FEDERAL COURT OF AUSTRALIA

COURTNEY v MEDTEL PTY LIMITED [2003] FCA 36

N 661 of 2000

                                                 SUMMARY

In accordance with the practice of the Federal Court in cases of public interest, the Court has prepared this brief summary to accompany the reasons for judgment, delivered today. It must, of course, be emphasised that the only authoritative pronouncement of the Court's reasons is that contained in the published reasons for judgment. This summary is intended to assist in understanding the principal conclusions reached by the Court, but is necessarily incomplete.

These proceedings arise out of a hazard alert issued by the Therapeutic Goods Administration on 5 June 2000.  The hazard alert related to a particular batch of St Jude Teletronic Tempo Pacemakers manufactured by Pacesetter Inc (“Pacesetter”), at its facility in Sylmar, California, between March 1997 and December 1998.  The judgment refers to this batch as the “Hazard Alert Pacemakers”.

A pacemaker is a device, comprising of a pulse generator (including a battery) and 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 the patient whose heart is subject to arrhythmia. 

The alert was issued due to an increased risk that the Hazard Alert Pacemakers would experience an increased risk of “early battery depletion and resulting no output conditions”.  The alert affected some 1,048 persons who had had a Tempo Pacemaker implanted in Australia.  The doctors treating these patients were advised to review each patient and evaluate the functioning of his or her Pacemaker.  Consideration was to be given to the removal (“explantation”) and replacement of the Pacemaker, both for patients who were considered pacemaker dependent and for those who were not. 

The applicant, who is now 70 years old, has a long history of ischaemic heart disease.  He was admitted to hospital in July 1999 and told that he would require surgery to unblock his carotid artery.  He was also told that he should have a pacemaker implanted prior to the surgery.  The Pacemaker was implanted on 21 July 1999 and the surgery took place shortly thereafter.

Following the hazard alert, the applicant attended Geelong Hospital for tests.  He was told that, although the battery in his Pacemaker was “working alright”, it was recommended that the Pacemaker should be explanted and replaced.  The applicant had to wait some time before the procedure could be undertaken.  In the end, his Pacemaker was explanted on 1 September 2000 and replaced with another pacemaker manufactured by Pacesetter.

The applicant instituted representative proceedings under Part IVA of the Federal Court of Australia Act 1976 (Cth).  He brought the proceedings on his own behalf and on behalf of all persons who had had a Hazard Alert Pacemaker implanted in Australia. 

The applicant says that Pacesetter, the manufacturer of Tempo Pacemakers, and Medtel Pty Ltd (“Medtel”), the Australian distributors of Tempo Pacemakers, are liable, on a variety of grounds, to pay damages or compensation to him and to each of the members of the represented group.  This judgment, however, is concerned only with the claims made against Medtel under certain provisions of the Trade Practices Act 1974 (Cth), including s 74D.  Section 74D of the Trade Practices Act provides that a distributor of products may be liable to compensate a consumer if the product supplied is not of merchantable quality and the consumer suffers loss or damage as a result.

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 Pacemaker has already ceased to function or shown signs of malfunction while in the patient’s body, it is not possible to ascertain whether it will actually lose function prematurely until it is explanted and tested outside the patient’s body.

The group members on whose behalf the proceedings are brought fall into at least three different sub-groups:

(i)                  those whose Hazard Alert Pacemakers have remained in place despite the hazard alert;

(ii)                those whose Hazard Alert Pacemakers have been explanted and, on examination, the Pacemakers have found not to be functioning normally; and

(iii)               those whose Hazard Alert Pacemakers have been explanted and, on examination, have been found to be functioning normally.

The applicant falls into the third sub-group.  This is because his Pacemaker was tested after it had been explanted and was found to be functioning normally.  The tests could not be carried out while the Pacemaker was still implanted in his body.

The judgment deals with the applicant’s claim to compensation, although it addresses some other issues. 

The parties agreed that the accelerated battery depletion that affected a proportion 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 or wiring.  It was also not in dispute that the short circuits were caused by what are known as dendrites.  Dendrites are branch-like structures, often only visible under a microscope, that are formed by electro-chemical processes.

The Court has found that nearly all the Hazard Alert Pacemakers were manufactured using a particular solder, known as “yellow spool solder”.  While pacemakers generally can never be guaranteed to be completely free of the possibility of malfunction, it was the use of that solder that created a superadded risk that the Hazard Alert Pacemakers would fail prematurely.  This is because the yellow spool solder created conditions conducive to dendritic growth which, in turn, would lead to partial short circuits and premature depletion of the Pacemaker’s battery.

The Court has concluded that the applicant’s Pacemaker was not of merchantable quality even though, as events turned out, it would probably have operated normally had it remained in the applicant’s body.  The Court considered that the purpose for which pacemakers are normally acquired is to be surgically implanted on the advice of doctors into the patient’s body, so as to restore and maintain a normal heart beat.  The applicant’s Pacemaker was not fit for this purpose, since it was subject to a superadded risk of premature failure that medical practitioners and others would regard as unacceptable.  Accordingly, the Pacemaker was not of merchantable quality.  The applicant is therefore entitled to compensation for any loss or damage he has sustained in consequence.

The judgment stresses that Medtel has not been held liable to pay compensation because the applicant’s Pacemaker was included in a hazard alert.  The device was held not to be of merchantable quality because it was manufactured using material (the yellow spool solder) that created a superadded risk of premature failure, thereby making the device less fit for its purpose than was reasonable to expect.  The decision does not create a disincentive for manufacturers or distributors who are aware of a problem to be frank in issuing hazard alerts or other warnings to the community.

The Court has decided that the applicant is entitled to compensation for pain and suffering and other losses resulting from the explantation of his Pacemaker.  It has assessed the compensation at $9,988.00, plus a small amount of interest.  The Court has declined to award a separate sum for any anxiety suffered by the applicant once he was told that his Pacemaker would have to be removed.

Whether members of the represented group are entitled to compensation will depend primarily upon whether they are able to show that they have suffered loss or damage by reason that their particular Pacemaker was not of merchantable quality. Not all will necessarily be able to do so.

The Court has made directions for the further conduct of the case.