Gregory and Defence Force Retirement and Death Benefits Authority
[2008] AATA 1053
•24 November 2008
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2008] AATA 1053
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/0716
GENERAL ADMINISTRATIVE DIVISION ) Re STEPHEN GREGORY Applicant
And
DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY
Respondent
DECISION
Tribunal Ms Robin Hunt, Senior Member Date24 November 2008
PlaceSydney
Decision The tribunal varies the decision under review, remitting it to the respondent for calculation of the total overpayments actually received by Mr Gregory, exclusive of tax, the actual overpayments to him being the only amounts that should be recovered.
...................[Sgd]....................
Ms Robin Hunt
Senior Member
CATCHWORDS
DEFENCE FORCE RETIREMENT AND DEATH BENEFITS – overpayment of service benefits – retirement followed by re-entry to defence force – no formal election made to remain in DFRDB fund – automatic disqualification as member of fund upon re-entry – consideration of discretion not to recover overpayment – discretion not exercised in applicant’s favour – decision under review varied.
Defence Act 1903 (Cth) ss 30, 31, 32, 32A, 32B
Defence Force Retirement and Death Benefits Act 1973 (Cth) ss 3(1), 5(2), 5A, 23, 61B, 61C, 62(1), 126, 132
Defence (Personnel) Regulations 2002 (Cth) Reg 64
Financial Management and Accountability Act 1997 (Cth) s 34
Chapman v Defence Force Retirement and Death Benefits Authority (2001) 108 FCR 537
Director-General of Social Services v Hales (1983) 47 ALR 281
Re Lokan and Defence Force Retirement and Death Benefits Authority [2007] AATA 1652
Re Purcell and Defence Force Retirement and Death Benefits Authority [2007] AATA 1848
Riddell v Department of Social Security (1993) 42 FCR 443
REASONS FOR DECISION
24 November 2008 Ms Robin Hunt, Senior Member introduction
1. Stephen Gregory is contesting a decision to raise a debt arising out of overpayment to him of benefits from the Defence Force Retirement and Death Benefits scheme (‘the DFRDB scheme’). Mr Gregory was deemed retired when he left active service in the Australian Army and served with the reserves. His transfer to the reserves therefore permitted him to receive pension benefits from the DFRDB scheme. Later, overpayment of pension occurred because Mr Gregory was unaware of the effect of re-entry to the Australian Defence Force (‘ADF’) as distinct from the reserves. It also never occurred to Mr Gregory that he was re-entering the ADF for the purposes of the DFRDB scheme as he had been in the reserves in the interval since he left the army. Mr Gregory, however, was required to make an election if he wished to remain a member of the DFRDB scheme once he transferred out of the reserves. As Mr Gregory made no formal election to remain a member, payments made to him after his re-entry to the ADF should not have been made.
2. The background facts are not disputed. Mr Gregory retired from the Australian Army in 2001 after more than 20 years of service and received a lump sum and pension under the DFRDB scheme. A copy of an unsigned letter dated 1 November 2001 from ComSuper informed Mr Gregory of the amount of his lump sum and of fortnightly payments to commence on 15 November 2001.
3. The respondent was represented by the Australian Government Solicitor for the review whereas Mr Gregory was initially unrepresented. Mr Gerald Purcell, who himself fell victim to provisions concerning the effect of retirement and re-entry to the defence services, learnt of Mr Gregory’s situation shortly before the hearing and appeared on his behalf pro bono. See Re Purcell and Defence Force Retirement and Death Benefits Authority [2007] AATA 1848.
issue
4. The issue before the tribunal is whether there is a debt and, if so, whether it should be recovered.
consideration and findings
5. When Mr Gregory retired from the Australian Army, in 2001, he transferred to the Inactive Army Reserve. This move to the reserves did not prevent his being considered retired from the ADF. Subsection 5(2) of Defence Force Retirement and Death Benefits Act 1973 (‘the DFRDB Act’) had the effect of bringing about deemed retirement and Mr Gregory therefore became entitled to retirement pay under section 23 of that Act.
6. Subsection 23(1)(a)(i) provides that, where a contributing member retires, and on his retirement, his total period of effective service is not less than 20 years, he is entitled, on his retirement, to retirement pay at the rate applicable to him in accordance with this section. The expression, ‘retirement pay’ means payment under section 23. Subsection 5(2) reads:
(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.
7. On 17 September 2003, however, Mr Gregory transferred out of the Inactive Army Reserve and re-commenced continuous full-time service for the ADF for approximately 4 months, ceasing on 18 January 2004. He re-entered the ADF a second time from 20 December 2004 to 3 April 2006 and again on 17 April 2006 to the present. As Mr Gregory had already retired from the ADF for the purposes of the DFRDB scheme, he was not again retired under subsection 5(2).
8. Mr Gregory did not notify the DFRDB Authority that he was re-entering the ADF when he served for the above periods. This was because he did not realise that he was making any change that might affect his DFRDB membership or entitlements. Mr Gregory was unaware that he needed to make an election to ensure that he remained a member of the DFRDB. Consequently, he did not complete the election form required by the Authority. He was not alerted to any problem until some months later when he suffered the shock of receiving a letter of demand, dated 28 August 2006, from the ‘Manager Military Benefits’. He was informed in that letter that his pension had ceased on 17 August 2006 and that he was required to repay $37,472.00. The letter asked him to send a cheque for this amount to the Collector of Public Monies.
9. The provisions covering continuing eligibility for membership of the DFRDB scheme are convoluted and operate differently depending on what employment a member undertakes after transfer from active service. Section 3 of the DFRDB Act is an interpretation section. Sections 3, 5 and 5A define what is meant by an ‘eligible member of the Defence Force’, who is entitled to be a ‘recipient member’ of the scheme, what ‘retirement’ means for the purposes of the Act, and other matters. ‘Eligible member of the Defence Force’ in subsection 3(1) means a member of the Defence Force who meets various requirements including continuous full-time service.
10. Among various legislative provisions about the consequences of changing from one branch of service to another, subsection 62(1) provides that, where a member of the scheme who is a recipient member becomes an eligible member of the Defence Force serving under an appointment or enlistment for a period of not less than one year, his retirement pay or invalidity pay, as the case may be, is, by force of this subsection, cancelled. I note that Mr Gregory’s first re-entry period in 2003/2004 was less than 12 months, being only four months, but other sections of the Act affect Mr Gregory’s situation, in particular, sections 5A and 61B. Under subsection 61B(1), Mr Gregory was required to make an election when resuming full -time service without reference to any particular time period. By contrast, subsection 61B(3) refers to a time period when entering the reserves.
11. Section 5 deals with the consequences of cessation of full-time service while a member of the scheme, and deemed retirement where there is a break in service. Subsection 5(2) brings in the concept of deemed retirement as set out above.
12. Section 5A deals with persons excluded as members of the Defence Force for the purposes of the DFRDB scheme. Pursuant to the definition of ‘eligible member of the Defence Force’ in subsection 3(1), a person who is excluded pursuant to section 5A does not satisfy the definition of an eligible member. Subsection 5A(1) further provides that persons are excluded from the definition unless they fall within exceptions set out under subsection 5A(2). One of the exceptions covers a person to whom section 61B applies and who has elected under that section to become a contributory member. Section 61B deals with election by a recipient member intending to resume full-time service. Under this provision, Mr Gregory had to make an election to remain a member of the scheme despite never meaning to leave it or thinking he had left it.
13. The effect of subsection 5(2) on Mr Gregory is that, when he retired from the ADF, he was considered as no longer on continuous full-time service although he had transferred to the Inactive Army Reserve. Mr Gregory, being unaware that resumption of a period of continuous full-time service with some other branches of the defence forces might affect his DFRDB status or entitlements, did not fill out any form of election to remain with the DFRDB scheme at any time. Mr Gregory thought he always was a member of the DFRDB scheme. If he wished to remain a member of the DFRDB, however, at certain times when he changed his Defence Force activities, he was required to make an election on a form described as a ‘DM 100’.
14. In the absence of making an election, pursuant to subsection 61B(1), Mr Gregory automatically joined another scheme in place of the DFRDB scheme. This other scheme is called the Military Superannuation and Benefits scheme (‘the MSB scheme’). Section 61C of the DFRDB Act provides:
(1) Where a recipient member in receipt of retirement pay becomes a member of the MSB scheme, payment of the member’s retirement pay is, subject to subsection (2), suspended.
(2) A suspension under subsection (1) ceases to have effect when the recipient member whose retirement pay has been suspended ceases to be a member of the MSB scheme.
15. As a member of the MSB scheme, by default pursuant to subsection 5(2), Mr Gregory no longer was entitled to receive benefits under the DFRDB scheme. ComSuper, however, mistakenly continued making DFRDB payments to him. These payments occurred during his 3 periods of full-time service. His pension was not suspended but continued being paid until August 2006. In these circumstances, Mr Gregory has been paid amounts of benefit that were not payable. Thus subsection 126(4) of the DFRDB Act becomes relevant. It provides:
(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.
16. Mr Gregory now is aware that he should have made an election and acknowledges the overpayment and resulting debt but argues the debt should not be recovered because of administrative errors and detriment caused him. He is adamant that he was never informed of these requirements and has suffered greatly as a result. He says the loss of his DFRDB scheme membership has cost him over $200,000 in entitlements let alone other damage.
17. The respondent claims Mr Gregory was informed of the need for an election and relies on an information sheet. A copy of this information sheet was attached to the letter, dated 1 November 2001, from ComSuper to Mr Gregory. This was the letter which informed him of the amount of his lump sum and fortnightly payments. Mr Gregory agrees that he received this information sheet and concedes that he read it but explains that he misunderstood the information it was meant to convey. He thought it had no application to him.
18. Towards the end of the information sheet are 3 paragraphs under the heading, ‘Re-entering the Defence Force’. The first paragraph explains that it is necessary to make an election whether to remain in the DFRDB scheme or to join the MSB scheme, prior to re-entering. It goes on to say that failure to make a scheme election will mean compulsorily joining the MSB scheme. The second paragraph says that, if electing to remain in DFRDB and re-engaging for 12 months or more, retirement pay will be cancelled from date of re-enlistment and pension will be restored on exit. The last paragraph says that re-entry for less than 12 months means that retirement pay will continue and there is no need to make contributions. Mr Gregory saw these passages but had no idea they applied to him as he thought he was always in the Defence Force whatever type of service he was performing and never meant to leave it when he changed positions.
19. I can find no definition in the DFRDB Act of what is meant by ‘Defence Force’ and can understand Mr Gregory’s confusion about what this means. Section 30 of the Defence Act 1903 (‘the Defence Act’), however, provides that the Defence Force ‘consists of 3 arms, namely, the Australian Navy, the Australian Army and the Australian Air Force’. Section 31 of the Defence Act further provides that the Australian Army consists of 2 parts: (a) the Regular Army; and (b) the Army Reserve. Section 32 of the Defence Act defines what is meant by the Regular Army and section 32A defines what is meant by the Army Reserve. The Army Reserve definition makes no reference to the Inactive Army reserve. Section 32B of the Defence Act provides that an arm of the Defence Force may, under such conditions (if any) as are prescribed, be attached or loaned to, or seconded for service with, another arm of the Defence Force. None of these provisions mention the Inactive Reserve Force and it is not therefore part of the Defence Force. In addition, the DFRDB Act contains provisions about persons excluded from the definition of ‘eligible member of the Defence Force’. Sections 5A and 61B deal with this concept as set out above.
20. Mr Gregory told the tribunal that he relied on instructions from the ADF being clear and accurate but the information he received was incomplete. He said he had received no advice and was not told of any effect on his superannuation when he took new positions. Mr Gregory pointed out the instruction sheet put an onus on him to act if he thought the instruction related to him. No one told him it applied to him at the times he transferred in the services and he had not realised that the instruction did apply to him. He had not thought he transferred in the manner indicated in the instruction sheet. The information sheet left him under the impression that, as he had never left some form of service but simply transferred from time to time for fixed periods or from one branch to another, he was not affected. He also did not understand how he was supposed to have ‘re-entered’ service if he had retired from it. Nowhere in the instruction sheet nor in the letter from ComSuper about his entitlements was Mr Gregory told he must notify ComSuper if he rejoined or re-entered the Defence Force and what ‘re-entry’ meant. I accept his evidence that he was not given this information when he did rejoin in 2003 or on two subsequent occasions in 2004 and 2006. There is no evidence that he was ever provided with an election form, described as a ‘DM 100’. If he had been given a form along with the instruction sheet, there is a chance this would have alerted Mr Gregory that his pension would be cancelled if he rejoined the Defence Force.
21. Mr Gregory gave evidence that he wished to have his membership of the DFRDB scheme restored as he had never chosen to leave this scheme. He complained that he was defaulted to the alternative scheme, MSB, though this was not of his choosing. Instructions given to him on the information sheet did not make him aware of the onus put on him to meet election requirements. He thought he should be compensated for losses he suffered through default transfer to the MSB scheme rather than be required to repay money. Mr Gregory has never been advised whether he may be able to rejoin his preferred scheme according to the material before me. This is an option available in some circumstances without any special intervention by the Authority or any special remedy. Pursuant to subsection 61C(2), a recipient member whose retirement pay has been suspended may be able to rejoin should he cease to be a member of the MSB scheme. Mr Gregory gave evidence to the effect that he is unaware of how he may go about ceasing to be a member of the MSB scheme and rejoining the DFRDB scheme. Subsection 61C(2) merely provides:
A suspension under subsection (1) ceases to have effect when the recipient member whose retirement pay has been suspended ceases to be a member of the MSB scheme.
22. Inadequate information about Mr Gregory’s superannuation position has been continual. Mr Gregory pointed to a contact history sheet in the respondent’s records which recorded his telephone call on 23 January 2004 seeking information about his entitlements. The contact note says that the person who took the call gave ‘general advice’ and suggested Mr Gregory contact a financial adviser. The contact note records that ‘the member’ called, that there is no DM 100 (election form) on file and that the member has been contributing to ‘MSBS’ during his 6 months in ‘CFTS’ (continuous full-time service). The note does not indicate whether the officer involved passed this information on to Mr Gregory. It does not record Mr Gregory’s reaction to the ‘general advice’ supplied during this conversation. The advice to contact a financial adviser suggests the maker of the note did not provide a great deal of advice.
23. The letter of demand to Mr Gregory, dated 28 August 2006, gave a breakdown of overpayments as well as figures setting out tax paid to the Australian Taxation Office (‘ATO’) in respect to these payments. The letter informs Mr Gregory ComSuper is unable to recover tax paid and suggests he sends a copy of their letter to the ATO. The letter does not address Mr Gregory’s resulting superannuation situation or whether anything has been done or should be done by Mr Gregory to adjust his present savings or contributions to reflect the receipt of the overpayment.
24. Mr Gregory also referred to the email reply he received from ‘DSuper’ when he sought advice about his perception that he had never left the ADF. The writer did not clarify the position but stated this was a legal point involving complex legal provisions and that the AAT was the appropriate place to get a definitive ruling. As Mr Gregory submitted to me, if the director cannot explain this complex legislation, how was he supposed to understand it?
25. Another letter dated 3 October 2006, from a Military Complaints Officer, stated that Mr Gregory had been advised that he was required to make an election prior to re-entry in order to suspend pension payments. This assertion, however, simply went on to refer to the information sheet supplied with the letter dated 1 November 2001 and mentioned no other advice. Mr Gregory has explained that he misunderstood this information and had not realised it applied to his transferring to the reserves. Mr Gregory gave evidence to the effect that no one ever took the time to explain to him how the scheme operated should he transfer within the services.
Mr Gregory thought it was indisputable that he elected to remain in the DFRDB scheme at all times. He argued that section 132 of the DFRDB Act supported this contention, placing importance on the heading ‘Election to remain member of scheme or to join MSB scheme’. Mr Gregory I cannot agree with this contention
As the respondent explained in its submissions,
28. Another publication which Mr Gregory brought to attention is a description of the DFRDB scheme that he sourced from the DFRDB Authority 2006/2007 annual report to Parliament. He highlighted a passage on page 8 that dealt with closure of new entrants to the DFRDB scheme after the introduction of the MSB scheme in October 1991. The passage says all new ADF members belong to the MSB scheme except for former ADF members in receipt of a DFRDB benefit who, on re-entry, choose to rejoin the DFRDB scheme. Mr Gregory finds this passage misleading or giving an incomplete picture. It is only later in the report that problems with re-entry of DFRDB members are mentioned.
29. A passage on page 17 of the 2006/2007 report concerns the exact position in which Mr Gregory finds himself. Under the sub-heading ‘re-entered pension recipients’ the report says an issue of continuing concern was the number of DFRDB pension recipients failing to make a valid scheme election prior to re-entering the ADF. After noting the consequences, that is, unintentional transfer to the MSB scheme and resultant overpayment from the DFRDB , the report claims:
Considerable efforts were made by ComSuper and the Department of Defence to enhance Member communication on this issue.
30. Unfortunately, Mr Gregory has not been the beneficiary of any such ‘considerable efforts’ from any quarter, either from ComSuper or from the Department of Defence. The only evidence of any efforts made in his case is the attachment of the unfortunately worded instruction sheet to the letter of 1 November 2001. Some deficiencies in the explanation contained in this sheet are lack of more information or examples where a person is considered about to ‘re-enter’ the defence force and so triggering the legislative requirement to make a formal election. As this is not clearly explained, I accept Mr Gregory’s evidence that he misunderstood the message intended in this information sheet.
31. Returning to the 2006/2007 report, on page 35, failures in communication with members of the DFRDB again comes up for comment. A passage reads:
In 2006-07, 71 complaints and 16 parliamentary representations were received. The largest amount of DFRBD complaints related to an administrative issue where a number of Members who had not submitted the relevant scheme election form before re-entering the Australian Defence Force had been placed into the MSB scheme by default.
32. On page 42 of the same report, a paragraph about debtors indicates $1,312,927 was due to the Authority in benefits overpaid under the DFRDB and DFRB schemes. One reason cited for overpayment was death of a recipient. The other main reason was re-entry confusion, that is, the situation of Mr Gregory. The report says administrative processes are in place to reduce the chance of such overpayments but does not explain what these are. It next refers to recovery, saying most overpayments were recovered but some were written off, with most write-offs occurring after death. Mr Gregory has not been offered any write-off relief.
33. Mr Gregory also drew attention to power under the Defence Act to make regulations about transfers of members to different arms of the Defence Forces. Part 2 of Chapter 8 of the Defence (Personnel) Regulations 2002 permits transfer of members and regulation 64 makes compulsory transfer to the Standby Reserve at the end of certain periods of service. Mr Gregory said these provisions added to his confusion. I accept that such provisions give rise to a perception that a member of the reserves is still a member of the Defence Force.
did mr gregory cease to be a member of the defence force?
34. In Chapman v Defence Force Retirement and Death Benefits Authority (2001) 108 FCR 537, Wilcox J analysed the operation of subsection 5(2) when read with section 3. His Honour observed that Mr Chapman in that case was always a ‘member of the Defence Force’ as that was normally understood. His Honour thought a reasonable first impression would be that a person had not ‘become’ a member after transfer to the reserve. Nevertheless, His Honour observed the legislative provisions of the DFRDB Act made it plain that for the purposes of the Act, that retirement occurred on transfer from continuous full-time service. This interpretation of the provisions does not assist Mr Gregory although the discussion supports his justification for not understanding the expectation or onus placed on him to make an election.
35. Despite his perception that he was at all times a member of the Defence Force, I find that Mr Gregory ceased to be a member when he retired in 2001. Subsection 5(2) resulted in his deemed retirement.
36. When Mr Gregory commenced service with the Inactive Army Reserve, he did not re-enter the Defence Force as the inactive reserve is not part of the Defence Force pursuant to section 30 of the Defence Act as set out above. As well, “Reserve” is defined in section 3 of the DFRDB Act for the purposes of the DFRDB scheme and does not include the inactive reserve. The definition reads:
“Reserve" means:
(a) in relation to a member of the Navy--the Naval Reserve; and
(b) in relation to a member of the Army--the Army Reserve; and
(c) in relation to a member of the Air Force--the Air Force Reserve.
did mr gregory re-enter the defence force?
37. As Mr Gregory had retired from the Defence Force on 28 October 2001, and was deemed to have retired from the ADF for the purposes of the DFRDB Act, any later service for the Defence Force was a re-entry for the purposes of the DFRDB Act. Upon retirement, he ceased to be an ‘eligible member of the Defence Force’ as defined in subsection 3(1) of the DFRDB Act and, notwithstanding being a member of the Inactive Army Reserve, Mr Gregory experienced a break in the continuity of relevant service from 28 October 2001 until he resumed continuous full-time service with the ADF on 17 September 2003, 20 December 2004 and again on 17 April 2006.
did mr gregory remain a member of the dfrdb scheme?
For the reasons outlined above, when Mr Gregory took his discharge from the Regular Army and ceased full-time service on 28 October 2001, he was deemed to have retired from the ADF for the purposes of the DFRDB Act, whether or not he continued to satisfy the definition of a ‘member of the Defence Force’ for the purposes of the Defence Act by virtue of his membership of the inactive reserves. Subsection
The
should the debt be recovered?
41. I find that Mr Gregory has received public monies to which he was not entitled. He has not disputed the calculation of the amount of the debt. He does not claim severe financial hardship although he is certainly suffering a degree of financial hardship and other hardship.
42. Subsection 126(1) to (6) of the DFRDB Act deals with debt recovery. Implicit in subsection 126(4) is discretion to recover relevant debt. The Authority’s power of recovery does not impliedly incorporate power to waive a debt. Waiver of a debt to the Commonwealth may be available under section 34 of the Financial Management and Accountability Act 1997, which provides that the Minister for Finance may waive the Commonwealth’s right to payment of an amount owing to it. However, this is not the basis of the decision under review which is restricted to the decision made under the DFRDB Act.
Subs
45. The discretion is conceded by the respondent but is not governed by any specific provision which might give such a pointer or indication when it should be used. There is no provision or guideline such as those contained in social security laws for exercise of discretion in ‘special circumstances’. As Senior Member Friedman observed in Mr Purcell’s case, however, the tribunal takes into account the merits of each case. For social security purposes, in Riddell v Department of Social Security (1993) 42 FCR 443, the Full Federal Court stated:
Each particular case must be considered on its merits. It is the essential nature of the provision [waiver of debt] to create a broad discretion to meet the great variety of circumstances which must occur, raising considerations of individual hardship, need, fairness, reasonableness, and whatever else may move an administrator, keeping in mind the scope and purposes of the [Social Security] Act, to make a decision one way or the other.
46. Sheppard J in Director-General of Social Services v Hales (1983) 47 ALR 281 discussed general policy considerations in giving discretion about recovery of an overpayment. Sheppard J noted that in ordinary circumstances the decision-maker’s public duty would require recovery of an overpayment unless there were sound reasons not to do so. Sheppard J observed [at 323] that actual receipt of public monies to which a person was not lawfully entitled was a paramount consideration notwithstanding hardship:
After all, the legislature has expressly provided for recovery of overpayments in the very legislation pursuant to which these benefits are paid. Thus it contemplated recovery from persons to whom overpayments of …benefits had been made.
47. Overpayment arose through no fault of Mr Gregory as was the case with Mr Lokan in the case of Re Lokan and Defence Force Retirement and Death Benefits Authority [2007] AATA 1652 (‘Lokan’). As in Lokan, nevertheless, the starting point in considering exercise of discretion is that Mr Gregory has received public monies to which he had no lawful entitlement. Prima facie, those monies must be repaid unless there is some strong or cogent reason why policy may be overcome. See Drake v Minister for Immigration and Ethnic Affairs (1979) 46 FLR 409), Re Drake and Minister for Immigration and Ethnic Affairs (No 2) (1979) 2 ALD 634 at 639-645; Re Dainty and Minister for Immigration and Ethic Affairs (1987) 12 ALD 416 at 417; and Minister for Immigration, Local Government and Ethnic Affairs v Roberts (1993) 41 FCR 82 at 86.
48. On the other side of the equation, detriment that Mr Gregory told the tribunal he had suffered through the decision to impose a default election on him included financial losses in a number of respects. He was unable to proceed with plans to purchase a house on which he and his wife were about to exchange contracts. He had lost entitlement to continuing and future benefits under the DFRDB scheme. Mr Gregory spoke of:
·Psychological damage for which he was undergoing treatment.
·Marital strain – Mr Gregory gave evidence his marriage was under severe strain because of the financial pressure.
·The loss of a new house – Mr Gregory gave evidence that he and his wife had been about to purchase a new house when the letter of demand arrived. The information that pension payments had already ceased and that he was expected to repay nearly $40,000 meant they could not proceed with the purchase. Luckily, they had not yet signed the contract or they would have suffered even greater detriment when they were unable to meet their contractual obligations.
·Cessation of payments before notification – Mr Gregory gave evidence he was unaware payments had already ceased before he received the letter of demand. This delay caused him immediate financial embarrassment.
Turning to the overpayment guidelines, I note t
51. continues to work in the Defence Force and gave evidence to the effect that he was now supposed to give advice about the very dilemma which has caused him this hardship. He is still unable to understand fully how the scheme operates as was evident from his submissions to the tribunal. It is clear that Mr Gregory is not alone in this when reading the statistics in the annual report and cases such as that of Mr Purcell who practises as a barrister and frequently assists this tribunal. Mr Purcell’s expertise did not prevent his failing to understand his own position.
52. In Mr Purcell’s case, I note the tribunal’s reasons for decision record that the respondent admitted its processes were deficient and apologised to Mr Purcell for the administrative errors in continuing to pay his pension during the period of full-time service when he was a member of the MSB scheme; providing incorrect advice; and for the delays in acting on his request for reconsideration of the decision to recover the overpayment. No such apology to Mr Gregory is indicated in the respondent’s records before me although the overpayments spanned periods during 2003, 2004, 2005 and 2006. At the very least, I consider Mr Gregory is entitled to an apology as he has not been at fault in any way, was not offered any assistance or leeway when sent the letter of demand and has suffered greatly.
53. In Lokan, recovery efforts excluded tax instalments that the respondent had paid directly to the Deputy Commissioner of Taxation. By comparison, I note that the respondent is demanding repayment in full from Mr Gregory and has made no deduction for the tax paid. Mr Gregory has not actually received the amount of the tax which the respondent paid to the ATO. According to the letter of demand, tax to be recovered from the ATO is $9,939.00. In an earlier part of the statement furnished in the letter of demand, reference is made to partial recovery of $594.00. As it was the respondent’s error in making payment to the ATO, I consider Mr Gregory is not liable to pay the outstanding $9,939.00 to the respondent. This amount should be deducted from the overpayment the respondent seeks to recover from Mr Gregory. I am unable to see any justification for requiring Mr Gregory to bear the burden of recovering this money. This is consistent with the findings of Deputy President Hack in Lokan. Thus, the net amount paid to Mr Gregory which ought to be recovered is in the vicinity of $28,000.
54. In balancing all relevant factors, and bearing in mind that the paramount consideration is that Mr Gregory received public monies to which he was not entitled, I find that the debt must be recovered. The decision to recover overpayment, however, should be varied in order to substitute the amount actually received by Mr Gregory less tax deducted.
55. Other components of the reviewable decision, particularly non-payment of interest, are unaffected. Unfortunately for Mr Gregory, the circumstances described by him, including administrative errors, misleading information and delay by the respondent in attending to his overpayment, are insufficient reason for not recovering the debt. For these reasons, the discretion to recover the overpayment cannot be exercised in his favour.
decision
56. The tribunal varies the decision under review, remitting it to the respondent for calculation of the total overpayments actually received by Mr Gregory, exclusive of tax, the actual overpayments to him being the only amounts that should be recovered.
I certify that the 56 preceding paragraphs are a true copy of the reasons for the decision herein of Ms Robin Hunt, Senior Member
Signed: .........................[Sgd]............................
Jennifer Wong, AssociateDate/s of Hearing 10 September 2008
Date of Decision 24 November 2008
Counsel for the Applicant G Purcell
Solicitor for the Respondent Australian Government Solicitor
1
8
0