1. This article raises an issue from a recent Marlborough Express article by Greg King a director of Winstanley Kerridge,
Chartered Accountants, Blenheim, on the up and coming 2013 grape harvest.
2.
In the article he
counsels the importance to grape growers of having a retention of title
provision in contracts for supply until paid. That is a wise precaution
but the reservation of title may not be without issue.
3.
If Mr King means
reservation of title clauses, in the sense of a Romalpa clause (named
after an English case on reservation of title), then the following
needs to be noted and legal advice should be sought. This email is not
a substitute for legal advice but is merely to flag the issue.
4.
First, the Personal
Property Securities Act 1999 (PPSA 1999) has displaced the effectiveness of
common law Romalpa Clauses by having a system of registered
charges. Thus a purchaser of grapes may have a registered
general security agreement (GSA) to its bankers or suppliers. The
registered charge(s) will have priority over the unregistered Romapla
clause contained in a contract. That means the secured party gets first
“dibs” on the proceeds and/or plant and/or stock. In a liquidation
the grower may be left at the end of the line.
5.
Secondly, in theory
it would be wise for the grape grower to have a PMSI- a registered
purchase money security interest under the PPSA 1999. In practice given
the inequality of bargaining power a grape purchaser may not willingly
agree to a PMSI and grower may not wish to be bothered with the registration
process.
6.
Thirdly, in my
experience it is the winery/grape purchaser that supplies the contract.
Some companies will not permit amendment of their standard form contacts.
Thus the grower/ grape supplier has little input into the terms it supplies
grapes on. Contacts usually have a point at where property (title)
in the grapes passes to the purchasing company- at time before crushing
with an escape mechanism if the juice is not up to scratch for say excess spray
residue. The passing of property in the contract is pursuant
to the Sale of Goods Act 1908 and can then be in conflict with a Romapla
clause. Legal advice should be sought on this point.
7.
Fourthly, a question
arises of whether retention of title is effective given the fact that the
grapes are crushed and transformed into a new product wine. Legal
advice should be sought on this point.
8.
Lastly, many but not
all contracts provide for installment payments and the issues raised
in the third and fourth points above arise. Legal advice should be
sought on this point.
9.
Ideally, a PMSI
should be registered and legal advice should be sought on this
point.
10.
Suppliers, some
service providers (a boat builder’s contract for example) and
indeed some wineries (in wine distribution contracts) make reference to
reservation of title clauses (Romapla clauses) in their contracts. The
use of them may not be clear cut as people seem to think and the may not
deliver what was intended by them. A rethink of the issue is required.
Disclaimer and Exclusion of
Liability: This blog is to raise a general issue concerning Mr King’s
article about security for payment for the supply of grapes. It is not to
be relied upon as being legal advice and is not a substitute for the
obtaining of legal advice of the grower's particular contract and circumstances
of supply. Graham Hill does not accept any liability for the
content of this blog which is provided as information to raise an issue
on which advice should be sought.
Graham Hill Barrister & Solicitor, email: graham@grhill.co.nz
Graham Hill Barrister & Solicitor, email: graham@grhill.co.nz
