Lodewijk and Dairy Adjustment Authority
[2003] AATA 245
•26 February 2003
Administrative
Appeals
Tribunal
DECISION AND REASONS FOR DECISION [2003] AATA 245
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V02/663
GENERAL ADMINISTRATIVE DIVISION ) Re ANDREW LODEWIJK Applicant
And
DAIRY ADJUSTMENT AUTHORITY
Respondent
DECISION
Tribunal Mr J. Handley, Senior Member Date26 February 2003
Place
DecisionMelbourne
The decision under review is affirmed.............Sgd. Mr J. Handley.................
Senior Member
CATCHWORDS
Dairy Adjustment - Applicant and parents in partnership in a dairy farm - land owned by applicant’s father - land and dairy farm enterprise sold at 1 July 1999 - stock & chattel mortgage to purchasers repayable over 5 years - applicant employed by purchaser to manage the farm until 17 December 1999 - whether applicant had an ‘interest’ in a ‘dairy farm enterprise’ at 17 September 1999 - decision affirmed.
Supplementary Dairy Assistance Scheme 2001
Dairy Produce Act 1986
Dairy Structural Adjustment Program Scheme 2000
Farm Household Support Act 1992
REASONS FOR DECISION
26 February 2003 Mr J. Handley, Senior Member 1. The applicant applies to review a decision made by the respondent on 6 June 2002, where it affirmed a primary decision of 2 May 2002 rejecting a claim for a discretionary payment right under the Supplementary Dairy Assistance Scheme 2001 (‘the SDA Scheme’).
2. At the hearing on 12 February Mr Grabau of Counsel appeared on behalf of Mr Lodewijk and Mr Pizer of Counsel appeared on behalf of the respondent. The applicant gave evidence. A number of documents were received into evidence and will be referred to in these reasons.
The Facts
3. Prior to 1 July 1999 a dairy farm enterprise was conducted on real estate at McVicars Road, Meeniyan in Gippsland. The real estate was registered in the name of Willem Lodewijk, the applicant’s father. The Victorian Department of Agriculture and Rural Affairs issued a dairy farm licence in June 1986 to Willem Lodewijk and Margaret Ann Lodewijk, the applicant’s mother. On 19 December 1989 the business name “W Lodewijk and Son” was registered with the Victorian Corporate Affairs Office. On 1 July 1992 Margaret Ann Lodewijk and the applicant together became proprietors of the business name.
4. The applicant said that he left school at the age of 15 and completed a dairy farm apprenticeship and a number of other trade courses and programs. He said he eventually became qualified as a dairy farmer and together with his parents operated the dairy farm enterprise at Meeniyan.
5. On 28 May 1999 the real estate was sold to G B L Nominees Pty Ltd for the sum of $1,400,900 with settlement taking effect at 1 July 1999. In addition to the sale of real estate, certain stock and chattels were also sold to the purchasers. The stock is separately described in the contract of sale as ‘plant listing’ and ‘mobile plant’. The contract of sale additionally provides that the parties to the sale will enter into a mortgage over the stock and the ‘mobile machinery’.. The principle sum advanced with respect to the mortgage was $250,000 repayable by quarterly instalments of interest within a period of 5 years. At the hearing, the applicant produced a letter from his parents’ solicitors indicating that the final payment over the mortgage was made by the purchasers on 31 January 2003 in the sum of $251,354.17. The letter is addressed to the applicant’s parents only. It describes a final payment in ‘Discharge of Stock Mortgage and Discharge or Movable Property Mortgage’.
6. Mr Lodewijk said that his parents agreed to sell the farm because they were of advancing years. Despite the applicant’s preference to acquire the farm, he was not able to raise sufficient funds and it was his intention ultimately to obtain a farm of his own or to enter into a share farming arrangement elsewhere.
7. Mr Lodewijk also said in evidence that he agreed to enter into a contract of employment with the purchasers, effective from 1 July 1999, where he would manage the farm for a period of 6 months. Apparently the purchasers were inexperienced dairy farmers and sought the assistance of the applicant for a six-month period from the day of settlement. The applicant did enter into such a contract and a letter filed by the applicant and completed by the purchasers confirms that Mr Lodewijk was employed on a contractual basis until 17 December 1999, during which time he undertook the duties of milking, animal husbandry, feeding, silage and haymaking, cropping and farm and machinery maintenance.
8. In evidence Mr Lodewijk agreed that at no time before or after 1 July 1999 did he have any interest in the dairy farm enterprise as a share farmer or as a lease holder. He agreed that he did not at any time have any proprietary interest in the land over which the dairy farm enterprise operated however it was his application that at 6.30pm on 28 September 1999 (refer legislation later in these reasons), he held an interest in a ‘dairy farm enterprise’, by virtue of the stock and chattel mortgage and/or the contract of employment with the purchasers.
The Legislation
9. An SDA grant is a creature of the Dairy Produce Act 1986 which established the Dairy Structural Adjustment Program Scheme 2000 (“the Scheme”).
10. The Scheme was established following deregulation of the Australian dairy industry. Grants are payable to persons who are affected by deregulation.
11. Schedule 2 of the Act relevantly provides that four types of grants are payable to persons affected by deregulation, namely Dairy Supplementary Adjustment Program (“DSAP”) payments, Supplementary Dairy Adjustment (SDA) payments, dairy exit payments made under the Farm Household Support Act 1992 and payments under the Dairy Regional Assistance Program. This application is concerned only with whether the applicant has an entitlement to an SDA payment.
12. Part 2 of Schedule 1 provides that the Minister is required in the formulation of the SDA scheme to grant three different types of payment, namely basic market milk right payments, additional market milk payment rights and discretionary payment rights. The parties agreed that the discretionary payment right only was applicable to the applicant, in this review, subject to eligibility.
13. Section 13 of the SDA scheme provides that the Minister may decide ‘that an entity is eligible for a discretionary payment right …..’
14. The respondent concedes that the applicant is an ‘entity’ as that word is defined at s.5 of the Dairy Produce Act namely, the applicant is an ‘entity’ because he is an ‘individual’.
15. Eligibility is determined by s.7, which provides that an entity becomes eligible if sections 8 or 9 are satisfied. For the purposes of this decision, section 9 is not relevant.
16. Section 8 is reproduced as follows-
“8. Eligibility for discretionary payment rights - significant events, significant crises and significant anomalous circumstances
(1) An entity is eligible for a discretionary payment right because of this section if:
(a) the entity held an interest of a kind mentioned in subsection (2) in a dairy farm enterprise at any time during the qualifying period; and
(b) either:
(i) the entity is taken to be affected by a significant event or a significant crisis because of subsection (3); or
(ii) the entity is taken to be affected by significant anomalous circumstances because of subsection (5)
(2) The kinds of interests are the following:
(a) an interest as a sharefarmer, lessor, lessee or owner-operator because of which the entity was granted a payment right under the DSAP scheme;
(b) if the entity was not granted a payment right under the DSAP scheme:
(i)an interest as a party to an eligible dairy share farming arrangement; or
(ii)an interest as a party to an eligible dairy leasing arrangement; or
(iii)a proprietary interest in the land on which a milking shed is situated; or
(iv)an interest as an owner of a dairy farm enterprise.
Significant events or significant crises
(3) An entity is taken to be affected by a significant event or a significant crisis because of this subsection if but only if:
(a) the entity held an interest in a dairy farm enterprise at 6:30pm on 28 September 1999; and
(b) the event or crisis is:
(i) an illness of a person that had a detrimental effect of the management of the diary farm enterprise mentioned in paragraph (a); or
(ii) a person’s incapacity to work due to injury that had such an effect; or
(iii) a person’s death that had such an effect; or
(iv) the disease or death of 1 or more dairy animals kept by the enterprise mentioned in paragraph (a) that had a detrimental effect on the production or delivery of milk during the 1998-1999 financial year; or
(v) an exceptional event; and
(c) there was a significant reduction in the volume of milk delivered by the dairy farm enterprise mentioned in paragraph (a) during the base year compared to the enterprise’s normal year volume of milk; and
(d) the Minister is satisfied that the reduction was attributable to the event or crisis.
(4) …..
Significant anomalous circumstances
(5) An entity is taken to be affected by significant anomalous circumstances because of this subsection if but only if:
(a) all the following apply:
(i) the entity held an interest in a dairy farm enterprise at 6.30pm on 28 September 1999;
(ii) before 28 September 1999 there was a change or an atypical feature in the ownership or management of the enterprise;
(iii) the Minister determines that the change or feature significantly and adversely affected the entity’s eligibility for a payment right under the DSAP scheme, or significantly and adversely affected the face value of such a payment right;
(iv) the Minister determines that this subsection should apply to the entity; or
(b) all the following apply:
(i) the entity held an interest in a dairy farm enterprise shortly before 28 September 1999 but had assigned the interest to another person by that date;
(ii) the entity did not, on that date, hold an interest in a dairy farm enterprise except as mentioned in subparagraph (iii);
(iii) at 6.30pm on 28 September 1999 the entity was a party to a binding contract or other binding arrangement under which it would, after that date, be entitled to hold an interest in a dairy farm enterprise;
(iv) the Minister determines that this subsection should apply to the entity; or
(c) all the following apply:
(i) the entity held an interest of a kind mentioned in subparagraph (2)(b)(i) or (ii) in a dairy farm enterprise shortly before 28 September 1999;
(ii) the entity did not, on that date, hold an interest in a dairy farm enterprise except as mentioned in subparagraph (iii);
(iii) at 6.30pm on 28 September 1999, or shortly after that date, the entity was a party to a binding contract or other binding arrangement under which it would, after that date, be entitled to hold an interest of a kind mentioned in subsection (2) in a dairy farm enterprise;
(iv) the Minister determines that this subsection should apply to the entity.
(6) If the contract or other arrangement under which an entity would, after 6.30pm on 28 September 1999, be entitled to hold an interest in a dairy farm enterprise was an option or a similar contract, subparagraphs (5) (b) (iii) and (c) (iii) do not apply unless the entity exercised the option and acquired the interest within a period that, in the circumstances, is reasonable.
(7) In this section:
dairy farm enterprise includes a business in Australia carried on with a view to delivering market milk or manufacturing milk during the qualifying period but did not deliver such milk during that period.
an enterprise’s normal year volume of milk is:
(a) the average of the total number of litres of market milk and manufacturing milk delivered by the enterprise in the 3 financial years immediately before the base year; or
(b) if the volume worked out under paragraph (a) does not, in the opinion of the DAA, fairly represent a normal year’s delivery for the enterprise - the volume of milk that, in the DAA’s opinion, does fairly represent a normal year’s delivery for the enterprise.”
17. Section 8(5)(c) was amended on 5 June 2002. The three subparagraphs were omitted and two subparagraphs were replaced by the amendment namely-
“(i) the entity held an interest of a kind mentioned in paragraph (2)(b) or (2)(c) in a dairy farm enterprise shortly before 28 September 1999;
(ii) on or shortly after 28 September 1999 the entity held an interest in a dairy farm enterprise only as mentioned in paragraph (2)(c) (whether or not the entity held an interest in another dairy farm enterprise at that time);”.
18. The amendments to the SDA scheme, effective from 5 June 2002, also omitted section 8(6). For reasons which will follow, the amendments - despite uncertainty as to whether they apply in the circumstances of this application - have no relevance.
Submissions
19. Mr Grabau on behalf of Mr Lodewijk relied on s.8(5)(b). Both counsel agreed that the applicant had ‘assigned’ his interest in the dairy farm enterprise within the meaning of (i).. The applicant, in order to satisfy (ii), had to have held an ‘interest’ by reason of the circumstances of (iii). Mr Graham submitted that his client held an ‘interest’ in a ‘dairy farm enterprise’ at 28 September 1999 within (iii) as constituted by a ‘binding contract’ or a ‘binding arrangement’ being either the stock and chattel mortgage with the purchasers and/or the contract of employment with the purchasers.
20. It was submitted (on the basis of prior Tribunal decisions) that the legislation should be interpreted beneficially. In those circumstances it was put that Mr Lodewijk had an equitable entitlement to enforce the chattel & stock mortgage either in the event of default by the purchasers or, in the event of the death or disappearance of his father, he could enforce the rights for and over collection of the chattel & stock mortgage payments.
21. The contract of employment was acknowledged as being verbal only but amounted to either a ‘binding contract’ or ‘binding arrangement’ within the meaning of sub-section (5). It was submitted that nothing within that sub-section compelled the ‘binding contract’ or ‘binding arrangement’ to be in writing.
22. Mr Pizer on behalf of the respondent conceded that the applicant did have an ‘interest’ (s.8(2)) in a dairy farm enterprise during the qualifying period (1 July 1998 until 28 September 1999) as an ‘owner - operator’.. However it was not conceded that Mr Lodewijk satisfied any other provision of the Act. Specifically it was submitted that s.8(3) was not satisfied because the applicant was not affected by any ‘significant event’ or ‘significant crisis’.
23. Additionally it was put that s.8(5) was not satisfied because any assignment of an interest in a dairy farm enterprise shortly before 28 September 1999 was made by the applicant’s father, being the proprietor of the real estate upon which the dairy farm enterprise was conducted. Additionally it was put that the applicant did not have any interest in a dairy farm enterprise under any binding arrangement or binding contract at 28 September 1999.
24. Insofar as s.8(3) and (5) were concerned, it was submitted that the applicant, at no time after 1 July 1999 had any interest in a ‘dairy farm enterprise’.. It was submitted that ‘dairy farm enterprise’ as defined extends to the production and sale of milk. Beyond 1 July 1999 it was submitted that the applicant was an employee of the new owners of a dairy farm previously owned by his father and by reason of that employment, he was entitled to wages only. On the evidence, it was submitted he had no entitlement to any share of the proceeds from milk sales. Additionally it was put that the applicant had no interest in a dairy farm enterprise as constituted by the (submitted) equitable interest in a mortgage over stock and chattels. That is to say, it was submitted that a ‘dairy farm enterprise’ is not constituted only by stock and chattels.
Decision & Reasons For Decision
25. A ‘dairy farm enterprise’ is defined at s.6 of the Act as follows-
“6. Dairy farm enterprise
(1)For the purposes of this Schedule, a dairy farm enterprise is a business in Australia that delivers market milk and/or manufacturing milk.
Eligible dairy sharefarming arrangements
(2)For the purposes of this clause, if:
(a) under the DSAP scheme, an arrangement is taken to be an eligible dairy sharefarming arrangement; and
(b) apart from this subclause, that arrangement involves 2 or more businesses;
those businesses are to be treated as a single business.
Eligible dairy leasing arrangements
(3)For the purposes of this clause, if:
(a) under the DSAP scheme, an arrangement is taken to be an eligible dairy leasing arrangement; and
(b) apart from this subclause, that arrangement involves 2 or more businesses;
those businesses are to be treated as a single business.
Continuity of a business or dairy farm enterprise
(4)For the purposes of this Schedule, the continuity of a business or a dairy farm enterprise is not affected by:
(a) any change in the identity of the entity or entities who carry on the business or enterprise; or
(b) any change in the ownership of the business or enterprise.”
26. Additionally, ‘dairy farm enterprise’ has the extended meaning as found within section 8.(7) (refer earlier).
27. Upon the evidence heard from the applicant and from the documents lodged in these proceedings it is clear that at 1 July 1999, the applicant’s father sold the land upon which a dairy farm enterprise was previously conducted. Having regard to the meaning of ‘dairy farm enterprise’ as found at s.6 and s.8(7) of the SDA schedule, it cannot be found that the applicant had any interest in a “dairy farm enterprise” at 6.30pm on 28 September 1999.
28. The capacity to deliver market milk or manufacturing milk cannot be confined only to stock and chattels. These may be regarded as no more than assets of the dairy farm enterprise. Absent pasture which is located upon land, feed and milking machinery it cannot be put in my view that a ‘dairy farm enterprise’ existed beyond 1 July 1999 in which the applicant had any interest. Beyond that date the dairy farm enterprise was owned and conducted by the purchasers. In reaching these conclusions I note that the contract of sale of the real estate (T-10, p.36) refers to a chattel mortgage over ‘mobile machinery’.. The schedule of chattels annexed to the contract of sale (page 33) refers to ‘mobile plant’ being the items over which I understand the mortgage over ‘mobile machinery’ applies. The letter from the solicitors (refer para 5 earlier) refers to ‘movable property’. I have decided that the items listed under the sub-heading of ‘plant listing’, none of which have the dual character of being both ‘mobile’, or ‘movable’ and ‘machinery’ were the subject of the chattel mortgage. In the absence of land and the items listed under ‘plant listing’ milk could not be ‘delivered’. It follows that there was no ‘dairy farm enterprise’ beyond 1 July 1999.
29. Having reached these conclusions I am satisfied that s.6(4) in its reference to the ‘continuity of a business’ by the ‘change in the identity of the entity who carries on the business’ is a reference to the eligibility of the purchasers at 28 September 1999 to an SDA grant - if at all - and not the applicant or his father. Whilst this issue was not addressed at the hearing, I cannot conceive that s.6(4) has application at all to the applicant. The ‘business’ existing before 30 June 1999 did not continue in the ownership of the applicant nor in a form preserving or granting him any interest. This sub-section must contemplate the rights available - in this case - to the purchaser of the dairy farm enterprise. Any other construction would be absurd.
30. I am satisfied that s.8(1) does not apply. The applicant has no interest in a ‘dairy farm enterprise’ within s.s.(2) and he was not affected by a ‘significant event’ or ‘significant crisis’ within the meaning of s.s.(3). The applicant did suffer injuries in a motor car accident in May 2001, which apparently caused a lengthy period of incapacity. However this would probably constitute a ‘significant event’ or ‘significant crisis’ outside the operation of the Act. For the same reasons which appear above however, the applicant did not have an interest in a dairy farm enterprise at 28 September 1999. The applicant cannot satisfy s.8(3)(a) and it follows that this sub-section does not assist the applicant.
31. The three sub-paragraphs of s.(8)5 must each be satisfied conjunctively and for the above reasons I cannot be satisfied that either sub-section applies. Specifically insofar as sub-paragraph (b) is concerned - and by way of response to the submissions of the applicant - Mr Lodewijk did not ‘hold an interest in a dairy farm enterprise’ at 6.30pm on 28 September 1999 for the reasons provided above. Mr Lodewijk was then an employee of the purchasers of the dairy farm enterprise previously owned by the applicant and his parents. The ‘dairy farm enterprise’ at 28 September 1999 was owned by the purchasers and the applicant did not then have an interest in it that satisfied s.8(2). Additionally, there was nothing which pointed to the applicant satisfying s.8(5)(b)(iv). Section 8.(5)(a) has no application, because there was no interest in a ‘dairy farm enterprise’ at 28 September 1999. S.8(5)(c) is not satisfied because of the reasons given above.
32. Additionally and by way of conclusion, the legislation arose out of the de-regulation of the dairy industry and is intended to provide a scheme of payments to affected dairy farmers. It is clear from the legislation that the affect upon dairy farmers is to be determined at 6.30 pm on 28 September 1999. The applicant and his parents sold the dairy farm enterprise on 1 July 1999. At that date they ceased to have an interest in a dairy farm enterprise. They received monies by reason of the sale of real estate and the enterprise. They did not - for the above reasons - have an interest in a dairy farm enterprise. They had disposed of it earlier. They cannot in those circumstances be found to have been affected by deregulation of the dairy industry.
33. In the circumstances the decision under review must be affirmed.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of Mr J. Handley, Senior Member.
Signed: ........C. Irons ..........................
SecretaryDate/s of Hearing 12/2/2003
Date of Decision 26/2/2003
Counsel for the Applicant Mr G. Grabau
Solicitor for the Applicant Francis A. Rutherford & Assoc.
Counsel for the Respondent Mr J. Pizer
Solicitor for the Respondent Mallesons Stephen Jaques
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