Perre & Ors v Apand Pty Ltd

[1998] HCATrans 232

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A64 of 1997

B e t w e e n -

FRANK PERRE, CATERINA PERRE, PASQUALE PERRE, MARY PERRE, GUISEPPE DOMENICO PERRE, MARIA PERRE, JIM PERRE, FRANCES PERRE, WARRUGA FARMS PTY LTD, PERRE’S VINEYARDS PTY LTD, RANGARA PTY LTD, PASQUALE PERRE, GRACE PERRE, FRANCESCO PERRE and MARIA PERRE

Applicants

and

APAND PTY LTD

Respondent

Application for special leave to appeal

McHUGH J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 19 JUNE 1998, AT 3.03 PM

Copyright in the High Court of Australia

MR D.M.J. BENNETT, QC:   May it please the Court, I appear for the applicants with my learned friend, MR N.G. ROCHOW. (instructed by Townsends).

MR P.R. GARLING, SC:   If the Court pleases, I appear for the respondent with my learned friend, MR M.A. FRAYNE. (instructed by Phillips Fox).

McHUGH J:   Mr Garling, this seems a very interesting point in which the Court might well be assisted by hearing from you first.

MR GARLING:   Your Honour, .....seems to have encouraged that view in the court which I would seek to discourage, your Honour.  We submit there are a number of reasons it is not appropriate to grant special leave.  In the first place, your Honours, we submit it is not a suitable vehicle for special leave because the arguments As to the existence of a duty now put forward by the applicants require the overturning of a number of factual findings below upon which the trial judge and the Full Court were unanimously agreed.

The first of those findings which is the first in point of time, is that the negligent act of my client was an act which occurred in February 1991 at Pakenham in Victoria.  It was known in the judgments as “the Pakenham meeting”.  That was the meeting at which a decision was made to distribute the seed from which the potatoes grown on the Sparnon property were generated.  Now, that was the only finding of negligence against my client and your Honours will see that in the application book at 95 in the judgment of Justice von Doussa at line 16 on page 95, this is in the context of the Perre’s claim.  His Honour says:

The act of negligence by Apand that has been made out is a failure by officers of Apand at Pakenham, Victoria, to appreciate the risk of spreading bacterial wilt by using as seed Saturna potatoes -

et cetera.  And in the Full Court, your Honours, that finding is to be found at 176 of the application book at line 5 and following.

Now the significance of that finding, your Honour, is this, that the immediately successive finding of fact which depends upon that finding is that the class to be affected by the negligent act was, in effect, an indeterminate class and that is one of the complaints made by the applicants.  But while your Honours have page 176 open, your Honours will see why that finding was correct.  If your Honours just follow for a moment the path of this potato seed from Pakenham.  The seed:

was subsequently supplied to some twenty one growers throughout four States of Australia including Virgara Bros in South Australia.

That was the source of the Sparnon seed:

Some fifty nine tonnes of potato seed were then planted in that generation.  When harvested, some, but by no means all, of those various crops were again utilised.....In particular, seven of the twenty one first generation growers produced potatoes which were further used for seed in second generation plantings, again, in four States of Australia, and involving, as the evidence now shows some twenty six growers planting some one hundred and thirty one tonnes of potato seed.

And then their Honours described what happened in South Australia.  The Vigara Bros:

seventeen tonnes was used for further planting by six growers in South Australia in February 1992.  At the same time, a second generation of the source seed was planted by nine growers (seventy three tonnes) in Queensland, six growers (thirty three tonnes) in Victoria and four growers (eight tonnes) in New South Wales.  Some other of that second generation produce was processed for consumption.   On the evidence, of the twenty six growers who planted the second generation seed throughout Australia, eighteen produced crops infected by bacterial wilt, three sprayed out their crops, and five apparently reported no problems.

So to say that this was not an indeterminate class at the time of the negligent act when the duty arises is to ignore the consequence found by the Full Court and the trial judge, namely that this was an extremely widespread distribution.  Your Honours, to say, as the applicants do, well 20 kilometres radius around a particular farm is really not a very big area, is to ignore the other side of the equation which is that a 20 kilometre radius of a circle ‑ ‑ ‑

McHUGH J:   But do you accept that your client owed a duty of care to each of the recipients of the seed?

MR GARLING:   Well, we did not argue - in this case, we did not say we owed no duty to the Sparnons.  It took the seed and planted it for propagation.  We argued for various reasons there was no breech but that was held against us.

McHUGH J:   But once you do not argue that there was no duty to the Sparnons, then the question is thrown up, is it not, as to whether or not other people who are within the 20 kilometre radius are not also owed a duty of care.

MR GARLING:   Yes, your Honour.  The question is thrown up, no question about that ‑ ‑ ‑

McHUGH J:   I know, I know, and I think on the existing state of the authorities you are probably a bit in front, maybe a long way in front.

MR GARLING:   I am indebted to your honour’s comment, and we adopt it.

McHUGH J:   But it is an important question of principle in an area of law which, to say the least, is most unsatisfactory and it may be that its future will be either a development of it or as some, including myself, have suggested, a real pulling back of it.  But one way or the other, I think we are in a developing area of law in which the outcome is by no means certain.  One thing I think we can say is the law is not standing still in this area.

MR GARLING:   Of course, your Honour.  I accept that.  But the law’s position will not be assisted by considering this case.  That is what we say.

McHUGH J:   Yes.

MR GARLING:   Because you have these findings of fact firstly, your Honours, that would need to be overturned.  Your Honours would need to be satisfied that the class was not indeterminate, because wherever the law presently stands this Court is unanimously of the view that one cannot have a duty where the class is indeterminate.

McHUGH J:   Yes.

MR GARLING:   There is no question about that.  And what the Full Court and what the trial judge found was that the class was indeterminate.

CALLINAN J:   But on a fairly unsatisfactory basis, I would have thought, with respect.  You look at page 176, just after the passage to which you referred, as the implication seems to be, it is an implication that is really reinforced that you have almost got to be able to count with precision the number of people affected before you have an ascertainable class, and that just cannot be right.

MR GARLING:   Well, with respect, your Honour, we start in this case with the proposition that these applicants were contending that a duty of care was owed.  The retort to that was, well you have to show that you are within a sufficient distance, if I may use that neutral expression, from the person who is owed the duty to be included in it.  Now, it was incumbent on the applicants to show that the class was capable of being ascertained.  Now, your Honour, can I just give your Honour this example.  A 20 kilometre radius throws up an area of 1250 square kilometres.

CALLINAN J:   That is nothing in a rural community.

McHUGH J:   Yes, we are talking ‑ ‑ ‑

CALLINAN J:   This is Australia.  We are not subsidised five acre farms in Switzerland.

MR GARLING:   Yes, your Honour.  But if we are talking of 29 growers spread around Australia and one multiplies it, you are talking of many thousands of square kilometres.  Now, it is not immediately apparent, your Honours, with respect, that there will within many thousands of square kilometres be a class which is not indeterminate.  The applicants had to persuade the courts below that one could determine with a reasonable approach what that class was.

McHUGH J:   Well, does the evidence indicate, for example, that there were tens of thousands of these growers, or ‑ ‑ ‑

MR GARLING:   The evidence, your Honour, as the Full Court notes, was entirely silent on the number of growers that one might expect within the 20 kilometre radius of the 26 growers.

McHUGH J:   Yes, I do not just mean that, I just mean even nationally or ‑ ‑ ‑

MR GARLING:   No.  Your Honour, I am always reluctant to say there was no evidence in a trial where the evidence took some months but the judgments do not refer to it and the Full Court, at the passage Justice Callinan just drew to my attention, certainly did not see any evidence identified.

CALLINAN J:   And then there is the other aspect of it which frankly concerns me on page 177, line 7 or 8:

There is no apparent reason why economic loss, due to an inability to export potatoes to Western Australia, is of any special significance compared with other causes of economic loss.

MR GARLING:   Yes.

CALLINAN J:   Well, it seems to me that it is quite wrong superficially to infer that it is unimportant, which that implies that somebody might be confined, or largely confined for their business to exports to Western Australia.

MR GARLING:   Your Honour will no doubt have appreciated, but may I take the opportunity of reminding your Honour, that what this quarantine ban, if that be the correct expression, did was merely to restrict these farms selling to Western Australia.  It did not restrict sales to South Australia or anywhere throughout Australia.  Bacterial wilt did not destroy the potatoes necessarily.  All that happened was that the Western Australian government prohibited the import into Western Australia of potatoes that were either grown or washed or packed within 20 kilometres of a known outbreak, so that ‑ ‑ ‑

CALLINAN J:   That seems to me more like a mitigation question, frankly, than a question going to liability.

MR GARLING:   No, the reason we put it, with respect to liability, is this, your Honour.  What the Full Court is here saying is, one has to look at not just the potato grower, but one has to look at the agent who buys the potatoes, the transporter and every business along what might be called the potato distribution chain, if that is an appropriate expression, of potatoes into Western Australia.  You ask yourself this question: the loss which they will suffer is precisely the same.  Its economic loss to their business, occasioned by a particular restricted market.  Not by the market as a whole, but by a restricted market.  And all their Honours here are saying is, it is impossible to detect a difference in principle between any one along that chain.  So that, as a matter of principle, if one extends the chain to the applicants in this case, one is extending to every business or person along the distribution chain, as a matter of notion, that economic loss will flow to all of them.  Your Honours, if 30,000 kilometres of space is not enough to have an indeterminate class, the potato distribution chain is certainly in that category.

So we would say, with respect, what their Honours are saying here is that, in the circumstances of this case, one has to find the boundary between where a duty of care is to be owed and where one says one has gone past that boundary where the duty of care is owed.  One of the ways their Honours did it was to examine whether or not there was a difference in the loss as it moved down the chain.

But your Honours, there is another reason why, notwithstanding your Honours’ impression that this is a suitable vehicle for elucidation of the principles of economic loss, it ought not be allowed and that is that the way in which the applicants now put their case is really a formulation quite different from trial and on appeal.  Now, your Honours need to start with this proposition.  The applicants do not all have the same economic interest.  They are different.  They are not all potato growers.  Some of the applicants are potato growers; some are, in effect, landlords;  some are, in effect, operators of a potato washing plant.  They are not all vendors of potatoes to Western Australia.  So that one starts with the proposition that the applicants do not all have identical interests.  The case was put below by the applicants as one of pure economic loss, although now the applicants put it as being a question of whether a threat of physical loss or a possibility of physical loss identifies this case as special.  It was never put that way.  May I give your Honours some references to that.

In the trial judge’s judgment, page 90 of the application book, his Honour notes at line 2:

Each of the heads of loss alleged by the three groups in the Perre interests is for purely economic loss.  None of the groups.....suffered direct injury -

et cetera.  Then at about line 12, Warruga Farms, which comprises some of the individual applicants and the company:

was the actual exporter.  Rangara Joint Venture.....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.....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.....the potatoes -

et cetera.  So, one starts with a proposition that it was separate interests amongst the applicants and a claim for pure economic loss.  The Full Court noted that and adopted it at 163 where they refer to the trial judge’s comments and then over to 164.  If your Honours see below line 10 on 164, there were five matters of proximity or five circumstances of proximity relied upon, none of which were a threat of physical harm to the property or a possibility of physical harm to the property.  That was the case put below and not changed on appeal.  The case put on appeal, your Honours will see at 165, line 12:

The case put on behalf of the Perre interests was summarised by Mr Sackar QC as follows:

“His Honour took too narrow a view of the notion of proximity, that he did not pay sufficient regard to factors uncontroverted on the evidence but which had the effect of significantly limiting ... the class of persons likely to be affected”-

i.e., an attack on the class:

“He did not pay ... sufficient regard to the question of constructive notice.”

And then he added some various matters, none of which relate to this notion of physical threat.  Your Honours, the case was pleaded as a case of pure economic loss and your Honours will see, and I will give your Honours the reference to this, page 87 is in the trial judge’s judgment.  He sets out the pleadings by the Perre interests, firstly dealing with the Warruga Farms, commencing at 86, over the page 87, paragraph 55 at line 33:

As a result of the outbreak of bacterial wilt.....and the proximity of the Warruga property.....

(a) Warruga Farms has suffered a loss of income.....

(b) the value of the Warruga property is less -

And your Honours will see heads of damage which might classically be called “pure economic loss”.  A similar pleading is to be found at 88 in paragraph 58, line 25, and 89, lines 37 to the end of the page which is in respect of what is known as the Rangara Joint Venture.  So the case was pleaded as a pure economic loss case, nothing to do with threat or physical threat but damage to the property as it is put here. 

Lastly, your Honours, on this point, we submit that fundamental to the applicant’s argument is that the damage suffered here is a particular special kind, but in the passage that your Honour Justice Callinan reminded me of a few moments ago at 177, the Full Court disposed of that argument in the way they did, saying logically analysed, it is not of a special kind, it is absolutely the same as everybody on the distribution chain.

Your Honours, because there are findings of fact which we say were unanimous and need to be overturned before one gets to discuss the question of duty of care ‑ ‑ ‑

McHUGH J:   Well, not necessarily.  Supposing one defined the class as the persons to whom this seed was delivered and those within a radius of 20 kilometres, why is that an unascertained class, or an indeterminate class?

MR GARLING:   Well, because ‑ ‑ ‑

CALLINAN J:   And to add to that, further to restrict it and clarify it, and who sold to Western Australia as a normal part of their business.

MR GARLING:   Well, the answer to that is the applicants failed to lead any evidence to who might be in that class.

McHUGH J:   But they do not have to ‑ ‑ ‑

MR GARLING:   I am sorry, your Honours, with respect, we would say the applicants bear the onus of satisfying the court there is a duty of care.

McHUGH J:   Well, that is true, but if the proper principle, or the correct principle, is they owe a duty to the class that has just been defined, in view of the issue that Justice Callinan has put to you, and if they know or ought to have known of injury to that class, that may be enough to get the present applicants home.

MR GARLING:   Well, your Honours, we would submit that merely in words to define a class, which on its face ‑ ‑ ‑

McHUGH J:   You would not have to read too many of my judgments to indicate that it probably would not be enough to get them home, but this is the important question of principle.  I was the sole dissenter in Hill v Van Erp, for example, and in Van Erp the Court tended to take, at least from my point of view, an expansive view of economic loss.  It is a developing .....and it has been expanded and then restricted and perhaps it is being expanded again, but it is terribly unsatisfactory and the facts of this case may be a reason why it is really as good a vehicle as you would get to test all the parameters of the problem, particularly having regard to the three separate categories of operators.  I mean, some could succeed and some fail, maybe only one category could succeed, maybe they all would fail.

MR GARLING:   Your Honour puts the applicants for special leave argument very persuasively, with respect.  But we say that in addition to the previous arguments we have put, that the facts of this particular case are

sufficiently diverse that no principle can be found from it and that, really, in this area one is examining cases of fact and asking is the totality of the facts and the surrounding circumstances sufficient for a duty of care to be found.  There is no principle of law to be found in this particular case, with respect, and that is why it is not a particularly - it is not an appropriate vehicle for special leave. 

Your Honours, of course, lastly we would submit that your Honours would not grant special leave because Justice von Doussa and the Full Court were clearly correct.  If it please the Court.

McHUGH J:   We need not trouble you, Mr Bennett.

There will be a grant of special leave in this case.

MR BENNETT:  Might I just, for completeness, hand to your Honours a page that was in the appeal book but was not reproduced in it, so the record is in order.

McHUGH J:   Yes.

AT 3.26 PM THE MATTER WAS CONCLUDED