By Penny Quarry
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“The Farm Debt Mediation Act prevents a creditor from taking enforcement action against a farmer in respect of a farm mortgage until at least 21 days have elapsed after the creditor has given [written] notice to the farmer. The farmer may then elect to have the matter mediated. If the farmer does not reply within 3 months [to the creditor’s notice] [and the creditor has tried to mediate in good faith] then the Rural Assistance Authority may issue a section 11 certificate stating that the Act no longer applies and the creditor may begin enforcement proceedings…..
“A section 11 certificate may also be issued if the RAA is satisfied that a satisfactory mediation has taken place or the farmer has declined to mediate” Spencer. D., Law Society Journal June 1996 at p. 52. [See also Law Society Journal August 1997 at p. 52]
The creditor can also agree to extend the 3 month period open to mediation, to a longer period.
A section 11 certificate lasts for 3 years. After the 3 years have elapsed, the farm mortgage again becomes subject to the Act.
A farmer who has requested mediation can apply to the RAA for a certificate of exemption from enforcement action, if the creditor doesn’t mediate. The certificate of exemption may be granted for a period of 6 months.
If a farmer and creditor agree about an issue during a mediation, a document called a “Heads of Agreement” can be prepared. There is then a 14 day cooling off period; and the farmer and creditor can agree to extend this. During the cooling off period, the RAA cannot issue a s.11 certificate.
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Set out below is a list of all the sections in the Farm Debt Mediation Act (NSW).
Following this is a selection and summary of some of the most important sections of the Act, together with some commentary by Penny Quarry, Senior Solicitor, Redfern Legal Centrre.
1. Name of Act
2. Commencement
3. Object
4. Definitions
4A. Notes
5. Application of Act
6. Enforcement action in contravention of Act Void
7. Relationship with other Acts
8. No enforcement action until notice of availability of mediation given
9. Farmer may request mediation
9A. Creditor may agree to or decline mediation
9B. Exemption certificates
10. Enforcement action postponed to allow for mediation
11. Certificate that Act does not apply to farm mortgage
11AA. Heads of Agreement
11A. Cooling off period for Heads of Agreement
11B. Rights during cooling off period
11C. Implementing Heads of Agreement
12. Role of Authority
12A. Farmer to nominate mediator
13. Functions of mediators
14. Conduct of mediation sessions
15. Confidentiality of mediation sessions
16. Disclosure of information
17. Representation and assistance during mediation
18. Exclusion of personal liability of mediators and certain other persons
18A. Summary of mediation
19. Act binds the Crown
20. Contracting out prohibited
21. Waiver of rights void
22. Notices by mortgagee
23. Manner of giving notice or other document
24. Date notice or other document is given
25. Proceedings for offences
26. Double jeopardy
27. Aiding, abetting and attempts
28. Offences by corporations
29. Limitation
29A. (Repealed)
30. Regulations
31. Savings and transitional provisions
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Section 3 Object (Purpose)
The object of this Act is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.
Section 4 Definitions
"Authority" means the New South Wales Rural Assistance Authority constituted by the Rural Assistance Act 1989.
"creditor" means a person to whom a farm debt is for the time being owed by a farmer.
"default" , in relation to a farm mortgage, means failure to perform an obligation that, under the terms of the mortgage, is a ground for enforcement action.
Note: Examples of default on the part of a farmer include failure to pay the principal, interest or other money the payment of which is secured by a farm mortgage; failure to keep the property subject to the farm mortgage insured; and failure to submit financial statements required by the creditor.
"enforcement action" , in relation to a farm mortgage, means taking possession of property under the mortgage or any other action to enforce the mortgage, including the giving of any statutory enforcement notice, or the continuation of any action to that end already commenced, but does not include:
[situations where contracts were exchanged or a judgment was obtained before the commencement of this Act]
"exemption certificate" means a certificate of exemption from enforcement action that is issued under section 9B.
"farm" means land on which a farmer engages in a farming operation.
"farm debt" means a debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage.
"farm machinery" means:
(a) a harvester, binder, tractor, plough or other agricultural implement, or
(b) any other goods of a class commonly used for the purposes of a farming operation ……
"farm mortgage" includes any interest in, or power over, any farm property securing obligations of the farmer whether as a debtor or guarantor, including ……. a hire purchase agreement relating to farm machinery, but does not include:
(a) …. any crop …… lien, or
(b) the interest of the lessor of any farm machinery that is leased.
"farm property" means:
(a) a farm or part of a farm, or
(b) farm machinery used by a farmer in connection with a farming operation.
"farmer" means a person (whether an individual person or a corporation) who is solely or principally engaged in a farming operation and includes a person who owns land cultivated under a share-farming agreement and the personal representatives of a deceased farmer.
"farming operation" means:
(a) a farming …. pastoral, horticultural or grazing operation, or
(b) any other operation prescribed by the regulations for the purposes of this definition.
"Heads of Agreement" , in relation to a mediation, means heads of agreement referred to in section 11AA.
"hire purchase agreement" has the same meaning as it has in the Duties Act 1997.
"mediator" means a mediator for the time being accredited by the Authority ………
"statutory enforcement notice" means:
(a) a notice under section 57 (2) (b) of the Real Property Act 1900 , or
(b) a notice under section 111 (2) (b) of the Conveyancing Act 1919 , or ……
(1A) A reference in this Act to "satisfactory mediation" is a reference to:
(a) a mediation that has achieved a resolution of a farm debt dispute, or
(b) a mediation that has proceeded as far as it reasonably can in an attempt to achieve a resolution of a farm debt dispute but has nevertheless failed to resolve the dispute, or [What constitutes a reasonable attempt?]
(c) a mediation specified ….in regulations …[as] a satisfactory mediation.
Section 5 Application of Act
(1) This Act applies in respect of creditors only in so far as they are creditors under a farm debt.
(2) This Act does not apply in respect of:
(a) a farmer whose property is subject to control under Division 2 of Part X of the Bankruptcy Act 1966………., or
(b) a farmer whose property is the subject of a bankruptcy petition presented by any person, or ……………
Section 6 Enforcement action taken by a creditor to whom this Act applies otherwise than in compliance with this Act is void.
Section 7 Relationship with other Acts
(1) Nothing in this Act affects the operation of the Contracts Review Act 1980 or any other Act or law that deals with the granting of relief in respect of harsh, oppressive, unconscionable or unjust contracts or on the grounds of hardship. ………..
[or, in effect, the Banking Act 1959 [Cth] or the Uniform Consumer Credit Code [as it applies to consumer credit]
Section 8 No enforcement action can be taken by a creditor until the creditor gives written notice to the farmer of the availability of mediation unless a section 11 certificate is in force (see below under section 11)
s.8(1) A creditor to whom money under a farm mortgage is owed by a farmer must not take enforcement action against the farmer in respect of the farm mortgage until at least 21 days have elapsed after the creditor has given a notice to the farmer under this section.
(2) Notice to the farmer is to be in writing in a form approved by the Authority (informing the farmer of the creditor’s intention to take enforcement action in respect of the farm mortgage and of the availability of mediation under this Act in respect of farm debts).
(3) This section does not apply if a certificate is in force under section 11 in respect of the farm mortgage concerned.
Farmer may request mediation (should do in writing within 21 days)
Section 9(1) A farmer to whom notice has been given under section 8 may, within 21 days after the notice was given, notify the creditor in writing that the farmer requests mediation concerning the farm debt involved.
(1A) A farmer who has not been given notice under section 8 but who owes money to a creditor in relation to a farm debt may notify the creditor in writing that the farmer requests mediation concerning the farm debt involved. A farmer may request mediation under this subsection whether or not the farmer is in default.
(2) The Authority may approve a form for the purposes of a notification under this section …….. Failure to use the approved form does not of itself invalidate a notification given by a farmer.
(3) If a farmer requests mediation but subsequently refuses to mediate, this Act ceases to apply to the farm mortgage concerned.
Section 9A Creditor may agree to or decline mediation
(1) A creditor who has received a request from a farmer to mediate may, by notice in writing given to the farmer, agree or decline to mediate in respect of the farm debt involved.
(2) A refusal by a creditor to mediate does not, of itself, give rise to any claim or other consequence under this Act if the farmer is not in default.
(3) If a farmer is in default, a refusal by a creditor to mediate may result in the issuance of an exemption certificate.
Section 9B Exemption certificates
s.9(B)(1) A farmer who is in default and who has requested a creditor to mediate in respect of the farm debt involved (whether or not the farmer has been given a notice under section 8) may apply to the Authority for a certificate of exemption from enforcement action ( "exemption certificate" ) if the creditor does not mediate.
[I.e., defaulting farmer can get in first - but consider how advantageous or not this will be to the farmer - may only give 6 months delay - see s.9B(4) below – farmer could possibly obtain six months delay through negotiations with creditor, without resorting to this section of the Act - depends on recalcitrance of creditor and/or skill of farmer and his/her advocate/negotiator.]
s.9B (2) The Authority must issue an exemption certificate if:
(a) the farmer is in default under a farm mortgage, and
(b) the farmer has requested the creditor to mediate in respect of the farm debt involved, and
(c) no certificate under section 11 is in force in relation to the farm mortgage, and
(d) the Authority is satisfied that:
(i) the creditor does not wish to enter into or proceed with mediation, or
(ii) the creditor has failed to respond in writing to the request to mediate, within 21 days after the receipt of the request, or
(iii) 3 months have elapsed after a request was made by the farmer under section 9 and the farmer has throughout that period attempted to mediate in good faith but no satisfactory mediation has taken place between the farmer and the creditor.
Problem; Farmer in disadvantaged position, yet onus on him/her to attempt to mediate in good faith.
(3) While an exemption certificate is in force in relation to a farm mortgage:
(a) no certificate can be issued by the Authority under section 11, and
(b) no enforcement action can be taken by the creditor.
(4) An exemption certificate ceases to be in force on the earlier of the following:
(a) 6 months after the day on which the creditor declined to mediate,
(b) the day on which the farmer and creditor enter into mediation in respect of the farm debt.
Section 10 Enforcement action postponed to allow for mediation
(1) Once a farmer has given a creditor a notification in accordance with section 9 requesting mediation, the creditor must not take enforcement action in respect of the farm mortgage concerned unless a certificate is in force under section 11 in respect of the farm mortgage.
(2) This section does not invalidate any statutory enforcement notice or other process given, served or executed in order to fulfil a condition precedent to the taking of any enforcement action, but operates to prohibit the taking of the action concerned, or the enforcement by a court or tribunal of any such process, except as provided by section 11 (6).
Section 11 Certificate that Act does not apply to farm mortgage
[This section is weighted in favour of the creditor – Penny Quarry’s opinion]
s.11(1) The Authority must, on the application of a creditor under a farm mortgage, issue a certificate that this Act does not apply to the farm mortgage if:
(a) the farmer is in default under the farm mortgage, and
(b) no exemption certificate is in force in relation to the farm mortgage, AND
(c) the Authority is satisfied that:
(i) satisfactory mediation has taken place in respect of the farm debt involved, or
(ii) the farmer has declined to mediate, or
(iii) 3 months have elapsed after a notice was given by the creditor under section 8 and the creditor has throughout that period attempted to mediate in good faith (whether or not a mediation session or satisfactory mediation took place during that period).
[What does "in good faith" mean? - see also subsection (1B) below]
(1A) If the creditor has ……. agreed in writing to extend the period that will be available to the farmer for the conclusion of mediation ….. to beyond 3 months, the reference in subsection (1) (c) (iii) to a period of 3 months is taken to be a reference to the extended period.
(1B) 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 attempting to mediate.
[What do the following terms mean: demonstrate a lack of good faith on
the part of the creditor? Failure to negotiate? Or to negotiate fairly?
Or to negotiate with the person chosen by the farmer as his/her advocate
or representative? Fairlure to return phone calls at appropriate times?
Harassment of the farmer and/or his/her family?]
Note: Satisfactory mediation may nevertheless have taken place between the farmer and the creditor despite such failure to agree (see section 4 (1A)).
(2) A farmer is presumed to have declined to mediate if any of the following circumstances is established:
[What is a farmer's "lack of good faith" or "unreasonable delay"? ]
(b) the farmer has indicated in writing to the Authority or to the creditor that the farmer does not wish to enter into or proceed with mediation in respect of the debt concerned,
[So it is not wise for a famer to do this]
(c) the farmer has failed to respond in writing, within 28 days, to an
invitation that:
(i) is made in writing by the creditor and is identified as an invitation
under this paragraph, and
(ii) invites the farmer to attend a mediation session, and
(iii) indicates that a failure of the farmer to respond in writing to the invitation might be taken to be an indication that the farmer declines to mediate in respect of the farm debt.
**[Shouldn't this apply to a creditor too?]
(4) A certificate may be given under this section (except where subsection (1) (c) (iii) applies) whether or not any notice has been given under section 8.
[Reminder - section 11(1)©(iii) says that the authority must give the creditor a section 11 certificate if the creditor has given the farmer a notice of availability of mediation; 3 months have elapsed and the creditor has attempted to mediate in good faith]
(5) A certificate under this section remains in force until the date specified by the Authority in the certificate. The date specified is to be calculated on the basis that the period for which the certificate is to be in force is:
(a) if satisfactory mediation in respect of the farm debt concerned has taken place, the period commencing on the date of its issue and ending on the third anniversary of the last date of the mediation, or
(b) if the farmer has failed to take part in mediation in good faith ( e.g. if the farmer was recalcitrant), the period commencing on the date of its issue and ending on the third anniversary of the last date of the mediation, or
(c) if the farmer has indicated in writing that the farmer does not wish to enter into or proceed with mediation, the period commencing on the date of its issue and ending on the third anniversary of the date the indication was given to the Authority or creditor, or
(d) if the farmer has failed to respond in writing, within 28 days, to an invitation referred to in subsection (2) (c), the period commencing on the date of its issue and ending on the third anniversary of the date that is 28 days after the invitation was given to the farmer, or
(e) if a notice was given by the creditor under section 8, the period commencing on the date of its issue and ending on the date that is 3 years and 3 months after the date the notice was given, or
(f) in any other case in which a certificate is issued, the period of 3 years commencing on the date the certificate was issued.
(5A) A certificate may not be issued after the date on which any such certificate would, if issued, expire under subsection (5).
(6) The expiry of a certificate under this section does not affect any proceedings for recovery of a farm debt, or for the exercise or enforcement of any right of the creditor, already taken or commenced by a creditor while the certificate was in force, and any such proceedings may be continued and concluded as if the certificate were still in force.
(7) The reference in subsection (6) to the commencement of proceedings does not include a reference to the giving of any statutory enforcement notice or other action taken in order to fulfil a condition precedent to the enforcement of a right otherwise than through proceedings in a court or tribunal.
In other words, what can happen:
Farmer defaults, creditor issues s. 57(2)(b) notice; farmer applies for an exemption which lasts for 6 months; creditor applies for a certificate which lasts for 3 years, and is able to proceed with enforcement of s. 57 (2)(b) notice – i.e., ultimately, take possession of the farmer's land.
Section 11AA Heads of Agreement
(1) If it appears to a mediator that a farmer and a creditor who are parties to a mediation have agreed, or are about to agree, on an issue between them, the mediator must personally prepare for the consideration of the parties a document setting out the main points of agreement on the issue.
Note: Failure to comply with this section may result in the withdrawal of the accreditation of a mediator (see section 12 (3)).
There is a cooling off period of 14 days after the Heads of Agreement is signed; but the farmer and the creditor can extend this by agreement – s.11A.
The RAA may not issue a s.11 certificate on the ground that a satisfactory mediation has taken place if Heads of Agreement are in force and the cooling off period is not over – s11A(5)
Section 11B Rights during cooling off period
(1) The farmer may, during a cooling off period arising under section 11A, serve a written notice on the creditor or the creditor’s solicitor to the effect that the farmer rescinds the Heads of Agreement subject to the cooling off period.
(2) The notice of rescission must be signed by the farmer or the farmer’s solicitor.
(3) On service of a notice of rescission signed in accordance with this section, the Heads of Agreement are taken to be rescinded ab initio.
(4) If rescission occurs, the farmer or creditor is entitled to make a claim for such compensation, adjustment or accounting as is just and equitable between the farmer and the creditor where a party has received a benefit under the Heads of Agreement.
(5) This section and section 11A do not affect any right or remedy available otherwise than under this section or section 11A.
(6) A creditor may not make a claim under subsection (4) if the only basis of the claim is the rescission of the Heads of Agreement under this section.
Section 11C Implementing Heads of Agreement
……………………………
11C (2) A creditor who is a party to any contract, deed, mortgage or other instrument which purportedly results from, or is pursuant to, Heads of Agreement between the creditor and a farmer but which fails to reflect the relevant Heads of Agreement is guilty of an offence.
Maximum penalty (subsection (2)): 100 penalty units.
Produced by Redfern Legal Centre.
This factsheet is no substitute for legal advice. If you have a problem
please seek legal advice from your local community legal centre
Last updated January 2006