Waller v Hargraves Secured Investments Limited

[2011] HCATrans 278

[2011] HCATrans 278

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S223 of 2011

B e t w e e n -

ROSLYN EDWINA WALLER

Appellant

and

HARGRAVES SECURED INVESTMENTS LIMITED

Respondent

FRENCH CJ
HAYNE J
HEYDON J
CRENNAN J
KIEFEL J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 6 OCTOBER 2011, AT 10.00 AM

Copyright in the High Court of Australia

MR D.J. HIGGS, SC:   May it please the Court, I appear with MR J.B. KING, for the appellant.  (instructed by Jackson Lalic)

MR D.M. LOEWENSTEIN:   May it please the Court, I appear with my learned friend, MR A.R.A. KUKLIK, for the respondent.  (instructed by Hargraves Solicitors)

FRENCH CJ:   Yes, Mr Higgs.

MR HIGGS:   Your Honour, there is a notice of contention.  My learned friend has a notice of contention that we oppose in respect of the reasons of the Court of Appeal that held that the ‑ ‑ ‑

FRENCH CJ:   This is on the variation question?

MR HIGGS:   Quite so.  I do not know when your Honours want that to be dealt with?  It can be dealt with during the course of argument, it seems, but it might be that it is better to be dealt with now.

FRENCH CJ:   We will deal with it in the course of argument, I think.

MR HIGGS:   As your Honours please.  Your Honours, there are two main contentions that we advance in relation to this appeal:  firstly, in respect of that which is a farm mortgage that is defined in the Farm Debt Mediation Act, in order for there to be a farm mortgage there needs to be a farm debt in existence at the time a relevant enforcement action is sought to be undertaken by the creditor and, second, in relation to the provisions that prohibit enforcement action so as to avoid that prohibition it is necessary for there to be in existence a certificate under section 11 of the Act in relation to a farm debt that is in existence at the time, save for one exception - that is in the event of the farmer declining to participate in a mediation.

Now, as we have put out in the outline, there were three loan agreements here and the Court of Appeal held that each of the loan agreements when they came into existence, the second and the third, extinguished the previous loan agreement and hence there was a new farm debt at the time the second loan agreement was entered into and again at the time the third loan agreement was entered into. 

In our submission, there are two possibilities in relation to whether or not at the time this enforcement action was sought to be undertaken a farm mortgage was in existence.  Firstly, we would say that at the time the previous loan agreements or the previous farm debt was extinguished by the advent of the second loan agreement and then the third loan agreement there was created a new farm mortgage because in order for there to be a farm mortgage there needs to be a farm debt in existence. 

So in respect of a common occurrence of the mortgage with an all moneys clause where there can be a significant period of time during which the instrument registered on the title secures no farm debt, it cannot be said during that time that there was a farm mortgage, which is a creature of statute, this Act, the Farm Debt Mediation Act.  Rather, the farm mortgage only exists or the mortgage creating an interest in or a power over the land securing the obligations of the farmer can only be said to be a farm mortgage for so long as there is a farm debt.  So during its period when there is no farm debt in existence the instrument or the interest in or the power over the land cannot be said to be a farm mortgage in accordance with the Act.

Alternatively, there is the analysis of Justice Macfarlan in the Court of Appeal that we also advance that a farm mortgage is created in respect of every farm debt that comes into existence, a separate farm mortgage in respect to each farm debt, but they are the two ways that we put it.  Your Honours, can I take you firstly to the Act in relation to those submissions.  The purpose or the object of the Act is set out in section 3.  It is:

the efficient and equitable resolution of farm debt disputes.

That is to be by means of a mediation.  A creditor is defined as:

a person to whom a farm debt is for the time being owned by a farmer.

An “enforcement action” is:

in relation to a farm mortgage, means taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice –

and the like, and there are two exceptions.  A “farm debt”:

means a debt incurred by a farmer for the purposes of the conduct of a farming operation –

A “farm mortgage”:

includes 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 –

the exceptions set out therein.  Now, it is, we concede, a very wide definition and no doubt it was intentional so as to provide to farmers, we would submit, the protection of the Act in relation to a whole range of arrangements with respect to obligations undertaken by farmers in carrying out a farming operation.  The width of that section is governed, in our respectful submission, by sections 5 and 6, in particular, section 5 not being mentioned to any great degree in the majority judgments of the Court of Appeal, and that is:

This Act applies in respect of creditors only in so far as they are creditors under a farm debt.

In our submission, that is significant because ‑ ‑ ‑

CRENNAN J:   Does that mean only applies to secured creditors?

MR HIGGS:   That is so.  Well, no, it only applies to – they do not have to be secured but the prohibition in the Act that we come to a little later on picks up the necessity of the creditors being secured.  So the prohibition ‑ ‑ ‑

HAYNE J:   Why do they not have to be secured?

CRENNAN J:   Having regard to the definition of “farm debt”?

MR HIGGS:   I am sorry.  No, your Honour is correct.

CRENNAN J:   That is why I raised it.

MR HIGGS:   No, I do apologise.  I am wrong, yes.

Not only do they have to be secured, but also the security has to be in respect of a farm debt which, when one goes back to the definition of “creditor” is for the time being owed by a farmer and hence we say the importance of the finding that the second loan extinguished the first and the third loan agreement extinguished the second.  So we have this.  We have got a very wide definition in relation to farm mortgage and then we have it being pulled back so that it is made abundantly plain that the Act has no application, other than in respect of creditors and only insofar as the creditor is under a farm debt, which picks up the notion of it being secured and also the debt being owed for the time being, and that is at the time of the enforcement action.  Section 6:

Enforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void.

That is important, we say, particularly given the breadth of the definition of “enforcement action” as including any action to enforce the mortgage.  Then one comes to section 8 of the Act and that was the focus of attention in the Court of Appeal.  Firstly, section 8(1) prohibits enforcement actions in these circumstances:

A Creditor –

so that is someone who is owed the farm debt at the time –

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 –

in respect of the giving of relevant notice inviting a mediation.  Subsection (2) makes plain that the notice is in respect of, amongst other things:

the availability of mediation under this Act in respect of farm debts. 

That is further fleshed out by the following sections which time and time again emphasise that the mediation that the legislature had in mind was a mediation concerning the farm debt involved.  So section 9(1) a farmer is to be given notice under section 8.  They have 21 days in which to respond.  If they do not respond, then there is no mediation, but if they do, what is sought or what is provided for is a:

mediation concerning the farm debt involved.

So that must be, we say, the farm debt involved at the time the creditor seeks to undertake enforcement action.  Again in section 9(1A) the farmer can give notice even if he is not in default requesting a mediation again in respect of the farm debt involved.  In section 9A(1):

A creditor who has received a request from a farmer to mediate may, by notice in writing given to the farmer, agree or decline to mediate in respect of the farm debt involved.

In the event of there being a refusal that does not have any consequence, but if there is a default under subsection (3), a refusal can give rise to:

the issuance of an exemption certificate.

An exemption certificate is provided for in section 9B in those circumstances of:

A farmer who is in default and who has requested a creditor to mediate in respect of the farm debt involved . . . may apply to the Authority for a certificate of exemption –

and by reason of subsection (2), the authority needs to be satisfied that:

(a)the farmer is in default under a farm mortgage, and

(b)the farmer has requested the creditor to mediate in respect of the farm debt involved, and

(c)no certificate under section 11 is in force in relation to the farm mortgage –

and then there are three things that need to be satisfied for the exemption certificate that:

(i)the creditor does not wish to enter into or proceed with mediation, or

(ii)the creditor has failed to respond in writing to the request to mediate . . . 

(iii)3 months have elapsed –

and there have been attempts to mediate in good faith and the like, and in that event, the exemption of certificate by virtue of subsection (4) provides that there is a six‑month prohibition against any enforcement action.

Section 10 is important because it provides that in the event of there having been a mediation, though whether it succeeded or not, if later on the creditor wishes to undertake enforcement action, then it is necessary for a section 11 certificate to be obtained.  It provides that:

Once a farmer has given a creditor a notification in accordance with section 9 requesting mediation, the creditor must not take enforcement action in respect of the farm mortgage concerned unless a certificate is in force under section 11 in respect of the farm mortgage. 

Then in section 11 it provides:

The Authority must, on the application of a creditor –

so again at the time of the application for this certificate the creditor is one who is owed – there is a farm debt for the time being owed under the farm mortgage.  It has to:

issue a certificate that this Act does not apply to the farm mortgage if:

(a) the farmer is in default . . . 

(b)no exemption certificate . . . 

and thirdly, if one of three matters are satisfied:

(i)satisfactory mediation has taken place in respect of the farm debt involved –

So the farm debt involved, we say, has to be the farm debt that was the subject of the invitation to mediation that either succeeded or did not succeed after the mediation had taken place -

(ii)the farmer has declined to mediate – 

and that is a scenario contemplated in section 9(1) and 9(3) that I have already taken your Honours to, 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 – 

that being contemplated by section 9B(2)(d)(iii).

CRENNAN J:   What did the certificate on these facts indicate?  Did it indicate that satisfactory mediation had taken place?

MR HIGGS:   That in respect of the previous farm debt.  We say not the farm debt that was in existence at the time of the application for the certificate under section 11.  It was common ground that that was so, and it can be clearly seen if one compares the farm debt certificate or the section 11 certificate I should say is to be found at page 120 of the appeal book and compare it with the section 8 certificate – or section 8 notice at page 201. 

So it is awkward, your Honours, but if your Honours were to compare those two and firstly go to 201, clearly this notice is in respect of the first loan agreement and if your Honours go down to between lines 30 and 40 you see the boxed section with the heading “Facility Hargraves - Account No 10294”, balance outstanding and the like $488,250.  Now, the whole of that table has been transposed into the section 11 certificate at page 120 of the appeal book, about line 40.  It seems to have been copied verbatim. 

In the section 8 certificate it is clear, if one goes back to page 201 at about line 25, that the “Default on interest and subsequent penalty interest” was the default that had occurred over a period between 5 March to 5 October 2004; your Honours see that.  Of course, that was very different to the ongoing defaults under the second and third loan agreements that brought about the application for the section 11 certificate that was issued on 20 October 2006; that is almost to the day two years later, the date appearing at about line 42 on page 120.

What is more, if your Honours then go to page 120, you see on the right‑hand side of the page, instead of being set out from top to bottom it is printed sideways, that there is a provision that “This certificate expires on 2nd June 2008”.  Now, we know that the mediation occurred in June 2005, that is in respect of the first loan agreement, and the Act provides that a certificate is enforced for three years and hence one can readily understand why at first instance, and as was observed by Justice Macfarlan in his judgment in paragraph 20 at page 416 of the appeal book at line 27, that:

it was common ground between the parties to the proceedings that the foundation for the Certificate was the mediation that occurred between the parties on 5 June 2005, that is, before the parties entered into the Second Loan Agreement.

Now, it is also clear that at the time this application was made the outstanding amount under the third loan agreement was $644,933.30, and probably the best place that one can find that is in the findings of the trial judge, paragraph 12 of his Honour’s judgment which is at page 355 of the appeal book between lines 20 and 29:

By way of contrast, the statement of loan account maintained by the plaintiff covering the defendant’s loan as at 5 October 2006 showed a debit balance in that account of $644,933.33.  That amount apparently corresponds to the principal sum advanced in accordance with the second and third loan agreements together with interest accrued on that sum since 5 September 2006.

The main focus of the debate before the Court of Appeal was the meaning of section 8(3) of the Act - if I could ask your Honours to go back to that – it providing that the prohibition against an enforcement action can be overcome by reason of the section not applying:

if a certificate is in force under section 11 in respect of the farm mortgage concerned.

Clearly, it seems to have been common ground and certainly it accorded with the findings of Justices Macfarlan and Tobias in the Court of Appeal that at the very least the words “the farm mortgage concerned” has to relate back to the farm mortgage referred to in subsection (1).  If I could take your Honours to Justice Tobias’s judgment in that regard.  In paragraph 7, page 407, his Honour there said that:

There can be no doubt that the reference in s 8(3) to “the farm mortgage concerned” is a reference to the farm mortgage in respect of which the creditor seeks to take enforcement action.

Then he goes on and agrees with the interpretation of Justice Sackville in relation to what that meant.  I will come back – I will give your Honours the reference to Justice Macfarlan’s finding in that regard - but Justice Macfarlan and Justice Tobias conferred in that regard.  It is also clear that both Justice Tobias and Justice Macfarlan were of the view that the second loan agreement extinguished the first and the third loan agreement extinguished the second.  If I could take your Honours to page 434 of the appeal book between lines 20 and 39 where his Honour Justice Macfarlan found that based on a review of various authorities that indicated that:

in the present context is whether on its true construction the Second Loan Agreement manifested an intention of the parties that the terms of that Agreement . . . exhaustively govern their relationship, with the result that the First Loan Agreement was superseded and that the debts due under it were discharged.  The second question is whether the Third Loan Agreement was likewise intended to supersede the Second Loan Agreement.

79       These questions should in my view be answered in the affirmative.

Justice Tobias concurred with that.  At page 407 of the appeal book at about line 52 in paragraph 10:

I would agree, that the effect of the Second and/or Third Loan Agreements was that the First Loan Agreement was discharged as was the farm debt to which it related.  A new farm debt was created as a result of, and therefore subsequent to, the mediation pursuant to which the relevant s 11 certificate was issued.

Now, that clearly has to be so.  If I could just take your Honours very quickly to the way these loan agreements came into existence.  The first loan agreement commences at page 68 of the appeal book.  What one finds is that, apart from the money lent, the amount lent and the interest rate and the date upon which money was to be repaid, that the terms of each of the loan agreements were identical. 

Originally there was a loan of $450,000 and there was then the farm debt mediation that resulted in a deed of settlement, which is to be found at page 95 through to 99 of the appeal book.  I do not think I need to trouble your Honours with that.  There was the second loan agreement which, as I have said, is in identical terms save for those things that I mentioned at page 108 and following.  Then importantly, if your Honours go to 114, the third loan agreement which is the loan agreement in respect of which the enforcement action was sought to be undertaken – was undertaken by the respondent.  It is 29 August 2006 and at line 22 there is a recital:

WHEREAS The Lender has agreed, at the request of the Borrower to make available to the Borrower the sum of SIX HUNDRED AND FORTY THOUSAND DOLLARS ($640,000.00) (hereinafter called “the principal sum”) on the terms and conditions hereinafter contained. 

NOW THIS DEED WITNESSETH:-

So a recital that the borrower is to make available arising from this deed a principal sum of $640,000.  So we would say that that seems to give rise to an estoppel as to the basis upon which a conventional estoppel is the basis upon which the money was advanced.  Clause 1 is curious.  It is inconsistent:

The Borrower acknowledges that, having received from the Lender the principal sum on a date to be advanced on the terms and conditions hereinafter contained, the Borrower is indebted – 

It is interesting to just see how the third loan agreement came into existence.  That loan agreement did not come into existence because of any complaint by the respondent about any default.  At page 331 of the appeal book there is a letter from the solicitors for the respondent where the third loan agreement is proposed: 

We act for Hargraves Secured Investments Limited.  We note that your abovementioned Mortgage with Hargraves Secured Investments Limited matures on the 5th day of September, 2006.

We note that Hargraves Secured Investments Limited would be more than happy to offer you a similar facility for a further three (3) years.  . . . 

We advise that the interest rate we can offer you is at a variable rate of 9.25% ‑ 

et cetera.  So it is in those circumstances that the loan was offered.  Then in relation to that, if one goes to page 340 of the appeal book, part of the documentation that the appellant was required to execute was an acceptance of the letter of offer, and if one goes down to (b):

acknowledge that this offer and acceptance represents the entire loan agreement between me and the Mortgagee –

FRENCH CJ:   There was no distinct repayment covenant, was there, in the mortgage terms and conditions?

MR HIGGS:   I think that the correct answer is no, there was not a distinct one, but there were obligations to pay.  The mortgage is to be found commencing at page 78 of the appeal book.  It seems to us that the relevant clauses, firstly, if one goes to page 79, paragraph 1.1:

By signing this mortgage you undertake certain obligations as mortgagor . . . if you do not comply with your obligations, we may take possession of the property, sell it and sue you for any remaining money you owe us.

Then 1.3:

You must ensure that you are not in default under this mortgage.  You must also carry out on time all your obligations under every agreement covered by this mortgage including the obligation to pay any of the amount owing.  These obligations and your other obligations under this mortgage (such as under “Enforcement expenses”) continue even if we release the property from this mortgage.

Then if your Honours go to page 84, paragraph 18 in the first column at line 41 and following:

You are in default if:

(a)you do not pay the amount owing on time; or –

Then there are other things set out.  Then going to paragraph 19.1:

If you are in default and we choose to enforce this mortgage, we must give you a notice.  (You must have been in default for one day or more before we may do this) –

They state the default and there is a 31 day grace period.  Then 19.3, it refers to that:

During the period of grace given under clause 9.1, you are allowed to correct any default that can be corrected.  If you do not correct that default . . . then, to the extent it is not already due for payment, the amount owing becomes immediately due for payment at the end of the grace period without further notice.  In addition, we may then do one or more of the following as well as anything else the law allows us to do as mortgagee:

(a)sue you for the amount owing;

(b)take possession of the property –

Then if your Honours could go to page 87 there is a definition section, paragraph 35, the right‑hand column about line 35, clause 35:

agreement covered by this mortgage means:

·an agreement or other arrangement (including a deed) under which one or more of you incurs or owes obligations to us or under which we have rights against you, including any such agreement or arrangement which all of you acknowledge in writing to be an agreement covered by this mortgage; and

·each variation of it.

Without limiting this definition, it includes an agreement or arrangement which is assigned to us and any agreement or arrangement which you acknowledged to another . . . 

amount owing means, at any time, all money which one or more of you owe us, or will or may owe us in the future, including under this mortgage or an agreement covered by this mortgage.  Without limiting this definition, it includes money (or which will –

and the like.

FRENCH CJ:   So that has to be read with, for example, in respect of the first loan agreement, clause 5 of the first loan agreement at page 69, to give content to particular obligations?

MR HIGGS:   Yes.  Whilst we are going through the appeal book, the way in which these proceedings were conducted by the respondent occurred in this way.  If one goes to page 2 of the appeal book, the relief sought was order 1 for possession and order 3, at the same time, the money judgment.  So these proceedings were undertaken in these circumstances that, firstly, the sole basis for the order for possession that was sought was the breach by the appellant to pay the principal interest under the mortgage, or to pay the principal in interest, and, second, there was no reliance upon the loan agreement in the statement of claim.  The sole basis for the claim for money was based on an allegation in the statement of claim, that I will take your Honours to in a moment, that it was money due under the mortgage, full stop, not under the loan. 

That is important because, in our submission, that comes within, as a question of fact, under the rubric of an enforcement action being taking possession of property under the mortgage or any other action to enforce the mortgage because, in our submission, it was intrinsically bound up in the way in which the respondent instituted these proceedings or undertook this enforcement action by serving the statement of claim that they relied on the money obligation, the breach of it and solely by reference to the mortgage.

HAYNE J:   Is that right?  Page 3, “Pleading and Particulars”, line 20 there is reference to the document marked “A”.  The document marked “A”, is that at page 7, is it?  Page 3, line 22:

The Plaintiff relies on the following facts and assertions set out in the Pleadings annexed hereto and marked “A”.

Is that right?

MR HIGGS:   Yes, your Honour.

HAYNE J:   Is the document marked “A” that at page 7?

MR HIGGS:   Yes, your Honour.  There is a reference to the loan agreement in it, but there is no – in paragraphs – sorry.  I have cut across your Honour.  I was about to say something.  We focus on paragraphs 19 and 20 of the statement of claim at pages 10 and 11 down the bottom of page 10, top of page 11, where:

The plaintiff is entitled to repayment, including principal and the unpaid arrears of interest, outstanding under the terms of the Mortgage.

and that is it.  Then 20:

As at 17 March 2008 the Defendant is obliged, under the terms of the Mortgage, to pay to the Plaintiff, the sum of $754,811.38.

and it is on that basis and on that basis alone.  Then paragraph 22, “continuing breach of the terms of the Mortgage”.  Then 23:

In the circumstances the Plaintiff is entitled to take possession –

There is reference in the statement of claim, I concede, to the loan agreement, as your Honour has mentioned, and I did not mean to shy away from that. The other point that I am reminded of by Mr King is that the only interest – so picking up the definition of a “farm mortgage” – the only “interest in, or power over” the property that was sought to be deployed in order to obtain the order for possession was the breach of the money obligations under the mortgage. That is our point. Accordingly, in our submission, that is an enforcement action that is prohibited by section 6 of the Act, the Farm Debt Mediation Act. 

Your Honour, there is one qualification to that for which I apologise.  If your Honours go to page 9, paragraph 13, that the interest owed on the principal sum was claimed in reliance upon the loan agreement, so I was incorrect – I overstated and for that I apologise.

HEYDON J:   It does not affect your main point, though.

MR HIGGS:   No, but the principal, the only claim for the principal was based on the mortgage, so subject to that qualification, that is what we say. The way that we have set out in the outline of submissions as being the appropriate way to apply the terms of this Act to the facts of this case are as follows. Firstly, consistent with the approach and the way it was argued before the Court of Appeal our submission is that if one goes to section 8(3) of the Farm Debt Mediation Act where there is a reference there to the need for there to be a certificate “in force under section 11 in respect of the farm mortgage concerned” that that has to be a reference to – that has to in the circumstances of this case – it has to be a certificate where the certificate is in relation to – picking up the words of section 11(1)(c)(i), the authority’s satisfaction as to a:

satisfactory mediation has taken place in respect of the farm debt involved –

that is, the farm debt that was owing at the time this enforcement action was sought to be undertaken or was undertaken by the creditor and that that farm debt has to be the same farm debt in respect of which there was an invitation to mediate that culminated in the mediation of June 2005, rather than, as the majority of the Court of Appeal held, that it did not matter whether it was a different farm debt. 

Justice Sackville proceeded on the basis that as there was no challenge to the validity of the certificate during the course of that argument before the Court of Appeal, that was an interesting matter that might arise but it did not have to be considered.  Here, of course, the validity of the certificate is challenged in the ways that we set out in our written submissions and clearly we would submit, on the face of it, as was common ground, the certificate, on the face of it, did not consider that which ought to have been considered, namely, whether the farm debt that was owing at the time the certificate was applied for was the same farm debt that had been the subject of the mediation.  Alternatively, we say, that on the face of the record and the evidence that was before – the only evidence that could have been before the authority that there could be no reasonable satisfaction that they were the same farm debt involved. 

The other way we advance our argument in the written submissions is this, that it relies heavily or draws heavily, I should say, from the dissenting judgment of Justice Cole in Australian Cherry Exports v Commonwealth Bank of Australia (1996) 39 NSWLR 337 that we have on the authorities. In that particular case, there was a statutory notice served under the Corporations Act.  The facts are probably best set out at page 341 of the judgment commencing at line C, the commencement of the judgment of Justice Clarke. 

The Commonwealth Bank of Australia (the Bank) served summons for winding up on Trellis Holdings Ltd, Cherryop Pty Ltd and Australian Cherry Exports Ltd (the companies) in January this year. The stated ground upon which the order was sought was that the Bank had served a creditor’s statutory demand under s 459E of the Corporations Law upon the companies which demand had not been complied with.  The statutory demand itself asserted that each company owed the Bank a substantial amount – 

and then specific questions were asked.  Given that the mortgage securing the loan was constituting an:

enforcement action under section 8(1) of the Farm Debt Mediation Act –

Now, Justice Cole was in dissent but one of the ways that we submit that this enforcement action is prohibited by section 6 of the Act is because on the facts of this case the – the claim for possession clearly is an enforcement action, no one cavils with that. But moreover, the way that we put it is that because of section 6 the only basis upon which a creditor is permitted to take an enforcement action is if all of the requirements of the Farm Debt Mediation Act are complied with. 

Now, probably the difference between Justice Cole’s approach and the majority is best illustrated in Justice Priestley’s judgment starting at page 340, line G, where his Honour observed, clearly after having read, one would assume, Justice Cole’s draft judgment:

Compliance with the Act as referred to in s 6, can be looked at in various ways. One is to say that compliance means doing everything the Act requires to be done to enable the mediation procedure to begin, and if begun, to be carried forward in accordance with the Act. Another way is to say that compliance means doing everything the Act requires a person to do, and not doing anything the Act requires a person not to do.

What the Act requires to be done to enable the mediation procedure to begin is contained in s 8, and to enable that procedure, once begun, to continue, as contained in s 10.

What the Act requires a person to do is contained in s 8.

What the Act requires a person not to do is contained in s 8 and s 10.

Thus both of my suggested meanings of compliance lead to s 8 and s 10.  The only prohibition in those sections are of taking enforcement action in respect of a farm mortgage.

That is the way his Honour approached it. In contrast, rather than starting with section 8, Justice Cole’s focus which, in our respectful submission, is correct focused on the definition of enforcement action that I have taken your Honours to and section 6 with the prohibition. At page 344 starting at line F – sorry, starting at the beginning of the judgment just above C, his Honour observes that:

The object of the Farm Debt Mediation Act 1994 is set out in s 3:

. . . 

It is to be noted that the mediation concerns farm debts, not farm mortgages.  The object of the Act is to encompass a wider scope than a farm mortgage.  The object is to have mediation concerning the farm debt; only thereafter may powers under the farm mortgage be exercised.

2. The manner in which the object of the Act is achieved is to render enforcement action taken by a creditor to whom the Act applies void, unless the Act is complied with. That appears from s 6 which provides: ‑

and he there sets out that which I have already taken your Honours to –

The creditors to whom the Act applies are specified in s 5(1):  “This Act applies in respect of creditors only in so far as they are creditors under a farm debt.”

Accordingly, the enforcement action prohibited is that taken by a creditor.  The creditor referred to is the creditor in respect of a farm debt.

It is important to notice that all enforcement action is void if it be by a creditor to whom the Act applies unless the Act has been complied with. Enforcement action is not limited to enforcement action in respect of or under a farm mortgage. The only restriction on the scope of width of enforcement action referred to in s 6 is that it must be that which is taken by a creditor to whom the Act applies, that is, a creditor under a farm debt.

Then over the page thereafter his Honour deals with the various definitions.  Then at page 345 just past line C:

That definition makes two things clear.

That is the definition of “farm mortgage”, “farm debt” and the others.

First, to be a farm mortgage the mortgage must be over what I shall call farm property, be it land or equipment.  Secondly, the obligations of the farmer which must be secured by the mortgage for the mortgage to become a farm mortgage may be in respect of a debt, or arising from a guarantee.  A farmer may, of course, have debts, or liabilities arising under a guarantee, which are quite unrelated to his farming operations.  If, what I shall call a farmer’s non-farm obligations are secured over farming property, then the mortgage constituting that security falls within the definition of “farm mortgage”. 

Such non-farm related obligations, however, do not fall within the meaning of the definition of “farm debt”.

His Honour observes that in respect of that because of section 5(1) the Act does not apply.

It follows, in my view, that in considering whether an act (or action) constitutes “enforcement action” within the meaning of s 6, and is thus void unless the Act has been complied with, one must first determine whether it is enforcement action in relation to a farm debt. By definition, if the debt is unsecured it will not be a farm debt.

Consistent with what your Honour Justice Hayne observed earlier on.  Then importantly, however, in relation to this issue of mortgage concern and enforcement action, at page 346, paragraphs 5 and 6, that is just past line C:

5.        The only “enforcement action” which the Act contemplates as being permissible is enforcement action after the provisions of Pt 2 of the Act have been complied with.  Pt 2 contemplates mediation.  Shortly stated, Pt 2 permits a creditor to take enforcement action “in respect of a farm mortgage” only after twenty‑one days have elapsed from it giving to the farmer a notice informing the farmer of the creditor’s intention to take action “in respect of the farm mortgage”, and of the availability of mediation in respect of the farm debts (s 8(1) and (2)).  The farmer on receipt of such notice may within twenty‑one days request mediation “concerning the farm debt involved” (s 9(1)).  Once that notice has been given the creditor must not take enforcement action “in respect of the farm mortgage concerned” unless and until the authority has given a certificate under s 11 in respect of that farm mortgage (s 10).

That is because of section 10 that I have taken your Honours to –

That certificate is to be issued by the authority only when it is satisfied that either satisfactory mediation in respect of the farm debt has taken place, the farmer has declined mediation in respect of the farm debt, or three months have elapsed since the creditor gave the notice under s 8 and the creditor has during that period attempted to mediate in good faith.

6. It follows, in my view, that the effect of s 6 is to extinguish all rights of a secured creditor in respect of farm debts, being those incurred by a farmer for the purpose of the conduct of farming operations and secured over farm property, except rights to take “enforcement action” in relation to the farm mortgage, and then only after the mediation process contemplated by Pt 2 has been implemented, or attempted and failed because the farmer has declined mediation or bona fide attempts at mediation by the creditor have been unsuccessful. Only then may [the] secured creditor take enforcement action in relation to that farm mortgage. That “enforcement action in relation to a farm mortgage”, means “taking possession of property under a farm mortgage, the sale of property under a farm mortgage, or any other action to enforce a farm mortgage including the continuing of action already commenced to enforce a farm mortgage”.

His Honour then went on to hold that that included the judgment – the money – to seek money.  In support of that analysis, his Honour then went to the definition of “enforcement action” and noted the exceptions:

(a)the completion of the sale of property held under a farm mortgage in respect of which contracts were exchanged before the commencement of s 6; or

(b)the enforcement of a judgment that was obtained before the commencement of that section.

Those exclusions are consistent with the interpretation I have adopted. Both (a) and (b) emphasise that the prohibition on action is found in s 6, not s 8. Enforcement action in relation to a farm mortgage is recognised as including the obtaining of a judgment in respect of moneys due under that mortgage. Implicitly, it recognises that similar action would be enforcement action in respect of the farm debt, as distinct from in relation to the farm mortgage.

FRENCH CJ:   All of this goes to paragraph 9 of your outline, does it?

MR HIGGS:   Yes.  Your Honours, just to cap off, if I could just direct your Honours to page 348, lines D through to the end of the page where there, adopting that analysis, his Honour came to the view that the question that the trial judge had been asked to answer was the wrong one.  Starting at line F:

In my opinion the service of a statutory demand and the commencement and prosecution of a petition to wind up the debtor corporation constitutes enforcement action for the reasons I have given. If, properly construed, the documents constitute enforcement action in relation to the farm debt, as McLelland CJ in Equity was asked to assume, the enforcement action is rendered void by s 6. If, properly construed, the documents are enforcement action against the farmer “in respect of the farm mortgage”, the action may not be rendered void by s 6 provided the provisions of Pt 2, including the giving of notice under s 8(2), have been complied with.

So it is the characterisation of the documents and the activity of commencing and prosecuting the petition actually filed that were matters sent back to the trial judge for determination. 

Now, your Honours, our submission is that – going back to the outline – firstly, it does not matter whether the way that our scenario 1 is the correct analysis of what this farm mortgage was or scenario 2, that is, is, as Justice Macfarlan held, that each farm debt creates a new farm mortgage which is our scenario 2, or is in the circumstances of this case, accepting that the second loan agreement was extinguished by the third loan agreement so that there was a new farm debt and therefore in that transition period there was no farm debt so the farm mortgage no longer exists because a farm mortgage is a creature of this Act and for it to be one that can exist there needs to be a farm debt or an interest in or power over the farm securing a money obligation for the time being to a creditor.

So if it be accepted that there has been the extinguishment of the second loan agreement and then a new loan agreement has been entered into, there is a new farm debt, it follows there is a new farm mortgage. Given if there is a new farm mortgage then in the ways that we have outlined in the written submission the certificate on its face asked itself the wrong question. It related to not “the farm mortgage concerned”, being the words of section 8(3), it was not in respect of the farm mortgage concerned, it was in respect of another mortgage, the first farm mortgage, if I can describe it that way, rather than the third farm mortgage.

In our submission, for the reasons that we have set out in the written submissions and in respect of which there does not seem to be any contest in terms of the principles that apply from an administrative law point of view as to the ability to review those decisions and the like, in our submission, for the reasons that we have set out in the written submissions, that is not a certificate that was valid. There was no certificate in force at the time. Section 8(3) was not complied with and hence the enforcement action in these proceedings are struck down because under section 8(1), the prohibition there and, moreover, because of the general prohibition in section 6 of the Act.

Your Honours, in respect of our written submissions could I just take your Honours to page 19?  There is a mistake in one of the footnote references that I should correct.  It is footnote 82, and the correction there should be – the references there are at page 342, it should be “B – C” and that is part of the judgment of Justice Clarke, not Justice Priestley, and for better particularity the reference to page 343, again that is B.

If I could then just make this general observation.  As we understand the respondent’s written submissions, it seems to us, with respect, that the focus of their submission is that there is a single and indivisible security or interest in or power over a property arising from the mortgage, the statutory charge under the Real Property Act that was the registered mortgage over this property.  Much is made by reference to the general law that for so long as a mortgage is on the title it remains a mortgage or a charge over the property in relation to a whole variety of obligations, whether they be existing or contingent.

In our respectful submission, if we have understood the submission correctly, that with respect misses the point.  In order for this to be a farm mortgage, as I have said, it needs to be a farm debt, there needs to be a farm debt in existence which – and one that is owed to a creditor for the time being.  So as was observed in the judgment of Justice Young in Varga that we have referred to in the authorities and which is notorious, the way in which lenders in this day and age quite properly attempt to secure obligations is by having all money clauses, and no doubt quite often situations would arise where there is a farm debt incurred by a farmer that is secured by the all moneys clause.  It is then paid off.  There could be years that elapse where there are non‑farm debts that are secured by the mortgage that is on the title and then later on a further mortgage that is in respect of a – or a loan in respect of or a farm debt is incurred, which again is secured.

In our submission, a proper construction of the Act, this being a creature of statute, means that the interest in or power arising over the farm is only one that can be classified as a farm debt if a farm debt is in existence at the time, and that there is nothing that would on an analysis of the Act suggest that anything different was appropriate.

On the contrary, it would give rise to problems if that were not so. It would give rise to problems if you were not able to and were not compelled, as we submit is the case, to tease out and to distinguish between debts and non‑farm debts, particularly if there is a mortgage securing – it is important to distinguish between farm debts and non‑farm debts for the reason that, as is clear from section 5(1) of the Act, that the Act only applies to creditors and only in respect of farm debts, and that the protection and the object of the Act of providing a mediation and the prohibitions that are put in place in order to protect the farmer from losing his farm without a mediation are all directed and only directed to farm debts, and it is only in respect of that that there is a need for the mortgage to be – or the interest or the charge to be classified as a farm debt as the Act does. So it is for those reasons that we say that section 8(3) was not complied with and that the appeal should be allowed and in particular including the money judgment.

Your Honours, in relation to the notice of contention point, it seems to us that I had touched on that.  It does not seem to us, with respect, that that is a matter – the notice of contention ought to be allowed.  We only had part of the evidence before the court in respect of what in part of my learned friend’s submissions, as I understand it, sought to be advanced.  In paragraph 7 of their written submissions on page 3 it is said that the first ground upon which the reason that the appeal should fail is that:

on the preferable construction of the nature of the arrangements between the parties and their common intention, there was only a single “farm debt” for the purposes of the Act, the terms of which were varied –

It is the “common intention” that we focus on.  At trial, there was cross‑examination of the deponents of the various affidavits.  As I have said, there have been findings or observations that a common ground was struck as between the parties in relation to the characterisation of that which was the farm debt involved and the like.  It seems to us, with respect, that if in relation to the notice of contention there is to be an examination of the common intention, that the notice of contention is too late and, moreover, the material that one would need to have before the court to properly test the common intention is not there before the court because, quite properly, when the appeal books were prepared the transcript was not included.  So it seems to us, with respect, that it is difficult to understand how that matter could be dealt with now.

HEYDON J:   There is something else which is very difficult to understand.  As I understand it, there is a summons dated 17 August 2011 in relation to the filing of a notice of contention.  The written submissions of the respondent say in paragraph 94, “There is no notice of contention”.  Do they mean there is not actually one yet, but there will be when we get leave to file one out of time?  Is that the position, as you understand it?

MR HIGGS:   That is as we understood it.

HEYDON J:   Your point is then that between 12 August and now there might have been some capacity to assemble missing evidence, but it has not been availed of?

MR HIGGS:   No.  Your Honours, the other matters have been fully canvassed, it seems to us, in the excellent submissions of Mr King who obtained special leave in this matter which I commend to your Honours and that we have prepared together, but I am largely indebted to him for the

preparation of those submissions.  If I could have leave to reply to the notice of contention point, it seems to us that that is a more appropriate way of dealing with that matter.  If there is anything further that your Honours would like to ask of me now, I am happy to field questions, otherwise they are our submissions.

FRENCH CJ:   Thank you, Mr Higgs.  Yes, Mr Loewenstein.

MR LOEWENSTEIN:   Your Honours, if I may deal with the notice of contention point later on in my submissions and deal firstly with the concept of mortgage.  Before, your Honours, I take the Court through the respondent’s outline of propositions which I will do seriatim in due course, if I may just address what the respondent contends are the essential elements and then go to expand upon them later on. 

There is at the heart of the dispute between the parties the concept of what a farm mortgage is, but what is ignored, in our respectful submission, is the fact that the parties contracted in respect of an all moneys mortgage and what we respectfully submit is that the Farm Debt Mediation Act does not, contra my friend’s submissions, create a new type of mortgage that is not contemplated by the general law.  So what we ask the Court to accept is that the general law of mortgages with respect to all moneys mortgages pertains – and in due course I will take your Honours to a case in Sibbles and English Scottish as authority for the propositions – that what was not created each time there was a loan agreement was a separate mortgage. 

All that happened was that there was an augmentation, leaving aside the notice of contention point, and I see the difficulties that we faced in relation to the evidentiary aspects of it, but on the mortgage point we say that this Act did not override the general law of mortgages and the creation of mortgages.  What we say is that there were a number of advances made under the all moneys clauses and what remained was one mortgage and that was the mortgage that was registered at the Land Titles Office.

The next question which I would ask your Honours to consider a little later on after I expand the notion of mortgage is the notion of one debt.  I see the matters raised by my learned friend as to the evidence, if I can address that later.

CRENNAN J:   May I just raise a problem with you in the context of “one mortgage”, accepting for the purposes of what I wanted to raise that there is only one mortgage?

MR LOEWENSTEIN:   Yes, your Honour.

CRENNAN J:   If you look at section 9 which is about the farmer’s request for mediation it is clear that the mediation is a mediation concerning the farm debt involved, so how does it work then if you get a certificate in circumstances where the farm debt involved is a different amount under the first loan agreement from what it is under the third loan agreement?

MR LOEWENSTEIN:   Yes.  What we say, your Honour, is that that has to be read as it presents itself so what we say is that there is an obligation to mediate in respect of the farm debt in existence at the section 8 point, if you like.  What we say is that the farm debt, and we are mindful of the definition that “a creditor” is defined as – I will just take your Honours to the definition:

creditor means a person to whom a farm debt is for the time being owed by a farmer.

What we say is that when one goes to section 11 all that has to happen or be in existence is a farm debt to enable the certificate to issue.  It does not, we say, on the reading of the Act, have to be the same farm debt.

HAYNE J:   How does that accommodate 11(1)(c)(i)?

MR LOEWENSTEIN:   What we say is the farm debt involved, and we expand upon that in our submissions, is that the farm debt involved is the farm debt that was the subject of notice given under section 8 of the Act.

HAYNE J:   No doubt, but is the debt that is the subject of the present proceedings the debt that arose under the agreement of 29 August 2006?

MR LOEWENSTEIN:   We say it is and that goes to our notice of contention argument.

HAYNE J:   That is the third loan agreement?

MR LOEWENSTEIN:   We say it is the same debt, the same debt in substance as arose originally and we take your Honours in our submission ‑ ‑ ‑

FRENCH CJ:   What does that mean when you say “in substance”?

HAYNE J:   It covers the problem.

MR LOEWENSTEIN:   We say, your Honours, that it is the same debt.

HAYNE J:   How?  It is due at a different time from the debt that was incurred under the second loan agreement.  I think there are different interest rates, are there not?  Whether or that is so, there is a different principal.  How is it the same debt?  The principal may be fixed having regard to earlier commercial transactions that have taken place between the parties.  So?

MR LOEWENSTEIN:   Well, your Honours, our position is that what happened – and if your Honour requires, I can take you through the submissions, but what we say in essence is that the form of the indebtedness may have changed, but what happened was there was an increase, and it is referred to in the evidence that we cite, it was regarded by all the parties as an increase in the amount owing from the primary amount of $450,000 by $190,000 to the new amount, but it was not a new debt.  It was an increase in the original debt. 

HEYDON J:   I apologise for interrupting you, but you refer to the intention of the parties.  Are you speaking of something outside the three loan agreements themselves?

MR LOEWENSTEIN:   Yes, your Honour, and I am somewhat, in my respectful submission, supported by the entitlement to refer to that additional evidence, which we refer to in our submissions, by the observations of Justice Meagher, if your Honour needs authority for that proposition, but what we are referring to is some affidavit evidence to which we refer in addition to the agreements.  But we do say, for example, if one looks at the deed of settlement, and if I can take your Honours to the deed of settlement that my friend, I do not recall, did take your Honours to.  It starts at 95, your Honours, if your Honour goes to page 96 at line 50 being the first operative clause:

HSI agrees to increase the current principal by $190,000.00, (‘the further advance’) making a total sum of $640,000.00, the principal (‘the Loan’).

So what we say was the intention of the parties, as revealed in the documents leading to the formulation of that second loan agreement, was that it was to be as stated in the first operative clause.

FRENCH CJ:   The mechanism by which that was effected was the creation of a fresh obligation, was it not, under the second loan agreement, and similarly the third loan agreement; in terms, just by reference to the terms of those agreements?

MR LOEWENSTEIN:   Yes, your Honour.

FRENCH CJ:   You do not have to rely upon anything other than the agreements themselves to sue on them, do you?

MR LOEWENSTEIN:   Not to sue on them, no, your Honour.  What we say nevertheless is that it is a matter of form rather than substance as to what that debt in fact was.  Now, your Honour, if we lose on what has been termed the one debt argument what we say is, your Honour, that this Act concerns, as his Honour Justice Priestley stated in the case to which my learned friend refers, and I take your Honours to page 339F:

Although the farm debt is necessarily secured by mortgage, it is noticeable that s 8(1), as enacted, and more clearly I think in its rewritten form, prohibits enforcement action for the prescribed period, in respect of the farm mortgage, not the farm debt. This seems to me to be relevant to the consideration of the questions McLelland CJ in Equity had to answer.

Now, what we say, your Honour, is what is being lost in the appellant’s case is the importance of primacy given under the Act to the mortgage, and what we say even if we lose on the one debt point for reasons concerned with interpretation or for reasons concerned with the production of evidence on this appeal is that there was one mortgage that was the subject of separate agreements under the all moneys clause, that the debt to which reference is made in section 11 does not have to be a continuing debt to which sections 8 and 9 refer, what we say with respect is that to say otherwise strains the plain meaning of the Act and what we say, with respect to your Honours, is that there just is not sufficient within the Farm Debt Mediation Act to create a new structure of mortgage.

HAYNE J:   Accept for the purposes of argument that there is a single mortgage, is it not necessary to read the Farm Debt Mediation Act, taking proper account of who is a creditor and what is a farm debt?

MR LOEWENSTEIN:   Indeed, your Honour.

HAYNE J:   A creditor is defined by reference to a farm debt, a farm debt secured wholly or partly by a farm mortgage, and do you accept that, at least in section 9 and section 11(1)(c)(i), the identification of the farm debt involved in this case would have you identify the farm debt involved as that created by the loan agreement of 29 August 2006, the third loan agreement?

MR LOEWENSTEIN:   No, your Honour.  What we respectfully submit is that what this Act provides is that there be a mediation in respect of a debt at a point of time in respect of which a certificate can issue which has validity for the period of three years, and by effect of the Act and the wording of the Act whatever happens after that, the certificate inures for that period of three years and covers subsequent debts. 

All that is required, we say on the reading of section 11, is that there be a debt, a debt, a farm debt in existence at the time the certificate issues.  It does not have to be, we respectfully submit, the same farm debt.  Now, your Honours, if we take the appellant’s case, as we understand it, one would have created under the regime that they say is spoken of under the Act a series of farm debts that begat a number of farm mortgages in respect of which what would be required are a number of mediations under the Act. 

So if there be an all moneys mortgage and a series of loan agreements and leaving aside the portion of the argument that I appear clearly to be losing, if there be a series of loan agreements that creates separate mortgages, what would happen under an all moneys mortgage is that there would be a series each time of mediations.  What we say is that is not the intention of the Act and does not render the Act workable.  So, your Honours, I was going to take this Court seriatim through the respondent’s propositions, but largely it seems to have been covered fairly quickly by the questions that have been posed to me. 

However, one thing remains and that is what may be termed as the money judgment argument.  What we say is that – and I do not know that it has been amplified, it might be amplified in reply but it has not been amplified in‑chief – sorry, in my friend’s submissions – is that there may exist a money judgment and the judgment arises by a covenant, personal covenant within the mortgage document, and that can exist subject to the provisions – and be applied when a judgment is rendered subject to the provisions of section 102 of the Conveyancing Act. 

What we say is that the appellant does two things.  The appellant attempts to create a new law of mortgages peculiar to the Farm Debt Mediation Act, and we say that strains the concept of mortgage and should not be created.  But what also is attempted to be created is a new notion that you cannot have both a money judgment and an order for possession under the mortgage without the money judgment in some way extinguishing the entitlement to possession.

That has not be advanced in my friend’s primary submissions orally, but we have dealt with that in our submissions in reply and also in the respondent’s propositions that we have handed up to your Honours.  What we say is, first of all, that the appellant’s submissions in this respect, which seem to advance a concept of an Anshun estoppel is, firstly, contradictory.  Your Honours, the appellant’s submissions at 144(a) we say are directly contradictory to what they advance in 15(b) and 17 of their submissions in reply.  What we say is that there is no Anshun estoppel.  We rely upon the judgment that we have handed up today to your Honours.  It is (2001) 33 HLR 66, your Honours.  Just if I may pause for a moment, we understand that the reprint is a faithful reprint of the actual report and what we say, your Honours, is that if I can take the Court to page 8, in the first column:

As every textbook on real property or –

It should be “on mortgages” –

makes clear, a mortgagee has a number of remedies all designed to enforce payment of what is due to him under the mortgage, which may be pursued concurrently as soon as the mortgagor is in default or successively, until payment in full is recovered or the mortgagee acts in a way which amounts to an election

If I can draw your Honours to the continuation without reading it now, but the continuation of the paragraph to the middle of the page and then the commencement of the following.  I will just pause for a moment while your Honours read that part of the judgment.  Then at point 6:

It would mean that the moment the plaintiffs entered judgment limited to the possession claim, the defendant was automatically released from all further liability on the money claim.   . . . It seems to me that the simple answer to this ground of appeal is that the mere fact of a judgment on the possession claim does not give rise as a matter of law to an estoppel with regard to the money claim ‑ ‑ ‑

HEYDON J:   Is this your point, that the definition of “enforcement action”:

means taking possession of property under the mortgage –

and personal claim for money is not that –

or any other action to enforce the mortgage –

and a claim under the loan agreements is not enforcing the mortgage, is that your argument?

MR LOEWENSTEIN:   It is.  That was the conclusion drawn by his Honour Justice Macfarlan in his dissenting judgment.

HEYDON J:   So that on that approach the legislation would protect people against the loss of their farms by claims as a mortgagee, but it would not protect them from having a personal judgment against them, being bankrupted and losing their farms that way?

MR LOEWENSTEIN:   Yes, your Honours.

HEYDON J:   Is that a rational outcome?

MR LOEWENSTEIN:   Your Honours, the Farm Debt Mediation Act deals with what we say is essentially the property and possession of the property.  If there be a loan agreement that was, for example, not within the terms of the mortgage and, for example, outside the terms, it is quite separate, then there is nothing within the Farm Debt Mediation Act that would draw that loan agreement, we say, into its operation.

FRENCH CJ:   The covenant to repay is to be found in the terms of the mortgage.

MR LOEWENSTEIN:   It is, but what we say, your Honours, it is a personal covenant.  We essentially adopt the approach taken by his Honour Justice Macfarlan.

HEYDON J:   The problem is that the amended statement of claim, as Mr Higgs pointed out, fastens largely upon obligations under the terms of the mortgage to pay the sum of $754,000.

MR LOEWENSTEIN:   I am sorry, your Honour, I lost the last ‑ ‑ ‑

HEYDON J:   Page 11, paragraph 20 says that:

the Defendant is obliged under the terms of the Mortgage, to pay to the Plaintiff, the sum of $754,811.38.

So his argument is that section 6 debars that particular claim.

MR LOEWENSTEIN:   I understand Mr Higgs’s point but what we say is that nevertheless in substance rather than in form it remains a personal debt, a personal covenant.  That is our point and that was the point of Justice Macfarlan which we respectfully embrace.

CRENNAN J:   I suppose on that issue of the personal covenant, if there is a sale pursuant to an order for possession and the funds which are realised fall short of the amount secured, there would then be the possibility of resort to the personal covenant to repay the loan?

MR LOEWENSTEIN:   Yes.  What has to be borne in mind, of course, are the provisions of section 102 of the Conveyancing Act.  Your Honours will find that set out or referred to at item 18 of our list of authorities:

On a judgment of any court for a debt secured by mortgage of any property (including land under the provisions of the Real Property Act 1900), the interest of the mortgagor in that property shall not be taken in execution under the judgment.

So, your Honours, in essence our position is, and I will not repeat what I have said perhaps more slowly in the outline of submissions and much more slowly perhaps in our more detailed submissions, is that there is nothing in this Act that creates a new form of mortgage that is created every time there happens to be a new debt, if your Honours so find, that the law of mortgages would be supplanted if your Honours found otherwise and that it is, with respect, somewhat creative rather than reflective of the intention of the parties, as revealed in the documents, that the only mortgage that was to be in existence was the all moneys mortgage under which various advances, even if there be separate debts, would be provided. 

That is the essential major point of the respondent’s submissions.  The second significant and remaining point is that the debt did not have to be a continuing debt.  The Act does not so say.  There merely has to be in existence at the time of the issue of the section 11 certificate a debt that would qualify the creditor to be a creditor as defined under the Act.  Unless there be anything further, your Honours.  Excuse me one moment, your Honours.  My learned junior does remind me that if your Honours turn to the all moneys provision on page 79 of the appeal book, if one does look at the four corners of the agreement and one does not need to look at extraneous material, it says at 1.3:

You must also carry out on time all your obligations under every agreement covered by this mortgage including the obligation to pay any of the amount owing.  These obligations and your other obligations under this mortgage (such as under “Enforcement expenses”) continue even if we release the property from this mortgage.

Your Honours will have read our submissions in relation to continuing mortgage in the authorities that we have cited of this Court in support of that contention:

You may require us to release the property from this mortgage when there is no amount owing.

We again refer to the property authorities –

However, even if the amount owing is repaid, the property remains mortgaged to us until we actually release it from this mortgage.

There was no discharge of mortgage under the Real Property Act.  There was no provision within, we say, a proper reading of the Farm Debt

Mediation Act to create mushrooming mortgages from another mortgage being the all moneys mortgage and, accordingly, your Honours, we respectfully submit that the appeal should fail.  May it please the Court.

FRENCH CJ:   Yes, thank you, Mr Loewenstein.  Yes, Mr Higgs.  Mr Higgs, we will not need to hear from you on the notice of contention.

MR HIGGS:   Thank you, your Honour.  Your Honour, first if I could just, in response to one of the matters that my learned friend made, draw your attention to point 6 of our outline.  Our submission is that even if he be right and the first and third loan agreements are secured by the same “farm mortgage” because of section 10 prohibiting an enforcement action unless there is a certificate in place, the enforcement action is prohibited and, here, for the reasons that we have already advanced in our submission, the certificate was ultra vires and void.

Secondly, we make this point. The majority made plain in their judgment that in their view the language of the Act was clear, recognising that there was this tension between the object of the Act, the purpose being to provide the farmer with an opportunity to mediate over a modest time – 21 days notice – and then undertaking a satisfactory mediation that is defined, and it is not a high bar for the creditor to meet, and then that it would have been better in section 8(3), in their view, the reference to the certificate that was required was one that was in respect of the farm debt rather than “the farm mortgage concerned”.

We have outlined the various ways in which we say that problem is overcome, but what is clear is, in our respectful submission, that the legislature intended that a farmer be given the opportunity to mediate if possible in respect to farm debts.  All that requires is for a creditor and debtor to get together and enter into a bona fide negotiation.  It is valuable consideration that is now recognised in contract law.  Clearly the legislature thought it was a valuable right and a timetable is set in the event of there being a new farm debt where for a short while there is a postponement of the creditor’s right to undertake enforcement action.

By suggesting that the Act is unworkable, if that were to occur in respect of each farm debt, seems to us, with respect, to cut across the plain intent of the legislature in providing an opportunity for mediation of that type. The object of the Act, as we have set out in the written submission, can achieved in the event of the construction of the Act that we have put forward that has placed greater emphasis on that which is upfront, section 5, the limited application of the Act to creditors and creditors only, section 6, the blatant prohibition and section 8 onwards, the clear framework that is set in place where notice is provided and people are given opportunity to mediate within a fairly short time. That does not seem to us, with respect,

to be unworkable in any way, shape or form.  They are our submissions in reply.

FRENCH CJ:   Yes, thank you, Mr Higgs.  The Court will reserve its decision.  The Court adjourns until 9.30 tomorrow morning in Sydney.

AT 11.47 AM THE MATTER WAS ADJOURNED