Bonic v Fieldair

PARTIES : Jure Bonic, Eva Bonic, John Bonic and Frank Bonic v Fieldair (Deniliquin) Pty Ltd, John Herschfelder, Rendell Nominees Pty Limited, Malcolm Rendell JUDGMENT OF : Davies AJ at 1

COUNSEL : Plaintiffs - J. Ireland QC, D. Robertson Defendants - No appearance Plaintiffs - Walsh & Blair, Wagga Wagga SOLICITORS : Defendants 1 & 2 - N.F. Gribble, Ballarat, Vic Defendants 3 & 4 - No appearance CATCHWORDS : Nuisance; Negligence; Aerial spraying; Damages; Foreseeability Burnie Port Authority v General Jones Pty Limited (1994) 179 CLR 520 Commissioners of Inland Revenue v Ballantine (1924) 8 TC 595 Donoghue v Stevenson [1932] AC 562 Fletcher v Rylands (1866) LR 1 EX 265 Glenboig Union Fireclay Company Ltd v Commissioners of Inland Revenue (1922) 12 TC 427 Hungerfords v Walker (1989) 171 CLR 125 CASES CITED : Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638 Norris v Blake (No 2) [1997] 41 NSWLR 49 O'Brien v McKean (1968) 118 CLR 540 Redding v Lee (1983) 151 CLR 117 Rylands v Fletcher (1868) LR 3HL 330 Tinkler v Federal Commissioner of Taxation (1979) 29 ALR 663 Todorovic v Waller (1981) 150 CLR 402 Whitaker v Federal Commissioner of Taxation (1998) 82 FCR 261 DECISION : Judgment for the plaintiffs against defendants 1 to 4. Defendants 1 to 4 to pay the costs of the plaintiffs.

• 1 - THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION CLD 12453/95 DAVIES AJ Tuesday, 29 June 1999

BONIC & ORS v FIELDAIR (DENILIQUIN) PTY LIMITED & ORS

1 HIS HONOUR: In these proceedings, damages are sought for nuisance or negligence in the circumstance that weedicide, which was sprayed by air onto one property, drifted onto and severely damaged two vineyards on an adjoining property. 2 The first and second plaintiffs, Jure and Eva Bonic, were the owners of the damaged property "Billabong" near Jerilderie in the Murray Irrigation Area. They had acquired the property of approximately 350 acres in 1970 when it was used for cropping and for the carrying of stock. Jure and Eva Bonic had come to Australia from Croatia and had a knowledge of the cultivation of vineyards in that country. They and the other plaintiffs, their sons John and Frank, had it in mind to develop "Billabong" progressively as a vineyard. 3 The first development for this purpose occurred in 1977 when an area of forty acres was planted with Semillon, Trebiano and Rhine Reisling white wine vines and also a small number of Cabernet Sauvignon red wine vines. By 1980, Vineyard 1 was producing grapes in commercial quantities and by 1982 it was in full production. Vineyard 2, an area of 100 acres, was planted out with cuttings in about October 1989, just before the spraying occurred. The wines planted included Chardonnay, Pinot Noir, Sauvignon Blanc, Cabernet, Chenin Blanc and Cabernet Franc varieties, as well as cuttings from Vineyard 1. At that time it was the family's intention to commence the production of bulk wine on the property. A company, Capital Wines Pty Ltd, was established for this purpose in 1991. The plaintiffs also had it in mind that at an appropriate time they would plant out the remaining available land on "Billabong", which was a large paddock to the north of Vineyard 2. By 1987, that land had been levelled and graded with a slope appropriate for flood irrigation. 4 The first defendant, Fieldair (Deniliquin) Pty Limited, was the company which contracted to undertake the aerial spraying. The second defendant, John Herschfelder, was the pilot of the aircraft. Both of these defendants entered an appearance and filed a defence but the Court was advised that, due to financial difficulties, they would not appear at the hearing. 5 Rendell Nominees Pty Limited was the owner of the property on which the spraying occurred. An order for the winding up of the company was made on 16 October 1990 but later, on 20 November 1992, a judge of the Court, Lee J, granted leave to proceed. Malcolm Rendell, the fourth defendant was the managing director of Rendell Nominees Pty Limited. He lived on the property and organised for the spraying to occur. Neither Rendell Nominees Pty Limited nor Mr Rendell entered an appearance or defended the proceedings although they were served with the initiating process and later with the statement of claim. 6 The fifth defendant, Rhone Poulenc Rural Australia Pty Limited, and the sixth defendant, Nufarm Limited, were the manufacturers of the weedicide which was sprayed on the Rendell property. They were joined as parties on an allegation that the labelling on their respective products was inadequate and misleading. Section 52 of the Trade Practices Act 1974 (Cth) was relied upon. The claims against these defendants were settled shortly prior to the commencement of the trial and, by consent, I made an order dismissing the claims against them. 7 The matter proceeded against the first four defendants on an undefended basis. Mr J. Ireland QC, with him Mr D. Robertson of counsel, appeared for the plaintiffs. 8 In his submissions to the Court, Mr Ireland relied principally upon the tort of nuisance, alleging that the plaintiffs, particularly Jure, Eva and John Bonic, had an interest in the property "Billabong" when the aerial spraying occurred and that their property and their use and enjoyment of it were harmed by the events which occurred. Mr Ireland did not however abandon reliance upon the tort of negligence. 9 In my view, the matter should be considered under the ordinary principles of negligence. Before the decision of the High Court of Australia in Burnie Port Authority v General Jones Pty Limited (1994) 179 CLR 520, proceedings of this type could have been couched in terms of the tort of nuisance, under the special rule expounded in Rylands v Fletcher (1868) LR 3HL 330 or under the principles of negligence which have developed since Donoghue v Stevenson [1932] AC 562, as indeed it was expressed in the statement of claim. 10 The rule in Rylands v Fletcher was expressed in the judgment of Blackburn J in the Court of Exchequer Chamber in Fletcher v Rylands (1866) LR 1 EX265 where his Lordship said at 279-280: " the person who for his own purposes brings on his lands and collects and keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and, if he does not do so, is prima facie answerable for all the damage which is the natural consequence of its escape. He can excuse himself by shewing that the escape was owing to the plaintiff's default; or perhaps that the escape was a consequence of a vis major, or the act of God; but as nothing of this sort exists here, it is unnecessary to inquire what excuse would be sufficient. "

That rule would have encompassed the spraying operation which we are now considering. In Burnie Port Authority v General Jones Pty Limited (1994) 179 CLR 520 at 549, Mason CJ, Deane, Dawson, Toohey and Gaudron JJ; said: " [We] shall assume that the rule extends to the introduction or retention of any dangerous substance or the carrying out of any dangerous activity upon or within property under the occupation or control of the defendant. "

11 In Burnie Port Authority v General Jones Pty Limited, Mason CJ, Deane, Dawson, Toohey and Gaudron JJ, Brennan and McHugh JJ dissenting, held that such issues should now be considered under the ordinary principles of negligence. At 556, the majority said: " The rule in Rylands v Fletcher , with all its difficulties, uncertainties, qualifications and exceptions, should now be seen for the purposes of the common law of this country, as absorbed by the principles of ordinary negligence. "

In the course of their reasoning, at 556, the majority expressed the qualification that there may remain cases in which it is preferable to see a defendant's liability in a Rylands v Fletcher situation as lying in nuisance or even trespass and not in negligence. But subject to that qualification, the majority considered that the type of situation with which we are concerned in this present case should be dealt with according to the ordinary principles of negligence. At 549, the majority mentioned that: "... the editors of the last five editions of Winfield and Jolowicz on Tort have expressed the view that, putting to one side the factual situations in which a plaintiff will succeed equally well either under the rule or in nuisance, ' [w]e have virtually reached the position where a defendant will not be considered liable when he would not be liable according to the ordinary principles of negligence' . A similar view has been expressed by other distinguished academic writers. "

12 The present is not a case where it would be appropriate to look at the defendants' liability under the principles of nuisance rather than those of negligence. The principles of negligence are entirely apposite to the situation, there having been an unintended harm to the Bonics' property arising from a one-off circumstance, namely the application of a dangerous weedicide to the Rendell property. The principles of nuisance, insofar as they are different from those of negligence, are more appropriate to cases of intentional harm and to cases where damages or an injunction are sought in relation to an ongoing situation where issues of an environmental nature have to be considered. In nuisance, the issues may take into account many objective factors, whether the defendants' conduct accorded with the ordinary practices of mankind, whether the nuisance complained of was an ordinary use of the defendants' land, whether the alleged nuisance, the noise, smell or dust etc, was an inevitable consequence of life in a crowded society, whether the defendants' conduct though harmful to another was nevertheless conduct which was of benefit to the community. See Winfield v Jolowicz on Tort, 14th ed, 405-412. These different principles continue to have application, but, in my opinion, they are not appropriate tests of a situation such as the present where the encroachment on the plaintiffs' land and the harm occasioned to it was unintended and where the issue is whether the defendants are liable for permitting a dangerous substance to escape. Accordingly, it is to the issue of negligence that I turn first. 13 The weedicide used in the spraying of the Rendell property was designed to eliminate broad leaved weeds. The Rhone Poulenc product was 2, 4-D Amine 500, the warnings on the label of which showed that it could be harmful to humans, livestock, trees, plants, crops and life. The label stated, inter alia: " Avoid spray drift. Spray drift can travel great distances. Do not use product in close proximity to COTTON, GRAPES, TOMATOES, BANANAS or other susceptible crops, flower plants, ornamentals or fruit trees. DO NOT SPRAY ON WINDY DAYS. "

The Nufarm product, Amicide 500, the active ingredient of which also was 2, 4-D, was likewise directed at broad leaved weeds. The label contained like warnings of harmful effects including a warning of which the copy in evidence discloses only: " Drift Warning: Avoid spray drift on to susceptible ... such as cotton, tobacco, tomatoes, vines, fruit trees ... legume crops and pastures, oil seed crops ... susceptible trees (eg. Kurrajongs, Belahs). "

Both labels gave instructions as to first aid should poisoning occur and provided emergency numbers. 14 It seems that Rendell Nominees Pty Limited had been requested by its banker to spray the land so as to eradicate the weeds thereon and to enhance the capital value of the property. 15 The south west corner of "Billabong" and the north east corner of the Rendell property adjoined, being separated only by a roadway. Vineyard 1 on "Billabong" went down to that corner. The distance between the nearest portion of the sprayed paddock on the Rendell land and the nearest portion of "Billabong" was about 300 metres. The distance to the farthest part of vineyard 2 was well over one kilometre. The sprayed paddock was 600 acres or 240 hectares in size, running in an east-west direction. 16 Records of the first defendant and of the pilot, John Herschfelder, show that Mr Herschfelder had been an agricultural pilot for thirty-three years and was engaged by Fieldair (Deniliquin) Pty Limited to spray the 600 acre paddock which was infested with thistles. Mr Herschfelder sprayed on 12 November 1989 using a Piper Pawnee Brave aeroplane fitted with Micronair nozzles, the blades of which were set at an angle of thirty-five degrees. Mr Herschfelder commenced spraying at 16.50 pm at a time when the wind direction was 150 degrees, with a light wind blowing at about two knots or 3.6 kilometres per hour. The temperature was twenty-five degrees Celsius. The plane flew at a height of approximately six to eight feet above the ground. To check the wind direction, Mr Herschfelder arranged for Mr Rendell to light fires in some old tyres. These were set near the north-east boundary of the paddock. Probably, Mr Herschfelder flew in an east-west line along the length of the paddock. After the second load, Mr Herschfelder found that the wind had swung to due south. He stopped operations until the wind changed back to approximately 150 degrees. Mr Herschfelder concluded spraying at 19.50 pm. During the spraying he used 480 litres of the weedicide, that is two litres per hectare, which was within the recommended limit of up to four litres per hectare. 17 The wind was blowing from a direction of 150 degrees, that is thirty degrees to the east of due south, approximately south-south-east. The south-west corner of "Billabong" adjoined the north-east corner of the Rendell property, while the eastern boundary of the Rendell property ran northerly on a line with much of the western boundary of "Billabong". The general run of "Billabong", from its south-west corner to its north-east corner, was about twenty-five degrees to the east of the northerly line. 18 There must have been a wind shift after the spraying concluded, as had occurred earlier during the spraying, for at about 10 pm that evening the plaintiffs noticed the strong and distinctive odour of the chemical, and this continued at least until they retired to bed at about 11 pm. They had to shut the windows of their residence in order to exclude the smell. 19 On the following day, Monday 13 November 1989, the plaintiffs noticed that their vines had been affected particularly those vines closest to the Rendell property. Over the ensuing days and weeks the harm to the property became more and more apparent. The vines on Vineyard 1 were badly affected although the damage was a little patchy. The Cabernet vines appeared to suffer a little less than the others. The newly planted vines on Vineyard 2 died. Roses and other plants in the Bonic's garden suffered from the spray and a number of fruit and nut trees were badly affected. Some persimmon trees died. Many of the walnut trees, particularly those nearest the Rendell land, became stunted and failed to grow and produce nuts as previously they had done. 20 The land at "Billabong" was inspected by Mr Rendell and by persons acting in his interests and those of Fieldair (Deniliquin) Pty Limited and also by officers from the Department of Agriculture NSW. The plaintiffs engaged an expert, Mr D.N.M. Hutchins, who was an agricultural consultant trading as Hutchins Agronomic Services and who had had experience with this type of problem. Mr Hutchins inspected "Billabong" on 22 December 1989 after having first inspected a neighbouring property "Canarney Farms" to the west of Billabong Creek, which also had suffered damage to its sugar beet, roses, fruit and nut trees and other plants as a result of the aerial spraying on the Rendell property. 21 Mr Hutchins found that the grapevines on "Billabong" were suffering from epinasty, leaf distortion with the leaves having a hard, leathery appearance, chlorosis of new growth, fan shaped leaves and prominent veins on new growth, twisting and distortion of new growth, some shoot necrosis, grape bunches twisted, bunch and berry necrosis and loss of yield. The damage was not completely uniform over the whole area with the Cabernet Sauvignon vines being not as badly affected as the white varieties, although individual Cabernet vines were badly affected. The Rhine Reisling and Semillon vines were more affected than the Trebiano. By the time of the inspection, the plants in Vineyard 2 were dead. Indeed, in 1990, Vineyard 2 was ploughed up and a rice crop was planted; although so late in the season that it was unsuccessful. The damage seen by Mr Hutchins was typical of exposure to a 2, 4-D weedicide, that weedicide being deadly to grapevines. What grapes were produced in the season could not be sold. 22 The evidence establishes clearly that spray drift from the spray applied to the Rendell property caused the damage to the vineyards and to trees and plants on "Billabong". 23 All the defendants would have been aware that aerial spraying of the weedicide 2, 4-D was likely to cause harm to any occupier of a property in the proximity which had susceptible vines, trees and plants on it, if adequate care to avoid harm was not taken. The labels alone made that plain. It cannot be in doubt that it was known to the four defendants that the weedicide was a dangerous chemical and that care in its use must be taken to avoid harm. 24 In Burnie Port Authority v General Jones Pty Limited, the majority made the point that, where activities were carried out which involved the handling or storing of dangerous goods, the duty to take care would not necessarily be discharged by the employment of a competent independent contractor and that each person had a duty to ensure that reasonable care was taken. At 550, the majority said: " It has long been recognised that there are certain categories of case in which a duty to take reasonable care to avoid a foreseeable risk of injury to another will not be discharged merely by the employment of a qualified and ostensibly competent independent contractor. In those categories of case, the nature of the relationship of proximity gives rise to a duty of care of a special and 'more stringent' kind, namely a 'duty to ensure that reasonable care is taken': see Kondis v State Transport Authority (1984) 154 CLR 672 at 686. Put differently, the requirement of reasonable care in those categories of case extends to seeing that care is taken. ... Viewed from the perspective of the person to whom the duty is owed, the relationship of proximity giving rise to the non-delegable duty of care in such cases is marked by special dependence or vulnerability on the part of that person: The Commonwealth v Introvigne (1982) 150 CLR 258 at 271, per Mason J. " 25 In the present case, the nature of the chemicals being sprayed was such that all persons responsible for the operation, that is the four defendants, had a non-delegable duty to ensure that properties in the vicinity of the Rendell land were not damaged by the spraying. 26 It therefore does not matter whether Mr Herschfelder was an employee or an independent contractor of the first defendant, a point which neither the evidence nor the statement of claim makes clear. The actions of Mr Rendell were also the actions of his company and therefore he is personally responsible and the third defendant, Rendell Nominees Pty Limited is responsible for his acts and omissions. 27 The 2, 4-D weedicides were deadly to grapevines. The Rhone Poulenc label stated that spray drift can travel great distances. Mr Hutchins gave evidence that he knew of two instances where, in calm conditions, spray drift had caused harm fifteen and twenty-five kilometres away from the sprayed property. The spraying of land only three hundred metres away from the nearest vines on "Billabong" was an inherently dangerous activity which was likely to cause harm unless extreme caution was taken. 28 Amongst his other fields of expertise, Mr Hutchins has expertise with respect to aerial spraying, for he has had control of such spraying and had studied means of minimising spray drift. Mr Hutchins gave evidence which I accept that aerial spraying is particularly dangerous when there is only a very light wind or no wind. Mr Hutchins said that, unless there is a wind, which should be blowing away from any vulnerable properties, the spray tended to remain in the air in the form of droplets or mixed with dust and that spraying should not be carried out unless there was a wind of five kilometres per hour or more but less than fifteen to twenty kilometres per hour. He said that a wind of ten kilometres per hour was ideal for such a wind tended to drive the spray down into the crop which was being sprayed. Mr Hutchins explained that there was also more risk when the weather was relatively warm, as it was on the evening of 12 November 1989 when the temperature was twenty-five degrees Celsius, for in warm conditions the spray tended to remain in the air and even to undergo a process of volatisation, to become a gaseous mixture. Another significant factor is the size of the drops which form the spray. When the small Micronair nozzles are used and set so as to create a fine spray, which was the position with the setting at 35 degrees, the spray may hang in the air and even vaporise. In such circumstances, the spray is particularly susceptible to drift. Mr Hutchins explained that spraying is safest when heavier drops are used and when there is a firm wind blowing away from any susceptible crops. 29 Mr Hutchins explained that the quantity of spray used is a relevant factor, for the greater the quantity the greater may be the spray drift. Mr Hutchins said that 480 litres sprayed over the Rendell property was a substantial quantity, for only a small mount of the 2, 4-D Amine would cause severe damage to the Bonics' vineyards. 30 Mr Hutchins expressed the view which I accept that it was not safe to aerial spray the Rendell land when the plaintiffs' vineyard were in such close proximity. He also expressed the view which I accept that, if such spraying were to be done, which was unwise, it should only have been done when there was a wind of over five kilometres per hour blowing away from "Billabong", which would have been the case had the wind been blowing from the north or north-east rather than from the south-south-east. Mr Hutchins said that the use of a fine spray in warmish weather contributed to the spray drift. 31 The following two paragraphs appear in the Mr Herschfelder's statement which was read as part of the plaintiffs' case: " 10. From my knowledge and experience as an agricultural pilot I am fully aware of ideal spraying conditions. It is important for there to be a slight breeze which there was while I was applying the spray. In my opinion the spraying conditions were ideal. 11. Further in my opinion from the wind speed and direction during the spraying operation, the alleged damage to the Plaintiff's crop did not occur from the aerial spraying performed by myself. "

However, the spraying conditions were not ideal. I am satisfied that the plaintiffs' land "Billabong" and also the Canarney Farms suffered damage as a result of the aerial spraying and that this was due to spray drift from the Rendell land. The spraying conditions were not ideal because the direction of the wind, 150 degrees, was from a generally southerly direction and it took only a minor wind shift, which occurred after the spraying had concluded, to carry the residual spray which remained in the air to the north onto "Billabong" and the Canarney Farms. 32 I am satisfied that the spraying carried with it a recognisable risk that spray would drift onto "Billabong" and would harm the vines, trees and susceptible plants thereon, and that the negligent manner in which the spraying was carried out increased that risk. 33 The steps taken by the defendants to protect the property "Billabong" from harm fell short of the steps which a person having a duty of care to the owners and occupiers of "Billabong" ought to have taken. In the circumstances, the first, second, third and fourth defendants are liable in negligence for the damage which has resulted to the plaintiffs therefrom. 34 Although I have dealt with the matter under the principles of negligence I am also of the view that the defendants are responsible under the principles of nuisance, if those principles be applied. Their action of aerial spraying the weedicides in the close proximity to the plaintiffs' vulnerable vines, especially in the circumstance that the general drift of the wind was to the north rather than to the south, was not reasonable. The benefit of destroying the weeds on the Rendell property could not possibly justify the harm to the plaintiffs' vineyards. Accordingly, liability is also established on this ground. 35 On the issue of damages, Mr Ireland principally submitted that they should be assessed in accordance with the principles of nuisance. However, I do not consider that there is any relevant distinction as to damages between the principles of nuisance and negligence applicable in this case. 36 Mr Ireland submitted that damages should be awarded at least to Jure and Eva Bonic, who are registered as the proprietors of "Billabong", and also to John Bonic whom he said had entered into a formal partnership with his parents during the 1980s. The partnership accounts and income tax returns do not include Frank Bonic as a partner. It appears that he was to have a particular interest in the winemaking activities which were contemplated. However, the statement of John Bonic which was tendered said that he commenced working for his parents at the end of 1976 and that, "After a few years working for my parents I entered into partnership with them and my brother". Whatever the accounts said, I am satisfied that the working relationship between the parties was such that there was from 1988 effectively a partnership between all members of the family. Indeed Frank Bonic expressly said in his statement, "The business conducted on 'Billabong' has always been run as a Partnership". The accounts of Capital Wines Pty Ltd show that all the members of the family participated in the winemaking venture. For the purposes of damages, I am of the view that all four plaintiffs should be regarded as having an interest in the vineyards. I am satisfied that the venture was not conducted with any strict regard to legal niceties and that the business carried on on the property was a family venture in which, from 1988, when Frank Bonic returned to live on the property, all members of the family participated and from which they all benefited. 37 As an indication of this point, I should mention that, in the 1989 and 1990 years, funds, which together with interest totalled $250,000 approximately, were deposited with the Pyramid Building Society in the name of Frank Bonic. The deposit books are in evidence showing a number of deposits into accounts in his name. The evidence as to how this came about is not entirely clear but it seems that grapes from "Billabong" were sent to wineries in the name of Frank Bonic and that the cheques therefor were deposited in his name. John Bonic gave evidence that this course of action arose from the fact that Frank Bonic had had a motor cycle accident and that, after a family conference, it was decided to put moneys into the Pyramid Building Society for his welfare. That evidence was not the whole truth. One result of the step taken was that the sums paid to the Pyramid Building Society were not disclosed in the partnership's accounts and, as a result, the income returned in the partnership's income tax returns was correspondingly diminished. No evidence was given that Frank Bonic returned the sums as income and I infer that he did not. Lest it be thought that sums deposited to the Pyramid Building Society account were to be treated entirely as Frank Bonic's money, I should mention that Frank Bonic, in his evidence, stated that as at April/May 1990 "our family resources" comprised moneys on deposit with the ANZ Bank and the investment of approximately $250,000 with the Pyramid Building Society. Frank Bonic also stated that, but for the damage to the vineyards in November 1989, "our family" had intended to use part of the sum of $250,000 for the acquisition of a new tractor, the cost of trellising Vineyard 2 and initial expenditure on the construction of the winery which "we" had planned. I conclude that the money was not lost to the family by its investment in Frank's name. In 1989 and 1990 Frank was very much a part of the business carried on on "Billabong". Much of the money was lost, however, when, in 1990 the Pyramid Building Society failed. A dividend of a proportion of the money was received only after the Government's intervention. 38 Vineyard 2, which had been planted early in 1989, was badly affected by the spray and within a few weeks the cuttings were dead. The replanting did not occur until 1995. The delay in replanting was due to a number of factors, one of which was this litigation which commenced in 1990. Another cause of delay was that, when the vineyards stopped producing and when the Pyramid Building Society failed, the plaintiffs found themselves without the funds which they needed both for their living expenses and to enable them to re-establish Vineyard 2. 39 Vineyard 1 was badly affected by the spray but it may be debatable whether the vineyard needs replanting. Mr Hutchins gave evidence that, while there is no cure for hormone herbicide harm except time, there is a general view that vineyards affected by 2, 4-D weedicide will recover in about three years. He said that that was a view which was strongly held by some persons but that it was not a view which he himself holds. Mr Hutchins said that he has heard of properties which have not recovered from such harm. He gave evidence that he was not sure that Vineyard 1 would ever fully recover. 40 When Mr Hutchins inspected "Billabong" on a second occasion on 10 December 1998, Vineyard 1 was producing only fifty to sixty per cent of its potential production. Mr Hutchins gave evidence that the vineyard was still showing signs of having been affected by the spray, that the formation of the bunches of grapes was not the formation one would expect to see on healthy vines, but was deficient or deformed. Mr Hutchins said that he made relevant enquiries as to the manner in which the plaintiffs maintained the vineyard and ultimately satisfied himself that the cause of the problem which he could see was the effect of the spraying in 1989. He said that Vineyard 2 which had been replanted in 1995 was developing normally with healthy growth. He said that he was satisfied that Vineyard 1 had received proper nourishment and that its deformities were the result of the spray drift. I accept Mr Hutchins' evidence on that point. 41 Perhaps one reason why the vines were slow to recover was that in 1993 they suffered an attack of a fungus which was endemic in the area. Ordinarily the fungus is controlled by appropriate sprays. The plaintiffs had treated the vines in the usual manner but, because the vines had been weakened by the spray in 1989, they did not respond and suffered considerable fungus damage in that year. Another problem that occurred was that, because the tops of the vines had been badly affected by the spray, the vines started to shoot at the bottom and these shoots had to be removed whenever they appeared. 42 Mr Hutchins is of the view that, given careful treatment, the vines in Vineyard 1 will ultimately recover their normal health. However, the plaintiffs have suffered a decade in which Vineyard 1 has failed to perform up to expectations. The vines are still showing signs of deformity and their production is severely limited. The plaintiffs have decided to replant Vineyard 1 and propose to undertake that operation later this year. That appears to me to be a sensible, commercial decision and I approach the issue of damages on the basis that that is a proper action to take and that the delay which has occurred in doing so, if it could be called delay, was due to the necessity of determining how the vineyard would respond to careful treatment. 43 A claim is also made for the delay in developing the remaining paddock into a vineyard. The land was levelled in about 1987 years to enable it to be used as a vineyard. The plaintiffs have only just commenced establishing a nursery of cuttings to enable them to plant up the new area. They claim loss for the delay and the establishment of this new vineyard, which they allege was due to the lack of funds brought about by the damage to Vineyards 1 and 2. 44 Mr Arnold Shields, a chartered accountant with extensive experience in the wine industry, has calculated the plaintiffs' losses as follows:

Past Future Total Vineyard 1 Grape Production Probable 528,191 258,900 787,091 Less: Tax (19,575) (24,147) (43,722)

Less: Actual & Estimate 583,086 (10,739) 572,347 Less: Tax (25,588) - (25,588) (48,882) 245,492 196,610

Bulk Wine Production Probable 336,110 344,670 680,780 Less: Tax (75,100) (124,081) (199,182)

Less: Actual & Estimate 608,192 129,309 737,501 Less: Tax (147,354) (38,148) (195,501 ) (199,829) 139,428 (60,401) _____________________________________ Subtotal (248,710) 384,920 136,210

Vineyard 2 Grape Production Probable 895,579 446,759 1,342,338 Less: Tax (76,653) (49,263) (125,916)

Less: Actual & Estimate (347,680) 257,165 (90,515) Less: Tax --- 1,166,606 140,331 1,306,937

Bulk Wine Production Probable 1,786,421 748,338 2,534,759 Less: Tax (537,735) (269,402) (807,137)

Less: Actual & Estimate (195,863) 835,601 639,739 Less: Tax - (300,816) (300,816 ) 1,444,548 (55,849) 1,388,699

  Subtotal 2,611,154 84,482 2,695,636
  Vineyard 3
  Grape Production
  Probable 419,833 1,189,516 1,609,349
  Less: Tax (107,237) (126,564) (233,801)

Less: Actual & Estimate - (279,215) (279,215) Less: Tax __ - _______________ - ______________ - ___ 312,596 1,342,167 1,654,763

Bulk Wine Production Probable 171,419 2,154,989 2,326,408 Less: Tax (199,347) (775,796) (975,143)

Less: Actual & Estimate - 715,089 715,089 Less: Tax - (261,197) (261,197 ) (27,928) 925,301 897,373 _____________________________________ Subtotal 284,668 2,267,468 2,552,136

Mr Shields has provided detailed schedules which set out the items he has taken into account in respect of each vineyard. It is unnecessary to set them out. Mr Shields has assumed that Vineyard 1 will be replanted in 1999 and will come into full production in the year 2004. He has calculated the loss on Vineyard 2 on the footing that it was replanted in 1996 and will come into full production in the year 2001. Mr Shields has assessed Vineyard 3 on the basis that it will be planted in 2001 and will be in full production in the year 2004. The years adopted are the financial years ending on 30th June of the specified years. 45 In making these calculations, Mr Shields has assumed that the damages award will be a capital sum for the purposes of the Income Tax Assessment Act 1936 (Cth) and therefore that he should deduct tax from his estimates of profits in order to give a true reflection of the actual loss which the plaintiffs would have suffered. This approach is in my opinion correct. No submissions have been made with respect to the application of the capital gains tax provisions of the Income Tax Assessment Act and I have given them no consideration. 46 Looking at Vineyards 1 and 2 for the moment, the damages awarded in respect of them will be damages for the harm done to the vineyards and the resultant diminution in the plaintiffs' earning capacity and not for loss of income as such. In Whitaker v Federal Commissioner of Taxation (1998) 82 FCR 261, when speaking of personal injury cases, Burchett J said at 283: " [In] principle the award is for the loss of earning capacity, not for particular wages. "

His Honour referred inter alia to remarks of Mason and Dawson JJ in Redding v Lee (1983) 151 CLR 117 at 133-4, of Barwick CJ in O'Brien v McKean (1968) 118 CLR 540 at 546, of Windeyer J in the same case at 557 and of Brennan J in Tinkler v Federal Commissioner of Taxation (1979) 29 ALR 663 at 667. The substance of those comments is that the ground of damages for economic loss may be the destruction or impairment of earning capacity. And so it is in the present case, where the assessment of what the earnings of the plaintiffs would have been but for the harm resulting to the plaintiffs' property from the defendants' negligence is simply the means of calculating what is fair compensation for that harm and not itself the object of the award. 47 Thus in Glenboig Union Fireclay Company Ltd v Commissioners of Inland Revenue (1922) 12 TC 427 compensation awarded for the sterilisation of a load of fireclay was held not to be taxable profits although it was calculated on the basis of two-and-one half year's working. Similarly, in Commissioners of Inland Revenue v Ballantine (1924) 8 TC 595, where a sum of interest was included in the total award, it was treated not as interest but as part of the capital sum awarded. In this country, Whitaker v Federal Commissioner of Taxation and Commissioner of Taxation v Northumberland Development Co Pty Ltd are to the same effect. 48 Mr Shields has incorporated a 3% discount in his calculations of profits in accordance with the figure adopted in Todorovic v Waller (1981) 150 CLR 402. 49 In assessing "probable" production, had the vineyards not suffered damage from the spray, Mr Shields has relied upon average figures for vineyards in the Murrumbidgee Irrigation Area, it being conceded that the plaintiffs' figures for actual production in 1989 and earlier are not reliable. Figures for the Murrumbidgee Irrigation Area are available and properties therein are analogous to "Billabong". Figures for the precise district in which "Billabong" is situated are not available. 50 I am prepared to accept Mr Shields' figures and the basis upon which he prepared them. Indeed, the fact that during some periods the plaintiffs achieved actual returns for their grapes and bulk wine production greater than the figures which Mr Shields has taken into account for probable production shows that Mr Shields' figures are conservative. Mr Shields has explained that the actual prices which the plaintiffs achieved for their bulk wine and their transfer prices to Capital Wines Pty Ltd were in some years greater than the prices which he has taken into account in calculating the plaintiffs' "probable" returns. 51 Mr Shields was correct, in my opinion, in ignoring the fact that the company Capital Wines Pty Ltd, was incorporated in 1991, and thereafter formed part of the income earning structure. As I have already mentioned, the task is not to determine the actual profits which the plaintiffs would have made but for the harm caused by the spray drift but rather to determine what is fair compensation for the harm done to the vineyards and to their income earning capacity. In this regard the precise structures that were subsequently adopted can be disregarded. See Hungerfords v Walker (1989) 171 CLR 125 at 150. 52 I accept the manner in which Mr Shields has calculated the damages in relation to Vineyards 1 and 2. Although another producer with greater assets may have undertaken the replantings at an earlier stage, I do not consider that any delay should be taken into account to the plaintiffs' detriment. "Billabong" was a small property and the plaintiffs did not have extensive resources or ready access to additional capital. It is understandable that their plans were thrown into confusion for quite a substantial time. And it has, indeed, been necessary to wait to see whether Vineyard 1 would recover before undertaking the substantial expense of replanting it. 53 I have given such consideration to Mr Shields' figures as I am able to. I have not identified any additional matter that Mr Shields should have taken into account or any matter that he has failed to take into account. I accept his calculation of the damages with respect to the harm done to Vineyards 1 and 2 as being a reasonable assessment of the loss flowing from the damage caused to those vineyards and their production by the spray drift. 54 Vineyard 3 falls into a different category. Although the planting of Vineyard 3 was one of the projects which the plaintiffs had in mind for some time in the future, the time of the planting does not appear to have been actually determined when the aerial spraying occurred in November 1989. Thus, Frank Bonic did not mention it as one of the items on which the $250,000 in the Pyramid Building Society accounts was to be spent. An earlier project to which attention was being given was the construction of a winery for the production of bulk wines. That project in fact went ahead. A winemaker was engaged in the early years but Frank Bonic has since studied for and passed the degree of Bachelor of Applied Science (Wine Science) at Charles Sturt University. In his oral evidence, John Bonic gave evidence that, "Back then (November 1989), I think we were concentrating on mainly the winery side ...". 55 It would be speculative to calculate damages on the footing that the plaintiffs were delayed in planting out Vineyard 3. To take an example, Frank Bonic gave evidence that, in 1990, the plaintiffs had the opportunity to purchase a further 2,000 acres of land for $220,000. The land was situated some four kilometres from "Billabong". The plaintiffs wished to purchase this land so they could commence planting red wine varieties and proposed initially to plant approximately 100 acres to a mix of Cabernet, Merlot, Shiraz and Malbec. Frank Bonic said that, as a result of the loss of income from the Vineyards 1 and 2, the plaintiffs were unable to purchase this land. This item of evidence, which is not relied upon as a head of damage, shows how wrong it would be to assume, as Mr Shields has assumed for the purposes of his figures, that Vineyard 3 would have been planted out in 1994. That may have happened or something different may have happened. 56 In Hungerfords v Walker the Court, Mason CJ, Wilson, Brennan and Deane JJ, Dawson J dissenting, held that expenses incurred and opportunity costs arising from moneys being paid away or withheld as a result of a breach of contract or negligence are pecuniary losses suffered by a plaintiff as a result of the defendant's conduct and therefore are an element of the loss for which the plaintiff is entitled to be compensated by an award of damages. Their Honours held that damage resulting from loss of the use of money was a foreseeable loss, within the contemplation of the parties, which could be directly related to the defendant's breach of contract or negligence. The general principle was stated by Mason CJ and Wilson J at 142 as follows: " If a plaintiff sustains loss or damage in relation to money which he has paid out or forgone, why is he not entitled to recover damages for loss of the use of money when the loss or damage sustained was reasonably foreseeable as liable to result from the relevant breach of contract or tort? After all, that is the fundamental rule governing the recovery of damages, according to the first limb in Hadley v Baxendale ( see Victoria Laundry (Windsor) Ltd v Newman Industries Ltd [1949] 2 KB 528 at 539) and, subject to proximity, in negligence. The object of the second limb in Hadley v Baxendale was to include loss arising from special circumstances of which the defendant had actual knowledge when that loss does not fall within the first limb because it does not arise from 'the ordinary course of things' of which the defendant has imputed knowledge: see Victoria Laundry . To allow a plaintiff to recover special, but not general, damages, is illogical, subverts the second limb in Hadley v Baxendale from its intended purpose and introduces a new element into the general measure of damages for negligence.

57 At 143, Mason CJ and Wilson J explained that such damages, calculated with reference to appropriate interest rates, may be reasonably foreseeable. Their Honours said: " The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates, for loss of the use of money. Opportunity cost, more so than incurred expense, is a plainly foreseeable loss because, according to common understanding, it represents the market price of obtaining money. "

At 154, their Honours rejected other contentions as to how the moneys may have been used. Their Honours expressed the view that it might be more appropriate to measure a loss on the basis of opportunity costs by reference to current market rates of interest. 58 A point being made by their Honours was that, if there is harm to a business which will result in a loss of income, it can be readily foreseen that such a loss will involve a loss in the use of money which can be measured by reference to appropriate interest rates. However, their Honours rejected the view that, absent special knowledge so as to bring the matter within the second rule in Hadley v Baxendale, the Court should engage any speculation as to how moneys lost may have been expended if received. 59 In Malec v J.C. Hutton Pty Ltd (1990) 169 CLR 638 the High Court explained that, in the assessment of the future earning capacity of a plaintiff who had been injured as a consequence of the defendant's negligence, it was necessary to engage in a degree of speculation. Brennan and Dawson JJ said at 640: " To make a finding on the balance of probabilities as though the prospect were something that had occurred in the past was to misconceive the process of evaluation. "

" Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. " In Norris v Blake (No 2) [1997] 41 NSWLR 49, Clarke JA with whom Handley and Sheller JJA agreed, examined the point in even more detail and at 75 said: " It follows from what I have said that the Court is concerned to determine what, on the evidence, was the most probable course that the respondent's career would have taken, what amount should be awarded to compensate him for the losses flowing from his inability to follow that course, and finally to make adjustments to the sum resulting from that determination to take account of the contingencies which in this case include the loss of the chance to do even better, to become, as it were, a successful star in the United States, even a superstar. " One can see therefore that, at least where future employment is concerned, the fact that possibilities may be speculative does not mean that they should not be taken into account. 60 However, the issue with respect to Vineyard 3 is different from that where the hypothetical future of a person who was injured has to be taken into account. The issue that we are speaking about now is not what the future would have been of Vineyards 1 and 2 had they not been harmed. The issue is the damages flowing from the non receipt of income from Vineyards 1 and 2. It is said by the plaintiffs that the non receipt of those moneys necessitated their delaying the planting of Vineyard 3, but it must be kept in mind that the spray drift on the property did not adversely affect the paddock on which Vineyard 3 was to be planted and there is no evidence that the defendants were aware of the plaintiffs' plans to plant Vineyard 3. From the defendants' viewpoint, the spray drift onto Vineyards 1 and 2 could just as readily have encouraged the plaintiffs to progress the planting of another vineyard as otherwise. The defendants would have been able to foresee that money might have had to be borrowed and they could foresee interest charges thereon. However it does not seem to me that it was reasonably foreseeable that the spray drift onto Vineyards 1 and 2 would cause large losses in respect of a vineyard yet to be planted on land which was not affected. 61 For these reasons I am of the view that the appropriate method of awarding damages in respect of the element of loss of the use of money is to award interest at appropriate rates. As no other rates have been put forward, I shall adopt the rates set out in Schedule J to the Rules of the Court. 62 Accordingly the plaintiffs are entitled to judgment for the sums calculated by Mr Shields in respect of Vineyards 1 and 2. Interest should be added by relating the interest rates set out in Schedule J to the details of Mr Shields' calculations in respect of Vineyards 1 and 2. The total should be reduced by the compensation which has been received from other parties, the amount of which was stated by counsel. The first four named defendants should pay the costs of the plaintiffs. Counsel should bring in short minutes within seven days giving effect to these findings.

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