Case law created with grazing dispute judgement

Grazing arrangements when they go wrong can get very messy for both parties, and this judgement on a case involving Janette Walker and Stock Co has firmed up the case law associated with this dispute.

The lessons learnt out of this action is, farmers should make sure grazing agreements are professionally written, and that security provisions on the stock grazed are declared. Grazing for maintainence and grazing for improvement are interpreted differently by the law, as to the use of a lien on the stock, if non payment arises.

Clear and concise arrangements need to be spelled out if non payment issues arise, and realistic weight gain targets need to be discussed before signing any deal.

My experience with bull grazing is growth rates in the winter may be minimal, but are compensated by faster ones in the spring. The cost and return budget with supplementary feeding for slow growth rates in the winter, may be over taken with a maintainence diet and better spring covers that allow this weight gain to be caught back up. These issues need to be discussed prior to any agreement to avoid costly disputes later on.

NZ Federated Farmers Summary of Stock Co vs Walker:

In February, March 2010 Janette Walker entered into an agreement to graze Bulls for Capehorn Farms based on a weight gain payment plus grazing charges per week. The 275 Bulls duly arrived on farm. Walker received one payment only for grazing and despite frequent invoices sent to Capehorn, received no further payments. Capehorn was placed in receivership in December 2010 and Stock Co contacted Walker to tell her that Capehorn was in receivership. Stock Co stated they had a PPSR over the stock, and Stock Co would pay Walker $7.00 a week , per bull from date of receivership and then wanted to uplift bulls a week later, which meant that Walker would receive no monies for the previous 10 months grass consumed.

January 26th Walker served Stock Co and the receivers a notice of general lien regarding the Capehorn Bulls followed with a notice of the sale of stock subject to Section 3 of The Wages and Protection and Contractors' Liens Repeal Act 1987.February 21st Stock Co filed "without notice" an order to have the bulls uplifted. The order was declined and an order put in place that the bulls remain on Walkers' property. While this was going on it became apparent that Stock Co couldn't prove ownership of all the Bulls and subsequently some bulls belonged to Riverlands.

The issues for the Court to determine were:

Does  Walker have a common law possessory lien over the Capehorn Bulls on her property? If Walker did have a lien whether that lien took priority over Stock Co's security interest registered under the Personal Properties Securities Act?

Stock Co argued that the grazing contract was merely an agistment contract and that Walker was obliged to maintain the bulls, not to improve them.  Justice Allan stated " if there was no weight gain, then there was no payment" according to the contract. Justice Allan said that in his opinion the grazing contract was a contract for improvement. Justice Allan also said "that the Livestock Agreement contains no provision prohibiting the creation of a lien by a third party, although it does prohibit the registration of any financing statement on the Personal Properties Securities Register."

Justice Allan ruled that Walker was entitled to a common law lien in respect of the bulls remaining on her property and that she was entitled to retain possession of the bulls until she got paid her entitlement pursuant to her contract with Capehorn. Stock Co's security interest was postponed in order of priority to Walker's entitlement to payment pursuant to her lien. Walker was awarded costs.

The importance of the judgement by Justice Allan will have an impact on how stock grazing agreements in New Zealand operate and will also impact how livestock financing companies carry out their business and hopefully add some integrity and security for farmers.