Sharpe v W H Bailey & Sons Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Sharpe v W H Bailey & Sons Pty Ltd [2014] FCA 921

Citation: Sharpe v W H Bailey & Sons Pty Ltd [2014] FCA 921
Appeal from: Sharpe v WH Bailey & Sons Pty Ltd [2014] FCCA 402
Parties: DAVID GEORGE SHARPE v W H BAILEY & SONS PTY LTD
File number: NSD 274 of 2014
Judge: GLEESON J
Date of judgment: 26 August 2014
Catchwords: BANKRUPTCY – appeal from the Federal Circuit Court – refusal to extend time for compliance with bankruptcy notice – whether primary judge’s decision contravened Farm Debt Mediation Act 1994 (NSW) – whether primary judge erred in not hearing and taking into account application in its entirety – where appellant recovering from medical condition – where appellant alleges abuse of process – appeal dismissed
Legislation: Bankruptcy Act 1966 (Cth) ss 30, 40(1)(g), 41(6A), 41(6C)
Farm Debt Mediation Act 1994 (NSW) ss 3, 4, 5(2)(b), 6, 8
Federal Court of Australia Act 1976 (Cth) ss 24(1)(d), 24(1A), 25(1AA), 28
Cases cited: Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137
Astrazeneca Pty Ltd v Glaxosmithkline Australia Pty Ltd [2006] ATPR 42-106; [2006] FCAFC 22
Australian Securities and Investments Commission v Forge (2004) 48 ACSR 474; [2003] FCAFC 274
Brunninghausen v Glavanics [1998] FCA 230
Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264
Cameron v Cole (1944) 68 CLR 571
Commissioner of Police v Tanos (1958) 98 CLR 383
Construction, Forestry, Mining and Energy Union v Mammoet Australia Pty Ltd (2012) 206 FCR 135
Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397
Fox v Percy (20013) 214 CLR 118
Guss v Johnstone (2000) 171 ALR 598
Hargraves Secured Investments Ltd v Sharpe [2012] NSWSC 1519
Hargraves Secured Investments Ltd v Sharpe [2013] NSWSC 177
Hargraves Secured Investments Ltd v Sharpe [2013] NSWSC 539
House v R (1936) 55 CLR 499
Hovan v Goycolea-Silva [2003] FCA 234
Hubner v ANZ Banking Group Ltd [1998] FCA 1779
James v Abrahams (1981) 34 ALR 657
Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564
Kakavas v Paradise Enterprises Ltd [2010] FCA 915
Kavia Holdings Pty Ltd v Werncog Ltd [1999] NSWSC 839
MZXGP v Minister for Immigration and Multicultural Affairs [2006] FCA 1075
Narain v Eurasia (Pacific) Pty Ltd [2010] FCA 1352
Re Athans; Ex Parte Athans (1991) 29 FCR 302
Re Briggs; Ex Parte Briggs v Deputy Commissioner of Taxation (1986) 12 FCR 310
Re Dalco; ex parte Dalco v Commissioner of Taxation (1986) 67 ALR 605
Re Sarina; Ex parte Wollondilly Shire Council [1980] FCA 66; (1980) 43 FLR 163
Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377
Robertson v Knott Investments Pty Ltd (No 3) [2010] FCA 1074
Rozenbes v Kronhill (1956) 95 CLR 407
Samsung Electronics Co. Ltd v Apple Inc (2011) 217 FCR 238
Sharpe v Hargraves Secured Investments Limited [2014] HCASL 66
Sharpe v Hargraves Secured Investments Ltd [2013] NSWCA 288
Sharpe…
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Details
Case
[2014] FCA 921
Decision Date

CaseChat Overview and Summary

The case of Sharpe v WH Bailey & Sons Pty Ltd involved a dispute between the appellant, Mr Sharpe, and the respondent, WH Bailey & Sons Pty Ltd, regarding a bankruptcy notice. The primary issue in the case was whether the primary judge's decision to refuse an extension of time for Mr Sharpe to comply with the bankruptcy notice contravened the Farm Debt Mediation Act 1994 (NSW). Additionally, the court examined whether the primary judge erred in not hearing and considering Mr Sharpe's application in its entirety. The case was heard in the Federal Circuit Court of Australia, and the appeal was subsequently dismissed.

The legal issues the court had to decide included whether the primary judge's decision contravened the Farm Debt Mediation Act 1994 (NSW), if the primary judge should have heard and considered Mr Sharpe's application in its entirety before deciding not to extend the time for compliance with the bankruptcy notice, and whether the primary judge should have extended the time for compliance with the bankruptcy notice due to Mr Sharpe's recovery from a medical condition and his alleged abuse of process.

The court's reasoning and outcome were that the primary judge made errors in exercising his discretion to refuse to extend the time for compliance with the bankruptcy notice. However, there were strong discretionary considerations against granting an extension of time in this case. The court found that the correct order was that the time for compliance with the bankruptcy notice not be extended. Consequently, the appeal was dismissed.

In conclusion, the final orders of the court were to dispense with the requirement to file an application for leave to appeal, to grant leave to appeal, and to dismiss the appeal with costs. The court held that the primary judge's decision did not contravene the Farm Debt Mediation Act 1994 (NSW) and that the primary judge should have heard and considered Mr Sharpe's application in its entirety before deciding not to extend the time for compliance with the bankruptcy notice. However, the court found that the primary judge's decision not to extend the time for compliance with the bankruptcy notice was correct.

Orders

Orders of the court

1. The requirement to file an application for leave to appeal be dispensed with.

2. Leave to appeal be granted.

3. The appeal be dismissed with costs.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Accordingly, I grant leave to appeal.BACKGROUND TO THE APPEALCircumstances leading up to WH Bailey’s judgment against Mr Sharpe: 2010 to December 2011 Mr Sharpe conducted a farming business from a property at Bellingen. At some point, WH Bailey commenced supplying Mr Sharpe with goods on a running account basis. The running account was not secured by a mortgage over Mr Sharpe’s farming property. By November 2010, Mr Sharpe owed in excess of $57,000. WH Bailey commenced debt recovery proceedings in the Local Court at Bellingen to recover this amount. In July 2011, the parties signed a document entitled “Terms of Settlement” (“July 2011 terms of settlement”). The substantive parts of the document stated:1.[Mr Sharpe] admits the claim of $58,772.96.2.[Mr Sharpe] will pay to [WH Bailey] the sum of $10,000 each 6 months commencing 31 October 2011 and thereafter on each following 30th April and 31st October each year until the debt, including cost[s] as below are paid in full. 3.[WH Bailey] to issue 6 monthly statements of account to [Mr Sharpe] within 28 days of the payment dates above. 4.Interest on the debt will be at the rate of 1% per month until the debt is paid in full. This rate to be calculated from 01 November 2010 and added to the debt each month. 5.Costs of [WH Bailey] in the sum of $9,316.00 to be added to the total of the debt.6.[Mr Sharpe] to do all things and sign all documents necessary to grant [WH Bailey] a second mortgage on his property at Bellingen being recorded on the folio of the register as [details provided]. 7.In the event of any default by [Mr Sharpe] pursuant to these terms the court to issue judgment against [Mr Sharpe] for the amount still owing. In November 2011, WH Bailey moved to enter judgment against Mr Sharpe. According to the judgment of Beech-Jones J ([2013] NSWSC 1887 at [8]), in other proceedings, Mr Sharpe has contended, and WH Bailey denied, that in October 2011 WH Bailey effectively abandoned the July 2011 terms of settlement when its solicitors protested about some of the conditions of the mortgage that Mr Sharpe proposed. However, it was agreed that Mr Sharpe did not pay any moneys to WH Bailey as contemplated by paragraph 2 of the terms of settlement. The judgment debt on which the bankruptcy notice is based is a judgment of the Local Court in Bellingen made on 6 December 2011 for an amount of $73,499.56 (“first Local Court judgment”). The amount of the judgment appears to reflect paragraphs 1 and 5 of the July 2011 terms of settlement plus interest.High Court judgment in Waller: February 2012 In February 2012, the High Court handed down its decision in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311 (“Waller”). In that decision, the Court held that certain agreements, read with a registered all monies mortgage, successively created distinct interests in, and powers over farm property owned by the farmer and securing her obligations as debtor. Those distinct interests and powers were held to be “farm mortgages” within the meaning of the FDM Act. Under that Act, certain “enforcement action” could not occur in the circumstances of the case. Importantly, it was held that Hargraves’ claim for a money judgment was “enforcement action” within the meaning of the FDM Act because it was pleaded by reference to the terms of the mortgage. Heydon J, at [66] said relevantly:The better view, with respect, is that the definition of “enforcement action” is wide enough to extend beyond enforcement of the security by taking possession to include reliance on any of the rights in the farm mortgage…it follows that action to obtain a money judgment after the commencement of the [FDM Act] is “enforcement action” so long as it is action to enforce the mortgage.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

For the reasons that follow, I accept that the primary judge made errors in exercising his discretion to refuse to extend time for compliance with the bankruptcy notice. In particular, the primary judge apparently failed to take into account that Mr Sharpe’s application for review of the Registrar’s decision not to set aside the bankruptcy notice (“application for review”) had not been determined. However, there are powerful discretionary considerations against granting an extension of time in this case. In my judgment, the correct order was that the time for compliance with the bankruptcy notice not be extended. Accordingly, the appeal will be dismissed.SCOPE OF THE DECISION UNDER APPEAL Mr Sharpe’s amended notice of appeal describes the primary judge’s decision as involving a dismissal of his application for review of the Registrar’s decision not to set aside the bankruptcy notice (see, for example paragraphs 2 and 14 of the grounds of appeal and order 1 of the orders sought in the amended notice of appeal). The precise orders made by the primary judge were:1.Application dismissed.2.The applicant must pay the respondent’s costs to be taxed, if not agreed, in accordance with the Federal Circuit Court (Bankruptcy) Rules. Unfortunately, it is not clear which application is the subject of order 1. The primary judge’s reasons refer to the matter before him as an application to extend time for compliance with a bankruptcy notice. The reasons do not refer to Mr Sharpe’s application for review of the decision not to set aside the bankruptcy notice. This is consistent with the orders made at the previous hearing before the primary judge, which extended time for compliance with the bankruptcy notice but did not adjourn or otherwise refer to the application for review. The problem may have arisen from some ambiguity in the application for review itself. That document identified the exercise of power sought to be reviewed as:Application to set aside Bankruptcy Notice Dismissed with no further evidence allowed to be filed, and, No further extension of time to comply with the Bankruptcy Notice/ Please See Copy of Orders Attached. This would seem to make it clear that Mr Sharpe sought review of the Registrar’s decision not to set aside the bankruptcy notice. However, section D of the application form, which requires the applicant to “set out the decree(s) or order(s) sought in place of those to be reviewed” contains two pages of closely typed submissions commencing with the following paragraph: 1/ Grant a further Extension of Time to comply with the Bankruptcy to allow for a Judgment in my Leave to Appeal and Appeal Proceedings against the Creditor listed to be heard in the NSW Supreme Court 16 December 2013. 2/ If needed pending the decision in the Supreme Court Proceedings, time to then apply to the NSW Rural Assistance Authority for the issue of a 9B exemption certificate against enforcement of the Judgement debt on which the Bankruptcy Notice relies. 3/ misstatement in the Bankruptcy Notice of the Solicitor for the Respondent noted on the Bankruptcy Notice not being allowed to bring this action before the Court on behalf of the Creditor under sections 16, 20 and 21 of the [FDM Act], and section 41(5) of the Bankruptcy Act 1966. 4/ That the next listing before the Registrar of the Federal Magistrates Court be for Directions for the hearing and leave to file further evidence, in the Set Aside Application matters and in relation to orders 1 2 and 3.

Ratio Decidendi

Legal Principle Established

In my opinion, Mr Sharpe’s appeal raises the following issues: a.Did the primary judge’s decision contravene the FDM Act?b.Should the primary judge have heard Mr Sharpe’s application to review in its entirety before deciding not to extend time for compliance with the bankruptcy notice?c.Should the primary judge have taken into account the matters raised in the application for review in deciding whether to extend time for compliance with the bankruptcy notice?d.Should the primary judge have extended time for compliance with the bankruptcy notice because Mr Sharpe had not exhausted his appeal rights in connection with the judgment on which the bankruptcy notice is founded?e.Should the primary judge have extended time for compliance with the bankruptcy notice to give Mr Sharpe an opportunity to make submissions after he had fully recovered from his medical problems?CONSIDERATIONDid the primary judge’s decision contravene the FDM Act? Mr Sharpe’s essential complaint is that the primary judge’s decision allowed an act of bankruptcy to be committed. This was “enforcement action” contrary to s 8(1) of the FDM Act. For convenience, I repeat the terms of s 8(1):A creditor to whom money under a farm mortgage is owed by a farmer must not take enforcement action against the farmer in respect of the farm mortgage until at least 21 days have elapsed after the creditor has given a notice to the farmer under this section. “Enforcement action” is defined in s 4 of the FDM Act to mean in relation to a farm mortgage: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, but does not include: (a)the completion of the sale of property held under the mortgage in respect of which contracts were exchanged before the commencement of this Act, or (b)the enforcement of a judgment that was obtained before the commencement of this Act. “Farm mortgage” is defined by s 4 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, but does not include: (a) any stock mortgage or any crop or wool lien, or (b) the interest of the lessor of any farm machinery that is leased. “Statutory enforcement notice” is also defined by s 4 to mean:(a) a notice under section 57(2)(b) of the Real Property Act 1900 , or (b) a notice under section 111(2)(b) of the Conveyancing Act 1919, or (b1) a notice under section 71X(1)(b) of the Water Management Act 2000, or (c) a notice, given under any Act or statutory instrument, that is prescribed by the regulations as being within the scope of this definition. Mr Sharpe’s contention fails for several reasons:a.As was decided by the NSW Court of Appeal in October 2013 and the NSW Supreme Court in December 2013, the effect of s 5(2)(b) is that the FDM Act did not apply in respect of Mr Sharpe at the time of the decision under appeal (and still does not apply) by reason of the presentation of Mr Heywood’s creditor’s petition. Accordingly, the FDM Act could not operate to render the primary judge’s decision, or the effect of the decision, a contravention of that Act;b.In any event, the primary judge’s decision was not action in respect of a farm mortgage. The decision was to refuse to extend time for compliance with a bankruptcy notice founded on a judgment debt. The judgment debt is unsecured: it does not confer any interest or power of the kind that falls within the meaning of “farm mortgage” in the FDM Act;c.Even if the primary judge’s decision was action in respect of a farm mortgage, it was not action to enforce such a mortgage so as to be enforcement action within the meaning of the FDM Act. The decision does not involve or permit reliance on any rights in a farm mortgage: cf Waller at [66]. Rather, the decision permitted WH Bailey to pursue its rights under the Bankruptcy Act.