An Australian farmer on Thursday launched legal action against his neighbour after genetically modified canola blew onto his farm, prompting authorities to strip him of his organic licence.

Believed to be Australia's first lawsuit over GM crops, organic farmer Steve Marsh is suing his neighbour Michael Baxter.

Marsh wants compensation for the loss of his lucrative organics title and subsequent business losses, according to his lawyer Mark Walter, who said it could set an important precedent for GM farming.

"This is a landmark case," said Walter.

"It's the first time Australian laws about competing land uses involving GM and non-GM crops has been tested."

Marsh had spent 10 years building up his organic food business and was devastated by the loss of his certificate, with about 70 percent of his land now unusable for organic farming.

"We've had our farm for 20 years, but since losing our organic accreditation last December we haven't been able to fulfil contracts," Marsh said.

"We have invested a great amount of time and money to bring organic produce to market. Now all that hard work has been for nothing."

Marsh wants the Supreme Court to rule that Baxter was negligent and pay him compensation.

But agricultural lobbyists warned that the case could set a dangerous precedent about land use.

"This is something that hasn't been very common among Australian farmers, for one farmer to seek damages from what might happen from a next door neighbour," said Rob Gillam, president of the Pastoralists and Graziers Association.

"Whether or not this case is really over GM, or it's over one farmer's farming interfering with someone next door."

The GM issue was thrust into the spotlight this month when a group of Greenpeace activists broke into a government research farm and destroyed a genetically modified wheat crop in what they described as a safety protest.

Funds are being raised for Marsh's case by the Safe Food Foundation, a non-profit group campaigning on GM, chemicals, irradiation and other food safety issues.

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