North Dairy Limited v Agricultural Contracting Limited [2012] NZHC 3499 (17 December 2012)

Last Updated: 5 February 2013

IN THE HIGH COURT OF NEW ZEALAND TIMARU REGISTRY

CIV-2011-476-10 [2012] NZHC 3499

BETWEEN NORTH DAIRY LIMITED Plaintiff

AND AGRICULTURAL CONTRACTING LIMITED

Defendant

Hearing: 17 December 2012

Counsel: A W Belcher for the Plaintiff

No appearance for the Defendant

Judgment: 17 December 2012

_{JUDGMENT OF FOGARTY J}

Introduction

[1] The plaintiff is a dairy farmer suing the defendant, an agricultural contracting company, for damages in the sum of $257,687 plus costs. The plaintiff has a

284 hectare dairy farm in North Otago. The defendant carries on business as an applicator of agricultural chemicals.

[2] The parties entered into a contract whereby the defendant agreed to apply selective herbicide to approximately 170 hectares of the plaintiff’s dairy farm. The purpose was to eradicate thistles. The thistle spray took place in June of 2010. The herbicide was supplied by the defendant.

[3] Subsequent to the thistle spraying, the plaintiff arranged for the spraying of a chemical known as Eco-N to the whole of the dairy farm. This is a chemical

_{supplied by Ravensdown. Ravensdown applied it. The purpose of Eco-N is to put}

NORTH DAIRY LTD V AGRICULTURAL CONTRACTING LTD HC TIM CIV-2011-476-10 [17 December

2012]

certain bacteria to sleep, as it were, in order to minimise the leach of ammonia from the effluent of the cattle into the soil.

[4] Soon after the Eco-N was applied, serious damage was observed by the plaintiff’s staff over the grazing pasture in two separate areas, totalling some 53 hectares. Initially the plaintiff thought that was caused by the application of Eco-N by Ravensdown, and Ravensdown investigated. Mr Michael Manning, an employee of Ravensdown, oversaw the investigation. The facts were gathered and the scientific analysis done by another Ravensdown employee, Mr Greg Costello. Both have filed affidavits in these proceedings. These proceedings proceeding by way of formal proof.

[5] I should say (as it were) that Ravensdown is a very large fertiliser company, yet is a farmer owned co-operative. It has a very good reputation. I was told from the bar that it is insured against loss by reason of problems with application of products. There is good reason therefore, in this context, to recognise the independent reliability of the report, even though it was undertaken by Mr Manning and Mr Costello to see whether or not it was the application of the Eco-N which caused the loss. Of the two men, Mr Greg Costello would more qualify in terms of technical expertise. He has been employed by Ravensdown since 2001, and has been working in the agro-chemical sector from 2005 until 2010. He and Mr Manning are of the firm view that they were looking at damage to pasture caused by the application of a chemical known as Glyphosate. Glyphosate is a broad spectrum non-selective herbicide which is used for the purpose of eradicating all vegetable matter to which it is applied. By contrast, a selective herbicide, such as that applied to eradicate thistles, essentially targets broadleafed vegetation, leaving the grass alone, assuming it is applied in winter. Both Messrs Manning and Costello came to the firm view that what they were looking at was damage caused by the application of Glyphosate.

How did this happen?

[6] One would not expect a spraying contractor like the defendant to have made such a basic mistake. The theory developed by Mr Costello for this mistake is that

the defendant’s method of work utilised the process called decanting of products. Decanting of products is where product is taken from its own large container and poured into a smaller container, normally for ease of transport and handling. The container into which the decanted product is poured is often the recipient of a number of different products over a period of time. During this exercise by Ravensdown investigating the matter, the defendant’s staff were informed of the investigation that was taking place. Mr Costello and Mr Manning visited the defendant’s premises and spoke to a Mr Mark McLennan, a director and shareholder of the defendant. They learned that Mr McLennan and his son Jonathon had applied thistle spray and also Eco-N on the plaintiff’s farm property. It appeared that during the application of the thistle spray, Mr Mark McLennan had run out of a product called Kiwicover and had used instead a product called Promax. Mr Costello was shown the Promax drum, it was old and, in Mr Costello’s view, had obviously been used repeatedly over a fair period of time.

[7] The particular use that the drum was being put to was for decanting of products. Mr Costello learned from Messrs McLennan that decanting was a common practice of the defendant. He also relied on the fact that in January 2010 a number of Ravensdown chemicals were returned to the Ravensdown depot by the defendant. The returned products appeared to have been put into mislabelled containers with the name of the new herbicide contents handwritten onto the container. So it is Mr Costello’s theory that the practice of decanting had led to some Glyphosate being applied when the intention was to apply only a selective spray. Mr Costello is confident that it was Glyphosate. He said:

The damage that I observed to the pasture on the Plaintiff’s farm was

entirely consistent with the way in which glyphosate acts upon pasture.

...

Glyphosate acts upon the root system of the plants with which it comes into contact. The chemical translocates to the root system of the plant from the leaves upon to which it is sprayed. This translocation occurs by means of photosynthesis. The photograph which I took on 11 August ... shows that the damaged pasture has been trans-located to the root zone.

This translocation which I observed and photographed is absolutely consistent with glyphosate damage.

Photosynthesis is slowed down during winter months and during cold temperatures.

As a result, the adverse effect of Glyphosate is delayed during cold temperatures...

(He then referred to NIWA weather station records.)

And observed:

... During cold temperatures such as those recorded ... it would take about a month for damage such as was observed that [sic] the Plaintiff’s farm to be observable to the extent by the Plaintiff by 20 July 2010.

I am therefore able to say with a high degree of certainty that the pasture damage was caused by the application of glyphosate on or about 17 June, which is when the Defendant was undertaking the thistle spray.

The second reason for concluding that it is likely that the glyphosate was applied at the time of the Defendant’s thistle spraying is that we were able to detect Glyphosate in the herbage samples taken from the drying areas.

Whilst glyphosate was not detected in the first sample taken, this does not, due to the hit and miss nature of spraying lead me to change my opinion that the damage was caused by glyphosate.

The test results from the samples taken on 6 and 20 August 2010 enable me to conclude with a very high degree of certainty that glyphosate was present on the Plaintiff’s farm and was responsible for the damage caused there.

[8] I am satisfied that the defendant is in breach of the implied duty of care to the plaintiff when applying chemical sprays to crops.

[9] The next question to arise is the measure of loss. Quantification of that loss accumulates losses under a number of different headings:

(i) Re-seeding.

(ii) Application of increased amounts of urea. (iii) Alternative costs to acquire extra baleage. (iv) Loss of milk production.

[10] These losses were the subject of the affidavit of Mr K J McLeod, a company director of the plaintiff.

Re-seeding

[11] As to re-seeding, he said that 53 hectares of land had to be re-seeded at a cost of $278 per hectare. A total cost of $14,734. The grass seed was planted by means of direct drilling, at a cost of $120 per hectare, the total cost being $6,360. He supported this with invoices.

Urea

[12] The 53 hectares of new pasture required more than the usual amount of topdressing with urea in the four months from August to September in the 2010 season in order to boost the new growth. The balance of the milking platform also required more than the usual amount of topdressing with urea. This was because the deficit in pasture caused by damage to the pasture required the rest of the milking platform to be grazed harder, due to there being a shorter grazing round. The extra pressure on the balance of the milking platform required more urea in order to catch up.

[13] Mr McLeod then did a comparison between the normal farm application of urea, taking 2009 as the example and 2011 as another example, comparing the figures from those two years with the 2010 application. He was able to demonstrate that the 2010 application had shown in 2010 a total increase of 137 kilograms per hectare or 33,976 kilograms over the whole farm, approximately 34 tonnes. At a cost of $629 per tonne, the loss claimed in respect of urea comes out at $21,370. He made a small adjustment to allow for application and claimed the sum of $21,873.

Baleage

[14] As a further way of compensating for the loss of 53 hectares of pasture between August and December, this was made up by feeding extra feed in the form of baleage. The extra baleage required was estimated to have been in the region of

1,600 bales. The herd size at that time was 900, and the assumption is that the herd would need an extra four kilograms of dried matter per head for a period of 122 days. The reckoning was needing about 439,200 kilograms of dry matter. Allowing

for 276 kilograms of dry matter in a good bale, the plaintiff needed to buy in about

160 bales. The cost at that time was $0.35 per kilogram or $96 per bale delivered to the farm, an equivalent cost of $153,720.

[15] The plaintiff, however, did not mitigate loss in that way. Rather, silage was made by the plaintiff’s on the plaintiff’s run-off block. One of the reasons the plaintiff’s made their own silage was to have control of quality, as well as the availability of grass at the run-off block. But the consequence of this is that the calves and heifers that normally grazed on the run-off block had to be grazed elsewhere with a grazier. Extra fertiliser had to be applied in order to replace the grass used for the baleage that was made. The direct cost of making the baleage was

$74,089.90. That sum does not allow for the value of the dry matter in the grass that went into the baleage.

[16] Mr McLeod also was able to show, again by comparison with different seasons, with production for the seasons ending 2011 and 2012, that there was a drop in the kilogram of milk solids per cow of approximately 15 kilograms per milk solids per cow. Further indirect costs were the costs of paying for the grazing of the heifers and the calves on two different run-off blocks of $70,000 for 150 calves and

$46,000-odd for the heifers. Putting these costs together, they actually add to a sum in excess of the market value of the baleage at $153,720. In the plaintiff’s statement of claim that is the sum sought for silage, with a loss of production of 10,000 kilograms of milk solids at $6.10 per kilogram of $61,000. I am satisfied that these last two sums are a sufficiently reliable estimate of losses that were incurred, but I would classify this claim as general damage rather than specific costs for the grass seed and the urea.

[17] Therefore, the claim builds up this way:

Grass seed @ $278 per hectare $14,734.00

Direct drilling @ $120 per hectare $6,360.00

Increased urea application $21,873

Total direct losses

General costs to supplement feed $153,720

Resultant loss of milk production $61,000

TOTAL $257,687

[18] The defendant filed a statement of defence in May 2011. At that point, the statement of defence denied that a broad based spectrum spray had been applied. The statement of defence denied the losses but did not provide any particulars disputing the quantum. The defendant did not, however, appear to defend the action. The statement of defence was filed when the defendant had retained solicitors. There was an application made in May of this year by Mr McLennan senior for leave to represent the defendants himself. This application was declined, applying the

leading decision of Re G J Mannix Ltd,[1] by Associate Judge Osborne.

[19] At the same time, the Judge gave leave to adduce evidence for trial by affidavit.

[20] I am satisfied that the defendant did have an opportunity to defend the case and that it was appropriate for this decision to have proceeded by way of formal proof before me, as it did.

[21] There has been no sign of any delays by the plaintiff, and no reason why interest should not accordingly run. The statement of claim seeks interest on the judgment sum. There is no detailed argument justifying interest before the judgment date. Given the way in which the losses had to be calculated/assessed, it is inappropriate for there to be an interest charge applying before the judgment date.

[22] Accordingly, there will be judgment against the defendant in the sum sought of $257,687, interest will run on that judgment at the Judicature Act rate. The plaintiff is entitled to costs on a 2B basis. A schedule of costs should be submitted

_{to me for approval.}

Solicitors:

A W Belcher Barrister PO Box 101, Dunedin – [e-mail]

Copy to:

R M McLennan – [e-mail]

---

[1] Re G J Mannix Ltd [1984] 1 NZLR 309, at 314.