Although vintage 2013 has barely finished, it is not too soon to start thinking about how to protect your interests in next year’s grape transactions. Research in South Australia has found that up to 1 in 10 grapegrowers is paid late or not paid in full. Recently a wine processor in that state went broke and growers are unlikely to receive any of the $1.3 million owed to them.
There are two particularly important things to do to protect your interests over fruit delivered to processors.
The first is to undertake due diligence before finalising any agreement for the sale of the grapes. This means –
a. Hedge against problem processors by obtaining a credible statement of their financial position.
b. Get agreements in writing.
c. Have agreements checked by a lawyer before signing.
On our website we have extensive resources to help you with negotiating contracts, ensuring that the contract is fair and writing contracts that won’t trip you up later.
The second is to secure an interest in your grapes before handing over the grapes. This means ensuring that a Purchase Money Security Interest (PMSI) clause is included in contracts and that the PMSI is registered on the Personal Property Securities Register. A PMSI means that title does not pass until the goods are paid for – which is different from the default position in all state legislation, that title passes to the off-taker on physical hand-over of sold goods.
It’s essential that you register this clause on the Personal Property Securities Register (www.ppsr.gov.au), which has the effect of making you a secured creditor against all of the assets of the insolvent business in the event that the off-taker becomes insolvent. More information on the Personal Property Securities Register can be found elsewhere on our website.
One of WGGA’s top priorities is to make trading conditions fairer for growers – through lobbying winemakers to sign the Wine Industry Code of Conduct, which sets minimum standards for grape purchase contracts and makes judgement on breaches of these standards. One really important step you can take to protect yourself from the wolves is to ensure that your contract complies with the Code and that your purchaser is a signatory. You might be wondering whether you can afford to make such demands – but think of the 10%¹ of growers who do not receive proper payment for their fruit and ask yourself: can you afford not to?
¹ This figure identified by the Winegrape Growers Council of SA in a 2012 survey
Executive Director, WGGA