A WESTERN Australian grain grower acting as a spokesman for a group of WA farmers taking Emerald Grain to court over the performance of its ill-fated 2011-12 wheat pools says the court action is as much a matter of principal as a push for compensation.
Mark Fitzpatrick, who farms at Gabbin, in WA’s north-eastern wheatbelt, said Emerald had never explained why its pool, which the legal team for the growers allege underperformed by around $74 a tonne on average against the market average, had failed.
“I’ve never got an official answer from the company as to why this pool went so badly and I think as a company Emerald needs to be brought to task.”
A class action handled by Perth law firm Granich Partners has been lodged in the WA Supreme Court on behalf of 49 WA grain growers for losses totalling $7.4 million.
Granich Partners solicitor Nathan Draper said the figure had been calculated on deliveries to the pool of 101,583 tonnes and underperformance of anywhere between $64-84/t depending on the grade of wheat.
In terms of the case against Emerald, Mr Draper said it would centre on allegations of a breach of trust, rather than a breach of contract.
He accepted that pool products typically offer no price certainty due to the eventual sales occurring over an extended period of time, but said growers could be entitled to expect a reasonable market average price.
“If the pool is $10-15/t below other offerings you would accept that as within the range, but this was not reflected in the eventual returns provided by the pool managed by Emerald.”
“Our calculations are that the prices received by the growers are below the average returns calculated on the lowest prevailing wheat price experienced in the contract period of the pool,” Mr Draper said.
He said the case would use data from an independent report commissioned in 2014 to assess the pool’s performance against rival products.
Mr Draper said he would be seeking to see the Emerald books to gain information regarding the pool.
“They have refused to provide information on the pool’s operation to pool participants to date.”
He said the report raised the prospect of the intermingling of Emerald’s wheat trading entity with the management of the pool as a probable reason for the losses.
“If intermingling of operations did occur, it would have resulted in the pool and trading entities of Emerald effectively being in competition with each other, jeopardising the potential overall returns available for distribution to participants of the pool,” he said.
“Under the terms of the contracts, Emerald was not entitled to include wheat purchased as part of its trading activities within the pool, nor was it entitled to pass on any losses incurred from any trading activities to participants in the pool, if in fact that was what occurred.”
Mr Draper said the trial date could be up to 18 months away.
Emerald Grain was contacted for comment but has yet to formulate a response.
