Plaintiffs v Defendants

2 The defendants rely on an affidavit of David Newman, sworn 17 June 2016, and two affidavits of Ashley Collett King, sworn 27 May 2016 and 1 July 2016. The plaintiffs rely on two affidavits of their solicitor, Samuel Armytage, sworn 12 May 2016 and 21 June 2016. They also rely on affidavits filed earlier in the proceeding of Terrence Grundy sworn 7 July 2015 and Garry Zerbe dated 23 June 2015.

3 The plaintiffs' claim that the defendants took enforcement action under a mortgage given by the first plaintiff ('Muranna Park') without complying with the Farm Debt Mediation Act 2011 (Vic) ('FDMA'). The plaintiffs contend that by reason of such non-compliance, the defendants' enforcement action was void and they seek certain declarations and other relief as a consequence.

4 For the reasons which follow, I consider that the FDMA had no application to the enforcement action taken against Muranna Park. The plaintiffs' claims should therefore be dismissed because they have no real prospect of success.

5 In light of this conclusion, it is unnecessary to determine the application by BEN for summary dismissal. However, for completeness, I consider that the plaintiffs' application against BEN should be dismissed by reason that BEN was not a creditor of Muranna Park and took no enforcement action against it within the meaning of the FDMA.

6 By reason of my dismissal of the proceedings against the defendants I will not deal with the defendants' application in respect of the alleged deficiencies in the ASOC.

7 By a summons filed 3 June 2016, the plaintiffs seek production of a document described as the Asset Sale and Purchase Deed ('ASPD'). The ASPD outlines the sale by the first defendant, Southern Mortgages Limited ('Southern'), and other members of its corporate group, of certain assets to BEN. The ASOC relies upon the terms of the ASPD to contend that BEN was a creditor of Muranna Park and had taken the impugned enforcement action.

8 The plaintiffs' legal representatives were initially provided with a redacted version of this document which concealed the identity of certain parties involved in the subject transaction. They were subsequently provided with an unredacted version of the document after each signing confidentiality agreements. The plaintiffs' legal representatives sought to be released from the undertakings contained in the confidentiality agreements so they could consult with their clients about its terms.

9 Because I have dismissed the plaintiffs' claim in the orders I have made, in respect of the summary judgment application, I do not consider it necessary to deal with the plaintiffs' application in respect of the ASPD. However, I am satisfied that the plaintiffs' legal representatives had adequate access to the document to enable them to make appropriate submissions in response to the BEN's application for summary judgment.

10 By an agreement dated 1 May 2002, Southern advanced moneys to Muranna Park for a period of three years under an interest-only loan facility. The loan was secured by a mortgage ('the mortgage') of land granted by Muranna Park to Southern. The mortgage was given on 6 May 2002 over land owned by Muranna Park at Merricks North in Victoria ('the land'). The mortgage incorporated the terms contained in the Memorandum of Common Provisions No AA689 ('the MCP').[1] There were variations to the loan facility in May 2005 and May 2006. The amount advanced increased over time, and, by June 2006, was approximately $2.065 million.

11 In April 2006, Muranna Park granted a fixed and floating charge over all its assets in favour of Southern to further secure the loan facility ('the Southern floating charge').

12 On 15 June 2008, Southern transferred the mortgage to the second defendant, DD & D Securities Limited ('DD & D'), an entity within the same corporate group as Southern.

13 The ledger for the loan facility reveals there were extended periods in which Muranna Park made no payments of interest and those arrears were capitalised.

14 Muranna Park first fell into arrears when it failed to pay interest of $15,045.22 due on 15 November 2007. It made no payments on the loan facility between November 2007 and July 2008.

15 On 12 November 2009, DD & D served Muranna Park with a Notice to Pay pursuant to s 76 of the Transfer of Land Act ('TLA') ('the first notice'). This notice demanded that Muranna Park pay the arrears that had accrued in respect of eight instalments of interest dating back to November 2007. The arrears demanded in the first notice were never paid.

16 On 21 December 2010, DD & D served a second Notice to Pay pursuant to s 76 of the TLA ('the second notice'). The second notice stated that Muranna Park had failed to pay the amounts specified in the first notice and that it had failed to make further payments due in November 2009 and December 2010. Muranna Park failed to remedy the defaults specified in the second notice.

17 There is no mention in the evidence of any written or oral communications between the parties in relation to the first and second notices subsequent to their service. Neither notice was expressly withdrawn or abandoned by DD & D.

18 On 8 December 2011, DD & D served a third Notice to Pay on Muranna Park ('the third notice') demanding payment of the whole amount then owing on the loan facility, which by then amounted to $2,229,021.25.

19 On 27 January 2012, DD & D commenced proceedings in the County Court of Victoria against Muranna Park and the other parties to the loan transaction, seeking possession of the land, damages, interest pursuant to the mortgage and costs. In its amended statement of claim filed in that proceeding, DD & D relied on the failure to comply with the third notice as the foundation for seeking possession of the land.

20 Muranna Park defended the County Court proceeding and was legally represented throughout. It filed a defence, an amended defence and a further amended defence.

21 On 24 July 2012, DD & D made an application for summary judgment against Muranna Park in the County Court proceeding. There were several adjournments of the application and DD & D and Muranna Park filed various documents in the application.

22 On 21 December 2012, Southern, DD & D and BEN entered into the ASPD referred to earlier.

23 On 23 January 2013, the parties entered into terms of settlement to compromise the County Court proceeding. These terms allowed Muranna Park until 15 April 2013 to sell the property, failing which DD & D was entitled to an order for possession of the land.

24 Muranna Park failed to fulfil the terms of settlement. On 31 May 2013, DD & D obtained judgment and orders were made, inter alia, for possession of the land. That order was stayed until 14 June 2013. On the same day that judgment was obtained, receivers were appointed to Muranna Park.

25 The receivers exercised the power of sale of the land pursuant to the mortgage and sale contracts were exchanged on 15 November 2013. The sale of the property settled on 27 February 2014 and the net proceeds paid to DD & D. When the receivers retired on 10 April 2015, a shortfall of approximately $732,050 remained owing to DD & D under the loan facility.

26 It seems clear that in these events, the parties to this proceeding did not consider the terms of the FDMA which require Muranna Park to be given notice of its entitlement to a mediation.

27 Octavius is the third plaintiff. It claims to be a creditor of Muranna Park. The ASOC alleges that by a loan agreement dated 1 October 2009 Octavius made a capital advance of $465,000 and a separate trading facility advance of $45,000 to Muranna Park. High rates of interest were payable under those advances. The loan for $465,000 was chargeable with interest of 25 per cent per annum compounding, increasing to 36 per cent compounding upon default; the trading facility loan had an interest charge of 5 per cent per month compounding, increasing to 6 per cent per month upon default. Octavius claimed to be owed approximately $3.8 million as of March 2015. The advances by Octavius to Muranna Park are secured by a mortgage over the land which ranks behind the mortgage originally held by Southern and assigned to DD & D.

28 The second plaintiff, Mr Zerbe, is a director of Muranna Park. Mr Zerbe signed two personal guarantees: first, in favour of Southern in relation to Muranna Park's liability under the Southern floating charge; and second, to Octavius in respect of the advances described above. He is exposed to liability under the Southern guarantee for the shortfall remaining owing after the auction of the land and to Octavius in respect of the advances it made to Muranna Park.

29 The basis of the plaintiffs' claim against the defendants is that, in taking enforcement action under the mortgage, the defendants contravened the provisions of the FDMA. It is alleged in the ASOC that, in breach of s 8 of the FDMA, no written notice was given to Muranna Park of the intention to take enforcement proceedings under the mortgage. Similarly, there was no notification of the availability of mediation between Muranna Park and the defendants pursuant to the FDMA, or that Muranna Park had 21 days to request such a mediation. No exemption certificate had been issued pursuant to s 16 of the FDMA in respect of these requirements.

30 The plaintiffs contend that by operation of s 6 of the FDMA, the enforcement action was void and the appointment of the receivers was invalid. They claim a number of declarations and orders as a consequence of this.

31 The primary issue for consideration in this application is whether the defendants should be given summary judgment by reason that the plaintiffs' claim does not have a real prospect of succeeding. This will be the case if the FDMA has no application to the action taken to enforce the mortgage.

32 Whether that is so depends upon whether 'enforcement action' under the mortgage had been commenced by the time the FDMA came into operation on 1 December 2011. By that date, Muranna Park had been served with both the first notice and the second notice. If the first notice and the second notice constitute 'enforcement action' within the meaning of that expression in the FDMA, the plaintiffs' claim will have no real prospect of success.

33 Section 62 of the CPA provides:

A defendant in a civil proceeding may apply to the court for summary judgment in the proceeding on the ground that a plaintiff's claim or part of that claim has no real prospect of success.

(1) Subject to section 64, a court may give summary judgment in any civil proceeding if satisfied that a claim, a defence or counterclaim or part of the claim, defence or counterclaim, as the case requires, has no real prospect of success.

(2) A court may give summary judgment in any civil proceeding under subsection (1):

(a) on the application of a plaintiff in a civil proceeding;

(b) on the application of a defendant in a civil proceeding;

(c) on the court's own motion, if satisfied that it is desirable to summarily dispose of the civil proceeding.

Despite anything to the contrary in this Part or any rules of court, a court may order that a civil proceeding proceed to trial if the court is satisfied that, despite there being no real prospect of success the civil proceeding should not be disposed of summarily because -

(a) it is not in the interests of justice to do so; or

(b) the dispute is of such a nature that only a full hearing on the merits is appropriate.

36 The test under s 63 of the CPA is whether the respondent to an application for summary judgment has a 'real' as opposed to a 'fanciful' chance of success.[2] Unlike the position in respect of summary judgment prior to the introduction of the CPA, it is not sufficient for a party to merely have an arguable case. It must have a real prospect of succeeding, although it need not have a probability of succeeding. Its prospects will not be fanciful or unreal even if they are less than 50 per cent. The earlier test under the r 22.03 of the Rules required the Court to be satisfied that a respondent had no prospect of success. However, the Court of Appeal in Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd observed that:[3]

...despite such similarities as there may be between the tests, the test under s 63 of the Civil Procedure Act has been interpreted as a more liberal test which may in some circumstances extend to cases not regarded as sufficiently hopeless to warrant striking out under the Rules.[4]

Upon the present state of authority:

(a) the test for summary judgment under s 63 of the Civil Procedure Act 2010 is whether the respondent to the application for summary judgment has a 'real' as opposed to a 'fanciful' chance of success;

(b) the test is to be applied by reference to its own language and without paraphrase or comparison with the 'hopeless' or 'bound to fail test' essayed in General Steel;

(c) it should be understood, however, that the test is to some degree a more liberal test than the 'hopeless' or 'bound to fail' test essayed in General Steel and, therefore, permits of the possibility that there might be cases, yet to be identified, in which it appears that, although the respondent's case is not hopeless or bound to fail, it does not have a real prospect of success;

(d) at the same time, it must be borne in mind that the power to terminate proceedings summarily should be exercised with caution and thus should not be exercised unless it is clear that there is no real question to be tried; and that is so regardless of whether the application for summary judgment is made on the basis that the pleadings fail to disclose a reasonable cause of action (and the defect cannot be cured by amendment) or on the basis that the action is frivolous or vexatious or an abuse of process or where the application is supported by evidence.

37 In the ASOC, the plaintiffs contend that the enforcement action taken in respect of the mortgage contravened the provisions of ss 6 and 8 of the FDMA and was therefore void.

38 The defendants contend that the FDMA does not apply to the enforcement action in this case, because it commenced before the FDMA came into operation and was not made subject to it by application of the transitional provisions of the FDMA. It is said that the reliance by the plaintiffs on the provisions of the FDMA is misconceived, has no real prospects of success and that the proceeding should be dismissed.

39 In the alternative, contrary to what the plaintiffs' allege, BEN contends that it is not a creditor of Muranna Park, it held no security over the land, that it did not take 'enforcement action,' within the meaning of that expression as defined in the FDMA and therefore no cause of action arises against it. As such, BEN contends that it is not a proper defendant to the proceeding, that the proceeding against it has no real prospects of success and that it ought to be dismissed.

40 Section 1 of the FDMA provides that the purpose of the Act is:

to provide for the efficient and equitable resolution of farm debt disputes by requiring a creditor to provide a farmer with the option to mediate before taking possession of property or other enforcement action under a farm mortgage.

41 Significantly in the present context, the FDMA was assented to on 6 September 2011 and commenced operation on 1 December 2011. It is very similar in its terms to the provisions of the Farm Debt Mediation Act 1994 (NSW). The New South Wales legislation was modelled on legislation which originated in Iowa in the United States of America.[5]

42 Section 6 of the FDMA provides:

Enforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void.

43 Section 8 of the FDMA provides:

Notice of availability of mediation to be given

(1) A creditor must, before taking enforcement action against a farmer under a farm mortgage -

(a) give written notice to the farmer in accordance with subsection (2); and

(b) wait 21 days from the day notice referred to in paragraph (a) has been given to the farmer before taking enforcement action.

(2) A notice under subsection (1) -

(a) must state that the creditor intends to take enforcement action under the farm mortgage; and

(b) must state that, under this Act, mediation between the farmer and the creditor is available; and

(c) must state that the farmer has 21 days from the date the notice was given to request mediation with the creditor in respect of the farm debt; and

(d) may be in the form approved by the Secretary.

(3) This section does not apply to a creditor if an exemption certificate has been issued under section 16 in respect of the farm mortgage.

44 Section 16 of the FDMA provides:

Issue of exemption certificate

(1) This Act (except this Division) does not apply to a creditor who holds a farm mortgage if an exemption certificate is issued under this section in respect of that farm mortgage.

(2) On the application of a creditor in respect of a farm mortgage, the Small Business Commissioner must issue an exemption certificate if -

(a) the farmer is in default under the farm mortgage; and

(b) no prohibition certificate is in force in relation to the farm mortgage; and

(c) the Small Business Commissioner is satisfied that -

(i) having regard to section 17, satisfactory mediation has taken place in respect of the farm debt involved; or

(ii) having regard to section 19(1), the farmer has refused to mediate; or

(iii) at least 3 months have elapsed after a notice was given by the creditor under section 8, or any extended period that has been agreed to in writing by the creditor and farmer, and throughout that period the creditor has attempted to mediate in good faith but no mediation or no satisfactory mediation has taken place.

(3) The Small Business Commissioner may issue an exemption certificate in respect of a farm mortgage to a creditor holding the mortgage if the Commissioner is satisfied that the farm debt has already been satisfactorily mediated under an alternative dispute resolution scheme other than that provided for under Part 3.

(4) If mediation has taken place under this Act, the Small Business Commissioner must have regard to the written report of the mediator who conducted the mediation to determine whether satisfactory mediation has occurred.

(5) An exemption certificate remains in force for the period specified in the certificate that has been calculated in accordance with section 18.

(6) The expiry of an exemption certificate does not affect any proceedings for recovery of a farm debt, or for the exercise or enforcement of any right of the creditor, already taken or commenced by a creditor while the exemption certificate was in force, and any proceedings may be continued and concluded as if the certificate were still in force.

(7) The reference in subsection (6) to the commencement of proceedings does not include a reference to the giving of any statutory enforcement notice or other action taken in order to fulfil a condition precedent to the enforcement of a right otherwise than through proceedings in a court or tribunal.

45 It is common ground that in this instance no notice was given to any of the plaintiffs pursuant to s 8 of the FDMA and nor was an exemption certificate issued under s 16.

The defendants' submissions in relation to the applicability of the FDMA

46 The defendants contend that the FDMA does not apply to the enforcement action taken in respect to the mortgage and therefore the plaintiffs' claim against all the defendants in the ASOC is hopeless and bound to fail. In this regard, they rely on the following transitional provisions in s 37 which provide (emphasis added):

This Act applies to -

(a) a farm debt that is outstanding on the commencement day irrespective of when the farm debt was incurred and in respect of which enforcement action has not commenced; and

(b) a farm debt that is incurred on or after the commencement day. (emphasis added)

47 The dictionary for the FDMA is contained in s 3 and defines a 'farm debt' as meaning a 'debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage'. A 'farmer' means a person (whether an individual person or a corporation) who is solely or principally engaged in a farming operation. A 'farm mortgage' includes, relevantly, 'any interest in, or power over, any farm property securing obligations of the farmer'. 'Farm property' is defined in s 3 as meaning a 'farm or part of a farm, or farm machinery used by a farmer in connection with a farming operation.'

48 Section 3 of the FDMA states that 'enforcement action':

... in relation to a farm mortgage, means taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice, or the continuation of any action to that end already commenced ... [emphasis added]

49 Section 3 defines 'statutory enforcement notice' as including a notice under s 76(1) of the TLA.

50 The defendants accepted (for the purposes of this application only) that the debt owed by Muranna Park was a 'farm debt' which was secured by a 'farm mortgage' and that Muranna Park was a 'farmer'. However, they contend that the alleged 'farm debt' pleaded in the ASOC was incurred before the commencement of the FDMA (i.e. before 1 December 2011) and therefore s 37(b) has no application. This is clearly so.

51 The defendants also contend that the relevant debt was unpaid and was outstanding on the commencement day of the FDMA and that s 37(a) may therefore potentially apply. However, they submit, an outstanding prior debt is only caught by s 37(a) if enforcement action in respect of that 'farm debt' has 'not commenced'. If it had commenced prior to 1 December 2011, then the FDMA has no application.

52 The defendants submit that the evidence demonstrates that the debt the subject of the ASOC fell into arrears and was in default from 15 November 2007 and that default was never remedied.

53 The defendants contend that by service of the first notice on about 12 November 2009, under s 76 of the TLA, DD & D, which by then had taken an assignment of the mortgage from Southern, gave a 'statutory enforcement notice' in respect of the mortgage and 'enforcement action' had therefore 'commenced' within the meaning of the FDMA on that date. As I have observed above, the second notice was also served before the commencement date, on 21 December 2010.

54 As such, the defendants contend that 'enforcement action' had commenced prior to the commencement day of the FDMA and the farm debt is not caught by the transitional provisions in s 37(a). If so, the FDMA does not apply.

55 Counsel for the defendants anticipated the plaintiffs' submission that there had been a waiver of the requirement to comply with the first and second notices by reason that they were not acted upon or became ineffective by capitalisation of the interest arrears demanded in them. Counsel for the defendants submitted that this was not arguable by reason of the relevant case law and the terms of the MCP, in particular clauses 6 and 31(11) which provide, relevantly:

6. (1) [Not relevant]

(2) If any interest payable hereunder is not paid by the due date for payment then without prejudice to the right of the Mortgagee to sue the Mortgagor for such unpaid interest and any other power of the Mortgagee contained in this Mortgage, the Mortgagee may if the Mortgagee thinks fit without notice to the Mortgagor treat such unpaid interest as having been capitalised and in that event such unpaid interest shall be added to and shall form part of the principal moneys secured and as such shall bear interest as provided for herein.

(3) [Not relevant]

Notwithstanding any rule of law or equity to the contrary -

(i) no indulgence granted by the Mortgagee to the Mortgagor or failure of the Mortgagee to take action in respect of any breach or default in the performance by the Mortgagor of the Mortgagor's obligations hereunder shall constitute a waiver of all or any of the provisions of this Mortgage with respect to any subsequent or continuing breach or default;

(ii) the failure of the Mortgagee to exercise any power or discretion given to it by this Mortgage shall not, unless agreed by the Mortgagee in writing, constitute a waiver by the Mortgagee of the right of the Mortgagee at any time thereafter to require the Mortgagor to comply strictly with the provisions of this Mortgage.

57 Mr Rubenstein submitted that clause 31(11) is clear in its terms and a waiver argument, by reason of the service of subsequent notices, is not available to the plaintiffs. He also submitted that capitalisation of unpaid interest cannot, on application of the relevant case law and a proper construction of clause 6(2) of the MCP, constitute waiver of the defaults specified in the first and second notices.

58 In response, senior counsel for the plaintiffs, Mr Cawthorn, submitted that the service of the first and second notices did not constitute enforcement action under the mortgage. His submissions in that regard were based on several grounds. He contended that it is at least arguable that the requirement to comply with the first and second notices was waived by the continued acceptance of mortgage payments without further complaint and the capitalisation of outstanding interest. This, he says, has the consequence that the subsequent service of the third notice constituted the commencement of fresh enforcement action.

59 In this regard, he submitted that the evidence is that neither the first notice or second notice were acted on, that DD & D continued to receive and accept payments to discharge the debt and that there were no steps taken to sell the land pursuant to the first notice or second notice. He noted that in the County Court proceedings, no reference was made to the first or second notices to support the summary judgment application. The plaintiffs contend that DD & D's conduct as mortgagee is consistent with it having abandoned its rights under both the first notice and second notice and that it is therefore now estopped from reliance upon those notices.

60 In the plaintiffs' written submissions, it is contended that reliance upon the first notice and the second notice is for the sole purpose of avoiding obligations under the FDMA, which should not be permitted as it offends the 'farmer friendly' purpose of the FDMA. It was also submitted that in contrast to the first two notices, which sought only the payment of arrears to rectify the non-compliance with the covenants of the farm mortgage, the third notice of default was an 'all moneys' claim; the purpose of that demand was quite different to that of the earlier notices.

61 I shall deal with each of these considerations in turn, commencing with the question of waiver of the first and second notices.

62 There is a body of case law dealing with the issue of whether, either by absence of action being taken on the noncompliance with the earlier notices and service of subsequent notices or by capitalisation of interest, there has been waiver of the earlier notices such that there has been an abandonment of enforcement action constituted by service of the earlier notices. Although they are cases in which the Supreme Court of New South Wales (and, on appeal, the High Court) deal with notices given under s 57 of the Real Property Act 1900 (NSW) , I consider they are apposite for application in the Victorian context.

63 In Silkdale Pty Ltd v Long Leys Co Pty Ltd,[6] Young J had to consider, inter alia, whether the service of a notice to pay under New South Wales legislation in 1985 was waived by capitalisation of interest or the service of a fresh notice in 1990. His Honour stated:[7]

[Counsel for the mortgagor] submits that after the notice of 1985 was given, the Bank continued to charge interest and to capitalise the interest. He says that this amounted to an election not to rely on the notice. However, this very point was decided adversely to this contention by Powell J in Sibard Pty Ltd v AGC (Advances) Ltd (1992) 6 BPR 13, 178.

One then has to look at the whole of the conduct between the Bank and Mr Kerr or the defendant from 1985 until 30 June 1990. The question is whether the long delay in taking action on the 1985 notice must have given Mr Kerr or the defendant the impression that the Bank had waived its rights under the notice.

... Once a demand is made which makes the principal due and payable, or once a notice has been given under s 57(2)(b) of the Real Property Act 1900 (NSW), the rights of the parties change. The parties cannot be put back to their former position by mere withdrawal of the notice, Stanley v Wilde [1899] 1 Ch 747. Thus, unless there is conduct on the part of the mortgagee which shows that the mortgagee does not intend to rely on any breach contained in the notice or acquiescence by both parties in resuming their former positions, the notice will continue to govern the parties' relationship, Morton v Suncorp Finance Ltd (1987) 8 NSWLR 325, 336.

In the instant case, I would find as a fact that the plaintiff knew before it issued its 1990 notice, that the earlier notice had been given. This was quite apparent on the Bank file, the plaintiff had its solicitor investigate the file and I have no doubt at all that this fact would have been brought to its attention. However, notwithstanding this, it seems to me that the mere giving of the second notice in the light of the surrounding circumstances of the difficulty that Mr Kerr was perceived to be creating, would not amount to a waiver of the first notice.

... There seems no doubt that in an appropriate case, long delay in enforcing one's rights under a notice may amount to waiver. However, it must be remembered that the law requires that waiver must be clear and unequivocal and that the other party must have altered his position in reliance on it, or at least acted on it, Chitty on Contracts 26th ed para 22-040. There is no suggestion here that Mr Kerr or the defendant in any way made any assumption as to the Bank's conduct setting at nought the notice that it had given in 1985.

Accordingly it does not seem to me that I can find that the Bank waived its rights up to 30 June 1990.

64 In Sibard Pty Ltd v AGC (Advances) Ltd[8] (referred to by Young J in Silkdale), Powell J was considering an application for an injunction by a mortgagor, on the ground that the mortgagee's notice was defective. The monies described as interest in the notice were not interest, but rather had been transformed into capital through the process of capitalisation. The mortgagor argued that once capitalised, there could thereafter be no default in payment of it in its character as interest. In that regard, the mortgage provided:[9]

The lender may in its absolute discretion (and without being obliged to communicate any such election to any person and without thereby waiving any of its rights hereunder) elect any time to capitalise any due but unpaid interest (including interest comprised in an instalment of Principal and Interest), whereupon each amount so capitalised shall be treated as from the date the instalment in question became due as part of the Principal Sum.[10]

65 It will be noticed that the clause under consideration in Sibard is very similar in substance to the terms of clause 6(2) of the MCP.

To support his submission that the sums described in the notice as interest were, in fact, capital, [counsel for the plaintiff] has drawn attention to the judgment of the High Court in Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925 at 935, where the following appears in the judgment of the Court which was delivered by Griffiths CJ:

The learned Judges were of opinion that, apart from the demand, a sufficient default was committed by non-payment of interest on 30 June in pursuance of the covenant and that no demand principal was necessary. We doubt whether the bank's election to treat the interest as capitalised did not amount to a waiver of that default, if it could be waived, but we do not think it necessary to decide the point.

Two things, so [counsel for the plaintiff] would seem to say, flow from that statement, namely, that, once an amount of interest has been capitalised, it has ceased to retain its character as interest; and second, that, once that act of capitalisation has occurred, it is no longer open to the lender to treat the non-payment of interest as a default. This approach is to be contrasted with the approach taken by the High Court in Bank of New South Wales v Brown (as Official Liquidator of Tom the Cheap (WA) Pty Ltd [1983] HCA 1; (1983) 45 ALR 225. In the course of the joint judgment of Mason J (as he then was) and Wilson J, their Honours after referring (at 234) to the appellant's bank's submissions that there was: '...an impressive stream of authority for (the) proposition that on the capitalisation by a bank of unpaid accrued interest on a current overdraft account at regular periods, the unpaid interest loses its character as interest and becomes capital', referring to several decisions of the High Court and Court of Appeal in England continue as follows (at 237):

Lord Macmillan and Lord Porter gave expression to a proposition concerning capitalisation of interest which is implicit in the other speeches. Lord Macmillan said ([1945] 1 AC at 373): 'The unpaid interest never ceases to retain its character as interest although it has from time to time been added to the capital indebtedness and has carried interest in its turn. Lord Porter said (at 379): "Capitalisation means no more than that interest which continues to be interest shall be treated together with the capital sum due is itself interest bearing but does not alter its quality as interest.'

After referring to the submission of Mr Meagher QC (as he then was) in which submission Mr Meagher sought to draw a distinction between capitalisation under a mortgage and capitalisation as between banker and customer, their Honours continued (at 238):

The thrust of this argument is blunted by the reservations expressed by Lord Atkin and Lord Macmillan in Paton and the refusal of Lord Porter and Lord Simonds in Oswald to draw any distinction between capitalisation of interest under a mortgage and capitalisation of interest between banker and customers according to the custom of bankers ... For our part we are much inclined to agree with this view (at 238):

However, in the ultimate analysis, the decision in the present case hinges, as did the decision in Bevan itself, upon the true construction of the relevant statute. True it is that in Bevan reliance seems to have been placed on the proposition that unpaid interest on a running overdraft account, once capitalised according to the practice of bankers, ceases to be interest and becomes capital. But the Lord Chancellor's reliance on this proposition was an inessential element in his conclusion that the statute on its true construction did not prohibit the taking of interest on unpaid interest which had been capitalised, notwithstanding that the result of doing so was in effect to secure the payment of interest at a rate exceeding the prescribed maximum.

It seems to me that, in the present case, the purpose of clause 16 of the loan agreement is to enable interest, for the purpose of earning interest, to be treated as capital rather than to convert interest into capital. If this be so, then, as it seems to me, the challenge to the form of the s 57(2)(b) notice on this ground must fall to the ground. But, even if it be not so, it seems to me that, notwithstanding the criticisms by the Court of Appeal in Websdale v S & JD Investments Pty Ltd (1991) 24 NSWLR 573; (1991) NSW Conv R 55-607 of the approach taken by me in Mir Brothers Projects Pty Ltd v 1924 Pty Ltd [1980] 2 NSWLR 907 it does not follow that this particular notice is invalid.

67 In Bank of New South Wales v Brown,[12] discussed in the above passage of Sibard, the High Court had to consider the question of the characterisation of the capitalised interest and whether it transformed the accrued debt for interest when capitalised into capital. The relevant passages of the judgments of Mason and Wilson JJ are set out above in paragraph [66]. In addition, Gibbs&#16[13]CJ stated:13

When, in accordance with normal banking practice, accrued interest is debited to a customer's current account, and itself bears interest, it may be convenient to say that, as between the banker and the customer, and those who stand in their shoes, the interest is treated as capital. In truth, however, the interest is not converted into capital, and the rights of third parties must be determined on the footing that the interest retains its character as such.

It follows that the character of a debt for interest is not altered when it is capitalised in accordance with what Lord Eldon L.C. in Ex parte Bevan called 'a previous agreement'. It is immaterial whether the previous agreement is to be found in the acceptance of the custom of bankers (whether an express or implied acceptance), in a bill of mortgage or in some other instrument securing a debt owed to a bank. An agreement which merely authorises a bank to add accrued interest to the principal in order that the total sum should be secured or should bear interest does not alter the character of the debt for interest. The total sum may appropriately be described as "principal", but capitalization in this sense is no legal alchemy for changing the character of a debt for interest. If the debt is discharged, whether by amount stated, by payment or by other means, a liability which takes its place will be of a different character. But that is not the present case.

69 In State Bank v Lo,[15] Austin J, following Young J in Silkdale, considered the validity of notices to pay which were served in 1990 under s 57(2)(b) of the Real Property Act 1900 (NSW) in circumstances where subsequent notices were served some three years later. The defendant had contended that the earlier notices had been waived by service of the 1993 notices. Austin J stated:

1. The Bank served further notices under s 57(2)(b) of the Real Property Act in respect of the ... mortgage on or about 4 June 1993 and 19 July 1993. Mr and Mrs Lo submit that the fresh notices constituted a waiver of any demand previously issued, and therefore they say that the Bank had no entitlement to possession of the land in the proceedings. In my opinion, however, there is no factual basis for the waiver claim. As Young J observed in Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414, at 14,425, long delay in enforcing one's rights can amount to waiver, but the waiver must be clear and unequivocal and the other party must have altered his position in reliance on it, or at least acted on it. Those conditions are not satisfied in the present case.
2. Counsel for Mr and Mrs Lo says that the giving of the subsequent notices gave the recipients a further opportunity to comply, and doing this is inconsistent with the proposition that a default already existed. Consequently, by giving the later notices the Bank extinguished the default upon which the possession proceedings were based. But an argument of this kind was considered and rejected by Young J in the Silkdale case at 14,425, where his Honour said:

'[U]nless there is conduct on the part of the mortgagee which shows that the mortgage[e] does not intend to rely on any breach contained in the notice or acquiescence by both parties in resuming their former positions, the notice will continue to govern the parties' relationship'.

There has been no such conduct by the mortgagee in this case.

70 In Morton & Anor v Suncorp Finance Ltd & Anor,[16] the Court of Appeal of the Supreme Court of New South Wales considered the question, inter alia, of whether a mortgagee's statutory power of sale arising under ss 57 and 58 of the Real Property Act 1900 (NSW) ceased to be able to be exercisable because of the subsequent payment of the amount specified in the default notice which gave rise to that right. Mahoney JA observed:[17]

The mortgagors' argument was: The mortgagee relies on a power of sale which arises only because of the notice served on 2 May 1985, ie, a notice based on default in the April and May interest payments; the effect of a subsequent payment and (to use a neutral term) receipt of interest in respect of those two months is that, after that receipt, such a power of sale is no longer available to the mortgagee; and consequently the power of sale which the mortgagee now proposes to exercise is not available.

This argument involves two things: either that the power of sale never arose; or that (though the power of sale arose) it ceased to be exercisable because of the subsequent payment of the amounts default on payment of which gave rise to it.

On the appeal before this Court, Mr Downes QC, for the mortgagors, conceded that reliance could not be placed upon election and based his case solely on waiver. ...

It is accepted that, a power of sale once having arisen, it can come to an end because of the conduct of the mortgagee: see Barns v Queensland National Bank Ltd [1906] HCA 26; (1906) 3 CLR 925. The term "waiver" has, in argument in the present case, been used in the broad sense in which it was used in Barns and cases of a similar kind. The learned judge, in his careful examination of this question, saw the term as including not merely those doctrines which would constitute a waiver in the sense of a release under the general law... but also those principles comprehended by the term 'promissory estoppel'.

In order to consider the application of waiver, in this sense, it is necessary first to examine more closely the facts upon which the mortgagors have in this regard relied. The statutory notice required compliance with its terms by 2 June 1985: upon the principles now established by the Carr decision the mortgagee became then for the first time entitled to exercise that power. The sale did not take place until 12 August 1986. An agreement for sale was made with the second defendant on 13 August 1986. The question to be determined is whether what took place between those dates constitutes relevantly a waiver. In this regard reliance was placed upon two things or a combination of them: the acceptance by the mortgagee of money on 26 June 1985; and the events generally which took place between that date and 12 August 1986.

It was submitted that what the mortgagee did in accepting the payment made on 20 June 1985 constituted such a waiver.

72 After detailing the evidence that the amount demanded in the statutory notice was paid after the expiry of the notice, his Honour stated:[19]

The argument was to the effect that this constituted a waiver of the power that had arisen on or about 2 June 1985. What took place was not, of course, an extension of the time for compliance with the statutory notice. The time had expired and the power of sale had arisen. Therefore, what was argued was that the power of sale, having arisen, was waived.

I do not think that what happened constituted a waiver in the sense to which reference was made in argument. Three things emerge, in my opinion, from a consideration of what passed between Mr Morton and Mr Santer: Mr Santer did not purport, on behalf of the mortgagee, to give up the power of sale; Mr Morton did not think that was what he was doing; and the mortgagors did not suffer any prejudice from the fact that, Mr Santer having said what he did, the mortgagee proceeded to exercise the power of sale.

The mortgagee refrained, for a long time, from exercising the power of sale. It proceeded slowly with the procedure for it. Between the order for possession obtained on 10 September 1985 and the authority for the auction sale given on 8 July 1986 some ten months elapsed. During that period, the mortgagee did not suggest otherwise than that the power of sale remained effective: possession was obviously being taken for the purposes of sale. The mortgagors did not suggest otherwise than that they knew the position.

If subjectively the parties were not in doubt as to the matter, it is necessary to consider whether the facts are such that the law should hold the relations between them to be other than the parties thought them to be. I do not think that it should. There are circumstances in which, notwithstanding the subjective understanding of the parties, what one party does is so inconsistent with the maintenance of a right or a power that conceptually the right or power must be seen to have been lost. But in the present case, I see nothing to that effect. The continuation of a mortgage is not inconsistent with the existence of a power of sale. Nor is the payment of interest pending the exercise of it: a mortgagor is under a continuing obligation to pay notwithstanding preparations for the exercise of a power of sale. And, in my opinion, there is no public interest in holding that a mortgagee may not give indulgences or proceed slowly to a sale provided there be no misunderstanding by or detriment to the mortgagor. In the present case I do not think that there was such.

74 In his submissions on the question of waiver, Mr Cawthorn placed emphasis on the passage of the High Court judgment in Barns v Queensland National Bank Ltd[21] referred to in Sibard which is extracted above, and by Mahoney JA in Morton. There, Griffiths CJ had stated that:[22]

We doubt whether the Bank's election to treat the interest as capitalized did not amount to a waiver of that default, if it could be waived, but we do not think it necessary to decide the point.

I consider that there are very considerable difficulties with reliance on this short passage of Barns to create the foundation for that submission. First, I consider it to be clearly obiter and secondly, as Powell J observes in Sibard, it is at odds with the views of the High Court in Bank of New South Wales v Brown[23] referred to above.

75 In The Mortgagee's Power of Sale[24] the authors observed in respect of waivers of notices to pay as follows:[25]

In determining whether the giving of a second notice by a mortgagee can held to constitute waiver, all the surrounding facts and circumstances will be examined together to see if a waiver can be made out. The waiver must be clear and unequivocal and the other party must have altered their position in reliance on it or at least acted on it. For circumstances where the giving of a second notice by the equitable assignee of a mortgage did not waive the notice given by the first mortgagee see Silkdale Pty Ltd v Long Leys Co Pty Ltd (1995) 7 BPR 14,414. In Gippsreal Pty Ltd v Berreas (SC) (Vic), 26 March 1996, BC9601004, when a notice was accompanied with a statement that no further action would be taken if a mortgagor proceeded with his own sale, it was held not to have been waived.

76 The authorities reviewed above stand quite clearly for the proposition that unless there is evidence of conduct on the part of the mortgagee that demonstrates that there has been an abandonment of the notice, or acquiescence in the resumption of the position which existed prior to the notice, the notice will continue thereafter to govern the parties' relationship. This is so despite the lapse of time and the service of subsequent notices. Any waiver must be clear and unequivocal and there must be evidence that the other party, in this context, Muranna Park, altered its position in reliance on it or acted upon it.

77 The position as to whether capitalisation of interest can amount to waiver in this context is also clear from a review of the relevant case law and in the absence of something more, it will not.

78 I reject the plaintiffs' submission that reliance on the first notice and second notice by the defendants should not be permitted as it offends the 'farmer friendly' purpose of the FDMA. Either the first and second notices constituted enforcement action within the meaning of that expression in the FDMA, so as to take DD & D's action outside of the operation of the FDMA, or it did not. I consider from the foregoing analysis that they did constitute enforcement action.

79 I also do not consider the plaintiffs' submission that the alleged difference in the first two notices (which sought payment of arrears) with the third (which sought the payment of the total amount outstanding) is a relevant difference: all three were statutory enforcement notices under s 76(1) of the TLA and each constituted enforcement action for the purposes of the FDMA.

80 In my view, the mere service of subsequent notices did not amount to a waiver by DD & D of its rights to act on the first notice (or for that matter the second notice). Once it had expired it was available for use as the foundation for a proceeding to take possession of the property under the TLA. The defaults specified in the first notice and the second notice were never remedied or paid. There was no express abandonment of the first notice or the second notice - they were just not acted on. Further, there is no evidence of conduct on DD & D's part which expressly or implicitly indicated an abandonment of the first notice or second notice. The subsequent acceptance by DD & D of payments from Muranna Park in no way, in my view, amounted to a waiver of DD & D's rights. If I had any doubt about the position of the case law in this regard it is dispelled by the clear terms of clause 31(11) of the MCP which provide that no waiver of rights can be regarded as having occurred in this instance.

81 Further, no evidence was adduced by the plaintiffs that they relied upon or acted on the assumption that the defendants had waived or abandoned the earlier notices, nor have they demonstrated that they have suffered any detriment so as to constitute the foundation of some type of estoppel. Significantly, there is no evidence of communications between the parties in the period after service of the first notice or the second notice which points to a clear and unequivocal waiver by DD & D of the earlier notices or a reliance or alteration on Muranna Park's part in its position.

82 The plaintiffs also contend in the alternative that even if enforcement action "bridges" the commencement date of the FDMA by reason of service of the first notice and second notice, it is still void or arguably so. This submission is based on a construction of the definition of 'enforcement action' in s 3, which includes the 'continuation of any action ....already commenced'. It is contended by the plaintiffs that section 37(a) should be construed as reading:

This Act applies to -(a) a farm debt that is outstanding on the commencement day irrespective of when the farm debt was incurred and in respect of which there is a continuation of enforcement action, even if already commenced.

83 It was submitted for the purposes of the present application that this point need only be arguable or have a real prospect of success and that the construction to be given to 'enforcement action,' when read with s 37(a), is a matter for a judge conducting a trial of this proceeding.

84 Counsel's researches revealed no authority of this Court dealing with the interpretation of these provisions of the FDMA. However, Mr Rubenstein, who appeared on behalf of the defendants, referred me to the decision of Judge Kennedy (as she then was) in Almond Land Pty Ltd (in liquidation) v Geoffjoy Enterprises Pty Ltd.[26] One of the issues that her Honour was required to consider in that case was the construction of the definition of 'enforcement action' in s 3 of the FDMA and, in particular, whether the reference to the continuation of enforcement action already commenced extends the ambit of s 37(a).

85 In Almond Land, the defendants, who were indebted to the plaintiff, submitted that the requisite notices for mediation had not been given under the FDMA and as such the plaintiffs' proceeding against them was void pursuant to s 6. The debt in that case had been incurred prior to the commencement date of the FDMA. In the course of her judgment, Judge Kennedy had to consider the construction of the provisions of s 37(a) of the FDMA.

86 The issue for determination was whether 'enforcement action' had commenced in respect of the farm debt. On 15 November 2011, a notice was given to the defendants under the Water Act (which notice was a 'statutory enforcement notice' for the purposes of the FDMA). Her Honour stated:

1. The defendants however submitted that, consistent with the approach of the High Court in Waller v Hargraves Secured Investments Ltd, the concept of 'enforcement action' should be considered as a series of steps. Given the issue of the proceeding was a separate enforcement step/action which had not commenced at the relevant time, the Act still applied.
2. I accept that the concept of 'enforcement action' is broad, as elucidated in Waller. However, the fact that there may be other steps constituting 'enforcement action' taken after the commencement date is not to the point. Provided there has already been enforcement action 'in respect of the [same] farm debt' s 37 does not extend the application of the Act.
3. I also see nothing in Waller which assists the defendants. In that case, the High Court was concerned with similar provisions contained in the New South Wales Act. It was held that a creditor was precluded from taking enforcement action where, following a mediation, a settlement agreement was reached by which the existing farm debt was discharged and a new debt created. A further loan was also subsequently agreed on revised terms. The creditor failed because there had been no mediation and certificate in respect of the new debt.
4. In this case there is no issue of fresh debts warranting further mediation. Instead, as at the commencement day, enforcement action had already commenced in respect of the (same) debt the subject of the current proceeding.
5. The Act is clear as to the circumstances in which its provision should be extended to farm debts incurred prior to its commencement. A statute ought generally not apply to events that have already occurred so as to affect rights unless the intention appears with reasonable certainty. The ordinary meaning of s 37(a) suggests that the Act does not apply to farm debts incurred prior to 1 December 2011 if any enforcement action had already commenced in relation to that debt. Such enforcement action had occurred in this case constituted by the service of the notice of 15 November 2011.
6. It follows that s 37(b) does not apply, with the result that the Act does not apply to the debt the subject of the current proceeding.

87 I agree with her Honour's construction of s 37(a), the conclusion that the FDMA does not apply to farm debts incurred prior to 1 December 2011 if any enforcement action had already commenced in relation to that debt, and the view that the existence of other steps constituting 'enforcement action' taken after the commencement date is not to the point.

88 I reject the plaintiffs' submissions in this regard. I do not consider that the construction of s 37(a) advocated by the plaintiffs is open or arguable. There is no reason to construe s 37(a) in the way submitted and it is at odds with an ordinary or natural construction of the sub-section.

89 By reason of the foregoing analysis, I do not consider that the FDMA applied to the enforcement of the mortgage and other action taken against Muranna Park. I consider that the plaintiffs' claim has no real prospects of success and should be dismissed.

90 Further, on an application of s 64 of the CPA, there are in my view no features of the plaintiffs' claim which would warrant the matter proceeding to trial in the interests of justice; nor do I consider that a trial of the merits is appropriate having regard to the nature of the dispute between the parties.

91 Because of the conclusion that I have reached in relation to the application for summary dismissal of the plaintiffs' claims it is not necessary to deal with the application by BEN for summary dismissal. However, for completeness, I consider that the case against BEN should be summarily dismissed because no cause of action arises against it.

92 The plaintiffs' ASOC alleges that BEN 'acquired the loan book of Southern Financial Group' and became a creditor of Muranna Park and that certain steps alleged to have been taken by all the defendants, including the appointment of the receivers, were taken in breach of the FDMA.

93 The plaintiffs' claim against BEN depends upon it being established that BEN became a creditor of Muranna Park under the terms of the ASPD and that it proceeded to take 'enforcement action' which should be declared void under the FDMA.

94 BEN submits that it is not a 'creditor' of Muranna Park within the meaning of the FDMA, that it held no security over its assets, that it has not taken enforcement action under the FDMA and that the claim against it should be summarily dismissed.

95 Section 3 of the FDMA defines a 'creditor' as a 'person to whom a farm debt is for the time being owed by a farmer.' 'Farm debt' is defined in s 3 as meaning 'a debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage'.

96 While accepting (for present purposes only) that Muranna Park was a farmer and that the mortgage was a 'farm mortgage' securing a farm debt, counsel for BEN contended that the evidence is clear that the mortgage was initially entered into between Muranna Park and Southern.[27] On 15 June 2008, Southern transferred the mortgage to DD & D. From that time, DD & D was responsible for the management of the facilities which included pursuing enforcement action. DD & D issued the first, second and third notices under s 76 of the TLA and was the plaintiff in the County Court debt recovery proceedings. BEN was not involved at any juncture in the enforcement proceedings. Indeed, it did not have standing to do so, and nor could it have participated in any FDMA mediation of the dispute concerning the mortgage.

97 On 21 December 2012, BEN and entities within the Southern Financial Group, which included Southern and DD & D, entered into the ASPD effecting the sale of identified assets to BEN, which included the Muranna Park transaction.

98 Mr Rubenstein took the Court to the operative provisions of the ASPD and contended that under its terms BEN only acquired ownership of units in a subscheme relating to the mortgage. It did not take an assignment of the mortgage and took no part in the enforcement of the mortgage.

99 The ASPD is a complex commercial instrument. For the purposes of this part of the application it is necessary to have reference to its terms. Although the plaintiffs advisors initially had access only to a redacted version of the ASPD for the purposes of their submissions, for reasons outlined earlier, I do not consider that this impeded their ability to make proper submissions on the present issue under consideration as the redactions were minor and not material in the present context. They were ultimately given access to an unredacted version of the document upon giving undertakings as to confidentiality.

100 There are several parties to the ASPD, including Southern (referred to in the ASPD as 'SML'), DD & D, and BEN. Other parties include Southern Financial Group Pty Ltd ('SFG') and Southern Finance Limited ('SFL').

101 The recitals record that DD & D, in its capacity as the responsible entity of a managed investment scheme called the Dwyers Scheme, is the legal owner of the 'Nominated Dwyer's Loans'.

102 The 'Nominated Dwyer's Loans' is defined as meaning four loans which were subschemes in the Dwyer's Scheme. The mortgage is not identified as one of the Nominated Dwyer's Loans. The designated number for the Muranna Park loan, 80014, which appears in paragraph 8.13 of the redacted version of the ASPD,[28] is not one of the sub-scheme account numbers appearing in the redacted table identifying the borrowers under the definition of Nominated Dwyer's loans.

103 Under the terms of the ASPD, the Nominated Dwyer's loans were assigned to BEN but those that were not Nominated Dwyer's loans were not. Under clause 2.1(b) it is provided that:

SFG, SFL, SFP and SML [i.e. Southern] agree to sell and BEN agrees to purchase all of SFL's, SFP's and SML's (as the case may be) right, title and interest, both present and future, in and to the Sale Assets (other than those the subject of clause 2.1(a)) free from any security interest on the terms set out in this deed.

104 'Sale assets' is defined as meaning, inter alia, the SFL assets, SFP assets, SML assets and Sale Asset Records. 'SML's Assets' is simply defined as meaning a dollar figure considerably less than the Muranna Park loan. Clause 2.4 of the ASPD makes provision for BEN electing to acquire the Nominated Dwyer's loans but, as noted, the mortgage is not one of the four Nominated Dwyer's Loans. Instead, BEN acquired units in the sub-scheme which held the mortgage.

105 Mr Rubenstein explained that as the mortgage was not assigned to BEN and the power to enforce it was with DD & D, BEN required a means under the ASPD to monitor and control how DD & D and Southern dealt with the Muranna Park transaction, because it had now acquired units in the sub-scheme which owned the mortgage and legal proceedings were on foot at the time of the agreement. For this reason, Mr Rubenstein contended that clause 8.13 was included in the ASPD, which provides as follows:

Muranna Park undertaking

No SF [Southern Financial] group member may take any step in respect of a settlement, waiver or compromise in relation to the loan granted by DD & D Securities to Muranna Park Pty Ltd (account No 81104) without BEN's consent.

106 Mr Rubenstein submitted, and I agree, that this provision in the ASPD did not result in BEN having power to 'enforce' the mortgage in any sense. The evidence in this regard adduced by the defendant is contained at page 44 of in the first affidavit of Mr King, where he makes reference to the ASPD. He explains[29] that all DD & D loans were 'Dwyer's loans' but that the Muranna Park facility was not a 'Nominated Dwyer's Loan' that BEN was entitled to acquire. While under the ASPD, BEN only acquired units in a sub-scheme that was entitled to the benefit of the Muranna Park facility and had not taken an assignment of the mortgage, BEN still required the comfort of the undertaking contained in clause 8.13. This enabled BEN to monitor how DD & D and Southern dealt with the mortgage as legal proceedings were on foot by the time the ASPD was entered into. Mr King states that at no time was BEN a creditor of Muranna Park and was not entitled to enforce the Muranna Park mortgage or the Muranna Park charge. All enforcement steps were taken by DD & D and Southern under the mortgage and the charge.

107 The plaintiffs also submitted that the effect of the ASPD was to equitably transfer the mortgage to BEN. This submission was based on the contention that the effect of clause 8.13 was to make BEN a creditor for the purpose of the ASPD. The plaintiffs submitted that at the least there appears to have been an equitable assignment of the mortgage to Bendigo Bank however I consider that the terms of the ASPD provide a clear carve out of the mortgage in the way described above. It will be recalled that 'creditor' is defined in s 3 of the FDMA as meaning 'a person to whom a farm debt is for the time being owed by a farmer'. In no sense did Muranna Park owe BEN any monies by reason of the operation of the ASPD. It was said that an explanation was needed but not given as to why in the ASPD granted BEN all the of powers required of a creditor if it had no interest in that loan. In this respect, I find Mr Rubenstein's submissions to be cogent and plausible. This was that by the time that the ASPD was entered into, legal proceedings were on foot in the County Court. Because BEN had acquired units in the sub-scheme which in turn owned the mortgage, cl 8.13 was inserted into the agreement to enable BEN as the owner of the units in the sub-scheme to sign off on any settlement reached in regard to the mortgage. I do not consider that such a right to approve of any such settlement is to confer on BEN with the status of creditor for the purposes of the FDMA.

108 In my view, BEN did not in any sense take enforcement action under the mortgage. The ASPD afforded it no ability to do so. While under the ASPD it acquired an interest in the form of units for the scheme which in turn owned the mortgage and was entitled to recover any income from it, BEN was not the entity which in any sense took action to enforce the mortgage. Clause 8.13 required recourse to BEN in negotiations concerning resolution of the proceeding involving the mortgage but this did not have the effect in my view of implicating BEN in the enforcement action taken. For this reason I consider that the plaintiffs' claim against BEN has no prospects of success and should be summarily dismissed.

109 For the foregoing reasons I will order that the proceeding be summarily dismissed pursuant to s 63 of the CPA and that the plaintiffs pay the defendants' costs of the proceeding including reserved costs.

110 I would ask the parties to submit orders which reflect these reasons.

OCTAVIUS SECURITIES AND INVESTMENTS PTY LTD (ACN 138 228 243)

BENDIGO AND ADELAIDE BANK LIMITED (ACN 068 049 178)

[1] Exhibit 'AK-1' to the affidavit of Ashley Collett King sworn 27 May 2016.

[2] Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2013] VSCA 158; (2013) 42 VR 27, 40 [35] (Warren CJ and Nettle JA) ('Lysaght'); see also Matthews v SPI Electricity Pty Ltd; SPI Electricity Pty Ltd v Utility Services Corporation Limited (Ruling No 2) [2011] VSC 168; (2011) 34 VR 584.

[3] [2013] VSCA 158; (2013) 42 VR 27, 39-40 [32], [35].

[5] See discussion in Varga v Commonwealth Bank of Australia (1996) 7 BPR 97-617 (Young J).

[6] (1995) 2 ACCR 33 ('Silkdale').

[7] Silkdale (1995) 2 ACCR 33, 44 (emphasis added).

[9] (1992) 6 BRP 1317, 13179.

[10] (1992) 6 BPR 13 per Powell J at [16].

[12] [1983] HCA 1; (1983) 151 CLR 514.

[13] [1983] HCA 1; (1983) 151 CLR 514, 523.

[14] [1983] HCA 1; (1983) 151 CLR 514 at 545-6 .

[15] [2000] NSWSC 1191.

[16] (1987) 8 NSWLR 325.

[17] (1987) 8 NSWLR 325, 333.

[18] (1987) 8 NSWLR 325, 336.

[19] (1987) 8 NSWLR 325, 337.

[20] (1987) 8 NSWLR 325, 339.

[21] [1906] HCA 26; (1906) 3 CLR 925 at 935.

[22] [1906] HCA 26; (1906) 3 CLR 925, 935.

[24] Clyde Croft and Jan Johannsson (Butterworths 2008, 2nd ed).

[26] [2014] VCC 196.

[27] Paragraph [10] of the affidavit of Ashley Collett King and Exhibit AK-1 at pages 42-87.