Re Repatriation Commission v Harry Stewart Hall and Joan Evelyn Hall [1988] FCA 89 (30 March 1988)

FEDERAL COURT OF AUSTRALIA

Re: REPATRIATION COMMISSION
And: HARRY STEWART HALL and JOAN EVELYN HALL
No. G575 of 1986
Veterans' Entitlements

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Sweeney(1), Davies(1) and Einfeld(1) JJ.

CATCHWORDS

Veterans' Entitlements - Appeal from Administrative Appeals Tribunal - application of assets tests in Division 4 of Part II of the Act - trust property held by family discretionary trust - what income reasonably derived from the property - what factors may be taken into account by the test of reasonableness - whether the Tribunal considered and dealt with the two issues raised by s.53(1) of the Act

Secretary, Department of Social Security v. Copping (1987) 73 ALR 343.

Veterans' Entitlements Act 1986 (Cth) - s.53

Administrative Appeals Tribunal Act 1975 (Cth) - s.44

HEARING

SYDNEY
30:3:1988

Counsel for the Applicant: Mr B.T. Sully Q.C. with Mr J.S. Hilton

Solicitors for the Applicant: Australian Government Solicitor

Counsel for the respondent: Mr M.D. Broun QC with Mr H. Bleicher

Solicitors for the respondent: Australian Legal Aid Office

ORDER

The appeal be dismissed.

The Tribunal's order be varied:

(a) In order 2 by substituting "direction" for
"recommendation"

(b) By adding to the end of the order -

"(b) That section 53(3) should not be applied to
reduce the service pension of H.S. Hall or
wife's service pension of J.E. Hall subject to
any relevant change of circumstances of the
veteran and spouse arising since the hearing
before the Tribunal, it being noted that the
Tribunal proceeded on the basis that no further
distributions would be made from the H.S. Hall
Family Trust otherwise than to the veteran and
for his spouse while the veteran and/or his
spouse is receiving a service pension, so that
such a distribution would be a change of
circumstances."

The applicant pay the respondent's costs of the

appeal.

NOTE: Settlement and entry of orders are dealt with in

Order 36 of the Federal Court Rules.

DECISION

This is an appeal from a decision by majority of an Administrative Appeals Tribunal ("the Tribunal") which held that, for the purposes of the application of the assets tests set out in Division 4 of Part II of the Veterans' Entitlements Act 1986 (Cth), the applicant, the Repatriation Commission, should disregard the interests of the respondents, Mr H.S. Hall and his wife, Mrs J.E. Hall, in three properties known as "Murray Pine", "Pine View" and "Lot 3" and also the value of the interests which Mr and Mrs Hall had in a Trust entitled the "Harry Stewart Hall Family Trust". Under s.44 of the Administrative Appeals Tribunal Act 1975 (Cth), the appeal is brought with respect to, and is limited to, points of law.

2. The matter arose under legislation substantially identical to that appearing in ss.6AD and 6AE of the Social Security Act 1947 (Cth), provisions which were considered by a Full Court of this Court in Secretary, Department of Social Security v. Copping (1987) 73 ALR 343. Relevant provisions of the Veterans' Entitlements Act 1986 (Cth)("the Act") provided:-

"Financial Hardship

53. (1) Where -

(a) the annual rate of a service pension, a wife's
service pension or a carer's service pension
payable to a person is calculated under or by
reference to paragraph 47(5)(b) or 48(4)(b);

(b) section 52 does not apply in relation to the
person or the Commission determines in writing
that the application of section 52 in relation
to the person should, for the purposes of this
section, be disregarded;

(c) any of the property of the person or, if the
person is a married person, of the person and
the person's spouse is property that the person,
or the person or the person's spouse, as the
case may be -

(i) cannot sell or realize or could not
reasonably be expected to sell or
realize; and

(ii) cannot use as security for borrowing
or could not reasonably be expected to
use as security for borrowing; and

(d) the Commission is satisfied that the person
would suffer severe financial hardship if this
section did not apply in relation to the person,

the Commission shall determine in writing that this
section applies in relation to the person.

(2) Subject to sub-sections (3) and (4), where
this section applies in relation to a person, the
annual rate of the service pension, wife's service
pension or carer's service pension payable to the
person shall, notwithstanding sections 47 and 48, be
determined in the following manner:

(a) the value of any of the property of the person
and, if the person is a married person, of the
person's spouse, that is property referred to in
paragraph (1)(c) shall be disregarded;

(b) there shall be deducted from the maximum annual
rate of service pension, wife's service pension
or carer's service pension that would be payable
to the person apart from the operation of
sub-section 47(4) or (5) or 48(4), as the case
requires (in this section referred to as the
'maximum rate'), an amount per annum equal to
the sum of -

(i) the annual rate of income of the
person (other than income from
property of the person or of the
person's spouse that is not property
referred to in paragraph (1)(c) or
property to which paragraph 50(1)(a)
applies); and

(ii) an amount per year equal to $26 for
each $250 of the value of the property
of the person (other than property
referred to in paragraph (1)(c) or
property to which paragraph 50(1)(a)
applies).

(3) Where the Commission is of the opinion that
the annual rate of service pension, wife's service
pension or carer's service pension applicable to a
person under sub-section (2) should, having regard to
the annual rate of income that could reasonably be
expected to be derived from, or produced with the use
of, property of the person or the person's spouse
that is property referred to in paragraph (1)(c), be
reduced, the Commission may direct that the annual
rate of service pension, wife's service pension or
carer's service pension payable to the person be
reduced by such amount per year as the Commission
determines in writing.

....

Pension reduction amounts

54. A pension reduction amount is applicable to a
person who is eligible to receive a service pension,
a wife's service pension or a carer's service pension
where the value of the property of the person exceeds
by not less than $250 -

(a) in the case of an unmarried person to whom
sub-paragraph 50(1)(a)(i) applies - $70,000;

(b) in the case of any other unmarried person -
$120,000;

(c) in the case of a married person to whom
sub-paragraph 50(1)(a)(ii) applies - $50,000; or

(d) in the case of any other married person -
$75,000,

and the amount of that pension reduction amount is an
amount equal to that excess (disregarding any part of
that excess that is not a multiple of $250)."

3. The case involved trust property held in a discretionary trust created by deed dated 30 June 1973 called the "Harry Stewart Hall Family Trust" ("the Trust").

4. The firstnamed respondent, Mr H.S. Hall, is an ex-serviceman who, together with his wife, the secondnamed respondent, owned a rice growing property, known as Murray Pine, situated near Deniliquin, consisting of 286.6 hectares acquired as a Closer Settlement Lease and held on Perpetual Lease. Murray Pine has on it a dwelling house occupied by the respondents.

5. The respondents, with the aid of an advance from the Rural Assistance Board, purchased an adjacent property known as Pine View consisting of 108 hectares. A dwelling was erected on 1.065 hectares which is known as Lot 3 and is in the names of the respondents.

6. The case before the Tribunal proceeded on the basis that the balance of Pine View, being 107.7 hectares and known as Lot 4, was part of the property of the Trust, which also included what was formerly the livestock, farming equipment and stock in trade of the respondents.

7. The respondents leased Murray Pine to the Trust and Murray Pine and Pine View are worked as one property by the respondent's son, Roger, under a sharefarming agreement with the Trust. Roger and his son live in the dwelling on Lot 3 of Pine View.

8. There were still substantial amounts owing by the respondents in respect of advances obtained by them to purchase and finance the operation of the properties. A number of the expenses of operating the properties were met out of the profits of the Trust. The Tribunal concluded that "it appears the (respondents) are really producing a little more from the property than the fair market rental" as fixed by an independent valuer, whose report was before it.

9. The trustee of the Trust is Mayrung Nominees Pty Limited of which the respondents were the sole directors and the respondents, their children and their grandchildren were the principal possible beneficiaries. The net profit of the Trust for the year ended 30 June 1985 was $3,194 after payment of $10,900 to Roger Hall as sharefarmer.

10. These facts before the Tribunal raised like issues to those considered in many decisions of the Administrative Appeals Tribunal. In Re Williamson and Repatriation Commission (1986) 10 ALD 19, a tribunal had held that, in considering whether a farmer could reasonably be expected to sell or realise a farm property and what income could reasonably be expected to be derived from the property, it was proper to have regard to the circumstances of the farmer and of other members of his family living on or deriving income from the land. Other decisions of the Administrative Appeals Tribunal subsequently took the same approach.

11. The propriety of this view was considered by this Court in Secretary, Department of Social Security v. Copping, cited above, which held it to be correct in law. The decision considered the operation of s.6AD(3) of the Social Security Act 1947, the equivalent of s.53(3) of the Act. Jenkinson J., with whom Foster and Burchett JJ. agreed, said at pp.346-8:-

"The tribunal's reasons in writing for its decisions
make it clear that in reasoning to its determination,
for the purposes of s.6AD(3), of 'the annual rate of
income that could reasonably be expected to be
derived from, or produced with the use of' each
respondent's interest in the farm land or the
interest of that respondent's spouse in that farm
land, the tribunal assumed that the only person to be
considered as a possible payer of income in respect
of occupation of the farm land or in respect of use
of the farm land was the respondents' son, Peter. It
is also, I think, clear that, in considering what
payment in respect of use or occupation Peter might
make, the tribunal assumed that the relevant inquiry
was what amount he would be able, without serious
harm to his own economic interests, to pay in all the
circumstances of his own and his family's economic
activities.

These assumptions accorded with reasons for decision
of the tribunal in Re Butler and Secretary,
Department of Social Security (s.85/94). After
hearing contradictory submissions, the tribunal in
that case had stated that the determination of what
'could reasonably be expected to be derived from, or
produced with the use of, property' for the purposes
of s. 6AD(3) required a consideration, not only of
what could be derived or produced in an open market
between strangers dealing at arm's length, but also
of what should be considered reasonable in all the
circumstances, personal as well as economic, as
between the particular applicant for a pension and
those (usually relatives) who were in fact interested
in occupying or using the property. In this case the
tribunal adopted the same understanding of what the
words just quoted from sub-section 6AD(3) required,
and the applicant's representative on the hearing of
the review acquiesced in that course. Upon that
construction of the words, the tribunal's exclusive
concern with Peter as the user and occupier of the
farm land resulted naturally from a consideration of
the history of his relations with his parents and the
history of his association with the land. However,
counsel for the applicant on the hearing of this
appeal advanced the submission that, on their proper
construction, those words designate a reasonable
expectation of what could be derived or produced if
economic exploitation of the property were sought
without regard to personal considerations or
feelings.

...

... the policy which underlies the provisions of the
section, considered as a whole, and the use of the
word 'reasonably', suggest strongly, in my opinion,
that in s. 6AD(3) the words under consideration
direct inquiry as to what annual rate of income could
reasonably be expected to be derived, in all the
circumstances relevant to a judgment as to what might
be reasonable. I think that the word 'reasonably',
in the context which sub-section 6AD(3) supplies,
directs the Secretary's attention to, inter alia, all
the circumstances, including the personal relations
of those concerned in the property, which in his
judgment might reasonably be taken into account by
'the person' or 'the person's spouse', as the case
may be, in deciding how the property was to be
exploited to produce income. And he is required, in
my opinion, to have regard to the annual rate of
income that could reasonably be expected to be
derived from, or produced with the use of, that
property in all the circumstances, including those
circumstances to which I have just referred. The
construction suggested does not direct inquiry merely
as to the annual rate of income likely in fact to be
derived from, or produced with the use of, the
property by 'the person' or 'the person's spouse', as
the case may be, but rather inquiry as to what annual
rate of income the Secretary, or the Administrative
Appeals Tribunal on a review, considers would be
likely to be derived from, or produced with the use
of, the property by that person if that person made
decisions concerning the exploitation of the property
which in all the circumstances, including personal
circumstances, the Secretary, or the tribunal on
review, considered reasonable."

12. Mr B.J. Sully QC, senior counsel for the applicant, challenged the view taken in Secretary, Department of Social Security v. Copping, and submitted that that decision did not apply to the provisions of s.53 of the Veterans' Entitlements Act but only to the provisions of the Social Security Act. However, having regard to the history of the legislation, and to the introduction of the assets test into both social security and repatriation legislation by the Social Security and Repatriation (Budget Measures and Assets Test) Act 1984, we are satisfied that the provisions in both the Social Securities Act 1947 and in the Veterans' Entitlements Act 1986 with respect to the assets test should be given a like interpretation.

13. Mr Sully submitted that s.53(1) of the Act was concerned only with the personal financial circumstances of the claimant for a pension. He submitted that the test of reasonableness did not take into account matters such as the circumstances of other members of the family who might be living on and deriving income from the farm property. In our opinion, if the legislation had intended to apply a financial test of that restricted character, it would have done so in clear terms. It did not do so. The tests prescribed in ss.53(1) and (3) specifically require that other circumstances shall be taken into account. When s.53 requires that a decision be made as to whether the claimant for a pension could not reasonably be expected to sell or realise an asset, it requires all matters that ought to bear upon the reasonableness of a decision to sell or realise to be taken into account. In doing so, the sub-section provides a separate and distinct test from the test of severe financial hardship which the sub-section also prescribes. Moreover, in Secretary, Department of Social Security v. Copping, the Court rejected a like submission. It is not correct to say, as Mr Sully contended, that the whole emphasis of the legislation is upon the personal financial capacity of the applicant for a pension.

14. In our opinion, the Tribunal was not obliged to characterize the factors which it took into account as personal and social on the one hand, and financial and economic on the other, and exclude the former from consideration. It was called upon to apply a very broad test, namely what the respondents could be reasonably expected to do, and was entitled to have regard to the whole of their circumstances.

15. In Re Fuller and Repatriation Commission (S95/136 delivered 3 November 1987), an Administrative Appeals Tribunal described the test as subjective rather than objective. However, in our opinion, it is clearly an objective test. Though the test takes account of personal circumstances, it is not dependant upon the personal view of the claimant for a pension as to what should or what should not reasonably be done. As was said by Jenkinson J. in Copping's case, the decision as to what is or what is not reasonable is one for the Secretary, Department of Social Security, or by the Tribunal on review, though it is to be made after taking all relevant circumstances, including personal circumstances, into account. Among the relevant factors to be considered are the purpose or object of the assets test provisions and the aim of the legislation to ensure that pensions are not paid to those who can afford to maintain themselves. The test of reasonableness takes into account the public or community interest as well as the interests of the claimant for a pension and of other persons with whom the claimant is associated. In Re Williamson, cited above, a Tribunal specifically referred to elements of the public interest, as indeed did a Tribunal in Re Fuller.

16. In the present case, the Tribunal considered the application of the provisions of s.53(1), the equivalent of s.6AD(1) of the Social Security Act, and applied the principles we have mentioned. In the application of s.53(1) to this case, there were two issues to be considered. One was whether the subject property was property which Mr Hall or the "Harry Stewart Hall Family Trust", which the respondents controlled, could not reasonably be expected to sell or realise. The other was whether, if so, the respondents would suffer severe financial hardship if s.53 of the Act did not apply in relation to them.

17. Mr Sully contended that, in its reasoning, the Tribunal did not clearly distinguish between the two questions it had to face. It is true that, neither in the reasoning nor in the order which the Tribunal made, were these two questions dealt with separately. Nevertheless, the Court must be careful not to look too critically at the words used by a busy Tribunal. The question which the Court must resolve is whether, as a matter of substance, the Tribunal turned its attention to, considered and dealt with the two issues raised by s.53(1).

18. In the present case, we are satisfied that the Tribunal answered the two questions. The facts which bear upon the question whether a claimant for a pension could not reasonably be expected to sell or realise assets which he holds and the facts which bear upon the question whether the claimant would suffer severe financial hardship if s.53 did not apply may, in a particular case, be substantially the same, especially when the issue arises in relation to a farming property. Such properties tend to have a capital value out of proportion to the incomes which they produce. It is the commitment of the family to the land, the involvement of succeeding generations in the one property and the lack of a sufficient return from the property to support more than the one generation which leads so often to the conclusion that the elderly parents who own the farm property could not reasonably be expected to sell or realise the property and that they would suffer severe financial hardship if s.53 were not applied. Thus, in this case, the Tribunal found that:-

"The properties together will support one family only
and that is at a somewhat meagre level."

As to the question whether Mr and Mrs Hall and the Trust could reasonably be expected to sell the properties and the other assets, the Tribunal said:-

"We also note in the case of Re Williamson the
Commission conceded that Mr Williamson could not
reasonably be expected to sell the farm now worked by
his son. Although such concession was not made in
the present case the principle is in our view
transferable. It is this principle which is
enunciated in the decision of President J.D. Davies
J. and Mr Attwood in Re Williamson. Even if such
principle was not applicable, the evidence in the
present case supports the fact that in the current
economic climate a sale of the properties would be
difficult to achieve. It provides a livelihood for
Roger Hall, the applicants' son, this being the only
type of work for which he is skilled, and it provides
a residence for the applicant which has been their
family home for many years. While not a primary
factor underpinning our decision, we nevertheless
accept that people have a right to remain living in
their normal social and geographical environment when
they reach an age when they can no longer earn an
income from their labours. In this case, being
forced to sell the property would of necessity
require the applicants to adapt to a different
lifestyle in a different locality."

As to hardship, the Tribunal said:-

"Taking into account the circumstances in which the
applicants are placed, and excluding Roger from
having a financial responsibility to provide
maintenance, we consider severe financial hardship
has been established in this case and that a
determination should be made that section 53 of the
Act applies in relation to the applicants. We come
to this conclusion acknowledging that the minutiae of
the personal expenditure of the applicants is not
known to the Tribunal. However, we know that the
only income available to the applicants for the year
1984/85 was $3,194, being the net profit as shown in
the profit and loss account of the Trust,
supplemented by motor vehicle expenses, rates,
electricity and telephone bills being paid by the
Trust, and meat supplies being provided from their
own property. Overall this still infers a very
meagre income, vastly below the poverty line."

We are satisfied that the Tribunal did as a matter of substance turn its attention to the issues which it had to consider.

19. Mr Sully also attacked the finding of the majority of the Tribunal that Mr and Mrs Hall would suffer severe financial hardship if s.53 did not apply. It was on this factual aspect that one member of the Tribunal dissented. Mr Sully submitted that there was no evidence on which the Tribunal could be satisfied that Mr and Mrs Hall would suffer severe financial hardship if s.53 of the Act were not applied in their favour. He submitted that Mr and Mrs Hall did not give detailed evidence as to their living conditions or evidence that they were unable to acquire food or clothing or other necessities of life.

20. It was, in our opinion, open to the Tribunal to find "severe financial hardship" on the evidence before it. We do not read this expression as requiring proof of destitution. The words must be read in the context in which they appear. The levels of pensions and benefits which the Veterans' Entitlements Act and the Social Security Act provide and the levels of income and assets which will bring about a reduction in the rate of pensions or benefits provide some guide to the level of income which, in Australia, is accepted as requiring the provision of government assistance. It would be wrong to read the assets test provisions as requiring destitution when the income test provisions do not.

21. What is or what is not severe financial hardship is a matter to be resolved in each case by the Repatriation Commission and, on review, by the Administrative Appeals Tribunal. As Lord Brightman, with whom the other members of the House agreed, said in Puhlhofer v. Hillingdon London Borough Council [1986] UKHL 1; (1986) 1 AC 484 at 518:-

"Where the existence or non-existence of a fact is
left to the judgment and discretion of a public body
and that fact involves a broad spectrum ranging from
the obvious to the debatable to the just conceivable,
it is the duty of the court to leave the decision of
that fact to the public body to whom Parliament has
entrusted the decision-making power save in a case
where it is obvious that the public body,
consciously or unconsciously, are acting perversely."

22. Likewise, in Waterford v. Commonwealth of Australia [1987] HCA 25; (1987) 61 ALJR 350 Brennan J. said, at 359:-

"A finding by the AAT on a matter of fact cannot be
reviewed on appeal unless the finding is vitiated by
an error of law. Section 44 of the AAT Act confers
on a party to a proceeding before the AAT a right of
appeal to the Federal Court of Australia 'from any
decision of the Tribunal in that proceeding' but only
'on a question of law'. The error of law which an
appellant must rely on to succeed must arise on the
facts as the AAT has found them to be or it must
vitiate the findings made or it must have led the AAT
to omit to make a finding it was legally required to
make. There is no error of law simply in making a
wrong finding of fact.".

23. The majority of the Tribunal reviewed the evidence before them and came to the view that the income of Mr and Mrs Hall was low, "vastly below the poverty level". They found that Mr and Mrs Hall would suffer severe financial hardship if s.53 of the Act were not applied in their favour. We find no error of law in their approach, having regard to the facts before them.

24. For these reasons, the appeal must fail, save that counsel were agreed that the Tribunal's order be varied as follows:-

"(a) In order 2 by substituting 'direction' for
'recommendation'.

(b) By adding to the end of the order:

(b) That section 53(3) should not be applied to
reduce the service pension of H.S. Hall or
wife's service pension of J.E. Hall subject to
any relevant change of circumstances of the
veteran and spouse arising since the hearing
before the Tribunal, it being noted that the
Tribunal proceeded on the basis that no further
distributions would be made from the H.S. Hall
Family Trust otherwise than to the veteran and
for his spouse while the veteran and/or his
spouse is receiving a service pension, so that
such a distribution would be a change of
circumstances."

25. The applicant should pay the respondents' costs of the appeal.