Farm Debt Mediation Act 1994

The Act’s primary subjects are “farmers” and “creditors”. A farmer is a person (individual or corporation) solely or principally engaged in a farming operation, including share-farmers and personal representatives of deceased farmers (s 4(1)). Farming operation is defined in s 4AB as a business primarily involving agriculture, aquaculture, timber or native vegetation cultivation, or connected primary production activities; it expressly excludes wild-harvest fishing or wild animal hunting. The regulations may declare additional activities to be, or not to be, farming operations.

A creditor is any person to whom a farm debt is owed. Farm debt means a debt incurred for the purposes of a farming operation and secured wholly or partly by a farm mortgage (s 4(1)). Farm mortgage is widely cast to include any interest in or power over farm property securing the farmer’s obligations as debtor or guarantor, including hire-purchase agreements over farm machinery, but excludes stock mortgages, crop or wool liens, and the interest of a lessor of leased farm machinery.

The Authority (NSW Rural Assistance Authority) is the administrator. It accredits mediators (s 16), issues and revokes certificates, receives internal-review applications, may demand information from farmers or creditors (s 19A), and approves forms. Mediators are natural persons accredited by the Authority; their role is tightly circumscribed.

Guarantors whose obligations are secured by a farm mortgage are “aggrieved persons” entitled to internal review and, by necessary implication, are protected by the mediation regime. Legal practitioners, agents and advisors attending mediations are regulated by the representation rules in s 18H. Corporations that are farmers or creditors are subject to the special attribution rules for offences in s 28.

Creditors’ key duty is negative: they must not take enforcement action without an exemption certificate (s 8(1)). They must respond to a mediation request within 20 business days (s 18B(4)) and, once mediation is agreed, participate in good faith. A creditor who gives a notice inviting mediation must attempt mediation in good faith for three months before an exemption certificate can issue on that ground (s 14(3)(c)). Creditors have the right to reject a farmer’s initial mediator nomination and to choose from a subsequent panel (s 18C).

Farmers’ rights centre on access to mediation and the ability to obtain a prohibition certificate that blocks enforcement. A farmer may request mediation even if not yet in default (s 18B(3)), though a prohibition certificate requires default (s 10(2)(a)). Farmers may nominate the mediator, are entitled to bring an advisor to sessions (s 18H(4)), and enjoy a statutory cooling-off right that cannot be used by the creditor as the sole basis for a compensation claim (s 18M(6)). Farmers must respond to a notice inviting mediation within 20 business days (s 18A(3)) and, once mediation begins, participate in good faith; failure on either count can ground an exemption certificate (s 14(3)(d)–(e)).

Mediators must prepare draft agreements when consensus appears imminent (s 18J), produce an approved-form summary at the end of every mediation (s 18O), and may facilitate information exchange while ensuring requests are reasonable (s 18D). They must not give legal advice or act as adjudicators (s 17(2)).

Both parties must share the mediator’s fee equally and bear their own attendance costs unless they agree otherwise or one party causes an additional session by failing to provide authority to settle (s 18I). Any person who represents a party must hold written authority to enter a mediation agreement (s 18H(3A)).

The Authority may require information relevant to applications or mediation rights and may refuse to consider an application if the requirement is not met (s 19A(2)). It must conduct internal reviews within 30 business days where possible and give written reasons (s 18P).

The heaviest sanction is the 2,500-penalty-unit (corporation) or 500-penalty-unit (individual) fine for taking enforcement action without an exemption certificate (s 8(1)). Enforcement action taken in breach is void (s 8(2)), although statutory enforcement notices given merely to satisfy conditions precedent are not invalidated until actual enforcement is attempted (s 8(3)).

Unauthorised disclosure of mediation information carries a 100-penalty-unit maximum (s 18G). A creditor who implements an instrument that does not reflect the mediation agreement also faces 100 penalty units (s 18N(2)). Contracting out or requiring indemnities for losses arising under the Act is an offence punishable by 100 penalty units (s 20(3)).

Officers of corporations are personally liable if they knowingly authorise or permit a corporate contravention (s 28). Aiding, abetting or attempting offences attracts the same penalty as the principal offence (s 27). Proceedings are summary before the Local Court and may be brought up to three years after the offence, or later with Attorney General consent (ss 25, 29). Double jeopardy is prevented where punishment has already occurred under another law (s 26).

Enforcement of the Act’s mediation policy is also achieved civilly: prohibition certificates directly restrain creditors, and any purported enforcement while a prohibition certificate or pending internal review is on foot is unlawful. Mediation agreements are binding (s 18K(2)) and can be enforced as contracts, subject only to the cooling-off rescission right.

Section 7 is the central interaction provision. The Act does not affect the Contracts Review Act 1980 or any other law dealing with relief against harsh, oppressive, unconscionable or unjust contracts or hardship. It does not disturb the Reserve Bank’s duties under the Banking Act 1959 (Cth). Except as expressly provided, the Act does not limit civil rights or remedies existing at common law or under other statutes (s 7(3)). It prevails over any other Act unless that Act expressly provides otherwise (s 7(4)).

The Act is excluded where the farmer is subject to Commonwealth insolvency regimes: control under Bankruptcy Act 1966 (Cth) Part X Division 2, pending bankruptcy petitions, or external administration under the Corporations Act 2001 (Cth) (s 5(2)). It does not apply to a subsequent mortgage that secures an earlier farm debt for which mediation has already occurred (s 5(3)).

Farm mortgage is defined by reference to the Duties Act 1997 definition of hire-purchase agreement. Statutory enforcement notices incorporate provisions of the Real Property Act 1900, Conveyancing Act 1919 and Water Management Act 2000. Farm property now includes access licences under the Water Management Act 2000 following the 2005 amendment.

Confidentiality rules in s 18F interact with evidence law by rendering mediation communications inadmissible, subject to the listed exceptions. Representation rights in s 18H intersect with corporations law by allowing corporate officers to appear without satisfying the agent-approval test.

The cooling-off and rescission provisions in ss 18L–18M operate as a statutory overlay on ordinary contract law, permitting rescission ab initio and equitable accounting without affecting other available remedies.

The most significant overhaul occurred via the Farm Debt Mediation Amendment Act 2018, which commenced on 1 July 2018. It repealed the former prohibition-certificate and exemption-certificate provisions and re-enacted them in a new Part 1A with clearer separation of farmer-initiated and creditor-initiated pathways. New definitions of “mediation” (s 4AA) and “farming operation” (s 4AB) were inserted to clarify the structured-negotiation character of the process and to include aquaculture while excluding wild-harvest fishing. The 2018 Act introduced the 20-business-day response periods, the farmer’s right to nominate the mediator (s 18C), detailed rules on session conduct and adjournment (s 18E), information-exchange controls (s 18D), and the statutory cooling-off regime (ss 18J–18L).

Internal review of Authority decisions was added as Division 5 of Part 2 (ss 18P–18Q), replacing earlier Administrative Decisions Tribunal review. The mediator’s summary requirement was strengthened (s 18O), and the Authority gained express power to demand information (s 19A). Penalty units for breach of the enforcement prohibition were increased. Transitional provisions in Schedule 1 Part 7 deem pre-2018 Heads of Agreement to be mediation agreements, extend the new rules to mediations already under way, and grandfather existing mediator accreditations.

Earlier amendments had incrementally expanded coverage: the 1996 Act adjusted certificate durations; the 1998 Act brought hire-purchase agreements within the definition of farm mortgage and introduced cooling-off; the 2002 Act refined good-faith concepts and added the “satisfactory mediation” definition; the 2005 Act included water access licences. Each change responded to practical difficulties reported by the Authority and stakeholder feedback that the original 1994 framework was too blunt, lacked clear timelines, and did not sufficiently address cross-border security or post-mediation documentation.

The Act itself contains no reported cases, but its provisions have generated recurring disputes before courts and the Authority. The meaning of “good faith” has been contentious. Section 14(5) states that a creditor’s failure to agree to reduce or forgive debt does not of itself demonstrate lack of good faith, yet s 10(3)(a) and s 14(3)(e) still require the Authority to be satisfied that a party “attempted to mediate in good faith”. Mediators’ summaries under s 18O routinely address this issue, and internal reviews under s 18P frequently turn on whether a party’s refusal to provide financial information or insistence on unrealistic repayment terms amounted to bad faith.

The scope of “farm debt” and “farming operation” has produced boundary litigation. The exclusion of wild-harvest fishing in s 4AB(2) has been tested where operators also conduct aquaculture. The extension to water access licences has raised questions whether a stand-alone water licence debt, without land security, still qualifies.

Confidentiality breaches under s 18G and admissibility disputes under s 18F have arisen when creditors seek to tender mediation admissions in subsequent debt-recovery proceedings. Courts have upheld the inadmissibility rule but permitted evidence of the fact that mediation occurred or that a mediation agreement was signed.

The cooling-off rescission power in s 18M has been controversial when farmers rescind after obtaining better market prices for livestock, prompting creditors to argue that the statutory restitutionary adjustment should include lost opportunity costs. Section 18M(6) prevents the creditor relying on the rescission itself as the sole basis of a claim, but leaves room for other heads of damage.

The voiding of enforcement action under s 8(2) has led to contested stay applications and questions whether a subsequent valid exemption certificate can retrospectively validate earlier void steps. The Authority’s internal-review stay provisions in s 18Q have been used strategically by farmers to delay enforcement while re-applying for prohibition certificates.

Most practitioners miss that a mediation agreement reached after a creditor-initiated notice inviting mediation still attracts the full three-year exemption-certificate duration under s 15(2)(a) only if the mediation is classified as “satisfactory”. If the mediator’s summary under s 18O records that the farmer participated but no agreement was reached, the creditor may still rely on the three-month attempt ground in s 14(3)(c), but the duration clock starts from certificate issue rather than mediation date.

The 20-business-day response periods in ss 18A and 18B are calendar-business-day counts; the definition of “business day” excludes only statewide public holidays, so regional show holidays do not extend time. Failure to respond exactly within that window can ground an exemption certificate even if the farmer later offers to mediate.

Section 5(3) contains a trap for creditors refinancing existing facilities. If the new mortgage secures any part of the balance outstanding under an earlier mortgage for which a mediation agreement was previously entered, the Act simply does not apply, regardless of how much new money is advanced. Creditors sometimes assume fresh mediation is required and inadvertently expose themselves to prohibition-certificate applications that cannot lawfully be granted.

The representation rules in s 18H(3A) are draconian: any representative, including a solicitor, must hold written authority to enter a mediation agreement before attending the session. A solicitor who attends without that authority risks the mediator terminating the session, triggering cost sanctions under s 18I(2) and potentially adverse comments in the s 18O summary that could support a later exemption certificate on bad-faith grounds.

Farmers often overlook that a prohibition certificate lasts only six months (s 12) and cannot be re-issued while an exemption certificate is in force (s 11). Once an exemption certificate of three years’ duration issues, the farmer’s only recourse is internal review or separate relief under the Contracts Review Act 1980.

The Act binds the Crown (s 19), yet many state-owned lenders assume they are exempt. They are not. Conversely, the Authority itself, when acting as creditor, is subject to the same mediation obligations.

For creditors:

1. Before issuing any statutory enforcement notice, check whether the debt is a farm debt secured by a farm mortgage and whether the borrower is a farmer under the expanded s 4AB definition.
2. If the farmer is in default, serve a notice inviting mediation in the approved form, expressly warning of the exemption-certificate consequence of non-response (s 18A).
3. Wait the full 20 business days. If no response or an inadequate response, apply for an exemption certificate citing s 14(3)(d). Provide the Authority with the mediator’s summary if mediation occurred.
4. If mediation is agreed, participate in good faith, document all information requests through the mediator (s 18D), and ensure any settlement instrument precisely reflects the signed mediation agreement to avoid s 18N(2) liability.
5. After a successful mediation or farmer non-participation, apply for the exemption certificate before taking any enforcement step. Keep the certificate for three years; note its expiry date.
6. If the farmer applies for internal review of an exemption certificate, note the automatic stay under s 18Q(1) and refrain from enforcement until notified of the review outcome.

For farmers:

1. Upon receiving a notice inviting mediation, respond in the approved form within 20 business days even if only to nominate a mediator or request further information.
2. To block enforcement, give a mediation request (which can be made before default) and, once in default, apply for a prohibition certificate under s 9. Supply evidence of good-faith attempts.
3. When nominating a mediator, prepare a panel of three accredited mediators with proven agricultural experience; the creditor must choose from that panel.
4. Attend with an advisor if desired, but ensure any agent or lawyer holds written authority to sign a mediation agreement (s 18H(3A)).
5. During the cooling-off period, obtain independent legal advice before deciding to rescind; if rescinding, serve the notice strictly in accordance with s 18M and be prepared for equitable accounting of benefits received.
6. Retain copies of all correspondence, the mediator’s summary and any mediation agreement; these are the primary evidence for subsequent internal review or Contracts Review Act relief.

For mediators and the Authority:

Accredited mediators must follow the Authority’s procedural directions, maintain contemporaneous notes for the s 18O summary, and refuse to give legal advice. The Authority must process certificate applications and internal reviews within statutory timeframes, give reasons, and apply the explicit good-faith criteria without imposing debt-forgiveness requirements.

Compliance is evidenced by contemporaneous records: dated notices, mediator nomination correspondence, session attendance sheets, information-exchange logs, signed agreements and the mediator’s approved-form summary. In any subsequent litigation or review, the party that can produce a complete documentary trail demonstrating adherence to the statutory timelines and good-faith obligations will prevail.