BEESON and DEFENCE FORCE RETIREMENT & DEATH BENEFITS AUTHORITY

[2010] AATA 254

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2010] AATA 254

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No. 2009/0855

GENERAL ADMINISTRATIVE DIVISION		)
Re		PAUL beeson

Applicant

And DEFENCE FORCE RETIREMENT & DEATH BENEFITS AUTHORITY

Respondent

DECISION

Tribunal Ms N Isenberg, Senior Member.

Date13 April 2010

PlaceSydney

Decision The Administrative Appeals Tribunal affirms the decision under review.

..................[sgd].................

Ms N Isenberg,

Senior Member

CATCHWORDS

DEFENCE FORCE RETIREMENT AND DEATH BENEFITS-recovery of overpayment- paid by mistake- waiver of the debt- financial burden of repayment.

LEGISLATION

Defence Force Retirement and Death Benefits Act 1973 s 61B, 62, 23, 24, 126

Social Security Act 1991

CASES

David Securities P/L v CBA (1991) 175 CLR 353

Director-General of Social Services v Hales (1983)47 ALR 281

Williams and Defence Force Retirement and Death Benefits Authority [2008]AATA 585

REASONS FOR DECISION

13 April 2010 Ms N Isenberg, Senior Member

Background

1.      Squadron Leader Beeson (SQNLDR Beeson) retired from the Australian Defence Force (ADF) in April 1992, having completed 20 years of service.  He began to receive retirement pay under the Defence Force Retirement and Death Benefits Act 1973 (the Act).  He elected to commute part of his retirement pay to a lump sum, and his retirement pay was reduced accordingly.

2.      At a later date, he undertook several periods of continuous full-time service (CFTS) in the ADF, only some of which were relevant for Defence Force Retirement and Death Benefits (DFRDB) purposes.  In 2002 his pension entitlement was miscalculated, erroneously taking into account two short periods of CFTS and resulting in an overpayment of $8,997.79. 

3.      On 27 November 2008 the Respondent decided to recover the overpayment.  This decision was subject to internal review and affirmed on 17 February 2009.  The Respondent decided that the debt should be recovered from the additional commutation lump sum that SQNLDR Beeson will be entitled to on retirement from his current CFTS  on 9 June 2011.  The Respondent does not seek any interest on the monies, notwithstanding that by the date of proposed recovery SQDLDR Beeson would have had the benefit of the money for about 10 years. 

Law

4.      If a DFRDB recipient resumes CFTS for 12 months or more (and the member elects under s 61B(1) of the Act to rejoin the DFRDB Scheme as a contributor), the member's retirement pay is cancelled under s 62(1) of the Act and the member again contributes to the scheme.  If the service is for less than 12 months in the Reserves (and the member elects under s 61B(3) of the Act not to join the Military Superannuation and Benefits Scheme), the member's retirement pay continues to be paid, but the member does not contribute to the DFRDB Scheme.

5.      Upon completion of the further period of DFRDB contributory service, the person's retirement pay and commutation lump sum are recalculated under ss 23 and 24 of the Act respectively.  Payment of the retirement pay resumes and the person receives an additional commutation lump sum.  Under s 23(2), retirement pay is calculated by 'having regard to the number of complete years included in his total period of effective service.'

6.      Section 126 of the Act relevantly provides:

126   Recovery of amounts payable to Commonwealth

(4)Where, for any reason (including the making of, or cancellation of, an election under this Act), an amount of benefit has been paid that is not payable, or has become not payable, the amount so paid may be recovered by the Authority, on behalf of the Commonwealth, in a court of competent jurisdiction as a debt due and payable to the Commonwealth.

(5)Where, for any reason (including the making of, or cancellation of, an election under this Act), an amount of benefit has been paid that is not payable, or has become not payable, and the person to whom that amount was paid is receiving, or is entitled to receive, a benefit, that amount, or such part of that amount as the Authority determines, may, if the Authority in its discretion so directs, be recovered by deduction from that benefit

Issues

7.The relevant issues before the Tribunal are as follows:

·     Was there was an overpayment of $8,997.79?

·     If so, should it be recovered under s 126(4) of the Act?

·     If it should be recovered, what manner of recovery should be used?

Consideration

8.      SQNLDR Beeson served seven years in the Army and 13 in the Royal Australian Air Force (RAAF), before retiring in 1992 and transferring to the RAAF Reserve as a ‘lifestyle choice’.  He intended to take on another job but it did not eventuate.  As a reservist, he undertook some CFTS for about six months in 1998 and for about 11 months in 1999, neither of which counted as effective service for the purpose of DFRDB. 

9.      In December 1999 SQNLDR Beeson decided to re-join the full-time RAAF, which he did for three years.  On re-joining the DFRDB scheme he was careful to point out in the ‘Application for Retirement Pay, Commutation and Superannuation Productivity’ what his periods of engagement were.  He specifically did not include his periods of CFTS in 1998 and 1999, to ensure that they were not taken into account when his final benefit was to be calculated.

10.     He completed a few further short periods of CFTS, and in September 2007 he was asked to undertake three years CFTS.  At that time he asked DFRDB for an estimate of his entitlement.  It was this enquiry that led to the discovery of the overpayment, some five or six years after the payments were made.  He points out that had it not been for his enquiry the error may never have been uncovered.

11.     The Respondent conceded that it had made an error in overpaying SQNLDR Beeson, and that the overpayment had occurred through no fault of the Applicant.  SQNLDR Beeson did not dispute that he had been overpaid but was not confident that the overpayment had been correctly calculated.  SQNLDR Beeson, understandably, has little confidence in the figures produced by the Respondent.  The Respondent provided calculations that the overpayment of $8,997.79 was made up of $5,107.44 in commutation lump sum (as at 4 December 2002); and $3,890.35 in pension (paid from 4 December 2002 to November 2007, when the error was discovered).  There was no evidence that these figures were other than correct, and I find that SQNLDR Beeson was overpaid $8,997.79.

12.     SQNLDR Beeson contended that he should not have to repay the money as it was received by him in good faith, and because his financial circumstances make repayment problematic.

13.     SQNLDR Beeson submitted, and I accept, that the likelihood of his gaining full-time employment after his present three year engagement concludes is remote, as he will be 65.

14.     He submitted that he is 'out of pocket' as a result of taking on his current CFTS contract, which required him to move from Queensland to the Blue Mountains in New South Wales.  Given the difficulties with rental accommodation when he arrived in the Blue Mountains, the fact that SQNLDR Beeson purchased a property in Winmalee 'right at the end of the housing boom and immediately prior to the crash', and the expense involved in having to kennel his dogs, I accept that the decision to take up his present period of service may not have been as financially beneficial as expected.  However, there was no suggestion that the error by the Respondent was responsible for his decision to take up the position, nor for the financial disappointments that may have ensued as a result of that decision.

15.     SQNLDR Beeson had previously provided to the Respondent details of his financial position and these were also made available to the Tribunal.  The documents showed net income (after all living and other expenses) of $158 per fortnight and net assets of $346,792.  At the hearing however, he agreed that overall the present value of his major assets had increased by about $50,000.  At the conclusion of his current three years of CFTS, he will have no retirement ‘nest egg’ but he gave evidence that he and his wife expected to be living in their retirement cottage, mortgage free, and to have received about $35,000 net from the sale of their other property.  The latest estimate of his commutation is about $54,000, the estimate of his productivity benefit is about $9,000, and his pension is expected to be about $27,000 per annum. 

16.     SQNLDR Beeson also submitted that his wife's medical conditions require costly treatment, and that her health is likely to continue to deteriorate.  He provided medical evidence of his wife's conditions, and a spreadsheet with details of associated medical expenses for the 2008/2009 financial year.  He said that currently her medications cost about $50 per week.  He said that his own health presently was good although he occasionally suffers with some asthma. 

17.     SQNLDR Beeson referred me to the High Court’s decision in David Securities P/L v CBA (1991)175 CLR 353, in support of his proposition that he should not have to repay the money because he had received it in good faith. The head-note refers to the majority of the Court (Mason CJ., Deane, Dawson, Toohey, Gaudron and McHugh JJ at para 3) having held that ‘it is a defence to a claim to recover money paid under a mistake that the payee has adversely changed his position in reliance on the payment.’ Also, Brennan J held that ‘it is a defence to a claim for the restitution of money paid or property transferred under a mistake of law that the payee honestly believed, when he learned of the payment or transfer, that he was entitled to receive and retain the money or property.’ (at para 3). SQNLDR Beeson had, however, overlooked the main dictum, namely that a payer is prima facie entitled to recover moneys paid under a mistake if it appears that the moneys were paid, in the mistaken belief by the payer, that he was under a legal obligation to pay them or that the payee was legally entitled to payment. In order to recover, a payer does not have to prove "unjustness" over and above the mistake (at para 2). While the Court went on to state that it is a defence to a claim to recover money paid under a mistake, that the payee has adversely changed his position in reliance on the payment, there was no evidence that SQNLDR Beeson had altered his position because he had been erroneously paid.

18.     The Respondent's power of recovery under s 126(4) of the Act is discretionary.  The Respondent is permitted to waive a debt that is otherwise due and owing in certain circumstances under that provision (cf: the general power of waiver like that which exists in the Social Security Act 1991.)

19.     Section 126 does not specify what matters are to be taken into account when considering whether to exercise the power of waiver.  Factors that are relevant to the exercise of the discretion are discussed in the case of Director-General of Social Services v Hales (1983) 47 ALR 281 (Hales), to which I was referred.  There it was held that the recovery of public moneys is the paramount consideration.  In ordinary circumstances, the decision-maker's public duty is to seek to recover the public funds.  The Respondent would be justified in not acting only if the circumstances of the case were such as to indicate a sound reason why recovery action should not be taken (per Sheppard J at 320).

20.     In assessing the circumstances, the Court in Hales suggested that the decision-maker have regard to the following factors:

·whether the recipient has, for whatever reasons, received public monies to which he or she is not lawfully entitled;

·whether the overpayment arose through innocent mistake or fraud;

·the recipient's financial circumstances;

·the prospects of recovery;

·whether a compromise had been offered;

·whether delaying recovery would improve the prospects of recovery; and

·compassionate considerations.

21.     In considering the relevant factors, I observe that there is no dispute that SQNLDR Beeson received public monies to which he was not entitled but there was no suggestion whatever of fraud.  The overpayment, which is conceded by the Respondent, occurred as a result of an administrative error. 

22.     I have come to the view that SQNLDR Beeson’s financial circumstances, discussed above, do not warrant any waiver of the debt.  The medical expenses associated with SQNLDR Beeson’s wife's medical conditions are not so extreme that they create an unusual financial burden in a couple of their age.  Also, some expenses may be offset, to a degree, by rebates from their health insurer.  I find that SQNLDR Beeson’s circumstances do not displace the paramount consideration (per Hales) that the money is to be restored to consolidated revenue. 

23.     The Respondent does not seek interest on the money nor does it seek immediate recovery of the money, and is prepared to wait until SQNLDR Beeson retires, at which time he will have access to his commutation amount and he will be mortgage free.  At about that time, he and his wife may be eligible for aged health care benefits.  I agree that the correct and preferable decision is that the money be recovered at that time.

24.     Similar to SM McCabe in Williams and Defence Force Retirement and Death Benefits Authority [2008] AATA 585 (8 July 2008), I am sympathetic towards servicemen like SQNLDR Beeson, especially as he returned to the ADF at the request of senior officers to undertake a specialised role. It is clear that more care needs to be taken in advising service personnel in relation to their entitlements.

decision

25.     The Administrative Appeals Tribunal affirms the decision under review.

I certify that the 25 preceding paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member.

Signed: .....................................................................................
           Associate B Dhanasar

Date of Hearing  24 March 2010
Date of Decision  13 April 2010
Representative for the Applicant                 Squadron Leader Beeson (self)       
Counsel for the Respondent  Mr Andrew Dillon
Solicitor for the Respondent  Mr Tony Guigni