Chapter 1

Introduction

Terms of reference

1.1        On 1 March 2011, the Senate referred the following matter to the Finance and Public Administration Committee for inquiry and report by 30 June 2011:

The superannuation claims of former and current Commonwealth Public Service employees employed on a full-time, part-time or temporary basis prior to the introduction of compulsory superannuation in 1992, who were either not aware or correctly advised of their eligibility for Commonwealth superannuation (the Commonwealth Superannuation Scheme), with particular reference to:

(a)      the number of employees in the Commonwealth Public Service impacted, because they were not aware or correctly advised of their eligibility to Commonwealth superannuation prior to the introduction of compulsory superannuation in 1992, including, but not limited to, employees of the following Commonwealth departments and statutory authorities:

(i)         Department of the Interior (which included Transport, Forestry and Conservation, and Agriculture),

(ii)        Department of Works (later renamed the Department of Housing and Construction, and then the Department of Construction) in the Australian Capital Territory and New South Wales,

(iii)       Department of Administrative Services in the Australian Capital Territory and Western Australia,

(iv)       Department of Education in the Australian Capital Territory,

(v)        Department of Supply in South Australia and the Australian Capital Territory,

(vi)       Post-Master General’s Department in the Australian Capital Territory and New South Wales,

(vii)      Australian Government Printing Office in the Australian Capital Territory and New South Wales,

(viii)     Defence – Research Weapons Establishment in South Australia,

(ix)       Defence – Defence Science and Technology Organisation in South Australia,

(x)        Defence – Defence Research Centre in South Australia,

(xi)       Australian Broadcasting Commission in South Australia, Tasmania, the Northern Territory and New South Wales,

(xii)      Australian Atomic Energy Commission (now Australian Nuclear Science and Technology Organisation) in New South Wales,

(xiii)     ACT Electricity Authority in the Australian Capital Territory,

(xiv)     Northern Territory Electricity Commission in the Northern Territory,

(xv)      Australian Antarctic Division in Tasmania,

(xvi)     Australian National Airlines Commission (trading as Trans Australian Airlines (TAA)) in New South Wales, and

(xvii)    Commonwealth Scientific and Industrial Research Organisation in the Australian Capital Territory, Queensland and Tasmania;

(b)     the impact on the retirement incomes of these employees as a result of not being aware or correctly advised of their eligibility to the Commonwealth Superannuation Scheme;

(c)      the handling of these cases by the Department of Finance and Deregulation;

(d)     what, if any, actions the Department of Finance and Deregulation has taken to notify persons who may be applicable for these claims;

(e)      consideration of cases under the Act of Grace by the Department of Finance and Deregulation; and

(f)      any other related matters.

Conduct of the inquiry

1.2        The inquiry was advertised in the newspaper The Australian and through the internet. The committee invited submissions from interested organisations and relevant Commonwealth and Australian Capital Territory (ACT) Government departments and agencies.

1.3        The committee received 23 public submissions. A list of individuals and organisations which made public submissions to the inquiry, together with other information authorised for publication by the committee, is at appendix 1. The committee held one public hearing in Canberra on 5 May 2011. A list of the witnesses who gave evidence at the public hearing is available at appendix 2.
Submissions, additional information and the Hansard transcript of evidence
may be accessed through the committee's website at https://www.aph.gov.au/Senate/committee/fapa_ctte/index.htm

1.4        Some submissions from individuals contained details of particular cases. The committee noted the circumstances of these cases and used them to inform its view on the matters before it. However, the committee is unable to recommend remedies for any particular person.

Acknowledgement

1.5        The committee thanks those organisations and individuals who made submissions and gave evidence at the public hearings.

Note on references

1.6        References in this report are to individual submissions as received by the committee, not to a bound volume. References to the committee Hansard are to the proof Hansard: page numbers may vary between the proof and the official Hansard transcript.

Background to the inquiry

The Cornwell case

1.7        Mr John Cornwell was a temporary employee of the Department of the Interior from May 1962 until his employment was transferred to the ACT Government in about 1994. He retired on 31 December 1994. Until appointed to a permanent position in 1987, Mr Cornwell did not contribute to Commonwealth superannuation. He transferred to the Public Sector Superannuation Scheme (PSS) in 1990.[1]

1.8        In 1999, Mr Cornwell commenced proceedings against the Commonwealth in the ACT Supreme Court alleging that in 1965, whilst a temporary employee, he received incorrect information or advice about his eligibility to apply to join Commonwealth superannuation. In 1965, after three years as a temporary employee, he would have become eligible to join the fund. If he had joined the fund in 1965, on retirement after 29 years' contribution, he would have been entitled to a pension of 44.1 per cent of his final salary. By joining in 1987, he had seven years' contributions which entitled him to a pension of only 12.6 per cent of his salary. Mr Cornwell brought his claim on the basis of negligent misstatement, negligence in general and/or breach of statutory duty.[2]

1.9        In 2006, the ACT Supreme Court held that Mr Cornwell was incorrectly advised about his eligibility to apply to join Commonwealth superannuation. The Court was satisfied that Mr Cornwell would have joined Commonwealth superannuation earlier than 1987 if he had been correctly informed in 1965. The Court also held that Mr Cornwell was entitled to damages for his loss. The Department of Finance and Deregulation (Finance) noted that:

Although the Court was not required to determine the loss (which was subsequently agreed between the parties) the loss was, in essence, the difference between the Commonwealth superannuation benefit which Mr Cornwell did in fact receive and the amount he would have received if he had joined Commonwealth superannuation at an earlier date.[3]

1.10      The Commonwealth appealed the decision to the High Court arguing that Mr Cornwell had suffered his loss many years before his retirement and that the statutory limitation period had expired. The Commonwealth lost its appeal on the limitation issue. The High Court agreed with Mr Cornwell that the cause of action for superannuation claims based on negligent misstatement accrues when the employee becomes statutorily entitled to their superannuation benefits, that is, on retirement. Finance noted:

The High Court explained that in a claim where the plaintiff allegedly received incorrect information about his or her eligibility to apply to join Commonwealth superannuation, the cause of action first accrues when the plaintiff retires from the workforce and satisfies the statutory criteria for the payment of a benefit in the relevant scheme.[4]

1.11      Finance also commented on a factual issue dealt with in the Cornwell case and commented:

A factual issue dealt with in the Cornwell case is whether there was a misconception in the 1960s and 1970s, in that workplace, that temporary employees were not able to contribute to the Commonwealth superannuation schemes, when in fact they could choose to join if they met certain prerequisites. It is this alleged misconception that is the background for the negligent misstatement claims which have been made.[5]

1.12      Mr Cornwell and the Commonwealth reached an agreement and his claim for compensation was settled.

Response to the Cornwell case

1.13      As a consequence of the case brought by Mr Cornwell, the issue of eligibility of temporary employees during the 1960s and 1970s to join Commonwealth superannuation was reported in the media. In addition to the media coverage, the then Minister for Finance and Administration issued a media release and the Secretary of Finance wrote to all department heads to alert them to the implications of the Cornwell case. Finance also created a page on its website to provide information for those affected regarding the process for seeking compensation.[6]

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