Secretary, Department of Family & Community Services v Wallace [2002] FCA 784

FEDERAL COURT OF AUSTRALIA

Secretary, Department of Family & Community Services v Wallace [2002] FCA 784 SOCIAL SECURITY – Farm Family Restart Scheme – income – whether person's intention is relevant in determining significant income – whether income correlates with actual earnings – whether absence can nullify continuous period of farming

WORDS & PHRASES – "farmer" Farm Household Support Act 1992 (Cth) ss 3, 8B, 52 Administrative Appeals Tribunal Act 1975 (Cth)

Re Drinkwater and Secretary, Department of Family and Community Services (1999) 29 AAR 365 approved ACI PET Operations Pty Ltd v Comptroller-General of Customs (1990) 26 FCR 531 referred to SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES v MICHAEL CHRISTOPHER WALLACE Q 9 OF 2002 DOWSETT J 20 JUNE 2002 BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY Q 9 OF 2002

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

APPLICANT

AND: MICHAEL CHRISTOPHER WALLACE

RESPONDENT

JUDGE: DOWSETT J

DATE OF ORDER: 20 JUNE 2002

WHERE MADE: BRISBANE

THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the respondent'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

QUEENSLAND DISTRICT REGISTRY Q 9 OF 2002

ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL

BETWEEN: SECRETARY, DEPARTMENT OF FAMILY AND COMMUNITY SERVICES

APPLICANT

AND: MICHAEL CHRISTOPHER WALLACE

RESPONDENT

JUDGE: DOWSETT J

DATE: 20 JUNE 2002

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 Section 8B of the Farm Household Support Act 1992 (Cth) (the "Farm Support Act") provides: Subject to this Division, a person is qualified for restart income support in respect of a period if: (a) the period begins on or after the restart scheme payment commencement day; and (b) throughout the period, the person: (i) is a farmer; and (ii) is at least 18; and (iii) is an Australian resident; and (iv) is in Australia; and (c) the person has been a farmer for a continuous period of at least 2 years immediately before the period; and (d) a certificate of inability to obtain finance issued in respect of the person has effect throughout the period. 2 Section 52A of the Farm Support Act authorizes the Minister to make provision for "financial assistance to people on the sale of farm enterprises, or rights or interests in farm enterprises …". The Minister has established such a scheme. A potential recipient must be qualified for restart income support pursuant to s 8B. These proceedings concern the respondent's entitlement to both benefits. It is common ground that such entitlement depends upon whether he was a farmer for the purposes of subpar 8B(b)(i) on 23 November 1999, and whether he had been a farmer for a continuous period of two years immediately prior to that date for the purposes of par 8B(c). The Administrative Appeals Tribunal (the "AAT"), in reviewing an earlier decision of the Social Security Appeals Tribunal ( "SSAT"), held that the respondent satisfied these requirements. This is an appeal from that decision pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the "AAT Act"). 3 Section 3 of the Farm Support Act defines "farmer" to mean: A person who: (a) has a right or interest in the land used for the purposes of a farm enterprise; and (b) contributes a significant part of his or her labour and capital to the farm enterprise; and (c) derives a significant part of his or her income from the farm enterprise. 4 Obviously, whether or not a person is a farmer is very much a question of fact. This appeal is limited to questions of law. (See AAT Act, subs 44(1).) The following passages from AAT's reasons adequately summarize the evidence: 15. The respondent had left school in 1984 and had been engaged in farming from 1984 to 1990. The respondent commenced full-time employment with Centrelink (formerly DSS) in November 1991. He had purchased a farm in August 1996, in the same locality of his full-time employment with Centrelink, and commenced residence on the farm on 12 January 1998. 16. The respondent's farm was 205 acres in area (including an 80 acre lease). Sixty-five acres were cultivated for a range of seasonal crops and the balance of the farm was used for livestock grazing. 17. In response to a Tribunal question, the respondent stated that his farm was average size for farm enterprises in the area and was not a "hobby farm". 18. Because of significant problems associated with working in the Centrelink regional office, the respondent had accepted an interstate transfer with Centrelink in 1998. However, he had ended this position after four months and returned to full-time employment in his original regional Centrelink office in September 1998. During his absence interstate, the respondent said that he had returned to the farm on two to three occasions using flex or annual leave entitlements (see T3 Folio 25). 19. The respondent ceased full-time work with Centrelink in November 1999. 20. During cross-examination by Mr Kanowski, the respondent would not concede that his estimates of time for labour (T3 Folios 9 to 11) were over-estimates. … 29. The respondent stated that his labour contributions to the farm enterprise for the two year period prior to making his claim on 23 November 1999 totalled approximately 4380 hours … . In contrast the time spent in full-time employment with Centrelink was 3078 hours. On this basis, around 58% of his overall labour time was associated with his farm enterprise. … 38. The Tribunal makes the following findings of fact in relation to the relevant two year period for the respondent's claim under the Act: ® The Tribunal accepts the respondent's evidence that his farm enterprise was not a "hobby farm" but an average sized farm for the district; ® The Tribunal concludes that, on the balance of probabilities, the estimates of time for the respondent's farm-related labour contributions: cattle, crops, other tasks, business (T3 Folios 9 – 11) are plausible and represent reasonable estimates for carrying out activities associated with his mixed farm enterprise; ® That the hours spent in farm-related labour activities by the respondent exceeded the time spent in full-time employment with Centrelink (paragraph 29); ® That the predominant reason the respondent incurred a net loss for his farm enterprise over the relevant period were predominantly climatic factors and prevailing market prices for livestock rather than any failure on the respondent's part to invest labour and capital into crop and livestock production (T3 Folio 22). An analysis of deductions in Income Tax Returns over the relevant period indicates a positive intention of the respondent directed towards crop and livestock production to generate cash flow. Moreover, given this fact situation, such intention on the respondent's part could not be described as "theoretical" (but see Parrett's case); ® That the gross primary production income for the respondent for the 1997/98 taxation year was $26,665 (T7 Folio 90), the 1998/99 taxation year was $15,496 (Exhibit 3) and the 1999/2000 taxation year was $21,953 (Exhibit 5) …; and ® That the respondent's income from full-time employment with Centrelink was $36,199 (1997/98) and $39,238 (1998/99) [T7 Folios 93, 142]. … 41. Based on: (a) the gross income of the respondent's farm income relative to the off-farm income (paragraph 38); (b) applying Drinkwater's case and so take into account the respondent's intention as to their principle source of income as evidenced by effort in the farm business (paragraph 38); (c) applying the reasoning of Foster FCJ in ACI PET Operations Pty Ltd v Comptroller-General of Customs that 'significant may be regarded as meaning sufficiently large to be important'; the Tribunal concludes that the respondent derived a significant part of his income from the farm enterprise. 42. By applying the same meaning for 'significant' and applying it to the Tribunal findings of the time spent by the respondent in farm-related labour activities relative to off-farm activities (paragraphs 29, 38), the Tribunal further concludes that the respondent contributed a significant part of his labour to the farm enterprise. 43. The Shorter Oxford Dictionary defines 'continuous'as: 'Characterized by continuity; connected; unbroken.' 44. Notwithstanding that the respondent was absent interstate for four months, the Tribunal concludes that the respondent satisfies the statutory requirement that he had been a farmer for a continuous period of at least two years immediately before the period because: ® various farm-related labour activities continued (see T3 Folio 11 'Business Labour') over the entire year; ® prior to the interstate transfer, crops were planted, and livestock grazed, for the purpose of sale later in the year (see paragraph 31); and ® that he had returned to the farm on a number of occasions (see paragraph 18). 45. Accordingly, the Tribunal concludes that during the period interstate the respondent maintained a degree of control over his farm enterprise by remaining 'connected' to his enterprise. It was not the case that all links with the farm enterprise were non-existent over this period. 5 The applicant makes the following criticisms of the decision: · That the AAT wrongly took account of the respondent's "intention as to their (sic) principal source of income as evidenced by effort in the farm business". · The AAT erred in concluding that the respondent had been a farmer for a continuous period of two years prior to the relevant date notwithstanding the period during which he was absent from the farm; and · The AAT erred in finding that the respondent had returned to the farm "on a number of occasions" during the period of his absence. 6 As to the third matter, I do not accept the applicant's reading of the evidence. The ATT referred, in [18], to the respondent's claim that during his interstate absence, he returned to the farm on two or three occasions, using flex or annual leave entitlements, and to a schedule which appears at AB 25. There was substantial cross-examination on this aspect of the evidence (at AB 169 - 171). To the extent that the table at AB 25 did not support the respondent's claim, he seems to have implied that it was incomplete. It is probable that the reference to the table at AB 25 was intended to refer also to this cross-examination. I am by no means satisfied that there has been any factual error. In any event, this was not a critical aspect of the case. 7 As to the first matter of criticism, the applicant submits that whether or not a claimant derives a significant part of his or her income from the farm enterprise depends solely upon the relationship between the amounts of gross farm income and total gross income. As appears from [41] of the AAT's reasons (cited above), in considering whether the respondent's farm income was "significant" in this sense, it took into account "the respondent's intention as to their (sic) principal source of income as evidenced by effort in the farm business … ." In so doing it purported to follow the approach adopted in an earlier decision, Re Drinkwater and Secretary, Department of Family and Community Services (1999) 29 AAR 365. That decision was based upon a Centrelink manual which provided as follows: Significant income is not defined in the FHS Act and each case should be treated individually when determining what is significant income for a particular farmer. The basis of deriving the income needs to be considered. An absolute level of income or proportion of income can not be prescribed. Where an applicant primarily contributes labour to the farm and the applicant's partner also contributes labour but obtains part-time off-farm income and where the farm is not generating a sufficient level of income to meet living costs of the farm family, the labour contribution or effort become paramount. Example: A farmer with gross farm income of $10,000 last year also made $20,000 from shearing wages. Even though the farm income is less than the wages, the farm income may have been dramatically affected by a poor season or some other disaster. The farmer may have needed the off-farm employment to support the farm enterprise. 8 In Drinkwater, AAT continued: 35. The example given suggests that on-farm income may be a significant part of a person's income even though it is considerably less than the person's off-farm income. In the Tribunal's view, in the light of the purpose or object of the restart scheme, it is the person's intention as to their principal source of income which is crucial, evidenced by their labour contribution or effort in the farm business. 9 The definition of "farmer' makes no reference to "principal source of income". Use of that expression may mislead and is therefore undesirable. 10 Prima facie, par (c) of the definition invites a comparison between the amount of income from a particular farm enterprise and total income. It is common ground that gross income figures are to be used in that exercise. The Shorter Oxford Dictionary offers as synonyms for "significant" the words "important", "notable" and "consequential". The AAT referred to a decision of Foster J in ACI PET Operations Pty Ltd v Comptroller-General of Customs (1990) 26 FCR 531 in which his Honour identified the meanings "not unimportant or trivial" and "sufficiently large to be important". It is arguable that farm income may be a significant part of total income for reasons other than its proportion of that total. For example, it may be significant because it is expected to be recurrent (as opposed to occasional) and reasonably reliable, even if such expectations are not always realized. However par (c) of the definition focuses on the significance of farm income as part of the whole income of the claimant. 11 The AAT found that the respondent's farm was not a "hobby farm". I take this to be a property maintained for the purpose of recreation rather than for that of earning income. The applicant did not challenge the correctness of the exclusion of hobby farmers from potential benefit under the Farm Support Act. A hobby farmer would usually be excluded from the definition of "farmer" simply because of the limited amount of time and capital put into his or her hobby and because it would probably not yield significant income. However the expression "hobby farm" is very flexible. If the word "significant" is construed as prescribing only a comparison of the amounts of farm income and total income over a particular period and similar exercises as to labour and capital, then it is possible that a person who describes him- or herself as a hobby farmer might meet the requirements of the definition. If hobby farmers, as a class, are to be excluded from access to the benefits prescribed by the Farm Support Act, it must be for some reason other than the proportions of time and capital put in and income derived. 12 Conversely, a bona fide farmer (according to the usual meaning of the word) might not satisfy such a narrow construction. As was recognized in the Centrelink manual, farm income in any one year, or over several years, may fall to a level where the farmer or his or her partner must seek off-farm work to maintain the family, or even to keep the farm operating. Where the farmer takes on such work, as in the example given in the manual, he or she will probably reduce the amount of time spent working on the farm. Further, climatic or other circumstances might deprive him or her of the opportunity to work there. If no crop has been planted, there will be no harvest. If much of the livestock has been sold off because of drought or killed in flood, then there will be little to do in that regard. Fluctuations, seasonal and otherwise, are aspects of being a farmer. 13 Each of the three paragraphs of the definition is cast in the present tense. It is contemplated that the claimant will be a person who "contributes a significant part of his or her labour and capital to the farm enterprise" and "derives a significant part of his or her income from" it. (emphasis added) Those verbs imply a history of such conduct, continuing to the present time and not yet terminated. A person will only be accurately so described at any particular time if he or she has a history of such investment of work and capital and of receipt of such income, and has not then decided immediately to cease such involvement. The definition assumes an ongoing farm enterprise, which I take to mean a farming business. In applying the tests prescribed by the definition, one must look to the whole history of the claimant's involvement in the enterprise in question. As I have said, his or her involvement must be extant at the relevant time, even if there is a real prospect of its ceasing in the near future. Such continuing involvement will be dependent upon the claimant's intending to continue in the enterprise, at least for the immediate future. Finally, it is not necessary that the claimant's farm income be a significant part of total income in each year. The definition permits a wider view, perhaps taking account of the whole period of his or her involvement in the relevant enterprise. 14 The AAT decision refers in par (a) to the respondent's farm income "relative to the off-farm income", demonstrating that the arithmetical proportion of one to the other was treated as relevant. The decision then refers in par (b) to "the respondent's intention as to their (sic) principal source of income as evidenced by effort in the farm business … ." I have already referred to the undesirability of introducing the notion of "principal source of income" into the exercise dictated by the definition. The applicant submits that this passage also indicates an erroneous consideration of the respondent's intention as relevant to the question of whether farm income is a significant part of total income. I accept that such intention was taken into account. However I do not accept that the AAT necessarily erred in so doing. As I have demonstrated, the continuing nature of a claimant's involvement in the relevant enterprise necessarily involves his or her intentions as to future involvement. At the very least, a continuing intention that income from the farm enterprise was to be the respondent's principal source of income excluded any suggestion that he was operating a hobby farm or that he had terminated that enterprise as at the relevant point in time. I see no reason to believe that the AAT used this aspect of the evidence in any impermissible way. 15 In any event, there can be no doubt that the respondent's farm income was a significant part of his income, at least throughout the two year period. In 1997-98, it comprised 42 per cent of total gross income. In 1998-99, it comprised 36 per cent of the total. Those proportions could not be other than significant. It has not been suggested that circumstances changed relevantly between 30 June and 23 November 1999. 16 The applicant also submits that the respondent's absence from the farm during his interstate employment in 1998 deprived him of the relevant status during that period. Obviously, a farmer continues to be a farmer even if he or she is absent through illness or on holiday, provided that he or she intends to return to the farm in due course. During his absence, the respondent occasionally visited the farm. He also performed farm-related work whilst away from it. It is not necessary, in order to satisfy the definition, that a claimant work on the farm for every minute or even on every day. The AAT was satisfied that over the two year period prior to 23 November 1999, the respondent had spent more than half of his working time in farm-related labour. See [38]. The significance attributable to the four month period of physical absence from the farm was a question of fact to be considered in the light of all of the circumstances. I see no valid ground for attacking the conclusion that the respondent continued to be a farmer during that period. 17 The appeal should be dismissed with costs. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.