v and D Zurcas Holdings Pty Ltd v K and S Coolstores Pty Ltd
[2013] VCC 75
•20 February 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised Not Restricted Suitable for Publication |
COMMERCIAL LIST
GENERAL DIVISION
Case No. CI-11-04036
| V & D ZURCAS HOLDINGS PTY LTD | Plaintiff |
| v | |
| K & S COOLSTORES PTY LTD (ACN 102 311 446) | First Defendant |
| -and- | |
| COLIN CAMPBELL (CHEMICALS) PTY LTD (ACN 000 045 590) | Second Defendant |
---
JUDGE: | HIS HONOUR JUDGE LACAVA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3-7, 10-12 and 14 December 2012 | |
DATE OF JUDGMENT: | 20 February 2013 | |
CASE MAY BE CITED AS: | V & D Zurcas Holdings Pty Ltd v K & S Coolstores Pty Ltd & Anor | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 75 | |
REASONS FOR JUDGMENT
---
Catchwords: Claims in contract and negligence for damages for damaged fruit (pears) caused by dipping the pears in chemicals that were unfit for the purpose – third party proceeding raising claims in negligence (failure to properly advise and failure to warn) and in misleading and deceptive conduct – refusal to apportion claims where no failure to take reasonable care.
Legislation Cited: Wrongs Act 1958; Trade Practices Act 1974 (Cth); Fair Trading Act 1999 (Vic)
Cases Cited:BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266; Wyong Shire Council v Shirt & Ors (1980) 146 CLR 40; Rogers v Whitaker (1992) 175 CLR 479; Pearsons Barristers and Solicitors v Avison [2009] VSCA 54.
Judgment: Judgment for the plaintiff.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Stuckey | Dawes & Vary Pty Ltd |
| For the First Defendant | Mr P Crennan | Lander & Rogers |
| For the Second Defendant | Mr M Barrett | McCabe Terrill (Vic) Pty Ltd |
HIS HONOUR:
Introduction – The Parties and the Primary Issue to be Decided
1 The plaintiff carries on business as an orchardist in Shepparton East. It grows packham pears and other varieties of fruit. Mr Nick Zurcas, a director of the plaintiff, gave evidence in the trial on behalf of the plaintiff. The evidence that I accept is that the plaintiff is regarded in the industry as a good grower of packham pears.[1]
[1]Evidence of Mr Bell (T225); Evidence of Angelo Sfetcopoulos (T386)
2 This proceeding relates to some of the packham pears that the plaintiff produced and picked for storage in February and March of 2010. The unchallenged evidence is that the plaintiff’s crop of pears in the 2010 year, when picked, was of good quality.[2] There are theories that this could not have been the case, but those theories are not supported by the evidence.[3]
[2]Evidence of Mr Zurcas (T62); Evidence of Mr Bell (T226); Evidence of Angelo Sfetcopoulos (T386);
[3]See, for example, Exhibit CC-15 at pages 363 and 368 – opinion of Dr Brown
3 The plaintiff contracted with the first defendant to dip and store its 2010 crop of packham pears. The intention of the plaintiff was that 360 bins of its packham pears would be dipped and stored by the first defendant in a refrigerated and controlled atmosphere (‘CA’) room until around October/November 2010 when the pears would be retrieved from cold storage and released onto the market for sale. The plaintiff’s strategy was to sell the pears when the market price for the pears was high.
4 The first defendant dipped and stored the plaintiff’s packham pears picked in February 2010 and stored them in its cool store. However, when they were inspected in July 2010 they were found to be infected by a rot, penicillium expansum, also known as ‘blue mould’.
5 When it was realised the plaintiff’s fruit was infected with blue mould, the pears were taken from the cool store on or about 3 August 2010 and immediately sent to a packing company called GV Independent Packers (‘GVIP’). There, the fruit was sorted and graded. The fruit that was not infected with blue mould, so far as was reasonably possible, was retrieved and sold.
6 GVIP is controlled by one Chris Georgopoulos. Like a number of other witnesses in this proceeding, he has had a lifetime experience in growing fruit in Shepparton East. As well as operating GVIP, Mr Georgopoulos also operates orchards and grows packham pears. The fruit picked on his orchards in February 2010 was also dipped and stored by the first defendant save for some that was stored at another cool store known as Kalafatis. Mr Georgopoulos, who gave evidence in this proceeding about the pack out of the plaintiff’s fruit, told me that his fruit was also found to suffer from blue mould. Mr Georgopoulos has a separate proceeding in this Court against the same defendants. That proceeding raises identical issues and is yet to be tried.
7 In 2010, the first defendant carried on business as a cool store which also provided dipping services.[4] The two persons who were the directors and persons in charge of actually running the business of the first defendant were Mr Angelo Sfetcopoulos and Mr Victor Kyriacou. Both of these persons gave evidence in the trial of this proceeding. Each of them has a background of involvement of growing fruit in the Shepparton area. The first defendant has operated the cool store since about 2001, but neither Mr Sfetcopoulos nor Mr Kyriacou has any formal training in operating a cool store or detailed knowledge or understanding of the chemicals used to treat the fruit.
[4]T304-306 and T402
8 The plaintiff submits the evidence shows the first defendant was committed to succeed in the business of operating a cool store without having any theoretical grasp of the chemical processes which underpinned it. I accept that submission.
9 The second defendant is a manufacturer and supplier of chemical compounds for use in the agricultural industry. In particular, it has been involved in agricultural chemicals since the 1960’s, evolving into the supply of post-harvest fungicides.[5]
[5]T565
10 The second defendant manufactured the fungicide chemicals which were sprayed onto the plaintiff’s fruit by the first defendant. Mr Geoffrey Derrick, a director of the second defendant, and Mr Rocco Stippio, a salesman employed by the second defendant, each gave evidence in the trial. Ramsay Zreikat, the national sales manager, director and secretary of the second defendant, also gave evidence. For reasons which I will detail later in these reasons, none of the witnesses called by the second defendant as to fact was impressive. Dr Brown was an unimpressive expert witness. I do not accept his opinions advanced in this proceeding. On matters of conflict I prefer the evidence given by others, especially Mr Angelo Sfetcopoulos and Mr Victor Kyriacou.
11 The fungicide chemicals were supplied to the first defendant by the second defendant through an on-seller, Lindsay Rural, another company that is not a party to this proceeding. Nothing turns on this fact.
Pleadings
12 By this proceeding the plaintiff claims damages from each defendant for the loss sustained by it for the damage to its fruit caused by the development within it of blue mould whilst it was stored in the first defendant’s cool store. As against the first defendant, the plaintiff pleads causes of action in contract and in negligence. As against the second defendant, the plaintiff pleads causes of action in negligence and misleading and deceptive conduct.
13 The plaintiff alleges the first defendant breached terms in a contract in that it:
(a) failed to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit; and
(b) did not dip the fruit in a fungicide capable of preventing the development of fungal rots and moulds; and
(c) used chemicals which were not reasonably fit for the purpose for which they were employed, namely controlling or preventing the development of fungal rots and moulds.[6]
[6]Plaintiff’s Further Amended Statement of Claim, paragraph 7 at CB 17B
14 The cause of action by the plaintiff as against the first defendant in negligence alleges the first defendant owed to the plaintiff a duty to take reasonable care and skill in the handling, treatment and storage of the pears and that it breached that duty by failing to exercise reasonable care and skill in dipping and storing the fruit, and that this breach of duty caused the fruit to suffer from blue mould.[7] In further and better particulars of the allegations of breach of duty the plaintiff alleged the first defendant, inter alia, failed to use chemicals in the dipping and storage of the fruit that were reasonably suitable for the elimination or control of the blue mould.[8] Although other particulars of negligence are also alleged, it is that particular to which much of the evidence in the trial of this proceeding was directed.
[7]Plaintiff’s Further Amended Statement of Claim, paragraphs 11 and 12 at CB 17C-17D
[8]Plaintiff’s Further and Better Particulars of Claim, paragraph 1(a) at CB 17J
15 In defending the plaintiff’s claim, the first defendant issued a third party proceeding[9] against the second defendant alleging it was negligent in advising the first defendant to dip the pears with a combination of fungicide chemicals known as Vorlon and Ippon.[10] It also alleged the second defendant, in making representations about the use of Vorlon, engaged in misleading and deceptive conduct in breach of provisions of the Trade Practices Act 1974 (Cth) (‘TPA’) and the Fair Trading Act 1999 (Vic) (‘FTA’) and seeks damages.[11]
[9]The Third Party Notice is dated 12 January 2012 at CB 49
[10]Statement of Claim on Third Party Notice, paragraphs 17-21 at CB 53
[11]First defendant’s Amended Statement of Claim on Third Party Notice dated 19 November 2012, CB 57
16 The first defendant also seeks contribution from the second defendant on the basis that it is a concurrent wrongdoer under PART IVAA of the Wrongs Act 1958 (Vic) (‘Wrongs Act’). In an Amended Statement of Claim on Third Party Notice, in addition to seeking indemnity from the third party (second defendant) for any damages it might be ordered to pay to the plaintiff, the first defendant also seeks payment from the second defendant to it of the sum of $6,072.00, being an amount not paid to it by the plaintiff for dipping and storage charges.
17 After the first defendant brought the second defendant into the proceeding as a third party, the plaintiff joined the second defendant as a party to its claim. The plaintiff’s claim against the second defendant essentially replicates the first defendant’s third party claim.
18 In response to that claim and to the third party claim, the second defendant denies liability to either the plaintiff or the first defendant. The second defendant relies on the alleged breach by the first defendant of its duty of care to the plaintiff to support a proportionate liability claim. The second defendant denies that the plaintiff’s fruit suffered from blue mould to any substantial degree but if it did, the blue mould was caused by the failure of the first defendant to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit. In that regard, the second defendant alleges the first defendant:
(i) failed to mix and/or maintain the fungicides in the proper concentrations;
(ii) failed to properly apply the fungicides; and/or
(iii) failed to properly handle and store the fruit.[12]
[12]Second defendant’s Amended Defence to Amended Third Party Notice
19 The second defendant also seeks apportionment of some liability for the plaintiff’s loss to GVIP. That claim alleges that, in sorting the fruit for sale, GVIP failed to properly sort the good fruit from the mould affected fruit.
20 In summary form the pleadings raise mixed questions of fact and law as to which party (if any) is responsible for the plaintiff’s loss.
Uncontested Facts
21 Many facts are uncontested. The plaintiff’s packham pears were grown at its orchard in Shepparton East.[13]
[13]T34
22 360 bins of that fruit were delivered to the first defendant’s cool store between 25 February 2010[14] and 2 March 2010.[15]
[14]Exhibit A: CB 419
[15]Exhibit A: CB 429
23 The 360 bins of pears were delivered to the first defendant for the purpose of the fruit being first dipped and then stored.[16] The plaintiff’s fruit was to be stored after harvest for up to ten to eleven months. The CA room was to hold the pears at a temperature of 0°C to 1°C, and in an atmosphere where the level of carbon dioxide and oxygen had been reduced to almost nil.[17]
[16]T36
[17]See evidence of Angelo Sfetcopoulos at T305-313 and Victor Kyriakou at T403-T405
24 The intention of CA storage is to combat senescence in the pears; that is, the ripening process, so that ripening is delayed. The commercial objective in delaying the ripening process is to enable pears to be released onto the market over time at prices favourable to the grower.
25 There are various stages in the handling of the fruit after picking and preparing the fruit for storage in a CA room. When harvested, the pears are loaded into “bins" consisting of large wooden crates of standard size. A full bin holds just under 500 kilograms of pears. After harvest, the pears are transported to be “dipped” before storage. “Dipping” is a misnomer, as the process involves drenching, or passing the pears through a “waterfall”.
26 The purpose of dipping is to eliminate or control certain conditions. In the present case, the pears passed through two dips. The first dip contained Nylate, a chlorine-based surface disinfectant. That part of the process is largely irrelevant to the issues that I must decide in this proceeding.
27 The second dip contained a chemical known as DPA, in specified quantities; and two fungicides, namely Vorlon and Ippon.
28 The DPA/dip is held in a 2600-litre tank. The chemical mixture is discarded (“dumped”) after 320 or more bins are dipped. The records of the first defendant indicate that when it is refilled, the prescribed amount of DPA and fungicide is added to the tank and that after about every 80 bins, the DPA solution and the fungicide are topped up (referred to as a “charge”).
29 The amount of DPA to be added in a charge is determined by titration of the mix according to a manual produced by the second defendant.[18] There is no means of measuring the amount of fungicide required in a charge. The first defendant determined the amount of fungicide required to be added as also shown by the titration process. This technique in itself was not criticised in the proceeding.
[18]Exhibit KS 1
30 The first defendant accepted the fruit and proceeded to dip it between 25 February 2010[19] and 2 March 2010.[20] After dipping, the pears were left to dry overnight. Drying was necessary to prevent DPA burn of the fruit skin. It was not necessary to achieve absolute dryness for this purpose.
[19]Exhibit KS2: CB 559
[20]Exhibit KS2: CB 564
31 The pears were next placed in a chilled cool room to reduce their temperature to 3°C - 4°C. They were then covered with plastic and replaced in a chilled cool room. Once all Zurcas’s bins were ready (that is dipped, covered, and chilled), they were placed in CA room 12. The doors were sealed and the CA was established on 12 March 2010.[21]
[21]Exhibit KS5
32 The temperature of the cool room after establishment of CA and the maintenance of the CA whilst the plaintiff’s fruit was stored within were not criticised in the proceeding.
33 The first defendant dipped all of the plaintiff’s fruit with a mixture of chemicals known respectively as DPA, Vorlon and Ippon. Each chemical has a separate role to play in the storage and preservation of the fruit. The first defendant’s dipping records that relate to the plaintiff’s fruit went into evidence.[22] At no time was the plaintiff consulted about the selection of chemicals used by the first defendant in the dipping process for its fruit.[23]
[22]Exhibit KS2: CB 559, 560, 561, 562, 563 and 564
[23]T41; T389
34 In 2010, the first defendant had also dipped and stored packham pears for a Sfetcopoulos company, Ashcorn Pty Ltd. The Ashcorn fruit had also been dipped with the chemicals DPA, Vorlon and Ippon prior to being placed into cool storage in a controlled atmosphere room. When inspected in July 2010, that fruit was found to have the rot blue mould.[24]
[24]T334; T409; T94-95; T41
35 After the discovery of rot in the Ashcorn fruit, CA room 12 containing the plaintiff’s fruit was opened on or about 3 August 2010.[25] The plaintiff’s fruit was then also observed to have rotted.[26]
[25]T43, Evidence of Mr Zurcas and Mr Georgopoulos. Exhibit KS5: CB 524
[26]T43; T98; Exhibit K: CB 122 at 5.4 and 5.5
36 The plaintiff’s fruit was delivered from the first defendant’s cool store to GVIP between 6 August 2010[27] and 14 August 2010.[28] The task of packing out that fruit was an extremely difficult one which required the packing house to endeavour to rescue as much fruit as possible without sending fruit contaminated by rot to market.[29]
[27]Exhibit C: CB 695
[28]Exhibit C: CB 612
[29]Evidence of Mr Zurcas at T45-46; Evidence of Mr Georgopoulos at T98-103 and T113-T122; Exhibit L: CB 168-172; Evidence of Mr Bell at T247-249 and T281-284
37 The spores that give rise to blue mould exist and are prevalent in the environment, including pear orchards and cool stores. The spores may be found in the soil in orchards and on the pears within. If the spores gain entry into the pear they may establish an infection, that is, the blue mould. It requires only one spore to create an infection.
38 The dipping process is intended and designed to deal with blue mould in two ways. Dipping with the Nylate kills most but not all of the spores on the surface of the pear. The Nylate does not kill spores that are established and not located at or on the surface of the pear.
39 The very process of the dipping can itself be a source of inoculums of the blue mould spores, particularly when the fruit is dipped in the DPA mix. That occurs because during this part of the dipping process spores are washed off the pears into the dipping mix and as more pears are processed the concentration of spores in the DPA dip becomes higher. The purpose of dipping the fruit in the fungicide (here Vorlon and Ippon) is to prevent or control fungal infections in the fruit itself.
40 At the time of the events the subject of this proceeding, there were three forms of fungicide which could legally be used in Australia for this purpose. They have various brand names, but the active ingredients are respectively:
(a) Thiabendazole (brand name Vorlon, made by the second defendant);
(b) Imazalil (brand names Magnate, made by the second defendant, and Fungaflor, made by a competitor of the second defendant); and
(c) Iprodione (brand name Ippon, made by the second defendant, and Rovral Aquaflo, made by a competitor of the second defendant).
41 Thiabendazole and Imazalil are systemic fungicides. That is, they enter the fruit and can prevent infection by spores and cure recently established infections. Iprodione is a surface fungicide. It does not enter the system of the fruit but attacks infections on the surface. Dr Brown, an expert called on behalf of the second defendant, referred to some literature which suggested that Iprodione may have limited systemic effect.
42 On the first day of dipping the 2010 crop of pears the first defendant used a combination of Fungaflor and Rovral Aquaflo as fungicides.[30] Those chemicals are what it had used prior to 2010 as fungicides and it had some left over.
[30]Exhibit KS2
43 For the remainder of the dipping the first defendant used a combination of Vorlon and Ippon as fungicides. All of the plaintiff’s fruit stored with the first defendant was dipped with this combination of fungicides. This case is essentially about whether or not the use of Vorlon and Ippon in combination was capable of preventing the plaintiff’s fruit from rotting whilst in storage.
Fruit Dipped in Fungaflor (Imazalil)
44 The plaintiff placed 360 bins of its packham pears with the first defendant for dipping and storage. Before dipping the plaintiff’s fruit the first defendant had also dipped pears from another grower Valley Star. That fruit was dipped with a combination of Fungaflor and Rovral. The first defendant noted those bins in its records and designated them by marking the bins with a capital “F”.[31] When those bins were inspected the unchallenged evidence is the pears within were not infected with rot.[32]
[31]Exhibit KS6: CB 625-626
[32]T410, evidence of Mr Kyriacou
45 The plaintiff also had other packham pears that it had dipped and stored elsewhere. About 1,100 bins were stored at another cool store, that of Geoffrey Thompson.[33] Those pears were dipped with the fungicides Fungaflor and Rovral[34] and they were not infected with blue mould.
[33]T36
[34]T216, evidence of Mr Fairless
46 Another grower of fruit in the same general area of Shepparton East was Billy Barolli. He gave evidence he dipped his packham pears with a combination of Fungaflor and Rovral before storage. His pears did not suffer damage from blue mould.[35]
[35]T125
47 Mr Don Ymer also gave evidence. He is a grower of fruit and operates a business known as Valley Star. He gave evidence of packham pears that he had grown and which were also dipped and stored with the first defendant. That fruit was dipped with the same fungicides as the majority of the plaintiff’s fruit, namely, Vorlon and Ippon. It also suffered damage from blue mould. However, Mr Ymer also dipped and stored some of his packham pears himself. Those pears were dipped with the combination of Fungaflor and Rovral. They did not suffer damage from blue mould.[36]
[36]T135
48 The plaintiff leads this evidence from other growers and of the chemicals with which their fruit was dipped to demonstrate that it is not a coincidence that the fruit that was dipped with a combination of the fungicides Vorlon (Thiabendazole) and Ippon (Iprodione) contracted blue mould and the fruit that was dipped with Fungaflor (Imazalil) and Rovral (Iprodione) did not. The evidence also negates an hypothesis advanced by the expert witness, Dr Brown, that the plaintiff’s fruit was damaged pre-harvest by hail which allowed infection to set into the fruit. If that were the case, one would expect fruit from other growers nearby to be affected in a similar way. This evidence shows that was not the case but if other fruit in the area was damaged by hail then treating it with the combination of Fungaflor and Rovral prevented blue mould setting in.
49 The plaintiff’s case is that its fruit should never have been dipped with Vorlon and Ippon because the blue mould was known to be resistant to Thiabendazole, the active ingredient in Vorlon. The plaintiff relies upon the evidence of an expert, Dr Peter Taylor, a plant pathologist with thirty seven years experience in research and development and in determining the causes of crop production problems and crop failures. He opined, inter alia, as follows:
“It is concluded that the most probable cause of the failure of the drenches to control the rot is resistance of the penicillium to Thiabendazole. This is supported by the long history of widespread benzimidazole use in the Goulbourn Valley in the 1970’s, the known widespread occurrence of pathogen resistance, and the known extreme longevity and persistence of genes for resistance to benzimidazole fungicides in fungal populations.
The advice provided by K&S Cool stores by staff of Colin Campbell (Chemicals) Pty Ltd, that Vorlon (Thiabendazole) would provided (sic) rot control equivalent to that provided by Fungaflor (Imazalil) was incorrect, and should not have been given.”[37]
[37]Exhibit J: CB 184
50 Dr Taylor was extensively cross examined by Mr Barrett, who appeared on behalf of the second defendant. A number of documents were put to him, as well as number of different propositions. He was unmoved in his evidence and did not change his opinion.[38] I accept the evidence of Dr Taylor and act on it. I find that the most probable cause of the rot suffered by the plaintiff’s fruit, penicillium expansum fungus, was present on the fruit when it was dipped, which was resistant to Thiabendazole, the active ingredient of the chemical known as Vorlon.
[38]T211
51 The plaintiff submitted the evidence shows that there are a number of possible causes for the blue mould found in the plaintiff’s pears that can be excluded. The plaintiff carries on its orchard activities in accordance with a certification process and in accordance with practices designed to prevent mishandling of the fruit at harvest.[39]
[39]T55-56
52 Steps are taken in the plaintiff’s orchards to minimise any risk of contamination being carried from the orchard to the dipping store, in particular by ensuring that the bins do not rest on the ground in the orchard or collect soil therefrom.[40] That evidence was not challenged and would satisfy the observation of Mr Pullar as to possible factors contributing to the development of the blue mould in this crop.[41] Mr Pullar inferred from the spread of the damage amongst orchardists and across the district that those factors had not had a role to play. I accept this evidence.
[40]T56
[41]Exhibit KS-12, CB 323
53 The plaintiff points to the fact that even Dr Brown, an expert called on behalf of the second defendant, conceded that the different outcome between the plaintiff’s fruit that was dipped by the first defendant and that which was dipped by Jeffrey Thompson would exclude the handling of the fruit at the orchard as a potential cause of the outbreak of blue mould.[42]
[42]T698
54 The plaintiff submits that in these circumstances I may be satisfied that the cause of the damage to the plaintiff’s fruit by blue mould does not involve the manner in which the fruit was treated by man or nature prior to its harvesting and delivery to the first defendant. I accept that submission.
55 Dr Brown opined that the extent of the blue mould observed in the plaintiff’s fruit when taken from the CA room indicates that the fruit was severely infected at the time of the delivery to the first-named defendant.[43] The evidence from witnesses who each observed the fruit is that this was not the case. Acknowledging this to be the case, Dr Brown then postulates that the fruit must have had “breaks in the skin that allowed infection (sic) were microscopic in size”.[44] Dr Brown then postulates that the fruit must have been damaged by a hail storm. He relies on records of the Bureau of Meteorology but there is no record of a hail storm in the area of Shepparton East and none of the farmers called could recall a hail storm as having occurred.[45] I reject the opinions advanced by Dr Brown as to the cause of the development of blue mould in the plaintiff’s fruit. I regard Dr Brown’s opinion as having been based on nothing more than speculation. He was prepared to come up with a hypothesis that suited the second defendant’s case which was not based on the probable facts. The evidence I accept is that the plaintiff’s fruit was not damaged shortly before harvest by hail. There is no evidentiary basis for speculating otherwise.
[43]Exhibit CC-15, CB 368
[44]Exhibit CC-15, CB 368, paragraph 4.11
[45]Exhibit CC-15, CB 368, paragraph 4.14
56 Much of the hearing was taken up by the cross examination of witnesses called by the first defendant about the methods used by it to conduct its business. In particular, Mr Sfetcopoulos and Mr Kyriacou were cross examined about the dipping process employed by the first defendant to dip the plaintiff’s fruit and about what the first defendant’s written records reveal about the amount of chemicals used in the dipping process and the frequency by which the dipping solution was either changed or topped up. Other matters included how long the fruit was left standing before the CA room was activated. These issues were collectively referred to by Mr Crennan in his address as “the management theory”.
57 In its Amended Defence dated 4 December 2012, the second defendant alleged the plaintiff’s fruit developed rot from blue mould as a result of the failure of the first defendant to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit. To that end, the allegation pleaded was extensively particularised.[46] Mr Barrett made extensive written submissions as to possible contributing causes for the development of blue mould rot in the plaintiff’s fruit.[47] I reject those submissions which are not based on the evidence as I find it to be.
[46]Second defendant’s Amended Defence to Amended Third Party Notice, paragraphs 7 and 23(aa) and (b)
[47]Second defendant’s written submissions, paragraphs 28 to 34
58 I have found that the plaintiff’s fruit developed blue mould whilst stored because the fungus penicillium expansum was resistant to the drenches used by the first defendant which had Thiabendazole as the active ingredient. In my view, the opinion of Dr Taylor is undoubtedly correct, evidenced by the fact that the Valley Star fruit stored by the first defendant that was dipped with a combination of Fungaflor and Rovral did not evidence blue mould rot. It was only that part of the plaintiff’s fruit that was treated with Vorlon and Ippon that evidenced rot. Also, other fruit from the same local area treated with Fungaflor and Rovral did not evidence blue mould rot, and other fruit from the same local area also treated with Vorlon and Ippon did evidence blue mould rot.
59 I therefore reject the defence advanced by the second defendant that the plaintiff’s fruit was damaged because of any failure by the first defendant to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit. I reject the “management theory” as the cause of damage here.
60 Also, the second defendant pleads that the development of blue mould in the plaintiff’s fruit was the “materialization of an inherent risk” by operation of s55 of the Wrongs Act.[48] By the terms of that section, “inherent risk” is defined as:
“Something occurring that cannot be avoided by the exercise of reasonable care.”[49]
[48]Second defendant’s Amended Defence to Amended Third Party Notice, paragraph 23(b)(i)
[49]Wrongs Act, s55(2)
61 The particulars relied upon by the second defendant to make out this pleading are, in combination, reliant upon proof of the “management theory” referred to above, and acceptance of the theories advanced by Dr Brown called by the second defendant. Mr Barrett devoted several paragraphs of his written submissions to this issue. I do not accept those submissions. As I indicated earlier, I do not accept that the plaintiff’s fruit was damaged because of any failure by the first defendant to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit. Later, I deal briefly with the evidence and opinions of Dr Brown. I have rejected his evidence and prefer the evidence of Dr Taylor. I regard Dr Brown’s theories as to why the plaintiff’s fruit suffered from rot caused by blue mould as nothing more than an exercise in speculation. It follows that I do not accept the defence advanced by the second defendant that the development of blue mould in the plaintiff’s fruit was the “materialization of an inherent risk” within s 55 of the Wrongs Act.
62 The second defendant also pleads that the development of blue mould in the plaintiff’s fruit was caused by the plaintiff’s own action in harvesting, handling and treating the fruit in such a way that the fruit was damaged sufficiently to enable penicillium expansum to infect the fruit to such a degree that the post-harvest treatment of the fruit was unable to prevent further development of rot.[50]
[50]Second defendant’s Amended Defence to Amended Third Party Notice, paragraph 23(b)(ii)
63 I reject this defence also. It is not supported by the evidence, which is that the plaintiff’s fruit was in excellent condition when taken to the first defendant.
MR BARRETT:
Q:“Now, did you observe your fruit when it was picked and sent off in 2010?---
A:Certainly did.
Q:And what was the general condition of the fruit?---
A:General condition of the fruit was excellent. It was one of our best years.”[51]
[51]T96, lines 16 to 20
64 The defence of the second defendant in many respects assumes that if the Vorlon and Ippon were mixed and applied properly they would, in combination, have prevented the rot developing. The second defendant’s pleading at paragraph 23(b)(ii) is no exception. This is contrary to the overwhelming evidence in the trial that penicillium expansum is resistant to Vorlon and Ippon when used in combination. Again, the pleading ignores the fact as I find it to be, that the Valley Star fruit that was dipped by the first defendant with the combination of Fungaflor and Rovral did not rot.
The Plaintiff’s Claim against the First Defendant in Contract
65 The first defendant admits that there was an agreement between the plaintiff and it for the dipping of the plaintiff’s 360 bins of fruit.[52]
[52]First defendant’s Amended Defence, paragraph 5, CB 36
66 The first defendant denies that there was a term of the agreement that it would dip the fruit in a fungicide to prevent the development of fungal rots and moulds.[53] It admits that there were terms that it would store the fruit at its premises in conditions and at a temperature suitable for the preservation of that fruit and that both the dipping and the storage would be carried out using reasonable care and skill and using chemicals and other materials that were reasonably fit for the purpose for which they were employed.[54]
[53]First defendant’s Amended Defence, paragraph 6(a), CB 36
[54]First defendant’s Amended Defence, paragraph 6(b), CB 36
67 It is convenient to deal with the contract between the plaintiff and the first defendant by first looking at the evidence that relates to whether or not the first defendant breached any of the terms of the agreement admitted in its defence.
68 It is common ground that, upon the recommendation of the second defendant, the first defendant dipped the plaintiff’s fruit in a dipping mix consisting of DPA, Vorlon and Ippon.[55] The chemical DPA is used to prevent superficial scald developing on pears during long-term storage.[56] It is not itself a fungicide but it occasions the need for fungicide, because the dipping of the fruit in DPA ensures that pears become inoculated with large quantities of fungal spores in that process.[57]
[55]T323; Exhibit KS2: CB 553
[56]T470-471
[57]T471-472
69 Vorlon is a commercial product sold by the second defendant which contains as its active ingredient Thiabendazole.[58] The chemical belongs to a class of chemicals known as the benzimidazoles which were widely used from the 1970’s onwards[59] both as a post-harvest fungicide dip and as an orchard spray.[60]
[58]Evidence of Dr Taylor: T150
[59]Evidence of Dr Taylor: T147
[60]Evidence of Dr Taylor: T155
70 The plaintiff submits, and I accept, that the evidence is compelling that there was, in 2010, well established problems with resistance having developed amongst penicillium strains to the chemicals within the benzimidazole family of fungicides.[61]
[61]Report of Dr Taylor, Exhibit J: CB 189-191; Report of Dr Brown, Exhibit CC15: CB 366; T588. That resistance is acknowledged in Exhibit CC3: CB 691, and the papers attached to the report of Dr Taylor at CB 282, CB 274 and CB 271
71 The expert witnesses called, and even Mr Derrick of the second defendant, all seemed to accept that Vorlon is not capable of controlling the resistant strains of penicillium.[62]
[62]Dr Taylor, Exhibit J: CB 193; Mr Derrick T588; Mr Pullar T521; Dr Brown T701.
72 The plaintiff submits, and I accept, that it is reasonable to assume, on the balance of probabilities, that there were resistant strains of penicillium expansum on the fruit that passed through the first defendant’s cool store at the time the plaintiff’s fruit was being dipped.[63] Assuming the presence of such resistant strains in the fungicide dips at the time the plaintiff’s fruit was dipped, then it would be coated by those fungal spores. The Vorlon would have no effect by way of controlling their growth.
[63]Evidence of Dr Taylor and in particular his report Exhibit J: CB 189-191
73 The only further chemical used by the first defendant which might have played a part in preventing the development of rots or moulds in the plaintiff’s pears was Iprodione in the product Ippon. The evidence indicates that it was not reasonably suited for performing that task because Vorlon and Ippon have similar modes of operation in preventing rots and moulds developing although they are in different chemical classes.[64] Ippon is a contact fungicide which will not kill penicillium spores and will not control penicillium infections within surface wounds or within the fruit tissues.[65]
[64]First report of Mr Pullar, Exhibit KS12: CB 323 and evidence at T519
[65]Second report of Mr Pullar, Exhibit KS13: CB 382 and 383
74 Mr Pullar concluded in his first report that the combination of Vorlon and Ippon failed to control penicillium, in combination. He thought the dipping procedures employed by the first defendant may have resulted in the build-up of penicillium spores in the dipping process.[66] He further concluded in his second report that the Thiabendazole was not capable of providing systemic or curative control of newly established infections and that the levels of infection reported were consistent with the failure of Vorlon to control the development of penicillium once it was present in the fruit tissues.[67]
[66]First report of Mr Pullar, Exhibit KS12: CB 324
[67]Second report of Mr Pullar, Exhibit KS13: CB 384
75 Mr Pullar further went on to conclude that the cause of the damage was the inability of Vorlon to properly control the germination and development of penicillium spores present in pre-existing wounds and enlarged lenticels which came into contact with the pears while waiting to be dipped.[68] No person gave evidence that differed significantly with that conclusion. I accept the evidence of Mr Pullar and act on it.
[68]Second report of Mr Pullar, Exhibit KS13 CB 385
76 The plaintiff submits that it follows from the admitted limitations of Vorlon and Ippon that the combination of chemicals in which the fruit was dipped by the first defendant was not reasonably fit for the purpose of controlling or preventing the development of fungal rots and moulds. I accept that submission.
77 The plaintiff submits, and I accept, that the same facts demonstrate the breach of the term alleged by it in paragraph 6(a) of its Further Amended Statement of Claim. Ippon on its own was not capable of preventing the development of fungal rots and moulds because it is a mere surface fungicide. Vorlon was not capable of preventing the development of fungal rots and moulds because it is known that there is substantial resistance to the family of chemicals to which it belongs, being in the order of 50 per cent of all phenotypes.[69]
[69]Evidence of Mr Pullar: T503
78 The only issue between the plaintiff and the first defendant is whether or not a term in the form alleged by the plaintiff is part of the agreement.
79 The plaintiff submits that the very purpose of the agreement to dip and store the fruit is to dip it with DPA to prevent scald and with fungicides to prevent the development of fungal rots and moulds. The plaintiff submits the term pleaded is not a warranty that there will be no rots or moulds in the fruit. It is that the first defendant was obligated to dip the fruit in a fungicide capable of preventing the development of fungal rots and moulds. The plaintiff submits that a term such as that alleged in paragraph 6(a) is the very essence of the parties’ bargain. I accept that submission.
80 There is no agreement in writing between the parties and neither was there detailed evidence of an oral agreement. The terms pleaded by the plaintiff are on the basis that each was an implied term.
81 Specific terms are implied in a contract because they are necessary to give a particular contract its intended operation or business efficacy. The conditions which must be satisfied for the implication of such terms are:
(i) it must be reasonable and equitable;
(ii) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(iii) it must be so obvious that it ‘goes without saying’;
(iv) it must be capable of clear expression;
(v) it must not contradict any express term of the contract.[70]
[70]Cheshire & Fifoot’s ‘Law of Contract’ (8th edition) at [1.71] citing BP Refinery (Westernport) Pty Ltd v President, Councillors and Ratepayers of the Shire of Hastings (1977) 180 CLR 266 at 26
82 In the circumstances of this case and, having regard to the very purpose in dipping the fruit for long-term storage, I am of the view that the plaintiff has made out its case that it was an implied term of its agreement with the first defendant that the first defendant would dip the fruit in a fungicide to prevent the development of fungal rots and moulds. The first defendant did dip the fruit, but the fungicide it used (Vorlon with Ippon) was not capable of preventing the development of fungal rots and moulds.
83 The first defendant made no submissions that Vorlon was reasonably fit for the purpose of dipping the plaintiff’s pears in the circumstances. It merely denied the existence of the term pleaded that it would dip the pears in a fungicide to prevent the development of fungal rots and moulds. As I have said, I find it was an implied term of the agreement that the first defendant would dip the fruit in a fungicide to prevent the development of fungal rots and moulds.
84 The other terms relied upon by the plaintiff and admitted by the first defendant are, first, that the first defendant would store the fruit in its premises at conditions and at a temperature suitable for the preservation of the fruit and would use chemicals that were reasonably fit for the purpose for which they were employed, and second, that the first defendant would use reasonable care and skill in the dipping and storage of the plaintiff’s fruit. The plaintiff alleges the first defendant breached this term of the contract by dipping the pears with the combination of Vorlon and Ippon without first making sufficient or proper enquiries about the nature and limitations of those chemicals. Whilst it admits the existence of the terms pleaded, the first defendant denies a breach by it of those terms. In submissions Mr Crennan made clear the first defendant was not submitting that Vorlon was a chemical that was reasonably fit for the purpose for which it was employed.
85 The first defendant had been using a combination of Fungaflor and Rovral. It had concerns that some of the fruit it stored was showing signs of black spotting on the skin. An expert (Dr Little)[71] had suggested the spotting may be occurring as a consequence of the use of Fungaflor. It was in that context that the first defendant had discussions with the second defendant and which eventually led to the first defendant ceasing to use the combination of Fungaflor and Rovral and dipping the fruit with Vorlon and Ippon instead.
[71]T420
86 The plaintiff submits the evidence is clear that having had Vorlon recommended to it by the second defendant, the first defendant satisfied itself about the credentials of Vorlon by asking only one question, namely, would it do the same job as Fungaflor. Angelo Sfetcopoulos said “Victor asked a number of times to make sure that definitely that Vorlon can replace Fungaflor”[72] or “That it would do the same job as what Fungaflor did”.[73] Victor Kyriacou said he asked “Are you 100 per cent sure that this will do the same job as Fungaflor?”[74] I accept this evidence.
[72]T329
[73]T329
[74]T407
87 It is in these circumstances that the plaintiff submits the first defendant failed to exercise reasonable care and skill in the dipping of its fruit by failing to make sufficient enquiry about the nature and limitations of the use of Vorlon and Ippon in combination. The evidence of Mr Sfetcopoulos and Mr Kyriacou shows that, in combination, they had little knowledge of the make up or characteristics of the chemicals the first defendant used or how they worked. They certainly did not consider whether or not the use of Vorlon and Ippon in combination would subject the fruit to problems caused by rots being resistant to those chemicals. The first defendant acted only on what it was told by the seller of the chemicals to it.
88 The plaintiff argues that the first defendant’s questions of the second defendant were asked against a background where each of Mr Sfetcopoulos and Mr Kyriacou in evidence expressed a thorough ignorance of the existence of resistance,[75] that they had no scientific or agronomic qualifications[76] and had no real understanding of the manner in which the chemicals functioned.[77] It was also made in circumstances where the livelihood of the first defendant’s clients hung upon the outcome of that decision. Goods which had been entrusted to the first defendant’s care and custody could be destroyed if the wrong chemical was selected.
[75]T411; T333
[76]T333; T411
[77]T392-393; T448
89 The plaintiff submits that in carrying out the dipping of the fruit with reasonable care and skill, the first defendant was obliged to carry out greater enquiries in relation to the products it intended to use than the evidence discloses that it did in this case. The first defendant, in changing the chemical combination of fungicides it had previously used, was taking a step which potentially affected its clients’ interests in a major way over which the clients had no influence or control.[78] Both Mr Sfetcopoulos and Mr Kyriacou were emphatic in their evidence that, had they been aware of any risk in the use of Vorlon, they would not have used the product.[79] I accept this evidence.
[78]T389-390; T451
[79]Mr Sfetcopoulos: T398; Mr Kyriakou: T462
90 Whilst the first defendant admits it was a term of its agreement with the plaintiff that required it to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit, the first defendant denies that it breached that term.
91 Mr Crennan submitted the term of the agreement required the first defendant to make reasonable enquiries as to the character and suitability of the chemicals to be used in processing the plaintiff’s fruit. He submitted that in making the enquiries of the second defendant, that it did the first defendant satisfied the term of the agreement.
92 In this regard, he submitted the evidence shows:
(a) the second defendant was a long-established, Australia-wide agrichemical company with specific experience and expertise in post-harvest anti fungicide. It was an early producer of Imazalil; and
(b) Mr Derrick had extensive qualifications and experience in the area of fungicides. He had authored articles on specific aspects of Thiabendazole;[80]and
[80]See T564-566
(c) the second defendant produced one of each of the three registered forms of post-harvest fungicide; and
(d) Thiabendazole was registered; and
(e) the first defendant had a long-term relationship with Mr Stippio, built up by him so as to achieve trust and reliance.[81]
[81]T559, lines 4-19
93 Mr Crennan submitted that enquiries made by the first defendant of the second defendant, which sought assurances that Vorlon would do the same job as Fungaflor, were reasonable enquiries. Mr Crennan submits that the plaintiff has not identified who the directors of the first defendant should have spoken to. Vorlon was presented as a new product. Other cool store operators could have had nothing to say about it. If one of the problems was that the second defendant had a commercial goal in view, the same would be true of other chemical companies and re-sellers.
94 Further, Mr Crennan submitted that the plaintiff led no evidence as to what other sources of information might have said had enquiry been made. That would entail proving, on the balance of probabilities that further enquiry would have stopped the first defendant using Vorlon. There has been no evidence to that effect. I accept the submissions of Mr Crennan.
95 I find there was a term of the contract between the plaintiff and the first defendant that required the first defendant to exercise reasonable care and skill in the dipping and storage of the plaintiff’s fruit. In my view, this term required the first defendant to make reasonable enquiries about the make up and characteristics of the chemicals it was proposing to apply to the plaintiff’s fruit and how those chemicals worked. In particular, the term required the first defendant to take steps to ensure that the chemicals it used would protect the plaintiff’s fruit whilst in CA storage against infection from fungal rots and moulds and that the fungal rots and moulds were not resistant to the chemicals it used.
96 Here, the first defendant, through Mr Sfetcopoulos and Mr Kyriacou, made enquiries from Mr Derrick and Mr Stippio that led to them being assured that Vorlon with Ippon would do the same job as Fungaflor with Rovral. Mr Derrick was a very senior executive in the second defendant. He has many years of experience in the agri-chemical industry and has professional qualifications that well enabled him to understand the issues and give advice. In my view, having regard to all of these considerations, it cannot be properly argued that the first defendant failed to take reasonable care in changing the chemicals it used in the dipping process from the combination of Fungaflor and Rovral to the combination of Vorlon and Ippon.
97 I find it was a term of the agreement between the plaintiff and the first defendant that, in storing and dipping the plaintiff’s fruit, the first defendant was to use reasonable care. I find that the plaintiff has not proved its case that the first defendant breached this term.
98 I find that the plaintiff’s pears were infected with blue mould either whilst being prepared for long-term storage or whilst in storage at the premises of the first defendant. The first defendant failed to dip the pears in a fungicide to prevent the development of fungal rots and moulds. Further, the first defendant failed to use chemicals that were reasonably fit for the purpose for which they were employed. The first defendant dipped the pears in a combination of fungicides, namely Vorlon and Ippon. The Vorlon was unable to properly control the germination and development of resistant penicillium spores present in pre-existing wounds and enlarged lenticels on some of the fruit which came into contact with the fruit whilst waiting to be dipped.[82] The plaintiff’s fruit developed blue mould rot whilst being dipped and stored by the first defendant. The blue mould rot developed because of the breach by the first defendant of the terms of the agreement that I have referred to.
[82]Second Report of Mr Pullar: Exhibit KS13: CB 385
99 The plaintiff has made out its case against the first defendant in contract that the first defendant breached a term of the contract that required it to dip the fruit in a fungicide to prevent the development of fungal rots and moulds and to use chemicals that were reasonably fit for the purpose for which they were employed.[83] I will deal with the question of damages separately later in these reasons.
[83]First defendant’s Amended Defence, paragraph 6(a) and (c), CB 36.
The Plaintiff’s Claim Against the First Defendant in Tort
100 In its Further Amended Statement of Claim, the plaintiff pleads in the alternative a cause of action against the first defendant for breach of duty of care. The duty alleged is a duty to exercise all reasonable care and skill in the handling, treatment and storage of its fruit.[84]
[84]Plaintiff’s Further Amended Statement of Claim, paragraph 11, CB 17C-17D
101 The plaintiff alleges that in dipping the fruit with the combination of fungicides, Vorlon and Ippon, the first defendant breached its duty owed to the plaintiff because the Vorlon was unable to properly control the germination and development of resistant penicillium spores present in the fruit, which resulted in the development of blue mould whilst the fruit was stored and resulted in the fruit being damaged. In consequence, the plaintiff asserts it suffered loss and damage.[85]
[85]Plaintiff’s Further Amended Statement of Claim, paragraphs 12 and 13, CB 17D
102 To establish liability for negligence, the plaintiff must establish the following:
(a) the first defendant owed a duty of care to the plaintiff;
(b) the first defendant breached that duty by failing to meet the relevant standard of care; and
(c) the breach caused the loss and damage alleged by the plaintiff.
103 Duty of care is not in dispute. The first defendant admits that it owed a duty of care to the plaintiff to exercise reasonable care and skill in the handling, treatment and storage of its fruit.[86]
[86]First defendant’s Amended Defence, paragraph 11, CB 37
104 The standard of care owed by a defendant is that of a reasonable person in the position of the first defendant.[87] If a defendant has special skills, it is that of the ordinary prudent person possessing those skills.[88]
[87]Wyong Shire Council v Shirt & Ors (1980) 146 CLR 40 at 47-8; Wrongs Act, s48(1)(c)
[88]Rogers v Whitaker (1992) 175 CLR 479 at 487
105 Section 48 of the Wrongs Act provides, relevantly as follows:
“48 General principles
(1)A person is not negligent in failing to take precautions against a risk of harm unless—
(a)the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known); and
(b) the risk was not insignificant; and
(c)in the circumstances, a reasonable person in the person's position would have taken those precautions.
(2)In determining whether a reasonable person would have taken precautions against a risk of harm, the court is to consider the following (amongst other relevant things)—
(a)the probability that the harm would occur if care were not taken;
(b) the likely seriousness of the harm;
(c)the burden of taking precautions to avoid the risk of harm;
(d)the social utility of the activity that creates the risk of harm.
(3) For the purposes of subsection (1)(b)—
(a)insignificant risks include, but are not limited to, risks that are far-fetched or fanciful; and
(b)risks that are not insignificant are all risks other than insignificant risks and include, but are not limited to, significant risks.”
106 Here, the standard of care imposed upon the first defendant is that of an ordinary prudent cool store operator storing pome fruit. Relevantly, the duty of care imposed upon the first defendant was to dip the plaintiff’s pears in fungicides that were capable of preventing or controlling the development of fungal rots and moulds whilst in storage. As to the chemicals it used, the duty of the first defendant was to make reasonable investigations or enquiries that the chemicals it used were fit for the purpose of preventing or controlling the development of fungal rots and moulds.
107 Both Mr Sfetcopoulos and Mr Kyriacou gave evidence that they were aware of the importance of dipping the fruit in fungicides to prevent the spread of rot whilst in storage.[89] Neither had any knowledge of how the fungicides actually work. Both Mr Sfetcopoulos and Mr Kyriacou gave evidence they informed themselves about the use of chemicals by speaking to others in similar business, and with sales representatives. The Vorlon label itself warned some strains of blue mould were resistant to it.[90]
[89]Mr Sfetcopoulos at T386 to 399; Mr Kyriacou at T448-462
[90]Exhibit CC10, CB 768
108 Mr Stuckey submitted that the first defendant well knew and understood the importance and purpose of dipping the fruit pre-storage in fungicides. The purpose of dipping the fruit clearly was to kill any fungal spores on the outside of the fruit that may have been present because of the dipping process itself and to protect the fruit from spread of rot that may have been present in some of the fruit in small wounds in the fruit. Both Mr Sfetcopoulos and Mr Kyriacou knew the reasons that lay behind the whole dipping process and of the risk of damage to the fruit from rot if the dipping process was inadequate in some way. That is why they, in effect, sought a 100 per cent guarantee from Mr Derrick that the Vorlon would do the same job as Fungaflor.
109 Mr Crennan, on behalf of the first defendant, submits the evidence does not permit of a finding that the first defendant breached its duty of care to the plaintiff. Mr Crennan submitted the duty owed by the first defendant to the plaintiff was to make reasonable enquiries as to the character and suitability of the chemicals to be used in processing the plaintiff’s fruit. He submitted the real issue here is whether, having regard to the standard of an ordinary reasonable cool store operator, the first defendant undertook reasonable enquires.
110 In this regard, he submitted the evidence shows:
(a) the second defendant was a long-established, Australia-wide agrichemical company with specific experience and expertise in post-harvest anti fungicide. It was an early producer of Imazalil; and
(b) Mr Derrick had extensive qualifications and experience in the area of fungicides. He had authored articles on specific aspects of Thiabendazole;[91]and
[91]See T564-566
(c) the second defendant produced one of each of the three registered forms of post-harvest fungicide; and
(d) Thiabendazole was registered; and
(e) the first defendant had a long-term relationship with Mr Stippio, built up by him so as to achieve trust and reliance.[92]
[92]T559, lines 4-19
111 Mr Crennan submitted that inquiries made by the first defendant of the second defendant which sought assurances that Vorlon would do the same job as Fungaflor were reasonable enquiries.
112 Mr Crennan further submitted that even if it be assumed that reasonable enquiries by the first defendant would have involved looking more widely, the plaintiff’s case in this regard has two further fatal flaws.
113 Mr Crennan submits first, that the plaintiff has not identified who the directors of the first defendant should have spoken to. Vorlon was presented as a new product. Other cool store operators could have had nothing to say about it. If one of the problems was that the second defendant had a commercial goal in view, the same would be true of other chemical companies and re-sellers.
114 Secondly, Mr Crennan submitted that the plaintiff led no evidence as to what other sources of information might have said had enquiry been made. Even if the first defendant had the alleged duty and breached it, the plaintiff must establish causation. To do so, it needed to adduce evidence to show that, but for the breach, it would not have suffered loss. That would entail proving, on the balance of probabilities, that further enquiry would have stopped the first defendant using Vorlon. There has been no evidence to that effect.
115 In my view, the duty of care imposed on the first defendant as a reasonable cool store operator in the circumstances of this case, required it to check with persons who did have knowledge of how the chemicals worked, that by changing to use Vorlon instead of Fungaflor, the risk of the spread of rot within the fruit would not be increased and that any blue mould present within the fruit would be controlled by the dipping process. The plaintiff submits the first defendant did not discharge its duty by seeking and obtaining the assurance of Mr Derrick or Mr Stippio and that it should have checked that what it was being told by those two gentlemen as salesmen was correct. It made no enquiry of anyone else.[93]
[93]T346
116 The plaintiff also submits that the risk of the spread of rot within the fruit, if not properly treated, was a foreseeable risk, the existence of which the first defendant knew[94] or ought to have known. It was not an insignificant risk. The existence of the risk is the very reason why every piece of fruit is dipped. The first defendant could relatively easily have made proper enquiries about the suitability of using Vorlon and Ippon in combination. A phone call to someone like Mr Pullar, for example, would have pointed it in the right direction.
[94]T410, Evidence of Mr Kyriacou
117 In my view, the arguments advanced by the plaintiff have strength only when viewed in hindsight. The first defendant had been dealing with Mr Stippio and the second defendant, as a supplier of chemicals for many years, without incident. It sought and obtained assurances from both Mr Stippio and Mr Derrick that Vorlon would do the same job as Fungaflor. Mr Derrick in particular was a very experienced and well qualified senior executive who advised that Vorlon would do the same job as Fungaflor. The first defendant was, in my view, entitled to make the enquiry that it did and to rely on the advice given by Mr Derrick. There was no evidence led as to what enquiries should be made by a reasonable cool store operator in these circumstances. I have formed the view that the first defendant did not breach its duty of care to the plaintiff by limiting itself, as it did, to making enquiries only of the second defendant.
118 I find that the first defendant did not breach its duty of care to the plaintiff and the plaintiff’s claim against the first defendant in negligence fails.
The Plaintiff’s Claim Against the Second Defendant
119 The plaintiff’s claims against the second defendant are dependent upon the advice given by it to the first defendant about the use of fungicides and the failure to give any advice or warning as to the risks involved in that selection.
120 It is first necessary to address the evidence as to what was said by the second defendant to the first defendant.
121 Mr Sfetcopoulos gave evidence of the discussions at a meeting in early February at the premises of the first defendant attended by Mr Derrick and Mr Stippio. He gave this evidence-in-chief:
“Q:Did Mr Derrick say anything in connection with the spotting issue?---
A:I can’t recall.
Q:Was the chemical Vorlon discussed in the meeting?---
A:Yes, it was.
Q:Do you recollect how the subject of Vorlon came up in the meeting?---
A:Because we were having – we had a concern that possibly Fungaflor might be the cause of this. We were looking – they said that they had a product that could do the job of what Fungaflor did and that was Vorlon.
Q:Can you remember who spoke to Mr Derrick on the subject?---
A:Who spoke to Mr Derrick about it?---
Q:Yes?---
A:My partner, Victor Kyriacou.
Q:Do you remember what Victor said?---
A:He asked whether there was a product that could do the same job as what Fungaflor did.
Q:Did Mr Derrick say anything to him in response to that?---
A:Yes, the response was that Vorlon could replace Fungaflor.
Q:Was there any further conversation between Mr Kyriacou, Victor, and Mr Derrick on that subject?---
A:Victor asked a number of times to make sure that definitely that Vorlon can replace Fungaflor. We went through the process of what we actually used which was the DPA, Rovral and Fungaflor and we wanted to have something that replaced Fungaflor and they recommended that we use Vorlon and he was asked a number of times, categorically that Vorlon could replace Fungaflor.
Q: What did he say when he was asked that?---
A: Yes, it would.
Q:Apart from that question, did Mr Kyriacou ask Mr Derrick anything else about Vorlon in that meeting?---
A:I don’t understand the question.
Q:You’ve given some evidence about the conversation between
Mr Kyriacou and Mr Derrick in terms of Mr Kyriacou asking, as you've said, questions about the capacity of Vorlon to replace Fungaflor, apart from that subject, was there any other subject raised about Vorlon in the meeting?---
A:That it would do the same job as what Fungaflor did, that was a question that was asked. That it would replace it so it would – there was no question that it wouldn’t substitute for Fungaflor.”[95]
[95]T328-330
122 Mr Sfetcopoulos said that at the meeting either Mr Derrick or Mr Stippio gave him and Mr Kyriacou the brochure that became Exhibit KS8.[96] He also gave evidence that during the visit, Mr Derrick inspected the first defendant’s dipping process and carried out a titration test. Mr Sfetcopoulos said that he and Mr Kyriacou made a decision to switch from using Fungaflor and Rovral to Vorlon and Ippon within 24 hours of the meeting.[97] He also gave evidence that Mr Derrick and Mr Stippio returned to the premises of the first defendant at the time the first defendant first started to dip using Vorlon and Ippon.[98]
[96]CB 614
[97]T330
[98]T333
123 Although cross examined at length by Mr Barrett, who appeared for the second defendant, Mr Sfetcopoulos was not asked about the evidence he had given of his conversations with Mr Derrick and Mr Stippio, and no contrary version of the conversation was put to him.
124 Mr Kyriacou gave evidence about what occurred and what was said at the meeting in early February 2010. He gave this evidence-in-chief:
“Q:In that conversation did you speak to Mr Derrick and Mr Stippio and Mr Giankos about the Fungaflor issue?---
A:Yes, I did.
Q:Do you remember what you said to them?---
A:I was under the assumption that that could be causing the spotting in the fruit; the lenticel damage.
Q:Right?---
A:From other opinions.
Q:What then happened in the conversation?---
A:Well, they produced a document saying that they’ve got a new product out. It was Vorlon. It was extensively used in the US and they had some very good results with that product being used in the US. And I specifically remember asking a question to Mr Geoff Derrick and I said to him that, ‘Are you 100 per cent sure that this will do the same job as Fungaflor?’ And his answer to me was, ‘Yes’.
Q:Why did you ask him that question?---
A:Well, we’re in the storage business and we don’t want to take any unnecessary risks with a changing from something that may be a small problem to maybe – I’ve never seen rot before so I didn’t realise what could happen if you got it wrong.
Q:We'll come to the rot in a moment, but just go back to - - -?---
A:Well, I mean it’s - you just want to be safe. You just want to make sure you're getting the right chemical to protect your customers' fruit and your own fruit as well.
Q:Were you given any documents in the meeting?---
A:Yeah, we were given a Vorlon brochure. It was a glossy brochure, I think.[99]
Q:Now, in terms of this brochure and the discussion about Vorlon and Fungaflor, how did you and Mr Sfetcopoulos go about deciding what to do?---
A:Well, obviously with the assurances it will do the same job as Fungaflor, we decided to adopt that chemical for that particular season. And we - we gave them an order for - for the Vorlon chemical.
Q:Do you recall when you made that decision?---
A:It was that day.[100]
[99]T407-408
[100]T409
125 Mr Kyriacou gave evidence that there was no discussion of fungicide resistance issues at the meeting and he had no knowledge at that time of such issues. In evidence-in-chief, he said:
“Q:In the meeting, was there any discussion of fungal resistance to Vorlon at all?---
A:None whatsoever.
Q:Was anything said to you in that meeting about possible resistance to the active ingredient of Vorlon, which is something called Thiabendazole?---
A:There was no discussion about any resistance.
Q:In 2010, were you aware of any fungicide resistance issues in the Goulburn Valley?---
A:Not that I knew of, no.
Q:Were you aware of any fungicide resistance issues in relation to pears in Australia generally?---
A:In 2010?
Q:Yes?---
A:No.[101]
Q:Do you remember anything about what it said about Vorlon?---
A:It’s a new product, I remember that - it was a new product. Said it was a new product.
Q:Now, in the meeting was anything said to you about the label of the Vorlon? Sorry, was your attention drawn to the label of Vorlon?---
A:No.
Q:Do you recollect if Mr Sfetcopoulos and Mr Derrick had any Vorlon with them on that day?---
A:No, I don’t remember exactly if they had any with them on that day, no. They may have, I just can’t recollect, it’s two years ago.”[102]
[101]T411
[102]T412
126 As was the case with Mr Sfetcopoulos, Mr Kyriacou was cross examined at length by Mr Barrett but was not asked about the evidence he had given of his conversations with Mr Derrick and Mr Stippio and no contrary version of the conversation was put to him.
127 Mr Stippio, a salesman employed by the second defendant, gave evidence of the February conversation. His version of the conversation was slightly different, although he did not contradict what had been said by the plaintiff’s witnesses. His version was not put in cross examination of the first defendant’s witnesses:
“Q:Was that the end of the meeting? Or was there further discussion?---
A:Then they suggested if we've got anything else, and we suggested we have TBZ - that was - we had that year. And they - they said, ‘Can we use that?’, and we said, ‘Yes, you can’.
Q:When you say ‘We said that’, was that something that you said or Mr Derrick said, or both of you?---
A:When I say ‘we’, I meant as a company. Well, Geoff Derrick said.
Q:So those matters you just referred to, that was something that Mr Derrick said?---
A:Yeah.
Q:What did they say, if anything, in answer to that?---
A:Can't recall anything in answer to that.”[103]
[103]T538-9
128 Mr Derrick, a director of the second defendant, gave evidence. He holds the tertiary qualification of Bachelor of Science in Agriculture with Honours from Sydney University and has been working for the second defendant since 1976.[104] Like Mr Stippio, Mr Derrick gave a version of the conversation in February 2010 that was different in important respects from that given by the first defendant’s witnesses but his version was never put to them. He said this in evidence-in-chief:
[104]T564
“Q:What happened in the office and boardroom?---
A:We sat down and Roy started talking about his DPA requirements.
Q:When you said ‘Roy started talking about his DPA requirements’?---
A:Sorry, sorry, Roy Stippio started talking about the requirements of the DPA by K&S for the coming season.
Q:And when you say ‘talking about the requirements’, was it a question or was he telling them what they needed or what was said?---
A:On the history of their using our DPA the question - he was asking the question of how much DPA they would be needing this year.
Q:What was said next?---
A:Well, I was - I was actually sitting back because I couldn’t see any relevance of this meeting to me, but seeing I was taken there, I was there. The next thing, Mr Kyriakou asked me - Mr Kyriakou started talking about fungicide usage and his first statement was, ‘I do not want to use Fungaflor’
Q:Did he say why?---
A:Because of lenticel spotting - lenticel damage.
Q:So he did say that at that time or is that something that you're inferring or - - -?---
A:No, he did say that. And he actually said it quite firmly.
Q:What was said then?---
A:Um, we suggested an alternative combination of products.
Q:When you say ‘We’?---
A:Sorry - sorry - - -
Q:Did you say something or did Roy say something or both of you?---
A:I'm sorry, Your Honour, the corporate ‘we’ - I did.
Q:And what did you say?---
A:I suggested that there was an option of DB - DBZ plus Iprodione if he did not want to use Fungaflor.
Q:And what was said after that?---
A:He accepted it.
Q:When you say he accepted it, that's - - -?---
A:Well, he said - - ----
Q:OK.
A:Essentially they said, ‘We will - we will consider it’.”[105]
[105]T578-9
129 In the above passage of transcript it can be seen that Mr Derrick’s version of what was said at the meeting differs from the version given by Mr Stippio and also by Mr Sfetcopoulos and Mr Kyriacou. The significant difference is his evidence that Mr Sfetcopoulos and Mr Kyriacou were adamant they would not use Fungaflor. This was not put to either Mr Sfetcopoulos or Mr Kyriacou.
130 In cross examination by Mr Crennan, Mr Derrick conceded he had little actual recollection of what was said at the meeting in February 2010 and that he had two sets of notes. One was in hand, made soon after the meeting.[106] The other was a typed elaboration, prepared in mid 2012.[107] Mr Derrick attempted to explain his use of notes in a way that I regarded as sheer nonsense. His evidence speaks for itself.[108]
[106]CB 766
[107]CB 673
[108]T611-612
131 Mr Derrick was cross examined on his notes. The transcript refers to the cross examiner as Mr Stuckey. At this point it was in fact Mr Crennan who was cross examining. This passage is important, as it goes to the credit of the witness:
“Q:Let’s focus on the reason you were at K&S Cool stores and what happened when you were there, Mr Derrick? In your note on p.76 - 766 - you say that ‘K&S had lenticel damage from Fungaflor, does not want to use, suggested TPZ’? ---
A:Yes.
Q:Now, what I suggest to you is that is a record of you making a suggestion to K&S Cool stores, is that correct?---
A:Yes.
Q:Let’s look at p.673. This is what you write - or type - after the dispute has erupted, and I draw your attention to the third paragraph. ‘We offered the use of Vorlon’. Now, I would suggest to you there is a shift between saying you suggested TBZ - which is what your immediate note is - and then saying, ‘We offered the use of Vorlon’?---
A:To me they’re the same thing.
Q:Are they? You don’t see any difference in that language? ---
A:No, I don’t.[109]
[109]T612-613
Q:Whichever way one looks at it, Mr Derrick, let me suggest this to you. In that meeting you were being asked a question by K&S Cool stores, weren’t you? You were being asked, ‘Was there an alternative to Fungaflor’?---
A:On the basis that they did not want to use Fungaflor.
Q:No, Mr Derrick. Don’t qualify the question. Don’t qualify my question - please don’t qualify the question that I am asking whether you - that was put to you. You were asked whether there was an alternative to Fungaflor, were you not?---
A:Yes.
Q:All right. And that was a question which was asked to you because you were there representing a chemical company which sold such products, were you not?---
A:Yes.
Q:And you were there as the product development officer and director of that company, were you not?---
A:Yes.
Q:That was a serious question which required as serious answer, was it not, Mr Derrick?---
A:I still say they did not - they were adamant they did not - - -
Q:Mr Derrick, please answer my question?---
A:Yes.
Q:It was a serious question which required a serious answer from you, was it not?---
A:Yes.
Q:It was a question which had ramifications for the conduct of these men's business, did it not?---
A:Yes.
Q:And you were the person in the room who had the knowledge to enable you to answer that question, is that correct? ---
A:That's correct.[110]
[110]T614
Q:You were asked several times in that meeting ‘Does Vorlon do the same job as Fungaflor?’?---
A:I can't recall that.
Q:The evidence has been that you were asked that, and that you were asked whether you were a hundred per cent certain. Do you deny that?---
A:One hundred per cent certain is not the type of terminology I use, that’s a marketing - - -
Q:I’m not suggesting that you used the terminology, Mr Derrick, I’m suggesting that were asked that question. Were you asked that question?---
A:In conjunction with Iprodione.
Q:No, were you asked that question?---
A:I believe I would’ve been, yes.
Q:And the answer you gave was that it would?---
A:In conjunction with Iprodione.
Q:No, the answer you gave is that it would?---
A:Yes.
Q:And that was wrong, wasn’t it?---
A:To use it by itself, yes.
Q:No, to use it to replace Fungaflor - sorry. To say that in any setting Vorlon is a hundred per cent as effective as Fungaflor, is wrong, is it not?---
A:When used by itself.
Q:No, in any setting?---
A:When used by itself.
Q:So your answer is that that - it is correct to say that Vorlon is a hundred per cent as good as Fungaflor when used with Ippon?---
A:Yes.”[111]
[111]T618
132 I have taken the trouble of setting out some of the evidence of the witnesses who were present at the meeting in February 2010 as to the conversation that was said to have taken place. I have done this in part that the evidence from the witnesses called by the respective parties as to what was said may be contrasted. I have also set it out to demonstrate just how evasive Mr Derrick was in his evidence.
133 I accept the version as to what was said at the February 2010 meeting given by Mr Sfetcopoulos and Mr Kyriacou and I reject the evidence of Mr Stippio and Mr Derrick. Mr Stippio had only limited recollection. I find his evidence unreliable and I do not accept it.
134 Mr Derrick, on the other hand, wanted to guild the lily by giving evidence that the first defendant was insistent on not using Fungaflor and the recommendation of Vorlon was made in that context. I do not accept that evidence. Mr Barrett submitted that as a matter of fact the second defendant did not advise the first defendant to substitute Vorlon for Fungaflor and that the first defendant had already decided to not use Fungaflor, having acted on the advice of Dr Little. This theme is reflected in a number of places through Mr Barrett’s submissions. I reject these submissions as not being based on the evidence as I find it to be.
135 I accept the position was that the first defendant was looking for a proper alternative to Fungaflor, if one was available, that could properly perform the function performed by Fungaflor in protecting the fruit from disease and rot. It was in that context that the discussions took place. I accept the evidence of Mr Sfetcopoulos and Mr Kyriacou that they asked Mr Derrick if there was a chemical available that could replace Fungaflor and do the job that it had been doing. I accept the evidence of Mr Kyriacou that during the course of the conversation he specifically asked Mr Derrick if he was 100 per cent sure that Vorlon would do the same job as Fungaflor. I accept the evidence of Mr Sfetcopoulos and Mr Kyriacou that during the course of the discussion, Mr Derrick assured both gentlemen that Vorlon could do the job of Fungaflor and that had it not been for that assurance by Mr Derrick, the first defendant would never have used Vorlon.
136 I reject the evidence of Mr Derrick that the conversation took place in the context of Mr Sfetcopoulos and Mr Kyriacou being adamant the plaintiff would no longer use Fungaflor. I also reject the defences pleaded by the second defendant that assume an acceptance of this evidence.[112] I accept the evidence of Mr Sfetcopoulos and Mr Kyriacou that during the course of the discussion and meeting, Mr Derrick never alerted either of them to problems with strains of fungal spores that are resistant to benzimidazole fungicides, of which Vorlon was one, even though he then possessed that knowledge.
[112]See also second defendant’s Amended Defence to Amended Third Party Notice, paragraphs 15 and 16, and paragraphs 18(a) and (b)
137 As an agricultural scientist with many years of experience, Mr Derrick would have been immediately alive to the problems of resistance to Vorlon yet he did not let on. I found his evidence most unconvincing and I reject it. As some of the passages above demonstrate, he was often evasive, sometimes when being asked even a simple question by counsel. He was not prepared to make any concession until forced to do so and, when all else failed, he tended to simply waffle in his evidence. Indeed, his evidence as to his notes might properly be given that description. On any contentious issue in this proceeding I do not accept his evidence and prefer the evidence of other witnesses. That is especially so as regards his evidence as to what occurred and what was said at the February 2010 meeting with Mr Sfetcopoulos and Mr Kyriacou. In that regard, I prefer the evidence of those two gentlemen.
Negligent Advice
138 The plaintiff submits the advice sought by the first defendant from the second defendant was given in circumstances where it was clear to the second defendant that the advice, if acted upon, would involve the physical treatment of goods belonging to third parties such as the plaintiff. The plaintiff further submits the advice, if given negligently, would likely occasion physical damage to the property of third parties and the purpose of the advice was to allow the first defendant to so deal with the property of third parties (including the plaintiff) in such a way as to avoid that risk of damage to the property. I accept that submission.
139 This is not a case where the plaintiff seeks to establish a claim for purely economic loss. Its claim arises consequent upon the physical damage to its fruit which made it unsaleable. In my view, the second defendant, as the manufacturer and seller of Vorlon, when asked to advise the first defendant, at all relevant times owed a duty to the clients of the first defendant to exercise all due care and skill in giving that advice. It is this duty that the plaintiff claims was breached by the second defendant.
140 Mr Derrick gave evidence he assumed that resistance to benzimidazole fungicides had reduced over a period of time.[113] He had no proper basis for making that assumption but, more importantly, he did not even mention the fact of resistance of penicillium to benzimidazole fungicides when giving his advice to Mr Sfetcopoulos and Mr Kyriacou. That, in my judgment, was a breach of the duty of care. In his advice to Mr Sfetcopoulos and Mr Kyriacou he did nothing to alert them to the existence of a well documented problem with the use of the product he was recommending.
[113]T590-592
141 The plaintiff submits the advice given by Mr Derrick on behalf of the second defendant differed from the warning it put in its own documentation.[114] The second defendant had given the first defendant a brochure which became Exhibit KS-8. That brochure recommended that Vorlon be used “in conjunction with Magnate 750WG which is an ideal base to your post harvest fungicide program”. I find that the advice or recommendation by Mr Derrick to use Vorlon with Ippon did in fact differ from that which its own written material was recommending. That fact alone, in my view, evidences that the second defendant failed to exercise all due care and skill which could be expected of a manufacturer and supplier of chemicals in advising the first defendant.[115]
[114]Exhibit KS8: CB 615-616; T590
[115]See Wrongs Act, s58(a)
142 There is no evidence of the second defendant having made any proper enquiries before advising the plaintiff to use the combination of Vorlon and Ippon. By advising the first defendant in the circumstances here that the combination of Vorlon and Ippon would do the same job as Fungaflor and Rovral, in my view, the second defendant breached its duty of care owed to the plaintiff, which was the client of the first defendant, to exercise all due care and skill in giving that advice.[116]
[116]See Wrongs Act, s58(b)
143 Before leaving the claim by the plaintiff against the second defendant based on negligent advice it is necessary to deal with a defence based on disclaimer.[117]
[117]See paragraph 18(d) of the second defendant’s Amended Defence to Amended Third Party Notice dated 5 December 2012
144 The label on the Vorlon containers supplied to the first defendant relevantly contained two disclaimers. The first was a general disclaimer in the following terms:
“Conditions of Sale
Agricultural, horticultural and pastoral preparation such as differing conditions, soil, climate and methods of application over which the vendor, whilst Colin Campbell (Chemicals) Pty Ltd believes that all goods sold but it are true to label and are effective and safe for purpose indicated the company and the seller hereby expressly negate and exclude any express or implied condition, statement or warranty, statutory or otherwise, as to quality or fitness of any goods sold for any purpose or purposes whatsoever except such warranties and conditions, if any, as are implied by the Trade Practices Act 1974 (Commonwealth). The company and the seller accept no responsibility for any loss, harm or damage whatsoever suffered from the use of such goods for any purpose or purposes irrespective of whether or not the buyer was acting in reliance upon the advice recommendation or representation of the seller or any representative agent or employee of the company is to such use except in respect of breaches of conditions and warranties, if any, implied by the Trade Practices Act and in respect of such breaches the liability of the company and the seller shall be limited to the replacement of the goods or the supply of equivalent goods, or the payment of the cost of replacing the goods.”[118]
[118]Exhibit CC-10: CB 768
145 The second was more specific and related to the issue of resistance. It was in the following terms:
“Vorlon Flowable SC Fungicide is a member of the Benzimidazole group of fungicides. For fungicide resistance management Vorlon Flowable SC Fungicide is a Group 1 Fungicide.
Some naturally occurring individual fungi resistant to Vorlon Flowable SC Fungicide and other Group 1 fungicide may exist through normal genetic, variability in any fungal population. The resistant individuals can eventually dominate the fungal population if these fungicides are used repeatedly. These resistant fungi will not be controlled by Vorlon Flowable SC fungicide or other Group 1 fungicides, thus resulting in a reduction in efficacy and possible yield loss. Since the occurrence of resistant fungi is difficult to detect prior to use. Colin Campbell (Chemicals) Pty Ltd, accepts no liability for any loss that may result from the failure of Vorlon Flowable SC Fungicides to control resistant fungi.”[119]
[119]Exhibit CC-10: CB 768
146 The second defendant does not plead either disclaimer to exclude any liability otherwise arising. It relies on the disclaimers as evidence to show that if the first defendant relied upon advice given by Mr Derrick and Mr Stippio then that reliance was unreasonable in the face of the disclaimer.
147 Mr Crennan made detailed submissions as to why any defence based upon the existence of the disclaimer should not succeed. I accept and act upon those submissions.
148 Dealing first with the general disclaimer. The first general disclaimer in terms purports to be a condition of sale. Here there was no sale from the second defendant to the first defendant direct. The first defendant purchased the Vorlon from an intermediary, Lindsay Rural. For that reason alone the disclaimer does not have application.
149 Further, what is disclaimed is any express or implied conditions, statement or warranty, statutory or otherwise as to quality or fitness of any good sold for purpose except such warranties and conditions if any as are implied under the Trade Practices Act. There was no evidence that the disclaimer came to the attention of the first defendant and it was not put to the directors of the first defendant that it had come to their attention. The evidence is that it was not drawn to their attention and it is buried deep in the label of the bottle.
150 The second and more specific disclaimer relates to the issue of fungal resistance. I accept the first defendant relied on what it was told by Mr Derrick and Mr Stippio. The disclaimers referred to by the second defendant do not qualify my view that both Mr Sfetcopoulos and Mr Kyriacou relied upon what they were told by Mr Derrick and Mr Stippio. Mr Derrick represented not that Vorlon did not suffer from resistance problems, but that Vorlon would do the same job as Fungaflor. The only effect of the disclaimer is to say to somebody if you suffer loss because of resistance, you cannot sue us for it. In my view, far from harming the plaintiff’s case, the disclaimers assist it. The fact the second defendant chose to publish the disclaimers proves it was aware of the problem of fungal resistance to Vorlon yet Mr Derrick chose to remain silent about this matter when asked by Mr Kyriacou whether the Vorlon would do the same job as Fungaflor.
151 I reject any defence to any part of the plaintiff’s or the first defendant’s claim by the second defendant based on the so-called disclaimers.
Negligence – Failure to Warn
152 The second way the plaintiff puts its case in negligence against the second defendant is an alleged failure to warn.[120] The plaintiff submits that the second defendant was promoting Vorlon as a new product for the first time in respect of post-harvest fungicide dipping.[121] At all times the second defendant was aware that there had been significant problems with known resistance by rot such as blue mould to the family of chemicals, of which Vorlon was a member, which had benzimidazole as the primary ingredient.[122] I accept the submission of the plaintiff that as Vorlon was a new product, and promoted as such by the second defendant, there could be no assumption that potential customers would be aware that rots such as blue mould might be resistant to it.[123]
[120]See paragraphs 21(a) and 21(b) of the plaintiff’s Further Amended Statement of Claim
[121]Exhibit KS8: CB 615 and T588
[122]T591; T606; T608
[123]T616
153 Both Mr Derrick and Mr Stippio knew that the first defendant had been using Fungaflor with Rovral and that there was no recorded history of fungal resistance to the active ingredient in Fungaflor in Australia.[124] As I said earlier, at all times the second defendant was aware that there had been significant problems with known resistance to the family of chemicals of which Vorlon was a member, namely benzimidazole fungicides.[125] It was in that context that the second defendant (through Mr Derrick and Mr Stippio) were being asked whether there was an alternative to Fungaflor that would do the same job.[126]
[124]T617
[125]T591; T606; T608
[126]T614
154 In my judgment, in the circumstances in which the second defendant through Mr Stippio and Mr Derrick were giving advice to the first defendant, the second defendant owed a duty to the first defendant when recommending Vorlon as an alternative to Fungaflor to advise the first defendant of the known issue of fungal resistance to that fungicide which was a limitation from which Vorlon suffered which was not shared with Fungaflor. Without such a warning, the advice or recommendation given by Mr Stippio and Mr Derrick to Mr Sfetcopoulos and Mr Kyriacou was both incomplete and inaccurate. The fact of fungal resistance to that fungicide now revealed was a major qualification to the advice without which the advice was wrong and likely to mislead the first defendant. The fact that Vorlon was from a family of fungicides to which penicillium spores had built up and demonstrated resistance, meant that Vorlon and Ippon in combination could not do the same job as Fungaflor and Rovral in combination.
155 By advising the first defendant in the circumstances here that the combination of Vorlon and Ippon would do the same job as Fungaflor and Rovral, in my view, the second defendant also breached its duty of care owed to the plaintiff by failing to warn the first defendant of the known issue of fungal resistance to that fungicide which was a limitation from which Vorlon suffered which was not shared with Fungaflor.
156 Mr Barrett submitted there was no evidence led as to the probability of the plaintiff suffering harm should the second defendant give otherwise negligent advice or fail to warn of the resistance of fungi to Vorlon. He referred to the need to comply with s48(2)(a) of the Wrongs Act. I reject his submission. The undisputed evidence is that if the fruit to be placed in storage is not dipped in chemicals that will protect it from infection from rot it will develop rot, as happened here. The second defendant was aware of this possibility. The probability of the fruit developing blue mould was so high as to justify the second defendant being in the business of manufacturing and selling chemicals to avoid this probability occurring.
157 The plaintiff’s case against the second defendant alleging negligent advice and failure to warn of the shortcomings of Vorlon when used with Ippon is made out.
Misleading and Deceptive Conduct
158 The final cause of action by the plaintiff as against the second defendant is that arising in respect of misleading and deceptive conduct. It is alleged that at the meeting held in February 2010 between Mr Sfetcopoulos and Mr Kyriacou on behalf of the first defendant, and Mr Stippio and Mr Derrick on behalf of the second defendant, the following representations were made:
(a) that Vorlon was an appropriate substitute for Fungaflor; and
(b) that Vorlon would protect pome fruit against blue mould to the same extent as Fungaflor.[127]
[127]Plaintiff’s Amended Statement of Claim, CB 14, at paragraph 19
159 To prove its action in misleading and deceptive conduct it is sufficient if the plaintiff proves the second defendant engaged in conduct that was misleading or deceptive and that conduct caused loss or damage to it. Accordingly, it is sufficient for the plaintiff to prove that the second defendant engaged in conduct in trade or commerce that was likely to mislead or deceive the first defendant and that the first defendant relied upon that conduct and so caused harm to the plaintiff.
160 The plaintiff submits that the evidence clearly shows that Mr Derrick did not qualify his statement that Vorlon was a substitute for Fungaflor by adding only if it was used with Ippon.[128] The plaintiff submitted that in evidence Mr Derrick effectively conceded that, when used by itself, it is not correct to say that Vorlon is 100 per cent as effective as Fungaflor.[129] I accept those submissions as being established by the evidence.
[128]T617
[129]T618
161 I find that in the meeting between the representatives of the first and second defendants that occurred in February 2010, Mr Derrick represented to Mr Sfetcopoulos and Mr Kyriacou that Vorlon was as effective as Fungaflor without qualification in any way. That meant that the second defendant was representing that Vorlon was an appropriate substitute for Fungaflor which would protect the plaintiff’s pears against blue mould to the same extent as Fungaflor.
162 Any arguments in defence of the claim in misleading and deceptive conduct raised by Mr Barrett in his submissions were predicated on an acceptance by me of the evidence given by witnesses called on behalf of his client. As I have said, I do not accept the evidence of those witnesses. I also reject submissions that there were reasonable grounds for any representations made by either Mr Stippio or Mr Derrick.
163 I have already indicated that I accept the evidence of Dr Taylor as to the cause of the blue mould in the plaintiff’s fruit. Dr Brown agreed in his evidence that there was a greater chance of finding resistant penicillium with Thiabendazole (Vorlon) than with Imazalil (Fungaflor).[130] Dr Brown also conceded in evidence that a combination of Imazalil (Fungaflor) and TBZ (Vorlon) would be superior to that of TBZ and Iprodione (Ippon).[131] That evidence is consistent with the evidence of Dr Taylor that Campbell’s should not have advised the first defendant that Vorlon would provide control of penicillium equivalent to that provided by Fungaflor.[132] Mr Pullar also opined that Imazalil should be used with Thiabendazole to ensure that no resistant strains of the penicillium fungus survive on the fruit.[133]
[130]T719
[131]T702
[132]Exhibit J: CB 193
[133]T521
164 I find that each of the representations pleaded by the plaintiff was made by the second defendant to the first defendant in conduct in trade or commerce and that each of the representations was likely to mislead or deceive the first defendant and that the first defendant relied upon that conduct. The plaintiff’s cause of action against the second defendant in misleading and deceptive conduct also has been made out. I will now deal with the question of loss and damage.
Plaintiff’s Loss and Damage
165 The plaintiff claims to have suffered loss and damage as a result of the breach of contract by the first defendant and also arising from the negligence and misleading and deceptive conduct of the second defendant.
166 The plaintiff’s loss is particularised in paragraph 10 of the Amended Statement of Claim and arrives at a net claim of $193,395.00, being the difference between the return per bin of pears for 360 bins of $300.38 per bin and the anticipated return per bin of $1,107.45 per bin and after deduction of the net income actually received of $108,137.00.
167 The experts called respectively by the plaintiff (Mr Bell) and the first defendant (Mr Pullar) have agreed a reasonable sum to compensate the plaintiff for its loss arising from its pairs rotting caused by blue mould after having been dipped and stored by the first defendant is $160,000. The second defendant does not accept that this is the loss, and submits the evidence shows a number of matters that need to be taken into account which have not been properly taken into account by the experts. The second defendant calls no evidence of its own to offer evidence that might contradict the evidence of either Mr Bell or Mr Pullar, or both of them.
168 Mr Bell performed a calculation which initially calculated the loss at $193,395.[134] Mr Pullar produced a calculation which expressed the view that Mr Bell’s calculations “may underestimate the quality of the fruit and it is possible that the level of waste would be less than suggested by Bell”.[135] Nevertheless, he was prepared to adopt the assumptions of Mr Bell notwithstanding that they may well understate the loss. He calculated the loss on the assumption of sales over a different period at $107,000.
[134]Exhibit K, commencing at CB 119
[135]Within Exhibit KS 12, CB 330, paragraph 8.2.
169 Mr Pullar later performed a further calculation of the loss which put the loss at $152,275.26 on the assumption that sales would be in November and December of 2010.[136]
[136]Exhibit KS 14, 389 at 390
170 The evidence given by Mr Bell and by Mr Pullar was that they had consulted with each other and reached the conclusion that upon the assumption that sales would have been in November and December, the fair estimate of the loss and damage sustained by the plaintiff was $160,000.[137] Mr Zurcas was not challenged in his evidence that those months were when he intended to sell the fruit and that this was why he had placed the 360 bins in storage with the first defendant.[138]
[137]T228 and T482
[138]T36-37
171 Mr Bell has based his estimation upon his assessment of the plaintiff’s orchards and the fruit which he examined at the time as being that of a good orchardist.[139] Mr Sfetcopoulos, who is familiar with the plaintiff’s crops growing, agreed that he would classify the plaintiff as an above average grower.[140] Mr Pullar expressed the view that the pack-out assumptions upon which the losses had been calculated assumed that the plaintiff was no more than an average grower.[141]
[139]T225 and T286-287
[140]T386
[141]T522-523
172 I am satisfied the plaintiff has proved on the balance of probabilities that as a result of their fruit contracting blue mould after having been dipped and stored at the premises of the first defendant, they suffered a loss of $160,000.00. On the evidence, I am satisfied that is a conservative figure. I reject the various submissions made on behalf of the second defendant that the experts have based their opinions on wrong assumptions and have not taken into account all of the evidence, or indeed that others were responsible for causing the loss. In my view, the second defendant was prepared to advance almost any argument on this issue and this was born more out of desperation than of logic.
173 At paragraph 9 of its Amended Defence to Amended Third Party Notice, the second defendant pleads that some of the plaintiff’s loss may be attributed to GVIP. GVIP operates a packing store in Shepparton East. The plaintiff arranged for GVIP to pack out its fruit after it was discovered as having been damaged by blue mould in August 2010.
174 The second defendant pleads that GVIP owed a duty of care to exercise reasonable care in packing out the fruit and it failed to do so. The second defendant alleges that GVIP breached this duty by packing out good fruit, as well as that which was rotten, and the amount ultimately received for the plaintiff’s fruit which was sold was thereby reduced.
175 The second defendant argues that in consequence, the plaintiff has failed to mitigate its loss.[142] The second defendant also pleads that GVIP is a concurrent wrongdoer within s 24AH of the Wrongs Act and s87CB of the Trade Practices Act. It seeks an order that GVIP is responsible for a portion of the loss.
[142]second defendants Amended Defence to Amended Third Party Notice, paragraph 9(f)
176 The first defendant makes no such plea and does not join the second defendant in its submissions on these matters.
177 I reject this claim by the second defendant as having no basis. GVIP was confronted with an almost impossible task of sorting mould-affected fruit from that which was not mould affected. The enormity of the task may be envisaged by what is depicted in Exhibit KS-10 which are photographs that show the extent of the rot in only some of the fruit.[143]
[143]CB 661 et seq
178 Mr Georgopoulos gave evidence describing the process that was entered into to try to extract the maximum amount of saleable fruit from the bins during the pack out. He described the measures taken as requiring more staff and the need to continually wash the fruit and stop the machinery for cleaning. He said there was a “minimal throw out, but I can’t assure you 101 per cent”.[144] Mr Barrett cross examined Mr Georgopoulos, suggesting the pack out could have been done better, all with the great benefit of hindsight. Much of the cross examination defied common sense and bordered on the absurd.
[144]T101
179 Mr Bell, the expert called by the plaintiff, was present during the pack out. He was asked about what he had observed. He said:
“Q:Did you form a view in what you observed whether there were any other things that might have been done commercially to try and improve the percentage of sound fruit that was being extracted from the pack out?---
A:No, there was nothing else that I believe that any of these packing sheds at the time could have done to mitigate the loss. I think they did a very, very good job under very, very difficult and trying circumstances.”[145]
[145]T249
180 I accept this evidence, as I accept the evidence of Mr Georgopoulos. GVIP was confronted with an almost impossible situation and the evidence shows it acted at all times reasonably to try to exact the maximum return in terms of sales for the plaintiff from the fruit that could be sold. Some good fruit may have inadvertently been discarded. If that occurred I find it was caused by the fact that much of the fruit contained rot, making the task of sorting the good from the bad very difficult and at the end of the day GVIP did its best.
181 I find there is no basis for a finding the plaintiff failed to mitigate its loss. I also dismiss the claim of the second defendant that part of the plaintiff’s loss ought be attributable to GVIP.
Apportionment
182 I have found for the plaintiff against the first defendant on its claims for breach of contract. I have found the first defendant breached two terms of a contract, a term of the contract that required it to dip the fruit in a fungicide to prevent the development of fungal rots and moulds and a term of the contract that required it to dip the plaintiff’s fruit in chemicals that were reasonably fit for the purpose for which they were employed.[146] Each of those terms was absolute and neither of them imposed on the first defendant a requirement to take reasonable care with s24AF(1)(a) of the Wrongs Act. Insofar as the plaintiff has succeeded against the first defendant in contract, that part of its claim is not an “apportionable claim” within s24AE and 24AF(1)(a).[147]
[146]First defendant’s Amended Defence, paragraph 6(a) and (c), CB 36
[147]Pearsons Barristers and Solicitors v Avison [2009] VSCA 54, and the cases referred to therein.
183 I have also found for the first defendant on the Third Party Notice and I have found for the plaintiff in each of its claims against the second defendant.
184 The second defendant seeks apportionment of the plaintiff’s claim amongst the first defendant and GVIP. I decline to apportion the plaintiff’s claim as sought by the second defendant. In my view, it ought properly be held entirely responsible in law for the plaintiff’s claim and loss. I do not regard either the first defendant or GVIP as being a concurrent wrongdoer within the Act.
185 By its Amended Statement of Claim on Third Party Notice, the first defendant claims damages from the third party (second defendant). The damages claim includes a claim for $6,072.00[148] for dipping and storage fees withheld by the plaintiff after it discovered its fruit had been damaged consequent upon the breach by the first defendant of its contractual obligations. The first defendant claims this sum from the third party. Having regard to my findings, it is appropriate that an order be made in its favour in this amount.
[148]CB 61
186 Subject to any submissions from counsel as to the orders that ought flow from these reasons, the orders I propose are as follows:
(1) There be judgment for the plaintiff on the claim against the first defendant and the second defendant.
(2) The defendants to pay to the plaintiff the sum of $160,000.00, together with damages by way of interest.
(3) Judgment for the first defendant on the Third Party Notice.
(4) The third party (second defendant) indemnify the first defendant as to any sum either by way of damages (including interest) or costs which the first defendant is ordered to pay to the plaintiff consequent upon the making of these orders.
(5) The third party (second defendant) pay to the first defendant damages in the sum of $6,072.00, together with damages by way of interest.
(6) The defendants pay the plaintiff’s costs of and incidental to the proceeding (including reserved costs), such costs in the absence of agreement to be assessed by the Costs Court.
(7) The second defendant pay the first defendant’s costs of the proceeding and the third party proceeding (including reserved costs), such costs in the absence of agreement to be assessed by the Costs Court.
- - -
0
5
0