Farm debt mediation process
There are two types of mediation available under the scheme:
- The first is creditor initiated mediation, which results from a creditor issuing a notice under section 8 of the Farm Debt Mediation Act 2011.
- The second is farmer initiated mediation, where a farmer takes the initiative to request mediation with their creditor.
Creditor initiated mediation
Creditors are now required to offer mediation to farmers before commencing debt recovery proceedings on farm mortgages and must write to the farmer advising that mediation is available.
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. Mediation will be provided by trained and experienced mediators through the Victorian Small Business Commission. 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 contacts the Department of Economic Development, Jobs, Resources and Transport (DEDJTR), advising the farmer has accepted its offer to mediate.
DEDJTR then provides the parties' details to the Victorian Small Business Commission to organise mediation.
The Victorian Small Business Commission 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 determining a mutually acceptable time and place for mediation.
The Victorian Small Business Commission appoints a mediator. The mediator conducts mediation between the farmer and creditor and discusses options for managing present and future farm debt arrangements.
At the conclusion of 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 request an exemption certificate from the Victorian Small Business Commission. If the Victorian Small Business Commission considers that satisfactory mediation has taken place, it will issue an exemption certificate, 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.
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 enter into mediation.
To assist farmers and creditors with the process, approved forms are provided.