Agistment agreements: why are they important and what should they include?

The three-part series on agistment includes:

  1. An introduction to Agistment: What, when and why?
  2. What we need to be aware of when agisting stock?
  3. Agistment Agreements

In our previous posts, we introduced when and why agistment may be an option for you and introduced key areas of interest/concern to be aware of when agisting stock. This final post will concentrate on the written agistment agreement, why it is are important and what to be sure to include.

Why are agistment agreements important?

Agistment agreements are the first step in ensuring a successful collaborative working relationship between the landowner and stockowner.

Once agreed upon and signed, they might never be looked at again, however if problems do arise they are incredibly important in resolving issues or concerns.

Ari McCamley from Thynne + Macartney state that “relying on handshakes or incomplete notes can give rise to costly legal disputes“.

What sort of legal disputes? They outline the following case example:

In Hornery v McDonald & Anor [2006], the owners of cows and calves agisted on a property at Blackall sued the landowners claiming that insufficient feed was provided for the stock, resulting in the failure of a subsequent artificial insemination program.

As noted by McCamley:

The Court’s decision turned on whether the landowners had accepted an obligation to ensure the cows were in above average condition in preparation for artificial insemination, which in the circumstances would have required supplementary feeding. The landowners and the stockowners had documented a short agistment agreement. However, the Court accepted that discussions between the landowners’ manager and the stockowner created additional obligations on the landowners’ part that were not in the written document.

Fortunately for the landowner, the Court found those obligations did not extend to keeping the cattle in above average condition and the stockowners’ claim failed, but things could have been different had the stockowners’ version of events been accepted.

If there was a written agreement, this dispute should have been put to rest before it reached the stage of going to the courts.

Agistment agreements also help to bed down issues around non-payment. Landowners do not have the automatic right to keep the stock/refuse to return stock to stockowner if fees remain outstanding. Rather, it depends on the terms of the agreement and whether the landowner holds any security interest in the stock.

How can a landowner protect themselves against unpaid money owing? By establishing a lien.

As noted by Murdoch Lawyers, “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 a lien is not obtained at the outset, it can be very difficult to recover unpaid agistment fees. McCamley puts forward the following case example:

The issue was most recently considered by the Queensland courts in Fearnley v Finlay [2014], where there was no written agistment agreement and the landowner sought to rely an oral agreement to recover $225,000 in unpaid agistment fees relating to a period of agistment in excess of three years.

The landowner claimed a lien over the cattle under the Storage Liens Act, which would have allowed the landowner to sell the agisted stock and retain the unpaid agistment fees from the proceeds. However, the landowner’s claim failed because the Court found that the agistment arrangement did not fall within the scope of the Storage Liens Act. Further, the Court noted that the general law, in most circumstances, will not imply a lien in agistment agreements.

The Court’s decision reminds landowners taking stock on agistment that, in order to obtain an effective lien over the livestock, it should be documented as part of a written agistment agreement and further steps should be taken to ensure the lien has priority over other claims (for example, any claims of the stockowner’s financier), including registration of the landowner’s interest under the PPSA.

Cassie O’Bryan from Madgwicks Lawyers stated that “A formal written agreement between parties is always a good start to any agistment relationship as the owner will be made aware of the consequences of non-payment and both parties will agree on the services to be provided.”

From a stockowners perspective, agreements also help protect the ownership of your stock. There is a potential risk to the stockowner in losing ownership if the landowner goes into bankruptcy, administration or liquidation. This risk arose out of the Personal Property Securities Act (PPSA),which commenced in 2012. This Act requires agistment agreements to be documented and registered in order to protect the owner of the stock.

Thynne + Macartney outline that registration is undoubtedly an additional administrative burden and the risks of not registering are still being ignored by many stockowners. They advise that “Registration should be completed no later than 15 business days after the livestock has been delivered to the landowner’s property or the agistment agreement has been signed (whichever is the earlier).”

Many situations do not reach crisis point like this, but an agistment agreement is a wonderful first step in a mutually beneficial and clear working relationship between both stock.

What should I include in an agistment agreement?

Our review of the available literature has demonstrated that the following should be considering when drawing up an agistment agreement:
  1. Date of agistment agreement
  2. Agistment property,name, address, contact details and ABN
  3. Stockowners name, address, contact details and ABN
  4. Agistment paddock location, size, feed type and availability
  5. Facilities
  6. Level of care/supervision provided by landowner (including movement of stock, checking stock, animal welfare, pulling lambs/calves, other management procedures)
  7. Access rights for agistee
  8. Agistment period
  9. Agistment fees (including interest charges)
  10. Class, number and body condition of livestock
  11. How stock will be run (pasture supply, single mob, set paddock)
  12. Pasture supply and rate if additional fodder is required
  13. Payment schedule/method of payment
  14. Communications procedures
  15. Veterinary call out procedures
  16. Responsibility for stock losses
  17. Dispute resolution clause
  18. Insurance requirements
  19. Right of Lien (allows landowever to sell stock if unpaid fees cannot be recovered)

The Kondinin Group present this minimum list of items to consider for agistment agreements, which they adapted from NSW DPI and AWI.

Issues to consider for agistment agreements (Kondinin Group, 2016)

Are there agistment templates available?

There are a number of agistment templates available online for a fee. These include:

We recommend seeking your own legal advice when drawing up an agistment agreement.

Agistment can be a mutually beneficial arrangement for both landowner and stockowner.  We hope you have found our blog series on agistment useful to your situation. Be sure to check out our Agistment toolkit for further resources and information.

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