Cottonweed makes food pellets for cattle out of the husks left over when cotton seed is harvested. They distribute brochures containing statements that cattle fed with cottonweed pellets will grow well and quickly and that the feed is extensively refined and tested during production to ensure that it is 100% safe.

A cattle grazier buys the pellets and feeds them to his cattle. He then sends the cattle to the Abattoir to be slaughter. Before they can be processed the Abattoir inspector notices a disturbing rash which has suddenly appeared on the cattle. The Abattoir is required to shut down for 2 weeks until an inquiry determines the cause of the problem. It is determined that all cattle who have been fed the batch of cottonweed pellets must be destroyed; that the batch was contaminated by pesticide used on the cotton crop; that Cottonweed Ltd was negligent in not properly testing the cotton husks before processing.

In a preliminary hearing a court holds that Cottonweed Ltd is liable for the claim made by the Abattoir in relation to lost profits over the 2-week shutdown period, but adjourns the case until submissions can be made on damages.

By now Cottonweed Ltd has completed its own investigation and discovers that the cotton producer, Georgia Pty Ltd, which had supplied it with the husks, had also been negligent in not carrying out the usual testing for pesticide residue.

Cottonweed Ltd asks you about the impact this discovery has on its own liability and rights in respect of the Abattoir's claim. Would your answer differ if the contract between Cottonweed Ltd and Georgia Pty Ltd included an indemnity against all losses and liability arising out of the use of the husks?

Assess this problem with reference to PEL and proportionate liability