Recovery of economic loss
29 Mr Newlinds SC for Bonny Glen submitted that there were errors in the judgment of the primary judge. He submitted that she did not address and decide the correct questions, namely whether the economic loss was caused by Country Energy's breach of duty, which in turn depended on whether Bonny Glen's actions in destroying the trees was reasonable; and whether that loss was of a kind which was foreseeable by Country Energy. He submitted that in par [104] of the judgment, the primary judge set up the wrong test, namely whether it was necessary to cut down the trees; and although in other places the primary judge referred to whether the economic loss was "foreseeable" (pars [105] and [129]) and whether Bonny Glen's actions were "reasonable" (par [129]), she did not decide those questions.
30 Mr Newlinds submitted that there were particular errors, first in the way the primary judge dealt with Mr Hawke's evidence. He submitted that it was an error to hold that the effect of his evidence was merely that he wanted to be told when Bonny Glen was spraying so that he could move his cattle. His affidavit evidence, that he said to Mr Timothy Hall words to the effect that "you won't be able to spray that block", was not merely a proof of evidence, but sworn evidence; and it was not squarely put to him that it was incorrect. Even when Country Energy's counsel was given the opportunity to do this, the only challenge was in terms of what he was concerned about, not what he said (see Black 249-250, 253-257). Mr Hawke's sworn affidavit evidence was that his concern about spraying near the destroyed windbreak was the cattle and the fact that he had decontaminated the block adjacent to it; and also that he could not keep the cattle away from both the area of the destroyed windbreak and also the southern gap. Further, Mr Newlinds submitted, the primary judge was in error in suggesting that Mr Hawke's concern was the reason for Bonny Glen removing the trees; whereas in truth that concern was what led them to seek expert advice, and they removed the trees acting on that expert advice.
31 Mr Newlinds submitted the primary judge also erred in finding an inconsistency in the evidence because of the existence of the southern gap. He submitted there were important distinctions between the southern gap and the area of the destroyed windbreak. The latter was a much larger gap, it was opposite an area decontaminated for the subdivision and was near the driveway giving access from the road to the Hawke's residence and therefore more likely to have people on or near it. On the other hand, the southern gap had been created by Mr Hawke, originally adjacent to an orchard of his, and later easily dealt with because it was only a small gap and Parkwood's cattle could be grazed elsewhere on Parkwood's property other than in the winter. Further, Mr Newlinds submitted, the experts did not say there was no risk associated with the southern gap, and Bonny Glen accepted that if questions were raised about the southern gap, it may have to consider ceasing to spray near the southern gap also.
32 Mr Newlinds submitted that the primary judge erred in rejecting the evidence of Bonny Glen's expert because of the existence of orchards in the area without windbreaks. The reasonable conclusion was that it was necessary to consider the circumstances of the individual orchards, and also to take into account that the growing awareness of the spray drift problem could be raising problems for these orchards as well.
33 Mr Newlinds submitted that the primary judge also erred in treating the question as being one of whether the advice of Mr Kidd and Mr Collett to remove the trees was correct, whereas the true questions were whether it was reasonable for Bonny Glen to follow the advice and whether the damage involved was of a foreseeable kind. This was particularly so in circumstances where the case had been fought on the basis that Bonny Glen could not just go on spraying as before, but had to do something to deal with the spray drift problem created by the loss of the windbreak. It was contended for Country Energy that this could be by way of different spraying methods or an artificial windbreak. The primary judge rejected the suggestion of an artificial windbreak, and that rejection was not challenged on appeal. Mr Newlinds further submitted that it had never been suggested that the expert advice was so wrong that giving of such advice was not foreseeable, or that it was unreasonable to follow it.
34 Mr Newlinds submitted that this Court should address the correct question, and conclude that the economic loss was caused by Country Energy's breach of duty.
35 Mr Campbell SC for Country Energy submitted that in considering questions of causation of damage for a breach of a duty to exercise reasonable care to avoid causing pure economic loss, it was appropriate to have regard to policy or value judgments as well as common sense. He submitted that the legal context informed normative consideration in relation to liability for pure economic loss. In that regard, he referred to Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627 at [28].
36 He submitted that the question was whether the defendant's breach of duty or contract caused the plaintiff's loss; and where part of the chain of causation involved the intervention of voluntary conduct by someone other than the defendant, there was a real question as to whether the defendant was liable. It was true that not all voluntary conduct by a plaintiff severs the causation; but if it is not to do so, the conduct must be reasonable, viewed objectively, and in that regard it is relevant to know whether any such expert advice as the plaintiff may have obtained was bad. Mr Campbell asked rhetorically why should a tortfeasor be liable for purely economic consequences of bad advice, given the general approach of the law to recovery for pure economic loss.
37 Mr Campbell submitted that the question was not so much whether the plaintiff acted reasonably at large, but whether, as between the plaintiff and the defendant, for the purpose of measuring the extent of the defendant's liability, the plaintiff's conduct was reasonable in all the circumstances of the case: see Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1 at 10-11.
38 Mr Campbell also referred to Perre, and submitted that the policy of the law in relation to pure economic loss is one of restraint and restriction, and one where the grant of a remedy is seen as exceptional. Mr Campbell submitted that this affects the approach to causation.
39 Mr Campbell submitted that the primary judge had correctly found that the removal of the trees was a free and voluntary decision of Bonny Glen. The primary judge considered what the Halls said as to why this action was taken, and considered the attitude of the neighbour. The primary judge found that the concern of the neighbour was more limited than suggested by Bonny Glen. The primary judge considered the advice of experts, which was not supported on a scientific basis, but rather was based on a fear of legal liability and of prosecution. That was bad advice, because, as shown by the existence of the southern gap and the existence of orchards in the area without windbreaks, it is possible to spray effectively without the existence of a windbreak. Furthermore, Bonny Glen made its decision to remove the trees without entering into discussion with Mr Hawke as to how the problem could otherwise be dealt with, and without any investigation of the expert's opinion.
40 In these circumstances, Mr Campbell submitted, there was no error by the primary judge and her decision was correct.
41 I note first that, in the absence of a notice of contention, the Court did not permit Country Energy to submit that Country Energy had no duty of care or no contractual duty to exercise reasonable skill and care not to cause economic loss (as distinct from property damage) to Bonny Glen. The matter is being dealt with on appeal on the basis that there was a relevant breach of duty of care or breach of contractual duty, with the only question being whether it was proved to be causative of the economic loss suffered by Bonny Glen.
42 However, I would note in passing that it seems to me that where there is a breach of a duty to exercise reasonable skill and care not to cause property damage, and as a result of that breach of duty economic loss is caused without property damage actually occurring, that loss may be recoverable. Suppose for an example the defendant's negligence causes a fire which would cause damage to the plaintiff's ship which is in the process of being loaded at a wharf; and the ship is moved thereby preventing the property damage but causing economic loss through the move and the delay to the loading of the ship. Even if the duty of care in such a case were considered to be limited to a duty of care not to cause property damage, it seems to me at least arguable that pure economic loss caused in that way would be recoverable.
43 In the present case, there is no doubt that Country Energy had a duty of care in relation to property damage to Bonny Glen's property; and there could be damage to that property not only by a fire spreading on to the property and damaging the property itself, but also by the removal of a windbreak causing damage to trees on Bonny Glen's property, for example by exposure to wind causing loss of blossom, loss of limbs and/or damage to fruit. It seems to me doubtful whether there would be a sharp distinction between physical damage of this kind, and economic loss arising because of problems created in relation to spraying of trees caused by removal of the windbreak.
44 In any event, it does not seem to me that the circumstance that the loss claimed is pure economic loss involves any significant change in principle in the way the question of causation is to be approached. Plainly, the question of "but for" causation must be satisfied. Then, it must also be found that the defendant's breach of duty was, as a matter of common sense, a material cause of the loss. This in turn must depend on whether it was reasonable for Bonny Glen to do what it did, with the question of reasonableness having regard both to the interests of Bonny Glen and the interests of Country Energy. In a case such as this, the requirement of reasonableness is a necessary step in the plaintiff's proving causation, not merely a matter for the defendant to negative as amounting to a failure to mitigate. However, if the plaintiff proves the plaintiff's action was reasonable, then a fortiori the defendant will not establish a failure to mitigate. Finally, if these elements are established, there is still the question whether the loss claimed was of a kind that was foreseeable by Country Energy.
45 I accept that the circumstance that what is being claimed is pure economic loss is to be taken into account in addressing these questions, and that the law's policy of restraint and restriction in relation to awarding damages for that kind of loss is relevant; but in my opinion it does not alter the basic approach for the questions to be considered.
46 In my opinion, the primary judge did make the errors identified by Mr Newlinds in his submission, in particular in treating the matter as depending on whether the experts' advice was correct, rather than squarely addressing the question whether Bonny Glen's conduct was reasonable and whether the loss was of a kind that was foreseeable.
47 In this case, the requirement for "but for" causation was plainly satisfied.
48 In addressing the question whether, as a matter of common sense, the breach of duty by Country Energy was a material cause of Bonny Glen's loss, the following matters are relevant. The windbreak was plainly advantageous to Bonny Glen, in protecting the trees, creating a micro climate and in reducing problems associated with the use of poisonous sprays; so undoubtedly the destruction of the windbreak would create problems for Bonny Glen and be likely to cause damage to Bonny Glen. The breach of duty by Country Energy thus created a problem for Bonny Glen, and in those circumstances the standard of reasonableness for Bonny Glen's conduct should not be set too high: see Banco de Portugal v Waterlow and Sons Limited [1932] AC 452 at 506. On the other hand, it should not be set too low, and in assessing reasonableness it is necessary to have regard to the interests of Country Energy as well as the interests of Bonny Glen.
49 It is relevant that Mr Hawke had expressed concerns to Bonny Glen, not limited to a request that he be warned so that he could move his cattle. The cross-examination at the pages previously indicated could not be considered to have destroyed Mr Hawke's evidence about the other concerns disclosed in his affidavit. Next, the additional problems, associated with the destroyed windbreak, of the driveway, the decontamination of the subdivided block, and the absence of other areas in which to graze cattle meant the problem was substantially greater than that involved with the southern gap. Next, it was relevant that the question of spray drift was becoming one of general community concern in the area. The Halls sought expert advice, which was to the effect that, because of the risk of spray drift and the risk of the commission of an offence and prosecution, Bonny Glen should not spray in the area until the windbreak was re-established; and that it therefore should remove the trees. The Halls, because of the concerns of the neighbour, the risk of spray drift and commission of an offence and prosecution, and because of the expert advice, decided to remove the trees. It was not suggested to the experts that they did not hold their opinions or give them; and the expert called by Country Energy, Mr Gordon, accepted that the question whether to continue spraying was a matter of judgment.
50 In my opinion, it is not necessary to find on the balance of probabilities that the expert advice was correct. It was not shown to be plainly unreasonable, or even to be incorrect. In my opinion, in those circumstances, Bonny Glen did prove that its conduct was reasonable, and reasonable having regard both to its own interests and the interest of Country Energy. Accordingly, in my opinion the economic loss resulting from the removal of the trees was caused by the fire and thus caused by Country Energy's breach of duty.
51 There is some force in the submission that, because some orchards operate in the area without windbreaks, the economic loss in question was not foreseeable. However, what has to be foreseeable is a kind of damage; and although that requires judgment as to the appropriate level of generality, in my opinion damage to an orchard business through loss of a windbreak is sufficiently specific; and in my opinion, loss of that kind was foreseeable. Further, because of the need to use poisonous sprays, and because the matter of spray drift was a matter of significant community concern and significant publicity in the area, in my opinion a narrower kind of damage was also foreseeable; that is, damage caused by loss of a windbreak through creating problems for managing spray drift. This was confirmed by the evidence of the Country Energy employee Mr Middleton (Black 340-41) that he knew at the time that a windbreak around an orchard was advantageous to that orchard, and that windbreaks had a positive effect for their neighbours because they stopped or reduced spray drift.
52 Since damage of that kind was in my opinion foreseeable, it is not necessary to find that the precise manner in which that damage occurred was foreseeable.
53 For those reasons, in my opinion the appeal should be upheld, and Country Energy should be held liable for the economic loss in question.