The Supreme Court of Queensland today dismissed the legal action brought by Wilmar Sugar (a large miller) against Queensland Sugar Ltd (a co-operative that has the role of marketing the Queensland export sugar crop). QSL's approach was to lock in prices via futures contracts during the season based on crop forecasts provided to it by millers. Heavy rain in one season resulted in a shortfall relative to futures commitments that resulted in a loss.
Frontier Economics advised the lawyers acting for QSL. Frontier's report explained that QSL's stated and agreed role was not to manage volume risk, but to maximise prices. It also demonstrated that the analysis presented by Wilmar was based on an economic framework that was inappropriate in the circumstances, and that the results were almost entirely driven by two historical data points that were unlikely to be repeated due to structural changes that had occurred in the industry. Frontier Economics chairman Stephen Gray, and Professor of Financial Economics at the University of Queensland, gave evidence in the Supreme Court. His evidence was well-received by the judge who noted that he found Professor Gray to be an ‘impressive witness’. QSL has indicated it will seek compensation for costs associated with Wilmar’s legal action.
Frontier Economics regularly provides economic advice and analysis in legal disputes, including those regarding financial instruments and quantification of damages or loss.
