Protection for graingrowers

14 Mar, 2012 01:00 AM

A PIECE of legislation that quietly became effective in January 2012 is set to shore up farmers’ rights when dealing with grain businesses that go bust.

The Personal Property Security Act (PPSA) will raise grain growers’ legal standing when owed money by an insolvent business.

Rather than sitting at the bottom of the pile as unsecured creditors, growers will be entitled by legislation to either repossess their goods if possible, or the proceeds of the sale.

Expert in the new law, solicitor Michael Staalkjaer, who has set up a business EDX dedicated to ensuring compliance with the PPSA, said the law applied to all personal property apart from land, fixtures and some statutory licences, such as water rights, so crops and grain were very much part of the scheme.

To ensure they are protected from non-payment or insolvency, Mr Staalkjaer said contracts needed to be registered on the Personal Property Security Register (PPSR).

If the contract is registered, farmers will not only be priority creditors, they will have an interest in commingled goods – such as grain in silos, meaning they will have the right to physically repossess grain, even though it is not actually the same grain produced, in the event of non-payment.

“It is a big win for growers, this new interpretation of grain, as in the past they have always struggled to prove ownership of grain once grain is commingled and haven’t been able to get it back.”

“Before you had the contractual terms, and non-payment was a contractual dispute, now, if the contract is registered, it is no longer a contractual dispute, but a statutory rule, governed by the act.

The act will have wide-ranging applications.

Mr Staalkjaer said farmers who sold grain to livestock operations can enforce the debt by seizing livestock to cover any outstanding debt.

“With a proper registered agreement, you will be able to take steps and repossess some of the livestock to recoup your debt.”

On the other hand, businesses supplying goods to a farmer to enable a crop to be produced, such as merchandise businesses, will have a priority security interest in the crop or proceeds of the sale of the crop, and will be able to seize and sell the crop to recover what they are owed.

“Even though land is not part of the PPSA, standing crop is not deemed to be part of the land, so a security interest remains even if the land is sold.”

To get contracts registered on the PPSR, the contract must be compliant with the legislation, and then registered.

Farmers can either outsource the registration of the contract or do it themselves on a government controlled website.

It will not be compulsory to register contracts, but Mr Staalkjaer said farmers were exposing themselves to unnecessary risk by not doing it.

“If a business goes belly up, and you are an unsecured creditor and other farmers are registered under the PPSA, then they will have priority over you to get the grain back.”

The PPSA was passed in January 2009, but the PPSR was only set up in January this year.

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14/03/2012 10:16:02 AM

I don't see this as an issue - how many grain marketers have gone bust? If you feel the risk is too high then don't sell to some fly by night company.
14/03/2012 5:03:43 PM

quite a few blahblah, you are obviously living in a parallel universe or at least not in NSW . Traders operating whilst in solvent has been all too common here, this legislation is a very small step in the right direction
what the
14/03/2012 7:30:26 PM

What planet are you living on blahblah? How many have gone bust? Shepherds producers co-op, Creasey's Grain, Barry smith grain, best western & NSW Grains Board. Just to name a few. Not exactly fly by nighters. I doubt any grower would have thought the risks were high when selling to these buyers.
14/03/2012 7:43:03 PM

Actually blahblah several have gone under in past years and one was quite a well established and respected firm. Nothing dodgy; just bad business at the time. The trouble was that the Receivers siezed all the bulk stored grain as a company asset leaving growers as unsecured creditors. It also affected a large multinational so non-discriminatory on the size of your business. A pity the item doesn't say if this is Federal or state legislation and there will no doubt be a cost for registering contracts.
15/03/2012 3:13:48 PM

It's a Commonwealth law, Observer. As for the fees, have a look at the fee page in the Government's legislation informaion and see if you can work it out. It looks to me like it might be less that $10.
15/03/2012 4:27:58 PM

The risk of default by a major grain marketer is so limited I don't see the value in paying more than $2. Investigate your marketer and don't sell to one of the small operations.
15/03/2012 8:33:54 PM

Thanks Helga, I hadn't had time to look it up. At that price you'd be mad not to consider it.
Bushie Bill
16/03/2012 2:14:56 PM

Where are you Jock? Did you miss this one?
16/03/2012 5:04:20 PM

BB. Obviously JM has no answer as there was no security with AWB. We only had a historic thought process where we blinkered to reality. The legal advice GCA recieved on ringfencing was rubbery to say the least. The issue was that whilst we all may well take payment security as an issue in this new paradigm by making a commercial judgement, the big issue was with the SD that in the export pathways there was a no chioce and a legislative compulsion to become an unsecured creditor of a publicly listed company. That was the reality. Whatever argument Jock puts up, he loses with this fact.
16/03/2012 5:55:33 PM

Bushie - I also thought this article need an injection of rhetoric. see below for typical comment. X was instrumental in the destruction of Australian wheat. Marketer defaults not be an issue if growers have not robbed of our iconic single desk marketing arrangement. The devilish labour/liberal/national/green government/martians, laughed their heads whilst the world looked on in shame as they dismantled our wheat board. This will change one day when Australia does not produce enough food to feed its extremely small populations.
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