Frequently asked questions about the Horticulture Code

The Horticulture Code, which came into effect on 14 May 2007, defines and clarifies the rights and responsibilities of those in the wholesale horticulture industry. These Q&A aim to explain some of these rights and responsibilities and help industry participants comply with the Code.

Please note that the information provided in this Q&A is not legal advice. Industry participants are advised to seek their own legal advice to clarify their responsibilities under the Code and ensure that they are complying with it.

Questions

This Q&A is structured to mirror the six parts of the Horticulture Code:

Part 1—Application

1. What is the purpose of the Horticulture Code?

The purpose of the Code is to:

  • regulate trade in horticulture produce between growers and traders to ensure transparency and clarity of transactions
  • provide a fair and equitable dispute resolution procedure for disputes arising under the Code or a horticulture produce agreement.

2. In a nutshell, what does the Horticulture Code do?

The Code has six parts as shown in the diagram.

Flow chart whicih breaks the Horticulture Code down into six parts 

Part 1 outlines the purpose of the Code and defines some of the important terms used in it.

Part 2 describes the responsibilities of a trader to prepare, publish and make available a trader’s terms of trade document. Part 2 also outlines information that must be included in a trader’s terms of trade document.

Part 3 requires that a trader and a grower enter into a written horticulture produce agreement before they can trade in horticulture produce with each other. It also sets out other requirements and obligations relating to horticulture produce agreements, including information that the agreement must contain.

Part 4 sets out the general rights and responsibilities of growers and traders. It also outlines the specific duties that apply to agents and to merchants.

Part 5 sets out a dispute resolution procedure that can be used if a dispute arises between growers and traders.

Part 6 outlines the role of a horticulture produce assessor (that is, to investigate and report on matters arising under a horticulture produce agreement) and identifies the circumstances in which a horticulture produce assessor can be appointed. Part 6 also outlines the level of assistance that a grower and a trader must provide to a horticulture produce assessor and deals with the payment of a horticulture produce assessor’s costs.

3. What are some of the important definitions in the Horticulture Code?

Agent

A person who sells horticulture produce on behalf of a grower for a commission or fee.

Bad debt

If an agent arranges for a person to buy the horticulture produce of a grower, and the person does not pay the agent for some or all of the produce within the required time, the amount owed by the person is a bad debt of the grower.

Commencement day

14 May 2007—the day the Trade Practices (Horticulture Code) Regulations 2006 commenced.

Complainant

A grower or trader who begins the dispute resolution procedure set out in clause 32 of the Horticulture Code to resolve a horticulture produce dispute with another person (the respondent).

Grower

A person who grows their own horticulture produce for sale.

Horticulture dispute

A dispute arising under a horticulture produce agreement or the Horticulture Code.

Horticulture produce

Unprocessed:

  • fruits
  • vegetables (including mushrooms and edible fungi)
  • nuts, herbs and other edible plants but not nursery products.

Horticulture produce agreement

An agreement between a grower and a trader under Part 3 of the Horticulture Code.

Horticulture produce assessor

A person listed by the mediation adviser as a horticulture produce assessor under clause 39 of the Horticulture Code, whose role is to investigate and report on matters referred to them arising under a horticulture produce agreement.

Mediation adviser

A person appointed under subclause 31(1) of the Horticulture Code who, among other things, deals with mediation requests made under the Horticulture Code.

Mediator

A person listed by the mediation adviser under subclause 31(2) of the Horticulture Code whose role is to conduct mediations in accordance with the procedure provided for in Part 5 of the Code.

Merchant

A person who purchases horticulture produce from a grower for the purpose of reselling that horticulture produce, but not a person who purchases the produce for the purpose of export or retail sale.

Nursery products

Includes:

  • trees, shrubs, plants, seeds, bulbs, corns and tubers (other than edible tubers)
  • propagating material and plant tissue cultures, grown for ornamental purposes or for producing fruits, vegetables, nuts, cut flowers or foliage
  • cut flowers and foliage.

Respondent

The other party to a horticulture dispute in respect of which a complainant has initiated the dispute resolution procedure set out in clause 32 of the Horticulture Code (see Complainant above).

Statutory potato marketing scheme

A scheme established under a state or territory law that regulates the marketing, sale or disposal of unprocessed potatoes.

Trader

An agent or a merchant.

Trader’s terms of trade

A document outlining the terms upon which the trader is prepared to trade in horticulture produce with growers. The document is to be prepared, published and made publicly available by the trader.

4. Who does the Horticulture Code apply to?

A Code of conduct prescribed under s. 51AE of the Competition and Consumer Act (the Act) has the force of law, which means that a breach of the Horticulture Code is a breach of the law. Section 22 of the ACL prohibits contraventions by corporations of an applicable industry Code such as the Horticulture Code. This means that a breach of the Code will constitute a breach of the Act.

The Horticulture Code applies specifically to:

  • horticulture produce—as defined in the Code (see question 3)
  • growers—persons who grow their own horticulture produce for sale
  • traders—being either agents, who find a buyer for the grower’s produce or merchants, who buy the grower’s produce for resale.

The Horticulture Code does not apply to:

  • nursery products—as defined in the Code (see question 3)
  • retailers— a person buying the grower’s produce for retail sale by that person
  • exporters—a person buying the grower’s produce for export by that person
  • processors—persons buying the grower’s produce and processing it.

Please consult the diagrams below for an illustration of who the Horticulture Code applies to.

Application of the Horticulture Code to growers

 

Flow chart which describes which growers the Horticulture Code applies to

Application of the Horticulture Code to traders

 

Flow chart which describes how the Horticulture Code applies to traders

5. What is the role of the Department of Agriculture, Fisheries and Forestry (DAFF)?

DAFF provides policy advice and support to the Australian Government on issues relating to the horticulture industry including the Horticulture Code of Conduct.

For further information go to the DAFF website at www.daff.gov.au/hortcode.

Part 2—Trader’s terms of trade

6. What are a trader’s terms of trade?

A trader’s terms of trade document will outline the standard terms upon which the trader proposes to trade with growers. These terms can then be changed to meet the needs of individual agreements with growers, although the terms of trade will likely form the basis of the horticulture produce agreements.

The requirement to prepare, publish and make publicly available a terms of trade document is intended to increase transparency in horticulture trade.

7. What must be included in the terms of trade?

A trader’s terms of trade document outlines the preferred terms and conditions upon which the trader seeks to trade in horticulture produce. The terms of trade must comply with the Horticulture Code and provide answers to the following questions.

  • Is the trader prepared to trade as an agent, merchant, or both?
  • Does the trader have any delivery requirements?
  • Does the trader have any requirements relating to the quality of horticulture produce?
  • Are there any circumstances—for example, produce not meeting the specified quality or quantity—in which the trader may reject produce delivered by a grower?
  • When will the grower be paid?

The terms of trade document should also include details of any insurance that the trader may hold on goods under the trader’s control, including whether the insurance covers:

  • fire, theft and accidental damage
  • the name of the insurer
  • the maximum amount of claims that can be made under the policy.

A trader can also include any other information they consider appropriate, provided it is not inconsistent with the Code.

Additional information agents must include in their terms of trade

In addition to the above information, agents must include the following in their terms of trade document:

  • the basis upon which any commissions or agent fees are charged (for example, on a percentage or fixed basis)
  • whether payment of any commissions, fees and other costs are contingent on the sale of the grower’s produce or any other event
  • whether the agent is prepared to pursue payment for bad debts of the grower and the terms that apply to the pursuit of any payments.

8. How must traders publish their terms of trade?

A trader must give their terms of trade in writing to any grower who asks for them.

A trader must also publish and make their terms of trade publicly available. It is up to each trader to determine how they will comply with this requirement. For example, they could display their terms of trade at their business premises or on their website.

If a trader changes their terms of trade in any way, they must prepare an updated document and make this available by the same means as the original document.

Part 3—Horticulture produce agreements

9. Do growers and traders have to enter into written horticulture produce agreements?

Yes, a trader and a grower must enter into a signed and written horticulture produce agreement that complies with the Horticulture Code before they can trade with each other.

If a trader and a grower trade with each other in horticulture produce without entering into a horticulture produce agreement, both parties are in breach of the Code.

10. Can a trader trade as an agent and a merchant?

Yes, a trader can trade as a merchant in one transaction and an agent in another transaction, even with the same grower, as long as they have separate horticulture produce agreements for each transaction. However, you cannot act as both a merchant and an agent under one horticulture produce agreement.

11. What must be included in a horticulture produce agreement?

Form of a horticulture produce agreement

A horticulture produce agreement must:

  • be in writing
  • be signed by the grower and the trader
  • contain the minimum terms set out in the Horticulture Code.

Requirements for all traders

The Horticulture Code specifies that a horticulture produce agreement must, at a minimum, include:

  • whether the trader is acting as an agent or a merchant under the agreement
  • any requirements the trader has regarding the delivery of produce by the grower
  • any circumstances in which the trader may reject horticulture produce delivered by the grower, and the period within which the trader must notify the grower of the rejection and the consequences of rejection
  • the period within which the trader must advise the grower in writing of the rejection of produce, and the reasons for the rejection
  • details of insurance (if any) for horticulture produce under the agreement, including the trader’s insurer, matters covered; and maximum amount of claims
  • the process for varying the agreement
  • the length of time of the agreement, if it is only for a limited time
  • any quantity and quality requirements relating to horticulture produce covered by the agreement
  • how the trader is to deal with produce that does not meet the specified quality and quantity requirements
  • the contact details of the person the trader should contact if there is a dispute under the agreement or Horticulture Code
  • the contact details of the person the grower should contact if there is a dispute under the agreement or Horticulture Code
  • the process for terminating or ending the agreement.

The horticulture produce agreement can also include any other terms and conditions agreed between the grower and trader that are consistent with the Code.

There are also other specific requirements for horticulture produce agreements, depending on whether the trader is acting as an agent or a merchant. These requirements are outlined below.

Additional requirements for agents

If a trader is trading under an agreement as an agent, at a minimum, the agreement must also specify:

  • when the agent will pay the proceeds of a sale of the grower’s produce to the grower
  • the reporting period for the agreement (that is, the period for which the trader will provide a statement to the grower in relation to produce received and sold)
  • the period within which the agent will give the grower a statement for the reporting period (that is, how soon after the reporting period ends must the statement be provided to the grower)
  • the basis on which commissions or fees are calculated (for example, whether they are calculated on a fixed or percentage basis) and the specific rates or amounts of the commission or fees
  • whether payment of any commissions, fees or extra costs is contingent on the produce being sold or any other event (for example, the agreement may stipulate that the grower will still have to pay a fee to the agent even if the produce is not sold by the agent)
  • whether the agent will pursue bad debts owing to the grower arising under the agreement
  • whether the grower will have a role in the pursuit of bad debts.

Additional requirements for merchants

In addition to the general matters common to agents and merchants set out above, if a trader is trading under an agreement as a merchant, the horticulture produce agreement must, at a minimum, specify:

  • whether the price for the produce will be agreed either before or immediately upon delivery
  • when the merchant will pay for purchasing the produce (for example, how many days after delivery)
  • the reporting period for the agreement (that is, the period for which the trader will provide a report to the grower in relation to produce received)
  • the period within which the trader will give the grower a statement for the reporting period (that is, how soon after the end of the reporting period the statement must be provided to the grower).

Traders may choose to use a standard form agreement with the trader’s terms of trade forming the basis of the standard agreement. This can then be changed to suit the specific requirements of the parties.

12. What is the cooling-off period for a horticulture produce agreement?

The Horticulture Code provides additional protection to parties by allowing a cooling-off period for longer-term agreements.

If a horticulture produce agreement is for 90 days or more, or if the period is not specified in the agreement, either party to the agreement may terminate the agreement:

  • within 14 days of entering into the agreement (this is referred to as the initial cooling-off period), or
  • a shorter or longer cooling-off period as agreed between the parties in accordance with the Horticulture Code (the cooling-off period cannot be shorter than seven days).

If a horticulture produce agreement is terminated during the initial cooling-off period, any payment already made for trade that would have occurred had the agreement not been terminated must be returned within 14 days.

A party can deduct any reasonable expenses they have already incurred from the amount to be returned. If an agreement is terminated during the initial cooling-off period, any trade that has occurred under the agreement before the termination is subject to the terms of the agreement.

13. What are the legal advice requirements for growers?

New agreements

Before entering into a horticulture produce agreement that is to be for a term of 90 days or more, the trader must ask the grower to provide a signed statement acknowledging either that:

  • the grower has received independent legal advice about the agreement, or
  • the grower has been told by the trader that they should seek legal advice about the agreement but has decided not to seek that advice.

A trader may require a grower to provide a signed statement that the grower has received independent legal advice about the proposed agreement.

Additionally, a trader can also (but does not have to) require a grower to provide a legal advice statement for horticulture produce agreements that last 90 days or less.

Existing agreement continuing for more than 90 days

If a horticulture produce agreement has been operating for longer than 90 days and a legal advice statement has not already been requested, the trader must ask the grower to provide a legal advice statement. The trader must ask for the statement within 14 days after the end of the 90-day period and the grower must comply with this request within 21 days of receiving it.

14. Does the Horticulture Code allow agreements to be backdated?

The Horticulture Code:

  • applies to written agreements between growers and traders of horticulture produce, entered into on or after 15 December 2006
  • does not apply to written agreements between growers and traders for horticulture produce entered into before 15 December 2006.

It is the view of the ACCC that written agreements signed after the 15 December 2006 must comply with the Code, regardless of the date of the agreement. This includes agreements that have been backdated (that is, if the contract is dated before the 15 December 2006 but signed after that date).

If, however, an agreement was entered into before 15 December 2006 and is later varied on or after 14 May 2007, the Code will apply to any trade that takes place after the agreement is varied. An agreement will be varied if it is amended, extended or transferred.

Part 4—Other matters affecting trade in horticulture produce

15. When does ownership of the horticulture produce pass from the grower?

Ownership of horticulture produce will pass from a grower to a trader at different times depending on whether the trader is acting as an agent or a merchant.

For agents—ownership stays with the grower until the agent sells the grower’s produce.

For merchants—ownership passes from the grower to the merchant when:

  • the produce is delivered to the merchant, if the price has already been agreed beforehand, or
  • the merchant and grower agree on a price (to take place immediately upon delivery), if the price has not been agreed before delivery.

Note: Growers and merchants must agree on a price for the horticulture produce in writing either before delivery or immediately upon delivery.

16. How does the Horticulture Code define ‘delivery’?

The Code does not define ‘delivery’ or ‘immediately upon delivery’. However, the ACCC considers that in the Horticulture Code ‘delivery’ means physical delivery and that the meaning of ‘immediately upon delivery’ will be determined on a case by case basis according to what is reasonable in the circumstances.

Therefore, if a merchant agreement specifies that the price of the produce will be agreed ‘immediately upon delivery’, the merchant will have a reasonable period of time following physical delivery of the produce and prior to the transfer of ownership, during which the merchant may inspect the produce received to determine whether a circumstance for rejection specified in the horticulture produce agreement exists.

17. When can a trader reject a delivery of horticulture produce?

A trader must accept all horticulture produce delivered under a horticulture produce agreement unless the agreement specifies circumstances in which horticulture produce may be rejected. A trader can reject horticulture produce only if one of these specified circumstances arises.

If a trader rejects any produce, the trader must:

  • contact the grower immediately (by telephone, fax, email or other electronic means) and advise them that the produce has been rejected
  • advise the grower in writing of the rejection and give reasons for the rejection within the timeframe specified in the horticulture produce agreement.

18. What happens if a grower delivers horticulture produce to a trader without a horticulture produce agreement in place?

The Horticulture Code requires that a written, signed horticulture produce agreement must be in place before trade in horticulture produce between a grower and a trader can take place. Therefore, the trader need not accept the produce if no agreement is in place. However, it would also be open to the parties to enter into a written horticulture produce agreement after the produce arrives.

If a shipment arrives without a prior agreement, it would simply be a matter of the trader contacting the grower and forming an agreement. The relevant details could be entered into a template agreement and after this document was signed by both parties and returned to the trader via fax or other electronic means, the transaction could begin.

An exception to this would be if an agreement were entered into before 15 December 2006. If this agreement continues, and no variation or extension of the agreement has taken place post-15 December 2006, the trader must deal with the produce under the terms of the pre-existing agreement.

It would be prudent for a trader in these circumstances to immediately notify the grower that they cannot trade in horticulture produce without a signed horticulture produce agreement in place between them and to discuss what should be done with the produce.

19. When must a trader pay for horticulture produce delivered?

A trader must pay a grower for produce delivered under a horticulture produce agreement within the timeframe specified in that agreement. If the trader does not pay the amount due within the required period, the trader is in breach of the agreement and therefore the Code.

As a result, if payment has not been made in the agreed timeframe, under the Code the grower may:

  • suspend any further deliveries until payment is made, and/or
  • cancel the agreement.

Before suspending deliveries or cancelling the agreement, the grower must give written notice to the trader of the grower’s intention to take that action.

This right is in addition to any provisions for termination that are set out in the agreement. To comply with the Code, an agreement must also contain a clause specifying the process for terminating an agreement. It is up to the parties to decide when and in what other circumstances a party can terminate the agreement.

20. What are the trader’s obligations for handling and storing produce?

A trader must exercise reasonable care and skill when handling and storing a grower’s produce to ensure that the produce remains of the highest quality possible. This care and skill must be exercised until ownership of the produce passes from the grower.

21. What are the specific obligations that apply to agents?

The Horticulture Code places additional obligations on agents. A breach of these obligations may not only result in a breach of the Code but may also amount to a breach of the individual horticulture produce agreement.

These additional obligations relate to the following:

  • an agent’s duty to act in the grower’s best interests
  • payment of the proceeds received from the sale of the produce to the grower
  • pursuing bad debts on the grower’s behalf
  • reporting to the grower
  • the grower’s right to inspect their agent’s records.

Duty to act in the best interests of the grower

The Horticulture Code requires an agent to comply with some general duties when conducting business under a horticulture produce agreement. An agent must:

  • act in the best interests of a grower when selling produce under the horticulture produce agreement
  • sell a grower’s produce on an arm’s length basis, unless the agent has first informed the grower that they intend to sell the grower’s produce on a non-arms length basis and obtained the grower’s informed consent to the sale.

What is an ‘arm’s length basis’?

The term arm’s length basis is not defined in the Code. What is considered to be a sale on an arm’s length basis will vary depending on the particular circumstances.

In general, a sale on an arm’s length basis is a sale where:

  • the parties entering into the transaction are not related in any way
  • the goods are sold for fair value.

As a guide, the following transactions are likely to be on a non-arm’s length basis:

  • sale of produce on a grower’s behalf to a related body corporate as defined in s. 50 of the Corporations Act 2001 (Cwlth)
  • sale of produce on a grower’s behalf to your relatives or close friends, or
  • sale of produce on a grower’s behalf to an individual that you are acting in concert with (for example, someone you are in business with).

Payment

An agent must pay to a grower all proceeds received for the sale of produce under the horticulture produce agreement, minus any:

  • commissions or agent’s fees permitted under the horticulture produce agreement
  • extra amounts that may be deducted under the horticulture produce agreement.

Payment must be made within the timeframe specified in the horticulture produce agreement.

Obligation to pursue bad debts on grower’s behalf

Growers and agents must decide in their horticulture produce agreement:

  • how bad debts will be pursued
  • who will be responsible for pursuing them.

The Horticulture Code requires agents to pursue bad debts on the grower’s behalf, but only on the basis—and to the extent—outlined in the horticulture produce agreement.

If the agent agrees in the horticulture produce agreement that they will pursue bad debts on behalf of the grower, failure to do so will amount to a breach of the horticulture produce agreement and therefore also the Code.

Provision of information relating to bad debts

The agent must give the grower information on a bad debt owed to the grower (including the buyer’s name and contact details) if:

  • the grower has a bad debt
  • the horticulture produce agreement gives the grower a role in pursing bad debts and
  • the grower asks for the information for the purposes of recovering the debt.

22. What information must an agent report to a grower?

An agent must provide a statement to the grower (for the particular reporting period) that contains the following information relating to the grower’s produce:

  • time and date of delivery of the produce to the agent
  • date(s) of sale
  • type and quantity of the produce sold
  • price(s) received for the produce sold
  • amount(s) deducted from the sale price by the agent
  • details of any produce received by the agent but not sold
  • details of any produce not sold but destroyed (and any costs incurred as a result)
  • details of any produce still held by the agent at the end of the period
  • reasons why any produce was not sold.

The agent must provide the information to the grower within the statement period provided within the horticulture produce agreement. However, the agent is not required to give the grower the name and the contact details of the person to whom the produce was sold (unless they owe a bad debt to the grower, as discussed above).

Inspection of records

The grower may ask to inspect the records of their agent relating to:

  • the sale of the grower’s produce under the horticulture produce agreement
  • transactions occurring on or after 14 May 2007.

The grower’s request must specify the period that the request relates to. This period must not exceed 12 months before the date of the request.

An agent must comply with such a request by making the records available for the grower to inspect (except the names and contact details of buyers of the grower’s produce, unless the information is requested for the purposes of pursuing a bad debt).

23. What are the specific obligations that apply to merchants?

The Horticulture Code also places additional obligations on merchants. A breach of these obligations may not only breach the Code, but may also breach the applicable horticulture produce agreement.

These additional obligations relate to:

  • ownership of horticulture produce
  • price
  • prohibition on fees and commissions
  • reports to the grower.

Ownership of horticulture produce

The Horticulture Code makes it clear that ownership of horticulture produce passes from the grower to the merchant if the price has:

  • been agreed before delivery—on delivery to the merchant or
  • not been agreed before delivery—at the time the merchant and grower agree on a price immediately upon delivery.

Once ownership passes to the merchant, the merchant no longer owes a duty to exercise reasonable care of the produce. This is because the produce is now owned by the merchant and no longer belongs to the grower.

Price

The price to be paid by a merchant for the grower’s horticulture produce must be:

  • a specified amount and not a method for calculating an amount or a price range
  • an amount agreed in writing between the merchant and grower, either:
    • before delivery of the produce to the merchant, or
    • immediately upon delivery to the merchant.

Prohibition on fees and commissions

A merchant is expressly prohibited from charging a fee, commission or any other amount for services they perform under a horticulture produce agreement. This provision of the Code does not prevent the merchant from deducting statutory levies from the purchase price.

24. What information must a merchant report to a grower?

Merchants, like agents, are required to give the grower a statement (for the particular reporting period) that contains specific information about the grower’s produce. The Code requires that this statement must include:

  • quantity and quality of the produce bought
  • date(s) of purchases
  • price(s) paid
  • time of delivery to the merchant.

25. How does the Horticulture Code apply to packing houses?

The Code does not contain any specific reference to packing houses (or packing sheds). The application of the Code to transactions involving packing houses will therefore be determined according to the circumstances of each case.

A transaction between a packing house and a grower will be regulated by the Code if the packing house acts as either:

  • a merchant (purchasing and then on-selling the grower’s horticulture produce), or
  • an agent (selling the grower’s horticulture produce on behalf of the grower).

Additionally, if the owner of a packing house grows their own horticulture produce for sale they will be a grower for the purposes of the Code.

The following four common scenarios illustrate the application of the Horticulture Code to packing houses.

Scenario 1.  When a packing house acts as an agent or a merchant

When several growers deal with a packing house, the Code may apply to a horticulture produce transaction between the growers and the packing house if the packing house:

  • is a separate legal entity from the growers (this legal entity may be owned collectively by the growers—for example, as a cooperative—or by an individual grower), and
  • acts as an agent, selling horticulture produce on behalf of the growers for a commission or fee, or
  • acts as a merchant, buying the growers’ horticulture produce to resell it.

However, the Horticulture Code will not apply to subsequent transactions in which the packing house on-sells the produce to another trader because these will not be transactions between a grower and trader. Instead they will be transactions between two traders.

Flow chart which describes the scenario when a packing house acts as an agent or merchant
 

Scenario 2: When a packing house is the same legal entity as a grower

If a grower owns a packing house and the packing house is the same legal entity as the grower, the Horticulture Code will not apply to the transaction when the grower passes their own horticulture produce to the packing house.

However, the Code will apply to the subsequent transaction for that produce between the packing house (which is the same legal entity as the grower) and a trader.

Flow chart which describes the scenario when a packing house is the same legal entity as a grower

Scenario 3. When growers transact with a grower-owned packing house

As discussed in scenario no. 2, the Horticulture Code will not apply when a grower passes their own horticulture produce to their own packing house (a packing house that is the same legal entity as the grower). However, the Code will apply to the subsequent transaction of that grower’s produce between the packing house (which is the same legal entity as the grower) and a trader.

The Horticulture Code will also apply to transactions between other growers and the packing house, when the packing house acts as a merchant or an agent for those other growers.

Flow chart which describes the scenario when a grower transacts with a grower-owned packing house

Scenario 4. Topping-up

When one grower (that is, grower 1) is acting as a merchant or an agent for another grower’s (that is, grower 2) produce, to ‘top-up’ their own produce to fill an order from a packing house (where the packing house is acting as an agent or a merchant), the Code will apply to the transaction between grower 1 and grower 2. In this transaction, grower 2 is the grower and grower 1 is the trader.

The Code will not apply to the subsequent transaction of grower 2’s produce between grower 1 and the packing house as this transaction will be between two traders (grower 1 and the packing house).

However, the Horticulture Code will apply to a transaction where grower 1 passes their own produce to the packing house. In this transaction grower 1 will be the grower and the packing house will act as the trader.

Flow chart which describes the scenario when growers 'top up' an order

26. What effect will the Code have on pooling of produce?

Agents may pool different grower’s produce, as long as they also comply with the following obligations imposed by the Code:

  • the agent must act in the grower’s best interests when selling their produce under a horticulture produce agreement
  • the agent must meet all their reporting obligations (see question 22)
  • the agent must let the grower inspect their records pertaining to the grower’s produce (see question 22)
  • if the grower has a role under the horticulture produce agreement in the collection of bad debts, the agent must also provide the names of these purchasers.

In summary, agents must ensure they are able to trace and record where, when, to whom and for how much each grower’s produce was sold.

If an agent were to pool produce in such a way that the grower’s produce was untraceable they would be in breach of the Code.

27. What effect will the Code have on price averaging of produce?

An agent must, under the Code, pay the grower the money received for the sale of the grower’s produce after subtracting:

  • any commissions and agent’s fees permitted under the horticulture produce agreement
  • any extra amounts that may be deducted under the agreement.

This means that the practice of paying growers a price based on the average received by the agent for their produce and that of other growers (in a pooled arrangement) is not permissible under the Code.

Under the Code, growers must receive the price that was their produce was actually sold for (less the agreed deductions).

Part 5—Resolving disputes

28. What is the dispute resolution procedure under the Horticulture Code?

A dispute is any disagreement between two or more parties to a horticulture produce agreement.

Growers and traders can use the procedure set out in the Code to resolve disputes or they may choose another dispute resolution procedure to resolve a horticulture dispute. However, even if a grower and a trader have agreed on a dispute resolution procedure which differs from the procedure set out in the Code, if one of the parties decides to initiate the procedure set out in the Code, the other party must participate in that process.

Traders and growers can also appoint a horticulture produce assessor to investigate and report on any matter arising under a horticulture produce agreement (see questions under part 6 below).

Dispute resolution procedure under the Code

1.  The complainant (a grower or trader) must notify the respondent (the other party) in writing of a dispute. They must inform the other party that they are using the procedure under the Code to resolve the dispute.

The written notice must state:

  • what the dispute is about
  • what action the complainant thinks will settle the dispute
  • the outcome the complainant wants.

2. The parties must then try to resolve the dispute through negotiation.

3. If the parties cannot resolve the dispute within three weeks, either party can ask the mediation adviser to appoint a mediator.

4. The mediator decides:

  • how the mediation will be carried out
  • the time and place for the mediation (subject to the requirement that it must be conducted in Australia)
  • the date that the mediation will begin.

5. The parties must attend the mediation and try to resolve the dispute. Either party may be represented at the mediation instead of attending in person. However, their representative must have the authority to enter into an agreement to settle the dispute.

6. The complainant can withdraw the dispute at any time during this process.

7. If the mediation is successful and the parties reach an agreement, the mediator will record the terms of the agreement, give a copy to each of the parties and notify the mediation adviser. Although the agreement reached between the parties will not be covered by the Code, the agreement will be a legally enforceable contract.

The following diagrams summarise the dispute resolution procedure under the Code.

Flow chart which summarizes the dispute resolution procedure under the Horticulture Code

 

Flow chart which describes the scenario if a dispute is unresolved after three weeks

 

Flow chart which describes steps a mediator may take 

 

Flow chart which describes the process when parties attend mediation

29. What happens if mediation is terminated?

If the complainant asks the mediator to terminate a mediation process under the Horticulture Code the mediator must terminate the mediation.

If the respondent asks the mediator to terminate a mediation process under the Horticulture Code, the mediator must do so, provided that:

  • at least 30 days have passed since the start of the mediation
  • the dispute has not been resolved.

A mediator may also terminate a mediation process at any time if they believe the dispute is unlikely to be resolved.

If a mediation is terminated, the mediator must issue a certificate to the mediation adviser as well as to the parties to the dispute, which states:

  • the names of the parties
  • the nature of the dispute
  • that the mediation is finished
  • that the dispute has not been resolved.

The following diagram summarises what happens when mediation is terminated.

Flow chart which summarizes what happens when mediation is terminated

30. What are the costs of mediation?

The costs (if any) associated with carrying out the mediation under the Code are to be shared equally by the parties to the dispute unless the parties agree otherwise. Each party must also pay their own costs of attending the mediation, unless the parties agree otherwise.

31. How can the horticulture mediation adviser be contacted?

Under the Horticulture Code, the Minister for Agriculture, Fisheries and Forestry is given the power to appoint a mediation adviser. The mediation adviser in turn maintains a list of appropriately qualified people who are to be mediators for the purposes of the Horticulture Code dispute resolution process.

Contact details for the Office of the Horticulture Mediation Adviser:

Telephone: 1800 206 385
Website: www.hortCodema.com.au
Email: info@hortCodema.com.au

You can also access the mediation adviser’s list of mediators (www.hortCodema.com.au).

32. What are the alternatives to mediation?

Although mediation is an effective way to resolve disputes, it may not always be the most appropriate.

Any action taken under the horticulture dispute resolution scheme does not affect the right of a party to a dispute to bring their own legal proceedings. In addition, the dispute resolution scheme does not prevent anyone from approaching the ACCC directly.

When a grower or trader believes there has been a breach of the Horticulture Code, the affected party may be entitled to claim damages or to obtain court orders to stop the contraventions or other orders, such as those requiring changes to the agreement.

However, court action can be costly, time-consuming, and damaging to relationships. There are also no guarantees that court action will provide the desired outcome. It may therefore be more practical to try to resolve a dispute using the procedures in the Code or in some other dispute resolution scheme.

If you decide to bring legal proceedings against another party, remember: if you lose the case, you may be liable for some or all of the other party’s costs as well as your own. Pursuing court action should only be considered after obtaining independent legal advice. You should also seek a legal opinion on your prospects of success in any court action.

If you are unsure about the suitability of mediation or any other dispute resolution method, ask your legal adviser.

33. What is the ACCC’s role with respect to the Horticulture Code?

The ACCC is an independent statutory authority which, while a government organisation, acts independently of government. The ACCC is responsible for administering the Competition and Consumer Act and other consumer protection and fair trading laws. Among other things, the Competition and Consumer Act and related laws are designed to prevent anti-competitive conduct in the marketplace and to encourage competition and efficiency in business—all of which should give consumers greater choice in the price and quality of the goods and services they buy.

In relation to the Horticulture Code, the ACCC:

  • administers ss. 21 and 22 of the Competition and Consumer Act, which prohibits contraventions by corporations and by individuals of applicable industry Codes (for example, the Horticulture Code).
  • administers section 22 of the Australian Consumer Law, which allows courts trying to determine unconscionable conduct in a particular case to regard the requirements of any applicable industry Code (for example, the Horticulture Code).
  • promotes compliance with the law by educating industry participants about their rights and obligations under the Horticulture Code.
  • enforces the provisions of the Horticulture Code when necessary by seeking remedies available under the Competition and Consumer Act.
  • enforces all other relevant provisions of the Competition and Consumer Act.

Although the ACCC records and assesses every complaint it receives, not all complaints are pursued. The information obtained from individual complainants is recorded on the ACCC complaints database and may be used to establish a pattern of behaviour by a particular industry participant or by a particular part of an industry.

The ACCC may give priority to matters of complaint that:

  • show a blatant disregard for the law
  • will cause significant public detriment
  • provide outcomes that will have educational or deterrent effects
  • include unconscionable conduct against small business, and/or
  • will clarify the reach and meaning of the Competition and Consumer Act.

The ACCC is likely to first of all direct parties to the dispute resolution process under the Code. However, if an industry participant has blatantly disregarded the Horticulture Code or the Competition and Consumer Act, the ACCC may take immediate action.

Part 6—Horticulture produce assessors

34. What is the role of a horticulture produce assessor?

The Horticulture Code provides for the appointment of a horticulture produce assessor to investigate and report on any matters arising under a horticulture produce agreement. In particular an assessor may report on whether:

  • the rejection of horticulture produce under a horticulture agreement was in accordance with the Code and the agreement in question
  • the amounts paid by a trader to a grower were calculated in accordance with the Code and the horticulture produce agreement.

Requests made by the horticulture produce assessor

If a horticulture produce assessor is appointed by either of the above means, each party to the horticulture produce agreement must comply with any reasonable requests made by the assessor for:

  • investigating the matter referred to in the appointment
  • preparing the horticulture produce assessor’s report.

Agents must allow inspection of:

  • financial and other records relating to the grower or the grower’s produce (but only for periods up to 12 months before the assessor’s appointment and for trade occurring on or after 14 May 2007)
  • any horticulture produce supplied by the grower that is still in the agent’s possession.

Merchants must allow inspection of:

  • records relating to trade in the grower’s produce up to the point at which ownership of the produce passed to the merchant (but only for periods up to 12 months before the assessor’s appointment and for trade occurring on or after 14 May 2007)
  • any horticulture produce supplied by the grower that is still in the merchant’s possession.

Horticulture produce assessor’s report

A horticulture produce assessor must prepare a report and give a copy to each party. If the assessor has been appointed by a mediator (under the Horticulture Code dispute resolution procedure), the assessor must also provide the mediator with a copy of the report. The report cannot contain information that a party is not entitled to obtain under the horticulture produce agreement or the Horticulture Code (although the assessor may have access to that information).

35. Who are the horticulture produce assessors?

The mediation adviser must prepare a list of people with suitable qualifications who are to be horticulture produce assessors under the Horticulture Code. This list is available online at www.hortCodema.com.au or by contacting the Office of the Horticulture Mediation Adviser.

36. Who pays a horticulture produce assessor’s costs?

This will depend on how the assessor is appointed. A horticulture produce assessor cannot act unless appointed to do so. Once a horticulture produce assessor is appointed, they can only investigate and report on matters referred to them under the appointment.

A horticulture produce assessor can only be appointed in the following two ways:

  • by a mediator who has been appointed under the Horticulture Code dispute resolution process. In this case, each of the parties must pay half the costs of the assessor (unless the parties agree otherwise).
  • by a grower or trader, regardless of whether a dispute has been notified in accordance with the Horticulture Code dispute resolution procedure described above. The party appointing the assessor must then pay the costs of the assessor (unless the parties agree otherwise).