Howieson and Repatriation Commission - [2002] AATA 1258

DECISION AND REASONS FOR DECISION [2002] AATA 1258

ADMINISTRATIVE APPEALS TRIBUNAL )

) No Q1998/1200

VETERANS' APPEALS DIVISION          )
           Re      BRUCE HOWIESON
  Applicant
           And    REPATRIATION COMMISSION
  Respondent

DECISION

Tribunal Mr B J McCabe, Member

Date6 December 2002
PlaceBrisbane

Decision The Tribunal sets aside the decision under review and substitutes therefor its decision that the applicant is entitled to pension at the special rate. The earliest date of effect is 4 June 1997.

(Sgnd) B J McCabe
Member
CATCHWORDS
VETERANS' AFFAIRS – pension – whether applicant entitled to pension at the special rate – whether applicant ceased work solely due to his war-caused disabilities

Veterans' Entitlements Act 1986

Hill v Repatriation Commission [2000] FCA 929
Counsel v Repatriation Commission [2002] FCAFC 210

REASONS FOR DECISION

6 December 2002 Mr B J McCabe, Member

Introduction

Mr Bruce Howieson, the applicant, has applied for payment of a veterans' pension at the special rate. It was accepted by the parties he must satisfy the requirements in s 24(1)(c) of the Veterans' Entitlements Act 1986 if he is to be eligible for a pension at the special rate. The respondent says the applicant cannot satisfy the requirements of the section given his work history. The applicant has asked the Tribunal to reconsider the decision of the applicant, which was affirmed by the Veterans' Review Board.
The Material Before the Tribunal
The Tribunal was provided with the documents required under s 37 of the Administrative Appeals Tribunal Act 1975. The Tribunal heard oral testimony from Mr Howieson and his wife, Gail Howieson. The applicant's accountant, Ms Christina Carr, gave evidence by telephone. Statements by the applicant and his wife were also tendered in evidence. The applicant was represented by Mr McGhee, and the respondent was represented by Mr Stoner.
The Facts
Mr Howieson is currently 62 years of age. He was 58 at the time of his application to the Repatriation Commission in 1997. There was no dispute he was on operational service with the Army on a number of occasions between 1961 and 1972. He also rendered eligible defence service between 1972 and 1982. It is accepted he suffers from post-traumatic stress disorder (PTSD) and a range of other ailments. He is currently paid a pension in respect of his accepted disabilities at 100% of the general rate.
Mr Howieson was a long-term employee of Queensland Railways. He began working as a Trades Assistant in the motor shop shortly after he left the Army. He said in his statement and in his oral evidence that he had difficulty adjusting to the life in the motor shop. In his statement, he said he nearly caused a strike in his first week when he took it upon himself to hammer a lid on a crate – doing what was apparently a carpenter's job. He said he found the work boring, although he occasionally got out of the workshop to do maintenance work in the field, which he enjoyed. He was subsequently transferred to the machinery shed where he worked on heavy machinery.
He found life in the machinery shed very hard. He was bored. He was also disenchanted with the attitudes and work practices he found there. His fellow workers would spend a great deal of time reading, playing cards and drinking. He began to drink. Nobody did much work, it seems. He said he was becoming more irascible. He says the other workers would turn on the radio even though he was irritated by the noise. He would turn the radio off, he said in his statement, but they would switch it back on. He finally cut the power cords. He also said he stalked another worker who annoyed him with a view to bashing him when he could get him on his own.
The railways workshops were restructured and the tractor shed closed down. The applicant and his work mates were sent back to the motor shed. The applicant says he was finding it harder and harder to cope. He said he would become outraged by small things, and he would break down in tears. He was involved in fights. His only relief was the occasional field trip for maintenance.
The applicant approached his supervisor about resigning. It is not clear precisely when this occurred. But his supervisor advised him to wait as redundancy packages were likely to be offered in the near future. The applicant took leave regularly while he was waiting for the packages to be offered. He finally received a redundancy offer in July 1996.
The applicant said in his evidence he decided sometime before leaving the railways to become an earth-worm farmer. By the time he took the redundancy offer in July 1996, he had already purchased some worm beds for the purpose of breeding the worms. He also researched the world of commercial worm farming. He and his wife visited worm farms near Hervey Bay and Landsborough to speak with the owners. The applicant and his wife also spoke with their accountant and business adviser, Ms Carr.
Ms Carr said in her evidence that she thought the applicant approached the venture as a business. She said she would not have told the Australian Taxation Office that it was a business if there was any doubt in her mind about how it should be characterised. She said the applicant researched the venture and the market and considered the opportunities in a thorough and business-like way. She said he was systematic in his preparations and apparently intended to make a living from the venture.
The applicant subsequently arranged for a sales tax number as a primary producer, and registered a business name.
The applicant invested part of his redundancy payment in setting up the worm farming business in partnership with his wife. He purchased more worm beds and worm farms (kits) for people to purchase. He concentrated initially on composting worms, including red worms and Tiger worms. That was consistent with his interests: he agreed with a suggestion from Mr McGhee that he was "a bit of a greenie" and said he wanted to investigate the development and promotion of organic waste management systems. He later started to breed African Night Crawlers, which were used as bait worms.
Mr Howieson initially operated the worm-farming business on his own. He quickly became very busy. He sold worms in bulk packages and by mail order. He also travelled to markets and hardware stores and other retail outlets around North Queensland. He was in negotiations with the Sheraton Hotel and a prison in Townsville about establishing waste treatment systems. He printed tee-shirts bearing a logo.
He became aware of the opportunity to sell African Night Crawlers on the resort islands in the Whitsundays. The applicant says worms were retailing for $1 per worm, although they cost a fraction of that to produce. But the applicant said the Night Crawlers were more difficult to cultivate as they would escape. They had to be kept at a constant temperature and he was forced to build a shaded area for them. The worm beds were very heavy and difficult for him to move.
The applicant says he had difficulty coping with the demands of the business. He says his back condition made it particularly hard for him. He was not always answering the phone when customers called with orders or inquiries. He found himself getting uptight with people, including customers, on the phone and at stalls in the markets where he was selling worms. He said he was able to talk to children, but he claimed he was becoming more irritable. He had to collect and cart quantities of manure in heavy buckets which he said strained his back.
Several months after he started the business, Mr Howieson was having such difficulty coping that his wife had to leave work and lend a hand. Mrs Howieson said in her evidence that she began working in the business in January 1997. At first she was not working full-time on the worm farm. Her sons, Scott and Andrew, took care of the heavy lifting work when the applicant was unable to attend to those duties.
Mrs Howieson started her own book-keeping business about the time the applicant established the earth-worm operation. She also sold Amway products. She said the earth-worm venture had good prospects but it could not succeed if her husband didn't answer the phone because of his condition and failed to take orders. She thought she could take it over and run it alongside her other ventures. She did so after her husband ceased working in June 1997.
I accept that Mr Howieson ceased working because of his war-caused injuries – in particular, his back condition and (to a lesser extent) his PTSD. I accept he was not equipped to do other work: he had limited training and he was physically and perhaps temperamentally unsuited to manual labour.
Ms Carr said in her evidence the Howiesons did draw some money out of the business and paid some expenses, but their partnership never made a profit out of the worm-farming venture. Sales picked up in the first half of 1997 but declined by October of that year. Mrs Howieson said she did not have the knowledge required to make the business work. The worm farming business ceased trading and the applicant's initial investment was lost.
I accept that the worm-farming venture was a business. I note in particular Ms Carr's evidence on this point. It may not have been successful, but the Howiesons apparently intended it should be a profitable business operation and approached it in a business-like way. It is unclear if the business would have been profitable had it been conducted differently. It is also impossible to say if it would have become profitable in the future if the applicant had not been prevented from continuing.
The Relevant Law
Section 24 of the Veterans' Entitlements Act 1986 (the Act) sets out the circumstances in which a veteran may apply for a pension paid at the special rate. It was common ground between the parties that the first two limbs of s 24(1) (that is, ss 24(1)(a) and (b)) were satisfied. The only dispute was in relation to the application of s 24(1)(c). That sub-section says the section applies if:
"…the veteran is, by reason of incapacity from that war-caused injury or war-caused disease, or both, alone, prevented from continuing to undertake remunerative work that the veteran was undertaking and is, by reason thereof, suffering a loss of salary or wages, or of earnings on his or her own account, that the veteran would not be suffering if the veteran were free of that incapacity…"

Section 24(2) goes on to elaborate on s 24(1)(c), saying (at s 24(2)(b)):

"Where a veteran, not being a veteran who has attained the age of 65 years, who has not been engaged in remunerative work satisfies the Commission that he or she has been genuinely seeking to engage in remunerative work, that he or she would, but for that incapacity, be continuing so to seek to engage in remunerative work and that that incapacity is the substantial cause of his or her inability to obtain remunerative work in which to engage, the veteran shall be treated as having been prevented by reason of that incapacity from continuing to undertake remunerative work that the veteran was undertaking."

The drafting is dreadful. One is reminded of the words of St Paul who said (1 Corinthians 14.9, quoted in Corkery, Starting Law (2 ed, 2002, Scribblers' Publishing, Australia) at 209):
"Except ye utter the words easy to be understood, how shall it be known what is spoken?"

The respondent says that to satisfy s 24(1)(c) it must be established the applicant was unable to persist with the remunerative work he was undertaking because of his war caused injury – and that he suffered a loss. The respondent says Mr Howieson cannot satisfy that test because he left Queensland Railways voluntarily and moved straight into his earth-worm business. Although his war caused injury appears to have been the cause of him ceasing that work, he did not sustain a loss because the business never made a profit.
Mr McGhee, for the applicant, says the applicant couldn't continue at Queensland Railways because of his war-caused illnesses. In any event, Mr Howieson was receiving drawings from the worm-farming business and paying bills (the phone bill, some motor vehicle expenses, and so on). He had also built up stock that could be realised for value. When he quit the business because of his war-caused injury, he was unable to receive further drawings or pay expenses out of the business. Moreover, when the business ultimately folded he lost his initial investment that had been made out of the redundancy payment he received from Queensland Railways.
I am satisfied in light of the findings of fact I have made and by reason of the operation of s 24(2) that the veteran was prevented by his war-caused injuries from undertaking the remunerative work he was undertaking as a worm-farmer. Although he was undoubtedly finding the work at Queensland Railways difficult and unpleasant in part because of his war-caused injuries, he was able to persist with it until he got his redundancy. He took a good deal of sick leave, but it was apparent from the evidence that his employer took a generous approach towards leave entitlements. The real dispute in this case is whether the applicant's cessation of work in the earth-worm venture resulted in a loss even though the business never turned a profit.
The Act does not include a definition of expressions like earnings. The Federal Court discussed the concept of loss of earnings briefly in Hill v Repatriation Commission [2000] FCA 929. In Hill, the applicant had become a dog breeder. In the two years of income in question, his revenue from sales was exceeded by his costs. Wilcox J accepted the Tribunal's conclusion that the operation was not really a business at all. It was a hobby. But his Honour went on to suggest in obiter remarks the reference to earnings in the legislation should be taken to be a reference to "net earnings after deduction of expenses": at par 27.
The Full Court took a different view in Counsel v Repatriation Commission [2002] FCAFC 210. Carr J acknowledged (at par 53):
"the word earnings is ambiguous in that it could mean gross earnings or it could mean a figure which results after deducting expenses from gross earnings."

Goldberg J noted there were difficulties in using the term earnings in the context of a partnership. His Honour said (at par 75):
"The concept of a veteran losing 'earnings on his or her own account' does not fit easily within the framework of a partnership. The income or receipts or cashflow of a partnership are not, strictly speaking, earnings on the account of a particular partner albeit that one of the partners has undertaken the activity which has brought about that income or cashflow. Partnership property and assets are not, because they are partnership assets, owned by any particular partner."

After referring to the relevant provisions of the Partnership Act, his Honour continued (at pars 78-80):
78. In the partnership-type situation in which the appellant was involved the appellant was receiving, as was his wife, from time to time, earnings, money or cashflow as a result of activities which the appellant and his wife were undertaking as part of their partnership business. For example, money would be received by them as a result of the sale of livestock. At the time these funds would be received, the appellant and his wife would have access to those funds. In time, of course, at the end of a relevant accounting period, there would need to be a reconciliation of the accounts of the partnership. Money or funds to which the appellant and his wife had obtained access would have to be accounted for, and if there was shown to be a deficit in net earnings, that is to say, the partnership had been carried on at a loss, then it would be necessary for the appellant's account with the partnership to be adjusted.
79. The fact that at the end of the relevant accounting period the partnership might be showing a loss should not obscure the fact that during that year the appellant had access to the cashflow or earnings of the partnership which had been derived from his personal exertion. When the appellant was ultimately prevented by incapacity from continuing to undertake the work which he carried out in the course of the partnership, he thereby suffered a loss of earnings on his own account in the sense that he was no longer able to have access to, or take advantage of, the cashflow or earnings of the partnership business. It is not to the point that at the end of a relevant accounting period the partnership was shown in its accounts to have carried on business at a loss.
80. When s 24(2A)(e) is viewed in this way it can be said that the reference to 'earnings', in a partnership context, is a reference to the money brought into the partnership, that is its cashflow, through the personal exertion of the veteran, that is, 'on his or her own account'."

Gray J agreed, saying (at par 19):
"It is clear that the words 'salary or wages' and 'earnings on his or her own account' are intended to encompass the full range of ways in which people can make money from their own efforts. The expression 'salary or wages' encompasses a relatively small part of that range. A loss of salary or wages is a fact that can be ascertained with relative ease. This suggests that no narrow meaning should be given to 'earnings on his or her own account', which must encompass the rest of the range. Authorities on other statutory provisions using similar words should be treated with care because the context may be different."

I note in the case before the Tribunal in this matter there was no partnership agreement in evidence. I assume, as Goldberg J did in Counsel, that it is a partnership at will governed by the common law. (Even if it there was a partnership agreement, the analysis set out above is likely to be appropriate).
While the applicant's business never turned a profit, I am satisfied the applicant lost access to the cash flow that the business generated and which he used to pay some expenses. That is enough to satisfy the expression "suffering a loss of salary or wages, or of earnings on his or her own account" in s 24(1)(c). I would reach the same conclusion even if the applicant was not a member of a partnership but was trading on his own account since he would in any event have lost access to the cashflow of the business and the benefits it brought.
Conclusion
Given the findings of fact that I have made and the concessions by the parties, I am satisfied the decision of the respondent should be set aside. The applicant is eligible to receive a payment at the special rate under s 24. The date of effect is 4 June 1997.
I certify that the 32 preceding paragraphs are a true copy of the reasons for the decision herein of Mr B J McCabe, Member
Signed:         .....................................................................................
  Associate
Date of Hearing  26 September 2002
Date of Decision  6 December 2002
Counsel for the Applicant        Mr J McGhee
Solicitor for the Applicant         Streeting Haney
Solicitor for the Respondent    Mr J Stoner, Departmental Advocate