The facts
4 Some of the issues in this matter arise as a result of the residency of the parties. Mr Vautin is a resident of Australia. Eagle Yachts is incorporated in Australia and has carried on business as a seller of boats here. Bertram, on the other hand, is an American company, incorporated in Delaware and engaged in the manufacture of motor vessels in the State of Florida.
5 The relationship between Eagle Yachts and Bertram was, effectively, governed by an exclusive dealership agreement. In summary, that consisted of a written agreement entered into in May 2005 between Bertram and Eagle Yachts whereby the latter became the exclusive supplier in Australia of "pleasure yachts" manufactured by Bertram. That agreement was entitled "Bertram Yacht, Inc Dealer Agreement 2005-2008". By its terms that agreement terminated on 31 August 2008. However, it is accepted as between Bertram and Eagle Yachts, that the parties continued to be bound by and continued to perform the terms of the agreement (exclusive of the termination clause) subsequent to that nominated termination date. On 28 October 2013, Eagle Yachts provided two months' written notice to Bertram that it would terminate the agreement. Consequently, on 27 December 2013, the agreement came to an end. The terms of the exclusive dealership agreement and the manner in which they were carried out are important in the context of the question of whether Bertram was carrying on business in Australia. They are discussed in detail below.
6 Mr Vautin enjoys boating in motor yachts, including engaging in marlin fishing. Prior to acquiring Revive, he had been the owner of four other vessels, all of which were made by Bertram, the last of which was a 63ft vessel. He had purchased that vessel from Eagle Yachts and, at the time of buying it, he had indicated to Eagle Yachts that he wanted to use the vessel for recreational deep-sea fishing and to use it to fish for marlin during the North Queensland marlin season.
7 In or about mid July 2010, Mr Vautin received a telephone call from Mr Brad Rodgers who was the sales manager with Eagle Yachts and who had sold him the 63ft vessel. Mr Rodgers called to offer to Mr Vautin a larger vessel; being one in the Bertram 700 series. The particular vessel offered was especially attractive to Mr Vautin as it had an enclosed flybridge.
8 Subsequently, on or about 6 October 2011, Mr Vautin entered into the contract to purchase a Bertram 700 Enclosed Bridge motor yacht (hull #009). He agreed to pay a purchase price of the combined amounts of US$3,000,000 plus AUD$1,200,000, the latter amount being satisfied by the trading in of his existing vessel. He also agreed to pay the sum of US$75,000 representing the cost of having the vessel shipped to Australia.
9 At the time of purchasing the vessel, Mr Vautin also purchased from Bertram upgrades to the vessel which cost US$235,290. He has also spent a considerable amount of money making his own additions to the vessel, including the installation of a satellite telephone, a marlin tower and associated electronics, a tender on the bow, a duckboard on the stern, a fridge / freezer in the cockpit, and two monitors in the helm with connected boat cameras.
10 It is an agreed fact between the parties that, prior to and at the time that Mr Vautin purchased the vessel from Eagle Yachts, he disclosed to Eagle Yachts by implication that the purpose for which the vessel was being acquired by him was for motoring on the open ocean. It is also agreed that Eagle Yachts represented to him that the vessel was reasonably fit for the purpose of motoring on the open ocean. Given the size and type of vessel in question these matters are somewhat axiomatic.
11 Another agreed fact is that Mr Vautin paid the purchase price and the shipping costs in accordance with the terms of the agreement.
12 Pursuant to the dealership agreement, a vessel of the type required to fulfil the order placed by Mr Vautin was ordered by Eagle Yachts from Bertram. The latter manufactured the vessel at its factory in Florida. It did so using a hull constructed some years previously. The completed vessel was delivered to Eagle Yachts at Bertram's Florida premises and it was shipped to Australia. It was received in Australia by Eagle Yachts in or around February 2012 and delivered to Mr Vautin on 5 March 2012.
13 On around 4 February 2012, Eagle Yachts, by Mr Rodgers, gave to Mr Vautin a Bertram Warranty Card in accordance with its obligations under the dealership agreement. Mr Vautin completed the card which was immediately returned to Mr Rodgers who forwarded it to Bertram in Florida. There is no dispute between the parties that Mr Vautin received the manufacturer's warranty from Bertram as he was entitled to under the contract of purchase and there is no dispute that the warranty card was returned to Bertram.
14 After acquiring it, Mr Vautin used the vessel solely for the purposes of recreational motor cruising and game fishing. He has not used it for any other purpose. There is no evidence that it was used other than in accordance with its intended uses and within its intended capabilities. Mr Vautin employed a full time skipper for the vessel, being Mr Leigh Bradshaw. It has been part of Mr Bradshaw's duties to maintain the vessel in first class condition and, apart from the damage to the vessel caused by the testing for the purposes of this litigation, it is apparent that he has fulfilled that obligation. Mr Bradshaw has incurred expenses for the maintenance and upkeep of the vessel from time to time on behalf of Mr Vautin.
15 Shortly after the vessel was acquired, Bertram undertook a number of warranty jobs on the vessel. When such work was required the warranty claims were made through Mr Rodgers at Eagle Yachts. Eagle Yachts undertook the required work to fulfil Bertram's obligations under its warranty.
16 In November 2014, the vessel was sailed from Cairns to Brisbane after the completion of the marlin fishing season. In the course of that journey the skipper of the vessel, Mr Bradshaw, noticed damage occurring in the forward portside part of the hull. In particular, he observed that there was delamination of the inside skin in the topside of the bow. He immediately telephoned Mr Vautin who, the next day, travelled to the Gold Coast to inspect the damage.
17 Shortly after Mr Vautin arrived on the Gold Coast and inspected the damage to Revive, he telephoned Mr Rodgers and advised him of what had occurred. Within a day or so Mr Rodgers arrived on the Gold Coast also to inspect the damage. Mr Rodgers was the employee at Eagle Yachts who sold Revive to Mr Vautin. At this point in time, Eagle Yachts had ceased to be the exclusive dealer of Bertram Yachts in Australia. That said, it was apparently still handling warranty claims on Bertram's behalf.
18 On 15 November 2014, and prior to leaving for the Gold Coast, Mr Rodgers sent an email to Bertram (by that time referred to as the Ferretti Group) and, in particular, to Mr Frederico Ferrando. In that email he advised that the vessel sold to Mr Vautin (referred to by its code 700/009) had started to delaminate on the port forward hull in an area of about 2 metres wide running down to just above the water line. Mr Rodgers advised that Mr Vautin would like to contact them to discuss a way forward to address the situation.
19 A reply email to Mr Rodgers came from Mr Ferrando on 17 November 2014 the effect of which was that he would discuss the matter with Mr Rodgers the following day.
20 It does not appear that Mr Ferrando did contact or communicate with Mr Rodgers on the following day as, on 19 November 2014, Mr Rodgers sent a further email to Mr Ferrando advising him that he was flying to Queensland to inspect the vessel and to review the damage and, further, that Mr Vautin was inquiring of Mr Rodgers as to what assistance would be provided by Bertram and/or the Ferretti Group in the future. Mr Rodgers sought information as to what steps would be taken and what assistance Ferretti would provide. He asked for an urgent response. Unfortunately there did not appear to be any response, urgent or otherwise, from Bertram, the Ferretti Group or from Mr Ferrando. Despite being entitled in this action to call evidence as it saw fit, Bertram remained completely silent as to why it did not respond to the requests for assistance in relation to the delamination on Revive.
21 On 4 December 2014, Bertram and Eagle Yachts were notified of the damage in a letter from Mr Vautin. The letter was directed to Mr Ferrando as the Logistic and Commissioning Manager Americas Ferretti Group in Ft Lauderdale, Florida. In the letter Mr Vautin formally advised of the defect in the hull of the Revive, that the defect appeared to fall within the scope of the Bertram warranty, that the vessel was unseaworthy and awaiting repair by Bertram or on its behalf. Mr Vautin sought an acknowledgment of the Notice of Defect as a matter of urgency together with advice as to how the repairs would be undertaken. The letter was sent by registered mail and, apparently, was received.
22 Bertram did not respond to that letter. Again, despite being a party to this action, it called no evidence as to why it did not reply to the letter or act to fulfil its warranty obligations. It has refused to fulfil its obligations under the warranty which it gave and has provided no justification for that refusal.
23 It appears that Mr Vautin's insurers, Club Marine, engaged Marine & Leisure Assess Pty Ltd to undertake an assessment of the damage to the vessel. A report was produced on 24 November 2014. The report identified substantial delamination on the portside hull and on the portside deck above the gunwale. It also identified cracking in the gel-coat and the external port deck. The report identified that it was not possible to estimate the cost of rectification at that time; it also recommended that the vessel not be used until further investigations were conducted.
24 A subsequent report was undertaken by marine assessors, Navsafe Marine Pty Ltd. It is dated 9 December 2014. There were a number of inspections of the vessel for the purposes of this report, including one on 4 December 2014 where some removal of inner structural laminate occurred. That investigation revealed the core bonding had failed. Various photographs were taken of the removed panel and of the condition of the core. The evidence revealed "the core bonding between both the inner structural and outer structural laminates has failed in large areas of the portside hull topside matrix". Navsafe reported that there was sufficient evidence to justify a conclusion that the structural integrity of the composite hull topside laminate matrix was compromised on the external portside in the vicinity of the anchor chain locker space. It postulated that the deficiencies might extend aft of the collision bulkhead on the forward cabin area. It pointed out that the nature and extent of the deficiencies could not be identified at that time. Most poignantly for present purposes is the conclusion in the report in relation to the delamination defect:
3. This will be an ongoing and increasing defect in cost and physical size and in time will cause a catastrophic failure of the hull structure if not immediately repaired.
25 On 15 February 2015, Mr Clive J Seares of Reanu Services Pty Ltd, a loss adjuster, sent further correspondence to the Ferretti Group and, in particular, to a Mr Brian Kelley. He advised that he was assisting Mr Vautin with the coordination of the warranty claim along with Mr Brad Rodgers. It appears that Mr Seares enclosed with the email a copy of the Navsafe Survey Report. In that email Mr Seares identified that there may be very extensive repairs as the surveyor had found delamination, or signs of delamination, in a number of areas of the yacht. He identified that the structural integrity of the hull topside had been compromised in a number of places and that further examination was required to determine the full extent of the affected areas. It was further identified that unless the hull areas were repaired there would be a catastrophic failure of the hull structure. Mr Seares identified that he looked forward to receiving an indication of any further information that Ferretti may require in order to proceed with the warranty repairs.
26 This letter apparently followed from an email of Mr Rodgers of 9 February 2015 to Mr Kelley about the matter and Mr Kelley's response on 10 February 2015 requesting that Mr Rodgers submit the survey and repair quotes ASAP. It is not apparent that any response was provided to Mr Seares in respect of the email which he sent.
27 Subsequently, on 27 April 2015 Mr Seares wrote to Mr Kelley of the Ferretti Group (via an email) in which it was advised that a detailed draft "scope of work" and estimate/quote for warranty repairs to the yacht was attached. The work which was identified as being necessary was based on the recommendations of the Navsafe Marine Report and in the expectation that in undertaking repairs of the currently visible damage, further failures would be found to involve the entire port and starboard topsides. The quote was for repair of those areas and the total cost was $856,054. In his email Mr Seares requested that Mr Kelley provide him with full construction drawings, a detailed laminate schedule for the inner and outer hull shell laminate, information as to how all secondary internal bonding was achieved, and identification of the core material and bonding agents used. He also sought authorisation of the repairs under the warranty.
28 Again, Bertram did not respond to that email. Again, it chose not to call any evidence as to why it did not respond to the email nor comply with its warranty obligations.
29 On 26 June 2015, Mr Vautin sent by registered mail to Mr Ferrando a copy of the letter of Mr Seares together with the repair quote. Mr Vautin's letter identified that there had been no response to the email of 27 April and that he looked forward to hearing from the Ferretti Group.
30 Bertram did not respond to that letter and has called no evidence as to why it did not.
31 As a consequence of the reports obtained by Mr Vautin as to the potential for the existence of substantial defects in the vessel, by letter of 23 July 2015, Mr Andrew Dovell was engaged to prepare an expert's report in relation to the defects. For the purposes of preparing that report Mr Dovell inspected the Revive on a number of occasions. First, between 3 and 4 August 2015, and then on 31 August 2015. Mr Dovell obtained "cored" samples of the hull structure which he sent to the University of Southern Queensland for testing. A report was received from that University and it was considered by Mr Dovell for the purposes of his report.
32 On 9 December 2015, Mr Dovell completed his expert report in relation to the Revive. It is damning of the structure of the vessel.
33 On 16 March 2016 Mr Vautin, by his solicitors, Banki Haddock Fiora, sent a letter to Eagle Yachts in which Mr Vautin purported to reject the vessel on the basis that Revive was not reasonably fit to motor on the open seas and that Eagle Yachts had failed to comply with the guarantees in ss 54(1) and 55(1) of the ACL. Further, on the basis of the damage to the vessel and that, due to its size, it was incapable of being returned to Eagle Yachts which was now located in Western Australia, Eagle Yachts was informed of its obligation to collect the vessel.
34 That purported rejection of the vessel was not accepted by Eagle Yachts
35 On 18 April 2016, the present proceedings were commenced by Mr Vautin against Eagle Yachts and Bertram. In turn, Eagle Yachts has pursued a cross-claim against Bertram in reliance upon a right of indemnity under the dealership agreement.