Heywood v Sharpe (No.2) - [2015] FCCA 355

FEDERAL CIRCUIT COURT OF AUSTRALIA

HEYWOOD v SHARPE (No.2)

[2015] FCCA 355

Catchwords:
CHARGES – Remedies of chargee – whether a judgment that was entered pursuant to consent orders, and whose payment was secured by a charge over land granted by a term of the consent orders, was a “farm debt” within the meaning of the Farm Debt Mediation Act 1994 (NSW) (FDM Act) – whether the consent orders pursuant to which the judgment was entered and the charge over the land was created was a “farm mortgage” within the meaning of the FDM Act – whether taking action to enforce the judgment would constitute the taking of “enforcement action” in respect of the consent orders, and hence in respect of a “farm mortgage” – whether a certificate that had been issued under s.11 of the FDM Act was “in force in respect of” the consent orders, and hence of the “farm mortgage” – whether notice under s.8(1) of the FDM Act was required to be given before the chargee could take enforcement action in respect of the consent orders or the judgment entered pursuant to the consent orders.

BANKRUPTCY – Creditor’s petition – application for a sequestration order based on failure to comply with the requirements of a bankruptcy notice – whether at the time the bankruptcy notice was issued the creditor could not enforce the judgment on the basis of which the bankruptcy notice was issued without the creditor first giving notice to the debtor pursuant to s.8(1) of the Farm Debt Mediation Act 1994 (NSW) (FDM Act) – if the creditor could not enforce the judgment without first giving notice under s.8(1) of the FDM Act whether the creditor was a “creditor” for the purposes of s.40(1)(g) and s.41 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) – whether a bankruptcy notice having been issued on the application of a person who is not a “creditor” for the purposes of s.40(1)(g) and s.41 of the Bankruptcy Act is a sufficient cause as to why a sequestration order ought not be made – sequestration order not made.

Legislation:

Bankruptcy Act 1966 (Cth), ss.40(1)(g), 41, 52, 52(2)

Bankruptcy Regulations 1996 (Cth), reg.4.05
Farm Debt Mediation Act 1994 (NSW), ss.4, 4(1), 5(1), 5(2), 5(2)(b), 6, 8, 8(1), 8(3), 9(1), 10(1), 11, 11(1)
Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), r.4.02(1), 4.02(2), 4.04(1)(a), 4.06(2), 4.06(3), 4.06(4)

Abigroup Limited v Abignano (1992) 39 FCR 74
Australia and New Zealand Banking Group Limited v Daher [2014] FCCA 365
Corney v Brien (1951) 84 CLR 343
Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 177 Hargraves Secured Investments Limited v Waller [2009] NSWSC 1210
IMF (Australia) Limited v Meadow Springs Fairway Resort Limited (in Liquidation) [2009] FCAFC 9
Sharpe v Heywood [2013] NSWCA 192
Sharpe v Heywood [2013] FCCA 1788
Standard Chartered Bank of Australia Ltd v Antico (1995) 38 NSWLR 290

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] FCCA 355
Decision Date: 20 February 2015

CaseChat Overview and Summary

The proceeding involved a dispute between Heywood (the chargee) and Sharpe (the debtor). Heywood sought to enforce a judgment against Sharpe, which was secured by a charge over land granted by consent orders. Sharpe contended that the judgment and the charge constituted a "farm debt" and a "farm mortgage" respectively, and that Heywood's enforcement actions were subject to the requirements of the *Farm Debt Mediation Act 1994* (NSW) (FDM Act). The matter came before Judge Manousaridis.

The central legal issues before the court were whether the judgment and the charge fell within the definitions of "farm debt" and "farm mortgage" under the FDM Act, and consequently, whether Heywood was required to comply with the notice provisions of the FDM Act before taking enforcement action. Specifically, the court had to determine if taking action to enforce the judgment constituted "enforcement action" in respect of a "farm mortgage," and if a certificate issued under s.11 of the FDM Act was in force in respect of the consent orders and the farm mortgage. The court also considered whether a bankruptcy notice issued by Heywood was valid, given Sharpe's argument that Heywood was not a "creditor" for the purposes of the *Bankruptcy Act 1966* (Cth) if the FDM Act's notice requirements had not been met.

Judge Manousaridis reasoned that the consent orders, which created both the judgment and the charge over land, were indeed a "farm mortgage" within the meaning of the FDM Act. His Honour found that the enforcement of the judgment constituted "enforcement action" in respect of this farm mortgage. Consequently, Heywood was required to give notice under s.8(1) of the FDM Act before taking such action. As Heywood had failed to provide this notice, the bankruptcy notice issued by Heywood was based on a judgment that could not be enforced at that time. Therefore, Heywood was not a "creditor" for the purposes of the *Bankruptcy Act* at the time the bankruptcy notice was issued.

His Honour concluded that the failure to comply with the FDM Act's notice requirements meant that Heywood was not a creditor entitled to issue a bankruptcy notice. Accordingly, a sequestration order ought not to be made.

Orders