Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd

[2025] NSWSC 395

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395

Hearing dates:

27-28 March 2025; further submissions on 2, 3 and 8 April 2025

Date of orders:

28 April 2025

Decision date:

28 April 2025

Jurisdiction:

Equity - Commercial List

Before:

Peden J

Decision:

At [85]

Catchwords:

CONSTITUTIONAL LAW — The Judiciary — Federal jurisdiction — Exercise by State court — Where plaintiffs seek declaratory relief as to whether change of control event clause in licence agreements for use of trade marks will be triggered by restructuring plaintiff group of companies — Whether rights created by the licence agreements owe their existence to federal law — Whether federal or state jurisdiction involved in relation to relief sought in summons

CONTRACTS — Remedies — Declarations — Whether declarations can be made about potential future engagement of change of control event clause in licence agreements for use of trade marks — Whether declarations would amount to an advisory opinion without a concrete factual basis

Legislation Cited:

Constitution ch III, s 76(ii)

Airports (Business Concessions) Act 1959 (Cth)

Corporations Act 2001 (Cth)

Judiciary Act 1903 (Cth) ss 39(2), 78B

Patents Act 1952 (Cth)

Patents Act 1990 (Cth)

Supreme Court Act 1970 (NSW) s 75

Trade Marks Act 1995 (Cth)

Cases Cited:

Ainsworth v Criminal Justice Commission (1992) 175 CLR 564

Australian Solar Mesh Sales Pty Ltd v Anderson (2000) 101 FCR 1

AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 278 CLR 512

Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334

Bramco Electronics Pty Ltd v ATF Mining Electrics (2013) 86 NSWLR 115

CGU Insurance v Blakely (2016) 259 CLR 339

Commonwealth v Sterling Nicholas Duty Free Ltd (1972) 126 CLR 297

Edwards v Santos Ltd (2011) 242 CLR 421

Felton v Mulligan (1971) 124 CLR 367

Ford v Commissioner for Corrective Services of New South Wales [2021] NSWSC 1541

Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421

Hanssen Pty Ltd v Owners of Strata Plan 58161 [2024] WASCA 87

Hobart International Airport Pty Ltd v Clarence City Council (2022) 276 CLR 519

Ibeneweka v Egbuna [1964] 1 WLR 219

LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575

Minister for Immigration and Multicultural Affairs v Ozmanian (1996) 71 FCR 1

Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457

Quach v RU [2024] FCAFC 32

R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141

Re Judiciary Act 1903-1920 (1921) 29 CLR 257

Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438

Singh v Charles [2022] NSWSC 743

Unions NSW v New South Wales (2023) 277 CLR 627

Zurich Australian Insurance Ltd v CIMIC Group Ltd [2024] NSWCA 229

Category:

Principal judgment

Parties:

Fonterra Brands (Australia) Pty Ltd (First Plaintiff)
Bonland Cheese Trading Pty Ltd (Second Plaintiff)
Bega Cheese Ltd (Defendant)

Representation:

Counsel:
V Whittaker SC, P Abdiel and A Khadra (Plaintiffs)
G Rich SC and C Murphy (Defendant)

Solicitors:
Herbert Smith Freehills (Plaintiffs)
Addisons (Defendant)

File Number(s):

2024/00441145

Publication restriction:

Nil

JUDGMENT

1. Fonterra Brands (Australia) Pty Ltd is part of a group of companies (Fonterra Group) ultimately controlled by Fonterra Co-operative Group Ltd (Fonterra). Fonterra Brands, and its wholly owned subsidiary, Bonland Cheese Trading Pty Ltd, bring these proceedings practically on behalf of the Fonterra Group.

2. Fonterra Brands and Bonland Cheese have the benefit of Bega Cheese trade marks under two licence agreements. They seek declaratory relief that, if the Fonterra Group is restructured and it divests itself of its Australian consumer business, including Fonterra Brands and Bonland Cheese, those steps will not trigger “change of control” clauses within the licence agreements.

3. Fonterra Group’s proposal, the subject of the proposed declarations, is described as an internal reorganisation followed by a divestment of a head company controlling Fonterra Brands and Bonland Cheese. That divestment is expected to occur by way of a trade sale or an IPO. Fonterra Group seeks certainty as to the assets it can sell; if there is a risk that the Bega Cheese trade marks will not be able to be used by a buyer, then Fonterra Group has concerns that the likely price of any business sale will be jeopardised.

4. Bega Cheese Ltd resists the making of the declarations, primarily on the basis that the Court lacks jurisdiction to do so, because there is no certainty or “genuine controversy” as to the exact nature of the restructure and sale that may eventuate, and the declarations sought would amount to an advisory opinion without a concrete factual basis. Alternatively, Bega submits that, if the Court has jurisdiction, it ought not be exercised on discretionary grounds.

5. The issues are:

1. Does the Court have jurisdiction to make a declaration about whether the pleaded proposed transaction amounts to a “Change of Control Event” within the meaning of the licence agreements?

2. If so, should the Court exercise its discretion to make the declarations sought?

6. For the reasons that follow, I do not consider the Court has jurisdiction to make the declarations sought, and, even if it did, it would not be appropriate to exercise the discretion to do so.

Background

7. Fonterra is a co-operative company, owned and supplied by around 8,000 shareholding dairy farms across New Zealand. It is listed on the New Zealand Exchange.

8. Fonterra operates globally and is one of the largest producers of dairy products in the world. Its business involves the sale of milk solids for three main purposes: for use as ingredients in products such as powders and proteins (80%); for use in products sold to hospitality businesses (13%); and for use in everyday consumer dairy products, such as milk, cheese and butter (the consumer business) (7%). As part of its consumer business, Fonterra (through Fonterra Brands and Bonland Cheese) has the benefit of Bega’s trade marks.

9. On 16 May 2024, Fonterra announced that it was exploring the proposed divestment of some, or all, of its global consumer business and its integrated businesses in Oceania and Sri Lanka. This was a change from Fonterra Group’s long-term strategy that it had announced on 21 September 2021, where, in relation to the Australian business, it was “considering the most appropriate ownership structure for this business[;] one option is an IPO, with the intention that [Fonterra] retain a significant stake.”

10. On 30 September 2024, Fonterra released a “revised strategy”, which indicated that it was “exploring divesting options for our global Consumer businesses” and said “[i]t remains our intention to seek shareholder approval prior to divesting these businesses”.

11. On 16 October 2024, Fonterra notified the Foreign Investment Review Board (FIRB) of a proposed internal reorganisation of Fonterra’s Australian subsidiaries “in preparation for a potential divestment (which may be by sale or IPO) of Fonterra’s Australian business”. Reference was made to the restructure occurring before divestment, because of the Bega licence agreements. The letter outlined some proposed reorganisation steps, but indicated that “the fulfilment of each Proposed Reorganisation Step may be influenced by commercial considerations as they arise.”

12. On 10 November 2024, Fonterra’s board resolved to commence a “dual track sale process” for the divestment of the consumer business:

… provided that any final terms of sale, or a final decision to list the Extended Consumer business on an exchange, would be subject to final approval by the Board and shareholder approval.

13. On 11 November 2024, Fonterra announced an update on its “work to explore potential divestment options for its global Consumer business, as well as [its] integrated businesses Fonterra Oceania and Fonterra Sri Lanka”. The announcement stated:

[Fonterra] has decided to proceed with a sale process for these businesses … [W]e have assessed both a trade sale and IPO as attractive divestment options and will now prepare for a sale process which will pursue both options … [W]e will thoroughly test the terms and value of both a trade sale and IPO with the market before seeking support from farmer shareholders for a divestment option through a vote.

14. On 21 November 2024, Fonterra wrote to Bega about the “potential internal reorganisation” and sought confirmation that the proposed reorganisation would not constitute a “Change of Control Event” within the meaning of the licence agreements. Bega did not agree with that interpretation of the relevant clause. Fonterra claimed a dispute had therefore arisen concerning the licences.

15. During late 2024, the parties engaged in correspondence concerning the proper construction of the licence agreements and the change of control clauses.

16. On 27 November 2024, Bega’s lawyers wrote to Fonterra’s lawyers:

Bega maintains its position … that

1. Clause 16A.1 of the Licence Agreements is not applicable or enlivened … as Fonterra has not sought Bega’s consent to a Change of Control Event occurring;

2. There is no justiciable dispute between the parties; and

3. The Court will not make the declarations that Fonterra seeks; including because they are in the nature of judicial advice in respect of a hypothetical or potential transaction or transactions …

Bega does not consent to the declarations sought in the draft Summons.

17. On the same day, the plaintiffs filed the summons.

18. On 19 February 2025, Fonterra announced that:

… we are pursuing both a trade sale and … IPO as potential divestment options. Our intention is to thoroughly test the terms and value of both a trade sale and IPO before selecting an option to put to farmer shareholders for a vote … we are today indicating the next steps that are required in both processes …

As part of the trade sale process, over the coming weeks Fonterra will be engaging with potential buyers of the Consumer and associated business.

19. On 10 March 2025, Fonterra announced “roadshow meetings with potential investor groups as part of the divestment process” and said that “[a] divestment remains subject to approval from Fonterra’s farmer shareholders”.

20. Part of the roadshow documentation included:

Fonterra reserves the right to negotiate, and enter into definitive documents relating to a Transaction … with any person at any time, and to reject any and all offers or proposals … regarding some or all of NewCo and the Consumer Business …

This document does not constitute any contract or commitment on the part of Fonterra to proceed with any sale or transaction …

Fonterra … is exploring the opportunity for a third-party to acquire its Consumer and associated businesses (“NewCo”) …

RemainCo will aim to align with the NewCo acquiror’s requirements throughout the transaction, through the establishment of a joint forum to oversee the separation process …

21. The documentation also indicated that there would need to be an “overarching Separation Agreement”, and that before pre-signing, there would need to be discussion about “entity reorganisation planning”. Potential purchasers were told that the transaction “will be subject to New Zealand’s Overseas Investment Act 2005” and that FIRB approval would be required by any proposed purchaser who was a “foreign person” for the purpose of the relevant legislation.

22. EY produced a “detailed step plan” dated 10 March 2025, setting out the requirements of a “credible transaction structure” and the “draft steps” needed in Australia to bring about a proposed internal restructure.

23. However, as at the date of the hearing, there were no agreed terms with any purchaser for any proposed internal restructure or proposed divestment.

Relief sought

24. The plaintiffs sought three declarations:

1. … that the Proposed Transaction (as defined at C.26 to C.30 of the Commercial List Statement dated 27 November 2024 … would not constitute a Change of Control Event within the meaning of the NSW and ACT Licence Agreement (as defined at C.12 of the CLS).

2. … that the Proposed Transaction would not constitute a Change of Control Event within the meaning of the Other States Licence Agreement (as defined at C.20 of the CLS).

3. … that on the proper construction of clause 16A.1 of each of [the licence agreements], neither [Fonterra Brands] nor [Bonland Cheese] would be in breach by reason of the Proposed Transaction being effected.

25. The “Proposed Transaction” is described in the pleading as follows:

26. An initial aspect of the Proposed Transaction involves an internal reorganisation of the Fonterra Group’s Australian business …

27. The Internal Reorganisation relevantly involves [Fonterra Brands], NZMA and Fonterra Australia as follows [reference is made to the 16 October 2024 notification to FIRB, referred to above].

28. Subsequent to the Internal Reorganisation, the Proposed Transaction will involve the divestment of Fonterra’s Australian assets including indirect ownership and control of [Fonterra Brands] and Fonterra Australia.

29. The Divestment is to occur via sale or initial public offering of NZMI [which would own Australasian Food Holdings, which would own Fonterra Australia, which would own Fonterra Brands. Fonterra Brands would, in turn, own Bonland Cheese].

30. In any event, at all times the Internal Reorganisation up to and including the Divestment, [Fonterra Brands] will remain directly owned by Fonterra Australia.

26. Fonterra Group accepted that the particular details of the “reorganisation” and “divestment” are not yet known, and neither is it known whether there will in fact be a divestment. Nevertheless, Fonterra submitted that there is utility in the specific declarations, because they would allow it to continue testing the market for potential buyers, with certainty that there would be no change of control event triggered.

27. The plaintiffs’ senior counsel explained the litigation including:

1. Any declarations could not “protect the transaction from … [the] contingency [that the transaction does not eventuate, for example, because the board does not approve it]”.

2. “True it is ... that it is not certain the proposed divestment will be finalised. That is a future matter, and it is contingent ... it requires board approval, farmer shareholder approval, and it may be that it requires regulatory approval.”

3. “[T]he uncertainty that could kill this transaction … [is that] the price that is going to be put is going to be materially affected by this issue … [and] purchasers simply may not engage”.

Change of control clauses

28. Fonterra has changed its corporate structure over time. The two licence agreements in issue refer to the names of the relevant parties at the time.

29. As at May 2001, Bonland Cheese (formerly Bega Cheese, and formerly controlled by the defendant, Bega), had the benefit of an exclusive licence in relation to Bega’s trade marks. In the NSW and ACT Licence Agreement, Bonland Cheese granted to Fonterra Brands a non-exclusive sublicence in relation to the Bega trade marks. In the Other States Licence Agreement, also entered into in May 2001, Bega granted Fonterra Brands an exclusive licence of various Bega trade marks in relation to certain products for sale in Australia, other than in NSW and the ACT.

30. On 30 June 2002, the licence agreements were amended. As at 1 July 2002, the day after the amendment deeds were entered into, the corporate structure was as depicted in the diagram below.

31. However, the current structure of the Fonterra Group companies is depicted in the diagram below.

32. Through this litigation, Fonterra Group wants to know whether, if it restructured its corporate group and sold NZMI as proposed in the below diagram, it would be in breach of the change in control clauses and enable Bega to terminate the licence agreements.

33. The two licence agreements are largely identical for present purposes, other than slight differences in the change of control provision outlined below. Both licence agreements were entered into on 8 May 2001 and amended on 30 June 2002.

34. From 1 July 2002, the NSW and ACT Licence Agreement change of control provision read:

16A CHANGE OF CONTROL

16A.1   Change of Control of the Licensee [ie Bonland Cheese]

[Bonland Cheese] must ensure that no Change of Control Event occurs in relation to [Bonland Cheese] and that it does not cease to be a wholly owned subsidiary of [Fonterra Brands], without the prior written consent of Bega. The parties agree that any breach of this clause by [Bonland Cheese] will be deemed to constitute a failure by [Bonland Cheese] to observe a term of this Agreement which has a material adverse effect on Bega for the purposes of clause 16.1(a).

35. In the Other States Licence Agreement, change of control did not include any requirement about a wholly owned subsidiary of Fonterra Brands. The clause provided:

16A CHANGE OF CONTROL

16A.1 Change of Control of Licensee [ie Fonterra Brands]

[Fonterra Brands] must ensure that no Change of Control Event occurs in relation to [Fonterra Brands] without the prior written consent of Bega. The parties agree that any breach of this clause by [Fonterra Brands] will be deemed to constitute a failure by [Fonterra Brands] to observe a term of this Agreement which has a material adverse effect on Bega for the purposes of clause 16.1(a).

36. From 1 July 2002, the following parts of definitional clause 1.1 (as amended) operated (placed out of alphabetical order):

In this Agreement, unless the context requires otherwise:

...

“Change of Control Event” means, and will occur upon if a person other than an Approved Person acquiring Control of the relevant party and, during the period that [Fonterra Brands] is Controlled by AFH [Australasian Food Holdings (Australia) Pty Ltd, formerly NZMA], will also occur if [Fonterra] ceases to be the Controlling Shareholder of AFH.”

A Change of Control Event does not occur in relation to the Licensee:

(a)   as a result of a person acquiring Control of an Approved Person; or

“Approved Person” means, in the case of the Licensee:

(a)   Bonlac;

(b)   [Fonterra]; or

(ba)    AFH for so long as [Fonterra] is the Controlling Shareholder of AFH; or

(c)   such other person as Bega may approve in writing.

“Control” in relation to a body corporate, means the ability to do one of the following things (whether directly or indirectly or through one or more intervening persons, companies or trusts):

(a)   control the composition of the body corporate’s board of directors;

(b)   be in a position to cast, or control the casting of, more than one half of the votes that might be cast at a general meeting of the members of the body corporate; or

(c)   hold or have a beneficial interest in more than one half of the issued share capital of the body corporate;

…

“Controlling Shareholder” means … a person who:

(a)    controls the appointment or election of a majority of the directors comprising the body corporate’s board of directors; and

(b)    is in a position to cast, or control the casting of, more than one half of the shares that might be cast at a general meeting of the body corporate; and

(c)    is the registered and beneficial owner of more than one half of the issued share capital of the body corporate.

37. To make the declarations sought by Fonterra Group, it would be necessary to determine the proper construction of both clause 16A and the particular “proposed transaction” to determine whether there would be a breach if the “proposed transaction” were to be implemented at some future time.

38. However, a preliminary issue, about which the parties are in dispute, is whether federal or state jurisdiction would be engaged in the making of declarations concerning the licence agreements.

State or federal jurisdiction engaged?

39. In their submissions in chief, the plaintiffs did not canvass the potential issue of federal jurisdiction in detail. They submitted that, although the declarations concerned the construction of agreements granting licenses to use Bega’s trade marks, this was insufficient to bring the matter within federal jurisdiction. Bega did not address the issue of federal jurisdiction in its submissions in chief at all.

39. At the hearing, I raised with the parties the question of whether federal jurisdiction was engaged because the licence agreements concerned trade marks, which are the creation of federal law: see Trade Marks Act 1995 (Cth). In closing oral submissions, the plaintiffs maintained that federal jurisdiction was not being exercised, while Bega submitted that it was. In view of that divergence between the parties, I invited further written submissions on the issue of jurisdiction.

40. The plaintiffs’ position in their further submissions was that, although the licences to use the trade marks were contractual rights “in respect of a right or property which is the creation of federal law”, the contractual right which was in fact in question in the proceedings was the “benefit and obligation of the change of control clauses in the [licence agreements]”: something which did not owe its existence to federal law.

41. Bega’s position was that the making of the declarations sought by the plaintiffs would involve the exercise of federal jurisdiction because:

1. the licence agreements were contracts, whose subject matter was property, that existed only by reason of federal law; and

2. any justiciable controversy between the parties concerns the question of whether the plaintiffs will have a right to continue using Bega’s trade marks after the Proposed Transaction, and so is a controversy concerning property or rights created by federal law.

43. On 7 April 2025, the matter was listed for judgment on 10 April 2025. On 8 April 2025, the parties considered it may be appropriate to issue a Notice of a Constitutional Matter pursuant to s 78B Judiciary Act 1903 (Cth) to Attorneys-General of the Commonwealth and the States. Those notices were served on 11 April 2025.

44. Since then, no Attorney-General has expressed a wish to intervene or to remove the proceedings to the High Court. This Court has previously considered that two weeks’ notice is sufficient to satisfy the requirement to provide “a reasonable time” for the Attorneys-General to consider intervening or removing the cause to the High Court: see eg Ford v Commissioner for Corrective Services of New South Wales [2021] NSWSC 1541 at [7] (Campbell J); Singh v Charles [2022] NSWSC 743 at [43]-[45] (Garling J).

45. Assuming that a matter arising under the Constitution exists in these proceedings, in circumstances where 17 days have elapsed since issuance of the notices without any substantive response, I am satisfied that a reasonable time has elapsed since the giving of the notice. Accordingly, judgment ought to proceed.

46. Although the issue is finely balanced, I consider that, for any or all of the following reasons, federal jurisdiction would not be exercised, if it were otherwise appropriate to make the declarations sought.

Principles

47. White and Stern JJA and Griffiths AJA explained in Zurich Australian Insurance Ltd v CIMIC Group Ltd [2024] NSWCA 229 (CIMIC) at [517] that this Court is vested with federal jurisdiction “in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon [the High Court]” (aside from various exceptions which are presently irrelevant): Judiciary Act 1903 (Cth) s 39(2). Matters in respect of which jurisdiction may be conferred upon the High Court include “any matter … arising under any laws made by Parliament”: Constitution s 76(ii). It follows that this Court exercises federal jurisdiction when it deals with “any matter … arising under any laws made by [the Commonwealth] Parliament”.

48. A “matter” is not a “legal proceeding”, but rather the “subject matter for determination in a legal proceeding": Re Judiciary Act 1903-1920 (1921) 29 CLR 257 (Re Judiciary Act) at 265 (Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ). A matter will arise under federal law “if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law”: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 (Ex parte Barrett) at 154 (Latham CJ).

49. It is a particular application of the above principle from Ex parte Barrett to say that while a claim for damages for breach or for specific performance of a contract is a claim for relief under State law, “if the contract … is in respect of a right or property which is the creation of federal law, the claim arises under federal law”: LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 (LNC Industries) at 581 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ); Edwards v Santos Ltd (2011) 242 CLR 421 at [45] (Heydon J; French CJ, Gummow, Crennan, Kiefel and Bell JJ agreeing); CGU Insurance v Blakely (2016) 259 CLR 339 (CGU Insurance) at [29] (French CJ, Kiefel, Bell and Keane JJ).

Application

50. The rights created by the licence agreements are not themselves the creation of federal law. The licence agreements confer on each of the plaintiffs in personam rights to use the Bega trade marks for the term of the agreements and subject to their terms and conditions.

51. While the rights conferred by the licence agreements could not exist, but for the antecedent registration of the trade marks under the Trade Marks Act, the licence agreements do not confer on the plaintiffs any rights created by that legislation. Indeed, the agreements make clear that ownership and responsibility for the registration of the trade marks remains with Bega (cl 9.1), and that the plaintiffs are not entitled to “exercise any of the rights conferred on authorised users of trade marks under the Trade Marks Act … in respect of any Trade Mark … without the prior written consent of Bega”, or unless otherwise authorised under the agreements (cl 9.1(i)). The in personam rights conferred by the licence agreements bear an incidental relationship to rights created by federal law, but are not created by federal law.

52. In any event, for federal jurisdiction to be attracted, the federal question — that the right or duty the existence of which is owed to federal law or depends upon federal law for its enforcement — must form part of the controversy between the parties, or else it will merely be an incidental consideration “lurking in the background”: Felton v Mulligan (1971) 124 CLR 367 (Felton) at 388 (Windeyer J). In Australian Solar Mesh Sales Pty Ltd v Anderson (2000) 101 FCR 1 (Solar Mesh) at [16] (Burchett J, Wilcox and Tamberlin JJ agreeing) put it this way (emphasis added):

It may be that the transformation of an action in a State jurisdiction to a federal proceeding occurs when the federal issue comes under serious examination by the court as an issue in the proceeding, whatever the question on which the decision ultimately turns.

53. So, for example, in Moorgate Tobacco Co Ltd v Philip Morris Ltd (1980) 145 CLR 457, although the dispute between the parties rested largely on the existence and terms of an alleged licence agreement, by which Moorgate Tobacco granted to Philip Morris a licence of all rights in Australia in respect of certain trade names and trade marks, the declarations sought by Moorgate attracted the exercise of federal jurisdiction because they “involved questions which were crucial to the outcome of … trade mark applications” and “raised for decision matters arising under the Trade Marks Act”: at 479-480 (Stephen, Mason, Aickin and Wilson JJ). The plurality observed at 480 that:

…the pleadings and the manner in which the case was fought create the strong impression in our minds that registration of the trade mark … was the real bone of contention between the parties.

54. That is not the case here. No issue is raised as to the existence, registration, scope or otherwise of Bega’s trade marks. Although it is true that, as Bega submitted, the proceedings are motivated by a concern on the part of the plaintiffs as to their right to use the trade marks after the Proposed Transaction, that concern is hypothetical.

55. Nor is the Court being invited to consider or construe the boundaries of the right or property created by federal law, as was the case in Bramco Electronics Pty Ltd v ATF Mining Electrics (2013) 86 NSWLR 115. There, the Court was required to determine questions of breach of a licence agreement for the use of a patent to manufacture devices, the answers to which could only be identified through construction of the patent itself: see [35]-[36] (Barrett JA, Meagher JA agreeing); [127] (Ward JA, as the President then was). This was because the rights conferred by the licence agreement “had content and meaning only when the nature and extent of the rights under the patent were identified”: at [35] (Barrett JA, Meagher JA agreeing).

56. The question of whether Bramco’s actions (which were said to have constituted a breach of the licence agreement) offended the monopoly created by the patent, could only be resolved by construing the patent. Meagher JA agreed with Barrett JA that this led to the conclusion that the parties’ contract was in respect of a right or property which was the creation of federal law, and the proceedings involved a matter arising under the Patents Act 1990 (Cth): at [36].

57. Here, neither the Trade Marks Act, nor any federal statute, is relied upon as being the source of any right claimed or defence asserted in the proceedings. As Windeyer J explained in Felton at 388, “a matter does not arise for adjudication under a law made by the Commonwealth Parliament unless a statute is relied upon as giving a right claimed or as the direct source of a defence asserted.”

58. The parties sought to rely on Solar Mesh in different ways. That case involved a claim in contract and tort against patent attorneys concerning negligent performance of a contract of retainer aimed at securing a right to a patent for an invention. Relying on LNC Industries, Burchett J (Wilcox and Tamberlin JJ agreeing) considered that the action was within federal jurisdiction because the retainer was “aimed at the securing of a right which was the creation of federal law”, and “both on the pleadings and … in the conduct of the case, questions were raised involving the operation of the patents legislation of the Commonwealth”: at [10], [17].

59. The result in that case can be distinguished here. Leaving aside analysis of the subject matter of the retainer in question, the action in that case would have become an action in federal jurisdiction in any event because the defence raised directly the question of whether the appellant had an entitlement to a patent under the Patents Act 1952 (Cth) or Patents Act 1990 (Cth): Solar Mesh at [17].

60. There is therefore nothing to suggest that the Trade Marks Act is anything more than an incidental consideration in this matter It is “lurking in the background”, and no part of the dispute between the parties has brought it to the foreground: Felton at 388.

61. Finally, for completeness, I note that although the parties did not engage with the debate in the authorities as to whether federal jurisdiction could be attracted by the mere fact that a party’s ability to sue and be sued is conferred by, and dependent upon, the Corporations Act 2001 (Cth), that issue is not relevant here. The current prevailing view, with which I agree, is that the mere involvement of an entity incorporated under the Corporations Act does not, of itself, mean that the proceedings involve a matter arising under Commonwealth law: see eg Hanssen Pty Ltd v Owners of Strata Plan 58161 [2024] WASCA 87 at [79]-[103] (Buss P, Mitchell and Hall JJA) and the cases there cited.

62. It follows that in making any appropriate declarations here, this Court would be exercising state and not federal jurisdiction.

Conditions for a declaration if state jurisdiction is invoked

63. Superior courts have an inherent power to grant declaratory relief: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581 (Mason CJ, Dawson, Toohey and Gaudron JJ). Gibbs J stated in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 (Forster) at 435 that the power to make a declaration “is a very wide one” and where it is a question of defining the rights of two parties, the power “is almost unlimited” and is “only limited by its own discretion”.

64. Consequential relief need not be sought alongside declaratory relief: s 75 Supreme Court Act 1970 (NSW).

65. The requirements necessary for a superior court to have jurisdiction to make a declaratory order were explained by Gibbs J in Forster at 437-438. His Honour repeated a summary by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 of the conditions which should be satisfied before the discretion is exercised in favour of making a declaration:

1. the question must be a real and not theoretical question;

2. the person raising it must have a real interest to raise it; and

3. there must be a proper contradictor, being someone who has a true interest to oppose the declaration sought.

66. These conditions were also approved in Hobart International Airport Pty Ltd v Clarence City Council (2022) 276 CLR 519 (Hobart International) at [32] (Kiefel CJ, Keane and Gordon JJ). Although the reasons given by Gibbs J refer to the exercise of the discretion to make a declaration, the conditions his Honour identified relate both to the issue of jurisdiction and, where jurisdiction exists, also to discretion: see CIMIC at [558]-[561].

67. The first condition precludes the giving of “advisory opinions”, namely, answers to questions which are hypothetical or academic. As explained by Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 (Bass) at [48], “one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties”.

68. As to the second condition, in Forster at 438, Gibbs J referred, with evident approval, to the comments of Lord Radcliffe in Ibeneweka v Egbuna [1964] 1 WLR 219 at 225 that “judicial pronouncements ought not to be issued unless there are circumstances that call for their making”. As otherwise explained in Hobart International at [34], a party will have a “sufficient” or “real” interest in obtaining a declaration where it “pertains to declaring the existence of legally enforceable rights or liabilities of the applicant”.

69. The question then is whether the declarations sought will:

1. quell any controversy, or

2. instead tend to “complicate the determination of issues which would arise” if the effect of a restructuring transaction were later litigated, or “embarrass the judge who might have to determine such a claim where the facts elicited might be different”: CIMIC at [424], citing Minister for Immigration and Multicultural Affairs v Ozmanian (1996) 71 FCR 1 at 32-33 (Kiefel J).

Consideration

70. I do not accept Fonterra’s submission that there is a “concrete and established” situation, or a dispute between the parties that ought to be quelled by way of the declarations sought. Nor do I consider there would be utility in making the declarations.

71. Until a particular restructure and a particular sale process are identified, it is not apparent that the specific declarations sought would be of any utility.

72. Here, because the steps that will be taken for a sale are not known, the declarations do not relate to a final or ultimate issue which will determine the rights of the parties: CIMIC at [563]. There is no “defined event” that is reasonably foreseeable, because Fonterra Group has expressly reserved to itself the option to change the components of its business restructure or what is sold, including because a purchaser wants that change, or if the board, shareholders or regulators require it. For that reason, Fonterra’s senior counsel accepted that “this is [not] the only way that this proposed divestment could occur”.

73. That supports the conclusion that the declarations ought not be made, because the particular restructure and transaction that might constitute a “change of control” has not been determined by Fonterra Group. In circumstances where the restructure and transaction may change shape or never eventuate, I do not accept there is currently a “real” or “foreseeable consequence” for the parties. Similarly, it cannot be said that the particular pleaded issue “is likely to arise in the future” (CGU Insurance at [102] (Nettle J)), such that the declarations about the specific pleaded “proposed transaction” ought be considered and made (if otherwise appropriate).

74. Further, I do not accept the plaintiffs’ submission that the order of restructuring steps does not matter, because there is a proposed final structure. As the plaintiffs conceded, there are likely to be significant taxation issues involved in any restructure, and any potential purchaser may wish to negotiate a different structure. Further, it is possible that one of the interim steps taken could amount to a change in control, even if the proposed end structure does not demonstrate that.

75. I accept that a Court may make a declaration as to a future matter. Fonterra’s senior counsel relied upon Commonwealth v Sterling Nicholas Duty Free Ltd (1972) 126 CLR 297. In that case, Sterling sold duty free goods to buyers, who intended to export them by sending them from Australia by ship or aircraft or by taking them when they left Australia by ship or aircraft. Sterling sought the permission of the customs department under the Airports (Business Concessions) Act 1959 (Cth) to supply the goods to persons within the airport, before they departed Australia, and that permission was refused. Sterling sought and obtained a declaration that to supply goods as it intended would not breach the legislation. The majority of the High Court disagreed, and the declaration was vacated.

76. While in the minority in the conclusion, Barwick CJ stated the following oft quoted passage at 305:

The jurisdiction to make a declaratory order without consequential relief is a large and most useful jurisdiction. In my opinion, the present was an apt case for its exercise. The respondent undoubtedly desired and intended to do as he asked the Court to declare he lawfully could do. The matter, in my opinion, was in no sense hypothetical, but in any case not hypothetical in a sense relevant to the exercise of this jurisdiction. Of its nature, the jurisdiction includes the power to declare that conduct which has not yet taken place will not be in breach of a contract or a law.

77. I do not accept that the situation in that case is analogous to the present. There, Sterling had been refused permission to carry out a specific action on the basis of the proper construction of the legislation. In contrast, here, Fonterra Group does not know exactly what course it will take, despite clearly taking steps to engage with the market as it has announced. It has no scheduled sale, nor restructure agreed by a purchaser. Further, it has not provided a final restructure and transaction plan to Bega for its potential agreement under the licence agreements.

78. The situation might have been different, had Fonterra Group been prepared to propose a restructure to Bega that was not dependent on a purchaser’s preference or other divestment process. However, Fonterra Group has chosen to leave the detail to negotiation with purchasers, and, therefore, has chosen to retain imprecision.

Conditions for a declaration if federal jurisdiction is invoked?

79. Even if I ought to have concluded that federal jurisdiction would be engaged, I do not consider there to be a justiciable controversy between the parties so as to give rise to a Chapter III “matter”. Without the existence of a matter, this Court cannot make the declarations sought by the plaintiffs: AZC20 v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs (2023) 278 CLR 512 (AZC20) at [30] (Kiefel CJ, Gordon and Steward JJ).

79. One of the necessary elements of a “matter” in constitutional terms is “[a] concrete or adequate adversarial nature of the dispute sufficient to give rise to a justiciable controversy”: Hobart International at [26]; AZC20 at [31]. This requires “some immediate right, duty or liability to be established by the determination of the Court”: AZC20 at [32], citing Unions NSW v New South Wales (2023) 277 CLR 627 at [15] (Kiefel CJ, Gageler, Gordon, Gleeson and Jagot JJ). This requirement prevents the Commonwealth Parliament from conferring on Courts exercising federal jurisdiction the ability to determine abstract questions of law: Re Judiciary Act at 266-7 (Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ).

80. There is an “overlap between some of the relevant principles concerning what is a ‘matter’ for the purposes of federal jurisdiction and the need for there to be a controversy for declaratory relief to issue”: CIMIC at [516]. So, as I have concluded earlier that there is no controversy between the parties that ought to be quelled by making the declarations sought, for similar reasons, I do not accept that there is a “matter” that would provide a basis for exercising federal jurisdiction.

Should the Court exercise its discretion to make a declaration?

82. The parties accepted that in circumstances where there is a question about the Court’s jurisdiction to make a declaration because of some perceived uncertainty or the hypothetical nature of the relief, there is some blurring with the exercise of the discretion to make a declaration. It might be accepted that where jurisdiction to make a declaration is found, there are unlikely to be many situations where the declaration would nevertheless be refused as a matter of discretion.

83. I do not accept the plaintiffs’ submission that the “size of the transaction” and the “costs involved” in the proposed transaction are relevant factors in the exercise of the Court’s discretion. That was not the substance of Kirby J’s comment in Bass at [98]; his Honour was concerned with the size and cost of the particular litigation, that had been on foot for over four years. The mere commercial preference of Fonterra Group for an advisory opinion to enable it to structure its affairs in the most profitable way is not a reason to make the declarations sought. Those declarations would not relate to a factual transaction, but merely a hoped-for transaction that may never eventuate. As Fonterra’s senior counsel conceded, if no declarations were made, Fonterra would “attempt to restructure the proposed divestment”.

Is the Proposed Transaction a “Change of Control Event”?

84. Having concluded that the Court either does not have jurisdiction to make the declarations sought, or ought not make them, it would be inappropriate to decide whether the Proposed Transaction is a “Change of Control Event”, on the contingency that the anterior conclusions are wrong. To do so would provide “an advisory opinion on the proper construction” of the license agreements, “which is beyond the Court’s jurisdiction to give”: see Quach v RU [2024] FCAFC 32 at [28] (Perry, Meagher and Shariff JJ).

Orders

85. The appropriate orders are:

1. Amended summons dismissed.

2. Plaintiffs to pay the defendant’s costs as agreed or assessed.

3. Grant liberty to the parties to apply for an alternative costs order within seven days of today's date, setting out the application and any evidence and submissions of no more than 3 pages upon which they rely.

4. Should such an application be made for an alternative costs order, the responding party is to provide evidence and submissions of no more than 3 pages opposing any alternative costs order within seven days of receiving the first application.

5. The Court will determine any such alternative costs application on the papers, if appropriate.

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Amendments

28 April 2025 - Removed "not" in second sentence of [40]

Decision last updated: 28 April 2025