FEDERAL COURT OF AUSTRALIA
McMahon v Permanent Custodians Limited [2014] FCA 1238
Citation: McMahon v Permanent Custodians Limited [2014] FCA 1238 Appeal from: McMahon v Permanent Custodians Ltd [2014] FCCA 216 Parties: ROBYN SANDRA McMAHON v PERMANENT CUSTODIANS LIMITED File number: NSD 210 of 2014 Parties: JOHN TERENCE MICHAEL McMAHON v PERMANENT CUSTODIANS LIMITED File number: NSD 211 of 2014 Judge: GLEESON J Date of judgment: 19 November 2014 Catchwords: BANKRUPTCY – appeal from the Federal Circuit Court – refusal to set aside sequestration order – whether primary judge’s decision contravened Farm Debt Mediation Act 1994 (NSW) – whether Farm Debt Mediation Act applies to decision to make sequestration orders – where rights of appeal not exhausted in relation to s 11 notice issued under Farm Debt Mediation Act – appeal dismissed Legislation: Bankruptcy Act 1966 (Cth)ss 43, 52, 60,
Federal Court of Australia Act 1976 (Cth) ss 24, 25(1AA)
Real Property Act 1900 (NSW) s 57(2)(b)
Farm Debt Mediation Act 1994 (NSW) ss 3, 4, 5, 6, 7, 8, 11Cases cited: Abeysinghe v Minister for Immigration & Multicultural & Indigenous Affairs [2004] FCA 1558
Burrell v The Queen (2008) 238 CLR 218
Clapham v Commonwealth Bank of Australia [2013] FCAFC 84
Hamilton Island Enterprises Pty Ltd v FCT [1982] 1 NSWLR 113
House v R (1936) 55 CLR 499
McMahon v Permanent Custodians Ltd [2013] HCATrans 254
Narain v Euroasia (Pacific) Pty Ltd [2010] FCA 1352
Permanent Custodians Ltd v McMahon [2013] NSWCA 275
Permanent Custodians Ltd v McMahon [2013] NSWSC 769
Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 381
Sharpe v Bailey [2014] FCA 921
Sharpe v Hargraves Secured Investments Ltd [2013] NSWCA 288
Undershaft (No 1) Ltd v Commissioner of Taxation (2009) 175 FCR 150Date of hearing: 4 September 2014 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 64 Counsel for the Appellant: The appellants appeared in person Counsel for the Respondent: Mr Darrell Barnett Solicitor for the Respondent: Gillis Delaney Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 210 of 2014
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: ROBYN SANDRA MCMAHON
AppellantAND: PERMANENT CUSTODIANS LIMITED
Respondent
JUDGE:
GLEESON J
DATE OF ORDER:
19 NOVEMBER 2014
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The respondent’s reasonable costs of and incidental to the appeal are to be treated as costs in the appellant’s bankruptcy in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 211 of 2014
ON APPEAL FROM THE FEDERAL CIRCUIT COURT OF AUSTRALIA
BETWEEN: JOHN TERENCE MICHAEL MCMAHON
AppellantAND: PERMANENT CUSTODIANS LIMITED
Respondent
JUDGE:
GLEESON J
DATE OF ORDER:
19 NOVEMBER 2014
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The respondent’s reasonable costs of…
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- AGLC
- McMahon v Permanent Custodians Limited [2014] FCA 1238
- Case
- [2014] FCA 1238
- Decision Date
CaseChat Overview and Summary
In McMahon v Permanent Custodians Limited, the appellants, McMahon and his wife, appealed against decisions of the Federal Circuit Court (FCC) dismissing their application for a review of a sequestration order. The central issue was whether the primary judge's decision contravened the Farm Debt Mediation Act 1994 (NSW). The appellants argued that the primary judge should have set aside the sequestration order on the basis that the Rural Assistance Authority had no authority to issue a certificate under s 11 of the Farm Debt Mediation Act and that this certificate was void. The appellants contended that the FCC erred by not recognising that the statutory mediation process under the Farm Debt Mediation Act had not been properly followed, and that the sequestration order should not have been made.
The court held that the appeal was governed by the principles applicable to an appeal from an exercise of discretion. The primary judge had exercised a discretion in dismissing the applications for review of the sequestration order, and the appeal was to be determined on whether there was some error in exercising that discretion. The court found that there was no error in the primary judge's decision. The arguments presented by the appellants had already been considered and rejected by other courts, and there was no new evidence or argument presented to the FCC that would lead to a different outcome. The court concluded that the primary judge's decision was not unreasonable or plainly unjust.
The appeal was dismissed, and the respondent's reasonable costs of and incidental to the appeal were to be treated as costs in the appellant's bankruptcy in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
The court held that the appeal was governed by the principles applicable to an appeal from an exercise of discretion. The primary judge had exercised a discretion in dismissing the applications for review of the sequestration order, and the appeal was to be determined on whether there was some error in exercising that discretion. The court found that there was no error in the primary judge's decision. The arguments presented by the appellants had already been considered and rejected by other courts, and there was no new evidence or argument presented to the FCC that would lead to a different outcome. The court concluded that the primary judge's decision was not unreasonable or plainly unjust.
The appeal was dismissed, and the respondent's reasonable costs of and incidental to the appeal were to be treated as costs in the appellant's bankruptcy in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
Orders
Orders of the court
1. The appeal be dismissed.
2. The respondent’s reasonable costs of and incidental to the appeal are to be treated as costs in the appellant’s bankruptcy in accordance with s 109(1)(a) of the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
In Narain, Gray J held that, by s 52(2), the onus of establishing “sufficient cause” to warrant the exercise of the discretion in favour of the debtor, if all the elements prescribed by s 52(1) have been established, falls upon the debtor.Facts In 2009 and 2010, the respondent advanced $3.3 million to the appellants on the terms and conditions set out in two loan agreements. The loans were secured by mortgages granted over various properties. The advances were farm debts within the meaning of the FDM Act. The mortgages were farm mortgages within the meaning of the FDM Act. The appellants defaulted under the loan agreements. Pursuant to s 8 of the FDM Act, the respondent gave notice to the appellants of its intention to take enforcement action and of the availability of mediation under the Act. A mediation was held on 14 June 2011, as a result of which the parties entered into a heads of agreement. The heads of agreement relevantly provided an opportunity for the applicants to remedy their defaults under the loan agreements by 15 August 2011, failing which the respondent was entitled to commence recovery action against them. On 11 August 2011 (that is, four days before the expiry of the time available to the appellants to remedy their defaults), the Rural Assistance Authority issued a certificate under s 11 of the FDM Act. The applicants did not remedy their defaults by 15 August 2011. On 15 September 2011, the respondent served notices under s 57(2)(b) of the Real Property Act 1900 (NSW). On 12 December 2011, the respondent commenced proceedings in the Supreme Court, seeking writs of possession of the farms the subject of the farm mortgages and judgment for the amount outstanding on the mortgages. In April 2012, the appellants consented to orders for possession of the relevant properties, and judgment in the sum of $3.75 million in favour of the respondent. Writs of possession were executed and all properties have now been sold. On 11 July 2012, bankruptcy notices in respect of the appellants were issued. The judgment relied upon for the issue of the bankruptcy notice was the consent judgment. On 17 August 2012, the appellants applied to the Supreme Court seeking that the consent orders be set aside or alternatively stayed. The application was heard and dismissed by Schmidt J on 24 September 2012. On 7 December 2012, Garling J in the Supreme Court heard and dismissed an application by Mr McMahon for orders having the effect of deferring public auctions scheduled for the following day. On 10 December 2012, creditor’s petitions in respect of the appellants were presented, following the appellants failure to comply with the bankruptcy notices. On 27 March 2013, the appellants sought and obtained injunctive relief to restrain the auctions of two of the properties pending an application for relief including declarations that the s 11 certificate was issued ultra vires and that the statement of claim in the possession proceedings was prohibited by the FDM Act. An order was sought that the consent orders be set aside. The application was heard by Davies J, who refused to grant the relief sought: Permanent Custodians Ltd v McMahon [2013] NSWSC 769. At [32], his Honour found that the appellants remained in default under the loan agreements after the heads of agreement was made, whilst being given an opportunity to rectify that default by one of the methods agreed in the heads of agreement. At [37], Davies J rejected contentions by the appellants that the s 11 certificate was issued ultra vires and was void.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Section 11(1) of the FDM Act provides relevantly:(1) 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).Decision under appeal On 3 February 2014, the primary judge made the decision under appeal. In deciding to dismiss the applications for review of the registrar’s decision to make the sequestration orders, his Honour said:[14] In his submissions Mr McMahon seeks to re-agitate the issues concerning s.11(1)(a) that have already been the subject of decisions by the Supreme Court, its Court of Appeal and, in a way, by the High Court of Australia. The gravamen of his argument is that if I do not review this decision and set aside the sequestration order he will not have an opportunity to argue his case in the High Court. His arguments will be “cut off at the knees”. I understand Mr McMahon’s concern, but the authorities are now clear that whilst favourable consideration is always given to allowing a debtor to appeal against the primary decision which constitutes the debt the subject of the bankruptcy: Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137, this is not the case when the applicant is seeking special leave from the High Court to appeal against a decision of a Court of Appeal: Narain v Euroasia (Pacific) Pty Ltd [2010] FCA 1352 at [52] [(“Narain”)].[15] In those cases the court must be satisfied that there are real prospects of success in the appeal. It is not for this Court to second guess the views of four judges of the Supreme Court of New South Wales and a judge of the High Court of Australia, all of whom have indicated that the arguments that Mr McMahon wishes to put forward on behalf of himself and his wife are unlikely to succeed. He has told me nothing to convince me that the arguments have any more strength today than they did when they were considered by those eminent jurists.Nature of appeal The appellants appeal as of right from the decisions below: s 24, Federal Court of Australia Act 1976 (Cth). Pursuant to s 25(1AA) of that Act, the appellate jurisdiction of the Court in relation to an appeal from a judgment of the FCC is exercised in this case by a single judge. The primary judge was required to exercise a discretion in making his decision: cf Clapham v Commonwealth Bank of Australia [2013] FCAFC 84 at [40]; Narain at [50]. Accordingly, the principles that apply to this appeal are the principles governing an appeal from an exercise of discretion, set out in the following well-known passage taken from House v R (1936) 55 CLR 499 at 504-505:The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.
Ratio Decidendi
Legal Principle Established
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