On 1 December 2011, the Farm Debt Mediation Act 2011 (Vic)(FDMA) was introduced in Victoria. The purpose of the Act is to provide for the efficient and equitable resolution of farm debt disputes between a creditor and a farmer. The FDMA provides a farmer with an option to mediate before a creditor takes possession of property or other enforcement action under a farm mortgage.
Who is a farmer?
‘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’.
On 31 October 2022, significant changes were made to the FDMA to:
- strengthen a Farmer’s rights to mediation;
- streamline the process; and
- align aspects of the FDMA with other states.
What do these changes look like?
Streamlining the Process
- The Victorian Small Business Commission (VSBC) has taken on all responsibilities. Previously the Department of Economic Development, Jobs, Transport and Resources would refer mediations to the VSBC. Now, creditors are to notify the VSBC directly of an agreement to mediate and all information in relation to farm debt mediation can be accessed on VSBC’s website.
Strengthening the Farmer’s rights
- Farming operation now means ‘any of the following activities undertaken for commercial gain— (a) agricultural, pastoral, horticultural or apicultural activities; (b) poultry farming, dairy farming or any business that consists of the cultivation of soils, the gathering of crops or the rearing of livestock; (ba) aquaculture; (bb) forestry and timber production activities including the establishment, growing, maintenance and harvesting of forests; (c) any prescribed activities’ (emphasis added on the new inclusions).
- A creditor is now required to obtain an exemption certificate in all instances before taking enforcement action under a farm mortgage. Previously a creditor did not have to obtain an exemption certificate if a Farmer did not respond to an offer to mediate within 21 days.
- Where a Farmer formally declines an invitation to mediate, a creditor can apply for an exemption certificate. Now, the VSBC can refuse to provide an exemption certificate if they believe the Farmer is justified in refusing or failing to mediate but intends to do so within a reasonable timeframe.
What does this mean for creditors?
Whilst the FDMA now provides that a creditor must obtain an exemption certification in relation to a farm mortgage in all instances, the FDMA now allows creditors to fulfil any conditions precedent prior to proceeding with enforcement action and the obtaining of an exemption certificate would not invalidate any statutory notice.
Watch this space
As recently as 7 November 2022, the Australian Government consulted with State and Territory governments and other stakeholders about developing a harmonised approach to farm debt as currently only Victoria, NSW, QLD and SA have farm debt mediations schemes in place. WA operates a voluntary scheme.