JOHN COOMBE and DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY

[2009] AATA 820

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2009] AATA 820

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No   2009/1861

GENERAL ADMINISTRATIVE  DIVISION		)
Re		JOHN COOMBE

Applicant

And DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY

Respondent

DECISION

Tribunal Mr John Handley, Senior Member

Date26 October 2009

PlaceMelbourne

Decision

1.        The decision of the respondent with respect to the applicant having been paid benefits under the Defence Force Retirement and Death Benefits Scheme to which he was not entitled is affirmed.

2.        The remainder of the decision with respect to recovery of monies overpaid is remitted to the respondent in accordance with these reasons.

(Sgd) John Handley
  Senior Member

SUPERANNUATION – Applicant was a member of the Defence Force Retirement and Death Benefits Scheme whilst he served as a permanent member of the Defence Forces – he resigned and joined the Army Reserve – an election not to join the Military Superannuation and Benefits Scheme was not made – deemed thereafter to be a member of MSB – paid DFRDB benefits whilst engaged in the Reserves – decision of respondent not to have an entitlement to DFRDB benefits as a member of MSB – overpayment – administrative errors by respondent – matters to be considered if it decides to recover – overpayment decision affirmed – whether respondent should recover remitted

Defence Force Retirement and Death Benefits Act 1973 (Cth) s 3, s 5(2), s 5(3), s 23, s 61B, s 61B(3), s 61C, s 99(6) and s 126

Military Superannuation and Benefits Act 1991 (Cth) s 6(1)(c)

Social Security Act 1991 (Cth) s 1237A, s 1237AAD

Auckland Harbour Board v R [1924] AC 318

Defence Force Retirement and Death Benefits Authority v Gregory [2009] FCA 875

Director-General of Social Services v Hales (1997) 47 ALR 281

REASONS FOR DECISION

26 October 2009 Mr John Handley, Senior Member           

1.      On 23 September 2008 a delegate of ComSuper decided that Mr Coombe (the applicant) had been overpaid retirement pay between the period 21 January 2008 and 14 August 2008 in the total nett sum of $13,250.18. The applicant requested reconsideration of that decision by the respondent. On 18 March 2009, the decision of the delegate was affirmed. These proceedings are brought by the applicant pursuant to s 99(6) of the Defence Force Retirement and Death Benefits Act 1973 (the DFRDB Act) as a review of the reconsidered decision.

the legislation

2. Section 6(1)(c) of the Military Superannuation and Benefits Act 1991 (the MSB Act) provides that a person who is a member of the Reserves rendering continuous full time service pursuant to an undertaking to serve for a period less than 12 months is a member of the Military Superannuation Scheme (MSB Scheme) unless that person elected not to become a member of that Scheme pursuant to s 61B of the DFRDB Act.

3. Section 61B of the DFRDB Act provides that a recipient member who intends to resume full time service as a member of the Reserves for a continuous period of less than 12 months and who has not previously elected to be a member of the MSB Scheme must make an election, before resuming service, whether or not to become a member of that Scheme.

4.      A recipient member is a member of the DFRDB Scheme and is entitled to retirement pay (refer s 3 of the DFRDB Act). Retirement pay is a payment pursuant to s 23 of the DFRDB Act which provides that a contributing member, having retired and not having an entitlement to an invalidity benefit (subject to some exceptions which are not relevant to this review) is entitled, upon retirement, to retirement pay.

5. However, pursuant to s 61C of the DFRDB Act, where a recipient member, in receipt of retirement pay, becomes a member of the MSB Scheme, his entitlement to retirement pay is suspended.

the facts

6.      The history of the applicant's service with the Australian Army was not in dispute.

7.      At all relevant times prior to 26 August 2007 the applicant was a permanent member of the Australian Army.  He retired on that date.  Between 27 August 2007 and 9 September 2007 he received retirement pay as a recipient member of the DFRDB Scheme.

8.      From 10 September 2007 the applicant was engaged as a member of the Army Reserve until 7 December 2007 (the first period of service).  Immediately prior to commencing that period of service, the applicant completed an election not to become a member of the MSB Scheme (refer T8, p43).

9.      From 21 January 2008 until 18 January 2009 (the second period of service) the applicant was engaged as a member of the Army Reserve.  He did not complete an election indicating his intention not to become a member of the MSB Scheme until 4 February 2008.  Between 21 January 2008 and 14 August 2008, the applicant was paid retirement pay under the DFRDB Scheme in the total nett sum of $13,250.18.

10.     The respondent contends that the applicant had no entitlement to retirement pay under the DFRDB Scheme during the second period because he did not make an election prior to commencement of that period of service not to become a member of the MSB Scheme and he was, by force of s 6(1) (c) of the MSB Act, a member of the MSB Scheme from 21 January 2008.

the evidence

11.     The hearing of the application was convened in Wangaratta on 12 October 2009.  The applicant appeared without representation and the respondent was represented by Mr Dillon.

12.     The applicant said that prior to the first period of service when he joined the Army Reserve he completed an election to remain a member of the DFRDB Scheme.  He knew that he would be engaged in a three month contract but had been told by his superiors that he would again be engaged from January 2008 without any entitlement to salary during the intervening Christmas and holiday period.

13.     Prior to engagement in the first period he did complete an election form which was provided to him before the first period commenced.  He commenced the second period undertaking the same work, in the same location and in the same office where he had completed the work during the first period.  He was not given additional paperwork and did not understand, nor was he advised, that he would be required to complete another election form.

14.     On or about 4 February 2008, being the first pay day after he commenced service in the second period,  the applicant received his first payment of salary and it was evident from the salary receipt that he was recorded as an MSB member.  It had not been his intention to become a member of that Scheme and he believed that the election that he had completed prior to the first period remained valid and operative during the currency of the second period.  He contacted an officer of ComSuper (who administer the DFRDB and MSB Schemes) and was forwarded an election form.  He completed it and returned it within a day or so of 4 February 2008.  On 6 February 2008 a ComSuper officer decided that the election form had been completed after the commencement of the second period and he was put in the MSB (refer T12, p51).  Despite that decision, the applicant continued to receive DFRDB retirement pay until 14 August 2008.

15.     The applicant said that he did not understand that he would be required to complete another election form and felt that he was being punished, despite having lodged the election form within a matter of days of commencing the second period.  He noted that the respondent was not punished despite its error in allowing payments to be made when it would appear on the respondent's submissions that he had no entitlement (to those payments).  He submitted he should have been informed earlier than 14 August 2008 that he did not have an entitlement, and the payments of DFRDB benefits should not, consequently, have been paid to him.

submissions

16.     Mr Dillon acknowledged that an administrative error had been made in allowing payments to be made to the applicant when he did not have an entitlement.

17.     Nonetheless he said that his client was obliged to recover monies paid to the applicant because he did not ever have an entitlement to them.  It was the submission of the respondent that from 21 January 2008 the applicant was, by force of the legislation, a member of the MSB Scheme and accordingly, from that date, he did not have an entitlement to payments under the DFRDB Scheme.

18.     Mr Dillon relied on a recent decision of the Federal Court in Defence Force Retirement and Death Benefits Authority v Gregory [2009] FCA 875 delivered on 18 August 2009 (Gregory) and contended that by reason of the applicant resuming the second period, it being for less than 12 months, he was not an eligible member of the DFRDB Scheme by reason of not having made an election and he was therefore deemed to be a member of the MSB Scheme pursuant to s 6 of the MSB Act. Accordingly, the applicant had no entitlement under the DFRDB Scheme and the respondent was entitled to recover retirement pay made under the DFRDB Scheme (and which was paid until 14 August 2008).

19.     In Gregory, the member had been a member of the permanent forces.  He resigned and joined the Army Reserve.  In circumstances almost identical to the applicant he did not make an election before resuming with the Reserves.  Consequently, he became a member of the MBS and the payments thereafter made to him under the DFRDB Scheme were found to be payments to which he had no entitlement.  At paragraphs 61‑63, Cowdroy J decided:

61.The respondent’s alternative proposition cannot be sustained. Section 61B(3) clearly states that a person ‘must, before resuming service, in writing addressed to the Authority, elect whether or not to become a member of that [the MSB] scheme’. The respondent had made an election under s 132 of the DFRDB Act, but such election was a different election to that required by s 61B(3) which is clearly phrased as ‘before resuming service’ which refers back to s 61B(3)(a) which says ‘full-time service as a member of... the Reserve Forces’. The respondent intended to resume his service as a member of the Army Reserve for a continuous period of less than 12 months and he had not previously made an election under s 61B of the DFRDB Act to become a member of the MSB Scheme when he intended to resume CFTS (continuous full time service). Therefore an election under s 132, which was made while the respondent was rendering CFTS in the Permanent Military Forces, has no bearing on s 61B and a fresh election was required to be made. Such election did not occur. Further, s 5A(2)(b) says that the relevant election for the purposes of that section is one ‘under that section’, that is, s 61B.

62.The respondent’s submission that a failure to elect under s 61B has no consequence, cannot be sustained. The respondent’s failure to make an election under s 61B has the consequence that the respondent was not excluded from the operation of s 5A(1)(a) which, as already found, caused him to cease to be an ‘eligible member’ from the time he recommenced CFTS. Further, s 6 of the MSB Act provides ‘each of the following persons is, by force of this section, a member of the scheme [that is, the MSB scheme]’ and s 6(c) describes a class of persons into which the respondent falls as ‘a member of the reserves who is rendering [CFTS] under an undertaking to serve for a period of less than 12 months unless the member has elected not to become a member of the Scheme under section 61B of the DFRDB Act’. Subsection (2) of s 6 does not apply to the respondent for the reasons already mentioned. Therefore, whatever the DFRDB Act might say about the consequences of failing to elect under s 61B, the MSB Scheme makes clear the consequences, those being that a failure to elect under s 61B will cause a person in the situation of the respondent to become a member of the MSB scheme. Therefore, a provision exists clearly stating the consequences of a failure to make an election under s 61B.

63.Consequently, upon resuming CFTS and in failing to make an election under s 61B, the respondent was no longer an ‘eligible member’ under the DFRDB Act, and was transferred to the MSB scheme.

was there an overpayment

20.     Having regard to the circumstances described above and by regard to the applicable legislation I am satisfied:

(a)The applicant ceased to be engaged in full time service as a permanent member of the Australian Army on 26 August 2007. He is then deemed to have retired (refer s 5(2) of the DFRDB Act).

(b)On 10 September 2007 the applicant commenced a period of engagement in the Army Reserve which expired on 7 December 2007.  That period commenced after a break in the continuity of his service (of full time membership of the permanent Army) and from the commencement of the first period he cannot be regarded as having been engaged in continuous full time service.  From that date he ceased to be an eligible member of the Defence Force by reason of his retirement at 26 August 2007 (refer s 5(3) of the DFRDB Act).

(c)Prior to 10 September 2007 the applicant completed an election not to be a member of the MSB Scheme and thereafter, during the currency of the first period, he remained a member of the DFRDB Scheme and entitlements under that Scheme accrued to him.

(d)The applicant commenced another period of service (the second period) on 21 January 2008.  There was no continuity between the first and second periods of service.  The second period was due to expire on 18 January 2009.  Between 21 January 2008 and 18 January 2009 the applicant, as a member of the Army Reserve, rendered continuous full time service pursuant to an undertaking to serve for a period of less than 12 months.

(e)The applicant did not, before resuming service in the second period, complete an election not to become a member of the MSB Scheme (refer s 61B(3) of the DFRDB Act).

(f)Consequently, from 21 January 2008 the applicant was a member of the MSB Scheme by force of s 6(1)(c) of the MSB Act.

(g)By reason of the applicant no longer being a member of the DFRDB Scheme after 21 January 2008, he did not have an entitlement to retirement pay under the provisions of the DFRDB Act.

(h)After 21 January 2008 the applicant was paid retirement pay until 14 August 2008 in the nett sum of $13,250.18.

(i)By operation of law, the applicant received retirement pay in the above sum when he was not entitled and that sum is recoverable by the respondent pursuant to s 126 of the DFRDB Act.

recovery of overpayment

21.     The retirement payments made to the applicant between 21 January 2008 and 14 August 2008 were not, as a matter of law, payable to him. The respondent is entitled to recover those monies on behalf of the Commonwealth (refer s 126 of the DFRDB Act).

22.     The Social Security Act 1991 (the Act) at s 1237AAD permits waiver of the whole or part of a debt if it did not result wholly or partly from the debtor or another person making a false statement or false representation or failing to comply with the provision of the Act and there are special circumstances, other than financial hardship alone, that make it desirable to waive.  Section 1237A permits the Secretary to waive recovery of a proportion of a debt attributable solely to administrative error made by the Commonwealth if the payments which constitute the debt were received in good faith.

23.     The respondent relied on the Privy Council decision in Auckland Harbour Board v R [1924] AC 318 as authority that a debt payable to the Commonwealth is recoverable even if it did arise from administrative error unless waiver or write-off of the debt is permitted by legislation.

24. Whilst the DFRDB Act has no equivalent provisions to those found in the Social Security Act, s 126(5) would suggest that the respondent has a discretion to waive collection, in whole or part, of the amount overpaid to the applicant.

25.     In Director-General of Social Services v Hales (1997) 47 ALR 281, Shepherd J at [319] decided that the Auckland Harbour Board case does not negative the making of a decision to abandon recovery of an overpayment. A decision of that type, if made, would be in the proper exercise of a discretion, after consideration is given to the cost of such proceedings, the likelihood of recovery and the financial circumstances of the beneficiary (refer also the decision of Lockhart J at [307]).

26.     In the present case the applicant received benefits to which he was not entitled.  He has a sense of grievance that the errors of the respondent were not corrected until August 2008 after payments had been authorised to him for approximately seven months.  But he did receive monies to which he was not entitled and he has received benefit by receipt of those funds.  Mr Dillon submitted that the respondent would consent to recovery by instalments.

27.     The applicant is in debt to the respondent.  Whilst he was not overpaid by any misrepresentation or false statements, he omitted, innocently, (but erroneously) to comply with the MSB and DFRDB legislation.  He continued to receive monies, to which he was not entitled, despite knowing that DFRDB benefit was being paid when he was a member of the MSB Scheme.  Without knowing more, it would be appropriate, on the facts to recover.  But, administratively, the respondent may not make that decision.  It will no doubt exercise its discretion consistent with Hales.  If a decision to recover is made it will do so after it has received information from the applicant, which should be requested, concerning his financial circumstances and capacity to repay.

28.     In all of the circumstances I am satisfied that the applicant has received monies to which he was not entitled.  That part of the decision under review will be affirmed.  The remainder of the decision with respect to recovery is remitted to the respondent for the reasons expressed above.

recommendation

29.     A disturbing feature of this review – and which was not unlike the circumstances giving rise to the applicant in Gregory – was the obvious administrative failings on the part of the respondent in allowing or causing benefits to be paid to which the member had no entitlement.

30.     To its credit, the respondent by one of its officers, admitted the error and offered an apology by a letter to the applicant (T22, pp71-73).  Nonetheless, the applicant in fact put the respondent on notice that his membership of the MSB was inconsistent with continuing to receive benefits under the DFRDB Scheme yet the respondent's officers did nothing to cancel those payments until August 2008.  A summary of the relevant emails to and from the applicant (T20), the investigation into the payments (T22), the telephone attendances upon the applicant (T13-T19) and the advice given to him (T25) all indicate a level of service which was deficient and not indicative of competent administration.  Whilst the applicant did receive benefits under the MSB Scheme during the second period of service, it was learnt that the ending of his DFRBD membership will cause negative financial consequences, long term, when he eventually (and permanently) retires.  It is hoped by this review that the respondent will ensure that errors of a similar type are not ever repeated.

31.     Also concerning was the failure of the applicant to be provided with documents prior to commencement of the second period putting him on notice that he was resuming service and was again required to consider whether he would make an election.  In this regard it is noted that documentation of that type was made available to him prior to the first period and which necessarily permitted him to make an election.

32.     The applicant has been advised that he may well have rights of complaint to the Ombudsman but that it a matter beyond this review.  He has also been advised that he might have an entitlement against the respondent for defective administration if he is able to demonstrate loss (refer T25, p79).  That is a matter also beyond this review and the powers of this Tribunal.

I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Mr John Handley, Senior Member

Signed:         Grace Carney

Associate

Date of Hearing  12 October 2009
Date of Decision  26 October 2009
Solicitor for the Applicant          Self Represented
Solicitor for the Respondent     Mr A Dillon, Australian Government Solicitor