CNH Capital Australia Pty Ltd v Sharpe
[2017] FCCA 221
•10 March 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| CNH CAPITAL AUSTRALIA PTY LTD v SHARPE | [2017] FCCA 221 |
| Catchwords: BANKRUPTCY – Entitlement to take enforcement action in respect of a farm debt – whether a judgment debt by way of bankruptcy notice may be prohibited by the Farm Debt Mediation Act 1994 (NSW) – whether a Court in considering a bankruptcy notice should “go behind” the judgment of another Court – sequestration order made. |
| Legislation: Bankruptcy Act 1966, s.52 Farm Debt Mediation Act1994 (NSW), ss.3, 5(2), 6, 8, 11 Real Property Act 1900 (NSW), s.57(2) |
| Cases cited: Corney v Brien (1951) 84 CLR 343; [1951] HCA 31 Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 Heywood v Sharpe (No. 2) (2015) 293 FLR 75; [2015] FCCA 355 Makhoul v Barnes (1995) 60 FCR 572 Roxo v Normandie Farm (Dairy) Pty Limited [2012] NSWSC 765 Wolff v Donovan (1991) 29 FCR 480 |
| Applicant: | CNH CAPITAL AUSTRALIA PTY LIMITED ACN 069 132 396 |
| Respondent: | DAVID GEORGE SHARPE |
| File Number: | SYG 1572 of 2016 |
| Judgment of: | Judge Smith |
| Hearing date: | 7 February 2017 |
| Date of Last Submission: | 7 February 2017 |
| Delivered at: | Sydney |
| Delivered on: | 10 March 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr S. Golledge |
| Solicitors for the Applicant: | Bayside Solicitors |
| The respondent appeared in person. |
ORDERS
A sequestration order be made against the estate of David George Sharpe.
THE COURT NOTES THAT:
The date of the act of bankruptcy is 11 May 2016.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1572 of 2016
| CNH CAPITAL AUSTRALIA PTY LIMITED ACN 069 132 396 |
Applicant
And
| DAVID GEORGE SHARPE |
Respondent
REASONS FOR JUDGMENT
(As corrected)
Background
On 31 July 2008, the respondent, David George Sharpe (“Mr Sharpe”) entered into an agreement with the applicant, CNH Capital Australia Pty Limited (“CNH”). Pursuant to this agreement, Mr Sharpe borrowed approximately A$300,000 for the purchase of certain farm equipment and motor vehicles. Mr Sharpe agreed to repay that loan, together with interest by instalments. In 2010, Mr Sharpe failed to pay a number of instalments and when he did not rectify that failure, CNH issued him with a letter terminating the agreement.
On 9 December 2010, CNH brought proceedings in the District Court of New South Wales (“first proceedings”) for the recovery of the balance of the amount owing under the agreement. In those proceedings, Mr Sharpe admitted that he had defaulted under the loan agreement, but argued that the proceedings were void by operation of s.6 of the Farm Debt Mediation Act1994 (NSW) (“FDM Act”). This, he said, was because the proceedings constituted an enforcement action in respect of a farm debt and there had been no mediation in accordance with the requirements of that Act. Mr Sharpe’s argument succeeded in light of the decision of the High Court in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; [2012] HCA 4 (“Waller”) and the proceedings were dismissed in a judgment given by Judge Delaney on 17 August 2012.
In the meantime, mediation had taken place between the parties in respect of the debt owed by Mr Sharpe and a certificate issued by the Rural Assistance Authority (“Authority”) under s.11 of the FDM Act. The effect of such a certificate is, broadly speaking, that during the term of the certificate, there is no prohibition on taking enforcement action against a farmer in respect of a farm debt or farm mortgage, subject to the certificate.
On 29 October 2012, CNH commenced further proceedings in the District Court of New South Wales seeking recovery of the amount outstanding under the loan agreement. Once again, Mr Sharpe admitted that he owed the amount sought in the proceedings but argued that the proceedings were void by operation of the FDM Act. After a fully contested hearing, Judge Delaney gave judgment on 24 June 2014. His Honour gave a verdict in favour of CNH against Mr Sharpe in the sum of $342,272.28 including interest and ordered Mr Sharpe to pay the costs of CNH.
On 8 May 2015, bankruptcy notice BN 180962 was issued on the basis of that judgment. The bankruptcy notice was served on Mr Sharpe in October 2015. Mr Sharpe applied to this Court on 4 November 2015 to have the bankruptcy notice set aside arguing that the FDM Act prohibited the notice. On 10 May 2016, Judge Street gave judgment dismissing that application and ordering that Mr Sharpe pay CNH’s costs fixed in the amount of $8,000. The period for compliance with the bankruptcy notice expired on that day. As Mr Sharpe had not complied with it, he committed an act of bankruptcy on the following day, 11 May 2016.
On 22 June 2016, CNH filed a creditor’s petition seeking an order for the sequestration of Mr Sharpe’s estate. Section 52 of the Bankruptcy Act1966 (Cth) (“Bankruptcy Act”) provides that, at the hearing of a creditor’s petition, the Court shall require proof of the following matters and, if satisfied with the proof of them, may make a sequestration order against the debtor:
Proceedings and order on creditor’s petition
(1)At the hearing of a creditor’s petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b)service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing.
(Emphasis in original)
The petition stated the following things:
1.The Respondent Debtor owes the Applicant Creditor the amount of Three Hundred and Forty Two Thousand, Two Hundred and Seventy Two Dollars and Twenty Eight Cents ($342,272.28) being the amount of loan moneys due to the Applicant Creditor by the Respondent Debtor and for which sum judgment was entered in the Parramatta District Court of NSW having Case No 2012/00336219 on 24 June 2014 and which together with the interest thereon (at the rate of 8.5% from 25 June 2014 to 8 May 2015) being $25,346.90, makes a total of $367,619.18.
2.The Applicant Creditor does not hold security over the property of the Respondent Debtor.
3.At the time when the act of bankruptcy was committed, the respondent debtor:
•was personally present in Australia;
•was ordinarily resident in Australia.
4.The following act of bankruptcy was committed by the respondent debtor within 6 months before presentation of this petition:
The respondent debtor, David George Sharpe, failed to comply on or before 10 May 2016 with the requirements of a bankruptcy notice served on him on 14 October 2015 or to satisfy the Court that he had a counter-claim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counter-claim, set-off or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained.
5.The applicant creditor provides the following information, to the extent it is known to the applicant creditor, for use by the Australian Financial Security Authority:
• any alias used by the respondent debtor: Unknown
• the date of birth of the respondent debtor: Unknown
• the business name of the respondent debtor: Unknown
• the business address of the respondent debtor: Unknown
Each of those matters was verified by affidavit and, subject to an argument concerning the validity of the judgment debt, was not contested by Mr Sharpe.
Service of the petition, and the fact that the debt was still owing at the date of the hearing were also verified by affidavit, and again subject to Mr Sharpe’s argument about the validity of the judgment debt, were not contested. Subject to what follows, I am satisfied of each of the matters in s.52(1) of the Bankruptcy Act. CNH is prima facie entitled to an order for sequestration.
Pursuant to s.52(2) of the Bankruptcy Act the Court may dismiss the petition if it is satisfied by the debtor:
(a)that he or she is able to pay his or her debts; or
(b)that for other sufficient cause a sequestration order ought not to be made;
…
In his notice of grounds of opposition to the petition, Mr Sharpe set out three grounds:
i)CNH is not entitled to pursue the judgment debt by way of bankruptcy notice because that is prohibited by the FDM Act;
ii)That this Court ought to go behind the judgment of the second proceedings of the District Court (“2014 judgment”) because that Court wrongly enforced the notice terminating the loan agreement which was given in breach of the FDM Act; and
iii)The 2014 judgment overstated the amount owing by Mr Sharpe to CNH in light of the order for costs in favour of Mr Sharpe in the first District Court proceedings, and the fact that CNH had taken possession of some of his farm property.
Mr Sharpe expanded upon the first two of these grounds in oral submissions at the hearing and included the following further arguments. First, the certificate issued by the Authority was not valid because there was no “satisfactory mediation” within the meaning of the FDM Act. Secondly, Judge Delaney in the District Court was not informed of the fact that there had been a mediation prior to his giving judgment in the first District Court proceedings (“2012 judgment”).
Mr Sharpe’s arguments are not easy to follow. That is partly because the provisions of the FDM Act are themselves difficult, and partly because Mr Sharpe appeared for himself at the hearing; although that is intended as no criticism of Mr Sharpe who presented his arguments in an articulate manner. That said, for the following reasons, on my understanding of those arguments, they do not establish any sufficient basis upon which this Court ought to go behind the 2014 judgment of the District Court relied upon by CNH, or to be satisfied that there is some other sufficient cause for which a sequestration order against the estate of Mr Sharpe ought not to be made.
Before turning to each of Mr Sharpe’s arguments, it is necessary to refer briefly to the relevant provisions of the FDM Act.
The object of the FDM Act is to “provide for the efficient and equitable resolution of farm debt disputes”: s.3. This object is implemented by requiring mediation to take place before a creditor can take possession of property or other enforcement action under a farm mortgage. The scheme by which this object is implemented was described as follows by Judge Manousaridis in Heywood v Sharpe (No. 2) (2015) 293 FLR 75; [2015] FCCA 355[1] (“Heywood (No.2)”):
[9]First, the FDM Act defines the persons whose conduct is regulated by the FDM Act. Those persons are “creditors”, but “only in so far as they are creditors under a farm debt”. The expression “farm debt” is defined to mean “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”. The expression “farm mortgage”, in turn, is defined to include “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”. The expression “farm mortgage” does not include any stock mortgage or any crop or wool lien, or the interest of the lessor in any farm machinery that is leased.
[10]Further, although the FDM Act applies to creditors only in so far as they are creditors under a farm debt, the FDM Act does not apply in respect of a farmer whose property is subject to control under Div 2 of Part X of the Bankruptcy Act, or is the subject of a bankruptcy petition presented by any person, or, where the farmer debtor is a corporation, it is “an externally administered corporation within the meaning of the Corporations Act 2001 of the Commonwealth”.
[11]Second, the FDM Act identifies the conduct of the persons which is the subject of regulation. That conduct is the taking of “enforcement action against the farmer in respect of the farm mortgage”. The expression “enforcement action”, in relation to a farm mortgage, is defined to mean:
Taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice, or the continuation of any action to that end already commenced . . .
[1] Another matter involving Mr Sharpe which is also referred to at [45] below.
[12]Third, the FDM Act prohibits creditors from taking “enforcement action” in relation to farm mortgages in two circumstances. The first is where the creditor has not provided to the farmer a notice in writing in the form approved by the New South Wales Rural Assistance Authority (Authority) informing the farmer of the creditor’s intention to take enforcement action in relation to the farm mortgage, and of the availability of mediation under the FDM Act “in respect of farm debts”. The second is where the creditor has given notice to the farmer and the farmer, within twenty-one days of having been given that notice, notifies the creditor in writing that the farmer requests mediation “concerning the farm debt involved”. Where the farmer has given such notice, the creditor must not take enforcement action “in respect of the farm mortgage concerned unless a certificate is in force under s11 in respect of the farm mortgage”. Subsection 11(1) of the FDM Act provides:
The Authority must, on the application of a creditor under a farm mortgage, issue a certificate that this Act does not apply to the farm mortgage if:
(a) the farmer is in default under the farm mortgage, and
(b) no exemption certificate is in force in relation to the farm mortgage, and
(c) the Authority is satisfied that:
(i)satisfactory mediation has taken place in respect of the farm debt involved, or
(ii)the farmer has declined to mediate, or
(iii)3 months have elapsed after a notice was given by the creditor under section 8 and the creditor has throughout that period attempted to mediate in good faith (whether or not a mediation session or satisfactory mediation took place during that period).
[13]The final means by which the FDM Act implements the legislative scheme of compulsory mediation in relation to farm debts is by declaring that “[e]nforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void”.
(Citations omitted)
There was no dispute that the FDM Act applied to the loan agreement because Mr Sharpe was a farmer and that the amount he owed under the loan agreement was a farm debt. It will be necessary to return to some of the other concepts in the FDM Act in due course.
Consideration
First ground
Mr Sharpe’s first ground of opposition to the petition was that CNH could not use a bankruptcy notice to enforce the farm debt because there had not been compliance with the requirements of the FDM ACT. Mr Sharpe relied on the same argument before Gleeson J in Sharpe v W H Bailey & Sons Pty Ltd (2014) 317 ALR 738; [2014] FCA 921. Her Honour gave the following reasons for rejecting the argument:
[110]This submission fails to take account of s 5(2)(b) of the FDM Act. The effect of that provision is that the FDM Act loses any precedence which it might otherwise have as a result of the presentation of Mr Heywood’s creditor’s petition.
[111]Further, I do not accept Mr Sharpe’s contention that the issue of the bankruptcy notice was an enforcement action prohibited by the FDM Act. The power to issue a bankruptcy notice is conferred by s 41 of the Bankruptcy Act on an Official Receiver. Relevantly, the pre-condition to the exercise of that power is an application of a creditor who has obtained against a debtor a final judgment or final order of the kind described in paragraph 40(1)(g) of the Bankruptcy Act and for an amount of at least $5,000. Paragraph 40(1)(g) refers to a final judgment or order the execution of which has not been stayed.
[112]“Enforcement action” under the FDM Act is referrable to a farm mortgage. Where it does not mean taking possession of property under the farm mortgage, it refers to “any other action to enforce the mortgage”. In this case, the bankruptcy notice was issued on the basis of the first Local Court judgment, the execution of which was not stayed at the time the bankruptcy notice was issued, by the Official Receiver exercising his or her functions under the Bankruptcy Act. There was no reliance by the Official Receiver on any right in a farm mortgage. It follows that the issue of the bankruptcy notice was not action to enforce any mortgage.
[113]Mr Sharpe also argued that the conduct of WH Bailey in applying for the bankruptcy notice was enforcement action within the meaning of the FDM Act.
[114]That conduct is not action to enforce a mortgage, even if the judgment was obtained in reliance on rights under a farm mortgage. WH Bailey did not rely on any right in a farm mortgage to apply for the bankruptcy notice. It relied upon a judgment, the execution of which was not stayed. Further, I do not read the reasons of Heydon J in Waller to imply that bankruptcy action to enforce a judgment is “enforcement action” within the meaning of the FDM Act because the judgment was obtained by reliance on rights under a farm mortgage. His Honour is simply acknowledging that a farmer could lose his farm if bankrupted as a result of a judgment obtained by reliance on rights under a farm mortgage.
I am bound to apply her Honour’s judgment and, for that reason, the first argument must fail.
Second ground
Counsel for CNH submitted that the first ground could be understood as being an attack on the 2014 judgment of the District Court. He argued however, that Mr Sharpe was not entitled to engage in a direct attack on the merits of that judgment, and there was no basis for the Court to “go behind” the judgment to determine whether there was, in reality, any debt owing. Mr Sharpe accepted in oral submissions that he was asking the Court to go behind the 2014 judgment of the District Court. It appears that, with the possible exception of the third ground in the notice of grounds of opposition filed by Mr Sharpe, all of his arguments were focussed on this. For that reason, before considering any of those remaining arguments, it is convenient to consider the basis on which a Court exercising bankruptcy jurisdiction might go behind the judgment of another court.
The principles in relation to going behind a judgment were summarised as follows by Robertson J in Xu v Wan Ze Property Development (Aust) Pty Ltd (in liq) (2014) 315 ALR 523; [2014] FCA 461 at [55]ff:
·The Court may, in an appropriate case, go behind a judgment to see whether in truth and reality a debt is due from the judgment debtor to the judgment creditor: Corney v Brien (1951) 84 CLR 343; [1951] HCA 31 (“Corney”) and Wren v Mahony (1972) 126 CLR 212; [1972] HCA 5;
·An appropriate case may include a judgment debt that has been obtained by fraud or collusion where there has been some miscarriage of justice: Corney at 347-348 and 352-353 and Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 at 588;
·If the judgment in question followed a full investigation at a trial on which both parties appeared, the Court will not reopen the matter unless a case of fraud or collusion or miscarriage of justice is made out: Corney at 356;
·The inquiry involved is a two-stage process enquiry: first, as to whether there is sufficient reason to question the existence of a real debt behind the judgment; and second, if there is, determining that issue. These two steps may be determined together: Makhoul v Barnes (1995) 60 FCR 572 at 584 and Wolff v Donovan (1991) 29 FCR 480.
In deciding whether to go behind the judgment of the District Court, it is relevant to recall that Mr Sharpe has never claimed that he did not owe a significant amount of money to CNH. Mr Sharpe admitted it on the pleadings in both sets of District Court proceedings and did not dispute it in this Court. At their highest, Mr Sharpe’s arguments amount to a claim that, while he owes CNH hundreds of thousands of dollars, CNH simply cannot enforce that debt. That outcome alone suggests, in my view, sufficient reason not to go behind the judgment of the District Court. There are, as will be seen, other reasons for the same conclusion.
The first is that the District Court proceedings were fully contested. Some of the arguments relied on by Mr Sharpe in these proceedings were heard and rejected by Judge Delaney.
The second is that, subject to what follows, there was no allegation of fraud, collusion or any miscarriage of justice. The qualification to this is that, at the hearing of this matter, Mr Sharpe argued that Judge Delaney was not informed of a particular matter: namely, that there had been a mediation prior to his Honour’s first judgment in August 2012. Mr Sharpe argued that, if his Honour had been informed of that fact, there may have been a different outcome such as the making of a declaration that the certificate issued by the Authority was invalid. This argument relied on the proposition that there had been no “satisfactory mediation” and so the Authority could not have been satisfied that such a mediation had taken place. I will deal with that argument more fully below. It is sufficient for present purposes to note that, even accepting that that was correct and that the District Court had the jurisdiction to make a declaration to that effect, none of this amounts to a miscarriage of justice.
The judgment in question arose out of the second District Court proceedings, not the first and, more importantly, the first judgment was in Mr Sharpe’s favour. Critically however, Mr Sharpe, who was legally represented at the time of the first proceedings and during the course of the mediation, was just as aware of the mediation as CNH was and, as such, was able himself, to make the Judge aware of the mediation. In those circumstances there was no miscarriage of justice, or any other basis upon which to go behind the 2014 judgment on which the bankruptcy notice was based.
The third reason is that Mr Sharpe’s arguments rely on a construction of the FDM Act which is inconsistent with its purpose and should not be accepted.
It is only necessary to examine the third of these reasons in any detail.
Mr Sharpe’s arguments hinge upon the fact that CNH commenced the District Court proceedings before it had given notice under s.8 of the FDM Act. As the commencement of proceedings was an “enforcement action” within the meaning of the FDM Act, it was prohibited by s.8 and, rendered void by s.6. Mr Sharpe argued that, because CNH had breached the provisions of the FDM Act, it was no longer entitled to take any enforcement action in respect of the farm debt.
Further, because the scheme of the FDM Act was compulsory, any mediation which took place between the parties after a breach of its provisions was not a “mediation” within the meaning of the Act. The consequence of that, Mr Sharpe argued, is that there could be no “satisfactory mediation” within the meaning of the FDM Act and, thus, the Authority could not be satisfied that there was a “satisfactory mediation”. As satisfaction that there had been a “satisfactory mediation” was a precondition to the issuing by the Authority of a certificate under s.11, the certificate actually issued was not valid under the FDM Act. Finally, the consequence of that was that there was no certificate under s.11 of the FDM Act and so the prohibition against taking enforcement action under s.8 continued.
There are two patent flaws in this argument: first, the fact that the provisions of the FDM Act were compulsory does not support the view that there can be no mediation within the meaning of that Act once any breach of it has occurred. The consequence of the breach is provided by s.6: the enforcement action is void. That was why the first District Court proceedings were dismissed. There is no other provision that deals with the consequence of a breach and none arises by implication, particularly in light of s.6.
In particular, there is nothing in the FDM Act to suggest that a mediation cannot take place after a breach. Other than a requirement in s.4 that a mediation is to by an accredited mediator, “mediation” is not defined in the FDM Act. It is ordinarily understood to be “the process of attempting to settle a dispute without recourse to litigation, through negotiation conducted by a neutral intermediary”: see Oxford Online Dictionary. There is nothing in the FDM Act to suggest that that is not the meaning in that Act. In particular, there is no support for reading in words such as “so long as there has been no prior breach of the Act”. Finally, this construction is inconsistent with the scheme and purpose of the Act.
Section 3 of the FDM ACT provides:
3 Object
The object of this Act is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.
(Emphasis in original)
It would, in my view, be inconsistent with the aim of an equitable resolution of disputes to forbid a creditor from recovering a debt which is owed, simply because there had been a breach of the FDM Act. For that reason, Mr Sharpe’s construction must be rejected in favour of a construction that fulfils the stated purpose of the Act. That construction allows for the process of notice and mediation to occur regardless of any prior breach.
Mr Sharpe argued that his construction was supported by the decision of Adamson J in Roxo v Normandie Farm (Dairy) Pty Limited [2012] NSWSC 765 (“Roxo”). In that case her Honour considered, and allowed, an application to set aside a default judgment. There, the defendant, a famer, had granted a mortgage to the plaintiff to secure a loan obtained to enable the defendant to purchase a rural property. Upon default under the loan, the creditor served a notice under sub-s.57(2)(b) of the Real Property Act 1900 (NSW) on the farmer prior to serving a notice on the farmer under the FDM Act. A mediation took place but did not resolve the dispute. The creditor then applied for a s.11 certificate and commenced proceedings in the Supreme Court of New South Wales seeking possession of the rural property. The Authority refused to issue the s.11 certificate but, in spite of that, the creditor obtained default judgment and a writ of possession.
The defendant applied to set aside the default judgment. In argument, the creditor said that it had made another application for a s.11 certificate and that, upon issue, that would cure any previous breach of the FDM Act. The creditor sought an adjournment to allow the further certificate to be issued. Adamson J refused the adjournment because she considered that the further certificate would not cure any such defect: [23]. Her Honour, at [32], explained that clear words would be required to allow the retrospective operation of the s.11 certificate and there were none in the FDM Act. Further, her Honour found that it would be inconsistent with the purpose of the Act to allow the adjournment in the circumstances. Her Honour also rejected an argument based on s.11(4) of the FDM Act.
Adamson J did not find, and did not have to find, that on the proper construction of the FDM Act, any breach of that Act had the consequence that a creditor could never take any later enforcement action.
Further, the circumstances of this case are different to those considered in Roxo. Importantly, unlike in that case, a mediation had taken place and a certificate issued by the Authority prior to the commencement of the second District Court proceedings. In light of that, there was no need for any retrospective operation of the certificate in order for those proceedings to be taken. CNH has never suggested that the certificate somehow revived the validity of the first District Court proceedings.
For those reasons, the decision in Roxo does not assist Mr Sharpe.
The rejection of Mr Sharpe’s construction of the Act means that, with the possible exception of his third ground, all of his arguments fail.
Third ground
On its face, the third ground is that, taking into account the costs order in Mr Sharpe’s favour, and the recovery of certain farm machinery by CNH, the amount owing to CNH was less than that owed to Mr Sharpe. There was no evidence to support that argument. In any event, Mr Sharpe did not argue the ground in that way at the hearing. Indeed, he drew the Court’s attention to a statement of account from the solicitor who acted for him in the first District Court proceedings showing that his fees amounted to around $10,000.
It is difficult to understand precisely the way in which Mr Sharpe framed this ground in argument. At first he argued that all costs orders made by the Court were void. That cannot help Mr Sharpe as he relies on one of those costs orders. In any event, framed in this way, the argument also relies on the construction of the FDM Act which I have rejected.
Mr Sharpe then raised the argument about the absence of a “satisfactory mediation”. That argument in substance had nothing to do with the third ground in the grounds of opposition and I have dealt with it above.
Next, Mr Sharpe raised the argument concerning the failure to disclose the mediation to Judge Delaney. I have also dealt with that argument.
Finally, Mr Sharpe raised an argument concerning the presentation of a creditor’s petition by another debtor. This too, had nothing to do with the third ground, although I will deal with it briefly below. In substance then, Mr Sharpe abandoned the third ground in the notice of grounds of opposition. If he had not, I would have rejected it for lack of evidence.
The argument concerning the other creditor’s petition was this: once the other creditor had filed a creditor’s petition, the FDM Act no longer applied in light of sub-s.5(2)(b) (which provides that the FDM Act does not apply to a farmer whose property is the subject of a bankruptcy petition presented by any person). Thus, upon the presentation of the petition, Mr Sharpe was unable to challenge either the second judgment of Judge Delany on appeal to the Court of Appeal of the Supreme Court of New South Wales, or to challenge the validity of the s.11 certificate issued by the Authority.
The creditor’s petition the subject of this argument was filed by Christopher John Heywood on 10 July 2013 in reliance on Mr Sharpe’s failure to comply with a bankruptcy notice demanding the payment of $90,000. That petition was dismissed by orders made in this Court on 20 February 2015: Heywood (No.2). I do not accept that the presentation of that petition affected Mr Sharpe’s ability to appeal from the decision of Judge Delaney in the second District Court proceedings; or in any event, even if it did, why that should be a reason for which this Court should now go behind that judgment.
The petition was presented after the relevant enforcement action (including the second District Court proceedings) had been taken. It did not affect the application, if any, of the FDM Act to that action and did not prevent an appeal on the basis that Judge Delaney ought to have found the FDM Act rendered that action void. The same reasoning applies to any attack on the validity of the s.11 certificate and the mediation, both of which preceded the presentation of the creditor’s petition by Mr Heywood.
Conclusion
In summary, I am not satisfied of any of the matters in sub-s.52(2)(b) of the Bankruptcy Act and will therefore make an order for the sequestration of the estate of Mr Sharpe.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Judge Smith
Associate:
Date: 17 March 2017
CORRECTIONS
Cover Sheet and Orders: Page 1, Catchwords, delete “Application to set aside bankruptcy notice”.
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