Fonterra Australia v Platt

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT

S ECI 2025 05444

FONTERRA AUSTRALIA PTY LTD	Plaintiff
- and -
RITA C PLATT	First Defendant
TREVOR A PLATT	Second Defendant

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JUDGE:	Attiwill J
WHERE HELD:	Melbourne
DATE OF HEARING:	22 September 2025
DATE OF RULING:	24 September 2025
CASE MAY BE CITED AS:	Fonterra Australia v Platt
MEDIUM NEUTRAL CITATION:	[2025] VSC 608

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INTERLOCUTORY INJUNCTION – Milk supply agreement – Injunction by a milk processor and dairy goods manufacturer to restrain a dairy farmer from taking any action in furtherance of, or in reliance upon, a notice of termination of the milk supply agreement – Purported right to terminate on account of alleged failure to ‘review’ the minimum price payable for supply of milk – Whether serious question to be tried – Construction of term providing that supplier is ‘eligible for a review’ of minimum price – Whether balance of convenience favours the grant of the injunction – Injunction granted.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms N Lenga	CIE Legal
For the Defendants	Ms G Coleman	Hall & Wilcox

HIS HONOUR:

INTRODUCTION

The plaintiff seeks an order in the following terms against the defendants:

Until the hearing and determination of this proceeding or further order, the Defendants, whether by themselves, their officers, servants, contractors, agents or howsoever otherwise, be restrained from taking any action in furtherance of, or in reliance upon, the notice served on the plaintiff by the defendants (by their solicitors Hall & Wilcox) under cover of email dated 12 September 2025, for the reasons set out in that notice.

The plaintiff relied upon affidavits of a Mr Timothy Roche, General Manager, Farm Source Delivery, made 17 and 20 September 2025 and of Mr Darren Smart, Head of Farm Collection, made 20 September 2025. The defendants opposed the relief and relied upon an affidavit of Mr Trevor Platt, the second defendant, made 19 September 2025 and affidavits of Mr Julian Hammond, the defendants’ solicitor, made 17 and 19September 2025. The parties relied upon written submissions and made oral submissions at the hearing.

FACTS

The plaintiff is a commercial milk processor and dairy goods manufacturer. It has a portfolio of well-known brands such as Western Star, Perfect Italiano, Bega Cheese and Mainland. The plaintiff also sells dairy ingredients to many of the world’s leading food companies and operates a dedicated sales channel for the food service industry. The plaintiff buys milk from farmers to manufacture its goods.

The defendants, who are wife and husband, operate a farm business in the Gippsland area of Victoria as a family partnership trading as ‘Machonochie Farms’. It is one of 5,000 dairy farms in Australia. The defendants have supplied milk to the plaintiff since about 2017. There was evidence that processors in the Gippsland area mostly manufacture products for export in addition to some products for domestic markets.

Since 1 January 2020, the Dairy Code (i.e. the Competition and Consumer (Industry Codes – Dairy Regulations 2019 (Cth)) has been in effect. It contains a mandatory industry code in relation to processors purchasing milk from farmers, including provisions concerning the minimum price for milk and the publication of milk prices.

The milk supply year runs from 1 July to 30 June. Each milk supply year is known as a ‘season’. Mr Platt gave detailed evidence concerning the uncertainties in dairy farming, including the following:

(a) there is a high demand for milk supply in the second half of the season (i.e. January to June each year);

(b) there is uncertainty in demand for dairy;

(c) weather conditions are uncertain;

(d) the Australian dairy industry competes with other dairy industries internationally.

The defendants also referred to a document titled ‘Fonterra 2022 Quarter One Update’ and submitted that this evidences that uncertainties are experienced by the plaintiff in obtaining milk supply. For example:

(a) sales volumes for the plaintiff can fluctuate from year to year. In the 2022 season there was a drop in sales volume for the plaintiff of 4% and that there was lower milk production early in this season;

(b) milk collection may be affected by weather;

(c) prices may be impacted by supply chain congestion and macroeconomic risk.

The defendants also submitted that the plaintiff is more likely to seek milk from farms producing at peak volume as that is often at lower prices. The defendants relied upon a document produced by the ACCC concerning the purchase by a company named BSA S.A.S of businesses within the Fonterra Co-Operative Group.

Mr Roche disputed parts of Mr Platt’s evidence concerning the uncertainty of the demand for dairy:

15.At paragraph 12 of the Platt Affidavit, Mr Platt alleges that demand for dairy is uncertain and specifically, that there is uncertainty as to the price offered by processors and volume of milk required by Fonterra from year to year. I do not agree with this assertion. Regulation 12 of the Code requires all milk processors, including Fonterra, to publicly announce the price at which it will buy milk by 2.00pm on 1 June each year, being a month before the start of the season. Typically, in the days after 1 June, as milk processors review their competitors’ pricing, prices will increase or be maintained depending on a processor’s volume requirements and commercial considerations. These changes in price are also publicly announced and provide transparency and certainty to farmers as to price before the commencement of the season. Further, regulation 23 of the Code provides a 14-day cooling off period starting from the date an agreement with a processor is entered into. Farmers can exit a contract without liability if they wish to during this 14-day cooling off period. This means that farmers have additional flexibility to consider the price offered and the obligations under a milk supply contract. I am familiar with these aspects of the Code given my experience and position with Fonterra as well as my participation as a member in the Code review led by the Department of Agriculture, Fisheries and Forestry.

On or about 26 June 2024, the plaintiff and the defendants entered into a contract for the sale and purchase of milk (the Contract). The Contract provides for a start of supply period from 1 July 2024. It also provides for an end of supply period at 30 June 2026. Later in these reasons I address the fact that the defendants have previously disputed the length of the supply period, contending that the end of the supply period is, in fact, 30 June 2025, but they did not make this submission on this application. It is convenient to set out a number of the provisions of the Contract that were referred to by the parties.

Item 9 defines ‘minimum price if quality standards are met’ as:

The minimum price for milk in terms of fat and protein for the period ending 30 June 2025 is as follows with a choice of either the 7/5 pricing system that may suit a split calving system that would calve in the spring and autumn or the 8/4 pricing system that may suit a more traditional single calving pasture based system.
The minimum price for milk in terms of fat and protein for any subsequent season is as follows with a choice of either the 7/5 pricing system that may suit a split calving system that would calve in the spring and autumn or the 8/4 pricing system that may suit a more traditional single calving pasture based system and may be increased in accordance with schedule 5 - Special Conditions.
[The pricing based on the 7/5 pricing system is set out in tables further below on page 3 of the agreement].

This is the lowest price we will pay for milk you sell us during the supply period, if it meets our quality standards. We will not lower the minimum price during the supply period unless there are exceptional circumstances not caused by us, and only if it is allowed under the Dairy Code. The justification for the minimum price, as required under the Dairy Code, is set out in schedule 1.

Item 10 defines ‘weighted average milk price’ as:

The applicable weighted average milk price can be found at: a multi-year agreement, it is not possible for us to provide a weighted average milk price at the time of agreement, but we will provide this on our website by 1 June each year.
This is our estimate of the weighted average milk price we will pay for all milk over the supply period if quality standards are met, inclusive of an average of the production and quality incentive additional payments. This is not the minimum price. The actual amount you receive may be more or less.

Item 11 defines ‘eligibility for step-ups’ as follows:

You are eligible for step-ups during the supply period.
A step-up is a supplement to the amount we may pay for the milk above the minimum price during the stated period in a season, as publicly announced by us from time to time. A step-up is an additional payment and does not form part of the minimum price.

Clause 2.8 provides:

Without limiting our other rights under this agreement, if you do not supply the minimum volume of milk that meets our quality standards (excluding any milk that we accept and you have paid the quality adjustment fee), we may require you to pay us for any loss and additional expenses we incur from buying replacement milk from the open market, in addition to any other consequences that may apply under this agreement.

Clause 3.4 provides:

We will provide you with monthly statements stating the volume of milk purchased by us, the amount payable to you and any deductions permitted by this agreement and the Dairy Code.

Clause 4 provides for loyalty payments, step-up and additional payments payable by the plaintiff.

Clause 5.1 provides:

Once we pick up the milk from you and it passes our tests on pick up, we own the milk, and we are responsible for it even if we have not yet paid for it. However, if the milk does not pass our tests on pick up or fails any subsequent test (and not because we are at fault) then we can, at our sole discretion, reject that milk at your cost or accept the milk subject to you paying us the quality adjustment fee as set out in Item 15. If rejected, that amount of milk will not count towards the minimum volume.

Clause 6.2 provides:

If the milk does not pass our tests, we may at our sole discretion, reject the milk or charge you the quality adjustment fee as set out in Item 15. In some cases, we may also end the agreement in accordance with clause 11.2 of this agreement.

Clause 9.6 provides:

You cannot change this agreement without our written agreement, and neither you nor we can agree to change the agreement if it means that the agreement does not comply with the Dairy Code.

Clause 10 provides:

10.1 If either you or we do not keep to the obligations, then depending on the obligation, how severe the failure is and the terms of the agreement, there can be several possible consequences, which may include one or of more of:
(a) a penalty or other punishment under the Dairy Code or other law regulation;
(b) payment of money to the other party, for example, if the failure has caused loss or additional expense to that party (although a party must take all reasonable steps to reduce its loss or additional expense).

(c) the other party having the right to end the agreement early.
(d) action by a Court or other authority, which could include ordering a party to correct its failure and continue to perform its obligations under the agreement
(e) us suspending the collection of milk from you in accordance with schedule 2, including because of contamination, safety and animal welfare concerns.

These are only some possible consequences and you should speak to your lawyer for independent advice.
10.2 Both you and we agree that while payment of money for failing to keep to obligations is a possible consequence, unless otherwise clearly stated in writing, in no circumstances will you have to pay us, or we have to pay you what is described in law as “consequential loss", “indirect damage” or “special damage”, even if the likelihood of such losses were known to either you or us. This type of loss includes for example, expectation loss , loss of opportunity, reputational loss or reliance loss.

Schedule 1 sets out a part, inter alia, titled ‘Minimum Price Justification’:

The minimum price Fonterra pays in any season is determined using the following criteria:
•The expected milk production forecast for each region taking into account any available industry milk production outlook
•The market conditions that impact the Australian business both domestically and international including commodity prices and the USD exchange rate
•Competition for milk in the regions we operate
•Our optimal product mix across our manufacturing facilities including costs and efficiencies
•The monthly minimum prices also take into account the variation in cost of milk production across the season and provide choice to enable suppliers to produce milk that is suitable for their farming system

We will continue to monitor evolving market conditions and their impacts on price throughout the season.
For any subsequent season the minimum price is based on the lowest price paid by Fonterra over the past 5 seasons FY20 to FY24 to allow for future market volatility.

The Contract also provided in Schedule 5 at SC 2, being part of the special conditions, as follows:

SC2. REVIEW OF THE MINIMUM PRICE
(a)Each year on 1 June, we will announce the new minimum price that we will pay for standard milk in the next season (“new minimum price”).
(b)If during the supply period, we publish a new minimum price for the same region and on materially the same terms we have agreed to pay you under Item 9, then we will always pay you the higher of the new minimum price or the minimum price.
(c)If SC2(b) applies, the new minimum price table for will replace the minimum price table in Item 9 of this agreement.
(d)You are eligible for a review of the minimum price under this SC2 if you are not in material breach under the agreement on the date we announce the new minimum price.
(e)If we end the agreement because you have materially breached the agreement, or by consent, then you are not entitled to receive, and we are not required to pay you under this SC2 after the date the agreement ends.

Clause 11.3 provides:

11.3You can end this agreement early by written notice to us if we materially breach this agreement or as set out in 9.4. We materially breach this agreement if:
(a) we fail to keep to a term of this agreement and we do not remedy our failure within 7 days’ written notice to us from you; or
(b)our failure to keep to a term of this agreement is one that cannot be remedied; or
(c) we repeatedly fail to keep to a term of this agreement, even if we have remedied each failure as required; or
(d) we become insolvent.

Mr Platt gave evidence concerning clause SC2(d)

34.I recall that, when we were negotiating the special conditions for the FY23 EMSA, it was agreed that clause SC2(d) would be inserted to provide a contractual mechanism to initiate negotiations between the parties on the new minimum price after it is announced by Fonterra each year.

This evidence is conclusionary.

Mr Roache disputed this and gave evidence in his second affidavit:

17.I dispute Mr Platt’s allegation at paragraph 34 of the Platt Affidavit, that when Fonterra and the Platts were negotiating the special conditions for the FY23 EMSA, it was agreed that clause SC2(d) would be inserted to provide a contractual mechanism to initiate negotiations between the parties on the new minimum price after it is announced by Fonterra each year. I have spoken to my manager, Matthew Watt, Director of Farm Source and he has informed me that SC2(d):
a. has been a standard clause in multi-year agreements or agreements with an option to extend (including the FY23 EMSA) for at least 3 years; and
b. there was no agreement or need to include it especially for the Platts.

A copy of the standard form contract from the Website is at pages 10 to 29.

Mr Platt also gave detailed evidence of a typical operation of the supply of milk by the defendants to the plaintiff. The plaintiff organises to pick up milk from the defendants’ farms twice a day. The defendants have two separate farms. Typically, the plaintiff picks up the milk at a time that accommodates the defendants’ twice a day milking times. Mr Platt gave evidence that the usual times have changed since 12 September 2025 but did not give evidence that this was inconvenient. Mr Platt then gave evidence of the co-operation between the plaintiff and the defendants in relation to milk supply and its importance. His evidence detailed one occasion on 1 September 2025 in which the defendants were given 24 demerit points and penalised $8,766.56 by the plaintiff in respect of their August 2025 supply instead of those points being taken from their 50 rebate points. He then gave the following evidence:

28. As set out in the paragraph above, during the course of supply to Fonterra, there have been a number of issues which we have been able to raise, or have raised with us, which have been easily sorted between us. This has in large part been because we have all wanted to co‑operate with one another. I consider the working relationship to have deteriorated between our farm and Fonterra since at least June of this year, and so issues as and when they arise might not be dealt with as quickly or easily as they have been to date.

Mr Roache disputes that the working relationship between the plaintiff and the defendants has deteriorated:

16.At paragraph 28 of the Platt Affidavit, Mr Platt states that since June 2025, he considers that the working relationship has deteriorated between the Platts and Fonterra and issues that arise may not be dealt with as quickly or easily as they have been to date. I do not agree with this statement. I do not agree that there are issues affecting the professional relationship between Fonterra and the Platts. We continue to collect and pay for milk as we have always done, and we will continue to do so. We need Platts’ milk, so there is every reason for us to continue with a good working relationship. I have also observed from my own dealings with the Platts that there have been no complaints by Fonterra towards the Platts or vice versa that would in any way affect the otherwise good working relationship Fonterra has had with the Platts since about August 2017.

Mr Smart also gave evidence:

5. The process of collecting milk from farmers who supply milk to Fonterra, involves:
a. Agreeing and arranging time periods for milk collection with the farm owner (Collection Windows), while ensuring the Collection Windows respect the farm’s milking process as far as practicable. The Collection Windows also enable farmers to leave the milk for collection, without anyone having to be present at the time of collection. Where there is a change to a Collection Window, Fonterra’s farmer service centre will contact the farm to advise so that the farm is aware of the adjusted collection time. If there is a material change to a Collection Window, the farmer is typically given a minimum of 24 hours’ notice;
b. generally collecting milk twice daily during the designated Collection Windows;
c.milk is left in a vat, and the Fonterra tanker driver (Driver) will undertake testing of the milk and then pump the milk out of the vat into the tanker;

d. the testing and collection process takes on average half an hour; and
e. there is no need for the farmers or anyone to be present for the milk collection.

6. Trevor and Rita Platt own two farms that supply milk to Fonterra (Platt Farms).
7.I have reviewed Fonterra’s records in relation to the Platt Farms and note that since 1 July 2024, no disputes have been raised, nor have any complaints been made by the Platts to Fonterra in relation to the collection of milk.

Mr Platt gave evidence concerning the 2023, 2024 and 2025 seasons as follows:

37. The FY23 EMSA included an option for Machonochie Farms to extend the term of the FY23 EMSA for a further year to 30 June 2024.
38. On 4 May 2023, Machonochie Farms exercised its option to extend the FY23 EMSA for a further year to 30 June 2024 and the parties agreed to vary the terms of the FY23 EMSA to give Machonochie Farms an option to extend the FY23 EMSA for another year, creating a second option to extend to 30 June 2025. A true copy of the FY23 EMSA variation is at pages 110 to 113 of Exhibit TP-1.
39. Machonochie Farms did not exercise the second option to extend the FY23 EMSA to 30 June 2025.
40. During the season ending 30 June 2024 (FY24 Season), Machonochie Farms was flooded which resulted in:
(a) the Riverslea farm being completely wiped out with no pasture from October 2023 until April 2024; and
(b) the Fullham farm being partially flooded with the fodder block being significantly damaged and all pasture and crops were lost between October 2023 to June 2024.

41. I estimate that the floods cost Machonochie Farms approximately an additional $2,000,000 in:
(a) replacement fodder;
(b) pasture renovations; and
(c) extensive track repairs.

42. Despite the flood damage, we worked hard to continue to supply milk to Fonterra and fulfill our obligations under the FY23 EMSA. Throughout this period, and even though it was a long‑term commercial arrangement, Fonterra did not offer any support or assistance while we were repairing and rebuilding the farm throughout the FY24 Season.
43. For the FY24 Season, the minimum price per kilogram of milk solids (kgMS) average weighted price was $9.70.
44.For the season ending 30 June 2025 (FY25 Season), the minimum price was $8.30/kgMS.
45. The reduction of the minimum price from the FY24 Season to the FY25 Season was significant (almost 15%). I estimate that it resulted in an approximately $2,000,000 reduction in revenue for the FY25 Season, compared to the FY24 Season. This loss of revenue was in addition to the approximately $2,000,000 additional costs incurred as a result of the floods in the FY24 Season.
46. In June 2024, Darielle and I started speaking with Fonterra representatives about Machonochie Farms continuing to supply milk for the FY25 Season.
47. On 18 June 2024, Tim Roache of Fonterra, provided me with a draft of a new agreement to review. A true copy of the email Darielle sent in response on 19 June 2024 is at pages 114 to 115 of Exhibit TP-1.
48. Machonochie Farms did not make any profits from supplying milk to Fonterra for the FY24 Season and the FY25 Season, and I was very concerned that the business would have to go through a third consecutive season of not making any profits.
49.On 13 June 2025, Fonterra publicly announced its minimum price for the season ending 30 June 2026 (FY26 Season) was $8.90/kgMS (FY26 Minimum Price). I was concerned by this FY26 Minimum Price. It meant that the minimum price was still significantly less than the FY24 Season. Our costs base is rising due to inflation and other pressures. I could not see how our business would make any profits with the FY26 Minimum Price, and I was very concerned about how it looked like our farm would have to go through a third consecutive season of not making any profits. It was not just me who was and is concerned with this – I had and continue to have a number of discussions with my son and daughter Darielle about how we are going to manage with the FY26 Minimum Price.

On 10 April 2025, the plaintiff sent a letter to all its suppliers, including the defendants, in which it stated it was increasing the 2024/25 minimum milk price by 20 cents/kgMS, comprising 17 cents per kilo of butterfat and 24 cents per kilogram of protein. It stated that this takes the weighted average price of milk to $8.35/kgMS, which would be ‘effective from 1 July 2024’ with payment being made on 14 April 2025 as part of the March pay run.

On 26 May 2025, the plaintiff announced that effective 1 July 2025, the new minimum price of standard milk for the 2025/26 season would be $8.60/kgMS average weighted price, and informed its suppliers accordingly. The announcement stated, inter alia:

Our opening price is higher than the current season, reflecting improved global market conditions, although dampened by a continued soft domestic outlook. Geopolitical tensions and potential trade disruptions, along with currency volatility continue to create uncertainty for the longer-term outlook.
However, there are favourable signals for the season ahead that are building optimism for F26, including the increase in global dairy prices over the last 12 months. Global demand has shown signs of growth, with constrained global supply driving an uptick in global prices throughout the year. Australian dairy exports have strengthened on the previous year in value and volume. These improvements have been supported by a return to balance between local and global dairy prices and a favourable, yet volatile Australian dollar.
Our domestic market, where we direct the majority of your milk, remains challenging. Inflationary pressures have yet to fully ease, and segments of Australian consumers continue to chase value through lower-cost dairy products. Foodservice channels, both locally and globally, are facing a multi-year recovery as even lower-cost restaurants are challenged as households eat out less.

On 13 June 2025, the plaintiff informed its suppliers, including the defendants, that it was increasing its weighted average Australian milk price for the 2025/26 season by 30 cents/kgMS, comprising 25 cents per kilo of butterfat and 35 cents per kilo of protein. It stated that this price increase takes its weighted average Australian milk price to $8.90/kgMS for the 2025/2026 season.

On 13 June 2025, Ms Darielle Platt, on behalf of the defendants, sent an email to Mr Roache in the following terms:

Good afternoon Tim,
The new minimum price for milk supplied in 2025/26 was announced this morning, and we would like a review of the minimum price paid to us for the next financial year?
We would appreciate a timely response so as we can move forward to resolve our concerns as discussed with Peter Dunstan and Darryl Rowe yesterday,
I look forward to hearing from you soon,
Kind regards,
Darielle Platt

Later that day Mr Roache replied to Ms Platt and stated: ‘No worries, will get them through today.’ Then later that day Mr Roache sent an email to Ms Platt in which he stated:

Hi Darielle
Pls see FY26 Income Estimates attached.
At our current $8.90/kgMS avg weighted price you’re at $9.40/kgMS (1741) and $9.42/kgMS (1742).
Regards.

Mr Platt also gave the following evidence:

53. On 16 and 17 June 2025, I had telephone calls with Mr Dunstan, Mr Roache and Matt Watt from Fonterra to try and negotiate the pricing for the FY26 Season. Each conversation was a very short one. All of them had the same message, which was to the effect of ‘you are contracted, we have nothing to discuss’.

This evidence was not disputed by Mr Roache.

On 18 June 2025, Mr Roache sent an email to Ms Tarc Platt in which he stated:

Hi Trevor
As discussed, please see summary of our proposed agreement variation below:
·$0.40/kgMS contract incentive for Riverslea & Fulham
o   CI paid upfront on 16.2ML (1,204,857 kgMS)
o   Additional $0.20/kgMS on growth volume above 16.2ML (1,204,857 kgMS) based on quarterly reconciliation
·$0.60/kgMS growth incentive for Burrowes
o   GI paid monthly on all kgMS produced
·Tenure: FY26 & FY27

Other terms, eg. quality rebates, would remain unchanged.
Regards.

On 24 July 2025, Hall & Wilcox sent a letter to the plaintiff in which it stated that the defendants were, in effect, misled into entering into the Contract as they were told by the plaintiff that the end of supply period would be 30 June 2025 as requested by the defendants. Hall & Wilcox also stated in the letter:

Accordingly, our client proposes the following:
(a)the parties agree to a mutual termination of the EMSA to take effect on 18 August 2025; and
(b)our client will agree to abstain from commencing litigation or contacting the ACCC or any other public body or organisation in relation to matters raised in this letter;

with these terms to be reflected in a Deed of Settlement and Release to be executed between the parties.

As I have already said in these reasons, the defendants did not rely upon this contention that the supply period ended on 30 June 2025 on this application.

On 4 August 2025, the plaintiff sent a letter to Hall & Wilcox in which it denied the allegations against it. It stated, in effect, that the plaintiff and the defendants agreed to an end of supply period being 30 June 2026. The plaintiff also stated:

12.Of course, as a fair-dealing processor, Fonterra has no objection to your client exercising its right to mediation under the EMSA and regulation 48 of the Dairy Code. Fonterra will in good faith, engage with the mediation process.
13.Since your client has raised this dispute, presumably your client will request that the mediation adviser appoint a mediator pursuant to the Dairy Code and provide us with the details accordingly.
14.Alternatively, if your client elects instead to commence legal proceedings, it will find that Fonterra is prepared to defend its position, particularly in circumstances such as these where the allegations are utterly devoid of merit or basis.

On 25 August 2025, Hall & Wilcox sent a further letter to the plaintiff. Hall & Wilcox took issue with a number of the matters relied upon by the plaintiff and stated the defendants’ position was that the end of supply period is 30 June 2025. Hall & Wilcox also raised an additional matter as follows:

Notice of breach - failure to review minimum milk price
22In any event, for the reasons set out below, our client is contractually entitled to a review of the minimum milk price for the milk supplied in this financial year.

23 On 13 June 2025:
(a)Fonterra announced the new minimum milk price for milk supplied in this financial year; and
(b)after the above announcement, Ms Platt emailed Mr Roache requesting a review of the minimum price.

24Pursuant to clause SC2(d) of Schedule 5 of the EMSA, our client is eligible for a review of the minimum price.
25To date, Fonterra has not responded to our client’s request for a review of the minimum price. Fonterra’s failure to respond to its request for a review of the minimum price under clause SC2(d) of Schedule 5 of the EMSA is a material breach of the agreement.

26 This letter serves as a notice to that effect.
27Fonterra must remedy the breach by 1 September 2025, being 7 days from the date of this letter.

On 1 September 2025, CIE Legal, the plaintiff’s solicitors, sent a letter to Hall & Wilcox in which it stated that the plaintiff had not breached the Dairy Code and was not in breach of its contractual requirements. CIE legal also stated that it was clear that there was a dispute between the parties for the purposes of the Dairy Code and that it was appropriate the dispute be referred to mediation in good faith. It submitted that its letter was notice to that effect.

On 12 September 2025, Hall & Wilcox sent a letter to the plaintiff, with a copy to CIE legal, and stated that the defendants give notice that they terminate the Contract pursuant to clause 11.3 effective 19 September 2025. Hall & Wilcox also stated, inter alia:

Reasons for termination
2Pursuant to clause 11.3(a) of the EMSA, our client is entitled to end the EMSA early by written notice to Fonterra if it materially breaches the agreement.
3Clause 11.3(a) of the EMSA provides that if Fonterra ‘fail to keep to a term of the agreement and [it does] not remedy [its] failure within 7 days’ written notice to [Fonterra] from [our client]’, this constitutes a material breach of the EMSA.
4By our letter dated 25 August 2025, Fonterra was put on notice that it failed to keep to clause SC2(d) of Schedule 5 of the EMSA, in breach of the agreement, by reason of its failure to respond to our client’s request for a review of the minimum price (Notice of Breach).
5Fonterra was given until 1 September 2025, being seven days from receipt of the Notice of Breach to remedy the breach.
6Fonterra failed to remedy the breach within seven days of the receipt of the Notice of Breach. Pursuant to clause 11.3(a) of the EMSA, this is a material breach of the EMSA.
7Accordingly, our client is entitled to terminate the EMSA early pursuant to clause 11.3, and this letter serves as notice to that effect.

On 16 September 2025, CIE legal sent a letter to Hall & Wilcox in which they explained why the plaintiff is not in breach of the Contract and requested Hall & Wilcox to advise them in writing that the Contract would not be terminated on 19 September 2025 and that the defendants would comply with their obligations pursuant to the Contract until 30 June 2026.

Mr Roache gave evidence as follows in relation to the loss and damage that may be suffered by the plaintiff if the interlocutory injunctive relief is not granted:

E. Loss/damage to be suffered by Fonterra if the Platts terminate the Agreement
26.The Platts supply Fonterra approximately 16 million litres per season, accounting for 7% of the milk collected by Fonterra in the East Victoria region.
27.For the following reasons, it is highly unlikely that Fonterra would be able to find an alternative supplier if the Platts cease supplying milk to Fonterra:
a.typically, all dairy farmers enter into agreements for the supply of milk over the next season by the end of June or early July each year and do not have excess milk available for purchase;
b.typically, milk supply agreements are exclusive agreements, requiring all milk produced at a farm to be sold to the counterparty processor or broker;
c.16 million litres is a substantial volume of milk that cannot be replaced by Fonterra’s existing farmers or any uncontracted farmers in the region. For context, the average Victorian dairy farm produces about 1.9 million litres of milk per season;
d.typically, milk production peaks in the first half of the season between July and December because dairy cows calve predominantly in the Spring. Thus, demand for milk is always higher, and available supply is always lower, in the second half of the season between January and June. The Platts’ milk supply profile or ‘phasing’ has less variation, in that their production is more consistent throughout the season compared to the average Victorian farm. The Platts produce relatively higher volumes of milk in the second half of the season as compared to the Victorian average;
e.there has been a substantial reduction in the size of milk pools and dairy farms in Victoria and Australia over time and going forward, industry bodies and market analysts are forecasting further reductions in 2025/2026, leading to further reduction in overall milk availability;
f.I have asked my team to make enquiries with milk brokers about replacement milk for the 2025/26 season, and surplus milk via milk brokers and other processors is almost non-existent. Milk brokers have responded that it is not possible to commit to supplying the replacement milk, in the volumes or phasing required, particularly in the second half of the season. This is why Fonterra and other processors contract with farmers as early as possible prior to the start of a season.

28.If Fonterra is unable to find replacement milk of the same volume and phasing:
a.Fonterra customers who buy dairy goods manufactured in Fonterra’s factories in Victoria will be affected; and
b.Fonterra is likely to suffer significant financial loss.

29.Broader ramifications for Fonterra, beyond financial losses, are likely to include:
a.substantial and long-term or potentially permanent loss of existing customers and distributors;
b.substantial and long-term or potentially permanent loss of prospective customers and distributors;
c.loss of exclusivity arrangements with customers and distributors in relation to affected goods;
d.de-listing of affected goods by distributors and supermarket customers, since they typically prioritise availability and consistency of supply when determining product ranging. Once goods are delisted, it is extremely difficult to have them reinstated;
e.disruption to milk collection logistics and manufacturing of products, particularly in Fonterra’s Darnum, Stanhope and Cobden factories, that rely on milk solids from the East Victoria region including that of the Platts; and

f. substantial and irreversible reputational damage.

Mr Platt gave evidence as follows in relation to the impact that may be suffered by the defendants if the interlocutory injunctive relief is granted:

63. If Machonochie Farms is required to continue to exclusively supply milk to Fonterra until 30 June 2026 for the FY26 Minimum Price, based on financial projections for the FY26 Season, I believe that Machonochie Farms will likely not make a profit from the FY26 Season, even if the Additional Incentives paid by Fonterra are taken into account. This would be the third consecutive season that the business will not make a profit, which is why I sought a review of the FY26 Minimum Price.
64. In order for the EMSA to be commercially viable for Machonochie Farms, I believe the minimum price for the FY26 Season would need to be at least $10.60/kgMS.
65. On 15 September 2025, just after Machonochie Farms issued the Notice of Termination, and because milk is quickly perishable, I had discussions with other processors to potentially buy Machonochie Farms’ milk supply, after the EMSA is terminated, at a price higher than the FY26 Minimum Price (plus the Additional Incentives). I made arrangements with a new processor to buy the milk supply as soon as the EMSA with Fonterra was terminated on 19 September 2025. The pricing and precise terms of those arrangements are confidential, but I intend to supply the new processor for at least one year.
66. On 18 September 2025, there was a hearing in this proceeding and we agreed to give an undertaking to Fonterra to change the effective date of termination of the EMSA in the Notice of Termination to 22 September 2025. The new processor is currently on standby ready to take our milk supply from 23 September 2025. I did not want to enter into any formal agreements with the new processor until the EMSA with Fonterra had concluded.
67. If Machonochie Farms is restrained from terminating the EMSA while the Court determines Fonterra’s claims against Machonochie Farms, then I will likely have to find another processor to buy the milk on short notice, if Fonterra is ultimately unsuccessful.

APPLICABLE LAW

The applicable law for an interlocutory injunction is well established. In summary:

(a) a plaintiff seeking interlocutory injunctive relief must demonstrate that there is a serious question to be tried;

(b) the injury the plaintiff is likely to suffer must be one for which damages will not provide an adequate remedy;

(c) the balance of convenience must favour the granting of an injunction, which also requires consideration of the strength of the plaintiff’s claim;

(d) ultimately, the Court should take the course that appears to carry the lower risk of injustice if it should turn out to have been wrong, in the sense of granting an injunction to a party who fails to establish the asserted right at trial, or failing to grant an injunction to a party who succeeds at trial.

These principles are not entirely separate and must be examined together.

In Bradto Pty Ltd v State of Victoria,[1] the Court of Appeal said:
[1][2006] VSCA 89; (2006) 15 VR 65 (Bradto).

33In our view, it is desirable that a single test be applied in all cases where an interlocutory injunction is sought. There is nothing in the body of authority to which we have referred, nor any consideration of principle, which requires a special test to be applied to one sub-category of such injunction applications, namely, those where mandatory relief is sought. On the contrary, as pointed out convincingly by Hoffman J in Films Rover, the grant of a mandatory interlocutory injunction may be justified in a particular case notwithstanding that the court does not feel the requisite “high degree of assurance”.
34As Lord Woolf, MR said in Broadmoor Special Health Authority v Robinson[2], adopting the words of Lord Cooke in TV3 Network Ltd v Eveready New Zealand Ltd[3]:
“The remedy of injunction should be available whenever required by justice”.[4]

35In our view, the flexibility and adaptability of the remedy of injunction as an instrument of justice will be best served by the adoption of the Hoffman approach. That is, whether the relief sought is prohibitory or mandatory, the court should take whichever course appears to carry the lower risk of injustice if it should turn out to have been “wrong”, in the sense of granting an injunction to a party who fails to establish his right at the trial, or in failing to grant an injunction to a party who succeeds at trial.[5]

SERIOUS QUESTION

[2](2000) 2 All ER 727, 732.

[3][1993] 3 NZLR 435, 438.

[4]Cited by Gillard J in Hartleys Limited v Martin [2002] VSC 301, [30].

[5]Bradto, [33]–[35].

Introduction

The plaintiff accepted that the interlocutory injunction it seeks is properly characterised as mandatory in substance. It submitted that it will seek such injunction at trial. As a result, the plaintiff seeks an interlocutory injunction in support of its final injunction. It submitted that there is a serious question whether the contract has been lawfully terminated.

The defendants submitted that the plaintiff has not established a sufficient likelihood of success in obtaining the final injunction at trial to justify the interlocutory injunction. The defendants ultimately relied upon the following two matters to submit that there was not a serious question:

(a) the plaintiff’s claim for the final injunction would require the constant supervision of the Court to ensure fulfilment of the Contract; and

(b) the plaintiff has not established that it would suffer irreparable harm.

It also relied upon each of these matters with respect to the balance of convenience and whether the Court should grant the interlocutory injunction. I address the balance of convenience later in these reasons.

The defendants otherwise accepted that there is a serious question as to whether the Contract has been lawfully terminated but submitted it was weak. The defendants also submitted that the plaintiff’s claim for damages is weak. During the hearing, the plaintiff submitted that it would make a claim for loss and damage in the statement of claim to be filed and served. It otherwise did not identify the loss and damage.

In my view, for the reasons I am about to give, the plaintiff has established a sufficient likelihood of success in obtaining the final injunction at trial to justify the interlocutory injunction, subject to determining the balance of convenience.

Supervision by the Court?

The defendants submitted that the plaintiff’s claim for final injunctive relief would require the constant supervision of the Court to ensure fulfilment of the Contract over an extended period of time. The defendants initially submitted that ‘such an order will not be made – either on an interim or final basis – where it would require the continued supervision of the Court to ensure fulfilment of the contract.’ But during oral submissions the defendants submitted ordering specific performance should be ‘discouraged’ where it requires both the constant supervision of the Court and the possibility of repeated applications for rulings. The defendants referred to paragraph 27 of Mr Platt’s affidavit concerning the supply of milk to the plaintiff and what this involves. The defendants submitted that the supply requires the co-operation of the parties. The defendants submitted that the relationship with the plaintiff has deteriorated and referred, in particular, to the imposition of demerit points by the plaintiff under the contract and also the dispute concerning the supply period of the Contract. The defendants also referred to the ‘tone’ in the letter from the plaintiff to them dated 4 August 2025 in which the plaintiff stated that the defendants were making untenable and baseless allegations and not acting in good faith.

The plaintiff submitted that because of the nature of the Contract and the history of a good working relationship between the parties, it is highly unlikely that ongoing supervision by the Court would be required if the injunction was granted. The plaintiff also submitted that, in any event, the possible supervision by the Court is merely one factor (although a very important one) to be taken into account, but that it is not a bar to relief.

In Patrick Stevedores Operations No 2 Pty Ltd v Maritime Union of Australia, the majority said: [6]

79The House of Lords discharged the order for specific performance which the Court of Appeal had made. The significance of Lord Hoffmann's speech for present purposes is not the rejection of the lessor's submissions. That rejection, with respect, was virtually inevitable. What is significant is the acceptance by the House of Lords that the concept of "constant supervision by the court" by itself is no longer an effective or useful criterion for refusing a decree of specific performance. Rather, Lord Hoffmann placed stress on other propositions. First, a person who is subject to a mandatory order attended by contempt sanction (which "must realistically be seen as criminal in nature") ought to know with precision what is required; and, second, the possibility of "repeated applications for rulings on compliance" with orders requiring a party "to carry on an activity, such as running a business over a more or less extended period of time" should be discouraged.
80 Reference to constant court applications should not be misunderstood. The courts are well accustomed to the exercise of supervisory jurisdiction upon applications by trustees, receivers, provisional liquidators and others with the responsibility for the conduct of administrations. The reservation of liberty to apply to the Federal Court in respect of certain of the orders to be made is in no way out of ordinary in the exercise of equitable jurisdiction.
81 Further, those orders do not, in form or in substance, require the Administrators to carry on business activities in the sense with which the Argyll case was concerned. Nor do the undertakings and orders leave those bound by them not knowing what is expected of them. This is not a case, referred to by Isaacs and Rich JJ in Pakenham Upper Fruit Co Ltd v Crosby, where the Court "could never be sure that it was in a position to enforce its order without injustice".

[6](1998) 195 CLR 1 [79]–[81] (Brennan CJ, McHugh, Gummow, Kirby and Hayne JJ) (citations omitted) (‘Stevedores’).

In my view, the plaintiff has established a strong prima facie case that the injunction it seeks at trial would not require such supervision that the Court would refuse the injunction.

First, the terms of the proposed injunctive relief are clear. There is ‘a sufficient definition of what has to be done in order to comply with the order of the Court’. [7]
[7]Tito v Waddell (No 2) [1977] Ch 106, 321.

Second, the injunction does not, in substance, require that the defendants carry on the business of dairy farmers and supply milk to the plaintiff. The proposed injunctive relief leaves the factual position as it was prior to the purported termination on 12 September 2025. In the event that the Court granted the proposed injunctive relief, the substantive rights and obligations of the parties would be governed by the Contract and not the injunctive relief. The rights and obligations of the parties would remain governed by the Contract. As a result, I do not accept the defendants’ ‘key’ submission on this issue that the injunction compels the defendants to perform their side of the Contract when the continuance of the defendants’ obligations to do so depends on the future conduct of the plaintiff in observing conditions to be fulfilled by it. The parties’ rights remain governed by the Contract.

Third, no supervision is required of the Court to give practical operation to the legal rights affected by the injunction.

Fourth, even if some supervision may be required of the parties, this is likely to be minimal and only for a relatively short period of time. The Court is centrally concerned with avoiding supervision arising from imprecision of an order,[8] or supervision arising in the form of adjudicating nebulous obligations,[9] rather than supervision arising from the relationship between, or co-operation of, the parties under the Contract. I also refer to the following matters:
[8]Stevedores (n 6) 47 [79] nn 115.
[9]Ibid 47 [79] nn 116.

(a) I accept that the parties have recently disagreed about some matters, including the duration of the supply period of the Contract;

(b) but the parties have dealt with one another on a regular, often daily basis, for eight years and the disputes between them have been minimal. I accept that the Contract requires, in some important respect, the cooperation of the parties;

(c) the rights and obligations of the parties are governed by the Contract and not by the terms of the proposed injunction, except insofar as it is restraining reliance upon the termination.

Finally, the fact that some supervision may be required is not fatal, especially in the circumstances I have addressed.

Are Damages an adequate remedy?

The plaintiff submitted that damages are not an adequate remedy and relied upon the evidence of Mr Roache at paragraphs 26 to 29 of his first affidavit and paragraph 18 of his second affidavit. It also relied upon clause 10.2 of the Contract and submitted that, if it is ‘valid’, it excluded certain loss and damage.

The defendants submitted the plaintiff has not established that it would be entitled to the injunction at trial as it has not established that it would suffer irreparable harm. They submitted that the plaintiff’s evidence at its highest is that it will not be able to find another single supplier in the same region as the defendants’ farm for all of the milk that it otherwise anticipated would be supplied by defendants. The defendants submitted:

13. The plaintiff’s evidence does not establish that damages would be an inadequate remedy. It is trite law that damages are the typical relief for breach of contract. Fonterra has operated in the dairy industry for a long time, and as publicly available documents (from when it was publicly listed) show, it operates in a way in which it can adapt to differing market conditions, including issues as to supply and demand. Fonterra successfully operates in a way where it has no certainty as to volume of milk that will be available to purchase from its exclusive suppliers. The standard terms of its exclusive supply and purchase agreement contemplate supply and purchase of all milk of the supplier, and minimum volumes of that milk (but not a maximum one).

14. The evidence contained in the Roache Affidavit is at a high level of generality. As an example, it does not address whether Fonterra would be able to find an alternative supplier to supply milk if it offered to purchase it at a higher minimum price than $8.90 (noting the unattractiveness of that minimum price compared to a current industry standard price of over $10).

(citations omitted)

The defendants submitted that Mr Roache’s evidence is scant on matters such as the gap between the milk volumes the plaintiff was expected to obtain from the defendants and the milk volumes the plaintiff might be able to purchase through other suppliers, including dairy farmers, milk processors and milk brokers. They submitted that the evidence of Mr Roache is inadequate and relied upon the following key matters:

(a) Mr Roache did not address matters such as the plaintiff’s optimal product mix across its manufacturing facilities and how this may be impacted by the defendants ceasing to supply milk;

(b) Mr Roache did not address all of the present uncertainties that presently confront the plaintiff, including those that are described by the plaintiff in the document provided to suppliers on 26 May 2025 in which it set the opening price for milk for the 2025 season;

(c) the defendants milk only accounts for 7% of the milk collected by the plaintiff in the East Victoria region but this is relatively insignificant when compared to the overall milk being collected by the plaintiff;

(d) Mr Roache’s evidence is confined to finding an ‘alternative supplier’ singular and does not address whether the milk may be supplied by a number of suppliers;

(e) the evidence of Mr Roache concerning the difficulties of obtaining an alternative milk supply are confined to the East Victoria region;

(f) Mr Roache’s reference to the demand for milk being higher, and supply being lower, between January and June is not a key time for the plaintiff given the matters set out by the ACCC in its publication;

(g) Mr Roache’s evidence is silent as to whether the plaintiff could obtain some supply of milk from brokers now and, if so, in what amount. Its evidence is premised upon it not being able to obtain replacement milk in the volumes or phasing required for the whole season, but that there is some evidence that it could obtain replacement milk now in the peak supply time and that this when the plaintiff obtains the majority of its supply;

(h) Mr Roache’s evidence in paragraphs 28 and 29 of his first affidavit of the consequences is premised ‘on an inability to find it all, rather than providing…specificity about the likely gap, and the likely consequences of it.’;

(i) none of the consequences are identified or described in any detail. As a result, it is unclear whether the plaintiff would suffer any irreparable harm or whether, for example:

(i) the plaintiff would have to spend more money in buying milk from milk brokers than they would otherwise pay the defendants;

(ii) the plaintiff would have to use its factories more in the first half of the season when there is higher amounts of milk and then being dormant in the second half or parts of the second half.

In my view, the plaintiff has established that damages would likely not be an adequate remedy.

First, I accept that there is some uncertainty in the dairy farm industry and that the plaintiff confronts such uncertainties on a regular basis. As the defendants submitted ‘Fonterra is never operating with a static amount of milk that it will receive from its suppliers throughout the season’. I also accept that there is some uncertainty as to the milk supply that the plaintiff will obtain during a season, including the present 2025 season and the forthcoming 2026 season. But one of the benefits of the defendants’ supply of milk to the plaintiff is that there is less variation as their production is more consistent throughout the season compared to other Victorian farms. I refer to Mr Platt’s affidavit at paragraph 11 and Mr Roache’s first affidavit at paragraph 27(d). Also, it cannot simply be inferred that because there is existing uncertainty that the plaintiff will be able to address further uncertainty created by the defendants ceasing to supply milk to it, especially when that volume of milk is significant in the East Victoria region.

Second, I accept that Mr Roache’s evidence is at a high level of generality. It does not, for example, contain the level of detail that is set out in some of the plaintiff’s publications on milk prices and the dairy industry. In addition, the defendants submitted that Mr Roache failed to engage in the level of detail, for example, as set out in the document it provided to suppliers on 26 May 2026 concerning the open price for milk. But some account must be taken of the fact that this was an urgent application for relief in which there was limited time to prepare. No objection was taken to any of his evidence on the basis that it was not relevant as it did not disclose the basis for the matters that he identified (e.g. paragraph 29 of his first affidavit). Mr Roache was not cross-examined. In my view, the criticisms of his evidence that they lack detail go to weight. I also now address the matters that are addressed by his evidence.

Third, Mr Roache’s evidence establishes the following:

(a) the plaintiff requires the replacement milk to be collected from the East Victoria region, being the same region in which the defendants are located (see paragraph 29(e) of Mr Roache’s first affidavit and paragraph 18 of Mr Roache’s second affidavit). The defendants accepted that Mr Roache’s reference to ‘region’ in paragraph 27(c) is a reference to the East Victoria region. The defendants submitted that Mr Roache’s evidence is limited to addressing a replacement supply from farmers in the East Victoria region. But this is not surprising as Mr Roache gave evidence that the plaintiff has factories in Darnum, Stanhope and Cobden that rely upon milk solids from the East Victoria region, including presently from the defendants;

(b) the milk supplied by the defendants to the plaintiff accounts for 7% of the milk collected by the plaintiff in the East Victoria region;

(c) the defendants are a very substantial dairy farm compared to the average Victorian dairy farm. The defendants supply about 16 million litres of milk to the plaintiff whereas the average dairy farm produces about 1.6 million litres of milk;

(d) it is highly unlikely that the plaintiff will be able to find replacement milk from an alternative supplier in the East Victoria region, including in the same volume and phasing as supplied by the defendants from the East Victoria region. Mr Roache gave evidence that milk in the volume of 16 million litres cannot be obtained from the plaintiff’s existing farmers or any uncontracted farmers in the East Victoria region. He also gave evidence that ‘surplus milk via brokers and other processors is almost non-existent.’ I do not accept that Mr Roache’s evidence is limited to the plaintiff not being able to obtain the whole supply of 16 million litres from one supplier. In my view, this is a strained interpretation of his evidence and his reference to ‘alternate supplier’ in the chapeau in paragraph 27. This is because his evidence in paragraph 27(c) is not limited to obtaining the whole volume from only one farmer and his evidence in paragraph 27(f) is also not limited to obtaining the whole volume from one processor or broker. I also do not accept that Mr Roache’s evidence is limited to finding replacement milk at the same price as supplied by the defendants. This is because his evidence in paragraph 27(c) is based upon ‘volume’ and his evidence in paragraph 27(f) is based upon ‘volumes and phasing’. He makes no mention of limiting his enquiries to finding replacement milk at a particular price. As a result, I do not accept the defendants’ submission that the Court cannot assess whether the plaintiff could obtain the replacement milk if it paid more for the milk that what it is paying the defendants. I accept that the plaintiff can obtain some milk in the volumes and phasing required in the first half the season (i.e. the period between July and 31 December 2025) from processors and brokers but not in the second half (i.e. period between 1 January 2026 to 30 June 2026). This is clear from his evidence that ‘[m]ilk brokers have responded that is not possible to commit to supplying the replacement milk, in the volumes or phasing required, particularly in the second half of the season.’ I also accept that there is evidence that the plaintiff is more likely to seek milk from farms producing a peak volume over spring. But, in my view, this does not mean that the Court should not accept his evidence concerning the likelihood of finding replacement milk in the same volumes and phasing;

(e) if the plaintiff is unable to find replacement milk of the same volume and phasing then it is likely that there would be ‘[b]roader ramifications’ for the plaintiff, including damage to its reputation. The defendants submitted that the evidence is ‘scant’ on the gap between the volumes that it expected the defendants to supply and the volumes it expects to be able to source third parties (i.e. brokers and other processors). I accept that the plaintiff does not identify the likely volumes that it expected the defendants to supply and the volumes it expects to be able to source from third parties. But his evidence is that even if the plaintiff can replace some of the milk (e.g. for the first half of the season), but not all, the ramifications he describes in paragraph 29 are likely to follow.

Finally, the plaintiff relied upon clause 10.2 of the Contract in written submissions, but at the hearing submitted that if that clause is found to be ‘valid’ then it may prevent the plaintiff from recovering some damages. The plaintiff otherwise did not assist the Court and did not identify why it might be invalid or what its position was on validity. As a result, I do not consider this to be relevant.

As a result, in my view, based upon the present evidence and submissions, damages are likely not to be an adequate remedy for the plaintiff’s claims.

Proper construction of clause SC2(d)

The plaintiff disputes that the Contract has been lawfully terminated. The defendants submit that the Contract has been terminated pursuant to a letter from their solicitors Hall & Wilcox to the plaintiff dated 12 September 2025The issue between the parties is the proper construction of special condition SC 2(d) of Schedule 5 of the Contract. The defendants accepted that the plaintiff’s proper construction is arguable, but weak.

It is convenient to set out the applicable law on the proper construction of commercial contracts. In Eureka Operations Pty Ltd v Viva Energy Australia Ltd (‘Eureka’)[10] the Court of Appeal said:[11]

45 … In the first place, the objective approach to contractual interpretation requires reference to the ‘text, context (the entire text of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and purpose’. It follows that the meaning of a word or clause cannot be determined by reference to its own text alone. As such, resort to the ‘ordinary meaning’ of the word or clause can be no more than a starting point in a process which in every case requires the reader of the contract to look further to context and purpose. Nor is it necessary that there be ambiguity, however understood, before undertaking that further process. Context (as defined above) and purpose are always relevant, no matter how clear the ‘ordinary meaning’ is said to be.
46 Secondly, the objective approach calls for the relevant provision to be interpreted as a reasonable businessperson would have understood it, which is revealed by considering the language used in the contract, the circumstances the contract addresses and the commercial purpose or objects to be secured by it, each of which is ordinarily able to be identified by reference to the contract alone. Again, the notion of ‘ordinary meaning’, while plainly a relevant aspect of this inquiry, cannot serve to foreclose consideration of these other elements. It is always possible that, despite the ‘ordinary meaning’, reference to context, the circumstances the contract addresses and its commercial purpose or objects will show that a reasonable businessperson would have understood a different meaning to apply. It is inherent in the test of the reasonable businessperson that he or she must be taken to be aware of more than just the text of the provision being construed.
47 Construction in the present case should therefore be approached on the basis that the ‘ordinary meaning’ of the relevant provisions is only one aspect of the wider inquiry, and that there is no need to establish any ambiguity arising from the text before undertaking that inquiry. It may be that no reason emerges to depart from the ordinary meaning of the words used. But the whole inquiry must be undertaken, whether or not the ordinary meaning can be described as unambiguous when read in isolation. Establishing ambiguity is not a threshold to be met before completing the inquiry.

[10]Eureka Operations Pty Ltd v Viva Energy Australia Ltd [2016] VSCA 95 (Santamaria, Ferguson and McLeish JJA) (citations omitted).

[11]Ibid [45]-[47] (Santamaria, Ferguson and McLeish JJA) (citations omitted).

In Lopes v Taranto,[12] the Court of Appeal referred to this passage from Eureka[13] and then said:[14]

66. It is clear, then, that there is a distinction between ‘context’ (being the entire context of the contract as well as any contract, document or statutory provision referred to in the text of the contract) and ‘the circumstances the contract addresses and its commercial purpose or objects’. As to the latter, admissible evidence of mutually known objective background circumstances is always admissible, no matter how clear the ‘ordinary meaning’ of the words to be construed is said to be.

[12]Lopes v Taranto [2018] VSCA 288, [66] (Kyrou, McLeish and Hargrave JJA) (Lopes).

[13][2016] VSCA 95 (Santamaria, Ferguson and McLeish JJA).

[14]Lopes [66] (citations omitted).

In Lopes[15] the Court of Appeal also said ‘in every case and whether or not there is ambiguity in the language, the Court should have regard to objective evidence of facts known to both parties as to commercial purpose’.[16]
[15]Ibid.
[16]Ibid [71].

The plaintiff submitted that on the proper construction of SC2(d), the reference to a ‘review of the minimum price under this SC2’ is a reference to the price announced by the plaintiff under SC2(a). The plaintiff submitted:

21These meanings are consistent with Fonterra’s interpretation of the word ‘review’ in SC2(d) and what in fact, was done by Fonterra. The word ‘review’ in SC2(d) does not give the Platts a right to negotiate a new price or review the new minimum price set by Fonterra on 1 June or anytime. Rather, ‘review’, consistent with its natural meaning is a reference to the minimum price (the lower price prior to the increase) being considered in order to make changes if necessary (i.e. to increase the minimum price to the new minimum price, being a higher price), if the Platt’s are not in breach of the Contract at the date the new minimum price is announced. The higher price is then backdated to 1 July of the relevant year. This is in fact what occurred.

22 Fonterra’s interpretation of SC2(d) is supported by the following:
(a) the words in SC2(d) “you are eligible for a review of the minimum price [emphasis added] under this SC2 ....”. It does not say you are entitled to a review of the “new minimum price” (being the higher price);
(b) the review of the minimum price being subject to the Platts not being in material breach under the Contract on the date the new minimum price is announced. If SC2(d) contemplated a review of the minimum price that was in no way connected to the new minimum price but rather to a price potentially higher (or lower) than the new minimum price (as seems to be alleged by the Platts), it begs the question why there is the reference to on the date the new minimum price is announced and not some other relevant date. That date is included in SC2(d) because the reviewed price (assuming the Platts are eligible), is the new minimum price as announced on 1 June;
(c)There is no mechanism in SC2 or anywhere at all in the Contract for an individual review or negotiation of the minimum price or the new minimum price and there is nothing to suggest ‘review’ means an individual negotiation with the Platts;
(d) Mr Roache’s evidence, that save for a very small number of farmers who are in a fixed price contract arrangement, farmers supplying milk to Fonterra are paid by way of the minimum price that is set by Fonterra;
(e) Mr Roache’s evidence that, if the minimum price is increased, Fonterra will automatically increase the price being paid to the farmer (provided they are not in breach of their agreement with Fonterra) and back payments will be made from 1 July of the relevant year based on the increased price. The last increase prior to 30 June (being the last day of the season) will be applied for the entirety of the season, without the need for farmers to request the increased minimum price to be paid to them;
(f) Fonterra’s determination of the minimum price does not and has never involved individual negotiations with farmers;
(g) Fonterra has never increased the minimum price in relation to an individual farmer or group of farmers. Rather the minimum price is applied to all farmers (provided they are not in breach of the agreement);
(h) Prior to the email from Darielle Platt to Mr Roach [sic] on 13 June 2025, the Platts have never requested a review of the minimum price. The increased price has always been automatically applied with no issues being raised by the Platts.

(citations omitted)

The defendants submitted that they were entitled to a review of the new minimum price announced by the plaintiff under SC2(d). They further submitted that they requested such a review and one was not provided. In the circumstances, they also submitted that they were entitled to terminate the contract. The defendants submitted:

10. As to the question of whether Fonterra is in breach of SC2 of the EMSA (plaintiff’s submissions at [25]), on a proper construction of the EMSA it is. Full reference to the terms of the EMSA will be made in oral submissions, but that proper construction includes consideration of the following:
(a) The EMSA must be read in the context of the Dairy Code, and the obligations imposed on Fonterra as set out in paragraphs 3 to 4 above [ie parts of the Dairy Code].
(b) For SC2 to have any work to do, it must require something more than what Fonterra is required to do under the Dairy Code and the standard terms of the EMSA.
(c) The natural meaning of ‘review’ is ‘to look at or examine again’, ‘to consider something in order to make changes in it’, ‘to formally assess something with the intention of instituting change if necessary’.

In particular, the defendants relied upon the express provision in SC2(b) that ‘we will always pay you the higher of the new minimum price or the minimum price’ and in SC2(c) that ‘the new minimum price table for [sic] will replace the minimum price table in Item 9 of this agreement’ to submit that once announced the new minimum price immediately becomes the ‘minimum price’ subject to the rights of the defendants to review it under cl SC2(d). They submitted that this construction gives meaning and work to the ‘review’. The defendants accepted that the proper construction of SC2(d) will involve the Court having regard to the relevant objective surrounding circumstances.

In my view, the plaintiff has established a strong prima facie case that the defendants did not have a right to review the new minimum price under SC2, that the plaintiff acted lawfully in not reviewing it and the defendants acted unlawfully in purporting to terminate it. But the final determination of this issue is properly a matter for trial.

First, SC2(d) provides that the supplier is ‘eligible’ for a review of the minimum price. It is arguable that the term ‘eligible’ has the effect that SC2(d) imposes a condition of eligibility for the defendants to have the benefit of the price-setting mechanism in SC2, rather than SC2(d) providing a right to separately review the price that is set in accordance with SC2(a). That is, that the defendants can only have the benefit of the new minimum price determined under SC2 if they are not in material breach of the EMSA at the time that new minimum price is announced.

Second, there are significant issues with the defendants’ construction that SC2(d) grants an independent right to review the ‘new minimum price’ announced by the plaintiff. This is because:

(a) clause SC2(d) refers to the defendants being ‘eligible for a review under this SC2’, which on one view, assumes that the review is already addressed in SC2 and that clause SC2(d) is addressing only eligibility and not the review itself;

(b) the only ‘review under this SC2’ that is expressly identified is the review by the plaintiff addressed in clause SC2 that results in the new minimum price;

(c) the mechanics of how this further right of ‘review’ relied upon by the defendants could be initiated and determined are not set out in the Contract;

(d) there are no provisions that relate to the outcome of any further review and the determination of, as a result, a further new minimum price from such review.

As a result, there is a strong prima facie case that the plaintiff’s construction is correct. As a result, the plaintiff has a strong prima facie case that the defendants’ termination on the basis of the plaintiff’s failure to conduct a ‘review’ after the new minimum price was set was a breach of the Contract.

BALANCE OF CONVENIENCE

First, the plaintiff has proffered the usual undertaking as to damages. This is a neutral factor.

Second, the status quo is that the defendants supply milk to the plaintiff but there is a substantial dispute to whether the Contract has been terminated. This is a neutral factor.

Third, the injunction does not compel the defendants to embark on a new course of conduct. The defendants have supplied milk to the plaintiff under the Contract for over a year and have supplied milk to the plaintiff since 2017. This is a neutral factor.

Fourth, there is no difficulty in framing the terms of the injunction. This is a neutral factor.

Fifth, the injunctive relief is limited to the defendants’ purported termination of the Contract, and all of the other rights and obligations of the parties under the Contract will not be affected. This is a neutral factor.

Sixth, if the interlocutory injunction is granted, no supervision is required of the Court to give practical operation to the legal rights affected by the proposed injunctive relief.

Seventh, even if some supervision may be required of the parties, this is likely to be minimal and only for a relatively short period of time. The parties have recently disagreed about some matters but they otherwise have a history of co-operation. This is a neutral factor.

Eighth, in my view, the plaintiff has delayed in making the application but the delay is not significant in the circumstances. This is because:

(a) on 25 August 2025, the defendants gave notice of an alleged breach under the Contract and stated that it must be remedied by 1 September 2025;

(b) the plaintiff responded by giving notice that it was appropriate that the dispute be referred to mediation;

(c) the plaintiff took no action at that time to prevent the Contract from being terminated;

(d) on 12 September 2025, the defendants gave notice of their purported termination and that their client would not continue to supply milk under the Contract from after 19 September 2025;

(e) the plaintiff did not take any step to approach the Court to list the matter for an urgent hearing until 16 September 2025.

As a result, in my view, the plaintiff has been on notice since 25 August 2025 that the defendants intended to terminate the Contract. This is because the plaintiff knew that it would not seek to remedy the alleged breach identified in the correspondence received from Hall & Wilcox on 25 August 2025 as the plaintiff contested such a construction of special condition SC 2(d). I accept that the plaintiff then sought to mediate the matter. In all of the circumstances, I consider that although the plaintiff has delayed in seeking urgent interlocutory relief, its delay is insignificant. In addition, the defendants did not rely upon any step that they have taken since 25 August 2025 that would make the granting of the relief unjust or oppressive. As a result, this is not a relevant factor.

Ninth, there is some risk that the interests of third parties may be affected if the defendants cease to supply the plaintiff with milk. Mr Roache has identified that the plaintiff’s customers who buy dairy goods manufactured in the plaintiff’s factories in Victoria will be affected. Mr Roache does not identify how they will be affected. As a result, in my view, this is not a relevant factor.

Tenth, the defendants have not entered into any agreement with the potential new processor. This is a neutral factor.

Eleventh, I have taken into account that the proceeding will not be ready for trial, upon the parties’ joint estimate, until after 4 December 2025 and that, even if a judge is available to hear the matter in December or late January/early February, by the time judgment is delivered, there may only be a short time remaining on the term of the Contract.

Twelfth, if I do not grant the injunction and the plaintiff succeeds at trial, damages are unlikely to be an adequate remedy for the plaintiff’s claims. This is a significant factor in favour of the injunction.

Thirteenth, the plaintiff has a strong prima facie case that the defendants’ purported termination of the Contract is unlawful. This is a significant factor in favour of the injunction.

Finally, if I grant the injunction and the plaintiff fails at trial then:

(a) the defendants would have been retrained from acting on their lawful termination of the Contract and, subject to their rights under the Contract, compelled to continue to supply milk to the plaintiff when they had no contractual obligation to do so and in circumstances in which they ‘want out’ and some co-operation is required. They also relied upon the parties operating otherwise in a ‘free market’ and that voluntariness in business dealings is a significant factor. But I also note that the proposed injunction does not purport to create a commercial relationship but to restrain the defendants from acting on their purported termination until the hearing and determination of the proceeding;

(b) the defendants would have been denied the opportunity to sell their milk to another processor who is ready to purchase their milk and at higher prices and assuming judgment is delivered prior to 30 June 2026, would have to find another processor to purchase their milk (i.e. ended 30 June 2026). I accept that, upon the present evidence, the defendants would likely not make a profit for this season ended 30 June 2026 and this would be the third season in which they would not have made a profit. I have taken this into account. But the defendants would be paid for the milk supplied to the plaintiff (subject to any rights of the plaintiff not to pay the milk in certain circumstances under the Contract);

(c) I have already addressed the issue of the parties’ co-operation under the Contract and the need for any supervision by the Court of the Contract;

(d) the defendants would be entitled to call on the plaintiff’s undertaking if they had suffered any damage. The defendants identified their loss and damage as being the loss of opportunity to supply milk during the relevant period to a different processor on more favourable terms. They submitted that they would not be able to recover 100% of their damages as they would be limited to loss of opportunity damages, which are notoriously difficult to establish at 100%. But damage is likely to be readily quantifiable (e.g. difference in the price paid by the plaintiff for the milk and the price they could have obtained for their milk by the processor, who is ‘currently on stand-by’). As a result, in the circumstances, I reject the defendants’ submission that loss of opportunity damages would be difficult to quantify. The defendants also identified that if the plaintiff did not pay for all of the milk (e.g. by relying upon rights under the Contract) that the defendants may have a claim for damages based upon the lost opportunity to sell that milk on more favourable terms. But although the defendants have made arrangements with a new processor (but not entered into a formal arrangement) the defendants did not inform the Court of those arrangements (even on a confidential basis). As a result, it is not known whether there are any differences between the terms of the Contract and the arrangements with the proposed new processor and, if there are, whether they are material. The defendants did not rely upon clause 10.2 of the Contract or make any submission that the terms of the Contract may prevent them recovering any damages pursuant to the plaintiff’s undertaking as to damages;

(e) on balance, the matters I have addressed are a significant factor against the grant of the injunction.

EXERCISE OF DISCRETION

In my view, the balance of convenience favours the grant of the interlocutory injunction and, as a result, I have decided to exercise my discretion to grant it. This is the course that appears to carry the lower risk of injustice. This is because, in the circumstances I have already addressed:

(a) the plaintiff has a strong prima facie case that the defendants’ purported termination of the Contract is unlawful; and

(b) if I refuse the injunction and the plaintiff succeeds at trial then the plaintiff is likely to suffer greater harm than the defendants would suffer if I grant it and the plaintiff fails at trial.

CONCLUSION AND ORDERS

In conclusion, I will order, upon the plaintiff giving the usual undertaking as to damages, that until the hearing and determination of this proceeding or further order, the defendants, whether by themselves, their officers, servants, contractors, agents or howsoever otherwise, be restrained from taking any action in furtherance of, or in reliance upon, the notice served on the plaintiff by the defendants (by their solicitors Hall & Wilcox) under cover of email dated 12 September 2025, for the reasons set out in that notice. In my preliminary view, the costs of the plaintiff’s application by summons filed 17 September 2025 should be reserved. But I will hear from the parties on this issue. In addition, I will also hear from the parties in relation to timetabling the proceeding to trial.

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[2025] VSC 608

24 September 2025