In 1994 the borrower gave a mortgage to the lender. In 1995 the lender served notice of an intention to take enforcement action under the Farm Debts Mediation Act. The borrower requested mediation which resulted in a workout agreement under the Farm Debts Mediation Act. As the workout was unsuccessful a receiver and manager were appointed.
The borrower then commenced legal action to rectify the agreement to include terms which it said should have been included. The lender and the receiver claimed the application should be dismissed as it relied on evidence from the mediation which was inadmissible pursuant to s.15 FDMA.
Justice Bergin concluded the borrowers may bring the rectification suit unaffected by the prohibition in s 15(1) of the Act by reason of s 7(1) of the Act. Alternatively, the plaintiffs may bring the rectification suit by reason of the exemption in s 16(e) of the Act and in the circumstances s 15(1) of the Act does not apply.
This case demonstrates the disastrous nature of the Farm Debts Mediation Act. The judgment noted that National Competition Council (NCC) in 2003 determined:
In relation to the principle restriction – mandatory mediation – the Council understands that the Government has a social objective of the fair resolution of farm debt disputes. However, the review did not adequately establish its case that the restriction improves fairness. It did not show that, without mandatory mediation, lenders would act unconscionably towards farmers to a significant extent. Nor did it show why the community might regard farmers as deserving more assistance than other small businesses to resolve debt disputes. Like other small businesses, farmers enter into finance contracts freely, and have the opportunity to seek professional advice – as they often do in preparing business plans (for finance applications and government assistance applications) and managing tax obligations.
The present case where it takes a lender a decade to enforce a mortgage clearly shows that the legislation is not living up to the optimistic but misguided object:
The object of this Act is to provide for the efficient and equitable resolution of farm debt disputes. Mediation is required before a creditor can take possession of property or other enforcement action under a farm mortgage.
In circumstances where it takes in excess of 10 years to enforce a mortgage Bransgroves Lawyers have no choice but to advise all lenders not to lend to farmers under any circumstances. Property rights (such as those represented by a mortgage) are illusory if they cannot be enforced.