Smith, Keith Kingsford v The Repatriation Commission

[1983] FCA 53

Re: KEITH KINGSFORD SMITH
And: THE REPATRIATION COMMISSION
Qld G114 of 1982
Repatriation

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Fitzgerald J.

CATCHWORDS

Repatriation - appellant's entitlement to a pension under the Repatriation Act 1920 (Cwlth), Second Schedule - appellant in partnership - profit received from the partnership - work performed for the partnership without payment - entitled to payment - earning a living wage - negligible percentage of a living wage.

The Repatriation Act 1920 (Cwlth), s.107VZZH, Second Schedule

HEARING

BRISBANE

#DATE 29:3:1983

ORDER

1. The Appeal is allowed.

2. The decision appealed from is set aside.

3. The matter is remitted to the Tribunal.

JUDGE1

This is an appeal from a decision of the Repatriation Review Tribunal made on 20 October 1982 affirming a decision of a Repatriation Board which assessed the appellant's pension at the Intermediate rate (paragraph 5 of Schedule 1, Repatriation Act, 1920), plus a Fifth Schedule benefit, with effect from 10 July 1979. The appellant claims to be entitled to the Special rate of pension provided for in the Second Schedule of the Repatriation Act 1920 ("the Act"). That rate of pension is payable to a person who is totally and permanently incapacitated for life to such an extent as to be precluded from earning other than a negligible percentage of a living wage. The appeal is brought to this Court pursuant to s.107VZZH of the Act. The question of law on which the appellant appeals is stated in the Notice of Appeal in the following terms:

"Whether the Repatriation Review Tribunal misdirected itself in relation to the interpretation of the word 'incapacitated for life to such an extent as to be precluded from earning other than a negligible percentage of a living wage' in Schedule 2 of the Repatriation Act 1920 (as amended) in arriving at its . . . decision."

The material facts are in short compass. The appellant is a grazier, in his late 60s. Until late 1973, he worked a grazing property, part of which is in his name, part of which is in his wife's name, and part of which is now in the name of his eldest son. In late 1973, a partnership "Wyngarra Partnership" was formed. It consists of the appellant, his wife, his married daughter and his two sons. The partnership's property consists of livestock and chattels. The appellant formed the partnership to encourage his sons to return to work the property. Under the terms of the partnership agreement, no rent is paid by the partnership for the use of the land owned by the appellant, his wife, and eldest son. Further, each of the partners is, under the partnership agreement, entitled to live on the land free of rent or other charge. Each of the partners also has telephone, electric light, and petrol accounts paid by the partnership.

The partnership agreement provides that the appellant is entitled to one-quarter of the net profits of the partnership and that each of the other partners is entitled to a three-sixteenths share. The appellant is managing partner. In each of 1980 and 1981 the appellant received about $4000 as his share of the partnership profits. The written partnership agreement requires each of the appellant and his sons to work full time in the partnership business and provides that each will be entitled to remuneration for doing so at such rate as is decided by the appellant. The appellant's wife and daughter are not required to take any active part in the partnership business and, if they do not do so, they are not entitled to any remuneration other than their respective shares in the profits. By implication, they are entitled to remuneration, presumably at the rate decided on by the appellant, in the event that they do work in the partnership business.

Even the sons, the working partners, are not always paid wages. The younger son did not receive any wages prior to the financial year 1979-80. On the other hand, since 30 June 1980 the eldest son has only received wages in respect of the work performed by him on that part of the property which is not in his own name. Presumably, as is not uncommon, the formal partnership agreement is something less than a wholly accurate record of the full arrangements between the parties. The sons are perhaps earning an interest in the property by their work. Neither has been paid wages as high as $100 per week over the last two financial years.

The appellant is seriously disabled. As I understand the findings below, he would, despite his age, be able to earn a living but for his disabilities. However, because of his disabilities, it was found that he is unable to earn any income other than from the partnership.

At all material times to which the appellant's claim for a pension relates, he has been unable to work full time in the partnership or to do any physical work at all. However, he contributes to the partnership by providing advice and counselling to his sons, acting in a limited supervisory capacity, undertaking paper work, and exercising financial control. As already noted, the appellant is managing partner. He is given extensive powers of management and control by the partnership agreement. The appellant does not award himself any remuneration because he considers that he is not "doing sufficient to warrant dragging any money whatsoever out of the partnership". The appellant's sons accept his inability to work full time for the partnership or to carry out any physical work. According to him they said:

"Well O.K. Dad, you own it all so what difference does it make?"

There is no suggestion that his sons' acceptance of the situation is conditional upon the appellant performing the work which he does carry out for the partnership without remuneration.

The Tribunal addressed itself to the question whether, although what the appellant receives from the partnership is designated as profit, any part of it is "referable to his personal exertion which can correctly be described as . . . earnings" from personal exertion. The Tribunal said:

" . . . if the applicant is active in performing work of value to the partnership, part of the profits which he receives from the partnership must be referable to that work. Alternatively, . . . the valuable work performed by the Applicant for the partnership was given by him without payment.
In looking at the question of the Applicant's capacity to earn, the Tribunal sees no difference in principle between earning a salary and handing it over and doing valuable work without payment in recompense thereof."

The Tribunal found -

" . . . that the Applicant has an ability to earn and indeed is either earning money from the partnership in that part of the profits he receives is referable to his personal exertion or else he is doing valuable work for the partnership without payment."

It may be stated immediately that the first of these propositions is quite untenable. As I comprehend the partnership arrangements, the appellant's entitlement to profits is unrelated to any work which he may perform; work gives a separate entitlement to remuneration. Further, such a theory cannot be accommodated to the facts without distortion of the percentages in which the net profits are shared in accordance with the partnership agreement.

Accordingly, if the Tribunal's decision is sustainable, it can only be on the alternative basis that the appellant is doing valuable work for the partnership without payment.

Plainly enough, in my opinion, such a finding would not of itself necessarily sustain a conclusion that the appellant could earn other than a negligible percentage of a living wage, or indeed could earn anything at all, from the partnership. It is necessary to place the finding in a wider context.

The matter was before the Tribunal for the second time. It had been remitted by an order of this Court (Davies J.) because his Honour held that the Tribunal had misdirected itself and approached the matter from a purely theoretical assessment of the appellant's ability to earn, and not the actualities. In particular, to quote from the Court's reasons:

" . . . the Tribunal did not insist that it have before it adequate details of the partnership agreement, nor did it have before it any evidence that the partnership or the sons would have been prepared to pay the appellant for the work that he did. It is one thing to find that the appellant did some work on the property by way of giving advice and attending to correspondence. It is another thing to conclude beyond reasonable doubt that he could have earned an income from doing so."

In the present case, the Tribunal had before it the documentation relating to the partnership, together with the appellant's evidence, some of which was based upon misconceptions and not all of which the Tribunal accepted. Under the partnership agreement, the appellant was entitled and indeed obliged to work (although the full extent of the obligations had been waived) and entitled if he did work to remuneration. Against that background, the Tribunal said:

" . . . from its consideration of the evidence, the Tribunal is satisfied beyond reasonable doubt that the Applicant has not relinquished all his rights and duties under the partnership agreement as to his participation and control of the running of the partnership business.
In particular, he takes an active part in a supervisory capacity by getting about and looking at things, advising his sons and suggesting what should be done as well as conducting financial oversight of the business.
He observes such matters as shearing and crotching and is capable of visiting sheep sales. He has discussions regarding the property with his sons in the paddocks and accompanies them from time to time when they drive on the property. He is capable of mowing the grass with a self-propelling mower. He attends to a big proportion of the records and accounts of the large property and authorises appropriate payments."

These findings led to, and in my view support, the Tribunal's finding that the appellant is "doing valuable work for the partnership without payment", in the sense in which I think that was intended by the Tribunal, namely, not that the appellant although no longer employed was doing what he could to assist without entitlement to remuneration but that he was still performing duties under the partnership agreement for which he was entitled to be paid, although not in fact paid.

In my opinion, it was open to the Tribunal for it to be satisfied beyond reasonable doubt that the appellant's efforts on behalf of the partnership entitle him to remuneration in accordance with the partnership agreement which he does not receive simply because he does not claim it or award it to himself. Put shortly, the fact that the appellant is not paid does not automatically mean that the appellant does not, or at least cannot, earn from the partnership. Nor does the fact that it is not essential that the work which he does be performed by him mean that he does not do work which entitles him to be paid. His sons could do the work which he does but would no doubt have to work harder. So much could often be said. I see no difficulty in the Tribunal making the necessary findings on the evidence which it had available in the light of its rejection of material evidence from the appellant to the contrary: see Steinberg v. F.C.T. (1975) 134 C.L.R. 640.

Reliance was placed for the appellant upon statements made in the High Court in Wicks v. Union Steamship Company of New Zealand (1933) 50 C.L.R. 328 at p.338 and Thompson v. Armstrong and Royse Pty Ltd (1950) 81 C.L.R. 585, at p.595 and at pp 621-622. However, the facts here are quite different. On the Tribunal's findings, the appellant's earning capacity has not gone "except for the chance of obtaining special employment of an unusual kind"; he has employment, however special. Further, his entitlement to payment is not related to some contractual provision or other arrangement under which he is paid although he does not work; he is entitled to be paid because he does work.

The Tribunal next embarked upon a notional assessment of the appellant's "earnings". It said:

"The amount of the 'earnings' or the precise value of the work done by the Applicant is difficult to determine . . . .
. . .
Because of this difficulty, the Tribunal finds that it cannot be satisfied beyond reasonable doubt that the amount of the earnings or the value of the work done by the Applicant is equivalent to a living wage. However, it is inconceivable to the Tribunal that the amount of earnings or value of the work would be less than a negligible percentage of a living wage.
The partnership documents do not provide sufficient information to enable precise formulation of the value of the personal exertion of each of the active (male) partners. However, the partnership accounts disclose a flourishing business enterprise which has enabled the firm to distribute profits to the partners, provide fringe benefits to them and to expand the partnership business by extending its operations to another property, 'Jilliby'. In this connection, the Applicant has made a significant contribution of considerable value to the partnership. He is the senior and most experienced of the active partners and notwithstanding his physical limitations, he has participated in the running of the business in the manner referred to above.
The Tribunal is therefore satisfied beyond reasonable doubt that, at the relevant times, the Applicant had the ability to earn more than a negligible percentage of a living wage and in the manner described above, is in fact earning more than a negligible percentage of a living wage."

The second last paragraph quoted is at best an overstatement. Reference has already been made to the sons' low wages. Even so, the total net profits of the partnership in 1980 were only $16,922.47 and in 1981 were $16,421.29. More importantly, it is not entirely clear that the Tribunal, in undertaking the exercise which it did, addressed itself fully to the correct issue.

In its assessment of what the appellant can earn, the Tribunal seems to have valued highly both the partnership's capacity to pay and the contribution made by the appellant to the success which it perceived the partnership enjoys. No doubt, the appellant could theoretically pay himself what he wished up to the limit of the funds available but, in practical terms, the other partners must be satisfied. The assessment called for from the Tribunal involved decision as to the partnership's continued willingness and ability to pay the appellant an appropriate amount for his work having regard to what it is worth in the special circumstances in which it is performed. Considerations such as the sons' ability to do the work themselves would be appropriately bought to account in this connection.

I am not persuaded that only one conclusion is available as to whether what the appellant can earn from the partnership is or is not more than a negligible percentage of a living wage. The Tribunal did not say how it considered a negligible percentage of a living wage was to be measured or express an opinion as to the amount which the appellant earns but is not paid. It seems from what I was told that, in practice, the Repatriation Commission considers 25% of a living wage as defined in Regulation 5 is the point of demarcation between a negligible and a non-negligible percentage of a living wage. It is not known whether the Tribunal had that practice in mind. In the circumstances, I do not propose to comment. There are obvious difficulties in this as in many other aspects of this unsatisfactorily drafted legislation.

The real difficulty is that the Tribunal has not followed the course prescribed by sub-s. 107VK(1) of the Act in relation to this aspect of this awkward case. Its reasons are too broadly expressed, and omit essential findings of primary fact. It cannot be said that it has substantially complied with the sub-section when it is not possible to follow its process of reasoning sufficiently to test its validity. I am satisfied that this breach of its statutory duty by the Tribunal involved error of law. Regrettably, therefore, the matter must again go back to the Tribunal.

However, whilst I would not exclude the Tribunal from hearing further evidence, it seems that it may well be unnecessary for it to do so. What is essentially required are further findings. It may be that further evidence will be thought to be helpful and may even influence the findings which must be made and consequently the decision. It seems more consistent with the benign policy towards ex-servicemen evident in the Act that this possibility should be left open. With that in mind, I consider that I should set aside the decision appealed from.

The order of the Court is that the decision under appeal be set aside and the matter remitted to the Tribunal.