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House of Assembly - Fifty-First Parliament, Third Session (51-3)
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STATUTES AMENDMENT (BULK GOODS) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 13 November 2008. Page 975.)

Mrs REDMOND (Heysen) (11:04): I am the lead speaker for the opposition on this bill as, in a peculiar way, it comes under my province of the shadow attorney-general's portfolio, although realistically most other speakers on our side of the chamber will know a whole lot more about what is involved than do I. The bill seeks to correct a problem which exists in relation to people who provide goods in bulk, which are then held in bulk before being onsold. There can be numerous examples of that: notably, grain and wine bulk storage spring to mind. For ease of discussion, although the bill deals with all goods that can be held in bulk, I will generally use the example of grain, since I think it is through the area of grain that the problem this bill seeks to address has arisen.

The problem is this: if you are a grain producer and you take your grain to the bulk storage silo, once it is delivered into bulk storage it is considered to be intermingled and, therefore, unidentifiable for the purposes of retrieving it. As a result, there was the case—way back in 1933—of Chapman Bros v Verco Bros—

The Hon. M.J. Atkinson: What is the CLR reference?

Mrs REDMOND: I have no idea what the CLR reference is, but the High Court, in that case, essentially said that, once those goods are delivered, they are intermingled, they are not a bailment—and I am not going to give a lecture on the details of the difference between a bailment and a sale. Suffice to say that by virtue of section 16 of our Sale of Goods Act 1895—and it is a good thing for us to be reminded that we still have a Sale of Goods Act that we introduced over 110 years ago and, for most purposes, it still serves us pretty well—property in unascertained goods (that is, goods that are not specifically identified) does not pass until they are specifically identified. For example, if a buyer contracts to buy 500 sheep from a flock of 2,000, property in those sheep will not pass until the 500 sheep (out of that 2,000 which are to be sold) are identified.

The problem that we seek to overcome then is that, once the grain is delivered, it is intermingled with everyone else's grain. No-one can tell which grain is theirs and which grain is someone else's, and the property thereby passes to the operator of the silo. If the operator of that silo then goes belly up, bankrupt or is liquidated, the difficulty that we have is that the poor old supplier of grain—whose grain is in that silo and he knows that his grain is in that silo, as do all the other suppliers of grain know that their grain is in the silo—cannot get their grain back. The grain effectively becomes part of what the liquidators then sell to meet the obligations of the silo operator, and the poor old person who has provided that grain to the silo is nothing more than an unsecured creditor.

This bill seeks to address that problem. It does it in two parts. It amends two pieces of legislation, the first of which is the Sale of Goods Act 1895. That part actually deals with the people at the other end of the transaction—the people who are buying things out of bulk storage. So the first part of the bill protects the rights of buyers who contract to purchase goods which are stored in bulk. The way the bill does that is it inserts, in the first instance, a definition of 'bulk' and then it adds a new section 20A, which provides, in essence, that, when a buyer contracts to buy bulk goods and pays some or all of the contract price, ownership of the purchased goods passes to the buyer at that point.

That has the effect that, even if they have not actually been delivered and thereby identified, the buyer has an entitlement to the goods and they will have an entitlement to the goods on a pro rata basis. So, if for instance (and I am just making up figures) we had 100 tonnes worth of grain in a silo and there was a contract to buy 50 tonnes of that grain, once the money has been paid for the grain, or part of the money has been paid for the grain, the purchaser has entitlement to their 50 tonnes.

If it happens that, say, 20 tonnes of the grain has already been sold, then they would only have a pro rata entitlement to what is left. They had a contract to purchase 50 per cent of what was in storage, therefore they would have an entitlement to get 50 per cent of the balance that is then available. However, it does place them in a better situation than what they are in currently; that is, if the holder of that grain goes into liquidation, even though they have paid their money, suddenly they are left as an unsecured creditor and they are at the bottom of the pecking order in terms of getting any of their money back in the liquidation process. That half of it covers the situation for someone purchasing goods in bulk.

The second part is the one that is of considerable importance, because I imagine that, most of the time, there is not a great delay between people actually paying anything for things that they are purchasing and receiving their entitlement. I think the delay occurs more often when people place the grain—as I said, I am using grain as the simplest example—into a bulk storage facility. No doubt, other speakers on this bill are more au fait with what time lines are involved, but those people have to wait considerable amounts of time; and thus we plan to amend the Warehouse Liens Act 1990, which is a more recent act than the good old Sale of Goods Act.

This part of the bill is to protect the growers; that is, anyone who deposits goods into bulk storage. It is virtually a mirror of what we are doing in the Sale of Goods Act. Again they insert a definition of the nature of 'bulk' and also a new definition of 'operator of a warehouse'. The bill then inserts a new section 14A, which is designed to overcome the effect of the court case of Chapman and Verco from 1933. It offers exactly the same protection to people who put goods in bulk storage. It applies only to goods once they are delivered and intermingled. Once that happens, the person who has put those goods into storage shares the ownership of the goods in common with other depositors, and again it is pro rata with each of the people who have made a deposit.

In both cases, it is possible for the parties to the arrangements to make arrangements in a contract which override the provisions of the legislation. Effectively, this is a default position. That means that, if there is nothing in the contract, then the provisions of this bill will apply and the possession of the grain will not entitle someone to ownership: the ownership will not pass at that time.

It is interesting for a couple of reasons that this has arisen now. First, one would have thought that this would have arisen sometime between 1933 and now, given that is how long ago the High Court made this determination. As I understand it, and according to the Attorney's second reading contribution, a case in New South Wales as recently as 2005 led to a change similar to what is contemplated by this bill being put into the New South Wales' legislation and, indeed, it is anticipated that the various states will all institute similar changes in due course.

The other thing which makes it interesting is that I notice we are intending to finish the debate in this chamber today—and I have no doubt that will occur. Of course, it will then go to the other chamber. The intention is that it will pass both houses this week. It is interesting because it became apparent some time ago that the Farmers Federation in this state and a number of other people (notably grain producers) thought that this bill was on its way through the houses. Indeed, they chatted to some of my colleagues about it, who expressed some surprise since there was no indication of any such bill, even on the horizon. So I am glad that the government finally decided that it should get moving on this and get it through. We are happy to support its rapid progress through the house. We would not want to see the bill delayed in a way that would have an adverse impact upon our farmers.

The Farmers Federation certainly has indicated its support for the bill. It has been waiting for it for some time. Indeed, I understand (although it does not particularly affect us in any economic way) that, when ships transport bulk grain these days, it is often the case that they nominate New South Wales as their jurisdiction for the contracts simply because of the legislative provision already having been put in place in New South Wales, whereas it is not yet in place here and in various other places around the country.

I know that a number of my colleagues wish to make a contribution in relation to this bill, and with good reason—they know far more about bulk grain handling than I—and I particularly look forward to the contribution of the member for Kavel, since he has a very personal interest in the 1933 High Court case, and he will no doubt advise members of that in due course. With those few words, I indicate that the opposition supports the bill.

Mr VENNING (Schubert) (11:17): I have to say that, in my time in this house, this is probably one of the more positive things that we will do to assist farmers in our state. Obviously, I support the bill. At the same time, I declare my interest as a farmer and grain seller, and also the fact that in the past I have done a bit of grain trading. So I have been on all sides of this and understand—

Mr Pederick: And you still are.

Mr VENNING: Well, I could well be, on another day. But I understand the risks, the shortfalls and the problems for the unsuspecting in grain trading. It is a very timely supportive measure for farmers. This issue was raised at the last annual meeting of the SAFF (South Australian Farmers Federation) by the financial adviser, whose name I have forgotten. He had a term for it, which I cannot recall, in relation to this situation.

Mrs Redmond: Bailment?

Mr VENNING: No, but 'bailment' will do. I thank the shadow minister. The situation of farmers being at risk of not being paid has been highlighted especially now, and it is very appropriate that we are discussing this because this is the first real trading year in which we have operated without a single desk system. In the old days, if you had a problem you just delivered the grain to the Australian wheat board or the Australian barley board. Now the situation is that the grain is going everywhere, and a lot of farmers are unsure.

In fact, the situation last week was terrible. All the speeches I made in this house in relation to what would happen with the abolition of the single desk have proven correct. A lot of farmers, including me, have not sold their grain because the prices are fluctuating so greatly. We are sitting on it—everyone is sitting on their grain. It is being warehoused—some with ABB, some with AWB and some with private grain traders. It is sitting in warehouses. So it has gone from your property and you do not have it any more, but you have not been paid. In fact, you have not even contracted who is going to buy it.

However, as I said to the house, the problem now is that the ships are coming to load the grain for the markets and, of course, the grain is not there. It is worse in Western Australia than here: the ships are coming in and the grain is not there, and they are now pleading for farmers to release the grain so we can look after our long-term markets. But the prices for wheat are fluctuating from about $200 a tonne to about $350, so what can you expect a farmer to do? The confusion is exactly the same as happened back in the 1920s that we talked about. There is chaos and confusion, so farmers are sitting on their grain. This is a direct result of what this house has done, because a lot of farmers are not confident, or electronically savvy to find out the world-marketing trends. In the old days, they just put it in the pool—whether it was the ABB or AWB—and, nine times out of 10, those people did okay. There were no worries and no hassles: they did not have the stress they now have of trying to gather a poor harvest and not knowing what to do with it.

We are helping here today, because this legislation is taking away that risk. It is great to read the history here. I think the member for Kavel will tell you about the connection he has with the late Hedley Chapman, who took them on and lost, because he said the grain was not paid for. It was intermingled with other people's grains and he could not define his product or get it back and, therefore, he had to go on to the list at the time as an unsecured creditor.

We have moved on since then, because today we warehouse our grains. As it is put into the silo system the grain is independently assessed for what it is. It is carted and is on the weighbridge and the variety and type of grain that was delivered is what comes out. We agree that you are not getting the same grain if you on-sell it to a trader. You know you are not getting the same grain, but as long as it is a comparable type and quality that you put there, you are not going to worry about that.

This is certainly a very timely bill and I note that both major parties are supporting it. I do not expect there to be any opposition to it. It is amazing that this sort of thing was not introduced many years ago, because I have known people to lose farms due to certain dealings. I will name a couple of them. Gulf Industries at Balaklava years ago went down, and it took a lot of farmers with it. The South Australian Pea Co-op, our own pea cooperative, went and it took a lot of people, including some close friends of mine who held executive positions in that group. They lost a lot of money as a result of things that happened. It is a multinational trader that knows a lot more than us, and the honest grain trader can also burn their fingers. This bill protects them as well—not only the trader but also the farmer who is putting the grain in trust.

So, I just flag this problem that we have at the moment. I do not know what the answer is. Farmers are sitting on their grain (as the member for Hammond would know). They are unsure of what to do, so they are sitting. They are reaping it and putting it into the system under warehouse, or even storing on farm. On farm is the safest place for it but, of course, you cannot store all your grain on farm unless you have a pretty large on-farm storage capacity. That is what the growth industry is right now: people who manufacture silos are seeing a huge increase in demand for large silos; there are 500-tonne silos being built on farms.

This is a direct result of our getting rid of single desk. It has ensured that the big companies such as Sherwells (the Ahrens company) are making a killing, because they are manufacturing large grain storage. The way it is, you could almost pay for that storage in one year with the difference in prices. We are seeing feed barley now at under $100 a tonne, which is way below the cost of production.

I never normally give commercial advice in this place to any farmer, but I will in this instance. If you cannot get at least $100 or $120 for it, do not sell it. That is below the cost of production. I am sure that next year, even if it be low-grade barley, you will be able to pay for your storage quite handsomely.

The concern is the cost of warehousing. If you put it in the system and warehouse it, it is all very well in the short term. However, if it goes over—I think, six months—the warehousing costs become pretty prohibitive and it then forces farmers to make a decision about the grain they have stored.

It is a very complex problem. However, I congratulate the minister (I presume, in this instance) for our doing this today, because it gives farmers some surety that the grain they have is not at risk. In the past, there has always been the risk. As the AWB and ABB have both said, if you sell it to a private trader you might never be paid. That has happened in many cases. They would bankrupt themselves or go out of business, and sometimes it was deliberate in times gone by. This measure will solve that problem, and I am pleased about that. We have taken a lot of time to get there but, certainly, I appreciate that.

Also, I am pleased (and I have thought about this long and hard) that there is protection for the trader. In this bill, if the trader pays a deposit on the product (and that is often the case) to secure it, he/she then has a pro rata share of the goods that he/she has; in other words, the pro rata is the amount of deposit he paid versus the final, or the agreed to, contract price. Therefore, the trader does not necessarily lose that deposit because they have paid a portion of the agreed price and consequently retain a portion of the goods. The Sale of Goods Act provides that there cannot be ownership of unascertained goods. When one looks at the original bill, one sees that it certainly solves that problem.

I commend the Farmers Federation. I have given it a few brickbats in the past, but I give it a tick for this one. I also commend the minister, the minister's staff and the departmental staff, as well, because the farmers will certainly welcome this bill. I certainly do. I am interested to hear other contributions this morning. We are in very difficult times. The harvest is now halfway through. The quality of the barley is low. There is very little malting barley out there, so a lot of it will go into storage for feed lots and later use.

In relation to wheat, I am surprised to see how good the wheat is. We grew a lot of hard wheat and some of the yields were 12 to 15 bags to the acre (using the old term). It is surprising and extraordinary that with rainfall of 7½ inches we can grow crops such as that. It speaks wonders for and gives much credit to the people in the department who have done research over the years—and I refer to Albert Riviera and Reg French. The work they did is now paying dividends for farmers because without that research we would not exist. Most farmers are producing right on the costs of production. This year you can drive around properties and look over the fences to see that farmers are up with the technology.

Most importantly, this year the timeliness of sowing was incredibly critical. Those who sowed in the last three weeks in April have crops, and the difference is huge for those farmers who sowed in the third and fourth week of May. The crops did not finish. We have different crops across the properties. One crop is, say, 14 or 15 bags and across the fence the crop is, say, two or three bags, hardly worth reaping.

The bill is timely. I give the minister an accolade for introducing the measure, which we support. Also, I give SAFF some credit because in the past I have given it a bit of a whack. I also give credit to the department. I support the bill.

Mr PEDERICK (Hammond) (11:27): I support the bill, and I commend the shadow attorney-general for her brief but very comprehensive contribution on this matter. I declare an interest here. I am a farmer by trade. I have not put in a crop since I took my last crop off at the end of 2004, early 2005. I have had a few things to do since then. I have been a bit busy. Since that time I have leased out my property. I commend the people operating my place. Sometimes you can run into problems letting other people operate your land, but they are doing a great job in trying conditions.

There have been drought conditions over the last several years. They would not have made a lot of money. I know that in 2006, during the harshness of the drought, one of our best paddocks only went about one or 1½ bags to the acre. Anyone with any farming blood in their veins knows that that is not profitable or sustainable. In a similar dry year last year they grew a 14-bag wheat crop on a sandy paddock. I used to curse the sand on our place because it would not yield as much as the good ground, but you do notice that in the tough times that is where the yield comes from because the heavy ground cannot sustain the growth and runs out of puff.

But the rains will come, and the farmers from right around the state with their initiatives, with no till farming practices and getting their crops in on time are showing the way forward. Yes, sometimes it does not work for the year but most times it does. People must get over the amount of crop they put in and do it in one pass. I firmly believe that the farmers who hang on and wait for what was considered in the old days a reasonable amount of rain to sow will lose out because, if you sow a crop in August, well, you have halved your yield already. You have essentially wasted your time.

Certainly, I have done it. As the member for Kavel indicated: get in and sow dry and get it under way. I want to make a comment on grain marketing. Before deregulation people did have the opportunity to sell to private buyers. I can say that I almost got caught, and plenty of people did get caught out. This was prior to deregulation of both barley and wheat. I just want to put that on the record. I know families who were $120,000 down one season, and that is very hard to take. If someone has a cash price on the board at the silo and it is $15 to $20 ahead of everyone else, you must ask questions.

I know that some of these companies were smart. They would pay for grain early in the season. The word would get around that such and such a company is fine. You can deal with them; they have paid full up, so they would get a bit of confidence out there and people would start contracting around the state. Tens of thousands of tonnes could be contracted to certain companies and, suddenly, after 30 days, there is no money—major strife. Also, in regard to deregulation, people can still market their grain under pools. I notice that the bill talks about payment in full or some payment being made, and I will be interested in the Attorney's response.

I know that pool payments can go for at least 18 months, so some working out must be done on who does retain the title. If the storer of the goods becomes insolvent in that time, I know that the bill says 'some or all', so, perhaps, that is what explains it. Certainly, from my experience, you can sell your grain for 30 days cash—sell it for pool payments or through different other contractual agreements. In regard to whether or not pool payments or selling grain into pools is a good option, neighbours of mine have done the research over quite a few years comparing cash selling versus pool selling, and they believe that cash wins 98 per cent of the time.

Over time, as the pool payments get paid, different fees come out. Suddenly, a belt charge, an export charge or some other storage charge turns up. You might think you are getting a $15 payment and you end up with about $7. Certainly, they are things to take into account. One thing people need to be assured of is that the pool system is still there—not just ABB but other buyers will go with that system. People have taken on board other marketing strategies as well, and a lot of that was done before deregulation. People were storing grain on the farm so they could take advantage of the peaks and troughs. I believe that later this year there will be a peak in the grain market. We are in a trough at the moment.

Early this year prices were probably treble where they are now for feed barley. I know of one case where a friend of mine was offered about $100 a tonne for grain at harvest and then sold it close to $400 six months down the track. In light of the harvest in the Victorian Wimmera Mallee (where farmers are really suffering), I believe that, down the track, there will be some real marketing opportunities. I am not trying to influence what people do with their grain, but a lot of choices are to be made. I know for a fact that, when a farmer is going seven days a week and the harvest is on, sometimes it can get a bit confusing, so it might be best for the farmer to get an adviser or someone else to assist them with their grain marketing. There is certainly money to be made by smart marketing, and that will vary from property to property.

I note that this bill does not directly protect sellers of grain against buyers defaulting. At the moment, if a seller of grain (a farmer) deposits grain into a bulk store and if the owner of the bulk store becomes insolvent, the farmer is an unsecured creditor. However, under the provisions of this bill, the farmer is protected from that happening. This bill also provides protection to the buyer of the grain if the holder of the storage facility (the third party) falls over; that is, the buyer will no longer be an unsecured creditor, as is the case at present. On my reading of the legislation, this bill affords total protection for the seller against the buyer becoming insolvent; it is possibly the third party that holds the goods.

I want to make some comments about the submission that the South Australian Farmers Federation sent to the Liberal Party. The South Australian Farmers Federation stated that it is very pleased that the state government has taken this initiative to amend the legislation to cover bulk products such as grain and wine grapes. The federation is also pleased that it has been asked to contribute to the consultation process.

SAFF policy is that retention of title be mandatory on all agricultural products, and the proposed amendments to the South Australian legislation is a move towards providing this. With the deregulation of both barley and wheat marketing, it is very timely that it is proposed to amend both the Sales of Goods Act 1895 and the Warehouse Liens Act 1990 to clarify the situation with products stored in bulk.

SAFF has recently conducted, with federal government funding, six wheat marketing workshops across the state to discuss the implications of the deregulation of wheat marketing. Grain growers can now sell their wheat for export to any accredited company. Thirteen companies have so far been accredited by Wheat Exports Australia. Previously, growers could sell only through AWB Limited. With this change, it is now essential that growers enter into valid contracts that cover a number of specific aspects, including retention of title.

To assist in this process, the National Agricultural Commodities Marketing Association (NACMA) has prepared standard contracts. Of relevance are the standard terms and conditions for ownership and passing of title and choice of law. Through the Grains Council of Australia, SAFF Grains Council, as a member, has been able to get the 'ownership and passing of title' clause altered so that this now reads:

Ownership and Passing of Title: Risk in any goods supplied by the seller to the buyer shall pass to the buyer when they leave the possession of the seller. However, title shall not pass until payment in full has been received by the seller. Until full payment is received, the buyer and/or its agents and third parties hold the goods as bailees only.

On breach of any payment terms, the buyer on its own behalf and on behalf of its agents and third parties authorises the seller to enter any premises and retake possession of the goods without notice to the buyer, its agents and third parties. Where the goods have been commingled with other goods, the buyer becomes an owner in common of the bulk goods and the undivided share of the seller shall be such share as the quantity of seller's goods bears to the quantity of the goods in the bulk.

Until such time as the seller has received payment in full, any on-sale by the buyer is made as the seller's agent and the buyer holds the proceeds of any on-sale of the goods as trustee for and on behalf of the seller and must account to the seller for those proceeds, on demand. Where at the time of default in any payment terms to the seller the buyer has not received proceeds of any on-sale, the seller is expressly authorised to receive proceeds of on-sale direct from the buyer's customer.

There are details on NACMA contracts which assist with this. There is the NACMA Contract No. 3, which is contract confirmation, and Contract No. 2, which is 'Grain and Oilseeds in Bulk—Basis Track'. Those are the two contracts that have the retention of title clause. In Contract No. 3 is the 'Ownership and passing of title' clause, in Contract No. 2 it is called the 'Retention of title' clause, and it is No. 9 in this contract.

The NACMA contracts are currently based on both the New South Wales Sale of Goods Act 1923 and the Warehousemen's Liens Act 1935. As was pointed out in the consultation paper, these New South Wales acts were amended to produce the mirror image of the United Kingdom amendment. To strengthen the use of the NACMA contracts in this state it is now timely to alter the two relevant South Australian acts to ensure South Australian farmers are covered by South Australian legislation.

While SAFF supports the amendments it would like the changes to go further, with retention of title clauses added—as in NACMA—so that passing of title does not occur until payment in full has been received by the seller. This needs to be for all goods, and not just those in bulk. I appreciate what the South Australian Farmers Federation is saying but, as I indicated earlier, I wonder how it works with pooling of grain.

SAFF believes that, with grain marketing becoming much broader under deregulation, it is essential that the legislation be amended before this year's harvest—and, as the member for Schubert rightly said, we are probably halfway through the state's harvest, with an early start and a dry finish. SAFF has also made a brief comment in relation to wine grapes, noting that while there are similar difficulties with the South Australian Wine Grapes Industry Act 1991, it does provide some protection by stipulating the terms and conditions of payments by processors to producers.

Another comment from a SAFF member is that SAFF is keen for this bill to go forward and would like to encourage NACMA to include reference to other states in the documentation in order to make it more broadly usable. SAFF would also like to see an industry standard adopted across all states. I believe that, for farmers trading grain and buyers buying grain—especially in the tough economic times we have now entered, with the world financial crisis—the more protections for either end of the deal, the better off the industry will be. From my perspective (as a farmer, originally) this gives a lot of strength to people putting their grain on the market. Some people would be putting up $2 million or $3 million of grain in any one season, or even more, and they certainly need to know that there is some surety that their money is flowing in. The work is too hard and the inputs are too expensive to lose it in one hit.

I see the amendments being moved today, in conjunction with people being careful with their marketing and selling grain with NACMA contracts, as a positive, and I commend the bill to the house.

Mr GOLDSWORTHY (Kavel) (11:44): I too am pleased to make a contribution to the debate on the Statutes Amendment (Bulk Goods) Bill 2008. Unlike my colleagues the members for Schubert and Hammond, I am not a farmer, although I certainly come from—

Ms Chapman interjecting:

Mr GOLDSWORTHY: I used to. I come from a family background of being directly involved in primary production, particularly broadacre farming. My father was a full-time farmer for a number of years until he made the decision to change. His side of the family—his uncles and grandfather—were farmers, as were those on my mother's side. Her father, uncles and grandfather also were farmers. So, I have an understanding of issues relating to primary production, broadacre farming, cropping operations, grazing and activities such as that, and I maintain a keen interest in those issues, particularly as they relate to the primary production pursuits of people in the Adelaide Hills in the electorate I represent.

There might have been an opportunity for me to go on the land in the early years of my life, but I chose to pursue other career avenues. As is the norm in relation to her contributions to the house, the member for Heysen, the opposition's lead speaker, has quite accurately outlined the intent of the legislation, so I do not think there is any need to recount any of those matters.

Essentially, the bill, which is based on New South Wales legislation—which, in turn, is based on United Kingdom legislation—is designed to overcome a legal problem, which arises when goods such as, typically, grain or wine are held in bulk storage and the storer becomes insolvent before the goods are on-sold.

The member for Heysen highlighted an issue involving the High Court case of Chapman Bros v Verco. I can advise the house that one of the Chapman brothers in this instance was my grandfather and the other brothers were obviously my great uncles. Therefore, I have a reasonably good knowledge—

Mrs Redmond: A personal knowledge.

Mr GOLDSWORTHY: —a personal knowledge of the background behind this case. I would like to advise the house of some of that background information. Obviously, as I said, my grandfather was a farmer—a grain grower—as were his brothers, and at that stage they worked as a family operation. They delivered grain to Verco, a grain-trading company, which became insolvent and, consequently, my grandfather and his brothers lost a considerable amount of money on delivering that amount of grain to that company.

There is also a bit of interesting information behind that in relation to the advice given by the manager of the bank with which Verco conducted its accounts. The bank manager was aware of the financial difficulty that Verco was in and advised its farming clients, who he believed could not withstand the loss incurred from that grain-trading company going bankrupt, not to deliver their grain to Verco. That is a pretty serious thing, and I can talk about this now because it is 75 years down the track.

Obviously, all the parties involved in that issue, including my grandfather and his brothers, are now well and truly deceased. However, my grandfather became aware that the bank manager had gone to other farmers and said, 'Don't deliver your grain to Verco's because they're in trouble financially.' My grandfather questioned the bank manager and said, 'Well, why didn't you tell us?' The bank manager said, 'Mr Chapman, we believed your farming operation could withstand the loss.' Hence, my grandfather became reasonably agitated and incensed.

Members interjecting:

Mr GOLDSWORTHY: I was reminded of that issue by my grandfather quite regularly during my banking career. Hence, the Chapman brothers took the issue to court and, I understand, with the assistance of what became the Farmers Federation—or whatever the equivalent organisation was called back then—ended in the High Court. Unfortunately, the High Court found that, because the grain was intermingled with all the other farmers' grains that were delivered, it could not be separated and the Chapman brothers became unsecured creditors with the others.

Mr Pederick: The rest of the losers!

Mr GOLDSWORTHY: Yes, with the rest of the losers; that is right. That is just a little bit of background in relation to that issue. I remember my grandfather telling me about it years and years ago, and it is obviously something that one does not forget. This legislation seeks to address that sort of situation, and I guess it was not an issue when we had the single desk arrangement in place in relation to grain marketing where there was a statutory authority and all the grain had to be marketed and sold through that entity.

I know that we have had some considerable debate over the past years in relation to dismantling the single desk. We have had some quite robust debate within the broader community and, obviously, here in the parliament as well in relation to that matter. Having an understanding of issues relating to farming operations, I listened to that debate quite intently and, obviously, came to the decision that I would support the deregulation of grain marketing because there is still a protection in place whereby grain producers can market their grain using the old system through the pools.

I visited a farming family in the Murray Mallee a number of months ago, and we stayed on their property over a weekend. The wife, whom I have known for many years—the husband is a family friend, so I have known him even longer than that—took up the issue with me of the deregulation of grain marketing. Quite often, in farming family practices, the man of the household does the work out in the paddock and produces the grain and the like, and the wife looks after the book work, the banking and the administration side of things.

This lady was quite frustrated with the complexity of how a farming family goes about marketing their grain in the deregulated markets and deals with agents and all the third parties who have found a means to involve themselves in grain-marketing activity. This lady was very frustrated with the level of knowledge, complexity and detail that somebody had to understand to be able to market their grain profitably through the deregulated markets, and I pointed out to her, 'Well, you don't have to do it. There's no compulsion for you to go down that particular avenue, to pursue that course of action. You can still market through ABB and AWB through the pool system.' I guess it is human nature to look to the avenue that maximises your returns. It is known that, if you can sell your grain for cash, forward contract, and all those other options that are available in the market, you can obtain a premium price for your grain.

We saw some quite stark examples last year, when the new legislation came into practice and farmers could engage in freely marketing their grain. Some mistakes were made, and people forward contracted far too much of their anticipated crop. It is the old adage: you do not put all your eggs in one basket; you spread your risk. It does not matter which industry, activity or business you are in, you never put all your eggs in one basket; you spread your risk in relation to your operation.

Unfortunately, some farming operations did not spread their risk enough and had to go to the bank for more money to pay out their contracts because they were not able to deliver the contracted amount of grain. That was obviously an unfortunate situation but, had some of those people thought a little more carefully about what they were doing, those problems may not have eventuated. As has been explained previously in the house, this is a tough grain season and once bitten twice shy: people will not enter into those contracts in a similar way.

Notwithstanding all these issues, I think this legislation certainly has merit. I do not need to go into the technical detail of the bill because the member for Heysen has done so extremely well. Obviously, as a member of the Liberal Party, I am pleased to support the legislation.

Mr PENGILLY (Finniss) (11:57): I also rise to support this legislation, and it is good that we in South Australia are going to tidy this up. The fact that New South Wales, given its current disastrous political mess, seems to be the only state that has sorted this out, the sooner we fix it up here the better.

The reality is that producers of goods need to be absolutely guaranteed that they can securely and safely sell their product, whether it be grain, wool, sheep, or whatever, and that, in the event that the company that has contracted for the goods falls over, they are guaranteed their money. As far as I am concerned, that is what it is all about. In some cases, it happens now, but this measure needs to tidy up an erroneous situation in South Australia.

There is nothing quite as uncertain for primary producers as seeing thousands of tonnes of grain disappear into the silos never to be seen again and then to have some doubt about whether they will be paid. The farming community in South Australia is changing, as it is all over the world, particularly in Australia. The reality is that many farmers go through the process of growing grain and expect to get a cheque at the end of it. That is changing.

Obviously, many big grain growers have far more businesslike practices, and that is a sign of the times. With the changes to grain marketing, you almost have to be a Rhodes scholar to deal with a lot of the options for selling grain, oil seeds, etc. in Australia these days. It is something that has become very complicated. I have followed it with interest and, in my former life having produced grain, oilseed, legumes and what not, it was a very simplistic exercise, but that has changed remarkably. There is no turning back; it will change again. That is what will happen: it will change again. If the member for Hammond and I walked out of this place tomorrow and had to go back to being farmers, I think we would be behind the eight ball; we would not know how to keep up.

It was interesting to hear the member for Kavel's recollections of the case of Chapman v Verco of 1933. It is a long time ago, but history is pretty handy in showing us where we should be now. The Farmers Federation has been lobbying for and expecting this bill for quite a period of time. It is unfortunate that a lot of the bulk grain ships transporting grain are nominating New South Wales as the jurisdiction for contracts because they have that coverage.

It is something that was needed to be done here, and it was needed to be done rapidly. It has taken some time to get to it. It will make a messy set of procedures more certain for producers and, indeed, I would suggest that it will make it more certain for those who are buying the grain as bulk goods.

It was my intention today, on behalf of the few grain growers in my electorate and, of course, the multitude of grain growers across South Australia, to provide some support for the bill in the house. It is good legislation. I support it, and I hope that it will come to a rapid conclusion and that we will move on and it will be put into practice.

The Hon. R.J. McEWEN (Mount Gambier—Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development) (12:02): I thank members opposite for their support. I was delighted to hear the member for Kavel describe how his family first became aware, in 1933, of the deficiencies in the act, keeping in mind that it is an act, I think, of 1895. It does show that sometimes these things do take quite some time to correct.

I must admit that I was not familiar with the case of Chapman Bros v Verco Bros & Co Ltd [1933]. The first time it came to my attention was when Stewart Andrew brought a couple of matters to my attention in relation to NACMA contracts. Not everything that Stewart Andrew brought to my attention could be resolved at a state level, in fact some matters he brought to my attention, I do not believe, can be resolved at all by legislation.

An honourable member: He's a good bloke.

The Hon. R.J. McEWEN: He is a good fellow. He did a good job. Equally, the law cannot protect everybody all the time, and I did bring this matter to the attention of both the member for Kavel and the member for Heysen when, in their company, I was delighted to launch the new cherry season last week. As part of launching the cherry season, I also had the opportunity to launch the new cherry map. I did point out to everybody on that morning that they had to go 450 kilometres south of that map to find the best cherry orchard in the state. It was on the map in the bottom corner.

Mr Goldsworthy interjecting:

The Hon. R.J. McEWEN: Yes; it is definitely on the map, it was just that there was a gap of some 400 kilometres. The far more serious omission in that publication was one that the member for Heysen is going to have to deal with at some stage, because I actually thought that advocating that the clothing for pick-your-own should be no more than a hat and sturdy shoes was not in—

Mrs Redmond: It would make it interesting.

The Hon. R.J. McEWEN: It would certainly make for some interesting picking and would bring a lot of spectators into the orchard. I think that would be a more difficult matter to resolve than the one that is before the house today, which is quite clearly that sellers are owners in common rather than unsecured creditors. I thank those opposite for their support. I trust that this bill will have a timely passage through the other place because it is important now that we have this extra level of certainty as we lead into another season.

Yes, we will lead into evermore deregulated markets for a number of reasons and, as more marketing options become available, it is important that, over time, we bolster the rights of sellers, particularly in the case where they become owners in common. I thank everybody who supports the bill. Obviously, I appreciate the house dealing with this in a timely manner.

The DEPUTY SPEAKER: I would like to confirm that you are the minister with carriage of the bill?

The Hon. R.J. McEWEN: I do apologise, Madam Deputy Speaker; you are absolutely right. I am the minister who has now taken responsibility for the carriage of the bill. In that regard, I am closing the second reading debate. When I rose I did not make it clear that I had carriage as the minister responsible for the bill. I could have well just been another speaker addressing the bill. I apologise for that.

The DEPUTY SPEAKER: Thank you.

Bill read a second time.

Third Reading

The Hon. R.J. McEWEN (Mount Gambier—Minister for Agriculture, Food and Fisheries, Minister for Forests, Minister for Regional Development) (12:06): I move:

That this bill be now read a third time.

Mrs REDMOND (Heysen) (12:06): I second the motion and speak to the third reading.

The Hon. R.J. McEwen: To clear up the matter of nudity in orchards? Yes, you should. It is outrageous!

Mrs REDMOND: The minister indicates that he did, indeed, open the cherry season last Wednesday and raised the issue of nudity in orchards in the cherry-picking season. Whilst some of us might welcome that (although it might be frightening in some ways), my response on the morning was that it would simply mean that everyone got a better dose of vitamin D, as well as vitamin C, which they would no doubt get from eating cherries and, therefore, it might be of considerable benefit. I just wish to confirm the opposition's position in relation to the bill.

An honourable member interjecting:

Mrs REDMOND: Rather than draw attention to the state of the house. I think the bill has come under the Attorney-General's purview simply because it amends two pieces of legislation, being the Sale of Goods Act and the Warehouse Liens Act, which are quite technical in terms of the legal understanding of the nature of a bailment. However, as I understand the situation, it will mean that, if someone delivers their grain into the silo, at the moment they deliver it into the silo, because of Chapman v Verco it is intermingled goods and, once we have intermingled goods then possession has passed as has ownership, technically, under the relevant legislation. Therefore, when the silo or bulk storage goes into liquidation those goods will then be sold off by the liquidator.

The effect of this legislation will be that, when the grain is delivered, if the warehouse or bulk storage goes into liquidation, then the people whose grain is in there have the right to sell it themselves. They still own the goods. They can sell it and it does not become part of what is sold off in liquidation. They are not just an unsecured creditor. To that end, hopefully, this will represent a significant improvement, although I have no doubt that, in practical terms, there could be some questions over how that ultimately works in practice.

Mr VENNING (Schubert) (12:09): I will speak to the third reading. I did omit, during my second reading speech, to talk about the wine industry because this applies to it equally as to the grain industry. There is just as big a risk of losing out for grape growers (who contract to wine companies) as there is for grain growers. On their behalf I congratulate minister and thank him, because anything we can do for the growers of this country, whether it be wine grapes and/or grain, I think we need to do.

I also wanted to make a comment in relation to what the member for Hammond said in relation to the pools. Yes, I am again declaring interest. Over the years I have been a cash trader in grains but only because the pools were there and giving a base price. The problem now is that we do not have the pool price locked in, and it is very hard for a cash trader to know what the base price is. That is the problem, and that is why people are sitting on grain while it is warehoused. So, while not all of us use the pools, it is certainly very helpful for a trader or a seller to know what the base price is. I commend the bill to the house and, again, I am happy to be on the same side as the minister for once.

Bill read a third time and passed.

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