When can farm debt mediation be bypassed? High Court provides first guidance

McNamara Farms Ltd v Lopez [2026] NZHC 1447 marks the first occasion on which the High Court has exercised its power under section 61 of the Farm Debt Mediation Act 2019 (Act) to permit a secured creditor to appoint a receiver over farm property without first completing the Act’s mandatory mediation process. The decision is significant not only for its novelty, but for the guidance it offers on the circumstances in which courts will – and will not – allow creditors to bypass mediation protections designed to shield farmers from precipitate enforcement.

What does the Farm Debt Mediation Act require?

The Act, which came into force in July 2020, established a mandatory mediation scheme for farm debt. Under section 11, a creditor must not take enforcement action in relation to a security interest in farm property unless an enforcement certificate is in force – and such a certificate ordinarily issues only after mediation has been completed in good faith. The purpose of this regime is to provide farmers and creditors with the opportunity to reach agreement on their financial relationship before enforcement action is taken.

Section 61 provides a limited exception: where there is an “event of urgency,” a creditor may apply to the High Court for an order permitting the appointment of a receiver notwithstanding section 11. Until this case, no application had been brought under section 61, leaving its operation entirely untested.

What happened in McNamara Farms Ltd v Lopez?

McNamara Farms Limited owned a dairy farm in Waiuku. It entered into a sharemilking agreement with the L & M Vermaak Partnership, which had no herd of its own. The company lent $600,000 to the Partnership to purchase a dairy herd of 77 cows, secured by a General Security Agreement.

The relationship deteriorated. The sharemilking agreement was terminated in February 2026 following allegations of methamphetamine use and repeated refusals to undergo drug testing. Mr Vermaak then began selling stock from the herd without the company’s consent and without remitting any proceeds – contrary to the loan facility’s requirement that sale monies be applied in repayment. He denied any obligation under the loan or security arrangements, despite the Partnership having been making interest payments throughout.

The company had entered into a new sharemilking agreement commencing 1 June 2026, meaning the herd needed to be removed from the farm. Critically, by the date of the hearing, the herd had been reduced from 77 to just 21 cows through unauthorised sales. The company had attempted to resolve matters with Mr Vermaak, who proved “uncooperative, difficult, evasive and abusive”.

Why did the High Court allow receivers to be appointed?

Becroft J, hearing the application without notice as Duty Judge, granted orders under section 61 appointing receivers over the herd with power of sale.

His Honour described section 61 as a “last resort” provision that “should be carefully and cautiously applied,” emphasising that its pre-conditions must be clearly established and that claims of urgency must be “carefully teased out”. He was satisfied that an event of urgency existed: the herd had been, and would continue to be, sold contrary to the terms of the security interest.

The Court accepted five reasons advanced by counsel in support of the application:

• The orders were necessary to safeguard the creditor’s security, which was being actively dissipated.
• There was an ongoing event of urgency with no realistic prospect of convening mediation in time.
• The respondents’ non-cooperation made direct resolution impossible.
• The orders were reasonable and proportionate, with sale proceeds to be held on trust pending mediation.
• Reputable receivers with overriding duties would protect the respondents’ interests.

Importantly, the Court required that proceeds of sale be held on trust pending mediation, thereby preserving – to the extent possible – the parties’ opportunity to mediate over the financial consequences of the dispute.

What does the decision mean for farm creditors and debtors?

This decision confirms two propositions that practitioners should bear in mind.

First, courts will be cautious before allowing secured creditors to enforce against farm property without first complying with the Act’s mediation requirements. Becroft J’s characterisation of section 61 as a “last resort” makes clear that urgency applications will not succeed simply because mediation is inconvenient or time-consuming. The Act’s protective purpose of giving farmers a genuine opportunity to negotiate before losing their productive assets remains paramount.

Second, however, the mediation requirement is not absolute. Where there is a demonstrable and urgent threat to collateral – particularly where the debtor is actively dissipating secured assets and refuses to engage – the Court will intervene to protect the creditor’s position. The balance struck in this case of an effective receivership with proceeds held on trust, illustrates that section 61 orders need not extinguish the mediation opportunity entirely, but rather preserve it in modified form.

For creditors, the case underscores the importance of documenting attempts at engagement, the debtor’s non-cooperation, and the specific threat to collateral. For farmer debtors, it serves as a reminder that the Act’s protections, while robust, are not a licence to dissipate assets with impunity.

Jackson Fletcher, Associate – Wynn Williams Dispute Resolution team