Bendigo & Adelaide Bank Ltd v McMahon

Judgment - ex tempore 1HER HONOUR: These are proceedings for possession of a property which has been identified in the evidence as a two-hectare property at Casino. 2The application presently before the Court is the defendant's notice of motion to stay, until further order, the enforcement of a judgment obtained by the plaintiff in the proceedings on 2 October 2012. 3The sole basis for the application is that the property in question attracts the protections of the Farm Debt Mediation Act 1994. Section 8 of that Act provides that no enforcement action may be taken by a creditor to whom money is owed by a farmer under a farm mortgage without, in summary, there first having been taken steps towards the dispute being resolved by a mediation in accordance with part 2 of the Act. 4When the application came before me yesterday the defendant relied on his affidavit sworn 6 May 2013. In that affidavit he stated: I have, and had at all material times conducted farming (cropping) and grazing activities and, I believe that I am a farmer within the meaning of section 4 of the Farm Debt Mediation Act 1994 ("the Act"). 5In support of that statement, the defendant provided details expressed principally in the past tense as to farming operations conducted by him and his wife on about 12 properties in the vicinity of Casino. He identified the fact that the security property the subject of the present proceedings was purchased by him and the second defendant, his wife, in about June 2008. The affidavit states that the property was purchased "as part of and ancillary to the farming operations but also as my wife's and my residence". The affidavit states that the property was used as a central administrative office for the farming operations; for storage of farm machinery, tools and spare parts; for servicing and repairing farm machinery; for stabling and breaking of horses; kennelling of the farm working dogs; housing of young or ill animals and occasionally for the housing of bulls to keep them separated from other cattle. 6Mr McMahon's first affidavit further stated that "currently" (that is, as at 6 May 2013) he is engaged in the real estate business. The affidavit proceeded to recite the steps taken by the plaintiff to enforce the mortgage over the property to which I have referred. In short, that material reveals that as at August 2012, before the sheriff first sought to enforce a writ of possession, the defendants raised with the plaintiff the contention that the enforcement of the mortgage was precluded by those provisions of the Farm Debt Mediation Act to which I have referred. At that time the solicitors for the plaintiff disputed that proposition and Mr McMahon explains that, being unrepresented, he accepted their assertions. 7In response to Mr McMahon's first affidavit yesterday the plaintiff tendered an email from Mr McMahon to "Lisa Banner" attaching a financial statement of position. There is no evidence before me as to the circumstances in which that statement was provided or indeed who Lisa Banner is. The statement, importantly, included the following information: under "Employment details", Mr McMahon identified his occupation as sales consultant employed by LJ Hooker; he stated that the length of his service in that position was one week as at 26 November 2012. 8Secondly, Mr Collins, who appears for the plaintiff, relied upon the remarks made by Mr McMahon at the conclusion of the document as follows: Our business went into liquidation and was sold. John has started a new job. Robyn - unemployed at the moment. Our other farming properties are mortgagee in possession so there is no income coming from the farms. We have all our properties on the market to clear debt. 9Mr Broskovitz, who appears for the defendants, indicated that he had not previously seen that document. He sought an opportunity to put on further evidence to explain or answer, if there was an answer, the proposition that all of the other farming properties were in the possession of mortgagees. I acceded to that application and stood the proceedings over to today to afford the defendants an opportunity to put on any further evidence as to current farming operations. 10As to current farming operations, the importance of that issue derives from the terms of the legislation, which direct attention to two periods of time. 11Some of the provisions of the Act turn on whether a debt is a "farm debt" within the meaning of the Act. A farm debt is one incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage. In focusing attention on the purpose for which the debt was incurred, plainly the legislation directs attention to the time at which the debt was incurred. That is a historical matter. 12There was no issue in the present proceedings as to whether the debt incurred by Mr and Mrs McMahon for the acquisition of the two-ha property was incurred for the purposes of conducting a farming operation. Rather, the principal dispute in the application before me focused on the present. 13The provisions of s 8 plainly direct attention to the position as at the time the creditor seeks to enforce a mortgage. So much is plain not only from the clear terms of the Act but from authorities which have considered this legislation, including the decision of Barrett J in Constantinidis v Equititrust [2010] NSWSC 299 where his Honour said at para 14: I am of the opinion, in particular, that one does not look for either "farmer" status or the existence of the mortgage at the time of the incurring of the debt. This is because the aim of the Act is to protect persons who are for the time being farmers from action under mortgages which for the time being exist over properties that are for the time being farm properties - but only where the secured debt incurred in the past was obtained for farming purposes. Applying the approach I consider to be correct, a person who is today a farmer and whose farm property stands today as security for a debt will be protected if the purpose of the original incurring of the debt was a relevant farming purpose (and whether or not the person was then a farmer), but not if the original incurring was for some non-farming purpose; while, if the original incurring was for a relevant farming purpose but either the person by whom the debt is owed is not today a farmer or the security property is not today a farming property, the protection will not be attracted. 14Thus, in order to establish a basis for the discretionary relief now sought, it was necessary for the defendants to establish a respectable basis for the contention that the money owed to the plaintiff is owed under a "farm mortgage" and owed by "a farmer", each within the terms of the legislation. 15The term "farm mortgage" is defined as follows: Farm mortgage includes any interest in, or power over, any farm property security obligations of the farmer whether as a debtor or guarantor, including any interest in, or power arising from, a hire purchase agreement relation 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. 16That, in turn, directs attention to the term "farm property", which is defined as follows: Farm property means: (a) a farm or part of a farm, or (b) farm machinery used by a farmer in connection with a farming operation, or (c) an access licence (within the meaning of the Water Management Act 2000) held by a farmer in connection with a farming operation. 17As to whether a person is "a farmer", that term is defined as follows: Farmer means a person (whether an individual person or a corporation) who is solely or principally engaged in a farming operation and includes a person who owns land cultivated under a share-farming agreement and the personal representatives of a deceased farmer. 18Following the adjournment of the proceedings yesterday, Mr McMahon has sworn a further affidavit directed to those issues. The affidavit states that the statement in exhibit 2, set out above, is correct - "... except my wife and I have an interest in a farming property through our superannuation fund called Coraki Properties Superannuation Fund. My wife and I are the trustees of the said superannuation fund". 19The affidavit describes the farming property and farming operations carried out at that property in the past including the fact that until the end of March 2013 the defendants ran about 100 head of cattle on that property. The affidavit further recites what Mr McMahon intends to do at the property in the future. That includes his intention in the next few weeks to undertake the annual winter planting of ryegrass, which provides grazing fodder for cattle. He also notes that, between planting, the property requires maintenance. The affidavit also refers to Mr McMahon's holding a ten-year grazing licence of which eight years has elapsed. He states that he uses that farm for supplementary feed for cattle and also maintains a corn silage at the farm as well as molasses and some hay. 20The affidavit further states that Mr McMahon also holds an agreement to maintain a property at Coraki, which he intends to sow in about June 2013. He further reiterates in his second affidavit the activities conducted at the two-ha property in support of those activities. 21Mr Collins, who appears for the plaintiff, expressed what he openly described as scepticism in respect of the new evidence. First, he noted certain inconsistencies, including assets now set out in detail in the sworn affidavit of 8 May 2013 by comparison with the brief statement of assets in exhibit 1. Whilst it may be accepted that the assets are now described in more detail and additional assets are described, not knowing the circumstances in which the statement of financial position in exhibit 1 were provided, I see no basis to reject the evidence set out in the further affidavit solely on the strength of comparing it with a document prepared earlier without anything the purpose for which that document was prepared or the circumstances in which it was provided to Lisa Banner. 22Separately, Mr Collins submitted that what is set out in the further affidavit does not provide any evidence of current farming operations. 23Mr Broskovitz submitted, on behalf of the defendants, that the Court should approach that issue on the basis that farming is a seasonal activity and that a farmer may not be engaged in direct farming activities every day of the year but plainly his activities will change from day to day and season to season depending on a variety of circumstances. 24I have to approach this issue bearing in mind the well-established ameliorative purpose of the provisions of the Farm Debt Mediation Act. The object of the Act is to provide for the efficient and equitable resolution of farm debt disputes by requiring mediation before the creditor can take possession of a property. It seems to me that the Act would plainly contemplate that, from time to time owing to the seasonal and uncertain nature of farming in this country, farmers will have more or less involvement in their farming activities and from time to time will require financial "breathing space", as it was put by Mr Broskovitz. 25The affidavit of Mr McMahon persuades me that there is a respectable basis for accepting his contention that he is currently principally engaged in a farming operation. 26The more difficult question is whether the two-ha property is one secured by a farm mortgage for the purpose of the Act. 27As indicated in the definitions set out above, the question is whether the mortgage is an interest in a farming property. The definition of that term is "a farm or part of a farm". 28I am satisfied, on the strength of Mr McMahon's evidence, that it is appropriate (at least on a prima facie basis) to regard the two-ha property as part of a farm, since it is the property at which the farmer lives and from which he conducts many of the administrative and ancillary aspects of his farming operations. 29For those reasons, I am satisfied that there is at least a prima facie case for accepting that the debt is protected by the provisions of pt 2 of the Farm Debt Mediation Act. 30Accordingly, I am satisfied in all the circumstances that it would be appropriate to stay enforcement of the judgment pending final determination of that issue or, if the parties agree, pending compliance with the provisions of the Act. 31I make orders 1, 2 and 3 in the notice of motion filed on 6 May 2013. 32I order the defendants to pay the plaintiff's costs thrown away by reason of the adjournment of the proceeding yesterday and otherwise reserve costs. 33I stand the proceedings over to 16 May 2013 before the registrar.