Wilkins v Dovuro Pty Ltd - [1999] FCA 1816

FEDERAL COURT OF AUSTRALIA
Wilkins v Dovuro Pty Ltd [1999] FCA 1816
NEGLIGENCE – Supply of canola seed taken from lines contaminated by weed seeds Canola seed produced in New Zealand by second respondent on behalf of first respondent – Seed supplied to Western Australian farmers – Weeds not known in Western Australian agricultural areas but not prohibited from importation into Western Australia – Losses and expenses sustained by farmers in following recommendations of Western Australian Department of Agriculture – No evidence of an observed weed plant emanating from the seed – Claim for recovery of losses and expenses – Whether first respondent was negligent in failing to ascertain acceptability of the seed in Western Australia and/or warning farmers – Whether second respondent owed a duty of care to farmers – Whether second respondent breached any duty of care.
TRADE PRACTICES – Whether either respondent was under a duty to speak, so that its failure to warn constituted misleading conduct.
SALE OF GOODS – Implied terms – Whether first respondent relied on second respondent’s skill or judgment – Whether seed was of merchantable quality.
Trade Practices Act 1974, s52
Sales of Goods Act 1908 (NZ), s16
ROBERT JOHN WILKINS, EILEEN JOYCE WILKINS, TREVOR IAN WILKINS, SUSAN CAROLINE WILKINS and LOCHIEL NOMINEES PTY LTD AS TRUSTEE FOR THE R & E WILKINS FAMILY TRUST all t/as R & E WILKINS v DOVURO PTY LTD, CROP MARKETING NEW ZEALAND SOCIETY LIMITED, DOVURO PTY LTD – First Cross Applicant, CROP MARKETING NEW ZEALAND SOCIETY LIMITED – First Cross Respondent, CROP MARKETING NEW ZEALAND SOCIETY LIMITED – Second Cross Applicant and DOVURO PTY LTD – Second Cross Respondent
NG297 of 1998
WILCOX J
SYDNEY
23 DECEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG297 of 1998

BETWEEN:

ROBERT JOHN WILKINS, EILEEN JOYCE WILKINS, TREVOR IAN WILKINS, SUSAN CAROLINE WILKINS and LOCHIEL NOMINEES PTY LTD AS TRUSTEE FOR THE R & E WILKINS FAMILY TRUST all t/as R & E WILKINS
Applicants

AND:

DOVURO PTY LTD
First Respondent

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
Second Respondent

DOVURO PTY LTD
First Cross Applicant

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
First Cross Respondent

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
Second Cross Applicant

DOVURO PTY LTD
Second Cross Respondent

JUDGE:

WILCOX J

DATE OF ORDER:

23 DECEMBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Insofar as it relates to the claim against the second respondent, Crop Marketing New Zealand Society Limited, the principal proceeding be dismissed.
2.Each of the cross claims be dismissed.
3.The first cross applicant, Dovuro Pty Limited, pay to the first cross respondent, Crop Marketing New Zealand Society Limited, the costs incurred by the said cross respondent in relation to the proceedings, other than any costs that were incurred only by reason of the joinder of Crop Marketing New Zealand Society Limited as second respondent to the principal proceeding.
4.The applicants, Robert John Wilkins, Eileen Joyce Wilkins, Trevor Ian Wilkins, Susan Caroline Wilkins and Lochiel Nominees Pty Ltd all trading as R & E Wilkins, pay to Crop Marketing New Zealand Society Limited the costs incurred by Crop Marketing New Zealand Society Limited only as a consequence of its being joined as second respondent to the principal proceeding, including the costs incurred by Crop Marketing New Zealand Society Limited in connection with the second cross claim.
5.Insofar as it relates to the claim against the first respondent, Dovuro Pty Limited, the principal proceeding be stood over to a directions hearing to be held at 9.30am on Thursday, 3 February 2000.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG297 of 1998

BETWEEN:

ROBERT JOHN WILKINS, EILEEN JOYCE WILKINS, TREVOR IAN WILKINS, SUSAN CAROLINE WILKINS and LOCHIEL NOMINEES PTY LTD AS TRUSTEE FOR THE R & E WILKINS FAMILY TRUST ALL T/AS R & E WILKINS
Applicants

AND:

DOVURO PTY LTD
First Respondent

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
Second Respondent

DOVURO PTY LTD
First Cross Applicant

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
First Cross Respondent

CROP MARKETING NEW ZEALAND SOCIETY LIMITED
Second Cross Applicant

DOVURO PTY LTD
Second Cross Respondent

JUDGE:

WILCOX J

DATE:

23 DECEMBER 1999

PLACE:

SYDNEY

REASONS FOR JUDGMENT

WILCOX J: The gospel of St Matthew (13.24-30) records the parable of the tares. Tares, sowed by an enemy amongst the wheat “while men slept”, came up with the wheat and caused a problem at harvest time. The present case sets that parable in Western Australian canola crops, but there is no evidence weeds came up. Nevertheless, fear of weeds caused many farmers to incur losses. They seek to recover those losses from two companies associated with supply of the canola seed.
The proceeding
The proceeding is brought by five persons (Robert John Wilkins, Eileen Joyce Wilkins, Trevor Ian Wilkins, Susan Caroline Wilkins and Lochiel Nominees Pty Ltd) who conduct a farming and grazing business under the partnership name “R & E Wilkins”. Their property is “Narbethong” at Kondinin, in the Western Australian wheatbelt. The applicants bring the proceedings under Part IVA of the Federal Court of Australia Act 1976, on behalf of themselves personally and as representatives of persons defined in the Further Amended Application as follows:
“i.a group of identified canola growers who purchased and seeded Karoo canola seed in 1996, supplied by the First Respondent to distributors in Western Australia, and which allegedly included seeds of the plants known as Cleavers, Redshank and Field Madder and who claim costs of past and ongoing management for containment of eradication of the possibility of the weed contained in the Canola seed, production losses and down grading of their Canola crop with subsequent loss of income, together with losses of a capital nature associated with devaluation of their properties; and
ii.all other Canola growers who purchased and seeded Karoo canola seed in 1996, supplied by the First Respondent to distributors in Western Australia, and which allegedly included seeds of the plants known as Cleavers, Redshank and Field Madder and who suffered loss in having to undertake past and ongoing management for containment or eradication of the possibility of the said weed, production losses and down grading of their Canola crop with subsequent loss of income, together with losses of a capital nature associated with devaluation of their properties.”
The first respondent, a Victorian company Dovuro Pty Ltd (“Dovuro”), carries on business as a producer and distributor of agricultural seed. Dovuro supplied the seed in relation to which the present claims arise. The seed was produced by crops grown in New Zealand under the supervision and control of the second respondent, Crop Marketing New Zealand Society Limited (“Cropmark”).
The proceeding was instituted on 7 April 1998. At that time, Dovuro was the only respondent. On 4 September 1998, Dovuro filed a cross-claim against Cropmark. Service was effected in New Zealand and, on 28 October 1998, Cropmark filed a Notice of Appearance. The applicants then obtained leave to file an Amended Application and Amended Statement of Claim in which they named Cropmark as second respondent. This was filed on 23 November 1998. On 12 March 1999, I gave leave to Cropmark to complete the circle by filing a cross-claim against Dovuro.
The applicants’ Further Amended Statement of Claim pleads two causes of action against each of the respondents: negligence and contravention of s52 of the Trade Practices Act 1974. The applicants allege that each of the respondents knew, or ought to have known, that the canola seed contained, or might contain, undesirable weed seeds including cleavers, redshank and field madder, but failed to warn the applicants or group members of that fact. It is alleged this omission was negligent and, under the circumstances, constituted misleading or deceptive conduct; and the omission caused the applicants and group members to suffer loss. Both respondents deny these allegations.
On 4 September 1998, I directed the matter proceed on the basis of an initial hearing on liability, the question of damages being postponed to a later date. That direction was made before Cropmark appeared in the case, but it was subsequently maintained with that party’s consent. This was done on the basis that the initial hearing would also deal with liability on the cross-claims.
The hearing on liability took place over seven days in July and August 1999. During some of those days, the Court sat in Perth to hear the evidence of witnesses resident in Western Australia. At the conclusion of the hearing, I reserved my decision on issues of liability. These reasons concern those issues only.
Uncontroversial factual matters
Some of the evidence in this case is controversial; much of it is not. I understand there to be no dispute between the parties as to the facts to be recounted in this section of my reasons. I will leave the disputed evidence until later.
(i) Canola
The botanical name for canola is Brassica napus. It is grown in Western Australia for use in the manufacture of margarine and edible oils and as livestock fodder. During recent years the Western Australian crop has substantially expanded, mainly because of exports to Japan, where it competes with Canadian canola. Apparently Canadian canola farmers suffer weed problems, especially from Galium species and Western Australian canola has been promoted in the Japanese market as weed free.
Most of the Western Australian canola crop is grown in the “wheatbelt”; that is, the part of Western Australia which runs roughly north west to south east, between a line of latitude north of Geraldton and a line of latitude a few kilometres north of Albany, the eastern boundary being about 100 km east of Esperance. However, much of the wheatbelt is infested with a weed called wild radish, also a member of the Brassica family. This creates a problem for farmers wishing to grow canola. Like other members of the Brassica family, wild radish is a vigorous competitor and may seriously affect crop yield, even for canola. Moreover, if harvested canola is contaminated to the extent of more than 5% by a Brassica weed, it is unsuitable for margarine or edible oil production. It can be used only as animal fodder, for which it fetches a lower price.
Wild radish is controllable by a herbicide called triazine. However, triazine adversely affects the strain of canola traditionally grown in Western Australia, Narendra.
In about 1994, a triazine-tolerant strain of canola was developed. It was initially called “T17”. During the winter of 1995, a crop of T17 canola was grown in Toowoomba, Queensland, under controlled conditions, to provide a quantity of “breeders’ seed”. Dovuro decided to obtain some of this seed and have Cropmark supervise its use by selected New Zealand farmers to grow, over the summer of 1995-96, a quantity of “first generation” seed. Dovuro believed many Australian farmers were anxious to obtain triazine-resistant canola seed for the 1996 (winter) season; it thought the seed could not successfully be bulked up during a summer in Australia, but this could be done in New Zealand’s cooler climate.
(ii) The bulk up crops
In August 1995 Rudolf Justin Kudnig, Dovuro’s Technical Manager, had a meeting in New Zealand with Richard Grigor, Marketing Manager of Cropmark. The two men discussed the numbers of hectares and individual growers that would be needed for the bulking up crops. In his affidavit, Mr Kudnig said he explained the Australian seed certification system to Mr Grigor and Mr Grigor told him it was similar to the New Zealand system. Under cross-examination, however, Mr Kudnig described the conversation differently. He said he asked Mr Grigor how crops were certified in New Zealand “and I compared them in my own mind against how they were certified in different States in Australia”. Mr Grigor said this included Western Australian seed standards, but he could not recall what Western Australian standards he knew. He did not have a copy of those standards with him at the time of the meeting. In his affidavit, Mr Kudnig went on:
“I agreed with Richard Grigor that Cropmark would organise the growers, inspect the crops, organise seed testing, grading and certification in New Zealand before sending the seeds to Australia. Cropmark was to assist certification and ensure compliance with New Zealand requirements. Richard Grigor’s role was to organise the finance and the contract. Bede McLoy organised the field work and crop production.”
Dovuro and Cropmark entered into a contract on 8 September 1995. The contract took the form of a sales confirmation note issued by Cropmark to “confirm the sale to you of goods covered by this contract”. Those goods were described in the following manner:
“The resultant crop of 100 hectares expected to be about 250 tonne of machine dressed canola. Packed in 25 kg bags as supplied by the purchaser.
First generation certified canola
Minimum 85% germination
Minimum 99% purity
Maximum 0.5% weed and free of undesirable species including brassica and rumex in working sample
Maximum moisture 9%
To comply Australian import regulations”
The place of delivery was noted as: “CIF Melbourne or Sydney, buyers option”. The date of delivery was: “prompt ex 1996 harvest”. Dovuro was to supply seed free of charge to the growers and to pay the cost of registration for certification. The sales confirmation notice was signed on behalf of Dovuro by its General Manager, William Alexander Tapp.
Although the sales confirmation note made no reference to it, there was in existence at that time a handbook issued by the New Zealand Grain & Seed Trade Association Inc, of which Cropmark was a member. This handbook contained a section entitled “General information on policy and trading procedures” which included a “list of undesirable weed seeds”. The list named 12 plant species, not including any of the three species (cleavers, redshank and field madder) with which this proceeding is concerned, or Brassica or Rumex, mentioned in the sales confirmation note. There is a dispute between Cropmark and Dovuro as to whether the handbook is relevant to the contract made between them.
It seems the Toowoomba crop was harvested in early October 1995. It was cleaned and certified in New South Wales and 600kg was forwarded to Cropmark. Cropmark distributed the seed amongst eight selected farmers, apparently all located in New Zealand’s South Island.
In January 1996, Mr Kudnig again visited New Zealand. He spent two or three days inspecting the growing crops. He walked around the fence lines and sometimes diagonally across the paddocks. The crops were maturing appropriately. Mr Kudnig noticed some weeds but they caused him no concern. He made notes of the weeds seen by him. At the time he did not know what cleavers or redshank looked like. He recognised oriental mustard, which is a member of the Brassica family. However, Mr Kudnig said he was not concerned about oriental mustard because it mainly cleans out in the heading process. One of the weeds noticed by Mr Kudnig was dock, a plant Mr Kudnig knew was “declared” in at least some Australian States, including Western Australia.
Following this visit, Mr Kudnig wrote a report directed to Mr Tapp and Keith White, a person with a major indirect interest in Dovuro, though not a director. Mr White is General Manager of Ag-Seed Research Pty Ltd of Toowoomba. A copy of the report was sent to Eamonn Rath, Dovuro’s Western Australian Field Officer (now Western Region Manager). The report set out a five-stage procedure being used “to ensure the highest quality seed be produced in New Zealand”. Stage 3 related to “Planting in New Zealand”. It included:
“(b) All T17 seed crops in New Zealand were inspected by MAF staff who have certified each of the paddocks and found them free of prohibited or noxious weeds”.
“MAF” is the acronym of the New Zealand Ministry of Agriculture and Fisheries.
Counsel for the applicants, Mr John Rowe, took Mr Kudnig to this comment during the course of cross-examination:
“But you in fact knew that wasn’t right, because on your inspection you had found weeds that were at least noxious; isn’t that right?---I may not have known they were noxious at the time.
Well, you inspected them and you identified weeds, first of all that you didn’t know whether they were declared or prohibited, right? And you saw other weeds that you believe were either declared or prohibited like Dock?---Yes.
So you knew that when you wrote this that, notwithstanding the MAF staff who had certified each of the paddocks and found them free of prohibited and noxious weeds, that there were in fact weeds that may have been declared or prohibited from your inspection?---Not in New Zealand to my knowledge.
You have just told us you inspected these paddocks when we went through your notes?---Yes, I’m saying they may not have been prohibited or noxious in New Zealand.
But you knew that they were prohibited or noxious in Australia?---That’s not what you asked. …
Where is the important part for the weeds to be prohibited or declared, New Zealand or Australia?---Well, firstly, New Zealand and then to be followed up by AQIS when they come into Australia.
Suffice to say then that you did know that there were weeds that, at the very least may have been declared or prohibited in Australia?---Yes.
In fact, in the case of Dock, a weed that you knew was at least declared in Australia?---Yes.
…
But you knew that Dock is a weed that is declared or prohibited in Western Australia?---At the time, yes.
And you knew from the seed analysis the seed had Dock in it, didn’t it?---Yes.
You knew it did not meet the Western Australian Standard?---I don’t agree with that. If AQIS passed it, then it must have met the standards.”
“AQIS” is an acronym for Australian Quarantine and Inspection Service, a Commonwealth government instrumentality.
During the course of his inspections, Mr Kudnig asked about weeds prevalent in the local area. One weed mentioned to him was cleavers, the botanical name of which is Galium aparine.
(iii) Importation of the bulk-up cropseed into Australia
The bulk-up crops were harvested in March 1996. The seed was cleaned by a contractor to Cropmark, Seedlands NZ Ltd (“Seedlands”). Seedlands apparently used a process that involves putting the seed through a number of riddles, the objective being to achieve at least 99% purity. Seedlands then packed the seed into 25 kg bags and attached a blue label, or tag, which bore MAF’s name and logo and the words “Certified seed, 1^st generation”. The species was identified as “Brassica napus L. Canola”. There was a cultivar number (T17), a reference number, a number indicating the “region of production”, a date in late March 1996 and the weight of the seed (25 kg). On the back of each label were the words:
“Minimum 99% Purity
Minimum 85% Germination.”
The labelling of the bags was effected in anticipation of MAF certification. It appears that, while the seed was at Seedlands, samples were taken from each “line” of seed. One set of samples was sent to Cropmark’s laboratory, where each sample was analysed by Cropmark employees. The other set of samples was sent to MAF. As it was expected there would be a delay of two or three weeks in obtaining the results of the MAF analyses, agreement was reached for the seed to be labelled and dispatched from New Zealand to Australia, in advance of those results being available. This was apparently done on the basis that the seed would not be distributed in Australia unless satisfactory MAF results were obtained.

After Cropmark completed its analysis of the samples, the seed was sent to Dovuro. Most of it went to Melbourne, but some was shipped to Fremantle. Also, some of the Melbourne seed was sent overland to Perth. Of the total quantity of 6,720 bags (168 tonnes) sent to Dovuro from New Zealand, 2,700 bags (67.5 tonnes) was made available to Western Australia.
Before distribution of the seed in Australia, MAF issued its seed analysis certificates. The applicants’ legal representatives have used the Cropmark and MAF certificates to construct a seed flow chart whose accuracy is accepted by both respondents. The flow chart is based on “lines” of seed. A “line” is defined by the rules of the International Seed Testing Association (“ISTA”) as a quantity of seed harvested from one location, but not exceeding ten tonnes plus 5%; that is, 10,500 kgs. If a quantity of a particular seed exceeds 10,500 kg, the excess must be treated as constituting one or more separate lines. However, it is usual to use an identification symbol that shows the association with the head line. For example, in this case there was a line of 10,400 kg numbered as 161B and two associated lines, 161B1 (3,600 kgs) and 161BA (2,475 kgs).
Of the 20 lines produced by the New Zealand crops, eight were imported into Western Australia. The analyses made in New Zealand establish that six out of the eight lines contained seeds of the species Polygonum persicaria (redshank). The remaining two lines had seeds of an unidentified Polygonum species, that could have been redshank. Two lines contained cleavers and another Sherardia arvensis (field madder). One line contained all three weed seeds.
Mr Tapp gave evidence that Dovuro received the Cropmark certificates of analysis, “but it didn’t mean anything because it was not a germination test and it wasn’t the official test”. He said the presence of weeds “was of concern” but he was not aware of Cropmark’s laboratory standards; the MAF test was “what we were waiting for”. Mr Tapp agreed that it was unusual to find seeds of cleavers, redshank and field madder in cropseeds. His evidence went on:
“Now, when you were confronted with some unusual weed seeds in your experience, did it occur to you to make an inquiry as to whether those particular weed seeds might adversely affect any growers who may buy your seed?---We relied on the information from AQIS, they passed it and any declared weed that they were unhappy with, they would have made us aware. I don’t ever try and dictate to them what should or should not go into the State.
So, you don’t make any inquiry yourself, you just accept what the regulators say?---But with my background experience if I was concerned I did, and I had no concern with the experience that I had gained that these were weeds of concern.”
Mr Tapp said the MAF certificates were sent to AQIS. He saw them “at about the same time”, the end of March or early April 1996. Mr Tapp said “they were fine”. He noticed there was “a fair number of weed seeds”, in some lines, but they were small in relative terms. His evidence continued:
“If [sic: Does] the fact that the weed seed count was high of an exotic weed but small in percentage terms mean that you would ignore it?---I would ignore it, yes.
So you really weren’t concerned too much about what the weed was, only how much of it was in the line?---I’m concerned, I am always concerned what the weed is.
Well if you were concerned when you got the official test certificates, it wasn’t very difficult for you to contact somebody at the department- - -?---The department had the – the department had the test.
I accept that, but it wasn’t very difficult for you to contact the department to ask them if this particular weed seed could be a problem?---It wouldn’t have been very hard.
No, you could have done it fairly easily, just pick up the phone?---Yes.”
(iv) Distribution of the seed
Sometime early in 1996, T17 was renamed Karoo canola. Mr Rath had already obtained orders for the seed in Western Australia, using for that purpose three seed distributors. At about the time of the arrival of the seed in Western Australia, Mr Rath had a telephone conversation with Mr Kudnig in which he asked Mr Kudnig what weed seeds were listed on the seed analysis statements. Mr Rath recalls Mr Kudnig mentioning redshank, cleavers, field madder, dock and fat hen. Apparently, Mr Kudnig stated the various levels of the weed seeds in particular lines but Mr Rath does not recall this detail. Mr Rath said in his affidavit:
“I was not concerned at this response, as I knew that none of the weed seeds mentioned were prohibited or declared weeds in WA. I also knew that neither Redshank, Cleavers or Field Madder were ‘weeds of agriculture’ in WA. ‘Weeds of agriculture’ is a term used in the agriculture sector to describe weeds common to cropping systems in WA. Finally I knew that neither Redshank, Cleavers, and Field Madder were listed in AgWest’s Seed Certification Rules for Canola as being not allowable under the seed standards listed there.”
The evidence does not establish whether any AQIS officer inspected the seed on its arrival in Australia; although it does suggest AQIS saw the MAF certificates. Either AQIS or the Western Australian Quarantine and Inspection Service (“WAQIS”) sent samples of the seed to the laboratory of AgWest Seed Quality, a unit of Agriculture Western Australia (“AgWest”), the Western Australian government department responsible for agricultural issues. AgWest Seed Quality identified Galium species in the samples but it was decided not to take the time and trouble to identify the particular species. No Galium species was on the list of prohibited imports into Australia, notwithstanding that it is an exotic plant originating in Europe. Presumably this is because Galium aparine (cleavers) is not uncommon in the eastern States of Australia and Galium tricornutum (bedstraw) is well known in South Australia. Nor was any Galium species prohibited or declared under Western Australian legislation, presumably because no such species had yet proved to be a “weed of agriculture”; that is, a known problem in cropping areas of the State.
The officers of Ag West Seed Quality who undertook the analysis made no inquiry of their colleagues in the seed section of AgWest before deciding to make a favourable report on the seed, as a result of which it was released for distribution. Nor did Mr Rath pass on to AgWest the information he had obtained from Mr Kudnig regarding the New Zealand analyses. Had officers of AgWest’s seed section been alerted to the presence of Galium species seeds, they would almost certainly have taken steps to prevent release of the canola to farmers, at least pending further investigation. The evidence includes correspondence one year earlier, in May 1995, in which Jonathan Dodd of AgWest’s Seed Science Section informed WAQIS of the seriousness of Galium aparine and Galium tricornutum weeds.
“Narbethong”, the property farmed by the partnership known as R & E Wilkins, in 1996 comprised 2,709 ha, about 90% of which was used for cropping. The partners sowed small areas of Narendra canola seed in 1994 and 1995. In October 1995, Mr Trevor Wilkins heard about the new variety of canola, then known as T17, which was said to be triazine resistant. As “Narbethong” was prone to wild radish and ryegrass infestations, for the control of which he used triazine, Mr Wilkins ordered one tonne of T17 seed from Elders Limited at Kondinin. While he was awaiting delivery, he negotiated to sell 100 tonnes of the projected crop for use as bird seed, at a price $50 per tonne above the price for crushing seed.
In early May 1996, Elders Limited delivered to “Narbethong” forty 25 kg bags of the new seed. Mr Wilkins noticed that the bags were sealed, with blue labels attached. He read the labels and noted the reference to “minimum 99% purity” and “minimum 85% germination”. Although he had not previously seen New Zealand certificates, he was familiar with their Australian equivalent. Indeed, in earlier years he had grown and sold certified clover seed to which he had attached similar certificates. The certificates had been obtainable by him only after Ag West inspected and tested the seed. He assumed the Karoo canola seed had been subjected to similar scrutiny.
Mr Wilkins immediately commenced spraying various paddocks and sowing them with the Karoo canola seed. This task extended through the month of May, by the end of which he had sown a total of 278 ha to Karoo. However, by then it was apparent that one 40 ha area had failed due to lack of moisture. This left 238 ha upon which he obtained a good Karoo canola crop.
(v) The Karoo “incident”
In early June 1996 a canola producer from Kojonup, Digby Stretch, contacted Matthew Appelbee, AgWest’s Canola Development Officer, querying some “foreign” seeds he had found in newly-purchased Karoo canola seed. Mr Appelbee arranged for samples to be analysed at the AgWest laboratory in Perth. He then contacted Dovuro and obtained copies of the MAF seed analysis certificates. On receipt of those certificates, there was formed within AgWest a group of officers called the “Canola Seed Incident Working Party”. Mr Appelbee was asked to serve on that working party. The working party collected information about cleavers, redshank and field madder and attempted to identify all the Western Australian buyers of Karoo canola seed, for the purpose of sending them information about the three weeds.
About 22 June 1996 a friend told Mr Wilkins about media talk concerning the contamination of Karoo canola seeds. Shortly afterwards he received a copy of the 20 June issue of “Countryman”, a Western Australian rural newspaper. This issue contained a news item about cleavers and redshank being found in canola seed and a comment by a journalist, Paul Ryan, on the need “for an urgent review of Australian and WA quarantine procedures”. Mr Ryan set out his understanding of what had happened:
“Trying to figure out where the system actually broke down reveals a Fawlty Towers-type comedy of errors.
It seems to go something like this.
The seed company, Dovuro, had the seed grown under contract in New Zealand, in an effort to satisfy on [sic] the local demand for triazine-tolerant canola.
The seed was certified in New Zealand, meaning it was true to seed type, free of weeds and admixture and had high germination ability.
Now, in New Zealand, where the weed cleavers is as common as ryegrass is over here (not that you’d want ryegrass in your canola seed), the seed was free of weeds. But in WA, it isn’t.
The seed was then brought to the various states of Australia for distribution.
Dovuro says it did not know that the two weeks would be a problem in WA.
AQIS says it looked at the list of weed seeds in the certified seed, and none of them were on the list of prohibited seeds for either Australia or WA, so it gave the seed the all clear.
But Agriculture WA says if the seed was grown in WA it would not have achieved certification.
So, since when has WA been using overseas certification standards for its own seed?
And surely because a weed is not in WA, that is a very, very good reason to put it on the prohibited list.
And what does this do (to) the credibility of seed certification?
You can’t thank the authorities for detecting the problem either.
It was discovered by farmers, who heard of a another scare involving turnip seeds in uncertified canola coming in from the eastern States.
Someone, luckily, misheard the message and checked his certified seed from New Zealand and found some funny looking seeds in them.
If it hadn’t been for this farmer, the first you might have heard of cleavers or redshank could have been halfway through the season when you noticed some strange plants in your canola crop.
Farmers have been saying that our quarantine system needs attention for quite some time.
It’s about time someone took notice. ”
As will be apparent, Mr Ryan’s understanding of events was, at least, substantially correct. Although the evidence is not clear, it seems AQIS only checked the seeds shown in the New Zealand certificates against its list of prohibited imports. As with cleavers, redshanks and field madder were already present in the eastern States of Australia, so there was no prohibition on the importation of the seeds of those plants into Australia. WAQIS may have been aware of the presence of redshank and field madder in the imported seeds. However, these species were then virtually unknown in Western Australia. As with cleavers, neither of them had ever been found in Western Australian agricultural areas; so neither of them had ever been the subject of a Western Australian prohibition or declaration. In the absence of a relevant prohibition or declaration, and without further inquiry, WAQIS released the seed for distribution. It seems not to have occurred to anybody in authority that, as Mr Ryan put it, “because a weed is not in WA, that is a very, very good reason to put it on the prohibited list”. Fortunately, according to the evidence, the system has since been changed. I was told that, if a particular seed is not known to be acceptable, importation into Western Australia is now refused.
The issue of “Farm Weekly” of 4 July 1996 reported an apology by Dovuro to growers “for neglecting to check for the presence of foreign weeds which were detected in packs of seed last week”. This report was probably based on an undated media release put out by Mr Tapp headed “Weed Seeds in Karoo”. The release read:
“Weed seeds of Galium aparine (cleavers) and Polygonum persicaria (redshank), have been detected in certified seed of the triazine-resistant canola cultivar ‘Karoo’ imported from New Zealand in April/May 1996.
The crops were inspected by a Dovuro seed production officer without detecting the weeds, in addition to regular inspection by Agronomists and Certification Officers in New Zealand without any indication of concern. The seed was cleared for Certification in New Zealand and subsequently by AQIS (Melbourne and Freemantle)[sic: Fremantle] for entry into Australia.
Trace levels of the weed seeds were found in some analysis. This information is available directly upon request from Dovuro where an Agent or Grower can supply the line number that is printed on the bag.
The seed of Karoo was imported under OECD Mutual Recognition Scheme, a large range of pasture grasses, legumes and field crops have also been imported under this Scheme for a number of years into Australia from New Zealand.
Dovuro and Ag-Seed Research are seeking advice from weed scientists, field agronomists and herbicide experts to develop a management strategy to assist identification, monitoring and control of the weeds in field crops. A management information package is being forwarded to dealers and regional agronomists shortly.
The two weeds are commonly found in New Zealand and treatment by several chemicals in following cereal crops is effective. Karoo crops treated with Trifluralin, Gesaprim a.i. atrazine, and Gesatop a.i. simazine, should give effective control. Regular monitoring is advised of these crops for all weeds including cleavers and redshank.
We apologise to canola growers and industry personnel. This situation should not have occurred but due to strong-interest in Karoo the unusual step was made of undertaking contract seed production in New Zealand to assist rapid multiplication; whilst the urgency to process and distribute the seed of Karoo in time for planting caused additional time pressures.
Dovuro in association with Ag-Seed Research has an enviable record of providing high quality planting seed of leading cultivars to Canola Growers in Australia. We can assure growers that seed production outside Australia in the foreseeable future is unlikely and that we will continue production under the existing strict guidelines set by our own internal quality standards and by individual State Certification Schemes.” [Emphasis added]
During the course of cross-examination, Mr Rowe asked Mr Tapp about this document. Mr Tapp said the apology contained in the emphasised paragraph was “a sincere apology”. But he would not concede Dovuro had been at fault; “I was apologising to the industry for the stir or the concerns it caused”. When Mr Tapp was asked what he meant by the sentence in the release “This situation should not have occurred”, he replied, “Well, I think it was blown out of proportion”. He denied the “situation” was the presence of weed seeds in the canola seed.
Not long before Mr Tapp’s apology, Mr White had written a letter to Russell Soderlund of Daratech Pty Ltd with copies to six other people. That letter contained the following paragraphs:
“It is difficult to gain a realistic perspective on the weeds. Neither weed is prohibited in Australia and only Galium aparine is declared in several States, whilst both weeds are listed (ie. occur already) in Australia – at least in the eastern States. The seed was certified in New Zealand and was approved for import by AQIS and also was passed for entry into Western Australia though [sic: through] its separate quarantine procedures.
There are indications from some weed experts and agrochemical agronomists with whom the matter has been discussed that both weeds should be readily manageable in field crops. Also it appears a reasonable proportion (20-25%) of significant seed imports from New Zealand, at least of pasture grasses and legumes but at times of field crops such as wheat and field peas, are likely to contain seeds of these weeds.
Nevertheless we recognise that the seed should not have been released and that field production may cause a problem for some canola growers. It is easy to make excuses but the short time-frame for the importation (from harvest to processing, shipment and distribution) in association with the strong demand (perhaps euphoria) from dealers and growers for the seed, may have resulted in inadequate quality control checks. Perhaps we almost tried too hard. Protocols for seed release are being addressed within Dovuro and Ag-Seed Research; we are confident that future canola planting seed will have all necessary control checks to ensure that only high quality seed is released. We also have abandoned any thoughts of future seed production in New Zealand or Tasmania over Summer due to difficulty of adequate control procedures.”
Mr White sent a copy of this letter to Mr Tapp. Mr Tapp took no action to dissociate Dovuro from it.
On 9 July 1996 Ag West published a bundle of documents entitled “Information Package – Weed control in Karoo canola”. Mr Wilkins received a copy of the package a few days later. The package contained a printed letter, addressed “Dear Canola Grower” from Rob Delane, Manager of Ag West’s Pulses and Oilseeds Program. The letter read:
“Agriculture Western Australia has been advised that a number of Western Australian growers have purchased and sown Karoo canola seed imported from New Zealand by the seed company Dovuro Pty Ltd.
The seed has been found to contain undesirable weeds including Cleavers (Galium aparine), Redshank (Polygonum persicaria) and Field madder (Sherardia arvensis).
Agriculture Western Australia has taken action to prevent further importation and spread of these weeds.
Primary Industry Minister Monty House has agreed to prohibit entry of Cleavers, Redshank and Field madder into Western Australia under the Plant Diseases Act for a period of eight weeks to enable a review of the regulations.
The Agriculture Protection Board included cleavers on the Declared Plant list at its meeting last month, and last week agreed to add Redshank and Field madder. Cleavers, Redshank and Field madder were all declared category P1 (Prevention: plants which cannot be introduced or spread) and P2” (Eradication: plants which must be eradicated).
Agriculture Western Australia is currently reviewing the processes and standards governing the sale of seed in Western Australia originating from interstate and overseas.
You will find enclosed a comprehensive information pack prepared by Agriculture Western Australia for growers who have sown contaminated seed. The package outlines the problem and provides relevant information to control these weeds in canola crops now and in subsequent years.
The agency is currently seeking temporary registration for additional chemicals to treat these weeds in canola. Spraying for two of the problem weeds, Redshank and Field madder is not required until mid-August. In the meantime, we recommend spraying the crop with atrazine flowable at two litres per hectare for general weed control.
Any growers who have not sown Karoo imported from New Zealand should return their seed to the point of sale.
A coordinated approach will be required from Agriculture Western Australia, seed agents, growers and agronomists to monitor and inspect affected crops throughout the season and determine appropriate management for the future.”

The accompanying documents contained information designed to enable farmers to identify the three weeds. There was also an “infonote” from the Agriculture Protection Board of Western Australia explaining the significance of the categories of declared plants and animals. Category P1 was for prevention, as distinct from control or containment. It applied to “plants which cannot be introduced or spread”. The note read:
“Most declared plants are placed in this category. It is most important for potentially devastating weeds, such as perrenial [sic: perennial] thistle, water hyacinth or artichoke thistle. These must be prevented from establishing in W.A.”
Category P2 was for “plants which will be eradicated”. The note explained:
“This category includes the potentially serious weeds which are not yet widely established in W.A. Examples are skeleton weed, salvinia, gorse and Noogoora burr.”
A reader would, understand that every effort should be made to detect and eradicate any plant declared in both categories P1 and P2; as cleavers, redshank and field madder had recently been.
However, AgWest was not content to leave it to the farmers to work out what action to take. Included in the package was a 17 page booklet which included detailed instructions for action. The booklet identified the weeds in each of the eight lines of Karoo seed imported into Western Australia, with a note of the region of production number shown on their labels. Region of production number W990AA, shown on the labels attached to the bags received by R & E Wilkins, correlated to line 605529, contaminated by cleavers and an unidentified species of Polygonum. Under the heading “The weeds and their current status”, the booklet said:
“· Redshank has not been detected previously in Western Australia. Cleavers is not present as an agricultural weed, while Field madder is found only in native woodlands along the west coast.
·Cleavers is notorious as a weed of cropping in Europe and Canada. Its weed status and the level of threat that it poses to Western Australia were assessed before this incident occurred. This led to Cleavers being Declared at the Agriculture Protection Board meeting (19 June 1996) as a P1, P2 Declared Plant – this category prohibits its entry and allows for its eradication when found.
·Assessment of the weed risk and potential distribution of Redshank and Field madder has shown that the south coastal farming regions between Albany and Esperance are at risk from Redshank. The potential distribution of Field madder includes most high rainfall areas of the south-western agricultural region; however, this weed is considered unlikely to maintain itself in the wheatbelt.
·Redshank has developed resistance to triazine herbicides in New Zealand. If this tolerance is expressed in crops of triazine-tolerant Karoo canola in this State, then Redshank will be unmanageable by this class of herbicide. This will defeat the purpose of growing Karoo. Both Redshank and Cleavers are hardseeded to varying degrees and will possibly survive up to five years. There is no comparable information for Field madder.”
The booklet referred to the establishment of a working group “to manage this incident in accordance with the agency’s emergency response plan”. There was a list of recommendations, including for a series of inspections and chemical control measures in 1996 and inspections in later years. The instructions included this note:
“Important
The contaminating weeds will be at very low levels. For example we would only expect to find one Redshank plant in every 200 square metres of the worst affected line. Cleavers and Field madder will be at lower levels. However, these few plants could multiply quickly if not controlled. Keep a constant look out for these weeds over the next 10 years. If found remove and burn the parent plants and spray to run off an area, 10 metres wide, with a mixture of one litre of Tordonâ 75-D in 100 litres of water.
Chemical control advice for other crops will be forwarded at a later date.”
One of the recommendations was that, due to potential weed seed dormancy, growers should not retain seed from affected paddocks for at least five years. Farmers were advised to avoid grazing affected paddocks over summer because of the risk of stock transporting the weed seeds, especially cleavers. Special instructions were given about harvesting, including advice to clean windrowers and headers thoroughly before moving onto other paddocks.
A section of the booklet was devoted to detailed information about each of the three weeds. The following statements were made about cleavers:
“Cleavers is a serious weed of temperate crops and is listed among the world’s worst weeds. It is regarded as a serious or principal weed in 10 countries and as a common weed in over 20 others. It is a serious competitor in cereal crops and is also a problem in vegetable crops and pastures. More recently, it is developing as a serious weed of canola, particularly in Canada.
…
The climate of south Western Australia is well suited to this weed especially the central wheatbelt and the Great Southern district. The fact that this species has not yet become widespread is probably due to lack of opportunity.”
In connection with redshank the booklet said:
“Redshank is a weed in a wide range of crops including cereals, vegetable crops and pastures. It is considered a weed in 40 countries and is a serious/principal weed in 16, mostly European, countries.
Resistance to triazine was demonstrated for Redshank in New Zealand in 1987 and in Holland in 1988. Control of Redshank in maize crops in New Zealand is now a major problem because of triazine resistance. The likelihood of triazine resistance in the imported Karoo seed is low, however, because the area where the Karoo seed was produced was not treated with triazines according to sources in New Zealand.
…
Although Redshank will probably grow well throughout the south-west, as indicated by its almost global distribution, it appears that it would become a weed of concern only in south coastal areas.
…
An area along the south coast from Albany east towards Esperance and beyond is most suitable for the growth of this weed.
In addition to the threat posed to Canola crops, Redshank could put at risk root crop industries and horticultural crops in general. The possibility of it developing atrazine resistance should not be overlooked.”
The authors of the booklet apparently felt less concern about field madder. They said:
“Although Field madder is not considered a serious/principal weed in any country, it has been noted as a weed in ryegrass seed crops, olives, strawberries and clover seed crops. Resistance to simazine has been demonstrated for Field madder in olive groves.
…
The whole of the south west of Western Australia appears to be climatically suitable for the growth of this weed.
…
Although Field madder has been present in this State for some time, it could become weedy in future cropping systems. The report of simazine resistance in Field madder is cause for concern because this herbicide is widely used in Western Australia.”
The evidence includes letters that Mr Rath wrote to people who had complained to him about the Karoo contamination. Those letters contained an apology. A typical example is to be found in the following paragraph of a letter of 1 August 1996 to the Katanning Zone Co-ordinators of the Western Australian Farmers Federation, Wally and Linley Filmer:
“I’d like to stress at this stage that this does not excuse Dovuro in failing in its duty of care to inform growers as to the presence of these weed seeds. We got it wrong in this case, and new varieties will not be brought on the market again in this manner. Dovuro will not be producing seed in New Zealand again. The company will continue in bulking up its varieties (as it does every year) in Western Australia. Dovuro currently has eight growers contracted to bulk up its varieties in Western Australia. Furthermore, Dovuro has always made available Seed Analysis Certificates to anyone who asks. Dovuro would like again to apologise unreservedly to all growers who purchased New Zealand Karoo seed. Dovuro did not break any regulation, and all its actions were legal at the time.”
Mr Rath sent copies of his letters to Mr Tapp. Mr Tapp took no action to disclaim their contents.
(vi) The sustaining of damage
Mr Wilkins followed the recommendations contained in the information package. This involved his spending considerable time inspecting the areas sown to Karoo canola and additional expense for chemical sprays. Mr Wilkins claims he sustained substantial losses at harvest time from four causes: production inefficiencies caused by the need to dismantle and minutely clean the header and other equipment; loss of opportunities to hire out to other farmers his services and equipment; loss of the opportunity to sell the canola crop for bird seed, rather than crushing; and loss of the opportunity to graze the paddocks sown to Karoo canola. These claims have not yet been fully investigated. However, I am satisfied the applicants have suffered some damage; if they are able to establish the existence of a duty of care to them by either respondent and breach of that duty, their negligence claim is made out.
Mr Wilkins said in his affidavit:
“Had I been warned that the Karoo canola seed available to fill my orders in 1996 may have contained weeds which were not known to broad acre farming in the State of Western Australia, I would have refused to accept that seed in satisfaction of my orders because it was not worth all the hassle.”
Mr Wilkins was not challenged in relation to that statement. In cross-examination, he conceded he knew there would always be some impurities in bags of seeds purchased from dealers, but he added “most of them were listed on the bag”. However, Mr Wilkins agreed he knew in April 1996 that impurities were not always listed; so that, in buying seeds, he would “buy weeds from time to time as well”.
Evidence was also given by Bruce Leslie Piper. Mr Piper conducts a farming operation in partnership with five other members of his family at “Woolandoon”, Bindi Bindi. The partnership purchased and sowed Karoo canola seed imported by Dovuro from New Zealand in early 1996. Mr Piper said, without challenge, that he would not have used the Karoo canola seed if he had known of the possibility of its contamination with weeds not known in Western Australia. Mr Piper also gave evidence of losses and expenses sustained in following the recommendations set out in the information package. I need not go into detail. Bearing in mind the number of people in each of the two partnerships (Wilkins and Piper), I am satisfied at least seven persons suffered damage as a result of sowing the Karoo canola seed, the amount of which has yet to be quantified.
Neither Mr Wilkins nor Mr Piper claimed to have identified any of the three subject weeds on his property. Nor is there evidence from any other source of any of the weeds being observed in a canola crop. The reason for this is uncertain. I am satisfied many Western Australian farmers were sold canola taken from lines in which one or more of the three weeds was detected in the Cropmark and MAF analyses. Of course, it does not follow from that circumstance that weed seeds were present in the particular bags taken by individual growers. However, it is common ground that post-harvest processing tends to distribute any quantity of foreign seed fairly evenly through the line. So it seems unlikely any grower escaped receiving some representatives of any species of seed that was found in significant volume in the line from which his or her bags were taken. In any case, the luck of distribution would not explain why no farmer reported finding the growing weeds. There are more likely explanations of that phenomenon. One possibility is that the weed seeds failed to germinate because of unfavourable soil or climatic conditions. Another possibility is that, having germinated, the weeds were smothered in infancy by the vigorously growing canola. A third possibility is that the young weeds were killed by the substantial doses of chemicals applied by growers to the crops in obedience to the instructions in the information package.
(vii) The incidence of the three weeds in Western Australia
At the time of his giving evidence, Terence John Piper was Acting Manager, Weed Science Group. He is an organic chemist of 27 years standing. Dr Piper has been employed by AgWest since 1982, being concerned with the chemistry of herbicides, problems of herbicide residues and herbicide resistant weeds and weed control in broad area crops, especially lupins and canola. He supervises AgWest’s Weed Risk Assessment Unit. This unit comprises two officers, each of whom holds the degree of Bachelor of Applied Science (Biology) from Murdoch University. As its name suggests, the unit evaluates the risk to Western Australian agriculture of particular weed species. During the course of his evidence, Dr Piper produced and verified reports by the Weed Risk Assessment Unit concerning cleavers, redshank and field madder. He said cleavers had “never been reported as a problem weed by farmers in the wheatbelt, and it has never been seen by Agriculture Western Australia staff. On that basis I would say it is not established”. He thought there was “a moderate to high chance” of cleavers becoming a problem in the wheatbelt, although he noted “the plant does not seem to have encroached outward from the present isolated occurrences”. Those occurrences were “a few rocky sites in the NE wheatbelt” which may have been used as overnight camps by early travellers to the goldfields. However, Dr Piper expressed doubt about the accuracy of the identification of the plant at these places.
Dr Piper said redshank was formally recognised and identified in Western Australia only in 1996-97, apparently as a result of the publicity arising out of the Karoo canola incident. After that publicity, redshank was found to be growing in some areas near Perth, in market gardens and some home gardens and on some golf courses. There has been no report of redshank in the wheatbelt, although the Weed Risk Assessment Unit thought there was “a slight chance” of the weed establishing itself there.
Field madder, also, had not been reported in the wheatbelt, although it had been found in disturbed ground near Albany. Dr Piper thought there was a “moderate chance” of it becoming a problem in the wheatbelt although it would probably be confined to its preferred soil types.
Dr Piper also provided information about herbicides. It is enough to say his evidence supports the advice contained in the information package sent to the affected farmers.
During the course of Dr Piper’s evidence, counsel for the applicants tendered a letter written by his instructing solicitors to Dr Piper and Dr Piper’s reply. The solicitor asked Dr Piper to confirm his oral advice that the presence of seeds of cleavers, redshank and field madder “in canola seed imported into WA for the purposes of broad acre farming would make them undesirable weeds as far as the WA canola growing industry, or in fact the WA broad acre farming industry is concerned”. Dr Piper responded:
“As far as agriculture and broadacre farming is concerned, all weeds are undesirable. Indeed the very definition of a weed is a plant growing where it is not wanted. Some weeds however are more undesirable than others.
As an extreme example, the most rapidly increasing weed of Western Australian agriculture at the moment is actually canola. Seed spillage is unavoidable during harvesting and carting operations, and canola is appearing on roadsides and in wheat crops the year after a canola crop. Yet farmers will accept this as no more than a nuisance, since they deliberately seeded the plant for economic reasons themselves. In a similar vein, they will accept volunteer wheat as a weed of their lupin and canola crops, and volunteer lupins as a weed of their cereal crops.
Another widespread weed in Western Australia is wild radish. This plant has no redeeming virtues, and is a serious problem especially in lupin crops. Its seeds will often be present in lupin seed that farmers hold on-farm to feed to their stock over summer, yet they will trail these contaminated lupins out without too much concern about the accompanying wild radish seed. After all, there is such a reserve of seed in the soil already that a bit more makes little difference.
The ‘most undesirable’ status would have to go to weeds that combine both traits; they are not already present, and they have no redeeming features. The three weeds of concern certainly fall into this category.” [Emphasis added]
Dr Piper also identified an article written by him for the May 1999 issue of a departmental publication “Agricultural Memo”. In that article he said:
“If you are planting lupins in a paddock that was sown with contaminated Karoo canola seed in 1996, don’t stint on your herbicide program, and monitor the crop closely.
The protocol developed for managing paddocks sown with contaminated Karoo canola seed, where cleavers, redshank or field madder could possibly establish, recommended that lupins not be grown for the next two years. This was because control of these weeds in lupins was not expected to be as effective as in cereals. Farmers following the guidelines would now be ready to sow a lupin crop on the area.
Given the long dormancy of some of the seeds, it is possible that some plants will emerge in this lupin crop. The following recommendations have been extrapolated from known control measures for the target weeds, or their close relatives. There is no experimental evidence to support them, as we have no large lupin growing areas of the weeds to do such trials, and we don’t want them!”
The article went on to set out recommendations regarding inspections and the application of herbicides. These recommendations were substantially similar to those contained in the information package, which had been followed by Mr Wilkins and others.
I am satisfied, from the evidence of Dr Piper and other AgWest officers that:
(a)As at early 1996, cleavers, redshank and field madder were not present (except perhaps in a few isolated places) in the Western Australia wheatbelt; and
(b)There was good reason for regarding the introduction of those weeds into the wheatbelt as most undesirable, especially if they affected canola crops intended to be used for the manufacture of magarine or edible oils.
I am also satisfied, by Mr Wilkins’ evidence, that the steps taken by him to cope with the threat of the weeds growing on “Narbethong” were steps that reasonably reflected the recommendations made in the information package published by the AgWest working party. There is an issue between the parties as to whether those recommendations went beyond what was reasonably required in the situation in which AgWest found itself in June/July 1996. The respondents say that, to the extent they did, they should not be held responsible for the expense and losses incurred by the applicants and group members in following the recommendations.
Contentious matters
(i)Did AgWest overreact?
During the course of his evidence, Mr Tapp made clear his opinion that AgWest overreacted to its discovery of contamination of the canola seed. This was not the first time he had indicated that view; he did so in 1996, about the time the working party published its information package.
Mr Tapp’s view received a little support from evidence given at the trial by Peter McKenzie Falconer, a farm management consultant and valuer. Mr Falconer holds a Diploma of Agriculture and a Diploma in Valuation and Farm Management from Lincoln College in New Zealand. He farmed for some years in New Zealand before establishing, in 1962, a business that provides consulting and management services to farmers and investors. The business is now operated through Planfarm Pty Ltd, of which Mr Falconer is a director. Planfarm has offices in Perth and in four Western Australian regional centres. Mr Falconer has held official positions in two organisations involved with farm management and agricultural consultancy and is a member of the Wheat Industry Research Committee of Western Australia.

Mr Falconer gave evidence that he had been asked to comment about two issues relevant to this case: “the likelihood of cleavers, field madder or redshank … becoming a problem in Western Australian agricultural crops” and the effect of those weeds on canola crop production.
In relation to those matters, Mr Falconer said in his statement of evidence:
“6.I believe that there is little, if any, likelihood of any of the weeds becoming a problem in Western Australian crops in the agricultural area. My reasons for this statement are as follows:
6.1.1The weeds have been present in Western Australia for many years without becoming generally established in the wheat belt.
6.1.2The weeds require a longer growing season than is normal in the wheat belt area.
6.1.3The weeds would all be controlled by the normal spray and other weed control measures adopted as normal practice in the wheat belt.
7.In relation to the second question, as would be the case with any severe weed competition, the production and quality of canola would suffer if there was a heavy burden of any one of the weeds. It needs to be recognised, however, that the weeds are relatively slow growing in the early stages and would therefore tend to be smothered by the aggressive growth of a normal canola crop unless they were very thick.
8.Further, I am informed that the percentage of the weeds in the imported canola seed is very small as the majority of lines of the canola seed imported from New Zealand contain 99.9% canola seed and the lowest percentage of any line is 99.7%. I believe that at that level there would have been no discernible effect on the resultant canola production or quality.”
In oral evidence Mr Falconer revealed he had previously seen the information package sent to Karoo canola growers by the AgWest working party. Some of his clients had sought his advice about the recommendations it contained. He said he advised them “to follow the normal practice which was very much in line with the recommendations made by the Department of Agriculture”. One exception was that he thought it unnecessary to apply dicamba. This exception seems relatively unimportant. As I understand the information package, AgWest recommended that dicamba be used only if redshank was found growing in the canola crop. Another possible exception was that, although AgWest recommended the growing of cereal crops on affected areas in both 1997 and 1998, Mr Falconer said his clients “did not plan to grow two consecutive wheat crops after the canola”. He said he meant that clients “should plan on not doing (this). The final decision wouldn’t have to be made until two years after this discussion was taking place”. Mr Falconer said he advised his clients to “keep an eye out while they were spraying and while they were harvesting in case there was any germination of those weeds in their crops”, but no client reported having found any of the weeds.
During the course of his cross-examination, Mr Rowe asked Mr Falconer when he formed his belief that there was little likelihood of any of the three weeds becoming a problem in Western Australia. Mr Falconer replied:
“I guess I hadn’t considered it as a serious question until it was general knowledge that the imported canola had these weed seeds present. But I had a general belief that the majority of annual English weeds are unlikely to be a problem in cereal crops in Western Australia. That view would have been formed, I guess, after I had been here for several years and observed the growth habit and persistence and so on of other weeds.”
Even so, Mr Falconer said, he would not ignore the presence of any of these weeds in seed that any of his clients might propose to sow; it was a factor he would take into account in recommending whether or not to sow the seed. Mr Falconer discounted both soil conditions and climatic conditions as relevant considerations, but he said he would take into account the concentration of the weed seed in the cropseed and the likely capacity of the weed to establish in the area. He said he would consider “the effect generally to agriculture in the wheatbelt in Western Australia”. Mr Falconer’s evidence went on:
“I suppose there are other factors you would also take into account if you knew them?---Yes.
When you weigh up all these factors, you would then, with all those into account, formulate your advice to your clients?---Yes.
In giving that advice, if in all those factors there was a risk, which you regarded as slight, [sic: more than slight] would you advise the clients of the potential risk and your assessment of its magnitude?---Yes.
So at the end of the day then, the client would make the decision with the benefit of your advice?---Yes. That would be the case except for clients where we had management executive responsibility.
In which case you would exercise their decision?---Yes.
Would you ever ring or contact the manufacturer or provider of the seed to ascertain the identity of weeds that may be in the seed?---Yes.
Do you do that often?---Frequently.
In relation to canola, have you ever made that enquiry?---No.
Why not?---Because the certification certificates have been quite adequate to provide that information.
When you refer to the certification certificate, what are you referring to?---Certification certificate issued by the Department of Agriculture. Their seed testing division.
Is that the analysis?---Yes.
If you see on the analysis the presence of weed seed but the weed seed not being identified, is that a circumstance that would lead you to enquire as to the identity of the weed seed?---If it was from an area that I wasn’t familiar with and knew what weed seeds were present, yes, it would prompt further enquiry.
So you would use your considerable professional expertise in deciding whether or not your [sic: you] would make an enquiry?---Yes.
Is it fair to say that obviously your expertise is greater than what you would expect from the average farmer?---Yes.
I mean you hold yourself out with that expertise?---Yes.”
The principal evidence justifying AgWest’s recommendations came from Paul Cornelius Carmody, AgWest’s Oil Seed Industry Development Officer. Mr Carmody graduated from the University of Melbourne in 1982 as a Bachelor of Agricultural Science. He worked on the family farm for a time before obtaining employment with an oil seeds company in South Australia and, subsequently, New South Wales. He then spent a year reviewing the marketing and training programs of the Australian Wheat Board before becoming a freelance technical writer for two years. In 1992 he joined AgWest as its Canola Industry Development Officer. During the following seven years he saw the Western Australian canola crop expand from an area of about 10,000 ha to over 100,000 ha. Mr Carmody said the majority of the Western Australian crop has, “for many years now”, been exported - mainly to Japan - and that “(q)uality assurance for such exporting customers has always been a premium concern”. In July 1995 Mr Carmody received a grant from the Grain Research and Development Corporation to travel to Canada and Europe for the purpose of studying the canola industry. In Canada he noted the quality control effort being made by the Canadian Grains Commission. In his first affidavit, Mr Carmody said this in relation to Canada:
“21.Grain destined for export which needed to be graded to satisfy the stringent export standards is graded at the port prior to being loaded onto ships for export. The grading equipment so far as its scale in sophistication and thoroughness was concerned was superior to anything I had ever seen in the Australian bulk handling systems.
22.I formed the opinion that it was essential that the Western Australian Canola Industry ensure that its level of contaminants in Canola was kept to an absolute minimum if it was to compete with Canadian exports, particularly since they were also destined for the Japanese market.
23.There were already contaminant or admixture problems in Canola in Western Australia and new contaminates would seriously compromise our competitive position in export markets.
24.This was in addition to the adverse effects that flowed from having weeds competing with the crop for nutrients and moisture.
25.A very serious problem for the Canadian Grains Commission and the Canadian exporters was contamination of Canola seed by the seeds of a weed known as Cleavers, which did not have the same pod segment as wild Radish and was therefore more difficult to grade out.
26.As cleavers was not known to the Canola growing areas of Western Australia I felt we had a valuable advantage over the Canadians which we should protect at all costs and so I decided to meet with the Western Australian Farmers Federation upon my return and to get the backing of the organisation to have that weed declared in this State.”
The evidence does not disclose what happened about that decision, but obviously it did not bear fruit before May 1996.
In cross-examination Mr Carmody expanded on the situation concerning exports:
“The problems were with export to Japan. The Grain Pool was getting feedback from the Japanese that admixture was going over one up to three per cent in the exported samples and the admixture was made up of canola pod material, stems and also rye grass seed and some radish in some of it. So the admixture was a problem for the Japanese and in terms of crushing it, it decreased the efficiency of the processing plants and the Japanese were putting a lot of pressure on the Grain Pool to actually reduce the level of admixture or otherwise they were going to start incurring dockages on those exports.”
In a second affidavit Mr Carmody revealed the thinking of the working party, of which he was a member:
“2.Given the seriousness of the weeds detected in some of the lines and the level to which they were detected, the Department needed to take action in order to minimise the risk of the weeds, especially cleavers, becoming established in the broad acre farming districts of Western Australia.
3.Although some certificates revealed a line free of the three weeds, Cleavers, Redshank and Field Madder, the Working Group managing the event decided to rule out any possibility of other lines allowing the weed into Western Australia. Therefore the safest option, and this was not without lengthy discussion by the working group, was to provide all growers who had obtained seed from New Zealand with appropriate management strategies to minimise the risk of the weeds becoming established in Western Australia.
4.The reasons for this were as follows:
(a)there was very limited information on how and where the seed was produced in New Zealand.
(b)it was the first time Agriculture WA had experienced Canola seed being produced in New Zealand for sale in Western Australia and had no prior knowledge of the level of Canola seed certification standards in New Zealand.
(c)the quality control procedures adopted in New Zealand when the crop was grown were unknown at the time but enquiries revealed that no atrazine was used on some of the seed crops which left doubt as to the chemical regime adopted for all of the seed crops and therefore required extra precaution.
(d)it was necessary to warn Western Australian growers that there could be a risk that all the lines from New Zealand may have weed seeds in them. At the time it was the Department’s responsibility to do this.
(e)there was no information available to the Working Group as to whether or not, and how thorough, the seed cleaning company had cleaned down machines between contaminated lines and uncontaminated lines. Given the number of weed seeds in some lines, there were doubts on the company’s proficiency. There could have be [sic: been] cross-contamination between lines, but at levels not detectable by standard sampling methods.
(f)the primary purposes of seed tests is to check for germination of the seed and secondly, to determine if unacceptable levels of weed seeds are present. They are not infallible when it comes to detecting weed seed, especially in Canola. There is always a possibility that some weed seeds will get through undetected, thereby creating an unacceptable risk in all the circumstances.
(g)also given what I already knew of admixture problems for Western Australian Canola in the export market and the potential for cleavers to become a serious contaminant I advised the working group not to take any risks with these weeds. The last thing a rapidly emerging industry needed was another potential threat to its attempts to develop new markets.”
Although Mr Carmody was cross-examined by both Mr Stephen Walmsley SC, who appeared with Mr Mark Macrossan for Dovuro, and Mr Paul Donohoe QC, counsel for Cropmark, he was not challenged in relation to any of these reasons. Nor was it put to him that the working party overreacted to the problem or that the recommendations made in AgWest’s information package were incorrect or excessive. Mr Carmody agreed he was also concerned about the sheer number of weed seeds revealed by the certificates of analyses, regardless of species. He admitted having been “horrified” when he saw the certificates and having been critical of Dovuro for importing the seed into Western Australia; but those circumstances do not establish an over-reaction.
I was impressed with Mr Carmody’s depth of knowledge of the problem. He was not unwilling to speak frankly, as was evident from his acceptance of a system failure in AgWest in relation to the importation of this seed into Western Australia. Having regard to his knowledge, and the lack of any challenge to his stated reasons for the working party’s recommendations, I am not prepared to say those recommendations involved an over-reaction to the problem confronting AgWest in June 1996. I am fortified in this conclusion by Mr Falconer’s view that the recommendations were substantially appropriate; he disagrees only with the suggestion of a dicamba spray and in his preference for a “wait and see” attitude to a second wheat crop. Although Mr Tapp thought the working party went too far, he did not spell out his reasons for that view.
I do not think the circumstance (where it occurred) that expenses and losses stemmed from following the recommendations contained in the information package is a reason for denying that those expenses and losses were caused by any breach of duty that may be established against one or both respondents.
(ii)Labelling good practice
Keith Donald Glasson is the Managing Director of Pioneer Hi-Bred Australia Pty Ltd (“Pioneer”), a competitor of Dovuro in the seed market. Mr Glasson has been involved in the Australian seed production industry since 1969. He is Vice President of The Seed Industry Association of Australia Limited (“SIAA”) and Chair of its Plant Breeders and Proprietary Marketers Group.
Mr Glasson was shown the MAF seed analysis certificates relating to the subject Karoo canola seed and asked to assume that none of the labels on the bags of canola imported by Dovuro into Western Australia revealed the presence of the weed seeds shown in the certificate. He said:
“Truth in Labelling required in 1996 that the customer, in this case the farmer, be informed of the presence of the weed seeds in the Canola seed that he or she was acquiring.”
By “Truth in Labelling”; Mr Glasson explained, he meant labelling in accordance with the accepted industry practice. In 1996 that practice was in accordance with what is now set out in section 6 of the SIAA Code of Practice. Section 6 includes the following provisions;
“6       Minimum Details Required on Label or Parcel
This Code of Practice requires that a person shall not sell seeds contained in a parcel unless there is clearly written or printed thereon, or on a label securely attached thereto, a statement setting out the particulars referred to in sub-sections 6.1-6.12 below.
6.1Species
The COMMON or BOTANICAL name of each species present in the seed lot in a proportion by mass or by count of:
.          1% or more in lawn or turf seed, or;
.          5% or more in other seed.
6.2Pure Seed
The proportion of each species named, (by mass or by count – if expressed by count then the words ‘by count’ must be included in the statement);
.          as the actual percentage, determined by examination, or;
.a minimum percentage. If stated as a minimum the word ‘minimum’, or ‘min’ must be included.
…
6.5Other Seeds
The total proportion of seeds, other than those named as per sub-section 6.1 above, present in the lot of seeds by mass as an actual or maximum percentage, or by number per kilogram, or by number per unit mass.
…

6.11Analysis Certificate
All labels attached to parcels of agricultural seeds to include the following:
‘A seed testing analysis certificate is available on request’ and this is to be printed and immediately visible on the label.
6.12Summary
To summarise, the following label format would be acceptable:
LOT NO:  …………..
CROP SPECIES:                 …………..
CULTIVAR:  …………..
PURE SEED (MIN):            …………..
GERMINATION (Min):       …………..
HARD SEEDS (Max):          …………..
OTHER SEEDS (Max):       …………..
NET WEIGHT:  …………..
CAUTION:TREATED WITH BENOMYL FUNGICIDE – DO NOT USE FOR FOOD, FEED OR OIL
PACKER:Tassie Seeds, 1 Main Road, Hobart, TAS.
A SEED TESTING ANALYSIS CERTIFICATE IS AVAILABLE ON REQUEST.”
Mr Glasson said that, faced with lines of canola containing weed seeds in the bulk indicated by the seed analysis certificates, Pioneer would have regraded the canola seed “to remove the vast majority so as to ensure that the ultimate consumer of that seed received seed that was reasonably fit for the purpose of broad acre planting”. Any weed seeds still present after regrading would have been identified on the label, if declared in their State of destination; otherwise their percentage would have been recorded on the label as “other seeds”. He said that, if weed seeds remained present after regrading, Pioneer officers would make inquiries of the Department of Agriculture in the State of destination “as to whether those weeds were either present and/or undesirable in the district or State” where they were to be sown.
During the course of his cross-examination, Mr Glasson agreed that (except in the case of seed intended for lawn or turf use) cl 6.1 of the Code required identification only of those species of seed that amounted to not less than 5% of the whole. He also agreed that cl 6.2 was concerned with stipulating how the obligation imposed by cl 6.1 should be discharged. Where cl 6.1 did not apply, as in this case in relation to the three weeds, there remained an obligation under cl 6.5 to name the “total proportion of seeds” other than canola. Mr Glasson did not accept this obligation was discharged by a label that referred only to “minimum 99% purity”; those words did not indicate whether the remaining 1% consisted of seeds other than canola or inert material such as dirt or plant fragments.
Although this obligation is not stated in the code, Mr Glasson said it would have been good practice in 1996 to identify by name any seeds in the sample that were declared weed seeds in the State of destination; otherwise it would suffice to say “other seeds”. In either case, if the quantity was less than 0.5% of the whole, it would be appropriate to use the word “trace”; if between 0.5% and 1%, the usual practice would be to state “1%”.
Mr Glasson said, if he were importing seed into Australia, he would rely on AQIS to determine whether it complied with the regulations but he would also look at the seed analysis certificate “to satisfy ourselves that the weed seed … was something we were not concerned about commercially”. He explained he meant by this “something that’s going to be harmful to the industry”. In such a situation, he said, “we would probably talk to our agents and if they showed concern we would talk to the department.”

Dovuro puts its cross claim against Cropmark on five bases:
(a)breach of an express condition of the contract between Dovuro and Cropmark that the delivered canola seed be “free of undesirable species”;
(b)breach of an implied condition that the seed be reasonably fit for the purpose of sowing a canola crop;
(c)breach of an implied condition that the seed be of merchantable quality;
(d)misleading or deceptive conduct in contravention of s52 of the Trade Practices Act; and
(e)contribution under s5(1)(c) of the Law Reform (Miscellaneous Provisions) Act 1944 (NSW) or its Western Australian equivalent.
I will deal separately with each of these bases of claim.
(ii)Express condition
In para 14 above, I set out the terms of the contract made between Dovuro and Cropmark in September 1995. Those terms include the condition: “Maximum 0.5% weed and free of undesirable species including Brassica and Rumex in working sample.” Dovuro does not suggest that the seed supplied by Cropmark contained more than 0.5% weed or any Brassica or Rumex species. It is accepted by counsel for Dovuro and Cropmark that their clients treated the reference to a “working sample” as covered by the certificates of analysis. However, Dovuro asserts that, if the applicants’ claim against it is accepted, Cropmark supplied to it seed containing “undesirable species”.
The words “undesirable species” are not defined in the contract. Counsel for Dovuro argue they include all weeds that were undesirable anywhere in Australia where Dovuro might reasonably be expected to sell canola seed. Counsel for Cropmark submit the words have to be construed by reference to their use in the New Zealand Grain & Seed Trade Association handbook.
Mr Grigor prepared the contract on behalf of Cropmark. He said he understood the words “free of undesirable species” to mean free of any of the twelve species or genera listed under the title “List of undesirable weed species” in the handbook. This list did not include any of the species the subject of the present action. Nor did it include any Brassica or Rumex species. Mr Grigor said that, in preparing contracts for the sale of seeds in 1995-96, it was not his practice to refer specifically to the handbook. He said the three subject weeds were common in New Zealand and not problematic there. When he prepared the contract, he had no idea where in Australia Dovuro would sell the canola seed. Because the contract required delivery in Melbourne or Sydney, he assumed the seed would be distributed in eastern Australia. However, he made no inquiry about this; he regarded Dovuro as his customer. Mr Grigor maintains he had only a broad knowledge of Australian seed certification requirements; he knew they varied from State to State. Mr Grigor said Mr Kudnig never informed him about the various State requirements. He agreed that, in a sense, all weed seeds might be regarded as undesirable.
Evidence was given by Brent Alexander Stirling, a seed trader with Cropmark who has been employed in the New Zealand seed industry for over 20 years, that the words “as per terms of trade rules” were commonly used in contracts between members of the New Zealand Grain & Seed Trade Association. He said “otherwise we spell that out, as I assume the way it is spelt out here is ‘undesirable species’”. Mr Stirling said he would class as “undesirable species” those weeds that are listed in the Trade Association handbook. He maintained he had seen this term used in other contracts between Cropmark and persons outside New Zealand.
It will be recalled that Mr Kudnig negotiated the contract on behalf of Dovuro but it was signed on behalf of the company by Mr Tapp. Neither Mr Kudnig nor Mr Tapp gave any evidence regarding the inclusion of the words “free of undesirable species”.
Counsel for Dovuro and Cropmark have both referred me to cases concerning the circumstances under which custom and usage warrant the implication of terms in a commercial agreement. Counsel for Dovuro also make the legitimate point that there is no reason why the term “undesirable species” should be looked at only from the seller’s perspective; any undesirability of species will be important primarily to the buyer. They say the meaning ascribed to the words should be the meaning which “would have been understood by seed purchasers in Australia”. Counsel say the inclusion of a reference to Brassica and Rumex is explicable on the basis that it is an exercise in caution; it demonstrates that the category of “undesirable species”, “whilst an ascertainable class, is not necessarily a readily ascertainable one”. They also make the point that, if the parties had intended to limit the term to the plants listed in the handbook, it would have been easy to say so; in which case, it would have been appropriate to use words like “as well as” rather than “including” in referring to Brassica and Rumex.
As is so often the case, it would have been helpful for the parties to have specified more clearly what they had in mind regarding unacceptable weeds. It is not relevant to consider authorities relating to implications based on custom and usage; here there is an express term, the problem is to construe it. This must be done by determining the likely intention of the parties.
I do not think it likely that either party intended the words “undesirable species” to bear the meaning advanced by counsel for Dovuro. It seems improbable that Cropmark would have been willing to make the performance of its contract, and its entitlement to payment, dependent upon a view, of either Dovuro or the ultimate purchasers, about acceptability of the seed in particular locations. Cropmark had no knowledge of the likely locations of plantings or the likely identity of the ultimate purchasers. Furthermore, it is unlikely that even Dovuro would have had in mind such a condition. From first to last, Mr Tapp’s position has been that Dovuro’s only obligation was to ensure the canola seed was acceptable to the regulatory authorities. It is improbable that, in signing the agreement with Cropmark, he intended his company, or the farmers who purchased the seed, would be the arbiters of the question whether any weed seeds were of “undesirable species”.
Further, the interpretation now suggested on behalf of Dovuro would render unnecessary the reference to Brassica and Rumex; it is common ground that, on any view, they are undesirable weeds in a canola crop. I appreciate counsel’s point about more abundant caution. Nonetheless, these references do support the view that the term “undesirable species” was intended to have a relatively confined meaning.
I see no reason to doubt Mr Grigor’s evidence that, in drafting the contract, he had in mind the New Zealand handbook. There is no evidence that he explained this to Mr Tapp or Mr Kudnig. That being so, I think they would have been entitled to regard the term “undesirable species” as embracing any species that could not lawfully be imported into Australia; although it can be argued that point is already covered by the words “to comply with Australia import regulations”. It is not necessary to reach a view about that matter. It is enough to hold, as I do, that the parties did not intend the term “undesirable species” to have the wide meaning now contended by Dovuro. I think it was intended to cover only the seeds listed in the handbook, with the possible addition of species unable to be imported into Australia. This ground of cross claim fails.
(iii)Implied term: reliance on seller’s skill or judgment
Section 16(a) of the Sale of Goods Act 1908 (NZ) provides:
“(a)Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller’s skill or judgment, and the goods are of a description which it is in the course of the seller’s business to supply (whether he is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose.”
There is no doubt the canola seed sold by Cropmark to Dovuro constituted “goods … of a description which it is in the course of the seller’s business to supply”. It may also be accepted that Dovuro made known to Cropmark the particular purpose for which the goods were required; that is, for resale as cropseed to farmers. But it seems to me impossible to hold that Dovuro relied on Cropmark’s skill or judgment, at least in relation to the matter of weed contamination. First, the parties negotiated terms concerning this very matter. Second, Mr Kudnig went to New Zealand for the express purpose of inspecting the growing canola crop. A major objective of the inspection was to ascertain the position regarding weeds. Mr Kudnig also made inquiries about weeds in the locality. All this was known to Mr Grigor, who accompanied Mr Kudnig on the inspections. Third, Dovuro required Cropmark to send to it certificates of analysis disclosing the identity of any weeds within the canola seed.
In their written submissions, council for Dovuro addressed the issue of reliance by referring to a promotional brochure published by Cropmark and passages in the oral evidence of Mr Stirling and Mr Grigor in which they agreed that Cropmark was an experienced grain exporter. Both witnesses acknowledged that Dovuro relied “to some extent” on Cropmark’s expertise, but neither witness was prepared to concede Cropmark undertook responsibility for seed quality beyond what was stated in the contract. I do not think this evidence overcomes the considerations to which I have made reference.
(iv)Implied term: purchase of goods by description
Section 16(b) of the New Zealand Sale of Goods Act provides:
“(b)Where goods are bought by description from a seller who deals in goods of that description (whether he is the manufacturer or not), there is an implied condition that the goods shall be of merchantable quality:
Provided that if the buyer has examined the goods, there shall be no implied condition as regards defects which such examination ought to have revealed.”
The seed was goods bought by description and Cropmark was “a seller who deals in goods of that description” (canola seed). Mr Donohoe did not argue the proviso applies to this case, so as to negate the implication of an implied term that the canola should be of merchantable quality; presumably on the basis that the proviso applies only to cases of an examination before contract: see Taylor v Combined Buyers Ltd [1924] NZLR 627 at 635. However, Mr Donohoe contends the seed was of merchantable quality “because it was used successfully in Western Australia and other States”.
As is revealed by perusal of Professor Sutton’s work The Law of Sale of Goods in Australia and New Zealand, the concept of merchantable quality has proved troublesome to the courts: see second edition 1974, chapter X. An early definition of the term was offered by Salmon J in Taylor at 645:
“I think that goods sold by description are merchantable in the legal sense when they are of such quality as to be saleable under that description to a buyer who has full and accurate knowledge of that quality, and who is buying for the ordinary and normal purposes for which goods are bought under that description in the market.”
In Australian Knitting Mills Limited v Grant (1933) 50 CLR 387 at 418, Dixon J said:
“The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms.”
The Judicial Committee of the Privy Council upheld an appeal against the High Court’s decision in that case: see Grant v Australian Knitting Mills Ltd (1935) 54 CLR 49. Speaking for the Committee, Lord Wright observed at 60-61:
“…whatever else merchantable may mean it does mean that the article sold, if only meant for one particular use in ordinary course, is fit for that use; merchantable does not mean that the thing is saleable in the market simply because it looks all right; it is not merchantable in that event if it has defects unfitting it for its only proper use but not apparent on ordinary examination: that is clear from the proviso, which shows that the implied condition only applies to defects not reasonably discoverable to the buyer on such examination as he made or could make.”
In George Wills and Company Limited v Davids Proprietary Limited (1957) 98 CLR 77, the High Court of Australia (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ) considered the Privy Council judgment in Grant, and a slightly earlier House of Lords decision, Cammell Laird & Company Limited v The Manganese Bronze and Brass Company Limited [1934] AC 402. At 88 their Honours observed:
“Before goods can be characterised as unmerchantable it must be shown that, as goods of that description or character, they are defective though no doubt, in many cases, proof of their unfitness for some particular and obvious purpose may well establish that the goods are defective.” [Original emphasis]
In Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 (generally called Hardwick Game Farm), Lord Reid stated what he took to be the meaning of “not of merchantable quality” in the United Kingdom equivalent of s16(b):
“that the goods in the form in which they were tendered were of no use for any purpose for which goods which complied with the description under which these goods were sold would normally be used, and hence were not saleable under that description.”
Lord Reid explained this was intended to be an objective test; “no use for any purpose” means “would not have been used by a reasonable man for any purpose”.
It seems to me that, on the application of any of these tests, Dovuro must fail in its claim that the subject canola seed lacked merchantable quality. To apply the test of Salmon J, the evidence shows the canola seed was saleable to a buyer (Dovuro) who had full and accurate knowledge of its quality (ascertainable from the certificates of analysis) and was buying for the ordinary and normal purpose for which canola cropseed is bought. Similarly, Dovuro’s actual purchase, with knowledge of the seed content, satisfies the test propounded by Dixon J in Grant. Applying the Privy Council approach, the seed was fit for use as seed, although subject to limitations about the places where it ought to be sown. The same response attaches to applications of the test in Wills and Lord Reid’s reformulation in Hardwick Game Farm. The point, of course, is that the defect in the subject canola seed was not an inherent defect, such as an inability to germinate; it was a defect that caused the canola seed to be unsuitable for sowing in particular localities, but it remained fit for sowing in other places and marketable for that purpose.
This ground of cross claim also fails.
(v)Trade Practices Act
The claim of Dovuro under s52 of the Trade Practices Act depends upon the reference to “undesirable species” in the contract. However, it must fail for the reasons expressed in paras 130-139 above.
(vi)Contribution
Finally, Dovuro makes a claim for contribution from Cropmark pursuant to s5 of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) or its Western Australian counterpart. This claim is said to be made alternatively to the earlier claims. However, that position is untenable. Liability relevantly arises only in the circumstances described by s5(1)(c) of the New South Wales Act:
“Where damage is suffered by any person as a result of a tort (whether a crime or not) –
…
(c)any tort-feasor liable in respect of that damage may recover contribution from any other tort-feasor who is, or would if sued have been, liable in respect of the same damage, whether as a joint tort-feasor or otherwise, so, however, that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by that person in respect of the liability in respect of which the contribution is sought.”
It will be noted that the person against whom contribution is obtainable must be another tort-feasor; that is, a person liable in tort to the person who has suffered damage. It is not necessary to determine what is meant, in this context, by the word “tort”; unless there is a basis upon which it may be said that Cropmark is liable to the applicants, the paragraph is inapplicable. In the view I take, Cropmark is not so liable.
Orders
(i) The case against Dovuro
I do not propose, at this stage, to make any orders in relation to the contest between the applicants and Dovuro. I will merely stand the matter over to a directions hearing at 9.30am on Thursday, 3 February 2000.
If Dovuro wishes to contest my finding on liability, it would be appropriate for it to do so before assessment of the damages claims. If asked, I would be minded to give leave to appeal subject to conditions requiring Dovuro to act expeditiously and ensure the appeal would be ready for hearing in the Full Court sittings commencing on 8 May 2000. This would require prompt action in relation to preparation of the appeal book. If there is to be an appeal, it will, of course, also be necessary for me to make a formal order; perhaps a declaration.
If there is to be no appeal, it is desirable that the parties consult as to the most efficient method of assessing the damages claims. I suggest the compilation of a Scott Schedule in respect of each claimant, or group of claimants, setting out the amount claimed and the manner of its computation. It may be desirable for any differences between the parties to be the subject of mediation hearings, possibly before a Registrar or Deputy Registrar sitting in Perth.
(ii) The case against Cropmark
The effect of my findings is that the claims against Cropmark must be dismissed; that is to say, both the principal proceeding, insofar as it relates to Cropmark, and Dovuro’s cross claim against Cropmark. I will so order. As Cropmark is under no liability, its cross claim against Dovuro ought also be dismissed.
Cropmark is entitled to recover its party-party costs of the action. When a claim by an applicant against a respondent is dismissed, the usual course is to order the applicant to pay the respondent’s costs. However, Cropmark was brought into this litigation by Dovuro. It was only after Dovuro sued Cropmark on its cross claim that the applicants amended their claim to add Cropmark as a second respondent. It is unlikely this step added significantly to the costs that Cropmark would anyway have incurred, in its role as cross respondent. Under these circumstances, it seems to me fair to order that Dovuro pay the general costs of Cropmark, but excluding any costs incurred by Cropmark only by reason of the fact that Cropmark was made a second respondent to the applicants’ claim. The applicants must pay those costs. The costs which the applicants must pay will include the costs incurred by Cropmark in making its claim against Dovuro, a step that was only taken because of the applicants’ claim against it.

I certify that the preceding one hundred and fifty-eight (158) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.

Associate:
Dated: 23 December 1999

Counsel for the Applicant:

J E Rowe

Solicitor for the Applicant:

Peter Long & Co

Counsel for the First Respondent:

S Walmsley SC and M Macrossan

Solicitor for the First Respondent:

Griffith Hack

Counsel for the Second Respondent:

P M Donohoe

Solicitor for the Second Respondent:

Phillips Fox

Date of Hearing:

19-23 July 1999 and 2 and 4 August 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG297 of 1998

BETWEEN:	ROBERT JOHN WILKINS, EILEEN JOYCE WILKINS, TREVOR IAN WILKINS, SUSAN CAROLINE WILKINS and LOCHIEL NOMINEES PTY LTD AS TRUSTEE FOR THE R & E WILKINS FAMILY TRUST all t/as R & E WILKINS Applicants
AND:	DOVURO PTY LTD First Respondent CROP MARKETING NEW ZEALAND SOCIETY LIMITED Second Respondent DOVURO PTY LTD First Cross Applicant CROP MARKETING NEW ZEALAND SOCIETY LIMITED First Cross Respondent CROP MARKETING NEW ZEALAND SOCIETY LIMITED Second Cross Applicant DOVURO PTY LTD Second Cross Respondent
JUDGE:	WILCOX J
DATE OF ORDER:	23 DECEMBER 1999
WHERE MADE:	SYDNEY

JUDGE:	WILCOX J
DATE:	23 DECEMBER 1999
PLACE:	SYDNEY

Counsel for the Applicant:	J E Rowe
Solicitor for the Applicant:	Peter Long & Co
Counsel for the First Respondent:	S Walmsley SC and M Macrossan
Solicitor for the First Respondent:	Griffith Hack
Counsel for the Second Respondent:	P M Donohoe
Solicitor for the Second Respondent:	Phillips Fox
Date of Hearing:	19-23 July 1999 and 2 and 4 August 1999