New Zealand Law Society - Committee recommends Farm Debt Mediation Bill

Committee recommends Farm Debt Mediation Bill

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The Primary Production select committee has reported on the Farm Debt Mediation Bill (No 2) and recommends it be passed with amendments.

The bill establishes a statutory farm debt mediation scheme to provide a structured and consistent process for resolving problems with farm debt.

The intent of the bill is to provide for fair, equitable, and timely resolution of farm debt problems.

The committee considered 30 submissions and heard evidence from 18 submitters.

It recommends a number of amendments in clause 6 to clarify the meaning of terms such as “enforcement action” (clause 6(1)), “farmer” and “primary production business” and “security interest”.

The committee considers that if mediation is to be effective it should be initiated at an early stage and so recommends inserting clause 16A to require creditors to agree to a farmer’s request for mediation unless there is a good reason for them to decline.

Some submitters were concerned about the position of guarantors and suggested that creditors might be able to take action to recover debt from a guarantor without first offering mediation. The committee said clause 20 was relevant as it provides for parties and the mediator to enter into an agreement about the procedure for mediation and clause 20(3) specifically provides for them to include guarantors and other interested parties in the mediation. Clause 57 should be amended to make it clear that any enforcement actions against any property owned by a guarantor would be limited until the farmer and the creditor have gone through the mediation scheme.

The Committee recommends amending clause 25 and inserting clauses 5(5), 22(1A), and 57A to make it clear that a mediation could encompass multiple parties or multiple debt arrangements.

The Committee proposes capping the farmer’s contribution towards the mediator’s costs at $2,000 by amending clause 21, with a consequential change in clause 5(3). This would help address concern that cost could be a barrier for those experiencing extreme financial hardship.

Clause 25(2)(b) (copy of mediation report to be given to the chief executive) should be removed to address concerns regarding confidentiality of agreements.

Clause 57B should be inserted to allow a secured creditor to apply to the High Court for an order allowing them to appoint a receiver to maintain the value of assets in situations where there is a need for urgency.

Clause 17(3) of the bill as introduced would allow a farmer, within 5 days of receiving a request for mediation from a creditor, to seek a 20 working day extension of time to reply to the request. The Committee recommends amending clause 17(3) so that an extension of time for a farmer’s reply could be no longer than 10 working days.