The Chinese-owned Van Dairy Group, Australia's largest dairy farm operation, does not have to pay the previous owner of the farming giant millions of dollars, a judge has ruled.
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The Supreme Court of Tasmania has dismissed a case against Chinese-owned Van Dairy, which bought the Woolnorth dairy farm in 2016.(ABC Rural: Hugh Hogan)

Key points:

  • The Tasmanian Land Company claimed Van Dairy Group breached a sales agreement involving compensation for fluctuating milk prices
  • New owner Van Dairy was paid a lump sum two years after the milk price crash in 2015-16, which TLC said should belong to it
  • Supreme Court judge Michael Brett dismissed the lawsuit, finding TLC had failed to substantiate its claim

 

In 2016, New Zealand’s Tasmanian Land Company (TLC) controversially sold the Van Diemen’s Land Company to the Chinese-owned Van Dairy Group in 2016 for $280 million.

At the time of the purchase, the new Van Dairy-owned operation milked about 18,000 cows over 7,062 hectares in Tasmania’s north-west and employed 140 people.

But TLC later claimed that Van Dairy had breached the terms of the sale agreement by failing to forward onto it a $2.2 million lump sum paid to Van Dairy by milk processor Fonterra.

As part of the 2016 sale, Van Dairy and TLC agreed to compensate each other for fluctuations in milk prices that might occur in the 2015-16 financial year.

New Zealand-owned TLC ended up paying Van Dairy $2.2 million after a dramatic, retrospective slash in milk prices for the 2015-16 financial year.

The historic gate of the Vand Diemen's Land company in Woolnorth.
The Van Diemen’s Land Company at Woolnorth in Tasmania’s far north-west was sold to a Chinese company in 2016.(ABC Rural: Lachlan Bennett)

That price slash led to milk prices dropping below the price of production and had widespread ramifications, prompting several farmers to exit the industry or take to the streets in protest.

The price cut also became the catalyst for an Australian Competition and Consumer Commission inquiry into the dairy industry.

Almost a year later, in 2017, milk processor Murray Goulburn reversed the price drop for the 2015-16 year.

Fonterra followed suit and introduced an “additional payment” of 40 cents per kilogram of milk solids for the 2017-18 season, paying the new Van Dairy-owned farming operation a $2.26 million lump sum.

TLC argued in the Tasmanian Supreme Court that that payment was a closing price adjustment for the 2015-16 financial year and was therefore owed to it.

But Van Dairy refused to pay it to TLC, arguing in its defence that the payment was a pre-payment for milk to be supplied in the 2017-18 season, and not related to the 2015-16 financial year.

Justice Michael Brett agreed, noting in his decision that Van Dairy was “not obligated by the terms of the sale agreement to pay to the plaintiff the additional payments received by it in respect of milk production during the 2017-18 season”.

“It is inconsistent with the commercial purpose of the agreement that the plaintiff should receive the benefit of a payment made for milk produced by the defendant in such circumstances,” Justice Brett said.

He dismissed the claim, finding TLC had “failed to establish its claim on any basis”.

A2 Milk Company Ltd (ATM.NZ) said on Wednesday the U.S. Food and Drug Administration (FDA) deferred its request to sell infant milk formula products in the United States, sending its shares down more than 12%.

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