Purcell and Defence Force Retirement and Death Benefits Authority

[2007] AATA 1848

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2007] AATA 1848

ADMINISTRATIVE APPEALS TRIBUNAL                No.  V 200700005

GENERAL ADMINISTRATIVE DIVISION
Re		GERALD LAWRENCE PURCELL

Applicant

And DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY

Respondent

DECISION

Tribunal: G.D. Friedman, Senior Member

Date:11 October 2007

Place:Melbourne

Decision: The Tribunal affirms the decision under review.  

(sgd) G.D. Friedman

Senior Member

DEFENCE FORCE RETIREMENT AND DEATH BENEFITS - overpayment of pension - whether discretion to recover overpayment should be exercised

Defence Force Retirement and Death Benefits Act 1973 s 126(4)

Financial Management and Accountability Act 1997  ss 44, 47

Director-General of Social Services v Hales (1983) 47 ALR 281

Re Lokan and Defence Force Retirement and Death Benefits Authority [2007] AATA 1652

Riddell v Secretary, Department of Social Security (1993) 42 FCR 443

REASONS FOR DECISION

11 October 2007 G.D. Friedman, Senior Member

1.      Gerald Purcell retired from the Royal Australian Navy in 1988 after 26 years of service and received a lump sum and pension under the Defence Force Retirement and Death Benefits Scheme (the DFRDB Scheme).  On 12 January 2004 he re-entered the navy on a short-term full-time posting to East Timor, but did not elect to remain with the DFRDB Scheme.  In the absence of such election, Mr Purcell automatically joined the scheme which replaced the DFRDB Scheme, the Military Superannuation and Benefits Scheme (the MSB Scheme).  Under the MSB Scheme he was not entitled to receive benefits under the DFRDB Scheme during the posting.  However the respondent continued to make DFRDB pension payments to him totalling $14,675.33 (the debt) during his full-time service.  The respondent seeks to recover this debt.

2.      Mr Purcell acknowledges the debt but claims that the amount should not be recovered because of the respondent’s administrative errors and the detriment caused to him by the respondent’s actions.

ISSUE

3.      The issue before the Tribunal is whether the debt should be recovered.

WHAT IS THE LEGISLATIVE BACKGROUND FOR RECOVERY OF THE DEBT?

4.      The Defence Force Retirement and Death Benefits Act 1973 provides:

126 Recovery of amounts payable to Commonwealth

(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.

5.      The Financial Management and Accountability Act 1997 provides:

44 Promoting efficient, effective and ethical use of Commonwealth resources

(1)A Chief Executive must manage the affairs of the Agency in a way that promotes proper use of the Commonwealth resources for which the Chief Executive is responsible.

(2)If compliance with the requirements of the regulations, Finance Minister’s Orders, Special Instructions or any other law would hinder or prevent the proper use of those resources, the Chief Executive must manage so as to promote proper use of those resources to the greatest extent practicable while complying with those requirements.

(3)In this section:

proper use means efficient, effective and ethical use.

…

47 Recovery of debts

(1)A Chief Executive must pursue recovery of each debt for which the Chief Executive is responsible unless:

(a)the debt has been written off as authorised by an Act; or

(b)the Chief Executive is satisfied that the debt is not legally recoverable; or

(c)the Chief Executive considers that it is not economical to pursue recovery of the debt.

(2)For the purposes of subsection (1), a Chief Executive is responsible for:

(a)debts owing to the Commonwealth in respect of the operations of the Agency; and

(b)debts owing to the Commonwealth that the Finance Minister has allocated to the Chief Executive.

SHOULD THE AMOUNT OF OVERPAYMENT BE RECOVERED?

6.      Mr Purcell told the Tribunal that his deployment to East Timor was arranged at short notice. He telephoned the Commonwealth Superannuation Administration (Comsuper), which delivers services on behalf of the respondent, on the morning of his departure to discuss the terms and seek advice.  He said he was told that he would be transferred automatically to the MSB Scheme and that his DFRDB pension would continue to be paid.  About nine months after completing the deployment he was shocked to receive a letter from the respondent informing him of the overpayment and seeking repayment of the debt.

7.      Mr Purcell stated that in a letter dated 6 June 2005 to Comsuper he explained the circumstances of the advice given to him and sought reconsideration of the decision to seek repayment.  He said that on 10 June 2005 and 13 July 2005 he was informed that the matter was under consideration, even though he later discovered that the respondent had made a formal determination on 23 June 2005 to recover the debt.

8.      In relation to the period from June 2005 to December 2005 when he was waiting for reconsideration of the determination, Mr Purcell explained that he deferred making significant financial decisions.  However by mid-December 2005 he needed to assist his son and, believing that the respondent was not proceeding to recover the debt, he purchased a home unit after drawing on his savings and taking out a bank loan of $150,000.  He said that he then received a letter dated 23 December 2005 from the respondent apologising for the delay in responding to his letter of 6 June 2005 and referring to the possibility of requesting that the debt be waived or written off because of severe financial hardship.  The respondent invited him to repay the debt by instalments as an alternative to reconsideration.  Mr Purcell stated that he responded by letter dated 20 January 2006.  In his letter he did not claim severe financial hardship, but pointed out that he had gained little profit from the overpayment because of additional tax and a superannuation surcharge.

9.      Mr Purcell told the Tribunal that he did not receive a response until December 2006 and complained to the Commonwealth Ombudsman’s office about the respondent’s delay in reconsidering the matter.  He said that the respondent finally replied by letter dated 30 November 2006 informing him that reconsideration of his matter would take place on 15 December 2006.  He said that in a letter dated 15 December 2006 the respondent acknowledged that the overpayment arose through no fault of his, but affirmed the original decision.  He drew the Tribunal’s attention to the observations in the letter that he may wish to consider lodging a claim against the respondent for compensation.

10.     In respect of his application before the Tribunal, Mr Purcell said that he has tried unsuccessfully to resolve the outstanding issues by mediation and has incurred costs by seeking advice from his accountant about excess tax and superannuation surcharge arising from the overpayment.  He does acknowledge that the respondent had offered to reimburse the accountant’s fees in return for a withdrawal of his application.

11.     Mr Purcell was highly critical of the respondent’s actions since 2004 which he said include unnecessary delays and a litany of errors.  He said the internal review process and the application to the Tribunal have been stressful, and the respondent has not acted as a model litigant.  He estimated that he has lost $5600 to date, based on at least 8 days of lost earnings calculated at his usual hourly rate as a barrister.  He emphasised this amount would have been considerably higher if he had engaged legal representation.  Mr Purcell also said that the process would be more difficult for individuals who did not have the benefit of his legal qualifications and his experience of review tribunals.

12. The Tribunal accepts that s 126(4) of the Act gives it the power, standing in the shoes of the decision-maker, to exercise the discretion of whether to recover the debt. The Tribunal takes into account that in Riddell v Secretary, Department of Social Security (1993) 42 FCR 443 the Full Federal Court stated at 450:

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.

13.      The respondent has admitted that its processes were deficient and has 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.  There is no suggestion of fraud on Mr Purcell’s part.  He has admitted that he received public monies to which he was not entitled, and his tax and superannuation situation has now been adjusted to reflect the receipt of the overpayment.  He has not disputed the amount of the debt and does not claim to suffering from severe financial hardship.

14.      In Director-General of Social Services v Hales (1983) 47 ALR 281 the Federal Court referred to the discretion in deciding whether to recover an overpayment. Sheppard J noted that in ordinary circumstances the decision-maker’s public duty would require steps to be taken for the recovery of an overpayment unless circumstances were such to indicate a sound reason for not doing so. He observed at 323 that the fact that the applicant in that case had received public monies to which she was not lawfully entitled was a paramount consideration notwithstanding considerations of 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.

15.      In Re Lokan andDefence Force Retirement and Death Benefits Authority [2007] AATA 1652 the respondent accepted that an overpayment occurred through no fault of Mr Lokan. The Tribunal held that it must give effect to the paramount consideration aspect, and affirmed the part of the decision in which Mr Lokan received public monies to which he was not entitled, excluding tax instalments that the respondent had paid directly to the Deputy Commissioner of Taxation.

16.      The public duty to recover an overpayment referred to in Hales is reflected in ss 44 and 47 of the Financial Management and Accountability Act 1997.  The Tribunal is satisfied that the respondent’s actions in pursuing Mr Purcell for recovery of the overpayment followed normal principles and took into account relevant circumstances such as Mr Purcell’s capacity to repay, the costs to the Commonwealth of recovery action, and the overall interests of the Commonwealth.

17.      Although Mr Purcell stated that he was not claiming severe financial hardship as a basis for the exercise of discretion not to seek recovery of the debt, he said that he entered into financial commitments to purchase a home unit for his son in December 2005, and one of the factors in the decision to place himself into debt was the belief that the respondent was not proceeding to recover the debt.  However, he made financial decisions without waiting for reconsideration of the primary decision and there was no basis for his belief that the respondent was about to exercise the discretion in his favour, particularly in view of his criticism of the respondent’s actions in its handling of the matter.

18.      In respect of Mr Purcell’s claimed loss of earnings as a barrister resulting from the review application, the Tribunal does not accept that the debt should be reduced by this or any other amount.  The Tribunal has no power in applications of this nature to award costs or damages, which is in effect the outcome sought by Mr Purcell.  Any legal action contemplated by Mr Purcell against the respondent in another jurisdiction is entirely a matter for him.

19.      In balancing all relevant factors, the Tribunal observes that the paramount consideration is that Mr Purcell has received public monies to which he was not entitled.  The circumstances described by him, including administrative errors and delays by the respondent, are insufficient to constitute a sound reason for not recovering the debt.  For these reasons the discretion to recover the overpayment should not be exercised in his favour.

DECISION

20.      The Tribunal affirms the decision under review.

I certify that the twenty [20] preceding paragraphs are a true copy of the reasons for the decision of:

G.D. Friedman, Senior Member

(sgd) Mara Putnis

Associate

Date of hearing:  1 October 2007

Date of decision:  11 October 2007

Advocate for applicant:                Self-represented

Advocate for respondent:           Mr A. Dillon

Solicitor for respondent:              Australia Government Solicitor