On 1 December 2011, the Victorian Government commenced the Farm Debt Mediation Scheme which makes it compulsory for creditors to offer mediation to farmers before commencing debt recovery proceedings on farm mortgages.

The scheme covers any debt incurred by a farmer for the purposes of the conduct of a farming operation that is secured wholly or partly by a farm mortgage.

A farmer has 21 days to respond to an offer to mediate before the creditor can commence action.

This Scheme applies only to:

•farm mortgages covering a farm (or part of a farm), farm machinery or a water share (within the meaning of the Water Act 1989).
•farmers, defined as: ‘a person (whether an individual person or a corporation) who is solely or principally engaged in a farming operation’. This includes people who own land cultivated under a share-farming agreement, or the personal representatives of a deceased farmer.

The Act applies to all outstanding farm debts incurred before 1 December 2011 (and incurred after that date) and in respect of which enforcement action has not been commenced.

The New South Wales Farm Mediation Scheme has operated since 1994.

In Craigie v Champion Mortgage Services Pty Ltd [2007] NSWCA 15 the NSW Court of Appeal decided that the scheme did not apply to a fish hatchery operation for the purpose of supplying fish for pet shops and aquariums

In Waller v Hargraves Secured Investments Limited [2010] NSWCA 300 the NSW Court of Appeal decided that the scheme did not require fresh mediations for a loan that had been mediated and subsequently varied. That decision is presently under appeal to the High Court.

There is no Queensland farm debt mediation scheme but the Credit (Rural Finance) Act 1996 (Qld) requires a mortgagee to give at least 30 days written notice before exercising a right to take possession of, or sell, farm equipment.