Sharpe v Heywood

Judgment 1BARRETT JA: I will ask Gleeson JA to give the first judgment. 2GLEESON JA: This is an application by Mr Sharpe, the defendant in the Court below, for leave to appeal against a decision of Neilsen DCJ, dismissing Mr Sharpe's notice of motion seeking to set aside the judgment entered in the proceedings below, in favour of Mr Heywood, the plaintiff. 3In his draft notice of appeal Mr Sharpe relies on two appeal grounds. First, that the primary judge erred in not exercising his discretion under Uniform Civil Procedure Rules r 36.15(1) to set aside the judgement below on the grounds that the judgment was entered irregularly, illegally or against good faith. Secondly, that the primary judge erred in not considering Mr Sharpe's submissions that the enforcement action taken by Mr Heywood (namely, the entry of judgment that was sought to be set aside) was void pursuant to s 6 of the Farm Debt Mediation Act 1994 (the Act). 4The entry of judgment on 6 June 2011 was pursuant to a Consent Order made on 6 June 2011 following the settlement of the proceedings below between Mr Sharpe and Mr Heywood. Those proceedings concerned a dispute relating to a loan agreement entered into between the parties on 26 May 2010. The principal sum under that loan agreement was $25,800. The terms of the loan agreement included security over certain farm machinery and an agreement that in the event of default by Mr Sharpe, he consented to a caveat being lodged by Mr Heywood against a property of Mr Sharpe situated at Dorrigo. 5 Mr Sharpe failed to pay the principal sum and interest pursuant to the loan agreement. On 28 April 2011, Mr Sharpe and Mr Heywood attended a farm debt mediation, which was unsuccessful. Subsequently on 18 July 2011, the creditor, Mr Heywood, obtained a certificate under s 11 of the Act. Mr Heywood then commenced the proceedings below on 15 September 2011 in which he claimed the sum of $107,389.67 which included principal and interest. 6On 31 January 2012, a default judgment was entered against Mr Sharpe in the sum of $132,692.39. 7On 5 April 2012, Mr Sharpe applied by notice of motion to set aside the default judgment. That application came on for hearing before the District Court at Coffs Harbour on 6 June 2012. The parties reached a compromise which was recorded in a document headed "Consent Order", which was signed by both Mr Sharpe and Mr Heywood and their legal representatives. Orders were made on that day by Murrell DCJ in the following terms: "1 The Judgment entered by default on 31 January 2012 is set aside. 2 Judgment for the Plaintiff in the amount of $90,000.00. 3 Interest is payable on so much of the Judgment as is from time to time unpaid at the prescribed rate as from 16 November 2012. 4 No order as to costs. AND THE COURT NOTES 1. The Plaintiff will accept the sum of $60,000.00 in full satisfaction of the Judgment if paid on or before 15 October 2012. 2. The Plaintiff will accept $70,000,00 in full satisfaction of the judgment if paid on or before 15 November 2012. 3. The Defendant will discontinue the proceedings in the Federal Magistrates Court on or before 18 June 2012. 4. The Plaintiff undertakes to take no further action in relation to the Defendant's non-compliance with the Bankruptcy Notice served on 15 March 2012. 5. The Plaintiff undertakes not to seek the issue of a bankruptcy notice in relation to the Judgment unless and until the Judgment remains unsatisfied as at 16 November 2012. 6. The Defendant charges the land and consents to the lodgement of Caveats on the properties located at "Campbells Hill" 485 Rimbanda Road, Woolbrook, NSW, being all of the land in Folio Identifier 2/567241 and Folio Identifier 3/206327, as security for the Defendant's obligation to pay the Judgment debt. 7. The Defendant undertakes not to seek a lapsing notice in relation to the Caveat and not to make an application to the Supreme Court for removal of the Caveat unless and until the Judgement is satisfied in accordance with the terms of this agreement. 8. The Plaintiff agrees to lodge a withdrawal of caveat form within 7 days after the Judgment is satisfied in accordance with the terms of this agreement. 9. The Plaintiff undertakes not to take any enforcement action in respect of the Judgement unless the Judgment remains unsatisfied as at 16 November 2012. 10. The Defendant undertakes not to seek a stay of enforcement of the Judgment except by way of an application under rule 37.2 of the Uniform Civil Procedure Rules to pay the Judgment by instalments on or after 16 November 2012. The Plaintiff reserves his rights to oppose any instalment application and to object to any instalment order. 11. The Plaintiff and the Defendant consent to the above orders and enter the agreement set out in this document as a genuine compromise of the issues between them arising from the loan agreements between the Plaintiff and the Defendant on 17 May 2010 and 26 May 2010, the proceedings in the District Court of NSW at Coffs Harbour, the bankruptcy notice and the Federal Magistrates Court proceedings between them. 12. The Plaintiff and the Defendant each acknowledges that he has received independent legal advice before consenting to the orders and entering the agreement set out in this document." 8On 25 June 2012, Mr Heywood lodged a caveat over the Campbell's Hill property (referred to in [6] of the notation to the Consent Order). 9Mr Sharpe subsequently applied for an order to pay the judgment of $90,000 by instalments. On 19 November 2012 an instalment order was made requiring Mr Sharpe to pay monthly instalments of $5000, the first instalment to be made by 16 December 2012. No instalment payments were made. 10On 3 January 2013, the District Court issued a certificate of judgment in favour of Mr Heywood against Mr Sharpe in the sum of $90,000. Shortly thereafter a bankruptcy notice was issued at the request of Mr Heywood against Mr Sharpe and served on 4 February 2013. Mr Sharpe thereafter applied in the Federal Magistrates Court to set aside the bankruptcy notice. 11On 21 February 2013, Mr Sharpe applied by notice of motion in the District Court at Coffs Harbour to set aside the Consent Order entered on 6 June 2012, and for stay of enforcement of the judgment until the notice of motion was determined. That application was heard by Nielson DCJ on 15 March 2013 and his Honour dismissed the application and ordered Mr Sharpe to pay Mr Heywood's costs of the motion. 12The reasons for judgment of Nielson DCJ record two significant matters. 13First, that it was conceded by Mr Sharpe's counsel that the judgment entered on 6 June 2012 was not obtained contrary to any rule of court; the judgment was not obtained illegally and the judgment was not obtained against good faith. Nor was there any suggestion that the judgment was obtained by fraud. The transcript of the oral argument before Nielson DCJ bears out this statement. 14Secondly, the primary judge did consider Mr Sharpe's argument under the Act, as the judgment below records: "Essentially the argument of the judgment debtor [Mr Sharpe] is that the form of the judgment, notations made by her Honour Judge Murrell, raise a new 'farm debt' within the meaning of the Farm Debt Mediation Act 1994 and therefore further mediation is required before the judgment can be enforced. Bearing in mind that there is no ground on which to grant any of the relief sought however, Mr Roser, to seek to find some accommodation for his client, asked for a stay of execution of the judgment debt until after the final decision of McCallum J in Hargraves Secured Investments Limited v Sharpe the first part of which was decided at [2013] NSWSC 177." 15The transcript of the argument before Nielson DCJ confirms that in addition to conceding that the judgment entered pursuant to the Consent Order on 6 June 2012 had not been entered either irregularly, illegally or against good faith or by fraud, counsel for Mr Sharpe submitted to the primary judge that the Act "has significant consequences so far as the question of enforcement and it's the question of enforcement which we're concerned with". 16Further, the following exchange subsequently occurred: "HIS HONOUR: All right, so no grounds for setting aside the judgment. What your argument really goes to is enforcement? ROSER: Yes your Honour. ... HIS HONOUR: So you want a stay until after that [Hargraves Secured Investments Ltd v Sharpe] is decided? ROSER: Yes your Honour." 17The primary judge delivered an ex tempore judgment giving reasons for dismissal of Mr Sharpe's application to set aside the Consent Order. No application was made by Mr Sharpe for a stay of enforcement of the judgment below. 18As a general proposition, a judgment that has been entered cannot subsequently be challenged, apart from any specific and relevant statutory provision permitting that course. This is particularly so in the case of a judgment entered by consent (Romeo v Papalia [2012] NSWCA 221 at [79] citing Gamser v The Nominal Defendant [1977] HCA 7; (1977) 136 CLR 145 at 154; DJL v The Central Authority [2000] HCA 17; (2000) 201 CLR 226 at 245 [38]). 19However a judgment that has been entered is not unassailable. It may be challenged on the ground that it was obtained by fraud or mistake or by an agreement which is void or voidable. See Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd (1976) 15 ACTR 45 per Brennan J. 20Mr Sharpe does not contend that the Consent Order was obtained by fraud or by mistake or by an agreement which is void or voidable. 21It was accepted on behalf of Mr Sharpe in oral submissions that the Consent Order did not involve a different loan (although described in his written submissions as the second loan agreement) and hence there was no new farm debt. Rather, Mr Sharpe's contention is that the Consent Order records the terms of a new farm mortgage (being the charge given over the Campbell's Hill property to secure the judgment debt), which was orally agreed between the parties on 6 June 2012, that is new and distinct from the earlier farm mortgage entered into between the parties on 26 May 2010. He refers in this regard to the approach taken by the High Court in Waller v Hargraves Secured Investments Ltd [2012] HCA 4, (2012) 245 CLR 311, and submits that the s 11 certificate issued in this case on 8 July 2011, was given only in respect of the earlier loan agreement. 22Mr Sharpe submits that the entry of judgment as contemplated in the Consent Order, is an "enforcement action" under the Act, because one of the "rights" contemplated in the second loan agreement (which is contended to be a farm mortgage) was that judgment was to be entered. The entry of judgment is said to be void pursuant to s 6 of that Act. This is because the creditor, Mr Heywood, had not given Mr Sharpe a notice of intention to take enforcement action as required by s 8 of the Act, and there was no certificate in force under s 11 of the Act in respect of the farm mortgage concerned. 23The expression "enforcement action" in relation to a farm mortgage is defined in s 4 of the Act to mean 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 the action to that end already commenced. It does not include certain specified actions which are not presently relevant. 24In Waller v Hargraves Secured Investments, Heydon J said at [66] that the better view is that the definition of "enforcement action" is wide enough to extend beyond enforcement of the security by taking a possession to include reliance on any of the rights in the farm mortgage. His Honour considered that action to obtain a money judgment after the commencement of the Act is "enforcement action", so long as it is action to enforce the mortgage. 25In Waller v Hargraves Secured Investments, the structure of the pleadings and the manner in which the proceedings were conducted, which included seeking orders for possession of property as well as a money judgment, was considered by Heydon J to be sufficient to justify the characterisation of the creditor's conduct as action to enforce the mortgage and hence as "enforcement action". French CJ, Crennan and Kiefel JJ at [17] agreed with the reasons given by Heydon J, that the proceedings to obtain a money judgment was an action barred by s 8(1) of the Act as much as the seeking of possession. Hayne J at [25] left open the question whether a claim for a money judgment, brought only by reference to a (successive) loan agreement and not the farm mortgage, was "enforcement action" within the meaning of the Act. 26Mr Heywood submits in response that the Consent Order does not constitute a new and distinct farm debt from the earlier loan agreement dated 26 May 2010. Rather the Consent Order simply changed certain items in the earlier loan agreement, in particular: (1)Reducing the amount payable in the judgment from $132,692.39 to $90,000. (2)Reducing the interest rate from 0.666% per day to (or 243.09% per annum) to the rate prescribed by the Court, approximately 9% per annum. (3)Extending the time for Mr Sharpe to pay the judgment sum. (4)Allowed Mr Heywood to lodge a caveat over two properties located at Campbell's Hill. 27Mr Heywood referred to a statement by Heydon J in Waller v Hargraves Secured Investments Limited at [57] that adjustments to a farm debt such as extending the term to pay, reducing the principal or capitalising interest would leave the initial farm debt in place, and thus the Consent Order does not constitute a new farm debt. It was also submitted that similar reasoning was applied by Harrison J in Hargraves Secured Investments Limited v Sharpe [2013] NSWSC 539 at [17]. 28One qualification to applying this reasoning in the present case is that insofar as the obligations under the Consent Order were secured by a new charge over additional property at Campbell's Hill, then the existing s 11 certificate obtained by Mr Heywood before the commencement of the proceedings below, would arguably not apply to any enforcement action, such as by way of sale by a court appointment receiver, in respect of that new charge. 29That however is not what Mr Sharpe complains about. Rather, Mr Sharpe contends that the s 11 certificate which was in force in respect of the proceedings below does not apply to the Consent Order made on 6 June 2012 which set aside the existing default judgment and entered judgment for a lesser sum. 30Mr Sharpe does not contend that the s 11 certificate did not apply in relation to the default judgment entered on 31 January 2012 for a larger sum. Mr Sharpe contends for the somewhat incongruous result that the judgment entered on 6 June 2012 for a lesser sum should be set aside, even though this would result in the default judgment for a larger sum (which was itself set aside by the Consent Order) being restored. 31It is apparent that Mr Sharpe's essential complaint is directed to enforcement of the judgment the subject of the Consent Order. This is on the ground that enforcement action is void, because the Consent Order records a new farm mortgage and any enforcement action would be contrary to s 8 of the Act, there being no s 11 certificate permitting such enforcement action in respect of the asserted new farm mortgage. 32Whatever the merit of this contention, it does not provide the basis for complaint in respect of the orders of the primary judge below dismissing Mr Sharpe's application to set aside the Consent Order made on 6 June 2012. Mr Sharpe's complaint is directed to the consequences of the entry of the Consent Order, in terms of the enforcement action which may flow from the Consent Order, not the circumstances in which the Consent Order was made and entered. 33In my view, it is not fairly arguable that the mere making and entry of the Consent Order constituted an "enforcement action" in relation to a new farm mortgage within the meaning of s 4 of the Act, even assuming that the agreement recorded in [6] of the notation to the Consent Order constituted a new farm mortgage. 34Although not the only factor relevant, an essential prerequisite of a grant of leave to appeal is that the Court be persuaded that the decision appealed from is attended with sufficient doubt to warrant its reconsideration on appeal. The submissions that have been made, both in writing and orally, do not make that out, and for that reason the application for leave to appeal should be dismissed. 35I propose the following orders: (1)The summons for leave to appeal be dismissed. (2)The applicant pay the respondent's costs of the summons. 36BARRETT JA: I am of the same opinion. The orders of the Court are accordingly those proposed by Gleeson JA.