Elliott and Secretary, Department of Family and Community Services - [2000] AATA 151

DECISION AND REASONS FOR DECISION [2000] AATA 151

ADMINISTRATIVE APPEALS TRIBUNAL )

) N1999/283

GENERAL ADMINISTRATIVE DIVISION )

Re DAVID ELLIOTT
Applicant

And SECRETARY, DEPARTMENT OF FAMILY & COMMUNITY SERVICES
Respondent

DECISION

Tribunal Mr B A Barbour, Senior Member

Date29 February 2000
PlaceSydney

Decision The decision under review is affirmed.

..............................................
Senior Member
CATCHWORDS
Restart Re-establishment Grant – refusal to grant – whether applicant was effectively in control of the farm enterprise – effect of writ of possession over property

Farm Household Support Act 1992, sections 8B and 8C

The Restart Re-establishment Grant Scheme 1997, Clauses 2.1 and 3.2

REASONS FOR DECISION

29 February 2000 B A BARBOUR, SENIOR MEMBER

This is an application by David Elliott ("the applicant") for review of a decision of the Social Security Appeals Tribunal ("the SSAT"), made on 19 January 1999, that the applicant was not eligible for a Restart Re-establishment Grant under the Farm Household Support Act 1992 ("the Act").
Pursuant to section 34B of the Administrative Appeals Tribunal Act 1975, and with the consent of both parties, this review was conducted on the papers. The Tribunal had before it the documents provided pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. The Tribunal also considered the following documents:
Applicant's Statement of Facts and Contentions dated 27 October 1999
Respondent's Statement of Facts and Contentions dated 12 November 1999
Applicant's submission in reply dated 30 November 1999

BACKGROUND

A number of facts are not in dispute. They are set out in the SSAT decision dated 19 January 1999, and include the following.
On 29 June 1998 the NSW Supreme Court ordered that the Colonial State Bank of NSW Ltd ("the Bank") was entitled to a writ of possession over the farm enterprise managed by the Ercildoune partnership. This family farm consisted of three adjoining properties near Forbes.
On 13 July 1998 the applicant applied for a Farm Family Restart Grant for the family property 'Ercildoune', Cowra Road, Forbes.
In a letter dated 15 July 1998 the Bank declined to issue the 'Determination of qualification for farm family restart scheme certificate'. The Bank said that the form of the certificate would be 'inappropriate in these circumstances' and that 'whilst no application for finance has recently been considered for continuation or additional finance, any such application could not be entertained'.
A writ of possession was issued on 28 July 1998 in relation to the three adjoining properties managed by the Ercildoune partnership.
A notice to vacate the farm was issued by the local Sheriff at Parkes on 11 September 1998 and the property was vacated either on 30 September or 8 October 1998. The property was passed in at auction and was sold several weeks later.
On 30 September 1998 the claim for the Farm Family Restart Scheme grant was refused.
On 2 October 1998 Mr Elliott asked for a review of the decision to refuse the claim. In letters dated 8 and 9 October 1998 Centrelink informed Mr Elliott that the decision would stand. The decision was referred to an Authorised Review Officer (ARO), and on 7 December 1998 the ARO decided that the decision to refuse the claim was correct.
The applicant lodged an appeal with the SSAT on 18 December 1998. The Tribunal affirmed the decision of the ARO in a decision dated 19 January 1999.
On 23 February 1999 the applicant lodged an appeal with the Administrative Appeals Tribunal ("the Tribunal").
LEGISLATION AND ISSUES
The relevant legislation is contained in sections 8B and 8C of the Farm Household Support Act 1992 (Cth) and in the subordinate instrument titled The Restart Re-establishment Grant Scheme 1997.
Under the scheme, 'Re-establishment Grants' of up to $45,000 (less any restart income support that has been paid to the person or the person's partner) may be payable to successful grant applicants on the sale of their farms or rights or interests in those farms. Clause 2.1 of the Restart Re-establishment Grant Scheme sets out the eligibility criteria for the scheme. The clause states:
A person is eligible to apply for a re-establishment grant only if he or she is qualified for restart income support under Division 1B of Part 2 of the Act.
Sections 8B and 8C of the Farm Household Support Act 1992 set out the qualification criteria for restart income support. Section 8B states:
Subject to this Division, a person is qualified for restart income support in respect of a period if:
(a)       the period begins on or after the restart scheme payment commencement day; and
(b)       throughout the period, the person:
(i)        is a farmer; and
(ii)       is at least 18; and
(iii)      is an Australian resident; and
(iv)      is in Australia; and
(c)       the person has been a farmer for a continuous period of at least 2 years immediately before the period; and
(d)       a certificate of inability to obtain finance issued in respect of the person has effect throughout the period.
Note:    For the ending of restart income support, see section 6B.

One of the issues to be determined in this case is whether the applicant was qualified for the Re-establishment Grant under section 8C(d) of the Farm Household Support Act 1992, as the Bank refused to grant a certificate of inability to obtain finance.

Section 8C of the Act states:
A person is not qualified, or ceases to be qualified, for restart income support in respect of a period if the Secretary determines that:
(a)       the person is not effectively in control of the farm enterprise for which the person claims restart income support; and
(b)       restart income support should not be payable to the person in respect of the period.
Note:    Some examples of cases in which the Secretary may consider that a person is not effectively in control of a farm enterprise are when a mortgagee has taken possession of a farm, when a person is a bankrupt or when an eviction notice has been served on a person in respect of a farm.

The primary issue that is in dispute in this matter is whether the applicant was "effectively in control" of the farm enterprise.

Further, clause 3.2 of the Restart Re-establishment Grant Scheme 1997 states in part that:
A person is qualified to receive a re-establishment grant if:
… (c) the Secretary is satisfied that the sale was on commercial terms and at arm's length.

APPLICANT'S SUBMISSIONS

The applicant did not dispute any of the facts as outlined above in any material way. However, the applicant did dispute that he had lost control of the farm for the purposes of the scheme when the NSW Supreme Court found that the Bank was entitled to possession of the property. The SSAT, in its reasons for the decision under review, stated that the applicant had lost control of the farm as the partnership was a mortgagor in default and, when the Supreme Court of NSW issued the writ of possession in favour of the Bank, this entitled the Bank to take possession of the property and to sell it, to offset the mortgage debt which had accrued. The SSAT also stated that when the writ of possession was issued, the partnership lost its ability to grant or discharge any rights or interests in the property without a further court order.
The applicant submitted that this was wrong at law. The applicant submitted that the correct legal position was that on 29 June 1998 the Supreme Court of NSW made an order in favour of the Bank authorising it to issue a writ of possession. The applicant submitted that at that point in time, the Bank had certain rights, however, the applicant also had certain rights. The applicant submitted that it was the Bank's right (if it chose to do so) to enforce the Court order by issuing a writ of possession and by then executing that writ and taking possession of the land.
The applicant submitted that at no stage had he lost his equity of redemption. The applicant stated that he could have re-financed the debt and redeemed the mortgage at any time up until the sale took place. Therefore, he claimed that the SSAT had erred in law finding that the Bank was in control of the property from 29 June 1998 onwards. The applicant believes that he remained in possession and control of the property until 11 September 1998 and continued to farm the property until he sold the plant and equipment. The applicant also stated that he continued to trade on the land, selling produce that was stored on the land.
The applicant referred to the SSAT decision, at paragraph 20, where it was stated that:
But if a farmer has already effectively lost control of their property, such as by having the right of possession to it vested in a financial institution, there is no need for an incentive to leave farming to be made available. Once a Court order has been issued, it is just a matter of time as to when it is complied with, enforced or amended. For the duration of the order, however, the beneficiary of the order has effective control of the property.

The applicant submitted that this conclusion was in error for the reasons set out above. Additionally, the applicant claimed that it is very common for banks to obtain an order for possession and then to permit the mortgagor to proceed with their own sale of a property.

At paragraph 21 of the SSAT decision it was concluded that Mr Elliott did not have control of the property when it was sold. The applicant agrees with that conclusion. However, he states that this is not a relevant consideration. The applicant states that under the policy, the relevant consideration is whether or not the applicant had control of the farming enterprise at the time of his application for the grant, not at the time of the sale.
At the SSAT hearing the applicant said that he remained in control of the property until 8 October 1998 when the family moved out. Mr Elliott also told the SSAT that the writ of possession was taken out by the Bank's solicitor on 28 July 1998. A notice to vacate was issued by the Sheriff on 11 September 1998. However, because the partnership needed to hold a clearing sale of farm equipment, the Bank agreed that the property need not be vacated until 8 October 1998.
The applicant also told the SSAT that the farm was sold by the Bank after a registered valuer valued the vacant property. The Bank contracted Elders Real Estate to conduct an auction on 5 November 1998. The property was passed in at $710,000 but was sold two or three weeks later. Mr Elliott said that he did not know either the valuer's assessment or the sale price, but that he believed it had sold for $750,000.
The applicant stated that the Act empowers the Minister, by written instrument, to:
Formulate a scheme for the provision of payments to be made… on the sale of farm enterprises, or rights or interests in the farm enterprises.

The applicant submitted that farming land is a fundamental ingredient of a farm enterprise, ownership of the land is not. The applicant submitted that many farming enterprises are conducted on land that is leased by the farmer or on land that is share-farmed. The enterprise itself is the farming business carried on by the farmer.

The applicant submitted that, in this case, there is no proper argument that the sale was not on commercial terms and at arm's length. The applicant outlined that the application for a grant was made on 13 July 1998. The farm plant and equipment was sold at an auction convened by the applicant on 26 September 1998. The land itself was sold by the Bank in November 1998. The sale of the plant and equipment was conducted by public auction. At the SSAT hearing the applicant stated that the property had been valued by a registered valuer, and although the property was passed in at auction because offers had been below the reserve price, it was sold privately several weeks later.
The applicant submitted that there is no contention that he failed to qualify under any of the other relevant criteria. The applicant stated that, hypothetically, he could have retained the farm plant and equipment, moved the same to another property (perhaps leased or share-farmed) and continued to carry on the farming enterprise.
The applicant submitted that the real purpose of the Restart Scheme was to encourage unsuccessful farmers to leave agriculture. The applicant admits that he was not a successful farmer. That is evidenced by the financial problems that he had accumulated. The applicant believes that he was one of the very people at whom the policy was directed. The applicant submitted that he applied for the grant and then wound up his farming enterprise; the plant and equipment was sold at a commercial auction to buyers at arm's length; the farm was sold by the Bank to a buyer at arm's length. The applicant also noted that there is no evidence that the sale of the land or the plant was uncommercial.
The applicant submitted that on a correct application of the policy, he was eligible for a grant at the time that he applied to Centrelink.
RESPONDENT'S SUBMISSIONS
The respondent requested that the Tribunal affirm the decision of the SSAT. It further submitted that the applicant does not fulfil the requirements of section 8B(d) of the Farm Household Support Act 1992. The respondent believed that this was evidenced by the letter dated 15 July 1998 sent to Mr Elliott from the Bank stating that it refused to complete the certificate which was required by Centrelink to assess the applicant's qualification under the Scheme. This refusal was due to the applicant's partnership being indebted to the Bank.
The respondent further submitted that the applicant did not meet the qualification criteria set out in section 8C of the Act as the applicant was not effectively in control of the farm enterprise. According to the Note under section 8C: "(s)ome examples of cases in which the Secretary may consider that a person is not effectively in control of a farm enterprise are when a mortgagee has taken possession of a farm…".
The respondent contended that issuing the writ of possession constituted a loss of control under section 8C, despite the fact that the Bank did not exercise its rights until a later date. The respondent argued that, at that stage, the applicant had lost his equity of redemption as evidenced in the letter sent to the applicant from the Bank. The Respondent submitted that even if the applicant had made application to re-finance his loan over the farm, Mr Elliott's application would have been refused due to the partnership's indebtedness on the earlier loan.
The respondent submitted that an application to re-finance with another financial institution or person would certainly have failed due to the State Bank's registered first mortgage over the property. The respondent noted that nothing short of a 'philanthropist' could have assisted the applicant at this point and that this was highly unlikely given the $2.3 million debt to the Bank.
The respondent submitted that legal possession is quite different to physical possession. The respondent submitted that even though the applicant continued to farm the property until he vacated the property on 11 September 1998, in effect, the applicant was farming the property on behalf of the Bank and any benefit would thus accrue to the Bank.
The respondent disputed the applicant's submission that control of the farming enterprise is distinct from control of the property. The respondent stated that the land can not be separated from the farming enterprise per se, as each component is dependent on the other for the enterprise/business to operate. Further, the respondent contended that the farm plant and equipment, although sold at public auction convened by the Elliotts on 26 September 1998, was not in their legal possession. Legal possession was vested in the Bank as of the date of the writ. As such, all proceeds from the auction were the property of the Bank.
The respondent outlined that Division 2.1 of the Restart Re-establishment Grant Scheme requires a claimant to be qualified for restart income support in order to be qualified for a grant. Sections 8B and 8C then set out the qualification criteria. The respondent submitted that section 8B(d) necessitates a certificate of inability to obtain finance as having effect through the period. The respondent claimed that the applicant was unable to obtain this certificate from his Bank. Section 8C(a) negates qualification if the person is not effectively in control of the farm enterprise. The respondent stated that its previous contentions dealt with this proviso and Centrelink's guidelines at paragraph 3.5.2 also offer support, that is, when a financial institution has taken control and/or the farmer is evicted from a farm, the farmer becomes ineligible for a restart and re-establishment grant.
The respondent further contended that Clause 3.2 of the instrument requires that the Secretary is satisfied that the sale of the farming enterprise was on commercial terms and at arm's length. The respondent disputed the applicant's argument that the auctioning of the plant and equipment is a sale for the purposes of the Act. The respondent submitted that by the date of the clearing sale on 26 September 1998, the Bank had a Bill of Sale over the plant and machinery. All proceeds of this sale went to the Bank. Therefore, it was the view of the respondent that the applicant's argument, that he could have retained the farm plant and equipment, and moved the same to another property to carry on the farming enterprise under a lease or a share farm arrangement, must fail.
The respondent submitted that it makes no difference that just prior to the sale of the plant and equipment the applicant engaged a property agent to sell the property. The respondent argued that it was far too late at this stage, the bank already had a writ of possession over the property when judgment was entered on 29 June 1998. The respondent submitted that this judgment put in place the substantive legal rights of the parties, and the subsequent engrossing and enforcement of the NSW Supreme Court orders were merely procedural and as such did not change the legal effect.
FINDINGS
The issue before the Tribunal is whether the applicant is entitled to a Restart Re-establishment Grant. To qualify for this grant the applicant must satisfy the criteria outlined in the Farm Household Support Act 1992 and the Restart Re-establishment Grant Scheme 1997. There is dispute between the parties as to whether or not the applicant satisfied these criteria. Firstly, the parties dispute whether the applicant was "effectively in control of the farm enterprise" pursuant to section 8C(a) of the Farm Household Support Act 1992. Secondly, there is some contention as to whether the sale of the 'Ercildoune' property was on "commercial terms and at arm's length" in accordance with Clause 3.2 of the Restart Re-establishment Grant Scheme 1997.
The respondent has further submitted that the applicant failed to satisfy the criterion under section 8B(d) of the Farm Household Support Act 1992. This section states that a person is qualified for restart income support if a certificate of inability to obtain finance issued in respect of the person has effect throughout the period. The Tribunal finds that the applicant has failed to satisfy this criterion. The Bank refused to issue the certificate in a letter dated 15 July 1998. In that letter the Bank stated:
We advise that the Bank is unable to complete the Certificate required by Centrelink to assess your entitlement under the Farm Family Restart Scheme.
Centrelink has confirmed that the form of the certificate would be inappropriate in these circumstances.
Section 8C(a) of the Farm Household Support Act 1992 states that a person ceases to be qualified for restart income support if "that person is not effectively in control of the farm enterprise for which the person claims the income support". The respondent has submitted that the applicant failed to satisfy this criterion, as "control" of the Ercildoune property was lost when the Colonial State Bank issued the writ of possession on 29 June 1998. In response to this, the applicant states that he did not lose "control" at this time as he still had certain rights in relation to the land, particularly, the equity of redemption. The applicant believes that he remained in possession and control of the property until 11 September 1998. The applicant also submitted that "farming land" is the fundamental ingredient of a farming enterprise, ownership of the land is not.

The issue to be decided, then, is whether the applicant was in "control" of the farming enterprise for which he claimed restart income support. In this case, the Tribunal finds that the applicant was not in control of the Ercildoune farming enterprise and therefore, failed to satisfy the criterion under section 8C(a) of the Act.
"Control" is not expressly defined in the Farm Household Support Act 1992. Further, the Administrative Appeals Tribunal has not considered the meaning of the word "control" in the context of section 8C(a). However, the courts have considered the word "control" in a number of different contexts. In many of these cases the debate about the meaning of "control" has focussed on whether "control" means the right to control, or actual physical control. One of the disputed issues in this case is whether "control" in the context of section 8C(a) means actual physical control or the right to control.
The Shorter Oxford Dictionary defines "control" as including:
The act or power of directing or regulating command; regulating influence.

Clearly, in this case when the Supreme Court issued the writ of possession in favour of the Bank, the Bank was entitled to direct or regulate the enterprise of the Ercildoune farm. Under the writ, the Bank was entitled to take possession of the property and sell it, to offset the mortgage debt that had accrued. The "Note" to section 8C further supports the conclusion that the applicant was not in control of the Ercildoune farming enterprise. It states that the Secretary may consider that a person is not effectively in control of a farm enterprise 'when a mortgagee has taken possession of a farm'. This is, in effect, what has happened in this case.

The applicant claimed that because he continued to farm the land, he remained in control of the property until 11 September 1998. The Tribunal does not accept this argument. When the writ of possession was issued, the partnership lost its ability to grant or discharge any rights or interest in the property without a further court order. It was only because the Bank consented to the applicant remaining on the land, that the applicant could continue farming. At this point, the Bank was clearly "effectively in control" of the farming enterprise. The applicant's physical possession and continued farming of the land does not equal control for the purposes of section 8C(a).
In deciding that the applicant did not have control of the farming enterprise, the SSAT considered paragraph 3.5.2 of the Centrelink guidelines for the restart and re-establishment scheme which states that:
A bank or financial institution will usually lend money to a farmer with the debt secured against the farm property. If the farmer is in financial hardship and unable to meet the requirement of the loan contract, the financial institution may foreclose on the loan and take possession of the mortgaged property to recover its loan. It is at the point where the financial institution takes control and/or the farmer is evicted that the farmer becomes ineligible for FFRS.

As was noted by the SSAT, guidelines for the implementation of legislation can be taken into account when interpreting an Act or subordinate instrument, provided that they are consistent with the relevant legislation and do not unduly restrict the decision-maker's discretion: Re Drake and Minister for Immigration and Ethnic Affairs (2) (1979) 2 ALD 634. In this case the guidelines are consistent with the purposes of the Act and clearly contemplate a case such as this one.

The applicant argued that he remained in control of the farm because he had not lost his equity of redemption. He stated that he could have re-financed the debt and redeemed the mortgage at any time up until the sale took place. The Tribunal notes the letter from the Bank dated 15 July 1998 where it states that 'whilst no application for finance has been considered for continuation or additional finance, any such application could not be entertained'. The Tribunal agrees with the Respondent that it was unlikely that the applicant could have exercised an equity of redemption at this point, considering the sizeable $2.3 million debt. Furthermore, the likelihood of this being able to be negotiated with any other financial institution would have been remote due to the partnership's indebtedness on the earlier loan, and given the order of the court.
The applicant also claimed that "farming land" is the fundamental ingredient of a farming enterprise, ownership of the land is not. However, control of the farming land can not be separated from control of the farming enterprise. Indeed, the primary objective of the Ercildoune partnership would have to have been to farm the property 'Ercildoune'. The farming enterprise would have no purpose, and could not function, if the land were not under its control.
Further, section 8C(a) clearly contemplates that "effectively in control" relates to the real property which is the subject of the farming enterprise. The Note to the section suggests that the control of the farm is central to the control of the farming enterprise when it refers to "when a mortgagee has taken possession of a farm" or "when an eviction notice has been served on a person in respect of a farm". Both these legal remedies are inextricably linked to real property.
One of the purposes of this grant scheme is to provide an incentive for unsuccessful eligible farmers to leave farming. Clearly, the applicant has not been a successful farmer. However, if a farmer has already effectively lost control of the farm property, there is no longer a need for the Government to provide an incentive to leave farming.
For these reasons the Tribunal finds that the applicant did not satisfy the criteria outlined in sections 8B(d) and 8C(a) of the Farm Household Support Act 1992. Consequently, the applicant did not qualify for a Farm Family Restart Grant for the family property 'Ercildoune' under clause 2.1. It is therefore unnecessary to consider whether the applicant was qualified for the grant under Clause 3.2 of the Restart Re-establishment Grant Scheme 1997. Accordingly, the Tribunal affirms the decision under review.
I certify that the 51 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member Barbour
Signed:         .....................................................................................
  Associate
Date of Hearing  Hearing on the papers
Date of Decision  29 February 2000
Solicitor for the Applicant         Self represented
Solicitor for the Respondent    Cheryl Collis – Admin Law Section, Centrelink