Repatriation Commission v Greenwood

[1990] FCA 697

CATCHWORDS

ADMINISTRATIVE LAW - appeal from the Administrative Appeals Trlbunal - veteran unable

to work due to war-caused disability - veteran received income from company and interest from partnership - s.24(l)(c) of the Veterans' 1986 (Cth) - whether income in the

nature of salary, wages or earnings - whether veteran would have continued remunerative work after age 65 - whether Tribunal erred in deriving date at which veteran entitled to special rate of pension.

. .

1975 (Cth) - s.44

1986 (Cth) - s.24

Sydney

No. G237 of 1990

Davies J.
30 November 1990

lN THE PEDERAL COURT OF AUSTRALIA	) )
YEW SOUTH	) No. G237 of 1990
)
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BETWEEN

Applicant

m: -

Respondent

Coram:	Davics J.
Date:	30 November 1990
Place:	Sydney

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P: 

The application be dismissed with costs.

PIQTE: Settlement and entry of orders IS dealt wlth in Order 36

of the Federal Court Rules.

)
)

PEW SOUTH	)	No	G237 of 1990
)
-	)

On from the Veterans' Appeals Drvision of

the Administrative Appeals Tribunal

BETWEEN T H E A T R I A T I O N COM-

Applicant

-

Respondent

Coram:	Davies 1.
Date:	30 November 1990
Place:	Sydney

This is an appeal from a decision of the Administrative Appeals Tribunal. The Trrbunal

upheld a claim by the respondent, Ronald Greenwood, that he was entitled to a pension at the
special rate provided under 5.24 of the	1986 (Cth)("the Act") and

ordered that such pension be granted as and from 1 July 1987. The appeal is brought under 5.44

. .

of t - e h 1975 (Cth) and IS thereby limited to questions of law.

Section 24 of the Act now provides, inter alia:-

"24. (1) This aection applies to a veteran, other than a veteran to whom section

25 applies, if -

(a)	either:
(i) the degree of incapacity of the veteran from war- caused injury or war-caused disease, or both, 1s determined under section 21A to be at least 70%

or has been so determined by a determ~nation	that
is in force; or

(ii)         the veteran is, because he or she has suffered or is suffering from pulmonary tuberculosis, receiving or entitled to receive a pension at the general rate;

(b)	the veteran is totally and permanently incapacitated, that is to say, the veteran's incapacity from war-caused injury or war-caused disease, or both, is of such a nature as, of itself alone, to render the veteran incapable of undertaking remunerative work for periods aggregating more than 8 hours per week and
(c)	the veteran is, by reason of incapac~ty, from that war-caused injury or war-caused disease, or both, alone, prevented from continuing to undertake remunerative work that the veteran was undertaking and is, by reason thereof, suffering a loss of salary or wages, or of earnings on his or her own account, that the veteran would not be suffering if the veteran were free of that incapacity.

(2)          For the purpose of paragraph (l)(c)

(a)

a veteran who is incapacitated from war-caused injury or war-caused disease, or both, shall not be taken to be suffering a loss of salary or wages, or of earnings on his or her own account, by reason of that incapacity if -

(i)	the veteran has ceased to engage in remunerative work for reasons other than his or her incapacity from that war-caused injury or war-caused disease, or both; or
(ii)	the veteran is incapacitated, or prevented, from engaging in

remunerative work for some other reason; and

(b) where a veteran, not being a veteran who has attained the age of 65 years. who h a not been engaged in remunerative work satisfies the Commission that he or ahe has been genuinely seeking to engage in remunerative work, that he or she would, but for that incapacity, be continuing so to seek to engage in remunerative work and that that incapacity is the substantial cause of his or her inability to ob ta~n remunerative work in which to engage, the veteran shall be treated as having been prevented by reason of that incapacity from continuing to undertake remunerative work that the veteran was undertaking.'

Amendments to the section which have been made from time to time do not affect the issues in

this appeal.

Mr Greenwood, who was born on 27 November 1920, worked for many years in the

production of furniture. He also had an interest rn buildlug. The homes in whlch he lived from

1946 to 1968 at Canterbury, Neutral Bay, Cronulla and Northbrrdge were built by himself using

sub-contractors. In 1969, Mr Greenwood moved to Gosford and he, his son Bill, who was a
carpenter, and his wife's uncle, who was a builder, established a bullding company named Wh~te
Built Homes Pty Limited. By 1976, due to medrcal problems, Mr Greenwood found that he could

not carry out the work required. He retired from the company and transferred his shares to his

son.

On 11 March 1977, Mr Greenwood formed R.& B. Greenwood Pty Limited with the

intention of building two or three homes a year to provide some income. The company obtained

a builders' licence. However, Mr Greenwood's condition continued to deteriorate. By 1980, Mr
Greenwood's health was poor. Mr Greenwood gave this evidence:-

"What was happening to your health in 19801---It was disastrous, I was getting worse and worse. I could not get out of the shower hardly. I was attendrng Royal North Shore Hospital - test after test for 12 months - and the estate, I did not have to go on to the estate at all, it just carried on."

In 1978, a partnership had been established between Whrte Built Homes Pty Limited, J.H.

Greenwood Holdings Pty Limited, a company owned by Mr Greenwood's eldest son, who was

a builder, and R. & B. Greenwood Pty Lrmited. The partnershrp engaged upon a subdivision which was commenced in 1978 and concluded in 1981. Prom the subdivision, R. & B. Greenwood Pty Limited took five blocks of land whlch were thereafter sold off at the rate of one

per year. The income of the company, other than from investments, was derived from this

source, or substantially so.

In 1986, the builders' licence of R. & B Greenwood Pty Ltd was surrendered as Mr

Greenwood was not well enough to make use of ~ t . Mr Greenwood said that, from 1980 onwards,

he was unable to work physically because of h ~ s chest and lung condition Mr Greenwood said

that. if he had been well, he would have carried on building and that he had tlre finance to

to enable him to do so.

The Tribunal made the following findings:.

"According to a statement by the veteran (part of Exhibit B), he ceased active work in 1980 due to h a chest condition, but h ~ s company R. & B. Greenwood Pty Ltd continued selling land from the subdivision until about 1984. It seems reasonably clear that the veteran's active work as a builder stopped in 1980 and his business involvement thereafter was either in clerical work assoelated with the company R. & B. Greenwood Pty Ltd. or in preparing plans for a jolnt venture with a friend Keith Bromfield for a commercial development, which did not proceed because of rejection by the Shire Council. Income tax returns for the financial years 1985 and 1986 lodged on behalf of R. & B. Greenwood Pty Ltd show deductions in the profit and loss accounts for salaries and wages and for various businem activities, which may well be excessive as against the Commissioner of Taxation. Whatever may be the position, we are satisfied that the veteran has not been able for some considerable time to undertake remunerative work for periods aggregating more than eight hours per week. We are further satisfied from the evidence, especially the evidence of the veteran and of Dr M.G. Baz in her medical report (Exhibit A), that it is by reason of his war- caused disease of emphysema alone that he has been prevented form continuing to undertake remunerative work and so remains.

Dr Baz's uncontradicted opinion is that the veteran's incapacity for remunerative employment goes back to October 1985.

In the veteran's Income Tax Returns for the financial year ended 30 June 1986,

the veteran declares himself to be in receipt of earnings from the family company R. & B. Greenwood Pty Ltd of $9,310. In the veteran's Income Tax Return for the financial year ended 30 June 1987, he declares himself to be in receipt of income from a partnership with his wife of $10.559. The Tribunal is not satisfied that the veteran was incapable of undertaking remunerative work by reason of his emphysema alone, prior to 30 June 1987, but is inclined to accept that the income shown in the veteran's partnership accounts, as regards himself and his wife for the year ended 30 June 1988, is simply an investment income and is not the result of undertaking remunerative work. Accordingly, the Tribunal considers it should direct the respondent Commission to grant the veteran the Special Rate pension as and from 1 July 1987."

Until the dissolution of the company, Mr Greenwood and his wife each received from

R. & B Greenwood Pty Llmrted a sum descr~bed as "salary or wages" Durlng the 1980's. the

income of R & B Greenwood Pty Lim~ted was der~ved from the sales of land I have mentioned

and from investments. In each year, the total of the assets closely approximated the liabilities representlug sums loaned by Mr Greenwood and h ~ s w ~ f e to the company. On 29 June 1986, it was resolved to wlnd up the company Mr Greenwood gave evidence that the company was wound up about September or October 1986. However, there was no taxation return for the company for the year ended 30 June 1987 and perhaps its lncome earnlng activities ended in 1986.

The investment activities cont~nued thereafter in the name of the partnership, R. & B.

Greenwood. It appears that the investments were principally, if not exclusively, investments at

interest. The value of the investments was approximately $160.000.00.

It was conceded that s 24(l)(a) of the Act was sat~sfied when, on 28 July 1986, emphysema, chronic bronchitis and bronchial asthma were accepted as attributable to war service and when, later in that year, Mr Greenwood was granted a penslon at 10090 of the general rate. It was also conceded that s.24(l)(b) was satisfied havlng regard to the evldence of Dr M G. Baz

undertake remunerative work for periods aggregating more than 8 hours per week and that that	that, by reason of his emphysema alone, Mr Greenwood was prevented from continuing to
incapacity went hack as far as 23 October 1985, the date on whlch the relevant application for
an increase in pension was lodged The Issue before the Tribunal and in this appeal thus concerns the application of s.24(l)(c).
First, it was submitted on behalf of the Commission that the Tribunal had no justification for adopting 1 July 1987 as the starting date for the pension, that that date had no foundation
and that no reasons for adopting it were stated

Certainly the reasons for the adoption of 1 July 1987 are obscure. By November 1986,

Mr Greenwood was in receipt of a penslon at the rate of 100% of the general rate. The evidence

also suggests that by then the affairs of the company had been wound up. Nothing relevant to his state of health appears to have occurred during the year of income ended 30 June 1987. But

to say that does not lead to the view that there was an error which should cause the Tribunal's decision to be set aside at the Commission's behest. It seems most l~kely, from a read~ng of the

Tribunal's reasons, that the Tribunal concluded that the partnership of R. & B. Greenwood had

or may have had relevant earnings in the year of income ended 30 June 1987. In that year of income. the partnership disclosed interest received of 522,659.00 and expenses of 51,541.00. In

the year ended 30 June 1988. the interest received was only 511,860.00 and the expenses were

5912.00. It seems that the Tribunal may have thought that, in the year ended 30 June 1987, when

the affairs of the company were wound up and when interest of 522,659.00 was received by the partnership, an element of earning may have been involved. Perhaps the finding, which was an

favour of the Commission, may have resulted not from any firm view of the proper classification

of the activities for that year, but simply from a lack of satisfaction, due to the vagueness of the evidence before the Tribunal, that the income in that year was not income in the nature of earnings. Any error in the finding was an error in the Commission's favour.

It wan next alleged that, by 1 July 1987, Mr Greenwood was 66 years of age and the

Tribunal ought not to have been satisfied that he would then have been earning income from

salary or wages but for his war-caused disabilities. Reference was made to the judgments of

. . . .

Davies, Jenkinson and Ryan JJ. in v. ,$l&hd (unreported, 21

September 1990) in which the significance of age 65 was discussed. The present case is not

similar t .-oMr Greenwood had been self-employed in the sense that, as long as he wished to keep on working, he could have done so. His evidence was that, but for his war-

caused disabilities, he would have continued with building projects. He had the finance to enable

hrm to do so. That evidence was not the subject of cross-examrnatron	On the evrdence, it was
open to the Trlbunal to make the flnding it did.

The Trlbunal did not overlook the srgnrflcance of age 65. Indeed, during the course of the hearing, Mr Greenwood was asked by the Tribunal to produce the superannuation deed for the R & B. Greenwood Pty Limrted Superannuation Fund in case it disclosed a retirement date

of age 65. This was a point raised by the members of the Tribunal and not by the Commissioner's representative. So the members of the Tribunal were alert to the point. The

deed when produced did not require retirement at age 65. The Tribunal therefore held:-

"The document does not appear to be complete in some respects. However, it does indicate that there was no requrrement or incentive given by the Trust for the veteran to cease remuneratrve work when he did. The deed does not throw any doubt upon his evidence, or upon the opinion given by Dr Baz."

This passage shows that the Tribunal dealt with the matter. The Trrbunal accepted the evidence

glven by Mr Greenwood. There was no error in its finding and the Trrbunal's reasons dealt

adequately with the substance of the point.

It was next alleged that nothing occurred proximate to 1 July 1987 that prevented Mr Greenwood from continuing to undertake remuneratrve work that he had been undertaking. It

was contended that the evidence disclosed that, by 1980, Mr Greenwood was ~ncapable of undertaking any significant physical work and that, thereafter, there was little significant change in h ~ s condition. It was contended that Mr Greenwood did not suffer a loss of salary or wages

or earnrngs by reason of having to give up physrcal work for he continued to receive salary or wages from R. & B. Greenwood Pty Limited It was submitted, moreover, that no loss was shown as the proceeda of investment were as high as would have been the proceeds from any building activity that R. & B. Greenwood Pty Limited might have undertaken. I thrnk that thin was the substance of the argument put though I have not used counsel's preclse words.

A similar submission was rejected by an Administrative Appeals Tribunal in m

. .

(1986) 10 A.L D. 338. In that case the Tribunal said at p.342:-

"While that submission covered many points, essentially it was that, by reason of the applicant's transposition of his investment in the farm into investments in a house in Boorowa township and into a deposit of money at interest, he was not suffering a loss of income and had in fact managed to produce a higher income than the farm had returned. It seems to us that the question is not one of loss of income, that is to say, of reduced support, but rather of loss of (a) salary. (b) wages, or (c) earnings on the veteran's own account, that the veteran would not he suffering if he or she had been free of the incapacity. And it IS all in the context of being 'prevented from continuing to undertake remunerative work'. The phrase here relevant, namely, 'earnings on his or her own account', was in our opinion clearly inserted to cover the case of a person who derived not salary or wager, but rather the earnings of a business, profession or trade as a result of remunerative work. There is a loss of salary or wages, or of earnings on one's own account, when one does suffer a loss of remuneration properly so described. It seems to us to be nothing to the point that a person has sold a business that was run by the sweat of his brow because of ill health and invested in shares in BHP. What that person receives in dividends c m be said to be 'earned', hut no definition of the word 'earnings' can, given that the legislation speaks of 'earnings on his or her own account' and puta that phrase into the context of what is received as the product of remunerative work, lead to a conclusion that a person like the present applicant h a not suffered a loss of earnings on his own account when he has had to give up the remunerative work which produced such earnings for him. It would have been very easy for the legislature to have said 'loss of income' if that was what was meant. Instead the legislature has used a more lengthy formula which, on a fair reading, is more restrictive in its scope. It would not be correct to subvert the legislative intent by giving 'earnings on his own account' an interpretation so expansive that it, together w ~ t h 'wages and salary', adds up to mean 'income'."

I agree with the approach taken in that passage.

In the present case, the Tribunal accepted Mr Greenwood's evidence that, but for his ill

health, he would have carried on some form of activity in the building lndustry and would have

gained salary or wages or earnings therefrom. The Tribunal also accepted that the income

received from 1 July 1987 onwards was not income in the nature of salary, wages or earnings. On theae findings the Tribunal correctly held that Mr Greenwood was suffering a loss of salary

or wages or of earnings on his own account that he would not have been suffering if free from
his accepted disabilities.

It was next submitted that the Interest recelved in the year ended 30 June 1988 by the

partnershrp was income in the nature of earnings. In thls respect I agree with the Tribunal's

finding. In the year ended 30 June 1988, Mr and Mrs Greenwood did not carry on a business

and the income in the nature of interest which they recerved could not properly be described as
"earnings" in the sense in whtch that term is used in s 24(l)(c).

It was next submitted that the change in the nature of Mr Greenwood's Income from salary or wages to that of Income in the nature of Interest resulted not from Mr Greenwood's medical condition of emphysema but from Mr Greenwood's decision for taxation and other reasons to wind up the company, R. & B. Greenwood Pty Limited It was submitted that that company could have been continued and the investments made in its name w ~ t h the result that it would have derived the interest and would have continued to pay Mr Greenwood salary or

wages.

This approach looks at Mr Greenwood's affairs in a most artrfrc~al way. The company

was set up in 1977 to perform a commercial function, that of carrying out burlding and associated activities. By the end of 1986, that sub-stratum or purpose of the company had gone, because of Mr Greenwood's ill health. The last block of land was sold in the 1986 year and the building licence was surrendered or allowed to lapse The company had no useful functlon thereafter.

Save for a small car and some office furniture, the company had no cap~tal. Its only actrvity if

continued would have been to borrow money from Mr and Mrs Greenwood and to invest the borrowed funds. It would be unreal to conclude that the company should have been continued

for this purpose. The Tribunal correctly took the view that the winding up of the company was

not a matter independent of Mr Greenwood's emphysema but was a matter caused by his emphysema as his medical condition precluded him from workrng in the building industry through the instrument of the company. I see no error in the Tribunal's approach to this matter.

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Reliance was next placed upon the fact that, in one or more of the company's nncome tax returns, the statement was made that Mr and Mrs Greenwood each worked 30 to 50 hours per week for the company. The object of the statement was of course to support the small claims made for salary or wages and thus the superannuation fund based thereon. The submission was made that it was wrong and unfair that a person such as Mr Greenwood should obtain a benefit from one authority of the Commonwealth, the Taxation Office, by claiming one thing and a

benefit from another authority, the Repatriation Commission, by clanming the opposite. Thls

matter was not referred to by the Tribunal in its reasons for decision.

It is sufficient for present purposes that any claim made that Mr and Mrs Greenwood worked 30 to 50 hours per week in the business of the company was obviously wrong and not a proper foundation on which to determine Mr Greenwood's entitlement to a benefit under the

I .

Veterans. I should add, however, that I sec nothing excessive in the deductions

claimed in the company's income tax returns and that I have confidence that th i members of the Tribunal, each of whom had expertise in taxation matters, would have raised the point had it

been thought to be significant.

It wan next contended that there must be a change in circumstances proxamate to the commencing date of the pension which reflects the change posited by 9.24. But that is not so. It is sufficient that, as at the relevant date, such as the date from which the pension is directed

to commence, the conditiona prescribed by s.24 are satisfied. In this case, they were satisfied.

I have found the present appeal to be a surprising one. It seems to me that, if anything,

the Tribunal in its decision waa generous to the Repatriation Commission. The evidence was very clear that, by 1980, Mr Greenwood had little ability to earn from his own work because of the limitations placed upon him by his war-caused disabilities. His condition continued to

deter~orate so that, by the early 1980s. he had l~tt le or no such capacity. The sign~ficant matters

that held back h ~ s ent~tlement to the penslon were the lack of acceptance of emphysema as a war-

caused disability and the lack of assessment of his ent~tlement to a penslon at 100%of the general

rate Once these matters had been resolved in h ~ s favour tn 1986, Mr Greenwood seems to have

had a strong case, at any rate a case which a tribunal could accept if it thought, as the Tr~bunal

did, that Mr Greenwood would have worked after age 65 but for h ~ s war-caused d ~ s a b ~ l ~ t i e s

The appeal is founded, I assume, on a m~sunderstandlng of the company's affairs.

Throughout the 1980s, the company's accounts were impress~vely drawn up but the company's

activities were minor. The accounts cloaked a lack of bus~ness activity. The company's income came substantially from the investment of funds borrowed from Mr and Mrs Greenwood and from the sale of land acquired from the 1978 to 1981 partnersh~p. Once this 1s understood, the

company and its affairs can be put into them proper perspective The Tribunal understood this

and approached the matter correctly. I see no error in its f ~ n d ~ n g s

For these reasons, the appeal will be dism~ssed w ~ t h costs.

1 certify that this and the preceding 10 pages
are a true copy of the reasons for judgment of

the Honourable Mr Justice Davies.

Associate: 

L L Q J Q c 4

Date:  30 November 1990 v

Counsel for the applicant:	Miss R Henderson
Solicitor for the applicant:	Australian Government Solicltor
Counsel for the respondent:	Mr M.B.  Smith
Solicitor for the respondent:	Legal Aid Commrss~on  of N S.W.
Date of hearing:	31 October 1990
Date of judgment:	30 November 1990