One bad seed…
Mallonland Pty Ltd & Anor v Advanta Seeds Pty Ltd  QCA 24
The Queensland Court of Appeal recently considered the question of whether a manufacturer owed end users of its product a duty of care to avoid pure economic loss.
A number of farmers purchased sorghum seeds from an intermediary, which were manufactured (processed/packaged) by Advanta. The sorghum seeds were contaminated with shattercane seeds (a noxious weed). Once planted, the shattercane corrupted the sorghum. The result was intermingling growth of sorghum and weeds over several seasons.
Printed on each packet of Advanta seeds was:
- a warning that the bag must only be opened if the buyer had read and agreed with the terms and conditions and should be returned unopened if the T&Cs were unacceptable;
- a broad disclaimer for any liability for loss directly or indirectly arising out of or related to the use of the seed, whether as a result of Advanta’s negligence or otherwise; and
- information to the effect that the sorghum seeds had a ‘Minimum Purity’ of 99% and that the packets had ‘Maximum Other Seeds’ of 0.1%.
The farmers issued a class action against Advanta, alleging negligence in the manufacturing process and claiming damages for pure economic loss (being the cost of removing the shattercane once discovered, and the losses from having to leave the land unsown for several seasons or planted with less remunerative crops).
The farmers did not have a contractual relationship with Advanta (having purchased the seed from a distributor) and were not ‘consumers’ within the meaning of the Australian Consumer Law, hence the reliance on allegations that the product had been negligently manufactured.
The trial judge found for Advanta on the basis it did not owe a relevant duty of care.
Duty of care to avoid pure economic loss?
The question of whether Advanta owed a duty of care to prevent pure economic loss required consideration of a number of ‘salient features’, including whether Advanta had assumed responsibility for the purity of its seeds and whether the farmers were vulnerable to such losses.
While the Court of Appeal held that the farmers were vulnerable end users (unable to protect themselves from damage/loss caused by a manufacturer’s negligence), Advanta’s disclaimer negated any assumption of responsibility.
Advanta took deliberate steps to disclaim an assumption of responsibility, with prominent warnings to that effect printed across a substantial portion of every bag, drafted in non-legalistic terms that could be easily understood by a lay person.
It was unanimously held that the disclaimer effectively announced to the world that: ‘you should be aware this product may contain contaminants which could cause losses to your business … And if you buy our product, you must take on that risk’.
The farmers’ appeal was dismissed, and the Court of Appeal unanimously held that Advanta did not owe the farmers a duty of care.
The judgment is a timely reminder of the cautious approach courts adopt when considering remedies for pure economic loss, and the importance of carefully drafted and prominently displayed disclaimers.
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