Wellington lawyer Michael Garnham failed in his challenge to Primary Industries supposed failure to block ANZ’s threat of a mortgagee sale with his request for a ‘prohibition certificate’ under the Farm Debt Mediation Act. An ANZ loan to complete his 2012 purchase of ASB Tower in central Wellington was not a ‘farm debt,’ though secured in part over his Wanaka deer farm.
Farm lobby complaints that banks in general no longer favour rural lending is one unintended consequence of the Farm Debt Mediation Act, in effect since 2020.
Rural borrowers in arrears can ask Ministry of Primary Industries for a prohibition certificate, blocking loan recoveries. Creditors then require clearance from Primary Industries before continuing. They must jump though several hoops before getting clearance: mediation between debtor and creditor is required; any agreement reached suspends enforcement for three years.
The Act is premised on a need to explore options for a business turn-around and what the previous Labour administration described as a need ‘to provide for a timely and dignified exit for those who had few other options.’
The High Court was told of a long and tortuous relationship between Mr Garnham and ANZ Bank.
In 2012, ANZ agreed a $35.95 million facility with Mr Garnham, primarily to fund his purchase of ASB Tower. Security was taken over multiple companies controlled by Mr Garnham, including his Wanaka farm: Criffel Deer Ltd. Criffel’s existing debt to Rabobank was refinanced with the ANZ loan.
ASB Tower was sold in 2015, with ANZ left owed some $4.9 million and a mortgage still secured over Criffel Deer’s assets.
Evidence was given of unresolved negotiations and extensive litigation between Mr Garnham and ANZ over the following seven years with ANZ eventually issuing a ‘drop dead’ ultimatum in late 2022: Criffel would be put into receivership if the balance outstanding and accrued interest was not paid within three months.
Mr Garnham asked Primary Industries to issue a Farm Debt prohibition certificate, blocking the proposed receivership.
Primary Industries refused. The debt was not a farm debt; it was debt incurred for purchase of a commercial building. And the Act did not apply because preliminary enforcement steps had already commenced before the Act came into effect, it said.
In the High Court, Justice Grau upheld Primary Industries reasons for refusal.
Criffel Deer Ltd v. Primary Industries – High Court (19.04.24)
24.098