Arla launches £2m claim over broken dairy contract

Arla Foods UK is claiming almost £2m in damages from a Lancashire dairy farmer and the “purported” new owner of his business.

The dairy processor claimed 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.

By selling his unit, Mr Barnes ended his contract before the 18-month notice period required, said Arla.

‘Very disappointing’

An Arla statement added: “Under the terms of its milk supply contract, the Barnes partnership/Withgill Farm Limited remains obliged to supply all the raw milk produced at the farm to Arla Foods for the remaining period of the notice.”

Hanne Sondergaard, Arla’s deputy chief executive and new head of milk buying, said the legal action was “very disappointing”.

“It was not out desired option in dealing with this matter,” she said. “But we were left with no alternative.”

‘Purchasing at a premium’

A spokeswoman for Arla said it had been left without a significant volume of milk which it had to purchase from an alternative supplier at a different price.

“We are paying a premium for that milk, which is why the damages are so high,” she said.

Jonathan Ovens, chairman of Arla Foods Milk Partnership which supplies most of Arla’s milk, said a supply contract with Arla was assigned to the business rather than the dairy farmer.

‘Still assigned’

“If a new owner is still milking, then the contract is still in place. The new owner can give notice, but they are still assigned to the contract.”

Mr Barnes said he did not want to comment at this stage, but it is believed he sold his dairy herd and began renting his dairy unit to Mr Willes in June.

He is understood to still own Withgill Farms Limited, the business which holds the contract with Arla.

‘Extremely dangerous’

Mr Willes was unavailable for comment.

Quota broker and industry commentator Ian Potter said the move by Arla was “extremely dangerous”.

“If Arla fails it will open the door to dozens of farmers who are not happy with Arla to think how to get out of their contracts,” he said.

‘Farmers need to know where they stand’

“If they are successful, any farmer who sells their business could face legal action.”

NFU dairy board chairman Gwyn Jones said the dispute highlighted the value of the organisation’s proposed new dairy contract.

“This is yet another reason why farmers need to know exactly where they stand with their contract. This business of assignment needs to be addressed.”

Mr Jones said the contract would enable farmers and processors to work more closely together in a fair and equitable way.

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