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Primary industries levies: solicitors beware!

Feature Articles

Cite as: (2003) 77(4) LIJ, p.58

Changes to the Primary Industries (Levies and Charges Collection) Act place solicitors in the position of de facto levy collectors for the Depart-ment of Agriculture, Fisheries and Forestry.

By Robyn Trigge and Kirsty Bennett

As of 1 January 2000, amendments[1] to the Primary Industries (Levies and Charges Collection) Act 1991 (PILCCA) allowed the Commonwealth to outsource to solicitors the function of calculating and collecting a levy on livestock, being cattle, sheep, lambs and goats (the livestock transaction levy).

The Department of Agriculture, Fisheries and Forestry (the Department) is responsible for collecting the livestock transaction levy on behalf of the Commonwealth. This department has responsibility for collecting levies on about 60 other primary products. While these are payable at other points in the life of the product (such as, in the case of fruit, when it is picked and submitted for processing), solicitors should be aware of the potential to amend legislation to capture such levies on the sale of the land carrying the product. In a conveyance of such land, a prudent practitioner might check with the Department’s local collection branch to ensure the conveyance is not triggering a collection responsibility.

The livestock transaction levy is payable by an owner per head of beast for research and development in the livestock industry. Solicitors acting in the sale of land carrying beasts are in effect commonwealth collection agents. For good measure, they are purportedly personally liable if they fail to collect and pay the levy. While the primary obligation to pay the levy is on the vendor’s solicitor, if one is engaged, this article examines the legislation and its implications from the perspective of the purchaser’s solicitor who is, in reality, most “at risk” of personal liability.

The Law Council of Australia (LCA) is currently lobbying to have the legislation changed. In the meantime, practitioners are alerted to its current requirements, the issues arising and how to address them.

Current requirements

Machinery provisions for imposition and collection of transaction levies are contained in a series of commonwealth Acts. Excise Acts in Australia impose the charge on particular products and create the liability to pay.

The Collection Acts set out how the charge is to be collected.

To determine what primary products are subject to levy, Excise Acts need careful scrutiny.

The livestock transaction levy is imposed by the Primary Industries (Excise) Levies Act 1999 (the Excise Act). Collection of levy is regulated by the PILCCA. Due dates for payment and the requirements for return forms for levy are set out in the PILCCA Regulations (the Regulations). The due date for payment is one month and 28 days after the end of the month in which a transaction attracting levy occurs, after which late payment penalty applies by s15 of the PILCCA.

The Excise Act imposes levy in respect of livestock transactions concerning cattle, sheep, lambs or goats. The levy may be imposed at a number of points in the life of a beast,[2] including when a “transaction effecting change in ownership occurs”. Schedule 3 s7 and Schedule 18 s5 impose liability to pay the levy on the person who last owned a beast before the change in ownership occurs. A “Return of cattle and livestock purchased/sold/delivered” form[3] must be completed and lodged to facilitate payment. This form indicates a division is required between sheep and lambs and (for cattle) between grain-fed, lot-fed and bobby calves. The quantum of levy depends on dividing the beasts into correct categories and applying the correct rate of levy to each category. Methods of collection and payment of levy are set out in the PILCCA.

Section 7(1) of the PILCCA imposes an obligation to pay the livestock transaction levy, plus any penalty for late payment, on a selling agent or buying agent.[4] Section 4 includes solicitors in the definition of “buying agent” and “selling agent”.

The legislation does provide a mechanism whereby selling agents and buying agents who pay a levy are entitled to a set off from the last owner of the beast, and are given power to deduct the levy from funds held on behalf of, or payable to, that owner.[5] If payment of the levy is made by such agent, notice of it must be given to the owner, whereon the owner is discharged from liability to the extent of the payment.

Issues for solicitors

A true appreciation of the issues for solicitors can be gained from considering the context in which these sections operate, as follows:

  • In Queensland, sales of land carrying beasts are often big; prices of $10 million to $20 million are not unusual. For cattle properties, there may be 10,000 to 50,000 head. At $3.50 per head for 50,000 cattle, the levy works out to $175,000.
  • The last owner of the beast, particularly in the current farm economic climate, often needs the settlement funds to pay the levy. Once settlement is complete it may be impossible for the new owner to pay the levy.
  • The last owner was traditionally the party responsible for paying the levy and s7 of the Excise Act still purports to impose liability on such owner. Section 7 of the PILCCA now makes the first purchaser of livestock also liable to pay if there is no selling agent or buying agent involved in the transaction. If a solicitor is acting for such a purchaser, the solicitor is liable to pay. If the buyer’s solicitor does not advise about the liability and ensure the buyer discharges it from funds in their hands, or over which they have control (i.e. before settlement), they are purportedly directly liable for it. However, it must be noted that a purchaser’s solicitor only has the liability to pay the levy if there is no selling agent acting for the vendor. If such a selling agent is engaged by the vendor, the primary liability to pay the levy falls on the selling agent, which may also be a solicitor.
  • Only the owner has all the information necessary to calculate the correct amount of levy, which includes the number, type and age of the beasts.
  • While the Department may have search and entry powers to formally audit the information needed to calculate the levy, the only such power a purchaser or a solicitor has is gained through contractual terms and by consent of the owner. The only way of checking the correctness of information supplied by the owner is to fly over the property and audit cattle numbers, or see the station manager to check station registers covering beasts kept, brands, calves at foot, etc.

Some practitioners dispute that solicitors can, despite the legislative attempt,[6] be described as a buying agent or selling agent. There is no doubt that a solicitor acting on instructions to settle a sale of livestock included in a sale of land is not in such an “agency” relationship.

However, until the legislation is amended and the definition clarified, solicitors must act to protect themselves from potential liability, either for payment of the levy, or possible negligence claims by their clients for failure to advise them about it.

Addressing the issues

Compliance is best achieved by solicitors including clauses in the contract to effect the following:

  1. make the levy an adjustable item on settlement;
  2. require the vendor to give the purchaser’s solicitor appropriate information (in particular, a completed “Return of cattle and livestock purchased/sold/delivered” form) to enable the levy to be calculated and paid;
  3. give the purchaser the right to enter and inspect the property and any books kept as to the accuracy of the information supplied or on the form;
  4. authorise the purchaser’s solicitor to pay the levy on settlement, giving notice of payment to the vendor at settlement; and
  5. a warranty from the vendor as to the accuracy of the information and an indemnification in favour of the purchaser for any further levy required to be paid.

Nothing in the PILCCA says the levy is to be paid before settlement, but given the amounts involved, a purchaser’s solicitor would be at great risk of personal liability in allowing the vendor to pay it after settlement.

Risk areas

In the unfortunate case of a purchaser’s solicitor not knowing about the levy and facing the prospect post-settlement of a demand from the Commonwealth for payment, unless the solicitor can secure payment voluntarily from the vendor, such solicitor should not continue to act. There is a clear conflict of interest in advising the purchaser to pay (if the vendor cannot or will not pay) as s7 of the PILCCA makes the solicitor liable. In that circumstance, an independent solicitor may well advise a purchaser that payment is the former solicitor’s responsibility.

To date, the only reported efforts of the Department to monitor and collect the levy have been in cases where large sales have been advertised, or changes of ownership recorded in land registry records. Investigators from the Department’s levies and revenue service have contacted solicitors and reminded them of their obligations to pay.

It is significant that the amendments introducing the new regime gave extensive new powers[7] to investigators to inspect documents and obtain warrants to search. In her second reading speech introducing the amendments, Parliamentary Secretary to the Minister for Agriculture, Fisheries and Forestry Senator Judith Troeth explained that these powers were added to “prevent inconvenient delays” and to enable inspectors to do their jobs “without undue hindrance”.

Solicitors are aware of how highly the courts regard legal professional privilege. There are many revenue cases where it has been attached to documents on a file communicating legal advice about legal implications of the transaction in question.[8] Legal professional privilege will not be abrogated without clear words in a statute, expressly saying it does not apply. While there are no such words in the PILCCA, indicating that such privilege still exists in relation to documents on solicitors’ files communicating legal advice about transactions, solicitors must, however, be mindful of the limited extent of the privilege. It will not, for example, extend to contracts, agreements or evidence of a transaction,[9] accounting information,[10] or correspondence that does not communicate legal advice. Information about stock numbers on a property may not be within the ambit of the privilege, and might be validly seized, thus forming the basis of an assessment either against the purchaser or the solicitor, for the levy payable.

In addition to a risk of failure to pay, a purchaser’s solicitor may run the risk of penalty payments for failure to pay the correct amount within one month and 28 days after the month in question. Audit mechanisms currently used by the Department to check correctness of payments include spot checks and land registry searches. However, being a commonwealth authority, it could avail itself of data matching legislation, particularly where information to obtain GST exemptions (such as are often sought on “walk in, walk out” sales) may be given to the Australian Tax Office and may include numbers of stock actually on a property and sold, which should have been reported post conveyance.

Perhaps the greatest risk arises from ignorance. No material – such as pamphlets, flow charts, sample return forms or facts sheets – was distributed by the administering department to solicitors or their industry associations before the amendments were proclaimed. There was no consultation with such associations before the amendments so as to allow them to warn their members in advance or provide them with the opportunity to research the requirements before they came into effect.

The LCA and the Queensland Law Society first became aware of the changes when country practitioners (or those involved in large sales) notified them, having been visited or contacted by investigators of the Department who reminded them of their obligations.

Conclusion

A levy on livestock for industry research and development is traditionally payable by the owner. It is the owner who benefits from it through market expansion and development. By taking the lead role in industry development and by choosing to levy owners to fund its programs, the Commonwealth is also responsible through its administering department to charge and collect such levies. Departmental compliance officers are given statutory powers of search, seizure and compulsion needed to fulfil the Commonwealth’s collection responsibility. Its officers, when they exercise such powers, have important statutory protection exempting them from liability for trespass and other torts that might otherwise be committed in their exercise.

While the conveyancing process may be a convenient point for government to “snag” levies not otherwise paid, it is, to say the least, unfair to use the process without giving solicitors information about their role, what they need to do to discharge it and some protection to cover the increased risk the role entails. This would allow solicitors to prepare for that role, by perhaps modifying the terms of their retainer with affected clients. They may also be required, under professional indemnity insurance policies, to advise their insurer of a potential risk of a high personal liability they assume.

When GST legislation was introduced and a revenue collection function outsourced, full warning and preparation was given well in advance. The need for warning is greater under the PILCCA, where the solicitor is potentially personally liable. The fact that search and entry powers were expanded in the same amendments seeking to impose personal liability on solicitors may indicate that enforcement is anticipated against them.

The new measure may be part of an outsourcing trend, an indication of government seizing on the conveyancing process and the solicitors who facilitate it to discharge its own functions but without first educating solicitors. Without the benefit of the compliance powers granted by legislation and also the protection afforded in the exercise of them, solicitors should, at the very least, be educated about any “compliance roles” put on them.

The LCA and law societies are monitoring the trend and ask members to report further incidences as they arise.


ROBYN TRIGGE is a barrister with the Department of Natural Resources and Mines, Brisbane, working mainly in Land Court advocacy. She is chair of the Queensland Division of the Australian Property Law Group, a division of the LCA, and sits on the Queensland Law Society’s Property Law and Practice Committee.

KIRSTY BENNETT was employed at Gadens Lawyers, Brisbane, when she assisted with research and writing this article. She is a graduate of business and law from the Queensland University of Technology and is currently employed by the Children’s Commission.


[1] By omnibus legislation, the Agriculture, Fisheries and Forestry Legislation Amendment Act (No 2) 1999, which scheduled amendments to a number of statutes about primary production, including the Primary Industries (Levies and Charges Collection) Act 1991 (PILCCA). Schedule 2, containing the PILCCA amendments, amended by ss2 and 9 the definitions of buying agent and selling agent.

[2] Under Schedule 3 (cattle) and 18 (lambs, sheep and goats) of the Excise Act.

[3] Prescribed by the Regulations.

[4] When it has not already been paid at another stage in the life of a beast, e.g. under s7(2) a receiver or processor can pay it when the beast is sent to the abattoir.

[5] Sections 8(1) and (2) of the PILCCA.

[6] In s4 of the PILCCA.

[7] See ss19A, 19B and 21.

[8] Baker v Campbell (1983) 153 CLR at 126, Balabel v Air India (1988) 2 All ER 246, Crown Court Ex Parte Baines (1987) 3 All ER 1025.

[9] O’Reilly v State Bank of Victoria (1983) 153 CLR 1.

[10] Packer v FCT (1985) 1 QR 275.

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