From: Neil Foster <neil.foster@newcastle.edu.au>

Sent: Wednesday 7 August 2024 03:49

To: obligations@uwo.ca

Subject: ODG: HCA on duty of care re pure economic loss, Mallonland

Dear Colleagues;

The High Court of Australia decision handed down today, Mallonland Pty Ltd v Advanta Seeds Pty Ltd [2024] HCA 25 (7 Aug 2024) addresses the question of when a duty of care arises to avoid causing pure economic loss. The 7-member bench unanimously rejects the appeal from a decision of the Queensland Court of Appeal (Mallonland Pty Ltd & Anor v Advanta Seeds Pty Ltd [2023] QCA 24), and holds that a supplier of seed did not owe a duty of care to the ultimate purchasers of the seeds to avoid causing pure economic loss which resulted from the bags of seed which were supplied being contaminated. The majority of the Court issue a joint judgment, but Edelman J writes separately in a fascinating tour of the area (and with, of course, many references to the work of list members.)

The question was whether there was a duty of care to avoid economic loss in a case where a number of growers of sorghum claimed that bags of seed which had been provided were contaminated with sub-standard plants ( shattercane , which  shatters, spreading seed widely and growing vigorously to the detriment of grain sorghum cultivation .) The seed had been purchased from suppliers who had purchased it from the manufacturers, who were being sued by the growers (so there was no direct contract between the growers and the manufacturers). A key factor for the QCA was that there was no assumption of responsibility because there was a clear disclaimer on the bags of seed making it apparent that the purchasers had to use their own judgment as to whether the seed was suitable or not.

The majority (GAGELER CJ, GORDON, STEWARD, GLEESON, JAGOT AND BEECH-JONES JJ) noted that it was not disputed that the manufacturer had behaved carelessly in its preparation of the bags, and that this had caused the economic loss incurred by the growers (see [17]-[18]). But the question was whether a duty of care was owed, affirming the long established principle that A man is entitled to be as negligent as he pleases towards the whole world if he owes no duty to them - see [29]. They also affirmed that in general mere foreseeability of economic loss is not sufficient to establish a duty of care in this area, and noted the policy justifications behind this position- see [30]-[31].

They identified assumption of responsibility as one key issue in determining whether such a duty arises, and defined this as:

[33] an undertaking (whether express or implied) by a person to take on a task or job for another person or class of persons, from which it can be inferred that the first person accepted that he or she would take reasonable care when engaging in that task or job.

The majority then note that in recent years in Australia it has become customary to examine duty of care in this area by consideration of a range of salient factors drawn from previous cases. Australian academics will usually refer to the decision of the NSWCA in Caltex Refineries (Qld) Pty Ltd v Stavar (2009) 75 NSWLR 649;  [2009] NSWCA 258 at  [103] for a list of these. The majority do not positively affirm this approach here, but they say that

neither the growers nor the producer argued that there should be a departure from the approach in this case - at [36]. So we can say it is (for the moment) an accepted approach! (Edelman J is much more scathing about the list of salient features , which his Honour traces back to the decision of Stephen J in the other Caltex case, Caltex Oil (Australia) Pty Ltd v The Dredge Willemstad" [1976] HCA 65 ; 136 CLR 529- see eg Edelman J at [86]).

The majority say:

[37] Their Honours' reference in Sullivan v Moody to "factors ... for or against" recognition of a duty of care in a novel case should not be understood as inviting any form of "instinctive synthesis" of competing considerations "without a chain of reasoning linking these factors with the ultimate conclusion".45 This is why an incremental and analogical approach,46 paying close attention to relevant precedents and any risk of incoherence in the principles they establish, is necessary.47 (footnotes in original)

Factors that led to the majority denying the existence of a duty of care here included:

• The disclaimer on the packaging explicitly denied any general assumption of responsibility, and legitimately and clearly delimited the nature of the product that it made available to the market - [45].
• While there was foreseeability of possible harm, and no indeterminacy of liability, the producers had no actual knowledge of the contamination risk to the specific growers nor of the extent of possible economic loss- [51].
• The growers were not relevantly vulnerable as they could have protected themselves against the risk- [53] On receipt of the seed in the packaging, the growers were able to make an informed choice to plant or not to plant seed that might not be free from contamination .

Edelman J s judgment is quite scathing about some of the prior Australian authority on economic loss, including Caltex v Willemstad and Perre v Apand. We should not attempt to breed from a mule [58], the mule being the 1976 Caltex decision. I will just urge colleagues to read his decision carefully, as it is very persuasive. He reluctantly accepts that the current Australian law is the salient features approach and agrees with the majority decision applying those features, but more than once hints that this approach itself is ripe for challenge at some stage. In the meanwhile, any application of salient features should be as narrow as possible- [59]. He very much offers a rights based approach and reiterates that we generally have no common law right to a level of income or value of our property. I appreciated the connection between the law of intentional economic torts and this area of the law of negligence at [71]:

just as there is no general duty at common law upon a non-fraudulent defendant not to expose a plaintiff to "pure" economic loss intentionally,99 there also can be no general duty of care at common law upon a defendant not to expose a person to "pure" economic loss negligently.

Much more could be said but I will leave it there for the moment.

Regards

Neil

NEIL FOSTER

Associate Professor, School of Law and Justice

College of Human and Social Futures,

University of Newcastle, NSW

T: +61 2 49217430

E: neil.foster@newcastle.edu.au

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