Farm Debt Mediation to Become Law

By 29 September 2016Business, News
Farm Debt Mediation to Become Law

Farm debt mediation which is currently a voluntary process will soon become law in Queensland.

The Honourable Le Donaldson, Minister for Agriculture, introduced the Farm Business Debt Mediation Bill 20216 to parliament on 30 August 2016.  The Bill is expected to commence 1 July 2017.

The Queensland government believes it has become necessary to make farm debt mediation law, rather than relying on a voluntary strategy which sets out what parties should do.  It is a direct response to concerns that farmers have not always been treated fairly by financiers.  It is designed to ensure consistency in farm debt mediation and set out an efficient and equitable process for the benefit of financiers and farmers.

The current farm debt mediation guidelines are contained in the Queensland Farm Finance Strategy (QFFS), which was developed by the Queensland Farmer’s Federation and the Australian Bankers’ Association in 1996 and revised in 2008.  It is a voluntary strategy which not all financiers have signed up for.

In making farm debt mediation law, Queensland is following NSW and Victoria and the proposed law is modelled on the NSW legislation.

Key aspects of the new laws:

  • > QRAA will be replaced by Queensland Rural and Industry Development Authority and its functions will be expanded;
  • > Queensland Rural and Industry Development Authority will accredit mediators who will be authorised to make certain administrative decisions under the law;
  • > an internal review mechanism will be established;
  • > further reviews will then be conducted by QCAT and the AAT.

The pre-mediation aspects of the Queensland Farm Finance Strategy will remain relevant, so farmers and financiers will be free to negotiate when farm debt issues are identified.

A further update will be provided on the proposed new laws at a later date.

In the meantime, here is a summary of the current strategy.

Current strategy – Queensland Farm Finance Strategy (QFFS)

The original signatories to the QFFS were:

Banks Ag Industry Groups
NAB Queensland Farmers Federation
CBA AgForce Queensland
Bendigo Queensland Canegrowers Organisation Ltd
Westpac Growcom
ANZ Cotton Australia
Suncorp Queensland Dairyfarmers’ Organisation
Rabobank Australian Prawn Farmers’ Association
Bankwest Queensland Irrigators’ Council
BOQ Flower Association of Queensland Inc
QRAA Nursery & Garden Industry Queensland
Pork Queensland Inc


As it is a voluntary scheme, not all banks have agreed to participate nor have second-tier providers of rural credit.

The purpose of the strategy was designed to get financiers, credit providers, financial advisers, counsellors and organisations to work together to:

  • > promote objective assessment of the financial viability of farming operations;
  • > resolve financial problems as they arise; and
  • > promote mediation between farmers and financiers to resolve disputes.

The strategy recommends what farmers, financiers and industry groups should do.

Farmers should endeavour to

  • > improve technical and business capability (particularly around financial and accounting matters);
  • > openly communicate with their financiers;
  • > obtain independent advice to identify and resolve difficulties as early as possible;
  • > maintain accurate financial records;
  • > accurately estimate capital and non-recurring expenses;
  • > maintain and monitor accurate and up to date financial statements, cash flow projections and other information;
  • > understand agreements made in relation to farm debt, mortgages, security agreement, in particular the consequences of default.

Financiers should endeavour to

  • > notify farmers when the become aware of financial problems;
  • > inform farmers of any significant change in their assessment of the farmer’s operation;
  • > encourage farmers and their advisers to identify and develop goals and actions to improve their position;
  • > encourage early disclosure of difficulties;
  • > encourage action to resolve financial problems;
  • > act fairly when reviewing financing arrangements;
  • > support the strategy, financial counselling and assistance measures.

Industry groups and supporters of the strategy should endeavour to

  • > encourage farmers to obtain professional and independent advice;
  • > encourage farmers to identify and address financial problems early;
  • > encourage farmer to seek assistance (financial counselling, QRAA, Centrelink and other agencies);
  • > establish systems to assist farmers monitor financial performance;
  • > develop and support best practice farming operation management standards.

Resolving financial difficulties

The strategy encourages a scaled approach to resolving issues.

Financier’s notice to commence negotiations

It generally starts with the financier giving a notice that it would like to commence negotiations with in a reasonable timeframe (at least 15 business days after the notice).

Farmers are able to include professional advisers in negotiations.

The negotiations often conclude with an agreement.

There are a couple of situations where a financier is not required under the strategy to negotiate, for example, where:

  • > the debt exceeds $10,000,000, however, in our experience, a number of financiers will still elect to;
  • > a farmer is unable to or fails to comply with its financial commitments;
  • > a farmer breaches a finance agreement or security agreement and secured assets are at risk.

Queensland Farm Debt Mediation Scheme

The Mediation Protocol involves the following:

  • > a farmer or a financier requesting the other to agree to mediation;
  • > there is no obligation on a party to mediate unless enforcement action is to be taken;
  • > a financier, who is a signatory to the QFSS, has agreed to notify a farmer when it intends to take enforcement action and of the availability of mediation (Notice of Intention to Take Enforcement Action);
  • > within 21 days after receiving a Notice of Intention to Take Enforcement Action, a farmer may advise the financier that they request mediation and the farmer can nominate three panel mediators;
  • > the cost of a mediation will be shared equally;
  • > a farmer can elect to decline mediation by sending a form;
  • > if a farmer does not respond to an offer of mediation, the financier will wait 28 days before commencing enforcement action;
  •  > mediation will usually consist of:
    • – a pre-mediation conference to define the issue, location, timing and participants for the mediation;
    • – mediation sessions which are to be concluded within 3 months of the notice being given or 2 months after a mediator is appointed;
    • – parties mediating in good faith;
    • – a notice at the end of the mediation from the mediator as to whether the financier has participated in the mediation in good faith;
    • – agreed confidential outcomes from the mediation.

If you would like further information please contact a Matt Bell, Director of our Business and Employment team on (07) 4616 9860.

This publication has been carefully prepared, but it has been written in general terms and should be viewed as broad guidance only. It does not purport to be comprehensive or to render advice. No one should rely on the information contained in this publication without first obtaining professional advice relevant to their own specific situation.

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