One of Australian agriculture's longest running legal disputes has finally been resolved. Viterra, a subsidiary of Anglo-Swiss multinational commodity trading and mining company Glencore, has been found guilty of misleading privately held American global food corporation Cargill, during the sale of its subsidiary Joe White Maltings in 2013.
The Supreme Court of Victoria found that “Joe White routinely, and without informing customers, supplied malt that did not comply with customers’ contractual requirements and specifications, and supplied certificates of analysis to customers that misstated the results of analytical testing of malt supplied. The result of many of these misstatements was that these certificates reported that malt complied with contractual requirements and specifications when it did not. It was further alleged that in some instances the certificates misstated the barley varieties used or failed to disclose that malt had been produced from barley varieties which were not approved by the customer to whom the malt was supplied. Furthermore, it was alleged that gibberellic acid had been used as an additive in the malting process when some customers prohibited its use.”
Cargill Australia alleged that if it had been aware of the practices set out above, it would not have entered into the acquisition agreement on 4 August 2013, or if it became aware after entering into the acquisition agreement would have terminated the acquisition agreement prior to completion
On 31 October 2013, Cargill finally bought all the shares in Joe White, as well as some additional assets which were used by Joe White Joe White from Viterra for AUD 420 million (USD 300m).
In its statement of claim, lodged back in 2015, Cargill said it was forced to spend around AUD 30 million (USD 21.4 m) to bring the different malt plants in Australia up to industry standard and to cut back production by up to 40% which translates into lost production of 60,000 mt.
The court now ruled that Cargill Australia is entitled to an award of damages in the amount being the difference between the purchase price of AUD 420 million (USD 300m) and the true value of the Joe White business as at 31 October 2013. In addition, Cargill Australia has established that representations which falsely and misleadingly represented the state of competition in the blind auction process induced Cargill Australia to increase its purchase price by AUD 15 million (USD 10.7m). However, the court ordered that this loss is subsumed in the compensation to be awarded for the primary claims. Further submissions will be made to determine the amount of the award.
The court also dismissed Viterra’s counterclaim against Cargill Australia and several third-party claims against its parent Cargill based in Minnesota, Joe White and a number of former Viterra executives engaged in the Joe White business save for a claim against Gary Hughes, former General Manager of Joe White Maltings who found guilty to breach his employment contract.
The court found Mr Hughes failed to act ethically, honestly and in the best interest of Viterra by making certain misleading representations and failing to disclose relevant information to Viterra.
However, Viterra failed to prove it suffered loss as a result of Mr.Hughes’s breaches, as it was not proved that if Hughes had acted in accordance with his contract, Viterra would have taken certain steps it alleged it would have. Accordingly, there will be judgment for all the third parties, except Mr. Hughes.
However, this might not be the end of the case. "We are surprised and disappointed with the judgement delivered by Hon Justice Elliott in relation to the sale process undertaken with the Joe White Maltings business in 2013," Viterra said in a statement. "We will consider the full judgement and our options of appeal," a spokesperson of Viterra said.
Joe White Maltings is today part of Boortmalt. In November 2019, Boortmalt sealed the acquisition of the malting division of Cargill (including Joe White Maltings) which consisted of 16 malting plants in nine countries with a combined annual malting capacity of 1.7 million tons. (inside.beer, 4.11.2019)