Dovuro Pty ltd v Wilkins

[2000] FCA 1902

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 FurnessHoulder 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 vMerton 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 vDepartment 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 vJohnson & 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 vLord 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 vLord 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 vGundowda 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 vHeller & 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 CoLtd (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 vMetana 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 BlackSea & 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 KarlshamnsOljefabriker [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

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 31 of 2000

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

BETWEEN:

DOVURO PTY LIMITED
APPELLANT

AND:

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
FIRST RESPONDENT

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
SECOND RESPONDENT

JUDGE:

BRANSON, FINKELSTEIN and GYLES JJ

DATE OF ORDER:

21 DECEMBER 2000

WHERE MADE:

SYDNEY

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.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 31 of 2000

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

BETWEEN:

DOVURO PTY LIMITED
APPELLANT

AND:

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
FIRST RESPONDENT

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
SECOND RESPONDENT

JUDGE:	BRANSON, FINKELSTEIN and GYLES JJ
DATE:	21 DECEMBER 2000
PLACE:	SYDNEY

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)

1. 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.

2. 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)

3. 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)

4. 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.”

5. 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.”

6. 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.”

7. 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.

8. 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?”

9. 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.

10. 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

11. 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.

12. 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.

13. 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.

14. 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.

    
    

15. 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.

16. 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.

17. 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.”

18. 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.

19. 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.

20. 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.

21. 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.

22. 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

23. 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

24. 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.”

25. 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.”

1. 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

2. 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.”

3. 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.”

4. 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.”

5. 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.

6. 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.

7. 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.

8. 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.

9. 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)

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

    Contractual Claims

11. 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.”

12. 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.

13. 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.

14. 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.

15. 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.

16. 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.”

17. 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.

18. 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).

19. 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

20. 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.

21. 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.”

22. 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.”

23. 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.”

24. 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

25. 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.

I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

Associate:

Dated:  21 December 2000

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 31 of 2000

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

BETWEEN:

DOVURO PTY LTD
Appellant

AND:

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

Respondents

JUDGES:	BRANSON, FINKELSTEIN & GYLES JJ
DATE:	21 DECEMBER 2000
PLACE:	SYDNEY

REASONS FOR JUDGMENT

FINKELSTEIN J:

1. 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.

2. 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. 

1. 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.

2. 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. 

3. 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.

4. 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.

5. 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.

6. 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.

7. 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. 

8. 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. 

9. 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.”

10. 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.

11. 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.

12. 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.”

13. 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.

14. 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.”

15. 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.” 

16. 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 FurnessHoulder 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).

17. 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. 

18. 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.

19. 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.

20. 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.

21. 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. 

22. 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. 

1. 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. 

2. 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.”

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.”

9. 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.

10. 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

11. 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.

12. 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.”

13. 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.

14. 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

15. 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

16. 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.

17. 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.

18. 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.

19. 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.”

20. 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.

21. 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. 

22. 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.

23. 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

24. It is unnecessary to consider these issues.

    conclusion

25. 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.

26. 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.

I certify that the preceding eighty-one (81) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.

Associate:       

Dated:            20 December 2000

Counsel for the Appellant:	BW Rayment QC and MM Macrossan
Solicitor for the Appellant:	Griffith Hack Lawyers
Counsel for the First Respondent:	JE Rowe
Solicitor for the First Respondent:	Peter Long & Co
Counsel for the Second Respondent:	PM Donohoe QC
Solicitor for the Second Respondent:	Phillips Fox
Date of Hearing:	22-23 May 2000
Date of Judgment:	21 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).