Findings: should the 'ACFO' salary be approved as superable salary? Yes

1. In my view, it is consistent with the purpose and content of the ESS Act, and consistent with past practice in respect of Mr Marshall's superable salary, to approve the applicable salary under the ACFO 2010 Agreement in the period 2014-2017 as Mr Marshall's superable salary, for the following reasons:
   • Doing so meets the express guidance provided by the first component of limb (b) of s 3 - it is the salary specified for superannuation purposes in Mr Marshall's detailed and comprehensive contract of employment.
   • It is open to be approved under s 4(1E)(b): it is greater than the salary of a leading firefighter. Approving it appropriately recognises, in my view, that although Mr Marshall held the position of leading firefighter when he last worked with the MFB, it can be assumed that he would not have remained in that position for 23 years. He is therefore not treated less favourably for having left to be a union official.
   • With the benefit of the 2012 Remuneration Agreement and the payroll advice slips, it is now clear that Mr Marshall's 'base salary' for the Victorian position reflected the salary of an ACFO before 2014 and continued to do so after 2014.
   • Before 2014, employer contributions to the Defined Benefits scheme were made on that basis, consistent with the 2012 Remuneration Agreement.
   • It remains unclear what happened from 2014 with superannuation deductions. There appears to have been a mistaken decision in 2016 to cease deducting them from Mr Marshall's gross pay. But if, as contended, what was paid to him constituted the voluntary member contributions he made until ceasing to be able to do so (because he had reached his maximum benefit multiple), this would not represent an increase in his total remuneration including superannuation contributions.
   • Approving it would not only be reasonable but also consistent with past practice in respect of Mr Marshall's superable salary, in circumstances where his overall remuneration did not change.
   • Apart from the change from fortnightly claims for overtime to a regular payment of overtime, Mr Marshall's overall remuneration did not change in 2014:
     • Although the payment arrangements for the National position payment changed in 2014, this did not represent an increase in salary by that amount. The payroll advice slips for both 'base salaries' reflect this.
     • Mr Marshall received the National position payment before 2014, and the National Union paid SGC on it. It was not included in his superable salary. He continued to receive it after 2014. The payer changed but not the payment.
     • Further, if, as submitted by Counsel on behalf of Mr Marshall, the National Union and the Victorian Branch are one body, the payer did not change.
     • On the evidence, Mr Marshall received the EMR, LAFM and meals allowances in his pay before 2014 and they were not included in his superable salary. He continued to receive them after 2014.
     • The only substantial change in 2014 was that there was apparently a decision, not recorded in any clear or formal way, to claim or designate the whole of Mr Marshall's remuneration as superable salary.[63] Any such decision does not bind the Board, nor, I add, would the Board be bound by a formal decision of NCOM or BCOM to that effect.
2. Approving such a substantial increase in superable salary only on the basis that a higher amount was being claimed or designated would not be reasonable.

Findings: should any other components be approved? No

1. The reasons why it is appropriate to approve as superable salary the salary of an ACFO, are relevant to any decision not to approve the additional components. I refer to them without repeating them.
2. Fairness to other members of the scheme and consistency across the scheme would, in my view, also preclude approving a significant increase in superable salary from one year to the next for an individual member whose overall remuneration had not changed. It would be an arbitrary decision.
3. Mr Marshall received the National position payment before 2014. According to the 11 April 2017 briefing paper to the Board,[64] the employment with NCOM did not satisfy the definition of 'operational staff member', as the employment was in a non-operational capacity. It was considered OTE and SGC was payable on it to the accumulation fund at the applicable rate.
4. Recognition now of the National position payment for the relevant years as superable salary for the purposes of the Defined Benefit scheme would potentially give rise to two benefits payable for the same period of employment because Mr Marshall will receive past benefit accrual for it in addition to the benefit of the SGCs made to Mr Marshall's ESSPLAN account. As he has already attained his maximum benefit multiple, he will receive an additional benefit on the National position payment which is effectively 7.5 times that payment.
5. Mr Marshall received the allowances before and after 2014 and would receive a similar additional benefit for those amounts.
6. Also weighing against approval of the amount notified in 2014, or amounts in excess of the ACFO salary, is that doing so would potentially create a significant unfunded liability. As I understand it, a significant increase in superable salary close to retirement or resignation age will create a problem where employer contributions over the person's working life have been based on a much lower salary figure.
7. As Mr Pearse stated in his first witness statement, employer contributions are paid by the employer to the fund on behalf of all their employees who are contributors to the Defined Benefits scheme.
8. The amount an employer has to contribute is a product of the aggregate of salaries the employer pays, and a rate determined by the Board's actuary.
9. The rate determined for a given employer takes into account the value of the pool of assets in the fund and the increases in the value of the fund's liabilities in respect of total accrued benefits related to that employer, based on changes specific to its employees and the factors which determine the employees' accrued benefits such as length of service; their voluntary employee contributions and their salary.
10. Mr Marshall has been a member of the since 1987. I expect that the rate and the amount of employer contributions have been based on the above process. $354,041 is a fraction over double the superable salary for the year ended 30 June 2013, $175,533.52, as stated in the Annual Benefit Statement as at 30 June 2013.[65] Approving the amount claimed would, I understand from the evidence, unexpectedly increase the fund's liability due to the unanticipated doubling of superable salary late in Mr Marshall's career.
11. The ESS Act expressly requires the Board to manage and determine investment objectives for the assets of the scheme so as to achieve optimal risk and return having regard to:

the need to provide for payments out of the Scheme or administered scheme; and

the need to exercise reasonable care and prudence so as to maintain the integrity of the Scheme or administered scheme.

1. This statutory duty would weigh against approval of the other components in the relevant period, including the allowances.
2. If I am wrong about the above, I make the following additional observations about the allowances.

1. The Board's 2017 decision about the allowances in Mr Marshall's case was based on the erroneous view, in the absence of Mr Marshall's employment contract, that except in the case of the EMR allowance, the LAFM and meals allowances were reimbursement for expenses, and so would not be superable under s 3 limb (a):

allowances which would...ordinarily be payable in respect of every pay period in a year of employment.

1. As agreed and as I have found, limb (a) does not apply in this case. In my view, If limb (a) had applied, the consideration is whether the allowances are of a kind that are ordinarily payable to persons in the member's position, not that they were paid to an individual in this way.
2. To the extent it is relevant, the Employer Manual for the Defined Benefits scheme is consistent with this view. Under Superable Allowances[66] It states that:

If an allowance is paid periodically and regularly it should be included in superable salary. If a member is paid an allowance that is not normally payable for the person's job classification, approval of the ESSSuper Board would be required.[emphasis added]

1. In making its 2017 decisions, the Board was at a disadvantage in not being provided with the 2012 Remuneration Agreement. Nor did the Board have the payroll advice slips, which show that the allowances were consistently paid on a fortnightly basis.
2. MOL stated the position accurately in their letters to the Board - that these allowances were not related to or dependent on expenses and Mr Marshall was separately reimbursed for expenses.
3. As submitted on behalf of Mr Marshall, there was evidence that allowances are accepted as superable salary in the case of firefighters, although no clear evidence as to what those allowances were.
4. Tribunal orders, made by consent on 8 December 2017, required the Board to advise the number of firefighters in respect of whom the Board has excluded allowances from their superable salary. It appears the Board did not provide this information. Instead, in response to a letter from Mr Marshall's lawyers dated 24 November 2017 asking that question in relation to 10 named firefighters, Mr Pearse answered that their superable salaries had not been reduced by allowances.
5. In his additional evidence at the hearing, Mr Pearse said that he had not realised at the time that the terms of the Tribunal's order required a broader statement but was not aware of any firefighters' allowances being disallowed.
6. He also said, however, "we had not seen a case where LAFM and meals allowances were paid in this way" but agreed the Board had been told that they were paid uniformly and regularly. He said that the Board was not satisfied the superably salary should be increased by the amount of the allowances, but it would be open to the Board to approve them.
7. He said that overtime would not normally be recognised, but it would be open to the Board to approve it.
8. In re-examination, Mr Pearse said that the sorts of allowances that are included in superable salary for firefighters are for things like being on duty, for training qualifications and on-call allowances if an hourly rate is paid and they are paid consistently.
9. I accept Mr Pearse's evidence that firefighters' allowances paid regularly and consistently are usually treated as superable salary. To the extent it is relevant here, it was also apparent from Mr Pearse's evidence overall that in most cases ESSSuper relies on the superable salary amount notified by the employer and takes the information in good faith.
10. There was no evidence, however, about what classification or position was held by the firefighters concerned, or whether, if they were on a contract what their contract provided as to superable salary. Nor was there evidence about what any such allowances were for.
11. If I had to decide the question, there was insufficient evidence to form a view that LAFM, meals and overtime allowances such as those paid to Mr Marshall were commonly included in the superable salary of firefighters, and there was evidence to the contrary from Mr Pearse. This would be a reason not to approve them, apart from the substantial increase in superable salary that would result.
12. The EMR Allowance is, on the evidence, commonly approved. It is payable to an employee for the training and maintenance of the skills required to provide first response medical treatment to an injured colleague or member of the public. As the briefing paper at TB 96 advised:

this is not reimbursement for an expense of office but salary for the performance of a specific skill and is consistent with the definition of salary under s 3 (a). Mr Marshall could be called upon to use this skill and provided it is paid regularly as part of his annual salary. Accordingly, we are of the view that it should be recognised as superable for ES DB Scheme purposes.

1. If Mr Marshall were not on a contract of employment, and so limb (a) applied, the EMR allowance would clearly form part of his superable salary.
2. If Mr Marshall's contract had not specified as his superable salary only the salary of an ACFO under the ACFO 2010 Agreement, the EMR would reasonably form part of his superable salary in my view.

Can the Board apply the 70% rule to Mr Marshall?

1. I have found that Mr Marshall is employed on a contract of employment that does not include employer superannuation contributions, that his superable salary is specified in the contract of employment as the salary of an ACFO and that there are, in any event, good reasons for approving that salary as his superable salary.
2. The ACFO salary is less than 70% of Mr Marshall's total remuneration. The weight of the evidence is also against him being on a TRP that includes employer superannuation contributions. In the circumstances I do not need to decide whether the Board can apply the 70% rule to Mr Marshall.
3. The parties have asked, however, that I express a view. If I am wrong about the above conclusions, my view is that the Board, as a matter of Board policy, could apply the 70% rule to Mr Marshall if he were on a TRP. My reasons follow.

1. The '70% rule' can be briefly (but incompletely) described as a 'rule' which has been applied in the public sector to executive and contract officers, that the superable salary for the purposes of a defined benefit scheme of a person in an executive position who has a package that includes superannuation, must not exceed 70% of their total package.
2. The 70% rule has its origins in 1994 when contract employment for public sector Executive Officers was introduced to the sector. Executive remuneration changed from a 'salary plus superannuation' basis to a Total Remuneration Package (TRP) basis. The TRP measures the total cost to the employer of employing that individual and includes the salary, superannuation and other fringe benefits such as motor vehicles.[67]
3. For the purposes and in the context of the Superannuation (Public Sector) Act 1992 the 70% rule is expressed as follows:

12 Calculation of contributions and benefits for contract officers

(1) For the purpose of calculating contributions and benefits under any statutory superannuation scheme in respect of a contract officer[68] the officer's salary for the purpose of that scheme must be taken to be the amount from time to time specified for that purpose in the contract of employment.

(2) Subject to subsection (3), the amount specified in the contract must be equal to 70 percent of the officer's remuneration package.

(3) If the amount of the officer's salary for the purposes of that scheme immediately before entering into the contract was more than the amount equivalent to 70 percent of the officer's remuneration package under that contract, the officer must elect in writing which of those amounts is to be the officer's salary for the purpose of that scheme under the contract.

1. Mr Marshall denied that he was an executive officer or a contract officer or that he was in a comparable position.

1. There was no dispute that the ESS Act does not require the 70% rule to be applied to members of the Defined Benefit scheme. There is no statutory requirement for the Board to apply it.
2. Although he is a member of the ESS Defined Benefit scheme, Mr Marshall is not a public sector employee.

1. There is evidence that since 1994 it has been Victorian Government policy that the 70% rule is to apply to employees of Victorian emergency services who are executive officers and members of the Defined Benefit scheme and whose salary contained a limitation that their salary for superannuation purposes cannot exceed 70 percent of the value of the remuneration package.
2. In a letter dated 26 October 1994 from Allan Griffin, Executive Director Superannuation, Department of Finance to the Chief Executive Officer of ESSS:

Please find attached a copy of a circular issued on 19 October 1994 by the Acting Public Service Commissioner on the above subject ['Employer superannuation contribution rates chargeable against remuneration packages']

You will note that the rates in the attached tables relate only to the State Superannuation Fund and the Transport Superannuation Fund. The reason is that nearly all executive officers or people appointed on an equivalent basis are in these funds.

ESSS is one of the three defined benefits schemes where people on executive contracts may be members. The Minister for Finance has an expectation that the Board of each of these funds will work closely with the Department of Finance to establish the appropriate rate to be charged to a member of one of these funds.

With respect to ESSS the following officers are likely to fall within the executive officer category:

Chief Commissioner and other Commissioners of Police;

Chairman and Deputy Chairman, Country Fire Authority

1. In February 1995, Mr Griffin wrote to the Secretary of the Department of Justice[69] in respect of Victoria Police. The letter, headed 'Salary for Superannuation purposes - Executive Offices who are Members of ESSS', contained following:
   • the term 'Executive Officer' means any employee appointed as an Executive Officer under the Public Sector Management Act 1992 or any other employee who has a contract on comparable terms and conditions including the limitation that the salary for superannuation purposes cannot exceed 70 percent of the value of the remuneration package and the employer's contribution is charged against that package.
   • As the Government has decided that Assistant Commissioners of Police will be appointed on the same terms and conditions as Executive Officer under the Public Sector Management Act and equivalent terms and conditions are being considered for Deputy Commissioners of Police, a set of appropriate employer's contribution rates applicable to ESSS has been determined by the Minister for Finance.
   • Please find attached copy of the table of employee's contribution rates approved by the Minister and are subject to the following conditions:
     • these rates apply when the Emergency Services Superannuation Scheme (Amendment) Regulations 1995 have been approved by the Governor in Council
     • these rates only apply to members of ESSS on an Executive Officer contract which contains a condition that the person's salary for superannuation purposes cannot exceed 70% of the value of that person's remuneration package, and
     • these contribution rates cease to apply when the person reaches the maximum retirement benefit multiple under the Emergency Services Superannuation Scheme Regulations 1987 provided that the rate of increase in the person's salary does not exceed the rate assumed by the fund's actuary for that age group.
2. The briefing paper to the Board dated 16 April 2017,[70] states that:

It was intended that the Emergency Services Superannuation Regulations would be updated to reflect Government policy, however, the Regulations were subsumed into the ESSA prior to being updated. Corresponding changes to the ESSA were overlooked so that the 70% rule has never been mandated by legislation for ES DB members who are contract officers.

1. Whether or not it was intended to update the regulations, in my view the policy as articulated in the 1995 letter only applied where the officer's contract contained a condition that the person's salary for superannuation purposes cannot exceed 70% of the value of that person's remuneration package. If that policy has changed, that was not apparent on the evidence before me.
2. Mr Marshall does not have such a condition in his contract of employment. He is not employed as an Executive Officer under the Public Sector Management Act 1992.
3. Unless the Government policy has been differently expressed in documents which are not in evidence, the policy as articulated in the 1994 and 1995 letters would not expressly apply to Mr Marshall.

1. This does not mean however that the Board cannot determine, as Board policy, that the 70% rule should apply to executive officers who do not have the above condition in their contract, or to other members of the Defined Benefit scheme who are on comparable TRPs, in particular, TRPs that are inclusive of superannuation and other components that would not ordinarily be superable salary.
2. The Board has the power, and the duty to establish policies for the administration of the ESSS.[71] It has the power, in my view, to establish and apply a policy in respect of the 70% rule.
3. It appears to have applied such a policy by its decision of 18 April 2017, although it appears to have done so on the basis that it accorded with Government policy to do so:

In accordance with Victorian Government policy, the 70% Rule applies to all Contract Officers on TRPs, inclusive of the employer superannuation contribution. This would cover UFU employees who are contract officers, such as Mr Marshall.

1. The Employer Manual for the Defined Benefits scheme refers to 'Executive Officers' superable salary at p 18.[72]

The superable salary of an executive officer must be equal to 70 percent of the total remuneration package as set out in the contract of the executive officer. There are exceptions in very limited circumstances. However, if prior to becoming an executive, the officer had a higher superable salary, the officer can lodge an election with the employer to retain the higher superable salary for superannuation purposes.....

1. That paragraph does not state that the policy will apply to members who are not executive officers (in the sense used in the Public Sector Management Act).
2. But again, there is no reason in principle why the Board cannot determine as a matter of policy that the superable salary of a member of the scheme who is on a TRP that includes the employer superannuation contribution and other components should be no more than or equal to 70% of the TRP.
3. There was some evidence in this case that the 70% rule is applied in respect of the MFB, the CFA and the Victoria Police Association, which I discuss below. In principle, applying such a policy to employees of other services or unions who are members of the Defined Benefit Scheme and on TRPs would ensure consistent and fair treatment of members on TRPs across the scheme no matter who is their employer.
4. Counsel on behalf of Mr Marshall submitted that the rule is irrelevant to UFU employees and should not apply to the National Union because, unlike the Victoria Police Association, the National Union has never agreed to it and, unlike the emergency services, has never received a directive from Government.
5. In my view, evidence of application of the 70% rule to other members of the scheme is relevant to the question of whether the 70% rule, as a matter of Board policy, could be applied to employees of the National Union on TRPs as consistent application of a policy to members of the Defined Benefits scheme who are on TRPs.
6. Moreover, the ESS Act confers on the Board the power to approve a scheme member's superable salary for the purposes of the Defined Benefit scheme, in particular under s 4(1E)(b).
7. In determining whether to exercise the discretion in limb (b) of s 3, and/or the discretion in s 4(1E)(b) where the union pays a greater salary than the person would have received had they remained in the emergency services, the Board may in my view approve the superable salary of a member on a TRP at no more than 70% of the TRP if doing so would represent a consistent application of principle across scheme members. It would be a matter for the Board, taking into account its duties under the ESS Act.
8. I note that the question is hypothetical as Mr Marshall is not, on the evidence, on a TRP. I was advised that one other employee of the union is a member of the Defined Benefits scheme but not that they are on a TRP.
9. I record, for completeness, the evidence of application of the 70% rule to employees of other services and organisations.

Application of the 70% rule to other members of the Defined Benefits scheme

1. Evidence that the 70% rule is applied to employees of the MFB, the CFA and the Victoria Police Association included:

• Ms Mulcahy from the HR department of the MFB
  • advised that only Executives and Deputy Chief Fire Officers are regarded as contract officers, and therefore subject to the 70% rule
  • confirmed that the MFB organisational structure does contain the position of ACFO however, unlike the CFA, they are not contract officers for ES DB Scheme purposes in so far as their remuneration arrangements are exclusive of the employer superannuation contribution.
  • confirmed that the employer contribution of ACFOs is always paid as a separate additional amount by the employer.
  • superannuation arrangements pertaining to ACFOs employed by the CFA or the MFB do not provide for the employer contribution to be regarded as part of their superable salary for ES DB purposes.

• Ms Deeley of the payroll office of the CFA advised:
  • For ES DB superannuation purposes, all ACFOs are treated as executives and/or contract officers i.e. on TRPs. They have three options as to the amount of superable salary which applies for ES DB purposes:
    • 70% of the TRP
    • The salary applicable immediately before becoming an Executive Officer; or
    • The salary applicable to the highest operational position at CFA (which is currently 'Regional Commander').
  • The first two options have always applied to contract officers subject to the 70% rule. The only change applicable to ACFOs is the introduction of a minimum salary applicable to the highest operational position. Recently, this third option has been extended to executives and contract officers employed by Victoria Police.
  • The CFA deducts an amount from the ACFOs TRP in accordance with an actuarial table applying to all executives and contract officers who are members of the ES DB scheme.
  • When they attain age 65 or reach their maximum benefit multiple the member ceases to be liable to have any employer component deducted from their TRP. Notwithstanding that this component then becomes payable as salary, their superable salary is unaffected, and remains as it was prior to 'maxing out' or attaining age 65

• Ms Nichols, Financial Controller of the Victoria Police Association:
  • confirmed that the TRP of all members subject to the 70% rule were inclusive of superannuation, car and other allowances and that they were satisfied that the 70% rule applied.
  • also produced a copy of an email between Mr Robert Hocombe of DTF and Mr Paul Mullet, Secretary of the VPA at the time, agreeing that the 70% rule was to apply in such cases.

1. For the reasons given, I will set aside the 2017 decisions of the Board and substitute for them the following decision:

Mr Peter Marshall's superable salary for the purposes of the Emergency Services Defined Benefits scheme in the years ending 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017 was in each of those years:

• The salary of an Assistant Chief Fire Officer under the Metropolitan Fire and Emergency Services Board, United Firefighters' Union of Australia, Assistant Chief Fire Officers Agreement 2010 or as amended or replaced, in respect of those years.

1. The words 'or as amended or replaced' are in the 2012 Remuneration Agreement.
2. I understand that the ACFO 2010 Agreement has not, at the date of these reasons, been amended or replaced.
3. I have added the words 'in respect of those years' for the avoidance of doubt.
4. I confirm that the salary referred to is the operative salary under the ACFO 2010 Agreement or as amended, or its replacement, for the years ending 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017.

[1] The National Union is a registered organisation. The Victorian Branch is an 'associated body' of the United Firefighters' Union of Australia under the United Firefighters' Union of Australia Rules and is an unincorporated association.

[2] The Board contends that the relevant definition is limb (b) of the definition of salary in s 3 of the ESS Act., discussed below.

[3] Mr Marshall and the National Union contend that s 4(1E)(b), discussed below, applies.

[4] Affidavit of Mr Agostinelli sworn 15 February 2019, [6].

[5] Order 1 required the applicants to produce all documents comprising the terms of the ongoing employment of Mr Marshall by the UFU, commencing in 2012; and all records created on or after 1 July 2012 of remuneration paid to or for his benefit; allowances paid to or for his benefit; expenses claimed and reimbursed to him and superannuation contributions made for his benefit.

[6] They are set out in more detail later in these reasons.

[7] Officer Manager of the Victorian Branch and PA to Mr Marshall.

[8] Also referred to in some documents as the 'Operational EBA'.

[9] Statement of Reasons dated 13 July 2017.

[10] The Board administers schemes under other superannuation Acts.

[11] The well-known authority is Minister for Aboriginal Affairs v Peko- Wallsend Ltd. [1986] HCA 40; [1985-1986] 162 CLR 24 at 40.

[12] As observed by then Deputy President Macnamara in Feaks v Cardinia Shire Council [2010] VCAT 1430, 'High authority tells us that even open discretions have to be exercised by reference to matters that seem appropriately related to the subject matter of the discretion and cannot be exercised on whim or for matters that are entirely irrelevant'.

[14] Under s 20 of the ESS Act, the Defined benefits scheme may be supplemented by the Consolidated Fund if the amount to the credit of the scheme is at any time insufficient to meet the benefits authorised to be paid out of the scheme to [listed categories of contributors].

[15] Drake v Minister for Immigration and Ethnic Affairs (No 1) (1979) 46 FLR 409; Drake v Minister for Immigration and Ethnic Affairs (No 2)(1979) ALD 634; cited in re Bornstein and State Superannuation Board of Victoria 5 VAR 407. See also Makerink v Emergency Services Superannuation Board [2011] VCAT 1125 at [90]. These cases and others are discussed in Pizer's Annotated VCAT Act 6th edition, Nekvapil (ed) at 57.100.

[16] Section 6 of the Superannuation Guarantee (Administration Act) 1992 defines OTE for the purposes of that Act.

[21] Email dated 24 June 2014, subject 'Quotes' TB 187

[26] The Statement of Advice records Mr Marshall's date of birth at page 6 as 21 September 1961, his 55th birthday was therefore 21 September 2016.

[28] Email dated 2 December 2015 TB 48.

[29] As recorded in Mr Nikoloski's email dated 3 December 205 TB 47.

[36] The 2012 Remuneration Agreement states the first three as '3.1.2.1 The applicable salary under the ACFO Agreement for an Assistant Chief Fire Officer; 3.1.2.2 and all Other Entitlements specified in this agreement; and 3.1.2.3 Entitlements under the Operation EBA'. 3.1.2.4 is 'Provided that in the event of any variations to or replacements of those instruments any entitlements of Marshall shall not be thereby reduced.'