JUDGMENT OF 27. 9. 1984 — CASE 235/83 MULLIGAN v COMMISSION

In Case 235/83

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

I — Facts and written procedure

II — Conclusions of the parties

III — Submissions and arguments of the parties

IV — Oral procedure

Decision

Costs

I —. Facts and written procedure

1. Mr Mulligan, the applicant, entered the service of the Commission on 1 July 1973 as a head of division in the Secretariat General. From 1 October 1974 to 1 April 1982 he held the post of Head of the Information Office in the Delegation of the Commission in Washington, United States of America. He left the service of the Commission on 1 January 1983.

2. The circumstances surrounding the grant and the recovery of the lodging allowance in question are as follows.

3. By a letter from his legal adviser dated 25 January 1983, which was received at the Secretariat General of the Commission on 16 February 1983, the applicant submitted through official channels a complaint within the meaning of Article 90 (2) of the Staff Regulations against the Commission's decision to recover the lodging allowance.

II —. Conclusions of the parties

1. Annul the implied decision rejecting the complaint made by the applicant by letter dated 25 January 1983 sent by the applicant's legal adviser to his immediate superior at the Commission;

2. Order the Commission to pay to the applicant the sum of BFR 1115525 together with interest thereon calculated from the date at which payment should have been made by the Commission, being the date of termination of the applicant's service, 31 December 1982;

3. Order the Commission to make good any other financial loss (including exchange losses if any resulting from the withheld payment) incurred by the applicant as a result of the Commission's wrongful decision;

4. Order the Commission to pay the applicant's costs;

5. Order such further or other relief as may be lawful or equitable in all the circumstances.

1. Dismiss the application;

2. Order the applicant to pay the defendant's costs.

III —. Submissions and arguments of the parties

IV —. Oral procedure

1. By application lodged at the Court Registry on 14 October 1983, Andrew Armstrong Mulligan, a former official of the Commission in Grade A 3 brought an action for the annulment of the Commission's decision to recover a sum overpaid in the amount of BFR 1115552, which was notified to the applicant by a letter from the Director-General for Personnel and Administration dated 21 October 1982.

2. The sum in question, the amount of which is not in dispute, represents all the payments made to the applicant by way of lodging allowance for the period from 1 December 1974 to 31 March 1982. During that period, the applicant performed the duties of Head of the Press and Information Office in the Delegation of the Commission in Washington, United States of America.

3. The abovementioned letter of 21 October 1982 states that the conditions for the grant of a lodging allowance were not fulfilled since the applicant was the proprietor of his residence, whereas the basis for the calculation of the lodging allowance is the rent which an official is obliged to pay during his temporary assignment to a delegation of the Commission in a nonmember country. According to that letter, the applicant was aware of that principle since he deliberately created a legal device which amounted in effect to a lease to himself, so that he could continue to receive the lodging allowance as a tenant.

4. The applicant maintains that the decision is unlawful since the conditions laid down by Article 85 of the Staff Regulations for the recovery of sums unduly paid to an official are not satisfied. He submits, on the one hand, that the payment of the allowance was not irregular and, on the other, that even if the payment were irregular, he was unaware of the irregularity and that in any event the irregularity was not patently such that he could not have been unaware of it.

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 rent applicable to Brussels: and that it was the Commission's practice, as is apparent from the internal service instructions the text of which was given to the recipients of the lodging allowance, to grant that allowance only to an official who spends by way of monthly rental a sum exceeding a certain percentage of his net remuneration.

7. In those circumstances, it must be stated that the allowance was granted to the applicant as a lodging allowance intended to cover part of the rent which he was obliged to pay in Washington. Various memoranda from the Commission administration in Brussels reminded the applicant that he was obliged to inform the administration at once of any changes in his situation which might affect the payment of the allowance.

8. Accordingly, it must be concluded that the basis for the grant of the allowance ceased to exist as soon as the applicant, without informing the Commission, purchased the house in which he had taken up residence. It is of little importance in that connection that, from the formal point of view, the house was purchased by a company incorporated by the applicant, in which he held all except one of the shares and of which he became the president, whilst his wife and one of his friends were the directors. The effect of the lease between the company and the applicant in those circumstances was to conceal from the Commission the fact that the applicant had purchased the property.

9. It having thus been established that the allowance was unduly paid, it should be considered whether the applicant was aware of that irregularity or whether that irregularity was patently such that he could not have been unaware of it.

10. 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.

11. 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 nonmember 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.

13. It follows that the applicant must have understood that the allowance was being paid to him without justification as from the time at which he ceased to be a tenant and became the owner of his house.

14. Consideration of the circumstances of the case thus leads to the conclusion that the irregularity of the payment of the allowance for the period in question was patently such that the applicant could not have been unaware of it.

15. It must therefore be held that the Commission applied Article 85 of the Staff Regulations correctly and that the application must be dismissed,

16. Under Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. However, under Article 70 of the Rules of Procedure, institutions are to bear their own costs in proceedings by servants of the Communities.

On those grounds, THE COURT (First Chamber) hereby:

1 Dismisses the application;

2 Orders the parties to bear their own costs.