Farm Debt Mediation Act 2018

The Act defines several key terms in section 4. A “farmer” is a person or body solely or principally engaged in a farming operation, and includes a person who owns land cultivated under a share-farming agreement as well as the personal representative of a deceased farmer. A “farming operation” means agricultural, pastoral, horticultural, viticultural, forestry or apicultural activities; poultry or dairy farming; aquaculture; or an activity prescribed by regulation - all undertaken for commercial gain. “Farm debt” is a debt incurred by a farmer for the purposes of conducting a farming operation that is secured wholly or partly by a farm mortgage.

“Farm mortgage” is broadly defined. It includes an interest in, or power over, farm property that secures obligations of the farmer (whether as debtor or guarantor), including an interest in or power arising from a hire purchase agreement relating to farm machinery. However, it expressly excludes stock mortgages, crop or wool liens, the interest of a lessor of leased farm machinery, and a security interest under the Commonwealth Personal Property Securities Act 2009 in stock, crops or wool. “Farm property” means a farm or part of a farm, farm machinery used in connection with a farming operation, an irrigation right under the Irrigation Act 2009, an authority to take water under the Landscape South Australia Act 2019, or property of a prescribed kind. “Farm machinery” includes harvesters, binders, tractors, ploughs, other agricultural implements, and other goods or equipment of a class commonly used for farming operations.

“Enforcement action” means the taking of possession of property under the mortgage or any other action to enforce the mortgage, including the continuation of an action already commenced. It does not include completing a sale under a contract executed before the commencement day, or enforcing a judgment obtained before that day. “Default” means a failure to perform an obligation that, under the terms of the mortgage, is a ground for enforcement action. Section 4 gives examples: failure to pay principal or interest, failure to insure the property, or failure to submit financial statements.

“Satisfactory mediation” can take three forms: mediation that has achieved a resolution of the farm debt dispute; mediation that has proceeded as far as it reasonably can but has failed to resolve the dispute; or mediation of a prescribed class. The Act creates a presumption of refusal to participate in mediation (section 18). A farmer is presumed to have refused if they fail to take part in good faith, or do not enter into or proceed with mediation within three months of the notice or request, or notify the Commission or creditor that they do not wish to proceed, or fail to respond within 28 days to a properly formatted invitation. A creditor is presumed to have refused if they fail to take part in good faith or do not enter into or proceed with mediation within three months of the notice or request, or notify the Commission or farmer that they do not wish to proceed.

The “Commission” means the Small Business Commission established under the Small Business Commission Act 2011. It is responsible for administering the Act, issuing prohibition and exemption certificates, arranging mediations, and providing preliminary assistance to parties (section 20). A “mediator” is a person engaged by the Commission to mediate farm debt disputes between creditors and farmers. The mediator must not advise parties about the law, encourage or assist in reserving or establishing legal rights, or act as an adjudicator or arbitrator (section 21(2)).

The Act primarily affects farmers and creditors. A “farmer” is broadly defined to include individuals, bodies corporate, partnerships, share-farmers, and personal representatives of deceased farmers, provided the person or entity is solely or principally engaged in a farming operation for commercial gain. The definition catches entities engaged in agriculture, pastoralism, horticulture, viticulture, forestry, apiculture, poultry farming, dairy farming, aquaculture, and any activity prescribed by regulation. This covers sole traders, family farming operations, incorporated farming companies, and trusts where the trustee carries on the farming operation.

Creditors are any persons to whom a farm debt is for the time being owed. This includes banks, credit unions, building societies, other financial institutions, private lenders, vendors under hire purchase agreements, and any other entity that holds a farm mortgage as security. The Act applies to creditors only in respect of farm debts (section 5(1)). However, the Act does not apply to a farmer whose property is subject to control under Part X Division 2 of the Bankruptcy Act 1966 (Cth), or is the subject of a bankruptcy petition, or is an externally-administered body corporate under the Corporations Act 2001 (Cth) (section 5(2)). This means that farmers who have entered bankruptcy or external administration are outside the mediation scheme, and creditors dealing with such farmers are not bound by the Act.

The Act also affects directors of body corporate creditors. Section 31 makes a director guilty of an offence (with the same penalty as the principal offence) if the body corporate commits an offence against the Act (other than a regulation offence) and the director knew or ought reasonably to have known of a significant risk of such an offence, was in a position to influence the body corporate’s conduct, and failed to exercise due diligence to prevent the commission. This imposes a positive duty on directors of creditor bodies to ensure compliance with the mediation requirements.

The Small Business Commission is the administrative body responsible for the Act. It issues prohibition and exemption certificates, arranges mediations, engages mediators, provides preliminary assistance to parties, and reports to the Minister. The Commission is not subject to Ministerial control or direction when issuing certificates or arranging mediations (section 20(2)). Mediators engaged by the Commission also have defined functions and limitations, as described above.

The Act imposes several duties on creditors. The primary duty is found in section 8: a creditor must not take enforcement action under a farm mortgage unless it has given the farmer a notice stating the intention to take enforcement action, advising that mediation is available, and informing the farmer of the 21-day period to request mediation. The notice must be given in a manner and form approved by the Commission. If an exemption certificate is in force, this notice requirement does not apply (section 8(3)).

When a creditor receives a request for mediation from a farmer (whether under section 9(2) after receiving a notice, or under section 9(3) without having received a notice), the creditor may agree or refuse to participate (section 10(1)). If the creditor agrees, it must within 10 days notify the Commission in the approved form (section 10(4)). If the creditor refuses and the farmer is in default, the refusal provides grounds for the farmer to apply for a prohibition certificate (section 10(3)(b)). If the farmer is not in default, the refusal does not give rise to any claim or other consequence (section 10(3)(a)). Section 11 prohibits the creditor from taking enforcement action while a request for mediation is outstanding, unless an exemption certificate is in force.

Section 26 imposes a duty on the creditor to ensure that any binding agreement made during or at the conclusion of mediation is reflected in a contract, deed, mortgage or other instrument executed as a result of that agreement. Sections 27 and 28 prohibit contracting out and waiver of mediation rights respectively; any provision that seeks to avoid, modify or restrict the operation of the Act is void, and any waiver of mediation rights is void.

Farmers have the right to request mediation even if they are not in default (section 9(1)). A farmer who receives a notice under section 8 has 21 days to request mediation (section 9(2)). A farmer who has not received a notice may still request mediation (section 9(3)). A farmer in default may apply for a prohibition certificate if the creditor has refused mediation or if three months of good-faith attempts have failed (section 12). The farmer must specify the circumstances of the request and the creditor’s refusal. The Commission must issue the prohibition certificate if the farmer is entitled (section 13(1)). While a prohibition certificate is in force, the creditor must not commence enforcement action (section 13(3)).

Creditors have the right to apply for an exemption certificate under sections 14 and 15. An exemption certificate is available if satisfactory mediation has taken place, the farmer has refused mediation, or three months of good-faith attempts by the creditor have failed (section 14(1)). The Commission must issue the certificate if the creditor is entitled (section 15(1)). An exemption certificate suspends the operation of the Act (except Division 3 of Part 2) while it is in force, allowing the creditor to take enforcement action (section 15(3)). Section 16 clarifies that a creditor’s failure to agree to reduce or forgive debt does not of itself demonstrate a lack of good faith.

The Act creates several enforcement mechanisms. The most significant is section 6: enforcement action taken by a creditor to whom the Act applies otherwise than in compliance with the Act is void. This means that any repossession, sale, or other enforcement step taken without first following the mediation requirements (including giving notice under section 8 and allowing for mediation or obtaining an exemption certificate) is legally ineffective. The farmer or any interested party can challenge the validity of such action.

Section 24(1) imposes a maximum penalty of $10,000 for disclosing information obtained in the course of mediation or in the administration of the Act, except in specified circumstances (required by law, with consent, in connection with administration of the Act, or other permitted disclosures). Section 24(3) imposes the same maximum penalty for using information disclosed under subsection (1) for any other purpose. Section 24(4) renders evidence of anything said or admitted during mediation, or documents prepared for mediation, inadmissible in court or tribunal proceedings, subject to exceptions for instruments executed as a result of binding agreements and mediator reports (section 24(5)).

Section 31 extends criminal liability to directors of body corporates. If a body corporate is guilty of an offence against the Act (other than a regulation offence), each director is guilty of the same offence and liable to the same penalty if the prosecution proves that the director knew or ought reasonably to have known of a significant risk of the offence, was in a position to influence the body corporate’s conduct, and failed to exercise due diligence to prevent the offence. This creates a due diligence defence for directors but imposes a positive obligation to monitor compliance.

The regulations (section 32) may prescribe fines not exceeding $5,000 for offences against the regulations. The Act itself does not create a specific monetary penalty for breaching the section 8 notice requirement; the primary consequence is that enforcement action is void under section 6. However, a creditor taking enforcement action without complying with the Act risks having that action declared void and may face further consequences under the general law (such as trespass or conversion). The prohibition certificate (section 13) and exemption certificate (section 15) mechanisms serve as administrative enforcement tools: a prohibition certificate bars enforcement, while an exemption certificate allows it.

Section 7 expressly preserves the operation of the Limitation of Actions Act 1936, the National Consumer Protection Act 2009 (Cth), and the Personal Property Securities Act 2009 (Cth). This means that the Farm Debt Mediation Act does not override statutory limitation periods, consumer credit protections, or personal property securities law. A creditor must still comply with those Acts when dealing with farm debts. Section 7(2) also preserves the operation of the Banking Act 1959 (Cth) and in particular the duty of APRA under Part II Division 2. This ensures that prudential regulation requirements are not affected.

The definition of “farm mortgage” in section 4 excludes certain interests that would otherwise be caught. It does not include a stock mortgage, a crop or wool lien, the lessor’s interest in leased farm machinery, or a security interest (within the meaning of section 12 of the PPSA) in stock, crops or wool. This means that the Act does not apply to the taking of possession of livestock or crops under a stock mortgage or PPSA security interest; those transactions are governed by other law. However, a farm mortgage can include an interest in or power over farm property that secures obligations, so traditional mortgages over farming land and chattel mortgages over farm machinery are captured.

Section 29 provides that if land is subject to a farm mortgage and another Act requires the mortgagee to give notice before exercising a power or right, nothing in the Farm Debt Mediation Act derogates from that notice requirement. For example, the Law of Property Act 1936 requires a mortgagee to give a notice under section 55A before taking possession. That obligation remains, and the mediation notice under section 8 is in addition to any other statutory notice requirements.

The Act’s operation is also affected by the transitional provision in Schedule 1. The Act applies to a farm debt whether incurred before or after the commencement of section 8, but only if no enforcement action was taken before that commencement. Enforcement action taken before the commencement day (3 September 2018) is not affected. This ensures the Act does not retrospectively invalidate completed enforcement actions.

The Small Business Commission (formerly the Small Business Commissioner) administers the Act. Amendments made by the Statutes Amendment (Small Business Commission and Retail and Commercial Leases) Act 2024, effective 1 July 2025, replaced references to the Commissioner with the Commission and made consequential changes. The Act also interacts with the Landscape South Australia Act 2019, which amended the definition of “farm property” to include an authority to take water under that Act from 1 July 2020.

The Farm Debt Mediation Act 2018 (SA) received assent on 2 August 2018 and commenced on 3 September 2018 (Gazette 30 August 2018 p3253). It has been amended twice.

The Landscape South Australia Act 2019 (Act No 33 of 2019) amended the definition of “farm property” in section 4(1) to include an authority to take water under the Landscape South Australia Act 2019. This amendment commenced on 1 July 2020 (Gazette 25 June 2020 p3502). It also deleted section 2 (the definition section for “commencement day” was originally included in the Act but later removed as part of standard legislative revision, though the term “commencement day” remains defined in section 4).

The most substantial amendments were made by the Statutes Amendment (Small Business Commission and Retail and Commercial Leases) Act 2024 (Act No 65 of 2024), which received assent on 5 December 2024 and its relevant provisions (Part 5, sections 78 to 96) commenced on 1 July 2025 (Gazette 19 June 2025 p1865). This amendment renamed the administering body from the Small Business Commissioner to the Small Business Commission. Accordingly, references to “Commissioner” were replaced with “Commission” throughout the Act. The term “mediator” was also amended to reflect the Commission (rather than the Commissioner) engaging mediators. The amendment affected sections 4, 8, 9, 10, 12, 13, 14, 15, 17, 18, 19, 20, 21, 22, 23, 25, and 32. Additionally, the headings of Part 3 and Division 1 of Part 3 were updated. The 2024 amendment also introduced the new concept of the Commission being able to determine mediation fees by notice in the Gazette or publication on a website (section 25(2)).

The Act as published contains no reference to any litigation history, court decisions, or case law. No cases are cited in the explanatory notes or preamble. This absence means the Act itself does not provide guidance on judicial interpretation. However, practitioners should be aware that the South Australian Supreme Court and other courts may have considered the Act since its commencement in 2018. A search of case law would be necessary to identify any decisions regarding the meaning of “farming operation”, “farm debt”, “enforcement action”, or the validity of prohibition and exemption certificates. The Act’s provisions on contracting out (section 27) and waiver (section 28) may have been litigated in the context of attempts to contract around the mediation requirement. The voidness provision in section 6 may also have been judicially considered in cases where a creditor took enforcement action without complying with the Act. Because the Act does not itself record such history, this deep dive cannot provide specific case references. Users should conduct their own legal research to identify any relevant decisions.

Several provisions in the Act contain traps that practitioners must carefully navigate. Section 27 renders void any provision of an agreement (whether entered into before, on or after commencement) that seeks to avoid, modify or restrict the operation of the Act. This applies to arbitration clauses, contractual waivers of mediation, or clauses purporting to allow immediate enforcement upon default. Section 28 specifically states that a waiver of mediation rights under the Act is void. Therefore, a farmer cannot validly agree to bypass the mediation process in advance, even as part of a loan agreement or deed of forbearance.

Section 6 provides that enforcement action taken in contravention of the Act is void. This is a strict consequence - not merely voidable or subject to a stay. A creditor who takes possession of property or sells it without first giving a section 8 notice and allowing for mediation (or obtaining an exemption certificate) takes a significant risk that the entire enforcement is legally ineffective. This could expose the creditor to claims for trespass, conversion, or damages.

The prohibition certificate in section 13(4) expires on the earlier of six months after issue or the day the farmer and creditor enter into mediation. This short window means that a farmer who obtains a prohibition certificate gains a temporary shield but must actively pursue mediation to obtain more lasting protection. If mediation does not commence within six months, the certificate lapses and the creditor can apply for an exemption certificate.

The exemption certificate duration under section 17 varies. If satisfactory mediation has taken place, the certificate runs from issue until the third anniversary of the last day of mediation. If the farmer failed to take part in good faith, it runs from issue until the third anniversary of the last date of mediation. If the farmer indicated in writing they do not wish to proceed, it runs from issue until the third anniversary of that indication. If the farmer failed to respond within 28 days to an invitation, it runs from issue until the third anniversary of 28 days after the invitation. If a section 8 notice was given, it runs until 3 years and 3 months after the notice. In any other case, the certificate lasts three years from issue. This complexity means creditors and farmers must carefully track dates.

Section 21(2) prohibits a mediator from advising a farmer or creditor about the law, encouraging or assisting in reserving or establishing legal rights, or acting as an adjudicator or arbitrator. This means parties cannot rely on the mediator for legal advice and must obtain independent legal representation. The mediator’s role is purely facilitative.

Section 10(3)(a) states that if a farmer who is not in default requests mediation and the creditor refuses, the refusal does not give rise to any claim or other consequence. This means a solvent farmer cannot force a creditor into mediation; only a farmer in default can use a refusal as grounds for a prohibition certificate. Similarly, a creditor who receives a request from a non-defaulting farmer can safely refuse without penalty.

The 21-day period in section 8(1)(b) runs from the day the notice is given. If the farmer does not request mediation within 21 days, the creditor may proceed with enforcement action, but only if no request for mediation is outstanding. However, section 11 prohibits enforcement if a request for mediation has been made, regardless of when. So a tardy farmer who requests mediation after 21 days but before enforcement action is taken may still trigger the postponement.

Creditors should implement a compliance protocol for any proposed enforcement action against a farmer under a farm mortgage. The first step is to determine whether the Act applies. Check that the debtor is a “farmer” as defined - solely or principally engaged in a farming operation for commercial gain - and that the debt is a “farm debt” secured by a “farm mortgage” as defined. If the debtor is in bankruptcy or external administration, the Act does not apply (section 5(2)).

If the Act applies, the creditor must give a notice under section 8(1) in the manner and form approved by the Commission. The notice must state that the creditor intends to take enforcement action, that mediation is available under the Act, and that the farmer has 21 days from the date the notice is given to request mediation. The creditor must wait at least 21 days before taking any enforcement action. If the farmer requests mediation within that 21-day period, or at any time before enforcement action commences, the creditor must not take enforcement action (section 11). If the farmer requests mediation, the creditor should respond within a reasonable time (the Act does not prescribe a deadline for response to a request, but section 18 presumes refusal if the creditor fails to enter into or proceed with mediation within three months). If the creditor agrees to mediate, it must notify the Commission within 10 days in the approved form (section 10(4)).

If the creditor wishes to proceed with enforcement despite the farmer’s request, it must either participate in mediation in good faith and then, if no resolution is reached, apply for an exemption certificate under section 14. The creditor must demonstrate either that satisfactory mediation has taken place (defined in section 4), that the farmer has refused to participate (see section 18 for presumptions), or that at least three months have elapsed since the section 8 notice was given and throughout that period the creditor has made attempts to participate in good faith. The creditor must lodge its application with the Commission in the approved form, specifying the circumstances of the default and, if relevant, the farmer’s refusal and any alternative dispute resolution process (section 14(2)). If an exemption certificate is issued, the creditor may then take enforcement action while the certificate is in force (section 15(3)), subject to any other statutory notice requirements (section 29). The certificate does not affect proceedings already commenced (section 15(4)), but the giving of statutory enforcement notices is not considered commencement of proceedings (section 15(5)).

Farmers who receive a section 8 notice should respond within the 21-day period if they wish to seek mediation. The farmer must use the approved form. Even if no notice has been given, a farmer may request mediation at any time (section 9(3)). If the creditor refuses mediation or fails to respond, and the farmer is in default, the farmer may apply to the Commission for a prohibition certificate (section 12). The farmer must specify the circumstances of the request and the creditor’s refusal. If issued, the prohibition certificate prevents the creditor from taking enforcement action for up to six months (or until mediation commences). The farmer should use that period to engage in mediation in good faith to achieve a resolution or to negotiate a formal agreement. Any agreement reached must be reflected in a binding instrument (section 26).

Directors of creditor bodies corporate should ensure that the organisation has systems in place to identify farm debts, issue proper notices, and track mediation requests and timeframes. Section 31 imposes personal criminal liability for directors if a body corporate commits an offence and the director failed to exercise due diligence. This means directors should actively supervise compliance with the Act and seek legal advice when enforcement action is contemplated.