Hamilton & Anor v. Papakura District Council (New Zealand) [2002] UKPC 9

Judicial Committee of the Privy Council

Case No Privy Council Appeal No. 57 of 2000

Venue FROM THE COURT OF APPEAL OF NEW ZEALAND

Between

Hamilton & AnorAppellant

Papakura District Council (New Zealand)Respondent

Before

Lord Nicholls of Birkenhead

Lord Hutton

Lord Rodger of Earlsferry

Sir Andrew Leggatt

Sir Kenneth Keith

Date 28 February 2002

[1]:- Lord Nicholls of Birkenhead Lord Hutton Lord Rodger of Earlsferry Sir Andrew Leggatt Sir Kenneth Keith [Majority judgment delivered by Sir Kenneth Keith ] Mr and Mrs Hamilton, the appellants, claim that their cherry tomato crops were damaged in 1995 by hormone herbicides which were present in their town water supply. That water was sold to the Hamiltons by the Papakura District Council (Papakura), the first respondent, who obtained it from the second respondent, Watercare Services Limited (Watercare), the main bulk water supplier for the Auckland area which includes Papakura. The damage occurred at two of the Hamilton properties serviced by the town supply, but not at a third where town supply water was not used. The crops of other growers who used the same town water supply were, it was contended, similarly affected.

[2]Williams J in the High Court dismissed the Hamiltons’ claims and the Court of Appeal (Gault, McGechan and Paterson JJ) dismissed their appeal ( Hamilton v Papakura District Council

[2000] 1 NZLR 265

). They now appeal to Her Majesty in Council.

[3]Before the Board, as in the Court of Appeal, the claims against Papakura are in contract and negligence and against Watercare are in negligence and nuisance and under the principle in Rylands v Fletcher (1868) LR 3 HL 330 .

[4]The Hamiltons contended that the water had been contaminated by the herbicide triclopyr which was a component of a weed spray marketed under the name Grazon. Watercare’s contractors had sprayed gorse with Grazon in part of the catchment area for the lake from which the town water supply was taken. The claim was that the herbicide had contaminated the water in the lake and that that contamination in turn had damaged their tomatoes.

[5]After hearing extensive evidence over more than three weeks, Williams J held that it had not been proved that the maximum concentration of any of the herbicides at the inlet tower in the lake or at the Papakura Filter Station or in the town supply ever came near the concentrations of herbicide shown by scientific results to be necessary to cause damage to cherry tomatoes grown hydroponically. In terms of those results, the concentration for triclopyr was at least 10 parts per billion (ppb). He went on to hold that, even had he found causation established, the Hamiltons could not succeed on the causes of action they pleaded.

[6]In their appeal to the Court of Appeal, the Hamiltons challenged the Judge’s findings on both the facts and the law. On the facts, the Court of Appeal, having stressed the advantage the Judge had from hearing the witnesses, said, given the pattern of damage not just to the Hamiltons’ tomatoes but also to the crops of other horticulturists, that “There is some merit in the contention that to determine that the Hamiltons had failed to show by scientific proof that their plants were damaged by contaminated water to which they were particularly sensitive was to impose a standard of proof higher than the balance of probabilities.”

[7]The Court then indicated that it was prepared to proceed on the premise that it had been shown as probable that the damage was caused by triclopyr contamination of the range of up to 10ppb. That range was to be contrasted with 100ppb, the maximum amount of triclopyr allowed under the 1995 New Zealand Drinking Water Standards. Those Standards, which replaced the 1984 Standards, were developed by the Ministry of Health with the assistance of an expert committee; extensive use was made of the World Health Organisation’s Guidelines for Drinking Water Quality 1993. (There was some question whether the 1984 rather than the 1995 Standards were applicable. In the event that is of no consequence for the resolution of the appeal.)

[8]On the basis of the premise it had stated about the probability of damage, the Court rejected each of the Hamiltons’ causes of action. On their appeal to the Board, the Hamiltons accept that, were they to succeed on any or all of the legal arguments, the case should be remitted to the Court of Appeal for it to make the necessary factual findings.

[9]The Hamiltons alleged that Papakura breached an implied term in its contract for the supply of water to them that the water supplied was suitable for horticultural use.

(a) of the Sale of Goods Act 1908:

“… there is no implied warranty or condition as to the quality or fitness for any particular purpose of goods supplied under a contract of sale, except as follows: (a) Where the buyer, expressly or by implication, makes known to the seller the particular purpose for which the goods are required, so as to show that the buyer relies on the seller's skill or judgment, and the goods are of a description which it is in the course of the seller's business to supply (whether he is the manufacturer or not), there is an implied condition that the goods shall be reasonably fit for such purpose: Provided that in the case of a contract for the sale of a specified article under its patent or other trade name, there is no implied condition as to its fitness for any particular purpose.”

[10]The High Court held against the Hamiltons on the ground that they had not shown that they had made known to Papakura the particular purpose for which they required the water in such a manner as to show that they relied on Papakura’s skill or judgment in ensuring it was suitable for that purpose.

[11]The Court of Appeal, citing Ashington Piggeries Ltd v Christopher Hill Ltd

[1972] AC 441

, stated that “[it] is, of course, clear that if the reliance of the Hamiltons was communicated to [Papakura] it would not be open to it to deny liability on the ground of ignorance of the precise level of contamination at which the damage would be caused”. However, the Court continued, that proposition did not avoid, indeed it emphasised the importance of, the statutory requirement that the particular purpose be made known by the buyer to the seller. The Court then set out matters emphasised by the Hamiltons as communicating the particular purpose and reliance, and it concluded:

“[49] Together this material establishes that the council knew at the relevant time that its town water supply was used for protected crop growing including the use of soil-less techniques, knew growers preferred that water to bore water because of its quality and knew that the catchment area was vulnerable to contamination from (inter alia) pesticides.”

[12]While that conclusion supported the Hamiltons’ claim, the next, critical sentence and two supporting paragraphs did not:

“[50] There is no evidence, however, that the council knew that growers relied on the water for use with sensitive crops without any testing or treatment in the expectation that the suppliers would ensure that its quality would be adequate for all such special uses. [51] The evidence was that at no time did Mr or Mrs Hamilton or their predecessors discuss with council officers their water use or special needs. While one of their consultants discussed with the council’s water engineer on occasions nutrient and element levels in the town-supply water, he did not communicate any needs or reliance on the part of the Hamiltons. [52] There was reference to the fact that when Mr and Mrs Hamilton won an award for their tomatoes the Mayor wrote to congratulate them. That, at its highest, translates to knowledge by the council of their activities but it could not amount to communication either of particular needs or reliance.”

[13]The Court of Appeal considered that the Ashington Piggeries case was distinguishable in principle, emphasising the importance of the particular facts, a matter to which it also referred in relation to other cases cited for the Hamiltons.

[14]Finally, in its discussion of the cases, the Court mentioned the difficult issues which may arise where a broad purpose is specified and the goods are suitable for some uses within that purpose and not others. It concluded its discussion of this head of claim as follows:

“[57] In the present case, the evidence does not establish communication by Mr and Mrs Hamilton to the council even of the broad purpose of horticultural use let alone the special needs purpose of soil-less, cherry tomato growing so that it is unnecessary to investigate whether the water was reasonably fit for wider horticultural use. [58] We are satisfied the finding of the Judge that the statutory conditions for invoking the implied warranty of suitability were not established was open to him, indeed inevitable.”

[15]It is convenient to recall the requirements of s16(a) of the Sale of Goods Act and to relate them to the present facts: 1. If the Hamiltons expressly or impliedly made known to Papakura the particular purpose for which they required the water 2. so as to show that they relied on Papakura’s skill or judgment (about the fitness of the water for that purpose) and 3. the goods are of a description which it is in the course of Papakura’s business to supply “So far as concerns the conduct of the buyer, the circumstances which give rise to the implied condition under subsection (1) [of s14 of the United Kingdom Act 1893; s16(a) of the New Zealand Act] are, first, that he should make known expressly or by implication to the seller what is the particular purpose for which the goods are required and, secondly, that he should do so in such a way as to make the seller reasonably understand that he is relying upon the seller to exercise sufficient skill or judgment to ensure that the goods are fit for that particular purpose. This he generally does by selecting a seller who makes it his business to supply goods which are used for purposes of that kind. It does not matter that the seller does not possess the necessary skill or judgment nor does it matter that in the then state of knowledge no one could by exercise of skill or judgment detect the particular characteristic of the goods which rendered them unfit for that purpose. This may seem harsh upon the seller, but its harshness is mitigated by the requirement that the goods must be of a description which it is in the course of the seller’s business to supply. By holding himself out to the buyer as a manufacturer or dealer in goods of that kind he leads the buyer reasonably to understand that he is capable of exercising sufficient skill or judgment to make or to select goods which will be fit for the particular purpose for which he knows the buyer wants them.” ([1972] AC at 505) “a duty of care to supply water that was fit for the purposes for which it was used, to monitor the quality of the water to determine that it was fit for such purposes and to warn the plaintiffs that the water supplied may not be fit for such purposes.”(a) To ensure that the water supplied by it was suitable for horticultural use.

(b) To ensure that the water supplied by it was free from contamination by hormonal herbicides in such concentrations as would poison or damage horticultural crops.

(c) To monitor the quality of the water adequately so as to detect and exclude from the supply water containing hormonal herbicides in such concentrations as to poison or damage horticultural crops.

(d) To prevent, control or monitor the use and/or accumulation of hormonal herbicides in the Hays Creek catchment area so as to avoid contamination of the water supply.

(e) To warn the plaintiffs of the risk and/or presence of hormonal herbicides in the water supply. “[61] While we incline to the view that special circumstances would need to be present before duties on water supply authorities should be held to extend beyond reasonable compliance with the New Zealand drinking water standard, we are satisfied that even then the scope of any duties of the kind alleged could not extend to protecting persons in the position of the Hamiltons from the loss for which they have claimed. Whether it is approached by reference to the scope of the relevant duty, the standard of skill and care to be imposed on a reasonable water supply authority or foreseeability of the kind of loss suffered, the facts are against the appellants.” “Those who have particular requirements, and in this case it was a particular requirement over and above water of ordinary standards, must deal with the problem as part of their ordinary operating procedure.” “[67] … Similarly a duty (particularly for Watercare) to monitor more closely the water supplied through the reticulation system would not lead to liability in the circumstances of this case. It has not been established what even continuous monitoring (plainly impractical) would have shown. Nor was it established that levels of triclopyr present of up to 10 ppb, would have, on known tolerances, prompted a reasonable supply authority to issue any warning.” “[63] Even after the extensive investigations of this case, as recounted in the evidence, it has not been established by tolerance tests and analyses that the presence of triclopyr herbicide in water to a level of 10 ppb is toxic to the Evita tomato variety. Even if a reasonable water supply authority had carried out all the tests undertaken since this matter arose, there would not have been established grounds for concern that the water might prove toxic to plants nor any cause to warn users. On the scientific evidence available in worst-case assessments in light of monitored levels of herbicide traces in the reservoir, known weed-spraying activities in the catchment area and tomato plant tolerance tests, there were no grounds upon which the damage that occurred would reasonably have been contemplated.” Dissenting Judgment delivered by Lord Hutton and Lord Rodger of Earlsferry “Together this material establishes that the council knew at the relevant time that its town water supply was used for protected crop growing including the use of soil-less techniques, knew growers preferred that water to bore water because of its quality and knew that the catchment area was vulnerable to contamination from (inter alia) pesticides.” “I regard it as almost unarguable that a person who goes into a shop and asks for a food for feeding to animals has not made known the particular purpose for which he is requiring the food and that he has only made known the particular purpose if he specifies the variety or varieties of animals he wants to feed.” “[50] There is no evidence, however, that the council knew that growers relied on the water for use with sensitive crops without any testing or treatment in the expectation that the suppliers would ensure that its quality would be adequate for all such special uses. [51] The evidence was that at no time did Mr or Mrs Hamilton or their predecessors discuss with council officers their water use or special needs. While one of their consultants discussed with the council’s water engineer on occasions nutrient and element levels in the town-water supply water, he did not communicate any needs or reliance on the part of the Hamiltons.” “If a particular purpose is made known, that is sufficient to raise the inference that the buyer relies on the seller’s skill and judgment unless there is something to displace the inference.” “Bullocks had been supplying Matthews with sawdust for 30 years. The sawdust had never been contaminated and had been used successfully for as many years. It had never been suggested that there might be a problem. Some degree of reliance must arise out of this long relationship when, as a matter of fact, Matthews had been able to rely on Bullocks not to supply sawdust which was contaminated. An obvious example would be that company’s reliance on Bullocks not to supply sawdust derived from treated timber.” “it disregards the essential function of the implied term, that of loss distribution or allocation, and contains overtones of fault. But once the concept of fault is divorced from the use of such words as ‘skill and judgment’, it becomes much easier to accept that Matthews relied on Bullocks’ expertise as the timber miller to supply sawdust which would not contain a toxic substance damaging to plants.”