Mackay Sugar loses $3 million compensation appeal
MACKAY Sugar's chief has expressed disappointment after losing an appeal against a $3 million compensation order made in a raw sugar supply dispute.
The company claimed the incredible rain in the 2010-11 season reduced its production from up to 900,000 tonnes to about 600,000 which meant it could not meet raw sugar supply obligations for the adjacent refinery.
But Sugar Australia argued Mackay Sugar's contract was only for 450,000 tonnes and the 50,000-tonne delivery shortfall of raw sugar in 2011 was its own fault because the company decided to sell raw sugar to a third party, Queensland Sugar Limited, before it knew how much sugar it would produce in the 2010 crushing season.
Sugar Australia was forced to buy sugar from Thailand and Bundaberg instead to meet the shortfall.
Judge David Jackson - in a judgment delivered this week after two arbitration decisions and a previous supreme court appeal - said it seemed uncommercial to expect Mackay Sugar to store all its season's first production to ensure there was enough to satisfy the agreement with Sugar Australia until the next season began.
But he said there were difficulties with Mackay Sugar having an unlimited right to forward sell every sugar tonne it expected to produce above its requirements because the production interruption risk would pass to Sugar Australia.
Ultimately, Justice Jackson upheld the previous finding that Mackay Sugar had breached its contract and allowed the $3.154 million damages order.
Mackay Sugar chief Quinton Hildebrand said the company would now consider the detailed reasoning in the judgment before determining its next course of action.
"In the meantime, we continue to work constructively with Sugar Australia, despite the court proceedings," he said.
Wilmar International and Mackay Sugar Limited respectively hold 75% and 25% in the Sugar Australia Joint Venture.
Mackay Sugar says the 2010 rain event left more than 700,000 tonnes of cane unharvested.
- Mackay Sugar's Racecourse Mill operates during the crushing season and is capable of
- producing up to 900,000 tonnes of raw sugar a season. But weather can disrupt harvests.
- Sugar Australia's Racecourse Sugar Refinery was built adjacent to allow the two
- facilities to operate symbiotically.
- The refinery was designed to operate all year round but with a maximum annual refined
- sugar production of about 450,000 tonnes.
- A Joint Venture Agreement was drawn up which included a proviso to create a
- "reasonable and workable limit" to the supply obligation.