From 1 July 2017, a legislated farm business debt mediation process requires providers of rural credit to offer primary producers access to mediation prior to the creditor commencing enforcement action.
Who and what does it apply to?
The new regime applies to “farm business debts” being moneys owed by a farmer that were borrowed for the purpose of conducting a “farming business” and is secured by a “farm mortgage”.
The new approach
Under the new regime, a secured lender must first serve an ‘Enforcement Action Notice’ on the farmer which notifies the farmer of the lender’s intention to take enforcement action and that the farmer may request mediation.
After receiving the Enforcement Action Notice, the farmer has 20 business days to request a mediation. A farmer is entitled to have one or more advisors at a mediation.
Parties must bear their own costs of the mediation and share equally the cost of the mediator.
The Queensland Rural and Industry Development Authority (QRIDA) (previously QRAA) will receive copies of the Enforcement Action Notice and any mediation request, oversee the mediation process and be responsible for accrediting mediators.
Where the regime applies, it does not prevent the parties seeking to resolve issues informally or by other means but the secured lender is prevented from taking enforcement action without mediation unless an exemption certificate is in force.
QRIDA will issue exemption certificates if the applicant mortgagee satisfies certain prescribed criteria in the Act, including where satisfactory mediation has taken place or where a mortgagor farmer has refused to mediate.
The Act will not apply in circumstances where the farmer is bankrupt, subject to a creditors’ petition, is a corporation in external administration or where the farmer and secured lender have previously taken part in the mediation process under the Act for a particular debt and there has been further default.
The new regime have wide reach and will afford considerable protection to farmers.
Practically however, it may lead to secured lenders giving notice of enforcement action to trigger formal mediation rather than negotiating informally in the first instance.