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Freedom Foods loses fraud case in Federal Court

Australian-owned Freedom Food has been slammed in the Federal Court over fraud and breach of contract allegations put forward by US-based Blue Diamond Growers.

BDG claimed Freedom Foods used other suppliers for nut-based and non-organic almond based products for manufacture and sale in Australia and New Zealand, when their agreement should have precluded that. Freedom Foods claimed this was not true.

However, in a 3:0 ruling, Federal Court judges deemed an earlier trial court judgement – which rejected Freedom’s claims its agreement with Blue Diamond was under the franchising code and its arbitration clause should be invalid – as correct, and awarded Blue Diamond costs of appeal.

The decision brings an end to the back-and-forward litigation between the two businesses in Australia, and sets the stage for further court battles in the US.

“We viewed Freedom’s Australian lawsuit as a strategic attempt to obstruct Blue Diamond from availing itself of its contractual right to arbitrate its claims against Freedom,” said Blue Diamond’s council for its California arbitration Michael Donner.

“We are grateful that the Federal Court of Australia rejected Freedom’s arguments, validated the enforceability of Freedom’s contractual promise to arbitrate, and rendered its decision in such a timely and efficient manner.”

The loss follows a difficult year for Freedom, which has seen its share price fall drastically after accounting irregularities were found in its books last June.

Freedom Food’s securities price over the course of the last year: Source: ASX.

Before the business went into a a trading hiatus its securities were worth around $3 each. Upon reopening to the market in March 2021, its value tanked to around 50c per security, which have since fallen further to 40c each.

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