Jeffrey Gill and Commonwealth Superannuation Corporation
[2012] AATA 876
•13 December 2012
[2012] AATA 876
Division GENERAL ADMINISTRATIVE DIVISION File Number
2011/5394
Re
Jeffrey Gill
APPLICANT
And
Commonwealth Superannuation Corporation
RESPONDENT
DECISION
Tribunal Deputy President R P Handley
Date 13 December 2012 Place Sydney Decision Summary
The Tribunal:
(1)affirms that part of the decision under review that found Mr Gill automatically became a member of the Military Superannuation and Benefits Scheme on 22 July 2011 as a result of his not making a written election to remain a member of the Defence Force Retirement and Death Benefits Scheme prior to commencing continuous full time service on that date; and
(2)sets aside that part of the decision under review that found Mr Gill received an overpayment of pension of $6,889.96 which was a recoverable debt, and remits the matter to the Respondent with directions that the Respondent recalculate the amount of the overpayment based on Mr Gill having commenced his continuous full time service on 22 July 2011.
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Deputy President R P Handley
CATCHWORDS
DEFENCE – Defence Force Retirement and Death Benefits Scheme – Military Superannuation and Benefits Scheme – Applicant commenced a period of continuous full time service of less than 12 months – Applicant required to make an election prior to commencement of continuous full time service not to join the Military Superannuation and Benefits Scheme – election not made prior to commencement of service
LEGISLATION
Defence Force Retirement and Death Benefits Act 1973 (Cth)
Military Superannuation and Benefits Act 1991 (Cth)
CASES
Defence Force Retirement and Death Benefits Authority v Gregory (2009) 179 FCR 535
Defence Force Retirement and Death Benefits Authority v Mathews (2011) 192 FCR 197
Director-General of Social Security v Hales (1982) 78 FLR 373
Marston and Defence Force Retirement and Death Benefits Authority (2011) 121 ALD 232
REASONS FOR DECISION
Deputy President R P Handley
Mr Gill has applied to the Tribunal for the review of a decision of the Commonwealth Superannuation Corporation (CSC) (the Respondent):
(1)that Mr Gill had automatically become a member of the Military Superannuation and Benefits (MSB) Scheme as a result of his not making a written election to remain a member of the Defence Force Retirement and Death Benefits (DFRDB) Scheme by the required date; and
(2)that Mr Gill had received an overpayment of pension of $6,889.96 which was a recoverable debt.
BACKGROUND
Mr Gill is aged 58. He joined the Australian Defence Force (ADF) on 12 March 1974 and was discharged on 26 August 2007, when he commenced receiving retirement pay under the Defence Force Retirement and Death Benefits Act 1973 (Cth) (the DFRDB Act) as a result of having more than 20 years’ service. He holds the rank of Warrant Officer 2. Since his discharge, Mr Gill has undertaken a number of further periods of continuous fulltime service (CFTS) including between 22 July 2011 and 1 December 2011.
Mr Gill commenced fulltime ADF duties on 1 July 2011. However, because formal approval for CFTS was initially refused (cable dated 19 July 2011), he was paid an Army Reserves Training Days salary for the days worked while his unit sought a reconsideration of the decision. On Friday 22 July 2011, approval for a period of CFTS was given, stated to be retrospective to 1 July 2011. This was notified by facsimile received, according to Mr Gill, before lunch on 22 July 2011. The contract for CFTS was stated not to be valid until Mr Gill had responded to the offer of CFTS by signing an undertaking for CFTS and returning this to Army Headquarters. Soon after receipt of the facsimile, Mr Gill signed the required undertaking which was then faxed to Army Headquarters. Formal approval for Mr Gill to commence CFTS was received by cable that afternoon.
Because the period of Mr Gill’s CFTS between July 2011 and 1 December 2011 was less than 12 months, under s 61B(3) of the DFRDB Act, he was required, before resuming service, to make an election, whether or not to become a member of the MSB Scheme. Mr Gill gave evidence that he completed, printed and signed a form D100 electing to remain a member of the DFRDB Scheme at the same time as he signed the undertaking for CFTS. He then attempted to fax the form D100 to CSC but the attempt failed and the fax machine then went to its redial mode in order to make further attempts to fax the document after a delay.
Mr Gill said that at Bullecourt Barracks in Newcastle (where he was working), the fax machine was in the Orderly Room, where a Sergeant who was responsible for coordinating personnel issues for members of the Unit was located. Mr Gill said he does not recall whether he personally attempted to fax the form D100 to CSC or whether he got someone else to do this for him. In any event, after a final redial attempt at faxing the form at 16:02 on Friday 22 July 2011, the fax machine made no further attempts.
On Monday 25 July 2011, Mr Gill telephoned CSC stating that he was having difficulty faxing the form D100. He was advised to send the form electronically. However, at 11.40am, he successfully faxed the form to CSC.
However, because the form D100 was communicated to CSC after Mr Gill had commenced CFTS on 22 July 2011, CSC automatically transferred Mr Gill to the MSB Scheme, and decided that his election was no effect. By letter dated 26 July 2011, CSC notified Mr Gill that his purported election was invalid because it was received after his re-entry date and he had automatically become a member of the MSB Scheme. The effect of a person receiving retirement pay under the DFRDB Scheme being transferred to the MSB Scheme is that their retirement pay is suspended during the period of CFTS, but when the period of CFTS ends, the person’s retirement pay revives under the DFRDB Scheme: s 61C of the DFRDB Act.
The CSC concedes that as a result of an administrative error, Mr Gill’s retirement pay was not suspended when he commenced CFTS as it should have been, and he continued to receive retirement pay with the result that an overpayment occurred. When, on 6 December 2011, after a reconsideration, the decision that Mr Gill’s election not to become a member of the MSB Scheme was invalid was affirmed, Mr Gill was also notified that the amount of $6,889.96, representing retirement pay paid to him from 1 July 2011, was a recoverable debt.
On 15 December 2011, Mr Gill sought a review by the Tribunal. He told the Tribunal that he is no longer undertaking CFTS and is back on his DFRDB retirement pay.
LEGISLATIVE FRAMEWORK AND ISSUES
Section 61B(3) of the DFRDB Act states:
(3) A recipient member who:
(a)intends to resume full-time service as a member of a Reserve for a continuous period of less than 12 months; and
(b)has not previously made, under this section, an election to become a member of the MSB scheme;
must, before resuming service, in writing addressed to CSC, elect whether or not to become a member of that scheme. (Emphasis added)
Section 6 of the Military Superannuation and Benefits Act 1991 (Cth) (MSB Act) states:
Membership of Superannuation Scheme
(1)Subject to subsection (2), each of the following persons is, by force of this section, a member of the Scheme:
…
(c)a member of the Reserves who is rendering continuous full-time service under an undertaking to serve for a period of less than 12 months unless that member has elected not to become a member of the Scheme under section 61B of the DFRDB Act. (Emphasis added)
(2)In spite of subsection (1), a person is not a member of the Scheme if the person is an eligible member of the Defence Force for the purposes of the DFRDB Act.
Section 126(4) of the DFRDB Act 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 CSC, on behalf of the Commonwealth, in a court of competent jurisdiction as a debt due and payable to the Commonwealth
The issues for the Tribunal are:
·Whether Mr Gill made the election required by s 61B(3) of the DFRDB Act to remain in the DFRDB Scheme before resuming CFTS;
·If not, whether, as a result, Mr Gill received an overpayment of pension which is a recoverable debt and whether that debt should be recovered.
SUBMISSIONS
Mr Gill told me that in his view, the law is grossly unfair. The requirement to make an election not to join the MSB Scheme should instead be a requirement to elect to join the MBS Scheme. He said the MSB Scheme is not as beneficial as the DFRDB Scheme.
Mr Gill said in the event that I find that he has received an overpayment of retirement pay which can be recovered, repayment of a lump sum would cause him some financial difficulty because his principal source of income is his retirement pay.
Mr Gill doubts he will seek further CFTS if his application is unsuccessful because once a person has been transferred to the MSB Scheme, they continue in the MSB Scheme for any further periods of CFTS. There is no further opportunity to make an election to not be transferred to the MSB Scheme.
Mr Giugni, for the Respondent, explained the way in which the legislation operates, noting that CSC’s functions are delegated to ComSuper. He submitted that to make a valid election pursuant to s 61B(3) of the DFRDB Act, which requires an election to be made “in writing addressed to CSC”, the election in writing must also be communicated. He referred to the Tribunal decision in Marston and Defence Force Retirement and Death Benefits Authority (2011) 121 ALD 232 (Marston), at [16], where Member Webb found that while service of the written election on CSC is not required by s 61B(3), for the election to be effective, it must nevertheless be communicated to CSC prior to the commencement of the particular period of service. In that case, the applicant, who had completed and signed the form D100, telephoned CSC and informed CSC of his election prior to his commencing CFTS on that day. The applicant did not fax the form D100 to CSC until later that day, after he had commenced his CFTS. Member Webb found that notwithstanding this, the applicant had made a valid and effective election prior to commencing CFTS. Mr Giugni said that, by contrast, in Mr Gill’s case, while he had completed and signed the form, he did not communicate his election to CSC before commencing CFTS.
Mr Guigni submitted that, as was recognised by Justice Moore in Defence Force Retirement and Death Benefits Authority v Mathews (2011) 192 FCR 197 (Mathews), at [42], there is little or no flexibility in the legislative scheme and, it appears, this is what Parliament intended. Thus, Mr Giugni submitted, Mr Gill did not make a valid and effective election.
DISCUSSION
It is clear from the decision of Justice Moore in Mathews, at [41-42], that the requirement in s 61B(3) of the DFRDB Act must be strictly complied with.
41. … A recipient member will be obliged to make an election under s 61B(3) if the undertaking reveals that he or she is to be serving as a member of a Reserve for a continuous period of less than 12 months. The recipient member is relieved of that obligation if the event referred to in s 61B(3)(b) has already occurred, namely an election had earlier been made to become a member of the new scheme. Because s 61B(3)(b) speaks of an election "under this section", it could have been an earlier election to become a member of the new scheme either under s 61B(1)(f) or s 61B(3). However unless relieved of the obligation to elect in writing, a person on whom s 61B(3) operates, must do so "before resuming service". As with the same formulation in s 61B(1), that is a reference to the service referred to in s 61B(3)(a). The obligation to elect must be met between the time the undertaking to serve is given by a person and the time that person actually resumes the service. …
Disposition
42. I acknowledge that the view I have taken of the legislative scheme provides little or no flexibility and can, as already arguably it has in the present case, operate oppressively on a given individual. However, that there is little or no flexibility, I think, is what Parliament intended.
Mr Gill’s evidence is that he completed and signed the form D100 election form on Friday 22 July 2011 contemporaneously with completing and signing the undertaking to undertake CFTS. This happened prior to his CFTS commencing when formal approval of his CFTS was notified later that day. However, while he completed and signed the form D100 election prior to commencement of his CFTS, the attempt to fax the form to CSC was unsuccessful and, thus, there was no communication of his election to CSC until late morning on Monday 25 July 2011 when the faxing of the form was successful. The reason for the unsuccessful fax on 22 July 2011 is unclear.
In my view, Member Webb’s interpretation of the requirements of s 61B(3) is correct. Relevantly, the election not to become a member of the MSB Scheme before resuming CFTS must be “in writing addressed to CSC”. While there is no express or implied requirement for service of the written election on CSC, for an election to be effective requires that it be communicated to CSC. To find otherwise would be contrary to common sense. Unfortunately, in Mr Gill’s case, this means that because his election was not communicated to CSC before the commencement of his CFTS, it was not effective and, therefore, s 6 of the MSB Act operated to transfer him to the MSB Scheme during the period of his CFTS.
I acknowledge Mr Gill’s frustration at what he regards as unfair treatment as a result of the application of the provisions of the DFRDB and MSB Acts. However, as Justice Moore commented in Mathews, it appears to have been Parliament’s intention for the provisions of the Act to operate in this way. That this is the case is perhaps unfortunate given the Defence Force’s apparent objective of encouraging former serving personnel to re-enter the Defence Force on short term contracts. Mr Gill indicated that it is unlikely he will seek any further CFTS given his treatment in this matter and what he perceives to be the disadvantage he has suffered as a result of being transferred to the MSB Scheme.
When Mr Gill was transferred to the MSB Scheme on the commencement of his CFTS, his retirement pay should have ceased. As a result of what Mr Giugni conceded was an administrative error by CSC, this did not happen and Mr Gill continued to receive retirement pay, thereby incurring an overpayment from the commencement of his CFTS on 22 July 2011. Section 126(4) of the DFRDB Act, set out above, provides for the recovery of overpayments.
In Defence Force Retirement and Death Benefits Authority v Gregory (2009) 179 FCR 535, at [79], Cowdroy J acknowledged that s 126(4) provides discretion to the decision-maker in deciding whether a debt should be recovered. However, as recognised by the Full Federal Court decision in Director-General of Social Security v Hales (1982) 78 FLR 373 in relation to a similar provision in the social security legislation, the recovery of an overpayment is always a paramount consideration: see Sheppard J at 413.
In terms of how the decision-maker’s discretion should be exercised, the Full Federal Court in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443, at 450, noted, referring to the similar provision in the social security legislation:
It is the essential nature of the provision 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 Act, to make a decision one way or the other.
Mr Gill’s evidence indicates that to have to repay the whole of the overpayment as a lump sum would cause him some financial difficulty given that he is currently reliant on his retirement pay as his principal source of income. However, apart from this, there is no evidence that Mr Gill would otherwise suffer severe financial hardship and, while Mr Gill regards what has occurred as being unfair and unreasonable, as I have said, this was in accordance with the relevant legislative provisions. I am not therefore satisfied that I should exercise the discretion so that the overpayment should not be recovered. Recovery should, however, be way of instalments. For example, s 126(5) of the DFRDB Act permits recovery of overpayments by deductions from a person’s retirement pay. In my view, it would be appropriate for CSC to negotiate the arrangements for recovery of the overpayment by reasonable instalments from Mr Gill according to his circumstances.
Finally, it should be noted that the overpayment raised by CSC against Mr Gill is in respect of the period from 1 July 2011 to, presumably, although not clearly stated, 1 December 2011. Since Mr Gill’s CFTS did not commence until 22 July 2011, as the Respondent concedes, the overpayment will need to be recalculated to take this into account. I will, therefore, remit the matter to CSC for this purpose and for it to negotiate arrangements for recovery of the overpayment by reasonable instalments from Mr Gill.
DECISION
The Tribunal
(1)affirms that part of the decision under review that found Mr Gill automatically became a member of the Military Superannuation and Benefits Scheme on 22 July 2011 as a result of his not making a written election to remain a member of the Defence Force Retirement and Death Benefits Scheme prior to commencing continuous full time service on that date; and
(2)sets aside that part of the decision under review that found Mr Gill received an overpayment of pension of $6,889.96 which was a recoverable debt, and remits the matter to the Respondent with directions that the Respondent recalculate the amount of the overpayment based on Mr Gill having commenced his continuous full time service on 22 July 2011.
I certify that the preceding 28 (twenty eight) paragraphs are a true copy of the reasons for the decision herein of Deputy President R P Handley.
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Associate
Dated 13 December 2012
Date of hearing 5 December 2012 Date final submissions received 5 December 2012 Applicant In person Advocate for the Respondent T. Giugni Solicitors for the Respondent Australian Government Solicitor
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