Matt Gunningham: Dairy farmer loses $3.4m Redpa Dairy case

A partnership between a prominent North-West Tasmania dairy farmer and his European backer went south following a decision to sell the business assets, the Federal Court heard.

Matthew Gunningham, owner of Gunningham Family Farms. Picture: File

A prominent North-West Tasmanian dairy farmer has lost a Federal Court case against his Swiss business partner relating to his attempt to purchase $3.4m worth of shares prior to the sale of their business in 2021.

Gunningham Family Farms owner Matthew Gunningham claimed in the Federal Court his purchase was valid, meaning he should have been entitled to a greater slice of the proceeds from the $27.15m sale of Redpa Dairy on May 31, 2021.

He will also pay costs to his Swiss business partner Anthony de Heinrich and investment company Haboob PTE Ltd.

Matthew Gunningham, owner of Gunningham Family Farms. Picture: File

A November 10 judgment by Justice Shaun McElwaine set out the details of the dispute.

Mr Gunningham and Mr de Heinrich went into partnership following a meeting in June 2013. They purchased two businesses together, Scopus Dairy (not the subject of proceedings) and Redpa Dairy, incorporating Redpa Dairy Partners Pty Ltd in April 2015 to make the latter purchase.

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Mr Gunningham owned 8.17 per cent of the company, Haboob the rest. Mr Gunningham had an option to acquire additional shares should he meet certain conditions.

The business was ultimately not profitable: it lost a total of $2m in the five years to June 30, 2020, Justice McElwaine said.

In February 2018, an in-principle decision to sell the business was made between the pair, reluctantly by Mr de Heinrich.

“Matthew stated that he was unsure about the direction of the dairy industry and pointed to various economic pressures such as wages and difficulties in processing the milk product,” Justice McElwaine said.

“He stated that he considered his personal position to be vulnerable in that he was carrying significant debt.”

An agreement was struck in December 2020 that Redpa Dairy would be sold to Circular Head Farming Group Pty Ltd for $27.15m, with sale coming into effect the following May.

The sale resulted in net proceeds of $14,339,401 to the company, of which $4,189,131 was distributed to Mr Gunningham.

Mr Gunningham’s case was that he gave notice in February 2021 that he wished to acquire additional shares worth $3.4m and that the agreement came into effect on May 31, the day of the sale. He believed he was therefore entitled to an additional $964,342.

Mr de Heinrich’s defence was that there was a clause in the agreement which held that Mr Gunningham’s option could only come into effect on July 1.

According to Justice McElwaine, the pair’s relationship turned sour when Mr Gunningham pushed for the sale to be delayed.

“Matthew... asserted that the option ‘is a fundamental part of our partnership’ and that unless the issue is resolved, he would not take any further steps to finalise the sale of the dairy farm,” Justice McElwaine said.

“He said that he was ‘dismayed’ at what he considered to be the attempt by Anthony ‘to limit or deny us the benefit of this fundamental provision in our partnership agreement’.”

Justice McElwaine ultimately ruled the July 1 clause was “significant” and bound the parties. For that and other reasons in the lengthy judgment, Mr Gunningham’s case failed.