McMullin, Brian v ICI Australia Operations Pty Ltd (No. 7)
[1998] FCA 962
•14 AUGUST 1998
FEDERAL COURT OF AUSTRALIA
DAMAGES – Losses sustained by owners of cattle contaminated with chlorfluazuron – No question of principle.
BRIAN McMULLIN and LEONE McMULLIN v ICI AUSTRALIA OPERATIONS PTY LTD, ICI AUSTRALIA LIMITED and CROP CARE AUSTRALIA PTY LIMITED
NG305 of 1995
JUDGE: WILCOX J
DATE: 14 AUGUST 1998
PLACE: SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG305 of 1995
BETWEEN:
BRIAN McMULLIN AND LEONE MARGARET McMULLIN
ApplicantsAND:
ICI AUSTRALIA OPERATIONS PTY LTD
First RespondentICI AUSTRALIA LIMITED
Second RespondentCROP CARE AUSTRALIA PTY LIMITED
Third Respondent
JUDGE:
WILCOX J
DATE:
14 AUGUST 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT (NO 7)
WILCOX J: These reasons concern the quantum of damage suffered by two grazing partnerships, N and M Harris & Sons and Bruce and Elsie Harris & Co, as a result of CFZ contamination of their cattle. The reasons should be read as supplemental to my Reasons for Judgment (No 4), dealing with issues of liability and reported at 72 FCR 1, and Reasons for Judgment (No 5), dated 27 November 1997 and relating to other damages claims. In particular I repeat, and intend to apply where relevant, the general principles enunciated at 2 to 4 of the latter judgment. To the extent of their relevance to the present claims, I also take into account my findings as to market conditions at 4 to 11 of those Reasons.
The partnerships
There is a family connection between the members of the two claimant partnerships. Bruce Maylon Harris (born 26 July 1934) and Norman Frederick Harris (born 18 February 1938) are brothers. A third brother, Harry, operates Gogo Station at Fitzroy Crossing, in the Kimberley area of Western Australia. He is not a member of either of the present claimants.
At the time of the brothers’ births, their parents farmed a small property near Coonabarabran, New South Wales, on which they grew wheat and ran some 2,500 sheep and 20 to 30 cattle. Bruce and Norman Harris each left school at about the age of 14 years. Each claims to have difficulty in reading and writing. After they left school, each worked on their parents’ property. Their father died in 1957 and the two young men then took over control of the farm. They acquired some adjoining land, so the farm contained some 1,000 acres by the time it was sold in 1964 or 1965.
In 1964 Bruce and Norman Harris and their wives went into a partnership business on their own account. They purchased “Moomin”, a property containing 6,064 acres at Rowena near Collarenebri. Mr Norman Harris said this property was then “an undeveloped scrub grazing block”. They used it to graze some 3,000 sheep and a “small number” of cattle. Shortly afterwards the members of the partnership acquired a nearby property, “Avondale”, of 2,560 acres, and then “Merrywinebone” (10,000 acres). In about 1974 the partners acquired “Krui”, a 16,300 acre property at Bellata, and another Rowena district property, “Hemmingford” of some 5,300 acres. In 1977, with a third party, the partners purchased “Moomin Plains” (26,000 acres) at Rowena.
In about 1981 the two brothers decided to dissolve their partnership so that each of them could form a business partnership involving their children. The properties were split, Mr Bruce Harris taking “Avondale”, “Merrywinebone” and most of “Moomin Plains” while Mr Norman Harris took “Krui”, “Moomin”, “Hemmingford” and the balance of “Moomin Plains”. They also split the water licences, covering some 24,000 acres, that the partnership then enjoyed. The present partnerships were then formed. There have been changes in membership over the years, owing to deaths and marriages; but in each case the founding partner (Mr Bruce Harris and Mr Norman Harris) has remained, taking a leading role in the partnership’s affairs.
After their establishment in 1981, each partnership acquired additional properties. Bruce and Elsie Harris & Co acquired “Myralga”, a 7,000 acre property adjoining “Merrywinebone”, in 1982 and another adjoining property, “Oreel” (15,000 acres), in 1986. In 1990 this partnership acquired four contiguous properties comprising 35,000 acres and in 1994 a further three properties containing 25,000 acres. These properties are all in the immediate vicinity of “Merrywinebone”.
Throughout the 1980’s Bruce and Elsie Harris & Co grew some cotton – it seems never more than about 2,000 acres per year - and some wheat, mainly as a crop rotation. The partnership was also a party to a sharefarming agreement with Ronald Greentree under which Mr Greentree grew wheat on “Merrywinebone”, “Moomin Plains” and “Oreel” on the basis that Bruce and Elsie Harris & Co received one-third of the crop. In about 1991 Mr Greentree suffered some financial difficulties; as a result, Bruce and Elsie Harris & Co took over responsibility for providing plant and machinery in return for an increased share of the crop.
Throughout the whole of this period the partnership’s main business was with cattle. Cattle constituted Mr Bruce Harris’ background and predominant interest, although his sons and partners, Kenneth and Robert, were interested in expanding the partnership’s involvement with cropping. The likely timing and extent of that expansion is a major factual issue in the case.
The situation was similar in relation to N and M Harris & Sons. In 1982 a family company purchased "Woodvale" at Rowena (8,800 acres) for use by the partnership. In 1987 Mr Norman Harris’ sons and partners, Peter and Malcolm Harris, purchased “Kindamindi” (also 8,800 acres). In 1988 and 1989 Mr Harris’ son Andrew purchased “Wathanoo North” and “Wahroonga” (2,800 acres and 6,600 acres respectively) and in 1991 Mr Norman Harris, his wife and son Ronald, purchased “Wean” (9,800 acres). There were further purchases by family members over the following six years: “Ruglan” in Queensland (5,000 acres) in 1994, “Jindeena” at Balranald, New South Wales (4,000 acres) in 1995, “West Haran”, Queensland (20,000 acres) in 1996, “Lyolia”, Queensland (5,000 acres) in 1996 and “Cleveland” at Mungindi, New South Wales (20,000 acres) in 1997. Mr Norman Harris said in his written statement:
“The overall investment objective of my family has been to buy underdeveloped properties that enabled us to maintain a balance between irrigated and dry land farming, and cattle production.”
The current position seems to be that N and M Harris & Sons is effectively a partnership between Mr Norman Harris, his sons Peter and Malcolm and their respective wives. The three men are engaged full-time in the partnership’s operations, the farming and cropping program being managed by Peter and Malcolm being responsible for cattle trading. Mr Norman Harris undertakes a general supervisory role.
The claim of N and M Harris & Sons
According to an amended Scott Schedule filed after completion of the oral evidence, N and M Harris & Sons claim $5,396,616, inclusive of interest to 30 June 1998. The claim contains numerous contentious items. As counsel for the respondents point out, many depend upon the premise that, but for Helix, the partnership would have disposed of its entire breeding herd by about March 1995. The respondents challenge this premise. As the issue spans several items, it is convenient to deal with it immediately.
In his written statement Mr Norman Harris said that in 1990 the partnership had about 16,000 sheep and 2,000 cattle but, from 1991, “progressively sold sheep and bought more cattle”. He said the partnership continued to increase cattle numbers through to late 1993, “but from early 1994 our plan was to remove cattle from country at Rowena and on other properties which could be farmed, other than with cattle to be finished in our feedlot at ‘Hemmingford’. Cattle would be moved onto cheaper grazing country and better country improved and used exclusively for farming activities”. Mr Malcolm Harris established a feedlot at “Hemmingford”. Initially it was quite small but, by 1994, it had been expanded sufficiently to accommodate some 1,200 to 1,300 head of cattle. After submitting an Environmental Impact Study, the partnership had received permission to operate a 10,000 head feedlot; but this had not been constructed at the time the partnership became aware of the CFZ problem.
Mr Malcolm Harris said the partnership’s cattle numbers were 5,200 at 30 June 1993 and 5,500 at 30 June 1994. In August 1994 he contracted to send 500 heifers to Midco and dispatched a first instalment of 115 head on 4 September. Almost immediately, he was informed of a contamination problem and asked not to send the remaining 385 animals. At that stage, the contaminant was unidentified.
In November 1994 Mr Malcolm Harris spoke to Stuart Bulmer of AMH about the sale of 480 steers to that company. Having regard to the Midco incident, Mr Bulmer advised him to have a sample of 30 head tested by a veterinary surgeon. The tests revealed some CFZ contamination and AMH thereupon refused the steers. On 8 November Mr Harris received a detention notice in respect of 1,000 steer weaners at “Hemmingford”. As I understand the position, these cattle were then in the feedlot and included the 480 head discussed with Mr Bulmer. The partnership’s tail tag was not removed from monitoring until 25 August 1997. There is no evidence of any attempt to sell cattle before that date, other than the 500 heifers for Midco and the 480 steers for AMH. However, Mr Malcolm Harris said in his statement that he and his partners planned in early 1994 to remove cattle from country that could be farmed and to sell the whole of their breeding herd (2,257 cows) “over the 18 months or so to October 1995”. He added: “however, we would have replaced those cows with other stock on other properties”.
In his written statement, Mr Peter Harris said that, by early 1994, parts of “Woodvale”, “Wahroonga” and “Krui” had been cleared for farming, leaving a balance of 16,000 acres to be cleared. By November 1994, he said, the uncleared acreage was down to 3,500 acres and it was planned to complete this clearing by mid-1995 and immediately sow all the cleared country to crops; the clearing program was halted in November 1994 because of the need to retain all available pasture for the cattle.
I am not prepared to accept that, absent the CFZ contamination, N and M Harris & Sons would have disposed by March 1995 of all their breeding cows. I have several reasons for that attitude. First, as I have indicated, Mr Malcolm Harris said in “early 1994” it was planned to dispose of the 2,257 breeding cows “over the 18 months” to October 1995. This suggests a program of gradual disposal as sales opportunities arose. Yet it appears that only 88 cows were sold between early 1994 and the issue of the detention notice in November, even though 1994 was what Mr Malcolm Harris called “a bad year” with a low calving rate. It might have been desirable to fatten the cows in the feedlot prior to sale. The feedlot was fully occupied in November 1994 by the steers intended to be sold; but they had been there for no more than a couple of months. If a firm decision had been made early in 1994 to dispose of all the breeding cows, it is strange that no action was taken before November even to prepare some for sale.
Secondly, Mr Habersberger tendered in evidence extracts from two draft reports prepared by Peppin Financial Services on behalf of N and M Harris & Sons. The first extract was from a document dated 15 March 1996. It lists the various categories of cattle held by the partnership at November 1994, including a “2,400 head Hereford breeding herd aged two to ten years with 1,488 calves”. Under the heading “Intended Program Details (prior to Helix contamination)”, the author of the draft has written “Mal - can you give an indication of the way in which these steers would have been off loaded in terms of pre-sale fattening, target market, weight and price per Kg”. In the same position in the extract from the second draft, dated 23 August 1996, the following words appear:
“Sale of cull cows (250 p.a.) typically in Oct. Sold to export ground beef market or other. Produce approximately 1900 calves per annum of varying age and sex which are put through feedlot program, used for replacement or shipped to northern property to fatten for live export.”
In the course of his cross-examination, Mr Malcolm Harris said that Peppin Financial Services commenced to prepare a claim against ICI on behalf of the partnership “but they never finalised”. Asked to explain the source of the information about the cows in the second draft, Mr Harris replied:
“This Peppin mob came out and they spent about four hours, maybe five, I can’t remember, and they wanted to get the whole set up of our business. Then they went away and drew up a report and sent it back and said ‘This is your claim’ and needless to say they don’t work – they haven’t been working for us since.”
No explanation was offered as to how it might have come about that Peppin Financial Services stated the partnership’s intention as being to cull about 250 cows per annum, as had been the practice in the past, and maintain the herd for production of “approximately 1900 calves per annum”. Despite his attempt to distance himself from the document, this information must have come from Mr Malcolm Harris, or perhaps his father. It is inconsistent with the claimed intention of disposing of the entire breeding herd by October 1995.
Thirdly, far from reducing cattle numbers as and when it could, the partnership actually expanded its holding after November 1994. An Appendix attached to the revised Scott Schedule shows that 2,828 cattle were bought in the year ended 30 June 1996, bringing the herd to 9,236 head. In the following year 4,435 cattle were purchased. Even though the partnership sold 3,464 head, it held 15,908 cattle at 30 June 1997; nearly three times the number held in late 1994. Significantly, as Mr Malcolm Harris conceded, they included the breeding herd. The partnership still retained its breeding herd at the date of the hearing, May 1998. This conduct is inconsistent with an intention to get out of breeding cattle in order to devote additional land to cropping. In particular, I note the partnership gained access to “Cleveland” in May 1996. This property had a carrying capacity of 10,000 head or more, yet not all the herd was moved there. Although Mr Malcolm Harris said he put 4,500 head onto “Cleveland”, it appears about 2,500 of these cattle were newly purchased, between April and July 1996. Mr Malcolm Harris agreed with a suggestion, during cross-examination, that, after May 1996, “there (was) absolutely no pressure on you in terms of land available to grow the wheat and to cope with the cattle that still had to be detained or retained because of Helix”.
Finally, neither Mr Norman Harris nor Mr Peter Harris gave evidence corroborating Mr Malcolm Harris’ claim that the partners agreed in early 1994 to sell off all the cows. Although Mr Malcolm Harris is the partnership’s cattle manager, it is improbable the other partners would forget such a momentous decision.
I turn to the items specified in the revised Scott Schedule. Items 1a and b relate to the 385 heifers that were the balance of the consignment to Midco and the 2,257 cows. For the reasons already given, I reject any claim in respect of the 2,257 cows. The respondents submit I should also reject the claim concerning the 385 heifers on the basis that Mr Malcolm Harris said that, when he received the telephone call from Midco, he put the heifers back in the paddock. He was asked in cross-examination why he did not return the heifers to the feedlot and attempt to sell them elsewhere. He replied that, if he had sold the heifers elsewhere, knowing they were contaminated, he would have been “locked up”.
I accept the Midco information caused Mr Malcolm Harris to decide against selling the 385 heifers. With the benefit of present knowledge, it is easy to see it might have been possible to place the cattle elsewhere. But Mr Harris did not have that knowledge in September 1994. He was confronted with information that a number of the heifers were affected by an unidentified contaminant. I can understand he thought it would be irresponsible, under those circumstances, to attempt to sell the remaining 385 heifers to someone else; and, if he was going to keep them for some time, he might as well avoid feedlot costs.
However, the respondents say that, even so, no loss was suffered in relation to the 385 heifers. The Scott Schedule calculated the gross return from 385 heifers sold in September 1994 at $177,023, a figure that is not disputed. It also shows the value of “cows” (that is the 385 heifers and the 2,257 cows) with progeny at August 1997 at the agreed figure of $2,118,000. As the respondents’ counsel observe, the figure is not dissected. However, 385 heifers represent 14.57% of the total number of cows and heifers (2,642) and 14.57% of $2,118,000 is $308,592.60. This amount comfortably exceeds the value of the heifers, even allowing for four years’ interest at 12% on $177,023.
This approach is somewhat rough and ready, but I do not think it does any disservice to the claimants. Because of their relative youth, the 385 heifers would now have a higher average value than the beasts that were cows in 1994, up to 12 years old. Although Mr Malcolm Harris acted reasonably in not attempting to sell the 385 heifers elsewhere, nothing should be allowed in relation to them.
In their submissions the respondents dealt with a possible claim that Helix delayed the sale of 250 culled cows in October 1995. The claimants have not put such a case. However, assuming the claimants lost the opportunity of selling 250 cows at that time, they lost an agreed net return of $290 per head or $72,500 in total. The present value of that return (approximately $100,000) is much less than the 250 cows’ proportion (250 to 2,642 or 9.46%) of the $2,118,000; that is, $200,416.
I do not propose to allow anything in relation to the 385 heifers and 2,257 cows.
Item 1c relates to the loss of the sale to AMH of the 480 steers. It is now agreed at $130,000, inclusive of interest. This sum is allowed.
Item 1d claims $283,586 as being the loss at May 1996 consequent upon delay in selling 995 weaners that were held in the feedlot in November 1994. Mr Malcolm Harris gave evidence that the weaners then had a live weight of about 350 Kg and his intention was to continue them in the feedlot until they reached a dressed weight of 300 Kg, which would have been in April/May 1995, and then sell them. The draft report of Peppin Financial Services refers to an intended sales program of 400 head in June 1995, 400 in late 1995 and 200 in mid-1996. Mr Harris did not adopt this program in his evidence and it seems to me unlikely that cattle would be held in the feedlot for over 18 months. I am prepared to accept the claimant’s case in relation to this item. There is no dispute about the value of the claim. I allow $283,586 with interest to be calculated on that sum from May 1996 to the present time.
Items 2a to 2f have all been agreed; item 2a at $16,733 as at December 1994, item 2b at $17,000 as at December 1994, items 2c and 2d together at $65,000 as at November 1995, item 2e at $45,000 as at December 1995 and item 2f at $154,830 as at December 1995. They are all allowed.
Item 2g is a claim for $2,303,909 for the forgone profits of cattle trading. The Scott Schedule asserts a loss of 11,599 steer trades at an average margin of $198.63. Mr Malcolm Harris gave evidence that he planned in 1996 “to increase the cattle trading” and said he had some previous experience of cattle trading. He has engaged in cattle trading since the acquisition of “Cleveland”.
No detailed evidence was given in support of this item, notwithstanding its monetary value. Mr Malcolm Harris said a cow and calf together eat twice as much as a steer. Judging by counsel’s submissions, the argument seems to be that 2,257 cows (most with calves) and 385 heifers consumed as much feed as 4,850 trade cattle, that each head of trade cattle could have been turned over 2.3 times between May 1995 and August 1997; consequently, multiplying 4,850 by 2.3, the claimants lost the opportunity of 11,599 steer trades.
There are obvious difficulties about this approach. First, having regard to Mr Malcolm Harris’ admission that there was no feed problem after May 1996, nothing should be allowed beyond that date. This confines possible turnover to 2 at most. Second, having regard to my finding above, the cows should be disregarded. At the most the loss would be 385 x 2 trades, that is 770 trades. At the claimed margin of $198.63, which was not disputed, this would yield $152,945. This is slightly more than the sum, $135,294, that the respondents are prepared to concede, they calculating the claim in a different way. I propose to allow a rounded sum of $153,000 with interest to be calculated from the mid-point between the two hypothetical trade sales of September 1995 and June 1996; that is, from February 1996.
Item 3, CFZ testing, is agreed at nil.
Items 4a (lost wheat crop 1995), 4b (lost wheat crop 1996), 4c (lost soy bean crop 1996) and 4d (lost wheat crop 1997) may be discussed together. Having regard to Mr Malcolm Harris’ admission about the position after May 1996, items 4b and 4d are obviously untenable. The other items appear to depend upon the premise that, absent CFZ contamination, the breeding herd would have been sold. As I reject that premise, these claims must fail. If these claims do not depend upon this premise, the basis of the claim has not been established. In particular it has not been demonstrated that CFZ contamination caused the partnership to retain cattle at the expense of expansion of crop acreage. I note there was a large expansion in crop areas in 1995 and 1996 despite the continued listing of the partnership’s tail tag.
Item 5 claims a lost land value of $622,000 in relation to 3,500 acres (2,200 on “Krui” and 1,300 on “Wahroonga”) that cannot be cleared because of the proclamation in August 1995 of State Environmental Planning Policy No 46. This Policy is concerned with protection and management of native vegetation. The Policy was replaced on 1 January 1998 by the Native Vegetation Conservation Act 1997 (NSW). This Act makes provision for the obtaining of permission to clear; but it should be accepted that, in a practical sense, the partnership may be precluded from clearing the 3,500 acres.
I have already mentioned Mr Peter Harris’ evidence that he refrained from clearing this 3,500 acres when he learned about CFZ contamination and thought it might be necessary to retain the land as pasture. The claimants’ argument is that CFZ contamination caused them not to clear the land when they were lawfully able to do so; now they cannot lawfully clear it and have suffered loss of its value.
The respondents make several answers to this claim. First, they note evidence of Mr Peter Harris that some 500-750 acres of this land were cultivated last year, notwithstanding the lack of clearing; apparently this area was sparsely timbered. Accordingly, the respondents say the relevant acreage is 2,750-3,000 acres, not 3500 acres. Secondly, they point out there is no evidence of the value of the relevant land; the rates shown in the Scott Schedule are apparently taken from a valuation not in evidence, prepared by a person who has not been called. Thirdly, and more fundamentally, they say that loss flowing from the introduction of legislative clearing controls is not recoverable in this action as a matter of principle; it is too remote from the negligence of the respondents.
It seems to me all these arguments are sound. In relation to remoteness, in Reasons for Judgment (No 5) I noted that damage must be foreseeable but this does not mean claimants must demonstrate that the precise nature or extent of their damage was foreseeable; it is enough that the damage is not different in kind from what was foreseeable. It was foreseeable that, if cattle became CFZ contaminated, graziers would have to retain them on their properties and this might limit their capacity to plant crops. It is not obvious to me that the need to retain cattle would be likely to inhibit the clearing of land; on the contrary, one of the great stimuli of land clearing in Australia has been to improve stock carrying capacity. However, even if somebody reasoned that land in a district like Rowena was unlikely to be cleared until it was required for cropping, and the need to retain pasture would postpone this day, I doubt that anybody would have foreseen this would result in a loss of the right to clear; SEPP 46 was a novel policy in New South Wales, introduced without prior warning by a newly elected State government. It seems the omission to warn was deliberate. A warning would have led to a rash of pre-emptive clearing activity; to that extent, defeating the purpose of the policy. Any loss suffered by N and M Harris & Sons as a result of the introduction of native vegetation clearing controls was damage different in kind from what was foreseeable by ICI.
I say “any damage” because I note the owner of “Wahroonga” is Andrew Harris, who is not a member of the partnership and is not a person shown to fall within any of the categories of persons to whom ICI owed a duty of care. If the native vegetation controls caused any capital loss in respect of “Wahroonga”, it would seem the loser was Mr Andrew Harris. The ownership of “Krui” is not clear; in his written statement, Mr Norman Harris only says that in 1974 “we” purchased “Krui”. Because of my conclusion as to foreseeability, it is not necessary to pursue this question.
I note the parties have agreed item 6 (additional labour) should be allowed in the sum of $5,000 inclusive of interest and there should be a credit for Helix relief fund payments (item 7) of $376,258 as at October 1995.
The claim of Bruce and Elsie Harris & Co
The revised Scott Schedule filed after the hearing of oral evidence in relation to this claim seeks damages totalling $27,975,635. An underlying premise of the claim is that, but for CFZ contamination, the partners would have disposed of all their cattle in early 1995 and devoted their resources to dryland farming, predominantly wheat. The respondents challenge this premise and it is convenient to deal with it immediately.
Mr Bruce Harris gave evidence that Mr Greentree suggested to him from time to time, possibly as early as 1992, that he should dispose of the cattle herd. Apparently Mr Greentree was unhappy about the partnership’s practice of grazing cattle on crop stubble; this sometimes delayed him planting a new crop. Mr Bruce Harris did nothing in 1992, but he says he discussed the matter with his sons, Kenneth and Robert, in about March 1994. In doing so, he was influenced by awareness of his advancing age – he was about to turn 60 – and his wife’s health; Mrs Harris had suffered for some years from cancer and her condition deteriorated during 1994. Mr Harris felt he would need to spend more time with his wife and this would limit his ability to manage the cattle. He was also conscious of the worsening drought.
There is no suggestion of any agreement in March 1994 about future action. However, in September, Mrs Harris was taken to Sydney for medical treatment. Mr Bruce Harris says that, at that time, he held a further conversation with his sons in which he proposed the cattle be sold as soon as they could be fattened for sale after the drought broke. He says his sons preferred to sell immediately but accepted his suggestion; it was also agreed Mr Greentree should be invited to contract for an additional 10,000 acres of wheat. Mr Bruce Harris discussed this proposal with Mr Greentree; he expressed interest in it.
Both Mr Kenneth Harris and Mr Robert Harris gave evidence confirming a discussion in September and their understanding it had been agreed that the cattle would be disposed of after the drought broke.
The drought broke in December 1994. However, at about that time, the partnership’s cattle were put on the tail tag list. The partnership had two tail tags. Both were listed, a fact notified by letter dated 20 December 1994. This did not prevent cattle being sold, but it meant cattle must first be tested for CFZ contamination.
In February 1995 the partnership sent 498 steers to Warwick Bacon, an abattoir at Warwick. On 16 February the abattoir tested ten head and found them clear of CFZ contamination. They were killed, as were a further 32 head on the following day. However, knowing the cattle had been fed cotton trash, on 20 February the abattoir tested another ten head. Apparently two proved positive. The evidence does not reveal the figure but it must have been low as all the steers were accepted for slaughter. However, Warwick Bacon invoiced Mr Harris for the cost of the tests (462 head at $32 per head = $14,784). He raised this as a grievance in conversations with several people.
Apparently, in March 1995 the partnership sent some cattle to Beaudesert for sale or slaughter. The evidence contains a report of a test of one beast, on 28 March 1995, recording a CFZ reading of 0.66 mgm/Kg. Mr Bruce Harris accepted this report related to the Beaudesert transaction but could offer no information about it.
On 5 April 1995 DepAg issued a 40 day detention notice in respect of the cattle on all the partnership’s properties. A further notice was given on 24 May. On 27 September 1995 Mr Harris signed a document containing an undertaking instead of detention, but it was related only to 800 steers on “Oreel”.
From time to time, on 21 July, 23 August, 31 August and 14 December, samples were taken from the partnership’s cattle and tested for CFZ contamination. The July tests resulted in 23 positive recordings against 18 negatives. But only one positive reading – at the most, the figure is unclear – exceeded 1 mgm/Kg. The 23 August samples returned nine positives – the highest of which was 0.58 mgm/Kg – against 24 negatives. The 31 August tests showed two positive readings (0.36 and 0.13) out of 48 results. The December tests involved ten beasts only, one of which was positive (0.48). On 5 February 1996 the 800 “Oreel” steers were released from the undertaking. On 9 April 1996 30 cattle were tested. The only positive reading was at 0.15 mgm/Kg.
On 23 April one tail tag was removed from the DepAg list. The other tail tag remained on the list until July 1996, but this is unimportant as it was not used by the partnership. In the course of his cross-examination, Mr Bruce Harris accepted that, after 23 April 1996, there was no tail tag restriction on his cattle. By that time the partnership owned some 15,000-16,000 cattle; up from about 12,000 in December 1994. Mr Habersberger asked Mr Harris whether he then started to sell cattle. Mr Harris replied:
“No, I don’t think so because as soon as you[r] tail tag came off [the] list still no meat buyers wanted to know you. They were still frightened to even think of buying our cattle that had been on a targeting list for fear they’d still get caught with more Helix in them, and you just couldn’t get anybody to give you a price on them; anything reasonable at all.”
Mr Harris claimed he tried to sell cattle but gave no details of his attempts.
In early August 1997 the partnership sold 1,516 steers to a buyer intending to ship them to Egypt. Mr Harris said, in 1997, “we would have been selling cattle to somewhere, for sure” but gave no details. He said cattle prices never recovered to the market price of March/April 1995.
Mr Bruce Harris accepted the accuracy of a report by his cattle manager, Michael Estens, that the partnership owned 12,693 cattle in March 1995. He agreed that, in November 1997, the holding was a little over 11,000 head. When he was asked why this figure was not lower, if his intention was to clear out all the cattle, he said seasonal conditions were not as good as in 1995. Mr Harris said Helix was still a problem, in terms of sales, in 1996 but not in 1997.
Counsel for the respondents submit I should not accept that, in September 1994, the members of the partnership made a firm decision to sell all the cattle. They rightly say the evidence supporting the making of such a decision is confined to the assertions of the members of the partnership. They suggest this evidence cannot be accepted because of its inconsistency with facts indisputably established by other evidence. I will deal with the evidence about those matters in due course.
Counsel also rely on differences in the account of the September conversation given by each of the three witnesses. I do not think the differences are so significant as to require me to reject the evidence. It is not to be expected that, four years later, the witnesses could do more than recount the general thrust of the conversation between them; and they are at one in saying the final result of the conversation was that all the cattle would be sold after the drought broke.
Counsel also impugn the credit of the three witnesses, claiming the September conversation has been concocted by them in order to provide a basis for a claim that all the cattle would have been sold in about March-April 1995, which is now known to have been a period of peak cattle prices, and the land extensively used for wheat, which is now known to have provided high yields, and sold at high prices, in 1995, 1996 and 1997. Counsel particularly attack the credit of Mr Bruce Harris, basing themselves on evidence given by Mr Estens concerning his conduct in relation to CFZ testing.
I need not make any findings about Mr Bruce Harris’ conduct in relation to CFZ testing or the general honesty of any of the members of the partnership. I accept the two sons, Robert and Kenneth Harris, favoured a move away from cattle towards increased cropping and discussed this with their father from time to time. I think it is equally clear Mr Bruce Harris was reluctant to take that course. This is not surprising. He had worked with cattle all his life and made a lot of money out of them. He had also grown wheat, but he was first and foremost a cattle man. I think it is likely there was a discussion in about September 1994, as claimed, in which Mr Bruce Harris gave some encouragement to his sons’ point of view. This was a dark period in his life. Mrs Harris’ physical condition had sharply deteriorated, she had been taken to Sydney for treatment and would need to stay in Sydney for some months. I think it credible that, as he suggested in his evidence, Mr Bruce Harris wished to spend more time with his wife. He said they then expected her to live “for a few more years”. Plainly, any extensive commitment of time to her would limit his participation in the management of the properties. It is not unlikely that, in this situation, Mr Bruce Harris might have been attracted to the prospect of turning over the burden of management to his sons and letting them have their own way about moving out of cattle.
However, I think any discussion in September fell short of being a firm decision. My impression of Mr Bruce Harris is that he is not a man to rush an important decision. Notwithstanding whatever suggestions had been earlier made by his sons, Mr Bruce Harris was still committed to the cattle as late as mid-1994. This can be inferred from evidence concerning Mr Estens. Mr Estens had worked for Bruce and Elsie Harris & Co from 13 January 1992 to 20 June 1993, when he resigned and went to Western Australia. He built a home in Albany and settled in to contract fencing. About Easter 1994, Mr Bruce Harris asked Mr Estens to return to Rowena as stock manager for the partnership. There was a series of conversations over the following six to eight weeks - that is, up to about June 1994 - before an agreement was reached for Mr Estens to return. He did so, commencing on 1 August 1994. It is common ground that Mr Bruce Harris said nothing to Mr Estens about the possibility of the partnership selling all their cattle. It would have been reprehensible for Mr Bruce Harris to omit to say something if, in his mind, this was a serious possibility. He was asking Mr Estens to give up his home and business in Western Australia and move back to New South Wales in order to take up a position whose continuance depended on the partnership’s retention of a substantial cattle holding. I am not prepared to accept Mr Bruce Harris would have been guilty of such unprincipled behaviour; I prefer to believe he was still intending to keep a substantial cattle holding.
Another reason for concluding no firm decision was made in September is that, as is common ground, Mr Estens was never told of any such decision. Although the relationship between Mr Estens and Mr Bruce Harris later deteriorated, in September 1994 they were on good terms. In his capacity as stock manager, Mr Estens had to make day to day decisions about the management of the cattle; it would surely have been desirable to acquaint him with the partners’ long-term strategy. And, as the decision directly affected Mr Estens’ prospect of long-term employment, it was only fair to do so. Yet nobody said anything to him. I think this was because nobody felt a firm decision had yet been made; all that had happened was that Mr Bruce Harris had given encouragement to a proposal he had previously been unwilling to entertain.
In submissions in reply, Mr Rowe argued that the partnership was under no obligation to inform Mr Estens of the September decision and, to have done so, would have been to risk losing Mr Estens prematurely “particularly when his intention was to continue Mr Estens’ employment albeit managing a smaller cattle enterprise and including other farming activities”. Mr Bruce Harris did claim in evidence that he had discussed Mr Estens’ position with his sons and they had decided “that he could work elsewhere when we sold all the cattle and he wouldn’t be out of a job”. If this was so, and the alternative employment likely to be attractive to Mr Estens, all the more reason to inform him of the decision, not as a matter of legal obligation but in order to allow him better to perform his duties as stock manager.
Mrs Harris died on 11 April 1995. To the extent that her illness had been a factor inclining Mr Bruce Harris towards acceptance of his sons’ proposal, that factor disappeared. With it, in my assessment, disappeared Mr Bruce Harris’ sympathy with his sons’ proposal. I say this because of the lack of satisfactory evidence about attempts to sell cattle. The Rowena properties had received good summer rain: 62 mm in November, 58 mm in December, 263 mm in January and 29 mm in February. By March there was good feed and the cattle were in good condition; hence the sale to Warwick Bacon. Two of the 498 cattle sent to Warwick Bacon had proved CFZ positive, but the readings were low and all cattle were accepted for sale.
Although I accept that any connection with CFZ contamination acted as a dampener on sale expectations, it is difficult to believe the Warwick Bacon experience would have caused the partners to abandon their decision to move out of cattle, if that is what they had firmly decided. If there had been such an intention, I would have expected specific evidence of attempts to procure sales, such as evidence of discussions with stock and station agents or abattoir buyers. However, there is nothing, apart from Mr Bruce Harris’ general assertion about attempting to sell. According to the sales summary admitted into evidence, the only cattle sold in 1995, after the end of March, were 288 steers sold in December.
The paucity of evidence about 1996 is even more striking. In the 1995-96 growing season, also, there was good rain at Rowena: 38 mm in October, 101 mm in November, 48 mm in December, 135 mm in January and 49 mm in February – 371 mm in five months. There must have been plenty of feed and the cattle must have been in good condition. When the tail tag came off the list in April, the moment was ripe to proceed with the disposal of the cattle. If this had been done quickly, substantial additional land would have been available for the sowing of 1996 winter crops. Yet only 1,651 head were sold in May, and then none until August. When asked the reason for failing immediately to clean out the herd, Mr Bruce Harris referred to meat buyers fearing “they’d still get caught with more Helix in them”. Particularly in the absence of evidence about attempts to sell, it is impossible to accept this explanation. Whatever the position in the early months, by April 1996 the abattoirs were knowledgeable about CFZ contamination. They were taking cattle with readings below 1 mgm/Kg. By this time, Mr Harris’ cattle were showing no detectable contamination at all. Even if the partners had been obliged to accept some discount from normal prices at that stage, the loss would have been much smaller than the claimed crop losses.
The summer of 1996-97 also saw good rain, 463 mm between the beginning of October and the end of February. By that time the partnership had been out of the tail tag list for over six months, yet only 167 cattle were sold between September 1996 and April 1997. Even in November 1997 the cattle count was only 801 head less than in June 1996.
Neither of the sons urged their father to get on with the disposal program. I do not think that was because they thought it was impractical to do so; Mr Robert Harris professed ignorance about the partnership’s CFZ's test results and the effect of various levels of CFZ residues on the saleability of the cattle. I think both sons understood their father was unwilling to dispose of the cattle and they were not prepared to press the issue.
Despite the detention notice of 5 April 1995 and notwithstanding requests from DepAg officers, the partnership undertook no on-farm residue tests until July 1995. If the partners had been anxious to dispose of substantial numbers of cattle in time to use additional land for 1995 winter crops, they would surely have undertaken extensive testing immediately after receiving the detention notice; cattle that tested clear of CFZ could have been sold despite the notice. Asked whether there was a reason for the delay, Mr Bruce Harris replied: “Well, not really, but we knew we had Helix and … we might have to test them several times and we left it as late as we could to see if we could get them out in the one test”. Mr Harris’ predominant concern seems to have been the cost of tests, yet this was insignificant compared with the value of the crops allegedly lost because of the retention of the cattle.
All three partners agreed they did not discuss alternatives to the retention of the cattle on the land supposedly intended to be devoted to cropping. This is remarkable, given the losses said to have been sustained by the forced retention of the cattle. I agree with the following extract from the respondents’ written submissions, from which I have deleted transcript references:
“For the claim as presented to the Court to have any validity, by April 1995 Bruce Harris and his two sons should have been looking carefully at the options that would have allowed the freeing of the land from cattle for the 1995 winter crops. The obvious option, despite the detention notice, but given the limited residues and the limited cost of testing ($32 per head on the sales to Warwick Bacon), was to sell the cattle and incur the testing cost and any small discounts. Other options were agistment, purchase of further properties and even perhaps shooting the cattle. Bruce Harris did not seem to have any knowledge of any such discussions of the type that would be expected by business people in the dilemma they claim to have been put in. He certainly acknowledged that the family did not look for agistment in April, May, June 1995 or look at selling the clean cattle after testing. Ken Harris was equally vague whilst Robert Harris had no idea about any such discussions at all. The lack of any evidence proving discussion of options and the failure, repeatedly, to take options that would have been obviously better decisions, indicate that in fact there was no intention thwarted by Helix in early 1995 to sell the entire herd of cattle.”
Mr Bruce Harris was cross-examined about an alleged conversation with Mr Estens in July 1995 in which he was said to have complained that Helix had cost him a lot of money. Mr Harris said he did not recall saying this. However, he agreed that, at the time, he did think Helix had cost him money. He referred to the testing charge made by Warwick Bacon ($14,784); interestingly, he said this was the “only money it cost me” at that stage. It seems unlikely he would have been of that view if Helix had frustrated the sowing of crops.
The evidence suggests the retention of the cattle did not frustrate the sowing of crops. A schedule verified by both Mr Bruce Harris and Mr Robert Harris shows that 9,185 acres were cropped in 1995. The figure almost doubled, to 18,243 acres, in 1996; the very time when cattle numbers peaked. It fell to 7,258 acres in 1997. Mr Robert Harris claimed in evidence that extra acreage was sown in 1996 so as to provide stock feed but the crops did so well they were all harvested and sold. Be that as it may, the 1996 harvested crop acreage increased, despite the retention of cattle.
As the evidence unfolded, I became increasingly sceptical about the claim that, absent CFZ contamination, the whole cattle herd would have been sold in early 1995. Having reviewed the evidence and considered counsel’s submissions, I find my scepticism confirmed. I do not believe this would have occurred or there was ever a firm intention that it would.
I turn to the items in the Scott Schedule. Items 1a, 1b, 1c, 1d and 1e all stem from the claimed decision to sell all the cattle in early 1995. They must all be rejected.
Item 2a is a credit allowed to the respondents of $105,125 as at April 1996. This came about because sorghum was grown for stock feed but turned out to be partly saleable. The respondents say this item should be included only if item 4, relating to an alleged missed cotton crop in 1995-96, is allowed, and it should not be. They also say the figure of $105,125 understates the benefit of the crop because further sorghum income was shown in the following financial year. I need not determine that matter. I agree this credit is logically dependent on allowing item 4 and there is no evidence that a cotton crop was missed because of the need to grow irrigated sorghum. Mr Kenneth Harris purported to deal with the matter but he did not make this claim. Such figures as are available to the Court, in relation to water consumption, do not demonstrate that the planting of sorghum prevented the planting of cotton. I disallow both items 2a and 4.
Item 2b claims feeding and husbandry costs of $1,002,260 for cattle withheld from sale because of CFZ contamination amongst the partners’ herd. The claim extends from March 1995 to 1 January 1998. The respondents argue the item should be rejected totally, on the basis that it is not shown that CFZ contamination caused any delay in disposing of cattle. Alternatively, they say nothing should be awarded for the period after 1 October 1996, this being a generous estimate of the date by which the partners could have disposed of all the cattle. This was two months after the delisting of the second tail tag; more importantly it was some six months after delisting the first (and critical) tail tag.
I think it is appropriate to allow something in respect of feeding and husbandry costs. Although I do not accept that, absent CFZ contamination, all the cattle would have been sold in March/April 1995, there can be little doubt that contamination within the herd inhibited selling. Although I am not satisfied that this forced a reduction in the acreage that would have been cropped, it must have caused the partnership to incur feeding and husbandry costs that it would not otherwise have borne.
However, nothing should be allowed in relation to the period after 1 October 1996. I agree with the respondents that the selection of this date is generous to the claimants. There was nothing to prevent them embarking on a vigorous selling program as soon as the first tail tag was delisted in April 1996. They may have needed some time to carry out the program in an orderly manner, without sacrificing prices; but it could have been comfortably completed by October.
There is a problem in determining the quantum of feeding and husbandry costs between March 1995 and October 1996. If I felt the figure of $1,002,260 was reliable, I would simply take a proportion – 18 months out of the 33 months to the end of December 1997. This equals 54.5%. But the figure of $1,002,260 was not proved. Counsel for the respondents made clear they contested the claims for feed ($394,733) and “general” ($50,360) and would require proof of them. None was forthcoming. If these items are deducted from the claim, the residue is $557,166. 54.5% of that figure is $303,655.
Having regard to the above, it would be a defensible action to restrict this item to $303,655. However, I would feel unhappy about that course. Notwithstanding the absence of proper proof, I do not doubt the claimants incurred many of the expenses listed in the Scott Schedule under the heading "general". And they must have incurred some feed costs, although I agree with counsel for the respondents that the rounded figure of $300,000 dated April 1995 looks suspiciously like an "ambit" claim. Doing the best I can, I think it would be fair to allow a figure of $400,000 in respect of item 2b. Interest should be allowed on that sum from the mid-point in the relevant 18 months, that is from 1 January 1996.
Item 3 relates to testing costs. It is agreed at $14,052 with interest from August 1995. This should be allowed.
Item 5 concerns losses sustained by the claimants as a result of reduced cotton profits occasioned by the diversion of irrigation water to sorghum growing. It is agreed at $79,294 inclusive of interest and should be allowed at that figure.
Item 6 is abandoned.
Item 7 is a claim for $6,980,971. It depends on the premise that the acreage available for the 1995 wheat crop was drastically reduced (from 40,000 acres to 11,300 acres) because of the need to retain the cattle. I do not accept that, absent CFZ contamination, the partners would have sown anything like 40,000 acres of wheat. Nor is it apparent they were precluded by the cattle from sowing more than 11,300 acres; in 1996 they sowed 18,243 acres to dryland crops. Although it is conceivable that the inhibition on the disposal of cattle caused by CFZ contamination had some affect on the acreage sown to wheat in 1995, the evidence does not establish this was the case. I must reject this item.
Item 8 is a claim for loss of profits on a barley crop in 1995; the proposition being that, absent CFZ contamination, the partners would have sown 20,000 acres. I do not accept this claim. It is worth noting that 40,000 acres of wheat and 20,000 acres of barley would have represented a planting of almost 100% of the 63,994 arable acres on the Rowena properties. That would be an unlikely position.
Items 9, 10, 11 and 12 may be dealt with together. They relate, respectively, to the 1996 wheat crop, the 1996 barley crop, the 1997 wheat crop and the 1997 barley crop. Each claim depends on the premise that, at the relevant time, CFZ contamination was having an ongoing negative effect, limiting the acreage that could be sown to crops. I am unpersuaded of this. There are also problems about each computation but I need not deal with them. As the premise fails, I must reject all four claims.
Item 13 is a credit of $192,680, as at October 1995, for Helix Relief Fund payments. This item is agreed and should be allowed in the final calculation of damages.
It will be apparent I consider the claim of Bruce and Elsie Harris & Co to be grossly excessive. I have been concerned that, in rejecting the claimants’ excesses, I not fall into the error of being niggardly about justifiable claims. I believe I have not done this. I accept CFZ contamination caused some problems for the partnership. It is theoretically possible that it had the effect of limiting crop acreages in 1995 and 1996 but, if this was the position, it has not been demonstrated by acceptable evidence. Bearing in mind that the crop loss claims total over $21 million, the respondents are entitled to have them proved by satisfactory evidence. They have not been. If the result is hard on the claimants, they have themselves to blame for tying their case to unjustifiable and exaggerated claims.
Orders
I do not propose to make any orders today. I will take the same course as I took on 27 November 1997. I will leave to the parties the task of making the necessary arithmetical calculations, bringing interest up to a date upon which payment of damages may conveniently be made. The parties should submit an agreed form of order to my associate. If it is acceptable, I will make the order in Chambers.
I certify that this and the preceding twenty-one (21) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox
Associate:
Dated:
Counsel for the Applicant: S M Littlemore QC, J E Rowe Solicitor for the Applicant: Peter Long & Co Counsel for the Respondent: D Habersberger QC, G McArthur Solicitor for the Respondent: Phillips Fox Date of Hearing: 18, 21, 22, 25, 27-29 May 1998
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