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Perspective

Farm Debt Mediation in NSW and Secured Property Wholly Outside of NSW

ABC Discretionary Trust v National Australia Bank Ltd and Ors [2024] NSWSC 43 (Musumeci)

Peter Jackson
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Increasingly, farmers have farming properties in a number of states. On 2 February 2024, Justice Black of the Supreme Court of NSW delivered judgment in Musumeci Property Investments Pty Ltd in its capacity as the trustee of the ABC Discretionary Trust v National Australia Bank Ltd and Ors [2024] NSWSC 43 (Musumeci) that related to the setting aside of the appointment in NSW of receivers and managers in circumstances where the farming property was held wholly in the Northern Territory.

The plaintiff, Musumeci borrowed in excess of $9 million dollars from the NAB in August 2020 for the purpose of conducting a mango farming operation in the Northern Territory. NSW law applied in the loan documentation for both property and equipment purchases in the NT. The law of the NT applied to the mortgage.

The NAB appointed Messrs Marsden and Hernan as receivers and managers of the secured property of Musemuci. Muscemuci applied to the court for a declaration that the appointment be set aside on the basis that it was void as an enforcement action under the Farm Debt Mediation Act (NSW).

The plaintiff argued that the because the law of NSW applied to the loan and the enforcement action, being the appointment of a receiver and manager, took place in NSW it was entitled to a mediation and therefore the appointment of the receivers and managers was void.

His Honour referred to the Farm Debt Mediation Act and the circumstances when a creditor is permitted to apply for an exemption certificate that would permit it to proceed with enforcement. Apart from the monetary default and the absence of a prohibition certificate there must be at least one additional ground. In the Musumeci matter the only additional ground was that in s14(3)(b) of the Farm Debt Mediation Act. This ground relates to the circumstance where the farmer conducting a farming operation in NSW and another state and mediation had already occurred in respect of the farm debt in NSW. The language of the section is clear: the reference is to a farming operation in NSW AND another state. In the Muscemuci case the farming operation was conducted wholly outside of NSW.

Justice Black reviewed the High Court decisions on the construction of statutes and affirmed the position that statutes are to interpreted in a way that is consistent with the language and purpose of the provision.

The court held that a creditor under a farm mortgage could apply for an exemption certificate under the Farm Debt Mediation Act and proceed with enforcement of the securities to recover the debt in circumstances such as Musumeci where the secured property was wholly outside of NSW.

The application to remove the receiver and manager failed.

Peter Jackson
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