New Zealand High Court judge Justice Geoffrey Venning last week approved Fonterra's request for a temporary stay in the case launched by Danone in January 2014 "to bring all facts to light and to obtain compensation for the harm it has suffered."
Danone claims to have lost sales worth €370m (US$510m, NZ$593m) as a result of the August 2013 WPC botulism alert.
Under the terms of its supply agreement with Fonterra, which Danone terminated in January, arbitration proceedings were simultaneously launched in Singapore.
Approving Fonterra's application for a temporary stay, Venning ordered that the arbitration be completed first.
“Given the substantial degree of factual overlap between the claims in the Singaporean arbitration and these proceedings I consider that it would not be in the interests of justice for both claims to proceed in tandem,” said Venning.
“It is in the interests of cost, convenience and justice that the factual matters be determined first, either in these proceedings or the Singaporean arbitration," the Justice added.
Danone may still pursue its New Zealand High Court if "there are issues not resolved in the arbitration."
In a statement sent to DairyReporter.com, Danone questioned why both cases can't continue concurrently.
“Danone believes this decision creates undue delay in having its separate High Court claims heard and that there is no reason both matters cannot proceed together," said Danone.
“Danone reiterates that this affair illustrates serious failings throughout the Fonterra group of companies in applying the quality standards required in the food industry. Danone will consult with its legal team to consider next steps in relation to the High Court claim.”
DairyReporter.com approached Fonterra for comment, but no response was forthcoming prior to publication.
Fonterra alerted eight customers, including Danone subsidiaries Nutricia Australia New Zealand (Nutricia ANZ) and Dumex, on August 2 2013 that three batches of WPC potentially contaminated with botulism-causing Clostridium botulinum had entered the supply chain.
Tests later revealed that the bacteria found were Clostridium sporogenes - a non-toxic Clostridium strain.
This information came too late, however, for Nutricia ANZ and Dumex, who, without proof their products were tainted, pulled thousands of units of infant formula from shelves in New Zealand, Cambodia, Thailand, Hong Kong, China, Malaysia, and Singapore.
Fonterra, which vowed previously to "vigorously defend any proceedings", has budgeted for a payout of just NZ$11m (US$9.5m, €7m) to Danone. This figure, Fonterra claims, represents "the maximum contractual liability to Danone."