Gamble and Secretary, Department of Defence

[2022] AATA 1271

Gamble and Secretary, Department of Defence [2022] AATA 1271 (19 May 2022)

Division:GENERAL DIVISION

File Number:          2021/4525

Re:Zan Gamble

APPLICANT

AndSecretary, Department of Defence

RESPONDENT

DECISION

Tribunal:Senior Member Dr M Evans-Bonner

Date:19 May 2022

Place:Perth

The Reviewable Decision is affirmed.

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Senior Member Dr M Evans-Bonner

CATCHWORDS

DEFENCE – Defence Home Ownership Assistance Scheme – Applicant’s subsidy payments ceased due to subsidy loan account being paid into a credit balance – whether there was a subsidy ceasing event – lack of discretion in s 27(4) of the Defence Home Ownership Assistance Scheme Act 2008 (Cth) which uses the word “must” – departmental “Policy View” states a discretion can be exercised in cases of “genuine error” – Policy View inconsistent with legislation – Reviewable Decision affirmed

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) s 34J

Defence Home Ownership Assistance Scheme Act 2008 (Cth) ss 14, 27(4), item 1 of s 36

SECONDARY MATERIALS

Explanatory Memorandum, Defence Home Ownership Assistance Scheme Bill 2008 (Cth)

REASONS FOR DECISION

Senior Member Dr M Evans-Bonner

19 May 2022

THE APPLICATION

1. The Applicant is a member of the Australian Defence Force (ADF). Due to his service, the Applicant became eligible to receive a Defence Home Ownership Assistance Scheme (DHOAS) subsidy under the Defence Home Ownership Assistance Scheme Act 2008 (Cth) (the Act). The DHOAS helps members of the ADF to purchase a home by paying them a monthly subsidy which is applied towards their mortgage. The DHOAS is administered by the Department of Veteran’s Affairs (DVA).

2. The Applicant is seeking review of a decision made by a delegate of the Respondent dated 11 June 2021 (the Reviewable Decision) which affirmed an earlier decision to cease his subsidy payments because his home loan had been paid into a credit balance.

3. By the consent of the parties, and because the issues could be adequately determined in their absence, this matter was heard and determined on the papers, pursuant to s 34J of the Administrative Appeals Tribunal Act 1975 (Cth).

   SUMMARY OF THE SUBMISSIONS

   The Applicant

4. The Applicant would like his subsidy payments to be reinstated. He argues, amongst other things, that he made a genuine error in allowing the loan to go into credit. He explained that this was caused by his making payments above the monthly minimum to reduce the interest payable on his home loan. The Applicant also refers to a “Genuine Error Policy” which he says should have been applied in his case.

5. He argues that he paid extra funds into the home loan because he could utilise the loan’s redraw facility. In this regard, he argues that he relied upon a condition published on the DHOAS website between 2015 and 2021 (Original Condition) which stated:

   If you take out a DHOAS home loan that has a redraw facility, and then proceed to make deposits above your minimum monthly repayments, you may draw on those extra repayments. You can use these extra funds at your own discretion. 

6. However, at the time of the Applicant’s Tribunal application (T1/6), he stated that the condition had been changed to the following one (Updated Condition):

   If you take out a DHOAS home loan that has a redraw facility, and then proceed to make deposits above your minimum monthly repayments, you may draw on those extra repayments. If your loan is paid down to a nil or credit balance at any point, your subsidy payments will cease as the purpose of your home loan is deemed to have changed. This applies even if you immediately redraw the funds.

   Please note: if you wish to refinance your DHOAS loan at a later stage and any redrawn funds have not been used for housing related purposes, such as improvements or renovations to your DHOAS property, this may impact your eligibility or entitlement. This is because a DHOAS loan can only be used for the purposes as outlined above.

7. The Applicant argues that technically the loan was not in credit because he still has a home loan debt and the loan had not been discharged.  

8. The Applicant’s position is that the cancellation of his subsidy payments had financial consequences for his family which had caused him significant stress. The receipt of the subsidy was a factor in deciding whether his family could afford to purchase the property. He was entitled to the highest level of subsidy payments after having completed more than 22 years’ service with the ADF. The Applicant transferred to the Army Reserve in 2015. However, as it has been over five years since he had provided effective reserve service, the Applicant would not be able to transfer or re-start a DHOAS subsidy entitlement. 

   The Respondent

9. The Respondent argues that the Applicant’s application cannot succeed because there was a subsidy ceasing event, as defined by item 1 of s 36 of the Act, when his home loan was paid into a credit balance.

10. The Respondent further argues that the proper construction of the Act is that when a subsidy ceasing event occurs the subsidy stops being payable (s 36 of the Act), and the Respondent must refuse to authorise the continued payment of the monthly subsidy (s 27(4) of the Act). That is, the Respondent says that there is no discretion to continue the subsidy payments, even if there is a “genuine error” by the Applicant.

11. The Respondent observes that the “Genuine Error Policy” is not an official departmental policy and argues that it cannot be applied because it is inconsistent with s 27(4) of the Act. This is because it purports to gives a discretion when there is none in the subsection.

    LEGISLATIVE REGIME IN CONTEXT

12. The long title of the Act explains that it is:

    An Act to establish a scheme to provide financial assistance to members of the Defence Force, and certain other persons, for the purchase, maintenance and development of their homes, and for related purposes

13. The Explanatory Memorandum for the Defence Home Ownership Assistance Scheme Bill 2008 (Cth) further explains the purpose of the scheme:

    … The Bill will establish a scheme to provide a subsidy on the home loan interest expense incurred in purchasing a home in which the member or their family will live. …

    This assistance is provided in response to the requirement for ADF members and their families to relocate frequently in order to meet Defence capability requirements.

    Home ownership assistance is made available to help those ADF members and their families who choose to purchase a home of their own to live in, rather than occupying rented or Service-provided accommodation. It is provided in response to the additional difficulties that ADF members and their families have in purchasing a home as a result of the nature of their service. …

    The assistance takes the form of a home loan interest subsidy because the Commonwealth can be reasonably assured that its outlays will be used by the beneficiaries toward the intended purpose, of providing a home for the ADF member and family, not an investment property. The loan on which subsidy is payable must be used for the purchase, maintenance and development of the subsidised borrower’s home

14. To access the scheme, s 14 of the Act states that a person must apply for a subsidy certificate. The Applicant applied for a subsidy certificate, which was approved on 22 April 2015 (T5/25).

15. After his home loan provider reported a home loan draw down, which was for the purchase of a family home, the Applicant’s monthly subsidy payments, which included a subsidy for June and July, commenced in August 2015 (T7/31).

16. However, on 17 March 2021, the DVA received advice from the Applicant’s home loan provider that his subsidised home loan went into a credit balance on 21 December 2020 (T2/11; T11/41).

17. On the basis that this was a subsidy ceasing event under item 1 of s 36 of the Act, a DVA representative wrote to the Applicant on 24 March 2021, advising him that his subsidy payments had ceased (T8/33).

18. Item 1 of s 36 of the Act provides:

    When subsidy stops being payable—general

    Subsidy stops being payable to the subsidised borrower, in relation to the entitlement period:

    (a)         if an event mentioned in an item in the following table occurs; and

    (b)with effect from the start of the monthly authorisation period in which the critical time provided for that item occurs.

When subsidy stops being payable
Item	Event	Critical time
1	All outstanding amounts due under the subsidised loan are paid	As soon as the outstanding amounts are paid

…

1. Further, s 27(4) of the Act provides that:

   The Secretary must refuse to authorise the continued payment of monthly subsidy to a person if subsidy stops being payable to the person under section 36.

2. On 26 March 2021, the Applicant wrote to the DVA to request the recommencement of his DHOAS subsidy payments. He stated that his home loan still had over $150,000 owing on it, that he had not closed the home loan account and had no intention of doing so, that due to an error transferring funds between his accounts the home loan account had gone into a credit balance of $6.89 on 1 March 2021, and that he had rectified the error so that the home loan no longer had a credit balance (T9/35).

3. After a telephone conversation with a departmental officer on 31 March 2021, the Applicant again wrote to the DVA on 1 April 2021. He asked for his DHOAS subsidy payments to be recommenced because he had made a “genuine mistake” by not realising that an automated loan repayment and the payment of the subsidy would occur on the same day, resulting in his home loan account being in credit. He explained that his home loan had a redraw facility and that he made deposits above his minimum monthly repayments with the intention of withdrawing funds to use at his discretion. The Applicant attached a copy of his loan statement for January to March 2021. He further explained that after being advised on 24 March 2021 that his balance had gone into credit, he discovered his error and immediately redrew $150,000 from the loan account (T10/37).

4. On 20 April 2021, the DVA wrote to the Applicant to advise him that they were not satisfied that he had made a genuine error, and that a technical advisor was of the view that the Applicant had been intentionally removing funds from the loan into an offset account for some time which was not an approved use of the DHOAS subsidy. The letter also confirmed that a subsidy ceasing event had occurred when the loan was first paid into credit on 21 December 2020 and that an overpayment had been raised for the months of January and February 2021 in the sum of $604.11 (T11/41).    

5. The Applicant wrote to the DVA on 21 April 2021 and made submissions in support of the subsidy being recommenced at the same level. He also requested that the recovery of the overpayment be withheld for the time being. He expressed the view that his home loan account had only gone into credit on two occasions, on 15 February 2021 for two days and on 1 March 2021 for six days. The Applicant provided a further explanation as to why he thought he had made a genuine mistake on these occasions and why he did not believe that he had been using the subsidy in a non-approved manner (T12/43-45).

6. However, on 6 May 2021, the DVA wrote to the Applicant confirming that his subsidy payments had ceased because his home loan account had been closed or paid to a zero or credit balance on 21 December 2020. The letter further confirmed that the Applicant’s subsidy payments for January and February 2021 had been incorrectly paid to him and that he was required to repay these payments, which totalled $604.11 (T13/53).

7. Then, on 11 June 2021, a delegate of the Respondent made the Reviewable Decision (T2/11-13). 

   ISSUES

8. The issues that I need to determine are:

   (a)whether a subsidy ceasing event occurred under s 36 of the Act; and

   (b)if so, the “critical time” at which the subsidy ceased to be payable.

9. As part of my consideration of these issues, I will examine whether there is any discretion available to the Respondent under s 27(4) to continue to pay the subsidy if a subsidy ceasing event occurs due to a genuine error, mistake or accident. As part of this consideration, I will consider whether the document referred to as the “Genuine Error Policy” is applicable. 

   CONSIDERATION

10. According to item 1 of s 36 of the Act, if “all outstanding amounts due under the subsidised loan are paid” the subsidy stops being payable “as soon as the outstanding amounts are paid”.

11. A home loan is a debt owed by the borrower. When that home loan is paid into a credit balance, all outstanding amounts due under the loan have been paid. I therefore find that a home loan being paid to a zero, or to a credit balance, is a subsidy ceasing event.

12. This interpretation is not only consistent with the ordinary meaning of the words of the statute but is also consistent with the objectives of the legislation, as can be seen in the long title and the excerpt from the Explanatory Memorandum reproduced above. The scheme is aimed at helping members of the ADF to overcome the difficulties associated with owning their own home, rather than occupying rented or service accommodation. The subsidy is intrinsically connected to the purchase, maintenance, and development of the subsidised borrower’s home. When that home loan has a credit balance, that purpose has been achieved, regardless of whether there are funds available to redraw and regardless of the intention of the borrower to discharge the loan or to keep the loan in case they wish to redraw funds at a future time. Indeed, it is doubtful that the legislature intended that once a zero or credit balance had been achieved, that a borrower could transfer funds out of the loan account by way of a redraw to continue to receive the subsidy. Those circumstances are more likely to indicate that the subsidy is no longer being utilised for home ownership, and instead is being used to supplement living expenses or as a longer-term financial planning tool that is not sufficiently connected to home ownership.   

13. I am not suggesting that the Applicant has done anything wrong. In this regard, I note that he relied upon the Original Condition stated on the DHOAS website in utilising the redraw facility to withdraw funds for his discretionary use. However, I also note that the Updated Condition more accurately describes the operation of the legislation and is more consistent with its objectives.  

14. There is disagreement between the parties as to the dates and times that the Applicant’s home loan account was paid into credit. The Respondent says that the account was paid into credit on 21 December 2020, 4 January 2021, 18 January 2021, 15 February 2021, and 1 March 2021. However, based on the credits that are explicitly shown on his loan account transaction statements, the Applicant says that the account was only paid into credit on two occasions being 15 February 2021, and 1 March 2021. Accordingly, I will now make some findings about these dates and times.   

15. I can see from the Applicant’s transaction history that on 11 December 2020, the balance of the Applicant’s loan was $4,237.60 debit. On 21 December 2020, there was a loan repayment of $4,889.00. Although it was not expressly shown on the statement, this repayment would have resulted in a $651.40 credit. The Applicant then redrew $2,000, which put his loan account into $1,348.60 debit again (T12/50).  

16. Again, although a credit is not expressly shown on the Applicant’s bank statement, I can see from his transaction history that his loan account went into credit on 4 January 2021. At that time the account had a debit balance of $1,348.60, but a subsidy payment of $306.76 and a loan repayment of $4889.00 resulted in the loan account having a credit balance of $3,847.16, which was then brought into debit again by a redraw of $4,000 on the same day. Again, on 18 January 2021, the loan account had a debit balance of $152.84, but was brought into credit by a repayment of $4889.00 which resulted in a credit of $4,736.16. On the same day, the loan was brought into a debit balance of $5,263.84 when $10,000 was redrawn from the loan.  

17. I can also see from this statement that the Applicant’s loan went into $4,817.71 credit on 15 February 2021 and $6.89 credit on 1 March 2021 (T12/50-51).

18. The “critical time” in item 1 of s 36, is “as soon as the outstanding amounts are paid”. I find that this occurred on 21 December 2020 when the loan account was first paid into credit. 

19. This brings me to whether there is a discretion in s 27(4) of the Act. The word “must” is used by the legislature instead of the word “may”. The former is mandatory, whereas the latter indicates a discretion. That is, there is no discretion given to the Secretary under s 27(4) of the Act. Therefore, the operation of the legislation to the Applicant’s circumstances is that the subsidy stopped being payable on 21 December 2020 when the subsidised home loan account went into a credit balance and from that time the Secretary was required to refuse to authorise the continued payment of the subsidy.

20. The “Genuine Error Policy” referred to by the Applicant, appears to be a minute written by the Assistant Secretary of the “People, Policy and Employment Conditions” section of the Respondent’s department dated 18 June 2015. It is titled “Defence’s Policy View Regarding the Handling of Errors Associated with DHOAS Subsidised Loan Accounts” (T6/29-30). I will refer to it as the Policy View. Paragraph [4] of the Policy View states:

    As you may be aware, under section 27(4) of the DHOAS Act, a delegate of the Secretary may make a decision to cease subsidy on the basis that a section 36 subsidy ceasing event has occurred. Before making such a decision, in our view it would be appropriate for the delegate to consider whether the event has occurred as a result of a genuine mistake or accident which has been notified to DVA very quickly and which is able to be easily rectified in a short period of time. If it is able to be rectified quickly and easily (for example, the loan is able to be reinstated to its former status) and the borrower is able to continue to meet the entitlement criteria as required by s 27, then in our view it would not be unreasonable for subsidy payment to continue uninterrupted. Such an approach promotes good administration and fairness.

    (Bold added.)

21. If the Policy View was able to be applied to the Applicant’s circumstances, he may nevertheless have difficulty establishing a genuine error, mistake or accident. This is because, as I have outlined above, his subsidised home loan account went into a credit balance on five occasions. However, regardless of whether the Applicant made a genuine error, the Policy View (regardless of whether it is an official policy of the DVA or something less than that), is not a valid one for reasons I will now explain.

22. Paragraph [4] of the Policy View contains an incorrect interpretation of s 27(4) of the Act. This is because it seeks to import a non-existent discretion into that subsection by using the word “may”. As I have noted above, the word “may” does not appear in s 27(4) of the Act. The word “must” is used instead, meaning that there is no discretion under s 27(4) of the Act to continue to pay a subsidy if a subsidy stops being payable to a person under s 36. Although the Policy View recognises that the cessation of subsidy payments may, in cases of genuine error, result in unfairness, the Policy View seeks to give the delegate a discretion that they do not have under the legislation.

23. Importing a discretion into legislation where there is none is a matter for Parliament to address by way of a legislative amendment. It cannot be achieved by a departmental minute or a policy, official or otherwise, howsoever described. Any unfairness resulting from a genuine error, mistake or accident cannot be rectified by the Policy View which is inconsistent with the express wording of the legislation. This may, however, be an issue that the Respondent decides to bring to the attention of the Minister so that legislative reform recommendations to remedy any unfairness (such as a discretion to continue to pay a subsidy in cases where the subsidy ceasing event is caused by a genuine error, mistake or accident) can be considered.

    CONCLUSION

1. In summary, for the reasons outlined above, I have found that:

   (a)there was a subsidy ceasing event under item 1 of s 36 of the Act when the Applicant’s loan account was paid into credit; and

   (b)the “critical time” at which the subsidy ceased to be payable was on 21 December 2020.

2. I understand that the cancellation of the Applicant’s subsidy has caused him significant stress. Unfortunately for the Applicant, as I have explained above, there is no discretion in the legislation to continue the payment of his subsidy payments now that a subsidy ceasing event has occurred. Additionally, the Policy View cannot be applied because it is inconsistent with the express statutory provisions.

   DECISION

3. The Reviewable Decision is affirmed.

I certify that the preceding 44 (forty-four) paragraphs are a true copy of the reasons for the decision herein of Senior Member Dr M Evans-Bonner

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Associate

Dated: 19 May 2022

Date of hearing on the papers:	19 January 2022
Applicant:	Self-represented
Representative for the Respondent:	Ms C Campbell, HWL Ebsworth Lawyers