FEDERAL COURT OF AUSTRALIA

BNMB Transport Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd [2018] FCA 223

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The Appellants pay the Respondents’ costs.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

MURPHY J:

INTRODUCTION

1    Before the Court is an appeal by BNMB Transport Pty Ltd (BNMB), Bojan Govedarica (Mr Govedarica) and Milivoje Govedarica (Mr M Govedarica) (the appellants) against a judgment of the Federal Circuit Court. The primary judge dismissed a claim for damages by BNMB against Mercedes-Benz Australia/Pacific Pty Ltd (Mercedes-Benz) and Mercedes-Benz Financial Services Australia (Mercedes-Benz Finance) (the respondents), and allowed a cross-claim by Mercedes-Benz Finance against the appellants: see BNMB Transport Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd & Another [2016] FCCA 2047.

2    The dispute arose out of BNMB’s purchase of a second-hand high-performance 2004 Mercedes-Benz E55 AMG 211 motor vehicle (the vehicle) from Mercedes-Benz on 23 May 2011, which it financed through a hire purchase agreement with Mercedes-Benz Finance guaranteed by Mr Govedarica and Mr M Govedarica. Two months after the purchase, within the warranty period, the rear suspension of the vehicle collapsed, rendering the vehicle useless. Mercedes-Benz refused to repair the vehicle under warranty on the basis that the suspension failure was caused by driver misuse.

3    In July 2013 BNMB commenced a claim in the Federal Circuit Court seeking compensation or damages pursuant to the Australian Consumer Law (ACL), Schedule 2 to the Competition and Consumer Act 2010 (Cth) and for breach of the vehicle sale contract. Mercedes-Benz Finance commenced a cross-claim to recover the monies due to it under the hire purchase agreement. On 11 August 2016 the primary judge dismissed BNMB’s proceeding and upheld the cross-claim. His Honour found that the vehicle was in good order and condition at the time of sale and that the rear suspension failure was caused by misuse after BNMB took delivery of it. The Court ordered the appellants to pay $91,718.78 due to Mercedes-Benz Finance under the hire purchase agreement.

4    For the reasons I set out below I have made orders to dismiss the appeal and for the appellants to pay the respondents’ costs.

THE FACTUAL BACKGROUND

The purchase of the vehicle on 20 May 2011

5    On or about 20 May 2011 BNMB entered into a contract to purchase the vehicle from Mercedes-Benz for $85,000. Mr Govedarica, BNMB’s principal officer, signed the contract on behalf of the company. On 23 May 2011 BNMB entered into a hire purchase agreement with Mercedes-Benz Finance, and Mr Govedarica and Mr M Govedarica guaranteed BNMB’s obligations under the agreement. BNMB took delivery of the vehicle that day.

The roadworthy certificate

6    On 19 May 2011 Scott Kelly, a supervisor and workshop foreman with Mercedes-Benz who was responsible for all roadworthy and pre-delivery operations, conducted a roadworthy test on the vehicle and certified its roadworthiness.

7    Mr Kelly’s evidence was accepted by the primary judge. His Honour said (at [9]) that Mr Kelly impressed him as “a very experienced, technically astute man with a highly developed understanding of the mechanical and technical workings of the vehicle”. His Honour summarised his evidence, including that:

(a)    Mercedes-Benz only kept the “best of the best” in used vehicles, and that vehicles that did not meet this description were sold on to wholesalers;

(b)    at that time the odometer reading was 61,176 kilometres;

(c)    in relation to the vehicle’s suspension, the roadworthiness check involved the checking of all ball joints or control arms and rubber bushings for wear and movement, and checking the suspension heights for sagging so that there were no deviations from ride height specifications. He said that the suspension was subjected to road testing in which phase technicians listen for unusual noises and test for loose movement and evidence of suspension issues or sideways movement of the vehicle when the brakes were applied hard;

(d)    the suspension of the vehicle would last a lifetime with normal use but if the vehicle was driven with harsh acceleration, meaning wheel spinning, “throwing the car around sideways”, putting the accelerator flat to the floor or turning the traction control off, then the suspension could fail in extreme conditions;

(e)    when asked whether such a high-performance vehicle was built to withstand serious acceleration he said that while it was designed to be a high-performance vehicle it was nonetheless a passenger vehicle, not a race vehicle. He said the vehicle is a road passenger vehicle with performance features;

(f)    the roadworthy check included assessing the tread on the vehicle’s tyres, especially for evidence of tread wear indicators. He said that the tread wear indicator needed to reach a minimum of between 1.5 to 1.8 mm but that Mercedes-Benz fiercely protected its reputation and ordinarily only sent vehicles out on the road with a new customer with between 50% and 60% of tyre tread (closer to 3 or 4 mm) ;

(g)    with normal driving new tyres fitted to the particular type of vehicle would be expected to last for 30,000 km of use. Tyres having 50% of new tyre capacity would last for half of that, that is, 15,000 km of use; and

(h)    the tyres on the vehicle were made of a “very soft compound” that is “very sticky and very soft” and that these tyres driven under harsh conditions would not last very long. He said that if the vehicle was driven while skidding with the traction control off, the tyres would last only a matter of minutes.

Mr Govedarica returns the vehicle to Mercedes-Benz on 1 June 2011

8    Mr Govedarica gave evidence that the day after purchasing the vehicle he heard a knocking sound while driving, and notified Mercedes-Benz two days later. Mercedes-Benz records show that Mr Govedarica returned the vehicle to Mercedes-Benz for repair under warranty on 1 June 2011.

9    Upon its return the vehicle was repaired under the supervision of Geoffrey Graetz, Mercedes-Benz’s service manager. Mr Graetz gave evidence that the vehicle was “a hundred percent roadworthy before it was sold”. He said that when the vehicle was returned it had problems with an engine mount and with a drive shaft coupling, together with a minor electrical issue, and that Mercedes-Benz investigated Mr Govedarica’s concerns and replaced a drive shaft bush. He said that there was no problem with the suspension at that time.

10    Importantly, Mr Graetz said that when he inspected the vehicle on or about 1 June 2011 the rear tyres were bald and there was burnt rubber on the inside of the rear wheel arches. At that point the vehicle had only been driven about 1,300 kilometres after the pre-sale roadworthy check. He said that given the state of the tyres, he believed they would have been replaced at this time.

11    Mr Govedarica’s case was that the tyres were not bald as at 1 June 2011. He said that some time after the vehicle was returned to him (on 3 June 2011) the car was handling poorly and drove “like a boat”. He said that he did not change the tyres until later, after he had contacted Liam Pamieta, a Mercedes-Benz salesman, who suggested he do so because they were getting bald. He produced an invoice for two tyres supplied by Victoria Wide Tyre Service Pty Ltd together with a payment stub, dated 11 July 2011, to show that the rear tyres were replaced then. Mr Govedarica said he went for a test drive with Mr Pamieta following the replacement of the tyres, and in his opinion the new tyres made little difference to the vehicle’s poor handling.

12    Mr Graetz gave evidence that the vehicle could not be test-driven as at 1 June 2011 because the rear tyres were completely bald and the vehicle was therefore unroadworthy. He said Mr Govedarica was informed that he had to replace the rear tyres before Mercedes-Benz could road-test the car for any other ongoing problems, and that Mr Govedarica did so. Then in cross-examination Mr Graetz accepted that the tyres were not replaced when the vehicle was serviced between 1-3 June 2011 and that the vehicle was nevertheless test-driven by Mercedes-Benz staff. Mr Graetz was, however, adamant that the tyres were bald as at 1 June 2011. He said that he had no difficulty in remembering that because a number of the mechanics and technicians in the workshop had come to look at the vehicle in that period because of what he described as the “massive pile of black rubber inside the guards”.

13    The vehicle was returned to Mr Govedarica on 3 June 2011. Mr Govedarica said that upon the return of the vehicle it still handled poorly and drove “like a boat”.

The suspension failure on 27 July 2011

14    It is common ground that after Mr Govedarica again took delivery of the vehicle he continued to drive it until the suspension failed on or about 27 July 2011.

15    The gist of Mr Govedarica’s evidence was (as the primary judge noted at [57]-[60]) that the suspension failed without any precipitating trauma to the vehicle. He said that immediately prior to the suspension failure he was driving the vehicle to a location near his house and a sensor light came on to indicate that the vehicle was too low. He pulled over and got out of the vehicle and saw that “the rear of the vehicle was raised up by the airbags.” Mr Govedarica said that the vehicle suspension failure made no sense as, while it was in his care, the vehicle was not subjected to impact or accident and he drove the vehicle normally.

16    Mr Govedarica said he did not know what was wrong with the vehicle and he telephoned Mercedes-Benz. He was told to send it in on the back of a tow truck. Mr Graetz said that a dispute arose when the vehicle was returned. He said it was plain that the rear suspension had failed and that Mercedes-Benz was concerned to investigate whether the suspension failure was a warranty matter.

17    Ultimately, Mercedes-Benz declined to repair the vehicle under warranty on the basis of “owner’s abuse”, and returned the vehicle to BNMB on the back of a tow truck. Mr Graetz told Mr Govedarica to look to the vehicle’s insurer and suggested that he find a mechanical engineer to give an opinion about the cause of the vehicle’s suspension failure. The vehicle has never been repaired.

The expert evidence

18    The critical issue in the case was the cause of the suspension failure and whether that failure was a result of damage to the vehicle after the point of sale. The parties filed the following expert witness reports:

(a)    the appellants relied on a report by William Malkoutzis, mechanical engineer, dated 23 March 2015; and

(b)    the respondents relied on a report by Dr Robert Casey, mechanical engineer, dated 9 July 2015.

19    The expert witnesses conferred and prepared a joint report to identify the areas of agreement and disagreement within the opinions they expressed in their initial reports. The parties filed a joint expert report dated 19 August 2015. It stated:

What Failed?

Both experts agree that the primary failure was the two weld nuts securing the two rear bolts of the rear sub-frame [of the vehicle].

Both experts agree that these two rear weld nuts failed via fatigue (i.e. an alternating force) such that a crack grew within each of the nuts to the point that the remaining metal was no longer able to support the applied load. The remaining metal failed in overload. …

Both experts agree that the failure within the weld nuts relates to bending. That is, the bolts were cyclically bent back and forth which consequently caused a crack in the nut to develop and grow. In engineering terms this failure process is termed fatigue.

20    The experts did not, however, agree as to the cause of the metal fatigue in the weld nuts:

What Caused the Fatigue?

[Dr Casey] believes that the two nuts failed due to harsh acceleration for the following reasons:

1.    The directionality of the fatigue on both nuts is consistent with their bolts being bent as a result of forces that occur as the vehicle is accelerated.

2.    Both nuts have the same directionality to their fatigue failure direction consistent with the fact that the same forces caused both to fail.

3.    Acceleration forces would cause the requisite tensile forces to be present on that side of the nuts where fatigue was observed (fatigue is a tensile phenomenon).

4.    The fact that the same forces caused both nuts to fail is consistent with the fact that the fatigue process was occurring in both nuts at the same time.

5.    Acceleration would affect both nuts equally and is commensurate with the fact that both nuts failed via fatigue with the same directionality.

6.    Other in-service forces exposed to those nuts are not consistent with the observed directionality of the fatigue or are not tensile and those forces are therefore discounted.

7.    [Dr Casey] could not find any defect or flaw to explain the initiation of the fatigue and therefore these were discounted.

8.    The unusual nature of this type of failure in his experience aligns to forces outside those typically experienced for normal on-road conditions and as such it is likely that the forces were harsher than usual.

[Mr Malkoutzis] believes:

1.    Agrees that the directionality of the fatigue on both nuts is consistent with their bolts being bent as a result of forces that occur as the vehicle is accelerated, and possibly also compounded by suspension input.

2.    The initiation of the crack that subsequently leads to a fatigue failure could have been the result of over tightening of the securing bolts. I.e. higher localised tensile force in the root of the nut weld that was then aggravated by the input forces discussed so causing the failure yet showing no initial flaw. Or alternatively the welding of the nut may not have been carried out correctly at manufacture so creating an inherent out of specification weak joints.

3.    Both acceleration and suspension forces could cause the requisite tensile forces to be present on the nuts where fatigue was observed. This is reinforced by figure 3b in [Mr Malkoutzis’] report [where] it can be seen that the crack line is approximately 30 to 45 degrees to the centreline of the vehicle on the remaining portion of the nut on one side still attached to the body. Indicating that the forces were not totally perpendicular to the centreline of the vehicle so not due to acceleration only.

4.    Both nuts did not failure [sic] at the “same time”; for both to fail catastrophically at the same time is highly improbable. The owner was complaining and reported to their Mercedes Dealer that the vehicle rear suspension was moving about while being driven. This strongly suggests they did not fail at the same time. One side was losing clamped load at some point before the other. The shuffling damage to one side of the 2 affected joints and the angle of the failure shown in fig 3b of my report also reinforces this.

When did the Failure Occur?

[Dr Casey] found no consistent long term indicia relating to the fatigue failure such as long term rust or fretting and this leads him to conclude that the fatigue process is relatively recent to the final failure. Moreover, the fact that the vehicle was repaired for a damaged tail shaft and worn tyres some 2 months prior is consistent with harsh driving in the months preceding the final failure. On this basis he concludes that the fatigue process had not been occurring for prolonged periods prior to the final failure.

Why Did the Failure Occur?

[Mr Malkoutzis] believes based on his test and development experience as an automotive vehicle design, test and development engineer; the hardware such as the weld nut and bolt combination are regarded as safety critical joints and would typically be designed and tested to loads 3 time[s] greater or more than the worst case scenario that the vehicle could possibly be exposed to. Since the vehicle optimises its acceleration capability (reported as 0-100 kph in 4.5 seconds) by the use of traction control; it is highly unlikely that the driver who may turned off the traction control could ever meet the levels of acceleration the vehicle is normally capable of and so a force input to the subject hardware as described above. It is based on this that he believes that either the vehicle was not assembled or manufactured correctly (nuts were incorrectly welded in), or more likely it has an inherent design fault that only arises when driven more aggressively in this the higher engine performance version of this model range.

[Dr Casey] believes that in all likelihood, the failure stems from harsh acceleration. He does not know;

1.    If Mercedes-Benz designs the joints in question on the basis of safety critical components,

2.    If Mercedes-Benz uses a safety factor of 3 for such components,

3.    If or when the traction control system was turned off,

4.    If this vehicle optimises its traction control capability via a traction control system,

5.    The driving habits of the people who drove this vehicle and in particular whether or not they would be capable of meeting the acceleration levels needed to accelerate this vehicle to 100 km/hr in 4.5 seconds.

Furthermore, as pointed out in his first report, [Dr Casey] did not find any fault or material defect that explains why the fatigue started in the first place. This includes welds and as such he does not agree with the assertion that the fatigue started due to its weld. Finally, he is not seen any support for an assertion that this vehicle has an inherent design fault that only arises when driven aggressively and notes that this possibility was not raised in Mr Malkoutzis’ report.

The commencement of the proceeding

21    On 8 July 2013 BNMB commenced a claim for compensation or damages under the ACL and for breach of the sale contract. BNMB relied on:

(a)    the statutory guarantee under s 54 of the ACL which provides that goods supplied to a consumer in trade or commerce must be of “acceptable quality”. Goods are of acceptable quality if, amongst other things, they are fit for all the purposes for which goods of that kind are commonly supplied and free from defects; and

(b)    the statutory warranty under s 54 of the Motor Car Traders Act 1986 (Vic) (the MCT Act), which provides that if a defect appears in a motor vehicle before the end of a three-month period following its sale, the motor car trader must fix or make good the vehicle at the motor car trader’s expense.

22    On 30 July 2013 the respondents filed a cross-claim in which they sought payment of the monies due from BNMB under the hire purchase agreement and the guarantees Mr Govedarica and Mr M Govedarica provided.

23    On 2 October 2014 the respondents filed an amended defence in which they denied liability and alleged that the rear suspension failure arose from misuse or abnormal use of the vehicle after BNMB took delivery of it. They relied on statutory defences:

(a)    under s 54(6) of the ACL, which provides that goods do not fail to be of acceptable quality if the consumer causes them to become so, or if the goods are damaged by abnormal use; and

(b)    under s 54(4) of the MCT Act, which provides that the obligation to repair the vehicle does not apply to any defect arising “from misuse or negligence on the part of the driver of the motor car that occurred after the taking of delivery”.

THE PRIMARY JUDGMENT

24    The central issue in the trial was whether the failure of the vehicle’s rear sub-frame was the result of misuse of the vehicle after BNMB took delivery. Broadly, the primary judge found in favour of the respondents on the basis of the following findings.

25    First, the primary judge preferred the expert evidence of Dr Casey to that of Mr Malkoutzis. His Honour based that preference on his view:

(a)    as to the comparative academic qualifications and experience of the experts. His Honour said that, self-evidently, Mr Malkoutzis did not have the same level of academic distinction or expertise-specific training as Dr Casey. His Honour said (at [68]):

By reason of his very considerable study in the fields within his stated expertise and by reason of his very considerable practical experience in the fields of his stated expertise, I had no hesitation in receiving Dr Casey’s evidence as an expert witness, properly so-called…

(b)    that Dr Casey was an “extremely impressive witness” (at [90]). The primary judge said (at [80] and [109]):

Dr Casey described in significant and valuable detail how the rotation of the sub-frame that he saw evident was consistent with rotation. When listening to his evidence given from the witness box, reading his report and comparing his views to the theory advanced by Mr Malkoutzis, I was left with no doubt whatsoever that Dr Casey’s theory was to be preferred over the sand and corrugated roads theory advanced by Mr Malkoutzis.

…

Dr Casey’s evidence of the examination of the rear sub-frame was compelling, especially in relation to the rotation of the frame and the consequences of that rotation on the bolts and nuts. I have accepted his version on point without reservation.

(c)    that Mr Malkoutzis was willing to engage in speculation, was not a careful witness, and that it was appropriate to examine his evidence “with utmost care” (at [27]). In his initial report Mr Malkoutzis said that he found coarse-grained sand on the underside of the vehicle and concluded that it was “highly likely” that the vehicle had been driven over corrugated rural dirt roads on a regular basis. He said such driving would aggravate or accelerate the rate of damage to the weld nuts leading to their failure and opined that the type of suspension failure in the present case is “often associated with ongoing use of the vehicle on rough road usage (sic) i.e. bumpy or corrugated roads”. He said that the problem could not have arisen in the short time that BNMB was in possession of the vehicle. Then, under cross-examination, Mr Malkoutzis accepted that his conclusion that the vehicle had been driven on a regular basis on corrugated dirt roads was “purely speculative”. The primary judge said that:

Mr Malkoutzis’s willingness to engage in pure speculation of the sort to which he admitted caused me to critically assess whether he was a witness on whose evidence I could rely.

26    Second, the primary judge accepted Mr Graetz’s evidence that when the vehicle was returned to Mercedes-Benz on 1 June 2011, 10 days after Mr Govedarica picked it up, the tyres had become bald and it had burnt rubber inside the rear wheel arches.

27    Third, the primary judge rejected Mr Govedarica’s evidence as to the manner in which he drove the vehicle, describing it as “unsatisfactory” (at [120]). His Honour said (at [92]–[94]):

Mr Govedarica was asked whether he accelerated the vehicle from a stationary position to a very high speed in a short space of time. The answer he gave was not credible. I do not accept it. He said “I don’t think so because I was not paying attention on that” (sic). Mr Govedarica was pressed on his answer. Mr Miller asked “[y]ou say “I don’t think so””, to which Mr Govedarica said “[l]ike, I – I wasn’t paying attention on that (sic). I was just using it, driving it normally”.

Mr Govedarica’s answers set out above bordered on the ridiculous. He said he did not pay attention to whether he accelerated from stationary to a very high speed in a short space of time. Yet molten rubber was found on the inside of the rear-wheel arches. The tyres were bald when the vehicle was first returned to MBAP and had to be replaced. Dr Casey said the directionality of the bending on the rear sub-frame was consistent with acceleration forces. Dr Casey said the vehicle was accelerated so hard that small cracks started on each of the bolts then the cracking continued to propagate under the same force. Dr Casey agreed with the question put, remarkably under cross-examination, “[s]o you’re saying that it was accelerated at - in an extreme way, is that right?” to which Dr Casey said “[h]arsh way, yes”. Then, the proposition was emphasised - “[s]o it doesn’t have to be extreme acceleration?” to which Dr Casey said “[i]t would have to be very harsh, yes”.

Mr Govedarica’s memory failure on driving the vehicle in a harsh manner indicated to me that he was falsely denying the only explanation reasonably open about the cause of the sub-frame failure…

(Emphasis added)

28    Fourth, consistently with Dr Casey’s opinion, the primary judge concluded that it was more likely than not that harsh acceleration of the vehicle caused the damage to the rear sub-frame. In reaching this conclusion, his Honour also accepted and relied upon the evidence that by 1 June 2011: (a) the rear tyres of the vehicle had been rendered bald notwithstanding that the tyre tread was of acceptable depth when Mr Govedarica took delivery of it; and (b) there was burnt rubber on the inside of the rear wheel arches. His Honour concluded that harsh acceleration caused each of those physical phenomena, and such harsh acceleration caused or propagated the fractures to the rear nuts on the sub-frame. Once fracturing became manifest, continued harsh acceleration of the vehicle further propagated the fracturing to the point that the rear sub-frame failed.

29    Fifth, although there were no eyewitness accounts of Mr Govedarica’s manner of driving the vehicle, his Honour inferred on the basis of the above that Mr Govedarica drove the vehicle in a manner that involved harsh acceleration.

30    Sixth, the primary judge found that since officers of BNMB drove the vehicle in a manner which amounted to misuse or abnormal use, the respondents established the statutory defences they advanced. His Honour said (at [120]-[121]):

I say that for several reasons –

(a)    first, as a matter of common human experience, vehicle owners (rally or racing drivers aside) rarely, if ever, drive their vehicles in such manner that the tyres become so hot as to disintegrate and to propel molten pieces of rubber tyre to the inside of the wheel arch, as happened in this case;

(b)    second, the vehicle was in a perfectly acceptable state when sold, as Mr Kelly and Mr Graetz said in their evidence;

(c)    third, the vehicle passed roadworthiness testing prior to its sale to the applicant;

(d)    fourth, the vehicle’s tyres were intact when sold, then they were bald when the vehicle was first returned after the vehicle had been driven for relatively few kilometres by the applicant’s servants or agents; and

(e)    fifth, Mr Govedarica’s explanation of his use of the vehicle and the manner of his driving was unsatisfactory, although he bore no onus of proof for the purposes of the reverse onus.

I am satisfied that the vehicle, as sold, functioned perfectly satisfactorily and was sold in good order and condition. I am also satisfied the vehicle was damaged by harsh driving while in the possession of the applicant. In my judgment, [Mercedes-Benz] made out the statutory defences.

31    The primary judge also held that Mercedes-Benz Finance established the cross-claim for payment of the monies due under the hire purchase agreement. His Honour ordered that judgment be entered in favour of Mercedes-Benz Finance in the sum of $91,718.78.

THE APPEAL

32    Before dealing with the grounds of appeal it is appropriate to note that this is an appeal under s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) (FCA Act). It is an appeal in the nature of a rehearing; it is not a hearing de novo conducted without regard to the findings made in the court below. The role of the Court in such an appeal is the correction of error: see Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd (2001) 117 FCR 424; [2001] FCA 1833 at [14], [21] and [25] (Allsop J (as his Honour then was) with Mansfield and Drummond JJ agreeing); Kedem v Johnson Lawyers Legal Practice Pty Ltd [2014] FCAFC 3 at [73] (North, Barker and Katzmann JJ).

33    As I explain below, some of the appellants’ grounds of appeal have little substance and can be easily dismissed. Others allege that the primary judge made findings which were against the evidence and invite a reconsideration of the evidence given on some limited factual questions. The appellants bore the onus of establishing that the views and conclusions of the primary judge were incorrect. I have given careful attention to the evidence below and in my view the primary judge’s conclusions were open on the evidence. I am not persuaded that the primary judge fell into appealable error.

34    I now turn to consider each of the grounds of appeal.

Ground 7 – apprehended bias

35    It is appropriate to first deal with Ground 7 because it involves an allegation of apprehension of bias. Such an allegation strikes at the validity of the trial and the judgment and so, logically, the issue of bias comes first: Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577; [2006] HCA 55 at [117] (Kirby and Crennan JJ).

36    Under this ground of appeal the appellants allege:

The learned judge erred in making factual findings based on the fact that a director of the applicant and its sole witness gave evidence via video link from Fulham Correction Centre in that the learned judge:

(a)    gave weight to considerations that were irrelevant to the issues in dispute between the parties;

(b)    further and alternatively, gave rise to an apprehension of bias on his part according to which an impartial observer might reasonably have thought that the learned judge had not brought an impartial mind to the resolution of the questions he was required to determine.

37    This ground of appeal is based on the primary judge’s statement (at [30]) as follows:

Before going further with the evidence of Mr Govedarica, I should point out that Mr Govedarica gave evidence by video link and over the whole of the hearing, he observed the proceeding by that video link. While on video link Mr Govedarica sat at a desk. Around him were three flags. Above his head and behind him was a sign that read “Fulham Correctional Centre”. No one asked why Mr Govedarica gave evidence and observed from the Fulham Correctional Centre.

38    It is common ground between the parties that no issue arose in the hearing as to the place from which Mr Govedarica gave his evidence and there is no question that such a consideration is not relevant. The appellants allege that the primary judge’s irrelevant reference to the fact that Mr Govedarica gave his evidence from prison gives rise to a reasonable apprehension of bias.

39    Against this the respondents contended that the appellants should not be permitted to assert apprehended bias in the appeal when they did not raise the question of bias during the trial. I disagree. Where a party does not object to a judge’s remarks in the course of a hearing the party may waive any right to appeal against an adverse decision on the ground of what had been said at the hearing. That is so because, when a party is in a position to object but takes no steps to do so, that party should not be heard to complain later that the judge was biased: Vakauta v Kelly (1989) 167 CLR 568 at 572 (Brennan, Deane and Gaudron JJ) and 587 (Toohey J). In the present case the allegation of apprehended bias arises not from the hearing but from the terms of the judgment below. It is plain that this could only be raised on appeal, and it is permissible for the appellants to do so.

40    The respondents also argued that, because neither party asked Mr Govedarica why he was giving evidence from Fulham Correctional Centre, it would have been uncertain to the primary judge whether Mr Govedarica was attending the prison as a worker, guest, inmate or otherwise. I disagree. In my view it is more likely that the primary judge understood that Mr Govedarica was an inmate.

41    The primary judge’s subjective understanding is, however, far from central to the determination of this ground of appeal. The central question is whether the primary judge’s statement gives rise to a reasonable apprehension of bias, which arises if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide: Johnson v Johnson (2000) 201 CLR 488; [2000] HCA 48 (Johnson) at [11] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ); Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63 (Ebner) at [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ). The enquiry is not directed to the personal thought processes of the decision-maker. It is directed to the decision-maker’s conduct “objectified” through the prism of what a fair-minded and informed observer would reasonably apprehend: NADH of 2001 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 214 ALR 264; [2004] FCAFC 328 at [21] (Allsop J (as his Honour then was) with whom Moore and Tamberlin JJ agreed).

42    The resolution of an allegation of an apprehension of bias involves two steps. First, “it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits”; and second, there “must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits”: Ebner at [8].

43    The appellants identified the impugned statement as indicating that the primary judge might decide the case other than on its legal and factual merits. They contended that making such an observation could logically give rise to a fear that, rather than deciding the case on the evidence as required, his Honour might treat Mr Govedarica’s evidence as unreliable or less reliable on the basis of his presumed criminality. They submitted that Mr Govedarica was the only person to give direct evidence of the manner in which the vehicle was driven, that the respondents did not challenge his account with any direct evidence of their own, and that the primary judge rejected Mr Govedarica’s account for reasons which were not made clear. They said this preference for the respondents’ version of events indicated the approach of the trial judge was: “[t]his man is a criminal. He’s giving evidence from jail. I don’t believe him.” The appellants contended that his Honour’s observation “colour[ed] his whole judgment”.

44    The primary judge’s observation that Mr Govedarica gave evidence from prison has given me cause for concern. It was irrelevant and it tended to disparage Mr Govedarica. Fairness, and its appearance, is an essential requirement of the exercise of judicial power. Even so, for the reasons I explain, I am not satisfied that the allegation of apprehended bias is made out.

45    I say this, first, because while the test of apprehended bias is less stringent than that of actual bias, it must nevertheless be “firmly established”: R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553 (the Court), and Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352 (Mason J). What must be firmly established is a reasonable fear that the decision-maker has formed a view that he or she will not alter, irrespective of the evidence or arguments presented: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 100 (Gaudron and McHugh JJ). Such an allegation must be “distinctly made and clearly proved”: Minister for Immigration and Multicultural Affairs v Jia Legeng [2001] HCA 17; (2001) 205 CLR 507 (Jia Legeng) at [69] (Gleeson CJ and Gummow J). It is not enough that the fair-minded lay observer “has a vague sense of unease or disquiet”: Jia Legeng at [135] (Kirby J).

46    Second, “in the case of a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial, a conclusion that there is a reasonable apprehension that [the judge] is biased should not be drawn lightly”: Vakauta v Kelly (1988) 13 NSWLR 502 at 527–8 (McHugh JA), cited with approval by Toohey J in Vakauta v Kelly (1989) 167 CLR 568 (Vakauta) at 584–5; Johnson at [12].

47    Third, the allegation that the impugned observation coloured his Honour’s judgment appeared to be an allegation of actual bias. Apprehended bias is an objective test directed to the appearance of unfairness to a fair-minded lay observer. It is not, as for actual bias, an enquiry into whether the decision-maker in fact brought a fair and impartial mind to the determination of the case.

48    In Michael Wilson & Partners Limited v Nicholls (2011) 244 CLR 427; [2011] HCA 48 Gummow ACJ, Hayne, Crennan and Bell JJ cautioned against conflating those issues. Their Honours said (at [32]–[33]):

Because the test is objective it is important to keep an inquiry about apprehension of bias distinct from any inquiry about actual bias. An inquiry about actual bias in the form of prejudgment would require assessment of the state of mind of the judge in question. No doubt that would have to be done, at least for the most part, on the basis of what the judge had said and done. But to allow an inquiry about whether the judge had in fact prejudged some issue to enter into a debate about what a fair-minded lay observer might apprehend is to introduce considerations that are irrelevant to the issue that is to be decided when a party submits that there is or was a reasonable apprehension of bias.

(Emphasis added.)

49    Considering the judgment below through the prism of apprehended bias, although his Honour strongly rejected aspects of Mr Govedarica’s evidence in my view there was a reasonable basis for him to do so. I am not persuaded that the terms of the judgment might indicate to a fair-minded observer that the primary judge might not deal with Mr Govedarica’s evidence fairly. His Honour’s findings were open on the evidence.

50    Having regard to the above, the appellants did not establish that the primary judge’s observation might lead a fair-minded lay observer to reasonably apprehend that his Honour might not treat Mr Govedarica’s evidence impartially because he gave evidence from prison. His Honour’s irrelevant observation might give rise to a vague sense of unease or disquiet but that is not enough.

Ground 1 – Onus of proof

51    Under this ground of appeal the appellants allege:

The learned primary judge erred in failing to consider or apply the requisite standard of proof to establish a statutory defence under the provisions, inter alia, of the Australian Consumer Law specifically that the onus lay on the respondents to show that statutory warranties under the Australian Consumer Law and Motor Car Traders Act 1986 (Vic) had been avoided by reason of the [appellants’] conduct in misusing the vehicle (the “statutory defence”).

52    It is common ground between the parties that the onus was on the respondents to make out the statutory defences alleged, on the balance of probabilities. The appellants submitted however that his Honour did not apply the test in Effem Foods Ltd v Nicholls (2004) ATPR 42-034; [2004] NSWCA 332 (Effem).

53    This ground of appeal is untenable. It is plain from the transcript and the judgment below that the primary judge considered the statutory defences raised by the respondents on the basis that they had the burden of establishing them. Amongst other things:

(a)    the respondents accepted that they bore the onus in opening and closing submissions. They cited Effem at [11], where Handley JA (Tobias JA and Palmer J agreeing) said that the party relying on statutory defences under the Trade Practices Act 1974 (Cth) had “the legal and the evidentiary burden of proof of these defences” ; and

(b)    the primary judge said:

(i)    “I am satisfied that the respondent discharged the onus upon it pursuant to the provisions of the ACL” (at [3]);

(ii)    “[t]he applicant contended that the onus was on the respondents to make out the statutory defence on the balance of probabilities. That much was common ground” (at [118]); and

(iii)    Mr Govedarica “bore no onus of proof” in relation to the statutory defence under the ACL (at [120]).

54    There is nothing in the judgment or transcript to suggest that the trial judge applied another standard in reaching his conclusion that the statutory defences were made out. It is appropriate to dismiss the first appeal ground.

Grounds 2 and 3 – Standard of proof and sufficiency of evidence

55    Grounds 2 and 3 of the appeal are as follows:

2.    The learned primary judge erred in failing to apply the Briginshaw standard to the allegations raised by the respondents against the [appellants] in the statutory defence having regard to the gravity of those allegations.

3.    Having regard to the grounds raised at paragraphs 1 and 2 above, the learned primary judge ought to have found that there was no evidence or no sufficient evidence to support the statutory defence.

56    It is uncontentious that the amended defence alleged that BNMB’s agents or employees had driven the vehicle in an “unsafe, improper or otherwise reckless manner” so as to cause the vehicle to become of unacceptable quality and/or damage the vehicle by abnormal use. The amended defence also alleged that Mr Govedarica exhibited “dangerous and illegal driving manoeuvres” in the presence of a Mercedes-Benz employee. In opening, Mr Miller, counsel for the respondents, told the primary judge he intended to call Mr Pamieta, an assistant service manager at Mercedes-Benz. He said that Mr Pamieta would give evidence of being in the vehicle when Mr Govedarica test-drove it at speeds between 150 and 180 km/h along the West Gate Freeway.

57    The appellants contended that the respondents’ allegations were “serious allegations of criminal wrongdoing” and that the standard in Briginshaw v Briginshaw (1938) 60 CLR 336 (Briginshaw) therefore applied. They noted that the primary judgment does not refer to the Briginshaw standard and submitted that it contains no indication that the primary judge turned his mind to how that standard might be applied to the facts of the case.

58    The use of expressions such as “Briginshaw standard” or “Briginshaw test” has been criticised, including for having a tendency to mislead: Qantas Airways v Gama (2008) 167 FCR 537; [2008] FCAFC 69 at [110] (French and Jacobson JJ) and at [123] (Branson J). The standard of proof in the trial below was that set out in s 140 of the Evidence Act 1995 (Cth) (the Evidence Act). Section 140(1) provides that the standard of proof in civil proceedings is the balance of probabilities. Section 140(2) provides that a court, in deciding in a civil proceeding whether it is satisfied that a case has been proved on the balance of probabilities, must take into account: (a) the nature of the cause of action or defence; (b) the nature of the subject-matter of the proceeding; and (c) the gravity of the matters alleged. Having said this, s 140(2) effectively encapsulates Dixon J’s classic discussion in Briginshaw regarding the operation of the civil standard of proof: Communications Electrical, Electronic, Energy, Information, Postal, Plumbing and Allied Services Union of Australia v Australian Competition and Consumer Commission (2007) 162 FCR 466; [2007] FCAFC 132 at [31] (Weinberg, Bennett and Rares JJ).

59    In effect the appellants assert that, having regard to s 140 of the Evidence Act, the primary judge failed to have regard to the gravity of the respondents’ allegations when reaching the conclusion that he was satisfied that they had made out the statutory defences. They further allege that having regard to the onus and appropriate standard of proof there was insufficient evidence to support the primary judge’s finding that the respondents made out the statutory defences.

60    I disagree. In my view the appellants failed to establish these grounds of appeal.

61    With respect to Ground 2, I say this because the appellants sought to overstate the seriousness of the respondents’ allegations. While the amended defence alleged that Mr Govedarica engaged in dangerous and illegal driving manoeuvres the respondents did not call any witnesses to establish that. Nor did they press that allegation in their closing submissions. Their closing submissions did not make any allegation that Mr Govedarica or other BNMB agents or employees had driven the vehicle in an unsafe, improper or otherwise reckless manner. They submitted only that Mr Govedarica drove the vehicle in a manner which involved harsh acceleration and expressly said that they made no allegation of illegality, impropriety or immorality. They submitted that the harsh acceleration they asserted “may have been a result of burn outs, or race track style starts, but this is not necessarily criminal conduct if conducted at a race track or on a private road”. Nor did the primary judge make any finding that Mr Govedarica had driven the vehicle dangerously, illegally or unsafely.

62    The respondents’ allegation that Mr Govedarica drove the vehicle in a manner which involved harsh acceleration does not constitute a serious allegation of criminal wrongdoing. The gravity of the allegation required to be taken into account, pursuant to s 140(2), is lower.

63    In light of this and my finding in relation to Ground 1 above, Ground 3 also fails. I consider the primary judge’s conclusion that the respondents established the statutory defences alleged was open on the evidence.

64    I say this, first, because although noting that there was no eyewitness evidence that the vehicle had been driven in a manner which involved harsh acceleration, the primary judge nevertheless considered that the evidence was sufficient to support an inference that such acceleration caused the damage to the rear sub-frame. The primary judge said (at [109]–[112]) that he based the inference that Mr Govedarica drove the vehicle in a manner involving harsh acceleration on:

(a)    Dr Casey’s opinion that the damage to the rear sub-frame was caused by harsh acceleration;

(b)    Mr Graetz’s evidence that there was a “massive pile” of burnt rubber on the inside of the rear wheel arches when he inspected the vehicle on 1 June 2011; and

(c)    Mr Graetz’s evidence that the tyres were bald on 1 June 2011, given that the tyre tread had been of an acceptable depth when the roadworthy check was undertaken and the vehicle had only been driven about 1,300 kilometres since then.

65    Building on that the primary judge concluded (at [120]) that Mr Govedarica’s use of the vehicle amounted to misuse and was abnormal because:

(a)    it was abnormal to drive a vehicle in a manner whereby the tyres became so hot as to disintegrate and to propel molten pieces of rubber tyre onto the inside of the rear wheel arch, as Mr Graetz said;

(b)    the vehicle was in a perfectly acceptable state when sold, as Mr Kelly and Mr Graetz said in evidence;

(c)    the vehicle passed the roadworthiness test prior to its sale;

(d)    the vehicle’s tyres had a good level of tread when the vehicle was sold yet Mr Graetz’s evidence was that they were bald when he inspected the vehicle on 1 June 2011. At that point the vehicle had only been driven approximately 1,300 kilometres since delivery (noting that on Mr Kelly’s evidence the tyres on the vehicle would have lasted 15,000 km with normal use); and

(e)    while accepting that Mr Govedarica did not bear the onus in relation to the statutory defences, his explanation of the use and manner of driving of the vehicle was unsatisfactory.

66    I consider the evidence provides a sufficient basis for the inferences the primary judge drew.

67    Second, the appellants exaggerated the significance of Dr Casey’s refusal to put an exact date on when the metal fatigue in the weld nuts in the rear sub-frame began.

68    His evidence was that the weld nuts on the rear sub-frame failed as a result of metal fatigue arising from harsh acceleration, but he was reluctant to offer an exact estimate of the distance in kilometres over which the fatigue process had occurred because he said it was a difficult parameter to quantify. He said that the absence of long-term rust and fretting on the fatigue surfaces of the weld nuts showed that the fatigue process had “not been taking place for very long prior to the final failure” and was “relatively recent” to the final failure. Dr Casey also said that the fact that the vehicle was repaired for a damaged tail shaft and worn tyres some two months prior to the failure of the rear sub-frame was consistent with harsh driving in the months preceding the final failure (although Mr Graetz later accepted that the tyres were not repaired until later). He concluded that the fatigue process had not been occurring for a prolonged period prior to the final failure.

69    The primary judge set out the thrust of Dr Casey’s evidence (at [86]) as follows:

Dr Casey said if the harsh acceleration was on a very regular basis then the total time needed to make the nuts fail could have been short. As there was no rust present on the fracture surfaces, Dr Casey concluded that it was more likely than not that the fatigue cracking had not been taking place from a very long time prior to the final failure.

70    The evidence to which I have referred was a sufficient foundation for the primary judge’s finding that Mr Govedarica drove the vehicle in a manner that involved harsh acceleration, thereby causing the failure of the weld nuts on the rear sub-frame, and which driving amounted to misuse or abnormal use of the vehicle.

71    Third, I do not accept the appellants’ submission that the primary judge failed to consider whether the weld nuts in the rear sub-frame already had a defect at the time the vehicle was sold to BNMB. Essentially, the appellants base this contention on the primary judge’s statement (at [113]) that harsh acceleration of the vehicle “caused or propagated” (emphasis added) the fractures to the weld nuts. They argued that merely propagating (meaning to spread or promote) a pre-existing defect in the vehicle does not meet the test for the statutory defences, and that the primary judge failed to consider the question whether the defect might have been present prior to the point of sale.

72    I disagree. The question as to when the process of metal fatigue in the weld nuts commenced was central in the case. Dr Casey’s opinion, which the primary judge accepted, was that it was more likely than not that the fracture process was not of long standing and occurred relatively recently to the final failure. Notwithstanding his Honour’s use of the conjunction “or” in the finding that harsh acceleration “caused or propagated” the failure, on a fair reading the primary judge found that the process of metal fatigue and failure in the rear sub-frame occurred after BNMB took delivery of the vehicle: see for example [84]-[86], [93], [114] and [121]. That conclusion was open on the evidence.

73    Fourth, while it is arguable that the primary judge misstated one aspect of Dr Casey’s evidence, any such misstatement was not significant to the decision.

74    The primary judge set out the reasoning leading to the conclusion that Mr Govedarica drove the vehicle in a manner that involved harsh acceleration, that the harsh acceleration caused the fractures to the weld nuts, and that the vehicle suspension failed as a result. Having done so, in a paragraph which was not essential to the earlier reasoning, the primary judge went on to say (at [115]):

Embedded in the applicant’s contention was the proposition that the vehicle was a high-performance vehicle, well capable of withstanding the forces generated by driving the vehicle in the manner a high-performance vehicle should have been driven. While superficially attractive, that submission overlooked the fact that the vehicle was nonetheless a road sedan. It was not a racing vehicle. As Dr Casey said, the vehicle was capable of acceleration but it was not necessary for there to have been an extraordinary level of acceleration, nor even extreme acceleration, before very harsh acceleration caused the vehicle’s sub-frame to fail. In addition, the fact of the vehicle being a high-performance vehicle did not mean its driver could drive it to the point of failure expecting the manufacturer or vendors to meet the financial consequences of driving the vehicle to point of failure.

(Emphasis added in italics.)

75    The appellants contended that the italicised passage is inconsistent with the thrust of Dr Casey’s evidence, essentially because Dr Casey said in cross-examination that the acceleration necessary to cause such a failure would have to be “way outside of normal”, and he did not usually see that type of failure in similar types of vehicles. He said that he had never seen this type of failure before in a road registered sedan, although he regularly saw it on trucks and racing cars.

76    In my view the asserted misstatement is not material to the judgment. Dr Casey concluded that, based on his inspection of the failed weld nuts, the rear suspension failure was caused by “harsh acceleration”. He was buttressed in that conclusion by the fact that the vehicle had suffered a drive shaft failure, and by the fact that the tyres had been rendered bald after only about 1,300 kilometres of post-sale driving. The asserted misstatement appeared after the primary judge had set out his conclusion, and his Honour clearly understood Dr Casey’s evidence in regard to the level of acceleration required to generate forces sufficient to cause the metal fatigue in the rear sub-frame. This can be seen (at [93]) where the primary judge noted Dr Casey’s evidence, as follows:

Dr Casey agreed with the question put, remarkably under cross-examination, “[s]o you’re saying that it was accelerated at - in an extreme way, is that right?” to which Dr Casey said “[h]arsh way, yes”. Then, the proposition was emphasised - “[s]o it doesn’t have to be extreme acceleration?” to which Dr Casey said “[i]t would have to be very harsh, yes”.

77    It is also worth noting the appellants did not put forward a case that Mr Govedarica drove the vehicle in a manner which involved harsh acceleration but which a high-performance vehicle should be capable of withstanding. Their case was that Mr Govedarica did not drive the vehicle in a manner which involved harsh acceleration. The primary judge did not accept Mr Govedarica’s evidence in that regard.

Ground 4 – the finding that the vehicle presented with bald tyres in June 2011

Ground 5 – the availability of a Jones v Dunkel inference regarding the respondents’ failure to call Mr Pamieta

78    Under Ground 4 the appellants allege:

The learned judge erred in finding that the vehicle presented with bald tyres when it was first returned to [Mercedes-Benz] in June 2011.

79    Under Ground 5 they allege:

Further, the learned primary judge erred in failing to consider or draw an inference in accordance with the principles enunciated in Jones v Dunkel (1959) 101 CLR 298 in respect of a failure on the part of the respondents to call a witness, Liam Pamieta, in circumstances where:

(a)    no explanation was given for the failure to call the witness;

(b)    had Pamieta been called the learned judge would have been in a position to resolve the conflict of the evidence between the applicant and the witness Graetz as to whether the car had presented with bald tires when it was returned to [Mercedes-Benz] in June 2011 and was therefore incapable of being test driven; and

(c)    the learned judge ought to have held that had Pamieta been called his evidence would not have assisted the respondents’ case.

80    In relation to both grounds the appellants submitted that the respondents did not put to Mr Govedarica in cross-examination the evidence that they intended to call from Mr Graetz, namely that on 1 June 2011 he observed that the rear tyres were bald. They submitted that the suggestion that the tyres were bald as at 1 June 2011 was hotly contested and it should have been put.

81    In relation to Ground 4 the appellants argued that the primary judge should not have found that the tyres were bald as at 1 June 2011, because:

(a)    the Victoria Wide Tyre Service Pty Ltd invoice showed the tyres were not replaced until 11 July 2011;

(b)    Mr Graetz accepted in cross-examination that the tyres were not replaced at the time the vehicle was serviced between 1-3 June 2011; and

(c)    notwithstanding Mr Graetz’s evidence that the vehicle was not roadworthy because of the bald tyres and could not be driven by Mercedes-Benz staff as at 1 June 2011, he accepted in cross-examination that Mr Pamieta and another Mercedes-Benz employee road-tested the vehicle with Mr Govedarica at some point in June 2011.

82    In my view the appellants failed to make out Ground 4.

83    First, there was no requirement for the respondents to put to Mr Govedarica the allegation that the vehicle’s rear tyres were found to be bald as at 1 July 2011. Under the rule in Browne v Dunn a party is obliged to give appropriate notice to the other party and any of that person’s witnesses of any imputation the former intends to make against either of the latter about his or her conduct relevant to the case, or party’s or a witness’ credit: MWJ v The Queen (2005) 222 ALR 436; [2005] HCA 74 at [38] citing Browne v Dunn (1893) 6 R 67. That does not mean the imputation must be put in cross-examination. Appropriate notice may emerge with sufficient clarity from pleadings and particulars, or from evidence provided in advance of the trial: Kennedy v Wallace (2004) 142 FCR 185; [2004] FCAFC 337 at [56] (Black CJ and Emmett J); Masterton Homes Pty Ltd v Palm Assets Pty Ltd [2009] NSWCA 234 at [105] (Campbell JA, Allsop P and Basten JA agreeing); Johnston v Brightstars Holding Company Pty Ltd [2014] NSWCA 150 at [72] (Beazley J).

84    Mr Govedarica is a party to the proceeding and he was on notice of the information in Dr Casey’s reports. In his initial report Dr Casey relied on the fact that the vehicle’s two rear tyres were found to be bald and in need of replacement as at 1 June 2011, despite having travelled only about 1,300 kilometres since the roadworthy check. That was sufficient notice of the respondents’ allegation. In any event, in cross-examination Mr Govedarica said that the tyres were not bald even as at 11 July 2011. The rule in Browne v Dunn is a rule directed towards fairness and Mr Govedarica suffered no unfairness.

85    Second, it was open on the evidence for the primary judge to reach the conclusion that the tyres were bald as at 1 June 2011. Mr Graetz said that when he inspected the vehicle on 1 June 2011 the rear tyres of the vehicle were bald and there was a “massive pile” of burnt rubber inside the rear wheel arches. He said that the vehicle was not roadworthy because of the bald tyres and therefore could not be road-tested by Mercedes-Benz. He said that his memory was that Mercedes-Benz took the wheels off and Mr Govedarica organised new tyres for them, and that he thought that the new tyres were fitted while the vehicle was still in Mercedes-Benz’s possession. He also said that if he was incorrect in his recollection and the tyres were not replaced before Mercedes-Benz returned the vehicle then Mercedes-Benz staff would not have road tested an unroadworthy vehicle. However, under cross-examination he seemed to accept that that the tyres were not replaced until later and that Mr Pamieta and another Mercedes-Benz employee, Vlad Nejowski, had test-driven the vehicle with Mr Govedarica in June 2011.

86    However, he strongly maintained his evidence that the tyres were bald as at 1 June 2011 and said he was certain in his recollection. The fact that he also found a “massive pile” of burnt rubber in the rear wheel arches, which he said attracted significant interest from workshop staff, was a good reason for him to be certain in his recollection. His evidence about the burnt rubber inside the rear wheel arches was unchallenged. It was open to the primary judge to prefer Mr Graetz’s evidence to that of Mr Govedarica.

87    Third, the primary judge rejected Mr Govedarica’s evidence, in effect, that the tyres did not become bald until later, finding that his account of how he used the car was “unsatisfactory”, “bordered on the ridiculous” and that he made false denials. In Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [26]-[31] Gleeson CJ, Gummow and Kirby JJ reiterated that, ordinarily, a finding of fact by a trial judge based on the credibility of a witness could only be set aside upon appeal where incontrovertible facts or uncontested evidence demonstrate that the judge’s conclusions are erroneous, or where it is concluded that the decision in the trial was clearly improbable or contrary to compelling inferences in the case. The appellants came nowhere near meeting this test.

88    It is appropriate to dismiss Ground 4.

89    Ground 5 of the appeal must also be rejected. Broadly put, the rule in Jones v Dunkel is that an unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party’s case: Jones v Dunkel (1959) 101 CLR 298; Kuhl v Zürich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 at [63] (Heydon, Crennan and Bell JJ). Whether the rule can or should be applied depends upon the satisfaction of three conditions, namely:

(a)    the missing witness would be expected to be called by one party rather than the other;

(b)    the witness’ evidence would elucidate a particular matter; and

(c)    the witness’ absence is unexplained:

Payne v Parker [1976] 1 NSWLR 191 at 201E (Glass JA); Wollongong Fabrications Pty Ltd v Ramsbottom (2006) 68 NSWLR 387; [2006] NSWCA 279 at [400] (Tobias JA with whom Mason P and Hodgson JA agreed); Coles Supermarkets Australia Pty Ltd v Tormey [2009] NSWCA 135 (Tormey) at [61] (Ipp JA with whom Giles and McColl JJA agreed).

90    In relation to the first condition, Mr Pamieta was a Mercedes-Benz employee and I accept that he would be expected to be called by the respondents rather than the appellants. In fact the respondents flagged an intention to call him.

91    In relation to the second condition, the appellants noted Mr Graetz’s evidence that the vehicle could not be test-driven by Mercedes-Benz staff as at 1-3 June 2011 because it was unroadworthy due to having bald tyres. In cross-examination he seemed to accept that two Mercedes-Benz employees had test-driven the vehicle in June 2011 and that the tyres were not replaced until 11 July 2011. The respondents had flagged an intention to call one of those employees, Mr Pamieta, to give evidence of having accompanied Mr Govedarica when he test-drove the vehicle in June 2011. The appellants argued that his evidence would have thrown doubt on Mr Graetz’s account of the bald tyres and the respondents did not call him.

92    Against that the respondents contended that, as counsel said in opening, they intended to call Mr Pamieta to give evidence in relation to Mr Govedarica’s illegal and dangerous driving manoeuvres. They did not state that he could or would give evidence that related directly to the bald tyres. Further, they argued that they had already adduced direct evidence of the bald tyres and the burnt rubber from Mr Graetz, and there was nothing left for them to explain or contradict in regard to that part of the evidence. They argued they were not required to adduce cumulative evidence: Ballard v Lumbermen’s Mutual Casualty Co (1967) 148 NW 2d 65 at [29]-[30].

93    When the respondents opened the case they did not intend to call Mr Pamieta in relation to the issue as to when or whether the rear tyres of the vehicle were bald. However, by the time the respondents decided not to call him, it is likely that his evidence would assisted in elucidating whether the tyres were bald as at 1 June 2011 and in those circumstances the second condition is satisfied.

94    The remaining condition is whether Mr Pamieta’s absence was unexplained. It is for the party who might have been expected to have called the witness to provide the explanation: Tormey at [62], citing Sheller JA (with whom Wood and Grove JJ agreed) in R v Vaitaiki (NSW Court of Criminal Appeal, Unreported, 8 October 1993).

95    I can see no basis for the appellants’ contention that Mr Pamieta’s absence was unexplained when on the second and final day of the trial Mr Miller for the respondents told the primary judge:

…My instructor has, only 15 to 20 minutes ago, received notification that Mr Pamieta is ill, in bed, and will not attend court today to give evidence. It is now the respondents’ intention not to call Mr Pamieta. For your Honour’s recollection, the evidence that he was going to give was the evidence in regards to the West Gate Freeway drive. That evidence cannot be given now, if Mr Pamieta does not attend. That affects the timeline of the hearing. There will be one witness after this.

96    The authorities reveal a variety of explanations for the absence of a witness which the courts have accepted as satisfactory: see for example, Cadwallader v Bajco Pty Ltd [2002] NSWCA 328 at [97] (Heydon JA); Fabre v Arenales (1992) 27 NSWLR 437 at 450 (Mahoney JA, Priestly JA and Sheller JA agreeing). Clearly, the illness of a witness may be a satisfactory explanation and the appellants did not contend otherwise. The gist of their submission appears to be that the respondents should have put on sworn evidence as to Mr Pamieta’s illness.

97    I disagree. Counsel for the appellants did not suggest at the time that Mr Miller’s statement to the primary judge was untrue or incorrect, or that Mr Pamieta’s illness was somehow fabricated. I do not consider the circumstances required the respondents to put on evidence to prove that his absence was due to ill health. In fact it is hard to see what probative evidence the respondents could have offered. If it is accepted that Mr Pamieta was ill at home it is likely that the best evidence the respondents could have adduced with reasonable diligence would have been hearsay evidence from the respondents’ instructing solicitor or Mr Graetz as to what Mr Pamieta told them. Such evidence would not have taken the issue far.

98    It is appropriate to dismiss Ground 5 of appeal.

The application for further evidence

99    In passing I note that the respondents sought leave to adduce further evidence in the appeal under s 27 of the FCA Act. They sought to rely upon an affidavit of Mr Pamieta affirmed on 28 February 2017 in which he deposed that he awoke on the morning of 11 May 2016 with a severe case of “gastroileitis”, decided that he was too ill to attend the Federal Circuit Court to give evidence, and called Mr Graetz (who was at court) and told Mr Graetz that he would not be attending.

100    Given my dismissal of this ground of appeal it is unnecessary to decide whether to allow Mr Pamieta’s affidavit to be adduced.

Ground 6 – the availability of a Jones v Dunkel inference regarding the respondents’ failure to produce documents

101    Ground 6 of the appeal is as follows:

The learned primary judge erred in failing to consider or draw an inference in accordance with the principles enunciated in Jones v Dunkel (1959) 101 CLR 298 by reason of the respondents’ failure to tender and/or discover documents in its possession that might have established what works were carried out to the vehicle when it was first returned to the first respondent in June 2011.

102    It is uncontroversial that the appellants served a notice to produce on the respondents and no documents were produced in response. The appellants argued that Mr Graetz gave evidence in relation to the whereabouts of Mercedes-Benz’ records and said that the notes and other documents relating to the repairs on the vehicle carried out on 1 June 2011 existed and were in storage by Mercedes-Benz. They submit that the primary judge erred in failing to draw an adverse inference in relation to the respondents’ failure to produce these documents.

103    The appellants failed to establish this ground of appeal.

104    The respondents applied to adduce further evidence in the appeal, being an affidavit of Sarah Manning, corporate counsel for Mercedes-Benz, affirmed on 17 February 2017. I start, however, by looking at the evidence as it is and putting the proposed further evidence to one side, the following is clear:

(a)    Mercedes-Benz filed an affidavit of documents dated 8 October 2013 in which it discovered, amongst other documents:

(i)    the Mercedes-Benz Melbourne Service History/Repair Report and customer contact notes commencing 27 July 2011; and

(ii)    the Customer Assistance Centre log in respect of BNMB between 3 June 2011 and 27 July 2011.

The entries in the Service History/Repair Report discovered by Mercedes-Benz did not commence until 27 July 2011. I would have expected that the Service History/Repair Report would contain entries which predated 27 July 2011 including, at least, entries relating to the repairs conducted in the period 1-3 June 2011. I would also expect that the Service History would contain entries which predated BNMB’s acquisition of the vehicle. However, the solicitors for the appellants did not seek further and better discovery;

(b)    at 4:11 pm on 9 May 2016, the day before the hearing, the solicitor for the appellants served a notice to produce on the solicitor for the respondents under cover of an email. The notice sought production of:

(i)    the original Mercedes-Benz Melbourne Service History/Repair Report and customer contact notes; and

(ii)    the original Customer Assistance Centre log in respect of BNMB.

(c)    at the commencement of the hearing the following day Mr Sowden, counsel for the appellants, called for production of the documents listed in the notice to produce. The primary judge requested that Mr Miller indicate the respondents’ position in relation to production at “some stage” that day; and

(d)    the respondents did not produce the documents listed in the notice to produce or indicate their position in that regard. The appellants did not again raise the issue with the primary judge.

105    On 11 May 2016 Mr Sowden cross-examined Mr Graetz in relation to the whereabouts of certain documents. He took Mr Graetz to entries on a printout from Mercedes-Benz records which recorded repairs Mercedes-Benz had undertaken and asked whether there were written documents underlying those entries. Mr Graetz said that there would be written “repair orders” which set out the vehicle details and the customer’s concerns and provided instructions to the workshop, which orders were kept by Mercedes-Benz. Mr Sowden asked Mr Graetz if he could provide an explanation as to why those records were not produced during the course of proceeding. Mr Graetz said his only comment was that they “would be archived”. He said “they would probably be at Mercedes-Benz” because “we keep records for over seven years”.

106    Mr Sowden asked whether any attempt had been made by Mr Graetz to find these archived, or potentially archived, records. Mr Graetz responded, somewhat confusingly:

Yes. I notified Mercedes-Benz Melbourne and I have a suspicion that they have been found, but then, I think, because - this is the second time, I think, this case has been visited, on - from our behalf - so I think it was - all the documents were found and sourced, and then put somewhere, and then a different solicitor/lawyer has taken over and - this is my assumption - that those documents are somewhere… I seem to recall sighting these documents, probably two or three years ago.

(Emphasis added.)

Mr Sowden did not ask Mr Graetz any further questions about the documents.

107    In my view the appellants sought to overstate Mr Graetz’s evidence in regard to the archiving of the documents to which Mr Sowden referred. The thrust of his evidence was that he had seen the relevant documents two or three years ago and that he assumed they were then put “somewhere”. Contrary to the appellants’ assertion, he did not clearly state that the relevant documents existed but were held in storage. If there was a basis for a Jones v Dunkel inference in my view it was tenuous.

108    That position becomes clearer when one has regard to Ms Manning’s affidavit of 17 February 2017.

The application to adduce further evidence

109    Section 27 of the FCA Act provides the Court a broad discretion to receive further evidence on appeal. Rule 36.57 of the Federal Court Rules 2011 (the Rules) provides that any such application must be accompanied by an affidavit explaining, amongst other things, the grounds of appeal to which the application relates and why the evidence was not adduced in the court appealed from. Except that the affidavit was short served the respondents complied with the requirements of r 36.57. The appellants conceded they had not suffered any prejudice through short service.

110    The principles underpinning the exercise of the discretion are well-established. In Sami v Minister for Immigration and Citizenship (2013) 139 ALD 1; [2013] FCAFC 128 at [7], Jagot, Barker and Perry JJ said:

The requirements of r 36.57 reflect the principles which apply to questions of fresh evidence on appeals. Generally, if the evidence could have been adduced below by the exercise of reasonable diligence it will not be admitted on appeal: see, for example, Moore v Minister for Immigration and Citizenship (2007) 161 FCR 236; 97 ALD 50; [2007] FCAFC 134 at [4]–[7]. Further, unless the evidence is of such relevance and weight that its admission would be likely to lead to a different result it also will not usually be admitted on an appeal.

The court exercising appellate jurisdiction needs to be satisfied that the proffered evidence is cogent, and likely to have produced a different result had it been available at the trial: Guss v Johnstone [2000] FCA 1455 at [29]-[33] (Sackville J with whom Drummond and Dowsett JJ agreed).

111    In her affidavit, Ms Manning deposed that:

(a)    in response to a request from the Mercedes-Benz legal department made on about 30 June 2012 Mr Graetz provided the legal department with copies of:

(i)    the Mercedes-Benz Melbourne Service History/Repair Report and customer contact notes; and

(ii)    the Customer Assistance Centre log in respect of BNMB,

along with other relevant documents;

(b)    in the week prior to 8 October 2013, in the process of preparing the affidavit of documents, Mercedes-Benz’s legal department made a further request of Mr Graetz for any additional relevant documents. No further documents were provided in response to this request;

(c)    at 4:11 pm on 9 May 2016 she received the notice to produce in which the appellants sought originals of the documents referred to in subparagraph (a) above;

(d)    on 9 May 2016 Ms Manning spoke to Mr Graetz in relation to the notice to produce. Mr Graetz said from his memory he had given all relevant documents to Mercedes-Benz’s legal department when the complaint first arose;

(e)    as the lawyer who dealt with the matter in 2012 was on maternity leave, Ms Manning conducted a search of the filing cabinets within the legal department. That search did not locate the documents pertaining to the notice to produce or any additional relevant documents;

(f)    Mercedes-Benz uses the archiving, storage and recovery services of Recall Information Management Pty Ltd trading as Iron Mountain (Iron Mountain). Mercedes-Benz documents that are no longer maintained at the relevant workplace are archived by Iron Mountain. Ms Manning therefore also organised a search of the archiving register maintained by Iron Mountain to ascertain whether any relevant folder documents had been archived there. That search also did not locate any relevant documents.

112    The thrust of Ms Manning’s evidence is that she conducted a reasonable search for the documents requested in the notice to produce but was unable to locate them. Her affidavit is plainly relevant to the adverse inference which the appellants contended the primary judge should have drawn, as it is cogent evidence that the documents covered by the notice to produce have been misplaced.

113    In my view, having regard to the principles set out above, it is appropriate to receive this further evidence. It provides a sufficient explanation as to why the respondents did not produce the documents sought.

114    It follows that the sixth ground of appeal is untenable. The failure of a party to produce documents in its possession is a matter from which an inference adverse to the party might fairly be drawn, but such an inference is not available where the documents are no longer in the possession, power or control of the party. Mercedes-Benz could not produce documents which it could not find.

Ground 8 – the opinion evidence given by Mr Graetz

115    This ground of appeal alleges:

The learned [judge] sought and received opinion evidence from the Respondents’ witness, [Graetz], in circumstances where:

(a)    the respondents had not indicated an intention to adduc[e] such evidence from that witness; and

(b)    there had been no compliance [with the] Federal Circuit Court Rules regarding expert evidence.

116    Under this ground the appellants noted that the respondents adduced opinion evidence from Mr Graetz, in particular evidence as to the manner in which the vehicle would have performed under harsh acceleration with the traction control system turned off.

117    The primary judge recounted Mr Graetz’s evidence in relation to driving the vehicle with the traction control turned off (at [51]-[52]), as follows:

Mr Graetz said he was familiar with the vehicle in question in this case, describing it as a V8 four-door sedan with rear-wheel drive. He said the vehicle’s performance characteristics included a tuned engine management system and tuned transmission to suit the vehicle. Mr Graetz said the horsepower was in the vicinity of 480–500. He said the vehicle accelerated quickly. Mr Graetz said the vehicle was equipped with [Mercedes-Benz’s] version of traction control known as ESP, being electronically controlled allowing for maximum acceleration and adhesion of the rear tyres to the road surface with a minimum amount of slip. Mr Graetz said ESP was an acronym for ‘electronic suspension prevention’.

Mr Graetz said the vehicle’s traction control could be turned off manually. He said that if the vehicle’s traction control was turned off, the vehicle’s rear wheels spun and the driver needed to ensure the vehicle was driven and managed in a controllable manner. Mr Graetz said that even if the traction control had been turned off, the vehicle could be driven normally but it could also be driven in a manner that involved harsh acceleration leading to a phenomenon known in the automotive industry as “light(ing) the rear wheels up”. That meant the rear wheels spun completely causing strain on the rear suspension, immediate wear and the reduction of control, according to Mr Graetz. He said driving the vehicle under those circumstances resembled driving on a wet road when the vehicle was “very difficult to control [in] a wet-road situation”.

(Emphasis added.)

118    The appellants submitted that the primary judge received Mr Graetz’s evidence as expert evidence and accepted it without qualification, and they were not provided notice of the respondents’ intention to adduce that evidence. They contended that the respondents failed to comply with r 15.07 of the Federal Circuit Court Rules and Federal Court Practice Note CM7 in regard to expert witness evidence, which prevented them from properly assessing whether Mr Graetz was competent to give the opinions he did.

119    The respondents did not establish this ground of appeal.

120    I say this, first, because having regard to Mr Graetz’s training, study and experience, in my view it was open for the primary judge to conclude that his evidence was admissible as an opinion based on specialised knowledge under s 79 of the Evidence Act.

121    The primary judge accepted that Mr Graetz is a qualified mechanic who had worked with Mercedes-Benz vehicles for 28 years, and had been a service manager for Mercedes-Benz dealerships in Melbourne and in Adelaide, as well as for Porsche and for SAAB, over a 30-year period. He had raced motocross and motorcycle speedway semi-professionally for a long time and had been Australian champion in each discipline. He then moved into race cars, where he was a Mercedes-Benz team technician and tyre technician, and had been regularly involved in speed comparisons held at the Australian Grand Prix each year.

122    Before the primary judge Mr Sowden objected on the basis that Mr Graetz’s evidence about the use of the traction control system was straying into opinion evidence. His Honour dismissed the objection and said that Mr Graetz had been associated with Mercedes-Benz vehicles for almost 30 years, had raced high-performance cars, had been associated with technical works relating to tyres, and had a high level of knowledge in respect of the performance of Mercedes-Benz vehicles. In my view those matters were a sufficient basis for his Honour to hold that Mr Graetz was giving evidence wholly or substantially within an area of specialised knowledge having regard to his training, study and experience.

123    In the appeal Mr Sowden expressly disavowed any contention that Mr Graetz was not competent to offer an opinion as to whether or not taking off the traction control system made it easier to spin the wheels of the vehicle. The appellants’ argument under this ground of appeal is essentially based on an alleged absence of fairness arising from non-compliance with the rules.

124    Second, Mr Graetz’s evidence in relation to the bald tyres and the presence of burnt rubber in the rear wheel arches of the vehicle was an eyewitness account and did not involve the expression of an opinion. The primary judge’s conclusions (at [109]-[113]) that:

(a)    the vehicle had been driven in a manner which involved harsh acceleration; and

(b)    driving the vehicle in a manner which involved harsh acceleration caused or propagated the fractures to the weld nuts on the rear sub-frame,

were based on Dr Casey’s evidence, the presence of burnt rubber on the inside of the rear wheel arches and the tyres being rendered bald after only 1,300 kilometres of use. They were not based on Mr Graetz’s evidence that it was likely that Mr Govedarica drove the vehicle with the traction control system turned off or his opinion as to the effect of doing so. The primary judge did not find that the damage to the vehicle occurred because Mr Govedarica drove it with the traction control off.

125    Third, rule 15.07 of the Federal Circuit Court Rules provides that the parties are to be guided by the Federal Court Practice Note in relation to expert evidence, at the time Practice Note CM7. The practice note proceeds on the assumption that expert evidence will be provided by way of a written report but there is no requirement that expert evidence only be given in that way. For example, as happened in the present case, a lay witness called to give evidence on an issue of fact and who has not therefore provided an expert report may be asked to express an expert opinion. Provided that evidence falls within s 79 of the Evidence Act the witness may do so.

126    I accept the appellants’ contention that, as a matter of fairness, the respondents should have given them notice that they proposed to adduce opinion evidence from Mr Graetz. However little turns on the respondents’ failure to do so when:

(a)    Mr Sowden objected to the receipt of the evidence and the primary judge refused the objection on the basis that he was satisfied that Mr Graetz’s evidence was wholly or substantially within his specialised knowledge. As I have said, his Honour’s decision was open on the facts regarding Mr Graetz’s training, study and experience;

(b)    the primary judge was entitled to waive compliance with the rules (see r 1.06); and

(c)    as I have said, Mr Graetz’s evidence regarding the use of the traction control system is not significant to the decision.

127    It is appropriate to dismiss this ground of appeal.

Ground 9 – the finding that Mr Govedarica had two speeding infringements

128    Under this ground of appeal the appellants allege:

The learned judge erred in making the finding at paragraph 61 of his reasons that Mr Govedarica had received two speeding infringements when driving the vehicle.

129    In the relevant paragraph (at [61]), his Honour said:

In his evidence-in-chief, Mr Govedarica was asked whether he received a speeding infringement when driving the vehicle, in answer to which he said he had not. He later admitted that he received a couple of speeding fines.

130    The appellants submitted, and I accept, that this constitutes a finding that Mr Govedarica received two speeding fines after taking delivery of the vehicle. It is common ground that there is no evidence to support such a finding. The question asked of Mr Govedarica was whether he had ever been convicted of any driving offence and he responded that he had received a couple of speeding fines when he got his licence.

131    There is, however, little substance to this ground of appeal. His Honour made the finding when summarising the evidence, and he did not refer to it as a basis for his conclusion that Mr Govedarica had driven the vehicle in a manner which involved harsh acceleration. Indeed, his Honour did not again refer to that evidence. On a fair reading of the primary judgment the finding that Mr Govedarica incurred two speeding fines, whether while driving the vehicle in question or another vehicle, is of marginal relevance and not significant to the decision.

132    It is appropriate to dismiss this ground of appeal.

Ground 10 – finding that Mr Malkoutzis had no comparable academic distinction or expert-specific training

133    Under this ground of appeal the appellants allege:

The learned primary judge erred in making the finding that expert called by the applicant, Mr Malkoutzis, had no comparable academic distinction or expert specific training compared with those of the expert called by the respondents.

134    The primary judge said (at [69]) that “self-evidently, Mr Malkoutzis had no comparable academic distinction or expertise-specific training as did Dr Casey.” The appellants submitted that there was no evidence to support his Honour’s conclusion in that regard.

135    This ground of appeal has little merit and the appellants effectively abandoned it in the course of the hearing.

136    The evidence is that Mr Malkoutzis has a Bachelor of Engineering (Mechanical) from Swinburne Institute of Technology, and worked for more than 30 years in the automotive industry, including 13 years at Ford Australia, as well as at Ford in the USA. He held various positions including positions relating to designing, testing, developing and manufacturing, and engineering of vehicles, components and systems at various engineering and management levels within the company. His experience includes evaluating engineering test vehicles and components that had been subjected to tests in both laboratory and durability test track environments, and the subsequent interpretation of failures and wear and tear on components. He also worked for 13 years full-time at PBR Automotive as a senior brake design engineer/manager in various engineering product design disciplines, and his responsibilities included the evaluation and diagnosis of engineering test parts post-testing.

137    Since 2003 he had worked as an automotive engineering consultant in his own business, Talk Torque Automotive. He has several large commercial clients and has experience investigating, researching and presenting reports in relation to vehicles for use in legal proceedings.

138    That stands in comparison to Dr Casey who has a Bachelor of Engineering (with first class honours), a Master of Engineering Science, and a PhD in the field of Mechanical Engineering. Dr Casey continued in academia from the time he completed his degrees until June 2005 and he has held academic postings in universities in Japan, Queensland and New South Wales, including as a lecturer in the School of Mechanical and Manufacturing Engineering at the University of NSW from January 1993 until June 2005. During that time he actively taught and researched areas relating to mechanical engineering. Dr Casey is a widely published author in international journals and has presented at conferences to professional bodies.

139    In addition to his academic positions Mr Casey has worked a consulting engineer since 1993, and in 1998 he formed his own consulting business, R T Casey Pty Ltd. Many of the consulting activities in which he was engaged relate to automotive matters. He has investigated over 1500 heavy vehicle accidents, crashes, fires and failures and had worked extensively in the field of automotive forensic investigation since March 1993. He has been involved in over 400 commercial testing and evaluation projects on matters that included compliance testing, load rating, dynamic stress and fatigue, stability and destructive load testing for suspensions, fatigue life and failure load on tow couplings and impact control causation, stability and failure scenarios for tyres.

140    Dr Casey said he has a strong understanding of bolts, nuts, studs, screws and other fasteners because he has tested many thousands of them for compliance to codes, for determination of their ultimate strength, and as part of forensic investigation into their failures. He deals with forensic analysis of machines, vehicles, plant, equipment and other mechanical systems on a very regular basis and has a strong working knowledge of automotive systems including suspension.

141    The primary judge’s conclusion that Dr Casey was more academically qualified and had a higher level of expertise-specific training than Mr Malkoutzis was plainly open.

142    It is appropriate to dismiss this ground of appeal.

Ground 12 – the adverse inference drawn against Mr Malkoutzis

143    Under this ground of appeal the appellants allege:

The learned judge erred in drawing an adverse inference against the applicant’s expert in failing to adduce evidence about the use of the vehicle prior to the sale of the vehicle to the applicant, when all records relating to the history of the vehicle were in the possession of, but were not discovered by, the respondents.

144    The primary judge set out Mr Malkoutzis’ theory as to the cause of the vehicle damage, noting (at [23]) that it was “predicated upon prolonged use of the vehicle on rough roads, meaning bumpy or corrugated roads”. His Honour then noted (at [24]) that “[n]o evidence was adduced in this case about the use of the vehicle prior to the applicant’s purchase of it.” The appellants argued that in noting the absence of evidence, the primary judge drew an adverse inference against Mr Malkoutzis.

145    I disagree. In my view, his Honour was merely noting the fact that there was no evidence that the vehicle had been driven for a prolonged period on bumpy or corrugated roads. This meant that there was no factual foundation for Mr Malkoutzis’ theory, and as his Honour noted (at [25]) Mr Malkoutzis conceded that his opinion in that regard was “purely speculative”.

146    I dismiss this ground of appeal.

Ground 13 – evidence of prior use of the vehicle

147    Under this ground of appeal the appellants allege:

The learned judge erred in failing to take into account, consider or provide reasons for concessions properly made by the respondents’ expert, namely, that he was unable to determine whether the initial cause of the fault leading to the failure of the subframe occurred before or after the applicant took possession of the vehicle.

148    It is uncontentious that no evidence was adduced about the use of the vehicle prior to its purchase by the appellants. The appellants argued that the respondents must have purchased the vehicle from someone prior to on-selling it to BNMB and submitted that Mercedes-Benz must have been in possession of documents relating to the history of the vehicle. They contended that the respondents had the onus to show that the vehicle did not suffer from a defect in the rear sub-frame at the point of sale yet they failed to discover any documents relating to prior use of the vehicle. They argued that the primary judge erred by failing to “account, consider or provide reasons” why his Honour rejected the possibility that the rear suspension failure of the vehicle was caused prior its sale to BNMB.

149    The appellants did not establish this ground of appeal.

150    Against the backdrop that there was no evidence as to the use of the vehicle prior to its purchase by the appellants and Mr Malkoutzis’ admission that he had not obtained any information in regard to the vehicle’s prior history, Mr Malkoutzis opined that one cause of the failure was the prior use of the vehicle on corrugated sandy roads. In cross-examination he accepted that his opinion in that regard was “pure speculation” and the primary judge rejected that theory. The primary judge accepted Dr Casey’s theory that the failure was caused by harsh acceleration.

151    It is an overstatement to contend that Dr Casey conceded that he was unable to determine whether the initial cause of the fault leading to the failure of the sub-frame occurred before or after the point of sale. Dr Casey said that, while it was a difficult parameter to quantify and he was reluctant to offer an exact estimate of the distance in kilometres over which the fatigue process had occurred, the fatigue cracking had not been taking place for very long prior to the final failure.

152    Contrary to the appellants’ contention, it is clear from the primary judgment (at [86] and elsewhere) that his Honour considered the issue as to when the fatigue cracking commenced. Dr Casey’s evidence, as accepted by the primary judge, was that:

(a)    if the harsh acceleration occurred on a very regular basis then the total time needed to make the weld nuts fail could have been short; and

(b)    the absence of long-term rust and fretting on the fatigue surfaces of the weld nuts showed that the fatigue process had “not been taking place for very long prior to the final failure” and was “relatively recent”.

It was open on the evidence for the primary judge to conclude that the metal fatigue in the weld nuts on the rear sub-frame commenced after BNMB acquired the vehicle.

153    It is appropriate to dismiss this ground of appeal.

COSTS

154    I am aware of no reason why costs should not follow the event, and I have made orders for the appellants to pay the respondents’ costs. If either party seeks a different costs order that party must file short submissions (no more than three pages) within seven days. The opposing party must file any short submissions in response within seven days thereafter. Subject to submissions by the parties, any question as to whether a different costs order is appropriate will be dealt with on the papers.

Associate:

Dated:    5 March 2018