Mynard and Dairy Adjustment Authority
[2004] AATA 940
•10 September 2004
CATCHWORDS – DAIRY ADJUSTMENT SCHEME - whether entitled to discretionary payment right - whether held eligible interest in a dairy farm enterprise - whether significant event or crisis - whether anomalous circumstances - whether entity passes lease income test - decision affirmed.
Supplementary Dairy Assistance Scheme 2001 ss. 3, 4, 5, 6, 7, 8, 9, 13, 16, 17, 18, 20, 27, 28 and 36
Dairy Structural Adjustment Program Scheme ss. 3, 4, 5, 9 to 11, 21 to 24, 25, 26, 27, 28, 29, 30, 31, 32 and 33; cl. 2
Dairy Produce Act 1986 s. 125A; cl. 2, 10, 37B and 37D to 37P
Acts Interpretation Act 1901 s. 46
Farm Household Support Act 1992 s. 3
Re Buchan and Dairy Adjustment Authority (2001) 71 ALD 114
Chan v Cresdon Pty Ltd (1989) 168 CLR 242
DECISION AND REASONS FOR DECISION [2004] AATA 940
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2003/66
GENERAL ADMINISTRATIVE DIVISION )
Re GEORGE MYNARD
Applicant
AndDAIRY ADJUSTMENT AUTHORITY
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 10 September, 2004
Place: Melbourne
Decision:The Tribunal affirms the decision of the respondent dated 7 October, 2002.
S A FORGIE
Deputy President
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2003/66
GENERAL ADMINISTRATIVE DIVISION )
Re:GEORGE MYNARD
Applicant
And:DAIRY ADJUSTMENT AUTHORITY
Respondent
Tribunal: Deputy President S A Forgie
Place: Melbourne
Date: 30 September 2004
CORRIGENDUM TO DECISION [2004] AATA 940
The Tribunal amends its decision and reasons for decision published on 10 September 2004 as follows:
Reasons for decision
paragraph 9, line 3,
delete the words:
“and he assisted them on the farm as they were inexperienced.”
paragraph 12,
delete point (i) and replace with:
“(i) Mr Barake was to pay $40,000 per annum quarterly in advance.”
S A FORGIE
Deputy President
ADMINISTRATIVE APPEALS TRIBUNAL )
) V2003/66
GENERAL ADMINISTRATIVE DIVISION )
Re:GEORGE MYNARD
Applicant
And:DAIRY ADJUSTMENT AUTHORITY
Respondent
Tribunal: Deputy President S A Forgie
Place: Melbourne
Date: 3 November 2004
CORRIGENDUM TO DECISION [2004] AATA 940
The Tribunal amends its decision and reasons for decision published on 10 September 2004 as follows:
Reasons for decision
paragraph 8, line 8
Delete the words:
“when their son moved away.”
paragraph 9, line 3
delete the words:
“and he assisted them on the farm as they were inexperienced. They employed Mr Mynard’s second son”
paragraph 12
delete the third dot point and replace with:
“· Between 1992 and April, 1996, Mr Mynard and his second eldest son, Ken, ran the property as sharefarmers.”
delete point (i) and replace with:
“(i) Mr Barake was to pay $40,000 per annum quarterly in advance.”
paragraph 55, line 6
delete the words:
“he was not going to put anyone else on the farm after that;”
S A FORGIE
Deputy President
REASONS FOR DECISION
On 16 January, 2003, the applicant, Mr George Mynard, applied for review of a decision made by the respondent, the Dairy Adjustment Authority (“DAA”), on 7 October, 2002. That decision had been confirmed by a further decision of the DAA dated 19 December, 2002. Pursuant to s. 36(10) of the Supplementary Dairy Assistance Scheme 2001 (“the SDA Scheme”), it is the earlier decision that has been confirmed that is reviewable by this Tribunal. The effect of the decision is that Mr Mynard is not eligible to be granted a discretionary payment right in respect of a property he owned at the relevant time.
At the hearing, Mr Mynard represented himself and Mr Pizer of counsel represented the DAA. Regard was had to the documents lodged pursuant to s. 37 of the Administrative Appeals Tribunal Act 1975 (“T documents”). Also admitted on behalf of Mr Mynard were a Dairy Farm Licence for AG and LJ Mynard issued 17 December, 1999, Debtors’ Statements from Murray Goulburn Trading Pty Ltd (“Murray Goulburn”) to AG and LJ Mynard for the periods ending 31 January, 1999 and 30 June, 1999, a bundle of invoices and the T documents lodged in earlier proceedings No. V2001/651. On behalf of the DAA were admitted witness statements of Mr James Richmond Forsyth, Ms Julie Lynn Barake and Joseph Stephan Barake, all of which were dated 30 October, 2003. Mr Mynard gave oral evidence in support of his case together with Mrs Jay Mynard. Mr Forsyth, who is a member of the DAA as an industry representative, gave evidence in support of DAA’s case together with Mr and Mrs Barake.
THE ISSUES
The issue in this case is whether Mr Mynard is entitled to
a discretionary payment right under the SDA Scheme. This raises two subsidiary issues. The first is whether or not Mr Mynard was affected by a significant event or significant crisis or whether he was affected by significant anomalous circumstances within the meaning of s. 8. There is no question that he satisfies the other requirements of s. 8 in that he held an “eligible interest” in a “dairy farm enterprise” as at 28 September, 1999 and during the whole or part of the base year being 1998/99. The second subsidiary issue is whether Mr Mynard suffered a fall in lease income.
BACKGROUND
There was little dispute between the parties as to the facts in this case. In light of that and on the basis of the evidence, we have made the findings of fact that we have set out in the following paragraphs.
Mr Mynard’s history in and contribution to the dairy industry
Mr Mynard was born in 1939 to dairy farmers. When he left school at the age of 16, he worked on dairy farms. He married a dairy farmer’s daughter in 1963. Mr and Mrs Mynard borrowed money so that they could go sharefarming. They were then allocated a block in the Heytesbury settlement where they established a dairy farm. That settlement was established to assist young farmers to purchase their own farm. Later, Mr Mynard and his wife purchased a partially cleared block and established another dairy farm. Later, they purchased another partially cleared block and established a small beef herd.
A few years later in 1980, the workload became too great and Mr Mynard tendered for another block when some 20 blocks were offered for tender by the Victorian government. Their tender was successful. Mr Mynard and his wife became the joint owners of a 220 acre farming property located at Block 472, Jancourt East, via Cobden (“the property”).
They entered a sharefarming agreement in relation to their existing farm and moved to the property. It had only a boundary fence, a new house and a shed. They reared more cattle, sowed new pastures, built fences and cattle troughs and generally developed the property. It took Mr and Mrs Mynard approximately seven years to establish a successful dairy farm on the new block. Their aim was to milk the cows themselves and to have a smaller enterprise than they operated on their other farm.
In the early 1980s, Mr Mynard began to suffer from a serious heart condition. His physician told him to reduce his workload and possibly to move to a warmer climate so that he could avoid cold mornings. As a consequence, Mr Mynard purchased a farm in northern Victoria north of Shepparton. He took his dairy heifers with him and had a small beef farm. The farm was set up for him and his wife to work but Mr Mynard found that he could not and employed more labour. The people he employed were very successful and they moved to Mr and Mrs Mynard’s original farm when their son moved away.
He entered an agreement with Terry and Lyn Hammond so that they sharefarmed the second farm i.e. the property in this proceeding. Mr Mynard found them to be very good people and he assisted them on the farm as they were inexperienced. They employed Mr Mynard’s second son. After three years, Mr and Mrs Hammond moved to a larger farm. It was then that Mr and Mrs Mynard entered an arrangement with Mr and Mrs Barake.
Mr Mynard has assisted many young people entering the dairy industry. He has assisted his sharefarmers and all have gone on to own their own farms.
From 4 September until 7 November, 1999, Mr Barake worked in the evenings driving a milk truck. His work began at approximately 6.00pm and ended somewhere between 2 and 4am. Mrs Barake milked the cows and he assisted her with the morning milking.
The property, dairy farm enterprise and activities in relation to both in the relevant period
Since they purchased the property in 1980, the following events have related to the property and those connected with it:
Between 1981 and 1988, Mr and Mrs Mynard developed the property for use as a dairy farm. At all relevant times, they had a milking shed.
At all relevant times, Mr and Mrs Mynard held a Dairy Farm Licence issued by the Victorian Dairy Industry Authority (Exhibit A).
Between 1992 and April, 1996, Mr Mynard and his eldest son, Ken, ran the property as sharefarmers.
On 1 May, 1996, Mr and Mrs Mynard leased the property to Julie and Joe Barake, who are the daughter and son in law of Terry and Lyn Hammond.
The term of the lease was for three years with a review on 1 March, 1999.
The property was leased so that it could continue to produce milk.
In summary, the relevant terms of the lease were:
(i)Mr Barake was to pay $40,000 quarterly in advance;
(ii)Mr and Mrs Mynard were to pay Shire rates;
(iii)Mr Barake was responsible for all household repairs and had to maintain the house and garden;
(iv)Mr Barake would respect tree plantations and replant any replacement trees with those supplied by Mr and Mrs Mynard;
(v)Mr Barake (the farmer) would “… maintain fencing & buildings in a satisfactory state of repair, owner [Mr and Mrs Mynard] will pay for material at his discretion.
Shed electrical equipment will be insured by owner, but farmer will kept the farm free of thistles & noxious weeds.
Farmer may cultivate 1 paddock per year, owner will supply lime & grass seed to re-sow pasture.
…
Owner has supplied [blank] rolls of hay, on leaving farmer will leave [blank] rolls of equivalent weight & quality. No hay will be sold off the property.” (T documents, page 118)
Milk was delivered to Murray Goulburn Cooperative.
The milk deliveries from the property in the four financial years from 1 July, 1995 to 30 June, 1999 were:
1995/96617,550 litres
1996/97588,965 litres
1997/98584,875 litres
1998/99620,895 litres
(T documents, page 206)
These figures were used by Mr and Mrs Barake in their application for a standard payment right on 11 August, 2000. It is agreed that the majority of the milk delivered in the 1995/96 year was delivered before 1 May, 1996 when Mr and Mrs Mynard operated the dairy farm enterprise.
In June, 1997, Mr Mynard suffered a heart attack. He was hospitalised and underwent heart bypass surgery. The following year Mr Mynard was hospitalised again when artery stents were inserted.
On 30 April, 1999, the term of the lease between Mr Mynard and Mr Barake came to an end. Mr and Mrs Barake remained in possession of the property with Mr and Mrs Mynard’s permission. They continued to operate the property as a dairy farm and continued to receive milk cheques for the milk they produced on it.
In April, 2000, Mr and Mrs Barake left the property and the dairy industry.
In July, 2002, Mr and Mrs Mynard were forced to sell the property.
Mr Mynard’s applications to the DAA
Mr and Mrs Mynard have made the following applications:
On 11 July, 2000, Mr Mynard completed an application for a standard payment right. When asked for details of the leasing arrangement, Mr Mynard wrote “Personal agreement which was flouted”. (T documents, pages 21-26).
On 21 March, 2002, Mr Mynard completed an application for a discretionary grant payment under s. 8(5) of the SDA Scheme. It was on the basis of significant anomalous circumstances described as:
“The person who was at my farm left on the 30th April 2000.
Owing to the exodus of most of the farm workers & potential sharefarmers, after the deregulation of the dairy industry I was unable to acquire a new sharefarmer or like person.
As I have had major heart surgery I was advised not to add any more workload to my busy schedule of work, & not to go back to milking cows.” (T documents, page 151)
On 21 March, 2002, Mr Mynard completed an application for a discretionary grant payment under s. 8(3). It was on the basis of a significant event or crisis described as:
“The person who was at my farm left on the 30th April 2000.
As I have had major heart surgery I was advised not to add any more workload to my busy schedule of work and not to go back to milking cows.” (T documents, page 155)
On 2 April, 2002, Mr Mynard completed an application for a discretionary payment right under s. 9 of the SDA Scheme. It was on the basis of the lease of the property. (T documents, pages 164-6)
The DAA’s decisions in respect of Mr and Mrs Mynard
With regard to Mr Mynard’s claim for a standard payment right, the DAA confirmed a decision that he was eligible for a standard payment right with a face value of $4,738 and that he would be granted a standard payment right for this value. He was granted that right on 1 February, 2001 as a lessor of the property. Mr Mynard applied to the Tribunal for review of that decision in No. V2001/651 but withdrew his application on 26 April, 2002.
The DAA later decided that Mr Mynard is not eligible to be granted a discretionary payment right under the SDA Scheme and that is the decision is now under review.
The DAA’s decisions in respect of Mr and Mrs Barake
On 11 August, 2000, Mr and Mrs Barake applied for a standard payment right under the Dairy Structural Adjustment Program Scheme (“DSAP Scheme”). They did so on the basis that they were lessees and that there was an eligible dairy leasing arrangement in place at 6.30pm on 28 September, 1999. The DAA assessed the overall enterprise amount for the enterprise as $77,102.
LEGISLATIVE FRAMEWORK
An outline of the Dairy Industry Adjustment Program
On 1 July, 2000, the dairy industry was deregulated. The Dairy Industry Adjustment Package (“the package”) was developed to assist the dairy industry to adjust to deregulation. The Dairy Produce Act 1986 (“the Act”) provides for one element of that package. That element is the Dairy Industry Adjustment Program (“the Program”) and it is set out in Schedule 2 of the Act (s. 125A). Clause 1 of Schedule 2 sets out a simplified outline of the Program:
“This Schedule and Part 9C of the Farm Household Support Act 1992 provide a framework for the implementation of the Dairy Industry Adjustment Program.
The main object of the Dairy Industry Adjustment Program is to help the dairy industry or dairy communities adjust to deregulation by providing for 4 types of grants, as follows:
(a)DSAP payments (made under this Schedule);
(b)SDA payments (made under this Schedule);
(c)dairy exit payments (made under Part 9C of the Farm Household Support Act 1992);
(d)payments under the Dairy Regional Assistance Programme (see clause 86)
Generally, DSAP payments are calculated by reference to 1998-1999 milk deliveries at a rate of 46.23 cents per litre for market milk and national average rate of 8.96 cents per litre for manufacturing milk.
There are 3 types of SDA payment rights: basic market milk payment rights, additional market milk payment rights and discretionary payment rights.
Dairy exit payments are available for farmers who choose to leave agriculture.
The Dairy Adjustment Authority will administer DSAP and SDA payment rights.
The Dairy Industry Adjustment Program will be funded by a dairy adjustment levy on milk products.
The levy will be paid into a Dairy Structural Adjustment Fund, and DSAP payments, SDA payments, dairy exit payments and payments under the Dairy Regional Assistance Programme will be paid out of that Fund.”
An outline of the DSAP Scheme
A “DSAP payment” is a payment under the DSAP Scheme (Program, cl. 2). The DSAP Scheme is the scheme formulated in writing by the Minister for the grant of payment rights to entities holding an eligible interest in a dairy farm enterprise at 6.30pm on 28 September, 1999 and satisfying other requirements set out in the DSAP Scheme (Program, cl. 10(a)).
Payments under the DSAP Scheme
The DSAP Scheme came into operation on 14 April, 2000. There was no suggestion in this case that it has not been appropriately formulated by the Minister or that is not consistent with the policy objectives set out in the Act. The DSAP Scheme establishes three types of payment rights: standard payment rights, exceptional events supplementary payment rights and anomalous circumstances payment rights (DSAP Scheme, ss. 9 to 11 and see also Program, cl. 12(2)). The basic eligibility criteria for a standard payment right are:
standard payment right:
“(1) An entity is eligible to be granted a standard payment right in respect of a dairy farm enterprise if:
(a)the entity held an eligible interest in a dairy farm enterprise at 6.30pm on 28 September 1999; and
(b)the enterprise delivered milk during the base year.” (DSAP Scheme, s. 9)
Those for an exceptional events supplementary payment right are set out in s. 10 and for an anomalous circumstances payment right in s. 11 of the DSAP Scheme.
DSAP Scheme: an “entity”
Payment rights are conferred on an “entity”. An “entity” is defined in broad terms to include an individual, a body corporate, body politic or a trustee of a particular trust estate. A person may act in a number of different capacities and be regarded as an entity in each (Program, cll. 2 and 5).
DSAP Scheme: a “dairy farm enterprise”
The payment rights are in respect of a “dairy farm enterprise”. That expression is not defined in the DSAP Scheme but it is defined in cl. 2 of the Program. The Program is found in Schedule 2 of the Act and so forms part of the Act. The DSAP Scheme is formulated under cl. 10 of Schedule 2 of the Act. As there is no suggestion in the DSAP Scheme that the same meaning should not be given to the expression as it has in the Act, it should be given the same meaning in both (Acts Interpretation Act 1901, s. 46). Clause 6 of the Program defines the expression “dairy farm enterprise” as “… a business in Australia that delivers market milk and/or manufacturing milk” (Program, cl. 2).
DSAP Scheme: “an eligible interest”
An entity must hold “an eligible interest” in a dairy farm enterprise. It does so when it is a party to an eligible dairy sharefarming arrangement, an eligible dairy leasing arrangement, or when it is carrying on the enterprise (Program, cl. 7).
Under the DSAP Scheme, an arrangement is taken to be an eligible dairy sharefarming arrangement and the arrangement involves two or more businesses (Program, cl. 6(2)). Under the DSAP Scheme, an eligible dairy sharefarming arrangement must meet two conditions. The first is that there is an arrangement between two or more entities. Under that arrangement, each entity is entitled to a fixed percentage share of the milk revenue of a dairy farm enterprise or a fixed percentage 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. The second condition is that at least one of the entities has no proprietary interest in the land on which a milking shed used by the enterprise is situated and the quota under which the enterprise delivers market milk (DSAP Scheme s. 4(1)(b)). A dairy farm enterprise is subject to an eligible dairy sharefarming arrangement if the milk revenue of the enterprise is shared under the arrangement (DSAP Scheme, s. 4(2)). 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 (DSAP Scheme, s. 4(3)).
If, under the DSAP Scheme, an arrangement is taken to be an eligible dairy leasing arrangement and involves two or more businesses, those businesses are treated as a single business. Under the DSAP Scheme, a dairy farm enterprise is subject to an eligible dairy leasing arrangement in one of two situations (DSAP Scheme, s. 5(1)). The first occurs if quota was required for the delivery of market milk by the enterprise in the base year, and the owner of quota used by the enterprise leases some or all of the quota used by the enterprise to one or more other entities for the purpose of delivering milk produced by the enterprise. The second occurs if quota was not required for the delivery of market milk by the enterprise in the base year and the owner of land on which a milking shed used by the enterprise is situated leases the land to one or more other entities for the purpose of producing milk. Sections 5(2), 5(3) and 5(4) of the DSAP Scheme recognise that quota or the land used for producing milk may be leased or sub-leased for that purpose. An entity is a party to an eligible dairy leasing arrangement if the entity is the lessor or lessee of quota or land mentioned in s. 5 of the DSAP Scheme (DSAP Scheme, s. 5(2)). If the quota or land is sub-leased, the sub-lessee is taken, for the purposes of s. 5(2) to be the lessee of the land or quota (ss. 5(3) and (4)).
Clause 6(4) of the Program provides that, for its purposes, “… 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.”
DSAP Scheme: “manufacturing milk” and “market milk”
Returning to the definition of a “dairy farm enterprise”, the business must deliver market milk and/or manufacturing milk. The term “manufacturing milk” is defined to mean “… manufacturing milk (within the meaning of section 103) in respect of which a domestic market support payment has been paid under section 108A.” (DSAP Scheme, cl. 2) The expression “market milk means milk on which levy was imposed by whichever of the following is applicable … paragraph 5(1)(a) of the repealed Dairy Produce Levy Act (No. 1) Act 1986 and paragraph 6(1)(a) of the Primary Industries (Excise) Levies Act 1999.” (DSAP Scheme, cl. 2) The “base year” to which reference is made is the financial year beginning on 1 July, 1998 (DSAP Scheme, s. 3).
DSAP Scheme: an “eligible interest in a dairy farm enterprise”?
An entity’s entitlement to a standard payment right is predicated in part upon its having held an eligible interest in a dairy farm enterprise at 6.30pm on 28 September, 1999 and in part upon its having delivered milk during the base year. An entity holds an “eligible interest in a dairy farm enterprise”:
“(1) If:
(a)both:
(i)under the DSAP scheme, the enterprise is not taken to be subject to an eligible dairy sharefarming arrangement or an eligible leasing arrangement; and
(ii)the entity carries on the enterprise (whether alone or together with one or more other entitles); or
(b)both:
(i)under the DSAP scheme, the enterprise is taken to be subject to an eligible dairy sharefarming arrangement; and
(ii)under the DSAP scheme, the entity is taken to be a party to that arrangement; or
(c) both:
(i)under the DSAP scheme, the enterprise is taken to be subject to an eligible dairy leasing arrangement; and
(ii)under the DSAP scheme, the entity is taken to be a party to that arrangement.
(2)For the purposes of this Schedule, if:
(a)an individual had an eligible interest in a dairy farm enterprise at 6.30 pm on 28 September 1999; and
(b)the individual dies after that time, but before making a claim for a payment right;
this Schedule has effect as if the trustee of the deceased individual’s estate had held that interest at that time.” (Program, cl. 7 and see cl. 2)
DSAP Scheme: calculation of payment right
The face value of an entity’s right is calculated in accordance with Part 4 of the DSAP Scheme. The method of calculating the face value of a standard payment right varies according to whether a dairy farm enterprise is subject to a sharefarming arrangement, a leasing arrangement, to both or to neither (DSAP Scheme, ss. 21 to 24). In the case of a dairy farm enterprise that is not subject either to a sharefarming arrangement or a leasing arrangement and only one entity has an eligible interest in that dairy farm enterprise, the face value of a standard payment right is equal to the overall enterprise amount (DSAP Scheme, s. 21(2)).
Where a dairy farm enterprise is subject to an eligible dairy leasing arrangement but is not subject to an eligible dairy sharefarming arrangement, the standard payment right is calculated according to s. 24 of the DSAP Scheme. It is determined in part by reference to whether quota is required or not. As there is no evidence that quota was required, s. 24(4) is relevant. It provides that:
“… the premium component of the overall enterprise amount that relates to market milk delivered otherwise than against a quota is allocated to the entities who provided an essential capital contribution for the enterprise in the same proportions as the derived milk revenue shares of the entitities.”
The “overall enterprise amount”:
“… in relation to a dairy farm enterprise, means the sum of:
(a)the amount calculated at the rate of 46.23 cents per litre of market milk delivered by the enterprise in the 1998-1999 financial year; and
(b)the amount calculated at the rate of 76.03 cents per kilogram of the milk fat content of manufacturing milk delivered by the enterprise in the 1998-1999 financial year; and
(c)the amount calculated at the rate of 178.77 cents per kilogram of the protein content of manufacturing milk delivered by the enterprise in the 1998-1999 financial year.” (Program, cl. 2)
The “premium component” referred to in s. 24(4) means:
“… in relation to the overall enterprise amount of a dairy farm enterprise, means so much of the overall enterprise amount as is attributable to 37.27 cents per litre of market milk delivered by the enterprise in the 1998-1999 financial year.” (Program, cl. 2)
The DSAP Scheme may provide for an adjustment of eligibility rights where there has been a transfer of the whole or part of market milk delivery rights or in relation to an abnormal market milk pool distribution (Program, cll. 30 and 31). The DSAP Scheme has done so in ss. 29 and 30. An adjustment is made in relation to the amount of milk actually delivered if, between 1 July, 1998 and 28 September, 1999, an entity with an eligible interest in a dairy farm enterprise transferred quota to another entity, surrendered quota, acquired quota by transfer from another entity or received quota from the dairy industry authority of a State or Territory. An adjustment is made if, in the base year, one or more dairy farm enterprises in a pooling jurisdiction did not receive payment at the market milk rate for the same proportion of their milk deliveries as other dairy farm enterprises in the jurisdiction.
If an entity is granted an exceptional events supplementary payment right in respect of a dairy farm enterprise, the total face value of the payment, any other exceptional events supplementary payment right granted to the entity in respect of the dairy farm enterprise and the standard payment right granted to the entity in respect of the dairy farm enterprise must not:
“… be more than the amount that would have been the face value of the entity’s standard payment right if:
(a)the volume of market milk delivered by the enterprise during the base year had been the same as the average annual volume of market milk delivered by the enterprise in the previous 3 financial years; and
(b)the volume of manufacturing milk delivered by the enterprise during the base year had been the same as the average annual volume of manufacturing milk delivered by the enterprise in the previous 3 financial years.” (DSAP Scheme, s. 25)
The total face value of an anomalous circumstances payment right is calculated in accordance with s. 26 of the DSAP Scheme. Except in the circumstances set out in s. 28 of the DSAP Scheme, the total face value of payment rights granted to an entity in respect of a particular dairy farm enterprise must not be greater than $350,000 (s. 28).
Having calculated the face value of any exceptional events supplementary payment right or anomalous circumstances payment right to which an entity is eligible in respect of a dairy farm enterprise, the DAA must have regard to s. 27 of the DSAP Scheme. That section directs that it:
“… must not grant an exceptional events supplementary payment right or anomalous circumstances payment right to an entity in respect of a dairy farm enterprise unless satisfied that the face value of the right proposed to be granted, together with the face value of all other exceptional events supplementary payment rights and anomalous circumstances payments granted or proposed to be granted by the DAA is less than or equal to the money available for payments for exceptional events supplementary payment rights and anomalous circumstances payment rights.
Note:The total face value of these rights cannot exceed the amounts worked out under section 25 or 26, whichever is relevant.
(2)If it is not enough, the DAA must determine the face value of the exceptional events supplementary payment right or anomalous circumstances payment right having regard to:
(a)the amount of money available for payments for exceptional events supplementary payment rights and anomalous circumstances payment rights; and
(b)the number of claims and anticipated claims for such rights; and
(c)the operation of sections 25 and 26; and
(d)such other matters as the DAA considers relevant.
(3)In this section:
money available for payments for exceptional events supplementary payment rights and anomalous circumstances payments rights means the amount of money in the Dairy Structural Adjustment Fund, or expected to be credited to the Dairy Structural Adjustment Fund under clause 78 of Schedule 2 to the Act, that would have been required to cover the standard payment rights that would be granted under the scheme if:
(a)every standard payment right for which an entity is eligible were claimed under section 15; and
(b)the cap mentioned in section 28 did not apply to any entity; and
(c)no units were cancelled under section 38;
plus the total value of milk delivered by dairy farming enterprises that would have been taken into account in working out the face values of standard payment rights of entities that would have been eligible to be granted a standard payment right (see section 9) if they had held eligible interests in the dairy farming enterprise enterprises at 6.30 pm on 28 September 1999, less the amount actually required to cover the standard payment rights that:
(d)are granted under section 18; or
(e)are claimed under section 15 and will be granted under section 18 if the entity complies with the rules in subsection 17(2) before the end of 12 months after the end of the DSAP claim period.”
Each payment right consists of a number of units worked out in accordance with s. 31 of the DSAP Scheme. In essence, the face value of the payment right is divided by 32 to reflect the number of quarters in the eight year period of the DSAP Scheme from 1 July, 2000. Units are recorded in a Register maintained by the DAA (DSAP Scheme, s. 33) and may be transferred (DSAP Scheme, s. 32). Units may be cancelled in the circumstances set out in Division 5.2 of Part 5 of the DSAP Scheme. Payments are made in accordance with Part 6 of the DSAP Scheme.
The Supplementary Dairy Assistance Scheme
In 2001, another scheme, known as the SDA Scheme, was formulated under cl. 37B of Schedule 2 of the Act. It had to comply with cll. 37D to 37P of the Schedule 2 to the Act. There is no suggestion that the SDA Scheme does not comply with them.
SDA Scheme: SDA payment rights
The SDA Scheme is concerned with conferring three types of payment rights which are collectively known as “SDA payment rights” (Act, Schedule 2, cl. 2). They are:
basic market milk payment rights;
additional market milk payment rights; and
discretionary payment rights (SDA Scheme, Note to s. 3(2) and Acts Interpretation Act 1901, s. 46)
Although described as “rights”, entitlement to them does not confer a right to a payment under the SDA Scheme. Payment lies within the discretion of the Minister, or his delegate, for s. 13(1) of the SDA Scheme provides that:
“At any time after the commencement of this scheme the Minister may decide:
(a)that an entity is eligible for a discretionary payment right; and
(b)if the Minister decides that entity is eligible:
(i)whether to grant the right; and
(ii)if the Minister decides to grant the right – the face value of the right and the time at which the right is granted.”
SDA Scheme: limits on eligibility for SDA payment rights
Section 5(1) of the SDA Scheme limits an entity’s eligibility for market milk payment rights and basic market milk payment rights. An entity is not eligible if it has a current, undetermined application under the DEP Scheme or has not repaid any amount paid under the DEP Scheme after 6.30pm on 28 September, 1999 (SDA Scheme, s. 4). The DEP Scheme is the scheme formulated under s. 52C of the Farm Household Support Act 1992 (“FHS Act”) under which dairy exit payments were made (SDA Scheme, Note to s. 3(2), FHS Act, s. 3(1), and Acts Interpretation Act 1901, s. 46). The entity will not be entitled to either payment if it did not hold an interest as owner of a dairy farm enterprise, sharefarmer, land lessee or land lessor at 6.30pm on 28 September, 1999 (SDA Scheme, ss. 5(2) and 6(1)(b) and (4)).
In so far as a discretionary payment is concerned, an entity is not eligible unless it has given the DAA a declaration that it does not have a current, undetermined application for a support or adjustment payment or it has either not received one after 6.30 pm on 28 September, 1999 or it has repaid it (SDA Scheme, s. 5(3)). A support or adjustment payment is made under the DSAP Scheme (SDA Scheme, Note to s. 3(5)).
SDA Scheme: eligibility for additional market milk payment rights and basic market milk payment rights
Section 6 of the SDA Scheme sets out those who are eligible for additional market milk payment rights and basic market milk payment rights. In summary, an entity is eligible to be granted an additional market milk payment right if it has been granted a DSAP payment right, it has held an interest of the kind in s. 6(4) of the SDA Scheme and the market milk number for the qualifying enterprise is at least 35.1 (SDA Scheme, s. 6(1)). The “market milk number” for a dairy farm enterprise is calculated using a formula that has regard to the total litres delivered in 1998-1999 financial year divided by the total number of litres of market and manufacturing milk delivered by that enterprise in that year (SDA Scheme, s. 3(2)).
An entity is eligible to be granted a basic market milk payment right if it has been granted a DSAP payment right, it held an interest of the kind in s. 6(4) and its market milk number is at least 25.1 (SDA Scheme, s. 6(2)). If an entity is entitled to both the additional market milk payment and the basic market milk payment right, it is eligible to be granted the right with the higher face value (SDA Scheme, s. 6(3)).
SDA Scheme: eligibility for a discretionary payment right
In order to be eligible for a discretionary payment right, an entity must satisfy the requirements of ss. 8 or 9 (s. 7 SDA Scheme). Section 9 of the SDA Scheme is concerned with eligibility for a discretionary payment where there has been a fall in lease income. An entity is eligible for a discretionary payment right under s. 8(1) of the SDA Scheme 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).”
The kinds of interests that are referred to in s. 8(1)(a) are:
“(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;
(c)an interest as a party to a binding contract or other binding arrangement under which the entity would, during or after the end of the qualifying period, be entitled to hold an interest in a dairy farm enterprise as described in paragraph (b).” (SDA Scheme, s. 8(2))
It should also be noted that:
“A contract or arrangement conferring an option or a similar right is not a contract or arrangement for the purposes of paragraph (2) (c) unless the entity exercised the option or right, and acquired the interest, before the end of the period after 6.30 pm on 28 September 1999 that, in the circumstances, is reasonable.” (SDA Scheme, s. 8(2A))
Section 8(3) of the SDA Scheme is concerned with the circumstances in which an entity is taken to be affected by a significant event or a significant crisis. It provides:
(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 6:30 pm on 28 September 1999; and
(b)the event or crisis is:
(i) an illness of a person that had a detrimental effect on the management of the dairy 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.”
For the purpose of s. 8(3)(c), s. 8(4) of the SDA Scheme provides that:
“(4) For the purposes of paragraph (3)(c), but without limiting that paragraph, if the volume of milk delivered by an enterprise during the base year is less than 70% of the enterprise's normal year volume of milk, the reduction may be taken to be significant.”
The “enterprise’s normal year volume of milk” is defined as:
“(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
(c)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.” (SDA Scheme, s. 8(7))
The “base year” is the financial year beginning on 1 July, 1998 (DSAP Scheme, s. 3).
Section 8(5) of the SDA Scheme is concerned with the circumstances in which an entity is taken to be affected by significant anomalous events. It provides:
“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 6.30 pm 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 6.30 pm 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 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);
(iv)the Minister determines that this subsection should apply to the entity.”
Section 9 of the SDA scheme is concerned with situations in which there has been a fall in lease income. An entity is entitled to a discretionary payment right if:
“(1) An entity satisfies this section if:
(a)the entity was granted a payment right under the DSAP scheme in respect of a lessor interest the entity held in a dairy farm enterprise; and
(b)the entity is not taken, under section 8, to have been affected by a significant event, a significant crisis or significant anomalous circumstances; and
(c)the entity passes the lease income test.” (SDA Scheme, s. 9(1))
An entity holds a “lessor interest in a dairy farm enterprise” if:
“(2) For the purposes of this section, an entity held a lessor interest in a dairy farm enterprise if, under the DSAP scheme:
(a)the enterprise was taken to be subject to an eligible dairy leasing arrangement; and
(b)the entity was taken to be a party to that arrangement as the lessor of land.” (SDA Scheme, s. 9(2))
An entity passes the “lease income test” if:
“(a) both:
(i)more than 50% of the total gross income derived by the entity in the 1999-2000 financial year consisted of eligible lease income; and
(ii)the eligible lease income derived by the entity in the 2000-2001 financial year is at least 20% less than the eligible lease income derived by the entity in the 1999-2000 financial year; or
(b) both:
(i)more than 50% of the total gross income derived by the entity in the 1999-2000, 1998-1999 and 1997-1998 financial years consisted of eligible lease income; and
(ii)the eligible lease income derived by the entity in the 2000-2001 financial year is at least 20% less than the average of the eligible lease income derived by the entity in the 1999-2000, 1998-1999 and 1997-1998 financial years.” (SDA Scheme, s. 9(3))
A reference to “entity's eligible lease income” is:
“… a reference to the income the entity derived as rent from a qualifying enterprise. If the entity concerned is one of 2 or more lessors, the entity's eligible lease income is the same percentage of the eligible lease income of the qualifying enterprise as the entity's percentage of the land lease income, as determined for the purposes of the DSAP Scheme.” (SDA Scheme, s. 3(4))
For the purposes of s. 9 of the SDA Scheme, the total gross income of an entity is to be worked out in accordance with generally accepted accounting principles (SDA Scheme, s. 9(4)).
SDA Scheme: meaning of an “enterprise's normal year volume of milk”
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.” (SDA Scheme, s. 8(7))
SDA Scheme: face value of discretionary payment rights
Once an entity has been granted a discretionary payment right under s. 8, the face value of that right is an amount determined by the Minister under s. 16. In determining that amount, the Minister must have regard to the matters set out in s. 16(2). There is a cap on the amount that may be determined and that cap is calculated in accordance with s. 17 of the SDA Scheme.
SDA Scheme: SDA units in SDA payment rights
Each SDA payment right consists of SDA units. The number of those units is calculated by dividing the face value of the payment right by 32. The resulting figure is rounded up or down to the nearest dollar and represents the number of SDA units in the SDA payment right (SDA Scheme, s. 18). Details of those SDA units are entered on a Register maintained by the DAA (SDA Scheme, s. 20). SDA units may be transferred, cancelled or varied in accordance with provisions of Part 5 of the SDA Scheme.
SDA Scheme: payment based on SDA units
The Australian Dairy Corporation must pay $1 to the registered owner of each SDA unit in respect of a quarter in which the SDA payment right has been granted to an entity and each earlier and following quarter (SDA Scheme, ss. 28(1) and (2)). Those quarters must not be earlier than 1 July, 2000 nor later than 30 June, 2008 (SDA Scheme, s. 27).
An entity with an additional market milk right or a basic market milk payment right may elect to receive a lump sum provided it elects to do so before receiving the first payment in respect of its SDA units (SDA Scheme, s. 28(3)). There is no right to receive a lump sum payment in respect of a discretionary payment right.
THE EVIDENCE
The lease and Mr and Mrs Barake’s occupation of the property
Mr Mynard said that he left hay worth approximately $7-9,000 in the shed to help Mr and Mrs Barake get started. It was a means of helping them. He told them to count it and replace it and did that on a “trust basis”. When possession of the property was returned to him, he said that there was very little hay in the shed. The hay had been cut but left in rolls in the paddock rather than taken to the shed. Mr Mynard said that he was not going to put anyone else on the farm after that; he felt very let down.
When asked whether Mr and Mrs Barake had run the dairy farm, Mr Mynard said “not entirely”. They had paid the rent and had exclusive possession of the property. Mr and Mrs Barake were paid 100% of the milk cheque. Mr Mynard said that he could not answer yes or no to the question whether he had been involved in the day to day dairy farm business on the property. That was because he had had input, he said, although he agreed that he was not there on a day to day basis, did not milk the cows or live at the house. Mr Mynard acknowledged that he could not contradict what Mr and Mrs Barake said about their presence on the property except that Mr Barake was not there when they purchased their block of land. If that occurred in 1999/2000, Mr Mynard agreed that their time away would not affect the milk production in 1998/99.
Of the farm, Mr Mynard told the Senate’s Rural and Regional Affairs and Transport Legislation Committee (“Senate Committee”), he had to keep the farm in working order because his lessee had obtained a job in August, 1999. As he did not have time to do all of the work himself, he had to get contractors to do it for him. He referred to an instance in which he had to pay a contractor $150 to put a $7 washer in a windmill and decried the fact that the lessee would be able to walk away with the package. In oral evidence, Mr Mynard said that Mr Barake had been present at the time the windmill was repaired and “that tells the story on its own”.
Mrs Barake rejected the notion that Mr Mynard had any role in the management, running or operation of the farm. He lived over 360 kilometres away and only visited two or three times each year. They would not have been helped by him, she said. She rejected any suggestion that Mr Mynard was called on to repair the milking plant and pump on a needs basis after 30 April, 1999. The payments he made on the grass seed, rates and maintenance of fixtures were normal expenses of a landlord of a dairy farm.
The events following the expiration of the written lease in 1999
Towards the end of the lease that occurred on 30 April, 1999, Mr Mynard said, he had asked Mr and Mrs Barake whether they wanted another three year lease. They told him that they did not as they were finishing with dairying. They had purchased a small block of land elsewhere but they were not ready just at that moment to leave. Mr Mynard said that he suggested to them that they could stay provided they paid him and provided they worked the farm. Mr and Mrs Barake paid him, Mr Mynard said. They could have left at any time. Mr Mynard said that he did ask them not to just use the spring and then leave. That was because spring is the most profitable time of the year. Consequently, Mr Mynard said that he asked them to stay for the rest of the season and they did that.
In his evidence to the Senate Committee on 10 March, 2000, Mr Mynard said that his charter was to debate the serious anomalies for lessors in the dairy de-regulation package. A lessor was written into the package as a lessor, he argued, whereas they should properly be regarded as farmers. Of his own situation, he said that he his “… lessee is there. His lease expired 12 months ago, but he is still there leasing until April 2000. He has given me notice to leave in April 2000. He can take the package.” (T documents, page 140)
In cross-examination, Mr Mynard agreed with Mr Pizer that he had either to lease the property or enter a sharefarming agreement with respect to it. He had sharefarmed with his son, Ken, he said, but leased the property to Mr and Mrs Barake. The Australian Taxation Office, though, would not accept that he had leased the property. His accountant, therefore, told him that he was sharefarming.
Mrs Barake said in her first statement (T documents, pages 112-148) that, when Mr Mynard visited her and her husband, they had intended to stay in dairying despite the low prices they were getting for their milk. They did not want to commit themselves to stay on the farm, though, for more than 12 months. They asked him if he would lease it for another 12 months and he agreed, she said. She disagreed with any suggestion that Mr Mynard had kept the property operational during the winter of 1999. She and her husband continued to carry on the business of delivering milk from the farm and continued the overall maintenance and day to day running of the farm. They paid all of the rent for the period from February, 1999 to February, 2000. They split the rent payment due for May, 1999 into two payments. Mr Mynard approved of their doing so, Mrs Barake said, as the May-June period is a dry period for dairy cows.
As their financial position was deteriorating, Mrs Barake said, her husband worked as a milk truck driver in the evenings between 4 September and 7 November, 1999. She continued to milk the cows. In the meantime, they continued to meet their obligations under the lease. Mr Barake stated that he did his normal work around the farm even though he was working elsewhere. They included maintenance of fences, pasture renovation, hay and silage and general maintenance. In cross-examination, Mr Barake said that he had worked for Murray Goulburn in the evenings but acknowledged that he had also worked for a transport company to pay a cartage bill he owed it. He did that for a couple of weeks in the first half of 1999. At times, his work took him to Shepparton that is a five or six hour drive from the property. Mr Barake said in cross-examination that he was also away from the property for two days when he fenced his own block of land, which is 90 kilometres away. He said that he was home in time to do the milking on the property. Mr Barake said that the work kept him and his wife going and helped him to pay for fertiliser as well as fodder and feed.
Mr Barake gave evidence regarding repairs that he had undertaken and said that Mr Mynard would have paid for some as they were repairs to fixtures. Mr Barake said that he had not done anything about a fence that was old and that had fallen down. Mr Mynard was of the view that Mr Barake had pulled it down to take hay from one paddock to another and he had replaced it in April, 2000.
Mr Forsyth has been involved with the dairy industry since 1949 and who is an industry representative on the DAA. He said that it is not unusual for husbands and wives to seek work off the farm on a casual or regular basis and is even fairly usual.
Mrs Barake said that they left the property in a state complying with the lease. Mr Mynard bought a feed system they had installed after they had offered it to him. Mr Barake denied Mr Mynard’s allegation that he had not left hay as required. He said that Mr Mynard’s photograph of the hay shed showing very little hay did not show the rest of the shed. Rather than replacing square bales with square bales, he had left rolls of hay. He left it in the back paddock.
Mr and Mrs Barake said that real estate agents had taken clients to view the property while they were there. They understood that those clients were viewing the property as a possible purchase. Mr Mynard denied that he had arranged any such visits.
Events after Mr and Mrs Barake left the property
Mr Mynard said that the crisis started when he allowed Mr and Mrs Barake to remain on the property and when he did not get somebody else to enter into a three year lease. Six months after the end of their lease when Mr and Mrs Barake left the property, Mr Mynard said that he was unable to find anybody to work the property. All the young people had left the country. A lot of young sharefarmers and potential lessees had taken a package to leave the industry. As no labour was available, he had no option but to sell the property.
Consequences for Mr and Mrs Mynard
That has meant that he no longer has a third farming property to pass on to his third son, who is now 29 years of age and who is very interested in joining the dairy industry. He has helped his other two sons to get started in the industry. This is an absolute disaster for him and his family, Mr Mynard said. It is an absolute disaster caused by de-regulation.
Mr Mynard said that he had lost $38,000 in the previous financial year.
THE SUBMISSIONS
Mr Mynard submitted that the legislation clearly stated that de‑regulation was intended to help dairy farmers without exposing efficient producers to risk because the rules had changed. The dairy package allowed dairy farmers to adjust to a new environment and to assist others to leave with dignity. People left the dairy industry in droves. It is a crisis that he does not receive a package. It is an anomaly. He has been left without labour, without the ability to run the farm himself and without a package. The DAA has drifted away from the spirit of the legislation. He questioned how the DAA could sell out part of his farm under one part of the scheme and not the other part of his farm under another part of the scheme.
Had he not had other income, a drop in his lease income in 1999/2000 would have entitled him to a payment. The anomaly is that the legislation looks at 1999/2000. Mr Mynard said that he did not suffer a significant loss of milk production but, when he got to the end of 2000, he did have a problem after deregulation.
Mr Mynard submitted that there was a change in the management of the dairy farm enterprise after 1 May, 1999 as Mr Barake’s intentions had changed when he decided on the new block. Mrs Barake milked the cows. Mr Mynard rejected the contention that he was a party to a lease agreement. After 30 April, 1999, it was a share arrangement and not a lease. There was a change of management after that time. He could not understand how his dairy enterprise could be taken from him and described by the DAA as Mr Barake’s dairy enterprise.
The heart of Mr Mynard’s submissions is found in his statement to the Senate Committee:
“I find it hard to accept how a person who has decided of his own volition to leave an industry to go and get a job outside the industry can be entitled to a package when the package is directed towards the welfare of the industry over the next eight years or at least the next few years, possibly not eight. How can that person who is leaving the industry-and deregulation has had nothing to do with him in any way, shape or form-walk away with that package while all my farm will be left with is a small proportion?” (T documents, page 146)
Mr Pizer submitted that there were two separate dairy farm enterprises on the property: that operated by Mr and Mrs Mynard and that operated by Mr and Mrs Barake.
CONSIDERATION
There is lingering ill-feeling between Mr Mynard and Mr and Mrs Barake. As I have found, Mr Mynard has a long history in the dairy industry and a long history of helping others to enter the industry. Mr and Mrs Barake were new entrants. Mr Mynard feels that he extended a helping hand to them and that he has been badly let down by their behaviour. He is deeply hurt. For their part, Mr and Mrs Barake feel that they have done everything that was required of them under the lease. Although it would benefit all three if there could be some resolution to their personal issues, unfortunately this proceeding is not designed to achieve that. It is focused on the DAA’s decision. At times, it is possible and appropriate to resolve, or assist in the resolution of, issues ancillary to but not directly raised by the decision under review. Sadly, this is not such a case.
Mr Mynard is also deeply hurt by the fact that he has been found to be eligible for a standard payment right with a face value of only $4,738. This is a payment that he has received for a property that, apart from a house, shed and boundary fence, he and his wife developed from scratch. They spent seven years developing it and, either alone or in a sharefarming arrangement with their eldest son, farmed the property for some 15 years. He has a deep attachment to it and I find that it upset Mr and Mrs Mynard to sell it. That was particularly so as they had wanted to give their youngest son the opportunity to operate the farm as they had done for their other two sons. Sadly, the hurt that Mr and Mrs Mynard feel is not a matter that I can lessen for them in this proceeding. Like the DAA, I am limited to the terms of the Act and the instruments made under that legislation. Neither the DAA nor I are able to alter the flow of the social, economic, business and personal consequences of that legislation. They are matters determined by those responsible for the legislation and the legislative instruments. All that I am able to do is to ensure that Mr Mynard has received all that he is entitled to receive under their terms.
Were Mr and Mrs Barake carrying on a dairy farm enterprise?
Mr and Mrs Barake had a dairy farm enterprise if they had a “… business in Australia that delivers market and/or manufacturing milk” (Program, cll. 2 and 6). In Re Buchan and Dairy Adjustment Authority (2001) 71 ALD 114, I considered the meaning of the word “business” and concluded on the basis of previous cases and the ordinary meaning of the word that, in the Program and so under the DSAP Scheme, it meant:
“30. Having regard to the ordinary meanings of the word ‘business’ and to the authorities, it seems to me that, taken in the context of the Act, the word should be given its most general meaning. That is to say, it should be interpreted as covering a wide field of human endeavour whether described as a profession, trade, employment, vocation or calling or occupation in which a person is engaged provided that it may not be more properly described as something such as a hobby or recreational pursuit. Identification of an endeavour as a business will depend upon the consideration of a wide range of issues including matters such as the regularity and repetition of the endeavour, its purpose, its record keeping, those engaged in it and the place at which the endeavour is conducted. No one factor is essential in order to make an endeavour a business. So, for example, while it may well be that the endeavour is carried out for the purpose of making a profit, I do not consider that such a purpose is an element that is required to make it a business. So, for example, while it may well be that the endeavour is carried out for the purpose of making a profit, I do not consider that such a purpose is an element that is required to make it a business. In the context of the Act this follows from the fact that, when viewed at the most basic level, the Scheme provides compensation to those who have delivered milk that has been subject to regulation (be it in the form of a payment or a levy) and the amount of that compensation is calculated on the basis of the amount of that milk delivered during 1998-99. Whether or not that milk was delivered for a profit or not or with the intention of gaining a profit or not is irrelevant. Again in the context of the Act, the precise place at which the endeavour is conducted is also irrelevant. The Act’s object is to assist the dairy industry and that, when read with the availability of dairy exit payments for farmers who wish to leave the industry, must mean that the emphasis is upon the business of dairy farming rather than upon the place at which that business is conducted.” (at 125)
Applying this interpretation, I am satisfied that Mr and Mrs Barake were each carrying on a business. They were running a herd of dairy cows, milking them, delivering the milk and receiving payment in return for that milk. Whether or not they made a profit is not relevant. Whether or not they carried out those activities on a property they had developed or on a property someone else developed, matters not. They were carrying on a business. As I find that they were delivering their milk to Murray Goulburn and am satisfied that there was no dispute that the milk included market and/or manufacturing milk, I am satisfied that they had a dairy farm enterprise.
Was Mr and Mrs Barake’s dairy farm enterprise subject to an eligible leasing arrangement?
Whether Mr and Mrs Barake’s dairy farm enterprise was subject to an eligible leasing arrangement depends on whether or not Mr Mynard leased the property to Mr and Mrs Barake on 28 September, 1999. That follows from the requirement of the DSAP Scheme. Where, as in this case, the delivery of market milk was not subject to a quota (and there is no evidence that it was), the enterprise is subject to an eligible leasing agreement if Mr and Mrs Barake lease the property. That follows from the fact that the shed in which they milk is on the property.
I am satisfied that the written lease between Mr Mynard and Mr and Mrs Barake had ended on 30 April, 1999. Based on his evidence and that of Mr and Mrs Barake, I find that he permitted them to remain in possession of the property after the expiration of that lease. On what terms were they permitted to remain? There was disagreement between Mr Mynard and Mr and Mrs Barake as to whether they had left the property in a proper state when the left it in April, 2000. As it is not relevant to do so, I do not wish to make any findings of fact as to who is right or wrong in that. What I do find is that, in their disagreement, all parties accepted the terms of the written lease as the bench mark of the state in which the property should have been left. That applied to their disagreements from the hay that was left on the property to the person who should have been responsible for carrying out repairs on the property. I also note that both Mr and Mrs Barake in their evidence and Mr Mynard in his evidence to the Senate Committee referred to their leasing the property until 2000.
The manner in which Mr Mynard and Mr and Mrs Barake referred to their arrangements is one relevant factor but not necessarily determinative. Also relevant is the fact that I find that Mr and Mrs Barake offered payment of the rent and Mr Mynard received that payment. Their evidence is consistent on this. So, too, is their evidence that Mr and Mrs Barake had exclusive possession of the property in the year following the expiration of the written lease. Certainly, Mr Mynard entered the property on occasion but I am satisfied that his doing so was by mutual agreement and that Mr and Mrs Barake’s possession of the property was exclusive. In view of these findings, I am satisfied that the property was leased by Mr Mynard to Mr and Mrs Barake. As the majority of the High Court decided in Chan v Cresdon Pty Ltd (1989) 168 CLR 242 (Mason CJ, Brennan, Deane and McHugh JJ, Toohey J dissenting):
“… It is well settled that entry into occupation followed by payment of rent under an agreement for a future lease brings into existence a common law tenancy from year to year so long as the payment of rent is referable to a yearly tenancy, as where it is for an aliquot part of a year … A similar tenancy from year to year arises from entry into occupation and payment of rent under an informal lease, including an unregistered lease of land under the provision of the Act … This tenancy is an implied or imputed tenancy. …” (at 248)
It follows from this conclusion that I am satisfied that Mr and Mrs Barake’s dairy farm enterprise was subject to an eligible dairy leasing arrangement. That gave them certain entitlements under the package.
Was there an eligible dairy sharefarming arrangement?
On the basis of the evidence, which was consistent in this regard, I am satisfied that Mr Mynard was not entitled to any share of the milk revenue of the dairy farm enterprise, fixed or otherwise. Consequently, I find that there was no eligible dairy sharefarming arrangement to which Mr Mynard was a party.
Mr Mynard’s eligible interest in Mr and Mrs Barake’s dairy farm enterprise
At the relevant time, Mr Mynard had a dairy farm enterprise but it was quite separate from the dairy farm enterprise operated by Mr and Mrs Barake. He did, however, hold an “eligible interest” in their dairy farm enterprise and did so because he was a party to the eligible dairy leasing arrangement within the meaning of cl. 7(1)(c) of the Program. As the lessor, he was, as the DAA decided, entitled to a standard payment right. Mr Mynard is not happy with its decision that the face value of that standard payment right is $4,738 but he has withdrawn his application seeking review of that decision.
Mr Mynard’s entitlement to the standard payment right means, however, that Mr Mynard held an interest of a kind referred to in s. 8(2)(a) of the SDA Scheme and so fulfils the first requirement specified in s. 8(1) of the SDA Scheme for a discretionary payment.
Was Mr Mynard affected by a significant event or crisis?
The second requirement specified is s. 8(1) of the SDA Scheme in that he is taken to have been affected by a significant event or a significant crisis as required by s. 8(3) of the SDA Scheme. This is not a case in which I am permitted to interpret those words and then to apply a meaning taking into account the object of the SDA Scheme. It is a case in which I am limited in my interpretation by what s. 8(3) tells me is a significant event or a significant crisis. This follows from the use of the words “if and only if” in the opening passage of s. 8(3) setting out the circumstances in which an entity is taken to be affected by a significant event or a significant crisis. Of relevance here is Mr Maynard’s submission regarding the management of the property, that Mr Barake worked part-time away from the property and that Mr and Mrs Barake purchased another property. He also referred to his illness.
What is meant by “management” in s. 8(3)(b)(i)? The word is not defined in the SDA Scheme or elsewhere in the package. Its ordinary meanings include “… the administration of … an organization or commercial enterprise …” (Shorter Oxford English Dictionary, 5th edition, 2002 (“SOED”)) and “… the act or manner of managing; handling, direction, or control …” (Macquarie Dictionary, 3rd edition, 1997 (“Macquarie”)). In view of my understanding of the word “business” above, the management of a dairy farm enterprise must, therefore, be the handling, directing and controlling all of those matters that go up to make the business including, but not limited to, maintaining the herd, milking the cows, organising the collection of the milk, maintaining the records, paying fees, charges and taxation, maintaining the pasture and mending the fences. A person does not have to do all of those tasks him or herself to be said to manage a dairy farm enterprise. They may, for example, be undertaken by an employee or contractor. In the case of a leased property, some, such as the maintenance of fixtures, may be the responsibility of the owner according to the lease. The enterprise must be viewed overall and these are factors to be considered.
In this case, I am satisfied that Mr and Mrs Barake managed the dairy farm enterprise that was conducted on the property. Mr Mynard had certain repairs carried out on the property but he undertook those as the lessor. He paid for seed for the pasture but again he did that as the lessor. He let Mr and Mrs Barake remain on the property but he did that out of kindness. He played no part in controlling or directing the day to day activities that led to the delivery of market or manufacturing milk. As a consequence of this finding, I have also found that Mr Mynard’s illness did not have any detrimental effect on the management of the dairy farm enterprise. Therefore, the case does not come within s. 8(3)(b)(i) of the SDA Scheme.
The next question is whether there was an “exceptional event” within the meaning of s. 8(3)(b)(v). That expression is not defined and again I will look to its ordinary meanings:
“… Of the nature of or forming an exception; unusual, out of the ordinary; special ..” (SOED); and
“… forming an exception or unusual instance; unusual or extraordinary …” (Macquarie)
There is no reason in the context of the section or of the SDA Scheme to adopt any meaning other than the ordinary meaning. There is no need to link it to the dairy farm enterprise in the context of s. 8(3)(b)(v) for the link with that enterprise and the reduction in the volume of milk is the subject of s. 8(3)(d).
In this case, I am not satisfied that there was any event that was unusual or out of the ordinary in the sense of its being exceptional. I have found that Mr Barake undertook other work for four months during the last year. I am not satisfied that this was anything out of the ordinary in the farming community and base that finding on the evidence of Mr Forsyth. It is almost a matter of which judicial notice could be taken. There is no question that Mr Barake did not have the same time to devote to the property but the task of milking was undertaken by Mrs Barake. It may well be that as a result of his absence Mr Mynard was called up as lessor to undertake repairs under the lease that he and others might have thought could have been easily and more cheaply attended to by the lessee. That he was called upon is not something that can be described as exceptional. I am also satisfied that Mr and Mrs Barake’s purchasing another block of land or Mr Barake’s spending time to fence the other block is not something that can be described as exceptional.
These conclusions mean that s. 8(3)(b) is not satisfied. That is an end of the matter for each of the four paragraphs of s. 8 must be satisfied if Mr Mynard is to be entitled to a discretionary payment right under it. Should I be incorrect in my conclusion, I have also looked to s. 8(3)(d). That requires that there be a significant reduction in the volume of milk delivered by the dairy farm enterprise during the base year compared with the enterprise’s normal year volume of milk. Section 8(4) sets out one circumstance in which there may be said to be a significant reduction but that is not met in this case because it cannot be said that the 620,895 litres of milk delivered in 1998/99 is 70% less than the enterprise’s normal year volume of milk i.e. the average of the total number of litres of market milk and manufacturing milk delivered by the enterprise in the three financial years immediately before 1998/99. The average of those three years is 597,130 litres. Putting aside the particular requirements of s. 8(4), there cannot on these figures be said to be a reduction at all let alone a significant reduction. Therefore, s. 8(3)(d) cannot be met and Mr Mynard is not entitled to a discretionary payment right under it.
Was Mr Mynard affected by significant anomalous circumstances?
What of s. 8(5)(a) of the SDA Scheme? Mr Mynard meets s. 8(5)(a)(i) but I am not satisfied that he meets s. 8(5)(a)(ii). I am not satisfied that there was any change in the management of the dairy farm enterprise. Certainly, I am satisfied that Mr Barake did not, for a period, undertake all of the tasks that he had previously undertaken but the absence of his labour, or part of it, does not satisfy me that there was any change in the way in which the dairy farm enterprise was managed in the sense of handled, directed or controlled. That was all done in the same way albeit at times with the use of labour other than Mr Barake’s. I am not satisfied that there was an atypical feature of the management. “Atypical” means “Not typical; not conforming to type” (SOED) and “… irregular; abnormal …” (Macquarie). Given that I have found that working away from a dairy farm at times is not out of the ordinary, I am not satisfied that his doing so could be said to be an atypical feature in the ownership or management of the dairy farm enterprise. The dairy farm enterprise was carried out on land leased from Mr Mynard. That was an arrangement that had been in place for over three years before 28 September, 1999 and so there was no change. It was not something that could be described as atypical. There were tensions between Mr Mynard and Mr and Mrs Barake but they were not of a degree that could be described as atypical in themselves or that could be described as an atypical feature of the management of the dairy farm enterprise.
That brings me to s. 9 of the SDA Scheme. I am satisfied that Mr Mynard meets ss. 9(1)(a) and (b). The question is whether he passes the lease income test within the meaning of s. 9(1(c) for all three must be satisfied if Mr Mynard is to receive a discretionary payment right. In his application, Mr Mynard set out the relevant figures (T documents, page 166). I am satisfied that he has not met the requirements of s. 9(3)(a)(i) of the lease income test for his eligible lease income was less than 50% of his total gross income in 1999/2000. I am satisfied that he has not met the requirements of s. 9(3)(b)(i) of the lease income test for his eligible lease income was less than 50% of his total gross income in 1999/2000, 1998/99 and 1997/98. It follows that I am not satisfied that Mr Mynard is entitled to a discretionary payment right under s. 9.
For the reasons that I have given, I affirm the decision of the respondent dated 7 October, 2002.
I certify that the ninety-five preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ...............................................................
R. Crook Associate
Date of Hearing 30 October, 2003
Date of Decision 10 September, 204
For the Applicant self represented
Counsel for the Respondent Mr J. PizerSolicitor for the Respondent Mr B. Reilly,
Mallesons Stephen Jacques
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