Waller v Hargraves Secured Investments Ltd

• Jurisdiction: Australia Federal only
• Judge: French CJ,Crennan,Kiefel JJ.,Hayne J.,Heydon J.
• Judgment Date: 29 February 2012
• Neutral Citation: 2012-0229 HCA B,[2012] HCA 4
• Court: High Court
• Docket Number: S223/2011
• Date: 29 February 2012

[2012] HCA 4

HIGH COURT OF AUSTRALIA

French CJ, Hayne, Heydon, Crennan and Kiefel JJ

S223/2011

Roslyn Edwina Waller

Appellant

and

Hargraves Secured Investments Limited

Respondent

Representation:

D J Higgs SC with J B King for the appellant (instructed by Jackson Lalic Lawyers)

D M Loewenstein with A R A Kuklik for the respondent (instructed by Hargraves Solicitors)

Farm Debt Mediation Act 1994 (NSW), ss 3, 4(1), 5(1), 6, 8, 9, 10(1), 11(1), 14, 17.

Real Property Act 1900 (NSW), s 3(1).

Interpretation Act 1987 (NSW), s 34.

Waller v Hargraves Secured Investments Limited

Mortgages — Mortgagee's remedies — Farm Debt Mediation Act 1994 (NSW) (‘Act’) — Creditor must provide notice of intention to take ‘enforcement action’ under ‘farm mortgage’ (‘Notice’) — Notice must specify availability of mediation regarding farm debts — Creditor unable to take enforcement action until NSW Rural Assistance Authority (‘Authority’) issues certificate that Act does not apply because satisfactory mediation has occurred — Borrower mortgaged land to secure all monies owed under loan agreement — Borrower defaulted and lender provided Notice — Borrower requested mediation under Act — Following mediation parties executed second and third loan agreements, discharged previous debts and created new farm debts — Authority satisfied of successful mediation and issued certificate certifying that Act did not apply to farm mortgage — Borrower defaulted in making interest payments due under third loan agreement — Whether successive farm debts created new ‘farm mortgage’ requiring satisfactory mediation before creditor could pursue enforcement action — Whether separate Notice required for enforcement action under subsequent loan agreements — Whether certificate issued by Authority void — Whether lender's entitlement to possession of secured land and outstanding monies barred.

Words and phrases — ‘enforcement action’, ‘farm debt’, ‘farm mortgage’, ‘in respect of the farm debt involved’, ‘in respect of the farm mortgage concerned’.

ORDER

• 1. Appeal allowed.

• 2. Set aside the order of the Court of Appeal of the Supreme Court of New South Wales dated 11 November 2010 and in its place order that:

  • (a) the appeal to that Court be allowed with costs; and

  • (b) the orders of the Supreme Court of New South Wales dated 12 November 2009 be set aside and in their place order that:

    • (i) the proceedings be dismissed; and

    • (ii) the respondent, Hargraves Secured Investments Limited, pay the costs of the appellant, Roslyn Edwina Waller, in that Court.

French CJ, Crennan and Kiefel JJ.

Introduction

1 The Farm Debt Mediation Act 1994 (NSW) (‘the Act’) has as its object ‘the efficient and equitable resolution of farm debt disputes.’1 In aid of that object ‘[m]ediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.’2 This appeal concerns the application of the Act to enforcement action under a farm mortgage securing advances made as part of a settlement which was reached following mediation of a farm debt dispute in accordance with the requirements of the Act.

2 The Act provides mechanisms, explained in detail in the reasons of Heydon J, which condition the enforceability of a farm mortgage upon 21 days prior written notice by the creditor, under s 8(1), in response to which the farmer may request ‘mediation concerning the farm debt involved.’3 The bar to enforcement is lifted if a certificate is in force under s 11 in respect of the farm mortgage concerned 4. Section 11 provides for the issue by the New South Wales Rural Assistance Authority 5 (‘the Authority’) of a certificate that the Act does not apply to a farm mortgage if the farmer is in default under the farm mortgage and, relevantly, if the Authority is satisfied that satisfactory mediation has taken place in respect of the farm debt involved 6. The Act applies to creditors ‘only in so far as they are creditors under a farm debt.’7 Enforcement action taken by a creditor to whom the Act applies otherwise than in compliance with the Act is void 8. ‘[E]nforcement action, in relation to a farm mortgage’ is defined in the Act to mean ‘taking possession of property under the mortgage or any other

action to enforce the mortgage’ 9. Three other definitions of importance in the Act are 10:

‘ creditor means a person to whom a farm debt is for the time being owed by a farmer.

farm debt means a debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage.

farm mortgage includes any interest in, or power over, any farm property securing obligations of the farmer whether as a debtor or guarantor, including any interest in, or power arising from, a hire purchase agreement relating to farm machinery, but does not include … [the exclusions are not relevant for present purposes].’

3 In this case a certificate was awarded to a creditor under s 11 of the Act following a mediated settlement of a dispute arising out of the breach of a loan agreement which had given rise to a farm debt. A second loan agreement was negotiated as part of the settlement and a third loan agreement negotiated when the second loan agreement was breached. Monies advanced under each loan agreement were secured by the same ‘all monies’ mortgage. The appellant farmer, Roslyn Waller, was the borrower and mortgagor. The respondent, Hargraves Secured Investments Limited (‘HSI’) was the lender and mortgagee.

4 The primary question on appeal is whether the certificate issued under s 11 lifted the bar on the enforceability of the mortgage as security for the advances made under the third loan agreement. The answer to that question is no. A second question is whether the bar on the enforceability of the mortgage precluded recovery of a money judgment framed on the basis of the covenants in the mortgage. The answer to that question is yes. For the reasons given by Heydon J and the reasons which follow, the appeal should be allowed. The factual and procedural history and the approaches taken by the primary judge in the Supreme Court of New South Wales and by the New South Wales Court of Appeal are described in Heydon J's reasons 11.

The appeal and the contentions

5 On 1 November 2007, HSI instituted proceedings in the Common Law Division of the Supreme Court of New South Wales for possession of Ms Waller's farm. It also sought judgment against her in the sum of $754,811.38. On 12 November 2009, Harrison J gave judgment for HSI including an order for possession and a money judgment for $906,667.93. Ms Waller was ordered to pay HSI's costs. Her appeal against the judgment of Harrison J was dismissed by the Court of Appeal (Tobias and Macfarlan JJA, Sackville AJA) on 11 November 2010 12.

6 Special leave to appeal against the judgment of the Court of Appeal was granted on 10 June 2011 by Gummow and Hayne JJ.

7 Ms Waller's primary argument rested upon the proposition that the proceedings instituted against her by HSI concerned a ‘farm mortgage’ within the meaning of the Act that was not the farm mortgage in respect of which the s 11 certificate of 20 October 2006 had been issued. Underlying that argument was the proposition that the third loan agreement gave rise to a farm debt distinct from that arising under the first loan agreement which had been the subject of mediation. On the findings of the Court of Appeal the first loan agreement had been superseded by the second loan agreement which had, in turn, been superseded by the third loan agreement. The debt arising under the third loan agreement, it was submitted, gave rise to a new and distinct ‘interest in, or power over’ Ms Waller's farm and thereby a new and distinct ‘farm mortgage’ in favour of HSI.

8 HSI sought leave to file, out of time, a notice of contention that Tobias and Macfarlan JJA, in the Court of Appeal, had erred in treating the second loan agreement as discharging the obligations under the first loan agreement and the third loan agreement as discharging the obligations under the second loan agreement. For the reasons give by Heydon J leave to file that notice of contention should be refused 13.

Construction of farm mortgage

9 The term ‘farm mortgage’ is defined in the Act broadly and non-exhaustively. It is sufficiently broadly defined to cover a mortgage at general

law which includes ‘a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given.’ 14 It encompasses a ‘mortgage’ within the meaning of the Conveyancing Act 191(NSW) which includes ‘a charge on any property for securing money or money's worth’ 15. It also covers a Torrens System mortgage defined in the Real Property Act 1900 (NSW) (‘the Real Property Act’) as ‘[a]ny charge on land (other than a covenant charge) created merely for securing the payment of a debt.’ 16 The latter definition and the provisions of the Real Property Act attract to a mortgage registered under that Act the description in English Scottish and Australian Bank Ltd v Phillips17:

‘Under the system of registration … the statutory charge described as a mortgage is a distinct interest. It involves no ownership of the land the subject of the security.’

10 The definition of ‘farm mortgage’, however, extends beyond the general law and statutory categories mentioned above. It extends to an ‘interest’ or a ‘power’ over farm property securing obligations of the farmer ‘as a debtor’. It thereby includes an interest or a power securing an obligation to repay, or pay interest on, a ‘farm debt’. If an ‘interest’ or ‘power’ is granted by a farmer as security for repayment of a farm debt and the debt is thereafter repaid or extinguished, the interest or power so granted no longer...