Perre & Ors v Apand Pty Ltd

[1999] HCATrans 7

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A27 of 1998

B e t w e e n -

FRANK PERRE and OTHERS

Appellants

and

APAND PTY LTD

Respondent

GLEESON CJ
GAUDRON J
McHUGH J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 10 FEBRUARY 1999, AT 10.18 AM

(Continued from 9/2/99)

Copyright in the High Court of Australia

GLEESON CJ:   Yes, Mr Gray.

MR GRAY:   May it please the Court, could I just deal with a couple of minor matters from yesterday.  Your Honour the Chief Justice inquired as to what happened to potatoes in the Perre lands after the outbreak.  The position is that both Rangara Joint Venture and Warruga Farms had potatoes growing.  As far as Rangara Joint Venture is concerned, there is simply no plea as to what happened to those potatoes.  There is just no evidence and no plea.

As far as Warruga Farms is concerned, the plea is that there was an attempt to sell, but unable to sell, in the markets in Brisbane, Sydney, Melbourne and Adelaide, and that comes from volume 1 of the appeal books, pages 28 through to 29, and in particular the statement of claim, paragraph 53(a).

GLEESON CJ:   But is there any claim or evidence that the inability to sell those potatoes or the difficulty in selling them was related to the bacterial wilt?

MR GRAY:   No, there is not.  I beg your Honour’s pardon.  No, the claim was that it was due to the wilt in the area, but there was no evidence because the damages matter was not explored.

KIRBY J:   What was the defence raised to that plea?

MR GRAY:   Do not know and cannot admit.

GLEESON CJ:   But, do you mean there was an outstanding unresolved issue in the case as to whether the inability of Warruga to dispose of their potatoes was related to the occurrence of the bacterial wilt on the nearby land.

MR GRAY:   Yes.

GLEESON CJ:   That is an issue that remains unresolved?

MR GRAY:   Unresolved and which will be dealt with on the damages part of the claim.

GLEESON CJ:   The corollary of that is that it is an issue that is irrelevant to the liability question.

MR GRAY:   Other than that this matter proceeds on the basis of an assumption that the assertions in the statement of claim as to damages are correct.  So, on that hypothesis the matter proceeded forward.

GLEESON CJ:   Is that so?

MR GRAY:   Yes.  I will have that reference turned up, if the Court pleases.

GLEESON CJ:   Thank you.

CALLINAN J:   Was there any request made for the court to assess damages in respect of the claim that failed?  To assess damages in any event.  I take it there was not.

MR GRAY:   No, the issue of damages was left totally to one side, by agreement, and by order of the court.  The passage is in volume 11 at page 3809 in the judgment of Justice von Doussa.  It is an order of the court:

the following issues be decided in the claims by the 4th to 18th applicants –

that is the Perre interests -

separately from the balance of the issues in their said claims, and at the same time as the claims of the 1st to 3rd applicants, namely ‑ ‑ ‑

HAYNE J:   Where are you reading from, Mr Gray?

MR GRAY:   It is the top of 3809.

HAYNE J:   Thank you.

MR GRAY:   And it is an order his Honour made in regard to separation of issues.  And then:

in the event that that the 4th to 18th applicants later establish such of the facts and losses or some of them alleged in paragraphs –

so, in the event that that is established, what is the position on liability?

The other matter, very minor, I wish to just clarify was that in answer to your Honour Justice Gummow, I indicated that there are about 160 growers in South Australia.  The evidence was that there were over 150 and that came from Mr van Velsen, volume 10 of the appeal books, page 3650.

GUMMOW J:   Thank you.

MR GRAY:   The third of the matters that I wish to complete from yesterday was the reference in the judgment of Justice Jacobs in Caltex to what we would describe as being what was a restriction of mobility in that case that was treated as a physical effect.  It is 136 CLR, and I wish just to read some discrete passages from pages 601 and a few pages thereafter.  At the foot of page 601 Justice Jacobs, in the final paragraph, says:

I come now to Morrison Steamship Co Ltd v Greystoke Castle (Cargo owners).  This decision on my view of it supports two presently relevant propositions; first, that a physical effect, short of physical injury, is a kind of injury the risk of which, if it be foreseeable, there may be a duty of care to avoid; and secondly that there will be such a duty where there is physical propinquity of the plaintiff’s property to the place where the defendant’s act or omission has its physical effect.  The cargo was at the place where the careless act or omission of the other ship had its physical effect.  The cargo was not physically damaged but there was the physical effect on it of being immobilized in a damaged ship.

There the immobilisation was being effectively put on to, I think, a wharf and held there for a period of time.  Then there is the reference to the illustrated instance of the two lorries in which Lord Roche allowed for that principle.  In particular, having dealt with the quotation the Court is more familiar with, Justice Jacobs says:

I do not think that Lord Roche’s reference to “common adventure” was more than a statement of commercial reality.  It introduced no special qualification of law.

We respectfully adopt that position.  Then there is a reference to the Spartan Steel Case, and Justice Jacobs identifies him as agreeing with the dissenting conclusion of Lord Justice Edmund Davies.             In that judgment Lord Justice Edmund Davies treated Justice Blackburn’s comments in Cattle v Stockton as being particular to the case, but I move on. 

Over the page at 603 in the second paragraph, in the second sentence:

In the present case the loss suffered by Caltex may be described as a pecuniary or economic loss but that in itself tells us nothing.  It is necessary to examine the circumstances out of which the loss arose and whether any, and if so what, duty of care existed on the part of the dredge and Decca towards Caltex. 

He then proceeds with a very detailed analysis of the facts, and then I move to the foot of 604 in the last paragraph about five lines in:

The duty of care was that owed to a person whose property was in such physical propinquity to the place where the acts or omissions of the dredge and Decca had their physical effect that a physical effect on the property of that person was foreseeable as the result of such acts or omissions.

GLEESON CJ:   Well, perhaps you need to read the first sentence of that paragraph.

MR GRAY:   Yes, certainly:

The defendants owed no duty of care to Caltex arising simply from a risk that A.O.R. might by the physical injury to its property be unable to supply refined petroleum products to Caltex under a contract for the supply thereof.

GLEESON CJ:   Well, one way you put your case you say that is dead wrong.  If the broadest proposition for which you contend is correct, that is simply wrong, is it not?

MR GRAY:   Yes, on the broadest proposition, it would be.  We put a series of alternative propositions.  If the Court pleases, this particular point that I was wishing to identify was the way in which Justice Jacobs treats physical propinquity and, in particular, how partial immobility is treated as being a sufficient physical effect to found a claim in tort.     His Honour continues:

The physical effect of Decca’s act or omission was at the place where the dredge went as a result of a navigational error, caused by that act or omission.  The physical effect of the dredge’s act or omission was at the place where it went in its dredging operation.  The property of Caltex in physical propinquity to the place where the acts or omissions of the defendants had their physical effect was its crude oil at the refinery and the products thereof so far as the crude oil had been refined.

We would draw the analogy here between the physical effect on the Sparnon’s land, having physical effect at a place in physical propinquity.

Though there was no evidence of precisely how much crude oil of Caltex was at the refinery at the time of the incident or of how much refined product was awaiting delivery, there was evidence that some was there.  The physical effect on this property of Caltex was the immobilization through the pipeline of the crude oil and the products thereof.  The risk of such a physical effect was foreseeable as the result of the act of breaking the pipeline.  The damage suffered was the immobilization through the pipeline of the processed crude oil.

And then:

A quantification of the damage was the cost of arranging alternative means of obtaining delivery of the products processed from the crude oil provided that so to do was reasonable.

Then that was done by, as Justice Gibbs the Chief Justice had mentioned, by alternative transport by ship or by road.  So the oil, the property, the equivalent of the potato, could be moved.  There was a restricting in mobility.  It could not go through the desired route of the pipeline, and the conclusion is that the impairment of mobility, but not total immobility, was a physical effect – it was treated for the purposes of tort as being physical injury.

Now, by analogy, we say here that at the time following harvest the potatoes took on the form of personalty;  they were the equivalent of the oil at the refinery;  there was an impairment in their mobility, that is, they could not be moved to Western Australia and as a result one has a case, we would say, on that analogy on all fours.  The reason why the case at bar is a fortiori is that there could be no movement to Western Australia – the total restriction in that direction.  In the case of the Caltex Oil, the oil could reach its destination and market.  So, on the question of is this a case of pure economic loss, we say, no, for the reasons that Justice Jacobs analyses in the Caltex Oil Case.

If the Court pleases, could I move from there to the judgment of Lord Justice Robert Goff in Leigh and Sillivan Ltd (1985) 1 QB that the Court referred to yesterday.  That case raised the issue that confronts in part this Court.  In particular, at the foot of page 391G and H Lord Justice Robert Goff identified the Anns test.  If I could just start there in the second sentence:

When Lord Wilberforce formulated his now celebrated statement of principle in the Anns case, he referred to Weller’s case with apparent approval; but his formulation of principle nevertheless requires us to reconsider our past attitudes, especially in cases of economic loss (on which he expressly abstained from comment), and to search for a reason of principle or policy which can justify a denial of recovery when the defendant has inflicted foreseeable damage on the plaintiff.

Over the page his Honour then dealt with the first of the tests posed by Lord Wilberforce and found that that was satisfied, and then he came to the second.  At paragraph C at the end of the first paragraph:

But Lord Wilberforce’s second question, which is whether there are any considerations which ought to negative, or reduce or limit, the scope of the duty of care which prima facie arises, is far more difficult to answer.  The difficulty arises from the fact that we are faced with all the problems of principle and policy which have arisen in cases of liability in negligence for purely economic loss.

So, effectively acknowledging that that decision was was not to be made in a vacuum, that there was a series of established matters.

Then his Lordship proceeds and he starts with Donoghue v Stevenson and then at the top of page 393 he identifies really a precursor to Cattle.  That was Justice Blackburn, as he then was, his statement that a purist approach would not differentiate between economic loss and other loss because such a distinction, with respect, is arbitrary.  He then proceeds to identify of course the rule from Cattle v Stockton and the other cases – that is the exclusionary rule – that is an arbitrary rule and an arbitrary rule that is against the purist approach.  So, from the start, one sees a policy decision being taken last century and against a recognition that it does not address all cases or do justice in all cases.  And then it was, as his Lordship notes, articulate a number of cases.

GUMMOW J:   Well he points out, significantly in a way, the existence of economic torts involving intention.

MR GRAY:   Yes, and he deals with the two rationales that lay behind that and the first identifies on page 393 paragraph D as the “floodgates” fear, which his comment really is perhaps not of substance, and then he deals with the one that he thinks is based on good sense, and that is the interference with ordinary commercial activity.

GLEESON CJ:   And the aspect that Justice Gummow just mentioned, the point being that you would be driving a horse and buggy through large areas of legal principle if you allowed a general recovery for foreseeable economic harm.

MR GRAY:   Yes, in terms of the, what had become by then, established precedent, yes.  But then at the foot of he page he makes, with respect, we would say, quite an important distinction, in paragraph H:

But a striking result of this line of thought is that criticism of the absence of recovery for economic loss tends to be concentrated on those cases where liability has in fact been caused to person or property, though not to the person or property of the plaintiff himself.

And so one can see two different classes:  one where there has been, in fact, some damage to property or person, but not the claimant; and one where there has been no such, as it were, intermediate damage.  Of course, the case at bar falls into the former.  His Lordship then traces the developments since, which are, effectively, the development of exceptions to the rule, and he starts with Greystoke as being seen to be the first of those.  Then he traces through Hedley Byrne v Heller, Rivtow, then the series of building cases, Dutton, Sparham, Anns and then the New Zealand case of Bowen, and then he comes to Caltex, and so, by this time, one can see there has developed, over several decades, a recognition that not only there needs to be exceptions to the rule, but that being given effect to by the courts in a number of jurisdictions.

GLEESON CJ:   At line C on page 395 he says:

there has been a reaffirmation of the widely accepted view that there cannot be a general right of recovery for economic loss on the simple basis of proximity –

MR GRAY:   Yes, and that is true, that in those cases one finds a reaffirmation of general principle and then the ‑ ‑ ‑

GLEESON CJ:   What he seems to be saying is that the general principle remains, but the courts are ready  to find exceptions to it.

MR GRAY:   Yes, and that is the way it has developed and in the process he identifies Ross & Caunters, which was one of the disappointed legatee cases in the Junior Books Ltd Case.  Now, since that time, of course, there have been further inroads, Hill v Van Erp, in this Court; Husky Oil in the Canadian Court; the Inglewood Case in New Zealand.  So, the body of case law as it develops continues to recognise the need for and the development of exceptions to the exclusionary rule, and the reason for that is because the exclusionary rule is too harsh; it causes injustice, and the point must come when the exceptions built up to such a point that one has to question the starting point – does the exclusionary rule remain an appropriate rule.  In that process, of course, there is reference to Caltex Oil and ‑ ‑ ‑

GLEESON CJ:   And a criticism of the judgment of Justice Jacobs on the bottom of 395 and the top of 396.

MR GRAY:   Yes; in particular, Lord Justice Robert Goff does have that criticism in regard to, what he calls, how this should transcend.  When we come to Candlewood, Candlewood approves Justice Jacobs.  But, if the Court pleases, undoubtedly Lord Justice Robert Goff finds himself in disagreement with the reasoning of the High Court, and a number of the judges in the High Court in Caltex Oil.  He goes through that in ‑ ‑ ‑

GLEESON CJ:   He goes further.  He says the very fact that they could not themselves agree on what the principle was is evidence that there is no principle.

MR GRAY:   Yes, and it is plain that they arrived at their conclusion by different strands of reasoning.  Having undergone that historical analysis of case…..reasoning, at 396 at the end of the first paragraph, paragraph B to C:

Speaking for myself, I can see nothing wrong in asserting that, in the present state of the law, there is no generalised principle upon which liability will be imposed in negligence for purely economic loss; that such liability will only be imposed when there are special circumstances which, on an identifiable principle, justify recovery; and further that, in those cases in which recovery is allowed, the principle underlying recovery need not be the same.

He then comes to consider the particular circumstances.  Ultimately he finds against the claimant, but on factual grounds rather than grounds of principle.

All of that, with respect, is a recognition of problems with the starting point with the exclusionary rule.  We would not be having this debate over decades with the cases coming forward time and time again, unless there was a problem with the exclusionary rule, and the answer is that it is too harsh.

McHUGH J:   Perhaps the solution, or perhaps the problem is to look at this area in terms of the type of damage.  We do it in respect of nervous shock; we do it in respect of economic loss, yet, in each case there is an invasion of an interest, or there may be an invasion of an interest.  Perhaps a better approach is to abandon the exclusionary rule, having regard to the many cases that have been held to be exceptions, and say there is no real distinction except it may be much more difficult in an economic loss case to prove a duty by reason of various circumstances.

MR GRAY:   Yes.  Well, we would say plainly the exclusionary rule and the exceptions to it are causing so many problems that one has to say now, “Have the exceptions overtaken the rule?”.  And perhaps not yet, but plainly there is something wrong with the foundation block.

Another way of approaching it is to take up, or perhaps we could describe it as the Caparo or Anns,  whether it be a two test or three test I think matters not for the purposes of this proposition, and that is that if there is foreseeability of the risk of injury, then a prima facie duty arises.  All of the matters that have been discussed in these cases, whether it be Leigh and Sillivan, whether it be Candlewood, whether it be Caltex ‑ ‑ ‑

HAYNE J:   Again, Mr Gray, you are dropping your voice, I cannot hear you.

MR GRAY:   I beg your Honour’s pardon.  All of these problems can be overcome if one starts with the Anns or Caparo approach, that is, ask the question, “Is there reasonable foreseeability?”.  If there is, there is a prima facie duty.  The next question becomes, “Are there reasons to negate that duty?”.  Now, the types of policy arguments that are used in the various cases are all open for debate at that point.  But one starts out with the clear proposition that the entire community, whatever that means, can understand that if there is a reasonable foreseeability, then prima facie there is a duty, and that is a clear unequivocal statement.  All the other concerns and the weight to be given to them and the balance to be struck can all be struck under the second limb of the Lord Wilberforce test or the second and third limbs of the Caparo test.

McHUGH J:   That really means overruling Hayman’s Case, does it not, because Hayman rejected Anns?

MR GRAY:   Yes.

KIRBY J:   It rejected Anns but Caparo was a later development.

MR GRAY:   Yes, and ‑ ‑ ‑

KIRBY J:   And Caparo poses a three-fold step.  You have to first, I think, find neighbourhood or proximity, and then you find foreseeability, and then you have to look at the third stage of disqualifying factors.

MR GRAY:   Yes.  The Caparo test, that three-stage test, we would respectfully submit, allow a circumstance where there would be justice done in every case, and I would not ‑ ‑ ‑

KIRBY J:   Does Caparo stand as the law in England now?

MR GRAY:   Yes.

KIRBY J:   Does it stand in New Zealand as the law?

MR GRAY:   It would appear that Anns ‑ ‑ ‑

KIRBY J:   Or had New Zealand adhered to Anns?

MR GRAY:   No, the most recent decision of Inglewood would suggest that New Zealand adheres to Anns and Canada, of course, adheres to Anns and it adheres to Anns in this area of pure economic loss.

GLEESON CJ:   Could you just remind us what was actually decided in Caparo.  It concerned the liability of auditors, did it not, to investors?

MR GRAY:   Yes, it did.

GUMMOW J:   It is a strike‑out application like many of these English decisions.  We never know what a trial will reveal.

MR GRAY:   But effectively, Caparo is at all fours with Esanda in this Court, that there was a finding of no liability in the auditors, no duty.

GLEESON CJ:   No duty in auditors to investors?

MR GRAY:   To investors.

GLEESON CJ:   Well, why not?

MR GRAY:   I just cannot recall the precise detail but it is on all fours with Esanda and Hercules in Canada.

GLEESON CJ:   I mean, that is about as plain a case as you can think, is it not, of foreseeable economic harm resulting from negligence?

MR GRAY:   Yes, and one where that has the possibility of a duty and the duty is negatived by other factors and the other ‑ ‑ ‑

HAYNE J:   Do those other factors include the notion that liability will be to too wide or too large a class of persons?

MR GRAY:   Yes, it does.

HAYNE J:   If that is so, then is not the debate only a debate about the order in which questions are asked or the stage at which the question is asked?  In the end, are we not simply bandying words?  If, once you acknowledge that there is to be a limitation which is a limitation founded in the conclusion liability is to too wide a class, what does it matter when you ask that question?

MR GRAY:   If your Honour pleases, our propositions do involve what has been called a consideration of controlled mechanisms and, by definition, that raises the point that your Honour has put.  The difference between Anns and Caparo, as we see it, is that after stage one of Anns one comes out with a prima facie duty and in Caparo one does not come to that stage.  One has foreseeability and then one considers other factors and the question from a prima facie position would, of course, be very, very material in a particular case before a trial judge, for example.

HAYNE J:   Why?  If a relevant consideration is, is the duty too wide, why does it matter that there is a prima facie conclusion?

MR GRAY:   It allows the trial judge, for example, to say that, “There is nothing before me that negatives that”, which is, with respect, an easier question to answer than to say, “Is there a duty?”.

HAYNE J:   Then is the point that you make a point about proof or is it a point of principle?

MR GRAY:    No, we would say, with respect, it is a point of principle because ‑ ‑ ‑

HAYNE J:   Then if the point is one of principle, what does it matter when you ask the question?

MR GRAY:    Well, in the ultimate sense it may not.

GAUDRON J:   For that matter, may I say, how do you elevate what sounds like a very pragmatic consideration, namely, too great a liability to too great a number of people, to a question of principle?  It has always seemed to be that that is just pure pragmatism.  I mean, it is a factor that has undoubtedly been influential but it is a statement of a factor which does not seem to relate to the law in this area.

MR GRAY:    Could I answer that in this way, that the matter of principle is that the courts will have regard to controlling factors or policy ‑ ‑ ‑

GAUDRON J:   But why is not the question of principle simply whether the plaintiff and defendant are neighbours?

MR GRAY:    Yes, well ‑ ‑ ‑

GLEESON CJ:   What you have to be careful of is erecting a principle that does not mock a whole lot of other established principles, the problem that Lord Justice Goff referred to.  For example, a whole lot of ink has been spilled on the question of the necessity for reliance in relation to liability for negligent misstatements.  What has reliance to do with it if there is foreseeable economic loss caused to somebody?

MR GRAY:    Again, we respectfully agree with that.  The reason why there has been the debate about reliance as a necessary step in regard to the assertion of that cause of action is because there has been an attempt to get around the exclusionary rule and the court has been driven to look for reasons that justify what is seen to be a very fair result and, as a result, one gets the creation of those doctrines.  Interesting enough, Lord Justice Robert Goff describes the damage in this case as not being purely economic loss.  He, at page 390, paragraph E, says:

The loss, which is the subject matter of the buyer’s claim against the shipowner, is therefore not merely a purely economic loss –

So, there is really a precursor, we would say, to the reasoning of Justice Gaudron in Hill v Van Erp.  He has looked behind the economic loss to see what has given rise to it.  It is the same approach Justice Jacobs has taken.  So, these are all attempts, with respect, by courts to militate against the rigours of an unfair exclusionary rule.

To put it another way, once you have an exclusionary rule that is arbitrary in nature and you allow for exceptions to it, immediately you completely undermine the exclusionary rule.  The moment the exception is allowed, there is uncertainty and the exceptions build.

GLEESON CJ:   The fear seems to be that you also undermine a lot of other rules too.

MR GRAY:   Yes.

GAUDRON J:   Negligence has necessarily done that right from its inception.

MR GRAY:   Yes.  That is inevitably a consideration that must face a court when it is in a developing area of the law.  There is always a striving for the guiding principle that can be viewed in its application and, as the common law is developing in an area, there is always the risk that that principle might cut across another.

GLEESON CJ:   Speaking purely for myself, I thought you made a very effective point at the commencement of your argument yesterday when you drew attention to those internal documents in which Apand were in effect worrying about the possible consequences for people like your clients of what they were proposing to do.  Is there any case in which a duty of care has been found in the recognition by the alleged tortfeasor itself of a responsibility to others?

MR GRAY:   I will take that on notice for a few moments.

GLEESON CJ:   You can come back to that.

HAYNE J:   May it not in fact lie behind the knowing reliance cases, those cases where reliance is not enough but the defendant knew that there would be reliance upon what it did, said or omitted to do?

MR GRAY:   Indeed.  The other case that sprang to mind was the matter that your Honour Justice McHugh mentioned yesterday of the American fishermen cases where there has been the pollution which then led to the destruction of the fishing reserve.

HAYNE J:   But may it not then direct attention to the fact that if it is legitimate to impose any control mechanism, as to which you say no, and the control mechanism is one that is directed to limiting the class of persons who may sue, that the mechanism may focus upon those whom the defendant either actually knew or had within its contemplation – that is, that the degree of specificity of identification must be the greater in cases where the injury is not to tangible property?

MR GRAY:   The answer to that is yes, that is a control mechanism that could be utilised and, in fact, would appear to lie behind the reasoning of Justice Mason, for example, in Caltex.  It is that very line of reasoning, of course, that the English courts in Candlewood found to be unsatisfactory.  That was their point of difference between Chief Justice Gibson and Justice Mason in Caltex, and those cases.

GAUDRON J:   I am wondering if the principle behind it all is not something akin to that which underlies the principle of estoppel.

MR GRAY:   Yes.

GAUDRON J:   The plaintiff assumes something.  In this case, assumes that nobody is going to do anything which might lead to the spread of bacterial wilt in his potato crops.  The assumption is reasonable in circumstances, whatever that means, but that will depend on the circumstances.  Thirdly, the defendant knew or ought to have known that such an assumption would be made, or was likely to be made, and therefore came under a duty, in essence, to give effect to it or, in other cases, to warn and so on, in much the same way as estoppel operates.

MR GRAY:   Yes, if equity was placed with these problems that is the ‑ ‑ ‑

GAUDRON J:   I do not know that estoppel is purely a matter of equity any more.

MR GRAY:   No, but that approach, whether it be at common law or if one was looking at the principles of equity, is an example of how the problem could well be addressed.  One has no difficulty in looking at this case and answering each of those questions, each of the steps along the way.

GAUDRON J:   But if one did adopt that approach I would think it simply defined who are neighbours.

MR GRAY:   Yes, it would be the touchstone of it.

KIRBY J:   Leave aside what Justice Jacobs said in Caltex, what is the case that you say comes closest to this case which a court has upheld duty of care and the right to recover for economic loss, or is this case avowedly breaking new ground?

MR GRAY:   We would say it would be within the dicta of Justice Widgery in Weller’s Case when he allowed for a claim by owners of cattle in the area who would be affected by the quarantine.

GAUDRON J:   And are you not close to Mengel, in which case I think negligence was not pursued, but there were statements in Mengel that an action could have been framed in negligence.

MR GRAY:   Yes, but as your Honour said, negligence was not pursued.  Undoubtedly Caltex is the closest, and when one analyses the facts of Caltex they are extremely close, indeed.

The Greystoke decision, again, we would say, would fall within that principle.  There was a case of the uninjured cargo owned by the third party and the court allowed there the recovery against the negligent ship.  They are some that spring to mind immediately.

KIRBY J:   Has the United States adopted and followed the same principle in relation to pure economic loss and have there been any changes in that country in recent years, given the economic arguments that are said to stand against the expanding the principle of recovery?

MR GRAY:   There is diverse approach in the United States in various jurisdictions but in Caltex Chief Justice Gibbs referred to one of the American decisions.  The decision is Union Oil v Oppen 501 F 2d 558 and in Caltex, Justice Gibbs at page 553 cited that with approval:

The United States Court of Appeals, Ninth Circuit, has also rejected the view that damages for loss which is purely economic cannot be recovered where the negligence consisted in acts rather than in words, and has allowed fishermen to recover damages for economic loss sustained when fishing grounds were affected by a spill of oil.

KIRBY J:   But assume in the fishing village the newsagent said, “Because of the spill of oil this has destroyed the fishermen and that has had a run‑on effect to me”.  I mean, by what principle would one say, “No, the newsagent cannot recover”?  You would have to test the proposition against the principle.

MR GRAY:   Yes.

GLEESON CJ:   Is not – my memory may be playing tricks on me but I though that the example that really worried them in North America was what they called the blocking cases where somebody’s negligence in relation to an internal waterway could cause a great hold‑up of vessels, all of whom would suffer and, perhaps in turn, cause economic loss.

MR GRAY:   Yes.  That very example is one of the examples, I think, being considered in the Union Oil Case.  They cite a series of such examples of the ongoing - what has been called the “ripple effect”.  That particular decision does draw together quite a lot of the American jurisprudence and it does…..to a Scottish case, for example, where economic recovery was allowed.

GLEESON CJ:   Yes, well the blocking of vessels in a canal is a pretty good example of immobilisation of property, is it not?

MR GRAY:   Yes.

KIRBY J:   Do we have the citation of that case?

MR GRAY:   Union Oil v Oppen?

KIRBY J:   That is the one you just gave us?

MR GRAY:   Yes, and we will provide a copy to the Court on the adjournment.

KIRBY J:   It is a long while ago.  It is a quarter of a century ago.

MR GRAY:   Yes, 1974 and there have been ‑ ‑ ‑

McHUGH J:   It was followed in one of the – is Oppen the Louisiana case ‑ ‑ ‑

MR GRAY: No, the Louisiana case is 1985. The reference to that is 752 F 2d 1019. That was a case where the majority of the court rejected in particular circumstances the claim that the principles in Union Oil were, as we understand it, continued.  But I cannot claim our researches were exhaustive in that regard.

The Court also raised the question of the attitude of the non‑common law jurisdictions.  We did make some investigations in that regard.  On our researches there is no equivalent concept to pure economic loss that is discussed under the Codes.  They have a differing approach according to the jurisdiction.  By and large they protect certain interests in certain circumstances and when the interest is identified, then often what are called business losses simply follow and there is no suggestion of any exclusionary rule.  So there the Code systems on our investigations appear to approach the matter quite differently, and as such no great assistance can be obtained from that.

Whilst just dealing with perhaps recent authorities, in New Zealand the most recent authority is Invercargill City Council v Hamlin (1996) 1 AC 624. In Canada the two most recent cases of perhaps relevance are Hercules 146 DLR (4th) 577, which is the auditors case, and the Husky Oil Operations Case 153 DLR (4th) 385. Hercules denied recovery, adopting an Anns approach, and Husky Oil allowed recovery, again adopting an Anns approach.

GUMMOW J:   Hercules was decided two months after Esanda in this Court.

MR GRAY:   Yes.  There is a great similarity in reasoning and approach in Hercules as in Esanda.  Hercules draws very heavily on Caparo.

KIRBY J:   Is there some hard-working academic who has pulled all these things together and, as it were, taken an overview of where the common law in these jurisdictions you have been mentioning has come from, is and is going?

MR GRAY:   Not as yet.  The Court will find, for example, in the Law Quarterly Case notes that the academics are starting to deal with each of these jurisprudential changes, but nobody yet has pulled all the threads together.  There are two articles that discuss the Canadian position:  Duncan Wallace, Contractual Relational Loss in Canada 114 Law Quarterly Review 370 and Fleming (1993) 1 Tort Law Review 68.  That is particularly in regard to the Canadian aspect of the matters.

KIRBY J:   Did Professor Fleming, who knew so much about Australian law, say anything as to the directions in which the common law was going or should go or not?

MR GRAY:   Yes, they have said that the court is yet to decide what it will do with Caltex.

GLEESON CJ:   Could you repeat that.

MR GRAY:   Professor Fleming suggested that the Australian courts had yet to decide what they would do with Caltex in the light of the criticisms elsewhere.  San Sabastian in this Court gave specific approval to Caltex, and other cases have cited it in the High Court since, and we have listed those in our outline of argument, but San Sabastian is probably the most explicit treatment of it.

Now, if the Court pleases, I did wish to deal with the notice of contention and I did wish to finish close to the hour if I could.  I have dealt with the Greystoke authority, whilst dealing with Lord Robert Goff’s submissions, and we say the Greystoke Case, as understood by his Honour and as applied in Caltex, is an authority directly in our favour.  Candlewood, we submit, is wrongly decided and is distinguishable and is not authority in Australia.  Candlewood, of course, went straight from a single judge to the Privy Council.

KIRBY J:   But it is a decision of the Privy Council at a time when the Privy Council had authority as part of the Australian judicature.  Why would it not be authority in Australia?

GAUDRON J:   At a time when this Court had decided it was not bound by the Privy Council decisions.

MR GRAY:   And, in particular, where this Court has since reaffirmed Caltex, certainly in dicta, on a number of occasions.  But, more importantly, at the level of principle, Candlewood, we say, is treating the Cattle v Stockton Waterworks Co and  Simpson principles as black letter law and is approaching the matter through Anns and saying that the past case law is a powerful factor against recognising duty and the exceptional case must be shown, and we say that that is not the correct approach.

GLEESON CJ:   I think the Supreme Court of New South Wales has actually had to face up to the question of whether it is bound by Candlewood or Caltex. 

MR GRAY:   Yes.

GLEESON CJ:   The case that Justice McHugh mentioned yesterday which, as a matter of interest, came at first instance before Justice Yeldham, was the case arising out of the second incident involving a damage to this pipeline by the same company that operated the dredge.  Both at first instance and in the Court of Appeal, as I recollect it, they decided they were bound by Caltex, not by Candlewood.

MR GRAY:   Yes.

GLEESON CJ:   But we, if we were to get into that area, would have to consider the merits of the criticism, the very specific criticisms that have been made of Caltex, for example, by Lord Justice Goff.

MR GRAY:   Yes, and, in particular, in Candlewood itself where the Court will find Justice Jacobs was the one judge approved of, and then one goes to the appeal decision from Justice Goff, where they reject his views in the House of Lords.

Now, if the Court pleases, I feel as though I am rather in a labyrinth and it is difficult to get out of in this area because whichever jurisdiction one goes to, one is finding competing authorities and no clear guidance.  I would like to leave that topic, if I could, and move the notice of contention.

If the Court pleases, I would hope to be short in regard to this topic.  We have a point that we have articulated that this is not a proper matter for a notice of contention.  What happened following Justice von Doussa’s joint hearing was that the Perre interests appealed, so did Apand, and Apand appealed against the finding in favour of Sparnon.  When the case came on for hearing at the Appeal Court there was an oddity in that the Sparnons did not appear on the appeal.  The court proceeded to hear both appeals.  The court proceeded to dismiss both appeals.  So that the Apand appeal against the Sparnon finding was dismissed by the intermediate court, and that is dealt with in the reasons. 

At the same time as putting the appeal, the Apand interests put in a notice of contention before the intermediate court, but the substantive matters between Apand and Sparnon before that court and the matters raised or that remain for issue on the notice of contention are the very matters that were the subject of the dismissal of their appeal.

We say that what is happening here is that by this technique, in substance, Apand is seeking to pursue an appeal from the intermediate court on the rejection of their appeal and they need special leave on that, and they cannot avoid that by simply a notice of contention.  In a sense, they want to leave the dismissal of their appeal to the intermediate court standing but seek to undermine it by way of a notice of contention in this matter.  Now, we are talking about the one action ‑ ‑ ‑

GUMMOW J:   Yes, I was looking at that.  The ninth statement of claim that we have at volume 1, in fact, is a statement of claim with the whole miscellany of claimants.

MR GRAY:    Yes, it is, and so, what we have is a finding of dismissal of appeal by the superior intermediate court of the Apand claims.  They have not appealed that but they seek to collaterally challenge it by way of a notice of contention.  Now, we would say, with respect, that is not the intention of the notice of contention procedure.  It was not designed to advance the matter in that way because, by that technique, they can challenge, in effect, the appeal without obtaining special leave.  When one looks at the grounds being agitated, they are purely factual, we would say, or at best, mixed fact and law, and that this Court should reject the notice of contention.

It is not as though my learned friends are not on notice of this because when the notice of contention was received, we wrote to draw to their attention what we said was the problem.  At the time the security costs was argued before Justice Gaudron the issue was ventilated there but did not need to be addressed or resolved, but it was certainly raised.  So, at all times, we have put the Apand interest on notice that we object to their procedure.  It is not appropriate.

GAUDRON J:   The question really boils down to this, does it, in terms of Order 70 rule 6(5), whether by their notice of contention they seek a discharge or variation of a part of the judgment actually pronounced?

MR GRAY:    Yes.  In our submission, in substance, they are seeking to ‑ ‑ ‑

GAUDRON J:   Well, do they?  Judgment was pronounced, was it?

MR GRAY:    Yes.

GAUDRON J:   Dismissing their cross-appeal?

MR GRAY:    No, dismissing their appeal.

GAUDRON J:   Dismissing their appeal.  There were two appeals but it was the one matter in this.

MR GRAY:    Yes, two notices of appeal.

GAUDRON J:   But the one matter.

MR GRAY:    But the one matter.  We do not want to advance the matter beyond that and we have articulated the argument that we put in our outline.

GUMMOW J:   We have an order at 3909 in volume 11 from the Full Court.  That is in your clients’ appeal.  Have we any other order disposing of the other appeal?

MR GRAY:    I do not know that it has been drawn up but it is referred to explicitly in the intermediate court’s reasons. If the Court as 80 FCR 34D to E:

This ground of appeal must also fail.  Apand’s appeal should be dismissed with costs.

That follows a section of the judgment that deals with the very matters that Apand wishes to agitate in this Court.  So, in our respectful submission, the notice of contention is not an appropriate vehicle to raise these points and it is incumbent on Apand ‑ ‑ ‑

GUMMOW J:   There would be an absence of parties, would there not?

MR GRAY:   At the ‑ ‑ ‑

GUMMOW J:   Now.

MR GRAY:   Yes.  The Sparnons are not here.  What is sought to be done is to challenge findings that Justice von Doussa made and the intermediate court upheld against Sparnon.

HAYNE J:   It wants conflicting findings in the one action.

MR GRAY:   Yes, and that is our point and why the notice of contention was never designed to deal with this situation, and my learned friends have been on notice of this from the start and have turned their face against taking any other procedure.

KIRBY J:   What do you say is the correct procedure that would tender the issue to the Court, because they surely cannot be left without an opportunity to ‑ ‑ ‑

MR GRAY:   No, they should seek special leave to appeal.

KIRBY J:   But that seems odd, given that they won the case.  It would be a contingent special leave, would it?  In the event that the appeal succeeded, they sought special leave to appeal against the order, though the order is in their favour.  That seems odd.

MR GRAY:   No, they lost their appeal in the intermediate court.

HAYNE J:   They would want leave against Sparnon, would they not, is the point you make?  That is either good or bad, but that is the point you make.

MR GRAY:   Yes, the substance of what they are doing is to challenge the Sparnon findings and they need leave against Sparnon.  The court is available to them.  They were told of our complaint when the notice came in and they have chosen to do nothing about it.  Our position is that we say that, for the reasons that have been just discussed, this is an inappropriate way to handle it and is wrong.  They had their alternative procedure.  It was a matter they could have followed through.

GAUDRON J:   You have to go further, do you not?  You have to say it is simply not within the rules, because it seems to vary a portion of the judgment actually pronounced.  It is not just the “appeal dismissed with costs” part it challenges, but the Full Court’s upholding of Justice von Doussa’s reasons with respect to negligence.

MR GRAY:   Yes, so that is our preliminary point.  If the Court is against that then we would wish to make some submissions in regard to the mixed matters of fact and law they seek to agitate.  In a sense, we would far prefer to be responding to that because it is, in substance, a matter where they are appealing.

GLEESON CJ:   It may be convenient to hear what you have to say further in relation to this matter in reply.  We will see what Mr Garling has to say about this point.

MR GRAY:   If the Court pleases.  The only remaining matter that I wanted to raise was that your Honour Justice Kirby raised the issue about have we tied policy considerations to cases, providing a list of cases that have raised particular policy considerations in these matters.  I have a document that does that, and we provide that, if I might, at the adjournment.  It simply is a list of policy considerations the courts have considered and identifies where they have been raised.  It is not exhaustive but, on the other hand, it does provide a point of reference for a number of these matters.

GUMMOW J:   You also provided us with a collection of regulations from Western Australia, the Plant Diseases Regulations.  There are about a dozen of them.

MR GRAY:   Could I perhaps speak to that then very briefly.

GUMMOW J:   Subject to what may be said, perhaps we could have a short note to explain to us how all that works.

MR GRAY:   I can provide a short index.  There are very few pages the Court needs to consider.  I will have that prepared and also provided after lunch.  If the Court pleases, they are the submissions for the appellants.

GLEESON CJ:   Thank you, Mr Gray.  Mr Garling.

MR GARLING:   If the Court pleases.  Your Honours, we submit that the trial judge and the Full Court correctly found that there was no duty owing.  Your Honours have been reminded this morning – I do not need to take your Honours back to it – of the specific order made by the trial judge with respect to this claim.  That was at page 3809 of volume 11 where his Honour decided to hear the claim in effect as to liability on the assumption that certain matters of damage were made out.

Your Honours need, with respect, to concentrate with some care, in our respectful submission, on the difference in the appellants’ positions as between themselves.  A convenient commencing point for that analysis is in the judgment of the trial judge in volume 11 at pages 3813 and 3814.  Immediately preceding his Honour’s summary on that page is a setting out by his Honour of the relevant paragraphs in the pleading as to damage.  His Honour then says at page 3813:

Each of the heads of loss alleged by the three groups in the Perre interests is for purely economic loss.

It would appear, your Honours, that the reason that his Honour said there were three groups and not four was the concession at trial that if the individuals recovered, then the tenant did not and so on, which is referred to in our submissions, but for present purposes it does not matter whether one has three or four groups.

None of the groups or individual members suffered direct injury to their property.  None of their properties became infected with bacterial wilt.  None of their properties were quarantined or subject to any statutory or other restriction against growing or selling potatoes or any other crop in South Australia or elsewhere, save for the export of potatoes to Western Australia.  All the losses claimed are based on the inability of Warruga Farms –

that is one of the appellants –

to continue exporting potatoes to the Western Australian market.  Warruga Farms was the actual exporter.  Rangara Joint Venture, although a potato grower, lost the benefit of the contract it had with Warruga Farms to sell to Warruga Farms a substantial part of its crop.  Perre’s Vineyards Pty Ltd was neither an exporter, nor a grower of potatoes.  It benefited under a tenancy at will from the fact that Warruga Farms conducted a potato packing business.  It was therefore in a similar position to, say, the interstate carriers who transported Warruga Farms’ potatoes to Western Australia who also benefited under contracts, the continuance of which depended on the export of potatoes by Warruga Farms.

Your Honours, we say that is a convenient starting point for an analysis of the nature of the claims being made.  The Full Court of the Federal Court in the reported decision at pages 43 and 44 dealt with a similar issue, perhaps in slightly different detail.  May I invite your Honours’ attention to that, commencing just under paragraph G at page 43.  The sentence commences just two lines above the bullet point:

Here, as appears from the statement of claim on behalf of each of the Perre interest, the claims as alleged were as follows:

Warruga Farms, being unable to export to Western Australia potatoes grown by it (or acquired by it from the Rangara Joint Venture) suffered a loss of income, an alleged diminution in the value of its property, and ultimately was unable to refinance or procure further finance to develop a different farming program with a different crop.  The expense incurred in its endeavours to mitigate its loss of income is also claimed. 

GLEESON CJ:   What is the property there referred to at the bottom of page 43?

MR GARLING:   Potatoes, your Honour.

GLEESON CJ:   Thank you.

MR GARLING:    And, perhaps, conceivably, a leasehold interest in the packing facility, the processing facility because it leased it.  It was a tenant at will of Perre Vineyards, of the processing facility so, conceivably, that could cover as well its leasehold interest.  Three lines down on 44, the Full Court says:

There is not the same relationship between that sort of claim for economic loss and the immediate damage to the Sparnon’s property as existed in the Caltex Oil case.

It says:

Warruga Farms was still entitled to sell its potatoes; it was still entitled to grow potatoes.  Its loss flows only from its market for the sale of its potatoes being confined and its exclusion from an apparently remunerative market.  But the character of that claimed loss…..has no special feature which in logic distinguishes it from other forms of indirect economic disadvantage which were, or may have been, suffered by many other potato growers whose farms were near to a grower whose farm, through Apand’s negligence, became infected with bacterial wilt.

The next bullet point, your Honours, deals with Perre Vineyards:

Perre Vineyards lost its captive tenant at will and Warruga Farms was unable to procure a suitable alternate tenant thereby suffering loss of income.

Then the court comments with respect to that and then lastly between D and E, the next bullet point, the Full Court says:

The Rangara Joint Venture was no longer able to supply its potatoes to Warruga Farms at the price at which Warruga Farms had previously been paying.  It, and Warruga Farms, were able to continue to sell potatoes but did not have as ready a market.  It thereby suffered a loss of income.  Ultimately, that loss of income is alleged to have resulted in such a reduced cash flow that other resources were used to reduce indebtedness generally.  In addition, the principals of the Rangara Joint Venture suffered loss on the sale of equipment.  The very detail of that claim illustrates the potential, if the claim is to succeed, for the liability of Apand to be to a wide number of persons and for unlimited amounts.

Your Honours, they are the descriptions in the judgments of the differences in the position and those descriptions appear to be founded in the ninth statement of claim, paragraphs 52 through to 56, 58 and 68 which are to be found variously between pages 28 and 37 of volume 1 of the appeal book.

GAUDRON J:   But again, does not the point of what you are saying seem to link, to focus for the purposes of proximity or whatever the control mechanism is, on the event and its consequences, whereas the notion as it has developed is as to a relationship between the plaintiff and the defendant?

MR GARLING:   Yes, your Honour, but one needs to note the different positions to see whether, in accordance with principle to date, their claims would be allowed; and to see whether, in accordance with principle, there is anything to differentiate these individuals or companies or entities from other entities that may suffer loss.  Because otherwise, unless one ‑ ‑ ‑

GAUDRON J:   Well, the land used in or for their income producing activities was adjacent to the land on to which Apand released bacterial wilt in circumstances in which it knew that there were other growers in the area, and which it also knew that potato growers exported to Western Australia and could suffer loss if there was bacterial wilt in the vicinity of their property.

MR GARLING:   Yes, the answer to your Honour’s point is multi‑factorial ‑ ‑ ‑

GAUDRON J:   That is always a good start, Mr Garling.

MR GARLING:    ‑ ‑ ‑and I did hope to develop a complete answer.  There are many features to it, your Honour, and I did hope to develop a complete answer over time.  But it may be convenient if I just invite your Honours’ immediate attention, since your Honour has raised it, to this finding of the trial judge at 3818 of volume 11.  Perhaps it is convenient to give your Honours the background if your Honours look at the previous page where his Honour is considering the question as between Warruga Farms and Apand.  His Honour considered the question separately with the various appellants in the three classes he had earlier identified, and at the top of 3818 his Honour says this:

The close geographic proximity of the two properties (3-3½ kms) does not provide a satisfactory control mechanism either.  That is a distance which, on the evidence, was sufficient for there to be no risk of the disease moving from the Sparnon property to Warruga Farms ‑ ‑ ‑

GUMMOW J:   But that misses the point.  The point is this Western Australian law.  This is a criticism of the reasoning behind the Western Australian law, is it not?  The Western Australian law operated and you are the one knew it operated too.

MR GARLING:    Yes, your Honour, but I took from her Honour’s question that one of the issues was the relevance of physical propinquity and I was ‑ ‑ ‑

GLEESON CJ:   Well, just to descend to detail for a moment, what is the 3 to 3½ kilometres a reference to?

MR GARLING:   That is the measurement of the distance between Sparnon and Perre.

GLEESON CJ:   So they are not adjacent?

MR GARLING:   They are not immediately adjacent.

GAUDRON J:   Did I not read somewhere that one abuts the other?

MR GARLING:    Well, that may be with respect to the Perres amongst themselves, your Honour, because they had adjacent land one to the other, but I do not believe that there would be a reference between Perre and Sparnon to abuttal.

GLEESON CJ:   So whilst there might have been Donoghue v Stevenson neighbours, they were not next door neighbours?

MR GARLING:   That is so, your Honour, and they were not neighbours in the sense that there was any risk of the bacterial wilt travelling from one property to the other, but for an external additional link, as his Honour identifies ‑ ‑ ‑

GUMMOW J:   The wilt did not travel; that is not their the complaint.

GAUDRON J:   But, in any event, if it had travelled, their actions would have been a substantive contributing cause to its travelling.

MR GARLING:    When you say there  ‑ ‑ ‑

HAYNE J:   It is a wholly different piece of litigation.

GAUDRON J:   Yes.

MR GARLING:   Well, your Honours, in part that is one of the answers to Justice Gaudron’s question.  May I answer quickly, but I wish to develop it, your Honour Justice Gummow’s proposition - - -

GUMMOW J:   It is not a proposition.

MR GARLING:   - - - that the question of duty should be determined by the existence or the fact of the regulation.  With respect, we would submit, that is the wrong question to ask.  It is true we knew of the regulation, but the question to be asked is, at the time of the negligent act, which was at the Pakenham meeting in 1991 ‑ ‑ ‑

HAYNE J:   Well, is that right?  Is the negligent act that or is the negligent act that and giving uncertified seed potatoes to the Sparnons or is it only the latter?

MR GARLING:   Well, firstly, your Honour, that is the only act of negligence found by the trial judge in the Full Court.  Secondly, your Honour, we would submit, that was correct because the decision to distribute the seed in South Australia was nothing more than the causative link from the act of negligence at Pakenham, namely to turn the seed from commercial into seed potato, the causal link to the way in which the damage occurred.  So that is the way we put the answer to your Honour’s question, but may I just go back to what I was seeking to put, which is that if one looks at the time of the breach, one asks the question, “Who might foreseeably suffer economic loss as a consequence of this act?”.

Now, that question is not answered by saying, “Only those caught by the quarantine regulation of Western Australia”.  That question is answered in a much broader way.  There are many, many people who would suffer, by various mechanisms, economic loss by that negligent act.

HAYNE J:   Let that be assumed for the purposes of debate, how does that help you if, at the core of that class, are those persons who grow potatoes within 20 kilometres of the intended point of introduction of uncertified seed potatoes?

MR GARLING:    That is one mechanism leading to damage to a group of people.  May I invite your Honours’ attention as a convenient way to the regulation, perhaps the most convenient location of the regulation for present purposes is that annexed A to the written submissions of the appellant.  I am sorry, I do not have the bundle that your Honours have of the regulations so I cannot assist your Honours by reference to that.  It is the second‑last page, your Honours, of the appellants’ submission and for present purposes, may I invite your Honours’ attention to (1)(b) of the regulation?  Now, it is clear that the regulation addresses a distinct and very broad group.  Firstly, the potatoes were:

grown in a district where Potato Spindle Tuber Viroid is not known to occur.

Secondly:

grown on a property situated at least 20 kilometres from a known outbreak of the disease…..detected within the last 5 years.

That, stopping there, your Honours, would cover people who suffered economic loss who did not own property at the time of the breach but who came to purchase property with the intention of growing potatoes on it within that five year period or, alternatively, they owned land but did not use it at the time of the breach to grow potatoes but may, within five years, have had a business plan to grow potatoes on that land.  So that, one is dealing not only with a geographic radius but a time sensitive period from a future date, namely, the date upon which the bacterial wilt is detected on the target property.  Then in subparagraph (iii):

not, unless otherwise approved by the Director General, harvested, cleaned, washed, graded or packed with equipment or in premises with or in which potatoes, grown within 20 kilometres of a known outbreak of the disease Bacterial Wilt detected within the last 5 years, have been handled.

GUMMOW J:   It also includes the effect of the regulation on the packing plant, does it not?

MR GRAY:   Yes, it does, and my learned friend’s reference to subparagraph (iii) of the regulation effectively makes our point, that that plant becomes quarantined.  Everything in the 20 kilometres radius becomes quarantined, including the plant.  And obviously the Darwin grower, if he wants to export to Western Australia, will have his potatoes washed somewhere else.  So he would have, at most, perhaps one load en route or at the washing plant.  And once news of this broke out, he would not go near it.

GUMMOW J:   But that may have a significance for the position of Perre’s Vineyards, may it not?

MR GRAY:   Yes it does, because it impacts on ‑ ‑ ‑

GUMMOW J:   The uses to which it could turn the plant.

MR GRAY:   Yes, I had hoped I had covered those points in earlier submissions and I did not want to go over that ground, but we do say that that washing plant is, in effect, quarantined and it, and obviously the land on which it stands, has a consequent diminution in value.  But we do, by contrast, say that if one is looking for what is fleeting and momentary in the scheme of things, the damage to Caltex was in that category; it lost the ability for its preferred method of delivery for a period of time, that is all.  No evidence that impacted on its sales at all.  The only damages brought forward were for the cost of the alternative transport.  There was no suggestion that there was any material delay in regard to supply to consumer that affected its otherwise profitability.  So the fleeting effect is in Caltex; the major effect is in the case at bar.

Now, if the Court pleases, if I could come to the matters in the notice of contention.  We maintain our submission that this is a matter on which my friend needs leave and, with respect, a party should not be allowed to…..avoid that hurdle by this technique, and we maintain that submission.  My learned friend, we say, talked of arriving at the cusp of the rule; the rule was not designed to allow them to go to a substantive matter – special leave to be avoided.

If the Court pleases, could I then come to the notice of contention.  The Court will find that in volume 11 at page 3917.  The Court would have noted that ground 1.2 of the notice of contention is not pressed, and that leaves ground 1.1 and 1.3.  My learned friend, to our understanding, advanced no oral submission at all in support of 1.1, but did, of course, advance an argument touching foreseeability.

In my learned friend’s submission at paragraph 45, under the heading “The Flood Theory”, in the second sentence, having identified Mr Justice von Doussa’s finding, he has then written:

the Respondent does not now contend that this finding of fact was not open to His Honour –

So again, that part of the notice of contention also falls away. 

If the Court pleases, in regard to the first notice of contention, the first of the grounds, that is, that there was no breach of duty because the respondent’s action did not fall below the relevant standard of care.  As we understand the written submission, what it is suggested is because the Sparnons were aware that they were using non‑certified seed, indeed a two‑off, as it is described, that the Sparnons understood and accepted the risk, or in some way that lowered the standard of duty owed to Sparnon.

Now, we would, in a sense, without accepting that for a moment, and we say that that does not accord with the court’s findings, say that, in particular, it cannot touch this case because the standard of care owed to my client cannot be affected by some knowledge exclusively within the domain of the Sparnons.  In any event, we say the primary factual foundation fails.  At book 11 page 3792, line 17, Justice von Doussa made this finding – perhaps I should start line 14:

They –

That is Sparnons –

knew Apand was heavily involved in research and development and promoted the use of good seed stock.  To that end Apand encouraged and assisted its contract growers to use certified seed.  I think it is highly improbable that the Sparnon partnership gave any thought to the possibility that experimental seed supplied to them by Apand could be diseased or could pose any threat to their property.  Their evidence to the contrary –

and, in particular, his Honour earlier finds there was knowing of running of the risk in any way at all.

Could I then turn to the foreseeability question?  The Court would understand that we would join issue with this, both as a matter of fact and law.  At the factual level, I have already identified to the Court a little earlier that to the knowledge of Apand, Tymensen were not growing on new ground, clean ground.  They knew that it was the non‑certified seed and that the first step of minimisation, namely growing on clean ground, was not addressed.

GAUDRON J:   Is there evidence that they knew that there had been an outbreak of bacterial wilt two farms along?

MR GRAY:   Yes, there is, if the Court pleases.  Mr Cullen, who I spoke of earlier in my submissions, a person of some seniority in operation, he knew that Summers had wilt.  That is volume 5 appeal book, page 1953, lines 24 to 32.  At line 23:

Did you, at that time, that is the time of the Pakenham meeting, know of a person by the name of Summers?---I did, yes.

Did you know Mr Summers to be the owner of land and a potato grower on the Koo Wee Rup swamp?---Yes, I did and do.

Was he a grower for CCA from time to time?---He was.

Did you become aware of the fact he had bacterial wilt diagnosed on his property at some time?---I was aware.

Do you know when you became aware of that?---In late ’89, I believe.  The ’89 crop of potatoes, in 1990.

He was aware of the flood, the next page, page 1954 –

As a result of becoming aware of that information –

the top of the page, about Mr Summers –

we ceased to contract with him.

Then, at line 14:

Now, I will just take you to another matter.  Were you aware that at some stage there was a flood in the KooWeeRup swamp area?---Yes, I was.

Was that – are you able to now tell us when that flood was?---I can tell you precisely.  You don’t forget things like that, 12 October.

Which year?…..1990.

1990, thank you.  Did you make any observations of the flood?‑‑‑Yes, I certainly did.

Then he knew that Tymenson’s property was flooded.  Page 1993 in this book, line 5:

Did you know the extent of the flood in terms of Tymenson’s property?---Yes.

You knew that a part of the paddock where his Saturna crop was sown had been subject to the flooding?---I believe it to be, I didn’t see it.

At the end of December ’90 you believed it had been?---No.

Did you have a belief one way or the other?---No.

I think it is the case that at the end of December 1990 you knew that a part of Tymensen’s property had been under water in the flood?---Yes.

He knew that wilt could be transferred by water movement, at page 1955.

GAUDRON J:   Page 1955, line 17.  Mr Cullen, in answer to his Honour’s question:

Were you aware at that stage that bacterial wilt could be transferred by water?---I was, your Honour.

He knew that Tymenson had planted Saturna on his property; page 1993 in this book.  He said that with the benefit of hindsight his decision would not have been taken again.  That is in this book at page 2006, line 34.  At line 20:

So if you had applied your mind to the question of transfer of bacterial wilt at the end of December 1990 I suggest you would have come up with the same attitude as you had in May ’92, that is it was

a reasonable theory that the flood could transfer bacterial wilt from Jack Summers’ property to Tymensen’s property in the flood October ’90? ---Reasonable theory if it crossed one’s mind.

Yes, and that was what I said.

He agrees.  So there was ample evidence of Cullen’s knowledge of that matter, and there is other material that carries the same impact, but that should be, with respect, sufficient unto the day, and clearly showing Cullen’s explicit knowledge of these matters.

We would put the submission that it was perfectly open to Justice von Doussa to find that anybody who had thought about it, with the knowledge that Apand had, would have seen that using non‑certified seed, that then had been grown for further seed in the Koo Wee Rup swamp area, then appeared on the Sparnon land, did involve a risk of injury.

So that against that background one has then to turn to consider my learned friend’s argument about Hughes v Lord Advocate.  Could we say, initially, that what the intermediate court and Justice von Doussa did was to apply well‑settled law in a conventional way, and there has been no error of law or mixed law and fact.  Could I just take the Court to Justice von Doussa’s judgment ‑ ‑ ‑

GLEESON CJ:   Perhaps it is sufficient if you give us the page references and we can look at them for ourselves.

MR GRAY:    Yes, if the Court pleases.  My learned friend referred to the foreseeability finding and there were two findings:  the first finding referred to was at 3764 – I am sorry, I have lost my place.  I am sorry, I had the right page, 3764 line 15 was the general finding my friend referred to and he took the Court then, I think, to 3765 but at 3765 line 11 his Honour makes a much more precise finding in regard to the specific issue of what happened at Koo Wee Rup swamp and the fact that the bacterial wilt was, in fact, there.  His first finding was about general disease, the second finding was in regard to the specific fact of bacterial wilt and…..foreseeability.  We say those findings, properly based on fact, lay a proper foundation in regard to foreseeability to found the duty of care.  May it please the Court.

GLEESON CJ:   Thank you, Mr Gray.  We will reserve our decision in this matter.

AT 4.29 PM THE MATTER WAS ADJOURNED