//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2010] NSWCA 300
respondent. Appeal dismissed with costs. The first-instance orders, including the possession order and monetary judgment, were not disturbed: [13], [133]. Macfarlan JA dissented, proposing that the appeal be...
No linked legislation citations have been extracted yet.
The Court of Appeal had to decide whether a certificate issued after an earlier farm-debt mediation stopped the statutory notice requirement from applying when the lender later sought possession under the same mortgage. The majority read the Act as linking the certificate to the mortgage, not requiring it to match the particular debt behind the later enforcement action. Because the Certificate identified the mortgage and remained in force when proceedings began, the appeal was dismissed. Macfarlan JA dissented, reasoning that mediation protection should apply separately to each distinct farm debt.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
2,156 words · generated 28/09/2026
Waller was the registered proprietor of farm land at Hargraves, New South Wales. On 28 August 2003, she granted Hargraves Secured Investments Ltd (HSI) a registered mortgage securing amounts owing to it from time to time. On the same date, HSI advanced her $450,000 under the First Loan Agreement. The mortgage instrument covered that agreement and later agreements between the parties: it secured amounts owing under any agreement covered by the mortgage [15], [26]-[27].
Waller defaulted on interest payments under the first agreement. HSI gave her a notice dated 7 October 2004 under s 8 of the Farm Debt Mediation Act 1994 (NSW) (the Act), advising of intended enforcement action and the availability of mediation [16]. The parties mediated on 5 June 2005. That mediation led to a deed of settlement and a Second Loan Agreement, under which the stated principal was $640,000. The amount comprised the earlier $450,000 and a further $190,000 [16], [28]-[29].
The parties later entered a Third Loan Agreement on 29 August 2006. After further missed interest payments, HSI began proceedings seeking possession of the land and a monetary judgment of $754,811.38 [17]. The Authority had issued a certificate under s 11 on 20 October 2006. It identified the mortgage and recorded the balance outstanding at the date of the 2004 notice as $488,250 [36], [101]-[102].
The dispute in the appeal was about the effect of that certificate. Waller argued that it related to the debt addressed in the 2005 mediation, not the later debt that HSI relied on for possession. On that basis, she said that a new s 8 notice and the associated statutory process were required before the later enforcement action.
At first instance, Harrison J rejected that argument and ordered possession, as well as entering judgment for the claimed money. Waller appealed the Farm Debt Mediation Act ruling, but did not challenge the finding on the Contracts Review Act issue [18]-[19]. The Court of Appeal dismissed the appeal with costs. Tobias JA agreed with Sackville AJA, forming the majority; Macfarlan JA dissented [1]-[13], [14], [94].
The majority’s reasoning turned on the statutory language. Section 8(1) restricts enforcement action in respect of a farm mortgage until the required notice period has elapsed. Section 8(3), however, says that s 8 does not apply if a certificate is in force under s 11 “in respect of the farm mortgage concerned”. Section 11 provides for a certificate that the Act does not apply to a farm mortgage, while requiring the Authority to be satisfied that satisfactory mediation has taken place in respect of the farm debt involved [112], [116].
Sackville AJA considered that these provisions deliberately used different terms for the security and the debt. The definition of “farm debt” concerns a debt incurred for farming purposes and secured by a farm mortgage. The definition of “farm mortgage” includes an interest in, or power over, farm property securing the farmer’s obligations. In the majority’s view, the legislation did not say that a certificate must be tied to the particular debt later relied on for enforcement [109]-[116].
The Certificate identified the mortgage and was in force when HSI commenced proceedings. That meant it was “in respect of the farm mortgage concerned” for s 8(3), so s 8(1) did not prevent the possession proceedings [100]-[102], [121], [133]. The majority did not need to decide whether the later loan agreements discharged and replaced the earlier debt. Its interpretation of s 8(3) meant that the answer to that contractual question did not change the result.
The majority also relied on the contrast between the statutory wording and the alternative wording that would have made the certificate effective only to the extent that it related to the debt being enforced. Sackville AJA reasoned that Parliament could have adopted such a limitation but did not [116], [120]. Tobias JA agreed that the text was reasonably clear and considered that any unfair result from that reading was for the legislature to address [7]-[8], [12].
The judgment also considered whether the Authority may have issued the Certificate incorrectly if the debt at the time of the application differed from the debt that had been mediated. Sackville AJA noted that an Authority decision to issue a certificate is amenable to judicial review. But Waller had not pursued that route, and the Court treated the Certificate as valid and in force in the appeal [122]-[124].
The judgment describes the statutory scheme as requiring mediation before a creditor takes possession or otherwise enforces a farm mortgage, while also providing for a certificate that makes the s 8 restriction inapplicable [21], [25]. The appeal addressed how the certificate operates where a creditor later relies on a debt arising under later loan arrangements secured by the same mortgage.
Before this decision, the Court of Appeal had considered the distinction between enforcement of a farm debt and enforcement of a farm mortgage in Australian Cherry Exports Ltd v Commonwealth Bank of Australia. That case concerned winding-up proceedings based on non-compliance with a statutory demand. The Court held that those proceedings were not enforcement action against the mortgage, because they were directed at the debt rather than enforcement of the security [117]-[119].
Waller applied that distinction in a different setting. The issue was not whether a personal debt claim was enforcement of a mortgage. It was whether a certificate in respect of a mortgage removed the s 8(1) restriction even though the later enforcement action was said to concern a different debt. The majority answered that question by focusing on the words “in respect of the farm mortgage concerned” [116]-[121].
The dissent would have read the Act differently. Macfarlan JA considered the Act’s object of efficient and equitable resolution of farm debt disputes, the remedial character of the legislation, and the consequences of allowing mediation about one debt to affect unrelated debts secured by the same all-monies mortgage. He concluded that, for the Act’s purposes, each separate debt could give rise to a separate security interest, so that a certificate relating to one debt would not cover another [55]-[65]. That was not the Court’s majority holding.
The judgment did not purport to resolve every question about the Act or all certificates. In particular, it noted a possible question about what debt the Authority must consider when a creditor applies for a certificate [113], [122]. The decision’s central holding is the majority’s construction of ss 8(3) and 11(1) on the facts before it.
At [116], Sackville AJA said that s 8(3) “does not provide that s 8(1) does not apply if a certificate is in force in respect of the farm mortgage concerned to the extent to which the certificate relates to the farm debt which is the subject of the enforcement action.” In plain English, the provision did not expressly require a match between the debt mediated and the debt later enforced. The majority considered the mortgage-level wording decisive.
At [120], Sackville AJA observed that Parliament could easily have restricted the certificate’s effect by adding words connecting it to the relevant debt. The practical significance is methodological: the Court relied on the distinction between what the statute says and the narrower test advanced by Waller.
At [121], Sackville AJA concluded that the mortgage was the interest in Waller’s property created by the mortgage instrument identified in the Certificate. The Certificate therefore concerned the relevant mortgage, rather than merely the historical loan balance recorded in it.
At [125], Sackville AJA said that a farmer in default can insist on mediation under the Act, but that a certificate can prevent a further mediation while it remains in force. He described the practical effect as one compulsory mediation every three years. That was an explanation of the majority’s reading of the scheme, not a separate statutory formula.
The dissent’s key passage is [65]. Macfarlan JA said an all-monies mortgage should be regarded, for the Act’s purposes, as giving rise to as many security interests as there are separate debts. In plain English, that approach would treat each debt as having its own relevant mortgage protection, even if the same registered instrument secured them all. The majority rejected that construction because it considered the statutory language reasonably clear [12], [116].
The decision is most directly relevant where a farmer’s property is subject to a mortgage securing multiple or successive obligations to the same creditor, the creditor has obtained a s 11 certificate following a mediation, and the creditor later seeks enforcement under the same mortgage. The key question is whether the certificate is in force “in respect of” the mortgage concerned, even if the debt underlying the later enforcement action is said to differ from the one mediated [100]-[102], [116], [121].
The case is also relevant where loan arrangements change over time. Here, the parties entered into a second loan agreement after mediation and then a third agreement, with the mortgage covering the later agreements as well as the first [27]-[30]. The majority’s statutory interpretation made it unnecessary to determine whether the subsequent agreements varied or replaced the earlier loan debt.
The decision should be distinguished from a claim that is merely a personal action to recover a debt and does not enforce security over farm property. The judgment discussed Australian Cherry Exports, where winding-up proceedings based on a statutory demand were treated as being in respect of the debt, not enforcement of the farm mortgage [117]-[120]. That distinction concerns the nature of the action; Waller concerned the effect of a certificate on a possession claim.
The judgment does not establish that every certificate will suffice in every circumstance. Its application depends on the certificate being in force and being in respect of the mortgage concerned, as those requirements were understood by the majority [116], [121], [133].
The supplied judgment does not discuss any later decisions applying or distinguishing Waller v Hargraves Secured Investments Ltd. It therefore does not provide a basis to state how subsequent courts have treated the decision.
The judgments do explain the earlier authorities they relied on. Australian Cherry Exports was discussed as establishing that the Act’s enforcement-action restriction concerns enforcement of a mortgage, rather than every action to recover the underlying debt [117]-[120]. Gain v Commonwealth Bank of Australia was cited for the proposition that a decision to issue a s 11 certificate is amenable to judicial review [123]-[124]. Those are descriptions of the authorities available to the Court of Appeal in 2010, not evidence of later treatment of Waller.
The majority also considered Varga v Commonwealth Bank of Australia. Sackville AJA cautioned against overstating the Act’s purpose as a general protection against being driven off a farm whenever restructuring might be possible. He read the statutory object as a compromise between farm debtors and credit providers, consistent with the text limiting when s 8 applies [129]-[131].
The judgment expressly identified a possible question about the debt relevant to an application for a s 11 certificate. Sackville AJA noted that it may matter whether “the farm debt involved” is the debt owing when the creditor applies, and how to determine whether that debt is the same as the one in existence at the mediation [113], [122]. The Court did not decide that issue.
A related issue is the proper response where a farmer considers that the Authority issued a certificate despite the absence of satisfactory mediation concerning the relevant debt. The majority said that the issue of a certificate is amenable to judicial review, but it did not decide the merits of any challenge to this Certificate. It noted that Waller had not sought judicial review [123]-[124].
The judgments also expose a difference in approach to the practical consequences of an all-monies mortgage. Macfarlan JA considered that the majority’s construction could allow mediation of a small debt to affect later enforcement concerning a much larger debt secured by the same instrument [62]-[65]. Sackville AJA responded that debts secured by the same mortgage would not, as a practical matter, usually be entirely separate, and that enforcement under a different mortgage would require a certificate relating to that separate mortgage [126]-[127]. Tobias JA acknowledged the possibility of unfairness but treated it as a matter for legislative amendment [7]-[8].
Finally, this appeal did not determine whether the second and third loan agreements discharged or merely varied the earlier agreement. Macfarlan JA analysed that issue in detail and concluded that the earlier debt had been replaced [68]-[85]. But because the majority resolved the appeal through its construction of ss 8(3) and 11(1), that contractual analysis was not necessary to the majority’s disposition.
This is general legal information, not legal advice. Zoe can make mistakes. Before acting on or relying on this analysis, have a qualified Australian lawyer check it.
CITATION: Waller v Hargraves Secured Investments Ltd [2010] NSWCA 300
JUDGMENT OF: Tobias JA at 1; Macfarlan JA at 14; Sackville AJA at 94
DECISION: The appeal is dismissed with costs.
CATCHWORDS: CONTRACT - whether further agreements between the parties replaced or simply varied an earlier agreement - whether subsequent loans repaid or simply supplemented an earlier loan - REAL PROPERTY - Farm Debt Mediation Act 1994 - construction of "farm mortgage" - whether "farm mortgage" refers to mortgage instrument or to security interest or power that mortgage instrument creates in respect of each farm debt - whether s 11 certificate in force - whether a relevant mediation had occurred - whether creditor precluded from taking enforcement action pursuant to mortgage instrument where only mediation that had occurred related to a different debt to that which the creditor claimed justified the enforcement action - STATUTORY INTERPRETATION - principles - whether text of statutory phrase capable of bearing more than one meaning - purposive approach - relevance of consequences of different constructions - remedial legislation - relevance of explanatory note
Contracts Review Act 1980 Farm Debt Mediation Act 1994 LEGISLATION CITED: Farm Debt Mediation Amendment Act 1996 Interpretation Act 1987 Real Property Act 1900
Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568 Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337 Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390 Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312 Dan v Barclays Australia Ltd (1983) 57 ALJR 442 CASES CITED: Encyclopaedia Britannica Australia Ltd v David Campbell [2009] NSWCA 286 Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1983 - 1984) 165 CLR 622 Nominal Defendant v GLG Australia Pty Limited [2006] HCA 11; (2006) 228 CLR 529 Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 84 ALJR 507 Santley v Wilde [1899] 2 Ch 474 Varga v Commonwealth Bank of Australia (1996) 7 BPR 15,052; (1997) NSW Conv R 55-797 Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191
TEXTS CITED: Professor Butt, Land Law, 6th ed (2010) Lawbook Co
PARTIES: Roslyn Edwina Waller (Appellant) Hargraves Secured Investments Ltd (Respondent)
COUNSEL: V A Thomas (Appellant) D M Loewenstein (Respondent)
SOLICITORS: Jackson Lalic Lawyers (Appellant) Hargraves Solicitors (Respondent)
LOWER COURT JURISDICTION: Supreme Court
LOWER COURT FILE NUMBER(S): SC 15600/2007
LOWER COURT DATE OF DECISION: 12 November 2009
LOWER COURT MEDIUM NEUTRAL CITATION: Hargraves Secured Investments Ltd v Waller [2009] NSWSC 1210
IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL
TOBIAS JA MACFARLAN JA SACKVILLE AJA
The appellant is the registered proprietor of Real Property Act land situated at Hargraves, New South Wales. On 28 August 2003 she executed a mortgage instrument to secure to the respondent all monies that were from time to time owing by her to the respondent. The mortgage was subsequently registered. By Loan Agreement of the same date ("the First Loan Agreement") the respondent agreed to lend to the appellant the sum of $450,000 which was advanced on that day.
In 2004 and 2005 the appellant breached the terms of the First Loan Agreement by failing to make various interest payments that were due under it. As a result, the respondent gave to the appellant a notice dated 7 October 2004 under s 8 Farm Debt Mediation Act 1994 ("the Act") informing the appellant of the respondent's intention to take enforcement action under the mortgage and of the availability of mediation under the Act. It was common ground that for the purposes of the Act the appellant was a "farmer" and that the respondent was a "creditor" which held a "farm mortgage" over the appellant's "farm". A mediation that occurred on 5 June 2005 led to the parties entering into a Deed of Settlement and a further Loan Agreement ("the Second Loan Agreement"). Pursuant to the latter, the respondent advanced to the appellant a total amount of $640,000. This included an amount of $450,000 to repay the amount that had previously been advanced.
On 29 August 2006 the parties entered into a further Loan Agreement ("the Third Loan Agreement"). The appellant defaulted in making various interest payments due under that Agreement. This led to the respondent commencing the present proceedings against the appellant for possession of her property and for judgment in the sum of $754,811.38.
Before Harrison J at first instance the appellant contended that the respondent's claim for possession was void under s 6 of the Act as there was not in force, when the proceedings were commenced, a certificate under s 11 of the Act referable to the debt for principal and interest upon which the respondent relied to found its possession claim. The primary judge rejected this contention, holding that a certificate issued under that section on 20 October 2006 ("the Certificate") based upon the mediation that occurred on 5 June 2005 sufficed. The judge accordingly made an order for possession and gave judgment for the respondent for the monetary sum that it claimed. His Honour also rejected a contention of the appellant that the three Loan Agreements between the parties were unjust within the meaning of the Contracts Review Act 1980.
The appeal related to the finding against the appellant concerning the Act. The appellant did not challenge the finding made in relation to the Contracts Review Act issue.
(ii) The respondent's claim in the proceedings for possession of the appellant's property was not void under s 6 of the Act as there was in force at the commencement of the proceedings a relevant certificate under s 11 of the Act (see [133] below). As a result the appeal should be dismissed and the appellant should pay the costs of the appeal.
Per Macfarlan JA (in dissent): (iii) The object of the Act and the consequences of a contrary construction require the expression "farm mortgage" where it appears in the Act to be construed as a reference to the interest in, or power over, the farm property that secures the particular farm debt that is the subject of the creditor's intended enforcement action. On this basis an instrument of mortgage such as that being considered in the proceedings is to be regarded, for the purposes of the Act, as giving rise to as many security interests (that is, mortgages) as there are separate debts (see [65] below).
(iv) The respondent's claim in the proceedings for possession of the appellant's property was void under s 6 of the Act as there was not in force at the commencement of the proceedings a relevant certificate under s 11 of the Act (see [65], [86] below). As a result the order for possession that the primary judge made should be set aside. (v) The respondent's claim against the appellant for a monetary judgment is a personal action to which the Act is not applicable (see [87] - [90] below). Accordingly, the appellant's challenge to the monetary judgment given against her should fail. IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 2009/298555
TOBIAS JA MACFARLAN JA SACKVILLE AJA
11 NOVEMBER 2010 WALLER v HARGRAVES SECURED INVESTMENTS LTD Judgment 1 TOBIAS JA: In this matter I have had the benefit of reading in draft the judgments of Macfarlan JA and Sackville AJA. The former has concluded (at [57]) that s 8(3) of the Farm Debt Mediation Act 1994 (the Act) applies only to a farm mortgage in respect of the farm debt the subject of the mediation referred to in s 11(1)(c) of which the Authority must be satisfied before it issues the certificate. 2 As the farm debt the subject of the respondent's enforcement action, was not the debt which was the subject of mediation pursuant to which the relevant certificate was issued, it followed in his Honour's view that the certificate which was issued did not have the effect pursuant to s 8(3) of the Act of rendering s 8(1) inapplicable to that enforcement action. 3 The critical reasoning of his Honour is set out at [55]-[65] of his reasons. As his Honour observes at the outset of [55], s 8(3) and, in particular, the reference in it to "the farm mortgage" is capable, consistently with the text of that subsection and the definition of "farm mortgage", of being construed either in the manner for which the appellant contended or in the manner for which the respondent contended. His Honour therefore looked essentially to the objects of the Act in order to resolve the relevant question of construction. 4 In particular, he held that in a situation such as the present where a number of farm debts owed by a farmer to a creditor are covered by an "all monies" mortgage, each separate farm debt should be considered as giving rise to a separate "farm mortgage". Thus at [65] his Honour said that "…an instrument of mortgage such as that being considered here is to be regarded, for the purposes of the Act, as giving rise to as many security interests (that is, mortgages) as there are separate debts". 5 In his judgment Sackville AJA, after noting that s 8(3) refers to a certificate under s 11 in respect of "the farm mortgage concerned" rather than the "farm debt involved", has it seems to me applied the provisions of that subsection in accordance with what he regarded as its "reasonably clear" terms: see [132]. Thus at [116] of his reasons his Honour finds as follows: "However, s 8(3) renders s 8(1) inapplicable if a certificate is in force ' in respect of the farm mortgage concerned '. As will be recalled, there is nothing in the definition of ' farm mortgage ' which refers to a particular farm debt being secured; the definition includes any interest in the farm property securing ' obligations of the farmer '. Section 8(3) does not provide that s 8(1) does not apply if the certificate is in force in respect of the farm mortgage concerned to the extent to which the certificate relates to the farm debt which is the subject of the enforcement action ." (His Honour's emphasis.) 6 In my opinion, the acceptance by Macfarlan JA of the appellant's argument may have had more force if s 8(3) had read as follows: "This section does not apply if a certificate is in force under s 11 in respect of the farm debt referred to in s 11(1)(c)"
or, alternatively, "This section does not apply if a certificate is in force under s 11 in respect of a farm mortgage insofar as that mortgage secures the farm debt referred to in s 11(1)(c)." 7 There can be no doubt that the reference in s 8(3) to "the farm mortgage concerned" is a reference to the farm mortgage in respect of which the creditor seeks to take enforcement action. It seems to me that the text of s 8(3) is plain and admits of only one construction being that adopted by Sackville AJA for the reasons that he has articulated. I appreciate that this might give rise to some unintended consequences such as those exemplified by Macfarlan JA at [63] of his reasons. The manner in which Sackville AJA seeks to meet that argument at [127] of his reasons is not altogether satisfactory. In the example given, it may well be that the relevant farm debt is one of $2.1 million albeit the subject of two separate advances of $2 million and $100,000. If the s 11 certificate is only issued in relation to a dispute with respect to the $100,000 advance then one can appreciate that there may be some unfairness if, within the three year limitation period of the certificate, there is default with respect to the $2 million debt in respect of which the creditor seeks to take enforcement action. 8 In my opinion this is the consequence of the clear words of s 8(3) and I do not believe that the text should be so construed, as Macfarlan JA understandably seeks to do, in order to avoid that result. If unfairness there be, then that is a matter for the legislature to remedy. 9 It is true, as Macfarlan JA observes at [60] of his reasons, that a farm debt may be the subject of mediation which results in the creditor agreeing to accept a lesser sum than the farm debt claimed or to extend the time for payment. A further possibility is that the farm debt is varied by increasing the principal sum by capitalising the interest outstanding which has given rise to the dispute in the first place. An increase in the capital amount of the farm debt would not, I would have thought, created a new farm debt; it would merely be a variation of the original debt. 10 The problem in the present case is the finding of Macfarlan JA, with which I would agree, that the effect of the Second and/or Third Loan Agreements was that the First Loan Agreement was discharged as was the farm debt to which it related. A new farm debt was created as a result of, and therefore subsequent to, the mediation pursuant to which the relevant s 11 certificate was issued. 11 However, as Sackville AJA observes at [126] of his reasons, at least on the facts of the present case there is a justifiable argument that the farm debt created under the Second and/or Third Loan Agreements was related to the farm debt of the First Loan Agreement which was the subject of the mediation pursuant to which the s 11 certificate was issued with the result that the unfairness contemplated by the example given by Macfarlan JA at [63] of his reasons would not necessarily arise in the present case. 12 Although I acknowledge the cogency of Macfarlan JA's approach to the question of construction of s 8(3), I agree with Sackville AJA that the relevant statutory language is reasonably clear. This being so, the unfairness to which Macfarlan JA refers inevitably requires him to adopt a construction of s 8(3) and the expression "farm mortgage" which, in my respectful opinion, the plain words of the provision cannot bear: see, for instance, [65]. 13 For the foregoing reasons, which are in addition to those articulated by Sackville AJA in his judgment which I gratefully adopt, I agree with his Honour that the appeal should be dismissed with costs. 14 MACFARLAN JA:
Nature of case and conclusions 15 The appellant is the registered proprietor of Real Property Act land situated at Hargraves, New South Wales. On 28 August 2003 she executed a mortgage instrument to secure to the respondent all monies that were from time to time owing by her to the respondent. The mortgage was subsequently registered. By Loan Agreement of the same date ("the First Loan Agreement") the respondent agreed to lend to the appellant the sum of $450,000 which was advanced on that day. 16 In 2004 and 2005 the appellant breached the terms of the First Loan Agreement by failing to make various interest payments that were due under it. As a result, the respondent gave to the appellant a notice dated 7 October 2004 under s 8 Farm Debt Mediation Act 1994 ("the Act") informing the appellant of the respondent's intention to take enforcement action under the mortgage and of the availability of mediation under the Act. It is common ground that for the purposes of the Act the appellant was a "farmer" and that the respondent was a "creditor" which held a "farm mortgage" over the appellant's "farm". A mediation that occurred on 5 June 2005 led to the parties entering into a Deed of Settlement and a further Loan Agreement ("the Second Loan Agreement"). Pursuant to the latter, the respondent advanced to the appellant a total amount of $640,000. This included an amount of $450,000 to repay the amount that had previously been advanced. 17 On 29 August 2006 the parties entered into a further Loan Agreement ("the Third Loan Agreement"). The appellant defaulted in making various interest payments due under that Agreement. This led to the respondent commencing the present proceedings against the appellant for possession of her property and for judgment in the sum of $754,811.38. 18 Before Harrison J at first instance the appellant contended that the respondent's claim for possession was void under s 6 of the Act as there was not in force, when the proceedings were commenced, a certificate under s 11 of the Act referable to the debt for principal and interest upon which the respondent relied to found its possession claim. The primary judge rejected this contention, holding that a certificate issued under that section on 20 October 2006 ("the Certificate") based upon the mediation that occurred on 5 June 2005 sufficed. The judge accordingly made an order for possession and gave judgment for the respondent for the monetary sum that it claimed. His Honour also rejected a contention of the appellant that the three Loan Agreements between the parties were unjust within the meaning of the Contracts Review Act 1980. 19 This appeal relates to the finding against the appellant concerning the Act. The appellant does not challenge the finding made in relation to the Contracts Review Act issue. 20 For the reasons appearing below, I have concluded that:
(a) The respondent's claim in the proceedings for possession of the appellant's property is void under s 6 of the Act as there was not in force at the commencement of the proceedings a relevant certificate under s 11 of the Act (see [65], [86] below). As a result the order for possession that the primary judge made should be set aside; and
(b) The respondent's claim against the appellant for a monetary judgment is a personal action to which the Act is not applicable (see [87] - [90] below). Accordingly, the appellant's challenge to the monetary judgment given against her fails.
The Farm Debt Mediation Act 1994 21 The terms of s 3 and relevant definitions contained in s 4 of the Act are as follows: "3 Object 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. 4 Definitions Authority means the New South Wales Rural Assistance Authority constituted by the Rural Assistance Act 1989. … creditor means a person to whom a farm debt is for the time being owed by a farmer. … 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 inclusions are not of present relevance]. farm debt means 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. … farm mortgage includes 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 … [the exclusions are not of present relevance]". 22 It was common ground in the proceedings that the debts secured by the respondent's mortgage are "farm debts" and that the respondent's claim for possession in the present proceedings is an "enforcement action". 23 Section 5 provides that the Act applies to creditors "only in so far as they are creditors under a farm debt" and does not apply inter alia to "a farmer whose property is the subject of a bankruptcy petition presented by any person". 24 Section 6 provides that "[e]nforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void". 25 Other relevant provisions are as follows: "8 No enforcement action until notice of availability of mediation given (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. (2) Notice to the farmer is to be in writing in a form approved by the Authority (informing the farmer of the creditor's intention to take enforcement action in respect of the farm mortgage and of the availability of mediation under this Act in respect of farm debts). (3) This section does not apply if a certificate is in force under section 11 in respect of the farm mortgage concerned. 9 Farmer may request mediation (1) A farmer to whom notice has been given under section 8 may, within 21 days after the notice was given, notify the creditor in writing that the farmer requests mediation concerning the farm debt involved. (1A) A farmer who has not been given notice under section 8 but who owes money to a creditor in relation to a farm debt may notify the creditor in writing that the farmer requests mediation concerning the farm debt involved. A farmer may request mediation under this subsection whether or not the farmer is in default. …
11 Certificate that Act does not apply to farm mortgage (1) The Authority must, on the application of a creditor under a farm mortgage, issue a certificate that this Act does not apply to the farm mortgage if: (a) the farmer is in default under the farm mortgage, and (b) no exemption certificate is in force in relation to the farm mortgage, and (c) the Authority is satisfied that: (i) satisfactory mediation has taken place in respect of the farm debt involved, or … ".
The Loan Agreements 26 The First Loan Agreement, which was dated 28 August 2003, provided for the advance to the appellant of $450,000, repayment of that sum on 5 September 2006 and payment of interest on the principal monthly. 27 The mortgage instrument of the same date contained a covenant by the appellant to meet all her obligations under "every agreement covered by this mortgage". This expression was defined in such a way as to include the First Loan Agreement and the two further Loan Agreements between the parties that were made later. The mortgage instrument was expressed to secure all amounts owing from time to time by the appellant to the respondent including amounts owing under the mortgage and any "agreement covered by this mortgage". 28 The Deed of Settlement of (about) 28 July 2005, which the parties entered into following the mediation between them of 5 June 2005, recited that the appellant had fallen into arrears in payment of interest on the amount of $450,000 borrowed by her from the respondent and that the parties agreed that all disputes between them "be settled on the terms and conditions in this Deed". The operative clauses of the Deed provided for a "further advance" to the appellant of $190,000, to be disbursed in a specified manner. Substantial parts of that advance were to be applied to payment of arrears of interest and interest in advance. 29 The Second Loan Agreement, which was executed on 28 July 2005, recited that the respondent had agreed at the request of the appellant to "make available" to the appellant the principal sum of $640,000 (representing the total of the original advance of $450,000 and the "further advance" of $190,000). Under Cl 1 the appellant acknowledged that, "having received from the [respondent] the principal sum on a date to be advanced on the terms and conditions hereinafter contained", she was indebted to the respondent in respect of that principal sum. The Loan Agreement required repayment of the principal sum on 5 September 2006, provided for the payment of interest, identified events of default and included various other provisions. Save for differences as to the principal sum and rate of interest the Agreement was in substantially the same form as the First Loan Agreement. It appeared to deal comprehensively with the terms of the advance of $640,000 and did not refer at all to the First Loan Agreement. 30 On 29 August 2006, that is, shortly prior to the repayment date specified in the Second Loan Agreement, the parties entered into the Third Loan Agreement. It also recited that the respondent had agreed to "make available" to the appellant the sum of $640,000. It specified a higher rate of interest than that previously applicable and required repayment of the principal sum on 5 September 2009. Otherwise it was in substantially the same terms as the Second Loan Agreement (and therefore also as the First Loan Agreement). Again, it appeared to deal comprehensively with the advance that was the subject of it. It did not refer to either of the earlier Loan Agreements.
The Amended Statement of Claim 31 In its Amended Statement of Claim the respondent alleged that the appellant breached the First Loan Agreement by failing to make payments of interest on or before their relevant due dates, the last date particularised being 5 July 2005 (at [7]). 32 It is however apparent that this interest was paid, or at least treated by the parties as having been paid, on or about 28 July 2005. The Deed of Settlement of that date provided for "the current principal amount" to be increased by $190,000 (Cl 1). It stated that part of that advance was to be applied to "[a]rrears of interest with no penalty up to 5 August 2005" and another part to payment of penalty interest (Cl 2). The credits for these payments appear in the Statement of Loan Account that is in evidence (Appeal Book p 394), as does a reversal in respect of a further amount in respect of penalty interest (the reversal no doubt being made in pursuance of the provision in the Deed for the appellant to be released in respect of certain penalty interest due). The balance shown after those entries is $640,000, that is, the amount of the advance made to the appellant, at the same time, pursuant to the Second Loan Agreement. The Statement of Account is thus consistent with the proposition that the interest that the appellant failed to pay under the First Loan Agreement was, as from 28 July 2005 (the date of the Deed of Settlement and the Second Loan Agreement), no longer owing by the appellant to the respondent. 33 The Amended Statement of Claim then pleaded the Second and Third Loan Agreements and that in breach of the terms of "the Loan Agreements" (defined in the Amended Statement of Claim as being the First, Second and Third Loan Agreements) the respondent failed to make interest payments on or before their relevant due dates ([15]). The first such failure particularised is one that occurred on 5 October 2006 which was a date more than a month after the Third Loan Agreement was entered into on 29 August 2006. The dates of the further defaults particularised fell in the period from 5 October 2006 to 5 March 2008. 34 The Amended Statement of Claim then alleged the following: "In breach of the terms of the Loan Agreements, and in breach of the terms of the Mortgage, the Defendant failed to make interest payments including penalty interest, totalling $114,811.38 ('the arrears of interest')" ([17]). 35 In light of what I have said in [32] - [33] above, the sum of $114,811.38 in interest, including penalty interest, of necessity represented amounts falling due after the date of the Third Loan Agreement. This sum, together with the amount of $640,000 principal, constituted the total of the monetary claim made by the respondent against the appellant in the Amended Statement of Claim. The failure to pay that amount was alleged to entitle the respondent to possession of the property and to sell it. 36 In the Amended Statement of Claim the respondent further alleged that a certificate had been issued to it under s 11 of the Act "certifying that the Farm Debt Mediation Act 1994 does not apply to the mortgage" ([26]). The certificate referred to was the Certificate dated 20 October 2006 issued by the Authority stating that it was satisfied that the Act "does not apply to the farm mortgage, details of which are set out hereunder". The Certificate referred to the mortgage instrument described in [27] above and to the balance outstanding "as at date of issue of Section 8 Notice [7 October 2004]" as being $488,250. This was necessarily a reference to the amount outstanding to the respondent on a date prior to the advance that the respondent made to the appellant under the Second Loan Agreement of 28 July 2005. This is because from the date of that Agreement the amount outstanding was or exceeded $640,000. Conformably with this, it was common ground between the parties to the proceedings that the foundation for the Certificate was the mediation that occurred between the parties on 5 June 2005, that is, before the parties entered into the Second Loan Agreement.
The Appellant's Argument 37 The argument that the appellant put at first instance and on appeal was to the following effect:
(a) The debt that was the subject of the respondent's s 8 notice of 7 October 2004 and of the farm debt mediation that occurred on 5 June 2005 arose under the First Loan Agreement;
(b) By the Second Loan Agreement which was entered into after the mediation of 5 June 2005 the parties treated the debt owing under the First Loan Agreement (and which had been the subject of the mediation) as having been repaid and provided for the making of a new advance equal to the total of the previous advance (made under the First Loan Agreement) and a further advance of $190,000. The agreement of the parties as to that new advance of $640,000 was contained wholly within the terms of the Second Loan Agreement, save for the incorporation in the Agreement of the terms of a letter of offer to which I refer below (see [81] below);
(c) By the Third Loan Agreement, the parties agreed to discharge the debt owing under the Second Loan Agreement and to provide for a new advance governed solely by the terms of the Third Loan Agreement (again subject to the incorporation of the terms of a letter of offer - see [81] below);
(d) The respondent's claim for possession was based upon the appellant's failure to pay interest in accordance with the terms of the Third Loan Agreement and to repay the principal sum advanced under it;
(e) The amounts due to be paid to the respondent under the Third Loan Agreement were different debts to those arising under the First Loan Agreement that had been the subject of the mediation of 5 June 2005, those earlier debts having been discharged by the Second Loan Agreement;
(f) Section 11(1) of the Act provides for the Authority to issue a certificate where it is satisfied that "satisfactory mediation has taken place in respect of the farm debt involved" (see [25] above). The "farm debt involved" in the mediation of 5 June 2005 comprised debts in respect of principal and interest arising under the First Loan Agreement, not the debts arising under the Third Loan Agreement that the respondent relied upon in its Amended Statement of Claim. Accordingly the Certificate did not relate to the debts that were "involved" in the respondent's enforcement action. As mediation has not occurred in relation to them, no certificate had issued, or could issue, in relation to them;
(g) As a result, s 8 of the Act precluded the respondent from taking its enforcement action because it had not given a notice under s 8 of the Act in respect of the debts "involved" in that enforcement action; and
(h) The respondent was not excused by s 8(3) from compliance with s 8(1) by reason of the issue and currency of the Certificate because the expression "farm mortgage" in s 8(3) refers to the interests in land that secure particular debts and the Certificate did not relate to the interests in land that secured the debts alleged to be owing under the Third Loan Agreement. Rather, it related to the interests in land, that is, the mortgages, that secured the by then-discharged debts owing under the First Loan Agreement.
The Judgment at first instance 38 The primary judge rejected the appellant's argument. His reasons for doing so are encapsulated in the following extracts from his judgment: "31 Even though mediation takes place in relation to a farm debt as is emphasised, by way of example, in the words of s 11(1)(c)(i), s 11(2)(b) and s 11(2)(c)(iii), the certificate that s 11 contemplates actually issues with respect to the farm mortgage . The [appellant] has emphasised the apparent significance of the debt, and the various loan agreements as the constantly changing factors that warrant return to mediation. The Act does not in my opinion contemplate or require this. On the contrary, the Act does contemplate that a certificate shall remain in force for a specified period, in this case until 2 June 2008. The period during which the certificate remains in force is calculated by s 11(5), which provides for presently relevant circumstances as follows: '(5) A certificate under this section remains in force until the date specified by the Authority in the certificate. The date specified is to be calculated on the basis that the period for which the certificate is to be in force is: (a) if satisfactory mediation in respect of the farm debt concerned has taken place, the period commencing on the date of its issue and ending on the third anniversary of the last date of the mediation, or …'.
32 Furthermore, even though the certificate may have expired it continues in force in respect of any proceedings or enforcement action taken before that occurs. Section 11(6) makes this clear …
33 There is another reason why the [appellant's] submissions are incorrect. In the present case the mediation took place at a time when the [appellant's] only relevant breach related to the first loan agreement. The terms of the Deed of Settlement were to take account of the [appellant's] breaches under that agreement, to replace that agreement with the second loan agreement and in effect thereafter to waive, or to exonerate the [appellant] from, any breach of the first loan agreement. Clauses 3 and 4 make this clear. They give effect to the sentiment of recital F, which says that '[i]t has been agreed between Ms Waller and HSI that all disputes between the parties be settled on the terms and conditions in this Deed'.
34 In the event that the [appellant's] submissions were correct the [respondent] or any equivalent creditor could not rely upon breaches of any agreement reached at a mediation without the need, if the farmer required it, for a subsequent mediation, even if a s 11 certificate had issued. This would then give rise to the spectre of successive mediations and successive certificates, a cycle that could be broken only by the refusal of the creditor to settle. Even though the Act anticipates that a creditor may decline to mediate, and cannot, in effect, be criticised or penalised for that fact (see, for example, s 9A(2)), the [appellant's] contention would potentially encourage such a result. It would also be inimical to the purpose of the Act outlined in s 3 if the requirement or prospect of constant mediations was to be endorsed or encouraged, let alone entrenched. It would hardly promote 'the efficient and equitable resolution of farm debt disputes'". 39 His Honour went on to say that "the farm mortgage is unaffected in its force or effect by variations in the amounts that it secures from time to time" and that: "The scheme of the legislation supports the proposition that a creditor ought to be entitled to proceed to enforce the terms of any agreement reached at or following a successful mediation with the authority of a s 11 certificate and otherwise unhindered" ([36]).
The operation of the Act 40 I turn now to consider whether the appellant's argument referred to in [37] above is supported by the terms of the Act. I shall assume initially that the appellant's contention that the debts arising under the First Loan Agreement were discharged by the Second and/or Third Loan Agreements is correct and will return later to consider the validity of that assumption. 41 Section 9(1) entitles a farmer who owes money to a creditor under a farm mortgage and who has been given a notice by the creditor under s 8 of the creditor's intention to take enforcement action under that mortgage, to request mediation "concerning the farm debt involved" within 21 days of the farmer being given such notice. Bearing in mind the context in which it appears, this expression must in my view be taken as referring to the farm debt or debts upon which the creditor is relying to found its intended enforcement action. The use of the word "involved", which indicates that the subsection is not referring to all farm debts that may be owed by the farmer to that creditor, renders this the only sensible meaning that can be attributed to the expression. 42 Section 9(1A) entitles a farmer who owes money to a creditor in relation to a farm debt and who has not been given a notice under s 8 to request mediation "concerning the farm debt involved", irrespective of whether the farmer is in default. In this instance the reference to the farm debt "involved" must in my view be to such farm debt or debts as the farmer has chosen to make the subject of the request for mediation. Again, the use of the word "involved" indicates that it is not all farm debts that the farmer owes to that creditor to which reference is made. The context indicates that the reference is to the narrower class of farm debt to which I have referred. 43 It could be argued that, because it is open to the farmer to request mediation in respect of every farm debt owed by the farmer to that creditor, there is no unfairness in a farmer not having the benefit of s 8 of the Act in respect of farm debts owed to the creditor when another farm debt of the farmer to that creditor has been satisfactorily mediated in the previous three years. This is not in my view a significant factor weighing against the appellant's argument: first, because no issue may have arisen between the parties about other debts at the time that a dispute about an earlier debt is mediated and, secondly, because it would be open to the creditor to decline such a request (see s 9A of the Act) although if the farmer is in default in respect of the farm debt involved, a refusal by the creditor to mediate may entitle the farmer to a six month exemption certificate: see s 9A(3) and s 9B. 44 So far as is relevant to this case the Authority must issue a certificate under s 11(1) if a farmer is in default under a farm mortgage and if it is satisfied that a "satisfactory mediation has taken place in respect of the farm debt involved". In the context of the farmer being in default and the creditor having given a notice under s 8 of its intention to take enforcement action, the reference to the "farm debt involved" must in my view again be to the farm debt or debts upon which the creditor relies to found its intended enforcement action (in this case, its claim for possession). Thus the circumstance that leads to the issue of a certificate under s 11 is the fact that mediation has taken place in respect of the "farm debt involved" understood in the sense I have explained, irrespective of whether other farm debts are owed by the farmer to the creditor and irrespective of whether the farmer is in default in respect of any of those other debts. 45 The respondent contends that even assuming that the debts relied upon in support of its possession claim were not the subject of the 5 June 2005 mediation, s 8(3) obviated the need for the respondent to give a notice under s 8(1) further to that which it gave on 7 October 2004 and which led to the mediation of 5 June 2005. Section 8(3) states that s 8 "does not apply if a certificate is in force under s 11 in respect of the farm mortgage concerned". Construction of the expression "the farm mortgage concerned" is critical to the Court's assessment of the validity of the appellant's argument. 46 This phrase in s 8(3) is reflected in the opening words of s 11(1) which provides for the issue of a certificate that the Act "does not apply to the farm mortgage". 47 Before turning to consider the meaning of the phrase and its counterpart in s 11(1), I note that, by reason of s 11(6), the expiry of a certificate whilst enforcement proceedings are on foot does not affect those proceedings if the certificate was in force when the proceedings were commenced. This was clearly the position in the present case.
The "farm mortgage concerned" 48 The question for determination then is whether the s 8(3) exemption applies to enforcement action based on all farm debts owed by the farmer to the creditor under the same mortgage instrument or only to the farm debt that was the subject of the mediation that justified the issue of the s 11 Certificate. The respondent says that the former is the case because the exemption is in respect of "the farm mortgage concerned" and not "the farm debt concerned". 49 The respondent submitted that "the farm mortgage" referred to is the instrument of mortgage. I do not agree. Whilst the definition of "farm mortgage" in s 4 (see [21] above) is inclusive rather than exhaustive, what appears in the definition is clearly directed, not to the document by which "an interest in, or power over" land is created, but to that interest or power itself. What appears in the definition is in my view accordingly inconsistent with the expression "farm mortgage" meaning the instrument by which an interest or power over land by way of security is created. I note at this point that a mortgage, as here, over Real Property Act land "has effect as a security but does not operate as a transfer of the land mortgaged" (s 57(1) Real Property Act 1900). For convenience I shall refer to such a mortgage as creating a security interest. 50 I also note that the definition of "farm mortgage" uses the expression "obligations of the farmer" rather than "farm debts". I do not regard this as of significance as the following words ("whether as a debtor or guarantor") make it plain that the word "obligations" has been used in the definition rather than the word "debts" to ensure that obligations by way of guarantee are encompassed. Further, the use of the plural ("obligations") does not derogate from the appellant's argument because a guarantee may, and usually will, give rise to a number of related obligations. 51 The respondent's alternative submission is that the instrument of mortgage here gave rise to a single indivisible security interest in the farm property and it is that security interest to which s 8(3) refers. Accordingly, the respondent submits that it may enforce that security interest (by obtaining possession) because there is a certificate under s 11 in respect of it. 52 This is the effect also of the primary judge's views. His Honour emphasised that the certificate for which s 11(1) provides is one that the Act does not apply to the "farm mortgage" (emphasis added - this also being the language of s 8(3)). He rejected the relevance of "the constantly changing factors" of the secured debt and various Loan Agreements (see Judgment [31] quoted in [38] above). He concluded that "[t]he Act directs attention to restraining, or more accurately postponing, the taking of enforcement action under the farm mortgage but does not do so in the context of, or by reference to, the amount owing at any particular time" (see Judgment [36]). 53 The appellant contends that it is not correct, at least in the context of the Act, to regard the security interest created by a mortgage instrument such as that in the present case as a single and indivisible one applicable to all such debts as may from time to time be secured over the property in favour of the mortgagee. She submits further as follows. The mortgage instrument created statutory charges (see ss 56, 57(1) Real Property Act, Professor Butt, Land Law, 6th ed (2010) Lawbook Co at [18 21] securing the variety of debts that were capable of falling within the ambit of the mortgage instrument. For the purposes of the Act, so the argument goes, it is correct to regard each debt within the ambit of the mortgage instrument as being secured by a charge in respect of the land, that is, a mortgage. Accordingly when a certificate is issued under s 11 it is referable to the "interest in, or power over" (see the definition of "farm mortgage" at [21] above) the farm property that secures the debt that has been the subject of mediation. It is not referable to the security interests, that is, the mortgages, that relate to other debts. 54 There does not appear to be any authority that bears directly on this question of construction. It may however be said that the appellant's approach is not inconsistent with the classic description of a mortgage given (in respect of land the subject of general law title) by Lindley MR in Santley v Wilde [1899] 2 Ch 474 as follows: "[A] mortgage is a conveyance of land or an assignment of chattels as a security for the payment of a debt or the discharge of some other obligation for which it is given. This is the idea of a mortgage: and the security is redeemable on the payment or discharge of such debt or obligation, any provision to the contrary notwithstanding. That, in my opinion, is the law" (at 474; see also E A Francis and K J Thomas Mortgages and Security 3 rd ed (1986) Butterworths at p 1 and E L G Tyler, P W Young and C Croft Fisher and Lightwood's Law of Mortgage 2 nd Australian ed (2005) LexisNexis Butterworths at [1.7]; Cambridge Credit Corporation Ltd v Lombard Australia Ltd [1977] HCA 29; (1977) 136 CLR 608 at 615; Handevel Pty Ltd v Comptroller of Stamps (Vic) [1985] HCA 73; (1985) 157 CLR 177 at 192). 55 Section 8(3) and in particular the reference in it to "the farm mortgage", is in my view capable, consistently with the text of that subsection and the definition of "farm mortgage", of being construed either in the manner for which the appellant contends or in the manner for which the respondent contends. As a result, the issue between the parties should in my view be resolved by applying the principle that "a construction promoting the purpose or object of the legislation is to be preferred to a construction that would not promote that purpose or object" (Vigolo v Bostin [2005] HCA 11; (2005) 221 CLR 191 at [53] per Gummow and Hayne JJ; s 33 Interpretation Act 1987). 56 The object of the Act is stated in s 3. That section indicates the legislative intent that "farm debt disputes" must be the subject of mediation "before a creditor takes possession of property or other enforcement action under a farm mortgage" (see [21] above). A construction of the Act that leads to the result that mediation of a dispute about one farm debt owed by a farmer to a creditor obviates the need for a creditor to submit in the following three years to mediation in respect of quite separate debts owed by that farmer to the creditor is in my view inimical to that object. 57 Consideration of the Act's object and of the consequences that (as I discuss below at [59] - [65]) would follow from the adoption or rejection of the appellant's argument to which I have referred in [37] above are in my view determinative in favour of adoption of the appellant's argument. The contrary conclusion would in my opinion seriously undermine the object of the Act as stated in s 3 (see [21] above). As the Act is remedial in character, "its language should be construed so as to give the most complete remedy which is consistent 'with the actual language employed' and to which its words 'are fairly open'" (Khoury v Government Insurance Office of New South Wales [1984] HCA 55; (1983 - 1984) 165 CLR 622 at 638, citations omitted). As Young J (as his Honour then was) said in Varga v Commonwealth Bank of Australia (1996) 7 BPR 15,052, in order to fulfil its purpose, the Act should be construed "favourably to the farmer" unless its language compels otherwise. 58 I add that the construction I have adopted is consistent with the following reference in the Explanatory Note to the Farm Debt Mediation Amendment Bill 1996 to the exclusion of "the debt concerned" from the operation of the Act: "At present a certificate issued under section 11 of this Act is valid for an unlimited time. The certificate is issued following any instance of successful mediation between the parties or of bona fide attempted mediation by the creditor, and effectively excludes the debt concerned from the operation of the Act from that time onward. Schedule 1[7] amends section 11 so that the validity of the certificate is limited to the period of three years after its issue" (emphasis added).
This passage in my view implies that a s 11 certificate was intended to apply only to a farm mortgage in respect of the farm debt that was the subject of a mediation. This is by no means determinative but it nevertheless assists in understanding the object of the Act (see Allianz Australia Insurance Ltd v GSF Australia Pty Ltd [2005] HCA 26; (2005) 221 CLR 568 at [80] - [81]; Nominal Defendant v GLG Australia Pty Limited [2006] HCA 11; (2006) 228 CLR 529 at [22]; Saeed v Minister for Immigration and Citizenship [2010] HCA 23; (2010) 84 ALJR 507 at [30] - [34]; s 34 Interpretation Act ).
Consequences of the different constructions 59 It is important to note that a successful outcome of the proceedings for the appellant depends not only upon acceptance by the Court of her argument concerning the Act, referred to in [37] above, but also upon the Court finding that the debts that were owing at the time of, and that were the subject of, the mediation of 5 June 2005 were subsequently discharged by the Second and/or Third Loan Agreement and are not debts upon which the respondent relies to support its claim for possession. The debts upon which the respondent in fact relies are, the appellant argues, ones that arose well after the mediation, by reason of the Third Loan Agreement. 60 The Court's acceptance of the appellant's argument concerning the Act would accordingly be unlikely to deter creditors from settling with their farm debtors by making commonly made concessions such as agreeing to accept a lesser sum than the farm debt claimed or by extending the time for payment. Fear that such concessions would entitle the debtors to further mediations before action to enforce those varied arrangements could be taken would be unjustified. Such a result would only follow if a creditor chose, as the respondent is alleged to have done in the present case, to discharge altogether the existing debt and to agree to make an entirely fresh advance. In that case there would be no remnant of the debt that was the subject of the mediation, non-payment of which could provide the basis for a claim for possession, or a mortgagee's sale, of the mortgaged property. If there were default in relation to the fresh advance, a new s 8 notice would be required. 61 In the more common case that I described in the first sentence of [60] above, the debt that was the subject of the mediation would continue to exist, either in whole or in part, albeit in a varied form. The non-payment of such a farm debt in accordance with such varied arrangements as were made at or after the mediation would, under the usual form of mortgage, entitle the creditor to possession and to effect a sale of the mortgaged property. As this debt would have been, for the purposes of the mediation and the intended enforcement action, the (or part of the) "farm debt involved" (to use the words of s 11(1)(c)(i) of the Act) the relevant certificate under s 11 could properly issue, or have been properly issued, in respect of that debt (or part thereof), and the creditor would not be prevented by s 8 of the Act from taking enforcement action, that is, in the usual case, seeking possession of and selling the mortgaged property. 62 The impact of acceptance of the appellant's argument would thus be confined to situations in which the farm debt upon which a creditor relies for its enforcement action is a different one from the farm debt that was the subject of mediation. That may occur because, as is alleged to be so in the present case, the earlier debt has been discharged and replaced by a new debt. Alternatively, the debt upon which a creditor relies for a possession claim may not have been connected in that way to the earlier debt but be a debt having entirely independent origins. Indeed it may have come into existence before the debt that was the subject of the mediation came into existence. A consequence of acceptance of the respondent's argument would be that if a mediation had occurred in respect of one only of a number of entirely separate farm debts owed by a farmer to a creditor and covered by an "all monies" mortgage, the creditor would not be required to comply with s 8 of the Act in respect of any of the separate farm debts, so long as the period, referred to in s 11(5) of the Act, of three years from the conclusion of the mediation had not expired. 63 This would be so even if the farm debt the subject of the mediation was a small one and the others were numerous and large. The anomalous result that would follow is illustrated by the following example. Assume a farmer borrowed $2,000,000 from a bank, secured by an "all monies" mortgage instrument, to assist in the purchase of a farm. Assume further that the farmer subsequently borrowed $100,000, secured under the same mortgage instrument, to assist with the purchase of a tractor, that a dispute arose in relation to that loan and that that dispute was the subject of a mediation which led the Authority to issue a certificate under s 11. If during the following three years a dispute arose between the farmer and the bank about the loan for the purchase of the farm, the bank could, unless the appellant's argument is correct, seek and obtain possession of the property, or exercise a power of sale in respect of it, without the need to give the farmer the opportunity to engage in a mediation with the bank concerning that dispute. On the respondent's case, the certificate issued as a result of a mediation concerning the relatively small amount would give the bank protection from the operation of the Act in relation to a dispute about a much larger amount that was entirely unrelated to the earlier dispute. Such a result would be contrary to the manifestly remedial policy underlying the Act. 64 I would add that if the parties intend that the farm debt that is the subject of a mediation not be discharged by varied arrangements made consequent upon the mediation it is a simple matter for them to so state in any settlement agreement or deed. I accordingly do not consider that adoption of the appellant's argument would be productive of uncertainty about the application of the Act and lead to an increase in litigation. 65 For the reasons I have given, the object of the Act and the consequences of a contrary construction require the expression "farm mortgage" where it appears in the Act to be construed as a reference to the interest in, or power over, the farm property that secures the particular farm debt that is the subject of the creditor's intended enforcement action. As I have indicated that is consistent with the text of the Act. On this basis an instrument of mortgage such as that being considered here is to be regarded, for the purposes of the Act, as giving rise to as many security interests (that is, mortgages) as there are separate debts.
Decisions concerning the Act 66 I should refer in conclusion on this topic to two decisions of this Court upon which the respondent relied. The first is Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337 in which it was held that proceedings to wind up a farm debtor corporation on the basis of non-compliance with a statutory demand did not constitute an "enforcement action" as defined in the Act (see [21] above). In that case Priestley JA referred to the Act as "imposing its temporary moratorium on actions to enforce farm mortgages, not farm debts" (at 340C). He agreed with the statement of the trial judge in that case that "where a debt is secured by a mortgage, action to recover the debt which is not dependent upon the existence of the mortgage, cannot properly be described as action to enforce the mortgage" (at 342C). My reasoning above is not inconsistent with that observation and in fact recognises the distinction that the Act draws between farm debts and the mortgages by which they are secured. The question of identification of the "mortgage" referred to in s 8(3) that arises in the present case did not arise in that case. 67 The second decision is Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252 which was concerned with the amenability to judicial review of a decision to issue a certificate under s 11 of the Act. In the course of considering that issue, Gleeson CJ observed that "[i]t is not the purpose of the legislation to provide an unlimited moratorium on farm debts, or to allow debtors to keep creditors at bay for as long as they wish" (at 257B). Again, there is no inconsistency between this observation and the reasons I have given above for adoption of the appellant's argument. Adoption of that argument does not result in "an unlimited moratorium". Rather, its effect is to ensure, consistently with the object of the Act expressed in s 3, that the Act's protection is available in respect of each separate farm debt owed by the farmer to the creditor.
Whether the farm debts that arose under the First Loan Agreement were discharged 68 I now return to consider the validity of the assumption that I made earlier that the farm debt that arose under the First Loan Agreement, and that was the subject of the mediation of 5 June 2005 and of the s 11 Certificate subsequently issued in relation to that mediation, was discharged by the entry of the parties into the Second and/or Third Loan Agreements. 69 It is clear from the matters to which I referred in the course of describing the respondent's Amended Statement of Claim (see [31] - [36] above) that all interest debts due prior to the date of the mediation (and indeed prior to 28 July 2005) were repaid or released on or prior to 28 July 2005. 70 The question that then arises is whether by the Loan Agreement of 28 July 2005 the parties agreed that the obligation of the appellant to repay the original advance of $450,000 was released, and replaced by an obligation to repay an advance of $640,000, that advance having been applied, as to $450,000 to repay the earlier advance, and as to the balance, in the manner specified in the Deed of Settlement of 28 July 2005 (see [32] above). The alternative possibility, which the respondent submitted to be the correct one, was that by the documents of 28 July 2005 the parties simply provided for an extension of the time for the repayment of the original advance of $450,000 and for a further advance of $190,000. 71 The following authorities identify the principles to be applied in resolving this issue. 72 In Dan v Barclays Australia Ltd (1983) 57 ALJR 442 guarantors guaranteed compliance by a borrower with a bill acceptance facility made available to the borrower pursuant to a letter from the respondent bank to the borrower dated 9 October 1978. By correspondence between them, the bank and the borrower subsequently varied that facility. By majority, the High Court held that the facility as it stood after variation of the terms contained in the bank's letter of 9 October 1978 was not that to which the guarantee related, with the result that payments for which the varied agreement provided were not recoverable under the guarantee. 73 The majority, Mason, Brennan and Deane JJ, dealt with the issue as one of construction of the guarantee. The minority, Wilson and Dawson JJ, did so also but made the following observations that were not, as a matter of principle, inconsistent with the judgment of the majority and that are relevant to the present case: "The distinction between rescission and variation is discussed in such cases as Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd (1957), 98 CLR 93, Morris v Baron and Co, [1918] AC 1 and British and Beningtons Ltd v N W Cachar Tea Co, [1923] AC 48. Variation of an existing contract, whilst it in one sense always gives rise to a new contract, does not always result in a substituted contract which, in order to operate, must necessarily rescind the contract which is varied. Variation may take the form of rescission of some of the terms of an existing contract but if that is to have the effect of rescission of the whole contract, the rescission must be express or by necessary implication and the determining factor must always be the intention of the parties as disclosed by contract when varied. See Tallerman & Co Pty Ltd v Nathan's Merchandise (Victoria) Pty Ltd , above, per Taylor J at pp 143-144.
It can hardly be suggested that the parties intended, by any variation of the contract formed by the acceptance of the offer contained in the letter of 9 th October, 1978, to rescind that contract. The whole method of operation of the facility, payment of an establishment fee, acceptance commission, stamp duty and a non-use commitment fee were provided for in that letter and no where else. The option of discounting bills with Barclays was contained only in that letter and it was the only place where provision was made for default. It is significant that the only place in which mention is made of interest or charges payable to Barclays (other than the variation fee) is in the letter of 9 th October, 1978. What the parties agreed to by way of variation was expressed as being a variation of the letter of 9 th October, 1978 or of that letter as amended by the letter of 18 th January, 1979. None of the variations could stand by themselves and were only intelligible by reference to the terms and conditions contained in the letter of 9 th October, 1978. No intention is expressed that the terms and conditions contained in that letter should be set aside; on the contrary there is the clear assumption that, apart from the variations, they should continue to bind the parties. For that reason there can be no implication arising from any inconsistency that the variations were intended to rescind the terms and conditions of the letter of 9 th October, 1978.
There is, we believe, no room for the conclusion that the agreement concluded on the terms and conditions of the letter of 9 th October, 1978 was brought to an end by any of the variations agreed by the parties. Nevertheless, as we have said, the question remains one of description rather than a choice between variation and rescission" (at 448 - 449). 74 In Commissioner of Taxation of the Commonwealth of Australia v Sara Lee Household & Body Care (Australia) Pty Ltd [2000] HCA 35; (2000) 201 CLR 520 the plurality said the following: "[23] In Tallerman & Co Pty Ltd v Nathan's Merchandise (Vict) Pty Ltd ((1957) 98 CLR 93 at 144) Taylor J said:
'It is firmly established by a long line of cases ... that the parties to an agreement may vary some of its terms by a subsequent agreement. They may, of course, rescind the earlier agreement altogether, and this may be done either expressly or by implication, but the determining factor must always be the intention of the parties as disclosed by the later agreement.'
[24] That passage was cited with approval by Wilson and Dawson JJ in Dan v Barclays Australia Ltd ((1983) 57 ALJR 442 at 448-449; 46 ALR 437 at 448). It accords with principle and with authority (eg, Morris v Baron and Co [1918] AC 1; British and Beningtons Ltd v NW Cachar Tea Co [1923] AC 48; United Dominions Corporation (Jamaica) Ltd v Shoucair [1969] 1 AC 340).
[25] It is clear that the parties to the agreements of 31 May and 30 August 1991 did not intend that the agreement of 31 May should be wholly rescinded. That is apparent from a number of the provisions of the 30 August agreement. In particular, it was made clear by s 11 of the 30 August agreement, which has been quoted above [this section expressly provided for the earlier agreement to remain 'in full force and effect']. This is hardly surprising. The agreement of 31 May had worldwide operation, and covered many dispositions and acquisitions that were unaffected by the alterations proposed in relation to Australia. It is also to be observed that the deed of assignment executed by the respondent and Nicholas Products Pty Ltd on 30 August 1991 recited that it was entered into pursuant to the agreement of 31 May 1991, as amended. The manifest intention of the parties was not that the agreement of 31 May 1991 should be wholly rescinded and replaced by a new agreement, but that the rights and liabilities under, and the mode of performance of, the agreement, should be varied in certain respects". 75 In Concut Pty Ltd v Worrell [2000] HCA 64; (2000) 75 ALJR 312 the plurality said the following: "[20] The decision of the majority in the Court of Appeal in the present case appears to involve the holding that there was a discharge of the prior contractual relationship between Concut and Mr Wells, that the Service Agreement became the exclusive charter of the contractual rights and duties of the parties, and that subsisting rights and liabilities under the prior contract, including those arising by reason of breach thereof, were compromised or released. However, the text of the Service Agreement itself, as well as the surrounding circumstances indicate that such a conclusion would not be in accord with the manifest intention of the parties". 76 Their Honours then referred to various aspects of the Service Agreement in question in that case that indicated that the previous employment contract between Mr Wells and the employer was to continue and that the terms of the continuing contractual relationship were to be supplemented by the terms of the Service Agreement. Their Honours said that the Service Agreement "manifested no intention to displace rights and liabilities which had accrued between the parties since Mr Wells had become the Queensland branch manager in 1980 by releasing or compromising those rights and liabilities" (at [21]). Indeed the Agreement contained a clause expressly preserving the accrued rights of Mr Wells in respect of his prior service. 77 The decisions in Sara Lee and Concut were applied by this Court in Encyclopaedia Britannica Australia Ltd v David Campbell [2009] NSWCA 286. In that case, Sackville AJA (with the concurrence of Giles JA and myself) observed: "57 In my opinion, the May 2000 Letter, on its proper construction, provided for a period of three months notice in the event of termination of the respondent's contract, otherwise than for misconduct or by reason of redundancy. Although it may not matter, the better view is that the May 2000 contract was intended to amend (and not to discharge) the pre-existing contract between the parties. This intention is suggested by the absence of any reference in the May 2000 Letter to a number of important issues (including superannuation, health insurance and sick leave entitlements) dealt with in the June 1999 Letter. (That letter retained its contractual force by reason of the express provision in the March 2000 Letter that it would form an addendum to the respondent's original letter of employment.) Clearly enough, the parties intended that some or all of the contractual terms in force immediately prior to the respondent's appointment as General Manager would continue to form part of his contract of employment after his appointment as General Manager. On this basis, the May 2000 Letter preserved the contractual effect of the period of notice stipulated in the 13 March 2000 file note, namely that the respondent was entitled to three months notice on termination of his contract, otherwise than for misconduct or by reason of redundancy". 78 To my mind, these authorities indicate that the first question to be addressed in the present context is whether on its true construction the Second Loan Agreement manifested an intention of the parties that the terms of that Agreement (together with the Deed of Settlement of 28 July 2005) exhaustively govern their relationship, with the result that the First Loan Agreement was superseded and that the debts due under it were discharged. The second question is whether the Third Loan Agreement was likewise intended to supersede the Second Loan Agreement. 79 These questions should in my view be answered in the affirmative. 80 As is apparent from the description given in [29] above, the Second Loan Agreement purported to be comprehensive in its terms. It did not leave any aspect of the relationship between the parties to be governed by the First Loan Agreement. The principal sum advanced under the Second Loan Agreement was $640,000 which incorporated not only the original advance but the further advance. The terms on which that advance of $640,000 was made were set out in the Second Loan Agreement. That Agreement did not require, or permit, any reference to the First Loan Agreement for the purpose of identifying any further or different terms. 81 A letter of offer of 5 July 2005 was expressed to be incorporated in the Second Loan Agreement. This letter referred to the "Loan Amount" as being "$640,000.00 (Additional Advance $190,000.00)". The reference to an "Additional Advance" there and in two other places in the letter does not in my view indicate that the letter, or the Second Loan Agreement into which it was incorporated, assumed the continued operation in any way of the First Loan Agreement. In light of the unequivocal way in which the Second Loan Agreement itself was expressed, these references should in my view be understood as no more than references to the historical position, that is, that the present advance was for an amount $190,000 greater than the previous one. The position is even clearer in respect of a Letter of Offer of 14 August 2006 which was incorporated into the Third Loan Agreement. This letter did not contain any reference to any part of the $640,000 as being an additional advance. It simply referred to the "Loan Amount" as being $640,000. 82 In my opinion the effect of the Second Loan Agreement was that the original advance of $450,000 was treated as having been repaid by part of the advance under the Second Loan Agreement of $640,000. The advance of $640,000 provided for by that Agreement only made sense if the earlier advance of $450,000 was to be treated as having been repaid, as on no view of the relationship between the parties did the respondent advance $1,090,000 ($450,000 plus $640,000) to the appellant. As indicated in [28] above, the parties agreed that the balance of the advance of $640,000 would be applied in the manner specified in the Deed of Settlement of the same date. 83 A similar conclusion is apt in respect of the Third Loan Agreement. That Agreement clearly manifested an intent that it be an exhaustive statement of the terms of the advance of $640,000 expressed to have been made under it. That advance repaid the advance of the same amount under the Second Loan Agreement. As a result the Third Loan Agreement superseded that earlier Agreement. 84 The terms of the Deed of Settlement do not conflict with the views that I have expressed. That Deed recited the original borrowing of $450,000 and contained an agreement by the respondent to increase "the current principal amount of $190,000.00, ('the further advance') making a total of $640,000.00, the principal ('The Loan')". The parties could have given effect to this agreement in the Deed by varying the original arrangement to increase the principal by $190,000 but the Second Loan Agreement in my view manifested a different intent, namely, to treat the original advance as having been repaid and to have the respondent make an advance of $640,000 upon terms comprehensively stated in the Second Loan Agreement. 85 The respondent contended that its "Statement of Loan A/C" relating to the appellant showed that the parties had not agreed to treat the original advance as having been repaid because that document treated the indebtedness of the appellant as a single continuous running account. I do not however consider that this account is of any significance. The executed Loan Agreements recorded the arrangements between the parties. The fact that after the Agreements were made one party treated the transactions in a particular way in its books of account does not dictate the meaning of the executed Agreements.
Conclusions as to the claim for possession 86 For the reasons that I have given, I do not consider that the fact that the Certificate dated 20 October 2006 was issued to the respondent under s 11 of the Act and was current when the respondent commenced the present proceedings exempted it from the requirement under s 8 of the Act to give to the appellant a notice under that section before making a claim for possession of the appellant's farm property based on debts owing under the Third Loan Agreement. As a result, the enforcement action taken by the respondent in the present proceedings, that is, its claim for possession of the appellant's farm property, is void under s 6 of the Act and that claim for possession should be dismissed.
The monetary judgment 87 Whilst the respondent alleged in its Amended Statement of Claim ("ASC") that the appellant had breached the Third Loan Agreement (as well as the earlier Loan Agreements and the mortgage), its claim to entitlement to repayment of the principal sum and to unpaid interest was said in the ASC to be "under the terms of the Mortgage" (see [19], [20] and [21]). This reflected the fact that the mortgage instrument contained a promise by the appellant to pay to the respondent any amount that was owing by the appellant under any agreement between them. This promise covered debts owed by the appellant under the Loan Agreements. Whilst the respondent could have based its claim in the ASC for principal and interest upon the Third Loan Agreement, it was entitled as a matter of contract to base it, as it did, in direct terms upon the terms of the mortgage instrument and in only indirect terms on the Third Loan Agreement. 88 If the claim had been framed in the former fashion there would have been no doubt that the Act did not preclude the respondent's action in debt. Nevertheless, even though the respondent framed its claim as one under the mortgage instrument, the Act does not in my view prevent or inhibit its claim in debt. This is because the Act is concerned with action to enforce a "farm mortgage" as defined in s 4 (see [21] above). As I have said earlier a "farm mortgage" for the purposes of the Act is not the instrument by which a mortgage is created, but instead is a security interest in, or power over, a farm property (see [65] above). A claim for a debt due under a mortgage instrument is not an "enforcement action" for the purposes of the Act because it does not involve the enforcement of security over the farm property (see definition in s 4). It is a purely personal action. The decision in Australian Cherry Exports (see [66] above) provides support for this conclusion although it is not clear whether in that case the farm debt sued upon arose independently of the mortgage instrument or arose out of a personal covenant in the mortgage instrument. The position is in my view the same in both cases. 89 The appellant argued on appeal that as the respondent's claim for possession was rendered void by s 6 of the Act, so also was the remainder of its claim. Her counsel submitted that the proceedings constituted an entirety and parts of it could not be severed (Appeal Transcript pp 7 - 9). I do not agree. The claim for possession and the claim for the debts owing are distinct. Only the former is affected by s 6 of the Act. 90 Accordingly, the monetary judgment entered by the primary judge against the appellant in favour of the respondent (Order 4) must stand. 91 As this question was the subject of only limited reference in oral argument on appeal and was not dealt with in the Written Submissions, I would not deprive the appellant of any part of the costs to which she would otherwise be entitled as a successful appellant. 92 The judgment of the primary judge does not suggest that there was any argument before him as to whether the respondent's claim in debt was affected by the Act. However a substantial issue under the Contracts Review Act was litigated and determined by the primary judge. As the appellant's argument concerning the Act succeeds but the primary judge's decision upon the Contracts Review Act (which was not challenged on appeal) stands, the parties should in my view be given the opportunity to make submissions to this Court as to what orders should be made in respect of the costs at first instance.
(2) Set aside the orders made at first instance other than Orders 4 and 6;
(3) Declare that the respondent's claim for possession of the appellant's property is void pursuant to s 6 of the Farm Debt Mediation Act 1994;
(4) Direct, first, that within seven days of the date of this judgment the appellant lodge, with the Court, Written Submissions as to the order that the Court should make concerning the costs of the proceedings at first instance, secondly, that within a further seven days the respondent lodge its submissions on that topic and, thirdly, that within a further seven days the appellant lodge any reply she wishes to make on that topic;
(5) Direct that the question of what order for costs should be made in respect of the proceedings at first instance be determined upon the basis of the Written Submissions referred to in the last preceding Order without the necessity for a further oral hearing;
(6) Order the respondent to pay the appellant's costs of the appeal; and
(7) The respondent to have a certificate under the Suitors' Fund Act 1951, if qualified. 94 SACKVILLE AJA: I am grateful to Macfarlan JA for setting out the facts and the relevant provisions of the Farm Debt Mediation Act 1994 ("the Act"). I have reached a different conclusion from his Honour on the construction of ss 8(3) and 11(1) of the Act. Accordingly, I have concluded that the appeal should be dismissed. In giving my reasons, I shall endeavour to avoid any unnecessary repetition.
The Issue 95 The issue in the appeal is whether the primary Judge correctly held that the certificate issued on 20 October 2006 ("Certificate") by the New South Wales Rural Assistance Authority ("Authority"), pursuant to s 11(1) of the Act, had the effect of rendering the prohibition in s 8(1) on enforcement action by the respondent inapplicable to the present proceedings. His Honour held that the Certificate satisfied s 8(3) because it was a certificate in force "in respect of the farm mortgage concerned" at the time the present proceedings were instituted. Accordingly s 8(1) did not create any barrier to the respondent pursuing enforcement action against the appellant. 96 The appellant's contention is that the Certificate issued by the Authority was not one "in respect of the farm mortgage concerned" within the meaning of s 8(3) of the Act. Ms Thomas, who appeared for the appellant, submitted that the notice required by s 8(1) must be one that provides the farmer with an opportunity to request a mediation concerning the particular farm debt involved in the enforcement action. This was said to follow, inter alia, from the use of the word "creditor" in s 8(1), which is defined in s 4(1) to mean a person to whom a farm debt is for the time being owed by a farmer. Ms Thomas contended that the only agreement under which the appellant owed obligations to the respondent at the time of the enforcement action was the Third Loan Agreement. The obligations under that agreement constituted the relevant farm debt for the purposes of s 8(1). 97 Ms Thomas next contended that the Certificate did not satisfy s 8(3) of the Act and thus did not relieve the respondent from its obligations under s 8(1). She accepted that a certificate under s 11(1) can be said to be issued in respect of a farm mortgage. Nonetheless, the definition of "farm mortgage" was not directed at the mortgage instrument, but at the interest in the farm property securing the farmer's obligations as a debtor. Identifying "the farm mortgage concerned" must involve a determination of the obligations secured by the farm mortgage being, relevantly, the farm debt at the time of the enforcement action. 98 Ms Thomas accordingly submitted that s 8(3) should be construed as confined to a certificate in respect of the farm mortgage, to the extent that the certificate refers to the farm debt the subject of the enforcement action. If the certificate issued under s 11 is not in respect of the farm debt which is the subject of the enforcement action, it is not "a certificate in force under section 11 in respect of the farm mortgage concerned". Thus the certificate, in order to satisfy s 8(3), must be issued in respect of the same farm debt that the creditor is seeking to enforce by action under the farm mortgage. 99 Since the Certificate in the present case related to the farm debt in existence at the date the respondent served a notice under s 8(1) (7 October 2004) and since (as the appellant argued) this debt had been discharged and replaced by a fresh farm debt created by the Third Loan Agreement, the Certificate was not in respect of the "farm mortgage concerned" in the relevant sense. Accordingly, s 8(1) applied to prohibit the respondent taking any enforcement action in respect of the farm mortgage unless and until it had served a new notice under s 8(1) and the parties had complied with the statutory mediation process. 100 As Macfarlan JA has explained, the facts are not in dispute. In particular, the following is common ground. (The italicised words or phrases are all terms defined in s 4(1) of the Act): o the appellant is a "farmer"; o the appellant is the proprietor of a "farm"; o the farm constitutes a "farm property"; o the respondent is a "creditor", since it is a person to whom a "farm debt" is for the time being owed by a farmer; o the respondent holds a "farm mortgage" over the farm property; o the only notice under s 8(1) of the Act given by the respondent to the appellant was that dated 7 October 2004; o the respondent applied to the Authority for the Certificate shortly before it was issued on 20 October 2006; and o the Certificate was valid and was in force on 29 October 2007 when the respondent commenced proceedings against the appellant claiming, inter alia, an order for possession of the farm. 101 The Certificate was in evidence. It stated that it was issued pursuant to s 11 of the Act and certified that the Authority was satisfied that the Act "does not apply to the farm mortgage details of which are set out hereunder". The Certificate set out the name of the farmer, the address of the farm property (which was identified as the property over which the respondent's security interest was held) and the registered number of the mortgage security instrument. 102 The Certificate further stated that the balance outstanding at the date of the s 8(1) notice (7 October 2004) was $488,250. The notice had identified the acts of default by the appellant up to that time, being the failure to pay interest and default interest due on the fifth day of each month from March 2004 until October 2004.
Legislative History 103 As Young J explained in Varga v Commonwealth Bank of Australia (1996) 7 BPR 15,052; (1997) NSW Conv R 55-797, the original version of the Act ("1994 Act") was enacted by the New South Wales Parliament in unusual circumstances. The Farm Debt Mediation Bill 1994 was introduced into the New South Wales Legislative Assembly in October 1994 by an Opposition Member of Parliament. At that time, Independents held the balance of power in the Legislative Assembly and it appears that they supported in principle legislation intended to grant relief to farmers under pressure from lending institutions. 104 Ultimately, the Act was passed in a much amended form, with amendments to the Bill being introduced both in the Legislative Assembly and Legislative Council. As Young J observed in Varga v CBA, the Bill in its original form appears to have been based on somewhat similar legislation in force in Iowa. However, the source or sources for many of the amendments made during the Bill's passage in Parliament are not clear. 105 Sections 6 and 8(1) of the Act as enacted in 1994 ("Original Act"), were in the same form as the current legislation, although certain terms used in ss 6 and 8(1) of the 1994 Act were defined somewhat differently. 106 Section 11(1) of the Original Act was different in certain respects from the current version of s 11(1). However, like the current version, it required the Authority to issue a certificate on the application of a "creditor" if satisfied, inter alia, that "a satisfactory mediation in respect of the farm debt has taken place". 107 Section 8(3) of the Original Act provided that s 8: "does not apply if the Authority has given a certificate under s 11 in respect of the farm mortgage concerned."
Section 8(3) of the Original Act was amended by the Farm Debt Mediation Amendment Act 1996 (" 1996 Act "). The 1996 Act omitted the words " the Authority has given a certificate " and replaced them with the words " a certificate is in force ". Section 8(3) thereupon took its present form. 108 The Explanatory Note to the Farm Debt Mediation Amendment Bill 1996 stated as follows: "At present a certificate issued under section 11 of this Act is valid for an unlimited time. The certificate is issued following any instance of successful mediation between the parties or of bona fide attempted mediation by the creditor, and effectively excludes the debt concerned from the operation of the Act from that time onwards. [The Bill] amends section 11 so that the validity of the certificate is limited to the period of three years after its issue. On the expiry of the three year period, the protection of the Act is again extended to the farmer, except to the extent that litigation has already commenced before expiry of the certificate."
Reasoning 109 The difficulty confronting the appellant's argument is a textual one. The Act draws a clear distinction between a "farm mortgage" and a "farm debt". The latter is defined by s 4(1) to mean: "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." 110 The definition of "farm mortgage" is inclusive. The expression relevantly includes: "any interest in, or power over, any farm property securing obligations of the farmer whether as debtor or guarantor …"
It will be seen that the definition of " farm mortgage " is not limited to an interest in a farm property securing a " farm debt ", but refers to an interest securing " obligations " of the debtor. 111 The only person who can make an application for a certificate under s 11 is a "creditor under a farm mortgage". As I have noted, a "creditor" is a person to whom a farm debt is for the time being owed by a farmer (s 4(1)). It follows that the application must be made by a person to whom a farm debt is for the time being owed. 112 The Authority is obliged to issue a certificate that the Act "does not apply to a farm mortgage" if various conditions are satisfied. These include the Authority being satisfied that: "satisfactory mediation has taken place in respect of the farm debt involved." 113 There may be an issue as to whether the "farm debt involved" must be the farm debt due to the creditor at the time it makes the application for a s 11 certificate. If so, a further issue may arise as to the criteria to be applied in order to determine whether the debt due to the creditor at the time of the application for a s 11 certificate is the same debt in existence at the time of the mediation. 114 Whatever the answers to these questions, s 11 clearly differentiates between the effect of the certificate and the nature of the mediation as to which the Authority must be satisfied. The chapeau to s 11 provides for the Authority to issue a certificate that the Act does not apply to a farm mortgage. By contrast, in order to issue a certificate, the Authority must be satisfied that a satisfactory mediation has taken place in respect of the farm debt involved. 115 The Certificate issued in the present case reflects the language of s 11(1) of the Act, in that it certifies that the Authority is satisfied that the Act does not apply to the farm mortgage, the details of which are set out in the Certificate. It does not expressly certify that the Authority is satisfied that a satisfactory mediation has taken place in relation to a particular farm debt. However, it does record the balance due to the respondent at the date of the s 8(1) notice (7 October 2004). 116 The language in the chapeau to s 11(1) is carried through into s 8(3) of the Act. The prohibition on enforcement action in s 8(1) applies to a creditor (that is, a person to whom a farm debt is for the time being owed by a farmer) to whom money under a farm mortgage is owed. The creditor is not permitted to 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. However, s 8(3) renders s 8(1) inapplicable if a certificate is in force "in respect of the farm mortgage concerned". As will be recalled, there is nothing in the definition of "farm mortgage" which refers to a particular farm debt being secured; the definition includes any interest in the farm property securing "obligations of the farmer". Section 8(3) does not provide that s 8(1) does not apply if a certificate is in force in respect of the farm mortgage concerned to the extent to which the certificate relates to the farm debt which is the subject of the enforcement action. If it did, the appellant's submission would no doubt be correct. 117 The distinction to which I have referred was recognised in Australian Cherry Exports Ltd v Commonwealth Bank of Australia (1996) 39 NSWLR 337. The issue in that case was whether proceedings to wind up a corporate "farmer" on the basis of a statutory demand to pay a "farm debt" secured by a farm mortgage constituted "enforcement action" for the purposes of s 8(1) of the Act. A majority (Priestley and Clarke JJA; Cole JA dissenting) held that the winding up proceedings were not caught by s 8(1) as the proceedings were in respect of the farm debt, not the farm mortgage. 118 Priestley JA pointed out (at 339) that s 8(1) of the Act prohibited enforcement action "in respect of the farm mortgage, not the farm debt". Later his Honour observed (at 340) that: "the Act appears quite plainly to be imposing its temporary moratorium on actions to enforce farm mortgages, not farm debts. The distinction is significant. A farm debt is two things, a debt, and a secured debt. It does not cease to be a debt because it is also a secured debt. Had the purpose been directed against actions to enforce farm debts both as debts and secured debts, nothing would have been easier than to say so." 119 Clarke JA noted (at 343) that if the legislature had intended that there should be a moratorium on a creditor taking steps to enforce a debt it could have said so. Instead it had quite deliberately limited the provisions of s 8(1) to the enforcement of a farm mortgage, thus making it clear that the ambit of the Act was limited to the enforcement of rights under a farm mortgage such as taking possession of or selling the farm subject to the mortgage. 120 The issue in the present case is different from that addressed in Cherry Exports v CBA, but the reasoning is nonetheless pertinent. Parliament could have limited the scope of the exclusion contained in s 8(3) very easily, by using the language to which I have referred (at [116] above). Instead it deliberately chose to exclude s 8(1) if a certificate is in force "in respect of the farm mortgage concerned". The statutory criterion for exclusion simply does not incorporate any reference to a "farm debt", much less to a farm debt that has been the subject of a certificate under s 11. 121 As I have noted (at [100] above), the appellant accepted that the Certificate was valid and in force at the date the proceedings were commenced. In my view, the Certificate clearly enough is "in respect of the farm mortgage concerned". The farm mortgage is the interest in the appellant's property created by the mortgage instrument identified in the Certificate. The definition of "farm mortgage" is satisfied because the interest so created secures obligations of the appellant as a debtor. The Certificate, conformably with s 11(1), expressly identifies the farm mortgage to which the Act is not to apply. 122 If the farm debt in existence at the date the respondent applied for a s 11 certificate was not the same farm debt in existence at the date of the mediation, it is arguable that the Authority should not have issued the Certificate. The argument would be that "the farm debt involved" (s 11(1)(c)(i)) means the farm debt due to the "creditor" at the time the application is made. If the argument is correct, a certificate cannot lawfully be issued unless the Authority is satisfied that satisfactory mediation has taken place in respect of the farm debt in existence at the time the creditor applies for a s 11 certificate. 123 It is important to appreciate, however, that this Court has held that the Authority's decision to issue a certificate under s 11 of the Act is amenable to judicial review: Gain v Commonwealth Bank of Australia (1997) 42 NSWLR 252. One of the factors taken into account by Gleeson CJ in that case (at 255) was that the issue of a certificate: "has important consequences for the respective rights and liabilities of the parties, especially bearing in mind that, in cases of financial difficulty or insolvency, it would not be uncommon for time to be important to parties exercising, or seeking to resist the exercise of, contractual rights." 124 It follows that the appellant, if she considered that the Authority erred in law in issuing the Certificate, could have sought judicial review of the Authority's decision. In short, she was not without a remedy if the respondent was not entitled under the Act to obtain the Certificate from the Authority. However, this course was not pursued. 125 In my opinion, there is nothing anomalous about this result. Parliament might well have taken the view that in this area certainty is essential. The effect of the construction I prefer is that a farmer in default can insist on a mediation (see ss 9(1), 9B, 10), but if the Authority issues a certificate under s 11, the farmer cannot insist on a further mediation under the Act while the certificate is in force. This is so regardless of whether the farm debt that was due at the time of the mediation has since been supplanted by a fresh farm debt, for example by the execution of a deed of loan entered into by the parties in consequence of a successful mediation. In effect, the farmer is entitled to one compulsory mediation every three years (see s 11(5)). 126 Macfarlan JA suggests that acceptance of the construction I prefer leads to the result that: "mediation of a dispute about one farm debt owed by a farmer to a creditor obviates the need for a creditor to submit in the following years in respect of quite separate debts ." (Emphasis added.)
It must be remembered, however, that s 8 of the Act is excluded only if a certificate is in force in respect of the " farm mortgage concerned ": s 8(3). It is true that a certificate might issue in respect of a debt that has since been extinguished and that the proposed enforcement action might relate to a debt created after the certificate was issued. But both debts must be secured by the same mortgage; otherwise the certificate would not be in force " in respect of the farm mortgage concerned ". As a practical matter, it is not likely that debts secured by the same mortgage will be " quite separate ", in the sense of having little or no relationship with each other. The facts of the present case illustrate the point. 127 Macfarlan JA gives the example of a dispute relating to a relatively small additional loan taken by a farmer to acquire a tractor. If the creditor attempts to enforce the all moneys mortgage, the mediation required by s 8(1) would extend to the entirety of the farm debt then due by the farmer to the creditor ($2.1 million in Macfarlan JA's example). If the creditor attempts to enforce a separate "farm mortgage" relating to the additional loan (for example, by repossessing the tractor under a hire purchase agreement), the effect of any certificate would be limited to the separate farm mortgage. Enforcement action by the creditor under the all moneys mortgage would require a fresh mediation, since the certificate in relation to the hire purchase agreement would not have been given "in respect of " the all moneys mortgage. 128 If the appellant's argument is correct, the rights of the parties will depend on nice and potentially difficult questions as to whether the farm debt in existence at the time of the mediation (or the notice under s 8) is the same farm debt in existence at the time of the enforcement action. The Act clearly contemplates that mediations may be conducted by non-lawyers (see s 12) and that parties may represent themselves or be represented by agents or advisers who are not necessarily lawyers (see s 17(1), (4)). On the appellant's argument a great deal may turn on the precise language used in an agreement resulting from a mediation in which lawyers are not necessarily involved. The present case, as Macfarlan JA's analysis (at [68]-[85]) demonstrates, illustrates the difficult issues that can arise. If a s 11 certificate creates an exemption for a creditor from the prohibition in s 8(1) so long as it is in force, the position is clear and disputation is minimised. 129 The appellant cited in support of her construction of s 8(3) of the Act the observations of Young J in Varga v CBA. Where his Honour said: "One must construe the Act to fulfil its purpose. The purpose was to prevent persons being driven off their farms because of inability to pay debt where it was possible for the debt to be rearranged after a bona fide mediation process. To fulfil the purposes of the Act, one must construe it, to my mind, favourably to the farmer, and unless compelled by the language, not permit the overriding purposes of the Act to be defeated by technicalities." 130 In my view, care must be taken not to overstate the purpose of the legislation. Section 3 provides that the object is: "to provide for the efficient and equitable resolution of farm disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a mortgage." (Emphasis added.) 131 The statutory objective is distinctly less sweeping and less favourable to the farmer than the paraphrase adopted by Young J. Clearly enough, as is commonly the case, the objective represents a compromise between the competing interests of farm debtors and credit providers. The statutory objective, insofar as it refers to the efficient and equitable resolution of disputes, does not suggest that the legislation should be construed in the absence of compelling language to the contrary as fulfilling the purpose of preventing enforcement action "where it is possible for the debt to be rearranged by a bona fide mediation process". Moreover, it is consistent with the statutory objective to construe the legislation, in accordance with its plain meaning, as entitling a defaulting farm debtor to only one mediation every three years. 132 I have not overlooked that the Explanatory Note (at [108] above) refers to the "debt concerned" being excluded by a certificate from the operation of the Act. Whatever the drafter of the Explanatory Note may have had in mind, the statutory language seems to me to be reasonably clear. 133 In my opinion, the respondent's construction of ss 8(3) and 11(1) of the Act is to be preferred. The Certificate was in force at the time the respondent instituted the present proceedings and rendered s 8(1) of the Act inapplicable to the proceedings. The appeal should therefore be dismissed. The appellant should pay the respondent's costs of the appeal.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Waller
Hargraves Secured Investments Ltd
(2005) 221 CLR 568
(1996) 39 NSWLR 337
(1955) 92 CLR 390
(2000) 201 CLR 520
(2000) 75 ALJR 312
(1983) 57 ALJR 442
(1997) 42 NSWLR 252
(2006) 228 CLR 529
(2010) 84 ALJR 507
(2005) 221 CLR 191
(1977) 136 CLR 608
(1985) 157 CLR 177
(1957) 98 CLR 93
[2000] HCA 64
Appeal dismissed with costs. The first-instance orders, including the possession order and monetary judgment, were not disturbed: [13], [133]. Macfarlan JA dissented, proposing that the appeal be allowed as to possession while leaving the monetary judgment intact: [20], [86]-[93].