Annett and Repatriation Commission

[2004] AATA 1130

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1130

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No A2003/469

VETERANS' APPEAL DIVISION		)
Re		DAROLD ANNETT

Applicant

And REPATRIATION COMMISSION

Respondent

DECISION

Tribunal Mr J.W. Constance, Senior Member

Date29 October 2004

PlaceCanberra

Decision The decision of the Repatriation Commission made 7 April 2003 is set aside and in substitution it is decided that the veteran is entitled to a special rate of pension from 13 December 2002.

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Senior Member

CATCHWORDS

VETERANS’ AFFAIRS – Veterans’ Entitlements – eligibility for special rate - whether the applicant satisfies the 10 year rule – whether applicant working on own account as a managing director – applicant eligible for special rate pension – decision set aside

Veterans’ Entitlement Act 1986 – ss 24(2A)

Starcevich v. Repatriation Commission (1987) 18 FCR 221

Re Melocco and. Repatriation Commission (1997) 47 ALD 173

Grant v. Repatriation Commission (1999) 57 ALD 1

Re William James McLaughlin v. Repatriation Commission (AAT 11997, 1 July 1997)

Brydon v. Repatriation Commission [2003] FMCA 299

Repatriation Commission v. Haskard [2002] FCA 1493

Re Easterbrook and Repatriation Commission [2004] AATA 506

REASONS FOR DECISION

29 October 2004 Mr J.W. Constance, Senior Member       

1.      Mr Annett is seeking a special rate of pension on the basis of his total and permanent incapacity arising from his war-caused injuries.  The only question to decide is whether he satisfies the “ten year rule” in section 24(2A)(g) of the Veterans’ Entitlement Act 1986 (Cth).

2.      I have decided that Mr Annett does satisfy this requirement and that therefore he is entitled to the special rate of pension.

FINDINGS OF FACT

3.      In the following paragraphs, I set out my findings of material facts and the evidence on which those findings are based.  Unless stated otherwise the evidence for those findings was given by Mr Annett.  Where the findings are based on a document before me I note that document.

4.      Mr Annett was born on 8 February 1935. He served as a member of the Australian Army from 1953 until 1980.

5.      In 1981 Mr Annett commenced to operate a business selling donuts.  In 1981, on advice from his accountant, he transferred the business to Oephelia Pty Limited, (as trustee for a family trust, Exhibit R1), and he became the Managing Director, Public Officer and shareholder of that company.  He continued in these roles until 1998, during which time the business expanded on a number of occasions.

6.      Mr Annett described his role in Oephelia P/L as “mainly operational management”, attending to financial records, stock control, refurbishment of premises and staff co-ordination.

7.      In July 1993 Mr Annett purchased shares in a second company, Fishwick Nominees Pty Limited, which was also involved in the food business.  He became a director and shareholder of that company.  Very shortly after Mr Annett became involved Fishwick Nominees P/L ceased to operate the food business.

8.      In 1993 Fishwick Nominees P/L commenced conducting the business of the sale of arts and craft, the teaching of craft, and the manufacture of ceramics.  The company changed its name to Artisan Arts & Craft Pty Limited.

9.      In 1998 Oephelia P/L ceased to operate its food business and from that time onwards neither company, nor Mr Annett personally, was involved in the food industry.

10.     Mr Annett managed the finances of Artisan Arts & Craft P/L, managed the purchase and sale of art work, conducted a gallery and took an active role in teaching, all on behalf of the company.  He also organised classes conducted by the company and arranged for visiting teachers to conduct the classes.  In 2002 Mr Annett was spending about 20 hours per week in managing the company.

11.     For some periods Mr Annett was paid as an employee of Artisan Arts & Craft P/L, but this ceased in 2002.

12.     By mid 2002 Mr Annett was unwell and decided to reduce his business activities.  Artisan Arts & Craft P/L ceased trading on 30 June 2002 and Mr Annett began to investigate the possibility of his operating some parts of the company’s business from smaller premises.  He could not find suitable commercial premises and about November 2002 he decided to work from home.  At about the same time he personally registered a business name with the intention of carrying on part of the business previously operated by the company.

13.     On 25 November 2002 Mr Annett instructed Bird Cameron, the company’s accountants, to apply to deregister the company.  This application was made on the same day (Exhibit R1) and at this time Mr Annett’s role as company director and manager ceased.  The Commission conceded, and I so find, that the sole cause of Mr Annett’s ceasing work was his war-caused injuries and disease.

14.     From November 2002 Mr Annett began setting up his home with the intention of selling and supplying art materials and teaching art (Exhibit A1 para.16).  This business had not begun to earn income by the application day (10 January 2003).

15.     On 13 December 2002 Mr Annett suffered a heart attack and was hospitalized for 10 days.

16.     On 10 January 2003 Mr Annett applied for a special rate of pension under section 24 of the Act.

17.     As of November 2002 Mr Annett had been “doing repairs to Objet Art for the Toll Group which [he] had been engaged in for some time.” (Exhibit A1, para. 16). During the financial year 2002-2003 he earned approximately $2000 from this activity.  A number of invoices in evidence (Exhibit A2) show that a considerable amount of this work was done after the application day.

LEGISLATION

18.     Section 24 of the Act sets out the requirements for eligibility for a special rate of pension.  Sub-section (2A) sets out the requirements which a veteran who has turned 65 before making an application must meet to be entitled to the special rate.  The Commission has conceded that Mr Annett meets all requirements other than those contained in sub-paragraph (2A)(g)(ii) ie. the 10 year rule.

Paragraph 24(2A)(g) requires, inter alia:

“when the veteran stopped undertaking his or her last paid work, the veteran……… if he or she was then working on his or her own account in any profession, trade, employment, vocation or calling -- had been so working in that profession, trade, employment, vocation or calling……….for a continuous period of at least 10 years that began before the veteran turned 65;”

In applying paragraph 24(2A)(g) it is necessary to take into account the requirements of paragraph 24(2A)(d) which provides that for the section to apply:

“the veteran is, because of the incapacity from war-caused injury or war-caused disease or both, alone, prevented from continuing to undertake the remunerative work (last paid work) that the veteran was last undertaking before he or she made the claim or application;”

THE ISSUES

19.     After hearing Mr Annett’s evidence, the Commission properly conceded that there were no factors other than those which were war-caused that rendered Mr Annett incapable of undertaking remunerative work for periods aggregating more than 8 hours per week.

20.     I have to decide:

(1) what was the last paid work that Mr Annett was last undertaking before he applied for the increase in pension on 10 January 2003;

(2) when did he stop undertaking his last paid work;

(3) at the time he stopped whether he working on his own account in a profession, trade, employment, vocation or calling;

(4) if so, had he been so working for a period of at least 10 years that began before he turned 65?

THE  LAW AND ITS APPLICATION TO THE FACTS

21.     The Act is beneficial legislation and notwithstanding that sub-section 24(2A) is restrictive of rights to a special rate of pension, the section should be interpreted reasonably liberally; Starcevich v. Repatriation Commission (1987) 18 FCR 221; Re Melocco and Repatriation Commission (1997) 47 ALD 173.

22.     Sub-section 120(4) of the Act provides that the standard of proof is to “reasonable satisfaction”.

What was the last paid work that Mr Annett was undertaking before he applied for the increase in pension on 10 January 2003?

23.     In Grant v. Repatriation Commission (1999) 57 ALD 1 at 4[9] the Full Court of the Federal Court said:

“Determination of the ‘remunerative work’ referred to in s 24(2A)(d) requires the characterisation of the specific remunerative activity or activities that the veteran was last undertaking before making the claim or application rather than of the capacity in which that work was undertaken. The particular capacity in which that work was undertaken is dealt with as a separate criterion in s 24(2A)(g).”

I am of the view that the proper characterisation of the work that Mr Annett was undertaking from 1981, (when Oephelia P/L was incorporated) until 25 November 2002 (when an application was made to have Artisan Arts & Craft P/L deregistered) is that of the management and directorship of his family companies.  Even though at times Mr Annett was an employee of his companies, this arrangement was for taxation purposes.  Throughout the whole of the 1981-2002 period he undertook the role of director exercising management responsibilities.

24.     I find support for this characterisation in the decision of this Tribunal in  Re William James McLaughlin and Repatriation Commission (AAT 11997, 1 July 1997).  The relevant facts in that case were very similar to this matter:

·the veteran had acquired a company on the advice of his accountant to act as trustee of a business;

·his object was to acquire assets which he could manage to earn income for himself and his family;

·he stated that he was Managing Director at all times.

The Tribunal accepted the submission on behalf of the applicant that “the Applicant performed duties for the company not as an employee but ‘on his own account’ for remuneration for Trust activities and assets, then his ‘employment, vocation or calling’ was that of company business manager and director….” (paras. 68, 95).

25.     It is clear from Mr Annett’s evidence that the companies ceased involvement in the food businesses in 1998 and that Artisan Arts & Crafts P/L did not commence the arts and crafts business until 1993.  This means that if one looks at the type of work in which the companies were involved whilst under Mr Annett’s management, he was not involved in either the food business or the arts and craft business for a period of at least 10 years. It was argued on behalf of the Commission that consequently Mr Annett did not satisfy the 10 year rule. I do not accept this argument.  For the reasons set out above, I consider that Mr Annett was working on his own account as a company director/manager and in those circumstances it does not matter that the companies may have changed the nature of the businesses being carried on by them and Mr Annett changed some of his “hands on” work from time to time.  In Brydon v. Repatriation Commission [2003] FMCA 299 the Federal Magistrates Court considered an application by a veteran who had been working for a company. Although the Court found against the veteran on other grounds, it did not regard as relevant the fact that the nature of the company’s business had changed.

26.     In Re Easterbrook and Repatriation Commission [2004] AATA 506, at para. 36, the Tribunal said in relation to the characterisation of work under section 24(2A) that:

I consider that the decisions outlined above indicate a requirement for particularity, not of job, or, in the case of a self employed person, business entity, but of nature of profession, trade, employment, vocation or calling.  This, in turn, requires an examination of the activity engaged in by the Applicant and the skills and experience required of the Applicant in that activity.  The Applicant’s last paid work, or his last activity, was the operation of the Graphic Golf Academy.

27.     To be entitled to the special rate under paragraph 24(2A) a veteran must have ceased paid work entirely; Repatriation Commission v Haskard [2002] FCA 1493.

28.     The last paid work undertaken by Mr Annett was as a director and manager of Artisan Arts & Craft P/L.  My reasons for so classifying the work are set out above. From November 2002 Mr Annett was in the process of setting up his new business to operate from his home, but this had not begun to operate prior to his suffering the heart attack and his applying for the special rate of pension and his work as part of this new business was not paid at that time.

29.     Mr Annett’s work in repairing objets d’art was in the nature of a hobby and cannot be characterised as remunerative work.  This was the contention of the Commission and one with which I agree.

30.     In McLaughlin v. Repatriation Commission (supra) at para. 96 the Tribunal said:

The Tribunal notes that the Applicant continued to run cattle on the farm after 18 May 1993.  The Tribunal has found, however, that those activities were in the nature of a hobby and is satisfied that the Applicant did not run the cattle on a commercial basis.  Those activities do not constitute remunerative work for the purposes of the Act.”

When did Mr Annett stop undertaking his last paid work?

31.     On 25 November 2002 Mr Annett gave instructions to his accountants to take steps to have the company wound up and an application was made the same day.  At that time Mr Annett would have had no further role to play in the company and his role as director and manager ended at that time. 

At the time he stopped was he working on his own account in a profession, trade, employment, vocation or calling?

32.     In the role of director/manager Mr Annett was working on his own account and not as an employee of the companies.  His employment by the companies had ceased some years before he ceased his role as director/manager.

33.     Counsel for Mr Annett put forward the alternative argument that Mr Annett worked on his own account as an artist producing pottery.  On the evidence this is a finding which is open to me, but that evidence also establishes that Mr Annett ceased undertaking that work at the time of his heart attack in December 2002.  As he commenced this work in 1993 he falls just short of satisfying the 10 year rule.

Had Mr Annett been working as a company manager/director for a period of at least 10 years that began before he turned 65?

34.     On the facts I have found, clearly the answer is “yes”.  Mr Annett commenced in this role in 1981 and did not cease carrying out this work until an application to have Artisan Arts & Craft P/L deregistered was lodged in November 2002.

DECISION

35.     Mr Annett is entitled to a special rate of pension under section 24 of the Act.  I set aside the decision of the Repatriation Commission made 7 April 2003.  I decide in substitution that Mr Annett is entitled to a special rate of pension from 13 December 2002.

I certify that the 35 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J.W. Constance, Senior Member

Signed:         .....................................................................................
  Chelsey Bell, Associate

Date/s of Hearing  20 September 2004
Date of Decision                  29 October 2004
Representation for the Applicant               Mr John Orr
Representation for the Respondent          Mr Nigel Bunn