In the High Court at Christchurch in May the Clark family sought compensation of $805,844 from Rural Livestock for losses from the sale, purchase and lease of cattle.
It argued Rural Livestock breached express and/or implied duties under agency contracts.
Rural Livestock, a large operator in the South Island with 6500 clients, argued the Clarks were wilfully reckless in failing to take responsibility for the loss of their own stock.
To investigate the Clarks’ as yet unresolved complaint Rural Livestock used a combination of three different identification systems – Nait, Minda and Animal Status Declaration records, general manager and former director Simon Cox told the court at the week-long hearing.
Cox said the firm failed to detect the Clarks’ losses because of “secretive” transactions by former agent John Williams.
The main stock manager, Ross Clark, should have realised by looking at stock tallies and other records “he was dealing with an agent failing to follow usual livestock agency practices”.
Agents made mistakes but they were almost quickly rectified, Cox said.
“I accept that at times the information provided by our agents has been less than ideal. Information has sometimes been late or incomplete but always, invariably, with the exception of Mr Williams, it has been due to generally being rushed while transacting a high volume of clients,” he told the court.
The Clarks’ complaint could have been resolved more easily if Nait was a single, reliable, national database, Cox said.
“The Nait system is only as good as its inputs and regrettably, to date, the livestock industry has been unable to achieve full compliance with this regime.”
Rural Livestock always told clients they were solely responsible for completing Nait transactions and did not hold Nait records on behalf of its clients. The company had done Nait processing as a service for clients but stopped the practice in March.
“It has been in the pipeline for a while. It was going to happen,” Cox told the court.
Outside court Rural Livestock director John Faulks said he would like registration of livestock agents, like the real estate industry adopted in 2008.
Faulks joined Rural Livestock from real estate, where up to 85% of practitioners are involved with the Real Estate Institute. The rules and regulations aren’t that strong but agents have to adhere to them to be part of the institute.
Cox said the industry is covered by a lot of legislation, including the Fair Trading Act, the Consumer Guarantees Act and the Auctioneers Act but could introduce codes of practice like in auctioneering.
“Probably what we don’t have is where it’s all lined up in black and white for our industry and every day we have to deal with that.”
The industry lived and breathed by internal, unspoken rules of engagement and did tens of thousands of transactions every day and normally there were checks and balances, such as reconciling invoices and credits.
One of the vulnerabilities is incomplete Nait records, Cox said.
Rural Livestock chairman David Barker said Rural Livestock has not changed its internal systems in response to the Clark claim but has tightened its monitoring.
The priority for the company now is talking to staff and emphasising the importance of those systems.
“Really, nothing has changed for our clients.
“We still pay them on the 14th day and still have the normal issues around following up the odd inefficient agent who is not so good on their administration.”
However, the Clarks’ complaint was a “wake-up call for us that you cannot take your eye off the ball in those basic principles of checks and balances within our system”, Barker said.
An internal audit of the company raised no issues with the company’s accounting or administrative processes.
“There was some stuff around financial processes and payroll but nothing in terms of fundamental business processes.”
The judge for the Clark v Rural Livestock hearing asked the parties to settle their dispute privately but he would reconvene a hearing and make a judgment if they could not.
The Clarks and Rural Livestock were subsequently not able to reach a settlement so they were to return to court today for Judge Nation to hear their closing statements.
Three farmers have civil claims against Rural Livestock and two more have filed statements of claim but are still to get dates for hearings. Another filed a statement of claim but then reached an out of court settlement. Another farmer also reached a settlement. It is understood the claims lodged total about $1.6 million.
