Costs mount in maltsters’ legal showdown

Field of barley, one of beer's four key ingredients

Cargill and Viterra’s dispute over the Joe White Maltings sale began in 2014 – File photo

Victoria’s highest court is working towards a May 2018 trial date for Cargill Australia’s dispute with Viterra Malt over the sale of Joe White Maltings.

Cargill launched legal proceedings in 2014 alleging it had been deliberately misled by Viterra in relation to the Joe White Maltings business, which Cargill acquired for $420 million in October 2013.

The Supreme Court of Victoria has set down May 7, 2018 to hear the substantive dispute, after an October 2017 showdown was previously postponed.

The parties have met in numerous preliminary hearings – both in the Australian court and in the US District Court for Minnesota (where Cargill is headquartered) – relating to legal professional privilege sought by Viterra over approximately 16,700 documents.

As at October 2017, Cargill had spent about $3.9 million and Viterra had spent approximately $5.3 million with respect to discovery and related issues, Judge Elliot revealed in December.

“The fact that approximately $9.2 million has been spent in this manner up to October this year [2017] is of considerable concern to the court. Even with claims in this proceeding exceeding $200 million,” Judge Elliot said.

He ordered that no further interlocutory applications were to be made in the dispute without first obtaining leave of the court.

But he subsequently granted leave to Viterra on February 9 this year to make yet another interlocutory application relating to discovery of documents.

“The description with respect to each of the 29 documents indicated that each document related to the due diligence process conducted by the Cargill parties prior to the settlement of the sale,” he said.

“Because the due diligence process conducted by the Cargill parties is critical to the issues in this case, leave is granted,” Judge Elliot said.

An interlocutory application is listed for hearing on March 7, as the May trial date edges nearer.

The dispute
Cargill alleges in the proceedings that under Viterra’s ownership, Joe White Maltings supplied customers with malt that did not comply with contractual requirements and specifications, breaching various warranties.

Cargill claimed Joe White’s practices included “buying off-grade barley and blending it with first grade barley, and documenting the entire lot as first grade barley”.

According to Cargill, Joe White also supplied malt produced using the addition of gibberellic acid (GA3) to customers who required that GA3 not be used in their malt.

“These customers were sold malt that didn’t comply with contractual requirements and were given false certificates of analysis to cover up noncompliance,” Cargill’s legal representatives said.

“That is the fraud on the customers and we say that was known by executives and employees of Viterra and Glencore [Viterra’s Swiss holding company] before mid-2013.

“What we say secondly, and as a result of that, Glencore and Viterra deceived Cargill Australia before and after the acquisition agreement was signed on 4 August.”

Cargill is seeking compensation for loss and damage relating to the purchase price for Joe White Maltings and its ongoing losses suffered by reason of lost production and additional costs incurred in order to comply with contractual obligations to its customers.

“Cargill may be able to offset those losses by embarking upon substantial capital expenditure, in the order of $30 million,” state documents before the court.

Viterra disputes the allegations, further arguing Cargill was fully aware of the manner in which Joe White conducted its business before the decision was made to proceed with the acquisition.

“In this regard, the Viterra parties seek to rely, amongst other things, on due diligence conducted by the Cargill parties before settlement of the purchase,” Supreme Court Judge James Elliot surmised last year.

Cargill declined to comment on the proceedings. Viterra did not respond to a request for comment.

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