Large stakeholder perspective: total claim could easily top $1 billion

Jon Condon, 28/10/2014

AFTER speaking to several large northern industry stakeholders who have joined, or plan to join the class action against the Commonwealth over the 2011 live export ban, it would appear the total industry claim amount could easily top $1 billion.

AAco managing director Jason Strong.

AA Co managing director Jason Strong.

The largest single litigant in the class action being brought to bear against the Commonwealth over the 2011 live export closure will be the world’s largest beef producer, the Australian Agricultural Company.

Managing director Jason Strong confirmed to Beef Central this morning that his company was involved in the action.

While AA Co says it has not yet done its own calculation of financial loss caused by the 2011 market closure initiated by Labor’s agriculture minister Joe Ludwig, another large corporate northern cattle entity, Consolidated Pastoral Co, recently offered an assessment of its own financial impact.

When asked to testify in front of the joint house northern select committee hearing earlier this year, CPC chief executive Troy Setter suggested a figure of “at least $80 million” in damages to CPC, as a result of the action. Beef Central understands that CPC will also be joining the class action.

“Calculating our own financial losses will be part of the next stage of the discussions,” AA Co’s Jason Strong said this morning.

“AA Co’s exposure to the live export trade is perhaps not as large as CPC’s, but it will be considerable, as it had a very big impact on the company,” he said.

In its 2012-13 annual report to shareholders, AA Co estimated total losses that year as a result of the live trade suspension, and the related devaluation of its northern Australian land assets, to be $51.2 million. That followed an estimated impact of $8.5 million the previous year.

Losses were also sustained from cattle falling out of specification and having to be delivered to other geographic markets. AA Co sold 82,000 cattle into the live trade in its 2012 financial year, or about one third of its entire cattle sales.

In his address to shareholders at the 2012 annual general meeting, chairman Don McGauchie squarely laid the blame for the company’s $8.4 million loss that year at the feet at for the live export ban.

“This result was primarily due to flow-on effects from the Federal Government’s live cattle export suspension in mid-2011, which had significant and wide-ranging impacts for AA Co and the industry as a whole,” he said.

As a result of the suspension, AA Co cattle (and others) which would have ordinarily been exported to the Indonesian market instead remained in the Australian market, causing over-supply issues and a subsequent collapse in the domestic cattle price.

The live export suspension had also created a challenging property market in northern Australia, which led to a significant decrease in the value of AA Co’s extensive land holdings in the region.

That further impacted the company’s 2012 profit result, through impairment costs of $8.1 million.

Given the sort of numbers already being talked about among individual companies affected by the closure, it is not unlikely that the total industry claim against the Commonwealth may exceed $1 billion, a prominent northern industry stakeholder suggested to Beef Central this morning.

“There has been some speculation over the past two years over just how large the overall (industry) figure might be, but it largely depends on what is included, and what is left out,” AA Co’s Jason Strong suggested.

“We would have hoped it (restitution) would have been resolved before this, but we are certainly going to be part of the claim,” he said.

He suggested there were two likely paths from here: running the full course of the legal system through a court hearing, or an out-of-court settlement negotiated between the two parties.

“The second option would be everyone’s preference,” he said. “We don’t what this to end up in a costly court action.”

“But this process is not about scoring points, or having a go at the government. It’s actually about recognition of the damage that was done by the decisions that were made, and the cost and hardship that was forced on the northern cattle industry – producers and other stakeholders – as a result.”

“While this action is also very much driven by the financial side, an important part of it is the recognition factor of the damage that was done.”

Mr Strong anticipated that a lot of affected northern cattle producers would now join the class action.

“There has been a lot of work done already by the industry, and individuals within it, working with the legal firm involved, to make sure that the claim captures as much of the impact as possible.”

“Hopefully what will happen is that the two parties go through a very sensible, structured, open process to get this concluded, where the industry can be professional about it and the government can respond appropriately.”

Mr Strong agreed that the strong conclusions drawn by the independent legal assessment of the case provided great encouragement to stakeholder claimants who were currently, or potentially part of the action.

“It’s not as if this is just a group of people why feel sleighted by events, and have employed a lawyer. There’s actually been a lot of work going on behind the scenes, and that independent assessment is an important part of that.”

“It was an appropriate thing for the people involved in the action to do: to get some good independent advice so that stakeholders could be confident about what is being claimed.”

Mr Strong said he hoped to see the matter finalised within the next 12 months.

“The sooner the better, so we can all put the issue behind us, and move on.”




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  1. Mike Teelow, 28/10/2014

    Did the Federal Government not admit guilt by giving us the 5k and 20k after the ban was lifted? This whole fiasco has left a lot of people and companies large and small devastated. With severe drought on top of the ban some long-time producer families will find it hard to recover now, even if they were fully compensated.

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