Baldrudgery Nominees Pty Limited v Landmark Operations Limited

District Court of NSW|2019-08-08

Introduction

The Hodges family operate the property known as "Baldrudgery" which is located at Baldry, in the Central West of the state. The property has been owned and operated by five generations of the family since 1874. The property and its business operations are owned by the plaintiff, which is a trustee of a trust.
The Hodges' family business includes sheep breeding and trading, cattle breeding and trading, goat trading and cereal cropping. The business also includes silage and fodder production for supplementary feeding of stock.
The total size of Baldrudgery is 1,750 ha. These proceedings concern damage to a lucerne crop which was sowed in four paddocks comprising 114 ha (the "Affected Paddocks").

The Affected Paddocks

The Affected Paddocks are as follows: 1. Wright's River Flat, which had an area of approximately 25 ha, and had been sown with lucerne on 25 April 2015. 2. Middle of Rolls, which had an area of approximately 24 ha, and had been sown with lucerne on 23 March 2014. 3. Stack, which had an area of approximately 46 ha, and had been sown with lucerne on 24 April 2012. 4. Top 126, which had an area of approximately 20 ha, and had been sown with lucerne on 30 March 2011.
I have mentioned the dates upon which the Affected Paddocks were sown to lucerne, as lucerne is a perennial plant; in contrast to other fodder crops such as oats or barley, which are annual plants.

The Spray Event

In August 2016, Mr Darrell Hodges, who controlled the business operations of the plaintiff, wished to improve the quality of the lucerne crop on the Affected Paddocks, by reducing the prevalence of certain broadleaf weeds which he had noticed were present in the crop.
Mr Hodges sought the advice of the defendant, which conducts a business involving both the provision of agronomic advice, and the supply of agricultural chemicals, including herbicides to customers. The defendant advised Mr Hodges to spray the lucerne with herbicides which traded under the names "Flagship" and "Starane Advanced", in quantities as recommended by it (Ex P5).
Mr Hodges accepted this advice and engaged a contractor to spray the Affected Paddocks in accordance with the defendant's recommendation (the "Spray Event"). He then went on holidays. Upon his return from his vacation, he noted that the lucerne in the Affected Paddocks was in a state of considerable distress.
Mr Hodges then took the advice of Mr Ross Yelland, who operates a consulting agronomy business in Manildra. Mr Yelland advised Mr Hodges that the lucerne had been damaged by the herbicides, to the point from which it could not recover, and advised Mr Hodges to kill off the balance of the crop, or to use the favoured expression in the proceedings, to have the crop "sprayed out". Mr Hodges took that advice and the crop was sprayed out on 15 August 2016 (Affidavit of Darrell Hodges, 30 November 2017, at [74] - [84]).
The plaintiff commenced proceedings based on the central contention that the spray recommendation of the defendant was incorrect, and negligently so. I will briefly return to the detail of the plaintiff's claim shortly.
Up until the commencement of the hearing, liability had been denied by the defendant. The defendant also relied on a disclaimer type clause contained in what may or may not have been contractual documentation (Ex P5). By a series of admissions made during the hearing, by the time of closing submissions, the defendant had admitted liability, and abandoned reliance on the disclaimer clause (Tp 138.7-9).

The Claim

The plaintiff's claim is for relief under the Australian Consumer Law ("ACL"). More specifically, the plaintiff sought declarations that: 1. the defendant engaged in misleading or deceptive conduct contrary to s 18 of the ACL; 2. in connection with the supply of goods and services, the defendant made a false and/or misleading representation that the goods and services had performance characteristics and uses, contrary to s 29 of the ACL; and 3. the defendant breached the guarantees imposed by ss 60 (due care and skill) and 61 (fitness for purpose) of the ACL.
The plaintiff also pleaded a case in negligence against the defendant, together with a claim in contract.
It sought damages pursuant to ss 236 and/or 237 of the ACL, together with damages at common law.

The Damages Contest

As a result of the defendant's admissions, the case was reduced to a contest as to causation and quantification of damages. The parties differed on their approach to these issues in a fundamental way.
The plaintiff said that as a result of the loss of the lucerne from the Affected Paddocks, it took stock off three other paddocks as follows: 1. Iona Tank (30 ha); 2. Cemetery (36 ha); and 3. Top Cemetery (26 ha).
These three paddocks (the "Unaffected Paddocks") were cut for silage in late October 2016. Mr Hodges said that he did this because he was concerned about his silage reserves. The Unaffected Paddocks were sown to clover and hay, not lucerne.
Mr Hodges quantified the loss of silage on the Affected Paddocks attributable to the Spray Event as a loss of 1,126 bales. Unusually, the plaintiff does not seek compensation for the loss of those 1,126 bales, nor for the loss of the fodder cut from the Unaffected Paddocks, being 639 bales (Affidavit of Darrell Hodges, 30 November 2017, at [114] and [117]).
Rather, the plaintiff seeks damages for the loss which it alleges that it suffered as a result of not being able to rotate three lots of fat lambs per year on the Affected Paddocks and the Unaffected Paddocks. There were said to be three such years for the Affected Paddocks and one year for the Unaffected Paddocks. These losses are entirely hypothetical.
The plaintiff's calculation of the hypothetical loss of grazing income was not substantially calculated by reference to the plaintiff's actual historical performance, but rather was based on a well-known agronomic standard known as the dry sheep equivalent ("DSE"). That this was a reputable measure of equivalence between sheep and cattle for stock carrying capacity purposes, was not disputed. Nor was the fact that the DSE could be utilised as a measure of grazing productivity, when expressed on a DSE/ha basis.
Mr Michael Ryan, an expert agronomist qualified by the plaintiff, quantified the plaintiff's loss by reference to the loss of hypothetical grazing income as follows (Ex P11): 1. The Unaffected Paddocks: $103,500. 2. The Affected Paddocks: $362,250.
He also quantified extra topdressing costs at $4,054.81.
The parties agreed that the pasture sowing and lucerne re-sowing costs were approximately $10,800 (Tp 154.28-155.13).
The final total claimed by the plaintiff by way of damages was thus $480,604.81.
The defendant submitted that the plaintiff's approach to quantification of damages was fundamentally flawed.
Mr Tony O'Connor was qualified as an expert by the defendant. I shall briefly summarise his conclusions on Mr Ryan's analysis.
As to the lost grazing from the Unaffected Paddocks, he found that there was no such loss. In his view, this was so as: 1. The plaintiff retained the benefit of the fodder cut from the Unaffected Paddocks. In effect, all that occurred was a change from fodder in the paddock, to fodder in the shed (Ex D4, at [4.82]). 2. He did not accept the hypothesis of Mr Ryan that after being cut, the Unaffected Paddocks would not support grazing. He pointed to the inconsistency between that proposition and: 1. Mr Ryan's view that the same paddocks are capable of running 15 DSE to the hectare (Ex D4, at [4.78], referencing Ryan Report dated 8 December 2017 (Ex P11) at [95]). 2. The fact that regrowth would be clearly achievable after the paddocks were cut, given the extent of rainfall in the period October 2016 to May 2017, which he summarised pithily in the following way (Ex D4, at [4.81]): If the pasture did not grow back in the Iona Tank, Cemetery and Top Cemetery paddocks as claimed in the Booth Report and Hodges Affidavit, it would not have grown anywhere on the property.
As to the grazing lots on the Affected Paddocks, Mr O'Connor did not accept that the paddocks would be unavailable for grazing for three years. He pointed out that the cropping plan recommended by Mr Yelland, and adopted by the plaintiff, provided for a mix of cropping and grazing for the Affected Paddocks in each of 2017 and 2018, and some limited grazing in 2019 when the paddocks were to be sown to lucerne again (Ex D4, at [4.90]).
Mr O'Connor's non-acceptance of the fact that the Affected Paddocks were not available for grazing for three years, appears to be well supported on the evidence. A witness, Mr Wallace, observed a cereal crop, and self-feeders on the Affected Paddock known as Stack in August 2017 and, he says, cattle (although Mr Hodges did not accept that). In 2019, Mr Wallace observed sheep on the Affected Paddocks known as Top 126 and Stack. Mr Hodges accepted that there was livestock on those paddocks, and that the plaintiff was also growing other crops in respect of each of the years, 2017-2019 (Tp 38-39; 48).
Mr O'Connor understandably accepted that there was a loss attributable to the destruction of the lucerne on the Affected Paddocks. He quantified that loss by reference to the tonnage of forage lost, which he calculated in terms of equivalent lost tonnage of hay, which he valued at $37,620 (Ex D4, at [4.93]).
Mr O'Connor discounted the extra topdressing costs claim by the plaintiff of $4,054.81, reliant on the fact that Mr Hodges, in his affidavit of 30 November 2017, at [117], disclosed that topdressing occurred prior to the Spray Event (Ex D4, at [4.98]).
As I have indicated, the parties were agreed on the pasture sowing and lucerne re-sowing costs (Tp 154.28-155.13).

Consideration

I have dealt with the parties' contentions in relation to damages at a level of generality, as I believe the dispute as to damages falls to be determined by reference to fundamental principles applicable to the issue of determination of the quantum of loss, rather than in the detail of the competing contentions.
It is helpful to recount some basic propositions, which are mostly derived from the classic work, McGregor on Damages (Sweet & Maxwell, 20th Ed, 2018): 1. It is for the plaintiff to establish its loss. 2. The lucerne was a chattel. This chattel was destroyed by the Spray Event. 3. The normal measure of damages for the destruction of a chattel is the market value of the chattel destroyed, as at the date of its destruction (McGregor [37-063]). 4. If the chattel was a profit producing chattel, then a loss of profit is recoverable, if it can be proved (McGregor [37-071]). 5. The value of the lucerne lost is a normal loss, that is to say a loss which all plaintiffs would suffer in like situations (McGregor [3-008]). 6. The loss of profit is a consequential loss which is special to the circumstances of the plaintiff, and is thus for the plaintiff to prove (McGregor [3-008]).
These propositions are derived from the law of damages as it applies in tort, but neither party suggested the possibility of any different outcome being achieved if the damages in this case were considered under the rubric of the ACL, or breach of contract.
Applying what I consider to be the orthodox approach to damages assessment, one would have expected the plaintiff to have adduced evidence about what it actually did, or was obliged to refrain from doing, as a result of the Spray Event. In broad terms, this might have been expected to be demonstrated by various possible scenarios, for example: 1. As a result of the loss of silage, the plaintiff lost the opportunity to purchase additional stock from which it would reasonably expect to yield a certain profit. It would then quantify this anticipated lost profit by reference to the then prevailing market. This scenario presumably would involve an analysis as to why, following the Spray Event, such stock could not be accommodated on the unaffected parts of the property. 2. Alternatively, as a result of the loss of silage, it became necessary for the plaintiff to de-stock. As a result of that destocking, the plaintiff lost the opportunity to maintain that stock, and fatten it for sale. Again, this loss would be referrable to prevailing market conditions. This scenario, presumably, would involve an analysis as to why the property could not support the animals destocked, as a result of the Spray Event. 3. Alternatively, as a result of the loss of silage, while the plaintiff neither lost the opportunity to purchase additional stock, nor was forced to destock, it had to go to market to purchase more fodder to replace the lost lucerne. It would then quantify the cost of purchase of the replacement fodder. 4. Alternatively, as a result of the silage loss, while the plaintiff neither lost the opportunity to purchase additional stock, nor was forced to destock or go to market to purchase fodder, it was forced to rely on its fodder reserves which otherwise would have been available to sell into the market. The plaintiff would then quantify that loss, by reference to the prevailing market.
The evidence adduced by the plaintiff might involve a combination of those possible scenarios; and might involve multiple seasons if the facts justified it. There may, of course, be other potential scenarios demonstrative of the plaintiff's loss.
Beyond saying that it was forced to take stock off the Unaffected Paddocks and cut fodder from such paddocks, the plaintiff gave no evidence of what it did, or refrained from doing, in response to the Spray Event. Rather, it merely gave evidence as to its usual practice of buying in lambs, fattening them, and on-selling them. The plaintiff relied upon a hypothetical analysis, substantially divorced from its actual trading history, and without an evidentiary foundation to prove: 1. The stock that would have been purchased but for the Spray Event. 2. When the stock would have been bought. 3. The likely cost of that stock on purchase. 4. Its capacity to purchase that stock. 5. When the stock would have been sold. 6. The likely price of that stock on sale. 7. The likely weights of the stock at purchase and sale. 8. The prevailing climatic conditions in relation to the period in which the stock would have been purchased, held, and then sold.
As I have mentioned, the plaintiff expressly eschewed any claim for the cost of the lost fodder caused by the Spray Event.
Curiously, the plaintiff also disavowed an approach to quantification of loss based on its financial accounts. In its written submissions, it relied on Mr Ryan's view that "those documents are prepared for accounting/tax purposes and not the purposes of farm management" (see plaintiff's outline of submissions, [150]). Unless the plaintiff's financial accounts were inaccurate, which has not been suggested, this was an unusual approach to quantification of damages.
I do not believe that it is inappropriate to describe the plaintiff's approach to damages, as one which assumes that the best possible fat lamb outcome would be achieved in each year on multiple occasions, without recourse to actual detail of the matters referred to in paragraph 39 (1)-(8) of these Reasons. This approach implies an almost metronomic achievement of profit which seems to disregard such matters as the seasons and the markets, in a way which seems divorced from the realities of agricultural life.
As the defendant correctly pointed out, damages much be proved with a degree of precision which reflects that which was reasonably available to the plaintiff. In circumstances where the relevant information is within the knowledge of the plaintiff, the Court will expect it to be brought forward and proved.
Where the plaintiff has not satisfied its onus, nominal or no damages will be awarded. The Court should not be forced to guess as to the damages where precise evidence is obtainable (FAL Healthy Beverages Pty Ltd and FAL Retail Pty Ltd [2017] NSWSC 476, at [179] per Black J; McCrohon v Harith [2010] NSWCA 67, at [118]-[126]).
The defendant suggested that the plaintiff has declined to produce direct evidence of its loss because the Spray Event in fact had little impact on the plaintiff's operations. It pointed, for example, to the following: 1. After the Affected Paddocks were sprayed out with a herbicide and the Unaffected Paddocks were cut on or about 26 and 27 October 2016, far from destocking, the plaintiff purchased more cattle and sheep. 2. For the financial year ending June 2017, the plaintiff purchased more cattle and sheep than in the previous year (Ex D2). 3. The plaintiff purchased all of those cattle and sheep after the Spray Event. 4. The plaintiff's closing stock for sheep and cattle was higher in 2017 when compared to 2016. 5. In 2017, the plaintiff had available to it 1,869 tonnes of hay, and only 100 tonnes of which was used to feed the livestock it had in that year. The defendant submitted that it can be inferred that the plaintiff had excess hay for its purposes, because it sold 30 tons of hay (Annexure 4 of Ryan Second Report - Ex P13).
I believe that there is merit in the defendant's contentions. To those contentions, I would add the following: the 2016 season, was an excellent season for rainfall, and this excellent season carried through to late Summer 2017 and Autumn 2017 (Ex P1, at p4; Ex D1; Tp 105.19-21, 115.48-116.5). As such, the bumper season may well have enabled the plaintiff to absorb some of the consequential loss from the Spray Event.
It should also be noted that the Affected Paddocks constituted a mere 7% of the total of the plaintiff's property. Of course, it must be accepted that not every inch of the plaintiff's property would be available for cropping or grazing, nor would every inch of it be of equal productivity in terms of fodder production or carrying capacity. That said, that only 7% of the plaintiff's property was affected by the Spray Event, does have a tendency to put the loss of the Affected Paddocks in context, and tends to suggest that far from the loss being in the order of half a million dollars, as claimed by the plaintiff, the loss actually suffered was likely to be far more modest.
In this regard, it is also relevant to note that the plaintiff, in its written submissions, referred to its "net operating position" in the period 2014-2018. It recited that net operating position in the following manner (per Ex P9): 1. FY 2014 - $265,173. 2. FY 2015 - $248,771. 3. FY 2016 - ($20,443) loss. 4. FY 2017 - ($622,753) loss. 5. FY 2018 - $588,810.
The plaintiff contended that these figures show "the enormous impact [of] the August 2016 spray event in the 2017 financial year" (see plaintiff's outline of submissions, [149]). I do not believe that this is the case.
The $622,753 loss in FY 2017 could not be largely attributable to the Spray Event, as on the plaintiff's case, the losses attributable to the Spray Event were not all suffered in the first year, that is FY 2017, but rather were suffered in that year and the succeeding two years. In FY 2018, a significant profit was apparently made.
The financial position of the plaintiff in the period set out above, in my view, does not assist the plaintiff. On the contrary, I believe that it is destructive of the plaintiff's case, in that it provides an albeit rough test for reasonableness of the plaintiff's claim for damages of approximately $480,000.
When viewed against the plaintiff's financial performance during the period FY 2014 to FY 2018, the proposition that the plaintiff, by dint of the loss of lucerne on 7% of its property, suffered a loss of $480,604.81, seems an unlikely one.
In my view, the question of quantification of loss should be approached on a more orthodox basis, reflecting the basic principles to which I have earlier referred to in McGregor. These principles, in my view, are best carried into effect by the method suggested by Mr O'Connor, that is to say: 1. lost grazing in respect of Affected Paddocks - $37,620; and 2. pasture and lucerne resowing costs - $10,800.

Conclusion

There should be Judgment and Verdict for the plaintiff in the sum of $48,420 together with interest thereon.
I will hear the parties on costs.

Orders 1. Judgment and Verdict for the plaintiff in the sum of $48,420. 2. Interest thereon at the rates prescribed from time to time pursuant to the provisions of section 100 of the Civil Procedure Act 2005 (NSW). 3. Should either party wish to be heard on costs, they should indicate that wish by contacting my associate, such contact to be made no later than 14 days from today. 4. In the absence of the parties wishing to be heard on costs, I order that the defendant pay the plaintiff's costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 October 2019

At a glance

Court

Decision date

Source

Judgment (9 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (2)