Mallonland Pty Ltd & Anor v Advanta Seeds Pty Ltd

This case considered whether a producer of sorghum seeds was liable in negligence in a class action brought by farmers who had purchased and planted contaminated seeds through distributors. The plaintiffs claimed damages for economic loss. Jackson J ultimately rejected the claim of negligence, because the existence of a disclaimer on the seed packing “operated as a disclaimer of an assumption of responsibility” and negated the existence of a duty of care to avoid economic loss of the kind experienced. The plaintiffs also failed on their claim of misleading or deceptive conduct.

Jackson J

9 April 2021

Background

This judgment concerned a class action brought by farmers who had all purchased and planted sorghum seed produced by the defendant, Advanta Seeds Pty Ltd. [1], [9]. The plaintiffs alleged that the seed was contaminated with seed from another subspecies of sorghum (“shattercane”), which proliferated on their farmlands and caused loss or damage (through increased operating expenses and decreased grain sorghum production). [8].

The plaintiffs sought damages for negligence, or for misleading or deceptive conduct. A noteworthy aspect of the judgment was the consideration given to “whether the defendant owed a duty of care in negligence to any of the plaintiffs and group members to avoid the risk of economic loss of the kind claimed by the plaintiffs and group members in relation to the supply of the contaminated seed”. [105]–[109]. In the result, the plaintiffs were unsuccessful on both of their causes of action. [206], [421]–[475].

The negligence claim

The defendant denied that it owed any duty of care to the plaintiffs, including: because the class of persons constituting the group members was “indeterminate in character” (noting that the defendant did not sell seed directly, but did so through distributors); because of the existence of terms that were included on the bags of seeds; and because the plaintiffs and group members were not vulnerable because they had the benefit of implied warranties or statutory guarantees from the distributor. [107]–[108].

Jackson J noted that statements of principle from the High Court indicated that whether there was a duty of care required identification of the “salient features” that might give rise to one. Two “important features” in that regard are the “vulnerability” of the plaintiffs and the “coherence” of the alleged duty of care “having regard to the existing legal frameworks that regulate or affect the relationships among the defendant, the plaintiffs and other relevant persons” (citing Brookfield Multiplex Ltd v Owners Corporation Strata Plan 61288 (2014) 254 CLR 185). [162].

His Honour placed particular emphasis on the issue of coherence. His Honour accepted that, at the relevant times, text on the bags in which the seeds were sold purported to exclude liability for any injury, loss or damage arising out of or related to the use of the product. [127], [135]. The incoherence in question was between this purported exclusion of liability and “the conclusion that [the defendant] has assumed or should be subjected to the same excluded liability to a sub-buyer who is a non-contracting party vis a vis the defendant”. [192]. In his Honour’s view, although the terms on the bags “were not proved to be terms of the contracts of purchase”, they negated the notion that there had been any “assumption of responsibility” by the defendant (which is recognised as a salient feature in determining the existence of a duty of care – Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465). [197], [200]–[201]. His Honour accepted the defendant’s submission that, “the terms on the bag operated as a disclaimer of an assumption of responsibility to negate the existence of a duty of care to avoid economic loss”. [205].

His Honour went on to find that, had he found there to be a duty of care, he would have considered that it had been breached by reason of the defendant’s “failing to conduct a commercial grow out” of the contaminated seed before it was sent to market (i.e. testing its purity by planting it). [367]. His Honour rejected arguments that there was a failure to take reasonable care by taking certain other steps, such as having greater “isolation distances” between different seeds in the production process. [354], [373].

The misleading or deceptive conduct claim

The plaintiffs alleged misleading and deceptive conduct contrary to either s 52 of the Trade Practices Act 1974 (Cth) (when it remained in force) or s 18 of the Australian Consumer Law, by reference to a number of supposed representations. [421]. Key amongst these was the representation that the seeds had a “minimum purity” of “99%” – which was printed on a label on the bags of seed. [44]. The plaintiffs contended that the representation was misleading or deceptive because, it suggested, “at best, the contaminated MR43 seed was about 95 percent pure”. [450]. However, Jackson J ultimately found that there was “no direct evidence” to support a finding that the contaminated seed exceeded .1 per cent of the total seed. [454]. The indirect evidence was also insufficient to prove that the representation was misleading or deceptive. [459].

His Honour also rejected all the other bases on which the plaintiffs alleged there to have been misleading or deceptive conduct. [448]–[475].

Whether out of time

The defendant alleged that any damage suffered by the plaintiffs was in the nature of property damage, for which the applicable limitation of actions legislation (s 10(1) Limitation of Actions Act 1974 and s 14(1) Limitation Act 1969 (NSW)) set a six-year time limit, commencing from when the cause of action “arose” or “first accrues”. [490].

Jackson J noted that in Hawkins v Clayton (1988) 164 CLR 539, the High Court had “reaffirmed the ordinary rule that a cause of action for negligence accrues when the plaintiff first suffers damage caused by the defendant’s breach of duty”. [501]. Here, all the alleged losses were “cash flow losses”. [492]. There was no evidence those losses had occurred more than six years before the proceedings were brought. [496]. Accordingly, the claims were not out of time. [513].

W Isdale