Fonterra Co-Operative Group Ltd v The Grate Kiwi Cheese Company Ltd

JurisdictionNew Zealand
CourtSupreme Court
JudgeTipping J
Judgment Date15 March 2012
Neutral Citation[2012] NZSC 15
Docket NumberSC 38/2011
Date15 March 2012

[2012] NZSC 15

IN THE SUPREME COURT OF NEW ZEALAND

Court:

Elias CJ, Blanchard,, Tipping, McGrath and William Young JJ

SC 38/2011

BETWEEN
Fonterra Co-Operative Group Limited
Appellant
and
The Grate Kiwi Cheese Company Limited
First Respondent

and

Kaimai Cheese Company Limited
Second Respondent
Counsel:

A R Galbraith QC, J D Every-Palmer and T C E Miller for Appellant

J A MacGillivray for First and Second Respondents

S J Mills and B Hamlin for Commerce Commission as Intervener

Appeal from a High Court decision dismissing an application for habeas corpus. Appellant was initially detained under s10 Mental Health (Compulsory Treatment and Assessment) Act 1992 (“MHA”) (certificate of preliminary assessment) and then under s13 MHA (further assessment and treatment for 14 days). An application under Part 2 MHA (compulsory treatment orders) for a compulsory treatment order was due to be heard the next day and had been made before the application for a writ of habeas corpus was sought. The application for habeas corpus was made primarily on the grounds that the initial detention under s10 was unlawful because there was no factual basis on which to believe the appellant was “mentally disordered” — whether the High Court erred in failing to determine whether the s10 MHA initial detention was unlawful or invalid.

At issue was whether the HC erred in failing to determine whether the s10 certificate was unlawful or invalid.

Held: There might be exceptional cases where an application for a writ of habeas corpus was an appropriate means of addressing a complaint of unlawful detention under Part 1 MHA. Given the nature of applications under the MHA however, its statutory mechanisms would, in normal circumstances, be much more efficacious and appropriate ( Sestan v Director of Area Mental Health Services). This was not a case where the matters at issue were “properly susceptible to fair and sensible summary determination” ( Manuel v Superintendent of Hawkes Bay Regional Prison). Since the s10 certificate had been issued, the process of assessment and treatment had moved on substantially. Any assessment of its validity would involve a significant factual assessment that would not be confined to the material available at the time the s10 certificate was issued, given the amount of material generated since. Further, there were more appropriate and effective remedies available to B under the MHA which could have been utilised at an earlier stage of the process.

Appeal dismissed.

JUDGMENT OF THE COURT
  • A The appeal is dismissed.

  • B The appellant is to pay the respondents costs in the sum of $15,000 plus disbursements to be fixed, if necessary, by the Registrar..

REASONS

(Given by Tipping J)

Introduction
1

On this appeal Fonterra Co-operative Group Ltd, as appellant, contends that it was not obliged to supply raw milk to the respondents, The Grate Kiwi Cheese Company Ltd and Kaimai Cheese Company Ltd, under reg 4 of the Dairy Industry Restructuring (Raw Milk) Regulations 2001. Fonterra's obligation to supply raw milk under that regulation arises only if those seeking such supply are “independent processors”, as defined. The Commerce Commission 1, the High Court 2 and the Court of Appeal 3 have each ruled against Fonterra on the basis that Grate and Kaimai were independent processors. Fonterra challenges that conclusion. Its essential proposition is that the meaning which has so far been given to the expression independent processor does not properly reflect the context and purpose of the relevant Regulations. For the reasons which follow, we consider that the meaning given to the expression by the Commission and the Courts below represents a natural meaning of its definition. The context and purpose of the Regulations support that meaning. Fonterra's appeal must therefore be dismissed.

Background
2

The legislative and factual background can be stated quite briefly. When Fonterra was established following the merger of New Zealand's two largest dairy producers and the New Zealand Dairy Board, it was necessary to enact legislation authorising the merger for the purposes of the Commerce Act 1986. 4 The legislation included provisions designed to guard against the risks to competition posed by the merger of the previously autonomous producers into one entity which then occupied a dominant position in the market. Section 4 of the Dairy Industry Restructuring Act 2001 sets out its purpose. The crucial provision, for present purposes, is s 4(f) which says that a purpose of the Act is to “promote the efficient operation of dairy markets in New Zealand by regulating the activities of new co-op [Fonterra] to ensure New Zealand markets for dairy goods and services are contestable”.

3

Section 115(1)(a)(i) empowered the Governor-General, by Order in Council made on the recommendation of the Minister, to require Fonterra to supply raw milk

in New Zealand. 5 Pursuant to that power, reg 4(1) of the Regulations mentioned above required Fonterra to supply raw milk to independent processors. Regulation 3(2)(c) expressly incorporated into the Regulations the definition of independent processor contained in the Act.
4

It is the terms of that definition which are at the heart of the case. Independent processor is defined as meaning “a processor of milk or milksolids or dairy products who is not an associated person of new co-op [Fonterra]”. 6 The definition also includes New Zealand Dairy Foods Ltd (now Goodman Fielder Ltd) and any associated person of that company other than Fonterra. 7 The issue is whether in order to qualify as an independent processor the party concerned must physically process the raw milk it obtains from Fonterra “in its own facility”, as the Commerce Commission put it in its determination; 8 or whether it is sufficient for the party concerned to do the processing by what has been called “toll processing”.

5

The expression toll processing describes a situation where the processor does not use its own facilities to process raw milk but makes use of spare capacity within the facilities of another party, pursuant to contractual arrangements entered into for that purpose. This latter and wider meaning of the definition was adopted by the Commission in its determination. The key difference between the rival contentions is that, in Fonterra's submission, an independent processor must personally process the raw milk it acquires from Fonterra. The argument favoured by the Commission and in the Courts below allows a person to be an independent processor when that person does not do the processing of the raw milk personally but arranges for the processing to be done by someone else, pursuant to contractual arrangements made for the purpose.

6

Both Grate and Kaimai personally processed certain dairy products including cheese but when they sought raw milk from Fonterra they were not proposing to process that milk personally, having arranged to have that processing done, on their behalf, by a company called Open Country. The raw milk thus processed was to be

used by Grate and Kaimai in their downstream production. Being of the view that in this situation Grate and Kaimai were not independent processors, Fonterra declined to supply the raw milk they had each sought.
7

Regulation 8 provides that Fonterra and an independent processor may agree a price for the supply of raw milk. If agreement is not reached the regulation provides a formula whereby a default price is established....

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