Member for Gippsland East, Tim Bull, has addressed Parliament on the benefits of the new Farm Debt Mediation Bill, which will require a creditor to provide a farmer with the option to mediate before taking possession of a property or undertaking an enforcement measure in relation to farm mortgages.
Mr Bull said the legislation, which is presently passing through Parliament, better protected the rights of farmers.
“For many farm families, including a high number in East Gippsland, the farm is not only the family business base, but also the family home. This Bill will reduce the fear farmers have of suddenly finding themselves without their business, home and a job.
“It will assist in providing for the efficient and equitable solution of farm debt disputes. The need for this Bill has been highlighted by the impact of drought over the past decade, followed by the recent floods in not only the north and west of the state, but also in my electorate of East Gippsland recently.
“There have also been a number of other impacts over recent years, including the wild dog problem and going back a few years Ovine Johne’s disease.
“My electorate has a number of communities where farming is crucial to the local economy. It is a sector that needs to be supported by government at all times and this bill delivers on another election commitment to support our food producers.
“The introduction of this legislation is very timely because of the decision to terminate exceptional circumstances drought assistance at a federal level. The loss of this will impact on many farm families who had been receiving this assistance.
“This Bill will require a creditor that is seeking to commence enforcement action over a farm debt, to provide a farmer with the option to mediate before the creditor can commence enforcement action.
“Farmers have no compulsion to take up mediation, but on request, creditors do,” Mr Bull told Parliament.
“They key to this legislation is that it prevents creditors from taking enforcement action on farm debt without first exploring, in a neutral setting and in a non-adversarial fashion, alternative terms and conditions which may provide a mutually beneficial solution to the problem.
“It will be structured so a creditor seeking to commence enforcement action must give the farmer the option to mediate. The farmer then has 21 days to consider this offer and either take it up, or refuse – which then results in enforcement proceeding as normal.
“Importantly, if a creditor refuses to meet the obligation to offer mediation, or refuses the willingness of a farmer to partake in mediation, the creditor can be prohibited from taking recovery action.
“Mediation will continue until a mutual agreement is reached, or the small business commissioner is of the view that agreement cannot be reached despite both parties mediating in good faith.
“As a result of this process, farmers have the security of knowing that a creditor cannot suddenly foreclose on their property without being offered the opportunity to discuss alternative options or solutions with a neutral and impartial mediator.” Mr Bull said in cases where communication has broken down over farm debt, this process will facilitate the re-commencement of discussions and negotiations.
“This is a mediation process, not an arbitrary process. It will not impose settlement decisions on farmers or financial institutions. It is about sitting down face to face and discussing all options and alternatives – the way it should be done.
“If recovery action is to follow, this Bill will have provided for a farmer to have had a fair hearing and it will also provide a pathway for farmers to be assisted to negotiate in a professional and sensitive manner, their possible exiting from the industry with dignity.
“A similar model to this works well in NSW and has produced many positive outcomes for both the farmer and the creditor. Importantly, 72% of cases were able to settle disputes.
“It has strong support from both farmers and lenders in NSW as an effective means of resolving farm debt related disputes and a high numbers saying they would use the service again
“It is also worth noting that the VFF is supportive of this legislation as is the Australian Bankers Association, with both organisations having been consulted in development of the Bill.
“One significant difference between the NSW and Victorian models are the costs for mediation. In NSW I am advised it can often be $3,000 for each party and in some cases exceeding $10,000 each.
“In Victoria it will be a nominal fee, planned to be less than $200 with the balance for the mediation session to be paid for by the office of the small business commissioner.
“It will forge a way forward through independent mediation in cases where communication has broken down. However, it will not allow farmers to use this process to delay debt recovery. Time constraints are built into the legislation to avoid it to be used for stalling,” Mr Bull said.