Bonny Glen Pty Limited v Country Energy [2009] NSWCA 26 (24 February 2009)

Last Updated: 25 February 2009

NEW SOUTH WALES COURT OF APPEAL

CITATION:
Bonny Glen Pty Limited v Country Energy [2009] NSWCA 26


FILE NUMBER(S):
40636/07

HEARING DATE(S):
3 February 2009

JUDGMENT DATE:
24 February 2009

PARTIES:
BONNY GLEN PTY LIMITED (ACN 001 005 787) (Appellant/Cross-Respondent)
COUNTRY ENERGY (Respondent/Cross Appellant)

JUDGMENT OF:
Hodgson JA Ipp JA Macfarlan JA

LOWER COURT JURISDICTION:
District Court

LOWER COURT FILE NUMBER(S):
3760/04

LOWER COURT JUDICIAL OFFICER:
J C Gibson DCJ

LOWER COURT DATE OF DECISION:
31 August 2007


COUNSEL:
C R C NEWLINDS SC/ P T NEWTON (Appellant/Cross-Respondent)
S G CAMPBELL SC/ J J RYAN (Respondent/Cross Appellant)

SOLICITORS:
Bruce Stewart Dimarco (Appellant/Cross-Respondent)
Colin Biggers & Paisley (Respondent/Cross Appellant)

CATCHWORDS:
TORTS – Negligence – Economic loss – Damage to property and independently-caused economic loss – Economic loss caused by action taken by plaintiff in response to situation created by defendant’s negligence – Test of reasonableness – Whether loss of a kind that was foreseeable – Basis of calculation of damages.
PROCEDURE – Primary judge dismisses plaintiff’s claim but determines quantum of damages – Plaintiff appeals – Defendant challenges quantum of damages – Whether cross-appeal is correct procedure.

LEGISLATION CITED:
Supreme Court Act 1970, s 101
UCPR 51.2, 51.17, 51.40

CATEGORY:
Principal judgment

CASES CITED:
Banco de Portugal v Waterlow and Sons Limited [1932] UKHL 1; [1932] AC 452
Caltex Oil (Australia) Pty Limited v The Dredge Willemstad [1976] HCA 65; (1976) 136 CLR 529
Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159
Medlin v State Government Insurance Commission [1995] HCA 5; (1995) 182 CLR 1
Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180
Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330
Tarabay v Leite [2008] NSWCA 759
Travel Compensation Fund v Tambree [2005] HCA 69; (2005) 224 CLR 627

TEXTS CITED:


DECISION:
(1) Appeal allowed.
(2) Cross-appeal allowed.
(3) Order Country Energy to pay Bonny Glen’s costs of the appeal.
(4) Order Bonny Glen to pay Country Energy’s costs of the cross-appeal, and Bonny Glen to have a certificate under the Suitors’ Fund Act 1951 if otherwise qualified.
(5) Judgment for Bonny Glen against Country Energy for $381,985.65 in lieu of $59,785.65, to take effect as at 31 August 2007.
(6) Direct that there be written submissions as to the costs of the proceedings below, by Bonny Glen within 14 days, by Country Energy within a further 14 days, and any submissions strictly in reply within a further 7 days.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40636/07

DC 3760/04

HODGSON JA

IPP JA

MACFARLAN JA

24 FEBRUARY 2009

BONNY GLEN PTY LIMITED v COUNTRY ENERGY

Headnote

Facts

On 10 November 2002, a fire occurred in a row of pine trees on a property at Orange owned by Parkwood Orchard Pty Limited, the neighbour to the appellant (Bonny Glen). The fire occurred as a result of contact between electricity wires owned by the respondent (Country Energy) and Parkwood’s pine trees. The row of pine trees was destroyed and damage was caused to Bonny Glen’s property. The row of pine trees had, for some time, operated as a windbreak to an apple orchard owned by the appellant.

In about August 2006, Bonny Glen cut down the apple trees not destroyed by the fire, because it was necessary to use poisonous sprays to successfully grow apples, and in the absence of the windbreak poisonous spray could drift on to Parkwood’s property and beyond. This action was taken after hearing concerns from Parkwood and receiving advice from two experts.

At first instance, Bonny Glen claimed losses from both the property damage and economic loss as a result of lost income arising from the voluntary destruction of the remaining orchard.

The primary judge found that the Country Energy owed a duty of care to Bonny Glen, had breached that duty of care and was liable for damages in respect of the property damage caused by the fire, but not in respect of the economic loss. In case this latter finding was incorrect, the primary judge determined the quantum of loss that would have been awarded at $753,396.72.

Bonny Glen appealed against the primary judge’s finding of non-liability for economic loss and against the primary judge’s failing to allow for interest. Country Energy cross-appealed on the basis that, if the appeal was successful, the quantum of economic loss was incorrect.

Issues:

(1) Was Bonny Glen’s pure economic loss recoverable?

(2) Was loss caused by the voluntary actions taken by Bonny Glen in response to a situation created by Country Energy’s negligence recoverable?

(3) Was the loss of a kind that was foreseeable by Country Energy?

(4) Did the primary judge err in the calculation of economic loss?

HELD (upholding the appeal and cross-appeal):

(per Hodgson JA, Ipp and Macfarlan JJA agreeing)

(1) In the absence of a notice of contention, the appeal was dealt with on the basis that a relevant breach of duty was established, and the only question was whether causation of economic loss was proved.

(2) It was necessary for Bonny Glen to establish “but for” causation and that Country Energy’s breach was as a matter of common sense a material cause of the loss; and in circumstances where its actions were a reasonable response to the situation created by Country Energy’s breach, it had done so: Banco de Portugal v Waterlow and Sons Limited [1932] UKHL 1; [1932] AC 452.

(3) For foreseeability to be satisfied, all that must be foreseen by the defendant is the kind of damage incurred, at an appropriate level of generality. Economic loss to an orchard business was a sufficiently specific and foreseeable kind of loss arising out of negligently destroying the neighbour’s windbreak.

(4) The primary judge erred by not taking into account evidence of lower gross profits than submitted by Bonny Glen and by not taking into account the issue of yields. The appeal court may give less weight to a contingent finding of this type: Tarabay v Leite [2008] NSWCA 759. The quantum of economic loss was redetermined to $292,400.

IN THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL

CA 40636/07

DC 3760/04

HODGSON JA

IPP JA

MACFARLAN JA

24 FEBRUARY 2009

BONNY GLEN PTY LIMITED v COUNTRY ENERGY

Judgment

1 HODGSON JA: On 10 November 2002, a fire occurred in a row of pine trees on a property at Orange owned by Parkwood Orchard Pty Limited (Parkwood), as a result of contact between the trees and electricity wires of the respondent (Country Energy). The row of pine trees, 161 in number, was destroyed and there was damage to an adjoining property owned by the appellant (Bonny Glen). Bonny Glen and Parkwood brought proceedings in the District Court against Country Energy seeking damages in respect of the damage to their properties and also, in the case of Bonny Glen, in respect of certain economic loss alleged to have been caused by the fire.

2 The proceedings were settled as between Parkwood and Country Energy; and as between Bonny Glen and Country Energy, they were determined by Gibson DCJ on 31 August 2007.

3 The primary judge found that Country Energy owed a duty of care to Bonny Glen, had breached that duty of care, and was liable for damages in respect of the property damage caused by the fire to Bonny Glen’s property; but was not liable for the economic loss claimed by Bonny Glen. However, the primary judge indicated that, if she had erred in rejecting the claim for economic loss, the quantum of that loss was as claimed by Bonny Glen, that is $753,396.72. The primary judge gave judgment for Bonny Glen for $59,785.65. However, by a costs order made on 2 October 2007, Country Energy was to pay Bonny Glen’s costs only up to 28 November 2005 and Bonny Glen was to pay Country Energy’s costs thereafter on an indemnity basis.

4 Bonny Glen has appealed against the rejection of its claim for economic loss, and also against the primary judge’s failure to allow interest. Country Energy has put on a cross-appeal, relevant only if the appeal is successful, against the primary judge’s assessment of damages for economic loss.

Circumstances
5 There is no dispute as to the following circumstances.

6 The boundary between Parkwood’s property and Bonny Glen’s property runs roughly north-south, with Parkwood’s property to the east of Bonny Glen’s property.

7 The row of pines destroyed by the fire, which constituted a windbreak about 14 metres high, ran along this boundary for the first 150 metres from the public road, and was adjacent to the driveway from the road to the house on Parkwood’s property. Prior to the fire, there was an area of about one hectare on Bonny Glen’s property adjacent to this row of pines planted with 218 gala apple trees and 80 granny smith apple trees.

8 The next 169 metres of the boundary did not have a windbreak. On Parkwood’s property, near this part of the boundary, was the home of the occupiers, Mr Hawke and his family, and also a shed.

9 As regards the next 58 metres, until about 1988 there had been a windbreak of pine trees along this part of the boundary; but this had been removed in about 1988 by Mr Hawke in order to extend the shed on his property. The extension of the shed did not happen, but this part of the boundary has remained open, and in the proceedings was called the “southern gap”. Apple trees were planted on Bonny Glen’s property adjacent to this gap; and at the time the gap was created, there was also an orchard on Parkwood’s property in this area. However, in about 2001 Mr Hawke ceased orchard operations on Parkwood’s property and thereafter grazed cattle on it.

10 To the south of the southern gap, there was a further 291 metres of windbreak along the boundary; and there were more apple trees on Bonny Glen’s property planted adjacent to part of this windbreak.

11 The fire on 10 November 2002 destroyed not only the windbreak of 161 pine trees, but it also destroyed 28 gala apple trees and 8 granny smith apple trees on Bonny Glen’s property, and it damaged a further 67 gala apple trees and 24 granny smith apple trees on that property. It destroyed some fences and irrigation systems on Bonny Glen’s property. Those effects of the fire were the subject of Bonny Glen’s property damage claim, which was allowed by the primary judge and is not the subject of any appeal.

12 In about August 2003, Mr Hawke planted replacement trees along the 150 metres where the destroyed windbreak had been. It will take about ten years for these trees to grow sufficiently to operate as an adequate windbreak.

13 In about August 2006, Bonny Glen decided to cut down the 190 gala apple trees and 72 granny smith apple trees that had not been destroyed by the fire, because it was necessary to use poisonous sprays to successfully grow apples, and in the absence of the windbreak poisonous spray could drift on to Parkwood’s property and beyond. This was done after Bonny Glen had received advice from two experts, Mr Collett and Mr Kidd. The loss flowing from this action taken by Bonny Glen is the subject of the economic loss claim that was rejected by the primary judge.

Decision of primary judge
14 The primary judge noted (at [94] of her judgment) Bonny Glen’s contention that the trees had to be cut down because spray drift from its property on to Parkwood’s property could lead to Bonny Glen being the subject of complaints and/or prosecution.

15 The primary judge then considered the evidence concerning the relationship between Mr Hawke and the Hall family, who occupied Bonny Glen’s property.

16 The primary judged noted that, when the southern gap was created, spraying of Bonny Glen’s trees adjacent to it did not concern Mr Hawke, because he was then operating an orchard on Parkwood’s property and using the same sort of chemicals. After Mr Hawke decided to graze cattle in 2001, he came to an arrangement with the Hall family that he would only graze cattle opposite the southern gap in winter when there would be no spraying.

17 The primary judge noted affidavit evidence given by Mr Hawke that in 2002 he had obtained development consent to the subdivision of Parkwood’s property, which resulted in there being a five acre block next to the destroyed windbreak, and which continued:

15. At about the time of the fire in late 2002, I recall that the issue of spray drift had become a widely discussed topic and I attended at several community meetings on the subject with other orchardists in the Orange district, during which, I learned that the Environmental Protection Authority was going to start imposing severe penalties upon orchardists if their business practices caused pesticide sprays drifting unto other properties.

16. After the fire and the loss of the windbreak in November 2002, I became concerned about spray drift from Bonny Glen in light of the Development Approval, so I had a conversation with Mr Timothy Hall, during which I said to him words to the following effect:

Me: "Tim, spray drift is a real issue now as you know. You won't be able to spray that block since I got that DA. I think you'd better tell Fred to stop spraying that block until the new pines re-grow."

Tim Hall: ”Yes, I know - I'm worried about it too. I'll talk to dad about it."

17. As well as for the reasons that I have given in my previous Affidavits, it is also because I am concerned about spray drift that I immediately replanted replacement pine trees to replace the Destroyed Windbreak.

18. I plan to continue using Parkwood as a farming property for the moment. In light of mine and my father's arrangement with Mr Hall not to graze my cattle on the Parkwood adjacent to the Removed Pine Trees, I cannot also agree not to graze my stock on the land next to the Destroyed Windbreak during Bonny Glen's spraying season because I will have almost not [sic] land left on Parkwood to use for farming purposes.

19. If, however, I choose to sell the subdivided land next to the Destroyed Windbreak then, for environmental reasons, I believe that Bonny Glen will not be able to spray its north-eastern block until the pine trees grow to an effective windbreak."

18 The primary judge then referred to Mr Hawke’s oral evidence, and gave the effect of that evidence as being, not that Mr Hawke would not allow spraying near the destroyed windbreak, but that “All Mr Hawke wants is to be told when they are spraying so that he could move his cattle”. (Judgment par [100]).

19 The primary judge then noted the existence of the southern gap, and expressed the view that this destroyed what she referred to as the perception argument in relation to spray drift and objections by Mr Hawke, as well as claims that the spray could go as far as the new hospital (which was one and half kilometres away); and she noted that, although she accepted it was unlikely that Mr Hawke would have removed the pine trees, nevertheless if Parkwood’s property was sold and the new owner had wished to remove them, there would be nothing Bonny Glen could have done about it.

20 The primary judge then continued:

104. Accordingly, the factual basis for asserting it was necessary to remove the apple trees because of spray drift and objections by Mr Hawke cannot be made out. In addition, evidence from the experts about the dangers of spray drift from the northern apple orchard is a danger, but spray drift from the southern apple orchards is not, would be an inconsistency which I find impossible to reconcile.

105. I have noted these factual findings because, in my view, there is a break in the chain of causation. I find that the removal of the fruit trees was not as a result of any request from Mr Hawke. It was done on a recommendation by Mr Collette and Mr Kidd. However, if their advice is not foreseeable, or wrongly overcautious, or based on incorrect information (eg the belief Mr Hawke might report the Hall family for prosecution), or just simply wrong, it does not entitle the plaintiff to claim that this is damage flowing from the fire.

106. There are other evidentiary difficulties that stand in the way of the plaintiff's claim for damages for the total replacement of the apple trees in the field and the consequential economic loss. Many other orchards in the Orange district, and for that matter in other locations, do not have windbreaks. The presence or absence of a windbreak, while an advantage to an orchard, is not an essential pre-requisite to a successful apple orchard.

21 The primary judge then discussed the evidence of Mr Fred Hall and his son Mr Trevor Hall, and the evidence of the experts consulted by Bonny Glen, Mr Kidd and Mr Collett. In relation to the latter, the primary judge noted reliance on what was called perception, namely that “in this time of environmental awareness, it was not so much that spray drift was a difficulty, but there was a perception that the spraying of poisonous chemicals could be an environmental or health hazard.” (Judgment par [112])

22 The primary judge concluded her consideration of relevant factual matters as follows:

123. As an expert on spray drift, it was Mr Kidd's opinion that was the crucial report relied upon by the plaintiff in relation to the removal of the remaining apple trees in the field. The above summary of his evidence shows how far Mr Kidd retreated from his position. His explanation of why spray drift from the field affected by the fire was so dangerous while spray drift from the south field (where there is no buffer) was not is incomprehensible. Ultimately, what seems to have been the reason for removal of the trees was a cocktail of concerns which included such disparate matters as the dangers of theft and trespass with the increasing urbanization of the area. There is nothing in Mr Kidd's evidence to support the contention that it was reasonably foreseeable that as a result of the fire all of the trees in this field would have to be removed.

23 The primary judge then addressed legal issues. She referred to a number of cases, including Perre v Apand Pty Limited [1999] HCA 36; (1999) 198 CLR 180; Caltex Oil (Australia) Pty Limited v The Dredge Willemstad [1976] HCA 65; (1976) 136 CLR 529; Hill v Van Erp [1997] HCA 9; (1997) 188 CLR 159; and Pyrenees Shire Council v Day [1998] HCA 3; (1998) 192 CLR 330.

24 The primary judge noted a submission for Bonny Glen that when a defendant foresees loss of the general character of the loss in question, a plaintiff will recover damages, even if the defendant did not foresee the precise manner in which the loss in question occurred; and she then continued:

129. While I do not have a problem with this statement of the law, to argue that it was not merely reasonably foreseeable but inevitable that if Country Energy did not prune the trees a fire may occur (which I do accept), this does not mean that the removal of other fruit trees by Bonny Glen is reasonable or foreseeable. The plaintiff submits it is not necessary to show that the precise manner in which its loss or damage was sustained was reasonably foreseeable; it is sufficient that some loss or damage of the same general character is sufficient.

130. ......

131. Accordingly I am not satisfied that the plaintiff has made out that the category 2 loss flowed from the negligent acts or from the breach of contract by the defendant.

25 As mentioned earlier, the primary judge then went ahead and decided the quantum of economic loss; and I will return to the way she dealt with that matter.

Issues on appeal
26 Bonny Glen relies on the following grounds of appeal:

Foreseeability

1. The Trial Judge ought to have found that it was reasonably foreseeable that if the pine trees the subject of the fire were destroyed, the Appellant would be unable to spray the apple trees in the “Affected Area" due to the risk of contamination to adjoining owners caused by "spray drift".

2. The Trial Judge ought to have found that it was reasonably foreseeable that if the pine trees the subject of the fire were destroyed the Appellant would be required to make a judgment as to whether it was unable to spray the apple trees in the "Affected Area" due to the risk of contamination to adjoining land owners caused by “spray drift” and further that it was reasonably foreseeable that in the exercise of that judgment the Appellant would determine the benefits of spraying the said apple trees.

3. The Trial Judge ought to have found that in the event the Appellant was unable to spray the apple trees in the "Affected Area", it was reasonably foreseeable that the Appellant may remove those trees so as to prevent the risk of disease.

4. The Trial Judge erred in finding that the factual basis for asserting that it was necessary to remove the apple trees from the "Affected Area" because of "spray drift" and objections by Mr Hawke had not been made out (para 104).

5. Her Honour erred in finding there was nothing in Mr Kidd's evidence to support the contention that it was reasonably foreseeable that as a result of the fire, all of the apple trees in the "Affected Area" would have to be removed.

6. Her Honour erred in failing to consider whether or not the exercise of judgment by the Appellant to cease spraying was reasonably foreseeable and in that regard ignored the concession by Mr Gordon to that effect.

7. Her Honour erred in concluding that the "Category 2" loss was not reasonably foreseeable so as to be recoverable as pure economic loss.

8. Her Honour ought to have concluded that the loss claimed was reasonably foreseeable.

9. Further, and/or in the alternative, the Trial Judge erred in law in that Her Honour assumed incorrectly that in order for the "Category 2" loss to be recoverable, the specific manner of the loss had to be reasonably foreseeable.

10. Her Honour ought to have determined the matter in accordance with law and concluded that it was irrelevant that the precise manner in which the damage actually occurred was unforeseeable. All that needs to be demonstrated is that loss or damage of the same general character as that which occurred was reasonably foreseeable as a consequence of the Respondent's conduct.

11. Her Honour ought to have found that such a test had been satisfied.

12. Her Honour erred in failing to deal with the Appellant's claim in contract wherein the relevant test for pure economic loss is whether the loss was "within the reasonable contemplation of the parties at the time the contract was made".

13. Her Honour ought to have concluded either as a result of the negligence as found by Her Honour, or the breach of contract as identified by Her Honour, that the “Category 2" loss as quantified by Her Honour was recoverable by the Appellant if that loss was "caused" by the negligence/breach of the Respondent.

Causation

14. Her Honour erred in concluding that the "Category 2" loss was not "caused" by the negligence/breach of the Respondent (paras 104 and 105).

15. Her Honour ought to have found that the "Category 2" loss was directly caused by the acts of the Respondent.

16. Her Honour ought to have concluded that in all the circumstances the Appellant's response to the loss of the natural windbreak, caused by the destruction of the pine trees during the fire, of ceasing to spray the trees in the "Affected Area" and thereafter having them removed, was not unreasonable.

17. Her Honour ought to have found that the expert opinion of Mr Collett and Mr Kidd and their recommendation that the trees in the "Affected Area” be removed was reasonable on its face and that it was reasonable for the Appellant to act upon it.

18. Her Honour failed to give any weight to the fact that the Respondents called no evidence, expert or otherwise (other than evidence identifying artificial windbreaks and the like, which alternatives were ultimately rejected by Her Honour) to contradict the expert opinions of Mr Collette and Mr Kidd and the opinion formed by Mr Tim Hall to the effect that it was not appropriate to continue spraying the trees in the "Affected Area".

19. Her Honour failed to give any weight to the fact that other than assertions regarding artificial windbreaks and the like, Mr Collette, Mr Kidd and Mr Tim Hall were not challenged as to their opinions.

20. Her Honour erred in failing to give any weight to the concession by Mr Gordon to the effect that the question as to whether it was appropriate to continue spraying was "a question of judgment by the person doing the spraying to be made with regard to each individual circumstance".

21. There was no basis, either in the evidence or upon the way in which the case was conducted, for Her Honour to find that the Appellant's decision to cease spraying the trees in the "Affected Area" was "over cautious or based on incorrect information or just simply wrong" (para 105).

22. Her Honour ought to have found that the Appellant's decision to cease spraying and remove the trees in the Affected Area was reasonable in all the circumstances and accordingly, ought to have concluded that the "Category 2" loss was "caused" by the conduct of the Respondent.

Interest

23. Her Honour erred in finding that Her Honour was 'not addressed on the availability or otherwise of interest in relation to damages' (para 146).

Procedural Error

24. Her Honour erred in refusing to conduct a view of the "Affected Area".

27 Country Energy relies on the following grounds of cross-appeal:

1. Her Honour erred in assessing Category 2 Damages in the sum of $753,396.72.

2. Her Honour erred, in paragraph 5 of her Judgment, in stating that "there is unchallenged evidence that this orchard, immediately adjacent to the 61 pine trees, was what could be called the star performer in the plaintiffs orchard" when there was a substantial and detailed challenge to the performance of the orchard.

3. Her Honour erred in failing to find that the subject orchard did not perform any better or worse than any other orchard operated by the appellant.

4. Her Honour erred in assessing the value of Category 2 Damages on the basis that orchard was a "star performer" and not an average performer.

5. Her Honour erred in relying on the profit and loss statements and invoices produced by the appellant when none of those documents related to the subject orchard.

6. Her Honour erred, in paragraph 134 of her judgment, in finding that "the reason for the high quality of the apples in this orchard was because of the existence of the buffer", when there was no reliable evidence of the high quality of apples in the orchard and further such a finding was against the evidence as to the common presence of successful orchards in the Orange area which did not have a buffer.

7. Her Honour erred in assessing the value of the Category 2 Damages on the basis of "sufficient invoices concerning actual sale prices and costs" when such invoices did not relate to the subject orchard.

28 I will deal first with the question whether Bonny Glen can recover economic loss; and then I will consider the questions of quantum and interest.

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] UKHL 1; [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.

Quantum of economic loss
54 The primary judge’s figure of $753,396.72 was based on an annual loss calculated at $78,844. That in turn was based on assumed yields, prices and expenses in relation to apples that would have been produced.

55 The yields assumed were 89 kilograms per tree per year of gala apples and 320 kilograms per tree per year of granny smith apples (Blue 674).

56 The prices assumed were $36 per 12 kilogram case for gala apples and $28 per 12 kilogram case for granny smith apples (Blue 637); and the expenses assumed were $10.87 per case for gala apples and $10.09 per case for granny smith apples (Blue 636).

57 Both figures were supported by the following evidence from Mr Timothy Hall:

(a) A bundle of delivery dockets, invoices and assignment notes for apples sold by Bonny Glen in the years 1998 to 2006 inclusive, selected by him, which he said gave “a representative sample of the sale price of the apples ... and the commissions and agent’s costs incurred”.

(b) Evidence of rates paid to packers and sorters and graders.

(c) The following paragraphs from his affidavit of 24 July 2006:

25. In 2003, Bonny Glen sold its granny smith apples for between $19 and $30 per case and its gala apples for between $28 and $44 per case. The variation in price is due to the size of the fruit, that is, smaller fruit is bought and sold at a cheaper price.

26. In 2006, Bonny Glen has sold gala apples for between $18.70 per case (for example, A. S. Barr) and $36.00 (to Towac Export Cooperative). All cases, whether two or three layered, weigh 12 kilograms. The difference in price simply reflects the size and quality of the fruit.

27. It is not possible to establish the profit yielded by a particular part of Bonny Glen (such as the Affected Area) by having regard to the percentage of the entire Orchard occupied by the Affected Area in comparison to the entire orchard and then applying this percentage to Bonny Glen's annual profits. This is because different parts of the Orchard operate to produce profits at different times.

28. The only way, therefore, to calculate the profit that would have been earned by Bonny Glen had the Affected Area remained in production would be by applying the production value of a particular tree (given the amount of fruit that such tree would have produced in terms of weight) to the price earned on fruit per kilo, then deducting the costs of production and multiplying the result by the number of trees that would have been in production in the Affected Area had the trees not been destroyed or the Pine Trees remained.

58 There was also affidavit evidence from Fred Hall as to yields and prices (for example, pars 32 to 35 of his affidavit of 24 July 2006: Blue 140). But in cross-examination (Black 86), he said that it was Timothy Hall who had that information and not himself.

59 The yields adopted in the calculations were asserted by Mr Collett (the expert relied on by Bonny Glen) to be based on a yield of 67 kilograms per tree per annum for gala apples in 2003/2004, when the trees were not yet fully mature, and an assertion by him as to average yields from apple trees, being 300-350 kilograms for granny smith and 75 kilograms for gala (Blue 631).

60 Country Energy’s expert, Mr Brown, asserted that 93 kilograms per tree for gala apples meant 66.6 tonnes per hectare, and 320 kilograms per tree for granny smiths meant 89 tonnes per hectare; whereas typical yields were 50-55 tonnes per hectare for gala apples and 60-70 tonnes per hectare for granny smiths. In the absence of historical average yield data, Mr Brown adopted figures of 54 tonnes per hectare for gala apples and 69 tonnes per hectare for granny smiths (Blue 732), which in turn would mean 75 kilograms per tree for gala apples and 250 kilograms per tree for granny smiths. It appears that lower figures again were adopted by the other expert called by Country Energy, Mr Gordon (Blue 846).

61 On the basis of average prices in the New South Wales fruit market, Mr Brown adopted a price of $24 per case for gala apples, but said he accepted the figure per case for granny smiths (Blue 734). However, that latter figure appears to have been on a different assumption, namely that granny smiths were packed in 18 kilogram cases: Blue 733, Blue 833. Mr Brown referred also to information concerning expenses, and suggested the expenses relied on were understated.

62 Mr Brown also gave an analysis of Bonny Glen’s profit and loss statements for the years ending June 2001 to June 2004, which indicated that those statements for the last three of those years showed gross profits on apple sales averaging about $1.05 million, and being very close to that figure in each of those years (I have made minor adjustments from the stated figures for the gross margin based on total fruit sales): Blue 775.

63 I note that if one took the total area under apples to be 59 hectares and the area in question in this case to be 1 hectare, then if this area was typical of the whole, one would get a yearly gross profit figure for this area of just under $18,000. There was however evidence that there was really only 41.81 hectares in full production in the Bonny Glen orchards (Blue 675); but by the same token, there was also evidence that the destroyed gala and granny smith trees together occupied only 0.593 hectares (Blue 816). Accordingly, the proportionate figure of around $18,000 seems appropriate.

64 Before the primary judge, Country Energy submitted that there was a dispute as to yields, costs and sale prices; that there were no reliable figures concerning the affected yields; that the only documentation available was that selected by Bonny Glen (which was only a small proportion of the whole); that Timothy Hall’s evidence was unreliable; and that the profit and loss statements showed figures lower than those allowed by Mr Brown.

65 The primary judge said that the figures for loss of yields were not in contention (Judgment [134]); and was satisfied there was sufficient evidence concerning prices (Judgment [135]). She later noted a concession by Mr Gordon that $36 per case for gala apples was the top end of the range, rather than excessive.

66 On appeal, Mr Campbell for Country Energy submitted that the primary judge did not address issues raised by Country Energy as to yields and as to inferences from the profit and loss statements. Also he submitted she erred in uncritically accepting estimates from Bonny Glen’s witnesses, when it was only their selection of documents that was produced. Also, he submitted, she made no allowance for vicissitudes, but merely projected the yearly figure into the future on the bases that that level of profit would always be achieved.

67 Mr Newlinds submitted that it was not open to Country Energy to complain of non-production of documents, when it did not seek discovery or inspection. He submitted that the evidence of the Halls about yield and prices was unchallenged, and that Timothy Hall was not challenged on his evidence in pars 27 and 28, set out above. He submitted that it was not an error to make no allowance for vicissitudes, when vicissitudes could go either up or down.

68 I note that no suggestion was made that there was any issue estoppel as to the relevant figures arising from the decision on the other aspect of damages, which is not the subject of challenge. Had such a contention been raised, and if there were any substance to it, then no doubt there could have been an application to bring an appeal in respect of that matter also. Accordingly, I do not consider whether there could be any such issue estoppel.

69 In my opinion, evidence that the gross profits of the apple production of Bonny Glen averaged in the order of $18,000 per annum per hectare was a matter that needed to be addressed by the primary judge, in circumstances where Bonny Glen was claiming that this particular hectare would have produced gross profits of the order of $78,000 per annum. It is true that there was evidence that this was the best part of the best of Bonny Glen’s orchards; but in my opinion this of itself would not explain why it would be over four times more profitable than the average. In my opinion, it was an error of the primary judge not to address this question.

70 The primary judge did err also in saying there was no issue on yields. There was such an issue, and Country Energy’s position was supported by its expert evidence and by inferences that might be drawn from the profit and loss figures. I would add that the submission that the witnesses for Bonny Glen were not challenged on evidence as to yields and prices was not correct: as mentioned earlier, Fred Hall conceded that he was not in a position to support the figures; and Timothy Hall was cross-examined on prices (Black 313-323) and on yields (Black 323-325 and 329).

71 One other aspect concerning the approach of an appeal court to a finding such as this is that the appeal court may give less weight to a contingent finding of this type: Tarabay v Leite [2008] NSWCA 759.

72 Having regard to the errors by the primary judge and to that last mentioned consideration, in my opinion it is necessary either that there be a new trial on damages or that this Court assess them. Both parties supported the view that this Court should assess damages, if it could. In my opinion, this Court is in a position to assess damages.

73 For my part, I give considerable weight to documents that show the actual performance of a business over time, rather than to figures constructed from estimates, particularly self-serving estimates given by plaintiffs. Further, I do not consider even the representative sample documents chosen by Bonny Glen support the price figures used as being figures that would consistently apply over a ten year period. The yields supported by Bonny Glen’s evidence were only estimates; and in my opinion the average yields referred to by Country Energy’s witnesses suggest they were over-estimates.

74 I do give weight to Bonny Glen’s evidence that this was the best part of Bonny Glen’s best orchard. However, in my opinion, that cannot justify a finding that it was four times as profitable as the average. Doing the best I can on the figures I have referred to and the evidence I have referred to, I would take the view that it has been shown to have been in the order of twice as profitable as the average; and on that basis I would select a yearly figure of $36,000 rather than the $78,844 adopted by the primary judge.

75 I would then apply a proportionate reduction to the primary judge’s figure of $753,396.72, giving $344,000. In my opinion, that figure should be reduced by reference to vicissitudes. The figure of $36,000 per annum supposes a consistent performance for about 10 years of twice the average performance of the Bonny Glen apple orchards in each of the years ending June 2002, 2003 and 2004; and in my opinion, the risks of farming from such things as drought, storms, fires, and other matters would justify a deduction for vicissitudes. On that basis, I would reduce the figure by 15 per cent, giving $292,400.

Interest
76 It is common ground that Bonny Glen is entitled to interest.

77 There are three relevant categories:

(1) Interest on money spent ($2,000) to replace a fence and an irrigation pipe.

(2) Interest on past loss of income due to property damage.

(3) Interest on economic loss.

78 As regards (1), Bonny Glen has submitted a calculation of $888.72; but this starts from the date of the fire itself and continues to 20 September 2007. I have not been referred to evidence as to precisely when the money was spent, although there is affidavit evidence that $800 for the irrigation pipe was incurred “after the fire” (Blue 178). Also, I propose to quantify the judgment as at the date of the primary judge’s judgment, that is 31 August 2007, so that it will bear judgment interest as from that date. Although no objection was raised by Country Energy to this aspect of interest, I will round it down to $800.

79 As regards (2), Bonny Glen seems to have claimed interest on $61,839.75. However, the primary judge’s figure for past loss of income was $49,471.81 to the end of 2006 (Red 50R-51H, 53P). I would allow interest on half that amount at nine per cent per annum for four years, and interest on the full amount at 10 per cent per annum for eight months, giving $12,219.54.

80 As regards (3), I would adjust figures shown on Red 52 to $6,000 for 2002/3, $7,000 for 2004, and $36,000 for each of 2005, 2006 and 2007. I would allow interest on $6,000 for four years at nine per cent and eight months at 10 per cent ($2,562), and on $7,000 for three years at nine per cent and eight months at 10 per cent ($2,359). Since from the beginning of 2005 the loss accrued at a regular rate, I would add the losses for 2005, 2006 and eight months of 2007 (that is $24,000) (giving $96,000), and allow interest on one half that amount for two years at nine per cent per annum and eight months at 10 per cent per annum ($11,856).

81 I would then add these amounts, as follows:

$ 800.00

12,219.54

2,562.00

2,359.00

11,856.00

$29,796.54

82 I would round this out to $29,800.

Conclusion
83 For those reasons, I would increase the judgment from that given below by $292,400 plus $29,800, that is, $322,200, giving a total judgment as at 31 August 2007 of $381,985.65.

84 I note that, although the cross-appeal did not challenge any order made below, it was correct to bring a cross-appeal. While generally an appeal can only be against an order (Supreme Court Act 1970, s 101), a cross-appeal can be brought against a decision (UCPR 51.17) which is given a wide inclusive definition (UCPR 51.2). A notice of contention would not have been appropriate, because the role of such a notice is to give grounds for contending that the decision below should be affirmed on grounds other than those relied on by the court below (UCPR 51.40). Had the cross-appeal not been brought, the result of the successful appeal would have been a judgment for Bonny Glen in the sum determined by the primary judge.

85 It will be necessary to direct submissions on the question of the costs of the proceedings.

86 I propose the following orders:

(1) Appeal allowed.

(2) Cross-appeal allowed.

(3) Order Country Energy to pay Bonny Glen’s costs of the appeal.

(4) Order Bonny Glen to pay Country Energy’s costs of the cross-appeal, and Bonny Glen to have a certificate under the Suitors’ Fund Act 1951 if otherwise qualified.

(5) Judgment for Bonny Glen against Country Energy for $381,985.65 in lieu of $59,785.65, to take effect as at 31 August 2007.

(6) Direct that there be written submissions as to the costs of the proceedings below, by Bonny Glen within 14 days, by Country Energy within a further 14 days, and any submissions strictly in reply within a further 7 days.

87 IPP JA: I agree with Hodgson JA.

88 MACFARLAN JA: I agree with Hodgson JA.

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LAST UPDATED:
24 February 2009