Selected Seeds Pty Ltd v QBEMM Pty Ltd

Selected Seeds Pty Ltd (the appellant) appealed to the High Court of Australia against a decision of the Court of Appeal of the Supreme Court of Queensland concerning a product liability insurance policy. The dispute arose after the appellant sold contaminated seed, which, when planted by a third party, caused damage to that party's property. The insurer (the respondent) sought to rely on an exclusion clause within the policy.

The central legal issue before the High Court was the proper construction of an exclusion clause in the insurance policy. Specifically, the court had to determine whether the liability for the damage caused by the contaminated seed arose from "the failure of any Product to correctly fulfil its intended use or function," as stipulated in the exclusion clause, or whether it constituted damage caused by the product itself performing an unintended and harmful function.

The High Court reasoned that the exclusion clause was intended to exclude liability where the product itself failed to perform as expected, rather than where the product, while performing its intended function (i.e., germinating), also caused positive harm due to contamination. The court distinguished between a product failing to fulfil its intended use or function and a product causing positive harm. In this instance, the seed germinated and grew, fulfilling its intended function of growing. However, the damage arose not from this intended function failing, but from the unintended consequence of the seed carrying a weed. Therefore, the liability to the third party was for what the seed *did* (i.e., introduced a weed), not for what it *failed to achieve* (i.e., being free of contamination).

Consequently, the High Court allowed the appeal with costs, set aside the order of the Court of Appeal, and ordered that the appeal to that Court be dismissed with costs.