Court of Appeal rejects Danone move to overturn stay on Fonterra damages suit

The Court of Appeal has rejected an attempt by French food company Danone to overturn a stay of proceedings in its damages suit against Fonterra Cooperative Group pending arbitration in Singapore.

Danone Asia Pacific Holdings sued Fonterra in January, seeking damages projected to exceed 630 million euros in relation to last year's whey protein contamination scare. The product was ultimately found not to be harmful but not before Fonterra instituted a wide and public recall of product supplied to Danone and other companies.

The High Court granted Fonterra a stay of proceedings on July 17 because the same issues were being dealt with in an arbitration process in Singapore. Danone appealed that ruling, saying the judge should not have exercised his discretion in the circumstances of the case. It sought to compel Fonterra to take further procedural steps in the high Court suit, including filing a statement of defence.

In a Nov. 7 judgment, Justices Douglas White, Ellen French and Mark Cooper dismissed Danone's appeal, saying Danone's statement of claim in the High Court proceeding "will inevitably require significant amendment once the Singapore arbitration has been resolved.

"To the extent that further discovery may be required in the high Court proceeding, the nature and scope of that discovery will also depend on the issues, if any, remaining following the resolution of the arbitration," the judges said. "The imposition of High Court discovery obligations on FCGL at this stage is therefore premature and potentially onerous."

Fonterra should be entitled to avoid having to face and defend two overlapping cases simultaneously," especially when there are reasonable prospects the Singapore arbitration will be completed first and may well resolve all the issues between the parties, they said. Unnecessary duplication of proceedings "gives rise to injustice for FCGL."

The judges ordered Danone meet Fonterra's costs for the appeal.