Farm Debt Mediation Bill

Introduction and First Reading

The Hon. T.J. WHETSTONE (Chaffey—Minister for Primary Industries and Regional Development) (15:59): Introduced a bill for an act to provide for the mediation of disputes between farmers and creditors relating to debt incurred in the conduct of farming operations, and for other purposes. Read a first time.

Second Reading

The Hon. T.J. WHETSTONE (Chaffey—Minister for Primary Industries and Regional Development) (16:00): I move:

That this bill be now read a second time.

It gives me great pleasure to introduce the Farm Debt Mediation Bill 2018. The introduction of this bill into parliament fulfils a commitment that the government made to introduce this legislation in its first 100 days.

Mediation is a structured negotiation process in which the mediator, as a neutral and independent person, assists, in this case, the farmer and the creditor in attempting to reach a mutually agreeable outcome on the present arrangements and future conduct of the financial relations between them. Currently, in South Australia a farming operation can be forcibly foreclosed without any form of negotiation. This can have a severe impact on a farmer and their family when we remember that a farm is not just a place of business; it is also the family home.

At a time when South Australia's manufacturing industry is facing challenges and falling global commodity prices are placing pressure on the mining sector, our primary industries sector is more important than ever. The agriculture industry has not only been the backbone of South Australia's economy since settlement in 1836 but will continue to be imperative to our state's future economic prosperity. Agriculture is our greatest renewable industry.

However, harsh climate conditions, damaging weather events and unpredictable commodity prices make farming a volatile industry that can leave farming families and their assets prone to financial crisis. In recent times South Australian farmers have been hit by severe storms, hail, bushfires, flood events, frost and, of course, drought.

The government is committed to our farmers and believes that farmers, through a mandatory farm debt mediation scheme, should be given a fair opportunity to present and discuss their case with an independent mediator before they have their farm foreclosed on them. Through this mediation, there will be an opportunity to facilitate an outcome for all parties involved, but one that enables our farmers to take ownership of decisions rather than have circumstances imposed on them. Let me summarise some of the key components of the Farm Debt Mediation Bill 2018.

A creditor who proposes to take enforcement action against a farmer under a farm mortgage must, before doing so, give written notice to the farmer. A creditor must not take enforcement action until the expiry of the period of 21 days from the day that notice is given. The notice must state that, under this act, mediation between the farmer and the creditor is available. A farmer who is liable for debt (whether or not the farmer is in default) may request mediation under this act.

A farmer who is given a notice may, within 21 days from the date the notice was given, notify the creditor in a manner and form approved by the commissioner that the farmer requests mediation concerning the farm debt involved. A creditor who receives a request for mediation from a farmer may, by notice given to the farmer, agree or refuse to participate in mediation in respect of the farm debt involved. The notice of a response by a creditor to a request for mediation must be given in a manner and form approved by the commissioner.

If a creditor refuses to participate in mediation with a farmer who has made a request, and if the farmer is in default, the farmer can apply to the Small Business Commissioner for a prohibition certificate, preventing the creditor from taking enforcement action against the farmer for up to six months.

Conversely, the creditor is entitled to apply for an exemption certificate if the farmer is in default under the farm mortgage, no prohibition certificate is in force against the creditor, and (1) a satisfactory mediation has taken place; or (2) a satisfactory mediation has not taken place due to the farmer's refusal to participate; or (3) at least three months (or such longer period agreed to in writing by the creditor and farmer) have elapsed since notice was given and throughout that period the creditor made attempts to participate in mediation in good faith but satisfactory mediation has not taken place; or (4) in any other case—satisfactory mediation has taken place under an alternative dispute resolution process.

The exemption certificate allows the creditor to begin enforcement proceedings and remains in force for varying periods of time depending upon the steps previously taken under the act. If the Small Business Commissioner, who is responsible for the administration of the farm debt mediation scheme, receives notice that a creditor and a farmer have agreed to participate in mediation, the Small Business Commissioner must make arrangements to facilitate the resolution of a farm debt dispute by mediation.

This bill improves the protections in place for South Australian farmers, building on the existing voluntary South Australian Farm Finance Strategy and the Farming Industry Dispute Resolution Code under the Fair Trading Act 1987. This bill brings South Australia up to date with other states where farm debt mediation legislation has been operating successfully—in New South Wales, Victoria, and Queensland since 1994, 2011 and 2016 respectively.

A bill for farm debt mediation was first introduced into the South Australian parliament in 2015 by the Hon. David Ridgway MLC. That bill formed the basis of this legislation. The Farm Debt Mediation Bill 2018 is largely aligned with Victoria's legislative framework and New South Wales' and Queensland's legislative frameworks for farm debt mediation have also been reviewed and considered.

Victoria conducted a recent independent evaluation of the Victorian farm debt mediation scheme. That evaluation found an agreement between parties had been reached in 96 per cent of all mediations held since commencement of the scheme, well above the program's initial target of 75 per cent. The evaluation process also revealed that participation in the Victorian farm debt mediation scheme resulted in improved outcomes for many farmers, and also saved both farmer's and creditors' time and money that may otherwise have been incurred in different debt resolution processes.

It should be noted that the federal government is committed to a nationally consistent approach to farm debt mediation, and the introduction of this bill is timely. A mandatory farm debt mediation scheme in South Australia will help relieve the emotional and mental stresses associated with a foreclosure at what is understandably an extremely difficult time, and ensure our South Australian farmers are given every opportunity to succeed. The government has consulted with key stakeholders on the design of the Farm Debt Mediation Bill 2018, including agricultural and banking industry stakeholders as well as the Small Business Commissioner.

With those words, I commend the bill to the house and look forward to further debate, and seek leave to have the remainder of the second reading explanation of clauses inserted in Hansard without my reading it.

Leave granted.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

These clauses are formal.

3—Object of Act

This clause sets out the object of the Act to provide for the efficient and equitable resolution of farm debt disputes by requiring creditors to provide farmers with the opportunity to have the disputes referred to mediation before the creditors are able to take possession of property or other enforcement action under farm mortgages.

4—Interpretation

This clause defines certain terms used in the measure.

5—Application of Act

This clause provides that the Act—

(a) applies to creditors only in respect of farm debts; and

(b) does not apply to a farmer in certain specified circumstances.

6—Enforcement action in contravention of Act void

This clause provides that enforcement action taken by a creditor otherwise than in compliance with the measure is void.

7—Relationship with other Acts

This clause sets out the interaction between the measure and other legislation.

Part 2—Availability of mediation

Division 1—Availability of mediation

8—Notice of availability of mediation to be given

This clause provides that enforcement action must not be taken unless the notice requirements set out in the provision are met.

9—Farmer may request mediation

This clause enables a farmer to request mediation.

10—Creditor may agree to or refuse mediation

The proposed section provides that a creditor who receives a request to mediate under section 9 may agree or refuse to mediate.

11—Enforcement action postponed to allow for mediation

This clause provides that if a farmer requests mediation under section 9, the creditor must not take enforcement action unless an exemption certificate is in force.

Division 2—Prohibition certificate

12—Application by farmer for issue of prohibition certificate

This clause provides that if certain conditions are met (as set out in the clause) a farmer is entitled to a prohibition certificate.

13—Issue of prohibition certificate

The clause sets out the requirement for the Commissioner to issue a prohibition certificate and provides that a creditor must not commence enforcement action against a farmer if a prohibition certificate is in force.

Division 3—Exemption certificate

14—Application by creditor for issue of exemption certificate

This clause provides that if certain conditions are met (as set out in the clause) a creditor is entitled to an exemption certificate.

15—Issue of exemption certificate

The clause sets out the requirement for the Commissioner to issue an exemption certificate and provides that the Act (other than Part 2 Division 3) does not apply to the creditor who holds the farm mortgage while the certificate is in force.

16—Creditor may satisfactorily participate in mediation without forgiving or reducing farm debt

This clause provides that a failure by a creditor to agree to reduce or forgive any debt does not, of itself, demonstrate a lack of good faith on the part of a creditor in participating in, or attempting to participate in, mediation.

17—Duration of exemption certificate

This clause sets out time limits for exemption certificates.

Division 4—General

18—When is a farmer or creditor presumed to have refused to participate in mediation?

This clause sets out the basis on which a farmer or a creditor (as the case may be) is presumed to have refused to participate in mediation.

Part 3—The Commissioner and mediation

Division 1—The Commissioner and mediators

19—Administration of Act

This clause provides that the Commissioner is responsible for the administration of the proposed Act.

20—Functions of Commissioner

This clause sets out the Commissioner's functions.

21—Functions of mediators

This clause sets out the functions of a mediator engaged by the Commissioner under clause 20.

Division 2—The mediation process

22—Commissioner must arrange mediation

The clause provides that the Commissioner must arrange mediation if notified under clause 10(4) that the parties have agreed to take part in mediation.

23—Conduct of mediation

The clause sets out the manner in which mediation must be conducted.

24—Confidentiality

The proposed section makes it an offence to disclose information obtained in the course of mediation under the Act, or in the administration of the Act, except in specified circumstances.

25—Mediation fees

The proposed section provides for the payment of mediation fees by each of the parties to a mediation.

Part 4—General

26—Agreement reached by parties at mediation

This clause provides that a creditor must ensure that any binding agreement relating to the farm debt made between the creditor and the farmer that is entered into during or at the conclusion of mediation is reflected in any contract, deed, mortgage or other instrument executed as a result of that binding agreement.

27—Contracting out prohibited

The proposed section provides that a provision of an agreement or other instrument that attempts to 'contract out' from the operation of the Act or attempts to have a farmer (as debtor or guarantor) or a guarantor indemnify a creditor for any loss or liability arising under the Act is void.

28—Waiver of rights void

The proposed section provides that a waiver of rights under this Act is void.

29—Notices by mortgagee

This clause provides that if land is subject to a farm mortgage and another Act requires the mortgagee to give notice to the mortgagor before exercising in relation to the land a power or right conferred by the other Act or by the farm mortgage nothing in this Act derogates from the requirement to give the notice under the other Act.

30—Service

This clause sets out the manner in which the service of a notice or document may occur.

31—Offences by bodies corporate

This clause provides that if a body corporate is guilty of an offence against this Act (other than an offence against the regulations), each director of the body corporate is guilty of an offence and liable to the same penalty as is prescribed for the principal offence if the prosecution proves certain specified matters.

32—Regulations

This clause facilitates the making of regulations by the Governor for the purposes of the Act.

Schedule 1—Transitional provision

1—Transitional provision

This clause states that the Act applies to farm debt (whether or not incurred before or after the commencement of section 8) in respect of which no enforcement action was taken before the commencement of that section.

Debate adjourned on motion of Ms Cook.