Mallonland Pty Ltd ACN 051 136 291 & Anor v Advanta Seeds Pty Ltd ACN 010 933 061

[2024] HCATrans 12

[2024] HCATrans 012

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Brisbane  No B60 of 2023

B e t w e e n -

MALLONLAND PTY LTD ACN 051 136 291

First Appellant

ME & JL NITSCHKE PTY LTD ACN 074 520 228

Second Appellant

and

ADVANTA SEEDS PTY LTD ACN 010 933 061

Respondent

GAGELER CJ
GORDON J
EDELMAN J
STEWARD J
GLEESON J
JAGOT J
BEECH‑JONES J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 6 MARCH 2024, AT 10.02 AM

Copyright in the High Court of Australia

MR W.A.D. EDWARDS, KC:   May it please the Court, I appear with my learned friends MR B.A. HALL and MR T.A. RAWLINSON for the appellants.  (instructed by Creevey Horrell Lawyers)

MR P.J. DUNNING, KC:   May it please the Court, I appear with my learned friends MR E.J. GOODWIN, KC and MS M.Y. BARNES for the respondent.  (instructed by Herbert Smith Freehills)

GAGELER CJ:   Thank you, Mr Dunning.  Mr Edwards.

MR EDWARDS:   May it please the Court.  I propose to frame the argument and the issues relevant both to error and to the way in which the appeal had been determined by reference to the facts, briefly, first.  I will then move into the discussion of legal principle and the reasons of the Court of Appeal will be dealt with in that context, and I will then discuss application, and finally the limitations question.

The simple facts relevant to error and the legal issue which arises on this appeal can be seen most entirely from the judgment of Justice Morrison in the Court of Appeal.  And if your Honour has the appeal books, that commences at 117.  The first significant fact, we would say, emerges from Justice Morrison’s judgment at paragraph [14]: 

Advanta:

(a)was engaged in the business of the commercial production of seed . . . for sale and distribution to growers;

(b)produced or caused to be produced MR43 seed for the purpose of commercial planting and harvesting and growers; and

(c)made MR43 seed available to be sold and distributed to growers –

It was a case in which the seed producer engaged in manufacture with an ascertained market of commercial growers in mind.  That market, we say, had objective features, which were discussed by the courts below when they dealt with, among other things, vulnerability.  But Advanta was always manufacturing, engaging in the task of manufacturing or production with that market in mind.  If one goes then to the next page of Justice Morrison’s judgment, one sees at paragraph [18], court book 119:

The MR43 production process included controls to obviate and preclude . . . the occurrence of contamination –

I will come in a little while to take your Honours to another passage in his Honour’s judgment which makes plain that the entire case was conducted on the pleaded basis and on an evidentiary basis that Advanta was undertaking thorough processes to guard against contaminants in the seed.  That was the task in which they were engaged.  That was the task it assumed responsibility for.

GLEESON J:   By giving a warranty to anyone?

MR EDWARDS:   No, your Honour.

GLEESON J:   So, what is the nature of this assumption of responsibility?

MR EDWARDS:   We say that the assumption of responsibility that Advanta engaged in was for the task of careful manufacture.  What the courts below did, however, was to say that a disclaimer of liability negated that assumption of responsibility.

EDELMAN J:   Sorry, assumption of responsibility to whom?

MR EDWARDS:   To the growers.

EDELMAN J:   The particular growers?  The growers at large?  The world?

MR EDWARDS:   It is the particular growers.

GLEESON J:   Is it an assumption of legal responsibility?

MR EDWARDS:   That is what the courts below said.  They said that it was a disclaimer of such an assumption, in a sense that it negated the voluntary assumption of legal liability, because that is how they understood and treated the concept of assumption of liability.  Now, we say that that is too simplistic an approach to that criterion, if it be one, as distinct from a label describing other things.

EDELMAN J:   If you are going to take us to this at some point then you can defer your answer to this, but when you are talking about an assumption of responsibility to the particular growers, did the manufacturer know that those particular growers were the ones who were going to buy the seeds?

MR EDWARDS:   It knew that there was a market of commercial sorghum growers.  It did not have in mind, necessarily, a particular person, but they were an identified, relatively small, class of persons who were engaged in that business. 

EDELMAN J:   So, your earlier answer, when you say it is an assumption of responsibility to the particular growers, you do not mean the particular growers, you mean growers in general.

MR EDWARDS:   Yes, save that, in this sense, what the courts below did was to find that there was a negation of that assumption of responsibility to the particular growers.

EDELMAN J:   Thank you.

GAGELER CJ:   So, Mr Edwards, you are taking us through the facts, I think.

MR EDWARDS:   Yes, your Honour.  The next very salient fact was the findings below as to knowledge and foreseeability.  If your Honours go to court book 120, at paragraph [24], his Honour records various submissions of Advanta, in periods prior to the failure to take the steps, which his Honour found they failed to take:

in 2009, that sorghum off‑types had been identified in three varieties –

including the MR43 – that:

this off‑type was a concern; and (B) had seen some off‑type sorghum in MR43 crops for several years prior –

Then, also in 2009:

it knew . . . that a sorghum off‑type with a shattering characteristic would be more difficult to control or eradicate –

Now, if you know that a sorghum off‑type with some characteristics will be more difficult to control or eradicate, you must have known – and this is the meaning of the admission – that the off‑types which you had served were ones that could, at least, include an off‑type with shattering characteristics.  You know it is a thing, you know an off‑type with shattering characteristics is something to be guarded against.

STEWARD J:   How does that square with the finding by the primary judge at paragraph [417]:

the defendant’s managers were not aware generally . . . that the off‑type plants growing in the season’s crops of MR43 were of a shattering variety.

They did not know that until January 2011.

MR EDWARDS:   They did not know that there was actual contamination of the MR43 with shattercane until that time.  What they did know was that there were off‑types in the seed lines and they must have known that those off‑types could at least include ones with shattering characteristics, because otherwise there would be no relevance to the admission.

STEWARD J:   So, knowledge of risk?

MR EDWARDS:   Knowledge of risk.

STEWARD J:   Yes, I see.

MR EDWARDS:   Importantly, (d), Advanta:

knew, in 2009, that a grower was likely to have greater difficulty in controlling a sorghum off‑type with a shattering characteristic –

Now, in the context of a farming business, an admission as to “greater difficulty” in control is knowledge of the kind of risk of harm which actually eventuated:  lost profits, increased expense.

GAGELER CJ:   Is that not spelt out in the following paragraph?

MR EDWARDS:   It is.  That paragraph is directed to 2010, and so the knowledge builds – 2009 and 2010 – but in both cases prior to the negligent acts of manufacture as found by the courts below.

GLEESON J:   This knowledge is really equivalent to reasonable foreseeability.

MR EDWARDS:   It is at least equivalent to that, your Honour.

GLEESON J:   Is it more than that?

MR EDWARDS:   Well, reasonable foreseeability does not require actual knowledge in any sense, whereas this has elements of both actual knowledge and what one ought to have known.  One can reasonably foresee a risk without having knowledge of the integers.  Your Honours already read the passage at paragraph [25], and I will not repeat what his Honour the Chief Justice said in relation to that.

GORDON J:   What about [26]?

MR EDWARDS:   That is an admission as to reasonable foreseeability.

GORDON J:   At what point in time?

MR EDWARDS:   It must be, having regard to the previous paragraphs, 2009/2010.

GORDON J:   Thank you, Mr Edwards.

MR EDWARDS:   I should draw your Honours’ attention to the finding at paragraph [23], which relates to 2010 and 2011, which relates to Advanta’s knowledge, as admitted, of what production processes were required in order to minimise risk, et cetera.  I will then take your Honours to the findings of breach over the page at court book 121, paragraphs [32] to [34].

There were two breaches.  They were breaches during the process of production.  The first was failure to rogue, a crop inspection.  That was a breach situated in time in early 2010.  The second was failure to “conduct a commercial grow out”, which was situated in time in mid‑2010.  The seeds were then placed in bags and committed to the market.  I will take your Honours to those findings as well, but I should have noted paragraph [22] of Justice Morrison’s judgment, which was, in a sense, an admission as to ultimate effect if there was contamination with off‑type sorghum with shattering characteristics.

Now, that is a general admission.  The more important one is the one in paragraphs [24] and [25].  Paragraphs [24](c) and (d), specifically, which talk about greater difficulty in control, because it is those findings that intersect with the type of harm that was suffered by the farmers.  The terms on the bag, your Honours – there were findings about these – are conveniently set out in Justice Morrison’s judgment, court book 122.

GORDON J:   If I can just go back – at the moment we are going through the facts, being facts directed at the seed, the knowledge of Advanta at particular periods of time, referrable, as you will say, also to foreseeability.  We have done 2009, 2010, 2011.  We have done the findings of breach, on the assumption that there is a duty, and now we are dealing with what happened in terms of the bags?

MR EDWARDS:   Yes.  Yes.  The bags being committed to the market and ultimately sold.  Because a duty of care – a duty to take reasonable care, we would say – is not to be assessed as a point in time thing.  It arises out of a relationship.  The relationship at least commences, we would say, at the points in time when you are starting production with an end user, or a class of end users, in mind.

GAGELER CJ:   Mr Edwards, I think you are taking us through the facts at the moment, rather than presenting the argumentative part of your case, is that right?

MR EDWARDS:   I will continue with that.  Your Honour, the disclaimer is a part of the bad conditions, which are set out at court book 122.  There are some important parts of it, including, in the chapeau:

Upon purchasing this product and opening the bag, the purchaser (“you”) agrees to be bound by the conditions set out below.

Now, it was not said below that that took effect contractually, and the trial judge found it did not.  But – the next sentence:

If, before opening the bag, these conditions are not acceptable to you, the product should be returned in its original condition to the place of purchase immediately, together with proof of purchase, for a refund.

The findings of the courts below were there was no contract between Advanta and the farmers.  It committed it to the market through distribution people – some of them were big, some of them were little, some of them were undoubtedly small produce operations in rural areas.  There was no contract between Advanta and the farmers.  But this says:

If . . . these conditions are not acceptable to you, the product should be returned in its original condition to the place of purchase immediately –

Now, Advanta – and we will come to it in the argument – says that that gave them a choice, but not a real choice, we will say – I will develop that – because it is taking it back to a distributor, not to the person that published the disclaimer.

The findings as to how it got into the market, Justice Morrison summarises it in paragraph [35] at court book 121, but it is illustrative to go to the primary judge’s findings at [139] to [140], court book 30.  There is a heading at the bottom of that page, “Incorporation of the terms on the bags”.  His Honour finds – and that is not challenged – that the bags did bear those terms.  His Honour, however, finds that they were not incorporated into any contract and – this is at [140]:

terms on the bag were not proved to be terms of the contract of sale of the contaminated MR43 seed by a distributor to any of the plaintiffs –

At [139], his Honour also made a factual finding ‑ ‑ ‑ 

GAGELER CJ:   Are you referring to pages or paragraphs?

MR EDWARDS:   I am referring to paragraphs.  It is court book 31, I am sorry, your Honour.

GAGELER CJ:   Thank you.

GORDON J:   Could you just explain to me what [139] is again, please?

MR EDWARDS:   At [139], his Honour is dealing with the argument as to incorporation of the terms on the bags.  That is not at issue now.  His Honour is saying:

In the absence of any evidence of a course of dealing, the incorporation of the terms –

should turn:

on notice of those terms being given to the relevant plaintiff . . . before or at the time when the contract was made to purchase the . . . seed.  There was no evidence of any notice of those terms at that time.

So, that is a factual finding that at the time they bought the seed, they entered into the contracts, they did not have notice of those terms.  Then his Honour makes the legal finding, they were:

not proved to be terms of the contract of sale –

Both of those matters are important.  There was never a contract incorporating them, they were not on notice of them at the time that they were purchased, which would we see as, in a sense, the end point or close to the end point of the time in which the duty to take reasonable care could be discharged.

GAGELER CJ:   What is the end point?  What is the timing?

MR EDWARDS:   The time of purchase.

GAGELER CJ:   At the point when the distributor sells to the purchaser?

MR EDWARDS:   Yes, and that was September to December of the year 2010.  So, you have a factual situation where seed production starts – we would align that with the beginning of a relationship, because the class of farmers are in the contemplation, and indeed, the purpose of the manufacture, running all the way through to that time when they buy the seeds from the distributors.  It is not the case that at that time, or prior to that time, that the disclaimer was something they were on notice of.

The reason that that has a significance, as I will come to, is that the courts below focused very heavily on the disclaimer of liability, but the task was always one that was being done for a particular purpose, and a disclaimer of liability is relied on after the breaches that were found to have occurred, if there be a duty.  So, my friends’ argument has an aspect of duties of care flashing in and out of existence.

GAGELER CJ:   Now, are you still going through the facts, or we have moved now into the argument?

MR EDWARDS:   I have now concluded the facts.

GAGELER CJ:   Thank you.

BEECH‑JONES J:   Can I ask you just about one other fact.  Were there any findings about alternative suppliers for this product in existence?

MR EDWARDS:   I will check the references.  My understanding from the judgment below is it was essentially a two‑supplier market.

GORDON J:   I think the relevant finding might be at paragraph [174], that:

There were only two manufacturers of commercial grain sorghum seed in the Australian market, being the defendant and Pioneer Seeds.

MR EDWARDS:   Thank you.  That is the reference I had in mind.

GORDON J:   Is that the one that you want?

MR EDWARDS:   Yes.

EDELMAN J:   Just before you finally move away from the facts, can I just ask what were the factual findings about ownership of the properties and leasing of the properties and licencing of the properties?  Was there a mix amongst all of the growers?

MR EDWARDS:   Not all growers were in the same situation.  It is certainly the case that, I think, the first plaintiff or first appellant was not the owner of the land on which the sorghum farming was conducted.  As for the second appellant – paragraph [14] of the trial judge’s judgment deals with the first plaintiff’s position, court book 14, also.  But there is not one place where one can find that addressed specifically by the trial judge.

EDELMAN J:   Some were owners, some were lessees, and some were licensees.  Is that right?

MR EDWARDS:   I have not seen a reference to licensees, your Honour.

EDELMAN J:   They were all owners or lessees?

MR EDWARDS:   I believe all owners or lessees, but I will have that checked.  While I am there, the reference to the second appellant at court book 16, paragraph [31]:

The second plaintiff . . . was the trustee of the Nitschke Family Trust and carried on business farming –

on land.  There are no findings as to ownership, and the trial judge records that.  He says the details of the restructure between the business trust and the other entities was “not clear”.

GORDON J:   Can I just ask a question about the findings you took us to from [136] to [140] and ask what you seek to make of them as a question of fact.  Is the trial judge not there dealing with identification of what the terms of trade were between the distributor and the farmers?

MR EDWARDS:   His Honour is dealing with that subject, but that incorporates those factual findings about there being no notice of the disclaimer at the time of the sale.

GAGELER CJ:   Well, presumably there was a course of dealing, it was not a one‑off purchase.

MR EDWARDS:   It was a course of dealing, but his Honour records at [139] there was no evidence, there was an absence of evidence as to the course of dealing.  His Honour was not in a position to make a finding based on course of dealing and he did not.

GORDON J:   Are they not facts against you?  I mean, you might need to deal with this later, I suspect, but in a sense the terms of trade between your clients and the distributors were not established.  Is this not what this is directed at?  No?

MR EDWARDS:   No.

MR EDWARDS:   There is a positive finding that those terms were not proven to be terms of any contract.

GORDON J:   Thank you.

GLEESON J:   I am finding it a little difficult to separate out the findings of fact from the actual argument.  So, bearing that in mind, do you say that the manufacturer assumed responsibility for the quality of the seeds vis‑à‑vis the distributor as much as vis‑à‑vis the farmers?

MR EDWARDS:   I say the manufacturer did take on the task of manufacturing, but it is really a matter of argument.  That much is a fact.  I say it is not necessary to show an assumption of responsibility, in the more extended sense, voluntary assumption of liability that the Court of Appeal insisted upon.

GLEESON J:   Are there any relevant facts about the relationship between the distributor and the manufacturer apart from the terms of the contract between them?

MR EDWARDS:   His Honour dealt with the terms between Advanta and some of the distributors in a passage that commenced at court book 25, paragraph [110].  There were two types of distributors.  Some were, in a sense, big businesses and some were small, and Advanta supplied it to the distributors either by straight‑out sale to them or by sale on consignment.  His Honour records at [113], for the straight‑out sales there is absolutely no evidence of the terms of those contracts; Advanta to the presumably small distributors and then the farmers ring up and place their orders.

For the consignment sales, there is evidence that Advanta had a contract with those distributors, and that was a contract – his Honour sets out some of the terms of which over the page, at court book 26 and following; there was a stockist standard condition.  That contract contemplated that the distributor should try and pass on the terms to the farmers, but it did not happen.

There were certain exclusions that are dealt with at paragraph [123] at court book 27, but those exclusions, really in the main, focus on excluding liability for breach of the distribution agreement.  One sees, for example, 8.5 at court book 28; that is breach by Pacific Seeds of this agreement.  Clause 8.6 is an exclusion of further liability, so they exclude:

further liability to the Stockist arising directly or indirectly out of or related to the delivery . . . the Product . . . (including as a result of Pacific Seeds’ negligence).

That is, I think, trying to say that for those categories, Advanta is not going to be liable if somebody sues the distributor.  At the end of the day, we say that those terms do not really go to the existence of duty of care in this case because they are dealing with a different kind of liability, and if anything, they are really contemplating an inefficacious attempt, as it turns out, to pass on the disclaimer contractually.  You might say, as a matter of policy, that if you have tried to do it contractually and failed, why should the law of tort look after you?

GAGELER CJ:   Mr Edwards, how do you formulate, with precision, the duty of care for which you contend?  Your written submissions seem to be slightly different from the way Mr Gleeson is recorded as having put the case below.  You may not intend any difference; I do not know.

MR EDWARDS:   The best place to see the way we formulate the duty is in the notice of appeal in ground 1.  We say that the duty was:

a duty of care to the appellant farmers as end users of its MR43 seed product, sold to them through distributors, to take reasonable care to avoid the risk that such end users who used the product as intended on their land for sorghum farming would sustain economic losses by reason of hidden defects in those goods.

When we say “on their land” we are not drawing an ownership‑possession distinction, we are just saying on the land on which they were conducting their farming businesses.

GAGELER CJ:   Mr Gleeson’s formulation confined the duty of care to what occurred in the production process.  Is your omission of that qualification deliberate?

MR EDWARDS:   No, we are dealing with it in the context of findings of breach that occurred in the production process.

BEECH-JONES J:   Do you accept, then, in your formulation in your notice of appeal, the words “take reasonable care” in and about the production.

MR EDWARDS:   Yes. 

GAGELER CJ:   Thank you.

MR EDWARDS:   If I might then move to the argument and some fairly basic propositions, which really require no authority.  Duty of care is relational; it rises in relationships, but it is imposed by the law.  It does not depend upon somebody agreeing to it.  In the sense of the way in which the law deals with facts, it looks at the facts and that imposes a duty.  It is against that context that the question of whether liability for breach of that duty can be disclaimed has to be considered.

EDELMAN J:   That broad proposition runs up against a very long line of authority which treats – from Hedley Bryne v Heller onwards – the voluntary, in the sense of objective assumption of responsibility, as something that is not imposed by the law but something that is undertaken by a party.  In that sense, there is a long line of authority that says that duties of care do not merely arise by imposition of the law, but they can also arise separately by objective voluntary undertakings.

MR EDWARDS:   I accept that, your Honour.  They can, but they do not have to.  They do not have to.  As your Honour said in the Swick Case, the undertaking language itself has a long history.  It is probably, we would say, best to be regarded as a vestigial form of terminology.

EDELMAN J:   If one is talking about disclaimers, disclaimers obviously have a very important role when one is talking about manifested or voluntary undertakings, because the person is then manifesting an intention not to undertake.  But they do ever operate in relation to imposed duties?  Can a person ever avoid an imposed duty by an undertaking not to be responsible?

MR EDWARDS:   That, in a sense, is the question.  Could the dredge in Caltex have just sent an email to the oil refinery saying, dredging in progress near pipeline, no liability?  It would have been irrelevant; it would have been irrelevant to the consideration of duty in that case because of the way in which that duty arose was recognised – we would say, imposed – by the Court.  In Perre v Apand, would it have been relevant at all for Apand to say, put leaflets in the farms 20 kilometres around saying, we are going to undertake an experiment, no liability accepted?  It would not have worked at all.

Ultimately, we would submit that for a disclaimer to be effective, in a case where the duty does not depend upon voluntary undertaking, it has to be seen to intersect relevantly with other salient features in a way attenuates them sufficiently to have the result that the court would not recognise the duty.  So yes, a disclaimer can be entirely irrelevant, depending on the facts.

GORDON J:   Sorry, I missed that last bit.  What did you just say there – “entirely irrelevant” and?

MR EDWARDS:   Depending on the facts.

GORDON J:   I see, thank you.

EDELMAN J:   Just outside the context of what might be described as pure economic loss cases – damage to property, damage to person – does a disclaimer ever operate?  Can it ever operate in those contexts?

MR EDWARDS:   Not as such, but one of the issues that we have identified is that – it is never really thought about these days – you can defend a negligence claim on the basis of voluntary assumption of risk.  So, if you could show and prove the very high bar that is required to establish that matter of defence, you may be able to say, my disclaimer put people on notice, properly, of the risk, and they voluntarily agreed to it factually and legally.  But that was not run here.  So, it could feature in that way ‑ ‑ ‑ 

EDELMAN J:   It is not really the disclaimer – that is a waiver of liability.

MR EDWARDS:   And that is what the disclaimer purports to be here.  So, there would be ways, factually, in which a disclaimer in these cases could have the effect which is sought, but not the way in which it was done here.  Here, it comes in after everything has happened and seeks to sweep the liability away on the basis that the duty never existed, did exist and has gone ‑ ‑ ‑ 

GLEESON J:   Is the problem for your argument not that the difficulty arises at an earlier point in time?  It is not about the disclaimer of responsibility, it is about how the manufacturer assumed responsibility in the first place, and at the moment I do not understand what you say – it seems to me that it is a question‑begging exercise to say that they assumed responsibility simply by being in the market for the supply of seed that had a potential for contamination.

MR EDWARDS:   Assumed responsibility in what sense?  I say that I do not have to say that they assumed responsibility in the sense of voluntarily agreed to legal liability.  But they took on a task; they took on a task which was intended – may not even need that – objectively, luckily, to impact the interests of the ascertained class of farmers.

GLEESON J:   In the area of misstatement, or the provision of services, the idea assumption of responsibility is often regarded as important in the identification of a relevant relationship.  What is different in the context of sale of goods?

MR EDWARDS:   It is often regarded that way; it is not always regarded that way.  I will take your Honour, in a little while, to some passages from Hill v Van Erp, which is a case about the provision of services, to make that good.

GAGELER CJ:   Mr Edwards, if I am understanding the gist of your argument, you say there are certain salient features in this case that give rise to the duty of care for which you contend is reformulated in your notice of appeal, and you say that the disclaimer does not intersect with, so as to detract from, any of those salient features.  Is that basically what you are saying?

MR EDWARDS:   Yes.

GAGELER CJ:   So, what are the salient features, and – if you can list them carefully.

MR EDWARDS:   Yes, I will list them.

GAGELER CJ:   And then let us see the way in which you say the disclaimer has little or nothing to say about them.

MR EDWARDS:   I was proposing to deal with that after I take your Honour through some of the authorities, but the list:  reasonable foreseeability, together with the kind of knowledge that was had by Advanta in this case, that is the first; vulnerability, that is the second.  The lack of indeterminacy was not an issue.  Nobody was suggesting that this was a ripple‑effect problem kind of a case from that perspective – they are an identified class of growers.  And then coherence – we say there is no lack of coherence, and we say Justice Bond approached that with error.

At the end of the day, in a case like this, similar to Dovuro on the facts, it is the intersection between knowledge and vulnerability which weigh most heavily in favour of the duty and which were not intersected with by the disclaimer in a way so as to prevent that duty from arising, we would say.

GLEESON J:   Well, I must have misunderstood, because I thought that you had said very early on, as you were going through the facts, that there was an assumption of responsibility by the manufacturer, but you are not relying on that as a basis for a duty of care.

MR EDWARDS:   There was an assumption of responsibility for a task which had them in contemplation, which had impacts on them in contemplation.  There is even a finding that they assumed that task.  What the Court of Appeal did, your Honour, was to take assumption of responsibility in two senses – the factual and then the voluntary agreeing to be liable part – and they relied entirely on the second.  There was no debate at trial that Advanta undertook the task.  And so, if assumption of responsibility in that sense is a salient feature, yes, I rely on it.  But the absence of the extended undertaking voluntary liability, I say, is not.

GLEESON J:   The task being the manufacture?

MR EDWARDS:   The task being the manufacture ‑ ‑ ‑

GLEESON J:   Of?

MR EDWARDS:   Of the goods.

GLEESON J:   Being?

MR EDWARDS:   The sorghum seeds, for the commercial growing market, sale by distribution.

GLEESON J:   And it is implicit in that that the seed was of a particular quality, namely, not contaminated.  Is that your argument?

MR EDWARDS:   No, your Honour.  There is no guarantee, as such.

GLEESON J:   Thank you.

MR EDWARDS:   But it is a task they were doing, and it is one they were doing trying to control the particular risk.  Just as the solicitor in Hill v Van Erp was trying to follow the instructions to make a provision for the beneficiaries, it is ‑ ‑ ‑ 

EDELMAN J:   It is almost every manufacturer then, is it not?  Because almost every manufacturer will know that there are risks of harm to which a purchaser is vulnerable in the use or consumption of its products, and almost every manufacturer is going to take action to guard against those risks, but as I understand your submission, it is effectively that almost every manufacturer that has a defined class of purchasers of its products would therefore owe a duty of care to that class in the guarding against those risks.

MR EDWARDS:   We are not making a submission for a general rule or a general duty ‑ ‑ ‑

EDELMAN J:   We have to formulate a rule that encompasses your case.

MR EDWARDS:   I understand, your Honour, but there are plenty of manufacturers that operate in different ways.  They may be making bespoke products – that would be a different case.  They may be making products that are capable of being used by a whole lot of different people for different purposes.  They may be making durable products that are going to be resold.  This case, so far as that picture is concerned, is particularly narrow in the sense that it is a single use consumable product for an identified commercial growing purpose with a limited, ascertained market.

Not every manufacturer is going to be in that category, and not every manufacturer is going to be in a world in which you have the intersection – as I call it – between the knowledge and the vulnerability which was found in this case.  There are always going to be control mechanisms, there have to be control mechanisms, because it is true economic loss.  Here, those things were proven or admitted.

The court below approached the matter, we would say, erroneously.  The central finding of Justice Morrison is at paragraphs [142] through to [144], court book 143.  It does start on the previous page – I should have said court book 142.  His Honour is saying Advanta took deliberate:

steps to publish words disclaiming responsibility –

that is [141]:

The words were on every bag.

Nobody disputes that.  He says they delivered a “message”.  His Honour actually misstates it in the last sentence of [143].  His Honour paraphrases it by saying:

if you buy our product, you must take on the risk it may be so contaminated.

Now, the facts I have taken your Honours to show that that was not the case, they had notice of it at the time they bought.  Then, his Honour says:

the learned trial judge was correct to conclude that there was no duty of care in this particular case.

His Honour is reasoning from a deliberate desire not to assume responsibility to the absence of duty.  That is exactly what the trial judge has done at [205], court book 45.  The trial judge said:

In my view, the defendant’s submission that the terms on the bag operated as a disclaimer of an assumption of responsibility to negate the existence of a duty of care to avoid economic loss that the MR43 seed supplied would be free of contamination . . . should be accepted.

So, the submission was made on that basis.  It was the gravamen of the trial judge’s decision and the Court of Appeal’s, and structurally, one can see that, because after the passage I have taken your Honours to from Justice Morrison, what his Honour really does is go through and then culminate by asking himself the question at court book 163, did the other salient features deprive the disclaimer of that effect?

GORDON J:   What passage was that?

MR EDWARDS:   Court book 163, paragraph [227].

GORDON J:   Thank you.  One might look at Justice Morrison’s approach and say that his Honour – I do not think these are the words – adopted what might be described as the necessary incremental approach.  That is, his Honour, recognising that there was no contention of damage to property or damage to person, that he turned his mind to the idea that it was necessary to look at the relationship between the parties and identify whether there was something that was sufficient to give rise to the imposition of the duty of care for now, that is now formulated on appeal, and, in a sense, seek to identify what it was about the relationship between them.

It is not a salient features approach, really, it is more looking to see what the relationship between the farmers and the manufacturer that would give rise to a duty of care is, rather than:  there is a duty, what is the nature of it?  Is that not what his Honour did?

MR EDWARDS:   No, with respect.  His Honour actually did the opposite.  His Honour said, here is something that negates the duty of care, there is no duty, I am going to ask myself whether the other salient features deprive it of that effect.  He did not build it up by looking at the salient features at all.

GORDON J:   It is not really salient features, that label is sometimes a bit distracting.  We are talking about what is the relationship between the two that would give rise to the potential for, the possibility of, on your case, a duty of care.  In a sense, the factors are here, as I understand it, from the factual analysis you undertook; knowledge by Advanta, foreseeability by Advanta.

MR EDWARDS:   Vulnerability by the farmers.  But what his Honour did was start by saying, I find there is no assumption of responsibility, therefore no duty, and I am going to ask myself whether any of the other salient features change that.  That is the opposite of what one should do.

GORDON J:   The reason why I ask is because your paragraph 2 of your outline says:

The law imposes any duty of care.

That is not the right starting point, is it?

MR EDWARDS:   It is too broad; a duty can be taken on voluntarily.

GAGELER CJ:   So where are we up to in your outline?

MR EDWARDS:   We are, your Honour, up to paragraph 3, but we have dealt, in anticipation, with some other things.  We say the error – if I might sum that up – is his Honour treated the absence of a salient feature as governing the outcome and approached it the wrong way around.

Now, I will not take your Honours to Justice Bond’s judgment, which we think proceeded on the same basis, so far as this question is concerned, because his Honour in the passage at [317] – which your Honours need not go to right now, court book 185 – he talked about it being – the case has to be characterised as a case in which the manufacturer has assumed direct responsibility to the ultimate purchaser.  He too was regarding an assumption of responsibility, in a sense of an assumption of legal liability, as necessary, and we say that was in error.

The salient features approach that the court has endorsed stands against bright line, exclusionary types of rules.  Concepts or labels, such as proximity, your Honours will know, deprecated – it is incremental, it builds up – but the suggestion that one has to give a tick to any one particular salient feature in order for a duty of care to arise or be recognised does lead to a jarring.  We say that is the error that the Court of Appeal made. 

I want to, then, address the concept of assumption of responsibility in a little more detail.  As I said before, it arose in the context of those early negligent misstatement cases when the courts were still very much grappling with whether duties of care to avoid economic loss existed at all or could exist.  The discussion by the Lords in Hedley Byrne shows that.  The concept of “equivalent to contract” was mentioned by Lord Devlin – undertakings and things of that nature.

But the law has not stood still with Hedley Bryne.  We do have, in this country – after Caltex Oil – a much more nuanced approach to duties of care to avoid economic loss.  We submit that one does not understand assumption of responsibility only as necessitating voluntary assumption of liability.  It could be that, but it does not have to be.

GLEESON J:   In the sale of goods context, the way that a supplier ordinarily assumes responsibility for the quality of goods is by warranting them.  Would you accept that?

MR EDWARDS:   It may be the case for many.  It was not the case here.

EDELMAN J:   But then you are moving into a different meaning of assumption of responsibility.  Either assumption of responsibility means – as Justice Gleeson has put to you – something objective that you have promised or undertaken, either a contract or in a deed, something without consideration by a representation, or it means something entirely different.  But you cannot merge them both together. 

MR EDWARDS:   The kind of assumption of responsibility, if any, that is going to be a salient feature in any given case will depend on the facts.  Dealing with it in terms of the label can be unhelpful, and it is in this case.  That was one of the points made by several of the justices in Hill v Van Erp itself.  

BEECH-JONES J:   So, is your point it is not confined to an assumption of legal responsibility with, say, a rough equivalent might be a rescuer’s case; a rescuer does not contract to look after a person.  Is that where we are going to?

MR EDWARDS:   Yes.  Sometimes someone takes on a particular task, that task has a particular foreseeable impact, it might even have particular people in contemplation.

GLEESON J:   Is this something that is special or peculiar to manufacturers whose products might have a latent defect?

MR EDWARDS:   This notion of assumption of responsibility?  No, no, no.

GORDON J:   Mr Edwards, if you remove the label – which is what we are debating at the moment – and you just go back to what I asked you before and you start with, in a sense, part of your second paragraph, and one looks to the factors of the relationship, what are the features of the relationship between the parties that gives rise to a duty of care?  That is what we are really talking about, are we not?

MR EDWARDS:   Yes.

GORDON J:   You have labelled it assumption of responsibility, but you are pointing to features of the relationship which you seek to rely upon between the manufacturer and the farmers.

MR EDWARDS:   Yes, and ‑ ‑ ‑

GORDON J:   And what are those features that you say give rise – put aside the label for the moment – to the existence of the duty of care?

MR EDWARDS:   I am happy to answer that now, but I was going to address that after I deal with the law.

GORDON J:   All right.

GAGELER CJ:   Where does it fit into your outline?

MR EDWARDS:   That part is dealt with in ‑ ‑ ‑

EDELMAN J:   Paragraph 8, is it not?

MR EDWARDS:   ‑ ‑ ‑ 7 and 8.  Yes.

GAGELER CJ:   I think that is what we are particularly interested in.

EDELMAN J:   The assumption of responsibility does not add anything to 7 and 8, does it?  The way you are using assumption of responsibility is the label that you attach to satisfaction of what occurs in paragraphs 7 and 8.

MR EDWARDS:   I do not even need it as a label.  I am only talking about it because the Court of Appeal said that it was necessary in this sense.  They proceeded in a particular way.  But in the sort of logical sense, the mere absence of one salient feature cannot govern the totality of the relationship, and so even if you take their Honours at face value as saying, well, it was just lacking here, that does not answer the question.  The question is:  look at the whole relationship; do the other facts – give them labels or not – give rise to a relationship out of which a duty of care ought be recognised?

GAGELER CJ:   Well, Mr Edwards, it really is a matter for you, but we are particularly interested in hearing you on paragraphs 7 and 8, so if you can get there quicker it would be better.

MR EDWARDS:   I will just give your Honours some references, before I do, to the way in which this has been dealt with in some other cases, without going to them, necessarily.  Caltex was not a case where anyone was talking about these words “assumption of responsibility”.  It was not a case of that kind.  The important features of a relationship there were the undertaking of activities in physical propinquity to the pipeline and knowledge of the risk.  Nobody was talking about that label.

GLEESON J:   Knowledge of the likelihood, actually, of harm.  It was not knowledge of a risk, it was knowledge of the likelihood of harm.

MR EDWARDS:   Bryan v Maloney (1995) 182 CLR 609, at 619, Chief Justice Mason and Justices Dean and Gaudron said – and one sees this quote coming back through all the other cases:

Commonly, but not necessarily –

pure economic loss cases:

will involve an identified element of known reliance (or dependence) or the assumption of responsibility –

Commonly, but not necessarily.  That was cited by Justice Gaudron in Perre v Apand, it was cited by Chief Justice French in Brookfield Multiplex.  I do want to invite your Honours to go to Hill v Van Erp (1997) 188 CLR 159. It is in the first book of the joint book of authorities at tab 9.

This was a case, as your Honours know, about negligence of a solicitor, and the beneficiaries were disappointed because the will was not drafted adequately.  It was decided in the time when the Court was moving away from proximity and towards what we now know to be the salient features test.  Justice Gummow’s judgment bears reading at 229 of the report, which is, I think, 423 of the electronic.  His Honour has the heading – and I am going to invite your Honours to the bottom of that page – cites Bryan v Maloney, and his Honour then says:

The use of the imprecise and beguiling but deceptively simple terms “known reliance” and “assumption of responsibility” in a number of recent decisions in this field has been subject to stringent criticism by judges and in academic writing.

He says, in the middle of the page, on the facts:

the respondent, Mrs Van Erp, did not assert in her favour any identified element of known reliance or dependence by her upon the discharge by Mrs Hill of her professional obligations . . . However, it was contended that Mrs Hill voluntarily assumed responsibility for the making by the testatrix of a valid will reflecting her intentions . . . The submission was that Mrs Hill did so by holding herself out as having and lending a professional skill –

So, advocates in that case were trying to bring it in within this concept of voluntary assumption of responsibility.  His Honour goes on: 

the evidence does not disclose, in any specific sense, any assumption of responsibility by Mrs Hill other than to her client. 

And his Honour cites from White v Jones, and the top of page 231 his Honour says this: 

In White v Jones, Lord Browne‑Wilkinson sought to meet criticism of the use in such contexts of the phrase “assumption of responsibility”.  His Lordship said that it should be understood as referring “to a conscious assumption of responsibility for the task rather than a conscious assumption of legal liability to the plaintiff for its careful performance”. 

And then his Honour says: 

Any such general notion of “assumption of responsibility” by reference to the performance of services and without identification of those to whom or for whose benefit they are performed has attracted criticism, with which I agree.

Now, in that case, the task was drafting a will on the client’s instructions, which was objectively, and intended, to benefit the beneficiaries.  The task encompassed their economic interest in that sense, and they were in contemplation.  We would say that, on the facts as found and admitted here, the seed producers’ task – focusing on the task – was the manufacturer or production of seed for sale to the farmers for their commercial use of that seed, was the object of the manufacture.  It was the entire purpose of the relationship.  I am not seeking to suggest that these cases are absolutely the same as each other.  Of course not, but the understanding of how one looks at this in this case is, in my submission, illuminating ‑ ‑ ‑

BEECH-JONES J:   I am sorry, Mr Edwards, are you seeking to rely on what Lord Browne‑Wilkinson said, or do you take Justice Gummow as having accepted that but added the requirement that it be an acceptance of responsibility towards a particular class? 

MR EDWARDS:   The latter. 

BEECH-JONES J:   The latter, but you are taking Justice Gummow as otherwise having agreed with that?

MR EDWARDS:   Yes, because his Honour is, really, warning against using this as a label, and the Chief Justice, in the same judgment, at pages 170 to 171, which is 364 to 365.  At the top of page 170, his Honour seems to have a similar understanding: 

The assumption of responsibility by the defendants in Hedley Byrne was a characteristic of the conduct to which a plaintiff’s economic loss had to be casually related through inducement and reliance, not an element that exhausted the circumstances in which damages for economic loss could be recovered.

Then, over the page, at 171, his Honour says, after citing from White v Jones, about point 7:

I would not regard the principle underlying recovery against the solicitor as being an extension of the Hedley Byrne assumption of responsibility.  The Hedley Byrne category of case depends upon an assumption of a duty of care as a factual element . . . In cases of the present kind, there is no anterior relationship –

So, his Honour is distinguishing between two different notions in which this label has been used.  Justice Dawson, at page 184 – page 378 of the joint book of authorities – has a passage which may be prescient of this appeal, in a sense:

To say that in this case the solicitor assumed responsibility to the intended beneficiary may invite argument but for reasons which will appear the argument would be one over terminology rather than substance.

His Honour’s further observations in that passage, we would say, suggest that his Honour was regarding it as a factual rather than a legal assumption – an assumption of responsibility for a task as a fact, rather than assuming liability for that task.

GLEESON J:   But, Mr Edwards, I am not sure how far this take you unless you then actually look at the dispositive reasoning in each judgment to see the factors that were actually relied upon to form a view that there was a duty of care.

MR EDWARDS:   I accept one has to look at the totality of the reasoning, but the beneficiaries succeeded in that case.

GLEESON J:   Well, I am just looking at Justice Gummow’s reasoning, and it does not really seem to bear much resemblance to – or reliance on the propositions that you have been articulating.

MR EDWARDS:   Because, your Honour, his Honour is not saying that you have to find this as voluntary, assuming liability.  His Honour is relying upon other facts, just as I am in this case.  But the way in which his Honour approaches it, and the way in which his Honour looks at assumption of responsibility, is, we think, correct.

EDELMAN J:   Well, he does – Justice Gummow, at least, talks about the law of tort operating to, and I think his words are to provide:

complete and vindicate fulfilment of that contractual obligation.

I mean, in that sense, where he is talking about duties equivalent to contract, it might be said that this is really an exceptional class of case where there is, as his Honour recognised earlier, an assumption of responsibility – a contractual duty that is owed to the testator, but the beneficiaries have this exceptional standing right to enforce the testator’s duties.

GLEESON J:   That seems to be borne out by what is said at page 234 of his Honour’s reasons.

MR EDWARDS:   It is a case where those were the facts.  And there is always a danger in abstracting from particular tort cases.  All I am really seeking to demonstrate through this is that the approach that his Honour took is not one that depends upon finding an assumption of responsibility in the sense of legal liability.

Now, I need to correct something in our written submissions at this point.  We said at paragraph 22 that Justice McHugh endorsed this reasoning in Hill v Van Erp.  That was not correct.  Justice Gummow did, we would say, and we would say that Chief Justice Brennan and Justice Dawson and Toohey also took the same approach, but I do need to correct that reference to Justice McHugh.  What his Honour did, in fact, in that case, was dissent, because he thought there needed to be an assumption of responsibility for the beneficiaries’ interest or a promise to them.

Now, I just want to pause for a moment on the more modern building cases.  All these are, in a sense, ripple‑effect cases, they are all cases for subsequent purchasers.  Our case here is for the first‑line users of the product.  But nonetheless, the passage from Bryan v Maloney which talks about assumption of responsibility is also not one which is talking about assumption of responsibility in a sense of full legal liability.  If your Honours have Bryan, it is joint book of authorities volume 1, tab 5.  Your Honours will see at the top, about point 2:

In ordinary circumstances, the builder of a house undertakes the ‑ ‑ ‑ 

STEWARD J:   Sorry, what page is that?

MR EDWARDS:   Page 627 of the report, your Honour, joint book of authorities page 109.

GAGELER CJ:   What are we getting out of this?

MR EDWARDS:   Just this, your Honour.  When their Honours are talking about assumption of responsibility in this passage, they are talking about it factually, they are not talking about legally assuming liability or voluntarily assuming legal liability.  What they are saying is:

the builder of a house undertakes the responsibility of erecting a structure on the basis that its footings are adequate to support it for a period during which it is likely that there will be one or more subsequent owners.

So, they are not searching for the builder having volunteered to be liable and subject to subsequent owners.  They are identifying that the builder’s task is one which had in contemplation subsequent owners.  That kind of reasoning is consistent with the way in which Justice Gummow approached the case in Hill v Van Erp.

GAGELER CJ:   Mr Edwards, it is customary for us to take a 15‑minute morning adjournment.  Again, it is a matter for you, but we are particularly interested in you getting to paragraphs 7 and 8, and we look forward to that on our return.

MR EDWARDS:   That is essentially where I am, your Honour.

GAGELER CJ:   We will take the morning adjournment.

AT 11.15 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.29 AM:

MR EDWARDS:   If it please the Court, I am now moving to paragraphs 7 and 8 of the outline.  As your Honours will have seen, we have said there that there is no hierarchical rule governing in all cases the relevant importance of salient features for the purpose of considering duty.  We are not putting one up.  We are not saying that we need a conclusion or a finding about assumption of responsibility at all.  In fact, we are saying that the salient features in this case support a duty once you free them of the suggestion that the disclaimer was determinative of duty.

I am not going to take your Honours exhaustively through earlier cases and try to justify a duty by reference to different facts.  But it is not insignificant that the closest facts that this Court has considered – but not identical, of course – was Dovuro.  Dovuro was a case where somebody was trying to withdraw a concession as to the existence of a duty of care.  Now, everything was obiter for that reason, but the passages that were cited – in fact, by the Court of Appeal in the argument that was put before them – were supportive of the proposition that in that kind of a context – producer‑farmer – the level of knowledge or foreseeability and vulnerability were particularly important factors.

If your Honours have the Court of Appeal’s judgment, Justice Morrison’s judgment at court book 147, his Honour sets out at paragraph [164] the short passage from the judgment of Justice McHugh on this duty question.  Justice McHugh thought that the duty was pretty obvious.  In fact, his Honour described it as:

not a case where there was any basis for contending that the losses suffered by the consumers –

who were commercial farmers:

might fall outside the ordinary duty owed by a manufacturer to a consumer.

That only goes so far, of course.  Justices Hayne and Callinan had a more extensive consideration of the question, which, again, is set out in the Court of Appeal, court book 149, paragraph [171].  This was a contaminated canola seed.  It was not noxious and, ultimately, the farmers in that case failed because the sort of loss was not reasonably foreseeable.  The way in which Justices Hayne and Callinan approached it is, we think, illustrative.  In the passage that is set out at the top of court book 150, their Honours cite Caltex:

there is no absolute rule denying a duty . . . If Dovuro failed to act with reasonable care, it was reasonably foreseeable that there could be circumstances in which those farmers may suffer economic loss as a result of their using the seed.

They start, then, with:

The class likely to be affected . . . would not be an indeterminate class and they would be persons vulnerable to loss if care were not taken, although it may be that assumptions . . . should not be made too readily –

Here, there were findings, of course, in our case.  Their Honours said:

All this being so, a duty to exercise reasonable care not to expose the farmers (as users or consumers of the seed) to a risk of injury of which they knew or ought to have known could, in some circumstances, extend to the risk of purely economic loss.

The “critical question” there was:

whether Dovuro knew or ought to have known that there was a risk of the sort of injury which it was alleged had been suffered – financial loss occasioned by pursuing a course of action recommended by government authorities –

Now, we say – and I will take your Honours to the findings again – that we do have findings both of what was known and ought to have been known as to the risk and the purely economic loss.  Their Honours conclude this passage by saying:

if that sort of loss was reasonably foreseeable by Dovuro would the duty asserted by the Wilkins have been engaged.

The sort of loss here, in our case, was the increased difficulty in controlling the off‑type.  They failed on reasonable foreseeability, but it is plain, we would submit, that Justices Hayne and Callinan in that case were placing particular emphasis on knowledge of the risk, vulnerability, and that the plaintiffs’ farmers failed on the facts because of lack of reasonable foreseeability, which is not the case here.

What Justice Morrison then did with this judgment, we say, was a little unsatisfactory.  But in particular, the distinguishing of the reasoning of Justices Hayne and Callinan at [172](d) of Justice Morrison – court book 150 – because what their Honours Justice Hayne and Callinan were doing in Dovuro was directly applying Caltex.  Justice Morrison seems to draw a could‑would distinction without really appreciating that Justices Hayne and Callinan were saying it could have and would have, if there was reasonable foreseeability.  His Honour does not really grapple with the fact, we would say, that Justices Hayne and Callinan are focusing upon the risk of an injury which they knew or ought to have known.  His Honour had already made findings that Advanta, here, had that kind of knowledge.

Coming, then, in more detail to the facts of this case, one does not, of course, say, simply because of what was said in Dovuro, a duty must arise, but it is an incremental salient features approach, and what their Honours said could not be trivialised or put to one side, as we say his Honour Justice Morrison did, the facts of this case concerning reasonable foreseeability and knowledge.

I will deal with that salient feature first.  This is Justice Morrison in the passage starting at court book 118, which is where I commenced.  The purpose of the commercial activity of Advanta, paragraph [14], was to produce this seed for:

commercial planting and harvesting by growers –

so, you have an identified class of people who are going to use the particular product for a particular commercial purpose.  That, as we have said, is the starting point in the sense of where one understands the relationship, because Advanta has them in mind at that time.  They have not presented themselves to the till or made the phone call to buy the seed, but they are in relationship, in anticipation, at that point in time.  As I said at the outset – this is [18] on court book 119 – the:

production process included controls –

So, there was an attempt to take reasonable care, they just failed in that attempt.  But knowledge – more particularly, [24] – knowledge in 2009, that there were off‑types in the seed lines, including MR43, had actually been seen “for several years prior to 2009”, off‑types, and, [24](c), those off‑types at least included the potential or the risk for off‑types with shattering characteristics, and (d), knowledge that that kind of off‑type was likely to cause a grower “to have greater difficulty in controlling” the crops.  Paragraph [25], “absent reasonable care being taken”.

Those are very clear and relevant knowledge findings.  The knowledge of Advanta in 2009 was both of the risk and of the kind of consequence that risk would cause to the growers if it came home, “greater difficulty in controlling”, which can only really mean more work, more expense.

MR DUNNING:   Because the case was run as a pure economic loss case, it did not matter, ultimately, to determine that.  It might have had impacted some of the ‑ ‑ ‑

BEECH‑JONES J:   Well, it would have impacted the whole duty argument we just had.

MR DUNNING:   Undoubtedly, but in terms of the way the case was run, because it was plaintiffs suing because they were running a farming enterprise – some of them happened to own the land, some did not; some of them happened to lease the land, some did not.

BEECH‑JONES J:   But it has never been run as a physical damage case.  It would be very different, and that is both sides happy to contend with that.  You must have been embracing that because you are being passionately arguing about the non‑existence of a duty based on economic loss.  So, if we would then embark upon an analysis of limitation periods on the assumption it was physical damage it would be inconsistent with how we got here, would it not?

MR DUNNING:   We have not asserted it is a physical damage case.

EDELMAN J:   It could only be relevant in the more abstract sense of coherence as to whether or not it could be coherent to recognise a duty of care not to cause economic loss in circumstances where, in principle, the same conduct could give rise, potentially to the same plaintiffs, to an immediate liability based on physical harm.

MR DUNNING:   I entirely accept that, Justice Edelman, but I know for a fact not every person running the farming enterprise was an owner – some were, some were not – but the incoherence your Honour refers to is certainly right in respect of landowners.

EDELMAN J:   Or lessees.

MR DUNNING:   Sorry or anybody that leases some land, yes, your Honour is quite right.  Justice Beech‑Jones, if I can just close out my answer to your Honour’s question simply to make this submission.  We have not ever asserted it was a damage to property case but nor are we the drivers of that.  We are only ever a defendant in the proceedings.  We were sued on the basis that it was a pure economic loss case and that was the forum in which we – that was how we responded to it.

Can I just briefly then take your Honours, please, to Wardley (1992) 175 CLR 514. Your Honours will find it in volume 2 of the bundle, it is tab 15, at bundle page 832 of the pagination. The only passage beyond that which we have set out in writing that I wanted to take your Honours to is at 528 to 529 of the reasons. As your Honours might recollect, part of what the High Court in Wardley was dealing with was a decision of the Full Court of the Federal Court in Jobbins, which had lent some support to this notion that time might run from the time of the contingency.  The distinction that their Honours draw – and I hope, Justice Gordon, this provides some answers to the question you asked me earlier – is to be seen in the judgment of Chief Justice Mason and Justices Dawson, Gaudron and McHugh regarding the English Court of Appeal in Forster v Outred.  Starting at the foot of page 528 until about the middle of 529, their Honours deal with that decision.

Now, there was a case where no money had been expended at that point in time but, nonetheless, this Court held that that was a case where time began to run, because the cause of action was complete, so that the payment of money or the knowledge – which Hawkins v Clayton tells us is not essential – are not requirements for the limitation period to run.

BEECH‑JONES J:   Are you talking about Forster or are you talking about Wardley?

MR DUNNING:   Sorry, your Honour?

BEECH‑JONES J:   You were talking about a particular case, is that about Forster?

MR DUNNING:   Forster in the manner in which it is adopted in Wardley, and also, prior to Hawkins v Clayton, this idea that time can run even though you do not appreciate it.  In our submission, the question comes to, when is the cause of action complete?  So, if we test it this way – and I appreciate, Justice Gordon, this does not provide a complete answer to the point you put to me – but you could have sued at any time after you had

sown the seed, because at that point you could have said, I run a farming enterprise and on the land or the premises on which I operate that enterprise something has occurred which will occasion me loss.

When one sees it in that context, and we are going to the point Justice Gordon raised with me, there cannot, in our submission, be any argument that time must run from then, because one does have a complete cause of action, and unless the fact that you did not know is a bar then the decisions below were, with respect, incorrect.  In the end, that concern about time starting before you know is one that exists and it was one that Wardley grappled with, but not in a way to suggest that it meant time could not run if one did not know of the existence of the cause of action.

The correctness of that is seen to be bound up in the legislative choice that the limitation statutes represent, and the need for the certainty of application in their application, otherwise, if we go back to the illustration of three farmers, they have three different limitation periods running.

Unless we could assist your Honours any further, they are our submissions.

GAGELER CJ:   Thank you.

MR DUNNING:   Thank you, your Honours.

GAGELER CJ:   Mr Edwards.

MR EDWARDS:   Please the Court.  I will address the appeal before the notice of contention, if that is convenient.  My learned friends’ address seemed to be predicated in part on a submission to the effect that the knowledge findings of Justice Morrison at paragraph [24] were somehow common knowledge or obvious things as between Advanta on the one hand and farmers on the other.

These are findings as to Advanta’s knowledge.  There was not any findings that the farmers had equivalent knowledge about those risks.  In fact, the trial judge made an express finding, for example, that second appellant – the relevant person, Mr Hemmings, who was the manager – did not even know what shattercane was.  The findings are to be understood as peculiar findings as to specialised knowledge that a seed manufacturer – here, Advanta – had:  knowledge that its own seed lines had exhibited off‑types prior to 2009.  That is an element of the knowledge.

The other element that those off-types may have at least included ones with shattering characteristics, that may well be knowledge that a seed manufacturer would generally have, but it is not knowledge that the courts below found was equivalent, or the subject of equivalent understanding by the farmers.

The reason that this matters is because, when one looks at the salient features as we have identified them, the nexus between knowledge on the one hand and vulnerability on the other hand is fundamentally connected to asymmetry.  Asymmetry of information.  My learned friend said on several occasions, I think, that the disclaimer and bag packaging put the farmers on notice in some fashion.  The disclaimer did not qualify a representation, like in Butcher, it did not warn of a risk like in Dederer.

The vulnerability findings were brief.  They were expressed in somewhat generic terms, but they focused, we would say, on inherent features of the market that indicated that those growers – the farmers – did not have information upon which they could make a choice.

My learned friend is saying farmers have a choice.  They certainly did not have an informed choice.  It is in that context that findings such as the one my learned friends took your Honours to in Justice Jackson’s judgment at [191] need to be understood, on vulnerability.  Paragraphs [190] and [191], court book 42:

unrealistic, in many consumer‑like transactions . . . to expect that the buyer from a producer or distributor of a thing is in a bargaining position to extract a warranty from the seller against a defect –

What choice did the farmers have?  My learned friend was asked that question, and the answer seemed to depend upon, with the greatest respect, putting evidence from the Bar table, not subject to findings, saying they could have mixed seed, they could have done other things.  The case was conducted on the battlefield so that the only relevant thing they could have done was to take it back.

But there was not even a finding that that would have been efficacious.  It was unrealistic to expect them to protect themselves by extracting warranties.  My learned friend accepts that; he seeks to make a virtue of it.  But it is not a virtue.  It is at the core of the way in which the courts below approached vulnerability, and those findings are not challenged.

The disclaimer did not intersect with those features that were described as giving rise to vulnerability.  It was not calibrated to do so.  My learned friend ultimately, I think, accepted that the disclaimer goes to weight – it is to be weighed.  He sought to say both things.  He sought to say, well, yes, I submit that assumption of responsibility is critical and necessary, but in questioning from your Honours he seemed also to accept that, really, it can only go to weight.

The matters that your Honour Justice Edelman referred to concerning the similarities, in a coherence sense, between this case and the well‑known personal injury case, are worth, in my submission, reflecting on.  Manufacturer and first‑line end user is an ordinary category for personal injury, for property damage.  The difference in economic loss cases is that control mechanisms need to be considered.  It does not go without saying that there is a duty.  You cannot just turn up and assert it.  You have to prove it, and you have to prove that it is appropriate, having regard for the need for control mechanisms.

The first control mechanisms is not even in issue.  This is not an indeterminate class.  Everyone is proceeding on that basis.  Once you step over that, you are in a much narrower category of case.  The ripple effect is not one that is reason not to recognise or impose a duty.  The other salient features come to the fore.

My learned friend seeks to say there is a difference between the quality of knowledge that was shown to be the case in Perre and here.  Yes, I am not saying that Advanta had actual knowledge that the seed lines were, in fact, contaminated with shattercane prior to early 2011, but they most certainly did have knowledge of the risk and they most certainly did have knowledge that the risk would have serious consequences of the kind that, ultimately, happened and that if they took steps in careful production they would be able to eliminate that risk.  That is how one understands the admissions, and Justice Morrison proceeded on that basis.

This is not a case where your Honours need to be concerned about recognising some kind of a general duty upon all manufacturers.  We are not putting it in that way, and it does not arise in that way.  It is a particular duty in a particular context – the agricultural context – with particular findings as to knowledge, as to foreseeability, and as to the vulnerability.  It is not, by any means, a floodgates‑type of an argument.  It does not raise those concerns.  It is also a case where a disclaimer was fixed to the bags of seed in a particular distribution model where the manufacturer tried, but failed, to impose them contractually.  There would be plenty of cases unlike that.

The terms of the disclaimer did not amount to a warning in any relevant sense that intersected with the kind of knowledge that the manufacturer had that the farmers did not have.  It did not intersect with the features which gave rise to their vulnerability.  To the extent that there have been policy concerns raised – and they are frequently raised in cases of this kind – if one really stands back from it, the law in this area has to have regard to – is recognising a duty in this way – somehow constraining ordinary or legitimate business activity, and it is not.

Lack of care in manufacture is not an ordinary business activity.  Shifting risk away from a person with control of the manufacturer who has the knowledge, who knows they can exercise the control, is consistent with the fundamental aim of tort law.  There is certainly no lack of coherence in that kind of an outcome when we are dealing with first‑line end users in an identified class who had no real choice to do anything about the risk that was inherent or pregnant in the goods by the time they purchased it.  No finding has been pointed to as to what they could have done.

A couple of other matters, your Honours.  This is not to be seen as a case of the same kind as Hedley Byrne.  In that case, the information that was provided came at that time, with a qualifier on that information.  It is a very different kind of a case.  The way in which the disclaimer was held effective in that case, apart from reflecting some vestiges of the old law, occurred concurrently with the acts that would otherwise have been careless, so as to give rise to liability.

The appellants are not here presuming a duty.  The appellants are pointing to features of the relationship, from inception to relevant conclusion, that ought lead a duty to be recognised, and features which the disclaimer was not calibrated to sufficiently reduce so as to prevent liability from arising.  I will check if I have covered everything on the duty question that I intended to and move, briefly, to the limitations argument.  It was, as your Honours have seen, rejected by all the Justices below.  We will not repeat what we have set out in writing about Alcan Gove; a lot of reliance was placed on that by our friends both below and in writing.  Time runs not from when loss is inevitable, but from when injury occurs.  In that case, it was the cell change.

It is very unclear from the terms of the notice of contention when it is said by Advanta that loss here became inevitable.  It postulated there three alternatives:  planting, germination, subsequent growth.  But the mere fact that the seeds were in the ground did not cause the cash flow losses, nor did their germination or growth.  They needed to be planted, germinate, mature, grow and shatter their heads, and, critically, result in increased expenditure being actually incurred. 

It is problematic to hypothesise inevitability given the nature of the interests infringed here and the contingent ways in which loss could have been avoided, or, indeed, suffered.  If the farmers had, for different reasons, decided just to not farm sorghum anymore, because some other crop was more profitable, there would never have been increased expenses.  Not all farmers owned the land.  If they had sold their farming businesses, they

would not have suffered any loss until it was ascertainable that there was contamination in the seeds that had been planted previously.  The subsequent purchaser might have had a very interesting kind of Bryan v Maloney‑style argument to run, but they could not have been said to be statute barred.

Advanta did not, at the end of the day, prove that the damage claimed was inevitable.  And when your Honours read it, Justice Morrison’s judgment at 165 of the core appeal book, paragraph [232], refers to submissions made by Mr Gleeson below; farmers could have honestly sold their business without discount while the contamination was undiscovered.  It was the change to the farming practices in the next season which resulted in the claimed damage which was increased expenditure and reduced revenue.  The primary judge was correct to say at [495], court book 87, that there was:

no allegation or evidence that . . . any increased cash outflow or expenditure –

occurred:

before 24 April 2011.

And the Court of Appeal was correct to affirm that finding, but they could not change their farming practices until they knew what the problem was, and not even Advanta knew what the problem was; it was still engaged in testing in around April 2011, there are references to that.  Even if some hypothetical farmers might have identified it early and incurred expenditure earlier, that was not the case for these plaintiffs on the findings of the courts below.

And we also rely, of course, upon what Justice Morrison said at 263 to 267, court book 172, about the relevance of Wardley to this kind of analysis.  Losses were merely prospective, in the Wardley sense, at the time that the seed was in the ground and the contamination unknown, and Advanta did not undertake the task of proving that any specific item of expenditure was incurred prior to 24 April 2011.

It did not even prove or try to prove that the farmers expected or planned to incur such items of expenditure.  They were not even cross‑examined at trial, and the suggestion, with respect, that loss was suffered, in a relevant sense before 24 April 2011, is speculative.

Those are the submissions in reply.

GAGELER CJ:   Thank you, Mr Edwards.  The Court will consider its decision in this matter and will adjourn until 10.00 am tomorrow. 

AT 3.55 PM THE MATTER WAS ADJOURNED