Thomas & 1 Ors v Foreshore Marine Exhaust Systems Pty Limited & 1 Ors

Court of Appeal (NSW)|2005-11-21|Before: Santow JA, Bryson JA, McClellan CJ, Clellan CJ

CITATION: Thomas & 1 Ors v Foreshore Marine Exhaust Systems Pty Limited & 1 Ors [2005] NSWCA 451

JUDGMENT OF: Santow JA at 1; Bryson JA at 69; McClellan CJ at CL at 70

DECISION: Appeal allowed. See orders at [68].

LEGISLATION CITED: Trade Practices Act 1974 (Cth) s74B; s74D

Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538 Courtney v Medtel Pty Ltd (2003) FCA 36 Davis v Bunn (1936) 56 CLR 246 CASES CITED: Hampton Court Ltd v Crooks [1957] 97 CLR 367 Jones v Dunkel (1959) 101 CLR 298 Medtel Pty Ltd v Courtney (2003) FCASC 151

David THOMAS and John WATT (First and Second Claimants) PARTIES: FORESHORE MARINE EXHAUST SYSTEMS PTY LIMITED (ACN 071 890 063) (First Opponent) Cameron TURNER (Second Opponent)

R J H DARKE, SC/ A J BULLEY (Claimants) COUNSEL: D CASPERSONN (First Opponent)

Ebsworth & Ebsworth (Claimants) SOLICITORS: Mark Hodges (First Opponent) Thompson Cooper Lawyers Pty Ltd (Second Opponent)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40207/05 DC 7348/02

SANTOW JA BRYSON JA McCLELLAN CJ at CL

14 DECEMBER 2005 David THOMAS & 1 Ors v FORESHORE MARINE EXHAUST SYSTEMS PTY LIMITED (ACN 071 890 063) & 1 Ors Judgment 1 SANTOW JA: INTRODUCTION The central issue in this case is whether: (a) the actual cause of the plaintiff's loss was not established with certainty, as between several alternative causes, so leading to consequential uncertainty as to the steps that might have been taken by the defendant manufacturer of a defective marine engine water-lift muffler to have averted that loss, and (b) whether the degree of uncertainty that should have been found (as to the precise explanation for the defect) precluded recovery on the part of the boat owners for their loss in negligence or under consumer protection provisions of the Trade Practices Act 1974 (Cth) ("TPA"). 2 Here, in a claim brought by two marine boat owners against the manufacturer for the failure of a marine water-lift muffler, which led to the sinking of their boat, the trial judge Sorby DCJ denied recovery essentially on the ground in (a) above. In one sense that was a curious result. It was clear that the defendant manufacturer's muffler was defective in letting in water, so causing the plaintiffs' boat to sink, and there was no basis for rendering the muffler's installer liable. 3 The trial judge however concluded that the plaintiff boat-owners, upon whom rested the onus of proof, must lose as they had failed to provide "convincing evidence as to the actual defect in the design and manufacturing process and what could and should have been done to correct it" [emphasis added]. He had earlier concluded "the evidence discloses that no expert or the manufacturer can give a clear and unequivocal reason for the muffler's failure" [emphasis added]. 4 The plaintiffs at trial and now claimants, Mr David Thomas and Mr John Watt, seek leave to appeal and if granted a concurrent hearing. They seek to challenge the trial judge's conclusion that there was no breach of duty by the manufacturer. They specifically take issue with his formulating the evidentiary onus in terms of "convincing evidence" or the necessity for "a clear and unequivocal reason for the muffler's failure". 5 The particular issues on appeal are: (a) whether there was a breach of duty of care by the manufacturer Foreshore Marine Exhaust Systems Pty Limited ("FM"), the first opponent, (b) whether the muffler was not of merchantable quality and not fit for its purpose under, respectively, s74D and s74B of the Trade Practices Act 1974 (Cth) ("TPA"), (c) the interpretation and use of the expert evidence by the trial judge, and (d) whether there was indeed no clear unequivocal evidence as to the actual cause of the failure of the muffler. 6 FM's counsel accepted that, read literally, the trial judge's reference to the necessity for "convincing evidence" being required to give "a clear and unequivocal reason for the muffler's failure" overstated the onus upon the claimants as plaintiffs. They were required to do no more than prove their case, including causation, on the balance of probabilities. The claimants' position was that the muffler's failure was a thing which spoke for itself. Moreover, the precise reason why it failed was a matter peculiarly within the knowledge of the manufacturer and there was no explanation at trial consistent with the absence of negligence on its part. 7 FM accepted that this Court in granting leave to appeal would have to consider afresh the relevant evidence and inferences drawn therefrom according to the proper standard of proof on the balance of probabilities. FM's position on appeal was that the claimants had nonetheless not met that standard; in particular that the claimants' case never did "more than give rise to conflicting inferences of equal degree of probability so that the choice between them is a mere matter of conjecture"; per Dixon CJ in Jones v Dunkel (1959) 101 CLR 298 at 304. Accordingly they must lose. 8 The claimants for their part contended that this was a case where most of the facts could "hardly be within the knowledge of the plaintiff". Accordingly, that while "a plaintiff is not relieved of the necessity of offering some evidence of negligence by the fact that the material circumstances are peculiarly within the knowledge of the defendant all that it means is that slight evidence might be enough and unless explained away by the defendant that the evidence should be weighed according to the power of the party to produce it …" per Dixon CJ in Hampton Court Ltd v Crooks [1957] 97 CLR 367 at 371. The claimants contended they had provided or elicited that evidence and that it established the manufacturer's negligence on the balance of probabilities, indeed comfortably so. 9 In particular, the claimants contend that the preferred explanation for the muffler's failure, inadequacy in the mode of its adhesion, was sufficiently established by the expert and other evidence, as against what became FM's competing explanation, failure in the waterproofing of the gel coat around the muffler. In any event, the claimants contend that either of the possible explanations necessarily implied negligence on the part of FM as manufacturer. Insofar as any other conceivable explanation not implying negligence by the manufacturer was concerned such as the dropping of a spanner on the muffler, the claimants' case was that there was no evidence for it. The latter explanation was in any event so improbable as not to displace the more probable explanation (inadequate adhesion) which necessarily implied negligence on the part of FM. Compare Dixon J in Davis v Bunn (1936) 56 CLR 246 at 260: "It is true that such a thing is consistent with more than one cause not implying negligence. For example, the driver might have fainted, or the steering gear have failed through no fault of the defendant. But such unavoidable events are sufficiently unusual to raise a probability that the erratic course of the vehicle is to be accounted for by some failure in due care, whether in its management on the roadway or in the maintenance of its mechanical efficiency. In the absence of all explanation the probability would be high enough to justify an inference in the plaintiff's favour. The legal burden of proof would not be thrown over to the defendant's side. No more than a presumption of fact would arise and its strength would be a matter for the jury to estimate, in whose province it would be to draw or refuse to draw the inference. But if facts appear which reasonably explain the accident in a manner involving no negligence for which the defendant is responsible, the foundation for the inference is excluded." 10 On appeal FM did not eventually seek to press any case that, contrary to the trial judge's findings, the installer of the muffler, the second opponent Cameron Turner, was responsible for its failure. FM's case was essentially to rely on that second explanation for the muffler's failure as constituting "facts … which reasonably explain the accident [the muffler's failure] in a manner involving no negligence for which the defendant is responsible". This was said to exclude the foundation for any inference of negligence from the fact of that failure. 11 At the conclusion of the hearing, leave to appeal was granted. What follows is the disposition of that appeal. I start by recording the salient facts, which are essentially uncontroversial.

SALIENT FACTS 12 The claimants, Mr Thomas and Mr Watt, were joint owners of a Mariner 34 cruiser known as "Como Lady" (the boat). 13 The boat was moored at Pittwater. 14 The boat was fitted with water lift mufflers to both its port and starboard engines. 15 In October-November 1999 the boat had undergone a major overhaul at the hands of the second opponent, Mr Turner, and this overhaul included the installation of the port and starboard water-lift mufflers manufactured by the first opponent, FM. 16 On 17 December 2001, the claimants decided to take the boat down to Sydney Harbour. 17 In previous days Mr Watt had checked the oil and coolant in the engines. To do so, he had taken up the floorboards, and had not noticed any water in the hull. The boat was fitted with bilge pumps. 18 Before setting out on 17 December, Mr Watt started and warmed up the motors, his usual practice. It was about a 2.5 hour trip to Sydney, at about 10-12 knots. 19 The boat proceeded up the harbour to just near Taronga Zoo, where Mr Watt brought the boat "back to idle" as a ferry approached. As he did this the starboard motor stopped. Mr Watt thought it "had got hot from the trip down". He was unable to restart the motor. 20 Using the port motor, Mr Watt manoeuvred the boat to Little Sirius Cove and picked up a mooring. 21 He then cut the motor and he and the others on board had lunch. 22 After a while, Mr Watt was told something and went to investigate. He saw water coming into the boat through the "drain holes". This was "not normal". The boat was "sinking from the back". 23 Mr Watt thought about trying to beach the boat, but because of the amount of water coming in, he decided it was best for everybody to get off. The water police were rung and all four on board jumped into the water. 24 Mr Watt watched the boat sink stern first. 25 The boat was "boomed" to prevent leakage of its fuel into the harbour. 26 The next day the boat was raised under the supervision of Mr Box from Club Marine, the boat's insurer (who later gave evidence as an expert marine engineer). The boat was then taken to Rose Bay for valuation. 27 The claimants claimed against FM and also Cameron Turner in negligence, and against FM only, in the alternative, under ss74B and 74D TPA. The claimants also claimed breach by the second opponent of the Fair Trading Act, but this is not at issue on appeal. On 24 October 2005 a notice of discontinuance was filed with respect to Mr Turner, who therefore played no part in the appeal. 28 The claimants' loss of $58,342.35 was agreed by the two opponents during the hearing at first instance. 29 While the precise cause of the failure of the muffler was in issue, that it failed was not. The muffler, one of two, was made of fibreglass and was in two parts, a body and base, joined by a flange, also of fibreglass. The starboard muffler came apart when water entered the delaminating bonded flange of the muffler, through a process called "wicking"; see elaboration below under "The Primary Judgment". 30 The relevant provisions of the TPA are set out below: 74B. Actions in respect of unsuitable goods (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…

74D. Actions in respect of goods of unmerchantable quality (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. …

(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; b. the price received by the corporation for the goods (if relevant); and c. all the other relevant circumstances.

The primary judgment 31 Having considered all the documentary evidence and the evidence of the witnesses, the trial judge concluded on the balance of probabilities that: (a) On 17 December 2001, the claimants' boat, while moored at Little Sirius Cove around lunchtime, starting taking in water at such a rate that the boat quickly sank. (b) The water entered the boat via the starboard engine muffler which had partly come apart between the base or flange of the body of the muffler and the flange of the base of the muffler, both pieces having been joined by bonded fibreglass in the manufacturing process. (c) The water entered the bonded flange of the muffler through a process called "wicking". (d) The ingress of the water between the two "mating surfaces" had caused a "delamination" or debonding, in parts sufficient to allow the water to flood, notwithstanding the relatively low pressure at which the muffler operates. (e) It is not clear whether the fibreglass bonding delaminated allowing the "wicking" of the water in the first instance, causing further delamination, or the wicking occurred first, causing the delamination by the egress of the water. (f) Both the starboard and port mufflers (the latter did not leak and was in sound condition when inspected by Mr Box on 18 December 2001) were suspended by three hoses - two input hoses from the boat motor and one exhaust hose - such that the muffler body and base were suspended above, but not attached to, the hull of the boat, either by self-tapping screws or otherwise. (g) The running of the motor caused the muffler to vibrate, but that vibration was not causative of the splitting of the starboard muffler base from its body that allowed water to being to "wick" its way between the mating surfaces. I interpolate here that this finding ((g) above) has some significance for one of the two theories for the cause of the muffler failure, based not on poor fibreglass bonding at the flange, but on a theory advanced by Dr Scheirs, FM's expert, when cross-examined. He said it was due to loss of integrity and deterioration in a "gel coat", which he said was due to vibration, at least in part. (h) The splitting of the base of the starboard muffler from the body was a gradual process that occurred between the muffler's installation by the second defendant, Mr Turner, two years previously and 17 December 2001, culminating in the division of the base and the body of the muffler on that day to such an extent that sea water was able to enter the bilge of the boat and ultimately sink it (judgment, WB, 26-27). 32 After making these findings, the trial judge emphasised that the claimants bore the onus (judgment, WB, 28) and that the evidence disclosed that no expert or the manufacturer could give a clear and unequivocal reason for the muffler's failure. The trial judge appeared to find significance in the fact that the port muffler, also manufactured by FM, was installed at the same time as the starboard muffler and in the same manner (supported only by three hoses), yet it did not fail. Indeed according to Mr Box it was intact with no leaking when he examined it (judgment, WB, 28). 33 The trial judge then commented that "the number of reasons or possible reasons advanced by the experts for the muffler's failure were considerable" and can be taken from the written submissions of Mr Turner as follows: (a) The interface between the body and the base failed and was weak. (b) Water came from the inside of the muffler to the outside. (c) Water came from outside the leading edge of the muffler to the inside. (d) Flexing of the flange. (e) The form of construction (there being no fibres in parts going across the interface). (f) Catastrophic event or number of small events. (g) Poor adhesion. (h) Overpressure. (i) Inadequate construction/ poor manufacture. (j) Loss of integrity/ deterioration of the gel coat. (k) Backfire. (l) Dropping a spanner on the edge of the muffler. (m) Removal of the gel coat by being subject to chipping or stress or mechanical interference. (n) Inadequate construction of the muffler at the base. (o) Normal pressure resulted in delamination of the base (judgment WB, 28-29). 34 I interpolate here that the trial judge made no attempt to relate the various supposedly separate reasons for failure to either or both of the only two explanations for that failure. Nor did he group those supposedly separate reasons as they bore upon, or were elements of, the only two possible explanations. In determining the cause of the muffler's failure, not on the basis of a clear and unequivocal reason, but on the correct test of the balance of probabilities, that should have been done. 35 The trial judge dealt with the question of breach of duty on the premise that there was no doubt that the manufacturer FM owed the claimants a duty of care. 36 The trial judge discounted the evidence of Mr Box, who was a self-employed surveyor, assessor and insurance loss adjuster, a certified naval architect. Mr Box had identified the cause of the muffler's failure as a failure of design and manufacture by FM, rather than a problem with the installation. He discounted Mr Box and his conclusions on the basis that Mr Box had not explained how the design and manufacture of the muffler were inadequate or involved a defect. Neither did any of the other experts, according to the trial judge. Thus he concluded that there was no evidence of what FM could or should have reasonably done in the manufacture of the muffler to prevent the delamination at its base (judgment WB, 31). 37 The claimants tendered a report of Dr Graham Edward from the School of Physics and Materials Engineering, Monash University dated 7 October 2003, his expertise being in relation to polymers including polymer recycling and degradation. The trial judge however stated that he did not attribute "great weight" to the conclusions of Dr Edward as to the defects in the flange and its bonding because of his limited expertise. This was on the basis that Dr Edward had conceded in cross-examination that: (i) His expertise was in polymers. (ii) He was not familiar with the manner of constructing this type of muffler. (iii) He was not given and did not seek any information about how the muffler was constructed, and (iv) He could only "surmise" how the muffler was made (judgment WB, 32-33). 38 The trial judge concluded that without "convincing evidence" as to the actual defect in the design and manufacturing process and what could or should have been done to correct it, he could not find that FM breached its duty of care to the claimants (judgment WB, 33). 39 Although the claim in negligence against Mr Turner is now of no relevance to this appeal, certain findings remain of significance. The trial judge concluded that he was not convinced that Mr Gorman, a director of FM, whose evidence he had otherwise accepted, had given precise instructions to the second opponent, Mr Turner, to the effect that the muffler must be secured to the boat by a "four point fix" (judgment WB, 34). I interpolate a "four point fix" was by way of four bolts in the circumference of the flange whereby the body of the muffler is secured to its base via the flange. 40 Mr Gorman impressed the trial judge as a witness, particularly his belief in the integrity of his product (judgment WB, 34). 41 In any case the trial judge had regard to the fact that: (a) Mr Box did not think that the four screws would have prevented the delamination, (b) The muffler was secured by the three hoses, its own weight and its position in the boat, and (c) Mr Box had experience of a muffler having delaminated in circumstances where it was secured (judgment WB, 34). 42 Thus while acknowledging that Mr Turner had a duty to the claimants to install a muffler in such a manner as to prevent damage, in light of that evidence, the trial judge was not convinced that this duty had been breached (judgment WB, 34). 43 I interpolate that this conclusion has implications for the second theory based on deterioration of the gel coat. Dr Scheirs gave evidence that wicking was the cause of the water entry causing in time delamination. His evidence was that this would have been made less likely by reinforcement around the base such as through fasteners or a circular clamp or thicker flange or additional matting (transcript WB, 167.20-168.32). His evidence on the use of screws was that it would have stopped the muffler deflecting under vibration and would ultimately have protected the gel coat from chipping so letting water in. The following passage reflects that conclusion: "Q. So the screws would stop the deflection, is that what you are saying? A. Yes.

Q. But the screws wouldn't stop water damage from chipping of the gel coat, would they? A. It would stop the chipping of the gel coat because it can't move." 44 Finally, in relation to the s74D claim under the Trade Practices Act, it was common ground that the proper test was that enunciated by Sackville J in Courtney v Medtel Pty Ltd (2003) FCA 36 and on appeal unanimously upholding the decision of Sackville J, subnom Medtel Pty Ltd v Courtney (2003) FCASC 151. In Medtel (supra) the court applied a "reasonableness" test. Thus the goods would not be of merchantable quality under s74D unless they were as fit for purposes for which they were commonly bought as "it is objectively reasonable to expect". 45 The trial judge found that because the experts, principally Dr Edward, were unable to comment on the process of manufacture and unable to give an opinion as to what could have and should have been done by FM in the manufacture of the muffler to prevent delamination and premature failure, he was not convinced that FM had breached s74D (judgment WB, 37-38). 46 The same reasons were held to apply to s74B TPA; that is, the claimants' expert evidence did not establish what was wrong with FM's manufacturing process that rendered the muffler not reasonably fit for the purpose for which it was applied, within the meaning of s74B (judgment WB, 38). 47 Accordingly, the trial judge entered judgment for both the first and second opponents against the claimants (judgment WB, 39).

DISPOSITION 48 I consider that once the installer's liability is put aside and the second explanation refuted by FM's own principal, this was not a case in which, in the ordinary affairs of mankind, failure of the muffler was likely to occur without some fault on the part of the manufacturer. Moreover, I consider that the expert evidence strongly supported that conclusion, for reasons I explain below. 49 There was no challenge to the trial judge's conclusion that the installer could not be liable in negligence (WB, 34). Here the fact of the failure of the muffler with its consequences more readily permits an inference of negligence on the part of the manufacturer to be drawn. It is however rebuttable by a tenable explanation equally consistent with negligence or its absence. That requires consideration of the explanations proffered by the manufacturer and the manner of their assessment by the trial judge, but applying the proper test for the plaintiff's onus; proof on the balance of probabilities. 50 Evidence was called by the claimants' qualified naval marine engineer, Mr Box. His evidence was clear and unequivocal. It was in essence that the failure of the muffler was due to the inadequate construction of the base of the muffler, but he does give further explanation of that. The evidence given by Mr Box is set out in two places in the trial judge's reasons (WB, 18-19 and 30-31). 51 Thus at 18-19 the trial judge records the following evidence given by Mr Box: "The Foreshore Marine waterlift has not been properly manufactured to withstand the pressures imposed upon it. The strength of the bond in the fibre reinforced plastic laminate has been inadequate for the purpose for which it was intended and has resulted in leakage and ultimately in failure. The failure of the waterlift is due to a manufacturing defect and not an installation problem.

The waterlift should be reinforced to withstand the exhaust and hydraulic pressures that are expected of it, without relying on any external clamps or fastenings. If such fastenings are required, then the design and construction is at fault. If any modifications are required for installation then in my opinion, these precautions should be clearly marked on the waterlift and explicit warnings and instructions be supplied with every waterlift manufactured. No such written instructions are currently provided." 52 It is true that Mr Box does not deal with precisely why the strength of the bond of the fibre reinforced plastic laminate was inadequate but simply points to that fact. However, the second paragraph quoted above refutes any suggestion that the explanation for the failure lay in faulty installation. The primary reason is that extra clamps or fastenings should have been unnecessary as the water-lift should be reinforced to withstand the exhaust and hydraulic pressures that are expected of it without reliance on clamps or fastenings. 53 If further reason were required, it is found in the fact that no written warning had been provided of the necessity for such fastenings to the installer nor any precise instruction even oral. The trial judge stated that Mr Gorman (the principal of FM whom the trial judge described as a "witness who impresses me overall, particularly his belief in the integrity of his product") did not convince him that "precise instructions were given by Mr Gorman" that "the mufflers must be secured to the boat by a 'four point fix'" (WB, 34). The "four point fix" refers to the suggestion from Mr Scheirs, who was FM's own expert witness, that there should have been four screws or bolts reinforcing the base to the flange (WB, 286-7). I shall return to the relevance of that matter when dealing with the second explanation advanced by FM for the failure of the muffler, namely, loss of integrity or deterioration of the gel coat due to deflection in the flange which caused a leak. 54 In any event, Mr Box himself discounted the need to secure the muffler with screws, as the trial judge expressly recognised in his record of his evidence (WB, 30): "The vessel (now called "Lady") was viewed on its mooring at Drummoyne on the 6th May 2003. The new owner has fitted another Foreshore Marine waterlift to replace the failed one. He stated that Foreshore Marine advised him screw the waterlift flanges to the base. This has been done with three small self-tapping screws, equally spaced around the circumference of the flange (see photo below). These screws will not prevent the flange from delaminating. The distance between the screws is greater that the distance between the area of leakage detailed in Mr Pilcher's report (Page 2 Comment No 5). As previously stated, the strength of the bond in the flange should be designed and manufactured to withstand the internal pressures and not require any extra securing to prevent failure ". [emphasis added] 55 Thus while it is true to say that Mr Box does not identify the precise mechanism of failure through faulty design and manufacture, in the sense that he does not identify each element contributing to the delamination, he does not need to do so. Put simply, the muffler should not have come apart in the way it did, it was clearly a safety hazard undermining the integrity of the boat. It was nothing to the point that the portside muffler had to that date not come apart. That may have just been luck. What was and remained lacking from FM was any explanation for the delamination at least equally consistent with the presence or absence of negligence on the part of FM. 56 But in any event, evidence was given by the claimants' expert Dr Edward in his report as to that precise process of delamination and what could have averted it. His evidence was accurately summarised by the trial judge (at WB, 31) which I quote below: "(a) Poor bonding between the body and base flange (paragraph 5);

(b) The interface seems to have been 'resin poor' (paragraph 5);

(e) The interface was considerably weaker than the remainder of the muffler (paragraph 14);

(f) The design of the muffler was not suited to any application which would involve any appreciable pressure (paragraph 15);

(g) The fibres were not lying in the direction best suited to accommodate the in plane membrane stresses expected (paragraph 15);

(h) The flange of the mufflers was a 'natural plane of weakness' (paragraph 15). 57 I have earlier referred to Dr Edward's particular expertise in polymers. The trial judge stated that "in view of the limited expertise of this witness, and his lack of any information on the manufacture of the muffler in question (and others like it by the First Defendant) I do not attribute great weight as to his conclusions set out above" (WB, 33). 58 With respect, given the evidence of Mr Box who was expert on marine construction generally, Dr Edward's expertise filled any gap that might have been left by Mr Box. Dr Edward's expertise was precisely directed to that gap, being the polymer bonding and its delamination. It was never shown how Dr Edward's readily conceded lack of information on the manufacture of the muffler generally undermined his capacity to give evidence on that bonding; nor why his evidence was not supported by Mr Box's evidence given that it was wholly consistent with it. 59 Dr Edward explained precisely how the bond failed to withstand the internal pressures which Mr Box said it should have withstood. Nowhere in the evidence was there any indication that knowledge of the process of manufacture of the muffler was necessary for his evidence on bonding to have any reliability. In fact his evidence was precisely based upon what the trial judge referred to as "his knowledge of fibreglass constructions". This was the very matter in question given that the muffler was constructed out of fibreglass including both the base and the body as well as the flange between them. 60 As I have said, FM never advanced any explanation consistent with the absence of negligence on its part, though it belatedly attempted an explanation based on failure of the gel coat, an explanation which Mr Gorman of FM himself disavowed. 61 I have already referred to Mr Scheirs' theory, elicited in cross-examination. It was based on assumed chipping of the Flowcoat gel or its removal by reason of flexing of the muffler due to failure to connect the flange to the body with screws, whereby water would or could have penetrated by the process of wicking (WB, 280-284). 62 Mr Gorman, when asked about Flowcoat gel, gave the following evidence: "JOHNSON: Q. So once that is completed, it is painted, the muffler is then painted using what? A. A product called Flowcoat.

Q. You described it, you agreed with Mr Box, that's cosmetic? A. Yes, it is.

Q. Does it form or does it provide any form of seal --- A. No.

Q. --- on it. The seal that you say is formed by that two layer approach, first bonding the circular part of the base into the body? A. Mm-hm.

Q. And then the fibreglassing of that circular part? A. Yes.

Q. To the flange? A. Mm-hm. (WB, 246.17-.36) 63 Mr Gorman's evidence focussed on the necessity as he saw it for making sure "the muffler is secure" by "a standard four point fix" (WB, 248.43-.51). But that necessity for securing the muffler, even if accepted, cannot avail FM in the absence of written or precise instructions as to installation being so carried out. It is therefore not an explanation consistent with the absence of negligence on the part of FM. 64 The trial judge was in error in concluding that there was no breach of FM's duty of care to the claimants, and thus no negligence. To the contrary, the evidence of the experts as well as Mr Gorman's own evidence leads inevitably to the conclusion that there was a breach of that duty of care. Whilst the inability to call lay or expert evidence showing the precise way in which something has happened is not necessary fatal (see for example Adelaide Stevedoring Co Ltd v Forst (1940) 64 CLR 538 at 563-4, 569) and where but slight evidence should suffice to persuade the trier of fact that liability has been sheeted home to a defendant where the facts are peculiarly within the knowledge of that party, this is not even such a case. 65 Here the explanation is clear enough. The trial judge's setting out of some 15 possible reasons for the failure ([33] above), with respect, was apt to mislead. Thus he breaks down into separate elements the two possible explanations as if each element constituted a separate reason. It does not. To these were added what are more accurately consequences of the failure, not explanations for it, such as water entry (elements (b) and (c)). Then there are added supposedly competing explanations for which there is simply no evidence, such as a dropped spanner or backfire (elements (l) and (k)). It is clear enough that the explanation the subject of Dr Edward's evidence and that of Mr Box is in fact a combination of paragraphs (a), (b), (g), (i), (k), (n) and (o). It should have been treated as the explanation to be accepted on the balance of probabilities being an explanation not consistent with absence of negligence on the part of FM.

Conclusion 66 The claimants have established that FM breached its duty of care in the carrying out of the manufacture of the muffler which failed, so that FM was liable to them in negligence.

Trade Practice Act - ss 74B and 74D 67 Accepting for both provisions the test in Medtel that "fitness of purpose of the goods in question is to be measured against what it was objectively reasonable to expect, in terms of fitness for the purpose, in all the relevant circumstances", that test is amply satisfied here. The reasons earlier set out in relation to that element of breach of the duty of care in negligence apply equally to ss74B and 74D. Accordingly, the trial judge was, with respect, in error in failing to find FM liable to the claimants under both s74B and s74D of the TPA. This was because the polymer bond for this particular muffler, the product of the process of design and manufacture which FM applied to it, was inadequate, resulting in leakage and its ultimate failure. Hence the muffler was neither reasonably fit for its known purpose nor of merchantable quality.

OVERALL CONCLUSION AND ORDERS 68 I conclude that the claimants succeed in their appeal and propose that the following orders be made: (1) Appeal allowed. (2) Set aside the judgment and orders made by Sorby DCJ on 1 March 2005. (3) In lieu thereof, order that judgment for $58,342.35 be entered for the appellants against the first respondent. (4) The first respondent to pay the costs of the appellants on appeal and in the proceedings below but to have a certificate under the Suitors' Fund Act, 1951, if otherwise entitled thereto. 69 BRYSON JA: I agree with Santow JA. 70 McCLELLAN CJ at CL: I agree with Santow JA. **********

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Trade Practices Act 1974(Cth)

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Judgment (34 paragraphs)

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