Mediation provides fairness for farmers

Dealing with financial institutions and other creditors can be a difficult issue for those in the agricultural sector. 

The government has recently introduced the Farm Debt Mediation Act 2018, which is intended to provide some additional protections for farmers.

The act introduces mandatory processes, including providing the farmer with an opportunity to request a mediation. This then must be untertaken before a creditor is able to persue what has been called a 'farm debt', which is 'a debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage'. 

A 'farm mortgage' includes farm property and an interest in a hire purchase agreement for farm machinery, but does not include things such as a stock mortgage, a crop or wool lien, and the interest of a lessor in farm machinery that is leased and a security interest in stock, wool or crops.

The general manner in which the act operates is as follows. If a farmer recieves a notice from a creditor to pay their outstanding debts during a time of financial hardship, the farmer has 21 days to request a mediation with the creditor.

The creditor must respond indicating whether it agrees to mediate or not. If the mediation request is refused by the creditor, a farmer can request a prohibition certificate to be issued against the creditor. This prohibition certificate prevents any further enforcement action by the creditor against the farm for a period of six months or until the farmer and creditor enter into a mediation. But, even after undertaking mediation, the outcome may not necessarily include a reduction or forgiveness of any debt.

This process has been introduced to ensure that farmers have access to a system that provides some fairness and an opportunity to have discussions with a creditor. It is not a 'get out of jail free' card. 

This article was written by Anthony Kelly and was published in The Stock Journal on Thursday 20 September 2018. 

Practice Area: Farm Law

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