Parrett and Department of Family and Community Services - [2001] AATA 427

DECISION AND REASONS FOR DECISION [2001] AATA 427

ADMINISTRATIVE APPEALS TRIBUNAL )

) No N1999/1897

GENERAL ADMINISTRATIVE DIVISION       )
           Re      JAMES PARRETT
  Applicant
           And    SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES
  Respondent

DECISION

Tribunal Dr J D Campbell, Member

Date21 May 2001
PlaceSydney

Decision The Tribunal determines that the decision under review be set aside and in substitution therefor finds that the Applicant was not eligible to apply for a restart re-establishment grant, as the Applicant failed to meet the qualifications for restart income support.

[sgd] Dr J D Campbell
Member
CATCHWORDS
Social Security - restart re establishment grant scheme – restart income support - definition of farm enterprise - definition of farmer - income from farm enterprise - significant part
Farm Household Support Act 1992 – sections 3(2), 4A(1), 8B, 52A
Restart Re-establishment Grant Scheme 1997 – clauses 2.1, 2.2, 3.2, 4.1
Re Drinkwater and Secretary, Department of Family and Community Services (1999) 58 ALD 243

REASONS FOR DECISION

Dr J D Campbell, Member

In this application, Mr James Parrett ("the Applicant") seeks a review of the decision of the Social Security Appeals Tribunal ("SSAT") dated 4 November 1999 which set aside the decision of a delegate of the Secretary, Department of Family and Community Services ("the Respondent") dated 21 January 1998. The latter decision, in turn, had been affirmed in a decision by the Authorised Review Officer ("ARO") dated 9 February 1998. The SSAT in setting aside the earlier decision, which concluded that the Applicant's farm was not considered to be a "farm enterprise" within the meaning of section 3(2) of the Farm Household Support Act 1992, found that the Applicant was a farmer as defined in section 3(2) of the Farm Household Support Act 1992.
A hearing was held before the Administrative Appeals Tribunal ("the Tribunal") at Leeton on 16 November 2000, at which the self represented Applicant presented oral evidence. The Respondent was represented by Mr J Walsh, a solicitor from the Advocacy and Administrative Law Team of Centrelink, Brisbane.
The following material was placed into evidence before the Tribunal:

Exhibit No  Description             Date
T1-T26 PP1-78 Documents prepared pursuant to section 37 of the Administrative Appeals Tribunal Act 1975
A1      Memorandum to the Tribunal from the Applicant          12 February 2000
A2      Submission on behalf of the Applicant from the Welfare Rights and Legal Centre Limited (Canberra)    13 November 2000
A3      Bundle of documents forwarded to the Tribunal by the Respondent 2 February 2000
A4      Report by Mr McLeish        30 April 2000
A5      Schedule of Applicant's assets for 1997/1998 financial year
R1      Respondents Statement of Facts and Contentions      3 November 2000
R2      Restart Re-establishment Grant Scheme 1997 (to commence 1 December 1997) 25 November 1997
R3      Proclamation fixing 1 December 1997 as the restart scheme payment commencement date           26 November 1997

issues

The relevant issues in this matter are whether the Applicant qualifies for payment of restart income support under the Farm Household Support Act 1992, and a restart re-establishment grant under the Restart Re-establishment Grant Scheme 1997, at the date of lodging his application on 17 December 1997.
legislation
The relevant legislation in this matter is the Farm Household Support Act 1992 ("the Act"), in particular sections 3(2), 4A(1), 8B, 52A, and the Restart Re-establishment Grant Scheme 1997 ("the Scheme"), in particular clauses 2.1, 2.2, 3.2 and 4.1.
background and documentary evidence
The applicant lodged a claim for restart income support and a restart re-establishment grant on 17 December 1997 (T8). The claim was rejected on 23 December 1997 on the basis that the Applicant was not a "farmer" as defined in the Farm Household Support Act 1992, in that he was not carrying on a "farm enterprise" as defined. This decision was reviewed and affirmed by a delegate of the Respondent on 21 January 1998 and by the ARO on 9 February 1998 (T23).
The Applicant sold his farm on 21 June 1999 and lodged an appeal against the earlier decision to the SSAT on 21 August 1999. The SSAT set aside the decision under review, in a decision dated 4 November 1999, and found that while the Applicant was considered to be a farmer as defined in section 3(2) of the Act, the new decision was to take effect from 31 August 1999 (the date of appeal to the SSAT), with his entitlement to restart income support commencing on that day. However, given that he was no longer a farmer, the appeal was effectively unsuccessful.
The Applicant commenced farming a 455-hectare property known as "Jays" at Jack's Creek Road, Narrabri in June 1980 as a 40 percent partner, the other 60 percent partner being V J Halfpenny Grazing Pty Ltd. Initially the partnership grew grain crops for a 60 sow intensive piggery and ran cattle, but adverse weather conditions and low profit from pigs forced the closure of the piggery in 1991. Continuing drought conditions up to 1995 resulted in the cattle being sold in 1992 and 1993. In 1995, some 300 hectares of the property was sold to settle debt and develop the remaining land for irrigation. Also in 1995, the Applicant purchased a number of miniature dogs for breeding purposes, in order to supplement his income during prolonged periods of drought.
In 1996 the Applicant commenced land preparation for crops, but because of severe health problems was unable to undertake any sowing of crops. In 1997, land preparation was undertaken and crops were sown, but because of drought there was no harvest. In 1998, due to wet weather, only 150 acres were sown with triticale and oats and the crops were subsequently destroyed by wet weather.
In further addressing the activities in 1995, 1996 and 1997, Mr McLeish, an agricultural consultant, in a letter dated 10 August 1999 (T25), stated that:
·     the Applicant utilised the pig sheds to breed Toy Dogs, in 1995;
·     the Applicant was unable to sow any crops in 1996, having prepared the land in late 1995/ early 1996, because of a heart condition and the need for by-pass surgery;
·     in 1997, some 300 acres of triticale were sown, but nothing was harvested because of adverse seasonal conditions (drought declared August, September, October);
·     no seed expenses were incurred because of store seed (120 tonnes), from the 1991 crop;
·     no fertiliser was used or outside labour employed, with 2000 litres of fuel used for each crop; and
·     repair and maintenance costs associated with farming were incurred continuously until the last crop was sown in 1998.

applicant's evidence

The Applicant stated that he considered his claim was not complete in all aspects and that he had contacted the Respondent to inform that he was considered a primary producer in his income tax return. Further, the Applicant stressed that if the decision maker had made an inspection as he had authorised in early December 1997 (T9), the decision maker would have been able to observe the plant and crop preparation.
The Applicant stated that in late 1995, he prepared some 250 acres for cropping with a further 50 acres to be prepared but the tractor motor blew and the tractor required extensive repairs. In January 1996, the Applicant undertook further land preparation by way of scarification. In February 1996 the Applicant stated that he suffered a heart attack. Because of continuing angina he was referred to a specialist in Tamworth, who referred him to St Vincent's Hospital in Sydney where he underwent a by-pass operation in April 1996. The Applicant stated that no crops were sown in 1996 because of consequential convalescence.
The Applicant stated that he spent the latter months of 1996 and the early months of 1997 preparing 300 acres of land for sowing with triticale, which was undertaken in May 1997. With drought occurring and being declared in August, September and October 1997, the Applicant stated that the crop just withered.
The Applicant indicated that he had particular farming assets, namely a tractor, plough, off set discs, scarifer and a utility. He further indicated that he had used the piggery for toy dog breeding, and that in 1991 when the piggery was closed an irrigation bore was drilled and an 18000 litre per hour pump fitted.
In response to questions asked in cross-examination, the Applicant stated that the soil on the property was of a high acid variety with some aluminium toxicity, and that winter rain was an important factor for successful cropping. Successful crops had been grown in 1984, 1987, 1988 to 1991 and in a few other years. The Applicant stated that when faced with a prolonged period of years of adverse weather conditions, which forced the sale of cattle and eventually 300 hectares of land in 1995, and because of a shortage of money, options were limited. Consequently, a decision was made to irrigate 150 acres with the intention to improve pastures and to run cattle. Further, the Applicant indicated that the introduction of toy dog breeding was an interim measure when undertaken in 1995, to assist with cash flow. Although it is evident from the years 1996 to 1997 that expenses associated with dog breeding were of the order of $11,000. The Applicant stated that he had expected an income from cropping to be of the order of $20,000 gross in a reasonable year.
financial information
Westpac Banking Corporation provided a certificate dated 15 December 1997 that the Applicant had applied for a loan and because of the Applicant's financial situation, Westpac did not propose to make any loan to the Applicant as at 15 December 1997 (T10).
In the financial year 1995/96, the partnership had income from dog sales of $11,524 and expenses of $3,046 (dog feed), $3,973 (veterinary expenses) and wages $2,200. Income from other activity totalled $16,456, comprising interest ($1,509), capital gain on sale of non current assets ($12,1722) and profit on sale of non current assets ($2,225). Operating expenses for activities other than those associated with toy dog breeding were in the order of $16,519, with a net profit for the year being $2,243 (T11).
In the financial year 1996/97 the partnership had income from dog sales of $11,346, and expenses of sales of $3,293 (dog feed), $1,161 (dog expenses), $3,838 (veterinary expenses) and $3,031 (wages). Income from other activities totalled $1,655 comprising interest $1,346 and sundry income $309. Operating expenses for other activities, other than those associated with dog breeding were of the order of $14,912, with a net loss for the year being $13,234 (T12, p 48).
The Tribunal also notes that receipts for particular and significant expenses other than non toy dog breeding expenses have been provided. These include diesel fuel related supplementary application for 1996 (900 litres), 1997 (2000 litres), and tractor repairs (Exhibit A1).
submissions
applicant:
The Applicant submitted, that while his claim for restart income support may not have been complete in all detail, subsequent enquiries and discussion have clearly detailed and established that he was:
(a) a part-owner of a farming property;
(b) that through the years 1980 until the sale in 1999 he carried out an agricultural activity, namely the sowing and harvesting of crops; and
(c) that at various times over the nineteen years he had undertaken other activities associated with the use of the property, namely:
·production and sale of pigs until 1991;
·raising and fattening of cattle until 1993; and
·breeding and sale of toy dogs from 1995 to 1998.
The Applicant contended that at all times he had been carrying on an agricultural enterprise and that for the two years prior to his application for restart income support, he had satisfied the requirements nominated within section 3(2) of the Act. The Applicant contended, that as a consequence, he was entitled to payment of restart income support from the date of his application. Further, as the property in question was sold on 21 June 1999, the Applicant contended that he satisfied the necessary criteria for payment of the grant.
respondent:
The Respondent submitted that clause 3.2 of the Scheme requires that a claimant be eligible to apply for a grant when the application is made. Clause 2.1 of the Scheme establishes that such eligibility occurs only if the claimant is qualified for restart income support under the Act.
The Respondent further submitted that section 8B of the Act governs qualification for restart income support. Further, section 8B requires that a claimant be a farmer for a continuous period of at least two years prior to a claim being made. "Farmer" and "farm enterprise" are two terms defined within section 3(2) of the Act, and as a consequence the Respondent contended that:
(a) the Applicant's dog breeding activities were not activities falling within the definition of "farm enterprise"; and
(b) the Applicant's activities in the two years prior to his claim do not allow him to be classified as a "farmer", as the only income received was derived from toy dog breeding activities and all or most of his labour was devoted to dog breeding.
The Respondent contended that the Applicant does not qualify for restart income support and hence the Applicant's claim must fail. The Respondent further contended, that even if the Applicant was found to meet the definition of a farmer, his claim for a restart re-establishment grant must fail as it is necessary, pursuant to clause 3(2)(1)(b), that the farm enterprise be sold within one year of the claim being made, that is, in December 1997.
considerations and findings
The Tribunal has paid particular attention to the many issues and the significant amount of written material placed before it. In preliminary comment, the Tribunal observes that many of the difficulties in this matter appear to have their origin in claims or forms that have been less than detailed in their completion – a matter which the Applicant acknowledged. The Tribunal notes, in particular, the way in which the Applicant described his farm:
(a) in his initial claim form (T8, P27):
"breeding dogs 11 females, 4 males
normally cattle, but due to drought none at present
4 tractors, disc harrow, combine scarifer, stick rake, slasher
1973 Holden Ute, 1960 International Truck, 1990 Subaru Ute, tools, welding gear
one household
title owned by Jays Pastoral Co Pty Ltd
155 HA";
(b) in an attachment to his claim form, Module R Real Estate Details, the Applicant stated that his income from his property was $244.00 per week (T9, P35);
(c) the Applicant stated the value of his livestock, machinery and plant (T9, P36):
"breeding dogs   $2,200
plant                 $15,000
          Subaru ute          $7,000";
(d) in the Applicant's Land and Stock Returns lodged with Narrabri Rural      Lands Protection Board (Exhibit A3), he stated that the return of land and stock as at 30 June 1996 was nil stock, nil improved pasture, fodder crops or field crops. The Applicant also stated the return of land and stock as at 30 June 1997 as nil stock, nil improved pasture, fodder crops or field crops.
The Tribunal notes, that an authority to inspect the property was forwarded by the Applicant to the Respondent as part of his original application in December 1997. However at no stage, in either the written material or at the hearing, was evidence adduced that an inspection of the property had occurred.
Having considered all the material placed before it in evidence, the Tribunal makes the following findings of fact:
(a) the Applicant was a 40 per cent owner of a property "Jays", which when purchased in 1980 encompassed some 455 hectares;
(b) the main activities carried out on the property between 1980 and 1995 were:

pig production until 1991;
cropping with results depending upon prevailing weather conditions; and
cattle raising and fattening until 1993.

(c) a pasture improvement program was commenced in 1990 by way of sinking a bore, fitting a pump and providing a limited reticulation system to some acres. 300 hectares of land were sold in 1995, to return debt and provide capital;
(d) in 1995, breeding of toy dogs commenced and continued throughout 1996 and 1997;
(e) in late 1995 early/ 1996, some 300 acres were prepared for sowing. The Applicant had a heart condition in February 1996, which required a coronary artery by-pass in April 1997. The crop was not sown because of the Applicant's health disabilities and wages were paid for assistance of the dog-breeding program in both financial years 1995/96 and 1996/97;
(f) income received or derived in the financial year 1995/96 was essentially from dog sales ($4524), the capital gain on sale of non current assets (12,722), the profit on sale of non current assets ($2,225), and interest ($1,509);
(g) in 1997, the Applicant prepared some 300 acres for sowing with triticale, which was planted in May 1997, with no fertiliser having been used in soil preparation. The crop failed because of adverse weather conditions (drought);
(i) income received or derived in the financial year 1996/97 was essentially from dog sales ($11,346), with other income coming from interest ($1,346) and sundry income ($309);
(j) further land preparation and crop planting ceased in 1998, but on this occasion too much rain ruined the crop and a nil crop was harvested; and
(k) the remaining land and assets were sold on 21 June 1999.

The Tribunal notes the following provisions of the particular sections of the Act, pursuant to which this matter is to be considered:
"Section 8B Qualifications for restart income support
Subject to this Division, a person is qualified for restart income support in respect of a period if:
(a) the period begins on or after the restart scheme payment commencement day; and
(b) throughout the period, the person:
(i)    is a farmer; and
(ii   is at least 18; and
          (iii) is an Australian resident; and
          (iv) is in Australia; and
(c) the person has been a farmer for a continuous period of at least 2 years immediately before the period; and
(d) a certificate of inability to obtain finance issued in respect of the person has effect throughout the period."

In particular, paragraph 8B(b)(i) requires that the person must be a "farmer". The word "farmer" is defined in s 3(2) of the Act:

"'farmer' means a person who:
(a) has the right or interest in the land used for the purposes of a farm enterprise; and
(b) contributes a significant part of his or her labour and capital to the farm enterprise; and
(c) derives a significant part of his or her income from the farm enterprise."

"Farm enterprise" is also defined within section 3(2) as:

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

The Tribunal further notes that section 52A of the Act is the authority under which the Scheme was formulated, and pursuant to section 4A(1) was promulgated on 26 November 1997 to commence on 1 December 1997 (Exhibits R2 and R3). The relevant clauses of the scheme provide as follows:
"Part 2 – Applying for a re-establishment grant
Division 1 – The application
2.1 Who can apply?
A person is eligible to apply for a re-establishment grant if he or she is qualified for restart income support under Division 1B of Part 2 of the Act.
…
Part 3 – The re-establishment grant
Division 2 – Qualifying for the re-establishment grant:
3.2 Who is qualified for a re-establishment grant?
(1) A person is qualified to receive a re-establishment grant if:
(a) the person was eligible to apply for the re-establishment grant when the person applied; and
(b) the person's farm enterprise has been sold (and completion of the sale has taken place) within 1 year after:
(i) if the person has received restart income support – the person last received restart income support; or
(ii) in any other case – the person applied for the re-establishment grant; and
(c) the Secretary is satisfied that the sale was on commercial terms and at arm's lengths; and
(d) the Secretary is satisfied that the person has disposed of all of the person's farm assets; and
(e) the person has complied with any direction under Division 2 of Part 2 of this Scheme or section 13A of the Act to obtain advice; and
(f) the person's net assets, plus the total of any restart income support the person has received, is less than $157,5000; and
(g) the person has not previously received a grant under this scheme or under an agreement subject to the Rural Adjustment Act 1992; and
(h) if the person has applied for a grant under an agreement subject to the Rural Adjustment Act 1992 – he or she has withdrawn that application."

In summarising the statutory framework it is noted by the Tribunal that a person to be eligible for a re-establishment grant must be qualified for re-start income support, with the qualifications for such being nominated in section 8B of the Act, with definitions for "farmer" and "farm enterprise" contained within section 3(2) of the Act.
In considering the facts found by the Tribunal to exist and other evidentiary material before it, the Tribunal finds that in the relevant years 1996 and 1997, the Applicant had been carrying on at least two activities on the property partly owned by him. The first was a toy dog breeding activity, which was carried on in the vacated pig sheds. An examination of this activity by the Tribunal reveals that this enterprise does not fall within any of the agricultural, pastoral, horticultural, apicultural or aquaculture industries. In arriving at such a finding, the Tribunal gives particular consideration to each adjective as defined in the Shorter Oxford English Dictionary. The Tribunal pays particular attention to the definition of the word agricultural, which pertains to agriculture, which in turn is defined as the science and art of cultivating the soil, including the gathering of crops and the rearing of live stock. The Tribunal thus concludes that the enterprise of dog breeding does not fall within any of the categories nominated.
However, the matter does not end there, for it is evident to the Tribunal that the Applicant was carrying on an enterprise of soil preparation and cultivation together with the intention of or actual sowing of crops in the years 1996 and 1997, and this activity was similar to what he had done in many previous years. The Tribunal is satisfied that the activities were undertaken as indicated, with the intention of producing a harvestable crop in 1997 and a monetary return. The Tribunal notes the Respondent's hesitancy in accepting the genuine nature of these endeavours, but in turn is satisfied that there is sufficient evidence of expenses and endeavours to find that such activities were undertaken with the intention of providing an income. The Tribunal also notes and accepts that the reason for failing to sow in 1996 was because of the Applicant's ill health. Further, the Tribunal in observing that preparations for all crops in 1996, 1997 and 1998 were hampered by a lack of finance, in that fertiliser and underlying soil was not necessarily optimally prepared, is not in a position, nor is it necessitated, to conclude on the probabilities of a successful crop in the circumstance detailed. Nevertheless, the Tribunal, while recognising the increasing financial difficulties of the Applicant at this time, is satisfied that the Applicant was carrying on an enterprise, which would fall within the definitional understanding of an agricultural industry. As such, the Tribunal finds that the Applicant was carrying on a farm enterprise.
The Tribunal, in considering whether the Applicant was a farmer as defined by section 3(2) of the Act, makes the following findings and for the following reasons:
(a) the Applicant has a right or interest in the land used for the purpose of a farm enterprise. The reason for such a finding is that the Applicant had a 40 percent interest in the company which owns the land and assets;
(b) apart from his period of illness in 1996, the Tribunal finds that the Applicant did contribute both a significant part of his labour and capital to the farm enterprise. In so finding, the Tribunal accepts the evidence of the Applicant in relation to the labour and capital inputs into soil preparation and sowing of crops in 1996, 1997 and 1998. That no crop was planted in 1996 and that no crops were ever harvested in 1996, 1997 and 1998 is not an issue, nor does it detract from the fundamental finding of significant quantities of labour and capital being applied by the Applicant to a farming enterprise. The Tribunal, in making a finding of a significant part, concludes that the word 'significant' implies nothing more than being not insignificant or not negligible at one end of the spectrum, and being noteworthy or of considerable amount, effect or importance (Concise Oxford Dictionary). In this regard the Tribunal recognises, that while the dog breeding activity may have taken a significant amount of labour and to a lesser extent capital, the concept of a number of activities being carried out and all requiring significant inputs of labour and capital by an individual, is not incongruent with the findings in this matter;
(c) the Tribunal has already concluded findings of fact in relation to income received or derived in both financial years 1995/96 and 1996/97. For the two financial years in question, no real income was received or derived from the farming enterprise. Any income received or derived was from the sale of the toy dogs or from the sale of capital assets. In further analysing the income received or derived, the Tribunal finds that any income earned in the financial year 1996/97 was by way of income from toy dog sales and interest. The Tribunal also finds that only the income from the dog sales could be described as significant, with again interest being derived from monies accumulated as a result of a sale of capital (land and other assets in 1995), and the creation of a cash reserve; and
(d) the Tribunal also notes the submission presented by the Applicant, that the issue of income is best addressed by studying the intentions of the Applicant in relation to the activities undertaken in pursuit of income as opposed to the actual results of those endeavours. In this regard, the Applicant relied upon the findings in the matter of Re Drinkwater and Secretary, Department of Family and Community Services (1999) 58 ALD 243. The Tribunal notes the submission and recognises that the major objective of the Act was to provide income support to low income farmers who could not borrow further against their assets. However, the Tribunal concludes that in the circumstances of this matter, the Applicant did not derive a significant part of his income from the farm enterprise. More particularly, the Tribunal concludes, that where the Applicant's submission conceded "that the Applicant did not derive any actual income from the farm enterprise in 1996 or 1997" (paragraph 6, Exhibit A2) that the concept of an applicant's intention as to his principal source of income is incongruent with the concept of drawing a significant part of his income from the farming enterprise, the latter in the Tribunal's view defining an actual as opposed to theoretical circumstance. As a consequence of the conclusion reached, the Tribunal finds that the Applicant does not satisfy subsection 8B(c) and the definition of farmer contained within section 3(2) of the Act.
In further findings, the Tribunal concludes that the Applicant meets all the requirements for qualification for restart income support, pursuant to section 8B of the Act, apart from the issue of being a farmer and being a farmer for a continuous period of two years immediately before the period.
As a result of the Tribunal's findings, the Applicant is not qualified for restart income support at the time of his application in December 1997, and accordingly is not eligible to apply for a restart re-establishment grant under the Scheme.
determination
The Tribunal determines that the decision under review be set aside and in substitution therefor finds that the Applicant was not eligible to apply for a restart re-establishment grant, as the Applicant failed to meet the qualifications for restart income support.

I certify that the 36 preceding paragraphs are a true copy of the reasons for the decision herein of Dr J D Campbell, Member
Signed:         .....................................................................................
  Associate
Date/s of Hearing  16 November 2000
Date of Decision  21 May 2001
Counsel for the Applicant        Self-represented
Counsel for the Respondent Mr J Walsh