Brendan Davey and SECRETARY, DEPARTMENT OF DEFENCE

[2011] AATA 958

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION

ADMINISTRATIVE APPEALS TRIBUNAL      )

)           No 2011/0826

GENERAL ADMINISTRATIVE DIVISION		)
Re		BRENDAN DAVEY

Applicant

And SECRETARY, DEPARTMENT OF DEFENCE

Respondent

DECISION

Tribunal Regina Perton

Date3 August 2011  

PlaceMelbourne

Decision For reasons given orally at the hearing, the Tribunal sets aside the decision under review and substitutes a decision that there is no variation of the authorisation under s 45 of the Defence Home Ownership Assistance Scheme Act 2008 (Cth).

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Member

DEFENCE

Defence home ownership assistance scheme – subsidy certificate – applicant member of naval reserve – inability to serve required number of hours – decision under review concerning authorization set aside.

Defence Home Ownership Scheme Act 2008 ss 5, 45, 46, 47, 66, 67, 68

Defence Home Ownership Scheme Regulations 2008  

Re Yorke and Secretary, Department of Defence [2010] AATA 655

REASONS FOR DECISION

3 August 2011   Ms Regina Perton

1.The Tribunal provided oral reasons for its decision at a hearing of this application on 3 August 2011.  Mr Davey requested written reasons for the decision.   

2.Mr Davey served in the Royal Australian Navy (the navy) for more than ten years, which included operational service.  He completed his service in November 2008.   On discharge he joined the naval reserve.  He had researched the recently changed Defence Home Ownership Assistance Scheme (DHOAS) before his discharge and believed he would be eligible for a particular level of subsidy of the interest on his mortgage given his past service and his ongoing participation in the Navy Reserve.   

3.Unfortunately, through no fault on his part, he was unable to complete the required number of hours to be considered an active reservist.  There were no advertised positions available for a person with his particular skills nor were there sufficient exercises available for him to achieve the requisite number of hours of service.

4.The current DHOAS scheme which commenced on 1 July 2008 provides three tiers of interest subsidy on an eligible person’s mortgage depending on how long he or she has served in the defence force.   Mr Davey applied for a subsidy certificate on 9 September 2008.  On 24 September 2008 Mr Davey was advised he would be classified at Tier 2 level.   

5.On 18 August 2010 the acting National Manager of Defence Support Services wrote to Mr Davey advising him that he had been reclassified as Tier 1 (the lowest) eligibility as he had not completed effective service as a reserve member in the 2009-10 financial year.  He was also informed that he had been overpaid $1,591.45 in subsidies and was required to repay that amount.   Mr Davey was also advised that if he had been prevented from undertaking effective service as a reserve member due to exceptional circumstances, he could request a review through his Commanding Officer. 

6.On 9 September 2010 Mr Davey applied for internal review of the decisions to change the subsidy level.  On 27 January 2011 the decision was affirmed.  Mr Davey was advised that there is no discretion under the legislation to waive overpayments and accrued interest charges. 

7.On 7 March 2011, Mr Davey lodged an application for review with the Tribunal.  He gave his reasons for seeking review as:

I am seeking to appeal the Department of Defence Review decision of DHOAS.

I am applying to have a waiver granted in relation to all Overpayments and Interest charges.

Also I request an extension of time be given to obtain Reserve work before my Tier 2 Level Assistance is reverted to Tier 1.

I believe that guidance given regarding DHOAS was insufficient and incorrect, which has the potential to negatively affect my financial situation.

Obtaining reserve work has become increasingly difficult, as it is unlike the army or Air Force.

Either Project work or permanent Navy positions must be found through advertising material or Contacts obtained from past employment.

LEGISLATION

8.The Defence Home Ownership Assistance Scheme Act 2008 (the Act) and Defence Home Ownership Assistance Scheme Regulations 2008 (the Regulations) commenced on 1 July 2008. 

9.Section 5 of the Act sets out circumstances in which a person is not considered to be a member of the reserve forces:

Membership of the Reserves

(1)For the purposes of this Act, a person who has been engaged (by enlistment, appointment or transfer) as a member of the Reserves at a particular time (the engagement time) is to be treated as a member of the Reserves until:

(a)the engagement ends; or

(b)during a service year:

(i)     the engagement does not end; but

(ii)     the person does not perform effective service as a member of the Reserves.

Effect of failure to perform effective service

(2)If a person's membership of the Reserves ends under paragraph (1)(b) in relation to a service year, this Act applies to the person, and is taken to have applied to the person, as if he or she had:

(a)in the case of a person who was a member of the Reserves at the end of the previous service year--stopped being a member of the Reserves immediately after the end of the previous service year; or

(b)in any other case--not been engaged as a member of the Reserves at the engagement time.

Note:   This section may have the following effects:

(a)the time at which a person is taken to stop being a member of the Reserves (or of the Defence Force) may be affected;

(b)there may be a retrospective loss of entitlements in relation to subsidy certificates, the payment of subsidy, service credits and accrued subsidy periods and loan limits;

(c)in particular, an authorisation of the payment of subsidy on the basis of a person's membership of the Reserves may be revoked retrospectively (see section 44);

(d)if a subsidised borrower who is taken not to have been a member of the Reserves because of the operation of subsection (2) would have been otherwise entitled to subsidy, the authorisation of the payment of subsidy to the person may be varied retrospectively (see section 45).

Example:A person is engaged as a member of the Reserves. The person is given a subsidy certificate under Part 3 on the basis of eligibility as a serving member of the Reserves. The person starts to receive amounts of monthly subsidy accordingly.

However, at the end of the service year, the person has not performed effective service as a member of the Reserves.

Because of subsection (2), this Act applies as if the person was not entitled to be given the subsidy certificate (because he or she was not eligible as a member of the Reserves).

As a result, the original authorisation of the payment of subsidy may be revoked or varied (see sections 44 and 45). Amounts of subsidy to which the person is not entitled (because of the revocation or variation) are recoverable as overpayments under Division 6 of Part 4.

10.Section 45 of the Act provides for change to a subsidy when a person is not deemed to be a member of the Reserves:

Variation of authorisation of payment of subsidy - when a person is not a member of the Reserves

Scope

(1)This section applies in relation to a subsidised borrower if the Secretary is satisfied that, immediately after the end of a service year:

(a)the Secretary, under section 27, has authorised the payment of subsidy to the subsidised borrower during an entitlement period beginning at or after the start of the service year on the basis of the borrower's eligibility as a member of the Reserves; and

(b)subsection 5(2) applies to the subsidised borrower's membership of the Reserves in relation to the service year; and

(c)by the operation of that subsection, the Secretary would (apart from this section) have the power to revoke the authorisation of the payment of subsidy to the subsidised borrower under section 44; and

(d)during the entitlement period, the Secretary could have given a subsidy certificate to the subsidised borrower, and subsidy on the basis of that certificate would have been payable to the borrower, otherwise than on the basis of the borrower's eligibility as a member of the Reserves.

Example 1:Paragraph (d) may apply because of the operation of subsection 5(2). Subsidy might have otherwise been payable to the subsidised borrower on the basis of the borrower's eligibility as a separated member (as the result of the person's being taken to have stopped being a member of the Reserves).

…

Variation of authorisation

(2)The Secretary may, by written notice to the subsidised borrower, vary the authorisation of the payment of subsidy to the borrower in relation to the entitlement period.

Note:Part 5 provides for the administrative review of the Secretary's decision to vary the authorisation.

(3)The Secretary may give a notice under subsection (2) during the entitlement period, or at any time after the end of the entitlement period.

Effect of variation

(4)If an authorisation is varied under this section:

(a)subsidy is payable, and is taken to have become payable, to the subsidised borrower on the basis of the borrower's eligibility (otherwise than as a member of the Reserves) as mentioned in paragraph (1)(d); and

(b)subsidy is taken to have become (and continued) to be so payable (subject otherwise to this Act) with effect from the earliest time that subsidy would have been payable to the subsidised borrower as mentioned in paragraph (1)(d).

Note:If the amount of subsidy paid to the subsidised borrower during the entitlement period on the basis of the borrower's membership of the Reserves exceeds the amount of subsidy payable to the borrower as a result of the operation of this subsection, the Commonwealth may recover the amount of the excess as an overpayment (see Division 6).

…

11.Section 46 of the Act provides guidance on the calculation of service credits at a particular time.  Section 47 provides methods for working out a person’s accrued subsidy period.   

12.Sections 66 to 68 provide for the recovery of overpayments if a person is not entitled to the level of subsidy provided.

13.Division 3 of the Regulations sets out the methods for calculating effective service for members of the reserves.

CONSIDERATION

14.In a letter dated 25 July 2011, a few days before the hearing, the respondent’s lawyers advised the Tribunal of their position in relation to the application:

The application is for review of a decision to vary the authorisation for a payment of subsidy made to the Applicant pursuant to section 45 of the Defence Home Ownership Scheme Act 2008 (the Act).  The Respondent’s position is that it no longer considers that the reviewable decision is the correct or preferable decision.

The Respondent has sought the Applicant’s agreement to proposed order to have the decision set aside to be made by the Tribunal pursuant to section 42C of the Administrative Appeals Tribunal Act 1977…  The Applicant has not agreed to the orders and has indicated that he wants the hearing to proceed.

We understand that the reason the Applicant wants to proceed to hearing is that he wishes to seek a waiver of any overpayments made to him…  However, no decision in respect of a waiver has been made by the Respondent and accordingly there is no jurisdiction for the Tribunal to review any request for a waiver.

…  

15.At the hearing which was conducted by telephone, there was discussion about the respondent’s assertion that it had not made the correct decision and the respondent’s request to set aside the decision under review.  Parts of the transcript of the hearing are reproduced below to assist the parties to recall the discussion and the reasons for the Tribunal’s decision:

…

MS PERTON:   …we’re here today to consider your application, Mr Davey, about the changes that have been made to your… effectively your mortgage repayments or the …the crediting of certain parts of the money because of, I guess, matters that have been outside your control with the tier 1 and tier 2 situation.  Would that be right?

MR DAVEY:   That’s right, yes.

MS PERTON:   Yes.  In that you’ve originally – when you left full-time navy service, that you joined the reserves and had anticipated that you would serve in the reserves but through no fault of your own, there haven’t been positions available.  And it certainly appears from my reading of it, that there has been a fair bit of cutbacks in terms of sort of general parades and the like that might have happened;  (a) more so in the army, or (b) that might have happened in the past.  Would that be about right?

MR DAVEY:   Yes, that’s right.  Yes.

MS PERTON:   Yes.  Now, before we … start to hear all the evidence…and do the formalities, I have a letter, Mr Sharpe, from you, saying that you wanted to settle the matter.  And I looked at the wording of the …proposed agreement, and that was that you wanted to have the tribunal set aside the decision and to vary an authorisation of payments.  And I wondered, because normally if there is an agreement between the parties, the tribunal is asked to set aside the decision but to substitute another decision or to remit it to the government agency to have them make a decision, and there didn’t seem to be anything in that proposed agreement that you sent to us earlier this month as to what was proposed to be done if I did set it aside.

MR SHARPE:   Yes, thank you.  Our proposal is and our submission basically is that we’re prepared to concede that a decision under section 45 to vary the authorisation shouldn’t have been made and that the power under section 45 would vary the authorisation.  On that basis, we see that the only course is that the decision be set aside by the tribunal and that’s the agreement we sought to get from the applicant…

MS PERTON: … Because it really wasn’t clear … with setting it aside, what would then happen…The agreement doesn’t set it out.

MR SHARPE: …  We are prepared to concede that there is no power under section 45 to vary Mr Davey’s authorisation.  So in defence of that section 45 aspect of this matter, that would disappear.  The department hasn’t got any intentions to go back and reconsider the possible variation of the authorisation…

MS PERTON: …   Would it be possible for me to have a plain English version of what all of that would mean and why that’s the proposal?

MR SHARPE:   Yes, certainly, Member… if you look at section 45… If you look at subsection (1) and paragraph (c), one of the criteria there that needs to be satisfied is that by the operation of subsection 5(2), the secretary would have the power to revoke the authorisation of a payment subsidy to ... under section 44.  So effectively, there needs to be an ability to revoke the subsidy authorisation given to the member under section 44.  And what section 44 is about is if there were circumstances in which an applicant or a member should not have received a … subsidy – and that’s at section 44(2) – then the authorisation for the payment of the subsidy can be revoked.  So for section 44 and 45 to work together, under 44 the subsidy authorisation can be revoked.  But there’s an alternative approach which can be that under section 45, that the authorisation can be amended so that the member can receive a lesser amount of the subsidy if he was entitled to that lesser amount of subsidy.  Even in this case, there is no basis on which we can say that the member should not – Mr Davey should not have received a subsidy.  Or if we say about section 44, that section 44 powers have arrived or if the section 44 power doesn’t arrive, also the section 45 power doesn’t arrive.

…

MR SHARPE:   Yes.  Well, we will agree with you it’s a somewhat complex system and we happen to agree with that.  What we’re essentially saying is that there was no power.  Mr Davey was entitled to receive a subsidy, and we don’t want to say that it was any basis on which he was not entitled to receive one…Once we make that concession, then there is no ability to either revoke his authorisation or to amend the authorisation. …that’s the powers available under section 44 and 45.  And because we say that there’s no power to …we can’t have varied the authorisation under section 45.

MS PERTON:   So are you basically saying that the decision that was made about Mr Davey, even though there’s all that stuff about … the inability to serve …  I’ve read your arguments obviously on that and also read a couple of other decisions or at least one. That was the Yorke one that was made by Senior Member Creyke late last year, which … spelled a lot of things out.  It appears that  … regardless of whatever Mr Davey’s wish was to do, if the opportunity doesn’t arise to do the requisite number of days, it doesn’t matter whether it’s through Mr Davey’s doing or the departments that he’s just not eligible for the higher rate of … that higher concession… 

MR SHARPE:   I think that’s exactly right.  I think your summary is completely correct… What we say is that there are two aspects.  This one is the question about whether or not an overpayment has been made …whether that overpayment arises through the operation of section 5 and section 51 of the Act.

…

MR SHARPE:   And this other question about whether or not the mechanism under section 45 was available to vary the authorisation.  And I think if you then - Member, if you go back and look at the way that this matter has commenced, the original letter from Mr Davey suggested that through the operation of section 5 and section 51, because he wasn’t able to complete effective service in ‘09/10, that had the effect that the Act was to apply to him as if he was no longer a member of the reserves.  Through the table at section 51 which sets aside the level of subsidies that a member is entitled to receive, that means that he was required to be regarded as a separated member at that time.  Now, that has the effect under section 67 that there has been an overpayment made to Mr Davey during the ‘09/10 period …and simply through the operation of section 67, that debt arises and it doesn’t arise through the operation of section 45.

MS PERTON:   So just if I can go back, Mr Davey …  Mr Davey applied because – Mr Davey, would I be correct to say that the reason you apply this that you had planned that … your mortgage repayments would be at a certain rate.  You were happy to go into the reserves as was suggested by this legislation.  You were happy to serve but you didn’t get the opportunity to serve, therefore you believe you shouldn’t be penalised by an overpayment because it was through no fault of yours that you couldn’t serve.  Would that be right?

MR DAVEY:   Yes, that’s right – that’s a hundred per cent right, actually, Ms Perton.

MS PERTON:   Yes.  So I don’t think when Mr Davey appealed or sought review of the decision, he was thinking about what particular sections of the Act all of this was under.  He just wanted his situation to go back to what he originally thought it would be...

…

MR DAVEY:   I was just seeking a waiver of the overpayments.

MS PERTON:   Yes.  Well, that’s one thing I don’t know that I can give you,…  I will certainly get Mr Sharpe to talk about whether waiver of overpayments is available to me to give.  I certainly, on looking at it, can’t find any provision in the law that allows me to waive those overpayments.  But it might be that there is something there.  But I certainly read through the Act and it seems to me that the only time that there can be waiver is if someone … was very ill and couldn’t do their service and so on.  There’s really no provision there to waive it if there are no positions available or nothing that you can do within the reserves to get up the amount - you know, the required number of hours.

MR DAVEY:   Yes.

MS PERTON:   But it may well be that there is and again, Mr Sharpe, I would be indebted to you if you could let us know if there is a general waiver provision which I certainly haven’t been able to find.

MR SHARPE:   Yes.  Member, the short answer to that is there is no plan of provisions in the legislation in DHOAS legislation.

…

MR SHARPE:   I think the only relevant waiver would be – or waiver which was required under the Financial Management and Accountability Act, the Commonwealth Act, and that’s at section 34(1)(a) of the Act.  But that’s not a provision which is under review here, but it is an avenue that Mr Davey could take if he chose to and that would be by contacting DVA and asking for consideration to be given to that waiver.  But that’s not an aspect of the decision which is been addressed in the internal review decision and therefore we say it’s not for the tribunal … to make a decision in relation to that waiver.

MS PERTON:   Yes.  So, Mr Davey – and I note that there was some discussion of that in the past - I don’t think that - this tribunal, unlike, say, a department which has got different mechanisms, all I can review is the decision in front of me.  And it’s something that happens to me regularly in social security as well, where there are certain things that go wrong and people have a loss out of it.  And I don’t have the power to say yes, you should get some damages or yes, you should get a waiver or something or your expenses should be paid for.  I’ve only got the power to review the decision that was made, …  that prompted you to appeal to the tribunal.  I don’t have a general power to fix situations,  … even if to me you’ve been caught up in something that hasn’t been of your own making.  I don’t have a general power to say yes, I agree this was unfair therefore I should waive the debt that’s owing.  So I certainly haven’t been able to find anywhere within the legal framework that would allow me to in fact waive the overpayment… 

MR DAVEY:   Yes, yes, I was.  There was a waiver set up in the last Act for the previous Defence Force Home Loan Assistance Act 1990…  But it wasn’t included in this DHOAS Act…

MS PERTON:  …  it seems that the new scheme sounded like it was going to be great, but there are some aspects of it that there has certainly been a lowering of the rights of former service people to get things like the waiver.  So I can only do this decision on the basis of what the current Act says.  I can’t …say, well, look, there has been an unfair change or an unanticipated change in the new law in comparison to the system that existed previously.  So I don’t have a general …sort of ombudsman type right to say look, I would like to do this.  Even though I would like to do it, I don’t believe I’ve got the legal power to do it in this instance.  But I still want to get back to – and we’re in legal complexities as to what sort of decision the respondent would like me to come up with in this.  In other words, Mr Sharpe, you don’t want me to affirm the decision.  You want me to in fact either vary it or set it aside and remit it for something else, presumably.

MR SHARPE:   ...  It doesn’t need to be varied and it doesn’t need to be remitted for further consideration.  There is no further consideration that the department will be giving to.  It’s a question of whether or not the variation of consolidation should be - whether the authorisation should be varied under section 45.  That’s our position in the matter.

MS PERTON:   Okay.  I’m just looking at the decisions this tribunal can make, because we’ve got various decisions we can make.  You see, under section 43 of the AAT Act, if we set aside the decision under review, we have to either make a decision in substitution for the decision so set aside or remit the matter for reconsideration in accordance with any directions or recommendations of the tribunal.  So we’ve really only got the power – we’ve got the power to affirm, the power to vary or if we set aside the decision, we’ve got to do one of two things and that’s either make a substitute decision or remit it for reconsideration with a direction or recommendation of the tribunal and that’s what I don’t have in your proposed settlement.

MR SHARPE:   Sorry, Member.  In terms of ... whether to make a decision of substitution or remitting it - yes, I agree.  So we’re not asking for the matter to be remitted to the department for reconsideration, we’re asking for the decision to be set aside…and therefore, I think the appropriate decision to be made by the tribunal would be that there is no variation of the authorisation for the payment of subsidies to Mr Davey under section 45.

MS PERTON: …Let me clarify this so, Mr Davey, you and I are both in the situation where we understand what the proposal is.  So, Mr Sharpe, you’re saying that the department shouldn’t have made a decision under section 45 and therefore you don’t want the decision that was made to be confirmed…I’ve got the possibility of dismissing it if both sides consent to it without in fact making a decision.  So dismissal is really where if all parties consent that I don’t actually review the decision, I don’t complete the review of decision and that’s dismissing it with the consent of the parties.  So that’s one thing I can do.  That’s section 42(a) of the AAT Act which I know, Mr Davey, you won’t have and you probably don’t either, Mr Sharpe.  Then Mr Davey can choose to withdraw his application or discontinue.

Then my other option is if the decision is not reviewable - well it does appear to be reviewable but I certainly don’t want to sit down and write lengthy reasons on this, given the complexities of it and given it effectively won’t do anything to assist.  So I can do those things or I can note that the parties have agreed to settle it on the basis that you’re suggesting, Mr Sharpe… They’re saying they made the decision on the wrong basis but effectively, the decision would still stand that you had been overpaid.  Is that right, Mr Sharpe?

MR SHARPE:   That is right.  As I was saying before, that arises separately through section 45.  And what we’ve suggested to Mr Davey separately in a letter … that the appropriate course here would be for Mr Davey to approach DVA and to discuss that overpayment, including – as we’ve talked about the possibility of taking that way through the FMA Act.  So if we are looking at ways that we actually frame the decision – and I take your point, Member, that we probably do need to look at what decision is made by the tribunal rather than just setting it aside.  I think I suggested that our view would be that we set aside a decision and the tribunal makes a decision in substitution of that decision, and that’s simply on the basis that … the tribunal decides that there is no variation of the authorisation under section 45 of the DHOAS Act.  I think that’s the only course … for the tribunal to take under section 43(1) to set aside that decision.  And I think that that is probably the appropriate ….  no provision or no variation of the authorisation under section 45 of the Act.

MS PERTON:   Okay.  Mr Davey, have you been able to follow that?

MR DAVEY:   Relatively, Miss.  I’m just trying to get in my head, this review section 45, that’s only allowing for ‘08/09 period and during that time, I only received three payments in June.  It was one month’s worth, so that’s the amount that they were setting aside.  So that still leaves me with $1900 to pay back.

MS PERTON:   Mr Sharpe, have you got a comment?

MR SHARPE:   Member, what I think Mr Davey is referring to is that he – as the internal review decision invited him to do – is to apply to have his service in those years ‘08/09 – ‘08/09 and also ‘09/10, needs to be effective service under regulation 20 of the regulations.

...

MS PERTON:   Yes.  So I guess the problem is that I’m not in a situation where I can waive that amount, because that’s certainly what it appears that Mr Davey was seeking.

MR SHARPE:   Yes.  We agree with that, Member

…..

MS PERTON: … Mr Davey, I’ve looked at the law very carefully and as I said, you’ve ended up in a very convoluted situation and Mr Sharpe is representing the department.  He’s required to act to assist the tribunal as well.  In other words, his job isn’t just to defend the government agency, it’s to help the tribunal come to the correct and/or preferable decision which is sort of a bit of a different role to … what you generally see in arguments in court that we see on TV or whatever.  So his job isn’t to win his side but to make sure that …you get your entitlements that you’re entitled to and if in fact the department has been in error, to tell the tribunal that.  And certainly what he’s saying to us today and obviously tried to say in the previous correspondence to you is that he doesn’t believe the decision that the department made to … vary the amount under section 45 of the DHOAS Act was in fact the appropriate decision.  So that’s what he’s asking me to note.  But that doesn’t get you anywhere beyond … really where you’re at anyway.  That doesn’t really change your situation in terms of the overpayment. … 

…

MR SHARPE:   The course from here would be that because there has been an acknowledgement that his service in the year of ‘08/09 is deemed to be effective service, there will have to be a new letter issued by DVA alerting him to what the amount of the overpayment is now… 

…

DECISION

16.For reasons given orally at the hearing, the Tribunal sets aside the decision under review and substitutes a decision that there is no variation of the authorisation under s 45 of the Defence Home Ownership Assistance Scheme Act 2008 (Cth).

I certify that the sixteen [16] preceding paragraphs are a true copy of the reasons for the decision herein of Ms Regina Perton, Member.

Signed:.....................................................................................
  Clerk

Date of Hearing  3 August 2011
Date of Decision  3 August 2011
Advocate for Applicant               Self -represented
Advocate for the Respondent   Mr W Sharpe

Solicitor for the Respondent                Sparke Helmore