National Australia Bank Limited v Landy Chen-Conway & Anor

National Australia Bank Limited v Landy Chen-Conway & Anor - [2008] NSWSC 448 - NSWSC 2008 case summary — Zoe

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JUDGMENT The proceedings 1 These are proceedings in which the National Australia Bank Ltd seeks judgment for possession of the land referred to in Certificate of Title Folio Identifier 61/755418, known as "Linden", Henry Lawson Drive, Mudgee, NSW (the Linden Property). 2 The defendants, Landy Chen-Conway and David Conway, by mortgage dated 22 December 2003 registered number AA337790 mortgaged the Linden Property to the plaintiff (the Linden Mortgage) (1/17). 3 There is no controversy in these proceedings that the plaintiff and a company of which the defendants were the sole directors and shareholders, and through which they carried on their business, Mudgee Wines Pty Limited (Mudgee Wines), entered into the facilities set out below; that the plaintiff provided to Mudgee Wines the funds contemplated by those facilities; that Mudgee Wines has failed to repay to the plaintiff the amounts owing by it under those facilities; and that Mudgee Wines is thereby seriously in default under those facilities. 4 It follows there could be no serious controversy that the defendants are liable to the plaintiff under a guarantee and indemnity entered into by them on 21 July 2004 in respect of the obligations of Mudgee Wines to the plaintiff (the Guarantee), and also pursuant to the Linden Mortgage. No challenge has been raised by the defendants in these proceedings as to the efficacy of either the Guarantee or the Linden Mortgage. 5 The only substantive issues which the defendants seek to agitate is that a mediation is required, pursuant to the Farm Debt Mediation Act 1994 (NSW) (the Act), as a precondition to the commencement or continuation of these proceedings, or that a certificate issued on 5 December 2005 by the Rural Assistance Authority of New South Wales (the Authority) under section 11 of the Act, certifying that the Act does not apply to the Linden Mortgage (the section 11 Certificate) (2/50) is invalid or ineffective. Factual background 6 The factual background contended for by the Bank is made out on the materials before the court. That background was as follows:

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The object of this Act is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take position of property or other enforcement action under a farm mortgage. 14 Conformably with this statutory object, section 8 of the Act provides that a creditor must not take enforcement action against a farmer in respect of a farm mortgage until at least 21 days have elapsed after the creditor has given notice to the farmer under this section. 15 Section 8(2) provides that the said notice must be in writing in a form approved by the Authority, which informs the farmer of the creditor's intention to take enforcement action in respect of the farm mortgage and of the availability of mediation under the Act in respect of farm debts. Section 8 does not apply if a certificate is in force under section 11 in respect of the farm mortgage concerned (see section 8(3)). 16 The section 8 procedure was invoked by the plaintiff on or about 14 March 2005 when it issued to the defendants the section 8 Notice, as set out above. 17 Section 9 of the Act provides that a farmer to whom notice has been given under section 8 may, within 21 days after the notice was given, notify the creditor that the farmer requests mediation. Section 9(3) provides that if a farmer requests mediation but subsequently refuses to mediate, the Act ceases to apply to the farm mortgage concerned. 18 Again, the procedure contemplated by section 9 of the Act was invoked in the present case: the defendants on or about 24 March 2004, within the relevant 21 day period, caused to be served a notice under section 9 of the Act requesting a mediation. 19 Pursuant to section 10 of the Act, once a farmer has given a creditor a notification in accordance with section 9 requesting mediation, the creditor must not take enforcement action in respect of the farm mortgage concerned unless a certificate is in force under section 11. 20 As noted by Barrett J in Myross (NSW) Pty Limited v Kahlefeldt Securities Pty Limited [2003] NSWSC 138 (at [22]) [See also Cassegrain v Commonwealth Development Bank of Australia Ltd [2003] NSWCA 260 at [28]]:

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The Act's purpose is thus to require a mortgagee to hold his hand on enforcement of the farm mortgage until there has been an opportunity for resolution of differences with respect to the mortgage by mediation and either an arrangement acceptable to the mortgagor and the mortgagee has been reached or the possibility of resolution is seen to be exhausted. Only at that point is the mortgagee free to resort to enforcement action. 25 The section 11 Certificate has now been issued by the Authority. It thereby has the effect contemplated by the Act, namely: the Act does not apply to and, pursuant to section 10, the plaintiff is free to continue with enforcement action under, the Linden Mortgage. 26 The defendants, having had the benefit of legal representation, have elected not to challenge the section 11 Certificate by judicial review: Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252. Accordingly, the section 11 Certificate is and remains valid and effective. 27 As the Bank has contended it is not to the point that the defendants might prefer that the section 11 Certificate had not been issued, or now seek to adopt a course different from that which they pursued in 1995. The approach which the defendants apparently propound is that the Court should go behind, or ignore the effect of, a valid statutory instrument, namely the section 11 Certificate. There is no power in this Court (at least as these proceedings are constituted) to take this approach, and no reasons advanced for the Court doing so even if there was. 28 On any view the proposition that no reasonable administrator in the position of the Authority could have concluded that a section 11 certificate should have been issued is plainly unsustainable (Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 at 256C). 29 In particular, even if the Court could in these proceedings go behind the section 11 Certificate, the Certificate was properly issued in the sense that the elements required by section 11 were fulfilled. 30 Thus, first, pursuant to section 11(1)(c)(iii) a period of three months had elapsed between the giving of the section 8 Notice and the issue of the section 11 Certificate. Secondly, during that period the plaintiff attempted to mediate in good faith. Without going through the facts summarised above exhaustively, the following are of particular relevance in establishing the latter proposition. 31 On 26 May 2005 Mr Fuller telephoned Mr Conway. Mr Fuller's filenote records:

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Ask him to call me back to confirm what is going on (1/45). 38 On 23 August 2005 a telephone conversation took place between Mr Fuller and Mr Conway in which the mediation was again discussed. 39 As the bank has submitted the inference that the plaintiff was at all times willing to mediate in good faith during the period between the section 8 Notice and the issue of the section 11 Certificate is supported by the commercial reality. It was plainly in the plaintiff's interests to prosecute and conclude a mediation under the Act, either to reach an agreed position or to enable it to proceed with enforcement action. It is highly unlikely in these circumstances that the plaintiff was motivated by anything other than a genuine desire to proceed with and finalise the mediation process. 40 In any event, the section 11 Certificate is described on its face as having been issued simply under section 11(1) of the Act. In other words, it would be sufficient if the requirements of section 11(1)(b) had been complied with, namely that the defendants had declined to mediate, including by unreasonably delaying entering into or proceeding with mediation. 41 In the circumstances, this alternative basis for the issue of the section 11 Certificate has also been made out. No explanation is offered by the defendants for their failure to proceed with the mediation, or even to respond to the Authority's letter of 31 October 2005 inviting further submissions. In these circumstances it was plainly reasonable for the Authority to issue the section 11 Certificate. The suggested requirement of "conveyance" or service 42 Ultimately this issue involves a question of statutory construction: does the proper construction of section 11 of the Act imply that a certificate is issued, and effective, on its execution and sealing by the Authority, or when the certificate is subsequently served or "conveyed" to the farmer. 43 In the ordinary course this question is determined by reference to the ordinary natural meaning of the words of the statute, considered in context of the relevant statutory purpose or object: CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 at 408.

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44 I reject the contention that upon its proper construction the reference [to be found in section 11 (1)] to the issue of a certificate that the Act does not apply to the farm mortgage, requires service upon the farmer whose farm debt is intended to be subject to 'such certificate'. Those words are not to be found in section 11 (1). The inclusion of that parameter would permit the farmer to absent himself or herself from being in a position to receive the material communication, hence aborting the statutory scheme. 45 Section 11 of the Act requires only the "issue" of a certificate by the Authority. In contrast to other sections of the Act, there is nothing in section 11 requiring the Authority to convey the certificate to the farmer. 46 In contrast, a number of other sections in the Act make specific provision for the communication or conveyance of a notice or other information from the creditor to the farmer or vice versa, for example: · section 8 specifically requires a creditor to have "given a notice to the farmer" under the section; · section 9 requires that a farmer, wishing to invoke the mediation procedure after the receipt of a section 8 notice, must "notify the creditor in writing that the farmer requests mediation"; · section 9A(1) contemplates that a creditor who receives a request for mediation and wishes either to agree or to decline to mediate may do so "by notice in writing given to the farmer"; · section 10 provides that a creditor must not take enforcement action "once a farmer has given a creditor a notification in accordance with section 9"; · section 11(2)(b) provides that a farmer is presumed to have declined to mediate if the farmer has "indicated in writing to the authority or to the creditor that the farmer does not wish to enter into or proceed with mediation"; and · section 11B provides that a farmer may "serve a written notice on the creditor or the creditor's Australian legal practitioner" rescinding a heads of agreement. 47 In other words, had the legislature intended that a certificate under section 11 would only be effective or operative upon, or in the event of, its notification to or service on the farmer, it could easily have said so. The legislature has deliberately chosen not to require that service of a section 11 certificate is a precondition for its validity. As the Bank has contended, that defendants seek to read words into the Act that are simply not there. 48 The issuing of an instrument by a statutory body is an act by, and internal to, that body. The subsequent notification or service of that instrument to a third party is an entirely separate and distinct step. (to take an example in a different context, Rule 33.2 of the Uniform Civil Procedure Rules enables the "issue" of a subpoena; the separate step of serving a subpoena so issued is regulated by Rule 33.5). 49 Section 11 of the Act regulates the issuing of the certificate (ie, by the Authority); the Act does not make express provision for the subsequent, and independent step of the service or notification of the certificate to the farmer (although in practice this would appear to be carried out by the Authority as a matter of course). 50 Indeed, to the extent that the Act requires a certificate under section 11 to be "conveyed" to anyone it is to the creditor: section 11 requires the certificate to be issued "on the application" of the creditor, and section 11A(5) contemplates the issue of a certificate under section 11 "to a creditor". This is consistent with the fact that such a certificate is to the benefit of a creditor. 51 The foregoing construction of the Act is also consistent with the policy of the Act. That policy and object is to provide the farmer with a fair and reasonable opportunity for mediation prior to the creditor proceeding with enforcement action. Once that opportunity has been exhausted the farmer is taken to have forfeited his or her right or entitlement to mediate. 52 Rather, as was the case here, on the expiry of a three month period after the service of the notice under section 8, provided the creditor has during that period sought to mediate in good faith, the certificate may be issued, and is on and from that time effective as contemplated by the Act. Conclusion 53 The Act, and the mediation proceedings it contemplates, do not give rise to any impediment to these proceedings. 54 The Act expressly contemplates the issue of a certificate under section 11 in circumstances in which no mediation has been concluded, and the section 11 Certificate was properly issued by the Authority. 55 Further, the section 11 Certificate having now been issued, and not having been the subject of any challenge by the defendants through judicial review or otherwise, it therefore has the effect contemplated by the Act, particularly section 10 (which provides, in effect, that a creditor's enforcement action is only postponed prior to the issue of a certificate under section 11). The finding is that the plaintiff can proceed with enforcement action including as contemplated by these proceedings, even absent a mediation. 56 Even if it were now somehow open to go behind the section 11 Certificate, the elements prescribed by section 11 for the issue of a section 11 Certificate were satisfied in the present case, such that any challenge to the section 11 Certificate would fail. Orders 57 The bank has established its entitlement to the relief sought. The orders are:

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