(Adds details, quotes)
By Colin Packham
SYDNEY, May 28 (Reuters) - An organic farmer in Western Australia lost his bid to claim damages from a neighbour after genetically modified (GMO) canola seed heads blew on to his property, causing him to lose his licence as an organic grower.
The Supreme Court of Western Australia ruled on Wednesday against organic farmer Steve Marsh, who sued his former friend Michael Baxter after winds carried harvested seed from Baxter's Monsanto Roundup Ready canola crop on to Marsh's farm.
The case has been closely watched internationally as a win for Marsh could have opened the door to widespread changes to rules governing the cultivation of GMO crops, placing a greater onus of responsibility on GMO farmers.
Proponents of organic farming in Australia said the judgment will open the door to more farmers losing their organic licence as GMO crop production increases.
"I am not satisfied that in 2010 Mr Baxter breached any (lesser) duty of reasonable care," the Hon. Justice Kenneth Martin said in his judgment.
The case pitted two former friends against each other, whose familes had farmed adjoining properties, Eagle Rest and Sevenoaks, for many years at Kojunip, 256 km (160 miles), southeast of Perth.
Baxter told Marsh during a 2010 "busy bee" working group at another farmer's property that he intended to plant GMO canola in two boundary paddocks. Marsh had found non-GMO canola from Baxter's property on his farm several years earlier, the judge said.
Marsh's lawsuit alleged that harvested seed heads from Monsanto's laboratory-created canola seed blew from Baxter's property across a dirt lane and over a boundary fence in November 2010, re-germinating on Marsh's land in January 2011.
The lawyer acting for acting for Marsh described the ruling as disappointing.
" leaves Australia's non-genetically modified food farmers with no legal protection against contamination from nearby properties," said Mark Walter of Slater & Gordon.
Lawyers told Reuters that a win for Marsh on the grounds of trespass could have led to new rules, such as larger buffer zones between GMO and organic farmers, potentially curbing the amount of GMO canola being planted.
"I think the ruling provides a lot of comfort to GM growers," said Joe Lederman, managing principal for FoodLegal, a law firm specialising in food industry issues.
"Unless something causes physical harm and that has not been shown to be the case here, it will be impossible for any person claiming to be affected economically by a GM crop to be successful in their claim," he said.
GMO crops accounted for about 15-20 percent of Australia's 3.2 million tonne canola crop in 2012/13, according to the Australian Oilseeds Federation, and the proportion has been growing.
Canola is grown for its seed, which is crushed for the oil used in margarine, cooking oils, salad oils and edible oil blends. Australia sells most of its exports to Europe and is the world's second-largest canola exporter after Canada, which produces mainly GMO canola.
Unlike the United States, the European Union and Japan, which allow trace amounts of GMO crops in organic foods in acknowledgement of contamination by wind or pollen transfer, Australia maintains a zero threshold.
The ruling is expected to lead to calls for Australia's national certification authority, Standards Australia, to ease its tight policy on contamination.
However, organic proponents say Australia then faces the prospect of losing its position on world markets as a strict organic producer at a time when demand for GMO-free food is increasing around the world, particularly in Asia.
Justice Martin said in his judgment that decertification of Marsh's Eagle Rest farm appeared to be a "gross overreaction" by Australia's organic certification body.
Only some of Marsh's organic wheat crop contained some GM canola, which could have been removed, he said.
Reporting by Colin Packham; Editing by Richard Pullin