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Valleyfield Pty Ltd v Primac Ltd

 

[2002] QSC 80

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Valleyfield P/L & Anor v Primac Ltd & Anor [2002] QSC 080

PARTIES:

VALLEYFIELD PTY LTD ACN 051 841 279 AS TRUSTEE OF THE PARKER UNIT INVESTMENT TRUST

(plaintiff)

v

PRIMAC LTD ACN 010 023 284 (first defendant)

NETAFIM AUSTRALIA PTY LTD ACN 056 229 755

(second defendant)

FILE NO/S:

344/99

DIVISION:

Trial

PROCEEDING:

Case Stated

ORIGINATING COURT:

Supreme Court at Townsville

DELIVERED ON:

25 March 2002

DELIVERED AT:

Townsville

HEARING DATE:

18 February 2002-8 March 2002

JUDGES:

Cullinane J

ORDER:

Judgment given for the first defendant against the plaintiff.

Judgment against the second defendant in the sum of $3,768,276.70.

Consideration to the question of costs adjourned.

Parties to forward to the Court submissions in writing on the issue of costs within fourteen days and parties given liberty to reply within a further seven days.

CATCHWORDS:

CONTRACT - TORTS - NEGLIGENCE-DAMAGES - whether the first defendant undertook to design irrigation system - whether implied term to that effect - whether second defendant negligent in failing to properly investigate soils on farm - whether duty of care owed by second defendant to plaintiff in designing of systems - whether plaintiff failed to mitigate losses by adopting another system to produce germination and growth - measure of damages

COUNSEL:

J Baulch SC, with T Moon, for the plaintiff

P McMurdo QC, with L Holyoak, for the first defendant

S Doyle SC, R Derrington, for the second defendant

SOLICITORS:

Lee Turnbull & Co. for the plaintiff

Barry & Nilsson Lawyers for the first defendant

Clayton Utz, Lawyers for the second defendant

  1. This action which was litigated over a period of three weeks concerns an irrigation system installed on two farms in the Lower Burdekin area on which the Plaintiff carries on small crop farming.
  1. The First Defendant is sued in contract and negligence and the Second Defendant is sued in negligence.
  1. The Plaintiff carries on its farming operations on two farms. One was described in evidence as the home farm (“home farm”) and has been in the Parker family for many years. It was originally a cane farm until the Plaintiff commenced to conduct small farming operations on it growing beans for the first time in the early nineties. The Burstill Road farm (“Burstill Road”) was acquired in 1995 and used to grow beans.
  1. The Plaintiff’s farming operations were conducted by Gary Parker (“Parker”). The evidence satisfies me that the Plaintiff’s farming operations were successful and that the Plaintiff attained better than average crop yields and better than average prices in the market.
  1. The system of irrigation in use on both farms until 1997 was a flood irrigation system. A flood irrigation system has disadvantages, both environmental and economic, when compared to a drip irrigation system. The evidence was that there were two types of drip irrigation systems. The first is a surface drip irrigation system (SDI) and the second is a sub surface drip irrigation system (SSDI). In the first the tapes which carry the water are either on the surface or situated an inch or so below the level of the surface. In the case of the SSDI the emitters are situated some distance below the level of the surface and of the place where the seed is planted. In such a system capillary movement of the water emitted takes the water upwards and laterally and thus carries it to the planted seeds. It is one of the latter systems which is the subject of these proceedings.
  1. Drip irrigation achieves substantial economies in water usage and allows a high degree of control over the application of both water and nutrients. The latter can be applied through the system. A high degree of uniformity of discharge is able to be achieved with resulting economies and increased yields. I heard evidence that drip irrigation greatly facilitates farming operations. The Plaintiff farms in the Burdekin area and is one of only a few bean farmers in that area. It has on occasions grown other crops. There is a larger number of bean farmers in the Bowen area. The evidence was that in 1997 all but one transferred from flood irrigation to surface trickle irrigation.
  1. Generally speaking then, increased yields and savings in costs are to be expected from drip irrigation but particular circumstances in a given year may have the result that no advantage is obtained through the use of drip irrigation. Nonetheless it is clear that such a system provides substantial advantages overall and it is for this reason that farmers in the zone have changed to it. The system with which I am concerned was fully automated.
  1. Because the tapes which carry the water in a SDI system are either on the surface or close to it they are exposed to damage from farm machinery and activities on the farm. This type of irrigation was referred to by at least one of the witnesses as seasonal irrigation. It is necessary to replace tapes after each crop although it is possible that some of the tapes are able to be used for a longer period. The costs of replacing the tapes are substantial but nonetheless farmers are prepared to bear these costs for the advantages which the system provides. One of the advantages of SSDI over SDI is that it is not necessary to replace the tapes or laterals in the same way since they are not exposed to such damage as the surface tapes in SDI systems.

PLAINTIFF’S FARMS

  1. The home farm has an area of 180 acres and Burstill Road has an area of 50 acres.
  1. In 1995 after purchasing Burstill Road the Plaintiff had both farms laser levelled. In the case of Burstill Road an earthmoving contractor moved and stockpiled the topsoil and then put it back across the farm. This resulted in a substantial degree of uniformity of the topsoil but there were still areas of variability and there were some areas where it was obvious to the eye that the sandy subsoil came close to or to the surface.
  1. There was also laser levelling on the home farm. It did not however involve the stockpiling and spreading of topsoil but rather only the levelling overall of the surface. The surface soil on the home farm is much more variable than that on Burstill Road. The soil varies in texture from sandy loam to clay loam and a particular feature of the soils on both farms is the existence of a coarse sandy subsoil extending for a depth of at least 30 metres. This feature and the variability of its location throughout the farms are of significance to the issues in this case.
  1. Ridge, a soil scientist who was called by the Second Defendant conducted investigations into the soil characteristics of the two farms and he describes these and the variations to which I have referred in his reports and in the evidence which he gave.

DEALINGS BETWEEN THE PARTIES.

  1. The First Defendant and the Plaintiff had had dealings for some years. In early 1996 on a visit to the farm by the First Defendant’s manager in the Burdekin area, (Hemming), Parker raised with him the question of drip irrigation. Parker had received reports of substantial increases in the yields of crops of beans in the Bowen district following a change to such a system. Hemming told him a little about what the Bowen farmers were doing and Parker expressed an interest in knowing more about the subject. Hemming told him that he would arrange for a representative of a company which the First Defendant dealt with to visit the farm. Shortly after that Nigel Thompson (“Thompson”) who was the Second Defendant’s manager in North Queensland came to the farm with Hemming. There was some general discussion between them in which the Plaintiff’s farming operations generally were discussed.
  1. It was made clear by both Hemming and Thompson that the Plaintiff could not deal directly with the Second Defendant and that any transaction which eventuated would be between the Plaintiff and the First Defendant.
  1. On a subsequent visit arrangements were made to have the Plaintiff’s sources of water tested. It was found that water from its bores was unsuitable but a subsequent test of water in a creek proved to be suitable. Some further tests were carried out later in the year.
  1. At some time a video was shown to Parker by Thompson. This is Exhibit 1.
  1. There were a number of discussions between Parker and Thompson. These included discussion about the Plaintiff’s farming operations and the farms. They also included a discussion about falls in land levels. At some time after the quality of the water from the creek had been confirmed as suitable, there was a discussion in which Thompson raised the question of SSDI. The advantages of this were explained by Thompson to Parker who until that time assumed that a SDI system was what was under consideration. Parker says, and I accept, that he had made it clear that he had no experience with drip irrigation systems.
  1. According to Parker, by about October the Plaintiff decided it would like to move to drip irrigation. Hemming was aware of what was occurring between Parker and Thompson as he was frequently on the farm and spoke to Parker.
  1. When Parker told Thompson that the Plaintiff wanted to progress the matter, Thompson indicated that he would like to conduct a trial to see how the system might work on the farm.
  1. The circumstances of this trial are also of importance to the issues in this litigation.

THE TRIAL

  1. The trial took place on the Burstill Road farm. I am satisfied that the place where the trial was conducted was chosen because there was water under pressure available to it. The trial was conducted with tapes set at two inches and seven inches below the ground. These broadly equate with a SDI system and a SSDI system. In each case, emitters were placed at .3 and .5 of a meter. That is, there were four alternatives trialled.
  1. Parker gave evidence that the trial lasted only for a couple of days or so but I am satisfied that he is mistaken about that and that it in fact took place over a number of days, probably about a week or thereabouts. It was suggested to Parker in cross-examination that the trial ran for a matter of weeks which he rejected.
  1. There were some difficulties with the trial when it started. Parker says that he went there late on the afternoon of the first day and then on the afternoon of the second day. The system had been pulsed twice for periods of twelve hours at a time and I am satisfied that subsequently during the trial it was pulsed for further periods.
  1. Whilst Parker in evidence said that he had first heard of the emitter spacings some time after the trial, a fax dated 6th November 1996, which was the first day of the trial, contained this information.  When the fax was shown to him in the witness box he acknowledged that he had probably received it.  He says he was not aware of the significance of the location of the emitters in the system at this time. 
  1. He says that when he went to the trial he saw some wet patches of a diameter of about six inches or so and separated from each other. This also seems to be what Thompson says occurred initially when he (Thompson) said he was not happy with the result. He was looking for a linking up of a wetted area between the drippers. According to Thompson this occurred with further pulsing over the following couple of days or so. Parker’s evidence was that Thompson told him on the occasion when the small areas of water appeared that the system was working successfully. Thompson acknowledges that he might have said this to Parker.
  1. According to Thompson Parker was at the site of the trial when Thompson observed the joining up of the wetted areas and told Parker that it was a success. This was some days after the trial commenced. Parker denies having seen this.
  1. According to Parker, after the trial had commenced he told Thompson in Hemming’s presence that the soil where the trial was being conducted was very light soil which could be wet up fairly quickly and easily with flood irrigation. Parker says that he told Thompson that there were areas on the home farm that were much more difficult to sub up with flood irrigation and said that he would like to show these to Thompson.
  1. Parker says that he, Hemming and Thompson drove to two places on the home farm and Thompson got out of the vehicle, walked around the area indicated by Parker and inspected the soil. According to Parker, Thompson then said, “You’ll have no trouble with this soil wetting up”.
  1. Thompson denies that this conversation took place. Parker’s evidence is however supported by Hemming who was called as a witness by the Plaintiff. He says that at the time of the trial Parker took Thompson to parts of the home farm and indicated that they were the worst parts of it and that Thompson got out of the vehicle and inspected the area and told Parker it would not be a problem to wet those areas up. Hemming also says that in the course of the trial, he observed the water appearing in a saucepan like effect instead of being, as he expected, more uniform along the row.
  1. The then state manager of the Second Defendant, one Shaul Gilan gave evidence of attending the farm in the course of the trial on 16th November. He says that Parker was there and that Hemming was also there and that in the course of his visit he had  a conversation with Parker in which Parker gave him certain information about the soils on the farm.   Parker denies that he ever saw Gilan on the farm during the course of the trial and says that he had no conversation with him.  Hemming also says that Gilan was not there during the course of the trial.
  1. Gilan says that in the course of his discussions with Parker he asked Parker why the particular site was chosen for the trial and that Parker told him that it was because of the availability of water on the site and that it was the most difficult area of his farm to sub up. He says that he asked Parker a number of questions about the farm, the farming operations and the soils, and he says that Parker told him that the soils on the farm were quite uniform and that the farms had even top soil of some two or three feet.
  1. Thompson also gave evidence of Gilan’s presence during the trial and of these conversations just referred to. After the trial Gilan completed forms which the Second Defendant uses and which are described as design briefs. These form part of Exhibit 76 and were sent to a designer in Adelaide for the purposes of preparing a plan for the irrigation system.
  1. No further investigations of the soils on the two farms took place prior to the information being sent to the designer or prior to a plan being prepared.
  1. The claim against the Second Defendant is based upon a failure to properly investigate the soils on the farms prior to completing the design of the irrigation system. The Second Defendant relies upon what it says is the information provided by Parker to Gilan that the area of the trial represented the most difficult area on the farm to sub up under flood irrigation and that there was a uniformity of topsoil across the farms.
  1. This information, it is said, made it unnecessary for any further investigations of the structure or the texture of the soil to be undertaken prior to the preparation of a design plan.
  1. The resolution of this conflict involves an assessment of the credibility of the witnesses concerned. My impression of Parker was generally a favourable one. He struck me as a straight forward man. He was undoubtedly incorrect in his recall in a number of areas but was prepared to acknowledge this when shown documentation which was inconsistent with what he remembered. Gilan is a man of considerable experience and qualifications and is plainly an intelligent person who was very astute to advance the Second Defendant’s case wherever possible. He gave evidence of conversations he had with Parker in 1997 after the problems arose in which he says that Parker told him his problems were about the same as they had been with flood irrigation. He said that he challenged Parker about why Parker had told him that the topsoil was uniform throughout when it had become apparent that it was not and says that Parker could not give him any answer. Parker denies these conversations and I accept his denials. I think that the suggested conversation about the extent of the problems is quite implausible given the difficulties I am satisfied Parker was then having. I think that Gilan in this area and in the evidence he gave about the conversations he said he had with Parker at the time of the trial was seeking to boost the Second Defendant’s case.
  1. I have no hesitation in accepting that on the first day of the trial Parker took Thompson to a part of the home farm where he pointed out soils which he told Thompson were the most difficult to sub up. Hemming confirms this and I accept him also as a witness of truth on this subject. It follows that I reject Thompson on this issue.
  1. Whilst I accept that Gilan was on the farm at some time during the trial I do not accept that he met with Parker or that Parker made the statements which Gilan claims he made. It follows that I do not accept the evidence of Thompson in this regard also. Thompson was a witness who gave the impression of being very nervous and greatly discomfited at being in the witness box.
  1. The finding that Parker took Thompson to the home farm where he pointed out areas which he said were the most difficult to sub up and that Thompson after looking at the soil said that there would be no difficulty in wetting this area with drip irrigation goes a long way it seems to me towards a rejection of Gilan and Thompson’s evidence as to the later conversations about the quality of the soil at the trial site and the uniformity of the soils throughout as this would be inconsistent with what Parker had earlier said. However whether this is correct or not I accept Parker’s account that he did not make any such statements of this kind to Gilan. I also accept Parker’s evidence that he told Thompson just the soil at the trial site was light and wet up easily.

THE STEPS WHICH OUGHT TO HAVE BEEN TAKEN BY A REASONABLE DESIGNER.

  1. The only test that was carried out was the trial. I am satisfied from the evidence that both the texture and the structure of the soils are important matters for someone designing a system of this kind to establish in order to identify the level at which the laterals and emitters were to be located and the distances at which the emitters should be placed. The Preparation Guidelines for Pressurised Irrigation Systems refers to the need to obtain soil information of this kind. The relevant publication is set out as an annexure to Exhibit 4B (a report of McGregor & Associates) and was tendered as Exhibit 64. As a minimum requirement it is said a soil survey describing the soil characteristics which are there stipulated should take place. There should be established the depth and texture of each soil layer within the soil profile to at least 1.5 metres. The depth of subsoil, or zone of soil exploited by proposed crop root systems should be assessed. Various other data should be obtained. The principles contained in this publication were common ground.
  1. In cross-examination Ridge said that in his opinion one ought to take tests to establish the texture of the soil which would not be apparent on a visual inspection and that in areas where there is information that the soils are variable it would be necessary when designing an irrigation system to either conduct trials or to obtain relevant information about the structure and texture of the soils in various areas before completing the design. He said that it was obvious to him that the topsoil varied in depth and texture and that in places the coarse sand appeared to come close to the surface. Purcell, an expert on irrigation systems called by the First Defendant, also suggested steps which could readily be taken to obtain the necessary information.
  1. I am satisfied that the Second Defendant did not take adequate steps to inform itself of the texture and structure of the soils on the farms and that in doing so it departed from what could be expected of a reasonably competent designer of a SSDI. I will deal with the question of duty of care a little later.

THE CONTRACT

  1. Following the trial Parker and Thompson decided to proceed with a SSDI system. Parker asked whether the emitters could be set at a level lower than seven inches and as a result and without any further testing the Second Defendant decided to locate the emitters at some nine inches. Parker asked for this to be done because he was concerned that his machinery might penetrate the ground as far as seven inches. The Second Defendant accommodated this request although Thompson told Parker that it was his experience that farmers’ implements did not penetrate as far as they thought and that their belief was based upon some misapprehension of what was observed by them. He said that he and Parker had a bet about this and when the matter was investigated it was found that the penetration was only to the extent of some five inches, something which Parker acknowledges.
  1. A plan was prepared and a copy was provided to Parker. He said that some alterations had to be made to some of the components such as a main passing under a road and there were discussions about changes to the positions of submains. His interest in the layout and alterations to it was related to how the installed system might affect his farming operations The emitters were to be placed at a depth of 9 inches and at intervals of .5 metre, throughout the farms.
  1. The Second Defendant provided quotes to the First Defendant for the supply of components which would be sold by the First Defendant to the Plaintiff for the system.
  1. A quote was prepared by the First Defendant and shown by one Wilson (in the absence of Hemming) to Parker and subsequently by a fax dated 24th January 1997, a quote dated 23rd January 1997 was forwarded to the Plaintiff. 
  1. It was the acceptance on 14th February 1997 of this quote that resulted in the contract.  Although it is pleaded that the contract is partly in writing and partly oral, no evidence of oral terms was led.             
  1. The quotation (Exhibit 2) contains a summary in the following terms:
“SUMMARY
Automation with Motorola (not essential) $ 33,897-00
Filtration Pant & Automation $ 37,252-00
PVC Pipe Fittings $ 8,589-80
PVC Pipe $ 32,697-00
Poly Pipe $ 64,950-00
Burstill Road Farm $ 39,255-00
Blocks 1 to 12 Tape and Associated Fittings $ 125,517-70
Contigency Allocation (only if required) $ 8,000-00
Included in the Package will be Technical advice and supervision by Netafim through the “NETAP” scheme to ensure a high
Standard of installation TOTAL $350,158-50”
  1. There then follows a number of pages of components whose description in most cases includes a particular specification.

WHAT DID THE FIRST DEFENDANT UNDERTAKE UNDER THE CONTRACT?

  1. The Plaintiff does not allege that the parties contracted upon the basis that there was a warranty by the First Defendant of an existing design. Rather the case is that it was an express or implied term that the First Defendant would design a SSDI system. This is said to be based upon the terms of the contract viewed in the light of the common understanding of the parties of the Netap Scheme and the surrounding circumstances generally.
  1. As will be obvious the contract does not expressly impose the obligation which the Plaintiff alleges. Because the Defendant says that the language is unequivocal and that what the First Defendant is obliged to provide through the Second Defendant is technical advice and supervision under the scheme for a particular purpose namely to ensure a high standard of installation it is not necessary or permissible to have regard to the surrounding circumstances for the purposes of construing the contract.
  1. I think that the relevant principles (summarised by Mason J in Codelfa Construction Pty Ltd v. State Rail Authority NSW (1982) 149 CLR 337) would permit reference to the surrounding circumstances for the purposes of construing what is meant by the term “Package” and the reference to “technical advice and supervision” to be supplied pursuant to the “Netap Scheme”.
  1. It is accepted that only circumstances which were known to both parties can be had regard to for the purposes of construing the terms used or considering whether a term should be implied to the effect contended for by the Plaintiff.
  1. There is no doubt that the parties proceeded upon the basis that a design would be prepared by the Second Defendant. Both the goods to be supplied and the services in so far as they related to the supervision of installation required a design. The Second Defendant had been requested by the First Defendant to investigate the provision of a drip irrigation system on the Plaintiff’s farms and it was known to the First Defendant that a plan was being prepared. Indeed the evidence is clear that as at the date of the contract both parties regarded the work of design as being for all intents and purposes complete. There were some changes made after this time but I do not think that this is inconsistent with the understanding that both parties acknowledged that they had of design as at the date of the contract. This evidence came from both Parker and Hemming.
  1. Both Parker and Wilson gave evidence of their understanding of the Netap scheme. In the case of Parker he said firstly at page 53:

“Yes, have you heard of Netap scheme that’s mentioned on that page prior to seeing that quote?--  Yeah.  The Netap system was explained to me by Nigel Thompson in – in the latter part of the year.  My understanding of it was that it was a – a service, I suppose, that – that Netafim provided.  From memory, it was to cost me around about $8,000.  He and I agreed to it.  It was a – how can I put it?  It was – it was for Netafim to oversee the job, the installation of the project, the overseeing of all the contractors, the – any – any faults that occurred in the system afterwards, they would be back to repair them, fix them.  It was the commissioning of the job the system.  It was – everything – everything to ensure that the job was installed properly, worked perfectly and also they would give me some education with it.  I told them from the start that I understand nothing about it and then – particular with the computerisation side of it.   I told them I’d need education in that area and this Netap system was to cover all of that".

  1. And subsequently at page 102:

“The Netap, that’s N-E-T-A-P, scheme you mentioned, I wanted to ask you about that.  On your understanding, that was in the nature of some after sales service, wasn’t it?—Yes, plus – plus the organising of installation and everything as the job went along".

  1. Wilson who prepared the quote was asked about a brochure dealing with the scheme (Exhibit 43) when he was re-examined. He said:

“Do you recall that you told me earlier this morning that you recognised that document as one that you’d had in the office at Ayr?--  Yes.

And you said in response to a question of mine about the description in the second paragraph of the front page that that was why you and Mr Parker chose to proceed with ----?--  That’s correct.

Now, does that assist you to recollect when you first saw the brochure?--  I – I can’t say exactly when I saw the brochure, but I was well aware of the Netap system before we quoted.  And – and whether that information came from the brochure or – or through conversations with Netafim, I – I can’t recall, but – but I was well aware of – of Netap.

All right?--  I just can’t recall whether I got that information from this brochure or when I got it from the brochure.

In any event, was the information you had, identical with the information that’s contained in that second paragraph of the document that -----

Following an objection the evidence went on:

MR BAULCH:   Do you recall the question now?--  Oh, might have to get it again, thanks.

I asked you whether or not the – the understanding you had of the Netap system was identical with that described in the brochure?--  Yes.

And – and was that so at the time that you – you say you and Mr Parker made the choice to proceed with the ----?--  That’s correct.

----- with Netafim?--  Yes".

  1. The second paragraph of the brochure referred to the design of drip irrigation systems. The Plaintiff placed reliance upon this passage but it is not at all clear what the effect of the evidence given here was and I think a reading of the evidence of Wilson as a whole does not suggest that the parties had specifically discussed or adverted to the component of the scheme concerned with design.
  1. Moreover it is clear from further evidence that this brochure was not in existence at the time. The effect of the evidence was that another brochure, (Exhibit 71), was in use so far as the Netap scheme was concerned.
  1. A reading of both brochures makes it clear that the scheme does not provide for a fixed and invariable package of services such that it could be said that any reference to it in the contract must incorporate those services. The scheme is described as modular and involves a number of options which a customer can choose to suit his circumstances. In some respects the services provided could not have been applicable to the Plaintiff’s case.
  1. The First Defendant says that to construe the contract so as to impose an obligation to design is not only not justified by its language but would be at odds with the Second Defendant’s obligation to supply goods meeting a particular specification. It is said that it would also be inconsistent with what an examination of the extrinsic evidence reveals, namely that the parties understood that the Second Defendant had effectively completed a design. It is also said that the evidence on the subject of the parties’ knowledge of the Netap scheme would not permit any extension of what the First Defendant undertook to provide through the Second Defendant beyond supervision of installation.
  1. Upon the First Defendant’s case the Plaintiff received the benefit of the design gratuitously from the Second Defendant, something which might be thought to be rather odd given the importance of a design of the system which the Plaintiff was acquiring and on which ultimately it spent something like $650,000.
  1. Nonetheless I think that the First Defendant is correct and that neither the express terms of the contract nor the proper construction of those terms viewed in the light of the relevant background justifies a finding that the Defendant undertook the design of the system nor in my view is it possible to imply a term to that effect.
  1. The Plaintiff’s claim against the First Defendant in contract must therefore fail.
  1. Similarly the claim in tort must fail as the First Defendant did not undertake the design of the system.

DUTY OF CARE

  1. The Second Defendant denies that it owed any duty of care to the Plaintiff. The claim is one for economic loss. The relevant principles to be applied are unclear in the light of the judgment of the High Court in Perre v Apand Pty. Ltd. (1999) CLR 180 with the different approaches of the members of the High Court to this question.  There are a number of features of the case which in my view justify the conclusion that a duty of care was owed by the Second Defendant to the Plaintiff.  These are:

(a)he proximity of the parties.  The relationship between the Plaintiff and the Second Defendant in the circumstances of this case was a close one almost approximating that which exists between contracting parties.  See Junior Books Ltd. –v- Veitchi (1983) 1 A.C. 520.

(b)The Plaintiff clearly relied upon the Second Defendant’s skill and experience in the preparation of a design of the system.  Parker gave evidence that he told Thompson this but it would have been obvious in any case in my view.

(c)It would have been apparent to the Second Defendant that a failure to take care on its part in the carrying out of the necessary investigations in the course of preparing a design could cause harm to the Plaintiff.

(d)The imposition of a duty of care in these circumstances would not impose indeterminate liability on the Second Defendant.

(e)The Plaintiff was vulnerable to loss from the conduct of the Second Defendant.  The Second Defendant substantially based its argument against the existence of a duty of care on the grounds of non-vulnerability.   It was said that the Plaintiff could have protected itself against the risk of loss by obtaining contractual warranties.  The Second Defendant refused to contract with the Plaintiff making it clear from the outset that this was not possible.  I do not think that the suggestion of the Defendant that the Plaintiff a farming company might have obtained a warranty in relation to the Second Defendant’s design from the First Defendant is realistic in the circumstances of the present case.  However assuming such a possibility I do not think that it should stand in the way of a finding that the Second Defendant was under a duty of care to the Plaintiff.

(f)There are no policy reasons for denying recovery in the circumstances of the present case.

  1. In my view then the Second Defendant was under a duty of care to the Plaintiff.

PROBLEMS

  1. Rain at the time of the early plantings of beans in 1997 provided a good germination of the seeds. However as the plants developed it became noticeable to Parker that these plants were not growing properly. Subsequently it became apparent that germination was not occurring in a significant part of the area planted. I accept the evidence that the effect on the beans overall was “patchy”. There were to be two plantings of beans followed by a crop of watermelons. Parker has prepared plans which purport to show the extent of the affected areas at different times during the year. This is shown in a very general way and I do not think it is possible to treat what the plans depict as accurate. Nonetheless I am satisfied that there were areas widely spread throughout the farm where germination did not occur and where plants that had germinated did not grow properly. Hemming gave evidence of visiting the farm and noticing the poor condition of the 1997 crop.

“No, Now, after the system was installed, you visited the property again?—Yes.

How did that come about, were you asked to go there or did you just – were you making a routine visit there?--  Just a routine visit on regular occasions.

All right.  And did you have an opportunity in 1997 to see the – the crops that were growing there?--  Yes.

And what can you say about them?--  Terrible.

Why were they terrible?--  Well, they – they looked yellow.  They weren’t growing, they weren’t germinating properly.  They were all over the place in the paddock.

HIS HONOUR:  What do you mean “all over the place”?--  Well, there was only – there was only bean plants – say up one row, for example, was only just coming up here and there.  There were a lot of spaces, a lot of misses.  You could see from that, from the eye, that, you know, obviously there was a problem.

MR BAULCH:  How did they – those crops compare with crops you had seen in previous years on the Parkers’ property?--  Well, they were terrible crops, simple as that.  I mean -----

Sorry?—They were terrible crops.

Yes.  But how did they compare with the crops you’d seen in previous years on the Parkers’ property?--  Well, previous years, they were better crops than those.  I mean, you just couldn’t grow beans the way that it was happening.

Yes?--  Disastrous that’s the word I could use".

  1. Wilson also gave evidence of this:-

“All right.  How would you describe the crops that appeared in 1997?  --  Oh, they were – it was devastating.  There – there just wasn’t – the crop establishment was extremely poor over the – over the whole firm.

How – how did that manifest itself, the crop establishment? It was obvious that the – the seed wasn’t getting moisture which it requires to germinate.

All right.  So what would you see when you looked into the – the fields, were there -----?   -- Well, where there was no moisture, you would see dirt.  Where there was some moisture you would see erratic germination.

All right.  And what about the plants that were growing, what did they look like?--  Um, they were erratic, they were poor.  Um, that’s the best way to describe it.

All right?--  They weren’t healthy". 

  1. For the Plaintiff evidence about the defects in the system was given by Gavin McGregor an agronomist who has qualifications and experience in the field of irrigation. However it is clear that in preparing his report Exhibit 4B he did so under some misapprehension of what had occurred when the land had been levelled and also some misunderstanding of the principles affecting the movement of water in soils. On his initial assumptions he acknowledged that the same outcome would have occurred throughout the farm and accepts that this did not occur.
  1. The result was as I have said “patchy” and in some areas good yields were achieved. In some areas of the farm the Plaintiff did not plant the second bean crop which it had intended to plant.
  1. The evidence as a whole satisfies me that the primary problem with the system is that in many areas because of the variability of the subsoil of coarse river sand the emitters were placed at too low a depth resulting in the water being drained down through the sand. In other areas the system performed well. A proper assessment of the soils would have revealed a variability of the subsoil and would have resulted in the emitters being placed at different levels in those areas where the problems occurred. Capillary movement of the water upwards to the seeds did not occur in many places because this was not done. I am satisfied that as well as problems with germination there were also problems with the growth of plants where the seeds had germinated. The evidence of lack of growth in areas where germination had taken place through rainfall bears this out. I am also satisfied that a secondary problem was that the emitters were placed too far apart. I accept what Purcell says on this subject namely that the emitters should (at least in some areas and perhaps throughout) have been placed closer than .5 of a metre to enable enough water to be delivered by a lateral spread and upward movement so as to enable the water to be distributed through the relevant area better. Purcell, in suggesting a remedy for the difficulties which had arisen proposes that the emitters be located at appropriate depths and that they be placed .3 of a metre apart. He would prefer .2 of a metre but says that this would involve a much greater expenditure as it would require the removal of existing infrastructure and the installation of new pumps etc. For this reason he suggests .3 of a metre as an appropriate interval and would alter the flow per hour so as to result on a slightly higher flow of water through the system. I will return to his proposal later in this judgment.
  1. The result then of the Second Defendant’s negligence was that the SSDI system as it was installed was not able to provide germination of seeds throughout the farm as the system was intended to and did not properly promote the growth of the plants which emerged from germinated seeds.

DAMAGES

  1. The measure of damages in tort is that sum which would put the Plaintiff in the position it would have been in if the tort had not been committed. Here the position, as I take it to be, is that the Plaintiff would but for the negligence of the Second Defendant have had a properly designed SSDI system in place.
  1. Although it placed no evidence before the court on this subject the Second Defendant in submissions contended that there was no evidence to suggest that such a system could have been put in place and, if so, no evidence of the cost of it. The Second Defendant did not attempt to cross-examine any of the witnesses on this subject. Whilst it is understandable that the Second Defendant which designs such systems might have taken this course, it, of all the parties, was in the best position to have placed evidence on the subject before the court.
  1. No witness expressed the view that a SSDI system could not have been satisfactorily designed for the farm. Purcell’s evidence plainly assumes this could be done although he does not suggest that the current system now be altered to make it sufficient in itself. The reasons for this have been touched on a little earlier. Nor is there anything to suggest that such a system could not have been designed and installed for a similar cost.
  1. Although there was a claim for damages said to be the consequence of a delay in installation in 1997 the Plaintiff acknowledges that this is a claim which lies only against the First Defendant and not against the Second Defendant. The evidence on this subject is somewhat unsatisfactory but I think that it supports the conclusion that installation was not properly supervised. The installation itself was the Plaintiff’s responsibility whilst the First Defendant was responsible for its supervision.

LOSS OF INCOME

  1. There is a claim for loss of income in the years 1997 and 1998. The Plaintiff intended to grow two crops of beans in 1997 followed by a crop of watermelons. This was intended also in 1998. As a result of the problems which I have described earlier I am satisfied that the Plaintiff suffered significant losses of income in 1997 and 1998. Quantifying them is not an easy task. I heard evidence on the subject from MacGregor on behalf of the Plaintiff and McDougall an agronomist who gave evidence on the subject on behalf of the Second Defendant. The methodology of each was similar but there were different assumptions made and it is necessary to make some findings about what is likely to have occurred if the system functioned as it ought to have in the course of the 1997 farming operations.

1997 - BEANS

  1. This involves identifying what the yield per acre is likely to have been on the areas planted or which would have been planted but for the problems which arose with the system, establishing the lost yield, and the income which would have been obtained less the costs not incurred. The prices for beans sold in the relevant markets are established as are the relevant costs. As part of this exercise it will be necessary to reach some conclusion as to the period during which the Plaintiff would have carried on its bean growing operations during the year. However, as the delays in installing the system in fact occurred, the date when planting commenced has to be taken as the start of the 1997 season. Any losses flowing from such delays are not the Second Defendant’s responsibility.
  1. The two major areas of difference between McGregor and McDougall in relation to these matters (and a somewhat similar dispute exists in relation to 1998) concern the yield per acre which might have been expected and the duration of the planting season.
  1. The Plaintiff could not plant some areas because of the problems with the system and in other areas obtained a lesser yield.
  1. MacGregor has considerable experience as an agronomist in the dry tropics region and has a good knowledge of all aspects of bean growing operations in this area. His final report is based upon the records of the Plaintiff and his discussions with those responsible for its farming operations. There remain some differences between the records and MacGregor’s figures as to areas planted but it seems to me in the light of what is not an entirely satisfactory state of the evidence that the figures which he has taken are the most reliable which the court has before it.
  1. Whereas McGregor has adopted an assumed yield of 325 cartons per acre in 1997, McDougall has adopted a range of yields with 257 cartons per acre at the top of the range. One of the problems in arriving at an appropriate figure for yield is that it is difficult if not impossible to compare one year with another or even one part of the same year with another part. McGregor has arrived at 325 cartons per acre by reference to a number of factors which are set out in Exhibit 4C at page 5. The Plaintiff was, according to the evidence of MacGregor and others (which evidence I accept), a very good farmer and would have been capable of obtaining the full benefit of increased yields which the SSDI system if properly functioning should permit. Even with all of the problems of the system in 1997 the Plaintiff averaged overall about 229 cartons per acre, a substantial increase over the previous year’s yield of 186 cartons per acre with flood irrigation.
  1. A DPI publication published in 1998 suggested that 700 cartons per hectare of beans is obtainable with drip irrigation in the dry tropics. The basis of this opinion did not appear in the publication nor in evidence and some criticism of it was advanced. However in my view it is of some assistance.
  1. Meurant, a former senior officer of the DPI in Bowen and someone who has considerable experience of bean growing in the area gave evidence that growers in Bowen who changed to drip from flood irrigation obtained increases of up to 20%. Meurant was called by the Second Defendant. McDougall adopted Meurant’s opinion based on the experience of the Bowen growers.
  1. I think there is good reason to expect that the Plaintiff would have obtained a substantial increase in production with a properly functioning SSDI system and I think that that increase would have reflected a yield greater than that assumed by McDougall but somewhat less than that assumed by MacGregor. I assess the likely yield had the system functioned properly as being about 300 cartons per acre, and adopt this figure.
  1. The second area of dispute is that McGregor has adopted a planting schedule which would have commenced on 1 April 1997. Because of delays in establishing the system, for which the Second Defendant is not responsible, planting did not commence until 28 April.
  1. McGregor assumed a 20 week planting period. McDougall assumed a 24 week planting period. The different starting dates produce different outcomes. Whilst McDougall’s figure is more consistent with the Plaintiff’s historical performance it was not suggested to either MacGregor or Parker that a 20 week planting period could not have been achieved. The Plaintiff intended to grow three crops in 1997 and should have had an automated drip irrigation system able to facilitate and expedite planting and growing. As the season was late in starting because of delays, the Plaintiff might have been expected to try to make up for lost time. I adopt a yield of 300 cartons to the acre and a 20 week planting period.
  1. The First Defendant has placed figures before the Court showing that, on these assumptions as to yield and planting, the loss would be about $350,000 which sum I allow.

1997 - BEAN SEEDS

  1. There is a claim for loss of bean seed which the Plaintiff says it would have planted in 1997. There was initially some confusion so far as this claim is concerned with 1998 when the bean seed crop was lost because of rain.
  1. The evidence of MacGregor was that the crop failed because of the inability of the SSDI to irrigate the lands properly. It is contended on behalf of the Second Defendant that there is no direct evidence of this but Parker swore that he had read MacGregor’s reports and that they accurately reflected what had occurred and what he had told MacGregor. MacGregor was first on the farm in 1998.
  1. Some challenge is advanced to this claim on the basis that nearby bays produced good yields of beans. I have already referred to the patchy nature of the problem. Meurant in his report (Exhibit 56) questioned why such a large quantity of seed is required and suggested other courses open to obtain bean seed. However I am satisfied that the Plaintiff has lost income as a result of the failure of the system and a consequent inability to grow the bean seed it intended to. The Second Defendant sought to limit the Plaintiff’s entitlement to costs of $46,375 incurred in the following year on the basis of an opinion of McDougall that bean seed would not last more than 2 years. However this is contrary to Meurant’s opinion which I accept. I allow the amount claimed of $80,000 under this head.

   1997 - WATERMELONS

  1. There is a claim for loss of income from a watermelon crop which the Plaintiff intended to plant after the second bean harvest that year. The loss assessed by MacGregor is $223,675. A crop was in fact planted but on a much reduced area (21.86 hectares compared to the planned 40.5 hectares). The SSDI irrigation system was unable to provide sufficient soil moisture.
  1. Again there is a dispute about yields. MacGregor assumes that 18 tonnes to the acre would have been achieved. Meurant suggested it would be 8 tonnes. The crop is picked in two harvests. Meurant expressed the opinion that watermelon planted in accordance with the Plaintiff’s practice of planting seeds directly into the soil instead of planting speedlings meant that the plants were at a greater risk of disease particularly when the planting took place on soils from which beans had just been harvested. He thought 18 tonnes per acre was unlikely to be obtained from a crop planted from seeds but might be obtained from speedlings. MacGregor gave evidence of returns obtained from a crop planted on the farm in 2001. This is Exhibit 35. Very much larger yields than those assumed by MacGregor were obtained in the areas the subject of that report. I find this evidence of assistance whilst recognising that it cannot be applied directly to an earlier year.
  1. It seems the Plaintiff adopted the practice of planting two rows of seeds per crop which is what its planting equipment was suited for.
  1. MacGregor’s approach was based upon an assumption that the watermelons would be planted in the week ending 17 August. However it is obvious that with the planting of beans delayed until 28 April and continuing at least 20 weeks, it would not have been possible to have achieved this. After that time rain may have had an adverse impact on some crops and the later in the year the crops are in the field the greater the risk of disease and of damage from high temperatures. It may be that some of the plantings MacGregor assumes in his exercise would not, because of the risks involved, have taken place. In addition, the evidence shows that whilst prices rose in December they were lower in January when some of the crops would have been sold. There is reason to believe that some of the later crop may not have been harvestable because of adverse weather conditions.
  1. Nonetheless I think the Plaintiff has suffered a substantial loss in this regard and I think that the yield which MacGregor has assumed is not unrealistic. I would however discount the amount claimed for the risks which I have just referred to with the consequent impact on yield and income if such risks were realised.. I have discounted the amount claimed of $223,000 (which assumed a start on 1st April 1997) by some 30% to make allowance for these risks and I allow the sum of $156,000 for loss of watermelons in 1997.
  1. The total loss of income for 1997 is $586,000 on which I allow interest for 4.5 years at 5 per cent producing a sum of $131,850.

LOSS OF INCOME IN 1998

BEANS

  1. The claim for loss of income from bean growing in 1998 is greater than in 1997. The Defendants suggested that this would on its face be surprising. Excess rain meant that 1998 was a much more difficult growing year than 1997. It was also suggested that since the Plaintiff’s irrigation system on the Plaintiff’s case had improved since the previous year, losses should be less than the previous year. On the other hand it is to be noted that prices were substantially higher in 1998. For example, the average weighted monthly return for the four markets serviced by the Plaintiff in July 1997 was $11.79 per carton compared to $26.63 per carton in 1998. Other months reflected significant, although somewhat lesser, increases. In addition it would seem to be only fairly late in the season that the Plaintiff modified the irrigation system so that it took its present form. Throughout the season prior to that the evidence suggests significant problems with germination and growth.
  1. I propose to adopt a yield of 200 cartons per acre. This allows a 1/3 discount from 1997 for the difficulties of the 1998 year which I think it is a reasonable allowance to make. I adopt a similar planting period for 1997.
  1. MacGregor’s assessment involved two errors. Firstly he had a planting schedule which would have had a second crop being planted before the first crop was harvested in a number of areas on the farm. His report also assumed that sales would have taken place when it is known that they did not. I have since received written submissions from the parties addressing these matters. On the Plaintiff’s supplementary submissions there would be a relatively small reduction of about $65,000 on what had been assessed by MacGregor reducing the claim from $984,144 to $919,426 reflecting variations in the market prices at the relevant dates. This however assumes a yield of 268 cartons per acre. On my calculations a yield of 200 cartons per acre applied to the actual period of harvest and sale would result in no loss for the month of July but an increased loss in September. The total loss for 1995 would be some $649,000 which I allow.
  1. There is no claim for loss of bean seed in 1998.
  1. WATERMELONS 1998
  1. The Plaintiff intended to plant about 44 hectares to watermelons in 1998 but in fact planted about 28 hectares.
  1. So far as the claim for loss of watermelons in 1998 is concerned, the effect of correcting the errors is that the planting of watermelons would be postponed and the harvest period would be correspondingly later. It is likely that the harvest would have been affected by rain in late October and that after late November no further harvest would have occurred. Whilst Meurant thought that after the October rain no further harvest would have been possible, I note that the Plaintiff did in fact sell watermelons in November.
  1. The result of the altered calculation made by the Plaintiff is that the claim is reduced from some $282,000-00 to about $90,000-00.
  1. The Second Defendant contended that on the evidence it would not have been possible to make a profit from the growing of watermelons in 1998. However this assumed a much smaller area planted to watermelons than I accept. I adopt the Plaintiff’s assumed yields for 1998 which makes a reasonable allowance for the impact of wet weather.
  1. I make a further allowance for the increased risk of disease and adopt a figure of $75,000.
  1. The total loss then for 1998 is $724,000. I allow interest at 5 per cent for 3.5 years producing a figure of $126,700.

ADDITIONAL EXPENSES INCURRED BY THE PLAINTIFF FOR SOIL AMENDMENTS AND  IN THE USE OF THE SDI SYSTEM WHICH WOULD NOT HAVE BEEN INCURRED WITH THE SSDI SYSTEM.

  1. In 1997 the Plaintiff expended some $47,913.18 on soil amendments. These were steps taken at the suggestion of the Second Defendant to attempt to break up the soil to make it easier to obtain the benefit of the irrigation system.
  1. There is a claim by the Plaintiff for the additional costs in 1998 associated with taking the steps that are outlined under the heading “MITIGATION”. These amount in that year to some $378,753.09.
  1. In 1999 the extra costs associated with the SDI was some $349,744.34, in 2000 some $361,838 and in 2001 some $206,139.
  1. These expenditures have all been proved but the Defendants claim that the Plaintiff should not be entitled to recover these as damages for reasons I will now turn to.

MITIGATION

  1. The Defendants claim that the Plaintiff should not recover its loss of income in 1998 and expenses incurred in maintaining an SDI in place during and since the 1998 season because, according to the Defendants, the Plaintiff has failed to mitigate its loss. Instead it should recover the costs of taking the steps which it is suggested by the Defendants it ought to have taken in mitigation no later than 1998.
  1. It is necessary to outline what has occurred since the problems became apparent following the installation in 1997. The Plaintiff had the responsibility of installing the system although the First Defendant undertook through the Second Defendant to supervise its installation. I have already referred to the problems which arose.
  1. Following Parker’s complaints, Thompson and Gilan came to the farm. In the course of discussions in 1997 and in early 1998 a number of steps were suggested. Initially Gilan suggested that gypsum be used to break up the soils. This was done and is the subject of a claim for the costs incurred.
  1. I am satisfied that Parker made it clear he wanted the system which had been installed to work and I am satisfied that the Second Defendant’s representatives assured him that they were attempting to do so with Gilan in particular assuring the Parkers that the problem would be fixed.
  1. A number of suggestions were raised in the course of discussions between the Second Defendant’s representatives and Parker. It was suggested he should restore his flood irrigation system. Parker says that this was impossible. It had been damaged when the SSDI was installed and some of the pipes had been broken and some of the broken pipes were at the same level as components of the SSDI. According to Parker there was not enough water available to use that system again as the flood pumps had been disconnected. Parker had initially wanted to keep this system in place but was assured by Thompson that he would have no need for it.
  1. Suggestions were made about a localised flood system or a mobile surface system. Other suggestions included a travelling irrigator and a portable irrigation system. It is the latter which the Defendants particularly rely upon. Each called an expert to give evidence about how such a system would work with the SSDI and the effectiveness of the combined systems.
  1. As I have said Parker was anxious for the SSDI for which the Plaintiff had paid a lot of money to function and saw difficulties with each of the suggested courses. Some of these could only have been temporary arrangements. Others had to be used in an improvised way with the SSDI. None of them gave him the self-sufficient permanent drip irrigation system throughout the farm for which the Plaintiff had paid and from which it was seeking to obtain efficiencies and increased production.
  1. Apart from the flood system each of the suggested courses involved handling and movement of components around the farm with increased labour costs. A video of the portable sprinkler system was shown to Parker but the evidence does not suggest that any of the suggested courses were the subject of any detailed explanation or analysis in terms of the pros and cons and of the increased cost involved.
  1. As I have said Gilan repeatedly promised the Parkers during 1997 that the problem would be fixed. In early 1998 he was discussing with them the possibility of conducting further tests with a view to rectifying the problem with the SSDI.
  1. Parker gave evidence of a meeting in early 1998 at which Badger, an officer of the First Defendant was present:

“It was Mr Badger then – at the same meeting that suggested – because I’d told him that my original plan was to put a surface system in, the same as the guys in Bowen were doing.  Now, he said to us, well, could we put a surface system above the sub-surface system and work with it, with a surface system?”  At that time it seemed ridiculous, but when I thought about it for another day or so it become – it become a – a more sensible idea.  There was no-one basically in the Burdekin that could design – that I knew of – that could design a surface system.  Primac never ever had - never had the people with the expertise to do it, but I knew there was a fellow at IAMA who was into that sort of business and I approached him and asked him if he would design a system".

  1. It was suggested that Badger was a financial officer of the First Defendant and as such was not someone who the Plaintiff could have relied upon for any advice about irrigation matters. On the other hand it seems from Exhibit 86B (Gilan’s diary) that Badger was being used by the Second Defendant to discuss propositions with Parker following the deterioration of the relationship between Parker and Gilan. The First Defendant offered to provide finance to the Plaintiff to acquire an SDI to be used in the way suggested by Badger.
  1. This system allowed the Plaintiff to use trickle irrigation by a combination of SDI and the SSDI. Parker arranged for IAMA to design a SDI to be used in conjunction with the SSDI. According to Parker it worked reasonably well early when there was subsoil moisture but after a couple of months proved inadequate. By this time Parker was applying fertiliser manually. About half way through the season it became apparent to Parker that the problem was that water was draining down through the sandy sub soil in many places on the farm and that the areas requiring water for germination and growth were not getting enough for these purposes. As a result he disconnected the SSDI system and put all of the water through the SDI system. This improved the situation but there were still problems with germination and growth. He made a further adjustment to the system by removing two inch valves from the SDI and putting one four inch valve directly into the surface tape. According to Parker this produced the best result that the Plaintiff had achieved until that time and the Plaintiff has continued to use it since. The system in use then involves the SSDI infrastructure to deliver water through an SDI modified in the way just described. For a short period in late 1998 the SSDI was used because the SDI system had been attacked by vermin.
  1. Parker’s evidence is that the system still has problems but no claim was advanced for losses of income in 1999, 2000 and 2001.
  1. There are however, substantial claims made for annual expenses, the greatest of which in each year is the cost of surface tape and the extra labour associated with the system..
  1. The use of SDI is overwhelmingly the preferred system of bean farmers in the dry tropics. As Meurant explained it farmers are prepared to meet these substantial annual costs in order to obtain the advantages of ease of handling, economies and increased production.
  1. It was contended that the Plaintiff has acted unreasonably in failing to take any of the courses suggested in evidence. Primarily the use of portable sprinklers was relied upon. The witnesses who gave evidence for the Defendants on this subject were experts with considerable experience in this field.
  1. Mr Chris Thompson (“C. Thompson”) who gave evidence for the Second Defendant thought that the use of the portable sprinkler system would, without doubt, provide germination which he was confident was the only difficulty with the SSDI system. The SSDI would be able to provide the necessary water for the growth of the plants. I am satisfied from the evidence that the lack of germination was not the only problem with the system although it was the main problem.  It seems that portable sprinkler systems carry a risk of disease when used on plants which have germinated and emerged.
  1. Whilst recognising the expertise of C. Thompson I thought that in some respects his evidence lacked objectivity and he was inclined to argue the Second Defendant’s case from the witness box wherever the opportunity presented itself to do so.
  1. Purcell who was called by the First Defendant adopted a more cautious approach. He thought that the portable sprinkler system might have to be accompanied by changes to the emitter spacings in the SSDI and some change to the flow rate. This, it was hoped, would be necessary only in the more difficult areas but might be required across the farm. He proposed a three stage exercise in which there would initially be a trial of a portable sprinkler system to provide germination and if this did not overcome the problem, it would be necessary then to change the SSDI system in the way just described, at least in some of the more difficult areas, and if the desired result was not achieved, the SSDI system would have to be changed across the farm, with a reduction of the need for the portable sprinkler system. Each stage would take one year.
  1. It was not suggested that anyone advised the Plaintiff to take this course in 1997 or 1998 or until Purcell’s report.
  1. I do not think that it would be reasonable to expect the Plaintiff to conduct what would be in effect an experiment over some two or three years which would involve the risk of losing part of its crop with consequent financial loss. The farm has a gross income of $1.5 million per year.
  1. The Plaintiff found itself in a difficult situation in 1997 when the system that it had paid for failed with serious consequences to its farming operations. In the following year it attempted to overcome the problems with an SDI system in conjunction with the SSDI system but this was not successful. It then attempted to use the SDI system alone (this has been referred to as the Furlong system) but with only limited success. It then altered the SDI system and obtained the most satisfactory result it had in the two years since the problems arose and it has continued to use that system since albeit, on the Plaintiff’s case, with some difficulties. I do not think that the Plaintiff acted unreasonably in persisting with this system in the last three years given the circumstances.
  1. Somewhat different considerations might apply so far as the future is concerned and I will deal with these a little later.
  1. It follows that the expenses incurred in taking these steps to avoid the losses flowing from the failure of the system and in its attempts to obtain the benefits of a trickle irrigation system are recoverable These are:
  1.  

1997.  Soil amendment costs

$47,913.18

 

Interest at 5 per cent for 4.5 years

$ 10,780.46

 

Total

$58,693.65

  1.  

1998.  Additional costs as particularised in Exhibit 4G (less Netafim Tape Layers 1997 and Marking Out Equipment 1997)

$378,753.09

 

Interest at 5 per cent for 3.5 years

$ 66,281.78

  1.  

1999. Additional costs (as taken from Exhibit 4G but with the deletion of some of the items relating to a warranty claim)

$349,744.34

 

Interest at 5 per cent for 2.5 years

$43,718.00

  1.  

2000. Additional costs (as taken from Exhibit 4G but (deleting costs for insect treatment)

$361,838.80

 

Interest at 5 per cent for 1.5 years

$27,137.91

  1.  

2001.  Additional costs (as taken from Exhibit 4G but deleting costs for insect treatment)

$213,559.15

 

Total

$1,558,420,40

THE FUTURE

  1. The evidence before the court raises a number of options to place the Plaintiff as best can be done in the position it would have been in if the system had been properly designed and the Plaintiff had had an efficient system. None of these options involve either the installation of a new SSDI system or the rectification of the existing one.
  1. As I have said, C. Thompson’s opinion was that a portable sprinkler system with the existing SSDI system would be sufficient. In evidence he acknowledged that his original estimates of the cost of such a sprinkler system were too low. Making some allowance for increase in costs since the time of his estimate this would seem to involve a capital expenditure of about $100,000 and annual expenses of some $10,200.
  1. I have already indicated that I do not accept that this system would provide the answer to the Plaintiff’s problems. I prefer the approach of Purcell but I do not think that it is reasonable to expect the Plaintiff to run the risks to its farming operations that I have mentioned for the length of time that the suggested trials are carried out. Purcell acknowledges that the alterations to the SSDI system may have to be carried out throughout the whole farm. The system would require the alteration of some blocks on the farm.
  1. The use of a portable sprinkler system in conjunction with the altered SSDI system would, I am satisfied from the evidence of Purcell, give the Plaintiff a satisfactory system to grow its crops and its immediate installation, whilst not being what Purcell suggested, would allow it to continue its operations with a secure and reliable system to obtain germination and growth. It involves combining two different systems and does not give the Plaintiff what it was to obtain but as I have said, I am satisfied it would irrigate the farm satisfactorily. The costs of altering the system would seem to be, on Purcell’s evidence, about $525,000 at the present time. This includes the cost of restoring some of the components of the SSDI which the Plaintiff removed. I do not think the Plaintiff acted unreasonably in doing so. In addition there would be a capital outlay of installing the portable sprinkler system of $100,000 together with an annual cost of $10,200 which would represent an extra cost during the expected life of the SSDI which would, I think, not be less than 15 years. The present value of an annual expenditure over the balance of 15 years applying the 5 per cent table is $81,675.
  1. The third option is for the Plaintiff to continue using the SDI it is currently using. The annual costs for the last three years (which are costs which would not have been incurred with the SSDI system in place) have averaged some $308,000. The system gives the Plaintiff the benefit of a drip irrigation system of the kind which is in general use throughout the area for the cultivation of beans but does not, according to Parker, function as well as a properly designed and installed system would. Nonetheless the Plaintiff does not assert any ongoing loss of income or loss for the last three years whilst using this system. The present value of the annual expenditures over the next 10 years is some $2,430,000. There would, it seems to me, in any assessment of damages on this basis have to be a substantial discount of this sum for a number of reasons. Firstly some farmers are able to use the seasonal tape more than once and it may be that more durable tapes will become available. It may also be that the sub surface tape may not have lasted for the whole life of the SSDI. In addition the ordinary contingencies and vicissitudes should be taken into account when making allowance for a future loss extending over such a period. I would apply a discount of some 25 per cent producing a figure of $1,700,000.
  1. Finally, there is what is described as the Richter system. Richter designed an SDI system (referred to as a T system) which is the subject of Exhibit 5. It would cost $1,140,000 to install and involve additional annual costs of about $500,000.
  1. The evidence suggests that there is a much higher level of system capacity and reserve than in the SSDI system.  I have no doubt that the system would function efficiently but there is nothing to suggest that the outlay of such a large capital sum and the annual costs of about $500,000 over the next ten years could possibly result in advantages to the Plaintiff’s farming operation which would justify such expenditures.
  1. To allow these amounts as damages would overcompensate the Plaintiff in my view.
  1. Taking the various considerations into account I think that the cost of Purcell’s proposal introduced immediately provides the most appropriate way to compensate the Plaintiff for the future losses flowing from the Defendant’s negligence. That is, whilst I do not think that the Plaintiff has acted unreasonably in the steps that it has taken until the present I think that the appropriate measure of damages so far as the future is concerned is to introduce such a system which would satisfactorily irrigate the Plaintiff’s farms. I allow the Plaintiff by way of damages the cost of rectifying the system in the sum of $700,000. If I had not thought that this course was reasonably open on the evidence I would have adopted as the measure of damages the costs associated with the continuation of the present system.
  1. A summary of the damages to which the Plaintiff is entitled is as follows:

a)

Loss of income 1997

$586,000

 

Interest at 5 per cent for 4.5 years

$131,850

  1.  

Loss of income 1998

$724,000

 

Interest of 5 per cent for 3.5 years

$126,700

  1.  

1997 - Soil Amendment Costs

$47,913.18

 

Interest at 5 per cent for 4.5 years

$10,780.46

  1.  

1998.  Additional costs as particularised in Exhibit 4G

$378,753.09

 

Interest at 5 per cent for 3.5 years

$66,281.78

  1.  

1999.  Additional costs (as taken from Exhibit 4G but with the deletion of some of the items included there)

$349,744.34

 

Interest at 5 per cent for 2.5 years

$43,718.00

  1.  

2000. Additional costs (deleting costs for insect treatment)

$361,838.80

 

Interest at 5 per cent for 1.5 years

$27,137.91

  1.  

2001.  Additional costs (deleting costs for insect treatment)

$213,559.15

  1.  

Future Costs

$700,000

 

Total

$3,768,276.70

  1. I give judgment for the First Defendant against the Plaintiff. I give judgment for the Plaintiff against the Second Defendant in the sum of $3,768,276.70. I will order that consideration to the question of costs be adjourned. I direct the parties to forward to the Court submissions in writing on the issue of costs within fourteen days and I give each of the parties liberty to reply within a further seven days.
Close

Editorial Notes

  • Published Case Name:

    Valleyfield P/L & Anor v Primac Ltd & Anor

  • Shortened Case Name:

    Valleyfield Pty Ltd v Primac Ltd

  • MNC:

    [2002] QSC 80

  • Court:

    QSC

  • Judge(s):

    Cullinane J

  • Date:

    25 Mar 2002

  • White Star Case:

    Yes

Litigation History

No Litigation History

Appeal Status

No Status