C-235/83

J U D G M E N T OF T H E C O U R T (FIRST CHAMBER) 27 SEPTEMBER 1984 '

Andrew Armstrong Mulligan v Commission of the European Communities

(Official: Recovery of undue payment)

Case 235/83

/. Officials — Reimbursement of expenses — Lodging allowance — Conditions for grant thereof (StaffiRegulations, Annex VII, Art. 14 (1), para. 2)

2. Officials — Recovery of undue payment — Conditions — Manifest irregularity of the payment — Person concerned aware thereof (Staff Regulations, Art. 85)

THE COURT (First Chamber)

composed of: T. Koopmans, President of Chamber, G. Bosco and R. Joliét, Judges,

Advocate General : Sir Gordon Slynn Registrar: J. A. Pompe, Deputy Registrar

gives the following

JUDGMENT

Facts and Issues

The detailed rules for implementation of the second paragraph of Article 14 (1) 2. The circumstances surrounding the are contained in an internal service in- grant and the recovery of the lodging struction of 18 February 1976, which allowance in question are as follows. was applicable as from 1 January 1976 and was replaced by a new instruction with effect from 1 January 1980. Before By letter of 9 September 1974, the 1976, the rules for the grant and the Director of Personnel of the Commission method of calculation of the allowance in Brussels informed the applicant of his were notified to the officials concerned, pecuniary rights in Washington. In a in each individual case, by the Director note attached to that letter, he stated of Personnel. that " M r Mulligan is entitled to a lodging allowance which cannot, however, be worked out until we have a In 1982 the Commission personnel copy of his lease . . . The lodging administration noted that the conditions allowance represents the difference for granting the lodging allowance to between the actual rent paid in Mr Mulligan were not satisfied between Washington and the notional rent for 1 December 1974 and 31 March 1982, Brussels . . . " . since Mr Mulligan owned his house and it is the rent payable by the official concerned which serves as the basis for For October and November 1974, Mr the calculation of the lodging allowance. Mulligan leased a house in Fulton Street, Washington, at the monthly rent of USD 750. Following his application on 18 Considering that Mr Mulligan was not September 1974 and after a copy of the unaware of that irregularity, the Com- lease was forwarded with a letter from mission, by a decision notified to the the Head of the Delegation in applicant in a letter from the Director Washington dated 11 October 1974, he General of Personnel and Administration obtained an initial lodging allowance of dated 21 October 1982, decided to BFR 7 805. The note from the Director recover the sum unduly paid, namely General for Personnel of 4 December BFR 1 115 552, by deducting that sum 1974 confirming the grant of that from his salary or other sums due to him. allowance stated that Mr Mulligan "must inform the administration at once of any changes in [his] situation which might affect the payment of the allowance in Recovery of undue payment is governed question". by Article 85 of the Staff Regulations, which provides as follows: During the same period, Mr Mulligan contemplated purchasing a house in "Any sum overpaid shall be recovered if Washington and discussed with the the recipient was aware that there was assistant to the Head of the Delegation no due reason for the payment or if the the question of claiming an ac-

It is apparent from the documents before The original lease having been only for the Court that Mr Mulligan was October and November 1974, the regularly kept informed of changes in Director General for Personnel, by letter the calculation of his lodging allowance, of 11 February 1975 informed the and in particular of the internal service applicant of a change in the allowance instructions governing that matter. and stated that until a new lease was forwarded the revised amount, paid after the expiry of the first lease, was to be At a meeting with the Head of the paid by way of an advance. Individual Rights Division on 23 April 1982, Mr Mulligan confirmed that he in fact was the owner, through Algonquin, of the house in Washington in respect After two reminders, by letter of 28 April of which he was receiving a lodging 1976 Mr Mulligan forwarded to the allowance. After consideration of the Head of the Individual Rights and situation, the Head of the Individual Privileges Division in Brussels a copy of Rights Division informed Mr Mulligan at the lease for the new house covering the a meeting on 27 September 1982 of the period from 1 January 1975 to 31 March Commission's intention to recover in full 1976 and stipulating a rent USD 750. On the amounts overpaid in respect of the the same date, Mr Mulligan forwarded a accommodation allowance. The decision copy of the lease for the period 1 April in that respect was notified to him by 1976 to 31 March 1978, under which the the above-mentioned letter from the rent was USD 1 200 per month, and the Director General of Personnel and covering letter indicated that "the rental Administration of 21 October 1982. is considered reasonable by an in- dependent valuer". At the request of the Individual Rights and Privileges Division, the Head of the "Washington The calculation of the amount recovered Delegation confirmed, by letter of 9 June is not disputed. 1976, that "the house leased by Mr Mulligan . . . is appropriate to the duties discharged by him in the Washington Delegation and takes account of his 3. By a letter from his legal adviser family situation . . .". Copies of the leases dated 25 January 1983, which was for the periods 1 April 1978 to 31 March received at the Secretariat General of the 1980 and 1 April 1980 to 31 March Commission on 16 February 1983, the

Upon hearing the report of the Judge- Rapporteur and the views of the Ill — Submissions and arguments Advocate General, the Court (First of t h e p a r t i e s Chamber) decided to open the oral procedure without any preparatory in- The applicant submits that the sums paid quiry. by him by way of accommodation allowance between 1 December 1974 and 31 March 1982 were properly paid to II — C o n c l u s i o n s of t h e p a r t i e s him by the Commission and cannot therefore be treated as sums overpaid within the meaning of Article 85 of the The applicant claims that the Court Staff Regulations. He maintains that the should: accommodation allowance provided for in the second subparagraph of Article 1. Annul the implied decision rejecting 14 (1) of Annex VII to the Staff Regu- the complaint made by the applicant lations constitutes an allowance for by letter dated 25 January 1983 sent entertainment expenses and that the by the applicant's legal adviser to his personal choice between rented and immediate superior at the Com- owned accommodation is irrelevant as mission; regards the application of that provision. In that respect, he draws attention to 2. Order the Commission to pay to the the fact that according to the English applicant the sum of BFR 1 115 525 language version of the second together with interest thereon cal- paragraph of Article 14 (1), the culated from the date at which pay- allowance in question concerns the "cost ment should have been made by the of accommodation", whereas the Commission, being the date of ter- allowance referred to in Article 14a of mination of the applicant's service, the same annex is specifically referred to 31 December 1982; as a "rent allowance". This difference of terminology confirms that the expression 3. Order the Commission to make good "accommodation" used in the second any other financial loss (including subparagraph of Article 14 (1) covers exchange losses if any resulting from more than accommodation rented from a the withheld payment) incurred by the third party. Moreover, to prevent an applicant as a result of the Com- official who is the owner of his residence mission's wrongful decision; from receiving the allowance in question constitutes discrimination by comparsion 4. Order the Commission to pay the with an official who rents a house applicant's costs; belonging to a third party.

The critical test for the granting of an the applicant's housing arrangements in allowance is whether the house is appro- Washington concluded that he had acted priate for the applicant's duties and honourably and that there could be no whether the rent on the basis of which question of any disciplinary problem the allowance is claimed represents a arising. fair basis for the claim for an accommodation allowance in respect of that house. In that connection the Moreover, the second part of Article 85 applicant refers to the notes sent by the permits recovery only in a case where a successive Heads of the Delegation sum has been paid either completely by contained in the file, which leave no accident or in circumstances where the doubts in that regard. After discussing payee is clearly unable to adduce reasons the matter with the persons responsible for it. That is not what happened in this in the Delegation in Washington, the case. applicant decided on the scheme he adopted in order to take account of the Commission's system of calculating As regards the interpretation of the accommodation allowances, and the rent second subparagraph of Article 14 (1) of paid by the applicant to Algonquin was Annex VII to the Staff Regulations, the no greater than the amount which he Commission, the defendant, observes that would have to have paid to a third-party the use of the term "rent allowance" in

if he felt it appropriate. He considers in no room for any misunderstanding on any case that the Head of the Delegation that point. Moreover, the repayment of binds the Commission as regards ad- rental costs rather than the purchase cost ministrative questions relating to the staff represents a constant practice of the of the Delegation. Commission corresponding to the system of rotation applied to the officials of external delegations. Alternatively, if the allowance was er- roneously paid, the applicant maintains that the Commission has not established that he was aware that there was no due The Commission rejects the argument reason for the payment or that the fact that the Head of the Delegation in of the overpayment was patently such Washington has any power of decision that he could not have been unaware of regarding lodging allowances.

MULLIGAN v COMMISSION

appointing authority, refer in that regard By failing to notify the administration of to the Directorate General for Personnel the fact that he himself, through and Administration. Algonquin Properties Inc., had purchased As regards the alternative submission, the the house in respect of which he claimed Commission contends in the first place a lodging allowance, the applicant gave that Article 85 of the Staff Regulations the impression that what was involved refers to circumstances in which an was a bona fide arm's length transaction. official receiving a payment knew or However, he did not explain why the should clearly have known that the property was not held in his name or money was not duly received. It adds why his interest in Algonquin Properties that in this case the applicant had all the Inc. was not made known to the information regarding the lodging al- Commission in Brussels at the outset. lowance, from which it is apparent that such an allowance is based on the arm's length rent payable. He cannot therefore IV — Oral p r o c e d u r e substitute his own view of the lodging allowance for that clearly expressed by the Commission, without informing the The parties presented oral argument at administration in Brussels of the the sitting on 30 May 1984. arrangement made by him reflecting his The Advocate General delivered his view of matters. opinion at the sitting on 21 June 1984.

Decision

1 By application lodged at the C o u r t Registry on 14 O c t o b e r 1983, A n d r e w A r m s t r o n g Mulligan, a former official of the Commission in G r a d e A 3 b r o u g h t an action for the annulment of the Commission's decision to recover a sum overpaid in the a m o u n t of BFR 1 115 552, which was notified to the applicant by a letter from the D i r e c t o r - G e n e r a l for Personnel and Administration dated 21 O c t o b e r 1982.

5 As regards the irregularis of the payment, the Commission contends that the lodging allowance paid to the applicant during the period in question was granted pursuant to Article 14 (1) of Annex VII to the Staff Regulations and that that provision covers only reimbursement of expenses in respect of rented accommodation. As a secondary point, the Commission also observes that it is for the appointing authority to decide whether only the expenses of rented accommodation should be reimbursed or whether the benefit of the lodging allowance should be extended to officials who become the owner of their residences, with a view to covering part of the purchase price or of the payments in respect of a mortgage loan. According to the Commission, it is, however, apparent from the information supplied to the applicant in September 1974 and from the internal service instructions of 1976 and 1980 regarding the lodging allowance, of which the applicant had knowledge, that only a part of the rent paid by an official may be borne by the Commission.

6 It is unnecessary to consider whether Article 14 of Annex VII must be interpreted as not allowing the grant of a lodging allowance to an official who is the owner of his residence. It is apparent from the documents before the Court that, in this case, the applicant applied for and obtained the lodging allowance to cover part of the rent of a residence rented by him in Washington; that the amount of the allowance was calculated.on the basis of the difference between the actual rent paid in Washington and a notional

io In that connection, the applicant submits in the first place that he was unaware of the Commission's view that the lodging allowance referred to in Article 14 (1) of Annex VII to the Staff Regulations can cover only the costs which officials incur by reason of high rents. On the contrary, the senior officials of the Community Delegation in Washington gave him to understand that the purchase of the house in which he lived did not preclude his continuing to receive the lodging allowance. The Head of the Delegation himself was not unaware of the basis of ownership adopted by the applicant and even approved it.

JUDGMENT OF 27. 9. 1984 — CASE 235/83

1 1 In the second place, the applicant submits that the second test laid down in Article 85 of the Staff Regulations allows sums overpaid to be recovered only where the recipient was clearly unable to adduce reasons for the payment. According to the applicant, that is not the case in this instance since the object of the payment was to enable the applicant to live in a residence of a standard consonant with his post and with the duties of representation which it involved.

12 Those arguments must be rejected. The applicant knew that the allowance had been granted to him to cover part of his rent and that he was obliged to inform the Commission administration in Brussels of any change in his situation. Moreover, an official of his rank could not have been unaware of the fact that grants, changes and withdrawals of lodging allowances are not matters for the Head of the Delegation in a non-member country but for the appointing authority, that is to say the Director-General for Personnel and Administration in Brussels. Furthermore, when the company acting as owner increased the rent, the applicant showed that he was aware of that rule.

On those grounds,

T H E C O U R T (First Chamber)

hereby:

1. Dismisses the application;

2. Orders the parties to bear their own costs.

Koopmans Bosco Joliét