Don’t jump the gun Lisa Dorman and Alysha Tuziak | February 2012
TurkAlert
The Act, through the broad definition of a “farm mortgage”, treats those distinct interests as in three successive “farm mortgages”6. >> Notwithstanding the mortgage over the property was an “all monies” mortgage, the Third Loan Agreement created a new interest or power over the property . The Third Loan Agreement was not included in the section 11 certificate. As a result, HSI had not obtained a valid certificate prior to the commencement of the enforcement action. The High Court also found that “enforcement action” included not only the proceedings for possession but also any reliance on any rights in the farm mortgage, including commencement of proceedings for debt. As a result, the High Court allowed the appeal with costs.
Implications for lenders The decision is a reminder to lenders to take particular care when enforcing rights under farm mortgages. In summary, even if a section 11 certificate has been obtained in respect of a farm mortgage, a lender must carefully check that the farm debt it relates to has not been discharged in any way prior to the commencement of enforcement action under the mortgage. Lenders cannot rely on the “all monies” provisions of the mortgage to capture debts not included at mediation. If in doubt, the lender should serve fresh notices for mediation concerning the new facility or obtain advice as to whether the section 11 certificate obtained is sufficient.
End notes 1. 2. 3. 4. 5. 6. 7.
[2001] HCA 4 29 February 2012 Paragraph 51, page 18 Paragraph 51, page 18 Paragraph 10, page 4 Paragraph 16, page 7 Paragraph 56, page 20 Paragraph 16, page 7
For more information, please contact: Lisa Dorman Partner T: 02 8257 5734 M: 0417 236 786 lisa.dorman@turkslegal.com.au
Alysha Tuziak Lawyer T: 03 8600 5135 M: 0402 887 044 alysha.tuziak@turkslegal.com.au
www.turkslegal.com.au Syd | Lvl 29 Angel Place, 123 Pitt St, NSW 2000 T: 02 8257 5700 | F: 02 9239 0922 Melb | Lvl 10 North Tower, 459 Collins St, VIC 3000 T: 03 8600 5000 | F: 03 8600 5099
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