Charlton v National Australia Bank Limited

HEADNOTE [This headnote is not to be read as part of the judgment] In 2002 Ms Charlton, the first appellant, entered into a contract for the purchase of a farming property situated at Five Ways in western New South Wales. The contract described her as "trustee for Phoenix Trust". The Trust was established in 1996 and Ms Charlton was appointed as a trustee in 2001. In 2007 Ms Charlton granted a mortgage over the Five Ways property to NAB, the first respondent, as security for financial facilities provided (or to be provided) to her by NAB. She was named as mortgagor without any reference to the Trust. In 2011 Ms Charlton defaulted in compliance with the terms of the financial facilities, resulting in NAB making demands for payment upon her. Ms Charlton alleged that she retired as a trustee in 2011. In 2013, after receiving a complaint made by Ms Charlton, the Financial Ombudsman Service concluded that Ms Charlton was liable to pay the amounts secured by the mortgage. However, the Ombudsman further found that, as Ms Charlton was a "farmer" at the relevant time, NAB was required to send her a notice offering mediation under s 8 of the Farm Debt Mediation Act 1994 (NSW). NAB subsequently issued a s 8 notice and a mediation between Ms Charlton and NAB was held in 2014. The Rural Assistance Authority held that a satisfactory mediation had taken place and issued a s 11 certificate certifying that the Act did not apply to the mortgage. In 2015 NAB commenced proceedings against Ms Charlton in the Common Law Division of the Supreme Court seeking possession of the Five Ways property and judgment against her for the amount owing under the financial facilities. Ms Charlton brought a cross-claim and commenced separate proceedings seeking judicial review of the s 11 certificate. The primary judge rejected Ms Charlton's cross-claim, dismissed her summons seeking judicial review and gave judgment to NAB for possession of the property and judgment against Ms Charlton in the sum of $1,838,388. The primary issues on appeal were: (1) Whether Ms Charlton's alleged retirement from the Trust meant that she was not liable for the debts owed to NAB; (2) Whether alleged non-adherence to the Farm Debt Mediation Act 1994 (NSW) precluded NAB from prosecuting its claims. The Court dismissed the appeal: (Per Macfarlan JA at [21], Basten JA and Emmett AJA agreeing at [3] and [93] and adding further observations). In relation to Issue 1 (Ms Charlton's liability for debts owed to NAB): The trust deed did not provide express authority for unilateral retirement and there was no lacuna to be filled by implying such a power: [38], [43]. Therefore, Ms Charlton's purported retirement was ineffective: [38], [88]. Bunten v Muir (1894) 21 R 370, distinguished. Even if Ms Charlton validly retired as a trustee, she still remained liable for the debts claimed by NAB as they were incurred prior to her purported retirement: [47], [84], [85]. That the debts were allegedly not yet payable at the time of the purported retirement does not mean that they were not liabilities: [46], [84]. In relation to Issue 2 (NAB's compliance with the Farm Debt Mediation Act): Ms Charlton was the only relevant farmer for the purposes of the Act because she was the person who granted the mortgage. Therefore, Ms Charlton was the only farmer who was required to be present at the mediation. The mediation held in 2014 was thus valid: [48]-[49], [87]. Further, NAB was entitled to enforce the debt owing under the financial facilities as Ms Charlton's obligations arose from the facility agreements rather than the mortgage: [63], [65], [91]. Such enforcement action was therefore not void under the Act. Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; [2012] HCA 4, applied. (Further observations per Basten JA regarding the judicial review proceeding): The primary judge refused to grant leave to extend time for Ms Charlton to bring a summons seeking judicial review of the s 11 certificate. On appeal, there was no challenge to that decision and, for that reason, grounds which sought only to challenge the validity of the certificate could not be addressed: [6], [13].

Judgment

1. BASTEN JA: In 2007 the appellant, Josephine Joan Charlton, entered into a loan facility with the National Australia Bank ("the Bank") secured by a mortgage of a farming property. Repayments having fallen into arrears, in 2015 the Bank commenced proceedings in the Common Law Division seeking a judgment against Ms Charlton and possession of the secured property. Ms Charlton brought a cross-claim and commenced separate proceedings seeking judicial review of a certificate granted under the Farm Debt Mediation Act 1994 (NSW).
2. The trial judge, Walton J, delivered his primary judgment on 29 October 2019. [1] On 23 March 2020, following further written submissions as to the appropriate orders, the judge made the orders sought by the Bank, dismissed Ms Charlton's cross-claim and dismissed her summons for judicial review. [2] Ms Charlton appealed from those judgments and the orders.
3. I agree with the orders proposed by Macfarlan JA dismissing the appeal. Subject to the following observations with respect to the judicial review proceeding, I also agree with the reasons of Macfarlan JA.
4. When the Bank commenced enforcement action after the default, Ms Charlton successfully asserted that the security was a farm mortgage and that enforcement action was subject to compliance with the Farm Debt Mediation Act. The Farm Debt Mediation Act imposed constraints on enforcement action taken by creditors in relation to a mortgage over farm property securing obligations of the farmer. Such enforcement action taken otherwise than in compliance with the Act was "void": s 6. The form of the prohibition on enforcement action was found in s 8, which provided: [3] 8 No enforcement action until notice of availability of mediation given (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. (2) Notice to the farmer is to be in writing in a form approved by the Authority (informing the farmer of the creditor's intention to take enforcement action in respect of the farm mortgage and of the availability of mediation under this Act in respect of farm debts). (3) This section does not apply if a certificate is in force under section 11 in respect of the farm mortgage concerned.
5. The reference in s 8(3) to a certificate under s 11 was to a certificate given by the New South Wales Rural Assistance Authority ("the Authority") stating that the Act "does not apply to the farm mortgage" if certain conditions were satisfied. Thus, s 11 relevantly provided: 11 Certificate that Act does not apply to farm mortgage (1) The Authority must, on the application of a creditor under a farm mortgage, issue a certificate that this Act does not apply to the farm mortgage if: (a) the farmer is in default under the farm mortgage, and (b) no exemption certificate is in force in relation to the farm mortgage, and (c) the Authority is satisfied that: (i) satisfactory mediation has taken place in respect of the farm debt involved, or (ii) the farmer has declined to mediate, or (iii) 3 months have elapsed after a notice was given by the creditor under section 8 and the creditor has throughout that period attempted to mediate in good faith (whether or not a mediation session or satisfactory mediation took place during that period).
6. As explained by Macfarlan JA, on 29 August 2014 the Authority issued a certificate under s 11. The relevant enforcement action by the Bank took place after the certificate was issued. Ms Charlton sought to set aside the certificate pursuant to a summons seeking judicial review. Those proceedings were commenced some two years after the certificate was issued and therefore required an extension of the three month time period within which to seek to have a determination quashed in the supervisory jurisdiction of the Supreme Court. [4] The trial judge refused to grant leave. [5] There was no challenge to that decision and, for that reason, grounds which sought only to challenge the validity of the certificate could not be addressed on the appeal.
7. That such grounds were agitated on the appeal, and in a way that treated the decision of the Authority as if it were itself the subject of an appeal by way of rehearing, revealed the danger of proceedings in two separate jurisdictions of the Court being heard together. The matter was further complicated by the fact that certain grounds relied on in the judicial review proceedings were also relied upon in resisting the application for possession in the proceedings brought by the Bank. An example of such an issue was the claim by Ms Charlton that she was not indebted to the Bank, hopeless as that submission was as explained by Macfarlan JA.
8. The nature and scope of the judicial review proceeding were limited. As noted in Hot Holdings Pty Ltd v Creasy, [6] "for certiorari to issue, it must be possible to identify a decision which has a discernible or apparent legal effect upon rights." A decision which merely provides a recommendation or occurs at a preliminary stage of the decision-making process will not necessarily affect the final legal rights in issue and will not be reviewable. However, a decision which constitutes a condition precedent to the exercise of power will be reviewable. [7]
9. In the present case, if the Farm Debt Mediation Act were engaged, a certificate under s 11 was a prerequisite to enforcement action by the Bank. The Act applied where the action was sought to be taken against a "farmer" in respect of a "farm mortgage". It is reasonably arguable that the engagement of the Act, turning on satisfaction of those two statutory terms, involved the determination of jurisdictional facts by a court. Accordingly, if the Bank had contended that its earlier enforcement action was valid because Ms Charlton was not a farmer, or because the action was not taken to enforce a farm mortgage, such claims would have been addressed by the Court. However, the Bank did not take that position. Rather, Ms Charlton challenged the validity of the certificate granted by the Authority under s 11. The issue of that certificate turned on two preconditions: first, that the farmer was in default under the farm mortgage and, secondly, that the Authority was satisfied that "satisfactory mediation has taken place". The first condition was not in issue. The judicial review proceedings thus turned on the ability of Ms Charlton to establish that the Authority could not lawfully have been satisfied as to the second condition. However, if the mediator were so satisfied, the Authority was obliged to issue the certificate: there was no discretion involved.
10. The thrust of Ms Charlton's submissions in the Court below as to the validity of the certificate turned on her contention, variously expressed, that she was not the proper party to the mediation because she had resigned as trustee. Those submissions, dismissed by the trial judge, have been addressed by Macfarlan JA.
11. Ms Charlton sought to challenge the certificate itself on the basis that, pursuant to s 11(1)(c)(iii), it was necessary for the Bank to have attempted to mediate in good faith throughout a period of three months from the date notice was given under s 8. However, as the Authority advised Ms Charlton in a letter enclosing the s 11 certificate, the certificate was issued pursuant to s 11(1)(c)(i), not subpar (iii). The subparagraphs of par (c) are expressed in the alternative. Accordingly that ground was misconceived. That left for consideration the possibility of a challenge to the criterion on which the certificate was issued, namely (i). However, whether or not there had been a satisfactory mediation was a question to be determined by the Authority. By its nature, the concept of "satisfactory mediation" required an assessment of the confidential process of mediation. It was necessary for Ms Charlton to establish that the opinion formed by the mediation officer was not reasonably open to him, or that in some way he had misunderstood his function. To that end, Ms Charlton's opinions as to what happened in the course of the mediation were of little if any relevance, and evidence as to their basis would not have been admissible, given the limits on admissibility imposed by s 15 of the Act.
12. To the extent that the primary judge considered whether subpar (iii) had been satisfied (he did not consider Ms Charlton had established that it was not satisfied [8] ) the point was irrelevant for the reasons noted. It does not appear that Ms Charlton challenged the finding in relation to subpar (i), which was the ground on which the certificate was issued.
13. To the extent that it was appropriate for the primary judge to consider the merit of the application for leave to extend time, no basis for an extension was established. Although the order made by the trial judge was that the summons seeking judicial review be dismissed, it is apparent from the refusal of the application to extend time that the summons was dismissed as incompetent. That decision, as noted above, was not challenged.
14. MACFARLAN JA: On 8 October 2002 Ms Josephine Charlton, the first appellant, entered into a contract for the purchase of a country property named Oriel, situated at Five Ways in western New South Wales. The contract described her as purchasing the property (in her maiden name of Josephine O'Brien) as "trustee for Phoenix Trust". That trust was established by a deed dated 22 January 1996. The trustee named in the deed was Mr Gavin O'Brien, who is one of Ms Charlton's brothers, and the "Appointor" was named as Mr John O'Brien, who is her uncle. Ms Charlton and her two brothers, Gavin and Justin O'Brien, were named as the principal beneficiaries. On 1 July 2001 Mr Gavin O'Brien resigned and Ms Charlton was appointed as a trustee of the trust. There was an issue in the proceedings below as to whether Mr Kevin O'Brien ("Mr O'Brien"), who is the second appellant and Ms Charlton's father, had been appointed as an additional trustee in 1997.
15. On 20 November 2006 the National Australia Bank Limited ("NAB"), which is the first respondent, agreed with Ms Charlton "as trustee for the Phoenix Trust" to increase the limit of an existing overdraft. By letter of 31 August 2007, it agreed to further increase the limit and to provide to Ms Charlton, again as "trustee for the Phoenix Trust", two "NAB Business Options Interest Only" loans.
16. On 31 October 2007 Ms Charlton gave to NAB a mortgage over the Five Ways property as security for the financial facilities provided or to be provided to her. She was named as mortgagor without any reference to the Phoenix Trust. The mortgage was subsequently registered and, conformably with s 82 of the Real Property Act 1900 (NSW) ("Real Property Act"), there was no reference on the Register to any trust on which Ms Charlton held the property.
17. In 2011 Ms Charlton defaulted in compliance with the terms of the facilities, resulting in NAB making demands for payment upon her. That led to Ms Charlton complaining in 2012 to the Financial Ombudsman Service ("FOS") concerning NAB's conduct. On 7 November 2013 the FOS concluded that NAB was entitled to enforce its mortgage and that Ms Charlton was liable to repay the credit facilities provided by NAB but found that Ms Charlton was a farmer at the relevant time and that NAB was therefore required to send her a notice offering mediation under s 8 of the Farm Debt Mediation Act 1994 (NSW) ("FDMA"). As NAB had not already done that, NAB's default notices issued in 2011 in respect of the mortgage were void by reason of s 6 of the FDMA. NAB however subsequently issued a s 8 notice and a mediation between Ms Charlton and NAB was held on 17 July 2014. On 29 August 2014 the Rural Assistance Authority ("RAA") stated that it was satisfied that a "satisfactory mediation has taken place in respect of the farm debt involved" and issued a certificate under s 11 of the FDMA certifying that it was satisfied that the Act did not apply to the mortgage given by Ms Charlton to NAB.
18. In proceedings against Ms Charlton commenced in 2015 in the Common Law Division of the Supreme Court, NAB sought possession of the Five Ways property and judgment against her for the amount owing under the financial facilities provided to her. Ms Charlton appeared for herself at the substantive hearing that subsequently took place before Walton J.
19. By judgment of 29 October 2019 his Honour rejected Ms Charlton's defence and cross-claim ([2019] NSWSC 1477) and on 23 March 2020 gave judgment to NAB for possession of the Five Ways property (there is a mistake in the form of order that requires correction under the slip rule - see [77(1)] below) and judgment for NAB against Ms Charlton in the sum of $1,838,388 ([2020] NSWSC 283). On appeal from those judgments, Ms Charlton was initially unrepresented, including at the time that she filed, with leave, her Further Amended Notice of Appeal. At the hearing in this Court Mr P King of counsel appeared for Ms Charlton and addressed the Court. With the Court's leave, Ms Charlton also addressed orally.
20. The 16 grounds of appeal upon which Ms Charlton relied are described below. At this point, it is sufficient to note that Ms Charlton's case on appeal in essence came down to two points. The first was that she retired as a trustee of the Phoenix Trust on 20 August 2011, with the consequence that she is not liable to NAB for the amounts it claims because they are debts that only arose after she had ceased to be a trustee and were, in Mr King's words, "future debts" when she resigned. Secondly, she argued that, notwithstanding that a mediation between her and NAB was in fact held, the FDMA was not adhered to in a number of respects and NAB was therefore precluded by the FDMA from making its claims.
21. For the reasons set out below, these arguments, and Ms Charlton's grounds of appeal generally, should be rejected and her appeal dismissed with costs.

FARM DEBT MEDIATION ACT 1994 (NSW)

1. The following are presently relevant provisions of the Act. 4 Definitions (1) In this Act: … enforcement action, 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, 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 debt means a debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage. … 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: (a) any stock mortgage or any crop or wool lien, or (b) the interest of the lessor of any farm machinery that is leased. … 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. farming operation means: (a) a farming (including dairy farming, poultry farming and bee farming), pastoral, horticultural or grazing operation, or (b) any other operation prescribed by the regulations for the purposes of this definition. … statutory enforcement notice means: (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. (1A) A reference in this Act to satisfactory mediation is a reference to: (a) a mediation that has achieved a resolution of a farm debt dispute, or (b) a mediation that has proceeded as far as it reasonably can in an attempt to achieve a resolution of a farm debt dispute but has nevertheless failed to resolve the dispute, or (c) a mediation specified or of a class described in regulations made for the purposes of this subsection to be a satisfactory mediation. … 6 Enforcement action in contravention of Act void Enforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void. … 8 No enforcement action until notice of availability of mediation given (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. (2) Notice to the farmer is to be in writing in a form approved by the Authority (informing the farmer of the creditor's intention to take enforcement action in respect of the farm mortgage and of the availability of mediation under this Act in respect of farm debts). (3) This section does not apply if a certificate is in force under section 11 in respect of the farm mortgage concerned. 9 Farmer may request mediation (1) A farmer to whom notice has been given under section 8 may, within 21 days after the notice was given, notify the creditor in writing that the farmer requests mediation concerning the farm debt involved. (1A) A farmer who has not been given notice under section 8 but who owes money to a creditor in relation to a farm debt may notify the creditor in writing that the farmer requests mediation concerning the farm debt involved. A farmer may request mediation under this subsection whether or not the farmer is in default. (2) The Authority may approve a form for the purposes of a notification under this section and a notification given to a creditor in that form is sufficient notification for the purposes of this section. Failure to use the approved form does not of itself invalidate a notification given by a farmer. (3) If a farmer requests mediation but subsequently refuses to mediate, this Act ceases to apply to the farm mortgage concerned. 9A Creditor may agree to or decline mediation (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. (2) A refusal by a creditor to mediate does not, of itself, give rise to any claim or other consequence under this Act if the farmer is not in default. (3) If a farmer is in default, a refusal by a creditor to mediate may result in the issuance of an exemption certificate. … 10 Enforcement action postponed to allow for mediation (1) 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. (2) This section does not invalidate any statutory enforcement notice or other process given, served or executed in order to fulfil a condition precedent to the taking of any enforcement action, but operates to prohibit the taking of the action concerned, or the enforcement by a court or tribunal of any such process, except as provided by section 11(6). 11 Certificate that Act does not apply to farm mortgage (1) The Authority must, on the application of a creditor under a farm mortgage, issue a certificate that this Act does not apply to the farm mortgage if: (a) the farmer is in default under the farm mortgage, and (b) no exemption certificate is in force in relation to the farm mortgage, and (c) the Authority is satisfied that: (i) satisfactory mediation has taken place in respect of the farm debt involved, or (ii) the farmer has declined to mediate, or (iii) 3 months have elapsed after a notice was given by the creditor under section 8 and the creditor has throughout that period attempted to mediate in good faith (whether or not a mediation session or satisfactory mediation took place during that period).

THE JUDGMENTS AT FIRST INSTANCE

1. In his judgment of 29 October 2019 the primary judge addressed Ms Charlton's case by reference to nine issues, as follows. They were identified by NAB but were expanded by his Honour to cover additional matters identified by Ms Charlton.

Issue 1: whether a "satisfactory mediation" was held for the purposes of the FDMA

1. The first issue was whether the RAA's certificate dated 29 August 2014 should, on judicial review as sought by Ms Charlton in her cross-claim, be set aside because there was no "satisfactory mediation" for the purposes of the FDMA (see s 11(1)(c)(i)). Ms Charlton contended that there was not and that NAB's attempts in the proceedings to enforce the subject mortgage were therefore void by reason of s 6 of the Act.
2. Ms Charlton argued in this context that the mediation that did occur was not "satisfactory", and that the RAA should have so concluded, because, as she had earlier resigned as trustee of the Phoenix Trust, NAB was required to mediate with the sole continuing trustee, Mr Kevin O'Brien, not Ms Charlton.
3. The primary judge rejected Ms Charlton's contention that she resigned in 2011 because he considered that her purported resignation had not been shown to have occurred with the authority of the appointor of the trust, Mr John O'Brien, whose assent to a retirement his Honour held was required under cl 15 of the trust deed. The relevant parts of cl 15 as quoted by his Honour at [282] were as follows: "15. The person(s) named in the Schedule hereto as 'The Appointor(s)' or the survivor of them shall have the power by instrument in writing at any time and from time to time to remove any Trustee of these presents and to appoint a new or additional Trustee or Trustees whether in addition to or in substitution for any other Trustee or Trustees… … Upon the appointment, removal or retirement of a trustee pursuant to these presents or whether made or done pursuant to the provisions of the Trustee Act as amended from time to time it shall not be necessary for such appointment, removal or retirement to be effected by registered deed or by any deed and such appointment, removal or retirement shall be fully effective provided the same is made by instrument in writing and signed by the relevant persons pursuant to this deed or such persons as authorised or nominated by or pursuant to the Trustee [A]ct aforesaid and any minute recorded in the minutes of the trustee of this deed as to the appointment, removal or retirement of any trustee or trustees shall be conclusive proof that such appointment, removal or retirement was effective in all respects."
4. His Honour also found that s 44 of the Trustee Act 1958 (Vic) ("Trustee Act") (Victorian law being the governing law of the trust) did not in the circumstances authorise the resignation. That section is relevantly in the following terms: 44 Retirement of trustee without a new appointment (1) This section applies where a trustee declares by writing that he is desirous of being discharged from all or any of the trusts reposed in him, and after his discharge there will be either a trustee company or at least two individuals to act as trustees to perform the trusts from which that trustee desires to be discharged. (2) In any case to which this section applies if the co-trustees and such other person (if any) as is empowered to appoint trustees consent by writing to the discharge of the trustee, and to the vesting in the co-trustees alone of the trust property, the trustee desirous of being discharged - (a) shall be deemed to have retired from the trusts from which he has declared he desires to be discharged; and (b) subject to subsection (3) of this section, shall, by the writing by which consent is given to his discharge, be discharged from the trusts under this Act - without any new trustee being appointed in his place.
5. His Honour held that at the time of the mediation (and effectively at all relevant times) Ms Charlton was the "farmer" for the purposes of the FDMA and as the mortgagor named in the mortgage was the person who owed the farm debt. His Honour held that in these circumstances it was not necessary for NAB to involve Mr O'Brien in the mediation. Further, in response to another argument put by Ms Charlton, his Honour concluded that there was no evidence that NAB did not mediate with Ms Charlton in good faith.

Issue 2: whether NAB's actions in 2011 constituted "enforcement action", such that the proceedings initiated by NAB were void by s 6 of the Act

1. His Honour addressed and rejected Ms Charlton's submission that NAB's issue of notices, prior to the 2014 mediation, cancelling the financial facilities it had granted and charging interest at default rates constituted "action to enforce the mortgage" within the meaning of the definition of "enforcement action" in the FDMA (see at [22] above). His Honour referred in this context to the High Court decision in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; [2012] HCA 4.
2. His Honour found however that two default notices issued by NAB in relation to the mortgage ("the s 57 notices"), prior to the mediation, being steps towards exercise by NAB of powers under the mortgage, did constitute "enforcement action". It follows that they were (and are) void by reason of s 6 of the FDMA. His Honour noted that the notices had been issued at a time, before the FOS determination, when NAB erroneously believed that Ms Charlton was not a farmer and that the FDMA did not therefore apply. Nevertheless, his Honour further found that the issue of these notices did not have any bearing on Issue 2 because NAB did not rely on them in the proceedings, as was evident from its pleadings. As well, his Honour found that the taking of enforcement steps that were void by reason of s 6 did not affect the validity of subsequent mortgage enforcement action taken by NAB in conformity with the FDMA.

Issue 3: alleged misrepresentations concerning refinance and other matters

1. The primary judge rejected Ms Charlton's contentions that NAB had engaged in misleading or deceptive conduct, including that NAB had misleadingly misrepresented in August and September 2011 that the finance facilities would be transferred from Ms Charlton to Mr O'Brien as the replacement trustee.

Issue 4: right of indemnity issue

1. The primary judge rejected Ms Charlton's contentions that the existence of certain opinions of NAB's legal department expressed prior to provision of the finance facilities affected Ms Charlton's liabilities.

Issue 5: service of the s 57 default notice

1. In relation to this issue the primary judge rejected Ms Charlton's contention that the default notice under s 57 of the Real Property Act issued by NAB after the RAA issued its s 11 certificate in August 2014, was not properly served on her.

Issues 6 to 9: other issues

1. The primary judge determined these issues against Ms Charlton. They do not arise on the appeal.

DETERMINATION OF THE APPEAL

1. I address Ms Charlton's case on appeal by reference to the grounds of appeal, contained in her Further Amended Notice of Appeal, referred to below. For the sake of clarity, the grounds have been restated.

Ground 1: the primary judge erred in finding that Ms Charlton did not retire as trustee in 2011

1. On appeal, Ms Charlton did not argue that s 44 of the Trustee Act (see [27] above) provided a source of authority for her purported resignation. The primary judge's conclusion that s 44 was inapplicable in the circumstances was therefore not challenged.
2. Ms Charlton did however argue, contrary to the primary judge's conclusion, that cl 15 of the trust deed (see [26] above) provided such authority. She submitted that the two limbs of the clause operated separately, such that the second provided authority for a trustee to retire without the need for compliance with the first limb (which required the involvement and therefore authority of the appointor of the trust), or any other provision.
3. This submission does not however in my view reflect the language of the provision. The second limb commences "[u]pon the appointment removal or retirement of a trustee pursuant to these presents or whether made or done pursuant to the provisions of the Trustee Act as amended from time to time…". It is thus referring to appointments, removals or retirements effected pursuant either to the first limb of cl 15 (as there is no other provision of the trust deed of arguable relevance) or to the Trustee Act, not to any authority conferred by the second limb itself, or by any other source outside the trust deed. Appointment or removal might of course occur pursuant to the first limb of cl 15 but in that case the appointor must be involved as the person taking the relevant action, which, as the primary judge held, did not occur here. As both possible sources of authority to which I have referred (that is, the first limb of cl 15 and the Trustee Act) were inapplicable, Ms Charlton's purported retirement was ineffective.
4. Ms Charlton's response to reasoning of this type was to submit that the second limb of cl 15 must itself be a source of authority because it refers to "retirement" pursuant to the trust deed (that is, "pursuant to these presents") and the trust deed does not anywhere else (including in the first limb of cl 15) authorise retirement.
5. The first answer to this submission is that whilst "retirement" (see the second limb of cl 15) essentially involves an act of the person retiring and "removal" (see the first limb) involves the action of a third party (that is the appointor), there is no reason why a removal under the first limb could not occur with the concurrence of the trustee, or even at his or her request, such that it was properly described as a "retirement".
6. It cannot therefore be said that the second limb is necessarily contemplating action beyond that referred to in the first limb. Against this it could be argued that in referring to both "removal" and "retirement" the second limb treats them as separate concepts. Bearing in mind that the purpose of considering cl 15's use of these terms is to determine whether the second limb must clearly be referring to cessation of trusteeship otherwise than pursuant to the first limb (or the Trustee Act), it is however sufficient to conclude that it is arguable that "removal" in the second limb is referring to a non-consensual removal under the first limb and "retirement" in the second limb is referring to a consensual removal under the first limb.
7. The second answer is that retirement can in any event occur pursuant to s 44 of the Trustee Act. That the circumstances in which s 44 is applicable were not present in this case is not of significance. Rather, the section's existence indicates that the reference in the second limb to "retirement" may, contrary to Ms Charlton's submissions, be given a sensible operation even if her argument that the second limb of cl 15 provides an independent source of authority to resign is not accepted.
8. Ms Charlton also submitted that an analogy was to be drawn between the present case and the decision of the Scottish Court of Sessions in Bunten v Muir (1894) 21 R 370 where a clause in a trust deed assumed that the trustees had the power to resign but did not expressly state that to be the case. The Court found that a power to resign was in those circumstances to be implied. The present case is distinguishable because the second limb of cl 15 assumes that the trustee has the power to resign but refers to that as being "pursuant to these presents", that is, the deed itself (or to the Trustee Act). As I have indicated, the power to resign can be found in the first limb (albeit requiring the involvement of the appointor) (and in the Trustee Act). There is therefore no lacuna, as there was in Bunten v Muir, to be filled by implying a power.

Relevance of resignation of trustee

1. Ms Charlton's written submissions proceeded upon the erroneous assumption that her resignation as trustee in 2011 (assuming, contrary to my view, that it did in fact occur) discharged her from liability to NAB in respect of the finance facility debts claim by NAB. This assumption was erroneous because by contracting with NAB to obtain the benefit of finance facilities Ms Charlton incurred contractual obligations to NAB that it was entitled to enforce by an action at law, which is what it sought to do in the present proceedings. That Ms Charlton incurred the liabilities in acting on behalf of the Phoenix Trust did not affect her liability at law to NAB. The recent decision of the High Court in Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 93 ALJR 807; [2019] HCA 20 confirms that to be so. In that case Kiefel CJ, Keane and Edelman JJ said the following: "[24] Although the Commonwealth's written submissions focused upon scenarios involving permutations of solvency and insolvency of a trustee and a trust, the trust is not a separate entity and therefore does not have a separate solvency status from the trustee. A trustee is personally liable for debts incurred as trustee. This is so whether or not the trustee contracted with creditors as a named trustee, and hence whether or not the creditors knew of the existence of the trust. Similarly, the expressions 'trust assets' and 'trust creditors' are simply shorthand for, respectively, the rights held on trust by the trustee and those creditors of the trustee whose debts were properly incurred with authority in the course of trust business". (Footnotes omitted). See also per Bell, Gageler and Nettle JJ at [80] and Gordon J at [129] and this Court's decision in ACES Sogutlu Holdings Pty Ltd (in liq) v Commonwealth Bank of Australia (2014) 89 NSWLR 209; [2014] NSWCA 402 at [13]-[18] per Leeming JA.
2. I note that neither at first instance nor on appeal did Ms Charlton contend, as a matter of construction of the contracts between her and NAB for provision of the finance facilities, that her liability was limited to the value of the assets of the trust, or limited on some other basis. Such an argument was put and rejected by this Court in Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773. If put in the present case, the argument would similarly have failed because, as pointed out by Kiefel CJ, Keane and Edelman JJ in Carter Holt in the passage quoted above, a trustee's personal liability for debts incurred as trustee exists "whether or not the trustee contracted with creditors as a named trustee" and statements to this effect were the nearest the finance contracts came to purporting to limit Ms Charlton's liability.
3. No doubt recognising the force of these considerations, on appeal Mr King put Ms Charlton's argument somewhat differently. He accepted that a trustee was personally liable for debts incurred whilst he or she was trustee but argued that the debts claimed by NAB in the present case were not liabilities incurred by Ms Charlton before her purported retirement in 2011. Instead, he argued, they were at that time only "future debts" because they were not then payable. Even assuming that they were not then payable (which is doubtful because default appears to have occurred in 2011), the proposition is not sustainable. That the debts were not yet payable does not mean that they were not liabilities. Mr King was not able to give a persuasive answer to the analogy put to him in argument of a corporate trustee who incurs debts which are not payable as at the trustee's balance date. Undoubtedly they would have to be referred to as at least contingent liabilities in the trustee's balance sheet, albeit that they were not then payable which might be relevant for other purposes such as the solvency of the trustee. I note by way of analogy that a "debt" for the purpose of corporate insolvent trading legislation has been held to include a contingent debt (see Hawkins v Bank of China (1992) 26 NSWLR 562). As Gleeson CJ said in Hawkins at 572: "…Once it is accepted that 'debt' may include a contingent debt then there is no obstacle to the conclusion that, in the present context, a debt may be taken to have been incurred when a company entered a contract by which it subjected itself to a conditional but unavoidable obligation to pay a sum of money at a future time. This is such a case."
4. As they were incurred prior to her purported retirement as trustee, Ms Charlton remained liable for the debts claimed by NAB even if (contrary to the primary judge's and my conclusion) she validly retired as trustee in 2011.

Ground 2: whether Mr O'Brien was a or the farmer for the purposes of the FDMA

Ground 3: whether NAB should have served a s 8 notice on Mr O'Brien

1. Ms Charlton contended that the mediation that took place with her in 2014 was defective because NAB did not make Mr (Kevin) O'Brien, her father, a party to it. (Mr O'Brien was in fact present at the mediation but, so Ms Charlton said, only as an observer.) Ms Charlton submitted in support of this ground that as she retired as a trustee in 2011, Mr O'Brien was thereafter the sole continuing trustee and therefore the person to whom NAB had to look to for recovery of the debts incurred by the Phoenix Trust. The necessary consequence of this, she contended, was that Mr O'Brien was for the purposes of the FDMA, and s 8(1) in particular, "a farmer" by whom money was owed under "a farm mortgage" (that is, the mortgage in favour of NAB dated 31 October 2007) to whom NAB was required by s 8 to give notice before it took action to enforce the mortgage. The effect of Ms Charlton's submissions was that Mr O'Brien would have been entitled to give to NAB a notice under s 9 requesting a mediation and, by reason of s 10, NAB would not have been able to take enforcement action in respect of the mortgage unless it satisfied the RAA, inter alia, that a satisfactory mediation had taken place with Mr O'Brien (see s 11).
2. These submissions should be rejected for the principal reason that even if the trusteeship position was as Ms Charlton contended, there was no basis in the evidence for concluding that Mr O'Brien, whether as trustee of the Phoenix Trust or otherwise, became liable to NAB under the mortgage, or otherwise assumed liability for the debts owing to NAB. Ms Charlton was the person who contracted with NAB for the finance facilities and who granted the mortgage over the property at Five Ways of which she was the registered proprietor. Neither her alleged retirement as trustee nor any other event discharged her from those contractual obligations.
3. I note in any event that, when dealing with Ground 1, I rejected Ms Charlton's contention that she retired as a trustee in 2011 (see [38] above). I also note that there was an issue at first instance as to whether Mr O'Brien ever became a trustee and the primary judge found it unnecessary to express a conclusion as to whether he did.
4. I add that Ms Charlton submitted that NAB had elected to treat Mr O'Brien as the, or perhaps just as "a", debtor under the mortgage (see Agricultural and Rural Finance Pty Ltd v Gardiner (2008) 238 CLR 570; [2008] HCA 57 at [57]-[67]). For example Ms Charlton relied on a letter dated 27 October 2014, after the mediation, from NAB to Mr O'Brien referring to him as a caveator in respect of the property. The letter attached a notice of demand in respect of the facilities and the mortgage which was addressed to Ms Charlton, and not to Mr O'Brien. There was therefore nothing in this correspondence which constituted an arguable election by NAB which prejudiced its rights to proceed against Ms Charlton. Nor did NAB make any election to treat Mr O'Brien as its debtor in place of Ms Charlton by letters, relied on by Mr King, that it wrote in August and September 2011. These letters do no more than indicate that NAB required any change to the trusteeship position to be reflected in changes to the title to the property. No such title changes occurred.

Ground 4: the s 8 notice was defective

1. In support of this ground Ms Charlton raised again matters that she raised and with which I have dealt in relation to Grounds 2 and 3.
2. A further submission that Ms Charlton made in relation to this ground was that the s 8 notice given by NAB on 22 January 2014, which was the trigger for the mediation that subsequently took place on 17 July 2014, was withdrawn by NAB by its letter of 7 April 2014 which stated: "NAB has previously advised you that it does not seek to rely on any notices issued prior to the Farm Debt Mediation notice issued in February 2014. That position remains unchanged".
3. This statement needs to be understood in the context of the following previous events of which Ms Charlton and NAB were aware. In particular, prior to 2014 NAB issued a number of cancellation of facility notices and mortgage default notices. As to the latter, NAB issued a default notice on 16 November 2011, expressly stated to be pursuant to s 57(2)(b) of the Real Property Act, and then another on 24 January 2012, although this notice did not expressly refer to s 57. NAB issued the default notices on the assumption that Ms Charlton was not a farmer for the purposes of the FDMA and that a mediation under that Act was not therefore required before NAB could take enforcement action under the mortgage. As noted earlier, Ms Charlton then complained to FOS. After considering the complaint, FOS determined on 7 November 2013 that NAB had been wrong in its assumption concerning the FDMA. By its letter of 7 April 2014, referred to above, NAB therefore confirmed, as it had apparently previously advised, that those mortgage default notices would not be relied upon. This context makes it clear that NAB's reference in the letter to "any notices issued prior to the Farm Debt Mediation notice issued in February 2014" contained an obvious error in stating that the farm debt mediation notice had been issued in February 2014. As Ms Charlton well knew the notice was in fact dated 22 January 2014. She could not in these circumstances reasonably have understood NAB's 7 April 2014 letter as an intended withdrawal of the 22 January 2014 notice.
4. By its statement in this letter NAB recognised that, contrary to its previous assumption, the FDMA was applicable and that it would have to comply with it. NAB did not therefore withdraw its s 8 notice of 22 January 2014 but, even if it had purported to do so, Ms Charlton and NAB conducted a mediation in accordance with the Act and a certificate under s 11 was issued. Any purported withdrawal of the notice was not therefore of any consequence as it was overtaken by the 17 July 2014 mediation and issue of a certificate in accordance with the FDMA, with these events rendering NAB's enforcement of the mortgage permissible.
5. A further submission made by Ms Charlton in relation to this ground of appeal was that the primary judge "erred in holding that constructive notice under the Farm Debt Act is sufficient". This alluded to a reference by the primary judge to "constructive notice" when referring to the absence of any formal notice by NAB to Ms Charlton under s 9A that it agreed to mediate in accordance with Ms Charlton's request that it do so, made pursuant to s 9. Section 9A does not however require any formal notice to be given. All that the primary judge was indicating in this context was that it was apparent that NAB implicitly communicated its agreement to mediate once the RAA issued the mediation kit to Ms Charlton. The expression "constructive notice" did not accurately describe what occurred but his Honour's intended meaning was clear and did not involve any error. In any event, as I have said, the term was used by his Honour in connection with s 9A and not, as Ms Charlton's Ground 4 assumes, in connection with s 8. The issue does not therefore assist her in her attack on the s 8 notice.

Grounds 5 to 8 and 11: NAB took enforcement action within the meaning of s 10 of the FDMA prior to the mediation

1. Ms Charlton contended that NAB took "continuous" enforcement action "by the issue of default notices, cancellation notices, charging penalty interest and enforcement costs, bringing proceedings and obtaining judgment for possession and in debt" (see Ground 7).
2. Insofar as these actions occurred after the RAA issued a s 11 certificate on 29 August 2014, this submission could only have a foundation if the certificate were found to be invalid (as to which see Grounds 9, 12 and 14 below). Whether steps taken by NAB prior to that time were in contravention of s 10 of the FDMA turned on whether the action was "enforcement action in respect of the farm mortgage" within the meaning of s 10(1). NAB recognised that its mortgage default notices served prior to the mediation were of that character and therefore "void" by reason of s 6 of the FDMA. After FOS' determination that the FDMA was applicable, NAB however told Ms Charlton that it withdrew those notices and thereafter, including in the present proceedings, did not rely upon their efficacy in any way. In these circumstances, the fact that the notices were void is of no consequence. In particular, and contrary to Ms Charlton's submission, the giving of those notices did not prevent NAB later giving a (valid) notice under s 57 of the Real Property Act, after the mediation certificate was issued. NAB did that and the notice so given formed the basis for its claim to possession of the mortgaged property in the proceedings that came before Walton J.
3. I add that there is no substance in Ms Charlton's complaint that the primary judge erred in listing only three out of four mortgage default notices that were given. Ms Charlton said that the omission was significant because if the fourth notice had been included in the list it would have been apparent that NAB's enforcement action was continuous.
4. The "fourth" notice to which she referred was however issued on 9 September 2014, that is, after the RAA issued its s 11 certificate on 29 August 2014. This was also the case with the third default notice on the primary judge's list which was issued on 27 October 2014. The FDMA did not therefore render either of these notices void. Thus, the notices did not constitute impermissible enforcement action and their issue, and the omission of the "fourth" from his Honour's list, does not assist Ms Charlton's appeal. I note that in any event NAB subsequently withdrew its 9 September 2014 ("fourth") notice on the basis that it had been issued due to an "internal error".
5. Whether pre-mediation actions of NAB in serving notices cancelling Ms Charlton's finance facilities and charging default interest and enforcement costs (as distinct from the mortgage default notices expressly referable to enforcement of the mortgage) were void under the FDMA requires consideration of the High Court decision in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; [2012] HCA 4.
6. In that case the High Court held that a valid mediation had not occurred in relation to a farm mortgage dispute, with the result that the lender was not entitled to possession of the mortgage property. The further question however remained whether the lender's claim for a money judgment constituted "enforcement action in respect of the mortgage" such that it was barred by the FDMA. As noted by Hayne J at [25], in its pleadings the lender "asserted its 'entitle[ment] to repayment, including principal and the unpaid arrears of interest' only 'under the terms of the Mortgage'". Heydon J (with whom the remainder of the Court, including Hayne J, agreed on this issue - see [17] and [23]-[25]) held that the claim for a money judgment did constitute enforcement action, stating: "[66] The expression 'enforcement action' is defined in s 4(1) of the Act as meaning not only taking possession of the property, but 'any other action to enforce the mortgage'. In the Amended Statement of Claim the respondent pleaded that it was a term of the Registered First Mortgage that interest be paid monthly in accordance with, inter alia, the Third Loan Agreement. In the Amended Statement of Claim the respondent also pleaded that the appellant was obliged, under the Registered First Mortgage, to pay the principal sum ($640,000) with interest owing. The respondent contended that a claim for a debt is not 'enforcement action' because it does not involve the enforcement of security over the farm property. 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. And since the claim to the order for possession was solely based on the breach of the money obligations arising under the Registered First Mortgage and the Third Loan Agreement, it was inextricably interlinked with the claim for a money judgment. The definition of 'enforcement order' in s 4(1) provides that it does not include 'the enforcement of a judgment that was obtained before the commencement of this Act'. The word 'judgment' is not limited to judgments other than money judgments. Had that type of enforcement action not been excluded, it would have fallen within the definition of 'enforcement action'. The exclusion leaves the enforcement of judgments (including money judgments) open if they were obtained after the commencement of the Act. It follows that action to obtain a money judgment after the commencement of the Act is 'enforcement action' so long as it is action to enforce the mortgage. The structure of the Amended Statement of Claim, and the manner in which the proceedings were conducted, justify the characterisation of the respondent's conduct as action to enforce the mortgage, and hence as 'enforcement action'." (Emphasis added.)
7. The position in the present case is different. In its amended statement of claim NAB clearly stated that its money claim was made pursuant to the facility agreements, rather than the mortgage. Thus, it alleged that Ms Charlton was indebted to it for the sum in question in respect of those facilities and claimed judgment "pursuant to" those facilities. In contrast, its claim for possession of the Five Ways property was stated, necessarily, to be founded upon the mortgage.
8. The effect of Waller is that action "to enforce the mortgage" only occurs where the creditor relies on the mortgage to justify its actions. If, as in the present case, the creditor is able to, and does, rely on a different source of the debtor's obligations (here, the contractual finance facilities), it is not attempting to enforce the mortgage.
9. In the present case NAB was therefore entitled, even prior to the farm debt mediation, to issue notices cancelling Ms Charlton's finance facilities and charging default interest and non-mortgage enforcement costs. Similarly, it could claim in a personal debt action against Ms Charlton amounts that became due under the finance facilities, irrespective of the occurrence of a farm debt mediation. Mr King contended that NAB was precluded by s 57(5) of the Real Property Act (see Carr v Finance Corporation of Australia Limited [No 2] (1982) 150 CLR 139; [1982] HCA 43 at 147-9) from treating these notices as accelerating the time for payment under the finance facilities but, as held by this Court in Turnbull v National Mutual Royal Bank Ltd (1991) 26 NSWLR 361 at 370, that subsection depriving acceleration clauses of effect is only concerned with provisions in "registered security documents" as referred to in s 57(2), not those in other contractual documents, such as the finance facilities in the present case.
10. NAB's claim for so-called "enforcement costs" would not have been permissible to the extent that those costs related to the issue of the void mortgage default notices prior to the mediation. The primary judge however made it clear in his second judgment, of 23 March 2020, at [66] and [73] that the amount for which judgment was awarded against Ms Charlton had had deducted from it "enforcement fees arising from notices [on] which reliance had been withdrawn by NAB". These notices included the void mortgage default notices.
11. For these reasons, Grounds 5 to 8 and 11 should be rejected.

Ground 9: the mediation was not "satisfactory" within the meaning of s 11 of the FDMA

Ground 14: the proceedings for judicial review of the s 11 certificate should not have been dismissed

1. The first point raised by Ms Charlton in relation to these grounds is that Mr O'Brien should have been a party to the mediation. I have rejected this contention at [48]-[49] above.
2. Secondly, Ms Charlton contended that the mediation was not "satisfactory" because NAB "failed or refused to compromise its claim". The primary judge held at [312] of his first judgment that there was no evidence before him indicating that NAB did not act in good faith in the mediation. There is no challenge to this finding on appeal (at least not a direct one) and Ms Charlton has not in any event referred this Court to any evidence that would contradict the primary judge's finding. In those circumstances, there is no basis for concluding that the mediation was not "satisfactory". That it did not result in a compromise agreement does not establish otherwise. This is evident from the definition of "satisfactory mediation" in s 4(1A) of the Act (see [22] above) and from Gleeson CJ's observation in Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 at 257 that: "…A satisfactory mediation is one which fulfils the object of the Act. It is not an object of the Act to force people to settle their disputes. The object of the Act is to give them an opportunity to do so by establishing a procedure to be followed. That procedure, however, cannot produce a result unless both parties want it. Legislation cannot force people to agree."

Ground 10: NAB did not establish its right to possession of the mortgaged property

1. This ground does not appear to raise any matter additional to those raised by the other grounds which I have addressed and rejected.

Ground 13: the primary judge erred in determining the identity of the trustee or trustees of the Phoenix Trust

1. Ms Charlton's contentions on this issue have been dealt with in relation to Grounds 1, 2 and 3 above.

Ground 15: the primary judge erred in assessing the quantum of NAB's money claim

1. As explained in her oral address, Ms Charlton's point in relation to this ground is that in assessing the quantum of the debt in his second judgment, the primary judge relied on an affidavit of Ms Beth Stacker of 19 December 2019 which recorded the amount of the debt owing in respect of the three finance facilities, as at 4 November 2019 in the case of the overdraft facility, and as at 1 November 2019 in the case of the two Business Options Loan facilities. This judgment dealing with the issue of quantum was not however delivered until 23 March 2020 (with orders being entered on the following day). Ms Charlton pointed out that the bank statements annexed to Ms Stacker's 19 December 2019 affidavit indicate that at the time of the affidavit NAB was progressively crediting her accounts with reversals of default interest that had previously been charged. Counsel for NAB said that this was occurring on an ex gratia basis. Consistent with the primary judge's findings, and also my conclusion above at [65] that the FDMA did not preclude NAB charging default interest under its facilities even in the absence of a mediation, that would be correct.
2. Nevertheless, Ms Charlton asserted that, by reason of this crediting process, the amounts owing to NAB at the date of judgment might well have been less than they had been in November 2019. In response, counsel for NAB pointed out that whilst default interest was being re-credited, interest accruing at the standard rate continued to be debited. He submitted, as also appears to be correct, that later bank statements in evidence, covering the dates of the second judgment and final orders, show that the debts on the three accounts were each higher at that time than they had been in November 2019. This was confirmed to be the case by a further affidavit of Ms Stacker of 29 March 2021 that the Court permitted NAB to file subsequent to the appeal hearing.
3. In these circumstances it is clear that there is no merit in this ground of appeal and that it should be rejected.

Ground 16: the primary judge erred in entering judgment against Ms Charlton in debt as well as for possession of the mortgaged property

1. This ground does not cover any more than the earlier grounds of appeal which I have rejected. It should therefore also be rejected.

ORDERS

1. As each of Ms Charlton's grounds of appeal have been rejected, her appeal should be dismissed with costs, subject to correction of the typographical error referred to at [19] above in the order for possession.
2. For these reasons I propose the following orders: 1. Order that Order 1 made on 23 March 2020 and entered on 24 March 2020 be varied by inserting the words "possession of" after the words "Judgment for NAB against Ms Charlton for" at the commencement of the order. 2. Dismiss Ms Charlton's appeal. 3. Order Ms Charlton to pay the respondents' costs of the appeal.
3. EMMETT AJA: This appeal is concerned with the liability of the appellant, Ms Josephine Charlton, to the respondent, National Australia Bank Limited (NAB) in respect of monies purportedly secured to NAB by a mortgage granted by Ms Charlton to NAB over a property situated at Five Ways in western New South Wales (the Property). On 23 March 2020, for reasons published on 29 October 2019, [9] a judge of the Common Law Division (the primary judge) directed the entry of judgment for possession of the Property in favour of NAB. The primary judge also directed the entry of judgment for NAB against Ms Charlton in the sum of $1,838,388. [10] Ms Charlton now appeals from the orders made by the primary judge.
4. Ms Charlton purchased the Property under a contract dated 8 October 2002, in which she was described, in her maiden name, as "Trustee for Phoenix Trust". The Phoenix Trust was established by a deed dated 22 January 1996 (the Trust Deed). Ms Charlton was appointed as a trustee of the Phoenix Trust on 1 July 2001.
5. On 31 October 2007, Ms Charlton granted a mortgage over the Property to NAB as security for financial facilities provided or to be provided to her by NAB (the Mortgage). Ms Charlton was named as mortgagor without any reference to the Phoenix Trust. The Mortgage was subsequently registered under the Real Property Act 1900 (NSW). There is no reference on the Register to any trust in relation to the Property.
6. In 2011, following default in complying with the terms of the facilities secured by the Mortgage, NAB made demands upon Ms Charlton for payment. On 7 November 2013, following a complaint by Ms Charlton to the Financial Ombudsman Service (the Ombudsman), the Ombudsman concluded that NAB was entitled to enforce the Mortgage and that Ms Charlton was liable to pay the amounts secured by it. However, the Ombudsman found that Ms Charlton was a farmer at the relevant time and that NAB was therefore required to give her a notice under the Farm Debt Mediation Act 1994 (NSW) (the Mediation Act), which NAB had not done. Accordingly, the demands made by NAB in 2011 were void by the operation of the Mediation Act.
7. NAB subsequently gave notice in accordance with the Mediation Act and a mediation took place between Ms Charlton and NAB on 17 July 2014. On 29 August 2014, the Rural Assistance Authority stated that it was satisfied that a satisfactory mediation had taken place in respect of the farm debt involved and gave a certificate under the Mediation Act that it was satisfied that the Mediation Act did not apply to the Mortgage.
8. Ms Charlton relied upon two broad grounds in her appeal. The first was that she had retired as a trustee of the Phoenix Trust on 20 August 2011 and that she was therefore not liable to NAB for the amounts secured by the Mortgage because they arose after she had ceased to be a trustee and were, as it was put on her behalf, "future debts". In addition, Ms Charlton contended that the Mediation Act was not adhered to in relation to the purported mediation and that, accordingly, the NAB was precluded by the Mediation Act from prosecuting its claims.
9. I have had the advantage of reading in draft form the reasons of Macfarlan JA for concluding that Ms Charlton's grounds of appeal should be rejected and that her appeal should be dismissed with costs. In particular, I agree that, whether or not Ms Charlton retired as a trustee in 2011, as she asserted, the indebtedness to NAB secured by the Mortgage was indebtedness of Ms Charlton to NAB. While it may not have been due and payable at the time of her purported resignation, it was clearly owing by her to NAB and her resignation as a trustee would not have extinguished that liability.
10. All of the indebtedness claimed by NAB against Ms Charlton arose prior to her purported resignation as trustee. The fact that the indebtedness did not become repayable until after the purported resignation does not have the consequence that Ms Charlton was excused from liability or that her liability under the debts that she incurred, albeit in her capacity as trustee, would be extinguished by her resignation. Accordingly, even if Ms Charlton resigned as trustee, her liability to NAB under the facilities entered into by her was not affected. In any event, she did not effectively resign.
11. By cl 15 of the Trust Deed, the appointors were to have the power, by instrument in writing, to remove any trustee and to appoint a new or additional trustee or trustees. Upon the appointment, removal or retirement of a trustee pursuant to the Trust Deed, or pursuant to the provisions of the Trustee Act 1925 (NSW), it was not to be necessary for such appointment, removal or retirement to be effected by registered deed or by any deed: any such appointment, removal or retirement was to be fully effective provided the same was made by instrument in writing and signed by the relevant persons pursuant to the Trust Deed or such persons as authorised or nominated by pursuant to the Trustee Act.
12. The provision clearly did not contemplate a unilateral resignation by a trustee and there is no express power conferred by the Trust Deed for a trustee to retire. Under cl 15, the appointment, removal or retirement must be signed "by the relevant persons pursuant to [the Trust Deed]" or such other persons as may be authorised or nominated by or pursuant to the Trustee Act. The purported resignation signed by Ms Charlton was not effective to extinguish her obligations as trustee, as she claimed. It also follows that she was the relevant farmer for the purposes of the Mediation Act. Accordingly, there was no defect in the certificate given under the Mediation Act.
13. I also agree with Macfarlan JA, for the reasons given by him, that Ms Charlton had not resigned as a trustee in 2011. It follows that there was no deficiency in the notices given by NAB to Ms Charlton under the Mediation Act and, accordingly, that there was no basis for contending that NAB was precluded by the Mediation Act from making claims and enforcing its rights under the Mortgage.
14. Section 6 of the Mediation Act provided that enforcement action taken by a creditor to whom the Act applied, otherwise than in compliance with the Act, was void. Enforcement action included taking possession of property under the mortgage or any other action to enforce the mortgage. Under s 8, a creditor to whom money under a farm mortgage was owed by a farmer must not take enforcement action against the farmer in respect of the farm mortgage unless notice under s 8 had been given to the farmer. However, s 8 did not apply if a certificate was in force under s 11 in respect of the mortgage concerned.
15. Enforcement action means taking possession of property under a farm 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. "Statutory enforcement notice" is defined as a notice given under specified provisions of the Real Property Act 1900 (NSW), Conveyancing Act 1919 (NSW) and Water Management Act 2000 (NSW), or a notice given under any Act or statutory instrument prescribed as within the scope of the definition. Section 6 provides that enforcement action taken by a creditor to whom the Act applies, otherwise than in accordance with the Act, is void. The Act applies in respect of creditors only insofar as they are creditors under a farm debt (s 5). A farm debt is a debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage. A farm mortgage includes any interest in or power over any farm property securing obligations of the farmer. Farm property includes a farm or part of a farm. A farmer is a person who is solely or principally engaged in a farming operation and includes the personal representatives of a deceased farmer. Farming operation means a farming, pastoral, horticultural or grazing operation or any other prescribed operation.
16. Ms Charlton contended that the Mediation Act was not complied with and that the proceedings in question constituted an enforcement action within the meaning of the Mediation Act. The contention appears to be that there was no mediation because the second appellant was not a party or only attended as an observer and that the certificate issued under s 11 was void and should be set aside. Accordingly, the appellants say, the proceedings for possession were void. However, that contention ignores the fact that the claim for debt against the first appellant was made under the facility agreements with the NAB and not under the farm mortgage.
17. That raises another apparent ground, namely, that the orders made by the primary judge involved double counting in so far as there is judgment for possession as well as judgment for the debt. The form of the judgment is defective in so far as it should be judgment for possession, rather than judgment for the mortgaged land. That is to say, the proceedings were not foreclosure proceedings. Any payment of the judgment debt would go in reduction of the amount secured by the mortgage. If the full judgment debt were paid, the mortgagor would be entitled to redeem the land from the mortgagee. Alternatively, if a power of sale were exercised, following the obtaining of possession, the proceeds of sale would go in pro tanto satisfaction of the judgment debt.
18. As Macfarlan JA points out, there was a defect in the order of possession made by the primary judge. I agree with the orders proposed by Macfarlan JA.

Endnotes

1. National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 4) [2019] NSWSC 1477 ("Primary judgment").
2. National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 5) [2020] NSWSC 283.
3. The provisions set out below are taken from the Farm Debt Mediation Act as in force in August 2014 when the mediation occurred. The Act has been subject to significant amendment since that time: see Farm Debt Mediation Amendment Act 2018 (NSW).
4. Uniform Civil Procedure Rules 2005 (NSW), r 59.10(1).
5. Primary judgment at [541].
6. (1996) 185 CLR 149 at 159 (Brennan CJ, Gaudron and Gummow JJ); [1996] HCA 44.
7. Hot Holdings at 161, referring to The Queen v Collins; Ex parte ACTU-Solo Enterprises Pty Ltd (1976) 50 ALJR 471, 473-475 (Stephen J).
8. Primary judgment at [307]-[312].
9. See National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 4) [2019] NSWSC 1477.
10. See National Australia Bank Ltd v Charlton; Charlton v The General Manager, NSW Rural Assistance Authority (No 5) [2020] NSWSC 283. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 May 2021