Futility of the appeal
21Section 5(2) of the FDMA provides:
"This Act does not apply in respect of:
(a) a farmer whose property is subject to control under Division 2 of Part X of the Bankruptcy Act 1966 of the Commonwealth, or
(b) a farmer whose property is the subject of a bankruptcy petition presented by any person, or
(c) a farmer, being a corporation, that is an externally administered corporation within the meaning of the Corporations Act 2001 of the Commonwealth."
22On 23 October 2013 Ward and Leeming JJA refused Mr Sharpe leave to appeal from a judgment of Harrison J which in turn had dismissed an application by Mr Sharpe for declaratory relief and other orders relating to enforcement action taken by Hargraves Secured Investments Limited in respect of a judgment entered with Mr Sharpe's consent (Sharpe v Hargraves Secured Investments Ltd [2013] NSWCA 288). At [32] to [33] Ward JA outlined the history to that time of attempts by another creditor, Mr Heywood, to pursue bankruptcy proceedings against Mr Sharpe.
"[32] Finally, by way of background, it is also relevant to note that on 10 July 2013, hence after the dismissal by Harrison J of Mr Sharpe's application and after the issue of the new s 11 certificate, a creditor's petition was filed in the Federal Circuit Court of Australia by a creditor (Mr Heywood), applying for a sequestration order against Mr Sharpe. The act of bankruptcy on which Mr Heywood relies in that petition is Mr Sharpe's failure to comply with a bankruptcy notice served on him on 4 February 2013 in respect of a judgment debt obtained in the District Court in Coffs Harbour. An application by Mr Hargraves for that bankruptcy notice to be set aside was dismissed by the Federal Circuit Court on 25 June 2013. Mr Sharpe has apparently lodged an appeal from the dismissal of that application. (In separate proceedings in this court, Sharpe v Heywood [2013] NSWSCA 192, Mr Sharpe has unsuccessfully sought leave to appeal from a decision dismissing his challenge to the entry of a consent order in favour of Mr Heywood on the basis that the lodgement of the consent order recorded the terms of a new farm mortgage and was enforcement action precluded by the Act.)
[33] The significance of the presentation of a creditor's petition against Mr Sharpe is that s 5(2)(b) of the Farm Debt Mediation Act provides that the Act does not apply in respect of a farmer whose property is the subject of a 'bankruptcy petition presented by any person'. Accordingly, Hargraves submits that, whatever might otherwise be the position in relation to the alleged new farm debt, the Farm Debt Mediation Act does not apply. As will be seen from the discussion later in these reasons, Mr Sharpe contends that s 5(2)(b) should be construed, in effect, as if it applies only where a sequestration order has been made and that it does not apply to the situation where a creditor's petition has been presented."
23Mr Sharpe did not dispute this history. Further, he advised the Court that subsequently he appealed the decision to refuse to set aside Mr Heywood's bankruptcy notice but his appeal was dismissed (Sharpe v Heywood [2013] FCCA 1788). However, Mr Sharpe pointed out that in the course of that judgment Judge Altobelli found, at [16]:
"There is an arguable case, therefore, that a Bankruptcy Notice is enforcement action as defined in s 4(1) of the Farm Debt Mediation Act 1994 on the expansive view adopted by Heydon J [in Waller]."
24Further, Mr Sharpe tendered his filed notice of objection to Mr Heywood's creditor's petition. As best I can ascertain, his grounds of opposition principally involved him seeking to re-agitate the same arguments that he has pursued to date in respect of action taken against him under the Bankruptcy Act 1966 (Cth).
25In Sharpe v Hargraves Ward JA stated at [71]:
"There is no utility in a grant of leave in circumstances where the [FDMA], in my opinion, does not now apply to Mr Hargraves, his property having been the subject of a petition presented in the bankruptcy jurisdiction by Mr Heywood."
26Leeming JA stated, at [74] to [76]
"[74] If leave were granted to appeal from the orders made by Harrison J on 13 May 2013, the appeal would not be confined to the matters in evidence before his Honour, but would include evidence of material matters which have occurred more recently: Supreme Court Act 1970, s 75 A. Those matters include a certificate issued under s 11 of the Farm Debt Mediation Act 1994 on 10 May 2013 (after Harrison J had reserved judgment, although his Honour mentioned the application for the certificate at [22]-[25]), and the creditor's petition subsequently filed by Mr Heywood.
[75] The starting point for considering the strength of Mr Sharpe's arguments, all of which are necessarily based upon the Farm Debt Mediation Act (because he candidly acknowledges his indebtedness and the efficacy of the settlement deed and the consent orders), are the provisions of that Act which limit the circumstances in which it applies. The Act makes enforcement action taken by a creditor to whom this Act applies void: s 6. The Act does not apply in respect of "a farmer whose property is the subject of a bankruptcy petition presented by any person" (s 5(2)(b)), or where a s 11 certificate has issued.
[76] Contrary to Mr Sharpe's submission that s 5(2)(b) only applies once a sequestration order is made, in my opinion the paragraph bears its ordinary meaning. Mr Sharpe pointed to the textual difference between the current and original form of that paragraph. The Farm Debt Mediation Amendment Act 1998 replaced the words "the farmer or the creditor" by the words "any person": Sch 1, item [3]. That amendment does not narrow the scope of the paragraph. Instead, it fends off an argument that the Act only ceases to apply if the bankruptcy petition is presented by the farmer or the particular creditor in question. The amendment makes it clear that it does not matter who the petitioning creditor is (whether it is the creditor threatening enforcement action or some other creditor); if any person has presented a bankruptcy petition, then the Act does not apply. There is good reason for that course being taken. If the Act did not expressly cease to apply where the procedures leading to bankruptcy had been invoked, there would be large questions of whether it was inconsistent with federal law." (emphasis added)
27Unlike the Court of Appeal in Sharpe v Hargraves, if leave were granted in this case I would not be able to consider the further evidence as to the circumstances surrounding the bankruptcy action taken against him, given that the appeal is restricted to a question of law, other than perhaps when considering any question of remittal. However, this is not an appeal but an application for leave to appeal. At the point of considering whether leave to appeal from an interlocutory order should be granted, I certainly can consider the utility of the application.
28Subject to the points next addressed, the circumstance that the FDMA does not now apply in respect of Mr Sharpe has the consequence that, even if his appeal was successful and the Local Court's refusal to set aside the first judgment was itself set aside with the matter either reconsidered by this Court or remitted to the Local Court, the same result would have to ensue. Given the delay and cost incurred by Bailey to get to this point, why should it be visited with more when, on the facts as known at present, no different result can be achieved?
29Mr Sharpe made two related submissions in response to this. First, in his written submissions in reply filed on the day of the hearing, he contended that ss 5(2)(b) of the FDMA is only engaged if the enforcement action constituted by the bringing of the creditor's petition is not itself rendered void by s 6, and that Mr Heywood's actions under the Bankruptcy Act are so void. This contention is inconsistent with the Court of Appeal's approach in Sharpe v Hargraves. Mr Heywood's action has now moved from being enforcement of a judgment to the pursuit of a non-compliance with a bankruptcy notice. Mr Heywood's actions are covered by Federal legislation. As contemplated by Leeming JA in Sharpe v Hargraves at [76], it is difficult, if not impossible, to see how s 6 could possibly operate to render void the operation of a provision of a Federal bankruptcy law in circumstances where it has been found not to attack the debt on which the bankruptcy notice and the creditor's petition are founded.
30These considerations mean that, with respect to the view of Judge Altobelli, in my view the definition of "enforcement action" in s 4(1) is very likely to be construed so as to not to embrace the pursuit of a creditor's petition presumably on the basis that a creditor's petition enforces rights under the Bankruptcy Act by reason of a non-compliance with a bankruptcy notice and does not involve "reliance on any rights in the farm mortgage" (cf Waller at [66] per Heydon J). As I have indicated, were it otherwise then it is likely that a question of direct inconsistency under s 109 of the Constitution would arise.
31Mr Sharpe's second contention was to seek an adjournment of this appeal pending the outcome of the creditor's petition. In effect he contends that it is a matter of unfortunate timing that has led to this challenge to the utility of his appeal being heard while a creditor's petition has been filed against him, and that it may fall away if he successfully opposes that petition. There is some force in this application, but I will not accede to it. To further adjourn the proceedings will only occasion even more delay and cost to Bailey. Further, my assessment of the prospect of his opposition to the creditor's petition is that it has very low, if any, prospects of success. Otherwise, as noted by Leeming JA at [76] of Sharpe v Hargraves, the FDMA contemplates its own operation receding as bankruptcy proceedings are invoked. Needless to say, proceedings under the Bankruptcy Act against Mr Sharpe are now well advanced.
32In these circumstances I refuse leave to appeal. I will hear the parties as to costs.
33At this point the Court orders that:
(1)Leave to appeal be refused;
(2)Plaintiff's summons be dismissed.
[The parties addressed on costs.]
34Mr Mulquiney seeks an order for costs on an indemnity basis. He submits that in effect Mr Sharpe is re-agitating the same point over and over. I can understand why at first glance that appears to be the case. It would appear from the reasons that I have given that Mr Sharpe has been fighting litigation against a number of creditors on a number of fronts and at the heart of his opposition at each point has been the decision in Waller and the proper construction of the FDMA.
35Nevertheless, I am not persuaded that there is anything vexatious about the manner in which he has conducted this appeal. To my mind there are matters of considerable complexity which warranted debate and consideration. I see no reason to depart from the usual basis of making a costs order.
36Accordingly, I order the plaintiff to the pay the defendant's costs on the ordinary basis.