Keain and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs

[2008] AATA 1020

Administrative Appeals Tribunal

DECISION AND REASONS FOR DECISION [2008] AATA 1020

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No 2008/1296

GENERAL ADMINISTRATIVE DIVISION		)
Re		NICHOLAS PETER KEAIN

Applicant

And SECRETARY, DEPARTMENT OF FAMILIES, HOUSING, COMMUNITY SERVICES AND INDIGENOUS AFFAIRS

Respondent

DECISION

Tribunal Senior Member R W Dunne

Date13 November 2008

PlaceAdelaide

Decision The Tribunal sets aside the decision under review and remits it to the respondent for reconsideration in accordance with these reasons for decision.

..............................................

R W DUNNE
  (Senior Member)

CATCHWORDS

SOCIAL SECURITY – pensions, benefits and allowances –  farm household support – financial hardship – qualification for exceptional circumstances relief payment – farmer – contribution of labour and capital to the farm enterprise – derivation of income from the farm enterprise – exceptional circumstances certificate – decision set aside

Farm Household Support Act 1992 ss 3(2), 6(1), 8A

Re Herrick and Secretary, Department of Family and Community Services [2002] AATA 91
Re Cobon and Secretary, Department of Family and Community Services [2001] AATA 549
Re Secretary, Department of Social Security and Christopher Bredhauer (AAT 10655, 16 January 1996)

REASONS FOR DECISION

13 November 2008   Senior Member R W Dunne   

1.      The applicant (Mr Nicholas Keain) runs a farming property of 1,800 acres with his brother in the mid-north of South Australia.  Both the farming operations and the land are conducted or owned by two family trusts.  Mr Keain lodged a claim for drought assistance, which was assessed by the respondent (“Centrelink”) as a claim for exceptional circumstances relief payment.  The Centrelink delegate decided that Mr Keain was not eligible for the payment because he did not meet the criteria for a “farmer” under the Farm Household Support Act 1992 (“Act”).  The decision was reconsidered and confirmed by the delegate.  It was then reviewed by an Authorised Review Officer, but found to be correct.  Mr Keain applied to the Social Security Appeals Tribunal (“SSAT”), which affirmed Centrelink’s decision, and he has applied to this Tribunal for a review of the decision of the SSAT.

2.      Mr Keain represented himself and Mr Anthony Parker (from Centrelink Legal Services Branch) appeared for the respondent.  The Tribunal received into evidence the T documents (Exhibit R1) and the supplementary T documents (Exhibit R3 lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975, together with the following:

·letter from the applicant to the Tribunal dated 3 July 2008 (Exhibit A1);

·letter from Rabobank dated 24 April 2008 (Exhibit A2); and

·respondent’s statement of facts and contentions (Exhibit R2).

issues for the tribunal

3. The issues for the Tribunal, for the relevant period and for the purposes of the Act, are as follows:

(a)Did the applicant contribute a significant part of his capital to the farm enterprise?

(b)Did the applicant derive a significant part of his income from the farm enterprise?

(c)Did the applicant qualify for exceptional circumstances relief payment?

The respondent has accepted that Mr Keain is a farmer and, during the relevant period, contributed a significant part of his labour to the farm enterprise. 

legislative framework

4. Section 6 of the Act outlines the object of exceptional circumstances relief payment. That section provides:

“Object of exceptional circumstances relief payment

(1)      The object of exceptional circumstances relief payment is:

(a)      to provide financial assistance to persons who:

(i)        are farmers; and

(ii)       are in exceptional circumstances; and

(iii)      are experiencing difficulty in meeting living expenses; and

(b)      to provide financial assistance to persons who:

(i)carry on a small business, gross income from which has been significantly reduced because of the effect of exceptional circumstances on farm enterprises in the area from which the income of the business is normally derived; and

(ii)       are experiencing difficulty in meeting living expenses.”

5. Section 8A of the Act sets out the qualifications for exceptional circumstances relief payment. That section provides:

“Qualification for exceptional circumstances relief payment

Qualification—farmers

(1)A person is qualified for exceptional circumstances relief payment in respect of a period if:

(a)      the period begins on or after 1 October 1994; and

(b)      throughout the period:

(i)        the person:

(A)      is a farmer; and

(B)contributes a significant part of his or her labour and capital to the farm enterprise; and

(C)derives a significant part of his or her income from the farm enterprise; and

(E)      is an Australian resident; and

(F)      is in Australia; and

(ii)an exceptional circumstances certificate issued in respect of the person has effect.

Certificate

(2)For the purposes of this section, an exceptional circumstances certificate issued in respect of the person is a certificate that:

(a)      is called an exceptional circumstances certificate; and

(b)      was issued, for a specified period, to the person by the Secretary; and

(c)relates to the farm enterprise, or any of the farm enterprises, in respect of which the person is a farmer.

Period of effect of certificate

(3)      A certificate only has effect for the period specified in it.

(4)      An exceptional circumstances certificate is not a legislative instrument.

…”

6. Section 3(2) provides definitions of words and phrases used in the Act. Relevantly, s 3(2) provides:

“(2)     In this Act, unless the contrary intention appears:

…

farm enterprise means an enterprise carried on within any of the agricultural, horticultural, pastoral, apicultural or aquacultural industries.

…

farmer means a person who has a right or interest in the land used for the purposes of a farm enterprise.

…”

background and evidence

7.      The factual background to this case is not in dispute and can be taken, in part, from the reasons for decision of the SSAT.  Mr Keain’s family comprises his partner and two children aged 11 years and 6 years.  Although Mr Keain and his brother run the farming property in question, his parents still have control of the property through their control of a company (Kincora Farm Pty Ltd), which is the trustee of the two family trusts.  One family trust conducts the farming operations (“Keain Family Trust”) and the other family trust owns the land on which the operations are conducted (“Kincora Land Trust”).  Mr Keain is an object (or potential beneficiary) of both family trusts.  Because of difficult years on the farm and to support his family, Mr Keain has worked on the Port Pirie wharf since August 1998.  Work on the wharf is irregular and varies from day to day.  He estimates that he spends 65 percent of his work time at the farm.  In the financial year ended 30 June 2007, no income distribution was made to Mr Keain from the Keain Family Trust.  He received drawings from the Trust of $6,354 (or approximately $250 per fortnight).  The Trust made a loss of $123,068 in that financial year.  In addition to his drawings, the Trust paid various of Mr Keain’s family expenses, such as electricity, gas, water rates, telephone and fuel, amounting to $15,000.  Payment of the expenses was made by the Trust out of the Trust’s cheque account, on the presentation of accounts, and in respect of fuel was charged to the Trust’s fuel account.  The total he received from the Trust during the financial year ended 30 June 2007 was approximately $21,354.  In addition, he received income of $20,945 from work on the wharf.

8.      In cross-examination, Mr Keain provided details of public company shares which had been sold between 2005 and 2008.  The net proceeds had been paid to Kincora Farm Pty Ltd to meet farm expenses and the deposits in 2004, 2005 and 2006 appear in Exhibit R3 at pages 2, 4 and 11.  The shares had been held by Mr Keain, jointly with his parents (T Keain and A Keain) and his brother (J Keain).  He provided the following particulars of the share sales:

Sold              Shares  Owners  Net Proceeds

10/2004         ABB Grain Ltd          N Keain, J Keain & A Keain          $27,846.00
2/2005           ABB Grain Ltd          N Keain, J Keain & A Keain          $55,091.00
6/2006           AWB   Limited          N Keain, T Keain & J Keain          $22,800.00

3/2008           Incitec Pivot             T Keain, A Keain, N Keain            $32,145.00

& J Keain                 

Mr Keain’s share of the net proceeds paid to Kincora Farm Pty Ltd was:

10/2004 – ABB Grain Ltd shares – $9,282.00
2/2005 – ABB Grain Ltd shares – $18,300.00
6/2006 – AWB Limited shares – $7,600.00

3/2008 – Incitec Pivot shares – $8,038.00

9.      The financial statements of the Keain Family Trust for the year ended 30 June 2007 disclosed various Beneficiaries Entitlement Accounts (Exhibit R1, T25 at page 113).  The balance of the Account in Mr Keain’s name was a negative amount of $142,169.57.  The amount was apparently a loan to the Trust, disclosed as a negative liability, but there was no real expectation that the loan would be repaid.  No distribution of income had been made to Mr Keain from the Keain Family Trust over the last 8 years.  Mr Keain was a joint guarantor of a loan of $1,425,000 that had been made to the Keain Family Trust by Rabobank (Exhibit  R3, page 22). 

consideration

Did the applicant contribute a significant part of his capital to the farm enterprise?

10. The respondent has accepted that, for the purposes of s 8A of the Act, the farming operations conducted by the Keain Family Trust constituted a “farm enterprise”, that Mr Keain was a “farmer” and that he contributed a significant part of his labour to the farm enterprise. In considering whether he contributed a significant part of his capital to the farm enterprise conducted by the Keain Family Trust, the words “contribute”, “significant” and “capital” are not defined in the Act. In Re Herrick and Secretary, Department of Family and Community Services [2002] AATA 91, Senior Member J Handley had cause to consider the meaning of these words. Dealing first with “contribute” and “significant”, he said (at paragraphs 24-26):

“24.  ‘Contribute’ is not a term of art or requiring legal gloss. As per the Macquarie Dictionary it means 'to give', whether 'in common with others' or for a 'common purpose'. In the context of the definition of 'farmer', I would add that a 'contribution' of 'capital' is in the nature of an investment.

25.  In Parett and Secretary, Department of Family & Community Services [2001] AATA 427 (being a review of a decision under the same legislation, as in the present application) the Tribunal determined at paragraph 33, that ‘significant implies nothing more than being not insignificant or not negligible at one end of the spectrum and being noteworthy or of considerable amount, effect or importance’. This analysis was taken apparently from the Concise Oxford Dictionary.

26.  In Re Vulcan Australia and Comptroller General of Customs (1994) 34 ALD 773, the Tribunal examined a number of authorities as to the meaning to be given to the word ‘significant’. Whilst the authorities highlighted that the meaning to be attributed to the word depended in part on the context of its use, Foster J, in ACI Pet Operations Pty Ltd v Comptroller General of Customs (1990) 26 FCR 531 examined the word in considerable detail, by reference to dictionary interpretations. At 551-552 His Honour said-

‘I derive assistance also from considering that the word is the opposite of ‘insignificant’ which word is defined in the Macquarie Dictionary as meaning ‘unimportant, trifling or petty’ and as ‘too small to be important’. Looked at from this point of view, ‘significant’ may be regarded as meaning ‘not unimportant or trivial’ or as ‘sufficiently large to be important’..... The very use of the term must frequently involve a subsidiary question – ‘significant for what?’”

11.     Then, in dealing with the word “capital”, he said (at paragraphs 27-30):

“27.  An interpretation of the word ‘capital’ is not as straight forward. The word ‘capital’ of course has a different meaning depending on context. In economic or accounting terms it can extend to capital which is either 'expenditure', 'value', 'paid up', 'fixed', 'issued' or 'nominal'.

28.  In Incorporated Interests Pty Ltd v Federal Commissioner of Taxation (1943) 67 CLR 508 Rich J, said at 519-

‘Capital required means the stock, money or wealth in any form necessary for the operations of the particular company during the accounting period. The question involved is one of degree and therefore one of fact’.

29.  In the same decision Starke J, at 520 said-

‘Capital is not in truth a technical term. For the purpose of economics capital has been defined as produced wealth as distinguished from land and other natural resources used productively for gain. But in the business or mercantile sense and therefore in the sense used in the War-Time (Company) Tax Assessment Act it is simply the means with which business is carried on and it may consist of money or property convertible into money’.

30.  In Federal Commissioner of Taxation v Roberts(1992) 108 ALR 385, (a decision of the Full Court), Hill J, at 389 referred to the decision of Northrop J at first instance, who decided-

‘In the present case the money borrowed from the bank constitutes part of the capital of the partnership necessary for it to carry on its profession’.”

12.     During the period from October 2004 until March 2008, Mr Keain received a share of the net proceeds from the sale of shares in ABB Grain Ltd, AWB Limited and Incitec Pivot.  His share of the net proceeds totalled approximately $43,220.  I am satisfied that, on the evidence (including the bank account extracts contained in Exhibit R3), Mr Keain contributed these net proceeds to the farm enterprise conducted by the Keain Family Trust.  As Senior Member Handley found in Re Herrick, in the context of the present case and noting that the legislation is to be interpreted beneficially (refer Re Cobon and Secretary, Department of Family and Community Services [2001] AATA 549 at paragraph 33), I am satisfied that Mr Keain made a “significant” contribution of “capital” to the farm enterprise.

Did the applicant derive a significant part of his income from the farm enterprise?

13.     It was Mr Keain’s evidence that, in the financial year ended 30 June 2007, he had drawings from the Keain Family Trust of approximately $6,354.  In addition, a number of his family expenses (totalling approximately $15,000) were paid by the Trust.  It was contended for the respondent that these amounts did not constitute “income from the farm enterprise”.  I am unable to accept this contention.  Although the amounts may not be “income” in the sense that that expression is usually understood, they were monies that Mr Keain “derived” in the same way that he would have received them had they been distributions or the payment of wages to him from the Trust.  In income tax parlance, they were monies applied for his benefit by the Trust.  Moreover, to deny Mr Keain exceptional circumstances relief payment because he did not receive much in the way of income from the farm enterprise because of the drought would be a curious result.  Mr Keain would have derived a significant part of his income from the farm enterprise if there had not been a drought (see Re Secretary, Department of Social Security and Christopher Bredhauer (AAT 10655, 16 January 1996) per Senior Member D W Muller at paragraph 8(c)). 

Does the applicant qualify for exception circumstances relief payment?

14. In my view, with the exception of s 8A(2) of the Act, Mr Keain qualifies for exceptional circumstances relief payment in respect of the relevant period. The exception, as recognised by the SSAT, is that an exceptional circumstances certificate has not been issued in respect of Mr Keain. In this regard, I note that from 3 July 2007, farmers in the Mid-North area of South Australia, which I understand is the area in which the farming operations of Mr Keain are conducted in the farm enterprise, are eligible to apply for exceptional circumstances relief payment (Exhibit R1, pages 178-179). In my view, there is no reason why such a certificate should not be issued by the respondent to the applicant, for the relevant period, in respect of the farm enterprise pursuant to s 8A(2).

decision

15.     The Tribunal sets aside the decision under review and remits it to the respondent for reconsideration in accordance with these reasons for decision.

I certify that the 15 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member R W Dunne

Signed:         ............J Coulthard...........................................
  Associate

Date of Hearing  21 July 2008
Date of Decision  13 November 2008
Advocate for the Applicant       Self represented

Advocate for the Respondent   Mr A Parker

Centrelink Legal Services Branch