FEDERAL COURT OF AUSTRALIA Counsel v Repatriation Commission [2002] FCAFC 201 VETERANS' ENTITLEMENTS – application for Special Rate pension – whether veteran had suffered a "loss of earnings on his or her own account" – veteran's last paid remunerative work was running a farming business in partnership with his wife – the business consistently recorded a net loss – whether Administrative Appeals Tribunal erred in law when it held that there had been no loss of earnings – whether earnings should be construed as the veteran's interest in the gross earnings of the partnership. WORDS AND PHRASES – "loss of earnings on his or her own account". Veterans' Entitlements Act 1986 (Cth), s 24(2A)(e) Hill v Repatriation Commission [2000] FCA 929 referred to Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 referred to Abram Coal Company Limited v Southern [1903] AC 306 referred to Glazebrook v Accident Compensation Commission [1988] VR 454 referred to Wilson v Wilson's Tile Works Pty Ltd (1960) 104 CLR 328 referred to Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 referred to Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 referred to Gauntlett v Repatriation Commission (1991) 32 FCR 73 referred to LAURENCE COUNSEL v REPATRIATION COMMISSION N 1219 of 2001 GRAY, CARR & GOLDBERG JJ 20 JUNE 2002 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1219 of 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LAURENCE COUNSEL APPELLANT AND: REPATRIATION COMMISSION RESPONDENT JUDGES: GRAY, CARR AND GOLDBERG JJ DATE OF ORDER: 20 JUNE 2002 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appeal be allowed. 2. The orders of the Court given on 1 August 2001 be set aside. 3. There be substituted for that judgment orders that: (a) the decision of the Administrative Appeals Tribunal given on 9 April 2001 be set aside; (b) the matter be remitted to the Administrative Appeals Tribunal for reconsideration in accordance with the direction of the Court that the Administrative Appeals Tribunal make a decision setting aside the decision of the delegate of the Repatriation Commission made on 13 November 1998 and substituting a decision that the applicant is entitled to pension at the special rate with effect from 31 July 1998; (c) the respondent pay the applicant's costs of the proceeding. 4. The respondent pay the appellant's costs of the appeal. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1219 of 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LAURENCE COUNSEL APPELLANT AND: REPATRIATION COMMISSION RESPONDENT JUDGES: GRAY, CARR AND GOLDBERG JJ DATE: 20 JUNE 2002 PLACE: SYDNEY REASONS FOR JUDGMENT GRAY J: Introduction 1 This is an appeal from a judgment of a single judge of the Court, dismissing an appeal on a question of law from the Administrative Appeals Tribunal, pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) ("the AAT Act"). The central question is the meaning of the word "earnings" in the phrase "loss of salary or wages, or of earnings on his or her own account" in s 24(2A)(e) of the Veterans' Entitlements Act 1986 (Cth) ("the VE Act"). 2 The appellant was born in the United Kingdom on 7 June 1922. He emigrated to Australia in 1938. He served with the Australian Army from 1940 to 1946, including some two years in New Guinea. The history of the proceeding 3 On 31 July 1998, the appellant was in receipt of a pension, fixed at 90 per cent of the general rate, pursuant to s 22 of the VE Act. It had therefore been determined that the appellant was suffering an incapacity from war-caused injury or war-caused disease, within the meaning of s 9 of the VE Act. His accepted conditions were myopia, bilateral sensorineural hearing loss, tinnitus, ischaemic heart disease, post-traumatic stress disorder, tinea, impotence, folliculitis and chronic solar skin damage. 4 On 31 July 1998, the appellant made an application to the respondent Repatriation Commission ("the Commission"), pursuant to s 15 of the VE Act, for an increase in the rate of his pension. On 13 November 1998, a delegate of the Commission made a decision on the application to increase the appellant's disability pension to 100 per cent of the general rate, pursuant to s 22 of the VE Act, with effect from the date of the application. The delegate considered whether to grant the appellant a pension at the intermediate rate pursuant to s 23 of the VE Act, or the special rate pursuant to s 24, or to allow him the extreme disablement adjustment pursuant to s 22, but decided not to make such increases. The appellant sought review by the Administrative Appeals Tribunal ("the Tribunal"). On 9 April 2001, the Tribunal published its decision, affirming the decision of the delegate of the Commission. It also published its reasons for decision. The appellant then appealed to a single judge of the Court, whose judgment dismissing the appeal with costs was delivered on 1 August 2001. The facts 5 The appellant gave evidence to the Tribunal that, prior to his war service, he worked on a farm on the Central Coast of New South Wales and a sheep and wheat property in the West Wyalong area. After the war, he worked in a variety of jobs, including three years in the United Kingdom, and then for a firm called W C Stevens from 1960 to 1982. He said that he ceased work with W C Stevens because it was starting to downsize and he was finding the work stressful. In 1971, the appellant married. In 1980, he purchased a farm property. He said that he had always wanted to be a farmer. Between 1980 and 1982, the appellant, his wife and some casual labour undertook major activities in relation to the house, the sheds and the piggery on this farm. The farm was stocked. In 1982, on his retirement from W C Stevens, the appellant and his wife moved to the farm and he devoted himself full-time to farming beef cattle, pigs and some crops. 6 The Tribunal found that, in 1982, the appellant and his wife formed a partnership to carry on the farming business. The appellant then devoted his labour and capital to making the property a viable business. In 1988, part of the land was sold. The appellant said that his health was deteriorating and that he had started to experience physical difficulty with various tasks. The piggery was closed and the beef cattle stock was reduced by about 50 per cent. The Tribunal found that the farm was sold in 1993 and the partnership was dissolved. The appellant said that, at that time, he was experiencing increasing health problems, related to his heart and his blood pressure, together with increasing stress and anxiety. 7 The Tribunal found that the appellant had not undertaken any other remunerative work following the sale of the farm. The partnership tax returns revealed a history of annual losses, with the exception of a very small profit in 1989. In other years, the losses were significant. The appellant did not lodge personal income tax returns during the period of the partnership. There was no evidence before the Tribunal to indicate on an annual basis what particular benefits the appellant may have received during the course of the partnership, or whether the annual losses were used by the appellant to offset other areas of income. The legislation 8 Section 21A of the VE Act provides for an assessment of the degree of incapacity of a veteran from war-caused injury or war-caused disease, or both, as 10 per cent or a multiple of 10 per cent. Section 22 provides for payment of pension at what is known at the general rate, to a veteran who is entitled to be paid a pension, other than a veteran to whom s 23, 24 or 25 applies. Section 22(2) provides for the payment of pension at the same percentage as that assessed under s 21A. Section 22(3) fixes the general rate. Section 22(4) provides for an increase by 50 per cent if certain conditions are met. This increase is known as the extreme disablement adjustment. Section 23 sets out the requirements that must be satisfied for a veteran to be entitled to be paid at what is known as the intermediate rate of pension. Section 23(4) fixes the intermediate rate of pension. Section 24 sets out the requirements that must be satisfied for a veteran to be entitled to be paid at what is known as the special rate of pension. Its relevant provisions are as follows: "(1) This section applies to a veteran if: ... (a) either: (i) the degree of incapacity of the veteran from war-caused injury or war-caused disease, or both, is determined under section 21A to be at least 70% or has been so determined by a determination that is in force; ... (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; ... (2A) This section applies to a veteran if: (a) the veteran has made a claim under section 14 for a pension, or an application under section 15 for an increase in the rate of the pension that he or she is receiving; and (b) the veteran had turned 65 before the claim or application was made; and (c) paragraphs (1)(a) and (1)(b) apply to the veteran; and (d) the veteran is, because of incapacity from war-caused injury or war-caused disease or both, alone, prevented from continuing to undertake the remunerative work (last paid work) that the veteran was last undertaking before he or she made the claim or application; and (e) because the veteran is so prevented from undertaking his or her last paid work, the veteran is suffering a loss of salary or wages, or of earnings on his or her own account, that he or she would not be suffering if he or she were free from that incapacity; and (f) the veteran was undertaking his or her last paid work after the veteran had turned 65; and (g) when the veteran stopped undertaking his or her last paid work, the veteran: (i) if he or she was then working as an employee of another person—had been working for that person, or for that person and any predecessor or predecessors of that person; or (ii) if he or she was then working on his or her own account in any profession, trade, employment, vocation or calling—had been so working in that profession, trade, employment, vocation or calling; for a continuous period of at least 10 years that began before the veteran turned 65; and (h) section 25 does not apply to the veteran. (2B) For the purposes of paragraph (2A)(e), a veteran who is incapacitated from war-caused injury or war-caused disease or both, is not taken to be suffering a loss of salary or wages, or of earnings on his or her own account, because of that incapacity if: (a) 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 (b) the veteran is incapacitated, or prevented from engaging in remunerative work for some other reason." Subsection (4) specifies the special rate of pension. Section 25 deals with payment of pension at the special rate for a temporary period. 9 It should be noted that the provisions in pars (d) and (e) of s 24(2A) follow a pattern of provisions relating to the various rates of pension specified in ss 23 and 24 of the VE Act. Section 23(1)(b) and (c), s 23(3A)(d) and (e) and s 24(1)(b) and (c) all reflect this pattern. In each case, there is a reference to a veteran's incapacity from war-caused injury or war-caused disease, or both, rendering the veteran incapable of undertaking "remunerative work". In each case, the phrase "a loss of salary or wages, or of earnings on his or her own account" appears. The Tribunal's reasoning 10 The Tribunal found that the appellant satisfied all of the elements of s 24(2A) except that found in par (e). Because of his failure to satisfy s 24(2A)(e), the Tribunal found that the appellant did not qualify for a pension at the special rate. For similar reasons, the Tribunal found that the appellant did not satisfy s 23(3A)(e) and that, as a consequence, he did not qualify for a pension at the intermediate rate. For different reasons, which are not material to this appeal, the Tribunal also found that the appellant failed to satisfy a provision of s 22 and was therefore not entitled to an extreme disablement adjustment. 11 In considering s 24(2A)(e), the Tribunal rejected a submission that the appellant's farming activity was a hobby not a business, concluding that the partnership accounts revealed both an intention to carry on a business and an actual carrying on of a business over many years. The Tribunal also rejected a submission on behalf of the respondent that the annual losses of the partnership were a reason for the sale of the property. It was satisfied that the farm partnership was a business conducted by the appellant and his wife and that they sold the business because of the appellant's deteriorating health, arising from his war-caused disabilities. The Tribunal said: "Further, by the very nature of the business, the Tribunal considers that this was an activity from which the Applicant expected to receive payment, whether by way of income reinvestment and capital enhancement or by way of drawings, profit, tax benefits or living expenses. ... the Tribunal concludes, having considered the evidence of the Applicant in relation to the work habits of the Applicant and his wife, that both the Applicant and his wife were in self employment and that such work was effectively undertaken over many years." 12 The Tribunal then posed the issue before it as whether gross income, or income after expenses, was to be regarded as the product of remunerative work. It took the view that "earnings" means "net earnings, namely gross earnings less deduction of expenses." It relied on the judgment of Wilcox J in Hill v Repatriation Commission [2000] FCA 929 as authority for the proposition that the failure of the appellant's farming business to make a profit meant that he had not suffered a loss of earnings. Because in all but one year the farming business showed a net loss, and in the absence of other material suggesting that the appellant had received net earnings in another form from the farming enterprise, the Tribunal found that the appellant had not suffered loss of earnings on his own account by virtue of his war-caused disabilities causing him to cease his farming activities. The reasoning of the primary judge 13 The learned primary judge drew attention to the link between "remunerative work" and the expressions "salary or wages" and "earnings" in s 24(2A)(d) and (e) of the VE Act. His Honour expressed the view that both "earnings" and "salary or wages" concern the product of "remunerative work". In the context of a discussion of the meaning of "remunerative work" his Honour doubted that Wilcox J in Hill intended to say that work in a business could never be remunerative if the business made no profit. His Honour drew attention to the fact that the work considered in Hill had been characterised by the Tribunal in that case as a hobby; Wilcox J was determining whether the veteran in that case had been engaged in "remunerative work", rather than whether amounts received were "earnings on his or her own account". 14 The learned primary judge then said (Counsel v Repatriation Commission [2001] FCA 1032 at [14]): "However, even if 'remunerative work' has the meaning just discussed, it does not follow that the expression 'earnings' in s 24(2A)(e) is intended to comprehend all that which may be 'remunerat(ion)' so as to give work the character of being 'remunerative work'. Expressions such as 'salary', 'wages' and 'earnings' often have a narrower meaning than 'remuneration'." 15 After referring at some length to Accident Compensation Commission v Alger [1993] 1 VR 379, his Honour indicated that, if the Tribunal had treated itself as being bound, as a matter of law, to assess loss of earnings by reference only to net earnings of the partnership, that would have been an error of law. His Honour then said: "However these remarks of the Tribunal followed an analysis of the business in which the Tribunal pointed to the capital injections made by the applicant and his wife, uncertainty as to the benefits enjoyed by the applicant while operating the partnership business and the applicant's expectation of receiving payment from the business whether by income reinvestment and capital enhancement or by way of drawings, profit, tax benefits or living expenses. The better view is, in my opinion, that the Tribunal adopted the approach it did having regard to the limited material before it concerning the business. The approach it took was an approach available having regard to the generality of the language used in s 24(2A)(e). The Tribunal's adoption of this approach does not reveal legal error." 16 His Honour then dealt with the second issue before him, which was whether the Tribunal erred by failing to consider the hypothetical position which would have obtained in relation to the appellant's earnings if he had not been incapacitated due to his war-caused disabilities. His Honour said that there was nothing to suggest that the appellant had raised as a possibility that the farm would have been profitable but for the changes that commenced in 1998 as a result of his deteriorating health. His Honour did not discern any error on the Tribunal's part in not addressing the question. The appeal to this Court 17 The appellant raised two issues in this Court. The first was as to the meaning of the word "earnings" in s 24(2A)(e). The appellant contended that the Tribunal erred in law in holding that the relevant amount was the amount arrived at after deducting expenses. He also argued that the learned primary judge was in error in failing to hold that the Tribunal had erred in law in this way. The second issue was whether the Tribunal erred in law in not addressing the hypothetical position as to whether the farming business would have been profitable if the appellant had been free of his incapacity. Again, it was said that there was error on the part of the learned primary judge in not finding that the Tribunal had erred in law. The meaning of "earnings" 18 In construing the word "earnings", the statutory context is the most important factor. The VE Act is beneficial legislation, establishing a system whereby those who rendered war service have their financial and other needs looked after, to the extent to which those needs are not met because of war-caused disabilities. It is to be expected that those suffering such disabilities will find that their earning capacity diminishes. The scheme of the VE Act is to compensate them, depending upon the degree of their disabilities and the diminution in their earning capacity. The amount of the compensation is not to be calculated by reference to the amount of any actual loss. Rather, the various rates of pension are fixed. While these depend, to a degree, on the extent of the incapacity of the veteran to earn, there is no provision linking the assessment of entitlement to an intermediate rate or a special rate by reference to the actual amount of earnings lost. For the special rate to be applicable, as s 24(2A) shows, it is sufficient for there to be "a loss of salary or wages, or of earnings on his or her own account" that the veteran would not be suffering in the absence of the incapacity. 19 It is clear that the words "salary or wages" and "earnings on his or her own account" are intended to encompass the full range of ways in which people can make money from their own efforts. The expression "salary or wages" encompasses a relatively small part of that range. A loss of salary or wages is a fact that can be ascertained with relative ease. This suggests that no narrow meaning should be given to "earnings on his or her own account", which must encompass the rest of the range. Authorities on other statutory provisions using similar words should be treated with care because the context may be different. 20 I agree with Goldberg J, whose reasons for judgment I have read in draft form, that s 24(2A)(e) looks to the loss of an income, revenue or cash flow stream available to the veteran. I agree with what his Honour says about the application of "earnings on his or her own account" to the income of a partnership business. There may be various reasons why accounts compiled after the end of a financial period may show that a partnership business that was receiving income during that period made a loss in that period. This does not detract from the fact that, during the period, each of the partners as a member of the partnership was entitled to income according to the terms of the partnership agreement. In the case of a partner, such as the appellant, whose physical and mental labour produced or contributed to the generation of that income, it is appropriate to regard that income as "earnings on his or her own account" within the meaning of s 24(2A)(e). 21 It follows that the Tribunal made an error of law in holding that the appellant had not suffered a loss of earnings on his own account because the partnership accounts showed a net loss in all but one year after expenses had been deducted from the partnership income. The Tribunal had before it evidence of the gross earnings of the partnership in each year in which it traded. Assuming that it accepted that evidence, it should have held that the loss of that gross income was a loss of earnings on the appellant's own account. It also follows that the learned primary judge erred in holding that the Tribunal had not made an error of law. The hypothetical position argument 22 I agree with Carr J, whose reasons for judgment I have also had the opportunity of reading in draft, that it is unnecessary for the Court to consider the appellant's argument that the Tribunal erred in law in not addressing the question whether the farming business would have been profitable but for the appellant's incapacity. In any event, I am not persuaded that the learned primary judge was wrong in pointing out that the appellant had not laid the factual basis for the consideration of that question in the evidence he provided to the Tribunal. Conclusion 23 Because the appellant has succeeded on the first point, the appeal must be allowed. The orders made by the learned primary judge on 1 August 2001 must be set aside. For them must be substituted orders to the effect that the appeal from the Tribunal be allowed, that the matter be remitted to the Tribunal for reconsideration according to law and that the respondent pay the appellant's costs of the proceeding. It should also be ordered that the respondent pay the appellant's costs of the appeal. 24 In the circumstances of this case, it is unnecessary for the Tribunal to conduct a complete rehearing of the case. As I have said, assuming that the Tribunal accepted the evidence about the gross income of the partnership business, if it had construed the word "earnings" in s 24(2A)(e) of the VE Act correctly, it would have come to the conclusion that the appellant was eligible to receive a pension at the special rate. It is at least implicit in the Tribunal's findings of fact that it accepted that evidence. The fact that it saw the question of the applicability of s 24(2A)(e) in terms of either gross income or net income suggests that it was satisfied that the partnership had been in receipt of gross income prior to the sale of the farm in 1993. In the circumstances, it is appropriate to save time and money by adding to the orders substituted for those of the learned primary judge an order exercising the power expressly granted to the Court by s 44(5) of the AAT Act to direct the Tribunal. I would add to the order of the Court a direction that the Tribunal make a decision setting aside the decision of the delegate of the Commission and substituting a decision that the appellant is entitled to receive pension at the special rate from 31 July 1998. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gray. Associate: Dated: 20 June 2002 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N1219 OF 2001 ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LAURENCE COUNSEL Appellant AND: REPATRIATION COMMISSION Respondent JUDGES: GRAY, CARR & GOLDBERG JJ DATE: 20 JUNE 2002 PLACE: SYDNEY REASONS FOR JUDGMENT CARR J: introduction 25 This is an appeal from a decision of a judge of the Court, on 1 August 2001, dismissing an application (by way of an appeal on questions of law) to set aside a decision of the Administration Appeals Tribunal, made on 9 April 2001, which affirmed a decision of the Veterans' Review Board that the appellant was not entitled to be paid a veterans' disability pension at the special rate. The central issue in the appeal is the meaning of the word "earnings" in s 24(2A)(e) of the Veterans' Entitlements Act 1986 (Cth) ("the Act"). THE FACTS 26 The appellant served with the army from 1940 to 1946. On his return from the war he worked in various jobs before moving, in 1982, to live and work on a farm purchased by him two years earlier. The appellant farmed in partnership with his wife, working very long hours, to raise beef cattle and pigs and cultivate crops. From year to year, revenue was generated from the sale of livestock and reinvested in improving the farm. 27 In 1988 due to a deterioration in the appellant's health, he sold part of the property. At the same time he reduced his beef cattle stock by 50% and closed the piggery because he had begun to experience physical difficulty in performing various tasks. This led to a decline in the partnership revenue. By 1993 the appellant's health had deteriorated further. He experienced heart and blood pressure problems and increasing stress and anxiety. As a result, the farm was sold and the partnership dissolved. With the exception of the financial year ended 30 June 1989 the partnership made losses, according to its tax returns. Since the sale of the farm the appellant has not undertaken any other paid work. 28 As at 31 July 1998 the appellant was in receipt of a disability pension at 90% of the general rate provided for in the Act. On that date he applied for an increase in the rate of pension. A delegate of the respondent increased the appellant's pension to 100% of the general rate, but decided (among other things) not to award him the special rate. The Veterans' Review Board affirmed the delegate's decision. LEGISLATIVE FRAMEWORK 29 The Act provides for four different rates of pension, one of which is the special rate. The eligibility requirements for the special rate are found in s 24 of the Act, with specific criteria for veterans over the age of 65 (applicable to the appellant) identified in s 24(2A). The criteria relevant to this appeal are: "(d) the veteran is, because of incapacity from war-caused injury or war-caused disease or both, alone, prevented from continuing to undertake the remunerative work ("last paid work") that the veteran was last undertaking before he or she made the claim or application; and (e) because the veteran is so prevented from undertaking his or her last paid work, the veteran is suffering a loss of salary or wages, or of earnings on his or her own account, that he or she would not be suffering if he or she were free from that incapacity." the Tribunal's decision 30 The Tribunal found that the appellant satisfied all of the criteria for entitlement to the special rate except the requirements of s 24(2A)(e). In particular, the Tribunal rejected the respondent's submission that the appellant's farming activity was a hobby, rather than a business, from which the appellant derived no financial benefit and which, as a result, could not be regarded as remunerative work. The Tribunal found that the farming activity conducted by the appellant in partnership with his wife was both "remunerative work" and the appellant's last paid work. The respondent did not challenge those conclusions before the learned primary judge. 31 However, the Tribunal did not accept that the appellant had suffered a "loss of … earnings on his … own account" which he would not be suffering were he free from his incapacity. The Tribunal did not accept the appellant's contention that the product of remunerative work was gross income. It held that: "[T]he correct appreciation of earnings is net earnings, namely gross earnings less deduction of expenses. On this issue the Tribunal follows Wilcox J in Hill v Repatriation Commission [2000] FCA 929. As a consequence of this finding (sic) the Tribunal further concludes, that from the evidence adduced before the Tribunal, the Applicant, in all but one year, namely 1989, has always derived a loss or negative net earnings from his carrying on of the farming business. In the absence of any other material that would convince the Tribunal that the Applicant had received net earnings in another form from the farming enterprise, the Tribunal, on the balance of probabilities, finds that the Applicant has not suffered a loss of earnings on his own account by virtue of his war caused disabilities causing him to cease his farming activities. Indeed, on the evidence available to the Tribunal, cessation of his farming activity may have had a financial benefit for the Applicant in that continuing losses requiring capital injections ceased." 32 As the Tribunal considered that the appellant had failed to satisfy the criterion contained in s 24(2A)(e) of the Act, it held that the appellant did not qualify for a pension at the special rate. THE DECISION AT FIRST INSTANCE 33 His Honour observed that the meaning of the expression "earnings on his or her own account" had to be ascertained having regard to the statutory context in which the expression appeared. I would respectfully agree with that observation. His Honour took as a logical starting point the phrase "remunerative work". He referred to some observations of Wilcox J in Hill. In that case the Tribunal was dealing with a dog breeding activity undertaken by Mr Hill. The Tribunal had found as a fact that Mr Hill's dog breeding plan did not properly commence operation and was merely a hobby which produced some very limited income. Wilcox J held that the Tribunal had not erred in law. 34 The primary judge in this case said this (at paragraph [13] of his reasons) about the observations of Wilcox J in Hill: "The observations of Wilcox J might be viewed as suggesting that work is "remunerative" only when a profit is derived from work undertaken as part of a business. However, I doubt that his Honour intended to say that work in a business could never be "remunerative" if the business made no profit. Rather, it was the characterisation of the work as a "hobby" by the Tribunal in its findings that led Wilcox J to conclude there had been no error of law on the Tribunal's part in deciding that the veteran had not been engaged in "remunerative work" (in so far as the dog breeding was concerned)." 35 The primary judge derived assistance from a decision of the Appeal Division of the Supreme Court of Victoria in Accident Compensation Commission v Alger [1993] 1 VR 379. In that case the Full Court held that the Accident Compensation Commission had not erred in looking at the net profits of a business when assessing the respondent's "actual earnings" for the purposes of making a calculation of the amount of an entitlement to accident compensation and the amount receivable if that entitlement were redeemed. 36 His Honour acknowledged that, on one view, the Tribunal had indicated that, as a matter of law, it was bound to assess loss of earnings by reference only to the net earnings of the partnership. His Honour said that if the Tribunal had adopted that approach, it would reveal legal error because s 24(2A)(e) did not require earnings to be assessed on that basis only. His Honour concluded his reasoning on this issue as follows: "However these remarks of the Tribunal followed an analysis of the business in which the Tribunal pointed to the capital injections made by the applicant and his wife, uncertainty as to the benefits enjoyed by the applicant while operating the partnership business and the applicant's expectation of receiving payment from the business whether by income reinvestment and capital enhancement or by way of drawings, profit, tax benefits or living expenses. The better view is, in my opinion, that the Tribunal adopted the approach it did having regard to the limited material before it concerning the business. The approach it took was an approach available having regard to the generality of the language used in s 24(2A)(e). The Tribunal's adoption of this approach does not reveal legal error." 37 The second issue which his Honour considered was whether the Tribunal had erred by failing to consider the hypothetical position which would have obtained in relation to the appellant's earnings if he had not been incapacitated due to his war-caused disabilities. The appellant had submitted that the Tribunal had erred by not making an assessment of what would have happened (in terms of earnings by the appellant) had the farming business not been pared back in 1988. 38 His Honour rejected this submission on the basis that no contention along those lines had been put to the Tribunal and, accordingly, it had not erred in law by not addressing that question. the appeal 39 The appeal raised two grounds. The first was, in essence, that the Tribunal erred in law by holding that "earnings" in s 24(2A)(e) meant an amount arrived at after deducting expenses, and that the primary judge should have so found. 40 The second matter raised in the appeal was that his Honour had erred by holding that there was no error in law on the Tribunal's part in not addressing the hypothetical position which would have obtained if the appellant had been free of his incapacity. That is, would there have been a loss of earnings in such a situation? my reasoning 41 I have read (in draft form) the respective reasons of Gray and Goldberg JJ and record my general agreement with them and my particular agreement with their observations about how partnership revenue should be characterised for the purposes of the Act. 42 In the paragraph from the Tribunal's reasons which I have set out at [7] above, the Tribunal makes it very clear that it was following what it considered had been decided by Wilcox J in Hill when it stated "… the correct appreciation of earnings is net earnings, namely gross earnings less deduction of expenses". 43 In my opinion, in doing so, the Tribunal erred in law. 44 In Hill the veteran had bred two or three litters of pups and had sold about ten dogs (for between $100 and $150 each) over a period of about four or five years. The Tribunal found as a fact that this was merely a hobby and was not "remunerative work" within the meaning of that expression in s 24(1)(c) of the Act. [That sub-paragraph relevantly combines into one paragraph the comparable criteria set out in s 24(2A)(c) and (d).] Wilcox J held (see [26]) that this finding was clearly open to the Tribunal on the evidence. But his Honour went further and expressed some views about the relevance of making a net profit to the question whether a particular activity may be regarded as "remunerative work". In doing so, he referred to a hypothetical example of a situation in which a loss-making activity might still be "remunerative work" if, but for war-caused disability, it might have been successful "… in the sense of providing 'earnings on his or her own account' – that is net earnings after deduction of expenses …". In my view, Wilcox J's observation to that effect was obiter dictum. 45 I would regard the proper construction of the term "earnings" in s 24(2A)(e) as a question of law: Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 79. Accordingly, the matter is, in my view, within the Court's jurisdiction conferred by s 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth). 46 The Act contains no definition of "earnings". The Macquarie Dictionary at 670 defines earnings as "money earned; wages; profits". 47 In Abram Coal Company Limited v Southern [1903] AC 306 the question was what were the "earnings", for the purposes of the Workmen's Compensation Act, 1897 (UK), of a collier whose employer deducted each week from his wages, by agreement, sums for cleaning lamps, supply of oil, sharpening picks and checking weights. Lord Macnaghten at 307-308 said this: "The sole question which your Lordships have to consider is what is the meaning of the word "earnings" in the Workmen's Compensation Act. There is no definition of that word in the Act, nor is there anything said there about deductions. I think the word "earnings" is used, not in the sense in which economical writers use it, but in a popular sense. The object of the Act was to determine the amount to be paid by way of compensation in the case of an accident resulting in disability or death. In the event of death there is a maximum limit fixed and a minimum limit as well. In the event of disability there is only a maximum limit. Subject to the prescribed limits or limit, as the case may be, the Act takes the workman's "earnings" as the standard of compensation. It is a rough standard of course. But it is a very obvious one, and there can be no difficulty if the word "earnings" means the full sum for which the man is engaged to work. The difficulties would be endless if the Court had to find out in each case the net remuneration received by the workman, or the balance left for him to spend on himself and his family." 48 In Glazebrook v Accident Compensation Commission [1988] VR 454, the appellant was a delivery truck driver who was required to provide, at his own expense, a delivery truck suitable for his work. He was also required to meet all the outgoings on the truck including fuel and maintenance. 49 The Accident Compensation Tribunal stated a special case to the Supreme Court of Victoria, sitting as a Full Court, pursuant to s 67 of the Accident Compensation Act 1985 (Vic). In essence, the Tribunal asked the Court whether the phrase "pre-injury average weekly earnings" meant the gross rate of pay paid to him by the employer or a net rate of pay after appropriate deductions had been made in respect of the truck. 50 In a joint judgment, the Full Court followed Abram Coal Company Limited and held (see p 457) that there was nothing in the relevant section of the Workers' Compensation Act 1958 (Vic) or elsewhere in that Act to show that "earnings" was meant to bear a restricted meaning, or that the legislature intended that in calculating compensation a Tribunal was required to dissect a worker's "earnings" in order to compute the proportion which he earned from personal exertion or as "the reward for his labour". 51 Glazebrook was distinguished by the Appeal Division of the Supreme Court of Victoria in Alger. 52 I would, in turn, distinguish Alger from the present case on the basis that the relevant definition (of "current weekly earnings") in the Accident Compensation Act 1985 (Vic) required a calculation of "the worker's actual earnings during the week". 53 I would acknowledge that, depending upon the context, the word "earnings" is ambiguous in that it could mean gross earnings or it could mean a figure which results after deducting expenses from gross earnings. 54 There is nothing in Part II (the relevant Part) of the Act which requires any dissection of a veteran's earnings, whether for the purpose of quantifying any rate of entitlement, or any other purpose for that matter. In other words, the amount of the earnings lost through incapacity is irrelevant to the amount payable as the special rate. That was not the case in Alger, where actual earnings had to be calculated for the purposes not only of entitlement to weekly payments but also the amount payable on redemption. 55 In Glazebrook the Full Court observed that were there "ambiguity in the construction of earnings" in the Accident Compensation Act, such ambiguity would be resolved in favour of a worker for whose benefit the Act existed. 56 In my view the same applies here. I would not give "earnings" a restricted meaning so as to require a veteran to show a loss after calculating appropriate deductions. That alone would raise many complicated issues about what would be appropriate deductions for this purpose – a factor to which the House of Lords referred in Abram Coal Company Limited. I do not see why it should be assumed that the appropriate deductions should be those allowable under the Income Tax Assessment Act 1936 (Cth). Under that Act the economic activities of a taxpayer are regarded in terms of receipts which may be income (either under ordinary concepts or as statutorily-defined income) from which there may be deductions (not necessarily those which would be regarded as expenses according to generally-accepted accounting principles) which result in assessable income. 57 The Act is clearly beneficial legislation and, in my view, the word "earnings" should be construed favourably to the veteran: Wilson v Wilson's Tile Works Pty Ltd (1960) 104 CLR 328. Accordingly, it should be construed as meaning gross earnings, even before deducting the cost of goods sold. 58 The Tribunal found that the appellant and his wife were in partnership in conducting the farm business and that the requirements of s 24(2A)(d) were satisfied i.e. that the appellant had been undertaking remunerative work. 59 In those circumstances the appellant became entitled (jointly with his wife) to every dollar which was paid for livestock or other produce of the farm. These receipts were the product of the labours of the appellant and his wife. They earned those monies. In my view, the appellant's interest in those monies from time to time constituted "earnings" within the meaning of s 24(2A)(e) of the Act. 60 The primary judge expressed the view that the Tribunal adopted the net profits approach having regard to the limited material before it concerning the business. That may be so, but the Tribunal had before it the gross receipts figures (i.e. the earnings) of the partnership, and hence the appellant's earnings from such remunerative employment, over a period of many years. That was, in my view, all it needed. 61 In my opinion, the facts found by the Tribunal showed that the appellant satisfied the requirements set out in s 24(2A)(e) of the Act, properly construed. The Tribunal erred in law by holding to the contrary. With respect, I consider that the primary judge, in turn, erred in law in not so holding. 62 In those circumstances, it is not necessary for me to consider the second point raised in the appeal. conclusion 63 I would allow the appeal and set aside the decision at first instance. I agree with Gray J's proposal that we direct the Tribunal to set aside the delegate's decision and substitute a decision that the appellant is entitled to receive pension at the special rate from 31 July 1998. There is no fact finding left for the Tribunal to do and no discretion to be exercised. The respondent should pay the appellant's costs at first instance and of the appeal. I certify that the preceding thirty-nine (39) numbered paragraphs are a true copy of the Reasons for Judgment herein of Justice Carr. Associate: Dated: 20 June 2002 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 1219 of 2001 ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN: LAURENCE COUNSEL Appellant AND: REPATRIATION COMMISSION Respondent JUDGES: GRAY, CARR & GOLDBERG JJ DATE: 20 JUNE 2002 PLACE: SYDNEY REASONS FOR JUDGMENT GOLDBERG J: 64 I have had the advantage of reading in draft form the reasons for judgment of Gray J and Carr J. Their Honours have set out the facts and legislative framework giving rise to the appeal. I agree, with respect, with their Honours' reasons for concluding that the facts found by the Tribunal showed that the appellant satisfied the requirements set out in s 24(2A)(e) of the Veterans' Entitlement Act 1986 (Cth) ("the Act), that the Tribunal erred in law by holding to the contrary and that the learned primary judge, in turn, erred in law in not so holding. I would, however, wish to amplify my reasons for concluding that the primary judge fell into error and that "earnings" in s 24(2A)(e) does not mean an amount arrived at after deducting expenses. 65 The primary judge accepted that if the Tribunal was indicating that, as a matter of law, it was bound to determine whether there was a loss of earnings by the appellant for the purposes of s 24(2A)(e) by reference only to the net earnings of a partnership of which the appellant was a member, then the Tribunal was falling into legal error because s 24(2A)(e) did not require that earnings be assessed on that basis only. 66 However, the primary judge did not consider that the Tribunal was indicating that s 24(2A)(e) required this conclusion as a matter of law, but that rather the Tribunal was saying that the assessment of loss of earnings of the appellant by reference to the net earnings of the partnership was the approach it should take having regard to the evidence which had been placed before it. His Honour noted that the observations of the Tribunal followed an analysis of the partnership business. 67 Although the Tribunal did undertake an analysis of the business carried on by the appellant and his wife, I am satisfied that the context in which it reached its conclusion as to the manner in which it should determine whether the appellant suffered a loss of earnings on his own account was a context in which it misdirected itself as to the applicable law. 68 The Tribunal's conclusion in this respect was reached in the following terms at [35]: "In finalising this issue, the Tribunal concludes that the correct appreciation of earnings is net earnings, namely gross earnings less deduction of expenses. On this issue the Tribunal follows Wilcox J in Hill v Repatriation Commission (supra). As a consequence of this finding the Tribunal further concludes, that from the evidence adduced before the Tribunal, the Applicant, in all but one year, namely 1989, has always derived a loss or negative net earnings from his carrying on of the farming business. In the absence of any other material that would convince the Tribunal that the Applicant had received net earnings in another form from the farming enterprise, the Tribunal, on the balance of probabilities, finds that the Applicant has not suffered a loss of earnings on his own account by virtue of his war caused disabilities causing him to cease his farming activities. Indeed, on the evidence available to the Tribunal, cessation of his farming activity may have had a financial benefit for the Applicant in that continuing losses requiring capital injections ceased." 69 In this passage the Tribunal was saying that the observations of Wilcox J in Hill v Repatriation Commission [2000] FCA 929 at [26]‑[27] required the conclusion that, for the purposes of s 24(2A)(e), determining the earnings of the veteran on his own account, where the veteran was a member of a partnership, involved a determination of the net earnings of the partnership, that is to say the gross earnings of the partnership less the deduction of expenses. 70 In Hill v Repatriation Commission (supra) Wilcox J was not called upon to determine the proper construction of the expression "suffering a loss of … earnings on his or her own account". Rather, he was faced with the issue whether the veteran's dog‑breeding activities were "remunerative work" for the purposes of s 24(1)(c) of the Act and the issue whether the remunerative work which the veteran had been undertaking, which he was now prevented from undertaking by reason of incapacity, was the veteran's most recent work or employment. Wilcox J found that the Tribunal had failed to consider the veteran's work as a public servant which had ceased some time earlier. 71 Wilcox J considered whether the veteran had been engaged in remunerative work for the purposes of s 24(1)(c) and held that it was open to the Tribunal to find that the veteran's dog‑breeding activities were a hobby. Wilcox J continued at [27]‑[28]: "There may be cases where an activity in which a veteran engaged failed to return a net profit to the veteran, but may nonetheless be regarded as 'remunerative work' for the purposes of s24(1)(c). One example may be a case where the veteran attempted to establish himself or herself in a particular activity, being a continuation of remunerative work previously undertaken by the veteran, but was denied success by his or her war‑caused disability. If the decision maker was satisfied that the attempt would have been successful, in the sense of providing 'earnings on his or her own account' – that is, net earnings after deduction of expenses – but for the war‑caused disability, I see no difficulty about concluding that the veteran has been prevented, by the war‑caused disability, 'from continuing to undertake remunerative work that the veteran was undertaking' and, by reason thereof, has suffered a loss of earnings on his or her own account. However, that is not the present case." The primary judge quoted this passage in his reasons and added the emphasis referred to. 72 These observations were obiter as the Tribunal's finding that the dog‑breeding activities were a hobby, and therefore not remunerative work, was not disturbed by Wilcox J. His Honour set aside the Tribunal's decision on the ground that the Tribunal had failed to consider the veteran's earlier employment as a public servant. 73 The primary judge considered it unlikely that the emphasised observations of Wilcox J were intended to be an exhaustive analysis of the meaning of "earnings on his or her own account". I agree with this view of Wilcox J's reasoning as that issue did not fall for consideration by him. 74 The primary judge concluded that the approach taken by the Tribunal was an approach available to it having regard to the generality of the language used in s 24(2A)(e) and that the Tribunal's adoption of this approach did not reveal legal error. I consider that this conclusion discloses an error of law as the expression "suffering a loss … of earnings on his or her own account" found in both s 24(1)(c) and s 24(2A)(e) of the Act does not require a calculation of net earnings, that is to say gross earnings less expenses, particularly in a context where the veteran is a member of a partnership which derives the earnings. The ordinary meaning which has been adopted for earnings in the context of accident and industrial compensation provisions is not easily adapted to the situation where a veteran derives earnings through the structure of a partnership of which the veteran is a member. For example, in Abram Coal Company v Southern [1903] AC 306 at 308, Lord Macnaghten considered "earnings", in the context of the Workmen's Compensation Act 1897, meant "the full sum for which the man is engaged to work". In Glazebrook v Accident Compensation Commission [1988] VR 454, the Full Court of the Supreme Court of Victoria regarded this definition as apt for the Accident Compensation Act 1985 (Vic). 75 The concept of a veteran losing "earnings on his or her own account" does not fit easily within the framework of a partnership. The income or receipts or cashflow of a partnership are not, strictly speaking, earnings on the account of a particular partner albeit that one of the partners has undertaken the activity which has brought about that income or cashflow. Partnership property and assets are not, because they are partnership assets, owned by any particular partner. Section 20(1) of the Partnership Act 1892 (NSW) provides: "All property, and rights and interests in property, originally brought into the partnership stock or acquired, whether by purchase or otherwise, on account of the firm, or for the purposes and in the course of the partnership business, are called in this Act partnership property, and must be held and applied by the partners exclusively for the purposes of the partnership, and in accordance with the partnership agreement." There was no evidence of the nature of the partnership or the terms of any partnership agreement between the appellant and his wife. Nevertheless, it is appropriate to infer that the partnership was a partnership at will governed by common law provisions. 76 In Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321 the High Court said at 327: "The nature of a partner's interest in the partnership property has often been explained. The partner's share in the partnership is not a title to specific property but a right to his proportion of the surplus after the realization of assets and the payment of debts and liabilities. However, it has always been accepted that a partner has an interest in every asset of the partnership and this interest has been universally described as a 'beneficial interest', notwithstanding its peculiar character. The assets of a partnership, individually and collectively, are described as partnership property (Partnership Act 1892, as amended (N.S.W.), s 20). This description acknowledges that they belong to the partnership, that is, to the members of the partnership." In Federal Commissioner of Taxation v Everett (1979‑1980) 143 CLR 440 at 449, the majority of the High Court considered that the right to receive profits from a partnership is not separate from a partner's interest in the partnership as such. 77 Section 24(2A)(e) contemplates that because a veteran may be prevented from continuing to undertake remunerative work he or she may thereby suffer one of two types of loss. First, a loss of salary or wages in circumstances where the veteran is employed under a contract of service. Secondly, a loss of earnings or money received as a result of or by reason of the veteran's own personal exertion in circumstances where the veteran is not receiving the money as salary or wages. The common thread running through these two situations is that an income, revenue or cashflow stream available to the veteran is lost. 78 In the partnership‑type situation in which the appellant was involved the appellant was receiving, as was his wife, from time to time, earnings, money or cashflow as a result of activities which the appellant and his wife were undertaking as part of their partnership business. For example, money would be received by them as a result of the sale of livestock. At the time these funds would be received, the appellant and his wife would have access to those funds. In time, of course, at the end of a relevant accounting period, there would need to be a reconciliation of the accounts of the partnership. Money or funds to which the appellant and his wife had obtained access would have to be accounted for, and if there was shown to be a deficit in net earnings, that is to say, the partnership had been carried on at a loss, then it would be necessary for the appellant's account with the partnership to be adjusted. 79 The fact that at the end of the relevant accounting period the partnership might be showing a loss should not obscure the fact that during that year the appellant had access to the cashflow or earnings of the partnership which had been derived from his personal exertion. When the appellant was ultimately prevented by incapacity from continuing to undertake the work which he carried out in the course of the partnership, he thereby suffered a loss of earnings on his own account in the sense that he was no longer able to have access to, or take advantage of, the cashflow or earnings of the partnership business. It is not to the point that at the end of a relevant accounting period the partnership was shown in its accounts to have carried on business at a loss. 80 When s 24(2A)(e) is viewed in this way it can be said that the reference to "earnings", in a partnership context, is a reference to the money brought into the partnership, that is its cashflow, through the personal exertion of the veteran, that is, "on his or her own account". 81 I do not consider that this analysis, as the respondent submitted, confuses two concepts, namely a loss of income by the partnership business in the sense that it is trading at a loss, with a loss of earnings on the part of the appellant. Rather it concentrates on the requirement that the entitlement to a special rate pension depends on establishing not only that war‑caused injury or disease has prevented the veteran from undertaking the remunerative work he or she has been undertaking, but that it has also brought about a cessation of the generation of an income stream which hitherto existed. Put another way, the appellant's efforts of personal exertion no longer produce money. 82 The two expressions in s 24(2A)(e), "salary or wages" and "earnings on his or her own account", are intended to cover the two general ways in which a person can generate funds by personal labour or exertion, namely working under a contract of employment, or carrying on a profession, business or trade. The two expressions do not require the establishing of any particular level of salary or earnings. As Pincus J said in Gauntlett v Repatriation Commission (1991) 32 FCR 73 at 76: "As I read s 24, to qualify under it a veteran does not have to show that he has lost a 'living', but merely that he has lost salary, wages or earnings. Applying the provision in this fashion can considerably overcompensate a veteran who falls within the section's scope, as compared with other veterans who do not so fall: the extra pension paid may considerably exceed the actual earnings lost. But that seems necessarily to follow from the language used." 83 In my opinion the appeal should be allowed and the decision of the primary judge should be set aside. I agree with Gray J's proposal that the matter should be remitted to the Tribunal for reconsideration according to law with a direction that the Tribunal set aside the decision of the delegate of the Commission and substitute a decision that the appellant is entitled to receive a pension at the special rate from 31 July 1998. The respondent should pay the appellant's costs of the appeal and the hearing at first instance. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Goldberg. Associate: Dated: 20 June 2002 Counsel for the Appellant: Mr M B Smith Solicitor for the Appellant: Legal Aid Commission of NSW Counsel for the Respondent: Ms R M Henderson Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 18 February 2002 Date of Judgment: 20 June 2002