Australia: Product Liability Update : Seeds, Shrimps And Cigarettes

Last Updated: 10 July 2009
Article by Bhrig Chauhan and John Goulios

One recent product liability case looks at the distinction between an 'occurrence' and 'damage' in a liability policy: Selected Seeds Pty Ltd v QBEMM Pty Ltd [2009] QSC 70. A second case confirms that the onus is on a plaintiff not only to establish damage, but to show that the damage resulted from the fault of the defendant: Thirlway v Parnell LP Gas Systems Pty Ltd [2009] WADC 36.

Selected Seeds Pty Ltd v QBEMM Pty LTD [2009] QSC 70


In 2002, Selected Seeds Pty Ltd, a seed merchant, purchased an amount of seeds which it believed was 'Jarra grass'. However, Selected Seeds was in fact supplied with an inferior and different type of seed known as 'Summer grass'.

Selected Seeds supplied these seeds to various intermediaries before some of the seeds were eventually acquired by Mr and Mrs Shrimp (the Shrimps). The Shrimps planted the seeds on their land believing them to be Jarra grass. However, when they discovered it was Summer grass the Shrimps instituted proceedings in the Federal Court of Australia against the intermediaries (with Selected Seeds eventually being joined) claiming damages for breach of contract, misleading and deceptive conduct and negligence.

A settlement was eventually reached in which Selected Seeds agreed to pay AU$150,000. Selected Seeds then sought to recover the AU$150,000 and almost AU$700,000 in legal costs under its liability policy with QBEMM Pty Ltd (QBEMM).

QBEMM denied the claim arguing that:

  • There had been no 'occurrence' within the required meaning under the insuring clause of the policy.
  • The 'efficacy clause' applied to exclude liability on the grounds that the product failed to correctly fulfil its intended use, which was to grow Jarra grass.

The insuring clause in the policy extended cover for legal liability 'in respect of Personal Injury or Property Damage happening during the Period of Insurance and caused by an Occurrence within the Territorial Limits in connection with Your Business'.

Notably, QBEMM argued that the insuring clause had not been satisfied because it required that the damage be caused by the occurrence and in this case, the alleged occurrence, the planting of the Summer grass on the Shrimps' land, was the same as the property damage incurred by the Shrimps. Consequently, if the damage and occurrence were the same incident, it could not be said that the occurrence caused the damage.


Justice McMurdo concluded that in this case, the 'occurrence' and 'damage' were different things and therefore the liability clause was satisfied. His Honour highlighted the importance of distinguishing between action and consequence in assessing causation. He found that the 'action' in this case was the planting of the seed which then resulted in the 'consequence', being that the Shrimps' land ended up in a damaged state.

Justice McMurdo also found that the exclusion in the efficacy clause did not apply because Selected Seed's liability for damages stemmed not from the fact that the product did not grow Jarra grass, but from the fact that it put the Shrimps' land into a contaminated state. While His Honour acknowledged that the production of the Jarra grass was the intended use for the purposes of the efficacy clause, he stated that it was essential to evaluate whether the liability of Selected Seeds arose from that failure.

Consequently, Selected Seeds was successful in its claim for indemnity.


The case demonstrates how a Court will construe an insuring clause in a manner which maximises the extent of any insurance cover in situations where the action resulting in the damage, and the damage itself, are difficult to distinguish. Ultimately, in relation to an insuring clause, the Court will ask whether it has been demonstrated that there was an 'occurrence' which had the required causative effect.

The application of principles in this case aligns with previously decided cases on this point.

Consistent with the principles established in GIO General Ltd v Newcastle City Council (1996) 38 NSWLR 558, Justice McMurdo sought to establish the most direct and obvious cause of the damage when evaluating whether the seed planting resulted in the land being contaminated/ damaged.

Insurers should be aware that '...caused by an occurrence...' will generally be construed in a manner which distinguishes an action resulting in damage, from the damage itself. In such a situation, the action resulting in damage will be construed as the 'occurrence' under the liability clause. However, this will not be the case where 'occurrence' is expressly defined under the policy to mean '...any damage or consequential loss arising out of an event...'. Where such wording is used, a Court may interpret the occurrence to be the same as the damage.

Thirlway v Parnell LP Gas Systems Pty Ltd [2009] WADC 36


In June 2005 the plaintiff, Mr Thirlway, slid into the driver's seat of his 1997 Altera LS Sedan, started the motor and proceeded to grab a cigarette from the passenger side. As he used the lighter to ignite the cigarette his car exploded, setting him on fire. Mr Thirlway suffered considerable injuries and commenced an action for damages against Parnell LP Gas Systems Pty Ltd (Parnell), the company that originally installed the LP gas system in the car in 1997. Quantum had been agreed at $100,000 but the issue of liability was contested. Thirlway argued that the accident was caused by the negligence of Parnell.

Thirlway purchased the car from a used car dealer in 2002 and was given a white folder containing a certificate from Parnell that the vehicle must be presented to an authorised LP gas service centre for inspection and testing every 12 months. Prior to the accident, Thirlway did not read the documents in the white folder and did not have the car serviced by a qualified mechanic to ensure its roadworthiness and safety.

Thirlway argued that Parnell failed to provide any or adequate warning of the risk of an explosion in the event that the car was not inspected and tested at an authorized LP Gas service centre every 12 months. Specifically, Thirlway argued that a warning label should have been placed in a prominent location such as next to the LP Gas fuel filler or on the inside of the glove box. Although it was agreed that there was an LPG leak, the forensic evidence could not establish the cause of the leak or where it came from.

Parnell relied on section 5B of the Civil Liability Act 2002 (WA) stating that it was not liable because the risk of harm complained of was insignificant and/or a reasonable person in its position would have taken the precaution suggested. Furthermore, Parnell constructed and installed the LP Gas system in compliance with the requirements of Australian Standard 1425 which did not place any obligation on an installer to provide the owner at the time of installation with any notice of the need for periodic inspection of the system.


Judge Stevenson of the District Court of Western Australia found in favour of Parnell based on the fact that Thirlway failed to show on the balance of probabilities that any fault on the part of Parnell, caused Thirlway's car to explode. His Honour stated that Parnell discharged its duty of care by providing the certificate and noted that even if Thirlway had read the certificate, and a warning label of the type argued by Thirlway was prominently placed next to the fuel filler, Thirlway would have continued to smoke in the car and would not have presented the vehicle to an authorised LP Gas service centre for testing.


This case demonstrates the continued importance that Courts place on establishing causation and the onus on the plaintiff not only to establish damage but to show that the damage resulted from the fault of the defendant. Judge Stevenson applied the general principles relating to causation as discussed in Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 when seeking to establish whether on the balance of probabilities, a failure by the defendant to place a warning label in the argued manner, caused or materially contributed to the plaintiff igniting a cigarette which resulted in his injuries.

Notably, the Court was asked to find that there was a standard of care on the part of the defendant which went beyond the requirement prescribed by the Australian Standard for installing LPG systems. From an insurer's perspective it is important to check whether an insured has complied with all industry standards. While this may not necessarily absolve from liability, it certainly provides a strong foundation for an insured's defence.

© DLA Phillips Fox

DLA Phillips Fox is one of the largest legal firms in Australasia and a member of DLA Piper Group, an alliance of independent legal practices. It is a separate and distinct legal entity. For more information visit

This publication is intended as a first point of reference and should not be relied on as a substitute for professional advice. Specialist legal advice should always be sought in relation to any particular circumstances.

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