Gooley v NSW Rural Assistance Authority

THE BACKGROUND

1. The background prior to the proceedings before Button J was set out succinctly by his Honour in the Supreme Court judgment at [4]-[14]. That background was uncontentious in these proceedings and was as follows: [4] In March 2011, the plaintiffs entered into a loan by way of a trading account with GFH for an amount of up to $450,000 (the loan), the terms and conditions of which were not reduced to writing. At the time, the plaintiffs were farming land in the area of the Murray-Darling basin region within New South Wales. There was no security granted by the plaintiffs to GFH with respect to the loan. [5] The plaintiffs failed to repay the loan in accordance with its conditions. In December 2012, GFH sought immediate repayment of the loan. Thereafter in 2013, GFH commenced proceedings against the plaintiffs in the District Court of New South Wales. [6] On 24 October 2014, the plaintiffs and GFH agreed to compromise those proceedings. The parties entered into a Deed of Settlement and Release (the Deed) whereby the plaintiffs would pay funds to GFH. The Deed included the giving of security by the plaintiffs to GFH by way of a charge over two farming properties of the plaintiffs. [7] On the same day that the Deed was executed, short minutes of orders were signed by the solicitor for GFH and the solicitor for the Gooleys. That document was annexed to the Deed. [8] The Deed required that the plaintiffs make payments of $15,000 on or before 21 November 2014, and $252,000 on or before 24 October 2015 to GFH. [9] On or about 24 October 2015, the plaintiffs defaulted under the Deed, in that they did not pay the latter amount to GFH. [10] On 9 November 2015, GFH applied for judgment in the District Court of New South Wales, less the $15,000 already paid by the plaintiffs pursuant to the Deed. [11] On 11 November 2015, orders were entered in favour of GFH and against the plaintiffs in the District Court of New South Wales. In their entirety, they were as follows: 1. Judgment for the plaintiff [that is, GFH] in the sum of $414,948.11 less $15,000 already paid, totalling $399,948.11; 2. Order for interest to accrue on the amount of the judgment at the rate specified by UCPR r 36.7, from 24 October 2014 to date; 3. The cross-claim [that is, of Mr and Mrs Gooley] is dismissed; 4. The defendant [sic; that is, Mr and Mrs Gooley] is to pay the plaintiff's costs of the proceedings on the ordinary basis. [12] Subsequently, GFH took steps to enforce that judgment debt. Those steps included, in February 2016, the issuing of a garnishee order to a third party, Suncorp-Metway Ltd (trading as Suncorp Bank), pursuant to r 39.34 of the Uniform Civil Procedure Rules 2005 (NSW). $2,085.05 was obtained by GFH from Suncorp Bank pursuant to the garnishee order. [13] Later, on 12 August 2016, a mediation took place, pursuant to s 9 of the Act, between GFH and the plaintiffs. [14] In due course, a certificate was issued by the Authority in accordance with s 11(1) of the Act, to the effect that a satisfactory mediation had taken place. It is that certificate that is impugned in these proceedings.
2. I shall adopt a number of short forms corresponding to that background: 1. The Deed dated 24 October 2014 became an exhibit in these proceedings (Exhibit 6) and shall be hereinafter referred to as "the Deed". 2. The short minutes of order annexed to the Deed and marked Annexure B shall be hereinafter referred to as ("the consent orders"). 3. The enforcement by GFH, in February 2016, of the judgment debt arising from the District Court judgment (referred to throughout the proceedings as "the judgment debt" or "the District Court orders") shall be hereinafter referred to as "the first enforcement action". 4. The second enforcement action in July 2017 (resulting in the garnishee orders with respect to the second plaintiff's employer) shall be described as "the second enforcement action".
3. Before turning to the reasons for the judgment published by Button J, given some of the issues raised in these proceedings, an addition should be made to those background facts.
4. The recitals to the Deed conveyed that as at 24 October 2014 the plaintiffs owned properties known as "Clovass" and "Dyrabba". These properties comprised of six folio identifiers.
5. In her affidavit of 24 July 2017, the second plaintiff deposed that she and her husband owned "4 portions of land" which corresponded to four of the folio identifiers in the recitals to the Deed. The four properties consisted of two properties at Sextonville Road, Dobies Bight and two properties at Tomki-Taham Road, Clovass. These properties shall hereinafter, whether by reference to the six parcels in the recital to the Deed or the four parcels referred to in that affidavit, be referred to as "the properties".
6. Clause 2 was entitled "Settlement Account". By that clause the plaintiffs agreed to pay the sum of $267,500 by two instalments. The first, which was paid in accordance with the clause, was for the sum of $15,000. The second was for the sum of $252,500, together with interest, which was payable upon the first of the following occurring: (i) Paul and Susan settling on contracts for the sale of the whole of both of their properties known as Clovass and Dyrabba (or where those properties are sold under separate contracts, the last of those contracts to settle); (ii) Paul and Susan obtaining refinance with respect to their existing debt to BankWest; or (iii)12 months from the date of this Deed.
7. Clause 3 of the Deed was entitled "Security". By that clause, the plaintiffs charged the properties as security for the payment of the amount payable to GFH under the Deed. There was an agreement for GFH to lodge a caveat over the title of the properties.
8. Clause 5 of the Deed referred to the consent orders and notes that they would be held in escrow by the solicitors for GFH and would be filed only in accordance with the terms of the Deed. Clause 6 provided that, if the plaintiffs failed to comply with cl 2 (which parties agreed occurred), then the plaintiffs agreed to GFH filing the consent orders with the effect the judgment would be entered against the plaintiffs for the sums owing under the settlement amount referred to in cl 2.
9. The consent orders were as follows: 1. Judgement to be entered in favour of the Plaintiff as follows: 1. $414,948.11; and 2. Interest accruing on the that amount at the rates specified at Part 36, Rule 7 of the Uniform Civil Procedure Rules 2005 from 24 October 2014 to the date of the judgment. 1. Cross Claim dismissed. 2. The defendants pay the plaintiff's costs of the proceedings on a party party basis.
10. The orders entered in favour of GFH on 11 November 2015 in the first enforcement action were those set out in [11] of the Supreme Court judgment (as set out in [5] above).
11. The second plaintiff deposed that the properties had been valued and that the valuations were within Tab D of the exhibit to her evidence ("SG1").Those valuations were undertaken by Taylor Byrne (hereinafter referred to as "the valuations") and will be discussed later in the judgment.
12. The second plaintiff also deposed that the properties and "our business assets" were subject to mortgages held by the Commonwealth Bank of Australia ("CBA") and a Priority in favour of the RAA. The mortgages were the subject of an incomplete claim for possession in this Court brought by the CBA together with a cross claim by the plaintiffs alleging misconduct by the CBA.
13. In the affidavit of Ms Warring, a calculation was made based upon the valuations. From that amount was deducted the current amount claimed by the CBA and RAA together with the amount owing, in net, from the District Court proceedings as well as the costs of the proceedings before Button J and the estimated costs of the appeal. Upon those calculations, the equity held in the properties by the plaintiffs amounted to $166,000. However, the second defendant contended that, on Ms Warring's evidence, the equity was considerably less due to the falling value of the properties since the valuations were conducted. I will return to that issue.
14. On 3 March 2016, the plaintiffs filed a notice of motion to stay and/or invalidate the first enforcement action taken by GFH. According to Ms Binney's affidavit, GFH consented to the aforementioned garnishee orders and writs for the levy of property (the writ had been sought at the same time as the garnishee orders in February 2016) be stayed for commercial reasons and without admission (it appears from the hand written consent orders dated 22 March 2016, attached to her affidavit, that the writ of levy and any garnishee orders "then in effect" were set aside). As noted in the background in the judgment of Button J, the amount recovered by GFH prior to those consent orders was the amount of $2,085.85, which was paid directly to GFH on 7 March 2016 pursuant to the garnishee issued to Suncorp Metway Bank on or about 18 February 2016. Those consent orders did not, by their terms, require the GFH to return those funds to the plaintiffs and this step was not taken.
15. On 10 July 2017, garnishees were issued, with respect to a number of entities; although no funds have been obtained from the above issued garnishees, save, it would appear, for the garnishee of the second plaintiff's wages. No property has been levied to date pursuant to the writ for levy for property issued in the District Court proceedings on 11 July 2017.
16. The garnishee order mentioned in the previous paragraph that was issued to second plaintiff's employer thereby garnisheed the second plaintiff's wages obtained from her employment at Lismore Base Hospital. The second plaintiff gave evidence that the plaintiffs relied upon that income to meet their day to day needs and expenses. The evidence was also given that the plaintiffs had "a small amount of income" from tenants who lived in houses situated on the properties. Again, I will return to these issues.

The Supreme Court Judgment

1. The proceedings before Button J were commenced by way of summons on 20 December 2016. In those proceedings, the plaintiffs sought judicial review of a certificate issued by the first defendant pursuant to s 11(1) of the Farm Debt Mediation Act 1994 (NSW) ("the Act"). His Honour dismissed that summons and in the conclusion to his judgment gave a summary of his reasons for judgment as follows (at [37]-[39]): [37] First, the certificate is not unlawful because it is not contrary to the Act. What is being enforced is a judgment of the District Court of New South Wales, not a farm mortgage. [38] Secondly, the plaintiffs acquiesced in the process now sought to be impugned. [39] Thirdly, ordering further mediation of this matter, in light of its history, would be futile.
2. The plaintiffs' focus in these proceedings (in addressing the arguability of their appeal from the judgment) was solely upon the first reason given by his Honour, notwithstanding that the draft notice of appeal annexed to Mr McKell's affidavit of 1 August 2017, which sought to challenge each of the three bases relied upon by his Honour in dismissing the summons.
3. As to the first reason, his Honour discussed the judgments of Heydon J of the High Court of Australia in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311; [2012] HCA 4 ("Waller") and the decision the decision of Manousaridis J of the Federal Circuit Court in Heywood v Sharpe (No 2) [2015] FCCA 355 ("Sharpe No 2") .
4. I extract the parts of his Honour's judgment which elaborate upon the first reason given, as follows (at [21]-[31]): [21] I respectfully do not accept the basal proposition of counsel for the plaintiffs. In other words, I do not accept that, in enforcing the orders of the District Court on 11 November 2015, GFH was enforcing a "farm mortgage" as defined in the Act. [22] As can be seen from the terms of the orders actually made by the Court, the charge placed over certain property of the plaintiffs was no part of the judgment. Rather, it was merely an event contemporaneous with the signing of the short minutes of order, many months beforehand in October 2014, that led to the making of orders by the Court in November 2015. [23] In other words, I respectfully consider that the basal proposition of counsel for the plaintiffs erroneously conflates two entirely separate events: on the one hand, the entry of certain orders by the District Court; and, on the other hand, a non-curial event that occurred, months before, between the parties. [24] It is true that, in Waller v Hargraves, Heydon J (with the agreement of all other justices of the High Court of Australia) spoke of the fact that, in certain circumstances, enforcement of a loan (which does not, of itself, attract the provisions of the Act) will be so inextricably bound up with enforcement of a related mortgage (which does attract the provisions of the Act) as to itself attract the Act. But that cannot be the case here: as I have said, orders of courts and events relating to them that form part of the context of the making of these orders are, to my mind, two entirely different things. [25] Separately, as I have said, reliance was placed by counsel for the plaintiffs upon the judgment of Manousaridis J in Sharpe No. 2. In particular, it was said that the following portion of that judgment supports the submissions of the plaintiffs: [59] …On the proper construction of the Consent Orders, Mr Sharpe [the debtor] was obliged to pay the Judgment debt on 16 November 2012, but only if Mr Sharpe did not tender payment to Mr Heywood [the creditor] of $60,000 by 15 October 2012 or $70,000 by 15 November 2012. [60] The arrangement created by the Consent Orders is in substance the same as the arrangement that was created by the mortgage and third loan agreement that were considered in Waller. As with the farmer in Waller, Mr Sharpe agreed to pay a certain amount of money by a certain day - $90,000 on 16 November 2012, unless Mr Sharpe paid $60,000 by 15 October 2012 or $70,000 by 15 November 2012. As with the farmer in Waller, Mr Sharpe also gave a farm property as security for the payment of that amount. And, finally, like the mortgage in Waller, the Consent Orders in effect provided that if Mr Sharpe were not to make the payment by the specified day - 16 November 2012, unless Mr Sharpe paid $60,000 by 15 October 2012 or $70,000 by 15 November 2012 - the creditor, Mr Heywood, would have the right to sell Mr Sharpe's farm property and use the proceeds of sale (subject to prior encumbrances) to pay the Judgment. It follows, therefore, that the relevant "farm mortgage" in the case before me is the express and implied terms of the agreement constituted by the Consent Orders. [26] A number of things may be respectfully said about that judgment. [27] The first is that, although the judgment has a persuasive force, a judge of the Federal Circuit Court does not sit above me in the judicial hierarchy, and accordingly his Honour's judgment is not strictly binding upon me. [28] The second is that, in Sharpe No. 2, the court orders that were made commanded the payment of a particular sum to the creditor, and explicitly noted the creation of a charge over the land of the debtor farmer to secure the judgment debt. That in turn directly replicated the terms of short minutes that were agreed between the parties on the same day that the court orders were made. The charge noted as securing the monetary judgment for a specific sum was found to be a farm mortgage as defined by the Act, and it was found to be inextricably linked with the court orders. [29] Here, in contrast, the orders of the District Court say nothing at all about any security that could be characterised as a "farm mortgage." Indeed, they do not even note such a thing: as I have said, they appear verbatim at [11] of this judgment. In other words, one can readily differentiate the court orders in Sharpe No. 2 that founded the analysis of his Honour, and the orders under consideration here. [30] The third is that, if (contrary to my understanding) it truly be the case that his Honour was saying that, in all cases, a security that falls within the Act, and that in some way forms part of the context of the court orders, has the effect that enforcement of these orders thereafter is within the confines of the Act, I would respectfully decline to follow such a determination. [31] In short, I am not satisfied that GFH is enforcing a farm mortgage as defined by the Act. Rather, I consider that GFH is enforcing a judgment debt entered by consent. For that reason, I consider that the Act has no application. The result of that is that non-compliance with the Act provides no basis for impugning the certificate as invalid. That is the primary reason, why, in my view, the application must fail.

The Proposed Appeal

1. A notice of intention to appeal against the judgment was filed on 11 July 2017. As mentioned, the plaintiffs subsequently caused their counsel to prepare a draft notice of appeal.
2. In submissions, counsel for the plaintiffs indicated that he had been advised that a notice of appeal would be filed on 21 September 2017; although no undertakings were given as to the date of filing of the appeal or the prosecution of the appeal. The appeal had not been lodged as at the date of this judgment.

Submissions of the Plaintiffs

1. The plaintiffs relied upon two primary submissions in support of the orders for the stay sought as follows: 1. The plaintiffs have an arguable case on appeal; and 2. An evaluation of the competing interests and balance of convenience between the parties favours the plaintiffs.
2. As to the first contention, Mr A Chen of counsel, who appeared for the plaintiffs, accepted that the orders entered in the District Court proceedings on 11 November 2015 (whereby judgment was entered for GFH) occurred in circumstances where the plaintiff was in default of the Deed. However, it was contended that, contrary to the District Court judgment, the first enforcement action was undertaken with respect to a farm mortgage (as defined in s 4 of the Act) as the consent orders formed part of the Deed. It was irrelevant that the consent orders did not refer to the Deed, as such, because any rights to make a money claim under the consent orders only arose in circumstances where there occurred a breach of the Deed.
3. It followed that mediation resulting in a certificate under s 11 of the Act was required before an enforcement action could be brought with respect to that farm mortgage. As the mediation and resulting certificate did not occur until some six months later, the Act operated to prohibit the enforcement action which thereby became void (s 6 of the Act).
4. The plaintiffs placed reliance upon the judgment of Heydon J in Waller at [66] and [68] in support of these contentions. In particular, it was contended that "if a creditor only pursues his money claim rather than their possession claim it would defeat the purpose of the Act which provides the debtor farmer protection against enforceable actions by creditors without mediation".
5. In this light, the failure by GFH to repay monies received under garnishee orders issued after first enforcement action constituted an abuse of process.
6. The plaintiffs further contended that the second enforcement action was also void because it had been obtained after the issuing of a s 11 certificate which was invalid.
7. As to the question of competing interests and the balance of convenience, the following submissions were advanced by the plaintiffs: 1. There was no prejudice to the defendants as the debt was protected by the Deed, which also provided compensation by way of interest 2. There was considerable prejudice to the plaintiffs because the second enforcement action against the plaintiffs resulted in a garnishee order with respect to the second plaintiff's employer over her wages. This placed the plaintiffs in a very difficult financial position because the orders affected their primary source of income. 3. Permitting the garnishee orders to run against the wages of the second plaintiff will disadvantage the plaintiffs in pursuing their appeal. 4. The concern raised by GFH as to the equity held by the plaintiffs in the properties secured by the Deed was misplaced. On GFH's own calculation there was $166,000 in equity which was more than sufficient to cover the costs incurred by the GFH (noting the $166,000 estimate took into account the costs of running the appeal). Further, the plaintiffs had withdrawn their submissions, which sought to challenge the evidence of the second defendant, with respect to successive valuations that showed a decrease in the value of the properties.

Submissions of the Second Defendant

1. The second defendant divided its written submissions into two parts corresponding to the stay applications with respect to proceedings in this Court and enforcement actions arising out of the District Court judgment. To some extent, part of those submissions lapsed because of the abandonment of the first prayer for relief by the plaintiffs. However, in oral submissions, the contentions effectively merged. It is convenient to summarise the second defendant's submission using their original form to fully expose its contentions although I approach the resolution of this matter having regard to the entirety of those contentions.

District Court Judgment

1. The second defendant contended that the Supreme Court does not have the jurisdiction to stay a judgment of the District Court. In this respect, the second defendant relied upon s 135(1) of the Civil Procedure Act 2005 (NSW) ("the CP Act"): "The court may, by order, give directions with respect to the enforcement of its judgments and orders". It was submitted that, on proper construction of that provision, the use of the words "its" in that sub-section meant this Court did not have power to stay the enforcement of judgments or orders beyond the four walls of its own jurisdiction.
2. In the event the construction proffered by the second defendant was not accepted and the Court considers it has power to entertain the present application in the exercise of a power under s 135 of the CP Act or an inherent power in the Court to stay an execution of a judgment (see Tringali v Stewardson Stubbs & Collett Pty Ltd [1966] 1 NSWR 354 ("Tringali") at 360), the second defendant submitted the Court should not exercise such a discretion to grant a stay for the reasons that follow: 1. As of 25 August 2017, the amount outstanding to the second defendant pursuant to the judgment obtained in the District Court proceedings (excluding the costs of the District Court Proceedings) was $488,097.96. The second defendant's costs in relation to the District Court Proceedings are estimated to be the sum of $50,000.00. 2. The plaintiffs do not dispute that the judgment debt was due and owing to the second defendant. The plaintiffs are simply challenging the manner in which the second defendant can recover the District Court judgment, having regard to the issues surrounding the mediation and the absence of an issue of the s 11 certificate under the Act. In that respect, there can be no prejudice to the plaintiffs if a stay is not granted because the plaintiffs do not dispute that the judgment debt remains owing. The absence of a stay enables enforcement action to recover a debt that the plaintiffs do not dispute. 3. Further, the plaintiffs have not challenged the District Court judgment by way of appeal. The challenge by the plaintiffs with respect to the enforcement action, based upon the absence of mediation, did not impugn or involve any challenge to the District Court judgment. Nor can the outcome of the intended appeal. 4. The plaintiffs have not explained how it would be appropriate for this Court to stay a judgment of the District Court given by consent in 2015: Alexander v Cambridge Credit Corp Ltd (1985) 2 NSWLR 685 ("Cambridge Credit") at 694. 5. The plaintiffs have only filed an intention to appeal. Filing an intention to appeal and/or filing an appeal does not discharge the onus which the plaintiffs bear to demonstrate a proper basis for a stay of the District Court judgment: Cambridge Credit at 694. The second defendant has been waiting since early 2016 to recover the District Court judgment debt. The stay will simply gain further time for the plaintiffs. 6. In weighing considerations such as the balance of convenience and the competing rights of the plaintiffs and the second defendant, the second defendant submitted: 1. The District Court judgment debt had not been "wholly or substantially paid" with only $2,085.85 having been recovered pursuant to a garnishee issued to Suncorp Metway Bank on or about 18 February 2016. 2. There is little risk that the second defendant will be unable to repay the money without difficulty or delay if the appeal were to succeed. This was supported by the large amount owing to the second defendant: see Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445 and TCN Channel 9 Pty Ltd v Antoniadis (No 2) (1999) 48 NSWLR 381 at [15] and [16]. 3. The second defendant has incurred considerable costs in prosecuting the District Court proceedings and in defending the plaintiffs' summons for judicial review in the Supreme Court proceedings. 4. The plaintiffs' present liability for amounts owing to the CBA and the first defendant (both of which are secured by mortgages over the plaintiffs' properties), together with the costs of the proceedings between the plaintiffs and the CBA may cause the plaintiffs' assets to be dissipated if a stay is granted and subsequently deny the second defendant "the fruits of its District Court Judgment." 1. The plaintiffs have not provided any undertaking as to security for the second defendant's costs or for the amount of the District Court Judgment. The second defendant's monetary sum awarded under the District Court proceedings, therefore, is presently not protected and there is no guaranteed means to compensate the second defendant for the delays in recovery.

Supreme Court Proceedings

1. Once the second defendant costs of the appeal are factored in, the plaintiffs' exposure to liability to the second defendant's judgment and costs increases to about $588,000. On the basis of the evidence of Ms Warring taking the best view of the plaintiffs' position, the equity in the plaintiffs' land would be potentially reduced to $166,000. However, the valuations relied upon are disputed by the second defendant which would thereby significantly reduce the amount of equity.
2. The valuation certificates for the properties show decreased gross land values from 2010/11 to 2016. This further reduces the equity available from the plaintiffs' land holdings.
3. There is real doubt about the plaintiffs' contentions that they have sufficient equity in their properties to cover the judgment debt.
4. Further, separate proceedings before the Court involving the CBA and the plaintiffs is further drawing upon the plaintiffs' resources.
5. In respect of the plaintiffs continued litigation with CBA and the intended appeal, the second defendant contended this would result in further dissipation of the plaintiffs' assets and put at risk the ability of the second defendant to recover the fruits of the District Court judgment. If the CBA recovered the properties by possession as the registered mortgagee, there would be a negligible value in the properties.
6. It was submitted that the delays associated with the anticipated appeal of the Supreme Court judgment warrants a preliminary assessment of whether the plaintiffs have an arguable case on the appeal.
7. The second defendant put the following submissions in support of a contention that there was limited prospects of success of the appeal, having regard to the judgment in Waller, because: 1. Ms Waller contended that the Act had not been complied with because the certificate issued, with respect to claims for possession and money claims, related to a farm debt created by a First Loan Agreement and not the subsequent loan agreements known as Second and Third Loan Agreements. The enforcement proceedings, which she contested, concerned the Third Loan Agreement to which no mediation had taken place and no s11(1) certificate had been issued: Waller at [40] 2. The respondent to the proceedings sought to file a contention that the certificate concerned all of the loan agreements but that was rejected, resulting in the outcome that the respondent was "left with the fundamental problem that the certificate granted… did not cover the very loan agreement that they sued upon". 3. The mortgage in Waller was an "all monies mortgage" which meant that it applied to all agreements. 4. The District Court judgment created separate and independent obligations that were not inextricably linked to the Deed. The enforcement action in Waller was the "very application for judgment" whereas here the second defendant sought to enforce a judgment which had already been made and was not challenged. 5. The plaintiffs do not actually seek to impugn the District Court judgment and there is no dispute that the debt is owing. 6. As to the second enforcement action, the plaintiffs' submissions are circular. If it is put that the certificate issued under s 11 was invalid because an enforcement action occurred before it was issued, then there would be no prospect of ever enforcing the judgment debt.
8. In the absence of any appeal against the District Court judgment there is no basis upon which the judgment can be properly stayed.
9. The best result that the plaintiffs can achieve on the appeal, it was contended, is the quashing of the certificate issued under the Act and a delay in enforcement action unless and until a mediation occurs.
10. As to the effect of the garnishee orders upon the second plaintiff's income, there is an absence of evidence as to what the real income of the plaintiffs is. There is also a second, unquantified income from tenants. There is no evidence of the income of the first plaintiff.

CONSIDERATION

1. The second defendant contended that this Court lacked power to grant a stay with respect to the enforcement of the District Court judgment (and the garnishee orders and writ of levy of the property issued by the District Court). It was submitted that s 135 of the the CP Act, was ineffective for that purpose pursuant to sub-ss (1) and (2)(c), which, it was contended, confined the Court to giving directions, by order, only with respect to the enforcement of judgments and orders of this Court. The second defendant, did, however refer to the prospect that this Court may have an inherent power to stay the execution of a judgment or order: Tringali at 360.
2. The plaintiffs made no submissions as to the scope of the Court's power to grant the stay orders sought by them.
3. As the plaintiffs abandoned the first prayer for relief in the notice of motion, there would not appear to be any scope for the operation of r 51.44 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") in the present context. Whilst that rule has a wide scope, applying to any proceedings in this Court including appellate and review and proceedings: Secretary of the Treasury v Public Service Association & Professional Officers' Association Amalgamated Union of New South Wales [2014] NSWCA 14 ("Secretary of the Treasury") at [14] (per Basten JA), a stay is not sought with respect to any proceedings in this Court. So far as the remaining prayers for relief are directed to either the District Court judgment or enforcement proceedings, brought pursuant to the same (and the consequential issuing of garnishee orders and a writ of levy) there is no appeal or review sought by the plaintiffs (see Secretary of the Treasury at [14] and [16]) within this Court. Likewise, s 67 of CP Act would not seem to be attracted in the present circumstances as no stay was sought with respect to any proceedings before this Court.
4. I consider that second defendant was correct to raise doubts about the operation of s 135(1) in the context of the orders given that that provision appears to confine the powers of the Court to the giving of directions with respect to enforcement, by order, of its own judgments and rulings (this seems to be implicitly recognised by Hallen J in McLeary v Swift [2014] NSWSC 1414 at [56]; see also, in the case of Local Court proceedings, Kitchen Xchange v Formacon Building Services [2014] NSWSC 1602 at [60] (per McDougall J).
5. No submission was made by the second defendant as to the scope of the powers of the Court under s 23 of the Supreme Court Act 1970 (NSW) although references were made to the judgment of the NSW Court of Appeal in Tringali (at 360) where the inherent power of this Court to stay "an action" was said to be a "power which is exercisable in any situation where the requirements of justice demands it".
6. Given the view I have formed, that the stay in this matter should be refused, it is unnecessary to finally resolve the question of power raised by the second defendant. However, the power to make the orders (after the abandonment of the first prayer for relief) is not without doubt given there is no appeal from or judicial review of the District Court judgment or orders. It would seem that, if such a power exists, it resides in the inherent or supervisory powers of the Court.
7. I will turn then to express my reasons for refusing the stay application.
8. The underlying principle that governs the exercise of the Court's discretion to grant a stay is that an applicant must demonstrate a proper case or reason to warrant the exercise of discretion in the applicant's favour: Cambridge Credit at 694 and Chen v Lym International; Chen v Marcolongo [2009] NSWCA 121("Chen") at [12] (per Beazley JA).
9. The first limb of the plaintiffs' contention, in favour of the application for a stay was that there existed an arguable case on the appeal. The second defendant submitted, in essence, that the prospects of success of the appeal were negligible.
10. The Court will generally not speculate upon an appellant's prospects of success, but may make some preliminary assessment as to whether an appellant has an arguable case in order to exclude an appeal lodged without any real prospect of success. The Court may also consider the competing rights of the parties and the balance of convenience (see Cambridge Credit at 695 and Chen at [15]), factors to which I will return after considering the extent to which the plaintiffs have an arguable case on the proposed appeal.
11. The sole foundation of the plaintiffs' contention as to error in the judgment concerned Button J's rejection of what his Honour described as the plaintiff's "basal proposition" (at [21]), namely, that the enforcement of the orders under the District Court judgment constituted the enforcement of a farm mortgage. The premise for this argument was that the consent orders "were inextricably linked" to the Deed. As earlier mentioned, reliance was placed upon the judgment of Heydon J in Waller at [66].
12. In this light, some brief preliminary observations should be made about the judgment of Heydon J in Waller before further considering the plaintiffs' contentions in that respect. Those observations are as follows: 1. The fundamental question which arose in Waller was how far the scheme of the Act worked if a certificate was issued with respect to one farm debt but the creditor later wished to take enforcement action in relation to another ([at [29]). 2. Ms Waller purchased a farm which was initially financed with a loan or mortgage. There was then a refinancing which resulted in the original mortgage being discharged. The resultant loan was described in the proceedings as the First Loan Agreement which was secured by a mortgage in favour of the respondents in the proceedings which was described as a Registered First Mortgage. There was no dispute that the Registered First Mortgage read with the First Loan Agreement was a farm mortgage for the purposes of s 4(1) of the Act. 3. Upon the failure to make the necessary payments, the respondent took enforcement action. In the result, a mediation took place as contemplated under the Act which resulted in Ms Waller and the respondent entering into a deed of settlement by which the respondent agreed to increase the advance. The further loan agreement was described as a Second Loan Agreement (at [35]). As a result of further difficulties, the parties executed a further loan agreement known as the Third Loan Agreement (at [36]). 4. As a result of the default under the Third Loan Agreement the respondent brought proceedings in this Court for possession of the farm and judgment for outstanding borrowings. 5. Ms Waller claimed in defence, in those proceedings, that the provisions of the Act had not been complied with because the certificate issued under the mediation related only to the farm debt created by the First Loan Agreement while the proceedings constituted an enforcement action in relation to the Third Loan Agreement with respect to which no mediation had taken place (at [40]). 6. The respondent who had sought to file a notice of contention which was rejected by the Court. By that contention the respondent had wished to argue that the judgment below had been wrong to treat the Second Loan Agreement as discharging the obligations of the First Loan Agreement and the Third Loan Agreement as discharging the obligations under the second (at [43]). 7. Mediation under Pt 2 of the Act can only take place in relation to a "farm debt". The operative provisions of that Part do not apply to mortgages but creditors, namely, a person to whom the farm debt is for a time being owed by a farmer. The definition of a farm debt under s 5(1) of the Act refers to creditors secured under a farm mortgage. A farm mortgage is defined as including any interest in or power over any farm property including obligations of the farmer whether as a debtor or guarantor (at [48]). 8. There is, therefore, a close connection between a farm mortgage in relation to which a creditor desires to takes an enforcement action and any farm debt which it secures. 9. The certificate under s 11 concerns a farm mortgage under which money is owed by a farmer to a creditor, that is, a particular farm debt in respect which a creditor intends to take enforcement action against a farmer (at [51]). A s 11 certificate is "in respect of the farm mortgage concerned" but only because "farm mortgage concerned secures a particular farm debt" (at [51]). There is, therefore, a distinction between the interest in or powers over farm land secured by the farm debt in the mediation and the interests in powers over farm land which the respondent wished to enforce in relation to proceedings. 10. Each of the First, Second and Third Loan Agreements when read with the Registered First Mortgage successively created a distinct interest in and powers over the farm property by Ms Waller securing her obligations as a debtor. Each previous debt had been discharged by the successive loan agreement (at [56]). 11. The respondent argued that, even if the respondent's claim to possession was barred, he had a right to claim a money judgment. This was rejected (at [64]-[68] of the judgment). 12. The enforcement action as defined in s 4(1) of the Act, means not only taking possession of the property but any other action to enforce the mortgage (at [66]). The amended statement of claim brought by the respondent pleaded that it was a term of the First Registered Mortgage that the interest be paid monthly in accordance with, inter alia, the Third Loan Agreement. 13. The same claim pleaded that Ms Waller was obliged under the Registered First Mortgage to pay the principal sum with interest owing. The respondent contended that the claim for a debt was not an enforcement action because it does not involve an enforcement of security over farm property. However, Hayden J found that the better view was that the definition of the enforcement action was wide enough to extend beyond enforcement of the security by taking possession to include reliance on any of the rights in the farm mortgage. His Honour opined that "since the claim to the order for the 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" (at [66]). 14. His Honour held that it followed that an action to obtain a money judgment after the commencement of the Act is an "enforcement action to ensure the mortgage". His Honour continued the "structure of the Amended Statement of Claim, and the manner in which the proceedings were conducted, justified the characterisation of the respondent's conduct as action to enforce a mortgage, and hence as enforcement action" (at [66]).
13. It may be gleaned from these extracts that the Act only has reach to creditors secured under a farm mortgage, namely, a person to whom a farm debt is for the time being owed by a farmer. A certificate under s 11 only has operation in relation to the particular farm debt, which the creditor intends to take enforcement action against the farmer.
14. The actual claim pursued by the respondent in Waller was said to constitute an "enforcement action" for the purposes of s 4(1) of the Act because the claim for possession was solely based upon a breach of the money obligations arising under the Registered First Mortgage and the Third Loan Agreement. That is, the Amended Statement of Claim pleaded that it was a term of the Registered First Mortgage the interest was to be paid under the loan agreement. The "inextricable" link referred to by his Honour was between the claim for the order for possession based on the Registered First Mortgage and the claim for the money order.
15. As Button J observed in the judgment, the orders made by the District Court in consequence of the District Court judgment were made entirely upon the basis of the consent orders held in escrow by the solicitors for the second defendant. As his Honour observed, "the charge placed over certain property of the plaintiffs was no part of the judgment. Rather, it was merely an event contemporaneous with the signing of the short minutes of order, many months beforehand in October 2014, that led to the making of the [District Court orders]". No reference was made in the District Court orders to any security or the Deed. Further, the stay in this matter is focused upon the enforcement of the District Court judgment. When viewed in the light of [66] of Heydon J's judgment in Waller, the enforcement actions were not predicated upon either the Deed or the consent orders but the District Court judgment. The enforcement actions were not, therefore, predicated upon a farm mortgage (in this case the Deed).
16. It may be accepted that the annexure of the consent orders to the Deed provided some basis for argument on appeal simpliciter, namely, that there is a relevant link between the consent orders and the Deed. However, that does not escape the difficulty arising from the analysis in the previous paragraph. Some support for the proposed appeal may be found in Sharpe (No 2), although Button J distinguished that judgment (at [29]). His Honour also found that, if the judgment in Sharpe (No 2) stood for the proposition that all cases where a security arises fall within the Act, he would decline to follow it (at [30]).
17. Reliance was also placed by the plaintiffs upon [68] of the judgment of Heydon J in Waller to contend that if a money claim would be supported from a possession claim to bring an enforcement action, the purposes of the Act would be defeated. However, this submission overlooked that the actual money claim in Waller was predicated upon claims for possession based upon the First Registered Mortgage.
18. It is unclear just how the plaintiffs' contention that the second enforcement action may be impacted, particularly when a s 11 certificate was obtained beforehand. If it be said the fact of the first enforcement action produces the irregularity, the argument potentially productive of an irresolvable bar to the enforcement of the judgment debt by the second defendant. In any event, the challenge to the second enforcement action is affected by the same essential difficulties as that of the first to which I have earlier referred.
19. For completeness, it should be noted that the contention by the plaintiffs that they have an arguable case on appeal must be adversely affected by their failure to advance any submissions on this application as to why the second and third reasons given by his Honour for dismissing the summons were erroneous.
20. It follows, in my view, that there must be doubt as to whether the plaintiffs have a reasonably arguable case on appeal. The prospects of the success on appeal are attended by weakness based upon the aforementioned analysis of both the appeal and Waller.
21. A further consideration as to questions of whether the plaintiffs have demonstrated a proper basis for the stay are the issues of balance of convenience and the competing rights of the parties before the Court to which I will now turn.
22. The second defendant has an undisputed judgment debt in its favour resulting from orders made by the District Court in November 2015 by consent. The plaintiffs did not seek to impeach or challenge those orders. There was no appeal or review application.
23. The plaintiffs did not seek to stay the District Court judgment, as such, and fixed their attention, as I have noted, upon the enforcement actions arising from that District Court judgment. The second defendant contended correctly, in my view, that in these circumstances, there must be a real question as to how the plaintiffs might properly obtain a stay of those enforcement actions. The singular answer to that question provided by the plaintiffs was that the certificate of mediation was not provided in advance of the first enforcement action under s 11 of the Act. However, that proposition; was previously answered by Button J in the negative and rests upon an appeal which I have found is attended by doubt as to its prospects for success.
24. Both parties raised the issue of prejudice.
25. The plaintiffs contended there is no prejudice to the second defendant because the debt is protected by the Deed, which also provided for compensation by way of interest. On its face that submission may be accepted but it is considerably weakened by the evidence in these proceedings that there is a real risk the plaintiffs' assets have been and are being dissipated, thereby preventing substantial recovery by the second defendant of the judgment debt. In other words, the grant of a stay in those circumstances raises the real prospect that the second defendant would be denied access to a substantial part of the "fruits of the [District Court] judgment": Cambridge Credit at 695.
26. The plaintiffs' present liability for amounts owing to the CBA and the first defendant (both of which are secured by mortgages over the plaintiffs' property) together with the cost of the proceedings between the plaintiffs and CBA and these proceedings, constitute the evidentiary basis for a finding that such a risk exists. On the basis of Ms Warring's evidence, if allowance is made for these liabilities (and adjustments for the garnishee payment made in the first enforcement action), the net equity in the plaintiffs properties was about $166,000.
27. However, that outcome was the best case scenario for the plaintiffs as it was based upon the valuations obtained by them in 2010 and 2011. The undisputed evidence of Ms Warring is that there has been a significant reduction in the value of the properties from that time to 2016; such that most of the equity found in the properties in the initial calculations by Ms Warring, had been lost or reduced to an insignificant amount. There is no evidence or submission to suggest that there has been some rise in the value of the properties between 2016 and 2017 and, as the second defendant submitted, the separate proceedings before this Court involving the CBA is further drawing on the plaintiffs' resources. There is no security for costs offered by the plaintiffs or for the amount of the District Court judgment.
28. Thus far, I have dealt with this factor raised by the second defendant against the grant of the application in the context of the consideration of prejudice. However, it is also relevant, in a broader sense, to the exercise of the Court's discretion with respect to the application. The risk that if a stay is granted the assets of the plaintiff will be dissipated is a relevant factor warranting the refusal of such an application.
29. The plaintiffs contend there is a considerable prejudice because a second enforcement action resulted in a garnishee order impacting upon the primary source of income for the plaintiffs. It was submitted that this will affect the capacity to pursue the appeal.
30. I accept that the garnishee orders on the wages of the second plaintiff, represents a prejudice to the plaintiffs in favour of the grant of their application. The evidence was that the plaintiffs were unable to meet regular bills "as and when they fall due" or to purchase necessities such as food. There was evidence as to credit card indebtedness and prospects of the credit cards reaching their limits. However, this evidence was given in a particular factual context.
31. The plaintiffs also referred to an unquantified income from tenancies on their properties. The second plaintiff gave evidence that the income is "small" and insufficient to meet weekly costs associated with the properties, although, again, those costs and expenses are not identified or quantified. Evidence was given that the "land" was generating negative income but there is no specification of just how, in accounting terms or otherwise, that position of negative revenue arises. There was no evidence as to the earnings of the first plaintiff, although the evidence of the second plaintiff was that "other than the properties" the second plaintiff's wage is the sole source of income. This gives rise to question as to how income from the properties is treated in the joint affairs of the plaintiffs. Finally, there was evidence that the plaintiffs have joint assets, in land alone of over $3 million.
32. Those concerns do not remove from consideration the prejudice suffered by the plaintiffs, in this respect, but serve to place the prejudice within the perspective of their overall financial position, which was attended by some degree of ambiguity on the evidence.
33. It may be added that I do not consider that the plaintiffs have otherwise demonstrated prejudice. If their appeal was successful then, on the contentions they advance in support of the appeal, as to the first reason given by Button J, any monies obtained through enforcement would be void and recoverable. There was no evidence that the second defendant would not be able to make the full repayment of such monies in a timely way. Nor do I consider the evidence sustains the plaintiffs' submissions that the refusal of the stay orders would deprive them of the opportunity of prosecuting their appeal.
34. I do not consider that there is any abuse of process by the second defendant not refunding monies obtained under garnishee orders arising under the first enforcement action, namely, $2,085.85. As mentioned earlier, it would appear from the hand written consent orders (dated 22 March 2016) that the writ for levy of property issued on 18 February 2016 and any garnishee order which was "still in effect" were set aside. It is apparent from those orders that no order was made to return monies obtained from the garnishee order (issued to Suncorp Metway Bank).
35. It should be noted, in this respect, that therein those consent orders was one order that the GFH was "prohibited from taking any further action to enforce [the District Court judgment] otherwise than in compliance with [the Act] or until further order of the Court". There was no submission by the plaintiffs that the GFH was not now released from that constraint because of the judgment of Button J.
36. There is one final matter requiring consideration in relation to the competing rights of the parties. Whilst the plaintiffs have filed an intention to appeal there is not, as at the date of this judgment, any appeal filed in the proceedings. This fact contributes to the conclusion that the plaintiffs have not discharged an onus upon them to show there is a proper basis to grant their stay application.
37. In my view, the weighing of competing rights of the parties and the balance of convenience lies in the application for a stay being refused.

CONCLUSION

1. I consider that the plaintiffs have not demonstrated a proper case for a stay. In particular, I have considered the limited prospects of success on appeal and the weighing of the competing rights of the parties, and the balance of convenience lies in the refusal of the stay application. That, in my view, represents a fair balancing of the respective positions and interests of the parties.
2. I determine, therefore, that the application for stay is refused. The notice of motion should be dismissed.

ORDERS

1. In all the circumstances, the Court makes the following orders: 1. The notice of motion filed on 2 August 2017 by the plaintiffs is dismissed. 2. The plaintiffs shall pay the costs of the second defendant with respect to that application as agreed or as assessed.

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: 03 October 2017