Rogers and the Dairy Adjustment Authority and the Van Diemen's Land Company - Dairies Ltd (VDLD) Pinegrove
[2001] AATA 937
•9 November 2001
DECISION AND REASONS FOR DECISION [2001] AATA 937
ADMINISTRATIVE APPEALS TRIBUNAL )
) No T2001/39
GENERAL ADMINISTRATIVE DIVISION )
Re BRENT ROGERS
Applicant
And THE DAIRY ADJUSTMENT AUTHORITY
Respondent
AndTHE VAN DIEMEN'S LAND COMPANY – DAIRIES LTD
(VDLD) PINEGROVE
Party Joined
DECISION
Tribunal S P Estcourt QC., (Deputy President)
Date9 November 2001
PlaceHobart
Decision The decision under review is affirmed.
..............................................
Deputy President
CATCHWORDS
Dairy Adjustment Authority – Dairy Structural Adjustment Program Scheme 2000 – eligible sharefarming arrangement – standard payment right – entity remunerated by fixed base price plus bonus – no entitlement.
Dairy Produce Act 1986 (Cth) – Clause 7, Schedule 2
IW v City of Perth (1997) 191 CLR 1
REASONS FOR DECISION
9 November 2001 S P Estcourt QC., (Deputy President)
This is an application to review the decision of a delegate of the Dairy Adjustment Authority ("the Authority") of 27 February 2001 determining that Brent Rogers was not eligible for a standard payment right under the provisions of the Dairy Structural Adjustment Program Scheme 2000 ("the Scheme") formulated under the Dairy Produce Act 1986 (Cth) ("the Act").
On 1 July 2000 the dairy industry was de-regulated and the Scheme was a program established under the Act to assist the industry to adjust by creating eligibility for entities to receive payments through the Authority.
By an application of 6 July 2000, the applicant claimed one of the three types of payment rights under the Scheme, namely a standard payment right, in relation to his sharefarming activities on a dairy farm at Smithton in Tasmania which was known as "Pinegrove" and which was owned by the joined party, the Van Diemen's Land Company – Dairies Limited.
The Authority gave notice of its decision on 15 December 2000 advising the applicant that he was eligible, subject to a condition not relevant for present purposes, for a standard payment right with a face value of $45,470.00.
On 9 January 2001 the joined party, aggrieved by not having received the full standard payment right attaching to the enterprise carried on at Pinegrove requested the Authority to reconsider its decision. This had the effect of requiring the Authority to reconsider its decision in relation to the applicant's claim.
On 27 February 2001 the Authority, having reconsidered the original decision, decided that the applicant was not eligible for a standard payment right.
This application for review turns on a very narrow point of statutory construction involving, factually, the terms of the sharefarming agreement between the applicant and the joined party.
Under s9 of the Scheme, in order to be eligible for a standard payment right in respect of a "dairy farm enterprise", the applicant had to be an "entity" which held an "eligible interest" in the enterprise at the "relevant date" of 28 September 1999 at 6.30 pm, and the enterprise had to have delivered milk during the 1998/1999 financial year.
There is no doubt, that as an individual, the applicant was an "entity" for the purpose of the Scheme, and the enterprise delivered milk during the relevant year. The sole question for determination is whether the applicant had an "eligible interest" in the dairy farm enterprise.
Under clause 7 of Schedule 2 of the Act, an entity has an eligible interest in a dairy farm enterprise if, relevantly to this application, both
under the Scheme the enterprise is taken to be subject to an eligible dairy sharefarming arrangement; and
under the Scheme the entity is taken to be a party to that arrangement.
Section 4 of the Scheme deals with the meaning of the term "eligible dairy sharefarming arrangement" and the other requirements contained in Clause 7 of Schedule 2 of the Act as follows:
"Meaning of eligible dairy sharefarming arrangement
(1)An eligible dairy sharefarming arrangement is an arrangement between 2 or more entities:
(a)under which each entity is entitled to:
(i)a fixed percentage share of the milk revenue of a dairy farm enterprise; or
(ii)a fixed percentage share of the milk revenue of a dairy farm enterprise in relation to the sale of each type or amount of milk produced by the enterprise; and
(b) where at least 1 of those entities has no proprietary interest in:
(i)the land on which a milking shed used by the enterprise is situated; and
(ii)quota under which the enterprise delivers market milk.
(2)A dairy farm enterprise is subject to an eligible dairy sharefarming arrangement if the milk revenue of the enterprise is shared under the arrangement.
(3)An entity is a party to an eligible dairy sharefarming arrangement if the entity is entitled to a share of the enterprise's milk revenue under the arrangement."
The words "milk revenue" used in s4 are defined in s3 as meaning "the gross proceeds from the sale of milk". Gross proceeds are not defined under either the Act or the Scheme.
There is no doubt that the applicant and the joined party were parties to a sharefarming agreement and that the dairy farming enterprise at Pinegrove was subject to that agreement. The sole question upon which the applicant's entitlement to a standard payment right hinges is whether that sharefarming agreement was one under which the applicant was "entitled" to a "fixed percentage share" of "the gross proceeds from the sale of milk" of the enterprise.
The Tribunal finds the following facts:
(a)until 30 June 1998 the applicant together with his wife dairy share-farmed on the joined party's property, Pinegrove, under an agreement whereby the applicant and his wife supplied the dairy herd, the non-fixed plant and farm labour, the joined party supplied the farm property and the fixed plant, and the parties shared various costs and then split the return from the sale of milk 50%/50%.
(b)due to very poor financial returns in dairying, the applicant and his wife sold their dairy herd prior to 1 July 1998 and accepted an offer from the joined party to sharefarm on the basis, principally of a fixed rate of return to them of $0.9143 per kilogram of milk solids.
(c)at the time of accepting a fixed rate of return the price paid for milk by dairy companies was low and a succession of poor dairying seasons meant that without a base price the applicant's contract he would not have been able to continue sharefarming. The effect of the change to a fixed rate agreement meant that the applicant had a built in base to his returns from the dairy enterprise.
(d)on 1 July 1998 the applicant entered into a written sharefarming agreement with the joined party which relevantly provided:
"(i) Clause 1.1
"Milker's Specified Share" means the percentage of the Gross Proceeds to be paid to the Milker as specified in Schedule 4 after proper declaration of the Milker's outgoings.
(ii) Clause 1.1
"Gross Proceeds" means all money actually received from the Dairy Company as payment for all milk and cream produced on the farm and sold to the Dairy Company.
(iii) Schedule 4
"The Milker's specified payment the Milker shall be paid at [$0.9143] per kg milk solids"
(iv) Clause 24
"Payments"
24.1The Milker shall receive his payment from the factory, excluding the 10% bonus above base price, calf rearing mating cows bonus which will be paid by the Owner.
24.2The Milker shall be entitled to a calf rearing bonus subject to the conditions in clause 10.
24.3The Milker shall be entitled to a mating performance bonus on the following basis:
Six weeks after A.I. is completed a pregnancy test by a qualified operator will be undertaken, to determine the percentage of the herd in calf to A.I.
For 70% of Cows wintered in calf to A.I.
The Milker will be paid at the rate of $5.00 per cow wintered.
For 75% of Cows wintered in calf to A.I.
The Milker will be paid at the rate of $7.50 per cow wintered.
For 80% of Cows wintered in calf to A.I.
The Milker will be paid at the rate of $10.00 per cow wintered.
The bonus is to be paid 30 days after the result is known.
24.4The base payout level is $3.20 per kg milk solids net farm gate. When the payout rises above this amount, the Owner will pay a bonus payment of 10% of the incremental increase over this base level to the Milker on every kg milk solids produced. The calculation to be based on the net farm gate price received at the end of the season after the final distribution and paid in August.
The net farm gate price is the actual gross for the farm less levies, volume deductions and demerit points, but including TDIA payments and domestic support payments.
Any share deductions are not included in the calculations."
(e)that prior to a dairying season the dairy company's practice was to announce an opening price for both milk fat and protein, and set a schedule of payments payable each month to the joined party with the applicant being paid at the fixed rate per kilogram of milk solids. As the year progressed the dairy company would review performance and determine its ability to pay more for milk, if it determined it could pay more for milk, it would review its schedule of payments to the joined party and announce a "step-up". If the dairy company gave a "step-up" then that was payable on all milk produced and sold for the year to date, retrospectively and would continue to apply until any further "step-up" occurred. At the end of the season the dairy company would do an actual calculation of performance for the entire year and would set a final price which was applied to every kilogram delivered to it that year and an adjusted payment made to the joined party.
(f)in the relevant year the base payment level did not exceed $3.20.
The applicant contends that his entitlement to 10% of the amount by which the price received by the enterprise exceeded $3.20 per kilogram of milk solids is clearly an arrangement for the payment of a fixed percentage of the milk revenue of a dairy farm enterprise as contemplated by s4(1)(a)(i) of the Scheme.
On the applicant's argument the term "the gross proceeds from the sale of milk" used to define the words "milk revenue" in s3 of the Scheme, means any of the proceeds and not all of the proceeds from the sale of milk of an enterprise and that he was entitled, to a fixed percentage of part of the milk revenue, namely 10% of the incremental increase on every kilogram of milk solids produced in a year in the event that the base payout level as defined in the sharefarming agreement exceeded $3.20.
The applicant further contends that the Scheme is remedial in its nature and the intention of the legislative was that those entities whose economic returns were at the relevant date subject to rises and falls in the milk price should receive the benefit of compensation.
The applicant argues that he was an entity whose economic fortune did depend on the vagaries of the rises and falls of the milk market as entitlement to participate in the 10% bonus or premium entitlement was dependant upon rise in milk prices beyond the agreed base amount.
The respondent and the joined party contend that the applicant's entitlement to payments under the share-farming agreement do not amount to "a fixed percentage share" of the milk revenue of a dairy farm enterprise on the basis that::
(a)the entitlement to a fixed rate per kg of milk solids sold by the enterprise means that the applicant's percentage share of the milk revenue will change every time milk prices change and is thus in fact a variable percentage; and
(b)the literal meaning of the words "gross proceeds" is such that the expression "a fixed percentage share of the milk revenue of a dairy farm enterprise" really means "a fixed percentage share of the total money produced by the enterprise from the sale of milk", and the applicant was not entitled to a fixed percentage share of that total money produced.
The respondent and the joined party further contend that the construction argued for by the applicant is unreasonable because, put simply, an entitlement to a 10% bonus payment is not a fixed percentage share of the milk revenue, the former being contingent and the latter automatic.
Finally the respondent and the joined party argue that a purposive approach to the construction of this remedial Scheme does not assist the applicant because not only is the construction "unreasonable or unnatural" (See IW v City of Perth (1997) 191 CLR 1 @ 12), but also because there was no element of risk or detriment to the applicant because his built in base price of $0.9143 per kilogram of milk solids provided him the security to remain in the dairy industry, precisely because it was built in and was not a fixed percentage share of the proceeds of sale. It was the joined party who was subject to the risk of fluctuations in the price of milk.
The applicant's entitlements under the sharefarming agreement between himself, his wife and the joined party include, relevantly for the purpose of this application:
(a) a specified payment of $0.9143 per kilogram of milk solids sold; and
(b)a bonus payment of 10% of the incremental increase over a base payout level of $3.20 per kilogram of milk solids "net farm rate" on every kilogram of milk solids produced.
The specified payment of $0.9143 per kilogram of milk solids is clearly not "a fixed percentage share of the milk revenue" of the Pinegrove enterprise for the purposes of s4(1)(a)(i) of the Scheme. It is, in truth, a fluctuating percentage of the milk revenue as prices rise and fall.
As to the bonus payment, the Tribunal is of the view that whilst it is only a fixed percentage share of an incremental increase it could be argued that it is a fixed percentage share of a part of the milk revenue of the enterprise and thus perhaps meet the description of the entitlement required by s4(1)(a)(i).
However in the Tribunal's judgment, the bonus payment provided by clause 24.4 of the sharefarming agreement is a contingent entitlement calculated as a fixed percentage of part of the milk revenue of the enterprise in the event of that contingency whereas the entitlement contemplated by s4(1)(a)(i) is a vested entitlement.
The Scheme, clearly is remedial in nature and as such its purpose must be steadily borne in mind in construing its provisions where they permit of ambiguity.
That purpose, the Tribunal accepts, as submitted by the applicant himself, is to provide the benefit of compensation to those entities whose economic returns were subjected to the vagaries of milk prices in a deregulated industry as a result of increased competition.
Contrary to the applicant's contentions that he was such an entity, the Tribunal is of the view that his sharefarming agreement was designed precisely to protect him from rises and falls, particularly falls of course, and to provide him with the security of a base level payment sufficient to permit him to remain in the industry.
In the Tribunal's judgment s4(1)(a)(i) is intended to embrace those entities whose milk revenue is affected by falling milk prices because they have a vested entitlement under a sharefarming arrangement to a fixed percentage of that revenue.
In such cases the entitlement to compensation is easily perceived as the fixed percentage share affects an entity's income depending on the actual price paid for milk. In the applicant's case however, he being remunerated predominantly by a specified amount per kilogram of milk solids, the amount of his percentage share will vary depending on the price actually paid for milk, but his income is not affected other than very peripherally in the sense that he could earn more by way of a bonus in the event that the actual price exceeded a certain level.
A bonus is just that, a boon or gift or premium over what is normally due. What was normally due to the applicant under his sharefarming agreement was a specified payment which, implicit in his submissions was to give him a return sufficient to allow him to remain in the dairying industry after bad years of low prices and poor seasons whilst farming with the joined party on the basis of a fixed vested 50%/50% entitlement.
For the foregoing reasons, in the judgment of the Tribunal, a contingent entitlement calculated on a fixed percentage of part of the milk revenue of an enterprise, namely 10% of the incremental increase over a base payout level of $3.20 per kilogram of milk solids is not, albeit payable by reference to every kilogram of milk solids produced or sold, an entitlement to "a fixed percentage of the milk revenue of a dairy farm enterprise" for the purposes of s4(1)(a)(i) of the Scheme. To hold otherwise would be to give the section a construction which would be unreasonable or unnatural given the legislative purpose of the Scheme and the character of the bonus payment provided for by the sharefarming agreement.
It follows that the decision of the Tribunal is that the decision under review is affirmed.
I certify that the 33 preceding paragraphs are a true copy of the reasons for the decision herein of S P Estcourt QC (Deputy President)
Signed: .....................................................................................
Personal AssistantDate/s of Hearing 15 October 2001
Date of Decision 9 November 2001
Counsel for the Applicant Mr Ken Proctor
Solicitor for the Applicant Murdoch Clarke
Counsel for the Respondent Mr A Cavanough SC
Solicitor for the Respondent Mallesons Stephen Jaques
Solicitor for Party Joined Ms M Lovett, Hunt & Hunt
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