McMullin v ICI Australia

BRIAN McMULLIN and LEONE MARGARET McMULLIN v ICI AUSTRALIA OPERATIONS PTY LTD, ICI AUSTRALIA LIMITED, CROP CARE AUSTRALIA PTY LIMITED, THE STATE OF NEW
SOUTH WALES, THE STATE OF QUEENSLAND, AUSCOTT LIMITED, GURLEY STATION PTY LIMITED, LEYDE PTY LIMITED, NEIL STEWART SOWERBY, DUNAVANT GINNING PTY LIMITED,
QUEENSLAND COTTON CORPORATION LIMITED, COLLY FARMS LIMITED, DARLING RIVER COTTON PTY LIMITED, NORTH-WEST GINNING PTY LIMITED, NAMOI COTTON CO-OPERATIVE
LIMITED, DEAN PHILLIPS, INC, TWYNAM COTTON PTY LIMITED, LIMETOWN PTY LIMITED, TARIGI PTY LIMITED and KOTAKI PTY LIMITED
No. NG305 of 1995
FED No.
541/97
Number of pages - 97 Trade practices - Public authorities - Fair trading
Negligence

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

WILCOX J

Negligence - Product liability - Liability of manufacturer of agricultural pesticide for use on cotton - Pesticide bio-accumulative and persistent - Contamination of cattle caused by ingestion of the chemical from over-spray, spray-drift and consumption of cotton gin trash - Foreseeability - Manufacturer's knowledge of the chemical's characteristics and industry practice concerning feeding of cotton gin trash - Duty of Care - Proximity - Position of various classes of claimants: owners of cattle at time of contamination, owners at time of discovery of contamination, persons holding cattle, persons suffering losses of sales, reduced prices etc.

Trade practices - Misleading and deceptive conduct - Manufacturer's failure to warn or notify withholding period - Need for causal connection with losses.

Public authorities - Negligence - Approval of registration of products - Failure of regulatory authorities to ascertain relevant facts and perceive deficiencies in manufacturer's registration application - Duty of care - Nature of decision - Whether within "policy" or "operational" sphere - Advice by government officers concerning feeding of cotton trash - Claim of vicarious liability against employer governments - Necessity for personal fault of employees.

Fair trading - Application of legislation to State government - Whether relevant conduct occurred in the course of government carrying on a business.

PLACE, 24-27 March, 2-4, 14-18, 21-24 and 28-30 April 1997 (hearing), 24 June 1997(decision)

#DATE 24:6:1997

#ADD 25:6:1997

APPEARANCES

Counsel for the Applicants J E Rowe

Solicitors for the Applicants Peter Long & Co

Counsel for First, Second and

Third Respondents E W Gillard QC and G McArthur

Solicitors for First, Second and

Third Respondents Phillips Fox

Counsel for Sixth Respondent P R Garling SC, M Windsor and S Woods

Solicitors for Sixth Respondent Lynn Boyd

Counsel for Seventh Respondent A Sullivan QC and P Freeburn

Solicitors for Seventh Respondent Crown Law (Queensland)

Counsel for First Cross-Respondent D R Pritchard

Solicitors for First Cross-Respondent Clive Curwood & Partners

Solicitors for Second, Third, Fourth

and Twelfth Cross-Respondent Henry Davis York

Counsel for Fifth, Ninth and Tenth

Cross-Respondent L Babb

Solicitors for Fifth, Ninth, Tenth

Cross-Respondents Windeyer Dibbs

Counsel for Seventh Cross-Respondent N Hutley SC, C E Moore

Solicitors for Seventh Cross-Respondent Clayton Utz

Counsel for Sixth Cross-Respondent D J Fagan

Solicitors for Sixth Cross-Respondent Cole & Butler

Counsel for Fourteenth Cross-Respondent H Shore and Skettle

Solicitors for Fourteenth

Cross-Respondent Goldrick Farrell Mullan

O R D E R S

THE COURT ORDERS THAT:

1. Insofar as it relates to the claims made against the sixth respondent, the State of New South Wales, and the seventh respondent, the State of Queensland, the proceeding be dismissed.

2. All cross-claims filed by the State of New South Wales and the State of Queensland be dismissed;

3. All questions of costs in relation to the dismissed proceedings be reserved;

4. The proceeding be listed for a further directions hearing on Tuesday, 29 July 1997 at 9.30 am, or such earlier date as may be arranged with the Associate to Wilcox, J.

WILCOX J:

THE STRUCTURE OF THE CASE
- The principal parties
- The proceeding
THE RURAL SCENE
- The cotton industry
- Cotton and cattle
FEEDING OF COTTON GIN TRASH
- Evidence of the practice
- Academic support for the practice
- The States' attitude to feeding cotton gin trash
- ICI's knowledge of the feeding of cotton gin trash
THE DEVELOPMENT OF HELIX
- The nature of chlorfluazuron
- ICI's interest in CFZ
- ICI people
- The Project Team
- Overseas contacts
THE HELIX REGISTRATION PROCESS
- The Technical Committee on Agricultural Chemicals
- The TCAC handbook
- ICI's application for clearance
- The context in which TCAC considered ICI's application for clearance
- The processing of ICI's application
- UK contacts during the registration period
- Clearance and registration
THE POST-REGISTRATION PERIOD
- The Fernhurst meeting
- The advent of AAVCC
- The setting of CFZ maximum residue levels
- The extensions of clearance
THE SALE OF HELIX
- Sales volumes
- Marketing strategy
- Helix literature
- The discovery of CFZ contamination
THE CASE AGAINST ICI: NEGLIGENCE
- The duty of care: legal principles
- The duty of care: the parties' contentions
- The duty of care: whether all the losses were pure economic losses
- The duty of care: proximity
- The duty of care: cotton trash feeders
- The duty of care: contamination below 1mg/kg
- Breach of the duty of care: contentions
- Damage
- Exemplary damages
THE CASE AGAINST ICI: THE TRADE PRACTICES ACT
- The basis of the claim
- Counsel's contentions
- Standing
- The withholding period
- Silence
THE CASE AGAINST THE STATES: NEGLIGENCE
- The applicants' claims
- Decisions in relation to clearance and registration
- Policy decisions
- Representations by DepAg and QDPI officers
THE CASE AGAINST NEW SOUTH WALES: THE FAIR TRADING ACT
- The basis of the claim
- Application of the Act
CONCLUSIONS AND ORDERS
- Summary of conclusions
- Orders
1. This is a case about cattle, cotton and chemicals, chiefly chlorfluazuron. But the main story is about bureaucracies: one in the private sector, seeking to generate profits from a new product; the other, a public network established to guard against harm from agricultural chemicals.
2. Each organisation failed of its purpose, largely because of tunnel vision. Well-qualified people examined matters of detail but nobody considered the whole picture. Nobody, in either organisation, assembled all the necessary information. Most of the relevant facts were already known to people within the two organisations, but they were not asked.
3. A contributing factor to the failures was that, in its haste for profits, the private organisation cut research corners and, inexcusably, suppressed information that might have alerted the dozing public watchdog. As a result of the failures, many people suffered losses.
THE STRUCTURE OF THE CASE
The principal parties
4. The applicants are husband and wife. During the period 1981 to 1995 they carried on business as farmers and graziers on a property known as "Auburn" near Wee Waa in northern New South Wales. They claim to have suffered loss as a result of the contamination of their cattle by chlorfluazuron. They seek damages for that loss from the five respondents. They also seek damages on behalf of others affected by chlorfluazuron contamination and, for that purpose, bring their action as a representative proceeding under Part IVA of the Federal Court of Australia Act 1976. In their Application the applicants described the group members in this way:
"i. graziers who claim loss to value of stock, costs associated with testing and holding stock and loss of profits; ii. agents who claim loss of commission; iii. abattoirs and meat processors who claim loss of profits and costs of storing carcasses; iv. pasture protection boards who claim loss of income from being unable to use stock routes that have been affected or may be affected by the goods; v. operators of feed lots."
1. The Application did not identify those persons by name.
6. A number of persons falling within the description opted out of the proceeding, by filing notices pursuant to s 33J(2) of the Federal Court of Australia Act. Even so, the solicitors for the applicants know of some 470 persons who remain as group members.
7. During the hearing to which these reasons pertain, a question arose as to whether the applicants are entitled to represent group members who carried on business in Queensland, especially in relation to those members' claims against the State of Queensland. In order to resolve any difficulty and without objection from any party, I constituted a sub-group consisting of those group members who conducted a grazing or other relevant business in Queensland. With his consent, I appointed Christopher John Blomfield as a sub-group representative party, representing the members of that sub-group in the proceeding: see s 33Q(2) of the Federal Court of Australia Act. Since 1975 Mr Blomfield has conducted a grazing business on "Meenawarra", near Cecil Plains, Queensland. He also claims to have been affected by chlorfluazuron contamination.
8. The first three respondents are related companies. As I understand the situation, ICI Australia Limited, the second respondent, is the holding company for the Australian members of an international group of companies controlled by Imperial Chemical Industries plc of the United Kingdom ("ICI U'"). ICI Australia Limited is listed on the Australian Stock Exchange but some 62% of its shares are held by, or on behalf of, ICI U'. According to a submission it made in March 1989 to a Senate Select Committee Inquiry concerning agricultural and veterinary chemicals, ICI Australia Limited was then the largest manufacturer and trader of chemicals in Australia; it also operated in eight other countries. In the year ended 30 September 1988, sales of the ICI Australia group of companies totalled nearly $3 billion, of which 22% ($645 million) were of agricultural products. The submission stated the company had "extensive research capacity" and the "benefits of its activities are enhanced through links with the ICI International Group". I understand this to be a reference to ICI U' and ICI companies in other countries, including the United States of America.
9. At least during the period with which this case is concerned, ICI U' carried on a substantial business in relation to the development and manufacture of chemicals. Its head office was at Fernhurst, Surrey. Some 80 kms from Fernhurst, at Jealott's Hill, Berkshire, ICI U' maintained an Environmental Services Division. According to the Senate Committee submission, in March 1989 about 120 people were employed at Jealott's Hill. The Environmental Services Division was the ICI group's centre of expertise in relation to the environmental impact of products being developed or marketed by members of the group. In words adopted by Dr Robert Brown, ICI Australia's Research and Technology Manager, the Environmental Services Division had "a worldwide auditing role ... on questions concerning the environment."
10. ICI's Australian headquarters were in Melbourne, although it had manufacturing plants in other cities and maintained offices in numerous regional centres. At all relevant times, the company maintained a research centre, called the Merrindale Rural Research Centre, at Croydon, outside Melbourne. Its head office held a comprehensive library of materials relevant to its work. The library had loan arrangements with the libraries of major universities and subscribed to the leading relevant publications, including overseas publications. It received and held the Agfacts bulletins published by the New South Wales Department of Agriculture ("DepAg").
11. ICI Australia claimed high standards of environmental responsibility. In para 3.3 of its Senate Inquiry submission, the company said:
"A major part of the total-management policy of the ICI International Group and ICI Australia is to ensure that support systems are in place so that the correct and proper use of farm chemicals is practised. This is of prime concern to ICI Australia, which sees product stewardship as a major responsibility. Effective product stewardship is aimed at ensuring safe use of a chemical product at all stages during its life cycle -- from development through to field use. Stewardship is a commitment to ensuring that neither human health nor the environment is adversely affected by the manufacture, distribution, or use of farm chemicals. The ICI Australia Crop Care business is committed to implementing product stewardship at all levels of its operations to ensure that a high standard of business conduct is achieved. To that end, the company has recently appointed a Stewardship Manager."
1. From the beginning of the period with which this case is concerned until 1 December 1993, the first respondent, ICI Australia Operations Pty Ltd ("ICI Operations"), carried on business as "ICI Crop Care". It specialised in agricultural products. Throughout the period 1989 to 1994 it was the manufacturer and, until 1 December 1993, also the distributor, of the product with which this proceeding is concerned: an insecticide variously called "Helix 40 ULV Insecticide" and "Helix Insecticide". I will refer to it simply as "Helix". On 1 December 1993, Crop Care Australasia Pty Ltd ("Crop Care"), the third respondent, took over the distribution of ICI's agricultural products, including Helix. Crop Care is a joint venture company between ICI Australia Limited and Incitec Limited. As I understand the position, Incitec is itself ultimately owned by ICI Australia Limited.
13. Jacques Malan, ICI's Cotton Manager from 1985 to 1991, gave evidence that, during that period, ICI "targeted" the cotton chemicals market and "became one of the major cotton chemical suppliers". Mr Malan was assisted by a Territory Sales Manager, Hugh Mc'innon. These positions had no counterpart in respect of other crops. As Mr Malan said, cotton was "a rather important crop". Its importance to ICI is highlighted by evidence that ICI organised a Cotton Conference each year, to which it invited persons involved in the cotton industry, including cotton consultants and government officers, and that it organised regular tours by growers and consultants of United States cotton-growing areas. The tours were always led by an ICI officer and included visits to the Lubbock region in Texas, one of the largest cotton areas in the United States.
14. In the conduct of this case, little attention has been paid to the distinction between the ICI respondents. Except for the purpose of identifying the company by which a person was employed at a particular time, counsel have been content to use the term "ICI" to refer to the ICI respondents collectively and individually. When it was necessary to distinguish the Australian companies from overseas ICI companies, they used the term "ICI Australia". I will follow the same course.
15. The remaining respondents are the States of New South Wales and Queensland; that is, the Governments of those two States. They are said to be liable for various acts and omissions of Government employees.
The proceeding
16. Before turning to the facts, it may be useful to say something about the history of the proceeding.
17. The proceeding was commenced on 3 May 1995. The Application filed that day named as respondents only the three ICI companies. However, on 28 August 1995 the applicants filed an Amended Statement of Claim in which they added four additional respondents: the Commonwealth of Australia (fourth respondent), National Registration Authority for Agriculture and Veterinary Chemicals ("NRA", fifth respondent), the State of New South Wales ("New South Wales", sixth respondent) and the State of Queensland ("Queensland", seventh respondent). Motions were subsequently filed on behalf of each of the four new respondents seeking orders dismissing, striking out or staying the proceeding against them. On 29 May 1996, I ordered the proceeding be dismissed insofar as it related to claims against the Commonwealth of Australia and NRA, but refused the motions of New South Wales and Queensland.
18. I dismissed the proceeding against the Commonwealth and NRA because they had the benefit of an immunity from suit contained in federal legislation. New South Wales was encouraged by that decision to file a second motion, seeking dismissal of the proceeding as against it on the basis of a New South Wales statutory provision. On 25 September 1996, I held that provision inapplicable to this case and dismissed the motion. However, I gave New South Wales leave to appeal against my decision. The appeal was dismissed by a Full Court (Beaumont, O'Loughlin and Moore JJ) on 28 February 1997.
19. In the meantime, preparations for trial continued. Each of the respondents filed Cross-claims. Some parties who were brought into the proceeding as cross-respondents themselves filed Cross-claims. In the result, by November 1996 and counting the ICI respondents as one, there were eighteen parties to the proceeding: the applicants, three surviving respondents and 14 cross-respondents.
20. Questions arose as to the best method of managing the proceeding. I heard submissions on that subject on 8 November. Ten days later I made detailed directions. I indicated that a hearing (the "March hearing"), already fixed to commence on 24 March 1997, would be confined to the case made by the applicants against the respondents; but, even then, excluding issues peculiar to the applicants or any particular group member, such as reliance, causation and contributory negligence. I recognised it would be necessary for the applicants to adduce some evidence of damage, because damage was an element of their negligence claims, but I indicated I would not be concerned at the March hearing with quantification of damage. The findings then made would be findings in the action generally, and therefore binding on the cross-respondents, but the Court would not, at the March hearing, consider the merits of the cross-claims.
21. I stated my reasons for making these directions in Reasons for Judgment (No.3) of 18 November 1996. I will not repeat them here. It is sufficient to say I wished to minimise the burden of the litigation on the parties, especially those cross-respondents who had relatively small amounts at stake. I thought the adopted course might enable some cross-respondents to forego, or consolidate, representation at the March hearing. This occurred. There were four separate representations on behalf of cross-respondents but counsel for only two cross-respondents played a significant role in the proceedings. These counsel were Mr D Pritchard on behalf of Auscott Limited ("Auscott"), the first cross-respondent, and Mr N Hutley SC and Mr C E Moore for Colly Farms Pty Limited ("Colly"), the seventh cross-respondent. Mr D J Fagan of counsel appeared from time to time on behalf of Queensland Cotton Corporation Limited ("Queensland Cotton"), the sixth cross-respondent. Mr L A Babb held a watching brief on behalf of three other cross-respondents.
22. The Statement of Claim was amended from time to time. The most recent version was filed in Court during the March hearing. I will return later to the detail of the applicants' allegations but it is appropriate to say immediately that the applicants' case against ICI is based upon two causes of action: negligence and breach of s 52 of the Trade Practices Act 1974. Their case against New South Wales alleges negligence and breach of s 42 of the Fair Trading Act (NSW) 1987; against Queensland, negligence only.
23. The March hearing occupied 19 sitting days. Mr J E Rowe of counsel appeared for the applicants; Mr E W Gillard QC and Mr G C McArthur for ICI; Mr P R Garling SC, Mr M Windsor and Mr S Woods for New South Wales; and Mr A Sullivan QC and Mr P Freeburn for Queensland. Counsel for the cross-respondents have already been mentioned. The hearing finished on 30 April. Thereafter, written submissions were lodged, in accordance with a stipulated time table. On Monday, 2 June I sat in open court to discuss the submissions with counsel and allow them the opportunity of oral elaboration.
24. These reasons deal only with the issues addressed at the March hearing. As I have come to a conclusion adverse to ICI in relation to the negligence claim, the proceeding must continue against the first three respondents in respect of that cause of action. The Trade Practices Act claim will be dismissed. As I have come to a conclusion entirely favourable to New South Wales and Queensland, the proceeding will be dismissed, as against those respondents. I will also dismiss the Cross-claims filed by them; these will become otiose. In accordance with an indication already provisionally given to counsel, on 4 August 1997 I will commence consideration of the remaining cross-claims. That hearing will include consideration of what orders, if any, should be made for apportionment of liability. It will not consider the reserved matters concerning the respondents' liability to the applicants and group members, or assessment of their damages.
THE RURAL SCENE
The cotton industry
25. Until the early 1960's there was little, if any, commercial cotton production in Australia. Since that time, however, the industry has expanded rapidly. I understand cotton is now Australia's fourth most valuable agricultural export. Most production is on irrigated land, and sometimes water is restricted or unavailable; so the harvest varies from one season to another. But the trend has been steadily upward. By way of illustration, "Australian Commodity Statistics 1996", a publication of the Australian Bureau of Statistics, states that 17,400 hectares of cotton were harvested in the 1964-65 season; 32,000 in 1969-70; 71,400 in 1979-80; 239,800 in 1989-90; and 303,900 in 1995-96. About two-thirds of production comes from New South Wales, the remaining one-third from Queensland. Some New South Wales cotton is grown in the Macquarie Valley near Dubbo, but the Wee Waa-Moree-Narrabri area in northern New South Wales is predominant. Queensland cotton is mainly produced near St George, in southern Queensland; but there is some production further north near Emerald.
26. Cotton is highly susceptible to insect damage. Consequently, growers need to use large quantities of insecticides. The number of applications varies from season to season but it is not unusual for a dozen or more applications of insecticide to be made over the season, which extends from planting in September-October to harvesting between late March and mid-May.
27. Insecticides are mostly applied to the cotton crop by aerial spraying. This is an important matter, because it leads to the problems of over-spray (spray inadvertently released over non-target areas) and spray-drift (spray released over target areas but carried by air currents to non-target areas). Over-spray and spray-drift are well known phenomena. Crop Care's current Field Development Manager (Northern), Francis Taylor, said of them: "It is always a risk there". The current Business Manager of Crop Care, Warwick Dowse, was ICI's Account Manager in Moree from April 1991 to 1993 and then became Crop Care's Cotton Market Manager. He conceded the problems of over-spray and spray-drift, and the "probability that from time to time some Helix would end up in pastures or non-target crops". Spray-drift, particularly, is extremely common. Donald Matthews, a former ICI Product Stewardship Manager with some 30 years experience of aerial application of chemicals, explained that, even with the most competent of operators, spray drift will occur because of variations in wind, temperature and humidity. He said aerial spraying should not take place in still air; wind ensures the spray swirls over and around the whole plant. Mr Matthews said wind conditions can be extremely variable and the degree of drift may change with the wind. Temperature and humidity can also change relatively quickly. Mr Matthews said "spray-drift can mean one metre beyond the fence or it can mean 10 kilometres beyond the fence line". The lighter the spray, the greater the problem of spray-drift. Helix was an ultralight vapour spray.
28. The significance of over-spray and spray-drift in a particular area depends on what activities take place in the area. In the cotton areas there are also other activities, notably beef production. And an important point about beef is that much of it is exported. In 1994-95 beef was Australia's second most valuable agricultural export. The evidence does not disclose the proportion of "cotton area" beef that, in relevant times, was exported. But it is apparent from the evidence of several witnesses that it was substantial. There are stringent controls concerning the export of contaminated meat.
29. Even on cotton farms, cotton growing is not the only activity. It is not good practice to plant cotton on the same land year after year. "Break" crops are needed every two or three years. The most popular break crops are wheat and safflower. And some cotton farms also run cattle or other livestock.
30. Moreover, even within the "cotton areas", not every property produces cotton. I understand the situation in all the cotton areas broadly conforms with a description of the Gwydir Valley written in June 1989 by Mr Mc'innon, who then resided and worked at Narrabri:
"Generally the areas being irrigated lie close to the regulated watercourse. Outside the influence of irrigation crops the main agricultural interests [are] all winter cereals, summer course [sic] grains, summer oilseeds, sheep and cattle. It is essentially extensive agricultural west of the highway from Bellata through Moree to Goondiwindi. Apart from the irrigation properties, areas have been cleared for farming, however vast tracks of country remain in its natural state. This is particularly true the further west you go ... The Gwydir valley is not wall to wall cropping. It has areas of cleared dryland cropping country interdispersed with natural grass country. Cotton is grown along the naturally existing waterways."
1. It is apparent from this description that, in June 1989, cotton fields often adjoined other crops or grazing paddocks. According to other evidence, that situation continued throughout the period with which this case is concerned.
32. Cotton plants grow "bolls", ball-like structures of which the outer casings, initially closed, are leaves and within which the "lint" develops. The lint is a fluffy white material which, in appearance and feel, resembles cottonballs. Seeds form within the lint. After the plant stops growing, the outer leaves of the boll open slowly and dry out, exposing the lint. When the boll is fully open, the plant is ready for harvest.
33. In Australia harvesting is carried out mechanically. The machine severs the plants beneath the boll, leaving bare stalks standing. The stalks, often called "stubble", are usually burnt or ploughed into the ground. The severed material is transported to a cotton gin where the lint is removed from the plant and the seeds from the lint. The lint, of course, is used for the making of cloth and other products. Cottonseed is crushed for oil or used as a stockfeed. The remainder of the plant - dried leaves and the severed length of stalk - is generally referred to as "cotton gin trash" or "cotton trash".
34. Two of the cotton plant's most significant predators are cotton bollworm (Helicoverpa armigera) and native budworm (Helicoverpa punctigera). Until a few years ago, their generic name was Heliothis. That name was used in many of the documents that are in evidence and in some oral evidence. The cotton bollworm and native budworm attack the flower and growing point of the plant. Unchecked, they drastically reduce the lint yield.
Cotton and cattle
35. I said a moment ago that cotton stubble is usually burnt or ploughed into the ground. However, the evidence shows that, for a long time, it has been not uncommon for cattle to be grazed on cotton stubble. Two of the applicants' witnesses, Bruce Jackson and Robert Waldron, both farmers near Wee Waa, spoke of this being common in their area since the early 1980s. Paul Waterhouse, the then Supervising Technologist (Agricultural Chemicals) of the Queensland Department of Primary Industries ("QDPI"), was aware of the practice in June 1988. On 21 June 1988, he sent to the Secretary of the Technical Committee on Agricultural Chemicals a letter enclosing lists of crop residues fed to livestock. In relation to cotton, he noted: "Stubble may be grazed or failed crop fed off". Mr Malan had observed cattle grazing on cotton stubble in South Africa and Zimbabwe in the 1960's. While he was employed as ICI's Cotton Manager, between 1985 and 1991, he was aware that cattle were grazed on cotton stubble in Australia, although he thought this "would probably be an unusual practice here". His awareness is consistent with a note included in a Product Manual issued by ICI in 1989 for "Endosan", an insecticide containing endosulfan. Cotton appeared in a list of crops to which this instruction related: "Do not graze or cut for stock food for 28 days after application".
36. Permitting cattle to graze cotton stubble means that cotton farmers' cattle might be put at risk of contamination from a persistent insecticide. Cattle on other properties would presumably not suffer that particular risk, but they would share the risk of contamination from over-spray or spray-drift affecting their pasture or drinking water. It seems it is not even necessary for cattle to consume grass or water in order to ingest a chemical contaminant. In an Agfacts bulletin published in 1989, two officers of DepAg wrote:
"Organochlorine residues are absorbed from ingested soil. When pasture availability is low or grazing pressure is high adult cattle can consume up to 3 kg of soil per day. Thus animal residues are highest during the dry period when pastures are short. During this period stock tend to be in poorer condition, and this concentrates the residues."
1. It is a notable feature of this case that some of the people on whose behalf it is brought never grew cotton or fed their cattle cotton trash. Yet their cattle became contaminated by chlorfluazuron, presumably from one of the causes last mentioned. However, most graziers in the group did feed cotton trash. It seems likely this was their cattle's primary source of contamination.
FEEDING OF COTTON GIN TRASH
Evidence of the practice
38. The practice of feeding cotton gin trash to cattle became extremely common during the drought that developed between 1991 and 1994, but it started well before that. As long ago as April 1980, Ian Blackwood, then an Extension Officer of DepAg, forwarded a report to Dale Weedman, then the New South Wales Registrar of Pesticides, "regarding the analysis of cotton gin trash samples that may be destined for use as a drought fodder". The title of the report was "Cotton Gin Trash and DDT Residue Analysis Drought Feeding, Wee Waa Area". The report identified only one grazing property then feeding cotton trash, but Mr Blackwood recognised the potential for expansion of the practice. He said:
"Gin break downs have restricted the amount of gin trash available. Alan Couter reports that the demand is there for gin trash and that people realise the problem of D.D.T. However, the attitude change is dominated by the necessity to keep cattle, particularly breeders, alive. It would appear that sampling of gin trash to obtain D.D.T. levels, which has not been done before, is feasible with co-operation from the ginners. Should the demand for gin trash increase significantly, the organisational aspects of sampling, storing, and distributing gin trash would be considerable in terms of resources."
1. In November 1980, the Director-General of DepAg issued a circular, marked for general distribution, on the subject "Pesticide Residues in the Fat of Cattle". It included the statement:
"The drought has undoubtedly encouraged feeding of fodder such as cotton trash, soyabean stubble, sorghum stubble and similar feed which would normally not be used because of its relatively low feed value. Some of these, and particularly cotton trash, could be impregnated with pesticide."
1. In September 1985, DepAg issued an Agfacts bulletin entitled "Feeding Cotton Industry By-Products to Cattle". It was written by two officers stationed at Narrabri: John Macfarlane, a Veterinary Inspector, and Bryan Johnston, a District Livestock Officer. The bulletin commenced:
"The growth of the cotton industry since the early 1960's has produced several by-products suitable for use as feed supplements for cattle. Many of these by-products are relatively cheap and producers are utilising them during periods of low rainfall or poor pasture production over the winter months. The quality of these by-products varies due to seasonal and harvesting conditions and the efficiency of processing plants. This information sheet provides background information on these by-products and suggests ways of feeding them to livestock."
1. The first by-product discussed was cotton gin trash. After a description of the by-product and a reference to its feed value, the authors said:
"Field Usage: This product has been extensively used to feed stock during drought and the addition of a protein supplement like urea/molasses roller drum licks would be beneficial. If relying on trash as a drought feed it would be necessary to feed stock to appetite. Trash can be dumped in a heap in the paddock or fed out in small heaps. Cows in late pregnancy and early lactation would need additional energy and protein and this could be supplied by grain, cottonseed meal, white cottonseed or good-quality hay."
1. The bulletin also discussed cottonseed hulls (the residue of the seed after crushing), cottonseed and cottonseed meal. It concluded with a discussion about the role of each of the by-products, their energy and protein values and a table setting out suggested ration combinations. All four combinations included "cotton hulls or trash".
43. Neither Mr Macfarlane nor Mr Johnston gave evidence in this case. However, evidence was given by a person who assisted in the compilation of the bulletin, Robert Eveleigh, a former DepAg District Agronomist. Mr Eveleigh was stationed at Narrabri from August 1985 until February 1996. He said the bulletin was brought into existence because of inquiries received by the Department concerning the suitability of cotton trash as an alternative stock feed. While he was at Narrabri, he received numerous inquiries about cotton trash. He said "during periods when the weather was dry and particularly when there were drought conditions, the requests for information were a common occurrence". It was his practice to respond by sending inquirers a copy of the bulletin. Mr Eveleigh said it was part of his work to travel around the Narrabri Shire, and "I recall from my observations that from time to time it was common practice to see cattle grazing on cotton trash that had been left in paddocks".
44. Other evidence supports Mr Eveleigh's claim that it was common, especially during the droughts of the 1980's and early 1990's, for cotton gin trash to be fed to cattle. Numerous witnesses attested to the practice. I need not refer to them all. A few references will illustrate its extent.
45. Brian McMullin, the first applicant, has been a grazier for over 30 years. He used cotton gin trash as a cattle feed supplement only once, in 1986, but he said he heard of the practice a few years before that. In 1986 "things were pretty tight ... and a lot of my neighbours were using it so I thought I'd try it". After 1986 he saw trash in people's paddocks from time to time, and cattle feeding off it. From May to July each year, "up until Helix", the sight of cattle eating cotton trash was obvious on the roads from his father's property at Yerandi to Narrabri and to Wee Waa, and also from the main Narrabri-Wee Waa road.
46. Bruce Jackson, a grazier at "Cudgewa" near Wee Waa, spoke of a nearby cotton gin, owned by Namoi Cotton Co-operative Pty Limited, supplying trash to "Cudgewa" since the early 1960's. Some of it was left to decompose but, at some stage in most years, cattle ate the trash. Mr Jackson's family company acquired "Cudgewa" and three other properties in 1986-87; since then, he said, his stock had been given "uncontrolled access" to gin trash on all four properties. He said the cattle did "quite well" on the trash and sometimes fattened on it. Mr Jackson grew cotton himself and grazed his cattle on cotton stubble from time to time. He was also a director of the Co-operative and gave evidence about the competition for gin trash that developed in the early 1990's; to such an extent that the gin had to ration its supply. It decided to give preference to graziers who, as cotton growers, had sent cotton into the gin.
47. Neil Stewart Sowerby, the fourth cross-respondent, is a partner in a business that conducts a feed lot at Gurley, south of Moree. In June 1994, he commenced to use cotton trash in the feed lot, but he had experience of the practice long before that. He had managed the Moree operations of Auscott between 1981 and 1985, before going into a cotton growing venture on his own account. He said that, during the drought of the early 1980's, while he was with Auscott, "we were making available the trash, principally, as I recall in those days for gin clients to take back for their cattle". Mr Sowerby said people could come and collect as much trash as they wished. Initially they were mainly cotton farmers, but subsequently others were allowed access to the trash pile. In the years up to 1985, over half the total trash was taken for feed; there were probably 20 or 30 individuals involved. In the early 1990's, when he was living at Gurley, he frequently travelled around the district by car and observed cotton trash being fed to cattle.
48. Bruce Picone has a property called "Tallawanta", about 60km north west of Moree. He has been a grazier for over 20 years and said the practice of drought-feeding cotton trash to cattle has been "common knowledge for a long time". He first saw piles of cotton trash in paddocks in the drought of 1982-83. Thereafter, "in any drought period it was always obvious", including in the 1990's. He used cotton trash himself, but not until 1994.
49. Mark McInnes grew up in Narrabri, then moved to Melbourne. He returned to Narrabri in 1987. Almost immediately, as he drove around the district, he noticed cattle eating cotton trash in paddocks. He recognised the feed because he had previously worked in cotton gins. By 1991 Mr McInnes had become sufficiently interested in the subject to embark on a business enterprise pelleting the trash.
50. The position was similar in Queensland. Mr Blomfield has been a farmer and grazier at "Cecil Plains", about 200kms west of Brisbane, since 1975. The property is close to a cotton gin. Mr Blomfield recalled seeing trash removed from the gin in about 1988 or 1989. From about 1990 he saw piles of cotton trash in paddocks, being eaten by cattle. He started general hand feeding in April 1991 "as the drought started to bite" and continued to do so, off and on, until early 1995. He first included cotton trash in the ration in July 1994, after observing its use on a neighbour's property,
51. George Bowhay is a farmer and grazier at "Buckenbar" near St George. He fed gin trash to his own stock only once, in 1991, but over the ensuing three or four years he earned income by delivering trash from the gin to other properties, mainly in Queensland but some in New South Wales and up to 400km from St George. He estimated he would have delivered to 100-150 properties or more. He would dump the trash in a heap on the recipient property.
Academic support for the practice
52. The use of cotton gin trash as a stockfeed in New South Wales and Queensland was consistent with long-standing American practice, as described in evidence by Professor Carl Reed Richardson of Texas Tech University, Texas. Professor Richardson specialises in Ruminant Nutrition. He has studied cotton gin trash since 1976. He cited an extensive bibliography relevant to its use as a stock feed. The bibliography included numerous articles directly discussing the practice that were published before 1985, and several published in the period 1985 to 1994. Professor Richardson said feeding cotton trash to cattle was common practice in the area around Lubbock, Texas, between 1985 and 1994. In that area, he said, "we have a lot of cotton and a lot of gin trash ... so it is a common feed style. Some other consultant nutritionists use it as a standard roughage for cattle ... it is widely used". Within a one hundred mile radius of Lubbock, Professor Reed said, "we have three million acres of cotton and ... within about 250 miles of Lubbock we feed five million head of cattle, so it's a large cotton producing area and a large cattle producing area". It will be recalled that Lubbock was always included in ICI's United Statescotton tours.
53. Professor Richardson said that, between 1985 and 1994, the practice of feeding cotton trash to cattle was also followed in California. He quoted statistics from a 1985 publication of the United States Department of Agriculture that showed that 27% of all United States cotton gin trash was used in feed lots, 9.6% used for range feed and 4% otherwise distributed. Professor Richardson explained the feeding requirements of cattle and the reasons for adding cotton trash to their diet. In the United States, gin trash is not used only as a drought food. So significant is the by-product that some effort is made to maximise its quantity, by stripping the plant rather than picking the cotton bolls. Businesses have developed around the sale of cotton trash. The trash is usually shaken to remove dirt but is not chemically treated. Professor Richardson said the businesses that dealt in trash did not test for chemicals; there was no legal requirement for this to be done and trash "is a product that has generally been recognised as safe". Professor Richardson commented in his witness statement:
"The question of chemicals and residue goes back to the labelling. Again, the label should indicate any constraints that apply to the use of chemicals, including the sale of cattle following contact or potential contact with the chemical."
1. Academic support for the feeding of cotton trash is not limited to the United States. Professor Ronald Leng taught Nutritional Biochemistry at the University of New England, Armidale, from 1973 to 1996. He specialised in sheep and cattle. Throughout the whole of that period, he studied drought feeding strategies. He has lectured on the subject in Australia and many overseas countries. He was heavily involved with international development agencies, including the United Nations Development Program, Asian Development Bank and the World Bank, his task being to establish ruminant production systems based on agro-industrial by-products and crop residues. This activity was always on a short-term assignment basis but involved work in over 30 countries.
55. Professor Leng is the author of a book, published in 1986, called "Drought Feeding Strategies: Theory and Practice" which has sold approximately 8,000 copies. A copy of the book was admitted into evidence. It includes a chapter headed "Feeds Available for Drought". That chapter includes section 3.7, "Agro-industrial Byproducts and Crop Residues", which reads:
"These include the oil-seed meals, brans from cereal processing, brewers grains, vegetable wastes, citrus pulps, husks from grains, cottonseed hulls and various crop residues such as cotton waste, peanut vines, soyabean straw, all of which can be valuable resources but in general are seldom available in sufficient quantities to be of widespread interest. They are often more valuable as feed supplements to basal diets of grain, straw or molasses, particularly the high protein oil-seed meals." (Emphasis added).
1. In his witness statement, Professor Leng said that, "(w)hen teaching on the subject of by-products I always stressed the possibility of chemical residues causing problems when recommended for feeding to livestock". However, he went on:
"During times of drought virtually any available biomass is likely to be used to feed cattle when forage availability is negligible. The farmers must choose between letting the animals die or feeding what is available and Animal Cruelty Acts now preclude the former."
1. Professor Leng said: "It is common world-wide for the by-products of crops to be fed to cattle". He referred to numerous by-products and said:
"In my opinion, if there is a by-product from any source that can be digested by a microbial digestive system with sufficient rapidity it will have been fed to ruminants."
1. Dr Leng attached to his statement a bibliography of relevant literature available prior to 1989. The list included articles published in 1958 and 1987 in the "Journal of Animal Science" - which, Professor Leng said, circulates widely in Australia - about the feeding of cotton gin trash to cattle. There were articles on the same subject in other publications dated 1957, 1984, 1985 and 1988.
59. During cross examination, Professor Leng referred to the advice he gave people who contacted him during droughts to ask about alternative stock feeds. In essence, he told inquirers that cotton trash, though inexpensive, was a poor fodder with low nutritional quality and difficult to handle, but it can be a useful feed, particularly when supplemented, and provides necessary roughage. He said he included this information in his lectures to students about drought feeding but it "would not be emphasised because I feel there is a lot better and more available material but they were definitely mentioned as potentials for feeding during drought".
The States' attitude to feeding cotton gin trash
60. The evidence clearly establishes that both DepAg and QDPI knew of, and sanctioned, the practice of feeding cotton gin trash to cattle.
61. In relation to DepAg, I have already referred to Mr Eveleigh's evidence and the 1985 Agfacts bulletin "Feeding Cotton Industry By-Products to Cattle". That document remained in circulation, and available to inquirers, until its withdrawal on 13 April 1995 in the wake of the CFZ contamination crisis. There is evidence of oral inquiries to departmental officers during the period the bulletin was in circulation. Some of this evidence is disputed but it is not necessary at this stage to reach a conclusion about those disputes. It is clear that the official position of DepAg, during the whole of the period with which this case is concerned, was that cotton trash is an appropriate supplemental feed for cattle, particularly during times of drought. This is apparent, not only from the continued use of the 1985 bulletin, but also from other material. For example, in a further Agfacts bulletin, issued in 1989 and entitled "Drought management of beef cattle", three departmental officers discussed suitable drought feeds. Under the heading "By-products", they wrote:
"By-products of oilseed crushing industry (such as cotton gin trash, cottonseed hulls, peanut hulls and sunflower hulls) are low in energy and protein. However, such substances can help maintain grown cattle or serve as a source of roughage for lotfeeding."
1. A table setting out the energy and protein content "of some commonly used feeds" included figures for cotton gin trash.
63. As the 1991-94 drought set in, DepAg publications frequently mentioned cattle trash as a cattle feed. This was not without some appreciation, at a senior level, of the possibility of contamination. On 16 May 1991, O R Southwood, the Orana and Far Western Regional Director of DepAg, wrote to D Allerton, Livestock Officer at Coonamble:
"I notice you have been recommending the feeding of cotton byproducts to livestock. What precautionary measures have you recommended to ensure that products eg. meat, do not suffer pesticide contamination. I understand that the material is being used also for dairy cattle. You should promptly take this matter up with Geoff Wise, RDVS, Dubbo."
1. Mr Wise endorsed the memo:
"My enquiries indicate that cotton by-products are not considered a risk from the residue viewpoint. A significant amount of research was done on this some years ago."
1. Mr Allerton responded to Mr Southwood with a memo dated 22 May 1991 in which he referred to inquiries he had made about pesticide residues in cotton. His informants included Harvey Baker, Environment Director of the Australian Cotton Foundation and former New South Wales Registrar of Pesticides.
66. At about this same time, on 6 June 1991, "The Land", a newspaper circulating extensively in rural New South Wales, published an article written by Mr Blackwood, now a Beef Cattle Nutrition Officer at DepAg's research station at Paterson. It was headed "Better Cattle Breeding" and dealt with cotton industry by-products. It commenced:
"BY PRODUCTS from the cotton industry can be very useful as drought feed and the current size of this season's cotton crop seems to assure the availability of cottonseed-based products. The by-products and their uses are as follows. ... Cotton gin trash is made up of leaves and other plant material from the removal of the lint fibres from the seed at the gin. It is very light and bulky which makes transport costly. Generally usage is restricted to areas close to the gin where it is used as a roughage source."
1. On 11 December 1991, the New South Wales Minister for Agriculture issued a media release announcing the introduction of transport subsidies on cotton gin trash. He said in this release: "Farmers have indicated the use of cotton gin trash is proving extremely helpful at this time of severe drought and have requested a transport subsidy be made available." These subsidies were maintained until the contamination crisis in late 1994.
68. In June 1992, the Minister put out a further media release advising producers "using cotton trash as a source of drought survival feed for cattle" to observe a 14 day withholding period prior to sale for slaughter. The reason was the possibility of endosulfan residues. The release quoted the Minister as saying "cotton trash was providing cheap drought survival feed for cattle, particularly in the parched north-west of the State"; and "in some cases cattle were being maintained over a number of months on a diet of up to 100 per cent cotton trash".
69. In evidence, Mr Eveleigh recalled the endosulfan warning. He said DepAg took steps to publicise through newspapers what was called a "cotton trash warning". He thought this was published in "The Land" and "Queensland Country Life", its Queensland counterpart. Mr Eveleigh identified a notice in the issue of "Queensland Country Life" of 8 July 1992 which was in these terms:
"COTTON TRASH FEED WARNING LIVESTOC' feeders using cotton trash as drought survival feed should observe a 14-day witholding period prior to sale or slaughter. This advice comes from the NSW Agriculture Animal Industries Division chief Helen Scott-Orr, who said cotton gin trash was being used as cheap drought-survival feed for cattle. Recent monitoring by the Australian Cotton Foundation had, however, detected low level endosulfan residues in the trash, and some gins had since withheld [sic] supplies to cattle producers. Ms Scott-Orr said Endosulfan was a chemical applied to cotton crops, but it was not stored in body fat reserves, and was rapidly eliminated from the body. 'Nevertheless, it's better to be cautious and for that reason we can only approve the use of cotton trash for drought survival feeding if producers observe a 14-day witholding period prior to sale,' she said."
1. Even as late as September 1994, DepAg continued to recommend cotton gin trash as a drought feed. The second edition of its 64 page booklet "The Drought Survival Guide", issued that month, reproduced the statement from the 1989 Agfacts bulletin quoted above.
71.The evidence does not disclose any QDPI publication about feeding cotton trash prior to the 1991-94 drought. However, there is no doubt that QDPI endorsed the practice during that period. As in New South Wales, drought relief transportation subsidies were available for cotton gin trash.
72.In a "Farm Note" published by the QDPI in May 1991, headed "Beef Cattle Feedlot feeds", an officer of the QDPI's Beef Cattle Husbandry Branch related the importance of roughage and identified materials suitable for this purpose. Under the heading "Cotton trash and cotton hulls", he said:
"Byproducts of the cotton fibre industry are cotton seed, cottonseed oil, cottonseed meal, cotton hulls and cotton trash, with the last two usually classified as roughages. Trash and hulls are low in nutrients but excellent roughage for high performance rations."
73. In September 1991, the Acting Director of the Division of Public Health in QDPI, sent a memo to the Department's Regional Veterinary Managers in Brisbane, Toowoomba, Longreach, Townsville and Rockhampton which read as follows:
"SUBJECT: USE OF COTTON GINNING TRASH FOR STOC' FEED 1. There have been expressions of public concern at the feeding of cotton ginning trash to stock for drought mitigation purposes. 2. While cotton ginning trash is available at a number of ginning outlets for drought feeding of stock, it may contain endosulphan residues above the level permitted under the Chemical Usage (Agricultural and Veterinary) Control Act. 3. Endosulphan, however, has a short half-life in stock and providing an appropriate time is allowed to lapse before slaughter, residues would not exceed prescribed MRL's for meat. 4. In all the monitoring that DPI had carried out on stock, the Department has not detected any endosulphan residues under normal feeding regimes. Because of the extremely short half-life of endosulphan the Director-General has under the powers delegated to him, approved the use of cotton ginning trash containing excess endosulphan residues for stock feed, subject to the following conditions: A. Cotton ginning trash not be fed to any - lactating dairy stock stock within a month of slaughter lactating females who progeny may be slaughtered within 30 days of ceasing the feeding regime. B. Owners who have purchased cotton ginning trash, or intend doing so will enter an undertaking with the Honourable the Minister to observe the conditions above. C. Any herds feeding trash will be monitored and cleared by DPI staff before animals are sold to slaughter. 5. Would you please initiate enquires [sic] to identify ginning outlets and persons who have obtained cotton ginning trash for stock feeding purposes and take appropriate action to put in place the Director-General's requirements."
1. This memorandum prompted the QDPI Regional Inspector of Stock, Veterinary Services Branch, to issue a circular to all staff in the Department's southern region (which included St George) enclosing a copy of an advice to be given to people who gave, or had given, the undertaking referred to in para 4B of the Acting Director's memorandum. The advice read:
"ADVICE TO OWNERS GRANTED A MINISTERIAL EXEMPTION TO FEED COTTON GINNING TRASH" Endosulphan may be present in cotton ginning trash. Cattle fed cotton ginning trash could possibly be poisoned by endosulphan. The signs are excessive salivation, abnormal breathing, staring eyes - may appear to be blind, listlessness, staggering, excitability, convulsions and death. Owners are warned to feed a small group of animals with each batch of cotton ginning trash and look for signs of poisoning. If detected the feed should be withdrawn immediately, and a Stock Inspector or Veterinary Officer should be informed. The likelihood of poisoning is not known at this stage, and may be extremely low, however endosulphan has poisoned cattle in experimental work."
1. Not all the Queensland graziers who gave evidence of feeding cotton trash to their cattle gave the required undertaking, but some did.
76. The extent of QDPI's involvement at this time in the feeding of cotton gin trash to cattle is demonstrated by a memorandum dated 30 September 1991 from the Manager (Chemical Residues and Exotic Disease), Veterinary Services Branch to the Deputy Director of the Branch. This memorandum listed, by district, a total of 157 undertakings received at the regional offices of the Branch. The memorandum also indicated what supplies of trash remained available at various gins.
77. On 2 October 1991, the Manager (Extension) Sheep and Wool Branch of QDPI sent to a group of departmental officers, designated "Officers of Sheep and Wool/Beef Cattle Husbandry", a memo setting out analyses of the feed value of ten samples of cotton gin trash. Presumably this information was intended to be made available, as required, to members of the public.
78. The QDPI "Drought Bulletin" of 29 October 1991, which was distributed widely to farmers and graziers in the area affected by drought (including the St George district), carried information about the required undertaking. It said the Department's Chemical Residue Program Manager reported that inquiries had been received regarding growing fodder crops on former sugar cane land, baling sugar cane tops and feeding cotton ginning trash. It then quoted him as saying:
"Producers are advised to submit samples of suspect animal feed for testing prior to feeding, although cotton ginning trash may be fed without testing provided producers sign a Ministerial undertaking. However, strict controls apply to selling cattle fed ginning trash"
1. On 14 September 1992, QDPI'S Manager, Animal Health Field Services, reported to the Manager, Agricultural Standards:
"I have consulted with regional staff who advise that cotton ginning trash continues to be a valuable drought feed. The conditions laid down under 3 of the memo from Mr Harty to Mr Kruger dated 18 September 1991 still apply. There is no indication that these conditions are being disregarded and no residues of endosulphan have been detected in animal products. Accordingly I believe that the current permission should continue. We could expect considerable backlash if permission were to be withdrawn."
1. The "Drought Bulletin" of 27 October 1993 reiterated that cattle producers feeding cotton trash "must sign an undertaking that the cattle must not be slaughtered for human consumption within 30 days of cessation of feeding the trash" and that "dairy farmers must not feed cotton trash to lactating animals". Nonetheless, a book issued by QDPI as late as October 1994, called "Drought Management Planning and Supplementary Feeding for Beef Cattle", retained the information that cotton trash "is a by product of cotton ginning and is a useful source of roughages". Its protein content and energy level were stated and a warning was given about endosulphan levels.
81. The evidence does not reveal any publication of DepAg or QDPI, issued prior to November 1994, containing a warning about, or even reference to, the risk of chlorfluazuron contamination.
ICI's knowledge of the feeding of cotton gin trash
82. Counsel for ICI called numerous employees and ex-employees of the company who stated they were unaware of the use of cotton trash as a stock feed until October-December 1994. In the case of most of these witnesses, their claim is unsurprising; they were not employed in positions, or located in places, where they would have been likely to become aware. In the case of some witnesses, the claim is surprising. For the most part, however, I need not reach a conclusion about the witnesses' truthfulness, or even identify those whose assertions of ignorance might be regarded as suspect. At least one ICI employee, Mr McKinnon, knew of the practice. He was based in Narrabri and responsible, from 1986 to 1991, for the sale of cotton products throughout northern New South Wales and southern Queensland.
83. Mr McKinnon gave evidence that he first saw cotton trash being fed to cattle during the 1985 drought. He thought this was in the Wee Waa district where he was then employed by a cotton farmer. He said it was "a widespread practice" and "it was fairly obvious around the place". Speaking of the position after he joined ICI, Mr McKinnon referred to "dumps of cotton trash out in the paddocks ... all the way from Moree, Wee Waa, Queensland". He said his district extended from Emerald in the north to Wee Waa and Narrabri in the south, and from Toowoomba in the east westwards to Bourke. He usually flew to Emerald but he drove around the remainder of his territory, including the St George district. As I understand his evidence, Mr McKinnon saw dumps of cotton trash, with cattle feeding from them, generally throughout this area. The dumps were up to a metre in height and extended in some cases over hundreds of metres. Mr McKinnon said he saw the dumps in most seasons between 1985 and 1991, but did not recall ever being asked by anybody in ICI what became of the by-products of cotton. Had he been asked, he would have stated that one of the by-products was gin trash, which could be fed to cattle.
84. Mr McKinnon was accompanied on some of his journeys by Mr Malan, his immediate superior. Mr Malan was based in Brisbane. During the cotton season, he said, he would spend about 60% of his time in the cotton areas; during the winter, a little less. He recalled becoming aware of the practice of feeding cotton trash to cattle in 1991 but he thought this might have been after he left ICI's employment.
85. Mr Matthews became aware of the concern over endosulfan in cotton trash fed to cattle. He said: "All companies would take an interest in it". He agreed this would be "because such a result is a very unfortunate event, not only for the owners of the cattle but for the chemical industry"; and that "it does absolutely nothing for [the chemical companies'] reputation". He said "the issue would have been discussed" at ICI, although he could not recall being involved.
86. In April 1992, Jack Lydiate, then Regulatory Affairs Manager of ICI, and Ronald de Groot, the Technology and Development Manager of Crop Care, attended a meeting of the Clearance and Registration Committee of a trade organisation, the Agricultural and Veterinary Chemicals Association of Australia Limited. They were representing ICI. There was discussion about the practice of grazing failed crops. As a result of the discussion, the Committee resolved to prepare a list of failed crops that might be grazed. The list included cotton.
87. Dr Lydiate and Mr de Groot both insisted they did not know about cattle eating cotton residues (other than cottonseed) until late 1994. That evidence is surprising, given the April 1992 meeting and the content of the list. However, I am not prepared to say their evidence was untruthful. Perhaps they did not see the list. In my opinion it does not matter whether they knew or not; it is clear that by the time of the endosulfan concerns, knowledge within ICI of the practice of feeding cotton trash to cattle was not confined to field officers like Mr McKinnon. The situation was known to senior officers in Melbourne, people who were directly concerned with the safety of the company's products. And the information had come to them in the context of concern about chemical residues in meat.
THE DEVELOPMENT OF HELIX
The nature of chlorfluazuron
88. Helix was developed by ICI for the control of cotton bollworm and native budworm. Its active ingredient was chlorfluazuron, a chemical that has also been called "Atabron", "PP 145", "ICIA 0145", "I'I 7899" and "CGA 112913". I will refer to it henceforth as "CFZ".
89. CFZ is a chitin inhibitor. It retards the development, at larval stage, of the target insect's hard outer shell, thereby causing its death.
90. At the hearing there was debate as to whether CFZ is properly called an organochlorine. Attention was given to the question because DDT and dieldrin, chemicals that attained environmental notoriety in the 1960s and 1970s, are organochlorines. But the debate never rose above the semantic. Everybody agrees that, by definition, an organochlorine is a compound containing carbon-hydrogen and chlorine atoms. CFZ answers this description. So it is clear that, in a technical sense, CFZ is an organochlorine. However, it is often classified in a different way. In one authoritative work, "The Pesticide Manual" (10th edition, 1995), CFZ is classified as a benzoylurea. Mr Gillard pointed this out to one witness, Dr Colin Young, a reader in the School of Chemistry at the University of Melbourne. Dr Young said he had no quarrel with that. He explained:
"The problem is that compounds can be described in a number of ways. CFZ is a complicated molecule and for some reason The Pesticide Manual has decided to put it in ... a benzoylurea."
1. Dr Young went on to say this classification arose because the classifier had chosen to have regard to the left hand side of the conventional graphic representation of the CFZ molecule rather than the right.
92. Notwithstanding the apparent arbitrariness of this classification, Dr Young and other experts called by the applicants conceded that, in compiling a list of organochlorines, CFZ might not immediately come to mind. For example, Dr Doreen Clark, a highly qualified analytical chemist said:
"CFZ is an organic compound containing chlorine (as well as fluorine, oxygen, nitrogen, carbon and hydrogen). Because of its structure, I consider it to be a benzoylurea or a substituted urea. Since CFZ contains carbon-chlorine bonds and is an organic chemical, however, some people consider it to be an organochlorine compound. However, in my opinion, even today CFZ is not generally included in the organochlorine pesticide group. This is because its structure is sufficiently different, for example, from DDT type organochlorine pesticides and because CFZ has not been widely used around the world."
1. ICI's principal scientific witness, Dr Lydiate, shared this view. He said CFZ "is an organochlorine but it is not an organochlorine in the same way as DDT is specified as a organochlorine".
94. It seems not to matter whether or not CFZ is ordinarily thought of as an organochlorine. Dr Lydiate agreed that CFZ shares the two characteristics that made DDT and dieldrin so problematic: a tendency to accumulate in the tissues of animals (bio-accumulation) and persistence in the environment. CFZ, DDT and dieldrin are all soluble in fat - hence the bioaccumulative quality. Dr Young explained the similarities (and differences) in the composition of these three chemicals, and some others he named, and why their compositions indicated solubility in fat. He said the chemical characteristics of CFZ indicated "it's got a high probability that it might bio-accumulate". His opinion was supported by Professor George Crank, Director of the Centre for Chemical Analysis at the University of New South Wales. Dr Crank said:
"Although [CFZ] contains carbon-hydrogen and chlorine atoms and thus is an organic compound containing chlorine, [it] is not a usual organochlorine. CFZ is far more complicated than most organochlorines and cannot neatly be categorised into any established class of chemicals. Organochlorines, however, are notorious for their tendency to bioaccumulate in the fatty tissues of animals. By observing the chemical structure of CFZ it is possible to recognise that it has a potential for persistence and bioaccumulation. The presence of chlorine atoms in an organic compound often results in persistence and bioaccumulative tendencies."
1. The important matter is CFZ's characteristics; they were apparent from its chemical formula. Moreover, the respondents were aware CFZ in fact had a tendency to bio-accumulate and was persistent in the environment. According to Michael Hood, a consultant agricultural biologist who gave evidence on behalf of ICI, "it is (this) combination ... that makes organochlorines potentially a problem for registration. It is necessary to investigate and be careful with the presented data." The respondents did not in fact know the extent of the two characteristics, because the necessary research was not undertaken; but their ignorance on that matter had nothing to do with the way the chemical was classified in publications such as "The Pesticide Manual".
ICI's interest in CFZ
96. "The Pesticide Manual" records that CFZ was first reported in 1982, having been discovered by a Japanese company, Ishihara Sangyo Kaisha Ltd ("IS'"). Shortly after that time, it seems, ICI entered into some arrangement with IS', the details of which were not proved and do not matter. However, it is proved that, by early 1985, ICI was interested in developing a CFZ-based product for use on cotton. It is necessary to recount the development process, insofar as it is revealed by the evidence, and it is convenient immediately to say something about the people involved in it.
ICI people
97. At the time CFZ was first considered by ICI, the division concerned was the Biological Division whose General Manager was John Plunkett. The Division later became known as ICI Rural Group. At some stage, Tom Kudelka became General Manager. Later again, the Division became ICI Crop Care. The Technical Manager, reporting first to Mr Plunkett and later to Mr Kudelka, was Keith Alcock. In 1987 he took up a position with ICI U' at Fernhurst and was replaced by Dr Robert Brown who, by May 1990, was styled "Research and Technology Manager". In April 1989, Mr Matthews, a former officer of the Victorian government, became ICI Crop Care's Product Stewardship Manager with a responsibility, in his own words, "to ensure that all procedures, literature, labelling and testing met both regulatory requirements, industry practices and appropriate ethical standards".
98. One of the managers answerable to Mr Alcock was Alan Jacques, the Regulatory Affairs Manager. Officers in his section included Dr Lydiate, then Senior Regulatory Affairs Officer, and two Regulatory Affairs Officers, Pauline John and Iris Early. Mr Jacques died in late 1988 and was succeeded by Dr Lydiate.
99. Dr Lydiate has impressive academic qualifications. He graduated in 1966 from Salford University, in the United Kingdom, with a first class honours degree in Applied Chemistry. In 1967 he was awarded the degree of Doctor of Philosophy by the University of Liverpool. He migrated to Australia in 1969 and joined ICI in 1971. Dr Lydiate said that, under the direction of Mr Jacques until late 1988 and thereafter as Regulatory Affairs Manager, he was "responsible for assembling the registration submission for the insecticide known as Helix". He said his role was to determine whether there was sufficient material to satisfy the registration requirements of Australian regulatory authorities, and to gather material for the registration submission. Dr Lydiate never claimed the wider responsibility of ensuring that Helix was a safe product.
The Project Team
100. The first step taken by ICI in the development of Helix seems to have been the assembly of a working party. On 5 January 1985, a meeting was held of seven ICI officers, from which two project teams were constituted. One was called the "Cotton Project Team"; it apparently had a general brief in relation to products for the cotton industry. The other team was called "PP321/PP145 Project Team". PP321 is a chemical called "'arate"; PP145 is, of course, CFZ. This team, which I will simply call "the Project Team", was concerned specifically with these two chemicals. It was chaired by Gregory Stuart Fraser, a Senior Research Officer then based in Toowoomba. Mr Fraser was later transferred to Brisbane as Technical Service and Development Manager, Northern Region, of the Rural Division of ICI. In that capacity, he became responsible for the field trials relating to the efficacy of Helix that were undertaken during the 1987-88 cotton season. Sometime in 1989 or 1990, he was transferred to Melbourne as ICI's Market Manager for cotton and non-crop insecticides. Mr Fraser left ICI in October 1992.
101. Dr Lydiate was a member of the Project Team. Another member was John Patrick Collingwood, the research officer at ICI's Merrindale Research Station. He was later involved in the Helix efficacy trials.
102. The three remaining members of the Project team were J M Ogilvy (Secretary of the team), G R Ireland and R P Heath. None of these three men gave evidence at the hearing. Mr Ogilvy had been seconded to ICI Australia from ICI U'. Mr Ireland was a marketing officer and Mr Heath a formulations chemist. The team did not contain an ecologist or a person with expertise in the environmental effects, as distinct from the efficacy, of chemicals. Perhaps the reason was that the team had a limited agenda. Mr Fraser said its object was "to co-ordinate the development of the particular products". Asked to be specific, he replied: "To the best of my recollection the specific goal was to have the products registered and to ultimately sell them". Mr Fraser said he "had no expertise in relation to questions concerning the environment". Asked about other members of the Project Team, he replied: "There may not have been any specific expertise by any individual in that area in the Project Team". To the extent that environmental concerns impacted on registration, they were matters for Dr Lydiate. But Mr Fraser did not suggest Dr Lydiate had a general responsibility for the environmental effects of the two chemicals, or the expertise to discharge any such responsibility.
103. The minute of the inaugural Project Team notes discussion of many matters. It was reported to the meeting that trials of CFZ had shown poor results, but it was thought that better results might be achieved if the chemical was used at the final stage of the cotton plant's life cycle, after it stopped growing. This is often called "Stage III". As I understand the point, the problem about using the spray before Stage III is that later leaf growth remains unprotected. The minute noted that, at Stage III, "a persistent material such as PP145 [CFZ] gives longer term protection than short-lived organophosphate and carbonates because unprotected new growth is not produced".
104. The Project Team discussed priorities for, and the cost of, trials in 1985-86. These trials were to be directed to the efficacy of the chemical, not its environmental effects. There was also discussion about the data needed for a registration application and the work being done on development of the formulation in which CFZ would be the active ingredient.
105. No attempt was made to set a work program for the Project Team, or to fix a meeting schedule.
106. Mr Fraser said in evidence that the Project Team met as required. Other ICI officers would generally refer documents relating to the work of the team to him, as chairman. He would circulate those documents, and other pertinent information that came to his attention, to relevant team members.
Overseas contacts
107. Although Mr Fraser said he did not specifically remember the document, it seems probable, in the light of his evidence about documents, that Mr Fraser and Dr Lydiate, at least, saw the minute of a meeting on 9 May 1985 of four officers of ICI U'. ICI Australia produced a copy of this minute in the course of its discovery (disclosure to other parties) of the documents relevant to this case that are held by it. The four officers who attended the meeting were D D Evans, an officer of ICI U''s Plant Protection Division ("PPD") at Fernhurst with particular responsibility for the Far East and Pacific region ("FEP"), including Australia; Malcolm Findlay, another PPD officer; D Ashdown; and I Hill, a senior officer of ICI U''s Environmental Services Division at Jealott's Hill. The opening item in the minute read:
"1. Two significant changes in the perception of the environmental hazard of this compound have occured.[sic] (a) Ciba have informed IS' they will not register the compound in the USA (I Hill believes even with a good package there is a good chance the compound would not be registered in USA on technical grounds). (b) A pond study (Ciba contract lab) evaluating run off hazard in the USA gave prolonged gross effects on the invertebrate population. (I Hill has not yet evaluated the quality of this study). If this study proves to have been competantly [sic] carried out then it raises a major concern for the use of the compound on broad acre crops, where run off of soil into lake and river environments is possible, eg, cotton in Thailand and Australia. The only other pond study (Union Carbide) gave a much more favourable picture, indicating the compound was similar to pyrethroids (immediate reduction, rapid reappearance)."
1. The reference to "Ciba" is a reference to a United States company, Ciba-Geigy Corporation.
109. The minute went on to refer to information received from Ciba-Geigy and IS' regarding registration of CFZ in various countries. Items 4 and 5 referred to pond studies, stating that "(t)he Ciba contract study in the USA is unlikely to remain confidential ... and would therefore need to be submitted to Australia in the registration package". Item 5 contained the statement: "(a) further pond study is almost certain to be requested by the Australian authorities when we submit the I'I [sic; possibly I'I 7899, possibly IS'] registration package, cost approximately [sterling]200,000, plus two years' delay in registration". The item said that, before "an extensive and costly evaluation on cotton in Australia 1985-86", certain steps should be taken, including a reassessment by the ICI Australia registration group of the registerability of the compound.
110. I admitted this minute into evidence as a business record, pursuant to s 69 of the Evidence Act 1995, but on a limited basis. I ruled it proved that ICI U' had received from Ciba-Geigy and IS' the information attributed to each of them. This receipt was something within the knowledge of the apparent reporter, Dr Hill, or other officers of ICI U'. Consequently, statements to that effect were representations within the meaning of s 69(2) of the Act. However, I expressed the provisional view that the minute was not evidence of the truth of the facts stated by Ciba-Geigy and IS'; it was not apparent that any ICI U' officer had personal knowledge of the correctness of their statements.
111. Having reflected further about this question, I adhere to my provisional view. Mr Rowe argues that, even so, the minute is significant; it shows that, as early as 1985, ICI U' had information suggesting possible difficulties with CFZ. Whether the information was right or wrong, he says, it should have alerted members of the Project Team to the need for careful evaluation of the effects of the chemical. Mr Fraser conceded that proposition. In the course of cross-examination, he said: "If this document would have come to our attention, I can't say whether it did or it didn't, it would have been of concern I think to most people". He said that, depending on the quality of the data referred to, it could have implications for the registration of the project. That would have been within Dr Lydiate's field of concern. Consistently with ICI Australia's usual approach to CFZ problems before 1994, Mr Fraser made no reference in his answer to the wider question of whether CFZ was a safe product; and this notwithstanding the "major concern" stated in item 1(b) of the minute about the use of the compound "on broadacre crops, where run off of soil into lake and river environments is possible, eg, cotton in Thailand and Australia". Mr McKinnon's later report on the Gwydir valley stated that irrigation water used on cotton crops was sometimes returned to the river system.

112. When Dr Lydiate was cross-examined, he said he understood that Ciba-Geigy had decided not to seek registration of CFZ in the United States because "it perceived that the environmental hazards attendant on that product outweighed any likely benefits to accrue to it from obtaining registration". He said this did not cause him concern. He took no steps to find out why Ciba-Geigy had taken that view. When asked his reason, he said: "My task at that time was just to put the submission together as part of the registration team". He was then asked who on the Project Team had the task of finding out why Ciba-Geigy had determined to act as it did. He replied: "I presume the chairman, Mr Fraser". He said he could not remember whether Mr Fraser ever reported to him the result of any investigation on the matter.
113.On 21 May 1985, Mr Evans sent a memo to officers in ICI companies in seven countries, including Australia. The memo read:
"ATABRON (IKI7899) - REGISTRATION IN THE UNITED STATES Ciba Geigy have informed PPD and Ishihara, that they do not intend to pursue registration in the United States due to the unfavourable risk/benefit profile of the compound. This means that given the environmental features of the compound, they believe that the cost of the required studies, would not be bearable given their analysis of the market opportunities. However, Ciba have informed us that they intend to pursue registration in Western Europe, (Switzerland, France) and Ishihara that they intend to register in Japan. PPD expect to see the letter withdrawing the compound from USA development, (before it is sent) and Dr Jackson believes that it is unlikely to become public knowledge that one of the reasons for discontinuing development is the environmental profile of the compound. This letter is to inform you of these developments, and assure you we are following them very closely, given the sensitive nature of this problem. The next review of this project will be towards the end of 1985, when a full presentation of the position will be made. The data base is incomplete but the data currently available to PPD does not indicate that the compound cannot be registered, but that a range of environmental studies do need to be carried out to confirm the safety of the compound in practice. We conclude at this stage it is still worth continuing with field trials programmes." (Emphasis added.)
1. The "Dr Jackson" referred to in the second paragraph of this letter was Dr G J Jackson, the Insecticides Development Manager at PPD, Fernhurst. He had been the author of a document entitled "Company Secret 'Atabron' (PP145) Working Document" dated 28 February 1985 and sent at some stage to ICI Australia. This document stated that IS', PPD and Ciba-Geigy were "collaborating on the environmental aspects of the compound". He said:
"There is concern about three critical areas: 1 Persistence in terrestrial and aquatic environments 2 Bioconcentration in aquatic species 3 Toxicity to aquatic invertebrates and to larval stages of fish."
1. Once again, this document was admitted as a business record. It proves what information was conveyed to ICI Australia, but not the truth of the quoted statement.
116. Returning to the letter of 21 May, I note the copy tendered in evidence contained a handwritten instruction to a person called "Gail", presumably a secretary, to copy the document to Mr Kudelka, Mr Alcock and Mr Jacques. Mr Alcock was Mr Fraser's immediate superior; Mr Jacques was Dr Lydiate's. Consequently, as Mr Fraser accepted, the letter was probably passed on to members of the Project Team. There is no evidence of their reaction to it. If they discussed whether they should undertake the "range of environmental studies" mentioned in the last paragraph, they did not in fact do so.
117. Three days later, Mr Findlay and another officer of FEP at Fernhurst wrote a letter to Mr Kudelka. This letter said that:
"A number of concerns have recently surfaced with regard to the future of IKI7899 worldwide as well as in Australia. The purpose of this letter is to alert you to these concerns, and request that you give them due consideration before committing further major expenditure on the project."
1. Two problems were mentioned. The first was described in this way:
"1. The environmental profile of the compound may cause problems/further expenditure in registration. We append a file note explaining the nature of concerns and the actions required. PPD will send Alan Jacques a summary of the available data for his assessment."
1. The file note became detached from the letter and is not in evidence. Mr Fraser accepted the letter would have been referred to Mr Jacques. I infer he would have passed it on to members of the Project Team, but there is no evidence that the team ever gave consideration to the concerns mentioned in the file note.
120. On 25 October 1985, Ciba-Geigy issued the report of a study carried out at its agricultural research station in Florida. The study dealt with CFZ residues in the tissues and milk of dairy cows that had been fed diets containing CFZ. ICI Australia received a copy of this report at some stage - the evidence does not reveal the date - and subsequently included it in its application for registration of Helix. Several witnesses commented on the study. I will refer to their evidence later.
121. On 14 November 1985, a meeting of the Cotton Project Team was held in Brisbane. Mr Fraser, Dr Lydiate and Mr Collingwood attended, along with others including Mr Malan, ICI's Cotton Manager. The meeting dealt mainly with preparations for the CFZ efficacy trials; but one item is of interest, having regard to evidence given in this case about the American practice of using cotton gin trash as cattle feed. Under the heading "Other Business", the following item was noted:
"It was the unanimous opinion of the meeting that there was a strong need to develop a closer liaison and interchange of information with ICI Americas region due to their vast involvement in cotton, often under conditions and practices similar to those in Australia."
1. There is no evidence as to what action (if any) was taken pursuant to this expression of opinion.
123. Mr Fraser gave evidence that ICI Australia had "long and well established links" with United States companies in the ICI group and information flowed between the two countries. He said he agreed, at the time, with the resolution of 14 November 1985. Over subsequent years, however, as a result of visits to the United States and information he received, he formed the opinion that some United States practices, especially resistance management and aerial application techniques, were inferior to those in Australia.
124. Although there is no direct evidence, it seems that, at some stage, ICI Australia decided not to proceed with the development of a CFZ product for use on cotton. I say this because the evidence includes a copy of a handwritten fax from Mr Jacques to Geoff Willis of PPD at Fernhurst dated 18 November 1986 that read:
"PP145 (IKI7899) We are currently reviewing our recent decision not to proceed with the development of the above for use in cotton. Whilst I believe that the compound is registrable in Australia, based on the data I have seen, I would be grateful if you could provide me with PPD's current thinking on the development and use of the chemical particularly with regard to the persistence, bioconcentration and aquatic species toxicity concerns expressed previously. Perhaps we could discuss this matter in Thailand."
1. CFZ's characteristics of persistence and bioconcentration (bioaccumulation) were much emphasised in this case. The problem of aquatic species toxicity was later to concern the regulatory authorities.
126. There is no evidence of any reply to Mr Jacques' fax or the content of any discussions in Thailand. However, by coincidence or otherwise, on the day of the fax, Mr Ogilvy, the Secretary of the Project Team, sent a telex to Mr Kudelka suggesting the form of a reply to a telex ICI Australia had received from IS'. The IS' telex is not in evidence but it apparently concerned efficacy trials. Mr Ogilvy's suggestion was that ICI Australia should offer to conduct further trials if IS' contributed half the cost. He further suggested the reply state:
"- BEFORE PROCEEDING WE WOULD APPRECIATE YOUR REASSURANCE ON 2 POINTS A) THAT COST STRUCTURE OF IS' 7899 IS SUCH THAT THERE IS REASONABLE CHANCE OF MEETING BEARABLE PRICE OF APPROX 22 AUST DOLLARS PER HA AT DISTRIBUTOR LEVEL BASED ON EXPECTED RATE OF 2 LITRES PER HA OF ULV FORMULATION CONTAINING 50 G AI PER LITRE. B) THAT KNOWN PERSISTENCE IN ENVIRONMENT DOES NOT REPRESENT ANY REAL HAZARD."
1. The abbreviation "AI" refers to the active ingredient; that is, CFZ.
128. On the following day, 19 November, Mr Ogilvy wrote a memo to Mr Kudelka and Mr Alcock (with copies to Mr Collingwood, Mr Jacques and Mr Fraser) in which he elaborated the points mentioned. The memorandum contained this paragraph:
"(6) The product is known to have very serious questions over its effect in the environment associated with bio accumulation and persistence in soil. It is considered by Alan Jacques this would not prevent registration in Australia but I believe it is a reason the product is not being progressed in the USA and we need to check if it is acceptable by current ICI product stewardship standards." (Emphasis added.)
129. Mr Ogilvy said that, if IS' provided "satisfactory answers to points (5) and (6), there is a case for further work in Australia during February/March". Point (5) related to price and expected revenues. Point (6) was that set out above.
130. This memorandum is important to the applicants' case. It was addressed to two very senior officers: the head of ICI Australia's Biological Division, and the Technical Manager. It referred to the two characteristics - bioaccumulation and persistence - which lie at the heart of the applicants' case. And it said these characteristics cause "very serious questions" about CFZ's effect in the environment. Mr Rowe says the memorandum demonstrates ICI's knowledge, at senior level, of the potential for the very disaster that later occurred.
131. The memorandum is also exceptional, by ICI standards, in that it discusses the problems of CFZ in terms beyond mere obstacles to its registration. The issue of acceptability "by current ICI product stewardship standards" relates to CFZ's subsequent safe use. However, there is no evidence that the memorandum caused anybody to address that issue. The evidence does not reveal what response, if any, Mr Kudelka made to IS', whether any agreement was reached about cost-sharing, or whether IS' supplied any information relevant to point (6).
132. On or about 13 January 1987, Mr Ogilvy had a conversation with Dr Jackson of PPD. He noted some points mentioned by Dr Jackson. They included:
"There could be some environmental concern if sprayed material contaminates waterways. Geoff Jackson will try to elicit a view from the PPD product stewardship area."
1. There is no evidence as to whether Dr Jackson succeeded in obtaining that view.
134. In the event, ICI decided to undertake further trials. They were conducted during 1987 but, again, were limited to the efficacy of the chemical, not its environmental effects.
135. In July 1987 Dr Robert Brown joined ICI. In October he became Research and Technology Manager and, in that capacity, Dr Lydiate's superior. He realised that CFZ had a tendency to bio-accumulate and he was aware of the concerns that had been expressed by officers of ICI U'. But he did not regard any of these matters as his concern. His task, he said, was "to ensure that the trials that were needed to generate data for registration purposes were undertaken". He did not regard it as his responsibility to consider any aspect of CFZ's effect on the environment, and he did not do so until he was asked, after registration, to do a field study concerning arthropods and aquatic fauna. This was a study required as a condition of clearance for registration.
THE HELIX REGISTRATION PROCESS
The Technical Committee on Agricultural Chemicals
136. In the period immediately before 1 July 1989, there existed a non-statutory regulatory body called the Technical Committee on Agricultural Chemicals ("TCAC"). The committee comprised an officer of the Agricultural and Veterinary Chemicals Section of the Commonwealth Department of Primary Industries ("CDPI") as chairman, a senior officer of each State, and a representative of the National Health and Medical Research Council ("NH&MRC"). There were observers from the Council of Nature Conservation Ministers, the Commonwealth Department of Health and the Commonwealth Department of Arts, Sport, the Environment, Tourism and Territories ("DASETT"). The last-named person represented the Australian Environment Council, the committee of Commonwealth and State Ministers having responsibility within their governments for environmental policy. At some stage - the evidence is unclear about the point - one or more of the observers may have become members of TCAC. The Committee's secretariat was provided by CDPI and located in Canberra.
137. TCAC was responsible to the Co-ordinating Committee on Agricultural Chemicals. That committee, in turn, was answerable to the Standing Committee on Agriculture, comprising the Ministers responsible for agriculture in each of the Australian governments.
138. TCAC had no statutory function, but performed the role of advising State governments as to whether they should register a particular chemical within their State. It seems that, by the late 1980's, if TCAC granted a clearance, State registration was virtually automatic.
139. Mr Matthews, who later became ICI's Product Stewardship Manager, was the Victorian representative on TCAC from about 1984 to 1988. He confirmed the accuracy of this description of TCAC's method of operation:
"( All the supporting data for the clearance of a new product was submitted to the secretariat which would distribute the appropriate data packages to each agency for evaluation; - Toxicology data was evaluated by the Drugs and Poisons Scheduling Committee of the NH&MRC. - Residue data was evaluated by the Pesticides and Agricultural Chemicals Committee of the NH&MRC. - Environmental data was evaluated by the Commonwealth Department of Environment representing the Australian Environment Council. - Efficacy data was reviewed by State departments of agriculture. ( States also received summaries of the environmental chemistry and toxicology data. ( TCAC provided a forum for all the relevant agencies to discuss the progress of their evaluations and to resolve problems or deficiencies identified during the evaluations. ( Each jurisdiction and agency would agree to clearance when their evaluation was complete and they were satisfied with the data presented to them. It was the responsibility of the TCAC secretariat to facilitate this process and communicate directly with the applicant. ( When all States and agencies were satisfied with the data a certificate of clearance was issued by DPIE on behalf of TCAC, to the applicant. ( Companies would then use the clearance to obtain registration of their product in each State. States would not normally register a new product without a clearance. There were however, exceptions made by different States based on particular circumstances. ( There was no statutory basis for this process. It was developed as a cooperative mechanism to ensure that the agencies with the appropriate expertise were evaluating the data provided." 140. Mr Matthews said TCAC usually met twice each year but did much work between meetings by correspondence. He thought it might have handled "up to 100 clearances" each year, although some were very minor.
1. At all material times, Queensland was represented on TCAC by its Assistant Standards Officer, Paul Waterhouse. Mr Waterhouse described TCAC operations in this way:
"I do not recall there being any specific voting power ascribed to any members of the TCAC. Indeed I do not recall any suggestion that each member had one vote on decisions made. The system was rather different to a voting system. Each member was asked whether they supported clearance. If all members supported clearance then a clearance was granted. If a member of a State did not support clearance then no clearance would be granted for the State except on conditions nominated by that State."
1. During the period 1987-1989, New South Wales was represented on TCAC by its successive Registrars of Pesticides, Harvey Baker and Ian Douglas. Neither of these men gave evidence although both were apparently available to do so. There is no evidence as to the date of their change-over; but it appears from one letter that Mr Baker was still Registrar of Pesticides in July 1988.
143. TCAC was assisted in its duties by a committee called the Pesticides and Agricultural Chemicals Committee ("PACC"). During relevant years, the secretary of this committee was Mr Weedman, now a Commonwealth officer. In his former capacity as New South Wales Registrar of Pesticides, Mr Weedman had been the recipient of the letter of 16 April 1980 from Mr Blackwood, referred to earlier, concerning the analysis of cotton gin trash samples "that may be destined for use as a drought fodder". Another member of PACC was Dennis Hamilton, an officer of QDPI, who was described in evidence by Mr Waterhouse as a residue expert of international repute.
144. PACC was a technical committee established under the auspices of NH&MRC. One of its functions was advising NH&MRC on the establishment of maximum residue levels for foodstuffs, including livestock feed. As its name suggests, a maximum residue level ("MRL") is the maximum acceptable level of a chemical. Food MRLs set by NH&MRC were notified to State authorities and applied pursuant to State food legislation. If the contaminant level in a food exceeded the MRL, the food faced condemnation. Where there was no relevant MRL, any detection might lead to condemnation.
The TCAC handbook
1. In 1985 TCAC published a handbook entitled "Requirements for Clearance of Agricultural Chemicals". The handbook was officially known as "Document PB310B". It replaced an earlier publication numbered PB310. Mr Matthews, who participated in its compilation, called the handbook "the TCAC bible". In the handbook, TCAC explained its role in this way: "The responsibilities of the TCAC as resolved by the Standing Committee on Agriculture are as follows: a. To receive submissions and to consider all proposals for the use of 'new agricultural chemicals' ... b. To evaluate the implications of such use in Australia including: - justification for such use - efficacy for proposed purpose - safety to operators and others who are occupationally exposed - safety to consumers of foods produced with the aid of the agricultural chemical - safety to treated crops, soil, livestock, domestic animals, property, etc. - fate in the environment - effects on components of the natural environment, eg. wildlife and fish - possible effects on international trade - labelling - packaging - disposal of unwanted chemical and empty containers. c. To evaluate possible agricultural and ecological hazards of agricultural chemicals and to recommend precautions in accordance with good agricultural practice and to determine withholding periods appropriate to specific applications. d. To refer to NHMRC Committees, where appropriate, data for determination of: (i) Poisons schedule classification (ii) Maximum residue limits (MRLs) in specific commodities. e. To make recommendations to State authorities in respect of the registration of end-use products. When all data requirements have been met, results of these deliberations are communicated to the applicant, members of the TCAC and to State Registrars in a Certificate of Clearance."
2. Chapter 2 of the handbook dealt with clearance of agricultural chemicals. It explained that TCAC clearance was required both for "end-use products" and "technical grade active constituents" of the end-use product. Relating those terms to this case, Helix was an end-use product in which CFZ was the technical grade active constituent.
147. The handbook stated the reasons for requiring the submission of detailed information on technical grade active constituents. They included:
" - assessment of safety to humans and the environment from use of products containing the technical grade active constituent and its associated contaminants."
1. In other words, TCAC needed to assess the safety to the environment - this would of course include animals - from use of products containing CFZ.
149. Chapter 2 went on to describe the situations where clearances were required. Chapters 3 to 5 contained information about submissions and their required content.
150. Chapter 6 contained explanatory notes, some of which are relevant. Note 2 required the applicant to submit a draft label for the end-use product. Note 9 read:
"Data showing the nature, level and safety of residues and metabolites resulting from the recommended use pattern and the effect of any major variables should be included in the submission for the establishment of an MRL. The recommended MRL, when ratified by the NHMRC is included in the NHMRC publication 'Standard for Maximum Residue Limits of Pesticides, Agricultural Chemicals, Feed Additives, Veterinary Medicines and Noxious Substances in Food' and is considered for incorporation into the Food and Drug Regulations of each State or Territory. When establishment of an MRL is being considered, account is taken of use pattern and the decline of residues with time." (Emphasis added.)
1. From the last sentence, it is apparent that the establishment of an appropriate MRL depended upon PACC and NH&MRC having accurate information as to the relationship between the use of the product and any possible contamination of food, and the persistence of the active ingredient over time.
152. The note went on to refer to residue trials, the point being made that trials "should show the rate of disappearance of residues and/or the interval which elapses before the residues substantially disappear". The note made special reference to livestock residue data:
"Guidelines have not yet been published for trials with animal products, either through application of agricultural chemicals externally or through feeding ... Among the principles which must be followed are: that adequate numbers of animals be included at each dose rate; that sampling and analysis be carried out for all types of edible tissue and products from livestock and; that the trial be conducted in such a way as to determine, rate of build-up or accumulation of the chemical, any plateau levels reached, and rate (where a withholding period is proposed) of excretion or breakdown of the chemical after cessation of the treatment. ... Residue data are also required where applications of pesticides are made to crops which may subsequently be fed to livestock and/or poultry either intentionally eg. pasture, forage crops, silage, hay, grain or indirectly by grazing livestock on failed crops or crop stubbles. The data should indicate the levels of residue in meat, fat of meat of livestock and poultry, eggs and milk as applicable." (Emphasis added.)
1. The applicants compare the requirements of the first quoted passage with the field studies concerning residues in meat and milk discussed below. They also emphasise the reference in the second quoted paragraph to crops fed to livestock, either directly or by grazing on stubble etc. The note said that, where overseas residue trials were relied on, "in most cases it will be expected that confirmatory tests should be carried out under typical conditions of use in Australia". In the case of CFZ, the applicants point out, no confirmatory residue trials were conducted in Australia.
154. The note also dealt with withholding periods:
"In the conduct of trials where a finite residue occurs, and a withholding period will be necessary, it is essential that trials be sampled across the range within which the withholding period is expected to occur including a sampling at the recommended withholding period. Failure to do this will normally result in a withholding period being set at the next longest sampling time."
1. A section of the note, dealing with the establishment of MRLs, specifically mentioned the case where the use of the end-use product "gives rise to significant residues in raw agricultural commodities", as was the case for Helix on cotton plants. In such a case, the note said:
"it is necessary to either establish an MRL for such residues, or to recommend use patterns which avoid or minimise the occurrence of residues. One means of avoiding residues is to recommend a lengthy withholding period between last application and harvest of edible crops or grazing of forage crops by animals, but that is frequently impracticable. An MRL at or about the limit of determination can be recommended if the withholding period or use pattern ensures that residues will not be present. Such use patterns and withholding periods must be compatible with agricultural practice."
1. Plainly, this requires identification of the pattern of use of the relevant raw agricultural commodity, the cotton plant.
157. Note 20B was entitled "Hazard to non-target crops, plants, beneficial insects and domestic animals". It read:
"Where it might be expected that the use of an end-use product could be hazardous to non-target species including crops, plants, beneficial insects ... and domestic animals, data from tests indicating its toxicity to such species should be presented. Applicants must state the conclusions drawn from the data. The effect of repeat treatments and carry-over of soil residues on subsequent crops should be fully considered. In the case of broad spectrum insecticides, possible adverse effects on beneficial species should be considered. Safety to livestock and other domestic animals should be considered in the light of the toxicity of the end-use product itself and the proposed method of application. Special consideration should be given to end-use products and use patterns which fall into the following categories:- (i) persistent chemicals (ii) volatile chemicals, eg. 2,4-D esters (iii) chemicals subject to bioaccumulation (iv) chemicals applied in near [sic] waterways (v) chemicals applied from aircraft or by other methods which might be conducive to drift from the target." (Emphasis added.)
1. Mr Rowe argues that Helix fell into categories (i), (iii), (iv) and (v). Accordingly, the note particularly required data about its effect on non-target species, including livestock.
1. Chapter 10 of the handbook dealt with registration of agricultural chemicals under State law. It identified the relevant statutes: in New South Wales, the
Pesticides Act
1978 (NSW); and in Queensland, the
Agricultural Standards Act
1952 (Qld). Paragraph 10.2 stated the "object of registration is to ensure safe, effective and efficient use of agricultural chemicals in the interests of", amongst others:
"(d) third parties (by-standers and the general public) who should be protected from hazards which may be associated with the use or misuse of the agricultural chemical. ... (f) international trade ..."
1. No criticism has been made of the handbook's requirements. They are rigorous and comprehensive. Unfortunately, ICI failed to comply with important aspects of them in relation to its CFZ submission; and TCAC failed to require it to do so.
ICI's application for clearance
1. In June 1987, ICI applied to TCAC for the establishment of: (a). a poisons schedule for CFZ; and (b) an MRL for CFZ in cottonseed.
2. That application ("the June submission") included details of the registration status of CFZ outside Australia. It revealed that CFZ was registered only in Indonesia and Peru. It was conditionally registered in the Philippines, for use on cabbages, and was sold, apparently without registration, in Thailand and Egypt. CFZ was sold for use on cotton, under experimental use permits, in Guatemala, El Salvador and Nicaragua. However, in those countries CFZ was apparently not applied aerially. In a letter written to IS' on 4 September 1987, Mr Alcock commented:
"I believe you will appreciate that we have taken great efforts to develop the system of use with IKI7899 that will enable, for the first time anywhere in the world, IKI7899 to be successfully used by aerial application to cotton for control of the flower and fruit feeding pest, Heliothis spp." [Emphasis added.]
1. I think it is fair to say, as Mr Rowe does in his written submission, that:
"the limited history of registration, and therefore use, of CFZ overseas ... should have meant it was given extra scrutiny by ICI and the registration authorities because there was no history of overseas use without problems from which any comfort could be drawn".
164. As the Commonwealth Environmental Protection Agency ("CEPA") was to say in a later document, at the time of the application, CFZ was not "registered for use in cotton, or any other crop, in any developed nation."
165. Part 5 of the June submission summarised the results of four residue studies. The first two related to residues in cottonseed. The summary stated that, in trials in the United States, "cotton was sprayed 8 to 15 times during the growing season at rates of 141 and 282g ac/ha and the cottonseed harvested from 21 to 90 days after the last application". CFZ residues in the cottonseed ranged from less than 0.05 to 0.32 mg/kg at the lower rate but up to 0.49 mg/kg at the higher rate. Trials in Thailand involved lower application rates at seven day intervals throughout the growing season. CFZ residues in cottonseed harvested from 13 to 48 days after the last application ranged from less than 0.01 to 0.02 mg/kg.
166. It is convenient to say immediately that nobody suggests these trials have any relevance to this case. No doubt they were helpful to NH&MRC in selecting, as it did, an MRL of 0.1 mg/kg for cottonseed. But they provided no guidance as to the level of CFZ on the remainder of the cotton plant. CFZ is not a systemic chemical. It reaches only the part of the plant that it touches. Cottonseed is doubly protected from spray administered during the growing season; it is encased in the lint, and the lint in turn is enclosed within the boll. The point was made in evidence by David Ham, a field research officer of Crop Care, who conducted numerous Helix efficacy trials and measured some cottonseed residues. He said the low CFZ levels in the cotton were not a surprise, since "it was hard to believe that the chemical would reach the seed". In contrast to the seed, the leaves and stalks of the plants are unprotected. They must be fully exposed to the spray for the chemical to achieve its purpose.
167. The other two studies summarised in the submission related to residues of CFZ in dairy cows and poultry. These studies were obviously relevant. Although it seems neither the officers of ICI who prepared the submission, nor the people in TCAC, PACC and NH&MRC who considered it, were aware of the practice of feeding cotton gin trash to cattle, they would all have known about over-spray and spray-drift. It would have been apparent to them that aerial application of CFZ to cotton crops must result in some contamination of adjoining land and waterways. They knew it was bio-accumulative; so it was obviously important to determine how long it would persist in animal tissue.
168. The dairy cow and poultry studies were merely summarised in the June submission. They were described in more detail in a later submission to TCAC, dated 29 October 1987 ("the October submission"), in which ICI sought:
"1. Clearance of technical grade chlorfluazuron as manufactured by Ishihara Sangyo Kaisha Limited, Japan. 2. Clearance for Registration for ICI Helix 40 ULV Insecticide and ICI Helix 100 EC Insecticide for the control of native budworm (Heliothis punctigera) and cotton bollworm (Heliothis armigera) in cotton."
1. The dairy cow study set out in the October submission was that carried out by Ciba-Geigy in 1985, mentioned above. The report of the study in the October submission leaves much to be desired. However, it is clear the study extended over 56 days and involved eleven lactating Holstein cows. They were divided into four groups. Each group was fed dairy ration and hay containing graded levels of CFZ: nil, 0.5ppm, 2.5ppm or 5.0ppm. Milk samples were taken on days 0, 1, 7, 14, 20, 26, 33, 40, 47 and 54. The nine cows that received CFZ produced milk with gradually increasing CFZ levels. The maximum reading was 0.22 mg/kg in one 5.0ppm cow at 54 days. Surprisingly, however, the second highest reading was taken at 33 days, 0.21 mg/kg from a cow fed 0.5ppm. There was not a strong relationship between the levels of CFZ fed to cows and the levels in their milk.
170. The other part of the study involved tissue from cows slaughtered on days 28, 42 and 56. In relation to this study, ICI said in its submission:
"No residues of chlorfluazuron (limit of detection 0.05 ppm) were found in any blood samples at the 3 feeding levels, or in tenderloin and kidney at the 0.5 ppm feeding level. Finite chlorfluazuron residues were found in the remaining tissues. Except for omental fat and perirenal fat from cows receiving the lowest feeding level (0.50 ppm), parent residues in tissues reached a maxima [sic] on or before day 42 of the 56-day feeding period. The residues in the fat samples at the 0.50ppm feeding level appeared to be still increasing at the end of the feeding period."
1. It is not clear to me how many cows were slaughtered. Asterisks on a table setting out the milk residue readings seem to indicate that one cow in each group was slaughtered each slaughter day. Although he did not make it completely clear, I think Dr Young understood the report in this way when he said in his witness statement "the results are based on one cow at each of the 3 sacrifice dates (that is, days 28, 42 and 56). In my opinion, a sample of one cow is not sufficient". Dr Young thought the study was probably intended to be a pilot study. He criticised the lack of information about the weights of the cows, reported only as ranging from 364 to 577 kg. He also thought the extent of the variation a "patent weakness".
172. Dr Young explained it was necessary to test both lactating cows and non-lactating cattle, the reason being that "a fair amount of the organochlorine will be passed out in the milk". He also thought the study period was too short. He said: "On a world basis the normal length of the shortest of these studies would be 90 days". He emphasised that, as ICI accepted in the passage quoted above, the study indicated that, at the lowest feeding level, CFZ levels in tissues had not plateaued at the end of the study. He thought it was essential to ascertain when they would plateau.
173. Dr Young agreed with the notions of dividing the cattle into about four groups, each receiving a different concentration of the chemical, and taking a sample every couple of weeks; but he said one would need at least ten cattle in each group. He explained it would not be necessary to slaughter the cattle; biopsies would suffice.
174. Even allowing for the deficiencies in, and limitations of, the study, Dr Young thought the results did not support ICI's stated conclusions.
175. Dr Young's criticisms were outlined in his witness statement and amplified in his oral evidence early in the hearing; he was the applicants' first witness. Moreover, his criticisms extended to TCAC, for failing to detect the study's inadequacies. Yet nobody gave evidence in defence of the study. On the contrary, ICI's two most scientifically qualified witnesses, Dr Lydiate and Dr Robert Brown, both agreed it was inadequate. Dr Lydiate said he did not know how many samples were necessary but said: "The study didn't go on long enough, that's certain". Dr Brown thought the study "involved three cows", which he thought insufficient. Speaking of both the cow study and the poultry study, he thought the samples too small and the duration too short. He commented: "I would interpret them as being inappropriate studies". He agreed they did nothing more than indicate bio-accumulation.
176. The poultry study involved 60 laying hens being divided into four groups. One group was given no CFZ. The other three groups were fed laying ration at graded concentrations of CFZ. Egg samples were taken on 10 occasions over 56 days and three hens in each group were sacrificed on each of four days. The authors of the study report concluded that residues in eggs at the lowest feeding level plateaued in the 56 day period, while residues in eggs at the other two levels did not. Residues in lean meat plateaued within the study period for two feeding levels; but not the third. At all three feeding levels, residues in fat and skin were still rising at the end of the study. Dr Young criticised this study, also, on grounds of inadequate samples and insufficient duration. Again nobody spoke in its defence.
177. It seems that nobody in ICI considered the appropriateness or adequacy of these studies before including them in the clearance package sent to TCAC, or taking the decision to market Helix. Dr Brown did not even see the study reports at that time; he first read them when interviewed by a solicitor preparing for the hearing of this case. Dr Lydiate said he did not evaluate the cattle study when he put it in the package; "I would have expected the PACC experts to review that and decide whether they thought it was adequate or not". He had no opinion about the sizes of the samples; he said he was not a statistician. Nor was he aware that a lactating cow would deplete a residue chemical differently than a bull or steer; he was not a physiologist. He did not consider referring the question of the adequacy of the studies to someone at Jealott's Hill who had the necessary expertise. His reason was that the data came from Jealott's Hill, "to send to the authorities here".
The context in which TCAC considered ICI's application for clearance
178. The June and October submissions were lodged with TCAC at a time of high awareness of the danger posed to Australia's export beef trade by chemical residues. There had recently been a number of occasions when unacceptable residues were found and, as a result, beef was rejected. The situation was outlined in a paper on chemical residues in Australian beef written by Dr Tony Brightling, a veterinarian with long experience in the meat industry and now a part-time lecturer in the Veterinary Faculty at Melbourne University. In his paper, Dr Brightling set out some history. He said that in 1987 "there was a crisis in the Australian beef industry, following a series of organochlorine residue violations detected at US point-of-entry inspections". He mentioned violations in January 1987 (dieldrin), May (DDT), June (dieldrin), August (heptachlor and dieldrin) and September (chlorpyrifos). Dr Brightling also said there were five dieldrin and one DDT violations at point-of-entry testing in Japan in 1987. "The residue violations seriously threatened access to the Japanese and US markets, with a likely domino effect to other markets. A $2 billion meat trade was at risk".
179. Queensland's response to the crisis was spelled out in an Information Bulletin distributed by QDPI on 1 July 1987 to all Branch Directors, and numerous other officers concerned with cattle husbandry. It commenced:
"This memorandum is to inform you and your officers of the background to the present very serious predicament in which the Australian beef industry has been placed through the repeated discovery of residues of agricultural chemicals in Australian beef by US food authorities. The prejudice generated is certain to spread to our other major markets, and future trade damage already appears inevitable. The situation is changing rapidly and it is not possible to convey other than a broad picture. Please see that your staff understand what is going on. The detection by American authorities of persistent chemicals beyond the approved maximum residue limits is causing a major threat to the economic viability of the Australian cattle industry. The Honourable the Minister has taken immediate steps to correct the situation with regard to the chemical usage in the cattle industry as well as in primary industry generally. The major thrust of these initiatives has been to ban immediately the registration, sale and use of offending chemicals or to restrict their use to strictly controlled and necessary circumstances."
1. Reference was made to several chemicals, all organochlorines, in relation to which specific restrictions were imposed. The bulletin referred to amendments made to the
Identification of Stock Regulations
, "to strengthen the ability to trace back contaminated meat to property". A statement was made that the United States government had indicated "that all types of meat from Australia were to be sampled before being considered for the US meat market. This included beef, sheepmeat, pigmeat, feral pigmeat and kangaroo". Details were given of the new testing protocol. They included: "All properties with residues above the maximum residue limit (MRL) will be formally quarantined". Reference was made to special meetings of the Standing Committee on Agriculture and the Australian Agricultural Council, convened "to discuss the current residue crisis". These meetings had made a number of recommendations including review of legislation governing the sale, distribution and use of agricultural and veterinary chemicals, and improved sampling, trace back and identification measures.
181. QDPI followed this document with the publication of a brochure entitled "Pesticide Residues - The Big Threat". The brochure itself is not in evidence but it was the subject of a memorandum to all QDPI officers, dated 26 August 1987, in which the Director-General wrote that the "brochure highlighted restrictions on the use of certain organochlorine chemicals following the discovery, in the United States, of unacceptable levels of chemical residues in meat imported from Australia". The memorandum went on:
"Because of the very wide safety margin required by todays society, the incidence of chemical residues (except in very minute quantities) has become unacceptable on many markets for our produce. It is therefore extremely important that we are familiar with the present restrictions on the use of agricultural chemicals and that we understand the measures being taken to help overcome the present problems. When cattle graze pasture, grain crops or fodder contaminated with organochlorine pesticides, the pesticides accumulate in the fat of the animal. Research has shown that after several weeks on contaminated feed, residue levels in cattle can be ten times greater than the pesticide levels in the feed. So even at low levels continuing intake can cause a build up of chemical residues in the animal. However, breakdown and elimination does occur. The rate of breakdown depends on many factors but approximate biological half-lives (time to eliminate half the residue) are considered to be: ..."
1. There followed a table of the half lives, in soil and in fat tissue, of various organochlorines.
183. In November 1987, the Queensland Pesticide Residue Extension Committee published the first issue of what was intended to be a series of information bulletins. This issue introduced the committee. It is worth setting out the introduction because it conveys the atmosphere at the time ICI made its CFZ applications to TCAC:
"On May 25, AQIS announced an 'Increased National Survey' for pesticides in response to the USDA/FSIS pronouncement that the levels of pesticide detected in Australian beef has become unacceptable. During the desperate days of late May, when the prospects of immediate and total loss of our North American and Asian meat markets were looming large on the horizon, a meeting of the producer organisations, meat processors and the Commonwealth DPI was held with little fan fare. It sought to reach broad agreement on a concerted plan to retrieve the market situation, and it commissioned three task forces to report on all aspects of legislation, sampling and traceback respectively on a national basis. A short time later, SCA and AAC met. An outcome of those discussions was that AAC representation was secured on the three grower/processor task forces, and that a fourth task force on extension was established. Queensland was the fortunate State chosen to convene the Extension Task Force, and the vague terms of reference were specific on one point - the final report was required prior to the end of July, in short, in something like four weeks. The lucky convenor gathered a group of advisers together, to help him to produce drafts for circulation to the other members of the Task Force interstate, and this group was the genesis of the Queensland Pesticide Extension Committee. Organisations involved in the advisory group included the Agricultural and Veterinary Chemical Association (AVCA), The Bureau of Sugar Experimental Stations (BSES), the Queensland Livestock, Property and Produce Brokers Association, cattle growers (John Armstrong, Stanbroke Pastoral Company), and Departmental officers from Horticulture, Agriculture, Veterinary Services, Veterinary Public Health and Information Branches."
1. "AQIS" is an acronym for Australian Quarantine Inspection Service, a Commonwealth instrumentality.
185. In New South Wales, DepAg was sounding the alarm. An Agfacts bulletin "Pesticide facts - organochlorine in livestock" was presented in question and answer form. The first question was: "What are the chemicals involved in the residue crisis?" The answer commenced: "All the chemicals involved belong to the persistent organochlorine class of insecticides". Nine chemicals were named, including DDT and dieldrin. The next question was "What action has been taken?" In response, six actions were identified. They included:
"( Restrictions on the use of persistent organochlorines in agriculture have been progressively applied since 1970 and they are now totally banned for use in agriculture (except that lindane may be used as a seed dressing). The only legal uses that remain for the rest of these pesticides are for sub-floor termite control by commercial pest control operators, in and around buildings not associated with livestock or grain storages. .... ( Following the detection of residues above the MRL (Maximum Residue Level) in export beef to the USA, an increased level of testing has been introduced by industry."
The processing of ICI's application
186. The June submission was referred to PACC. It was examined by Mr Hamilton who prepared a report for the November 1987 meeting of that committee. It seems from the report that the only residue issue considered by Mr Hamilton was in relation to cottonseed. I say this for two reasons. First, under the heading "Residue Data", and against the words "Crop, animal", he wrote "Cottonseed". Second, Mr Hamilton confined his recommendation concerning a suitable MRL to "0.05 cottonseed". Mr Hamilton made the comment: "Use pattern in Australia has yet to be determined. Residues tend to accumulate in fat". Under the heading "Recommendation", after referring to the proposed cottonseed MRL, he said:
"Await data from Australian use pattern. Look at animal transfer data again in the light of Australian residues. Request studies which show rates of residue decline in milk and eggs after withdrawal of treated feed."
1. There is no evidence that PACC or TCAC ever sought or received information about the Australian use pattern of CFZ, or about rates of residue decline in milk and eggs after withdrawal of treated feed. Nor is there any evidence to explain this omission. Although he was available, Mr Hamilton was not called. Neither was any other member of PACC or NH&MRC.
188. In his 1987 report, Mr Hamilton summarised the studies submitted by ICI and noted above. In relation to the Ciba-Geigy studies on dairy cows and poultry he commented:
"Residues in eggs, fat and liver were highest towards the end of the feeding period. Residues perhaps had not reached a plateau. Residues in eggs should be measured after withdrawal of treated feed."
1. Mr Hamilton made no comment about the adequacy of the studies, either in sample size or duration. Nor did he draw attention to the apparent contradiction between relying on studies in which some residues had not plateaued and the requirement of Note 9 of the "TCAC bible", "that the trial be conducted in such a way as to
determine
...
any plateau levels reached and rate ... of excretion or breakdown
of the chemical after cessation of the treatment".
190. PACC accepted Mr Hamilton's recommendation for an MRL for cottonseed of 0.05mg/kg, but only on an experimental basis. This decision was conveyed to Dr Lydiate. He responded with a letter dated 24 November 1987 to Roger Sargent, the secretary of PACC, protesting about the decision to limit the MRL to an experimental basis. He referred to "the extremely comprehensive data package" presented to PACC in June 1987 and said a "residue trial will be conducted in Australia early in 1988". Such a trial was conducted but it related only to residues in cottonseed.
191. After referring to a request by PACC to include on Helix's label a statement regarding the number of spray applications allowable in a season, Dr Lydiate mentioned ICI's submission to TCAC seeking clearance for registration. He concluded:
"The decision by your committee not to grant a provisional MRL for chlorfluazuron in cottonseed has put in jeopardy the possibility of ICI Australia obtaining provisional registration in Queensland and obtaining a permit in New South Wales for limited sale of Helix 100 EC Insecticide in early 1988. Provisional registration is normally only granted when at least a provisional MRL exists. It is essential, therefore, that we obtain provisional MRL status for chlorfluazuron within the next few weeks in order to make arrangements for manufacture, packaging and transport of the product to distributors. We ask, therefore, that you give this your most urgent attention and resolve the problem outside of a committee meeting."
1. Mr Sargent responded to this letter by sending a telex to Dr Lydiate requesting, amongst other things, information:
"to clarify the Australian use pattern with respect to: (1) proposed maximum number of applications; (2) pre-harvest interval. and to provide a draft Australian label incorporating these relevant features. "
1. No information was sought regarding the ultimate fate of the cotton plants on which the chemical was sprayed.
194. Dr Lydiate supplied the required information on the following day. But it seems the matter was not dealt with between meetings, as Dr Lydiate had requested. Indeed it was not dealt with for over two years, apparently because PACC wished to have the results of the promised cottonseed residue trial.
195. As I have mentioned, the October submission sought clearance of technical grade CFZ, as manufactured by IS', and clearance for registration of Helix 40 ULV insecticide and Helix 100 EC insecticide for use in cotton. The abbreviation "ULV" stands for ultralight vapour, this being a formulation suitable for aerial application.
196. There was some delay in TCAC dealing with ICI's clearance application; apparently the October submission went astray. Mr Jacques became aware of this fact, and, on 11 April 1988, he sent TCAC more copies of the submission. In order to save time, he also sent copies directly to Mr Waterhouse and Mr Baker.
UK contacts during the registration period
197. While they were waiting for clearance, the relevant ICI officers progressed their marketing plans for Helix. On 22 December 1987, B G Johnen, Head of the Environmental Division at Jealott's Hill, sent a memorandum to R Pascoe, also of ICI U', referring to an application by ICI Australia for environmental clearance "for test marketing ICIA 0145 (in cotton in Australia) in February 1988". Dr Johnen acceded to that application subject to conditions designed to ensure that aquatic systems would not be "contaminated either by run-off or accidental overspraying". The memorandum concluded:
"I would like to point out that this clearance should in no way be regarded as an indication of my agreement to any further sales of ICIA 0145 in Australia. In fact, at the present time it seems unlikely that I will give environmental clearance for sales in future years for ICIA 0145 in Australia until we have experimentally established the environmental safety of the compound in Australia."
1. Copies of this letter were sent to various people including Mr Findlay. He, apparently, forwarded a copy to ICI Australia. The study approved by Dr Johnen was conducted in February-March 1988. This study related to the efficacy of CFZ and residues in cottonseed. It did not deal with contamination of aquatic systems and did not meet Dr Johnen's requirement of ICI having "experimentally established the environmental safety of the compound in Australia". This was not done at any stage.
199. On 21 January 1988, Dr Lydiate sent a memo to three ICI U' officers referring to the need for a program of environmental monitoring for Helix "during its first three full years of sales starting 1989". He said the program should be set up by Jealott's Hill personnel following the 1988 test marketing, and the study should be carried out by Jealott's Hill in conjunction with an ICI Australia Study Manager. The study "would be comprehensive covering worms, beetles, bees, small mammals, soil and water etc". No such study was ever carried out.
200. About two weeks later, on 2 February 1988, Mr Evans of FEP send a memo to various officers, including Mr Findlay, that commenced:
"As you are aware, for all uses of Atabron, authorisation must be obtained from the Environmental Sciences Group Manager, Dr B G Johnen. Some of the concerns regarding the environmental persistence of this compound remain, and a 3 year study of the compound in the terrestrial environment (mammals, birds, dissipation) will be carried out in Australia, where the product is being test marketed on cotton this year (February - April 1988)."
1. The memo proceeded to set out requirements for obtaining authorisation. A copy of this memo was sent to ICI Australia, presumably by Mr Findlay.
202. I admitted into evidence, without objection, a fax from Mr Findlay to Mr Fraser to which was attached what Mr Findlay described as "a copy of a questionnaire prepared by env. sciences dept. for Atabron studies in cotton". The fax was dated only "1/3", the year not being shown. However, there are internal indications that the year was 1988. It refers to an imminent visit by Mr Findlay to Australia; he did visit in early 1988. The fax was certainly sent before there was any decision by TCAC on clearance. I say this because Mr Findlay wrote in the fax:
"I believe we should only do in Aust the bare necessities to meet local req'mts and do not think we should get involved in long and elaborate studies, particularly terrestrial studies which may not be a concern."
1. The fax was shown to Mr Fraser during the course of his evidence. He agreed it had been sent to him by Mr Findlay - he seemed to accept, in 1988 - for the purpose of circulation "to a number of farmers ... to get answers to the questions in the questionnaire". He also agreed it was sent because, to his knowledge, ICI U' was concerned about the likely environmental impact of CFZ; the purpose of the questionnaire was for ICI U' to "gain information to understand what they should be looking for".
"It was critical for them to get accurate information as to a range of matters about the cotton industry in Australia to be adequately able to plan their approach to environmental investigation of the CFZ chemical; correct?---Yes."
1. Despite this knowledge, Mr Fraser did not put the questionnaire before any cotton farmers. This is unfortunate; answers to question 12 may have proved enlightening. That question read:
"12. What is the fate of the cotton plant after harvest? How and when is trash (leaves and stems) removed? Incorporated into soil/grubbed up/other."
1. I gather from some evidence of Mr Fraser that he attempted to supply the required information himself. He said that, at the time, he had heard of cotton gin trash. But he construed question 12 as relating only to stubble left in the paddock after harvest; presumably he answered it accordingly. Mr Fraser did not think it necessary to investigate what became of the part of the cotton plant that left the field, and he did not do so.
206. On 19 May 1988, Mr Findlay sent a memorandum to Peter Braithwaite of ICI Australia, with a copy to Mr Fraser. The memorandum read:
"ATABRON - ENVIRONMENTAL CLEARANCE Further to my file note on my recent Australian visit we had a meeting with Dr Bernard Johnen last Friday who is head of Environmental Dept at J Hill. He is basically saying that unless we do a terrestrial monitoring study in Australia he will not allow us to go ahead with full sales of Atabron. The main reason is that there is potential for bio-accumulation the full extent of which is not known. Ciba-Geigy do not believe the product is registerable [sic] in the US and it is not being registered in any developed country, other than Australia. He insists that we carry out this study in Australia to generate sufficient data to be able to defend ourselves should any adverse criticism arise. However we still do need to be sure that there is sufficient vertebrate activity within the cotton area to justify the experiment, and to meet this end i have asked Greg if when he comes to U' he could come with a completed questionnaire to enable Env Sciences to make a sensible judgment. The proposal is to carry out the study next season simultaneously with first sales. Dev Dept will pay all costs. Will discuss in detail with Greg and Env Sciences during his visit, but appreciate your views also. Are you still planning 4te [sic] for next year assuming registration goes ahead." (Emphasis added.)
1. This memorandum seems to have caused Mr Fraser to send a memorandum, dated 26 May, to Ian Logan, ICI Australia's Technical Service and Development Manager, which commenced:
"As you are aware, the large scale use of chlorfluazuron in Australian cotton is causing some concern within the Environmental Sciences group at Jealott's Hill. When Dr Philippa Guest from Entomology, Jealott's Hill, visited Australia in March this year, she brought with her some 30 copies of the attached questionnaire to be completed by cotton farmers. I decided not to distribute that document as it had the potential to create a problem, rather than gather information. I have discussed some of the questions with people involved in the cotton industry and would like to make the following comments."
1. The comments related to the manner in which cotton is grown in Australia, the point being made that "cotton, although grown in separate fields, is generally grown in blocks within each farm. Areas of non-cotton properties may separate cotton farms". Mr Fraser also referred to the rotation of cotton with wheat and other crops.
209. There is no evidence as to the content of the questionnaire brought to Australia by Dr Guest. But there is evidence of the importance of obtaining adequate information as to the likely use of a product. It came from Mr Logan, the recipient of Mr Fraser's memorandum of 26 May 1988.
210. Mr Logan was asked to assume that in 1991 he was aware CFZ had a tendency to bio-accumulate in the tissues of livestock, and that (although he believed this did not happen) there was a possibility that cotton waste was fed to livestock. On those assumptions, he was asked whether "it might be wise to just check to make sure by asking [Dr Lydiate] what studies, if any, had been made?" He replied: "Yes ... on the basis of the term 'might happen', then we would have made inquiries as to the advisability and what we needed to do". Mr Logan's evidence continued:
"Right, now, let us assume that Dr Lydiate said to you, 'Well, we don't believe anything is fed to the cattle but we haven't actually gone out there and asked'. How would you respond to that?---If there was the inference that it could happen, then we would have checked up on the reality to start with, so we'd have followed that up. How would you do that?-- We'd have inquired of our people in the field to ask the question and ascertain how much of that material was likely to be fed. Well, when you say you would have asked your people in the field you mean your employees?---That would've been the starting point. What other step would you go from there?---We probably would have initiated some other inquiries in relation to the true effects in livestock. ... Can I suggest to you that one step you might make would be to ask your people in the field to ask some quiet inquiries around of farmers to ascertain whether any of them did or had fed say stubble or trash in the field to their livestock?---That would have been the operation, that's what they would have done. Would you not in addition ask them to go to the - when they went to the farmers to ask whether they fed any other part of the plant?---Well, yes, it would be general inquiry, yes. Can I take it that you are generally aware that from any action involving harvesting there is always by-products or trash?--- Mm. And you would expect in the harvesting of cotton that there would be some trash?--- Yes. Would the common sense approach be to also have your people inquire as to the gins, as to what happens with the trash?--- Yes. Such inquiries would not be difficult to instigate?---That's right."
Clearance and registration
211. It seems Mr Waterhouse promptly examined ICI's October submission, after receiving a copy in April 1988. On 3 June 1988, he wrote to Mr Coleman, the Secretary of TCAC, agreeing that "clearances as requested be issued". His only comment on the substance of the submission was that he had been advised that the data supported the efficacy of the material. He added: "Because these materials are needed for the 1988-89 cotton season, anything that can be done to expedite clearance would be appreciated". It was apparently Mr Waterhouse's opinion that cotton bollworm were developing some resistance to pyrethroids and the cotton industry needed an alternative chemical to manage the insects in Stage III.
212. By chance, at the very time the Helix submission was before TCAC, the committee was engaged in the compilation of a list of crops and crop residues fed to livestock in various parts of Australia. This project arose out of a discussion at TCAC's March 1988 meeting concerning a chemical intended for use on peanuts. Mr Waterhouse had argued that clearance should not proceed without consideration of MRLs for meat, milk and other foodstuffs; he felt waste peanut material would be fed to animals. So it was decided each State should submit a list of the crops and crop residues that were used in that State for grazing and stock feed. The idea was to collect this data into a national list.
213. It seems Mr Waterhouse was the only State representative ever to follow through on this decision. He made some inquiries amongst his QDPI colleagues and, on 21 June 1988, wrote a letter to Mr Coleman enclosing two lists. One of them related to crops and crop residues fed to animals. A symbol was marked, against the word "cotton", that indicated "stubble may be grazed or failed crop fed off".
214. A member of the TCAC secretariat prepared a paper about the proposed national list for the committee's August meeting in Hobart. The paper mentioned Mr Waterhouse's list and recommended it be accepted as "the basis for a Coded crop list". Other members were requested to "add crops and coding relevant to their State". The paper went on:
"Where there are no residues on a fodder crop (determined by list) no further data or assessment is required. Where residues occur additional assessment is necessary to determine (a) need for meat, milk, eggs etc, MRL's (b) Withholding period or 'DO NOT graze' statements."
1. Mr Waterhouse was present at the August meeting. He thought his list was attached to the documents circulated amounts TCAC members. He also thought the paper was discussed, but he could not recall the content of the discussion. In cross examination Mr Waterhouse explained the reason for his concern:
"In relation to stock feed, did you recognise that there may be a failing in the clearance protocol so far as it dealt with chemicals on stock feed?---Yes. And were you particularly aware of the situation of chemicals used on crops that may perhaps not be designed for stock feed?---I was concerned about that. In the case of a failed crop that might inadvertently become stock feed?---Yes. Did you recognise that as a possible problem in the registration protocol?---Yes. ..."
1. One of the many strange features of this case is that nobody connected with TCAC related this reasoning to ICI's Helix submission; and this despite the fact that cotton had been identified on Mr Waterhouse's list as a crop sometimes used for grazing. It is especially curious that Mr Waterhouse did not make the connection. The two matters were on his desk at virtually the same time. Only two days after Mr Waterhouse sent off his list to TCAC, Ms John wrote to him on behalf of ICI enclosing applications for registration, under the Queensland legislation, of Helix 40 ULV insecticide and Helix 100 EC insecticide. The applications were immediately processed. On 1 July 1985, they were placed before a meeting of the Agricultural Requirements Board, a body constituted under s 9 of the
Agricultural Standards Act
. The Board approved both applications subject to conditions, including "TCAC clearance prior/at registration". According to the minutes of the meeting, Mr Waterhouse was one of eight persons in attendance. It appears from Mr Waterhouse's evidence that the only concern of the Board was the efficacy claims made by the manufacturer.
217. It seems that, in the period July to October, various members of TCAC considered aspects of ICI's submission. On 1 November 1988, Dr Guy Kretschmer, Director of the Chemicals Assessment Section of DASETT, wrote to Mr Coleman opposing a grant of clearance. As I understand the position, Dr Kretschmer was what Mr Matthews described as "the environmental watchdog on the committee". He wrote:
"Clearance of this product should be refused until further data is available from population studies on non-target arthropods, especially aquatic and soil dwelling forms, and the related cascade effects on food chains dependent on these species, eg fish and birds. The company should supply data from valid field level population studies on arthropods and the food chains heavily dependant on these organisms, eg fish and birds, to show that the proposed use pattern will not have drastic effects in reducing non-target arthropod populations, particularly soil dwelling and aquatic forms. Since this product is currently used in overseas countries, eg Indonesia and Peru, it appears both necessary and feasible to conduct this scale of test programme to assure that the environmental impact of this potent 'chitin inhibitor' is minimized. To add weight to this requirement, there are four main areas of concern for non-target arthropod life forms: (i) for bees, ants and other pollinators which are likely to be exposed to surface deposits of this potent 'chitin inhibitor' and whose communal habits would very likely expose larval stages to toxic doses. (ii) for soil dwelling arthropods, especially those feeding on decaying organic matter. (iii) for aquatic arthropods exposed through direct application to waterbodies, eg overspray or spray drift. (iv) for aquatic arthropods exposed through indirect contamination of waterways, especially return of irrigation tailwaters and efflux of storm/floodwaters." (Emphasis added.)
1. Dr Kretschmer went on to specify some requirements about labelling "before clearance could be supported".
219. Dr Kretschmer's concerns were referred to Dr Lydiate. He responded with a letter of 29 November 1988 expressing surprise and the belief "that the data submitted suggests that the proposed use pattern for chlorfluazuron in cotton would be safe to the environment". He also contacted Dr Kretschmer. As a result of a meeting between the two men, Dr Kretschmer changed his position. He agreed to support a provisional clearance, for a period of three years, on condition that environmental monitoring studies were conducted during that time. On 14 December 1988, Dr Lydiate wrote to Janine Crowther, an officer of the CDPI, telling her of Dr Kretschmer's changed attitude and confirming "that ICI will conduct such monitoring studies with the protocols agreed with an Australian environmental body to be determined". On 22 December, Dr Kretschmer confirmed Dr Lydiate's account of his position.
220. On 20 January 1989, Ms Crowther wrote to Dr Lydiate enclosing draft clearance certificates for Helix 40 ULV insecticide and Helix 100 EC insecticide. Both certificates were expressed to be subject to a "Restraint" that read: "Do not apply when weather conditions will cause spray drift onto non-target areas". The labels were to include this advice: "Do not apply later than 21 days before harvest". Ms Crowther referred to the agreed condition that an environmental field study be conducted, but this condition was not set out in the draft certificates themselves.
221. The draft clearances were also sent to the members of TCAC. Both New South Wales and Queensland acted immediately, in advance of TCAC's final decision. In New South Wales, registration was effected on 22 February 1989. In Queensland, Mr R L Harty, the Director of Agricultural Standards and Standards Officer, wrote to ICI on 22 March 1989 enclosing a notification of registration of Helix 40 ULV. The letter contained a reminder "that this registration may need to be reviewed as a result of modifications to clearance following determination of the matter raised with you" in TCAC's letter of 20 January.
222. On 16 May 1989, Ms Crowther issued formal TCAC clearances for Helix 40 ULV insecticide and Helix 100 EC insecticide, for use on cotton. The formal certificates did not include a time limitation or a condition requiring an arthropod and aquatic study, but ICI apparently understood the three year limitation and the condition still applied.
THE POST-REGISTRATION PERIOD
The Fernhurst meeting
223. On 10 May 1989 Dr Lydiate and Dr Robert Brown attended a meeting at Fernhurst. Several ICI U' representatives were present, including Dr Richard Brown, an environmental scientist at Jealott's Hill, and three Fernhurst personnel. A minute of the meeting that is in evidence identifies its subject as "ICI-7899 Registration Meeting (Australia)". The minute records this background material:
"Richard Brown explained the concerns with the product, and its status to the present day, Persistence in soil. Recent data from Egypt showed little or no breakdown in soil 0-30 weeks. Invertebrate effects down to parts per billion. Bio-accumulation ie. a potential DDT. The Jan 88 TRC recommended Environmental clearance be sought for trial work, sales and expanding use of I'I-7899. I'I-7899 to be used only when justified ie where there is resistance. A 3 year Field Monitoring programme to be carried out in Australia. By May 89 The environmental clearance system had fallen into disarray due to personnel changes. The Field Monitoring study lacked co-ordination. There was no agreement on who was paying for the Registration study in Australia."
1. Attached to the minute is a graphic representation of the Egypt data, referred to in Dr Brown's first point. It refers to soil persistence readings made in Egypt in 1987-88; the particular months are not specified. The graph shows the detected CFZ residue level as a percentage of the quantity of CFZ theoretically applied. Immediately after application, the level is about 45%. It drops to below 40% after two weeks, but then rises again to about 45%, where it stays until ten weeks, before falling to about 30% by about 18 weeks. Surprisingly, the level then rises steadily to a figure over 50% at 35 weeks (245 days).
225. The information in the graph contrasts markedly with the statement regarding soil persistence ICI Australia had made in its application for clearance. Its October 1987 submission said: "The half-life of chlorfluazuron in soil is approximately 160 days and its degradation is unaffected by soil type, application rate or soil moisture". As Dr Lydiate explained in evidence, in scientific parlance a "half-life" is the period of time during which the quantity of a substance will halve. So a statement that CFZ had a half-life of 160 days would be understood as meaning it broke down appreciably in that period, whereas the Egypt data showed no breakdown in 245 days. Although Dr Lydiate acknowledged in evidence that ICI had an ongoing obligation, of complete good faith, to pass on to the regulatory authorities any information that was conceivably relevant to their assessment, which obligation continued even after clearance, he did not inform any regulatory authority about the Egypt data. Asked about this, he agreed he was "quite remiss" not to have done so, particularly in a situation where persistence would be important to a grazier who lived near a cotton field and suffered spray drift of Helix, and in relation to a chemical that was bio-accumulative and could get into the fat of animals to be exported to countries without CFZ MRLs. He offered no explanation of his omission.
226. The meeting minute then referred to discussion about the possibility of a field monitoring study. Two reasons were stated in favour of such a study: "TRC recommendation as being essential for ICI's position" and "Australia only ICI-7899 market suitable for GLP standards" ("TRC" was an ICI-U' committee, and "GLP" means good laboratory practice). Four reasons against holding a study were noted. They included that Australia was non-representative in terms of the application rate of the chemical (apparently the Australian rate was higher than the international expectation) and in its species of vertebrates and invertebrates. It was also said the cost was "very high opposite returns in Australia" and "Cotton community in Australia very close. Chance of info leaking." The minute records comments on these points and a discussion about costs. The meeting concluded with decisions for a series of actions designed to implement the study.
227. Dr Lydiate said the study discussed at this meeting was a different study to that required by TCAC as a condition of the provisional clearance. The latter study related only to non-target arthropods and aquatic life; the study discussed at Fernhurst was to be a full field monitoring study looking at all environmental aspects of CFZ use.
228. Despite the decisions at the meeting, the proposed study was never conducted. Dr Lydiate said he was not a party to the decision not to undertake the study and did not know who made it. The reason may have been opposition from IS'. In a memorandum dated 27 July 1989 to ICI U', IS' argued against any study that went beyond what was necessary for regulatory purposes.
The advent of AAVCC
229. On 1 July 1989 TCAC ceased to exist. It was replaced by the Australian Agricultural Veterinary Chemicals Council ("AAVCC"). This body was established by s 8 of the Agricultural and Veterinary Chemicals Act 1988, which commenced that day. The objective of that Act was stated in s 3(1) as follows:
"The objective of this Act is to make provision for a national system for evaluating the suitability of agricultural chemical products and veterinary chemical products to be cleared for registration in States and Territories for particular uses with a view to: (a) protecting and enhancing trade and commerce in agricultural produce and livestock: (i) between Australia and places outside Australia; (ii) among the States; or (iii) engaged in by a corporation; (b) assisting in the conduct of agricultural and veterinary operations in the Territories; (c) minimising any undue hazard to: (i) the general public; (ii) the environment; (iii) users of such products and other workers exposed to such products or to residues of such products; and (iv) agricultural produce and livestock; arising from the application of such products; (d) minimising the need for separate evaluation of such products by the registering authorities of States and Territories; (e) ensuring that such products are effective in respect of uses for which they are cleared; and (f) ensuring that evaluation of such products is carried out in a timely and efficient manner."
1. Section 23 provided that the Council shall consist of a Chairperson, a member to represent each "scheme participant" (each participating State or Territory), a member to represent NH&MRC, a member to represent the Australian Environment Council and Council of Nature Conservation Ministers and a member to represent the National Occupational Health and Safety Commission. All members were appointed by the Commonwealth Minister but, except for the Chairperson, on the nomination of the government or organisation whom they were to represent.
231. The term "scheme participant" was defined in s 4 of the Act as a State or Territory declared by the Commonwealth Minister to be a scheme participant. That declaration depended on the Minister being satisfied that the relevant government had entered into an agreement with the Commonwealth in terms substantially similar to those in a Schedule to the Act. Apparently all States and Territories entered into the required agreement with the Commonwealth and became foundation scheme participants.
232. The prescribed form of agreement included clause 5 which required the relevant State or Territory to amend its law to provide (with some minor exceptions) for registration of chemical products only in accordance with decisions of the Council. Consistently with this concept, s 9 of the Act conferred wide functions on the Council. They included:
"(a) to grant or withdraw clearances for the registration of chemical products for use in States and Territories for specified purposes under specified conditions; (b)) to determine the conditions to which such clearances are subject or to vary such conditions;"
1. Section 25 authorised the Council to establish committees. Pursuant to that power, the Council established the Agricultural Chemicals Advisory Committee ("ACAC"), on which all scheme participants were represented. Mr Waterhouse represented Queensland on ACAC, although not on AAVCC. He said that, so far as he could recall, all the people who had been members of TCAC became members of ACAC. ACAC carried on the work formerly carried out by TCAC; it made recommendations for clearances, and extensions of clearances, to AAVCC. Because of the changes in State law effected pursuant to the various Commonwealth-State agreements, the decisions of AAVCC were given virtually automatic effect under all relevant State laws. AAVCC remained in existence for a period of just under four years, until 15 June 1993. That was the date of commencement of the
Agricultural and Veterinary Chemicals (Administration) Act

1992 which constituted NRA, the earlier fifth respondent to this proceeding. NRA took over the functions of AAVCC.
The setting of CFZ maximum residue levels
234. Shortly before the demise of TCAC, on 1 June 1989, Ms John wrote to PACC proposing the establishment of a full MRL for chlorfluazuron on cottonseed. She mentioned that, in January 1988, PACC had recommended a provisional MRL of 0.05 ppm. She now proposed a full MRL of 0.1 ppm. In support of this application, she referred to a trial at Lawes, Queensland in April 1988 that showed residues, in the seed of cotton plants harvested 21 days after spraying, of 0.08 mg/kg when the spray rate was 100 g ac/ha, and 0.16 mg/kg when the rate was 200 g ac/ha.
235. There was a long delay before any response to this application. It was referred to PACC and, in particular, Mr Hamilton. The evidence contains a report of Mr Hamilton for the February 1990 meeting of PACC, proposing an MRL for cottonseed of 0.1 mg/kg but suggesting the recommendation be held in abeyance "until information on processing is supplied". Judging from a later report, prepared for the August 1990 meeting of PACC, Mr Hamilton had in mind only information about the processing of cottonseed. I assume this information was supplied; the recommended MRL was adopted at the August meeting.
236. The August 1990 meeting also adopted CFZ residues for cattle meat (in the fat) of 1 mg/kg, and 0.1 mg/kg for cottonseed oil, edible offal, cattle milk, poultry and eggs. In recommending those MRLs, Mr Hamilton commented:
"1. Residues of chlorfluazuron accumulate in fat. 2. Adequate information on cotton seed and animal transfer has been supplied. 3. Because chlorfluazuron accumulates in fat, and is likely to be detected by importers of Australian meat, MRLs and tolerances for chlorfluazuron in countries which import Australian meat should be obtained. In 1987 no MRLs for chlorfluazuron had been established in any overseas country."
1. On 16 November 1990, Mr Weedman, as secretary of PACC, wrote to Ms John enclosing a copy of a letter he had written to ACAC informing ACAC of PACC's recommendations to NH&MRC concerning MRL levels. The letter included this paragraph:
"The Committee noted that chlorfluazuron accumulates in fat and is likely to be detected by importers of Australian meat. Action should be taken to obtain MRLs/tolerances in countries which import Australian meat."
1. This note precisely predicted what happened four years later. Unfortunately, nobody took any notice of the warning. ICI did nothing about overseas MRLs or tolerances; Dr Lydiate thought this was a matter for the Commonwealth government. No doubt it was, in a formal sense; but it would have been prudent for ICI to follow up the note with an appropriate request for action. With or without a request from ICI, it was clearly incumbent on ACAC (and AAVCC) to initiate negotiations, for MRLs in cattle meat, with at least those countries that were major importers of Australian beef. The stated objective of the Act constituting AAVCC was to provide for a national system for evaluating agricultural chemical products "with a view to ... protecting and enhancing trade and commerce in agricultural produce and livestock ... between Australia and places outside Australia". Despite this objective, and the clearest of warnings, AAVCC did nothing about overseas MRLs.
The extensions of clearance
239. The arthropod and aquatic fauna study required by TCAC as a condition of its provisional clearance commenced in early 1990. It was conducted under the supervision of Dr Richard Brown, who came to Australia for the purpose, and in accordance with a protocol previously sighted (but apparently not fully approved) by ACAC. In November 1990, Dr Lydiate sent ACAC a report on the first year of study. On 25 May 1992, he sent a two-volume final report. This was a few days after the expiration of the three-year provisional clearance period stipulated by TCAC. The reports had to be evaluated. No doubt for this reason, on 10 September 1992 AAVCC extended the provisional clearances, apparently for one year. But there was continuing delay in the evaluation of the study reports. So, on 27 April 1993, the clearance was again extended; apparently again for one year.
240. On 2 December 1992, Ms Early applied to AAVCC for registration of Helix Insecticide, which she described as "an image of ICI Crop Care Helix 40 ULV Insecticide which has been registered for some years". On 17 March 1993, an officer of AAVCC responded with a letter enclosing a certificate granting clearance to Helix Insecticide (200 litre and 1,000 litre pack sizes) for use in New South Wales and Queensland.
241. On 24 November 1993, at long last, J S Holland, Manager of the Chemical Section of CEPA, wrote to Dr Lydiate enclosing a copy of the Agency's assessment of the study reports. His letter said "CEPA ... has not been able to reach the same conclusions as your company. We would be happy to discuss this report and your reaction to the suggestions (options) at the end. We welcome your views on how the question of whether use of this chemical poses an unacceptable hazard may be resolved".
242. The assessment report noted a number of variations between the study and the protocol and made several criticisms of the study and its results. It is not necessary to mention all the points raised; but it is relevant to note a reference, in the section on bees, to "overspray and drift (both of which apparently occurred frequently within this study)". Under the heading "Overall Conclusions" the following was stated:
"ICI conclude that overall HELIX is unlikely to pose a significant risk to aquatic or terrestrial organisms, and that transient effects noted for some groups would be overcome by recruitment from other areas in the spring (or new water influxes). Farming practices, such as water pumping were seen to often have a greater effect on faunal populations than HELIX application. However, results are now forthcoming from a number of studies ... that suggest populations of aquatic organisms are significantly lower in cotton growing areas, resulting in a depleted potential for recruitment. The soil arthropod data as presented here certainly indicates a depauperate fauna, with little potential for replacement of organisms killed by pesticide application. Data, as presented, are too patchy over time and taken for too short a period, with too many interfering factors, to properly determine the effect of HELIX. In general, the concern CEPA had about the effect of HELIX usage largely remain, as the data presented do not support many of the conclusions ICI draw."
1. Dr Lydiate referred CEPA's assessment to Jealott's Hill under cover of a letter dated 25 November in which he said:
"A summary of the major criticisms CEPA have are presented on pages 9 and 10. In particular, criticism is made of protocol variations ... However, CEPA do acknowledge they are partially to blame in not having sufficiently scrutinised the protocol and the interim report provided for the first years results. All of this does not mean that registration is in immediate jeopardy, but CEPA still feel that something needs to be done to resolve the question of whether a hazard exists when chlorfluazuron is used. In order to clarify the potential hazard, CEPA suggest ICI/IS' might be in possession of other studies not yet reported to them. Alternatively, it is suggested we might be prepared to include chlorfluazuron in the Land and Water Resources Research and Development Corporation programme examining the impact on the environment of pesticides used in cotton, particularly in the area of toxic amelioration of suspended sediments through the use of micrososms [sic]. Even if clarification of the issues is forthcoming it appears that CEPA'S recommendation would likely be restricted to a single late season application and coupled with a strong monitoring and reporting component of incidence of wild life mortality following use."
1. Dr Lydiate concluded the letter by proposing a telephone discussion. But there is no evidence of such a discussion, of any response by ICI to CEPA's comments, or of any action by CEPA to restrict the use of Helix 40 ULV and Helix 100 EC insecticides. On the contrary, in June 1994 the two clearances were once again extended, this time by NRA. The new extension was valid until July 1995. Its effect was that, despite the unsatisfactory results of a study that was a condition of a three-year clearance announced in December 1988, the clearance remained operative until after the expiration of the seventh season. However, CEPA's comments were not entirely forgotten. The June 1994 fax sent on behalf of NRA concluded:
"There is a growing reluctance to continually extend this provisional clearance. Please advise if you consider that your company will be able to provide CEPA with the information it requested in November 1993."
1. It will never be known how long CEPA and NRA would have been willing to wait for the information requested in November 1993, or what action they would have taken if it had proved unsatisfactory. By the end of 1994, the cattle contamination problem was apparent and Helix was off the market.
THE SALE OF HELIX
Sales volumes
246. Helix was launched at the August 1988 ICI Cotton Conference; that is, before TCAC clearance or registration in either New South Wales or Queensland. ICI's intention was to catch Stage III of the 1988-89 season. However, no sales were made that year. The reason was stated in a letter from Mr Braithwaite to IS' on 15 May 1989:
"The season has been different to past years. The cotton crop was planted early, was subject to the lowest pest pressure on record and was harvested early. Because of this low pest pressure and the early harvest, little spraying of heliothis occurred in late February and March - the time that Helix would be used. All products suffered greatly reduced sales. In spite of the excellent product launch in August and subsequent promotion by brochure, radio advertising and field visits, we failed to make any sales of Helix."
1. According to an ICI Crop Care newsletter, "Teamline", Helix was again promoted at the August 1989 ICI Cotton Conference. Notwithstanding this, only 8120 litres were sold that year, a result described by Mr McKinnon in evidence as "very, very poor". So Mr McKinnon presented a paper dealing specifically with Helix at the 1990 ICI Cotton Conference. In that paper, he listed the product's advantages. Under the heading "Persistence" he said: "Helix is very persistent on treated foliage". He did not quantify that statement. It seems it would not have been possible to do so. The Australian efficacy trials had established that the chemical was still on the leaves of the cotton plant 21 days after spraying. But no study had been made as to the limit of its persistence.
248. In 1990-91, 81,460 litres of Helix were sold, a result Mr McKinnon described as "not good". In the following year, 1991-92, sales rose to 163,000 litres, a figure not as high as Mr McKinnon would have expected. There is no evidence about 1992-93 but Mr de Groot said 200,000 litres, or more, were sold in 1993-94. As already indicated, Helix was withdrawn from the market in late 1994. It was not used in the 1994-95 season.
Marketing strategy
249. Mr Fraser gave evidence that Helix was "actively marketed as being environmentally soft". He explained it was "relatively specific in its application in cotton to heliothis". Similar evidence of this marketing strategy was given by many other people employed at the time by ICI. It is not necessary to mention them all; some examples will suffice.
250. Between 1989 and 1991, it was part of Mr Malan's job as Cotton Manager to sell Helix. In doing this, he said, he stressed that Helix was a very "soft" product; that is, environmentally friendly. The only environmental problem of which he was aware was Helix's possible effect on aquatic life, particularly crustaceans. He did not recall being told that Helix had a tendency to bioaccumulate. Mr McKinnon gave similar evidence. He said Helix was marketed by ICI as a safe chemical. He was not told it had a tendency to bio-accumulate. The product was actively marketed at the ICI Cotton Conferences as one that had no attendant environmental risks, other than to crustaceans.
251. John Molennaar, the Crop Care account manager at Dubbo from December 1990 to June 1996, promoted the sale of Helix to cotton farmers in the Macquarie Valley. He said Helix's marketing advantages were that it was "persistent on the plant" and "soft to the environment". He was never told it had a tendency to bio-accumulate. He said, if a product is registered, "(i)t gives me confidence to go out there and know that the label is correct. I can recommend off the label". So he made no inquiries about bio-accumulation. The cross examination went on:
"In what way would bio-accumulation be an important consideration for you as a salesperson?---Well if there is chemical build-up in anything, I mean, you don't want it; it is not something you want. If the chemicals - you want it in and out as quick as possible out of the environment altogether. If something bio-accumulates it means it is persistent and it builds. We don't want that. Why not?---The population in general is anti-chemical. Now if they - I don't think it would be a popular move for us to have chemicals that persisted and actually grew as we continued to use them. We need chemicals that dissipate over a period of time so the environment is left the same as when we started. Would the fact of bio-accumulation be an impediment to the sale of Helix?---Oh yes."
1. Geoffrey Hokin commenced employment with Crop Care on 20 July 1992. His job is to develop the market for the company's products by conducting development trials and demonstrations for agronomists, consultants and distributors. He also answers technical questions about the company's products. Helix was included in his portfolio of products from the time of his commencement until late 1994 and he spent a lot of time on cotton properties during that period. He was given some instruction, on the job, and attended technical training sessions twice each year where there was formal tuition about products. He said he was informed that Helix was "environmentally soft" and persistent. He was never told it had a tendency to bio-accumulate, nor did he ever read this in literature on the product provided by ICI. Mr Hokin said, if he had identified this as a concern, he would have mentioned it to the people to whom he spoke, as a matter of honesty, though he thought it would have sold anyway.
253. Jason Thomas has been Crop Care's manager at Moree since early 1994. He had been employed by Auscott as an agronomist during the previous season. When he started with Crop Care, he received some training about the company's chemicals but was not told anything about bio-accumulation. He knew all the chemicals were registered. He said this meant "they could legally be used without any harm or side effects"; "they were safe if used in accordance with the label". He was told Helix could be marketed as a "soft and safe chemical". He understood the word "soft" to mean "it did not hurt or harm or kill any beneficial insects"; it was "soft to the environment and a very low risk to handlers, people using the product". He was not aware of receiving any information about Helix's bio-accumulation tendency. Mr Thomas agreed that, with aerial spraying of any chemical, there was always a risk of over-spray or spray-drift. If he knew a chemical was a bio-accumulating chemical, he said, "in the first instance I would not recommend it be sprayed and, if it had been sprayed, I would be very wary or possibly have the vegetable matter tested". He was asked: "Would you go beyond that and conduct a study to ascertain what happens to the vegetable matter?" He replied: "Yes".
Helix literature
254. ICI published brochures concerning Helix. These were intended for distribution to cotton farmers and their advisers. Three different publications are in evidence. They each contain much the same information. As might be expected, they describe the way Helix works and extol its efficacy. They emphasise its persistence. They contain instructions as to use and refer to the withholding period of 21 days before harvest. None of them says anything about bio-accumulation or risk to cattle or other non-target species.
255. The evidence also contains some Helix labels. They have limited relevance. Several witnesses made the point that a cotton farmer using Helix may not see the label. The chemical would ordinarily be delivered by the distributor to the depot of the aerial spray contractor, which might be some distance from the cotton farm. However, for what it is worth, I note the labels include, under the heading "Restraint", the words: "Do not apply when weather conditions will cause spray drift onto non-target areas". They also refer to the danger posed by the chemical to "non-target insects, fish, yabbies and other aquatic arthropods". There is no reference to livestock or to bio-accumulation.
256. ICI regularly publishes a Product Manual containing information about its range of agricultural products. This is intended as a reference work for ICI staff and distributors. The 1989 and 1993 editions included Helix. They each set out the information contained in the brochures, including the warning about danger to non-target insects, fish, yabbies and other aquatic arthropods; but, once again, nothing about livestock or bio-accumulation.
257. Finally, ICI publishes Material Safety Data Sheets ("MSDS"), previously called Safety Data Sheets. These sheets are concerned mainly with the proper handling of chemicals and are intended primarily for use by people concerned with the storage or transportation of a particular chemical. The earliest MSDS on CFZ seems to be that dated June 1988. Under the heading "Safe Handling Information" and the sub-heading "Environmental Impact", there is a reference to fish toxicity and the statement: "Half life in soil is approximately 160 days; degradation is unaffected by soil type, application rate or soil moisture". There is no reference to bio-accumulation.
258. In December 1988, ICI published an MSDS dealing specifically with Helix 40 ULV. It contained the same information concerning environmental impact.
259. In August 1991, ICI issued an MSDS for Helix Insecticide. It superseded the December 1988 publication. This document did refer to bio-accumulation, saying CFZ "has potential for bioaccumulation but has low mobility in soil". The information about persistence was varied to say: "There is no evidence of hydrolysis in water. It is slowly biodegradable in soil". A new MSDS was issued in May 1994, superseding the August 1991 document. It retained the same environmental impact information.
The discovery of CFZ contamination
260. The Mid-Coast Meat Company Pty Limited ("Midco") conducts an abattoir at Macksville, on the New South Wales north coast. It purchases cattle for slaughter, drawing from an area that extends from southern Queensland, on occasions, as far south as Victoria. During the period 1988 to 1994, south west Queensland and the "cotton area" around Moree, Narrabri and Wee Waa were major sources. About half the meat produced at the abattoir during that period was exported; the other half was supplied to the domestic market. Also, during that period, it was Midco's policy to test a fat sample from every carcass, looking for pesticide residues. For this purpose, the company maintained an analytical laboratory at the abattoir. It was under the charge of Ian Crisp, an analytical chemist with previous experience in DepAg's Analytical Reference Laboratories at Grafton.
261. Mr Crisp gave evidence that, in July and August 1994, some printouts of gas chromatograph tests of fat samples revealed unusual peaks. The peaks appeared on tests taken at weekly intervals over a period of two or three weeks. Mr Crisp checked the company's "kill agenda" sheets and found the samples all came from cattle supplied by a grazier named Brian Lewis.
262. Mr Crisp was unable to identify the substance causing the peaks. So he made inquiries of scientists at other laboratories, notably Gavin Rose at DepAg's Chemical Residue Laboratory, Lismore, and Michael Atkinson of the Australian Government Analytical Laboratories ("AGAL") in Sydney. He sent each of them a fat sample but neither was able to provide an identification.
263. On 7 September 1994, Mr Crisp was at a conference of residue chemists in Brisbane when his technical officer telephoned to report he had noticed a similar test response in fat taken from cattle supplied to Midco by another grazier. Mr Crisp asked him to fax a copy of the printout. It was similar to those relating to Mr Lewis' cattle. Mr Crisp showed the printout to colleagues at the conference but nobody could identify the peak. So he telephoned Mr Lewis and asked him some questions, including about the cattle feeds he was using. They included cotton leaf pellets. Mr Lewis sent Mr Crisp some samples of his feeds and Mr Crisp sent them on to Mr Rose. Mr Rose identified a number of chemicals in the samples, but not the chemical causing the peaks.
264. Mr Crisp then spoke to Graeme Williamson, DepAg Residues Co-ordinator. On 4 October 1994, Mr Williamson sent him a list of chemicals used on cotton he had obtained from the Australian Cotton Foundation. Strangely, Helix was not on the list.
265. On 21 October 1994, Hugh Mawhinney of QDPI's Animal Research Institute telephoned Mr Crisp and told him he believed the unidentified substance was CFZ, but he did not have a sample of CFZ against which to confirm his belief. Mr Mawhinney explained he had been doing some gas chromatograph work on fluazuron and noticed the similarity between its test pattern and that of the unknown substance. The link was fortuitous.
266. Once a tentative identification had been made, there was no difficulty in its confirmation. Samples of CFZ were obtained from Probe Analytical, a laboratory operated by ICI. Mr Crisp supplied two fat samples to Mr Mawhinney. He homogenised and distributed them, along with a blank dripping sample and a sample of the same dripping spiked with CFZ, to three laboratories: his own, Midco and Probe Analytical. The results clearly indicated the presence of CFZ in the fat samples. Mr Crisp said in evidence the result indicates that CFZ forms residues in fat, when ingested by cattle.
267. Mr Crisp subsequently tested for CFZ some of the cotton pellets sent to him in September by Mr Lewis. The tests revealed CFZ at a concentration of 0.19 mg/kg.
268. The discovery of CFZ contamination of cattle became public knowledge in early November 1994. An official statement was made about 14 November. The discovery had a serious impact on the beef industry, especially in relation to exports. Much evidence has been tendered about the impact but I need not now refer to it. The impact would have been worse had not the relevant government authorities acted with speed and determination.
269. The two State governments immediately published warnings against feeding cotton gin trash to cattle and put in place a regime of carcass testing. When a carcass test found CFZ residues above the Australian MRL of 1 mg/kg, the relevant grazier's live cattle were subjected to a regime of tail-tagging and detention. They could not be sold for slaughter unless they were accompanied by a biopsy report showing they did not have CFZ contamination above the Australian MRL, or, in the case of slaughter for export, any detectable CFZ residue. The State authorities also imposed restrictions on sale other than for slaughter.
270. The Commonwealth government opened negotiations with some foreign countries about accepting CFZ contaminated beef provided the contamination did not exceed the Australian MRL of 1 mg/kg. These negotiations extended over months, during which time the attitude of the other countries was that any detected contamination would lead to rejection. This led to some losses of export sales. Eventually, most, if not all, of the major importing countries accepted a de facto MRL of 1 mg/kg. When that happened, Australian exporters became able to accept for slaughter cattle with known contamination at a level below that figure.
271. The restrictions imposed by the two State governments, and the understandable attitude of exporters, caused losses to many people. Some graziers had carcasses condemned at abattoir and lost the benefit of their sale price. Many graziers were restricted in the disposal of their cattle and incurred holding costs before they could sell, often at prices they say were lower than those available in November-December 1994. Feedlot operators incurred extra expenses in holding cattle, still owned by the graziers, that had been consigned to them for fattening prior to sale for slaughter. Companies that transported cotton gin trash lost this part of their business. Mr McInnes was unable to sell his cotton trash pellets. He seems to have been affected particularly badly; he lost overnight the value of the effort and investment he had made, over three years, in developing an economical method of pelletising cotton trash and in building up a customer base. Many abattoirs and stock agents lost business or profits. No doubt other people also suffered financial losses. The full extent of the losses has not yet been investigated.
THE CASE AGAINST ICI: NEGLIGENCE
The duty of care: legal principles
272. Mr Rowe submits, on behalf of the applicants, that ICI owed a duty of care to his clients and all group members in relation to all damage suffered by any of them as a result of CFZ. He is supported by counsel for Colly in relation to the members of the group who owned cattle affected by CFZ contamination, but not in respect of "downstream processors", that is, people "who had no proprietary interest in the cattle at the date of their contamination and have suffered pure economic loss". Counsel for ICI, on the other hand, submit that all the losses suffered by the applicants and group members fell within the category of pure economic loss; so there was no relationship between those people and ICI such as might give rise to a duty of care.
273. The divergence between counsel's positions is remarkable. It does not depend upon different views about the facts of the case but, rather, different approaches to matters of legal principle. Accordingly, it seems desirable to commence with a review of the authorities concerning the scope of the duty of care.
274. The starting point is Lord Atkin's celebrated statement in Donoghue v Stevenson [1932] AC 562 at 580:
"The liability for negligence, whether you style it such or treat it as in other systems as a species of 'culpa', is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit the range of complainants and the extent of their remedy. The rule that you are to love your neighbour becomes in law, you must not injure your neighbour; and the lawyer's question, Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law is my neighbour? The answer seems to be - persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are called in question."
1. At 599 Lord Atkin described the effect of his approach:
"a manufacturer of products, which he sells in such a form as to show that he intends them to reach the ultimate consumer in the form in which they left him with no reasonable possibility of intermediate examination, and with the knowledge that the absence of reasonable care in the preparation or putting up of the products will result in an injury to the consumer's life or property, owes a duty to the consumer to take that reasonable care."
1. This statement is important in the present case, but
Donoghue v Stevenson
is the beginning of the modern story, not the end. The law has developed since then. The next major development was probably the decision of the House of Lords in
Hedley Byrne Co Ltd v Heller & Partners Ltd
[1964] AC 465, allowing recovery for economic loss sustained as a result of reliance on a negligent misstatement. More recently, the High Court of Australia has, on a number of occasions, considered what degree of proximity is necessary to constitute a person a "neighbour" of the alleged tortfeasor.
277. In considering the High Court decisions, it is convenient to start with Jaensch v Coffey (1984) 155 CLR 549. The facts of the case were quite dissimilar from those of the present case; Jaensch v Coffey was a nervous shock claim. But the case is important for Deane J's analysis, with the concurrence of Gibbs CJ, of Lord Atkin's reasoning in Donoghue v Stevenson. The analysis is too lengthy to set out in full. But it is important to note that Deane J insisted that Lord Atkin had required more than reasonable foreseeability before a person became subject to a duty of care; there must be proximity as well. He explained this did not necessarily mean physical proximity; physical proximity was "but one facet of the proximity requirement that constituted an overriding control of the test of reasonable foreseeability in the law of negligence". However, the fact that an act of one person can be reasonably foreseen as "likely to injure" another "is an indication, and sometimes an adequate indication, that the requirement of 'proximity' is satisfied": see 579.
278. Deane J went on at 582 to point out that "in cases falling within some closely settled areas of the law of negligence ... it will have been established in previous cases that the relationship between the parties necessarily possesses the requisite degree of proximity". These include "at least most ... cases involving ordinary physical injury to a person or his property as a consequence of the direct impact of an act of the other party", provided the risk of injury was reasonably foreseeable. "The result has been that, in cases involving direct physical damage to person or property, separate reference to any notion of proximity has come to be commonly regarded as either unnecessary or as being appropriately formulated in terms of being satisfied if the physical injury sustained was of a kind which is reasonably foreseeable". This approach is unobjectionable, said Deane J at 582, provided that:
"one does not lose sight of the fact that reasonable foreseeability of injury was propounded by Lord Atkin in Donoghue v Stevenson as constituting, on its own, no more than an incomplete determinant of a common law duty of care in the sense that such a duty of care will not be owed to a particular plaintiff unless the requirement of proximity in the relationship between plaintiff and defendant with respect to the relevant act and injury is satisfied".
1. What then is proximity? Deane J pointed out at 584-585 that Lord Atkin did not seek to identify the precise content of the concept:
"It was left as a broad and flexible touchstone of the circumstances in which the common law would admit the existence of a relevant duty of care to avoid reasonably foreseeable injury to another. It is directed to the relationship between the parties in so far as it is relevant to the allegedly negligent act of one person and the resulting injury sustained by the other. It involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the plaintiff and the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client and causal proximity in the sense of the closeness or directness of the relationship between the particular act or cause of action and the injury sustained ... The identity and relative importance of the considerations relevant to an issue of proximity will obviously vary in different classes of case and the question whether the relationship is 'so' close 'that' the common law should recognize a duty of care in a new area or class of case is, as Lord Atkin foresaw, likely to be 'difficult' of resolution in that it may involve value judgments on matters of policy and degree." (Emphasis added)
1. Deane J went on to say at 585 this does not mean there is scope to decide a particular case by individual predilections or by reference to the particular relationship between the plaintiff and the defendant:
"The requirement of a 'relationship of proximity' is a touchstone and a control of the categories of case in which the common law will admit the existence of a duty of care and, given the general circumstances of a case in a new or developing area of the law of negligence, the question whether the relationship between plaintiff and defendant with reference to the allegedly negligent act possessed the requisite degree of proximity is a question of law to be resolved by the processes of legal reasoning by induction and deduction. The identification of the content of the criteria or rules which reflect that requirement in developing areas of the law should not, however, be either ostensibly or actually divorced from the considerations of public policy which underlie and enlighten it. 'What Lord Atkin did was to use his general conception to open up a category of cases giving rise to a special duty. ... The general conception can be used to produce other categories in the same way. An existing category grows as instances of its application multiply until the time comes when the cell divides': per Lord Devlin [in] Hedley Byrne" (Original emphasis)
1. At 586-587 Deane J reserved the question "whether all actions in negligence, including actions involving purely economic injury, can properly be accommodated in that or some other framework structured on the test of reasonable foreseeability". He went on:
"It may be that, in any such comprehensive framework, the requisite 'proximity' of relationship ... should be seen as an anterior general requirement which must be satisfied before any duty of care to avoid reasonably foreseeable injury will arise. The above formulation is, however, adequate for the purposes of the present case where the carelessness took the form of a positive act, where any intervening acts were clearly foreseeable as at least likely ... and where the injury sustained was injury of a type which the courts have, after an initial denial, accepted as sounding in damages."
1. Before considering the application of these principles to the present case, it is appropriate to mention an earlier case,
Caltex Oil (Australia) Pty Ltd v The Dredge 'Willemstad'
(1976) 136 CLR 529, whose facts were closer to the present case than those of
Jaensch v Coffey
.
Caltex
raised starkly the issue of recoverability of damages for economic loss unrelated - on one view - to property damage.
283. The defendant dredge had fractured a submarine pipeline connecting an oil refinery on the southern shore of Botany Bay to Caltex's terminal on the northern shore. The refinery and pipeline were owned by another company, Australian Oil Refinery Pty Ltd ("AOR"). Caltex owned the oil in the pipeline, some of which was lost at the time of fracture. But it was indemnified against that loss by AOR and made no claim on that head. However, it incurred expense in transporting refined oil from the refinery to the terminal by road while the pipeline was out of use. The High Court unanimously held Caltex entitled to recover that expenditure. All the Justices, except Murphy J, accepted that, as a general rule, damages are not recoverable for an economic loss that is not consequential upon an injury to the plaintiff's person or property. But Gibbs, Stephen and Mason JJ excluded the general rule in this case because the defendant had knowledge, or the means of knowledge, that Caltex, as a particular person and not merely as a member of an unascertained class, would be likely to suffer economic loss as a consequence of its negligence. Jacobs J held the general principle inapplicable; the loss arose from a physical effect of an act affecting Caltex's property (the oil in the pipeline) and was foreseeable. It did not matter that it was purely economic, in that it did not include a claim for the loss of the oil. For Murphy J, it was enough that the loss flowed directly from the defendant's negligence and was foreseeable. He thought any attempted limitation of recovery unsatisfactory and socially unacceptable.
284. Having regard to their approach, I should refer to the reasoning of Gibbs, Stephen and Mason JJ.
285. At 544 Gibbs J pointed out "it is clearly settled that where personal injury or physical damage to property has been caused by a negligent act, the damages which may be recovered include compensation for all pecuniary loss suffered as a result of the injury or damage". However, he said, before Hedley Byrne:
"it appeared to have been established that a plaintiff who sustained economic loss which resulted from loss or damage negligently caused to the property of a third person was not entitled to recover damages. The simplest explanation of these decisions appears to be that it was thought that the wrongdoer owed the plaintiff no duty to take care to avoid causing him loss which was purely economic ..."
1. After referring to cases decided before
Hedley Byrne
, Gibbs J pointed out the effect of that decision in breaking down the rule excluding recovery of purely economic losses. But he said (at 550) the case "did not obliterate the distinction previously drawn between damages for pecuniary loss and damages for material or physical loss". He explained at 555:
"In my opinion it is still right to say that as a general rule damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff's person or property. The fact that the loss was foreseeable is not enough to make it recoverable. However, there are exceptional cases in which the defendant has knowledge or means of knowledge that the plaintiff individually, and not merely as a member of an unascertained class, will be likely to suffer economic loss as a consequence of his negligence, and owes the plaintiff a duty to take care not to cause him such damage by his negligent act. It is not necessary, and would not be wise, to attempt to formulate a principle that would cover all cases in which such a duty is owed ... 'Those will fall to be ascertained step by step as the facts of particular cases which come before the courts make it necessary to determine them.' All the facts of the particular case will have to be considered. It will be material, but not in my opinion sufficient, that some property of the plaintiff was in physical proximity to the damaged property, or that the plaintiff, and the person whose property was injured, were negated in a common adventure."
1. Gibbs J held, in the case before him, it was enough that those concerned with the operation of the dredge knew about the pipeline and its purpose; consequently, he said, they "should have had Caltex in contemplation as a person who would probably suffer economic loss if the pipes were broken". Further, the officers navigating the dredge had a particular obligation to take care to avoid damage to the pipeline, because it was shown on a drawing supplied to them for that very purpose. In those circumstances, Gibbs J held, there was such a particular relationship between the parties "that both the dredge and Decca owed a duty to Caltex to take reasonable care to avoid causing damage to the pipeline and thereby causing economic loss to Caltex".
288. Stephen J made a survey of the authorities in which recovery of purely economic losses was allowed. He found difficulty with the justifications advanced in those cases and commented at 568:
"No doubt to discard the element of physical injury to person or property as a prerequisite to the recovery of damages in negligence means that its effect of tending to ensure that compensable damage is restricted to that which is immediately consequential upon the tortious act also disappears; there then looms the spectre, described by Cardozo C.J. in Ultramares Corporation v. Touche (1931) 174 NE 441 at 444 as that of 'liability in an indeterminate amount for an indeterminate time to an indeterminate class'. However to counter this spectre by rejecting all recovery for economic loss unless accompanied by and directly consequential upon such physical injury is Draconic; it operates to confer upon such physical injury a special status unexplained either by logic or by common experience. No reason exists for according to it such special status other than its character of tending to ensure a reassuringly proximate nexus between tortious act and recoverable damage; to this alone does it owe such merit as it may have as a necessary element in the recovery of damages in negligence.
1. After developing his objections to the exclusionary rule, Stephen J argued the need for a control mechanism; reasonable foreseeability, on its own, did not provide a sufficient limitation on recovery: see 572-574. At 574-575 his Honour said:
"The need is for some control mechanism based upon notions of proximity between tortious act and resultant detriment to take the place of the nexus provided by the suggested exclusory rule which I have rejected. Its precise nature and the extent to which it should restrict recovery for purely economic loss must depend upon policy considerations just as does the conclusion that for cases of economic loss such an additional control mechanism is necessary. Both in actions for negligent misstatement and in products liability actions based upon negligence, the particular fact situations encountered are likely themselves to provide material out of which formulations limiting the extent of liability may be fashioned ... But in the general realm of negligent conduct it may be that no more specific proposition can be formulated than a need for insistence upon sufficient proximity between tortious act and compensable detriment. The articulation, through the cases, of circumstances which denote sufficient proximity will provide a body of precedent productive of the necessary certainty; the gradual accumulation of decided cases and the impact of evolving policy considerations will reflect 'the courts' assessment of the demands of society for protection from the carelessness of others' - per Lord Pearce in Hedley Byrne."
1. Stephen J went on to say that guidance "in the determination of the requisite degree of proximity will be derived from the broad principle which underlies liability in negligence". He referred (at 575) to Lord Atkin's statement about liability for negligence being "based upon a general public sentiment of moral wrongdoing for which the offender must pay" and commented this will only be present "when there exists a degree of proximity between the tortious act and the injury such that the community will recognize the tortfeasor as being in justice obliged to make good his moral wrongdoing by compensating the victims of his negligence". He thought the courts might have regard to what is "fair and reasonable" in determining the requisite degree of proximity for recovery of purely economic loss.
291. Mason J propounded a more specific test. At 591 he stated the problem:
"The problem is to yield compensation to the individual who suffers financial loss not necessarily consequential upon damage to his property when that loss is closely connected with the failure to take care and yet at the same time to deny compensation 'in an indeterminate amount ... to an indeterminate class', in particular, to a large class of persons whose loss arises because their use of a public utility or facility has been interrupted."
1. At 592 Mason J indicated a view that the desirable solution was to clarify the duty of care. He referred to
Weller & Co v Foot and Mouth Disease Research Institute
[1966] 1 QB 569 where, he said:
"it was held that a defendant is liable for economic damage sustained by a plaintiff whose person or property is at risk according to the foreseeability test. The adoption of this approach would expand the area in which economic damage may be recovered, yet in limiting recovery to cases in which physical damage can be foreseen, the approach makes recovery conditional upon the fortuitous circumstance that financial loss was suffered by a person who could have recovered had he sustained physical damage. The test is one which effectively narrows the class of plaintiffs eligible to recover financial loss. It achieves this object by reference to the long-established general criterion of the existence of a duty of care framed restrictively in that it is based on the foreseeability of physical damage only. Although it is more liberal than the old notion of recovery of financial loss which is consequential upon physical damage it is founded on a concept of the duty of care which confines it to those who may suffer foreseeable physical damage."
1. The relationship between economic loss and the existence of a duty of care was discussed in
Sutherland Shire Council v Heyman
(1985) 157 CLR 424, particularly by Mason J. I need not refer to the detail of that discussion. Nothing was said to derogate from
Caltex
or the principles enunciated by Deane J in
Jaensch v Coffey.
294. A similar statement may be made about San Sebastian Pty Ltd v Minister (1986) 162 CLR 340. In that case the plaintiff alleged the defendants negligently published certain information, thereby causing it purely economic loss. At 355 Gibbs CJ, Mason, Wilson and Dawson JJ pointed out the importance of proximity:
"The relationship of proximity is an integral constituent of the duty of care concept. We refer to that relationship in its broader sense, namely, as embracing a general limitation upon the test of reasonable foreseeability, this being the sense in which it has been discussed and applied in recent judgments in this Court ... The notion of proximity, because it limits the loss that would otherwise be recoverable if foreseeability were used as an exclusive criterion of the duty of care, is of vital importance when the plaintiff's claim is for pure economic loss. When the economic loss results from negligent misstatement, the element of reliance plays a prominent part in the ascertainment of a relationship of proximity between the plaintiff and the defendant, and therefore in the ascertainment of a duty of care. But when the economic loss results from a negligent act or omission outside the realm of negligent misstatement, the element of reliance may not be present. It is in this sphere that the absence of reliance as a factor creates an additional difficulty in deciding whether a sufficient relationship of proximity exists to enable a plaintiff to recover economic loss." (Emphasis added)
1. In
Bryan v Maloney
(1995) 182 CLR 609, the High Court upheld an award of damages to the owner of a house constructed with inadequate footings, as a result of which cracks appeared in the walls. The plaintiff was not the original building owner; the house had changed hands twice since its erection. Nonetheless, she was permitted to recover from the original building contractor the cost of remedying the inadequate footings and cracks.
296. In affirming the award, Mason CJ, Deane and Gaudron JJ again insisted on a relationship of proximity (see 617) and noted the problems about allowing recovery of purely economic losses (see 618). But they held there was a sufficient degree of proximity in this case. In reaching that conclusion, their Honours took a two-stage approach. First, they looked at the relationship between the building contractor, Mr Bryan, and the original building owner, Mrs Manion. They said at 622-623 that "(c)learly enough, a relationship of proximity" existed between those two people "with respect to ordinary physical injury to Mrs Manion or her property with the consequence that Mr Bryan was under a duty to exercise reasonable care in relation to the building work, including the footings, to avoid a foreseeable risk of such injury". Second, their Honours considered the "more difficult question" of "whether that relationship of proximity and subsequent duty of care ... extended to mere economic loss by Mrs Manion of the kind ultimately sustained by Mrs Maloney ..." They thought it did; the distinction between ordinary physical damage to a house by some external cause, and mere economic loss in the form of diminution in value when a defect first becomes manifest, was "an essentially technical one". Policy considerations favoured finding a relevant relationship of proximity in regard to the economic loss.
297. Their Honours said (at 624):
"(a)t least prima facie, a relationship of proximity also existed between Mr Bryan and persons other than Mrs Manion, including Mrs Maloney, who might sustain physical injury to person or property as a consequence of a collapse, as a result of inadequate footings, of part of the house while they or their property were lawfully in the house or in its vicinity".
1. They went on, at 625:
"It is in the context of the above-mentioned relationships of proximity that one must determine whether the relationship which exists between a professional builder of a house, such as Mr. Bryan, and a subsequent owner, such as Mrs. Maloney, possesses the requisite degree of proximity to give rise to a duty to take reasonable care on the part of the builder to avoid the kind of economic loss sustained by Mrs. Maloney in the present case. It is likely that the only connexion between such a builder and such a subsequent owner will be the house itself. Nonetheless, the relationship between them is marked by proximity in a number of important respects. The connecting link of the house is itself a substantial one. It is a permanent structure to be used indefinitely and, in this country, is likely to represent one of the most significant, and possibly the most significant, investment which the subsequent owner will make during his or her lifetime. It is obviously foreseeable by such a builder that the negligent construction of the house with inadequate footings is likely to cause economic loss, of the kind sustained by Mrs. Maloney, to the owner of the house at the time when the inadequacy of the footings first becomes manifest. When such economic loss is eventually sustained and there is no intervening negligence or other causative event, the causal proximity between the loss and the builder's lack of reasonable care is unextinguished by either lapse of time or change of ownership." (Original emphasis)
1. Finally, in this review of High Court decisions, I mention
Hill v Van Erp
(1997) 142 ALR 687 wherein the Court upheld an award of damages in favour of a person named as a beneficiary in a will. The testamentary disposition failed because the solicitor who prepared the will negligently allowed the spouse of the beneficiary to act as an attesting witness. The solicitor acted, of course, on behalf of the testatrix, to whom she owed a duty of care, but the Court held this did not exclude the existence of a duty also to the intended beneficiary.
300. Dawson J made the comment, at 701, that sometimes "the question of proximity will turn upon the nature of the conduct which caused the damage - such as negligent misstatement or a failure to act - as well as the type of damage suffered - nervous shock or economic loss, for example". He said that, although Mrs Van Erp's loss was pure economic loss, "the considerations which ordinarily prompt concern about imposing liability for such a loss are absent". To impose liability upon the solicitor would not raise the prospect of indeterminate liability: "(a)n intended beneficiary under a will is a specific, identifiable individual rather than a member of an unascertained class". Secondly, there was no question of competitive advantage. Thirdly, recognition of a duty of care would not supplant or supplement remedies available in other areas or disturb any general codes or rules constituting a coherent body of law.
301. Toohey J agreed generally with Dawson J but added some comments on proximity. At 708 he made the point that "(i)t is the category of cases with which proximity is concerned, rather than whether a relationship of proximity exists on the facts of a particular case. The category may be an established one; it may not". Where it is not, he went on (at 709):
"Attention is focused on established categories in which a duty of care has been held to exist; analogies are then drawn and policy considerations examined in order to determine whether the law should recognise a further category, whether that be seen as a new one or an extension of an old one. Thus in Bryan v Maloney the existence of a duty of care on the part of the builder to exercise reasonable care in relation to the building work to avoid a foreseeable risk of physical injury to someone who was a subsequent purchaser of the house was a starting point in a consideration of the recoverability for a particular kind of economic loss arising from inadequacies in the performance of the work. At the same time policy considerations, such as avoiding the imposition of an indeterminate liability, were examined to see whether they presented an obstacle to holding that liability existed in that type of case. And so, by the process of reasoning to which reference has been made, the builder was held liable to a subsequent purchaser for diminution in the value of the house because of inadequate footings. Seen in that way, I doubt whether the difference between an approach based on proximity and the incremental approach favoured by Brennan J in Sutherland Shire Council v Heyman at 481 is as stark as is sometimes suggested." (Emphasis added)
1. Gaudron J rested her judgment on the fact that the solicitor was in a position of control. She also thought the case was not truly one of pure economic loss, but rather one that involved loss of a precise legal right which, in turn, resulted in economic loss.
303. I earlier mentioned Weller & Co v Foot and Mouth Disease Research Institute. This was only a first instance decision, decided as long ago (comparatively speaking) as 1965. But it is worth recalling because of similarities between the claim made in that case and some of the claims in the present case. Weller has been discussed in a number of later decisions at appellate level without discernible disapproval of the result; as distinct, perhaps, from some of the reasoning.
304. The salient facts of the case are set out in the headnote to the report:
"The defendants occupied premises where they carried out experimental work in connection with foot and mouth disease. Cattle in the vicinity of the premises became infected with the disease and, as a result, the Minister of Agriculture, Fisheries and Food made an order closing two markets in the area. During the closure, the plaintiffs, auctioneers, were unable to auction cattle at those markets and they brought these consolidated actions against the defendants for damages for loss of business. On the assumption that the defendants had imported an African virus onto their premises which had escaped and was the cause of the outbreak of the disease, the decision of the court was sought as to whether the defendants owed a duty to the plaintiffs to take reasonable care and whether they had an absolute duty to the plaintiffs to ensure that the virus did not escape:- Held, that the common law duty in this case to take reasonable care was owed only to those persons whose person or property might foreseeably be injured by a failure to take such care but, provided that the damage was foreseeable, it was immaterial that the loss was direct or consequential ...; that the defendants owed that duty to cattle owners in the neighbourhood, for it was foreseeable that, if the virus escaped, it might infect cattle and cause their deaths, but not to the plaintiffs, who were not owners of cattle and had no proprietary interest in anything which could be damaged by the escape of the virus and, therefore, had no claim in negligence against the defendants; and that that was so, even if the plaintiffs had a proprietary interest in the market, for the escape of the virus could not possibly injure those premises ..."
1. The trial judge, Widgery J, referred to the argument of the plaintiff's counsel that damage to the plaintiff was foreseeable, but the defendants took no proper precautions against the escape of the virus, so their liability was established. He commented at 577, in terms having a resonance in this case:
"... if this argument is sound, the defendants' liability is likely to extend far beyond the loss suffered by the auctioneers, for in an agricultural community the escape of foot and mouth disease virus is a tragedy which can foreseeably affect almost all businesses in that area. The affected beasts must be slaughtered, as must others to whom the disease may conceivably have spread. Other farmers are prohibited from moving their cattle and may be unable to bring them to market at the most profitable time; transport contractors who make their living by the transport of animals are out of work; dairymen may go short of milk, and sellers of cattle feed suffer loss of business. The magnitude of these consequences must not be allowed to deprive the plaintiffs of their rights, but it emphasises the importance of this case."
1. Widgery J rejected an argument that the old rules disallowing recovery of such losses were displaced by
Hedley Byrne.
As the headnote suggests, he rested his judgment on a narrow view of foreseeability, treating as foreseeable only the possibility of infection to cattle in the neighbourhood, not the indirect losses mentioned in the passage set out above. Nowadays, perhaps, all the losses would be seen as foreseeable, but only damage by infection sufficiently proximate.
The duty of care: the parties' contentions
1. All counsel recognise that the claimants - applicants and group members - fall into different categories. Various divisions are offered. I think there are seven categories: (i). Claimants (mainly graziers) whose cattle become contaminated by CFZ during their period of ownership; (ii) Claimants (graziers and others such as abattoir operators) who unwittingly purchased already-contaminated cattle; (iii) Claimants, such as meat processors and exporters, who owned meat that was found to be contaminated and was, therefore, condemned; (iv) Claimants, such as feed lot operators, who found that cattle in their possession (but not ownership) were contaminated and thereafter incurred expense in holding them in detention; (v) Claimants whose cattle were not in fact contaminated by CFZ but were placed in detention, or on a targeted tail tag list, because of a belief they were or may be affected; (vi) Claimants, such as gin trash transporters and trash pellet suppliers, who lost business (or their whole enterprise) because of the discovery of CFZ contamination and the resultant advice given to graziers against feeding cotton gin trash to cattle; and (vii) Claimants, such as abattoir operators, feed lot operators, stock agents, cattle transporters, meat processors and exporters and the like, who lost business, or suffered reduced profit margins, because of the effect of the controls introduced by DepAg or QDPI or the attitude of foreign governments to CFZ contamination.
2. As indicated earlier, Mr Rowe argues that ICI owed a duty of care to all those people in respect of all losses they sustained. He says the losses were caused directly by ICI's failure to exercise due care; all were reasonably foreseeable and sufficiently proximate. In relation to the latter point, he cites what was said by Lord Atkin, in
Donoghue v Stevenson
at 581, about a comment of A L Smith LJ in
Le Lievre v Gould
[1893] 1 QB 491 at 504 concerning the duty to take due care arising "when the person or property of one was in such proximity to the person or property of another that, if due care was not taken, damage might be done by the one to the other". Lord Atkin commented that "this sufficiently states the truth
if proximity
be not confined to mere physical proximity but
be used
...
to extend to such close and direct relations that the act complained of directly affects a person whom the person alleged to be bound to take care would know would be directly affected by his careless act
". Mr Rowe argues that, although there was not physical proximity between ICI and the various claimants, ICI would have known the claimants would be directly affected by any carelessness in the manufacture and distribution of Helix.
309. As also earlier indicated, Mr Gillard QC and Mr McArthur, on behalf of ICI, deny any of the losses are recoverable. They put seven propositions. First, all the claimed losses are pure economic losses and none of the claimants had such a special relationship with ICI as to give rise to a duty of care to avoid economic losses. Second, and alternatively, all losses sustained by people other than those in the first of the seven categories listed above were pure economic losses. Third, the graziers who suffered loss consequentially on feeding cotton gin trash are not sufficiently proximate to ICI to be owed a duty of care. Fourth, and alternatively, the type of harm suffered by these people was not reasonably foreseeable; so no duty of care arose. Fifth, the losses related to cattle intended for the domestic market and having CFZ residues of less than 1mg/kg are purely economic and/or unforeseeable losses. Sixth, any losses caused by inability to export meat having a detectable level of CFZ contamination of less than 1mg/kg arise from the state of the international trade system and are not recoverable from ICI. Seventh, the effect of allowing recovery of the cotton trash feeding claims would be to circumvent limitations of liability in the chain of contractual relationships.
310. It seems to me these propositions raise four separate topics: whether all the losses were pure economic losses (proposition 1), proximity (1 and 2), the position of cotton gin trash feeders (3,4 and 7) and contamination below 1mg/kg (5 and 6). I will discuss them separately under those headings.
The duty of care: whether all the losses were pure economic losses
311. Counsel for ICI point out this is not a Hedley Byrne case; there is no claim of negligent misstatement. There being neither personal injury nor property damage, but purely economic loss, they say the applicants must establish a special relationship in order to establish a duty of care; foreseeability is not enough. They say that, in determining whether there is a special relationship, many factors can be taken into account. Three factors often taken into account are: assumption of responsibility and/or reliance; whether the duty of care, if imposed, would extend liability to an indeterminate class for an indeterminate amount of money; and whether the imposition of a tortious duty would affect commercial relationships.
312. But is it correct to say all the losses claimed in this proceeding are "pure economic losses"; that is, losses not causally connected to physical injury or property damage? Some of them certainly are, but Mr Rowe says it is wrong to so describe the losses suffered by grazier group members whose cattle became contaminated; the contamination was damage to their property and their losses flowed from that damage.
313. In support of their argument that even those graziers whose cattle became contaminated suffered a mere economic loss, counsel for ICI point to passages in some High Court judgments where "economic loss" has been contrasted to physical injury to person or property; for example, Wardley Australia Limited v Western Australia (1992) 175 CLR 514 at 525 and Bryan v Maloney at 617-618. They also refer to the substance of five cases. The first of them is Bryan v Maloney which Mason CJ, Deane and Gaudron JJ characterised at 630 as turning, to no small extent, "on the particular kind of economic loss involved, namely, the diminution in value of a house when the inadequacy of its footings first becomes manifest by reason of consequent damage to the fabric of the house". In that case, of course, the defendant committed no relevant act or omission during the plaintiff's ownership of the house. The negligent act occurred earlier, at the time of construction. The plaintiff's loss was a loss of value when the hidden defect became apparent; or, alternatively, the cost of rectifying the defect. Mrs Maloney's position contrasts with that of group members in the first category whose cattle became contaminated, allegedly due to ICI's negligence, during their period of ownership.
314. The same comment may be made about D & F Estates Ltd vChurch Commissioners for England [1989] AC 177, another case cited by counsel for ICI. The facts of the case were similar to those of Bryan v Maloney, but it was decided differently. While the plaintiffs were tenants of a flat some plaster peeled and fell. They repaired the damage and sued the owner of the land at the time the building was erected, along with the building contractor and the plastering sub-contractor. The House of Lords affirmed a decision to dismiss the claim on the basis that the loss sustained by the plaintiffs was purely economic.
315. Counsel also mentioned Merlin v British Nuclear Fuels plc [1990] 2 QB 557, a claim under a statutory provision requiring the defendant nuclear authority to ensure no occurrence involving nuclear matter, or ionising radiation emitted from waste discharged from its site, caused "damage to any property of any person". Having discovered their house had been invaded by radionuclides emanating from the defendant's plant, the plaintiffs purchased elsewhere and sold their first home at a loss. They sued to recover the loss, arguing the defendant had breached its statutory duty. They failed. Gatehouse J held that the relevant loss - the loss of value - was not "damage to property". He said this meant "physical damage to tangible property". With respect, that seems right. In contrast to the present case, the contaminating radionuclides had not effected any physical change in the property itself. They had made it an unappealing, perhaps dangerous, place to live, but they did not affect the property itself.
316. The other two cases mentioned by counsel are decisions of the Appeal Division of the Supreme Court of Victoria: Pullen v Gutteridge, Haskins v Davey Pty Ltd [1993] 1 VR 27 and Minchillo v Ford Motor Company of Australia Ltd [1995] 2 VR 594. Pullen was an action in negligence against a firm of consulting engineers retained to advise on the construction of a four-pool swimming complex. After construction, problems occurred due to differential settlement of various parts of the structure. A question arose whether the claim was one for pure economic loss. The Court held it was, referring to Sutherland Shire Council v Heyman. Their Honours said no distinction should be drawn between the position of a person who purchased or leased a defective building, and that of the person for whom the building was originally erected: see 68-69. They thought in both cases it was true to say, as Deane J had in Heyman, that:
"any loss or injury involved in the actual inadequacy of the foundations is sustained only at the time when that inadequacy is first known or manifest. It is only then that the actual diminution in the market value of the premises occurs ... any loss involved in the actual inadequacy of the foundations by a person who acquires an interest in the premises after the building has been completed is merely economic in its nature".
1. It is not immediately obvious to me, with respect, that the Appeal Division was correct in equating the position of the original owner to that of a purchaser or lessee. Deane J said nothing about an original owner in
Heyman
. However, for present purposes, the question is immaterial; it is well removed from the issues in this case.
318. Counsel cite Minchillo only for a statement by Brooking J at 599: "We should adopt the view ... that as regards goods which are merely defective in quality as opposed to dangerous manufacturers are under no general duty of care towards consumers". It is difficult to see the relevance of the citation. The present claimants do not say CFZ was "defective", in the sense of lacking efficacy; their claim is that it was "dangerous", because of its potential to devalue their cattle and affect their businesses.
319. Counsel for ICI submit these authorities show "that property damage is something more than a physical effect (i.e. the mere presence of a residue) that can impact upon value. What is required is actual harm or injury. In the case of an animal what would be required is recognised veterinary harm to the well being of the animal". Counsel rightly say the only evidence on that subject was to the effect that the CFZ residues were inert in the fat of the cattle, and did not harm or injure the cattle or endanger their lives. "What has happened", say counsel, "is that, depending on the level of residue and the market for which the cattle were intended, their value may have been impaired. This is an economic effect, not property damage".
320. The applicants and Colly sought to meet this argument by referring to a number of cases. One of them was the decision of the Judicial Committee of the Privy Council in South Coast Basalt Pty Ltd v R W Miller Co Pty Ltd [1981] 1 NSWLR 356. The respondent transported basalt aggregate, quarried by the first appellant, from Bass Point to Blackwattle Bay, Sydney. The ship was chartered from another company, Hethking Steamships Pty Ltd. It had previously been used by Hethking for the transport of sugar. When the aggregate was loaded, one of the holds was awash with a sugar residue, sucrose. The sucrose impregnated the aggregate, thereby making it unsuitable for its designated purpose, the manufacture of ready-mixed concrete. The trial judge allowed recovery by the first appellant of damages it had paid to an arms-length purchaser of the contaminated aggregate, but disallowed a claim for losses suffered by a related company, the second appellant. On appeal, their Lordships allowed this claim, but on the basis of an implied warranty of fitness under the Sale of Goods Act 1923 (NSW). They did not need to consider the second appellant's alternative claim of negligence. In those circumstances, the decision is of limited value. However, it is pertinent to note that at 364, when considering an argument (put by Hethking on a cross-appeal) that the seriousness of the damage was not foreseeable, the Committee treated contamination as "damage actually resulting from the breach".
321. South Coast Basalt was cited in an unreported decision of the New South Wales Court of Appeal, Allianz Insurance Company Limited v Kemcon Pty Ltd (Meagher, Handley and Cripps JJA, 8 February 1993). The case turned on the proper construction of an insurance policy. An employee of the respondent, Kemcon, had inadvertently mixed a herbicide with an insecticide, heliothin EC, being prepared by Kemcon for a client, Bayer Australia Limited. Bayer supplied the mixture to tomato growers. They suffered losses. Bayer paid compensation and sued Kemcon. Kemcon sought indemnity under its insurance policy with the appellant. That policy, after importing some definitions into the relevant clause, provided an indemnity to Kemcon "against their liability to pay compensation ... for and/or arising out of injury and/or loss of or damage to property occurring before 30 June 1987 ..."
322. Kemcon had supplied the contaminated heliothin EC to Bayer before 30 June 1987, but it was not until after 30 June 1987 that the tomato growers suffered damage and claimed against Bayer. The Court held this did not matter; the contamination of the stock of heliothin EC was "damage to property" and the claims relating to the tomato crops were claims "in connection with" or "arising out of" the damaged property. It was enough that one kind of damage - that is, to the stock of heliothin EC - had occurred before 30 June 1987.
323. Allianz was only one of several insurance policy cases cited by counsel for the applicants and counsel for Colly. I need not refer to them all; they all turn on the words used in the particular policy. But I should mention the decision of Green CJ of the Tasmanian Supreme Court in P and S Ranicar v Frigmobile Pty Ltd (1983) 2 ANZ Insurance Cases (60-525. Scallops had been insufficiently refrigerated, at -6oC rather than -18oC, with the result they were rejected for export. The scallops were able to be sold locally but at a lower price. The consignor brought two actions; one against the shipping company in contract, the other against its insurer seeking indemnity. Both actions required the Court to determine whether there was "damage to" the scallops. There was expert evidence that, although damage due to enzyme activity and the chemical oxidation of fats in the scallops would have been greater at -6oC than at -18oC, storage at the higher temperature would not have resulted in any significant difference in the edibility, taste, smell, texture or appearance of the scallops. Nonetheless, Green CJ held there was "damage to" them. After considering a number of authorities, he said:
"In my view, the ordinary meaning, and therefore the meaning which I should prima facie give to the phrase 'damage to' when used in relation to goods, is a physical alteration or change, not necessarily permanent or irreparable, which impairs the value or usefulness of the thing said to have been damaged. It follows that not every physical change to goods would amount to damage. What amounts to damage will depend upon the nature of the goods." (Emphasis added)
1. Interestingly, in the context of the present case, the Chief Justice added:
"... the changes caused by enzymic activity and the chemical oxidation of the fats in the scallops did not constitute damage to the scallops. Although clearly physical changes, they were not such as to significantly affect the marketability, edibility, or any other material qualities of the scallops. Further, the plaintiffs' loss did not arise out of those changes. Their loss arose out of their inability to export the scallops, which was caused solely by the fact that they were stored at a temperature above -18(C. Even had the scallops undergone no change of any kind, the mere fact that they were stored at a temperature above -18(C would have been sufficient to prevent the plaintiffs from being able to export them. The question which remains is whether in the circumstances of this case that change in temperature amounted to damage to the scallops. In my view, it plainly did. An alteration in temperature undeniably involves a physical change to a substance and in this case that change had the effect of removing one of the primary qualities which the scallops had - their exportability. As a result, it is plain that their usefulness was impaired and their value reduced." (Emphasis added)
1. Towards the end of the hearing, Mr Hutley sought leave to re-open his case in order to tender a document concerning the effect of CFZ on cattle. Mr Gillard opposed this. I commented that I did not think it was controversial "that there was an effect on the cattle and that is why they were held out [of the market] ... It is pretty plain that there is a contamination effect - the cattle might not be very aware of the fact that they have got very high CFZ levels but it is a physical effect which manifests itself in financial loss". Mr Gillard replied: "Your Honour, we say we accept that. Our submission will be that the evidence shows that it depletes in various ways over a period of time. We accept that. I do not like the suggestion my friend keeps saying it is a significant length of time".
326. I think this exchange encapsulates the present point. CFZ effected a physical change in the cattle, albeit one that did not affect their health or enjoyment of life. Whether the change caused damage to the then-owner of the cattle depended, in the first instance, on whether that owner was caught "holding the parcel"; that is, whether he or she still owned them when the contamination was discovered. The contamination of cattle sold before the contamination was detected obviously would not have caused loss; the contamination would not have affected the price. Secondly, damage depended (substantially at least) on whether the owner at the time contamination was discovered had planned to sell or slaughter the cattle before the date when the CFZ was likely to deplete to an acceptable level. If an owner learned of contamination, but did not in any event propose to sell or slaughter until that date, there would be little or no loss; perhaps some expense in relation to detention and tail-tagging requirements, but that is all. On the other hand, if a particular owner had planned to sell or slaughter earlier, but was frustrated because of the contamination, this would be a case of financial loss resulting directly from a physical change to the cattle. In the words of Green CJ in Ranicar, there would have been "a physical alteration or change, not ... permanent or irreparable, which impairs the value or usefulness" of the cattle. If it is material to determine whether CFZ contamination constitutes "damage to" the cattle, I think it does so in those cases where it postpones their saleability, reduces their price on sale, or involves the owner in extra holding or sale expenses.
327. It remains true, of course, that the damage suffered by the owner is economic loss; it is a loss of income on sale, in whole or in part, or an additional expense. However, to pick up a distinction made by McHugh J in Hill v Van Erp (see footnote 174) it is economic loss resulting from physical damage, not "pure" economic loss. As such, it is unexceptionable. It is the daily task of judges and juries to assess economic losses flowing from a physical injury to the plaintiff or damage to the plaintiff's property. It seems to me there is nothing novel or contentious in saying that, in manufacturing and distributing Helix, ICI was under a duty to take care not to cause physical damage - such as CFZ contamination - to cattle owned by others, which damage might foreseeability lead to financial loss. It follows that, subject to other arguments, ICI was under a duty of care to people falling within the first of the seven categories set out above. I reject ICI's first proposition.
The duty of care: proximity
328. The second proposition concerns people in the last six categories. By definition, none of these people owned relevant cattle at the time of their contamination. Consequently, I think it is correct to describe their claimed losses as pure economic losses. This does not necessarily mean they are irrecoverable; there may be a sufficient degree of proximity between ICI and those people to bring them within ICI's duty of care.

329. It is common ground between the parties that the position of these claimants is not covered by the decided cases. The situation is novel. And, as the cases demonstrate, in novel situations there is no sure guide to deciding whether a particular category of persons is owed a duty of care. It is necessary to reason by analogy in determining whether the situation is one where there was such a degree of proximity between the parties as to make it appropriate to impose a duty of care: see the approach adopted in Bryan v Maloney and the comment of Toohey J in Hill v Van Erp quoted above.
330. It seems to me that, reasoning by analogy from Bryan v Maloney, it should be held that ICI was under a duty of care to people in the second category; that is, persons, such as graziers and abattoir operators, who unwittingly purchased already-contaminated cattle. If they still owned the cattle when the contamination was discovered, and had planned to sell or slaughter them on a date before the likely end of the depletion period, they were as much damaged as if they owned the cattle at the time of contamination; they paid a full price for cattle with a latent defect. To deny those people recovery would mean that, although ICI was under a duty to cattle owners to take reasonable care to prevent damage from CFZ contamination, if that duty was breached and damaged ensued, there could be no recovery at all. On this argument, the duty would have been owed exclusively to one person, but the damage suffered by another. The result would be consistent with cases like D & F Estates v Church Commissioners but inconsistent with Bryan v Maloney, unless there is a critical difference between a house and livestock.
331. It is true that, in Bryan v Maloney, Mason CJ, Deane and Gaudron JJ emphasised the substantiality of the "connecting link" between the parties, the house itself. They pointed out (at 625) that a house "is a permanent structure to be used indefinitely and ... is likely to represent one of the most significant, and possibly the most significant, investment which the subsequent owner will make during his or her lifetime". The statement about permanency and indefinite use cannot be made about cattle; and the significance of the investment will vary from person to person. Also, Toohey J at 663 referred to "the importance of a house to any buyer, something which is well recognised and would certainly be understood by a builder".
332. However, other factors that carried weight in Bryan v Maloney apply in this case. A person in the position of ICI would undoubtedly recognise that cattle are a valuable resource; that any significant herd has a substantial money value; and that it is important to graziers that this investment be protected by maintaining the value and saleability of the herd. Furthermore, it is possible to apply directly the comment of Toohey J at 663-664 that "there is a very direct relationship between the negligence of the appellant and the loss sustained by the respondent. It is only a matter of timing that cracks in the wall appeared while the respondent was the owner rather than Mrs Manion".
333. Mason CJ, Deane and Gaudron JJ referred at 624 to the relationship between Mr Bryan and Mrs Maloney having probably been characterised by an assumption of responsibility by Mr Bryan and reliance by Mrs Manion. In the present case, there was an assumption of responsibility by ICI, in deciding to manufacture and distribute Helix; but there is not yet any evidence of reliance. The probability is that few, if any, claimants will be able to prove they changed their position in reliance on an act or statement of ICI. The lack of reliance is a difference between the situation in Bryan v Maloney and this case, and works against the argument in favour of drawing an analogy. However, I think there is no legitimate distinction between the two cases in respect of the matters mentioned at 623-624 in the joint judgment. Their Honours pointed out there was no basis for thinking that recognition of a relevant relationship of proximity would give rise to liability "in an indeterminate amount for an indeterminate time to an indeterminate class". Recognition of a duty of care to subsequent owners of contaminated cattle would involve liability to a number of people - I do not know how many at this stage - but the number is finite and ascertainable. The controlling factor is the contaminated cattle; their numbers are limited and ascertainable. Just as in Bryan v Maloney the house was the connecting link between the house, the only cause of a relationship, it is the cattle here.
334. Mason CJ, Deane and Gaudron JJ also pointed out that there was no "question of inconsistency between the existence of a relationship of proximity with respect to that particular kind of economic loss and the legitimate pursuit by the builder of his or her own financial interests". The same statement may be made about ICI in this case.
335. Finally, their Honours denied it was "legitimate to assert that, as a matter of policy, the sanctity of contract or the compartmentalisation of the law dictates that liability under the ordinary principles of negligence in respect of either damages generally or a particular kind of damage must be excluded as between parties in a contractual relationship notwithstanding the absence of any agreement between the parties to that effect".
336. I recognise there are relevant differences between the facts of Bryan v Maloney and those surrounding the present claims. If there were not, Bryan v Maloney would directly apply; it would not be necessary to resort to reasoning by analogy - what Toohey J at 661 called "the incremental approach". But it seems to me those differences do not provide any reason for declining to apply the underlying rationale of Bryan v Maloney; that a person who is guilty of negligence, in breach of a duty of care to an identifiable person, should not escape liability simply because the damage did not become manifest until that person had sold the property to someone else, who then suffered loss. Bio-accumulation is a relatively slow process; whereas cattle are readily saleable. Unwitting purchasers of cattle must be regarded, in the words of Lord Atkin, as "persons ... so closely and directly affected" by contamination of the cattle that the contaminator "ought reasonably to have them in mind as being so affected" when directing its mind to the relevant acts or omissions. In their case, I believe, there is such a degree of proximity, to use the words of Stephen J in Caltex, "that the community [would] recognize [ICI] as being in justice obliged to make good [its alleged] moral wrongdoing by compensating the victim of [its] negligence."
337. Subject to ICI's other arguments, I think ICI's duty of care to owners of cattle who became contaminated with CFZ extended also to persons who purchased those cattle in a contaminated condition without knowing of that latent defect.
338. I am fortified in this conclusion by a decision of the Full Court of the South Australian Supreme Court, Seas Sapfor Forests Pty Ltd v Electricity Trust of South Australia (Doyle CJ, Bollen and Nyland JJ, 9 August 1996, not reported). The matter went to the Full Court on an appeal against the refusal of the Master to allow an amendment of pleadings adding two new plaintiffs. The claim arose out of a bushfire that was said to have resulted from the defendant's negligence. The three existing plaintiffs were related, to an extent: the first plaintiff was the owner of a forest damaged by the fire; the third plaintiff was a milling company that sold and milled timber on behalf of the first plaintiff; and the second plaintiff, a trustee company, provided finance. The two proposed additional plaintiffs became involved in the milling operation only after the fire. They argued that the fire destruction had caused them economic loss. In a detailed judgment with which Nyland J agreed, Doyle CJ distinguished between what he called "transferred loss" cases, like Bryan v Maloney, and claims by "a range of people who derive profit or their livelihood from the felling and milling and selling of ... timber". He said:
"It seems to me that no duty is owed by the defendant in respect of pure economic loss, of the type pleaded, to the class of persons who profit from handling or a dealing in produce of land damaged by bushfires. Ultimately, this conclusion is a product of the problem of liability to an unascertained class. There is no factor in the definition of that class which adequately restricts the class of claimants ... There may possibly be a duty of care owed to those ... who are in a joint venture relationship with ... the owner of property to whom a duty of care is owed in respect of damage to that property. First, it is relevant to enquire as to the existence of a duty of care to P3. This is of significance because, as I have noted, the joint venture, transferred loss and purchase cases all appear to depend on the existence of a relationship of proximity between the tortfeasor and a person to whom the plaintiff is somehow related. Caution is required here, but when the joint venture is for the purposes that the owner of the damaged property might be expected to use that property, there may be a duty of care. However, that duty will necessarily be limited quite strictly, presumably to economic loss flowing directly from the destruction of that property such that, if the owner of the property had suffered that economic loss, the owner would have been able to claim it. Such a limitation is necessary to ensure not only that the class of claimants is ascertainable ... but that the loss flowing from the tortious act is not indeterminate." (Emphasis added.)
1. It seems to me the distinction made by Doyle CJ is apposite to this case. The claims made by people in the second category are for the recovery of "transferred losses", flowing directly from the damage to the cattle such that, if the original owners had suffered the losses, they would have been claimable. These "transferred losses" are different in kind from other economic losses.
340. The difference between the second category of claimants and the third is the difference between live meat and dead meat. It seems nonsensical to distinguish between cattle found to be contaminated after purchase but before slaughter, and carcasses found to be contaminated upon testing after slaughter. If the cattle furnish the "connecting link" on which proximity depends, then they do so alive or dead. Subject to consideration of ICI's other arguments, I hold there is a duty of care to claimants in the third category also.
341. The fourth category comprises claimants who were in possession of cattle at the time contamination was discovered and who were forced to retain them for a time, at their own expense, pending depletion of the residues. This was the situation of Gurley Lot Feeders, according to Mr Sowerby. Gurley Lot Feeders did not own the cattle, so the partners did not fall within either of the first two categories of claimant. But they had possession; to that extent, the "connecting link" applies, and it applies both to limit the number of persons who can claim under this rubric and to identify them. One only has to follow the "cattle trail". Although to do so involves an additional incremental step, it seems to me the policy considerations that dictate acceptance of a duty of care in relation to the second and third categories apply equally here; ICI would have been under a duty to take care to avoid contaminating these cattle if they were still in the possession of their owners, or were being held in the feed lot at the owners' expense. It was entirely fortuitous that they were being held in the feed lot at the time the contamination was discovered and thereafter had to be detained at the feed lot's expense. Subject to other relevant considerations, I hold there was a duty of care to this category of claimants also.
342. There is at least one group member in the fifth category. Mr Bowhay gave evidence that he had not fed his cattle cotton trash and they were not contaminated. But his cattle were detained; apparently because the cotton gin's records showed he took delivery of many loads of trash. Indeed, he did so; but only in order to sell them to others.
343. I do not think ICI was under a duty of care in respect of losses suffered in this way. It is true the losses would not have occurred but for the contamination crisis, which the applicants claim stemmed from ICI's negligence. But this is not enough. If the "connecting link", as I believe, is contaminated cattle (or meat), that link is missing in relation to Mr Bowhay, and anybody else in a similar position.
344. Moreover, it seems to me such losses are not losses of a kind a reasonable chemical manufacturer and distributor would foresee. I have no difficulty in concluding a chemical company would foresee the condemnation of carcasses having a level of CFZ contamination above the Australian MRL or, where there was no relevant MRL, the limits of detectability; this is what maximum residue levels are all about. For the same reason, I have no difficulty in concluding a chemical company would foresee that cattle found to have residues above the MRL would not be readily saleable, or be saleable only at a discounted price, until the residue level declined; and that this would involve loss and expenditure for the person having possession at the time the residues were detected. The practice of withholding a contaminated substance from the market until the contamination declines to an acceptable level has long been followed. It is the concept behind the stipulation of a withholding period, such as, in this case, in relation to cottonseed. But it would not normally be foreseen that a person would suffer loss, not because his cattle were contaminated, but because a government authority erroneously thought they were.
345. The last two categories of claimants can be considered together. They are the people who suffered a loss of business because of the contamination crisis. They include those, like Mr McInnes and the transport companies, who lost their gin trash business and those, like the feed lots, abattoir operators, stock agents and exporters, who suffered a down-turn of business and a consequential loss of profits. Mr Rowe submits that a duty of care extends to all those people, even though their losses were purely economic. These are all people, he says, "involved in converting the cattle into processed meat"; their losses flowed from ICI's acts and omissions and were foreseeable.
346. Mr Rowe supports this argument by quotations from numerous cases, but the argument must fail. Whatever their logical difficulties, and whatever the virtues of the policy position advocated by Murphy J in Caltex at 606, the authorities are too strong. In recent years the High Court has several times insisted on the need for proximity, as well as foreseeability. While the Court has been disposed to take a pragmatic, and increasingly liberal, view of what facts constitute the necessary special relationship, the Court has continued to insist on a connecting link. In the present case, once one moves away from the cattle (or meat) trail, there is no connecting link. The situation becomes similar to that described by Widgery J in Weller; for contamination, like foot and mouth disease, can be "a tragedy which can foreseeably affect almost all businesses in (an agricultural) area".
347. The view that there is insufficient proximity to sustain the claims of the sixth and seventh category claimants is supported by Seas Sapfor Forests, mentioned above, a case that was followed in this Court by von Doussa J in Sparnon v Apand Pty Ltd (20 December 1996, not reported).
348. To accede to the applicants' submission in respect of the sixth and seventh category claimants would be to ignore the "general rule" stated by Gibbs J in Caltex, that "damages are not recoverable for economic loss which is not consequential upon injury to the plaintiff's person or property". Though the exceptions have expanded, the rule remains.
The duty of care: cotton trash feeders
349. I turn to ICI's third, fourth and seventh propositions. In relation to the third proposition, counsel say that any duty to avoid property damage is limited to users of Helix - that is, to cotton growers, or at most to persons who were both cotton growers and graziers - and "foreseeable bystanders (such as graziers whose properties adjoin cotton properties)". They say the duty does not extend to others, who never used Helix or were "proximate to its use". They say also that damage from feeding cotton trash was not reasonably foreseeable because the practice itself was not reasonably foreseeable.
1. In support of these propositions, counsel set out what they say was the relevant chain of events leading to the losses. They include references to the decisions of TCAC, PACC and NH&MRC, the sale of Helix through distributors and other matters. I think the chain is much shorter. It may be summarised as follows: (i) ICI decides to manufacture and distribute a new product, Helix, using a new chemical, CFZ, that is: (a) bio-accumulative; and (b) persistent; (ii) ICI intends that Helix be sprayed on cotton plants towards the end of their growing period, up to only 21 days before harvest; (iii) ICI takes no steps to determine the extent of the likely persistence of CFZ on the plant. ICI knows only that CFZ will persist on the plant for at least 21 days. It follows it is foreseeable that CFZ will persist on the plant at the time of harvest. (iv) The practice of feeding cotton trash to cattle is long-established in the United Statesand discussed in numerous publications available to ICI. It is also well-established in the cotton areas in which Helix is proposed to be used, and this is known to ICI's local cotton representative; (v) Fairly soon after Helix goes on the market, there is an industry crisis concerning the possible contamination of cattle by endosulfan residues on cotton trash fed to them, and this is known to ICI's senior management; (vi) ICI knows that a significant proportion of the beef produced in the "cotton areas" is exported but no export destination has an MRL for CFZ, so any detection of residues will result in rejection of the meat. (vii) Yet no steps are taken by ICI: (a) to determine the amount of CFZ (if any) likely to be found on harvested gin trash; (b) to determine the likely fate of that trash; (c) to determine the likelihood of that trash being fed to cattle; (d) to explore the consequences of this occurring; or (e) to warn against it.
2. I cannot agree that, in the relevant chain of events, ICI was too remote from the cattle owners to give rise to a duty to avoid property damage, or that the damage was unforeseeable. Damage of this general kind was in fact foreseen by some ICI officers: see the comments on breach of duty below.
352. As I understand their position, counsel for ICI accept that there would have been a duty of care in relation to cotton trash feeders if the senior officers in Melbourne who were responsible for the development, registration and marketing of Helix had known of the practice. I accept that, initially, they did not know; but this was only because they neglected to ask. Any search of the literature in ICI's Melbourne library would have revealed information about the practice; so, also, would a telephone call to DepAg or Mr McKinnon or, very probably, an instruction to any of its cotton area representatives to investigate the fates of cotton byproducts. If ICI Australia had circulated the questionnaire prepared by ICI U', the position would have been revealed. As Mr Logan accepted, in the evidence quoted above (in Section 5(vi)), it would have been prudent and easy for ICI to ascertain the usual fate of cotton plant residues; but this was not done. It would be iniquitous to exclude a duty of care because of ignorance caused by the putative tortfeasor's own failure to inquire.
353. At a later stage, senior officers had actual knowledge. Mr Matthews conceded that he knew about the endosulfan crisis which, according to the documents, erupted in 1991. That crisis arose because of concern that cattle were being contaminated with endosulfan on cotton gin trash. Mr Matthews said in evidence the situation was known to senior ICI officers in Melbourne, as might be expected; after all, Endosan was one of ICI's major agricultural products. At least from that time, it must be accepted that the practice of feeding cotton trash was known to relevant officers. Mr Matthews was himself such a person. He was the Product Stewardship Manager with responsibilities that included ensuring the company's procedures met "industry practices and appropriate ethical standards". It was incumbent on him, on learning of the practice of feeding cotton gin trash to cattle, to inquire what other ICI chemicals were used on cotton and to check whether appropriate field studies had been undertaken into bio-accumulation of their residues. Mr Matthews could not have been unaware of the importance of the issue. After all, he had been Victorian Agricultural Standards Officer, and Victoria's TCAC representative during the 1987 crises.
354. The importance of my observations about the 1991 and 1992 endosulphan problems is that most Helix sales occurred after those years, in the 1992-93 and 1993-94 seasons. Moreover, it is clear that the practice of feeding cotton trash increased and spread geographically during those seasons, as the drought worsened. If Mr Matthews, or any other senior ICI officer, had acted on the information he obtained and made appropriate inquiries and decisions, Helix would not have been marketed in 1992-93, except perhaps with appropriate warnings to all gins, and to graziers generally, about the risks of feeding cotton trash to stock. It seems apparent that, if this had been done, much contamination would have been avoided.
355. The seventh proposition is that a further factor, against imposing on ICI a duty of care in relation to the claims based on the feeding of trash, "is that the effect would be to circumvent limitations of liability in the chain of contractual relationships". The proper course, it is said, is for those with access to claims in contract that may lead to ICI, to sue in contract.
356. The answer to this submission was given by Mason CJ, Deane and Gaudron JJ in Bryan v Maloney at 624: whatever may have the position in other times or in other places, Australian law does not require "liability under the ordinary principles of negligence" to be excluded as between parties in a contractual relationship, notwithstanding the absence of any agreement between them to that effect. Even more so, I would suggest, does it require the exclusion of liability as between persons who have not entered into a relevant agreement.
The duty of care: contamination below 1mg/kg
357. ICI's fifth and sixth propositions concern losses relating to cattle which had residue levels of less than 1mg/kg, the Australian MRL. It is said in relation to cattle intended for the domestic market that the losses "are purely economic and/or unforeseeable and such claims must fail". Such losses are certainly "economic"; whether they are "purely economic" and, if so, whether the claims must fail, are matters that depend upon the circumstances discussed above in relation to the various categories of claimant. As to foreseeability, it is enough that the kind of damage is foreseeable. It is not necessary to establish foreseeability of the particular degree of damage: see South Coast Basalt at 364.
358. However, under the heading of this proposition, counsel raise a matter of more substance. They point out that, at all material times, the Australian MRL for CFZ in cattle meat was 1mg/kg; they say this was carried into New South Wales and Queensland law. There may be a question about New South Wales, but I accept, as a general proposition, that cattle with a CFZ residue level of less than 1mg/kg could still have been sold for domestic consumption. If they were not so sold because of confusion by the owner or mistaken advice by a government officer, it is probably correct to say any resultant loss is not the responsibility of ICI. But it is premature to consider that matter; it raises a question of causation, and causation has been left to a later stage of this proceeding.
359. In relation to exports, counsel say any losses caused by CFZ residues less than 1mg/kg "arise from the state of the international trade system and are not amenable to recovery from ICI". Counsel say, at relevant times, there was no provision for mutual recognition between countries of tolerances of chemicals; this was a gap in the trade system. They submit, first, this is a situation of purely economic loss - as to which, see above - and, second, "this situation cannot be a failing of ICI. It is not a matter within the power of ICI to correct".
360. The second submission is audacious, given ICI's disregard of the note about overseas MRLs in the letter of 16 November 1990 from Mr Weedman to ACAC, a copy of which was sent to Ms John. However, even if ICI had no ability to influence the making of overseas MRLs, that does not absolve it from responsibility for losses caused to exporters. With knowledge that there were no overseas MRLs, ICI sold Helix for use in areas where cattle were known to be produced for export. Any competent person who gave the matter a moment's thought would have realised there was a risk that some cattle would build up some CFZ residues, even if only from eating pasture or drinking water contaminated by over-spray or spray-drift; that this might lead to a rejection by an overseas importer of a beef shipment; and, as had happened in 1987, this might have a serious effect on Australia's beef export trade.
361. I do not think there is any substance in ICI's third to seventh propositions. I hold that ICI owed a duty of care to all the claimants within the first, second, third and fourth categories, identified above; but not those in categories 5, 6 and 7.
Breach of the duty of care: contentions
1. In opening his case, Mr Rowe submitted ICI breached its duty of care to the applicants and group members in relation to six matters: (i). research into the characteristics of CFZ and the testing of Helix; (ii) the establishment of an appropriate withholding period for Helix; (iii) the decision to market Helix; (iv) the provision of instructions to users of Helix; (v) its failure to warn people likely to be affected by the use of Helix, such as owners of cattle grazing in the cotton areas and people feeding cotton gin trash; and (vi) its failure to monitor the use of Helix and the fate of the cotton biomass to which it was applied.
2. Counsel for ICI say that, assuming the existence of a duty of care, there is no basis for finding a breach of that duty. Their submission on the point is extremely lengthy. It deals with many factual matters in minute detail. I do not propose to follow counsel into that detail. In my opinion, the applicants' case on breach is overwhelming.
364. I agree with Mr Rowe's submission in relation to each of the six matters he mentions. But they are linked together; the problem stemmed from a combination of these deficiencies. Probably the best way of expressing the situation is to say that ICI breached its duty of care by marketing Helix without having first undertaken the research and testing necessary to determine and quantify its potentially deleterious characteristics, and without taking such precautions as were necessary to prevent those characteristics causing damage. If proper research and testing had shown it was not possible to market the product without causing damage to others, it would have been a breach of duty to market it at all. If proper research and testing had shown that it was possible to prevent damage by taking particular precautions - for example, by establishing an appropriate withholding period or giving instructions to users and warnings to affected persons - it would have been a breach of duty to market Helix without doing so.
Breach of duty: findings
365. By way of justification of this conclusion, I set out a summary of findings about critical facts. None of these depends upon disputed primary facts; most of them emerge from documents of accepted authenticity, some from uncontested oral evidence.
1. I find as follows: (i). CFZ was the active ingredient in Helix. Technically speaking, CFZ is an organochlorine, like DDT and dieldrin; it is a compound containing carbon-hydrogen and chlorine atoms. It can also be, and sometimes is, classified as a benzoylurea; it may not immediately come to chemists' minds when they think of organochlorines; (ii) Whatever its proper chemical classification, CFZ shares two characteristics usually associated with organochlorines; a tendency to accumulate in the fat of mammals (bio-accumulation) and persistence. These characteristics can be predicted from the formulation, and the graphical representation, of the compound. It was these two attributes of other organochlorines (especially DDT and dieldrin) that led to beef contamination crises in earlier years (notably 1987), when Australian beef was rejected by some importing countries (notably the United States and Japan). (iii) From the outset, Dr Lydiate knew of these two characteristics of CFZ, although he did not know their degree. Prior to the commencement of the marketing of Helix, he knew CFZ was persistent on cotton plants for at least 21 days and in soil for at least 245 days. He also knew studies involving cattle and poultry showed CFZ was continuing to accumulate at the end of the study period (56 days). (iv) The only reason Dr Lydiate (and ICI) did not know the extent of CFZ's bio-accumulation and persistence characteristics was because the company failed to undertake the full environmental field studies recommended by specialist scientists in ICI U''s Environmental Services Division at Jealott's Hill. This failure occurred despite: (a) numerous expressions of concern, over a period of four years, by officers of ICI U' to senior officers of ICI Australia about the environmental hazards of CFZ; and (b) Dr Lydiate's knowledge that Ciba Geigy had decided not to seek registration of CFZ in the United States because of its environmental problems. Especially under these circumstances, the failure of ICI Australia to carry out the research necessary to quantify CFZ's characteristics of bio-accumulation and persistence, was a case of wilful blindness. (v) Helix was developed by ICI to combat two insects that feed on the cotton plant: cotton bollworm and the native budworm. Its major formulation was as an ultralight vapour intended for application by air. Aerial application necessarily involves the risk of over-spray and spray-drift. To a degree, the latter phenomenon is inevitable; satisfactory spray cover can only be achieved if there is some wind. It follows it was foreseeable that some Helix would finish up on non-target areas - adjoining land or waterways. The extent of the drift is impossible to predict. Mr Matthews, a former senior ICI officer with over 30 years experience of aerial spraying, said "spray drift can mean one metre beyond the fence or it can mean ten kilometres beyond the fence line". (vi) The importance of over-spray and spray-drift depended largely on what was beyond the fence. At all relevant times, the cotton areas of Australia comprised mixed farming and grazing areas. It was commonplace for cotton fields to adjoin areas used for the grazing of cattle, particularly beef cattle. Accordingly, it was probable that, from time to time, beef cattle on adjacent properties would ingest Helix, from contaminated pasture, waterways or soil. (vii) In addition, at material times there was a practice of feeding cotton plant waste to cattle. Although perhaps uncommonly, cattle were allowed to graze the stubble of harvested cotton plants; that is, the stalks left in the field after harvesting. There was also a more widespread practice of feeding to cattle what was left of the cotton plant after the ginning process; that is, after removal of the lint and cottonseed. This practice was well established, documented by academic writers and endorsed by DepAg and QDPI. It was, accordingly, foreseeable that any chemical material left on the plant at the time of harvest might be ingested by cattle. (viii) Helix was intended to be applied to the cotton plant during the last stage of its life, up to 21 days before harvest. The extent of CFZ's persistence on vegetation was never ascertained, but it was shown to persist for at least 21 days after application. Having regard to this knowledge about persistence, it was foreseeable that Helix would remain on the cotton plant at the time of harvest, and, if the residue of the plant was grazed by cattle, as stubble, or fed as gin trash, CFZ would be ingested by them. (ix) The significance of CFZ being ingested by cattle depends upon the consequences for their utility; CFZ did not affect the animals' health or well being. In the case of dairy cattle, any adverse consequence would primarily be contamination of their milk; in the case of beef cattle, contamination in their body tissues. It was important to ensure that any ingestion of Helix would not result in residues exceeding those acceptable for milk and body tissues respectively. (x) In relation to milk and meat intended for domestic consumption, the position was that, according to a long-established system enforced by State laws, the acceptability in a food of a chemical contaminant depends upon whether the level is below the MRL fixed by the NH&MRC. Shortly after registration of Helix, MRLs were set for CFZ in milk and cattle meat; but whether any contamination caused by Helix could be expected to remain within these limits could only be determined by studying its degree of bio-accumulation and persistence. (xi) ICI had no information as to the levels of residues that would result from ingestion of a particular quantity of CFZ, or as to the persistence of residues in the milk or tissues of cattle. ICI had access to a study carried out by Ciba-Geigy in America in 1985 that showed accumulation of CFZ in the milk and tissues of cattle. But the study was inadequate, both in terms of sample sizes and duration. It proved no more than that CFZ bio-accumulates. It did not negative the possibility that CFZ residues accumulated by cattle as a result of ingestion of Helix might exceed permitted MRLs, with consequential losses to affected graziers. (xii) A significant proportion of Australian beef, including beef produced in the areas where cotton is grown, is exported overseas. Despite the point being drawn to ICI's attention, no action was taken by it towards causing any overseas countries to establish MRLs for beef. This omission meant the detection of any level of CFZ in exported beef, however low, would probably lead to rejection of the shipment and publicity that would be harmful to the whole Australian beef industry. (xiii) The officers of ICI who made the decision to manufacture and distribute Helix were aware of all the above facts, with two exceptions: (a) They were not initially aware of the practice of feeding cotton waste to cattle. They should have been aware. The information was readily available from any one of at least three sources: ICI's own cotton representative in Narrabri; the two State governments, especially New South Wales which had published information bulletins recommending cotton trash as a stock feed; and published academic literature, to which the officers had access in ICI's library. (b) According to the evidence, they did not consider whether the Ciba-Geigy field study was adequate or showed acceptable results; so they did not realise its inadequacy and unsatisfactory results. They knew that Ciba-Geigy had decided not to pursue an application for registration of CFZ in the United States because of perceived environmental problems associated with its use. So far as the evidence reveals, no officer of ICI Australia ever inquired about these perceived problems. No officer considered whether they compelled abandonment of the chemical, or at least warranted full-scale field tests and/or a system of warning users and relevant members of the public about the risks attaching to the use of Helix. Once again, this was a case of wilful blindness. (xiv) ICI sold Helix during five cotton seasons: 1989-90, 1990-91, 1991-92, 1992-93 and 1993-94. Sales probably peaked in the last year, the worst year of a long drought that afflicted much of eastern Australia. It is probable this was also the year of peak feeding of cotton gin trash to cattle. (xv) In October-November 1994, it was discovered some cattle were contaminated by CFZ. Stringent measures were immediately adopted to curtail the movement and sale of contaminated cattle and exporters refused to purchase cattle having any degree of contamination. As a result of all this, many people suffered financial losses. (xvi) Nobody associated with ICI deliberately intended to cause contamination of cattle. The contamination resulted from lack of a proper system of work. Although ICI set up a project team to deal with CFZ, the team had no fixed program or work schedule and no member whose duty it was to consider the environmental implications of CFZ's use. No member of the team had qualifications in an environmental science. The team's brief was to achieve registration and sales as quickly as possible. The members directed their efforts only to that goal. They did no more than they thought necessary to satisfy the regulatory authorities. They satisfied themselves about the efficacy of Helix against its target insects, but they did not concern themselves with the wider question of the chemical's environmental safety or its effect on other agricultural pursuits. Nobody had, or took, responsibility to ensure information collected by individual members of the team was satisfactory and complete. Problems raised by outsiders, including officers of ICI U', were brushed aside if it was considered they were irrelevant to, or would complicate, the goals of registration and sales. ICI did not know the problems associated with Helix because, and only because, it did not take usual and obvious steps to find them out.
2. A few further comments are appropriate. First, it is a recurrent theme in ICI's submissions that it relied on the regulatory authorities. For example, its counsel say:
"Whatever the extent of bio-accumulation of a chemical, it should have been taken into account in the setting of the MRL and cease to be a matter of concern or relevance. There is no need to advise staff of this characteristic for the same reasons as have been given for it being useless to warn consumers of this characteristic. Knowledge of such a characteristic tells staff and consumers nothing about whether or not or when and how to use the chemical. All issues relating to bio-accumulation and persistence should be taken into account in setting the MRL. There should be no remaining concerns about characteristics that need to be the subject of warnings."
1. It is not easy to reconcile this submission with ICI's argument that those who fed cotton trash to cattle were the authors of their own misfortune, in that they ought to have first tested the trash. If ICI staff were entitled to be free of concerns about the characteristics of any chemical that may have been used on the cotton plants, why not people such as graziers who have no knowledge of the chemical at all? However, there is a more fundamental point: bio-accumulation and persistence are linked. The significance of the ingestion of a given quantity of a chemical depends on the speed of depletion. And ICI misled the regulatory authorities about the persistence of CFZ. ICI told TCAC that CFZ had a half-life in soil of 160 days. I do not know what justification there was for making that statement; it was not supported by any residue studies submitted. Whatever its initial justification, the accuracy of the statement was at least thrown into doubt by the Egypt soil persistence study disclosed to Dr Lydiate and Dr Robert Brown at the Fernhurst meeting on 10 May 1989. Yet they did not disclose the Egypt study to TCAC, PACC or either of the two State registration authorities. Having left them to operate on a basis that was suspect, if not false, ICI can hardly argue it was entitled to rely on their decisions as to the safety of the product when proceeding to market it.
369. Second, some people who took cotton gin trash for use as a stock feed did test it for chemicals. Counsel submit "(t)hese persons had the resources or opportunity to test for chemical residues". After referring to the evidence, they proceed:
"In this situation it is not logical to foresee damage from the feeding of trash, rather the logical conclusion would be that those promoting and engaging in the practice would take the obvious and prudent steps to protect themselves against residues. Critically they were in fact doing testing which shows that in fact, as well as logic, there was no assumption that chemical manufacturers were guarding against such residues, rather the assumption was that those manufacturing and supplying the trash had to guard against residues."
1. As I understand the situation, ICI wish to support their cross-claims by alleging failure to test, or failure to test adequately and appropriately. They may also wish to raise such matters, by way of a claim of contributory negligence, against individual claimants. As these are all matters for the future, it is better for me to say little about the argument that the group members could, and should, have protected themselves by testing trash samples. I say only that I am not so persuaded, on the present evidence. I have in mind Mr McInnes' evidence of extensive testing of his samples, over a period of two years, without detection of any CFZ residue; the evidence of Dr Clark about the testing carried out by her company for Colly in 1992 and 1993 and the difficulty of detecting CFZ peaks on gas chromatographic analysis; and Mr Crisp's evidence about the difficulty in identifying the unknown peak that appeared on the Midco gas chromatograph reports. Later evidence may change my mind about this matter. However, considering it on the basis of the present evidence, for the purposes of evaluating the argument that capacity to test is an answer to the applicants' claim of breach of duty, I simply say I am not prepared to uphold that argument.
In my opinion, the applicants have established breach of the duty of care ICI owed to claimants in categories 1 to 4 outlined above.
Damage
371. There is no doubt that at least some of the claimants suffered damage. That is all I need say, at this stage. As there has not yet been an investigation of the quantum of any claimants' damages, it is also all I can say. But it is clear that, subject to any defence that may be available against any particular claimant in relation to any reserved matter, each individual claimant in categories 1 to 4 inclusive is entitled to recover damages against ICI in respect of such losses, if any, as he or she may have sustained by reason of its negligence.
Exemplary damages
372. However, there is one matter germane to damages with which I can deal immediately. That is because the claim arises out of a submission concerning ICI's conduct, rather than the quantum of the loss sustained by any particular claimant. I refer to Mr Rowe's submission that I should award exemplary damages against ICI in respect of its negligent conduct towards the claimants. He suggested the appropriate measure of those damages is the gross profit from the sale of Helix in the years 1990 to 1994, this to be on top of compensatory damages.
373. I doubt it would be possible to assess in that way the exemplary damages payable to each claimant. It must be remembered that not all group members are yet known. More fundamentally, however, this is not a case for exemplary damages.
374. The authorities on exemplary damages were discussed in a recent Full Court judgment to which I was a party: see Sanders v Snell (1997) 143 ALR 426 at 450-456. I need not repeat that discussion. I accept that exemplary damages are available, in Australia, in a negligence case; the fetters imposed on English law by the decision in Rookes v Barnard [1964] AC 1129 do not apply: see Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118 and Australian Consolidated Press Ltd v Uren (1966) 117 CLR 185. But there must be something more than mere negligence, however gross. As was said in the 12th edition of Mayne & McGregor on damages (applied in Sanders v Snell at 451), exemplary damages:
"can apply only where the conduct of the defendant merits punishment, which is only considered to be so where his conduct is wanton, as where it discloses fraud, malice, violence, cruelty, insolence or the like; or as it is sometimes put, where he acts in contumelious disregard of the plaintiff's rights."
1. In my opinion, the negligence exhibited by ICI in the manufacture and distribution of Helix warrants the epithet "gross"; but it was negligent conduct, thoughtlessness and lack of professionalism, not deliberate action or action taken in contumelious disregard of anyone's rights. I reject the claim for exemplary damages.
THE CASE AGAINST ICI: THE TRADE PRACTICES ACT
The basis of the claim
376. The applicants claim that ICI's conduct in relation to the manufacture and distribution of Helix contravened s 52(1) of the Trade Practices Act 1974. That subsection provides:
"(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive".
1. Each of the three ICI respondents admits it acted in trade or commerce in relation to its relevant acts.
378. Section 82 of the Trade Practices Act enables a "person who suffers loss or damage by conduct of another person that was done in contravention of" s 52, amongst other provisions, to recover that loss or damage. There must be a causal relationship between the conduct and the loss or damage: see per Mason CJ in Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 at 525. Often the causal relationship is established by proof that the applicant relied on an act or statement of the respondent. But this is not essential. For example, in Janssen-Gilag Pty Limited v Pfizer Pty Limited (1992) 37 FCR 526, Lockhart J held good a company's claim to recover damages for losses sustained by it as a result of a competitor's allegedly misleading advertising. The company contended the advertising caused it to lose sales it otherwise would have made. At 530 his Honour referred to the use of the preposition "by" and commented:
"Loss or damage must directly result from or be caused by the respondent's conduct. The respondent's conduct must be the real or direct or effective cause of the applicant's loss; it must have been 'brought about by virtue of' the conduct which is in contravention of s 52". 379. In their Fourth Further Amended Statement of Claim the applicants particularised the alleged misleading conduct by saying, "(i)n the premises," ICI should have: (i) provided a warning that CFZ had a tendency to build up residues in tissues of cattle if they consumed the "feed and water" i.e. cotton trash and by-products, stubble, pasture and water from waterways; and (ii) notified a withholding period which corresponded with the persistence of CFZ in crops, stubble, trash and by-products.
Counsel's contentions
380. In support of the misleading conduct case, Mr Rowe repeats his submissions on negligence, especially those concerning breach of the duty of care. He specifies many matters. In particular, he emphasises what he describes as misleading conduct by ICI in relation to its application for clearance and registration. However, many of these matters fall outside the applicants' pleaded case. In particular, the Fourth Further Amended Statement of Claim makes no reference to ICI misleading any of the regulatory authorities. The general allegations are qualified by the words "(i)n the premises"; that is, what has gone before. The previously-mentioned material does not include misleading the regulatory authorities. Nor was such a case litigated. In relation to their s 52 claim the applicants must be confined to their pleaded case.
381. For people falling within ICI's duty of care, it seems not to matter whether or not they suffered loss by reason of conduct contravening s 52 of the Trade Practices Act. They are entitled, at common law, to recover whatever losses they have sustained as a result of ICI's negligence; and this is likely to include any items of loss recoverable under s 82 of the Trade Practices Act. In practical terms, as it seems to me, the s 52 claim is important only to those who fall outside the ambit of the duty of care - claimants falling within categories 5, 6 and 7 above.
382. Counsel for ICI contend the s 52 claim must fail in its entirety. They put three propositions which I will deal with separately.
Standing
383. The first proposition is that the claim regarding a withholding period must fail because neither the applicants nor Mr Blomfield, the Queensland sub-group representative party, "ever used Helix or read or relied upon the withholding period, nor was there any evidence their losses arose from anyone else doing so". Consequently, it is said, "they have never had a sufficient interest in a section 52 claim to commence or maintain the proceeding".
384. The factual assertions are correct, but they do not have the effect argued by counsel. Counsel do not challenge the entitlement of the applicants and Mr Blomfield to make a s 52 claim based upon the other item of alleged misleading conduct, omission to warn against the tendency to bio-accumulate. If they have the right to make that claim, they are each a "person ... who has a sufficient interest to commence a proceeding on his or her own behalf against another person" (ICI) within the meaning of s 33D(1) of the Federal Court of Australia Act. Therefore, by force of that subsection, each has a sufficient interest to commence a representative proceeding against ICI on behalf of other persons referred to in s33C(1)(a) of the Act: "7 or more persons who have claims against" ICI. Once the proceeding is properly instituted, of course, associated claims may be added: see s 32 of the Federal Court of Australia Act. From a jurisdictional point of view, it does not matter if the principal claim fails. At least unless the principal claim is merely colourable, associated claims must be considered on their merits: see Burgundy Royale Investments Pty Ltd v Westpac Banking Corporation (1987) 18 FCR 212 at 219. There is no suggestion of colourability here. It follows that the applicants, and Mr Blomfield, have standing to assert all claims, of any group members, associated with the s 52 claim in relation to which ICI acknowledges their standing to sue.
The withholding period
385. Counsel's second proposition is also directed to the second particularised item of misleading conduct: the failure to notify an appropriate withholding period. They say there is no evidence this conduct was misleading or deceptive or likely to mislead or deceive. They refer to the fact that the Fourth Further Amended Statement of Claim refers to ICI's advice to users of Helix "that the goods must not be applied to the crops later than 21 days before harvest". They argue there is no logical connection between the 21 day withholding period and the persistence of CFZ. They rightly say that, on the evidence, the withholding period was determined by reference to the expected use pattern of the chemical and say this "involved no implied assertion that CFZ did not persist longer than 21 days".
386. I think a person might easily be misled by the notified withholding period into believing that, if it was observed, there would be no persistence problem. The statement made on the various Helix brochures and labels was: "Withholding period. Do not apply later than 21 days before harvest". These words constitute a clear instruction, a clear warning. A reader would understand there might be a problem, perhaps a danger of contamination, if the chemical was applied less than 21 days before harvest. Equally, I think, a reader would assume there would be no problem, or danger of contamination, if the instruction was observed; otherwise why specify 21 days? A reader who had no knowledge of the manner of determining withholding periods would be unlikely to realise that there was no connection between the warning and the persistence of the chemical; that 21 days was selected only because a cotton farmer would not usually wish to use the chemical at a later point of time. Although I accept that the Helix withholding period was selected in this way, and the approach is not unusual, the result is surprising, even bizarre. What is the point of a manufacturer warning a user against doing something the user would not wish to do anyway? Especially when this might lead people into thinking that, provided there is compliance there will be no problem.
387. At this stage there is no evidence of anybody relying on the stated withholding period or suffering loss because it conveyed a misleading impression. As counsel for ICI point out, only one witness (Mr Jackson) claimed to have read the label and he did not say he interpreted the statement about a withholding period to mean that CFZ did not persist longer than 21 days. However, issues of reliance and causation have not been determined. Although I think it doubtful that any person in categories 5, 6 and 7 above will be able to make out a case in respect of this issue, that is for the future.
Silence
388. The first particularised item of allegedly misleading conduct is a failure to warn about bio-accumulation. The applicants do not allege that ICI made a positive statement about bio-accumulation. Rather, they suggest that ICI's silence on the subject was misleading. Apparently, the suggestion is that ICI's failure to mention bio-accumulation in the Helix brochures and labels misled purchasers, and their advisers, in relation to its characteristics, and this caused damage to some or all the claimants. So far, the evidence does not establish either element of that suggestion. It may be difficult for anyone in categories 5, 6 and 7 to make out a claim under this head. Once again, however, that is for the future.
The fate of the s 52 claim must be reserved for future determination.
THE CASE AGAINST THE STATES: NEGLIGENCE
The applicants' claims
1. The applicants' negligence claim against the States has undergone some metamorphosis during the course of the proceeding. However, it became clear early in the hearing - if not previously - that the applicants rely on three separate categories of act or omission. (i) The decisions of the representatives of New South Wales and Queensland to concur in TCAC's decision to grant clearance to Helix and AAVCC's decision to extend that clearance; (ii) The decisions of the relevant functionaries of each State to register Helix under State law; and (iii) The making of representations (written and oral) by officers of DepAg and QDPI, to graziers and others, concerning the suitability of cotton gin trash as a stock feed.
2. The applicants say each of these actions was undertaken by a person acting as a servant or agent of the relevant State, so the State is liable for his or her negligence. Each State concedes that its officers who made representations did so in the course of their employment, so it would be vicariously liable for any negligence in making those representations. Neither State concedes that the people who participated in the decisions of TCAC and AAVCC did so in the course of their employment or as servants or agents of the States by whom they were ordinarily employed; they say the participants acted as independent appointees to each of two committees organised by or on behalf of the Commonwealth government. Counsel emphasise that AAVCC, though not TCAC, was a statutory committee whose members were appointed by the Commonwealth Minister, albeit one member was appointed on the nomination of each of New South Wales and Queensland.
Decisions in relation to clearance and registration
391. It is convenient to deal together with the first two categories of act or omission relied on by the applicants; they are linked. The decision by TCAC to grant clearance had no legal effect; it did not overcome the prohibitions on sale or supply imposed under State law: see the Pesticides Act (NSW) ss 29 and 30, noting the wide definition of "sell" in s 5, and the Agricultural Standards Act (Qld) s 15, noting that "agricultural requirement" is defined in s 7 so as to include a pest destroyer, and the definition of "sale". A negligent decision to grant clearance would not, of itself, damage persons in the position of the present claimants. Damage would occur only if the clearance was followed by a State decision to effect registration of the chemical. Nonetheless, by 1987 at least, in making their decisions about registration, the States were prepared to be guided substantially by TCAC's decisions on clearance. It would not have been a coincidence that New South Wales was represented on TCAC by its Registrar of Pesticides, the officer empowered under s 13 of the Pesticides Act to effect registration, or that Queensland was represented by its Assistant Standards Officer, a member of the Agricultural Requirements Board which decided pest destroyer applications under s 18 of the Agricultural Standards Act. In this situation, the correct approach is to treat the whole continuum of activity embracing clearance and registration as a single act.
392. In discussing the case against ICI, I criticised the material it placed before TCAC and the two States. Except in relation to the Egypt soil persistence study, which was not disclosed to any regulatory authority, those criticisms apply equally to the members and officers of TCAC, PACC, AAVCC and the State government instrumentalities that dealt with the applications for clearance, extension of clearance and registration. These people knew the nature of the chemical and the manner of its application; and, therefore, the risk of bio-accumulation in cattle from over-spray and spray-drift. If they had given the matter competent consideration, they would have seen the inadequacies of the Ciba-Geigy cattle and poultry residue studies but realised that, inadequate or not, the studies showed CFZ persisted in body tissues. They knew no overseas MRLs had been obtained. They knew of the 1987 beef crises; they ought to have had them scarred on their brains.
393. The members of TCAC, at least, knew cotton stubble was sometimes grazed by cattle. If they had thought about the matter at all, they would have realised the possibility of cotton gin trash being fed to cattle. If they had heeded the guidelines in their own "TCAC bible", they would have insisted on ICI supplying information about the end-use of the cotton plant, and thereby learned of its use as a feed. Likewise if they had searched the literature, or inquired of DepAg. But none of these things happened, for much the same reason as for ICI: it was nobody's task to look at the clearance submission as a whole, to consider the nature of the chemical, the likely incidents of its use and the adequacy of the supporting information. Instead, the voluminous package of documents was immediately divided amongst four separate agencies who apparently made specialist assessments in isolation from each other. Residues were seen as the province of PACC and NH&MRC, the material relating to residues was detached and sent to PACC without any comment, from people having practical agricultural experience, about the sufficiency of the data or the relevance of an MRL for cotton seed as opposed to other cotton products. The scientists, like Mr Hamilton, who advised PACC and NH&MRC were insufficiently briefed on industry practice; but because the scientists were experts in their own fields, the members of TCAC assumed the MRLs they selected would cope with any residue problem. It was not the practice for PACC or NH&MRC to tell TCAC how PACC had reached its recommendations on MRLs or what facts it had assumed; NH&MRC merely notified the decision. And it was not the practice for TCAC to inquire about these matters. To pick up a comment made during the hearing, the system lent itself to the phenomenon "garbage in, garbage out".
Policy decisions
394. Having said all this, I do not think either State is liable in damages for the performance of their representatives on TCAC or AAVCC. I do not say this because I adopt the submission that the States are not vicariously liable for any negligence of their representatives on these committees; though I think that is strongly arguable, especially in relation to AAVCC. I reach my conclusion because of the nature of the tasks upon which the two committees were engaged when granting and extending clearance, and the nature of the decisions to register Helix under State law. I think all those decisions fall into the policy, rather than operational, area.
395. The inquiry whether an action of a public authority falls into the policy or operational area is an aspect of the inquiry about proximity: see per Gibbs CJ in Sutherland Shire Council v Heyman at 441, quoting from the House of Lords decision in Governors of the Peabody Donation Fund v Sir Lindsay Parkinson Co Ltd [1988] AC 210 at 246. At 442, Gibbs CJ went on to say:
"The distinction between the area of policy and the operational area is a logical and convenient one. There is no doubt that a public authority may be liable for the negligent acts of its servants or agents in carrying out their duties, or exercising their powers, within the operational area, although if the performance of their duties or the exercise of their powers involves the exercise of a discretion, an act will not be negligent if it was done in good faith in the exercise of, and within the limits of, the discretion."
1. Mason J said at 468-469:
"The standard of negligence applied by the courts in determining whether a duty of care has been breached cannot be applied to a policy decision, but it can be applied to operational decisions. Accordingly, it is possible that a duty of care may exist in relation to discretionary considerations which stand outside the policy category in the division between policy factors on the one hand and operational factors on the other. ... The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognize that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints. Thus budgetary allocations and the constraints which they entail in terms of allocation of resources cannot be made the subject of a duty of care. But it may be otherwise when the courts are called upon to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness."
397.In Rowling v Takaro Properties Ltd [1988] 1 AC 473, the Judicial Committee expressed reservations about the policy/operational dichotomy. Delivering the advice of the Committee, Lord Keith of Kinkel said at 501:
"[Their Lordships] incline to the opinion, expressed in the literature, that this distinction does not provide a touchstone of liability, but rather is expressive of the need to exclude altogether those cases in which the decision under attack is of such a kind that a question whether it has been made negligently is unsuitable for judicial resolution, of which notable examples are discretionary decisions on the allocation of scarce resources or the distribution of risks ... If this is right, classification of the relevant decision as a policy or planning decision in this sense may exclude liability; but a conclusion that it does not fall within that category does not, in their Lordships' opinion, mean that a duty of care will necessarily exist."
1. In a practical sense, there may not be much difference between the two approaches; an action of a public authority that reflects substantial financial, economic, social or political factors will readily be recognised as unsuitable for judicial resolution. And if an action is intuitively thought unsuitable for judicial resolution it will probably be because it involves one of those factors to a marked degree. Of course, however it is stated, the question will usually be one of degree; many operational actions involve a discretionary element. It is not enough that the relevant act or omission flowed from the exercise of a discretion; see, for examples, the cases cited by Gibbs CJ in
Heyman
at 442 concerning building and planning approvals by councils. However, at a certain point, the discretionary element may become so dominant that the act or omission may properly be regarded as a manifestation of policy, and so unsuitable for judicial resolution.
399. The point I make is illustrated by a decision of Burchett J, Alec Finlayson Pty Ltd v Armidale City Council (1994) 51 FCR 378. Land within the City of Armidale had been used for industrial purposes. The respondent caused it to be re-zoned as residential land and granted development approvals for various subdivisions and buildings. After the applicant purchased the land and carried out subdivision works and the construction of cottages, the land was found to be contaminated with a combination of creosote and copper chrome arsenate. The applicant sued the council alleging it had acted negligently in relation to the re-zoning of the land and the subsequent development approvals. Applying the policy/operational dichotomy discussed in Heyman, Burchett J drew a distinction between the re-zoning decision on the one hand and the development approvals on the other:
"A development approval, to use words which Mason J used in Sutherland Shire Council v Heyman, is 'the product of administrative direction, expert or professional opinion, [and] technical standards'. It is an operational decision. And it is not perplexed by the kind of 'very delicate choice' which forbad the application of the ordinary law of negligence in Yuen 'un Yeu v Attorney-General (Hong Kong) [1988] AC 175 at 195. Indeed, in this particular case, the evidence does not suggest that any policy considerations intruded in any way into the development approvals which were granted. But a decision to re-zone an industrial area of Armidale, in order to concentrate industrial activity in a particular quarter of the city, although that involves relocation of some industries, is plainly a policy decision; and the extent to which resources are committed or not committed to the investigation of the suitability of every part of the land involved to be utilised for the purposes to be permitted by the new zoning, without the imposition of some, perhaps stringent, conditions, is also a policy decision. Accordingly, I think the applicant's case fails, so far as it fastens upon the decision to re-zone the area including the subject land for residential purposes."
1. However, his Honour held the applicant was entitled to succeed in relation to the development approvals. The point, obviously, was that there was a significant difference between the degree of discretion that the council had to exercise in relation to the re-zoning of the land, on the one hand, and subsequent development approvals, on the other. The two categories of decision fell on different sides of the policy/operational divide.
401. Another useful statement of the position is to be found in the speech of Lord Browne-Wilkinson in X (Minors) v Bedfordshire County Council [1995] 2 AC 633 at 735:
"It is clear that a common law duty of care may arise in the performance of statutory functions. But a broad distinction has to be drawn between: (a) cases in which it is alleged that the authority owes a duty of care in the manner in which it exercises a statutory discretion; (b) cases in which a duty of care is alleged to arise from the manner in which the statutory duty has been implemented in practice. An example of (a) in the educational field would be a decision whether or not to exercise a statutory discretion to close a school, being a decision which necessarily involves the exercise of a discretion. An example of (b) would be the actual running of a school pursuant to the statutory duties. In such latter case a common law duty to take reasonable care for the physical safety of the pupils will arise. The fact that the school is being run pursuant to a statutory duty is not necessarily incompatible with a common law duty of care arising from the proximate relationship between a school and the pupils it has agreed to accept. The distinction is between (a) taking care in exercising a statutory discretion whether or not to do an act and (b) having decided to do that act, taking care in the manner in which you do it."
1. A clue to the proper categorisation of the decisions to grant, and extend, clearance to Helix and to register the chemical in New South Wales and Queensland is to be found, I think, in
Yuen Kun Yeu,
referred to by Burchett J. That was an appeal to the Judicial Committee of the Privy Council from Hong Kong. The appellants deposited money with a company that subsequently went into liquidation, causing them loss. The company had been registered as a deposit-taking company by a Hong Kong government official called the Commissioner of Deposit-taking Companies. The appellants claimed the Commissioner acted negligently in relation to the registration and sought damages from the government. A judge struck out the action as disclosing no reasonable cause of action. The Court of Appeal of Hong Kong affirmed that decision, as did the Judicial Committee. The Committee took the opportunity of disavowing the "two-stage" approach of Lord Wilberforce in
Anns v Merton London Borough Council
[1978] AC 728, as the High Court of Australia had already effectively done in
Heyman
. Speaking for the Judicial Committee, Lord Keith of Kinkel at 194 identified the "primary and all-important matter for consideration" as being "whether in all the circumstances ... there existed between the commissioner and would-be depositors with the company such close and direct relations as to place the commissioner, in the exercise of his functions under the Ordinance, under a duty of care towards would-be depositors". He went on:
"Among the circumstances of the case to be taken into account is that one of the purposes of the Ordinance (though not the only one) was to make provision for the protection of persons who deposit money. The restrictions and obligations placed on registered deposit-taking companies, fenced by criminal sanctions, in themselves went a long way to secure that object. But the discretion given to the commissioner to register or deregister such companies, so as effectively to confer or remove the right to do business, was also an important part of the protection afforded. No doubt it was reasonably foreseeable by the commissioner that if an uncreditworthy company were placed on or allowed to remain on the register, persons who might in the future deposit money with it would be at risk of losing that money. But mere foreseeability of harm does not create a duty, and future would-be depositors cannot be regarded as the only persons whom the commissioner should properly have in contemplation. In considering the question of removal from the register, the immediate and probably disastrous effect on existing depositors would be a very relevant factor. It might be a very delicate choice whether the best course was to deregister a company forthwith or to allow it to continue in business with some hope that, after appropriate measures by the management, its financial position would improve."
1. Although the nature of the statutory discretion is very different, this approach can be applied to the present case. TCAC was not exercising a statutory function, so the discretion it exercised was not a statutory discretion. But it was a discretion in relation to a matter of public importance, exercised in the discharge of public responsibilities formulated by an inter-government Ministerial committee, the Standing Committee on Agriculture. Those responsibilities are set out in section 5(ii) of these Reasons. It is clear that, in a particular case, some elements of responsibility might collide with others. For example, the justification for introducing the chemical, and/or the consideration of its efficacy, may conflict with safety or environmental effects. "Possible effects on international trade" may support clearance in some cases; but may be a negative factor in others.
404. In the present case, there is no evidence that TCAC engaged in a process of weighing competing considerations before reaching an ultimate conclusion; the applicants' very point is that TCAC did not assemble the data it needed to make an informed decision. I have already indicated my agreement with that criticism. But the critical question, in determining the existence of a duty of care, is the nature of the task that had to be performed; not whether, in the particular case, it was performed well or badly. A duty of care is something imposed by the law on a person having a particular relationship with another person. If the relationship exists, the duty exists; even though there may be no breach of duty. In Heyman, Mason J spoke of "decisions which involve or are dictated by financial, economic, social or political factors or constraints". He was addressing the nature of the decision, not whether, in a particular case, the decision-maker in fact looked at financial, economic, social or political factors.
405. It seems to me the decision TCAC had to make, in deciding whether to grant or withhold clearance, was one that, by its very nature, involved all these factors. ICI perceived a gap in the cotton pesticide market. It believed that cotton bollworm were developing resistance to pyrethroids and it was advisable to use a different chemical in Stage III. It seems that view was shared by Mr Waterhouse, at least. The view had financial implications for cotton farmers, and implications for the national economy; cotton was a major export. In determining whether to grant clearance to CFZ, TCAC was entitled to consider the correctness of this view and the desirability, from the viewpoint of both individual farmers and the nation, of providing an alternative Stage III chemical. TCAC also had a responsibility to consider social factors, such as safety to operators, consumers, crops, soil, livestock etc, and environmental effects. Matters such as these might support a refusal to permit the new chemical, as Dr Kretschmer initially thought. But he allowed himself to be persuaded to agree to a conditional approval, presumably because of the financial and economic considerations mentioned above. For present purposes, it does not matter which was the better of his two views. His experience demonstrates that TCAC's decision involved the factors mentioned by Mason J. It was a policy decision within the meaning of authorities such as Heyman. It was also a decision "unsuitable for judicial resolution", to apply the test adopted in Rowling.
406.I have concentrated on the TCAC clearance decision because, in practice, it was the key decision. However, at law, clearance did not automatically mean State registration. Both the New South Wales Pesticides Act and the Queensland Agricultural Controls Act contained provisions establishing a registration regime and requiring a decision by an official or a Board.
407. The New South Wales Act did not specify any criteria for the registration decision. Section 13(1) simply provided: "The Registrar, after receipt of an application for registration of a pesticide, may register the pesticide." Section 13(3) permitted the registration to be made subject to conditions. There were provisions regarding consequential actions, including in relation to labels and containers. However, as I say, no criteria were specified. The Registrar would have been entitled to take into account any factors that fell within the scope and purpose of the Act. They undoubtedly included the matters falling within the responsibilities of TCAC.
408. Section 18 of the Queensland Act conferred on the Agricultural Requirements Board the duty of deciding an application for registration of a pest destroyer. The Standards Officer actually effected registration, but was entitled to do so only after a recommendation from the Board. If the Board recommended registration, and all conditions were complied with, the Standards Officer was bound to register, having no independent discretion. But the Board had a discretion, limited only by the scope and purposes of the Act, and s 18(2)(c). That paragraph forbad the Board to recommend registration "where it is of the opinion that the requirement is not efficacious as claimed or intended to be claimed", unless the recommendation was made subject to a condition ensuring efficacy. I have no doubt the Board was entitled to take into account the full range of factors open to TCAC.
409. AAVCC extended TCAC's clearance on two occasions, on 10 September 1992 and 27 April 1993. Without those extensions, each of the States would presumably have cancelled their registration of Helix, thereby bringing to an end its lawful sale, supply and use in Australia. The evidence does not disclose the mechanics of either extension. It does not reveal who decided to grant them or what matters were taken into account. I suspect the applications for extension were treated as matters of routine, because the arthropod and aquatic fauna study had not been evaluated. The extensions may have been granted by an officer of AAVCC without reference to Council. However, as with the TCAC decision, this does not affect the nature of the discretion AAVCC was required to exercise; if my suspicion is right, it simply means the matter was not well-handled.
410. In relation to the nature of the decision AAVCC was required to make, it is sufficient to refer to the objects of its Act, set out in section 6(ii) above. Those objects are extremely broad and include potentially conflicting factors of the kind discussed by Mason J in Heyman.
411. In my opinion, all the decisions concerning clearance, registration and extension of clearance were policy decisions. It was foreseeable that a negligent act or omission in relation to them might cause damage to persons whose cattle were affected by the subject chemical. That circumstance underlined the importance of the people concerned with the decisions acting in a careful and professional manner. However, because of the nature of the relevant decisions, it did not give rise to a duty of care to the cattle owners, enforceable by an action in negligence.
Representations by DepAg and QDPI officers
412. The only area of substantial factual controversy in this case concerns certain oral statements alleged to have been made to graziers by officers of DepAg and QDPI. I do not find it necessary to resolve any of those disputes. It is abundantly clear that, over a period of years, DepAg and QDPI recommended the use of cotton gin trash as a stock feed, at least during periods of drought. Their publications make this clear. It is impossible to doubt that, in the bad drought of 1991-94, many graziers were influenced to feed cotton trash by those publications and things said by departmental officers.

413. As both States concede, in making statements to graziers and/or distributing departmental publications, officers of DepAg and QDPI were acting in the course of their employment and on behalf of their employer government; so the relevant government is vicariously liable for any tortious acts or omissions they may have committed.
414. Notwithstanding all this, I reject the argument that New South Wales and Queensland are vicariously liable in respect of the representations (documentary or oral) made by departmental officers. I do so because it has not been established that any of the officers concerned with the making of the representations knew, or ought to have known, that cotton gin trash was an unsuitable cattle feed. The evidence, especially that of Professor Richardson and Professor Leng, establishes that cotton gin trash is not an inherently unsuitable stock feed. The two professors differ in their enthusiasm for the feed, but they agree it is at least a useful supplement in dry times. And 1991-94 was a dry time, to put the matter mildly. The grazier witnesses also differed in their enthusiasm for cotton trash, but nobody suggested it was inherently unsuitable as a supplemental feed. As is common ground amongst all witnesses and all parties, the only problem was the possibility of chemical residues.
415. The next step is not common ground, but appears clear. Although there was a possibility of residues of other chemicals, and other chemicals were routinely found on analyses of cotton trash, those circumstances did not make cotton trash an unsuitable stock feed. There were concerns about endosulfan residues, and QDPI put in place a regime for controlling them. But endosulfan has a short depletion time; in fact there was no problem. Although QDPI officers continued to monitor the situation, endosulfan contamination did not cause them to curtail the feeding of cotton trash to cattle; on the evidence, rightly so.
416. The only reason why cotton gin trash was an unsuitable stock feed was the possibility of bio-accumulation from CFZ. But it is not shown that any of the departmental officers who were involved in the making of representations were aware of that possibility. In making that statement, I have in mind both the officers concerned in the preparation and distribution of publications like "Agfacts", "Farm Notes" and "The Drought Survival Guide", and the field officers who distributed these publications to graziers and other members of the public and provided information and advice. I accept, of course, that all these officers would have been aware that the cotton industry is heavily dependent on chemicals, especially insecticides; that has long been public knowledge. I accept also that, if they had thought about it, the officers would have realised there was a possibility of chemical residues persisting on the plant at harvest time, and so remaining on the trash when it was fed to livestock. The evidence shows some officers did think about it: see, for example, the exchange in May 1991 between Mr Southwood and Mr Allerton mentioned in section 3(iii) above. But they concluded there was no problem.
417. It seems to me likely that some departmental officers concerned with the representations, particularly those stationed in the cotton areas, knew of Helix as a specific product. But I see no basis for inferring that they knew, or ought to have known, it was bio-accumulative; the evidence shows that ICI's own field staff were unaware of this, and they were informed about the product by senior officers and ICI publications. Nor do I see any basis for inferring that the relevant departmental officers knew, or ought to have known, that Helix contained an active ingredient that was so persistent it might cause a serious problem for any grazier who used cotton trash as a cattle feed. If they thought about that matter at all, the endosulfan experience might have given them the idea that any chemical residue in the cattle would quickly be depleted and cause little inconvenience or loss. And it is reasonable to assume that most, if not all, the departmental officers were aware of the clearance and registration system and, like some of the ICI personnel who gave evidence, assumed registration meant residue concerns had been fully addressed.
418. The applicants impliedly concede the correctness of what I have just written. They do not suggest there is evidence that any departmental officer involved in the making of representations had knowledge of the undesirability of feeding cotton trash, or of facts from which he or she should have realised this practice was undesirable or dangerous. Their argument, on this aspect of the case, depends on a notion of corporate pooling of information. Counsel submits:
"The representation was negligent because the Department of Agriculture knew that the registration system it ran, and clearance system in which its Registrar of Pesticides participated, did not require any residue analysis based on the feeding of cotton foliage. It was further negligent given that the Department of Agriculture knew through receipt of the ICI registration package and through its representatives on the TCAC and ACAC that Helix was bio-accumulative. It was further negligent because the endosulfan incident in 1991-2 was known to the Department and yet it continued to make representations to the effect that cotton foliage was suitable as a livestock feed. It was further negligent given the fact that Helix was registered for use in NSW and Qld and each knew that there were no tolerances in export markets."
1. I am not sure it is technically correct to say that, in either State, the relevant department (DepAg or QDPI) "ran" the registration system or to describe the Registrar of Pesticides or Agricultural Standards Officer as "its" Registrar. But there was a close association; at least in Queensland, as Mr Waterhouse's evidence shows. It is debatable, I think, whether it is correct to describe the New South Wales and Queensland members of TCAC or ACAC as "its" (each Department's) representative. There is no evidence about the New South Wales position; but there is evidence that Mr Waterhouse was appointed, albeit by the Director General of Agriculture, as "Queensland representative" on TCAC. It seems to me this correctly states the position; TCAC was an intergovernmental organisation rather than an interdepartmental one.
420. However, nothing turns on fine distinctions like these. The basic flaw in counsel's submission is that it overlooks the necessity to prove personal fault, if an employer is to be made liable. It is not sufficient to add up the snippets of information held by various people in an organisation and say the organisation "knew", or ought to have known, something.
421. The situation was explained by Walsh J in Ramsay v Appel (1972) 46 ALJR 510. The respondent in that case was a six year old boy at the time of the accident from which the case arose. While he was playing, after school hours, in the grounds of the State public school at which he was a pupil, he was hit in the eye by a ball thrown by another boy. The ball had been moulded out of a quantity of slaked lime left within the grounds by servants of the Department of Public Works. One question for the High Court was whether there was evidence to support a conclusion that the government, as occupier of the land, had such knowledge of the relevant danger as was necessary to render it liable for breach of a duty owed to the respondent as a licensee. Walsh J (with whom Gibbs and Stephen JJ agreed) said at 516-517:
"It is clear that it could have been found that servants of the Government knew that the slaked lime was in the school grounds at the relevant time. It was put or left there by employees of the Department of Public Works. The inference was open also, although I do not think that this matters, that teachers employed in the Department of Education knew that it was there. But if I have correctly described the relevant danger, it was not enough for the respondent to establish knowledge on the part of the Government's employees that the lime was there. It was necessary also to provide some evidence upon which it could be found that some person or persons for whom the Government was responsible knew of the harm that could arise from the corrosive quality of the material and which could befall children coming to the place where the lime was or at least that some such person or persons had knowledge of facts such that a reasonable man possessed of that knowledge would have appreciated that there was a danger of such harm to the children." (Emphasis added.)
1. The applicants in the present case have not provided evidence from which it can be found that a particular person or persons, who made representations on behalf of New South Wales or Queensland, knew or ought to have known there was a risk of serious contamination of cattle from feeding cotton gin trash.
423. The applicants' negligence claim fails, as against both States.
THE CASE AGAINST NEW SOUTH WALES: THE FAIR TRADING ACT
The basis of the claim
1. The applicants made a Fair Trading Act claim only against New South Wales; at the time of the representations there was no equivalent Queensland Act. The New South Wales Act is the Fair Trading Act 1987. Section 42(1) provides: "(1) A person shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive".
2. The applicants pleaded that New South Wales contravened this section "in making the second Department of Agriculture representation": see para 80 of the Fourth Further Amended Statement of Claim. The term "second Department of Agriculture representation" was defined by para 77 as a representation, during the period 1985 to 1994, by staff and employees of DepAg "that the feed and water were suitable for consumption by the cattle". The term "feed and water" was defined in such a way as to include cotton trash. So the allegation is that the conduct of DepAg employees in representing that cotton trash was suitable for consumption by cattle was misleading or deceptive or likely to mislead or deceive. There was no allegation of an intention to mislead or deceive, but this is not necessary: compare
Hornsby Building Information Centre Ltd v Sydney Building Information Centre Pty Ltd
(1978) 140 CLR 216 at 223 and
Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd
(1982) 149 CLR 191 at 197, dealing with the almost identical wording of s 52 of the
Trade Practices Act
.
426. The applicants particularised the "second Department of Agriculture representation" by referring to various DepAg publications and some alleged oral representations. There is some dispute about the oral representations. But the publications are in evidence and there is no doubt that, in the relevant period, DepAg recommended cotton trash as a suitable stock feed. Having regard to the CFZ contamination problem, in the latter part of the period, it was not a suitable stock feed. During this time, the representation of suitability was misleading, although made without knowledge of that fact or intent to mislead.
Application of the Act
1. However, counsel for New South Wales contend that s 42 does not affect their client, in relation to the representations, because of the circumstances under which the representations were made. Section 4 of the Act provides that the term "trade or commerce" includes "any business or professional activity". The word "business" is defined as including: "(a) a business not carried on for profit; and (b) a trade or profession."
2. Section 3 provides that the "Act binds the Crown in right of the State in so far as the Crown in right of the State carries on a business, whether directly or by an authority of the State".
429. It will be apparent that the application of s 42 to this case turns on whether the representations were made by New South Wales in the course of carrying on a business.
430. The provisions to which I have referred were discussed by Rolfe J of the New South Wales Supreme Court in Durant v Greiner (1990) 21 NSWLR 119. He held that, in the context of the Fair Trading Act, the word "business" should be taken as referring to "trade, commercial transactions or engagement". I respectfully agree. On that understanding, it seems to me impossible to conclude that the publication of the relevant documents or the making of the alleged oral statements constituted, or were part of, the carrying on of a business. These were activities undertaken by a Department of State for the benefit of the farmers and the public generally. Australian governments have long provided advice and support to members of the rural community. They have done so not as a business venture, but because this has been thought a necessary community service. Traditionally, also, Australian governments have assisted in times of drought, both with advice and material assistance. Far from this being done for profit, it has often involved considerable cost.
431. It is apparent from the contents of the documents particularised by the applicants that they were produced and distributed as a public service. As I understand the position, Agfacts bulletins are published by DepAg from time to time in order to deal with topical agricultural issues. They are distributed free of charge to anybody who asks. The three editions of "The Drought Survival Guide" were published in quick succession in late 1994. The evidence does not establish whether the publication was distributed free of charge or at some cost. No price is marked on the cover so I suspect the former, particularly having regard to the circumstances and time of publication and intended readership. But even if a price was charged, this would not establish that DepAg was conducting a business; it would have to be shown that the publication and distribution was commercially-motivated.
432. The evidence includes several DepAg annual reports. They reveal the Department received fees for some services. This does not necessarily make the provision of those services the conduct of a business. It may or may not be so; one would need to look at the particular service. There is no income that raises this issue in relation to advice about stock feeding.
433. The Fair Trading Act claim must fail.
CONCLUSIONS AND ORDERS
Summary of conclusions
1. I summarise my conclusions in this way: (a) Subject to matters reserved for future consideration, the negligence claim by the applicants against ICI succeeds, but only in respect of themselves and those group members who fall within the following four categories of claimants: (i) Claimants (mainly graziers) whose cattle become contaminated by CFZ during the claimants' period of ownership; (ii) Claimants (graziers and others such as abattoir owners) who unwittingly purchased already-contaminated cattle; (iii) Claimants, such as meat processors and exporters, who owned meat that was found to be contaminated and was, therefore, condemned; and (iv) Claimants, such as feed lot owners, who found that cattle in their possession (but not ownership) were contaminated and thereafter incurred expense in holding them in detention. In relation to those claimants, I hold that ICI was under a duty of care in connection with the manufacture and distribution of Helix. In relation to all other claimants, I hold there was insufficient proximity between ICI and the claimants to give rise to a duty of care. Breach of the duties of care is established: see the summary of findings in section 8(vii) above. There is evidence of damage, but its extent has yet to be investigated. The claim for exemplary damages fails. (b) The negligence claim by the applicants against New South Wales and Queensland fails. Although I am of the view that the members of TCAC acted negligently in relation to their consideration of ICI's application for clearance of Helix, the decision to grant clearance was a policy decision. It did not give rise to a duty of care actionable in negligence. The decisions of AAVCC to extend clearance, and the decisions of New South Wales and Queensland government functionaries to register Helix under State law, were likewise policy decisions. In relation to the claim that the two State governments are vicariously liable for the negligence of officers involved in recommending feeding cotton gin trash to cattle, I hold there is no liability. It is not shown that any officer knew, or ought to have known, that the feeding of cotton trash might lead to a significant contamination problem. (c) The claim against New South Wales of breach of s42 of the Fair Trading Act fails. It is not shown that, in making the documentary and oral representations relied on by the applicants, New South Wales was conducting a business. (d) It follows that the case continues as against ICI, but not as against New South Wales and Queensland. Insofar as the case concerns those respondents, it will be dismissed, along with all cross-claims filed by them.
Orders
1. I make the following orders: (a). Insofar as it relates to the claims made against the sixth respondent, the State of New South Wales, and the seventh respondent, the State of Queensland, the proceeding be dismissed. (b) All cross-claims filed by the State of New South Wales and the State of Queensland be dismissed; (c) All questions of costs in relation to the dismissed proceedings be reserved; (d) The proceeding be listed for a further directions hearing on Tuesday, 29 July 1997 at 9.30am, or such earlier date as may be arranged with my Associate.
2. I make two final comments. First, as previously indicated, my present intention is to commence the hearing of the remaining cross-claims on Monday, 4 August 1997. Second, if any application were made to me for leave to appeal against any of the dismissal orders just made, I would be inclined to grant leave. However, I would probably do so only on the basis that the resultant appeal would not be heard until disposal of the remaining issues in the case, other than mere computation of damages. A multiplicity of appeals would be unreasonably burdensome, both to the parties and the Court.

[1997] FCA 541

24 JUNE 1997

THE STRUCTURE OF THE CASE

The principal parties

The proceeding

THE RURAL SCENE

The cotton industry

Cotton and cattle

FEEDING OF COTTON GIN TRASH

Evidence of the practice

Academic support for the practice

The States' attitude to feeding cotton gin trash

ICI's knowledge of the feeding of cotton gin trash

THE DEVELOPMENT OF HELIX

The nature of chlorfluazuron

ICI's interest in CFZ

ICI people

The Project Team

Overseas contacts

THE HELIX REGISTRATION PROCESS

The Technical Committee on Agricultural Chemicals

The TCAC handbook

ICI's application for clearance

The context in which TCAC considered ICI's application for clearance

The processing of ICI's application

UK contacts during the registration period

Clearance and registration

THE POST-REGISTRATION PERIOD

The Fernhurst meeting

The advent of AAVCC

The setting of CFZ maximum residue levels

The extensions of clearance

THE SALE OF HELIX

Sales volumes

Marketing strategy

Helix literature

The discovery of CFZ contamination

THE CASE AGAINST ICI: NEGLIGENCE

The duty of care: legal principles

The duty of care: the parties' contentions

The duty of care: whether all the losses were pure economic losses

The duty of care: proximity

The duty of care: cotton trash feeders

The duty of care: contamination below 1mg/kg

Breach of the duty of care: contentions

Damage

Exemplary damages

THE CASE AGAINST ICI: THE TRADE PRACTICES ACT

The basis of the claim

Counsel's contentions

Standing

The withholding period

Silence

THE CASE AGAINST THE STATES: NEGLIGENCE

The applicants' claims

Decisions in relation to clearance and registration

Policy decisions

Representations by DepAg and QDPI officers

THE CASE AGAINST NEW SOUTH WALES: THE FAIR TRADING ACT

The basis of the claim

Application of the Act

CONCLUSIONS AND ORDERS

Summary of conclusions

Orders