Farm Debt Mediation Bill

​The Farm Debt Mediation Bill, now before the Economic Development, Science and Innovation Committee, would do two things:

  • set up a mandatory mediation step before the appointment of a receiver for agricultural debt, and
  • remove any financial limit for compensation.

The Bill is due for report back on 16 November. No date has yet been set for submissions.

Prognosis

The Bill has wide support in Parliament but may need to be licked into shape before it can be passed into law. Speaking in the first reading, Agriculture Minister Damien O’Connor described it as “a good attempt” which would need “some adjustment” before Labour could support it all the way.

This tends to be the case with Private Member’s Bills as they do not go through the Parliamentary Counsel Office.

This means that the submission stage is particularly important.

Current provisions

The Bill would amend the Receiverships Act 1993 and would be implemented through the Banking Ombudsman Scheme.

It would require the Banking Ombudsman to draw up a list of suitably qualified mediators in consultation with the Arbitrators’ and Mediators’ Institute of New Zealand and the New Zealand Bankers’ Association.

Any costs would be recovered from the relevant bank/s.

The financial limits applying under the Banking Ombudsman Scheme would be removed.

The Bill accepts the Reserve Bank definition of agricultural debt as lending to farmers by banks and non-bank lending institutions. However, it is worth noting that the Bill’s sponsor, NZ First MP Darroch Ball, told the House that he envisages it applying to forests, plantations, orchards, vineyards and fisheries as well.

Mechanics of mediation

Farmers would have 10 business days after notice of pending receivership to nominate a mediator to hear the dispute. The creditor must accept or reject that mediator. If rejected, the farmer must nominate a panel from which the creditor must select one.

If no nomination is received, the Banking Ombudsman will make an appointment.

At the end of a mediation, the mediator must, within one business day, complete and lodge a ‘Summary of Mediation’ to the Banking Ombudsman, summarising the conduct and results of the mediation.

The summary must be published to the parties the following day. Receivers cannot be appointed until at least 10 working days after publication.

The Bill provides for the mediator to mediate impartially for the purpose of agreeing on “present arrangements and for future conduct of financial relations” between the creditor and farmer. The mediator is not there to advise parties or to act as an adjudicator.

As with privately arranged mediations, evidence of anything said in mediation, or in the course of arranging mediation or follow-up to mediation, will not usually be admissible in Court. The same restriction applies to documents prepared for the purpose of, or during or after, mediation.

The Bill does not specify an end-date by which the mediation must take place so there is a risk of long delays while the mediation is arranged.

Chapman Tripp comment

The Labour-New Zealand First Coalition Agreement provides for an “examination of agricultural debt mediation as well as receivership fees and charges” and was prioritised by NZ First to provide comfort for the farming sector in the heat of the Mycoplasma bovis disaster.

The political circumstances will ensure that the Bill gets a sympathetic hearing. Indeed, media reports are that National was disposed to oppose it until the rural MPs persuaded the caucus that this would go down poorly in the heartland.

But the Bill needs work if it is to pass so the committee process will be critical.

For more information or assistance with preparing a submission, please get in touch with our contacts. 

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Related topics: Agriculture; Restructuring & insolvency

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