Arla Foods has lost a crucial legal case after it accused a farmer of reneging on his supply contract.
Arla had accused dairy farmer David Barnes, of Withgill Farm in Lancashire, of breaking his contract by failing to ensure contractual responsibility for milk supply was passed on when he sold his dairy business to Parkham Farms' MD Peter Willes in June 2007. Willes then started to sell the milk to another milk purchaser, Meadow Foods.
The High Court case against Barnes and Willes concluded earlier this month, but the judgement has just been published. The Danish dairy giant was believed to have been seeking almost £2m in damages over the 18 million litres of milk per year contract.
In his judgment Sir Edward Evans-Lombe said the contract provided no protection to Arla against a producer ceasing supply, and contained no minimum production requirements.
The case illustrated the "importance of building close working relationships between processors and supplying farmers," said Arla Foods UK deputy CEO Hanne Sondergaard.
"This test case has provided important clarity for the UK dairy industry on the key challenges of managing a relationship in a volatile and unpredictable market," she added.
In the current market of short UK milk supply, farmers are seen as having more potential buyers for their milk than ever before. The case therefore underlined the need for more robust contracts between farmers and processors, said National Farmers' Union Dairy Board chairman Gwyn Jones.
"Better contracts and relationships would prevent this sort of thing happening in the first place," he said. "When someone wants to leave and is taken to task like this it suggests the relationship has broken down already."
Arla and Willes said in a joint statement that they had now opened discussions over establishing a future commercial relationship.
Arla had accused dairy farmer David Barnes, of Withgill Farm in Lancashire, of breaking his contract by failing to ensure contractual responsibility for milk supply was passed on when he sold his dairy business to Parkham Farms' MD Peter Willes in June 2007. Willes then started to sell the milk to another milk purchaser, Meadow Foods.
The High Court case against Barnes and Willes concluded earlier this month, but the judgement has just been published. The Danish dairy giant was believed to have been seeking almost £2m in damages over the 18 million litres of milk per year contract.
In his judgment Sir Edward Evans-Lombe said the contract provided no protection to Arla against a producer ceasing supply, and contained no minimum production requirements.
The case illustrated the "importance of building close working relationships between processors and supplying farmers," said Arla Foods UK deputy CEO Hanne Sondergaard.
"This test case has provided important clarity for the UK dairy industry on the key challenges of managing a relationship in a volatile and unpredictable market," she added.
In the current market of short UK milk supply, farmers are seen as having more potential buyers for their milk than ever before. The case therefore underlined the need for more robust contracts between farmers and processors, said National Farmers' Union Dairy Board chairman Gwyn Jones.
"Better contracts and relationships would prevent this sort of thing happening in the first place," he said. "When someone wants to leave and is taken to task like this it suggests the relationship has broken down already."
Arla and Willes said in a joint statement that they had now opened discussions over establishing a future commercial relationship.
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