2018-05-16 – Farm Debt Mediation Bill – First Reading – Video 8

Stuart Smith

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2018-05-16 – Farm Debt Mediation Bill – First Reading – Video 11

Mark Patterson

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2018-05-16 – Farm Debt Mediation Bill – First Reading – Video 7

Rino Tirikatene

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2018-05-16 – Farm Debt Mediation Bill – First Reading – Video 3

Damien O’Connor

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2018-05-16 – Farm Debt Mediation Bill – First Reading – Video 6

David Bennett

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Farm Debt Mediation in NSW — A few problems
by ALEX ELLIOTT on 05/05/2012 · LEAVE A COMMENT · in MEDIATION

The object of the NSW Farm Debt Mediation Act 1994 is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a bank or financial institution can take possession of the farm or other farm property.

Section 10 of the Act provides that once a farmer gives notification that mediation is required, the bank or financial institution cannot take any enforcement action unless a certificate is in force under section 11.

Section 11 of the Act stipulates that a certificate will be issued by the Authority (NSW Rural Assistance Authority), if the Authority is satisfied that a satisfactory mediation has taken place in respect of the farm debt involved.

Mediation is a structured process in which the mediator, who must be a neutral and independent person, assists the farmer and the bank or financial institution to reach an agreement. That agreement may mean the capitalisation of interest, the extension of repayments, additional advances or increasing an overdraft limit. It may also mean the sale of certain assets over time. There are many possible settlement outcomes available to the parties.

The High Court of Australia in its decision in Waller v Hargraves Secured Investments Limited [2012] HCA 4 has added a substantial complication to the mediation process and any possible settlement.

In August 2003, Hargraves Secured Investment Limited advanced $450,000 to Ms Waller under a loan agreement. The advance was secured by a mortgage over Ms Waller’s farm. She defaulted on the loan.

Mediation was held under the provisions of the Farm Debt Mediation Act 1994. The parties entered into terms of settlement under which there was a second loan agreement for $640,000. This enabled the first loan to be paid out, along with past and future interest.

Ms Waller defaulted on the second loan.

Hargraves Secured Investment Limited commenced action in court for possession of the farm and judgment against Ms Waller.

Ms Waller appealed to the High Court from a decision of the NSW Court Appeal. The argument which was accepted by the High Court was that the enforcement proceedings were not in relation to the farm debt the subject of the mediation. There was now a new and different debt, which was distinct from the first loan. Hargraves Secured Investment Limited had not complied with the Act because the mediation only dealt with the first loan, not the new one.

So it seems that even if a section 11 certificate has been obtained in respect of a farm mortgage, a bank or financial institution must be careful that the farm debt it relates to is the same and has not been discharged in anyway prior to enforcement action. If in doubt it seems that a new notice to the farmer may have to be given.

The High Court’s decision may discourage future lending to farmers because of the uncertainty surrounding this decision. The bank or financial institution may play it safe and only offer in mediation the option of refinancing with another institution, selling the asset or agreeing to surrender the asset to the bank or financial institution. Anything else may complicate future enforcement proceedings.

This is clearly not in the interests of the rural community and the Act needs to be amended as a matter of urgency. A full range of options should be available to comply with the spirit of the legislation.

Alex Elliott

Farmers who are down on their financial luck will be able to go to mediation before being forced into receivership by banks.
A Farm Debt Mediation Bill will soon be introduced into Parliament which will require creditors to offer mediation to farmers who default on payments before they take any enforcement action.
The bill arises out of concern there is a lot of debt in the primary sector. Last year agriculture debt stood at $62 billion, with dairy $41.5b, sheep and beef $14.1b and “other” including horticulture $6.3b. Four years ago dairy farmer debt was $34b.
In announcing on Monday that the bill had been given the go-ahead by Cabinet, Agriculture Minister Damien O’Connor said farm debt had ballooned out by 270 per cent compared with 20 years ago.
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“Farmers are especially vulnerable to business down-turns as a result of conditions that are often outside their control, like weather, market price volatility, pests and diseases like Mycoplasma bovis.”
The estimated cost to set-up the scheme is $350,000, and the estimated annual cost for administering the scheme is $250,000 to $300,000. This will be met from the existing MPI baseline.
It is expected each case of mediation will cost about $6000. This will be split between the lender and the farmer.
Federated Farmers and the Bankers Association both back the bill. Neither could provide statistics for the numbers of farmers who go into receivership every year.
A similar private member’s bill in the name of NZ First primary spokesman Mark Patterson was introduced last year but was withdrawn at select committee stage because it was considered unworkable.
O’Connor said the bill was “pragmatic”.
“The guts of it is early intervention – where either the farmer or the bank have an ability to go and seek mediation, which is a far better option than forced foreclosure,” he said.
The genesis of the bill goes back to the 1990s when NZ First had attempted to introduce a similar measure. O’Connor said Patterson’s bill had been reworked as a Coalition Government piece of legislation.
One of the reasons why the bill failed to advance last year was the mechanism proposed came too late in the process, by which time a farmer was already under water.
Last year the Reserve Bank warned that while financial stress in the dairy sector was falling, a small number of farmers were struggling to pay down debt.
The numbers of farmers who were at least 90 days overdue with their loans was 2 per cent out of 8059 owner-operators and 3911 sharemilkers.
That figure was an improvement on the worst period for non-performing loans in 2011, when it had risen to 4.7 per cent.
Two years ago 12.7 per cent of dairy farms were “potentially stressed” but that has dropped to 8.6 per cent.
Real Estate Institute spokesman Brian Peacocke said it was difficult to gather accurate statistic

Banks wanting to foreclose on farmers will be forced to head to mediation first, under proposed new law. Agriculture Minister Damien O’Connor discussed the Farm Debt Mediation Bill with Lisa Owen.

2018-05-16 – Farm Debt Mediation Bill – First Reading – Video 9

Kieran McAnulty

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