The High Court of Australia’s judgment in Mallonland Pty Ltd & Anor v Advanta Seeds Pty Ltd [2024] HCA 25 emphasised the significance of incorporating clearly written disclaimers on your product’s packaging to limit your liability for pure economic loss claims in negligence.

The main issue that the High Court considered was the principles governing when a common law duty to take reasonable care to avoid causing pure economic loss will arise.

The High Court found that no such duty can arise between a producer of a product who expressly stated the disclaimer and the end users of that product who despite knowing of the disclaimer continued to use the product.

Background

This High Court case involved a producer (Advanta Seeds) of a grain sorghum seed for distribution and sale in Australia and growers (Mallonland) who conducted businesses involving the cultivation and sale of the grain sorghum.

In the summer of 2010/2011, Mallonland purchased bags of the seed from a distributor authorised by Advanta Seeds. The bags that that were purchased displayed prominent labels which stipulated that the “[m]inimum purity” of the seed was “99%”. A label on the bag read:

“[the producer] will not be liable to [the consumer] or any other person for any injury, loss or damage caused or contributed to by the producer] … arising out of or related to the use of the product in this bag”.

There was an understanding that if the consumer did not agree to the above terms, they should return the bag back to Advanta Seeds unopened and request a refund.

However, some months after Mallonland planted the seeds they became aware of contamination from another plant named shattercane. As a result, Mallonland commenced a class action in the Supreme Court of Queensland on the grounds that the grain sorghum seed they purchased was allegedly contaminated and they therefore suffered pure economic loss in the form of reduced income and increased expenditure.

The Supreme Court of Appeal of Queensland held that Advanta Seeds was not liable to Mallonland in negligence because the producers did not owe them a duty of care.

Mallonland then appealed this decision in the High Court.

Findings and Reasoning

The issue for determination by the High Court was whether Advanta Seeds owed a duty of care in negligence to Mallonland to avert the possibility of economic loss in relation to the contaminated seed.

The High Court found that the terms stipulated on the seed bags acted as a “disclaimer of an assumption of responsibility” by Advanta Seeds for the supply of uncontaminated seeds. Therefore Advanta Seeds did not owe Mallonland a duty to take reasonable care in its grain sorghum seed production process to avoid the risk that the grains would sustain pure economic loss by reason of a hidden defect in the seed.

In other words, the seed bags clearly stated that Mallonland should be aware the product may contain contaminants which could cause losses to Mallonland’s business and they must be aware that if losses arise, they would be at their own risk and not Advanta Seeds. By buying the product, Mallonland would take on the risk that the seeds may be contaminated.

The High Court also discussed the relationship between Advanta Seeds and Mallonland and whether there was a relationship that amounted to a duty of care.

The Court found that the facts in this matter fall far short of identifying a relationship between the producer and the growers which would require a duty to take reasonable care when producing the grain sorghum seed to avoid the possibility of the grower’s economic loss. This was because Advanta Seed had not assumed a responsibility to Mallonland using a disclaimer as a shield displayed on their bags of seeds.

The High Court appeal was dismissed, with costs awarded to Advanta Seeds.

Key Take Aways

• This case highlights the importance of incorporating clearly written disclaimers on your products packaging to limit liability in negligence.

• This case affirmed that a claim for pure economic loss in negligence is not able to be pursued as a person cannot owe a duty to take reasonable care to avoid causing reasonably foreseeable pure economic loss to another where:

  • a disclaimer expressly states it would not be liable for such actions;

  • this disclaimer is made known to the purchasing party;

  • there is an ability to return the goods if not wanting to buy goods subject to a disclaimer of liability;

  • the purchasing party did not elect to return the goods and proceeded with the purchase aware of the risk.

If you are unsure whether you are clearly and carefully wording your disclaimers on your products or need assistance with your case, please contact our specialist Dispute Resolution and Litigation Team or our Corporate and Commercial Team. Contacts are below.

Alicia Hill
Principal
T: +61 3 9611 0180 | M: +61 484 313 865
E: ahill@sladen.com.au

Inshani Ward
Senior Associate
T: +61 3 9611 0110 | M: +61 413 557 157
E: iward@sladen.com.au

Meagan O’Connor
Principal
T +61 3 9611 0106 | M +61 438 531 978
E: moconnor@sladen.com.au

Dean Beaumont
Special Counsel
T +61 3 9611 0129
E: dbeaumont@sladen.com.au

Ellise Kotsu
Law Clerk
E: ekotsu@sladen.com.au