FEDERAL COURT OF AUSTRALIA Defence Force Retirement & Death Benefits Authority v Chapman [2000] FCA 1804 ADMINISTRATIVE LAW – appeal from decision of Administrative Appeals Tribunal – whether respondent excluded from contributing to Defence Force Retirement and Death Benefits Scheme – whether Tribunal erred in interpretation and application of ss 5 and 5A of the Defence Force Retirement and Death Benefits Act 1973 (Cth) – whether decision of the appellant should be affirmed. Defence Force Retirement and Death Benefits Act 1973 (Cth) ss 3(1), 5(2), 5(3), 5A Defence Act 1903 (Cth) ss 4, 32 Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297 at 336 referred to Marshall v Watson (1972) 124 CLR 640 at 649 referred to CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 referred Commonwealth v Baume (1905) 2 CLR 405 at 414 referred to Beckwith v The Queen (1976) 135 CLR 569 at 574 referred to DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY v PHILLIP GEORGE CHAPMAN V 466 of 1999 WEINBERG J 12 DECEMBER 2000 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V466 of 1999 BETWEEN: DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY APPLICANT AND: PHILLIP GEORGE CHAPMAN RESPONDENT JUDGE: WEINBERG J DATE OF ORDER: 12 DECEMBER 2000 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The decision of the Authority that: · Major Chapman did not become an "eligible member of the Defence Force" within s 3(1) of the Defence Force Retirement and Death Benefits Act 1973 (Cth) when he transferred from the Australian Army Reserve to the Australian Regular Army on 2 December 1996; and · that he was required to contribute to the Military Superannuation and Benefits Scheme, be affirmed. 3. There be no order as to costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V466 of 1999 BETWEEN: DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY APPLICANT AND: PHILLIP GEORGE CHAPMAN RESPONDENT JUDGE: WEINBERG J DATE: 12 DECEMBER 2000 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is an appeal pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal ("the AAT") given on 16 July 1999. 2 By that decision the AAT set aside the decision of the applicant ("the Authority") that the respondent, Major Chapman, upon his transfer from the Active Australian Army Reserve to the Australian Regular Army on 2 December 1996, did not become an "eligible member of the Defence Force" within s 3(1) of the Defence Force Retirement and Death Benefits Act 1973 (Cth) ("the DFRDB Act"), and was required to contribute to the Military Superannuation and Benefits ("MSB") Scheme. 3 The AAT remitted the matter to the Authority with a direction that Major Chapman is an eligible member of the Defence Force Retirement and Death Benefits ("DFRDB") Scheme under s 5(3) of the DFRDB Act. 4 The grounds of appeal that were pursued by the Authority concern the construction of ss 5(2), 5(3) and 5A(1) of the DFRDB Act. Specifically they are as follows: (a) The AAT erred in construing s 5(2) of the DFRDB Act as deeming the respondent to have retired from the DFRDB Scheme, rather than from the Defence Force, on 31 January 1988. (b) The AAT erred in construing s 5(3) of the DFRDB Act as qualifying the respondent as an eligible member of the Defence Force upon his re-appointment to the Australian Regular Army on 2 December 1996. (c) The AAT erred in failing to construe s 5A(1)(a) of the DFRDB Act as excluding the respondent from the definition of "eligible member of the Defence Force" in s 3(1) of the DFRDB Act, because the respondent became a member of the Defence Force, for the purposes of the DFRDB Act, after 1 October 1991 – namely on 2 December 1996. (d) The AAT erred in construing s 5A(1)(b) of the DFRDB Act as incorporating the distinction between a member of the Reserve Forces who commences to render continuous full-time service and a member of the Reserve Forces who is appointed to the Australian Regular Army. (e) The AAT erred in failing to construe s 5A(1)(b) of the DFRDB Act as excluding the respondent from the definition of "eligible member of the Defence Force" in s 3(1) of the DFRDB Act, because he was a member of the Reserve Forces who, after 1 October 1991 (namely on 2 December 1996), commenced to render continuous full-time service for a period of not less than 12 months. The legislative framework The DFRDB Act 5 The DFRDB Act establishes a scheme that provides superannuation benefits for members of the Defence Force and their dependants which is administered by the Authority. Membership of the DFRDB Scheme depends on the definition of "eligible member of the Defence Force" in s 3(1) of the DFRDB Act. That subsection relevantly provides: ""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 … but does not include: (c) a person who, under s 5A, is excluded from this definition; …" 6 That subsection also provides a definition of "retirement" as follows: ""retirement" means retirement as a member of the Defence Force, and includes discharge from the Defence Force, and "retire" has a corresponding meaning." 7 Section 5A of the DFRDB Act, which was added by s 55 of the Military Superannuation Benefits Act 1991 (Cth), provides: "Persons excluded from definition of "eligible member of the Defence Force" 5A. (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 s 63 applies." 8 Sections 5(2) and (3) of the DFRDB Act deal with two situations that effect continuity of membership of the DFRDB Scheme: "(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. (3) Where a contributing member retires and, without a break in the continuity of his service, again becomes an eligible member of the Defence Force serving on continuous full-time service, he shall, for the purposes of this Act, be deemed not to have ceased to be an eligible member of the Defence Force by reason of that retirement." 9 Section 56(1) provides: "Refund of contributions 56. (1) Where a contributing member retires and, on his retirement, benefit is not payable to him under any other provision of this Act, he is entitled to a refund of the amount of the contributions paid by him." The Military Superannuation Benefits Act 1991 (Cth) ("the MSB Act") 10 The MSB Act closed the DFRDB Scheme to new members following the amendment of the definition of "eligible member of the Defence Force" in s 3(1) of the DFRDB Act. The MSB Act established the MSB Scheme as from 1 October 1991. The Defence Act 1903 (Cth) ("the Defence Act") 11 Section 4(1) provides, inter alia, the following definitions to be applied in the Defence Act, unless the contrary intention appears: ""Member" – Includes any officer, sailor, soldier and airman; … "Officer" – means: … (b) in relation to the Australian Army or the Australian Air Force – a person appointed as an officer of the Australian Army or the Australian Air Force;" 12 Section 30 of the Defence Act provides that the Defence Force consists of three arms: the Australian Navy, the Australian Army and the Australian Air Force. Section 31 provides that the Army consists of two parts, namely the Permanent Military Forces ("the PMF"), and the Australian Army Reserve ("the AAR"). Section 32(1) provides that the PMF consists of three forces, namely the Australian Regular Army ("the ARA"), the Regular Army Supplement ("the RAS"), and the Regular Army Emergency Reserve ("the RAER"). Section 32(2) provides that the ARA consists of, inter alia, officers appointed to, or transferred to, that force from any other part of the PMF or the AAR. Section 32A(1) provides that the AAR consists of two forces: the Active AAR, and the Inactive AAR. Section 50 provides that members of the AAR are not generally bound to render continuous full-time military service. Section 32A(4) provides that the Active AAR consists of, inter alia, officers appointed to, or transferred to, that force from the PMF or the Inactive AAR. The factual background 13 Major Chapman served in the ARA from 13 February 1973 to 10 November 1981, when he transferred to the RAER. During his service in the ARA, he was an "eligible member of the Defence Force" for the purpose of the DFRDB Act. Following his "retirement from the Defence Force" in November 1981 he received a refund of his contributions under the DFRDB Act, in accordance with s 56 of the DFRDB Act. 14 After a transfer to the Active AAR in May 1982, Major Chapman rejoined the ARA on 1 February 1983 and again became an "eligible member of the Defence Force". On 31 January 1988, his appointment to the ARA expired. He became a member of the Active AAR on 1 February 1988, and he again received a refund of his contributions under the DFRDB Act. 15 On 2 December 1996, Major Chapman transferred to the ARA. At that time his application to rejoin the DFRDB Scheme was rejected by the Authority. The proceeding before the AAT 16 The question to be decided by the AAT was whether Major Chapman, upon his transfer from the Active AAR to the ARA on 2 December 1996, became, as he contended, an "eligible member of the Defence Force" within s 3(1) of the DFRDB Act and thereby a member of the DFRDB Scheme, or whether he was, as the Authority determined excluded from membership of that scheme and therefore required to become a member of the MSB Scheme. 17 The AAT considered that s 5(2) of the DFRDB Act deemed Major Chapman to have retired from the DRFDB Scheme when he ceased continuous full-time service on 31 January 1988. However, he remained a member of the Defence Force albeit serving in a different capacity, as an officer of the AAR, and there was no break in the continuity of his service. The AAT stated that apart from s 5A of the DFRDB Act, Major Chapman's reappointment to the ARA on 2 December 1996 would have qualified him under s 5(3) of the DFRDB Act as again being an eligible member of the Defence Force. Unless Major Chapman was excluded under the provisions of s 5A, then this would continue to be the position. 18 In respect of s 5A(1) the AAT said: "It is clear that the applicant does not fall within paragraph (a) of s 5A(1) because he was already a member of the Defence Force on the nominated date of 1 October 1991. The more difficult question is whether the alternative exclusionary provision in paragraph (b) applies." 19 The AAT determined that the distinction drawn in the Defence Act between members of the AAR and the RAER who commence, voluntarily, to render continuous full-time service, and a member of the AAR who is appointed or reappointed to the ARA, meant that Major Chapman's circumstances "clearly do not fall under s 5A(1)(b) of the DFRDB Act." 20 Rather, the AAT concluded that Major Chapman's circumstances fell within the provisions of s 5(3) of the DFRDB Act. That is, as a contributing member, he retired and without a break in the continuity of his service, again became eligible as a result of his reappointment to the ARA where, by definition, he was rendering continuous full-time service. The Authority's case 1. Section 5(2) of the DFRDB Act 21 The Authority's first submission was that even if s 5A(1) carried the meaning given to it by the AAT, s 5(2) deemed Major Chapman to have retired from the Defence Force for the purposes of the DFRDB Act on 1 February 1988, the day after his last day of continuous full-time service. He did not become a member of the Defence Force for the purposes of the DFRDB Act until he transferred to the ARA on 2 December 1996. The Authority submitted that it is plain from the definition of "retirement" in s 3(1) of the DFRDB Act that the deemed retirement effected by s 5(2) is retirement as a member of the Defence Force, for the purposes of the DFRDB Act. 22 The Authority contended that if a person is deemed, for the purposes of the DFRDB Act, to have retired from the Defence Force, then that person could only return to the status of "an eligible member of the Defence Force" by again becoming, for the purposes of the DFRDB Act, a member of the Defence Force who is serving on continuous full-time service. That is, Major Chapman was required to take some positive step before he could again be regarded as a member of the Defence Force for the purposes of the DFRDB Act. That positive step was Major Chapman's return to the ARA with effect from 2 December 1996. From that date Major Chapman again became a member of the Defence Force for the purposes of the DFRDB Act, because he commenced to be on continuous full-time service. 23 Upon Major Chapman again becoming a member of the Defence Force for the purposes of the DFRDB Act, it being after 1 October 1991, s 5A(1) operated to exclude him from the definition of "eligible member of the Defence Force". 2. Section 5A(1)(a) of the DFRDB Act 24 In the alternative, the Authority submitted that the AAT erred in its application of s 5A(1) of the DFRDB Act. Section 5A was inserted into the DFRDB Act in order to establish the MSB Scheme in place of the DFRDB Scheme. The Authority contended that the effect of s 5A is to close the DFRDB Scheme by excluding all but a very limited class of re-entrants from entering the scheme. In support of this contention, the Authority referred to both the context of the section, namely s 5A(2), and extrinsic material such as the second reading speech in relation to the introduction of the MSB Bill. 25 The Authority drew particular attention to the following words in the second reading speech of the Minister for Defence Science and Personnel: "The Military Superannuation and Benefits Bill has the effect of making the existing Defence Force Retirement and Death Benefits (DFRDB) scheme a closed scheme. That is to say that the only persons who will be permitted to join the superseded scheme will be pensioner re-entrants who choose not to join the new Military Superannuation and Benefits scheme and a couple of rare classes of re-entrants." 26 The Authority submitted that the "pensioner re-entrants" referred to by the Minister are the group of people referred to in s 5A(2)(b), while the "couple of rare classes of re-entrants" are those groups referred to in s 5A(2)(a) and (c). The Authority submitted that apart from those groups, the intention was to close the DFRDB Scheme to new entrants. If effect is to be given to that intention, then s 5A(1) must be treated as closing the scheme, as excluding all possible entrants and re-entrants from the DFRDB Scheme, while s 5A(2) operates to ameliorate that effect. 27 The Authority submitted that s 5A(1) must be read in conjunction with s 5A(2), and that the two subsections should operate harmoniously. The function of s 5A(2) is to protect three limited classes of person from the excluding effect of s 5A(1). The three paragraphs of s 5A(2) must have been drafted and enacted on the assumption that, unless they were enacted, either s 5A(1)(a) or (b) would catch the people referred to in each paragraph. The Authority set out in detail those three classes of people and how the corresponding subsections apply. 28 The first class of person (s 5A(2)(a)(i) and (ii)) is a former eligible member who transferred to a Reserve, was discharged or had his or her continuous full-time service terminated under the Defence (Parliamentary Candidates) Act 1969 (Cth) and was transferred back, reinstated or accepted for continuous full-time service under Part III of that Act. Section 5A(2)(a) would have no function to perform unless such a person would otherwise have been caught by s 5A(1). 29 To illustrate this point, the Authority gave the example of a member who joined the Defence Force before 1 October 1991, is transferred to a Reserve and then under Part III is transferred back to the ARA after 1 October 1991. That member must be caught by either s 5A(1)(a) or (b), otherwise s 5A(2)(a) has no effect. But, if the AAT's construction is correct, the Authority submitted: (a) s 5A(1)(a) does not apply because the person was already a member of the Defence Force before 1 October 1991; and (b) s 5A(1)(b) does not apply because a person who is transferred from the Reserve to the ARA clearly does not, as the AAT stated in its reasons for decision, fall under s 5A(1)(b) of the DFRDB Act. 30 The second class of person (s 5A(2)(b)) is a person who is a recipient member or person in respect of whom deferred benefits are payable, who intends to resume full-time service and who has elected to become a contributing member. Section 5A(2)(b) would have no function to perform if such a person would otherwise have been caught by s 5A(1). 31 Again, the Authority gave an example of a member who joined the Defence Force and was rendering continuous full-time service before 1 October 1991, and after 20 years of effective service ceased to render continuous full-time service (by reason of a transfer to the Reserve) and was, pursuant to s 5(2) of the DFRDB Act, then deemed to have retired so as to be entitled to retirement pay under s 23 of the DFRDB Act. If that person, on or after 1 October 1991, is transferred from the Reserve to the ARA and again commences to render continuous full-time service, then s 61B of the DFRDB Act gives that person the right to elect to rejoin the DFRDB Scheme. That member must be caught by s 5A(1)(a) or (b), otherwise s 5A(2)(b) has no effect. But, if the AAT's construction is correct, then for the same reasons as submitted in relation to the first class, neither s 5A(1)(a) nor (b) would apply. 32 The third class of person (s 5A(2)(c)) is a person who was a contributing member who retires and upon his retirement receives a refund under s 56 of the DFRDB Act, and within 90 days again becomes an eligible member of the Defence Force. That is, commences to render continuous full-time service, and elects within a further 90 days to have his or her retirement disregarded. 33 The example the Authority gave was a person who joined the Defence Force and was rendering continuous full-time service before 1 October 1991. After ten years effective service that person ceased to render continuous full-time service (by reason of a transfer to the Reserve) and was, pursuant to s 5(2) of the DFRDB Act, then deemed to have retired so as to be entitled to a refund of contributions under s 56(1) of the DFRDB Act. If, within 90 days of that retirement, that person is transferred from the Reserve to the ARA on or after 1 October 1991, and again commences to render continuous full-time service, s 63 of the DFRDB Act gives that person the right to elect to have his or her retirement disregarded. That member must be caught by s 5A(1)(a) or (b), otherwise s 5A(2)(c) has no effect. But again, if the AAT's construction were correct, then for the same reasons as submitted in relation to the first class, neither s 5A(1)(a) nor (b) would apply. 34 The Authority submitted that it is improbable that the framers of s 5A could have intended to insert a provision which would have virtually no effect. 35 The Authority further submitted that assuming that s 5A(1)(a) was intended to perform a specific function (that is, to identify a particular class of persons who are not to qualify for membership of the DFRDB Scheme), it is appropriate to qualify the wide terms of the provision. Unless those wide terms are qualified, then the operation of s 5A(1) will produce anomalous distinctions that cannot have been intended. 36 The exclusion would catch every person who becomes a member of the Defence Force (including the AAR) on or after 1 October 1991; and every existing member of the AAR or the RAER who, on or after that date, voluntarily commences to render continuous full-time service for not less than 12 months. But the exclusion would not catch any person who was a member of the Defence Force (including the AAR and RAER), not rendering continuous full-time service, on or before 1 October 1991, and who, on or after that date, commences to render continuous full-time service for not less than 12 months pursuant to a transfer to the ARA. 37 The Authority submitted that there is no rational basis for the discrimination that would be effected between those members of the AAR or the RAER who would be caught by the exclusion and those who would not be so caught. The language of s 5A(1)(a) should be given a construction which would avoid the consequences of the provision excluding a wider group of persons than required, and failing to exclude a class of persons with no significant distinction from a class that is excluded. 38 Additionally, the Authority submitted that if one reads s 5A, together with s 5, particularly s 5(2), one gets a clear sense that the way that "member of the Defence Force" is intended to be used in the DFRDB Act is in a somewhat different way from the way in which it is used for more general purposes in the Defence Act. The Authority submitted that there is no concept in the DFRDB Act of retirement from the DFRDB Scheme, but only of retirement from the Defence Force, whether actual or deemed. For this reason the meaning of "member of the Defence Force" in ss 5 and 5A in the DFRDB Act must be construed quite separately from the Defence Act, even though, it was noted, Major Chapman remained a member of the Defence Force for the purposes of the Defence Act. 3. Construction of s 5A(1)(b) of the DFRDB Act 39 The Authority submitted that if the AAT's construction of s 5A(1)(a) was not erroneous, the AAT should have held that s 5A(1)(b) excluded Major Chapman from the definition of "eligible member of the Defence Force", by reason of his having commenced, from 2 December 1996, to render continuous full-time service for a period of not less than 12 months. 40 Section 5A(1)(b) performs a separate function from s 5A(1)(a). It covers a class of persons other than those persons who become members of the Defence Force on or after 1 October 1991 – namely, those persons who, while remaining as members of the Defence Force, change the nature of their service from service that is not continuous full-time service (typically, service as members of the Reserve Forces or Emergency Forces) to service that is continuous full-time service for a period of not less than 12 months. Immediately before Major Chapman commenced to render continuous full-time service on 2 December 1996, he was a member of the Active AAR. According to s 4(1) of the Defence Act, "The Reserve Forces" include the AAR which in turn, according to s 32A(1), includes the Active AAR. 41 It follows that, being a member of the Reserve Forces, Major Chapman commenced to render continuous full-time service after 1 October 1991 for a period of not less than 12 months; and s 5A(1)(b) of the DFRDB Act precludes him from being treated as an "eligible member of the Defence Force". 42 The Authority noted that the AAT identified a distinction in the Defence Act which, it said, should also be recognised for the purposes of the DFRDB Act, namely, a distinction between members of the AAR and the RAER who commence to render continuous full-time service and a member of the AAR who may be appointed or re-appointed to the ARA. It appears that the AAT was proposing that s 5A(1)(b) should be confined to a person who, while remaining a member of the AAR or the RAER, voluntarily undertakes to render continuous full-time service. 43 The Authority submitted that the reading of s 5A(1)(b) proposed by the AAT assumes that the provision distinguishes between members of the AAR and the RAER who voluntarily undertake to render continuous full-time service, on the one hand, and members of the AAR or the RAER who transfer to the ARA, on the other. On this assumption, s 5A(1)(b) excludes the first group, but not the second, from the definition of "eligible member" in the DFRDB Act. This reading, it was submitted, would lead to an irrational discriminatory consequence: a person who stayed in the AAR and commenced to render continuous full-time service for the required period after 1 October 1991 could not enter the DFRDB Scheme, whereas another person who transferred from the AAR to ARA and commenced to render continuous full-time service would be eligible to become a member of the scheme. 44 The Authority submitted that there is no reason to suppose Parliament intended to distinguish in that way between two persons, each of whom has commenced to render continuous full-time service but under different status. Rather, Parliament should be understood to have intended to close the doors on access to the DFRDB Scheme as at 1 October 1991. Parliament has effected that closure through s 5A(1), with s 5A(1)(a) closing the door to persons who become members of the Defence Force and render continuous full-time service on or after 1 October 1991, and s 5A(1)(b) closing the door to persons who alter the nature of their service so as to commence rendering continuous full-time service on or after that date. 45 The AAT's reading, on the other hand, would attribute no significance to s 5A(2), which protects a distinct class of members of the Defence Force against the excluding effect of s 5A(1). If the AAT's reading of s 5A(1)(b) is correct, the protection offered by s 5A(2)(a) to an officer transferred from, say, the ARA to the AAR and then reinstated, would be quite unnecessary. 4. Section 5(3) of the DFRDB Act 46 The AAT eventually relied upon s 5(3) to support its decision. The Authority submitted that this was curious, because there was no need, once it had taken the view that it took of s 5A, to invoke s 5(3) in order to allow the respondent again to join the DRDFB Scheme. If s 5A did not apply to the respondent, then as soon as he commenced to be a member of the Defence Force on an appointment for more than 12 months, rendering continuous full-time service, that was all that was needed. 47 The AAT viewed s 5(3) of the DFRDB Act as covering Major Chapman's situation because: "…he has as a contributing member retired and without a break in the continuity of his service has, again, become eligible as the result of his re-appointment to the ARA where by definition he is rendering continuous full-time service." 48 The Authority submitted that this aspect of the AAT's reasoning is erroneous, and that the AAT made inappropriate use of section 5(3). It was submitted that s 5(3) has a very limited operation: it provides for continuity of membership of the Scheme where a member transfers between arms of the Defence Force, or within an arm of the Defence Force (provided that the member continues to render continuous full-time service), and avoids the situation where each transfer would be treated as an exit from and re-entry to the Defence Force for the purposes of the DFRDB Act. The Authority pointed out that s 5(3) is not associated with the introduction of the MSB Scheme, (having been enacted prior to the introduction of that scheme). Rather s 5(3) deems certain people not to have retired from the DFRDB Scheme. The Authority noted that the practice within the Defence Force is such that if a person moves, for example, from the Navy to the Army, the person is formally discharged from the Navy, which constitutes a retirement for the purposes of the DFRDB Act, and a new position is created by then joining the Army. 49 In the present case, s 5(3) of the DFRDB Act would have applied when Major Chapman ceased to be a member of the ARA on 10 November 1981, transferred to the RAER and transferred back to the ARA on 1 February 1983, so that Major Chapman: · would not have been entitled to a refund of contributions from his first period of service, in accordance with s 56(1) of the DFRDB Act; · would not have been required to elect to have his first period of service taken into account as effective service (s 64 of the DFRDB Act); and · would have been required to continue to contribute under the DFRDB Act during the period from 10 November 1981 to 31 January 1983. 50 Section 5(3) would have had a similar effect when Major Chapman ceased to be a member of the ARA on 31 January 1988, transferred to the Active AAR and transferred back to the ARA on 2 December 1996. 51 The Authority submitted that if the AAT's reading of s 5(3) were correct, the provision would have the effect, when a member again became an eligible member of the Defence Force serving on continuous full-time service, of requiring that member to contribute to the DFRDB Scheme for the intervening period (the period of "continuity of service"), because the member is deemed not to have ceased to be an eligible member of the Defence Force by reason of that retirement. However, there are no provisions in the DFRDB Act which permit a member of the Defence Force to contribute to the Scheme other than when that person is rendering continuous full-time service. The respondent's case 52 In summary, the respondent submitted that as and from 2 December 1996, Major Chapman is an eligible member of the Defence Force (under s 3(1) of the DFRDB Act) who is not excluded by s 5A(1) DFRDB Act. This section does not exclude a former contributing member of the DFRDB Scheme who retired for the purposes of s 5(2) but who continues to be a member of the Defence Force (whether as a member of the AAR or the ER) and who subsequently transfers back to the Permanent Forces on or after 1 October 1991. He is not excluded by s 5A(1)(b) as he was not a member of the Reserve or Emergency Forces who commenced to render continuous full-time service. Eligibility to the DFRDB Scheme arises under s 5(3) of the DFRDB Act as Major Chapman has continuity of service. 1. Section 5(2) of the DFRDB Act 53 In response to the Authority's first contention that s 5(2) deemed Major Chapman to have retired from the Defence Force for the purposes of the DFRDB Act on 1 February 1988, the day after his last day of continuous full-time service, the respondent submitted that a contributing member may retire for the purposes of the DFRDB Act but continue to be a member of the Defence Force for the purposes of that Act. The respondent submitted that the section clearly contemplates 'deemed retirement' as well as continuity of membership of the Defence Force. 54 The respondent submitted that the definition of "retirement" and "retire" in s 3(1) is not applicable for the purposes of s 5 and the concept of "continuity of service" under the DFRDB Act. The respondent submitted that he remained a member of the Defence Force for the purposes of the DFRDB Act (and retention of his continuity of service rights), but not an eligible member of the Defence Force (as defined in s 3(1)) until his transfer to the Permanent Forces on 2 December 1996. 55 In support of this argument, the respondent submitted that as there is no definition of "member of the Defence Force" given in the DFRDB Act, then the meaning of that phrase must be taken from the Defence Act. Therefore, there can not be said to be any change in Major Chapman's circumstances for the purposes of the DFRDB Act, as he was always a member of the Defence Force, according to the meaning of that phrase in the Defence Act. The respondent submitted that that phrase has to be given some meaning, and that meaning must come from the parent Act, the Defence Act. 56 In support of this submission, the respondent referred to s 15 of the Acts Interpretation Act 1901 (Cth) which states: "Every Act amending another Act shall, unless the contrary intention appears, be construed with such other Act and as part thereof." The respondent noted that the AAT stated in its reasons for decision that it was uncontentious that the meaning of the phrase "a member of the Defence Force" in the DFRDB Act could only be given meaning by the use of that phrase in the Defence Act. 2. Section 5A(1)(a) of the DFRDB Act 57 This section excludes from the definition of "eligible member of the Defence Force" in s 3(1) all those people who join the Defence Force, the respondent submits, as a new member, on or after the date specified. Major Chapman joined the Defence Force on 13 February 1973, and continued to remain as a member of the Defence Force throughout and without a break in the continuity of his service under the Defence Act. He did not, it was submitted, become a member of the Defence Force at that time. Section s 5A(1) can therefore have no application in relation to Major Chapman. 58 In support of this contention the respondent submitted that as there is no definition of "member of the Defence Force" provided in the DFRDB Act, the definition must be the same as that in the parent act, the Defence Act. Further, the respondent submitted that the general words in s 5A(1)(a) should be given their natural and ordinary meaning and should not be read down by the existence of subsection (2). Subsection (2), it was submitted, is not applicable by virtue of the fact that the respondent is not caught by s 5A(1)(a), and accordingly one does not need to go to subsection (2). Subsection (2), therefore, cannot be said to bear upon the meaning of the words in subsection (1). 59 In response to the Authority's contention as to the irrational discrimination which would arise between persons who are caught by the exclusion and those who are not, the respondent submitted that only those persons who were members of the Defence Force, were previously members of the DFRDB Scheme prior to 1 October 1991, and who retained continuity of service can be eligible members of the Defence Force for the purposes of the DFRDB Act. 60 In support of this submission, the respondent relied on the definition of "member of the scheme", which is defined in s 3(1) of the DFRDB Act: ""member of the scheme" means a person who is, or at any time on or after the date of commencement of the scheme, has been, an eligible member of the Defence Force." 61 It was submitted that Major Chapman fell into this category and was therefore not excluded from the DFRDB Scheme. 62 During the course of argument before me, however, counsel for the Authority pointed out that the phrase "member of the scheme" is a term which is defined in the DFRDB Act as it is used in various sections. It is not, however, used in either of ss 5 or 5A, and nothing, therefore, turns on the meaning of that term. 3. Section 5A(1)(b) of the DFRDB Act 63 The respondent submitted that s 5A(1)(b) is not applicable to Major Chapman as s 3(1) of the DFRDB Act states: "In this Act, unless the contrary intention appears:… "Reserve" means: … (b) in relation to a member of the Army – the Inactive Australian Army Reserve;…" In s 5A(1)(b), the respondent submitted, "Reserve Forces" must mean the Inactive Army Reserve, and that it does not apply to Major Chapman, as he was only ever a member of the Active Army Reserve or the ARA. 64 The respondent also made a submission in respect of the Authority's reference to extrinsic material to explain the meaning of section 5A of the DFRDB Act. The respondent submitted that such a course was permissible, pursuant to s 15AB of the Acts Interpretation Act 1901 (Cth), but that such material cannot alter the interpretation which the Court, without reference to those materials, would place on the provision. The respondent referred to Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 297 at 336 where Aickin J said: "It is however not permissible to rely on a supposed failure to express the real intention by reliance on what the reader thinks the Parliament or the draftsman should have intended or should have said." 65 His Honour then referred to the words of Stephen J in Marshall v Watson (1972) 124 CLR 640 at 649: "Granted that there may seem to be lacking in the legislation powers which it might be thought the Legislature would have done well to include, it is no power [? part] of the judicial function to fill gaps disclosed in legislation; as Lord Simmons said in Magor and St Mellons RDC v Newport Corporation ([1952) AC 189 at 191), "If a gap is disclosed, the remedy lies in an amending Act" and not in a "usurpation of the legislative function under the thin disguise of interpretation"." 66 See also CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384. 67 The respondent further submitted that the DFRDB Act should be viewed as beneficial legislation. The respondent submitted that it followed that any ambiguities in the legislation should be construed in his favour rather than in favour of the Authority. 4. Section 5(3) of the DFRDB Act 68 The respondent submitted that even without s 5(3) Major Chapman is an eligible member of the Defence Force for the purposes of the DFRDB Act, but that his eligibility under the DFRDB Scheme is confirmed by that section. Major Chapman retired for the purposes of the DFRDB Act, as that term is given meaning under s 5(2), but without a break in the continuity of his service, nor at any time ceasing to be a member of the Defence Force, he once again commenced continuous full-time service on 2 December 1996, and was deemed, by virtue of s 5(3) not to have ceased to be an eligible member of the Defence Force by reason of that retirement. 69 During the course of argument, I raised with counsel for the respondent the problem that one must go back to the definition of "eligible member of the Defence Force" in s 3(1), which takes one to the positive definition which does not include a person who, under s 5A, is excluded from this definition. That is, although s 5(3) may deem Major Chapman not to have ceased to have be an eligible member of the Defence Force, assuming he is otherwise an eligible member, the definition of "eligible member" says he is not so eligible if he falls within s 5A. The respondent submitted that there may be some inconsistency and, if so, the specific section (ie. s 5(3)) would give meaning to the general definition. Findings 70 In my opinion the AAT erred in law in failing to exclude the respondent from the definition of "eligible member of the Defence Force" within the meaning of s 3(1) of the DFRDB Act upon his transfer from the AAR to the ARA on 2 December 1996. 71 I consider that the respondent fell squarely within s 5A(1) of the DFRDB Act. On 2 December 1996, when Major Chapman transferred from the AAR to the ARA, he relevantly became a member of the Defence Force after 1 October 1991 (s 5A(1)(a)). Or, being a member of the Reserve Forces, he commenced to render continuous full-time service for a period of not less than twelve months (s 5A(1)(b)). 72 In my opinion the construction of s 5A(1) is to be informed by the scope which must be given to s 5A(2). The three exceptions to the exclusionary provision in s 5A(1) are set out in s 5A(2). Those three exceptions are quite specific, and narrowly formulated. They do not encompass a person in the position of the respondent. 73 If the reasoning of the AAT were to be accepted as correct, there would be little scope for the operation of s 5A(2). That is, persons in the position of the respondent would be dealt with upon the footing that they continue to be members of the Defence Force for the purposes of the DFRDB Act notwithstanding their having retired from continuous full-time service, and having qualified for a refund of contributions under s 56 of that Act. Section 5A(1) would not operate to exclude the very persons who are identified as falling within the exceptions to the exclusionary provision. It would follow that s 5A(2) would be largely superfluous or insignificant. 74 It is a well-recognised canon of construction that, as a general principle, courts are not at liberty to consider any word or sentence in an Act of Parliament as superfluous or insignificant. All words must prima facie be given some meaning and effect: Commonwealth v Baume (1905) 2 CLR 405 at 414 per Griffith CJ; and Beckwith v The Queen (1976) 135 CLR 569 at 574 per Gibbs J. See generally DC Pearce and RS Geddes Statutory Interpretation in Australia 4th ed 1996, par [2.12]. 75 It follows that I accept as correct the submission of the Authority that the effect of s 5A is to close the DFRDB Scheme to all but the very limited classes of re-entrants specifically identified in s 5A(2). The extrinsic material supports this conclusion as do the examples offered by the Authority of the anomalous distinctions which would flow from adopting the reasoning of the AAT as correct. 76 Having found that the AAT erred in its application of s 5A(1), it is unnecessary to determine whether or not the Authority's first submission should be accepted, namely that s 5(2) deemed the respondent to have retired from the Defence Force on 1 February 1988 for the purposes of the DFRDB Act (even if not for the purposes of the Defence Act). I refrain from making any finding upon that submission, though I note that there is force in the contention that a contributing member may continue to be a member of the Defence Force for the purposes of the Defence Act without necessarily being viewed as having continued to be a member of the Defence Force for the purposes of the DFRDB Act. There is no reason in principle why the provisions of the DFRDB Act which deal generally with retirement as a member of the Defence Force (for example s 3(1)) should not be applicable to the deemed retirement provision in s 5(2) of that Act. 77 I turn finally to the AAT's conclusion that s 5(3) of the Act provides support for its construction of s 5A. I agree with the submissions advanced on behalf of the Authority that s 5(3) does not operate in the way that the AAT considered that it did. Section 5(3) was enacted prior to the introduction of the MSB Scheme. It operates to deem certain contributing members (namely those who have retired, and without a break in the continuity of their service again become eligible members of the Defence Force serving on continuous full-time service) not to have ceased to be eligible members of the Defence Force by reason of their retirement. The provision was not introduced with a view to preserving the rights of members to continue to contribute to the DFRDB Scheme once that scheme was closed off. Rather it was designed, it would seem, to deal with the long-established practice within the Defence Force of treating members who move from one branch of the service to another, for example, the Navy to the Army, as persons who are discharged (and therefore retired for the purposes of the DFRDB Act) and thereby treated as having become members of the Defence Force again when reappointed. 78 I cannot see why a provision such as s 5(3), which can be given a sensible interpretation, should instead be treated as being arguably in conflict with s 5A, and as modifying the operation of that section when plainly s 5A was introduced into the DFRDB Act to deal specifically with continued eligibility for membership of the DFRDB Scheme. 79 It follows that the decision of the AAT must be set aside. There is little point in remitting this matter to the AAT to be dealt with in accordance with these reasons for judgment. The better course is to order that the decision of the Authority that: · Major Chapman did not become an "eligible member of the Defence Force" within s 3(1) of the DFRDB Act when he transferred from the AAR to the ARA on 2 December 1996; and · that he was required to contribute to the MSB Scheme, be affirmed. 80 The Authority indicated that in the event that it was successful in this appeal it did not seek an order for costs. Accordingly there will be no order for costs. I certify that the preceding eighty (80) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Weinberg. Associate: Dated: 12 December 2000 Counsel for the Applicant: Mr P.J.Hanks QC Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondent: Mr J.Arthur Solicitor for the Respondent: Cahills Date of Hearing: 24 October 2000 Date of Judgment: 12 December 2000