Williams and Defence Force Retirement and Death Benefits Authority

[2008] AATA 585

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 585

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/0119

GENERAL ADMINISTRATIVE DIVISION		)
Re		OWEN WILLIAMS

Applicant

And DEFENCE FORCE RETIREMENT AND DEATH BENEFITS AUTHORITY

Respondent

DECISION

Tribunal Senior Member Bernard J McCabe

Date8 July 2008

PlaceBrisbane

Decision The Tribunal affirms the decision under review.

......................[Sgd]........................

Senior Member

CATCHWORDS

PUBLIC ADMINISTRATION – Defence Force Retirement Benefits – Whether a debt owed to the Commonwealth – Defence Force Retirement scheme – Military Superannuation scheme – Applicant did not elect to stay with Defence Force Retirement scheme before employment circumstances changed – Debt should not be written off – Decision affirmed

Defence Force and Retirement Benefits Act 1973 (Cth), ss 23, 61B, 61C, 126

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

Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281

REASONS FOR DECISION

8 July 2008 Senior Member Bernard J McCabe         

1.      The Australian Defence Forces (“the ADF”) changed the superannuation and retirement arrangements for its members some years ago. The old scheme, known as the Defence Force Retirement and Death Benefits scheme (“the DFRDB scheme”), is managed by the respondent. The scheme was established by the Defence Force Retirement and Death Benefits Act 1973 (“the DFRDB Act”). A decision was taken not to offer coverage under the DFRDB scheme to newer service members. Those individuals are covered under the Military Superannuation Benefits scheme (“the MSB scheme”). The MSB scheme appears to be a conventional superannuation scheme, albeit one adapted for the special purposes of the ADF. The MSB scheme was established by the Military Superannuation and Benefits Act 1991 (“the MSB Act”). The MSB scheme does not include all of the same benefits that were payable under the old DFRDB scheme. The MSB scheme is the default option; individuals who might otherwise be entitled to coverage under the old scheme must elect to remain with the scheme if their employment arrangements change, failing which they are paid under the MSB scheme. This case deals with what happens when a member of the ADF does not make an election when their employment arrangements change.

Does the applicant owe a debt to the commonwealth?

2. Mr Owen Williams was a senior non-commissioned officer when he retired from the Army on 28 February 2005 after 35 years of service. He was entitled to benefits paid under the DFRDB scheme upon his retirement from continuous full-time service: s 23 of the DFRDB Act. He signed a D20 form (see T-Documents, at document T4) in which he elected to take part of his entitlements in the form of a lump sum payment with the balance as fortnightly retirement pay.

3.      The applicant’s retirement from full-time service did not signal the end of his association with the ADF. He joined the Army Reserve and served on a part-time basis after he was discharged from the Army. He resumed continuous full-time service in November 2006 for a six month deployment to the Solomon Islands.

4. Section 61B of the DFRDB Act provides that a person receiving benefits under the DFRDB scheme who is planning to resume continuous full-time service with the ADF must elect whether he or she will join the MSB scheme or be covered by the DFRDB scheme. The section makes it clear that the member must notify the respondent in writing of his election before he or she resumes service. That advice is set out at the end of a letter, dated 3 March 2005, sent to the applicant explaining his entitlements (T-Documents, at document T5). 

5.      Mr Williams says he contacted the respondent’s offices by telephone before he resumed full-time service with the ADF in 2006. He says he was aware there might be consequences for his entitlements under the DFRDB scheme if he signed up for 12 months or longer, but he was under the impression that he would not be prejudiced if he joined for a shorter period. He said he was reassured by the conversation he had on the telephone.

6.      I have no reason to doubt Mr Williams’s account of his conversation and his understanding of his entitlements. He says the advice he received was either wrong or the correct advice was not pressed upon him.

7. The respondent informed the Tribunal that a member planning to rejoin the ADF would ordinarily make his election in a form DM100. It is unclear whether Mr Williams ever completed a DM100 form; I was not provided with a copy if he did. In any event, it is apparent Mr Williams did not make an election to stay with the DFRDB scheme before he rejoined the ADF. In those circumstances, he was deemed to be a member of the MSB scheme: s 6(1)(c) of the MSB Act.

8. As a member of the MSB scheme, Mr Williams was ineligible to receive retirement pay under the DFRDB Act: s 61C. But Mr Williams did not appreciate that his entitlement to retirement pay had been suspended. Nor, it seems, did the respondent – at least not until after the applicant completed his period of full-time engagement with the ADF in May 2007. The respondent continued to pay Mr Williams from the DFRDB scheme while he was a member of the MSB scheme.

9. Mr Williams received retirement pay in the amount of $13,569.91 from the DFRDB scheme while he was a member of the MSB scheme. Once the respondent realised the mistake, it informed Mr Williams and decided the money had to be recovered as a debt: see T-Documents, at document T8. The power to recover amounts paid to a person who was not entitled to receive those monies is found in s 126 of the DFRDB Act.

10.     The applicant was predictably upset by this turn of events because the MSB scheme is less generous than the DFRDB scheme. He does not see why he should be required to return payments he would have been entitled to receive under the DFRDB scheme if he had simply signed a document – a document that should have been explained more clearly when he was discussing re-engagement.

11.     I understand the sense of frustration Mr Williams must feel. Unfortunately, there is nothing that can be done. The law makes it clear that, in the absence of an election in writing prior to re-engagement, the applicant becomes a member of the MSB scheme and the rules applicable to that scheme take effect. There is no scope in the legislation for making a retrospective election. That is, the decision-maker is not permitted to allow a member to elect to remain with the DFRDB scheme after the date of re-engagement.

12.     It follows the applicant did incur a debt to the Commonwealth in the amount of $13,569.91.

Should the debt be recovered or written off?

13. I have already noted the power to recover debts is set out in s 126 of the DFRDB Act. The respondent is permitted to write off a debt that is otherwise due and owing in certain circumstances under that provision. There is no general power of waiver like that which exists in the Social Security Act 1991.

14. Section 126 does not specify what matters ought to be taken into account when considering whether to exercise the power of write off, but the respondent submits those matters are well known. It referred me in particular to the Full Federal Court’s decision in Director-General of Social Services v Hales [1983] FCA 81; (1983) 47 ALR 281. In that case, Sheppard J said (at 319-320):

If an overpayment is detected, the question will arise as to whether it is sensible to pursue the person to whom it has been made. He may be quite impecunious; that would be likely to be the case more often than not in the area of social service benefits. The pursuit of such a claim may involve the throwing away of good money after bad. In other cases a compromise may be offered. Is it to be suggested that the Director-General has no power to accept half of what is owing if that seems a sensible course having regard to a pensioner's means? In other cases wisdom might indicate that action should await the day when a payee's financial circumstances may change. There may be something known of his private affairs which would suggest that his fortunes may change for the better at some future time. Or it may be a case where the provisions of s 140(2) may be thought to be likely to become applicable in the future due to the payee then becoming entitled to a different benefit under the Act. In such a case the Director-General is expressly vested with a discretion to determine whether he should apply the sub-section or not.

15.     The respondent formulated a series of questions for me to consider based on the reasoning in Hales. I agree those questions are appropriate and I will address the issues they raise below.

16.     Did the overpayment occur as a result of innocent mistake or fraud? I am satisfied the applicant was not acting improperly. There is no question of fraud.

17.     Are there good prospects of recovering the money if debt recovery proceedings were commenced in court? For reasons I have explained, I am satisfied the debt exists and is recoverable.

18.     How will the debtor’s financial circumstances be affected? The applicant will experience some pain if he is required to repay the money, but the evidence before me suggests he has the capacity to pay. I am satisfied he will not experience undue hardship, particularly in circumstances where the respondent has said it will accept instalment repayments over a year and not impose interest. I note that an instalment payment program is authorised under s 126(5) of the DFRDB Act.

19.     I am satisfied there are no other matters that suggest the money should not be recovered, and there is no reason why the recovery process should not be commenced forthwith. Indeed, it would be unfair not to recover the money in circumstances where other individuals have undoubtedly fallen victim to the same inflexible rules. It was not suggested the applicant was being treated any differently.

Conclusion

20.     I have already indicated my sympathy for men of action like Mr Williams who may not have been aware of the consequences attaching to a job the community is glad they have taken on. The respondent and the ADF may need to consider the way they bring those consequences to the attention of former servicemen and servicewomen who rejoin the ranks. That is of little comfort to Mr Williams, however. In his case at least, the decision under review must be affirmed.

I certify that the 20 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe

Signed:................................[Sgd]..............................................
  Michael Buckingham, Associate

Date of Hearing  2 May 2008
Date of Decision  8 July 2008
Applicant was self-represented
Solicitor for the Respondent     Australian Government Solicitor