Thomas Fischer v PSS Board [1997] FCA 443 (29 May 1997)

CATCHWORDS

SUPERANNUATION - Public Service Superannuation Scheme - construction of Rule 12.2.1 of Scheme's Rules - "preserved benefits" of former member of Scheme - whether express power to "vary any of the components or factors applicable in the determination of benefits" encompasses power to advance the time for payment of benefit - no question of general principle.

THOMAS FISCHER v PSS BOARD

No NG 1 of 1997

Burchett, Moore, Lindgren JJ

Sydney

29 May 1997

IN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) No NG 1 of 1997

)

GENERAL DIVISION )

On appeal from a Judge of the Federal Court of Australia

BETWEEN: THOMAS FISCHER

Appellant

AND: PSS BOARD

Respondent

CORAM: BURCHETT, MOORE, LINDGREN JJ

PLACE: SYDNEY

DATE: 29 May 1997

MINUTE OF ORDERS

THE COURT:

1. ORDERS THAT the appeal be dismissed.

2. NOTES THAT there is no order as to the costs of the appeal, to the intent that the parties bear their own respective costs of the appeal.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) No NG 1 of 1997

)

GENERAL DIVISION )

On appeal from a Judge of the Federal Court of Australia

BETWEEN: THOMAS FISCHER

Appellant

AND: PSS BOARD

Respondent

CORAM: BURCHETT, MOORE, LINDGREN JJ

PLACE: SYDNEY

DATE: 29 May 1997

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

The appellant ("Mr Fischer") appeals from an order of a Judge of the Court made on 5 December 1996 dismissing his appeal from a decision of the Superannuation Complaints Tribunal ("the Tribunal") which had affirmed a decision of the respondent ("the Board") as trustee of the Public Sector Superannuation Scheme ("the Scheme" and "the Fund") refusing to pay to Mr Fischer his "unfunded preserved benefit" under Rule 12.2.1 of the Fund's trust deed.

GENERAL STRUCTURE OF THE SCHEME

The Board is established as a body corporate by ss 20 and 21 of the Superannuation Act 1990 ("the Act"). Section 4 of the Act required the Minister, for and on behalf of the Commonwealth, to establish the Scheme by executing a Trust Deed in the form set out in the Schedule to the Act. Section 5 empowers the Minister, by signed instrument, to amend the Trust Deed. Section 22 provides that the functions and powers of the Board are those set out in the Trust Deed and that the Board is also responsible for the general administration of the Act. Section 23 provides that the Board comprises five persons who are appointed. They are called "trustees".

The Trust Deed was executed by the Minister on behalf of the Commonwealth on 21 June 1990. The Minister has subsequently amended it from time to time. "Rules for the Administration of the Superannuation Scheme" are set out in a schedule to the Trust Deed and form part of that Deed.

BACKGROUND FACTS

Mr Fischer was born on 21 November 1946 and joined the Scheme on 8 February 1993. On 15 June 1994, his employment with the Australian Public Service ceased and he no longer satisfied the definition of "member" in the Trust Deed by which the fund was established (see later). When he ceased to be a "member", a benefit was compulsorily retained in the Scheme for payment to or in respect of him. In the Rules of the Scheme, that benefit was called a "preserved benefit", and Mr Fischer, although having ceased to be a "member", was given, for the purpose of the future operation of the Scheme, the status of a "preserved benefit member". The amount of the preserved benefit applicable to Mr Fischer on any particular day was defined in the then Rule 6.1.2 as an amount equal to the sum, on that day, of the amounts of his "accumulated member contributions", his "accumulated employer contributions" and his "unfunded preserved benefit".

On 15 June 1994, Mr Fischer applied for a refund of the "Member Component" of his preserved benefit and stated in his application that he understood that the "Productivity Component" and the "Employer Component" would be held for him in the Scheme.

On 1 July, the Commissioner for Superannuation ("the Commissioner"), who is responsible for the provision of administrative services to the Board in the performance of its functions, wrote to Mr Fischer advising him that as at 15 June, the date of his exit from the Scheme, his "lump sum benefit" had consisted of the following components:

"Member Component $649.45

Productivity Component $873.44

Employer Component $2,821.18

Total Accrued Benefit $4,344.07"

(underlining supplied)

He was paid the amount of his "Member Component" plus interest less tax. The letter also advised Mr Fischer that the "Productivity Component" and "Employer Component" totalling $3,694.62 were "preserved"; that the "Productivity Component" would continue to attract interest; and that the "Employer Component" would be updated each year in line with movements in the Consumer Price Index. The letter also advised that the Productivity Component could also be released if the Insurance and Superannuation Commission ("ISC") gave its approval on the ground of "severe financial hardship".

Mr Fischer made an application to the ISC, which, on 19 July, advised the Board that the ISC had received "an application for release of preserved benefits on the grounds of severe financial hardship" from Mr Fischer and had decided that "subject to the provisions of the relevant trust Deed", the ISC had no objection to the Board's "granting a full release of the preserved benefit." Apparently the effect of this was to satisfy the "condition of release" referred to in Item 105 in Part 1 of Schedule 1 to the Superannuation Industry (Supervision) Regulations. Regulation 6.18 provides that "[a] member's preserved benefits in a regulated superannuation fund may be cashed on or after the satisfaction by the member of a condition of release" (underlining supplied).

On 18 August 1994 the Commissioner wrote to Mr Fischer, in response to his application for refund of his preserved benefit, advising that the amount of the "Productivity Component" of his preserved benefit plus interest less tax would be paid. As noted earlier, the amount of the "preserved benefit" was identified in the then Rule 6.1.2 as the sum of a person's "accumulated member contributions", "accumulated employer contributions" and "unfunded preserved benefit". In its submissions, the Board states that the "accumulated employer contributions" in Rule 6.1.2 was synonymous with the "Productivity Component". The then Rule 6.1.4A provided, relevantly, that where a preserved benefit was applicable to a person and included accumulated employer contributions, and the ISC approved payment of those contributions in circumstances other than those provided for in Rule 6.1.1 (see below), the person in question was "entitled" to payment of the accumulated employer contributions.

The Commissioner's letter of 18 August was silent in relation to the "Employer Component" which, it will be recalled, had been referred to in his letter of 1 July, as having been an amount of $2,821.18 as at 15 June.

On 21 December, Mr Fischer wrote to the Board requesting release of the "Employer Financed Component" "on the grounds of extreme hardship". He advised that he had been unemployed since 15 June and was "living on Social Security", which was insufficient to sustain him. Mr Fischer's reference to "Employer Financed Component" was clearly a reference to the "unfunded preserved benefit" which, with the "accumulated member contributions" and "accumulated employer contributions" (which had already been paid) had, by the operation of Rule 6.1.2, constituted the preserved benefit payable.

On 3 January 1995, a delegate of the Board wrote to Mr Fischer advising that the Rules of the Scheme did not allow the "Employer Component" of his benefit to be paid except at times which, for Mr Fischer, had not yet arrived. The letter described those times in terms which summarised the effect of the then Rule 6.1.1, which was the only rule that permitted release of the amount of his unfunded preserved benefit to Mr Fischer, as follows:

"* you reach retiring age, normally 55;

* you reach age 65;

* you become terminally ill or totally and permanently incapacitated;

* you leave Australia permanently;

* to your personal representative in the event of your death."

On 4 October 1995, Mr Fischer applied again to the Board for the payment, asserting his belief that he was entitled to it under Rule 8.1.2 and asking that if he was not entitled to it under that Rule, the Board's discretion be exercised in his favour under Rule 12.2.1. Rules 8.1.2 and 12.2.1 had commenced operation on 1 July 1995. Since the appeal turns on Rule 12.2.1, it is as well to set it out now:

"12.2.1 If, in a particular case, the Board is of the opinion that:

(a) the operation of the Rules would otherwise produce a result that is not in the spirit of the Rules; and

(b) the circumstances of the case are unusual or exceptional;

the Board may, having regard to the principles in the Rules and the need for equity between members, including preserved benefit members, vary any of the components or factors applicable in the determination of benefits, whether or not any benefit is immediately payable."

On 30 October, a "Reconsideration Advisory Committee" established by the Board pursuant to the Rules recommended that the Board affirm the decision of its delegate dated 3 January 1995 "not to allow early release of the employer component of Mr Fischer's preserved benefit." The recommendation did not deal with Mr Fischer's alternative application for exercise of the Board's discretion under Rule 12.2.1.

Apparently, by a letter received on 16 November 1995 (not reproduced in the Appeal Book) Mr Fischer advised that he accepted the Committee's reasoning, but that he wished to pursue his application under Rule 12.2.1 (Minute No 1348 of meeting of Board on 7 December 1995). At a meeting on 7 December, the Board decided "that it was inappropriate to apply the provisions of rule 12.2.1 to [Mr Fischer's] case and therefore declined to exercise its discretion to allow payment of the employer component of his preserved benefit." Mr Fischer lodged a "Registration of Complaint Form" with the Tribunal on 20 December. In it, he complained of the Board's decision "not to pay ... employer part of superannuation benefit [sic]."

While the application to the Tribunal was pending, Mr Fischer made a further application to the ISC. This letter is not reproduced in the Appeal Book, no doubt for the good reason that it is irrelevant to the appeal. The ISC wrote to Mr Fischer on 11 June 1996 as follows:

"Dear Mr Fisher

I refer to your application dated 29 May 1996 for release of your preserved superannuation benefit held with the PSS.

In considering the circumstances in which it might be appropriate for benefits which are preserved under the superannuation legislation to be released early, the Insurance and Superannuation Commissioner has regard to guidelines. These guidelines generally restrict the release of benefits to cases where it is established that the applicant is in severe financial hardship and has no other assets which could reasonably be used, in the next six months, to cover the gap between personal income and expenses associated with the basic necessities of everyday living.

After careful consideration of your application I have decided that, subject to the provisions of the relevant trust deed, the Insurance and Superannuation Commission (ISC) would have no objection to the trustees of the fund granting a full release of your preserved benefit. While it is necessary for the ISC to consider your application and advise you of our decision, the final decision rests with the trustee of your superannuation fund as to whether the benefit will be released. In this regard the fund has indicated to us that your unfunded preserved benefit, which I am informed is the only remaining element of your superannuation entitlement with the PSS, is not payable to you at this time.

Any future enquiry regarding the release of your benefit should be directed to the fund." (emphasis in original)

Mr Fischer made no further application or representation to the Board based on this second letter from the ISC.

While Mr Fischer's application to the Tribunal made on 20 December 1995 was pending, the Tribunal wrote to "The Trustee, Commonwealth Superannuation Scheme" on 26 March 1996, referring to Mr Fischer's complaint as being, in the Tribunal's understanding, a complaint about the "refusal to pay him his unfunded preserved employer benefit pursuant to his application for an exercise of discretion under clause 12.2.1 of the new [Scheme] Rules". On 1 July 1996 Mr Fischer wrote to the Tribunal a letter which included the following:

"1. There is no dispute about the amount that I am asking for.

2. The only dispute is when I can receive it.

3. I am asking the Trustees to use their discretion under rule 12.2.1.

4. The Fund stated that they couldn't use their discretion and rely on an opinion from the Attorney General's department." (underlining supplied)

The letter confirms that the dispute between the parties had become one confined to the Board's refusal to exercise its discretion under Rule 12.2.1.

On 22 October 1996, the Tribunal made its determination, affirming the Board's decision. The front page of the "Determination and Reasons" of the Tribunal refers to that decision as the refusal to pay to Mr Fischer his unfunded preserved benefit "under rule 12.2.1 of the Fund's trust deed." As well, in the text of the Reasons, the Tribunal recorded that the provision on which Mr Fischer relied was Rule 12.2.1.

Section 46 of the Superannuation (Resolution of Complaints) Act 1993 provides that a party may appeal to this Court, on a question of law, from a determination of the Tribunal. On 29 October, Mr Fischer filed the notice of appeal which gave rise to the hearing before the trial Judge. In that notice of appeal to the Court, Mr Fischer described the question of law raised on the appeal in these terms: "The Tribunal erred in their interpretation of rule 12.2.1 of the Trust Deed."

REASONING OF THE TRIAL JUDGE

The trial Judge noted that Mr Fischer's appeal to the Tribunal had been limited to the assertion that the Board's construction of Rule 12.2.1 was erroneous, and that Mr Fischer had taken only that point in his appeal to the Court. His Honour observed:

"Mr Fischer, who was unrepresented before me, did not contest the conclusion that he does not otherwise qualify for the early payment of this part of his superannuation entitlements."

His Honour stated that three issues had arisen before the Tribunal: whether the payment to Mr Fischer "would produce a result that is not in the spirit of the rules"; whether "the circumstances of the case are unusual or exceptional"; and whether ordering early payment of the Employer Component could be said to be a variation of one or more "of the components or factors applicable in the determination of benefits, whether or not any benefit is immediately payable."

His Honour noted that the Tribunal had decided the third issue against Mr Fischer, with the result that it had not been necessary for it to decide the first two issues. Nonetheless, he observed that the Tribunal had expressed the opinion that the circumstances of Mr Fischer's case were "unusual or exceptional" and that he agreed with that view, which, in any case, had not been challenged.

The trial Judge also expressed the view that the context of Rule 12.2.1 was such that the Board's power was "only to increase the benefits payable" to a particular person. By a notice of contention, the Board contends that this view is in error. Although we heard argument on it, we do not find it necessary to determine the question, and we should not be taken to have formed a view one way or the other on it. We think that it should be regarded, if it arises in the future, as an open question.

His Honour held that "the components or factors applicable in the determination of benefits" to which Rule 12.2.1 refers do not include the time fixed by the Rules as the time at which benefits are payable. This construction of Rule 12.2.1 was the ratio decidendi of his Honour's decision.

Finally, his Honour expressed the view, by way of obiter dictum, that the refusal to advance payment to Mr Fischer produced a result that was "not in the spirit of the rules". Again, by a notice of contention, the Board contends that his Honour erred in this respect. Again, it is not necessary for us to resolve the issue raised, which is certainly debatable, and we should not be taken to have formed a view one way or the other on it.

REASONING ON THE APPEAL

Mr Fischer is a "preserved benefit member" and is therefore a potential beneficiary of Rule 12.2.1. A "preserved benefit member" is defined in Rule 1.2.1 as "a former member to or in respect of whom a preserved benefit has not yet been paid." The same rule defines "preserved benefit" as:

" ... a benefit that, on a member ceasing membership, is either compulsorily or voluntarily retained in the [Scheme] for payment under Part 8 of these Rules, together with any increases under Division 6 of that Part, to, or in respect of, the former member or his/her beneficiaries." (underlining supplied)

Although the word "benefits" is not defined in Rule 1.2.1, it is clear that benefits are amounts payable pursuant to the Rules to members, former members or the "beneficiaries" of members or former members. That "benefits" are amounts of money paid or payable is borne out by the references to "benefits" throughout the Act, the Trust Deed and the Rules.

Rule 12.2.1 empowers the Board to "vary any of the components or factors applicable in the determination of benefits, whether or not any benefit is immediately payable." The expressions "components" and "factors" are not defined in the Rules. However, the composite expression, "components or factors applicable in the determination of benefits", as well as the significance of "benefits" as amounts of money payable in accordance with the Rules, suggests that the "components" and "factors" referred to are components or factors applicable to enable the determination of those amounts of money. Moreover, the expressions "components" and "factors" feature in the Rules in ways that make it clear that they contribute to the determination of amounts of benefits, not the times at which benefits are payable.

"PRESERVED BENEFITS" was previously the subject of PART 6 of the Rules and is now the subject of PART 8. The amount of the preserved benefit of a preserved benefit member, such as Mr Fischer, was previously identified in Rule 6.1.2 and is now specified in Rule 8.1.3. Under these provisions, it is the sum of the amounts of "accumulated member contributions", "accumulated productivity contributions" ("accumulated employer contributions" in Rule 6.1.2) and "unfunded preserved benefit." The possible times at which preserved benefits become payable to a preserved benefit member were previously separately specified in Rule 6.1.1 and are now separately specified in Rule 8.1.1.

It is true that there is provision for an increase in the amounts of the accumulated member contributions and the accumulated productivity contributions included in a preserved benefit by the accrual of interest, while those components remain preserved benefits in the Scheme, and that there is provision for an increase in the amount of the unfunded preserved benefit in accordance with Consumer Price Index movements. (Of course, these increases cease once the amounts in question cease to be included in a preserved benefit.) To that extent, the time of payment limits the period in which such increases continue. But the time fixed as the time when preserved benefits become payable is not a factor in the determination of the amount of the preserved benefit. That amount must be able to be determined at the time when a former member ceases to be a member of the Scheme.

Mr Fischer relies on the words "whether or not any benefit is immediately payable" at the end of Rule 12.2.1. However, in our view, those words signify only that the Board may effect the variation, whether the time for payment fixed in Rule 8.1.1 has or has not yet arrived. Without those words, it might have been arguable that the power to vary is available only where benefits have become payable. That proposition might have been arguable on the basis that a change in circumstances between the date on which the variation is sought and the later date when the benefit becomes payable might result in a situation in which the Board would not have exercised the discretion at the later date.

In his written submissions, Mr Fischer also relied on Rule 6.1.1 (f). However, it was not open to him to do so. Mr Fischer has long since identified the field of contest as one falling within Rule 12.2.1. Most of the relevant facts were recounted earlier. In addition to those facts, it is noteworthy that by his written submission to the Tribunal dated 1 July 1996, Mr Fischer made clear that his complaint was confined to questions arising under Rule 12.2.1. Further, in para 29 of the Board's submissions to the Tribunal dated 15 July 1996, the Board noted that although Mr Fischer had complained to the Tribunal in general terms, "it has emerged that it is the Trustee's primary decision under Rule 12.2.1 that is being considered by the Tribunal". The Tribunal's Reasons refer to Rule 12.2.1 as "[t]he provision on which the Complainant relies" and address only that Rule. As noted earlier, in his notice of appeal to this Court dated 29 October 1996, Mr Fischer stated the question of law raised on the appeal as the Tribunal's error in its interpretation of Rule 12.2.1. Moreover, in that notice of appeal he identified the ground on which he relied in terms referable to clause 12.2.1 alone. As noted earlier, the trial Judge referred to the construction of Rule 12.2.1 as the only issue involved in the appeal from the Tribunal's decision to the Court. Finally, in his notice of appeal to this Full Court, Mr Fischer referred only to error in the trial Judge's construction of clause 12.2.1 as the ground of his appeal. Mr Fischer should not lightly be permitted to agitate the point under Rule 6.1.1 (f) in view of the forensic history to which we have referred.

In any event, of a different order, and conclusive of the question in our view, is the consideration that Mr Fischer's submission would be doomed to fail for two reasons. Firstly, Rule 6.1.1 (f) is irrelevant to Mr Fischer's position, because it had been deleted by clause 1.41 (e) of the Amending Trust Deed made on 1 July 1991, well before the date of his exit from the Scheme on 15 June 1994. In response, Mr Fischer has drawn attention to the fact that the Board has been content to treat Rule 12.2.1 as available, notwithstanding that it was introduced on 1 July 1995, after Mr Fischer's exit from the Scheme. But there is a clear distinction between Rules which had ceased to be part of the Rules of the Scheme before Mr Fischer ceased to be a member, and other Rules. Indeed, Rule 6.1.1 (f) had been deleted before Mr Fischer even joined the Scheme. The Board has not disputed the availability of Rule 12.2.1 because the first application by Mr Fischer for an exercise of the Board's discretion was made on 4 October 1995, that is, after the commencement of Rule 12.2.1. The Board has referred to the decision of the Full Court of this Court in Lee v Secretary, Department of Social Security (1996) 139 ALR 57 as supporting the stance that it has taken that Rule 12.2.1 is available. The correctness of this view has not been debated before us: it has been common ground that Rule 12.2.1 applies.

Secondly, Mr Fischer could not appeal to this Court on any "question of law" relating to Rule 6.1.1 (f) from the determination of the Tribunal, because no issue relating to Rule 6.1.1 (f) was before the Tribunal or was decided by it. This Court therefore lacked (and lacks) jurisdiction to hear and determine an appeal from the Tribunal's determination based on a question of law relating to Rule 6.1.1 (f).

For all of the above reasons, we would not permit Mr Fischer to raise a case based on the former Rule 6.1.1 (f).

However, while the issue directly raised by the appeal is confined to Rule 12.2.1, during the argument of counsel for the Board, reference was made to a new Rule 6.1.1 (a) (i) which came into effect on 1 July 1995. Rule 6.1.1 (a) (i) provides:

"6.1.1 A member who ceases membership before minimum retiring age, for example on resignation or dismissal, but not by reason of death, and is not entitled to benefits under any other rule, is entitled to a preserved benefit of his/her final benefit accrual, or, as an alternative, may choose:

(a) to be paid a lump sum of:

(i) all his/her final benefit accrual if the SIS Act 1993 does not restrict payment of any part of that amount; ..." (bold print in original, signifying defined terms)

The "SIS Act" is the Superannuation Industry (Supervision) Act.

We need not explore further the terms or effect of Rule 6.1.1 (a) (i). It will be recalled that by its letter dated 11 June 1996 quoted earlier, the ISC advised Mr Fischer that the ISC "would have no objection to the trustees of the fund granting a full release of [his] preserved benefit". It was accepted in argument that the terms of the ISC's letter were sufficient to establish that the SIS Act did not prevent the making of the payment sought by Mr Fischer. There may be a question whether this Rule, adopted as it was after Mr Fischer ceased to be a "member", is applicable, but no convincing reason was advanced why it should benefit only members who ceased membership after 1 July 1995. (As noted above, Rule 12.2.1 also became effective on 1 July 1995, and its availability, according to its terms, has not been disputed.) Be this as it may, the question must be put to one side because the decision under appeal does not raise the matter to which the ISC's letter refers. Of course, it remains open to the Board to deal with the outstanding question, and it may think that it should consider and deal with it urgently, in view of the fact that Mr Fischer's need has been accepted.

CONCLUSION

The appeal should be dismissed. As the implications of the ISC's letter of 11 June 1996 have never been addressed, and in all the circumstances of this unfortunate case, which raises issues of law that are important for the Board and range more widely than Mr Fischer's particular concerns, there should be no order as to costs: see Arnold v Queensland (1987) 73 ALR 607 at 635.

I certify that this and the preceding 19 pages are a true copy of the Reasons for Judgment of the Court.

Associate:

Dated: 29 May 1997

Heard: 13 May 1997

Last

submission

received: 27 May 1997

Place: Sydney

Decision: 29 May 1997

Appearances: The appellant appeared in person.

Mr P Hanks of counsel instructed by The Australian Government Solicitor appeared for the respondent.