Australia: Review of NSW Farm Debt Mediation Act

Services: Banking & Finance, Dispute Resolution & Litigation, Restructuring & Insolvency
Industry Focus: Financial Services

What you need to know

  • The New South Wales Rural Assistance Authority (RAA) has published a consultation paper raising more than 200 questions as part of a review of the Farm Debt Mediation Act 1994 (NSW) (FDMA).
  • The issues canvassed in the review range from whether the FDMA should be extended to protect a broader range of farmers, through to whether the confidentiality of mediations should exclude disclosures in certain circumstances.
  • Those interested in having a say on the RAA's review can provide comments up until 5 May 2017.

The New South Wales Rural Assistance Authority (RAA), which administers the Farm Debt Mediation Act 1994 (NSW) (FDMA), is currently overseeing a review of the FDMA. The RAA has published a review consultation paper raising 229 consultation questions in total, which are open for comment until 5 May 2017.

Background to the review

The FDMA is no stranger to review. Having been in existence for 22 years, it has been reviewed several times and amended 10 times since its commencement, most recently in 2010.

Two priorities of the current review are:

  1. to ensure the FDMA continues to deliver on its original intent, which is to provide for the efficient and equitable resolution of farm debt disputes, and
  2. to work with the Australian Government on a national approach to farm debt mediation. A nationally consistent approach is on the agenda of the Australian Government. There is now farm debt mediation legislation in Victoria and New South Wales, a code in South Australia and legislation is soon to commence in Queensland.

The review is being conducted within the RAA as a desktop study with consultation, and the Board of the RAA has asked that recent court decisions inform the review recommendations.

The consultation paper is accessible on the New South Wales Government's 'Have Your Say' website and the RAA's website. It includes statistics about mediation activity over the 22 years that the FDMA has been in operation. For example, in that time there have been 1659 'satisfactory mediations' completed. Agreement was reached in 1487 of those mediations, leaving 172 in which agreement was not reached, representing an agreement rate of 90%.

According to the RAA, stakeholders have generally been satisfied with how the FDMA has operated in NSW to date.

Consultation questions

The consultation questions seek feedback on a broad range of topics including whether:

  • non-farmer guarantors should be provided with notice of a farm debt mediation and be invited to participate
  • the FDMA should be amended to extend its protection to a broader range of farmers, but excluding fishing, hunting and trapping
  • the FDMA, regulations or guidelines should require a farmer or creditor to establish that the FDMA applies to a 'farmer' or 'primary producer' because they are "solely or principally engaged in primary production"
  • the RAA should require farmers and creditors to provide information to the RAA and/or the other party to establish that applicable definitions in the FDMA have been met
  • the FDMA should be clarified so that subsequent mediations are not required for farmers who default under a heads of agreement, contract, mortgage or other document that gives effect to a mediated agreement
  • the FDMA should be amended to require that if a heads of agreement has been agreed, default under that agreement must occur before an application can be made by the creditor for a section 11 certificate
  • 'good faith' should be defined in the FDMA, in regulations, in the RAA template checklist for the mediator's summary of each mediation or in a policy document
  • the FDMA should be amended to allow farmers to amend a heads of agreement and to waive the cooling off period upon production of a letter from the farmer's lawyer to the effect that the farmer is aware of and understands the nature and effect of the amendment or waiver
  • the FDMA, regulations or guidelines should permit mediations to be conducted by electronic means provided all parties agree
  • the FDMA should require that the mediation be held at a place reasonably convenient for the farmer
  • the FDMA should be amended to require farmers, creditors or third parties to provide information to the RAA, the mediator or the parties to a mediation - such as information about the mortgage, correspondence between the parties, the farmer's default and any other matter prescribed by regulation
  • the confidentiality of mediation should exclude disclosures for the prevention of a serious, imminent risk to a person's life, health or property, violent or damaging offences, or deliberate abuse of power, or whether the FDMA should adopt the New South Wales Law Reform Commission's (NSWLRC) provisions concerned with confidentiality and admissibility of mediation communications into evidence
  • the NSWLRC's model enforcement provision for heads of agreement should be included in the FDMA, which puts the onus on the defendant to prove lack of enforceability and gives the party wishing to enforce it the right to apply to the court for orders to give effect to the agreement.

The paper also seeks comments on any issues not included in the consultation questions for consideration by the RAA Board.

Key takeaways

Submissions on the consultation paper are invited by 5 May 2017.

The review is likely to result in further amendments to the FDMA, which will hopefully not only meet the review objectives but also clarify issues that are currently in need of clarification, and update the FDMA to be in step with technological advancements and other developments.

For example:

  • the paper makes reference to the High Court decision in Waller v Hargraves Secured Investment Ltd [2012] HCA 4 which held that a certificate issued under section 11 of the FDMA authorised the creditor to take enforcement action only in relation to a farm debt that had been the subject of mediation under the FDMA. It did not authorise enforcement action in relation to a new secured farm debt that had not been the subject of mediation. The consultation paper notes that this interpretation could have the effect of unreasonably delaying a creditor's ability to realise its security because any mediated amendments to the mortgage could create a new debt. The paper says that in order to ensure that the FDMA provides for efficient and equitable resolution of farm debt disputes, amendments may be necessary to clarify its operation so as to avoid the practical implications of the Waller judgment
  • in keeping with technological advancements the FDMA could in future allow mediations to be held by electronic means
  • unless clearly defined or limited, an expansion of the exemptions to the confidentiality of mediations could create uncertainty about what can and can't be used subsequent to a mediation, and as a result could potentially inhibit the open exchange of information at mediation. For example the NSWLRC's proposed model includes the ability to seek leave of the court or tribunal to disclose information, on grounds which include whether it is in the public interest or the interests of justice for the mediation communication to be disclosed or admitted into evidence.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories

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