A long-standing class action brought by farmers against Advanta Seeds for the sale of contaminated seed has failed on the basis that no duty of care owing to the plaintiffs could be established.
- The plaintiffs and group members of the class action sought damages for pure economic loss from the defendant commercial seed supplier, Advanta Seeds, resulting from the growth of cross-contaminated sorghum grain from the 'MR43 Elite' seed. The plaintiffs brought actions against Advanta Seeds in both negligence and misleading and deceptive conduct.
Throughout 2010, the plaintiff farmers purchased varying quantities of the contaminated MR43 seed from several distributors, who had purchased the seed from the defendant. The defendant did not sell the seed directly to the farmers. Following the harvesting season in the summer of 2010/2011 until approximately 2018, the plaintiffs discovered off-types of wheat within the MR43 crop, being shattercane or AGOT (which has the propensity to germinate, propagate and quickly infest the land on which it grows).
Relevantly, the plaintiffs did not plead to the existence of any duty of care owed by the defendant to the plaintiffs. Instead, the plaintiffs simply alleged breaches of an undefined duty of care.
The defendant explicitly denied the existence of a duty of care for economic loss and, in support of that position, pleaded that:
- The damages sought were for economic loss only;
- The plaintiffs’ alleged loss was not reasonably foreseeable, and there was no significant risk of economic loss to the plaintiffs prior to February 2011;
- The label attached to each bag of the MR43 seed stated the contents of each bag and the terms of supply of the bag, which included ‘conditions of sale and use’ which relevantly included various disclaimers relating to loss and damage caused by the used of the MR43 seed;
- The plaintiffs were not vulnerable as they had the benefit of implied warranties and statutory guarantees from the distributors of the MR43 seed.
The decision at trial
His Honour Jackson J found in favour of the defendant, dismissing the plaintiffs’ claim.
As to the existence of a duty of care, his Honour considered relevant salient factors as identified in previous High Court decisions, namely ‘Assumption of Responsibility’, ‘Coherence’ and ‘Vulnerability’.
His Honour queried the utility of ‘Vulnerability’ as a ‘salient factor’ in the context of ordinary commercial relationships but observed that the plaintiffs’ vulnerability was difficult to distinguish from the vulnerability identified in Woolcock Street Investments. In terms of ‘Coherence’, his Honour considered the apparent incoherence between the defendant’s clear attempt to limit its liability with respect to its distributors and the purported duty owed to the end-users of the product. Finally, his Honour considered ‘Assumption of Responsibility’ and accepted the defendant’s argument that the ‘conditions of sale and use’ on each bag of MR43 clearly sought to disclaim relevant responsibility which weighed against the existence of a duty.
Having regard to the above salient factors, his Honour concluded that the plaintiffs did not establish that the defendant owed duty of care to the plaintiffs to take reasonable care to avoid the risk of economic loss.
Ultimately, his Honour held there was insufficient evidence to make a finding of misleading and defective conduct on the part of the defendant in the supply of the seed.
Implications for you
The decision represents an interesting development in the law of negligence relating to situations involving pure economic loss. In a claims management context, his Honour’s conclusion that no duty of care was owed by the defendants reiterates the importance of carefully considering the existence of a duty particularly in situations involving pure economic loss. In the commercial context, the decision highlights the potentially significant limitations in terms of the protections afforded by the law of negligence and the importance of confirming the existence of contractual or statutory protections from economic loss.
Updated 13 March 2023: On 28 February 2023, the Qld Court of Appeal dismissed an appeal by the sorghum farmers on the basis that no duty of care was owed by the seed manufacturers to them. The Court of Appeal found no justification for the expansion of the protection available to commercial businesses in the position of the farmers beyond that which they might have obtained in contract, or under applicable statute law.
Updated 19 October 2023: On 13 October 2023, the High Court granted special leave to appeal. A further update will follow after the High Court’s decision is delivered.