A flurry of Murray Goulburn emails on milk prices is being aired in court.
In early August 2015, the then Murray Goulburn managing director Gary Helou and chief financial officer Brad Hingle received an email from an executive general manager that should have rung alarm bells.
"This is the 10th consecutive auction of net price decline. Prices on this auction represent the lowest ever recorded on [Global Dairy Trade] surpassing the weak prices during the GFC," the email said.
Two days later, a board director sent around an email to the executives, apparently concerned about the company's decision to stick to the final milk price forecast of $6.05 per kilogram of milk solids when dairy prices were falling globally.
"Isn't it about time that we had a look at a new RIF [revised income forecast] for us given the current trading conditions," he asked.
It wasn't until six months later, in February 2016, when Murray Goulburn, the nation's biggest dairy processor, told its farmers the final milk price forecast for that year would be $5.60/kg.
It got worse from there. To the shock of dairyfarmers and shareholders, Murray Goulburn in April revised its milk price forecast down to between $4.75/kg and $5.00/kg and introduced a bailout package known as "Milk Supply Support Package".
The "package" effectively meant farmers had to pay back the company for the drop in milk price in subsequent years. (The support package was scrapped in 2017 and the company "forgave" the debt").
The email exchange has been revealed in Federal Court documents as part of Hingle's defence against allegations by the Australian Competition and Consumer Commission, which is arguing Bingle, Helou and Murray Goulburn misled its farmers.
The milk price scandal prompted the resignation of Helou and Hingle on the same day and led the company to appoint restructuring expert John Spark as chairman.
He was the first chairman in its 67-year history who was not a dairyfarmer.
It also triggered a six-month Senate inquiry into Murray Goulburn and the ACCC court action.
The ACCC alleges Murray Goulburn, Helou and Hingle knowingly misled farmers by sticking to the forecast of $6.05 for most of the 2016 financial year when they knew dairy commodity prices were falling globally.
But Murray Goulburn, Helou and Hingle maintain they did nothing wrong.
In a defence in the Federal Court filed last week, Murray Goulburn denied it misled or acted unconscionably towards farmers in relation to its milk price forecast.
The company says its support package meant farmers received approximately $5.53 per kilogram for their milk, which was "materially the same" as the 2016 opening price of $5.60 per kilogram.
Murray Goulburn also says its farmers "knew and understood" its earnings were "subject to factors beyond the control of MG, such as changes in global dairy commodity prices and prevailing exchange rates".
Furthermore, the co-operative says farmers could terminate their supply at any time by giving a written notice and could switch to other dairy processors.
According to Murray Goulburn, many milk farmers switched to other dairy processors in 2017, therefore avoiding paying Murray Goulburn any money under the company's lending package.
When the ACCC began its court action in April, it said it would not push for a fine against Murray Goulburn because as a co-operative any fine could ultimately hurt farmers.
The stakes are higher for Helou and Hingle, who could be disqualified from managing a company for seven years and suffer a further blow to their reputations if they are found to have knowingly misled farmers.
They could also be ordered to pay a fine of up to $220,000 each, although their directors' liability insurers are likely to pick up the bill.
Each has hired lawyers at the top end of town to defend them, with Herbert Smith Freehills acting for Murray Goulburn, Corrs Chamber Westgarth defending Helou and MinterEllison defending Hingle.
Murray Goulburn declined to comment, citing the ongoing court case.
Helou and Hingle's lawyers did not respond to request for comment, but their defence appears to shift the blame on the rest of the board and the executive team.
Helou's defence says in October, November and December 2015 and again in February 2016, the board remained confident in its ability to deliver a price above $5.60 per kilogram, believing the company's "optimisation initiatives" would minimise the impact of lower dairy commodity prices.
At the time, Murray Goulburn was pursuing a strategy of creating value-added products and focusing on the key growth categories of nutritional powders, consumer cheese and dairy beverages.
This would deliver bigger profit margins and therefore make itself resistant to the fluctuations in global dairy commodity prices.
Similarly, Hingle's defence says any final disclosure by Murray Goulburn concerning its milk price was "ultimately a matter for determination by the board, or a sub-committee delegated by the board".
He also points to disclaimers in numerous documents, which effectively state the company's forecast was subject to external factors, such as global dairy commodity prices and prevailing foreign exchange rates - fine prints which farmers were unlikely to have read.
It was perhaps no surprise the executives had an incentive to hold tightly onto the company's initial forecast, because any short-term bonuses in 2016 were subject to hitting a "gateway" target of the closing milk price set by the board at the beginning of the financial year.
The ACCC's case shows as early as May 2015, when the company partially floated on the ASX with the closing price forecast of $6.05 per kilogram, executives expressed concerns the company's budget was "already very aggressive".
By the end of August, Hingle was getting an email from Murray Goulburn's head of group finance, Daniel Egan, accusing him of setting aspirational targets and masking the impact of global commodity prices.
"These forecasts/prices do not look like they are based on reality - rather purely a goal to seek to achieve a certain outcome," he wrote.
"Here we have hidden the impact on price in the base result, which I believe is the incorrect approach unless we truly believe we will achieve these prices - by your own admission nobody knows where prices will go, so we should show this separately in my opinion."
Nevertheless, at an analyst call later that month, the company stuck to the final forecast of $6.05 per kilogram as the most likely outcome for the 2016 financial year.
By February 2016 the picture looked grim, with an executive general manager informing Helou the company missed the instant milk powder target for the month by at least 2000 tonnes.
Helou responded by coaching him to be more aggressive.
"We have to get more aggressive in our approach. Peter Scott [sales general manager] is up there now and he must focus on this task. He shouldn't come back until he has put in place BIG and IMMEDIATE DEALS!!!"
By then, the executives had no choice but to ditch the $6.05 per kilogram forecast in favour of $5.60 per kilogram - which they would slash down to between $4.75 per kilogram to $5.00 per kilogram less than two months later.
The case is due to return for a directions hearing on Friday before Justice Beach of the Federal Court.