Reid and Dairy Adjustment Authority
[2005] AATA 258
•18 March 2005
CATCHWORDS – SUPPLEMENTARY DAIRY ADJUSTMENT SCHEME – whether entitled to discretionary payment right –fair representation of a normal year volume of milk for the enterprise – whether a significant reduction in the volume of milk delivered during the base year – decision affirmed.
Acts Interpretation Act 1901 s. 46
Dairy Produce Act 1986 s. 125A, Schedule 2. cll. 1, 2, 3, 6, 7, 9, 10 to 23 and 31
Dairy Produce Legislation Amendment (Supplementary Assistance) Bill 2001
Dairy Structural Adjustment Program Scheme 2000 ss. 2, 9 to 11, 21 to 24, 30 and Part 4
Dairy Structural Adjustment Program Scheme 2000 Amendment (No. 3)
Supplementary Dairy Assistance Scheme 2001 ss. 3(1), 3(2), 8(1), 8(2), 8(3), 8(4), 8(5)(a), 8(7), 13(1), 16, 17, 18, 20, 27, 28 and Part 5
Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd and Another (1991) 22 NSWLR 389
Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60
Emaaas Pty Ltd v Mobil Oil Australia Ltd [2000] QCA 513
Ferrcom Pty Ltd v Commercial Union Assurance Co. of Australia Ltd (1993) 176 CLR 332
Fink v Fink (1946) 74 CLR 127
Grocery Holdings Pty Ltd v Chief Executive Officer of Customs [2004] FCAFC 85
R v Palmer [1981] 1 NSWLR 209; 1 A Crim 458 (CCA)
Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634
Sellars v Adelaide Petroleum NL (1994) 179 CLR 332
Tasmanian Conservation Trust Inc v Minister for Resources (1995) 127 ALR 580
The Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64
DECISION AND REASONS FOR DECISION [2005] AATA 258
ADMINISTRATIVE APPEALS TRIBUNAL )
) S2002/155
GENERAL ADMINISTRATIVE DIVISION )
Re WAYNE REID
Applicant
AndDAIRY ADJUSTMENT AUTHORITY
Respondent
S2002/156
Re ANNETTE REID
Applicant
AndDAIRY ADJUSTMENT AUTHORITY
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 18 March 2005
Place: Adelaide
Decision:The Tribunal affirms the decisions of the respondent dated 18 April 2002.
S A FORGIE
Deputy President
REASONS FOR DECISION
The applicants, Mr Wayne Reid and Mrs Annette Reid, are dairy farmers, who share farmed a property in the South East of South Australia from 1995 until they left it on 23 March 2000. The respondent, the Dairy Adjustment Authority (“DAA”) has refused their application for a discretionary payment right under the Supplementary Dairy Assistance Scheme 2001 (“SDA Scheme”). They had made their application on the basis that their milk production during the year beginning 1 July 1998 (“base year”) had been affected by their discovery that their cows had Bovine Johne’s Disease and to their having to cull their herd as a consequence during that year. That was the base year used for calculating their entitlements under the earlier Dairy Structural Adjustment Program Scheme 2000 (“DSAP Scheme”). Overall, they incurred a loss in excess of $300,000. I have decided that the decision should be affirmed as there was not a significant reduction in the volume of milk delivered in the base year.
THE ISSUES
The issue is whether Mr and Mrs Reid are eligible for a discretionary payment right under the SDA Scheme. This raises three subsidiary issues: one under s. 8(3) and the other under s. 8(5)(a) of the Act:
fair representation of a normal year volume of milk
What volume of milk fairly represents the “normal year volume of milk” delivered by Mr and Mrs Reid’s dairy farm enterprise for the base year? I have decided that the volume is 6,937.035 litres each year.
section 8(3): was there a significant reduction in the volume of milk delivered during the base year?
Was there a significant reduction in the volume of milk delivered by Mr and Mrs Reid’s dairy farm enterprise during the base year compared with its normal year volume of milk? If there was, the DAA has conceded that their dairy farm enterprise was affected by a significant event or crisis and that the reduction is attributable to that significant event or crisis. I have decided that there was not a significant reduction in the volume of milk delivered in the base year.
I note that Mr and Mrs Reid did not pursue one of their original arguments to the effect that the introduction of the SAMME Scheme on 1 July 1995 constituted a change or atypical feature in the management of their enterprises within the meaning of s. 8(5)(a).
THE LEGISLATIVE SCHEME
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 (“Program”) and provides for further elements. The Program is set out in Schedule 2 of the Act (s. 125A). Clause 1 of Schedule 2 sets out a simplified outline of it:
“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 cl. 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.
Dairy exit payments are available for farmers who choose to leave agriculture.
The Dairy Adjustment Authority will administer DSAP 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 and dairy exit payments will be paid out of that Fund.”
An outline of the DSAP Scheme
A “DSAP payment” is a payment under the Dairy Structural Adjustment Program Scheme 2000 (“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 the objectives set out cll. 12-23 of the Program in the DSAP Scheme (Program, cll. 10(a) and 11).
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 it 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)). Only one, the standard payment right, is relevant in this case.
The basic eligibility criteria for a standard payment right are:
“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)
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). As one of those capacities is as an individual, it follows that Mr and Mrs Reid are entities.
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 (“AI Act”), s. 46). Clause 2 of the Program defines the expression “dairy farm enterprise” as “… a business in Australia that delivers market milk and/or manufacturing milk” (Program, cll. 2 and 6).
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 share farming arrangement, an eligible dairy leasing arrangement, or when it is carrying on the enterprise (Program, cl. 7). I am satisfied that Mr and Mrs Reid are parties to an eligible dairy share farming arrangement and, as share farmers, hold an eligible interest.
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, in so far as it relates to a producer, “… relevant dairy produce delivered by a producer to a manufacturer during a month ending before 1 July 2000, in respect of which a domestic market support payment has been paid under section 108A as in force before the conversion time.” (Program, 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.” (Program, cl. 2) The “base year” to which reference is made is the financial year beginning on 1 July 1998 (Program, cl. 3).
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 share farming 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 to a share farming arrangement, the face value of a standard payment right is calculated according to s. 23 of the DSAP Scheme.
DSAP Scheme: market pool distributions
Clause 31 of the Program provides that the DSAP Scheme may make provision for and in relation to the adjustment of eligibility for payment rights in relation to a distribution that is to be taken as an abnormal market milk pool distribution.
“Those provisions may include (but are not limited to):
(a)treating a particular dairy farm enterprise, for the purposes of this Part and the scheme, as if the enterprise had delivered a particular volume of market milk during a particular financial year instead of a particular volume of manufacturing milk; and
(b)treating a particular dairy farm enterprise, for the purposes of this Part and the scheme, as if the enterprise had delivered a particular volume of manufacturing milk during a particular financial year instead of a particular volume of market milk.” (Program, cl. 31(2))
In its original form, s. 30 of the DSAP Scheme provided that:
“(1) This section applies if, in the base year, 1 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.
(2) However, this section does not apply to:
(a)a dairy farm in South Australia that was not bound by the voluntary price equalisation scheme known as the South Australian Market Milk Equalisation Agreement approved under section 26 of the Dairy Industry Act 1992 of South Australia; or
(b)a dairy farm enterprise in Victoria that does not deliver milk to an authorised agent within the meaning of section 49 of the Dairy Industry Act 1992 of Victoria.
(3) If this section applies, the DAA must determine, for each dairy farm
enterprise in relation to which 1 or more claims for payment rights have been received:
(a)the amount of market milk that the enterprise would have delivered if it had received payment at the market milk rate for the same proportion of its eligible milk deliveries during the base year as other dairy farm enterprises in the jurisdiction; and
(b)the amount of manufacturing milk that the enterprise would have delivered if it had received payment at the market milk rate for the same proportion of its eligible milk deliveries during the base year as other dairy farm enterprises in the jurisdiction.
(4) The sum of the amount of market milk and manufacturing milk that the DAA determines an enterprise would have delivered during the base year must be equal to the amount of milk that the enterprise actually delivered during the year.
(5) For the scheme, each enterprise is taken to have delivered, during the base year, the amount of market milk, and the amount of manufacturing milk, determined under subsection (3).
(6) In this section:
eligible milk deliveries means deliveries of milk that satisfies the requirements for market milk under the law of the State or Territory in which the milk is delivered.
pooling jurisdiction means a State or Territory in which enterprises were not required to hold quota to deliver market milk during the base year.”
The Minister amended s. 30 of the DSAP Scheme with effect from 17 August 2000 when he made the Dairy Structural Adjustment Program Scheme 2000 Amendment (No. 3). He added s. 30(3A) and amended s. 30(4) so that they now read:
“(3A) For subsection (3), do not count the amount of milk deliveries of market milk that were not covered by State pooling arrangements embodied in, or that operated under:
(a)the voluntary price equalisation scheme known as the South Australian Market Milk Equalisation Agreement approved under section 26 of the Dairy Industry Act 1992 of South Australia; or
(b)the Dairy Industry Act 1992 of Victoria; or
(c)the Dairy Industry Act 1994 of Tasmania.
Note Deliveries of market milk not covered by these State pooling arrangements are dealt with under other provisions of this scheme.
(4) The sum of the amount of market milk and manufacturing milk that the DAA determines an enterprise would have delivered during the base year, together with milk not counted because of subsection (3A), must be equal to the amount of milk that the enterprise actually delivered during the year.”
SDA Scheme: SDA payment rights
In 2001, another scheme, known as the SDA Scheme, was formulated under cl. 37B of the Program. It had to comply with cll. 37D to 37P of the Program. There is no suggestion that the SDA Scheme does not comply with them. The SDA Scheme is concerned with conferring three types of payment rights which are collectively known as “SDA payment rights” (Program, cl. 2). They are:
basic market milk payment rights;
additional market milk payment rights; and
discretionary payment rights.
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: eligibility for a discretionary payment right
In order to be eligible for a discretionary payment right in the circumstances of this case, an entity must satisfy the requirements of s. 8(1). In so far as it is relevant in this case, an entity is eligible for a discretionary payment right under that provision 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) and that are relevant in this case are:
“(a) …
(b)if the entity was not granted a payment right under the DSAP scheme:
(i)…
(ii)…
(iii)a proprietary interest in the land on which a milking shed is situated;
(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))
The entity must have held that interest in a “dairy farm enterprise”. Unless the contrary intention appears, words used in the SDA Scheme have the same meanings as they have for the purposes of the DSAP Scheme (SDA Scheme, s. 3(1)). I have given the DSAP Scheme’s meaning in relation to “dairy farm enterprise”. It is apparent from s. 8(7) of the SDA Scheme that it continues to have that meaning but that it also has an extended meaning:
“dairy farm enterprise includes a business in Australia carried on with a view to delivering market milk or manufacturing milk during the qualifying period but did not deliver such milk in that period.”
The “qualifying period” is defined as the period from 1 July 1998 to 6.30pm on 28 September 1999 (SDA Scheme, s. 3(2)).
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.”
An “exceptional event” is defined to mean:
“… in relation to a dairy farm enterprise, … a drought, storm, flood or other natural event, or disease suffered by livestock.” (DSAP Scheme, s. 3 and SDA Scheme, s. 3(1))
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
(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))
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 circumstances. 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.”
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.
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, s. 28(1) and (2)). Those quarters must be neither 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.
BACKGROUND
There was no dispute between the parties regarding a number of matters in this case. In light of that and on the basis of the evidence, I have made the findings of fact set out in the following paragraphs.
Early life
Mr Reid grew up on a dairy farm and started dairy farming on the family farm in 1985. The family farm had 140 cows and, after they married in 1988, Mr Reid and his wife share farmed and milked approximately 140 cows. In 1994, Mr and Mrs Reid looked for opportunities to share farm in the South East of South Australia. Although there were no opportunities at the time, they took another in the Heywood area. On that farm, they milked 330 cows and a further 30 cows of their own.
Share farming in South East of South Australia and plans for expansion
In July 1995, they entered the agreement with Nikima Pty Ltd (“Nikima”) to share farm a property in the South East of South Australia (“South East”) (“the Property”). The Property comprised 305 acres and Mr and Mrs Reid began with 140 cows. They purchased those cows from previous owners of the Property. When they went onto the Property, approximately 116 acres were under irrigation by means of a centre pivot irrigator. In that area, irrigation meant that green grass could be grown on those 116 acres all the year. Some 22 tons of dry matter per hectare can be grown from irrigated land but only 8 tons on unirrigated land. Travelling irrigators were installed in other paddocks but Mr and Mrs Reid removed them during the first year they took over the Property. They re-sowed and improved the land’s productivity.
During the season, they purchased 70 milking cows to use the grass Mr and Mrs Reid were growing on the Property. They put their young stock out to contract feeding. Contract feeding means that stock are fed a ration comprising grass, silage, grain and the like. Payment for feeding is made on the basis of the animal’s weight gain until they calve and give birth. The contract rearer was responsible for getting each animal to a goal weight of 550 kilogrammes. When they reached the goal weight, they were sent back to the Property.
In 1996 or early 1997, Mr Reid renewed his acquaintance with a school friend, Mr Andrew Angelino. By this time, Mr Angelino, who had been born on a dairy farm in Timboon in 1968, was employed by Best-Fed Nutrition as a Nutrition Consultant. He held a Diploma of Applied Science (Agriculture) from Dookie Agricultural College and had been employed by Timboon Herd Improvement as a Herd Recording Supervisor. As a Nutrition Consultant, he visited farmers on their properties and inspected their herds and investigated their feeding programmes. He had over 100 clients while he held that position. They had cow production starting from 4,000 litres per cow and progressing to 10,000 litres. The average increase in production over three years was 2,000 litres per cow. Many of the farms also doubled their farm production by increasing their stocking rate. In July 2000, Mr Angelino established his own consulting business to assist farmers to achieve optimum stocking rates and feeding regimes with the focus being on their increasing their profitability. Since September 1997, Mr Angelino has been a member of a partnership operating an 850 cow dairy farm in the South East of South Australia. Production on that farm exceeds 8,000 litres per cow per year.
Mr Angelino based his advice on an assumption that a cow must have a body condition score of at least 5 before any significant improvement in milk production can be achieved. Different types of feed, such as pasture, grain and hay, have different nutritional or energy values. Expressed in megajoules per kilogramme (“MJ/Kg”), a cow requires a known number of MJ/Kg per day for maintenance, milk production, gestation and environmental effects and a known number to change its body condition score. When a feeding regime is changed and a cow is given increased food, there is not an automatic increase in milk production. When a cow calves, it loses condition and it loses more while it is looking after its calf. A skinny cow first adds condition with increased food and a cow in better condition gives an increased milk production. I set out below my findings as to factors that may affect milk production.
Mr Angelino advised Mr and Mrs Reid about the pasture. As cows use only 70 to 80% of pasture on the ground due to dirt and spoilage, he worked on the basis that they could be assured of 16 tons of pasture on the irrigated land and 8 tons from the dry land. Allowing for deaths due to calving, he worked on the basis that there were 500 cows. He planned on their each consuming an additional 500 to 600 kg of food before increasing their milk production.
Nikima and Mr and Mrs Reid agreed that the Property could be further developed. They felt the need to grow as an enterprise and Mr Reid did not want to stagnate. As a result, he approached irrigation developers who drew up plans to develop the land with irrigation. The irrigation plan required the removal of the existing pivot to a new location and the installation of a new pivot. A further 98 acres of land could be irrigated in this way. Part of that plan required the development of a new dairy in order to milk the increased number of cows that the farm would be able to hold. The new dairy was a 40 unit rotary dairy. New roadways and laneways had to be built to cater for the increased size of the herd. Three phase power was connected to supply both the dairy and the additional pivot.
Construction of the new dairy began in January 1997 and was to be completed in June of that year. The new pivot operated briefly in September 1997 but required replacement of a controller box. It took them until December 1997 to obtain the replacement. Although the new pivot was then operational, all the fencing and watering points had to be replaced as they had been removed in order to level the land before the installation of that pivot. The fences and watering points were subsequently installed and the pasture re-sown. This enabled Mr and Mrs Reid to continue to increase cow numbers.
Once everything was in place, the plan was to produce 8,500 litres of milk from each cow in each year. The addition of a further 98 acres of irrigated land meant that the property could handle almost double the number of cows. A cow eats approximately four tons of grass. If the correct grass species is sown and there is good paddock management, the result is superior grass production and greater milk production. They had begun to achieve the growth rate that they sought. Mr and Mrs Reid planned to have 550 cows on the Property. They planned a careful rotation of those cows through the irrigated pasture so enabling the pasture to have a short recovery period before being grazed again.
In early 1997, Nikima negotiated with milk processors to ensure maximum returns for the Property and then in May 1997 selected Murray Goulburn. Nikima gave notice to Dairy Vale that it would not supply it from 30 June 1997. Mr and Mrs Reid played no part in that decision as it was Nikima’s to make as the owner of the Property.
The “condition” of a cow refers to the level of fat covering on a cow. It may be measured according to several systems. Under the system preferred by Mr Reid, the cows had a fat covering of 3½ when he began farming the Property. He prefers a score of 5. Cows will go to a score of 4½ or 5 when they have a very good lactation. Cows have to be in the right condition to produce milk at the rate planned by Mr and Mrs Reid.
Mr John Patrick Drinan is a consultant offering consulting services to the agricultural industry and a beef producer as well as a member of the DAA. He has worked on a dairy farm and has held various academic positions concerned with environmental management and animal production as well as research and academic management positions. On the basis of his evidence, I find that milk production can be affected by a variety of factors including feed supply, disease, climate and the personality of the handler. They can also be affected by genetic factors and so the breed of the cows is relevant also. As a general rule, more feed means more milk if other matters are appropriate. If it carries fewer than its capacity, the milk production per cow does not increase as a result. Each of ten cows will produce the same as each of 100 cows if the carrying capacity of the piece of land is 250 cows. If that same land carried 1,000 cows, it could be expected that there would be a detrimental effect to the milk production.
Bovine Johne’s Disease
On the basis of Mr Drinan’s evidence, I find that Johne’s Disease is a wasting disease that affects a wide range of animals. It is caused by bacteria that live mainly in animal intestines but that may live in the outside environment for several months. The strain that affects cows is Bovine Johne’s Disease. In the main, it causes the thickening of the intestinal wall. That in turn blocks the normal absorption of food. Although the cow keeps eating, it wastes away. Diarrhoea and bottle jaw are other clinical signs of the disease. On the basis of the evidence of both Mr Drinan and Mr Angelino, I find that Bovine Johne’s Disease does not affect milk production until the cow shows clinical signs of the disease. That may take years or even a cow’s whole lifetime but, in the meantime, those cows can spread the bacteria in their faeces.
The consequences of Bovine Johne’s Disease for Mr and Mrs Reid
Mr and Mrs Reid had undertaken the work to achieve their plans before the consequences of Bovine Johne’s Disease were felt. Some of that work had involved Mr and Mrs Reid’s spending some of their own savings to re-sow paddocks that Nikima did not want to fund. Part of the plan was to purchase 1,000 tons of grain. They purchased only 850 tons and did not purchase more when they realised that they would not reach their target of 8,500 litres of milk from each cow.
In about August 1997, Mr and Mrs Reid discovered that some of the stock that they had purchased had been purchased from herds with Bovine Johne’s Disease. Earlier, in January 1996, they had purchased approximately 70 cows from farmers located in the Adelaide Hills. At the time, they had been conscious of Bovine Johne’s Disease and had been assured that they came from herds with no known disease. In June or July 1997 Mr Reid was inspecting young heifers with colleagues in the industry. One of them told him not to purchase certain heifers as they came from a herd with known Bovine Johne’s Disease. At the time, Mr Reid knew that the heifers were progeny of some of the cows that he had purchased in January 1996.
On his return to Mount Gambier, Mr Reid contacted the Department of Primary Industries and Resources, South Australia (“PIRSA”). He felt that he was given conflicting advice but he was clear that he had to sell any young stock that were the progeny of the cattle he had purchased. In December 1997, Mr Reid sold 13 heifers to the abattoirs. They were heifers that were at high risk of contracting Bovine Johne’s Disease because they were from cows at high risk of contracting the disease. They could not afford to sell the rest of the infected cattle at that time as to do so would have significantly reduced milk production during the 1997/98 financial year. At that time, Mr and Mrs Reid had 300 cattle and the infected cattle represented 20% of the herd. At that time, none of the cattle showed any signs of infection with Bovine Johne’s Disease and were in full milk production. The cows never showed any sign of the disease.
Early in the 1998/99 financial year, Mr and Mrs Reid had to remove 200 young stock from their contract rearing facility. They had no choice but to take them back to the Property as the contract rearer had heard that they had Bovine Johne’s Disease in their herd. He had dairy cows and people were questioning him about his having Mr and Mrs Reid’s stock on his property. The return of the 200 stock led to a severe pasture shortage on the Property as it was not yet ready to cope with the increased numbers of cattle. There was a consequent loss of pasture available to the milking cows. On the basis of the evidence of both Mr Reid and Mr Angelino, I find that the reduction in pasture available to the milkers and the reduction of supplemental feeding led to a consequent loss in milk production. The calves did not reduce the grass available as they were fed on their mothers’ milk and did not eat grass until they were weaned after Christmas of 1998. After Christmas, they required 1 to 1¼ tons of feed but the yearlings required 2½ to 3 tons. Therefore, the 200 young stock took over 300 tons of pasture from the milkers. This had a financial impact on both Nikima and Mr and Mrs Reid.
They culled their herd in early 1999 by selling the 61 cows at risk of disease but received only the value of their meat. Mr and Mrs Reid experienced difficulty in persuading freight companies to move the cattle they sold. The freight companies were concerned that Bovine Johne’s Disease would be transferred by means of faeces picked up on their vehicles’ tyres. Contractors refused to go onto the Property for the same reason. Mr and Mrs Reid could continue to sell their cows but only to abattoirs. They felt that they were treated like lepers because of the presence of Bovine Johne’s Disease in their herd. The presence of the disease was, they believed, registered on the title to the Property. Although they approached a number of people, they could not get anybody to take their stock on agistment. They could not get their effluent spread as they planned as the contractor would not work for them lest he lose work for other farmers who did not have Bovine Johne’s Disease in their herds.
Milk production
The milk production on the Property in the relevant years were:
| Financial year | Production (litres) | Milking cows | Litres per cow production (litres) |
| 1995/96 | 1,181,110 | 170 | 6,947.71 |
| 1996/97 | 1,523,799 | 220 | 6,926.36 |
| 1997/98 | 2,043,200 | 300 | 6,810.67 |
| 1998/99 | 2,903,550 | 440 | 6,598.98 |
| 1999/00 | 2,916,160 | 540 | 5,400.30 |
Effect of Bovine Johne’s Disease on milk production
Milk production peaks in November of each year. After that peak, the cows go into a steady decline. Mr and Mrs Reid believe that, had they not had Bovine Johne’s Disease in their herd and had they not had to take 200 stock back to the Property from agistment as a consequence, they would have achieved their target of 8,500 litres each cow each year. That would have meant that, when their peak production occurred in November each year, the cows had to each produce 36 to 37 litres of milk and they were achieving that. After that, their production would have steadily declined. Mr and Mrs Reid’s advised their bank manager and the DAA that their targets for milk production were 546,450 litres from 500 cows each producing 6,900 litres in 1998/99 and 2,028,510 litres from 600 cows each producing 6,950 litres in 1999/2000. They were conservative in their estimations to their bank manager and to DAA but had planned on achieving 8,500 litres each year.
Subsequent events
Mr and Mrs Reid were deeply hurt by the turn of events. They saw their dreams and plans slipping away. Mrs Reid obtained employment off the farm but then they decided to leave the farm. In August 2000, they gave notice of their intentions to Nikima. They sold their herd to Nikima for the value of their meat and their young stock to the abattoirs. On 23 March, 2000, Mr and Mrs Reid left the property. After a break in Queensland, they have resumed dairy farming on another farm.
Standard payment right
Mr and Mrs Reid were granted a standard payment right amounting to $230,568. That was as a result of a decision dated 6 March 2001 and reconsidering an earlier decision dated 11 December 2001.
CONSIDERATION
Significant event or significant crisis: identification of the event or crisis
According to s. 8(3) of the Act, Mr and Mrs Reid are only to be taken to have been affected by a significant event or crisis if they come within each of its paragraphs. There is no question that they meet those in s. 8(3)(a). As parties to a share farming agreement, I am satisfied that, as share farmers, Mr and Mrs Reid held an eligible interest in the dairy farm enterprise conducted on the Property at all relevant times. There was also an event or crisis that came within s. 8(3)(b). Five events or crises are specified. I am satisfied that the event or crisis in this case is Bovine Johne’s Disease that had a detrimental effect on the production and delivery of milk during 1998/99. I am not satisfied that the development of the irrigation system or the consequent disruption of paddocks or watering points was a significant event or crisis. They were part of the normal development of a farming property. DAA has conceded that if, s. 8(3)(c) is satisfied, the reduction is attributable to the event or crisis in s. 8(3)(b). I am satisfied that this is an appropriate concession to make on the facts of the case.
Normal year volume of milk
Section 8(3)(c) raises two matters for consideration. The first is to ascertain Mr and Mrs Reid’s “normal year volume of milk” and to do so by reference to s. 8(7). Having ascertained that, the second matter raised by s. 8(3)(c) is to ascertain the volume of milk delivered during the base year i.e. 1998/99. The two figures are then to be compared and a decision made as to whether there has been a “significant reduction” in the volume of milk delivered by the dairy farm enterprise in the base year when compared with the enterprise’s normal year volume of milk.
Taking first the enterprise’s normal year volume of milk, s. 8(7) provides two ways in which it may be assessed. Section 8(7)(a) is based on the average of the total number of market milk and manufacturing milk delivered in the three financial years immediately preceding 1998/99. If that approach were adopted, the enterprise’s normal year volume of milk would be 1,582,703 litres. It is agreed between the parties that this is not an appropriate way in which to make the assessment for it does not fairly represent a normal year’s delivery for the enterprise. The reason for that lies in the significant increase in the size of Mr and Mrs Reid’s herd from 170 cows in 1995/96 to 220 in 1996/97 and to 300 in 1997/98 before reaching 440 in the base year of 1998/99.
The second way, is set out in s. 8(7)(b), presupposes that DAA does not consider that the first way fairly represents an enterprise’s normal year delivery of milk. That means that I must consider what is meant by what “fairly represents a normal year’s delivery for the enterprise”. On behalf of Mr and Mrs Reid, Mr Ower of counsel submitted that the figure fairly representing a normal year’s delivery for the enterprise was somewhere between 7,245 and 8,199 litres per cow and so, for 501 cows, somewhere between 3,629,745 and 4,107,699 litres. Mr Pizer, representing DAA, submitted that the enterprise’s production history showed a remarkably consistent average per cow of 6,895 litres over the three years prior to 1998/99. That is the regular, usual or standard production per cow that had been achieved for the enterprise. The greater figure contended for by Mr Ower was never achieved.
Dr Drinan gave evidence both in his statement and orally setting out the DAA’s reasons for considering why the three year average yield from Mr and Mrs Reid’s cows fairly represents a normal year’s delivery for the enterprise. He gave particular reasons supporting that approach in relation to Mr and Mrs Reid. Among them were that: the three year period was unaffected by Johne’s Disease; is based on the known past performance of the enterprise; and is consistent with Mr and Mrs Reid’s own estimates of 6,900 litres for the base year (letter dated 4 April 2002, T documents at 164). In addition, the average production from each cow would have had to increase by over 20% to achieve their hoped for production of somewhere between 7,245 and 8,199 litres per cow. At the same time, the property was expected to carry an increase in the size of the herd from 300 to 501 cows. In Dr Drinan’s experience, this would have placed great stress on the carrying capacity of the Property and would have more likely led to a decrease in production for each cow rather than an increase. Dr Drinan concluded that these reasons meant that the DAA’s usual practice of determining a normal year’s delivery by reference to average cow production should not be abandoned.
I have some reservations about accepting Dr Drinan’s evidence on these matters. It hints at being an elaboration of the DAA’s reasons for decision rather than evidence of facts. There are exceptions to that and I refer, for example, to Dr Drinan’s evidence regarding likely increase in milk production given an increase in herd size. Dr Drinan’s evidence also hints at not being addressed to facts but to the very issue that I must determine; that is, what “fairly represents a normal year’s delivery for the enterprise”. That is a question that requires me first to consider what is meant by the words themselves. Whether the interpretation of the words is a question of law may be a matter of debate (see, for example, the difference of opinion in Grocery Holdings Pty Ltd v Chief Executive Officer of Customs [2004] FCAFC 85 at [8] per Whitlam and Marshall JJ and at [10] per Finkelstein J). Whether it is or is not, I still have to apply the evidence against the words in the Act to determine what fairly represents a normal year’s delivery of milk for the enterprise. That, it seems to me, is not a question on which I may take account of evidence and is to be distinguished from a situation in which I must have regard to policy or where I must exercise a discretion (see [73] below). As Glass JA said in R v Palmer [1981] 1 NSWLR 209; 1 A Crim 458 (CCA):
“… The true rule, in my opinion, is that no evidence can be received upon any question, the answer to which involves the application of a legal standard. It is not possible, for example, to tender evidence that a defendant was negligent, that a deceased lacked testamentary capacity or that the accused was provoked. …” (at 214; 464)
Beginning with the word “normal”, its meanings as an adjective include:
“… 3 Constituting or conforming to a type or standard; regular, usual, typical; ordinary, conventional. …” (Shorter Oxford English Dictionary, 5th edition, 2002)
“1. conforming to the standard or the common type; regular, usual, natural, or not abnormal: the normal procedure. …” (Macquarie Dictionary, 3rd edition, 1997)
The second word to consider is “delivery”. In so far as they are relevant, its meanings include “… provision, supply” (SOED) or “…9. Comm. a shipment of goods from the seller to the buyer. 10. Law the transfer of possession from one person to another: the delivery of a deed….” (Macquarie). Given their ordinary meanings, they suggest that “a normal year’s delivery” refers to the provision or supply, and so delivery, of milk that occurs in a typical or ordinary, and so normal, year. They do not suggest that they are referring to what would have happened if events had been other than what they were.
What of the words “fairly represents”? This expression was considered by the New South Wales Court of Appeal in Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd and Another (1991) 22 NSWLR 389. The expression was used in s. 54(1) of the Insurance Contracts Act 1984 providing that, in specified circumstances, an insurer’s liability is reduced by the amount that fairly represents the extent to which the insurer’s interests were prejudiced by an act of the insured occurring after the contract of insurance was entered. The owner of a mobile crane had insured it when it was on a construction site. It was not registered to be driven on public roads but the owner later registered it. The owner did not notify the insurer of the crane’s registration despite its being a term of the insurance policy that the insurer be notified of any change materially varying any of the facts or circumstances existing at the commencement of the policy. In an action claiming payment under the insurance policy after the crane had overturned, Gyles J in the Supreme Court of New South Wales found that, had the insurer been notified of the registration, it would have cancelled the policy but offered alternative cover at an increased premium.
On appeal to the Court of Appeal, Kirby P, as he then was, considered that s. 54(1) assessment of “the amount that fairly represents” the extent of prejudice to an insurer’s interests required a subjective, rather than an objective, assessment. That is to say, it required an assessment of what the particular insurer would hypothetically and relevantly done had it been notified of, in that case, a material fact. It did not require the objective approach of having the court determine what was a fair adjustment by reference to all relevant circumstances. Handley JA agreed with Kirby P’s final decision and generally with his reasons but preferred to express his own reasons. His Honour did not state whether the assessment was subjective or objective but it is apparent from his reasons that he adopted a subjective approach. It is apparent from his assessment of the evidence that the assessment of what the particular insurer would hypothetically and relevantly done had it been notified of the registration was tested objectively against the evidence.
On appeal, the High Court did not expressly consider the question either but concluded that the Court “… must form an estimate of the likelihood of Commercial Union having acted in that way …”. “That way” was Commercial Union’s having “… gone off the risk of the crane’s overturning had Ferrcom notified it of the registration of the mobile crane …” (Ferrcom Pty Ltd v Commercial Union Assurance Co. of Australia Ltd (1993) 176 CLR 332 (Brennan, Deane, Dawson, Gaudron and McHugh JJ). This is consistent with the majority’s approach in the Court of Appeal.
I have spent some time on Commercial Union Assurance Company of Australia Ltd v Ferrcom Pty Ltd and Another because, in his submissions, Mr Ower drew a link between the notion of fair representation and lost opportunity in the law of contract. He further submitted that the fact that it may be difficult to estimate a loss in monetary terms when there has been a breach of a contract to provide a commercial advantage or opportunity does not defeat an award of damages. Applying that principle, the difficulties in estimating the exact production per cow should not prevent the calculation of what would fairly represent the production that would have occurred but for the event or crisis.
Mr Ower referred to three cases to support his submission: Fink v Fink (1946) 74 CLR 127, The Commonwealth of Australia v Amann Aviation Pty Limited (1991) 174 CLR 64 and Sellars v Adelaide Petroleum NL (1994) 179 CLR 332. There is no question that these cases establish that, in general terms, “… a person who has sustained loss by reason of a breach of contract is entitled to be placed in the same position, so far as money can do it, as if the contract had been performed. …” (The Commonwealth of Australia v Amann Aviation Pty Limited, headnote at 65). It is also clear that the loss of an opportunity to obtain a commercial benefit or advantage is loss or damage within the meaning of s. 82(1) of the Trade Practices Act 1974 (Sellars v Adelaide Petroleum NL at 349 and 364) and generally under the law of contract (Fink v Fink at 135 and 143). When each case is examined, it is also clear that there must indeed have been an opportunity that was lost and, if there was, that the breach of contract was the cause of the lost opportunity. Mrs Fink, for example, could not establish that the contract gave her the opportunity to be reconciled with her husband and to be supported and maintained by him for the rest of her life. What all the cases establish is that the terms of the contract must be carefully scrutinised to establish the opportunity, if any, that is lost.
Applying those principles to s. 8(7)(b), its terms must be carefully scrutinised to see what opportunity is referred to and so what opportunity may be lost. When that is done in isolation from the remainder of the SDA Scheme, I have formed the view that there is no reference, express or implicit, to a lost opportunity. In referring to what “… fairly represents a normal year’s delivery for the enterprise …”, the provision is focusing on the particular enterprise concerned and what it delivered in a normal year. It is not focusing on a hypothetical enterprise in a hypothetical set of circumstances. On its face, it is not referring to what that particular enterprise could have delivered had all its plans been implemented and had it reaped the benefits it expected to reap from their implementation. It is focusing on what volume could fairly be said to represent the volume of milk actually delivered by that particular enterprise in a normal year. Clearly some regard must be paid to what would have happened had circumstances been different. If that were not the case, there would be no need to be making the assessment. In focusing on the volume of milk actually delivered, the assessment must have a firm foundation in what has happened in the past while having regard to current circumstances that have had an impact on the amount delivered. The assessment, however, cannot be entirely based on what could have been delivered had circumstances been different.
Does the context in which s. 8(3)(b) appears in the SDA Scheme and in the package generally suggest some other meaning? The package generally was developed to assist dairy farmers with the consequences of de-regulation. Each element of the package centres on a dairy farm enterprise. That dairy farm enterprise is a business in Australia that delivers market and/or manufacturing milk at the relevant time. It is not a business that may deliver milk in the future or that has at some time before the relevant dates specified in the legislation. Taking an entitlement to a standard payment right as an example, it is based on an entity’s holding an eligible interest in a dairy farm enterprise at the relevant time and delivering milk during the base year (DSAP Scheme, s. 9). It is clear from its terms that the SDA Scheme was intended to provide additional assistance to dairy farmers. The Explanatory Memorandum accompanying the Dairy Produce Legislation Amendment (Supplementary Assistance) Bill 2001 makes it clear that the additional assistance was provided as some individuals and some regions dependent on the dairy industry were experiencing greater difficulties in adjusting to de-regulation than had been anticipated.
Basic market milk payments and additional market milk payments are based on a dairy farm enterprise’s market milk deliveries in 1998/99 (SDA Scheme, s. 6). Regard is had to the actual delivery of milk. Discretionary payment rights are available to those affected by significant events or crises or by significant anomalous circumstances. Lost opportunities may well result from circumstances that are significant events or crises or by significant anomalous circumstances. If they are, regard is had to the loss in milk production that results from those lost opportunities in the context of ss. 8(3)(c) and (d) of the SDA Scheme. That is when the reduction in milk delivery attributable to the significant event or crisis is compared with the enterprise’s normal year volume of milk. To have regard to reduction in milk deliveries caused by lost opportunities in assessing the enterprise’s normal year volume of milk and then as significant events or crises or significant anomalous circumstances in assessing the loss of milk deliveries in the base year would erode the foundation of the comparison.
It could be said that Mr and Mrs Reid never had a normal year. They took over the Property in 1995 and undertook major work in the following years to build up the herd and to develop the area of irrigated land. There was never a period when it could be said that they went from month to month, let alone year to year, where the size of the herd remained stable, the fencing and watering troughs were fully in place and the land irrigated according to plan. Normality for them was a state of flux. It is arguable, then, that what fairly represents a normal year’s delivery for the business conducted by Mr and Mrs Reid was the average of what that business delivered over the years when the business was not affected by the significant event or crisis.
They discovered the possibility of infection by Bovine Johne’s Disease in or about August 1997. That was the significant event or crisis. It had consequences including the need to take back 200 heifers from the contract rearer. That led to a consequent reduction in pasture for the cows in milk production and consequent reduction in cash flow leading to a reduction in grain available for the cows in milk production. I am satisfied that the enterprise began to suffer an adverse effect from the significant event or crisis in the 1997/98 year. That would mean that regard could be had to the years before 1997/98 as they were not affected by it. They were also not positively affected by the plans that Mr and Mrs Reid had to improve the feeding of the stock but changes in feeding and development of pasture were part of the ongoing management of the enterprise. The changes were planned but had not yet been effected and were not yet part of what was normal for the enterprise.
In the two years 1995/96 and 1996/97, Mr and Mrs Reid had 170 and 220 cows respectively each producing 6,947.71 and 6,926.36 litres respectively in those years. I find that an average of those two figures fairly represents what Mr and Mrs Reid would deliver from each cow in a normal year. That means that the enterprise’s normal volume of milk delivered from each cow would be 6,937.035 litres each year. This is a figure that exceeds their budgeted production for the 1998/99 year given to DAA in a letter dated 4 April, 2002. Their budgeted projection was 6,900 litres. I accept that Mr Reid regarded that figure as a conservative estimate of what his milk production would be but I do not consider that what he hoped to produce influences my finding of what he normally delivered from each cow each year. It is agreed that they would have milked 501 cows in 1998/99 had it not been for Bovine Johne’s Disease. Therefore, the figure achieved by multiplying 6,937.035 by 501 is what I consider fairly represents the enterprise’s normal year volume of milk i.e. 3,475,454.535 litres.
Significant event or significant crisis: was there a significant reduction in the volume of milk delivered?
The difference between the enterprise’s normal year volume of milk and that delivered in the base year (2,903,550 litres) is 571,904.535 litres. That represents a 16.45% reduction in the volume of milk delivered by the enterprise during the base year compared with its normal year volume of milk. Does that amount to a significant reduction within the meaning of s. 8(3)(c)? It does not represent less than 70% of the enterprise’s normal year volume of milk within the meaning of s. 8(4). Had it done, it would have been significant but that section does not limit what may be regarded as significant.
DAA regards a 20% reduction as significant but not a lesser reduction in percentage terms and this is set out in B4 of its Business Guidelines. B4A of the Business Guidelines states:
“Where an enterprise has suffered a reduction in the volume of milk delivered and that reduction is less than 20%, the composition of the milk delivered should also be assessed. The case will then be referred to the Board.” (Exhibit 3, “JPD-2”)
In his statement, Dr Drinan set out the DAA’s reasons for adopting this policy:
“25 The DAA adopted Guideline B4 because it accepted that the effect of an event or crisis upon an enterprise might be considered significant, even if the reduction in the volume of milk delivered was less than 30%. However, agricultural production is notoriously variable. The DAA’s view is that fluctuations in production of up to 20% are not uncommon, being caused by variations in factors such as weather, pasture growth, disease, handling and other matters, and that it would be difficult to determine that an event or crisis had affected the Enterprise’s production unless the production had been reduced by an amount in excess of 20%. The general lower limit of 20% was adopted on that basis.
26Also, the DAA took the view that whether or not there had been a reduction in the volume of milk delivered compared to the Normal Year Volume of Milk should be determined by reference to the percentage reduction in the volume of milk delivered, rather than simply the size of the reduction. That is consistent with the test set out in section 8(4) of the SDA Scheme. It also eliminates the possibility that very large enterprises which experienced a small percentage of reduction in milk production might receive a discretionary payment right just because of the overall scale of their business.” (Exhibit 3)
I have had regard to the evidence of Dr Drinan on this matter in accordance with the principles expressed in Re Drake and Minister for Immigration and Ethnic Affairs (No. 2) (1979) 2 ALD 634 (Brennan J, President) when he said that the DAA:
“… is equally free, in point of law, to adopt such a policy in order to guide him in the exercise of the statutory discretion, provided the policy is consistent with the statute.” (page 640)
The reason for a body such as the DAA’s adopting a policy in relation to its decision-making in relation to applications were explained by Brennan J:
“… It can serve to focus attention on the purpose which the exercise of the discretion is calculated to achieve, and thereby to assist the Minister and others to see more clearly, in each case, the desirability of exercising the power in one way or another. Decision-making is facilitated by the guidance given by an adopted policy, and the integrity of decision-making in particular cases is the better assured if decisions can be tested against such a policy. By diminishing the importance of individual predilection, an adopted policy can diminish the inconsistencies which might otherwise appear in a series of decisions, and enhance the sense of satisfaction with the fairness and continuity of the administrative process.” (page 640)
While acknowledging the importance of policy, Smithers J in Drake v Minister for Immigration and Ethnic Affairs (1979) 2 ALD 60 (Bowen CJ, Smithers and Deane JJ) said:
“ In the performance of the Tribunal’s function it is essential that a policy adopted by an administrator should be under review to the same extent as his evaluation of relevant matters and his general process of reasoning, not for the purpose of deciding whether it was reasonable for the administrator to make the decision he did, but for the purpose of deciding whether, by the objective standard of good government it was the right decision to make.” (page 80)
The views of Smithers J were consistent with those of Bowen CJ and Deane J (at page 70) and developed by Brennan J in Re Drake (No. 2) at 640-641.
In view of these principles, the DAA’s guidelines are matters to which I have regard for they provide a normative effect in the administration of the scheme. For all that, they do not take away the need to consider what is a “significant reduction” as the expression is used in s. 8(3)(c) of the SDA Scheme. The word “significant” has been considered in a number of cases in a variety of contexts. They
have been summarised by Sackville J in Tasmanian Conservation Trust Inc v Minister for Resources (1995) 127 ALR 580 at 603:
“(123) It is clear from these cases that a consistent meaning has been given to the word ‘significant’ in cases concerned with a broad range of subjects. We propose to do the same, and accord the word ‘significantly’ in para 10(6)(b) the meaning ‘not unimportantly or trivially’ or, to put it in positive terms, ‘importantly or notably’.”
The word was considered by the Court of Appeal of the Supreme Court of Queensland (Pincus, Thomas JJA and White J) in a more recent case of Emaaas Pty Ltd v Mobil Oil Australia Ltd [2000] QCA 513. Thomas JA said that:
“[25] The word ‘significant’ is not a synonym for ‘substantial’, although it is often used in that way. It is richer in meaning than the quantity-oriented ‘substantial’. The Oxford English Dictionary Second Edition definition of the word includes the following entries:
‘1. Full of meaning or import; highly expressive or suggestive ...
2. Having or conveying a meaning; signifying something ...
3. Expressive or indicative of something ...’
The word has been considered in a variety of legal contexts, both in statutes and other legal instruments, and while I will not attempt a review of authorities it is useful to note that on a number of occasions the terms ‘important’ or ‘of consequence’ have been adopted as useful synonyms. The comments of an American court adopted by Young J in Coombs v Bahama Palm Trading Pty Ltd [[1991] Aust Contract Reports 90-002 at 89,123] suitably illustrate the flexibility of the word:
‘While ... determination of the meaning of “significant” is a question of law, one must add immediately that to make this determination on the basis of the dictionary would be impossible. Although all words may be “chameleons, which reflect the colour of their environment”, “significant” has that quality more than most. It covers a spectrum ranging from “not trivial” through “appreciable” to “important” and even “momentous”.’
[26] It is a word then which takes its meaning very much from the context in which it is used. This may be illustrated by testing the application of a similar formula with respect to a concert pianist who has booked a hall for a further recital next year unless the streets giving access to or egress from the hall are permanently closed or significantly altered. The principal criterion to which ‘significant’ might be thought to relate in such a situation would surely be customer-related or economic. The effect of the access upon the number of potential bookings from impedance of customers would be the primary consideration in determining whether the alteration was ‘significant’. Thus an alteration to streets providing access such as to produce a substantial adverse effect on ticket sales might be thought to amount to a relevantly ‘significant’ alteration. As the clause deals with a right of an occupant, it must mean significantly adversely altered from the occupant's point of view.
[27] By contrast if a fire brigade is the lessee and its right of termination depends upon a similar formula, the economic context would disappear in favour of the sheer importance of quick and easy access for the brigade vehicles which perform the brigade's functions. In that context the size and speed of access would be thought to determine whether the alteration was significant.”
Adopting these meanings, s. 8(3)(c) requires me to consider whether there was an important or notable reduction in the enterprise in which Mr and Mrs Reid held an interest. It is not assessed in the context of a typical or average dairy farm enterprise but of that particular enterprise engaged in the production and delivery of milk. A 17.6% reduction in the volume of milk delivered in the base year may be seen as representing a significant reduction when compared with the figure that I have found to be the normal year volume of milk for Mr and Mrs Reid’s enterprise. At the same time, I must consider the matter in the context of the particular enterprise engaged in the production and delivery of milk. In that regard, I have Dr Drinan’s evidence that a fluctuation in the order of 20% in the production in a year is not uncommon given the variation in seasonal factors and handling as well as the incident of disease. I have also had regard to the fact that it is not a fluctuation that accords with Mr and Mrs Reid’s experience for the years from 1995/96 to 1998/99 (see [46] above). Even though it does not accord with their experience, I consider that it would be inappropriate to regard a reduction in milk production of 17.6% as a significant reduction when the evidence is that a 20% variation is not uncommon and others have been assessed on the basis of the Business Guidelines. While I am particularly mindful that Mr and Mrs Reid underwent an extremely heartbreaking time of their lives when they discovered Bovine Johne’s Disease, consistency in the application of s. 8(3)(c) is important. That is particularly so when there have been numerous instances of difficulties flowing from the deregulation of the dairy industry even though only some of them have come to the attention of the Tribunal. Business Guideline B4A does cater for circumstances where the variation is less than 20%. I do not have sufficient evidence, if there be any, on which to make a finding that there was any variation in the composition of the milk as that guideline requires before the matter may be further considered.
In view of this conclusion, I am not satisfied that Mr and Mrs Reid are entitled to a discretionary payment right. It follows that I must affirm the DAA’s decisions.
I certify that the seventy five preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie,
Signed: ..sgd. Nathaniel Wills…...........................
Nathaniel Wills Associate
Date of Hearing 27 and 28 November 2003
and 26 May 2004
Date of Decision 18 March 2005
Counsel for the Applicant Mr S. Ower
Solicitor for the Applicant Mellor Olsson
Counsel for the Respondent Mr J. Pizer
Solicitor for the Respondent Mallesons Stephen Jaques
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