(a) The claim under s 75AD
182 Part VA was introduced by the Trade Practices Amendment Act 1992 (Cth). The applicant submitted, in support of her contention that liability under the Part is strict, that it resulted from Report No 51, 'Product Liability', by the Australian Law Reform Commission (the 'ALRC'). The Explanatory Memorandum to the Trade Practices Amendment Bill (No. 2) 1991 (Cth) does not support the applicant's contention. It says that the purpose of the Bill is to introduce into Australia 'a strict product liability regime based on the 1985 European Community Product Liability Directive …'. It appears from what follows in the Explanatory Memorandum however that liability was to be limited by the requirement of a defect. In JD Heydon, Trade Practices Law: Restrictive Trade Practices, Deceptive Conduct and Consumer Protection, Lawbook Co., Sydney, 2001, at [16A.80] it is observed that s 75AC(1) is a departure from strict or absolute liability. The Memorandum states that the regime of strict liability provided for, when a person suffers injury as a result of a defective product, is that they have a right of compensation against the manufacturer without the need to prove negligence on the part of the manufacturer. Another aspect of Part VA, which a Full Court observed in Glendale Chemical Products Pty Ltd v Australian Competition and Consumer Commission and Anor (1999) ATPR 41-672at 42,592, is that it permits recovery irrespective of the existence of any contractual relationship between the manufacturer and the person injured.
183 The provisions of Part VA follow closely the European Community Directive of 25 July 1985 (Directive 85/374/EEC, OJ No L210, 7.8.1985, p 29). The approach recommended by the ALRC went further. Pursuant to it a person would not need to establish that the goods did not comply with a standard of safety or quality. It rejected the need to limit liability by some concept such as 'defect'.
184 The Outline to the Explanatory Memorandum continued:
'2. The key concept of the new Part VA inserted by this Bill is that a person who is injured, or whose personal property is damaged, by a defective product will have a right to compensation against the manufacturer of the product. Goods are 'defective' if they do not have the degree of safety which persons generally are entitled to expect in all the circumstances. 'Manufacturer' has the same extended definition as currently applies for the purposes of Division 2A of Part V of the Trade Practices Act.
3. The manufacturer can escape liability where it can prove one of a number of defences, the most significant being that the goods were not defective when supplied by the manufacturer or that the goods represented the "state of the art". The Bill also provides that, where goods contain a defect only because of compliance with a mandatory standard imposed by the Commonwealth, the Commonwealth and not the manufacturer should be liable to compensate the consumer. The amount of compensation payable is reduced by contributory acts by the injured party.'
185 There are three aspects to an action brought under s 75AD: the supply of goods by a corporation in trade or commerce; the goods having a defect; and a person suffering injuries 'because of' the defect.
186 The standard referred to in s 75AC(1), that goods are defective if they do not provide the level of safety which persons generally are entitled to expect, was described in the Explanatory Memorandum (at par 14) as an objective standard. It is based upon what the public at large, rather than any particular individual, is entitled to expect. Further, the standard does not require that the goods be absolutely free from risk (at par 14). The subsection has been construed in this way by Emmett J in Australian Competition and Consumer Commission v Glendale Chemical Products Pty Limited; Barnes v Glendale Chemical Products Pty Limited (1998) ATPR 41-632at 40,970 and by the Full Court on appeal (Glendale Chemical Products Pty Ltd v Australian Competition and Consumer Commission and Anor at 42,595).
187 Section 75AC(1) is intended to apply to a number of different goods. It applies even if there is no inherent defect in the goods: Heydon's Trade Practices Law at [16A.106]. At par 15 of the Explanatory Memorandum it is said:
'It should be noted that there are a number of different types of potential defects. Design defects relate to matters such as the form, structure and composition of the goods. Manufacturing defects are those related to matters such as the process of construction and assembly. Instructional defects are those caused by incorrect or inadequate warnings and instructions. All these categories of "defect" fall within the definition of defect in section 75AC.'
188 In assessing the safety of the product s 75AC(2) provides that all relevant circumstances are to be taken into account. Relevant to this case is the following discussion in the Explanatory Memorandum (at par 21):
'As noted above, in addition to the factors specified in subsection 75AC(2), the court must take all relevant circumstances into account in determining the safety of goods. Safety expectations may also depend on matters such as the nature of the product and community knowledge of that product. For example, there are a number of known negative side effects associated with certain pharmaceuticals and vaccines. It is also generally accepted and known that these side effects cannot be avoided. Such products are known to confer substantial benefits which flow to the wider community at large. The small statistical chance of injury associated with them does not of itself mean that they are "defective".'
189 The Explanatory Memorandum to the Trade Practices Amendment Bill 1992 (Cth) suggests that so far as instructions or warnings are concerned, it may be relevant in a particular case to take into account the role of 'intermediaries' such as treating doctors (at par 24):
'The role which intermediaries may play in the supply of goods may also need to be taken into account. For example, prescription pharmaceuticals are supplied to the consumer by a qualified pharmacists and only on the prescription of a qualified medical practitioner. Due to the complex nature and effects of these products, complete instructions and warnings may not be provided to the consumer by the manufacturer. However, detailed product information is provided to doctors and pharmacists by the manufacturer so these learned intermediaries are sufficiently informed to be able to decide whether or not it is appropriate to dispense pharmaceuticals to particular consumers. This factor will be relevant in determining whether a pharmaceutical is defective, particularly where a claim of a defect in information provided is made. …'
190 An issue arises in this case concerning whether the applicant is obliged to prove, as part of her case concerning the chip, that it was present when the valve was implanted. The first respondent submits that the applicant cannot establish, as s 75AD(c) requires, that she suffered injury 'because of the defect' unless she establishes this fact. The applicant counters that the legislature could not be taken to have intended that an injured person be required to prove the existence of the defect at the time of the supply.
191 The applicant's submission must be correct, in my view. A person bringing a claim under s 75AD is to establish the existence of a defect in the goods and the fact of their injury. Additionally they must prove causation, which is to say that the injury came about 'because of' the defect. I shall return to that question shortly. If the manufacturer has no statutory defence, the scheme of Part VA is that liability is established. It would not be consistent with the requirements of the defence provisions, such as s 75AK(1), to require an applicant to establish the existence of the defect at a point before injury. If the necessary link between defect and injury is established it is to be inferred that the defect was present at the time of the injury, unless the manufacturer shows otherwise. The first respondent's defence, relevant to these proceedings (under s 75AK(1)(a)), is that the defect did not exist when the goods left the control of the actual manufacturer, St Jude Medical Inc ('the supply time'). The Explanatory Memorandum to the Trade Practices Amendment Bill (No. 2) 1991 (Cth) described the nature of the evidence that a manufacturer might have to give in this connexion (at par 39):
'To succeed in this defence, the manufacturer must show, on the balance of probabilities, that the (admittedly) defective goods were defect free when they left the manufacturer's control. Factors such as the nature of the goods, the level of use of the goods, and the length of time between the goods leaving the control of the manufacturer and the damage will be important. Depending on the nature of the defect, the manufacturer may also need to provide detailed evidence on the manufacturing process and quality control to which the alleged defective good (not just goods of that type generally) was subjected, in order to show that this particular good was not defective when it left the manufacturer's control.'
192 The applicant also submitted that it may be that the extent to which she is required to prove a link between a defect in the valve and her injuries is lessened by the subsection. The submission rests upon the choice of the words 'because of' (the defect) in s 75AD(c), which may be contrasted with the use of the word 'by' in s 82(1). It has been suggested that there may be differences in terms of causation, remoteness and the measure of damages flowing from the use of the various terms 'because of' and 'as a result of' in different sections in Pt VA and 'by' in s 82: see Heydon's Trade Practices Law at [16A.150] and at [18.1260].
193 Gummow J in Elna Australia Pty Ltd v International Computers (Aust) Pty Ltd (No 2) (1987) 16 FCR 410at 418 held that the nature or quality of the causation of which s 82 speaks is to be determined as a question of statutory construction. In his Honour's view common law analogies would not offer appropriate guidance to a statute such as the Trade Practices Act 1974 (Cth)(at 419). The use of the word 'by' is to be understood in a context where a contravention of Parts IV or V need not be the only cause of the loss or damage.
194 Deane J in Wardley Australia Limited & Anor v The State of Western Australia (1992) 175 CLR 514at 542 ('Wardley') adopted a similar approach to s 82. The majority however did not. They do not appear to have considered that the word 'by' conveyed anything apart from the notion of causation. Their Honours (at 525) held that 'by' should be understood as taking up the 'common law practical or common-sense concept of causation' discussed in March v Stramare(E. & M.H.) Pty Limited (1991) 171 CLR 506('March v Stramare'). In March v Stramare Deane J considered that the question of causation is:
'… whether an identified negligent act or omission of the defendant was so connected with the plaintiff's loss or injury that, as a matter of ordinary common sense and experience, it should be regarded as a cause of it …'
(at 522 and see 515 per Mason CJ).
In the context of s 82(1) acts done in reliance upon a misrepresentation furnish a sufficient connexion.
195 The words in s 75AD denote clearly the requirement of causation. The approach taken in Wardley and in March v Stramare does not permit consideration of the strength of the link required. In the context of s 75AD the defect must be shown to have caused an applicant's injuries by applying a common sense approach. In any event, were reference to the words and statutory context possible, there is nothing in the subsection which would support the applicant's contention of there being some lesser link necessary.
196 The applicant's case relies upon instructional defects and defects which can be taken to have occurred in the manufacturing process. In the former regard reliance is placed upon the lack of warning about the risk of thromboembolism developing on the valve in the Patient Booklet. It is also alleged that the booklet was misleading in that it conveyed that there was no risk. The first respondent contends that these do not render the valve defective within the meaning of s 75AC(2). It is however accepted that the chip is a defect if it was present after manufacture and when supplied by St Jude Medical Inc to the first respondent. I should add that in final submissions for the applicant it was sought to widen the applicant's case to allege a defect arising because the first respondent had failed to warn the applicant prior to implant. This does not arise from the pleading and was not part of the case opened for the applicant. I will not take it into account in relation to the case concerning s 75AD. It does however arise for consideration with respect to allegations of breach of duty at common law.
197 There are a number of facts which are relevant to a consideration as to whether the safety of the St Jude Medical valves generally is such as might be expected by the public. And it is important to bear in mind that the fact that a risk of complication attends their use would not of itself render them defective, as the Explanatory Memorandum to the Trade Practices Amendment Bill (No. 2) 1991 (Cth) points out. Goods are not required to be completely free of defect.
198 The evidence shows that the product has been made available to many persons. The incidence of complications shows that many people have benefited from it. The valve is not particularly prone to the development of thrombus and it was described by one witness as relatively thrombus-resistant and perhaps even more so than other valves. The risk cannot be eliminated, even with optimal anticoagulation. The risk which is present is, and was at the relevant time, well known by cardiologists and surgeons even without the Physician's Reference Manual. They were in a position to convey information concerning the risk in a meaningful way to their patients. In these circumstances I do not see how it is possible to conclude generally that the St Jude Medical valve was defective. The fact that it was the cause of thromboembolisms in the applicant establishes only that she unfortunately fell within a small number of persons who suffer such a complication.
199 In any event the applicant's case, apart from reliance upon the chip, is not based upon the general quality of the valve but upon what she was told about it after implant. In some cases a failure to warn might render a product defective in the sense spoken of in the subsection. Without a warning or instruction its use might be unsafe. A warning might be necessary to remove some inherent dangerous quality. A warning of the risk and rate of risk of thromboembolism despite anticoagulation could have no such effect here. Assuming however that the concept of goods being defective is much wider, and extends to any warning relevant to a person's informed choice, this does not avail the applicant. The decision to have the valve has been made at the point when she receives the booklet. The applicant does not and cannot allege that the failure to warn afterwards was causally connected to the injuries she sustained save that she may have sought further advice.
200 The chip on the valve can be considered a defect. The first question which arises with respect to it is whether it could itself cause the development of a thrombus which then broke away from the valve, travelled through the applicant's system and caused the infarcts and stroke from which most, if not all, of her injuries are alleged to stem.
201 Some evidence suggests that there is a theoretical possibility that a chip such as this could cause a thrombus to develop. Had that been the case one would have observed at explant a localised build-up of material at the site of the chip, whereas here it was quite generalised across the whole surface of the valve. Professor Brandwood did not disagree with this and conceded that one would expect a concentration of clotting at the site of a chip. Professor Brandwood's hypothesis accepts that the thrombus is widespread across the valve. He considered that there is evidence that at explant it was greater and more concentrated near the hinge which is close to the site of the chip. This is to be derived from the evidence of Dr Mahon's notation and the observations of Dr Titus.
202 Doctor Mahon was not called as a witness and Dr Titus was not questioned on this topic. The observation that a thrombus first develops, or develops to a greater extent, in the hinge area is unreasonable. It does not take the matter of the possible relationship with a chip in the area very far. Even if it be accepted as likely that a thrombus first formed in the hinge area, this does not establish that the chip was the cause of it. A thrombus is more likely to be created because of the effects on the movement of blood through that area. Professor Brandwood's thesis concerning the build up in the hinge area requires that it be substantial and such as would impede the movement of the leaflets and create the spread of the thrombus across the whole of the valve. Professor Hirsh however explained that if the movement of the leaflets had been so impeded the adverse effects upon the applicant would have been noticeable and serious, approaching heart failure. Further, one would have expected to see some indication of the problem in the echocardiograms which were taken.
203 The development of a thrombus because of the chip found on the leaflet of the St Jude Medical valve in question is a scientific possibility. There is however no scientific literature or other evidence which can elevate it to a higher level. The observations made of the valve on explant suggest to the contrary. The applicant therefore cannot establish that the chip was the cause of the thromboembolic events she suffered from.
204 There remains the question whether the chip was present at the time of supply to the first respondent, on the assumption that the evidence did establish causation. This has been the subject of considerable evidence.
205 Professors Brandwood and Williams are at least agreed that of the three possible mechanisms by which a chip could be caused the more likely is local physical impact. Professor Brandwood considers that the only periods in which it could have been caused were during manufacture and assembly or during post-explantation handling associated with testing. He did not explain why he initially discounted the latter and later conceded it was also a possibility. His view would appear to be based upon the prospect that Ms Smentek had not completely examined each aspect of the surfaces. This conclusion is arrived at because her recording of the photographs was not full and it could not be said that she photographed each ear of the disassembled valve. This failure on her part may have removed the confirmation of her visual inspection at 10x magnification which the photographs provided. It cannot in my view be said to follow that her examination and the record of it is to be taken as wholly unreliable. There is therefore evidence that the valve leaflet, viewed in a disassembled state, did not disclose a chip prior to the analysis by Mr Long using a scanning electron microscope. As against that it should be added that the hypothesis favoured by some of the other witnesses, namely that the chip occurred when it was disassembled post-explant, would have the chip present when Ms Smentek viewed it. There remains the possibility however that it occurred between the time Ms Smentek undertook her examination and packaged it for testing and when the further testing by Mr Long was undertaken.
206 Accepting for present purposes that there may have been some difficulty in viewing the chip on the valve leaflet in its assembled state, the only other occasion when its component parts were viewed and examined was prior to initial assembly. Professor Brandwood suggests the possibility that the chip occurred during the reworking process, but does not put it at higher than a possibility. It is clearly a hypothesis which is unsupported by evidence. There was no criticism made of the procedures for testing, reworking and re-testing prior to assembly. Mr Monaghan's evidence is that the reworking took place in an especially clean environment. It is not possible to infer that a hard particle was likely to have been present during the reworking of the leaflet surface or that the pressure involved in the cleaning would have created this chip. The evidence simply does not permit it. Moreover the theory does not take account of the further visual examination at 7x magnification after reworking. No defect was then recorded.
207 The defence under s 75AK(1)(a) requires that it be shown that the defect found in the goods did not exist at the time they passed from the manufacturer's control. It does not require the manufacturer to establish that it occurred at a later time, although if this were possible it would obviously deny the earlier existence of the defect. The first respondent cannot establish as a fact that the chip occurred during or subsequent to Ms Smentek's examination, although they would appear to be the most likely of the scenarios. The number of examinations prior to the scanning electron microscope examination, at which such a chip would have been visible under the magnifications used, strongly suggests the absence of a chip up to this point.
208 The evidence of the examinations of the valve's component parts prior to assembly establishes the likelihood that any chip present would have been detected. The prospect of a chip being created in the reworking process is only a hypothesis. The evidence concerning the process does not point to it as a very likely prospect. In any event it cannot stand the detailed records of examinations after the rework and the many examinations undertaken after explant. The first respondent would therefore succeed on its defence.
209 It is not necessary to deal with the first respondent's alternative defence, that the applicant brings this action outside the period limited for its commencement, but I make the following observations. It is accepted that the applicant did not have actual knowledge of the existence of the chip until 26 June 2003. The first respondent's point is that the applicant could have known of it earlier had she followed up on her request to have tests conducted on the valve released to her for that purpose. It is to be noted however that it is most unlikely that St Jude Medical Inc would have released the valve, but it may be that it would have agreed to testing in conjunction with the applicant if a protocol had been agreed. The difficulty with the defence is that it assumes that the chip was in existence and available to be discovered by 13 March 1998. The evidence does not establish this.