By upholding an appeal by a convicted farmer High Court judge J Venning has opened the gate for farmers to direct sharemilkers funds into their own personal accounts and have free use of the money because they have a claim of right to do so.
In July 2012 Lance Maxwell Burt was sentenced for using a computer for a dishonest purpose when taking sharemilkers funds for his own company’s use.
High Court Judge Venning agreed with District Court judge Wolff that Burt acted dishonestly but ruled that the farm owner was entitled to the funds because he thought he had a claim of right to the money even though the contract clearly directs the money to be paid into a Solicitors trust account in the event of a dispute.
In 2007 Consultant Barrie Ridler emailed a list of calculations designed to fabricate a claim against the sharemilker so the Director Lance Maxwell Burt could terminate the sharemilking agreement. A 10 day notice of repair was not given to the sharemilker nor would Ridler meet the sharemilkers nor did he alert them of any alleged breaches. One of the claims against the sharemilker was an alleged loss of production because the farm did not meet budget even though the budget quoted was actually a five year target and the sharemilker did record production in the first season.
On the evidence of the unsubstantiated calculations in the email, Judge Venning ruled that Burt had a claim of right to direct Fonterra to pay the money directly into his financially troubled company Coromandel Land Trust Ltd.
The decision will set a new legal precedent in an already struggling sharemilking industry.
Already 50/50 sharemilkers are under financial pressure because they do not receive the milk dividend with the change to Fonterra’s payout structure. VOSM sharemilkers are covered under the sharemilkers act but are also disadvantaged. VOSM only receive a percentage of the milk price therefore are also disadvantaged by the new Fonterra payout system. This was not the intention of the Sharemilking Act.
Sharemilking contracts are only for honest people. The Federated Farmers dispute process has unreasonable time frames and it is usual for disputes to be heard months if not years after the event. It is obvious to me that the people who wrote the Fed Farmers sharemilking contracts were not in touch with the real world.
Now a farmer does not have to follow the terms of the contract in regard to stopping milk payments. A shareholder can authorise Fonterra to pay sharemilker funds directly into their own account by simply getting an outside consultant to draft a list of losses and use this as evidence of right of claim.
Further areas of major concern are
- The rise in sharemilker stress with farmers legally now free to take sharemilkers funds and make claim of right. It is an extremely stressful time during a dispute process and is made worse by the farm owner talking the high ground by stopping milk payments to a sharemilker.
- Mediators, Conciliators and Arbitrators will balance disputes rulings in favour of the dominant party because each hearing can be appealed and overturned on points of law.
- Large entities will be likely to take sharemilker funds to prop up financially struggling companies.
- More disputes as ‘off farm shareholders’ under TAF will have right over claim over sharemilkers funds by quoting perceived poor performance affecting their dividend payment.
- A complete disintegration of the sharemilking system as we know it.
The new precedent set by a High Court Judge who admitted knowing nothing about farming is going to have huge impact in the farming industry and have dire consequences for sharemilkers.
Fonterra do nothing to protect sharemilkers funds. Fonterra is a shareholders company and have made it quite clear that they will always do what the shareholder directs them to do. It is evident that farming is heading into a new future without a succession plan.
Federated farmers have dropped the ball with sharemilkers. Quoting processes within their contestable contracts is hardly helpful.
Farming as we know it today will be much different in tomorrow’s world.