Secretary, Department of Defence v Conroy

REGULATIONS 13 I have previously referred to s 5 which deals with effective service by members of the Reserves. It provides that a person may, for the purposes of the Act, cease to be a member of the Reserves (and therefore of the Defence Force) although he or she continues to be engaged as such a member. The distinction depends upon whether a person renders "effective service" in a particular service year. Relevantly, reg 8 of the Defence Home Ownership Assistance Scheme Regulations 2008 (Cth) (the "Regulations") defines the circumstances in which a member of the Reserves will have performed effective service for the purposes of the Act. The minimum requirement is that he or she "performs Reserve service on 20 or more days in a service year". The case has been conducted on the basis that the term "service year" means the period from 1 July in a calendar year to 30 June in the following calendar year. Section 3 of the Act contemplates the term being defined in the regulations. There is such a definition but it refers to s 4 of the Act, rather than s 3. I proceed on the basis that this is a typographical error. Reg 6 "recognizes" effective service. Part 2, Div 5 of the Regulations deals with combined service in the Permanent Forces and the Reserves.

BACKGROUND 14 The respondent ("Mr Conroy"), enlisted in the Regular Army on 18 May 1988 and transferred to the Standby Reserve on 7 July 2008, having attained the rank of Warrant Officer Class 2. His service included overseas service. His rank on discharge was the second highest non-commissioned rank. On or about 29 July 2008, he applied for a subsidy certificate (the "first application"). He was notified on 15 September 2008 that his application had been approved. More than a year after the first application, Mr Conroy and his wife bought another house and obtained a new home loan. He was informed that a new certificate was necessary in order that he continue to receive a subsidy under the Act. On 30 October 2009 the respondent applied for a second subsidy certificate (the "second application"). His application was refused by letter dated 2 November 2009 (the "refusal"). The respondent sought internal review of that decision. By a letter dated 12 February 2010 (the "internal review decision"), Mr Conroy was informed that the refusal had been upheld. Mr Conroy successfully sought review of the internal review decision in the Administrative Appeals Tribunal (the "Tribunal"). This is an appeal by the applicant (the "Secretary") against that decision.

THE FIRST APPLICATION 15 The first application, dated 14 July 2008, was received by the relevant department on 29 July 2008. Notwithstanding his transfer to the Standby Reserve, Mr Conroy indicated that he was no longer serving in the Defence Force, provided details of his service and attached a certificate of service. Lieutenant Colonel B James certified that the details of his service were correct. The difference between a separated member and a serving member is of some importance. A separated member derives entitlement to a subsidy certificate from his or her prior service. A serving member's entitlement depends upon his or her current service status. The effect of s 5 is that such a person must fulfil a minimum amount of service in a service year in order to retain entitlement to a subsidy certificate and a subsidy for that year, although s 45 moderates the effect of that requirement in some circumstances. 16 In the application Mr Conroy also indicated that he had previously had a subsidised loan under earlier legislation and had "revoked" his entitlement in 1991. The purpose of his application was to enable him to build or buy a home.

THE SECOND APPLICATION 17 The second application was in a slightly different form from the first. However Mr Conroy again indicated that he was not serving in the Defence Force. He asserted that he had completed 20 years of service, dating from his initial enlistment on 18 May 1988. On 2 November 2009, that is the on the day on which the Department of Veterans Affairs received the application, it advised Mr Conroy by letter that he did not meet the eligibility criteria for the issue of a subsidy certificate. The writer identified the various criteria, including the requirement that an applicant had not previously applied for a subsidy certificate since he or she stopped being a member of the Defence Force, and continued: I have considered your application and determined that we are unable to issue a subsidy certificate to you at this time because you have previously applied for a subsidy certificate since your discharge from the ADF. You separated from the permanent Army on 6 July 2008 and transferred to the inactive Reserve the following day. You lodged an Application for Subsidy Certificate on 29 July 2008 and a DHOAS Subsidy Certificate was issued on 15 September 2008. As you have not undertaken any Reserve service since you transferred to the inactive Reserves you cannot be considered a "serving member" under the DHOAS legislation.

THE STANDBY RESERVE 18 The term "inactive Reserves" reflected previous nomenclature. That body is now described as the "Standby Reserve". See reg 121(f) of the Defence (Personnel) Regulations 2002 (Cth) (the "Personnel Regulations") made pursuant to the Defence Act 1903 (Cth) (the "Defence Act"). The mechanism by which Mr Conroy was transferred to the Standby Reserve is unclear. Regulation 64(2) of those Regulations appears to provide that a member who has completed a period of service in the Permanent Forces is to be transferred to the Standby Reserve where, in general, he or she will remain until the compulsory retirement age for service in that organization. However reg 64(4)(c) suggests that such a transfer "is taken to be a retirement from the Defence Force, with effect from the transfer, for all purposes relating to the payment of benefits". Assuming that a subsidy pursuant to the Act is a "benefit", it would follow that if Mr Conroy was transferred to the Standby Reserve pursuant to reg 64, he was to be treated as having retired from the Defence Force for the purposes of the Act. If so, then he would be a separated member as defined in s 12 of the Act, notwithstanding his continued membership of the Standby Reserve. 19 In fact, Mr Conroy's Discharge or Transfer Certificate suggests that he was transferred pursuant to "reg 56B". There is no reg 56B, but reg 56(b) provides for transfer, upon application, from a Permanent Force to the Reserves. There seems to be no provision similar to reg 64(4)(c) applying to such a transfer. If reg 64(4) does not apply to a transfer pursuant to reg 56(b), then a member would not be taken to have retired from the Defence Force and would continue to be a serving member, although assigned to the Standby Reserve. I should add that I have not had the benefit of submissions concerning regs 56(b) and 64. 20 As I have observed, Mr Conroy asserted in both applications that he was, in effect, a separated member. That appears to have been his understanding of the position. However the subsidy certificate which he received following his first application was said to have been granted to him as a serving member. The distinction is of some significance. As a separated member, Mr Conroy could only be granted a subsidy certificate if he had not already applied for a certificate since the time at which he stopped being a member of the Defence Force, and if he applied within two years of that time. As a serving member of the Standby Reserve Mr Conroy could have obtained a certificate, assuming that he satisfied other requirements based upon his service in the Regular Army. However, in the event that he did not perform 20 days of service during the service year in which he received it, s 5 would be engaged. If the certificate was still in force, it might be cancelled pursuant to s 25. Any subsidy authorization could be revoked pursuant to s 47 and any payment recovered. However s 45 may have been engaged so that Mr Conroy's entitlement continued, solely upon the basis of his entitlement as a separated member. I will discuss that section at a later stage. Mr Conroy has not, in any year since he left the Regular Army, performed effective service. The Secretary has not sought to recover payments made to Mr Conroy, suggesting that he is being treated as having received his certificate as a separated member rather than as a serving member, perhaps because s 45 has been applied.

INTERNAL REVIEW 21 Mr Conroy sought review of the internal review decision by letter dated 16 November 2009. In that letter Mr Conroy wrote: On the 14 Jul 08 I applied for the DHOAS Certificate and I was fully aware that I would only be eligible for one certificate as I was now not a Defence Member. However, prior to applying and whilst I was a Defence Member, I spoke with several members from DHOAS and asked several questions one of which was the following: I stated that I may only live in the home I purchased for another 2 to 3 years and what would be my options if I [were] to find another home. At that time I was informed that I would be eligible to hold onto the entitlement if I was to turn the house into an investment property or that I would have 1 chance in changing my entitlement within the life of the loan by rolling it into my new purchase. This I understood and proceeded to apply knowing that I had those two options. On 26 Oct 09, my wife and I found another property that we wanted to purchase and make our primary residence… . The decision to purchase this property was [in part] made on what our current budget could cope with. A big part of the budget was DHOAS that we current [sic] have. Prior to signing any contracts we spoke with the bank (NAB) and they informed us that we would be eligible for a further home loan. One of the big attractions for the NAB was that we had the DHOAS. As I spoke to the bank they also [were] under the impression that I had one opportunity in which to transfer to the new home loan; however, they suggested that I contact DHOAS and inform them of the situation and confirm any changes. On the 28 Oct 09, I rang DHOAS and spoke to a member and informed them of my situation. I ask [sic] them to look at my current entitlement to make sure that I was able to transfer this to my new home. Again I was informed that everything was fine and all I needed to do was apply for a new certificate. I was also informed that as I was now not a Defence member I would only have the one opportunity in which to change DHOAS loan. This I understood and with this in mind and the banks [sic] approval we decided to sign a contract to purchase a new home. On the 30 Oct 09, I completed [an] application, attached all the required paperwork and posted it off to DHOAS. At approximately 1330h on the 02 Nov 09 I was contacted at home by DHOAS and informed that my application had arrived and been checked. The main nature for this call was to inform me that if I accept this certificate it would be the last time that I was able to do so under my entitlement. I said that I was fully aware of this and happy to continue with the application. I was also informed that everything looked in order and that I shouldn't have any problems with further approval. I was told all that needed to occur now was to send the application to the review board and a certificate would be in the mail next week. Not 30mins later I received another phone call from DHOAS that my application would now be declined because I already have received a certificate since discharge. Confused, I then informed this member that I have been repeatedly told that I had once chance within the life of the loan to change it. The decision was then explained in detail which I understood; however, I was also told that it may be unfortunate that people may have given me the wrong information over time. With all the above, the one common theme is that I was still eligible to change my current loan once within the life of the loan. This information was given to me on several occasions by the staff from DHOAS up and to the point where I had 2 phone calls within the space of 30mins with 2 separate personnel with two completely difference versions of eligibility status. I feel I have been totally mislead and ill informed. Because of the information provided by this organisation, which is the information in which I based my facts on, I feel that I may now fall into what I would call a financial nightmare. As the decision of in-elitibility occurred on the 2 Nov, it has left me [too] late to withdraw from the new contract for financial reasons. We now have no choice but to continue with this contract leaving us in a situation where regrettably we will definitely now have to sell our current home, thus causing us to loose [sic] our DHOAS entitlement completely. We are now left with a house that requires major renovations and a market which now indicates that interest rates maybe [sic] on the rise. As a member that has completed 20yrs service and deployed to many different operations theatres, I feel that I have been let down. I am about to completely lose an entitlement that would have continued for a further 16yrs and am lost for words. 22 As I understand it, Mr Conroy's complaint is that he received incorrect advice as to his entitlements under the Act. Some of that advice was given before he left the Regular Army, and some was given thereafter. In the advice received whilst he was still serving in the Regular Army, those giving it appear to have assumed that he already had, or would, before his transfer or discharge, obtain a certificate. The advice given after his transfer was apparently given on the assumption that he had done so. In other words, those advising assumed that he was a separated member who was entitled to one further certificate within two years of his leaving the Regular Army, such entitlement being pursuant to s 17 of the Act. In fact, the first application was made after separation, and so it was the only application which he could make as a separated member. Mr Conroy had not appreciated the misapprehension under which those advising him were labouring and so understood the advice as applying in his situation. 23 By letter dated 12 February 2010, the "Assistant Secretary Personnel Support Services" in the Department of Defence declined to vary the decision to refuse a certificate. After setting out the background to the application, the writer gave the following reasons for the decision: I recognise that DVA failed to identify that you were a separated member when you applied for the second Subsidy Certificate. This resulted in conflicting phone calls on 2 November 2009. My office has brought this issue to the attention of DVA. They have assured me they have reviewed the circumstances of your application and introduced measures to avoid a recurrence. However, DVA's advice in relation to your enquiries was correct. That is, you were eligible to apply for one Subsidy Certificate within two years post separation; and that you had one opportunity to change your loan within two years of discharge. However, DVA's advice in relation to your second enquiry assumed that you were a serving member when you applied for the first subsidy certificate which was used for the initial establishment of the DHOAS loan. Had you completed 20 days service, including at least one day Reserve service in financial year 2008-09, your discharge date for the purposes of DHOAS would have been extended to 30 June 2009 (rather than 7 July 2008), and you would have been eligible for a second Subsidy Certificate. Separating members are advised to apply for a Subsidy Certificate prior to discharge. In considering the information available to me, I confirm DVA's decision not to issue you a second Subsidy Certificate in accordance with Section 17(1)(c) of the DHOAS Act. This provision stipulates that eligible separated members can apply for one Subsidy Certificate only within two years after discharging from the ADF. It is regrettable that you find yourself in this situation, but the DHOAS legislation is complex, and neither DVA nor I have the discretion to make a decision contrary to provisions under the DHOAS Act, irrespective of a member's personal circumstances. The DHOAS Act provides no flexibility in this regard. If you complete effective Reserve service of at least 20 days within a financial year, you again will be recognised as a serving member and be eligible for a new Subsidy Certificate. You will be required to complete effective Reserve service during either 2009-10 or 2010-11 to retain your current entitlement.

THE TRIBUNAL'S DECISION 24 Mr Conroy applied to the Administrative Appeals Tribunal (the "Tribunal") for review of the internal review decision. His application is really a letter of complaint concerning the advice which he received. Nonetheless it was treated as engaging the Tribunal's jurisdiction. In its decision, published on 6 August 2010, the Tribunal observed at para 17: The Secretary has submitted that the "only relevant issue for this Tribunal to decide is whether the Applicant stopped being a member of the Defence Force for the purposes of this Scheme". The prior decisions have treated the applicant as not being a member of the Defence Force at the time when he made his application for further assistance. I therefore consider that this is appropriate for me to decide this issue that was outlined by the Secretary. My reasons have focused upon the evidence and law that I consider is relevant to that issue. As a matter of procedural fairness to both parties my decision will therefore focus upon whether for the purposes of the Act the applicant was on 30 October 2009 a member of the Defence Force. 25 At paras 21 and 22 the Tribunal continued: 21 The expression "Defence Force" is not defined in the Act. In my view, to understand that expression it is necessary for me to have regard to the Defence Act 1903 (Cth). Division 1 of Part III of the Defence Act 1903 (Cth) concerns the "Constitution of the Defence Force". Division 1 includes s 32A of the Defence Act 1903 (Cth) which provides that the Army Reserves consists of inter alia officers and soldiers transferred to the Army Reserve from the Regular Army. 22 In evidence is a Discharge or Transfer Certificate that was issued on 19 March 2008. That certificate is evidence of the transfer of the applicant to the Reserves under regulation 56 of the Defence (Personnel) Regulations 2002; the certificate provides for the transfer to be effected on 7 July 2008. That regulation provides that a member may apply to the Chief of the member's Service for permission to transfer from the Permanent Force of that Service to a category of the Reserves for that Service. The certificate is evidence of the approval of the transfer of the applicant to the Reserves. The applicant has also given evidence that he has transferred to the inactive Reserves. There is certainly no evidence before me that the service of the applicant has been terminated under Defence (Personnel) Regulations. Having regard to the evidence before me, I find that the applicant when he made his application on 30 October 2009 was a member of the Defence Force. 26 The Tribunal then proceeded to "consider whether the status of [Mr Conroy] as a member of the Defence Force is displaced by the operation of the Act". Central to that inquiry was the Tribunal's construction of s 5 of the Act, concerning which the Tribunal observed at para 24: I have taken the view that the purpose of s 5 is to enable the Secretary to vary the authorisation of subsidy to a member under s 45 of the Act. In my opinion the terms of s 5 does not operate to deem an applicant to be no longer be a member of the Defence Force. The commentary to clause 5 of the Defence Home Ownership Assistance Scheme Bill 2008 (Cth) makes it clear that the operation of clause 5 of the Bill is for "the purpose of the Scheme" and that the provision does not end a person's "engagement in the Reserves". 27 The Tribunal then concluded at para 26: I consider that in this instance it is appropriate to set aside the decision under review. Because of the operation of s 75(2) of the Act, that decision is the decision of the delegate which was made on 12 February 2010. The reasons of the delegate, in referring to s 17(1)(c) of the Act, contain the following remarks: "This provision stipulates that eligible separated members can apply for one Subsidy Certificate only within the two years after discharging from the ADF". These reasons reveal that an assumption that on 30 October 2009 the applicant had been discharged from the Defence Force when that is, on my view of the evidence, not the case. 28 The Tribunal set aside the decision and remitted the matter to the Secretary "with the direction that [Mr Conroy] is 'a member of the Defence Force' for the purposes of s 17(1)(c) of the [Act]". It is a little difficult to understand the significance of that direction. Its purpose was, I infer, to avoid application of the limitation in s 17(1)(c) to Mr Conroy. However, if he was a member, then he was also a member at the time of the first application and so was not entitled to apply as a separated member as he did not satisfy the requirement in s 12(c). If his application was treated as an application by a serving member (of the Standby Reserve), then he lost his entitlement when he failed to render effective service, unless the Tribunal also intended to hold that s 5 did not apply to s 25(b) and s 44(2)(a) of the Act.

THE APPEAL 29 This appeal is brought pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the "AAT Act"). Such an appeal must be "on a question of law". The Secretary's notice of appeal raises the following question: Whether [Mr Conroy], on 30 October 2009 when he made an application for a subsidy certificate under s.14 of the Act, was a member of the Defence Force for the purposes of s 17(1)(c) of the Act? 30 The Secretary advances three grounds of appeal, namely that: 1 The Tribunal erred in holding that s.5 of the Act had no application as to whether a person is to be treated as a member of the Defence Force for the purposes of considering whether the respondent was eligible for a subsidy certificate under the Act. 2 The Tribunal erred in holding that the respondent was, on 30 October 2009, a member of the Defence Force for the purposes of s.17(1)(c) of the Act by having reference to the Defence Act 1903 (Cth) and Defence (Personnel) Regulations 2002 (Cth). 3 The Tribunal erred in holding that the purpose of s.5 was restricted to only enabling the applicant to vary the authorisation of subsidy under s.45 of the Act. 31 The Secretary submits that the Tribunal wrongly held that Mr Conroy was, at the time of his second application, a member of the Defence Force and so was not prevented by s 17(1)(c) from making it. That result depended upon the Tribunal's view that s 5 did not apply generally for the purposes of the Act. The Tribunal considered that s 5 only applied for the purposes of s 45. That section may be engaged where, as contemplated by s 5, a member has not, during a relevant service year, performed effective service as a member of the Reserves. In those circumstances, the Secretary might, pursuant to s 44, revoke the authorization of subsidy payments. Any amounts paid would then be repayable by the member. However, if apart from his or her membership of the Reserves, the member would have been entitled to a subsidy certificate (and a subsidy), the Secretary may vary the authorization so that the subsidy continues to be payable. This mechanism would have been available to Mr Conroy, assuming that his certificate had been granted to him as a member of the Army Reserve and assuming other necessary qualifications. Upon his failure to perform effective service, the Secretary could have varied the authorization so that his entitlement depended upon his prior service in the Regular Army, and not his membership of the Army Reserve. In other words, he would be treated as a separated member because, pursuant to s 5, he was to be treated as, in effect, never having been a member of the Army Reserve. 32 Clearly, s 45 was designed to alleviate the effects of s 5 where a member of the Reserves was qualified to receive a subsidy without regard to ongoing service. However that proposition provides no basis for limiting the operation of s 5 to situations in which s 45 is engaged. The wording of s 5 clearly demonstrates an intention that it apply in connection with service in the Reserves for all relevant purposes under the Act. There is simply no textual justification for the Tribunal's attempt to limit its operation. 33 For the purposes of the Act, Mr Conroy has not been a member of the Standby Reserve during any service year since he left the Regular Army, save for the current service year. He is to be treated as having ceased to be a member of the Army Reserve during the 2008-2009 year by virtue of s 5(2)(b). It has not been suggested that his service in the Regular Army in that year was relevant in that regard. In each completed service year since 2008-2009, his failure to perform effective service led to his being deemed to have ceased to be a member immediately before the commencement of such year. He is presently a member for the purposes of the 2010-2011 year, but unless he performs effective service prior to the end of the year, he will be deemed not to have been a member during that year. He could apply for a certificate in the current year, assuming all other statutory requirements are met but if, at 30 June 2011, he has not performed his effective service, he will lose such entitlement, save to the extent that s 45 may protect him. The Tribunal erred in concluding that s 17(1)(c) did not disqualify Mr Conroy from obtaining a certificate. That decision must be set aside. 34 It does not follow that Mr Conroy's application to the Tribunal should be dismissed. Because of the approach taken by the Tribunal and, perhaps, by the parties, a number of issues were not identified as requiring consideration. I am by no means suggesting that such consideration will necessarily lead to a favourable outcome from Mr Conroy's point of view. However the matter must be dealt with according to law. Points for consideration include identification of the basis of his status as a member of the Standby Reserve, in particular whether he was transferred into that organization in a way which engaged reg 64(4) of the Personnel Regulations. That decision may bear upon the validity of his first application (purportedly made as a separated member). If the application was valid, the next question is whether the decision to grant a certificate upon the basis that he was a serving member was valid in the absence of an application on that basis. If not, then the Tribunal must decide whether his application is still pending. If so, he may be able to amend it to relate to his new home. If his original application was not valid then, again, the Tribunal must consider whether the grant of a certificate was valid. If not, then he may not have made an application of the kind contemplated in s 17(1)(c). I do not express a final opinion about any of these matters.

COMPENSATION 35 In the course of argument I mentioned to Mr Conroy the possibility of seeking compensation pursuant to the scheme known as "Compensation for Detriment Caused by Defective Administration". I understand that the Tribunal also raised that possibility. I do not assert that any such claim will necessarily be successful but, in the event that Mr Conroy is unsuccessful in future proceedings in the Tribunal, he should consider the possibility of such a claim.

ORDERS 36 I allow the appeal and set aside the Tribunal's decision. I remit the matter to the Tribunal for further consideration. I will hear submissions as to costs. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.