Kiwifruit lawsuit seeks to hold govt to account for biosecurity threats

by Jonathan Underhill / 11 August, 2017
RelatedArticlesModule - Kiwifruit

Te Puke kiwifruit orchards. Photo/Alamy

After an outbreak of Psa, growers want accountability.

Google Maps has a great satellite view of Te Puke kiwifruit country, at least 10sq km of densely packed orchards, darker green than the surrounding pasture, bordered by shelter belts.

Zoom in to Kiwi Pollen on the corner of Te Matai and Mark roads and you have a bird’s-eye view of what was the epicentre of New Zealand’s Psa-V infection. Just behind Kiwi Pollen, the company that imported kiwifruit pollen anthers from China in 2009 that allegedly carried the bacteria, are two kiwifruit properties that got labelled Restricted Place No 1 and Restricted Place No 2. The properties at 37 and 36 Mark Rd were the first sites in New Zealand where Psa-like symptoms were found a month apart in late 2010.

What followed was devastating to the industry, causing multi-year losses estimated at upwards of $885 million. The bacteria spread quickly in the wet, windy summer of 2010/11, proving almost impossible to contain – a runaway biosecurity incursion. The varroa mite that’s killed off bees and this year’s myrtle rust incursion are other examples.

Processed pollen sold by companies such as Kiwi Pollen still plays a major role in the production of kiwifruit, most of it locally milled but with some imports. Most orchards have a sprinkling of male vines sufficient to fertilise the females that bear the fruit and they also pay for beehive services. But pollen is a backstop if the bees don’t do their job, there aren’t enough males or they are out of sync in flowering. It is sprayed wet or dispersed dry with blowers over the kiwifruit flowers.

The kiwifruit industry proved to be resilient, and having torn out infected gold kiwifruit vines and replanted or grafted with the Psa-resistant Gold3, it is enjoying boom times like never before. It will add $3.5 billion a year to New Zealand’s gross domestic product by 2030 and create 29,000 new jobs, according to a University of Waikato report for Zespri, the monopoly export authority.

The battle begins

But a group of growers and a major packhouse aren’t ready to consign the Psa outbreak to history yet. They want accountability, and their target isn’t the media-shy owners of Kiwi Pollen but the state agency whose tardiness they allege allowed the bacteria to piggyback into the country when outbreaks in other parts of the world should have rung alarm bells.

Starting on August 7, grower Strathboss Kiwifruit and packer Seeka will begin a representative lawsuit on behalf of 212 claimants against the Attorney-General for $376 million before interest and costs to recover losses they say were incurred because the Ministry for Primary Industries (MPI) failed in its duty of care to protect them from an overseas biosecurity threat.

According to the plaintiffs, the ministry gave biosecurity clearance for the importation of consignments of pollen and anthers from China’s Shanxi Province in 2009, a little more than a year after a virulent new outbreak of Psa-V was identified in Italy’s Lazio region. By February 2009, Italy’s Psa-V outbreak had aggressively taken hold.

DNA testing by University of Otago associate professor Russell Poulter much later tracked genes from bacterial outbreaks in Chile, Italy and New Zealand back to Shanxi Province. That DNA evidence will be a feature of the hearing.

The statement of claim sets a somewhat Keystone Cops account of events around the particular Kiwi Pollen import in 2009. The previous year, Australia had banned kiwifruit pollen imports except for those from New Zealand in the face of the Italian outbreak, but MPI officials kept the door here open.

In issuing the import permit for kiwifruit pollen from Shanxi the following year, the plaintiffs allege, MPI breached its own import health standards. When the shipment reached the border, shipping documents didn’t match the import permit and officials didn’t notice that the shipment contained not only pollen but pollen anthers and other plant material prohibited under the Biosecurity Act. Once through the border, the consignment was sent to Kiwi Pollen’s plant, where the anthers were milled into pollen and 3.5-4kg of plant material was discarded.

The Ministry of Agriculture and Forestry (MAF), as MPI was then known, had identified Psa as a risk in 2004, but in imposing strict quarantine rules on imports of imported budwood and nursery stock, it appeared to have overlooked pollen. In 2007, the suit alleges, it issued the first import certificate for pollen, ignoring its own procedures to carry out a full risk assessment as required by its rules.

An independent review commissioned by MPI from Sapere Research Group in 2012 came to some damming conclusions about MAF/MPI. It identified “major shortcomings with the relevant import requirements and border processes in place prior to the incursion”. Those shortcomings were “primarily due to the lack of a strategic view of the risk to the kiwifruit industry, a failure to adequately respond to changing circumstances, and the absence of effective working relationships between MAF, the industry stakeholders and scientific researchers”.

“Money is only a partial driver,” says Seeka chief executive Michael Franks, who estimates his company’s losses were in the order of $50-70 million. “As a primary producer and having been to hell and back through the Psa event, there’s a big part that’s about accountability and not wanting this to happen again. I don’t think it is correct to say just because we’re in a better place now we should forget about the suffering and loss.” Seeka shares tumbled 72% between May 2011 and September 2012, when they bottomed out at 80.6 cents. They’ve since more than recovered, hitting a record $5.50 on April 7.

Constitutional law expert Sir Geoffrey Palmer. Photo/Grant Maiden

An unusual case

The case is unusual, to say the least – an attempt to hold a government department accountable for failing to prevent a biosecurity incursion when it had a duty of care. Security of costs have been set at $590,000 and the lawsuit is being bankrolled by litigation funder LPF Group, which will take about 25% of any settlement plus costs.

Duty of care by public servants has been successfully argued before in Body Corporate No 207624 v North Shore City Council, known as the Spencer on Byron leaky building claim, in which the Supreme Court ruled in 2012 that the owners of the Takapuna hotel and apartment complex were owed a duty of care by the body that signed off the construction. But this will be the first time the concept has been tested under the Biosecurity Act.

“Litigation these days tends to push the boat out into uncertain and untested legal fields,” says constitutional law expert and former prime minister Sir Geoffrey Palmer. “The presence of litigation funders adds to that tendency.” He said the kiwifruit proceedings “are novel and the legal arguments will be intricate, to say the least”.

The plaintiffs amount to about 8.5% of New Zealand’s 2600 kiwifruit growers. When the claim was announced in 2014, it divided opinion. Many growers would have been influenced by Zespri, which opposed the lawsuit.

Zespri chairman Peter McBride criticised a “lack of transparency” around the claim and the involvement of LPF. He argued that collaboration with government agencies was a better approach and pointed to the government-industry Agreement on Biosecurity and the Government Industry Agreement for Biosecurity Readiness and Response, which came into effect in May 2014.

Neil Trebilco, former president of New Zealand Kiwifruit Growers (NZKG), also opposes the lawsuit. “The working relationship, particularly with biosecurity, needs strengthening. If you want to be in partnership with somebody, you don’t sue them.

“Many people, including me, lost quite a lot of money back then. But those who stayed in the industry and grafted to the new gold variety now have more equity than they did prior to Psa. It had more than a silver lining. It turned out to be a huge seam in a silver mine.”

He says NZKG sought its own legal advice, which was that litigation was unlikely to be successful. “I disagreed with the action, but I also understand some growers lost money and some sold out at low prices … The problem is that MPI is funded by taxpayers. Nothing is for free. This court case is probably going to cost the taxpayer millions.”

Zespri’s Peter McBride.

The defence

The Crown has mounted a multi-pronged argument in its statement of defence: the ministry acted appropriately in its response to the Psa threat, acting in accordance with its international obligations and the scientific knowledge of the time. Studies have been inconclusive about how exactly Psa entered New Zealand, and anyway, it argues, officials have statutory immunity from civil proceedings under the Biosecurity Act.

It also cited $25 million of specific assistance offered to growers after the outbreak as meeting any obligations for compensation. MPI, whose statement of defence is on its website, declined to comment on the lawsuit.

Zespri also came in for criticism in the Sapere report. “It appears Zespri made a number of optimistic assumptions about the protection afforded by New Zealand’s biosecurity regime,” it said.

Strathboss shareholder John Cameron chairs the Kiwifruit Claim committee. He is diversified – he also has a dairy farm.

“There was a belief within the industry that there was no merit in the case going ahead,” he says. “Zespri entered into that. But I think why it got some traction is because there’s a moral obligation on directors and trustees and a legal obligation to exercise all avenues of mitigating losses.

“Someone has to be responsible for these acts. You can’t just put it under the carpet because it’s the Government. That’s what annoys the shit out of me.”

This article was first published in the August 5, 2017 issue of the New Zealand Listener.

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