Counsel and Repatriation Commission - [2001] AATA 286

DECISION AND REASONS FOR DECISION [2001] AATA 286

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/1270

VETERANS' APPEALS DIVISION       )
           Re      LAURENCE COUNSEL
  Applicant
           And    REPATRIATION COMMISSION
  Respondent

DECISION

Tribunal Dr J D Campbell, Member

Date9 April 2001
PlaceSydney

Decision      The Tribunal determines that the decision under review be affirmed.
  ..............................................
  [Sgd] Dr J D Campbell
  Member
CATCHWORDS
Veterans' Entitlement - assessment - special rate - extreme disablement - alone issue - remunerations work - loss of earnings
Veterans' Entitlement Act 1986 ss 22, 23, 24, 120
Hill v Repatriation Commission [2000] FCA 929
Repatriation Commission v Greenwood (1990) 22 ALD 289
Re Fahey and Repatriation Commission (1986) 10 ALD 338
Re Bertram and Repatriation Commission (AAT 2783, 29 July 1986)

REASONS FOR DECISION

Dr J D Campbell, Member

In this application, Mr L Counsel ("the Applicant") seeks a review of the decision of the Repatriation Commission ("the Respondent") dated 13 November 1998, which increased the Applicant's disability pension to 100% of the General Rate with effect from 31 July 1998. This decision had been reviewed by the Veterans' Review Board and affirmed in a decision dated 26 July 1999.
A hearing was held before the Tribunal on 4 August 2000 and adjourned, pending receipt of income tax returns for the Applicant and his wife. The Applicant was represented by Ms Buchanan, an advocate from the Legal Aid Commission. The Applicant presented oral evidence to the Tribunal. The Respondent was represented by Mr Wallis, a solicitor from the Department of Veterans' Affairs. Following receipt of the outstanding documentation, final submissions were received from the Applicant on 15 November 2000, and from the Respondent on 18 January 2001. The Applicant's closing submission was received on 25 January 2001.

The following material was placed into evidence before the Tribunal:
Exhibit No  Description            Date
T1-T15 pp1-61 Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
A1      Employment history of the Applicant      24 April 2000
A2      Occupational activities of the Applicant 1982-1993      4 May 2000
A3      Bundle of documents relating to sale of property          24 July 2000
A4      Statement Mr K Sawyer     30 March 2000
A5      Copy of photographs of Applicant's previous property showing farming and fencing activities
A6      Copies of tax returns for partnership 1986-1993
A7      Summary of Applicant's farm revenue 1983-1993        3 August 2000
A8      Financial Statement for Applicant's and his wife partnership for year ending 30 June 1993
A9      Applicant's statement of facts and contentions 12 July 2000
R1      Medical Report Dr Baz       4 November 1999
R2      Financial return for partnership for financial years 1984/85 and 1985/86
R3      Income and assets statement for the Applicant for years 1984, 1987, 1988, 1990, 1991, 1994
R4      Respondent's statement of facts and contentions        1 August 2000
issues
The relevant issue in this matter is whether the Applicant is entitled to payment of a disability pension at a rate higher than 100% of the general rate.
legislation
The relevant legislation in this matter is the Veterans' Entitlement Act 1986 ("the Act"), and in particular sections 22, 23, 24(1), 24(2A), 24(2B), 120(4).
background
The Applicant lodged a claim for an increase in disability pension on 31 July 1998. At the time of lodgement, the Applicant was receiving a disability pension at 90% of the general rate for the accepted conditions of myopia, bilateral sensorineural hearing loss, tinnitus, ischaemic heart disease, post traumatic stress disorder, tinea, impotence, folliculitis and chronic solar skin damage.
On 13 November 1998, a delegate of the Respondent made a decision upon the application to increase the Applicant's disability pension to 100% of the general rate, with effect from 31 July 1998. Consideration by the delegate was given to payment of the pension at either the intermediate or special rate or the payment of an extreme disablement allowance, but each in turn was declined by the delegate for nominated reasons. Following consideration by the departmental review officer on 31 March 1999, a review was undertaken by the Veterans' Review Board, who in a decision dated 26 July 1999, affirmed the decision under review.
applicant's evidence:
The Applicant informed the Tribunal that he was born in the United Kingdom on 7 June 1922 and came to Australia as a migrant in 1938. The Applicant stated that he served with the Army from 1940 to 1946 and served for some two years in New Guinea. Prior to his war service, the Applicant stated that he spent some six weeks on a farm on the Central Coast of New South Wales, during which time he had an episode of blood poisoning. For the following 12 months, the Applicant indicated that he worked on a sheep and wheat property in the West Wyalong area, where his duties included ploughing, seeding and rabbit trapping.
The Applicant indicated that after the war he worked in a variety of jobs, including 3 years in the United Kingdom, prior to returning to work for W C Stevens from 1960 to 1982. The Applicant indicated that he ceased work with W C Stevens because the company was starting to downsize and he was finding the work stressful.
The Applicant stated that he married in 1971 and in 1980 purchased a farm property, as he had always wanted to be a farmer. At the time of the purchase, the Applicant stated that, it was not a viable business. In 1980 the property was stocked, his wife and casual labour undertook major activities in relation to the house, sheds and piggery over the next two years. In 1982, the Applicant and his wife moved to live on the property and his work activity was seven days a week, ten hours a day, as he and his wife moved to improve and expand the farming activities, which included beef cattle, pigs and some cropping.
The Applicant stated that revenue came from the sale of livestock, and that any revenue, which varied from year to year depending on seasonal conditions, was reinvested in further developing the farm, by way of equipment purchases, fencing, building dams, sheds and a house. The Applicant stated that in 1988 he sold part of the property because of health deterioration (high blood pressure), and that he stopped smoking. At this time he had started to experience physical difficulty with various tasks and he had reduced stock, with closure of the piggery and a reduction in beef cattle by about 50%. As a consequence, revenue dropped off after 1988.
The Applicant told the Tribunal that the farm was sold in 1993, at a time when it was still a viable business. The Applicant stated that at this time he was experiencing increasing health problems, with heart and blood pressure problems, together with increasing stress and anxiety.
In response to questions in cross examination the Applicant stated:
·     that a profit had never been made from the farm;
·     that the property partnership with his wife commenced in 1982;
·     that the partnership returns were ceased after 1993 following the sale of the property;
·     that he has not paid personal income tax in 11 years;
·     that no personal income tax returns were lodged during the period;
·     that he had done nothing other than voluntary work for legacy in the last five years;
·     that he and his wife receive a service pension;
·     that he essentially has no debt and no earnings; and
·     that the farm ran at a loss except for the financial year 1988/89, when there were probably good stock prices, and a small profit eventuated.

other evidence:

In documenting evidence contained within income and assets statements completed by the Applicant for financial years ending 30 June 1984, 1987, 1988, 1990, 1991, the Applicant has considered himself not to be in full-time, part-time or casual employment (including self employment or odd jobs), in the last 12 months (Exhibit R3).
An inquiry to the Australian Taxation Office ("ATO") by the Respondent revealed personal income tax returns for the Applicant could not be found, with a further annotation that returns for the years 1994 to 1999 were not necessary (correspondence 3 October 2000).
An analysis of the partnership returns for tax years 1983 through to 1993 revealed the following information:
Taxation year ending Partnership Gross income Partnership Net Income Applicant's net income from partnership
No tax return available
No tax return available
3910 (10621) (5310)
4362 (7694) (3847)
6610 (5648) (2824)
No tax return available
5759 284 142
126 (7685) (3843)
2990 (2162) (1081)
3131 (4541) (2270)
2565 (3924) (1962)
(Exhibits A6 and A7)
medical evidence:
Dr M Baz, a consultant occupational health physician, examined the Applicant on 2 November 1999. In her report dated 4 November 1999, Dr Baz made the following comments and opinions:

that the Applicant had a combined impairment rating of 70;
that the Applicant had a lifestyle rating of 5;
that the Applicant's degree of incapacity was 100%;
that the Applicant was unfit for work eight or more hours weekly;
that the reduction in work ability relates to his war caused disabilities, namely post traumatic stress disorder and ischaemic heart disease;
that there was no evidence of other significant disabilities impacting on the Applicant's work fitness;
that his age would not have precluded him from working as a farmer; and
that the Applicant's limited work fitness was in effect as at 31 July 1998.
(Exhibit R1)

submissions
the applicant:

The advocate for the Applicant, relied upon Repatriation Commission v Greenwood (1990) 22 ALD 289 where Davis J agreed with the approach taken in Re Fahey and Repatriation Commission (1986) 10 ALD 338 where in the latter, the Tribunal stated at 342:
"It seems to us that the question is not one of loss of income, that is to say, of reduced support, but rather of loss of (a) salary, (b) wages, or (c) earnings on the veteran's own account, that the veteran would not be suffering if he or she had been free of the incapacity. And it is all in the context of being "prevented from continuing to undertake remunerative work". The phrase here relevant, namely, "earnings on his own account", was in our opinion clearly inserted to cover the case of a person who derived not salary or wages, but rather the earnings of a business, profession or trade as a result of remunerative work…no definition of the word "earnings" can, given that the legislation speaks of "earnings on his or her own account" and puts that phrase into the context of what is received as the product of remunerative work, lead to a conclusion that a person like the present applicant has not suffered a loss of earnings on his own account when he has had to give up the remunerative work which produced such earnings for him…"
Further, it was contended that remunerative work does not necessarily mean profitable employment or profitable undertakings, rather it means activities in which the aim is to make a profit, whether or not that aim is successful. In essence, remunerative work is intended to recompense in money terms Re Bertram and Repatriation Commission (AAT 2783, 29 July 1986).
The Applicant contended that the loss of income from the farm was not negligible, and was a real loss as demonstrated by the figures of annual gross income from the partnership returns.
It was the Applicant's contention that section 24(2A)(d) is satisfied, in that the Applicant's war caused disabilities alone prevented him from continuing to undertake his last paid work as a self employed farmer, that he was last undertaking prior to lodging his claim.
The Applicant further contended that he satisfies section 24(2A)(e), in that he would have continued to undertake remunerative work as a farmer at the date of effect and thereafter, and would have been remunerated as such, if he was free of his war caused disabilities, for age, as exampled by his neighbour Mr Sawyer, is not a bar to such activity. The Applicant also contended that the phrase "earnings on one's own account" must be read in the reality of tax effective arrangements when a farming business coupled with a recognition that personal labour inputs may be recognised in the form of a growing business arising from re-investments, as opposed to profits being taken from the business.
The respondent:
The solicitor for the Respondent contended that the standard of proof in this matter is one of reasonable satisfaction pursuant to section 120(4) of the Act.
Further, the Respondent contended that the phrase "earnings on his or her own account" means net earnings as opposed to gross earnings, and authority for such contention rests with Wilcox J in Hill v Repatriation Commission [2000] FCA 929. In further analysis of earnings on his own account from the partnership over the period of its existence, the Respondent argued that the Applicant has a longitudinal series of losses in the period 1985 to 1993, with the exemption of one year when profit amounted to $142. As a consequence, it is difficult for the Applicant to argue that he has suffered a loss of earnings on his account as a consequence of the Applicant's accepted disabilities, causing him to sell his property, for indeed, selling of his property curtailed a pattern of continuing annual losses.
The Respondent argued that the Applicant must have had other sources of income, which allowed the Applicant to carry on the farming enterprise. Further, the Respondent contended that the Applicant did not regard his farming activities as a form of employment, as evidenced by his many declarations to the contrary in his income and asset annual returns associated with his service pension. The Respondent contended that as a consequence, the Applicant was in essence carrying on a hobby rather than a form of employment for the time of the occupation of the farm.
In final contention, the Respondent submitted that as the Applicant is not able to establish a loss of earnings on his own account as a result of the effects of accepted disabilities, the Applicant cannot succeed in any claim for either intermediate or special rate.
consideration and findings
In preliminary observations, the Tribunal acknowledges the manner in which both parties have attempted to conduct their approach to this matter. Nevertheless, at the end of all relevant inquiries, the Tribunal is left to ponder on what were the Applicant's actual financial arrangements, during the period in which the partnership existed. In the evidence presented to the Tribunal, there existed a partnership between 1982 and 1993 which involved the Applicant and his wife, and for all extent and purpose owned a farm from which income was derived. The Tribunal notes that the farming enterprise resulted in a longitudinal series of annual losses, apart from an insignificant profit in 1989. Further, the Tribunal observes that the Applicant had particular investments which yielded income and that he was in receipt of a service pension throughout the period of the partnership.
Having assessed and considered the evidence, the Tribunal makes the following findings of fact:

(a) the Applicant was aged 76 at the date of lodgement of his claim;

(b) the Applicant had a number of war caused disabilities, including post traumatic stress disorder and ischaemic heart disease, and that his disability pension for all war caused disabilities had been assessed at 100% of the general rate, with the date of effect being 31 July 1998;

(c) the Applicant had purchased a farm in 1980, with the intention of carrying on a farming enterprise involving cattle, pigs and crops;

(d) the Applicant left his place of full time employment in 1982 and thereafter with his wife, devoted his labour and capital to making the property a viable business proposition;

(e) the Applicant and his wife formed a partnership in 1982 to carry on the farming business;

(f) part of the land was sold in 1988 and over time the farming enterprise moved towards cattle and cropping, with cessation of involvement in pigs;

(g) in 1993 the farm was sold and the partnership dissolved;

(h) the Applicant's health deteriorated over the period of the partnership, as evidenced by the development of numerous clinical conditions, all of which were granted as war caused conditions. Part sale of the farm occurred in 1988 and this was associated with the Applicant's hypertension and anxiety, while the final sale in 1993 was associated with the Applicant being unable to continue to work the property because of his ischaemic heart disease and underlying psychiatric disorder;

the Applicant has not undertaken any other remunerative work following the sale of his farm up to the present time;

(j) the partnership tax returns revealed a longitudinal history of annual losses with the exception of a minimalist profit in 1989, and that throughout the years 1985 to 1993 the Applicant would have accrued significant annual losses apart from 1989;

(k) the Applicant did not lodge personal annual tax returns with the ATO during the period of the partnership; and

(l) no evidence has been adduced before the Tribunal to indicate on an annual basis what particular benefits the Applicant may have received during the course of the partnership, or alternatively, whether the annual losses realised were used by the Applicant to offset other areas of income.

The Tribunal notes the following statutory framework under which this matter is to be determined, namely section 22(4) and sections 23 and 24 of the Act:
" General rate of pension and extreme disablement adjustment
22(4) Where:
(a) either:
(i) the degree of incapacity of a veteran from war-caused injury or war-caused disease, or both, is determined under section 21A to be 100% or has been so determined by a determination that is in force; or
(ii) a veteran is, because he or she has suffered or is suffering from pulmonary tuberculosis, receiving or entitled to receive a pension at the maximum rate per fortnight specified in subsection (3);
(b) the veteran has attained the age of 65;
(c) the veteran has an impairment rating of at least 70 points and a lifestyle rating of at least 6 points, each determined in accordance with the approved Guide to the Assessment of Rates of Veterans' Pensions; and
(d) the veteran is not receiving a pension at a rate provided for by section 23, 24 or 25;
the rate at which pension is payable to the veteran is increased by 50% of the maximum rate set out in subsection (3).
…
Special rate of pension
24(1) This section applies to a veteran if:
(aa) the veteran has made a claim under section 14 for a pension, or an application under section 15 for an increase in the rate of the pension that he or she is receiving; and
(aab) the veteran had not yet turned 65 when the claim or application was made; and
(a) either:
(i) the degree of incapacity of the veteran from war-caused injury or war-caused disease, or both, is determined under section 21A to be at least 70% or has been so determined by a determination that is in force; or
(ii) the veteran is, because he or she has suffered or is suffering from pulmonary tuberculosis, receiving or entitled to receive a pension at the general rate; and
(b) the veteran is totally and permanently incapacitated, that is to say, the veteran's incapacity from war-caused injury or war-caused disease, or both, is of such a nature as, of itself alone, to render the veteran incapable of undertaking remunerative work for periods aggregating more than 8 hours per week; and
…
(2A) This section applies to a veteran if:
(a) the veteran has made a claim under section 14 for a pension, or an application under section 15 for an increase in the rate of the pension that he or she is receiving; and
(b) the veteran had turned 65 before the claim or application was made; and
(c) paragraphs (1)(a) and (1)(b) apply to the veteran; and
(d) the veteran is, because of 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; and
(e) because the veteran is so prevented from undertaking his or her last paid work, the veteran is suffering a loss of salary or wages, or of earnings on his or her own account, that he or she would not be suffering if he or she were free from that incapacity; and
(f) the veteran was undertaking his or her last paid work after the veteran had turned 65; and
(g) when the veteran stopped undertaking his or her last paid work, the veteran:
(i) if he or she was then working as an employee of another person—had been working for that person, or for that person and any predecessor or predecessors of that person; or
(ii) 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; and
(h) section 25 does not apply to the veteran.
(2B) For the purposes of paragraph (2A)(e), a veteran who is incapacitated from war-caused injury or war-caused disease or both, is not taken to be suffering a loss of salary or wages, or of earnings on his or her own account, because of that incapacity if:
(a) the veteran has ceased to engage in remunerative work for reasons other than his or her incapacity from that war-caused injury or war-caused disease, or both; or
(b) the veteran is incapacitated, or prevented from engaging in remunerative work for some other reason."

special or intermediate rate:

In considering the issue of a special rate pension, the Tribunal finds that the Applicant:

(a) satisfies section 24(2A)(a) in that an application was lodged for an increase in pension on 31 July 1998;

(b) satisfies section 24(2A)(b) in that the Applicant was more than 65 years of age at the time of the application;

(c) satisfies section 24(2A)(c) in that his degree of incapacity from war caused disabilities has been determined to be 100% (section 24(1)(a)(i) satisfied); that his incapacity from war caused disabilities alone renders the Applicant incapable of undertaking remunerative work for periods aggregating more than eight hours per week (section 24(1)(b) satisfied). In making the latter finding, the Tribunal relies upon both the evidence of the Applicant and the assessment and opinion of Dr Baz detailed earlier in the decision;

(d) satisfies section 24(2A)(d) in that the Applicant's last remunerative work ceased in 1993 (farming enterprise); that incapacity from his war caused disabilities caused him to cease work by way of selling the farm and that his war caused disabilities continue to prevent him from undertaking such work. In making this finding the Tribunal accepts the opinion of Dr Baz, that the Applicant's war caused disabilities of ischaemic heart disease and post traumatic stress disorder are the cause of him ceasing work and being unable to continue in such work activity up to and continuing from the date of his application. Further, the Tribunal finds that such work was remunerative, as it had been effectively performed over many years.

The issue in relation to section 24(2A)(e) is more complex. The Tribunal notes that the Respondent has argued that the Applicant's farming activity was a hobby and not a business, in that the Applicant never received a financial benefit from the carrying on of the farming activity. In considering this issue, the Tribunal, having examined in detail the partnership's accounts over many years, concludes that such accounts reveal both an intention to carry on a business and an actual carrying on of a business over many years. In essence, the Tribunal finds that all the accounting indicia are present in the accounts and that the Applicant's description of his intentions and work habits during the period 1982 to 1993 correlate with the activities of running a business. The Tribunal concludes that the Respondent had placed too much emphasis on a particular issue of profit and/or loss to define a distinction between a hobby activity and a business activity. The Respondent also failed to recognise that where the owners of a business carry on the business, the intention to and the actual growing of the business in capital terms, may be a greater financial incentive than actually returning a profit.
It has been further argued by the Respondent that the continued annual losses of the partnership through its trading activities could well have been another reason as to why the property was sold. The Tribunal is not satisfied that such reasoning is built on anything other than on speculation, for no evidence has been adduced before the Tribunal that would allow it to conclude on the balance of probabilities, that the partnership business was sold because of financial difficulties, either by the partnership or the Applicant. Further, the Tribunal notes that there were small capital injections made by the Applicant and his wife, indicated in some of the annual financial statements, which in time made good any loss. Further, the Tribunal, when considering the totality of loss accrued during the partnership's period of trading, cannot conclude on the evidence before it that such accrued losses had caused financial difficulties for the Applicant, particularly where the Tribunal has not been placed in a position to fully understand the financial benefits that the Applicant and his wife may have enjoyed while operating the partnership business.
In essence, the Tribunal is satisfied that the farm partnership was a business conducted by the Applicant and his wife and that they sold the business because of the Applicant's deteriorating health status arising from his war caused disabilities. Further, by the very nature of the business, the Tribunal considers that this was an activity from which the Applicant expected to receive payment, whether by way of income reinvestment and capital enhancement or by way of drawings, profit, tax benefits or living expenses. The Tribunal notes that the Applicant never considered himself to be in employment or self employment, as demonstrated by the many income and assets forms he submitted in relation to his service pension. However, the Tribunal concludes, having considered the evidence of the Applicant in relation to the work habits of the Applicant and his wife, that both the Applicant and his wife were in self employment and that such work was effectively undertaken over many years.
In the Tribunal's view, the major obstacle to a successful outcome in this matter for the Applicant rests with the issue of whether or not the Applicant is suffering a loss of earnings on his own account, that he would not be suffering if he was free of his incapacity. The Tribunal, in noting the submissions of both parties on this issue, observes that there is no disagreement, in that the phrase "earnings in his own account" must be placed in the context of what is received as the product of remunerative work. The difference between the parties is that the Applicant considers gross income as the product of remunerative work, and the Respondent considers income after expenses, namely net income that may or may not equate to a final profit/loss figure depending on the accounting frame work employed.
In finalising this issue, the Tribunal concludes that the correct appreciation of earnings is net earnings, namely gross earnings less deduction of expenses. On this issue the Tribunal follows Wilcox J in Hill v Repatriation Commission (supra). As a consequence of this finding the Tribunal further concludes, that from the evidence adduced before the Tribunal, the Applicant, in all but one year, namely 1989, has always derived a loss or negative net earnings from his carrying on of the farming business. In the absence of any other material that would convince the Tribunal that the Applicant had received net earnings in another form from the farming enterprise, the Tribunal, on the balance of probabilities, finds that the Applicant has not suffered a loss of earnings on his own account by virtue of his war caused disabilities causing him to cease his farming activities. Indeed, on the evidence available to the Tribunal, cessation of his farming activity may have had a financial benefit for the Applicant in that continuing losses requiring capital injections ceased.
As a consequence of the Tribunal's conclusions, the Tribunal finds that the Applicant does not satisfy section 24(2A)(e) of the Act, in that the Applicant, while prevented because of his war caused disabilities from undertaking his last paid work, has not suffered a loss of earnings on his own account, with any loss of earnings in this matter being unrelated to his war caused disabilities, as negative net earings had existed for many years prior to his cessation of work in 1993, with cessation apparently improving the Applicant's financial circumstances as a consequence of the removal of negative net earnings, namely losses.
In further consideration, the Tribunal finds that the Applicant:

(a) satisfies section 24(2A)(f) in that the Applicant was 71 when undertaking his last paid work;

(b) satisfies section 24(2A)(g)(ii) in that he commenced working in the partnership in 1982 at age 60 and continued for a period of 11 years until 1993; and

As a consequence of the Applicant failing to satisfy section 24(2A)(e), the Tribunal finds that the Applicant does not qualify for a pension at a special rate.
In addressing the issue of an intermediate rate pension, the Tribunal, consistent with the reasoning that has been detailed in relation to a special rate pension, finds that the Applicant does not satisfy section 23(3A)(e) and that as a consequence the Applicant does not qualify for a pension at the intermediate rate.
In addressing the issue of the Applicant's entitlement to an extreme disability allowance pursuant to section 22(4) of the Act, the Tribunal finds that the Applicant, while satisfying section 22(4)(a)(i), (4)(b), (4)(d), fails to satisfy section 22(4)(c) of the Act in that the Applicant's lifestyle rating is 5. The Tribunal, in making such a finding, relies on and accepts the opinion of Dr Baz, as regards the Applicant's lifestyle rating.
determination:
The Tribunal determines that the decision under review be affirmed.
I certify that the 41 preceding paragraphs are a true copy of the reasons for the decision herein of Dr J D Campbell, Member
Signed:         .....................................................................................
  Associate
Date/s of Hearing  4 August 2000
Date of Decision  9 April 2001
Counsel for the Applicant        Ms Buchanan
Solicitor for the Respondent    Mr Wallis