# 2011-072 Pay and Benefits, Overpayment, Pay, Recovery of Overpayment/Debt Write-Off

Case Summary

F&R Date: 2011–11–30

The grievor was overpaid a large sum of money due to an error in the calculation of a significant pay adjustment. Although the grievor questioned the amount, he was assured that his pay was correct. Two years later, the grievor was advised that his pay adjustment had been improperly calculated, and that he was obligated to repay over $40,000.

The grievor contested the recovery action, arguing that his debt should be considered “unreasonable and unjust”. The grievor argued that the overpayment was caused by an administrative error despite his efforts to ensure his pay was correct, and that repaying the debt would cause financial distress. The grievor requested that the debt be remitted, written-off or forgiven pursuant to the Financial Administration Act (FAA).

The initial authority , the Director General Financial Management, found that the provisions for forgiveness and write-off did not apply in the grievor's case, and that the debt could not be considered “unreasonable or unjust” since the grievor did not meet the stringent tests provided by the Treasury Board (TB).

The Board carried out a careful review of the statutory and regulatory structure relating to the remission of debts owing to the Crown, as well as the Canadian Forces (CF) history relating to remission. The Board noted that it had seen a considerable number of grievances relating to overpayments, and that it appeared that some CF financial officials were under the impression that debts must always be recovered notwithstanding the circumstances that may be involved. In the Board's view, this interpretation is incorrect, inconsistent with the provisions of the FAA, based on misinterpretation of TB direction, and prejudicial to CF members. The Board found that all members of the CF have recourse to the remedial provisions of the FAA, which provide at subsection 23(2.1) that a debt can be remitted if it is “unreasonable”, “unjust” or “otherwise in the public interest”.

The Board recognized that there is no CF or Department of National Defence (DND) policy on debt remission; however the Canada Revenue Agency has a well-developed and comprehensive policy on remission that specifies criteria to consider when determining whether a debt can be considered “unreasonable or unjust”. The Board cited that policy as an example and proposed to apply the criteria set out in its guidelines (extreme hardship, incorrect action or advice, financial setback coupled with extenuating factors and unintended results of the legislation) to the case at hand. The Board emphasized that, in considering these criteria, it would not be necessary for a member to meet every one; meeting just one of the criteria could be enough to determine that the debt should be remitted. The Board also indicated that timeliness on the part of the CF in discovering the error would also be a factor to consider.

The Board found that, in the circumstances, it would be unreasonable and unjust to collect the full amount of the debt from the grievor.

The Board recommended to the Chief of the Defence Staff (CDS) that the grievance be partially upheld. The Board recommended that the CDS direct the appropriate authorities to prepare a submission to be forwarded to the TB recommending remission of one half of the grievor's debt. The Board further recommended that recovery be ceased until a decision was made by the Governor in Council, or that in the alternative, the amount of the recovery payments be reduced by fifty percent.

The Board also referred to a previous systemic recommendation where it was recommended that the CDS direct that a CF/DND policy on remission be formulated and publicized.

CDS Decision Summary

CDS Decision Date: 2013–07–11

The CDS did not agree with the Board's recommendations. The CDS did not find appropriate to direct that departmental authorities prepare a remission order, knowing that it would be very unlikely for Treasury Board to permit it since the grievor's debt is clearly collectible. Instead, the CDS forwarded the grievance file to DCCL for assessment in accordance with the Treasury Board Directive on Claims and Ex-Gratia Payments. As a result, a financial settlement was reached and resolved the issue.