In Sharpe v WH Bailey & Sons Pty Ltd 
FCA 921, Justice Gleeson found that the Farm Debt Mediation Act
1994 (NSW) (FDM Act) did not operate to prevent an individual
from pursuing their rights under the Bankruptcy Act 1966
(Cth), even though those rights may have been related to a farm
mortgage. In doing so, Justice Gleeson confirmed that the
Bankruptcy Act 1966 (Cth) will have priority over the FDM
Act where the requirements of section 5 of the FDM Act are
Mr Sharpe ran a farming business from a property at Bellingen,
New South Wales. WH Bailey supplied Mr Sharpe with goods on a
running account basis. When Mr Sharpe accumulated debts in excess
of $57,000, WH Bailey commenced debt recovery proceedings. Pursuant
to a settlement agreement, repayment of these debts was secured by
a second mortgage over his property.
WH Bailey obtained judgment against Mr Sharpe and issued a
bankruptcy notice against him. Mr Sharpe unsuccessfully applied to
the Federal Magistrates Court to have the bankruptcy notice set
aside. On appeal, the Federal Circuit Court then refused to extend
the time to comply with the bankruptcy notice. Another creditor
also issued a bankruptcy notice and subsequent creditor's
petition against Mr Sharpe.
Mr Sharpe then appealed to the Federal Court on a number of
grounds, which included an argument that the debts he owed WH
Bailey were "farm debts" within the meaning of the
Farm Debt Mediation Act 1994 (NSW) (FDM
Act), and as a result no enforcement action could be taken
in respect of them.
Justice Gleeson considered the provisions of the FDM Act, which
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 unless proper notice has been
Enforcement action is defined to include taking possession of
property under the mortgage and the giving of any statutory
Farm mortgage is defined to include any interest in, or power
over, any farm property securing obligations of
the farmer (subject to some exceptions).
However, Justice Gleeson found that the FDM Act was not
applicable. This was because section 5 of the FDM Act states that
the Act does not apply in respect of a farmer "whose property
is the subject of a bankruptcy petition presented by any
Further, the Court did not accept Mr Sharpe's contention
that the issue of the bankruptcy notice was an enforcement action
prohibited by the FDM Act. The power to issue a bankruptcy notice
is conferred by the Bankruptcy Act where a creditor has obtained an
The Court held that "enforcement action" under the FDM
Act is referrable to a farm mortgage. Here the bankruptcy notice
was issued by the Officer Receiver on the basis of a Local Court
judgment, which was not stayed. Accordingly, the issue of the
bankruptcy notice was not action to enforce any mortgage.
Accordingly, the Court found there were no grounds to set aside the
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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