What it does
The Farm Debt Mediation Act 1994 (NSW) establishes a compulsory pre-enforcement mediation regime for farm debts secured by farm mortgages. Its core mechanism is a prohibition on creditors taking “enforcement action” unless they first hold an exemption certificate issued by the NSW Rural Assistance Authority (the Authority). Section 8(1) makes it an offence, punishable by 2,500 penalty units for a corporation or 500 for an individual, to take enforcement action without such a certificate. Enforcement action is broadly defined in s 4(1) as taking possession of property under the mortgage or any other action to enforce it, including the giving of statutory enforcement notices under the Real Property Act 1900 s 57(2)(b), the Conveyancing Act 1919 s 111(2)(b) or the Water Management Act 2000 s 71X(1)(b). Any such action taken in breach is declared void by s 8(2).
The Act creates two interlocking certificate regimes. A farmer in default may apply for a prohibition certificate under s 9 if they have given the creditor a mediation request. The Authority must issue the certificate if the farmer is in default, has made a mediation request, no exemption certificate is in force, and at least one additional ground exists (s 10(2)). Those additional grounds include the farmer attempting mediation in good faith for three months without a satisfactory outcome, the creditor failing to respond, or the creditor declining mediation (s 10(3)). A prohibition certificate lasts six months (s 12).
Conversely, a creditor may apply for an exemption certificate under s 13. The Authority must grant it if the farmer is in default, no prohibition certificate is current, and at least one additional ground is satisfied (s 14(2)). Grounds include satisfactory mediation having occurred, equivalent mediation in another jurisdiction where the security spans borders, the creditor having attempted mediation in good faith for three months after issuing a notice inviting mediation, or the farmer failing to respond, failing to participate in good faith, or declining mediation (s 14(3)). Section 14(5) expressly provides that a creditor’s refusal to reduce or forgive debt does not, of itself, demonstrate lack of good faith. An exemption certificate generally lasts three years, with the starting date varying according to the circumstances that justified its issue (s 15(2)).