Two law firms in Victoria, Australia, are working in conjunction on a group claim for dairy farmers on the continent.

Adley Burstyner and Harwood Andrews are working on a case supported by approximately 300 dairy farmers who claim that New Zealand milk processor Fonterra and Australian milk processor Murray Goulburn (MG) have applied unlawful deductions to the farmgate milk price and are taking back money already paid to them.

In a statement issued to the Irish Farmers Journal, David Burstyner, head of Adley Burstyner’s group claims practice, said: “In effect, the two processors are reducing the prices paid over the 10 months before the reduction. The milk has already been delivered. The processors are clawing back in the difference between the price they paid, AU$5.60/kgMS, and the price they now claim to be better for them. We do not consider there to be a legal basis for the clawback.”

Instead of accepting responsibility for, apparently, getting it wrong, they are shifting the burden of that extra payment to farmers

According to Burstyner, MG’s opening price announced on 24 June 2015, which Fonterra is contractually obliged to meet, was $5.60/kg MS. He says MG also forecast a step up to $6.05. MG maintained that price and a possible step up from June 2015 to 27 April 2016.

But on 27 April 2016, MG said it would drop the full-year average price to around $4.80. Fonterra then announced its revised price of $5 on 5 May 2016.

“To generate the lower price as an average across the entire year, MG and Fonterra are taking back from farmers the difference between $5.60 and their revised prices on their productions for July 2015 to April 2016,” Burstyner said.

According to him, the money is being recovered by deducting from farmers’ future milk cheques.

“The reality of the situation is that the processors apparently set farmgate milk prices for the period July 2015 to April 2016 higher than they now think they could afford. But instead of accepting responsibility for, apparently, getting it wrong, they are shifting the burden of that extra payment to farmers,” he added.

Response

In a statement to the Irish Farmers Journal, Fonterra said that it "takes its legal and regulatory obligations seriously and is committed to fully complying with them". It also denied it is taking money back from farmers.

Contrary to some reports, Fonterra has not asked farmers to return money

“We have been working closely with farmers in Australia to help them with the impact of last season’s revised milk price. Contrary to some reports, Fonterra has not asked farmers to return money already paid to them for that season,” the statement said.

Meanwhile, a spokesperson for MG said that it has not received notice of the claim on behalf its farmers, adding that to date the Australian processor has only been notified of one group proceeding filed against it in the Supreme Court of Victoria on behalf of unitholders in the MG Unit Trust. The Irish Farmers Journal understands that this claim relates to the same issue of alleged milk price cuts.

"MG strongly denies there is a proper basis for this claim and will vigorously defend the proceedings. MG has not received notice of any claims on behalf of MG suppliers or shareholders [farmers who supply the co-op with milk and who may also be shareholders in the co-op].”

Farmers affected

According to Burstyner, around 4,000 farmers in Australia incurred expenses in the expectation of the $5.60 price the processors were paying. “This means they purchased grain, fodder, water (expensive in Australia), hay, seed, cows, and equipment, with money the processors are now clawing back.

“The average loss for farmers from one processor (around 2,600 farmers) is roughly $120,000 (€80,862).”

As to how many farmers will eventually be involved in the case, Burstyner said: “It is too early to say. It’s in the hundreds so far. There’s strong interest and favourable attitude of farmers on social media.”

Separate to this case, the Australian Competition and Consumer Commission has launched its own investigation into the timing and notice of cuts of the milk price paid to farmers following the price cuts by MG and Fonterra.

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