Appeal Panel - Internal CITATION: Kirkham Estate Wines Pty Ltd v General Manager, New South Wales Rural Assistance Authority & Anor [2004] NSWADTAP 24 APPLICANT Kirkham Estate Wines Pty Ltd PARTIES: FIRST RESPONDENT General Manager, New South Wales Rural Assistance Authority SECOND RESPONDENT Various Creditors FILE NUMBER: 049014 HEARING DATES: 07/05/2004 SUBMISSIONS CLOSED: 05/07/2004 DATE OF DECISION: 06/18/2004 Kirkham Estate Wines Pty Ltd v General Manager, NSW Rural Assistance Authority DECISION UNDER APPEAL: BEFORE: O'Connor K - DCJ (President); Montgomery S - Judicial Member; Antonios Z - Non Judicial Member CATCHWORDS: procedural fairness MATTER FOR DECISION: Princiipal matter FILE NUMBER UNDER APPEAL: 033343 DATE OF DECISION UNDER APPEAL: 03/02/2004 LEGISLATION CITED : Farm Debt Mediation Act 1994 Gain v Commonwealth Bank (1997) 42 NSWLR 252 CASES CITED: Kirkham Estate Wines Pty Ltd v General Manager, NSW Rural Assistance Authority [2004] NSWADT (unreported, 2 March 2004) O'Reilly v State Bank of Victoria (1983) 153 CLR 1 Taylor v Public Service Board (NSW) (1976) 137 CLR 208 APPLICANT M Foley, solicitor REPRESENTATION: FIRST RESPONDENT S J Griffith, General Manager, NSW Rural Assistance Authority SECOND RESPONDENT E C Muston of counsel ORDERS: 1. Appeal allowed; 2. Decision under appeal set aside; 3. Decision of first respondent set aside; 4. The application for a section 11 certificate is remitted to the first respondent to determine again REASONS FOR DECISION 1 This appeal relates to the operation of the Farm Debt Mediation Act 1994 (the Act). The appellant is a company seeking to resist enforcement of a substantial debt due under a mortgage. The appellant is the applicant for the review of a decision made under s 11 of the Act by the first respondent, the Rural Assistance Authority (the Authority). The decision is a reviewable decision: s 29A. The decision - to grant a certificate that satisfactory mediation between the farmer and the creditors has taken place – is a precondition to the taking of enforcement action: s 8. The Act is applicable as the appellant is a farmer and the debt is a farm debt within the meaning of the Act. The second respondent has appeared in the proceedings by leave and comprises the various persons named as creditors in the certificate. 2 The expressed object of the Act is to 'provide for the efficient and equitable resolution of farm debt disputes': s 3. Section 3 also states: 'Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.' 3 Section 8 of the Act provides: ' 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.' 4 Section 11(1) of the Act provides: '(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 (ii) the farmer has declined to mediate, or (iii) 3 months have elapsed after a notice was given by the creditor under section 8 and the creditor has throughout that period attempted to mediate in good faith (whether or not a mediation session or satisfactory mediation took place during that period).' 5 Farm debt mediation provides a way of facilitating 'constructive negotiations between creditors and their farmer clients': Ginnivan, 'Farm Debt Mediation, Discussion Paper', Rural Development Centre, University of New England, September 1993, 9. 6 The Tribunal dismissed the appellant's application for review of the Authority's decision: Kirkham Estate Wines Pty Ltd v General Manager, NSW Rural Assistance Authority [2004] NSWADT (ex tempore decision, unreported, 2 March 2004). 7 The mediation session took place on 14 August 2003. It failed to achieve resolution. The putative creditors applied for a s 11 certificate, which issued on 26 September 2003. 8 It is not a bar to the issue of a certificate under s 11 that mediation is unsuccessful. In Gain v Commonwealth Bank (1997) 42 NSWLR 252 (CA, Gleeson CJ, Cole JA, Sheppard AJA) the Court of Appeal rejected such a submission. Subsequently the Parliament put the matter beyond doubt, by an amendment defining the term 'satisfactory mediation' (s 4(1A)) as follows: '(1A) A reference in this Act to satisfactory mediation is a reference to: (a) a mediation that has achieved a resolution of a farm debt dispute, or (b) a mediation that has proceeded as far as it reasonably can in an attempt to achieve a resolution of a farm debt dispute but has nevertheless failed to resolve the dispute, or (c) a mediation specified or of a class described in regulations made for the purposes of this subsection to be a satisfactory mediation.' 9 The certificate issued despite letters of protest from the farmer's solicitor dated 13 August 2003 (ahead of mediation) and 17 September 2003 (following the application for the certificate) raising a number of objections, most importantly whether the creditors represented at the mediation session by Mr Thorpe, solicitor, were the 'true' creditors. 10 The farm mortgage in issue is a registered contributory mortgage. The registered mortgage shows thirteen contributors made up of twelve individuals (or couples) and one company. The s 8 notice issued on 4 April 2003 lists twelve, as distinct from thirteen, creditors. Ten of the eleven remaining individual (or couple) contributors are the same. There is one new name (that of a couple). Two of the original group are missing. The twelfth contributor is the same company as shown on the registered mortgage. The s 11 certificate names the same twelve contributors as shown on the s 8 notice. 11 At the request of the appellant, the General Manager of the Authority conducted an internal review in which he confirmed the original decision. The General Manager's reasons for decision were brief: 'Section 11(1)(c)(i) of the Act specifies that '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 satisfactory mediation has taken place in respect of the farm debt involved.' I note concerns expressed on behalf of the borrower that the true identity of the creditors was not disclosed to the borrower. However the accredited mediator in the written summary of mediation indicates that the creditors had appointed Mr Andrew Thorpe as their agent. I have also closely considered the exit questionnaire completed by the borrower following the conduct of the mediation. I consider that the circumstances disclose that a satisfactory mediation occurred, despite agreement not being reached. Accordingly, I have confirmed the Authority's decision of 26 September 2003 to issue a Section 11 Certificate.' 12 We note that the General Manager's letter misstates the material text of s 11(1)(c). The requirement is that: '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: … (c) the Authority is satisfied that : (i) satisfactory mediation has taken place in respect of the farm debt involved' [the italicised words were omitted]. Tribunal's Reasons 13 The arguments advanced by Mr Foley before the Tribunal were similar to those now made on appeal. As noted, his main point throughout has been that the mediation process miscarried because it did not involve the 'true' creditors. He has referred to the inconsistency between the list of creditors shown on the registered instrument of mortgage as compared to the list attached to the mediation certificate. As noted there is a discrepancy in relation to two of the names shown on the registered mortgage. They were not parties to the s 8 notice or the s 11 certificate, and one new name appears on those documents. His client has also alleged that a company identified as a creditor on both lists could not be a creditor as it was not registered in Australia. (At the appeal hearing the Tribunal was informed that this company was an overseas registered company.) Mr Foley also challenged Mr Thorpe's authority to act on behalf of the creditors, as he claimed that Mr Thorpe's law firm had a material interest in the debt as an undisclosed creditor. 14 As to the question of the formation by the Authority of the necessary state of satisfaction for the purposes of exercise of the s 11 discretion, the Tribunal said: '[O]n the basis of Ms Charlton's summary of mediation, in my opinion, the Authority had the requisite information on which to form the view that it was satisfied that a satisfactory mediation had taken place. While the Tribunal acknowledges [the appellant's] allegations in respect of the bona fides of Mr Thorpe and [the appellant's] concerns about the discrepancies in the list of the names of creditors on the mortgage and those listed on the Section 8 Notice, these allegations and concerns are of no relevance to the matters in respect of which the Authority was required to be satisfied pursuant to subparagraph 11(1)(c)(i) of the Act. As was stated in Gain, these were matters in dispute between the parties, which the mediator and Authority had no power or functions to determine. This does mean that [the appellant] were [sic] prevented from seeking remedies elsewhere in respect of such allegations. The parties were, however, at liberty, if they chose to, to resolve this aspect of the dispute at mediation. From all accounts, they were unable to do so, and as stated in Gain, which has been confirmed by the inclusion of subsection 4(1A) into the Act [the definition of 'satisfactory mediation'], this does not mean that there had not been a satisfactory mediation process.' 15 As to the question of Mr Thorpe's authority to act, the Tribunal said: 'Whether Mr Thorpe had the authority to act on behalf of the creditors was a matter for decision by the mediator, Ms Charlton, pursuant to s 17(1) of the Act. [Section 17(1) provides: (1) A party to mediation is not entitled to be represented by an agent unless it appears to the mediator that: (a) an agent should be permitted to facilitate the mediation, and (b) the agent proposed to be appointed has sufficient knowledge of the issue concerned to enable the agent to represent the party effectively, and the mediator so approves.] According to Ms Charlton's summary of mediation, Mr Thorpe had written authority from the creditors to enter into Heads of Agreement. Implicit in such an authority is an authority to represent the creditors. In any event, as pointed out by Mr Muston [counsel for the creditors] and Mr Griffith [General Manager of the Authority], the decision of the mediator to accept Mr Thorpe's authority to act on behalf of the creditors is not a decision that is reviewable by the Tribunal, nor, in the opinion of the Tribunal, is it a decision which the Authority is to go behind for the purpose of satisfying itself of the requirements of subparagraph 11(1)(c)(i) of the Act. As I have already stated, the role of the Authority under the Act is that of a facilitator, and, in my opinion, subparagraph 11(1)(c)(i) of the Act must be considered in such a context. That is, in satisfying itself as to whether there had been a satisfactory mediation the Authority must be satisfied that the process – and by process, I mean the procedure relating to a mediation, as set out in the Act, has been complied with. That is, the procedure for issuing a Section 8 notice and a Section 9 notice and the convening of a mediation with an accredited mediator, if the parties agree to a mediation.' 16 The Tribunal gave a general policy reason for rejecting the appellant's arguments: 'Finally, to accept Mr Foley's argument, in my opinion, would be contrary to the objects of the Act and what was said in the Court of Appeal in Gain , as such arguments would clearly extend a farmer's right to postpone enforcement action under the Act. In stating this, I do not in any way suggest that this has been the intention of Mr Foley or [the appellant].' Grounds of Appeal 17 The grounds of appeal, as amended, are that the Tribunal: 1. Erred in finding that the correct and preferred decision was to issue the Section 11 Certificate pursuant to the provisions of the Act in the form and to the named parties in which the Authority issued the Certificate. 2. Erred in finding that 'satisfactory mediation' had taken place in accordance with the provisions of the Act. 3. Erred in finding that 'the creditors' were the persons named in the Section 11 Certificate issued pursuant to the provisions of the Act. 4. Erred in finding that the agents for the putative 'creditors' had a proper authority form all parties to the relevant farm mortgage to settle this matter in the 'mediation' in accordance with the Act. 5. Erred in not allowing the appellant to call Mr Thorpe, one of the agents for the putative 'creditors', for the purpose of giving relevant and proper evidence to the Tribunal. 6. Erred in not finding that the creditors were not 'acting in good faith' in satisfaction of the provisions of the Act. Assessment 18 It is clear that the scheme of the Act gives, in keeping with the function of mediation, great autonomy to the appointed mediator and protects strictly the confidentiality of what occurs within the mediation session. It requires the preparation of a summary of mediation and envisages that that will be the record to which the Authority should have regard in forming a view as to whether a satisfactory mediation has occurred. 19 In her summary Ms Charlton advised that the session had taken 7 hours, proper process was followed, both parties were competent, and no party to the mediation failed to have proper authority to enter into heads of agreement had that resulted from the mediation. 20 It will be seen from the General Manager's reasons that the Authority, and subsequently the Tribunal's reasons, relied entirely on the mediator's summary of mediation and exit questionnaire as to the question of whether the mediation could be said to be a 'satisfactory mediation'. In the usual case reliance on information of this kind by a statutory body charged with exercising such a discretion would not present a difficulty. (See, for example, Taylor v Public Service Board (NSW) (1976) 137 CLR 208.) As we see it, such a 'usual case' is one where there is no dispute as to the following matters: that there is a default within the meaning of the Act, that the debt is a farm debt within the meaning of the Act, and that the applicant for a s 11 certificate is a creditor within the meaning of the Act. 21 This was not the usual case. In this case the farmer questioned whether the applicants were current creditors. This is a point that is open to be raised. The need to ensure that the s 11 process is one involving current creditors follows from the terms of the Act. Section 11(1)'s opening words are: '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: …' [emphasis added]. The Act's definition of 'creditor' is 'creditor means a person to whom a farm debt is for the time being owed by a farmer' [emphasis added]: s 4. 22 The Act requires the Authority to be 'satisfied' that a satisfactory mediation has taken place. In order to reach a state of satisfaction, factors beyond those reflected in the summary of mediation or the exit questionnaire may sometimes need to be considered. One might be whether the appointed mediator held the required qualifications under the Act. (That was not an issue in this case.) 23 It is clear from the definition of 'creditor', in contradistinction to one of the submissions put by Mr Foley, that the true creditors for this purpose are the current creditors. If the farmer raises an objection on some credible basis to the effect that the creditors participating in the mediation session are not the current creditors to whom a debt is owed, then the Authority is in our view duty-bound to examine that objection and form a view. The Authority is responsible ultimately for the probity and fairness of the process. 24 The Authority's position is that it can not seek to examine what transpired within the mediation session because of the strict confidentiality provisions that bind the conduct of mediation sessions (see Act, s 15). Only the summary is admissible as evidence (see Act, s 15(3), s 18A). We do not see the objection raised in this case as one going to what occurred within the environment of the mediation session. 25 In our view in the circumstances of this case the Authority erred, as did the Tribunal, in not ascertaining whether each and all of the applicants for the s 11 certificate were current creditors. As we understand it, there is no dispute that several of those named on the registered instrument remained current creditors, but there was dispute as to some. A credible doubt was raised as to at least one of them. As only current creditors can apply for a s 11 certificate, it must follow, if the objectives of the Act are to be achieved, that those same creditors must be the ones that participated in the statutory mediation session. 26 It would be inimical to the aims of the Act if a mediation session included either directly or through an authorised representative, persons who were not current creditors. The importance of ensuring that the current creditors participate in the mediation is reinforced by the following comments of Ginnivan, ibid, at p 9: (i) '[Farm debt mediation] provides the opportunity for a farmer to discuss his/her situation with all creditors at the same time.' (ii) 'The development of a plan which is aimed at resolving the situation will require the agreement of all creditors.' (We reserve on the question of whether as a matter of law the Act requires all creditors to participate in the mediation session, and thereby put the whole debt under consideration.) 27 The Authority's view that as a general practice it should not direct its mind to questions going to the constitution of the process, but leave them entirely to the decision of the mediator, involves an abdication of responsibility in the sense explained in O'Reilly v State Bank of Victoria (1983) 153 CLR 1 at 19 per Mason J. Once the objection was raised, the Authority should have satisfied itself that the applicants for the certificate were the creditors at law, and if unregistered assignments had occurred, who held the beneficial interests. 28 In our view the process miscarried, with the result that the Tribunal's and the Authority's decisions should be set aside, and the matter of the exercise of the s 11 discretion remitted to the Authority for determination according to law. That will also enable consideration to be given to the other issue pressed by Mr Foley relating to whether the company whose name appears on the registered mortgage and also on the s 11 certificate was a creditor at the time of the mediation session (Tycon Finance Ltd). If in fact the creditors who participated in the mediation session through Mr Thorpe were the current creditors there may be no further issue. 29 It is not necessary to deal at length with the other grounds of appeal. 30 We will briefly refer to two matters. We do not see a lack of correspondence between the names given in the original mortgage and the s 8 notice as critical. While this notice is the mechanism that commences the process of mediation, the crucial events are the mediation session itself and subsequently the grant of the certificate. The key question to be addressed, ordinarily, is whether the applicants for the s 11 certificate are current creditors who participated in a satisfactory mediation process. 31 Mr Foley also raised an issue as to the appointed agent. There would seem not to be a problem if the appointed agent is known to have an interest as a creditor. It would, we think, not be uncommon for a group of creditors to appoint one of their number as the agent. There may be an issue if the appointed agent fails to disclose the existence of an interest as a creditor to co-creditors or to the mediator. There may be concern that the agent might behave in a manner which preferred his or her interests over those of the co-creditors. There may be an issue of possible conflict of interest that goes to the question of whether the mediator made the correct decision in accepting the appointment. Were the Authority to have such a matter raised with it in some credible way, then it should, we consider, at least seek further information and possibly refer the information back to the mediator for report. 32 The Authority's decision and the Tribunal's decision are set aside. The decision is remitted to the Authority to determine again. Order 1. Appeal allowed. 2. Decision under appeal set aside. 3. Decision of first respondent set aside. 4. The application for a section 11 certificate is remitted to the first respondent to determine again. 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.