Arla Foods has lost its litigation case against a Lancashire milk producer accused of breaking his contract before the 18-month notice period required.

The dairy processor had claimed that David Barnes, who supplied 18m litres of milk a year through Withgill Farms Limited, had breached his contract with the business by selling his milk production unit to Peter Willes of Devon farmhouse Cheddar business Parkham Farms.

Arla was seeking damages of just under £2m from the Barnes Partnership/ Withgill Farm.

Hanne Søndergaard, deputy chief executive of Arla Foods UK said the case, which took 18 months to reach a conclusion, reinforced the importance of building close working relationships between processors and farmers.

“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,” he said.

Mr Barnes urged any dairy farmer thinking about selling his business to communicate closely with their milk buyer as early as possible.

“I am very pleased that this dispute is now settled,” Mr Willes added. “Farmers, processors and retailers need to work closer together for the future benefit of the whole industry.”

Following the conclusion of the case, both Arla Foods and Mr Willes were understood to be in discussion about developing a future commercial relationship.