Repatriation Commission v Kimpton

Case [2006] FCA 1120

FEDERAL COURT OF AUSTRALIA

Repatriation Commission v Kimpton [2006] FCA 1120

VETERANS’ AFFAIRS – service pension – means test – treatment of otherwise attributed assets of controlled private company as excluded assets – exercise of discretion by Tribunal to exclude assets – application of relevant Decision Making Principles – whether question of possible exclusion of assets raised in Tribunal hearing – whether failure of natural justice – appeal grounds not made out – whether failure of Tribunal process nevertheless – failure of Tribunal to decide question raised by Commission – possibility of relitigation of that question – conditional remitter to Tribunal on filing of notice of amended grounds – costs to respondents in any event

Veterans’ Entitlements Act 1986 (Cth) s 52ZN, s 52ZZR, s 52ZZZQ
Administrative Appeals Tribunal Act 1975  (Cth)
Social Security and Veterans’ Entitlements Legislative Amendments (Private Trusts and Private Companies – Integrity of Means Testing) Act 2000 (Cth)

REPATRIATION COMMISSION v PERCY KIMPTON and BERYL KIMPTON
WAD 297 OF 2005

FRENCH J
22 AUGUST 2006
ADELAIDE (HEARD IN PERTH)


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 297 OF 2005

On appeal from the Veterans’ Appeals Division of the Administrative Appeals Tribunal constituted by Associate Professor GA Barton, Member

BETWEEN:

REPATRIATION COMMISSION
Applicant

AND:

PERCY KIMPTON AND BERYL KIMPTON
Respondent

JUDGE:

FRENCH J

DATE OF ORDER:

22 AUGUST 2006

WHERE MADE:

ADELAIDE (HEARD IN PERTH)

THE COURT ORDERS THAT:

1.The applicant has leave to amend the notice of appeal to include as a ground of appeal that the Tribunal erred in law in failing to decide upon the question whether shares held by the respondents were ‘disposed of’ pursuant to s 52E of the Veterans’ Entitlements Act 1986 (Cth).

2.In the event that an amended notice of appeal including that ground is filed on or before 12 September 2006 the decision of the Tribunal given on 20 September 2005 will be set aside on and from 12 September 2006 and the matter remitted to the Tribunal for determination according to law.

3.In the event that an amended notice of appeal is not filed as provided by the preceding order, the application will stand dismissed as from 12 September 2006.

4.The applicant is to pay the respondents’ costs of the appeal in any event.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

WAD 297 OF 2005

On appeal from the Veterans’ Appeals Division of the Administrative Appeals Tribunal constituted by Associate Professor GA Barton, Member

BETWEEN:

REPATRIATION COMMISSION
Applicant

AND:

PERCY KIMPTON AND BERYL KIMPTON
Respondents

JUDGE:

FRENCH J

DATE:

22 AUGUST 2006

PLACE:

ADELAIDE (HEARD IN PERTH)

REASONS FOR JUDGMENT

Introduction

  1. Percy and Beryl Kimpton are retired farmers, living on service pensions under the Veterans’ Entitlements Act 1986 (Cth) (the Act). During their working lives they were shareholders in two family companies involving cattle farming and other agricultural pursuits. Those companies became…

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Details
AGLC
Repatriation Commission v Kimpton [2006] FCA 1120
Case
[2006] FCA 1120
Decision Date

CaseChat Overview and Summary

The appeal in Repatriation Commission v Kimpton concerns the Commission's challenge to a decision made by the Tribunal regarding the treatment of certain assets under the Veterans' Entitlements Act 1986 (Cth). The Commission argues that the Tribunal did not follow natural justice and did not apply relevant decision-making principles when it treated the assets as excluded. The Tribunal, however, found that the Commission's appeal was unsuccessful on these grounds. The Court identified a significant issue that the Tribunal had not addressed, which is whether the winding up of the companies involved an imputed disposal of the shares held by the Kimptons under the anti-avoidance provision, section 52E of the Act. The Court ruled that it is appropriate for the Commission to amend its ground of appeal to include this question, and if it does so by a specified date, the Tribunal's decision will be set aside and the matter will be remitted to the Tribunal for determination according to law. If the appeal is not amended, the Tribunal's decision will stand, and the appeal will be dismissed.

The legal issues in this case primarily revolve around the interpretation and application of the decision-making principles under section 52ZZR of the Veterans' Entitlements Act 1986 (Cth). The Court examined whether the Tribunal appropriately exercised its discretion to determine that certain assets should be excluded from consideration, and whether it failed to adhere to the relevant decision-making principles. Additionally, the Court considered the scope of the Commission's authority to make decision-making principles and whether such principles could limit the range of cases it could consider for the purpose of determining whether assets are to be excluded. The Court found that while the Commission has the authority to make decision-making principles, it cannot use them to limit its discretion in a way that would confine the broad power conferred by the Parliament.

The Court's reasoning led to a decision that allows the Commission to amend its grounds of appeal to include the significant question of whether the winding up of the companies resulted in an imputed disposal of the shares. This amendment is crucial as it may lead to the Commission deciding the matter adversely to the Kimptons, potentially resulting in further Tribunal review. The Court emphasized the importance of consistent and efficient decision-making in similar cases and the need for the Commission to promulgate decision-making principles to achieve this. However, the Court clarified that such principles should not be used to limit the range of cases considered by the Commission.

The final orders of the Court include granting the applicant leave to amend the notice of appeal to include the question of imputed disposal under section 52E of the Act. If the amended notice of appeal is filed by the specified date, the Tribunal's decision will be set aside and the matter will be remitted to the Tribunal. If the notice of appeal is not amended by the deadline, the application will be dismissed. Additionally, the Court ordered that the applicant is to pay the respondents' costs of the appeal regardless of the outcome of the amendment.

Orders

Orders of the court

1. The applicant has leave to amend the notice of appeal to include as a ground of appeal that the Tribunal erred in law in failing to decide upon the question whether shares held by the respondents were ‘disposed of’ pursuant to s 52E of the Veterans’ Entitlements Act 1986 (Cth).

2. In the event that an amended notice of appeal including that ground is filed on or before 12 September 2006 the decision of the Tribunal given on 20 September 2005 will be set aside on and from 12 September 2006 and the matter remitted to the Tribunal for determination according to law.

3. In the event that an amended notice of appeal is not filed as provided by the preceding order, the application will stand dismissed as from 12 September 2006.

4. The applicant is to pay the respondents’ costs of the appeal in any event.

Background

Background to the litigation

The Commission has appealed to this Court against the decision of the Tribunal. It says that the Tribunal failed to accord it natural justice in treating the relevant assets as excluded and that it failed to take into account applicable Decision Making Principles made under the provisions of the Act. On both of those grounds the Commission’s appeal fails. It is however apparent that the Tribunal proceedings miscarried in that it failed to decide upon a significant question put to it by the Commission as to whether the winding up of the companies involved an imputed disposal of the shares held by the Kimptons pursuant to the anti-avoidance provision, s 52E of the Act. If the Tribunal decision stands and the matter is remitted to the Commission, it is possible that it may be open to the Commission to decide the matter adversely to the Kimptons on that basis. This may lead to another round of Tribunal review. In my opinion it is appropriate that the Commission be given the opportunity to amend its ground of appeal to expressly raise that question which was argued before me. If the grounds of appeal are so amended by 12 September 2006, then the Tribunal decision will be set aside and the matter remitted to the Tribunal for determination according to law. If the notice of appeal is not amended, then the Tribunal decision will stand and the appeal will be dismissed. In my opinion the Kimptons should have their costs in any event. Factual and procedural background Percy Lawrence Kimpton and his wife Beryl Kimpton receive a service pension under the provisions of the Act. They were both born in rural Victoria, Mr Kimpton in 1924 and Mrs Kimpton in 1929. Mr and Mrs Kimpton carried on cattle farming in the Kununurra region in the 1970s. They formed a company called Kununurra Poll Shorthorn Studs Pty Ltd (KPS) in January 1971 under the Companies Act 1961 (WA). KPS had a nominal capital of $100,000 divided into 100,000 shares of $1 each. Its objects included ‘to conduct or carry on the business of stud masters and commercial breeders and fatteners of cattle, sheep and other livestock’. Mr Kimpton was one of the subscribers for its shares. Kimpton & Sons Pty Ltd (KS) was incorporated under the Companies Act in September 1972. Its objects included carrying on the business of ‘grazier, butcher, agriculturalist, farmer, horticulturalist, pastoralist, and to deal in all products of animal husbandry and agriculture’. KS was, from the outset, a family company. Mr and Mrs Kimpton subscribed for one share each. In 1984 each of their sons, Gregory, Guy and Scott, were also issued with one share. The cattle business of KPS was short lived. The company’s herd became infected with red water fever carried by cattle tick. Mr and Mrs Kimpton, her brother and their son Gregory, used the company for agricultural trading purposes from 1975 to 1979. From 1979 to 1980 KPS carried on business as a transport company carting grain. It did not trade at all between 1981 and 1991. Mrs Kimpton’s brother ceased his involvement in 1989. On 2 November 1992 Mr and Mrs Kimpton resigned as directors of the company, thereby relinquishing its control to their son, Gregory, and his wife, Susanne, so that they could use it for their own business purposes. Mr and Mrs Kimpton nevertheless remained shareholders of KPS. KPS ceased to trade after 30 June 1993.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

FRENCH J
The first, third and fourth grounds were uninformative. The Commission’s written submissions reduced to the following propositions: 1.The Tribunal failed to have regard to decision-making principles which had been made by the Commission under s 52ZZQ and which were applicable to the exercise of the discretion under s 52ZZR(2) to treat the relevant assets as excluded assets. 2.The Tribunal failed to accord the Commission procedural fairness in that it decided the matter by exercising the discretion under s 52ZZR(2), an option of which the Commission had no notice as it was neither advanced by the Kimptons nor raised by the Tribunal before the Tribunal made its decision. Whether the Tribunal failed to comply with relevant decision-making principles Section 52ZZR(1) provides for the attribution to attributable stakeholders of assets owned by a controlled private company or controlled private trust. The attribution involves the inclusion in the value of the individual’s assets of an amount equal to the individual’s asset attribution percentage of the value of the attributable asset. It is a necessary condition of the attribution for which s 52ZZR(1) provides that ‘… the asset is not an excluded asset …’. An asset becomes an excluded asset by the making of a determination to that effect under s 52ZZR(2). The discretion conferred upon the Commission by s 52ZZR(2) has the following elements and constraints: 1. It must be in writing.2. It must identify a specified asset and determine that it is an excluded asset.3.The determination is to be made for the purposes of the application of subs (1) to a specified individual and a particular company or trust. 4.The Commission, in making the determination, must comply with any relevant decision-making principles. The discretion, not otherwise confined, is nevertheless to be exercised for the purposes of the legislative scheme of which it forms part. That scheme, which provides for the means testing of benefits payable under the Act, is located in a statute described in its long title as: ‘An Act to provide for the payment of pensions and other benefits to, and to provide medical and other treatment for, veterans and certain other persons, and for other purposes.’It is ultimately a beneficial statute. The novelty and generality of the provisions of Div 11A raise the possibility of unfair and unintended consequences in the application of its provisions to people claiming or in receipt of service pensions. The power under s 52ZZR(2) to determine that assets, otherwise attributable to an individual, should be excluded assets is provided to avoid such cases. Its generality makes that purpose apparent. That purpose is also reflected in the passage quoted by the Tribunal from the Explanatory Memorandum which refers to the object of the relieving provisions in the amending Act as ‘… to ensure that people are not treated unfairly or affected unintentionally as a result of this measure’. The power conferred by s 52ZZR(2) allows for flexibility of response to the great variety of circumstances that may present for decision by the Commission. At the same time the exercise of the power should be consistent across similar cases. The ability of the Commission to promulgate decision-making principles with which it must comply in the exercise of its discretion enables the development of consistent approaches to like cases. As the experience of the Commission in the application of s 52ZZR grows, classes of similar cases requiring similar treatment will no doubt emerge. Efficient and consistent decision-making in such cases will be assisted by the promulgation of decision-making principles. It cannot however, by making such principles, fetter its discretion so as to limit it to a particular class of case. That would amount to a confinement of the broad power which the Parliament has conferred. The authority to make decision-making principles, which are a species of delegated legislation, does not sanction limitation by the Commission of the range of cases which it may consider for the purpose of determining whether otherwise attributable assets are to be excluded.

Ratio Decidendi

Legal Principle Established

Established by: FRENCH J

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