Agistment and Non-Payment of Agistment Fees – Can you Claim a Lien over Cattle?

By 25 November 2014Litigation, News
Agistment & Non-Payment of Agistment Fees

Agistment and Non-Payment of Agistment Fees

Agistment contracts usually contain terms which provide for the grazing of livestock owned by one party (the livestock owner) on land owned by another party (the agister) in return for a fee.

In a situation where the fees payable under the agistment contract are not paid, the legal rights of the agister will depend on the terms of the contract, including whether the agister holds any security interest over the agisted livestock which may operate in priority to the livestock owner’s rights to re-take possession of the stock.

Recently, the Queensland Court of Appeal, in the case of Fearnley v Finlay [2014] QCA 155, considered whether a person who is in the business of agisting cattle on their land had an enforceable lien under the Storage Liens Act 1973 (Qld) over the cattle in order to secure payment by the livestock owner of unpaid fees, including the costs and charges for the storage and of the cattle.

A lien, in a practical sense, allows a party entitled to the lien to lawfully retain the property the subject of the lien (in this case, cattle) until such time as all money properly owing in respect to the property has been paid by the owner. In effect, a lien secures payment.

If available, a lien is a very powerful tool to assist a party in compelling payment of unpaid monies owing in respect to the property.

Background Facts

In Fearnley v Finlay the parties were involved in a dispute regarding unpaid fees for the agistment of cattle pursuant to an oral contract.

Fearnley was appealing a decision of the District Court of Queensland which had, in effect, decided that it was open to Finlay to claim a lien over the cattle pursuant to section 3 of the Storage Liens Act.

Section 3 of the Storage Liens Act 1973 (the Act)provides that:

[Subject to section 5 of the Act] every storer shall have a lien on goods deposited with the storer for storage, whether deposited by the owner of the goods or by the owner’s authority, or by any person entrusted with the possession of the goods by the owner or by his or her authority.

The Act defines “storer” to mean a person lawfully engaged in the business of storing goods as a bailee for reward.

The Court of Appeal accepted that the definition of “goods” in the Act would extend to cattle.

Central to the concept of “storer” under the Act is that of bailment. Briefly, bailment describes a legal arrangement whereby the owner of goods (the bailor) transfers possession (but not ownership) of goods to another person (the bailee), usually to allow for the performance of a contract agreed by both parties. A typical example is where a person gives possession of their car to a repairer to allow it to be repaired for a fee. Upon completion of the repairs, and payment of the fee, possession is transferred back to the owner of the car.

Arguments of the parties

In the appeal before the Court of Appeal:

Fearnley argued that:

  1. Agistment of cattle on an agister’s land, even by way of bailment, does not constitute “goods deposited with the storer for storage” under the Act in that:
    • Cattle are not goods within the meaning of that term in the Act (as noted above, the Court rejected this submission);
    • Delivery of cattle and agistment do not amount to goods being “deposited with” a storer; and
    • Delivery of cattle and agistment do not amount to goods being deposited with a storer “for storage”.
  2. The purpose of the Act, in the context of its history, did not extend to the law relating to the agistment of cattle.

Finlay argued that:

  1. As a matter of ordinary meaning:
    • Cattle would fall within the meaning of goods, as defined in the Act;
    • Delivery of cattle to an agister under a contract of bailment constitutes “goods deposited” under the Act; and
    • The primary purpose of an agistment contract was for storage and therefore the goods were deposited “for storage”.
  2. The purpose of the Act was to create a lien for a storer’s (or agister’s) lawful charges for the storage and preservation and other expenses in relation to the goods (cattle).

Findings of the Court

The Court of Appeal held that:

  1. Cattle were “goods” within the meaning of that term in the Act;
  2.  While it is an unusual use of language to describe agistment of cattle as goods “deposited for storage”, it is not impossible to deposit cattle for storage, and section 3 of the Act, on its ordinary meaning, could be applied to some bailments of cattle where the person keeping the cattle for storage is engaged in the business of storing goods as a bailee for reward.
  3. The question to be answered has to be considered by reference to the terms of the particular contract in each case and agistment contracts can take varying forms.
  4. The purpose of the contract in this case between Fearnley and Findlay was not exclusively or primarily a storage arrangement because the fee structure as agreed between the parties:
    • Contemplated that the cattle were to be agisted as producing beef cattle and would produce calves; and
    • The fees for the agistment could be paid by Fearnley from the proceeds of sales of the cattle.
  5. Therefore, it was decided by the Court of Appeal that, under this particular contract, the cattle in question were not “deposited with the storer for storage”, and so section 3 of the Act did not operate to create a lien of the cattle in favour of Finlay.

Other Comments by the Court of Appeal

In the course of deciding the case, the Court of Appeal made the following interesting observations:

  1. At common law (rather than, for example, laws made by legislation), there is no implied lien under an agistment contract in most circumstances.
  2. The legal principle of legality provides that legislation affecting fundamental rights of people (such as imposing a lien) must be clear and unambiguous; any ambiguity must be resolved in favour of the protection of those fundamental rights which are affected.
  3. The Act provides for a storer to have a lien where none exists at common law and therefore, where its provisions apply, the effect of the Act is to affect a person’s right to possession of their own property.
  4. A lien is a security interest in goods to retain possession of those goods until payment. Questions arise of the priority such a security interest has in relation to the proprietary interests of another party, such as a mortgagee.
  5. The relatively recent introduction of a new section 4A into the Act declares a storer’s lien on goods to be a statutory interest given priority pursuant to s73(1) of the Personal Properties and Securities Act 2009 (Cth) (PPSA). The provisions of the PPSA are intended to allow for the priority of a security interest where it is granted to enable livestock to be fed or developed, which would include an agreement to grant a charge over cattle on agistment. 

Conclusion

This case demonstrates the hazards which may flow to an agister who is owed payment for agistment in circumstances where the agistment contract has not been correctly drafted to clearly provide sufficient security in favour of the agister.

Depending on the terms of the agistment contract, the operation of the Storage Liens Act and the PPSA (and the protection they provide), may not extend to agistment contracts except in very particular circumstances.

As such, it is essential that agister’s who are a party to an existing agistment contract, or those who are contemplating entering into an agistment contract, obtain proper legal advice about that contract or otherwise risk having no recourse should a livestock owner refuse to pay the fees agreed for the agistment.

 

Should you require further information, please contact Craig Shepherd or Anneliese Seymour at Murdoch Lawyers on (07) 4619 9898.

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