Bendigo & Adelaide Bank v McMahon [2013] NSWSC 628

The bank had obtained a judgment for possession of a security property being a two-hectare property at Casino. However the borrower asked the court to stay the enforcement because the security property fell under the protections of the Farm Debt Mediation Act 1994 and therefore the bank could not take possession without first having taken steps to mediate the matter in accordance with Part 2 of that Act.

There was evidence the borrower had raised this issue with the bank before the proceedings for possession but the bank had told him it did not apply and, not being represented by a lawyer, he accepted the bank’s assertion.

The Court identified three issues:

  1. Whether at the time the debt was originally incurred it was for a farming purpose;
  2. Whether at the present time (when the bank sought to enforce the mortgage) the borrower was a ‘farmer’; and
  3. Whether at the present time the security is a farming property.

In this case, the parties were disagreeing about (2) and (3). The borrower had started working in real estate at the time of the court hearing, his business had gone into liquidation and the other farms were being sold to clear debts. However his evidence was that he believed he was a farmer and intended farming activities in the near future (annual planting, sowing, maintenance of a corn silage on the property).

The judge agreed with the borrower that farming is seasonal, and a farmer might not be engaged in farming every day of the year depending on circumstances. The Judge decided that the purpose of the Farm Debt Mediation Act is ameliorative and would contemplate the seasonal and uncertain nature of farming activities, including farmers being sometimes less involved in farming and doing other work for “financial breathing space”.

Her Honour also decided that even though the property was a residence, it was still part of a farm being the property at which the farmer lives and from which he conducts many administrative and ancillary aspects of his farming operation.

The Judge decided that because the borrower was a “farmer” and the security property was part of a farm at the time the bank tried to enforce the mortgage, there was an argument that the provisions of the Farm Debt Mediation Act should have applied. Therefore the enforcement of the bank’s judgment for possession was stayed until the issue was ultimately decided by a Court (or, alternatively, the bank complied with the mediation requirements of the Act).

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