guarantee (Administration) Act 1992 (Cth) on behalf of Mr Guy. It denied that Mr Guy was entitled to any damages for breach of statutory duty.

22. The Commonwealth also pleaded that the whole of Mr Guy's claim was barred by the Limitation Act 1985 (ACT) because it was brought beyond six years from the date when the causes of action pleaded by him accrued.

23. In the light of the decision of the High Court in Commonwealth v Cornwell [2007] HCA 16; (2007) 229 CLR 519, that an employee, given negligent advice as to his or her eligibility for superannuation, sustains any loss from such advice upon his or her retirement, the limitation period for Mr Guy did not expire until 28 December 2006, six years after the date he retired: see s 11 of the Limitation Act. Accordingly, the proceedings had been commenced within that period and the limitation defence fails.

24. The proceedings were heard with a number of other claims of a similar nature by persons who had been temporary employees of the Commonwealth in various capacities, and who also alleged that they had been misinformed or not informed of their eligibility for membership of the Commonwealth's Superannuation Funds.

25. Affidavits were filed by both Mr Guy and the Commonwealth. A number of the deponents were cross-examined at the hearing which commenced on 18 November 2009 and concluded on 11 February 2010. The oral evidence in connection with Mr Guy's claim was principally heard between 9 and 14 December 2009. Submissions on all cases, including that of Mr Guy, were made the following year.

26. On 6 December 2012, I entered judgment for Mr Guy on the basis that I was satisfied that negligent misstatements had been made to him and that he had relied on them, to his loss and detriment. The parties informed me that they did not require me to provide reasons. I am grateful.

27. The only issue now in the proceedings is, accordingly, the question of damages.

28. In order to determine the appropriate award of damages, it is necessary to determine a number of factual matters that are required as a basis for the calculation of the payable damages. It is to these matters I now turn.

29. A number of these matters are uncontroversial. Some were contested.

30. Mr Guy was born 23 March 1940. He commenced employment with the Commonwealth of Australia on 24 April 1984. At this time, the Superannuation Act 1976 had established the Commonwealth Superannuation Scheme (CSS). Under s 11 of that Act, a temporary employee was only eligible to join the fund if:

(a) he or she had been a temporary employee for the immediately preceding 1 year; and

(b) he or she requested the Commissioner of Superannuation direct that he or she be treated as an eligible employee; and

(c) the Commissioner was satisfied that he or she was likely to continue to be employed for a further period of at least 3 years.

31. Thus, Mr Guy would have been eligible at the earliest on 24 April 1985. Since this is later than the evidence showed he made the relevant inquiries (see [5]-[6]), I am satisfied that, had he been provided with the correct information, he would have joined the relevant Superannuation Fund on 24 April 1985. Though not conceded by the Commonwealth, that did not seem to me to be seriously in contest between the parties and was the basis on which two actuaries, being experts called for Mr Guy and the Commonwealth, prepared their reports on damages.

32. As to the satisfaction of the Commissioner that Mr Guy would be employed for a further period of 3 years, I am satisfied that this criterion would also have been met. It also did not seem to be seriously in issue. That Mr Guy was told that, in the absence of the previous, deceased forklift driver, he would have permanent employment, as I have noted above (at [3]), is strongly supportive of this. In addition, I had affidavits from a number of Mr Guy's colleagues who were also temporary employees, but who all remained employed by the Commonwealth for a significant period of time. There is no reason to believe on the evidence that there was a regular short-term turnover of employees; there was a significant longevity of employment among employees such as Mr Guy.

33. As to the discretion of the Commissioner, I have no reason to believe, these two conditions having been met, that it would be likely that the Commissioner would not direct that Mr Guy be treated as an eligible employee and have every reason to believe that he would so direct.

34. The CSS closed to new members on 1 July 1990 and, in that year, members of the CSS had to decide whether to continue in that scheme or transfer to the PSS, established by the Superannuation Act 1990. I will deal with the complications that this gives rise to below.

35. Mr Guy in fact joined the PSS on 13 December 1995. There was, in the pleading, a claim that he should be taken to have joined on 5 May 1992 but I could find no basis for that in the evidence and no submission was made to this effect. I do not accept that this was likely.

36. There were a number of assumptions that had to be made in order for the actuarial expert witnesses to prepare their calculations.

37. In the first place, it has to be assumed that Mr Guy would have joined the CSS on (or about) 24 April 1985. Given that he made the inquiry about superannuation in late 1984 or early 1985, as I have noted above (at [5]-[6]), and actually joined the PSS after a presentation about it in 1995 I am prepared to accept that he would have joined the CSS on 24 April 1985.

38. In 1990, when the PSS was established, members of the CSS were given the option of transferring to the PSS. There was evidence about the circumstances under which members would do so but it by no means pointed to a particular direction; some transferred, some did not.

39. The submissions on behalf of Mr Guy is that he would not have elected to transfer to the PSS in 1990.

40. The Commonwealth submitted that Mr Guy would have elected to transfer to the PSS. It was submitted that Mr Guy gave no direct evidence that would make it more likely than not that he would have chosen to remain in the CSS. Further, that he elected to access his PSS benefits as a lump sum rollover was said to suggest he would have done the same if he had been a member of the CSS.

41. The evidence about what Mr Guy would do is, quite frankly, thin. There is a little about it in his affidavit and nothing in his oral evidence. That is not really surprising because it is a hypothetical matter about which an ex post facto opinion may be of limited value.

42. Mr Guy did rollover his lump sum payment from the PSS on termination to a further, private, superannuation scheme.

43. He also continued to work after he was made excess and given a voluntary redundancy in 2000. He was able to work as a casual driver until he ceased to have a drivers licence in 2006, aged 66. This suggests to me that he did not choose to stop working but was forced to do so because of his circumstances.

44. Comments were made by the experts retained by the parties about whether Mr Guy would have transferred to the PSS. These were adopted as the submissions of the parties on this issue.

45. Mr David Heath, an actuary of Cumpston Sarjeant Pty Ltd, Consulting Actuaries, gave evidence for Mr Guy. Mr Peter Martin, also an actuary, employed with the Australian Government Actuary, gave evidence for the Commonwealth.

46. Both had appropriate qualifications and experience, and their expertise and entitlement to give expert evidence was not in issue.

47. Both addressed the factors that were relevant to a consideration of whether a member of the CSS would transfer to the PSS in 1990.

48. Mr Heath's evidence on this point was in the context of another of the proceedings heard at the same time, but it was relied on in these proceedings. He proceeded on the basis that "[a]n informed individual ... would likely have compared the benefits payable under each fund". He suggested that this was "best ... done in terms of their respective retirement benefits". This was because, in that case, the plaintiff's "intention at that time would have been to remain in Government employment until retirement".

49. As noted above, Mr Guy worked for the Commonwealth until he was made excess and offered a redundancy but continued thereafter in casual employment with the Commonwealth. Also relevant is that he had experienced other options. He had worked outside government from 1956 at various jobs until he joined the Commonwealth in 1984.

50. Also relevant is that, while employed by the Commonwealth, he had purchased a coffee shop business. He had invested substantial capital in it. His evidence was:

The business was in my name and in the end the business broke even. My partner, Pauline initially operated the business. About 5-6 months after commencing the business we separated. Pauline left and I had to look after the coffee shop. I had to give up work for 6 months to operate the business until it was sold .... Comcar gave me leave without pay. I didn't resign, and when I was ready to return there was no difficulty with my recommencing work for Comcar.

51. It is further relevant that, while working full-time with Comcar, Mr Guy established another policy with AGEST into which Comcar made small superannuation contributions.

52. I further note that Mr Guy sought financial advice about what to do with his superannuation payout on redundancy and took a reasonably conservative approach to rolling it over into another superannuation plan.

53. Finally, his evidence, which was not subject to challenge in cross-examination, as to what he may have done when he did receive the termination payments, including the superannuation payout, was as follows. He deposed in his affidavit:

If I had been in the CSS scheme from the time when I was first eligible to join, and I had accumulated a much greater sum, I would have sought advice about the best financial options available to me following the redundancy and followed that advice. I would have considered it beneficial to be able to access a fully indexed pension if I had sufficient funds to do so.

54. On the basis of the above evidence, I consider that Mr Heath's approach is a reasonable one to apply to Mr Guy.

55. Mr Heath explained the benefits from the two schemes as follows:

In the PSS, the basic age retirement benefit is a lump sum benefit, determined by the individual's length of service, contribution rate, and salary in the final three years of service. Having calculated the lump sum in this way, part or all of the lump sum can be converted into a pension.

In the CSS, the basic age retirement benefit is a combination of lump sum and pension. The lump sum is the accumulated value of the member's own contributions, and the accumulated value of productivity contributions. The pension is a function of the individual's final salary, age at retirement and length of service.

One important point then is that the CSS benefit depends on the rate of investment return, whereas the total PSS benefit does not. In comparing the benefits payable under the two funds then, assumptions would need to have been made concerning the future rate of return within the CSS.

Rather than use actual returns, we have used rates which would have reasonably been expected at the time of decision to transfer. At the time of the creation of the PSS, the CSS had been operating for 14 years. An average (either arithmetic or geometric) of the annual crediting rates for that period is 12%pa.

At the time it would not have been generally believed that such returns could be maintained, so a reasonable person may have assumed a return of say 8%pa on average. In addition it would be reasonable to expect growth in superannuation salary of 4%pa.

We note that it is possible under the PSS to contribute lower salary percentages than in the CSS, with 2% being the lowest permissible percentage.

...

The usual form of retirement benefit under the CSS is not a lump sum, rather it takes the form of an indexed pension together with a lump sum ... For PSS, part of the above lump sum is convertible to a pension.

56. Mr Martin also addressed the issue. His report on the issue was that:

CSS retirement benefits are, for all but a small number of people, likely to be higher in actuarial value terms than standard PSS benefits (that is, assuming 5% contribution rate in the PSS). It follows that, if the decision was to be made on that basis, then virtually no-one would have transferred.

57. He then listed a number of relevant factors. The first of these was a difference on resignation where PSS members could receive a return of their member component and retain a preserved employer component in the fund. On the other hand, a CSS member who resigned did not retain an entitlement to a preserved employer component; such members had to preserve all their benefits to achieve this.

58. As to retirement, the PSS allowed its members to take their entire retirement benefit as an immediate lump sum. This may have been attractive to older members at the date of conversion. Further, PSS members on retirement could take all or part of their benefit as a CPI indexed pension, which would have an actuarial value at least 60% higher than the lump sum benefit.

59. Thirdly, there was a flexible contribution rate so that PSS contributions could be made up to 10% of salary but it could be as low as 2%.

60. Mr Martin further noted that "[m]any members were not engaged with their superannuation". He acknowledged that there was likely to be some suspicion of the government's intention in establishing the new scheme and these forces may have led to an inertia against change.

61. He pointed out that there would also have been some "workplace-centric decision making" but I have no evidence of what approach applied at the workplace of Mr Guy.

62. In 1990, Mr Guy had a partner with whom he had four children. Although the relationship broke down about twelve months after the date for election (which I assume was 1 July 1990), there was no evidence that Mr Guy was other than in a permanent relationship at the time the election was required and would approach his options in that context when the question of an election arose.

63. I also take into account that in 1993 he re-married. When he received his PSS superannuation payout he sought professional advice. I take into account the evidence of what he anticipated his intentions at the time of his redundancy would have been.

64. I also note the evidence of Mr George Hayes, who had worked in the Commonwealth's various superannuation agencies since 1969 until his retirement in 2002. He provided a detailed affidavit and gave oral evidence. In his evidence, he addressed the question of choice between the PSS and the CSS. His evidence was as follows:

Do you remember the differences between the CSS and the PSS and the points that would have been comparison? --- As to why you would or wouldn't change schemes?

M'mm? --- Well, it was very much how you saw your future, which was a bit difficult. As a matter of fact, I was - I went on - my family, we went for a trip to the US in the middle of this campaign and I happened to run into a customs man and he found out I worked for COMSuper. I was lucky to catch the plane. But in his particular case he was single so because it was possible under the PSS to get a full benefit as a lump sum then for him it was probably attractive as I was yelling out to him as I was running up the gang plank. But for many people it was very line ball and for me personally I thought it was a pretty line ball. It wasn't - you pretty well had to take a view as to how you thought your career was going to pan out.

I take it, and I may be wrong in this, but I take it that if somebody had been in the scheme, in the CSS, for a long time, perhaps had even been in the CSF before then, and they were coming up to a stage in their life where they intended remaining employed by the Commonwealth but weren't that far away from turning 55 and being able to access the CSS benefits, that in that situation it might have been more beneficial to remain in the CSS than go to the PSS? --- Well, as I say it was pretty personal. I mean some people - see, if you stayed in the CSS you were going to get a benefit which was going to be pension and lump sum. In the PSS you could take all of your benefit as a lump sum or you could take - provided you took up to half of this pension you could pension and lump sum. Some people who thought they were, say, investment gurus probably thought I'm going to get hold of this lump sum and do fantastic things with it. But the general view was, I think, but I'm not - COMSuper was neutral on it.

You were neutral, yes? --- We - we had no instructions from government or anybody that, you know, you must get 55% of people in the PSS, it was purely neutral. If you were going to stay in employment with the Commonwealth, you didn't really know what to do, well then your best bet was probably to stay in the CSS, but as I say, it was very much a personal decision.

...

HIS HONOUR: You mean by that, staying in the CSS or going to the PSS? --- Staying in - well, again I think it depends on your circumstances. Our customs man, I think he thought it was no trouble, he wanted - he was single, he wanted a lump sum, I suppose he thought if he retired in the CSS, collected his pension for a week and dropped dead, that was it.

MR DAVIS: But it may have been different if he had a wife, dependents? --- Yes, exactly.

And been in the service a long time? --- Yes. That's right.

Approaching retirement, more concerned about a pension than anything else, wanted a bit of money perhaps to, you know, pay out his mortgage? --- Mm. And if he described a sort of situation you have described, you - it was a fairly difficult decision and we didn't say it, but the financial people in the press at the time, because there was a lot of information around the place. Their position was well if you - if you're in this situation, you're worried about the decision, stay in the CSS, but that wasn't COMSuper's position.

No, but that was the advice that was available at that time? --- Well that was what the financial press was saying, you know, whether people - I was going to say, say free advice is, you know, something to do with - - -

HIS HONOUR: Worth what you pay for it? --- Worth what you pay for it.

MR DAVIS: At the same time too, I suppose, and you mentioned earlier that if you thought you were a bit of a financial guru, you might chance your luck on investing the lump sum if you hadn't retired? --- Yes.

Whereas if you - - - ? --- Yes, well I certainly am not a financial guru, and I certainly wouldn't have done that, but I did run across a few people who thought they were and they thought they could do something better with this lump sum than collecting a PSS lump sum than collecting a CSS benefit of some combination.

65. My attention was also drawn to a number of articles and letters in the press at the time. Much of it was very critical of the benefits that the PSS offered, some in quite colourful terms.

Is there some kind of conspiracy between your so called investigative journalists and the ACOA [the Commonwealth public sector union], not to tell their members the truth about the employer component for public servants when they resign from the old scheme [the CSS]?

The new lump sum scheme will provide members with a benefit much less in value.

67. A number of financial advisors made it clear that they considered "there is little intrinsically wrong with the present CSS, especially when employees have had five years' service". While Mr Guy said that he did not often read the Canberra Times, I accept that this media material would have had a inhibiting effect on the likelihood of employees electing to become a PSS member.

68. Mr J Gordon and Mr R Davis, who appeared for Mr Guy, submitted further that a "presumption of continuance" applies so that, in the absence of evidence to show that Mr Guy was likely to elect for membership of the PSS, the presumption would apply that he remained in the CSS.

69. While reference was made to J D Heydon, Butterworths, Cross on Evidence, vol 1 (at Service 151), [1125], I note that the learned author was there very critical of the appellation "presumption", suggesting that it is a "presumption of fact" or a "provisional presumption". The kind of situation where the "presumption" applies, seems to me somewhat different from what I have here to decide. It is generally concerned with the likelihood that a state of affairs known at a point in time is likely to have existed at another point in time, such as what the rate of travel of a motor vehicle at one point in time is compared with a few moments earlier (R v Duryea [2008] SASC 363; (2008) 192 A Crim R 286 at 299) or what the seaworthiness of a ship was at port, if it is unseaworthy at sea (Pickup v Thames and Mersey Marine Insurance Co Ltd (1878) 3 QBD 594 at 600-1).

70. There is also what has been called "a presumption that a contract once made continues in existence." In Massoud v NRMA Insurance Ltd (1995) 62 NSWLR 657 at 661, McLelland CJ in Eq said:

(Such a presumption may of course be rebutted by proof of termination of the contract, for example, by a valid cancellation thereof, but the burden of proof of such a termination would rest on the party alleging it.) A presumption of continuance of this kind is ordinarily relied on in any proceedings to enforce a contract, since the making of the contract invariably precedes its enforcement, and generally speaking the plaintiff has the burden of proving the making of the contract whereas the defendant has the burden of proving any matters alleged to have resulted in the termination of the contract subsequent to its formation.

71. That presumption would, of course, be available for Mr Guy to say that if he were a member of the CSS and he did not elect to join the PSS, he would have remained a member of the CSS, but I have to say that I do not think it helps me to decide whether Mr Guy would have elected to join the PSS.

72. It seems to me no more than a factor of common experience on which I can draw that there is a degree of inertia in human activity where some people avoid choices by resisting change and clinging to the status quo. In this case, that is no more than a factor with limited assistance for the decision I have to make.

73. Nevertheless, having regard to all the matters I have mentioned, I am satisfied on the balance of probabilities that Mr Guy would not have elected to join the PSS and would have remained in the CSS.

74. The evidence of Mr Guy, and there was no reason not to accept it, especially as it was consistent with the other evidence I had heard in this case, was also that he would have elected on retirement to have accessed his benefits as a fully indexed pension.

75. As noted above at [44]-[45], each party provided an expert report from an actuary to calculate the damages payable to Mr Guy in the event, as I have found, that the Commonwealth was held liable to him.

76. Mr Heath prepared a report based on the following assumptions:

Mr Guy was born on 23 March 1940
he commenced Commonwealth employment on 24 April 1984
he ultimately joined the PSS on 13 December 1995 though should have been eligible to join from 24 April 1985
he ceased employment on 29 December 2000 and received a redundancy benefit

Mr Guy would have been 66.7 years of age at the date he elected to withdraw his superannuation benefits
Although Mr Guy originally specified contribution rates for the PSS fund of 2% of salary he made arrangements to contribute at 5% and did so up until the time of retirement
Contribution rates for the CSS fund would have been 5% of salary
Losses are discounted to present values at 3% pa, the rate adopted by the High Court in Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402

77. He then calculated that his loss was $258,137, excluding any payment in respect of taxation on that sum.

78. He subsequently revised his calculation because of the following changes to his assumptions as follows:

(i) calculation date revised to 16 November 2009

(ii) correction to an error which had productivity benefits starting in 1985 rather than 1988

(iii) benefits taken at age 65 rather than deferral beyond age 65

(iv) small revision to taxation offsets on pensions

79. On this revised basis, Mr Heath calculated that, excluding any payment in respect of tax, the loss sustained by Mr Guy would have been $237,448.

80. Mr Martin also prepared a report which calculated Mr Guy's loss on a number of bases. These included a scenario where Mr Guy would have transferred to the PSS on 1 July 1990 and at 29 December 2000 elected to receive his benefit as a lump sum rollover, and a scenario where he remained in the CSS but again elected to receive his benefit on 29 December 2000 as a rollover. For the reasons outlined above (at [48]-[54]), I have rejected these as likely scenarios that Mr Guy would have followed.

81. He also prepared calculations on the basis that Mr Guy would have joined the CSS on 24 April 1985, remained in the CSS until he left on 29 December 2000 and then elected to preserve his benefits until he turned 65, when he would have taken them as an indexed pension and a lump sum. This was a method comparable with that undertaken by Mr Heath.

82. In my view, this is the appropriate approach to the assessment of damages. It has the advantage, though serendipitous, that I can compare the approach of Mr Martin and Mr Heath quite directly.

83. Mr Martin calculated the loss sustained by Mr Guy on this basis as $206,814 as at 31 August 2009.

84. Both Mr Martin and the Commonwealth prepared helpful comments on the differences between these two calculations and that work was very helpful and much appreciated. I will deal with these next.

Mr Heath in his report calculated there to be $38,625 in Mr Guy's member account at this date; Mr Martin calculated it to be $38,153.

Mr Heath used a mixture of actual salary (obtained from Mr Guy's PSS superannuation statement), directly calculated salary (obtained from AGEST superannuation statements to which he applied the assumption of 4% of superable salary from 1 January 1992, 5% from 1 July 1992 and 6% from 1 July 1995) and, for periods prior to that, from a "salary schedule."

Mr Martin based his salary on "employee data provided by the Australian Government Solicitor". So far as salary was concerned, I did not have any other evidence of the provenance of this information and, indeed, I had no information as to the provenance of the "salary schedule provided" to Mr Heath.

The actual salary used by Mr Heath from 1 July 1995 agreed to some extent with that provided to Mr Martin, but was higher than that used by Mr Martin at earlier times. Given the greater apparent accuracy of the information generally used by Mr Heath, I will accept that figure, namely $38,625.

Productivity account at the date of retrenchment

Mr Heath calculated the productivity contributions from 24 April 1985. The Superannuation Benefit (Interim Arrangement) Act 1988 (Cth) (later renamed as the Superannuation (Productivity Benefit) Act), however, only commenced on 1 January 1988.

While I have some reservations about the salary figures used by Mr Martin, I note that, at least for the period to 1988, the annual rate of contribution by Mr Guy was a fixed amount because his salary was less than $19,934 (see s 3(1) of the Superannuation Benefit (Interim Arrangement) Act).

Accordingly, I consider that the calculation by Mr Martin is appropriate and I use that one, namely, $16,025.

Mr Heath corrected this error in his re-calculation.

To extrapolate to 23 March 2005, when Mr Guy turned 65, I calculated the member benefit to be $47,005 and, as I accept Mr Martin's calculation of the productivity benefit to be $19,502, that amounted to a total of $66,507.

Assessing the tax on these sums as $465, that results in an after-tax lump sum benefit as at 23 March 2005 of $66,042.

Pre-judgment interest on lump sum and part pension

Mr Heath did not apply pre-judgment interest, payable under r 1616 of the Court Procedures Rules 2006 (ACT), on either the lump sum or part pension payments.

This would add $26,000 in respect of the interest on the lump sum and $11,500 for interest on the part pension payments.

Mr Heath based his annuity factor of 13.722 on the Australian Bureau of Statistics projections with an allowance for a mid-level of mortality improvement together with the discount rate of 3% established by Todorovic v Waller [1981] HCA 72; (1981) 150 CLR 402.

Mr Martin based his annuity factor of 11.805 on the Australian Life Tables with a similar allowance for mortality improvement but using a discount rate of 3.5%. He reasoned that, as the pension payment is linked to movements of the consumer price index, the more wage-based rate of 3% is inappropriate. That approach is supported by the fact that the actuary to the CSS applied this rate when estimating the long term cost of pension payments.

I accept that the annuity factor should be as used by Mr Martin. This accounts for a difference of roughly $28,000, compared to the calculation by Mr Heath.

Mr Heath estimated the accumulated value of Mr Guy's actual PSS rollover benefit as $67,111 at 19 December 2006. Mr Martin estimated it as $62,529.

Mr Heath's calculations were set out in a table but I found it difficult to identify the assumptions that underlay the table.

On the other hand, Mr Martin used the actual rates applied to the rollover from the PSS, which had been placed in the Questor account (as noted above at [13]). That seems to me to be a reasonable basis for estimating the likely amount of the benefit by 19 December 2006 and I accept that calculation. The difference between these figures is $4,582, by which Mr Heath's higher reduction of the damages because of the benefit must be moderated.

Mr Heath also made no allowance for notional interest on the actual accumulated roll-over benefit between 19 December 2006 and the date of valuation, even though Mr Guy had those funds available to him during that period. Mr Martin used mortgage rates to calculate an additional amount of $14,195 of interest for this period. That would reduce the amount of Mr Guy's loss.

I suggest below (under item 7) that these rates are too high. I reduce the amount by an estimate of $9,000 which should reduce the loss on the basis of an allowance for notional interest.

Mr Guy would, of course, have had the use of the contributions that would otherwise have been paid to the superannuation fund, whether to CSS or PSS (other than, of course, those he actually did pay).

Mr Heath calculated that these would have amounted to $22,621. Mr Martin calculated that to be $49,789.

The difference appeared to be in the interest rate applied to the contributions, though, again, Mr Heath based his contributions on the salary scales on which he had originally relied, as did Mr Martin.

Mr Heath used building society interest rates from 1 July 1984 to 1 July 1994 and then cash management rates. Mr Martin assumed that the contributions would be invested in 12 month term deposits and later mortgages. He used the 12 month term deposit rates as a proxy to actual building society rates. The use of building society deposit and mortgage rates were said by Mr Martin to have been chosen because he was so instructed.

I note that Mr Guy did invest in a coffee shop and thereafter in a mortgage. The coffee shop did not provide him with any particular advantage. His evidence was that "in the end the business broke even". He invested $33,000 in the purchase and in re-fitting it out and sold it for $23,000.

It seems to me that Mr Martin's calculation is too optimistic as to the realistic outcome of the likely use that Mr Guy would make of the saved contributions. I prefer to rely on the calculations of $22,621 made by Mr Heath in this regard.

Mr Martin, in his helpful analysis of the difference between his report and that of Mr Heath, mentioned other matters. These were as follows:

(i) Differences in the consequences of deferment after the redundancy. Mr Martin pointed out that Mr Heath had assessed that Mr Guy would have preserved his benefits until he actually left the workforce at age 66.7 years. He noted, however, that the rules of the CSS require that a member who preserved benefits had to commence receiving payments on or before age 65.

Mr Heath accepted this and, in his revised calculations, took it into account.

In the light of his re-calculation, I do not need to make any adjustment myself.

(ii) Valuation date. Mr Heath's initial valuation was to 1 September 2008; Mr Martin made his valuation to 31 August 2009.

Again, this was dealt with in Mr Heath's revised calculation, where he recalculated the loss to 16 November 2009. Accordingly, I do not have to consider any adjustments as a result of that.

(iii) Generally. Mr Martin indicated that he "adopted simplifying assumptions" for easier comparison with Mr Heath's estimate. This, he quantified, accounted for a $2,000 in reduction from Mr Heath's calculations. I see no need to take this into account.

85. As, in general, I have preferred Mr Heath's revised assessment, I shall use his calculation of loss as the base from which to make the adjustments I have noted above. The calculation is as follows:

Mr Heath's revised estimate as at 16 November 2009 $237,448

Plus pre-judgment interest on part pension $11,500

Plus difference in PSS benefit calculations $4,582

Interest is payable on only part of that sum, as pre-judgment interest is not to compound ordinarily. The court should ensure that there is no double dipping: J Edelman and D I Cassidy Interest Awards in Australia (Lexis Nexis Butterworths, 2003) at 147-8; [7.11]. The sum on which pre-judgment interest should be calculated is $204,565.
Interest on that sum from 16 November 2009 to the date of judgment, 4 July 2013, is, in accordance with Pt 2.1 of Sch 2 of the Court Procedures Rules, $61,516.63. Given that the calculations have been rounded to dollars, it seems to me that I should add $61,517 in interest.
I will, accordingly, enter judgment for $303,582.00.

89. A question arises as to whether this sum or any part of it will incur tax either as income or as a capital gain. Both parties made submission about this. The Commonwealth submitted that the damages would not be taxable as ordinary income and that the damages will be exempt from capital gains tax. The plaintiff submitted that the damages would be taxable on ordinary principles and that an award of damages should be made to ensure that the plaintiff is fully compensated.

90. The Commonwealth, however, referred to a number of cases where the Court did not rule on the issue but reserved leave to apply for additional damages in respect of any damages referable to income tax or capital gains tax. See Rabelais Pty Ltd v Cameron (1995) 95 ATC 4552; Turner v T R Nominees Pty Ltd (1995) 31 ATR 578; P M Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2001] NSWSC 798 at [114]- [119]. See also P M Sulcs & Associates Pty Ltd v Daihatsu Australia Pty Ltd [2008] NSWSC 683.

91. The Commonwealth submitted that it was appropriate to take the course adopted in those cases and reserve to the plaintiff leave to apply for additional damages should the award be assessed as liable to tax on any basis. At this time, argument would be permitted as to whether it is appropriate for there to be such an award and, if so, of what amount.

92. Mr Guy, through his counsel, suggested that such a proposal was apparently inconsistent with the "once and for all" principle (Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 93 ATC 5101) but nevertheless adopted the Commonwealth's proposal, which, his counsel submitted, "makes sense for a number of reasons".

93. These include that Mr Guy has the comfort of knowing that if the Commissioner of Taxation were to levy tax, he could return to the court to recover damages for any loss thereby occasioned. It also provides certainty to the court to know whether tax would be levied and, if so, how much would be levied, so as properly to provide compensation for what is at law required to be compensated.

94. It seems to me that it would also relieve the court of making a determination which would not be binding on the Commissioner of Taxation and yet may render an injustice to one of the parties.

95. I shall, accordingly, reserve a right to the plaintiff to seek further damages should the award made by the judgment be subject to a levy of tax of any kind.

I certify that the preceding ninety-five (95) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Refshauge.

Counsel for the applicant: Mr R Davis and Mr J Gordon

Counsel for the respondent: Mr S P Estcourt QC and Ms C M Dowsett

Solicitor for the respondent: Australian Government Solicitor

Date of hearing: 18-19 23-26, 30 November 2009; 1-3, 8-11, 14 December 2009, 10-11 February 2010

Benefit (Interim Arrangement) Act 1988

Guarantee (Administration) Act 1992

(Productivity Benefit) Act 1988

Procedures Rules 2006

Benefit (Interim Arrangement) Act 1988

Guarantee (Administration) Act 1992

(Productivity Benefit) Act 1988

Procedures Rules 2006

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