Gisborne Milk survival bid washed away by Fonterra 'perfect storm'

Gisborne Milk Co-op, the 66-year-old dairy supplier in liquidation, has lost a last-ditch bid to get back shares and supply arrangements with Fonterra.

In the High Court in Auckland, Justice Rebecca Ellis turned down Gisborne Milk's claim that Fonterra breached its empowering legislation, saying the Bay of Plenty firm made its own commercial decisions to surrender shares in the giant co-operative.

The December 17 judgment was published on the Justice Ministry's website this week.

"It is difficult not to think of the shareholders Gisborne Milk as sailors caught in a perfect storm," Justice Ellis said. "It is impossible not to have considerable sympathy for them. But none of their claims can succeed."

Gisborne Milk was seeking reinstatement of its Fonterra shares and an inquiry into damages, saying Fonterra's hardball negotiations and stance on whether the company could be a shareholder fell foul of the Dairy Industry Restructuring Act and constituted misleading conduct.

Fonterra inherited Gisborne Milk as a supplier from the company's relationship with Bay Milk when Parliament legislated to create a national dairy group.

What made Gisborne Milk unusual for Fonterra was that the company processed milk for its local community, shipping excess supply to the Bay Milk operation without producing its own product.

The distance and nature of Gisborne Milk's shareholding was seen as a problem for Fonterra, though the dairy group did not devise a way to deal with the issue for several years, even with prodding by its supplier.

Justice Ellis said Fonterra's interpretation of the act that Gisborne Milk could not be a shareholder was incorrect, but the dairy group was entitled to put it forward as an honestly held and reasonable opinion.

Gisborne Milk was not obligated to sell its shares, and in doing so ignored legal advice it had received that Fonterra's position was wrong, the judgment said.

"The evidence from Gisborne Milk's own witnesses leads to the conclusion that a decision was taken by Gisborne Milk to voluntarily surrender its shares, for a number of perfectly sound reasons," the judgment said.

The judgment does not determine a separate action by Gisborne Milk shareholder Opoiti, which claims a letter from Fonterra manager Mark Leslie caused it to enter into an individual contract with the dairy group.

(BusinessDesk)

This article is tagged with the following keywords. Find out more about My Tags

Post Comment

4 Comments & Questions

Commenter icon key: Subscriber Verified

I live in Gisborne. It is sad to see an iconic company have its throat cut like this...

Reply
Share

Sorry, JB. It had to happen and it will not be the last throat to be cut by this politically created evil.

Reply
Share

Fonterra is all about NZ Inc and a united front against overseas competitors... until it doesn't suit them. I hope the Government remembers this the next time they come pleading for some special dispensation.

Reply
Share

Hey, vitriolic hatred serves no purpose.
Did not the learned Judge say that the company had made its own commercial decisions to surrender shares in Fonterra.
I would be looking at the board that made those decisions and ask for explanantions.
I am sure Fonterra cannot afford to be a Xmas fairy - even though it is going to supply daily milk to tens of thousands or more school kids.
This is a wonderful move, paid for by shareholders. Thank you, Fonterra.

Reply
Share

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

NZ Market Snapshot

Forex

Sym Price Change
USD 0.8012 0.0052 0.65%
AUD 0.9077 0.0006 0.07%
EUR 0.6252 0.0028 0.45%
GBP 0.4952 0.0024 0.49%
HKD 6.2173 0.0415 0.67%
JPY 85.2240 0.1390 0.16%

Commods

Commodity Price Change Time
Gold Index 1244.2 5.700 2014-10-20T00:
Oil Brent 85.4 -0.760 2014-10-20T00:
Oil Nymex 82.8 -0.040 2014-10-20T00:
Silver Index 17.3 0.020 2014-10-20T00:

Indices

Symbol Open High Last %
NZX 50 5197.9 5238.9 5197.9 0.68%
NASDAQ 4254.2 4316.9 4258.4 1.35%
DAX 8819.3 8834.7 8850.3 -1.50%
DJI 16373.1 16401.6 16380.4 0.12%
FTSE 6310.3 6320.3 6310.3 -0.68%
HKSE 23073.4 23231.5 23070.3 -0.25%
NI225 15115.3 15115.3 15111.2 -1.66%