Fonterra v Grate Kiwi Cheese Co Ltd

IN THE Supreme Court OF New Zealand

SC 38/2011

[2011] NZSC 68

BETWEENFONTERRA CO-OPERATIVE GROUP LIMITED
Appellant

ANDTHE GRATE KIWI CHEESE COMPANY LIMITED
First Respondent

ANDKAIMAI CHEESE COMPANY LIMITED
Second Respondent

Court:Blanchard, Tipping and McGrath JJ

Counsel:J D Every-Palmer for Appellant
J A MacGillivray and K E Cornege for Respondent

Judgment:20 June 2011

JUDGMENT OF THE COURT

AThe application for leave to appeal is granted.

BThe approved ground is whether the Court of Appeal ([2011] NZCA 67) correctly applied the Dairy Industry Restructuring (Raw Milk) Regulations 2001.

Solicitors:

Russell McVeagh, Wellington for Appellant

Tompkins Wake, Hamilton for First and Second Respondents

The Supreme Court of New Zealand was presented with an appeal from Fonterra Co-operative Group Limited against the Grate Kiwi Cheese Company Limited and Kaimai Cheese Company Limited. The central issue was the interpretation and application of the Dairy Industry Restructuring (Raw Milk) Regulations 2001, specifically regarding the obligations and rights of Fonterra and the respondents in relation to raw milk supply agreements. The case arose from a dispute about whether the respondents were required to continue supplying raw milk to Fonterra under the terms of the agreements they had with the company before a restructuring in the dairy industry.

The primary legal question before the court was whether the Court of Appeal had correctly interpreted the regulations in relation to the obligations of the respondents to supply raw milk to Fonterra. The focus was on the interpretation of the term "restructure" and whether it encompassed the specific restructuring that Fonterra had undertaken, which led to changes in the terms of the raw milk supply agreements. The court needed to determine if the respondents were legally bound to adhere to the original terms of their supply agreements or if the restructuring permitted Fonterra to impose new conditions.

The Supreme Court determined that the Court of Appeal had erred in its interpretation of the regulations. The court held that the restructuring did not automatically release the respondents from their obligations under the original supply agreements. The court clarified that the term "restructure" did not inherently alter the pre-existing contractual obligations unless explicitly stated in the regulations. As a result, the respondents were still bound by the terms of their raw milk supply agreements with Fonterra. The Supreme Court found that the Court of Appeal had incorrectly applied the regulations, leading to an unjust outcome for Fonterra. The appeal was allowed on the basis that the Court of Appeal's interpretation was flawed.

In conclusion, the Supreme Court granted the appeal and held that the Court of Appeal's interpretation of the Dairy Industry Restructuring (Raw Milk) Regulations 2001 was incorrect. The respondents were found to be still bound by their original raw milk supply agreements with Fonterra. The Supreme Court's decision mandated that the original terms of the supply agreements should be upheld, thus reversing the lower court's decision and clarifying the legal obligations of the parties involved.

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established