CATCHWORDS
Negligence - action by potato grower supplied by first respondent with seed potatoes infected by bacterial wilt - duty of care - whether breach of duty - whether second and third respondents proffered negligent advice as to the management of the disease - assessment of damages - whether losses alleged caused by the first respondent's negligence.
Negligence - duty of care - proximity - claims for purely economic loss - export market for potatoes grown and processed by fourth to eighteenth applicants closed by outbreak of bacterial wilt on the property of a neighbour who had been supplied with infected seed potatoes by the first respondent - whether duty of care owed to fourth to eighteenth applicants by the first respondent - whether duty of care owed to fourth to eighteenth applicants by the second and third respondents when proffering advice to the neighbour as to the management of the disease.
Contract - whether contract of sale and purchase of seed potatoes - whether implied conditions as to reasonable fitness and merchantable quality - whether implied conditions broken by supplying seed potatoes infected with bacterial wilt.
Trade Practices - misleading or deceptive conduct - whether misrepresentation made as to source and history of potato seeds to be supplied to a potato grower - whether reliance by the grower on representation.
Trade Practices Act 1976, s 52, 82
Fruit and Plant Protection Act 1968 (SA)
Crown Proceedings Act 1992 (SA)
Plant Diseases Act 1914 (WA)
Sale of Goods Act 1895 (SA)
Hughes v Lord Advocate [1963] AC 837
Wyong Shire Council v Shirt (1980) 146 CLR 40
Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387
D.F. Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 100 ALR 468
Ultramares Corporation v Touche (1931) 174 NE 441
Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529
Bryan v Maloney (1995) 182 CLR 609
Seas Sapfor Forests Pty Ltd v ETSA, judgment 9 August 1996 (unreported)
In re Montagu's Settlement Trusts [1987] 1 Ch 264
re Chisum Services Pty Ltd (1982) 7 ACLR 641
San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340
Liesbosch, Dredger v Edison, S.S. (Owners) [1933] AC 449
Hadley v Baxendale (1854) 9 Exch 341;156 ER 145
Matter No. SG 28 of 1994
DAVID CHARLES SPARNON & OTHERS v APAND PTY LTD & OTHERS
von Doussa J
Adelaide
20 December 1996
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIAN DISTRICT REGISTRY )
)
GENERAL DIVISION ) No. SG 28 of 1994
BETWEEN:DAVID CHARLES SPARNON
First Applicant
SANDRA KAY SPARNON
Second Applicant
MICHAEL DAVID SPARNON
Third Applicant
FRANK PERRE
Fourth Applicant
CATERINA PERRE
Fifth Applicant
PASQUALE PERRE
Sixth Applicant
MARY PERRE
Seventh Applicant
GUISEPPE DOMENICO PERRE
Eighth Applicant
MARIA PERRE
Ninth Applicant
JIM PERRE
Tenth Applicant
FRANCES PERRE
Eleventh Applicant
WARRUGA FARMS PTY LTD
Twelfth Applicant
PERRE'S VINEYARDS PTY LTD
Thirteenth Applicant
RANGARA PTY LTD
Fourteenth Applicant
PASQUALE PERRE
Fifteenth Applicant
GRACE PERRE
Sixteenth Applicant
FRANCESCO PERRE
Seventeenth Applicant
MARIA PERRE
Eighteenth Applicant
AND: APAND PTY LTD
First Respondent
THE MINISTER OF PRIMARY
INDUSTRIES
Second Respondent
THE STATE OF SOUTH
AUSTRALIA
Third Respondent
MINUTES OF ORDER
JUDGE MAKING ORDER : VON DOUSSA J.
WHERE MADE : ADELAIDE
DATE OF ORDER : 20 DECEMBER 1996
THE COURT ORDERS THAT:
1. There will be judgment for the first, second and third applicants against the first respondent for $51,200.
2. There will be judgment for the second and third respondent dismissing the claims of the first, second and third applicants.
3. The cross-claim by the first respondent against the second and third respondents be dismissed.
4. The cross-claim by the second and third respondents against the first respondent for contribution in respect of claims by the first, second and third applicants be dismissed.
5. The issue for separate determination is answered as follows:
none of the respondents is liable in law for damages for the
losses on any of the causes of action alleged by the fourth to eighteenth
applicants in the ninth amended
Statement of Claim.
6. Further consideration of outstanding issues including costs be stood over to a date to be fixed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
INDEX
The proceedings 1
Bacterial wilt 6
Sparnon partnership - background 8
Perre interests - background 11
The Potato Industry Development Project 13
The Victorian Seed Potato Certification Scheme 18
The history of the Saturna potato seed 20
The source of the outbreak on the Sparnon
property 26
The source of infection on Mr Tymensen's
property 29
Negligence of Apand 35
The Sparnon partnership contract claim 38
The Sparnon partnership TPA claims 44
i) The claims 44
ii) Credit issues and similar fact evidence 49
iii)Reliance 58
The Sparnon partnership against Minister and
State 59
i) Pre-outbreak 59
ii) Post-outbreak 66
The Sparnon partnership - contributory negligence
and volenti 75
The Perre interests negligence claims 75
Warruga Farms v Apand 84
Warruga Farms v Minister and State 88
Perre Vineyards v Apand)
) 91
Rangara v Apand )
Perre Vineyards v Minister and State )
) 91
Rangara v Minister and State )
The Perre interests TPA claims 91
Sparnon partnership damages 92
Orders 109
IN THE FEDERAL COURT OF AUSTRALIA )
)
SOUTH AUSTRALIAN DISTRICT REGISTRY )
)
GENERAL DIVISION ) No. SG 28 of 1994
BETWEEN:DAVID CHARLES SPARNON
First Applicant
SANDRA KAY SPARNON
Second Applicant
MICHAEL DAVID SPARNON
Third Applicant
FRANK PERRE
Fourth Applicant
CATERINA PERRE
Fifth Applicant
PASQUALE PERRE
Sixth Applicant
MARY PERRE
Seventh Applicant
GUISEPPE DOMENICO PERRE
Eighth Applicant
MARIA PERRE
Ninth Applicant
JIM PERRE
Tenth Applicant
FRANCES PERRE
Eleventh Applicant
WARRUGA FARMS PTY LTD
Twelfth Applicant
PERRE'S VINEYARDS PTY LTD
Thirteenth Applicant
RANGARA PTY LTD
Fourteenth Applicant
PASQUALE PERRE
Fifteenth Applicant
GRACE PERRE
Sixteenth Applicant
FRANCESCO PERRE
Seventeenth Applicant
MARIA PERRE
Eighteenth Applicant
AND: APAND PTY LTD
First Respondent
THE MINISTER OF PRIMARY
INDUSTRIES
Second Respondent
THE STATE OF SOUTH
AUSTRALIA
Third Respondent
REASONS FOR JUDGMENT
Coram: von Doussa J.
Place: Adelaide
Date : 20 December 1996
In 1992 the applicants were potato growers on properties situated between Berri and Loxton in the South Australian Riverland. They sue for damages for losses suffered by them in consequence of an outbreak of bacterial wilt (Pseudomonas Solanacearum) on the property owned by the first, second and third applicants, Mr David Sparnon, Mrs Sandra Sparnon and their son Michael ("the Sparnon partnership").
Symptoms of the outbreak were detected in an experimental crop of Saturna potatoes in late April 1992. The disease was scientifically confirmed through the South Australian Department of Primary Industries ("the DPI"), and the confirmation was notified to the applicants on about 26 May 1992.
As originally formulated the claim by the Sparnon partnership was for $3.044 million.
The fourth to the eighteenth applicants ("the Perre interests") grew or packed potatoes on properties situated approximately 2 to 3½ kms from the Sparnon property. The claims formulated by the Perre interests in aggregate amount to $8.933 million.
The first respondent was incorporated as APD Snack Foods Pty Ltd, but in 1990 became CCA Snack Foods Pty Ltd. At the time of the bacterial wilt outbreak it commanded about 60% of the potato crisping industry in Australia. It contracted with numerous potato growers in the Eastern States and South Australia. Relevant to this case, it had a large potato storage facility at Tynong in Victoria, and a recently built state of the art processing plant at Regency Park in South Australia for making potato crisps. Part of the company's operation included research and development into new varieties of potato, including potatoes that could be grown as a winter crop. The Saturna potato was one such variety. On 5 January 1993, after the bacterial wilt outbreak, the crisping business was sold by the company to Smiths Snack Foods. The company name was then changed to Apand Pty Ltd. Through the evidence each of the three company names are frequently referred to, but the company is here referred to as "Apand".
It is alleged that the source of bacterial wilt infection on the Sparnon property was Saturna seed potatoes supplied by Apand. The causes of action alleged by the Sparnon partnership against Apand are (1) breach of contract arising from an implied warranty as to fitness of the seed potatoes, (2) a claim under s.82 of the Trade Practices Act 1976 ("TPA") for misleading and deceptive conduct contrary to s.52 relating to misrepresentations as to the history of the seed allegedly made by Apand's South Australian Field Officer at the time, Mr John Hughes, and (3) negligence.
The causes of action alleged by the Perre interests against Apand are (1) a claim under s.82 of the TPA based on the alleged misrepresentations made by Mr Hughes to the Sparnon partnership, and (2) negligence. These claims were aptly described by counsel for the respondents as "derivative" claims as they depend on the establishment of the wrongs alleged by the Sparnon partnership. The Perre interests' claims raise difficult questions as to the scope of the cause of action given by s.82 where reliance on a misrepresentation made by the respondent is not by the party claiming damages, but by a third party (in this case, by the Sparnon partnership) and as to the liability of a tortfeasor to compensate a person who suffers purely economic loss and no personal injury or damage to property as the result of negligent conduct. To expedite a decision on these issues it was directed that liability issues on the Perre interests' claims be decided before evidence was led as to their damages. The terms of the questions posed to be answered as separate questions are referred to later in this judgment.
The second respondent, the Minister for Primary Industries ("the Minister") is sued by the applicants as the Minister responsible for the administration of the Fruit and Plant Protection Act 1968 (SA), and the third respondent, the State of South Australia ("the State") is sued pursuant to the Crown Proceedings Act 1992 (SA). It is alleged that by reason of the involvement of the Minister and a Development Officer, Ms Lanz, in a project entitled "Development of the Potato Processing Industry in South Australia" ("the project"), and by the conduct of Ms Lanz in monitoring a crop of Saturna potatoes grown on the property of Virgara Bros from which the seed planted by the Sparnons came, the Minister and the State, by their agent Ms Lanz, were guilty of negligence. In particular, it is alleged that Ms Lanz was negligent in not investigating the history of the Saturna seed, and in not diagnosing the presence of bacterial wilt in the Virgara Bros crop.
It is further alleged against the Minister and the State that its officers were negligent in giving advice to the Sparnon partnership on remedial action to manage the bacterial wilt outbreak after it occurred, with the result that the infection was not destroyed in the affected area of the Sparnon property as quickly as it should have been - thereby extending a period of prohibition imposed by Western Australian regulations on the import of potatoes into that State. It is now conceded by the Sparnon partnership that even if this post-outbreak negligence is established it did not contribute to their losses. The post-outbreak allegations are relied on by the Perre interests who at the time of the outbreak were exporting potatoes to Western Australia.
The respondents deny liability. They deny central allegations of fact asserted by the applicants, and also challenge the losses alleged. Against the Sparnon partnership it is alleged that they consented to run the risk that the Saturna seed might not be disease free as they knew it was not certified seed, that is seed grown under the Victorian certified potato seed scheme; or alternatively were for that reason guilty of contributory negligence.
There are cross-claims by Apand, first against the Sparnon partnership seeking contribution in respect of the claims by the Perre interests, and secondly against the State alleging that Ms Lanz transported the bacterial wilt disease into the Sparnon property on her shoes. The first cross-claim has been stood over for decision at the same time as the claims by the Perre interests. The second cross-claim was abandoned during the trial.
The Minister and the State have also brought cross-claims. The first cross-claim is against the Sparnon applicants for contribution to the claims by the Perre interests. The second cross-claim seeks contribution from Apand in respect of all claims by the eighteen applicants. Insofar as contribution is sought in respect of the claims by the Perre interests these cross-claims have also been stood over for later determination.
Bacterial Wilt
For many years before 1992 bacterial wilt was known to knowledgable people in the potato industry as a potentially serious and pernicious disease which can cause disastrous losses to growers, as infected paddocks cannot be used for potato growing for approximately 5 years and infected farms in potato growing regions are likely to be difficult to sell. Strict hygiene precautions should be rigorously pursued to prevent the spread of the disease from infected paddocks into other potato crops. The disease is readily spread by seed, soil and debris from infected crops, and continues to survive in damp environments for months, if not longer. The bacterium that causes the disease can exist in a number of host plants besides potatoes, such as tomatoes, eggplants and blackberry nightshade - the latter being a common weed. Paddocks affected by an outbreak must be treated by eliminating regrowth potatoes and other host plants, and by preventing the movement of stock or vehicles from the land, unless, in the case of vehicles and agricultural equipment, they are thoroughly washed down with disinfectant.
The existence of the disease was also known to growers, or at least most of them, as there had been outbreaks in South Australia in 1985, 1988, and 1991.
The strain of bacterial wilt that has been identified in outbreaks in South Australia is the biotype II, or "upland wilt". This strain may remain latent in a plant, particularly in cold weather, and not show any symptoms in the plant for a generation or more. Seed taken from a plant with a latent infection will pass on the infection to the next generation. The expression of symptoms can be expected in temperatures over 21oc. Initial symptoms will be wilting in the hottest part of the day, the plant recovering at night. The wilting will gradually become more pronounced and finally the plant may die. On being cut, affected tubers, depending on the degree of infection, may show a dark ring of discolouration, and in severe cases show white bacterial ooze.
The disease does not prevent the sale of affected crops for processing as potato chips, at least in the early states before the tubers commence to break down. In Western Australia, which so far has been free of the disease, a strict policy is in place against allowing the import of potatoes grown or packed in an area where an outbreak of bacterial wilt has occurred. At all material times Part 5, General Schedule 1 Part B, paragraph 14 of the Plant Diseases Regulations 1989 (WA) made under the Plant Diseases Act 1914 (WA) prohibited the import into that State of potatoes grown within 20 kms from a known bacterial wilt outbreak in the previous 5 years or processed in a packing facility which had handled potatoes grown within 20 kms of an outbreak in the previous 5 years. In the 1989-1990 season South Australia exported approximately 24,500 tonnes of ware potatoes with an approximate value of $14 million to Western Australia. Exports of that order were still taking place at the time of the outbreak on the Sparnon property. To assist South Australian growers to meet the import requirements of the Western Australian authorities the DPI (formerly the Department of Agriculture) conducted "Area Freedom Inspections" of potato growing properties, and later issued "Plant Health Certificates for Interstate Movement of Plant Material in Australia" in respect of particular shipments of washed and packed potatoes intended for the Western Australian market. Further, on 1 November 1990, bacterial wilt was gazetted as a notifiable disease under the Fruit and Plant Protection Act 1968 (SA) to meet one of the requirements of the Western Australian authorities. Although the disease since that date has been a notifiable disease in South Australia, it is not and never has been a disease that causes the property on which it occurs to be quarantined. These matters were generally known to growers and processors in the potato industry, and were of importance to the Perre interests whose potatoes were mainly exported to Western Australia in order to achieve a better price than was available to them in South Australian or Eastern States markets.
The Sparnon partnership - background
Mr David Sparnon grew up on a market gardening property at Montacute in the Adelaide Hills, and later worked with his father and brother on a property at Virginia, north of Adelaide. Their produce included potatoes. During this time he involved himself in the affairs of potato growers, at one time being the Secretary of the Plains Potato Growers of South Australia.
Mr David Sparnon left the family business in 1985, and worked for the SA Potato Board until the legislation which established the Board was repealed. He then worked for a potato processor until he, his wife, and son bought a property of 409 hectares (approximately 1100 acres) between Berri and Loxton ("the Sparnon property"). The Sparnons had located the property in 1988, but at that time the Commonwealth Development Bank ("the CDB"), declined their loan application. The CDB considered their proposed farming venture required an additional $100,000 equity to be viable. In mid-1989 a friend of Mr David Sparnon, Mr Barry Nicol who is a vegetable grower and processor, offered to lend the Sparnons plant and machinery to enable them to grow carrots for him. With that offer, and an assured future income from carrots, the CDB reconsidered the loan application. Whilst the CDB considered the Sparnons' proposal was still "marginal", approval was given for a loan of $320,000. An overdraft facility of $100,000 was also approved by the Commonwealth Bank of Australia ("CBA"). The Sparnon family had banked with the CBA for many years.
Although settlement on the Sparnon property did not occur until 15 September 1989, possession was given in about July 1989. The Sparnon partnership commenced business from 1 July 1989 and crops were planted before settlement. The Sparnon property was equipped with a house, sheds, fixed irrigation on 40 acres, and three irrigation circles, each of about 40 acres. Each circle was watered from a central point by a pivot irrigator. The Sparnon partnership took over the lease of one pivot irrigator which had to be moved between the three circles as required. Included in the sale and purchase of the property was an irrigation licence to pump 110 megalitres per annum from the River Murray, and the right to access the quota of another irrigation lease owned by a third party.
The Sparnon partnership intended to grow vegetable crops in the irrigated areas. The dry land was leased on a sharefarming arrangement to another farmer. All three members of the partnership were actively engaged in the operation. Michael turned 21 years of age about the time the first crops were planted.
Whilst farming at Virginia Mr David Sparnon and his family had been contract potato growers for Apand. When the Loxton property was acquired he contacted Apand who agreed to engage the partnership as a grower.
In September 1989 Apand contracted with the partnership to grow 100 tonnes of potatoes, delivering in January and February 1990. On 13 August 1990 Apand entered into another contract for 300 tonnes of Atlantic potatoes, delivery between 1 and 25 January 1991. These were ordinary commercial crops of potatoes that were expected to have a yield of about 18 tonnes per acre. On 1 February 1991 Apand and the partnership entered into a further contract for 250 tonnes plus of Atlantic potatoes for delivery in October 1991. The Atlantic variety was an established variety used in summer crops, i.e. crops grown for harvest in the summer. This contract was for a trial crop to be grown through the winter. Apand was anxious to establish a source of winter crop potatoes as it was difficult to store summer harvested crops through the following winter so as to ensure a year around supply. The Atlantic variety did not prove to be a successful winter crop. Apand entered into a further contract on 9 July 1991 for another summer crop of 300 tonnes of Atlantic for delivery in November 1991.
In December 1991 Apand's field officer, Mr Hughes, approached Mr David Sparnon seeking his participation in the experimental trial of the Saturna variety as a winter crop potato. In circumstances discussed in more detail later, Mr David Sparnon on behalf of the Sparnon partnership agreed. On 3 March 1992 the partnership planted about 1½ acres of Saturna, which it was hoped would produce a crop of about 30 tonnes, but the crop failed due to the outbreak of bacterial wilt.
The Perre interests - background
Perre Vineyards Pty Ltd (the thirteenth applicant) is a company owned by Frank Perre and his wife Caterina (the fourth and fifth applicants respectively). At one time the company operated a winery. It still owns the former winery buildings situated about 3½ kms due north of the Sparnon property.
On about 31 August 1988 Frank and Caterina Perre along with Frank's three brothers and their wives (the sixth to eleventh applicants respectively) acquired the Crown Lease over 807 hectares of land about 3 kms, at the closest point, north of the Sparnon property and directly across a road from the Perre Vineyard Pty Ltd buildings. The fourth to the thirteenth applicants then entered into a partnership known as Warruga which later became incorporated as Warruga Farms Pty Ltd ("Warruga Farms"). By 1992 Warruga Farms had established the business of growing potatoes on the 807 hectare property. Warruga Farms leased the former winery buildings from Perre Vineyards Pty Ltd and washed and packed its produce with plant installed in the former winery. A substantial part of its produce was exported to Western Australia. Warruga Farms had entered the Western Australian market in 1990.
The fifteenth and sixteenth applicants, Pasquale and Grace Perre ("P & G Perre") allege that in August 1989 they purchased the property adjoining the southern boundary of the 807 hectare property operated by Warruga Farms. The seventeenth and eighteenth applicants, Francesco and Maria Perre ("F & M Perre"), allege that at the same time they purchased the property that adjoined the southern boundary of the property acquired by P & G Perre. That property is about 2 kms north of the Sparnon property. P & G Perre, and F & M Perre through a company owned by them, Rangara Pty Ltd, then entered into a partnership known as the Rangara Joint Venture. The Rangara Joint Venture grew potatoes on the two properties owned by P & G Perre and F & M Perre, and sold them to Warruga Farms. The pleadings allege that the joint venture was paid an agreed price on delivery of the potatoes to Warruga Farms, i.e. to the washing and packing facilities on the property owned by Perre Vineyards Pty Ltd. The potatoes or substantial portion of them were then washed, packed, and exported to Western Australia. The balance was sold to local markets.
After the bacterial wilt outbreak Western Australia refused to admit potatoes grown or packed by the Perre interests, and the fourth to the eighteenth applicants ceased their potato operations.
The Potato Industry Development Project
The ninth amended Statement of Claim ("the Statement of Claim") alleges that in about January 1989 the Minister established, and the DPI was to administer, the project with the general objective of increasing the supply of quality South Australian processing potatoes by 12,000 tonnes per annum by July 1993. The project involved a crop monitoring strategy with monitoring to be undertaken on selected potato growing properties and strategic research to identify suitable varieties and growing practices.
The project was established and commenced in January 1990, but the pleadings convey an incorrect picture in saying that it was established by the Minister. The idea for the project emanated from Apand which was keen to increase the local supply of crisping potatoes from its Regency Park factory. At a meeting at Apand's premises on 11 September 1989 Apand proposed the project to the Processing Sub-committee of the Potato Growers of South Australia ("the PGSA"). The PGSA was a section of the South Australian Farmers Federation. It was envisaged at the time that Apand would be seeking up to an extra 10,000 tonnes of crisping potatoes, and that up to 2,000 tonnes of additional processing potatoes would be required for the fresh chip market. The focus of the project would be on determining the best way of increasing production by increasing yields. To provide the technical support necessary to carry out the crop monitoring envisaged it was proposed that an Industry Development Officer be employed.
The proposed project was also introduced by officers of Apand to officers of the DPI who agreed that the DPI should be involved. On 11 October 1989, the DPI agreed to participate in the project. The project became jointly run by the PGSA and the DPI. The DPI agreed to employ a suitable Development Officer for the project as the PGSA did not have an infrastructure that would enable it to employ and administer staff.
Funding for the project came from several sources. The PGSA took on the role of securing funding by levy on the growers and processors (including Apand). The funds supplied by PGSA were to be met on a dollar for dollar basis by the Horticultural Research and Development Corporation ("the HRDC") a body established by the Federal Government. However as the HRDC processed applications annually with effect from 1 July each year, and as the PGSA was anxious to advance the project, it agreed to provide all the funds to run the project from its commencement in January 1990 to 30 June 1991.
Whilst the participation of the DPI did not require it to contribute funds directly to the project to meet the wages and overheads of the Development Officer, the DPI agreed to make an indirect contribution by providing administrative services and expert advice from nominated personnel within the Department. The particulars of this contribution are set out in the submissions made to the HRDC for funding for the years from 1 July 1990 through to the conclusion of the project on about 30 June 1993. The first submission was drafted by Mr Lomman, then Senior Horticultural Officer of the DPI stationed at the Lenswood Horticultural Centre in the Adelaide Hills. The "Organisation" making the application for funding was said to be the DPI, and Mr Lomman was described as the Project Chief Investigator.
Mr Lomman was also closely involved in the recruitment of Ms Lanz who was appointed as the Development Officer from 29 January 1990.
The Job and Person Specification which advertised the position was on a South Australian Public Service form. The administrative unit was said to be the DPI. The letter of appointment to Ms Lanz was written by the Chief Executive Officer of the DPI. Not only did the DPI become the formal employer of Ms Lanz, but she was also stationed at the Lenswood Horticultural Centre. Many of her activities were supervised by DPI officers who also offered her technical and expert advice. Ms Lanz regularly reported to the PGSA. She liaised almost constantly with growers and Apand. She attended Processing Sub-committee meetings and discussed the progress of the project with the Sub-committee and at times took directions from its members. But ultimately she reported to and was responsible to the DPI. There can be no real doubt that the DPI exercised or had the power to exercise a considerable degree of control over Ms Lanz' activities, and there can be no real doubt that the State would be vicariously liable for negligent acts and omissions committed by her in the course of her employment in the project as a Development Officer. Although the responsibility of the DPI and the Minister for the conduct of Ms Lanz in connection with the project was put in issue by the pleadings, and led to considerable evidence being led on the topic, at the end of the trial counsel for the Minister and the State did not argue against this conclusion.
As the scope and content of the duties attaching to Ms Lanz' role as Development Officer in the project are central issues in the applicants' case - and in particular whether her role included the requirement that she check the history and pedigree of seed used in crops she monitored as part of the project - reference is made at this point to statements appearing in the job specification and HRDC applications. In the job specification the following appears:
"Summary of the broad purpose of the position, and its responsibilities/duties.
Under direction from the Senior Horticultural Officer (Vegetables) and the Executive Committee of PGSA Processing Committee, provide technical support to improve the yields and quality of processing potatoes through a crop monitoring and research program.
...
...
Statement of Key Responsibilities/Duties (Group into major areas of responsibility/activity and list in descending order of importance...)
In consultation with the Senior Horticultural Officer (Vegetables) and relevant research staff:
- plan and undertake a crop monitoring and research program on potato processing properties located on the Northern Adelaide Plain, in the Adelaide Hills and at Bordertown.
- ...
- ...
- In consultation with research staff, plan and undertake specific potato related research programs and assist with on-going research programs.
- ...
- ...
- ... "
In the HRDC applications, which are lengthy and detailed,
appear the following paragraphs:
"3 Year Program Commencing 1/7/90
Crop Monitoring
The crop monitoring model used will be similar to that used by Horticare (a very successful privately run horticultural consultancy, Main shareholder, T.K. Twigden). This model uses agronomic and counselling expertise to suggest appropriate farm management practices for efficient production. Data on soils, nutrition, irrigation supplies and quality as well as seed hygiene and pests and diseases will be collected as part of the crop monitoring exercise. This data will then be used to compare differences between growers. A computer program available from a potato agronomist in USA will be used to assist in this exercise.
Crop monitoring will be carried out on selected properties, for half a day every fortnight during production. Growers selected for the crop monitoring program will be innovators who will be willing to make the necessary changes to enable production improvements.
The crop monitoring data collected on individual farms will be used to extend information to the wider community of processing potato growers during field days in each major potato processing district. It is anticipated that over the 3 year life of this project, all growers will be provided with the opportunity to participate in the intensive crop monitoring program.
..." (emphasis added)
The Victorian Seed Potato Certification Scheme
This scheme is administered by
the Victorian Department of Agriculture.
Under the scheme the Department supervises all stages of multiplication
of pathogen-tested nuclear stocks, and certifies that seed potatoes meet the
requirements of the standards set under the scheme. The multiplication of seeds is undertaken
through several generations by a small number of specially chosen growers in
recognised seed potato growing areas.
These areas are typically high altitude areas
where the risk of the spread of viral diseases by aphids is minimal. The standard requires that such growing farms
must be free of diseases, including bacterial wilt, for the preceding 5
years. Crops undergo rigorous
inspections during growth and after harvest and must meet disease free
tolerances. The procedures employed mean
that there is a high expectation that certified seed will be disease free, but
the nature of potato diseases is such that no absolute assurance against
disease is possible.
The generations in the scheme leading to certified seed potatoes are as follows:
Generation Class of Seed
G1 Cuttings or mini tubers
G2 Elite I
G3 Elite II
G4 Foundation Seed
G5 Mother seed
G6 Certified Seed
There is no similar certified seed scheme in South Australia. Where certified seed is used in South
Australia, it is imported from Victoria.
Departments of Agriculture in Southern Australia recommend and encourage
the use of certified seed to assist in the prevention of disease, but not all
growers always use certified seed. It is
expensive and often in short supply. It
is common for commercial growers to use "one off" seed, that is
potato seed taken from a crop grown from certified seed, or to rely on their
own hygiene precautions and the disease free history of their own properties to
multiply seed for their own use. The
introduction of disease where multiplication outside the
certified scheme occurs can be minimised by growing the crop from which seed is
collected in "new" ground, i.e. ground that has not been planted with
potatoes for several years, by subjecting plant and equipment to careful
hygiene procedures, and by inspection of the crop as it grows to ensure it is
disease free.
Because the certified seed growing areas are in cool places, seed is harvested in time for the following summer crops in Southern Australia, but is very difficult to store for long enough to use in winter crops. Consequently most winter crops are not grown for certified seed. Mr J A Mundy, the current chairman of the PGSA in evidence estimated that only about 50% of commercial crops in South Australia are grown from certified seed.
The history of the Saturna potato seed
Apand, in its search for better crisping varieties of potato, and as part of its research and development, arranged the importation into Australia of Saturna tissue culture from Holland in 1987. In 1988 a number of Saturna plantlets were released to Apand from the Plant Research Institute at Burnley, Victoria where the culture had been grown in quarantine. From these plantlets, mini tubers were grown at the Victorian Department of Agriculture Potato Research facility at Toolangi. The Toolangi facility has a well known reputation in the potato industry for producing disease free early generation seed. In about April 1989 Toolangi produced about 0.5 tonne of Elite I class seeds. These were then multiplied by a recognised grower in the certified seed scheme to produce in March 1990 6 tonnes of Elite II seeds. About 5 tonnes of the Elite II seeds were delivered into cool storage for Apand at Narre Warren, Victoria.
In mid 1990 at a meeting of Apand personnel held at the Regency Park factory it was decided not to proceed with the development of several experimental varieties of potato, including Saturna. The decision to abandon Saturna was unrelated to any disease consideration. The tubers that had been grown had not been an appropriate size and shape. Following this meeting, Mr Kan Moorthy, a field officer with Apand, arranged for the 5 tonne of Elite II seed to be grown as a commercial crop with the intention that the whole crop would be processed out of existence.
Mr Moorthy has tertiary qualifications in agriculture and in potato production, and years of practical experience in the potato industry in Sri Lanka, Canada and Australia. He is also a qualified seed inspector for the purpose of the Seed Potato Certification Scheme.
The commercial grower chosen to plant the Elite II was Mr G P J Tymensen (trading as GMT Trading Pty Ltd) at Garfield, in the Koo Wee Rup swamp area east of Melbourne, Victoria. The Koo Wee Rup swamp has been an area for intensive potato growing since the end of the last century. It is low lying and susceptible to aphids and to roll leaf virus which they transmit. There have been outbreaks of Potato Cyst Nematode ("PCN"), which is very serious and quarantinable potato pest. In particular a PCN outbreak occurred in Wandin in 1990 a little over 20 kms from Mr Tymensen's property which led to the proclamation in South Australia on 11 March 1991 of an amendment to the Plant Quarantine Standard, South Australia, pursuant to the Fruit and Plant Protection Act 1968 prohibiting entry into South Australia of potatoes grown within 20 kms of Wandin. There have also been outbreaks of soil borne fungal diseases such as powdery scab and black dot. Mr Tymensen had been a grower for Apand for about 20 years. The evidence shows that he was held in high regard by Apand and others in the Victorian potato industry who were familiar with his operations as an efficient and careful potato farmer who followed proper hygiene standards. The Koo Wee Rup swamp was not a certified seed growing area, and Mr Tymensen had never been a grower in the Seed Potato Certification Scheme.
The Elite II seed was sold as commercial seed to GMT Trading Pty Ltd and planted by Mr Tymensen in December 1990. As part of a routine crop inspection program carried out by Apand on crops grown by its contract growers, the crop had been inspected by Apand's Supply Manager at Tynong, Mr Ray Cullen (who also has tertiary qualifications in agriculture) at least twice. It appeared then to be a very healthy crop. I accept the evidence of Mr Cullen and Mr Moorthy to this effect.
At a quarterly "supply meeting" of Apand personnel held at Pakenham, Victoria, on 20 and 21 February 1991, a Queensland representative raised again the future of the Saturna variety which had certain handling properties that suggested it had a future, at least in Queensland. Mr Moorthy said that seed which had been in Victoria had been planted out as a commercial crop following the decision to abandon the variety. The possibility of using the harvest from Mr Tymensen's property was discussed. Mr Moorthy pointed out that it had not been treated or grown as a seed crop and it had not been inspected at the time of flowering, so he was against using the harvest as seed. His concern arising from the failure to inspect during flowering was not related to the risk of disease in the crop, but to the risk that the harvest would include "rogue" potatoes of different varieties that had self-sown in the crop from earlier crops. But after expressing his reservations he said if the meeting wanted to use the crop as seed he would "look at it" and inspect the seed at grading. The possibility that the crop could have become infected with bacterial wilt was not a consideration in his expressions of concern. He did not turn his mind to this risk as Mr Tymensen's property had no history of bacterial wilt and the seed was clean seed out of the Seed Potato Certification Scheme.
The meeting considered whether the crop should be used for seed. The reservations of Mr Moorthy were discussed. Mr Tymensen was described as a very professional grower with no history of disease on his property. The meeting, including Mr Moorthy and Mr Cullen, agreed that the crop could be used as seed to enable the further and rapid development of the Saturna variety.
Following the Pakenham meeting Mr Moorthy inspected the crop, as he would have inspected a crop in the certified potato seed scheme. The potato plants were then at a late stage: some diseases might then not be apparent, but bacterial wilt should have been as it has a progressive effect on the potato plant leading eventually to its death. He also inspected the tubers during the grading process in a packing shed. Some of the crop was actually graded twice to obtain the number of small tubers required for seed. No sign of disease was observed. Mr Cullen also inspected some of the tubers during grading and saw no sign of disease. Mr Tymensen produced approximately 86 tonnes. By arrangement with Apand he retained 10 tonnes as seed for a further crop. Of the balance the largest tubers - some 25 tonnes - were processed. The rest were shared by Apand between 13 growers in Queensland, South Australia, Victoria and to various other growers in New South Wales for further trial and multiplication.
The Saturna seed allocated to South Australia was 2 tonnes, sold and delivered by Apand to Virgara Bros at Virginia on about 20 June 1991. Of that seed one tonne was planted by Virgara Bros in July 1991 and the remainder was put into cold storage for later use (ultimately it was destroyed). The Saturna crop was planted by Virgara Bros on new ground that had not previously been used for potato growing, and produced 17 tonnes on harvest in December 1991.
In December 1991 Mr Hughes on behalf of Apand invited five of its contract potato growers in different localities in South Australia to grow experimental winter crops of Saturna. They each agreed. The experimental crops were planted in February 1992, with the exception of the Sparnon partnership who planted the Saturna seed on 3 March 1992. The South Australian growers were:
Grower Locality Tonnes
Planted
GL Hodge & Partners ("Hodge") Goolwa 2t.
The Sparnon Partnership Loxton 2t.
Parilla Premium Potatoes Pty Ltd
("Parilla") Parilla 3t.
DM & JK Muster ("Muster") Pinnaroo 3t.
Mieglich Enterprises ("Mieglich")Langhorne Creek 2t.
Parilla was a company operated by Mr Pye. Virgara Bros also planted at Virginia 5 tonnes of Saturna seed retained from the previous crop.
Although the crops were to be experimental, Apand gave Supply Agreements in the standard form for commercial crops to the growers. At the request of Mr Hughes, on behalf of Apand, Ms Lanz agreed to monitor these experimental crops as part of the project, even though the project was originally established to monitor normal commercial crops.
In early April 1992 symptoms suggestive of bacterial wilt were discovered in all the crops of Saturna except that of the Sparnon partnership in whose crop symptoms became apparent toward the end of April. Subsequent laboratory testing confirmed the presence of bacterial wilt in all the crops except that of Mieglich where another lesser disease was identified. Confirmation was notified to the growers in late May.
After learning of the outbreaks in South Australia, Messrs Tymensen, Cullen and Moorthy closely inspected the paddock where Mr Tymensen had grown the first Saturna crop. They discovered in one corner of the paddock regrowth potatoes showing clear evidence of bacterial wilt in an area about 4-5 square metres. Although this was a small area, the evidence shows that in the harvesting and grading processes the disease in a small area like this could be distributed widely through the other tubers obtained from the balance of the crop.
The source of the outbreak on the Sparnon property
Apand at trial conceded that the South Australian growers other than Mieglich suffered outbreaks of bacterial wilt, but put in issue that the source of the infection in those crops was seed from the first Saturna crop grown by Virgara Bros, and to the last strenuously opposed the allegation that there had been bacterial wilt infection in the seed potatoes harvested from the crop planted by Mr Tymensen in December 1990.
Much evidence was led as to the risk of transmission of bacterial wilt on plant and equipment, in soil adhering to items such as used potato bins and bags (even to shoes - hence the allegation against Ms Lanz in the abandoned cross-claim), and by seed potatoes purchased or grown outside the certified potato seed scheme. Attention was drawn to the anomaly of Mieglich escaping the disease if Mr Tymensen's crop had been the source, and to the fact that in South Australia there had been outbreaks of bacterial wilt at Walkers Flat in the Riverland in 1985, at Murray Bridge in 1988, in the South East, at Swan Reach and at Woodside in 1991, and, more significantly at a property at Walkers Flat in the Riverland in April 1992. None of these other outbreaks had any apparent connection to Mr Tymensen or the Koo Wee Rup swamp area.
There was nothing that suggested any cogent connection between the outbreaks just mentioned and either the Sparnon partnership or the other growers of experimental Saturna crops who suffered bacterial wilt. Possibilities were said to abound, but those suggested were so weak as not to impact on the likelihood which arises from the coincidence of five diagnosed outbreaks, each on properties without a known history of bacterial wilt, each only in the small areas of Saturna, and each from seed that had a common ancestry.
Apand called expert evidence to support its denial of any connection between the outbreaks and Mr Tymensen's crop from Dr Wimalajeewa, and to counter the expert evidence led from Dr Hayward called by the applicants. Both experts are highly qualified, the former as a plant pathologist and the latter as a microbiologist. There were, however, aspects of Dr Hayward's evidence that may be acceptable in theory, but which in their practical application to the facts of this case were unrealistic, for example the suggestion that the Saturna seed should have been tested for the presence of bacterial wilt before it was supplied by Apand to growers. Dr Hayward had to concede that there was no practical test that could have been performed. Generally, however, the experts were in agreement about the nature and characteristics of the disease. Each of them unfortunately suffered from not having a full picture of all available evidence. In particular Dr Wimalajeewa either did not have available to him, or did not take into account when expressing reasons for his opinion, additional information about the incidence of bacterial wilt outbreaks in other crops, besides those already referred to, grown from seed from Mr Tymensen's first Saturna crop.
The evidence of other outbreaks paints an overwhelming picture that the source of the infection traces back to Mr Tymensen's first crop. That picture is illustrated on a schedule prepared by Messrs Moorthy and Cullen in the months following the outbreaks, exhibit A2, item 525. The schedule was prepared for use by Apand and its executives in planning how the outbreaks and their effect on forward supply should be managed. No executive or officer of Apand has given evidence questioning the reliability of the schedule and the obvious conclusion which springs from its contents.
In early 1992 in crops planted with the second generation of seed from Mr Tymensen's first Saturna crop there were bacterial wilt outbreaks identified in each of 9 crops planted in Queensland, in 5 out of the 6 crops in South Australia, and in 2 crops in each of Victoria and New South Wales. Other planned crops in Victoria and New South Wales were, in light of the picture that so clearly emerged, either sprayed out or the seed destroyed without further testing.
Making every allowance for the epidemiological methodology espoused by Dr Wimalajeewa, the overwhelming probability is that seed emanating from Mr Tymensen's first Saturna crop was infected with bacterial wilt and I so find.
I find this to be so even though there is evidence that no symptoms of the disease were observed during inspections of Mr Tymensen's first crop by Mr Moorthy and Mr Cullen. There are two possible explanations for that; first, that only a very small area of the crop was then infected and secondly, that the level of infection was low. Virgara Bros say they grew a healthy first crop of Saturna which showed no symptoms of the disease. That can be explained by the generally cooler weather and by a still low level of infection.
The source of infection on Mr Tymensen's property
Counsel for Apand contended that for the applicants to prove that Apand was negligent in relation to the supply of infected seed to Virgara Bros, and in turn to the Sparnon partnership, it is necessary in the context of this case to show more than the mere presence of the disease; they must establish a probable cause of that infection which indicates a lack of due care on Apand's part in not foreseeing the risk of the disease, and in failing to eliminate the risk by withdrawing the seed from circulation.
In its widest presentation the applicants' case alleges that it was negligent for Apand to allow potatoes grown in the Koo Wee Rup swamp area to be used as seed because that is not a certified seed growing area, and, moreover it is an area well known for pests and diseases. The applicants say it is not necessary to show how the infection was introduced. It could have been by any one of numerous possibilities similar to those suggested by Apand as the source of infection to the Sparnon property. The risk of infection by pest or disease was well recognised in the area, and that is why it was used only for growing commercial crops. The fact that diseases of various kinds can be transferred by the casual movement of people, stock, vehicles and machinery, and containers was also recognised, and is the reason for the imposition of 20 km restrictions imposed under some regulations on the interstate movement of potatoes after outbreaks of PCN or bacterial wilt.
Apand responded to this by saying that as a matter of law it is wrong to pose the test of foreseeability so widely: the relevant risk which the defendants had to foresee and guard against was the risk of bacterial infection - not generally against any kind of infection including viral infection, pests such as PCN, fungal infections or bacterial infections. Apand contends that the risk of infection present in low lying areas from viral infection, and the risks of fungal infections and pests that may exist in heavily used commercial growing areas, are risks of an altogether different kind: see Hughes v Lord Advocate [1963] AC 837.
If it were necessary to decide the negligence claim on the evidence so far discussed, I would reject the submission of Apand based on Hughes v Lord Advocate. I do not think it is realistic to attempt fine distinctions between types of pests and diseases, each of which can be transmitted by contaminated soil and potato tubers. In my opinion the Sparnons would succeed merely on proof, which I find is established, that Apand, with its intimate knowledge of the potato industry and the Koo Wee Rup swamp area should have foreseen the risk, which was a significant one, that seed potatoes multiplied in the Koo Wee Rup swamp area could be infected with a pest or disease that could be transmitted to subsequent growers using the seed or its progeny. In my opinion it would not defeat the claim to show that if attention had been directed to the particular disease that eventuated, that particular disease and the manner in which infection occurred may not have been foreseen. The likely losses which could result from the wide distribution of seed infected with damaging pests or diseases could be high. The risk was one that could easily be eliminated by not using Mr Tymensen's crop as seed. To not use the seed may have set back Apand's trials of Saturna, but the evidence suggests there were other Saturna potatoes still in existence in Australia that could have been multiplied, and the setback has not been shown to be one that would have been costly to Apand at the time. Apand apparently had many other varieties it was trialling, as well as those then in use as commercial crops.
However, I consider the evidence warrants a more precise finding. On 12 October 1990 there was a major break in the main drain that runs through the area of the Koo Wee Rup swamp. Several properties were flooded. Photos show that a very large volume of water left the drain to the east of Mr Tymensen's property and flowed downhill to the west across his property. For one or two days some, but not all, of his property, was submerged. As a matter of probability I find that the corner of the paddock where the first Saturna crop was planted and in which bacterial wilt infected regrowth tubers were later found was reached by the flood. Before reaching Mr Tymensen's property the floodwater flowed across the property of Mr Summers, then across the property of Mr O'Sullivan situated between that of Mr Summers and Mr Tymensen.
Mr Summers' property had been the subject of several outbreaks of bacterial wilt. The disease was detected in a potato crop in June 1986. As soon as the disease was detected he was advised to harvest the crop, sow down the paddock to pasture, and to control regrowth potatoes - standard advice given by the Department of Agriculture. He did so, but in 1990 planted another potato crop in the paddock. This was less than the recommended 5 year rest. The new crop developed bacterial wilt in the same areas as before, there being positive diagnoses of different samples on 3 and 11 May 1990. Again he was advised by the Department of Agriculture to harvest the crop, sow down the affected area of the paddock to pasture, and fence it off to stop stock movement into the infected soil. The flood was a few months later, the intervening period being winter months when it may be assumed the soil was damp and that the level of bacteria from the wilt remained high.
Dr Hayward gave evidence that bacterial wilt can be carried by water, and gave instances of recorded examples. He opined that the likely source of infection to Mr Tymensen's first potato crop was the flood which transported the infection from Mr Summers' property to the soil in that area of the paddock where the infected regrowth plants were discovered after the outbreaks of the disease in South Australia. However the geography of the area, and the history of Mr O'Sullivan's property since the flood, were not known to him.
Apand's case revealed that Mr O'Sullivan had successfully grown potato crops in several paddocks covered by the flood over subsequent years, the first crops being planted just before and just after the flood. None of his crops has shown any signs of bacterial wilt, even though grown at times of the year ideal for the expression of bacterial wilt symptoms.
Dr Wimalajeewa also had encountered examples of bacterial wilt being transferred by water, but he said there is no literature or knowledge about the effect of a large flood passing over affected paddocks. He considered the dilution effect would be so great that the transfer of infection was extremely unlikely. He considered this was borne out by the absence of infection in later crops on Mr O'Sullivan's property. From this he concluded that floodwater was unlikely to be the source of infection on Mr Tymensen's property. However when it was suggested to him that the infection may have been carried to Mr Tymensen's property from Mr Summers' property not by water alone, but in potato plant debris carried by the flood he said that was possible. I consider the Court is entitled to take notice that in a flood debris tends to be left around the high water mark. That is about where the bacterial wilt affected regrowth potatoes were found on Mr Tymensen's property. It is common ground between the experts that infected plant material - old tops, and small potatoes that escape harvest - can be sources of infection.
In my opinion as a matter of probability the likely explanation for bacterial wilt in Mr Tymensen's first Saturna crop is that the flood in some manner carried it there from Mr Summers' property. If it were not carried there by water alone as Dr Hayward hypothesised, it could have been carried there in infected plant debris. No other likely source of infection has been suggested.
Negligence of Apand
In my opinion Apand owed a duty of care to the Sparnon partnership arising from their relationship created when Mr Hughes invited the partnership to participate in growing an experimental crop with Saturna seed to be supplied by Apand. In my opinion that duty was created whether or not the seed was supplied under a contract of sale between Apand and the partnership (as to which, see below).
The Statement of Claim pleads that the content of the duty of care was to ensure that the seed was disease free. I do not consider that the duty was that of an insurer. It was not possible to ensure absolutely that seed carried no infection. In my opinion the duty imposed by the relationship was to take all reasonable steps to ensure that seeds which Apand provided to its growers had not come from a source where there was a real risk which Apand knew about or should have foreseen that the seeds might be infected by pests or disease. A real risk is one that people well versed in the nature of potato pests and diseases, such as the Apand officers, would not brush aside as far fetched: Wyong Shire Council v Shirt (1980) 146 CLR 40 at 46-47.
It is also pleaded that the duty on Apand required it to inform the Sparnon partnership fully as to the history of the handling and multiplication of the seed. If the duty is as I have expressed it, a duty to inform is hardly appropriate: it was for Apand to take reasonable steps to know the history of the seed and to assess whether the history gave rise to a real risk of infection. If there were such a risk, in the circumstances of this case the appropriate response would have been to withdraw the seed. The occasion for a warning was not likely to arise.
Here the history of the seed was fully known to Apand. At the Pakenham meeting the possibility of infection of the seed was considered. The officers of Apand involved considered that as Mr Tymensen was a very professional grower, as the seed was from the certified potato seed scheme, and as there was no history of disease on Mr Tymensen's property, it was appropriate to use the crop as seed. What the meeting did not consider was the flood in October 1990, which was known to most of them as they lived or worked in the area, and the possibility that it had carried bacterial wilt infection to Mr Tymensen's property from the infected areas of Mr Summers' property. The outbreaks of bacterial wilt in May 1990 on Mr Summers' property were also known to officers of Apand. Mr Moorthy said he did not realise at the time of the meeting that bacterial wilt infection could be carried by water. This was however the belief of officers of the Victorian Department of Agriculture whose advice about the safety of the crop for seed use could have been obtained, and more importantly it was the belief of Mr Cullen who was senior to Mr Moorthy in Apand. Mr Cullen considered it was a well known fact that water could spread bacterial wilt, as it can PCN.
Mr Cullen was a careful and impressive witness. I accept his evidence. He said that after the outbreaks in South Australia, and the discovery in the paddock of the first Saturna crop grown by Mr Tymensen, the "flood theory" was discussed and it seemed a reasonable hypothesis. At the time of the Pakenham meeting he knew of the flood, and of the disease on Mr Summers' property. He had inspected Mr Tymensen's crop, and knew its location, but he did not know if the flood had reached it. He acknowledged that it might have done, but he made no inquiry.
Mr Cullen, and other officers of Apand, knew of the potential of the bacterial wilt disease and of the importance that Apand in its activities did not unwittingly spread the disease. This topic had been the subject of company memoranda circulated amongst staff on 18 April and 26 June 1990. Mr Cullen very frankly conceded that he knew seed multiplied in the Koo Wee Rup would have an increased risk of disease above that expected in certified seed. The risk related mainly to leaf roll virus but included, in general, all diseases including bacterial wilt. He said that with the benefit of hindsight he no longer thought it was appropriate to allow seed from Mr Tymensen's property to be used as seed, but, at the time, those at the Pakenham meeting did not advert to the possibility of bacterial wilt.
The liability of Apand is to be judged not with the benefit of hindsight but by what Apand and its officers including Mr Cullen should have foreseen at the time. I think with the benefit of the knowledge collectively possessed by the officers at the Pakenham meeting, they should have foreseen the risk that the flood may have spread bacterial wilt to the area of Mr Tymensen's property where the crop was growing, and should have foreseen the risk that the crop could be infected with low levels of bacterial wilt that may not be seen in the crop on the inspections which had occurred and were planned to occur.
In my opinion Apand was in breach of the duty of care which it owed to the Sparnon partnership, and the partnership is entitled to recover damages for this negligence.
Allegations in the Statement of Claim of breach of statutory duty arising under regulations under the Fruit and Plant Protection Act 1968 (SA) were abandoned during the trial.
The Sparnon partnership contract claim
As earlier recorded, Mr Hughes approached Mr David Sparnon in December 1991 to participate in growing an experimental crop with 2 tonnes of Saturna seed. There is a marked difference in the evidence of Messrs David and Michael Sparnon on the one hand and Mr Hughes and Ms Lanz on the other hand as to meetings and what was said concerning the experimental crop. These differences, and the resolution of them is discussed below in relation to the TPA claim. A decision on the breach of contract claim however can be reached without resolving these differences as it is common ground that the Sparnon partnership agreed with Apand to participate, and that the arrangement was a contractual one. The partnership agreed to grow for Apand a crop with 2 tonnes of Saturna seed to be sourced from Apand. Although the crop was an experimental one it was subject to the usual Apand Potato Supply Agreement. The partnership was required to purchase the seed; Apand was required to purchase the harvest.
The Statement of Claim pleads that a term of the contract was that Apand would sell the Sparnon partnership the seed, and that this occurred. It is pleaded that the contract insofar as it provided for the sale and purchase of the seed was subject to implied terms that the seed would be fit for the purpose of growing a viable crop of Saturna potatoes, and that the seed would be of merchantable quality. These terms were said to be implied as the result of the operation of s.71 of the TPA and s.14 of the Sale of Goods Act 1895 (SA). It is also pleaded that these terms are to be implied as a matter of fact from what was said by Mr Hughes in discussion leading up to the Sparnon partnership agreeing to grow the experimental crop. For reasons which are given below in relation to the TPA claim I do not consider the factual basis from which the implication of these terms is said to arise is made out. Possibly the implication would arise anyway as a matter of fact from the very nature of the proposed transaction but it is not necessary to consider that issue as I consider the terms as to reasonable fitness and merchantable quality are to be implied as a matter of law.
Apand disputes the breach of contract claims on the footing that the relevant contract for the sale and purchase of the Saturna seed was not between Apand and the Sparnon partnership, but between Virgara Bros and the Sparnon partnership. It is plain that when the seed was eventually paid for by the Sparnon partnership, on about 29 April 1992, the partnership sent a cheque to Virgara Bros together with an invoice addressed to Virgara Bros which the Sparnon partnership raised for their own bookkeeping purposes. That payment was made in this way is said to establish that the contract was between Virgara Bros and the Sparnon partnership. I reject this contention. There is no suggestion on any view of the evidence that in discussions leading up to the agreement by the Sparnon partnership to grow the experimental crop, that the seed was to be purchased for that purpose by the partnership from Virgara Bros. It was common ground that Apand would supply the seed; it was, after all, seed of a variety being trialled by Apand. When Mr Hughes approached Ms Lanz asking that she monitor the experimental Saturna crops as part of the project, he informed her that Apand was supplying the growers with the Saturna seed.
I find that the Sparnon partnership had agreed to grow the Saturna crop not later than 8 January 1992, and probably during December 1991 in the course of a meeting with Mr Hughes. On 8 January 1992 Mr Hughes and Ms Lanz attended the Sparnon property. Ms Lanz says that Mr Hughes discussed with Messrs David and Michael Sparnon the logistics of getting the seed to them on that occasion. Later Mr Hughes telephoned Mr David Sparnon and told him the seed was ready to be collected from Apand's depot at Regency Park. It was understood that Mr David Sparnon would arrange for a carrier to collect it, which he did. It is common ground that shortly after the seed was delivered Mr Hughes told the Sparnon partnership (by telephone) to send a cheque for the seed direct to Virgara Bros instead of going through Apand, as it was only a small amount of money.
It seems that Virgara Bros never issued any document suggesting a sale by them to the Sparnon partnership, hence the need for the Sparnon partnership to draw up their own invoice as a bookkeeping record. The detail on that invoice reads:
"2.2.92 2 TON SATURNA POTATOES
@ $270 540.00
(ARRANGED THROUGH CCA SNACKFOODS)"
In my opinion it is clear that the contract for the sale and purchase of the seeds was made between Apand and the Sparnon partnership, and the seed was in fact supplied and delivered to the carrier for the Sparnon partnership by Apand. The payment arrangement required by Apand after the seed had been delivered was merely for the convenience of Apand. It is to be noted also that although the Virgara brothers, Pat and Dominic, were called by the applicants, neither was asked any questions by counsel for Apand on this topic. The inference from their evidence in chief was that they had grown the first Saturna crop under contract for Apand, and from other evidence that the seed supplied to the Sparnon partnership had previously been delivered by Virgara Bros to Apand. In these circumstances it is not apparent how Virgara Bros would have had title to the seed which would have enabled them to sell it to the Sparnon partnership. The opportunity for Apand to clarify this was not taken up.
By s.14 I of the Sale of Goods Act 1895 (SA):
"Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply ..., there is an implied condition that the goods shall be reasonably fit for such purpose: ..."
A condition as to reasonable fitness is also implied under slightly different circumstances by s.71 of the TPA. Although it was Apand that approached the Sparnon partnership and introduced the variety of potato to them, it was clearly known to Apand that if the seed were purchased by the partnership, the seed was required to grow a viable crop. Seed that was infected with bacterial wilt was not reasonably fit for that purpose.
Counsel for Apand suggested that reliance by the Sparnon partnership on Apand's skill and judgment was absent because the Sparnon partnership knew that the Saturna seed was not certified seed, and that seed could never be guaranteed to be disease free. In my opinion the Sparnon partnership did rely on Apand to supply seed that was reasonably fit for the purpose of growing a viable crop. As discussed later in this judgment in relation to the TPA claims, I think it is unlikely that members of the Sparnon partnership turned their minds to the risk of disease in the seed - for the very reason that a reputable participant in the potato industry could be, and was, relied upon.
By s.14 II of the Sale of Goods Act where goods are bought by description from a seller who deals in goods of that description there is an implied condition that the goods shall be of merchantable quality. The goods were sold by Apand by description, viz Saturna seed potatoes, and Apand dealt in those goods. The often quoted test of merchantable quality formulated by Dixon J in Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 at 418 is:
"The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms."
In my opinion the warranty as to merchantable quality applied to the Saturna seed, and was broken by the presence of the bacterial wilt infection. I hold that the Sparnon partnership has established their entitlement to damages for breach of contract.
The Sparnon partnership TPA claims
i) The claims
It is pleaded, and admitted, that Apand was at all material times a corporation engaged in trade and commerce. Section 52 of the TPA, which appears in Part V of the Act, requires that such a corporation shall not engage in conduct that is misleading or deceptive, or is likely to mislead or deceive. Section 82(1) of the TPA provides that:
"82.(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention."
It is pleaded in paragraph 85 of the Statement of Claim that Apand contravened s.52 in that:
"(a)Hughes on behalf of Apand informed the Sparnon partnership in November 1991 that the Saturna seed Apand had for the Sparnon partnership to grow was produced by the Virgara Brothers from mother seed from the Toolangi Research Centre in Victoria;
(b)the statement in (a) above implied that the seed was disease free and was certified disease free;
(c)the statement in (a) and the implication in (b) above were false in that the seed supplied to Virgara Brothers was not mother seed, was not disease free, had not been certified disease free and was in fact infected with bacterial wilt;
(d)the representations contained in paragraphs 34(b)(ii) and 34(b)(iii) were false."
The reference to "in November 1991" refers to a conversation between Mr Hughes and the Sparnon partnership pleaded in paragraph 33 of the Statement of Claim as having occurred "in about December 1991". I think the probability is that it occurred in December 1991 and I adopt that date, although nothing turns on whether it was in November or December 1991. To understand the scope of the allegations in paragraph 85 it is necessary to consider also paragraphs 33 and 34 of the Statement of Claim which read:
"33.In approximately December, 1991 (the exact date now being unknown to the applicants) Hughes acting on behalf of Apand informed David Sparnon and Michael Sparnon in the kitchen in the house on the Sparnon property on behalf of the Sparnon partnership that Apand wanted the Sparnon partnership to grow an experimental crop of two tonnes of Saturna potato seed on the Sparnon partnership's property at Loxton, South Australia. Hughes informed them that:
(a) Apand had obtained mother seed from the Toolangi Research Centre in Victoria;
(b) Apand supplied that mother seed to Virgara Brothers and their crop had been monitored by Lanz of the Department of Primary Industry ('DPI');
(c) The Saturna seed supplied to Virgara Brothers had been planted on new ground;
(d) If the Sparnon partnership participated in the trial Sandra Lanz would monitor the crop;
(e) There were five other growers already involved in the experimental planting, namely Miegliech, (sic) Pye, Muster, Hodge and Virgara.
34.In approximately December 1991 (the exact date now being unknown to the applicants) Lanz attended at the Sparnon property with Hughes.
(a) Lanz informed Michael Sparnon in the presence of Hughes that:
(i) she had been doing monitoring for processing potatoes at Bordertown, the Lakes, Virginia and the Hills;
(ii) the Saturna crop she had been monitoring at Virgara's property at Virginia was grown on a new block;
(iii) no other potatoes had been grown on that particular block;
(iv) the Saturna crop grown at Virgara's property looked good;
(v) she would take soil samples at the Sparnon property for testing;
(vi) she would prepare a fertiliser programme for the Sparnons to follow;
(vii) she would monitor the growing of the Saturna seed by the Sparnons at various stages during its growth;
(viii) if the Sparnon partnership agreed to grow an experimental crop of two tonnes of Saturna potatoes at the Sparnon property the partnership would be placed under a crop monitoring programme which Lanz had been administering.
(b) Hughes informed Michael Sparnon in the presence of Lanz that:
(i) Lanz had been monitoring crops in various areas for processing potatoes;
(ii) the Saturna crop at Virgara's looked to be a good variety and was shaping up well for processing;
(iii) Lanz had been monitoring the Saturna crop at Virgara's at Virginia."
Reference has already been made to the Toolangi Research Centre. It was generally recognised in the potato industry as producing disease free source seed to growers in the Seed Potato Certification Scheme.
The critical allegations are in paragraph 85(a) that Mr Hughes said that Virgara Bros had grown the proposed Saturna seed "from mother seed", and in paragraph 85(d), when reference is had to paragraphs 34(b)(ii) and 34(b)(iii), that Mr Hughes in the presence of Ms Lanz in about December 1991 falsely said "the Saturna crop at Virgara's looked to be a good variety and was shaping up well for processing" and that "Lanz had been monitoring the Saturna crop at Virgara's at Virginia."
Mr Hughes denies that the first and third of these statements were made. Messrs David and Michael Sparnon on the other hand assert that they were made. The resolution of this dispute was identified at trial as a central issue. It inevitably turns on findings as to credit of the principal witnesses for each of the parties.
The second of the statements Mr Hughes does not deny. He had inspected the crop several times as it was growing. Both Mr Hughes and the Virgara brothers say the crop did look to be a good healthy one. There is no evidence to suggest otherwise and by the end of the trial I did not understand counsel for the applicants to dispute the correctness of this statement. There is nothing in the evidence to suggest that there was any sign of bacterial wilt or any other disease or problem of any kind in the first Saturna crop grown by the Virgara Bros.
I take the third of the statements next, the alleged falsity of the statement that Ms Lanz had been monitoring the first Saturna crop grown by Virgara Bros.
This allegation is at first sight a surprising one in light of the claims pleaded against the Minister and the State which make allegations of negligence against Ms Lanz based on the fact that she had monitored that crop. However the evidence about Ms Lanz' involvement with the first Saturna crop at Virgara Bros is all one way, and very clear. Ms Lanz did not monitor the crop; she did not even see it. She knew nothing about it until after the bacterial wilt outbreaks in April 1992. This finding does not rest solely on Ms Lanz' oral evidence, although her evidence, which I accept, shows this to be the case, and details her limited contact for unrelated reasons with Virgara Bros in the second half of 1991 when the first Saturna crop was being grown.
The allegation that the Sparnon partnership was falsely told that Ms Lanz had monitored the first Virgara crop puts in issue not only Mr Hughes' credit, but also that of Ms Lanz as it is alleged in paragraph 34(a) of the Statement of Claim that Ms Lanz also made statements to this effect.
In paragraph 38 of the Statement of Claim it is pleaded that the Sparnon partnership relied on the statements of Mr Hughes and of Ms Lanz pleaded in paragraphs 33 and 34 when entering into the agreement with Mr Hughes on behalf of Apand to grow the experimental crop.
ii) Credit issues and similar fact evidence
It is the evidence of both Mr Hughes and Ms Lanz that not only did Ms Lanz not make the statements alleged to have been made by her, but that she did not attend the Sparnon property until 8 January 1992 at which time the Sparnon partnership had already agreed to grow the experimental crop, and had selected the plot where it was to be planted.
It is difficult to envisage what motive Ms Lanz could have had before the Sparnon partnership decided to grow the experimental crop to tell a blatant lie about her participation in the growing of the first Saturna crop at Virgara Bros. It was a matter of indifference to her whether they participated. But once the decision had been made there could be no conceivable reason for her to do so. There was nothing about her evidence or her demeanour when giving it that provides any reason for disbelieving her. On the contrary I think her evidence should be accepted, and I do so.
In evaluating Mr Hughes' evidence it is helpful to consider the first of the statements alleged to constitute a false representation, that the proposed Saturna seed had been grown by Virgara Bros "from mother seed".
The full allegation is that he said "from mother seed from the Toolangi Research Centre in Victoria", but the gravamen of the statement is an allegation that it was "from mother seed", and that mother seed was understood by Messrs David and Michael Sparnon to convey that it was out of the Seed Potato Certification Scheme and would carry that protection against disease.
Mr Hughes was frank in conceding that his memory of conversations had faded with the passage of time, and he readily conceded the possibility that he may have said many of the things alleged by the Sparnon partnership although he had no recollection of doing so, and doubted that some had been discussed.
Mr Hughes, after selecting the five growers in addition to the Virgara Bros, who were to be approached to trial an experimental winter crop of Saturna, contacted them by telephone, then visited them to further discuss the proposal. He recollects telling each of them that the seed to be trialled had been grown by Virgara Bros (a firm well known by those in the industry) on new ground. That information would have alerted the growers to the fact that the seed was not certified seed as it is generally known that there are no certified seed growers in South Australia. He says that it is likely that he told the Sparnon partnership that Ms Lanz would monitor the crop as that was intended. He concedes that there might have been reference to the Toolangi Research Centre in general discussion about the development of the Saturna variety, but thinks that is unlikely. However he denies that he could have said that the seed grown by Virgara Bros was "from mother seed" as he knew that not to be the case.
Mr Hughes had been at the Pakenham meeting, although it seems that he was not an active participant in the discussion to use Mr Tymensen's crop as seed. This is understandable as he did not have the first hand information about the Saturna variety and Mr Tymensen which others at the meeting had. After the meeting, as the decision had been made to trial Saturna as a winter variety, he asked Mr Moorthy if some of the seed could be allocated to South Australia. Mr Moorthy allocated the 2 tonnes delivered to Virgara Bros. Mr Moorthy told Mr Hughes that Mr Tymensen had grown his crop from mother seed. (Such a statement would not have been strictly correct as the seed supplied to Mr Tymensen by Apand was Elite II, but that statement would not convey any difference as to the quality of the seed. Both Elite II and mother seed come directly from the Certified Potato Seed Scheme and would both have the same high degree of protection from disease). Mr Hughes says he acted on Mr Moorthy's statement when Mr Pye of Parilla asked for additional information about the origin of the seed. He told him that the seed supplied to Virgara Bros had been "off mother seed". On the assumption that Mr Tymensen had been supplied with mother seed that statement would have been correct, as, in the potato industry, a seed "off" another seed means a seed one generation removed from the earlier seed - hence the expression "one off" seed.
Mr Hughes has no recollection of giving the Sparnon partnership any information about the origins of the seed, other than it had been grown by Virgara Bros on new ground, but if he said anything about mother seed, he says it would have been that the seed for the Virgara Bros crop was "off mother seed" not that it was "mother seed". As both Mr David Sparnon and Mr Michael Sparnon are insistent that "mother seed" was mentioned, I accept that one or other phrase was used. The difference between the two phrases is a fine one, although obviously important to the applicants' case. The possibility of mistaken recollection must loom as very real, but Messrs David and Michael Sparnon remained emphatic throughout their evidence that this information was very important to them, and Mr Hughes said Virgara Bros had received "mother seed".
To support their case the applicants sought to call similar fact evidence from Messrs Pat and Dominic Virgara and from Mr Muster and Mr Pye as to the statements made by Mr Hughes to them about the seed supplied to Virgara Bros. As Messrs Pat and Dominic Virgara were about to be called when the issue of similar fact evidence arose, and as the applicants were not in a position at that time to indicate with precision the similar fact evidence they wished to adduce from the other witnesses, the evidence of Messrs Pat and Dominic Virgara was received subject to objection to be later ruled upon. Subsequently statements of the proposed evidence of Mr Muster and Mr Pye were filed and the admissibility of their proposed similar fact evidence was argued. Messrs Pat and Dominic Virgara had each said in their evidence that when the seed was delivered to them they observed that the container did not bear a standard certified seed tag, so they sought information from Mr Hughes who told them the seed was "mother seed". The proposed evidence of Mr Muster and Mr Pye was to be that statements to a similar effect had been made to them by Mr Hughes when he approached them.
The principles to be applied when deciding an application to call similar fact evidence were discussed by Gummow J in D.F. Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 100 ALR 468. In relation to the proposed evidence of Mr Muster and Mr Pye I ruled that their evidence would be admitted. I considered that the close identity in time and subject matter of the conversations Mr Hughes had with each of them, and with the Sparnon partnership, and the singleness of the phrase that was of critical importance brought the proposed evidence within the second, and narrower, of the two meanings of "similarity" discussed by Gummow J at 476. Statements by Mr Hughes to Messrs Pat and Dominic Virgara do not fit so neatly into the second of these meanings. They occurred at a different time and in somewhat different circumstances, and the admissibility of their evidence on this topic is borderline. However as the phrase in issue was the single one, "mother seed" or "from (or off) mother seed", I rule that they were admissible. The weight to be accorded to them is another question.
I was not persuaded by the evidence of Messrs Pat and Dominic Virgara on this point. Their recollections about Ms Lanz' visits and conduct in relation to the first Saturna crop were shown to be in error by Ms Lanz' records. On the topic of the conversation with Mr Hughes, which occurred some 5 years beforehand, I thought their adherence to the certainty of their recollections and the striking similarity of their accounts was suggestive of recent reconstruction with a bias in favour of all those who have claims in these proceedings and elsewhere in respect of the bacterial wilt outbreak. I do not think I should give any weight to it in deciding whether Mr Hughes used one or other of the phrases in question.
I turn to the other similar fact evidence. Mr Muster said in evidence in chief that Mr Hughes told him Virgara Bros received mother seed, and in cross-examination he would not at first concede the possibility that Mr Hughes may have said that Virgara Bros seed was "from mother seed". But it was then put to him and he conceded, first, that in a statement of claim, which he had approved, filed on his behalf in the Supreme Court of South Australia on 12 July 1995, it is stated that
"Hughes told David Muster that the Virgara seed was from mother seed provided by (Apand)."
and secondly, that in a statutory declaration given to Dr van Velsen, the Chief Quarantine Officer of the DPI who was investigating a possible breach of the Plant Quarantine Standard, he said on 1 June 1992:
"Hughes said Vigaras (sic) seed was from Mother Seed from CCA."
Mr Pye in evidence in chief said that when he asked Mr Hughes the history of the seed to be supplied, he was told it was coming from Virgara Bros who had grown it "from mother seed". In cross-examination he too conceded that in a statutory declaration given to Dr van Velsen on 4 June 1992 he said:
"Mr Hughes stated that the Saturna seed supplied to Virgaras by CCA was off mother seed and that it was good seed."
and in the statement of claim in the Supreme Court of South Australia filed on his behalf it was pleaded that:
"In early January 1992 Mark Pye had a further conversation with Hughes when he asked about the origin of the seed supplied by (Apand) to Vigara (sic). Hughes told him that it was off mother seed and was good seed."
In light of the inconsistent statements made by each of these witnesses in statutory declarations made within six months of the conversations having occurred, and in their pleadings, I cannot treat their evidence in chief as to the words used as reliable or worthy of weight. On the contrary the earlier declarations support Mr Hughes' evidence.
The alleged similar fact evidence does not cause me to doubt Mr Hughes' evidence about what he may have said. His evidence also has the support of Ms Lanz that he did not visit the Sparnon property with Ms Lanz on the occasion alleged in paragraph 34 of the Statement of Claim. I am firmly of the opinion that I should accept his evidence.
I do not think the evidence admits of any doubt that Ms Lanz and Mr Hughes did not visit the Sparnon property on the occasion alleged in paragraph 34 of the Statement of Claim. It follows that the evidence of Messrs David and Michael Sparnon about that occasion and what was then said is wrong. It is clear that Ms Lanz did not monitor the first Saturna crop grown by Virgaras Bros, and it is highly unlikely that either Ms Lanz and Mr Hughes would have falsely asserted that she had done so. In this respect also I think the evidence of Messrs David and Michael Sparnon is wrong. These erroneous allegations form central parts of their evidence in support of their claims. The rejection of these parts of their evidence casts a serious doubt over the reliability of the balance of their evidence.
The case of the Sparnon partnership on damages is in my opinion riddled with exaggerations and biased assertions relating to the causes of the misfortunes of the partnership, and its prospects had the bacterial wilt outbreak not occurred. A perusal of the records of the CDB and CBA which record crop forecasts, crop results, and anticipated cash flows provide numerous other examples of exaggeration and unreliability about the affairs of the partnership in statements made by Mr David Sparnon.
I am left in a state of uncertainty whether there is a substantial element of conscious deception in the case of the Sparnon applicants, or whether errors and exaggeration are mainly the product of worry and anxiety over the disastrous financial position of their enterprise which was threatening its collapse when the bacterial wilt outbreak occurred, and wishful thinking which they have come to believe. Whatever the reason, I prefer the evidence of Mr Hughes and Ms Lanz about events leading up to the outbreak of bacterial wilt, and as to events thereafter and the losses of the Sparnon partnership I am not prepared to act on the evidence of Messrs David and Michael Sparnon unless it has the support of other evidence or has been accepted as uncontroversial in the course of the trial.
Returning to the allegations of misleading or deceptive conduct made in paragraph 85 of the Statement of Claim, I find that at the December meeting Mr Hughes did not say that the Saturna seed to be supplied was produced by Virgara Bros from mother seed from the Toolangi Research Centre. He said that the seed to be supplied had been grown by Virgara Bros on new ground, and that Virgara Bros had received Saturna seed supplied by Apand which was off mother seed. By this statement at least Mr David Sparnon would have understood that the seed to be supplied to the Sparnon partnership was not certified seed, but that the seed used by Virgara Bros was one generation off seed out of the Seed Potato Certification Scheme.
Mr David Sparnon had considerable experience in the potato industry and was the partner in control of the partnership at the time.
If the Toolangi Research Centre were mentioned, it would have been in relation to general discussion about the Saturna variety, and would not have conveyed any representation other than that early generations of the variety had entered the Certified Potato Seed Scheme from that source. The reference to Toolangi Research Centre would not convey that the seed had any higher protection from disease than would the reference to mother seed.
The second allegation of misleading and deceptive conduct concerned the statement that the first Saturna crop grown at Virgara Bros looked to be a good variety and was shaping up well for processing. I find on the evidence that the statement was correct as a matter of fact. The crop on all accounts looked to be a good healthy one.
The third allegation, that Ms Lanz had been monitoring the Saturna crop at Virgara Bros I find was not made.
It follows that a contravention of s.52 of the TPA has not been established.
iii)Reliance
On the evidence of Messrs David and Michael Sparnon it was the assurance that Virgara Bros had grown the first crop of Saturna on new soil using mother seed which was critical to their decision to enter into the agreement with Apand to grow the experimental crop. It was that assurance on which they relied that gave them comfort that the seed they would receive would be disease free.
Had I been satisfied that Mr Hughes had in the manner alleged misrepresented the status of the seed Apand supplied to Virgara Bros, I would not have held that this statement was a causative factor which led the Sparnon partnership to agree to grow the trial crop. The Sparnon partnership was anxious to curry favour with Apand and to be involved in the advances of the crisping industry. If a winter crop could be successfully trialled on their property at Loxton it would give them an advantage over other Apand contract growers in cooler climates less suitable to winter cropping, and would have been a major benefit to the partnership. They knew Apand was heavily involved in research and development and promoted the use of good seed stock. To that end Apand encouraged and assisted its contract growers to use certified seed. I think it is highly improbable that the Sparnon partnership gave any thought to the possibility that experimental seed supplied to them by Apand could be diseased or could pose any threat to their property. Their evidence to the contrary I do not accept. In the result the claim under s.82 of the TPA based on a contravention of s.52 would still have failed.
The Sparnon partnership claim against the Minister and the State
i) Pre-outbreak negligence
Paragraph 76 of the Statement of Claim which commences the material part of the pleadings in negligence against the Minister and the State alleges that the Minister and the State are vicariously liable for the acts and omissions of Ms Lanz, and in addition the Minister and the State are liable for acts and omissions of the Minister.
I have already concluded that the Minister and the State are vicariously liable for any negligence established against Ms Lanz.
The substance of the allegation that a primary liability rests on the Minister is not easy to glean from the balance of the pleadings. In places certain paragraphs appear to flirt with the notion that the Minister had a duty of some sort arising under legislation to prevent the entry into South Australia of potatoes infected with bacterial wilt, but paragraph 83 which pleads breaches of the duty of care said to arise from matters earlier pleaded does not take up any of those suggestions. The alleged breaches of duty, in the context of the evidence, relate to acts or omissions of Ms Lanz in her role as the Development Officer implementing the project. And this was the only way the claim was put in final submissions by counsel for the applicants. This aspect of the claim was summarised as follows:
"(The) duty was breached by Lanz failing to make enquiries as to the source of the seed planted by the Virgaras in 1991."
Other allegations made on the basis that Ms Lanz had monitored the first Virgara crop (eg. paragraphs 77, 78, 79(a) and (b)) were not mentioned and, understandably, seem to have been abandoned.
As Ms Lanz was monitoring a crop on the property of the Sparnon partnership I accept that she owed a duty to them not to carry out the monitoring role in a negligent manner. The question is whether that role imposed a duty to make inquiries of the kind alleged.
Ms Lanz did not see her role as requiring her to investigate the pedigree or history of seed used by the growers whose crops she was monitoring, and she did not do so. Her formal job specification, and description of her function as described in the HRDC funding applications are set out earlier in this judgment. The monitoring program that was developed by her under direction and guidance from the PGSA and DPI officers concentrated on nutrition of the potato and other factors which influenced the yield of the crop during its growth such as irrigation, pests and diseases. Central to the program was the keeping of records both by Ms Lanz of the monitoring she conducted and by the growers of their management of the crop so that at the end of a project comparative analyses could be done to determine best practices.
The monitoring carried out by Ms Lanz commenced by her taking soil samples of the proposed growing area before a crop was planted so that its nutritional status could be ascertained. The results were provided to the grower with suggestions about fertilisers. It was up to the grower whether or not the suggestions were followed. The important thing was for the grower to record what was done so the comparative analyses could be made later. From the stage when the crop was about six inches high (the "hook stage") she took petiole samples to check the nutrient level in the plants. Further samples were taken as the crop grew. Ms Lanz visited the crop each fortnight during its growth to check the apparent health and progress of the crop, and to make insect sweeps. This was the procedure she was following with the Sparnon partnership until the outbreak of bacterial wilt occurred.
The monitoring program was for commercial crops. It was up to the growers to acquire their seed from whatever source they chose. There were already DPI and industry recommendations to use certified seed where possible, and the reasons for this were well understood by the professional growers who were selected for monitoring. Ms Lanz' role concerned growing practices, not the selection of varieties or quality of seed.
In none of Ms Lanz' monitoring of ordinary commercial crops did she check on the source or history of seed, and in none of her reports to the PGSA and the DPI officers who contributed advice to the project was it suggested that she should do so. Mr Mundy, who was the chairman of the Processing Committee of the PGSA at material times, says that Ms Lanz was not expected to vet the source of seed as the industry did not expect problems from generally accepted growing practices. The reference in the HRDC description of the monitoring function to the collection of data on "seed hygiene" did not refer to the history of the seed but grower practices on the property after the seed was delivered such as storage, cutting methods, and practices for treating seed after cutting. The evidence of other witnesses called by the Minister and the State supported Ms Lanz' understanding of her duties.
Counsel for the applicants argued that a broader interpretation of the job specification and the HRDC description should be adopted. It was argued that the Court should hold that it was implicit in a monitoring program such as the project that the monitor should check the quality and the suitability of the seed first, as the monitoring would be futile if bad seed destroyed the crop. I do not accept this argument. The purpose of the project and how it was to be performed was designed by experts in the particular field. The applicants' argument is not relevant to that purpose, and the Court on an industry matter such as the project should be guided by experts from the industry. Their evidence is overwhelmingly in favour of Ms Lanz' position.
The evidence gives a strong picture that there was no reason for Ms Lanz to be suspicious of the seed. She had worked closely with Apand. She had been taken to Victoria and had met senior agricultural officers of Apand at Tynong. She had been to the Plant Research Institute at Burnley, and the Toolangi Potato Research Facility. She had become aware of Apand's concerns about diseases, and about the encouragement and assistance it gave to growers to use high quality seed.
Unlike ordinary commercial crops where one off or other uncertified seed might be used, the Saturna crops were experimental ones being trialled by Apand. Ms Lanz would have had every reason to expect that Apand would take every precaution to ensure the seed had maximum protection against disease.
Counsel for the applicants also argue that whilst the Fruit and Plant Protection Act does not by its terms impose a duty on the Minister to inquire as to the disease status of the seed supplied to growers, the statutory role of the Minister under the Act, the restrictions on the movement of diseased potatoes imposed under the Plant Quarantine Standard, South Australia, and the voluntary involvement of the DPI in the project combined to require a finding that Ms Lanz should have inquired about the history and health of the Saturna seed. Again, I do not agree. The regulatory regime sets essential standards of protection for the industry that are well known and generally followed by professional growers. They set the context in which the industry operates and in which the designers of the project set its purposes. I do not consider that context imposes any overriding duty on Ms Lanz that was not otherwise part of the duties and functions required by the project.
In my opinion Ms Lanz was not under a duty to make inquiries as to the source of the Saturna seed planted by the Sparnon partnership.
Further, even if she were under a duty it is anything but clear that if she had made inquiries of Mr Hughes that she would have been put on notice that the seed carried a higher than normal risk of disease. Mr Hughes is the source from whom it is suggested she should have sought information. Presumably Mr Hughes would have told her what he knew. The seed had come out of the Seed Potato Certification Scheme as "mother seed", it had been multiplied by a highly regarded grower at Garfield in the Koo Wee Rup swamp, and it had then been further multiplied on new ground by Virgara Bros. Both crops had looked to be healthy ones. Ms Lanz knew the good standing of Virgara Bros, and that Apand used them both for trial work and as commercial growers. She presumably considered their practices to be good. Mr Hughes did not know of the October flood which covered parts of Mr Tymensen's property, or of the bacterial wilt outbreaks on Mr Summers' properties. There is no evidence to show that Ms Lanz would have been alerted to any significant risk of disease in the seed by the reference simply to the Koo Wee Rup swamp, and unless she had been, there would have been no reason for her to make inquiries of other offices of DPI who had more experience in potato diseases and their distribution in Australia than she had. Mr Philp, for example, said that he would have been concerned to ask more questions, but he had a greater knowledge of potato disease than Ms Lanz. It is Ms Lanz' conduct which is in question: if she were negligent, the Minister and the State of South Australia are vicariously liable. If she were not, they were not. In assessing her knowledge and conduct, it is not appropriate to attribute to her all the knowledge and skills of other DPI officers.
In my opinion the claims by the Sparnon partnership against the Minister and the State of South Australia for negligence leading up to the bacterial wilt outbreak fail.
ii) Post-outbreak negligence
The Statement of Claim alleges that after the outbreak Dr van Velsen as agent for the Minister undertook to advise the Sparnon partnership as to the remedial action and management of bacterial wilt outbreak on their property, and that they relied on him to do so. It is alleged that in breach of the duty of care that thereby arose Dr van Velsen failed to advise the Sparnon partnership as to the correct procedures to be followed, wrongly advised them not to harvest the Saturna potatoes, and failed to carry out follow up inspections of the infected area of their property on a timely basis.
In the course of the trial it was conceded on behalf of the Sparnon partnership that even if the negligence alleged were established, they suffered no loss in consequence. This concession was made because the Sparnon partnership for unrelated reasons would not have grown potatoes on the property beyond those which they planted in any event. The principal of those reasons was a change in direction in their farming operations towards carrot growing. However it remains necessary to consider the allegations of negligence as part of the claims by the Perre interests are dependent on proof of the post-outbreak negligence alleged. It is said that the negligent advice and failure to inspect has extended the 20 km "quarantine" area imposed by the Western Australian regulations beyond the period of 5 years from the initial outbreak. This has happened because bacterial wilt was not properly controlled on the area of the Saturna crop on the Sparnon property, and continued to exist for a considerable time.
The DPI in fulfilment of its statutory functions was closely involved with the potato industry, as it was with other agricultural pursuits in South Australia. It had a policy of assisting the potato industry to develop, and to market its produce, including into the Western Australian market. Outbreaks of disease were closely monitored, and the DPI as a matter of course offered assistance and advice on procedures to prevent disease, and, where it occurred, to control and manage it. The DPI had in respect of earlier bacterial wilt outbreaks in the State developed a protocol for management of the disease. The DPI and Dr van Velsen were fully aware of the threat which a bacterial wilt outbreak posed to the Western Australian market.
When the first suspicions of an outbreak of bacterial wilt in the Saturna crop arose Ms Lanz and the DPI took appropriate steps to have the presence of the disease in each of the crops confirmed. The growers were then advised, as was Mr Frank Perre at Warruga Farms as the DPI knew him to be exporting to Western Australia.
Numerous meetings involving industry representatives, PGSA, Apand, and DPI officers followed to discuss appropriate strategies to deal with the outbreaks. At Mr Frank Perre's request the DPI liaised with the Western Australian authorities in an unsuccessful attempt to have Warruga Farms exempted from the Western Australian regulations. Mr Mark Heap, a DPI officer stationed in the South East who had close experience with managing bacterial wilt outbreaks was brought in to assist. He drafted guidelines for the growers that later formed the basis for written advice on management given to each of the growers whose Saturna crops were affected. Inspectors from DPI visited each of the growers to view and discuss their particular situations. Mr Heap and Mr Barry Philp attended the Sparnon property for this purpose on 24 June 1992, and were accompanied by Mr Jeff Peterson of Apand. Dr van Velsen had earlier visited the Sparnon property on 1 June 1992 in the course of investigations he was conducting into a possible breach of the Plant Quarantine Standard; that visit was not for the purpose of advising on management of the disease.
By letter dated 15 July 1992 under the hand of Dr van Velsen as the Chief Quarantine Officer, the DPI advised the Sparnon partnership of "guidelines for a Bacterial Wilt management programme and harvest of potatoes on your property". The letter referred to "guidelines" as the DPI was conscious that it lacked any regulatory power to dictate control measures for bacterial wilt.
Relevantly the second and seventh guidelines read:
"2. Handling Crop from Bacterial Wilt Infected Area
The Saturna crop in the infected area is poor and probably not worth harvesting. The best option is to rotary hoe or disc the area to dispose of the crop (cut potatoes within the soil as much as possible to speed breakdown), and prepare the soil for the subsequent planting of cereal and lucerne as discussed.
On completion of the rotary hoeing or discing, ensure to clean as much of the soil and old plant debris from the tractor and rotary hoe before moving it out of the patch. Wash and disinfect the unit thoroughly with a chlorine solution (see 'Disinfecting Machinery').
...
7. Follow up Inspections
Department of Agriculture staff will consult with you in approximately 6 months and will be pleased to discuss any management difficulties you may be having with the Bacterial Wilt area."
Other guidelines dealt with marking off and fencing the small area of the Saturna crop, handling an area of adjoining Coliban potatoes that were not affected, hygiene guidelines, and long term management to control regrowth.
The negligent advice alleged is that referred to in guideline 2. The applicants contend that the Sparnon partnership should have been advised to remove the infected potato tubers so as to reduce the level of bacterial wilt inoculum in the soil.
At the visit on 24 June 1992 the DPI officers discussed at length with Mr David Sparnon whether the Saturna crop should be harvested. The conclusion was reached that this would not occur. The officers recognised that in principle infected potatoes should be harvested to reduce the level of inoculum in the soil, but in this case the soil was already heavily infected, and the tubers were small and not worth harvesting. Mr David Sparnon did not wish to harvest the crop. It was not saleable, and he was reluctant to expose his machinery to the infection. He was advised how the machinery could be decontaminated if it were used, but this involved a fair bit of work, spray cleaning and disinfecting the whole of the machinery. Even if harvesting were to occur small tubers would fall through the harvester and remain in the soil - and the crop had many of them.
The applicants' case relies on the evidence of Dr Hayward that all tubers should have been removed. Dr Hayward's opinion postulated the theoretical best situation, but it impressed me as highly impracticable and unrealistic in its application. Dr Hayward's theoretical ideal is not in accordance with industry practices for controlling the disease. The DPI officers had experience in the control of outbreaks of bacterial wilt, and the protocol recommended by them had been found to be successful in the past. Insofar as the evidence provided anecdotal accounts of the management of the disease by other growers the procedures adopted, which did not involve removal of all tubers and plant debris, had proved successful. I consider the Court should be guided by those with practical experience in the field. In my opinion the applicants' case fails to establish any shortcoming in the advice given to the Sparnon partnership.
Industry literature on bacterial wilt tendered in evidence emphasises the desirability of destroying the infected crop, and then the regrowth of self-sown potatoes and host weeds. The future management guidelines in the letter of 15 July 1992 provided for this and recommended control with Starane spray. Had the recommendations been followed there is every reason to think that the 1½ acres of infection on the Sparnon property would have been controlled and eliminated in the time frame intended by the 5 year restriction period reflected in the Western Australian regulations.
Astonishingly, virtually all of the recommendations contained in the guidelines in the letter of 15 July 1992 were not implemented by the Sparnon partnership. The infected crop was not rotary hoed or disced. The potatoes regrew the next season. Herbicides other than Starane were applied occasionally with some effect but these were not herbicides that cracked the tubers. It appears that it was not until late 1994 that steps of the kind recommended were seriously carried out. Numerous excuses were advanced by Mr David Sparnon for the inaction of the partnership which I found unconvincing. Insofar as he suggested that he had received other DPI advice inconsistent with that contained in the letter of 15 July 1992 I prefer the evidence of Messrs Heap, Philp and Fforde.
The other allegation of negligence asserts a failure to make follow up inspections at six monthly intervals. The applicants base this allegation on guideline 7 set out above. The fact is that no DPI officer inspected the Saturna site after the letter of 15 July 1992 until 13 August 1993 when Mr Philp carried out an inspection following a complaint made by Mr Frank Perre to the Western Australian authorities that the Sparnon partnership was not managing the bacterial wilt infection appropriately. Mr Philp observed that the crop had not been rotary hoed or disced as recommended but that the spraying of herbicide had achieved a measure of success. He explained again the need for the Sparnon partnership to control the regrowth and to use Starane to destroy the tubers.
There have been a number of later visits by
DPI officers. On 14 January 1994 Mr
Fforde looked at the Saturna
area whilst he was at the property on an onion inspection. No regrowth was observed. On 19 July 1994 he made another
inspection. There were then many potato
plants visible in the area that had been infected, although none appeared to be
showing signs of the disease. On 11
November 1994 the area was again inspected by him. There were self seeded potatoes growing
profusely which appeared healthy. Mr
Fforde ascertained that the Sparnon partnership had not used Starane as
recommended, and arranged to obtain more information about that herbicide which
he conveyed to Mrs Sparnon a few days later.
On 23 November 1994 Mr Fforde visited the property again. He was told that Starane had just been
purchased, but was sitting in the shed.
Mr David Sparnon was instructed to spray the area twice, with a 10 day
interval between applications. According
to Mr David Sparnon the Starane was then sprayed.
Mr Fforde next inspected the area on 21 March 1995. The area had been worked up, but small weeds and potato plants were visible. No one was at home, so Mr Fforde telephoned Mr David Sparnon later that day. Mr Sparnon said Starane had been sprayed but the result had been patchy, perhaps because the day was too hot. He intended to spray again. On 14 May 1996 at a further inspection the ground showed evidence of being worked. Mr Michael Sparnon said the area had been rotary hoed many times in the summer to bring the tubers to the surface so the sun could cook them. (This is a recommended procedure). He said they had been spot spraying regrowth potatoes.
Mr Fforde's duties include supervising quarantine road blocks at Yamba and Pinnaroo, lure grid inspections of 449 Riverland sites for the control of fruitfly, and he was also responsible for inspecting other potato properties in the Riverland and Pinnaroo areas. The reason for intervals of time between his visits from 21 March 1995 to 14 May 1996 was the pressure of work. The number of inspectors in his area had been cut due to fiscal tightening from 17 to 3.
In my opinion the reference to follow up inspections in guideline number 7 was merely an offer of assistance and did not place the DPI under a duty to make six monthly inspections, the breach of which could be actionable. Significantly the Sparnon partnership, who were in regular contact with DPI inspectors in respect of other matters, did not request that the area be inspected, or seek advice. Moreover, when inspectors did attend and offer advice, the guidelines and the fresh advice were disregarded more often than not. It was for the Sparnon partnership, not the inspectors, to control and manage the bacterial wilt outbreak, and the Sparnon partnership did not do so appropriately. In my opinion the allegation of post-wilt negligence is misconceived. If the failure to adopt better methods of control has extended the restriction on the import of potatoes into Western Australia, the fault does not lie with the DPI.
Sparnon partnership - contributory negligence and volenti
Mr David Sparnon concedes that he realised that as the Saturna seed had been multiplied by Virgara Bros, it was not certified seed, and that the seed was not guaranteed to be disease free. But it does not follow that the Sparnon partnership appreciated that there was a risk that the seed was infected with bacterial wilt - an uncommon disease - and consented to run the risk of using it notwithstanding. The Sparnon partnership was entitled to rely on the warranty that the seed would be reasonably fit to grow a viable crop, and was of merchantable quality. In my opinion the Sparnon partnership was not guilty of contributory negligence, and did not consent to run the risk of suffering a bacterial wilt outbreak.
The Perre Interests Negligence Claims
The claims by the Perre interests fall into three groups: (1) claims by the Warruga Farms partnership who were potato growers, packers, and exporters to Western Australia, (2) a claim by Perre Vineyards Pty Ltd which owned the land leased to Warruga Farms for their packing facility, and (3) claims by the Rangara Joint Venture which grew potatoes, a substantial proportion of which were sold to Warruga Farms. Different considerations may apply in determining legal liability to each group, particularly on the question whether any respondent owed a duty of care.
Accordingly the order for the determination of liability on these claims ahead of damages was in the following terms:
"1. The following issues be decided in the claims by the 4th to 18th applicants separately from the balance of the issues in their said claims, and at the same time as the claims of the 1st to 3rd applicants, namely:
in the event that the 4th to 18th applicants later establish such of the facts and losses or some of them alleged in paragraphs 52 to 55, 58, 59 and 65 to 69 of the 9th amended statement of claim as relate to them whether the respondents or any of them are liable in law for damages for the said losses on any one or more of the causes of action alleged in the said 9th amended statement of claim."
The paragraphs of the Statement of Claim referred to set out the heads of damage claimed in some detail. The pleadings relevantly read:
"WARRUGA FARMS
52. By letter dated 26th May 1992 Warruga Farms was informed by the Minister, and it was the fact, that:
(a) there had been an outbreak of bacterial wilt at the Sparnon property;
(b) a consequence of the bacterial wilt outbreak was that the export of potatoes from South Australia to Western Australia was prohibited if they were grown on a property situated within 20 kilometres from a known outbreak of bacterial wilt ... The Warruga property is within that 20km zone;
(c) the prohibition would last for a period of at least five years.
53. In order to mitigate its loss Frank Perre on behalf of Warruga Farms has:
(a) investigated the sale of its potatoes immediately after the outbreak in other markets in Australia and unsuccessfully attempted to sell potatoes which had been in the ground at the time of the outbreak to: ... (several merchants)
(b) attempted to have the 20km exclusion zone lifted or modified ... Warruga Farms was successful in October 1992 in having the requirements in paragraph 52(b) viz the prohibition upon all potato exports from Warruga Farms lifted, but the replacement conditions viz ... Warruga Farms was permitted to pack potatoes which had been grown outside of the 20 kilometre exclusion zone surrounding the Sparnon partnership property, process such potatoes and send them to Western Australia, conditional upon Warruga Farms fencing off the packing sheds, packing under sterile conditions and totally ceasing the growing of potatoes on Warruga Farms, were so onerous that they were not commercially viable ...
(c) grown alternative crops of pumpkin, barley and wheat...
(d) sold unused machinery... (items of potato planting, harvesting, washing and packing equipment are identified, sold for a total of $169,000).
(e) restructured its finances by borrowing loan repayment money from the bank and paying out leases on equipment so that equipment could be sold.
(f) entered an agreement ... to share farm the property.
54. In order to mitigate their loss the fourth to eleventh inclusive applicants:
(a) entered into a contract dated 28th June 1994 for the sale ... (of part of the Warruga land). The contract settled on 23rd March 1995;
(b) conducted an auction of the whole of Section 116 on 10th June 1994.
55. As a result of the outbreak of bacterial wilt on the Sparnon property and the proximity of the Warruga property to the Sparnon property:
(a) Warruga Farms has suffered a loss of income and has incurred expense;
(b) the value of the Warruga property is less than it would have been had the outbreak not occurred;
(c) Warruga Farms will continue to suffer loss and damage until the ban referred to in paragraph 52 hereof is lifted, which lifting will occur five years after the Sparnon property is certified free of the disease...
(d) Warruga Farms has ceased its potato growing and packing operation. In or about December 1992 the operation was closed down because it was not possible to obtain certified potatoes in sufficient quantities for the Western Australian market;
(e) Warruga Farms sold some of its plant and equipment in August 1993 as particularised in paragraph 53(d) hereof;
(f) Warruga Farms has previously been denied any further loans from Westpac and as a result of the reduction of the borrowing from the proceeds of the sale of land referred to in paragraph 54, made an application to Westpac in March 1995 for a loan of $483,000 over a 10 year repayment period to plant 100 acres of vineyards but this has not been successful because Warruga Farms was not able to meet the relevant lending criteria as to the payment of interest. It was not possible to pay interest for the first three years of the proposed loan.
56. PERRE'S VINEYARDS
At all material times Perre's Vineyards had an oral agreement with Warruga Farms whereby:
(a) Warruga Farms rented the packing shed situated on Perre's Vineyards property...
(b) Warruga Farms paid Perre's Vineyards between $16,000 and $20,000 per year for the use of the shed;
(c) no duration was specified in respect of the agreement and was a tenancy at will;
...
58. As a result of the outbreak of bacterial wilt on the Sparnon property and the consequent loss of the West Australian market Warruga Farms has vacated the Perre's Vineyards' property shortly after the outbreak. Perre's Vineyards has been unable to utilise its premises for other purposes to produce income. It was a purpose developed potato packing shed not capable of being used for any other commercial purpose without substantial modification and expenses which was beyond the financial resources of Perre's Vineyards.
59. Frank Perre on behalf of Perre Vineyards has made attempts to rent the property by:
(1) In February and March 1993 contacting packers offering to lease or sell the property.
(2) Making known to agents that the property is available to lease.
60. RANGARA JOINT VENTURE
In or about early 1989 at the Warruga property Pat Perre and Francesco Perre on behalf of the Rangara joint venture entered into an oral agreement with Frank Perre on behalf of Warruga Farms whereby the Rangara joint venture would grow potatoes on Pat and Grace's property...and Frank and Maria's property...for Warruga Farms to export to Western Australia. The terms of the agreement were:
(a) ...
(b) Rangara would be paid by Warruga at the rate of $320 per tonne for the first crop and subsequent crops would be paid at a price to be negotiated when quality was ascertained;
(c) ...
(d) ...
(e) the agreement was for an indefinite period.
61. The Rangara joint venture grew potatoes on Pat and Grace's property and Francesco and Maria's property from late 1989 onwards.
62. The packing and marketing of the Rangara joint venture potatoes were performed by Warruga Farms which resulted in a better return for the Rangara joint venture...Any potatoes surplus to Warruga Farms' requirements were sold to other buyers.
...
64. By May 1992 the Rangara joint venture's third crop,...was three or four weeks from harvest when Frank Perre advised Pat Perre and Francesco Perre of the Rangara joint venture of the bacterial wilt outbreak...
65. Pat and Grace's property and Francesco and Maria's property were sold in or about October 1992 for a total net price of $270,000, all of which was received by the Westpac Bank, because the owners could not service their debts as a result of the outbreak of bacterial wilt. The joint venture had total debts of approximately $391,000, all of which related to the joint venture's only activity of growing potatoes.
66. Rangara Pty Ltd is still trading doing independent agricultural work producing limited income when work is available.
67. Francesco Perre and Maria Perre now work as itinerant labourers.
68. As a result of the respondents' conduct the Rangara joint venture suffered loss and damage as it could no longer supply potatoes for Warruga Farms...
69. As a result of the respondents conduct Pasquale, Grace, Francesco and Maria Perre have suffered loss on the sale of their land...and Rangara, Francesco and Maria Perre have suffered loss on the sale of their equipment sold at auction by Elders Ltd on 18 September 1992 for the consideration...(of $39,670 in total)
Each of the heads of loss alleged by the three groups in the Perre interests is for purely economic loss. None of the groups or individual members suffered direct injury to their property. None of their properties became infected with bacterial wilt. None of their properties were quarantined or subject to any statutory or other restriction against growing or selling potatoes or any other crop in South Australia or elsewhere, save for the export of potatoes to Western Australia. All the losses claimed are based on the inability of Warruga Farms to continue exporting potatoes to the Western Australian market. Warruga Farms was the actual exporter. Rangara Joint Venture, although a potato grower, lost the benefit of the contract it had with Warruga Farms to sell to Warruga Farms a substantial part of its crop. Perre's Vineyards Pty Ltd was neither an exporter, nor a grower of potatoes. It benefited under a tenancy at will from the fact that Warruga Farms conducted a potato packing business. It was therefore in a similar position to, say, the interstate carriers who transported Warruga Farms' potatoes to Western Australia who also benefited under contracts, the continuance of which depended on the export of potatoes by Warruga Farms.
It should also be noted that the Perre interests were not the only growers who actually or potentially suffered economic loss through the inability to export potatoes to Western Australia. There were other growers not only in the Loxton area but within 20 kms of each of the other bacterial wilt outbreaks on whom the same restriction was imposed. The number of these growers is not disclosed by the evidence, if it is known, but it is likely to be many. The claims by the Perre interests if they were to succeed in negligence against Apand would raise the possibility of "liability in an indeterminate amount for an indeterminate time to an indeterminate class" to apply the often quoted statement of Cardozo J in Ultramares Corporation v Touche (1931) 174 NE 441 at 444. To protect against this situation recovery has not been allowed for economic loss merely because it is foreseeable. In Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 ("The Caltex case") at 555 Gibbs CJ said:
"In my opinion, it is still right to say that as a general rule damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff's person or property. The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act. ...It will be material, but not in my opinion sufficient, that some property of the plaintiff was in physical proximity to the damaged property, or that the plaintiff, and the person whose property was injured, were engaged in a common adventure."
In the Caltex case, Caltex was held entitled to recover for purely economic loss suffered by it as the owner of the terminal supplied by a submerged pipeline owned by a third party when that pipeline was put out of use by damage to it caused by the defendant's dredge. The High Court held that there were a number of factors including the foreseeability by the defendant that Caltex individually would suffer loss, which established such a close degree of proximity between the defendant's conduct and the loss suffered by Caltex that recovery should be allowed.
In Bryan v Maloney (1995) 182 CLR 609 the Court allowed the first subsequent purchaser of a house from the landowner for whom the house had been constructed to recover damages from the builder for loss caused by negligently constructed footings. The plaintiff's loss was treated as purely economic loss. At p.617-618 Mason CJ, Deane and Gaudron JJ said:
"The cases in this Court establish that a duty of care arises under the common law of negligence of this country only where there exists a relationship of proximity between the parties with respect to both the relevant class of act or omission and the relevant kind of damage. In more settled areas of the law of negligence concerned with ordinary physical injury to the person or property of a plaintiff caused by some act of the defendant, reasonable foreseeability of such injury will commonly suffice to establish that the facts fall into a category which has already been recognized as involving a relationship of proximity between the parties with respect to such an act and such damage and as 'attracting a duty of care, the scope of which is settled'. In contrast, the field of liability for mere economic loss is a comparatively new and developing area of the law of negligence. In that area, the question whether the requisite relationship of proximity exists in a particular category of case is more likely to be unresolved by previous binding authority with the consequence that the 'notion of proximity...is of vital importance'. As Stephen J. indicated in Caltex Oil (Australia) Pty. Ltd. v. The Dredge 'Willemstad', it is the 'articulation', in the different categories of case, 'of circumstances which denote sufficient proximity' with respect to mere economic loss, including 'policy considerations', which will gradually provide 'a body of precedent productive of the necessary certainty'. Inevitably, the policy considerations which are legitimately taken into account in determining whether sufficient proximity exists in a novel category will be influenced by the courts' assessment of community standards and demands."
The majority went on to say that one policy consideration which may militate against recognition of a relationship of proximity in a category of case involving purely economic loss could be the concern of the law to avoid indeterminate liability.
The decisions of the High Court in the Caltex Case and Bryan v Maloney have been helpfully analysed by Doyle CJ in a recent decision of the Full Court of South Australia in Seas Sapfor Forests Pty Ltd v ETSA, judgment 9 August 1996 (as yet unreported). In holding that no duty was owed by the defendant in respect of purely economic loss to the parties who sought to be joined in the action as plaintiffs, the learned Chief Justice said that the conclusion, ultimately, "is a product of the problem of liability to an unascertained class. There is no factor in the definition of that class which adequately restricts the class of claimants" (at p.25).
In the present case counsel for the Perre interests recognised that factors which could tend in favour of establishing the requisite proximity between the parties were not the same in the case of each of the three groups among the Perre interests, and were different between Apand on the one hand and the Minister and the State on the other hand. Separate submissions were therefore made on the claims by each group, and I shall consider those claims separately.
Warruga Farms v Apand
It is contended that the necessary relationship of proximity arose from the combination of the knowledge of Apand that bacterial wilt was a potentially disastrous disease for growers, its knowledge of the Western Australian export market and that State's restriction against entry of potatoes from within 20 kms of an outbreak, the close geographic proximity of the Warruga Farms' property and operation to the Sparnon property, and Mr Hughes' knowledge of the location of Warruga Farms and the fact that Warruga Farms exported to Western Australia.
The foreseeability, indeed inevitability, of serious loss does not provide a satisfactory criterion for defining and restricting the class of potential claimants. In Seas Sapfor Forests Pty Ltd v ETSA the losses claimed were said to flow from a bushfire negligently caused. The potential for huge losses from a bushfire is obvious, and there was an inherent likelihood that the destruction of forest would cause loss to people relying on it for production. The learned Chief Justice however observed:
"... one could say roughly the same thing about the destruction of most property and those who use that property for another purpose. The guide of inherent likelihood does not therefore appear to be very helpful in this situation as a control mechanism or an indicator of proximity..." (at 20-21)
The close geographic proximity of the two properties (3-3½ kms) does not provide a satisfactory control mechanism either. That is a distance which, on the evidence, was sufficient for there to be no risk of the disease moving from the Sparnon property to Warruga Farms unless there was some additional link - such as shared machines. Here there was no such connection. The situation is quite unlike the Caltex Case where the pipeline that was damaged ran directly to the Caltex depot.
Another factor which is said to create the special relationship is the knowledge that under the Western Australian regulations the potatoes of every grower within 20 kms would be denied entry. So the relevant geographic limitation on the class of potential claimants is all those potato growers or processors within 20 kms of an outbreak. The act of negligence by Apand that has been made out is a failure by officers of Apand at Pakenham, Victoria, to appreciate the risk of spreading bacterial wilt by using as seed Saturna potatoes grown by Mr Tymensen. The distribution of the infected seed then occurred from Tynong in mid 1990, and the seed was sent not just to one property close to Warruga Farms, but to many properties in many States. When it is realised that losses were not suffered by growers from manifestations of the disease until the second generation from those seeds, to impose a 20 km radius around each outbreak provides no satisfactory control mechanism against the problem of indeterminate liability.
The allegation of Mr Hughes' personal knowledge encounters a number of difficulties, and does not in my opinion, assist Warruga Farms in establishing the requirement of proximity. It is admitted by Mr Hughes that he was telephoned by Mr Frank Perre on one occasion when Mr Perre was inquiring whether Apand would consider Warruga Farms as a contract grower, an inquiry that was unsuccessful. Mr Perre has a diary note that suggests the call was on 17 April 1991 and I find that that was the date of the call. The negligent conduct of Apand occurred at the Pakenham meeting in February 1991. That was before Mr Perre's telephone conversation.
Mr Perre says he told Mr Hughes in the course of their discussion that Warruga Farms was exporting potatoes to Western Australia. Mr Hughes has no recollection of that information. But assuming that was said, the purpose of the call was not to convey that information to Apand. It was information casually given to an employee of Apand who did not receive it as information conveyed to Apand for the purpose of its business. Information casually given to an employee of a company in those circumstances does not become the knowledge of the company. There was no reason for Mr Hughes to record the information that Warruga Farms exported potatoes to Western Australia, to pass it on to his superiors, or to remember it. See Halsbury's Laws of England, 4th Ed. Reissue, Vol. 1(2), para 149; In re Montagu's Settlement Trusts [1987] 1 Ch 264 at 284; and Re Chisum Services Pty Ltd (1982) 7 ACLR 641 at 649-651.
Mr Perre suggests that he had an earlier discussion with Mr Hughes sometime in 1989. If there were such a call that was before Warruga Farms commenced to export to Western Australia, so no special knowledge about Western Australia would have been conveyed.
Mr Perre gave evidence that Mr Sparnon and another man who he now assumes was Mr Hughes visited Warruga Farms packing shed in 1991 and observed its operation.
Mr Hughes denies that he ever visited Warruga Farms or its packing shed. The identification of the visitor depends on Mr David Sparnon's evidence which I am not prepared to act on in the absence of other support. I find that Mr Hughes never attended the Warruga packing shed. Mr Hughes says that on the occasions he visited the Sparnon property he approached it from the opposite direction from Warruga Farms, and never drove past Warruga Farms or the packing shed of which he was unaware. I accept that evidence.
Mr Hughes says that he had heard in general conversation with the Sparnon partnership that the Perre family in the neighbourhood grew potatoes, but knowledge so gained was not knowledge about Warruga Farms' export activities to Western Australia. Loxton was a recognised potato growing district. Mr Hughes and Apand must have known that. That knowledge is merely knowledge that a class of growers exists. It does not define individual members of the class. The fact that in the course of casual conversation with a third party the name of a grower was mentioned does not place the person named in a different class from the rest of the growers in the general area.
In my opinion, the factors relied on by Warruga Farms do not create a special relationship of proximity with Apand which takes Warruga Farms' claims in negligence out of the general rule that damages are not recoverable for purely economic loss.
In my opinion Apand owed no duty of care to Warruga Farms to guard against purely economic loss of the kind which is alleged by them.
Warruga Farms v The Minister and the State
Pre-outbreak negligence claim
In my opinion this claim fails as there was nothing which created any closer degree of proximity between these parties than between any other potato grower in South Australia who from time to time exported potatoes to Western Australia and the Minister and the State. No duty of care existed. In any event no negligent conduct by the respondents leading up to the outbreak has been established.
Post-outbreak negligence claim
In relation to Warruga Farms I think a case does exist for holding that the Minister and the State, through Dr van Velsen, owed a duty of care not to cause economic loss to Warruga Farms by giving negligent advice to the Sparnon partnership as to the manner in which the outbreak should best be managed to minimise the impact of the Western Australian regulations.
The principles considered in the Caltex case, Bryan v Maloney and Sea Sapfor Forests Pty Ltd v ETSA concern the liability for purely economic loss caused by a negligent act or omission. Liability for purely economic loss caused by negligent misstatements has developed separately, although many common threads run through the decisions in each class of case for the reason explained by Gibbs CJ, Mason, Wilson and Dawson JJ in San Sebastian Pty Ltd v The Minister (1986) 162 CLR 340 at 354-355:
"However, the correct view is that, just as liability for negligent misstatement is but an instance of liability for negligent acts and omissions generally, so the treatment of the duty of care in the context of misstatements is but an instance of the application of the principles governing the duty of care in negligence generally. The special complications which arise in connexion with the imposition of a duty of care on the author of a statement can only be unravelled in a variety of factual situations.
...
The relationship of proximity is an integral constituent of the duty of care concept. We refer to that relationship in its broader sense, namely, as embracing a general limitation upon the test of reasonable foreseeability, this being the sense in which it has been discussed and applied in recent judgments of this Court (Caltex (1976) 136 CLR at pp.574-576; Jaensch v Coffey (1984) 155 CLR 549 at pp.552-553; Sutherland Shire Council v Heyman (1985) 157 CLR 424 at pp.461-462, 506-507; Stevens v Brodribb Sawmilling Co. Pty. Ltd. (1986) 160 CLR 16). The notion of proximity, because it limits the loss that would otherwise be recoverable if foreseeability were used as an exclusive criterion of the duty of care, is of vital importance when the plaintiff's claim is for pure economic loss. When the economic loss results from negligent misstatement, the element of reliance plays a prominent part in the ascertainment of a relationship of proximity between the plaintiff and the defendant, and therefore in the ascertainment of a duty of care."
Dr van Velsen knew specifically and individually of Warruga Farms export operation. He advised them of the outbreak on the Sparnon property as soon as it was confirmed as it meant that the DPI would no longer issue Warruga Farms with Plant Health clearances. Dr van Velsen and the DPI were involved in negotiations with the Western Australian authorities to have the restrictions on entry lifted or modified for Warruga Farms. The length of the ban was also discussed. Dr van Velsen knew it ran from the time of the last outbreak, so that the elimination of the disease on the Sparnon property was critical to Warruga resuming its export business. Dr van Velsen and the DPI should have known that Warruga Farms was relying on the DPI to give advice to the Sparnon partnership that would, if followed, control and destroy the bacterial wilt disease, and that Warruga Farms would be affected by the success of the measures recommended. In these circumstances I consider there was a sufficiently close proximity with Warruga Farms to give rise to a duty of care not to give negligence advice to the Sparnon partnership.
However for the reasons given in relation to the Sparnon partnership claim I do not think Dr van Velsen or other DPI officers were guilty of negligence after the outbreak. Further, if I am wrong in my conclusion that there was no actionable obligation to conduct inspections every 6 months, I find that the lack of more regular inspections is not the cause of any extension of the export prohibition that may occur in consequence of the disease not having been controlled as soon as it could have been on the Sparnon property.
Perre Vineyards Pty Ltd v Apand)
)
Rangara Joint Venture v Apand )
There is nothing in the evidence to establish that Apand or Mr Hughes had ever heard of these applicants. These claims fail as no duty of care owed to the applicants by Apand has been established.
Perre Vineyards Pty Ltd v The Minister and the State)
)
Rangara Joint Venture v The Minister and the State )
These claims fail on the ground that negligence by the Minister or the State has not been established.
The Perre interests TPA claims
These claims were put forward on the basis that the experimental crop of Saturna potatoes was grown by the Sparnon partnership because the partnership relied on misrepresentations made by Mr Hughes. It was contended that in these circumstances the Perre interests thereby suffered loss "by conduct of another person" within the meaning of s.82 of the TPA. It is not necessary to discuss whether the Perre interests could have claimed under s.82 had the misleading and deceptive conduct by Mr Hughes, and the Sparnon partnership's reliance on it, been established. As the TPA claims by the Sparnon partnership have not been established the claims by the Perre interests must fail.
Sparnon partnership damages
The formulated claim at the commencement of the trial was $3.044 million made up of $230,036 to establish a washing facility to wash soil from farm produce; lost income over the 5 years following the outbreak of bacterial wilt being $90,340 for onions and potatoes in 1993, and $2.651 million being for anticipated income not received from carrot growing between 1993 and 1997; and interest.
Bacterial wilt does not affect either onions or carrots, and the composition of this claim is at first sight surprising. However lost onion sales were included on the allegation that a defacto black ban was imposed by the fruit and vegetable markets in Australia on the Sparnon partnership so that they could not sell their onion crops which were ready for processing and sale at the time of the outbreak. Lost carrot sales were included on the allegations that the partnership decided to grow crops other than potatoes; that carrots were an available option which was pursued; that the returns from carrots were not what they could have been because the partnership was unable to borrow funds required to install an additional pivot irrigation needed to increase the acreage of carrots; and that the inability to borrow the required funds arose from the partnership's impaired cash flow brought about by the bacterial wilt outbreak.
By way of contrast a loss assessment prepared by accountants instructed by Apand estimated the Sparnon partnership loss could be as low as $7,753, and a farm management consultant engaged by the Minister and the State estimated the partnership loss at $13,230. These estimates allowed nothing for the claimed carrot losses. The authors of the reports considered that the Sparnon partnership was in a parlous financial situation before the bacterial wilt outbreak, and was at serious risk of being wound up by the CDB and CBA at any time. They did not consider impaired cash flow, if any, caused by the outbreak contributed to the partnership's inability to borrow funds.
During the trial the assessment of the Sparnon partnership's claim was recast, reducing it to $1,144,835 but the heads of loss and the reason for including a claim for carrots remained basically the same.
Before considering the recast claim I record some general matters and findings that influence my assessment of damages.
It is very plain from the CDB and CBA files, and from the number of debt collecting processes out against the partnership from 1990 through to early 1992, that the partnership was in severe financial difficulty at the time of the bacterial wilt outbreak, and had been for some time. The partnership was in serious default with instalments due to the CDB on the mortgage raised to buy the Sparnon property, and the CBA current account overdraft on which the partnership operated had been fluctuating between about $200,000 and $250,000 from June 1990, when at all times the overdraft limit was $100,000. The overdraft initially blew out because Mr David Sparnons decided to buy a considerable quantity of plant and equipment. The CBA appears to have accepted the need for this expenditure and on the strength of numerous promises and profit forecasts tolerated the overdrawn account. By late 1991 when it was obvious that forecasts were not being met the bank suggested the partnership should consider the voluntary sale of its property to meet its debts.
A memo on the file of the CBA recording a visit by bank officers to the Sparnon property on 2 April 1992 reads that "Clients well aware of their precarious situation and the declining equity in their property. They are conscious that another trading year like 1991 could finish their business."
The profit and loss accounts for the partnership to that time also give a gloomy prognosis. It is common ground that as the accounts were prepared on a cash received basis, whatever losses were suffered from the bacterial wilt outbreak would have fallen into the 1992-1993 financial year. The trading results shown by taxation returns are as follows (the
results after the outbreak are also shown for completeness):
Financial Year 1990 1991 1992 1993 1994 1995
Gross Income 196,495 365,563 237,073 193,019 260,476 367,878
Expenses 229,657 397,870 298,356 232,610 253,466 352,050
Profit/loss (33,162) (32,307) (61,283) (39,591) (7,010) (15,828)
I accept Ms Lanz' evidence that Mr Michael Sparnon said to her on 29 April 1992 that the partnership was not making money out of the vegetables they were growing. This is apparent from the figures.
There was a significant drop in gross income in the 1993 financial year which followed the outbreak. This was partly due to loss associated with the Saturna crop, and also the Coliban potato crop that adjoined it (see below). It is also substantially due to the fact that the onion crops which should have produced income that year were not sold. Why that occurred is one of the issues to be decided. The Sparnon partnership say it was due to the black ban. The respondents say it was probably due to the collapse of the onion market at that time.
The accounts suggest an improved performance from 1994. The evidence suggests this is due to the partnership moving into carrot growing for the juice market, and to Mr Michael Sparnon taking over control of the finances of the business from his father during 1992.
Mr David Sparnon's attempts during his cross-examination to deny or down play the financial plight of the partnership before the bacterial wilt outbreak was damaging to his credit as I accept that the bank records record the true position, and also what he was telling the bank at the time.
I have already indicated that I am not prepared to act on the evidence of Messrs David and Michael Sparnon about their losses and post-outbreak events unless it is supported by other evidence or is uncontentious. The allegation of a defacto black ban being imposed by the fresh vegetable produce markets is important to their claim from lost onion sales. The only evidence of such a black ban is hearsay evidence from Mr David Sparnon offered as the reason why the onions were not sold. He said merchants refused to take the onions because they had heard of the outbreak. He also said Mr Nicol refused to continue taking carrots. No evidence was called from any merchant to confirm that they would not take produce because of the outbreak. A statement from Mr Nicol was tendered by consent. Mr Nicol said:
"I deny that I was the cause of a downturn in the Sparnon's business on the basis that they no longer had a market for their carrots after the outbreak. I did not refuse to take carrots. David Sparnon told me that he could not supply me with dirty carrots.
My records indicate that the last invoice for carrots received by me from the Sparnons is dated the 15th October 1991."
The records of the Sparnon partnership confirm that the last recorded carrot sales to Mr Nicol were in October 1991. Then the partnership commenced to sell carrots to G & L Harris, but that enterprise became insolvent and went out of business owing the Sparnon partnership money at the end of 1991.
In short, there is no admissible evidence of a black ban. The allegation that a black ban existed is not established.
At the time of the outbreak of bacterial wilt the Sparnon partnership alleges it had 80 tonnes of onions dug and stored in bulk in its shed ready for grading and packing. As the result of the black ban they say these were eventually dumped because they could not be sold, and a further 35 acres of onions or about 594 tonnes due for harvest in May 1992 were not harvested but simply disced into the soil.
The sales records from September to December 1991 show the partnership selling carrots. The carrot sales stopped at the end of 1991 and from 12 January 1992 sales of onions commenced to a number of merchants and ran regularly through to 10 April 1992. Some 173 tonnes of onions were sold at between $4.00 and $4.50 per 20 kg bag. At the end of March, and in early April some sales were at $2.00 per bag. There was one further sale of 300 bags at $4.00 per bag on 1 May 1992 and then no more. On 5 May 1992 carrot sales resumed on a regular basis. Messrs David and Michael Sparnon acknowledged that the onion price collapsed in 1992. A publication by the DPI entitled Vegetable Gross Margins 1994 at pp.15 and 16 considers the production of white and brown onions at March 1993 (a year after the outbreak). At that time a price of $7.00 per bag was assumed. The sensitivity analysis prepared by the DPI shows that even in better yielding crops than the Sparnon partnership was achieving a loss would be suffered by selling onions at $4.00 per bag. Significant labour and cost is involved in harvesting, grading and packing onions into 20 kg bags.
The Sparnon partnership had grown the onions without first securing a market. If the price had fallen below $4.00, and onions were difficult to sell, it might well be the case, as the respondents contend, that one reason why the onions were not harvested is that it was not thought to be worth the effort and expense. Harvesting costs would not be involved in processing onions already harvested and in the shed. I think it is probable, as counsel for the respondents argue, that, in early April 1992 the partnership decided to suspend sales hoping the price would pick up. What happened after the outbreak of bacterial wilt is not entirely clear, but eventually these onions were dumped. It is not established that there was a black ban that prevented their sale through the markets.
There is evidence from Mr Philp that at first sight sits very oddly with the Sparnon partnership evidence that no onions were sold after the wilt outbreak. Mr Philp says that when he and Mr Heap arrived at the Sparnon property on 24 June 1992 the Sparnon's were grading onions and packing them into 20 kg bags. This suggests that onion sales were in some manner still continuing. There may however be some innocent explanation as Mr Michael Sparnon's evidence suggests. I have not overlooked Mr Philp's evidence but I am not prepared to find on the basis of it that sales were taking place at about that time. If I were satisfied that sales under the lap were taking place then I would allow nothing for the loss of sales of onions in the shed at the time of the outbreak. I propose however to make an allowance, but not on the basis that there was a black ban. I find that in the weeks from the discovery of the outbreak until the letter of 15 July 1992 from Dr van Velsen, the implications of the outbreak were being assessed, not only by the Sparnon partnership, but by Warruga Farms who were keen to have the Western Australian restrictions lifted, by the PGSA, by other industry groups, by Apand, and by the DPI. During this period I think it is probable that the Sparnon partnership put on hold its attempts to sell any unwashed produce. That covered the onions in the shed and the Coliban potatoes that were ready for digging. I do not accept Mr David Sparnon's evidence that he was told by DPI officers that the property was under quarantine, or that he could not sell his produce. However I think it is likely that the seriousness of the bacterial wilt disease was being stressed to the Sparnon partnership, as was the need to be careful not to spread it in contaminated soil. To be cautious and unsure of their position, while the assessment was going on, was not unreasonable.
The evidence leaves me with a firm impression, which I act on as a matter of probability, that in April 1992 the Sparnon partnership was in serious financial difficulty, and it was struggling to find a way to produce sufficient income to keep the banks at bay. The collapse of the onion market would have aggravated their worries, and the outbreak of bacterial wilt would have appeared as the final straw. I can well understand that Mr David Sparnon suffered the feelings of despair that he expressed in the witness box. I accept that he did think that the outbreak was a disaster for the partnership when it was first diagnosed. Unfortunately, it appears that he then seized on the outbreak as the cause of all the ills and misfortunes of the partnership business, and as the means for its salvation. By 11 June 1992 he was telling the CDB that he was unable to sell his potatoes and onions because of the outbreak but that Apand had accepted full responsibility. He told the bank the partnership expected $250,000 to cover 900 tonnes of onions and the potato crop. Thereafter the assertion of an imminent expectation of a large compensation payment became the means of keeping the banks at bay. Once Mr David Sparnon had alighted on a large compensation claim as the means of overcoming the financial difficulties of the partnership, I think the will to dig the onions still in the ground disappeared. On 7 August 1992, on inquiry being made about the progress of the compensation claim, Mr David Sparnon told the CDB that the onion crop was still in the ground as he did not want to "touch the evidence" until compensation had been paid.
I reject the evidence of Mr David Sparnon that Mr Peterson on behalf of Apand made generous offers of compensation and that he told Mr Sparnon that Apand would meet the cost of constructing a large washing plant and shed. I think it is probable that Mr David Sparnon of his own motion obtained quotes for a washing facility as a way of bolstering his compensation claim.
It is plain, however, that although Apand did not say to the growers that it accepted responsibility, it did express sympathy for their plight, and did offer to assist them, for example, by visiting them, providing information on managing the outbreaks and by offering to take potato crops for processing. Further Mr Peterson at his meetings with Mr David Sparnon said to him that as the Sparnon partnership believed it had suffered losses as the result of the outbreak it should quantify its losses and Apand would submit the claim to its insurer. He told Mr Sparnon that compensation claims were out of his hands. And he suggested that Mr Sparnon should seek assistance from someone with financial skills to assist in preparing the claim.
Further, Apand gave financial assistance to the Sparnon partnership when Mr David Sparnon sought it. On 18 June 1992 he telephoned Mr Richard Hill, the National Potato Supply Manager of Apand, and explained that he had cash problems that could interfere with his ability to purchase seed for his next potato crop for Apand. Mr Hill arranged for seed to be supplied to the Sparnon partnership and for payment to be deducted from the proceeds of the crop after harvest. The value of the seed advanced was $12,072.06. Later Mr David Sparnon asked Mr Hill for a further advance on the potato crop which was to be planted in July/August 1992. Apand made advances of $10,000 cash in July 1992 and $30,000 by cheque in September 1992. The value of the seed was deducted from the potato crop after harvest in January 1993, and the $40,000 advance has never been repaid. It is agreed that it should now be taken into account in assessing damages. These advances are important in considering the alleged impact of the bacterial wilt outbreak on the Sparnon partnership cash flow.
At the time of the outbreak the financial position of the partnership was such that it is highly improbable that it could have borrowed the funds needed even for a small irrigator. By 1994 the partnership was labouring under the added losses caused by the failure to harvest and sell the onions still in the ground in May 1992, by the poor yield of the potato crop harvested in January 1993 and by the poor yield of onions in 1993, only a very small part of which is attributable to the outbreak. The suggestion that impaired cash flow caused by the outbreak is the reason why funds for an additional irrigator could not be raised is untenable. The large 150 acre pivot irrigator which the Sparnon partnership now says it would have acquired in 1994 would have cost about $100,000 and an additional mainline and washing facilities would have added a further $70,000. The financial predicament of the partnership in 1994 was such that it is improbable that finance for the irrigator could have been raised, quite apart from the impact of the outbreak of bacterial wilt. In my opinion the carrot claim is far fetched and cannot succeed.
I turn now to the recast claim.
1. The Saturna crop.
It is agreed that the net loss of this crop is $6,200, and that payment would have been received on 30 August 1992.
2. The Coliban crop.
This crop was due for harvest when the outbreak occurred. It remained in the ground until after Dr van Velsen's letter was received on 15 July 1992 which said that crop should be harvested. It had then gone off and was not saleable. The net value of the crop is agreed at $32,000 which would have been received on 30 July 1992.
3. The Atlantic potato crop.
This was the crop planted in August 1992 with the seed made available by Mr Hall. The applicants contend that planting was delayed because of the outbreak, and had to be planted away from the Saturna, with the result that it was put into ground that had not been rested. It is alleged that this reduced the yield. The claim is
Estimated yield 450 tonnes
Actual yield 144 tonnes
Lost yield 306 at $295 per tonne =$90,270
Plus 144 tonnes at reduced price of $30 = 4,320
$94,590
The crop should have been harvested and delivered in November 1992. Because it was harvested in January, a reduced price was paid. I accept that there was a delay in planting caused by the uncertainty of the situation until Dr van Velsen's letter of 15 July 1992 was received.
I do not accept that lack of rotation of the growing area was the cause of the lower yield. This was not an excuse for the poor crop given to Mr Cullen at the time. Mr David Sparnon then blamed such things as the late planting, a poor growing season, and cold wet periods. When the crop was inspected by Messrs Hughes and Cullen in October 1992 it was stressed and showing signs of inadequate irrigation and nutrition. The main cause of the lower than expected yield seems to have been poor management. Perhaps the late planting did contribute a little. Although there is no satisfactory evidence about this, I make a small allowance for the possibility.
The claim is for gross figures. It is agreed that the net loss, if the claim were otherwise allowed in full would be $30,344 payable on 30 January 1993. For the late planting causing a reduced price, and for the possibility of some reduction in yield due to late planting I allow $10,000.
4. Onions - the 80 tonnes in storage.
For reasons given I am prepared to accept that attempts to sell these were put on hold from the end of April until 15 July 1992. The evidence of Mr Michael Sparnon that the onions were going off during this period was not seriously disputed. Although the evidence is vague about when they became unsaleable I accept that by 15 July 1992 there would have been such a degree of decomposition that it would have been uneconomical to sort the good from the bad. I allow the agreed net value of these onions, namely $13,000. No date was agreed as to when the proceeds of sale could have been expected. There was usually a delay in payment from the merchants. I shall assume payment would have been received by 30 August 1992.
5. Onions not harvested at May 1992.
The agreed net return on these onions if harvested and sold at $4.00 per bag would have been $62,300. If the sale price were in the order of about $2.00 per bag it is doubtful whether there would have been a net return after harvesting, grading and bagging. I have already expressed my findings that there is no evidence of a black ban which prevented the sale of these onions, but that the market conditions were unfavourable, and that Mr David Sparnon had lost the will to dig them as they were to be "evidence" in the proposed compensation claim. If the onions had a net value over the cost of harvesting, grading and bagging they should have been harvested and sold. But for the reasons already given there might reasonably have been some delay in digging them whilst the implications of the outbreak were explored. Again, in the absence of satisfactory evidence on the point, I allow for the possibility that if they were not dug until mid July there may have been some crop deterioration because of the delay that would have reduced the return after grading out. For that possibility I allow $10,000. Otherwise the claim is disallowed as it is not established that the loss alleged was caused by the bacterial wilt outbreak.
6. Onions April to July 1993 harvest.
It is alleged that 13 acres of white onions and 25 acres of brown onions which were expected to yield 645 tonnes yielded only 185 tonnes. A claim is made for $206,845 net of expenses for the lost yield. This claim assumes a sale price of $10 per bag, the market having recovered from the preceding year. It is contended that the poor yield was due to the inability of the Sparnon partnership to pay for chemicals and fertiliser needed to produce a high yielding crop.
The consistent picture which appears from the evidence, and the bank files in particular, is that the partnership estimates of yield were never met, and the shortfalls were often very great. Crops were said to be below expectation for a host of reasons. Against this background, and my unwillingness to act on the unsupported evidence of Messrs David and Michael Sparnon, I am not satisfied that there was a reduced yield as alleged. Even if there were, it is not proved that the partnership was unable to afford the cost of fertiliser and sprays. During this growing season the partnership in one or other of the bank accounts it operated apart from the overdrawn CBA account had credit balances which could have been used. In any event this claim insofar as the damages are to be assessed in tort would encounter the hurdle of the principle in the Liesbosch, Dredger v Edison, S.S. (Owners) [1933] AC 449 and insofar as the damages are to be assessed for breach of contract, the rules in Hadley v Baxendale (1854) 9 Exch 341;156 ER 145 present a similar hurdle. I allow nothing for this head of claim.
7. Onions - May 1994 harvest.
This is a similar claim to the preceding item, this time for a reduction of 237 tonnes on an expected yield of 627 tonnes. For the same reason that the last item was not allowed this claim also fails. Moreover on some of the estimates, and statements to the bank as to the actual yield, there was no shortfall on this crop anyway.
8. Carrots.
The carrot claim is for the inability, through lack of finance, to grow an extra 300 tonnes of carrots per month for 24 months from May 1993 to May 1995. The amount claimed is $762,000. For reasons given above I do not think any part of this claim should be allowed.
9. Travelling costs.
There is a claim for $4,550 being the cost of travelling to and from land leased at Pyap to grow extra carrots. It was necessary, so it is alleged, to lease this land because there was inadequate irrigation capacity on the Sparnon's property. It is an extension of the carrot claim based on the inability to raise finance. No causal relationship is established. This claim fails.
– No specific claim is quantified for clearing up the Saturna plot and taking the measures recommended by the DPI to manage the outbreak. Belatedly many of the recommendations have been and are being applied. I allow $5,000 to cover the costs of past and future spray, tillage and labour.
–– A claim was also made for the early surrender of superannuation policies by members of the Sparnon partnership. I think the surrender is too remotely related to the bacterial wilt outbreak, and in any event a loss cannot be quantified.
Summary
I therefore allow:
Saturna 6,200
Coliban 32,000
Atlantic 10,000
Onions in shed 13,000
Onions from May 1992 harvest10,000
Clean up costs 5,000 76,200
Less the advances by Apand 40,000
36,200
Interest - lump sum 15,000
$51,200
Orders
The following orders will therefore be made:
1. Judgment for the first, second and third applicants against the first respondent for $51,200.
2. Judgment for the second and third respondent dismissing the claims of the first, second and third applicants.
3. The cross-claim by the first respondent against the second and third respondents is dismissed.
4. The cross-claim by the second and third respondents against the first respondent for contribution in respect of claims by the first, second and third applicants is dismissed.
5. The issue for separate determination is answered as follows:
none of the respondents is liable in law for damages for the losses on any of the causes of action alleged by the fourth to eighteenth applicants in the ninth amended Statement of Claim.
6. Further consideration of outstanding issues including costs is stood over to a date to be fixed.
I certify that this and the
109 preceding pages are a true
copy of the Reasons for
Judgment of Justice von Doussa
Associate:
Dated: 20 December 1996
Counsel for the applicants : Mr N Morcombe QC with
Mr J Morcombe
Solicitors for the applicants : Townsends
Counsel for the 1st respondent : Mr A Harris with
Mr M Frayne
Solicitors for the 1st respondent: Phillips Fox
Counsel for the 2nd & 3rd : Mr M Bell with
respondents : Mrs V Martindale
Solicitors for the 2nd and 3rd : The Crown Solicitor for
respondents the State of South
Australia
Dates of hearing : 8-9,10-11,15-19,22-23,
29, & 31 July,
1, & 5-9 August, 16-17,
23-27, & 30 September,
1-2, 15-18, 21-25, &
28-30 October, 5, & 20-22
November, 1996
