A retired High Court judge has been appointed to mediate a resolution between former business sweethearts, Silver Fern Farms and PGG Wrightson, but the move does not preclude the Dunedin meat company from taking legal action.
Robert Fisher QC has until April 18 to mediate a solution to a dispute over compensation following last year's failed partnership, but the outcome would not be binding on either party unless it resulted in an agreed settlement.
It also did not preclude Silver Fern Farms (SFF) from beginning litigation if mediation did not produce an agreed outcome, the two parties said in a statement.
Silver Fern Farms chief executive Keith Cooper said in an interview the heart of the dispute was how to calculate the final settlement figure.
The actual size of PGG Wrightson's (PGGW) potential liability was unknown, but the rural servicing company has allocated $17 million in costs for last year's failure to complete the $220 million partnership of which $10 million was compensation.
It has added a sweetener of an offer to have a role procuring livestock, something similar to what the two parties were trying to achieve with the partnership, but this has been rejected by SFF as PGGW "clipping the ticket".
Mr Cooper said yesterday that deciding the amount of damages was the focus of the mediation.
SFF has declined to state how much compensation it was seeking, but sources have indicated a more realistic range was in the financial benefits identified in pre-partnership studies.
Those studies calculated quantifiable short-term benefits of $59 million and long-term quantifiable benefits of $111 million.
In yesterday's statement PGGW identified the damages as "minimal" whereas SFF said they were "considerable".
Prof Alan Geare from the University of Otago's School of Business said the role of a mediator was to try to get parties to reach an agreement which, while not perfect, was something they could both "sign off".
"It may not be something that people are happy with, but often you are better having a settlement than spending a lot of time and money going through the courts."
The previously amicable relationship between the two parties turned sour last month when PGGW, under legal requirement, announced it was making financial provision for resolving the compensation issue and offered mediation.
PGGW was not commenting yesterday beyond what it said in the joint public statement.
Last August the two companies entered into an agreement where PGGW would buy 50% of SFF for $220 million and which included PGGW taking over the livestock-procurement role.
The partnership was agreed to by SFF shareholders and the deal became unconditional on September 8, but international credit subsequently dried up and PGGW was unable to complete the deal, resulting in SFF terminating the agreement on November 3.
"The issue between the parties now relates solely to compensation for damages caused by PGGW's default on the unconditional contract, and the costs of the transaction and the costs flowing from the breach," the joint statement said.
Investors have been concerned at PGGW's growing debt but received some relief after last week's interim result, which was widely considered to be better than could have been expected.
