Welcoming The Farm Debt Mediation Scheme

A government backed scheme to assist primary producers in financial distress took effect on 1 July.  Unlike some of the other recent debt relief measures that apply to business more generally, this was not a COVID related measure, but recognises the particular pressures that primary producers are facing.  It is backed by the Farm Debt Mediation Act. 

The scheme applies to primary producers in fields such as agriculture, horticulture and aquaculture.  Some primary producers, such as forestry, fishing and lifestyle farming are excluded.

At the heart of the scheme is the mandatory requirement for banks, and other security holders, to go through a formal mediation process, in good faith, with their farmer clients before they can take any action to enforce their security (for example beginning a mortgagee sale process).  Farmers don’t have to wait for their creditors to act and can initiate the mediation process themselves.  The scheme provides a streamlined process for setting up the mediation and farmer’s costs are capped at $2,000.  A mediator is appointed and they then conduct a mediation meeting with the parties.

The scheme is no “magic cure-all” for farmers given that mediators have no ability to impose solutions on either party.  If the farmer cannot reach an agreement with their creditor at the mediation then the creditor can proceed with enforcement, provided they have negotiated in good faith.

However mediation can still be a very useful process.  Firstly there is the practical aspect of forcing the parties to put all other matters to one side for the day and focus their energies on resolving this one issue.  It can be surprising what a difference this focussed approach can make.  Secondly the parties have the benefit of a mediator who is skilled at assisting parties in working through their issues and arriving at a mutually acceptable solution.  With a mediator involved parties are much less inclined to walk away from the table and instead will often continue negotiating past their usual comfort point. 

Accordingly we would urge farmers who are experiencing financial difficulties to consider using this scheme on a proactive basis.  If your bank invokes the scheme, then we would recommend that farmers take appropriate professional advice on how to approach the mediation to maximise the opportunity for achieving a positive outcome.

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Disclaimer: The information contained in this publication is of a general nature and is not intended as legal advice. It is important that you seek legal advice that is specific to your circumstances.