GM farmer not held liable for the pure economic losses suffered by his neighbouring Organic farmer when the Organic farmer lost his organic certification following the discovery of GM swathes on his property blown in from the neighbouring GM farm.

In the recent Supreme Court of Western Australia case of Marsh v Baxter [2014] WASC 187, the Court recently held that a farmer of Genetically Modified ("GM") Canola was not liable for the pure economic loss suffered by his farming neighbour who lost his "NASAA" organic certification following strong winds blowing GM swathes onto his organic crops. This is an important decision in the wake of the 2010 introduction of legislation to allow the harvest of GM Canola in WA.

Facts

Mr & Mrs Marsh owned the organic crop producing farm "Eagle Rest". Their organic produce was certified by NASAA (National Association of Sustainable Agriculture (Australia) Ltd), and as such, could fetch a higher sales price than that of non-certified produce.

A neighbouring farm, the "Sevenoaks", was owned by Mr Baxter and in 2010, began lawfully growing and harvesting Genetically Modified (GM) Canola. In late 2010 Mr Baxter decided to use a well recognised and preferred harvesting method called "swathing", which involves cutting the canola plants before they are matured and leaving them in piles in the field to ripen.

In late November or early December 2010, strong winds caused some of the GM Canola swathes to be blown onto the organic "Eagle Rest" farm.

NCO, a subsidiary of NASAA which deals with certification, attended "Eagle Rest" on 4 December during which it noted the presence of the GM Canola swathes. As a result, "Eagle Rest" lost its organic certification for 70% of its paddocks and could not label its produce as "NASAA certified organic" for 3 years on the basis that NCO considered there was a perceived "unacceptable risk" of "contamination". The Marshes claimed this caused them economic loss due to the reduced sale price of their crops. They brought their claim against Mr Baxter alleging negligence and private nuisance. They also sought a permanent injunction preventing Mr Baxter from growing GM Canola and from harvesting GM Canola using the swathing method.

Main findings

  1. The Plaintiff failed to prove that the swathes were "in any way toxic, harmful or otherwise dangerous to humans, animals or to land". Likewise there was no evidence that any physical damage was suffered or that there was any transfer of GM material to any of the "Eagle Rest" crops or sheep. There was also no evidence that the swathes had caused GM canola seeds to grow on the "Eagle Rest" farm. The Court held that the offending swathes caused no damage and could and were easily removed from "Eagle Rest". It was merely the perceived "unacceptable risk" of GM contamination that NCO had based its decision on to decertify "Eagle Rest" crops. The Court therefore concluded that the only loss suffered by the Plaintiffs was the 'pure economic loss' of its profits by reason of its NASAA organic certification having been revoked.
  2. The mere growing of GM Canola at the neighbouring "Sevenoaks" did not cause the airborne infiltration found at "Eagle Rest". Any risk of swathes blowing onto "Eagle Rest" would have been significantly reduced or eliminated completely had Mr Baxter used "direct heading", the alternative method, when harvesting Canola. It was held that the "swathing" method of harvesting was not an unreasonable interference with the use and enjoyment by the Marshes of "Eagle Rest".
  3. Since the growing of GM Canola only became lawful in WA at the beginning of 2010, the impact on the greater agricultural industry was unknown in WA and as such the growing and harvesting by Mr Baxter that year was somewhat of a learning experience. Evidence before the Court suggested that little research had been done regarding optimal separation distances between different Canola crops and there was no recommended swathing buffer in 2010. In May 2011, the Department of Farming and Agriculture of Western Australia ("DAFWA") published a recommendation in very general terms.

Conclusion & comments

As the crops at "Eagle Rest" did not sustain any 'damage' from the swathes, which could be removed, the Plaintiff's loss was 'purely economic' and, as such, the Defendant could not be held liable. As no Canola was grown at "Eagle Rest" there was no risk of a genetic transfer via pollen because such pollination could only occur if the species were compatible. The Court inferred that the position could have been different if Canola had been grown at "Eagle Rest" such that genetic interference could have occurred theoretically. Arguably, however, such interference would still be a 'purely economic loss' and, at this stage, it is likely that even a wholly foreseeable economic loss would be unrecoverable from a GM farmer.

No injunction was granted against the Defendant and therefore he was free to grow and harvest GM Canola using the "swathing" method.

The Court found that the legal cause of the economic loss was NCO unreasonably having applied the NASAA standards and cancelling the certification. It also considered that NCO had acted "well beyond the scope of its contractual rights…in decertifying 70% of "Eagle Rest"…". This point raises the possibility that a grower in Mr Marsh's position could bring a claim against the certifying authority for breach of contract which, among others, would avoid the difficulties in succeeding with 'pure economic loss' claims.

As the growth of Genetically Modified crops in Australia is relatively new, guidelines for the growing and harvesting of different crops in proximity to each other will come under increased scrutiny as more cases such as this arise. Similarly, one can expect that further efforts will be made to understand the effects of incursion of one crop on others and the standards that organic certification authorities set for their growers.