Lokan and Defence Force Retirement and Death Benefits Authority

[2007] AATA 1652

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1652

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2007/1198

GENERAL ADMINISTRATIVE DIVISION		)
Re		GEOFFREY ALLAN LOKAN

Applicant

And DEFENCE FORCE RETIREMENT & DEATH BENEFITS AUTHORITY

Respondent

DECISION

Tribunal Deputy President P E Hack SC

Date9 August 2007  

PlaceBrisbane

Decision The Tribunal varies the decision under review such that the sum of $21,352.86 is substituted in lieu of the amount of $29,791.86 as the amount to be recovered from the applicant by fortnightly instalments of $300.00.

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Deputy President

CATCHWORDS

DEFENCE AND WAR – Defence Force Retirement and Death Benefits – pension paid during period of re-enlistment – no entitlement to pension when re-enlisted - overpayment of pension – recovery of overpayment – no fault of applicant – decision varied to waive tax instalment amounts of payments

Defence Force Retirement and Death Benefits Act 1973 (Cth.) – ss 3, 61C, 99(2),(4), 126(4),(6)

Military Superannuation and Benefits Act 1991 (Cth.)

Director-General of Social Services v Hales (1983) 78 FLR 373

REASONS FOR DECISION

9 August 2007 Deputy President P E Hack SC    

1.The applicant, Mr Geoffrey Lokan, served in the Royal Australian Air Force from January 1979 to April 2000 when he retired from the Permanent Air Force and transferred to the Reserve. In August 2003 Mr Lokan re-enlisted in the Permanent Air Force for a period of 4 years. That enlistment ended in March 2007.

2.Prior to his retirement in 2000, Mr Lokan had been a member of the Defence Force Retirement and Death Benefit Scheme (“the DFRDB Scheme”) i.e. the superannuation scheme established under the Defence Force Retirement and Death Benefits Act 1973 (Cth.). On retirement, he was entitled to be paid a pension under the DFRDB scheme. Mr Lokan elected to commute part of his pension entitlement to a lump sum and to be paid the balance by way of a fortnightly pension. Mr Lokan received this pension until August 2005. At that time the Commonwealth Superannuation Authority (“ComSuper”), the body administering the DFRDB Scheme, learnt that Mr Lokan had re-enlisted in the Permanent Air Force. ComSuper took the view, which is not challenged before me, that Mr Lokan was not entitled to receive his pension while he was a member of the Permanent Air Force. Moreover, it contended that the amounts paid to Mr Lokan in the period of almost two years from his re-enlistment, totalling $29,791.86, had to be repaid by Mr Lokan.

3.On 31 October 2006 the respondent, the Defence Force Retirement and Death Benefit Authority (“the Authority”), by a delegate, made a decision to approve recovery of the amount of $29,791.86 from Mr Lokan. That decision was affirmed by the Authority on reconsideration on 23 March 2007. The Authority decided to recover the full amount of the overpayment by fortnightly payments of $300 and did not seek to recover interest on amounts outstanding.

4.Mr Lokan seeks review in this Tribunal of the Authority’s decision to recover the amount.

5.It is not in issue that there was an overpayment. When he re-enlisted in the Permanent Air Force in August 2003, Mr Lokan was a “recipient member” as that term is defined by s 3 of the DFRDB Act. On re-enlistment he became a member of the Military Superannuation and Benefits scheme (“MSB scheme”) i.e. the superannuation scheme established under the Military Superannuation and Benefits Act 1991 (Cth.) 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.”

6.In this case, Mr Lokan’s pension was not suspended; it continued being paid until August 2005. In these circumstances, Mr Lokan has been paid amounts of benefit that were not payable. In those circumstances s 126(4) of the DFRDB Act is 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.”

7.The DFRDB Act provides a mechanism for both internal and external review. A person who is affected by a decision of the Authority and is dissatisfied with the decision may request the Authority to reconsider the decision by giving notice in writing to the Authority within a prescribed period[1]. On receipt of a request for reconsideration, the Authority is required to reconsider the decision and may confirm or vary the decision as it thinks fit[2]. Application may be made to the Tribunal for review of decisions of the Authority that have been confirmed or varied under s 99(4) of the DFRDB Act[3].

[1]        See s 99(2) of the DFRDB Act.

[2]       See s 99(4) of the DFRDB Act.

[3]        See s 126(6) of the DFRDB Act.

8.The DFRDB Act makes no other provision for the recovery of amounts overpaid and, in particular, makes no express provision regarding the circumstances in which a discretion not to recover might be exercised. Mr Dillon, who appeared for the Authority, accepted that there was such a discretion. He drew attention to the observations of Sheppard J in Director-General of Social Services v Hales[4] where, in the context of the social security legislation, his Honour spoke of the discretion to proceed to recover an overpayment or to do nothing, as well as the public duty “in ordinary circumstances” that requires steps to be taken to recover monies paid without parliamentary authority. The consideration that the respondent had received public monies to which she was not lawfully entitled was, his Honour considered, a “paramount consideration” in the exercise of the discretion[5].

[4]        (1983) 78 FLR 373 at 411.

[5] 78 FLR 373 at 413.

9.Mr Lokan put before me evidence of his present financial circumstances. He is employed, although that employment is to end shortly. He does not anticipate any difficulty in obtaining employment in the future. His financial circumstances are relatively comfortable. He has a reasonable surplus of income over expenditure each fortnight and a significant excess of assets over liabilities. As he has ceased being a member of the MSB scheme his DFRDB Scheme pension will resume, bringing him a fortnightly pension of $393 with effect from March 2007.

10.It is relevant to note the circumstances under which the overpayment has arisen. At the time of his discharge in 2000, Mr Lokan received a letter dated 23 May 2000 from ComSuper that enclosed “General Information” about his superannuation benefits. Mr Lokan did not recall whether he read that document. Had he done so he would have read a passage at the end of the document that said:

“If you rejoin the Defence Force and join the MSB Scheme, regardless of the length of re-entry your pension will be cancelled for the period of your service and restored on exit (with appropriate CPI adjustment).”

11.Curiously, nowhere in the document was Mr Lokan told that he was obliged to notify ComSuper if he rejoined the Defence Force and he says, and I accept, that he was not told that information when he did rejoin in 2003. Moreover, he apparently ought to have been provided with, but was not, a form described as a “DM 100”. That document, as I understand it, would have alerted Mr Lokan to the fact that his pension would be cancelled were he to rejoin the Defence Force. Mr Lokan says, and his evidence was not challenged, that had he been aware of that he would not have rejoined. Without the pension, he was only $4,000 per year better off back in the Permanent Air Force than he would have been had he stayed in civilian employment and retained his DFRDB Scheme pension. For that $4,000 per year he was required to relocate to Williamstown, away from his family.

12.The Authority accepts that the overpayment arose through no fault of Mr Lokan. If there is fault, it is fault on the part of the Air Force.

13.In these circumstances it is necessary to consider the exercise of the discretion. The starting point is that Mr Lokan has received public monies to which he had no lawful entitlement. Prima facie, those monies must be repaid. But it is useful to consider precisely what Mr Lokan received. The Authority paid a total of $30,535.86 but Mr Lokan did not receive all of this amount. $9,183.00 was deducted from fortnightly payments and remitted to the Deputy Commissioner of Taxation as PAYG tax instalments and paid into Consolidated Revenue. Mr Lokan got no benefit from the PAYG instalment because they represented tax payable on monies to which he was not entitled.

14.Mr Dillon for the Authority suggested that Mr Lokan’s remedy was to lodge amended income tax returns for the 2004 and 2005 income tax years. Assuming that that course is open to him, I am unable to see any justification for requiring Mr Lokan to do so. The Authority does not suggest it would meet Mr Lokan’s costs of preparing and lodging amended returns for those years. But there is, as it seems to me, a more fundamental reason why lodging amended returns is not necessary. Were it to be done, it would result in no more than the Deputy Commissioner of Taxation, on behalf of the Commonwealth of Australia, drawing a cheque or cheques in favour of Mr Lokan which Mr Lokan would, in effect, pay to the Authority on behalf of the Commonwealth of Australia. The transaction is the reverse of that undertaken when the pension was paid when it ought not to have been paid. The Authority paid the pension, including the PAYG instalments, out of consolidated revenue. The PAYG instalments were paid to the Deputy Commissioner who paid them back to consolidated revenue.

15.In my view, there is no practical benefit that would be achieved by requiring Mr Lokan to repay the PAYG instalments. I would not, in these circumstances, require Mr Lokan to repay the amounts of tax.

16.There remains the question of the balance. I considered, at one stage of the argument, that Mr Lokan might have had a defence by way of change of position or estoppel to a claim by the Commonwealth for monies had and received. But I am satisfied that they have no application. It is not as if Mr Lokan rejoined the Defence Force on the basis of an affirmative representation that he was entitled to retain his DFRDB Scheme. Had he read, and recalled the detail of, the “General Information” enclosed with the letter of 23 May 2000 his state of mind would have been that his pension would have been cancelled on re-enlistment. The fact that it was not cancelled and continued to be paid might have amounted to a representation or a course of conduct from which Mr Lokan concluded that he was entitled to retain the pension, but that cannot be operative here because he changed his position before that conduct. That is, even if there had been a representation, there was no relevant reliance.

17.In the result I consider I must give effect to the “paramount consideration” that Mr Lokan received, albeit with no fault on his part, public monies to which he was not entitled. The decision made so far as it relates to monies actually paid to Mr Lokan is, in my opinion, the preferable decision.

18.As I understand the evidence, the PAYG instalments in the 2004 and 2005 tax years total $8,439. The $744 deducted in the 2006 tax year was recovered. Thus, the net amount paid to Mr Lokan which ought to be recovered is $21,352.86. It will give effect to my views if I vary the decision under review by substituting the sum of $21,352.86 as the amount to be recovered. The other components of the decision, relating to the amount of fortnightly interest and waiving interest will be unaffected.   

I certify that the 18 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC

Signed:         .....................................................................................
  Eleanor O’Gorman, Associate

Date of Hearing  6 August 2007
Date of Decision  9 August 2007
The Applicant in person            
Solicitors for the Respondent    Australian Government Solicitor