When the effluent hits the fan

by Chris Grenfell

Like any relationship, the relationship between a sharemilker and farm owner has times where disputes and problems can occur. There are a number of ways that these issues can be resolved and this article looks at the most common methods contained in modern sharemilking agreements.

All modern sharemilking agreements provide for very strict timeframes for parties to raise disputes. Often the agreement provides a dispute cannot be raised more than a month (or two) after the end of the season in which the issue arose. This can be problematic if the aggrieved party chose not to raise the issue because they were hoping that the issue would be resolved at the end of the contract. For example, the sharemilker breaks some equipment of the farm owner in July 2010 – come the end of the contract in May 2012 the farm owner can’t then claim that damage against the sharemilker if the sharemilker disputes it as the time for raising a claim has passed.

There are two main types of sharemilking agreements. Firstly, those based on the Sharemilking Order which applies to sharemilkers that do not own the herd, and secondly, sharemilking agreements where the sharemilker does own the herd (usually a 50/50 income/expenditure agreement). The Sharemilking Order provides for a specific process of resolving disputes.

The Sharemilking Agreements Order 2011 has just come into force. This requires disputes to be raised within 20 working days of becoming aware of the issue arising but no later than 20 working days after the end of the season. The next step in the process is ‘conciliation’.

Conciliation is more common in the farming industry than any other. Conciliation is a process where a neutral person helps the parties agree what can be agreed and recommends a way forward on what can’t be agreed. The recommendation becomes binding on the parties unless either reject it. If rejected the dispute then goes to ‘arbitration’.

Conciliation can be excellent at resolving disputes where both parties approach the dispute with an open mind and without entrenched (often emotionally motivated) positions. The choice of conciliator is vital. Depending on the personalities involved I have found that the ‘three Fs’ are best – that is a person who is ‘firm, fair and a farmer’. They can be practical and cut through a lot of the technical issues by understanding what the practice is in the district and recommending that the parties adopt that approach. The conciliator may well gently ‘guide’ a party to a reasonable position if they are out of step with what is legal, fair or reasonable.

Arbitration is like a private court hearing. The parties agree a neutral judge who will listen to both sides and then make a binding determination. The determination has basically the same effect as a court judgment. In theory, an arbitration could be conducted in a paddock with the decision drawn up on the back of an envelope. In practice most arbitrations are relatively costly and involve lawyers. The arbitrator can be anyone the parties agree on, sometimes a lawyer, sometimes a farm advisor or professional rural arbitrator. Often the sharemilking agreement will determine who should appoint the arbitrator if the parties can’t agree (e.g. the president of the Arbitrators and Mediators Institute (in the case of the Order or) the President of Federated Farmers etc.).

With agreements not covered by the Order the parties are free to agree how they would like to resolve disputes. I find that most agreements now provide for ‘mediation’. Mediation is like conciliation but there is no automatic recommendation made to the parties. The mediator’s role is to be wholly neutral and simply facilitate the parties to reach their own agreement. Like conciliation and arbitration, the process is totally confidential and if a party accidently blurts out that they are liable then this can’t be used later (e.g. in arbitration or court proceedings) against them.

An interesting hybrid exists of the mediation and arbitration methods of resolving disputes. That is the parties see if they can reach agreement on matters and if they can’t then the mediator gives a binding decision. Dispute resolution purists would argue that this means that the mediation is not a genuine chance for the parties to discuss the issues fully and frankly without fear that if they concede something in the hope of reaching settlement that it won’t come back and bite them. However, from the pragmatist’s point of view it is a cost-effective way of resolving disputes in a way that lets the parties determine their own fate.

Of course, avoiding the dispute resolution provision of the agreement is the best medicine. Where there is potential for dispute it is best to discuss it with the other party and if something is agreed then get it in writing (a simple email confirming a discussion is fine). If things start to look nasty get some advice as soon as possible. This could be from a farm advisor, lawyer or industry organisation (e.g. Federated Farmers). Be wary of professional ‘dispute resolution experts’ as I have found that they can push the parties towards a formal procedure like conciliation when a letter or phone call might more efficiently resolve matters.