William Whitfield and Commonwealth Superannuation Corporation
[2012] AATA 613
•13 September 2012
[2012] AATA 613
Division GENERAL ADMINISTRATIVE DIVISION File Number
2012/0007
Re
William Whitfield
APPLICANT
And
Commonwealth Superannuation Corporation
RESPONDENT
DECISION
Tribunal Ms N Isenberg, Senior Member
Date 13 September 2012 Place Sydney The decision under review is set aside and in substitution thereof the Tribunal decides that:
1.The Applicant did not make a valid and effective election under s 61B(3) of the Defence Force Retirement and Death Benefits Act 1973; and
2.The Applicant was overpaid an amount of $3,861.17 but that overpayment is to be written off pursuant to s 126(4).
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Ms N Isenberg, Senior Member
CATCHWORDS
MILITARY SUPERANNUATION: Applicant required to elect whether or not to become a member of Military Superannuation Benefits Scheme prior to resuming service - Respondent did not receive election form by due date - Ceased membership of Defence Force Retirement and Death Benefits at relevant date - Automatic transfer to Military Superannuation Benefits Scheme - Overpaid pension - Debt waived - Decision under review is set aside.
LEGISLATION
Acts Interpretation Act 1901, s 29
Defence Force Retirement and Death Benefits Act 1973, ss 61B, 126
Evidence Act 1995, s 160
Military Superannuation and Benefits Act 1991, s 6
CASES
Bullock and Commonwealth Superannuation Corporation [2012] AATA 274
Defence Force Retirement and Death Benefits Authority v Gregory [1993] HCA 21; (2009) 176 CLR 535
Defence Force Retirement and Death Benefits Authority v Mathews (2011) 192 CLR 197
Director-General of Social Security v Hales [1983] FCA 81; (1983) 78 FLR 373
Marston and Defence Force Retirement and Death Benefits Authority [2011] AATA 291
Metcalf and Commonwealth Superannuation Corporation [2012] AATA 261
Saunders and Commissioner of Superannuation [1994] AATA 14REASONS FOR DECISION
Ms N Isenberg, Senior Member
13 September 2012
BACKGROUND
On 24 June 1975, William Whitfield joined the Australian Defence Force (ADF). He achieved the rank of Chief Petty Officer in the Navy. After completing 20 years of service, he was discharged on 23 June 1995. He was paid retirement benefits under s 23 of the Defence Force Retirement and Death Benefits Act 1973 (DFRDB Act).
Between May 1996 and May 2011, the Applicant resumed service with the ADF for a number of periods, providing both continuous full time service (CFTS) and some Reserve ‘diary days’.
On 30 May 2011, the Applicant re-entered the ADF for another period of CFTS with an expected completion date of 5 September 2011. As this period was for less than 12 months, the Applicant was required to make an election, under s 61B(3) of the DFRDB Act, whether or not to become a member of the Military Superannuation and Benefits Scheme (MSBS).
The Respondent did not receive the Applicant’s election until August 2011. As a result, the Applicant was transferred to the MSBS.
The Applicant was paid benefits of $3,861.17 under the DFRDB Act to which, as a member of MSBS, he would not be entitled.
ISSUES BEFORE THE TRIBUNAL
Whether:
·the Applicant, before commencing CFTS of less than 12 months on 30 May 2012, made an election to remain in the DFRDB Scheme;
·the Applicant’s election was in accordance with s 61B(3) of the DFRDB Act;
·the amount of $3,861.17 is a recoverable debt, and, if so, whether there are reasons it should be written off pursuant to s 126(4) of the DRFDB Act.
LEGISLATIVE FRAMEWORK
Section 61B(3) of the DFRDB Act relevantly states that:
(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 (MSB Act) relevantly states that:
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 that:
(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
CONSIDERATION
Did the applicant make an election to remain in the DFRDB scheme before resuming CFTS on 30 May 2011?
The Applicant’s evidence was that he had served in the Navy for 20 years, retiring on 23 June 1995 with the rank of Chief Petty Officer. Throughout his service he had been a member of the DFRDB superannuation scheme. During the latter part of his service the MSBS was introduced but, despite various inducements, it was less attractive than the DFRDB scheme and he, and many other members, did not transfer to it.
In 1996, shortly after leaving the Navy, he undertook his first period of CFTS of less than 12 months as an instructor. He was obliged to make an election about his preferred scheme. The form contained a note stating that “after having completed this form prior to re-entry, on the first day of service hand the form to your pay officer who will place a copy of it on your file and will then send the original to Comsuper [the agency that administers both schemes]”. He said that was precisely what he did. He agreed that he had faxed it to Comsuper and that the original was to be forwarded by the pay office.
In 2009, he undertook another period of CFTS but for more than 12 months, and his election was faxed to Comsuper by the Reserve cell at Headquarters.
The Applicant was due to commence another period of CFTS of less than 12 months in March 2010. From the papers it appeared that on 28 November 2009 his election form was faxed to Comsuper, but he did not know precisely by whom. He said he thought he also mailed it to Comsuper. He was referred to records of telephone conversations noted in the Respondent’s papers that he had telephoned on 1, 9 and 14 December 2009 about his forms. He said that he telephoned in order to make sure the forms had been received before the Christmas stand-down period which would commence in mid-December. He wanted to ensure that his pension would continue over the holiday period. On 7 January 2010, it was confirmed that the forms had been received and he wanted to know when his pension would start. On 20 January 2010, he was informed that his pension would commence on 28 January 2010.
The Applicant was asked in cross-examination about those earlier occasions when he had followed up with Comsuper, in particular in 2009, and he said that he was concerned because the pension was due to restart and he was anxious to have money over the holiday period.
He undertook another period of CFTS for less than 12 months, from 17 January 2011. He says he had posted his election form to Comsuper. Before this period ended on about 9 May 2011, he was offered another period of CFTS for less than 12 months. He started preparing his paperwork, including his ‘D100’, the election form. The Applicant was to start on 24 May 2011, but the start date was postponed until a position against which his service was to be held could be identified. He was only informed shortly before 27 May 2011 that a position had been identified and he could start the following Monday, namely 30 May 2011.
He said that on 27 May 2011, at 8:00 am or perhaps earlier in the day, he attended the Customer Service Centre at HMAS Watson and spoke to Robin Hodge, a Customer Service Officer. Mr Hodge gave him a package with other CFTS service documents. Some of the forms needed to be witnessed and so he immediately went to CPO Linnett to do that.
CPO Linnett provided a statutory declaration to the effect that “on or about 27 May 2011” the Applicant had come to see him between CFTS contracts in order to complete and dispatch paperwork prior to the commencement of his next CFTS contract. He wrote that he recalled witnessing paperwork that related to the Applicant’s contract and that this was a form titled “Australian Naval Reserve Continuous Full Time Service” form – colloquially referred to as sign-on papers. He wrote that he was aware that after witnessing the form, the Applicant proceeded to the Customer Service Centre to fax/post that and other documents. The Applicant noted that his sign-on papers bear Mr Linnett’s signature above the date 27 May 2011.
The Applicant said he then went back to see Mr Hodge at about 9:30 am and gave him copies of the documents. Mr Hodge knew it was urgent and had to be done that day, and he said he would dispatch the documents. The Applicant very specifically said he did not ask Mr Hodge to send the D100 to Comsuper and that Mr Hodge was only a conduit to DEFPAY.
The Applicant said that after leaving Mr Hodge he went straight to Vaucluse Post Office where he obtained a stamp to put on the envelope addressed to Comsuper. The letter was taken by the staff member inside the post office and she put it in the tray behind her. He said it did not occur to him to have it marked for express or registered post.
He was asked in cross-examination why he had not sought access to Mr Hodge’s fax in order to send the D100 to Comsuper as he had apparently done in the past. He said that he had only asked Mr Hodge to send it to the relevant people and didn’t specify that it should be by fax. He did not inform Comsuper that it was in the post. There is a postal facility at Watsons Bay largely for internal use and is somewhat unreliable.
He said that it was only when his pension was stopped in August 2011 that he made enquiries of Comsuper. He had assumed they had received the D100.
The Applicant was referred to the D100 and agreed he was aware that he was obliged to send his response prior to starting work, and that he needed to supply a copy to DEFPAY as well. He said that the reference in the Comsuper file note dated 11 August 2011 that “Member advised that he gave his ‘pack’ including his D100 to [DEFPAY]”, was ambiguous because in fact he had given a copy to Mr Hodge to be forwarded to DEFPAY and he had posted the original to Comsuper. He said that when he first learned there was a problem with his pension he had immediately told Comsuper that the D100 had already been sent. This is confirmed in a Comsuper record of telephone contact of 11 August 2011.
He said the reference in a telephone contact record dated 11 August 2011, where he was reported to have said that he had given his form to the Customer Service Centre to mail to DEFPAY so they could fax the D100 to Comsuper, was clearly an error because there was no reason to have DEFPAY forward the D100. He had never communicated with Comsuper that way in the past, nor did it make sense to interpose DEFPAY in the process. In cross-examination he said there was no possibility that he had given the forms to Mr Hodge to fax to Comsuper. If that were the case he would have the original but he does not because he sent it in the post.
The Applicant observed that two of the Respondent’s officers had said that he had done the election correctly in the past and they could not see why he had not on this occasion.
It was noted that the D100 is signed and dated 30 May 2011. He said that date was an error as the dates in the document in relation to when he was re-entering the ADF were changed to reflect the changed commencement date, he had inadvertently carried over the same date to the signature block. He said at the time he was rushed and flustered because he knew it had to be done prior to his re-entry. He said the form requires only that he make the election before resumption of CFTS.
He said in cross-examination that it was not possible that he had signed a document on 30 May 2011. He referred to Mr Linnett’s statutory declaration and also to a statutory declaration by Mr Hodge. There Mr Hodge wrote :
Similarly in mid May CPO Whitfield attended the CSC and obtained a further full CFTS Enlistment pack for the renewal of his full time service contract. Once again he completed all documentation and returned them to me at the CSC on 27/05/2011. I checked all documents and ensured that the D100 was included. I faxed all these documents to the PAC in Raymond Terrace on that date. After faxing the D100 I returned the original to CPA Whitfield for forwarding to Belconnen.
It was pointed out in cross-examination that Mr Hodge had said the D100 was submitted on 27 May 2011, whereas the fax to DEFPAY was dated 10:40 am on (Monday) 30 May. The Applicant thought it was possible that the fax may not have gone through until Monday because the fax would not have been monitored after the weekend stand down, which is from 1:00 pm Friday. The Applicant said that it was not possible that Mr Hodge’s memory was faulty. He agreed that he had also gone into the office on 30 May 2011 but his sole purpose in attending on 27 May 2011 was to lodge the D100 and other pay forms. He remained clear that he had given his documents to Mr Hodge on 27 May 2011.
He said that he arrived at work on Monday, 30 May 2011 between 7:30 and 8:00 am. He was obliged to collect his posting form from the Customer Service Centre and to take it around to various points, such as security and medical, in order to effectively sign on. He agreed that CFTS required his attendance from 7:30 to 8:00 am but that concept of CFTS was that he was on duty full-time.
The Applicant pointed out that a number of the file notes regarding his telephone contact with Comsuper were ambiguous or incomprehensible. He also noted that conversations with at least two officers were omitted completely. There was also some confusion in Comsuper which had resulted in him being transferred back to the DFRDB scheme and then re-transferred to MSBS. There had been errors in the calculation of the claimed debt. He said that if there was that level of error in Comsuper, then it was not unreasonable to come to a view that Comsuper was mistaken in claiming not to have received the form he posted on 27 May 2011.
I found the Applicant to be a credible witness. He gave his evidence in a clear and straight-forward manner. He has been reasonably thorough in his record-keeping. In answer to the Tribunal’s questioning, and in the course of cross-examination, he responded persuasively to alternative versions of what had transpired on or around 27 May 2011. For the most part he appeared to have a good recollection of these and other events related to his service. His evidence was broadly consistent with his previous detailed accounts and the statutory declarations of Messrs Hodge and Linnett.
I am prepared to accept, on the balance of probabilities, that the Applicant on 27 May 2011 attended the Customer Service Office at HMAS Watson and provided the customer service officer, Mr Hodge, with a copy of the D100 to send to DEFPAY. I also accept that he attended Vaucluse Post Office that day and sent the original D100 to Comsuper by regular mail.
Was the applicant’s election was in accordance with s 61B(3) of the DFRDB Act?
The Respondent did not receive the D100, which I have found was sent by the Applicant on 27 May 2011. However, the question is whether this meets the requirements of s 61B(3), that is, did the Applicant, before resuming service, elect, in writing addressed to CSC, whether or not to become a member of that scheme.
In Defence Force Retirement and Death Benefits Authority v Gregory [1993] HCA 21; (2009) 176 CLR 535 and Defence Force Retirement and Death Benefits Authority v Mathews (2011) 192 CLR 197 the strictness of the election test was highlighted. Unlike some other superannuation schemes, there is no scope for a retrospective election.
I was referred to Metcalf and Commonwealth Superannuation Corporation [2012] AATA 261 and Bullock and Commonwealth Superannuation Corporation [2012] AATA 274 where there had been some delegation to another person to on-forward the D100. That was not the Applicant’s contention in this case, but those cases also note the strictness of the test.
A more helpful case was that of Marston and Defence Force Retirement and Death Benefits Authority [2011] AATA 291. There the Tribunal found that the Applicant had made a valid election, notwithstanding that the D100 was not received by Comsuper until sometime after the Applicant had started work. The difference in that case was that the Applicant had contacted Comsuper by phone, prior to starting work, to inform it of his election. The Applicant in that matter had already completed the D100 but did not send it until later in the day, after he had started work.
In Marston Webb M stated:
13. It is clear enough that a written election must be made prior to the resumption of service: between the time the undertaking to serve is given by a person and the time that person actually resumes service [20]. But this does not mean in all cases that the election must be received by the Authority prior to that point in time. The section does not expressly require it; the requirement is for the election to be effectively made prior to the resumption of service. As will appear, to my mind, for an election to be effective it must be properly made in writing and telegraphed or communicated to the Authority. These are matters for proof in the face of uncertainty.
…
15. Without an express requirement for lodgement of a written election with the Authority prior to the particular service, I would not too readily accept the rigid construction for which the Authority contends. A construction of that kind would not take into any account of the wide variety of circumstances in which a person may have exercised the choice conferred by statutory right and made an election in writing addressed to the Authority, without serving the written election on the Authority prior to the resumption of the particular period of service. Under the Authority’s construction an election would not be effective if it was sent by registered post and communicated orally to the Authority before the start of the particular period of service but was not received until after the service had commenced. Nor would it be effective if the election was received by Defence, a paymaster for example, and communicated orally to the Authority prior to the period of service but was not received by the Authority until after the service had commenced. One can conceive of many such examples.
16. The only guidance the DFRDB Act provides is the direction that the person ‘must, before resuming service, in writing addressed to the Authority, elect whether or not to become a member of [the MSB Scheme].’ The election to be made under 61B(3) for the purposes of the DFRDB Act and the MSB Act is a statutory right to opt out of the default MSB Scheme. This is a right that requires the exercise of choice. It is crystal clear that section 61B(3) imposes express limits on the exercise of that choice, once properly preconditioned, concerning the manner and the timeframe of the election, where failure to comply, or failure to elect, will result in the default statutory scheme being applied [21]. The election is to be made prior to the resumption of a period of service and it is to be in writing and addressed to the Authority. Satisfaction of these requirements does not require service of the written election on the Authority prior to the commencement of the period of service; service is not expressly or impliedly required by the section, nor do the objects and purposes of the DFRDB Act and the MSB Act require it. Nevertheless, for the election to be effective, it must be communicated to the Authority prior to the commencement of the particular period of service. I would not proceed too readily to accept any further limit on the exercise of the statutory right without express provision in the terms of the DFRDB Act or the MSB Act.
…
19. An election requires knowledge on the part of the elector and words or conduct sufficient to amount to the making of the election [23]… In some cases it is not necessary for the person to exercise “a consciously ‘choosing mind’, as there must, in fraud, be a ‘wicked mind’” [24], with that task being assigned to another, but this is not such a case. Section 61B(3) of the DFRDB confers a statutory right on a person to make an election to opt out of the [MSBS]; as I have said, an election of that kind requires the exercise of choice. Ordinarily, unequivocal words or conduct are required to constitute an election – one cannot approbate and reprobate; it ensures that there is no inconsistency in the enforcement of the person's rights [25]
…
21. In the ordinary course, whether or not service of a written election is required, for an election to be effective it is necessary, by words or conduct, to make the content of the election known to the other party [28]. That, to my mind, is what section 61B(3) requires. The making of an election under section 61B(3) is completed when the election is communicated to the Authority. In the usual run of cases it may be that the communication includes the written election itself, but what is required, at the minimum, is communication of the content of the election…
22. Once an election is overtly made, or at least not later than when it is communicated to affected parties, it is binding on the person who made it [29]…
The Respondent accepted that Marston was correctly decided and accepted that there may be circumstances where, for various operational or other reasons, a member undertaking CFTS may be precluded from providing the written communication prior to commencing the CFTS. However, applying Marston, some form of communication with Comsuper was required – whether by telephone or email – before resuming work.
In this matter there was no such communication.
I have come to the view that the Applicant did not make an effective election not to become a member of the MSBS. The essential preconditions for an election are not made out: although the Applicant formalised his election in writing, addressed as required, he did not communicate its contents to the Respondent prior to resuming service as required by s 61B(3).
Was there an overpayment of $3,861.17 is a recoverable debt, and, if so, are there reasons it should be written off?
The Applicant did not dispute that if he had been transferred to the MSBS then he had been overpaid DFRDB benefits. Although the Respondent has undertaken the calculations on at least two occasions, there was no evidence that the amount now claimed was incorrect. I find that the Applicant was overpaid an amount of $3,861.17 under s 61C of the DFRDB Act. That amount is a recoverable debt.
I then to turn to consider whether there were circumstances such as to warrant the writing-off of the overpayment under s 126(4) of the DFRDB Act in accordance with the principles in Director-General of Social Security v Hales (1983) 47 ALR 281. That case provides guidance as to the exercise of the discretion to write off or waive debts where it is viewed by the decision-maker that the circumstances give rise to hardship or unfairness if the debts were to be recovered in full.
The Applicant’s evidence was that he is currently unemployed and lives off his DFRDB pension, which is approximately $900 per fortnight. In addition, he receives a small veteran’s pension in the sum of about $320 per fortnight. He has no other source of income except from ad hoc ‘diary days’, which pay about $150 per day tax-free. There was also some evidence that the consequence of transfer to the MSBS adversely affects the Applicant’s ongoing financial situation.
He has debts of $100,000. He previously owed a total of $180,000 but over the last five years has been able to reduce it to the current level.
His rental expenses are $480 per week and he has a tenant who contributes about $150 per week towards that. He hopes the tenant will be able to make greater contributions until he can get a job. He does not own any property and has taken a loan to finance his car. His only luxury is cable TV at a cost of $100 per month. He has less than $1,000 in cash.
He described his financial situation as being “in a bad way” and that he can “barely struggle”. He said that he could probably persuade someone to lend him sufficient money to pay back the loan but that would only increase his debt.
The Respondent conceded that the Applicant continued to receive DFRDB retirement pay after resuming CFTS on 30 May 2011 through no fault of his own. It was not the Respondent’s case that the Applicant knew he was receiving money to which he is not entitled.
Therefore, in consideration of the factors identified in Hales, I find that the evidence of the Applicant’s circumstances are such as to warrant the writing-off of the overpayment.
DECISION
The decision under review is set aside and the Tribunal finds that:
(a)The Applicant did not make a valid and effective election to remain in the DFRDB scheme; and
(b)The Applicant was overpaid an amount of $3,861.17 but that overpayment is to be written off pursuant to s 126(4) of the DFRDB Act.
I certify that the preceding 48 (forty-eight) paragraphs are a true copy of the reasons for the decision herein of Ms N Isenberg, Senior Member.
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Associate
Dated 13 September 2012
Date of hearing
28 August 2012
Applicant In person Counsel for the Respondent Mr A Giugni Solicitors for the Respondent Australian Government Solicitor
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