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Cite as: [2002] UKPC 9, 25 TCL 9/7, [2002] BCL 310, [2002] 3 NZLR 308

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Hamilton & Anor v. Papakura District Council (New Zealand) [2002] UKPC 9 (28 February 2002)

Privy Council Appeal No. 57 of 2000

(1) G.J. Hamilton and

(2) M.P. Hamilton Appellants

v.

(1) Papakura District Council and

(2) Watercare Services Ltd. Respondents

FROM

THE COURT OF APPEAL OF NEW ZEALAND

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 28th February 2002

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Present at the hearing:-

Lord Nicholls of Birkenhead

Lord Hutton

Lord Rodger of Earlsferry

Sir Andrew Leggatt

Sir Kenneth Keith

[Majority judgment delivered by Sir Kenneth Keith]

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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.

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.

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.

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.

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.

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.”

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.)

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.

The claim in contract

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. The claim was based on s16(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.”

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.

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.”

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.”

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.

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.”

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

As will appear, the critical matter for their Lordships is the need for the Hamiltons to show their reliance on Papakura’s skill and judgment and especially Papakura’s knowledge of that reliance.

Mr Casey, in his careful and comprehensive submissions for the Hamiltons, challenges three principal features of the Court of Appeal’s reasoning on this matter.

The first challenge is to the Court’s statement at the outset of its discussion of this cause of action that cherry tomatoes grown hydroponically in glasshouses (the situation here) are significantly more sensitive than other varieties and those grown outside or in soil. “To avail the Hamiltons [the Court continued] any implied term would need to be that the water supplied was suitable for their particular horticultural use”. Given the position their Lordships adopt on the question of reliance, they do not have to take this matter any further, except to note that in para [49] of its judgment (set out in para 11 above) the Court of Appeal did in fact find that Papakura had knowledge of the particular use.

Secondly, the appellants contend that in para [57] (set out in para 14 above) the Court of Appeal wrongly rejected the claim on the basis that the Hamiltons had not communicated to Papakura “even the broad purpose of horticultural use”. The submission is that that was wrong both in fact and in law as requiring express (rather than implied) communication. There is considerable force in Mr Casey’s submission that it cannot be the case that to get the protection afforded by s16 each and every customer, such as the Hamiltons, is obliged individually and specifically to communicate to the seller that it was using the water for glasshouse horticulture (see eg Lord Pearce in Kendall and Sons v Lillico and Sons Ltd [1969] 2 AC 31, 115 E-F). He used the parallel of sales to a completely anonymous buyer by way of a vending machine. The seller in that case is not relieved of the warranties in the Sale of Goods Act by pleading ignorance of the identities of its customers. Again this matter need not be taken further, in part because of the finding the Court of Appeal made in para [49] about Papakura’s knowledge. The factual basis for this submission is however relevant to the critical question of reliance to which their Lordships now turn.

Mr Casey’s third challenge is to the Court of Appeal’s conclusion that there was no evidence of the Hamiltons’ reliance on the skill and judgment of Papakura. The statutory requirement goes a step further. The Hamiltons must also show that Papakura knew of their reliance. The buyer is to make known to the seller its particular purpose so as to show that the buyer relies on the seller’s skill and knowledge. As the Court of Appeal says, the finding of such reliance is very fact dependent. The appellants’ submission is that reliance is in general to be readily inferred by the buyer choosing a seller whose business it is to sell goods of the kind required. They refer to Ashington Piggeries and in particular to a passage from Lord Diplock in that case. The Court of Appeal also quoted that passage, slightly more fully, as follows:

“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)

As indicated there, s16(a) (s14(1) of the UK Act) imposes strict liability on the seller if its conditions are satisfied. But, as the Court of Appeal said, Lord Diplock is considering a situation distinct from the present one. The buyer in Ashington Piggeries selected the seller; and the particular purpose (that the food was to be used for feeding mink) was communicated to the seller as was the fact that the expertise of the compounders was to be relied on not to provide food which was toxic to mink. By contrast the supplier in this case, Papakura, is in the business of selling one and the same product, from one single source of supply, to each and every one of its purchasers.

Papakura distributes its water to more than 38,000 people in its district. It buys the water in bulk from Watercare and it onsells that water to ratepayers and residents on the basis of a standard charge. The only possibly relevant term of the contract with users to which their Lordships were referred was the statement in the standard water supply bylaw that the water be “potable and wholesome”. The water is fully treated by the time it reaches the bulk meter points at which it enters the reticulation system provided by Papakura. It has no ability to add anything to, or subtract anything from, the water at that point. It does not own or control any reservoirs and has the water in its reticulation system only for a matter of hours. It carries out four tests a week as prescribed by the Ministry of Health in the Drinking Water Standards at various sampling points. The tests are for chemical and related matters. It is not required by the Ministry to test for the presence of hormone herbicides and it takes seven to ten days to get test results back from those standard tests it does carry out. Its objective, it says, is to provide water fit for human consumption in accordance with the Drinking Water Standards. There is no suggestion of any breach of those Standards or indeed of any statutory requirements. (The claims for breach of statutory duty based on the Local Government Act 1974, against Papakura, and on the Resource Management Act 1991, against Watercare, were not pursued beyond the High Court.)

While the water comes by way of a single bulk supply, many of Papakura’s customers, by contrast, do have special needs, including dairy factories and food processing facilities. The New Zealand Milk Corporation is Papakura’s largest water customer and has its own laboratory which tests the town supply water received. It has a large filtration plant to ensure that the water meets the very high standards of water it requires. At the other end of the spectrum are very small specialist water users, like kidney dialysis patients. Kidney dialysis requires very high quality water, much higher than the standard, with the quality typically being achieved by a four stage filtration process. In this context, Papakura also called attention to one of its water sources which had been closed in June 1995, a bore source in Drury. The water from that bore had been historically high in the element boron which is generally safe for human consumption at the level present but completely unsuitable for horticulture. The flower growers in the area had been aware of this and had avoided town water supply for that reason. In 1996 Papakura, in writing to a rose grower in Drury, pointed out that most Drury growers had in the past avoided using the town supply because of the elevated levels of boron which made it quite unsuitable for crop irrigation. Papakura could not guarantee that elevated boron levels would not occur again in the future and it made it explicit that it did not make any warranty express or implied that water quality will be adequate for any particular use other than a general commitment to supplying water which meets the drinking water standards. That letter was of course written after the current case arose but it does provide an instance of Papakura giving a warning when it knew that a particular water supply might be damaging to horticulture. Such knowledge might indeed arise directly from the Drinking Water Standards : for instance, those for 1984 had expressly stated that, while the safe level of boron for human intake is 5g/m³, some glasshouse plants are damaged above 0.5g/m³.

The appellants emphasise that only one percent of water is ingested by humans and question why the other 99% should not be subject to any standard. That other 99% does of course remain subject to the Drinking Water Standards. Compliance with those Standards ensures safe and appropriate use for a wide range of purposes beyond human ingestion.

In the end, this case is a narrow one to be determined on its own facts. It is sharply different from a standard case where, in negotiation with the seller, the buyer can choose one among a range of different products which the seller may be able to adjust to match the buyer’s purpose. The facts do not raise any wider issue of policy about s16. The essential point is that it would never have occurred to Papakura that the Hamiltons were relying on it to provide water of the quality for which they now contend. Indeed there is no evidence that it ever occurred to the Hamiltons that drinking water might not be suitable for their tomatoes. So no question of reliance ever arose. Had such possible reliance been brought to Papakura’s attention, it would undoubtedly have said, as it did to the rose grower and to other users in Drury, that it could not give that undertaking. The Hamiltons would have known this. It was a bulk supplier. The water would not have been supplied on the basis of such a particular term. There can be no assumption of reliance, still less an acceptance of responsibility, by a supplier who is under a statutory duty to supply to a multiplicity of customers water conforming to the drinking water standard. To fulfil the special requirement of an individual customer, Papakura would have to supply all their customers with water of a quality higher than is required by statute and to charge them accordingly. That makes no commercial sense. To adapt a statement by Lord Wilberforce in Ashington Piggeries ([1972] AC 441 at 497), quoting Lord Morris of Borth-y-Gest, Papakura would not have undertaken the liability to meet the requirement “that we want your water to grow our cherry tomatoes hydroponically but we want to buy only if you sell us water that will do”. The simple fact is that it did not undertake that liability.

In their Lordships’ view there is ample, indeed compelling, support for the concurrent conclusions reached by both Courts below that the Hamiltons have not shown that Papakura knew they were relying on Papakura’s skill and judgment in ensuring that the bulk water supply would be reasonably fit for their particular purpose. This ground of appeal accordingly fails.

The claims in negligence

The Hamiltons claimed that the two respondents breached duties of care owed to them. As pleaded, Papakura had

“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.”

According to the statement of claim, Watercare had duties:

(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.

Watercare in its statement of defence responded that the bulk water which it supplied to Papakura was potable and complied with the 1995 Standards. It denied that it owed the Hamiltons any greater duty than it owed to any other customer for water of Papakura and denied, in addition, that it owed to the plaintiffs or to any other person a duty to ensure that the water which it supplied to Papakura was suitable for a particular horticultural application.

The Court of Appeal stated its conclusion about the negligence causes for actions against both defendants in this way:

“[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.”

Quoting from the High Court findings, it elaborated on the conclusion that there were no grounds on which the damage which occurred could reasonably have been contemplated. Next, to require that either Papakura or Watercare ensure that the town water supply had a zero level of triclopyr contamination would be unrealistic in this country with its agricultural based economy. “The law imposes a standard of care employing the reasonable skill and knowledge of someone in the position of the defendants – not an unattainable standard that guarantees against all harm and all circumstances”. And the duty asserted would be imposed similarly for the benefit of other specialist users of water such as kidney dialysis patients and brewers and would apply to water supply authorities throughout the country. The law of negligence was never intended to impose such costs and impracticability. In the words of the Supreme Court of Canada in Munshaw Colour Service Ltd v City of Vancouver (1962) 33 DLR (2d) 719,727, supported by the evidence of the general manager of Manukau Water (a neighbouring district),

“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.”

The manager accepted that, if he became aware of users who believed the water was pure enough for their needs and had reason to believe that might not be so, he would feel obliged to advise them of the risk. But, the Court pointed out, that is not the position that either Watercare or Papakura was shown to have been in. The Court continued:

“[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.”

The Court concluded that it had not been persuaded that Williams J erred in concluding that neither Watercare nor Papakura was liable in negligence.

The legislation in terms of which the respondents supply the water is part of the context in which all of the Hamiltons’ claims, and in particular those in negligence, are to be seen. The relevant current statute is the Local Government Act. Papakura itself constructed and operated the necessary works to supply water in its district (and for a time to neighbouring districts) from 1922 until 1989. Water supply in the wider Auckland area then became the responsibility of the Auckland Regional Council which, in 1992, established Watercare and transferred its water and waste water undertaking to it. Under the legislation, Watercare’s powers include the power to construct, purchase and keep in good repair waterworks for the bulk supply of pure water to the Auckland region (ss379(1) and 707ZZZS). It is also obliged to manage its business efficiently with a view to maintaining prices for water and waste water services at the minimum level consistent with the effective conduct of that business and the maintenance of the long term integrity of its assets (s707ZZZS). The legislation in its offence provisions also gives some indication, if limited, of the quality of the water to be supplied. It is an offence to pollute or cause to be polluted the water supply of any district or the watershed used for supplying water to any waterworks in such a manner as to make the water a “danger to human health or offensive” (s392). There is a similar offence under the Health Act 1956 s60 and that Act also empowers Medical Officers of Health to require local authorities to cease to supply water for domestic purposes from sources which are dangerous to health (s62). Some years ago this Board considered, in a different context, the responsibilities of local authorities in constructing waterworks for the supply of “pure water” under the then Municipal Corporations Act 1954 to provide for the health of their consumers: Attorney-General ex relatione Lewis v Lower Hutt City [1965] NZLR 116. Throughout, the emphasis is on human health.

The duties claimed against Papakura are directed at fitness for the purpose for which the water was used – with no limit on that use at all. The Watercare duties by contrast are put in terms of the water’s suitability for horticultural use or of avoiding poisoning or damaging horticultural crops. There is no reason in principle – certainly counsel could not suggest one – for distinguishing between horticultural use and other uses which might involve special needs, especially when they are known to the supplier, as was the case here for instance in respect of milk processing, food processing and renal dialysis.

If the duty is put in terms of all uses, even all uses known to Papakura, the duty would be extraordinarily broad. For a court to impose such a duty would be to impose a requirement on water suppliers which goes far beyond the duty met in practice by those authorities supplying bulk water, a duty which has long been founded on the Drinking Water Standards, standards drawn from World Health Organisation guidelines and from other international material and established through extensive consultation. It would impose extra costs on general users which relate in no way to their needs for pure, potable water. No evidence was called to support the imposition of such a wide ranging, costly and burdensome duty.

The extraordinarily broad scope of the proposed duty provides one decisive reason for rejecting the claims in negligence. A second, distinct reason is provided by the requirement of foreseeability. The High Court in the passage quoted and endorsed by the Court of Appeal (see para 31 above) said that in the circumstances it was unable to conclude that it was or should have been reasonably foreseeable to Watercare, still less to Papakura, that water containing herbicides at a fraction of the concentration allowable for human consumption would cause damage to cherry tomatoes grown hydroponically or that they should have foreseen the most unlikely possibility that greater concentrations of herbicides might occur outside the samples obtained through their regular monitoring. Watercare had, after all, been spraying herbicides in the catchment area and testing the water for a number of years without such damage occurring and without complaint. The Court of Appeal put the matter this way:

“[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.”

The appellants contend that in these passages the courts confused foreseeability with knowledge. As Mr Casey says, it can be no defence to a claim in negligence that the person inflicting the damage did not know the level of toxicity at which injury might result. Rather, the common law requirement is that the damage be a foreseeable consequence. The judgments in this case are however clear. The courts are plainly addressing the question of foreseeability. In particular in the sentences just quoted the Court of Appeal refers not to the knowledge of Watercare but to the reasonable foreseeability of the damage suffered, having regard to the state of knowledge after, as well as before, the event.

As the Board made clear in Overseas Tankship (UK) Ltd v Miller Steamship Co Pty (Wagon Mound No 2) [1967] 1 AC 617, 643, damage is foreseeable only when there is a real risk of damage, that is one which would occur to the mind of a reasonable person in the position of the defendant and one which he would not brush aside as far fetched. The mere fact that certain herbicides may kill or damage certain plants at certain concentrations does not itself establish such a risk. Indeed, as Watercare points out, tests done by a Crown Research Institute, AgResearch, suggested that very low levels of herbicides can promote plant growth.

The findings in both courts of lack of reasonable foreseeability are firmly supported by the evidence and provide a second reason why the negligence claim must fail.

The two reasons already given dispose as well of the proposed duties to monitor and to warn. Little more need be said about them. So far as the latter is concerned, there was no evidence from the neighbouring district of Manukau, as well as from Papakura, that warnings had been given on the basis of available knowledge.

Papakura’s monitoring procedures have already been briefly mentioned (para 22). Watercare’s monitoring was also carried out in accordance with the Drinking Water Standards. Over a period of more than four years, triclopyr residues were only very occasionally detected at the sampling sites in the lake, the highest concentration when detection did occur being 0.8ppb or some 125 times less than the 1995 Standard. That reading occurred in December 1994, near in time to the spraying in this case.

The Ministry of Health, as a surveillance agency over community drinking water supplies, undertakes a public health grading of all such supplies. Two of the criteria for the grading are that continuous quality monitoring is installed and that the treatment plant should be operated and managed by appropriately qualified personnel. The grades are A1, A, B, C, D and E. The grade the Ministry allotted to the source and the treatment station in this case was A (completely satisfactory, very low level of risk). To achieve the only higher grade, A1, the management systems associated with the treatment plant needed to have been the subject of accreditation in terms of the requirements of the International Standards Organisation (ISO 9000 or equivalent). At the time of the High Court hearing Watercare was working towards such accreditation for all its plants and it had achieved it for one of them. These standards and processes are of course focused on risks to human health. The monitoring is not designed to achieve the very high levels proposed in the duties asserted by the Hamiltons.

Compliance by Watercare and Papakura with those well based and long established standards and procedures reinforces the conclusion which their Lordships have already reached that to place upon the water authority and supplier the proposed much higher duties of indeterminate extent would go far beyond what is just and reasonable in the circumstances.

It follows that their Lordships agree with the courts below that the claims in negligence against the two defendants cannot be sustained.

Claim in nuisance and in Rylands v Fletcher.

The claim in nuisance and in Rylands v Fletcher was against Watercare alone. The Hamiltons pleaded that Watercare brought onto its land in the catchment area a substance, namely hormonal herbicide, which if it escaped was likely to cause damage and that the herbicide did escape by entering the reservoir from which contaminated water was supplied to the Hamiltons. The consequence was the damage to the tomatoes.

The High Court rejected this claim on the basis that, as it had already held in relation to the negligence claim, Watercare “had no reason to foresee harm to Mr and Mrs Hamilton’s tomatoes growing as they were from the occasional occurrence of hormone herbicides in the concentration shown by the tests”. The requirement of foreseeability as a matter of law under this head of claim was questioned in the Court of Appeal which concluded however that it must now be taken as clear that foreseeability is an element necessary to establish liability under Rylands v Fletcher as under nuisance. The Court referred to its conclusion that the High Court was correct in deciding that the damage complained of was not reasonably foreseeable as required to establish liability in negligence. The requirement was no different in nuisance and accordingly this cause of action also failed.

Before their Lordships, Mr Casey did not any longer contest the requirement that foreseeability was a necessary element of this head of claim. Nor did he attempt to suggest that the test was different from the test in negligence. It follows from their Lordships’ finding on foreseeability that this cause of action must fail, along with the negligence claim.

Their Lordships accordingly do not find it necessary to discuss other possible answers to this head of liability presented by Watercare or the issues about the relationship between liability in negligence, nuisance and Rylands v Fletcher considered in the House of Lords in Cambridge Water Company v Eastern Counties Leather Plc [1994] 2 AC 264, in the High Court of Australia in Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 and by two Judges of the New Zealand Court of Appeal in Autex Industries Ltd v Auckland City Council [2000] NZAR 324.

Conclusion

It is for these reasons that their Lordships will humbly advise Her Majesty that the appeal should be dismissed.

As requested by Mr Casey (in the event of the appeal failing), the question of costs is reserved. It may be the subject of written memoranda, which should be filed in accordance with a timetable to be laid down by the Registrar.

_____________________

Dissenting Judgment delivered by Lord Hutton and

Lord Rodger of Earlsferry

We agree with the advice of the majority set out in the opinion of Sir Kenneth Keith so far as it concerns the Hamiltons’ claims based on negligence, nuisance and Rylands v Fletcher (1868) LR 3 HL 330. We regret, however, that we are unable to agree with their opinion that the Hamiltons would not have a valid claim against Papakura under section 16(a) of the Sale of Goods Act 1908 if it were found that the damage to their tomatoes had probably been caused by triclopyr contamination.

Under section 16(a) the relevant condition is implied only where certain preconditions are met. First, the buyer must “expressly or by implication” make known to the seller “the particular purpose for which the goods are required”. Secondly, the buyer must do this “so as to show that the buyer relies on the seller’s skill or judgment”. Finally, the goods must be of a description which it is in the course of the seller’s business to supply, whether he is the manufacturer or not. In this case it is accepted that the third precondition is satisfied. The dispute centres around the first two.

The area of dispute can be further narrowed. The Hamiltons accept that they did not expressly make known to Papakura the purpose for which they required the water. They contend, however, that they made that purpose known “by implication”.

The Court of Appeal reviewed the evidence and summarised its effect (Hamilton v Papakura District Council [2000] 1 NZLR 265, 277, para 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.”

Hardwick

Game Farm v Suffolk Agricultural Poultry Producers Association Ltd

[1969] 2 AC 31

Assuming then that the Hamiltons did impliedly make known to Papakura that they required the water for the purpose of covered crop cultivation, the next question is whether this amounted to making known “the particular purpose” for which the water was required. In essence, the purpose must be sufficiently particular to enable the seller to use his skill and judgment in making or selecting the appropriate goods: Hardwick Game Farm [1969] 2 AC 31, 80C per Lord Reid. The Court of Appeal held ([2000] 1 NZLR 265, 276, para 42) that, to avail the Hamiltons, any implied term would need to be that the water supplied was suitable “for their particular horticultural use”. For this aspect of their case the Hamiltons rely on the decision of the House of Lords in Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441. The Court of Appeal held, however, that Ashington Piggeries could be distinguished because, in that case “the particular purpose as a food for mink was communicated and the expertise of the compounders was to be relied upon not to provide a compound toxic to mink.” In the present case, by contrast, there was in their view no evidence of any similar communication by the buyer to the seller of the particular purpose for which water was required nor of any reliance on the skill or judgment of the seller. See [2000] 1 NZLR 265, 278, para 53. The majority have adopted this aspect of the reasoning of the Court of Appeal.

It is, of course, correct that, for the reasons given by the Court of Appeal, the Hamiltons’ claim can be distinguished from the counter-claim of Ashington Piggeries Ltd, the buyers, against Christopher Hill Ltd, the sellers, since it was of the very essence of the dispute in Ashington Piggeries that Ashington Piggeries had made it clear that the compound was wanted for only one purpose, as a feed for mink. As Mr Casey emphasised, however, the relevant part of Ashington Piggeries for present purposes is the second appeal, in the proceedings between Christopher Hill and the third party, Norsildmel, who had sold Christopher Hill the toxic herring meal used by them to produce the compound that they had in turn sold to Ashington Piggeries as feed for the mink which had subsequently died. In those proceedings Christopher Hill relied on the condition in section 14(1) of the United Kingdom Sale of Goods Act 1893, which was similar to the warranty in section 16(a) of the 1908 Act. Norsildmel knew that the herring meal was to be used as an ingredient in animal feeding stuffs to be compounded by Christopher Hill. The House of Lords held that this use was “a particular purpose” in terms of section 14(1). We draw particular attention to Viscount Dilhorne’s observation ([1972] AC 441, 487A):

“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.”

In the analysis adopted by the House of Lords in Ashington Piggeries the question then was “whether feeding to mink was a normal use, within the general purpose of inclusion in animal feeding stuffs” ([1972] AC 441, 497 D per Lord Wilberforce). Lord Guest, while not attaching undue importance to the precise phraseology, asked himself whether Norsildmel “knew that it was likely that it would be fed to mink” ([1972] AC 441, 477 E – G), while Viscount Dilhorne held that Christopher Hill had to show that Norsildmel “should reasonably have contemplated when the contract was made that mink was a type of animal to which it was not unlikely that herring meal would be fed” ([1972] AC 441, 487 B). Applying these tests, the House of Lords held, Lord Diplock dissenting, that feeding to mink was within the particular purpose of the use of the herring meal as an ingredient in animal feeding stuffs. Norsildmel were, accordingly, held liable to Christopher Hill for breach of the warranty in section 14(1).

In our view the same approach has to be applied in this case. Supplying water for the purpose of covered crop cultivation is supplying it for a particular purpose in terms of section 16(a) of the 1908 Act. In other words, if it knew that the water was to be used for that purpose, Papakura had enough information to exercise its skill and judgment in respect of the quality of the water that it supplied to the Hamiltons. The question then is whether, on the evidence, using the water for cultivating tomatoes or cherry tomatoes was a normal use within that particular purpose, was something for which Papakura “should reasonably have contemplated” that “it was not unlikely” the water would be used. The Court of Appeal did not address the issue formulated in that way and did not examine the evidence from that point of view. Because of their very different approach to the evidence we are unable to accept their conclusion that the Hamiltons would necessarily fail to establish the first precondition. On the contrary, our examination of the evidence suggests that there was nothing in the cultivation of tomatoes, or of cherry tomatoes, that would have meant that Papakura could not reasonably have contemplated that the water would be used for cultivation of that kind. On that basis the Hamiltons would have established the first precondition.

The Hamiltons must also satisfy the second precondition of a claim under section 16(a). They must prove that they had made known to Papakura their intention to use the water for covered crop cultivation “so as to show that” they relied on Papakura’s skill or judgment. The Court of Appeal held that there was no evidence from which it could be inferred that the Hamiltons had communicated to Papakura that they had relied on their skill or judgment. In particular they held ([2000] 1 NZLR 265, 277, paras 50 and 51):

“[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.”

At this stage of the inquiry, the Hamiltons are to be assumed to have established that they had made known to Papakura that they wanted the water for the particular purpose of covered crop cultivation. As Lord Sumner pointed out in Manchester Liners Ltd v Rea Ltd [1922] 2 AC 74, 90 the words of section 16(a) are “so as to show” not “and shows”. “They are satisfied, if the reliance is a matter of reasonable inference to the seller and to the Court ….” Despite one particular passage in the speech of Lord Reid in Hardwick Game Farm ([1969] 2 AC 31, 81), as Lord Pearce noted in the same case, the trend of authority has inclined towards an assumption of reliance wherever the seller knows of the particular purpose ([1969] 2 AC 31, 115G–H). He summarised the approach to be applied in this way ([1969] 2 AC 31, 115E)

“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.”

Ashington Piggeries

Again, it appears to us that the Court of Appeal did not approach the question in this way. They said that there was no evidence that Papakura knew that the growers relied on the water for use with sensitive crops without any testing or treatment. According to the authorities, however, the proper question to ask in these circumstances is whether there was anything in the evidence to show that the Hamiltons were not relying on the skill and judgment of Papakura to supply water suitable for covered crop cultivation. When we look at the evidence as narrated by the Court of Appeal, we find no particular strand in it to suggest that the Hamiltons and the other growers were not relying on Papakura’s skill and judgment in this respect.

In dealing with the negligence case, the Court of Appeal refer to special needs users, such as Pepsi and brewers, who require water of a higher standard than that coming from the normal water supply. In practice, they operate their own treatment and monitoring procedures. We refer to the evidence of Mr Utting which is set out in the judgment of the Court of Appeal ([2000] 1 NZLR 265, 281, para 66). In their opinion the majority have referred to the New Zealand Milk Corporation’s plant with its laboratory for testing the town water supply and its large filtration plant. Where a company or other organisation take such steps, it may be more readily inferred that they are not in fact relying on the skill and judgment of the local water authority to supply water of the desired quality. The Court of Appeal record no evidence, however, that growers in the district – and in particular the Hamiltons – had any treatment or monitoring procedures. Moreover, even if they had, this would not be a conclusive basis for rejecting the Hamiltons’ claim since, under section 16(a), the reliance on the seller’s skill and judgment need not be total or exclusive. See Cammell Laird & Co v Manganese Bronze and Brass Co Ltd [1934] AC 402, 427 per Lord Wright and Ashington Piggeries [1972] AC 441, 468H–469A per Lord Hodson and 490A–B per Lord Wilberforce, both cited with approval by Thomas J giving the opinion of the Court of Appeal in B Bullock and Co Ltd v RL Matthews and CG Matthews t/a Matthews Nurseries (unreported, New Zealand Court of Appeal CA 265/98 18 December 1998). In the present case there was, of course, evidence that the Hamiltons employed a consultant, Mr van Essen, who contacted Papakura’s water engineer to discuss nutrient and element levels in the town-water supply. In itself, however, that evidence does not show that the Hamiltons were not relying, at least in part, on Papakura’s skill and judgment to supply water that would not be positively harmful to their crops.

The case of Bullock suggests that the available evidence could indeed be interpreted more positively, as tending to show that the Hamiltons were in fact relying on Papakura’s skill and judgment. Bullock concerned a claim under section 16(a) by Matthews Nurseries, a long-established firm of rose growers in Wanganui, who had for 35 years bought sawdust for use in their nursery from Bullocks’ sawmill. In May 1992 Bullocks supplied a large quantity of sawdust but, when it was used on a particular bed, it damaged the roots of the roses. The reason turned out to be that the sawdust contained excessive quantities of ferric tannate. Matthews sued Bullocks, inter alia on the basis of section 16(a). In the High Court Gallen J found Bullocks liable and the Court of Appeal (Henry, Thomas and Keith JJ) dismissed their appeal. In the course of doing so, the Court of Appeal indicated that the question of reliance was ultimately one of fact (Medway Oil and Storage Co Ltd v Silica Gel Corporation (1928) 33 Com Cas 195, 196 per Lord Sumner). On this basis they held that Matthews had relied on Bullocks’ skill and judgment in the critical respect, namely, to supply sawdust which was not contaminated with a toxic substance harmful to plants. Giving the opinion of the court, Thomas J explained:

“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.”

We do not suggest that Bullock is on all fours with the present case, but we none the less find the approach of the Court of Appeal in that case instructive. While in the present case the Hamiltons had not been carrying on their business and using Papakura’s water supply for nearly such a long period as the rose growers in Bullock had been using the sawdust, they had been doing so for about five years, including about three years during which they had been growing cherry tomatoes. Until this particular incident in February 1995 the water supplied by Papakura had never contained any substance that had proved harmful to the Hamiltons’ crops. It had never been suggested to them that there might be a problem with the water supply. The Hamiltons did not have the necessary knowledge about the purity of Papakura’s water supply or about the various factors which might affect it. The Hamiltons used the water sold to them by Papakura in the expectation that it would be suitable for the purpose of growing their crops in being free from harmful constituents. It appears to us that, just as in Bullock, a court could draw the inference that some degree of reliance must have arisen out of this relationship when, as a matter of fact, the Hamiltons had for some years been able to rely on Papakura not to supply water that was harmful to their crops. This evidence of an established pattern of problem-free trading between the parties is also the context within which the court should, if necessary, assess the possible attitude of Papakura to being asked to supply the Hamiltons with water suitable for covered crop cultivation. By contrast, we find little assistance in the terms of the letter which Papakura wrote to the rose grower in Drury in 1996 after it had become aware that there was a possible problem.

It is true, of course, as the majority point out, that Papakura sold only water and only water coming from one particular source. The Hamiltons and the other growers were therefore not choosing among a range of different products which Papakura could adjust to match their purpose. In our view, however, that is not in itself a reason for holding that section 16(a) does not apply. The argument resembles the contention advanced by the defendants in the Manchester Liners case. They had agreed to supply coal for the plaintiffs’ vessel, the Manchester Importer, at a time when coal supplies were controlled. The coal supplied was unsuitable for the steamer and she had to return to port, with the result that the plaintiffs suffered loss. They sued for damages for breach of the condition in section 14(1) of the Sale of Goods Act 1893. The defendants argued that the condition was negatived because the plaintiffs knew that the supplies of coal available to the defendants were limited and might indeed be confined to the cargo of coal carried on one particular vessel. The House of Lords unanimously rejected that argument. As Lord Dunedin observed ([1922] 2 AC 74, 82), when asked to supply to coal for the steamer, the defendants could easily have guarded themselves, but instead merely answered “Yes”. Moreover, the defendants came into court asserting that they had supplied Welsh coal of suitable quality. Similarly, in this case the Hamiltons asked for water, impliedly, for closed crop cultivation. Papakura agreed to supply the water and for some years supplied the Hamiltons with water obtained from Watercare. Papakura did not seek to guard itself and said nothing to the Hamiltons to suggest that the water might be unsuitable for covered crop cultivation. Indeed to this day Papakura maintains in its defence to this action that the water was entirely suitable for that purpose. Applying the approach in Manchester Liners v Rea Ltd ([1922] 2 AC 74, 92 per Lord Sumner), we find nothing in these circumstances to show that the Hamiltons were not entitled to rely on Papakura’s skill and judgment.

Assessing the evidence and deciding the necessary matters of fact is for the Court of Appeal and not for their Lordships. The court must, however, consider all the relevant evidence. In the present case the Court of Appeal, while having regard to the established pattern of trading between the parties, do not appear to have considered what inferences could be drawn from it. In our view that was a significant omission. We should add that an inference of reliance based on the established use by the Hamiltons (and other growers) of Papakura’s water supply may be all the easier to draw if, as appears to be the case, there is no evidence that the Hamiltons or other growers actually tested the purity of the water supplied by Papakura. Indeed, on the respondents’ evidence, testing would not of itself have been an adequate precaution against the effects of contamination on the crops since the damage would have been done before the results could be processed and preventive measures taken. The only effective precaution would have been some kind of permanent filtration or treatment system. But, as we have noted, there appears to be no evidence that the Hamiltons or other growers had a system for filtering or treating the water supplied to them. Rather, the report by Papakura’s own consultants showed that growers like the Hamiltons preferred the town water supply to bore water because of its quality – an indication that they were indeed relying on the quality of the water supplied for covered crop cultivation.

We remind ourselves of two further points. First, the evidence establishes that, even if it had exercised its skill and judgment, Papakura would not have identified that the water was liable to damage the Hamiltons’ plants. Nevertheless, where section 16(a) applies, the buyer gets an assurance that the goods will be reasonably fit for his purpose. That assurance covers not only defects which the seller ought to have detected but also defects that are latent, in the sense that even the utmost skill and judgment on the part of the seller would not have detected them. See, for example, Hardwick Game Farm [1969] 2 AC 31, 84A-C per Lord Reid. Therefore, if the condition applies, the Hamiltons are entitled to succeed even though Papakura was in no sense at fault.

Secondly, on one view this could seem unduly severe on Papakura. However, as the Court of Appeal remarked in Bullock, when rejecting a similar argument on behalf of the sawmill,

“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.”

For the reasons which we have given we consider that the Court of Appeal erred in law in making their assessment of the evidence and hence in the conclusions which they drew from it in respect of the requirements of section 16(a). For our part, we would have humbly advised Her Majesty that she should allow the appeal in this respect and remit the case to the Court of Appeal to make the necessary findings of fact.