Richard Inder: A spoonful of vital medicine

Fonterra's discomfort over the "Powdergate" case is an unpalatable side-effect of necessary medicine.

It is a matter of credibility.

The New Zealand Government came clean on the Waiheke Island foot-and-mouth disease scare to show it recognised the importance of trust in international trade.

Had the disclosure come through anything but official channels, faith in New Zealand's systems of monitoring and the integrity of the public service would have been compromised.

These are qualities worth a lot more to the economy than the temporary closure of borders.

It is the same for Fonterra.

With the co-operative accounting for a fifth of New Zealand's exports, much of the country's prosperity depends on a belief that its officers play with a straight bat.

The Auckland District Court has heard a number of disturbing allegations about the dairy industry in the lead-up to the creation of Fonterra from the 2001 merger of Hamilton-based New Zealand Dairy Group and Kiwi Co-operative Dairies.

As the Business Herald has documented over the past four weeks, witnesses have painted a picture of warring factions, where exports outside the New Zealand Dairy Board monopoly were commonplace.

It could be easy to dismiss the allegations as old history.

Many people involved in the case have since left and the dynamics of the industry have changed dramatically since Fonterra was formed.

Although arguments will arise over Fonterra's direction, there is now a single command. Competition with rivals such as Westland and Tatua is transparent and open.

However, there is first the question of culture, which lasts much longer than the tenure of people within an organ-isation.

The hearing has also raised a number of questions over the role of sitting directors, not least that of the co-operative's chairman, Henry van der Heyden, along with Greg Gent and Graeme Hawkins.

All three were sitting on a committee overseeing the Fonterra inquiry that was accused of bias against Kiwi.

Finally, Craig Norgate, the executive who first led Kiwi and later Fonterra at the time the alleged exports took place, remains a key player on the business scene.

It is unclear whether any of these questions will get a full airing. After all, justices of the peace Ken McKay and Don Harrow yesterday only passed the allegations against the defendants to the district court.

But the process is as important as the result and, to its credit, Fonterra appears to recognise this.

The allegations against the Fonterra board committee - perhaps the most stunning evidence of the entire depositions hearing - came from commercial lawyer Richard Mehrtens.

He was in charge of the Fonterra investigation and was only able to make his views on the case known because Fonterra had waived its right to client privilege.

Ironically, the trial could also serve to galvanise Fonterra.

If it does lead to the airing of the less seemly side of dairy industry politics, it could give existing Fonterra workers and its 12,000 farmer shareholders clear reason why the merger was necessary.

Even before the "Powdergate" case emerged there were strong arguments that the old Dairy Board needed reform.