On 28 May 2014, the Western Australian Supreme Court delivered its much anticipated decision in Marsh v Baxter  WASC 187. The case involved a claim by Stephen and Susan Marsh for damages on the dual basis of an alleged negligent breach by their neighbour, Michael Baxter, of his common law duty of care and, secondly, upon private nuisance.
The decision confirms that farmers will have great difficulty establishing that their neighbours are liable for the incursion of genetically modified crops onto their land for pure economic loss where there is no physical damage to person or property by those crops.
Steve and Susan Marsh and Michael Baxter are neighbouring farmers in the southwest of Western Australia. The farms share a common boundary along which the properties are separated by a road reserve of approximately 20 m width.
Since 2002, the Marshes farmed their property, Eagle Rest, organically. They grew cereal crops and raised sheep for the purpose of sale as organic meat. As a legal requirement for export, and as a practical requirement for domestic sale, it is necessary for organic producers to be certified by an accredited certifying body.
The need for the conferral of organic status for their produce led the Marshes to enter into a contract with the National Association of Sustainable Agriculture (Australia) Ltd (NASAA). By January 2006, the Marshes had obtained organic certification from NASAA for 476 of their 477 hectares of Eagle Rest.
Unlike the Marshes, Baxter never sought to grow organic produce, but rather conducted a conventional mixed farming operation on his larger adjoining farm, Sevenoaks, located to the west of Eagle Rest. This involved his sowing of cereal crops, vegetable seed crops (canola) and the running of some sheep.
While Mr Baxter had planted and harvested conventional canola crops across his various paddocks for about 10 years, in 2010 he decided to sow a new a variety of genetically modified canola in the paddocks which were adjacent to Eagle Rest. The particular variety of GM canola grown by Baxter is known as Roundup Ready. The genetic modification to this variety of canola delivers immunity to the effects of a herbicide called Roundup, which weeds do not have.
In late November 2010, Baxter harvested the GM canola. For the first time since he started growing canola on Sevenoaks, he chose to harvest the crop by swathing it rather than direct harvesting. This technique involves, first, cutting the not yet fully matured canola plants at close to their base – the cut plant (with attached seed pods) are referred to as a ‘swathe’. Once cut, the swathes are pushed together into standing windrows in the paddock. There, the swathes stand to ripen in the paddock for 2 to 3 weeks. They are then processed by a header to harvest up the ripened seeds from each swathe.
Some of the canola swathes on Sevenoaks were blown by the wind into Eagle Rest.
After Eagle Rest was inspected by a representative of NASAA’s certification subsidiary, NASAA Certified Organic Pty Ltd (NCO), the Marshes were notified that organic certification for 70% of the property had been suspended. Later, the NCO notified the Marshes that the decertified areas would remain so until it could be verified that the GM material had been entirely removed.
The NCO decertification decision was made on the basis of a perceived ‘unacceptable risk’ of contamination of the Marshes’ produce by the GM canola as per NASAA standard 3.2.9. That standard reads:
Organic certification shall be withdrawn where NASAA considers there is an unacceptable risk of contamination from [genetically modified organisms] or their derivatives.
The terms ‘unacceptable risk’ and ‘contamination’ were not defined in the NASAA standard, or the National Standards, upon which the NASAA standards are based.
The Marshes sued Baxter for $85,000 for the loss arising by reason of the absence of NCO certification for 70% of the area of Eagle Rest. The two causes of action brought against Baxter for these damages were negligence and private nuisance.
The Marshes alleged that it was reasonably foreseeable to Baxter that if he did not take reasonable care to ensure that GM canola was not blown or carried from Sevenoaks to Eagle Rest, the Marshes would be at risk of losing their organic certification on all or part of Eagle East, and would then, as a result, be at risk of suffering financial loss. Their grievance was about how the financial loss happened not against the mere growing of GM canola on Sevenoaks by Baxter, but rather against the swathing process under which the crop was cut and left stacked in windrows. It was argued that if the GM canola crop had not been harvested in this way, but by an alternative method – for example, by direct harvesting as was done with previous crops – this would have limited any unexpected wind blown spread event of the GM canola seeds.
By reason of these matters, the Marshes submitted that Baxter owed them a duty of care to take reasonable care:
(a) to ensure that GM canola was not blown or carried from Sevenoaks onto Eagle Rest; and
(b) to ensure that the Marshes did not suffer loss, including economic loss as a result of GM canola being blown or carried from Sevenoaks onto Eagle Rest.
The Marshes contended that the presence of GM canola on Eagle Rest constituted an ‘unlawful interference with the use and enjoyment of the land’ by them. In particular, it was submitted that the interference, and the consequential loss of certification, resulted in the Marshes not being able to use Eagle Rest to cultivate or raise certified organic crops or livestock.
The Court held that the duty of care contended for against Baxter ‘to ensure’ GM canola was not blown or carried onto Eagle Rest (and the subsequent economic losses to the Marshes) was set too high, especially in circumstances involving large scale farming which was necessarily exposed to uncontrollable weather events.
This confirms the well-established position that a person does not a owe a duty to another to take care not to cause reasonably foreseeable economic loss, that is, the loss suffered is not a consequence of injury or damage caused by the former to the latter’s person or property.
While the Supreme Court noted that economic loss has been successfully recovered in the aftermath of diseased potato seeds causing a potato blight and then an inability of a potato growing family to sell to their wholly unaffected potato crop at higher prices (in Perre v Apand (1999) 198 CLR 180), there was still physical damage (disease) caused to property unlike in the present circumstances where the canola swathes posed no risk health risk or a risk of any GM genetic trait transfer to any species.
The evidence led at the trial showed that none of the Marshes’ crops or sheep could acquire any genetic traits of the GM canola. While some GM canola plants were found to have grown in Eagle Rest, these plants were easily identified (since canola was not grown on Eagle Rest) and eventually pulled out by the Marshes. There was no subsequent germination of GM canola plants upon Eagle Rest.
The ‘vulnerability’ of the family in Perre was an important factor in the High Court’s recognition of a duty of care to avoid economic loss. In this case, the Supreme Court found that the vulnerability concept did not extend to catch what was a different and ‘self-inflicted’ contractual vulnerability to NCO of the Marshes, generating their claimed economic loss.
The Supreme Court found that there was no unreasonable interference with the use and enjoyment by the Marshes of Eagle Rest by Baxter’s swathing. The following factors relevant to this finding include:
- there was no physical damage from the swathes to persons, animals, land or chattels at Eagle Rest, the character of the damage suffered by the Marshes was purely financial;
- Baxter held legitimate agricultural reasons for swathing his GM canola crop;
- the swathing method is not a novel method for harvesting a canola crop;
- Baxter did not make an uninformed decision to swathe the GM canola crop, the swathing method was recommended by an agronomist;
- the strong winds causing the GM canola swathes to be carried onto Eagle Rest could not reasonably have been anticipated or expected by Baxter; and
- there was not any recommended swathing buffer distance suggested for GM canola grown in a boundary paddock put before farmers for the 2010 growing season.
It was held that had the underlying facts been different, by an incursion of a physically dangerous substance – for instance, a pesticide or herbicide – thereby causing physical damage, the nuisance action would be different.
What does the decision mean for farmers?
The decision highlights a number of important matters to consider for organic farmers or those seeking organic certification, as well as those farmers currently growing GM crops.
For organic farmers, the decision makes it clear that you should review the contractual relationship with your organic certifier. In particular, you should consider the defined terms of the standards upon which your certification is maintained, and determine in what circumstances your property can be decertified. This is made clear by the relevant decision maker of NCO asserting during cross-examination that ‘one seed is enough’ for there to be an unacceptable risk of contamination. This position highlights the need to review how exposed you could be to decertification.
For GM farmers, the decision does not provide an immunity for all loss caused by GM crops blown or carried onto adjoining land. Where adjoining farms grow a compatible crop species, cross-fertilisation by pollen is possible and physical damage, as well as economic loss because of decertification, could be suffered. A duty of care to take reasonable steps to prevent cross-fertilisation could be found to be owed in such circumstances.
For this reason, you should seek technical advice to manage the spread of your GM crops, including:
- the harvesting method you choose to adopt; and
- a suitable or, if any, prescribed separation distance and buffer zones as between GM and non-GM crops.
For further information contact our Agribusiness & Rural Industries Team.
Author: Thomas Ambrose
Alistair Salmon, Partner
T +61 2 8083 0467
Ron Eames, Partner
T: +61 7 3135 0629
This publication does not deal with every important topic or change in law and is not intended to be relied upon as a substitute for legal or other advice that may be relevant to the reader's specific circumstances. If you have found this publication of interest and would like to know more or wish to obtain legal advice relevant to your circumstances please contact one of the named individuals listed above.