Farm Debt Mediation Bill

Second Reading

Adjourned debate on second reading.

(Continued from 24 July 2018.)

The Hon. F. PANGALLO (12:26): I rise to speak in support of the Farm Debt Mediation Bill 2018. It may have been a wet week in Adelaide, but many of us would not realise that farmers in most parts of regional South Australia are suffering from extremely dry conditions. In fact, farmers throughout Australia are doing it tough, really tough, right now. In many places across the nation, drought conditions are the worst since records began.

May was an exceptionally dry month across the country. The Bureau of Meteorology said that the first three months of 2018 were the driest for more than 30 years averaged across New South Wales, with about 60 per cent of the state now on drought watch. Ninety-nine per cent of New South Wales is in drought, while other parts of the country are in drought, on drought watch or are about to go into drought onset, and half of Queensland is still drought declared.

Australia has always been a continent defined by extremes, and recent decades have seen extraordinary climate events. The situation is so dire that we must do more. As Dorothea Mackellar's poem so poignantly describes, Australia is:

A land of sweeping plains

Of ragged mountain ranges

Of droughts and flooding rains.

The current drought is wreaking havoc across the country, leaving in its wake devastated farming families. Australia's wide brown landscape has been expanding into once verdant farms across the country, with heartbreaking images filtering through on our TV screens via news stories and spreading across social media. Once lush, rich Australian pastoral land is being turned into brown, cracked, desolate dust plains, with livestock languishing in the dry conditions, some of them becoming emaciated and dying from a lack of food.

We feel insulated living in our cities from what is occurring in the bush, but you do not have to travel far out of the city to see what is happening firsthand and hear stories from desperate farmers in our drought-stricken region. While the national spotlight has been on the drought in New South Wales and Queensland, a similar crisis is unfolding closer to home. ABC rural reporter Lucas Forbes reported this week about the crisis.

His story focused on a farmer at Sutherlands, about one hour and 40 minutes' drive north of Adelaide, who had resorted to feeding his sheep onions due to the lack of feed. The farmer, Grantley Doecke, said he got his onions cheap in bulk because they were rejected for sale due to irregular sizing. While the sheep took a little getting used to it, he has nothing left to offer them. Mr Doecke told the ABC he has never seen the area so dry in his lifetime and knows of others who are struggling to find enough feed for their stock. Mr Doecke also said:

We had five inches last year and in that period we had two inches [50.8mm] in January, so three inches [76.2mm] for the remainder of the year.

We've had 41mm for the year and not looking like we're getting any more rain anytime soon.

The problem for farmers is not just that there has not been much rain this year but is compounded by the fact that there was hardly any last year either. Other farmers between the Mid North towns of Burra and Sutherlands told the reporter it was now drier than anyone could remember. Worlds End farmer Simon Schmidt said it was drier now than either he or his 78-year-old father could remember. He said the ewes were abandoning their lambs just to survive. These desperate farmers want politicians to visit the area to see how dry it is. I plan to do just that in the winter recess. Some families are at breaking point, unable to afford food and left with no choice but to shoot their stock so the animals do not starve and suffer a slow death.

It was reported this week that New South Wales farmer Les Jones faces that impossible choice. This month he will shoot all 1,200 of his starving sheep and bury them in a mass grave on his barren farm in north-western New South Wales because he cannot afford to feed them. Currently, 10 sheep a day die from starvation on his 670-hectare property, so the most humane option is to shoot them all. In an ordinary year the property is highly productive and can sustain 1,500 merino sheep or 500 Angus cattle, but this is no ordinary year. The farm has been up for sale since 2014 and is valued at $1.5 million on paper even though there is currently not a single blade of green grass. It is impossible to make any money in these conditions. The farm has been in the family for over 60 years, but Mr Jones and his family may walk away with nothing.

This nationwide devastation has been occurring against the backdrop of the royal commission into banks, which in recent times has brought a sharp focus on the way banks unfairly deal with farmers doing it tough. The royal commission into banks, which my federal Centre Alliance colleagues and others long advocated for and yet was fiercely resisted for just as long by the federal coalition government until The Nationals began to make some noise, has unearthed damning and appalling revelations against the big banks.

ANZ Bank admitted it could have shown more empathy for former Landmark financial services customers facing hard times after it bought the Landmark agribusiness loan book in 2010. Third and fourth generation farmers Arthur and Rhonda Cheesman and their son Reuben and his wife Katrina agreed to sell assets when they hit financial difficulties. But the bank rejected their repeated pleas to be allowed to keep their homes on the farms in western Victoria and the equipment and machinery so they could still earn a living. ANZ rejected the Cheesman's proposal put forward by their accountant, cruelly throwing away any chance the family had to retain their home and livelihood, with an ANZ bank manager noting, 'We should be firm here.'

ANZ repeatedly rejected reasonable offers from the Cheesmans to settle their remaining debt, as the bank thought it could get more by forcing the sale of their farming property. Hearing what happened to the Cheesmans makes me sick to my stomach. It is cold comfort to the Cheesmans that ANZ head of lending services and commercial, Ben Steinberg, told the commission that the case made for difficult reading and said he felt sad about the ANZ Bank's refusal to let the struggling Victorian farming family keep a roof over their heads.

Steinberg told the royal commission that ANZ would show more empathy towards its agribusiness customers. That is too late for the Cheesman family. Theirs is just one tragic story. The big banks will have to undergo a complete about turn on how they deal with farming customers, given this example and the many others that have come out of the banking royal commission, which I am sure would never have occurred if not for the royal commission.

After a bruising round of hearings at the royal commission, the National Australia Bank, Australia's largest agribusiness lender, and with some form of business with one in three farmers, announced it was sending former New South Wales Liberal premier and banker, Mike Baird, to the bush to win back the trust of its customers and farmers. Call me cynical, but I hope it does more than end up being just a PR stunt and is a genuine attempt to usher in a new era for relations with farming finance and banking customers in the bush.

National Australia Bank also announced this week proactive measures to help alleviate financial pressures. NAB CEO, Andrew Thorburn, announced the bank will stop charging farmers penalty interest if they fall behind on their repayments due to drought, admitting it had lost touch with some of its customers. You don't say! Thorburn said that NAB would introduce new policies to allow farmers to use much-needed offset accounts against agribusiness loans.

NAB has also hired former deputy prime minister and leader of The Nationals, John Anderson, to advise on a strategy for its rural footprint. At least John has a history in farming, his family having been graziers and landowners at Mullaley in northern New South Wales since the 1840s. Banks need to maintain their regional footprint in order to foster good relationships with their rural farming and regional customers. NAB's review of its regional footprint comes as it has closed about a dozen rural branches over the past year, including the Casterton branch in western Victoria, which the current CEO Andrew Thorburn's great grandfather, W.H. Stevenson, managed.

The closure of regional banking branches is hurting regional communities, even in our own patch, with the NAB announcing plans to close its Burra branch on 29 August 2018. I urge the NAB to halt those plans, and have written to the CEO for that purpose. If the big banks want to restore the mistrust and anger towards them, they need to halt the closure of regional banking branches so that local managers can maintain relationships with farmers and regional customers on their doorstep, on their turf.

Next month, I will be travelling across Eyre Peninsula and the West Coast to attend a range of meetings. I plan to meet with farmers there to hear firsthand their personal experiences with banks. It is simply not good enough for banks to knock on farmers' doors during the good times, encouraging them to increase their home and farming loans to upgrade their farming machinery, etc., and then to be the first to circle overhead, like vultures over a dead corpse, at the first sign of a bad season.

Turning to the bill itself, I first acknowledge the work of the Hon. David Ridgway on this issue, particularly the private members' bill he introduced and carried through this place during the last parliament. Under the new Farm Debt Mediation Bill 2018, creditors will have no alternative but to undertake a mediation administered by the Small Business Commissioner before enforcement action against a farmer under a farm mortgage commences.

The bill also allows for a farmer to request mediation within 21 days from the date written notice was given by a creditor, stating the creditor's intention to take enforcement action against the farmer. A creditor who proposes to take enforcement action against a farmer under a farm mortgage must 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 the notice is given. The notice must state that a creditor intends to take enforcement action and that mediation between the farmer and the creditor is available.

A farmer who is given a notice may, within 21 days from the date that the notice was given, notify the creditor that the farmer requests mediation concerning the farm debt involved. A farmer who is liable for debt may request mediation. 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. If a creditor subsequently refuses to participate in mediation with a 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.

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 enforced against the creditor and certain conditions regarding mediation proceedings have been met. 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 legislative framework.

The Small Business Commissioner must make arrangements to facilitate the resolution of the farm debt dispute by mediation as soon as the notice is received that a farmer and a creditor have agreed to participate in mediation. A failure by a creditor to agree to reduce or forgive any debt does not demonstrate a lack of good faith on the part of the creditor in participating or attempting to participate in mediation. Once proclaimed, the Office of the Small Business Commissioner will be responsible for the administration of the farm debt mediation scheme.

The bill has been modelled on the Victorian scheme, which has been in place for several years and had a recent review. Notably, an important piece of feedback gained, related to the Victorian scheme, is that farmers involved in that scheme felt more supported and less vulnerable than they otherwise would have had the scheme not been in operation. The considerable mental stress that is understandably experienced by farmers being subject to foreclosure is something to be taken very seriously.

While SA-Best supports the bill, I do raise some concerns about it and make the following comments. The first is in relation to clause 5—Application of Act, which says that if a farmer appoints a controlling trustee or has a petition for their bankruptcy presented to court by a creditor, the act does not apply. Consequently, all a bank has to do to circumvent the act and prevent it from applying it, is to get a judgement that the farmer owes the money and then file a petition for his or her bankruptcy. This will fall within clause 5(2) so that the act will not apply to that farmer.

Similarly, under clause 5(2)(c), if the farmer is an incorporated company and has an external controller such as a liquidator appointed, then the act does not apply. A financier wishing to circumvent the act simply has to serve a statutory demand on the company and, if the farmer does not pay, apply to the court to wind up the company. Once the liquidator is appointed, the act does not apply. It is unclear why the act is being limited in this way and what the justification is for these carve-outs.

The second area I wanted to point out relates to another limitation on the application of the act as set out in clause 8. Mediation is only available to prevent a creditor from taking enforcement action against a farmer under a farm mortgage. This will prevent the bank from appointing a receiver or going in as mortgagee in possession. However, under the loan agreement that underlies the mortgage, the bank would be entitled to issue a summons, get a judgement and bankrupt the farmer, all of which can be done without taking enforcement action under the farm mortgage.

The act and the availability of the mediation process could be extended in situations where the creditor takes any action to recover money owed to it, not simply action taken under the mortgage. Again, the justification for limiting the act to enforcement action under a farm mortgage, rather than allowing the act to apply to any action taken by a creditor to recover money owed to it, is still unclear. As detailed above, this could allow the creditor to circumvent the operation of the act by taking other steps to recover the money without taking action under the farm mortgage.

I have put these concerns to the government and did receive a timely response. Whilst I am satisfied with their response, I wanted to put my concerns on the record and note that there will be a review of legislation after three years of operation of the act. I note that interstate jurisdictions have not experienced adverse creditor behaviour that has warranted any change to their current legislation.

I further note that the New South Wales farm debt mediation legislation commenced in 1994, in Victoria in 2011 and in Queensland in 2016. Both the New South Wales and Victorian legislation have been subject to review and amendments in recent years to 2018 and 2017 respectively, and the relevant clauses causing concern remain unchanged. I commend the bill to the chamber.

The Hon. D.W. RIDGWAY (Minister for Trade, Tourism and Investment) (12:45): I am very happy to rise to sum up the debate. I would like to thank honourable members, the Hon. Clare Scriven, speaking on behalf of the opposition, for her and her party's support, the Hon. Mr Darley for his support and the Hon. Mr Pangallo for his party's support. I know the Greens are supportive, even though they have not spoken. I was aware that Mr Pangallo, through his office, had put some questions to the government, and the Small Business Commissioner responded. I think the Hon. Mr Pangallo has made clear that he has had a detailed response. The act will be reviewed, so I think he is reasonably relaxed with where we are at present with this bill.

As the Hon. Mr Pangallo points out, we are, sadly, in the grip of a pretty tough season in most of South Australia. I have been out in the regions, as members know, and it is brown. It is the end of July; it should be green. It is pretty tough in a lot of areas. It is important that this legislation passes as quickly as possible so that at least the Small Business Commissioner is able to provide support if it is required.

The only comment I will make is that it was the same bill I introduced before the election. It is refreshing to see that, now the former member for Waite, Martin Hamilton-Smith, is no longer in the cabinet, the Labor Party has seen the good sense in supporting this bill. It was a shame, and maybe I am drawing too long a bow, but maybe it was personality issues that led to the former government's position to not support it, but I am very pleased that the Labor Party is supporting the bill. I thank all members for their contributions.

Bill read a second time.

Committee Stage

Bill taken through committee without amendment.

Third Reading

The Hon. D.W. RIDGWAY (Minister for Trade, Tourism and Investment) (12:50): I move:

That this bill be now read a third time.

Bill read a third time and passed.