FEDERAL COURT OF AUSTRALIA

DAMAGES – Loss flowing from contamination of cattle – Date at which damages should be assessed – Method of calculating damages – Use of Scott Schedule in adducing evidence – Absence of documentation.

BRIAN McMULLIN AND LEONE MARGARET McMULLIN v ICI AUSTRALIA OPERATIONS PTY LTD and CROP CARE AUSTRALASIA PTY LTD

NG3052 of 1998

JUDGE:          WILCOX J

PLACE:          SYDNEY

DATE:            2 NOVEMBER 1998

THE COURT ORDERS THAT:

1.                  The determination of Judicial Registrar Walker in respect of the claim of C F & R Pursehouse be set aside.

2.                  The said claim be remitted to the Judicial Registrar for further determination in the light of the existing evidence and any further evidence either party may adduce.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

EXTEMPORE REASONS FOR JUDGMENT

WILCOX J:   From time to time I have made orders constituting subgroups in respect of the claims of particular people, or groups of people, and delegated these matters to a Judicial Registrar for determination.  One of the subgroups was in respect of the claim of C.F. and R. Pursehouse.  That claim was considered by Judicial Registrar Walker and is the subject (with another claim) of Reasons for Judgment he handed down on 17 September 1998.

The respondents (“ICI”) have applied for review of the determination in respect of Mr and Mrs Pursehouse.  The application raises three points which are said to be points of principle.  ICI does not ask me to re-assess the amount of damages.  ICI is content to resolve the three points and have the matter remitted to the Judicial Registrar.  Mr Rowe, counsel for Mr and Mrs Pursehouse, agreed to argue the matter on that basis.  I am content with that proposal.  Having regard to the view I have formed, the matter will go back to Judicial Registrar Walker for re-consideration in the light of the rulings I am about to make.

The first, and most important, point taken by ICI is a criticism of the Judicial Registrar's adoption of 30 June 1996 as a date for crystallisation of the loss said to have been incurred by the claimants in respect of 122 cows and calves depastured on the claimant's property, Breeze Station near Quirindi, when the Helix crisis became known in November 1994. 

In addition to these 122 cows, there were a further 29 cows Mr Pursehouse said he had intended to sell in November, but he conceded he had not taken any action to sell these cows before he became aware of the Helix contamination.  For that reason, the Judicial Registrar held any loss in respect of the 29 cows should be disregarded.  This ruling is not questioned before me.  I mention the matter because it affects the arithmetic used in calculating the deduction that should be made in respect of cows subsequently sold and cows retained at the date of trial.

The Judicial Registrar found the 122 cows and calves were intended to be sold shortly before Christmas 1994.  Because Mr Pursehouse became aware of the Helix contamination, he withheld the cattle from sale.  ICI does not criticise him for that.   It seems to me he acted in the only way reasonably open to him.

Breeze Station was put on the tail tag list in February 1995.  It remained tail tagged until August 1995.   Mr Pursehouse subsequently sold about 24 cows.  In November 1995 he sold more cows.  In 1996 he sold some vealers and heifers.  When his case was first evaluated by Mr Ian Aberdeen, the loss assessor, a calculation was made as at 30 June 1996. Mr Habersberger QC, senior counsel for ICI, suggests this occurred because the loss was being calculated in May 1996.  At that time, there were discussions between the parties about resolution of individual claims and Mr Aberdeen understandably took 30 June 1996 as being an appropriate date, as at which to negotiate a possible settlement.

In his statement tendered before the Judicial Registrar, Mr Aberdeen mentioned that 23 cows were sold in December 1996; so he adjusted the June 1996 valuation to substitute the proceeds of that sale for the assumed June value.  This was obviously the correct course to be taken.   Mr Habersberger asks why this was not done in respect of other cattle.

It seems that, at the date of trial, Mr and Mrs Pursehouse retained some of the 122 cows, and some of the animals that were calves in December 1994 but are now cows of breeding age.  Mr Habersberger's submission is that, in this situation, it was wrong to have regard to the value of the animals as at June 1996, a date which had no particular significance except as a reflection of the way Mr Aberdeen approached the matter in May, 1996.

The Judicial Registrar referred to the selection of 30 June 1996 in his reasons.   After citing authority about assessment of damages, and in particular what was said in Johnson v Perez (1998) 166 CLR by Mason CJ at 355 and 360, Mr Walker said:

“The methodology used by the claimant in this matter has to be considered with the intentions of the claimant and the circumstances of the particular time for the alleged loss.  It is true that the time selected for the crystallisation reflects the lowest point in the market for cattle and may appear somewhat arbitrary, but it is a time that does reflect an appropriate period for assessment of the loss.  To take in account all of the factors as at the date of hearing would present a somewhat more difficult task on the evidence led.  For these reasons, the method adopted in the Scott schedule be used for the assessment of damages for this particular matter.  The adoption of this methodology does not necessarily mean it would be applicable in other cases.” 

I agree with the first sentence in that passage.  Any assessment of damages has to be based upon findings as to the intentions of the claimant, having regard to the circumstances that applied at the time when relevant decisions were made.  It is important to emphasise that, in evaluating the reasonableness of such decisions, the Court must have regard to the situation as it then appeared to the claimant, and not determine the matter by reference to hindsight.  In considering whether a particular person acted reasonably, hindsight is to be disregarded.  On the other hand, in calculating the loss that was suffered, the Court has regard to subsequent facts.

I agree with Judicial Registrar Walker’s comment that the selection of 30 June 1996 “may appear somewhat arbitrary”.  Arbitrariness is not necessarily a defect  There are occasions when a court must make an assessment that is impossible of arithmetical justification; a number of factors intrude and, at the end of the day, the court can do no more than say that a fair figure appears to be a particular sum of money.  That can be regarded as an arbitrary assessment, in that sense its correctness cannot be arithmetically or logically demonstrated; but it may, nonetheless, represent a reasonable judgment in all the circumstances of the case.

The problem about the use of 30 June 1996 in the present case is that the selection of that date is not justified in any way in the Judicial Registrar’s reasoning, other than by saying it would be a difficult task to take account of all relevant factors.   I do not think that reason is sufficient.  It may be that, after considering a multitude of factors, the tribunal of fact has no alternative other than to make a decision that is an exercise of judgment and, in that sense, arbitrary; but it ought to appear from the reasons that all relevant factors have been taken into account.

The appropriate method of dealing with a matter such as this is to make two separate calculations; one “without Helix” and the other “with Helix”.  This is the approach taken in the Scott Schedule used in respect of this claim and other claims.  The "without Helix" scenario is relatively simple.  One starts by taking the assumed proceeds of sale of the 122 cows and calves in December 1994.  There is apparently no particular difficulty about this.  Judicial Registrar Walker took a figure of $77,433.  This was previously contentious, in the sense that ICI argued for a different figure, but Mr Habersberger tells me his client is now willing to accept this figure.

The second step is to add interest.  If the cattle had been sold in December 1994, Mr and Mrs Pursehouse would have received $77,433 at that time.  They have been deprived of the value of that money and this should be reflected in an interest allowance.  For the purposes of these cases, the parties have been working on the basis of 12 per cent per annum, so it would be appropriate to calculate 12 per cent on $77, 433 from December 1994 until the date at which the judgment is being entered.  In this case the period was a little under four years. 

In addition, it is necessary to take into account any proved loss of opportunity.  If the Court was satisfied that, upon the sale of the cattle in December 1994, the land would have been used for some other productive enterprise, for which it was not used because of the necessity to retain the cattle, it would be appropriate to allow the value of the lost opportunity.  There may be an element of judgment in working that out, but the Court must do the best it can.  A critical factor in determining whether or not to allow opportunity cost, is whether the Court is persuaded the particular claimant would have taken the opportunity of alternative action presented by the sale of the cattle.  To a large extent, this depends upon the Court’s assessment of the credibility and personality of the claimant.  Are the claimant’s protestations about his intentions to be believed?  Is this a person who would have pursued every opportunity to obtain maximum income from the land?  Or is this a person who would have been unlikely to have taken that course?  The answer will vary from case to case, but it is an issue claimants are entitled to have considered where they make such a claim. 

In the present case there was a hint of alternative use of the land, but the evidence was far from satisfactory.  When the matter goes back to the Judicial Registrar, it will be for the claimants to decide whether to put a case of foregone opportunity; if so, their case will need evaluation. 

The second exercise is to take a "with Helix" scenario.  In some cases this is quite simple.  In other cases, such as the present, a number of items have to be taken into account.  First, some of the cattle have been sold.  In respect of those cattle, it is necessary to ascertain the date when they were sold and the proceeds of sale.  It is then appropriate to add interest on the proceeds of sale, calculated from the date of sale to the date as at which the judgment is being entered.  In calculating the proceeds of sale, it is necessary to remember there were calves at foot.  If they were sold, the sale proceeds must be taken into account.  Where, as in this case, the sold cattle came out of a composite herd (the 122 cows intended to be sold in December and the 29 that were said to have been intended to be sold in November), it may be necessary to distribute the sales proportionately between the total herd of 151 cows.

If, before their eventual sale, any cows had calves subsequent to the calf at foot in December 1994, the sale proceeds of those calves should also be taken into account.  Those calves were a benefit to the claimants in retaining the cows, on the “with-Helix” scenario.

In relation to the cattle (the original 122 cows and calves or their progeny) that were still held at the date of trial, the correct approach is to take their value as at that time.  In the absence of agreement, it may be necessary to consider valuation evidence.  All of these items then have to be added together to get the total credit figure, as it were, on the “with Helix” scenario.

There are normally costs associated with running cattle.   Any proved feeding costs, or other costs of caring for the cattle, should be deducted from the proceeds, actual or notional, of sale of the cattle. 

The final step is to compare the “with Helix” scenario and the “without Helix” scenario in order to determine whether there is a compensable claim in respect of the relevant herd of cattle.

In carrying out this exercise, judgments may have to be made.  There may be items in respect of which one cannot be certain about a monetary sum,  so the Court has to make the assessment it thinks reasonable.  There can be no quarrel about that.  What is important is that there be a methodology like that I have outlined, so the parties can be assured that all relevant factors have been considered in making the assessment.

Counsel have debated whether this case admits an expression of general principle.  I think, to some extent, it does; in the way that I have indicated.  However, it should be emphasised that the Court’s function in every case is to do justice between the parties, having regard to the proved facts of that particular case.  In a case such as that of Mr and Mrs Pursehouse, it will normally be appropriate to go through the steps I have mentioned; but the facts of other cases may be different.

It is sufficient to say, in regard to the first point raised by ICI, that the assessment of damages seems to have depended significantly on a value as at 30 June 1996.  Mr Rowe has not been able to justify that date, except on the basis it was about two years after the first feeding of cattle trash and it would take that long for market place discrimination to wear off.  I am not persuaded by that argument; it is inconsistent with evidence adduced in respect of other claims.  Nor was such a case run, in respect of this claim, before the Judicial Registrar.  I think the explanation of 30 June 1996 is that indicated by Mr Habersberger.

The second point is whether the Judicial Registrar should have admitted evidence in respect of some items in the Scott Schedule:  travelling, accommodation and labour.  Claims in a Scott Schedule are not evidence of losses; they are mere particulars.  It may be useful for a witness to cross-reference items in his or her statement to items in the Scott Schedule; there can be no criticism if a witness says the travelling cost was $X and then refers to the particular item in the Scott Schedule.  However, it is important there be a witness able to vouch for the accuracy of any item in the Scott Schedule that is not agreed between the parties.  That person can be questioned about the figure by the opposing side or, indeed, the Court.

I do not agree with the contention the Judicial Registrar erred in admitting a witness statement which contained references to particular items in the Scott Schedule.  The evidence was admissible in that form.  Mr Pursehouse was pledging his word that these items of expenditure were incurred and, also, as their amount.  He was called as a witness and he was available to be cross-examined about those items and made to justify them.  At the end of the day, it was for the Judicial Registrar to determine whether or not to accept those items and, if so, in what amount.

There was one item, a claim for agistment, that was not referred to in Mr Pursehouse's witness statement or in oral evidence.  Nonetheless, it was allowed in the Judicial Registrar's computation.  Mr Rowe said the Judicial Registrar made a slip in allowing it.  It seems this is correct.  The amount is not large, but it ought not to have been allowed, in the absence of verifying evidence.

One point mentioned in discussing these items was the absence of documentation.  By way of example, Mr Habersberger referred to a claim for veterinary expenses.  When Mr Pursehouse was asked about this, he could not explain the absence of an account from the veterinary surgeon.  A situation such as this creates a problem for a tribunal of fact.  The circumstance that a witness cannot produce an account does not mean the debt was not incurred.  The account may have been lost.  On the other hand, the absence of an account creates a question about the item that would be avoided if the original account were produced or a copy obtained from the person who issued it, in this case the veterinary surgeon.  In order to obviate arguments, efficient solicitors endeavour to obtain accounts wherever possible.  I do not know why no account was available in this case. 

If a claimant gives evidence that a particular cost was incurred and the account paid, but is unable to produce any documentary evidence, it is for the tribunal of fact to determine whether or not to accept the evidence.  To my mind, the first matter for consideration is the degree of probability that an item of that nature would have been incurred, having regard to the proved circumstances of the case.  Sometimes it may be obvious some such expense would have been incurred; so one can be confident in accepting the item, although a doubt might remain as to quantum.  In other cases, it will be less clear such an item would have been incurred; so one may be disposed not to accept the item in the absence of documentary corroboration.  A second factor is, of course, the Court's assessment of the general reliability of the witness.  If the Court is favourably impressed with a witness, and believes the witness is honest and credible, the Court is more likely to allow the item, even in the absence of documentary evidence.  The converse is also true. 

All this is no more than every day experience.  When these matters go back to the Judicial Registrar it will be for him to determine whether, having regard to his assessment of Mr Pursehouse and the circumstances, he is prepared to allow the items that are not agreed or documented.  What I have said deals with the three points that arose for my consideration.  The appropriate order is as follows:  I set aside the determination of Judicial Registrar Walker in respect of the claim of C.F. & R. Pursehouse and remit the said claim to the Judicial Registrar for further determination in the light of the existing evidence and any further evidence either party may adduce.

[There was discussion about costs.]

I make no order as to costs of the review.

Associate:

Dated:              2 November 1998