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Secretary, Department of Defence v Perry [2011] FCA 214 (15 March 2011)

Last Updated: 16 March 2011

FEDERAL COURT OF AUSTRALIA

Secretary, Department of Defence v Perry [2011] FCA 214

Citation:		Secretary, Department of Defence v Perry [2011] FCA 214
Appeal from:		Perry and Secretary, Department of Defence [2010] AATA 458
Parties:		SECRETARY, DEPARTMENT OF DEFENCE v RAYMOND PERRY
File number:		QUD 277 of 2010
Judge:		DOWSETT J
Date of judgment:		15 March 2011
Catchwords:		DEFENCE – Defence Home Ownership Assistance Scheme – application for subsidy certificate – meaning of effective service – eligibility for a subsidy credit – the effect of Regulation 20 of the Defence Home Ownership Assistance Scheme Regulations 2008 (Cth)
Legislation:		Defence Home Ownership Assistance Scheme Act 2008  (Cth)  ss 3 ,  5 ,  7 ,  8 , 11,  12 ,  14 ,  16 ,  17 ,  22 ,  25 ,  27 ,  44 ,  46 ,  47 , 71,  76  Defence Act 1903 (Cth) s 30 Air Force Act 1923 (Cth) ss 4A, 4B, 4C Administrative Appeals Tribunal Act 1975 (Cth) s 44 Defence Home Ownership Assistance Scheme Regulations 2008 (Cth) regs 8, 15, 20
Date of hearing:	5 November 2010
Place:	Brisbane
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	44
Counsel for the Appellant:	Mr SA McLeod
Solicitor for the Appellant:	Clayton Utz
Counsel for the Respondent:	The Respondent appeared in person

THE COURT ORDERS THAT:

1. The appeal be allowed;
2. the decision of the Administrative Appeals Tribunal dated 18 June 2010 be set aside; and
3. the application to that Tribunal for review of the decision of the delegate of the Assistant Secretary, Personnel Support Services in the Department of Defence be dismissed.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

THE ACT

1. The Commonwealth has long recognised service in the armed forces by providing members and former members with financial assistance in connection with housing. Such assistance has also been used as an incentive to continued service. The  Defence Home Ownership Assistance Scheme Act 2008  (Cth) (the “Act”) came into effect on 1 July 2008. Its long title explains that it is:

[a]n Act to establish a scheme to provide financial assistance to members of the Defence Force, and certain other persons, for the purchase, maintenance and development of their homes, and for related purposes.

2.  Part 2  of the Act identifies classes of “eligible” persons.  Section 7  provides:

A person is eligible if the person is eligible as any of the following:
(a) a serving member (see  section 8) ;
(b) an incapacitated member (see  section 9) ;
(c) a rejoining incapacitated member (see section 10);
(d) a rejoining member (see  section 11) ;
(e) a separated member (see  section 12) ;
(f) an old scheme member (see  section 13). 

3. For present purposes, the potentially relevant categories are “serving member”, “rejoining member” and “separated member”. The eligibility requirements for these categories are set out in  ss 8 ,  11  and  12 . Section 8 provides:

(1) A person is eligible as a serving member at a particular time (the eligibility time) if, at that time, the person:

(a) is a member of the Defence Force; and
(b) has completed (whether before, on or after the commencing day) the relevant qualifying service period under subsection (2).

(2) The qualifying service period for a serving member is:

(a) if the member is, at the eligibility time, a member of the Permanent Forces – 4 years of effective service; and
(b) if the member is, at the eligibility time, a member of the Reserves – 8 years of effective service; and
(c) ...

(3) A person is not eligible as a serving member at a particular time if the person is eligible as a rejoining incapacitated member (see  section 10)  or as a rejoining member (see section 11) at that time.

4.  Section 11  provides:

A person is eligible as a rejoining member at a particular time (the eligibility time) if the person:
(a) before, on or after the commencing day, stopped being a member of the Defence Force; and
(b) was eligible immediately before he or she stopped being a member; and
(c) before, on or after the commencing day, again became a member of the Defence Force within 5 years after the day on which the person stopped being a member; and
(d) is a member of the Defence Force at the eligibility time.

5.  Section 12  provides:

A person is eligible as a separated member at a particular time if the person:
(a) on or after 1 July 2008, stopped being a member of the Defence Force; and
(b) was eligible immediately before he or she stopped being a member; and
(c) has not again become a member of the Defence Force.

6. Terms in  ss 8 ,  11  and  12  are relevantly defined in  s 3  as follows:

Permanent Forces means the Permanent Navy, the Regular Army or the Permanent Air Force.
Reserves means the Naval Reserve, the Army Reserve or the Air Force Reserve.
effective service, in relation to a person who is, or has been, a member of the Defence Force, means service in the Defence Force by the person that:
(a) if the person has, at any time before, on or after the commencing day, stopped being a member of the Defence Force, and, more than 5 years later, again become a member of the Defence Force – does not include service before the person again became a member of the Defence Force; and
(b) in any case – is recognised as effective service in accordance with the regulations.
service year means a year prescribed by regulations made for the purposes of the definition of effective service in this section.

7. The terms “serving member”, “Defence Force” and “member of the Defence Force” are not defined in the Act. However the Defence Act 1903 (Cth) (the “Defence Act”) provides assistance in this regard. I will address that legislation at a later stage. However, s 5 deals with “[w]hen a person is a member of the Reserves”, providing that:

Membership of the Reserves

(1) For the purposes of this Act, a person who has been engaged (by enlistment, appointment or transfer) as a member of the Reserves at a particular time (the engagement time) is to be treated as a member of the Reserves until:

(a) the engagement ends; or
(b) during a service year:

(i) the engagement does not end; but
(ii) the person does not perform effective service as a member of the Reserves.

Effect of failure to perform effective service

(2) If a person’s membership of the Reserves ends under paragraph (1)(b) in relation to a service year, this Act applies to the person, and is taken to have applied to the person, as if he or she had:

(a) in the case of a person who was a member of the Reserves at the end of the previous service year – stopped being a member of the Reserves immediately after the end of the previous service year; or
(b) in any other case – not been engaged as a member of the Reserves at the engagement time.

8. Under the Act, financial assistance becomes available to a person once that person receives a “subsidy certificate” and satisfies certain other conditions. Applications for, and the issue of subsidy certificates are dealt with in Pt 3 of the Act. Section 14 provides:

(1) A person may apply to the Secretary for a subsidy certificate.
(2) An application must be in the approved form.

9. The term “Secretary” is defined in s 3 as meaning the “Secretary of the Department”. The word “Department” is not defined in the Act, although it is apparently a reference to the Department of Defence. The appellant is the Secretary of that Department. I shall henceforth refer to the appellant as the “Secretary”.
10. Section 16 provides:

(1) This section applies if a person applies for a subsidy certificate in accordance with section 14.

(2) The Secretary must give a subsidy certificate to the applicant if:

(a) section 17, 18, 19 or 20 applies; and
(b) either:

(i) the applicant has a service credit (see section 46) ...

(3) The Secretary must refuse to give a subsidy certificate to the applicant if subsection (2) does not apply ... .

11. Section 17(1) of the Act relevantly provides as follows:

Subject to this section, the Secretary must give a subsidy certificate to the applicant if the Secretary is satisfied that the applicant:
(a) is eligible; and
(b) does not hold a subsidy certificate that is in force; and
(c) if the applicant is not a member of the Defence Force – has not previously applied for a subsidy certificate since he or she stopped being a member of the Defence Force.

THE DEFENCE ACT

12. As I have said, eligibility pursuant to ss 8, 11 and 12 depends upon membership or past membership of the Defence Force. As I have also said, that term is not defined in the Act. Section 30 of the Defence Act provides that the Defence Force (the “Defence Force”) consists of three arms: the Australian Navy (the “Navy”), the Australian Army (the “Army”) and the Australian Air Force (the “Air Force”). Section 4A of the Air Force Act 1923 (Cth) relevantly provides that the Air Force consists of the Permanent Air Force (the “Permanent Air Force”) and the Air Force Reserve (the “Australian Reserves”). Section 4B provides that the Permanent Air Force consists of officers appointed to, and airmen enlisted in the Permanent Air Force, and officers and airmen transferred to the Permanent Air Force from the Air Force Reserve, the Navy or the Army. Section 4C provides that the Air Force Reserve consists of officers appointed to, and airmen enlisted in, the Air Force Reserve and officers and airmen transferred to the Air Force Reserve from the Permanent Air Force, the Navy or the Army. The term “Reserves” is used in s 5 of the Act to describe the Navy, Army and Air Force Reserves collectively. In these reasons, the terms “Air Force Reserve” and “Reserves” will be used interchangeably. For present purposes membership of the Air Force Reserve is of some importance. I have previously referred to s 5 which provides that a person may, for the purposes of the Act, cease to be a member of the “Reserves” although he or she continues to be a member pursuant to the Defence Act. The distinction depends upon whether a person renders “effective service” in a particular service year.
13. Part 3 Div 3 prescribes the effective period of operation of a certificate. Part 3 Div 4 deals with variation and cancellation of certificates. Part 4 deals with the subsidy, including entitlements, duration, revocation and variation, the identification of service credits and other matters.

REGULATIONS

14. Whether a person performs effective service during a service year is determined by reference to the Defence Home Ownership Assistance Scheme Regulations 2008 (Cth) (“the Regulations”). Relevantly, reg 8 defines the circumstances in which a member of the Reserves will have performed effective service. The minimum requirement is that he or she “performs Reserve service on 20 or more days in a service year”. This 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. Part 2 of the regulations prescribes the meaning of the term “effective service”. Part 2 Div 2 deals with service in the Permanent Forces or the Reserves. Part 2 Div 5 deals with combined service in both. In Pt 2 Div 6, reg 20 provides:

(1) If:
(a) a member's service is not effective service under this Part; and
(b) the Secretary is satisfied that exceptional circumstances exist;

the Secretary may, on the application of a member, treat the member's service as effective service.

(2) Without limiting subregulation (1), the following are taken to be exceptional circumstances:
(a) the member has had an extended period of illness or injury that prevents the member from performing their effective service;
(b) service has been performed but, as a result of a defective decision, is not recognised as service.

THE DECISION

15. This case concerns a decision pursuant to s 44 of the Act to revoke an authorization for the payment of a subsidy. Section 44 relevantly provides:

Scope
(1) This section applies if:
(a) the Secretary authorises the payment of subsidy to a subsidised borrower under section 27 in relation to a subsidised loan, on the basis of a subsidy certificate; and
(b) as a result, subsidy has been paid to the subsidised borrower during an entitlement period.

Revocation of authorisation
(2) The Secretary may, by written notice to the subsidised borrower, revoke the authorisation of the payment of subsidy to the subsidised borrower in relation to the entitlement period if the Secretary is satisfied that:
(a) the subsidy certificate ought not to have been given; or
(b) the subsidy certificate was only given because of a false or misleading statement by the subsidised borrower (or anyone else); or
(c) payment of subsidy at any time during the entitlement period was only made (or continued) because of a false or misleading statement by the subsidised borrower (or anyone else).

(3) The Secretary may give a notice under subsection (2) during the entitlement period, or at any time after the end of the entitlement period.

Effect of revocation
(4) If an authorisation is revoked under this section, subsidy is taken not to have become payable to the subsidised borrower during the entitlement period.

Notice to load provider
(5) The Secretary must give a copy of a notice under subsection (2) to the loan provider who made the loan to the subsidised borrower.

If the subsidised borrower has died
(6) If the subsidised borrower has died, the Secretary may revoke the authorisation of the payment of subsidy to the subsidised borrower by giving a notice under subsection (2) to the borrower's legal personal representative.

If the subsidised borrower is a surviving partner
(7) In the application of this section to a surviving partner (of a deceased partner) who is a subsidised borrower because of section 60 or 61:
(a) a reference in paragraph (2)(c) to the payment of subsidy includes a reference to the payment of subsidy to the deceased partner during the entitlement period; and
(b) subsection (4) does not apply to the deceased partner's entitlement to subsidy.

16. Section 71 of the Act provides for internal review of reviewable decisions. A decision to revoke an authorization pursuant to s 44 is a reviewable decision. Pursuant to s 76 a decision by way of review is, itself, reviewable by the Administrative Appeal Tribunal (the “Tribunal”) pursuant to the Administrative Appeals Tribunal Act 1975 (Cth) (the “AAT Act”).

THE RESPONDENT AND HIS SERVICE

17. The respondent (“Air Commodore Perry”) served in the Permanent Air Force from 10 March 1966 until 11 July 2000 when he transferred to the Air Force Reserve, of which he remains a member. His service in the Permanent Air Force included two periods of “war-like service”. He served as a pilot, flying Sabre, Mirage and F111 aircraft. He commanded the F111 wing at Amberley and later, had higher command responsibilities. Clearly, it was in the national interest that the Air Force continue to have access to his ability, training and experience after the conclusion of his full time service. However he has performed very little service as a member of the Air Force Reserve. Documentary evidence indicates that he served 5 days in the year 2004-05, 16 days in the year 2005-06, 2 days in 2006-07 and perhaps .2 of a day (or perhaps 2 hours) in 2008-09. In about July 2008 some uncertainty arose as to his status in the Air Force Reserve. This led to his being appointed to a “War Establishment (Band 4)” position within the Office of Director-General, Personnel-Reserves. In this capacity he may be called upon to perform high level responsibilities in the Air Force for up to 90 days in any one year. During his service in the Permanent Air Force he qualified for housing assistance under previous legislation and took advantage of such assistance. There is evidence in the appeal book as to the extent of the benefit which he derived from that service. Such benefit may be relevant for some purposes under the Act.

AIR COMMODORE PERRY’S APPLICATION

18. Sections 1 and 2 of the Act came into effect on 23 June 2008 and the balance of the Act, on 1 July 2008. On 4 August 2008, Air Commodore Perry signed his application for a subsidy and forwarded it to the relevant authority by letter bearing the same date. The relevant form required an applicant to provide details of his or her service history. Air Commodore Perry listed his service in the Permanent Air Force, including his two periods of war-like service. He also indicated that he had served in the “AR” from 11 July 2000 until “present”. The “AR” is the “Active Reserve”. This service information was verified by Squadron Leader Norman Siggee of 23 Squadron at Amberley. The relevant form was, according to a statement on the front page, to be used in applying for a subsidy for which the applicant was eligible as a serving member of the Australian Defence Force on or after 1 July 2008, or the surviving partner of such a person. The form also indicated that if a person had been discharged from service prior to 1 July 2008, he or she might be eligible for benefits under a different legislative scheme. This statement reflects the content of s 12 of the Act which provides that a “separated member” is only eligible if he or she ceases to be a member of the Defence Force on or after 1 July 2008. I understand the term “separated member” to mean, generally, “former member”. Thus, Air Commodore Perry would not have qualified for a subsidy under the Act as a former member unless he had been serving as at 1 July 2008 or thereafter. He applied as a serving member. As at 4 August 2008, his status as a serving member depended upon his membership of the Air Force Reserve.

THE CERTIFICATE

19. On 2 September 2008, Air Commodore Perry was informed that his application had been successful. He was also advised as follows:

Please note that it is a requirement of the [Act] that you be a member of the ADF on or after 1 July 2008 to receive ... assistance [under the Act]. For Reservists, this requires you to complete at least 20 days of Reserve service within this financial year.

At the end of 2008-09, we will be auditing the status of Reservists who have received ... subsidy payments. If you have not met this requirement, you will be liable to pay back any ... monies paid into your ... home loan account.

20. During 2008-2009 Air Commodore Perry received various amounts by way of subsidy. At some stage, presumably prior to 30 June 2009, the “National Manager, Defence Homes Group” sent a letter to members of the Reserves stressing the obligation to perform 20 days’ service during the 2008-2009 year in order to retain eligibility for the subsidy. When Air Commodore Perry became aware of the service requirement he took steps to obtain appropriate duties. However he was told that no such duties were available. As a result he was unable to satisfy the requirement that he complete at least 20 days of service during the 2008-2009 financial year. On 7 August 2009, the National Manager wrote to him, pointing out that he had not performed any effective service during the relevant year, and that he had not applied for his service to be deemed effective pursuant to reg 20. The National Manager also advised him that as a result, she had determined that he was not a member of the Reserves on or after 1 July 2008, and that he was therefore ineligible for a subsidy certificate or a subsidy. His alleged “overpayments” were identified, totalling (with interest) $2,516.84. The National Manager indicated that in the absence of other arrangements, the Department would contact the relevant “Home Loan Provider” to recover that amount from his account.
21. The letter referred to his ineligibility both for a certificate and for a subsidy. A certificate could be cancelled pursuant to s 25 if it had been given to a person who was not entitled to it, or if it was given as the result of a false or misleading statement. However, in this case, the certificate was probably spent by the operation of s 22. Authorization of payment of the subsidy could be revoked pursuant to s 44 if the certificate ought not to have been given, or if it was given because of a false or misleading statement, or if any payment had been made because of such a statement. It seems that the decision-maker acted pursuant to s 44 upon the basis that the certificate ought not to have been granted.

INTERNAL REVIEW

22. Air Commodore Perry applied for review of this decision on the basis of “special circumstances”. Those circumstances were the difficulty with his status as a member of the Air Force Reserve and the subsequent unavailability of tasks. On 23 November 2009, a delegate of the Secretary of the Department of Defence confirmed the decision. In brief reasons, the decision-maker said that Air Commodore Perry had not performed effective service in the 2008-2009 year. The decision-maker also noted that he had not rendered effective service in any year since his transfer to the Air Force Reserve, indicating that in those circumstances, he could not consider Air Commodore Perry’s claim to special circumstances “because your break in service, which was in excess of five years, determines that you were ineligible for the Subsidy Certificate”.
23. This problem arises out of the operation of ss 3, 5, 8 and 11. As Air Commodore Perry had not given effective service in the years between his departure from the Permanent Air Force and 1 July 2008, the effect of s 5 was that for the purposes of the Act, he was not a member of the Air Force Reserve during any of those service years except, possibly, in the year 2000-2001. His status in that year would depend upon how his 10 days of service in the Permanent Air Force should be treated pursuant to the regulations. However such status is of no consequence in view of his failure to perform 20 days’ service in each of the following years.
24. It follows that even if Air Commodore Perry had given effective service in the 2008-2009 service year, he would not have the qualifying period of service required by s 8(2). This is because, pursuant to the definition of “effective service” in s 3, a person who has ceased to be a member and, after a period in excess of five years, rejoins, cannot count previous service as effective service. The effect of s 5 is that for the purposes of the Act, Air Commodore Perry ceased to be a member of the Air Force Reserve immediately after 30 June 2000 or 30 June 2001, depending upon the treatment of his service in July 2000. None of this would have mattered if Air Commodore Perry had been entitled to a subsidy as a separated member, but s 12 applies only to a person who stopped being a member on or after 1 July 2008. If, because of s 5, he is to be treated as not having been a member in any year in which he failed to perform effective service, then it follows that he ceased to be a member on 1 July 2001 or 1 July 2002, long before 1 July 2008. At the time of his application he was a member of the Reserves, but such membership was retrospectively negated when, at the end of the year, he had failed to perform effective service. At the time of his application, he was a member, but without the necessary years of service. In order to become eligible as a serving member pursuant to s 8, he must complete eight years of effective service. He has completed none. He cannot be a rejoining member pursuant to s 11 because, for the purposes of the Act, he did not rejoin within five years.
25. Further reasons were supplied on 22 January 2010. In them the delegate noted that:

... [Air Commodore] Perry failed to complete effective Reserve service (20 days service) in any financial year after he transferred to the Reserve Forces.
Under section 5, [Air Commodore] Perry was therefore not deemed a member of the Reserve Forces.

26. These reasons differed from those which accompanied the original decision and those given in the letter of 23 November 2009. Originally, the basis for cancelling his entitlement to the subsidy had been his failure to perform 20 days’ service in the 2008-2009 financial year. The letter of 23 November 2009 gave similar reasons although it also referred to his failure to perform service in earlier years. This seems to have been treated as relevant to the reg 20 discretion. However, in the reasons dated 22 January 2010, it is asserted that Air Commodore Perry had not been entitled to the certificate because he had not been an effective member of the Air Force Reserve at any time after his transfer from the Permanent Air Force. In those circumstances, the question of exceptional circumstances in the 2008-2009 year was irrelevant.

REVIEW IN THE AAT

27. Air Commodore Perry applied to the Tribunal for review of the decision. At the hearing on 21 April 2010, he was self-represented. In its reasons, the Tribunal summarized his service history, the circumstances leading up to the revocation of the authorization and the relevant statutory and regulatory provisions. It noted at para 54 that the fact that a member has an appointment pursuant to the Defence Act is not decisive of the eligibility of that member for assistance under the Act. At para 55 the Tribunal observed that a member of the Reserves “must complete effective service in each service year to be treated as a member of the Reserves for the purposes of the Scheme” and that:

[a] person who has been engaged as a member of the Reserves at a particular time is to be treated as a member of the Reserves until during a service year, the person does not perform effective service as a member of the Reserves.

28. At para 56 the Tribunal observed that:

[t]here is no issue that [Air Commodore Perry] did not perform 20 days service in the Reserves for the financial year 2008-09 or indeed since he was admitted to the Reserves. This has been admitted by [him] and I find that [he] did not perform 20 days service in the Reserves for the financial 2008-09 or in all of the proceeding [sic] financial years since he became a member of the Active Reserves.

29. At para 57 the Tribunal concluded that as Air Commodore Perry had not performed effective service for the financial year 2008-09 “[a] consequence of such failure is that he stopped being a member of the Reserves immediately after the end of the previous service year: s 5(2)(a)”. The Tribunal concluded that “[f]or the purposes of the Act the applicant stopped being a member of the Reserves immediately after 30 June 2008 if not before”. At para 58, the Tribunal observed that the Secretary “certainly has discretion under s 44(2) of the Act, to revoke the authorisation of the payment of subsidy ... in relation to the entitlement period”. In paras 59-60, the Tribunal sought to identify the basis for the engagement of that discretion. The references to ss 5(2)(a) and 5(2)(b) seem a little confused, but it is clear that the Tribunal concluded that for the purposes of the Act, Air Commodore Perry had ceased to be a member of the Reserves immediately after 30 June 2008, and that he was therefore not eligible for a certificate after that date. In this respect the Tribunal appears to have taken the approach adopted in the earlier reasons rather than that adopted in the reasons given on 22 January 2010.
30. The Tribunal then considered “... whether it is appropriate in this instance to exercise the discretion under s 44(2) of the Act to revoke the authorisation of the payment of subsidy”. It is common ground that s 44(2) conferred such a discretion. The Tribunal concluded that the discretion ought not to be exercised. Its reasons appear at paras 64-66. They may be summarized as follows:
    • that Air Commodore Perry had made himself available to serve in the Air Force Reserve, had ensured that he was able to serve by having annual medical examinations and had not declined to serve;
    • that he was a senior officer with operational experience, appointed to a War Establishment (Band 4) position with a requirement to serve for 90 days in each year;
    • that his willingness to perform such service was “a significant matter which inclines me against making a decision to recover the payment of subsidy. The Act has to apply to all categories of rank and I am conscious that in a time of budgetary constraints the funding for a Reservist of a one star rank may not be readily available”; and
    • that Air Commodore Perry was prepared to serve in the Air Force as evidenced by his service in the 2005-06 financial year, when he performed 16 days of service; allowed another colleague to utilise his allotted days for that financial year to give the latter more experience; had inquired as to whether there were tasks which he could perform; and desired, in the future, to perform duties in the Reserves.
31. Having exercised that discretion in favour of Air Commodore Perry the Tribunal then considered the express power conferred upon the Secretary by reg 20 “in exceptional circumstances” to treat service which was not effective as being effective. The Tribunal considered that exceptional circumstances were “out of the ordinary course, or unusual, or special, or uncommon”. Regulation 20 provides examples of such exceptional circumstances, including extended periods of illness or injury preventing performance of effective service and service which was performed but, “as a result of a defective decision, is not recognised as service”. The Tribunal noted that neither of the examples was relevant in this case, and that Air Commodore Perry relied upon the fact that although he was ready, willing and able to perform service, there was no work available for him during the 2008-09 financial year. The Secretary submitted that the explanatory memorandum demonstrated that such an event did not constitute exceptional circumstances. The Tribunal considered that there was the additional factor that Air Commodore Perry was “ready, willing and able to perform service but had not been tasked”. Nonetheless the Tribunal concluded that such circumstances were not exceptional. Air Commodore Perry also relied upon the fact that there was a period of “uncertainty” as to his status in the Reserves, and that he was, during that period, denied the opportunity to serve. The Tribunal considered that this matter was also not exceptional.
32. The Tribunal’s approach seems a little unusual. The need to exercise the discretion pursuant to s 44(2), would not have arisen had the Secretary treated his service as effective pursuant to reg 20. The question of effective service should have been considered before considering the discretion conferred by s 44(2). In any event the outcome was that the Tribunal set aside the decision and substituted its own decision that “the payment of the subsidy to the applicant is not revoked under s 44(2) of the Act”.

THE APPEAL

33. From that decision the Secretary appeals to this Court pursuant to s 44 of the AAT Act. The “question of law” is said to be:

If the Tribunal finds that no exceptional circumstances exist under regulation 20 of the [Regulations] meaning that an authorisation for the payment of subsidy made under s 16 of the Act ought not to have been given – does the Tribunal nonetheless have a discretion under s 44(2) of the Act not to revoke the authorisation of the payment of the subsidy?

34. The Secretary identifies the following “grounds”:
    1. Having found that no exceptional circumstances existed under regulation 20 of the Regulations, the Tribunal was not authorised by the Act to exercise its discretion under s 44(2)(a) of the Act not to revoke the authorisation of the payment of subsidy.
       

Particulars
(i) The Tribunal expressly found that no exceptional circumstances exist under regulation 20 of the Regulations to deem the respondent’s “ineffective circumstances” between 2001-09 as “effective service” with the effect that:

1. the respondent ought not have been given a subsidy certificate under s 16(2) of the Act as he was not eligible and did not have a service credit; and
2. the conditions for payment of a subsidy to the respondent under s 29 are not met, namely that the respondent holds a subsidy certificate in force and has a service credit.

2. The Tribunal erred in finding that it should so exercise its discretion under s 44(2)(a) of the Act as referred to in ground 1 above by taking into account irrelevant considerations.
   

Particulars
(i) The Tribunal took into account:

1. the willingness of the respondent to perform service duties in the Active Reserves; and
2. that in times of budgetary constraints the funding of service duties for a reservist of a one star rank may not be readily available.
   

35. I should record my understanding of the expression “one star rank”. Perhaps by analogy to the American general officer ranking system, for some purposes in the Defence Force, senior officers are identified using a star system which indicates equivalent ranks across the three services. An Air Commodore is a one star rank, the equivalent of a Rear Admiral in the Navy and, in the Army, a Brigadier.
36. The grounds of appeal appear more clearly from the outline of submissions. After setting out, in a coherent and economical way, the facts of the case, the relevant legislation and the decision, the Secretary contends that in exercising the residual discretion pursuant to s 44(2), the Tribunal erred by taking into account irrelevant considerations, namely Air Commodore Perry’s willingness to service and the difficulty, in times of budgetary constraint, in finding duties for such a person. He further submits that those considerations had to be considered in the context of the Tribunal’s finding that Air Commodore Perry had not performed effective service in the 2008-09 year, and so had ceased to be a member of the Reserves for relevant purposes. He was not eligible pursuant to s 8 and had no service credits as required by s 16(2) of the Act. Thus, the conditions for payment of the subsidy were not met.
37. In considering this matter one must distinguish between Air Commodore Perry’s full-time service prior to 11 July 2000 and his service as a member of the Reserves. I have demonstrated that the only basis upon which he may be eligible is as a serving member. In that capacity, he will only be eligible pursuant to s 8 of the Act if he has served eight years of effective service. Where a person transfers from the Permanent Forces to the Reserves, combined service in both may count as effective service. See reg 15. However, when a person has ceased to be a member of the Defence Force for more than five years, and then rejoins, prior service cannot be effective service for the purposes of the Act. See s 3.
38. Air Commodore Perry, in fact, has not ceased to be a member of the Defence Force at any time since his original engagement in 1966. However, for the purposes of the Act, he was not a member in any service year since the 2000-2001 year, or, perhaps, the 2001-2002 year, because he did not perform effective service in those years. Save for the 2008-2009 year, there was not, in any of those years, an obligation upon him to perform such service, at least as far as the evidence goes. Thus, when I speak of his failure to perform service, I do not imply that he failed in his duty. Such “failure” occurs only for the purposes of the Act. In 2008-2009, he undertook an obligation to perform up to 90 days service, if called upon to do so. However the Act looks to the actual performance of service, not availability. At first blush, it may seem unfair that Air Commodore Perry is to be disadvantaged by a failure to perform service which he was not obliged to perform, or which he was willing to perform, but was not asked to perform. However the point is that the Act uses effective service as a criterion for entitlement to a benefit. Air Commodore Perry was not, at least in connection with service prior to 1 July 2008, such a person. Of course, his full-time service had entitled him to similar benefits under earlier legislation, but that is not to the point.
39. As to 2008-2009 he engaged the Act by applying for a certificate and receiving a subsidy. However his ultimate entitlement to both depended upon his performing effective service in that year, and having the requisite period of effective service pursuant to s 8. Because he had ceased to be a member for more than five years, any service prior to his termination was not effective service for the purposes of the Act, and he has not performed effective service in any subsequent year. Hence Air Commodore Perry was not an eligible person at the date of the certificate. It should not have been granted. See ss 16(3)(a) and 17(1)(a). Further, for similar reasons, he did not have a service credit and therefore did not satisfy s 16(2)(b) so that, again, a certificate should not have been granted. Service credits are calculated pursuant to ss 46 and 47. The starting point, for the purposes of s 46, is a relevant person’s accrued subsidy period pursuant to s 47. Various deductions are then made in order to identify the person’s service credit. Pursuant to s 47(1), a serving member’s accrued subsidy period is the number of months of effective service which he or she has completed since becoming an eligible member. Air Commodore Perry has never become an eligible member and has no effective service.
40. These problems were identified in the internal review reasons dated 22 January 2010. Although the Tribunal recognized the fact that Air Commodore Perry had performed no effective service since joining the Reserves, it failed to identify the significance of that fact in the performance of its function. The question was whether the authorization pursuant to s 27 should be revoked for reason of the fact that the subsidy certificate ought not to have been given. Failure to perform effective service in 2008-2009 was a relevant consideration, as were the facts that he was not eligible pursuant to s 8, and that he had no service credit pursuant to s 46 at the time at which the certificate was issued, or at the time of the Tribunal’s decision. These two matters were not considered. The Tribunal’s reasons for refraining from revoking the authorization were that:
    • Air Commodore Perry remained willing and able to service; and
    • in a time of budgetary constraint, funding for service by a senior officer may not be readily available.
41. Had the failure to perform effective service in 2008-2009 been the only reason for concluding that the certificate should not have been given, the matters which led the Tribunal to decide not to revoke the authorization may have been relevant, although I do not wish to be taken as deciding that matter. However there were other reasons for concluding that the certificate should not have been issued – Air Commodore Perry’s ineligibility under s 8 and his lack of any service credit under s 46. While both of the Tribunal’s reasons may bear upon Air Commodore Perry’s failure to perform effective service in 2008-2009, they do not bear upon his ineligibility under s 8 or his lack of a service credit pursuant to s 46. The Tribunal has, effectively, failed to understand the nature of its function.
42. I should make one other observation. It concerns the way in which the Tribunal dealt with the reg 20 discretion. I wish only to point out that whether circumstances are exceptional will frequently be a matter of fact. I am not sure of the basis upon which the Tribunal concluded that the matters raised by Air Commodore Perry were not exceptional. I offer no view concerning the relevance of extrinsic material to the construction of reg 20.
43. On the basis of my reasoning and the Tribunal’s findings of fact, there can be no basis for any conclusion other than that the certificate ought not to have been granted. My attention has been drawn to no consideration which, in those circumstances, would lead to the view that the authorization should not be revoked. It has not been suggested that the discretion under reg 20 could be exercised so as to provide Air Commodore Perry with eight years of effective service and the ongoing service credit. I should not generally arrogate to myself the decision-making function of the Tribunal. However, in this case, the only possible outcome must recognize that he was simply not entitled to a certificate or to any benefit under the Act.

ORDERS

44. I order that:
    • the appeal be allowed;
    • the decision of the Administrative Appeals Tribunal dated 18 June 2010 be set aside; and
    • the application to that Tribunal for review of the decision of the delegate of the Assistant Secretary, Personnel Support Services in the Department of Defence be dismissed.

I will hear submissions as to costs.

Associate:

Dated: 15 March 2011