Harker-Mortlock v Commonwealth Bank of Australia & Anor
[2019] HCATrans 89
[2019] HCATrans 089
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S126 of 2019
B e t w e e n -
JAMES HARKER‑MORTLOCK
First Applicant
J.H.M. PTY LTD (ACN 074 474 089)
Second Applicant
and
COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Respondent
IINVEST (IN LIQ) PTY LIMITED
Second Respondent
GORDON J
TRANSCRIPT OF PROCEEDINGS
FROM CANBERRA BY VIDEO LINK TO SYDNEY
ON TUESDAY, 7 MAY 2019, AT 4.25 PM
Copyright in the High Court of Australia
MR P.E. KING: If your Honour pleases, I appear for the applicants. (instructed by Messrs Allsop Glover, Lawyers)
MS E.A. CHEESEMAN, SC: I appear with my learned junior, MR J.M. WHITE, for the first respondent, the Bank, your Honour. (instructed by Dentons)
HER HONOUR: Mr King.
MR KING: Thank you, your Honour. Your Honour, I move on the summons and the affidavit in support.
HER HONOUR: Right, I have read that. I will just tell you what I have from your side and tell you what I have read. That might help, would it?
MR KING: Thank you very much, your Honour.
HER HONOUR: I have a summons which you filed on 6 May.
MR KING: Yes.
HER HONOUR: Together with an outline of submissions filed the same day in support of the stay.
MR KING: Yes.
HER HONOUR: I have an affidavit of James Harker‑Mortlock sworn on the same day together with the exhibits.
MR KING: Yes.
HER HONOUR: And in response, I have an affidavit from Iain Stevens from the Commonwealth Bank of Australia.
MS CHEESEMAN: Sworn today, your Honour - that is correct.
HER HONOUR: And a short outline of submissions.
MS CHEESEMAN: Yes, your Honour.
HER HONOUR: Mr King, do you have those documents?
MR KING: I do, your Honour.
HER HONOUR: Good.
MR KING: Your Honour, can I just indicate that I have also provided ‑ ‑ ‑
HER HONOUR: Sorry, I should also say to you that I have, of course, looked at the exhibits to the affidavit which include things like the application for special leave and the like.
MR KING: Thank you very much, your Honour. Can I indicate to your Honour that the undertaking which is referred to in the summons is a form of undertaking that was agreed before Justice Campbell when the stay order in similar form was granted in the Court of Appeal.
HER HONOUR: I saw that.
MR KING: I have provided that to my friend, although obviously I have not provided it to your Honour. I can indicate to your Honour, as I understand it, that if the Court is minded to grant the stay, the undertaking is provided in those terms to the Court and to my friends.
HER HONOUR: I see.
MR KING: Your Honour, I think I can be reasonably brief, I hope, even though the matter is of some complexity. If your Honour goes to the written submissions - there are two points. The first is a reasonably arguable case sufficient to attract the appellate attention of the High Court and in that regard I am referring to the observations of Justice Kiefel in Mercanti v Mercanti [2017] HCA 1, which we have referred to in our outline, and which we also referred to the Court of Appeal. The second is balance of convenience and also what happened in the Court of Appeal on this issue. As to the first point ‑ ‑ ‑
HER HONOUR: You, of course, accept, do you not, that the principles that were set out so eloquently about this sort of matter - which, I think, probably in its life, before I had grey hair at least, started back in Jennings Construction Ltd v Burgundy Royale.
MR KING: That is correct, your Honour, and if I may respectfully say so, in Mercanti, her Honour, as her Honour then was, at paragraph 13, expressed it in a way which we respectfully submit is apposite to the present case, that is:
It does not seem to me that the prospects of a grant of special leave can be said to be insubstantial. As to the other considerations referred to in Jennings –
the matters to which your Honour has just mentioned:
the applicant has not failed to take steps necessary to seek orders from the Court of Appeal, even though the term of the orders sought should have been longer in order to obviate the need for an application to this Court.
Also, her Honour found on the balance of convenience. Your Honour, just turning – if I could ask your Honour, on the first point, to look at my friend’s written submissions before the Court, the Bank’s written submissions in paragraph – under Part C, paragraph 2 - accept – well, they do not accept, they assume, we say, and of course there is no reason not to, that there is an arguable error in relation to the definition of “farmer” in the Farm Debt Mediation Act in the Court of Appeal. I will not repeat the way we put it in our written submissions, your Honour, but it is really a critical part of it.
The other construction error, which the Bank’s submissions proceed upon is enforcement action. I will come back to those two points in a moment. But the Bank says that the reason this stay should be refused – it is in the last two sentences of paragraph 2 is:
First, as the applicants’ case at trial raised no factual issue as to iInvest’s default in early 2012 -
and rely on Coulton v Holcombe. It is true that the Court of Appeal said that at paragraph 27 but, with respect, your Honour, that is simply an error because if your Honour goes to the Court book – that is to say to the affidavit of Mr Harker‑Mortlock and to the judgment of the learned primary judge, Justice Campbell, at page 28, paragraph 45, your Honour would see, at about point 7 on the page in the middle of paragraph 45 this - it is about line 8 in paragraph 45 of the primary judge’s judgment:
In his affidavit sworn on 18 June 2015 . . . the cross‑claimant says that “until iInvest’s liquidation it had paid every loan facility payment to the Bank in accordance with the terms of the first facility, second facility and [bills matured account]”. I infer that the payments referred to are, of course, payments of interest including any “default” interest due, as discussed above, after the debiting of the face value of a bill to a bills matured account. The cross‑claimant’s evidence about this in not challenged nor contradicted.
Then in the first sentence of the next paragraph:
An absence of financial default in the sense implied by the cross‑claimant provides no defence to the Bank’s claim, I repeat, the act of default relied upon to ground the claim for possession is iInvest going into liquidation.
So, your Honour, it is just simply in error to say – for the Bank to rely upon Coulton v Holcombe for the fact there was no case put, that there was no default by my client up until the time of liquidation in 2012. That is simply in error. It was put. It was decided by the judge and decided in my client’s favour.
The second reason that the Bank gives for refusing this stay application is that the Farm Debt Mediation Act ceased to apply upon the liquidation of the Farm Debt Mediation Act on 29 October 2012 because of section 5(2)(c). Now, I do not know if your Honour has had a chance to read that section.
HER HONOUR: Yes.
MR KING: But our short answer to it is this. It is true that section 5(2)(c) provides that the Farm Debt Mediation Act does not apply once a party – if a farmer is a company and it goes into liquidation. In this case the company went into liquidation – the former trustee – on 29 October 2012. But that takes no account of our real case in this Court, which is that before the company went into liquidation, that is, between 2008 and 2012 – the Bank’s enforcement action led to the blighting of my client’s farm, to the loss of more than half its acreage, the loss of the whole of its prize flock of sheep and, in effect, the destitution of the farm.
The error in the Bank’s submission is really one of law, not of fact, that is to say, section 5(2)(c) operates prospectively, not retrospectively, in respect of enforcement action by the Bank prior to a company – in this case, the farmer – going into liquidation. Now, of course, your Honour, there are other issues which I do not need to ventilate but, in this case, the farmer was a trustee of the Harker‑Mortlock Family Trust.
HER HONOUR: I saw that.
MR KING: Upon the trustee going into liquidation there was an automatic right under the deed of settlement ‑ ‑ ‑
HER HONOUR: It created an event of default, did it not?
MR KING: Yes, that is right, and then a new trustee was automatically appointed and that is the first applicant in the appeal. There is no quibble with the finding by the Court of Appeal or by the primary judge that the replacement trustee has a right to claim the damages for the whole of the period of the loss. Of course it is our claim, your Honour, that in the period between 2008 and 2012, the Bank’s enforcement action by requiring the sale of my client’s land, assets and undertaking led to substantial damage in excess of the Bank’s claim in debt, which impeaches that claim and therefore is a complete answer to the matter.
It is important, your Honour, to note that in the Court of Appeal judgment, dealing with damages, particularly at paragraph 79, at page 126 of the affidavit of Mr Harker‑Mortlock, the Court of Appeal said that if the court had found in our favour on the issue of liability the damages should be referred either to the primary judge or to another judge. But, for present purposes, we submit ‑ ‑ ‑
HER HONOUR: Is that right? I thought that was dealing with just assessments of quantum, that is, calculation method rather than a question of liability. Have I misread that?
MR KING: No, no. Your Honour is correct. I have not made my submission clear. Our submission is that the only evidence of damage before the court below was of our expert agronomist, Mr Firth, whose evidence was that the damages suffered by my client exceeded the bank debt, at least as at the date of commencement of the proceedings. That is the issue which we say would make the whole proceeding significant, impeach the Bank’s debt and of course the possession action.
Those issues do not seem – are not taken by the Bank. They are only taking the two points at paragraph 2 and we say that neither of those points have any substantial merit - the first on the facts because it is simply wrong. The primary judge did find that my client was not in default as at early 2012 right up until the 29 October 2012 when an off‑farm creditor put the company into liquidation.
The second point is that section 5(2)(c) says nothing about the operation of the Farm Debt Mediation Act in the critical years of damage to my client’s farm between 2008 and 2012. The point is brought to a head, your Honour, perhaps by paragraph 82 of the primary judge’s judgment - and I will just leave this point on this issue. Paragraph 82 is bound up at page 40 of Mr Harker‑Mortlock’s affidavit, where the learned judge said:
Even if I am wrong in saying that iInvest was not a farmer –
and, of course, the Bank now accepts for present purposes that it is:
within the meaning of the Farm Debt Mediation Act as at July 2008. It is hard to see what was lost to it by the Bank’s refusal to mediate at that time.
Now, just pausing there, your Honour, this is an argument about futility and in the Court of Appeal we led evidence from the Royal Commission ‑ ‑ ‑
HER HONOUR: We will come to that in a moment. I think, for present purposes, rather than getting into the detail we are better off dealing with what you put as, in a sense, the prospects of your current application for special leave to appeal, which is yet to be heard and determined, and one of the four matters that I have to take into account in your application for a stay.
MR KING: That is correct. Thank you, your Honour. So the short point there is that we submit that the Bank’s two answers are really not an answer to our case in relation to the first issue of no arguable basis for the application. At Part C of my friend’s submissions, “Prejudice to first respondent”, the Bank (a) has not led any evidence of prejudice – there is, of course, a drought at the moment. There is stock on the farm. The evidence is, in Mr Harker‑Mortlock’s affidavit at paragraphs 30 and following, that my client’s farm has dams, that neighbours have agisted their stock on his property on the basis that he is the only one in the area with dams and the evidence is that stock will die if they are dispossessed as contended for by the Bank.
The other irreversible damage is to the cultural heritage property. This property, which is depicted, your Honour, at page 36 of Mr Stevens’ affidavit for the Bank, is a very significant cultural heritage property. It was built by a Mr Weir, who was the grandson of Rabbie Burns, the Scottish poet. It remains in relatively good condition and if left vacant the evidence is there was a threat of vandalism and other loss.
There are other problems in being evicted now if we are successful on the appeal. It will be impossible, according to the evidence, to be reinstated by money or money’s worth to be put back into the position we otherwise would have been in. So, it is our respectful submission that there is no real evidence to suggest that, contrary to our submission that if the stay is not granted then the appeal could prove nugatory – or will prove nugatory.
HER HONOUR: There are two matters I think put against you, as I understand the Commonwealth Bank’s submissions.
MR KING: Yes, your Honour.
HER HONOUR: The first is that the judgment debt against your client is a judgment debt capped by reference to the liability under the guarantee, which itself is much larger than the value of the two properties and is itself smaller than the actual total debt recognised by the trial judge in January of 2017 at that time, of some $6 million. So, as I understand the way in which it is put against you, it is that there is a loss and a continuing loss, which is a loss to the Commonwealth Bank.
MR KING: Yes.
HER HONOUR: The other matter is that - you, of course, Mr King, will be aware of – and that is the principle that in cases such as this, ordinarily as a general rule the Court will not interfere unless the money is brought into Court. Now, that raises two aspects, I think. The judgment debt has not been paid and there is no mechanism for meeting it and bringing it into Court, is there?
MR KING: There is not, your Honour. Can I deal with both those issues?
HER HONOUR: Certainly.
MR KING: Your Honour, as to the first point, there is a short answer, and that is this. If your Honour goes to the valuations at page 11 attached to Mr Stevens’ affidavit, you will see that it refers to the fact that the instructions to be given by Mr Stevens to the valuer was to value the property on the whole and without regard to the fact that there had been, although it is only referred to obliquely in that last paragraph, an LEP in 2013 which authorised the sale of 40 hectare blocks.
There are six 40 hectare blocks in Brecon, which is the property first considered in this valuation. We have some evidence together this afternoon, which I am afraid I am not able to provide to your Honour for obvious reasons.
HER HONOUR: Well, I will only move on material that I have before me, Mr King.
MR KING: I understand that, your Honour. But the valuation – the indication from agents’ reports in the area, which we have been able to obtain this afternoon once we got Mr Stevens’ affidavit, is that such blocks are selling at the moment, indeed along Cooks Hill Road where Brecon is, for $400,000. The reason is that, as the valuation report says, attached to Mr Stevens’ affidavit, especially see page 18 under “Market Commentary”:
The rural residential real estate market within the Yass area is currently steady with the demand for property having increased . . .
The rural residential market in this locality is directly influenced by the ACT residential market -
So the 40 hectare blocks are very attractive.
HER HONOUR: Well, that might be right. I have said to you, Mr King, I am not going to move on material that is not before me.
MR KING: No, but the short point is, your Honour, that on that putative material, the property is worth $2.4 million. We submit that having regard to the instructions and the matters that appear at page 11 of the executive summary that I have just mentioned under 1.2, it is clear that there is substantial value in the property which is not covered by the report.
Likewise in relation to the second valuation report, if your Honour goes to page 38 of Mr Stevens’ affidavit, your Honour will see the Rabbie Burns heritage house. The value there is given at page 51 at 1.7 million. On our figures, that puts it at 4.1. But even on my friend’s figures, it is in excess of 3 million and certainly not dissipating, but increasing. So we submit that the evidence of the Bank, if it is really just about loss in value, is not probative of any real issue against the grant of a stay but in fact, if anything, in favour of it.
Your Honour, as to the second point, we submit that the undertaking that was given below, which is sufficient, which was agreed to then – the Inglis point was not taken for this reason. It is our case that the bank debt is directly impugned by the Bank’s conduct in this case, namely undertaking illegal enforcement action under the mortgage by requiring asset sales, and the sale of the whole of my client’s farm undertaking as a condition of forbearance by the Bank.
Justice Heydon in Waller’s Case, Chief Justice Dixon in Dreyer’s Case, the two authorities that I have referred to in our outline of submissions, both confirm the proposition which the Court of Appeal rejected, which the primary judge rejected at paragraph 82 in the passage I have mentioned, that extrajudicial enforcement action by a bank under the terms of a mortgage, for example, as a condition of forbearance requiring sale of assets, sale of undertakings and repayment, early repayment, is impermissible, and in the words of section 6 of the Farm Debt Act, “void”.
If the Bank’s action was void between 2008 and 2012, then very substantial damages are available to my client, as Mr Firth, our agronomist, has said - damages which exceed and therefore impeach the Bank’s debt. In those circumstances, Inglis has no application. It was not sought to be relied upon by the Bank below, either, your Honour. In those circumstances, we respectfully submit the orders sought should be made.
HER HONOUR: Thank you, Mr King. Ms Cheeseman.
MS CHEESEMAN: Thank you, your Honour. Your Honour, I only wish to supplement briefly the outline of submissions that was transmitted to the Court during the lunch hour.
HER HONOUR: Yes.
MS CHEESEMAN: The submissions that have been filed, the key point on the prospects of obtaining a grant of special leave are in section C.1 of the Bank’s outline of submissions.
HER HONOUR: Yes.
MS CHEESEMAN: Your Honour will appreciate that in paragraph 8, the sub‑paragraphs there, 1, 2, 3 and 4, correspond to the proposed ‑ ‑ ‑
HER HONOUR: I understand that.
MS CHEESEMAN: Thank you, your Honour. Your Honour, dealing with ground 1, Mr King has not addressed on this ground – but might I correct a typographical error in paragraph 1?
HER HONOUR: Yes.
MS CHEESEMAN: The reference should be to paragraphs 38 to 82, where the Court of Appeal in His Honour Justice Meagher’s judgment dealt with the grounds of appeal dealing with the cross‑claim. Then moving to ground 2 ‑ ‑ ‑
HER HONOUR: Just so I am clear, what am I replacing in paragraph 1?
MS CHEESEMAN: I am sorry, your Honour.
HER HONOUR: Under 8.1, you have a reference to pages 17 to 34 of the reasons for the judgment.
MS CHEESEMAN: Correct, your Honour, and those pages do not translate to the paragraph numbers - that should be the reference 38 to 82.
HER HONOUR: Just let me check that I am clear about that at the moment, just one moment. Yes, I understand, thank you.
MS CHEESEMAN: Thank you, your Honour, I apologise for the error. In ground 2, subparagraph (2), this is the critical ground on which Mr King has addressed your Honour. The relevant grounds below were ground 3 and ground 4. They are dealt with in the Court of Appeal’s judgment – and if it is convenient, your Honour, to use the copy annexed to Mr Harker‑Mortlock’s affidavit. Ground 3 is dealt with at page 105, commencing at paragraph 22 of the judgment, and ground 4 - I would like to deal with these together, your Honour – commences at page 106, paragraph 25.
Mr King has addressed your Honour in relation to there being no default under the facilities prior to the event of liquidation. Of course below, the case was put in a different way. The attack was on what was described as an unpleaded non‑monetary default, namely a material change in circumstances and both the trial judge and the Court of Appeal dealt with that attack, the attack based on a pleading point, by setting out that it was necessary and relevant for the trial judge, and then the Court of Appeal, to deal with the material change of position in the context of dealing with the cross‑claim.
So it is quite misleading to suggest to your Honour that there was no evidence below that there had been a breach. The breach was not - the breach being a non‑monetary breach of change in position was not the breach relied on for the Bank to take enforcement action, namely possession proceedings. That did not occur until after the borrower, iInvest, had entered into liquidation. It is related to ground 4, dealing with enforcement action and ‑ ‑ ‑
HER HONOUR: I had understood – I mean, this detail is interesting but I had thought that the answer was as you put it, that regardless of whether or not there was a misconstruction of the definitions under the Farm Debt Mediation Act there were two complete answers. One was that the access to apply from 29 October 2012, which was the liquidation, and therefore – and in effect, generated the event of default itself.
MS CHEESEMAN: Yes, your Honour.
HER HONOUR: Secondly, that on the way in which it had been conducted below by the applicants, the courts below found that the applicants had suffered no damage.
MS CHEESEMAN: Yes, your Honour, and both of those matters would be compelling reasons why this case would not attract a grant of special leave. Your Honour, I might move to – can I give your Honour the references to paragraph 27 and 28 of the judgment.
HER HONOUR: Is that dealing with damage?
MS CHEESEMAN: Sorry, they are the two references that we have set out in our outline at paragraph 2.
HER HONOUR: Directed to what, Ms Cheeseman?
MS CHEESEMAN: Directed to those two features. The Coulton v Holcombe point as to – your Honour, I will move on. Your Honour has the reference. The three further reasons set out in the unnumbered paragraph under ground 2, that was - I will give your Honour the reference, ground 10 below – the way in which the case was framed in relation to the complaint about farm debt mediation was as a misleading conduct claim.
Their complete answer, the three further reasons were set out there – again a reason why special leave would not be granted. Then your Honour has our submissions on ground 3, the ground relating to the particular findings in relation to farm mortgages in the Royal Commission report. The relevant finding below is at paragraph 8 of the Court of Appeal’s judgment. It was given in the context of an application to lead fresh evidence and thus it is framed in terms of relevance.
In our submission, there is no prospect of obtaining a grant of special leave on the rejection of that particular evidence below, if that is what proposed ground 3 is meant to capture. Then, your Honour, in terms of the balance of the submissions on prospects of success I rely on the written submissions. If I might come briefly to prejudice to the first respondent.
HER HONOUR: Yes. Can I ask you a factual matter about that?
MS CHEESEMAN: Yes, your Honour.
HER HONOUR: Am I right, in the sense that by reference to what is set out in the affidavit of Mr Stevens, that as at 12 September 2018, Blackburn was valued at $1.55 million and Brecon – is it Brecon, is that how you pronounce it?
MS CHEESEMAN: It is, your Honour.
HER HONOUR: Was valued at $1.25 million.
MS CHEESEMAN: Yes, your Honour – coming to a total of 2.8. Your Honour will find that at paragraphs 8 to 10 of Mr Stevens’ affidavit. The reference in paragraph 10 of our submissions to the trial judge accepting the figure was in excess of $6 million – if I can give your Honour the reference to the trial judge at paragraph 9 below.
HER HONOUR: Yes.
MS CHEESEMAN: Your Honour has, in engaging in questions with Mr King, captured the way in which the Bank frames the case as to prejudice, continuing prejudice and the likelihood that the property will not cover the damage that the Bank has suffered to date, and is continuing. In relation to the submissions from the Bar table by way of additional evidence, I note your Honour is not going to deal with that. We certainly had not been served with that – a copy was passed to me at the Bar table, but I do not propose to address your Honour on that.
In the circumstances, your Honour, in the Bank’s submission, there is only one additional matter to note and that is one of the matters relevant to the exercise of the discretion in this Court is whether or not an application has been made to the court below. Your Honour will have seen the transcript ‑ ‑ ‑
HER HONOUR: I saw that, that there was an oral application made for a grant of stay of 21 days to allow them to review the reasons. I read your submissions that no further substantive application has been made.
MS CHEESEMAN: Yes, your Honour. That concludes the Bank’s submissions.
HER HONOUR: Can I ask, pragmatically, what is happening in relation to the writs of possession and the notices to vacate?
MS CHEESEMAN: Pragmatically, on 9 May, the sheriff is due to attend the property. So the notice is framed in terms of 9 May or thereafter and we have set out in our written submissions the relevant chronology in that regard.
HER HONOUR: No, I know the history. I am talking about the future.
MS CHEESEMAN: So under the formal notices to vacate that were served in early April, the foreshadowed eviction is on 9 May or thereafter and I cannot take it further than that, your Honour.
HER HONOUR: Really?
MS CHEESEMAN: Because it is in the hands of the sheriff, your Honour.
HER HONOUR: Well, that is why I am asking. Has anyone made any inquiries of the sheriff?
MR KING: We have, your Honour. It is up to Mr Stevens.
MS CHEESEMAN: Your Honour, my instructions are that the Bank’s understanding is that the sheriff usually takes those steps on the date nominated, but there is not a guarantee that it will be on that date and for that reason, it is proposed – and in answer to your Honour’s question specifically, inquiries have not been made since we were served with this application to ascertain what the current status of the sheriff’s proposed course of action is.
HER HONOUR: Can I ask you about one legal matter, just about the Court of Appeal’s judgment because I just want to clarify to make sure that I am right that you were correct to amend your submissions in relation to the first ground? In paragraph 7 of the Court of Appeal’s judgment ‑ ‑ ‑
MS CHEESEMAN: Yes, your Honour.
HER HONOUR: ‑ ‑ ‑ in paragraph 7, it talks about the fact that on what I will call the main appeal there were issues relevant to the cross‑claim.
MS CHEESEMAN: I take your Honour’s point, yes.
HER HONOUR: So does it not mean that those paragraphs - those pages to which you took me and asked me to delete are themselves relevant to the way in which you deal with the cross‑claim?
MS CHEESEMAN: In addition to the particular paragraph?
HER HONOUR: Correct.
MS CHEESEMAN: I apologise, your Honour, your Honour is quite correct, with respect.
HER HONOUR: I thought I must have misread it.
MS CHEESEMAN: No, your Honour has not.
HER HONOUR: So let us just be clear. The way in which the Court of Appeal addressed it was to say, “I have got these issues on the main appeal, and I am going to deal with them. But I want to make it clear that those issues are inextricably linked with the cross‑claim and my analysis of them is going to affect the way in which you look at the cross‑claims as well”.
MS CHEESEMAN: Yes, your Honour. Then the third category being the findings as to fact which were relevant to one or both of those earlier categories.
HER HONOUR: Yes, thank you.
MS CHEESEMAN: Yes, your Honour.
HER HONOUR: Mr King, any reply?
MR KING: Thank you, your Honour, yes. Your Honour, we have – Ms Swan, my instructor, has been in touch with the sheriff. He has told her that he takes the view that unless a stay is granted that he will be proceeding to act, unless the Bank withholds its hand – and we do not anticipate that to be the case. We submit that irreversible damage will be done, for the reasons that we put to Justice Campbell and the Court of Appeal below, in granting the original stay and that is why it should be continued for this appeal, otherwise the appeal will be nugatory if we succeed.
Just briefly on the four points raised, your Honour. As to the suggestion of no evidence of damage, that is simply wrong. The learned primary judge at paragraph 225 of his reasons held that if he was satisfied on the issue of liability, which we raise in this Court, that damages should be assessed by Mr Firth, with a deduction of 15 per cent. So it is simply not right to say there is no evidence of a finding of damage.
The second point is section 5(2)(c). There is, with respect to my friends, a real error, and we say a serious error in their approach to this case, and in the Court of Appeal’s approach – that is 27 and 28 of the Court of Appeal’s judgment. Section 5(2) provides, after subsection (1):
This Act applies in respect of creditors only in so far as they are creditors under a farm debt.
There is no doubt that the Bank was a creditor under a farm debt from my client, in relation to the bill facilities. Then subsection (2):
This Act does not apply in respect of:
. . .
(c)a farmer, being a corporation, that is an externally administered corporation within the meaning of the Corporations Act 2001 of the Commonwealth.
Now, having regard to what Justice Barrett said in Constantinidis, and to what Justice Heydon said in Waller, and the manifest importance of a liberal construction of this statute, it is clear that this provision, this exception to the operation of the Act only applies after the corporation is externally administered and that did not happen in this case until 29 October 2012, just a few months before the Bank sued.
It was in the preceding four years that the breaches of sections 6 and 8 of the Farm Debt Act occurred. That is the importance of what Justice Campbell held at paragraph 82 of the reasons, saying the Act did not apply; if it did it was futile. Why we relied upon the Royal Commission in the paragraphs which the Court of Appeal rejected as irrelevant at paragraph 8 of their judgment, because Justice Hayne in his commission has advised ‑ ‑ ‑
HER HONOUR: I do not think he was Justice Hayne at the time.
MR KING: Sorry, Kenneth Hayne AC, advised that the New South Wales Act, which is the subject of this appeal, was so important not only was it not futile, but it should be adopted as the prototype for the whole of Australia. The issues that we have raised of farmer and enforcement action, based upon what Justice Heydon and Justice Hayne said in Waller, and upon what Chief Justice Dixon said in Dreyer, are accepted by the Bank as arguable points.
Their argument that 5(2)(c) somehow or rather insulates them or quarantines them from the operation of the Act is simply false. There was a failure of the Court of Appeal to exercise its jurisdiction, because it never considered our argument on this point. It was directly considered by the primary judge at paragraph 82. The judges would not look at the point about futility, which we raised and emphasised by reference to the Royal Commission.
In those circumstances, we say that this is a matter in which at least, to use the words of Justice Kiefel, as her Honour then was in Mercanti, there is a not insubstantial prospect of special leave being favourably considered. The only other point about Coulton v Holcombe is a straightforward point.
My friend’s argument that there was no monetary default pleaded by the Bank when it brought its proceedings is quite true – it did not plead a monetary default. That is because there had been no monetary default by my client who had laboured mightily to try and avoid – to meet its responsibilities to the Bank, sold off its land and sold off all its property in compliance with the requirements of the Bank under its mortgage as impermissible enforcement action – hence the very foundation of the claim.
This is a matter which affects many farmers across the country. Not every farmer waits until a court gives an eviction notice or a sheriff turns up at the front gate. Most farmers try and deal with their problems as they arise, and they agree, on condition of forbearance by a bank of taking such action, to sell their property, to sell their sheep. What the Farm Debt Mediation Act does is to say no, banks cannot do that because they have to
first serve a mediation notice under section 8. If they do not, subsequent enforcement action is void.
This is a very important protection not just for Harker‑Mortlock, but for a whole range of farmers across the nation, in our respectful submission, your Honour. The Bank’s submission about this is simply misconceived and the Coulton v Holcombe point is simply wrong, having regard to the findings of the learned judge that there was actually no default by my client of a monetary character, in those paragraphs to which I have referred.
In our respectful submission, a stay ought be granted on the undertaking that we have previously given, which had previously been agreed to, for a medium point in time, until the resolution of the special leave application, and if then thought appropriate until the hearing of the appeal if we are successful. If your Honour pleases.
HER HONOUR: Yes, thank you. I will adjourn for a moment to consider what I will do.
AT 5.08 PM SHORT ADJOURNMENT
UPON RESUMING AT 5.21 PM:
HER HONOUR: I just want to make sure that I understand the actual name of the second respondent. Is it iLnvest?
MR KING: It is pronounced iInvest, your Honour.
HER HONOUR: I see - iInvest. I understand now; thank you.
MR KING: The farmer, yes.
HER HONOUR: iInvest (in liq) Pty Ltd, the second respondent (“iInvest”), was the registered proprietor of two rural properties ‑ known as “Blackburn” and “Brecon” ‑ located in Yass, New South Wales. The properties were mortgaged to the first respondent (“the CBA”). After the mortgages were granted, iInvest was appointed trustee of the Harker‑Mortlock Family Trust (“the Trust”) and purported to declare the properties to be held on trust for that Trust. iInvest went into liquidation on 29 October 2012 and the second applicant (“JHM”) was appointed trustee of the Trust. The first applicant, Mr Harker‑Mortlock, was the guarantor of the facilities secured by the mortgages and a beneficiary of the Trust. Mr Harker‑Mortlock resides at Blackburn and farms both Blackburn and Brecon (collectively, “the properties”).
The CBA commenced proceedings in the Supreme Court of New South Wales for possession of the properties and for judgment under the guarantee against Mr Harker‑Mortlock. Mr Harker‑Mortlock and JHM brought a cross‑claim against the CBA on behalf of iInvest by way of set‑off or in defence of its claims.
On 31 August 2018, Justice Campbell of the Supreme Court of New South Wales made the following relevant orders (“the 31 August 2018 Orders”):
“1.Judgment for the [CBA] for possession of the whole of the land . . . known as [Blackburn].”
You will notice that as I have gone along I have paraphrased some of these orders to take into account the definitions I have made before.
“2.The [CBA] have leave to obtain a writ of possession with respect to the whole of the land . . . known as [Blackburn].
3.Judgment for the [CBA] for possession of the whole of the land . . . known as [Brecon].
4.The [CBA] have leave to obtain a writ of possession with respect to the whole of the land . . . known as [Brecon].
5.Judgment for the [CBA] against [Mr Harker‑Mortlock] on the guarantee in the sum of $4,492,545.24.
6.On the written undertaking to the Court made by [Mr Harker‑Mortlock] on 31 August 2018, stay:
a)the execution of each writ of possession identified in paragraphs 2 and 4 of these orders; and
b)enforcement of the judgment in paragraph 5 of these orders,
until 5.00 pm on 31 October 2018.”
As is self‑evident, Justice Campbell granted a stay of orders 2, 4 and 5 of the 31 August 2018 Orders until 5.00 pm on 31 October 2018.
Mr Harker‑Mortlock and JHM appealed against the 31 August 2018 Orders. On 29 October 2018, on the written undertaking of Mr Harker‑Mortlock that he would, among other things, maintain the properties in a good state of repair “until [the CBA] obtains possession” of them, the Court of Appeal of the Supreme Court of New South Wales granted a stay of orders 2 and 4 of the 31 August 2018 Orders, until the final determination of that appeal. A stay of order 5 of the 31 August 2018 Orders, until the final determination of the appeal, was made by consent on 31 October 2018.
On 27 March 2019, the Court of Appeal dismissed Mr Harker‑Mortlock’s and JHM’s appeal and ordered them to pay the CBA’s costs. On the same day, Justice Meagher of the Court of Appeal refused to extend the stay granted by Justice Campbell for a further 21 days on the basis that, relevantly, there were not sufficient prospects of success to justify any further stay. The stay which was sought, and refused, was, as I have said, for a period of 21 days and it was to enable the applicants to review the Court of Appeal’s reasons for judgment. The applicants have not made any further application for a stay to that Court.
On 9 April 2019, in respect of each property, Mr Harker‑Mortlock was served with a Writ of Possession and a Notice to Vacate dated 4 April 2019. Each Writ and Notice relevantly stated that:
“All occupants are hereby given notice that they must vacate the premises prior to [11:30:00 AM in respect of Blackburn and 12:30:00 PM in respect of Brecon] on Thursday 9 May 2019, otherwise action will proceed to evict you without further warning.”
Vacant possession has not yet been given.
On 26 April 2019, the applicants filed in this Court an application for special leave to appeal against the judgment and orders of the Court of Appeal. It will be necessary to return to consider that application.
On 6 May 2019, the applicants filed a summons in this Court seeking a stay of orders 2, 4 and 5 of the 31 August 2018 Orders until the “completion of proceedings” before this Court, or until further order of this Court. Mr Harker‑Mortlock contends that a stay is necessary to preserve the subject matter of the proposed appeal – the properties – and that if a stay is not granted, any appeal would be rendered nugatory and there is a real risk that it would not be possible for Mr Harker‑Mortlock to be restored to his former position.
An applicant for a stay has the burden of persuading the Court that it should be granted[1]. Where special leave has not yet been obtained, as is the position here, it is an exceptional jurisdiction which requires extraordinary circumstances to be shown in order to obtain a stay[2].
[1]See Advanced Building Systems Pty Ltd v Ramset Fasteners (Aust) Pty Ltd (1997) 71 ALJR 814 at 815.
[2]See Jennings Construction Ltd v Burgundy Royale Investments Pty Ltd [No 1] (1986) 161 CLR 681 at 684; Edelsten v Ward [No 2] (1988) 63 ALJR 346 at 346.
The purpose of a stay is not to enable the parties merely to maintain the status quo pending any justiciable controversy between them being brought to practical finality by a decision of this Court. The purpose is, rather, to safeguard against the exercise of this Court’s appellate jurisdiction being rendered in some degree inutile or a source of adverse collateral consequences in the event of special leave to appeal being granted[3]. It is for that reason that, in determining whether to exercise the extraordinary jurisdiction of this Court in granting a stay pending the hearing and determination of an application for special leave to appeal, the considerations impacting upon the exercise of this Court’s discretion include, first, whether there is a substantial prospect that special leave to appeal will be granted; second, whether the applicants have failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; third, whether the grant of a stay will cause loss to the respondents; and, finally, where the balance of convenience lies[4]. It is to those considerations that I now turn.
[3]Obeid v The Queen [2016] HCA 9 at [12]. See also Belajev v Director of Public Prosecutions (1991) 173 CLR 28 at 31.
[4]Jennings Construction (1986) 161 CLR 681 at 685.
The applicants contend that their prospects on special leave are not insubstantial[5]. The substantive merits of the special leave application are not to, and cannot, be determined today. However, it must be said that having regard to the material currently before this Court, it is not apparent that the Court of Appeal has fallen into error. Five proposed grounds are listed. The first proposed ground concerns an alleged failure of the Court of Appeal to consider “sufficiently or at all” JHM’s cross‑claim that the CBA breached its duty to the Trust. The Court noted in its reasons that some of the grounds relating to the issues arising in the CBA’s claims for possession and a money judgment under the guarantee were relevant to the cross‑claim: see paragraph 7 of its reasons for decision. The Court therefore addressed the substance of JHM’s cross‑claim substantively at paragraphs 29 to 30, and again from paragraphs 38 to 82.
[5]See Mercanti v Mercanti (2017) 91 ALJR 258 at 260 [13], citing Jennings Construction (1986) 161 CLR 681 at 685.
The second proposed ground concerns questions of construction regarding two definitions in the Farm Debt Mediation Act 1994 (NSW). That argument was considered by the Court of Appeal. The Court concluded that the ground could not succeed because, among other things, the Act ceased to apply from the liquidation of iInvest on 29 October 2012 and, on the cause of action pursued at trial, the applicants had suffered no damage. In the circumstances of those matters there would seem to be a question as to whether this would be an appropriate vehicle to even consider the relevant questions of construction regarding those two definitions, notwithstanding that on its face the section would appear not to apply to the circumstances: see section 5(2)(c) of the Farm Debt Mediation Act.
The third proposed ground contends that the Court erred in holding as irrelevant findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. That proposed ground appears at least on its face to proceed on a false premise. The Court of Appeal appears to have dismissed the applicants’ interlocutory application to adduce fresh evidence, in the form of an extract from the report of that Commission. There is no appeal from that order.
The fourth and fifth proposed grounds appear to be new, not having been raised in the lower courts.
In relation to the other matters relevant to the considerations for the grant of a stay, it is those matters I now address.
There is no direct evidence that the CBA will suffer loss if a stay were granted. However, as counsel for the CBA explained, the value of the properties is significantly less than the judgment debt. Specifically, the documents filed with this Court by the CBA record that, as at 12 September 2018, Blackburn was valued at $1.55 million and Brecon at $1.25 million, comprising a total valuation of some $2.8 million. That is significantly less than the judgment debt of $4.49 million, which does not include post‑judgment interest. Moreover, it must be recalled that that judgment debt in fact reflects the capped liability of Mr Harker‑Mortlock under the guarantee. As at 25 January 2017, the total amount due to the CBA at that date was in excess of $6 million. Thus, a stay of execution of the judgment given at trial, and affirmed in the Court of Appeal, would keep the CBA out of its funds for a further period and thereby, at least to that extent, cause it loss.
Next, where, as here, the debt has not been paid, the Court will not, as a general rule, interfere to deprive the mortgagee of the benefit of its security, except upon terms that an equivalent safeguard is provided to it, either by means of the applicants bringing in an amount sufficient to meet what is claimed by the mortgagee to be due or some other mechanism[6]. In this case the applicants have not paid or otherwise brought in an amount sufficient to meet or secure the judgment debt.
[6]See Inglis v Commonwealth Trading Bank of Australia (1972) 126 CLR 161 at 164.
Finally, the application to the Court of Appeal to stay the relevant 31 August 2018 Orders for 21 days was an oral application made without supporting papers and before the application for special leave to appeal was filed in this Court. The applicants made no further application to that Court for a stay based upon the material on which they now move in this Court.
That leaves the balance of convenience. There is no doubt Mr Harker‑Mortlock will suffer prejudice if a stay is not granted. He will no longer live on one property and no longer farm both properties. However, despite those unfortunate circumstances, it appears to me that the balance of convenience lies with the CBA. The applicants failed at trial and on appeal. The judgment debt has not been paid, and the applicants have not established extraordinary circumstances necessitating the exercise of this exceptional jurisdiction.
For those reasons I am not persuaded that the applicants’ prospects of success in obtaining special leave to appeal to this Court are sufficient to outweigh those other considerations. In these circumstances I am not persuaded that it is in the interests of justice in this case that the Court, in the exercise of an exceptional jurisdiction, should grant a stay. The application for a stay should be dismissed.
Do you seek costs, Ms Cheeseman?
MS CHEESEMAN: Yes, I do, your Honour.
HER HONOUR: Costs in the application for special leave ‑ ‑ ‑
MS CHEESEMAN: Yes, your Honour, that is appropriate.
HER HONOUR: Anything else you wish to say?
MR KING: Your Honour, can I just respectfully point out something which I hope is not – which is on the record. Your Honour, we did have papers before Justice Meagher, and twice we made the application. It is just that his Honour made it very clear that he was not going to consider it. We did our best. Thank you, your Honour.
HER HONOUR: I understand. Thank you, Mr King.
The orders of the Court are as follows:
1. The application by summons filed 6 May 2019 is dismissed.
2.Costs of the summons are the first respondent’s costs in the application for special leave to appeal.
Adjourn the Court.
AT 5.36 PM THE MATTER WAS CONCLUDED
0
7
0