NSW Government Introduces Farm Debt Mediation Amendment Bill 2018 (NSW)

Monday 16 April 2018 @ 9.51 a.m. | Legal Research

On 10 April 2018, Minister for Primary Industries, Minister for Regional Water, and Minister for Trade and Industry, Niall Blair introduced the Farm Debt Mediation Amendment Bill 2018 (NSW) (the "Bill) into the NSW Legislative Council. The object of the Bill is to make amendments to the Farm Debt Mediation Act 1994 (NSW) (the “FDMA”) in response to the Farm Debt Mediation Act 1994 (NSW) Review (the “Review”) which was completed in late 2017. Mr Blair outlined the Bill in his second reading speech on 11 April 2018:

“The Farm Debt Mediation Amendment Bill 2018 will improve the operation of the Farm Debt Mediation Act 1994. It will ensure that efficient and equitable negotiations can occur between farmers and creditors to resolve matters involving farm debts. This legislation was introduced in 1994 after a tough drought, when pressure for bank accountability was mounting. New South Wales led the nation by providing this alternative dispute resolution. Mediation is now an integral part of the civil justice system in many parts of Australia. The New South Wales legislation has been so successful that Victoria and Queensland have adopted substantially the same framework.”

Farm Debt Mediation

Farm debt mediation is outlined on the Department of Primary Industries, Rural Assistance Authority website.

“'Farm Debt Mediation' is a structured negotiation process in which the mediator, as a neutral and independent person, assists the farmer and the creditor in attempting to reach agreement on the present arrangements and future conduct of financial relations between them. Mediation is a simple, voluntary and confidential process that is quick, accessible and affordable.

The object of mediation under the Farm Debt Mediation Act 1994 is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.”

The Review

Public consultation for the review closed on 5 May 2017. Forty submissions from non-government stakeholders, as well as six submissions from industry bodies were received (accessible here). These submissions addressed a number of questions regarding farm debt mediation, including:

  • Should the FDMA include a definition of ‘mediation’ as proposed by the NSW Law Reform Commission?
  • Should the FDMA definition of ‘farm’ or ‘primary production enterprise’ extend the protection of the Act to a broader range of farmers using the ANZSIC code, but exclude wild-harvest such as fishing, hunting and trapping?
  • Should regulations be made under the FDMA to exclude from the definition of ‘farm machinery’ certain types of machinery that are commonly used on farms such as motorbike, quadbike, car, utility, truck and other vehicles?
  • Should the FDMA, regulations or guidelines require a farmer or creditor to establish that the Act applies to a ‘farmer’ or ‘primary producer’ because they are ‘solely or principally engaged in primary production’?
  • Should the FDMA be amended to enable the RAA to require farmers and creditors to provide information to the RAA and/or the other party to establish that applicable definitions in the Act have been met?
  • Should the FDMA be amended to clarify its operation where a farming operation is conducted in more than one jurisdiction and the FDMA applies?
  • Should the FDMA be clarified so that subsequent mediations are not required for a farmer’s default under a heads of agreement, contract, mortgage or other document that gives effect to the mediated agreement?
  • Should ss 42 and 43A of the Real Property Act 1900 (NSW) prevail over FDMA s 6 and should that be noted in FDMA s 7?
  • Should FDMA s 5(2) be amended so that the Act does not apply to a farmer whose property is subject to proceedings under the Family Law Act 1975 (Cth)?
  • Should FDMA s 5(2) be amended so that the Act does not apply to farmers whose farm mortgage is secured by a guarantor if the guarantor is subject to a bankruptcy petition or is being managed under the Bankruptcy Act 1966 (Cth)?
  • Should the FDMA be amended to ensure that the needs of separated joint debtors can be accommodated effectively in mediation, and if so, how?

Overall, the response from the majority of the participating stakeholders was broad support for certain key features of the FDMA, including its simplicity and flexibility. The Bill was then introduced into the NSW Parliament as a proposed mechanism for implementing certain of the submissions received in the review process.

The Bill

Mr Blair detailed the Bill’s proposed objectives in the second reading speech of 11 April 2018:

“The Farm Debt Mediation Amendment Bill 2018 will enhance the Act by strengthening its accessibility, flexibility and fairness. The amendments will improve the operation of the Act and will encourage both farmers and creditors to seek realistic solutions to financial challenges. The first amendments will extend the protection of the Act to a broader range of primary producers. The definition of farming operations will be expanded to include types of farming operations such as on-farm and offshore aquaculture, and farm forestry, that are currently outside the scope of the Act. By doing this, the Act will provide a broad and inclusive protective buffer for farmers who pursue primary production for profit and who are subject to the sometimes extreme vagaries of the weather and market conditions. The definition of farm machinery is also being extended to secured farm machinery commonly used on farms, such as vehicles, machines and other implements.”

Other amendments that the Bill proposes are those made with the purpose of encouraging early mediation. As stated by Mr Niall:

“We aim to encourage farmers to seek mediation early, before they default on a loan. We know that the earlier mediation occurs, the more successful the outcomes are likely to be in terms of ongoing financial viability. When mediation occurs early, farmers enter the mediation in a stronger bargaining position and at a time when their emotional stress is lower. The bill includes amendments that provide an incentive for early mediation by enabling farmers to ask their creditors to mediate before they default on their loan. If a farmer later defaults on the loan, the Act requires creditors to provide one mandatory invitation to mediate before taking enforcement action. Further voluntary mediations may also occur. In addition, the New South Wales Liberal-Nationals Government aims to discourage situations of the past where multiple mediations sometimes resulted in a number of loan restructures, compounding the debt and, regrettably, sometimes bankruptcy. A requirement to offer only one mandatory mediation minimises this risk and encourages farmers and creditors to attend mediation with a willingness to find a viable and durable solution.”

The final major area of amendments proposed by the Bill are those relating to the protection of farmers who may not have been aware that they had been invited to mediate by a creditor:

“The Act currently includes provisions that have the effect of deeming when a notice or other document is taken to have been received by the farmer and other debtors with interests in a farming operation. The bill includes provisions for serving notices under the Act and makes time frames for responding to notices clearer and more flexible. The Rural Assistance Authority will be authorised to allow a farmer extra time to respond to an invitation to mediate in certain circumstances, including if the farmer has experienced or is experiencing extreme events such as flood or bushfire; relationship and family breakdown or family violence; physical and mental health issues; or if the farmer is working off-farm or is in jail, meaning the notice may not have been received. These changes will reduce the number of situations where a farmer has been unable to respond to a notice to mediate and a creditor begins enforcement action to recover a farm debt, believing a mediation offer has been declined.”

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