Brownlie v Campbell

Brownlie v Campbell - [2007] NSWCA 18 - NSWCA 2007 case summary — Zoe

[15]

The events leading to the remitted trial (the first two rounds) 4 This is the fourth round of litigation between the appellant ("Falls Investments") and the respondent (the State of New South Wales). 5 Since 1978 Falls Investments conducted a beef shorthorn stud at its property Malton at Finley, near Deniliquin, and at various other agistment properties. From 1983 until 1993, the Malton stud was the most successful exhibitor of beef shorthorn cattle at the Sydney Royal Easter Show and the Royal Melbourne Show. It had a very high reputation in the Australian cattle industry. 6 The litigation arises out of the loss in value of the Malton herd of stud cattle (comprising over 800 head). The loss resulted from virtually the entire herd having or being perceived to have been infected with Bovine Johne's Disease ("BJD"). 7 In August 1992, a number of animals on Malton tested positive for BJD. By this time, the New South Wales Department of Agriculture had adopted a policy for eradication of BJD by what was called "total herd depopulation", that is, slaughter of all cattle in herds found to contain infected animals. In terms of the Department's policy, owners of slaughtered cattle were paid compensation under the Cattle Compensation Act 1951 (NSW) (now repealed). When the tests on Malton cattle proved positive, both Falls Investments and the Department believed that the policy would apply and the entire Malton herd would have to be slaughtered. 8 In August 1992, the major part of the Malton herd was on the Malton property, but a substantial number of animals in the herd were at agistment properties. I shall refer to that part of the Malton herd kept on Malton as the "home herd". From time to time, Falls Investments moved cattle from Malton to agistment properties and vice versa. The population of the home herd was therefore, to a degree, transient and continually changing. 9 Falls Investments contends that, on the strength of negligent representations by the Department, it allowed the home herd to remain in proximity with cattle infected with BJD ("reactors") and moved its agisted cattle to Malton where they, too, mixed with reactors. Eventually, the entire herd became, or was perceived to be, infected and lost all value as stud cattle. 10 The representations alleged were to the effect that the Department would probably require Falls Investments to destroy the herd and, in return, Falls Investments would receive compensation from the State Government. This, in effect, was a representation that the Department's policy would be applied to the Malton herd. In the result, however, the Department did not apply the policy. The State did not require the destruction of the herd and did not agree to pay compensation in anything like the amount that Falls Investments contends it was led to believe would be paid. 11 Falls Investments brought proceedings against the State for damages sustained by reason of the loss in value of the Malton herd. It relied on four alternative causes of action, namely, breach of contract, estoppel, breach of the Fair Trading Act 1987 (NSW) and negligence. 12 On 26 November 2001, in the first round of the litigation, Palmer J dismissed the claims based on contract, estoppel and negligence but upheld the claim under the Fair Trading Act (see R T & Y E Falls Investments Pty Limited v State of New South Wales [2001] NSWSC 1027). His Honour gave judgment for Falls Investments in the sum of $607,981. 13 Both the State and Falls Investments appealed against the judgment of Palmer J (the second round). 14 On 25 March 2003, this Court (constituted by Spigelman CJ, Sheller and Hodgson JJA) upheld the State's appeal (see State of New South Wales v R T & Y E Falls Investments Pty Ltd (2003) 57 NSWLR 1). The Court found that the representations that had been made by the Department were not made "in trade or commerce" for the purposes of the Fair Trading Act, and, accordingly, there had been no contravention of that Act. 15 In its appeal, Falls Investments challenged the judge's findings in regard to the contract, estoppel and negligence causes of action. It also sought damages in a larger amount. This Court dismissed Falls Investments' appeal in relation to the contract and estoppel causes of action and also in regard to damages. It upheld Falls Investments' appeal in regard to the negligence cause of action on the ground that the trial judge had not dealt adequately with the negligence case. 16 The orders made by this Court in regard to the two appeals included: "5. Falls Investments' claim in negligence and all questions of costs of the first instance proceedings remitted to Palmer J for further consideration in accordance with the judgment of the Court of Appeal".

[18]

The judge required the parties to lead their evidence afresh as if the matter were a brand new trial. 18 The case then took an unexpected turn. Senior counsel for Falls Investments tendered only the material that formed its evidence-in-chief in the first trial, plus an additional bundle of documents. He adduced no other evidence. The evidence that was so tendered comprised three affidavits by two directors of Falls Investments (Mr Peter Falls and Mr Ronald Falls) and reports by two experts (Mr Favaloro and Dr Sykes). The State, in turn, did not tender any evidence save for Falls Investments' answers to three interrogatories (which are not presently relevant). Ultimately, the State did not seek to cross-examine any of the Falls Investments' witnesses. 19 At the first trial, the Falls Investments' witnesses were cross-examined and the State led evidence from its own witnesses who, in turn, were cross-examined. There was a substantial credibility dispute at the first trial involving, amongst other things, what was said in an important conversation on 28 August 1992 between Mr Peter Falls and Dr Daniel Salmon, a District Veterinarian in the employ of the Department and an Inspector under the Stock Diseases Act 1923 (NSW). Palmer J resolved this dispute in favour of the State and his Honour's findings were upheld on appeal. Spigelman CJ described this finding by Palmer J as "critical" (at [2]). The evidence of Dr Salmon, however, was not part of the evidence in the remitted trial. 20 During the course of closing addresses at the remitted trial, the parties relied only on the evidence that had been tendered in that trial. Nevertheless, they appeared to regard factual issues that had been determined in the first trial (and upheld on appeal in relation to the contract and estoppel causes of action) as being open for determination afresh in the remitted trial. Palmer J accepted this and in his judgment in the remitted trial ([2005] NSWSC 335) he determined those issues. Unfortunately, his Honour did so by reference not only to the evidence tendered in the remitted trial but to other evidence that was adduced in the first trial (but not in the remitted trial). This has consequences for this appeal and I will come to these. 21 The case in negligence presented by Falls Investments at the remitted trial was based on five representations made by Dr Salmon on behalf of the State and by a set of representations made by various persons, including Dr Salmon (to which I refer as the "sixth representations"). Falls Investments contended that the State was vicariously liable for Dr Salmon's conduct and, further, was independently liable. 22 Falls Investments pleaded in its statement of claim that the first three representations were made from about late July 1992 to late August 1992 by Dr Salmon on behalf of the State. These three representations were to the effect that the State had decided to "depopulate" (a euphemism that has been used throughout the proceedings) the Malton herd, that the State would arrange for the removal and slaughter of all the Malton herd, except for a select group of 30 head which would be kept on a separate property, and that Falls Investments would receive the value of each animal destroyed or $2,000, whichever was the lesser amount. 23 The fourth representation was alleged to have been made between about late August 1992 and 8 September 1992 by Dr Salmon on behalf of the State. This was to the effect that cattle on Malton, which had tested positive for BJD, did not need to be separated from the other cattle at Malton because all cattle would be removed from that farm by 1 December 1992, and that a valuer (Mr Brian Leslie) should proceed to value the cattle (for the purposes of the State paying compensation). 24 The fifth representation was alleged to have been made in September 1992 by Dr Salmon on behalf of the State. It was to the effect that the depopulation of the Malton herd would commence in October 1992. 25 Falls Investments alleged that the first five representations were false and misleading. The following particulars were given of this allegation: "On 2 September 1992 [the Department] decided that because the Cattle Compensation Fund was in question, any approval of the depopulation proposal was deferred. On 7 September 1992 [the Department] decided to defer indefinitely any decision on approval of the depopulation proposal, but that neither [Dr Salmon] nor [Falls Investments] should be informed of this deferral." 26 The sixth representations were pleaded after the Court of Appeal's judgment in the first trial. In substance, by the sixth representations, Falls Investments pleaded that from July to September 1992 various individuals, on behalf of the Department, represented that the Department would support the depopulation proposal relating to the Malton herd (the "Proposal"), that the Department had agreed in principle to the Proposal and was not concerned about a large payout to Falls Investments, that the Department policy for BJD "preferred depopulation (whether total or partial) with compensation", that approval of the Proposal "was almost a foregone conclusion" and that it was safe for Falls Investments to proceed with the Proposal by having Mr Leslie value its stud cattle. 27 Palmer J, in the remitted trial, found that in the conversation of 28 August 1992 Dr Salmon told Mr Peter Falls that "he believed that support for [Falls Investments] depopulation proposal was very strong at [the Department's] head office and that it was highly unlikely not to be approved." His Honour found, however, that Dr Salmon did not make statements to Falls Investments in the terms alleged in the first to third representations. 28 Generally, with regard to the first three representations, the judge said: "[62] In my opinion, as the Court of Appeal has pointed out, what Dr Salmon said to Mr Peter Falls could not reasonably be interpreted as suggesting to [Falls Investments] that [Falls Investments] depopulation proposal would be approved by [the Department] with compensation and that it was, therefore, safe to proceed with mingling the agisted stud cattle with the stud cattle on Malton. Dr Salmon's statement necessarily conveyed that there was a risk - slight, no doubt, but still a risk - that the proposal would not be approved. [63] Accordingly, in mingling its herds of stud cattle, either [Falls Investments] consciously exercised its own judgment in deciding to take the risk, evident from Dr Salmon's statement, that the depopulation proposal would not be approved or else it placed an unreasonable construction on Dr Salmon's statement, concluding that there was no risk and that it was safe to proceed. In either case the loss which [Falls Investments] suffered was caused by its own act, not by the statement actually made by Dr Salmon. [64] The causative link between Dr Salmon's statement to Mr Falls and [Falls Investments] loss has not been established. That conclusion is sufficient to dispose of the case." 29 With regard to the fourth and fifth representations, his Honour made no express finding as to whether they were made or not. He dealt with them in this way: "The evidence as to when they were made is vague. However, the terms of the representations suggest that they were made after the decision to move agisted cattle to Malton had been made by [Falls Investments] and implemented. In those circumstances the representations could not have produced the loss claimed by [Falls Investments]." 30 Further, Palmer J did not accept that either the Department or Dr Salmon was aware that "there was a real likelihood of damage from cross-contamination if depopulation did not proceed". His Honour said: "As I have observed on a number of occasions there is no evidence that Dr Salmon and [the Department] had been informed by [Falls Investments] that it intended to act on Dr Salmon's statement to Mr Peter Falls on 28 August by bringing agisted cattle onto Malton for valuation prior to formal approval of [Falls Investments] application. There was no need for [Falls Investments] to bring its agisted cattle to Malton for valuation: Mr Ron Falls conceded that [Falls Investments] transported the agisted cattle to Malton for valuation because it was more convenient for [it] to do so. There was no reason for Dr Salmon to suppose that [Falls Investments] was likely to 'jump the gun' and to act on the basis that it was safe to proceed as if [its] application for depopulation had already been approved by [the Department]." 31 In dealing with the Department's knowledge of the policy change alleged by Falls Investments, Palmer J found that by early August 1992 concern was being expressed by some officers within the Department about the long term ability of the Cattle Compensation Fund to meet claims upon it if the Government adopted the proposal to use part of the Fund for research purposes. His Honour found, however, that there was no evidence that suggested that the Government's proposal, if accepted, would mean that the Cattle Compensation Fund would be unable to meet claims upon it in the 1992/93 year or would be unable to meet Falls Investments claim in particular. He found that there was no evidence to suggest that anyone in the Department believed that to be the case at any time in August 1992. 32 His Honour went on to say: "It is clear, in my opinion, that by 2 September 1992, [the Department] rightly perceived that the fate of the Cattle Compensation Fund generally was a politically sensitive matter, that changes to the Act might soon be made which could impact on the availability of funds to meet large claims, and that a change to [the Department's] policy on total herd depopulation might be necessary." 33 Nevertheless, his Honour observed that no firm decision about the Department's policy in relation to the Cattle Compensation Fund had been made by 2 September or at the conclusion of a meeting of the senior officers of the Department on 7 September. His Honour noted: "Obviously, before any change in policy could be considered further and implemented, the Chief, Division of Animal Industries, Dr Scott-Orr, would have to be consulted but Dr Scott-Orr was absent from 6 September until 28 September." 34 A decision concerning Falls Investments' proposal was made as soon as Dr Scott-Orr returned. On 29 September 1992, Dr Salmon was informed that BJD compensation payments from the Cattle Compensation Fund had been "frozen". On 21 October 1992, the Minister approved the change to the Department's policy. On 29 October, Dr Scott-Orr wrote to Dr Salmon formally rejecting Falls Investments application. 35 His Honour found that, if the Department owed a duty to Falls Investments in tort to advise it carefully as to herd depopulation requirements or as to the Department's policy, that duty did not require the Department "to say anything further to Dr Salmon or to [Falls Investments] about the Department's policy or about [Falls Investments] application for depopulation". 36 In dealing with damages, Palmer J regarded proof that Falls Investments' agisted stud cattle were free of BJD prior to being moved to Malton as a necessary element of the claim. His Honour held: "The best evidence to prove that the agisted stud cattle were free from BJD as at 28 August and had not been exposed to BJD prior to that time by movement to and from Malton, was evidence directly to that effect which could have been given by the Messrs Falls who had direct knowledge of the facts."

[20]

The consequences of findings being made on evidence not led at the remitted trial 39 Falls Investments, in its notice of appeal, challenged his Honour's factual findings on the basis that they were based on evidence not led at the remitted trial. The State conceded that evidence, on which Palmer J relied, had not been led at the remitted trial. 40 On the day before the appeal was due to commence, the Court provided a memorandum to the parties concerning the way in which the remitted trial had been conducted. Relevantly, the memorandum stated: "… In substance, what the order [remitting the trial to Palmer J] required was a hearing that completed the resolution of the proceedings, with the decision disposing of all other causes of action, and the findings essential to that decision, left undisturbed. Since it was still the same case between the parties there could be no question of challenging these essential findings. … So far as evidence is concerned, the judgment of the Court of Appeal plainly did not contemplate that Palmer J would be asked to forget and ignore the evidence he had already heard, particularly when none of the findings of fact he had made were overturned … … It would seen [sic] that the appellant cannot contend for a finding of fact which is inconsistent with the essential findings on which disposal of the other causes of action rested, in particular, the finding as to the 28 August conversation. In our tentative view also, there can be no contention contrary to the dismissal of the negligence claim against Dr Salmon, and thus no submission that the State of New South Wales is vicariously liable for negligent conduct by Dr Salmon." 41 Mr Walker SC, who together with Mr P T Taylor SC appeared for Falls Investments, informed the Court that, in effect, he accepted what was stated in the memorandum. Mr P W Taylor, who together with Mr Laughton SC appeared for the State, did not demur from what was stated therein. Argument from both sides accordingly proceeded on the basis that the Court's "tentative" views were correct. This meant, amongst other things, that Falls Investments' challenge to the factual findings concerning the first three representations fell away (although the findings actually made remained capable of supporting the case based on the sixth representations).

[21]

BJD, its consequences and its history in the Malton herd 42 BJD is a wasting disease of cattle caused by bacteria. Cattle with clinical BJD have profuse diarrhoea, which may contain a massive number of the bacteria organisms. Some infected animals excrete the bacteria in their manure even though they appear clinically normal. Cattle may be infected by drinking milk or water, or eating pasture, contaminated with bacteria excreted in the manure of infected cattle. The progeny of infected cows are at high risk of being infected. Bacteria may survive in the environment for up to one year. 43 It is not unusual for infected animals to remain clinically normal throughout their commercial life in a herd but be a potential source of infection to other cattle. It is also not uncommon for there to be a low level of clinical disease in a stud herd but a significant number of clinical cases in cattle moved from the home property of the herd to other properties. This may be because the transported cattle may experience greater stress, and the onset of the clinical disease is often associated with stress (including stress caused by mustering and animals being transported to other properties). 44 Once BJD is detected in a herd or on the property of a herd, there is a reduced market demand for the infected cattle (and, to a degree, dependent on the circumstances, all animals from the herd). 45 The Malton herd had a history of BJD in the 1970s. No clinical cases were reported after the late 1970's. Nevertheless, cattle sold from the herd "broke down" with clinical BJD on the properties of one or more purchasers. Mr Ronald Falls said that, "to the best of his memory", all cattle, sold to others, that broke down with BJD originated from the home property, Malton, and not "the Finley and Oaklands agistment properties which had been established and run separately in an attempt to eradicate BJD". 46 On 8 May 1992, Dr Salmon wrote to Falls Investments noting that BJD "had been most recently suspected on Malton on 9 May 1991". 47 According to Dr Sykes, Falls Investments' expert, prior to August 1992 (when the July tests were found to be positive) "amongst some buyers there was a suspicion of BJD in the herd due to previous history and trace backs from herds that had purchased cattle from Falls".

[22]

Circumstances leading to the decision to move the agisted cattle to Malton 48 By 1992, Falls Investments' cattle was divided into over 800 head of stud cattle and a number of "commercial" cattle. 49 On 8 May 1992, Dr Salmon wrote to Falls Investments and stated that the Department had decided that more active intervention was necessary to limit the spread of BJD in New South Wales. Dr Salmon wrote: "Our first step is to restrict the entry of cattle into NSW from herds which have had evidence of [BJD] during the previous five years. This is being planned. The second step is of direct significance to you. As from February 1994 all herds in NSW with [BJD] will be quarantined. Cattle from those properties will only be allowed to go for slaughter and will not be able to be sold or sent to other properties. We are providing you with advance notice of this decision so that you will be able to check if your property is infected with [BJD], and if it is, to commence eradication procedure. A blood test of all cattle on your property over two years of age should show whether your property is infected. I shall be contacting you shortly to arrange this test. The first test will be free of charge. If your herd is infected with [BJD] there are several ways in which you can approach the problem. The attached pages summarise them …" 50 The "attached pages" included statements to the effect that the Department's preferred policy for eradication of BJD was "total depopulation of the herd" with compensation payable to the owner. The legal basis on which compensation was payable is set out in (2003) 57 NSWLR 1 at [64], 15 to [69], 17 by Hodgson JA and it is unnecessary to repeat what his Honour there said. It is sufficient to observe that compensation was paid from the Cattle Compensation Fund by the authority of the Cattle Compensation Act. 51 Dr Salmon's letter of 8 May 1992 had serious implications for Falls Investments. Palmer J observed in this regard: "The effect of [the Department's] policy on [Falls Investments'] business was potentially disastrous. Unless BJD could be eradicated from [Falls Investments'] herd prior to commencement of quarantining in February 1994, the herd would be quarantined and [Falls Investments'] stud cattle could thenceforth only be disposed of as commercial cattle. [Falls Investments'] stud cattle breeding business would be destroyed." 52 His Honour found that there was "no issue that any procedure other than whole depopulation was ever considered appropriate for the Malton herd". It was common ground that "depopulation" meant depopulation of the whole of Falls Investments' herd of cattle, wherever agisted. 53 On 26 June 1992, the Premier of New South Wales wrote to the Minister for Agriculture advising that he had given approval in principle for the use of $2m from the Cattle Compensation Fund for research relating to the cattle industry. As at 1 July 1992, the Cattle Compensation Fund stood at $9,014,000. 54 On 13 July 1992, Mr Ronald Falls proposed to Dr Salmon that Falls Investments would segregate 30 of its best old cows from the rest of the herd, test them to ensure they were free of BJD, and use them to build up a new elite herd after the remainder of the herd had been depopulated. Dr Salmon conveyed this proposal (which was the "Proposal" to which I have previously referred) to the Department. On 15 July 1992, Mr Richard Roe, Dr Salmon's immediate superior in the Department, said that he would be prepared to support it. 55 On 17 July 1992, the Minister for Agriculture wrote to the head of the Department requiring preparation of a letter to the Premier opposing use of any funds in the Cattle Compensation Fund for research purposes. Shortly thereafter, a draft letter was prepared in response to the Minister's request, urging retention of all moneys in the Cattle Compensation Fund. 56 The Department prepared a financial analysis of the Fund. The analysis showed that claims on the Fund were expected to increase very substantially from the 1992/93 year onwards, and, assuming that the proposed $2m was not withdrawn from the Fund for research purposes, the Fund would be reduced to $1,525,000 by the close of the 1999/2000 year. 57 Nevertheless, the analysis showed that, even if the $2m were to be withdrawn immediately, there would still be an amount in excess of $6,500,000 in the Fund to meet expected claims during the 1992/93 year - that is, the year in which Falls Investments' claim was expected to be made. 58 On 23 and 24 July 1992, Dr Salmon took blood for testing (the "July tests") from all stud cattle at Malton aged two years and over (about 301 were tested). Hodgson JA remarked in (2003) 57 NSWLR 1 at [74], 18 (in regard to evidence that on this issue was substantially the same as that led at the remitted trial): "The evidence about how much of the herd was then [i.e., at about the time the cattle were tested] agisted elsewhere is not clear; but it appears that more than half of the herd was at Malton, something over 100 head were at a property at Oatlands [sic - Oaklands], about 30 or 40 at a property at Albury, and about 20 at a property at Geelong. There may also have been some on short term agistment properties near Malton." 59 On 7 August 1992, the Department issued a circular to its senior officers advising that the maximum compensation from the Cattle Compensation Fund had been increased to $2,000 per head of cattle. There was no indication in this circular that the Department's policy relating to administration of the Fund might be under review. 60 By 11 August 1992, however, a legal officer within the Department had prepared a draft cabinet minute approving amendment of the Cattle Compensation Act to permit "the use of surplus funds [in the Cattle Compensation Fund] for research and development projects in the cattle industry". The draft minute noted: "these proposals are supported by the NSW Farmers' Association". Dr Scott-Orr signed off the proposal on 18 August 1992 as "supported". 61 A note from a senior officer in the Department was in evidence that recorded his opinion that, if $2m were to be removed from the Fund, the Fund "will be broke by 2000". There is nothing in the evidence, however, to the effect that, by the end of August 1992, even if $2m were to be removed from the Fund, the planned disease control and eradication programs (including total herd depopulation with compensation) would not continue. It was expected that business would carry on as usual, at least until after the time when Falls Investments would be expected to be paid compensation. 62 On 13 August 1992, Dr Salmon received the results of the July tests. As mentioned, there were 11 positive results showing animals infected with BJD and four regarded as suspicious. On 18 August 1992, Dr Salmon informed Peter Falls of these results. Dr Salmon told Mr Falls that he had discussed the situation with the Department head office at Orange and as the "level of reaction was high … it has been decided that depopulation of the entire herd was the preferred solution". 63 On 21 August 1992, Mr Peter Falls and Dr Salmon discussed the Proposal. Dr Salmon, together with Mr Falls, drafted a written document that reflected its terms. That day, Dr Salmon sent the Proposal by facsimile to Mr Roe. The Proposal referred to the July test results and the fact that the herd had been "the subject of intensive investigation by me during the late 1970s". It also referred to the prominence and success of Malton stud. The Proposal explained that Falls Investments wished to select 30 mature cows so as to set up an elite herd to be removed "to three different properties which have no history of [BJD]" and noted that Malton would be depopulated prior to December 1992. The Proposal sought approval to slaughter all but 30 of the cattle "under compensation" and requested that a decision be made as soon as possible "so that an independent valuer can value the herd and allow depopulation before the summer". 64 A handwritten note by Mr Roe dated 28 August 1992 records: "Ian Roth advises Scott-Orr and Jane agree in principle to proposal. Dan Salmon asked to document proposed program in more detail … and nominate valuer for endorsement by Division."

[23]

As noted, Mr Roth was Mr Roe's superior in the Department and Dr Helen Scott-Orr was Chief, Division of Animal Industries, within the Department. Dr Scott-Orr was the person authorised to approve depopulation proposals and compensation under the Cattle Compensation Act . Mr Jane was a senior officer within the Department. 65 On 28 August 1992, Dr Salmon had a conversation with Mr Peter Falls (this being the conversation referred to in the memorandum of this Court that the parties accepted). The appeal proceeded on the basis that in this conversation Dr Salmon said words to the effect that it was highly likely that the Proposal would be approved. It was common ground that, in this conversation, Dr Salmon assured Mr Falls that the Department was not concerned that the compensation payable for the depopulation of the Malton herd would be very substantial. In this regard, Dr Salmon recorded in his diary: "Neither Helen nor Dick Jane phased by large payout." 66 According to Mr Peter Falls, "in about late August 1992" he had a telephone conversation with Dr Salmon who agreed that the cattle be valued by Mr Leslie. Dr Salmon said that the Department would pay for Mr Leslie's services. Mr Falls asked whether the reactor cattle should not be taken away from the property and the other cattle. Dr Salmon replied "No they can all go together. They will all be off the property by 1 December 1992". 67 According to a memorandum dated 3 November 1992, prepared by Mr Roth: "On 2 September 1992, the formal application from the district veterinarian at Deniliquin was received at the Orange head office. No action was taken on this application as information had become available that the Compensation Fund may be reduced in size. This information was not immediately relayed to field staff due to the political sensitivity of the matter. Chief, Division of Animal Industries was away in Canberra and then Indonesia from 6 September 1992 to 28 September 1992." 68 In another version of the memorandum of 3 November 1992 the following was written: "On 7 September 1992 Mr Roth, Mr Graeme Eggleston, program manager, agricultural protection, Mr Barry Buffier, deputy director-general, and Mr Phil Small, executive director, administration met concerning the Cattle Compensation Fund. A briefing note was prepared following this meeting. This meeting indicated that the compensation funds were in question and that no decision could be made with regard to such a large payout as it was the case with Mr Falls. This meeting also indicated that the whole question of the future of the Cattle Compensation Fund could be kept in confidence and that no information should be distributed prior to the Minister making an announcement on any future changes."

[31]

The two different arguments advanced by Falls Investments 85 Significant parts of the findings of Palmer J and the argument on appeal were directed to the propositions that the Department's conduct had caused Falls Investments to transfer its agisted cattle to Malton and that the Department should have foreseen that that transfer might cause loss. This is the first way in which Falls Investments put its argument, and it is to this argument that the first category of appeal grounds was directed. 86 The representations pleaded, however, made out another, alternative, basis on which liability could be established. I shall refer to this alternative basis as the "reactor case". The second category of appeal grounds was directed to the reactor case. 87 The reactor case was encompassed by the fourth, fifth and sixth representations. In addition, para 17 of the statement of claim pleaded that, in reliance on the first five representations, Falls Investments exposed its cattle to BJD and acted in other ways that disrupted and harmed its business, and to this extent this paragraph is also relevant to the reactor case. 88 In my opinion, it was open on these pleaded allegations for Falls Investments to present the reactor case as follows: (a) The Department represented to Falls Investments and encouraged it to believe that it was highly probable that its depopulation proposal would be accepted, the Malton herd (save for the elite herd) would be destroyed, and there was no need for the reactors to be removed from the herd. (b) The Department knew, however, in August 1992 or by no later than 2 September 1992 that there was a real doubt that Falls Investments' proposal would be accepted; hence, there were compelling reasons for the reactors to be removed, immediately, from the herd. (c) The Department by allowing Falls Investments to remain under the false belief that its representations were true, induced it to leave the reactors in the herd on Malton. (d) The consequence was that - until Falls Investments discovered the truth - the stud cattle on Malton (wherever they came from) were exposed to BJD and depreciated continuously in value. (e) The Department should have foreseen that, were the reactors to remain on Malton, other cattle in the Malton herd were likely to become infected, the market would perceive that other cattle in the herd would be in jeopardy because they had been mixed with the reactors, and the longer the reactors remained on Malton, the greater the loss Falls Investments would suffer. (f) The Department should have foreseen that, were Falls Investments not advised of the change in the Department's depopulation policy, it would continue to keep the reactors on Malton with the consequences set out in the preceding sub-paragraph. (g) The Department owed Falls Investments a duty of care. That duty required the Department to take reasonable steps to prevent Falls Investments from suffering economic harm by acting on its representations when those representations - to the Department's knowledge - became false.

[36]

The problem, however, is that it is not known whether the stock was brought on to Malton in one delivery or in stages. While it is possible that some work might have started on 5 September, it is not possible to decide whether that work involved cattle already on Malton or agisted cattle brought on to Malton. In particular, it is not possible to determine whether all or some or none of the agisted cattle were brought on to Malton before 5 September or any other specific date in September. Accordingly, it is not possible to fix the date on which the agisted cattle were brought to Malton more definitely than "early September 1992". 96 It is not clear where the Falls Investments' stud cattle were agisted. Palmer J understood them to be at properties at Oaklands, Albury and Geelong, but there was evidence that they were agisted at other properties as well (albeit that all of the other properties were not identified). Most of these other properties were near Malton. 97 The number of cattle agisted was not clear. Hodgson JA held in (2003) 57 NSWLR 1), on testimony that was in evidence at the remitted trial, that more than half of the herd was at Malton, something over 100 head were at Oaklands, about 30 or 40 at a property at Albury, and about 20 at a property at Geelong - and others were on other agistment properties. The 30 June 1992 Stock Return recorded that there were 332 agisted cattle. Despite the absence of precise figures, I think it can safely be inferred that at the beginning of September 1992 the number of agisted cattle was in the region of 300. 98 Palmer J observed that there was no evidence that Falls Investments had informed Dr Salmon and the Department that it intended to act on Dr Salmon's representations "by bringing agisted cattle on to Malton for valuation prior to formal approval of [Falls Investments'] application". 99 Mr P T Taylor, who argued this part of the case for Falls Investments, relied on several pieces of evidence in an attempt to show that Dr Salmon, in fact, had specific knowledge that Falls Investments intended to move its agisted cattle to Malton. 100 The first piece of evidence was a diary note dated 21 August 1992 recording a conversation Dr Salmon had with Mr Peter Falls in which the former was told that the herd consisted of 827 cattle "born by 30 June" including "75 or so commercial". The note then states: "On agistment Geelong, Albury, Oaklands".

[37]

The note proceeded to set out the steps required to implement the Proposal. Step 1 was to select 30 "good cows". Step 3 was to remove three groups of 10 cows. Step 5 was "return → Malton". Underneath the five steps was written the words "On Malton", and beneath them the words "Value Cattle" and "Slaughter by 1 December 93". 101 The diary note of 21 August 1992 formed the basis of the Proposal drafted that day by Dr Salmon with Mr Peter Falls. Mr P T Taylor submitted that the diary note indicated that Mr Peter Falls told Dr Salmon on 21 August 1992 that part of the Proposal was that the agisted cattle would be moved to Malton, valued there and then slaughtered. The diary note, however, is ambiguous. No express statement is made therein as to what cattle are to be returned to Malton and what cattle are to be valued there. The diary note is further open to the construction that Dr Salmon was intending to convey that the elite herd of 30 cows would be returned to Malton and that cattle, generally, would be valued on Malton. 102 The Proposal stated that those animals in the elite herd which, after three tests, were proved not to be infected with BJD, would be returned to Malton "mid-1994" with their calves. The Proposal stated, "if any animal in a group reacts, she will be destroyed along with any calves" and, "It is proposed to depopulate Malton prior to December 1992". To the extent that the Proposal casts light on Dr Salmon's diary note, it tends to suggest that none of the references in the note involved return of the agisted stock to Malton. Rather, it seems that the diary note was recording the possibility that animals in the elite herd of 30 cows would be returned to Malton if found to be free of BJD. 103 The next piece of evidence to which Mr P T Taylor referred was an affidavit by Mr Ronald Falls in which he stated that, in late August 1992, Dr Salmon told him that he could arrange for Mr Leslie to value the cattle. According to Mr Falls, Dr Salmon told him that the Department would move the commercial cattle out "soon" and it would "get the stud ones under control first". Mr Falls asked what was to be done with the reactor cattle and Dr Salmon said that they should "go with the other cattle". Dr Salmon repeated: "No they can all go together. They will all be off the property by 1 December 1992". 104 Mr P T Taylor relied on the statement "they can all go together" and that they "will all be off the property by 1 December 1992" in submitting that, by this conversation, Dr Salmon was led to understand that the cattle on the other properties would be brought to Malton. 105 I am not persuaded by this submission. The conversation is consistent with Dr Salmon referring merely to the cattle that were already on Malton when saying that the reactor cattle should not be taken away from Malton and that all the cattle could "go together". 106 Finally, Mr P T Taylor referred to a conversation between Mr Ronald Falls and Dr Salmon in about mid-September 1997 when Mr Falls told Dr Salmon that "we are getting a mass of cattle around us and it is worrying me" and that "we have trucked a lot of cattle home on your advice". 107 This conversation occurred after the valuations had been completed, that is, after 15 September 1997 (when - on Falls Investments' case - the transfer of all the agisted cattle had been completed). Thus, the statements made in the conversation do not suggest that Dr Salmon knew, before the agisted cattle were moved to Malton, that Falls Investments were in fact going to take their agisted cattle, wherever they were, to Malton. Moreover, there is nothing to say that Mr Falls was speaking of stud cattle and not commercial cattle. 108 Mr P T Taylor submitted that the statement "we have trucked a lot of cattle home on your advice" was an assertion that Dr Salmon knew of the intention to move the cattle on to Malton. I do not accept that argument. All the statement means is that Falls Investments moved a lot of cattle to Malton on the strength of Dr Salmon's advice concerning the likelihood of the Proposal being approved. It does not prove in any way that Dr Salmon knew earlier that Falls Investments was, in fact, going to move its stud cattle from the agistment properties to Malton. 109 Accordingly, I am not persuaded that the material to which Mr P T Taylor referred establishes, on its own, that Dr Salmon (or the Department) knew, or even suspected, that Falls Investments intended to transport their agisted cattle to Malton for valuation. 110 Nevertheless, I have concluded that, before the end of August 1992, the Department (in the person of Dr Salmon, at least), should reasonably have foreseen that Falls Investments might bring its agisted cattle on to Malton for valuation and ultimate destruction. 111 It appears from Dr Salmon's diary note of 21 August 1992 that he knew that some of the Malton herd were kept on agisted properties. Mr Ronald Falls testified that the agisted cattle were transported so that, for reasons of convenience, they could be valued at Malton and slaughtered there. The factors that caused Falls Investments to transport the agisted cattle to Malton were obvious and known to Dr Salmon. 112 I have noted that it took the Messrs Falls, working at Malton ten days at 15 hours a day, to perform the work necessary to prepare the stock for valuing. Dr Salmon, as an experienced expert in the field, would have known that work of this kind, and to this extent, would have to be carried out for valuation purposes. He had informed Falls Investments that the Malton herd should be valued and had agreed to the appointment of Mr Leslie as the valuer. Dr Salmon knew that Falls Investments was proceeding to have the herd valued. It was, as a matter of commonsense, economical and convenient for all the cattle in the Malton herd to be mustered together at Malton. This would enable the preparatory work and the valuation itself (to be followed by the slaughtering) to be carried out in one place. True it is that at least one, and perhaps two, of the agistment properties were hundreds of kilometres away from Malton, but the others were relatively close. The bringing together of the entire Malton herd on Malton was a logical and obviously practical step that Falls Investments was likely to make in consequence of the representations that the Department had made to it. 113 To paraphrase Dixon CJ, McTiernan, Kitto and Taylor JJ in Caledonian Collieries v Speirs (1957) 97 CLR 202 at 222, the trial judge did not have to consider whether it was foreseeable that damage could occur in the precise manner in which it in fact occurred (namely, amongst other things, by bringing the agisted cattle from each of the agistment properties to Malton). His Honour had only to consider whether it was reasonable to foresee in a general way the kind of thing that occurred (namely, that cattle, being part of the home herd, and the agisted cattle, would be placed in close proximity and mixed with the reactors). 114 In my opinion, in accordance with the test in Caledonian Collieries v Speirs, it was proved that the State should reasonably have foreseen that there was a real possibility that Falls Investments might bring agisted cattle on to Malton and that the agisted cattle and the home herd would be infected by being mixed with the reactors. 115 In my opinion, however, Falls Investments failed to prove the second element of the cause of action based on the transfer of the agisted cattle to Malton. This is the element of knowledge on the part of the Department that, at the time the agisted cattle were moved on to Malton, there was a real or significant risk that its BJD policy of depopulation might be changed. 116 Undoubtedly, on 2 September 1992, the Department knew that the Compensation Fund might be reduced in size and the issue had become "very sensitive". This led the Department to be "guarded" in its approach and not taking any action on Falls Investments' proposal. The Department knew on 2 September 1992 that it would no longer be correct to represent that it was highly probable that Falls Investments' proposal would be approved. 117 Prior to 2 September 1992, however, while the Department knew that its BJD policy was under scrutiny, there was no reason for it to believe that, should Falls Investments' proposal be accepted, the Cattle Compensation Fund would not have adequate funds to make the expected payment of compensation. 118 Accordingly, no complaint could be made that the Department should have advised Falls Investments on or before 2 September 1992 that its BJD policy had been changed. 119 Thus, the critical question regarding this element of Falls Investments' claim, based on the movement of the agisted cattle, is: on what date or dates did the transfer take place? In particular, did the transfer take place before 2 September 1992? 120 As I have indicated, the evidence as to the date or dates on which the cattle were moved on to Malton is vague. Some or all may have been moved on or before 2 September and some or all may have been moved thereafter. It is not possible, however, to attach any notion of probability to either scenario. 121 On this basis, I would not uphold Fall Investments' appeal concerning the claim based on the transfer of the agisted cattle.

[39]

Falls Investments contended that Dr Salmon's conduct in this regard is the conduct of the Department. The State, on appeal, did not challenge this proposition which, in my view, is correct. 124 It follows that Falls Investments was induced by the Department's representations to leave the reactors with the herd. 125 I have expressed the opinion that prior to 2 September 1992 the Department did not know that any change to its depopulation policy would affect the Proposal, but on 2 September 1992 that position altered. On that date, the Department knew that it was no longer probable that the Proposal would be approved. 126 On 2 September 1992, the Department decided that neither Dr Salmon nor Falls Investments should be informed of its deferral of consideration of the Proposal and the reasons for that deferral. The decision to conceal the deferral was made notwithstanding that, as appears from the documentary evidence, by 2 September 1992: (a) Dr Salmon had advised his superiors of the July test results and they knew that the Malton herd included 11 reactors with four animals suspected of having BJD. (b) The Department knew that the home herd was perceived to be infected, generally, with BJD and that Falls Investments believed that the whole herd was subject to the Department's policy of whole herd depopulation. (c) The Department had told Dr Salmon that Dr Scott-Orr and Mr Jane had agreed to Falls Investments' depopulation proposal in principle and were not concerned that the compensation to be paid in terms thereof would be very substantial. (d) The Department knew that Dr Salmon was the liaison between it and Falls Investments (he had submitted Falls Investments' depopulation proposal to it). In the circumstances, the Department must have known that he would probably communicate its responses to Falls Investments. (e) The Department must have known that Falls Investments would rely on those responses by conducting itself in the belief that the Malton herd, probably, would soon have to be depopulated in accordance with the Department's policy. (f) Dr Salmon (whose knowledge must be taken to be that of the Department) authorised the valuing of the Malton herd, represented that the herd would soon be slaughtered, and advised Falls Investments that there was no point in removing the reactors from Malton. (g) Dr Salmon also knew that part of the Malton herd was situated on agistment properties, some of which were relatively close to Malton, and knew or should have known that, for reasons of convenience and expediency, Falls Investments might well move the agisted cattle to Malton so that they could all be valued and slaughtered together. (h) It was common knowledge in the cattle industry that the longer healthy cattle were in proximity to cattle infected with BJD and on contaminated ground, the more their value would decrease and the more likely it became that they, too, would become infected. 127 When the Department discovered that there was a real prospect that its depopulation policy might change, it became aware, firstly, that the information Dr Salmon had given to Falls Investments had become incorrect and, secondly, that Falls Investments' belief (induced by the Department), that the Malton herd would probably soon have to be depopulated (with compensation being paid for the depopulation), might well be wrong. 128 The Department knew or should have known that, in such circumstances, Falls Investments might act or refrain from acting on its incorrect belief to its prejudice. In particular, the Department knew or should have known that, by reason of Falls Investments' ignorance of the true facts, Falls Investments might leave the reactors with the home herd and bring agisted cattle, forming part of the Malton herd, on to Malton. To the Department's knowledge, the consequence of this occurring would be that all cattle on Malton would become, or be perceived by the market to have become, infected with BJD. 129 Accordingly, in my opinion, the Department became duty bound to take reasonable steps to advise Falls Investments of the true position. This would have given Falls Investments the opportunity of taking whatever steps it thought appropriate to prevent BJD spreading to the rest of the Malton herd and protecting the market reputation of those animals that had had the least contact with the infection. 130 The Department, however, decided, deliberately, to remain silent and to keep the true facts from Falls Investments. 131 The consequence was that - until Falls Investments discovered the truth - the entire herd depreciated continuously in value.

[43]

Causation 140 Palmer J commenced his consideration of the causation issue by reiterating that Dr Salmon did not represent to Falls Investments that the Department would approve the depopulation proposal and, therefore, did not represent that it was safe to proceed with mingling the agisted stud cattle with the home herd. His Honour noted that Dr Salmon's representation "necessarily conveyed that there was a risk - slight, no doubt, but still a risk - that the proposal would not be approved". 141 Palmer J then stated: "Accordingly, in mingling its herds of stud cattle, either [Falls Investments] consciously exercised its own judgment in deciding to take the risk, evident from Dr Salmon's statement, that the depopulation proposal would not be approved or else it placed an unreasonable construction on Dr Salmon's statement, concluding that there was no risk and that it was safe to proceed. In either case, the loss which [Falls Investments] suffered was caused by its own act, not by the statement actually made by Dr Salmon. The causative link between Dr Salmon's statement to Mr Peter Falls and [Falls Investments] loss has not been established." 142 It is true that Falls Investments knew that there was a risk that the depopulation proposal would not be approved. It is also true that, in keeping the reactor cattle on Malton with the home herd and in bringing the agisted cattle to Malton, Falls Investments took a risk. But, as represented to Falls Investments, that risk was very small. In addition, Dr Salmon himself observed that the reactors remained on Malton on his advice "in anticipation of the whole herd being slaughtered". 143 Falls Investments' knowledge of the risk that the depopulation proposal might not be approved, and its taking of that risk, do not exclude or negate the causative effect of the representations made to it. 144 It is trite to observe that there can be more than one cause for the incurring of loss. Undoubtedly, Falls Investments' decision to take the risk that the depopulation proposal might not be approved contributed to its loss. Nevertheless, the representations made by the Department to Falls Investments were a major influence on that decision and were, themselves, a major cause of the loss. 145 Accordingly, his Honour, in my view, erred in finding that the Falls Investments' loss was caused by its own act, not by the statements actually made by Dr Salmon, and that the causative link between Dr Salmon's statements and Falls Investments' loss was not established.

[49]

Palmer J applied a capitalisation rate (a multiplier of 15) to Falls Investments' lost annual income for the period 1992 to 1997 so as to arrive at the appropriate amount to compensate Falls Investments "for the diminution in its goodwill and profitability". His Honour thereby arrived at the sum of $450,000. 152 On appeal in (2003) 57 NSWLR 1 the only issue taken with this assessment of damages was the allowance that Palmer J should have made for the likelihood of loss of sales caused by the July test results. Hodgson JA at 36, [140] was of the view that the discount should be 30% and it would be appropriate to apply that discount to both the five year loss and the capitalisation loss. Spigelman CJ agreed with this but made it plain that the issue "should not be regarded as closed on a retrial of the negligence case" (8, [45]). The case was remitted on the basis that damages were open for decision afresh. 153 In the remitted trial, Palmer J came to a different conclusion despite the fact that the evidentiary material before him on the damages issue was not materially different to that led at the first trial which his Honour then accepted. His Honour regarded proof that the agisted stud cattle, when moved to Malton, were free of BJD, as being a necessary element of the quantification of damages. The judge explained: "If, as the [State suggests, Falls Investments] agisted stud cattle were exposed to BJD infection before 28 August 1992, then bringing them to Malton in reliance upon what Dr Salmon said on that day, or as a consequence of [the Department] failing to take corrective action, produced no damage to [Falls Investments]: [Falls Investments] agisted stud cattle had already been devalued by reason of their exposure to BJD infection." 154 His Honour said: "The best evidence to prove that the agisted stud cattle were free from BJD as at 28 August and had not been exposed to BJD prior to that time by movement to and from Malton, was evidence directly to that effect which could have been given by the Messrs Falls who had direct knowledge of the facts."

[51]

Damages: the principal arguments of the State 155 The State supported the conclusion to which Palmer J came. Mr P W Taylor drew attention to the lack of certainty as to the number of stud cattle on Malton before the agisted cattle were moved there, and the number of agisted cattle that were moved. He pointed to the uncertainty as to the identity of the agisted properties from which the cattle were moved and the number of cattle that were on each agisted property. He stressed the fact that there was no evidence to prove that the agisted cattle were free of BJD when they were moved and no evidence to prove that, if some were infected with this disease, how many were and to what degree. 156 There was, indeed, uncertainty as to the number of cattle comprising the Malton herd. According to Dr Salmon's facsimile to his superiors on 21 August 1992, the Malton herd comprised 827 cattle. According to Falls Investments' "Return of Land and Stock" as at 30 June 1992, 518 head of cattle were on Malton and 332 were agisted elsewhere. It is possible that some of the cattle on Malton were commercial stock, or some might have been slaughtered after 30 June 1992. Further, the stock referred to in the stock return did not include cattle under six months of age. Mr Ronald Falls gave evidence that in September 1992 the Malton herd comprised 880 stud cattle. The valuation by Mr Leslie records 886 stud cattle; this number includes cattle under six months of age. Despite the uncertainty, the clear thrust of the evidence is that, at the relevant time, the Malton herd comprised about 850 head. 157 As to the uncertainty regarding the number of agisted cattle, I have held that it is to be inferred that at least 300 cattle were agisted in early September 1992. 158 As Mr P W Taylor rightly submitted, there was no direct evidence as to whether the agisted cattle were BJD-free and, if not, to what degree were they infected. 159 Mr P W Taylor pointed out that two animals from the Oaklands agistment property tested positive to BJD in January 1993. He submitted that these animals were likely to have been diseased before they were transferred to Malton. He submitted that this indicated that no inference could be drawn that the agisted cattle were free of BJD (and in fact the contrary was the case). Senior counsel for Falls Investments strenuously resisted these propositions. 160 The evidence relevant to the determination of the origin and testing of the two infected animals is complex, draws largely on inferences, and lacks certainty. It is not possible to determine with any certainty whether the two animals were infected on Malton or arrived there infected. If the animals did come from Oaklands there is a real possibility that they may have been infected after they came to Malton. 161 It became clear towards the end of the argument on appeal, however, that Falls Investments accepted that virtually all the cattle in the Malton herd, including the agisted cattle, at some time or other had been on Malton. The evidence reveals this to have been the case. This supports the possibility that some were infected with, or were carriers of, BJD. 162 In all the circumstances, I accept that it is reasonably possible that some of the agisted cattle were infected with BJD before they were transported to Malton. 163 Mr P W Taylor submitted that the uncertainty of the evidence as to these matters was fatal to Falls Investments' case (as Palmer J, in his judgment in the remitted trial, held). This argument was based on the proposition that the home herd at Malton had no value (because of the results of the July tests) and Falls Investments' loss depended on the value of the agisted cattle that were moved to Malton (and this value had not been proved). Mr P W Taylor submitted that, as it was not known how many agisted cattle were moved to Malton and how many were free of BJD when they were moved, it was not possible to determine their value. 164 It must be borne in mind, however, that, prior to 1992, the market had suspected the Malton herd to be suffering, at least to a minor extent, from BJD. Nevertheless, Falls Investments was still able to conduct a successful stud cattle business. At that time, the mere existence of an unknown number of infected cattle in the herd did not materially detract from the marketing of its Malton cattle. 165 In my view, the uncertainties to which Mr P W Taylor referred do not preclude an award of damages to Falls Investments. In my opinion, there was some evidence on which the Court could assess damages and, according to well-established principle, the Court must do its best. I explain the reasons for my conclusion below.

[52]

Determination of damages 166 In my view, it would be appropriate to commence with the sum of $607,981 arrived at by Palmer J in [2001] NSWSC 1027. As I have said, the evidence relating to the assessment of damages in the remitted trial before Palmer J was not materially different to that in the first. Further, in the appeal from Palmer J, the only complaint raised by the State in relation to the assessment of damages was the absence of a discount of the kind that Hodgson JA considered should be taken into account. 167 I appreciate, of course, that a different factor has arisen, namely, Palmer J's decision that, because Falls Investments did not lead direct evidence that the agisted cattle were free from BJD as at 28 August 1992, it had not proved its damages. This needs to be dealt with. 168 Palmer J relied on the fact that the State had informed Falls Investments prior to the trial that it wished to argue that the agisted cattle were not BJD free and, notwithstanding this knowledge, Falls Investments did not call the Messrs Falls or the valuer, Mr Leslie, to testify. I do not accept, however, that the failure to call these witnesses should be held against Falls Investments in this way. When the trial commenced, senior counsel for Falls Investments tendered affidavits by Mr Peter Falls and Mr Ronald Falls as constituting their evidence in chief. Senior counsel for the State then took a number of objections to the affidavits. These were resolved. The affidavits, with offending portions struck out, were admitted. There was, thereafter, no attempt by senior counsel for the State to oppose the admission of the evidence on this basis. The affidavits of the Messrs Falls contained material relevant to the proof of damages, but senior counsel for the State did not seek to cross-examine in regard to those matters. In these circumstances, I do not think that Falls Investments can be criticised for not presenting the Messrs Falls or Mr Leslie for cross-examination. I reiterate, therefore, that Palmer J's assessment in the first trial is an appropriate starting point to assess damages in the present proceedings. 169 As I have noted, Palmer J awarded $150,481 for the fall in Fall Investments' bull sales for the five-year period from 1992. I have also noted that on appeal in (2003) 57 NSWLR 1, Hodgson JA concluded that a discount of 30% should be applied to that amount to take into account of the possibility of loss of sales stemming from the July test results. On the basis of the evidence led at the remitted trial, however, I would allow a greater discount. I take into account the following three factors. 170 Firstly, in all aspects relating to damages, the onus was on Falls Investments to prove its case. Falls Investments could have led far more detailed evidence than it did. In the circumstances, when determining what discount is to be applied, I would apply a discount at the high end of the range available. 171 Secondly, it is by no means clear what the effect of the infection of the home herd would be on sales of the progeny of stud bulls on the agisted properties. The evidence does not address this issue with any particularity. 172 According to Dr Sykes, the value of cattle on the agisted properties "would depend on their true BJD status and the ability of the Falls to address buyer concerns regarding BJD". The latter factor would depend "on the degree of separation in the minds of buyers". 173 The prior successful business history of the Malton history (notwithstanding the suspicion that Malton was a contaminated property), gives rise to a strong inference that, prior to the July test results, the market regarded Malton cattle as reasonably safe to buy (subject to some discount caused by the possibility of BJD). 174 I have found that the number of agisted cattle was in the region of 300. Prior to the agisted cattle being brought on to Malton, they were perceived to be free of BJD (although there was a possibility of some animals being infected). 175 In theory, it seems to me, it is possible - if not likely - that the 300 agisted cattle could have produced 25 bulls each year for sale. But whether this would have occurred was not dealt with in evidence and one must ask: if 850 head produced only 25 bulls a year for sale, would 300 not have produced less? In the absence of evidence on this issue some allowance must be made for the reduction in the stud cattle that would have been available to produce progeny for sale (that is, from about 850 to about 300). 176 Thirdly, the publicity attendant on the loss of the home herd must have had an influence on the market perception of the reliability of the progeny of the agisted cattle. Another allowance must be made for this. 177 Adopting a broad brush approach (which, in my view, is appropriate) I would allow damages of $75,000 under this head. 178 In the first trial, Palmer J awarded $450,000 as damages for the loss in value of Falls Investments' business and $7,500 for wasted labour costs. Hodgson JA on appeal from that judgment would have discounted the $450,000 by 30%. Again, on the evidence in the remitted trial, I would allow a greater discount. 179 Palmer J's reasoning as to the loss in value of Falls Investments' business was based on the mixing of the relatively healthy agisted cattle with the infected home herd. But this does not take account of the fact that the home herd was regarded as infected once the July test results had become known. The loss involving this perception cannot in any way be attributed to the State. 180 According to the unchallenged evidence of Dr Sykes, when the test results became known, the value of the home herd decreased to the extent that, "in general", the cattle comprising the home herd assumed "commercial meat value". He said that "as a veterinarian/beef stud producer", he would be "very reluctant to purchase them". Dr Sykes' conclusion was that after the July tests there would be "substantial reduction in market interest" in cattle "ex-Malton" unless there was interest in "specific genetics". 181 I conclude on Dr Sykes' evidence that, after the July tests became known, the value of the home herd on Malton before the agisted cattle commenced being brought on to the property was substantially reduced. Nevertheless, on that evidence, a small number of animals in the home herd could have had a residual value over and above their value on the commercial meat market. 182 The State was not responsible for any of the loss to the home herd caused by the perception (flowing from the July test results) that the home herd was infected to the extent described by Dr Sykes. I would assess that loss as being in the region of close to 65% of the entire Malton herd. An appropriate discount representing this loss must be made from the amount assessed by Palmer J in respect of this head. 183 In addition, due allowance must be made for the possibility that some of the agisted cattle were infected, as well as for the loss of goodwill stemming from the perception that the home herd was infected. 184 As regards the $7,500 for wasted labour costs similar allowances must again be made. 185 Doing the best I can, and allowing for the paucity of evidence on this issue, I would allow damages of $100,000 for the loss in value of Falls Investments' business and for wasted labour costs. 186 I accordingly arrive at an overall amount of $175,000 ($75,000 plus $100,000) in respect of damages.

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Judgment (55 paragraphs)

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Legislation Cited (3)

Cases Cited (9)

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