Courtney v Medtel Pty Limited - [2003] FCA 36 - FCA 2003 case summary — Zoe

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Courtney v Medtel Pty Limited

[2003] FCA 36

Federal Court of Australia|2003-07-01|Before: Schedule J, Sackville J

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Court

Federal Court of Australia

Decision date

2003-07-01

Before

Schedule J, Sackville J

Source

Original judgment source is linked above.

Judgment (48 paragraphs)

[1]

INTRODUCTION 1 These are representative proceedings brought pursuant to Part IVA of the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). They arise out of a "Hazard Alert" issued on 5 June 2000 by the Therapeutic Goods Administration ("TGA"), then a division of the Commonwealth Department of Health and Aged Care. The Hazard Alert related to a particular production run identified by serial numbers, of St Jude Telectronics Tempo Pacemakers, models 2102, 2902, 1102 and 1902. The Hazard Alert stated that it had been issued "due to an increased risk of early battery depletion and a resulting no output condition. The failure mechanism identified is a potential short circuit at the site of the battery/hybrid connector". (I refer to Tempo Pacemakers models 2102, 2902, 1102 and 1902 as the "Tempo Pacemakers". I refer to Tempo Pacemakers which were surgically implanted in Australia and were subject to the Hazard Alert as the "Hazard Alert Pacemakers". When I simply use the expressions "Pacemaker" or "Pacemakers", the context should make the meaning clear.) 2 A pacemaker is a device, comprising a pulse generator (including a battery) and one, two or three leads, which is implanted into the body of a patient and connected via the leads to the heart. In essence, a pacemaker monitors the heart's rate and rhythm and produces electrical impulses when the patient's own heart does not. It is designed to restore the proper heart rate and rhythm of a patient whose heart is subject to arrhythmia. 3 Only a relatively small proportion of the Hazard Alert Pacemakers have failed or will fail, in the sense that they have experienced or will experience accelerated battery depletion leading to premature loss of function. The difficulty presented by the case is that, unless an implanted Hazard Alert Pacemaker has already ceased to function or shown signs of malfunction in situ, it is not possible to ascertain whether it will actually lose function prematurely until it is explanted (removed) and tested outside the patient's body. 4 The applicant says, among other things, that each Hazard Alert Pacemaker is unfit for the purpose for which it was acquired by the "consumer" (the patient in whom it was implanted). He also says that each such Pacemaker is not of merchantable quality. Thus, so he argues, he and each group member whom he represents, is entitled to compensation pursuant to ss 74B and 74D of the Trade Practices Act 1974 (Cth) ("TP Act") from the first respondent ("Medtel"), the Australian distributor of Tempo Pacemakers. This is so notwithstanding that the vast majority of the Hazard Alert Pacemakers (including those that have been explanted as a precautionary measure) have not been and will not be subject to early battery depletion or any other form of premature loss of function. 5 The second respondent ("Pacesetter"), the United States manufacturer of the Tempo Pacemakers, offers, in conjunction with Medtel, a warranty to patients who have a Pacemaker implanted. The warranty provides that where a Pacemaker is subject to a hazard alert and is replaced, regardless of whether it exhibits the problem identified in the hazard alert, the patient is entitled to receive a replacement Pacesetter pacemaker and up to $A2,000 of unreimbursed medical expenses associated with the replacement procedure. The respondents say that they are under no further liability to a patient who has received a Hazard Alert Pacemaker. In particular, Medtel disputes that it is liable to compensate patients pursuant to ss 74B or 74D of the TP Act merely because those patients face or have faced a greater than usual risk that their Hazard Alert Pacemakers will prove to be defective.

[2]

THE SEPARATE QUESTION 6 The present proceedings were commenced on 22 June 2000 by the applicant, one of the patients affected by the Hazard Alert. Three respondents were originally joined, but only two remain. Medtel, a company incorporated in New South Wales, markets and distributes products in Australia. Since January 1998, Medtel has been the distributor in Australia of the Pacemakers under the business names "Cardiac Rhythm Solutions", "Medtel Australia" and "Telectronic Pacing Systems". Pacesetter, now the second respondent, is incorporated in Delaware, in the United States of America. Its principal place of business is Sylmar, California. Pacesetter is and has been since March 1997 the manufacturer of the Tempo Pacemakers. It is a wholly owned subsidiary of St Jude Medical Inc ("St Jude") and at the relevant times constituted St Jude's Cardiac Rhythm Management Division ("CRMD"). 7 As is often the case with representative proceedings, the pleadings have undergone many amendments. According to the eighth amended application (the "application"), the applicant brings the proceedings on his own behalf and on behalf of the following class of persons ("group members"): "(a) persons who have had a St Jude Medical Tempo Pacemaker, model number 1102, 1902, 2102, 2902 (singularly, a 'Pacemaker', and together, the 'Pacemakers'), surgically implanted by a doctor in Australia, where that Pacemaker was the subject of a hazard alert issued on or about 5 June 2000 (the 'Hazard Alert'), or would have been the subject of the hazard alert had the Pacemaker not already been explanted, including persons who have had or may in the future have surgical removal of the Pacemaker; and (b) the legal personal representatives of the estates of deceased persons who had a St Jude Medical Tempo Pacemaker, model number 1102, 1902, 2102, 2902, surgically implanted by a doctor in Australia, where that Pacemaker was the subject of the Hazard Alert, or would have been the subject of the hazard alert [sic] had the Pacemaker not already been explanted, including persons who had surgical removal of the Pacemaker." The pleadings allege that there are 992 group members, although the evidence suggests that the Hazard Alert in fact applied to 1,048 Pacemakers implanted in Australia. After allowing for those group members who have opted out of the proceedings pursuant to s 33J of the Federal Court Act, it appears the represented group consists of approximately 616 persons who had a Pacemaker surgically implanted in Australia ("the remaining group members"). (This figure includes the legal personal representatives of the estates of deceased persons who had Tempo Pacemakers surgically implanted by a doctor in Australia. Each such person has been counted as one group member although it is that person's legal representatives, of whom there may be more than one, who actually form part of the represented group.) 8 It will be seen that the remaining group members include at least three different sub-groups, namely: (i) those whose Hazard Alert Pacemakers have remained in situ notwithstanding the Hazard Alert; (ii) those whose Hazard Alert Pacemakers have been explanted (either before or after the Hazard Alert) and, on examination, the Pacemakers have been found not to be functioning normally; and (iii) those whose Hazard Alert Pacemakers have been explanted and, on subsequent examination, have been found to be functioning normally. The applicant falls into the third sub-group. His Pacemaker was explanted on 1 September 2000 at Geelong Hospital in Victoria, and replaced with a new pacemaker. Subsequent testing revealed the explanted Pacemaker to be operating normally. 9 The eighth amended statement of claim ("ASC") pleads a number of causes of action, as follows:

an action for compensation under s 74B of the TP Act against Medtel by reason of its supplying goods (the Hazard Alert Pacemakers) not reasonably fit for the purpose for which they were acquired by the consumer (the patient);
an action for compensation under s 74D of the TP Act against Medtel by reason of its supplying goods to patients that were not of merchantable quality;
an action for compensation under s 75AD of the TP Act against Medtel by reason of its supplying goods manufactured by it that had a defect causing an individual to suffer injuries;
an action seeking relief against both respondents by reason of misleading and deceptive conduct or false representations in contravention of ss 52 and 53(a) of the TP Act; and
an action founded in breach of a duty of care said to be owed by each respondent to the applicant and the remaining group members. 10 The parties agreed between themselves that there should be a separate determination of the causes of action against Medtel arising under ss 74B and 74D of the TP Act. To this end they jointly proposed that an order should be made pursuant to Federal Court Rules ("FCR"), O 29 r 2, that certain issues be determined separately and in advance of all other issues in the proceedings. The order is as follows: "The claims made in the Eighth Amended Statement of Claim under sections 74B and 74D of the Trade Practices Act 1974 (Cth) raised by paragraphs 1-3, 6-16, 18-43, 69, 70(a)(i) and (ii) and 70(e), and paragraphs 67(a) and (b), 68, 70(b), (c) and (g)-(i) insofar as they relate to the injury, loss and damage allegedly suffered by the Applicant and any other group member called during the hearing, be determined separately and in advance of the determination of all other issues in these proceedings by resolution of the following questions: a. Whether the Pacemakers are subject to the Fault as defined in the Eighth Amended Statement of Claim: b. Whether: (i) the Pacemakers are not reasonably fit for their purpose within the meaning of section 74B of the Trade Practices Act; (ii) the Pacemakers are not of merchantable quality within the meaning of section 74D of the Trade Practices Act; c. Whether, as a result of: (i) the Pacemakers not being reasonably fit for their purpose; (ii) the Pacemakers not being of merchantable quality; (iii) the Applicant has suffered and may continue to suffer injury, loss and damage." 11 The difficulties associated with attempts to formulate separate questions for determination are well-known: cf Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334, at 355-360 (joint judgment); Director of Fisheries (Northern Territory) v Arnhem Land Aboriginal Land Trust (2001) 109 FCR at 519-522, per Sackville J. This case is no exception. It is appropriate to make five observations at the outset. 12 First, the order refers to "the Pacemakers". The application defines "Pacemakers" to mean St Jude Medical Tempo Pacemaker Model numbers 1102, 1902, 2102, 2902. The order, as I understand the position, is intended to raise questions concerning a subset of "Pacemakers" (as that term is defined in the application). That is, the order is concerned with those "Pacemakers" that were surgically implanted in Australia and were subject to the Hazard Alert (including those that would have been subject to the Hazard Alert had they not already been explanted). In other words, the expression "Pacemakers" in the order is apparently intended to be equivalent to "Hazard Alert Pacemakers" as I have used the latter expression. 13 As will be seen, the Hazard Alert was expressed to apply to a defined batch of Tempo Pacemakers, being those within the range of serial numbers OU6100663 to OU6227334. This batch corresponded to Tempo Pacemakers manufactured at the Sylmar facility between March 1997 and 31 December 1998. Only about one tenth of the Tempo Pacemakers bearing those serial numbers were subject to the Hazard Alert, since most of the batch were exported to countries other than Australia and implanted into patients in those countries. 14 Secondly, Mr Bannon SC, who appeared with Mr J Clarke for the applicant, acknowledged in opening that the expression "the Pacemakers" was inappropriate, since the thrust of the applicant's case was that each and every one of the Hazard Alert Pacemakers was neither fit for the purpose for which it was acquired nor of merchantable quality. Mr Bannon suggested that "the Pacemakers" should be read as meaning "each of the Pacemakers", and that consequential grammatical changes should be made to the questions. He did not, however, propose that the order for the determination of separate questions be amended. 15 Thirdly, the order contemplates that the hearing might deal with the pleaded claims not only of the applicant but of any other group member called during the hearing. In fact no remaining group member, other than the applicant himself, gave evidence at the hearing. Accordingly, this judgment is concerned only with the applicant's claim to compensation under ss 74B and 74D of the TP Act, although the order calls for that claim to be determined by answering question (c). 16 Fourthly, it follows from the terms of the separate questions that it is no part of this phase of the case to determine whether the respondents, or either of them, should have done more to detect or remedy the "Fault" alleged in the ASC. That issue presumably will arise if the causes of action founded on alleged breaches of a duty of care proceed to trial. But questions of negligence as such are not relevant to the pleaded claims arising under ss 74B and 74D of the TP Act. In this connection, it should be noted that some of the evidence, particularly certain material in Dr Brydon's affidavits, would seem to have been relevant only to a cause of action founded on a breach of a duty of care. Mr Walker SC, who appeared with Mr S S Clark for the respondents, did not attempt, in his word, to "fillet" this material. Mr Walker's restraint was due to the fact that Mr Bannon accepted that it would not be appropriate for the Court to make any findings in this phase of the proceedings that relate only to the alleged breaches of duty. 17 Fifthly, despite the respondents having consented to the order for the separate determination of the identified questions, Mr Walker ultimately submitted that it was unnecessary or inappropriate to answer them. This change of heart on the part of the respondents reflected the difficulties to which I have referred and, it is fair to say, the fact that the questions were formulated prior to the filing of the eighth (and final) version of the statement of claim. 18 In order to understand the issues the separate questions were intended to address, it is necessary to set out the relevant provision of the TP Act and to recount the case pleaded by the applicant.

[3]

THE LEGISLATION 19 Section 74B of the TP Act imposes liability on the manufacturer of goods supplied to a consumer, where the goods are not reasonably fit for the particular purpose for which they were acquired. Section 74B, which is in Div 2A of Part V of the TP Act, provides as follows: "(1) Where (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (c) the goods are acquired by the consumer for a particular purpose that was, expressly or by implication, made known to the corporation, either directly, or through the person from whom the consumer acquired the goods or a person by whom any antecedent negotiations in connexion with the acquisition of the goods were conducted; (d) the goods are not reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied; and (e) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not reasonably fit for that purpose; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply: (a) if the goods are not reasonably fit for the purpose referred to in that subsection by reason of: (i) an act or default of any person (not being the corporation of a servant or agent of the corporation); or (ii) a cause independent of human control; occurring after the goods have left the control of the corporation; or (b) where the circumstances show that the consumer did not rely, or that it was unreasonable for the consumer to rely, on the skill or judgment of the corporation." 20 Section 74D of the TP Act imposes liability on a corporation that supplies goods to a consumer that are not of merchantable quality. Section 74D, also in Div 2A, provides as follows: "(1) Where: (a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer; (c) the goods are not of merchantable quality; and (d) the consumer or a person who acquires the goods from, or derives title to the goods through or under, the consumer suffers loss or damage by reason that the goods are not of merchantable quality; the corporation is liable to compensate the consumer or that other person for the loss or damage and the consumer or that other person may recover the amount of the compensation by action against the corporation in a court of competent jurisdiction. (2) Subsection (1) does not apply: (a) if the goods are not of merchantable quality by reason of: (i) an act or default of any person (not being the corporation or a servant or agent of the corporation); or (ii) a cause independent of human control; occurring after the goods have left the control of the corporation; (b) as regards defects specifically drawn to the consumer's attention before the making of the contract for the supply of the goods to the consumer; or (c) if the consumer examines the goods before that contract is made, as regards defects that the examination ought to reveal. (3) Goods of any kind are of merchantable quality within the meaning of this section if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to: (a) any description applied to the goods by the corporation; (c) the price received by the corporation for the goods (if relevant); and (d) all the other relevant circumstances." 21 Section 4B(1) of the TP Act provides that a person shall be taken to have acquired particular goods as a consumer if and only if (relevantly) the price of the goods did not exceed the prescribed amount and the person did not acquire the goods for the purpose of resupply or for the purpose of using them up or transforming them in trade or commerce. 22 Section 74A provides as follows: "(1) … (2) In this Division (a) a reference to goods shall, unless the contrary intention appears, be read as a reference to goods of a kind ordinarily acquired for personal, domestic or household use or consumption; … (b) a reference to the quality of goods includes a reference to the state or condition of the goods; … (3) If: (a) a corporation holds itself out to the public as the manufacturer of goods; (b) a corporation causes or permits the name of the corporation, a name by which the corporation carries on business or a brand or mark of the corporation to be applied to goods supplied by the corporation; or (c) a corporation causes or permits another person, in connexion with the supply or possible supply of goods by that other person, or in connexion with the promotion by that other person by any means of the supply or use of goods, to hold out the corporation to the public as the manufacturer of the goods; the corporation shall be deemed, for the purposes of this Division, to have manufactured the goods. (4) If: (a) goods are imported into Australia by a corporation that was not the manufacturer of the goods; and (b) at the time of the importation the manufacturer of the goods does not have a place of business in Australia; the corporation shall be deemed, for the purposes of this Division, to have manufactured the goods." 23 Section 74K of the TP Act invalidates any term of a contract that purports to exclude, restrict or modify any liability of a person to compensate another person that may arise under Div 2A.

[4]

THE PLEADINGS 24 The ASC first pleads that the action is brought by the applicant on his own behalf and on behalf of the represented group which is identified in the same terms as in the application. Accordingly, the ASC uses the term "Pacemaker" to refer to the St Jude Medical Tempo Pacemaker, model number 1102, 1902, 2102 or 2902. 25 After pleading a number of non-contentious matters, the applicant pleads that he was supplied with a Pacemaker, model number VR 1102 ("the applicant's Pacemaker"), "for his personal use" on 21 July 1999, by reason of it being surgically implanted into his body on that date (par 9). He says that he was a "consumer" of the applicant's Pacemaker within the meaning of the TP Act (par 10). 26 The applicant alleges that in or about June 2000 he was notified by Geelong Hospital that his Pacemaker was the subject of a hazard alert and required testing (par 11). The applicant underwent a medical examination shortly thereafter (par 12) and was advised by a cardiologist to have his Pacemaker removed surgically (par 13). The applicant's Pacemaker was removed at Geelong Hospital on 1 September 2000 and a new pacemaker implanted (par 14). 27 The Pacemaker is described in the ASC as follows (par 16): "The Pacemaker is a cardiac device manufactured and used for the particular purpose of being surgically implanted on the advice of doctors inside the human body attached to the heart so as to restore and maintain a normal heart beat by providing an electrical impulse or energy or beat that is carried through leads to the heart. The Pacemaker is triggered by an irregular pulse in the user to send a series of light electric pulses activating a regular heart beat. Once fitted, the Pacemaker can only be used for the personal use of the user." 28 Paragraph 18 of the ASC alleges the "Fault" referred to in the order providing for the determination of the separate questions: "At all material times, the Pacemakers were designed or manufactured in such a way or with such inputs or under such conditions that: (a) (i) they were prone to accelerated battery depletion and consequential failure, whereby the Pacemaker may cease to function without any prior warning or indication; and (ii) their longevity indicators or measurements could not be depended upon to give a reliable estimate of the Pacemaker's remaining longevity; or (b) the possibility that they had the characteristics identified in subparagraphs (i) and (ii) above could not be excluded (each of the circumstances referred to in (a) and (b) being hereinafter referred to as 'the [F]ault')." 29 It is said that on or about 5 June 2000, the Pacemakers were the subject of the Hazard Alert at the direction of the TGA, which alert "arose as a result of a complication arising out of the Pacemakers having the Fault" (par 19). 30 The ASC then pleads that the Pacemakers were "goods" within the meaning of the TP Act (par 20) and thatat the material times:

Pacesetter was the manufacturer of the Pacemakers (par 21);
Pacesetter did not have a place of business within Australia (par 22);
Medtel imported the Pacemakers into Australia (par 23); and
Medtel caused or permitted its name to be applied to the Pacemakers for sale in Australia (par 25). Accordingly, it is said that Medtel is deemed to be the manufacturer of the Pacemaker by virtue of s 74A(3) or, alternatively, s 74A(4) of the TP Act (par 26). 31 The chain of supply is pleaded as follows:
the applicant and each group member was supplied with a Pacemaker by his or her treating hospital on the advice of his or her treating doctor (par 27);
Medtel, as the deemed manufacturers of the Pacemakers, supplied Pacemakers to the treating hospitals for the purpose of resupply to consumers, including the applicant and group members (par 28); and
each of the treating hospitals acquired the pacemakers from Medtel for resupply to other persons, including the applicant and group members (par 29). 32 It is then alleged that Pacesetter promoted the Pacemakers in trade or commerce between Australia and a place outside Australia, namely the United States (par 30). Medtel is said to have promoted and supplied Pacemakers to treating hospitals in trade and commerce in Australia (par 33). 33 The claim under s 74B of the TP Act is pleaded as follows:
by reason of the matters pleaded in par 33, Medtel's conduct referred to in pars 27-29 was in trade or commerce (par 35);
the applicant and the group members acquired the Pacemakers as consumers of the Pacemakers for the particular purpose for which they were manufactured, that is for ensuring the regular beating of the heart as pleaded in par 16 (par 36);
Medtel was aware of the purpose for which all users of the Pacemaker acquired them (par 37);
the Pacemakers acquired by each of the applicant and the group members were subject to the Fault (par 38);
accordingly, the Pacemakers acquired by each of the applicant and the group members were not reasonably fit for the particular purpose for which they were acquired within the meaning of s 74B of the TP Act (par 39). 34 The claim under s 74D is pleaded by repeating the allegations in pars 27-29, 33 and 38 and claiming that, accordingly, the Pacemakers acquired by each of the applicant and the group members were not of merchantable quality within the meaning of s 74D (pars 40-43). 35 It is alleged that by reason of the Pacemakers not being reasonably fit for their purpose and not being of merchantable quality, each of the applicant and the group members has suffered and may continue to suffer loss and damage (par 67). The applicant claims to have suffered stress, anxiety, worry and grave concern at the risk of imminent failure of the applicant's Tempo and (albeit to a "lesser extent") since the implant of the new pacemaker on 1 September 2000 (par 69(a), (b)). He also claims that the invasive surgery of 1 September 2000 caused hurt, discomfort and loss of enjoyment of life, as well as economic loss (par 69(d), (e), (f)). 36 The relief sought by the applicant includes declarations that the Pacemakers were not reasonably fit for their purpose within the meaning of s 74B of the TP Act and were not of merchantable quality within the meaning of s 74D of the TP Act (par 70(a)(i) and (ii)). The applicant also seeks compensation pursuant to ss 74B and 74D (par 70(b) and (d)).

[5]

COMMON GROUND 37 Section 74B(1)(a) and (b) and s 74D(1)(a) and (b) are identical. Each sub-paragraph applies where: "(a) a corporation, in trade or commerce, supplies goods manufactured by the corporation to another person who acquires the goods for re-supply; (b) a person (whether or not the person who acquired the goods from the corporation) supplies the goods (otherwise than by way of sale by auction) to a consumer". 38 There was no dispute that these provisions were satisfied in the present case, for the following reasons: (i) Medtel admitted that the Pacemakers are "goods" as defined in s 74A(2) of the TP Act, being goods of a kind ordinarily acquired for the personal use of the patients in whom they have been implanted. (ii) Medtel admitted that, although the Pacemakers were manufactured in Sylmar, California, it caused or permitted a name by which it carried on business, namely "Telectronics") to be applied to the goods (the Pacemakers) supplied by it. The consequence is that s 74A(3) deems Medtel to have manufactured the goods. In any event, Medtel did not dispute that the terms of s 74A(4) of the TP Act were satisfied, so that it is also deemed by that provision to have manufactured the goods. (iii) Medtel admitted that it supplied the Pacemakers to treating hospitals and doctors for the purpose of resupply to patients requiring implants of pacemakers. (iv) Medtel admitted that it supplied the Pacemakers in the course of its business of marketing and distributing medical devices. It did not dispute that it thereby supplied the Pacemakers in trade or commerce. (v) Medtel admitted that each of the treating hospitals and doctors acquired the Pacemakers from it to resupply to other persons including the applicant and the group members. (vi) Since the price for each Pacemaker was under $5,000 (that is, lower than the "prescribed amount" of $40,000 under s 4B(2)(a) of the TP Act) and the applicant and the remaining group members did not acquire the goods for the purpose of resupply or to use them in trade or commerce, they had acquired the Pacemakers as "consumers". (See also s 4B(2)(d).) 39 There was also no dispute that the applicant had a Tempo Pacemaker model number VR 1102, serial number OU 6226435, being a Pacemaker within the Hazard Alert, surgically implanted by a doctor in Australia. By definition, each living remaining group member must also have had a Tempo Pacemaker, being a Pacemaker within the Hazard Alert, surgically implanted by a doctor in Australia (otherwise that person could not be a member of the represented group, as defined in the pleadings). Similarly, each deceased person, whose personal legal representatives are remaining group members, must have had a Tempo Pacemaker, being a Pacemaker within the Hazard Alert, surgically implanted by a doctor in Australia.

[6]

WITNESSES 40 The applicant gave evidence and was cross-examined. His wife ("Mrs Courtney") gave affidavit evidence but was not required for cross-examination. 41 The following treating doctors gave evidence on behalf of the applicant:

Dr Murdock, a consultant cardiologist, practising in Geelong, Victoria. Dr Murdock treated the applicant for cardiac disease from 1994 and selected the model of Pacemaker implanted into the applicant in July 1999.
Dr Purnell, Cardiology Registrar at Geelong Hospital in 1999. Dr Purnell was not cross-examined.
Associate Professor Black, Director of Cardiology at Geelong Cardiology Practice. Professor Black performed the operation to explant the applicant's Pacemaker. Professor Black was not cross-examined. 42 The applicant called four experts:
Dr Brydon, Adjunct Associate Professor of Electrical Engineering at the University of Sydney and Visiting Associate Professor in the Graduate School of Biomedical Engineering at the University of New South Wales. Dr Brydon has qualifications in the field of design and functionality of biomedical equipment.
Professor Hibbert, Professor of Analytical Chemistry at the University of New South Wales. Professor Hibbert has expertise in the subject of electrochemistry including the formation of dendrites.
Professor Chard, Head of Cardiothoracic Surgery at Westmead Hospital and Clinical Associate Professor at the Department of Surgery, University of Sydney. Professor Chard's field of expertise includes the clinical management of patients requiring pacemaker implantation and explantation.
Dr Yiannikas, a cardiologist holding appointments at Royal Prince Alfred and Concord Hospitals. 43 The respondents called evidence from the following:
Dr Fain, Senior Vice President, Development and Clinical/Regulatory Affairs at Pacesetter. Dr Fain's research areas include the biochemical, physiological and electrophysiological aspects of the cardiovascular system.
Dr Morris, from December 1999 to July 2001 the Manager - Product Analysis and Reliability, St Jude Medical, Inc, at Sylmar, California. Dr Morris' qualifications include a Doctor of Philosophy in Natural Science and Engineering.
Mr Bruneel, currently the President of Interflux USA, Inc and formerly a partner in Interflux Solder NV, a Belgian company which manufactured and supplied solder to Pacesetter.
Professor Hughes, Head of the Cardiothoracic Surgical Unit at Royal Prince Alfred Hospital and the Repatriation General Hospital. From 1987 to 2002 Professor Hughes was Chairman of the Therapeutic Devices Evaluation Committee.

[7]

THE HEART 44 The heart consists of four chambers: the atria (left and right) at the top of the heart and the ventricles (left and right) at the bottom. The left ventricle pumps blood around the circulatory system. The blood returns from the body to the right atrium, which in turn pumps the blood into the right ventricle. The right ventricle then pumps the blood to the lungs. In the lungs, the blood gives out waste products, such as carbon dioxide, and takes in oxygen. The oxygenated blood then returns from the lungs to the left atrium, which delivers the blood into the left ventricle, to be pumped around the body again. 45 Each "heartbeat" actually consists of two beats: a contraction of the atria, followed very shortly thereafter by a contraction of the ventricles. The delay of a fraction of a second allows the blood pumped from the atria to fill the ventricles before the ventricles contract in a "wringer-like" way. This efficient natural rhythm is maintained and coordinated by regulated electrical stimuli provided by bundles of specialised cells (called nodes) located in the heart muscle. 46 The heart's natural pacemaker is the sinus or sinoatrial node ("the SA node"), a bundle of specialised muscle cells in the superior wall of the right atrium. The SA node sends an electrical signal both to the atria and to the ventricles. The signal to the atria causes them to contract immediately. However, the signal to the ventricles passes through the atrioventricular node ("the AV node"), which sits within the walls between the atria and ventricles. The AV node, another bundle of specialised muscle cells, delays the signal, causing the ventricles' contraction to be delayed by the required fraction of a second for efficient pumping. 47 Any damage, disease or abnormality affecting the heart system can cause an arrhythmia, that is a deviation from the normal heart rhythm. An arrhythmia that is slower than the normal rate is called a bradycardia, and an arrhythmia that is faster than the normal rate is called a tachycardia. Symptoms of bradycardia vary widely but include syncope (fainting), transient dizziness, fatigue, exercise intolerance and congestive failure. Arrhythmias can be detected on an electrocardiogram ("ECG"), a graphic representation of the electrical signal emitted by the cardiac tissue and recorded through electrodes placed on the patient's skin either side of the heart. Abnormalities of the conductive system of the heart can occur between the SA node and the atria, within the AV node and in the intraventricular conduction pathways. 48 The normal resting heart rate controlled by the SA node is around sixty to seventy beats per minute. However, even if no signal arrives from the SA node, the ventricles will contract, but at a slower than normal rate. This is because the AV node, and other bundles of cells further along the conduction pathway inside the ventricles, can supply their own electrical signals (but at a slower rate than the signal from the SA node). Indeed, each individual heart muscle cell can generate its own rhythmical electrical pulse and will beat at its own intrinsic pace if placed in a dish with oxygen and nutrients. The rate supplied by the AV node to the ventricles is usually about forty to sixty beats per minute, and the rate supplied by bundles further along than the AV node is usually about thirty to forty beats per minute. A rate of forty beats per minute or less may be insufficient to pump enough blood around the body to maintain consciousness. 49 The two most common diseases which affect the heart's natural rhythm involve either the SA node or the electrical conduction system within the atria and ventricles. When disease involves the SA node it causes a condition usually known as "sick sinus syndrome" or "sinus node dysfunction". Sick sinus syndrome can be asymptomatic, or manifested by symptoms associated with bradycardia, or by pauses in heartbeat. However, many patients with SA node problems have occasional tachycardia. If sinus bradycardia or sinus pauses produce significant symptoms, the insertion of a pacemaker is generally indicated. If the patient is asymptomatic, a pacemaker may still be warranted, for example where the heartbeat falls below forty beats per minute or there are sinus pauses exceeding three seconds during waking hours. 50 Atrioventricular block ("AV Block") or heart block occurs when the conduction of the electrical signal from the atria to the ventricles is impaired by damage, disease or abnormality. There are three types of heart block: first degree, where the signals get through, but are delayed; second degree, where some, but not all of the signals get through from the atria to the ventricles; and third degree, or complete, heart block, where none of the signals gets through (that is, no atrioventricular function). Second degree heart block can be either type I (Wenckebach) heart block, where the delay between atrial and ventricular contraction increases until a ventricular contraction is missed; or type II heart block, in which a ventricular contraction is missed after a fixed number of atrial contractions. The applicant in this case has second degree, type I (Wenckebach) heart block. 51 AV Block can be asymptomatic, but even then the degree of heart block may be sufficient to require the insertion of a pacemaker to prevent any future events. AV Block, if symptomatic, can require urgent pacemaker insertion due to severe bradycardia or cardiac standstill producing syncope or cardiac arrest. 52 Common conduction problems inside the ventricles are bifascicular and trifascicular heart block, which can progress to third degree heart block. These conditions can be asymptomatic, but can also produce symptoms of bradycardia or supraventricular arrhythmias.

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PACEMAKERS 53 As has already been indicated, a pacemaker is inserted in order to address chronotropic (electrical heart related) problems. Whether a pacemaker is to be implanted in a patient involves the exercise of clinical judgment. Sometimes implantation of a pacemaker may be indicated, on a temporary or permanent basis, even where the patient is asymptomatic. On the other hand, a pacemaker might not be implanted notwithstanding that the patient is experiencing significant symptoms. The main considerations to be taken into account include:

the underlying condition causing the conduction impairment (such as sick sinus syndrome, coronary disease and myocardial infarction);
the type and degree of the conduction problem; and
the severity of symptoms caused by the arrhythmia. 54 It is important to appreciate that the role of a pacemaker is only to support a failed or failing biological system. It does not treat the underlying medical condition, but rather corrects the arrhythmia being experienced by the patient. As Professor Chard remarked, a pacemaker is a man-made mechanical and electrical device, while the heart's conductive system is an intricate and powerful biological system. The former cannot replace the latter. 55 Pacemakers, such as the Tempo Pacemakers, are implantable devices that can generate an electrical impulse which is transmitted to the heart via the pacemaker leads, thereby causing the heart muscle to contract. A pacemaker is implanted under the skin in the upper chest near the collarbone, and is attached to one to three specially insulated wires ("pacing leads" or "J leads"). The leads are passed through an incision in a vein in the upper chest and fed through the vein into the right atrium and right ventricle. 56 The pacemaker consists of the pulse generator (which itself may be referred to as a "pacemaker"), and the pacing leads. The pulse generator contains a hybrid circuit, including a microprocessor, and a battery. The electronic circuitry produces the electrical impulses which are conducted via the pacing leads to the electrode tip at the end of the leads. This, in turn, carries the impulses to the heart, stimulating it to beat. 57 The battery is designed to be small and flat, so as to fit within the pacemaker case. In current model pacemakers, a lithium iodine battery is usually used. A typical pulse generator is very small, often less than 50 mm wide and 6 mm thick. The battery occupies between 50 and 70 percent of the volume of a pacemaker. 58 The pulse generator is hermetically sealed inside a titanium case. The Tempo Pacemaker case is roughly circular in shape, and has a diameter of 45 mm and a thickness of 8 mm. The seal is airtight and watertight, and cannot be broken without the device ceasing to operate. Accordingly, when it is time for a battery to be replaced, the entire pulse generator must be explanted and replaced. 59 Pacemakers may be single or dual chamber. A single chamber pacemaker can pace and sense in one chamber of the heart, while a dual pacemaker can pace and sense in both chambers. The choice between them depends upon a medical assessment of the patient's underlying condition and needs. Two of the four models of Tempo Pacemaker, numbers 1102 and 1902, are single chamber devices. The remaining models, numbers 2102 and 2902, are dual chamber devices. 60 Modern pacemakers have many functions, in addition to pacing the heart at a fixed rate. For example, the pacemaker can detect the electrical signal from the heart's inherent conducting pathway, and send a pulse to the heart only when it senses a problem with the intrinsic rhythm. Pacemakers can also be rate responsive, in that they can sense the patient's level of physical activity and adjust the pacing of the heart accordingly. Dual chamber pacing enables the contraction of the atria and ventricles to be synchronised, so that the paced heartbeat mimics a normal heartbeat. Dual chamber pacing is particularly helpful to patients with electrical conduction problems between the atria and the ventricles. Current pacemakers also include diagnostics and data logging features which record information on the functioning of the pacemakers themselves and on the patient's intrinsic rhythm. The physician or technician can communicate with the pacemaker via a specialised computer known as a programmer which "interrogates" the pacemaker. 61 In the case of Tempo Pacemakers, a programmer can be used to interrogate the Pacemaker to obtain a longevity estimate, that is (according to a manual): "a conservative estimate of the minimum number of months remaining until the pulse generator enters [end of life (EOL)] mode assuming 100 per cent pacing at the current settings". 62 In addition, the physician can estimate the longevity of Tempo Pacemakers by a "magnet rate" test. This shows, by reference to pulses per minute ("ppm") of output, what stage in the pulse generator's life has been reached. The stages, according to the Implant Manual for the Tempo Pacemakers are: 100 ppm Beginning of life ("BOL") Pulse generator may be implanted 100-85 ppm Standard operation Monitor pulse generator at standard intervals 82.5 ppm Elective replacement indicator ("ERI") Plan to replace the pulse generator at EOL 3 months remains at current settings before EOL indicator 80 ppm EOL. When first indicated, 6 months of operation remain at 63 ppm before end of service Replace pulse generator

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PACEMAKER DEPENDENCY 63 It appears that there is no generally accepted definition of pacemaker dependency. According to Dr Yiannikas, some definitions require a patient to be virtually asystolic (that is, in a state of cardiac standstill) without a pacemaker before the patient can be said to be dependent. Others define dependency as a state where failure of the pacemaker would result in significant symptoms, such as syncope. Dr Yiannikas himself said that "pacemaker dependency generally refers to patients in whom abrupt cessation of pacing may produce immediate and serious cardiac events, and where such categorisation allows pacemaker clinics and physicians to flag that subset of patients and respond more urgently." 64 Whatever the definitional difficulties, it was common ground that there is a wide spectrum of patients who have pacemakers implanted. At one extreme are those with complete heart block and an intrinsic heart rate of between 0 and 10 beats per minute. Patients in heart block would quickly be unconscious without the pacemaker and obviously would be at risk of death. At the other extreme are patients who suffer only very intermittent symptoms of bradycardia, such as dizziness or near syncope. Most patients are not dependent on pacemakers for their immediate survival. In these patients, if the pacemaker ceases to function for any reason, the intrinsic rhythm takes over the pacing of the heart. Nonetheless, some of those patients may suffer significant symptoms if the pacemaker ceases to function, including abrupt and serious syncope or persistent debility. If the degree of bradycardia is not overwhelming, the symptoms will be less severe but still may include fatigue, breathlessness, dizziness and increasing angina. Of course, as Professor Chard pointed out in his evidence, a pacemaker's abrupt cessation of function may create the risk of harm to a patient who is in a potentially dangerous situation at the time, such as driving a motor vehicle or operating equipment.

[12]

THE PROBLEM OF DENDRITIC GROWTH 68 It was common ground in the present case that the accelerated battery depletion affecting some of the Hazard Alert Pacemakers was the consequence of a short circuit between the solder terminals where the battery was soldered to the flex circuit. While there was a suggestion in some of the evidence that some of the bridges creating the short circuit in the affected Pacemakers may have been caused by poor soldering, it was also common ground (as the applicant put it) that "the fundamental short circuit problem was due to electrochemical dendrites". 69 The term "dendrite" is derived from the Greek word for tree and refers to a branch-like structure. The dendritic shape, which is quite ubiquitous in nature, tends to be formed by a diffusional process, namely the random movement of ions in a solution. In the present context, that means an aqueous ionic solution. An ion is a charged atom or molecule. 70 Dendrites can be observed under a microscope, but also can become visible to the naked eye. Electrochemical dendrites are usually thin and delicate because of the manner in which they are formed. Professor Hibbert explained the conditions necessary for electrochemical dendrites to form as follows: "1. Two electrodes with a sufficient potential difference between them to effect the reaction (about at least 1 V). 2. A conducting solution between the electrodes, containing ions of the metal to be plated. (An ion is a charged form of a species, for example Pb2+is the ion of lead which has two positive charges.) The solution is made conducting by any ions dissolved in water. These ions can be impurities such as chloride or sodium." If these conditions are fulfilled, dendrites will start growing immediately, although the rate of growth depends on the circumstances. If any one condition is absent, dendrites do not form. 71 The conditions referred to by Professor Hibbert were summarised and simplified by all the experts to three components, namely:

electrical bias;
moisture; and
ionic contamination. Of the three essential conditions for dendritic growth, there was no real dispute that the first two were present in the case of the Tempo Pacemakers. 72 First, electrical bias or voltage must exist in electronic circuitry. The bias, or difference in electrical potential, is between the opposite (positive and negative) terminals of the battery. 73 Secondly, so far as moisture is concerned, it must be borne in mind that, as Professor Hibbert explained, only a minuscule volume of water is required to provide the medium within which the ions can move. Dr Morris acknowledged that, although Pacesetter took careful steps to remove as much moisture as possible before sealing the can (including subjecting the devices to a "bake out" prior to sealing and filling the cans with inert gas), it is not possible to remove all moisture. Professor Hibbert was sceptical about whether any moisture could survive these processes, but neither party invited me to reject Dr Morris' opinion based, as it was, on the practical experience of manufacturing the Tempo Pacemakers. Indeed, the fact that dendritic growth appeared in the Tempo Pacemakers notwithstanding the procedures adopted by Pacesetter tends to supports Dr Morris' view. 74 The third condition is ionic contamination. It is here that there was some measure of disagreement as to the source or sources of ionic contamination. I shall return to this question later. 75 The dendritic growth observed in the Tempo Pacemakers occurred between one of the points of connection of the hybrid (the module bearing electronic circuitry that generates pulses and controls the device) to the battery and another point of connection. An electrical current flows around a circuit from the battery to the hybrid and back again. A conductive path constituted by the very small amount of moisture containing ionic contaminants (the aqueous ionic solution) extends between the two lines of the battery circuit. (In this connection, it must be remembered that the distances are very small. I was told that the gap between the conductive lines on a Tempo Pacemaker is 1.27 mm.) According to Professor Hibbert, the lead in the solder at the positive anode loses two electrons, which dissolve in the moisture and migrate as positive lead ions along the moisture path to the negative cathode. At this point they are converted back to metal and start or add to (as the case may be) the dendrite. Ultimately, unless interrupted, the build up will create a continuous path that completes the short circuit. Because the lead is conductive, electrical current from the battery circuit is diverted along the short circuit. (See the diagram reproduced [85] below.) 76 The conductivity of a circuit reflects resistance to the passage of current. The more current that can flow, the more quickly the circuit will deplete the battery. The conductivity of a dendrite is determined by the size and length of the path, bearing in mind that the path will not be constituted by a straight line. The thinner the dendrite and the longer the path, the lower the conductivity of the circuit that is thereby produced. Professor Hibbert, however, expressed the view that conductivity was not necessarily of great significance in determining the rate of battery depletion because a metal dendrite would have sufficient conductivity to create a circuit that would reduce the life of the battery. 77 After the dendrite has formed a bridge, thereby establishing a partial short circuit, it is not necessary for the three conditions required for dendritic growth to continue. So long as the battery runs, the short circuit will continue to operate, unless the bridge is fractured. Fracture may occur, for example, in consequence of a mechanical shock.

[14]

THE INVESTIGATIONS 80 As a matter of policy, Pacesetter encourages the return of all explanted pacemakers for laboratory examination and analysis. In about April 1998, Pacesetter became aware of a Tempo Pacemaker exhibiting the problem that was later the subject of the Hazard Alert - that is, early battery depletion and a resulting "no output condition". By July 1999, Pacesetter had received ten such devices. A more comprehensive investigation was then launched. The investigation was undertaken by Dr Morris, who was at the relevant time employed as Manager-Product Analysis and Reliability by St Jude Medical Inc in Sylmar, California facility. Dr Morris reported to Dr Khosravi, Vice President, Quality Assurance. Dr Khosravi was closely involved in the investigation and reviewed the work of Dr Morris and others. Dr Morris gave evidence. Dr Khosravi did not. 81 It is clear from the evidence that the task of isolating the cause of the problem proved extremely difficult. A variety of inquiries were undertaken but initially yielded no results. For example, in an attempt to ascertain the cause of the problem, the titanium can of some of the affected Tempo Pacemakers was cut open, using a high speed rotary cutting device. When that was done, the Pacemakers generally recovered both output and telemetry. In February 2000, a method was developed to open the cans in a way that minimised the mechanical disturbance to the contents. 82 Following this development, Dr Morris used an optical microscope to detect a minute bridge that had formed between the terminals or solder pads in the flex circuit. The flex circuit is a flexible insulated printed circuit used to connect the battery to the hybrid. The terminals or solder pads are only 0.25 mm apart. According to Dr Morris, many of the bridges were on the underside of the flex circuit, making them extremely difficult to see. The difficulty was compounded by the fact that the bridge was often covered by a white residue. 83 As a result of reviewing data relating to the no output Tempo Pacemakers, Dr Morris observed that all had been manufactured at Sylmar before January 1999. In March 2000, an accelerated life test was conducted on Tempo Pacemakers manufactured after 1998. The test seemed to confirm that no device manufactured after 1998 exhibited the problem of early battery depletion. 84 Initial analysis of the bridges observed by Dr Morris suggested that they were dendrites. The fact that dendrites are extremely thin and delicate was said to explain why the fault generally disappeared when, earlier in the investigations, the Pacemaker can had been cut open. The electrical pathway had simply been severed by the mechanical vibration and shock. (The evidence did not address whether and, if so, how the vibration could lead to a depleted battery being recharged.) 85 The effect of the bridge was to create an extra conductive path (a "partial short circuit") between the internal electrical connections of the affected Tempo Pacemaker. In other words, a circuit was made across a bridge that was formed between the solder pads, the points at which the copper conductive lines are connected to the battery terminals. This constituted an alternate and shorter circuit than the ordinary electrical circuit of the battery from the negative terminal to the hybrid and then back to the positive terminal. A diagrammatic representation (not, of course, to scale) of this effect was provided by Dr Brydon, as follows: 86 Dr Morris and his staff proceeded on the basis that of the three requirements for dendritic growth - electrical bias, moisture and ionic contamination - the first two were necessarily present in the devices. That was because, as already explained, electrical bias necessarily exists in electronic circuitry and it is inevitable, despite all precautions, that a small quantity of moisture will be present in all devices. It followed that the focus of the investigation had to be directed to locating the source of the ionic contamination. 87 One study initially suggested that the failed devices had a thin network of tin on the flex circuits. This led to a hypothesis, recorded as a memorandum of 15 May 2000 prepared by Dr Khosravi, that the root cause of the premature battery depletion was the presence of tin contamination in the flex circuits. A report prepared by Hi-Rel Laboratories established that flex circuits manufactured after December 1998 had traces of tin. Accordingly, Dr Morris concluded that the presence of tin in the flex circuits could not be the source of ionic contamination. 88 After considering various theories, inquiries concentrated on the solder that had been used in the production line. Solder is a low melting point alloy, commonly a 70:30 ratio of lead (Pb) and tin (Sn), used to form an electrically conducting point between one metallic component of a circuit board and another. The investigators ascertained that the solder which Pacesetter used when it commenced manufacturing the Tempo Pacemakers at Sylmar was different from the solder that Telectronics had used. Moreover, Telectronics had never experienced the bridging problem that Pacesetter had encountered. 89 The solder used by Pacesetter during the period until late 1998 was IF 14 solder supplied in a yellow spool and manufactured by Interflux NV Belgium ("yellow spool solder"). Pacesetter commenced using IF 14 solder supplied in blue spools by Interflux USA ("blue spool solder") in about late 1998. According to Dr Morris, operators had quickly shown a preference for the blue spool solder because, unlike the yellow spool solder, it did not leave a white residue. Dr Morris, upon reviewing the records, formed the view that production operators had more or less stopped using the yellow spool solder when the blue spool solder became available. He also concluded that Tempo Pacemakers manufactured after the yellow spool solder had ceased to be used had not failed in consequence of dendritic growth. 90 Armed with these discoveries, Dr Morris telephoned Mr Bruneel, a principal of Interflux USA which supplied the blue spool solder to Pacesetter. Mr Bruneel had previously been a partner in a Belgian business, Interflux Solder NV, which had supplied the yellow spool solder to Pacesetter. Mr Bruneel told Dr Morris that the two solders had slightly different chemistry in that the blue spool solder did not produce the white crystalline residue characteristic of the yellow spool solder. Mr Bruneel also said in that conversation that neither solder should have caused dendritic growth because they were both non-ionic and the residue from the yellow spool solder was non-conductive. 91 On 26 May 2000, Dr Morris travelled to Dallas to meet with Mr Bruneel. Dr Morris took with him a number of flex circuits from failed Tempo Pacemakers on which dendritic growth had been found. Mr Bruneel inspected the flex circuits using a hand held microscope. He identified a substance on the flex circuit that he described both to Dr Morris and in his evidence as a "moist residue". Mr Bruneel gave evidence that although he did no scientific testing, he was "pretty sure", based on his twenty-five years' experience, that this was conventional flux residue. Conventional flux is a compilation of ionic chemicals used to remove contaminants, usually oxides, from metallic surfaces prior to or during soldering. Mr Bruneel thought that the moist residue was likely to be a halide, probably a chloride or fluoride. He said in evidence that a halide flux should not be used in the process of manufacture in conjunction with the solder. 92 Upon his return to Sylmar, Dr Morris compared flex circuits that had not exhibited dendritic growth with flex circuits that had. He observed that the "moist residue" was not present on those flex circuits which had not exhibited dendritic growth. That prompted him to initiate a search for anything in the manufacturing area that might contain conventional flux. That search ultimately turned up a de-soldering wick which contained conventional flux. A de-soldering wick is used to remove solder from a connection that has previously been made. In order to remove the solder, the joint is heated and the de-soldering wick placed against the joint. The liquid solder is then absorbed by the de-soldering wick and can be removed. 93 According to Dr Morris, it was a "comparatively rare occurrence" for a de-soldering wick to be used in the manufacturing process for Tempo Pacemakers. Operators in the manufacturing area would visually inspect each solder joint after it had been completed. If the operator formed the view that it was not an optimal joint, the solder was removed using the de-soldering wick and the joint was re-soldered. This procedure was not regarded as "rework" for the purposes of Pacesetter's internal record-keeping. In particular, the "Traveler", which is the record of work carried out in relation to each Tempo Pacemaker, did not include any record of re-soldering carried out in this fashion. (Mr Bannon challenged Dr Morris on his evidence that re-soldering was not recorded on the Traveler, but I accept his evidence.) Accordingly, Pacesetter had no record as to which of the Tempo Pacemakers had been de-soldered using a de-soldering wick. 94 Since the de-soldering wick contained conventional flux (which is an ionic contaminant), it became clear to Dr Morris that some of the flex circuits for the Tempo Pacemakers must have come in contact with an ionic contaminant. The question still remained, however, as to why the cleaning process, which was designed to remove contaminants, both ionic and non-ionic, from the surface of the joint, had not removed all traces of the conventional flux. The answer that Dr Morris arrived at (which he supported in his evidence) was that, where the yellow spool solder was used, it left a tenacious crystalline residue. In Dr Morris' view, the residue was both non-metallic and non-ionic and thus could not cause or contribute to dendritic growth. Accordingly, he concluded (as he explained in his evidence) that: "if the solder joint was re-soldered, using the de-soldering wick, the crystalline residue from the yellow spool solder absorbed the flux from the wick. Despite swabbing the joint at the completion of the re-soldering process, the residue still retained some flux from the wick. This flux then provided the source of ionic contamination which allowed the dendritic growth to proceed". This view of the "most probable root cause" of the "failures" was recorded by Dr Khosravi in a memorandum of 30 May 2000, as follows: "'Active flux' residue from the solder-wick (cases of re-soldering) retained by fluxes of the crystallizing solder, forming significant ionic contaminants, that in the presence of very low levels of moisture (after vacuum bake) and voltage of 3.5 V are forming dendrites". 95 Dr Morris' ultimate conclusion was that dendritic growth would only occur in circumstances where the yellow spool solder had been used in conjunction with the de-soldering wick. Accordingly, Pacesetter informed the TGA in a letter of 7 June 2000 that "the solder used from the time that manufacturing transferred from Telectronics in 1997 until late in 1998 for attaching the battery to the flex circuit is susceptible to dendritic growth if the solder operation required re-work. Analysis has identified that an ionic contaminant can be introduced during the re-soldering process, which can then act to promote dendritic growth".

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THE HAZARD ALERT 96 On 20 March 2000, Mr Braico, the General Manager of Medtel, recorded in an internal email that the "Tempo failure rate has now reached an unacceptable level". Shortly after this, the Royal Prince Alfred Hospital in Sydney experienced a failure of a Tempo Pacemaker and sent the unit directly to the TGA. 97 On 27 March 2000, Pacesetter halted the supply of Tempo Pacemakers. On 5 April 2000, Medtel followed suit, perhaps anticipating a recommendation made by the TGA a week later that supply of the product be halted until the cause of the failure had been determined. By 1 May 2000, Medtel had withdrawn supplies from hospital stocks. 98 On 25 May 2000, a teleconference took place involving representatives of the TGA, including Professor Hughes, in his capacity as Chairman of the Therapeutic Devices Evaluation Committee, an advisory body to the TGA. Later that day, the TGA advised Pacesetter and Medtel that the evidence was sufficient to indicate a "Recall/Hazard Alert" of all Tempo Pacemakers distributed prior to January 1999. The TGA requested that such an alert be initiated by 1 June 2000 at the latest. Clearly enough, this advice carried considerable weight since the TGA has power to cancel goods from the Australian Register of Therapeutic Goods and to require that steps be taken to recover cancelled goods that have been distributed: Therapeutic Goods Act 1989 (Cth) , s 30(1), (2)(a), (b). 99 On 5 June 2000, the Hazard Alert was issued by the TGA to relevant clinicians and hospitals. The Hazard Alert advised that the "sponsor", identified as Medtel, would distribute Hazard Alert letters to clinicians and hospitals. On the same date, Medtel sent a letter under the heading "Hazard Alert" to hospitals and doctors whose patients were recorded as having had a Tempo Pacemaker implanted. Medtel's letter contained the following recommendations: "Clinicians are advised to review patients and evaluate pacemaker function. For patients who are pacemaker dependent, consideration should be given to explantation and replacement as soon as practicable. For patients who are not considered pacemaker dependent, clinical consideration should be given for replacement where any abnormal function is identified (such as no output, loss of telemetry, or premature end of life indication)." As already noted, the TGA's Hazard Alert stated that it had been issued due to an increased risk of early battery depletion and a resulting no output condition. The failure mechanism identified was a potential short circuit at the site of the battery/hybrid connectors. Medtel's letter contained a similar statement. 100 The Hazard Alert was expressed to include Models 2102, 2902, 1102 and 1902, serial numbers OU6100663 to OU6227334. As Dr Morris explained, the start of the serial number range was determined to be the date the first device was manufactured at the Sylmar facility (March 1997). The cut-off date was 31 December 1998, since Dr Morris believed that no yellow spool solder would have been used in the manufacture of Tempo Pacemakers after that date, after allowing a margin for possible error. As already explained, only about ten per cent of the serial numbers identified in the Hazard Alert represented Tempo Pacemakers implanted in Australia. The bulk of the Tempo Pacemakers bearing those serial numbers had been implanted into patients in countries other than Australia. 101 A letter apparently sent by Pacesetter to doctors shortly after the Hazard Alert stated that the condition (premature battery depletion), to that time had occurred in 0.6 per cent of devices in the defined population, but that engineering analysis and modelling suggested that it could occur in up to 2.6 per cent of devices over the first five years of service. Pacesetter's letter stated that if the doctor elected to replace the Tempo Pacemaker, St Jude Medical would honour the terms of its warranty for replacement purposes and, in addition, pay up to $800 of the patient's unreimbursed medical expenses. Dr Fain gave evidence that Pacesetter's warranty included up to $2,000 of unreimbursed medical expenses associated with the replacement procedure. The evidence did not explain the apparent minor discrepancy in the amount of compensation available under the warranty.

[16]

THE HAZARD ALERT PACEMAKERS AND YELLOW SPOOL SOLDER 102 Until the latter part of the respondents' final submissions it seemed to be common ground that all, or virtually all, the Hazard Alert Pacemakers had been manufactured using the yellow spool solder. Accordingly, to that point it was common ground that the applicant's Pacemaker had been manufactured using the yellow spool solder and not the blue spool solder. 103 As the argument developed, it became clear that the question of whether or not yellow spool solder had been used in the manufacture of the Hazard Alert Pacemakers might be significant in determining the applicant's claim that those Pacemakers were not of merchantable quality or were unfit for their particular purpose. As will be seen, the applicant submitted that each of the Hazard Alert Pacemakers was not of merchantable quality or fit for its purpose precisely because it had been manufactured with the yellow spool solder thereby creating a superadded risk of dendritic growth and, consequently, of premature failure of the device. In order to counter this submission, Mr Walker somewhat belatedly invited me to find that "a number (probably many)" of the Hazard Alert Pacemakers had been manufactured using the blue spool solder and that the applicant's Pacemaker had probably fallen within this category. If these findings were made, it would seem to follow that the applicant's Pacemaker was not subject to any superadded risk of premature failure. 104 In support of this contention, Mr Walker relied on evidence given by Dr Morris that when the blue spool solder had first become available for use on the production line, the operators quickly exhibited a preference for using it rather than the yellow spool solder. Mr Walker also relied on an internal document of 30 May 2000 which recorded that Pacesetter had purchased significant quantities of blue spool solder as early as February 1998, of which little apparently remained in stock by May 2000. Mr Walker suggested that this document indicated that Pacesetter had an abundance of blue spool solder in use by 27 October 1998, the date on which, according to the relevant Traveler, the battery was attached to the flex circuit of the applicant's Pacemaker. Since the operators preferred blue spool solder to the yellow variety, so Mr Walker argued, the probabilities were that only the blue solder was used in the manufacture of the applicant's Pacemaker. 105 I do not find these submissions persuasive. The very document relied on by Mr Walker stated that yellow spool solder had been used "until late 1998". Other documents are to the same effect. For example, a letter of 14 June 2000 from Pacesetter to the FDA recorded the following: "Our investigation has indicated that the solder used from the time that manufacturing transferred from Telectronics in 1997 until late in 1998 for attaching the battery to the flex circuit is susceptible to dendritic growth if the solder operation required rework…. Solder that has been used in Tempo manufacturing since late 1998 does not show the tendency to contribute to dendritic growth. The serial number range listed in the notification corresponds with the utilization of the solder susceptible to dendritic growth…. As stated earlier, this solder was last used by production personnel in late 1998 and in order to be conservative and provide ourselves with additional margin, we have used a date of January 1999 to bound the potentially affected devices." (Emphasis added.) An internal document prepared by Pacesetter on 15 June 2000 includes this question and answer: "15. Does this problem occur only in devices manufactured during a specific time period? The vast majority of the affected devices were manufactured in 1997 to 1998. The new solder was incorporated in late 1998 to early 1999 and has been used since." Dr Fain confirmed in his cross-examination that he still believed this answer to be correct. 106 The documentary evidence also shows that Pacesetters used the blue spool solder for purposes other than the manufacture of Tempo Pacemakers. This would explain the purchase and use of that solder before the end of 1998. In other words, whatever use Pacesetters made of the blue spool solder earlier in 1998, it was not until late 1998 or early 1999 that it was used in the manufacture of Tempo Pacemakers. 107 Moreover, it must be borne in mind that Dr Morris erred in his assumption that a "cut-off date" of 31 December 1998 for the worldwide advisory was safe. (Pacesetters kept no records of whether blue or yellow spool solder was used in the manufacture of particular Pacemakers.) In fact, as will be seen, a number of devices manufactured at Sylmar after 31 December 1998 subsequently failed by reason of premature battery depletion. It can be inferred that they were manufactured using yellow spool solder, notwithstanding the availability of blue spool solder by the beginning of 1999. Accordingly, Dr Morris' "margin for error" was inadequate. This suggests that the transition from yellow spool solder to the blue variety took place later than Dr Morris and others in Pacesetter had assumed. 108 On the evidence, I cannot exclude the possibility that a small number of Tempo Pacemakers manufactured towards the very end of 1998 used the blue spool solder. However, I am satisfied that the vast majority, if not all, of the Hazard Alert Pacemakers were manufactured using the yellow spool solder. It is true that the applicant's Pacemaker was manufactured towards the end of October 1998. But at that time the year still had over two months to run. The vague statements in Pacesetter's documentation do not constitute a reliable basis for concluding that the yellow spool solder had not generally been used in late October 1998. Moreover, Pacesetter kept no records that would have identified the solder used in the manufacture of each device. In these circumstances, I am satisfied on the balance of probabilities that yellow spool solder and not blue spool solder was used in the manufacture of the applicant's Pacemaker.

[17]

THE CONTENTIONS 109 It is a somewhat curious feature of this case that it was not until the applicant's affidavit evidence in reply was filed that the parties differed as to what was described in argument as the "root cause" of the premature depletion of the batteries in some of the Hazard Alert Pacemakers. While the competing hypotheses became clearer as the case developed, it was less clear whether the differences between them had any significance for the legal issues. Indeed, in the course of final submissions the differences between the parties once again seemed to recede. Nonetheless, it is appropriate that I should record my findings. 110 There was substantial agreement between the parties as to the following: (i) The Hazard Alert Pacemakers were at greater risk of failing by reason of accelerated battery depletion than Tempo Pacemakers manufactured outside the period covered by the Hazard Alert. (As already noted, the Hazard Alert Pacemakers, being Tempo Pacemakers which were implanted in Australia, were not the only Tempo Pacemakers manufactured by Pacesetter during the relevant period.) (ii) The accelerated battery depletion was the consequence of partial short circuits forming between the solder pads or terminals where the flex circuit was soldered to the battery terminals. (iii) The short circuits were created by the formation of electrochemical dendrites. (iv) The problem of increased risk of failure by reason of premature battery depletion was confined to Tempo Pacemakers that were manufactured using the yellow spool solder. That solder produced a white crystalline residue after soldering by a process that Mr Bruneel described as a "form of condensation" resulting from differences in temperatures around the solder joint. The residue had the capacity to trap ionic contaminants and, as Mr Bruneel said, could be extremely difficult to remove. (v) For dendritic growth to occur, three factors must be present, namely electrical bias, moisture and ionic contamination. When those three conditions are present dendritic growth must occur. (vi) In relation to the Hazard Alert Pacemakers, the condition of electrical bias was satisfied, since electrical bias inevitably exists in electronic circuitry. The second condition, moisture, was also satisfied since the respondents accepted that, despite the measures taken by Pacesetter to remove moisture from the flex circuit, it was inevitable that some moisture would remain. (vii) The remaining question was therefore the source of ionic contamination that allowed the dendritic growth to occur. 111 The respondents' position, based on the evidence of Dr Morris, was that the source of ionic contamination in the affected Tempo Pacemakers was conventional flux in the de-soldering wick (de-soldering being necessary in those cases where the joint had to be re-soldered). According to this hypothesis, the use of yellow spool solder in the manufacture of Pacemakers from March 1997 to 31 December 1998 produced the crystalline white residue, which trapped the conventional flux from the de-soldering wick. Mr Walker, as I understood him, invited me to find that the increased risk of failure through accelerated battery depletion was due solely to use of the yellow spool solder in combination with the use in some cases of the de-soldering wick, although he seemed to recognise ultimately that this was a difficult submission to maintain. 112 The applicant submitted that there were two much simpler and more probable sources of ionic contamination. First, Mr Bannon relied on evidence suggesting that sources of ionic contamination are commonplace in the process of manufacturing pacemakers. Such sources include the flex circuits themselves and carbonic acids, derived from carbon dioxide in the air, that can form in water. Mr Bannon submitted that the evidence justified a finding that the white residue from the yellow spool solder had a propensity to trap any lurking ionic contaminants and to inhibit the cleaning process. Accordingly, so he argued, it was likely that the white residue trapped the ambient ionic contaminants and led to the dendritic growth that, in turn, caused the short circuits. The second possible source of ionic contamination identified by Mr Bannon was the white residue itself. 113 Mr Bannon also suggested that there were other possibilities. These included the introduction of contamination by the cleaning process itself and (at least at one stage of the hearing) that tin on the flex circuits may have contributed to the partial short circuits.

[18]

THREE SIDE ISSUES 114 Before addressing these submissions, three side issues should be mentioned. First, shortly before the hearing, the respondents produced documents indicating that nineteen Tempo Pacemakers manufactured after 31 December 1998 had been returned because of premature battery depletion. In all but one of these cases, however, the device had been manufactured on or before 24 February 1999, that is, within two months of the "cut-off date" determined for the purposes of identifying Pacemakers covered by the Hazard Alert. None of the nineteen returned Tempo Pacemakers manufactured after 31 December 1998 had been implanted into patients in Australia. The time between implant and failure of these devices varied between 1.5 and 3.3 years. 115 On the face of it, the fact that a number of Tempo Pacemakers manufactured after 31 December 1998 experienced premature battery depletion might seem to cast doubt on the theory that the sine qua non for a higher risk of failure through premature battery depletion was the use of the yellow spool solder in the manufacturing process. In my opinion, however, the additional cases of battery depletion simply indicate that Dr Morris erred in his assumptions that use of the yellow spool solder had completely ceased by 31 December 1998 and that it was therefore safe to choose that date as the "cut-off" for the Hazard Alert. 116 This inference is supported by an internal Pacesetter document prepared on 31 May 2000 recording that the blue spool solder had been used as from "late 1998/early 1999". The document suggests that the yellow spool solder probably continued in use, at least in some cases, after December 1998. If this were so, it would explain the instances of premature battery depletion occurring in Tempo Pacemakers manufactured in early 1999. Furthermore, as Dr Morris pointed out in his evidence, if the root cause of the premature battery depletion did not involve yellow spool solder, devices manufactured after February 1999 would have continued to exhibit rates of failure similar to those experienced by the Hazard Alert Pacemakers. There is nothing in the evidence to suggest that more recently manufactured Tempo Pacemakers have in fact experienced similar rates of premature battery depletion. 117 Secondly, Mr Bannon spent some time in cross-examination pursuing the composition of what were described in some documents as "droplets" on the surface of the failed Pacemakers. Tests of the "droplets" showed that they were not ionic, but contain carbon and hydrogen and so were organic. Dr Morris' evidence was that the droplets were different from the "moist substance" that he had seen between the terminals. I accept his evidence on this issue and, indeed, I did not understand Mr Bannon ultimately to challenge it. Accordingly, the evidence relating to the composition of the droplets can be put to one side for present purposes. 118 Thirdly, two of the applicant's witnesses, Dr Brydon and Professor Hibbert, pointed out that Hi-Rel Laboratories and MicroJoining Solutions had referred to instances of solder bridging appearing as a "lumpy formation", as distinct from the web-like morphology characteristic of dendrites. Dr Brydon and Professor Hibbert expressed the view that what the latter described as "massive bridges" could not have been formed by the same electrochemical processes that produced the dendrites. Dr Brydon suggested that the lumpy formations or massive bridges had been caused by faulty soldering techniques or, alternatively, defects in the manufacture of the circuit boards. He also suggested that some of the observed solder bridges could have had a non-electromigratory provenance. By implication, if not expressly, Dr Brydon could be taken as suggesting that poor soldering or defects in manufacture caused the battery depletion that resulted in the premature failure of some of the Tempo Pacemakers 119 Dr Morris rejected Dr Brydon's hypothesis. Dr Morris accepted that some flex circuits on the failed Pacemakers exhibited the "massive bridges" morphology. He explained, however, that prior to completion of the manufacturing process, the Tempo Pacemakers undergo a test of battery impedance. In order to pass that test, the pacemaker was required to have a battery impedance of less than 600 ohms (a reading of 600 ohms indicates that about ten percent of the total capacity of the battery has been expended). Dr Morris said that, if a short circuit had been created by a massive solder bridge of low contact resistance, the level of battery impedance would rise rapidly to a level above 600 ohms and the voltage delivered by the battery to the circuit would fall below the minimum threshold and the device would not function. Dr Morris said that even if the short circuit was of a higher contact resistance, there would still have been premature battery depletion which would have been detected prior to implantation. 120 Dr Morris' evidence on this issue, although perhaps not answering all questions that might have been raised about the role played by the massive bridges, was not challenged. I therefore accept that the premature battery depletion experienced by some of the Tempo Pacemakers was not caused by massive bridges resulting from poor soldering technique or defective manufacture of the circuits.

[19]

THE SOURCES OF IONIC CONTAMINATION 121 It follows from what I have said that I am satisfied that the use of the yellow spool solder in the manufacturing process was the sine qua non of the phenomenon of premature battery depletion resulting from partial short circuits that affected some Hazard Alert Pacemakers. Surprisingly, however, the evidence as to the source or sources of the ionic contamination was less than conclusive. I use the word "surprisingly" because one might be forgiven for thinking that an issue of such importance for patients who depend, to a greater or lesser extent, on functioning pacemakers for their health and, perhaps, for their very lives, would have been resolved definitively by the investigative process undertaken by Pacesetter. Such is not the case. 122 I have referred to the applicant's theory that the two most probable sources of ionic contamination were ambient ionic contaminants or the white residue itself. Ultimately, Mr Bannon seemed to modify this contention. As I understood him, he did not dispute that the de-soldering flux constituted an ionic contaminant and that the presence of this flux would explain some cases of premature battery depletion. In other words, he accepted that the de-soldering flux was onesource of ionic contamination that would have led to dendritic growth in some Tempo Pacemakers. He submitted, however, that, on the balance of probabilities, I should find that this was not the only source of ionic contamination producing dendritic growth in Hazard Alert Pacemakers. He relied on a number of factors to support this contention. 123 First, Mr Bannon pointed out, correctly, that Pacesetter had not proved by tests or experiments that what Mr Bruneel identified as the "moist residue" came from a conventional flux product such as the de-soldering flux. Dr Morris did not ask Mr Bruneel to undertake any tests to confirm the latter's view that the "moist substance" that he identified on the units he examined was a halide. Yet Mr Bruneel said in evidence that the test to determine whether the substance was indeed a halide was very simple. 124 Pacesetter, as might be expected, instigated tests designed to compare the "moist residue" with the conventional solder flux which was thought to be the culprit so far as dendritic growth was concerned. Dr Morris accepted, however, that the tests carried out by Pacesetter or Hi-Rel on its behalf had been "inconclusive". In other words, Pacesetter had been unable to prove that the moist substances had in fact been derived from conventional flux. Dr Morris suggested in his evidence that the reason for the tests being inconclusive may have been that the substance being tested was unstable. He admitted, however, that this explanation was "speculation". 125 Secondly, Dr Morris acknowledged in his affidavit that his opinion, to the effect that dendritic growth would only occur in circumstances where the yellow spool solder had been used in conjunction with the de-soldering wick, had not been "conclusively established". He went further in cross-examination, agreeing that his opinion could be described as an "hypothesis" for which the testing had provided no analytical support. Dr Morris also acknowledged that the problem he had been asked to investigate was one that he had not previously encountered and that he himself lacked expertise in the causes of dendritic growth. Moreover, he agreed that he was not sufficiently familiar with conventional flux residue, as opposed to non-ionic flux residue, to distinguish between them. 126 Thirdly, the instructions given to those inspecting the failed devices on behalf of Pacesetter did not specifically require them to determine whether any moist substances could be observed on the failed flex circuits. They were told to look for any kind of bridging between the terminals, but were not asked to identify the precise nature of the bridging material. 127 Fourthly, on Pacesetter's hypothesis, the source of the ionic contaminants was a de-soldering procedure in respect of which the corporation kept no records. There was therefore no documentary evidence as to the proportion of Tempo Pacemakers subjected to the use of a de-soldering wick. Pacesetter's internal report of 31 May 2000 estimated that the "subset of Tempo devices which [had] been re-soldered" was approximately 1 to 2 percent of all units. This estimate, however, is lower than the proportion of Hazard Alert Pacemakers apparently affected by premature battery depletion in consequence of partial short circuits. 128 Fifthly, as Mr Bannon pointed out, it was an essential part of the respondents' hypothesis that the white residue from the yellow spool solder formed a trap for ionic contaminants. Dr Morris accepted as much in his evidence. Mr Bannon submitted that this characteristic of the residue made it more likely that the ionic contamination, at least in some cases, came from ambient sources such as the flex circuits themselves or carbonic acid in water. Mr Bannon also directed attention to evidence indicating that the white residue was (in words with which Dr Morris agreed) "practically impossible to clean". Mr Bannon's point emerged clearly from a passage in Dr Morris' cross-examination: "If you had joints which were soldered using a white residue which was very difficult to remove and acted as a trap for ionic contamination the potential for properly cleaning ionic contamination out of such a residue, or at the least the potential for not doing it effectively, was very great?---The potential existed. Just to make it clear, in other words in each of the cases where the yellow solder was used you accept essentially there was a difficult white residue which couldn't be removed; correct?---Yes. Do you also accept that it formed, in effect, a trap for ionic contamination?---Yes. Its very existence made it very difficult to clean?---Yes. All cleaning processes involved the removal of almost ubiquitous ionic contamination?---Yes." 129 Mr Walker answered, convincingly in my view, the more speculative suggestions advanced on behalf of the applicant. In particular, I am not satisfied on the balance of probabilities that ionic contaminants were introduced into any of the Hazard Alert Pacemakers by the cleaning process itself. Obviously, the possibility cannot be ruled out since the use, for example, of a dirty brush to clean the soldered joints could introduce ionic contaminants. But in the absence of evidence that dirty brushes or other faulty procedures were in fact used, I do not think that I can conclude on the material presently before me that defective cleaning was the source of ionic contamination in any of the cases. I also think the evidence does not permit me to conclude that tin played any part in the growth of dendrites in the Tempo Pacemakers. 130 On the other hand (if it matters) I think the probabilities are against the respondents' contention that the source of ionic contamination that allowed the dendritic growth to occur was confined to conventional flux from de-soldering wicks. As Dr Morris acknowledged, there were other potential sources of ionic contamination that could have been attracted by the white residue which frequently resulted from the use of the yellow spool solder. These included ambient ionic contamination found on the flex circuits themselves and in carbonic acid dissolved in water. Moreover, Mr Bruneel's evidence was that although the active volatile ingredient in the residue was non-ionic, the residue itself could be "very slightly" ionic, depending on whether it was applied in a less than ideal manner. 131 In my opinion, the circumstances identified by Mr Bannon make it unlikely that the dendritic growth affecting Tempo Pacemakers occurred exclusively when ionic contamination was introduced by the use of de-soldering wicks. The potential for other sources of ionic contamination to be "trapped" by the residue was simply too great to reach that conclusion, particularly having regard to the inconclusive nature of the investigations undertaken by Pacesetter. Although Dr Brydon made some concessions in cross-examination, his evidence does not suggest otherwise. I appreciate that on this issue, the applicant bears the onus and that the evidence is in many respects incomplete. I am, however, satisfied that at least some cases of dendritic growth in the Tempo Pacemakers involved a source of ionic contamination other than the conventional flux introduced by the use of de-soldering wicks. 132 Nonetheless, the evidence does not permit me to draw any conclusion as to the proportion of cases in which the source of ionic contamination was ambient contamination or the residue itself (as distinct from the conventional flux). All that can be said is that the probabilities are that in some cases the ionic contamination came from these sources.

[20]

"BACKGROUND" FAILURE 133 Pacemakers have a finite life. All pacemakers will therefore ultimately "fail" if left in situ long enough. However, the concept of "premature battery depletion" and that of "premature failure" imply that a particular device has ceased to function earlier than it should. As Dr Yiannikas explained, clinicians consider that pacemaker failures fall within two distinct categories: "Failure of a device in a way that allows us to manage the patient without risk in the predictable and well organised manner is certainly failure but it's a failure that we've come to expect, the patients expect it and we deal with it and we have extraordinarily well oiled pacemaker clinics and facilities that provide superb follow up to achieve the appropriate result. Failure of another type where, yes, there is a certain incidence of an abrupt problem of some sort, whether it's with the leads or with the pacemaker box, is a different kettle of fish and that failure whilst there is a frequency there is a figure that you can place depending on the failure and that is another issue. If there is a frequency of an abrupt failure that particular failure is a major event". 134 All the medical experts agreed that pacemakers and other implantable electrical cardiac devices can fail unexpectedly. For this reason clinicians receive hazard alerts relating to such devices from time to time. A passage in Dr Murdock's evidence reflected the general view: "And the literature, be it commercial put out by manufacturers or be it peer reviewed medical literature includes from time to time various time grouped reliability, longevity, survival probability figures for various devices, is that correct?---That's true. To attempt a very broad generalisation over say the last ten to fifteen years, in relation to cardiac pacemakers, by and large longevity or reliability figures at around the five year level, could be described as being mostly in the high 90 percent, is that right?---Yes. The fact that pacemakers in general, in your experience at say five years have survival probabilities in the high ninety percent rather than all of them absolutely 100 percent is not remarkable at all to you, is it?---No. You would not be deterred simply by a statistic which showed that there had been some failures of a particular model before say five years, would you?---It depends on the level of failure, really." 135 Mr Walker in his cross-examination of Dr Murdock and other medical witnesses did not seek more precise information as to what might be described as the background failure rate that clinicians regard as acceptable (in the sense of a more or less irreducible minimum). Nor did the applicant's experts address this question in their affidavits or reports. Professor Chard, however, did give some information. In his affidavit, Professor Chard observed that with technological advances "pacemakers are extremely reliable and effective in the treatment of a range of bradycardic conditions", although he acknowledged that pacemakers can fail for many reasons. His oral evidence included the following passage: "So that your view in dealing with pacemakers is there is a background random risk of failure of a pacemaker in terms of any complex device would fail, is that right?---Exactly. And it's acceptable to acquire and implant such a pacemaker taking into account that level of risk?---Yes. And that's an informed decision you can make on those terms?---Yes. … HIS HONOUR: Professor Chard, are you able to quantify what you described as the underlying risk associated with pacemakers in, say, 1998, 1999, the risk of failure?---The risk of overall failure for all causes: its very difficult to get from the literature. I would suspect it would be in the order of one in 200, one in 100. It depends on the patient population you are dealing with because there are many patient related factors which add up to the same problem that a patient turns up with a pacemaker that is not working. But, yes, there is an incidence of late failure for various reasons which is unpredictable and that incidence is seen in clinical practice on a regular basis. It's that sort of incidence, it's one in hundreds, not thousands, or tens of thousands. And the failure to which you refer includes the device simply stopping to work without prior warning?---Yes, that does occur. We see patients with lead fractures, for instance. We see a range of other electrical and patient related factors, if they have a myocardial infarct, an infarct of a heart that's being paced. It will stop working. There is a range of reasons why these things fail."

[22]

138 As this table indicates, the proportion of 5.5 per cent for Australia is calculated by reference to the total number of Hazard Alert Pacemakers, not by reference to those returned. If the proportion is calculated as a percentage of devices returned, it is about 10.0 per cent. Dr Fain acknowledged that

he could say nothing about the failure rate of Hazard Alert Pacemakers that had not been returned for examination other than that most had not been explanted; and
the number of known cases of dendritic growth did not include all possible cases, for example among those Pacemakers that had been returned but not cut open (because they appeared to be working) or among Pacemakers that had been implanted in patients who later died but whose devices had not been returned for examination. It follows that Dr Fain's figures must be taken as minimum estimates of the proportion of Tempo Pacemakers exhibiting dendritic growth. The likelihood is that the actual proportions are higher, although the evidence does not permit a finding to be made of the "true" rate. 139 It will be seen from Dr Fain's table that the percentage of devices returned, as well as the percentage of returned devices exhibiting dendritic growth, are higher in Australia than elsewhere. There was no evidence to suggest that the Tempo Pacemakers exported from the United States to Australia were manufactured in such a way or subject to influences that made them more susceptible to dendritic growth than other Tempo Pacemakers covered by the world-wide advisory. As Dr Fain acknowledged, there are many differences in the hospital systems, public health funding and clinical practices among various countries that might account for the variations. 140 Dr Brydon gave evidence as to failures experienced by the Hazard Alert Pacemakers. He examined fifty-nine "Product Analysis Reports" discovered by the respondents each of which (according to the letter of instructions from the applicant's solicitor) related to a Tempo Pacemaker explanted from group members in the proceedings. Dr Brydon gave evidence, without objection, of the results of his analysis although the reports themselves were not tendered. 141 Dr Brydon concluded that 42 of the reports identified Tempo Pacemakers that had demonstrated no output by reason of foreign material contaminating the flex circuit within the device. A further 15 reports identified Tempo Pacemakers that experienced abnormal operation attributable to contamination of the flex circuit. Dr Brydon considered that the remaining two reports concerned devices that had not failed. On the assumption that the total number of Hazard Alert Pacemakers was 1,055 (the actual figure seems to have been 1,048), Dr Brydon calculated that the proportion of no output failures due to flex circuit contamination was 3.9 per cent (42 of 1,055) and the proportion of abnormal operations due to the same cause was 5.4 per cent (57 of 1,055). 142 Dr Brydon was cross-examined on this aspect of his evidence. The cross-examination revealed only one probable error, namely a report of a Tempo Pacemaker explanted in China which the applicant's solicitors apparently assumed was subject to the Australian Hazard Alert. No other errors were suggested or demonstrated. Indeed, as Dr Brydon explained, he had merely examined the notations recorded by Pacesetter's staff and tabulated the results. His evidence is consistent with that of Dr Fain and, subject to the qualification I have noted, I accept it. 143 Dr Brydon's analysis of other discovered documents showed that devices frequently failed without advance warning. On the basis of his examination of Pacesetter's documents, Dr Brydon attributed the lack of warning in such cases primarily to
the battery depletion rate being sufficiently rapid to reach a non-functional state prior to the first scheduled monitoring or between scheduled check-ups; and
the unreliability of the longevity measurement displayed by the Pacemaker when interrogated, leading it to show erroneously a long remaining life. There is nothing to contradict this evidence.

[24]

EXPECTATIONS 146 Pacesetter's user's brochure entitled "About Your Pacemaker", a copy of which was read by the applicant prior to the implantation of his Pacemaker, stated that "[i]n general, pacemakers last anywhere from 2 to 10 years - on the average, about five years. Pacemaker longevity depends upon how hard the battery inside the pulse generator has to work…. Pacemaker batteries usually do not stop suddenly…". The manual also stated that "[p]acemakers are extremely dependable devices", but stressed the importance of periodic checks to ensure that the particular device is functioning properly. 147 Other documents paint a somewhat different, or at least more complete, picture. A tender submitted by Medtel in September 1999 to the South Eastern Sydney Area Health Service for the supply of Tempo Pacemakers stated that the "projected longevity" for Tempo Pacemakers models 1902 and 1102 was 11.1 years, while that for models 2102 and 2902 was 8.5 years. A table in an Implant Manual for models 2102 and 2902 gave "extended service life estimates [at] 100% pacing". The "minimum mean longevity" of the devices was said to be 5.28 years. That estimate was accompanied by a statistical measure described as "Longevity -3 sigma (years)", which was recorded as 4.86 years. Dr Brydon interpreted this measure as meaning that the chances of a unit having a life less than 4.86 years were 0.135 per cent, or one in 740, assuming that the probability curve followed a normal distribution. The accuracy of Dr Brydon's interpretation of the table was not challenged. Nor was it suggested that the assumption concerning the probability curve was misplaced. 148 Dr Yiannikas said that he would expect modern physiological dual chamber pacemakers to last six to eight years, depending on the extent of usage and the pacemaker settings required. Professor Chard said that in general he would expect a pacemaker to operate for between six and ten years, although he acknowledged that the precise lifetime would depend on many patient related factors. Both Dr Yiannikas and Professor Chard expected pacemakers to have a predictable decline in battery life and to have observable triggers that indicate the time for pacemaker box replacement. Professor Chard, not surprisingly, said that he would not expect pacemakers to be manufactured in such a way as to increase the chances of a short circuit occurring.

[25]

IMPLANTATION OF THE PACEMAKER 149 The applicant was born on 8 July 1932. He is now retired. He lives with Mrs Courtney, who is also retired. 150 The applicant has a long history of ischaemic heart disease. In 1983 he had coronary by-pass surgery, in Wellington, New Zealand, and in 1993 he had repeat bypass surgery in Melbourne. He has been diagnosed as having residual ischaemia and left ventricular dysfunction, meaning that the heart muscle does not function satisfactorily. 151 The applicant was admitted to Geelong Hospital in July 1999 after an episode of breathlessness. He was diagnosed by the Cardiology Registrar, Dr Purnell, as having second degree type I (Wenckebach) heart block, with slow ventricular rate at rest, a resting intra-ventricular conduction delay, impaired left ventricular systolic function and ischaemic heart disease. The diagnosis was confirmed by the consultant cardiologist, Dr Murdock. The applicant was told that surgery was required to unblock his carotid artery. 152 Dr Murdock recommended that the applicant should have a pacemaker implanted prior to his surgery. The recommendation was related to his underlying progressive condition, which increased the risks of the carotid surgery and, in the longer term, contributed to symptoms from his ischaemic heart disease and impaired left ventricular systolic function. The applicant relied on Dr Murdock's recommendation. He also relied on the doctors to select an appropriate pacemaker. 153 Dr Murdock selected a Tempo Pacemaker model number VR 1102 as appropriate to be implanted. Although Geelong Hospital carried a number of different brands, Dr Murdock had no particular reason for selecting the Tempo Pacemaker, beyond the fact that it was a single-chamber pacemaker that would serve the desired purpose. Dr Murdock believed that all models carried by the hospital at the time were of similar reliability and longevity. He understood that cardiac pacemakers were not infallible. Dr Murdock said that whether he would have been deterred from using a particular model by a statistic which showed that the model had experienced some failures within, say, five years of implantation would depend on the level of failure. 154 Medtel imported the Pacemaker later implanted into the applicant on or about 13 May 1999 and delivered it to Geelong Hospital on or about 28 June 1999, about three weeks prior to its implantation. The Pacemaker was delivered to Geelong Hospital in a box which also contained a warranty card, a patient registration form, a User's Manual and the brochure entitled "About Your Pacemaker". At about the time the applicant's Pacemaker was implanted, a staff member completed the patient registration form and sent it to Medtel. On 18 August 1999, Medtel invoiced Geelong Hospital for the Pacemaker. 155 As I have already noted, the applicant read the brochure prior to implantation of his Pacemaker. In addition to the material to which I have referred ([146] above, the brochure included the following statements: "The information on the following pages is intended to anticipate and answer most of your questions, to help alleviate any concerns you may have and to restore a sense of well-being and optimism about the times ahead. In addition to this general information, your physician will discuss anything that is unique to your care. The most important thing to learn from this booklet is that pacemakers really do work. … Pacemakers are extremely dependable devices. However, it is important to periodically check the pacemaker to make sure that it is functioning properly and that its settings remain appropriate for your medical needs. … One of the purposes of your follow-up care is to monitor battery status. Your pacemaker will give ample warning that the battery is reaching depletion. At this time, your doctor will schedule a replacement procedure." 156 Tempo Pacemaker number OU6226435 was implanted into the applicant on 21 July 1999, shortly before his carotid artery surgery. The Pacemaker, which was a single chamber device, was programmed in such a way that the applicant would remain in his own intrinsic rhythm for most of the time but the Pacemaker would operate if there was significant bradycardia. The applicant had an uneventful recovery from these procedures. 157 The applicant's Pacemaker had been tested during the course of its manufacture, on 6 November 1998 at the conclusion of the manufacturing process and on 21 July 1999, immediately prior to its implantation into the applicant's body. Following the implantation, the applicant attended the Geelong Hospital on three occasions for routine follow up. On each occasion, the test indicated that the applicant's Pacemaker was functioning normally with an estimated longevity in excess of sixty months.

[26]

EXPLANTATION OF THE PACEMAKER 158 At the beginning of June 2000, the applicant read a newspaper article about problems with some pacemakers. He was not too worried at this stage, as he assumed he would be contacted directly if there was any problem with his Pacemaker. 159 Shortly after this, he was contacted by a representative of Geelong Hospital who informed him that his Pacemaker was among those being recalled. He was informed that tests would be done on all people who had the recalled Pacemakers to see whether they were working, with a view to replacing them all in time. The applicant was told that his should be replaced by the end of July 2000. 160 On 9 June 2000, the applicant attended Geelong Hospital for tests. At that time, the applicant's Pacemaker was found to be functioning normally, still with an estimated longevity in excess of sixty months. The applicant was told that the battery was "working alright, but we do not know when it could give out". Professor Black told the applicant that his Pacemaker "does two-thirds of the job for you" and informed him that he would be telephoned when the time came to have the Pacemaker replaced. He was also told that "the company is paying for everything". 161 Professor Black gave evidence that the policy of the cardiology unit at Geelong Hospital in response to the Hazard Alert was to check the functioning of each affected Pacemaker; to make a cardiologist available to each patient to give advice; and to recommend whether the Pacemaker should be replaced. Professor Black himself took into account a number of factors including the Hazard Alert, the age and health of the patient; the risk associated with the surgery required to replace the Pacemaker; and the cost and inconvenience to the patient and to the cardiology unit of having to monitor the Pacemaker more frequently. As one might expect, the applicant acted upon Professor Black's advice that he should have the Pacemaker replaced. 162 Despite the applicant's expectation that his Pacemaker would be replaced by the end of July, it was not until 1 September 2000 that the Pacemaker was explanted. In the meantime, the applicant was told that his was not the most urgent case and that patients more at risk of cardiac arrests and requiring intensive care were being dealt with ahead of him. The applicant's Pacemaker was replaced with a Pacesetter Regency SR Plus 2400L pacemaker. 163 Immediately prior to the applicant's Pacemaker being explanted, it was tested. Once again, the test indicated that the Pacemaker was functioning normally with an estimated longevity in excess of sixty months. The Pacemaker was also tested on two subsequent occasions, on 5 February 2001 and 27 September 2001, by Pacesetter's Reliability Laboratory. On each of those occasions, the test indicated that the Pacemaker was functioning normally, with an estimated longevity in excess of sixty months. The Pacemaker has never been opened up for internal examination. 164 On the basis of this history I infer, on the balance of probabilities, that the applicant's Pacemaker has at all times functioned normally and that had it remained in situ it would not have ceased to function prematurely by reason of battery depletion. In other words, it is one of 90 per cent or more of Hazard Alert Pacemakers that, despite the use of yellow spool solder in the manufacturing process, did not suffer from a short circuit problem in consequence of dendritic growth. Of course, this is not to cast doubt on Professor Black's decision to recommend explanation of the device. Indeed, no challenge was made to the reasonableness of that decision. The finding is based on information now known, but which was not available to Professor Black at the time he advised the applicant to have his Pacemaker explanted.

[27]

THE APPLICANT'S SUBMISSIONS 165 Section 74B(1)(c) of the TP Act is satisfied if goods are acquired by the consumer "for a particular purpose that was, expressly or by implication, made known to the corporation…". The applicant submitted that the particular purpose for which the applicant and each remaining group member had acquired the Tempo Pacemakers was that pleaded in par 16 of the statement of claim: that is, the Hazard Alert Pacemakers had been acquired for the particular purpose of being surgically implanted on the advice of doctors and attached to the heart so as to restore and maintain a normal heart beat by providing an electrical impulse or beat that is carried through leads to the heart. Mr Bannon acknowledged that at a "medical level" the needs of each patient might vary, depending on his or her condition. But, so he argued, that did not alter the fact that all patients shared the common purpose of acquiring the Pacemaker to ensure the regular beating of the heart. That purpose had been made known, by implication, to Medtel. 166 Section 74D(3) of the TP Act provides that goods are of merchantable quality within the meaning of s 74D if "they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to [all relevant circumstances]". Mr Bannon submitted that the purpose was to be ascertained from the perspective of the reasonable consumer. On this basis, the purpose for which goods of the same kind as the Hazard Alert Pacemakers were commonly bought was that pleaded in par 16 of the statement of claim. 167 In his oral submissions, Mr Bannon summarised the relevant "particular purpose" for which the Tempo Pacemakers were acquired, or the purpose for which they were commonly bought, as being to "act as a pacemaker". Upon being pressed to explain this concept further, he said that "acting as a pacemaker would embrace providing the comfort and assurance of a pacemaker, a product of that type". The relevant purpose therefore went further than providing a device which ensured regularity of heartbeat, but included providing to a consumer comfort or assurance that the particular Pacemaker would perform in as reliable a way as a consumer was entitled to expect of a product of this kind. Mr Bannon maintained, however, that this view of the relevant purpose was embraced by pars 16 and 36 of the statement of claim, since no surgeon would recommend implantation of a particular device unless that device offered comfort and assurance that there was no superadded risk of failure. 168 Mr Bannon identified the main legal question as whether "a device that is part of a specific batch known to have a particular risk of failure for a known reason, over and above any underlying but unknown risk of failure of any device or machine, is thereby unfit for its purpose or not of merchantable quality". He submitted, on the authority of Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387, at 418, per Dixon J, that the correct test is whether the goods are in such an actual state that a buyer fully acquainted with the facts (that is, knowing what hidden defects exist and not being limited to their apparent condition) would buy them without abatement of the price obtainable for such goods in reasonably sound order and condition and without special terms. 169 Mr Bannon accepted that the random risk that a pacemaker, including the Tempo Pacemaker, might fail is not enough to render the device unfit for its purpose or not of merchantable quality. However, the Hazard Alert Pacemakers were subject to a "superadded risk" that prevented them from providing comfort and assurance to the recipient, subject only to the ordinary risk of random failure. Mr Bannon accepted that the statutory warranties do not require perfection in performance, in the sense that a "random" failure in a batch would not mean that all devices within the batch are unfit for their purpose or unmerchantable. However, he said that in this case, while it was unnecessary to put a precise figure on it, the rate of failure for the relevant population was considerably higher than "normal populations of devices". The Hazard Alert had taken the Pacemakers out of the class of "extremely reliable and effective" devices. 170 Mr Bannon contended that each and every one of the Hazard Alert Pacemakers had been manufactured using the yellow spool solder. Each therefore left white residue that was a trap for ionic contamination and, given the existence of electrical bias and the presence of moisture, each was potentially subject to dendritic growth and consequential premature battery depletion. This was so whether one adopted the respondents' theory of the root cause of premature failure or the applicant's theory. It followed that each Hazard Alert Pacemaker had a physical characteristic or defect rendering it subject to a superadded risk of dendritic growth and hence premature failure, in conditions where it was impossible to know whether ionic contamination was present. 171 Mr Bannon submitted that the question of fitness for purpose or merchantable quality would be resolved by asking whether a consumer, possessed of all the facts, would have rejected the Tempo Pacemaker. Such a consumer would know that the preferred Pacemaker formed one of a batch which included a disproportionate number that would experience premature battery failure. He or she would also know that it was impossible to determine whether any given Pacemaker had that fault. In these circumstances, the consumer would inevitably reject the Tempo Pacemaker. The choice for that consumer would be to acquire a Pacemaker that might be subject to the problem of accelerated battery depletion, over and above the normally low risk with pacemakers, or to acquire an alternative product that would exclude the risk of the additional problem. 172 Mr Bannon contended that on the evidence, the Hazard Alert Pacemakers simply could not have been sold had the facts been known. In this connection he pointed to the evidence showing that Medtel and Getz had withheld Tempo Pacemakers from the market as from 5 April 2000 and that the failure rate was regarded both by Medtel and doctors consulting with the TGA as "unacceptable". He also relied on medical evidence, for example, from Professor Chard, to the effect that if the information revealed in the Hazard Alert had been known at the time of implementation, doctors would not have used the Tempo Pacemakers. It followed, so he argued, that none of the Pacemakers was reasonably fit for the particular purpose for which it had been acquired or was of merchantable quality. In other words, each Hazard Alert Pacemaker was unfit for the relevant purpose and each was not of merchantable quality. 173 Mr Bannon did not spell out the answers he proposed should be given to the separate questions. I infer, however, that he would suggest that each question, construed in the manner referred to in his opening (see [14] above), should be answered in the affirmative.

[28]

THE RESPONDENTS' SUBMISSIONS 174 The respondents submitted that ss 74B and 74D of the TP Act are concerned with the fitness or merchantability of an item or items acquired by a particular consumer. Mr Walker contended that the applicant attempted to attribute to a single item - in his case his own Pacemaker - a risk of failure that could properly only be applied to generic products, such as a quantity of fruit. Mr Walker argued that it is wrong to suggest that each item of a group of mass-produced products is unfit for its purpose or not of merchantable quality just because a small but unidentified number of items in the group are defective. The question must always be whether the particular item is fit for the purpose or of merchantable quality. 175 The applicant's Pacemaker had been implanted for two purposes: to improve his prospects of surviving his carotid surgery and to address the anticipated progression of his second degree heart block. Those purposes were fulfilled. Both before and after the device was explanted the applicant's Pacemaker was found to be operating normally. On the balance of probabilities, that particular Pacemaker would never show signs of dendritic growth. At all times it was able to fulfil the common purpose identified by the applicant, namely to ensure the regular beating of the recipient's heart. 176 Mr Walker characterised the applicant's case as essentially resting on beliefs, derived from the superadded risk of premature failure over and above the "background rate". According to him, the "whole case [comes] down to whether a risk of being defective is, itself, a defect." The risk itself could not be a defect because it was the product of artificial matters, such as the choice of serial numbers to include a hazard alert or the extent to which an alert is publicised. The flaw in the applicant's case could be illustrated by asking when his Pacemaker was unfit for the purpose or not of merchantable quality: was it when taken off the shelf to be implanted, or perhaps when it was tested before and after explant? On each occasion, tests had confirmed that the device was functioning normally. 177 In essence, according to Mr Walker, the applicant was seeking to rely on a "superadded" risk of catastrophic failure of a batch of Tempo Pacemakers when it was known that his own device was perfectly sound. The applicant's attempt to rely on a greater than usual risk was a misuse of statistics because it "cloak[ed] each item of a group, spuriously and illogically with attributes which are expressible only about a group and never about the items in it." 178 Mr Walker warned against adopting an approach to ss 74B and 74D of the TP Act which allows the breadth of a hazard alert or other caution to consumers to define the class of persons entitled to compensation for the unmerchantibility or unfitness for purpose of a particular product. Such an approach would discourage manufacturers or distributors of products from being frank in disclosing possible defects to consumers. Frankness in commerce should not carry with it a price of more extensive liability. The policy underlying ss 74B and 74D is to protect consumers against the risk of actual failure of a product. It is not to protect against the possibility of failure. 179 Mr Walker further submitted that the pleadings did not permit the applicant to conduct his case on the basis that the purpose for which the Pacemakers had been acquired included the comfort and assurance that they would perform in as reliable a way as a consumer was entitled to expect of a product of that kind. Mr Walker contended that par 16 of the statement of claim said nothing about the production of any psychological effect on a person acquiring a Tempo Pacemaker. He also said that had the issue been properly pleaded he would have cross-examined the applicant as to the nature of his concerns about the implantation of a Pacemaker. 180 In response to questions from me, Mr Walker submitted that the appropriate answer to separate question (a) ("Whether the Pacemakers are subject to the Fault as defined in the [ASC]") was "unnecessary to answer". This followed, so he argued, from the fact that a statement about Pacemakers as a group could not assist in resolving questions concerning the merchantability or fitness for purpose of particular Pacemakers implanted into individual patients. Similarly he suggested that separate question (b) ("Whether…the Pacemakers are not reasonably fit for their purpose…[or] are not of merchantable quality") was unnecessary to answer. Insofar as the questions were directed to the applicant's own Pacemaker, he submitted that they should be answered in the negative, the consequence being that the applicant was not entitled to compensation. He did not dissent from a suggestion put to him that, in substance, he was saying that none of the separate questions was really appropriate to answer.

[29]

THE ISSUES 181 Sections 74B and 74D form part of Div 2A of Part V of the TP Act. Division 2A, which is headed "Actions against manufacturers and importers of goods" was introduced into the TP Act by the Trade Practices Amendment Act 1978 (Cth). The amending legislation was designed to implement a recommendation made by the Swanson committee that the TP Act should impose liability on the manufacturer or importer of goods to a "consumer buyer" for breach, inter alia, of any implied warranties essentially of the same kind as those already implied by the TP Act into contracts between a seller and a consumer buyer: Trade Practices Act Review Committee, Report to Minister for Business and Consumer Affairs (August 1976), par 9.127; Cth Parl Deb, HR, 13 April 1978, at 1507 (Minister for Business and Consumer Affairs). Then, as now, the TP Act provided for non-excludable warranties of merchantable quality and fitness for purpose in contracts for the supply of goods to consumers: TP Act, ss 68, 71. 182 Neither s 74B nor s 74D operates on a contract. Nor do those sections, unlike earlier State and Territory legislation which imposed liability on manufacturers or distributors of consumer goods (Manufacturers Warranties Act 1974 (SA); Law Reform (Manufacturers Warranties) Ordinance 1975 (ACT)), create a fictional contract between the manufacturer or distributor and the consumer: G M Gregg and T D Tzovaras, "The Liability of Manufacturers and Importers under the Trade Practices Amendment Act 1978" (1979) 10 Fed LR 398, at 403. Rather the sections create statutory causes of action that are available where a corporation places goods in the chain of distribution and the goods are not of merchantable quality or are not reasonably fit for the particular purpose that was made known to the corporation: Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323, at 344, per Cooper J. 183 The terms of ss 74B and 74D and their associated definitions have already been set out ([19]-[23] above). As I have noted, there was no dispute that

Medtel, in trade or commerce, had supplied goods (Tempo Pacemakers), deemed to have been manufactured by it, to treating hospitals and doctors;
the treating hospitals and doctors had acquired the goods for resupply to patients requiring pacemakers to be implanted in order to address electrical heart-related problems; and
the treating hospitals and doctors had supplied the goods to consumers, being the applicant and each of the remaining group members, by implanting the Pacemakers into their bodies. So far as the applicant himself is concerned, Medtel supplied the applicant's Pacemaker to Geelong Hospital. That hospital acquired the applicant's Pacemaker for resupply to patients suffering electrical heart-related problems. Geelong Hospital, through Dr Murdock, supplied the applicant's Pacemaker to him on 21 July 1999, when the Pacemaker was implanted. It follows that the requirements of s 74B(1)(a) and (b) and s 74D(1)(a) and (b) (which are in identical terms) have been satisfied. 184 In order to make out the case pleaded under s 74B, the applicant must, in addition, establish that
he and each group member acquired a Tempo Pacemaker for a particular purpose (s 74B(1)(c));
that purpose was made known, expressly or by implication, to Medtel, either directly or through the person from whom the applicant and each remaining group member acquired the goods (s 74B(1)(c));
the goods were not reasonably fit for that purpose, whether or not the purpose is one for which such goods are commonly supplied (s 74B(1)(d)); and
the applicant and the remaining group members suffered loss or damage by reason that the goods were not reasonably fit for that purpose (s 74B(1)(e)). If each of these conditions is satisfied, subject to the exclusions contained in s 74B(2), Medtel is liable to compensate the applicant and each remaining group member for loss or damage suffered "by reason that the goods [were] not reasonably fit for [the particular] purpose". (Of course, in this part of the proceedings I am concerned only with the applicant's claim for compensation and not with the individual claims of the remaining group members.) 185 In order to make out the case pleaded under s 74D of the TP Act, the applicant must, in addition to the matters in respect of which there was no dispute, establish that
the goods were not of merchantable quality because they were not as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect (s 74D(1)(c), (3)); and
the applicant and the remaining group members suffered loss or damage by reason that the goods were not of merchantable quality (s 74D(1)(d)). If each of these conditions is satisfied, subject to the exclusions contained in s 74D(2), Medtel is liable to compensate the applicant and each remaining group member for loss or damage suffered "by reason that the goods [were] not of merchantable quality". 186 As has been explained, the applicant's case under s 74B of the TP Act was that he and each remaining group member had acquired a Tempo Pacemaker for a common purpose, that had been made known, by implication, to Medtel. The common purpose was that of "being surgically implanted on the advice of doctors inside the human body attached to the heart so as to restore and maintain a normal heart beat by providing an electrical impulse or energy or beat that is carried through leads to the heart". Mr Bannon disclaimed any suggestion that the "particular purpose" for which the Pacemakers had been acquired might vary from patient to patient. The applicant's case under s 74D of the TP Act, as it developed, was that the Tempo Pacemakers supplied to the applicant and the remaining group members were not of merchantable quality because they were not fit for the same purpose identified in relation to the claims made under s 74B of the TP Act. 187 As Mr Walker pointed out on behalf of the respondents, the claims under ss 74B and 74D are essentially the same and can therefore be considered together. Mr Bannon did not suggest otherwise. In particular, he did not contend that the applicant could succeed under s 74B if his claim under s 74D failed. It is therefore convenient to follow the approach taken in argument and focus attention in the first instance on the applicant's case founded on the supply of goods said not to be of merchantable quality.

[30]

THE CONSTRUCTION OF s 74D OF THE TP ACT 188 The legislative history of s 74D(3) was traced by Cooper J in Rasell v Cavalier Marketing, at 344. In brief, s 66(2) of the TP Act, which defines "merchantable quality" for the purposes of the statutory warranties implied into consumer contracts, is taken from s 7 of the Supply of Goods (Implied Terms) Act 1973 (UK). The latter provision inserted s 62(1A) into the Sale of Goods Act 1893 (UK) which was later re-enacted as s 14(6) of the Sale of Goods Act 1979 (UK). (Section 14(6) was subsequently amended by the Sale and Supply of Goods Act 1994 (UK), which replaced the concept of "merchantable quality" with that of "satisfactory quality": see Benjamin's Sale of Goods (6th ed 2002), par 11-026.) Section 74D(3) of the TP Act is adapted from s 66(2),some slight modification being needed in order to reflect the fact that s 74D(1) creates a statutory cause of action and does not imply a statutory warranty into a consumer contract. 189 In Rasell v Cavalier Marketing, Cooper J (at 348), following the approach of Mustill and Woolf LJJ in Rogers v Parish (Scarborough) Ltd [1987] QB 933, at 942, 947, held that it is unnecessary and undesirable to look at the common law definition of merchantability for the purposes of construing s 74D(1) and (3) of the TP Act. As his Honour pointed out (at 348): "The common law tests relate to saleability of goods. They are the tests of merchants and are more appropriate to commercial sales. The provisions of s 66(2) and s 74D(3) are quite different and focus on the reasonable objective expectations of a consumer as defined. They are not concerned with goods purchased for resale, although indirectly a consumer may purchase goods with the ultimate view of resale e.g. a family motor vehicle. Further, the legislation ought to be interpreted against the background of its remedial character giving consumers rights and protection which previously were not available. The definition in s 66(2) and s 74D(3) are comprehensible and flexible and ought to be directly applied, in accordance with their terms, to the many and varied factual situations to which they may apply." Shepherdson J, with whom Kniepp J concurred, expressed agreement with Cooper J's observations on the relevance of the common law tests, although noting that there may be exceptional cases where recourse may be required to give full meaning to the statutory language. 190 In view of the judicial warning not to resort too readily to the common law approach to merchantable quality, it is perhaps a little curious that both parties took as the starting point for their respective arguments the observations of Dixon J in Australian Knitting Mills v Grant. The plaintiff in that case alleged that woollen underwear he had purchased was not of merchantable quality because it contained a chemical substance that caused him to contract dermatitis. Dixon J, in addressing the plaintiff's claim, said (at 418) that the "condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms." His Honour adapted this formulation from the judgment of Farwell LJ in Bristol Tramways & Carriage Co Ltd v Fiat Motors Ltd [1910] 2 KB 831, at 841. Dixon J's general approach was later endorsed by a majority of the House of Lords in Henry Kendall & Sons v William Lillico & Sons Ltd (the "Hardwick Game Farm Case") [1969] 2 AC 31: see at 79, per Lord Reid; at 108, per Lord Guest; at 118-119, per Lord Pearce (with whom Lord Wilberforce agreed). 191 The emphasis on Dixon J's language, at least as a starting point for analysis of the applicant's claims, is made even less appropriate by the fact that the English and Scottish Law Commissions, which were responsible for drafting what later became s 14(6) of the Sale of Goods Act 1979 (UK), specifically rejected an alternative draft constituting "in effect an amplified version of Dixon J's definition": The Law Commission and the Scottish Law Commission, Exemption Clauses in Contracts - First Report: Amendments to the Sale of Goods Act 1893 (Law Com No 24; Scot Law Com No 12; 1969), par 42. The Law Commissions preferred a simpler formula, which was thought to have the advantage of "being more in line" with the text of art 33(1)(d) of the Uniform Law on the International Sale of Goods and with one of the minimum standards of merchantability laid down in s 2-314(2)(c) of the United States Uniform Commercial Code (par 43). The latter, for example, provided that for goods to be merchantable they had to be at least such as to be fit "for the ordinary purposes for which such goods are used". 192 In my view, a more appropriate starting point is the language of s 74D itself. The section applies where goods are supplied to a "consumer". As the applicant accepted, the provision is concerned with goods supplied to individual consumers. Thus the applicant's claim for compensation (like that of each remaining group member) rests on whether the particular Pacemaker implanted into his body was or was not of merchantable quality. The fact that some Hazard Alert Pacemakers were defective (in the sense that they failed prematurely and without prior warning) does not mean, of itself, that each Hazard Alert Pacemaker implanted in a remaining group member was defective. 193 Section 74D(3) specifies a test as to whether "goods of any kind" are of merchantable quality. They are of merchantable quality if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to

any description applied to the goods by the corporation;
the price received for the goods; and
all other relevant circumstances. By its express terms, s 74D(3) contemplates that goods of the relevant kind may be commonly bought for more than one purpose. 194 It will be seen that s 74D(3) is framed affirmatively. It has been held by the English Court of Appeal, in relation to very similar statutory language, that goods which do not fall within the definition of merchantable quality are to be regarded as unmerchantable: Rogers v Parish Ltd, at 946, per Woolf LJ. While the reasoning of the Court cannot be applied precisely to s 74D(3) (Woolf LJ relied in part on differences between the language of s 7 of the Supply of Goods (Implied Terms) Act 1973 (UK) and s 14(6) of the Sale of Goods Act 1979 (UK)), I think that s 74D(3) should be construed in the same way. I did not understand the parties to contend otherwise. 195 Section 74D(3) directs attention to the question of whether goods of any kind are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect. As Cooper J pointed out in Rasell v Cavalier Marketing, at 348, s 74D(3) requires a determination of two matters: (i) the "purpose or purposes for which goods of that kind are commonly bought"; and (ii) whether the goods supplied are as fit for the purpose or purposes so identified as is reasonable to expect, having regard to the listed criteria. 196 So far as the first matter is concerned, the question is the purpose or purposes for which goods of the relevant kind "are commonly bought". The question is not the individual consumer's subjective purpose in acquiring the goods, although that may be material to the broader inquiry. Moreover, s 74D(1) of the TP Act applies where goods are "suppl[ied] to" a consumer. It is not confined to a case where the consumer actually buys the goods that are said not to be of merchantable quality. Accordingly, it may be relevant in a particular case to consider the purpose or purposes for which persons other than consumers themselves commonly buy goods of the relevant kind. An example may be health products bought by hospitals or other health service providers for supply to patients who may or may not buy the products themselves, depending on the health care financial arrangements. 197 So far as the second matter is concerned, in Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307, Lindgren J noted (at 445) that the words "as it is reasonable to expect" raise a question as to the identity of the person or persons the reasonableness of whose expectations is in question. He considered that it was consistent with both the objective nature of the statutory standard and the consumer protection purpose of the provision to hold that the reasonable expectations to consider were those of a reasonable consumer placed in the position of the actual consumer. Lee J (at 330) agreed with Lindgren J on this issue, while Kiefel J appears to have taken (at 462) a similar approach. (The appeal to the High Court did not challenge the Full Court's conclusions on ss 74B and 74D of the TP Act: Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54). Lindgren J's analysis is consistent with that of Cooper J in Rasell v Cavalier Marketing, at 348. 198 A consumer who establishes that the goods supplied to him or her are not of merchantable quality, is not necessarily entitled to compensation. An entitlement to compensation arises only if the consumer "suffers loss or damage by reason that the goods are not of merchantable quality" (s 74D(1)(d)). This language is similar, but not identical to that used in s 82 of the TP Act, which provides that a person who suffers "loss or damage by conduct of another person" in contravention, inter alia, of Part V of the TP Act may recover the amount of loss or damage by action against the contravener. In Wardley Australia Ltd v Western Australia (1992) 175 CLR 514, the joint judgment observed (at 525) that "by" was a curious word to use and that it might have been expected that an expression such as "by reason of" would have been used. Section 74D(1)(d) conforms more closely to the High Court's expectations in the manner in which it expresses the notion of causation. Thus, in order to recover compensation for acquiring goods that are not of merchantable quality a consumer must show that he or she has suffered loss or damage by reason of having acquired the goods.

[31]

The Purpose 199 The first task is to identify the purpose or purposes for which goods of the relevant kind are commonly bought. The applicant's submissions appeared to proceed on the basis that this requires identification of the purpose or purposes for which Tempo Pacemakers are commonly bought. The evidence establishes, however, that there is a class of devices known as pacemakers which are designed to address electrical heart related problems in the manner described earlier in this judgment ([53]-[60]). Tempo Pacemakers were merely one brand of pacemakers competing with similar products in the marketplace. I am inclined to think that in these circumstances s 74D(3) of the TP Act is concerned with the purpose or purposes for which pacemakers are commonly bought, rather than the purpose or purposes for which Tempo Pacemakers are commonly bought: cf Rogers v Parish Ltd, at 944, per Mustill LJ. In the present case nothing turns on the distinction. There was no evidence that Tempo Pacemakers were commonly bought for purposes different from the purposes for which other pacemakers are commonly bought. Nor did the submissions suggest that there was any relevant difference. 200 The applicant's pleading and opening submissions were somewhat imprecise in identifying the purpose or purposes for which Pacemakers (or pacemakers) are commonly bought. The ASC, in pleading the cause of action under s 74B, alleges that the particular purpose made known to Medtel was that of ensuring the regular beating of the heart as pleaded in par 16. The ASC lacks an equivalent allegation in pleading the cause of action arising under s 74D of the TP Act, although it might be inferred that the applicant intended to allege that the purpose for which pacemakers are commonly bought is also to ensure the regular beating of the heart. The applicant's opening written outline is no more explicit. 201 In the end, however, I think it clear enough that the applicant identified the purpose for which pacemakers (or Pacemakers) are commonly bought is restoring and maintaining the regular heart beat in the manner pleaded in par 16 of the ASC. Mr Walker certainly understood the submission in this way. It follows that, subject to one matter to be mentioned, the applicant relied on a single purpose in pursuing the claim based on lack of merchantable quality. 202 The qualification to which I refer is the applicant's argument, raised for the first time in final submissions, that one of the "ordinary purposes" of a Pacemaker is to provide "comfort and assurance to the recipient subject to the ordinary risk of random failure". If this submission was intended belatedly to expand the applicant's case by identifying an additional purpose for which goods of the relevant kind are commonly bought, I do not think that he is entitled to take this course. The additional purpose was not pleaded and I accept Mr Walker's contention that, had it been pleaded, or at least flagged at an earlier stage of the proceedings, he would or might have adduced additional evidence. Accordingly, the applicant should be limited to presenting his case as opened, namely that pacemakers (or Tempo Pacemakers) are commonly bought for the purpose of being implanted into patients on the advice of doctors so as to restore and maintain a normal heart beat by providing an electrical impulse carried through leads to the heart. 203 In my view, the purposes for which pacemakers are commonly bought include the purpose identified by the applicant. The test for determining the purpose or purposes for which goods of the relevant kind are commonly bought is an objective one. It is therefore appropriate to take into account the evidence, to which I have already referred at some length, explaining the functions performed by pacemakers and the reasons for implanting them into the bodies of patients experiencing electrical heart-related problems. Pacemakers are commonly bought by hospitals, although it is possible that other health service providers also acquire them. I think that it can readily be inferred that the principal purpose for which pacemakers are bought is to enable them to be implanted, on the advice of doctors, into patients experiencing electrical heart-related problems in order to restore and maintain regular heart beat by means of electrical impulses sent to the heart.

[33]

The in situ Failures 206 The position of remaining group members whose Pacemakers failed in situ received little attention in argument. The applicant's representatives appear to have assumed, not entirely without reason, that the respondents did not dispute that remaining group members whose Pacemakers had prematurely failed in situ were entitled to compensation under ss 74B and 74D of the TP Act. Doubtless for this reason, Mr Bannon did not consider it necessary to explore the question in depth. Nor did Mr Walker address the position of this category of remaining group members in any detail. 207 One approach to the in situ failures is to focus on the fact that the particular Pacemaker failed prematurely. Such a failure, after all, would seem to be a clear indication that the particular device was not fit for the purpose of being implanted to restore and maintain the patient's heart beat. In essence, the Pacemaker has simply not worked as it should and thus can be said to have been unmerchantable. 208 Even here, however, some caution must be exercised. As I have found, all pacemakers are subject to a background or random risk of failure. The failure of a particular Hazard Alert Pacemaker might therefore reflect the falling in of the background or random risk and have nothing to do with the concerns that led to the issue of the Hazard Alert. In particular, bearing in mind what is now known about the cause of the superadded risk of premature failure, the particular failure may have nothing to do with the use of the yellow spool solder and the associated problem of dendritic growth and partial short circuits. The applicant accepted that a failure of this kind would not demonstrate that a particular device was not of merchantable quality. 209 It follows that a remaining group member cannot establish that his or her Hazard Alert Pacemaker was not of merchantable quality at the time of implantation simply by proving that the device had in fact failed prematurely. That group member must also show, on the balance of probabilities, that

the failed Pacemaker was manufactured using yellow spool solder; and
the failure that occurred was not attributable to a cause unconnected with the use of the yellow spool solder and an associated partial short circuit. 210 Assuming that the group member satisfies these evidentiary requirements, I think it correct to say that the particular Pacemaker was not as fit for the purpose of restoring and maintaining heart beat as it is reasonable to expect. However, I do think that this is because of some physical characteristic of the Pacemaker that sets it apart from other Hazard Alert Pacemakers that have not failed prematurely. Like the Pacemakers that failed in situ, those that did not fail, leaving aside the small number that may have been manufactured using the blue spool solder, were manufactured using the yellow spool solder. 211 (I note in passing that it is possible that the failed Hazard Alert Pacemakers manufactured with yellow spool solder did in fact have a physical characteristic that set them apart from other Hazard Alert Pacemakers. It may be that the failed Pacemakers (and only those Pacemakers) invariably exhibited signs of dendritic growth at the time of implantation even though, in practice, the growth could not have been detected. The evidence bearing on this question was, however, equivocal. It is clear that when the three conditions for dendritic growth - electrical bias, moisture and ionic contamination - are present, dendritic growth must occur. This would seem to suggest that dendritic growth, if it is to occur, must commence prior to the sealing of the pulse generator within the titanium case. On the other hand, none of the experts was asked to consider the point and the submissions did not address it. To reach any conclusion would be to speculate about the responses of the experts to questions they were not asked.) 212 In my view, the critical point is that, with the possible exception of some devices manufactured very late in 1998, all Hazard Alert Pacemakers were manufactured using yellow spool solder. All were therefore affected by the white residue which had a tendency to attract or "trap" ionic contaminants. The use of the yellow spool solder in the manufacturing process created conditions in which dendritic growth and associated short circuits and premature battery depletion were much more likely to occur than had the yellow spool solder not been used. As it happens, the risk was further increased by the (unrecorded) use in some cases of de-soldering wicks containing conventional flux. 213 It is true, as Mr Walker repeatedly emphasised in his submissions, that the Hazard Alert Pacemakers, like all pacemakers, were subject to a random or background risk of failure. Doubtless, as he suggested, even pacemakers not made with yellow spool solder might very occasionally fail by reason of dendritic growth leading to short circuits. But it was only those Hazard Alert Pacemakers manufactured with yellow spool solder that were subject to a superadded risk of premature failure by reason of partial short circuits. Dr Fain recognised the significance of the additional risk: "You agree with the drawing of a distinction between random failures which could happen to any device on the one hand and failures of the type which were experienced in relation to the dendritic growth problem for the Sylmar manufactured devices for a period of time?---There is - yes, there's a difference between a group of failures that have a similar cause versus values maybe in another set of devices that could have a variety of different--- The failures might be described as random or one off may we take it you'd say is part of building machines?---Yes, I'd say that when we design and manufacture a device we don't expect that there will be a hundred per cent reliability for any product. But do you agree that the sort of problem which was experienced in relation to the dendritic growth in relation to the early manufactured devices at Sylmar presented, as it were, a super added risk?---Those devices based on field reports and return analysis did have a higher than expected failure rate, yes. It presented really as having a super added risk over and above the normal risk of random failure?---Yes, the rate of failure for that population of devices was higher in comparison to other populations of devices, normal populations of devices." It is important to appreciate that the additional risk of failure (as is now known) was of a particular kind: that is, premature battery depletion caused by dendritic growth which, in turn, was the product of ionic contamination attracted or trapped by the white residue interacting with ever-present electrical bias and moisture. Although the evidence as to the background or random rate of failure was meagre, it is clear that the risk of failure of each Hazard Alert Pacemaker manufactured with yellow spool solder was substantially greater than the risk applicable to other available pacemakers, including other Tempo Pacemakers. 214 The additional risk of this particular kind of failure was regarded by the respondents themselves as unacceptable to consumers. Dr Fain, for example, agreed that it would not have been "wise, sensible or practical" to sell Pacemakers manufactured with yellow spool solder where it was not known whether the unit had been re-soldered or not. As he said: "[w]e would not have felt that we could sell a product that was known to have a failure rate higher than the typical pacemaker in which we couldn't identify the particular unit [that would fail]". Dr Fain's evidence is consistent with the actions taken by the respondents. Pacesetter suspended distribution of the Tempo Pacemakers on 27 March 2000 once it had "determined the failure mechanism", a suspension that was effected worldwide. Medtel withdrew Pacemakers that had been sent on consignment to hospitals in Australia. Supplies were resumed in July 2000 in the belief (which turned out not to be entirely accurate) that Tempo Pacemakers manufactured outside the "advisory range" were not subject to the superadded risk of premature failure. 215 The TGA also plainly regarded the superadded risk of failure as unacceptable. In a letter dated 12 April 2000, Mr Jamieson of the Conformity Assessment Branch, notified Medtel that the TGA recommended that "supply of Tempo Pacemakers in Australia be halted until the cause of these device failures is determined and device safety can be assured". The TGA's view was based on the opinion of its medical advisers. That opinion was reflected in the evidence, for example, of Professor Chard who said that he would not have implanted a Hazard Alert Pacemaker had he known of the information on the Hazard Alert, regardless of whether the individual patient was pacemaker dependent. 216 As Graham v Barclay Oysters shows, the application of s 74D(3) of the TP Act requires an assessment to be made of the expectations of a reasonable consumer in the position (in this case) of a recipient of a Tempo Pacemaker. In my opinion, such expectations must be informed by the expectations of specialist medical practitioners upon whose advice, with very rare exceptions, consumers will be heavily dependent. Once the expectations are ascertained, it becomes necessary to determine whether the particular device's fitness for the relevant purpose matches the expectations. 217 I infer from medical evidence that specialist cardiologists would not expect a pacemaker to be manufactured using material that subjects recipients to a materially increased risk, over and above the inherent risk, of premature battery depletion and consequential loss of output. To put it another way, specialist medical practitioners would not expect a particular pacemaker to be manufactured using materials that result in a substantial "superadded" risk of premature failure over and above the risk attaching to readily available alternatives. Independently of the views of medical practitioners, it is difficult to imagine that a patient requiring a pacemaker implant would have any different expectation. Such a patient, acting reasonably, could hardly expect that device, by reason of the materials used in the manufacturing process, would have a substantially greater risk of premature failure if implanted in his or her body than readily available alternatives. 218 There may be cases where the information supplied to consumers is such as to displace what otherwise would be the reasonable expectations of consumers. In my opinion, the information provided to the applicant, in particular that contained in the brochure About Your Pacemaker, does not fall into this category. The applicant was told, somewhat uninformatively, that "[I]n general, pacemakers last anywhere from 2-10 years". He was not told that virtually all the Hazard Alert Pacemakers had been manufactured using material, specifically the yellow spool solder, that created a superadded risk of premature failure. 219 The respondents argued in their written submissions that even those remaining group members whose Hazard Alert Pacemakers had failed prematurely in situ were not entitled to compensation pursuant to ss 74B and 74D of the TP Act. The written submissions, which were not developed in oral argument, pointed out that pacemakers are different from other categories of consumer goods because the users rely on medical expertise; that pacemakers cannot cure the underlying disease; that pacemaker implantation is necessarily attended by risk; that Pacemaker recipients are warned that follow-up is important and that failures can occur; and that Pacemaker recipients are also told that Tempo Pacemakers may last between two and ten years. As I understood the argument, it was that having regard to these circumstances, the Hazard Alert Pacemakers were as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect (see TP Act, s 74D(3)(c)). 220 In my opinion, none of the matters identified by the respondents, either individually or collectively, detracts from the conclusion I have reached. It is of course true that pacemaker implantation is necessarily attended by a certain degree of risk and that Pacemaker recipients are warned that failures can occur. The critical point in the present case, however, is that the recipients of those Hazard Alert Pacemakers manufactured using the yellow spool solder were never told prior to implantation that their devices had been manufactured in such a way as to subject patients to significant risk of battery depletion and premature failure over and above the random or background risk of failure. They were reasonably entitled to expect that the Pacemakers were not manufactured in this way. 221 It follows that a Hazard Alert Pacemaker that is subject to a significant superadded risk of premature failure by reason of the materials used in the manufacturing process is not as fit for the purpose of restoring and maintaining heart beat as it is reasonable to expect. The evidence shows that each Hazard Alert Pacemaker manufactured with yellow spool solder was subject to just such a risk. Accordingly, none of those Pacemakers was of merchantable quality. 222 As I have explained, the fact that goods are not of merchantable quality does not necessarily establish that the consumer acquiring those goods is entitled to compensation pursuant to s 74D(1) of the TP Act. The consumer must show that he or she has suffered loss or damage by reason that the goods are not of merchantable quality. A patient whose Pacemaker actually fails prematurely is, however, likely to have little difficulty in establishing that he or she has suffered loss or damage by reason of the device not being of merchantable quality. Of course the assessment of compensation for the loss or damage will depend upon the individual's particular circumstances.

[34]

The Explanted Pacemakers 223 The applicant's Pacemaker did not fail prematurely in situ. It was explanted on the advice of Professor Black after the Hazard Alert was issued because of concerns that the battery might fail prematurely. As I have found, the probabilities are that the applicant's Pacemaker, had it remained in situ, would not have ceased to function prematurely by reason of battery depletion. Doubtless other remaining group members are in the same or a very similar position as the applicant. 224 In my view, the applicant's Pacemaker was not of merchantable quality at the time of implantation for the reasons I have already given. In summary, the reasons are as follows:

the purpose for which pacemakers are commonly bought is to enable them to be implanted, on the advice of doctors, into patients experiencing electrical heart related problems in order to restore regular heart beat by means of electrical impulses to the heart;
the applicant's Pacemaker was manufactured using yellow spool solder and was therefore affected by white residue which acted as a trap or attraction for ionic contaminants;
the Pacemaker was therefore subject at the time of implantation to a risk of premature failure over and above the background or random risk affecting all pacemakers;
this superadded risk related to premature battery depletion caused by dendritic growth which, in turn, was the product of ionic contamination attracted or trapped by the white residue interacting with ever present electrical bias and moisture;
a reasonable person in the position of the applicant (or other remaining group members similarly placed) would not expect his or her Pacemaker to have been manufactured in such a way as to be subject to a superadded risk of premature failure (that is, a superadded risk that it will be unable to fulfil the purpose of restoring and maintaining the heart rate of patients experiencing electrical heart-related problems);
accordingly, the applicant's Pacemaker was not of merchantable quality for the purposes of s 74D(1)(c) of the TP Act. 225 The major difference between the position of the applicant and that of group members whose Hazard Alert Pacemaker failed in situ is that his Pacemaker had not failed at the time of explantation and, on the basis of facts now known, probably would not have failed prematurely had it been left in situ. These facts seem to me not to bear on the issue of whether the Pacemaker was or was not of merchantable quality. They may be relevant, however, to the question of whether and to what extent the applicant suffered "loss or damage by reason that [the Pacemaker was] not of merchantable quality" (s 74D(1)(d)). 226 Given that the applicant's Pacemaker was not of merchantable quality, he clearly suffered at least some loss or damage by reason of that fact. The Pacemaker was explanted on Professor Black's recommendation. That recommendation was made in the aftermath of the Hazard Alert because of concerns about the health consequences for the applicant of premature failure of the device. Professor Black's recommendation, and the applicant's acceptance of that recommendation were reasonable responses to the Hazard Alert and to the increased risk that the applicant's Pacemaker would fail. The explantation of the Pacemaker and any loss or damage suffered by the applicant as a result of the explantation were plainly caused by the device's lack of merchantable quality.

[35]

Answering the Respondents' Submissions 227 It is implicit in what I have said that I do not accept the additional arguments made by the respondents in support of the submission that the applicant's Pacemaker was of merchantable quality. 228 Some of those arguments can, I think, be put to one side because they were really designed to answer a case that receded in significance as the hearing progressed and ultimately disappeared. At an early stage, for example, the applicant appeared to be suggesting that the fact that a Pacemaker was included in the Hazard Alert might be sufficient to make that Pacemaker unmerchantable. Mr Walker responded by arguing, with considerable force, that any principle that penalised corporate frankness had to be viewed with suspicion. In particular, he warned against an approach to the construction of s 74D of the TP Act which discouraged manufacturers from fully disclosing possible defects to consumers, especially in relation to health products. 229 For the policy reasons identified by Mr Walker, I think the courts would be very slow to make the liability of a manufacturer or distributor of a product dependent on the scope of a hazard alert or other warning to consumers. But this is not the way the applicant ultimately presented his case and it is not the approach I have adopted. The applicant has succeeded in his claim that his Pacemaker was not of merchantable quality because of a particular element introduced into the manufacturing process by the manufacturer, albeit unwittingly, that materially increased the risk that the product would fail prematurely. The "batch" of Pacemakers implanted in Australia affected by what I think can be fairly described as a physical anomaly in the manufacturing process (that is, the yellow spool solder) is not in fact co-extensive with the batch covered by the Hazard Alert. (The expression "physical anomaly" is intended to convey that the use of the yellow spool solder in the manufacture of Pacemakers is recognised by Pacesetter itself, with the knowledge it now has, as unacceptable. The expression is not intended to imply that Pacesetter was negligent in using the yellow spool solder or in any other way.) Some Hazard Alert Pacemakers, as I have found, may not have been manufactured with yellow spool solder. Further, it appears that some Pacemakers manufactured outside the time limits implicit in the Hazard Alert were manufactured with yellow spool solder. In short, the fact that a Pacemaker was included in the Hazard Alert does not of itself establish want of merchantability. 230 For similar reasons, I think that Mr Walker's contention that the applicant was seeking to impose liability on Medtel as the deemed manufacturer of Pacemakers simply by reason of a belief that certain of the Pacemakers were more likely to fail than others must be rejected. As I have explained, the conclusion that the applicant's Pacemaker was not of merchantable quality rests on the fact that it was one of those manufactured using yellow spool solder. It was the use of that solder - an objective fact - that created the superadded risk of failure by reason of premature depletion of the battery. Only those Pacemakers that had been manufactured using the yellow spool solder were subject to the superadded risk. 231 Mr Walker's main objection to the conclusion I have reached was that it is inappropriate to apply to a single item (a particular Pacemaker) the concept of risk which, so he argued, is properly applicable only to generic products (Hazard Alert Pacemakers or yellow spool solder Pacemakers). It is true that the "rate" of failure of a product can be ascertained only by reference to past experience of a group of items and that the concept of a failure rate in that sense cannot be applied to an individual item. But that does not mean that a risk of future failure based on physical anomalies in a product is not a concept that can be meaningfully applied to an individual item, such as the applicant's Pacemaker. Indeed the evidence in this case indicates that decisions are necessarily made in relation to individual items by reference to the risk that the item will fail to perform correctly. For example, I infer that Professor Black took into account the risk (so far as it could be assessed at the time) that the applicant's Pacemaker would fail, as well as other considerations, when recommending explantation of the device. 232 The application of s 74D to the circumstances of a particular case does not call for an exercise in mathematical theory. The question posed by the legislation is whether the particular goods are as fit for the purpose for which goods of that kind are commonly bought as it is reasonable to expect. If it is reasonable to expect that products of a certain kind will not have a physical anomaly that materially increases the risk that they will not fulfil the relevant purpose, it seems to me consistent with the statutory language to hold that each item with that physical anomaly is not of merchantable quality. To so hold is also consistent with the "remedial character" of the legislation (Rasell v Cavalier Marketing, at 348, per Cooper J). 233 Nor do I consider that acknowledging that the reasonable expectations of consumers can extend to the superadded risk that a particular device will fail imposes an inappropriate or unsustainable burden on a manufacturer or distributor. The complaint in the present case is not that Pacesetter and Medtel have been unable to eliminate all risk from a product that human ingenuity can never make risk-free. The complaint is that each Pacemaker implanted into a patient was manufactured using materials that exposed the patient to a substantial risk of failure that did not apply to other similar devices manufactured using different materials. It is not clear to me why the patient, rather than the manufacturer or distributor, should bear any loss or damage fairly attributable to the use of materials in the manufacturing process that significantly increased the risk that the goods would fail to achieve their purpose. Doubtless, the manufacturer did not appreciate at the time that the yellow spool solder should not have been used to manufacture pacemakers. But as between the manufacturer and distributor, on the one hand, and the consumer, on the other, it was the former that had the capacity to prevent or eliminate the problem. 234 The distinctive feature of the present case is that because of the nature of the product, the very fact of the increased risk of physical failure of a particular device, was capable of causing loss or damage to at least some consumers. Imposing liability for such loss or damage, where the consumer was reasonably entitled to expect that his or her device would not be manufactured in a way that created the additional risk, creates an incentive for manufacturers and distributors to avoid subjecting consumers to the superadded risk. It does not create a disincentive to manufacturing products that are necessarily subject to an irreducible background or random risk of failure. Nor does it create a disincentive to corporate frankness. 235 Mr Walker cited George Wills and Co Ltd v Davids Pty Ltd (1957) 98 CLR 77 in support of his argument. In my opinion, the case illustrates why care must be taken in citing authorities on the implied contractual warranty of merchantability in construing and applying a provision such as s 74D of the TP Act. In George Wills v Davids, a wholesale grocer sued the supplier of a quantity of canned beetroot pickled in vinegar and described by the supplier as such. The contents of many of the cans deteriorated within about fifteen months from purchase. The wholesaler alleged that the goods were unmerchantable because canned vegetables usually had a life of three years, as did beetroot canned in brine. The supplier had introduced beetroot canned in vinegar instead of brine only shortly before the relevant transaction. According to the High Court, since the normal life of beetroot in vinegar was only about twelve months, it could not be said that the goods were defective at the time of delivery. A reasonable person would have accepted the goods in performance of the offer to purchase them: see at 89-91, per curiam. 236 As I have explained, the very point of s 74D of the TP Act is to provide remedies to consumers who are not in a contractual relationship with the supplier of goods. A test that focuses on whether the goods would have been accepted by a reasonable buyer is inappropriate when considering the position of a consumer who has never made any such offer. It is for that reason that s 74D(3) is framed in the way it is. In the present case, as I have found, a reasonable consumer would expect that the Pacemakers would not be manufactured using materials that created a substantially greater risk of premature failure than that applicable to pacemakers generally. In George Wills v Davids, by contrast, it was not reasonable for the buyer to expect the canned beetroot to last more than about twelve months.

[37]

United States Authorities 239 I should record that the respondents referred in argument to some United States authorities in support of the proposition that the Hazard Alert Pacemakers, including the applicant's Pacemaker, were of merchantable quality. I have found these authorities to be of little assistance for present purposes primarily because this case is concerned with specific statutory provisions which have no precise counterpart in the United States. Cases which turn on product liability law or the law of implied warranties shed little light on the construction, for example, of s 74D of the TP Act. 240 There are, moreover, considerable differences in approach in the United States cases. Some have held that a plaintiff is not entitled to damages for a device said to have a high risk of malfunctioning but which has not yet malfunctioned: see, for example, O'Brien v Medtronic, Inc 149 Wis 2d 615; 439 NW 2d 151, review denied, 446 NW 2d 286 (1989) (Court of Appeals, Wisconsin); Khan v Shiley, Inc 217 Cal App 3d 848; 266 Cal Rptr 106 (1990) (Court of Appeals, California). Others have taken the view that a product such as a pacemaker can be defective for the purposes of a products liability claim even though it has not actually malfunctioned but has been removed on the advice of a physician or has been left in situ: see, for example, Larsen v Pacesetter Systems Inc 74 Haw 1, 837 P 2d 1273 (1992) (Supreme Court of Hawaii); Michael v Shiley, Inc, 46 F 3d 1316 (1995) (Court of Appeals, 3rd Cir). Larsen distinguished the earlier decision in O'Brien (where a pacemaker was removed against a physician's advice) and Khan (where the heart valve remained in situ because the risk of removal was greater than the risk of failure and the plaintiff claimed damages for emotional distress), on the ground that each of the earlier decisions turned on questions of causation. It is difficult to discern any consistent pattern in the United States authorities that might be helpful in construing and applying ss 74B and 74D of the TP Act.

[39]

THE APPLICANT'S CLAIM FOR COMPENSATION 243 The parties agreed that if the applicant's Pacemaker was found to be not of merchantable quality or not fit for its particular purpose I should assess the compensation to which he is entitled pursuant to ss 74B and 74D of the TP Act. 244 The applicant claimed the following heads of damage: (i) Past economic loss of $68.20. This claim was admitted by Medtel. (ii) Damages for stress, anxiety, concern and inconvenience. Mr Bannon suggested a figure in the range of $3,000 to $5,000 under this head. (iii) Post-operative hurt, scarring, discomfort and loss of enjoyment of life following explantation of the Pacemaker. Mr Bannon suggested $15,000 as an appropriate figure for this head of damage, while Mr Walker suggested a figure of $5,000. (iv) "Griffiths v Kerkemeyer damages" in respect of gratuitous services provided to the applicant by his wife after his discharge from hospital. It was agreed that if the applicant was entitled to so-called Griffiths v Kerkemeyer damages, the appropriate figure was $2,420. (v) Interest on non-economic loss from 7 June 2000 at the rate of 4 per cent per annum and interest on damages for economic loss and Griffiths v Kerkemeyer damages at commercial rates of interest. 245 The written submissions proceeded on the basis that the applicant's claim was for damages under s 82 of the TP Act. Both Mr Bannon and Mr Walker recognised in oral argument that this was an error and that the applicant's claim for compensation was founded on the statutory causes of action created by ss 74B and 74D of the TP Act. 246 As I have noted, the language of s 74B(1)(c) and s 74D(1)(d) ("loss or damage by reason that") is not identical to that in s 82 ("loss or damage by conduct"). It was common ground, however, that the language in ss 74B and 74D, like that of s 82, seeks to identify a causal connection between the loss or damage that is alleged to have occurred and the relevant conduct (in this case supplying goods not fit for their purpose or not of merchantable quality): see Wardley v Western Australia, at 525; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494, at 510, per McHugh, Hayne and Callinan JJ.

[40]

DAMAGES FOR STRESS AND ANXIETY 247 Medtel resisted the applicant's claim for compensation under this head on two grounds. First, it was said that the extent of the applicant's worry and anxiety about the superadded risk of failure (as distinct from his worry about the durability of the device from the outset) was so minor and so difficult to identify that compensation was not appropriate. Secondly, it was said that there should be no compensation under ss 74B or 74D for pure worry or anxiety falling short of psychiatric illness. Mr Walker relied on Tame v New South Wales (2002) 191 ALR 449, where several members of the Court restated the proposition that in an action for negligence, in the absence of physical injury, damages are not recoverable for emotional distress as distinct from a recognisable psychiatric injury. Gummow and Kirby JJ (with whom Gaudron J agreed) said (at 495-496 [193]) that "a plaintiff who is unable affirmatively to establish the existence of a recognisable psychiatric illness is not entitled to recover. Grief and sorrow are among the 'ordinary and inevitable incidents of life'; the very universality of those emotions denies to them the character of compensable loss under the tort of negligence. Fright, distress or embarrassment, without more, will not ground an action in negligence. Emotional harm of that nature may be evanescent or trivial". (Citations omitted.) See, too, at 524 [296], per Hayne J; at 541 [366], per Callinan J. 248 In an action for damages under s 82 of the TP Act, once the necessary causal relationship is established, neither the amount that can be recovered nor the orders that can be made are limited by drawing analogies with the law of contract or torts: Marks v GIO, at 510, per McHugh, Hayne and Callinan JJ, at 529, per Gummow J. Sections 74B and 74D differ from s 82 in that the actions for compensation for which they provide are available only in the circumstances identified in each section, while s 82 applies to "widely differing contraventions of the Act": Marks v GIO, at 510. Nonetheless, ss 74B and 74D provide for statutory causes of action for which there is no precise common law or equitable equivalent. There is no reason to suppose that the scope of the statutory remedies is to be circumscribed by analogies of the kind referred to in Marks v GIO. It seems to me, therefore, that notwithstanding the limitations on damages for non-economic loss in negligence cases recognised in Tame v New South Wales, there may be cases where it is appropriate to award compensation under ss 74B and 74D for stress and anxiety: cf Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445, at 468-469, per Hill J; aff'd (1990) ATPR 41-058. 249 While there may be cases where compensation can be awarded pursuant to ss 74B and 74D of the TP Act in respect of anxiety, worry and stress, I do not think that an award for this head of damage should be made in the present case. The applicant accepted that he had doubts and worries about his Pacemaker from the time of implantation and became worried before his first six monthly check-up that the device might not be working properly. His worries therefore predated the Hazard Alert. The applicant was reassured by his initial check-up but again became worried when he read the newspaper article in June 2000 referring to the Hazard Alert. He felt a "little better" when a subsequent check-up revealed no abnormality in function and he was told that his case was not urgent. He began to get a bit more worried when the replacement procedure was put off (the explantation ultimately took place on 1 September 2000). On 14 August 2000, the applicant completed a multiple choice form in which he described his mood over the previous four weeks as "slightly" anxious, depressed, irritable or downhearted. He agreed in evidence that his answer accurately reflected his state of mind at the time. 250 I accept that the Hazard Alert and the uncertainty pending explantation of the Pacemaker created some anxiety and worry in the applicant additional to his initial worry about whether the Pacemaker would work. I accept also that, as Mrs Courtney said, he was more agitated and worried than usual while he was waiting for the Pacemaker to be explanted. But in his own words, he was only "slightly" worried and anxious about the possibility of failure. Without in any way denigrating the applicant's reasonable concerns, his worry and anxiety can fairly be regarded as short-lived (if not "evanescent") and relatively minor. The applicant impressed me as a fairly stoic and phlegmatic person who had not been unduly concerned about the complication he had encountered. 251 In my view, not every consumer who has experienced anxiety or worry as a consequence of acquiring goods that are not fit for their purpose or not of merchantable quality should receive compensation on that account. In the absence of special or unusual circumstances, I think something more substantial than the worry and anxiety experienced by the applicant in the present case is required before compensation should be awarded under this head. Some restraint is appropriate in cases where compensation is sought for worry and anxiety as such to avoid "the creation of a society bent on litigation": Farley v Skinner [2002] 2 AC 732, at 751, per Lord Steyn. Accordingly, no compensation should be awarded to the applicant in respect of anxiety, worry and stress.

[42]

GRIFFITHS V KERKEMEYER DAMAGES 255 In Griffiths v Kerkemeyer (1977) 139 CLR 161, it was held that a claim for damages for personal injuries could include a component with respect to care or services provided gratuitously to the injured person. In Van Gervan v Fenton (1992) 175 CLR 327, it was held that the true basis of such a claim is the need of the injured person for the services, not the actual financial loss suffered as the result of the provision of those services. For this reason, damages are not determined by reference to the actual cost to the injured person of having the care or services provided, but by reference to the market cost of providing them: see Grincelis v House (2000) 201 CLR 321, at 327, per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ. 256 The point taken by Mr Walker in relation to this head of damage was a very narrow one. He conceded that the care provided to the applicant by his wife during the period of his convalescence from the explantation operation would have been compensable, had the applicant been claiming damages in a common law negligence action. Mr Walker also conceded that there may be some cases arising under s 74B or s 74D of the TP Act where an award for compensation on the principle established in Griffiths v Kerkemeyer would be appropriate. He contended, however, that compensation should not be awarded in respect of gratuitous services provided in the past, that is in respect of a closed period. He explained the distinction between services rendered in the past and those required for the future on the basis that it cannot be known whether future services would be provided gratuitously to the injured plaintiff or whether he or she would have to purchase the services on the open market. By contrast, the gratuitous nature of past services is known. 257 Had Mr Walker not made the concession to which I have referred, I would have had serious doubts whether, on the evidence, the applicant had satisfied the requirements for an award of damages in respect of so-called gratuitous services. But having made that concession, I do not think that a distinction can be drawn, for the purposes of assessing compensation in a claim under s 74B or s 74D of the TP Act, between past and future periods. Any entitlement to compensation rests on the existence of the need for care services and a causal relationship between the creation of that need and the supply of goods that are not of merchantable quality or are unfit for their purpose. In this connection, I note that the award of compensation in Graham Barclay v Ryan included a component in respect of past gratuitous services: see at 452, per Lindgren J. Accordingly, the applicant should be award $2,420 as compensation for this head of loss.

[44]

CONCLUSION 260 The applicant has succeeded in his claim against Medtel for compensation pursuant to ss 74B and 74D of the TP Act. I have assessed the compensation at $9,988.20, comprising $7,500 for pain and suffering and loss of enjoyment of life, $2,420 in respect of past gratuitous care services provided by Mrs Courtney and $68.20 for economic loss. I have also provided for interest on the first two amounts. 261 Some remaining group members are in a position similar to that of the applicant, although obviously each claim requires individual consideration. I have also expressed views on the judgment that bear on the claims of other remaining group members. To that extent, the judgment may assist in resolving these claims. 262 My present view, subject to further submissions, is that I should not answer the separate questions formulated by the parties. The order pursuant to FCR, O 29 r 2 was made by consent. The respondents, however, have effectively resiled from their agreement to following the course suggested by the order. Moreover, I see little point in attempting to answer question (a) (which is framed by reference to the "Fault" identified in the statement of claim) and the applicant's own claim can be resolved on the facts without answering question (c). Question (b) assumes that an answer should be given in respect of the Hazard Alert Pacemakers as a class and apparently invites an "all or nothing answer". For the reasons I have given, there are differences among the Hazard Alert Pacemakers depending upon whether a particular Pacemaker was manufactured using the yellow spool solder. 263 I think the appropriate course is to invite submissions from the parties as to the orders that should be made at this stage of the proceedings and to give the parties an opportunity to consider the further conduct of the litigation. 264 I wish to record that the present proceedings have been conducted by the parties in a most co-operative manner, an approach not always evident in representative proceedings. I also wish to record my gratitude to the legal representatives for the expeditious conduct of the hearing and for their most helpful written and oral submissions. I certify that the preceding two hundred and sixty-four (264) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice SACKVILLE.

Parties

Applicant/Plaintiff:

Courtney

Respondent/Defendant:

Medtel Pty Limited

Legislation Cited (7)

Trade Practices Act 1974(Cth)ss 4B, 68, 71, 74A, 74B, 74D, 74K, 82

Trade Practices Amendment Act 1978(Cth)

Law Reform (Manufacturers Warranties) Ordinance 1975(ACT)

Supreme Court Rules (NSW), Schedule J Manufacturers Warranties Act 1974(SA)

(Manufacturers Warranties Act 1974(SA)

Federal Court of Australia Act 1976(Cth)

Therapeutic Goods Act 1989(Cth)s 30(1), (2)(b)

Cases Cited (18)

Courtney v Medtel Pty Limited [2003] FCA 36 TRADE PRACTICES - consumer protection - representative proceedings - batch of pacemakers subject to hazard alert because of risk of premature failure due to battery depletion - only a small proportion of batch actually fail prematurely - all pacemakers subject to a "background" risk of premature failure - whether superadded risk of failure due to use of a particular solder in the manufacturing process constitutes pacemakers unfit for purpose or not of merchantable quality - ss 74B and 74D of the Trade Practices Act 1974 (Cth). COMPENSATION - whether minor stress and anxiety compensable under ss 74B and 74D of the Trade Practices Act 1974 (Cth) - assessment of compensation in respect of pain and suffering following explantation of pacemaker - whether compensation available under ss 74B and 74D in respect of past gratuitous services provided to patient following explantation of pacemaker.

Trade Practices Act 1974 (Cth) ss 4B, 68, 71, 74A, 74B, 74D, 74K, 82 Federal Court of Australia Act 1976 (Cth), ss 33J, 51A Trade Practices Amendment Act 1978 (Cth) Therapeutic Goods Act 1989 (Cth) s 30(1), (2)(b) Federal Court Rules O 29 r 2 Law Reform (Manufacturers Warranties) Ordinance 1975 (ACT) Supreme Court Rules (NSW), Schedule J Manufacturers Warranties Act 1974 (SA) Sale of Goods Act 1893 (UK) Supply of Goods (Implied Terms) Act 1973 (UK) Sale of Goods Act 1979 (UK) Supply of Goods Act 1994 (UK) Uniform Law on the International Sale of Goods art 33(1)(d) United States Uniform Commercial Code s 2-314(2)(c) Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 cited. Director of Fisheries (Northern Territory) v Arnhem Land Aboriginal Land Trust (2001) 109 FCR cited. Australian Knitting Mills Ltd v Grant (1933) 50 CLR 387 discussed. Rasell v Cavalier Marketing (Australia) Pty Ltd [1991] 2 Qd R 323 followed. Rogers v Parish (Scarborough) Ltd [1987] QB 933 cited. Bristol Tramways & Carriage Co Ltd v Fiat Motors Ltd [1910] 2 KB 831 cited. Henry Kendall & Sons v William Lillico & Sons Ltd [1969] 2 AC 31 cited. Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 followed. Wardley Australia Ltd v Western Australia (1992) 175 CLR 514 cited. George Wills and Co Ltd v Davids Pty Ltd (1957) 98 CLR 77 distinguished. O'Brien v Medtronic, Inc 149 Wis 2d 615; 439 NW 2d 151 (1989) cited. Khan v Shiley, Inc 217 Cal. App. 3d 848; 266 Cal Rptr 106 (1990) cited. Larsen v Pacesetter Systems Inc 74 Haw 1, 837 P 2d 1273 (1992) cited. Michael v Shiley, Inc, 46 F 3d 1316 (1995) cited. Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 followed. Tame v New South Wales(2002) 191 ALR 449 discussed. Zoneff v Elcom Credit Union Ltd (1990) 94 ALR 445 cited. Zoneff v Elcom Credit Union Ltd (1990) ATPR 41-058 cited. Farley v Skinner [2002] 2 AC 732 cited. Griffiths v Kerkemeyer (1977) 139 CLR 161 followed. Van Gervan v Fenton(1992) 175 CLR 327 followed. Grincelis v House (2000) 173 ALR 564 followed. MBP (SA) Pty Ltd v Gogic(1991) 171 CLR 657 followed. White Industries (Qld) v Flower & Hart (No 2)[2000] FCA 1132 followed. Trade Practices Act Review Committee, Report to Minister for Business and Consumer Affairs (August 1976), par 9.127 Cth Parl Deb, HR, 13 April 1978, at 1507 (Minister for Business and Consumer Affairs). G M Gregg and T D Tzovaras, "The Liability of Manufacturer and Importers under the Trade Practices Amendment Act 1978" (1979) 10 Fed LR 398 Benjamin's Sale of Goods (6th ed 2002), par 11-026) The Law Commission and the Scottish Law Commission, Exemption Clauses in Contracts - First Report: Amendments to the Sale of Goods Act 1893 (Law Com No 24; Scot Law Com No 12; 1969), par 42 KEVIN GLYNN COURTNEY in a representative capacity on behalf of the persons referred to in par 1 of the Eighth Amended Statement of Claim v MEDTEL PTY LIMITED & ANOR N 661 of 2000 SACKVILLE J SYDNEY 5 FEBRUARY 2003

(1999) 198 CLR 334

(1933) 50 CLR 387

(2000) 102 FCR 307

(1992) 175 CLR 514

(1957) 98 CLR 77

(1998) 196 CLR 494

(2002) 191 ALR 449

(1990) 94 ALR 445

(1977) 139 CLR 161

(1992) 175 CLR 327

(2000) 173 ALR 564

(1991) 171 CLR 657

(2000) 201 CLR 321

(2000) 103 FCR 559

[2000] FCA 1132

[2002] HCA 54