Less butting of heads? Changes to the NSW Farm Debt Mediation Act

The Farm Debt Mediation regime established in NSW in 1994 is now well understood, and is regarded by most observers as the Australian benchmark.

The changes contained in a Bill tabled in Parliament on 10 April 2018 and available here follow a careful and thorough consultation.  Although the reforms represent more of an adjustment than a major overhaul, they are significant nonetheless.

One of the most striking changes is the creation of an offence, committed by a creditor who enforces a farm debt without having first obtained an ‘exemption certificate’ from the Rural Assistance Authority.  An exemption certificate will only be available if a ‘satisfactory mediation’ has been already undertaken and completed, or if the farmer declines mediation or fails to properly participate.

Other changes include:

• Broadening the ambit of the scheme, to apply to ‘matters involving farm debts’ rather than ‘farm debt disputes.’
• More specific definition of a ‘farming operation’ as a business undertaking that ‘primarily involves’ agriculture, aquaculture, the cultivation or harvesting of timber or native vegetation or any connected activity – but excludes wild harvest fishing, or the hunting or trapping of animals in the wild.
• Confirmation that a breach of an earlier mediated outcome does not require a second round of mediation.
• Allowing the parties to waive the 14 day cooling off period in writing.
• Implementing a more structured approach by which the parties may reasonably request information or copies of documents from each other.
• Sensibly allowing parties to break the current confidentiality regime if it will ‘prevent or minimise the danger of injury to any person or damage to any property.’

What’s missing?

To create a criminal offence for enforcement absent an exemption certificate will be seen by some as heavy-handed, but otherwise the changes should receive broad support. That said, there are some missed – albeit less significant – opportunities for improvement:

• Currently lenders can only invite a farmer to mediate if he or she is in default.  In practice this may lead a lender to call a default earlier than they otherwise might, because that is the only way to access the mediation process.  A way to initiate mediation without a default would be useful in some situations.
• Attendance at a mediation by all parties is preferable – but sometimes relationship breakdowns contribute to financial difficulties, and vice versa, and it can sometimes be better to mediate with one party ‘attending’ by video conference.  The amendments don’t directly facilitate this, however there is allowance for later modification of the mediation process by regulation.
• There is no ‘minimum’ size for a farming operation.  The question: ‘how many fruit trees turn a weekender into a farm?’ remains unanswered.

If passed, the legislation will commence on proclamation.