Farm Family Restart Grant - definition of farmer - whether farmer for period of two years immediately prior to date of claim - decision set aside.

Farm Household Support Act 1992, sections 3(2); 8B

Re Drinkwater and Secretary, Department of Family & Community Services (AAT Decision No. 0408 : 9.6.1999)

1. This is an application by Mr Graeme Catto for review of the decision of the Social Security Appeals Tribunal ("SSAT") dated 18 July 2000, being a decision to reject a claim by Mr Catto, for Farm Family Restart Grant.

2. At the hearing Mr Catto was represented by his solicitor Mr A.G. Lyall. Mr M. Todd, Advocacy and Administrative Law Team, Centrelink, appeared for the respondent.

3. The Tribunal had before it documents ("the T documents") lodged by the respondent, pursuant to section 37 of the Administrative Appeals Tribunal Act 1975. Other material, to some of which it may be necessary to refer, was also received in evidence.

4. Mr Catto, the applicant, was the only person called to give evidence at the hearing.

5. The issue to be determined by the Tribunal is whether Mr Catto is a farmer as defined in section 3(2) of the Farm Household Support Act 1992 ("the Act").

6. The background to this application is conveniently set out in a statement of facts and contentions lodged by the respondent. The facts, which it is understood are not disputed, are as follows:

(i) Mr Catto lodged a claim for disability support pension on 15 July 1993 (T16, pp138-9).

(ii) Mr Catto advised that he had ceased work in July 1993 (T18, p143).

(iii) Mr Catto was issued with a notice dated 3 August 1993 which required him to advise if his income became more than $45.00 per week, if he recommenced work or started self employment (T19, pp147-149).

(iv) Mr Catto was transferred to age pension as from February 1995. Mr Catto was issued with a notice dated 3 February 1995 which required him to advise if his income became more than $76.00 per week, if he recommenced work or started self employment (T20, pp150-152).

(v) No advice was provided in relation to the above issues.

(vi) Mr Catto lodged a claim for farm family restart grant on 22 July 1999 (T3, pp10-22).

(vii) Mr Catto advised that no crops had been planted during 1992-1999, all sheep stock had been sold or destroyed and leases relinquished, his son was running his stock on the remaining lease, listed his medical history and advised farm machinery had been sold to pay solicitor's costs (T3, p14).

(viii) Mr Catto also provided financial information for a lengthy period (T5, pp26-57).

(ix) Mr Catto gave evidence to the SSAT about his circumstances.

(x) Further details were provided by correspondence dated 14 November 2000 from Cahills, Barristers & Solicitors.

(xi) Taxation returns for the financial years 97/98 & 98/99 were provided by correspondence dated 14 December 2000 from Cahills, Barristers & Solicitors.

7. Section 8B of the Act sets out the qualifications for farm help income support, as follows:

"Subject to this Division, a person is qualified for farm help income support in respect of a period if:

(a) the period begins on or after the farm help scheme payment commencement day; 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."

8. Section 3(2) of the Act states that:

(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."

9. The contentions of the respondent in this matter are as follows:

(a) Qualification for payment is dependant on Mr Catto having been a farmer for a continuous period of two years prior to claim.

(b) Was Mr Catto involved in a farm enterprise for the period in question? The lack of crops, stock reduction, lease relinquishment, selling of machinery and Mr Catto's health suggest that the situation is not one of an ongoing income producing business.

(c) In the alternative if there is a farm enterprise Mr Catto has not contributed a significant part of his labour or capital to the enterprise. Due to his health problems Mr Catto's labour cannot be considered significant. The contributions made by Mr Catto's son, both in labour and capital, were minor in the context of two years or were for the son's benefit.

(d) There are inconsistencies in the evidence relating to what income Mr Catto derived from the farm enterprise.

(e) Even if the figures provided on the tax returns are relied on it is contended that the farm income is not significant.

(f) On the evidence Mr Catto had already ceased farming prior to 1997.

10. Mr Catto contends that he is a farmer as defined in section 3(2) of the Act.

11. Mr Catto commenced farming in 1948, and at all material times he was in partnership with his wife.

12. As at 23 July 1997 he had interests in two farming properties, namely:

* Crown Allotment 5 Section 5 Parish of Inglewood, a property consisting of 158 acres ("the farming property"); and

* A grazing licence over 1732 acres in the reserved forest in the Parish of Kingower, pursuant to Licence No. 5735 ("the grazing property").

13. In 1992 Mr Catto was in dispute with the National Australia Bank ("the Bank") over a primary industry bank loan. He issued proceedings against the Bank in December 1992, and the Bank instituted a counter claim in a sum of $500,000.

14. In December 1998 Mr Catto and the Bank reached agreement. Pursuant to the agreement Mr Catto was required to pay the Bank a sum of money by about June 1999.

15. In 1993 Mr Catto experienced a lot of pain in his hip joints, which were eventually successfully replaced in February 1994. Even so, it was not until some months later that he was free of pain and recovered his mobility.

16. In about May 1997 Mr Catto entered into an agreement with his son Glenn concerning the farming property. The arrangement was that he and Glenn would farm the property by growing lucerne for sale, and running ewes on the property for wool. The sale of fat lambs would generate income to pay local Council rates and water rates in respect of the property. The arrangement would also enable Glenn to be repaid in respect of back rates.

17. The arrangement in respect of the farming property also included the installation of a pump on the property, so as to make the property a viable farming enterprise, and to return an amount to Glenn for his efforts in achieving these goals.

18. The financial agreement between Mr Catto and Glenn was that Glenn would receive the gross proceeds from the farming activities on the farming property; that Glenn would pay all the expenses associated with the farming property, and that Mr Catto and Glenn would then disburse any net funds in accordance with their agreement.

19. Mr Catto explained the position in respect of the farming property vis-à-vis the Bank, stating:

"We had a bit of a headache in the sense that - because I had been blacklisted with the stock firms because I owed them money still, you are not allowed to go and get sheep. That puts the end to that and technically you could not put a crop in because if the bank beat us on any occasion, well, they were going to sweep the crop off us as well. So we were left with only a grazing attitude. So if, really, we got into a nitty gritty with the bank we could pull the stock off. I didn't have any stock because all mine had gone back to the stock firm to try and pay them back as much as we could, and we still had a debt of 30,000 or close to that with Nevins and they were marvellous about it, because they didn't push it home."

Mr Catto further explained that once he had settled with the Bank there was a need to do some work on a pump:

"I had put several pumps in on the Loddon over the period of my lifetime. I think four in all on different, varying blocks, but this particular, on my home block, it needed the pump upgrading and - to bring it into action, but we also had 30 acres lucerne, which would have been sown in the late 1980s and it was a beautiful standard of lucerne, and the only way we could get it going was to get some water onto it. So I had to think up an idea with Glenn that could not only renovate the pump or get it back in order, but also work some arrangement where Glenn's sheep could come onto the property and on some sort of a basis - well, on a share basis, if you want to call it that, he would have to do all the work because I was limited."

20. It was Mr Catto's evidence that due to his illness property rates had not been paid for some years. As a result of this the Shire intended to sell the property. Mr Catto approached the Bank for assistance but this was refused. Mr Catto then asked Glenn for assistance, with the result that an amount of some $7,800.00 was paid to the Shire. However, he was still in debt to Glenn. It was because of this situation that Mr Catto and Glenn entered into the agreement in about May 1997.

21. Mr Catto said that in 1997 he was physically limited in what he could manage to do in terms of heavy farm work. He therefore looked to Glenn for assistance, sharing the heavy work:

"I would do what I could and Glenn would do what he could, but I had the experience on the stock because we used to lamb 2000."

22. As at May 1997 Glenn was working as a sub-contractor for AH Plant Pty Ltd, and as a hay carter, and therefore not in a position to work the farming property on a full time basis.

23. In accordance with their agreement, Mr Catto and Glenn grew lucerne and ran Glenn's ewes on the farming property during the period 23 July 1997 to 22 July 1999.

24. At the commencement of his evidence Mr Catto attested to the truthfulness and accuracy of the content of a statement of facts and contentions lodged with the Tribunal and dated 15 March 2001. The statement sets out in some detail the work undertaken by Mr Catto pursuant to the May 1997 agreement with Glenn:

(i) Mr Catto owned a 6" Kelly flood pump which required substantial rebuilding. Mr Glenn Catto purchased the necessary parts and together Mr Catto and Mr Glenn Catto rebuilt and installed the pump on the farming property in August 1997.

(ii) Mr Catto assisted with the design of the pump. He put grease and vasoline onto the bolts which hold the pump in place. He mixed concrete for the foundations of the pump structure. He helped to build the support trusses for the pipe (3) including welding 2 inch pipe supports. He estimates that this work took approximately 26 hours.

(iii) Approximately 30 acres of the farming property had been lasered in the late 1980's and lucerne stands had been sown.

(iv) During the 1998 and 1999 financial years Mr Catto and Mr Glenn Catto had 4 cuts of lucerne in the 1998 financial year and 2 cuts in the 1999 financial year. This involved watering the lucerne on average each 10 to 14 days during the period September to March in both the 1998 and 1999 financial years. Each watering occupied approximately 36 hours and involved the running of a tractor to work the pump. Mr Catto did at least half of the watering. Mr Glenn Catto cut the lucerne. Mr Catto then raked the lucerne into rows. On each occasion this task took approximately 2 to 3 hours. Mr Catto and Mr Glenn Catto then together collected the bales of lucerne. This would also take between 2 and 3 hours on each occasion. Mr Glenn Catto sold the bales of lucerne.

(v) In August 1998 Mr Glenn Catto purchased 1.28 tonnes of superphosphate. Mr Catto and Glenn Catto spread the superphosphate on the farming property on 24th August 1998. This took approximately 2 hours.

(vi) The Department of Natural Resources and Environment requires farmers to control Bathurst Burrs, thistles and other noxious weeds.

(vii) In the 1998 financial year Mr Catto spent approximately 28 hours chipping out Bathurst Burrs and other noxious weeds from the farming property. In the 1999 financial year he spent approximately 14 hours chipping out the noxious weeds. In approximately April 1998 and April 1999 Mr Catto spent approximately 1 to 2 hours burning the noxious weeds.

(viii) In accordance with the agreement Mr Glenn Catto ran 330 ewes on the farming property in the 1998 and 1999 financial years. The ewes produced approximately 274 lambs in each year.

(ix) In April 1998 and March 1999 Mr Catto assisted contractors crutch the sheep. Mr Catto's job involved working as a shed hand including sweeping and penning up sheep. This took approximately 1 day in each year. In April to May of 1998 and 1999 Mr Catto assisted with the birth of the lambs. This involved attending at the farming property on average for one to two hours each day checking ewes, assisting with lambing and shooting vermin. In May and June of 1998 and 1999 Mr Catto and Mr Glenn Catto spent 1 day in each year injecting lambs, castrating lambs and ear marking the lambs. In April to May of 1998 and 1999 Mr Catto spent approximately 6 to 8 weeks feeding the stock approximately 3 times a week. This took approximately 1 hours on each occasion. In August 1997 and August 1998 Mr Catto assisted with the shearing. His job was as a shed hand sweeping, skirting, penning up branding and general maintenance. This work occupied approximately 2 and a half days in each year. Between October 1997 and January 1998 and October 1998 and January 1999 Mr Catto and Mr Glenn Catto yarded the lambs for sale including dagging the lambs. This occurred on approximately 6 occasions during the period and on each occasion took between 2 and a half and 3 hours. In December 1997 and December 1998 Mr Catto and Mr Glenn Catto dipped the sheep and lambs. This took approximately 2 days."

It is noted that the oral evidence of Mr Catto in relation to each of the activities set out above is consistent with the statements contained in his statement of facts and contentions.

25. In his statement of facts and contentions Mr Catto stated that, as a result of his agreement with Glenn, and their respective labour and efforts, the following gross income was earned:

26. Reference has already been made to the difficulty experienced by Mr Catto during 1993 and 1994 in relation to his hips. It was Mr Catto's evidence that during 1997-1998:

"Well, I had an extremely bad heart turn - after all the bank - I think - I have got to be realistic, the bank started to take a toll on me. I thought we were going to beat them, but it wasn't quite like that and it started to grab my health. And I didn't realise until about May of '97 that I had a problem, but I went to run up a flight of stairs and I got a massive pain starting to go across here and then I went to the base hospital and got checked on the exercise test and they found that my heart wasn't good, and they had me on some medication at that stage, but it wasn't effective. And in the springtime, September sometime, I think it was, I had a massive turn at about half past 12 in the day and I was on the table up at the Bendigo base here until 7 o'clock at night and it was touch and go whether I came around."

When asked whether during this period he was able to work full time, Mr Catto stated:

"After that time you are limited, right, but that was the first heart turn and then I had a second one. I got tested at Mr Alvernia in February and they found I had a partial block and they were going to get something and put a spring in it and then 10 days later I took another one and I finished up in the Austin that time, so that was - then they said there is nothing else but bypass. So I had to go through a bypass and all the rest story."

27. Mr Catto estimated that in terms of labour on the farming property he would have done about 40 per cent, with Glenn doing 60 per cent. However, the number of hours worked would vary from week to week.

28. As indicated earlier, as at 23 July 1997 Mr Catto, in addition to the farming property, had a grazing licence over 1732 acres, referred to as the grazing property. He explained that at the time he had retained the lease because he had a firm belief that he could "beat the Bank":

"I didn't think they were going to get the farm off me, I can be quite candid. I really didn't think - I thought we could come to some arrangement where I didn't really think I would be paying them any money. I didn't really think that because they had stolen ours and I mean, okay, that's pretty serious stuff. And we must have had a pretty good case on for them to something like knock off 500,000, because that's about the figure I did. Now, they are not going to give in that easy, knowing a bank. We really must have had a top case on them, but we couldn't finish it because it was going to cost us 80 to 100 thousand to take it to the last stage and we didn't have that money. So we had to settle and the worst scenario we could was 160,000, but after that, some of that money had been taken, so we really didn't get out money back."

29. It was Mr Catto's evidence that over a significant number of years he purchased plant and equipment in respect of his various farming enterprises, the reason being that it is not possible to carry out most farming enterprises without plant and equipment.

30. In the 1998 financial year farming plant and equipment was sold in the total sum of $7,080, and in 1999 in the total sum of $9,615. Mr Catto stated in evidence that these amounts are correct, and it is noted that the items of plant and equipment sold in each of the two years are detailed in an attachment to Mr Catto's statement of facts and contentions (Exhibit A3).

31. It was Mr Catto's assertion that he did not engage in any labour for reward, save for the labour to which reference has been made above. Consequently, having regard to the total labour which he was able to engage in, Mr Catto submitted that the farm enterprise was the only focus of his labour and effort, and that all of his labour was contributed to the farm enterprise.

32. Mr Catto further asserted that if a notional figure was allocated to his labour of over $20 per hour, then he would have earned a further sum in excess of $12,000 for the relevant period. Given that he was beset with serious health problems, he submitted that his labour component was significant.

33. Mr Catto submitted that the gross income he and Glenn derived from the farming property exceeded his pension entitlement. He asserted that, consequently, he derived a significant part of his income from the farm enterprise.

34. Having considered the whole of the material before it, the Tribunal finds that Mr Catto is a farmer within the meaning of section 3(2) of the Act.

35. There is no dispute that as at 23 July 1997 Mr Catto had a right or interest in land used for the purposes of a farming enterprise.

36. From the evidence before this Tribunal, which appears not to be disputed by the respondent, it is clear that Mr Catto contributed a significant part of his labour and capital to the farm enterprise. It is also clear from the evidence that Mr Catto derived a significant part of his income from the farm enterprise, and that this was so notwithstanding his receipt of age pension.

37. The Tribunal further finds that Mr Catto is qualified for farm family restart grant pursuant to the provisions of section 8B of the Act. Implicit in this finding is the Tribunal's acceptance that Mr Catto was a farmer and that he was so for a continuous period of at least two years immediately prior to the date of his claim. The remaining qualifications set out in section 8B do not appear to be in dispute.

38. It should be recorded that in relation to the issue of whether or not Mr Catto derived a significant part of his income from the farm enterprise, the Tribunal notes that the Centrelink Manual states at paragraph 3.1.5 as follows:

(a) When determining an application gross income figures should be used; and

(b) Where the farm is not generating a sufficient level of income to meet the living costs of the farm family, the labour contribution or effort becomes paramount.

39. The decision of the Tribunal will be that the decision under review will be set aside and that the Tribunal will substitute therefor its decision:

(a) That Mr Catto satisfies the definition of farmer pursuant to section 3(2) of the Act; and

(b) That Mr Catto was a farmer for a period of at least two years immediately prior to the date of his claim, as required by section 8B of the Act;

(c) That Mr Catto satisfies the requirements of section 8B of the Act for Farm Family Restart Grant.

I certify that the 39 preceding paragraphs are a true copy of the reasons for the decision herein of:

Signed: .....................................................................................

Solicitor for the Respondent Administrative Law Team, Centrelink