In Perre v Apand Pty Ltd, the High Court of Australia addressed a significant issue in the law of negligence: whether a defendant could owe a duty of care to prevent purely economic loss, even when there was no physical injury to person or property.
Case name & citation: Perre v Apand Pty Ltd [1999] HCA 36; (1999) 198 CLR 180
- Decided on: 12 August 1999
- The concerned Court: High Court of Australia
- The bench of judges: Gleeson CJ, Gaudron, McHugh, Gummow, Kirby, Hayne and Callinan JJ
- Area of law: Negligence, Duty of care, Economic loss
Case Background (Perre v Apand Pty Ltd)
Apand Pty Ltd, a potato chip manufacturer, sold an experimental batch of potato seeds to Sparnon, a potato grower and neighbour to the Perre family in South Australia. These seeds were infected with bacterial wilt, leading to contamination of Sparnon’s crops. Under Western Australian law, this contamination prohibited the import of potatoes from Sparnon’s farm and any farm within a 20 km radius, including the Perres’ farm, for five years. Consequently, the Perre family and other affected farmers were unable to export their potatoes to the lucrative Western Australian market, causing significant economic loss. The Perres and other farmers sued Apand for compensation, arguing that Apand owed them a duty of care to prevent this economic loss.
And as far as Sparnon is concerned, Apand was liable for selling infected seeds.
Key Legal Issue
The primary issue was whether Apand owed a duty of care to the Perres and other potato farmers to avoid causing them purely economic loss, even though there was no physical damage to their property or person.
High Court’s Decision in Perre v Apand Pty Ltd
The High Court of Australia found that Apand did owe a duty of care to the Perre family and the other farmers. The court’s decision marked a significant development in the law of negligence, particularly in relation to claims for purely economic loss.
Judges’ Reasoning
The Judges of the High Court had differing reasons for determining how a duty of care was imposed on Apand, but they all agreed that Apand should have foreseen that supplying infected seeds to a potato farmer in South Australia would affect the ability of neighbouring potato farmers to sell their potatoes, thus causing economic loss.
Justice Gaudron’s View
Gaudron J emphasized that if a person knows or should know that their actions could impair the legal rights of another person who cannot protect their own interests, a duty of care should be imposed to prevent foreseeable economic loss.
His words were:
“In my view, where a person knows or ought to know that his or her acts or omissions may cause the loss or impairment of legal rights possessed, enjoyed or exercised by another, whether as an individual or as a member of a class, and that that latter person is in no position to protect his or her own interests, there is a relationship such that the law should impose a duty of care on the former to take reasonable steps to avoid a foreseeable risk of economic loss resulting from the loss or impairment of those rights.”
(GAUDRON J at p 42)
Justice Kirby’s Three-Stage Test
Kirby J proposed a three-stage test for determining the existence of a duty of care in cases of economic loss:
1. Foreseeability of harm to the plaintiffs from the defendant’s conduct.
2. The existence of a proximate relationship or neighbourhood between the parties.
3. Whether it is fair, just, and reasonable to impose such a duty of care.
His words were as under:
“As an approach or methodology for deciding whether a legal duty of care in negligence exists, I suggested that the decision-maker must ask three questions:
1. Was it reasonably foreseeable to the alleged wrongdoer that particular conduct or an omission on its part would be likely to cause harm to persons who have suffered damage or a person in the same position?
2. Does there exist between the alleged wrongdoer and such person a relationship characterised by the law as one of “proximity” or “neighbourhood”?
3. If so, is it fair, just and reasonable that the law should impose a duty of a given scope upon the alleged wrongdoer for the benefit of such a person?”
(KIRBY J at p 259)
Legal Context and Impact (Perre v Apand Pty Ltd)
Traditionally, negligence law restricted claims to physical damage to a person or property, with limited exceptions for foreseeable and quantifiable economic loss. Courts were wary of indeterminate liability, where defendants could face unlimited claims for economic loss. The decision in Perre v Apand signifies a shift towards recognizing duties of care in cases of purely economic loss under certain circumstances. This case highlights the courts’ increasing willingness to allow claims for economic loss where plaintiffs have no means to protect their interests against a defendant’s actions. In this instance, the Perre family lacked the ability to prevent the outbreak of bacterial wilt. And once the outbreak occurred, there was nothing they could do to prevent the loss of their lucrative contracts in Western Australia as a result of being within the 20 km radius.
List of references:
- https://www.johnwiley.com.au/highered/blaw/content110/case_summaries/perre_vs_apand.pdf
- https://doylesconstructionlawyers.com/wp-content/uploads/2015/09/Perre-v-Apand.pdf
- https://jade.io/article/68136
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