Ciavarella v Hargraves Secured Investments Ltd

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

1. MEAGHER JA: The applicants seek leave to appeal from the judgment and orders of the primary judge (Fagan J) of 7 June 2016: Hargraves Secured Investments Ltd v Ciavarella [2016] NSWSC 732. The respondent lender obtained summary judgment for possession of two farm properties, and a money judgment for $1,467,612.56 against the applicants. On 17 June 2016 his Honour also made orders dismissing the applicants' amended cross-claim filed in those proceedings (2015/205112) and the applicants' statement of claim, filed in separate proceedings (2015/177740) but making the same allegations. Leave is also sought to appeal from that last order. It is accepted, however, that the fate of that application depends on the outcome of the application in the principal proceedings.
2. This is the concurrent hearing of those applications and the proposed appeal. For the reasons which follow the applications for leave to appeal should be refused. Before explaining why, it is first necessary to summarise the relationship between the parties and the issues sought to be raised by the applicants' defence and amended cross-claim.

The parties, the Loan Agreement and securities

1. The respondent (Hargraves) is a credit provider, the directors of which include partners in the law firm, Hargraves Solicitors. That firm also acted for Hargraves in its dealings with the applicants with respect to the loan and in the proceedings. The first and third applicants (Darren and Louis Ciavarella) are brothers and the second applicant (Shirley Ciavarella) is their mother. With the exception of the third applicant, all are farmers in the Leeton area. For convenience I will refer to each of them and to Matteo Ciavarella (the second applicant's husband) by their given names.
2. By a Loan Agreement dated 29 October 2013 Hargraves advanced $1,370,000 to Darren. That loan was repayable, at the latest, after one year and repayment was severally guaranteed by Louis and Matteo, who died on 16 May 2014. Probate of his will was granted to Shirley, but not until 1 October 2014.
3. The Loan Agreement provided for the payment of monthly instalments of interest which was payable in arrears. Six interest only payments were due on the fifth day of each month from November 2013 to April 2014. On the fifth days of May and June 2014 payments of $30,000 were due. A portion of each was a monthly interest payment and the balance represented a repayment of principal. Five further interest only payments were due on the fifth day of each month from July to November 2014. The interest rate was 17.25% per annum, reducible to 13.25% if payments were made on time and the borrower was not otherwise in default.
4. Repayment of the loan was also secured by registered mortgages over four properties. They were "Midgee", which was owned by Darren, and "Farm 557", "Farm 557 Lot 2" (a property at 333 Fivebough Road) and "Farm 1863", each of which was owned by Matteo. In addition Matteo gave a charge over water entitlements that he held in the Murrumbidgee Irrigation Scheme. Those entitlements were associated with Farm 557 and permitted him to draw up to 321 megalitres of water per year.
5. The properties which were the subject of the summary judgment for possession were Farm 557 Lot 2 and Farm 557. The remaining two properties had already been sold by Hargraves, as mortgagee in possession. Farm 1863 was sold in June 2015, and Midgee in August 2015.
6. The events which followed the making of the loan are conveniently considered by reference to three periods of time. The first is the period up to early September 2014. The second is the period concluding on 26 November 2014 when, following a mediation under the Farm Debt Mediation Act 1994 (NSW) (FDM Act), the parties signed a Heads of Agreement. The third is the period leading to Hargraves commencing proceedings in July 2015 for possession of Farm 557 Lot 2 and Farm 557.

Events up to early September 2014

1. By April 2014 Darren was, in his own words, experiencing "considerable financial hardship". As a result at a meeting in late April he advised Hargraves that he could not make the repayments of principal due in May and June 2014. It is alleged by the applicants in their amended cross-claim that in response Hargraves stated that it would not require repayment of those amounts as long as Darren kept up the interest payments. It was not alleged that there was any agreement to that effect. At the same time the parties explored the possibility of selling Matteo's annual water entitlement to enable the making of those payments.
2. The applicants also allege that in early May 2014 it was agreed between Darren, Matteo and Hargraves that the water entitlement for 2014 would be sold to enable Darren "to meet interest repayments due under the Loan Agreement, to pay creditors and to meet expenses relating to the irrigation and harvesting of crops" (amended cross-claim para 15).
3. The sale of that entitlement did not occur until mid August 2014, and was settled on 29 August 2014. No interest payments were made in the intervening period. It was delayed, to a significant extent, by Matteo's death. The net proceeds, $262,016.93, were paid to Hargraves on 1 September 2014. It applied $75,635.40 in payment of the interest payments due in the months of April to September 2014. It described the balance of $186,381.53 as "invested pending further discussions with you and with the security providers regarding the loan" (letter to Darren from Hargraves Solicitors dated 4 September 2014).
4. Darren requested that Hargraves pay that amount to him. In his letter of 2 September 2014 he said that he needed those "funds to spray, fertilise and water" crops and to pay outstanding creditors. Hargraves did not release the monies and the applicants allege that its failure to do so was a breach of the agreement made in early May. They also allege that by reason of that agreement, and Hargraves' earlier statement concerning the repayments of principal, that as at early September 2014 there was no "actionable" default under the Loan Agreement or other securities.
5. Hargraves did not proceed on the basis that there had been any arrangement as to the suspension of Darren's obligation to make the repayments of principal. At the same time it appears to have overlooked that each of the $30,000 payments due on 5 May and 5 June included a component of interest. In their letter of 4 September 2014 to Darren, Hargraves Solicitors stated: We note that under the conditions of the loan you were required to pay the sum of $30,000 on 5th May, 2014 and a further $30,000 on 5th June, 2014 and we note that these reductions in the principal amount have not been made.
6. On 9 September 2014 Hargraves served a notice on each of the applicants under s 8 of the FDM Act. By the letter accompanying that notice Hargraves invited them to attend a mediation conducted by a mediator accredited under that Act. The letter pointed out that if the applicants did not respond to that invitation in writing and within 28 days they would be presumed to have declined to mediate, that being the effect of s 11(2)(c). That was one of the matters about which the Rural Assistance Authority (Authority) had to be satisfied before it could certify under s 11 that the FDM Act did not apply to the relevant mortgages and charge.
7. Section 8 of the FDM provides: 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.
8. The form of notice referred to in subs 8(2) includes a statement that the creditor intends to take "enforcement action" and provides for the giving of "Details and dates of act/s of default". Such action is defined in s 4(1) to mean action to enforce the mortgage, including by taking possession of the property. It does not include, as is confirmed by the language of s 8(1), the giving of a notice under that section.
9. The notice served by Hargraves included the following details and dates of default: 1. As agreed in Loan Agreement dated 29th October, 2013; "Principal & Interest repayment due 05/05/14 $30,000.00 - The $15,127.08 being the interest portion and $14,872.92 being the Principal portion. (Principal now being $1,355,127.08)" 2. "Principal & Interest repayment due 05/06/14 $30,000.00 - The $14,962.86 being the interest portion and $15,037.14 being the Principal portion. (Principal now being $1,30,089.94.) [sic]
10. A statement of the loan account as at 8 September 2014 accompanied the s 8 notice. That statement indicated that whilst interest payments calculated at 13.25% had now been made in respect of the due dates up to and including 5 September 2014, no payments in reduction of the principal amount had been made.

The farm debt mediation and Heads of Agreement

1. On 23 September 2014 solicitors acting for Darren, Jackson Lalic, wrote to Hargraves stating that its ongoing breach of the agreement in relation to the sale of the annual water entitlement was causing him "unnecessary hardship and loss". The letter demanded that the balance of those monies be released to their client and that Hargraves also withdraw the invitation to attend the mediation which because of that breach could not "be said to be made in good faith". In their letter in response of 25 September 2014 Hargraves Solicitors denied that there was a binding agreement as alleged and rejected the suggestion that the request to mediate was not made in good faith.
2. The applicants as a group then retained different solicitors (Cater & Blumer) and on 30 September 2014 those solicitors wrote to Hargraves enclosing a request from the applicants for a mediation. That request was made in accordance with s 9(1) which provides: 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.
3. That notice was in the approved form (s 9(2)), and included the following statement: This is a notice under Section 9 of the Farm Debt Mediation Act 1994 requesting mediation in regard to our farm debt and farm mortgage under which I/we is/are in default referred to in the Section 8 Notice issued by Hargraves Secured Investments Limited.
4. The mediation was held on 26 November 2014 before an accredited mediator. Each party was legally represented. There were also rural counsellors present and advising one or more of the applicants. The mediation lasted for in excess of nine hours. At its conclusion the parties executed the Heads of Agreement, which included the following acknowledgment and release by the applicants. The references to "the Farmer" are to the applicants, including Shirley as executrix of Matteo's estate.
5. By cl 1.1 the applicants acknowledged: … The Farmer acknowledges that as at 26/11/2014 they are indebted to the Creditor in for the sum of $1,370,000 plus interest as agreed in the schedule attached and that his obligations to the Creditor to repay that sum are secured by the mortgages which are valid and enforceable in accordance with their terms.
6. The handwritten schedule attached to the Heads of Agreement provides for monthly payments of interest calculated at the rate of 13.25% from 5 May 2014 to 5 December 2014 and thereafter from 5 January 2015 to 5 May 2015 calculated at a rate of 10%. As the primary judge explained at [41]: The reason interest was only calculated up to 5 May 2015 was that the schedule to the Heads of Agreement also required the defendants to enter into an unconditional contract for sale of Midgee by 27 March 2015. If this had not occurred the defendants agreed the plaintiff should have vacant possession of all of the mortgaged lands from 27 March and the defendants would, from 5 May 2015, pay interest on the unpaid balance at 17.25%.
7. The release given by the applicants (cl 2.2) was in the following terms: The Farmer and the Guarantors from this date release and discharge the Creditor in connection with all current and future actions, suits, causes of action, proceedings, claims, costs and expenses whatsoever both at law or in equity arising out of their relationship with each other and their dealings up to the date of this agreement in respect of the Mortgages, the Mortgage Debenture and the Guarantee.
8. Three further matters should be mentioned at this point. First, in the period before the mediation there was correspondence between Hargraves Solicitors and Cater & Blumer. In that correspondence the parties put their respective positions in relation to the alleged breach of agreement and it was maintained that Darren was continuing to suffer significant and ongoing losses as a result of not having received the promised funds.
9. Secondly, in that period Darren provided detailed instructions to Cater & Blumer. Some of those instructions were in evidence before the primary judge. In particular a note of 17 October 2014 makes clear that Darren appreciated that each of the $30,000 payments due in May and June included a "$15K principal" payment which had not been paid. It was also readily apparent from the statement of account which accompanied the s 8 notice that as at 8 September 2014 no repayments of principal had been made. Finally, the Heads of Agreement, as required by s 11A of the FDM Act, provided for a "cooling off period" of 14 days from the date on which it was executed, that being a period at any time during which the farmer could by written notice rescind the agreement.

Events leading to the commencement of proceedings for possession

1. Hargraves applied to the Authority for a certificate under s 11. Notice of that application was given to the applicants' solicitors by letter dated 3 December 2014. Notwithstanding that Darren objected, a certificate was issued on 16 January 2015. Although the amended cross-claim includes an order that the certificate be set aside, no argument was made as to the basis on which that order might be made. The Authority was required to issue the certificate if the three conditions in s 11(1) were satisfied. Those conditions included that the farmer was in default under the farm mortgage. That question was to be addressed by reference to the terms of that mortgage and without regard to any agreement reached at the mediation which qualified or compromised any right of the creditor to enforce that mortgage: see McMahon v Permanent Custodians Ltd [2013] NSWCA 275.
2. The applicants did not adhere to the terms of the Heads of Agreement. The Midgee property was not sold by 27 March 2015 and vacant possession of that property and Farm 557, Farm 557 Lot 2 and Farm 1863 was not given by that date. On 2 April 2015 Hargraves Solicitors served on each of the applicants notices of default under s 111(2)(b) of the Conveyancing Act 1919 (NSW) and s 57(2)(b) of the Real Property Act 1900 (NSW). Those notices claimed an amount of $1,445,527.

The applicants' defences to Hargraves' claim

1. The claim for summary judgment was for possession of the remaining two properties and for the amount demanded plus interest. The applicants defended those claims, relying on the relief sought by their amended cross-claim. That relief falls into three parts.
2. First, it is alleged that Hargraves breached the agreement for the sale of the annual water entitlement by not releasing the balance of the sale proceeds to Darren in early September 2014. As a result it is said that the applicants suffered damage including the profits lost from the failure of the 2014 crops (approx $321,736) and the ongoing profits lost because they were prevented from continuing to conduct farming operations on the four properties. The amount claimed is $3,719,369. The material before this Court does not explain how that amount is arrived at.
3. The relief sought in respect of this breach is an award of damages; an order that those damages be set-off against any monies due under the Loan Agreement; an order that Hargraves be restrained from exercising any power of sale in respect of the two properties; and an order that the securities be released. The argument that this claim might be relied on by way of equitable set-off appears to be that had Hargraves performed the sale agreement the balance of the proceeds would have been available to Darren and applied to pay expenses, creditors, and the remaining interest and principal by the due date. Exactly how that would have happened before 5 November 2014 is not explained, or obvious.
4. As to the second basis on which relief is sought, it is alleged that Hargraves engaged in unconscionable conduct contrary to ss 12CA or 12CB of the Australian Securities and Investment Commission Act 2001 (Cth) (ASIC Act) or alternatively contrary to ss 20 or 21 of the Australian Consumer Law (Cth) (contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)). Although it is not necessary to decide, the position would appear to be that the applicable provisions are ss 12CA and 12CB because in granting financial accommodation to Darren, Hargraves was dealing in a "financial product" (namely a "credit facility") within s 12BAB, and accordingly supplying a "financial service" for the purposes of those sections.
5. Hargraves was alleged to have engaged in unconscionable conduct by failing to pay the balance of the sale proceeds to Darren in early September 2014; asserting by the letter of 4 September 2014 that the applicants had defaulted under the Loan Agreement by failing to make the payments due on 5 May and 5 June 2014; and serving a notice under s 8 of the FDM Act when no default existed under that agreement.
6. The relief claimed in respect of this conduct is a declaration of contravention; an award of damages (the amount claimed is not specified but is to be taken to include the damages described above); a declaration that entry into the Heads of Agreement was "unconscionable"; and an order that the Heads of Agreement, or cl 2.2 of that agreement, be set aside.
7. Thirdly, it is claimed that the Heads of Agreement and Hargraves' conduct in procuring its execution was unjust within the meaning of ss 7 and 9 of the Contracts Review Act 1980 (NSW). The relief sought is an order that the Heads of Agreement, or cl 2.2 of that agreement, be set aside.

The argument before the primary judge for setting aside the Heads of Agreement

1. It was accepted before the primary judge and in this Court that if the Heads of Agreement is enforceable any set-off claim was released by cl 2.2. It was also accepted that the claims of breach of contract and of unconscionable conduct did not provide a basis for setting aside the Loan Agreement, or the mortgages and guarantees given in support of it. Accordingly, claims could only be relied on by way of equitable set-off if they were so directly connected with Hargraves' entitlement to rely on the defaults specified in its statutory demands that it would be unjust to allow it to enforce its securities without taking those claims into account. The relevant principles are summarised by Giles JA in Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 at 464-467.
2. The applicants sought to set aside the Heads of Agreement on two bases. The first was that Hargraves' unconscionable conduct entitled them to that relief. That was the conduct described in [34] above. The second was that the Heads of Agreement was "unjust" within s 7 of the Contracts Review Act.
3. As McHugh JA observed in West v AGC (Advances) Ltd (1986) 5 NSWLR 610 at 620, a contract may be "unjust in the circumstances relating to the contract at the time it was made" (s7(1)): … because of the way it operates in relation to the claimant or because of the way in which it was made or both. Thus a contractual provision may be unjust simply because it imposes an unreasonable burden on the claimant when it was not reasonably necessary for the protection of the legitimate interests of the party seeking to enforce the provision: cf s 9(2)(d). In other cases the contract may not be unjust per se but may be unjust because in the circumstances the claimant did not have the capacity or opportunity to make an informed or real choice as to whether he should enter into the contract …
4. In their written submissions before the primary judge the applicants' claim to relief on each of these bases was formulated as follows: The pleadings and the evidence served by the Ciavarellas support the claim that the circumstances in which the Heads of Agreement were entered into were productive of "unjustness". The unjustness was substantive (the provisions of the Heads of Agreement) and procedural (the methods used to make it - ie withholding payment due to the Ciavarellas under the Sale of Water Rights Agreement, wrongly alleging a default under the Loan Agreement, serving a notice of intention to take enforcement action under the Farm Debt Mediation Act and compelling the Ciavarellas to attend a mediation under the Farm Debt Mediation Act).
5. No separate case was made that the taking of the release in cl 2.2 was not reasonably necessary to protect Hargraves' interests in circumstances where the parties had reached an agreement which gave the applicants time to sell Midgee so as to avoid the forced sale of the other properties. Nor was such an argument made in this Court.

The decision of the primary judge that there was no arguable case that the Heads of Agreement was not binding

1. The primary judge addressed whether there was anything unjust or unconscionable about the circumstances in which the Heads of Agreement was executed. He did so in the course of determining whether the applicants "have no arguable case against the validity of the Heads of Agreement or for relief in relation to it" (at [43]).
2. He concluded that the material before him: [44] … shows that he [Darren] and the other defendants were legally advised in the lead up to the mediation and during it. They had the services of two different firms of solicitors, in succession. These solicitors were provided with detailed instructions about the conversations and correspondence of April and May 2014, including written instructions from Darren Ciavarella. The solicitors tendered advice about the efficacy of the agreement which Darren Ciavarella alleged had arisen from these communications. The solicitors for the defendants corresponded with Mr Mulquiney during late September and October 2014 about the alleged agreement for distribution of proceeds from the sale of water rights, as per their instructions. [45] At the mediation the defendants were represented by two solicitors and had the additional assistance of two rural counsellors. None of the evidence from Darren Ciavarella concerning these matters shows the slightest colour of unconscionable conduct on the part of the plaintiff or of unfairness or injustice in the course of events up to the execution of the Heads on 26 November 2014. [46] In an affidavit sworn 29 April 2016 at pars 25 and 26 Darren Ciavarella has deposed that at the mediation he was under considerable financial pressure as he had lost the winter crops planted on the subject properties, for want of funds to meet the costs of cultivation, irrigation and harvest. Further he says that at this time he was depressed and taking prescribed anti-depressant medication, which was proving not to be efficacious. Darren Ciavarella says he was tired and confused during the mediation. None of this adds to the non-existent case on unconscionability, injustice and unfairness of the mediation process or of the agreement in which it culminated.
3. His Honour concluded at [49] that there was "no arguable case that the Heads of Agreement does not bind the defendants". That conclusion is challenged by proposed grounds 5, 8, 9, 10, 11 and 12 in the applicants' draft notice of appeal. Those grounds, which are directed to his Honour's findings with respect to Hargraves' alleged unconscionable conduct, are as follows: 5 Fagan J erred in finding at judgment [27] that the cross-claimants did not contend that the discussions and correspondence of April and May 2014 amounted to a binding waiver or deferral of Darren Ciavarella's obligation to pay instalments of principal on 5 May 2014 and 5 June 2014. … 8 Fagan J erred in finding at judgment [38] that on the cross-claimants' own case there had never been an agreed variation of the Loan Agreement with respect to the instalments of principal which had been due on 5 May 2014 and 5 June 2014 9 Fagan J erred in finding at judgment [39] that the cross-claimants cannot establish an entitlement to damages because the giving of the section 8 notice under the Farm Debt Mediation Act is not actionable. 10 Fagan J erred in finding at judgment [44] that the cross-claimant had not particularised in the cross-claim the allegations pleaded in paragraph 37. 11 Fagan J erred in finding at judgment [46] that there was no evidence of unconscionability, injustice or unfairness of the mediation process or the agreement in which it culminated. 12 Fagan J erred in finding at judgment [49] that there is no arguable case that the Heads of Agreement did not bind the Defendants.

Proposed grounds 5, 8, 9, 10, 11 and 12

1. The arguments made in relation to these grounds overlap. They challenge the holding that the applicants did not have a claim as to "unconscionability, injustice and unfairness of the mediation process or of the agreement in which it culminated" (at [46]) such that they were not bound by the Heads of Agreement (at [49]).
2. That conclusion was critical to Hargraves' success on its application for summary judgment under Uniform Civil Procedure Rules 2005 (UCPR), (NSW), r 13.1. That rule provides that on such an application, there being evidence of the facts on which the claim is based and evidence that in the belief of the plaintiff the defendant has no defence to the claim, the court "may give such judgment" as the case requires. With respect to that question his Honour directed himself (at [43]) in accordance with the test formulated in General Steel Industries v Commissioner for Railways (NSW) (1964) 112 CLR 125. That test is concerned with the exercise by a court of a generally expressed power to deal with a claim summarily: see Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91-92, which concerned an application for summary dismissal; and Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99 where the plaintiff sought summary judgment. As variously expressed it requires for the exercise of the power that there be a "high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way": per Gaudron, McHugh, Gummow and Hayne JJ in Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57]; see also Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256; [2006] HCA 26 at [46] and Spencer v The Commonwealth (2010) 241 CLR 118; [2010] HCA 28 at [24], [53]-[55].
3. The applicants' case that Hargraves engaged in "unconscionable conduct" and that the Heads of Agreement was "unjust" focusses on Hargraves' conduct between 29 August and 9 September 2014. The applicants do not challenge the primary judge's findings as to what occurred thereafter (see [43] above).
4. That case proceeded as follows. As at 9 September 2014, when the s 8 notice was served, there was no outstanding default under the Loan Agreement which entitled Hargraves to take enforcement proceedings. Interest payments, including the interest portions of the payments due on 5 May and 5 June, had been made in accordance with the agreement made in early May and the two repayments of principal were not payable because Hargraves had waived its rights to insist on performance of Darren's obligation to make those payments.
5. Accordingly there was no "actionable" default as at 9 September 2014 and, as a result, that Hargraves was not entitled to give a notice under s 8 of its intention to take enforcement action. The giving of the notice in those circumstances was said to be void and of no effect because of the operation of s 6 which provides: Enforcement action taken by a creditor to whom this Act applies otherwise that in compliance with this Act is void.
6. It was also argued that the s 8 notice was misleading or deceptive because it stated that there had been an event of default when in fact that was not, or no longer, the position. Finally, it was submitted that because there was no "actionable" default at the time that notice was served, Hargraves was not entitled to take "enforcement action", or to request a mediation. By its "wrongful" service of the s 8 notice, and the issuing of the invitation to mediate, the applicants were then "forced" to participate in a mediation. If they had not done so there was a risk that a s 11 certificate may have been issued permitting Hargraves to take enforcement action. Participation in the mediation resulted in their execution of the Heads of Agreement. Thus, it was argued, that agreement was the result or outcome of the earlier "unconscionable" or "unjust" conduct.
7. Before addressing these submissions, mention must be made of a further argument which was foreshadowed in the applicants' written submissions to this Court and referred to in oral argument, but subsequently withdrawn.
8. It was said that in serving the s 8 notice Hargraves made a knowingly false allegation of default thereby "fraudulently contriving to have Darren attend a mediation over a dispute which did not exist". Such an allegation was not pleaded or relied on before the primary judge. Had it been relied on, the mere fact that it had not been pleaded would not have meant that it could not have been taken into account by the primary judge in deciding whether there should be summary judgment (see Spencer at [23]).
9. Although this submission was not pressed in this Court, two matters should be noted. The first is that if such a serious allegation was to be raised and relied on for the first time in the appeal it should have been formulated and particularised in a draft pleading so that there could be no uncertainty as to how that aspect of the applicants' case was put. The second is that there is nothing in the evidentiary material before this Court which provides a clear basis for the making of such an allegation. Nor is the reason why Hargraves would have sought to contrive such a dispute readily apparent. If, as the applicants sought to allege, there was in fact no event of default which entitled Hargraves to enforce the mortgages and Hargraves appreciated that fact, it faced substantial difficulties in obtaining a s 11 certificate (which depended on its satisfying the Authority that there had been such an event) and then succeeding in establishing in opposed proceedings that there had been a default entitling it to possession and judgment.
10. Two propositions are fundamental to the case that the applicants do seek to make. The first is that the primary judge erred in holding that it was not arguable that there had been no "actionable default" under the Loan Agreement as at 9 September 2014. His Honour did so, there being no dispute that Darren did not pay the two instalments of principal due in May and June, because there was no "binding waiver or deferral" of that obligation (at [27], [38]). That conclusion is challenged by proposed grounds 5 and 8. Whilst it is accepted by the applicants that there was no agreement to defer those payments made by the conversation in late April 2014, it is said to be at least arguable that by the statement made at that time, and the subsequent making of the agreement for the sale of the annual water entitlement, Hargraves "waived the obligation to meet [those] principal payments".
11. I agree with the primary judge that this first proposition must fail. Accepting Darren's allegations as to what was said in late April, Mr Mulquiney's statement as to Hargraves not being concerned about the non-payment of the "principal payments" was subject to a qualification - "as long as you keep up the interest payments". That condition was not satisfied as at May or June when those payments fell due. That being the position was not affected by the alleged agreement made in early May. Accordingly as at 4 September those payments remained outstanding, and the condition subject to which Hargraves was alleged to have waived the right to rely on their non-payment had not been satisfied.
12. This conclusion makes it unnecessary to consider the applicants' second proposition which is that it was not sufficient to attract the application of s 8 that Hargraves asserted that the default specified in its notice had occurred and intended to take enforcement action in reliance on it. The applicants contend that Hargraves was not entitled to give that notice because at the relevant time there was no "actionable" default. This argument turns on the construction of s 8 about which the following observations may be made.
13. The stated object of the Act is "the efficient and equitable resolution of farm debt disputes" (s 3). To achieve that end mediation is "required before a creditor can take possession of property or other enforcement action under a farm mortgage" (s 3). As Heydon J observed in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; [2012] HCA 4 at [53] (French CJ, Crennan and Kiefel JJ agreeing at [4]): … the function of mediation is to explore the means for settling a dispute. The type of dispute contemplated by the mediation referred to in ss 3, 9, 9A and 11 arises where a creditor wishes to take enforcement action under a farm mortgage on the ground that a person who owes a farm debt is in default, and the debtor disputes that.
14. Section 8 prevents a creditor from taking enforcement action under a farm mortgage without first giving notice of their intention to do so. The existence of such an intention presupposes that there is a ground or are grounds relied on for doing so. The farmer to whom the notice is addressed may in turn notify the creditor that they request "mediation concerning the farm debt involved" (s 9(1)). By reference to s 3 the "farm debt dispute" - an expression which is not defined - is that which then arises about the relevant farm debt, and, in the context of a notice given under s 8, with respect to the creditor's notified intention to take enforcement action in relation to that debt.
15. As Heydon J observed in Waller in the passage referred to above, the type of dispute contemplated could be as to whether the farmer is in default. Or, it may be added, the dispute could be as to whether the creditor is entitled to rely on a default which has occurred, or to take particular enforcement action on the basis of that default. It is of the essence of such disputes that there is a contested question which, if necessary, may be resolved by the bringing of proceedings. The object of the Act is to avoid that outcome where the farmer elects to have the dispute mediated. If the creditor's entitlement to give a valid notice under s 8 depended on whether there was a default which entitled the creditor to take the enforcement action proposed (as distinct from there being one in respect of which the creditor claimed to be entitled to do so) uncertainty would be introduced concerning the rights and consequences for the parties in relation to and following the giving of such a notice. The purpose of the Act is to avoid any uncertainty by requiring the mediation of a dispute if the farmer makes such a request and preventing the enforcement of the farm debt mortgage until that mediation has occurred or been abandoned.
16. The applicants' remaining arguments may be dealt with more briefly. The s 8 notice was not rendered void or of no effect by the operation of s 6. There was no non-compliance with the Act and, in any event, the giving of the s 8 notice was not the taking of "enforcement action" to which s 6 might apply. That expression as defined (s 4(1)) describes action taken to enforce. As s 8 makes clear, the giving of a notice under that section precedes the doing of anything that constitutes the taking of "enforcement action".
17. Secondly, the giving of the notice was not misleading or deceptive. It was to be understood as providing details of the default alleged. It did not become misleading or deceptive merely because Hargraves may not have been entitled to rely on any act of default constituted by Darren's failure to pay the interest instalments due in May and June 2014. Finally, as at 9 September 2014 Hargraves was entitled to invite the applicants to participate in mediation, as it did. These conclusions dispose of proposed grounds 9, 10 and 11 and the challenge to his Honour's ultimate conclusion which is made by proposed ground 12.

Other proposed grounds of appeal

1. Ground 1 challenges the conclusion that none of the applicants' claims could give rise to an equitable set-off. It is accepted that the availability of any set-off turns on whether it is arguable that the release in the Heads of Agreement binds the applicants. As the primary judge did not err in deciding that question in the negative, this ground does not arise.
2. Proposed grounds 2, 3, 4, 6 and 7 are directed to his Honour's findings in relation to whether there is an arguable claim for breach of the agreement for sale of the annual water entitlement. These grounds do not arise for the same reason.
3. Proposed ground 13 asserted error in his Honour's finding that there was no argument about Hargraves' compliance with the formalities of giving notices before taking possession. No written or oral submissions were made in support of this ground.

Conclusion

1. As I am not persuaded that the proposed appeal has any realistic prospects of success, I consider that leave to appeal should be refused.
2. On 22 August 2016, Simpson JA ordered that the orders made by the primary judge on 7 June 2016 "be stayed pending determination of the appeal or until further order" and that the costs of that application be costs in the appeal. At the same time her Honour noted that the applicants' notice of appeal from those orders (filed in proceedings 2016/202913) was acknowledged to be incompetent. The applicants subsequently filed two summonses seeking leave to appeal from the primary judge's orders of 7 and 17 June 2016. Those summonses were allocated file numbers 2016/262213 and 2016/202914.
3. So that the applicants have an opportunity to consider their position, the existing stay should remain in place for a further 7 days after the making of the orders that I propose.
4. To take account of each of these matters, those orders are:
5. The applicants' summonses for leave to appeal in proceedings 2016/262213 and 2016/202914 be dismissed with costs.
6. The applicants' notice of appeal in proceedings 2016/202913 be dismissed as incompetent.
7. The stay order made on 22 August 2016 be discharged at 5pm on 14 November 2016.
8. The applicants pay the respondent's costs of these proceedings, including the costs of their notice of motion filed on 12 August 2016.
9. LEEMING JA: I agree with Meagher JA.
10. PAYNE JA: I agree with Meagher JA.

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: 07 November 2016