FEDERAL COURT OF AUSTRALIA

Dovuro Pty Ltd v Wilkins [2000] FCA 1902

NEGLIGENCE – duty of care – economic loss – absence of physical injury – risk of physical injury – cost of avoiding or minimising risk – standard of care – forseeability – existence of statutory scheme regulating conduct – compliance with statutory scheme – whether liability can be greater than arising under contract

CONTRACT – construction and interpretation – “undesirable species” – trade meaning – incorporated by conduct – custom or usage – how established – exclusion clause – causation

SALE OF GOODS – implied terms – whether purchaser relied on seller’s skill and judgment – whether goods of merchantable conduct

PRACTICE & PROCEDURE – appeal – point not argued at trial

Federal Court of Australia Act 1976 (Cth) ss 4, 24

Quarantine Act 1908 (Cth)

Sale of Goods Act 1908 (NZ) s 16

Trade Practices Act 1974 (Cth)

Perre v Apand Pty Ltd (1999) 198 CLR 180, discussed

Ward v McMaster [1988] IR 337, cited

Dynasty Pty Ltd v Coombs (1995) 59 FCR 122, cited

White v Minister for Immigration & Multicultural Affairs [2000] FCA 232, cited

Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 74 ALJR 1348, cited

Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631, applied

Winnipeg Condominium Corporation No 36 v Bird Construction Co (1995) 121 DLR (4^th) 193, referred to

Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd [1985] QB 350, cited

DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423, distinguished

Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982)149 CLR 337, distinguished

FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343, cited

Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31, cited

Donoghue v Stevenson [1932] AC 562, discussed

Winterbottom v Wright (1842) 152 ER 402, cited

Langridge v Levy (1837) 150 ER 863, cited

Haseldine v C A Daw & Son Ltd [1941] 2 KB 343, cited

Stennett v Hancock & Peters [1939] 2 All ER 578, cited

Maindonald v Marlborough Aero Club & New Zealand Airways Ltd [1935] NZLR 371, cited

Howard v Furness Houlder Argentine Lines Ltd [1936] 2 All ER 781, cited

Malfroot v Noxal Ltd (1935) 51 TLR 551, cited

Watson v Buckley, Osborne, Garnett & Co Ltd [1940] 1 All ER 174, cited

Pack v County of Warner (1964) 44 DLR (2d) 215, cited

Fraser Henleins Pty Ltd v Cody (1944) 70 CLR 100, cited

Harris v Macquarie Distributors Pty Ltd [1967] VR 257, cited

Bourhill v Young [1943] AC 92, cited

Anns v Merton London Borough Council [1978] AC 728, referred to

South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282, cited

Caparo Industries plc v Dickman [1990] 2 AC 605, cited

Reeman v Department of Transport [1997] 2 Lloyds Rep 648, cited

Sutherland Shire Council v Heyman (1985) 157 CLR 424, cited

Pyrenees Shire Council v Day (1998) 192 CLR 330, cited

Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431, cited

Graham Barclay Oysters Pty Ltd v Ryan [2000] FCA 1099, referred to

Wyong Shire Council v Shirt (1980) 146 CLR 40, applied

United States v Carroll Towing Co 159 F2d 169 (1947), cited

Thompson v Johnson & Johnson Pty Ltd [1991] 2 VR 449, considered

Polemis and Furness, Withy & Co Ltd [1921] 3 KB 560, referred to

Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [1961] AC 388, referred to

Hughes v Lord Advocate [1963] AC 837, referred to

Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967] AC 617 (The Wagon Mound (No 2), referred to

Hughes v Lord Advocate [1963] AC 837, referred to

Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383, referred to

Rae v Broken Hill Pty Co Ltd (1957) 97 CLR 419, referred to

Hawkins v Coulsdon & Purley Urban District Council [1954] 1 QB 319, referred to

Marshall v Lindsey County Council [1935] 1 KB 516, referred to

Rogers v Whitaker (1992) 175 CLR 479, cited

Austral Pacific Group Ltd (in liquidation) v Airservices Australia [2000] HCA 39, cited

Suttor v Gundowda Pty Ltd (1950) 81 CLR 418, referred to

O’Brien v Komesaroff (1982) 150 CLR 310, cited

Coulton v Holcombe (1986) 162 CLR 1, applied

University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481, applied

Water Board v Moustakas (1988) 62 ALJR 209, referred to

Banque Commerciale SA, en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279, referred to

Ultramares Corp v Touche 174 NE 441, referred to

Football Club de Metz v Winoth, “Colmar”, 20 April 1955, D, 1956, 723, cited

Cattle v Stockton Waterworks Co (1875) LR 10 QB 453, cited

Simpson & Co v Thompson (1877) 3 AppCas 279, cited

Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, cited

Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529, cited

Hill v van Erp (1997) 188 CLR 159, cited

Bryan v Maloney (1995) 182 CLR 609, applied

Weller & Co v Foot & Mouth Disease Research Institute [1966] 1 QB 569, referred to

S C M (United Kingdom) Ltd v W J Whittal & Son Ltd [1971] 1 QB 337, referred to

D & F Estates Ltd v Church Commissioners for England [1989] AC 177, cited

Murphy v Brentwood District Council [1991] 1 AC 398, cited

Rivtow Marine Ltd v Washington Iron Works (1973) 40 DLR (3d) 530, discussed

Attorney-General for Ontario v Fatehi (1981) 127 DLR (3d) 603, followed

Canadian National Railway Co v Norsk Pacific Steamship Co Ltd (1992) 91 DLR (4^th) 289, referred to

Nelson v Dahl (1879) 12 ChD 568, applied

Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48, applied

Appleby v Pursell [1973] 2 NSWLR 879, cited

Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435, cited

Lord Forres v Scottish Flax Co Ltd [1943] 2 All ER 366, applied

Strand Music Hall Co Ltd (1865) 35 Beav 153, referred to

SA Maritime et Commerciale of Geneva v Anglo Iranian Oil Co Ltd [1954] 1 WLR 492, cited

Tea Trade Properties Ltd v CIN Properties Ltd [1990] 1 EGLR 155, cited

Smith Hogg & Co Ltd v Black Sea & Baltic General Insurance Co Ltd [1940] AC 997, referred to

Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350, cited

Monarch Steamship Co Ltd v Karlshamns Oljefabriker  [1949] AC 196, cited

March v E & MH Stramare Pty Ltd (1991) 171 CLR 506, cited

Warren v Coombes (1979) 142 CLR 531, followed

Fangrove Pty Ltd v Tod Group Holdings Pty Ltd [1999] 2 QdR 236, cited

Woollahra Corporation v Sved (1996) 40 NSWLR 101, cited

Zumpano v Montagnese [1997] 2 VR 525, cited

Bow Valley Husky (Bermuda) Ltd v  Saint John Shipbuilding Ltd [1997] 3 SCR 1210, considered

Seely v White Motor Co 403 P 2^nd 145 [1965], cited

Duffin v Idaho Crop Improvement Association 895 P 2^nd 1195 (Idaho 1995), cited

Pioneer Hi-Bred International Inc v Talley 493 SW 2^nd 602 (1973), cited

Miller v United States Steel Corporation 902 F 2^nd 573 (1990), cited

State of Louisana ex rel Guste v M/V Testbank 752 F 2^nd 1019 (1985), cited

East River Steamship Corporation v Transamerica Delaval Inc (1986) 476 US 858, cited

State Rail Authority v Earthline Pty Ltd (in liq) (1999) 73 ALJR 306, followed

Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520, cited

Unity Insurance Brokers Pty Ltd v Pezzano (1998) 192 CLR 603, cited

Fleming, The Law of Torts, 9^th ed, p 238

Linden, Canadian Tort Law, 5^th ed, pp 380-398

Feldthusen B, Pure Economic Loss in the High Court of Australia:  Reinventing the Square Wheel? (2000) 8 (1) Tort Law Review 33

American Law Institute, Restatement of the Law, Torts 2^nd Ch 14

Prosser & Keeton on The Law of Torts, 5^th ed, (1984)

Mason A, The Recovery & Calculation of Economic Loss at 22-24 in Mulleny NJ (ed), Torts in the Nineties (1997)

DOVURO PTY LIMITED v ROBERT JOHN WILKINS, EILEEN JOYCE WILKINS, TREVOR IAN WILKINS, SUSAN CAROLINE WILKINS and LOCHIEL NOMINEES PTY LIMITED as trustee for the R & E WILKINS FAMILY TRUST, all trading as R & E WILKINS, and CROP MARKETING NEW ZEALAND SOCIETY LIMITED

BRANSON, FINKELSTEIN and GYLES JJ

SYDNEY

21 DECEMBER 2000

On appeal from a single judge of the Federal Court of Australia

THE COURT ORDERS THAT:

The Court orders that:

1.                  The appeal by Dovuro Pty Limited (“Dovuro”) against the declarations made by Wilcox J on 19 May 2000 be dismissed.

2.                  The appeal against the order of Wilcox J of 23 December 1999 dismissing Dovuro’s cross claim against the second respondent be allowed, and the order dismissing the cross claim be set aside.

3.                  The appeal otherwise be stood over to a date to be fixed for the purpose of determining what other orders, including orders as to costs, should be made.

4.         The parties provide to the Associate to Branson J by 9 February 2001, an agreed minute of the orders to be made (including orders as to costs) and if agreement has not by then been reached, the minutes of orders for which they will respectively contend and brief outlines of submissions in support of the orders.

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

On appeal from a single judge of the Federal Court of Australia

REASONS FOR JUDGMENT

BRANSON J:

INTRODUCTION

1                     I have had the benefit of reading in draft the reasons for judgment of Gyles J.  I have the misfortune of disagreeing with his Honour as to the result of the appeal.  However, I am indebted to his Honour for his outline of the case which includes an outline of the factual background to the case, the pleadings and the decision below.

2                     For the reasons set out below, I would dismiss the appeal against the declaration made by the learned trial judge (Wilcox J) on 19 May 2000 that the appellant (“Dovuro”) owed a duty of care to the first respondent (“Wilkins”) and group members and that it was in breach of such duty.  I would also dismiss the appeal against his Honour’s declaration of the same date that some damage was suffered by Wilkins as a result of such breach of duty.  Further I would dismiss the appeal against his Honour’s order of 23 December 1999 dismissing Dovuro’s cross-claim against the second respondent (“Cropmark”).

FACTUAL CONSIDERATIONS

3                     A weed may well be only a plant growing where it is not wanted.  However, as the judgment of the learned trial judge illustrates, it has been recognised since biblical times that “good seed” is seed that does not include the seeds of weeds (Matthew 13.27).

4                     So far as canola seed is concerned, it is not disputed that seed quality, and thus the price that can be achieved for it, is dependent on seed purity.  Weed seeds detract from the purity of harvested crop seeds and, in the case of an oil seed such as canola, adversely effect the quality of the oil produced from such seeds.  Weeds compete with crop plants for nutrients and moisture thus reducing yield at the time of harvest.

5                     Dovuro having decided to “bulk-up” in New Zealand the triazine tolerant strain of canola which came to be known as Karoo, imported the bulked-up seed into Australia in 25kg bags.  The bags were labelled “Certified seed, 1^st generation” and on the back of each label were the words “Minimum 99% Purity, Minimum 85% germination”.  Before the seed was distributed in Australia, Dovuro received seed analysis certificates from the New Zealand Ministry of Agriculture and Fisheries (“MAF”).  Of the eight lines of seed imported into Western Australia, six contained “redshank” seeds (the remaining two lines had seeds which could have been “redshank” seeds), two lines contained “cleavers” seeds and another “field madder” seeds.  One line contained all three of these weed seeds.

6                     Dr Terence John Piper (“Dr Piper”), the Acting Manager, Weed Science Group, Agriculture Western Australia (“AgWest”), gave expert evidence which the learned trial judge accepted.  Dr Piper expressed the opinion that none of the weeds cleavers, redshank and field madder was established in the Western Australian wheat belt.  He further expressed the opinions that the relevant Weed Risk Assessments (“WRAs”) prepared by the officers of Agriculture Western Australia suggested that there was a moderate to high risk that cleavers was capable of becoming a problem in the Western Australian wheat belt, a slight chance of redshank becoming a problem in that area and a moderate chance of field madder becoming a problem in that area – although field madder “might not be a serious weed” in that there are only limited areas of its preferred soil type in the Western Australian wheat belt.

7                     Mr Tapp, the General Manager of Dovuro, agreed that it was unusual to find seeds of cleavers, redshank and field madder in crop seed and that the presence of the seeds was “of concern”.  He recognised that it was “very important” to avoid the presence of weeds in a seed crop and that Dovuro had a duty to its customers to provide seed as clean as it could.  He further recognised that there is always a risk of importing weed seed that growers may not have experienced in their district before and he agreed that it was a risk Dovuro should do its best to guard against.  He agreed that as a seed dealer, Dovuro has an obligation to look at any seed analysis to see if there are any unusual weed seeds in the analysis.  He further agreed that “the industry” has to be careful to avoid seed contamination and that he saw it as part of Dovuro’s duty to avoid such contamination.  He knew that “weeds are the biggest burden to the canola industry” and he also knew that it was possible to inquire by telephone of AgWest whether the introduction of a particular weed seed into the Western Australian wheat belt would do harm.  Yet Dovuro did not make any relevant inquiries of AgWest.  Nor did it inform, or cause to be informed, the ultimate purchasers of the seed of the risk that the imported Karoo canola seed was contaminated with seeds of cleavers, redshank and field madder.

8                     Mr Tapp issued a media release once public concern about the weed seeds developed.  The media release contained the following passage:

“We apologise to canola growers and industry personnel.  This situation should not have occurred but due to strong-interest in Karoo the unusual step was made of undertaking contract seed production in New Zealand to assist rapid multiplication; whilst the urgency to process and distribute the seed of Karoo in time for planting caused additional time pressures.”

9                     Mr Tapp, as I read his evidence, agreed that the “situation” referred to in the above passage was the presence of the weed seeds in the imported Karoo canola seeds.

10                  Little significance, in my view, attaches to the apology contained in the above passage.  An apology may be no more than an expression of regret that an incident has occurred.  However, the remaining words of the passage indicate that in response to “strong interest in Karoo” Dovuro took the unusual step of undertaking contract seed production in New Zealand.  That step self-evidently involved the risk of bringing exotic weed seeds into Australia.  It would seem to be implied by the passage that had Dovuro not been under additional time pressures, it would have done something differently after seed production from that which it did do.  That something, about which no evidence was given, could only have been greater efforts to clean the seed or greater efforts to inquire and, if necessary, warn about the weed seeds.  Apologetic letters from Mr Eamoun Rath (“Mr Rath”), Western Region Manager of Dovuro, suggest that the latter is the more likely explanation.  A letter from Mr Rath that the learned trial judge found to be typical of letters sent by him said:

“I’d like to stress at this stage that this does not excuse Dovuro in failing in its duty of care to inform growers as to the presence of these weed seeds.  We got it wrong in this case, and new varieties will not be brought on the market again in this manner.  Dovuro will not be producing seed in New Zealand again.  The company will continue in bulking up its varieties (as it does every year) in Western Australia.”

LIABILITY FOR PURE ECONOMIC LOSS

11                  It seems to me that it may have been possible to treat this case as one involving physical damage to land by the introduction of exotic seeds.  However, the appeal was argued on the basis that the loss suffered by Wilkins and the group members was “pure economic loss”.  It is appropriate for this reason to consider the appeal on that basis although there is reason to doubt that the case was similarly presented by Dovuro before the primary judge.  The economic loss is perhaps best thought of as the cost of the adoption, on the recommendation of AgWest, of more costly farming practices than would otherwise have been adopted to avoid the likelihood of injury arising from the planting of the contaminated Karoo seed.  In most cases this loss would ultimately have been reflected in reduced profits, or increased losses, from the growing of the relevant canola crops.

12                  While there is no general rule that one person owes to another a duty to take care not to cause to him or her reasonably foreseeable financial harm, “there are circumstances in which the law recognises a duty of care such as will permit recovery of pure economic loss” (Perre v Apand Pty Ltd (1999) 198 CLR 180 per Gleeson CJ at para 4).  There is no single authoritative statement as to the correct approach for identifying such circumstances.  However, the decision of the High Court of Australia in Perre v Apand provides the most recent consideration by that court of this difficult question.

13                  In Perre v Apand at para 5 the Chief Justice identified three considerations which are influential in restraining acceptance of a duty of care which would permit recovery of pure economic loss.  First, the need for intelligible limits to keep the law of negligence within the bounds of common sense and practicality.  Secondly, respect for the freedoms, controls and limitations established both by common law and statute in many legal contexts.  Thirdly, as I understand it, the potential unfairness in imposing on a party to a contract a tortious liability to a third party which involves a higher duty of care than that provided for by the contract.

14                  The Chief Justice in Perre v Apand at paras 13-14 emphasised the following matters in agreeing with Gummow J that the respondent owed the appellants a duty of care.  First, the respondent had actual foresight of the likelihood of harm and knowledge of an ascertainable class of vulnerable persons; and secondly, the respondent controlled the activity on the land which ultimately caused harm to the appellants.

15                  In Perre v Apand, Gaudron J at paras 32-33 discussed two policy considerations frequently invoked in this area of the law.  The policy considerations discussed by her Honour closely resemble the considerations identified by the Chief Justice which are referred to in para 13 above.  Her Honour said:

“The first policy consideration is ‘the law’s concern to avoid the imposition of liability “in an indeterminate amount for an indeterminate time to an indeterminate class”’.  It is important to remember that that is a policy consideration, not a rule of law.  Thus it is not necessarily fatal to the recognition of a duty of care that the duty is owed to a class whose members cannot be identified with complete accuracy.

The second policy consideration is that, in a competitive commercial environment, ‘a duty to take reasonable care to avoid causing mere economic loss to another … may be inconsistent with community standards in relation to what is ordinarily legitimate in the pursuit of personal advantage’.  It is because of this that the law requires some special factor or factors before it will impose a duty of care in protection of commercial interests, opportunities or, even, advantages.  However, the factor or factors which will attract liability may be of a somewhat broader character when economic loss results from the destruction or impairment of a legal right.”  (citations omitted)

16                  Gaudron J after considering the facts in Perre v Apand, formulated at para 42 the following principle:

“… where a person knows or ought to know that his or her acts or omissions may cause the loss or impairment of legal rights possessed, enjoyed or exercised by another, whether as an individual or as a member of a class, and that that latter person is in no position to protect his or her own interests, there is a relationship such that the law should impose a duty of care on the former to take reasonable steps to avoid a foreseeable risk of economic loss resulting from the loss or impairment of those rights.”

No other member of the High Court expressed support for the principal so formulated by her Honour.

17                  McHugh J in Perre v Apand at para 93 expressed the view that an incremental approach is the most satisfactory approach in this area of the law.  His Honour at para 94 said:

“In my view, given the needs of practitioners and trial judges, the most helpful approach to the duty problem is first to ascertain whether the case comes within an established category.  If the answer is in the negative, the next question is, was the harm which the plaintiff suffered a reasonably foreseeable result of the defendant’s acts or omissions?  A negative answer will result in a finding of no duty.  But a positive answer invites further inquiry and an examination of analogous cases where the courts have held that a duty does or does not exist.  The law should be developed incrementally by reference to the reasons why the material facts in analogous cases did or did not found a duty and by reference to the few principles of general application that can be found in the duty cases.” (citation omitted)

18                  At para 100 McHugh J observed:

“In determining whether the defendant owed a duty of care to the plaintiff, the ultimate issue is always whether the defendant in pursuing a course of conduct that caused injury to the plaintiff, or failing to pursue a course of conduct which would have prevented injury to the plaintiff, should have had the interest or interests of the plaintiff in contemplation before he or she pursued or failed to pursue that course of conduct.  That issue applies whether the damage suffered is injury to person or tangible property or pure economic loss.  If the defendant should have had those interests in mind, the law will impose a duty of care.  If not, the law will not impose a duty.” (citations omitted, emphasis in original)

19                  At paras 103-4, his Honour stated:

“… when a court is satisfied that the economic loss suffered by the plaintiff was reasonably foreseeable by the defendant, that no question of indeterminacy of liability arises and that the defendant was not legitimately protecting or pursuing his or her social or business interests, it will often accord with community standards and the goals of negligence law, as an instrument of corrective justice, to hold that the defendant should have had the plaintiff’s interests in mind when engaging or refusing to engage in a particular course of conduct. …

What is likely to be decisive, and always of relevance, in determining whether a duty of care is owed is the answer to the question, ‘How vulnerable was the plaintiff to incurring loss by reason of the defendant’s conduct?’  So also is the actual knowledge of the defendant concerning the risk and its magnitude.  If no question of indeterminate liability is present and the defendant, having no legitimate interest to pursue, is aware that his or her conduct will cause economic loss to persons who are not easily able to protect themselves against that loss, it seems to accord with current community standards in most, if not all, cases to require the defendant to have the interests of those persons in mind before he or she embarks on that conduct.”

20                  McHugh J went on at para 120 to observe:

“In determining whether the plaintiff was vulnerable, an important consideration will be whether the plaintiff could easily have protected itself against the risk of loss by protective action, particularly by obtaining contractual warranties.  …  Where another body of law can effectively deal with economic loss, a court should be slow to use negligence law to impose a duty of care on a defendant.  This is particularly important where to do so would interfere with a coherent body of law in another field.”

21                  Gummow J, with whose reasons for concluding that the respondent owed the appellants a duty of care Gleeson CJ agreed, expressed at para 199 disapproval of the “incremental development” approach.  His Honour cited McCarthy J of the Supreme Court of Ireland who observed in Ward v McMaster [1988] IR 337 at 347 that such an approach –

“suffers from a temporal defect – that rights should be determined by the accident of birth.”

22                  Gummow J indicated at paras 198 and 201 a preference for an approach which examines the particular facts of the case for the purpose of isolating, should they exist, salient features which combine to constitute a sufficiently close relationship to give rise to a duty of care owed to the plaintiff for breach of which it might recover its purely economic loss.  His Honour identified salient features of the case before the court.  These features included knowledge in the respondent of the significance for the export of potatoes to Western Australia of a 20km buffer zone around land affected by pests or disease; appreciation by the respondent of the significance of the spread of disease by the supply of uncertified seed; knowledge in the respondent of an outbreak of disease near the source of the seed supplied by it and constructive knowledge in the respondent that growers within 20km of the property to which it supplied the seed would participate in export to Western Australia.  His Honour also identified as a salient feature of the case the fact that the appellants had no way of appreciating the existence of the risk to which they were exposed by the respondent’s conduct and no avenue to protect themselves against that risk.  His Honour concluded that, subject to certain matters which need not be considered here, the salient features identified by him brought the appellants and the respondent into such close and direct relations as to give rise to a duty of care owed by the respondent for breach of which purely economic loss could be recovered.

23                  Kirby J at para 259 suggested that in deciding whether a legal duty in negligence exists in any case (ie not only in cases of pure economic loss), a decision maker must ask three questions:

“1.       Was it reasonably foreseeable to the alleged wrongdoer that particular conduct or an omission on its part would be likely to cause harm to persons who have suffered damage or a person in the same position?

2.                  Does there exist between the alleged wrongdoer and such person a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’?

3.         If so, is it fair, just and reasonable that the law should impose a duty of a given scope upon the alleged wrongdoer for the benefit of such a person?”

24                  Hayne J at para 329 identified two threads which had assumed importance in the development of the principles governing liability for negligently caused pure economic loss.  First, the desire to avoid “liability in an indeterminate amount for an indeterminate time to an indeterminate class”.  Second, the concern not to establish a rule that will render “ordinary” business conduct tortious.  These “threads” share much in common with the “considerations” identified by the Chief Justice (para 13 above) and the “policy considerations” discussed by Gaudron J (para 15 above).  His Honour found (at para 342) that the class of possible plaintiffs in Perre v Apand was limited in the relevant sense.  He further concluded (at para 349) that the relevant conduct of the respondent would have been unlawful if engaged in deliberately, so that to hold that the respondents owed a duty to some or all of the appellants in the circumstances would not inhibit the respondents from engaging in conduct that otherwise would have been lawful.  For these reasons his Honour concluded (at para 351) that the respondent owed a duty to some of the appellants to take care not to cause them pure economic loss.

25                  Callinan J found in favour of the respondent compensating the appellants for their losses because of factors identified by him which in combination established a sufficient degree of proximity, foreseeability, a special relationship, determinancy of a relatively small class of potential claimants, a large measure of control on the part of the respondent and special circumstances (para 406).

CONCLUSIONS REGARDING DUTY OF CARE

26                  It seems to me that the conclusion of the learned trial judge in this case that Dovuro owed a duty of care to Wilkins and group members is consistent with the approaches adopted by the majority of the members of the High Court in Perre v Apand.  Further, in my view, his Honour’s conclusion is correct.

27                  The features of this case which have caused me to adopt the view that Wilcox J rightly found that Dovuro owed to Wilkins and the group members a duty to take care not to cause them financial harm by failing to warn of the presence of the weed seeds are the following.

28                  Dovuro is a seed merchant which, through its officers and in particular Mr Tapp, appreciated the dangers inherent in the introduction of new weeds into areas of Australia where grain crops are commercially grown.  It appreciated that the Australian canola seed industry could be adversely affected by weed seed contamination, and the seed merchants had a “duty to avoid such contamination”.  It further appreciated the limitations inherent in the statutory requirements of Australian Quarantine Inspection Service, Western Australian Quarantine and Inspection Service and the Agriculture Protection Board (WA).  That is, Dovuro had actual foresight of the likelihood of harm if it caused or allowed certified canola seed, contaminated by the seed of weeds not established in the Western Australian wheat belt, to be distributed without warning to farmers in that area.  Dovuro knew from the seed analyses provided to it by Cropmark that the Karoo seed distributed by it did contain unusual weed seeds.  It was alert to the fact that this was a matter of concern.

29                  The class of persons who were vulnerable to a failure by Dovuro to warn of the presence of the weed seeds was, in my view, limited and ascertainable in the relevant sense (see particularly Perre v Apand per Gaudron J at para 32, McHugh J at para 111-112, Hayne at para 336 and Callinan J at para 409).  The class comprised the ultimate purchasers of the limited amount of Karoo canola seed imported by Dovuro from New Zealand who farmed in the Western Australian wheat belt.  This class was vulnerable to incurring loss by reason of Dovuro’s conduct.

30                  The evidence and correspondence of the officers of Dovuro, particularly Messrs Tapp and Rath, is inconsistent with there being an industry standard, let alone a community standard, suggesting that it is ordinarily legitimate in the pursuit of commercial advantage for a seed merchant to fail to take reasonable steps to ensure that a farmer who purchases certified seed supplied by a seed merchant, which the seed merchant knows to be contaminated in a way which is “unusual” and “of concern”, is aware of such contamination.

31                  To use the language of McHugh J in Perre v Apand at para 103, subject to the issue of whether AgWest overreacted, the economic loss suffered by Wilkins and the group members was reasonably foreseeable by Dovuro, no question of indeterminacy of liability arises and Dovuro was not legitimately protecting or pursuing its business interests.

32                  There is also another policy consideration which, in my view, suggests that Dovuro should in the circumstances of this case be found to owe a duty of care to avoid the type of economic loss suffered by Wilkins and the group members.  This is the policy consideration discussed by La Forest J in delivering the judgment of the Canadian Supreme Court in Winnipeg Condominium Corporation No 36 v Bird Construction Co (1995) 121 DLR (4^th) 193 at 212-213.  His Honour expressed the following view:

“If a contractor can be held liable in tort where he or she constructs a building negligently and, as a result of that negligence, the building causes damage to persons or property, it follows that the contractor should also be held liable in cases where the dangerous defect is discovered and the owner of the building wishes to mitigate the danger by fixing the defect and putting the building back into a non-dangerous state.”

33                  As La Forest J has pointed out, it would be difficult to justify a legal doctrine under which a person who acts promptly and responsibly to remedy a defect must do so at his or her own expense while another who allows the defect to develop and cause personal or physical injury may recover at law.

34                  If it be the case here, as I conclude that it is, that Dovuro owed Wilkins and the group members a duty of care to avoid actual damage to their land by causing exotic weeds to become established thereon, it would accord with good sense to find that Dovuro also owed them a duty of care to avoid giving rise to a situation in which it would be reasonable and responsible of them to expend money to mitigate the risk of exotic weeds becoming established on their land.  No risk of the imposition of indeterminate and unreasonable liability arises in such circumstances.  In this regard, it is not material in my view that there is no evidence that the risk would, if no preventative action had been taken, have given rise to the establishment of exotic weeds on the land on which the Karoo seed was sown.  In the Winnipeg Condominium case,there was no evidence that the defective building would have, as opposed to could have, caused further damage to persons or property.  The important thing is whether the money spent to mitigate the risk was money reasonably spent.

35                  Moreover, it would not, in my view, interfere with the body of law which governs the sale of goods generally to impose a duty on seed merchants who sell certified seeds to take steps to ensure that the ultimate buyers of the seed are warned of the presence of identified weed seeds where the presence of such seeds may carry with it significant risks for the buyers.  This is not a situation, in my view, where it is realistically to be expected that farmers would protect themselves by obtaining contractual warranties.

36                  The learned trial judge was satisfied that the first respondents and the group members had suffered some damage as a consequence of the breach by the appellant of its duty of care to them.  No error, in my view, has been demonstrated in either the approach taken by his Honour to this issue, or in his conclusion.  Nor, in my view, has any error been demonstrated to attend his Honour’s conclusion that such damage was caused by Dovuro and not by an overreaction by AgWest which Wilkins and the group members should have ignored.

37                  The appeal against the declaration made by Wilcox J that Dovuro owed a duty of care to Wilkins and the group members and that it was in breach of such duty should be dismissed.

WITHDRAWAL OF CONCESSION

38                  Despite my conclusion that the learned trial judge rightly found that Dovuro owed a duty of care to Wilkins and the group members, because of the approach adopted by the other members of the Court it is necessary for me to consider whether Dovuro should be allowed to withdraw the concession made by it in closing submissions to Wilcox J, and repeated in its written submission on the appeal, that it owed to Wilkins and the group members a duty to take reasonable care to avoid injury to them.  I join with Finkelstein J, for the reasons which he gives, in concluding that Dovuro should not be allowed to withdraw its concession.  In addition to the matters considered by his Honour, I add the following.  An appeal to this Court from a decision of a judge of the Court is an appeal in the strict sense and not an appeal by way of rehearing (Dynasty Pty Ltd v Coombs (FC) (1995) 59 FCR 122 at 129; White v Minister for Immigration & Multicultural Affairs [2000] FCA 232).  The appeal power is thus to be exercised for the correction of errors (Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 74 ALJR 1348 per Gleeson CJ, Gaudron and Hayne JJ at para 21).  To the extent that a determination is based upon a concession deliberately made by a represented party it will not ordinarily involve error.  In my view, the volume and complexity of the cases presently required to be heard and determined by Australian courts, including appellate courts, is such that it cannot ordinarily be accepted as being in the interests of justice that an appellant can, by submitting to an order for costs, effectively buy an opportunity to re-run its case before an appeal court adopting a changed strategy.  The remarks of Mason P, with whom Gleeson CJ and Priestly JA agreed, in Multicon Engineering Pty Ltd v Federal Airports Corporation (1997) 47 NSWLR 631 at 645-646, although addressed to a slightly different situation, are in my view apposite here:

“A party does not have a right to insist that a new point be decided on appeal simply because all of the facts have been established beyond controversy or the point is one of construction or of law, even constitutional law.  This is because it remains a question of whether the appellate court ‘may find it expedient and in the interests of justice to entertain the point’.

…

In the present case it would not be ‘in the interests of justice’ to permit Multicon Engineering to repudiate on appeal the stance it adopted at all stages in the trial.  That would make it a classical case of a party having elected to fight on one basis, and lost, seeking a new trial to be allowed to fight it on another basis.  To say nothing about a significant waste of judicial resources, payment of the costs thrown away (which Multicon Engineering offers) would not remedy the injustice that would flow if a party that invited the Court to exercise the powers conferred by r 13 …[were] now to adopt the position that there was no power to do this in the first place.”

CONTRIBUTORY NEGLIGENCE

39                  Dovuro pleaded that any damage suffered by Wilkins and the group members was caused or contributed to by their own negligence in:

“a)       Failing to make sufficient enquiries about the information on seed analysis certificates, before planting Karoo canola.

b)                  Failing to make sufficient enquiries about the manner and extent of remedial work to avoid loss.

c)         Failing to follow the procedures for control of cleavers, redshank and field madder in agricultural crops by means of herbicide use recommended by Agriculture Western Australia.”

40                  On the issue of contributory negligence Wilcox J said at paras 111-112:

“There is so far no evidence to support either para (b) or para (c), although conceivably that may emerge in relation to individual claimants at the damages assessment stage.  It is possible immediately to deal with para (a) because that depends on the information contained on the labels affixed to the bags in which the canola seed was sold.  The proposition is that the farmers were negligent in failing to seek from Dovuro a copy of the seed analysis certificates relating to the bags delivered to them.  I accept they might have done so and, in all probability, would then have received this information.  However, I do not accept that the farmers’ failure to take this step was an act of contributory negligence.  I think the farmers were entitled to assume that any impurities in the bags were not such as would be likely to cause a problem in a canola crop; on the basis that, if they were, they would have been warned.  After all, the purpose of purchase was obvious, as was the place where the seed was likely to be sown.

Insofar as it is a general allegation against all purchasers of the canola seed, I reject the defence of contributory negligence.”

41                  It may be that, in view of the limited nature of the orders made by Wilcox J, the issue of contributory negligence is not properly before this Court.  Although the notice of appeal contends that his Honour erred in not upholding Dovuro’s plea of contributory negligence, no submissions on this topic were advanced on the appeal.  I say no more than that no basis has been demonstrated for any challenge to his Honour’s conclusion on the issue of contributory negligence.

CROSS CLAIM AGAINST CROPMARK

Contribution as a Joint Tortfeasor

42                  Cropmark did not concede before the primary judge or on appeal that it had a duty of care to the persons who purchased the seeds for sowing, at least in respect of defects ascertainable by intermediate inspection.  Wilcox J identified (at para 123) the critical questions on the claim and cross claim against Cropmark as being:

“first, what must be done to fulfil that duty, and second, whether any intermediate negligence has broken the chain of causation between negligence by the manufacturer and damage sustained by the end-user.”

43                  His Honour found (at para 125):

“… that consideration of the content of the parcel of canola seed by Dovuro was contemplated by the supplier (Cropmark).  That was the reason for Cropmark forwarding to Dovuro the certificates of its own analysis of the seed and those obtained by it from MAF.”

44                  His Honour also placed weight on the fact that Dovuro rather than Cropmark knew where the seed would be sold.  His Honour considered that it was reasonable for Cropmark to assume that Dovuro, an Australian company with an Australian-wide information network, would give consideration to matters such as the incidence of the three weeds in the areas where the seed was to be sold and the likelihood that their presence in the seed would excite concern.  Wilcox J concluded (at para 127):

“There may be room for criticising Cropmark, or its seed cleaner, Seedlands, in relation to the number of foreign seeds contained in the canola seed shipped to Australia.  However, it was not the number of weeds that caused the problem, but rather their particular identity; and this problem arose only because of the place in which they were to be sown.  Having regard to the principles discussed above, it would not be reasonable to hold Cropmark liable in negligence to the applicants and group members.”

45                  Although his Honour did not base his conclusion that it would not be reasonable to hold Cropmark liable in negligence to Wilkins and the group members on a finding that Cropmark did not, in the circumstances, owe Wilkins and the group members a duty of care not to cause them economic loss, the appeal against his Honour’s conclusion can, in my view, be determined on this basis.

46                  The relationship between Dovuro and Cropmark was regulated by contract.  The contract expressly dealt with the issue of weed seeds.  For the reasons given below, I conclude that no error in his Honour’s approach to the construction of the contract in this regard has been identified.  On that basis, to impose a duty of care to the ultimate purchasers of the seed upon Cropmark would subject Cropmark to duties beyond those that could arise under its contract with Dovuro.  To do this would be to deprive Cropmark of the protection of contractual terms which may have been critical to its decision to enter into the contract, notwithstanding that the economic advantage to be derived by Cropmark under the contract is likely to have been calculated by reference to the terms of the contract.  It would, to use language employed by Professor Bruce Feldthusen in his article “Liability for Pure Economic Loss: Yes, But Why?” (1999) 28 Western Australian Law Review 84 at 87, involve the Court in reallocating through tort risk already allocated by contract.

47                  It was issues of this kind which I understand Gleeson CJ to have been referring to in the third of the considerations identified by him in Perre v Apand at para 5 where the Chief Justice  referred to Leigh and Sillivan Ltd v Aliakmon Shipping Co Ltd [1985] QB 350.  In Leigh and Sillivan the Court of Appeal, by majority, rejected a claim by a buyer of goods to impose upon a shipowner a higher duty of care than the shipowner owed to the seller of the goods under the bill of lading contract.

48                  Other factors which suggest against a finding that Cropmark owed a duty of care to avoid economic loss to Wilkins and the group members were identified by the primary judge.  Cropmark could not be expected to have the same level of appreciation as Dovuro of the dangers inherent in the introduction of weed from New Zealand into areas of Australia where grain crops are commercially grown.  Cropmark could not have been expected to know precisely where in Australia Dovuro would distribute the canola seed which it purchased from Cropmark.

49                  In the circumstances, it may not matter whether the question asked is whether the loss suffered by Wilkins and the group members was a reasonably foreseeable result of Cropmark’s conduct (which included providing seed analyses to Dovuro), whether Cropmark in supplying the canola seed and seed analyses to Dovuro should have had the interests of Wilkins and the group members in contemplation, whether Wilkins and the group members were properly to be seen as vulnerable to risk occasioned by Cropmark’s conduct as opposed to risk occasioned by Dovuro’s conduct or whether Cropmark appreciated the risk to which supply of the seed to Wilkins and the group members would expose them.  The answers to each of these questions indicates, in my view, that a finding that Cropmark owed a duty of care to Wilkins and the group members would be inconsistent with the approaches adopted by the majority of the member of the High Court in Perre v Apand.

Section 52 of the Trade Practices Act 1974 (Cth)

50                  The appellant did not press its ground of appeal in relation to s 52 of the Trade Practices Act 1974 (Cth).

Contractual Claims

51                  The contract between Dovuro and Cropmark included the condition “Maximum 0.5% weed and free of undesirable species including Brassica and Rumex in working sample”.  Dovuro contended before the primary judge and on appeal that Cropmark breached this condition by supplying seed which was not free of undesirable species.  The term “undesirable species” was not defined in the contract.  His Honour adopted the approach that the expression should be construed by determining the likely intent of the parties to the contract.  His Honour rejected Dovuro’s contention that the expression meant all weeds that were undesirable anywhere in Australia where Dovuro might reasonably be expected to sell canola seed.  His Honour observed:

“It seems improbable that Cropmark would have been willing to make the performance of its contract, and its entitlement to payment, dependent upon a view, of either Dovuro or the ultimate purchasers, about acceptability of the seed in particular locations.  Cropmark had no knowledge of the likely locations of plantings or the likely identity of the ultimate purchasers.  Furthermore, it is unlikely that even Dovuro would have had in mind such a condition.  From first to last, Mr Tapp’s position has been that Dovuro’s only obligation was to ensure the canola seed was acceptable to the regulatory authorities.  It is improbable that, in signing the agreement with Cropmark, he intended his company, or the farmers who purchased the seed, would be the arbiters of the question whether any weed seeds were of ‘undesirable species’.

Further, the interpretation now suggested on behalf of Dovuro would render unnecessary the reference to Brassica and Rumex; it is common ground that, on any view, they are undesirable weeds in canola crop.  I appreciate counsel’s point about more abundant caution.  Nonetheless, these references do support the view that the term ‘undesirable species’ was intended to have a relatively confined meaning.”

52                  His Honour concluded that the parties intended the term “undesirable species” to cover only the seeds listed in the New Zealand Grain & Seed Trade Association handbook as undesirable species with the possible addition of species unable to be imported into Australia.  As so construed, Cropmark did not breach this condition.

53                  It is contended by the appellant that his Honour erred in his approach to the construction of the contract particularly by receiving evidence of the subjective intention of Cropmark.  In DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 429 Stephens, Mason and Jacobs JJ observed:

“A court may admit evidence of surrounding circumstances in the form of ‘mutually known facts’ ‘to identify the meaning of a descriptive term’ and it may admit evidence of the ‘genesis’ and objectively the ‘aim’ of a transaction to show that the attribution of a strict legal meaning would ‘make the transaction futile’.  But it cannot receive oral evidence from one party as to its intentions and construe the contract by reference to those intentions.”  (citation omitted)

See also Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 per Mason J at 352.

54                  Although his Honour received, and referred to, evidence of the understanding of the term “undesirable species” held by the individual who prepared the contract on behalf of Cropmark, his Honour thereafter made it plain that he understood that he was required to determine the likely intention of the parties, not their actual intention.  That is, his Honour sought to ascertain the meaning of the expression from an objective point of view having regard to what reasonable people in the position of the parties would have understood the expression to mean.

55                  In my view, no error has been demonstrated in the analysis by his Honour of factors tending to show that from an objective viewpoint the intended meaning of the expression “undesirable species” was no wider than the species listed in the New Zealand handbook plus the species unable legally to be imported into Australia.

56                  Reliance was also placed both before his Honour and on appeal on s 16(a) of the Sale of Goods Act 1908 (NZ) which provides:

“Where a 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 (whether he is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose.”

In this regard his Honour concluded (at para 141):

“… it seems to me impossible to hold that Dovuro relied on Cropmark’s skill or judgment, at least in relation to the matter of weed contamination.  First, the parties negotiated terms concerning this very matter.  Second, Mr Kudnig went to New Zealand for the express purpose of inspecting the growing canola crop.  A major objective of the inspection was to ascertain the position regarding weeds.  Mr Kudnig also made inquiries about weeds in the locality.  All this was known to Mr Grigor, who accompanied Mr Kudnig on the inspections.  Third, Dovuro required Cropmark to send to it certificates of analysis disclosing the identity of any weeds within the canola seed.”

57                  The appellant argued that his Honour was wrong to place reliance on Mr Kudnig’s visit to New Zealand as it was post-contractual.  While post-contractual conduct does not assist in the determination of whether there were implied terms (FAI Traders Insurance Co Ltd v Savoy Plaza Pty Ltd [1993] 2 VR 343), I see no reason to conclude that it may not be relied upon as tending to show an absence of reliance.  Another factor strongly suggesting against reliance by Dovuro on Cropmark in relation to seed contamination is the express terms of the contract as to the quantity and description of the goods to be supplied.  On the construction of the express terms which his Honour (in my view, rightly) adopted, they suggest against reliance by Dovuro on Cropmark’s skill and judgment.  Of course, if the construction for which Dovuro contended were the correct construction, the position might well be otherwise.

58                  I conclude that his Honour correctly concluded that Dovuro could not maintain a claim against Cropmark under s 16(a) of the Sale of Goods Act 1908 (NZ).

59                  Similarly, in my view, his Honour correctly concluded that Dovuro had not established that the Karoo seed supplied by Cropmark to Dovuro was not of merchantable quality within the meaning of s 16(b) of the Sale of Goods Act Act 1908 (NZ).  The test of whether goods are “not of merchantable quality” is an objective test: are the goods of “no use for any purpose for which goods which complied with the description under which these goods were sold would normally be used” (Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 per Lord Reid at 77).  As his Honour pointed out, the seed was fit for use as seed although there were places where it ought not to have been sown.  That is, there was no defect in the seed as seed; it was just that it was contaminated in a way that made it unsuitable for sowing in particular localities.  It was marketable for sowing elsewhere.  As his Honour pointed out, it was not without significance that Dovuro did not complain to Cropmark that the seed was not suitable for sale as certified seed when it received the certificates of seed analyses.  Indeed, it proceeded to distribute the seed in Australia.

NOTICE OF APPEAL

60                  I consider it appropriate to record some remarks about the notice of appeal in this case.  It was plainly drafted without regard to the fact that an appeal to this Court from a judgment of a judge is an appeal from a “judgment, decree or order” of the primary judge   (ss 4 and 24 Federal Court of Australia Act 1976 (Cth)).  It is not an appeal from published reasons for judgment.  Indeed, in this case it was necessary for the Full Court to give the appellant dispensation from the requirement to comply with the Rules of Court concerning the initiation of appeals as his Honour was not invited to make the declaratory orders necessary to allow the appellant to challenge the findings of his Honour of which it complains until after the appeal was listed for hearing.  This may have contributed to problems in the form of the notice of appeal.

61                  The notice of appeal sets out 24 asserted “grounds of appeal”.  Some of the asserted grounds are of considerable generality and include no particulars.  For example, ground 17 is:

“His Honour erred in finding that the Second Respondent was not liable in negligence to the First Respondent.”

Others of the grounds complain of subsidiary findings of fact made, or not made, by his Honour but give no indication of the asserted significance of such findings or the absence of such findings.  For example, ground 4 is:

“His Honour erred in not finding that the Second Respondent was a manufacturer of seed.”

62                  While the notice of appeal in this matter is less unsatisfactory than that considered by the Full Court in Dynasty Pty Ltd v Coombs it is open, at least in part, to the criticism made of the notice of appeal in that case (at 128):

“The notice of appeal in this matter is inappropriately and unhelpfully drawn.  It would seem that the draftsperson has closely examined the learned trial judge’s judgment and listed every comment and finding of his Honour which he or she did not regard with favour.”

63                  The Full Court went on in Dynasty Pty Ltd v Coombs to say (at 130):

“A notice of appeal in a case of this kind ought to indicate:

(a)               the findings of fact (as opposed to subordinate or collateral facts) made by the trial judge which are challenged on appeal;

(b)               the findings of fact which the appellants contend ought to have been made at trial and, to the extent to which it is appropriate, particulars in support of those assertions;

(c)               any errors of law said to have been made by the trial judge; and

(d)               the principles of law for which the appellants contend on appeal.”

64                  Consideration of this appeal would have been assisted had the notice of appeal been drawn in the way suggested by the Full Court in Dynasty Pty Ltd v Coombs.

CONCLUSION

65                  As is indicated above, in my view the appeal should be wholly dismissed and the appellant should pay the respondents’ costs.  However, having regard to the views of the other members of the Court, I consider that the appropriate orders to be made are the following:

1.                  The appeal by Dovuro Pty Limited (“Dovuro”) against the declarations made by Wilcox J on 19 May 2000 be dismissed.

2.                  The appeal against the order of Wilcox J of 23 December 1999 dismissing Dovuro’s cross claim against the second respondent be allowed, and the order dismissing the cross claim be set aside.

3.                  The appeal otherwise be stood over to a date to be fixed for the purpose of determining what other orders including orders as to costs should be made.

4.                  The parties provide to the Associate to Branson J by 9 February 2001, an agreed minute of the orders to be made (including orders as to costs) and if agreement has not by then been reached, the minutes of orders for which they will respectively contend and brief outlines of submissions in support of the orders.

Associate:

Dated:                                                        21 December 2000

On appeal from a single judge of the Federal Court of Australia

REASONS FOR JUDGMENT

FINKELSTEIN J:

66                  Agriculture has for a long time played a central role in the Australian economy.  After European settlement, systems of agriculture were rapidly developed to produce commodities needed in Europe, so that agricultural development did not depend on the size of the Australian population, but rather on the size of the European market.  Australian agricultural history has been influenced by technological innovations, foreign investment and state intervention.  While agriculture may no longer make a contribution of 30 per cent to our economy as it did half a century ago, the rural sector still contributes significantly to Australia’s total exports.  It is the great importance of agriculture that has been the impetus for various forms of government protection and assistance ranging from hundreds of millions of dollars spent on agricultural research, to the establishment of marketing boards to maintain prices.  One means of protection that is relevant to this case is that provided by legislation.  The Commonwealth and every Australian State has legislation to prohibit or regulate the introduction of unwanted plants and seeds and to eradicate or prevent the spread of undesirable weeds and plant diseases.  There are several hundred species of plants and seeds that cannot be imported into or sold in various parts of the country.  All imported seed is held in quarantine where it is inspected.  Any seed lot containing prohibited seeds will not be released for entry into home consumption.

67                  The appellant, Dovuro Pty Ltd (Dovuro), is a grain merchant.  In 1996 it imported 168 tonnes of canola seed from New Zealand.  The seed had been cultivated by the second respondent, Crop Marketing New Zealand Society Limited (Cropmark), and sold to Dovuro.  Before the seed was shipped to Australia it was analysed by the New Zealand Ministry of Agriculture and Fisheries at its official seed testing station.  The Ministry issued certificates that certified the content and quality of the seed.  Each certificate stated that the seed was either 99.8 per cent or 99.9 per cent pure (dependent upon the line that was sampled) and that it “complie[d] with the Seeds Acts of all Australian States”.  In some of the samples, traces of weed seeds were detected.  The weeds were cleaver (galium aparine), redshank (polygonum persicaria) and field madder (sherardia arvensis).  The existence of the weed seeds was noted on the certificates.  There was no restriction on, or prohibition against, the importation of these weeds into Australia. 

68                  Dovuro imported the canola seed for sale in New South Wales, Victoria, South Australia and Western Australia.  It did not intend to sell the seed directly to growers, but rather to local grain merchants.  When the seed was imported it came under the control of Customs.  Samples of the seed were taken for testing to determine whether it could be entered for home consumption and distributed in the four States.

69                  Ag West Seed Quality is a division of the Department of Agriculture in Western Australia.  It maintains a seed testing laboratory that is used by both the Australian Quarantine and Inspection Service and the Western Australian Quarantine and Inspection Service.  The laboratory received samples of the imported seed and analysed those samples.  No restricted or prohibited species were detected and the imported seed was released to Dovuro. 

70                  Mr Wilkins owns a farming property, Narbethong, in the Kondinin district in Western Australia.  A farming and grazing enterprise is conducted on Narbethong by Mr Wilkins, members of his family and a trust established for the benefit of his family.  Collectively, they are the first respondent.  I will refer to them as Wilkins or the Wilkins’ interests.  Mr Wilkins purchased forty bags of the imported canola seed from a local merchant.  The seed was sown in paddocks at Narbethong in May 1996.

71                  In June 1996 Mr Nicholas, the manager of Ag West Seed Quality, became concerned about the presence of cleaver, redshank and field madder seeds in the canola seed.  Some officers in the Department of Agriculture were of opinion that the weeds constituted a threat to the future development of the oil seed industry in Western Australia.  The Department established a working group to consider the issue.  The group developed a set of recommendations, one being that the three weeds be declared under the Agriculture and Related Resources Protection Act 1976 (WA).  Those declarations were made on 5 July 1996.  An effect of the declarations was that it became illegal to import or sell the weed seeds in Western Australia.  Another effect was that growers were required to take steps to eradicate the weeds.  The Department published a news release advising growers of the steps they should take to prevent the spread of the three weeds.  Growers were advised to spray their crops with certain chemicals to eradicate the weeds.  An information package was distributed to growers informing them how to manage affected paddocks for the following ten years.

72                  The Wilkins’ interests and other growers incurred expense in implementing the recommendations of the Department.  The Wilkins’ interests then brought proceedings on their own behalf and, pursuant to Pt IVA of the Federal Court of Australia Act 1976 (Cth), on behalf of the other growers, to recover the loss they suffered in acting on the advice of the Department.  The respondents in the proceeding were Dovuro and Cropmark.  The Wilkins’ interests relied upon a number of causes of action, including common law negligence.  In their statement of claim the Wilkins’ interests alleged that each of Dovuro and Cropmark was a wholesaler of seed, knew or ought to have known the imported canola seed was to be sown by farmers, knew or ought to have known that the imported canola seed contained or may have contained undesirable weed seeds including cleavers, redshank and field madder, failed to warn the Wilkins’ interests of the presence or potential presence of the weed seeds in the canola seed, owed a duty to the Wilkins’ interests to exercise reasonable care to avoid injury to them and was negligent in failing to advise the Wilkins’ interests of the presence of the weed seed and in failing to place any warning on the bags of the canola seed that they contained weed seed.

73                  This was not how the Wilkins’ interests put their case at trial.  There the following allegations were made.  Both Dovuro and Cropmark manufactured the canola seed that was purchased by Mr Wilkins, and owed a duty to the consumers of the seed to exercise reasonable care not to expose them to a risk of injury of which they knew or ought to have known.  The relevant risk of injury was the introduction of weed seed to the consumer’s farm that had the potential to cause the consumer loss in eradicating it.  Both Dovuro and Cropmark understood that the canola seed was to be marketed in Australia over a vast area with different conditions, and that such distribution made it incumbent upon each of them to consider the potential risk of the known weed seeds in their product.  Both Dovuro and Cropmark failed to exercise adequate quality control to detect and remove undesirable weed seeds.  The duty that Dovuro and Cropmark owed to the Wilkins’ interests could have been discharged by providing a warning or by labelling the bags in which the seed was sold thereby advising consumers of the presence of the weed seeds.  It was foreseeable that the Western Australian government would take action to contain, evaluate and deal with the potential threat to the canola seed and oil market by the presence of the weed seeds.

74                  It is necessary to explain the reference both in the pleadings and in the submissions at trial to the weed seeds having the “potential” to cause harm and the reference to the weed seeds being a “potential threat to the canola seed and oil market”.  Notwithstanding the view of officers of the Department that the weed seeds represented a significant threat to the canola industry, no harm ever materialised.  The weeds did not grow, much less spread to other parts of the wheat belt.  No canola crop was damaged or had to be destroyed.  It soon became apparent that the Department had raised a false alarm.  In August 1997 the declaration of redshank as a prohibited species was cancelled and in May 1998 the declaration of field madder as a prohibited species was cancelled.  Hence, the reference to the weed seeds having a “potential” to cause harm recognises the fact that no canola crop was destroyed and none was at risk. 

75                  I do not mean to suggest that the Department of Agriculture necessarily overreacted to the problem with which it was confronted in mid-1996.  This was certainly one of the submissions made by Dovuro and Cropmark at trial, but it was rejected by the trial judge.  Mr Carmody, an oil seed industry development officer with the Department of Agriculture, explained why the Department had reacted in the way that it did.  Mr Carmody was a well qualified witness, having graduated with a Bachelor of Agricultural Science from the University of Melbourne. In summary, Mr Carmody said that the Department had little knowledge on how and where the seed was produced in New Zealand, no knowledge of seed certification standards in New Zealand, no knowledge whether or not the seed cleaning company had properly cleaned its machinery and it believed from Mr Carmody’s experience in Canada with another strain of galium that cleaver could become a serious contaminant.  Accordingly, the Department decided to take precautionary measures to protect the rapidly emerging canola oil industry.  The trial judge accepted this evidence.  In giving his reasons, the trial judge said that Mr Carmody was “not challenged in relation to any of [the] reasons [for the Department’s actions]”.  In fact the trial judge was in error in this regard.  Mr Carmody was subjected to a good deal of cross-examination on the issue by both counsel for Dovuro and Cropmark.  Importantly, during the course of his cross-examination, Mr Carmody, with the benefit of hindsight, conceded that neither field madder nor redshank constituted a threat to growers in Western Australia.  He did not make the same concession in relation to cleaver. 

76                  There was also the evidence given by Dr Piper, the acting manager of the Weed Science Group of the Department.  In a written report, Dr Piper said that there was a risk of the weeds becoming a problem, the risk ranging from slight in the case of redshank, to moderate in the case of cleaver.  In his oral testimony Dr Piper qualified what he said in his written report.  When asked to express his opinion on the risk of the weeds becoming established in Western Australia he said:  “It’s a difficult question to answer, because there is a whole range of factors involved in the plant becoming established … Were these plants to get to [Western Australia] we don’t really know how they’d survive under our cropping regimes and it may well be that they wouldn’t establish very well.”

77                  In reality, no useful purpose would have been served, nor is it now served, by deciding whether or not the Department overreacted.  What is important for the purposes of this appeal is to determine whether the weed seeds constituted a threat to growers.  Mr Carmody’s evidence shows that neither field madder nor redshank posed a risk.  Although Mr Carmody made no such concession, the evidence does not establish that cleaver was a threat.  First, no witness was able to point to any instance of this weed adversely affecting any canola crop in Western Australia.  I regard the absence of such evidence as a strong indication that cleaver did not present a risk.  It is possible that cleaver did not grow or spread because growers followed the Department’s advice.  That said, if the weed were a problem it would have manifested itself somewhere in the wheat belt where the canola seed was sown.  Second, there is the evidence of the farming expert, Mr Falconer.  In his opinion there was little risk of any of the weeds becoming a problem.  Moreover, he acted for approximately 300 growers, some of whom had planted canola seed supplied by Dovuro.  None of these growers reported suffering any problem with cleaver.  Nor had Mr Falconer heard any report of a person who had encountered the weed.  Finally, the evidence of Dr Piper shows that the risk to growers was no more than speculation.

78                  Returning to the Wilkins’ claim, it is possible to discern two possible bases upon which it was alleged that Dovuro and Cropmark owed them a duty of care.  The two grounds were not treated as distinct in the court below or on appeal.  The first possible basis of liability is founded on Donoghue v Stevenson [1932] AC 562.

79                  In the 19th century, with its emphasis on laissez-faire thinking, a consumer who acquired unmerchantable goods that caused physical damage or personal injury had no claim in tort against the manufacturer.  Once the rule caveat emptor (another legacy of laissez-faire economics) was replaced by the implied warranties of reasonable fitness and reasonable quality, the consumer was limited to his remedy against the seller.  In Winterbottom v Wright (1842) 152 ER 402 at 405 Lord Abinger foresaw: “the most absurd and outrageous consequences, to which I can see no limit … unless we confine the operation of such contracts as this to parties who entered into them.”

80                  Of course, if an article was dangerous by reason of some defect known to the manufacturer, he would be liable in damages for fraud:  Langridge v Levy (1837) 150 ER 863.  So, the law was that an injured purchaser could sue the seller, who could sue the supplier, who could sue the manufacturer;  but the injured purchaser had no claim directly against the supplier nor the manufacturer.  Often, in this state of affairs, the real wrongdoer, the manufacturer, escaped liability. 

81                  In England all this was changed by the House of Lords in the seminal case Donoghue v Stevenson.  The facts need not be recited.  The case is known to every law student.  Besides his famous “neighbour principle”, Lord Atkin defined the scope of the duty of care of a manufacturer in language which has been cited again and again but which bears repetition.  He said (at 599):

“ … a manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer’s life or property, owes a duty to the consumer to take that reasonable care.

It is a proposition which I venture to say no one in Scotland or England who was not a lawyer would for one moment doubt.  It will be an advantage to make it clear that the law in this matter, as in most others, is in accordance with sound common sense.”

82                  Two aspects of Donoghue v Stevenson should be noticed.  First, the case was not concerned with an article that was dangerous per se.  Second, it was not necessary for the plaintiff to establish knowledge of the existence of the defect.  But as Lord Thankerton observed (at 602) where “an article [is] per se dangerous or [is] one which was known by the defender to be dangerous, … a special duty of protection or adequate warning is placed upon the person who uses or distributes it.” 

83                  No narrow meaning has been given to Lord Atkin’s “manufacturer”.  In particular, it has not been limited to an industrialist or factory owner who fabricates goods.  Virtually every type of product falls within the rule.  Indeed the duty of care established by Donoghue v Stevenson is not limited to manufacturers.  The duty is also imposed on a repairer of a chattel (Haseldine v C A Daw & Son Ltd [1941] 2 KB 343; Stennett v Hancock & Peters [1939] 2 All ER 578; Maindonald v Marlborough Aero Club & New Zealand Airways Ltd [1935] NZLR 371) as well as on a person who installs or erects a product (Howard v Furness Houlder Argentine Lines Ltd [1936] 2 All ER 781; Malfroot v Noxal Ltd (1935) 51 TLR 551).  Moreover, as the cases show, in appropriate circumstances even a distributor of defective products can be held liable in negligence on the doctrine of Donoghue v Stevenson:  see eg Watson v Buckley, Osborne, Garnett & Co Ltd [1940] 1 All ER 174 (a distributor of hair dye); Pack v County of Warner (1964) 44 DLR (2d) 215 (a distributor of chemical products used to control lice on livestock).

84                  The second possible basis for imposing a duty of care is the allegation that there was a known risk of injury to growers by the introduction of weed seeds, and in particular the allegation that it was known that there was a risk of injury to growers in some part of Australia by the introduction of the three weed seeds.  The risk of injury was not confined to property damage, such as would occur if crop seeds mixed with undesirable weed seeds were sown in a grower’s paddock.  The Wilkins’ interests alleged that it was foreseeable that the Western Australian government would take the action that it did in relation to the “potential threat” to canola growers, being action which caused them to suffer financial loss that did not result from property damage.  Here the injury the subject of the Wilkins’ interests’ claim seems to be what has come to be called “pure economic loss”, that is loss which is unconnected with damage to property or personal injury. 

85                  At the commencement of his final speech at trial, counsel for Dovuro conceded that his client “owed Wilkins a duty to take reasonable care”, but denied that it had breached the requisite standard of care.  The content of the conceded duty was not described.  However, having regard to the allegations made against Dovuro (both in pleadings and orally) it must be taken to have been accepted that Dovuro owed the Wilkins’ interests and other purchasers of its canola seed, a duty to exercise reasonable care to avoid a risk of injury such as would be owed by a manufacturer or a distributor of a defective product who knew or ought reasonably to have known that his products might cause injury.  In a practical sense, Dovuro’s concession amounted to a withdrawal of the denial in its defence of the existence of a duty of care.  Thereafter the trial proceeded as if the defence had been amended.  Put another way, in substance, but not in form, the pleaded defence of “no duty owed” had been abandoned.

86                  The existence of a duty of care was an issue of law for the trial judge to determine.  The concession that there was a duty may have been a tactical decision made in view of the evidence which, although it could not be conclusive on a point of law, was decidedly unfavourable to Dovuro’s case.  Over objection the trial judge had received into evidence a letter from Mr Rath (the western region manager of Dovuro) and a letter from Mr White (a person with a major indirect interest in Dovuro, though not a director) in which, for all practical purposes, they had conceded the existence of a duty of care.  The letter by Mr White was not, and the letter by Mr Rath may not have been, admissible against Dovuro, on the authority of cases such as Fraser Henleins Pty Ltd v Cody (1944) 70 CLR 100 and Harris v Macquarie Distributors Pty Ltd [1967] VR 257.  But once in evidence, this correspondence, as well as certain oral evidence given by Mr Rath and Mr Tapp, the general manager of Dovuro, undermined Dovuro’s continued insistence that it owed no duty to the applicants. 

87                  The trial judge found against Dovuro on the negligence claim.  He acted on the concession of counsel to find the existence of a duty.  The trial judge then turned his attention to whether Dovuro had acted as a reasonable person in its position should have acted, that is whether it had acted negligently.  When considering this question, the trial judge made certain findings that would also have been relevant if the existence of a duty of care was still an issue.  It is necessary to consider the findings because a number are subject to challenge on this appeal.

88                  The trial judge found that Dovuro was one of the manufacturers of the canola seed, the other manufacturer being Cropmark.  This finding is not supported by the evidence.  Indeed it is inconsistent with the uncontradicted evidence.  The relevant evidence was to the following effect.  After some negotiations Cropmark entered into a written agreement to sell Dovuro machine-dressed canola seed that was to be grown on 100 hectares of land in New Zealand.  It was anticipated that the yield would be approximately 250 tonnes of canola seed.  The contract provided that the seed would be packed in twenty-five kilogram bags to be supplied by Dovuro.  The price was NZ$1.10 per kilogram and delivery was “CIF Melbourne or Sydney, buyer’s option”.  In performance of its obligations Cropmark arranged for the canola crop to be grown and harvested in New Zealand.  The seed was cleaned by a New Zealand company.  Cropmark then delivered the seed as required by the contract.  In simple terms, Cropmark was the manufacturer of the canola seed and Dovuro was the purchaser. 

89                  The trial judge found that if Dovuro had contacted the Weed Seeds Unit of the Western Australian Department of Agriculture, and comparable sections of other State Departments of Agriculture, those inquiries “may have revealed that foreign seeds were not considered a problem in some places” but they “would have alerted Dovuro to the necessity to convey an explicit warning to purchasers located in a district that might attract the concern of the relevant Department of Agriculture”.  This finding is challenged.  On the evidence it was not open.  In the first place there was no evidence as to what information would have been provided to Dovuro had it made enquiries of the Weed Seed Unit or its equivalent in States other than Western Australia.  For one thing, the evidence does not show that any other State had an equivalent to the Weed Seed Unit.  In any event, there is no suggestion that any other Department of Agriculture regarded any of the three weeds as a threat.  However, that is not the main criticism.  The real point is that while it may be conceded that if anyone had spoken with Mr Carmody, Dovuro would have discovered that he was of opinion that cleaver should have been declared a prohibited seed and that there was a potential risk in introducing redshank and field madder to Western Australia, it does not follow that Dovuro would have made the same discovery if others were spoken to.  Mr Carmody did say that he had expressed concern over the introduction of cleaver to other officers, but he did not identify them.  In 1991, Mr Dodd, a senior research officer in the Weed Science Branch of the Department, prepared a note on the weeds galium aparine and galium tricornutum for Dr Martin, the principal research officer of the branch.  In the note Mr Dodd said in relation to galium tricornutum that “the conservative view is that the agricultural south west of Western Australia is at risk, unless this species is, indeed, limited to alkaline soils.”  He repeated this advice to the Western Australian Quarantine Inspection Service in May 1995.  But on no occasion did Mr Dodd express concern about galium aparine.  Indeed a reader of his note could easily form the opinion that Mr Dodd regarded the risk from galium aparine to be insignificant.  All that can be drawn from this evidence is that if Dovuro had made enquiries of the Department of Agriculture, it may have been alerted to a potential risk from the introduction of cleaver, especially if Mr Carmody had answered that query.  On the other hand, if Dovuro had contacted other officers the chance of it being alerted to there being any risk to growers in Western Australia by the introduction of cleaver, redshank or field madder, was slim, if there was any such prospect at all. 

90                  There is, in any event, an air of unreality about the suggestion that Dovuro should have made enquiries of relevant government departments to ascertain whether there would be any problem if it imported canola seed that contained a small quantity of cleaver, redshank or field madder.  If it were required to make such enquiries, on the facts of the case those enquiries would have been directed to five separate departments, one in the Commonwealth and four in the States.  I suppose there to be no difficulty in formulating the question to be put to each department.  But it is far from clear what Dovuro’s obligation would have been had its enquiry yielded any of the following types of response, each of which was a possible response:  “We will let you know, but it may take some time”; “It will be necessary to look into the matter and perhaps conduct tests to provide an answer”.  Was Dovuro obliged to await a response?  If so, for how long?  What if the response was uninformative, such as “We do not know whether the weeds are a problem”?  It is plain enough, in my view, that the suggestion that Dovuro should make enquiries of relevant government departments proceeded on the assumption that Dovuro would be informed that the canola seed mixed with the weed seeds should not be brought into some areas where it may be sown.  However, that assumption has no foundation. 

91                  Although the trial judge proceeded on the concession that Dovuro owed a duty of care, he nevertheless expressly accepted Wilkins’ submission that Dovuro was aware of a risk of injury to the Wilkins’ interests and to other growers by the introduction of weed seed.  There was not, however, a finding that Dovuro knew of any particular risk of injury from the weeds cleaver, redshank and field madder.  Rather the trial judge found that Dovuro knew that as a general proposition, weeds not commonly found in Australia could, if introduced, be harmful to crops grown here.  Accordingly, the trial judge found that it was incumbent upon Dovuro to consider the potential risk of these three weeds because they had been mixed with the canola seed.  It will be necessary to return to this finding later, when dealing with the nature of the loss suffered by the Wilkins’ interests.

92                  The trial judge also found that it was foreseeable that the Western Australian government would take the action that it did to contain, evaluate and deal with the potential threat of the weeds cleaver, redshank and field madder.  This is a significant finding, the correctness of which is at the heart of this appeal.  But before dealing with this issue it is necessary to say something about the troubling concept of reasonable foreseeability and its role in the law of negligence.  Fortunately it will not be necessary to undertake a detailed examination of the concept. 

93                  Usually the first question that is to be decided in a negligence case is whether the plaintiff is owed a duty of care.  Once it was thought that foreseeability of harm was the sole criterion upon which the existence of the duty could be established:  Bourhill v Young [1943] AC 92.  After Donoghue v Stevenson it was accepted that foreseeability would not be enough.  The view taken was that there had to be a sufficiently close relationship or neighbourhood, so that in the reasonable contemplation of the defendant a certain act may cause his neighbour to suffer harm – that is, reasonable foreseeability and proximity were relevant.  A fundamental change in the approach to the establishment of the existence of a duty of care was brought about by the judgment of Lord Wilberforce in Anns v Merton London Borough Council [1978] AC 728.  In a well-known passage (at 751-752) his Lordship said whether a duty of care exists must be determined in the following way: 

“Through the trilogy of cases in this House – Donoghue v Stevenson [1932] AC 562, Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, and Dorset Yacht Co Ltd v Home Office [1970] AC 1004, the position has now been reached that in order to establish that a duty of care arises in a particular situation, it is not necessary to bring the facts of that situation within those of previous situations in which a duty of care has been held to exist.  Rather the question has to be approached in two stages.  First one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his part may be likely to cause damage to the latter in which case a prima facie duty of care arises.  Secondly, if the first question is answered affirmatively, it is necessary to consider whether there are any considerations which ought to negative, or reduce or limit the scope of the duty or the class of person to whom it is owed or the damages to which a breach of it may give rise:  see Dorset Yacht case [1970] AC 1004 per Lord Reid at p 1027.”

Anns was followed in New Zealand (eg South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282) and in Canada (eg Kamloops v Neilsen (1984) 10 DLR (4^th) 64).  But Anns was later overruled by the House of Lords.  In Caparo Industries plc v Dickman [1990] 2 AC 605 the Law Lords replaced the two-stage approach of Lord Wilberforce with a three-stage test.  Lord Bridge said (at 617-618):

“What emerges is that, in addition to the foreseeability of damage, necessary ingredients in any situation giving rise to a duty of care are that there should exist between the party owing the duty and the party to whom it is owed a relationship characterised by the law as one of ‘proximity’ or ‘neighbourhood’ and that the situation should be one in which the court considers it fair, just and reasonable that the law should impose a duty of a given scope upon the one party for the benefit of the other.”

94                  In England this is now accepted as the correct approach to determining the existence of a duty of care.  However, foreseeability, proximity and whether it is fair that a duty be imposed are issues that overlap.  When dealing with a novel claim the court will inevitably make a comparison with the established categories of negligence.  Nevertheless it is to be expected that in England there is now little scope for any radical development of the law:  Reeman v Department of Transport [1997] 2 Lloyds Rep 648. 

95                  The position in Australia is unsettled although it is clear that Anns is not regarded as good law.  In a series of cases including Sutherland Shire Council v Heyman (1985) 157 CLR 424, Pyrenees Shire Council v Day (1998) 192 CLR 330, Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431 and Perre v Apand Pty Ltd (1999) 198 CLR 180, the High Court has sought to redefine the circumstances when a duty of care will be held to arise.  The cases are summarised by Lindgren J in Graham Barclay Oysters Pty Ltd v Ryan [2000] FCA 1099.  As Lindgren J observed, no clear statement of principle has emerged.  Perhaps the test that will gain acceptance will be along the lines that a duty will be imposed on a defendant when he knows that his negligence will cause damage to members of a known or ascertainable class who were particularly vulnerable to that damage.

96                  The second way that foreseeability is relevant in a negligence case arises when it is necessary to determine whether a defendant, who owes a duty of care, was negligent; that is, when the question is “did the defendant breach his duty of care?”.  As to the law, it is sufficient to refer to a passage in the judgment of Mason J (as he then was) in Wyong Shire Council v Shirt (1980) 146 CLR 40 at 47-48:

“In deciding whether there has been a breach of the duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant’s position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff.  If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk.  The perception of the reasonable man’s response calls for a consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have.  It is only when these matters are balanced out that the tribunal of fact can confidently assert what is the standard of care of response to be ascribed to the reasonable man placed in the defendant’s position.

The considerations to which I have referred indicate that a risk of injury which is remote in the sense that it is extremely unlikely to occur may nevertheless constitute a foreseeable risk.  A risk which is not far-fetched or fanciful is real and therefore foreseeable.  But, as we have seen, the existence of a foreseeable risk of injury does not in itself dispose of the question of breach of duty.  The magnitude of the risk and its degree of probability remain to be considered with other relevant factors.”

Another way of stating these propositions is to adopt the formula in United States v Carroll Towing Co 159 F2d 169 (1947).  Learned Hand J (at 173) described the standard of care to be expected of the owner of a moored barge as:

“… a function of three variables: (1) the probability that she will break away; (2) the gravity of the resulting injury, if she does; (3) the burden of adequate precautions … [I]n algebraic terms:  if the probability be called P; the injury L; and the burden B; liability depends upon whether B is less than L multiplied by P; ie whether B is less than P L.”

97                  A useful example of the application of these principles is found in Thompson v Johnson & Johnson Pty Ltd [1991] 2 VR 449.  The facts are conveniently and succinctly summarised in the headnote.  The plaintiff sued the defendants, who were manufacturers and distributors of tampons manufactured in New Zealand and purchased by the plaintiff in Australia and used by her shortly after purchase.  The plaintiff alleged negligence resulting in personal injuries to her in the form of toxic shock syndrome.  The plaintiff claimed that the defendants should have warned her of the existence of a possible relationship between the use of tampons and toxic shock syndrome and as to the steps to be taken if symptoms developed.  The trial judge found against the plaintiff.  He accepted that the plaintiff had suffered from toxic shock syndrome as a result of the use of the defendants’ tampons.  But he did not accept that the defendants were under any obligation to warn the plaintiff of the dangers.  In the course of his reasons the trial judge said (at 468):

“Lying at the heart of this matter, however, is the necessity to ensure, as far as possible, that consumers are not unnecessarily or, through no fault of their own, unknowingly exposed to the risk of injury or other adverse consequences being suffered by reason of their use of products available to them in the marketplace.”

Later the trial judge went on (at 469):

“As a general proposition it appears to me to be obvious that where possible consequences of the contraction of a condition include death, even though the risk of any contraction may be very small, a potential purchaser is, at least, entitled to know of the existence of that risk and to be able to choose whether or not it will be accepted.”

However, the trial judge was not prepared to accept that the defendants were under a duty to give any warning before they were aware that their product was dangerous, and that there was little they could reasonably do later, having regard to their state of knowledge. 

98                  An appeal was taken to the Full Court.  When dealing with standard of care, the Full Court referred to a number of cases that dealt with the appropriate standard that was owed by a manufacturer or distributor of goods and said that even in the case of products suspected of being harmful there was no general duty to warn.  The duty is to take reasonable care.  In some cases this will require that a product be withdrawn from sale.  In other cases it will be necessary to warn of risks assumed with the use of the product.  The Full Court then referred to the statements just cited from the decision of the trial judge and said (at 491-492):

 “If by those expressions his Honour meant that a manufacturer and/or distributor of goods to which such a risk as last referred to is attached and which risk would not ordinarily be apparent it has a duty or an obligation in order to satisfy that entitlement to warn of such risk as distinct from a duty to take reasonable care, we would disagree.  If such was the case it would promote the duty to take reasonable care to an absolute duty to warn of such risk.  The consequences of risk, which possibly may result in death, does not of itself gives rise to a duty or obligation to warn of the risk.  However it would be a very material consideration to be regarded along with other material considerations when assessing whether the duty to take reasonable care in all the circumstances had been fulfilled.”

In the result, the appeal was dismissed.

99                  Foreseeability is also important when deciding whether a defendant is liable for the particular damage that resulted from his negligence; that is, in deciding whether the damage is too remote.  Here again it is necessary to refer to cases taught in law school.

100               At one time it was thought that the test of liability was that of “direct consequence”.  In In re Polemis and Furness, Withy & Co Ltd [1921] 3 KB 560 a plank was negligently dropped into the hold of a ship.  This caused a spark igniting gas vapour which had leaked into the hold and the ship was destroyed.  The defendant was held liable for the loss even though it could not have anticipated that the plank would cause a spark.  It was enough that it could foresee some damage to the ship.  Warrington LJ said (at 574):

“The presence or absence of reasonable anticipation of damage determines the legal quality of the act as negligent or innocent.  If it be thus determined to be negligent, then the question whether particular damages are recoverable depends only on the answer to the question whether they are the direct consequence of the act … ”

101               This simple proposition proved to be quite unsatisfactory.  Often it was not easy to determine whether a particular result was the “direct consequence” of some act.  Moreover, there was dispute as to the meaning of the “direct consequence of the act”.  Did it mean the immediate cause, or the precipitating cause, causa causans or causa sine qua non?  In the result, In re Polemis was overruled by the Privy Council in Overseas Tankship (UK) Ltd v Morts Dock & Engineering Co Ltd [1961] AC 388  (The Wagon Mound (No 1)).  Careless employees of the charterer of the Wagon Mound spilled oil into Sydney Harbour.  The oil floated to the plaintiff’s dock where it ignited and damaged the dock and two ships.  The trial judge imposed liability on the charterer because the negligent spilling of the oil was a direct cause of the fire.  The Privy Council thought otherwise and in the process overruled In re Polemis.  Viscount Simonds said (at 422-423):

“It is not probable that many cases will for that reason have a different result, though it is hoped that the law will be thereby simplified, and that in some cases, at least, palpable injustice will be avoided.  For it does not seem consonant with current ideas of justice or morality that for an act of negligence, however slight or venial, which results in some trivial foreseeable damage the actor should be liable for all consequences however unforeseeable and however grave, so long as they can be said to be ‘direct’.  It is a principle of civil liability, subject only to qualifications which have no present relevance, that a man must be considered to be responsible for the probable consequences of his act.  To demand more of him is too harsh a rule, to demand less is to ignore that civilised order requires the observance of a minimum standard of behaviour.”

102               The principle established by The Wagon Mound (No 1) was diluted in Hughes v Lord Advocate [1963] AC 837.  The employees of the defendant left paraffin lamps burning beside a manhole.  A young boy picked up one of the lamps and descended into the manhole.  He tripped and fell causing an explosion.  The boy sustained severe burning injuries.  In reliance on The Wagon Mound (No. 1) the lower court dismissed the plaintiff’s claim.  The House of Lords reversed the decision.  The House of Lords held that it was not necessary to foresee the exact way in which an accident occurs, as long as one anticipates the general type of consequence that transpires. 

103               Another qualification to The Wagon Mound (No 1) was made by Overseas Tankship (UK) Ltd v The Miller Steamship Co Pty Ltd [1967] AC 617 (The Wagon Mound (No 2)).  In that case the plaintiffs were the owners of the ships that had been moored at the dock owned by the plaintiffs in Wagon Mound (No 1).  The Privy Council said that just because a real risk was remote it did not mean it could not be reasonably foreseeable.  It held that a real risk was one which would occur to the mind of a reasonable man and which would not be brushed aside as far-fetched.

104               For what purpose did the trial judge find that it was foreseeable that the Western Australian Department would take the action that it did to deal with the potential threat of the weed seeds?  It is unlikely that it had to do with the existence of a duty of care for that had been conceded.  Having regard to the manner in which Dovuro argued its defence, it is likely that the trial judge was dealing with both the extent of the duty owed and whether the claimed losses were too remote.

105               Foreseeability is a question of fact.  On what facts did the trial judge base his conclusion that the conduct of the Department was foreseeable?  Is there any error in his conclusion?

106               Dovuro’s case before the trial judge was simple enough.  There was in place in every State and Territory of Australia, as well as at the Commonwealth level, a complex statutory regime pursuant to which the States, Territories and the Commonwealth could and did prohibit the importation, sale or distribution of any unwanted plant or seed.  When the canola seed was imported in 1996 there was in existence an extensive list of plants and seeds that could not be imported into the country or that could not be imported into or sold in a particular State or Territory.  Accordingly, so the argument went, a reasonable seed merchant, wishing to import seed into Australia or distribute seed in a particular part of the country, need do no more than ascertain whether that seed had been declared a prohibited seed.  If no such declaration had been made in respect of a particular seed, a reasonable seed merchant would not be acting negligently if the merchant imported and distributed that seed.  In other words, Dovuro contended that the system of statutory regulation of the importation, sale and distribution of plants and seeds that had been established throughout Australia was a system upon which a reasonable seed merchant could place reliance when distributing seed to any part of the country, in order to discharge any duty of care owed to consumers. 

107               This argument must be considered in the light of the following additional facts, none of which are in dispute, or if they were disputed, they are favourable to Wilkins’ case.  After his trip to Canada, Mr Carmody became concerned about the introduction into Western Australia of the weed bedstraw (galium tricornutum).  Mr Carmody raised his concerns with either Mr Rath or Mr Tapp in early 1996, well before the importation of the canola seed.  Mr Rath was aware that cleaver (galium aparine) was related to bedstraw.  He was also aware that the Department had taken no action to declare bedstraw a prohibited seed.  Mr Tapp accepted that there could be seeds that were not on the list of prohibited seeds that could be a risk to agriculture in a particular district.  He agreed that weeds were the “biggest burden” to the canola industry.  On the other hand, there is no evidence to suggest that Dovuro believed that any of the weeds cleaver, redshank and field madder was a particular risk to agriculture in any part of the country.  Further, there was no evidence of an occasion when a government, either State or Federal, had released seeds from quarantine and shortly thereafter made a declaration that those very same seeds were prohibited and had to be eradicated.

108               The basis for the finding on foreseeability is found in the following passage in the reasons of the trial judge:

“It should have been readily evident especially to a person trained in agricultural science [a reference to Mr Rath] that it would be impossible for any regulatory authority to anticipate by declaration every exotic weed that might enter Western Australia and turn out to be a threat to Western Australian agriculture, if introduced to the wheatbelt.  It should have been equally apparent that the concept of ‘weed of agriculture’ [a reference to weeds commonly found in particular crops] is necessarily limited to plants that have already proved a problem in the agricultural areas of the State; it could provide no guidance about plants, that might prove to be a problem if introduced into those areas.  And the possibility of that occurring would have been obvious to anybody with even a superficial knowledge of Australian agriculture and agricultural history.  Many of our worst agricultural and environmental scourges are plants and animals that are useful, ornamental or, at least, innocuous in their native habitat and had no reputation as pests before arriving in Australia.”

Accordingly, the trial judge held that Dovuro had breached its duty of care by failing to label the bags of canola seed in a way that indicated that the seed contained the three weed seeds.

109               Although a finding of foreseeability is one of fact, in this case the trial judge did not base his finding on any particular evidence, and certainly not upon any contested evidence.  The finding was based upon the trial judge’s own opinion of how a reasonable person in the position of Dovuro should have conducted itself.  I regret to say that I am unable to agree with the conclusion of the trial judge.  First, it appears to me that the standard of care that he imposed was far too high.  It must be remembered that the reasonable person, whose standard the defendant is required to satisfy, is not perfect.  He is not a “seer” (Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383 at 398); he is not a “person of infinite resource and sagacity” (Rae v Broken Hill Pty Co Ltd (1957) 97 CLR 419 at 422); he does not have the “prophetic vision of a clairvoyant” (Hawkins v Coulsdon & Purley Urban District Council [1954] 1 QB 319 at 341).  That is to say, a defendant can be guilty of error of judgment.  He need not avoid all possible risks to avoid a finding of negligence. 

110               The trial judge spoke of what would be readily apparent to an agricultural scientist.  That person can hardly set the standard for a seed merchant, although if a defendant possesses special knowledge, his conduct is to be considered in that light.  The trial judge also considered what would have been obvious to a person with a superficial knowledge of Australian agriculture or agricultural history.  Assuming that observation to be accurate, the relevant standard is not that which would be applied to an historian or an economist.  Moreover, the fact that it may be common knowledge that there have been introduced into Australia harmful pests such as rabbits and harmful plants such as prickly pear, fog grass and thistle, being pests and plants which were introduced before the present statutory regime was in place, is hardly a basis for imposing liability for a failure to warn of the existence of field madder, cleaver and redshank.  The question the trial judge had to consider was whether it was foreseeable that the three weeds, cleaver, redshank and field madder, which were not known to be dangerous and which were not proven to be dangerous, would be declared to be prohibited weeds that were to be eradicated in 1996 shortly after they were imported.  In circumstances where no similar action had ever been taken by an Australian government, it is impossible to answer this question in the affirmative. 

111               If I am wrong in this conclusion, I would not, in any event, find that Dovuro had acted negligently by failing to warn of the presence of the three weed seeds.  Dovuro would only be negligent if it omitted to do that which a reasonable seed merchant would have done.  The standard is objective and must be considered in the light of the circumstances of the case.

112               Often a defendant charged with negligence can avoid liability by showing that he acted in accordance with usual practices.  In Marshall v Lindsey County Council [1935] 1 KB 516 (affirmed [1937] AC 97) Maugham LJ said (at 540):

“An act cannot, in my opinion, be held to be due to a want of reasonable care if it is in accordance with the general practice of mankind.  What is reasonable in a world not wholly composed of wise men and women must depend on what people presumed to be reasonable, constantly do.  Many illustrations might be given and I will take one from the evidence given in this action.  A jury could not, in my opinion, properly hold it to be negligent in a doctor or a midwife to perform his or her duties in a confinement without mask and gloves, even though some experts gave evidence that in their opinion that was a wise precaution.  Such an omission may become negligent if, and only if, at some future date it becomes the general custom to take such a precaution among skilled practitioners … I do not doubt the general truth of the observation … [in Vancouver General Hospital v McDaniel] that a defendant charged with negligence can clear himself if he shows that he has acted in accordance with general and approved practice.”

Like many general statements of general principle, this statement cannot be taken too far.  The observance of custom is not always conclusive of reasonable care, although it is always influential:  Rogers v Whitaker (1992) 175 CLR 479. 

113               It is practically impossible for crop seed to be completely free of contamination by other seeds, including weed seeds.  All growers are aware of this.  According to the evidence the accepted practice in the seed industry (a practice which was later codified for members of the trade organisation, the Seed Industry Association of Australia Ltd) was that seed merchants informed purchasers of the presence and species of seed in a lot, if that seed was present by mass of 1 per cent or more in lawn or turf seed, or 5 per cent or more in other seed.  Each bag of canola seed was labelled “certified seed, first generation” and on the back of each label was printed “minimum 99 per cent purity, minimum 85 per cent germination”.  The label alerted growers to the fact that the bag did not contain pure canola seed.  In the absence of actual knowledge that the weed seeds were a risk to growers, Dovuro was not obliged to add further information to the label.  The label was in accordance with industry practice and there are no facts from which it could be concluded that Dovuro acted unreasonably by confining itself to that practice.

114               If this conclusion disposes of the appeal it would be unnecessary for me to deal with an alternative submission by Dovuro namely that, contrary to its concession, it owed no duty of care to the Wilkins’ interests.  However, in virtue of the views of the other members of the court it is necessary for me to deal with this argument. 

115               First there is the question whether Dovuro should be permitted to withdraw its concession.  To fully appreciate the circumstance in which this issue arises it is necessary to say more about the proceedings.  It will be remembered that the Wilkins’ interests brought suit not only against Dovuro but also against Cropmark, relying on the same causes of action against it as had been alleged against Dovuro.  Dovuro and Cropmark brought a cross-claim against each other seeking indemnity in respect of Wilkins’ claim.  Dovuro sued for breach of contract and for misleading or deceptive conduct.  It also sought contribution, inter alia, under s 5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) or under s 7 of the Law reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 (WA).  For its part Cropmark claimed contribution from Dovuro in reliance upon the same provisions. Each party assumed, correctly as it turns out, that the relevant State statute is “picked up” as federal law by s 79 of the Judiciary Act 1903  (Cth): Austral Pacific Group Ltd (in liquidation) v Airservices Australia [2000] HCA 39.  Each party also assumed that contribution could be claimed under the relevant statute from a person who did not commit any civil wrong in Australia.  It is not necessary to rule on the correctness of this assumption.

116               Wilkins’ claim against Cropmark failed.  Cropmark had defended the claim on two bases.  The first basis was that no duty of care could be owed to a person who had suffered neither personal injury nor property damage.  The trial judge did not deal with this issue.  The second basis for denying liability was because of the existence of the “possibility of intermediate examination” of the canola seed by Dovuro.  In Donoghue v Stevenson Lord Atkin said that a manufacturer owed a duty of care in relation to the manufacture of goods only where the goods were “intended to reach the ultimate consumer in the form in which they left [the manufacturer]” and there was “no possibility of intermediate examination”.

117               The trial judge found that because Cropmark had informed Dovuro of the existence of the weeds in the canola seed it would be unreasonable to impose an obligation on Cropmark to convey a warning to that effect to farmers who purchased the canola seed for sowing.  It seems that the trial judge was of opinion that the negligence of Dovuro had broken the chain of causation between the negligence of Cropmark as manufacturer and the damage sustained by the Wilkins’ interests.  No appeal was brought against this holding.  However, in the event that it was unsuccessful on the appeal, Dovuro pressed its claim for contribution from Cropmark.

118               The only thing that could be said, and indeed was said, in favour of the argument that Dovuro should be released from its concession that it owed a duty of care, is that if it had persisted with the argument below, the conduct of the case would not have been affected, except that closing arguments would have taken a little longer.  This is not a sufficient reason to permit Dovuro to change course, as the cases show. 

119               In Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 the High Court said that when a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot afterwards be taken.  See also O’Brien v Komesaroff (1982) 150 CLR 310 at 319.  But it does not follow that because all the evidence is in, that is a sufficient reason to allow a new point to be taken on appeal.  In Coulton v Holcombe (1986) 162 CLR 1 the High Court, after referring to Suttor v Gundowda and O’Brien v Komesaroff, said that it is sometimes convenient upon admitted facts or facts proved beyond controversy, for an ultimate court of appeal to consider a question of law raised for the first time.  Earlier, however, the court said (at 7):

“It is fundamental to the true administration of justice that the substantial issues between the parties are ordinarily settled at the trial.  If it were not so the main arena for the settlement of disputes would move from the court of first instance to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish.”

The rule is that a point not argued below may be raised on appeal only in special circumstances.  In University of Wollongong v Metwally (No. 2) (1985) 59 ALJR 481 at 483 the High Court said:

“It is elementary that a party is bound by the conduct of his case.  Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case has been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so.

See also Water Board v Moustakas (1988) 62 ALJR 209; Banque Commerciale SA, en liquidation v Akhil Holdings Ltd (1990) 169 CLR 279.

120               What are the exceptional circumstances in this case?  None were referred to and none are apparent to me.  All that has occurred is a change of mind by Dovuro.  What appears to be a tactical decision made at trial no longer seems to be such a good decision.  If that were a proper basis for allowing a party to argue on appeal a point abandoned below, there would be few cases where exceptional circumstances could not be made out.

121               Nevertheless I propose to say something about tort claims in respect of pure economic loss and whether Wilkins could be denied a cause of action because their claim is for pure economic loss.  I propose to take this course because I do recognise the importance of the issue raised.

122               The great fear of the common law courts has been to impose liability “in an indeterminate amount for an indeterminate time to an indeterminate class”:  Ultramares Corp v Touche 174 NE 441 at 444 (1931) per Cardozo ACJ.  This policy has been adopted, to a greater or lesser extent, by most common law countries although it is a view not shared with all civil code jurisdictions:  as to the civil law position see, eg, Article 1832 of the French Code civil and Article 1053 of the Quebecois Code civil, which by and large do not distinguish between the type of loss (Football Club de Metz v Winoth, “Colmar”, 20 April 1955, D, 1956, 723); compare Paragraph 823 of the German Burgerliches Gesetzbuch, which poses some difficulty to the recovery of reiner Vermogensschoden (pure economic loss).  This policy lies at the heart of the denial of the existence of a duty of care to protect another from pure economic loss except in ill-defined but limited circumstances. 

123               Would the principle have provided a defence for Dovuro in this case?  There are two different circumstances in which this question must be considered.  The first is if the three weed seeds were actually harmful to the canola crop.  The second circumstance is if it were reasonably believed that the three weed seeds were harmful to the canola crops but in fact they were not harmful.

124               If the weeds were harmful the case would present no difficulty.  Once the weed seeds were sown, the claim would not be for pure economic loss but one that could properly be characterised as loss resulting from property damage.  In other words, when farming land is sown with weed seed that makes the land either unsuitable or less suitable for growing, the land has been “damaged” in a relevant sense. 

125               However, in this case it could not be said that the Wilkins’ land was damaged because Wilkins did not establish that the weeds adversely affected farming.  Thus the expense incurred by Wilkins in complying with the Department’s advice can be characterised as “pure economic loss” in the sense that this expression is understood in negligence cases.  The question that arises is whether there can be liability for the negligent infliction of pure economic loss caused by a threat of physical damage to Wilkins’ land and canola crops?  This question itself must be considered in different situations, first, where the threat is real and second where the threat is reasonably, but wrongly, believed to be real.

126               The starting point is England.  Cattle v Stockton Waterworks Co (1875) LR 10 QB 453 and Simpson & Co v Thompson (1877) 3 AppCas 279 are said to have established the principle that financial loss not consequent upon property damage or personal injury (that is pure economic loss) is not recoverable in a suit in negligence.  It is doubtful whether these early cases in fact established the principle for which they are now cited.  The cases were concerned with a plaintiff who claimed interference with his contractual rights as a result of damage to property of a third party and it was held that the plaintiff could not have sued for the interference with his contractual rights.  Be that as it may, since at least the time of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 it has been accepted that pure economic loss is recoverable in limited circumstances.  Those circumstances now include:  when there is a loss flowing from negligent words (Hedley Byrne); when there has been negligent damage to the property of a third party and economic damage to the particular plaintiff is foreseeable (Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529); when there has been the negligent performance of a service (Hill v van Erp (1997) 188 CLR 159); when there has been the negligent introduction of a diseased crop (Perre v Apand); when there has been a wrongful failure by a statutory authority to protect the plaintiff against economic loss (Sutherland Shire Council v Heyman); when loss has been caused by the purchase of a defective building (Bryan v Maloney (1995) 182 CLR 609).   

127               Proceeding from the premise that the common law of Australia does not forbid the recovery of pure economic loss, can the cost of taking reasonable steps to protect property from physical damage be recovered from a negligent defendant? To answer this question it is not necessary, or even desirable, to formulate a general rule, if one exists, that defines the boundaries for claims for pure economic loss.  Such an attempt was made in Perre v Apand, but as the seven separate judgments of the justices of the High Court show, there is real difficulty in attempting to formulate an overarching principle.  It is possible in this case to confine the discussion to the circumstances in which a manufacturer or a supplier of a defective product can be liable for pure economic loss. In fact the question is even more confined than that.  The true issue is whether a manufacturer or supplier of a defective product which has the potential to cause physical harm can be liable for pure economic loss.  When the question is considered in this narrow way, the issues involved are less complex than if one were to ask generally – when are damages recoverable for pure economic loss?

128               I can illustrate the problems raised in this case by borrowing, but making some changes to, the facts of an actual case.  The plaintiff owns a property.  The defendant negligently starts a fire.  There is a risk that the fire will cause damage to the plaintiff’s property.  If the fire damages the plaintiff’s property, the defendant will be liable for the resultant loss.  What if the plaintiff incurs expense in protecting his property from damage by the fire?  Is that expense recoverable?  I can see no reason in principle why the expense should not be recoverable.  First, the case is not one of liability “in an indeterminate amount for an indeterminate time to an indeterminate class”.  Second, once it is accepted that there is no absolute barrier to the recovery of “pure economic loss”, there is no reason why a plaintiff who takes steps to avoid damage to his property should be worse off than a plaintiff who actually suffers damage to his property.  In the supposed circumstances the same negligent act has caused each plaintiff to suffer loss, although the loss is of a different character; in one case it is loss because of damage to property and in the other case it is not.  However, in each case the loss is the direct result of the negligence of the defendant.  There is not a sufficient difference between a case of actual physical damage to property and one of threatened physical damage to warrant a different result in law.  Third, there are cases that support the conclusion that a claim will lie.  I will now mention those cases. 

129               For a time it was possible that English law would develop along lines that would have permitted recovery.  For example in Weller & Co v Foot & Mouth Disease Research Institute [1966] 1 QB 569 the plaintiffs, who were auctioneers at cattle markets, suffered loss when a virus escaped from the defendant’s premises forcing cattle in the vicinity to become infected resulting in closure of two cattle markets where the plaintiffs conducted business.  Widgery J, in a detailed examination of the relevant authorities, said (at 577) that:

“ … there is a great volume of authority both before and after Donoghue v Stevenson to the effect that a plaintiff suing in negligence for damages suffered as a result of an act or omission of a defendant cannot recover if the act or omission did not directly injure, or at least threaten directly to injure, the plaintiff’s person or property but merely caused consequential loss as, for example, by upsetting the plaintiff’s business relations with a third party who was the direct victim of the act or omission.”

Nonetheless, the plaintiffs were denied a remedy.  They did not own the infected cattle and had no proprietary interest in anything which may have been damaged by the virus.  More particularly, the plaintiffs did not have a proprietary interest in the markets and in any event those premises were not in jeopardy.

130               The next case to mention is S C M (United Kingdom) Ltd v W J Whittal & Son Ltd [1971] 1 QB 337.  The plaintiff owned a factory in which it manufactured steel alloy.  Due to the defendant’s negligence, a cable which supplied electricity to the factory was damaged and the factory was shut down.  Some property damage was caused.  Further, to avoid harm to its furnace the plaintiff had to melt material that was in the furnace.  This material was rendered less valuable.  The plaintiff was permitted to recover compensation for the property damage that it suffered as well as for the diminished value of the melted material.  It was not, however, awarded damages for general loss of business.  Lord Denning MR referred to the settled principle that when a defendant, by his negligence, causes physical damage, that loss is recoverable.  He said (at 343) that economic loss which is consequent upon personal injury or damage to property is also compensable.  But Lord Denning MR said that pure economic loss was not compensable because it was too remote.  Winn LJ, who concurred with Lord Denning MR, said (at 352):

“It seems to me that it is far more satisfactory in a sociological sense, and is in accordance with the present law, to say that apart from the special case of imposition of liability for negligently uttered false statements, there is no liability for unintentional negligent infliction of any form of economic loss which is not itself consequential upon foreseeable physical injury or damage to property.”

I observe that Winn LJ did not expressly state that there must be physical injury or damage to property.  It was sufficient for his Lordship, so it seems, that physical injury or damage was “foreseeable”. 

131               But these views were not developed.  The House of Lords in D & F Estates Ltd v Church Commissioners for England [1989] AC 177 and in Murphy v Brentwood District Council [1991] 1 AC 398 returned to the old principle and held that the supplier of a defective product or the constructor of a defective building is not liable in negligence unless that product or building has caused property damage or personal injury.

132               The position is different in Canada.  There are four cases to which reference should be made.  The first is Rivtow Marine Ltd v Washington Iron Works (1973) 40 DLR (3d) 530.  The appellant chartered a barge.  It was fitted with two cranes designed and manufactured by the defendant.  A serious structural defect was discovered in the cranes and the plaintiff brought action to recover special damages for the cost of repair to the cranes and for the loss of use of the barge during the repair period. The majority, whose judgment was delivered by Ritchie J, allowed recovery of damages for loss of profits.  Ritchie J did not base his decision on Donoghue v Stevenson.  Instead he said that the defendant owed a duty because it knew of the danger to person and property involved in the continued use of the cranes, such duty arising immediately when the defendant became seized with the knowledge.  However Ritchie J would not allow recovery for the cost of repairing the crane.  Laskin J agreed that damages were recoverable for loss of profits.  However he would have allowed the cost of repairs as recoverable economic loss.  He said that economic loss resulting directly from avoidance of threatened physical harm to property or threatened personal injury is recoverable.  Laskin J said (at 552):

“It is foreseeable injury to person or to property which supports recovery for economic loss suffered by a consumer or user who is fortunate enough to avert such injury.  If recovery for economic loss is allowed when injury is suffered, I see no reason to deny it when the threatened injury is forestalled. … Prevention of threatened harm resulting directly in economic loss should not be treated differently from post-injury cure.”

133               The second Canadian case is Attorney-General for Ontario v Fatehi (1981) 127 DLR (3d) 603.  The Crown owned a highway upon which the defendant, who was the driver of a car,  negligently collided with another car.  As a result there was debris on the highway and petrol had also spilled onto the highway causing a danger of fire or explosion that could damage the surface of the road and adjacent property also owned by the Crown.  The Crown incurred expense in cleaning up the highway to prevent explosion and brought proceedings to recover that cost.  The Ontario Court of Appeal held that no duty of care was owed to the Crown as owner of the highway because the Crown is not in the relationship of “neighbour” to a motorist.  The defendant had also argued that the claim should fail because it was for pure economic loss.  This argument was rejected.  Brooke JA said that the claim was not for pure economic loss.  He explained (at 606) that:  “[t]he Crown as the owner of the property had the right to take reasonable steps to protect its property from damage and pursue this claim against the defendant whose negligence had caused the loss.”

134               Wilson JA (as her Ladyship then was) found (at 612) that actual physical damage was not necessary for economic loss to be recoverable.  The threat of damage was sufficient if the economic loss was incurred in averting threatened physical damage.

135               The case went on appeal to the Supreme Court:  the decision is reported at (1984) 15 DLR (4^th) 132.  The Supreme Court allowed the appeal and gave judgment for the plaintiff.  It held, contrary to the view of the Court of Appeal, that the Crown was owed a duty of care by motorists who used its highways.  The Supreme Court was not required to consider the circumstances in which a plaintiff might be entitled to recover for pure economic loss because it held that the cost incurred by the Crown was to render the highway useable from its previously unuseable condition, which was in the nature of property damage. 

136               In two subsequent decisions, Canadian National Railway Co v Norsk Pacific Steamship Co Ltd (1992) 91 DLR (4^th) 289 and Winnipeg Condominium Corporation No. 36 v Bird Construction Co (1995) 121 DLR (4^th) 193, the Supreme Court of Canada adopted the view of Laskin J in Rivtow Marine.  It is not necessary to deal with these cases in any detail.  It is sufficient to note that they clearly establish that a manufacturer or a supplier of a defective product that may cause physical harm to person or property will be liable for the reasonable cost of preventing that harm as well as the cost of repairing the defective product.  In Winnipeg Condominium La Forest J, who delivered the unanimous judgment of the court, said (at 213):

“In my view the reasonable likelihood that a defect in a building could cause injury to its inhabitants is also sufficient to ground a contractor’s duty in tort to subsequent purchasers of the building for the cost of repairing the defect if that defect is discovered prior to any injury and if it poses a real and substantial danger to the inhabitants of the building.  In coming to this conclusion, I adopt the reasoning of Laskin J in Rivtow which I find highly persuasive.  If a contractor can be held liable in tort where he or she constructs a building negligently and, as a result of that negligence, the building causes damage to persons or property, it follows that the contractor should also be held liable in cases where the dangerous defect is discovered and the owner of the building wishes to mitigate the danger by fixing the defect and putting the building back into a non-dangerous state.  In both cases the duty in tort serves to protect the bodily integrity and property interests of the inhabitants of the building.”

137               So far the High Court has adopted a position somewhere between that in England and in Canada:  see Perre v Apand.  For present purposes, however, it is sufficient to refer to Bryan v Maloney, a case where a purchaser of a land sued the builder for the negligent construction of the building that was on the land.  The High Court did not follow D & N Estates and Murphy v Brentwood District Council.  In their joint judgment, Mason CJ, Deane & Gaudron JJ said (at 629):  “It is difficult to see why, as a matter of principle, policy or commonsense, a negligent builder should be liable for ordinary physical injury caused to any person or to other property by reason of the collapse of the building by reason of the inadequacy of the foundations but not be liable to the owner of the building for the cost of remedial work necessary to remedy that inadequacy and to avert such damage.”  There can be no reason why the position would be any different in the case of a defective chattel.

138               It seems to me that there is no impediment to allowing recovery against a negligent supplier of a defective product of the cost incurred in avoiding or reducing the risk of physical harm that may be caused by that product.  First, as I have said, it is not a case of an indeterminate claimant bringing an action for indeterminate damage:  the class of plaintiffs is no wider than in Donoghue v Stevenson; the damages are likely to be less.  Second, there is no obvious reason why a person who can avoid physical damage should not recover the cost occasioned thereby when a person who suffers physical damage from that same cause is entitled to recover his losses.  Third, there are sound policy reasons for encouraging people to make reasonable attempts to avoid or mitigate their losses.  Finally, the cases support the imposition of liability.  Thus I would conclude that pure economic loss is recoverable in these circumstances.

139               So far I have been dealing with pure economic loss caused by a defective product which posed an actual threat of physical harm.  What if the product was not in fact a threat, but it was believed on reasonable grounds that the product would cause physical harm?  Is the expense incurred in avoiding the perceived risk recoverable? 

140               Let me return to the negligently caused fire to illustrate the point.  We have already concluded that the expense incurred in averting property damage is recoverable.  What would be the position if, after that expense was incurred there was a sudden change in the direction of the wind so that the plaintiff’s property could have been saved from the fire?  Should that be an answer to the plaintiff’s claim?

141               In my opinion the plaintiff would still be entitled to maintain her cause of action.  First, it is difficult to see why the defendant would not owe a duty of care.  The time to determine the existence of a duty was when the fire was negligently lit, not when the wind changed.  The question then is whether the injury (loss) suffered is foreseeable.  If it is foreseeable that a plaintiff may take action to prevent actual harm to person or property, it is no less foreseeable that the plaintiff will take the same or similar action if she reasonably suspects there to be a threat of harm.  To hold otherwise would bring an unprincipled distinction into this area of the law. 

142               The final matter I must consider is Dovuro’s claim in contract against Cropmark.  Here again, although I have concluded that the Wilkins’ claim against Dovuro should fail, it is necessary for me to deal with the claim against Cropmark, because the decision of the majority is that Dovuro’s appeal against the Wilkins’ interests.

143               By the contract under which Dovuro purchased the canola seed, Cropmark warranted that the seed met certain standards.  The relevant part of the contract provides:

“The resultant crop of 100 hectares expected to be about 250 tonne of machine dressed canola.  Packed in 25 kg bags as supplied by the purchaser.

First generation certified canola

Minimum 85% germination

Minimum 99% purity

Maximum 0.5% weed and free of undesirable species including brassica and rumex in working sample

Maximum moisture 9%

To comply Australian import regulations.”

144               On the assumption that it was liable in damages to the Wilkins’ interests, Dovuro alleged that the warranty was broken because the canola seed was not “maximum 0.5% weed and free of undesirable species including brassica and rumex in working sample”.  It was not suggested that the weed seed exceeded 0.5% of the seed sold to Dovuro, as the evidence was to the opposite effect.  Rather, it was alleged that the canola seed was not “free of undesirable species” because it contained the weed seeds.  The argument proceeded upon the assumption, which was not challenged, that whatever be the meaning of the expression “undesirable species”, it could include species of weed seeds.  So much may be accepted because brassica and rumex, which are included within the category of “undesirable species”, are weeds.

145               The issue at trial was the meaning to be given to “undesirable species”.  Dovuro argued that the expression was one of ordinary meaning and not a term of art, and that it should be given its ordinary meaning.  It submitted that in the context of the contract, when considered as a whole and in light of the surrounding circumstances, what was meant by “undesirable species” were seeds that were undesirable in any part of Australia where Dovuro might wish to sell canola seed.  For its part, Cropmark said that the words “undesirable species” had a particular trade meaning, and that the words should be given that meaning.  It argued that “undesirable species” was a reference to the list of weeds found in the standard terms and conditions of sale that are contained in a handbook published by the New Zealand Grain and Seed Trade Association Inc.  Those terms and conditions provide that “when a clause for freedom from undesirable weeds is inserted in [a] broker’s contract” the undesirable seeds are those that are listed.  This is followed by a list of 12 undesirable weed seeds.  None of the weed seeds that are the subject of this proceeding are included in the list. 

146               I should mention that the argument on this aspect of the case assumed that the proper law of the contract was that of New Zealand and that the relevant law of New Zealand was the same as Australian law.  Whether correct or not, I will proceed on the same basis.

147               The trial judge did not form a concluded view on the meaning of “undesirable species”.  He did reject the construction put forward by Dovuro on the basis that it was improbable that Cropmark would have been willing to make the performance of its contract, and its entitlement to payment, dependent upon a view of either Dovuro or the ultimate purchasers, about the acceptability of the canola seed in particular locations.  The trial judge said that while it was not necessary for him to reach a final view about the matter, nevertheless he was able to say that the term “‘undesirable species’ was intended to cover only the seeds listed in the handbook, with the possible addition of species unable to be imported into Australia”.

148               There are only two possible bases for the conclusion that “undesirable species” could refer to the undesirable weeds listed in the handbook.  The first basis would be that the terms of trade in the handbook were incorporated into the contract by conduct.  This could have occurred through a course of dealing, a common understanding from past conduct or by express incorporation such as by one party drawing the other party’s attention to the terms of trade.  But the evidence provides no foundation for incorporation by conduct.

149               The second basis would be to show that by custom or usage the words “undesirable species” have a special meaning.  But to prove usage is not easy.  In Nelson v Dahl (1879) 12 ChD 568 at 575 Jessel MR described the existence of a usage as:

“[a] question of fact, and, like all other customs, it must be strictly proved.  It must be so notorious that everybody in the trade enters into a contract with that usage as an implied term.  It must be uniform as well as reasonable, and it must have quite as much certainty as the written contract itself.”

There is also a passage from Browne on Usage and Custom (1875), which Stephen J said, in Majeau Carrying Co Pty Ltd v Coastal Rutile Ltd (1973) 129 CLR 48 at 61, stated settled law.  The passage reads:

“Seeing that custom is only to be inferred from a large number of individual acts, it is evident that the only proof of the existence of a usage must be by the multiplication or aggregation of a great number of particular instances; but these instances must not be miscellaneous in character, but must have a principle of unity running through their variety, and that unity must show a certain course of business and an established understanding respecting it.”

See also Appleby v Pursell [1973] 2 NSWLR 879; Con-stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd (1986) 160 CLR 226, 236-238; Homestake Australia Ltd v Metana Minerals NL (1991) 11 WAR 435; and Byrne v Australian Airlines (1995) 185 CLR 410, 423-4, 440-441.

150               As these cases show it is difficult to discharge the burden of proving that a custom is so notorious that everybody contracts on the basis of it.  This explains why so few cases have succeeded on this ground. The only admissible evidence on the existence of a relevant custom was that given by Mr Stirling, a seed trader with Cropmark with many years’ experience in both the domestic and international grain markets.  His evidence was to the following effect.  There were about 30 seed and grain merchants who were members of the Grain and Seed Trade Association and they accounted for approximately 90 to 95 per cent of the New Zealand grain trade.  In New Zealand many contracts use the expression “free of undesirable species”.  This expression would be taken to mean the weeds mentioned in the list in the handbook.  Many contracts incorporate the terms and conditions found in the handbook by use of expressions such as “per the terms of trade rules and competency” and “undesirable species”.  Such phrases would “pick up” the association’s list of undesirable weeds.  In contracts between a member of the Association and a non-member, especially contracts for the sale of seeds for export, the expression “undesirable species” is sometimes found.  More usually, however, the undesirable species, if there were any, would be spelt out.  I am not persuaded that this evidence goes anywhere near to establishing what is required to make out the existence of a custom in dealings between a New Zealand grain merchant and a purchaser who is not a member of the Association, especially a purchaser who is acquiring grain for export.  I say nothing of the apparent unlikelihood of these parties intending to incorporate into their contract a meaning of “undesirable species” that has relevance where seed is to be sown in New Zealand, but has no evident purpose as regards seed that is to be exported to other parts of the world.

151               In any event, on the authority of Lord Forres v Scottish Flax Co Ltd [1943] 2 All ER 366, I would find against the argument of Cropmark.  Lord Forres concerned a contract made in a market where it was alleged that the words “natural fibre” had a trade meaning.  The contract was made with a person who was not a trader in the market in which this usage was established.  Scott LJ, with whom, on this question, McKinnon and Goddard LJJ agreed, said (at 368) that a stranger to a market may become bound by the usage of that market, if the stranger asks a member of the market to act as his agent in effecting a sale or purchase.  However Scott LJ suggested that the position would be different where a stranger came to the market without the intervention of an agent who was a member of the market.  He said (at 368) “there is no case, so far as I can remember, where it has been decided that such a dealing of itself imports such a knowledge of the market as would put upon a stranger coming to sell to or to buy from a principal in the market a knowledge of or consent to all the terms of the market.”  See also FAI Traders Insurance Co Ltd v ANZ McCaughan Securities Ltd (1990) 3 ACSR 279.  I would not hold an Australian purchaser bound by New Zealand usage of which he has no knowledge and which has no relevance to his contract.

152               The other limb of the meaning given by the trial judge to the words “undesirable species” is that it referred to seeds that were unable to be imported into Australia.  To give the expression that meaning is to ignore one of the express warranties given by Cropmark namely that the seed sold is “to comply [with] Australian import regulations”.  Speaking generally, it is not permissible to construe one part of a contract so as to render inoperative or as surplusage another part.  In In re Strand Music Hall Co Ltd (1865) 35 Beav 153 at 159; 55 ER 853 at 856 Sir John Romilly MR said:

“The proper mode of construing any written instrument is to give effect to every part of it, if this be possible, and not to strike out or nullify one clause in a deed, unless it be impossible to reconcile it with another and more express clause in the same deed.”

See also SA Maritime et Commerciale of Geneva v Anglo Iranian Oil Co Ltd [1954] 1 WLR 492, although in Tea Trade Properties Ltd v CIN Properties Ltd [1990] 1 EGLR 155 Hoffmann J (as his Lordship then was) noted that draftsmen often “employ linguistic overkill” and use a number of phrases to cover more or less the same idea. 

153               There is no difficulty in giving the words “undesirable species” a meaning which does not render as surplusage the wording “to comply [with] Australian import regulations” and takes account of the ordinary signification of the words used in the context in which they are employed.  In my view, canola seed will not be “free of undesirable species” if it contains any species of seed (including the nominated species) that renders the canola seed unmerchantable in any part of Australia either because the seed is prohibited or for any other reason.  The canola seed was supplied for the purposes of resale in any part of Australia where canola could be grown.  The parties to the contract were aware that there were restrictions on the importation of seed into Australia.  Cropmark assumed the risk if it supplied seed that could not be lawfully imported into any part of Australia.  It is not unreasonable then to have it carry the risk if it supplies seed that is unfit to be sold in Australia.

154               For the sake of completeness I should mention cl 3 of the General Conditions of Sale of the contract between Cropmark and Dovuro.  This provides that: “The Seller will not be liable for any loss, damage, injury, shortages, delay, late delivery or non-delivery whatsoever due to any cause or circumstances beyond the control of the Seller.”  Cropmark denied Dovuro’s claim for indemnity in respect of the Wilkins’ claim on the basis that Dovuro’s loss (being its liability to Wilkins) was “due to [a] cause or circumstances beyond [its] control.”  The argument assumes that the loss suffered by Dovuro resulted from or was caused by the actions of the Western Australian government.

155               In a claim in contract the damages that are recoverable are those caused by the breach.  The question in each case is:  “Was the breach of contract a ‘cause of the damage’?”:  Smith Hogg & Co Ltd v Black Sea & Baltic General Insurance Co Ltd [1940] AC 997 at 1007.  The cause is sometimes referred to as “the proximate cause” or “the efficient cause”:  Leyland Shipping Co Ltd v Norwich Union Fire Insurance Society Ltd [1918] AC 350 at 362, 369 and 371.   In contract cases, causation is to be determined not according to some philosophic notion but on the basis of “ordinary everyday life [considerations] and thoughts”:  Monarch Steamship Co Ltd v Karlshamns Oljefabriker  [1949] AC 196 at 228.  For similar views on causation in the context of negligence claims, see March v E & MH Stramare Pty Ltd (1991) 171 CLR 506 at 515.

156               Applying these principles, there can be no doubt that Dovuro’s loss (if it had suffered any) was caused by the failure by Cropmark to supply canola seed free of undesirable species.  The chain of causation was not broken by the action of the Western Australian government.  Put another way, the effective or efficient cause of any loss suffered by Dovuro was the supply of the canola seed admixed with weed seeds.  That was an act within the control of Cropmark.  Therefore I would find that Cropmark could not avail itself of the protection afforded by the exclusion clause.

157               In my opinion the appeal should be allowed, the orders made by the trial judge should be set aside, and judgment should be entered for Dovuro.  However as that is not the view of the majority then, for the reasons I have given, I would allow the appeal by Dovuro on its cross-claim.  I agree in the opinion of Gyles J that the parties should be invited to make submissions on what other orders should be made.

Associate:

Dated:                 21 December 2000

REASONS FOR JUDGMENT

GYLES J:

OUTLINE OF CASE

158               The appellant, Dovuro Pty Limited (“Dovuro”) carried on business as a producer and distributor of agricultural seed.  It had a licence to produce and distribute a particular strain of canola seed known originally as T17 and later as Karoo.  Karoo seed showed promise as an early maturing, triazine-resistant cultivar in trials in 1993, 1994 and 1995.  These were highly desirable commercial traits, and significant demand existed for such a cultivar.

159               In order to obtain supplies as soon as possible, Dovuro arranged for production of Karoo seed in New Zealand by the second respondent, Crop Marketing New Zealand Society Limited (“Cropmark”), pursuant to written terms and conditions.  The terms and conditions included the following:

“Minimum 99% purity

Maximum 0.5% weed and free of undesirable species including brassica and  rumex in working sample

…

To comply with Australian import regulations”

Delivery was “CIF Melbourne or Sydney, buyers option”.

160               The New Zealand crop was harvested in March 1996, and the seed was cleaned and packed in 25kg bags by a contractor to Cropmark.  Samples were taken, and analysed both by Cropmark and the New Zealand Ministry of Agriculture and Fisheries (“MAF”).  The bags had attached a label or tag which bore the name MAF and also, inter alia, the words “Minimum 99% purity”.  A total of 6,720 bags (168 tonnes) of seed was supplied to Dovuro.  Of this, 2,700 bags (67.5 tonnes) was supplied to merchants in Western Australia for resale to users.  The rest was sold in the eastern states.

161               Each of the Cropmark seed analysis certificates and the MAF seed analysis certificates was expressed to certify compliance with relevant proclamations under the Quarantine Act 1908 (Cth) and with the Seeds Acts of all Australian States.  The inspection and certification by MAF was done according to an OECD Members Recognition Scheme to which Australia adhered.  Import of the seed into Australia was cleared by the Australian Quarantine and Inspection Service (“AQIS”) and into Western Australia by the Western Australian Quarantine and Inspection Service (“WAQIS”).  Each of these bodies received the MAF certificates, and, to the knowledge of Mr Rath of Dovuro, samples of seed were supplied for analysis to the laboratories of Ag West Seed Quality, a unit of Agriculture Western Australia (“Ag West”), the West Australian Government department responsible for agricultural issues. The Ag West Seed Quality analysis (which was not given to Dovuro) identified “galium” species in the samples, but the particular species were not identified.

162               According to the rules of the International Seed Testing Association (“ISTA”), a line of seed is a quantity of seed harvested from one location, but not exceeding 10 tonnes.  In this case, 20 lines were imported into Australia, eight of which were imported into Western Australia.  The MAF certificates revealed that six out of the eight lines contained seeds of the species “polygonum persicaria” (redshank).  The remaining two lines had seeds of an unidentified polygonum species which could have been redshank  Two lines contained seeds of “galium aparine” (cleavers) and another “shelardia arvensis” (field madder).  In each case the quantity of seeds of these species was less than 0.5%.

163               It is not in dispute that the MAF certificates were, in fact, correct in stating that the samples of seed analysed met the Australian quarantine standards, and complied with the Seeds Acts of the various Australian States, including Western Australia.  In Western Australia, the statutory regime provided for means of regulating or prohibiting undesirable species.  None of the identified species was regulated or prohibited.

164               In 1996 the first respondent in this appeal (“the Applicants”) Robert John Wilkins, Eileen Joyce Wilkins, Trevor Ian Wilkins, Susan Caroline Wilkins and Lochiel Nominees Pty Limited conducted a farming and grazing business in partnership under the name “R & E Wilkins” on a property, “Narbethong”, at Kondinin in the Western Australian wheat belt.  In April 1996 Mr Trevor Wilkins ordered one tonne of Karoo seed from two merchants, which was delivered in early May and sown during that month.  Another member of the class, Bruce Leslie Piper, purchased three tonnes of Karoo seed from two other merchants in May 1996 and proceeded to sow the crop.

165               In early June 1996, as a result of an inquiry from a grower as to foreign seeds in Karoo, Mr Matthew Appelbee, Ag West’s Canola Development Officer, arranged for samples of Karoo seed to be analysed at the Ag West laboratory and obtained copies of the MAF certificates from Dovuro.  A departmental working party was set up.  Mr Carmody of Ag West, who had some particular knowledge about cleavers and canola, was included.  The issue generated agri-political heat in Western Australia, and received quite some publicity. 

166               On 20 June 1996 Ag West issued a news release advising growers to monitor crops sown with New Zealand imported seed, and advising that it was currently compiling an information pack concerning weeds in the seed samples.  On 3 July a news release issued by Ag West proposed atrazine spray to control any weed infestation.  On 5 July 1996 redshank, field madder and cleavers were declared plants pursuant to the Western Australian legislation, effectively prohibiting introduction or spreading, and required eradication.  Entry of the species to Western Australia was also prohibited.  On 9 July Ag West sent an information package to canola growers in relation to weed control.  This contained some recommendations going beyond normal procedures for cultivating canola.  During this period, persons associated with Dovuro made various statements apologising for the incident, which are set out in the judgment below, one being couched in terms of failing its duty of care.

167               Mr Trevor Wilkins became aware of, and followed, these recommendations.  It is the claimed expense and losses from following these recommendations which is the subject of the proceedings.  There is no claim arising out of the emergence of any of the claimed weed species, and, indeed, there is no evidence that any such plant germinated anywhere in Australia from seeds supplied by Dovuro.  There was no governmental action in any other State.  The Applicants (the First Respondent here) sued under Pt IVA of the Federal Court of Australia Act 1976 on behalf of themselves personally and as representatives of persons defined as follows:

 “i.      a group of identified canola growers who purchased and seeded Karoo canola seed in 1996, supplied by the First Respondent to distributors in Western Australia, and which allegedly included seeds of the plants known as Cleavers, Redshank and Field Madder and who claim costs of past and ongoing management for containment of eradication of the possibility of the weed contained in the Canola seed, production losses and down grading of their Canola crop with subsequent loss of income, together with losses of a capital nature associated with devaluation of their properties;  and

ii.                  all other Canola growers who purchased and seeded Karoo canola seed in 1996, supplied by the First Respondent to distributors in Western Australia, and which allegedly included seeds of the plants known as Cleavers, Redshank and Field Madder and who suffered loss in having to undertake past and ongoing management for containment or eradication of the possibility of the said weed, production losses and down grading of their Canola crop with subsequent loss of income, together with losses of a capital nature associated with devaluation of their properties.”

168               The Applicants claimed in negligence and for breach of s 52 of the Trade Practices Act 1974 (Cth) against each of Dovuro and Cropmark.  In addition to denials, each of Dovuro and Cropmark pleaded contributory negligence.  Dovuro cross claimed against Cropmark in contract and for contribution or indemnity, and Cropmark cross claimed against Dovuro for contribution or indemnity.

169               The trial proceeded on the basis of deciding liability as to claims and cross claims, with damages postponed to a later date.  His Honour found Dovuro liable in negligence, making the following declarations:

 “1.     DECLARE that Dovuro Pty Limited owed a duty of care to the appellants and group members and that it was in breach of such duty.

2.                  DECLARE that some damage was suffered by the appellants as a result of such breach of duty.”

170               His Honour rejected the allegation that all purchasers of canola seed were guilty of contributory negligence, whilst leaving open the possibility of contributory negligence being found in relation to individual Applicants at the damages assessment stage.  His Honour rejected the s 52 case against Dovuro.

171               His Honour dismissed all the Applicants’ claims against Cropmark, and rejected the cross claim by Dovuro against Cropmark.  The consequence is that Cropmark is dismissed from the proceedings, which now continue against Dovuro on damages. 

172               Dovuro appeals against the declarations made against it in favour of the appellants, and against the dismissal of its cross claims against Cropmark.  Cropmark, in addition to supporting the decision on the cross claim, relies upon a notice of contention.  There is no issue on appeal as to the findings concerning s 52 or general contributory negligence.

NEGLIGENCE

173               The Applicants’ claims for negligence against each of Dovuro and Cropmark are in issue – the latter because of Dovuro’s claim for contribution.  Because of some issues which emerged in argument, it is necessary to go back to the case which was pleaded.  The critical portions of the Further Amended Statement of Claim are as follows (substituting “Dovuro” for First Respondent and “Cropmark” for Second Respondent):

 “5A.   At all material times Cropmark knew or ought to have known the imported canola seed contained or may contain undesirable weed seeds including cleavers, red shank and field madder.

5B.      At all material times Cropmark knew or ought to have known the imported canola seed was to be sown by farmers including the Appellants and represented parties to grow commercial crops of canola.

5C.      At all material times Dovuro knew or ought to have known that the imported canola seed contained or may contain undesirable weed seeds including cleavers, red shank and field madder.

6.                  Dovuro sold the Canola seed to seed merchants.

7.                  The seed merchants sold the said Canola seed to the Appellants and represented parties.

8.                  Between April and September 1996 the Appellants and represented parties sowed the said seed.

9.                  In June 1996 the State of Western Australia declared the weeds cleavers, red shank and field madder as “declared plants” under Section 12 of the Seeds Act (WA).

10.              At all material times the Respondents represented the said Canola seed to be clean meaning thereby that it was free of undesirable weed seed species.

11.              The Respondents failed to warn the Appellants and represented parties of the presence or potential presence of the said weed seed in the Canola seed.

12.              The Appellants and represented parties claim that in the circumstances of paragraphs 1 to 10 hereof the Respondents owed a duty to the Appellants and represented parties to exercise reasonable care to avoid injury to them.

PARTICULARS OF NEGLIGENCE

13.              The Respondents were negligent in that it, by its servants or agents:-

(i)                 failed to advise the Appellants and represented parties of the presence of the said weed seed in the Canola seed;

(ii)               failed to place any warning on the containers or bags of the Canola seed that the seed therein contained or may contain the said weed seed;

           (iii)       failed to generally advise the Canola seed growing industry of the presence or possible presence of the said weed seed in its Canola seed.

…

22.              The Appellants claim:

…

(ii)        damages.”

174               Dovuro responded in its Second Further Amended Defence as follows:

 “6.     The First Respondent does not admit paragraph 5A of the Amended Statement of Claim.

7.                  The first Respondent does not admit paragraph 5B of the Amended Statement of Claim.

8.                  The First Respondent denies paragraph 5C of the Amended Statement of Claim.

9.                  The First Respondent admits paragraph 6 of the Amended Statement of Claim insofar as it relates to the seed in paragraph 4 and otherwise denies paragraph 6 of the Amended Statement of Claim.

10.              The First Respondent does not admit paragraph 7 of the Amended Statement of Claim.

11.              The First Respondent does not admit paragraph 8 of the Amended Statement of Claim.

12.              In relation to paragraph 9 of the Amended Statement of Claim, the First Respondent admits that the Minister responsible for the administration of the Seeds Act 1981 (WA) made declarations in relation to seeds of cleavers, redshank and field madder under section 12 of the said Act in or after June 1996 and otherwise does not admit the matters pleaded in paragraph 9 of the Amended Statement of Claim.

13.              The First Respondent denies paragraph 10 of the Amended Statement of Claim.

14.              As to paragraph 11 of the Amended Statement of Claim, the First Respondent admits that it did not warn the Appellant or other persons whom the Appellant claims to represent of the presence or potential presence of seeds of cleavers, redshank or field madder in the Karoo canola seed which it had sold to seed merchants prior to those species becoming the subject of declarations under section 12 of the Seeds Act 1981 (WA).  The First Respondent denies that it had any duty to warn those persons of those matters.  If and in so far as paragraph 11 of the Amended Statement of Claim is intended to allege any matters not covered by the foregoing, the First Respondent does not admit any such further matters.

15.              The First Respondent denies paragraph 12 of the Amended Statement of Claim.

…

18.              The First Respondent denies that the Appellant is entitled to the relief sought in paragraph 22 of the Amended Statement of Claim.

19.       By way of further defence if (which is denied) the First Respondent owed a duty of care and was in breach of that duty, no breach of duty on its part was causative of any damage to the Appellants or any of the representative parties.”

175               Cropmark responded in its Amended Defence as follows:

 “4.      In answer to paragraph 5 of the cross-claim, Cropmark:

(a)                admits that the contract No. 95-002 dated 8 September 1995 contains, under the heading “Quantity and Description”, inter alia, the following words:

                        “Maximum 0.5% weed and free of undesirable species including brassica and rumex in working sample”

(b)                says that the reference in the words quoted in the preceding sub-paragraph to “working sample” is a reference to an industry standard for sampling bulk seed;

(c)                says that the reference to “undesirable species” is a reference to the industry meaning given to that term and further says that at no time relevant to the agreement between Cropmark and Dovuro were the weed species known as cleavers, redshank or field madder “undesirable species”;  and

(d)                otherwise does not admit the allegations in paragraph 5.

5.                  Cropmark admits the allegations in paragraph 6 of the cross-claim.

6.         In answer to paragraph 7 of the cross-claim, Cropmark:

(a)               admits that prior to the conclusion of an agreement between Dovuro and Cropmark, Dovuro made known to Cropmark that the canola seed was to be shipped by Cropmark to Dovuro in Australia and that Dovuro proposed to sell the seed in Australia;  and

(b)               shortly prior to confirming shipping details, Dovuro requested that certain of the canola seed be shipped to Western Australia;  and

(c)               otherwise does not admit the allegations in paragraph 7.

            7.         As to paragraph 8 of the cross-claim, Cropmark admits that the agreement between Cropmark and Dovuro should be interpreted in accordance with New Zealand law but otherwise does not admit the allegations in paragraph 8

8.                  In answer to paragraph 9 of the cross-claim Cropmark:

(a)               admits that there were quantities of:

(i)                 cleaver weed seed present in line numbers 165B1, 170B and 170B1 of the relevant canola seed;

(ii)               redshank weed seed present in line numbers 161B, 161B1, 161BA, 165B, 165B1, 166B2, 166BA, 170B1, 175B, 175B1, 175B2, 176B1 and 176B;

(iii)             field madder weed seed present in line number 165B1.

(b)               says that the quantities of cleavers, redshank and field madder were less than 0.5% in the working sample;

(c)               says that the presence of the quantities referred to above is not a breach of the agreement between Cropmark and Dovuro;

(d)               says that the existence of cleaver, redshank and field madder in the canola seed was specifically drawn to the attention of Dovuro prior to shipment and/or prior to receipt of the canola seed in Australia;

(e)               says that Dovuro knew and understood all the matters in the preceding sub-paragraph, notwithstanding that knowledge accepted delivery and at no stage relevant to the contract did Dovuro assert that the canola seed did not comply with the contract.

9.                  In answer to paragraph 10 of the cross-claim, Cropmark:

(a)               says that cleaver, redshank and field madder are not undesirable species as that term is understood in the industry;

(b)               says that as at the date of contract, shipment and acceptance cleaver, redshank and field madder were not declared, scheduled or prohibited under any of the Australian States Seeds Acts;

(c)               says that although subsequently in Western Australia, cleaver, redshank and field madder became declared, that was neither reasonable nor foreseeable and subsequently redshank and field madder have been removed from the relevant lists in Western Australia;

(d)               denies that the canola seed was not reasonably fit for the said purpose;

(e)               otherwise denies the allegations in paragraph 10.

10.              As to paragraph 11(a) of the cross-claim, Cropmark:

(a)               admits that it delivered the Karoo canola seeds contained in line numbers 161B, 161B1, 161BA, 165B, 165B1, 166B, 166B1, 166B2, 166BA, 170B, 170B1, 174B, 174B1, 174B2, 174B3, 175B, 175B1, 175B2, 176B and 176B1 to Dovuro;

(b)               says that the seed was grown and harvested by farmers other than Cropmark on farms which were inspected by Dovuro from time to time;

(c)               says that the seed was cleaned and packaged by Seedlands, being the nominated contractor of Dovuro;  and

(d)               otherwise does not admit the allegations in paragraph 11(a).

11.              Cropmark admits the allegations in paragraph 11(b) of the cross-claim.

12.       As to paragraph 11(c) of the cross-claim Cropmark:

(a)               admits that it supplied canola seed to Dovuro knowing that:

(i)                 line numbers 165B1, 170B and 170B1 contained seeds of cleavers;

(ii)               line numbers 161B, 161B1, 161BA, 165B, 165B1, 166B2, 166BA, 170B1, 175B, 175B1, 175B2, 176B1 and 176B contained seeds of redshank;

(iii)             line number 165B1 contained seeds of field madder.

(b)               repeats matters pleaded in answer to paragraph 9 of the cross-claim;

(c)               otherwise does not admit those allegations.

…

            17.       In further answer to the whole of the cross-claim Cropmark says as follows:

(a)               Cropmark complied with the terms contained in contract No. 95-002.

(b)               At no time relevant to the agreement between Cropmark and Dovuro were the species cleaver, redshank or field madder understood in the industry as being undesirable species in connection with the supply of canola;

(c)               The conduct of the Western Australian Agriculture Department in and about June 1996 in declaring as prohibited weeds was not reasonable foreseeable by Cropmark and could not be reasonably foreseen;

(d)               In the alternative, if cleaver, redshank and field madder are found to be undesirable species as that term is understood in the industry, the existence of quantities of those species was disclosed to Dovuro and known by Dovuro prior to acceptance of the canola seed, notwithstanding which Dovuro accepted the seed as being in compliance with the agreement between Cropmark and Dovuro;

(e)               It was a term of contract No. 95-002 that Cropmark would not be liable for any loss due to any cause or circumstances beyond its control.”

176               The case pleaded was that there was a duty to exercise reasonable care to avoid injury to the appellants and represented parties.  This may be described as a conventional Donoghue v Stevenson pleading which would encompass injury to person or property – here, plainly, the latter.  This may be significant because of the use which is sought to be made of a concession by counsel for Dovuro at the trial that there was a duty.  There was no allegation of damage in the pleading, and apparently there was no further formal particularisation of the claims for damages.  Counsel explained that this was done in detail in the affidavit of Mr Trevor Wilkins.  The breach of duty (or negligence) alleged was a failure to inform and warn.

decision below

Dovuro

177               The trial judge accepted the following submissions of counsel for the Applicants in finding against Dovuro:

 “16.1  Both respondents are manufacturers of the seed.

16.2          Both respondents had a duty to the consumers of the seed to exercise reasonable care not to expose the consumers to a risk of injury of which they knew or ought to have known.

16.3          The risk of injury was to introduce a weed seed to the consumers’ farm that had the potential to cause him loss in eradicating it or in restricting his income potential in the use of his farm.

16.4          Both respondents understood the seed was to be marketed in Australia over a vast area with different soil types, climatic conditions, established weeds, State Governments, legislation and variations within state boundaries.  Such diverse distribution made it incumbent upon the respondents to consider the potential risk of the known weed seeds in their product.

16.5          Both Respondents failed to exercise adequate quality control to detect and remove undesirable weed seeds.  The inadequacy of the quality control is evidenced by the diversity of weed seeds that had been declared in Australia and Western Australia, the number of weed seeds in the working samples, lack of adequate inspections of crops by either Respondent, preparedness of both Respondents to rely on inspections of crop by a third party being the officers of MAF and preparedness of both respondents to rely on the seed analysis certificates getting passed by the authorities rather than exercising their own control and judgment as to the quality of the product.

            …

16.7     The First Respondent has admitted “breach of duty” in writing through Rath and White.  The admissions were not rejected by Tapp, the General Manager of the First Respondent.  They were made by Rath in an attempt to be honest and open with the growers.  We submit these admissions can and should be given full weight by the Court.

16.8          The respondents could have discharged their duty of care by providing a warning or, perhaps, by labelling the bags thereby advising the consumers of the presence of the weed seeds.

16.9          The product was distributed in WA through only three distributors.  The warning could have been published by way of documents accompanying the goods or by tags attached to the bags at bagging (Cropmark seed analysis certificates were available at that time) or delayed the bagging until MAF certificates were available, or subsequently before delivery.

16.10      It was foreseeable the State Government would take action to contain, evaluate and deal with the potential threat to the Canola seed and oil market.  The action taken by the Government and the response by the Appellant was what might reasonably be expected.

16.11      The appellant has suffered damage including incurring the cost of additional herbicide, loss of grazing, loss of contracting opportunity, interruption to farm plan and associated costs (fuel etc).”

178               The submissions on behalf of the Applicants, which were accepted by his Honour in terms, inter alia:

(1)               defined the risk of injury (16.3);

(2)               referred to inadequate quality control (16.5) but not in a manner which alleged it was a breach of duty – not surprisingly, as no such breach was pleaded;

(3)        in accordance with the pleading, identified the breach as failure to warn or label (16.8, 16.9).

Cropmark

179               The trial judge came to a different result in relation to the negligence case against Cropmark.  It had sent analyses of the seed to Dovuro which revealed the presence and nature of the foreign seeds.  His Honour held that it would be unreasonable to require Cropmark to give a warning to those who acquired through Dovuro, referring to Holmes v Ashford [1950] 2 All ER 76 and Voli v Inglewood Shire Council (1963) 110 CLR 74 at 86.  His Honour also held that Cropmark was not to know whether the foreign species would be a problem in the particular areas in Australia where the seed was to be sown.  The contractual cross claim was also dismissed.

Threshold question on appeal – duty of care

180               Cropmark had argued below that it owed no duty as the loss claimed was pure economic loss.  In the end the trial judge did not need to deal with that question.  As the issue of Cropmark’s negligence is relevant to the contribution claim against it, it takes the point again on appeal.  Following submissions on the point by Mr Donohoe QC for Cropmark, Mr Rayment QC for Dovuro sought leave to take the same point, in effect adopting the argument which had been put by Mr Donohoe QC for Cropmark.  It was objected that counsel for Dovuro had conceded the issue of duty in closing submissions at the trial.  This is correct.  As the pleadings alleged a duty to avoid injury, not economic loss, there is some question as to the content of the concession.  Furthermore, consideration of the written submissions of Dovuro at the trial reveal that the substance of the point was raised, but in a rather different context.  It was put that there was no causal link between any breach of duty and the loss, and that, in particular, any damage was incurred by responding to the reactions of Ag West rather than the presence of weed seeds, which  was damage of a different kind to that which gave rise to the duty and was not foreseeable.  It is, however, clear that the precise point now sought to be relied upon was not put in address on behalf of Dovuro. 

181               The issue sought to be relied upon by Dovuro was squarely raised by Cropmark before the trial judge, and is raised by it on appeal.  Dovuro denied the existence of a duty on the pleadings and the pleadings were never amended.  The concession in question was only made in closing submissions.  Counsel for the Applicants accepted, when the issue was raised during argument on appeal, that the concession had not affected the way the case had been presented below.  There is no relevant prejudice to the Applicants.  I cannot see any basis for imputing any hidden tactical motive to counsel for Dovuro in making the concession in final address, and none was suggested in argument.  In those circumstances, there is no sound reason why the point cannot now be relied upon by Dovuro as well as Cropmark, although the consequences for costs would need to be considered (Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438;  Coulton v Holcombe (1986) 162 CLR 1 at 7.10-8.1;  Banque Commerciale SA, en liquidation v Akhil Holdings Ltd [1990] 169 CLR 279 at 283-4, 288, 290, 304-6).

182               It is submitted that neither the canola seed itself nor any other property of the Applicants was damaged.  The damages claimed were, or would be, pure economic loss, viz, losses or outgoings incurred as a result of observance of the prophylactic measures advised by Ag West, backed up by the declarations under the legislation, all occurring after the goods had left the control of the respondents.  It was submitted that the facts here cannot be brought within the principles discussed in Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad (1976) 136 CLR 529 and Perre v Apand Pty Ltd (1999) 198 CLR 180 (“Perre”).  Perre (which was not decided by the High Court at the time of the argument below) requires the closest scrutiny.  It has some obvious similarities with the facts of the present case, and is the most comprehensive recent analysis of the law by the High Court relevant to the issue here.

183               Perre confirms that the damage claimed here is only economic loss (pars 3, 165-174, 242-247, 327).  In that case, there was the possibility that the disease bacterial wilt may have entered the appellant’s land (hence the Western Australian 20km quarantine zone) but no evidence that this had occurred (Perre pars 24, 162).  The position here is similar (Perre pars 235, 236).  Some seeds of the species complained of may have been supplied and may have been sown, but there is no finding that they were, or that any have germinated or survived after germination.  The loss, as submitted, has been prophylactic rather than physical (Perre pars 47, 166, 320-323).  The relevant portion of the judgment below in this case was as follows (from par 103):

 “Their [the appellants’] case does not depend on proof that the seed delivered to them was in fact contaminated, but merely on proof that it was reasonably suspected of being contaminated.  Ag West did not limit its advice about precautionary measures to those farmers who were found to have received contaminated seed;  it gave the advice to all farmers who had received Karoo canola seed.  In the case of any farmers who received seed from a line that, on analysis, showed no contamination, there may be a question about the reasonableness of the farmers claiming from Dovuro the cost of following that advice, but there can be no such question in relation to those who received seed from a line known to be contaminated.  Plainly, a precautionary approach was warranted.  Dovuro’s own expert witness, Mr Falconer, agreed with this.”

It will be recalled that the trial judge accepted the appellants’ submission that Ag West’s action was foreseeable.

184               It is neither profitable nor appropriate that I should attempt a comprehensive statement of the circumstances in which a duty of care to avoid economic loss will arise, or attempt to reconcile and restate, in my words, what the various members of the High Court said in Perre.  That task has already sparked a lively literature.  Rather, I will discuss the factors which, in my opinion, negate the imposition of such a duty in this case, in the light of those judgments.  It can be safely said, however, firstly, that a duty of care to avoid economic loss is still the exception rather than the rule (Perre pars 4, 71), and, secondly, that reasonable foreseeability is necessary but not sufficient to give rise to the duty (Perre pars 27, 66, 186). 

185               It is important to note that the seed species of which complaint is made are simply certain types of plants which occur naturally and are not poisonous, noxious or diseased in themselves, and do not transmit disease or noxious qualities to stock or humans or even to the canola seed either as part of the seed mix or in the ground.  All were already present in Western Australia.  In this respect, the present case is unlike Perre and, for example, Weller & Co v Foot & Mouth Disease Research Institute [1966] 1 QB 569.  His Honour said below (at par 126):

 “However, as is common ground in this proceeding, it is virtually impossible to obtain a substantial quantity of cropseed that is totally free of foreign seed.   Whether the presence of particular foreign seed amounts to a substantial defect in the quality of the cropseed depends not only upon the quantity of the foreign seed but also on the place where the crop is sown.  Relevant factors include climate, the season and circumstances of sowing the crop, and the presence or otherwise of the foreign seed in the place where the crop is to be sown.”

Indeed, according to evidence, a weed is simply a plant growing where it is not wanted.  According to Mr Carmody, the problems with foreign plant species in a canola crop is competition with the crop plant, together with, in some cases, difficulty of harvesting the desired crop without including foreign seeds.  It is thus a somewhat special use of language to describe having less than 0.5% of foreign seed in a batch as contaminating the batch.

186               Next, the supply of the seed in question to the Applicants was in the ordinary course of commerce (Perre pars 345-349, 419).  In the case of the witnesses called, the seed was purchased from seed merchants (none of which is sued), which had purchased from Dovuro, which, in turn, had purchased from Cropmark.  The loss was sustained by the contracting party (Perre par 200).  It can be assumed that any representative party would have acquired the seed from an intermediate commercial source.  The complaint is a typical quality of goods claim with normal consequential losses (Perre par 115, 345).  In those circumstances, there is a web of contractual relationships (Perre pars 122, 353).  Tort and contract liability may co-exist in some circumstances, but the court should be slow to impose tortious liability in relation to quality complaints where there is a comprehensive contractual regime applying to the parties to the litigation (Perre pars 352, 414).  This is particularly important in relation to the field of sale of goods, which lies at the heart of commercial activity, and involves interstate and international trade (Perre pars 121, 414).  Sale of goods is also a field in which State and Commonwealth legislatures have intervened in circumstances where that has been deemed appropriate, starting with various Sale of Goods Acts, and including the Trade Practices Act 1974 (Cth), the various State Fair Trading Acts and Contract Review Acts (Perre pars 39, 61, 62, 68, 374). The circumstance that representative actions may be brought more readily in tort than in contract is not a reason for extending tortious duties (Perre pars 197, 404, 405).  There is no need in circumstances such as the present to strain for a tortious cause of action because a party chooses not to sue other parties in contract.

187               Another factor of importance is that seeds and weeds are the subject of a comprehensive system of international, national and state regulation (Perre pars 121, 160, 162, 163, 183, 236, 301, 349, 352, 372, 428).  It would unduly burden this judgment to set this out in detail, but I append a schedule which outlines the system, with particular reference to Western Australia.  It suffices for present purposes to say that there was ample power to regulate or prohibit undesirable plant species and that power had been considerably exercised in the past.  Given that whether the plants in question here were defective depends on the factors identified by his Honour in the passage from par 126 quoted above (and probably others), it surely could be assumed that the regulatory system would be designed and administered to take account of these factors.  In this connection, a critical distinction between Perre and the present case is that the seed species were not prohibited or regulated anywhere in Australia or by the OECD system at the time the seed was supplied by each of Cropmark and Dovuro (Perre pars 59, 160, 162, 163, 183, 236, 301, 349, 352, 372, 428).  The trial judge was critical of the manner in which the system was administered by the Commonwealth and State authorities.  Even if this criticism was justified, it would provide no reason for the extension of tortious duties.  The labelling of the goods also complied with both the international scheme and the Seed Industry Association of Australia Limited Code of Practice.

188               Another significant difference between this case and Perre is that there is no finding, indeed, no evidence, that either Dovuro or Cropmark knew of the alleged deleterious nature of the species in question (Perre pars 67-69, 412-416, 419-422). Further, the trial judge expressly rejected a case of deliberate refusal to inquire.  Dovuro knew that both the Commonwealth and the Western Australian authorities received the certificates of analysis which revealed the presence of the species of seed in question and that Ag West had done its own testing in each case before release.

189               The trial judge’s consideration (and finding) of foreseeability of action by the Western Australian authorities was, as I have outlined, in the context of remoteness of damage, which differs from the present issue.  Even if it were not, the finding was a conclusion drawn from other facts, and so is liable to review according to the principles explained in Warren v Coombes (1979) 142 CLR 531.  The judge merely baldly accepted par 16.10 of the Applicant’s submission without explaining why.  He had earlier concluded that Ag West did not overreact to the situation, but that is a somewhat different question. 

190               Here, as I have said, Dovuro knew that the very certificates of analysis which revealed the species which caused the later action were provided to the relevant Western Australian authorities prior to release, and that Ag West did its own testing prior to release, and yet release was authorised.  Furthermore, the plants concerned were not exotic – they had been present in parts of Western Australia for many years.  The declarations of redshank and field madder were cancelled in due course.  As far as cleavers were concerned, Mr Carmody, an officer of Ag West, during a visit to Canada in 1995, learned of disadvantages for crushing of canola seed if cleaver seed was harvested with the canola seed.  On his return, he determined to seek the declaration of cleavers.  Another officer of Ag West, Mr Dodd, wrote to WAQIS on the topic at about the same time.  It is unclear whether this was his own initiative or sparked by Mr Carmody’s concern.  Nothing had eventuated by May 1996, and there is no evidence that this concern was made public or that it was shared by anybody else.  Indeed, there is no evidence of any warning in any textbook or other publication about problems with this plant species in connection with grain crops in Western Australia or any other part of Australia, and no evidence to suggest that any problem was recognised by those in this field prior to this incident.  As it happened, Mr Carmody was included in the working party formed by Ag West to consider the matter, and brought to it his particular knowledge.

191               What is required is reasonable foreseeability, judged according to the circumstances at the time of the alleged negligent action (or omission) (Perre pars 66, 186).  For the purposes at least of imposing a duty of care, that which caused the economic loss must have been in reasonable contemplation (Perre pars 111, 131, 132, 259) .  In my opinion, the objective circumstances which existed here at the time of release compel a negative conclusion.  The same answer may not necessarily follow in relation to foreseeability and remoteness of damage, which was the context in which the trial judge considered the issue or in relation to physical injury or damage (Fleming, The Law of Torts, 9^th ed, p 238; per Kirby J in Perre par 289, also pars 5, 27, 70, 131, 132, 186, 255, 259).  It is unnecessary to pursue those questions. 

192               Justification for introducing tortious liability into this particular web of contractual and legislative obligations is absent.  To do so would unnecessarily interfere with trade and traders (Perre pars 14, 114, 115, 146-148, 156, 299, 300, 345-350, 406-422, 414, 418-419, 421).  Furthermore, the position of a commercial buyer of agricultural seed from a seed merchant does not have any greater degree of vulnerability (Perre pars 10, 11, 104, 105, 113, 118-132, 149-151, 414-416, 422) to economic loss than any other purchaser of goods, and the supplier of the goods to the merchant has no greater control over the buyer than any other string supplier of goods.  The proximity of the parties is because each is in a contractual chain (Perre par 70).  The “wrong” or “default” of the supplier is no greater than that of any other supplier of goods who breaches express or implied warranties of fitness, merchantability and so on.  Indeed, it is difficult to distinguish the content of a duty imposed from the content of these warranties, but extends them to a purchaser down the line.  When the legislature considered this topic it restricted such remedies to consumer goods – see Div 2 and 2A of the Trade Practices Act 1974 (Cth).

193               To impose a duty in the present circumstances would lead to problems of indeterminacy (Perre pars 81, 102, 106-113, 142-145, 336-344.  At the moment, a supplier of goods for commercial use which do not threaten physical injury, is concerned only with liability to known contracting parties upon well-settled principles (Perre pars 38, 72, 100, 102).  If a duty is imposed, it will be owed to persons of whom it has never heard, in places of which it may have little, if any, knowledge, who may be susceptible to all kinds of economic loss.  The duty may not even be restricted to users of the seeds, but might include their clients, and so on.  It is not fanciful, for example, that the Australian Wheat Board might sue for a shortfall in wheat to fulfil export orders in the case of a large batch of defective wheat seed depressing production in a particular area.

194               Furthermore, there would be indeterminacy in the imposition of a duty (Perre pars 81, 102, 142-145, 336-344).  On the one hand, Perre establishes that foreseeability of economic loss is not sufficient (Perre pars 72, 111, 131, 132, 255, 259).  On the other, it is difficult to see how this claim can be distinguished from other contractual claims – including, but not limited to, sale of goods cases.  Not only would there be no bright line (Perre pars 7-8, 81, 169, 405), there would be no line at all save for a few smudges.

195               I have referred to a number of factors which distinguish this case from the decision of the High Court in Perre.  No other comparable case has been suggested.  The argument put to the trial judge by the Applicants that the case was to be considered on the basis that the weeds were “a dangerous substance” is plainly not tenable.

196               This leads me to the conclusion that it is not appropriate to impose a tortious duty of care upon suppliers of seed for agricultural purposes in Australia to avoid economic loss to purchasers of seed acquired in ordinary commercial channels where the alleged defect is the presence of seed of a plant species which is not in itself noxious, poisonous or otherwise dangerous to plants, animals or humans and which is not regulated or prohibited by or under Commonwealth or State legislation.

197               Since coming to this conclusion, I have had the advantage of reading the judgments of Branson J and Finkelstein J in draft.  Each of their Honours refers, by analogy, to the issue of avoidance of physical damage by the expenditure of money or the taking of action which leads to monetary loss.   This, itself, is a controversial question which, in my opinion, provides an inadequate springboard for solution of the present problem.  Analogy is a good servant, but a bad master.  If planting a seed of a plant which is regarded as a weed, but which has no other deleterious qualities, can be regarded as physical damage to property at all, it is physical damage of a peculiar kind, quite unlike some of the more striking examples which can be given, such as the escape of fire.  The analogy to which appeal is made would have applied more clearly in Perre than in the present case, as the risk there was disease, but was not selected as the bright line test to be applied.  This is not surprising.  There is even considerable debate in intermediate appellate courts as to the true scope of the decision of the High Court in Bryan v Maloney (1995) 182 CLR 609 (Fangrove Pty Ltd v Tod Group Holdings Pty Ltd [1999] 2 QdR 236;  Woollahra Corporation v Sved (1996) 40 NSWLR 101;  and Zumpano v Montagnese [1997] 2 VR 525).

198               There was no significant discussion of the overseas authorities during the course of argument.  I do not think that the position in Canada is at all clear.   The Canadian authorities were considered by the High Court in Perre, and were not regarded as decisive.  None of the Canadian cases referred to in the other judgments here was a product liability case.  The subsequent decision of the Supreme Court of Canada in Bow Valley Husky (Bermuda) Ltd v  Saint John Shipbuilding Ltd [1997] 3 SCR 1210 in my opinion reveals that the issue which arises here is far from settled in Canada.  It is also worth noting that the adherents of widest recovery in the Canadian cases cited apply the Anns v Merton London Borough test, which has been rejected by all High Court justices apart from Kirby J (see also Linden, Canadian Tort Law, 5^th ed, pp 380-398;  Feldthusen B, Pure Economic Loss in the High Court of Australia:  Reinventing the Square Wheel? (2000) 8 (1) Tort Law Review 33, particularly footnote 42). 

199               In any event, there is no particular reason why guidance should be gleaned from Canada rather than from other places in the common law world, including the United States of America.  Although I speak somewhat tentatively, as the matter was not argued, it is unlikely that recovery would be permitted in the United States in the present circumstances.  See American Law Institute – Restatement of the Law, Torts 2^nd Ch 14, particularly par 402A;  Prosser & Keeton on Torts, 5^th ed, p 708;  Sir Anthony Mason The Recovery & Calculation of Economic Loss at 22-24 in Torts in the Nineties, ed NJ Mullany (1997);  Seely v White Motor Co 403 P 2^nd 145 [1965];  Duffin v Idaho Crop Improvement Association 895 P 2^nd 1195 (Idaho 1995);  Pioneer Hi-Bred International Inc v Talley 493 SW 2^nd 602 (1973);  Miller v United States Steel Corporation 902 F 2^nd 573 (1990);  State of Louisana ex rel Guste v M/V Testbank 752 F 2^nd 1019 (1985);  East River Steamship Corporation v Transamerica Delaval Inc (1986) 476 US 858.

breach of duty – standard of care

200               In view of the conclusions of Branson J and Finkelstein J as to the duty of care, and as to the availability of that point to the appellant, I should go on to consider breach on the assumption (contrary to my view) that there was duty of care. Dovuro commences its attack upon the trial judge’s finding of breach of duty with three substantial difficulties:

1.                  The issue involves questions of fact and the trial judge had the advantage of seeing the witnesses.

2.                  The issue might involve questions of balancing and degree where appropriate weight must be given to the assessment of the trial judge.  Mere disagreement with the result would not normally justify appellate interference.

3.                  The apologies which were made by various officers of Dovuro. 

On the other hand, the decision of the High Court in State Rail Authority v Earthline Pty Ltd (in liq) (1999) 73 ALJR 306 makes clear that an intermediate appellate court cannot avoid the responsibility of properly scrutinising trial judgments. 

201               The supplier of seeds, for the purposes of the law of tort, is not an insurer and gives no warranty.  The obligation is to exercise reasonable care.  In Wyong Shire Council v Shirt (1979-1980) 146 CLR 40, at 47-8, Mason J (who delivered the leading judgment) said:

 “In deciding whether there has been a breach of the duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant’s position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff.  If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk.  The perception of the reasonable man’s response calls for a consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have.  It is only when these matters are balanced out that the tribunal of fact can confidently assert what is the standard of response to be ascribed to the reasonable man placed in the defendant’s position.

…

But, as we have seen, the existence of a foreseeable risk of injury does not in itself dispose of the question of breach of duty.  The magnitude of the risk and its degree of probability remain to be considered with other relevant factors.”

(See also Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 554).

202               It is for the Applicant, inter alia, to identify the risk and to specify the precautions which should have been, but were not, taken.  The first and, in this case, the critical, question is the reasonable foresight of risk and an appreciation of the magnitude of it, the degree of probability of it occurring, the likely consequences of it and so on.

203               In considering the judgment, it is helpful to go back to the structure of the Applicant’s case as it was presented.  The principal evidence led on the issue of breach of duty was that of Keith Donald Glasson, the managing director of Pioneer Hi-bred Australia Pty Ltd, who was the vice-president of the Seed Industry Association of Australia Ltd and chair of that Association’s Plant Breeders and Proprietary Marketers Group.  The relevant part of his affidavit was in the following terms:

 “5.     I have been shown the Seed Analysis Certificates being documents Nos 56 to 63 inclusive from the 1^st Respondent’s List of Documents.

6.                  I have been asked to assume that none of the labels on the bags of Karoo Canola imported into Western Australia by First Respondent and distributed to Canola growers in that State in 1996 did declare the presence of the weed seeds shown on those Certificates nor did those labels declare the weeds which were Declared in that State.

7.                  Truth in Labelling required in 1996 that the customer, in this case the farmer, be informed of the presence of the weed seeds in the Canola seed that he or she was acquiring.

8.                  I am asked to assume that this notification was not given by the First Respondent.  This was contrary to the seed industry accepted code of practice followed in 1996 and now about to be codified in the SIAA Code of Practice:  Labelling and Marketing of Seed for Sowing which I annex hereto and mark with the letter “A”.

9.                  In particular I refer to Section 6 thereof.

10.              Pioneer, faced with lines of Canola which had weed seeds in the bulk search as set out in the said Seed Analysis Certificates would have re-graded the Canola Seed to remove the vast majority so as to ensure that the ultimate consumer of that seed received seed that was reasonably fit for the purpose of broad acre planting.

11.              Those weed seeds still present after such re-grading would then be declared on the label if they had Declared status in their State of destination, or recorded on the label as “other seeds” as a percentage.

12.              If after the re-grading the bulk search still showed the presence of weed seeds as identified on those Seed Analysis Certificates, Pioneer officers would make enquiries through Pioneer agents in the State of destination and the Department of Agriculture in that State as to whether those weeds were either present and/or undesirable in the district or State where it was to be planted.

…

18.              The weeds known as Cleavers, Redshank and Field Matter [sic] were, I am asked to assume were not declared or prohibited in the State of Western Australia at the time of the said importation.  Their characteristics were however such as to make them undesirable for broad acre farming.”

In oral evidence, Mr Glasson amended the words in inverted commas in par 11 to read:

“… weed seeds rather than “other seeds”.”

Most of this evidence was admitted over objection.  Mr Glasson was also critical of the standard of the seed itself, as was Mr Carmody from Ag West, but that was not the basis of the pleaded case nor of the finding of his Honour.

204               The cross-examination of Mr Glasson was very effective, as it quickly became apparent that he had misread the standards of the Association of which he was vice-president,  and that, in fact, the labelling of this seed met the relevant standard.  This caused the principal support for the pleaded case to collapse.  It would not have been at all surprising if the judge had completely rejected Mr Glasson’s evidence.  The topic of labelling good practice – which was the negligence pleaded – is dealt with at pars 74-89 of the judgment, and Mr Glasson’s evidence is dealt with between par 74 and par 80.  I confess to being left in some doubt as to the precise finding made by his Honour in relation to Mr Glasson’s evidence.  His Honour said that the only challenge in the end was to the evidence he had given about talking to his agents and departments about particular weeds.  This comment must relate to the evidence other than that relating to labelling because, as I have said, cross-examination destroyed the essence of the case made by Mr Glasson in this respect.

205               Mr David Nicholas, the manager of Ag West seed quality, gave the following evidence in his affidavit:

 “9.     As a major supplier of Canola seed over a number of years, Dovuro had had close contact with the Canola industry and relevant government departments such as the Department of Agriculture of Western Australia.

10.              My concerns over the risks of importing seed from outside Western Australia that contain not only prohibited weeds but also undesirable weeds had been communicated to Bill Tapp and other representatives of Dovuro on several previous occasions in general discussion regarding the preference for locally produced certified Canola seed.”

206               In oral evidence, Mr Nicholas gave two examples – one was a claim that Pattersons Curse had appeared in stands of canola which had been grown from seed provided by Dovuro from interstate, and the other an occasion where some wild radish seeds were in seed which had been brought in from South Australia.  He also said that there had been general discussions with Dovuro personnel concerning the Western Australian certified seed arrangements, in the course of which reference was made to the risk of interstate seed bringing in undesirable, though not prohibited, weed species.  There was no denial of this evidence of Mr Nicholas. 

207               The evidence of Mr Nicholas, and that part of the evidence of Mr Glasson which was available for acceptance by the judge, were capable of establishing:

1.                  That undesirable weed seeds could be imported into Western Australia, although not declared or otherwise prohibited.

2.                  That local agents or merchants, together with local departmental officers, would be a source of information as to what weeds were regarded as undesirable.

208               This might have been an available foundation for rejecting Dovuro’s contention that it was entitled to simply rely upon the regulatory scheme.  However, it does not establish that the seeds in question here at the concentration shown by the analyses were regarded as undesirable weeds in the wheatbelt of Western Australia at the relevant time.  It is not as if the weeds were unknown or exotic in any real sense.  As has been pointed out, they had all existed in Western Australia for some time, although perhaps not in the wheatbelt.  Mr Tapp gave evidence in his affidavit that:

 “Over the years prior to 1996, I had inspected many crops and was aware of cleavers, redshank and field madder.  None of these weeds represented a weed problem in any of the cropping areas I was familiar with.  In my opinion, and to my knowledge, the weeds of greatest concern to the canola industry are the wild Brassica weeds, because they contaminate canola oil and compete vigorously with the canola crop.”

He said in his oral evidence that he had seen cleavers for 20 years adjacent to cropping country and did not agree that they were generally undesirable or of concern for cropping.  He was not challenged on that evidence.  Indeed, Mr Tapp accepted that if he had any concern about weeds, then he made appropriate inquiries, but said that based upon his experience he did not regard these as weeds of concern.

209               As I have said in dealing with the duty of care, there was no evidence that the weeds in question, particularly cleavers, were or should have been known to have been of concern at the relevant time and place.  The weeds were not revealed as being of concern under the comprehensive regulatory system.  There was no evidence led by the Applicants from any local agronomist or seed merchant to establish that there was concern about the weeds.  No publicly available literature was tendered to establish that fact.  No textbook was tendered.  There was no bulletin from Ag West or any other Department of Agriculture warning of the risk. 

210               A significant finding of the trial judge was that Dovuro should have asked Ag West about the suitability of the extraneous seed species, and that if it had done so, it would have learned of the risk that they, in particular cleavers, would pose if sown in the Western Australian wheatbelt.  The first problem with this finding is that Dovuro knew that Ag West  had analysed and cleared samples of the very seed.  It seems curious to demand that further inquiry be made of the same government department.  The second problem is that it is now known, as a result of this case, that Mr Carmody, the Ag West officer who harboured a particular concern about cleavers, had ventilated those concerns within Ag West and was a proponent of having cleavers declared in Western Australia long before the events in question here, without any result.  His concerns were kept to the bosom of the Department.  There is no basis upon which it can be held that the private view of individual officers could be regarded as the view of Ag West at the relevant time.

211               Cropmark called Mr Peter Falconer, an agricultural scientist, who was familiar with farming and agronomy in both New Zealand and Western Australia.  He has been consulting in Western Australia since 1962, and his company has clients throughout the agricultural areas of that State.  He has also managed several farms in Western Australia and owns a farm in that State.  The substance of his evidence was as follows:

 “5.      I have been asked to comment on two specific issues as set out below:

5.1              The likelihood of cleavers, field madder or redshank (“the weeds”) becoming a problem in Western Australian agricultural crops;  and

5.2              The effect of cleavers, field madder and redshank on canola crop production.

6.                  I believe that there is little, if any, likelihood of any of the weeds becoming a problem in Western Australian crops in the agricultural area.  My reasons for this statement are as follows:

6.1.1        The weeds have been present in Western Australia for many years without becoming generally established in the wheat belt.

6.1.2        The weeds require a longer growing season than is normal in the wheat belt area.

6.1.3        The weeds would all be controlled by the normal spray and other weed control measures adopted as normal practice in the wheat belt.

7.                  In relation to the second question, as would be the case with any severe weed competition, the production and quality of canola would suffer if there was a heavy burden of any one of the weeds.  It needs to be recognised, however, that the weeds are relatively slow growing in the early stages and would therefore tend to be smothered by the aggressive growth of a normal canola crop unless they were very thick.

8.         Further, I am informed that the percentage of the weeds in the imported canola seed is very small as the majority of lines of the canola seed imported from New Zealand contain 99.9% canola seed and the lowest percentage of any line is 99.7%.  I believe that at that level there would have been no discernible effect on the resultant canola production or quality.”

212               Mr Falconer was not shaken from this opinion in cross-examination, but did give the following evidence:

 “Would you ever ring or contact the manufacturer or provider of the seed to ascertain the identity of weeds that may be in the seed? --- Yes.

Do you do that often? --- Frequently.

In relation to canola, have you ever made that enquiry? --- No.

Why not? --- Because the certification certificates have been quite adequate to provide that information.

When you refer to the certification certificate, what are you referring to? --- Certification certificate issued by the Department of Agriculture.  Their seed testing division.

Is that the analysis? --- Yes.

If you see on the analysis the presence of weed seed but the weed seed not being identified, is that a circumstance that would lead you to enquire as to the identity of the weed seed? --- If it was from an area that I wasn’t familiar with and knew what weed seeds were present, yes, it would prompt further enquiry.

So you would use your considerable professional expertise in deciding whether or not you would make an enquiry --- Yes.

Is it fair to say that obviously your expertise is greater than what you would expect from the average farmer? --- Yes.”

213               The other independent evidence from an agronomist arose in a somewhat unusual fashion.  Mr Rudolf Kudnig was the technical manager for Dovuro.  He inspected the crop in New Zealand.  In his affidavit, he said:

“I did not know what cleavers or redshank looked like at that time, because these are not common crop weeds in Australia and to my knowledge, have never presented a problem in canola crops in Australia.”

In his oral evidence, he said that he learned on his visit that cleavers existed in crops in the district in which the seed was grown.  His Honour seemed to think that he saw cleavers in the crop, but that is contrary to the evidence.  When pressed in cross-examination as to his reaction when he saw that there were cleavers revealed by the Cropmark analysis, he said he went and spoke to Mr Michael Moerkerk, who he believed was a leading weed scientist in Australia, located at Horsham, where Mr Kudnig was also based at that time.  He told him that the seed was going to be marketed in areas of low rainfall and acid soils in the drier regions around southern Australia, and asked him about the weeds which were disclosed.  His evidence was:

 “He told me that he didn’t believe that those weeds would grow in the area where the seed was going to be sold and that the weeds were from areas that were high rainfall, alkaline soils, wet, swampy regions and that the seed was being sold into low rainfall, predominantly acid soils, light sandy type soils and it didn’t suit those weeds whatsoever.”

Mr Kudnig said that Mr Moerkerk made some books available from his library to enable Mr Kudnig to research the weeds a bit further.  Mr Kudnig put the conversation as shortly after the Cropmark analysis was obtained.  He thought the seed was already pretty much on the docks but he was unable to say whether it was actually released and being sown or not.  It took place maybe a month or a couple of months prior to the discovery of the problem in Western Australia, when Mr Moerkerk was engaged by Ag West as a consultant, and following which there was further co-operation between Dovuro and Mr Moerkerk with spraying trials and the like. 

214               In view of the way the evidence came out on Friday, 30 July 1999, the trial judge indicated to counsel for Dovuro that he would not be prepared to accept it unless there was corroboration.  On Monday, 2 August, Mr Moerkerk swore an affidavit in which, after dealing with his qualifications, he said:

 “4.     I have known Justin Kudnig for some years.  In 1996 he came to see me in my office in Horsham.  I cannot now recall the date when he came to see me.  There was a time in mid 1996 when I was contacted by members of the Western Australian Farmers Federation and asked to go to Western Australia to assist in dealing with problems arising from cleavers, redshank and field madder seeds which had been apparently brought into Western Australia with canola seeds.  The conversation with Mr Kudnig occurred before that.  To the best of my recollection the conversation occurred around the time when some Dovuro canola seed came into Victoria.  I cannot recall the conversation except to this limited extent.  He said words to this effect:

                       “We have a problem with these foreign weeds which are about to come into Victoria.  What do you know about them?  Do you know what the seeds are?  What are the implications of the seeds?"

5.         During the conversation he named the weeds as cleavers, redshank and field madder.  I recall that when Mr Kudnig came to see  me he looked at some of my books concerning weeds.

6.         I do not recall in connection with the conversation and visit any reference to the seeds having come from New Zealand.”

215               When Mr Moerkerk was called to give evidence on that day, counsel for Dovuro referred to par 4 and asked if he could recall what, if anything, he had said in response to Mr Kudnig’s question.  His reply was:

“It’s so long ago, no not very clearly at all.  Some of the discussions that would have taken place at that time would have been along the lines of they are not a significant ---.”

There was then an objection which was upheld.

216               Mr Moerkerk was not cross-examined to suggest that his recollection of the time of the conversation was incorrect.  He gave evidence that he agreed with the recommendation by Ag West that farmers should assume that the seed included cleavers and manage accordingly, because at that point in time they had very little information on the effect of chemicals on cleavers.  He said that the views that he then held would have been refined from the views he held in the month prior to that.  The trial judge expressed some doubt as to the timing of the conversation and as to whether the advice by Mr Moerkerk was as sweeping as Mr Kudnig claimed.  The basis for these doubts is not apparent.

217               The evidence of Mr Kudnig is some support for the view that mere reliance upon the regulatory system was not sufficient.  However, his evidence, and that of Mr Moerkerk, does not indicate that other inquiries would have revealed the problem.  The view attributed to Mr Moerkerk is consistent with that expressed by Mr Falconer.  On the other hand, neither does it say a great deal about what the result of a formal approach by Dovuro to Mr Moerkerk at the appropriate time would have been.  It is difficult to see his evidence as anything but neutral on the point at issue.

218               Whilst a case of inadequate inquiry might have been made on this evidence, this would only have been relevant on the pleadings if it could have been concluded that a proper inquiry would have revealed sufficient risk to warrant a warning or precise labelling of the seed.   In my opinion, it was not possible to supply the missing evidence by the application of common sense or the judge’s opinion.  The behaviour of seeds and weeds in crops and the effect of soil type, climate type, herbicides and so on are technical matters.

219               It is possible that the trial judge misdirected himself by his reference to Rogers v Whitaker (1992) 175 CLR 479.  It may be that his Honour read the passage he cited as entitling a judge of fact to act upon his or her views as to negligence in technical fields.  If so, this was likely to induce error.  In my opinion, that decision has virtually nothing to say about the present case.  It dealt with a particular aspect of the negligence of those professing to have a special skill, namely, whether a warning of a known risk should be given.  Here, the question is the perception of risk.   There is nothing in Rogers v Whitaker which would permit the judge to assess the extent to which a risk existed in this case which should have been perceived, and its magnitude and so on, without the benefit of expert evidence.  The distinction between treatment and warning discussed at 489 of  Rogers v Whitaker is pertinent.  As Finkelstein J has pointed out, much of the reasoning as to negligence seems to be based upon the views of the trial judge.

220               However, consideration must, nevertheless, be given to the apologies and admissions made on behalf of Dovuro.  The principal amongst these have been set out in the judgment of Branson J.  The submission which was made by the Applicants, and accepted by his Honour, was as follows:

 “16.7The First Respondent has admitted ‘breach of duty’ in writing through Rath and White.  The admissions were not rejected by Tapp, the General Manager of the First Respondent.  They were made by Rath in an attempt to be honest and open with the growers.  We submit these admissions can and should be given full weight by the Court.”

221               In my view, it was open to the trial judge to accept these admissions, when coupled with other evidence which supported the view that reliance upon the regulatory system was not enough, as sufficient to establish breach of duty.  They were not precise as to the defect, or as to the remedy, and were given in circumstances where an apology can be explained by commercial considerations.  It would have been well open to the trial judge not to accept the Applicant’s reliance upon them.  However, the trial judge had the opportunity of seeing the authors give evidence, and of considering the admissions made against the backdrop of the other evidence.  It also needs to be borne in mind that in case of doubt, labelling the goods with the actual MAF analyses was a precaution which was relatively simple and cheap.

222               Thus, whilst the analysis of this issue by Finkelstein J would persuade me as a judge of fact to reject the Applicant’s case, in my view the decision below was open to the trial judge and should not be disturbed.

causation

223               Dovuro submitted that it is not proved that if Dovuro had given a warning to the members of the class represented by the Applicant of the matters stated in the seed analysis certificates, or of the presence of the undesirable seeds, those members and each of them would not have bought the seed.  It submitted that knowing that the seeds were neither declared nor prohibited in Western Australia would surely have reassured any of those persons who may have been doubtful.  This question illustrates one of the problems with split issues in representative actions.  There can be no class evidence or class finding on this issue.

224               The evidence of Trevor Wilkins was:

 “Had I been warned that the Karoo canola seed available to fill my orders in 1996 may have contained weeds which were not known to broad acre farming in the State of Western Australia, I would have refused to accept that seed in satisfaction of my orders because it was not worth all the hassle.”

225               The evidence of Bruce Leslie Piper was:

 “I would not have planted the Karoo canola seed in 1996 if I had known that the seed was contaminated, or may have been contaminated, with weeds which were not known to the State of Western Australia.”

It is interesting to note that Mr Piper also says he relied upon various representations on behalf of the merchant which sold him the seed, but which is not sued.

226               In my opinion, this evidence, whilst sparse, is sufficient.  If the actual species had been identified, then the knowledgeable user can be taken to have known or have the means of knowledge that the weeds were not known in the relevant area of Western Australia.

cross claims against cropmark

Contribution

227               Assuming that one of the statutory provisions applies, the claim for contribution should not succeed for (at least) the following reasons:

1.         Cropmark’s notice of contention as to lack of a duty of care should be upheld for the reasons I have explained in relation to the claim against Dovuro.  The position of Cropmark is even stronger, as it is one further step removed.

2.         The admissions on behalf of Dovuro, which, in my opinion, were central to a finding of breach by Dovuro, are not admissible against Cropmark.

3.         I agree with the reasoning of the trial judge at pars 126 and 127.

Contractual claims

Express term

228               I agree with the submissions of Dovuro and the opinion of Finkelstein J that there is no proper basis for giving “undesirable species” a special meaning based upon the contents of the New Zealand Grain and Seed Trade Association Ltd handbook.  There is no foundation for incorporation by reference or by custom or usage.  Indeed, it does not seem that the trial judge held differently.  The words must be understood in their ordinary meaning.

229               The trial judge held that the ordinary meaning of the phrase was intended to be limited to seeds listed in the handbook, with the possible addition of species unable to be imported into Australia.  I am not sure upon what basis that finding was made or what follows from it.  Either the parties agreed upon a special meaning or they did not.  If (as his Honour held) they did not, reference to the intentions of the parties is irrelevant to the construction and application of the contract.  As a contractual warranty, the phrase is not conditioned upon the knowledge or opinion of either party.  The promise was absolute, rather than being to use reasonable care to achieve the result, and should not be construed in the latter sense.  I should say that, in my opinion, nothing relevant turns on the reference to working sample.  The samples which were provided included cleavers.

230               This phrase, in a contract for the growing and supply of seeds to an Australian purchaser, purchased for known resale in Australia, cannot be construed as limited to species undesirable in New Zealand.  It would, in my opinion, plainly include species undesirable in Australia.  Neither, as a matter of construction, can it be limited to species unable to be imported into Australia.  This would make otiose another express term.  In any event, I can see no warrant for reading down the term in this way.

231               The nub of the problem is summed up by the following passage from the judgment below (from par 150):

 “The point, of course, is that the defect in the subject canola seed was not an inherent defect, such as an inability to germinate;  it was a defect that caused the canola seed to be unsuitable for sowing in particular localities, but it remained fit for sowing in other places and marketable for that purpose.”

232               It is relevant to recall why cleavers were said to be detrimental if planted with canola in the Western Australian wheatbelt.  Mr Carmody, who was accepted by the trial judge, identified:

1.                  Competition with the canola crop for nutrients and moisture.

2.                  The possible mixture of cleaver seeds with canola seeds in the harvested crop, particularly as the pod segment of cleavers was difficult to grade out, with the result that there would be problems with the quality required for export in competition with Canadian canola, especially with exports to Japan.

233               There is no suggestion that cleavers (or redshank or madder) are any worse than other weed species in the first respect, which is effectively dealt with by the quantitative aspects of the warranty.  The second problem, on the judge’s acceptance of Mr Carmody, would plainly make cleavers an undesirable species in the Western Australian wheatbelt, and no doubt anywhere else in Australia where the species could grow sufficiently to have its seed harvested with the canola seed.  This finding underpinned the trial judge’s finding of damage to the Applicants.  In my opinion, such propensity, albeit limited in area, is sufficient to make cleavers an undesirable species within the meaning of the relevant warranty.  There is no basis for limiting the phrase to those species which are undesirable throughout Australia in all conditions.  The wheatbelt of Western Australia is not de minimis.   The circumstance that the undesirable characteristics of the species in parts of Australia was not publicly known at the time does not detract from this conclusion.  I cannot see any basis for reading into the warranty a standard depending upon perception or reputation rather than actual characteristics. 

234               In short, I do not believe that the effect of the words as agreed between the parties can be modified or rectified under the banner of construction.  Nor do I think that differential findings between the claim and the cross-claim can be made as to the undesirability of cleavers on the same body of evidence.

235               I agree with Finkelstein J as to the effect of cl 3 of the General Conditions of Sale.  There is a related aspect of the matter which arises for consideration.  I have held that Dovuro will only be liable for breach of any duty of care which exists (contrary to my view) primarily on the basis of admissions made on its behalf which do not bind Cropmark.  The seed supplied did contain undesirable species of seed.    This was a breach of contract.  Cropmark is liable for loss which is both causally connected with the breach and is of a kind which was within the contemplation of Cropmark or a reasonable person in its position.  The trial judge did not need to address the question of damages on the cross claim and the same applies to each of the judgments of Branson J and Finkelstein J.  There are real issues which arise as to both causation and foreseeability.  Apart from the usual questions which arise, the particular damage which Dovuro sustained was, because of the effect of these judgments, substantially the result of out of court admissions, together with a concession as to the existence of a duty of care.  The latter is effective because of a procedural ruling by this Court with which I disagree.  Not surprisingly, the submissions of the parties did not address the damages issues which now arise as a result of these judgments.  As the split decision of the High Court in Unity Insurance Brokers Pty Ltd v Pezzano (1998) 192 CLR 603 shows, this is a controversial area of the law.  There are various possible results, including reference back to the trial judge to make findings.  In the result, the proper course is to receive submissions from the parties as to this issue.

Implied warranties

236               It is unnecessary to consider these issues.

conclusion

237               My preferred position is that Dovuro’s appeal should succeed, the judgment below be set aside and in lieu thereof the application and cross-claims be dismissed with an appropriate order for costs.

238               If Dovuro is not to be permitted to rely upon the argument as to absence of a duty of care to it, then:

(a)                the appeal by Dovuro against the orders on the application should be dismissed;

(b)               the appeal by Dovuro on the cross-claims should be allowed, the order dismissing the cross-claims be set aside, and the proceedings be stood over to receive further submissions from the parties as to what other orders should be made including orders as to costs.

Associate:        

Dated:              20 December 2000

APPENDIX TO JUDGMENT OF GYLES J

Summary – Regulatory regime

International

1.                  International Plant Protection Convention (1952, revised 1981)

2.                  Agreement on the Application of Sanitary and Phytosanitary Measures (1995)

Commonwealth Legislation

The Customs Act 1901 (CA), the Customs (Prohibited Imports) Regulations 1956 (C(PI)R), the Quarantine Act 1908 (QA) and the Quarantine (Plant) Regulations (Q(P)R) govern the import and/or entry of plants into Australia.  It can be assumed that “plant” includes seeds throughout this analysis.

The scope of the Quarantine Act is for “the inspection, exclusion, detention, observation, segregation, isolation, protection, treatment, sanitary regulation, and disinfection of vessels, installations, persons, goods, things, animals, or plants, and having as their object the prevention of the introduction, establishment or spread of diseases or pests affecting human beings, animals, or plants” (section 4).  Goods include animals, plants, mail of any kind and any other kind of movable property (section 5 QA).  Quarantine officers, who are charged with execution of the Act, Regulations etc, can be specifically appointed to deal with plants (sections 8B and 9AA QA). 

All goods on board vessels from outside Australia are subject to the control of the Customs whilst in Australian limits and may be examined by Customs (sections 31 and 32 CA).  Goods within Customs control must not be moved, altered or interfered with without authorisation (section 33 CA).  On arrival of vessels in Australia, the cargo must be reported, entered, unshipped and may be examined (section 49 CA).

The Governor–General can prohibit by regulation the importation of goods, with or without conditions attached (section 50 CA, C(PI)R) and goods prescribed as prohibited from importation (under section 50 CA, C(PI)R) are deemed prohibited imports (section 51 CA). The Governor–General can proclaim at which ports, etc where plants may enter Australia and which plants are prohibited from being brought into Australia (section 13 QA).

Vessels must report their arrival (both prior to arrival and on arrival) and what cargo is being carried to Customs (sections 64, 64AA, 64AB and 68 CA). Goods are deemed to be imported into Australia once they have entered certain Australian installations and notice must be given at port of landing of proposal to import goods into Australia (section 16AC QA, regulation 4 Q(P)R) and quarantine officers can require further information about goods imported (or proposed to be imported) into Australia (section 16AD QA).

Goods must not be moved from under Customs control unless permission has been applied for and granted (section 71E CA).  Goods must not be removed from quarantine (or from vessels in quarantine) until released from quarantine (sections 44, 44A and 44B QA and regulations 20A, 34 and 34B Q(P)R).

Goods must not be unshipped from vessels without a permit to unship the goods or without a cargo clearance (sections 74 and 74A CA).  Customs officers may board and search vessels and examine all goods on boarded vessels (sections 185 to 189 CA).

Quarantine officers can inspect plants where they are located (eg subject to quarantine on board vessels, at locations outside quarantine stations or otherwise not released from quarantine) (sections 52A, 53, 70, 70AA, 70A, 74AB, 74A and 74D QA, regulations 20A and 34A Q(P)R).  Quarantine officers can order that goods either remain in quarantine for a prescribed period (sections 52A and 53, regulation 17 Q(P)R), release the plants from quarantine and permit them to be delivered to the importer, subject to the condition that authority has been given under the Customs Act (sections 52A and 53, regulations 13 and 14 Q(P)R) or otherwise give directions relating to their movement (section 70D QA).

Permits authorising delivery are only to be issued by the Director of Plant Quarantine after plants inspected and found free of disease and the importer shall remove the imported plants after treatment and release from quarantine (regulations 8, 13, 14, 20A and 31 Q(P)R).

The issue of permits to remove imported seed is subject to the following conditions (regulation 21 Q(P)R).

·        A certificate was issued by a government authority in a country in which seed was produced certifying that the plants from which the seed was harvested were inspected during their growth and found to be free from disease

·        The Director is satisfied that that inspection was thoroughly and efficiently carried out and that the harvesting, threshing, winnowing, cleaning, grading and bagging of the seed, and the sealing and labelling of the bag or parcel containing the seed, was carried out under the supervision of the competent authority;

·        The Director is satisfied that measures adequate for ensuring that the seed would be free from disease were taken in respect of the selection of the stock from which the seed was grown, the selection of the soil in which the seed was grown and the isolation of the plants from which the seed was harvested from other bean plants during their growth;

·        The quantity of the seed is not greater than the minimum quantity of seed necessary to establish, under quarantine, a variety or strain of the particular species or genus in Australia;

·        The Director is satisfied that the seed will, before sowing, be subjected to any treatment directed by the Director.

·        All seed imported under a permit for sowing, shall be grown in quarantine for at least one season and during that period shall be subject to such examination and treatment as the Director considers necessary.

·        Where any disease is detected in any plants so grown the Director may order the destruction of the plants or may order such treatment of the plants and the soil in which the plants were grown as he considers necessary.

Quarantine officers can inspect plants and packaging containing plants released from quarantine and order that they be returned to quarantine if infected with disease, disease agents, insects or pests (sections 54 and 55A and regulations 9, 10, 11 and 20A Q(P)R)).  All plants and packaging containing plants ordered into quarantine must be detained in quarantine for a prescribed period and treated as prescribed (sections 47, 48 and 56 QA and regulations 9, 10, 11, 16, 17, 18, 20A and 31 Q(P)R)) at an approved “place of quarantine” (section 46A QA).

If plants or packaging containing plants cannot be treated or disinfected, carry a danger of infecting other plants or spreading disease or are abandoned/not removed from quarantine, the plants or packaging containing plants can be forfeited to the Crown and destroyed.  (Sections 48, 48A and 58 QA and regulations 11, 15, 21, 21 and 33 Q(P)R)). The importer or owner shall pay quarantine expenses, plants must not be released from quarantine until the expenses have been paid and the plants can be sold to recover the quarantine expenses (sections 64 and 66A QA and regulations 19 and 33 Q(P)R).

Plants must not be imported (or removed from a quarantine station) in contravention of the Act, the regulations or any proclamation (or permit granted) under the Act and all plants imported (or removed) in contravention of the Act, or any proclamation under this Act, shall be forfeited and disposed of (sections 67 and 68 QA and regulations 33, 34 and 34B Q(P)R).

Prohibited imports and the packaging in which they are contained are to be forfeited to the Crown (sections 229 and 230 CA).  It is an offence to smuggle goods, import prohibited imports, export prohibited exports or be in possession of smuggled goods, prohibited imports or prohibited exports (section 233 CA).  (The C(PI)R does not presently cover Plants).

Western Australian Legislation

The importation of plants into Western Australia is regulated by the following legislation:–

·                    Seeds Act 1981 – SA

·                    Seeds Regulations 1982 – SR

·                    Agricultural and Related Resources Protection Act 1976 – ARRPA

·                    Agricultural and Related Resources (Declared Plants and Restricted Animals) Regulations 1982 – ARRDPR

·                    Plant Diseases Act 1914 – PDA

·                    Plant Diseases Regulations 1989 – PDR

Before plants or seeds can be imported, they must be inspected and meet certain standards (and certified to have met those standards at registered and certified seed processing works).  Importers or purchasers may also request that seeds be tested to check the certification.  (Sections 19, 20, 21, 22, 25 SA, regulations 9, 12, 13, 14, 15 and 16 and Schedules 4, 6, 7 8 and 9 SR, sections 10, 11, 12, 15, 16, 17, 18 and 22 PDA, regulations 6, 7, 8 and 16 to 19P PDA).

Seed lots must be labelled prior to sale and the labels must contain certain information (sections 5, 6, 7, 8, 9, 10 and regulations 6, 10, 11, 17, Schedules 1, 2, 5 SR).  Seed lots must not contain prohibited seeds, declared diseases or pests (sections 6 and 13 SA) and must not be tampered with (section 16 SA).  Proceedings can be taken for breach of the labelling, testing and certification requirements (sections 11 and 16 to 23 SA, sections 11 to 14 and 34 PDA, regulations 4, 6, 7, 8, 11, 12, 13, 14, 16, 19, 19A to 19F and schedule 8 PDR).  There are statutory warranties of fitness and quality in relation to labelled lots (section 10 PDA).

The State is divided into zones and regions and a regional authority, which may make recommendations to the Minister on disease and pest control (Part III ARRPA), controls each region.

The Minister can declare that certain plants, seeds and diseases fall within certain categories.  Once the categories are declared, the Minister can then prohibit or restrict the declared plant from entering either the State as a whole or parts of the State.  (sections 12 SA, regulation 5, 7 and 8 and schedules 1, 3 and 8 SR, sections 35, 36, 37 ARRPA, sections 10, 15, 16, 23D PDA, regulations 14 and 15, Schedule 7 PDR).

Declared plants must not be introduced into the State (section 72 ARRPA). The Agricultural Protection Board must be given notice of certain imports (sections 48 and 74 ARRPA, regulation 5 ARRDPR, section 10 PDA) and inspectors or the Agricultural Protection Board may detain and destroy declared plants (sections 73 and 76 ARRPA, regulations 7 to 11 ARRDPR, section 6A PDA).

On the appearance of declared (or prescribed) plants and diseases the owner or controller of the land on which it appears must take action to control or treat the plant or disease.  The Minister (and inspectors) can declare certain areas of the State to be infested with declared/prescribed plants/diseases and require action to be taken to eradicate or treat the plant/disease.  (Sections 39, 42 and 49 ARRPA, regulations 5 to 10 ARRDPR, sections 10, 11, 12, 15, 16, 17, 18, 22, 23, 23A and 23D PDA, regulations 3B, 4, 4A, 4B and 5 and Schedules 1, 4A, 4B, 4C and 5 PDR).  Any person brining plants into the State must declare those plants (section 23D PDA) and those plants may then be quarantined or destroyed (sections 23D and 32A PDA).

State Government departments, local governments and private land owners/occupiers must control declared and pest plants on land controlled by them (Parts V and IX ARRPA, sections 10, 11, 12, 15, 16, 17, 18, 22, 23 PDA).  State Government departments, local governments and private land owners/occupiers must comply with directions given by inspectors (sections 40, 43, 45, 50 ARRPA).  If directions are not complied with, penalties will apply (sections 51 to 54 ARRPA).  The Agricultural Protection Board and local governments may provide assistance in controlling declared plants (sections 41, 46, 55 to 59, 67 to 69 ARRPA).  Funds raised by the Agricultural Protection Board by charging rates (sections 60 to 65 ARRPA) are put towards controlling declared plants.

Inspectors have been appointed and given powers under the various legislation and it is an offence to interfere with inspectors (sections 14, 15 and 17 SA, Parts II and VII, sections 40, 43, 45 and 50 ARRPA, sections 6A, 14, 16, 17, 18 and 32A PDA). 

The Governor has power to make regulations under the legislation (section 26 SA, Part VIII ARRPA, section 39 PDA).