October 2015

Two growing farming sectors - Genetically Modified Foods and Organic. Both have the potential to contribute significantly to our economy and export market. But is the very existence of these two important sectors at risk?

Tensions between both farming sectors have been increasing as organic farmers try to protect their business from GM contamination, including by taking legal action against the GM sector.

The recent WA Supreme Court of Appeal decision in Marsh v Baxter (3 September 2015) has significant implications for agribusiness and policy makers.

Marsh v Baxter was a case involving two farmers, Mr Baxter growing Roundup Ready canola and the Marshs growing organic cereal crops and sheep. In 2010, Mr Baxter adopted a harvesting technique called swathing whereby he cut, stacked in windrows and left to dry his GM canola crop. Some of the cut plants were blown by the wind onto the Marshs’ property and 70% of Marshs’ property was subsequently decertified as organic by the certifying body NASAA, with whom the Marshs had a contract.

The Marshs did not grow organic canola. There was no risk of genetic contamination (which could only occur if GM canola seed germinated in Marshs’ property and then later cross fertilized through its pollen being exchanged with another compatible species (another canola variety).

Due to the decertification, the Marshs could not label their produce “NASAA Certified Organic” and brought two causes of action against Mr Baxter, in negligence and private nuisance, claiming $85,000 in loss of profits. The Marshs failed to establish both causes of action at first instance and on appeal by a majority of two to one.

The Marshs argued that Mr Baxter had a duty to take reasonable care to ensure GM canola was not blown over to Marshs’ property and to avoid economic loss. This meant they should have harvested differently (by direct heading instead of swathing).

On appeal, the majority said the “Notice of Intention to Take Legal Action” the Marshs’ provided to Mr Baxter prior to harvest time putting Mr Baxter on notice of the risks of possible contractual decertification in the case of contamination was not enough to establish actual knowledge and foresight that the Marshs were at risk of decertification and economic loss if Mr Baxter harvested his GM crop by swathing. This was particularly the case where it was difficult to know with any certainty the private contractual rights of NASAA to decertify.

The court also found the Marshs knew of the risks of GM transference risk and were in a position to mitigate the risks themselves (for example, buffer zones, sanitation, record keeping and testing). In the circumstances, no duty of care could be established.

If there was a duty to ensure the swaths were not blown and to avoid economic loss, the court held the Marshs failed to establish that a reasonable person in the position of Mr Baxter would have taken the precaution, for the benefit of the Marshs, of direct heading rather than swathing.

In relation to nuisance, the court held it was relevant that Mr Baxter did not deliberately cause the swaths to be released on to Marshs’ property, the decision to swathe was based on legitimate agricultural considerations, and without expectation of an incursion, canola farming was a common and ordinary use of land in the district, swathing was a conventional method of harvesting, the relationship between Marsh and NASAA was relevant as was the purely economic nature of the loss and absence of physical damage to Marshs land (because of no genetic transfer risk). The claim therefore failed. Alternatively, the court held Marshs’ claim failed on the basis the organic farming operation was abnormally sensitive to an incursion of GM canola.

The minority judgement of the President of the Court of Appeal, Justice McLure found both causes of action established. Her Honour considered the contractual arrangements to be an integral part of the export control regime, interpreted “contamination” in the NASAA Standard in the broad sense to include not just genetic contamination but the presence or use of GMOs in an organic farming system and found decertification by NASAA was open to NASAA and based on reasonable grounds. The factual cause of the loss was not the NASAA contract which incorporates the NASAA Standard, but the escape of the GM canola swaths from Mr Baxter’s property to the Marshs’ property.

Unless there is an appeal to the High Court, and the decision is overturned, the majority judgment stands.

Depending on the terms of the contracts with the certifying bodies and the applicable Standards, organic farmers are at risk of losing organic certification of their crop and livestock if their property is contaminated by Genetically Modified Organisms, suffering huge financial losses. They may be unable to recover losses from the relevant GM farmer in circumstances similar to Marsh v Baxter.

However, the GM sector may not necessarily be free of liability in all cases. In Marsh v Baxter, there was no risk of genetic contamination because Mr Marsh did not grow the same crop (canola). Should risk of genetic contamination arise in a future case, the legal outcome may be different.

What does this mean for the Agribusiness sector?

Agribusiness will be watching any government response (at Commonwealth and State levels) to the Supreme Court of Appeal’s decision very closely.

In the meantime, organic farmers should familiarise themselves with the National Standards, the contractual arrangements with their certifying body and the Standards they issue. Legal advice can assist with interpretation of the relevant Standards and understanding where an organic farmer stands contractually with the certifying body. They should also identify possible sources of contamination, proximity, possible modes of transfer and adopt appropriate risk mitigation measures.

Conversely, despite the outcome in Marsh v Baxter, GM farmers should be on alert as to their potential exposure to legal liability particularly in the case of genetic transfer risk, and what they need to do to minimise risk.

In both cases, consulting agronomists, farming experts and government is essential. Risk mitigation will go some way to helping the genetically modified foods and organic foods industries co-exist.

This is for general information only and formal legal advice should be sought on matters of interest arising from this article.

Giovanna Tivisini, Principal at Hive Legal

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Email: giovanna.tivisini@hivelegal.com.au
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