Bills

Farm Debt Mediation Bill

Committee Stage

In committee.

Clause 1.

The Hon. D.W. RIDGWAY: I have six amendments to move and I have just a couple of brief comments I would make at clause 1, but I think I might move to report progress shortly. As I said, I have six amendments standing in my name that I will move, before, of course, the third reading of this bill. In my second reading speech last month I briefly outlined the five amendments I intended to move during the committee stage; however, my colleagues may have noticed there are now six.

All of these amendments were suggested by the Australian Bankers Association and effectively mirror elements of the corresponding New South Wales legislation. I do not believe any of these amendments are contentious and they will simply strengthen the bill. I intend to explain those amendments in more detail when I move them.

Clause passed.

Sitting suspended from 17:57 to 19:46.

Clauses 2 to 4 passed.

Clause 5.

The Hon. D.W. RIDGWAY: I move:

Amendment No 1 [Ridgway–1]—

Page 5, after line 21—Insert:

(3) This Act does not apply to a farm debt of less than $50,000 or more than $30,000,000.

This is the insertion of clause 5(3), which effectively limits the scope of this bill to farm debts between $50,000 and $30 million. I have a few other comments to make. As I mentioned in my second reading speech, the reason for this amendment is that for a farm debt below the minimum of $50,000, although mediation expenses are not too significant, we believe the effectiveness of this process could be somewhat diminished.

Similarly, if the farm debt is over $30 million then perhaps mediation would not be the most appropriate forum to settle a dispute of this magnitude. As I said in my remarks, all these amendments were suggested by the Australian Bankers Association, and they mirror a lot of the provisions in the New South Wales legislation. This amendment confines mediation to debts between $50,000 and $30 million.

Amendment carried; clause as amended passed.

Clauses 6 to 18 passed.

Clause 19.

The Hon. D.W. RIDGWAY: I move:

Amendment No 2 [Ridgway–1]—

Page 10, line 20 [Clause 19(1)(a)]—Delete 'unreasonably delayed entering into or proceeding with mediation' and substitute:

not entered into or proceeded with mediation within 3 months of a notice of availability under section 8 being given or a request for mediation under section 9 being made (as the case requires)

This is a new provision, or an amendment to the provision, to put a deadline or a time limit on the mediation process. There are two amendments to clause 19: my amendments Nos 2 and 3, which I assume will be consequential. This clause refers to a situation where both the farmer and the creditor are presumed to have refused to participate in mediation following an unreasonable delay entering into or proceeding with mediation.

The feedback we received is that it will create more certainty if there is a defined period. We have taken this feedback on board, and now the farmer, the landowner, the farm operator, or the creditor will be presumed to have refused to participate in mediation if either party has not entered into or proceeded with mediation within three months of the request being made under sections 8 and 9 of this bill.

To be clear, these amendments are intended to exist in conjunction with the remaining subsections that already exist in clause 19. Again, this was a suggestion from the Australian Bankers Association to have a defined period of time. I urge all members, as with my previous amendment, to support this amendment.

Amendment carried.

The Hon. D.W. RIDGWAY: I move:

Amendment No 3 [Ridgway–1]—

Page 10, line 34 [Clause 19(2)(a)]—Delete 'unreasonably delayed entering into or proceeding with mediation' and substitute:

not entered into or proceeded with mediation within 3 months of a notice of availability under section 8 being given or a request for mediation under section 9 being made (as the case requires)

I believe this amendment to be consequential because it has exactly the same wording as the previous one.

Amendment carried; clause as amended passed.

Clauses 20 to 22 passed.

Clause 23.

The Hon. D.W. RIDGWAY: I move:

Amendment No 4 [Ridgway–1]—

Page 12, after line 13—Insert:

(2a) A mediator may call a pre-mediation conference.

(2b) The mediator may—

(a) conduct a pre-mediation conference with such procedures as it thinks fit; and

(b) without limiting paragraph (a), allow the parties to participate in a pre-mediation conference by means of telephone, video link or any other system or method of communication.

This fourth amendment I move today inserts subclauses (2a) and (2b), which require a pre-mediation teleconference. This enables the mediator to call what we will call a pre-meditation teleconference to be conducted via phone, telephone link or any other communication system, and the purpose of this is so that both parties can actually be prepared before they get to mediation. The experience, I think, from what we have seen in other states, is that, if you do not actually have this, then people turn up, do not have the appropriate documents and are not fully prepared. So, it is really just a way of being fully prepared so that the actual mediation starts with people getting maximum benefit out of the mediation process.

Pre-meditation conferences give both parties an opportunity to better prepare and almost, if you like, see what the other party has, in a sense, the issues they will been dealing with. We think that also by having that pre-meditation teleconference (and this is the New South Wales experience) it moves it further towards both parties feeling that they are treated fairly and equitably. Often, as you would appreciate, Mr Chairman, when it is a business owner, a farmer, a relatively small operation, against the might of one of the big banks, this actually levels the playing field because everybody is prepared before they get there. I encourage all members to support the amendment.

Amendment carried; clause as amended passed.

Clause 24.

The Hon. D.W. RIDGWAY: I move:

Amendment No 5 [Ridgway–1]—

Page 12, line 31 [Clause 24(1)(b)]—Before 'consent' insert 'written'

Amendment No 6 [Ridgway–1]—

Page 12, line 35 [Clause 24(1)(d)]—Before 'consent' insert 'written'

These amendments prevent a person from disclosing any information obtained in mediation or in the administration of this proposed act without the consent from whom the information was obtained or to whom it relates. The amendment would require written consent to be specifically given to release their information.

From what we have worked out from the other states where mandatory mediation has worked extremely well, it is their advice that it is a sensible amendment that provides certainty and security for people that their information, sometimes very sensitive information about their personal financial details, will not be disclosed. I encourage members to support those two final amendments as well.

Amendments carried; clause as amended passed.

Remaining clauses (25 to 31), schedule and title passed.

Bill reported with amendment.

Third Reading

The Hon. D.W. RIDGWAY (Leader of the Opposition) (19:56): I move:

That this bill be now read a third time.

I would like to thank those members who provided a contribution and their support for the bill. I note that this bill will receive the support of all of the crossbenchers, and I thank each member who has taken the time to understand the proposition we are putting forward.

I would also like to take this opportunity to comment on the government's position. At the second reading speech—I think the Hon. Gerry Kandelaars spoke on behalf of the government—he said they would not be supporting this bill. I am disappointed with that. Since then, I have had a couple of briefings and one in particular was with the Small Business Commissioner and the minister who he reports to, minister Hamilton-Smith. We met last week and they outlined why they would be advising the government that they should not support this bill.

The Hon. J.S.L. Dawkins interjecting:

The Hon. D.W. RIDGWAY: No, we do not exchange Christmas cards and probably never will, I suspect, exchange Christmas cards.

The Hon. R.L. Brokenshire interjecting:

The Hon. D.W. RIDGWAY: I voted for him when he was the leader, absolutely, I always support the leader.

The PRESIDENT: The Hon. Mr Ridgway, do not get distracted.

The Hon. D.W. RIDGWAY: I got distracted, I am sorry.

Members interjecting:

The Hon. D.W. RIDGWAY: And of course, he is a very good friend of Kyam Maher's. Anyway, we are trying—

The Hon. R.L. Brokenshire interjecting:

The Hon. D.W. RIDGWAY: Can we just keep the comments for—I had a meeting with the minister. The primary assertion from the government, through the minister, was that the current farming industry dispute resolution code was working effectively and therefore a mandatory model was not necessary. Strangely enough, in the very next sentence they also informed me that the farming code, which is working so well, has never been used by the Small Business Commissioner for any farm debt mediation. So, it is absolutely laughable, I think, that the government can say their mediation model is working effectively when it has not resulted in one mediation since its inception in 2013.

The purpose of the bill currently before the parliament is to require mandatory mediation, something the current model does not impose. It is about getting the parties, the farmer and the creditor, around the table early in the piece to ensure they have the opportunity to get the best outcome for everyone involved. I have covered the industry-wide support I have had for this bill in my second reading speech, but I reiterate that this bill has strong support from the farmers and the banking industry. Two parties, or industries, which will be directly affected by the bill support it. So, why is the government standing in the way? Is there a political motivation behind their opposition to this bill?

The government and the minister also mentioned that they thought the current model did impose mandatory mediation. I reiterate, under the current code parties must voluntarily request mediation after having already attempted to resolve the dispute and then it is at the discretion of the Small Business Commissioner to require mediation. This hardly seems mandatory. The words 'voluntary', 'attempt' and 'discretion' are hardly synonymous with the word 'mandatory'.

The bill I have put before the chamber requires a creditor to write to a farming operation before it commences the steps involved with foreclosure. In a bid to remove any confusion on the government's part I will read out clause 8 of this bill. Clause 8(1) states:

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 in accordance with subsection (3).

The operative word of that sentence is 'must', a creditor must write to a farmer informing them of their right to mediation. I have also already outlined there is also a mechanism for the farmer to instigate mediation. Therefore, there are notable points of difference between the current code and the bill here before us today.

First, under my bill, the creditor must write to the farmer regarding mediation available through the Small Business Commissioner, which is not currently required under the farming code. Secondly, under this bill, the Small Business Commissioner must arrange for each farm debt dispute to be referred to mediation under part 2, to be the subject of mediation by a mediator. Again this is not under the farming code.

I also highlight that the Small Business Commissioner has ample mediation resources to facilitate and implement this proposed legislation. To my understanding, the Small Business Commissioner has 10 mediators on its panel. In the commissioner's 2014-15 annual report it outlined that there had only been three mediations conducted in total across all industry disputes in the 2014-15 period. Therefore, logic tells me that at least seven of the mediators available to the commissioner were not even used in this period.

I hear anecdotally in the 2015-16 period so far there have been eight mediations which represents a significant increase. However, this is still less than one mediation per mediator per year available to the commissioner. Also in terms of cost, it is my understanding that the Small Business Commissioner pays for the mediators somewhere in the order of $920 a day. Parties to a negotiation pay a flat fee of $195 per mediation. A simple calculation tells me the cost of mediation through the Small Business Commissioner would only cost the commissioner just over $500, speaking in very rough terms. The point I make is that, although this mediation is through the commissioner, it is not an overly burdensome expense for the commissioner to wear.

It was interesting, when I had the discussions with minister Hamilton-Smith and the Small Business Commissioner, Mr John Chapman, that they talked about getting an increase in their budget, so they were going to do some more advertising. You would think if you adopt this approach then it is mandatory: the finance authority or the farmer can in writing request mediation. They do not actually have to have the Small Business Commissioner advertising what they are doing out in the marketplace. It is an interesting concept where it just seems that we have to continually spend lots of money on government advertising, rather than actually just delivering the service.

Again we do not have accurate information, but anecdotally we think there have been about 50 farms in the last six years that have either been foreclosed on or are in mediation at the moment. There is actually a real need for this, and none of them is going through the Small Business Commissioner. This is all happening externally to that.

This bill has received the support of all key players involved, with the exception of the government. Both the farmers and the banking industry, those who are directly affected by the implications of this bill, support it. I have received submissions and consulted with the Australian Bankers Association, the rural arms of the NAB, the Rural Bank, Bendigo Bank, Rabobank, ANZ, Westpac and the Commonwealth, none of which opposes the bill.

I have also had mediators who speak out strongly in favour of this bill. I know that I have had discussions with some of the farm rural financial counsellors who see this as a really important part of dealing with farm debt. Of course we have the issue, very sadly at the moment, with the crisis in the dairy industry, where I know a number of operators are faced with some particularly unpleasant financial circumstances, yet the government is not prepared to acknowledge that. The Minister for Primary Industry announced some extra money for counselling and support for the dairy industry today, but this would have been a very simple measure that the government could have supported.

You just never know—two months ago you would not have thought that the dairy industry would be facing the crisis they are facing now. We all do hope that we have a great season, with plenty of rain, and that none of our grain farmers or broadacre farmers face difficult circumstances, but you just never know. It seems really strange that the government is not prepared to support it. As I flagged in my second reading speech, Primary Producers SA are not strong advocates for the bill but they do not oppose it either; they do not see it as being a negative step.

With all this support from all of the farm sectors involved, coupled with the fact that the existing voluntary code has never been used, I really cannot understand why the government has not been prepared to support this bill. I believe I canvassed the effectiveness of the New South Wales legislation when I first introduced the bill but, as a last resort to get the government to see reason, I will run through it again. A report into the New South Wales act, commissioned by the New South Wales Rural Assistance Authority and conducted by the University of Western Sydney, included survey data from all parts of the mediation process, including farmers, creditors, mediators and representatives.

Firstly, generally the report found the New South Wales Farm Debt Mediation Act is achieving its objects. Secondly, all participants in farm debt mediation support the opportunity for farm debt mediation. Thirdly, they believe that farm debt mediation is cost-effective. Fourthly, the majority of farmers and overwhelming majority of members would use and recommend mediation again. Fifthly, the results of the mediation act highlighted the benefits of farm debt mediation.

More specifically, 72 per cent of farmers reached a settlement. Positive settlements reported by farmers included 37 per cent of the time farmers refinanced the debt, 20 per cent of the time the lender gave the farmer more time to pay, and 23 per cent of the time the lender either wrote off or paid off part of the debt. So 60.7 per cent of farmers felt positive after a farm debt mediation and only 17 per cent had a negative view.

Again by way of comparison, zero per cent of farmers reached a settlement under the South Australian voluntary code, zero recorded positive settlements, and zero felt positive after mediation, because, I reiterate, there has never been a mediation under the current voluntary code. Mandatory farm debt mediation legislation works in other states and the current voluntary code does not. In conclusion, although I welcome the passage of this bill through the Legislative Council, I am a realist and know that without government support in the other place this proposed legislation will never come to fruition.

The Hon. S.G. Wade: Change the government.

The Hon. D.W. RIDGWAY: My colleague, the Hon. Stephen Wade, yells out, 'Change the government' and maybe in 667 days' time that may take place, but while we are here today and dealing with the government that we have I would implore the government to see reason and to revise its position when the bill comes up for debate in the other place later this year.

With those words, I thank all members of the chamber for their contributions. When this bill, hopefully, passes the Legislative Council and is sponsored by one of the Liberal Party members in the lower house—probably the member for Hammond, Adrian Pederick—then I do hope the government has the good sense to change its position.

Bill read a third time and passed.