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Express law

30 April 2007

Damages claim for negligent advice given 34 years previously not statute-barred

The High Court, by a majority of 6:1, held that a damages claim for negligent advice on eligibility to join a Commonwealth defined benefit superannuation scheme, given some 34 years previously, was, in the circumstances, brought within time.

Commonwealth of Australia v Cornwell

High Court of Australia, 20 April 2007
[2007] HCA 16

Background

The respondent, John Cornwell, commenced employment as a temporary employee in the Commonwealth’s Department of the Interior in 1962, as a spray painter at the Canberra bus depot. Mr Cornwell claimed that in July 1965 his (deceased) manager negligently advised him that he was not eligible to join the Commonwealth Superannuation Fund established under the Superannuation Act 1922 (the Fund).

The ACT courts below ruled in Mr Cornwell’s favour, holding that the negligent advice caused him to refrain from commencing contributions to the Fund in 1965 or 1966.

Mr Cornwell only became a member of the Commonwealth Superannuation Scheme (the CSS) established under the Superannuation Act 1976 (Cth) in 1987, when his employment was reclassified as permanent. He retired from Commonwealth employment on 31 December 1994.

Mr Cornwell commenced proceedings against the Commonwealth on 16 November 1999, some 34 years after the negligent advice.

The Commonwealth pleaded that Mr Cornwell’s claim was barred by section 11 of the Limitations Act 1985 (ACT), as the action was commenced more than six years after the date on which the cause of action first accrued. The ACT courts rejected this defence.

The Commonwealth was granted special leave to appeal to the High Court on the question of the point at which loss was first sustained, such that time began to run for the purposes of the Limitation Act defence.

Summary of decision

An appeal by the Commonwealth to the High Court was dismissed by a 6:1 majority.

The majority agreed with the courts below that Mr Cornwell suffered no actual loss until his retirement. He had no entitlement to benefits under the Superannuation Act 1976 until he had satisfied any applicable statutory criteria for the payment of benefits in the CSS, such as ceasing to be an employee on or after attaining the specified ages of 55, 60 or 65 years. Entitlements under the Commonwealth’s defined benefit schemes are prospective only until the occurrence of a contingency. It is only then that an actual loss is sustained.

The majority rejected the proposition that Mr Cornwell had suffered either an actual loss prior to retirement, or the loss of a chance. Consequently, Mr Cornwell had six years from the date of his retirement to commence proceedings, and he had commenced proceedings within time.

The majority considered speculative the question of whether in 1976 Mr Cornwell would have been better or worse off had he invested the money he would otherwise have paid in contributions to the superannuation schemes. Their Honours considered that it would not have been possible to calculate Mr Cornwell’s loss at any time prior to retirement (or the happening of some other trigger for the payment of benefits).

Mr Cornwell’s damages remain to be assessed.

Dissenting judgment

In a strong dissent, Callinan J was of the view that Mr Cornwell had as at 1977, at the latest, suffered both an actual loss and the loss of a chance, stating that the Commonwealth had proved its case ‘beyond contradiction’. His Honour noted that it has never been the law that damage occurs only when the loss is ascertained or ascertainable. Courts regularly estimate damages on the basis of likelihood or probability. It was not only upon retirement, or the happening of the other relevant triggers (or contingencies) that Mr Cornwell became entitled to an ascertainable interest in the scheme. It was always open to Mr Cornwell from at least 1977 to prove the likelihood or otherwise of each of the relevant statutory contingencies, and the statute of limitations (the predecessor of section 11 of the Limitations Act 1985) ran from then, expiring well before the commencement of the current claim.

Implications

The precedent value of the High Court decision is that similar claims involving negligent advice by management about entitlements under the Commonwealth’s defined benefit superannuation schemes may be instituted within six years of the date of retirement (or other relevant statutory trigger), regardless of when the alleged advice was given. There remains, however, no positive general duty on the Commonwealth to advise employees of superannuation entitlements (as opposed to an obligation not to misadvise), and each individual claimant must prove all the elements of the cause of action in his or her particular circumstances.

The Department of Finance and Administration is currently considering how to process other claims and will provide further information to potential claimants in due course.

Text of the decision is available at:
http://www.austlii.edu.au/au/cases/cth/high_ct/2007/16.html

AGS lawyers acted for the Commonwealth in all stages of the litigation. The Commonwealth’s counsel included Kim Bennett, Special Counsel Litigation.

For further information please contact:

Kim Bennett
Special Counsel Litigation
T 02 6253 7404 F 02 6253 7381
kim.bennett@ags.gov.au

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