Coleman and Defence Force Retirement and Death Benefits Authority [2002] AATA 696 (12 July 2002)

Last Updated: 20 August 2002

DECISION AND REASONS FOR DECISION [2002] AATA 696

ADMINISTRATIVE APPEALS TRIBUNAL )

) No A2002/21

GENERAL ADMINISTRATIVE DIVISION )

Re Craig Coleman

Applicant

And Defence Force Retirement and Death Benefits Authority

Respondent

DECISION

Tribunal Mr G A Mowbray

Date 12 July 2002

Place Canberra

Decision For reasons given orally the Tribunal affirms the decision under review, being Comsuper's decision of 25 May 2001 as confirmed by the Respondent on 17 December 2001.

..............................................

Member

CATCHWORDS

DEFENCE FORCE RETIREMENT BENEFITS - recipient member re-joining Defence Force - term of appointment greater than one year but actual service less than one year - whether elected to become contributing member of scheme - construction of "serving under an appointment for a period of not less than one year"

Defence Force Retirement and Death Benefits Act 1973, ss 3(1), 5A, 17, 61B, 62(1)

Mills v Meeking (1990) 169 CLR 214; 91 ALR 16

R v L (1994) 122 ALR 464; 49 FCR 534

Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622; 54 ALR 639

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; 153 ALR 490

Re Dodds and Defence Force Retirement and Death Benefits Authority (AAT 7574, 10 December 1991); (1991) 24 ALD 413.

REASONS FOR DECISION

15 August 2002 Mr G A Mowbray

History of the Application

1. On 8 September 2000 ComSuper advised Mr Craig Coleman that he was not entitled to a benefit from the Defence Force Retirement and Death Benefits Authority ("the Authority") for the duration of his current engagement with the Defence Force as the engagement was for not less than one year.

2. On 7 May 2001 Mr Coleman informed ComSuper that he would now not be serving for longer than 12 months. He asked if his benefit could be re-established or for advice as to what was necessary to re-establish his benefit. On 25 May 2001 ComSuper informed Mr Coleman that because his original contract was for more than 365 days he was required to pay contributions to the DFRDB Scheme (the superannuation scheme established under the Defence Force Retirement and Death Benefits Act 1973, "the Act") until his service was finished and was not entitled to retirement pay for that period. The letter also indicated his retirement payment would recommence upon his discharge.

3. On 20 June 2001 Mr Coleman requested a reconsideration of the decision of 25 May 2001. On 17 December 2001 the Authority confirmed the decision that Mr Coleman was required to pay contributions during his service and was not entitled to retirement pay in that period. The terms of that decision were as follows

"[W]hen Mr Coleman commenced continuous full-time service in the Defence Force on 21 August 2000 under an appointment to serve for a period of not less than one year, he became an eligible member of the Defence Force required to pay contributions pursuant to section 17(1) of the Act and... under subsection 62(1) of the Act his retirement pay was cancelled."

4. On 14 January 2001 the Tribunal received Mr Coleman's application for review. By virtue of section 99(6) of the Act the reviewable decision is the decision of 25 May 2001 as confirmed by the decision of 17 December 2001.

5. The hearing for this matter was held on 12 July 2002. Mr Coleman was represented by Mr Holcombe of Minter Ellison and the Authority was represented by Mr Rule of ComSuper's Legal Services Section. Oral reasons for decision were given on the day of the hearing affirming the decision under review. On 17 July 2002 the Tribunal received a request for written reasons for the decision from Mr Rule pursuant to s 43(2A) of the Administrative Appeals Tribunal Act 1975. A like request was received from Mr Holcombe on 2 August 2002. Accordingly these written reasons have been prepared based on the reasons given at the hearing with appropriate minor editing.

Background

6. Mr Coleman was born on 29 September 1961. He served in the army for 20 years before retiring in 1998 at the rank of Warrant Officer Class 1. He re-entered the Defence Force on 21 August 2000 with the rank of Captain. He again left full-time Defence service on 17 August 2001.

Legislation

7. The relevant provisions of the Act are as follows

"3 Interpretation

(1) In this Act, unless the contrary intention appears:

...

"contributing member" means a member of the Defence Force who is making, or is required to make, or, but for section 18 or 18A, would be required to make, contributions under section 17.

...

"eligible member of the Defence Force" means:

(a) a member of the Defence Force who:

(i) is serving on continuous full-time service under an appointment or engagement, or under a re-appointment or re-engagement, for a period of not less than one year; or

...

"recipient member" means a member of the scheme who is entitled to retirement pay or invalidity pay, and includes:

(a) a member of the scheme who, but for the suspension of his or her invalidity pay under subsection 35(3) or 61D(2), would be entitled to invalidity pay; and

(b) a member of the scheme who, but for the suspension of his or her retirement pay under subsection 61C(1), would be entitled to retirement pay.

...

"retirement pay" means retirement pay payable under section 23.

..."

"5 Continuity of service

...

(2) Where a contributing member ceases to be on continuous full-time service but continues to be a member of the Defence Force he shall, for the purposes of this Act, be deemed to have retired on the day on which he ceases to be on continuous full-time service.

..."

"5A Persons excluded from definition of eligible member of the Defence Force

(1) Subject to subsection (2), a person who:

(a) becomes, on or after 1 October 1991, a member of the Defence Force; or

(b) being a member of the Reserve Forces or the Emergency Forces, commences on or after that day to render continuous full-time service for a period of not less than 12 months;

is excluded from the definition of eligible member of the Defence Force in subsection 3(1).

(2) Subsection (1) does not apply to:

(a) a person who:

(i) ceased to be an eligible member of the Defence Force because he or she was transferred to a Reserve, was discharged from the Defence Force, or had his or her continuous full-time service terminated, under the Defence (Parliamentary Candidates) Act; and

(ii) under Part III of that Act is transferred back to, reinstated in, or accepted for further continuous full-time service in, the force of which he or she was a member immediately before ceasing to be an eligible member of the Defence Force; or

(b) a person to whom section 61B applies and who has elected under that section to become a contributory member; or

(c) a person to whom section 63 applies."

"17 Contributions by members of scheme

(1) Subject to sections 18 and 18A, an eligible member of the Defence Force shall pay to the Commonwealth fortnightly contributions in accordance with this Act.

(1A) Subsection (1) does not apply to an eligible member of the Defence Force who:

(a) was a recipient member immediately before he became an eligible member; and

(b) is serving under an appointment or enlistment for a period of less than one year that commenced after the commencement of this subsection.

(2) Subject to subsection (3), the first fortnightly contribution is payable by an eligible member of the Defence Force:

(a) in the case of a person who is such a member on the date of commencement of the scheme--on the first pay-day next following that date; or

(b) in any other case--on the day on which the person becomes an eligible member of the Defence Force or, if that day is not a pay-day, on the first pay-day next following that day.

..."

"23 Entitlement to retirement pay

(1) Where a contributing member retires and is not entitled to invalidity benefit and:

(a) on his retirement:

(i) his total period of effective service is not less than 20 years; or

(ii) his total period of effective service is not less than 15 years and he has attained the retiring age for the rank held by him immediately before his retirement; or

(b) he had previously become entitled to retirement pay under this Act or pension, other than invalidity benefit, under the previous legislation that was cancelled under section 62 upon his becoming an eligible member of the Defence Force;

he is entitled, on his retirement, to retirement pay at the rate applicable to him in accordance with this section.

..."

"61B Election by recipient member intending to resume full-time service

(1) Where a person:

(a) who is a recipient member; or

(b) in respect of whom deferred benefits are applicable under section 78;

intends to resume full-time service:

(c) as a member of the Permanent Forces; or

(d) as a member of a Reserve for a continuous period of not less than 12 months;

the person must, before resuming service, in writing addressed to the Authority, elect:

(e) to become a contributing member; or

(f) to become a member of the MSB scheme.

(2) Subsection (1) does not apply if the person has previously:

(a) made an election under that subsection; or

(b) made, under subsection (3), an election to become a member of the MSB scheme.

(3) A recipient member who:

(a) intends to resume full-time service as a member of a Reserve for a continuous period of less than 12 months; and

(b) has not previously made, under this section, an election to become a member of the MSB scheme;

must, before resuming service, in writing addressed to the Authority, elect whether or not to become a member of that scheme."

"62 Recipient member who becomes eligible member

(1) Where a member of the scheme who is a recipient member becomes an eligible member of the Defence Force serving under an appointment or enlistment for a period of not less than one year, his retirement pay or invalidity pay, as the case may be, is, by force of this subsection, cancelled.

...

(8) Where, by reason of the failure of a person to whom subsection (1) or (2) applies to notify the Authority that he has become an eligible member of the Defence Force, or for any other reason, an amount of retirement pay or invalidity pay, or of pension under the previous legislation, has been paid after it has been cancelled under this section, the amount shall be repaid to the Commonwealth."

Issues

8. There are two issues before the Tribunal. First, whether upon Mr Coleman rejoining the Defence Force on 21 August 2000 he again became an "eligible member of the Defence Force" within the meaning of the Act so that he was required to make contributions to the DFRDB Scheme in accordance with section 17 of the Act. Secondly, whether his entitlement to retirement pay under section 23 of the Act was therefore required to be cancelled in accordance with section 62(1) of the Act.

Evidence

9. The evidence before the Tribunal consisted of the T documents numbered T1 to T19, the applicant's documents A1 and A2 and the respondent's documents R1. There was no oral evidence.

Undisputed Facts

10. There is no dispute over the facts in this matter. The following is paraphrased from the Authority's Statement of Facts and Contentions (Exhibit R1)

* Mr Coleman joined the Defence Force (Army) on 21 November 1978. Upon his enlistment in the Australian Army Mr Coleman commenced to make contributions to the DFRDB Scheme

* on 22 November 1998 Mr Coleman retired from the Defence Force having completed 20 years of effective service. By virtue of his having completed 20 years of effective service he became entitled to retirement pay payable in accordance with section 23 of the Act

* on 8 August 2000 Mr Coleman notified the Authority's administrator, ComSuper, that he would be rejoining the Defence Force on a full-time basis from 21 August 2000 (T4). On 20 August 2000 Mr Coleman made an election under section 61B of the Act to become a contributing member of the DFRDB Scheme upon his re-enlistment. I will briefly consider this election later

* on 21 August 2000 Mr Coleman rejoined the Defence Force (Army) with the rank of Captain having accepted an appointment to serve on a Short Service Commission for a period of six years (see T3). Mr Coleman again became a contributor to the DFRDB Scheme and his entitlement to retirement pay under section 23 of the Act was 'suspended'

* on 7 May 2001 Mr Coleman contacted ComSuper to advise that he would be resigning his commission prior to the completion of 12 months effective service (T6). As he was no longer going to serve for a period of greater than 12 months he asked that his entitlement to retirement pay under section 23 of the Act be restored

* on 17 August 2001 Mr Coleman transferred from the Australian Regular Army into the Australian Army Reserve (see T9). Upon doing so he ceased to render continuous full-time service as a member of the Defence Force and was thereby deemed to have retired from the Defence Force for the purposes of the Act (see section 5(2) of the Act).

Consideration of Issues and Findings

The DFRDB Scheme

11. The DFRDB Scheme is an occupational superannuation scheme which makes provision for the payment of retirement and death benefits to eligible members of the Defence Force. Eligible members of the Defence Force are obliged to contribute to the Scheme at a rate of 5.5 per cent of the salary applicable to the member during the fortnight in which each contribution falls due.

12. Benefits payable from the DFRDB Scheme are based on length of contributory service and not upon the member's age at retirement. If a member retires on grounds other than invalidity prior to completing 20 years of contributory service he or she is entitled only to a refund of any contributions paid to the scheme. Where a member retires having completed 20 or more years of contributory service that member becomes entitled to retirement pay calculated in accordance with section 23 of the Act.

Did Mr Coleman make an election under Section 61B?

13. Mr Rule for the Authority contends that sections 17 and 62(1) of the Act apply to Mr Coleman. Mr Coleman disputes this. Neither section will apply if he was not an "eligible member of the Defence Force".

14. Section 5A excludes certain persons from the definition of an "eligible member of the defence force". It relevantly provides

"(1) Subject to subsection (2), a person who:

(a) becomes, on or after 1 October 1991, a member of the Defence Force;

...

is excluded from the definition of eligible member of the Defence Force in subsection 3(1).

(2) Subsection (1) does not apply to:

...

(b) a person to whom section 61B applies and who has elected under that section to become a contributory member"

15. Section 5A would have excluded Mr Coleman from the definition of an "eligible member of the Defence Force" unless he was a person to whom section 61B applied and he elected under that section to become a contributory member. Section 61B relevantly provides

"61B Election by recipient member intending to resume full-time service

(1) Where a person:

(a) who is a recipient member;

...

intends to resume full-time service:

(c) as a member of the Permanent Forces;

...

the person must, before resuming service, in writing addressed to the Authority, elect:

(e) to become a contributing member; or

(f) to become a member of the MSB scheme."

16. I first note that section 5A refers to a contributory member and section 61B to a contributing member. The interpretation provision section 3(1) defines "contributing member" but there is no definition of "contributory member". I take the reference in section 5A to a "contributory member" to mean a "contributing member". There clearly has been a drafting error and section 5A is intended to refer to a "contributing member".

17. Mr Rule relies on document T4 as containing an election for the purposes of section 61B of the Act. The relevant material from the first page is as follows

"Part B - ELECTION BY DFRDB RECIPIENT BEFORE RESUMING SERVICE

NOTE:

1) This Part MUST also be completed if you are receiving a DFRDB fortnightly benefit and are re-entering the Defence Force. Please read the reverse of this form before making your election. If you require further information please phone ComSuper on [phone].

2) To have effect, this Part MUST be completed BEFORE you resume service. Failure to complete this form prior to resuming service may result in serious financial consequences. (See important information overleaf).

I ACKNOWLEDGE that I have read the information contained on this form (including that provided on the reverse side) and (please tick the box of your preference)" (emphasis in original)

And then the box "Elect not to become a member of the MSB Scheme" is ticked and the alternative, "Elect to become a member of the MSB Scheme", is left vacant. It is signed by Mr Coleman, dated 20/8/00.

18. The reverse side of that form contains the following of relevance

"IMPORTANT INFORMATION TO HELP YOU COMPLETE THIS FORM

For the purposes of this form the words re-entering the Defence Force including any resumption of continuous full-time service with the Defence Force

DFRDB recipients who are re-entering the Defence Force

Before resuming service you must elect whether or not to become a member of the Military Superannuation and Benefits Scheme (MSBS). However, if you have previously re-entered the Defence Force for an appointmet (sic) of 12 months or more and elected to join MSBS, the choice you expressed then will prevail. If you have not previously made an election and fail to do so now before you resume service, you will by default become an MSBS member.

...

If you are re-entering for an appointment of 12 months or more

If you elect not to become an MSBS member your DFRDB benefit will be cancelled during your re-entry and you will contribute to the DFRDB Scheme. When you conclude your service, your DFRDB benefit will be recalculated based on total years of service (including your re-entry period). You may also be entitled to an additional DFRDB commutation on your exit.

If you elect to become an MSBS member, or if you do not make an election and therefore default to MSBS, your DFRDB benefit will be cancelled and you will contribute to the MSBS during your re-entry. When you exit your DFRDB benefit will be updated based on the CPI and restored. You will also be entitled to an MSBS benefit as a result of being an MSBS member during your re-entry. In most circumstances you cannot access the employer component of that entitlement until you obtain your superannuation preservation age." (emphasis in original)

19. On the face of it Mr Coleman elected not to be a member of the MSB Scheme. He did not expressly elect to become a contributing member of the DFRDB Scheme as required by section 61B of the Act. Mr Rule for the Authority said that the election could be inferred, particularly taking into account the purpose of the form and referring to the explanatory material on the reverse of the form which I have quoted. Mr Holcombe for Mr Coleman did not really contest this, as on his approach it was unnecessary to consider whether or not an election had been made.

20. I am prepared to accept Mr Rule's submission and find that Mr Coleman did make an election under section 61B, but I only do this after some hesitation. The Authority should attend to this matter and make its form both direct and transparent.

How is the period of service determined for the purposes of sections 3(1), 17 and 62(1)?

21. The definition of "eligible member of the Defence Force" in section 3(1) relevantly provides

"(a) a member of the Defence Force who:

is serving on continuous full-time service under an appointment or engagement, or under a re-appointment or re-engagement, for a period of not less than one year"

22. Section 17, which provides for contributions to be made by members of the DFRDB Scheme, relevantly provides

"(1) Subject to sections 18 and 18A, an eligible member of the Defence Force shall pay to the Commonwealth fortnightly contributions in accordance with this Act.

(1A) Subsection (1) does not apply to an eligible member of the Defence Force who:

(a) was a recipient member immediately before he became an eligible member; and

(b) is serving under an appointment or enlistment for a period of less than one year that commenced after the commencement of this subsection."

23. Section 62 relevantly provides

"(1) Where a member of the scheme who is a recipient member becomes an eligible member of the Defence Force serving under an appointment or enlistment for a period of not less than one year, his retirement pay or invalidity pay, as the case may be, is, by force of this subsection, cancelled."

24. This brings us to the nub of the dispute between the parties. Although Mr Coleman signed up for six years he served for less than one year. Mr Coleman contends that it is the actual period of service rendered that is to be taken into account. He argued through his representative Mr Holcombe that the definition of "eligible member of the Defence Force" and scope of subsection 62(1) should be read beneficially and in a manner consistent with the purpose for which those provisions were enacted.

25. Mr Holcombe referred to various authorities on the obligation to read this legislation beneficially, to section 15AA of the Acts Interpretation Act 1901 and to various authorities on the construction of legislation, in particular, Mills v Meeking (1990) 169 CLR 214; 91 ALR 16 and R v L (1994) 122 ALR 464; 49 FCR 534. He also referred to the history of legislative amendment of section 62(1) and in particular to passages in the second reading speech of the Minister and the explanatory memorandum for the Defence Force Retirement and Death Benefits Amendment Bill 1981. The passage in the second reading speech reads as follows

"Pensioners who re-enter for brief periods of less than one year will not again become contributing members, nor will their retirement pensions be cancelled on re-entry as is currently the case."

26. Mr Holcombe referred to a passage in the outline to the explanatory memorandum

"They also provide for non-cancellation of pensions and non-payment of additional contributions for pensioners who re-enter for periods of less than one year; and for those who re-enter for periods of one year or more, appropriate pension increments, but with no further access to commutation options."

And also to the explanatory memorandum for clause 7, the clause that amended section 62 of the Act

"Sub-clause (1) rectifies a deficiency in section 62 of the Principal Act. It provides a period of effective service for DFRB pensioners whose pensions were cancelled on re-entry to the DFRB Scheme and who subsequently became DFRDB contributors.

Paragraphs (a) and (b) of sub-clause (2) provide in effect for non-cancellation of pensions for those pensioners who re-enter the Defence Force for periods of less than one year."

27. Mr Holcombe also contended that the definition of "eligible member of the Defence Force" and scope of subsection 62(1) should not be construed in the manner suggested by the Authority because it led to absurd conclusions. He referred to the possibility of persons being engaged on a series of rolling 11 month contracts. He contended that Mr Coleman's contract was for a period of less than 12 months. In any event, Mr Coleman's attendance would not have satisfied the term "appointment" until the expiry of his probationary period, which was 18 months. Support for this contention could be found in the Australian Military Regulations 1927.

28. Mr Rule for the Authority agreed that the legislation was remedial and therefore should be construed in a beneficial way. Nevertheless, the authorities made it clear that remedial legislation can only be construed beneficially to the extent that the statutory language will allow. He referred to a passage in the joint judgment of Justices Mason, Brennan, Deane and Dawson in Khoury v Government Insurance Office of New South Wales (1984) 165 CLR 622 at 638; 54 ALR 639 at 650

"First, the rule that remedial provisions are to be beneficially construed so as to provide the most complete remedy of the situation with which they intend to deal must, as has been said, be restrained within the confines of "the actual language employed" and what is "fairly open" on the words used."

29. He also referred to Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; 153 ALR 490 which he said was authority for the following

"39. This means that individual provisions in legislation are not to be interpreted in isolation. In determining the meaning of an individual provision, regard must be had to the context in which it is found, to the consequences of a literal or grammatical construction and to the purposes of the legislation itself; Project Blue Sky (supra) at 509 and 511." (Exhibit R1, reference is to ALR version)

30. Mr Rule detailed what he contended would be a range of anomalies and administrative difficulties which would arise on the construction of the legislation as asserted by Mr Coleman. I again quote from Exhibit R1 (paragraph 51)

"(a) it could not be determined whether a member of the Defence Force was an 'eligible member of the Defence Force' for the purposes of the Act until that member had actually rendered an effective period of service of not less than one year.

(b) this in turn would mean that no member of the Defence Force could be obligated to contribute under s.17 of the Act (thereby becoming a 'contributing member' within the meaning of the Act) until having completed one year of actual service.

(c) having never become a 'contributing member' within the meaning of this Act, this would mean that any member who retired on invalidity grounds prior to completing one year of service would not be entitled to invalidity benefits under s.26 of the Act."

Mr Rule also argued that a number of other capricious and irrational results would arise if the construction contended for by Mr Coleman were adopted.

31. Mr Rule pointed me to the decision of the Tribunal presided over by Deputy President Forgie in Re Dodds and Defence Force Retirement and Death Benefits Authority (AAT 7574, 10 December 1991; partially reported at (1991) 24 ALD 413). The Tribunal appears to rely in that decision on an earlier version of section 62(1). Nevertheless, the Tribunal's view on the construction of the definition of "eligible member of the Defence Force" in section 3(1) remains, in Mr Rule's submission, relevant and very much to the point

"8. It is to this definition that Mr Dodds' argument is directed. He argues that the actual period of service should be taken into account and not that proposed at the outset. Unfortunately, while we realise that it may be open to argue that the ultimate result is not a fair one, we cannot agree with Mr Dodds' interpretation of the legislation. It is quite clear from the terms of sub-section 62(1) that the retirement pay paid to a person who becomes an eligible member of the Defence Force once again is, without any further ado, cancelled. The emphasis of the sub-section is upon a person who becomes an eligible member of the Defence Force and not upon one who becomes and remains such a member. It follows that the time at which it is determined whether a person is an eligible member is at the start of the commencement of that period of service. It also follows that Mr Dodds is clearly an eligible member of the Defence Force for he satisfied sub-paragraph 3(1)(a)(i) at the outset of his re-engagement with the RAAF. He was a member of the Defence Force serving on continuous full time service and the term of re-engagement was for a term exceeding one year. He did not remain an eligible member of the Defence Force for the whole year but he was such an eligible member upon his re-engagement." (emphasis in original)

32. In my opinion, the proper construction of these statutory provisions, that is the definition of "eligible member of the Defence Force" in section 3(1), section 17(1A) and section 62(1), is free from doubt. The use of the present tense in each is critical. The definition of "eligible member of the Defence Force" refers to a member of the Defence Force who is serving on continuous service. Section 17(1A) refers to an eligible member of the Defence Force who is serving under an appointment or an enlistment for a period of less than one year. Section 62(1) refers to a person who becomes an eligible member serving under an appointment. Then it states that his retirement pay is by force of this subsection cancelled.

33. These provisions, in particular section 17 and 62(1), make it very clear. Section 17 places an obligation on a member to make a contribution. It is referring to a present obligation and could not work if understood as Mr Coleman contends. Similarly, section 62(1) is about cancellation at a point in time. It is not speaking of a retrospective cancellation. Again, this provision in my view could not work if it was construed as Mr Coleman wishes. Furthermore, if Parliament had wished these provisions to only cover those people who actually serve for less than one year it could easily have said so, but the legislative scheme and wording would in my opinion have been very different.

34. I am therefore of the view, notwithstanding the courageous efforts of Mr Holcombe and his very helpful submissions, that there is no real doubt about the construction of these provisions. As was said in Re Dodds in a slightly different context, the relevant period is that proposed at the outset of the service.

Conclusion

35. On the undisputed facts Mr Coleman's appointment was for six years. Both sections 17(1) and (2) and section 62 applied to him. The decision of the Tribunal therefore must be that the reviewable decision of 25 May 2001 be affirmed.

I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Mr G A Mowbray

Signed: .....................................................................................

Associate

Date of Hearing 12 July 2002

Date of Decision 12 July 2002

Date of Written Reasons 15 August 2002

Solicitor for the Applicant Mr Lex Holcombe, Minter Ellison Lawyers

Solicitor for the Respondent Mr Joe Rule, ComSuper Legal Services Section