The crippling of the live export trade, the prevailing drought,
the resulting reduction in cash flows and correction in rural
property values across northern Australia in recent years has led
to a significant reduction in equity in many operations. Any number
of Thynne & Macartney's clients have received approaches
from their financiers to revise budgets and engineer debt reduction
strategies to address these issues.
As their relationship with their bank deteriorates, clients
often ask us what options are available to them to avoid
Queensland Farm Finance Strategy
Most banks which service the Agricultural industry take part in
this voluntary scheme which is available to borrowers with debts
between $50,000 and $10,000,000.
The scheme encourages borrowers and the bank to enter into a
mediation process to set out timeframes in which the borrowers must
achieve certain objectives before the bank will take further action
(such as a foreclosure). Such arrangements are "binding"
in that if the borrowers are unable to meet the agreed objectives
then the bank will become entitled to take over control of the
Caution should be exercised when entering into such agreements
as they will usually contain an acknowledgement by the borrower
that the loan documents were validly entered into which could stop
a borrower from later alleging that the bank acted improperly, for
example, when it approved the loan.
Financial Ombudsman Service
The Financial Ombudsman Service acts as an external complaint
resolution service which a troubled borrower can approach to seek a
solution to an issue which it has encountered with a bank if the
loan in dispute is less than $500,000 and the Ombudsman determines
that the complaint is not too complex nor will it take up to many
resources to hear the complaint.
Many loans for rural operations won't meet these criteria
and so the Ombudsman may be of limited use in circumstances where a
foreclosure is pending, however, it can be a useful tool in
resolving ancillary issues to delay foreclosures.
A borrower sometimes has grounds to sue a bank over an issue
that arose during the course of the relationship. This could
involve a challenge to loan agreements, guarantees, mortgages and
Usually, by the time serious issues have arisen the borrower
will have entered into comprehensive securities documents that can
be difficult to challenge.
However, it might be that the borrower suffered some
"special disadvantage" that led the borrower to be
unfairly exposed to the bank and that a court might accept entitles
the borrower to compensation from the bank or affects the
Of course, engaging in any form of litigation involves
significant costs and personal time and should be only considered
as a last resort once all other avenues of negotiation have been
Our advice to clients is generally – keep your bank
informed – both with the good news and the bad. Banks (like
us all) do not appreciate unpleasant surprises.
If you have kept the bank informed then generally it will be
easier for all parties to sit down and negotiate a strategy
acceptable to all.
Thynne & Macartney's agribusiness and commercial
litigation lawyers are called upon regularly to assist clients in
dealing with financiers and would be happy to answer any
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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