Farm Debt Mediation Process
The Farm Debt Mediation Scheme provides new obligations for creditors and new rights for farmers.
There are two types of mediation available under the Scheme:
- Farmer initiated mediation (Form 3) - where a farmer takes the initiative to request mediation with their creditor, whether the farmer is in default or not
- Creditor initiated mediation (Form 1) - where a creditor who wishes to enforce a farm mortgage in default, must issue a notice as required by section 8 of the Farm Debt Mediation Act 2018, advising the farmer that the farmer is entitled to request Mediation within 21 days
Farmer initiated mediation
The Scheme also allows a farmer to initiate mediation. The farmer does not have to be in default to request mediation with their creditor. The creditor may accept or refuse an offer to mediate. If the creditor refuses to mediate and the farmer is in default, then the farmer may apply for a Prohibition Certificate. This will prohibit a creditor from commencing enforcement action for up to six months or until the day on which the farmer and creditor later enter into mediation.
Creditor initiated mediation
Creditors are now required to offer mediation to farmers before commencing debt recovery proceedings on farm mortgages in default and must write to the farmer advising that mediation is available, giving notice with a Form 1.
A farmer has 21 days from the date of the offer to mediate to respond. If the farmer does not respond, or refuses mediation, a creditor can commence recovery action as normal.
If you are a farmer and are planning to be away from your farm at a time when you believe there is a risk a creditor may seek to commence recovery action, then it is important to ensure someone is checking your mail, email or fax and / or can act on your behalf.
If the farmer agrees to mediation, they respond in writing to the creditor's offer on a Form 2. Mediation will be provided by independent trained and experienced Mediators through the Office of the Small Business Commissioner. The Mediator acts as a neutral and independent person, and will work to assist farmers and creditors try to reach an agreement about current and future debt arrangements.
Once the creditor receives a request to mediate from the farmer, the creditor has 10 days to send a Form 5 – Notice that Mediation is Required, attaching copies of the Forms 1-4 as indicated, to the Small Business Commissioner to advise that the parties wish to mediate.
The Office of the Small Business Commissioner contacts the farmer and the creditor and provides both parties with preliminary assistance. This includes discussing the objectives of mediation, the responsibilities of both parties, and arranging a mutually acceptable time and place for mediation.
The Small Business Commissioner appoints a Mediator from the panel of accredited mediators. The Mediator conducts the mediation between the farmer and creditor and discusses options for managing present and future farm debt arrangements.
At the conclusion of the mediation, the farmer and creditor may agree to sign a binding agreement to resolve the dispute. The creditor must ensure that any binding agreement between the parties is reflected in any contract, deed, mortgage or other instrument.
The creditor may apply to the Small Business Commissioner for an Exemption Certificate on a Form 7. If the Small Business Commissioner considers that satisfactory mediation has taken place, an Exemption Certificate will be issued, allowing the creditor to commence recovery action. Mediation may still be considered satisfactory even when no agreement is reached between the parties.
An Exemption Certificate remains in place in respect of a farm mortgage for three years from the relevant date, which is determined in accordance with section17 of the Act.
If a farmer decides not to enter into or proceed with mediation, the farmer is to complete a Form 8. It is strongly recommended that a farmer obtains independent professional advice before such a decision, as it waives the farmer’s rights to request mediation under the Act. A farmer should get professional advice and assistance from their Solicitor and/or Accountant and/or Rural Business Support on free call 1800 836 211.
To assist farmers and creditors with the process, approved forms are provided. For information about the Forms, and assistance with completing the Forms, please contact the Office of the Small Business Commissioner on 08 8303 2026 or toll free 1800 072 722.