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Current as of 28/11/14 05:40PM NZST

Hamish Fletcher

Business reporter for the NZ Herald

Don't close door on botulism fight, Danone tells court

Danone put the cost of Fonterra's recall of 38 tonnes of whey protein from a feared botulism scare at 350 million euro.
Danone put the cost of Fonterra's recall of 38 tonnes of whey protein from a feared botulism scare at 350 million euro.

Danone says the High Court shouldn't "close the door" on its legal action against Fonterra Group to await the outcome of an arbitration process that will at least a year to complete.

Danone, the parent company of infant formula maker Nutricia, has launched High Court proceedings in New Zealand against Fonterra Group and arbitration proceedings in Singapore against Fonterra Ltd "to bring all facts to light and to obtain compensation for the harm it has suffered" over a whey protein concentrate recall by New Zealand's biggest company.

The Paris-based company put the cost of Fonterra's recall at €350 million when it revealed its third-quarter results last year.

Danone wants compensation from Fonterra for losses from the botulism scare and the harm it says was caused to its reputation.

Fonterra is arguing today in the High Court at Auckland for the New Zealand proceedings to be stayed - effectively put on halt - while the arbitration process takes place.

But Danone's QC, David Goddard, said today that the court shouldn't "close the door" - even temporarily - while the parties await the outcome of arbitration.

Arbitration in Singapore was still a long way off, he said.

"This isn't going to be resolved in three months or six months or I suggest 12 months," Goddard said.

Goddard said it wouldn't be decided at arbitration whether it can take action against Fonterra's parent, Fonterra Group, rather than Fonterra Ltd, which the arbitration proceedings were against.

The parties needed to get their "skates on" and deal with issues in the New Zealand proceedings, which involved different claims than in the arbitration action even though they arose out of the same events.

Fonterra had to explain why it was unfair for it to file a statement of defence, which it has yet to do so, Goddard said.

The Queen's Counsel representing the New Zealand dairy co-op, Alan Galbraith said all dealings between parties took place between Fonterra Limited and the French company.

These parties had made a supply agreement, which has a process for sorting out disputes that includes arbitration.

Galbraith said issues between the parties should first be determined at arbitration under the terms of the supply agreement and remaining issues could then be sorted out by the courts.

Goddard, however, said that while supply contract was important, it wasn't the "whole picture".

The hearing continues this afternoon.

- NZ Herald

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