Fonterra says it was caught out by a milk production overload that led to it to dumping millions of litres of buttermilk at the Eltham wastewater plant in 2013.
The dairy company is being tried in the New Plymouth District Court over the stench caused by discharging the waste at the plant, which is run by the South Taranaki District Council.
The Taranaki Regional Council laid the charge under the Resource Management Act.
The company's regional manager, Bill Nichol, said Fonterra had not been forecasting record milk levels in 2013, as the regional council contends.
And he said that, even if they had, Fonterra did not have enough time to increase production capacity or develop contingency plans for dealing with the excess, other than on-farm disposal or breaching consents at its Whareroa outfall.
Judge Brian Dwyer said that the company did not appear to have "enough slack in its systems".
He told Mr Nichol it was odd that Fonterra did not have contingencies available to handle the excess milk production.