Discussion
256 The decision in Cornwell concerned a Commonwealth employee who had been informed, negligently and incorrectly, by his superior in July 1965 that he was not eligible to join the CSF. As a result of a subsequent reclassification, Mr Cornwell did become a member of the CSS on 24 March 1987. The Commonwealth contended that his claim for the additional benefits he would have received if he had been admitted to the CSF 22 years earlier was statute barred, on the basis that his loss had crystallised in either 1976 when the CSF was closed and replaced by the CSS, or on 24 March 1987 when he joined the CSS.
257 By majority, the High Court held that Mr Cornwell had sustained actual loss only on his retirement on 31 December 1994. The majority (Gleeson CJ, Gummow, Kirby, Hayne, Heydon and Crennan JJ) emphasised the necessity in actions for negligence causing economic loss of identifying the interest said to be infringed, referring at [16] to the observations of Mason CJ, Dawson, Gaudron and McHugh JJ in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 527. The majority in Cornwell identified the economic loss which Mr Cornwell sustained as "the lesser benefit" which he had obtained "on his retirement". That is, the difference between what he did obtain on his retirement on the one hand, and the benefit he would have received had he not relied upon the negligent advice on the other.
258 The majority accepted (at [36]) that, on the commencement of the 1976 Act, it had no longer been open to Mr Cornwell to make up for his years of service since 1965 for the purposes of the calculation of benefits under the 1976 Act. The majority also accepted that Mr Cornwell could have been assured that the amount of his actual contributions paid under the 1922 Act was secured to him by s 51(1) of the 1922 Act.
259 Despite those considerations, the majority considered Mr Cornwell's entitlements to be "prospective and contingent" upon the satisfaction of the differing statutory criteria at some future time. These criteria were those contained in Parts V and VI of the 1976 Act discussed above, including the "standard age retirement pension", an "early retirement benefit", an "invalidity benefit", or commutation of a pension. If there was no entitlement to any of those benefits and the employee's employment ceased for reasons other than death, Mr Cornwell would have been entitled to the accumulated contributions made by him under s 80. Until it was known which of these criteria were satisfied, Mr Cornwell had not sustained a loss so as to set the limitation period running.
260 Another relevant decision is Commonwealth v Innes, a decision on a special case referred to the Full Court of the ACT Supreme Court (Murrell CJ, Penfold and Katzmann JJ). It concerned an employee born in 1947 who was employed by the Commonwealth between 1963 and 1993. His employment came to an end on his acceptance of voluntary redundancy. The employee was then employed in the private sector until December 2013 when he retired. His claim was that, but for negligent advice, he would have joined the CSF in about February 1966, transferred to the CSS, and elected at the time of his voluntary retirement to preserve his superannuation benefit until he turned 60 in June 2007. The employee did not commence his action against the Commonwealth until 18 May 2011. He claimed that this was within the six year limitation period on the basis that his cause of action had not accrued until he had turned 60 when, but for the negligence of the Commonwealth, he would have retired and accessed his deferred benefit.
261 The Full Court rejected that argument. It held, applying Cornwell, that the employee's loss comprised the loss of entitlement to receive superannuation from the CSS on satisfaction of any one of the statutory criteria. On the counterfactual circumstance on which the special case was based, this was in 1993 when the employee's employment ceased, because he then had an entitlement to be paid early retirement benefits. The contention that he would have chosen to defer that payment by choosing to preserve the benefit until he turned 60 did not alter the fact that an entitlement to payment had accrued. Thus, the employee's claim was statute barred.
262 As I have noted, the respondent contended that these appeals are relevantly distinguishable from Cornwell. It was not suggested that the facts of this case align with those in Innes.
263 Before I return to further consider Cornwell I should refer to the judgment in Wardley upon which the majority in Cornwell relied in two important respects.
264 Wardley had made misleading representations to the State of Western Australia which led the latter to provide an indemnity to the National Australia Bank against a facility granted by Rothwells Ltd. The representations were said to be to the effect that Rothwells was a sound financial institution with substantial net assets, and it was said that those representations were contrary to fact. In due course the Bank called on the indemnity. The State sought to sue Wardley for engaging in misleading and deceptive conduct. A question arose as to when the State's cause of action accrued. As the majority (Mason CJ, Dawson, Gaudron and McHugh JJ) outlined at 522, Wardley claimed, and at first instance French J accepted, that the State suffered loss the moment it executed the indemnity because it had assumed a risk of loss that was very much greater than it had been led to believe was the case, representing a compensable loss. On appeal the Full Court of this Court disagreed. The Full Court held that the indemnity created an executory and contingent obligation which, at the earliest, had crystalized when the National Australia Bank requested the State to indemnify it.
265 In the High Court, the majority agreed with the Full Court. The majority characterized the indemnity as "contingent and executory" (at 524) and went on to say that "[t]he likelihood, perhaps the virtual certainty, that there would be a loss, in the light of Rothwell's actual financial position as it stood when the indemnity was executed, did not transform the liability into an actual or present liability at that time" (at 524-525).
266 Of some importance to the majority's rejection of Wardley's contention was the judgment of Gaudron J in Hawkins v Clayton (1988) 164 CLR 539, where, at 600-601, and in relation to whether a limitation provision had barred the suit, her Honour had observed that when a cause of action for economic loss accrues may depend on the nature of the interest infringed. The majority in Wardley said this at 527 (emphasis added, citations omitted):
Economic loss may take a variety of forms and, as Gaudron J. noted in Hawkins v Clayton, the answer to the question when a cause of action for negligence causing economic loss accrues may require consideration of the precise interest infringed by the negligent act or omission. The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough.
267 The majority continued (emphasis added):
When a plaintiff is induced by a misrepresentation to enter into an agreement which is, or proves to be, to his or her disadvantage, the plaintiff sustains a detriment in a general sense on entry into the agreement. That is because the agreement subjects the plaintiff to obligations and liabilities which exceed the value or worth of the rights and benefits which it confers upon the plaintiff. But, as will appear shortly, detriment in this general sense has not universally been equated with the legal concept of "loss or damage". And that is just as well. In many instances the disadvantageous character or effect of the agreement cannot be ascertained until some future date when its impact upon events as they unfold becomes known or apparent and, by then, the relevant limitation period may have expired. To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever-present risk of undercompensation or overcompensation, the risk of the former being the greater.
268 The majority in Wardley concluded that where a plaintiff enters into a contract which exposes that person to a contingent loss or liability, loss is not first suffered on entry into the contract (at 532). At 533 and in support of that conclusion the majority reiterated (emphasis added):
The conclusion which we have reached is reinforced by the general considerations to which we referred earlier. It is unjust and unreasonable to expect the plaintiff to commence proceedings before the contingency is fulfilled. If an action is commenced before that date, it will fail if the events so transpire that it becomes clear that no loss is, or will be, incurred. Moreover, the plaintiff will run the risk that damages will be estimated on a contingency basis, in which event the compensation awarded may not fully compensate the plaintiff for the loss ultimately suffered. These practical consequences which would follow from an adoption of the view for which the appellants contend outweigh the strength of the argument that the principle applicable to the cases in which the plaintiff acquires property (or a chose in action) should be extended to cases where an agreement subjects the plaintiff to a contingent loss. In such cases, it is fair and sensible to say that the plaintiff does not incur loss until the contingency is fulfilled.
269 The observations made in Wardley as to the importance of determining the nature of the interest said to be infringed and the disadvantageous practical consequences which flow from a finding that loss has accrued when loss is not ascertained or ascertainable, were taken up and relied upon the majority in Cornwell at [16] and [17] (citations omitted):
[16] In Hawkins v Clayton, Gaudron J emphasised the importance for actions for negligence causing economic loss in identifying the interest said to be infringed, whether it be the value of property, the physical integrity of property, or the recoupment of moneys advanced. Thereafter, in Wardley Australia Ltd v Western Australia, Mason CJ, Dawson, Gaudron and McHugh JJ observed:
"To compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable would be unjust. Moreover, it would increase the possibility that the courts would be forced to estimate damages on the basis of likelihood or probability instead of assessing damages by reference to established events. In such a situation, there would be an ever-present risk of under compensation or overcompensation, the risk of the former being the greater."
Their Honours also said:
"The kind of economic loss which is sustained and the time when it is first sustained depend upon the nature of the interest infringed and, perhaps, the nature of the interference to which it is subjected. With economic loss, as with other forms of damage, there has to be some actual damage. Prospective loss is not enough."
[17] In Law Society v Sephton & Co, Lord Mance said, with reference to Wardley, that he saw the attraction of an approach:
"the effect of which is that unless and until a remote contingency eventuates the claimant is not expected to issue proceedings which he would not normally issue or wish to issue unless and until that point arrives."
270 Thereafter, at [18], the majority in Cornwell identified the nature of the economic loss which it was alleged Mr Cornwell had sustained. The loss alleged was the lesser CSS benefit Mr Cornwell obtained on his retirement as a result of the negligent advice given to him in 1965. The nature of Mr Cornwell's interest (in the sense used in Wardley) was an "entitlement conferred by federal statute law". The majority distinguished such an interest from "proprietary or other rights or obligations created or governed by the general law". At [19] and at [37] the majority characterised Mr Cornwell's CSS entitlements prior to his retirement as prospective and contingent upon the falling in at a future time of the statutory criteria upon which those entitlements depended. At [19] the majority said this:
What was only in prospect until the falling in of one or more of various contingencies, matured into actual loss only at the end of the respondent's service and upon the falling in of one or more of the statutory contingencies which had to be met for the respondent to be entitled to a statutory benefit.
271 Put another way, Mr Cornwell's interest (in the sense used in Wardley) only crystallised and became capable of being infringed upon the falling in of one or other of the statutory criteria. At that time Mr Cornwell's prospective entitlements became an actual entitlement and Mr Cornwell suffered actual loss.
272 Turning then to the facts of this case, the loss alleged by Mr Innes is of the same nature as in Cornwell being the loss of a CSS benefit on retirement. The nature of the interest is, just as in Cornwell, the entitlement to be payed a benefit under the 1976 Act on the falling in of one or other of the statutory contingencies.
273 In my view, just as in Cornwell, the interest here infringed was Mr Innes' entitlement to a benefit conferred by the 1976 Act. That entitlement, whether provided under s 144B (age 65 retirement), s 144C (early retirement), ss 144D-F (invalidity) or s 144G (spouse and children) "depended upon the terms of the particular legislation" and "was only in prospect until the falling in of the various contingencies" (Cornwell at [19]). It is only at that time that the infringement of the interest of Mr Innes can be said to have "matured into actual loss" (Cornwell at [19]). Prior to that time, the entitlement was "prospective and contingent upon the falling in at a future time of the statutory criteria" (Cornwell at [37]). There is no relevant distinction as to the nature of the interest held by Mr Cornwell and that interest held by Mr Innes. Nor is a distinction to be found in the nature of the interference to which those respective interests were subjected.
274 The position may well have been different if the opportunity to elect for a DUP had crystallised the prospective contingent entitlements available under the 1976 Act, a circumstance akin to the position in Innes. But the election had no such consequence. Each of the entitlements available under the 1976 Act and provided under the DUP remained prospective and contingent upon the falling in at a future time of the statutory criteria provided by the 1976 Act. The fact that on making the election, the available contingent entitlements were narrower and excluded a s 80 return of contributions (a feature emphasised by the respondent) did not alter the prospective and contingent nature of the remaining entitlements. The opportunity lost to elect for the DUP was an opportunity to extend access to one or other of the several prospective and contingent entitlements. It was not an opportunity to convert a prospective entitlement into an actual entitlement.
275 Insofar as the respondent's contention sought to characterise the interest infringed as a present entitlement to a future payment or a future revenue flow under the DUP, there is a short answer to that contention. The negligence of the respondent did not infringe any such interest because no such interest could have existed. Any proprietary or other right to or interest in a future payment or revenue flow remained prospective and contingent, at least until one or other of the statutory criteria for the payment of a benefit had been satisfied. As at 30 July 1995 no statutory criterion had been met by Mr Innes.
276 Insofar as the respondent's contention was grounded in the loss as at 30 July 1995 of a chance or valuable opportunity, I do not consider that the matters relied upon by the respondent demonstrate an interest (in the sense used in Wardley).
277 On the assumption that each of the available contingent entitlements on the counterfactual were superior to the value of the monies not contributed to the CSS and held on the factual, the respondent characterised the opportunity said to have been lost as an opportunity for a guaranteed entitlement to a benefit. However, to adopt the reasoning in Wardley quoted at [265] above, "[t]he likelihood, perhaps the virtual certainty", at the time that the opportunity was lost that there would be a benefit in the future did not transform the contingent benefits into actual benefits at that time. Therefore, any interest and thus any loss remained prospective. As the majority said in Wardley at 527 in the passage quoted at [267] above, detriment in a "general sense has not universally been equated with the legal concept of 'loss or damage'". That is so including because to compel a plaintiff to institute proceedings before the existence of his or her loss is ascertained or ascertainable may be unjust.
278 I should add that the respondent was wrong to assert, as a point of distinction, that the High Court in Cornwell reasoned that there was a need to wait and see which of the contingencies fell in to know when a loss had occurred because in Cornwell a s 80 return of contributions remained a possibility. Nothing in the judgment of the majority suggests that the High Court so reasoned.
279 In any event, I find it difficult to see how, on the respondent's argument, the guarantee of an entitlement more valuable than a s 80 return of contributions could form the basis of a relevant distinction with the facts in Cornwell. The respondent's contention that loss accrued at the time of the 1995 election rests on a premise that, on the counterfactual, Mr Innes held some interest in his future entitlement under the DUP which was capable of being valued at the time of the 1995 election. If it were otherwise, the respondent could not say that Mr Innes had suffered a loss at that time. It was contemplated that the valuation of that interest would be approached on the basis of the relative likelihood of each contingency falling in applied against the relative values of those contingencies. That valuation process does not differ in any material way from the process that would be applied to the valuation of an interest in a future entitlement which included a s 80 return of contributions. Such a process is capable of taking into account the possibility of a net return of zero in the case of a s 80 return of contributions. However, significantly, the prospect of a zero return in combination with other valuable contingencies does not diminish the overall value of the interest to zero. The relative likelihood of the other "more valuable" contingencies falling in has the result that the net value of the interest remains positive and, on the respondent's argument, is similarly capable of forming the basis of a loss for the purposes of the limitation period.
280 It follows that on the respondent's argument, on the counterfactual, Mr Innes had a benefit of greater value than a s 80 return of contributions on entering the CSS. The same would have been true for Mr Cornwell. Yet the High Court did not rule that Mr Cornwell would have suffered loss on entering CSS. These observations point to the artificiality of the respondent's fixation on the 1995 election as providing some point of distinction with the facts of Cornwell.
281 Furthermore, the assumption upon which the respondent's contention relied and described at [277] above, was not substantiated.
282 In Cornwell, the High Court only briefly dealt with the idea that Mr Cornwell may have suffered a lost chance or commercial opportunity. At [38] the majority said this:
The respondent also correctly emphasised that his was not a "transaction case" where property was sold or acquired at a disadvantageous price, or the opportunity was lost of the lucrative exploitation of contractual rights or of some other commercial opportunity. The appellant submitted that the respondent's loss was "necessarily and irretrievably sustained" when the 1976 Fund commenced and replaced the 1922 Fund in the manner described briefly earlier in these reasons. However, whether in 1976 the respondent would have been better or worse off had he invested elsewhere the contributions he otherwise would have placed for units under the 1922 Fund arrangements is a matter of speculation. He could not be said, consistently with remarks in Sellars v Adelaide Petroleum NL, in 1976 to have sustained loss of a commercial opportunity which had some value, as a matter of the degree of probabilities and possibilities.
283 As I read that passage and in particular when read in the context of the majority's reasons at [18] where the nature of the interest infringed was discussed and similar observations were made by the majority about the non-commercial nature of that interest, the first part of [38] acknowledges the view of the majority that a loss of a commercial chance or opportunity was not the relevant interest infringed by the negligence suffered by Mr Cornwell. The second half of the paragraph concludes that a loss of opportunity case could not be sustained. The latter conclusion seems to have been premised on the contrary presumption that the interest infringed on the counterfactual could have been a commercial opportunity. On that presumption, the majority held that whether Mr Cornwell was worse off on the counterfactual than on the factual involved speculation and was therefore not established.
284 Here too, whether Mr Innes was worse off by being denied the chance or opportunity to take up the DUP is a matter of speculation that has not been established on the evidence. Such a finding could only have been made on a forward looking assessment from the vantage of mid-1995.
285 For the factual, an assessment would have been required of the value of monies not contributed into the CSS through to mid-1995 (when contributions closed) together with the return on the investment of those monies. I will call that exercise A. In order to know whether those monies were, as at mid-1995, less valuable than the value of the DUP as an opportunity of value, would have entailed some forecast as to what rate of growth could be expected through to the time when a benefit under the DUP would be paid. I will call that exercise B.
286 For the counterfactual, to assess the value of the lost opportunity would have required, again from the vantage of mid-1995, an assessment of when a benefit would likely first be paid and which of the available benefits that would be. I will call that exercise C. Additionally, it would have been necessary to make an assessment as to the rate of pension that would likely be payable in the context of the operation of s 144H which provided for the final annual salary to be adjusted for CPI but only to the last day of employment in the workforce. For that, it would have been necessary to assess, again from the vantage of mid-1995, what would likely be the last day of employment in the workforce for Mr Innes. I will call that exercise D.
287 It is arguable that the primary judge undertook exercise A (see at [271], [296] and [297]) but the primary judge clearly did not undertake exercises B, C or D including because the nature of the case put by the respondent to him did not require it. Each of exercises B, C and D, by their nature, involve a high degree of speculation. On the findings made by the primary judge Mr Innes could not "be said, consistently with remarks in Sellars v Adelaide Petroleum NL [(1994) 179 CLR 332], [in mid-1995] to have sustained loss of a commercial opportunity which had some value, as a matter of the degree of probabilities and possibilities" (Cornwell at [38]).
288 Mr Innes relied upon [38] of Cornwell to submit that the many variables at hand render speculative the identification of loss as at mid-1995. To some extent, the submission is consistent with the views I have just expressed. However, in two respects, Mr Innes' submission went further and for completeness I should deal with each.
289 First, Mr Innes submitted that an entitlement under those provisions which established the DUP will depend upon the content of the legislation at the time that the relevant contingency occurs and, like any other statute, the provisions in question are not fixed and may be amended. That argument seems to have been directed to the respondent's contention that the DUP provided a present entitlement to a future payment and sought to draw a distinction between an entitlement founded in a commercial or private right with that based in a statutory right capable of being varied at the whim of Parliament. But, the distinction sought to be drawn is not so clear cut. A commercial or private right may not be conferred by statute but its value may nevertheless be dependent upon it and thereby is also capable of being at risk of legislative amendment. I agree, however, with Mr Innes' alternative point that the prospect of legislative change over the particular subject matter in question adds to the basket of contingencies and thus the speculative nature of the assessments which the respondent's proposition called for.
290 Second, responding to the contention that under the DUP Mr Innes would necessarily do better than a return of contributions, Mr Innes contended that one possibility under the DUP is that a former eligible employee could get no benefit at all not even a return of contributions.
291 In order to deal with the argument it is necessary to set out the terms of s 144A(2) and convenient to set out s 144B(1) and 144C(1):
144A Delayed Updated Pension
…
(2) Delayed updated pension is payable:
(a) to a former eligible employee who has reached the age of 65; or
(b) on request - to a former eligible employee on retirement if he or she is aged 55 or more; or
(c) on request - to a former eligible employee on retirement on the grounds of invalidity; or
(d) on request - to a spouse or child of a deceased former eligible employee, in accordance with Part VI.
…
144B Benefits - age 65 retirement
(1) A former eligible employee entitled to delayed updated pension who retires at or after the age of 65 is entitled to age retirement benefits in accordance with Division 1 of Part V:
(a) that relate to the period of contributory service that ended on the day he or she ceased to be an eligible employee; and
(b) subject to adjustment (if any) under section 144H - as if his or her final annual rate of salary on ceasing to be an eligible employee is the final annual rate of salary on retirement."
…
144C Benefits - early retirement
(1) A former eligible employee entitled to delayed updated pension who retires at or after the age of 55 but before the age of 65 is entitled to early retirement benefits in accordance with Division 2 of Part V (except sections 60 and 62):
(a) that relate to the period of contributory service that ended on the day he or she ceased to be an eligible employee; and
(b) subject to adjustment (if any) under section 144H - as if his or her final annual rate of salary on ceasing to be an eligible employee is the final annual rate of salary on retirement.
…
292 Mr Innes' submission was this (emphasis in original):
Sections 144B and 144C identify the entitlement prerequisites for receipt of a delayed updated pension by a former eligible employee upon "retirement". Such provisions are quite explicit, namely that such employee must be one "who retires at or after the age of 65" (emphasis added), or in the case of s 144C "who retire at or after the age of 55 but before the age of 65" (emphasis added).
For example, in the case of s 144C, a former eligible employee who retires at age 57 falls within the entitlement prerequisite. However, a former eligible employee who retires at age 50, in one of the circumstances exemplified above in paragraph 4, is not a person "who retires at or after the age of 55 but before the age of 65". Rather, such person is one, to adapt the statutory language, "who retires before the age of 55".
293 Mr Innes' interpretation would lead to perverse and bizarre outcomes. An employee who retired from the workforce a day after reaching the age of 55 would be entitled to a benefit but an employee who retired the day before reaching 55 years of age would be entitled to nothing at all, not even the age 65 retirement benefit on reaching 65 years of age. The policy that would give rise to an intent to implement such a scheme is not apparent. It would create an extreme disincentive - verging on a punitive disincentive - to retirement prior to the age of 55. Such a disincentive is not elsewhere manifest in the Act, as the existence of the DWB reveals (see ss 138(2)(c) and 138(3) of the 1976 Act). And, it is hard to imagine why the framers of Sch 11 would care whether persons who are no longer public employees and no longer entitled to contribute to the CSS scheme should withdraw from the workforce before or after the age of 55. Still less likely is it that it was intended to implement a regime that could very well destroy the retirement savings of former public employees because they happen to voluntarily leave the workforce (or be retrenched) at the age of (say) 54.
294 The absurdity, inconvenience, and improbability of the result of that construction render it the kind of construction that would be avoided by a court, if another construction were reasonably open: see Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297.
295 Another construction is reasonably open. In my view the word "retires" in s 144C(1) must be read with s 144A(2)(b) which relevantly provides that the early retirement benefit provided for by s 144C "is payable … on request - to a former eligible employee on retirement if he or she is aged 55 or more" (emphasis added). In that context "retires" is open to be read as not merely a reference to the employee withdrawing from the workforce but that it contemplates that the employee has at least reached the minimum retirement age of 55 years of age. On that construction, an employee who has both withdrawn from the workforce and reached the age of 55 may be regarded as having retired. When the word "retires" in s 144(C)(1) is so understood, the absurd results earlier referred to are avoided. It follows that Mr Innes' construction should be rejected.
296 For those reasons the respondent's notice of contention should be dismissed.
I certify that the preceding one hundred and twenty-four (124) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.