First Mortgage Managed Investments Ltd v Skyfarm Holdings Pty Ltd [2010] NSWSC 58 (12 February 2010)

Last Updated: 15 February 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
First Mortgage Managed Investments Ltd v Skyfarm Holdings Pty Ltd [2010] NSWSC 58


JURISDICTION:


FILE NUMBER(S):
2009/00295122
2009/13280

HEARING DATE(S):
10 February 2010

JUDGMENT DATE:
12 February 2010

PARTIES:
First Mortgage Managed Investments Ltd - Plaintiff
Skyfarm Holdings Pty Ltd - Defendant

JUDGMENT OF:
Hoeben J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Mr G George - Plaintiff
Mr P Cutler - Defendant

SOLICITORS:
Boyce Lawyers - Plaintiff
A R Walmsley & Co - Defendant


CATCHWORDS:
Claim for possession of land - motion for summary judgment - whether service of notice under section 8 Farm Debt Mediation Act 1994 was effective - whether plaintiff entitled to bring proceedings.

LEGISLATION CITED:
Farm Debt Mediation Act 1994

CATEGORY:
Principal judgment

CASES CITED:


TEXTS CITED:


DECISION:
Judgment for possession in favour of plaintiff. Plaintiff stayed from taking steps to exercise its right of possession in respect of one of the properties but leave granted to issue Writ of Possession in relation to the other. Defendant to pay costs of motion. Liberty to either party to apply on five days notice.



JUDGMENT:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

HOEBEN J

Friday 12 February 2010

2009/00295122 - FIRST MORTGAGE MANAGED INVESTMENTS LIMITED v SKYFARM HOLDINGS PTY LIMITED

JUDGMENT

1 HIS HONOUR:

Nature of proceedings

By an agreement dated 27 October 2006 between the plaintiff as lender and the defendant as borrower, the plaintiff loaned to the defendant $2,710,000. That amount was secured by mortgages over five parcels of land at Kurrajong Heights.

2 The defendant defaulted in payments of interest under the loan, which on the plaintiff’s case, led to the principal under the loan, together with outstanding interest, becoming due on 27 October 2008.

3 Proceedings for possession of the mortgaged land were commenced by the plaintiff on 30 June 2009. Between that date and the date on which this motion was heard, three of the parcels of land have been sold by the defendant and the proceeds of those sales have been accounted to the plaintiff by way of reduction of the debt owing to it. At the hearing of this motion, the amount owed by the defendant to the plaintiff by way of principal and interest was $2,458,038.34.

4 By motion filed 2 February 2010 the plaintiff seeks summary judgment for possession of the two remaining unsold parcels of land, the subject of the mortgage, i.e. the property known as 1366 Bells Line of Road, Kurrajong Heights (the Lot 1 property) and the property known as Lot 30, Leidich Lane, Kurrajong Heights (the Lot 30 property).

5 The notice of motion came on for hearing on 10 February 2010. All evidence was by way of affidavit and no cross-examination of the deponents took place. This judgment is in respect of the notice of motion.

Issues and Submissions

6 The only issue raised in the defence was that the land comprised a farm and the moneys advanced under the mortgage constituted a “farm debt” as those terms are defined in the Farm Debt Mediation Act 1994 (the Act).

7 Section 8 of the Act provides that a creditor to whom money is owed under a farm mortgage must not take enforcement action until at least 21 days have elapsed after the creditor has given a notice to the farmer under the section. The section goes on to specify the form of that notice.

8 Section 9 of the Act provides that a farmer to whom notice has been given under s 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.

9 Section 23 of the Act provides for the giving of notice to a corporation as follows:

“(iii) by sending it by post, telex, facsimile or similar electronic facility to the registered office of the body corporate or the address of the place of residence or business of a director or secretary of the body corporate.”

10 Relying upon the affidavits of Ms Locke, its managing director, the defendant submitted that the section 8 notice first came to its attention on or about 10 February 2009 and that it responded on 17 February 2009 by serving on the plaintiff a notice under s 9 of the Act requesting mediation of the farm debt.

11 The defendant submitted that since the mediation required by the Act had not taken place, the enforcement proceedings which had occurred after service of its section 9 notice, were ineffective.

12 The plaintiff relied for its evidence on affidavits of its director, Michael Boyce. In his affidavit of 10 December 2009 Mr Boyce deposed that he had sent the section 8 notice and other notices to three addresses associated with the defendant and had emailed those notices to the defendant’s email address. Included in those addresses was 1366 Bells Line of Road, Kurrajong Heights, NSW 2578 and “Remony Farm”, 140A Springrove Lane, Kurrajong Heights, NJSW 2758. It was common ground that the latter was the registered office of the defendant and the former was the residential address of Ms Locke. The section 8 notice was dated 19 January 2009.

13 The plaintiff submitted that under s 23 of the Act and under the general law the relevant date was that on which the notice had been sent, not the date on which the notice came to the attention of the defendant. It submitted that since more than 21 days had passed after the section 8 notice had been given without a request for mediation being received from the defendant, the Act did not provide any impediment to it exercising its rights under the mortgage and taking enforcement proceedings.

14 The plaintiff also took another point. It submitted that there was no evidence before the Court that at the time that enforcement proceedings were commenced (June 2009), the defendant was carrying on a “farming operation” and that the debt in respect of which proceedings have been brought was a “farm debt”. It submitted that in the absence of such evidence, the defendant could not rely upon the Act and there was nothing to prevent the plaintiff taking enforcement proceedings under its mortgage.

15 The defendant objected to the plaintiff taking that point. It did so on the basis that throughout these proceedings it had been accepted by both parties that the Act applied and this was the first time that this point had been taken. No notice had been given to the defendant of the plaintiff’s intention to change its position in that regard. The defendant submitted that if the plaintiff were to be allowed to take this point, then time should be given to the defendant to adduce evidence that the Act did apply.

16 I indicated to the parties that should it become necessary, I would give to the defendant sufficient time to adduce such evidence. It seemed to me, however, that the matter could be decided on the service issue, i.e. on the assumption that the Act did apply. If the plaintiff failed on that question, then the Court could explore the wider question of whether the Act applied.

17 The relevant paragraph in Mr Boyce’s affidavit, dealing with the service of the notice, read as follows:

“3. On the 19^th January 2009 I issued a Form 1 – section 8 Notice to Farmer, Form 2 – Notice to Creditor/Bank, Form 6 – Notice to Creditor/Bank of decision not to enter Mediation & the Farm Debt Mediation Brochure to the Defendant at four (4) addresses under cover of letter dated 19^th January 2009. Exhibited hereto at pages 1 – 8 is a copy of the letter and Notices.”

18 The defendant took the point that this paragraph did not in terms state that the notice had been sent by mail, nor did it depose to the steps taken to that effect. The defendant submitted that the paragraph did no more than state in a conclusory fashion what had occurred but did not provide admissible evidence as to postage of the notice.

19 In the absence of any objection to that paragraph, I am of the opinion that the plaintiff could rely upon it as sufficient to establish that the section 8 and other notices had been “sent by post” as required by s 23 of the Act. There was also a letter dated 1 April 2009 from the defendant’s then solicitors, Messrs Jackson Lalic, to the plaintiff’s then solicitors, Messrs Gadens, which contained an admission as to service in the following terms:

“In relation to the proposed mediation, our client maintains that this mortgage is a farm mortgage and the Farm Debt Mediation Act applies. In that regard, our client is of the view that our client’s failure to respond to the section 9 notice within 21 days does not mean that the Farm Debt Mediation Act does not apply.”

20 In view of the consequences for the defendant of a finding that the section 8 notice was sent by post, I concluded that the defendant was entitled to have that issue strictly proved. In the circumstances I gave leave to the plaintiff to adduce additional evidence to that effect (if such evidence were available) by 9:30am on Friday, 12 February 2010. I advised the parties that I would give a decision on the service question at that time.

21 When the matter resumed on Friday, 12 February the evidence adduced on behalf of the plaintiff clearly established that the section 8 notice had been sent by post on 19 January 2009 and that service has been effected in accordance with the provisions of the Act. The effect of that finding, for the reasons already set out, is that there is and has been no impediment to the plaintiff bringing these proceedings. Absent other considerations, there should be judgment for possession entered in favour of the plaintiff in respect of the two remaining properties which were subject to the mortgage.

22 In the course of the hearing of this motion, the Court was advised that contracts for sale of the Lot 1 property had been exchanged on 9 February 2010. The purchase price was $805,000 and a 10 percent deposit of $80,500 had been paid by the purchasers to the defendant’s solicitor and is currently held in his trust account. In those circumstances, I propose to grant a stay preventing the plaintiff from taking any steps to take possession of the Lot 1 property until 1 May 2010, or pending further order of the Court, in order to enable that sale to be completed.

23 My reason for granting a stay is that I am convinced by the affidavits of Ms Locke and from my overall knowledge of this matter that this is a proper sale price, given the prevailing economic circumstances, and that it is a higher price than would be achieved if the plaintiff took possession and conducted a sale as mortgagee. There is, of course, nothing to prevent the plaintiff taking possession of the Lot 30 property forthwith.

24 The orders which I make are as follows:

1. I enter judgment for possession in favour of the plaintiff against the defendant in respect of the following properties:

(a) The whole of the land contained in Folio Identifier 1/1121404 being the property situate at and known as 1366 Bells Line of Road, Kurrajong Heights (the Lot 1 property).

(b) The whole of the land contained in Folio Identifier 30/751649 being the property situate at and known as Lot 30 Leidich Lane, Kurrajong Heights (the Lot 30 property).

2. The plaintiff is stayed from taking any steps to exercise its right of possession in respect of the Lot 1 property until 1 May 2010 or until further order of the Court, whichever shall first occur, so as to enable the sale of that property to proceed.

3. I grant leave to the plaintiff to issue a Writ of Possession in respect of the Lot 30 property forthwith.

4. I order the defendant to pay the costs of the hearing of this motion.

5. I grant leave to the parties to approach the Court on 5 days’ notice.

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LAST UPDATED:
12 February 2010