Heywood v Sharpe (No.2)

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.