Martin and Dairy Adjustment Authority and Carinya Dairy Pty Ltd
[2002] AATA 726
•26 August 2002
DECISION AND REASONS FOR DECISION [2002] AATA 726
ADMINISTRATIVE APPEALS TRIBUNAL )
) No V01/1046
GENERAL ADMINISTRATIVE DIVISION )
Re GREGORY MARTIN
Applicant
And DAIRY ADJUSTMENT AUTHORITY
Respondent
AndCARINYA DAIRY PTY LTD
Party Joined
DECISION
Tribunal Mrs Joan Dwyer, Senior Member
Date26 August 2002
PlaceMelbourne
Decision The Tribunal sets aside the decision under review.
(Sgd) Joan Dwyer
Senior Member
DAIRY ADJUSTMENT AUTHORITY – Dairy Structural Adjustment Program Scheme 2000 – cancellation of units in a standard payment right – whether applicant made a false statement that dairy farm enterprise was not subject to an eligible sharefarming arrangement – meaning of "false statement" - nature of arrangement between applicant and workers on farm – whether an eligible sharefarming arrangement – requirement that statement be made to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2 - decision set aside
Dairy Structural Adjustment Program Scheme ss 4, 35, 49(7)
Dairy Produce Act 1986 Schedule 2, Cl 25(c), Cl 50
Dairy Industry Adjustment Act 2000
Re Buchan and Dairy Adjustment Authority [2002] AATA 600
Masters v Cameron (1954) 91 CLR 353
Re Rogers and Dairy Adjustment Authority and the Van Diemen's Land Company
- Dairies Ltd (VDLD) Pinegrove [2001] AATA 937
Re King and Secretary, Department of Social Security (1994) 34 ALD 583
Re Krpan and Secretary, Department of Family and Community Services [1999]
57 ALD 663
Re Secretary, Department of Social Security and Doravelu (1992) 15 AAR 392
Boxvale Holdings Pty Ltd v Federal Commissioner of Taxation [1989] ATC 4927
Project Blue Sky Inc and Others v Australian Broadcasting Corporation [1998]
HCH 28 194 CLR 355
REASONS FOR DECISION
26 August 2002 Mrs Joan Dwyer, Senior Member
This is an application under s 49(7) of the Dairy Structural Adjustment Program Scheme ("the Scheme") made under clause 25(c), of Schedule 2 of the Dairy Produce Act 1986, as amended by the Dairy Industry Adjustment Act 2000, ("the Act") for review of a reviewable decision, made by the Dairy Adjustment Authority ("DAA"). Applying the analysis made by the Tribunal in Re Buchan and Dairy Adjustment Authority [2002] AATA 600, the reviewable decision is the primary decision made 20 April 2001 (T40 pp92-96) as confirmed on 13 July 2002 (T49 pp112-121).That was a decision to cancel 903 units of the payment right of a dairy farm enterprise owned by Mr Martin, which operates under the name of GE and LJ Martin. There had been an earlier decision made on 29 December 2001 ("the original decision") (T11, pp 37-40) that the dairy farm enterprise was entitled to a standard payment right of $351,913.
The payment right came into being under the Scheme made pursuant to the Dairy Industry Adjustment Program in Schedule 2 of the Act. As is explained in Clause 1 of Schedule 2, the object of the Program was to help the dairy industry or dairy communities adjust to deregulation. The Program provides for certain types of grants to be made to dairy farmers. Those relevant to this matter are described in Clause 1 as DSAP payments (made under this schedule). The letters DSAP stand for Dairy Structural Adjustment Program.
Clause 1 of Schedule 2 provides for the DAA to administer DSAP payment rights.Clause 10 of Schedule 2 provides
10 DSAP scheme
Within 14 days after the commencement of this Schedule, the Minister must, by writing, formulate a scheme (the DSAP scheme) for:
(a) the grant of payment rights to entities who:(i) held an eligible interest in a dairy farm enterprise at 6.30 pm on 28 September 1999; and
(ii) satisfy such other conditions as are set out in the scheme; and
(b) the division of payment rights into units; and
(c) the registration of units; and
(d) the making of payments by the Corporation to registered owners of units.
The Scheme was formulated on 18 May 2000.
At the hearing Mr Martin appeared in person and gave evidence. Evidence on his behalf was also given by Mr Brown, a farm consultant. Mr Pizer of Counsel appeared for the DAA. At the suggestion of the Tribunal he called Miss Clarke, the delegate who made the original decision that Mr Martin was eligible for a standard payment right with a face value of $351,913 (T11 pp37-40). Mr Cassidy, a solicitor with Cassidy Morrison and Teare, appeared for Carinya Dairy Pty Ltd ("Carinya"). Mr Paul Mundy a director of that company gave evidence.
The Tribunal had before it the documents ("the T documents") lodged pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 ("the AAT Act") and also the exhibits tendered during the hearing. The Tribunal also had before it a folder of relevant material as follows:
1 Dairy Produce Act 1986 (relevant excerpts)
2 Dairy Produce Legislation Amendment (Supplementary Assistance) Act 2001
3Dairy Structural Adjustment Program Scheme 2000, consolidated as at 16 May 2001 taking into account variations up to the Dairy Structural Adjustment Program Scheme Amendment 2000 (No. 7)
4 Consolidated Scheme incorporating amendments 1-3
5 Copy of amendment 4 signed by the Minister
6 Copy of amendment 5 signed by the Minister
7 Copy of amendment 6 signed by the Minister
8 Copy of amendment 7 signed by the Minister
9 Copy of amendment 8 signed by the Minister
10 Copies of the Gazette notices for amendments 4-8
11 Explanatory Memorandum on the Dairy Industry Adjustment Bill 2000
12 Dairy Structural Adjustment Program Information Booklet and Application
The contents of that folder were referred to during the hearing and are referred to in these reasons as the core documents ("the CDs").
The s 37 statement included in the T documents provides a summary of the background to the DSAP Scheme. It is reproduced here so far as relevant to the facts of this matter (T2 p3):
1. BACKGROUND TO THE DSAP SCHEME
1.1The Dairy Industry Adjustment Package was developed to assist the dairy industry to adjust to deregulation, which took effect on 1 July 2000. One of the programs under the package is the Dairy Structural Adjustment Program (DSAP), which provides for dairy structural adjustment payments to be made to eligible entities on a quarterly basis over an 8 year period which commenced on 1 July 2000. The Scheme is formulated under Schedule 2 of the Dairy Produce Act 1986 (the Act).
. . .
1.3The Scheme provides a framework for the grant of payment rights to entities who held an eligible interest in a dairy farm enterprise at 6.30 pm on 28 September 1999. Under the Scheme there are three types of payment rights as follows:
(a) standard payment rights;
(b) exceptional events supplementary payment rights; and
(c) anomalous circumstances payment rights.1.4Standard payment rights are based on a dairy farm enterprise's milk deliveries in the 1998/1999 financial year. Exceptional events supplementary payment rights may be granted in cases where, because of exceptional events, the volume of milk deliveries in the 1998/1999 financial year is less than 70% of the average milk deliveries in the 3 previous financial years. Anomalous circumstances payment rights may be granted to entities who have been affected by anomalous circumstances as defined under the Scheme.
1.5The vast majority of applications received by the DAA under the Scheme are for standard payment rights. Under the Scheme the face value of a standard payment right is calculated by reference to the dairy farm enterprise's "overall enterprise amount". The overall enterprise amount is calculated by reference to the volume of milk delivered by the enterprise in the 1998/1999 financial year. Each entity with an eligible interest in the enterprise shares in the overall enterprise amount in accordance with the provisions of the Scheme.
1.6. . . For the purposes of the Scheme market milk is divided into a premium component paid at a rate of 37.27 cents per litre and a non-premium component paid at a rate of 8.96 cents per litre. Manufacturing milk is classed as non-premium and paid on a fat and protein basis.
1.7The Scheme specifically sets out the methods for determining how the premium component and non-premium component of the overall enterprise amount is to be allocated.
1.8.For the purpose of calculating the face value of standard payment rights under the Scheme a dairy farm enterprise is categorised as either:
(a)an enterprise that is not subject to an eligible sharefarming arrangement or an eligible leasing arrangement (commonly referred to as owner-operator); or
(b)an enterprise that is subject to an eligible sharefarming arrangement; or
. . .
1.9The DAA has a statutory duty to comply with the Act and the Scheme and does not have a general discretion to change the face value of a standard payment right calculated in accordance with the Scheme.
1.10Once an entity has been granted an unconditional payment right under the Scheme the payment right is divided by 32 (being the number of quarters in the 8 year period which commenced on 1 July 2000, in which the payments are to be made) to derive a number of units for the payment right. The number of units is then recorded in the Register of Units kept by the DAA in accordance with the Scheme. A registered owner of units is entitled to a quarterly payment of $1 per unit for each of the 32 quarters in the abovementioned 8 –year period.
The CDs at Tab 3, contain a copy of the Scheme as consolidated as at 16 May 2001. That consolidation incorporated 7 amendments. The most recent was made on 16 May 2001. The original decision in this matter was made on 20 April 2001. Amendment 6 was made on 15 February 2001. It is the first 6 amendments only which are relevant. However s 35, on which the respondent relied, has not been amended.
It is appropriate to consider first the circumstances in which a decision may be made to cancel units in a payment right. The relevant legislative provision is s 35 of the Scheme which provides as follows (CDs 3.43):
(3) Subsection (4) applies if:
(a) before a payment right is granted, an entity makes a false statement to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2 to the Act or the scheme; and
(b)as a result of action taken relying on the false statement, the face value of the payment right exceeds the amount that would have been the face value if the false statement had not been made.
(4) If this subsection applies, the DAA may cancel the number of
units in the payment right worked out by:(a) dividing the number of whole dollars in the amount of the excess by 32; and
(b) if the result of the division is not a whole number — rounding down to the nearest whole number (treating zero as a whole number).
(5) In this section:
false statement has the same meaning as in clause 50 of Schedule 2 to the Act.Note If a unit is cancelled under this section, Schedule 2 to the Act and the scheme have effect as if the unit had never existed: see subclause 50 (2) of Schedule 2 to the Act.
The definition of "false statement" in clause 50 of Schedule 2 of the Act is as follows (CDs 1.59-60):
false statement means a statement (whether made orally, in a document or in any other way) that:
(a)is false or misleading in a material particular; or
(b)omits any matter or thing without which the statement is misleading in a material particular.
Mr Pizer set out the requirements of s 35(3):
1.An entity made a false statement.
2.The false statement was made before the payment right was granted.
3.The false statement was made to a person exercising powers or performing functions under or in connection with the Schedule or the Scheme.
4.The DAA took action relying on the false statement.
5.As a result of taking that action, the face value of the payment right that was granted exceeds the amount that would have been the face value if the false statement had not been made.
THE FACTS
There is no dispute about the fact that the dairy farm enterprise run by Mr Martin, under the name G.E. and L.G. Martin, is an eligible entity and thus was qualified to be granted a standard payment right in respect of a dairy farm enterprise under s 9 of the Scheme.
The original decision made in this matter (T11) found that the face value of Mr Martin's standard payment right under the Act was the total dairy farm enterprise amount for his farm, namely $351,913. The Scheme provided that each payment right under the Scheme was to be divided into units, where each unit has a face value of $32.00. It provided that quarterly payments were to be made over an eight year period until the whole payment right was paid. Mr Martin was advised that he would receive 32 quarterly payments of $10,997. The decision stated at para 17:
Accordingly, unless the Decision is varied by the DAA or the Administrative Appeals Tribunal following a request for review, the face value of your right will be $351913.
It is not in dispute that as at 28 September 1999 Mr and Mrs Mundy were working on Mr Martin's farm and that the terms on which they commenced that work on or about 12 July 1999 were set out in an unsigned document headed Sharefarming Memorandum of Understanding (T12 pp44-46). The document was prepared by Mr Brown after a meeting with Mr and Mrs Mundy and Mr Martin at the farm on 16 June 1999.
Nor is there any dispute that if Mr and Mrs Mundy were in fact participating in an "eligible sharefarming arrangement", as defined in s 4 of the Scheme, as at 28 September 1999, then the Scheme provided for them to have a share of the standard payment right payable in respect of Mr Martin's dairy farm. His entitlement would accordingly be reduced. The means of assessing the face value of each entity's standard payment right, where an enterprise is subject to a sharefarming arrangement is set out in s 23 of the Scheme (page 3.25 and 3.26 of the CDs)
That definition of an "eligible sharefarming arrangement" in s 4 of the Scheme is as follows:
(1) An eligible dairy sharefarming arrangement is an arrangement between 2 or more entities:
(a) under which each entity is entitled to:
(i) a fixed percentage share of the milk revenue of a dairy farm enterprise; or
(ii) a fixed percentage share of the milk revenue of a dairy farm enterprise in relation to the sale of each type or amount of milk produced by the enterprise; and
(b) where at least 1 of those entities has no proprietary interest in:
(i) the land on which a milking shed used by the enterprise is situated; and
(ii) quota under which the enterprise delivers market milk.
(2) A dairy farm enterprise is subject to an eligible dairy sharefarming arrangement if the milk revenue of the enterprise is shared under the arrangement.
(3) An entity is a party to an eligible dairy sharefarming arrangement if the entity is entitled to a share of the enterprise's milk revenue under the arrangement.
(a) Did Mr Martin make a false statement?
In reviewing the decision to cancel 903 units in Mr Martin's name, the first step must be, as set out by Mr Pizer in his analysis of s35(3), to determine whether Mr Martin made a false statement. Mr Pizer relied on sections 1 and 7 of Mr Martin's application for a Standard Payment Right (T3 pp11-16) as false statements. Applying the definition in clause 50 of Schedule 2 of the Act a false statement is a statement that:
(a)is false or misleading in a material particular; or
(b)omits any matter or thing without which the statement is misleading in a material particular.
Mr Pizer relied on paragraph (a) of the definition.
The application form which Mr Martin completed (T3) states at the top of p1:
Important information, please read this in conjunction with the Information Book.
The Information Book (CD p 12.7) contains the following relevant definitions:
Owner-Operator – is owner of land and/or quota with a share of the milk revenue. Could be an individual or a joint owner, a company, a business or family partner, or a trust manager, but not a sharefarmer, lessee of land or lessor.
Sharefarmer – is an entity who participates in an eligible dairy sharefarming arrangement, but not as an owner-operator
In section 1 of his application Mr Martin selected as the box that, in his view best described him, "Owner-Operator - but NOT a sharefarmer, lessee of land or lessor." I am satisfied that was not a false statement. Mr Martin is an Owner-Operator and not a sharefarmer as those terms are explained in the Information Book.
Mr Pizer also relied on section 7 of the application. It asked "Did the Dairy Farm Enterprise have an eligible sharefarming arrangement in place at 6.30pm on 28 September 1999?" (T3 p12) Mr Martin answered that question, "No". It is not at all easy to determine whether or not that was a false statement, because it is not clear whether or not the arrangement between Mr Martin and Mr and Mrs Mundy was "an eligible sharefarming arrangement".
The Information Book also contains the following definition:
Eligible Dairy Sharefarming Arrangement – is an arrangement made between two or more entities:
(a) under which each entity is entitled to:
a fixed percentage share of the milk revenue of a dairy farm enterprise; or
a fixed percentage share of the milk revenue of a dairy farm enterprise in relation to the sale of each type or amount of milk from the enterprise; and
where at least one of those entities has no proprietary interest in the land on which the milking shed was situated, and quota used to deliver market milk.
That definition of an "Eligible Dairy Sharefarming Arrangement" is in all important respects identical to that at s 4 of the Scheme, which is set out in paragraph 15 of these reasons.
Those definitions provide that the crucial feature of an eligible sharefarming arrangement is that each entity to the arrangement "is entitled to a fixed percentage share of the milk revenue of a dairy farm enterprise".
As already stated, as at 6:30pm on 28 September 1999, Mr and Mrs Mundy were working on Mr Martin's farm. They agreed that the arrangement under which they commenced work was set out in the unsigned document headed "Sharefarming Memorandum of Understanding" ("the Memorandum"). It is necessary to consider the terms and effect of that unsigned document. Neither party took the Memorandum to their solicitor for approval before Mr and Mrs Mundy commenced work on the farm. Mr Brown said in evidence that he had advised both parties to take the document to their own solicitor, and, under the heading "Sharefarming Memorandum of Understanding" the Memorandum states:
(THIS DOCUMENT AIMS TO PROVIDE GUIDELINES ONLY TAKE TO YOUR OWN SOLICITOR TO DRAW UP AGREEMENT)
After setting out the obligations of the owner and the sharefarmer, the Memorandum sets out the shares of income and expenses as follows:
Owner Sharefarmer
INCOME
Milk (net of levies etc) 89% 11%
Calves 100% 0%
Culls 100% 0%
Rebates (as per expense schedule)
EXPENSES
Shed
Shed Power 100% 0%
Detergent/Rubberware 100% 0%
Herd
AI/Herd test 100% 0%
Animal Health/vet 100% 0%
Calf rearing costs 100% 0%
Feed
Concentrates (grain/pellets/additives) 89% 11%
Hay – Silage purchases/contracting 89% 11%
Agistment (off farm) 100% 0%
Irrigation Water 100% 0%
(including sales and GMW TWE del. costs) 100% 0%
TWE water (capital) 100% 0%
Fertiliser (only Nitrogen on % basis) 100% 0%
Fuel/oil (farm) 100% 0%
Overheads
Casual Labour (plus super/wcover) 100% 0%
Fuel for capital works 100% 0%
Repairs to plant and machinery own Own
Repairs to improvements 100%
Rates 100%
Vehicle Registration and Insurances own Own
Telephone own Own
Insurance 100% farm Public risk and contents
Personal Accident (& income protection) Suggest 100%
(S/F Superannuation and Workcover 0% 100%
The Memorandum also contained the following additional points.
Special notes:
1.The s/farmer milk income share is to be 11% after all factory/industry levies, including any stop charges and any cartage rebates associated (ie 11/89 income split after ALL factory & industry levies).
2.Method of payment to the sharefarmer shall be factory order.
3.Should the sharefarmer receive less than $66000 in net income after the share of feed costs per year, the difference is to be made up by the owner with rising 2 yr olds nominally valued at $1000/hd. (eg. If after receiving 11% of net milk income, paying 11% share of feed costs, the s/f net income is 60000, The owner is to provide 6 heifers to being figure to $66000). Cows are then to be leased back by the owner at $140/yr in future years (paid quarterly to S/F). See Lease Agreement (attached).
4.At completion of the arrangement, the sharefarmer and owner to agree on a method of selection of animals (eg. pick for pick, drafting race, etc).
5.Milk to be provided for calf rearing by sharefarmer to owner at no cost. Maximum use of colostrum by sharefarmers for calf rearing.
6.Contract to be initially for three years, being renewed annually, then may be renegotiated. (herd ownership option).
There was no dispute about the meaning of Note 3 which guaranteed Mr and Mrs Mundy a net income of $66,000 per year from the enterprise. There was evidence as to how it came to be added to the agreement.
Mr Martin explained that he has been dairying at Ardmona for 30 years. He said he purchased an adjoining property and built a dairy on it in 1997. He was looking for assistance with the work and a mutual acquaintance put him in touch with Mr and Mrs Mundy. They suggested that Mr Brown, who is an agricultural consultant, consulting predominantly to dairy farmers in the Goulburn Valley, be brought in to assist with negotiating the terms under which they would work.
Mr Martin said that during the negotiations there was discussion about the deregulation package which was expected to be announced soon. At the time everybody in the industry was aware of the fact that deregulation was imminent, and that the compensation package which would be made available was likely to benefit sharefarmers. He did not intend to enter into a sharefarming agreement with Mr and Mrs Mundy. He did not want to share his compensation payment, which took into account the 30 years he had spent building up his dairy farm, with a sharefarmer who was just starting to work with him when the structural adjustment scheme was due to come into operation.
Mr Martin said that Mr and Mrs Mundy made it clear that they wanted a guaranteed minimum income rather than a straight percentage of the milk income. It was agreed that they would receive 11% of milk income, but that there would be a "top up" to take their income up to $66,000 per annum, if the agreed percentage of milk income came to less than that figure. Mr Martin said that on his projected figures there would in fact have been a top up required to bring their income up to the agreed figure. He said he understood that because of the agreed minimum income, Mr and Mrs Mundy were not sharefarmers and would not be entitled to share in his compensation package when it was announced.
Mr Martin said that he was obliged to pay Mr and Mrs Mundy an agreed income regardless of the income of the farm. That meant that he bore all the risk of any reduction of income due to fluctuations in milk prices. Even though he had not wanted or intended to enter into a sharefarming arrangement, he had agreed during negotiations with Mr and Mrs Mundy that the terms on which they worked would, in some respects, resemble a sharefarming arrangement. He said this was agreed to so that Mr and Mrs Mundy would be entitled to tax and sales tax concessions as sharefarmers.
Both Mr Brown and Mr Mundy also gave evidence as to the meeting at which the agreement between Mr Martin and Mr and Mrs Mundy was negotiated. Mr Brown said that he had previously worked with both Mr Martin and Mr and Mrs Mundy. He said he was contacted by them and visited Mr Martin at the farm on 16 June 1999. After he had some preliminary discussion with Mr Martin, Mr and Mrs Mundy arrived and discussed their requirements. Mr Brown said Mr and Mrs Mundy wanted a share farming arrangement and financial security.
Mr Brown said that in May 1999 he had been involved in workshops preparing for the deregulation of the dairy farming industry. He had done a report to the Australian Dairy Farmers Federation suggesting guidelines for disbursement of the compensation package. He said the suggested guidelines were:
(i)that the compensation would not cover capital losses
(ii)that it would relate to potential loss of dairy income after regulation.
As a result of his awareness of the issues raised by the deregulation package Mr Brown said he raised that issue in his discussions with Mr Martin and Mrs and Mrs Mundy. He explained that it was his understanding that people exposed to price fluctuations as a result of the deregulation of the industry would participate in the package. He said he expected milk prices to fall. He said that it was his belief that the fixed income required by Mr and Mrs Mundy might jeopardise their participation in the package. He said they accepted that. He drafted an agreement and sent it to the parties. He was requested to amend it by Mr Mundy. He did so and sent an amended version to the parties. That is the document which so far as relevant is set out at paragraphs 23 and 24 of these reasons.
In his evidence Mr Mundy said that he and Mrs Mundy intended to enter into a sharefarming arrangement. He said he had considered it likely that the 11% of milk income payable to him and Mrs Mundy would have been more than the agreed $66,000. He referred to attachment A to exhibit R1. That is a projection of income prepared by Mr Brown. Mr Mundy said he regarded Mr Brown's estimates as conservative and thought he could have improved on the $64,210 shown there as projected income for Mr and Mrs Mundy on the 89-11% split.
There is a question as to the nature of the agreement under which Mr and Mrs Mundy started work. The Memorandum, does not read as if it was intended to be a binding document. It was never signed or dated. It stated that it provided "guidelines only" and advised that it be taken to "your own solicitor to draw up agreement". Yet both parties in their evidence agreed that it did set out the terms of their agreement. Thus it is not necessary to consider whether the agreement was oral or written or to refer to the analysis set out in Masters v Cameron (1954) 91 CLR 353
The evidence is that Mr and Mrs Mundy started work on the farm on the terms set out in the Memorandum on about 12 July 1999. However the arrangement did not last long. On 16 September 1999 Mr and Mrs Mundy gave one week's notice of intention to terminate the agreement. Mr Martin said that he asked them to stay on longer and pointed out that their agreement had provided for six months notice of termination. In fact that is what the Memorandum provides for "where a party is in default of the agreement." It does also state, "or earlier by mutual agreement". After discussion with Mr Brown, Mr and Mrs Mundy agreed to extend the period of notice and to stay until 10 October 1999. The crucial date, 28 September 1999, fell during the period of notice worked by Mr and Mrs Mundy.
In order to decide whether Mr Martin made a false statement when he answered "No" in his application (T3) to the question whether the enterprise had an eligible share farming arrangement in place at 6.30 pm on 28 September 1999, it is necessary to consider whether the agreed terms, as set out in the Memorandum, constituted an "eligible sharefarming arrangement".
Mr Martin explained that because the income of Mr and Mrs Mundy was fixed at $66,000 per annum and not as a percentage of the profits of the farm, he did not regard himself as having entered into a sharefarming arrangement. On the other hand he did not regard Mr and Mrs Mundy as employees, because he did not cover them for workers' compensation.
Mr Brown said that in his opinion Mr and Mrs Mundy were sharefarmers. He said it was a sharefarming arrangement, "but with a floor". He said it was quite different from an employment agreement. He said there is not one accepted form of sharefarming agreement or arrangement. There are many different variations. That is no doubt true.
However, the only variation of a sharefarming arrangement which gives an entitlement to share in a DSAP payment right, is one where the sharefarmer is entitled to a fixed percentage share of the milk revenue of a dairy farm enterprise. The question here is whether the terms of the arrangement between Mr Martin and Mr and Mrs Mundy are to be characterised, as Mr Pizer submitted, as entitling Mr and Mrs Mundy to "a fixed percentage share of the milk revenue" namely 11%. That submission, in effect, ignores the fact that if a "top up" was paid the actual percentage would have been more than 11%. That was the basis of Mr Martin's submission that the agreed payment to Mr and Mrs Mundy of a minimum of $66,000 meant that the percentage share of the milk income to which they were entitled was not "a fixed percentage", but would have been more than 11% where 11% did not yield an income of $66,000. There is merit in both submissions. It is not possible to say whether Mr Martin made a false statement without considering the meaning of the terms "a fixed percentage share" and "a false statement".
There is an ambiguity about the meaning of the term "an eligible sharefarming arrangement". It is not easy to decide whether a person is entitled to a fixed percentage share of the milk revenue, if that is one component of the entitlements, but there is "a floor", so that the percentage must be increased if an 11% share does not reach the agreed floor.
Mr Pizer submitted that in providing for an 89-11% split of the milk revenue, the agreement provided that each party was entitled to a fixed percentage share of the milk revenue.
Mr Martin submitted that because Mr and Mrs Mundy's income would, or may, have required topping up to reach $66,000, it was not "a fixed percentage" share of milk revenue, but could have been more than the percentage fixed in the agreement. If their percentage had turned out to be more than 11%, his percentage would correspondingly have been less than 89%. As Mr and Mrs Mundy left after three months their percentage share of milk revenue was never determined. If there had in fact been an increase in milk revenue for the year 1999-2000, over the preceding year, so that 11% of the milk income was equal to or more than $66,000, then under the agreement Mr and Mrs Mundy's income would have been fixed at 11% of the total milk revenue of the farm. But, as at 28 September 1999, it could not have been known whether Mr and Mrs Mundy would have been entitled to "a fixed percentage share of the milk revenue" of the dairy farm enterprise, or to more than the fixed 11% share.
An additional issue is that as at the relevant date, 28 September 1999, Mr and Mrs Mundy had given notice and were serving out their period of notice. Was the arrangement, if there had been one, still in existence? Had it been terminated by breach by Mr and Mrs Mundy, or was it continuing during a mutually agreed period of notice?
The definition of an "eligible sharefarming agreement" in s 4 of the Scheme, was considered by the Tribunal in Re Rogers and Dairy Adjustment Authority and the Van Diemen's Land Company - Dairies Ltd (VDLD) Pinegrove [2001] AATA 937. The facts there were that a sharefarmer was entitled to a return of $0.9143 per kilogram of milk solids plus some bonuses which were calculated as a percentage of part of the milk revenue. The price paid for milk by the dairy company to the dairy enterprise was adjusted as the year progressed, if the dairy company could pay more for the milk.
The Tribunal said at paragraphs 22 to 33:
22. The applicant's entitlements under the sharefarming agreement between himself, his wife and the joined party include, relevantly for the purpose of this application:
(a) a specified payment of $0.9143 per kilogram of milk solids sold; and
(b) a bonus payment of 10% of the incremental increase over a base payout level of $3.20 per kilogram of milk solids "net farm rate" on every kilogram of milk solids produced.
23. The specified payment of $0.9143 per kilogram of milk solids is clearly not "a fixed percentage share of the milk revenue" of the Pinegrove enterprise for the purposes of s4(1)(a)(i) of the Scheme. It is, in truth, a fluctuating percentage of the milk revenue as prices rise and fall.
24. As to the bonus payment, the Tribunal is of the view that whilst it is only a fixed percentage share of an incremental increase it could be argued that it is a fixed percentage share of a part of the milk revenue of the enterprise and thus perhaps meet the description of the entitlement required by s4(1)(a)(i).
25. However in the Tribunal's judgment, the bonus payment provided by clause 24.4 of the sharefarming agreement is a contingent entitlement calculated as a fixed percentage of part of the milk revenue of the enterprise in the event of that contingency whereas the entitlement contemplated by s4(1)(a)(i) is a vested entitlement.
26. The Scheme, clearly is remedial in nature and as such its purpose must be steadily borne in mind in construing its provisions where they permit of ambiguity.
27. That purpose, the Tribunal accepts, as submitted by the applicant himself, is to provide the benefit of compensation to those entities whose economic returns were subjected to the vagaries of milk prices in a deregulated industry as a result of increased competition.
28. Contrary to the applicant's contentions that he was such an entity, the Tribunal is of the view that his sharefarming agreement was designed precisely to protect him from rises and falls, particularly falls of course, and to provide him with the security of a base level payment sufficient to permit him to remain in the industry.
29. In the Tribunal's judgment s4(1)(a)(i) is intended to embrace those entities whose milk revenue is affected by falling milk prices because they have a vested entitlement under a sharefarming arrangement to a fixed percentage of that revenue.
30. In such cases the entitlement to compensation is easily perceived as the fixed percentage share affects an entity's income depending on the actual price paid for milk. In the applicant's case however, he being remunerated predominantly by a specified amount per kilogram of milk solids, the amount of his percentage share will vary depending on the price actually paid for milk, but his income is not affected other than very peripherally in the sense that he could earn more by way of a bonus in the event that the actual price exceeded a certain level.
31. A bonus is just that, a boon or gift or premium over what is normally due. What was normally due to the applicant under his sharefarming agreement was a specified payment which, implicit in his submissions was to give him a return sufficient to allow him to remain in the dairying industry after bad years of low prices and poor seasons whilst farming with the joined party on the basis of a fixed vested 50%/50% entitlement.
32. For the foregoing reasons, in the judgment of the Tribunal, a contingent entitlement calculated on a fixed percentage of part of the milk revenue of an enterprise, namely 10% of the incremental increase over a base payout level of $3.20 per kilogram of milk solids is not, albeit payable by reference to every kilogram of milk solids produced or sold, an entitlement to "a fixed percentage of the milk revenue of a dairy farm enterprise" for the purposes of s4(1)(a)(i) of the Scheme. To hold otherwise would be to give the section a construction which would be unreasonable or unnatural given the legislative purpose of the Scheme and the character of the bonus payment provided for by the sharefarming agreement.
33. It follows that the decision of the Tribunal is that the decision under review is affirmed. (emphasis added)If the purposive approach to construction adopted by Deputy President Estcourt in Re Rogers is adopted, and if Mr and Mrs Mundy's entitlements as at 28 September 1999 were as set out in the Memorandum, their entitlement may have been to more than a fixed 11% of the milk revenue of the enterprise, but could not have been to less than 11%.
The evidence was that during the time Mr and Mrs Mundy worked on the enterprise the milk cheque from the milk factory was divided 11% to Mr and Mrs Mundy and 89% to Mr Martin. That may have been only part of their entitlements. Was that arrangement alone sufficient to mean that the enterprise had an "eligible sharefarming arrangement" in place at 6.30pm on 28 September 1999?
Applying Deputy President Estcourt's comments in Re Rogers, Mr and Mrs Mundy had an entitlement to a fluctuating percentage of the milk revenue as it could have been to more than 11%, if 11% did not yield an income of $66,000 (paragraph 23). Thus Mr and Mrs Mundy's economic return was protected "from the vagaries of milk prices in a deregulated industry as a result of increased competition", as it could not be less than $66,000 (paragraph 27). The term of the agreement, which guaranteed Mr and Mrs Mundy a base income of $66,000 was designed to protect them from falls in the price of milk and to provide them with the security of a base level payment sufficient to permit them to remain in the industry (paragraph 28).
If s 4(1)(a)(ii) is "intended to embrace those entities whose milk revenue is affected by falling milk prices because they have a vested entitlement under a sharefarming arrangement to a fixed percentage of that revenue", then it would not apply to Mr and Mrs Mundy (paragraph 29). As they were remunerated by an agreed minimum income, the amount of their income would not vary depending on the price actually paid for milk, except that they could earn more than the agreed figure, if the price of milk rose beyond the prices as at June 1999 (paragraph 30).
Those considerations show there is a real difficulty in interpreting and applying the definition of "eligible sharefarming arrangement" in s 4 of the Act. The definition does not explain whether an arrangement providing for an entitlement to a percentage of milk revenue which may fluctuate upwards, but not downwards is to be regarded as a fixed percentage share of the milk revenue of a dairy farm with a top up clause, or to a fluctuating percentage share of the milk revenue.
Mr Martin pointed out that there has been some flexibility in applying the definition of an "eligible sharefarming arrangement", as if strictly adopted it is apt to cover the situation of people who are clearly not sharefarmers, but who provide specified services, such as contract milkers. They would be classed as sharefarmers, if, as is often the practice, their remuneration is calculated on the basis of a fixed percentage share of the milk revenue of an enterprise. That interpretation was not applied in the DAA decision of McClure which Mr Martin tendered as exhibit A11, where although the fee for milking was a percentage of the milk revenue of the enterprise, the DAA decided that the agreement was not an eligible sharefarming arrangement. Mr Pizer submitted that the Tribunal should not be influenced by that decision which had not been reviewed by the Administrative Appeals Tribunal.
I refer to the decision of McClure only to show that the definition of a sharefarming arrangement in s 4, like so many definitions, is not easy to apply. On the interpretation contended for by Mr Pizer, Mr and Mrs Mundy would be parties to "an eligible sharefarming arrangement". If a purposive interpretation were applied, as in Re Rogers, Mr and Mrs Mundy would not be parties to an "eligible sharefarming arrangement" as their income would not necessarily be a fixed percentage, and was protected from falls due to deregulation.
As to the meaning of the term "a false statement", Mr Pizer acknowledged that Mr Martin had not knowingly made a false statement, but had believed his statement to be true. But he submitted that as the matter was not concerned with a penal provision it was not necessary for Mr Martin to have "knowingly" made a false statement. He relied on the Tribunal decision in Re King and Secretary, Department of Social Security (1994) 34 ALD 583 where the Tribunal said at paragraph 44:
44) In this matter we are satisfied that the statements made by Mr Darren King in the form filled in by him on 27 July 1990 "quite clearly and unambiguously on any objective criteria [were] not true", even if he believed they were. We are not looking at a penal provision. There is no criminal offence involved. Nor is there anything "draconian" about the consequence that money paid to Mr Darren King, to which he was not entitled, should be a debt recoverable by the Commonwealth. That result is totally proportionate to the effect of the wrong statements, because of which the money was paid to Mr Darren King. We are satisfied that the statements Mr Darren King made in his claim for unemployment benefit were false in the sense of wrong or incorrect, as he did receive income, in the form of distributions from the trust, in the three relevant financial years and did not disclose either that income or the accumulated distributions. We are satisfied that his answers were "false" in the sense in which that term is used in s 1224 (1) of the Act. '3
However Mr Pizer did not place emphasis on the preceding paragraph in Re King. The Tribunal there said:
(43) A more recent tribunal decision which considered recovery of a social security payment made "in consequence of a false statement" is Re Secretary, Department of Social Security and Smitherman (1991) 22 ALD 336. In that matter the tribunal said, at 345:
It is apparent that a person's belief in the truth of any such statement does not provide an automatic answer to a claim that a false statement has been made: Secretary, Department of Social Security v Salvona (1989) 18 ALD 289 (Federal Court, Lee J); Re Pepi and Director-General of Social Security (1984) 7 ALD 155. The respondent's belief that he was not engaged in full-time work therefore does not, of itself, provide him with a basis for resisting the claim in this instance. Having said that, it does not, however, conclude the issue.
A distinction, in the opinion of the tribunal, has to be drawn between the situation where a person makes an assertion that quite clearly and unambiguously on any objective criteria is not true (even if the person believes it is) and a situation where a person makes an assertion that he believes to be true about a state of facts, where the characterisation to be given to that state of facts is ambiguous, so that different minds may well differ as to the description that they would attach to that set of facts.
The Tribunal went on to conclude that any statement made by Mr Smitherman could not "categorically be described as false" so as to attract the operation of the relevant statutory provision.
Mr Pizer submitted that although the DAA accepted that Mr Martin believed that his answer was true, it was, in fact, false. I find that Mr Martin's statement, in s 7 of his application, that the enterprise did not have an "eligible sharefarming arrangement" in place at the relevant time and date, expressed his honest and reasonably held opinion. It cannot be characterised as "false or misleading in a relevant particular" as required for the operation of s 35(3) of the Scheme. Section 35(3) does not apply where one needs a determination of law to know whether a statement is true or false. The difficulty is caused by the incorporation of a complex artificial concept into the application form. The concept of an "eligible sharefarming arrangement" requires legal construction. That makes it inappropriate to characterise Mr Martin's statement as either true or false. It is no more than the statement of a judgement or opinion. Accordingly I find that s 35(3) has no application and the decision under review will be set aside.
(b) Did Mr Martin make a statement to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2?There is a second reason why I have decided that the decision under review must be set aside. Even if I had found that a false statement was made by Mr Martin, the third requirement of s 35(3), is that the false statement was made "to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2 to the Act or the scheme". I cannot be satisfied of that issue.
The statement relied on by Mr Pizer as false, was made by Mr Martin on the Standard Payment Right application form. The instructions at the top of that form require it to be returned in a reply paid envelope. The instructions then continue (T3 p11):
The Dairy Adjustment Authority will process the claim and determine whether you are eligible to receive a standard payment right. If so, you will be advised by mail of the amount. You must also sign the declaration at Section 13 before you return this form to the Authority. The declaration is a legally binding statement. Applications will be randomly audited so you should make a copy of your entire application and keep it in a safe place. Also keep any information used to substantiate the statements made in your application for at least five years. You may be requested to provide this information at a later stage. Please be aware that there are severe penalties for knowingly providing false or misleading information. Please return this form to: Dairy Adjustment Authority PO Box 5158 Heidelberg West Vic 3081I raised with Mr Pizer during the hearing the fact that completing an application form to be sent to the Dairy Adjustment Authority does not seem to be the same as "making a false statement to a person . . .". Mr Pizer, in answer, submitted that the fact that a person would be using the statement for the purpose of making a decision in connection with the schedule or the scheme should be sufficient to satisfy the third requirement of s 35(3). I have difficulty with that submission. The section in paragraph 3(a) contains a clear requirement that the false statement be made "to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2 to the Act or the scheme". Paragraph 3(b) contains a second requirement that as a result of action taken relying on the false statement, "the face value of the payment right exceeds the amount that would have been the face value if the false statement had not been made". The section could well have been just as effective if it did not contain the requirement that the statement be made "to a person . . .". Some meaning must be given to that requirement.
Mr Pizer submitted in regard to the definition of "eligible sharefarming arrangement" in s 4 of the Scheme, that the Tribunal is not at liberty to rewrite a section of an Act or a statutory definition, but must interpret the section or definition as it stands. He relied on Re Krpan and Secretary, Department of Family and Community Services [1999] 57 ALD 663 at page 679 paragraphs 60-62, which read as follows:
60) Accordingly, having regard to the considerations referred to in the preceding paragraph, the two specific drafting errors which the tribunal considers to be present in s 1179 (5) (c) (iii) of the Act are (as suggested in para (56) above):
• the phrase "lump sum compensation affected payment should read "lump sum compensation payment"; and
• the phrase "before 20 March 1997" should read "on or after 20 March 1997".
In each case, however, the meaning of the existing words is clear and there is no ambiguity or obscurity. As regards the phrase "lump sum compensation affected payment", the expression "compensation affected payment" is itself exhaustively defined in s 17 (1) of the Act (see para (42) above) and, accordingly, the clear and unambiguous meaning of that phrase is: a "compensation affected payment" (as statutorily defined) in the form of a lump sum. As regards the phrase "before 20 March 1997", its clear and unambiguous meaning is: earlier in time than, or prior to, 20 March 1997.
(61) In those circumstances, would it be appropriate for the tribunal, in effect, to rewrite subpara (iii) of para (c) of s 1179 (5) of the Act so that it reads in the way set out in para (57) above? In the tribunal's opinion, it would not. Although it may be appropriate for the tribunal, when called upon to interpret and apply a statutory provision which is open to more than one construction, to give that provision a strained construction or read words into it or otherwise clarify or modify the ordinary, grammatical meaning of the statutory language, in order to give effect to the intention or purpose of the legislature, it is not appropriate for the tribunal to substitute words for the words that appear in the relevant statutory provision when the meaning of the latter words is "intractable" and no construction, other than their ordinary, grammatical meaning, is reasonably open: Cooper Brookes (Wollongong) Pty Ltd v FCT (1981) 147 CLR 297; at 320; 35 ALR 151. For the tribunal to engage in such an exercise would be for it to engage in rewriting the relevant statutory provision that is, to engage in the function of legislation rather than in the function of interpretation or construction. As McHugh JA said in Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404; at 423:
But first and last the function of the court remains one of construction and not legislation.
Section 15AA (1) of the AI Act in no way derogates from that proposition. In Mills v Meeking (1990) 169 CLR 214; 91 ALR 16 Dawson J, referring to s 35 (a) of the Interpretation of Legislation Act 1984 (Vic) (which is in similar terms to s 15AA (1) of the AI Act), said (at CLR 235; ALR 31) that that section:
… requires a court to construe an Act, not to rewrite it, in the light of its purposes.
Similarly, Burchett J in Trevisan v FCT (1991) 29 FCR 157; 101 ALR 26 said (at FCR 162; ALR 31):
Section 15AA [of the AI Act] requires a court to prefer one construction to another. Such a requirement can only have meaning where two constructions are otherwise open. The section is not a warrant for redrafting legislation nearer to an assumed desire of the legislature. It is not for the courts to legislate; a meaning, though illuminated by the statutory injunction to promote the purpose or object underlying the Act, must be found in the words of parliament.
As regards the use of extrinsic material in statutory interpretation, which is authorised by s 15AB of the AI Act, Fitzgerald J said in FCT v Trustees of the Lisa Marie Walsh Trust (1983) 48 ALR 253; at 278:
… even if the extrinsic material does reveal the legislative purpose, there will continue to be boundaries beyond which the words used will not stretch even where it is known that they were intended to do so.
(62) Accordingly, the tribunal will not depart from the literal words of s 1179 (5) (c) (iii) of the Act and will apply those words, in accordance with their plain and ordinary grammatical meaning and in accordance with any relevant statutory definition of those words, to the facts of the present case. Before doing so, the tribunal notes that there is a decision of the tribunal to the contrary effect Re Lawrie and Secretary, Department of Family and Community Services (1998) 54 ALD 483 in which s 1179 (4) (a) (iii) of the Act (which is in identical terms to, and contains the same apparent drafting errors as, s 1179 (5) (c) (iii) of the Act) was applied as though it read in the way set out in para (57) above. For the reasons expressed above, however, the tribunal respectfully declines to take that approach in the present case. In the tribunal's opinion it is the responsibility of the legislature to correct drafting errors in its legislation by the process of statutory amendment and, in relation to subparas 1179 (4) (a) (iii) and 1179 (5) (c) (iii) of the Act, the relevant drafting errors are such that they can very easily be corrected by this means. It is not appropriate for the tribunal in the present case in effect to usurp the function of the legislature by effectively rewriting the relevant statutory provision.
Applying the comments of the Tribunal in Re Krpan, I cannot ignore the requirement in s 35(3) of the Scheme that the statement be made "to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2 to the Act or the scheme". A similar conclusion was reached by the Tribunal in Re Secretary, Department of Social Security and Doravelu (1992) 15 AAR 392 at p402. Senior Member Balmford, as she then was, was considering an alleged overpayment under the Social Security Act 1947. The question was whether Ms Doravelu had failed to notify "a notifiable event". The definition of "a notifiable event" in paragraph (b) included that the event be described in a notice as "a notifiable event for the purposes of this section" of the Act. That had not been done. It was submitted that paragraph (b) of the definition of "a notifiable event" was a procedural requirement only, and substantial compliance was sufficient. Senior Member Balmford rejected that submission, saying that failure to comply with the requirement to notify of the occurrence of a notifiable event could found a claim for recovery of an overpayment, or a prosecution. She concluded that the statutory pre-requisites for the creation of "a notifiable event", had to be complied with strictly.
I suggested to Mr Pizer that the section providing for cancellation of entitlements should similarly be construed strictly. He replied that that was not necessary when the cancellation only has the effect of cancelling units to which a person was not entitled. I accept his submission that the provision is not a penal provision, but it is similar to a provision giving rise to an overpayment. I do not feel justified in ignoring or disregarding more than half of s 35(3)(a) of the Scheme. The Federal Court in Boxvale Holdings Pty Ltd v Federal Commissioner of Taxation [1989] ATC 4927 at 4931 per Wilcox J (paragraph 2.20) said:
The fact that a particular statutory provision is not easy of application, or that it admits of disputes in its application to the facts of particular cases, is not a reason for saying that it is so unworkable that it should be in effect disregarded.
In this matter the requirements of s 35(3)(a) of the Scheme are not unworkable. The problem is that the application form did not correspond with s 35(3)(a) of the Scheme. An amendment to the application form to include a declaration addressed to a person exercising powers or performing functions under or in connection with Part 2 of Schedule 2, verifying all the information contained in the application, would have made s 35(3)(a) of the Scheme quite workable.
Section 35(3) and (4) of the Scheme give the DAA power to cancel units in a payment right, but only where a false statement has been made "to a person exercising powers, or performing functions under or in connection with Part 2 of Schedule 2 to the Act or the scheme". In Project Blue Sky Inc and Others v Australian Broadcasting Corporation [1998] HCH 28 194 CLR 355 McHugh, Gummow, Kirby and Hayne JJ said at p382:
[A] court construing a statutory provision must strive to give meaning to every word of the provision (52) [(1905) 2 CLR 495 at 414, per Griffith CJ; at 419, per O'Connor J; Chu Kheng Lim v Minister for Immigration Local Government & Ethnic Affairs (1992) 176 CLR 1 at 12-13, per Mason CJ]. In The Commonwealth v Baume (53) [(1905) 2 CLR 405 at 414] Griffith CJ cited R v Berchet (54) [(1688) 1 Show KB 106 [89 ER 480]] to support the proposition that it was "a known rule in the interpretation of Statutes that such a sense is to be made upon the whole as that no clause, sentence, or word shall prove superfluous, void, or insignificant, if by any other construction they may all be made useful and pertinent".
Brennan CJ, who dissented, but not on this point, said at p373:
A provision which directs the manner of the exercise of a power is quite different from a provision which prescribes an act or the occurrence of an event as a condition on the power – that is, a provision which denies the availability of the power unless the prescribed act is done or the prescribed event occurs. In one case, power is available for exercise by the repository but the power available is no wider than the direction as to the manner of its exercise permits; in the other case, no power is available for exercise by the repository unless the condition is satisfied (See, eg. Spicer v Holt [1977] Australian Citizenship 987. A provision which prescribes such a condition has traditionally been described as mandatory because non-compliance is attended with invalidity. A purported exercise of a power when a condition has not been satisfied is not a valid exercise of the power. (page 373)
I cannot overlook or disregard that provision. There is no evidence that the statement relied on in this matter was made "to a person . . . " as required. Rather it seems to have been made to the Dairy Adjustment Authority. Thus the third requirement of s 35(3) is not satisfied and s 35(3) does not give the Dairy Adjustment Authority power to cancel any units in Mr Martin's payment right.
The decision under review will be set aside.
I certify that the 65 preceding paragraphs are a true copy of the reasons for the decision herein of Mrs Joan Dwyer, Senior Member
Signed: Grace Carney
Personal AssistantDate/s of Hearing 1 May 2002
Date of Decision 26 August 2002
Counsel for the Applicant Nil
Solicitor for the Applicant Nil - Self Represented
Counsel for the Respondent Mr J Pizer
Solicitor for the Respondent Mallesons Stephen Jacques
Solicitor for the Party Joined Cassidys Morrison & Teare