Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395 | Case summary

Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd [2025] NSWSC 395 | Case summary | Zoe

Fonterra Brands (Australia) Pty Ltd is part of a group of companies (Fonterra Group) ultimately controlled by Fonterra Co-operative Group Ltd (Fonterra). Fonterra Brands, and its wholly owned subsidiary, Bonland Cheese Trading Pty Ltd, bring these proceedings practically on behalf of the Fonterra Group.
Fonterra Brands and Bonland Cheese have the benefit of Bega Cheese trade marks under two licence agreements. They seek declaratory relief that, if the Fonterra Group is restructured and it divests itself of its Australian consumer business, including Fonterra Brands and Bonland Cheese, those steps will not trigger “change of control” clauses within the licence agreements.
Fonterra Group’s proposal, the subject of the proposed declarations, is described as an internal reorganisation followed by a divestment of a head company controlling Fonterra Brands and Bonland Cheese. That divestment is expected to occur by way of a trade sale or an IPO. Fonterra Group seeks certainty as to the assets it can sell; if there is a risk that the Bega Cheese trade marks will not be able to be used by a buyer, then Fonterra Group has concerns that the likely price of any business sale will be jeopardised.
Bega Cheese Ltd resists the making of the declarations, primarily on the basis that the Court lacks jurisdiction to do so, because there is no certainty or “genuine controversy” as to the exact nature of the restructure and sale that may eventuate, and the declarations sought would amount to an advisory opinion without a concrete factual basis. Alternatively, Bega submits that, if the Court has jurisdiction, it ought not be exercised on discretionary grounds.
The issues are:
Does the Court have jurisdiction to make a declaration about whether the pleaded proposed transaction amounts to a “Change of Control Event” within the meaning of the licence agreements?
If so, should the Court exercise its discretion to make the declarations sought?
For the reasons that follow, I do not consider the Court has jurisdiction to make the declarations sought, and, even if it did, it would not be appropriate to exercise the discretion to do so.

Fonterra is a co-operative company, owned and supplied by around 8,000 shareholding dairy farms across New Zealand. It is listed on the New Zealand Exchange.
Fonterra operates globally and is one of the largest producers of dairy products in the world. Its business involves the sale of milk solids for three main purposes: for use as ingredients in products such as powders and proteins (80%); for use in products sold to hospitality businesses (13%); and for use in everyday consumer dairy products, such as milk, cheese and butter (the consumer business) (7%). As part of its consumer business, Fonterra (through Fonterra Brands and Bonland Cheese) has the benefit of Bega’s trade marks.
On 16 May 2024, Fonterra announced that it was exploring the proposed divestment of some, or all, of its global consumer business and its integrated businesses in Oceania and Sri Lanka. This was a change from Fonterra Group’s long-term strategy that it had announced on 21 September 2021, where, in relation to the Australian business, it was “considering the most appropriate ownership structure for this business[;] one option is an IPO, with the intention that [Fonterra] retain a significant stake.”
On 30 September 2024, Fonterra released a “revised strategy”, which indicated that it was “exploring divesting options for our global Consumer businesses” and said “[i]t remains our intention to seek shareholder approval prior to divesting these businesses”.
On 16 October 2024, Fonterra notified the Foreign Investment Review Board (FIRB) of a proposed internal reorganisation of Fonterra’s Australian subsidiaries “in preparation for a potential divestment (which may be by sale or IPO) of Fonterra’s Australian business”. Reference was made to the restructure occurring before divestment, because of the Bega licence agreements. The letter outlined some proposed reorganisation steps, but indicated that “the fulfilment of each Proposed Reorganisation Step may be influenced by commercial considerations as they arise.”
On 10 November 2024, Fonterra’s board resolved to commence a “dual track sale process” for the divestment of the consumer business:

In their submissions in chief, the plaintiffs did not canvass the potential issue of federal jurisdiction in detail. They submitted that, although the declarations concerned the construction of agreements granting licenses to use Bega’s trade marks, this was insufficient to bring the matter within federal jurisdiction. Bega did not address the issue of federal jurisdiction in its submissions in chief at all.
At the hearing, I raised with the parties the question of whether federal jurisdiction was engaged because the licence agreements concerned trade marks, which are the creation of federal law: see T**rade Marks Act 1995 (Cth). In closing oral submissions, the plaintiffs maintained that federal jurisdiction was not being exercised, while Bega submitted that it was. In view of that divergence between the parties, I invited further written submissions on the issue of jurisdiction.
The plaintiffs’ position in their further submissions was that, although the licences to use the trade marks were contractual rights “in respect of a right or property which is the creation of federal law”, the contractual right which was in fact in question in the proceedings was the “benefit and obligation of the change of control clauses in the [licence agreements]”: something which did not owe its existence to federal law.
Bega’s position was that the making of the declarations sought by the plaintiffs would involve the exercise of federal jurisdiction because:
the licence agreements were contracts, whose subject matter was property, that existed only by reason of federal law; and
any justiciable controversy between the parties concerns the question of whether the plaintiffs will have a right to continue using Bega’s trade marks after the Proposed Transaction, and so is a controversy concerning property or rights created by federal law.
On 7 April 2025, the matter was listed for judgment on 10 April 2025. On 8 April 2025, the parties considered it may be appropriate to issue a Notice of a Constitutional Matter pursuant to s 78B Judiciary Act 1903 (Cth) to Attorneys-General of the Commonwealth and the States. Those notices were served on 11 April 2025.
Since then, no Attorney-General has expressed a wish to intervene or to remove the proceedings to the High Court. This Court has previously considered that two weeks’ notice is sufficient to satisfy the requirement to provide “a reasonable time” for the Attorneys-General to consider intervening or removing the cause to the High Court: see eg Ford v Commissioner for Corrective Services of New South Wales [2021] NSWSC 1541 at [7] (Campbell J); Singh v Charles [2022] NSWSC 743 at [43]-[45] (Garling J).
Assuming that a matter arising under the Constitution exists in these proceedings, in circumstances where 17 days have elapsed since issuance of the notices without any substantive response, I am satisfied that a reasonable time has elapsed since the giving of the notice. Accordingly, judgment ought to proceed.
Although the issue is finely balanced, I consider that, for any or all of the following reasons, federal jurisdiction would not be exercised, if it were otherwise appropriate to make the declarations sought.

White and Stern JJA and Griffiths AJA explained in Zurich Australian Insurance Ltd v CIMIC Group Ltd [2024] NSWCA 229 (CIMIC) at [517] that this Court is vested with federal jurisdiction “in all matters in which the High Court has original jurisdiction or in which original jurisdiction can be conferred upon [the High Court]” (aside from various exceptions which are presently irrelevant): Judiciary Act 1903 (Cth) s 39(2). Matters in respect of which jurisdiction may be conferred upon the High Court include “any matter … arising under any laws made by Parliament”: Constitution s 76(ii). It follows that this Court exercises federal jurisdiction when it deals with “any matter … arising under any laws made by [the Commonwealth] Parliament”.
A “matter” is not a “legal proceeding”, but rather the “subject matter for determination in a legal proceeding": Re Judiciary Act 1903-1920 (1921) 29 CLR 257 (Re Judiciary Act) at 265 (Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ). A matter will arise under federal law “if the right or duty in question in the matter owes its existence to federal law or depends upon federal law for its enforcement, whether or not the determination of the controversy involves the interpretation (or validity) of the law”: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 (Ex p**arte Barrett) at 154 (Latham CJ).
It is a particular application of the above principle from Ex parte Barrett to say that while a claim for damages for breach or for specific performance of a contract is a claim for relief under State law, “if the contract … is in respect of a right or property which is the creation of federal law, the claim arises under federal law”: LNC Industries Ltd v BMW (Australia) Ltd (1983) 151 CLR 575 (LNC Industries) at 581 (Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ); Edwards v Santos Ltd (2011) 242 CLR 421 at [45] (Heydon J; French CJ, Gummow, Crennan, Kiefel and Bell JJ agreeing); CGU Insurance v Blakely (2016) 259 CLR 339 (CGU Insurance) at [29] (French CJ, Kiefel, Bell and Keane JJ).

That is not the case here. No issue is raised as to the existence, registration, scope or otherwise of Bega’s trade marks. Although it is true that, as Bega submitted, the proceedings are motivated by a concern on the part of the plaintiffs as to their right to use the trade marks after the Proposed Transaction, that concern is hypothetical.
Nor is the Court being invited to consider or construe the boundaries of the right or property created by federal law, as was the case in Bramco Electronics Pty Ltd v ATF Mining Electrics (2013) 86 NSWLR 115. There, the Court was required to determine questions of breach of a licence agreement for the use of a patent to manufacture devices, the answers to which could only be identified through construction of the patent itself: see [35]-[36] (Barrett JA, Meagher JA agreeing); [127] (Ward JA, as the President then was). This was because the rights conferred by the licence agreement “had content and meaning only when the nature and extent of the rights under the patent were identified”: at [35] (Barrett JA, Meagher JA agreeing).
The question of whether Bramco’s actions (which were said to have constituted a breach of the licence agreement) offended the monopoly created by the patent, could only be resolved by construing the patent. Meagher JA agreed with Barrett JA that this led to the conclusion that the parties’ contract was in respect of a right or property which was the creation of federal law, and the proceedings involved a matter arising under the Patents Act 1990 (Cth): at [36].
Here, neither the Trade Marks Act, nor any federal statute, is relied upon as being the source of any right claimed or defence asserted in the proceedings. As Windeyer J explained in Felton at 388, “a matter does not arise for adjudication under a law made by the Commonwealth Parliament unless a statute is relied upon as giving a right claimed or as the direct source of a defence asserted.”
The parties sought to rely on Solar Mesh in different ways. That case involved a claim in contract and tort against patent attorneys concerning negligent performance of a contract of retainer aimed at securing a right to a patent for an invention. Relying on LNC Industries, Burchett J (Wilcox and Tamberlin JJ agreeing) considered that the action was within federal jurisdiction because the retainer was “aimed at the securing of a right which was the creation of federal law”, and “both on the pleadings and … in the conduct of the case, questions were raised involving the operation of the patents legislation of the Commonwealth”: at [10], [17].
The result in that case can be distinguished here. Leaving aside analysis of the subject matter of the retainer in question, the action in that case would have become an action in federal jurisdiction in any event because the defence raised directly the question of whether the appellant had an entitlement to a patent under the Patents Act 1952 (Cth) or Patents Act 1990 (Cth): Solar Mesh at [17].
There is therefore nothing to suggest that the Trade Marks Act is anything more than an incidental consideration in this matter It is “lurking in the background”, and no part of the dispute between the parties has brought it to the foreground: Felton at 388.
Finally, for completeness, I note that although the parties did not engage with the debate in the authorities as to whether federal jurisdiction could be attracted by the mere fact that a party’s ability to sue and be sued is conferred by, and dependent upon, the Corporations Act 2001 (Cth), that issue is not relevant here. The current prevailing view, with which I agree, is that the mere involvement of an entity incorporated under the Corporations Act does not, of itself, mean that the proceedings involve a matter arising under Commonwealth law: see eg Hanssen Pty Ltd v Owners of Strata Plan 58161 [2024] WASCA 87 at [79]-[103] (Buss P, Mitchell and Hall JJA) and the cases there cited.
It follows that in making any appropriate declarations here, this Court would be exercising state and not federal jurisdiction.

Superior courts have an inherent power to grant declaratory relief*: Ainsworth v Criminal Justice Commission* (1992) 175 CLR 564 at 581 (Mason CJ, Dawson, Toohey and Gaudron JJ). Gibbs J stated in Forster v Jododex Australia Pty Ltd (1972) 127 CLR 421 (Forster) at 435 that the power to make a declaration “is a very wide one” and where it is a question of defining the rights of two parties, the power “is almost unlimited” and is “only limited by its own discretion”.
Consequential relief need not be sought alongside declaratory relief: s 75 Supreme Court Act 1970 (NSW).
The requirements necessary for a superior court to have jurisdiction to make a declaratory order were explained by Gibbs J in Forster at 437-438. His Honour repeated a summary by Lord Dunedin in Russian Commercial and Industrial Bank v British Bank for Foreign Trade Ltd [1921] 2 AC 438 at 448 of the conditions which should be satisfied before the discretion is exercised in favour of making a declaration:
the question must be a real and not theoretical question;
the person raising it must have a real interest to raise it; and
there must be a proper contradictor, being someone who has a true interest to oppose the declaration sought.
These conditions were also approved in Hobart International Airport Pty Ltd v Clarence City Council (2022) 276 CLR 519 (Hobart International) at [32] (Kiefel CJ, Keane and Gordon JJ). Although the reasons given by Gibbs J refer to the exercise of the discretion to make a declaration, the conditions his Honour identified relate both to the issue of jurisdiction and, where jurisdiction exists, also to discretion: see CIMIC at [558]-[561].
The first condition precludes the giving of “advisory opinions”, namely, answers to questions which are hypothetical or academic. As explained by Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ in Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 (Bass) at [48], “one crucial difference between an advisory opinion and a declaratory judgment is the fact that an advisory opinion is not based on a concrete situation and does not amount to a binding decision raising a res judicata between parties”.
As to the second condition, in Forster at 438, Gibbs J referred, with evident approval, to the comments of Lord Radcliffe in Ibeneweka v Egbuna [1964] 1 WLR 219 at 225 that “judicial pronouncements ought not to be issued unless there are circumstances that call for their making”. As otherwise explained in Hobart International at [34], a party will have a “sufficient” or “real” interest in obtaining a declaration where it “pertains to declaring the existence of legally enforceable rights or liabilities of the applicant”.
The question then is whether the declarations sought will:
quell any controversy, or
instead tend to “complicate the determination of issues which would arise” if the effect of a restructuring transaction were later litigated, or “embarrass the judge who might have to determine such a claim where the facts elicited might be different”: CIMIC at [424], citing Minister for Immigration and Multicultural Affairs v Ozmanian (1996) 71 FCR 1 at 32-33 (Kiefel J).

I do not accept Fonterra’s submission that there is a “concrete and established” situation, or a dispute between the parties that ought to be quelled by way of the declarations sought. Nor do I consider there would be utility in making the declarations.
Until a particular restructure and a particular sale process are identified, it is not apparent that the specific declarations sought would be of any utility.
Here, because the steps that will be taken for a sale are not known, the declarations do not relate to a final or ultimate issue which will determine the rights of the parties: CIMIC at [563]. There is no “defined event” that is reasonably foreseeable, because Fonterra Group has expressly reserved to itself the option to change the components of its business restructure or what is sold, including because a purchaser wants that change, or if the board, shareholders or regulators require it. For that reason, Fonterra’s senior counsel accepted that “this is [not] the only way that this proposed divestment could occur”.
That supports the conclusion that the declarations ought not be made, because the particular restructure and transaction that might constitute a “change of control” has not been determined by Fonterra Group. In circumstances where the restructure and transaction may change shape or never eventuate, I do not accept there is currently a “real” or “foreseeable consequence” for the parties. Similarly, it cannot be said that the particular pleaded issue “is likely to arise in the future” (CGU Insurance at [102] (Nettle J)), such that the declarations about the specific pleaded “proposed transaction” ought be considered and made (if otherwise appropriate).
Further, I do not accept the plaintiffs’ submission that the order of restructuring steps does not matter, because there is a proposed final structure. As the plaintiffs conceded, there are likely to be significant taxation issues involved in any restructure, and any potential purchaser may wish to negotiate a different structure. Further, it is possible that one of the interim steps taken could amount to a change in control, even if the proposed end structure does not demonstrate that.
I accept that a Court may make a declaration as to a future matter. Fonterra’s senior counsel relied upon Commonwealth v Sterling Nicholas Duty Free Ltd (1972) 126 CLR 297. In that case, Sterling sold duty free goods to buyers, who intended to export them by sending them from Australia by ship or aircraft or by taking them when they left Australia by ship or aircraft. Sterling sought the permission of the customs department under the Airports (Business Concessions) Act 1959 (Cth) to supply the goods to persons within the airport, before they departed Australia, and that permission was refused. Sterling sought and obtained a declaration that to supply goods as it intended would not breach the legislation. The majority of the High Court disagreed, and the declaration was vacated.
While in the minority in the conclusion, Barwick CJ stated the following oft quoted passage at 305:

Fonterra Brands (Australia) Pty Ltd v Bega Cheese Ltd

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment

JUDGMENT

Background

Relief sought

Change of control clauses

State or federal jurisdiction engaged?

Principles

Application

Conditions for a declaration if state jurisdiction is invoked

Consideration

Conditions for a declaration if federal jurisdiction is invoked?

Should the Court exercise its discretion to make a declaration?

Is the Proposed Transaction a “Change of Control Event”?

Orders

Amendments

28 April 2025

Parties

Legislation Cited (16)

Cases Cited (17)

Cited By (1)