Sharpe v W H Bailey & Sons Pty Ltd

Sharpe v W H Bailey & Sons Pty Ltd - [2014] FCA 921 - FCA 2014 case summary — Zoe

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REASONS FOR JUDGMENT 1 The appellant ("Mr Sharpe") seeks to appeal from a decision of a judge of the Federal Circuit Court of Australia ("FCC"), to refuse to extend time for compliance with a bankruptcy notice: Sharpe v WH Bailey & Sons Pty Ltd [2014] FCCA 402. 2 In essence, the primary judge's reason for his decision was that Mr Sharpe had been unsuccessful in proceedings in the Supreme Court of New South Wales to set aside the judgment in respect of which the bankruptcy notice was issued. 3 In addition, the primary judge said: [2] It also happens that Mr Sharpe has suffered some serious medical problems in the interim, and he says this has delayed his ability to seek leave of the High Court to appeal against the decision of the New South Wales Court of Appeal. This may well be the case, but the general principle that is applied in matters of this type is that whilst the Court is generous about extending time where an appeal is on foot against the primary judgment, this does not extend automatically to applications for leave to appeal to the High Court: Narain v Eurasia (Pacific) Pty Ltd [2010] FCA 1352. [3] I have not seen a copy of the decision of the New South Wales Court of Appeal, but I am sure that it took into account the views expressed by Campbell J that were referred to in my earlier judgment. Noting that a refusal to extend time for compliance with a bankruptcy notice is only the first stage in bankruptcy proceedings, that the debtor still has an opportunity to convince the court at the time of the hearing of the petition that it should be adjourned, I am of the view that it is appropriate at this time to dismiss the application so that the act of bankruptcy will occur if the debtor does not make payment by midnight tonight. 4 The primary judge's reference to the decision of the NSW Court of Appeal should be read as a reference to the decision of Beech-Jones J in Sharpe v WH Bailey & Sons (No 3) [2013] NSWSC 1887, delivered on 16 December 2013. In that case, Beech-Jones J refused to grant Mr Sharpe leave to appeal from a decision of the Local Court of New South Wales to refuse to set aside the judgment upon which the bankruptcy notice is based. 5 The primary judge's reference to views expressed by Campbell J concerns the latter's interlocutory decision in the proceedings determined by Beech-Jones J: Sharpe v WH Bailey [2013] NSWSC 913. In essence, Campbell J had found an arguable case that the Farm Debt Mediation Act 1994 (NSW) ("FDM Act") operated to render void the judgment upon which the bankruptcy notice is based. 6 The primary judge's reference to his earlier judgment concerns Sharpe v WH Bailey & Sons [2013] FCCA 2228, delivered on 18 November 2013. The relevant passage is: [9] … it does appear from the decision of Campbell J, Mr Sharpe has an argument, and if his judgment is set aside he will have an opportunity to negotiate with the creditor through the Farm Debt Mediation Act 1994 provisions some satisfactory method of paying off his obligations. I am particularly influenced by the fact that the appeal is only some three weeks away, and whilst it is probable that any decision on the matter may be reserved it is unlikely that the court will take too long to come to judgment. 7 When the primary judge mentioned that "the appeal is only some three weeks away", he was referring to the hearing of Mr Sharpe's application for leave to appeal that was listed before Beech-Jones J on 16 December 2013. 8 The FDM Act is central to Mr Sharpe's appeal to this Court. That Act is remedial legislation which provides mechanisms conditioning the enforceability of a "farm mortgage" within the meaning of that Act. Section 3 of the FDM Act provides: The object of this Act is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage. 9 Section 8(1) of the FDM Act is particularly relied upon by Mr Sharpe. It provides: A creditor to whom money under a farm mortgage is owed by a farmer must not take enforcement action against the farmer in respect of the farm mortgage until at least 21 days have elapsed after the creditor has given a notice to the farmer under this section. 10 Mr Sharpe's underlying contention is that he should have the benefit of the FDM Act and that any rights of the respondent ("WH Bailey") under the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act") are qualified or negated by Mr Sharpe's rights arising from the FDM Act. Thus, Mr Sharpe's written summary of argument commences: 1. That the Federal Court of Australia may not override the [FDM Act] in respect of "farm debts" falling within the ambit of [the FDM Act]. 11 For the reasons that follow, I accept that the primary judge made errors in exercising his discretion to refuse to extend time for compliance with the bankruptcy notice. In particular, the primary judge apparently failed to take into account that Mr Sharpe's application for review of the Registrar's decision not to set aside the bankruptcy notice ("application for review") had not been determined. However, there are powerful discretionary considerations against granting an extension of time in this case. In my judgment, the correct order was that the time for compliance with the bankruptcy notice not be extended. Accordingly, the appeal will be dismissed.

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Scope of the decision under appeal 12 Mr Sharpe's amended notice of appeal describes the primary judge's decision as involving a dismissal of his application for review of the Registrar's decision not to set aside the bankruptcy notice (see, for example paragraphs 2 and 14 of the grounds of appeal and order 1 of the orders sought in the amended notice of appeal). 13 The precise orders made by the primary judge were: 1. Application dismissed. 2. The applicant must pay the respondent's costs to be taxed, if not agreed, in accordance with the Federal Circuit Court (Bankruptcy) Rules. 14 Unfortunately, it is not clear which application is the subject of order 1. The primary judge's reasons refer to the matter before him as an application to extend time for compliance with a bankruptcy notice. The reasons do not refer to Mr Sharpe's application for review of the decision not to set aside the bankruptcy notice. This is consistent with the orders made at the previous hearing before the primary judge, which extended time for compliance with the bankruptcy notice but did not adjourn or otherwise refer to the application for review. 15 The problem may have arisen from some ambiguity in the application for review itself. That document identified the exercise of power sought to be reviewed as: Application to set aside Bankruptcy Notice Dismissed with no further evidence allowed to be filed, and, No further extension of time to comply with the Bankruptcy Notice/ Please See Copy of Orders Attached. 16 This would seem to make it clear that Mr Sharpe sought review of the Registrar's decision not to set aside the bankruptcy notice. However, section D of the application form, which requires the applicant to "set out the decree(s) or order(s) sought in place of those to be reviewed" contains two pages of closely typed submissions commencing with the following paragraph: 1/ Grant a further Extension of Time to comply with the Bankruptcy to allow for a Judgment in my Leave to Appeal and Appeal Proceedings against the Creditor listed to be heard in the NSW Supreme Court 16 December 2013. 2/ If needed pending the decision in the Supreme Court Proceedings, time to then apply to the NSW Rural Assistance Authority for the issue of a 9B exemption certificate against enforcement of the Judgement debt on which the Bankruptcy Notice relies. 3/ misstatement in the Bankruptcy Notice of the Solicitor for the Respondent noted on the Bankruptcy Notice not being allowed to bring this action before the Court on behalf of the Creditor under sections 16, 20 and 21 of the [FDM Act], and section 41(5) of the Bankruptcy Act 1966. 4/ That the next listing before the Registrar of the Federal Magistrates Court be for Directions for the hearing and leave to file further evidence, in the Set Aside Application matters and in relation to orders 1 2 and 3. 17 The application for review does not, in terms, seek an order setting aside the bankruptcy notice. 18 Even so, the application includes the following submissions which make it reasonably clear that Mr Sharpe was seeking to have the bankruptcy notice set aside: I submit that Registrar Segal erred in 1/ not dismissing the Bankruptcy Notice bearing the name of the Solicitor acting for the Creditor. 2/ in not applying in the interim leading up to Proceedings 2013/172370 in the NSW Supreme Court, the stay provided me pursuant to section 9 and 10 of the [FDM Act]. 3/ not extending time to comply with the Bankruptcy Notice in circumstances where the matter of Appealing the Judgment debt would be determined in the Supreme Court in only two months time, but which had been delayed by the solicitor for the creditor by 3 months in a failed application to strike out those proceedings. … It is my submission, that given the findings in 'Waller' by the High Court, if the s11 certificate is not in place when Bankruptcy Proceedings are commenced, the Bankruptcy Notice must be set aside in this Jurisdiction, and/or the creditors proceedings be dismissed. The Mandatory operation of the [FDM Act] (in NSW, and now VIC) in all matters of 'farm debts' together with the recent definitive and unanimous findings of the High Court of Australia, I believe is sufficient to now require this Court, if the evidence is before it, to go behind the Judgment of the subject debt and not simply refer the matter back to the state Jurisdiction which had entered the Judgment in the first place, in the absence of a section 11 certificate and/or in error of the facts, in all 'farm debts' pursuant to the Act that are brought before it. 19 If the primary judge dismissed the entirety of Mr Sharpe's application for review, then it is plain from his reasons that he did so without having conducted a review of the Registrar's decision not to set aside the bankruptcy notice. 20 However, in my view, the primary judge did not dismiss the entirety of Mr Sharpe's application for review. A common sense reading of the primary judge's reasons is that he refused that part of Mr Sharpe's application which sought an extension of time for compliance with the bankruptcy notice. 21 Even so, the effect of the decision under appeal was to allow an act of bankruptcy to occur. 22 A question arises whether the substantive effect of the primary judge's decision was also to render the application for review redundant because the bankruptcy notice was spent once an act of bankruptcy was committed. In Hubner v ANZ Banking Group Ltd [1998] FCA 1779, Dowsett J said: There would…be no point in setting aside a notice after expiry of the time for compliance in the absence of a power to extend time. Once time has expired, the bankruptcy notice is, in effect, spent in that the act of bankruptcy has been committed and is available for use by all creditors for the purpose of presenting a petition. This has long been understood to be the position although, as was pointed out by Lockhart J in [Sterling; ex parte Esanda Ltd (1980) 44 FLR 125 ("Sterling")] at p 130, there have been surprisingly few reported cases dealing with the procedure. 23 In Sterling at 130 to 131, Lockhart J said: Plainly the power to extend time for compliance is in aid of the power to set aside the notice itself. What is the point in extending time for compliance otherwise than for the purpose of enabling the court to hear the application to set aside the notice without the occurrence of an act of bankruptcy in the meantime? If it did occur this would be destructive of the very power itself. 24 In my view, although the decision under appeal was not a decision to dismiss the entirety of Mr Sharpe's application for review, the decision produced the result that the application for review was rendered futile unless Mr Sharpe could obtain a further extension of time for compliance with the bankruptcy notice. Mr Sharpe thereby lost the opportunity of a review of the Registrar's decision not to set aside the bankruptcy notice.

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Nature of the decision under appeal 25 The FCC's power to extend time for compliance with a bankruptcy notice is set out in s 41(6A) of the Bankruptcy Act: Re Dalco; ex parte Dalco v Commissioner of Taxation (1986) 67 ALR 605; James v Abrahams (1981) 34 ALR 657. Section 41(6A) provides: Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice: (a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or (b) an application has been made to the Court to set aside the bankruptcy notice; the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice. 26 Subject to s 41(6C) of the Bankruptcy Act (which is not relevant in this case), the discretion conferred by s 41(6A) is one which should not be fettered and should be exercised based upon the facts and circumstances of the particular case: Kakavas v Paradise Enterprises Ltd [2010] FCA 915 at [8] ("Kakavas"). The discretion is "at large": Re Taylor; Ex parte Deputy Commissioner of Taxation (1983) 74 FLR 377 at 379. 27 In Ahern v Deputy Commissioner of Taxation (1987) 76 ALR 137 ("Ahern"), considering the discretion to adjourn the hearing of a creditor's petition, a Full Court said: The decision whether or not to adjourn the hearing of the petition was within the discretion of the primary judge. It is well established that an appellate court will rarely interfere with a trial judge's exercise of discretion upon an application for adjournment. However, the refusal to grant an adjournment may in some cases prevent the party seeking it from presenting his case or defence and in some circumstances this may result in injustice of such kind or magnitude as to warrant interference on appeal. In Maxwell v Keun [1928] 1 KB 645 Aitken LJ said (at 653): "I quite agree the Court of Appeal ought to be very slow indeed to interfere with the discretion of the learned judge on such a question as an adjournment of a trial, and it very seldom does do so; but, on the other hand, if it appears that the result of the order made below is to defeat the rights of the parties altogether, and to do that which the Court of Appeal is satisfied would be an injustice to one or other of the parties, then the court has power to review such an order, and it is, to my mind, its duty to do so". 28 However, the principles to be applied on an application to adjourn the hearing of a creditor's petition are not necessarily applicable to the exercise of the discretion to extend time for compliance with a bankruptcy notice because the commission of an act of bankruptcy is of a different order of gravity from the change of status brought about by the making of a sequestration order: Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270 ("Byron"); Taubert v Eddaglide Pty Ltd [2001] FCA 567 at [13]; Shephard v Chiquita Brands (South Pacific) Ltd [2001] FCA 1394 at [5]; Hovan v Goycolea-Silva [2003] FCA 234. 29 In Byron, at 270 to 271, Lehane J referred to the following matters to be taken into account in deciding whether to extend time for compliance with a bankruptcy notice: a. The interest of the judgment creditor and other creditors of the judgment debtor in ensuring that, if ultimately a sequestration order is made, the relevant act of bankruptcy occurs earlier rather than later; b. Whether any stay has been granted of the judgment supporting the bankruptcy notice; c. As "a consideration reinforcing the Court's reluctance to extend time in the absence of a stay, that an appeal has already been dismissed and the proceeding in question is…an application for special leave to make a further appeal." 30 The principles that apply to an appeal from a discretionary decision are set out in the following well-known passage taken from House v R (1936) 55 CLR 499 at 504-505: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

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This Court's powers 31 The Court's power to hear appeals from judgments of the FCC exercising original jurisdiction under the Bankruptcy Act is contained in s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). Section 24(1A) of the Federal Court Act provides that an appeal from an interlocutory judgment shall not be brought without leave of the Court or a Judge. Section 25(1AA) of the Federal Court Act permits the appellate jurisdiction of the Court in relation to an appeal from a judgment of the FCC to be exercised by a single judge. 32 An appeal from a judgment of the FCC is conducted as a rehearing of the initial application: Robertson v Knott Investments Pty Ltd (No 3) [2010] FCA 1074 at [22], citing Farrington v Deputy Commissioner of Taxation [2002] FCA 1013, 50 ATR 429 and Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424. 33 Where an error is identified in the exercise of discretion by a FCC judge, that error should be corrected so that the appellate court gives the judgment which in its opinion ought to have been given in the first instance (bearing in mind the "natural limitations" affecting an appellate court proceeding wholly or substantially on the record): Fox v Percy (20013) 214 CLR 118 at [23]; Astrazeneca Pty Ltd v Glaxosmithkline Australia Pty Ltd [2006] ATPR 42-106; [2006] FCAFC 22 at [32]; Construction, Forestry, Mining and Energy Union v Mammoet Australia Pty Ltd (2012) 206 FCR 135 at [18]. 34 Section 28 of the Federal Court Act provides relevantly: (1) Subject to any other Act, the Court may, in the exercise of its appellate jurisdiction: (a) affirm, reverse or vary the judgment appealed from; (b) give such judgment, or make such order, as, in all the circumstances, it thinks fit, or refuse to make an order; (c) set aside the judgment appealed from, in whole or in part, and remit the proceeding to the court from which the appeal was brought for further hearing and determination, subject to such directions as the Court thinks fit; … (2) The powers specified in subsection (1) may be exercised by the Court notwithstanding that the notice of appeal asks that part only of the decision may be reversed or varied, and may be exercised in favour of all or any of the respondents or parties, including respondents or parties who have not appealed from or complained of the decision. (3) An interlocutory judgment or order from which there has been no appeal does not operate to prevent the Court, upon hearing an appeal, from giving such decision upon the appeal as is just.

[17]

Circumstances leading up to WH Bailey's judgment against Mr Sharpe: 2010 to December 2011 42 Mr Sharpe conducted a farming business from a property at Bellingen. At some point, WH Bailey commenced supplying Mr Sharpe with goods on a running account basis. The running account was not secured by a mortgage over Mr Sharpe's farming property. 43 By November 2010, Mr Sharpe owed in excess of $57,000. WH Bailey commenced debt recovery proceedings in the Local Court at Bellingen to recover this amount. 44 In July 2011, the parties signed a document entitled "Terms of Settlement" ("July 2011 terms of settlement"). The substantive parts of the document stated: 1. [Mr Sharpe] admits the claim of $58,772.96. 2. [Mr Sharpe] will pay to [WH Bailey] the sum of $10,000 each 6 months commencing 31 October 2011 and thereafter on each following 30th April and 31st October each year until the debt, including cost[s] as below are paid in full. 3. [WH Bailey] to issue 6 monthly statements of account to [Mr Sharpe] within 28 days of the payment dates above. 4. Interest on the debt will be at the rate of 1% per month until the debt is paid in full. This rate to be calculated from 01 November 2010 and added to the debt each month. 5. Costs of [WH Bailey] in the sum of $9,316.00 to be added to the total of the debt. 6. [Mr Sharpe] to do all things and sign all documents necessary to grant [WH Bailey] a second mortgage on his property at Bellingen being recorded on the folio of the register as [details provided]. 7. In the event of any default by [Mr Sharpe] pursuant to these terms the court to issue judgment against [Mr Sharpe] for the amount still owing. 45 In November 2011, WH Bailey moved to enter judgment against Mr Sharpe. According to the judgment of Beech-Jones J ([2013] NSWSC 1887 at [8]), in other proceedings, Mr Sharpe has contended, and WH Bailey denied, that in October 2011 WH Bailey effectively abandoned the July 2011 terms of settlement when its solicitors protested about some of the conditions of the mortgage that Mr Sharpe proposed. However, it was agreed that Mr Sharpe did not pay any moneys to WH Bailey as contemplated by paragraph 2 of the terms of settlement. 46 The judgment debt on which the bankruptcy notice is based is a judgment of the Local Court in Bellingen made on 6 December 2011 for an amount of $73,499.56 ("first Local Court judgment"). The amount of the judgment appears to reflect paragraphs 1 and 5 of the July 2011 terms of settlement plus interest.

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High Court judgment in Waller: February 2012 47 In February 2012, the High Court handed down its decision in Waller v Hargraves Secured Investments Ltd (2012) 245 CLR 311 ("Waller"). In that decision, the Court held that certain agreements, read with a registered all monies mortgage, successively created distinct interests in, and powers over farm property owned by the farmer and securing her obligations as debtor. Those distinct interests and powers were held to be "farm mortgages" within the meaning of the FDM Act. Under that Act, certain "enforcement action" could not occur in the circumstances of the case. Importantly, it was held that Hargraves' claim for a money judgment was "enforcement action" within the meaning of the FDM Act because it was pleaded by reference to the terms of the mortgage. Heydon J, at [66] said relevantly: The better view, with respect, is that the definition of "enforcement action" is wide enough to extend beyond enforcement of the security by taking possession to include reliance on any of the rights in the farm mortgage…it follows that action to obtain a money judgment after the commencement of the [FDM Act] is "enforcement action" so long as it is action to enforce the mortgage. 48 At [68], Heydon J continued: … if the effect of the definition of "enforcement order" read with s 8(1) [of the FDM Act] was to debar the claim for possession but not the money claim, the appellant's victory would be a hollow one. The respondent could simply obtain the money judgment, use it to bankrupt the appellant, and then take whatever its share of her bankrupt estate was. Depending on the extent of claims by other secured creditors and by unsecured creditors, this might be, for the respondent, an inferior result to that obtainable by enforcement of the respondent's security interest in priority to the general creditors. But it would be just as damaging to the appellant… 49 As will appear, Mr Sharpe's appeal relies substantially on the High Court's decision in Waller.

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NSW Supreme Court applies s 5(2)(b) FDM Act to deny Mr Sharpe leave to appeal from refusal to set aside first Local Court judgment: December 2013 81 As mentioned in paragraph 4 above, on 16 December 2013, Beech-Jones J heard and dismissed Mr Sharpe's application for leave to appeal from the second Local Court judgment. The Court applied s 5(2)(b) of the FDM Act in the light of the creditor's petition to conclude that leave to appeal would be futile. At [28], his Honour said: Subject to the points next addressed, the circumstance that the [FDM Act] 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 [WH 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? 82 The qualification to his Honour's passage at [28] concerns the following two submissions made by Mr Sharpe: a. That s 5(2)(b) of the FDM Act is only engaged if the enforcement action constituted by the bringing of the creditor's petition is not itself rendered void by s 6 of the FDM Act, and that Mr Heywood's actions under the Bankruptcy Act are so void. His Honour rejected this submission as inconsistent with the Court of Appeal's approach in Sharpe v Hargraves Secured Investments Ltd [2013] NSWCA 288. He noted that Mr Heywood's action had moved from being enforcement of a judgment to the pursuit of a non-compliance with a bankruptcy notice and that Mr Heywood's actions are covered by Federal legislation (that is, the Bankruptcy Act). His Honour observed that it was difficult, if not impossible, to see how the FDM Act 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. His Honour then expressed the opinion that the definition of "enforcement action" in s 4(1) of the FDM Act 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). Were it otherwise then it was likely that a question of direct inconsistency under s 109 of the Constitution would arise. b. The appeal should be adjourned pending the outcome of the creditor's petition. His Honour rejected the submission on the basis that to further adjourn the proceedings would only occasion even more delay and cost to WH Bailey. Further, his Honour's assessment of the prospects of Mr Sharpe's opposition to the creditor's petition was that it had very low, if any, prospects of success. Furthermore, as had been noted on appeal by Leeming JA, the FDM Act "contemplates its own operation receding as bankruptcy proceedings are invoked". 83 As a result of the operation of s 5(2)(b), Beech-Jones J did not finally determine whether the FDM Act might have applied to the July 2011 terms of settlement prior to the presentation of the creditor's petition. Thus, the primary judge's observation in the first sentence of [3] of his reasons (set out at paragraph 3 above) was wrong on two counts. First, it referred to a decision of the Court of Appeal, when the relevant decision was made by a single judge of the Common Law Division of the Supreme Court (Beech-Jones J). Second, Beech-Jones J did not take into account, or address, the views expressed by Campbell J as to the arguable application of the FDM Act to the circumstances of Mr Sharpe's case.

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Grounds of appeal 85 Mr Sharpe's amended notice of appeal sets out 27 numbered paragraphs under the headings "Grounds of Appeal". Some of those paragraphs are plainly not discrete grounds of appeal in the sense explained by Branson J in Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 345; [2002] FCAFC 157 ("Red Bull"), for example, paragraphs 3 to 11 of the amended notice of appeal, which set out provisions of the FDM Act. In Red Bull, Branson J said, at [4]: A ground of appeal is a basis upon which the appellant will contend that the judgment, or a part of the judgment, should be set aside or varied by the Court in the exercise of its appellate jurisdiction. Not every grievance entertained by a party, or its legal advisors, in respect of the factual findings or legal reasoning of the primary judge will constitute a ground of appeal. Findings as to subordinate or basic facts will rarely, if ever, found a ground of appeal. Even were the Full Court to be persuaded that different factual findings of this kind should have been made, this would not of itself lead to the judgment, or part of the judgment, being set aside or varied. This result would be achieved, if at all, only if the Full Court were persuaded that an ultimate fact in issue had been wrongly determined. The same applies with respect to steps in the primary judge's process of legal reasoning. Although alleged errors with respect to findings as to subordinate or basic facts, and as to steps in a process of legal reasoning leading to an ultimate conclusion of law, may be relied upon to support a ground of appeal, they do not themselves constitute a ground of appeal. 86 Applying this passage from Red Bull, only the following five paragraphs in the amended notice of appeal articulate matters that could be described as grounds of appeal: 14. In not considering in full, the matters subject of the application for the review of the Registrars decision, in regards to those pertaining to the correct operation of the [FDM Act], and of the subsequent alleged abuse of process by the instructed Hargraves Solicitor for the Creditor, [the primary judge] erred in His decision to dismiss the application on 24 February 2014 and allow an Act of Bankruptcy to occur, hence effectively "enforcing" the said Statutory Enforcement Notice (the Bankruptcy Notice subject of these proceedings) contra to the overriding [FDM Act]. 16. [The primary judge] further erred on 24 February 2014 in regard to the creation of an inherent adverse effect on my rights afforded me by the [FDM Act] and mandatory operation of such. His Honours Judgment hence facilitating the creditor to then be able to present a Bankruptcy Petition against me. The presentation of a Bankruptcy Petition extinguishes my rights in relation to the [FDM Act] with all of my other Farm Debt Creditors, pursuant to section 5(2)(b) of the said Act. 18. His Honour erred in not granting my application for a further adjournment of the matter, and that of natural justice or procedural fairness, when the matter came before the Court on 24 February 2014 at which time I had been granted leave to attend by telephone, in circumstances where my health had recently been compromised with me having had several Heart Attacks and corrective surgery only some weeks prior, and, when I was as at the 24th of February 'off work' under a medical certificate, and when I had 'filed and served' material setting out those matters for the Court under cover of my letter to the Registrar dated 17 February 2014 and hence, then supported and further updated in my Sworn Affidavit of 21 February 2014 including a then current Doctors Certificate in force until 5 March 2014. 20. In circumstances where I gave evidence to the hearing on 24 February 2014 that I wished to appeal the NSWSC decision of the debt to the High Court of Australia 'out of time' when my Health resumed to that of an individual being able to work a minimum of 8 hours per week, His Honour erred in not affording me that opportunity in the absence of Him not hearing the matter subject to the Lower Court proceedings in full in His own Court, in light of the 'mandatory' nature of the prohibition under section 10(2), the effect of a ruling of 'void' pursuant to section 6 of the Act, and the ascendancy given the [FDM Act] by section 7.4 of the said Act. 27. In so far as enforcement of the debt in this matter is subject to enforcement by the Bankruptcy Notice 158540 issued 14 March 2013 and potential Creditors Petition being presented, and said 'enforcement action' entered by this Court on 24 February 2014 and declaration of an Act of Bankruptcy, was prohibited pursuant to section 10 and/or void by section 6 of the [FDM Act], without first hearing the facts of the matter in full, or conversely, my exhausting every avenue of appeal available in the New South Wales Jurisdiction, the prohibition of such 'enforcement' being mine under NSW Statute Ex Debito Justitiae. 87 Mr Sharpe's oral and written submissions provided some clarification of the grounds of appeal. The written submissions contained seven numbered contentions, some of which raised multiple issues and some of which overlapped. In summary, the following propositions are contained in the written submissions: 1. The FDM Act has "mandatory" operation while the relevant provisions of the Bankruptcy Act involve the exercise of discretion. Accordingly, the FDM Act takes precedence over the Bankruptcy Act in this case; 2. The decisions: a. not to extend time for compliance with the bankruptcy notice; b. not to set aside the bankruptcy notice; and c. to issue the bankruptcy notice are each enforcement actions prohibited by the FDM Act. If the creditor did not comply with the FDM Act, then it is not a "creditor" within s 40(3)(d) of the Bankruptcy Act. 3. The primary judge's decision "trespasses" on the FDM Act by allowing an act of bankruptcy to occur. The recording of an act of bankruptcy is an enforcement action prohibited by the FDM Act. . 4. The primary judge erred by not hearing the substantive matters raised in the application for review; 5. The proceedings raise serious questions about the jurisdictions of the NSW Supreme Court, this court and the FCC which, if not addressed, may allow creditors to avoid the operation of the FDM Act. In particular, this matter involved an abuse of process, in that (I infer from the application for review) Hargraves has encouraged or facilitated WH Bailey to pursue bankruptcy proceedings in order to avoid the application of the FDM Act; 6. By not dealing with the abuse of process claim and the other substantive issues identified in the application for review, the primary judge denied Mr Sharpe procedural fairness. 7. By not dealing with the abuse of process claim and the other substantive issues identified in the application for review, while Mr Sharpe still have avenues of appeal under NSW jurisdiction, the primary judge erred in not applying the FDM Act. In support of this contention, Mr Sharpe cited Ahern and Narain v Eurasia (Pacific) Pty Ltd [2010] FCA 1352. 8. The solicitor for WH Bailey has wrongly failed to disclose to various courts his involvement in other actions against Mr Sharpe. This has caused "adverse, incorrect or frustrated" findings to be made by the court. The solicitor has also failed to comply with and even attempted to thwart relevant judgments, orders or directions. In support of this contention, Mr Sharpe cited Kavia Holdings Pty Ltd v Werncog Ltd [1999] NSWSC 839. 88 Mr Sharpe's oral submissions focussed on why the bankruptcy notice should be set aside. In summary, the arguments were: a. The FDM Act applied to prevent WH Bailey from obtaining the judgment on which the bankruptcy notice is based; to prevent WH Bailey from enforcing that judgment; and to render the bankruptcy notice enforcement action in contravention of that Act; b. The bankruptcy notice proceedings were an abuse of process, as a result of the involvement of Hargraves or Hargraves lawyers in the proceedings. 89 In my opinion, Mr Sharpe's appeal raises the following issues: a. Did the primary judge's decision contravene the FDM Act? b. Should the primary judge have heard Mr Sharpe's application to review in its entirety before deciding not to extend time for compliance with the bankruptcy notice? c. Should the primary judge have taken into account the matters raised in the application for review in deciding whether to extend time for compliance with the bankruptcy notice? d. Should the primary judge have extended time for compliance with the bankruptcy notice because Mr Sharpe had not exhausted his appeal rights in connection with the judgment on which the bankruptcy notice is founded? e. Should the primary judge have extended time for compliance with the bankruptcy notice to give Mr Sharpe an opportunity to make submissions after he had fully recovered from his medical problems?

[35]

Did the primary judge's decision contravene the FDM Act? 90 Mr Sharpe's essential complaint is that the primary judge's decision allowed an act of bankruptcy to be committed. This was "enforcement action" contrary to s 8(1) of the FDM Act. For convenience, I repeat the terms of s 8(1): A creditor to whom money under a farm mortgage is owed by a farmer must not take enforcement action against the farmer in respect of the farm mortgage until at least 21 days have elapsed after the creditor has given a notice to the farmer under this section. 91 "Enforcement action" is defined in s 4 of the FDM Act to mean in relation to a farm mortgage: 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, but does not include: (a) the completion of the sale of property held under the mortgage in respect of which contracts were exchanged before the commencement of this Act, or (b) the enforcement of a judgment that was obtained before the commencement of this Act. 92 "Farm mortgage" is defined by s 4 to include: any interest in, or power over, any farm property securing obligations of the farmer whether as a debtor or guarantor, including any interest in, or power arising from, a hire purchase agreement relating to farm machinery, but does not include: (a) any stock mortgage or any crop or wool lien, or (b) the interest of the lessor of any farm machinery that is leased. 93 "Statutory enforcement notice" is also defined by s 4 to mean: (a) a notice under section 57(2)(b) of the Real Property Act 1900 , or (b) a notice under section 111(2)(b) of the Conveyancing Act 1919, or (b1) a notice under section 71X(1)(b) of the Water Management Act 2000, or (c) a notice, given under any Act or statutory instrument, that is prescribed by the regulations as being within the scope of this definition. 94 Mr Sharpe's contention fails for several reasons: a. As was decided by the NSW Court of Appeal in October 2013 and the NSW Supreme Court in December 2013, the effect of s 5(2)(b) is that the FDM Act did not apply in respect of Mr Sharpe at the time of the decision under appeal (and still does not apply) by reason of the presentation of Mr Heywood's creditor's petition. Accordingly, the FDM Act could not operate to render the primary judge's decision, or the effect of the decision, a contravention of that Act; b. In any event, the primary judge's decision was not action in respect of a farm mortgage. The decision was to refuse to extend time for compliance with a bankruptcy notice founded on a judgment debt. The judgment debt is unsecured: it does not confer any interest or power of the kind that falls within the meaning of "farm mortgage" in the FDM Act; c. Even if the primary judge's decision was action in respect of a farm mortgage, it was not action to enforce such a mortgage so as to be enforcement action within the meaning of the FDM Act. The decision does not involve or permit reliance on any rights in a farm mortgage: cf Waller at [66]. Rather, the decision permitted WH Bailey to pursue its rights under the Bankruptcy Act. 95 In his written submissions, Mr Sharpe contended that the Federal Court must apply the FDM Act rather than the relevant provisions of the Bankruptcy Act. The answer to this submission is that s 5(2)(b) of the FDM Act precludes the Federal Court from applying that Act in respect of Mr Sharpe.

[36]

Should the primary judge have heard Mr Sharpe's application to review in its entirety before deciding not to extend time for compliance with the bankruptcy notice? 96 Mr Sharpe addressed this issue in writing, saying: In this matter, [the primary judge] has erred in not hearing the substantive matters raised in the application to set aside the bankruptcy notice…dismissing those [FDM Act] arguments raised within the application, whilst stating: that "there would be an opportunity to hear those 'farm debt' arguments at the hearing of the Creditor's Petition". …in the absence of dealing with the 'abuse of process' claimed in the application for review of a registrars decision, or, hearing the substantive issued and arguments raised in those proceedings in relation to the claimed 'farm debt' pursuant to the [FDM Act], [the primary judge] has again erred, denying me Natural Justice/Procedural Fairness with those said proceedings. 97 In Ahern, the appellant argued that he had been denied procedural fairness when the primary judge refused to adjourn the hearing of the creditor's petition. The Full Court cited the following passage from the judgment of Rich J in Cameron v Cole (1944) 68 CLR 571 at 589: It is a fundamental principle of natural justice, applicable to all courts whether superior or inferior, that a person against whom a claim or charge is made must be given a reasonable opportunity of appearing and presenting his case. The Full Court also cited the judgment of Dixon CJ and Webb J in Commissioner of Police v Tanos (1958) 98 CLR 383 at 395: …it is a deep-rooted principle of the law that before anyone can be punished or prejudiced in his person or property by any judicial or quasi-judicial proceeding he must be afforded an adequate opportunity of being heard. 98 The primary judge appears to have proceeded on the basis that the sole ground on which Mr Sharpe sought to set aside the bankruptcy notice was his proceedings to set aside the first Local Court judgment. However, Mr Sharpe's application for review raised two other discrete grounds, namely, the operation of the FDM Act in relation to the bankruptcy notice and the alleged abuse of process. 99 Before refusing to extend time for compliance with the bankruptcy notice, the primary judge should have afforded Mr Sharpe a reasonable opportunity to present his case as to why the bankruptcy notice should be set aside even if the underlying judgment was not set aside. In failing to afford Mr Sharpe that opportunity, the primary judge denied Mr Sharpe procedural fairness.

[41]

Application of the FDM Act to the bankruptcy notice 109 As set out above, Mr Sharpe submitted in writing that the FDM Act has "mandatory" operation while the relevant provisions of the Bankruptcy Act involve the exercise of discretion. Accordingly, the FDM Act takes precedence over the Bankruptcy Act in this case. 110 This submission fails to take account of s 5(2)(b) of the FDM Act. The effect of that provision is that the FDM Act loses any precedence which it might otherwise have as a result of the presentation of Mr Heywood's creditor's petition. 111 Further, I do not accept Mr Sharpe's contention that the issue of the bankruptcy notice was an enforcement action prohibited by the FDM Act. The power to issue a bankruptcy notice is conferred by s 41 of the Bankruptcy Act on an Official Receiver. Relevantly, the pre-condition to the exercise of that power is an application of a creditor who has obtained against a debtor a final judgment or final order of the kind described in paragraph 40(1)(g) of the Bankruptcy Act and for an amount of at least $5,000. Paragraph 40(1)(g) refers to a final judgment or order the execution of which has not been stayed. 112 "Enforcement action" under the FDM Act is referrable to a farm mortgage. Where it does not mean taking possession of property under the farm mortgage, it refers to "any other action to enforce the mortgage". In this case, the bankruptcy notice was issued on the basis of the first Local Court judgment, the execution of which was not stayed at the time the bankruptcy notice was issued, by the Official Receiver exercising his or her functions under the Bankruptcy Act. There was no reliance by the Official Receiver on any right in a farm mortgage. It follows that the issue of the bankruptcy notice was not action to enforce any mortgage. 113 Mr Sharpe also argued that the conduct of WH Bailey in applying for the bankruptcy notice was enforcement action within the meaning of the FDM Act. 114 That conduct is not action to enforce a mortgage, even if the judgment was obtained in reliance on rights under a farm mortgage. WH Bailey did not rely on any right in a farm mortgage to apply for the bankruptcy notice. It relied upon a judgment, the execution of which was not stayed. Further, I do not read the reasons of Heydon J in Waller to imply that bankruptcy action to enforce a judgment is "enforcement action" within the meaning of the FDM Act because the judgment was obtained by reliance on rights under a farm mortgage. His Honour is simply acknowledging that a farmer could lose his farm if bankrupted as a result of a judgment obtained by reliance on rights under a farm mortgage. 115 In light of the decision of Beech-Jones J, I will not address the further anterior question of whether the failure of WH Bailey to comply with the FDM Act prior to obtaining the first Local Court judgment was enforcement action within the meaning of the FDM Act.

[42]

The alleged abuse of process 116 The application for review set out the following facts upon which the allegation of abuse of process was made were: a. WH Bailey's solicitor, Mr Mulquiney, is also a director of and solicitor for Hargraves; b. Mr Sharpe is indebted to Hargraves in excess of $2 million; c. In February 2013, Mr Sharpe was granted the interim injunction mentioned above against Hargraves; d. Upon the injunction being ordered, Hargraves contacted WH Bailey to propose that it commence bankruptcy proceedings, represented by Mr Mulquiney; e. The effect of Mr Sharpe's bankruptcy at the application of WH Bailey would be to release Hargraves from the operation of the injunction; f. Mr Mulquiney gave assurances to WH Bailey that the Hargraves would pay "the debt and costs in these Bankruptcy proceedings". 117 The application for review also contains the following allegations: This agreement to Bankrupt me was to mutually benefit both of those parties and was an agreement contrived of by Hargraves and made by the parties in criminal breach of the [FDM Act] (breach of ss 16 and 20 provide for criminal penalty) and in contempt of the High Court's decision in [Waller]. 118 If it is apparent to the Court that the purpose of a bankruptcy notice is to put pressure on a debtor to pay a debt, rather than to invoke the Court's insolvency jurisdiction, the issuing of the bankruptcy notice will be an abuse of process: Brunninghausen v Glavanics [1998] FCA 230; see also Re Sarina; Ex parte Wollondilly Shire Council [1980] FCA 66; (1980) 43 FLR 163 at 166. 119 However, it is not an abuse of process if a creditor genuinely intends to pursue the matter, there is default in complying with the notice and there is no evidence of collateral purpose or undue pressure: Slack v Bottoms English Solicitors [2002] FCA 1445 at [15]-[21]. 120 It has been held that it is an abuse of process to threaten bankruptcy proceedings as a means of "extortion": Rozenbes v Kronhill (1956) 95 CLR 407 at 417 ("Rozenbes"). In that case, Dixon CJ, Webb and Fullagar JJ said: The word "extortion" is not a technical term, and it has in bankruptcy law "no special and artificial significance divorced altogether from the ordinary implication of the word". The court will look strictly at the conduct of a creditor using or threatening bankruptcy proceedings, and extortion may be held to have taken place if the creditor has used, or attempted to use, a pending petition, or a threat of a petition, in order to extract from the debtor money which the debtor is not bound to pay, or in order to obtain some secret and unfair advantage over other creditors. But extortion will not be held to have taken place "in the absence of mala fides or anything amounting to oppression in fact". There must be a real intention on the part of the creditor to use the process for some other end than its legitimate end, and there must be a real exertion of pressure. 121 In Wilcox v Cottrell [2000] FCA 1656 ("Wilcox"), the debtor claimed that the solicitors for the creditor had acted illegally in order to bring about the making of a sequestration order, by reason of their role in negotiating an agreement with the solicitors for third parties who were in litigation with the debtor whereby the costs of the bankruptcy would be shared between the creditor and the third parties. The court rejected an argument that the costs sharing agreement revealed an improper purpose on the part of the creditor in pursuing the bankruptcy proceedings, in accordance with the passage in Rozenbes set out above. The court found that creditor did not use the pendency of the bankruptcy proceedings as a means of exacting money from the debtor which the debtor was not bound to pay. The circumstances that the third parties stood to benefit "at least in a temporary or practical sense" from the debtor's bankruptcy was not material to the issue of alleged improper purpose on the part of the creditor. 122 Accordingly, even if the facts set out in the application for review are accepted, they do not support a conclusion that the bankruptcy notice is an abuse of process. The position is analogous to the facts in Wilcox. There is no reason to conclude that WH Bailey did not obtain the bankruptcy notice as a means of exacting money from Mr Sharpe which he is not bound to pay. Any benefit that Hargraves may obtain from Mr Sharpe's bankruptcy is immaterial to whether the bankruptcy notice issued at WH Bailey's request is an abuse of process.

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