The Court of Appeal refused to overturn a High Court ruling made nearly a year ago against the terms imposed on 19 former supplying farmers of New Zealand Dairies (NZDL) when they transferred to Fonterra in 2012.
The group of suppliers alleged unfair treatment when they were not able to share up at the pre-Trading Among Farmers $4.52 price and were paid 5c/kg milksolids less than other farmers for three seasons.
The group estimated Fonterra’s inferior terms as part of a take-it-or-leave-it “growth contract” had cost them collectively about $10 million.
Conversely, Fonterra said it had favourably treated the farmers by paying more than $20 million retrospectively for milk supplied to NZDL, which had gone into receivership.
After the Court of Appeal finding, a spokesman said the company was disappointed by the outcome and how Fonterra had been portrayed by the group of suppliers throughout the process.
Fonterra bought the Studholme plant, founded by the Russian-owned NZDL, for $48m and the farmers’ group argued that considerably discounted price included the arrears of milk payments owed to them.
Their court case was based on alleged inferior terms that breached the open entry provisions of the Dairy Industry Restructuring Act.
The High Court ruled the farmers qualified to become fully-fledged shareholders and Fonterra misled them about their ability to buy more shares.
The Court of Appeal has upheld that decision, rejecting Fonterra's assertion the agreements were supply contracts without share backing and found they should have been covered by DIRA.
"We agree with the Judge that the main reason for imposing the less favourable terms was to placate existing shareholders who might have harboured concerns that the respondents were being allowed to waltz back in," the judgment said.
"It is difficult to escape the judge’s conclusion that they were imposed as a penalty for the respondents’ perceived disloyalty."
The court process has already taken more than two years and the questions of plaintiffs’ losses and legal costs were deferred while Fonterra appealed.
One of the farmers taking legal action, Robert Borst of Oamaru, said they hoped common sense would prevail now and that Fonterra would not spend any more farmers’ money fighting through the courts.
“We have made multiple approaches to Fonterra to get around the table but to no avail.
“We have made approaches through our lawyer and directly to Fonterra managers, councillors and directors.”
Borst thought the 19 farmers, with 35 supply farms, represented 80% of the current milk intake for Studholme plant, where Fonterra has consented plans for a five-fold expansion in milk powder capacity.
