Farmers’ debts – ‘sit down at a table and work it out, and walk away, alive’

Preventing the appointment of receivers to ‘family farms’ and using farm debt mediation instead seems to be an idea that might come from the current Select Committee on Lending to Primary Production Customers inquiry due to report by 29 November 2017.

Limited extracts of the transcripts of this Committee are below, from which a certain favour of the inquiry can be discerned.  

National

Senator Williams’ idea of farm debt mediation is:

simply. If we had Australia-wide farm debt mediation, when people get into trouble on family farms we would sit down as adults and work out a way to get out of trouble—we would work out how to sell assets or half of the assets if we needed to—instead of sending receivers in and letting the house fall down. That’s my point. People get so angry when receivers are sent in. We know that finance for farms is essential for the growth of our nation. When receivers come in then I think that’s when the war starts. You need the security. I’ve done a lot of work in the last 9½ years with banks about farmers in trouble and we always managed to sit down at a table and work it out. Assets are sold and people walk away, most importantly, alive.

A difficulty with that is that FDM is not national.  As one submission explains,

Harmonised FDM legislation would benefit lenders, borrowers and other decision-makers across Australia by enabling a consistent interpretation and application of FDM legislation. This would reduce the inefficiency, inequity and costs for stakeholders of engaging with different statutory requirements, and improve equality under the law. Currently the differences are minor in the NSW, Victorian and Queensland FDM Acts, but South Australia’s approach to FDM is more different, and there is no FDM legislation in Tasmania, Western Australia, the Northern Territory, or the Australian Capital Territory”.

Contra-national

Another view is that a national approach is not the right way to go. Senator Roberts supports competitive federalism, that the states with the best laws will attract the best industries:

“You were advocating a national farm debt mediation. Our Constitution is built on competitive federalism—each state making changes, making improvements, in either revenue or expenses, or even in just plain practices, with those then being copied throughout the other states. If we only had one national farm debt mediation scheme, there’s very little pressure for improvement. So would it not be better for the states to maintain their own independence and run their own farm debt mediation? Whichever is the best will be copied or the people in the other states will just simply go to that best state. That’s what has happened in the past. ….

So when there are improvements in one state, business goes there and people go there. When another state flounders, people leave”.

That’s an interesting approach ….

In any event, I have reported that the relevant federal Minister is

“consulting with his state and territory counterparts to assess ways to implement this.  This has not stopped a review of the NSW laws, nor the introduction of the Farm Business Debt Mediation Act 2017 in Queensland”. 

The committee’s report will be interesting.

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Lending to Primary Production Customers 17/11/2017 – transcript extracts

CHAIR: I now welcome Mr Mark Mentha and Mr Robert Hutson from KordaMentha. I understand that information on parliamentary privilege and the protection of witnesses and evidence has been provided to you. Do you have any comments on the capacity in which you appear?

Senator GEORGIOU: Okay. Will KordaMentha provide to this inquiry all correspondence, documentation, including valuations, legal advice and consultant reports in relation to this receivership?

Mr Mentha : Again, I’ll take that question on notice. That’s a lot to ask. Obviously there are matters of privilege in the things that we need to deal with. As I said, it is a very sensitive file and I’m very wary.

Senator GEORGIOU: Why is it a very sensitive file?

Mr Mentha : It’s a sensitive file because of the personal threats that have been made to numerous parties and stakeholders representing the interests of the bank. So bank officers have taken leave of absence and sick leave for the threats that have been made. Senator Williams is very familiar with having death threats and the like being made against him and knows what consequences that can have for your family and people who are affected. We have KordaMentha staff that have been threatened. We’ve had legal people that have been threatened. It’s no small matter, and to be able to discuss it in a public forum like this, I think, is disrespectful to the mental health and wellbeing of the people that are involved on the file. We’ve stated that very clearly.

Senator GEORGIOU: Okay, that’s fair enough. But are you prepared to provide this to the inquiry on notice?

Mr Mentha : What I’ll do is I’ll take the question on notice. What I might ask the senator to do is to put the questions to me in writing, or if I can get them from the Hansard, and, maybe through the secretary, I can respond to those questions.

Senator GEORGIOU: Also, I believe there were 3,500 sheep which were sold from his property and transported from Kondinin to Beacon. Is that correct?

Mr Mentha : It’s roughly correct, I think.

Senator GEORGIOU: Roughly that number, yes?

Mr Mentha : Yes.

Senator GEORGIOU: Can you tell me how much was charged for the transportation of these sheep?

Mr Mentha : I don’t have that number in front of me. What I can say, though, is that the person transporting the sheep was threatened and had the lights on his truck smashed and his arm broken. So it is a sensitive file.

CHAIR: Would it be unrealistic to say that the charge was about $120,000 to move the sheep?

Mr Mentha : I don’t have that number in front of me. I’m not wanting to avoid the question; I just don’t have that detail in front of me.

Senator GEORGIOU: Let me try and help you out here. Apparently, he was charged $120,000 to move 3,500 sheep, which was six loads on a truck. Included in that $120,000 was $28,000 for 12 security guards, who were there approximately one day.

Senator WILLIAMS: What?

Mr Mentha : What does it cost to protect you, as members of parliament, in this house?

CHAIR: Are you justifying that?

Mr Mentha : No; but what I’m saying is—

Senator WILLIAMS: Point of order, Chair. That’s a very poor analogy. The chance of terrorists going out on a farm is probably a darned sight lower than coming around this place.

Mr Mentha : No; it’s about the respect for life, Senator.

Senator WILLIAMS: Hang on, I’m speaking on a point of order. The point of order I make, Chair, is that the witness should just answer the question that’s been asked.

Mr Mentha : I apologise, Chair.

CHAIR: Do you want to answer the question?

Mr Mentha : Can I take the question on notice as to the breakdown of the costs? But the protection of—

CHAIR: Can I just ask the question: are you aware that there was $28,000 charged for security?

Mr Mentha : I don’t know what the total cost was, but I am aware that there were numerous security guards employed, given the threats that were made to numerous people.

CHAIR: The information we have is that it was $28,000. Can you justify that? Do you feel that that is a fair and just amount for one day’s work?

Mr Hutson : There’s no cost that can’t be justified to protect your life.

Senator BURSTON: So you can charge anything?

Mr Hutson : If you were threatened with harm, what cost is an acceptable cost to protect yourself from harm? It’s unacceptable that anyone should be threatened with violence and have violence committed against them. We don’t have, today, the exact amount, but to suggest that it’s unacceptable to protect people from going about their ordinary course, we don’t—

Senator BURSTON: We’re not suggesting that. We’re just questioning the cost.

Mr Hutson : And I’m advising you that the cost was necessary to protect people from the threats that were made against them.

Senator GEORGIOU: Let’s just carry on with that cost. …

CHAIR: The committee would like to know who actually got the money. Who got paid the money?

Mr Mentha : It’s a shame we’re spending so much time on this particular matter because it is, in my 40 years of experience, probably one of only two or three files where we’ve got to a point where physical harm and physical threats have occurred and the costs have been escalated because of physical harm and security of my employees. I have an obligation to protect my employees, as you being here have an obligation to be protected. It is a shame, but I’m happy to work with you. It is a very, very complex matter. It’s very difficult to air some of the things in a public forum, given we do have in camera available to us. But if we did that, I don’t have all of the information.

Senator GEORGIOU: That’s why I’m asking for all the detailed tax invoices charged by KordaMentha and the documentation, valuation, legal advice and consultant’s report. This is the reason why I’m asking.

Senator WILLIAMS: Mr Mentha, I used to be a livestock transport driver.

..

Senator GEORGIOU: Okay; thank you very much. Just one more question: Mrs Repacholi has told us that KordaMentha charged about $650,000 between November 2013 and August 2014. From what we’ve been told, KordaMentha has done little to justify this very high level of fees and it seems totally unjustified. What work did KordaMentha do to justify these fees? This is nine months’ worth of work.

Mr Mentha : Do you know how much this administration would have cost had we had full cooperation and no death threats and worked with the parties, which we do on nearly every other engagement? In every other engagement, we try and work with the farmer in situ; we don’t stand at 10 paces with guns. We work with the farmer, we work with the community where bills are unpaid and we are fully aware of the mental health and wellbeing issues that affect not only the farmer but their children and their relations and the like. So these issues Mrs Repacholi is raising I can’t sit here and refute without notice.

Senator GEORGIOU: Was she charged $650,000 for nine months work? That’s what I’m asking.

Mr Mentha : The actual cost for the period of receivership I have in front of me: $204,000. That’s excluding GST and disbursements. The disbursements I can’t speak to; I don’t have them in front of me.

Senator GEORGIOU: Between November 2013 and August 2014, apparently she was charged—

Mr Mentha : She can say whatever she likes—

Senator GEORGIOU: Yes, and that’s what I want to get to the bottom of.

Mr Mentha : but I have the data in front of me and can speak to it.

Senator GEORGIOU: Was she charged that?

Mr Mentha : I can tell you that annual firebreaks cost $7,000; annual spraying cost $50,000; annual insurance cost $10,000. I can talk to legal fees, receivership and disbursement fees, sheep-mustering costs, agronomist fees, sale and advertising, and livestock and maintenance. Grain proceeds were $566,000; sheep proceeds were $163,000. On the disbursements, I can can’t see anything in relation to that transport number. It does seem rather high when I look at these gross numbers in front of me, but I’m happy to sit down with you. We have nothing to hide. The work we do is subject to so much scrutiny by ASIC, by ARITA, by the courts and by you. So I’m here to help you, not to stand accused of having done anything wrong.

CHAIR: You’ve got here that your rates charges are $150 per hour up to $675 an hour for yourself, and you’ve got capped daily rates. What are your capped daily rates?

Mr Hutson : It depends on the client. We have different rates for different clients, but, typically, we’ll charge a capped daily rate irrespective of the hours that we work. For example, for me, that will range from probably $520 an hour up to $600 an hour, but we’ll cap it at seven times, and in some cases we provide a discounted daily rate. That’s a 25 per cent discount on that, depending on the location, to reflect the fact that there’s a lot of travel involved and that we have to get around the properties. So, to try and match the value that we bring to the costs, we provide a capped daily rate. But that doesn’t mean that I charge a full day where I don’t spend the whole day. The rate, as I said, will vary from $520 to $650 an hour depending on whether I’m there for a full day or not, and the client.

Mr Mentha : Our objective is around outcomes. You’ve got to look at the cost relative to the outcome, and we try to mitigate those costs as best as we can.

Senator WILLIAMS: That’s funny because our objectives are about outcomes as well, for the farmer.

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