Bills

Farm Debt Mediation Bill

Second Reading

Adjourned debate on second reading.

(Continued from 5 July 2018.)

The Hon. J.A. DARLEY (16:28): I rise in support of the bill. The bill will establish a formal framework for mediation in cases where foreclosure is imminent on farm properties. I understand that, under the bill, before a bank or financial institution can foreclose on a property, they must give notice to the owner and provide them with the opportunity to request mediation. If a request for mediation is made by the owner, a prohibition certificate may be issued, which prevents any action being taken until mediation has occurred.

The Office of the Small Business Commissioner will assist in setting up the mediation. If the owner requests that mediation occur but refuses to participate, the creditor can request the Small Business Commissioner to issue an exemption certificate so that action to foreclose can proceed. Given some of the harrowing stories that were presented as part of the federal government's inquiry into the banking system, I do not think there is one person who can say that the banks acted honourably and with respect in all circumstances.

It is clear that there was unconscionable conduct, with some families suddenly losing their homes and livelihoods without even an opportunity to rectify matters. This is disgusting behaviour, and this bill will provide oversight from an independent arbitrator to ensure that these practices do not occur again. I support the bill and congratulate the government on moving this bill to increase consumer protection.

The Hon. C.M. SCRIVEN (16:30): I rise to respond to this bill on behalf of the opposition. Members are aware that I am the only member of this council who lives in a regional area, namely, the Limestone Coast. I have a number of friends who are farmers, and of course primary production is a vital part of the local economy. Primary production is a vital part of the state's economy, and under the previous state government South Australia's gross revenue for food and wine reached a record high of almost $20 billion in 2016-17.

However, farming is a challenging industry, subject to the vagaries of weather, international markets and unpredictable commodity prices. There can be many reasons why financial difficulties arise, from natural disasters and changes in international conditions to personal circumstances, such as sickness, death, divorce or the need to contribute to the costs of residential aged care. We have also seen the impact of changing farm sizes that may have reduced productivity, requiring changes to business practices. We want to do all we can to ensure farmers are given every opportunity to resolve financial problems when they arise, because we are talking about their livelihoods.

However, often we are talking not only about a person's business but, to a large extent, also about their heritage, their identity and their legacy. Many farming families have held their land for generations and have made careful succession plans to ensure their children can continue the family's enterprise. My friend Adrian was one of such a family. His parents had run a successful farm that had been established more than a hundred years before his birth. Two of his brothers had studied agriculture and his sister had studied business, with a particular focus on farming and regional issues. His parents were still fit and active and they worked hard seven days a week, as farmers must do.

But as my friend was making plans to return to the farm after his studies, the world changed for him and his family. Drought, multiple years of poor yields and some family issues combined to create a financial catastrophe. The financial institution with which his family dealt was unsupportive, shall we say, at the least, and the outcome was that they lost their farm. A number of their neighbours suffered the same consequence. That outcome was devastating. The family lost not only their business but also their home and their community. They were forced to move to Adelaide to get work. There were too many other farmers in stretched situations for them to find work in the area in which they had lived all their life.

Of course, that is just one story. There are many like it over many, many years in different circumstances. I spoke to Adrian's parents recently. It has been many years since they lost the farm, but they still feel their loss very keenly. One of the strongest resentments they have is the feeling they experienced of almost total powerlessness. Their dealings with the financial institution were not equal: there was no ability to negotiate from any equal bargaining position.

Our primary producers need every opportunity to succeed, and farm debt mediation provides support when times of crisis come. This bill provides some certainty to farmers and gives them guidelines and protection. This bill is about mandating the opportunity for farmers to have disputes referred to mediation before the creditors can foreclose. Perhaps mandatory mediation, such as that proposed by this bill, may have made a difference to Adrian's family by ensuring that some independent mediation was available. When minister Ridgway introduced this bill, he outlined how it is proposed to work. The key points are:

Once the farmer has been served with a notice that a creditor proposes to take enforcement action against them under a farm mortgage, they have 21 days from the date the notice was given to notify the creditor that they request mediation;

A farmer who is liable for debt may request mediation;

A creditor who receives requests for mediation from the farmer may, by notice given to the farmer, agree or refuse to participate in mediation;

If the creditor refuses to participate in mediation with the farmer, 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; and

The Small Business Commissioner must make arrangements to facilitate the resolution of a farm debt dispute by mediation as soon as notice is received that a farmer and a creditor have agreed to participate in mediation. These are all steps that increase the chances of a farmer being able to negotiate a positive outcome.

We are advised that the Small Business Commissioner supports this bill. He has advised the shadow minister for regional development that the bill provides uniformity and that there are 'more points for reset'.

New South Wales, Victoria and Queensland all have mandatory farm debt mediation in place, and this bill, we are told, has been modelled on these other jurisdictions. It is certainly worth noting that after farm debt mediation was introduced in Victoria, 96 per cent of cases reached a satisfactory outcome. Any measures that provide greater certainty and control for farmers and a greater ability to negotiate with creditors are welcome, and the opposition will be supporting this bill.

Debate adjourned on motion of Hon. T.J. Stephens.