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Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.
(a)
to extend the operation of that Act beyond 12 February 1997 by
repealing the "sunset" provision (section 31), and
(b) to clarify the meanings of farm mortgage and other essential terms,
and
(c)
to make further provision with respect to mediation between farmers
and their creditors.
Clause 2 provides for the commencement of the repeal of section 3 1 of the
Farm Debt Mediation Act 1994 on the date of assent to the proposed Act.
The remainder of the Act will commence on a day or days to be appointed by
proclamation.
Clause 3 is a formal provision giving effect to the amendments to the Farm
Debt Mediation Act 1994 set out in Schedule 1.
Schedule 1
Amendments
Definitions
Schedule 1 [1] amends section 3 of the Act to clarify the meanings of three
defined terms. At present the definition of creditor refers to the provider of
financial accommodation to a farmer. The definition is amended to include a
reference to the holder of the debt for the time being (for example, the
assignee of a mortgage).
The definition of enforcement action is amended to include a reference to the
giving of a prescribed statutory notice under the Real Property Act 1900, the
Conveyancing Act 1919 or other prescribed legislation.
The definition of farm mortgage is amended to make it clear that it does not
include a reference to stock mortgages, crop and wool liens or other interests
in the nature of a chattel mortgage (other than such an interest in farm
machinery) and does not include the interest of the lessor of leased farm
machinery or the interest of the owner of machinery on hire-purchase.
Separate definitions of the expressions farm property (that is, the kind of
property that can be the subject of a farm mortgage) and statutory
enforcement notice are included, for ease of reading.
Time period for attempted mediation before issue of
section 11 certificate
Section 11 of the Act provides for the issue of certificates that the Act does
not apply to a particular farm mortgage. The section at present provides for a
time period of 3 months after which a creditor who satisfies the Rural
Assistance Authority that bona fide but unsuccessful attempts at mediation
have been tried within that period is entitled to a certificate under the section.
Schedule 1 [5] amends section 11 by inserting a new subsection (1A) that
provides that, where the farmer and creditor have agreed in writing that the
finalisation of mediation between them will require a longer period, the
period relevant to obtaining the certificate is correspondingly extended.
Explanatory note page 2
Good faith of creditor
A creditor wishing to obtain a section 11 certificate must show that efforts at
mediation were attempted in good faith. Schedule 1 [5] amends section 11 by
inserting a new subsection (1B) that provides that a failure on the part of the
creditor to agree to reduce or forgive the debt concerned does not, of itself,
demonstrate a lack of good faith on the part of the creditor in attempting to
mediate.
What counts as "declining to mediate"
Section 11 (2) of the Act creates presumptions as to when a farmer may be
said to have declined to engage in mediation under the Act. One of these
presumptions depends on a farmer's failure to respond to an invitation by the
creditor to ``commence mediation". Schedule 1 [6] re-enacts section 11 (2)
(c) to provide that the invitation must be specific as to a particular time and
place of meeting proposed for a mediation session, and that the invitation is
distinct from a notice given as required by section 8 of the Act, and that it
must contain certain statements and indications. If the invitation is properly
made out and issued, the farmer is obliged to respond in writing.
Expiry of section 11 certificates
At present a certificate issued under section 11 of this Act is valid for an
unlimited time. The certificate is issued following any instance of successful
mediation between the parties or of bona fide attempted mediation by the
creditor, and effectively excludes the debt concerned from the operation of
the Act from that time onward. Schedule 1 [7]
amends section 11 so that the
validity of the certificate is limited to the period of three years after its issue.
On the expiry of the three-year period, the protection of the Act is again
extended to the farmer, except to the extent that litigation has already
commenced before expiry of the certificate. Schedule 1 [2], [3] and [4] make
consequential amendments.
Advice to farmer at mediation sessions
Schedule 1 [9] amends section 17 of the Act to confer on a farmer the right
to have an advisor present at mediation sessions. The advisor can be a lawyer
or other professional advisor or an unqualified person. Schedule 1 [8] makes
a consequential amendment.
Explanatory note page 3
Reprieve of Act from sunset
Schedule 1 [10] repeals section 3 1 of the Act, which effectively provides for
the cessation of the operation of the Act on 12 February 1997. In place of the
repealed section, provision is made for savings and transitional provisions
consequent on the enactment of the proposed Act.
Explanatory note page 4