The Court of Appeal has heard that the former Wool Board was correct in the way it handled a group of high-end merino sheep farmers.
The court is now rehearing an appeal case in which the disestablishment company is seeking to overturn a High Court decision in favour of Saxmere, which is a select group of merino wool producers.
The Saxmere group has been battling through the courts for more than a decade to have money it paid the board in marketing levies returned.
It says the Wool Board refused to help the group fund its own marketing plans to promote its superfine merino wool. Saxmere is claiming $1m in compensation.
The Supreme Court ordered the appeal be reheard after concerns were raised about a business relationship between Justice Wilson, who was on the bench for the original appeal hearing, and the lawyer for the former Wool Board, Alan Galbraith.
On Wednesday morning the Wool Board's lawyer told the court Saxmere was a small-scale operation, which produced only one-one-hundredth of the merino clip.
He said the High Court was wrong to find in favour of the Saxmere farmers.
Lawyers for the Saxmere group begin presenting their case on Wednesday afternoon.
The hearing is expected to end on Thursday. It's likely the Court of Appeal judges will reserve their decision.