Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Sharpe v Hargraves Secured Investments Ltd [2013] NSWCA 288
• Hearing dates: 22 and 23 October 2013
• Decision date: 23 October 2013
• Before: Ward JA at [1]; Leeming JA at [73]

Decision

1. Applicant's notice of motion filed 16 October 2013 dismissed with costs.

2. Summons for Leave to Appeal dismissed with costs.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: PROCEDURE - application for referral for pro bono -assistance; STATUTES - acts of parliament - interpretation - Farm Debt Mediation Act - where deed of settlement regarding a farm mortgage entered into following mediation of dispute - whether a new farm mortgage came into existence by virtue of that deed - whether Act applies where a creditor's petition has been lodged pursuant to the Bankruptcy Act
• Legislation Cited: Farm Debt Mediation Act 1994; Supreme Court Act 1970; Uniform Civil Procedure Rules 2005
• Cases Cited: Dafaalla v Concord Repatriation General Hospital [2007] NSWSC 602; Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 177; Hargraves Secured Investments Ltd v Sharpe [2013] NSWSC 539; Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 1094; Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 1151; Hargraves Secured Investments Ltd v Sharpe [2012] NSWSC 1519; Hetherington-Gregory v Ali Vehicle Services (No 2) [2012] NSWCA 257; M v Director General, Department of Family and Community Services [2013] NSWCA 118; Myross (NSW) Pty Limited v Kahlefeldt Securities Pty Limited, [2003] NSWSC 138; National Australia Bank Limited v Landy Chen-Conway & Anor [2008] NSWSC 448; Phu v New South Wales Department of Education and Training [2011] NSWCA 119; Re F [2013] NSWCA 239; Roxo v Normandie Farm (Dairy) Pty Limited [2012] NSWSC 765; Sharpe v Heywood [2013] NSWSCA 192; Sharpe v WH Bailey & Sons Pty Ltd [2013] NSWSC 913; Waller v Hargraves Secured Investments Ltd [2012] HCA 4; (2012) 245 CLR 311
• Category: Principal judgment
• Parties: David George Sharpe (Applicant); Hargraves Secured Investments Ltd (Respondent)
• Representation: Solicitors: Applicant self represented; Mr R Mulquiney (Hargraves Solicitors) (Respondent)
• File Number(s): CA 2013/174476

Decision under appeal

• Jurisdiction: 9111
• Citation: Hargraves Secured Investments Ltd v Sharpe [2013] NSWSC 539
• Date of Decision: 2013-05-13 00:00:00
• Before: Harrison J
• File Number(s): SC 2012/041764

Judgment

1 WARD JA: Listed for hearing on 22 October 2013 was a summons by Mr Sharpe, seeking leave to appeal from a decision of Harrison J in May this year (Hargraves Secured Investments Ltd v Sharpe [2013] NSWSC 539) in which his Honour dismissed with costs an application by Mr Sharpe for declaratory relief and other orders relating to enforcement action taken by the respondent, Hargraves, in respect of a judgment entered against Mr Sharpe, with his consent, in July 2012.

2 Also before this Court was an application by Mr Sharpe, by notice of motion filed on 16 October 2013 after his summons for leave to appeal had been listed for hearing, in which, among other things, Mr Sharpe sought to vacate the hearing of his application for leave to appeal and that an order be made under rule 7.36 of the Uniform Civil Procedure Rules 2005 (NSW) in effect for the Registrar to refer Mr Sharpe to a barrister or solicitor on the Registrar's pro bono panel in order for Mr Sharpe to obtain legal assistance in the prosecution of his application for leave to appeal.

3 In his notice of motion, Mr Sharpe also sought orders staying the enforcement by Hargraves of the July 2012 consent judgment and of the 2013 judgment and orders made by Harrison J. Consequential orders were sought restraining the Sheriff from enforcing the July 2012 consent judgment. Finally, Mr Sharpe sought an order that Hargraves return items seized by the Sheriff from a farm property referred to as the Campbell's Hill property following execution by Hargraves of a writ of possession obtained in respect of that property.

4 By way of evidence in support of his notice of motion, Mr Sharpe relied on an affidavit sworn 16 October 2013. In support of his application for leave to appeal, Mr Sharpe relied on that affidavit and on two further affidavits sworn on 22 October 2013. Hargraves filed no evidence in response to the notice of motion but, with leave, its solicitor filed an affidavit in Court on 23 October 2013 on which reliance was placed in resisting the application for leave to appeal.

5 At the conclusion of argument on the application for referral for pro bono legal assistance, this Court dismissed that application and indicated that reasons would be provided as soon as practicable. The request for an adjournment of the hearing of Mr Sharpe's application for leave to appeal was refused. At the conclusion of argument on the application for leave to appeal, that application was also dismissed, together with the balance of the notice of motion filed on 16 October 2013. My reasons for the dismissal of those applications are as follows.

Background

6 This is the latest in a series of applications brought by Mr Sharpe seeking to resist the recovery by Hargraves of a not insubstantial debt (now close to $2 million). Mr Sharpe does not dispute that this amount is owing by him to Hargraves, although he disputes that Hargraves is presently able to enforce the monetary judgment or orders for possession that it obtained in relation to that debt.

7 The background to the dispute, and the history of the litigation between Hargraves and Mr Sharpe, as at 2012 was outlined by Harrison J in an earlier judgment (Hargraves Secured Investments Ltd v Sharpe [2012] NSWSC 1519), from which Mr Sharpe has lodged no appeal.

8 Briefly, Mr Sharpe defaulted under a loan agreement that had been entered into with Hargraves in 2009. That loan agreement (a copy of which is Annexure A to the affidavit sworn 23 October 2013 by Hargraves' solicitor in these proceedings) had been preceded by a number of other loan agreements going back at least to May 2004 (a copy of which is Annexure B to the affidavit sworn 27 February 2013 by Mr Sharpe in possession proceedings commenced by Hargraves in 2012).

9 Following that default, the parties participated in a mediation pursuant to the Farm Debt Mediation Act 1994 (NSW) in November 2010. That mediation resulted in the entry by the parties into Heads of Agreement dated 3 November 2010.

10 In September 2011, Hargraves obtained a certificate under s 11 of the Farm Debt Mediation Act on the basis that Mr Sharpe had failed to comply with the agreement reached at the November 2010 mediation. It is not disputed that the effect of that certificate was that the Act then did not apply to the farm mortgage in question and Hargraves was not precluded from taking enforcement action in relation to the debt the subject of the 2009 loan agreement and secured by its registered mortgage.

11 In early 2012, proceedings were commenced by Hargraves in the Possession List in the Common Law Division (proceedings number 2012/41764) seeking judgment for the amount payable under the 2009 loan agreement as at 5 December 2011 and continuing interest under that agreement as well as orders for possession of the Campbell's Hill property and another farm property known as "The Old Farm" in Dorrigo.

12 On 5 June 2012, Hargraves and Mr Sharpe entered into a Deed of Settlement by which they agreed to resolve the issues between them and compromised the possession proceedings. Under that Deed of Settlement, Mr Sharpe acknowledged that he was indebted to Hargraves in the sum of $1,867,801.76 (Recital A); that the component of that sum referable to the balance of his loan account at 5 December 2011 was secured by registered mortgage over the Campbell's Hill and Dorrigo properties (Recital B); and that he was in default of his obligations in relation to the said loan (Recital C).

13 The parties agreed (clause 1.1) that the proceedings were to be settled in accordance with the terms of a consent judgment annexed to the deed (by which Mr Sharpe consented to entry of judgment for Hargraves in the amount of the agreed indebtedness; to orders for interest to the date of judgment and thereafter and for costs; and to judgment in favour of Hargraves for possession of the said properties). The order for possession was agreed to be stayed until 15 September 2012.

14 The Deed of Settlement provided in clause 1.2 that order 3(a) of the consent judgment for possession of the Campbell's Hills property would not be enforced by Hargraves until 16 May 2014 to allow Mr Sharpe to sell or refinance the debt associated with it, with the proviso that Mr Sharpe had not committed an act of default pursuant to the terms of the deed. This was defined as the "Stay Period", during which interest was payable and Mr Sharpe had certain specified obligations both in relation to the property and in relation to the payment of interest (clause 1.4).

15 Clause 2 provided for the sale of the Dorrigo property. It was to be marketed and sold by Hargraves in the name of Mr Sharpe, without disclosure in the contract for sale as to the existence of a mortgagee in possession. There was also provision (clause 2.8) for extension of the date for the auction of the Dorrigo property (provision for which was contained in clause 3) if Mr Sharpe made payment of a specified sum prior to 15 September 2012.

16 By clause 4 of the deed, Hargraves agreed to discount and limit all legal costs in the proceedings to a specified sum, included in the judgment debt to be entered in its favour.

17 Clause 5 dealt with the payment of the judgment debt. It provided for the payment of all proceeds from the sale of the Dorrigo property to Hargraves in payment of the judgment debt and interest (clause 5.2) and a regime for the repayment of any amount of the judgment debt that remained outstanding after the earlier of the sale of the Dorrigo property and 15 December 2012.

18 Clause 7, headed "[d]efault" provided that:

7.1 In the event that Sharpe fails to make a payment pursuant to clause 5 of this Deed, [Hargraves] will be entitled to immediate possession of property "Campbell Hills" Kentucky and Sharpe by his signature hereto irrevocably consents to [Hargraves] taking possession.

19 The payments under clause 5 included quarterly interest payments during the stay period as well as the proceeds from sale of the Dorrigo property (which did not eventuate) and payments commencing from 3 months after the earlier of the sale of that property and 15 December 2012.

20 Harrison J, in his 2012 judgment (at [44]), described the scheme of the arrangement under the Deed of Settlement as being for the sale of the Dorrigo property in order to reduce Mr Sharpe's level of indebtedness, while simultaneously permitting him to retain the Campbell's Hill property for as long as possible in order to enable Mr Sharpe to exploit what was referred to as its valuable mineral potential.

21 Orders in accordance with the consent judgment were made on 5 July 2012, with the effect that the debt under the loan agreement merged into the judgment.

22 A dispute then arose as to compliance with the terms of the Deed of Settlement, each party contending that the other had failed to comply with its obligations. In practical terms, this dispute seems to have had the result that the Dorrigo property did not proceed to auction as contemplated under the Deed of Settlement. In October 2012, Hargraves sought and obtained writs of possession over the Dorrigo and Campbell's Hill properties, by way of enforcement of the consent judgment.

23 By notice of motion filed on 23 November 2012 in the possession proceedings, Mr Sharpe applied to set aside those writs of possession and sought declarations that the Deed of Settlement was valid and enforceable and that all enforcement action in the proceedings was void (or, in the alternative, an order that any action to enforce the consent judgment be stayed). That application was heard by Harrison J.

24 Mr Sharpe was successful in obtaining an order setting aside the writ of possession in relation to the Campbell's Hill property but not in relation to the Dorrigo property. His Honour held that in relation to the Campbell's Hill property the consent judgment was subject to the agreement in clause 1.2 that it be stayed until 16 May 2014. His Honour found that there was no evidence of a default pursuant to the terms of the deed that entitled Hargraves to apply for a writ of possession in respect of that property until the end of the stay period. Mr Sharpe does not appeal from this decision. Mr Sharpe has not contended, and does not now contend, that the Deed of Settlement was not a binding agreement.

25 Following the judgment of Harrison J in 2012, Mr Sharpe issued a request under s 9(1A) of the Farm Debt Mediation Act for Hargraves to participate in a farm debt mediation, specifying the security instrument as being the Deed of Settlement and the property over which security was held as being the Campbell's Hill and Dorrigo properties. The premise on which this request was based (that the Deed of Settlement constituted or gave rise to a new and distinct farm debt secured by a farm mortgage) is that on which the appeal Mr Sharpe now seeks to bring rests. Mr Sharpe contends that, because of this, the consent judgment entered in July 2012 could not be enforced by Hargraves without compliance by it with the mediation provisions of the Act.

26 Hargraves did not respond to Mr Sharpe's request for mediation and Mr Sharpe then applied, by notice of motion, for orders to set aside, or stay, the writ of possession in respect of both properties on the basis that enforcement action was precluded by the Act. It was this application that Harrison J dismissed in May 2013 and that is now the subject of the application for leave to appeal.

27 Prior to the hearing of that notice of motion, however, at least two further things of note had happened.

28 First, Hargraves, expressly on a "without prejudice" basis (presumably meaning to convey by this that its action in so doing was without prejudice to its contention that no new farm debt had been created by the Deed of Settlement) invited Mr Sharpe to participate in a mediation in relation to the deed of settlement in response to Mr Sharpe's contention that it had given rise to a new farm debt. Mr Sharpe did not accede to that request.

29 In oral submissions before this Court, Mr Sharpe contended that the insertion of the words "Without Prejudice" on the relevant forms rendered them "unauthorised". He said from the bar table that there had been a lack of goodwill at that time and that he did not believe that he was obliged to participate in the requested mediation. Mr Sharpe also said that it was his understanding that his entitlement to apply for a s 9B exemption certificate (based on the refusal of Hargraves to accede to his earlier mediation request) had "priority" over the later mediation request issued by Hargraves and that he had not applied for an exemption certificate in reliance on advice from the Rural Assistance Authority that it was not able to issue one given the existence of the original s 11 certificate.

30 Second, on an application by Hargraves, the Rural Assistance Authority on 10 May 2013 issued a new s 11 certificate in relation to the existing registered mortgage, referring to the Deed of Settlement as the relevant "facility". Mr Sharpe appeared to rely on this as an admission by Hargraves that a new farm debt came into existence by reason of entry into the Deed of Settlement.

31 Notwithstanding the submissions made as to the "unauthorised" forms used by Hargraves to request mediation in 2013 and as to the "priority" of his entitlement to apply for an exemption certificate, Mr Sharpe accepts that the s 11 certificate dated 10 May 2013 is valid. However, he maintains that enforcement action taken in respect of the consent judgment prior to the issue of this certificate is void.

32 Finally, by way of background, it is also relevant to note that on 10 July 2013, hence after the dismissal by Harrison J of Mr Sharpe's application and after the issue of the new s 11 certificate, a creditor's petition was filed in the Federal Circuit Court of Australia by a creditor (Mr Heywood), applying for a sequestration order against Mr Sharpe. The act of bankruptcy on which Mr Heywood relies in that petition is Mr Sharpe's failure to comply with a bankruptcy notice served on him on 4 February 2013 in respect of a judgment debt obtained in the District Court in Coffs Harbour. An application by Mr Sharpe for that bankruptcy notice to be set aside was dismissed by the Federal Circuit Court on 25 June 2013. Mr Sharpe has apparently lodged an appeal from the dismissal of that application. (In separate proceedings in this Court, Sharpe v Heywood [2013] NSWSCA 192, Mr Sharpe has unsuccessfully sought leave to appeal from a decision dismissing his challenge to the entry of a consent order in favour of Mr Heywood on the basis that the lodgement of the consent order recorded the terms of a new farm mortgage and was enforcement action precluded by the Act.)

33 The significance of the presentation of a creditor's petition against Mr Sharpe is that s 5(2)(b) of the Farm Debt Mediation Act provides that the Act does not apply in respect of a farmer whose property is the subject of a "bankruptcy petition presented by any person". Accordingly, Hargraves submits that, whatever might otherwise be the position in relation to the alleged new farm debt, the Farm Debt Mediation Act does not apply. As will be seen from the discussion later in these reasons, Mr Sharpe contends that s 5(2)(b) should be construed, in effect, as if it applies only where a sequestration order has been made and that it does not apply to the situation where a creditor's petition has been presented.

Proposed appeal

34 As adverted to earlier, the appeal that Mr Sharpe seeks leave to bring is premised on the proposition that the Deed of Settlement constitutes a new and distinct farm debt and farm mortgage pursuant to the Farm Debt Mediation Act (ground 1 of the draft notice of appeal) and hence could not be enforced by Hargraves in the absence of a fresh s 11 certificate relating to that particular farm mortgage (which is the gist of ground 2 of the draft notice of appeal). Mr Sharpe contends that the new s 11 certificate does not operate to give retrospective validity to the enforcement action taken prior to 10 May 2013. Accordingly, he contends that Hargraves' enforcement actions are void.

35 In the draft notice of appeal Mr Sharpe describes the relief sought as being an order setting aside the decision and judgment of Harrison J in May 2013 and granting the relief sought by Mr Sharpe in his notice of motion of 28 February 2013 (which, as noted above, included a stay of the enforcement of the July 2012 consent judgment).

36 Hargraves contends that even if the writs of possession were to be set aside, there would remain, unaffected by such relief, the consent judgment in its favour against Mr Sharpe. It submits that the Act no longer applies (either because of the grant of the new s 11 certificate or because of the presentation by Mr Heywood of his creditor's petition in relation to Mr Sharpe) and that therefore Hargraves would still be entitled to possession of the properties in question and hence the appeal is futile.

Application for referral for pro bono assistance

37 The first matter dealt with on 22 October 2013 was Mr Sharpe's application for a referral for pro bono assistance. Although Mr Sharpe's notice of motion appears to contemplate that an order pursuant to Rule 7.36 would require the provision of pro bono legal assistance to him, he accepted in the course of submissions that the rule expressly contemplates that the Registrar may be unable to arrange legal assistance for the litigant (see 7.36(4A)).

38 The evidence on which Mr Sharpe relies for his application for referral for pro bono legal assistance relates to his financial circumstances and his unsuccessful attempts to obtain legal assistance. The evidence he relies upon shows that he is currently in receipt of a CentreLink allowance. He has deposed to his unsuccessful attempts to obtain legal assistance from the legal representatives formerly appearing for him (who he says are not prepared to do so on a pro bono basis) as well as his unsuccessful attempts to obtain legal aid and pro bono assistance otherwise than under the referral procedure provided for under Rule 7.36.

39 It was not disputed that Mr Sharpe's financial position is not sufficient to enable him to obtain paid legal assistance for the hearing of his application for leave to appeal. Nor was there any suggestion that Mr Sharpe had not attempted to obtain legal assistance as recounted in his affidavit, although I note that his application for legal aid seems to have been dismissed on an application of the merit test and not, as Mr Sharpe asserts, on a financial means basis (a copy of the letter refusing legal aid was tendered by Mr Sharpe at the hearing).

40 Mr Sharpe also informed the Court from the bar table that he had been negotiating with a barrister as to whether she would be prepared to provide pro bono legal advice or appear for him in relation to the application for leave to appeal. However, he pressed his application for an order for a referral for pro bono assistance on the basis that there was no certainty that he would be able to obtain legal representation.

41 Hargraves objected to the application, its solicitor noting that Mr Sharpe had been capable of presenting his arguments to the Court in other applications and that Mr Sharpe was a regular litigant in the Supreme Court referring to the fact that applications by Mr Sharpe have been before various judges of the Supreme Court on at least seven occasions this year and noting the observations made by Adams J in Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 1151 at [8]. (Mr Sharpe takes issue with the statement made by Adams J to the effect that all of the notices of motion listed by his Honour had resulted in "dismissal or dismissal and orders for costs, none of which have been paid". It is not necessary in my opinion to enter into that particular controversy as my view on the merits of the pro bono referral application would be the same in any event.)

42 It has been recognised that the mere fact that a litigant would be assisted by pro bono legal assistance is not sufficient of itself for an order for referral to be made (Re F [2013] NSWCA 239). The Court must consider what the interests of justice require in each case. Further, while it is recognised that the Court on such an application does not deal fully with the merits of the matter in respect of which pro bono legal assistance is sought, account may be taken as to whether there is a real chance of success (Dafaalla v Concord Repatriation General Hospital [2007] NSWSC 602). It has been said more than once that the Court should be conscious of the fact that the voluntary services of the legal profession should not be imposed upon where the claim appears to be without merit or where a referral would be futile (Phu v New South Wales Department of Education and Training [2011] NSWCA 119; Hetherington-Gregory v Ali Vehicle Services (No 2) [2012] NSWCA 257; M v Director General, Department of Family and Community Services [2013] NSWCA 118; Re F).

43 Mr Sharpe contends that he has an arguable case on appeal, citing in aid of that submission the fact that on earlier interlocutory applications various judges have been prepared to accept that he had an arguable case (there referring to the decisions of McCallum J in Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 177; Campbell J, in other proceedings involving Mr Sharpe, in Sharpe v WH Bailey & Sons Pty Ltd [2013] NSWSC 913; Adamson J in Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 1094; and the making of orders by me on 8 April 2013 in proceedings between Mr Sharpe and Mr Heywood pending the determination of Mr Sharpe's ultimately unsuccessful application for leave to appeal in Sharpe v Heywood).

44 Mr Sharpe also points to the significance for him and his family if leave to appeal is not granted and he loses the properties in question.

45 For the reasons that I set out below in relation to Mr Sharpe's application for leave to appeal, in my opinion Mr Sharpe's latest appeal is bound to fail. At the time of hearing the application for referral for pro bono legal assistance, this Court had the benefit of Mr Sharpe's written submissions on that issue and his oral submissions. At that stage, my view was that the prospects of success of the proposed appeal were so slim that it was not appropriate to refer the matter for pro bono legal assistance and hence I concluded that the application should be dismissed. The balance of Mr Sharpe's notice of motion was stood over to be heard, together with the balance of his oral submissions on the application for leave to appeal, on 23 October 2013.

Application for leave to appeal

46 I have referred above to the grounds set out in the draft notice of appeal that Mr Sharpe seeks leave now to bring. They turn on the proposition that the deed of settlement gave rise to a "new and distinct farm debt" requiring compliance with the mediation provisions of the legislation. Reliance is placed by Mr Sharpe on Waller v Hargraves Secured Investments Ltd [2012] HCA 4; (2012) 245 CLR 311, where the High Court held that successive loan agreements entered into pursuant to a deed of settlement agreement, read with the registered mortgage, created distinct interests in, and powers over, the farm property that secured the obligations under the mortgage and that this gave rise to successive farm mortgages under the Act, with the consequence that no enforcement action could thereafter be taken under that mortgage by reference to obligations arising under the loan agreements entered into in accordance with the settlement agreement absent compliance with the Act.

47 At [16], French CJ, Crennan and Kiefel JJ noted that the successive discharges of the debt secured by the registered mortgage had extinguished Ms Waller's obligations arising under that mortgage. Mr Sharpe contends that, similarly, each of the loan agreements operated in effect (though not in their terms) to discharge the previous farm debt and create a new one; and that the Deed of Settlement does so as well.

48 In his written submissions, Mr Sharpe raised five matters by way of synopsis of his argument, to which he then spoke when addressing the Court in oral submissions.

49 First, Mr Sharpe submits that the Deed of Settlement constitutes the tenth loan agreement made by the parties and that it is new and distinct from the farm debt/farm mortgage constituted by the ninth (2009) loan agreement. This submission is based on the terms of the Deed of Settlement when read with the all moneys registered mortgage that secured the loans under the earlier loan agreements.

50 Reliance is placed for the purposes of this submission on various definitions of "loan", including amongst others, the provision of credit or any other form of financial accommodation. Pausing there, it is not difficult to see that the operation of the stay for which provision was made in the Deed of Settlement was to provide Mr Sharpe with financial accommodation or credit in the sense that Hargraves was agreeing on certain terms to defer the exercise of powers and rights that it had to enforce a monetary judgment to which Mr Sharpe was thereby consenting. The question, however, is whether the Deed of Settlement falls within the definition of "farm mortgage" under the Act and whether execution of the consent judgment amounts to "enforcement action" within the definition of that term in the Act.

51 "Farm mortgage" is defined in s 4 as, relevantly, including "any interest in, or power over, any farm property securing obligations of the farmer whether as a debtor or guarantor ...". "Enforcement action" is defined as meaning, in relation to a farm mortgage, "taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice ...", and expressly excluding the enforcement of a judgment obtained before the commencement of the Act.

52 Mr Sharpe places weight on the result in Waller in which successive loan agreements were held to have discharged the debts secured by a registered mortgage under earlier loan agreements, extinguishing the obligations of the borrower arising under that mortgage by reason of those earlier agreements and creating distinct interests in and powers over the farm property secured by the existing instrument of mortgage and thus the last loan agreement, read with the mortgage, was taken to have created a new interest or power over the farm property, falling within the definition of "farm mortgage for the purposes of the Act (at [16]). In that case, Heydon J noted at [66] that the expression "enforcement action" was not limited to judgments other than money judgments and implicitly included the enforcement of judgments (including money judgments) if obtained after the commencement of the Act. His Honour said that action to obtain a money judgment (and by the same reasoning action to obtain a judgment other than a money judgment) after the commencement of the Act amounts to "enforcement action" so long as it is action to enforce the mortgage.

53 In Sharpe v Heywood, Gleeson JA, with whom Barrett JA agreed, rejected as not fairly arguable an argument that the making and entry of a consent order (by which the parties had agreed to set aside a default judgment and enter judgment for a smaller sum) was an enforcement action in relation to a new farm mortgage constituted by that consent order. This was said by Mr Sharpe to have arisen from the provision in the consent order for the court to note that Mr Sharpe charged the land and consented to the lodgement of caveats over his Campbells Hill property "as security for the ... obligation to pay the Judgment debt".

54 Mr Sharpe in the present case points to clause 7.1 of the Deed of Settlement as creating a power over property and hence bringing the Deed of Settlement within the definition of a "farm mortgage" under the Act and giving rise to a new and distinct farm debt. I have difficulty with that submission. Clause 7.1 seems to me instead to amount to an acknowledgement of the rights that Hargraves would have under the consent judgment to which Mr Sharpe had agreed (at a time when there was a subsisting s 11 certificate in relation to the farm mortgage constituted by the 2009 loan agreement and mortgage) in the event of a failure to make payment in default of the regime provided for in the Deed. In that event, there would be a default for the purposes of clause 1.2 and this would have the effect that the stay provided for by that clause would come to an end.

55 The second argument made in the written submissions was that the issue and execution by Hargraves of the writs for possession constituted actions of enforcement under the deed "farm debt" and "farm mortgage" and for that reason those enforcement actions are void pursuant to s 6 of the Act. That turns on the proposition that I think is not correct that the Deed of Settlement created a new farm debt/mortgage.

56 Third, it is said that the provisions in the "deed loan agreement" granting immediate possession upon failure in the performance of an obligation for the farmer prior to, and without a right to, mediation of the default, are against the "principal and organic purpose" of the Act. As already noted, the acknowledgement of Hargraves right, pursuant to the consent judgment, to immediate possession of the properties (assuming the stay period had expired) does not involve the grant of a right.

57 Reference is made by Mr Sharpe to the intention of the legislature being to protect against "hair trigger" unilateral action being taken against farmers. However, it is difficult to see the long drawn-out process that has occurred to date as amounting to hair trigger action. What the Act provides for is a measure by which farmers will have an opportunity to enter into mediation of disputes before enforcement action is taken in relation to farm debts or, as Barrett J, as his Honour then was, said in Myross (NSW) Pty Limited v Kahlefeldt Securities Pty Limited, [2003] NSWSC 138 (at [23]), to require a mortgagee to "hold his hand on enforcement of the farm mortgage until there has been an opportunity for resolution of differences with respect to the mortgage by mediation and either an arrangement acceptable to the mortgagor and the mortgagee has been reached or the possibility of resolution is seen to be exhausted".

58 It would make a mockery of that process if the mere entry into an agreement at mediation provided an ongoing mechanism for dispute and mediation deferring ad infinitum the ability of the lender to enforce an acknowledged debt. That is not the result contemplated in Waller. Rather, it is only where the result of the mediation is to bring into existence a new farm mortgage, that the prohibition on enforcement of that fresh farm mortgage prior to compliance with the mediation process will operate.

59 That is consistent, in my view, with the observations of Heydon J in Waller at [57] as to what had been submitted would be the unsatisfactory outcome if Ms Waller's argument were to succeed. There, his Honour said:

But the unsatisfactory consequence [that a dispute about a farm debt settled at mediation might then lead to a dispute about alleged breach of the settlement terms preventing enforcement of those terms even if a s 11 certificate had been issued] would not follow if the settlement terms involved only adjustments to the farm debt such as extending the term to pay, reducing the principal or capitalising interest. These adjustments would leave the initial farm debt in place; to that initial farm debt the s 11 certificate could apply; and s 8(3) would affect the s 8(1) immunity from enforcement action.

60 Fourth, it is submitted by Mr Sharpe that, the parties having entered into an agreement with a judgment order having been attached "as a security term of that agreement" does not prevent the operation of the Act. Again, this is premised on the Deed of Settlement giving rise to a new farm mortgage.

61 Fifth, it is submitted by Mr Sharpe that the Deed of Settlement 'holds the judgment for the debt of the ninth loan' and provides mandatory provisions (clauses 3.4 and 7.1) for its enforcement, to which Hargraves should be required to adhere. This appears to relate to Mr Sharpe's contention that Hargraves failed to comply with its obligations in relation to the marketing and sale of the Dorrigo property prior to the date on which the deed provided that Hargraves could elect to proceed with the marketing and sale of that property without consultation with or recourse to Mr Sharpe.

62 In essence those submissions turn on the proposition that a new farm debt was created and that the issue of the writs of possession (and subsequent execution of those writs) amounted to enforcement in breach of the legislation.

63 Mr Sharpe maintains that leave should be granted to appeal in circumstances where this would provide a basis for the questions raised in his appeal to be determined having regard to the "black letter interpretation" of the objects of the Act as set out in Waller. It is submitted that, if leave is refused, those same questions will continue to be re-asked of lower courts with "little and defined direction" for those courts.

64 In response, Hargraves points to the fact that the Deed of Settlement expressly maintained its right to enforce the consent judgment and submits that this did not give rise to a new farm debt mortgage. Hargraves' principal position is that the debt owing under the October 2009 agreement merged in the consent judgment entered into in July 2012 and that the Deed of Settlement did not involve the creation of any new farm debt. If that is not accepted, Hargraves submits that the Deed of Settlement did not adjust or extinguish the loan agreement but was a deed in aid of the loan agreement's enforcement. Hargraves further contends that the Deed of Settlement, if it involved any adjustment or extinguishment of the 2009 loan agreement at all (which is not conceded), did no more than adjust matters of a kind that Heydon J suggested would not lead to the outcome in Waller.

65 Ultimately, it is not necessary to reach a conclusion as to whether the Deed of Settlement constituted a new farm mortgage for two reasons: first, if it did, then Mr Sharpe concedes that Hargraves is entitled to rely on the s 11 certificate issued in May 2013 at least for any enforcement action to be taken in relation to that mortgage after May 2013. Hence, the appeal in practical terms will be futile. Second, if the issue of the creditor's petition by Mr Heywood has the result that s 5(2)(b) applies, then the Act no longer applies to Mr Sharpe.

66 As to the first of those matters, Mr Sharpe submits that there is authority for the proposition that the issue of a s 11 certificate does not retrospectively validate enforcement action taken by a lender in breach of the Act. He relied for that proposition on what was argued in National Australia Bank Limited v Landy Chen-Conway & Anor [2008] NSWSC 448 (see at [11]). However, Einstein J held at [25] that the s 11 certificate having by then been issued by the authority, the plaintiff was free to continue with enforcement action under the mortgage in question. He also referred to Roxo v Normandie Farm (Dairy) Pty Limited [2012] NSWSC 765, where Adamson J held that s 11 did not operate retrospectively to validate proceedings that were otherwise a nullity because of s 6 of the Act. Her Honour held that proceedings commenced and a s 57(2)(b) notice served before mediation under the Act were a nullity.

67 Here, however, the consent judgment is not challenged by Mr Sharpe and he concedes that the new s 11 certificate means that future enforcement action based on that judgment is not precluded. Therefore the appeal seems to me to be futile and as a question of discretion leave should not be granted on that basis.

68 As to the second matter, that also seems to me to be decisive on the present application. Mr Sharpe sought to argue that a distinction was to be drawn from the use of the term "bankruptcy petition" as opposed to "creditor's petition"; from the difference in wording between the former version of s 5 and the present; and from the reference to the word "property" not "assets" in s 5. Mr Sharpe points to subsections (2)(a) and (c) as involving a determination as to the position of the farmer.

69 In my opinion those matters do not support a construction of s 5 as meaning that (2)(b) is enlivened only if the farmer presents a bankruptcy petition or if there is a sequestration order made. The section seems to me in its ordinary meaning to refer to the presentation of a petition in the bankruptcy jurisdiction and that has occurred. Nor is the fact that the creditor's petition is under challenge determinative, although it might perhaps go to the exercise of discretion if that were relevant in a particular case.

Conclusion

70 While not the only relevant factor, it is necessary (and was described in Sharpe v Heywood by Gleeson JA, with whom Barrett JA agreed, at [34] as an essential prerequisite of) for a grant of leave to appeal, that the Court be persuaded that the decision the subject of appeal is attended with sufficient doubt to warrant its reconsideration on appeal. That prerequisite is not satisfied in the present case.

71 There is no utility in a grant of leave in circumstances where the Act, in my opinion, does not now apply to Mr Sharpe, his property having been the subject of a petition presented in the bankruptcy jurisdiction by Mr Heywood. Even if that were not the case, Mr Sharpe faces the difficulty that if (as he asserts) a new farm mortgage was created within the meaning of the Act by entry into the Deed of Settlement, there has since then been a further s 11 certificate issued in relation to that, which means that it would be open to Hargraves now to obtain and enforce writs of possession in respect of the properties.

72 Hence, it was (and is) my opinion that this appeal is bound to fail and that even if it were to succeed it would be futile. For those reasons I was of the view that the application for leave to appeal should be dismissed with costs. That conclusion removes the basis on which the orders in the balance of the notice of motion were sought. In relation to the complaint by Mr Sharpe that the Sheriff has seized property over which third parties may hold security in priority to Hargraves, the dismissal of the notice of motion does not affect those third party rights.

73 LEEMING JA: I agree that Mr Sharpe's applications for referral for pro bono legal assistance, for leave to appeal, and for ancillary relief, should be dismissed with costs. I agree with the reasons and conclusions of Ward JA which I have read in draft. In deference to the importance of the matter to Mr Sharpe, and to the arguments which he has advanced (it should be said, politely and carefully), I would add this.

74 If leave were granted to appeal from the orders made by Harrison J on 13 May 2013, the appeal would not be confined to the matters in evidence before his Honour, but would include evidence of material matters which have occurred more recently: Supreme Court Act 1970, s 75A. Those matters include a certificate issued under s 11 of the Farm Debt Mediation Act 1994 on 10 May 2013 (after Harrison J had reserved judgment, although his Honour mentioned the application for the certificate at [22]-[25]), and the creditor's petition subsequently filed by Mr Heywood.

75 The starting point for considering the strength of Mr Sharpe's arguments, all of which are necessarily based upon the Farm Debt Mediation Act (because he candidly acknowledges his indebtedness and the efficacy of the settlement deed and the consent orders), are the provisions of that Act which limit the circumstances in which it applies. The Act makes enforcement action taken by a creditor to whom this Act applies void: s 6. The Act does not apply in respect of "a farmer whose property is the subject of a bankruptcy petition presented by any person" (s 5(2)(b)), or where a s 11 certificate has issued.

76 Contrary to Mr Sharpe's submission that s 5(2)(b) only applies once a sequestration order is made, in my opinion the paragraph bears its ordinary meaning. Mr Sharpe pointed to the textual difference between the current and original form of that paragraph. The Farm Debt Mediation Amendment Act 1998 replaced the words "the farmer or the creditor" by the words "any person": Schedule 1, item [3]. That amendment does not narrow the scope of the paragraph. Instead, it fends off an argument that the Act only ceases to apply if the bankruptcy petition is presented by the farmer or the particular creditor in question. The amendment makes it clear that it does not matter who the petitioning creditor is (whether it is the creditor threatening enforcement action or some other creditor); if any person has presented a bankruptcy petition, then the Act does not apply. There is good reason for that course being taken. If the Act did not expressly cease to apply where the procedures leading to bankruptcy had been invoked, there would be large questions of whether it was inconsistent with federal law.

77 Secondly, I disagree with Mr Sharpe's submission that the fact that Hargraves included the words "without prejudice" on its application for a s 11 certificate detracts from the force of the certificate which issued on 10 May 2013. There is nothing in the Act to suggest that using a form which departs (in this case, very slightly) from the precise terms prescribed by the Rural Assistance Authority, invalidates the making of the application for the certificate; cf Interpretation Act 1987, s 80. Still less is there any basis for thinking that the certificate which issued is impaired: there is no reason in this case to think that the Authority has not properly attended to the statutory question, which essentially is whether it is satisfied of the matters in s 11(1)(c).

78 The consequence is that for those two independent reasons, Mr Sharpe's prospects of success in the proposed appeal, even if his arguments about the application of Waller to the Deed of Settlement are taken at their highest, are, if the position continues as it presently is, nil. The position might conceivably change by the time the appeal was heard, if leave were granted, but there is no sound basis on the materials before the Court to think that there is any significant prospect of that occurring. Further, as noted at the outset, I share Ward JA's doubts concerning the strength of Mr Sharpe's substantive arguments, and in particular the force of her Honour's observation that the entry into a settlement agreement at a mediation is most unlikely to provide a mechanism for an endless round of dispute and mediation precluding the enforcement of an acknowledged debt.

79 Because of my views as to the underlying weakness of Mr Sharpe's substantive arguments, I joined in the Court's order refusing an adjournment and a referral for pro bono assistance. Because of my conclusions as to the inapplicability of the Act by reason of the operation of s 5(2)(b) and s 11, coupled with my views as to the weakness of the substantive argument, I joined in the Court's order refusing leave and dismissing the balance of the notice of motion.

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Amendments

25 October 2013 - [32]/9th line - the word "Sharpe" has replaced the word "Hargraves"[36]/1st line - the word "Sharpe" has replaced the word "Hargraves"[71]/2nd line - the word "Sharpe" has replaced the word "Hargraves"
Amended paragraphs: [32], [36], [71]

Decision last updated: 24 October 2013