FEDERAL COURT OF AUSTRALIA

Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426

ORDERS

THE COURT ORDERS THAT:

1.    The applicant have judgment against the first respondent in the sum of nine hundred and eighty-six thousand, four hundred and seventy-four four dollars and fifty-six cents ($986,474.56).

2.    The applicant have judgment against the second respondent in the sum of five million two hundred and twenty thousand, two hundred and seventy-five dollars and fifty-nine cents ($5,220,275.59).

3.    The second respondent have judgment on its cross-claim against the first respondent in the sum of five million two hundred and twenty thousand two hundred and seventy-five dollars and fifty-nine cents ($5,220,275.59).

4.    The parties are to be heard as to the amount of interest to be awarded and on the question of costs.

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

REASONS FOR JUDGMENT

DERRINGTON J:

Introduction

1    The applicant, Mr Vautin, purchased a recreational fishing vessel in October 2011. As a pleasure craft it is of the larger type, being some 74 feet long. Vessels of this type are marketed and sold for ocean going travel and as being capable of withstanding all but the most extraordinary sea conditions. Mr Vautin paid a substantial amount of money for his vessel, specifically the combined sums of US$3,000,000 and AU$1,200,000 (this latter amount being the ascribed trade-in value of a vessel he previously owned). The vessel was sold to Mr Vautin by the second respondent, Eagle Yachts Pty Ltd (Eagle Yachts). It had been constructed by the first respondent whose name at the time was Bertram Yachts Inc (Bertram), a company incorporated under the laws of the State of Delaware in the United States of America and carrying on business in and from the State of Florida. All parties agree that the vessel acquired by Mr Vautin, which is named “Revive”, is defective. The defect had its origins in the manufacturing process as a result of which the laminated PVC foam core of the vessel (being the hull, the decks and the superstructure) were not constructed in accordance with any known specification or, as has been found, Bertram’s own specifications. To date, the consequence of the defective manufacture has been that those areas of the vessel’s hull which have been subject to the most buffeting, have “delaminated” (being the separation of the outer laminate layers from the PVC foam core). Necessarily, this renders the vessel unseaworthy and not capable of being used for the purposes for which it was acquired. It certainly cannot be used in the open seas. It is possible that other parts of the vessel will delaminate or fail in the future.

2    Mr Vautin is, understandably, unhappy with this situation. He brings this action against Bertram as the manufacturer of the vessel and against Eagle Yachts as the entity which sold it to him. Various causes of action are pursued, including a number which arise pursuant to the Australian Consumer Law (ACL) (Sch 2 to the Competition and Consumer Act 2010 (Cth)).

3    The respondents do not assert that Mr Vautin is not entitled to some form of remedy. However, they dispute the nature of the remedy to which he is entitled; the quantum of any damages payable; and, the identity of the respondent whom ought to be liable to Mr Vautin. A central issue is the extent to which the defective manufacture of the vessel has rendered it unfit for its intended purposes. Mr Vautin asserts that all of the defectively manufactured shell of the vessel requires rectification to make it comply with a relevant specification. The total cost of doing so is in the vicinity of $2.975m. The respondents, on the other hand, assert remediation need only occur in the areas of the vessel where the defects have, to date, resulted in delamination. As an alternative, they submit the remediation can be limited to the hull area of the vessel.

The facts

4    Some of the issues in this matter arise as a result of the residency of the parties. Mr Vautin is a resident of Australia. Eagle Yachts is incorporated in Australia and has carried on business as a seller of boats here. Bertram, on the other hand, is an American company, incorporated in Delaware and engaged in the manufacture of motor vessels in the State of Florida.

5    The relationship between Eagle Yachts and Bertram was, effectively, governed by an exclusive dealership agreement. In summary, that consisted of a written agreement entered into in May 2005 between Bertram and Eagle Yachts whereby the latter became the exclusive supplier in Australia of “pleasure yachts” manufactured by Bertram. That agreement was entitled “Bertram Yacht, Inc Dealer Agreement 2005-2008”. By its terms that agreement terminated on 31 August 2008. However, it is accepted as between Bertram and Eagle Yachts, that the parties continued to be bound by and continued to perform the terms of the agreement (exclusive of the termination clause) subsequent to that nominated termination date. On 28 October 2013, Eagle Yachts provided two months’ written notice to Bertram that it would terminate the agreement. Consequently, on 27 December 2013, the agreement came to an end. The terms of the exclusive dealership agreement and the manner in which they were carried out are important in the context of the question of whether Bertram was carrying on business in Australia. They are discussed in detail below.

6    Mr Vautin enjoys boating in motor yachts, including engaging in marlin fishing. Prior to acquiring Revive, he had been the owner of four other vessels, all of which were made by Bertram, the last of which was a 63ft vessel. He had purchased that vessel from Eagle Yachts and, at the time of buying it, he had indicated to Eagle Yachts that he wanted to use the vessel for recreational deep-sea fishing and to use it to fish for marlin during the North Queensland marlin season.

7    In or about mid July 2010, Mr Vautin received a telephone call from Mr Brad Rodgers who was the sales manager with Eagle Yachts and who had sold him the 63ft vessel. Mr Rodgers called to offer to Mr Vautin a larger vessel; being one in the Bertram 700 series. The particular vessel offered was especially attractive to Mr Vautin as it had an enclosed flybridge.

8    Subsequently, on or about 6 October 2011, Mr Vautin entered into the contract to purchase a Bertram 700 Enclosed Bridge motor yacht (hull #009). He agreed to pay a purchase price of the combined amounts of US$3,000,000 plus AUD$1,200,000, the latter amount being satisfied by the trading in of his existing vessel. He also agreed to pay the sum of US$75,000 representing the cost of having the vessel shipped to Australia.

9    At the time of purchasing the vessel, Mr Vautin also purchased from Bertram upgrades to the vessel which cost US$235,290. He has also spent a considerable amount of money making his own additions to the vessel, including the installation of a satellite telephone, a marlin tower and associated electronics, a tender on the bow, a duckboard on the stern, a fridge / freezer in the cockpit, and two monitors in the helm with connected boat cameras.

10    It is an agreed fact between the parties that, prior to and at the time that Mr Vautin purchased the vessel from Eagle Yachts, he disclosed to Eagle Yachts by implication that the purpose for which the vessel was being acquired by him was for motoring on the open ocean. It is also agreed that Eagle Yachts represented to him that the vessel was reasonably fit for the purpose of motoring on the open ocean. Given the size and type of vessel in question these matters are somewhat axiomatic.

11    Another agreed fact is that Mr Vautin paid the purchase price and the shipping costs in accordance with the terms of the agreement.

12    Pursuant to the dealership agreement, a vessel of the type required to fulfil the order placed by Mr Vautin was ordered by Eagle Yachts from Bertram. The latter manufactured the vessel at its factory in Florida. It did so using a hull constructed some years previously. The completed vessel was delivered to Eagle Yachts at Bertram’s Florida premises and it was shipped to Australia. It was received in Australia by Eagle Yachts in or around February 2012 and delivered to Mr Vautin on 5 March 2012.

13    On around 4 February 2012, Eagle Yachts, by Mr Rodgers, gave to Mr Vautin a Bertram Warranty Card in accordance with its obligations under the dealership agreement. Mr Vautin completed the card which was immediately returned to Mr Rodgers who forwarded it to Bertram in Florida. There is no dispute between the parties that Mr Vautin received the manufacturer’s warranty from Bertram as he was entitled to under the contract of purchase and there is no dispute that the warranty card was returned to Bertram.

14    After acquiring it, Mr Vautin used the vessel solely for the purposes of recreational motor cruising and game fishing. He has not used it for any other purpose. There is no evidence that it was used other than in accordance with its intended uses and within its intended capabilities. Mr Vautin employed a full time skipper for the vessel, being Mr Leigh Bradshaw. It has been part of Mr Bradshaw’s duties to maintain the vessel in first class condition and, apart from the damage to the vessel caused by the testing for the purposes of this litigation, it is apparent that he has fulfilled that obligation. Mr Bradshaw has incurred expenses for the maintenance and upkeep of the vessel from time to time on behalf of Mr Vautin.

15    Shortly after the vessel was acquired, Bertram undertook a number of warranty jobs on the vessel. When such work was required the warranty claims were made through Mr Rodgers at Eagle Yachts. Eagle Yachts undertook the required work to fulfil Bertram’s obligations under its warranty.

16    In November 2014, the vessel was sailed from Cairns to Brisbane after the completion of the marlin fishing season. In the course of that journey the skipper of the vessel, Mr Bradshaw, noticed damage occurring in the forward portside part of the hull. In particular, he observed that there was delamination of the inside skin in the topside of the bow. He immediately telephoned Mr Vautin who, the next day, travelled to the Gold Coast to inspect the damage.

17    Shortly after Mr Vautin arrived on the Gold Coast and inspected the damage to Revive, he telephoned Mr Rodgers and advised him of what had occurred. Within a day or so Mr Rodgers arrived on the Gold Coast also to inspect the damage. Mr Rodgers was the employee at Eagle Yachts who sold Revive to Mr Vautin. At this point in time, Eagle Yachts had ceased to be the exclusive dealer of Bertram Yachts in Australia. That said, it was apparently still handling warranty claims on Bertram’s behalf.

18    On 15 November 2014, and prior to leaving for the Gold Coast, Mr Rodgers sent an email to Bertram (by that time referred to as the Ferretti Group) and, in particular, to Mr Frederico Ferrando. In that email he advised that the vessel sold to Mr Vautin (referred to by its code 700/009) had started to delaminate on the port forward hull in an area of about 2 metres wide running down to just above the water line. Mr Rodgers advised that Mr Vautin would like to contact them to discuss a way forward to address the situation.

19    A reply email to Mr Rodgers came from Mr Ferrando on 17 November 2014 the effect of which was that he would discuss the matter with Mr Rodgers the following day.

20    It does not appear that Mr Ferrando did contact or communicate with Mr Rodgers on the following day as, on 19 November 2014, Mr Rodgers sent a further email to Mr Ferrando advising him that he was flying to Queensland to inspect the vessel and to review the damage and, further, that Mr Vautin was inquiring of Mr Rodgers as to what assistance would be provided by Bertram and/or the Ferretti Group in the future. Mr Rodgers sought information as to what steps would be taken and what assistance Ferretti would provide. He asked for an urgent response. Unfortunately there did not appear to be any response, urgent or otherwise, from Bertram, the Ferretti Group or from Mr Ferrando. Despite being entitled in this action to call evidence as it saw fit, Bertram remained completely silent as to why it did not respond to the requests for assistance in relation to the delamination on Revive.

21    On 4 December 2014, Bertram and Eagle Yachts were notified of the damage in a letter from Mr Vautin. The letter was directed to Mr Ferrando as the Logistic and Commissioning Manager Americas Ferretti Group in Ft Lauderdale, Florida. In the letter Mr Vautin formally advised of the defect in the hull of the Revive, that the defect appeared to fall within the scope of the Bertram warranty, that the vessel was unseaworthy and awaiting repair by Bertram or on its behalf. Mr Vautin sought an acknowledgment of the Notice of Defect as a matter of urgency together with advice as to how the repairs would be undertaken. The letter was sent by registered mail and, apparently, was received.

22    Bertram did not respond to that letter. Again, despite being a party to this action, it called no evidence as to why it did not reply to the letter or act to fulfil its warranty obligations. It has refused to fulfil its obligations under the warranty which it gave and has provided no justification for that refusal.

23    It appears that Mr Vautin’s insurers, Club Marine, engaged Marine & Leisure Assess Pty Ltd to undertake an assessment of the damage to the vessel. A report was produced on 24 November 2014. The report identified substantial delamination on the portside hull and on the portside deck above the gunwale. It also identified cracking in the gel-coat and the external port deck. The report identified that it was not possible to estimate the cost of rectification at that time; it also recommended that the vessel not be used until further investigations were conducted.

24    A subsequent report was undertaken by marine assessors, Navsafe Marine Pty Ltd. It is dated 9 December 2014. There were a number of inspections of the vessel for the purposes of this report, including one on 4 December 2014 where some removal of inner structural laminate occurred. That investigation revealed the core bonding had failed. Various photographs were taken of the removed panel and of the condition of the core. The evidence revealed “the core bonding between both the inner structural and outer structural laminates has failed in large areas of the portside hull topside matrix”. Navsafe reported that there was sufficient evidence to justify a conclusion that the structural integrity of the composite hull topside laminate matrix was compromised on the external portside in the vicinity of the anchor chain locker space. It postulated that the deficiencies might extend aft of the collision bulkhead on the forward cabin area. It pointed out that the nature and extent of the deficiencies could not be identified at that time. Most poignantly for present purposes is the conclusion in the report in relation to the delamination defect:

3.    This will be an ongoing and increasing defect in cost and physical size and in time will cause a catastrophic failure of the hull structure if not immediately repaired.

25    On 15 February 2015, Mr Clive J Seares of Reanu Services Pty Ltd, a loss adjuster, sent further correspondence to the Ferretti Group and, in particular, to a Mr Brian Kelley. He advised that he was assisting Mr Vautin with the coordination of the warranty claim along with Mr Brad Rodgers. It appears that Mr Seares enclosed with the email a copy of the Navsafe Survey Report. In that email Mr Seares identified that there may be very extensive repairs as the surveyor had found delamination, or signs of delamination, in a number of areas of the yacht. He identified that the structural integrity of the hull topside had been compromised in a number of places and that further examination was required to determine the full extent of the affected areas. It was further identified that unless the hull areas were repaired there would be a catastrophic failure of the hull structure. Mr Seares identified that he looked forward to receiving an indication of any further information that Ferretti may require in order to proceed with the warranty repairs.

26    This letter apparently followed from an email of Mr Rodgers of 9 February 2015 to Mr Kelley about the matter and Mr Kelley’s response on 10 February 2015 requesting that Mr Rodgers submit the survey and repair quotes ASAP. It is not apparent that any response was provided to Mr Seares in respect of the email which he sent.

27    Subsequently, on 27 April 2015 Mr Seares wrote to Mr Kelley of the Ferretti Group (via an email) in which it was advised that a detailed draft “scope of work” and estimate/quote for warranty repairs to the yacht was attached. The work which was identified as being necessary was based on the recommendations of the Navsafe Marine Report and in the expectation that in undertaking repairs of the currently visible damage, further failures would be found to involve the entire port and starboard topsides. The quote was for repair of those areas and the total cost was $856,054. In his email Mr Seares requested that Mr Kelley provide him with full construction drawings, a detailed laminate schedule for the inner and outer hull shell laminate, information as to how all secondary internal bonding was achieved, and identification of the core material and bonding agents used. He also sought authorisation of the repairs under the warranty.

28    Again, Bertram did not respond to that email. Again, it chose not to call any evidence as to why it did not respond to the email nor comply with its warranty obligations.

29    On 26 June 2015, Mr Vautin sent by registered mail to Mr Ferrando a copy of the letter of Mr Seares together with the repair quote. Mr Vautin’s letter identified that there had been no response to the email of 27 April and that he looked forward to hearing from the Ferretti Group.

30    Bertram did not respond to that letter and has called no evidence as to why it did not.

31    As a consequence of the reports obtained by Mr Vautin as to the potential for the existence of substantial defects in the vessel, by letter of 23 July 2015, Mr Andrew Dovell was engaged to prepare an expert’s report in relation to the defects. For the purposes of preparing that report Mr Dovell inspected the Revive on a number of occasions. First, between 3 and 4 August 2015, and then on 31 August 2015. Mr Dovell obtained “cored” samples of the hull structure which he sent to the University of Southern Queensland for testing. A report was received from that University and it was considered by Mr Dovell for the purposes of his report.

32    On 9 December 2015, Mr Dovell completed his expert report in relation to the Revive. It is damning of the structure of the vessel.

33    On 16 March 2016 Mr Vautin, by his solicitors, Banki Haddock Fiora, sent a letter to Eagle Yachts in which Mr Vautin purported to reject the vessel on the basis that Revive was not reasonably fit to motor on the open seas and that Eagle Yachts had failed to comply with the guarantees in ss 54(1) and 55(1) of the ACL. Further, on the basis of the damage to the vessel and that, due to its size, it was incapable of being returned to Eagle Yachts which was now located in Western Australia, Eagle Yachts was informed of its obligation to collect the vessel.

34    That purported rejection of the vessel was not accepted by Eagle Yachts

35    On 18 April 2016, the present proceedings were commenced by Mr Vautin against Eagle Yachts and Bertram. In turn, Eagle Yachts has pursued a cross-claim against Bertram in reliance upon a right of indemnity under the dealership agreement.

The issues in dispute between the parties

36    Two central issues arise in relation to the defective construction of Revive. The first is as to the nature and extent of the defects that exist consequent upon the defective method of manufacture adopted by Bertram. The second is how that defect might be characterised for the purposes of the implied guarantees imposed by the ACL. The resolution of these issues will determine whether relief is available to Mr Vautin and, if so, to what extent.

37    In relation to Bertram only, the major issue concerns whether it is subject to liability under the operation of the ACL. To some extent that involves a question as to whether it carried on business in Australia. Mr Vautin has also brought a claim in negligence against Bertram, which responds by asserting that the relevant law to apply to such a claim is the law of Florida, which allegedly excludes such a claim.

38    Bertram appears to accept that it is liable to indemnify Eagle Yachts in relation to the valid claims of Mr Vautin. It asserts, however, that the totality of the quantum claimed by Mr Vautin cannot be sheeted home to it by reason of the contractual indemnity.

The defective construction of Revive

39    As mentioned, by the time of trial, the parties agreed that the vessel is defective. They and their experts agreed that the method by which the cored construction of the hull, decking and super structure was carried out was not in accordance with good boat building practices. Indeed, it appears that the method of constructing those areas of cored panels was not in compliance with Bertram’s own construction specifications, nor in accordance with an appropriate and accepted standard for this type of build. The parties also agreed that the CE Directive 94/25/CE, as amended by Directive 2003/44/CE, was an appropriate protocol for the construction of the cored panels of this vessel and that the construction did not meet the standards identified in that Directive. Despite that apparent agreement, the parties remain in dispute as to the nature and extent of the defects in the vessel.

The PVC foam core construction technique

40    The topsides (being that area of the hull above the waterline), the decking and the superstructure of Revive is largely constructed of a rigid, PVC foam core which is bonded onto internal and external fibreglass laminates. The layer of PVC core is approximately 30mm in thickness whereas the fibreglass laminates are about 5mm. The PVC core is bonded to the outer and inner skins by bonding paste and resin. This type of construction is referred to as a “sandwich core construction”. The hull below the waterline is constructed of solid fibreglass, but is not relevant for present purposes.

41    An important part of this sandwich core construction concerns the manner in which it is used to create the variable or curved surfaces necessary for constructing this type of boat in which very few parts are flat. The PVC core (which are manufactured as flat rectangular boards) must be adapted to meet the variety of shapes required. That is achieved by the introduction of what are known as “kerfs” into the foam core. A “kerf” is, in effect a cut or a groove which is made through the PVC core. They are made across the length and breadth of the core material through its depth at intervals of approximately 35mm. The result of making kerfs in the core material is that it ceases to be a continuous panel of foam and, instead, is turned into a series of rectangular prisms of approximately 35mm x 35mm x 30mm. The grid of pieces is held together by a light fibreglass “scrim” on the back of the sheet of core material. Kerfs allow the PVC core pieces to be manoeuvred relative to each other to create the contours required for the various parts of the vessel. It would appear that this general method is adapted for different parts of the vessel and, in some sections, there are two layers of core material instead of one.

42    In the reports of the various experts, and in their evidence, they occasionally refer to parts of the sandwich foam core laminate as being a “panel”. As it was explained, that term has no special meaning and, in this context, it is merely a convenient reference to a section of the vessel’s shell between two different boundaries of support. I adopt that expression such that in these reasons, the expression “sandwich core panel”, refers to a “panel” of sandwich core laminate construction.

43    A central issue in this case relating to the construction of Revive is the efficacy of the construction materials used to cause the adhesion of the PVC core material to the inner and outer fibreglass laminate skins. The existence of the gaps caused by the kerfs and the fact that the inner and outer skins form curved and molded surfaces, necessitates the adoption of certain construction techniques to ensure that the outer skins of the cored panel effectively adhere to the foam core. These require that:

(a)    the kerfs (or the gaps created by the kerfs) in the PVC foam are completely filled up with resin or putty prior to the foam being affixed to the laminates;

(b)    the surfaces of the kerfs of all of the cored construction are coated with resin; and

(c)    the outside surface of the core is effectively primed with resin prior to being installed against the skins.

44    It is apparent that a significant benefit of filling the kerfs with putty, bonding paste or resin is that it ensures the curved surface of the foam core provides an even and continuous plane on which to adhere the outer skin. Further, if the kerfs are not filled, a penetration to the outer skin of the panel might allow the ingress of water, which may then flow through the unfilled kerfs and allow the accumulation of moisture within a wide area of the foam core. The existence of such moisture may subsequently cause deterioration and loss of balance in the vessel.

45    There is no disagreement as between the parties that Bertram did not apply the above identified techniques in the construction of the Revive.

The damage appearing in the vessel

46    There is also no argument between the parties as to the extent of the visible damage sustained to the vessel as a result of the techniques used in its construction. This is because the occasions on which the damage was first noted and through the investigations which followed, photographic records of the observations have been made.

47    The first instance of damage appearing in the hull was the identification, in around November 2014, of delamination in the forward section of the hull, both internally and externally in the area of the port-side anchor locker. That is an area on the forward part of the topside of the hull which, in the ordinary course, is exposed to regular wave impact. The inner side of the topside was removed by NavSafe Marine on its initial inspection and the photographs then taken have been viewed by the experts who gave evidence before the Court. There is no dispute that those photos show that there was a failure of the bond between the PVC core and skins. In particular, there were signs of gaps existing between the core and skins indicating a failure of the bond.

48    The photographic evidence reveals that the kerfs in the foam core used in the construction of the forward topside areas of the hull were not filled with adhesive paste or putty. They were left as voids. It also is not in doubt that, prior to being installed, the surfaces of the PVC core in the kerfs were neither primed nor resin coated.

49    Samples of other parts of the vessel were taken where the core construction technique was used and, again, there does not appear to be any dispute that the kerfs were not filled. Voids remained and little or no priming of the core took place prior to its installation as appears from the fact that the surfaces of all of the kerfs which were exposed were raw. The samples taken from the vessel were tendered as exhibits and they display the qualities which are identified.

50    The expert engaged by Mr Vautin, Mr Dovell, also undertook inspections of the deck and the superstructure of the vessel. His investigations disclosed that the sandwich core construction in these areas also suffered from the same deficiencies. Specifically, that the core was not primed as its surfaces were raw on inspection, there was no sign of resin being applied directly or of any drainage from the priming of the outer surface of the core prisms, and the kerfs were left unfilled. In these areas the manner of construction did not use a bonding paste between the foam core and the outer skin. Rather, a layer of chopped fibreglass with a bonding agent was used.

51    None of the experts called by the respondents suggested that the above observations were incorrect. Indeed, they are apparent from a consideration of the photographs attached to the expert report of Mr Dovell and the samples tendered in evidence.

The extent of the alleged deficient manner of construction

52    A number of experts have produced reports for the purposes of the trial in relation to the manner of the construction of the cored components of Revive. The central experts were Mr Andrew Dovell, Mr Christopher Hutchings and Mr Paul Stanyon. They have also produced a joint report dated 12 May 2017, which identifies the areas of agreement and disagreement. The experts agree that the topside of the vessel is of a sandwich cored construction using contoured foam throughout and also agree that the hull bottom, below the lower chine, is of single skin construction throughout. They also agree that the deck and superstructure are of cored construction using contoured foam throughout.

53    For present purposes the following agreed findings are important to the determination of this matter:

…

7.    Based on all evidence the kerfs of all of the cored construction have remained unfilled. Agree CCH, PS, ACD.

8.    Based on all evidence the surfaces of the kerfs of all of the cored construction were not coated with resin. Agree CCH, PS, ACD.

9.    The evidence indicates that the outside surface, (the scrim side of the contour foam), of the core was not effectively primed with resin prior to being installed in the hull against the outside skin. Agree CCH, PS, ACD.

…

12.    Very little of the applied core bonding paste has penetrated the kerfs of the core. Agree CCH, PS, ACD.

13.    Based on the evidence it appears that the inside surface of the core has had sufficient resin applied to affect an adequate bond between it and the inside skins. Agree CCH, PS, ACD.

…

21.    The best measure of fitness for purpose for the design and construction of a pleasure boat similar to REVIVE is the application of an appropriate and accepted standard of which the CE Directive 94/25/CE as amended by directive 2003/44/CE is one. Agree PS, CCH, ACD”

54    Central to this case are the consequences of the above identified deficient methods of construction to the integrity of Revive. At the very least, all of the experts agree that these methods of construction were inappropriate for those areas where delamination has already occurred. That would appear to be self-evident. All parties agree that these parts of the vessel require remediation work. What divides them is the qualitative impact of the use of this apparently defective construction method on those other parts of the vessel where delamination has not occurred, or not yet occurred.

Bertram’s own specifications - CE specifications

Consequences of defective construction

55    The joint experts agree that the consequence of the defective construction is that the sandwich core panels have a reduced shear capacity. In the briefest of terms, the shear capacity of the panel is its ability to withstand forces impacting perpendicularly upon it. Once the forces on a panel exceed the shear capacity the panel will rupture and fracture which may, but not necessarily, entail a complete breakage through the whole width of the panel, or the inner core. That will often involve the inner core separating from the laminate skins as occurred in this case. If that occurs, the only protection from external forces will be the outer laminate skin which has minimal shear capacity. If that outer skin fails the vessel ceases to be watertight and is liable to be seriously compromised.

56    Whilst the experts agree that the construction method used in this case meant the laminated core panels had a reduced shear capacity, they were not entirely ad idem as to the extent of that reduction. In considering this issue they all had reference to a scientific article by Berger, Loiselet, and Dransfeld entitled “Filling or Not Filling the Slits in Contourable Sandwich Cores With Resin? – Effect on the Properties of the Sandwich Construction”. In that article the authors identified that where the kerfs / groves in foam core laminate are not filled, the shear capacity is 50% less than where the kerfs / groves are filled. Additionally, fatigue tests showed that the unfilled kerf configuration had a substantially shorter life span than did a filled kerf configuration.

57    In their joint expert reports Messrs Dovell (ACD), Stanyon (PS) and Hutchings (CCH) recorded the following:

The cored panels as built will have a reduced shear capacity in the order of 50% as suggested by the paper of BERGER, LOISELET, and DRANSFELD due to the fact that the cored panels as built in REVIVE have unfilled kerfs per the paper. Agree PS, ACD. Disagree CCH.

CCH Disagrees with this statement for the following reasons:

a.    The paper of BERGER, LOISELET, and DRANSFELD relies on the testing of a sandwich panel consisting of a 20mm core and 1.5mm thick inner and outer skins; whereas REVIVE consists of a sandwich panel that has a 30mm core, 7.5mm thick outer skin and 3mm thick inner skin. CCH believes that due to the significant difference in skin thickness between REVIVE and the test panel the magnitude of core shear failure could be different.

b.    The cored panels as built will have reduced shear capacity relative to a panel built with the kerfs filled, however quantifying that loss would require testing of a panel cut from the vessel.

58    In other words, Mr Hutchings was of the opinion that the sandwich core panels, as built, has a reduced shear capacity relative to a panel built with kerfs filled. He asserts, however, that quantifying the level of reduction requires testing of a panel cut from the vessel. Messrs Dovell and Stanyon relied upon a scientific paper of Berger, Loiselet and Dransfeld to conclude that the shear capacity reduction of the panels on Revive was in the order of 50%. On the other hand, Mr Hutchings opined that the variation between the panels which were tested for the purposes of the article and those used in the construction of Revive, means that the magnitude of their reduced shear capacity could well be different. All of the experts agreed that the actual loss of shear capacity in the “as built” core panels of Revive may not directly correlate to the loss in the panels referred to in the Berger et al article because they were of a different construction. On the other hand, Messrs Dovell and Stanyon remained of the view that the article supported the conclusion that the panels in Revive had a loss of shear capacity in the order of 50%. All agreed that the most accurate quantification of the loss of shear capacity of the panels as built would require destructive testing of panels from the vessel.

59    The experts also agreed that, putting aside the loss of shear capacity, there were other deleterious effects of the kerfs not being filled. Those deleterious effects included:

a.    If the kerfs are filled, water ingress due to damage is limited to the area of impact. Without the kerfs filled water can track away from the area of the damage potentially filling all of the kerfs below the waterline in the cored zone. Long term exposure of the unprotected foam and laminates to seawater will have a deleterious effect on the strength of the panel. Agree PS, CCH, ACD.

b.    This is also the case of any penetration of the inside skin in associated of any fitting screwed to the inside skin surface or similar. These penetrations are not in association with damage. Agree PS, CCH, ACD.

60    The experts further agreed as to the best measure of fitness for purpose for the design and construction of a pleasure boat such as Revive in the following terms:

The best measure of fitness for purpose for the design and construction of a pleasure boat similar to REVIVE is the application of an appropriate and accepted standard of which the CE directive 94/25/CE as amended by directive 2003/44/CE is one. Agree PS, CCH. ACD.

Conclusions concerning the veracity of the expert opinions

61    There is no doubt that all of the experts who gave evidence concerning the defects in the sandwich core panels of Revive, Messrs Dovell, Stanyon and Hutchings, were qualified in the area of expertise. To the extent to which they differed in their opinions, I preferred the conclusions reached by Mr Dovell to those expressed by Messrs Stanyon and Hutchings.

62    Mr Dovell’s prepared report and evidence caused me to conclude that he was a more careful and thorough expert. He was more able to clearly explain his conclusions and his observations and assertions withstood cross-examination. In the “hot-tubbing” process he was, generally, prepared to give direct and clear answers and displayed a willingness to consider all views. Messrs Hutchings and Stanyon were far more reluctant to do this.

63    In his written and oral submissions, Mr Vautin was critical of Mr Hutchings and the manner in which he gave his evidence. Those criticisms are not without merit. Under cross-examination Mr Hutchings was somewhat evasive and sought to avoid making admissions which were contrary to Bertram’s contentions. He often did so by resorting to theoretical possibilities which were lacking in reality. For instance, it became apparent from the various inspections and testing on the vessel that it had not been constructed in accordance with any known standard for a vessel of a sandwich core construction. Mr Dovell identified in his report the manner in which the panels on Revive did not meet the standards required of the ISO Standard, which he identified as the reasonable minimum structural design and construction standard for this type of vessel. He opined that “boats designed and built in accordance with accepted good practice would, at a minimum, meet the ISO Standard”. There did not appear to be any serious disagreement with these points. In answer to this, Mr Hutchings suggested that the ISO Standard did not necessarily apply and that some other standard might be applicable (ts.283). Whilst it is theoretically possible the construction of the vessel might have complied with another standard, if one did exist, Mr Hutchings did not identify it. It appears that none of the experts were aware of any standard for the sandwich core construction of vessels that permitted leaving the kerfs unfilled and Mr Hutchings could not identify one despite applying his 20 years of knowledge, study and expertise which he drew upon for the purposes of giving evidence (ts.350). In the context of the ISO Standard being the minimum standard, Mr Hutchings hypothesis that the construction might satisfy another standard, without identifying it or even suggesting that one existed, was somewhat facetious. That response gave the appearance that he was not being entirely impartial in his answers nor attempting to assist the Court to reach the correct conclusions in relation to the factual matters under discussion.

64    Similarly, I considered that Mr Hutchings was somewhat dissembling when he sought to explain away Bertram’s omission to prime the core, prior to adhering it to the inner and outer skins, by suggesting the panel might be overdesigned and so strengthened in some other way (ts.264 – 267). There was no suggestion the sandwich core construction was “overdesigned” and nothing was pointed to that suggested it was. Certainly an expert in Mr Hutchings’ position ought to have been able to point to some factor to support that proposition. He did not do so and his answer appeared to be an attempt to obfuscate. That was particularly so because, while Mr Dovell calculated the panels on Revive were designed (if constructed properly) to have only 106% of the minimum shear strength capacity for that type of construction, Mr Hutchings made no detailed or effective analysis of that calculation. Moreover, even if the panels were otherwise overdesigned, there was nothing to suggest the redundancies in the design would be sufficient to counterbalance the reduction in shear capacity caused by the failure to fill the kerfs or to prime the core. The suggestion was also self-evidently false because, if the panels were “over-designed”, it is most unlikely they would have delaminated as they did.

65    Mr Hutchings’ attitude was also revealed when he opined that other standards, of which he was aware, did not specifically prohibit kerfs being left unfilled. That was a somewhat blatant attempt to diminish the import of standards that required kerfs to be filled. Eventually, he admitted that those other standards actually provided that the kerfs should be filled (ts.351). In these respects, Mr Hutchings answers tended to obfuscate rather than clarify the nature and extent of the consequences of the defects in the construction of the vessel. It is unfortunate his answers appeared to be attempts to minimise the impact of points in favour of Mr Vautin’s case, rather than to ensure that the Court was accurately apprised of the issues.

66    My perception of Mr Hutchings was that, whilst he is obviously intelligent and capable in his field of expertise, he appeared to attempt to agitate his client's cause rather than make appropriate concessions as and when required. Overall, I preferred the evidence of Mr Dovell to that of Mr Hutchings.

67    Mr Stanyon also revealed an inclination to advance the interests of his client, Eagle Yachts, in his reluctance to accept that the Revive was a category A vessel and, being such, was designed to withstand Beaufort eight winds and significant seas at four metres (ts.326). He, like Mr Hutchings, also sought to obscure the failure of the construction of Revive to comply with any known or accepted international standard by resorting to speculation that there might exist a standard to which the construction complied. In attempting to do so he made the following comment in relation to standards (at ts 342-343):

There may be a couple of smaller ones from other European countries, but - so this is issue of kerf filling, we would have to know intimately every single one of those standards. Like there are plenty of Czechoslovakian built production boats in - that are compliant with CE and may be they use their own national standard, I don't know. …

68    I considered that Mr Stanyon’s reference to Czechoslovakian standards was bordering upon disingenuousness. First, given the dissolution of Czechoslovakia in the early 1990's, any Czechoslovakian standards would necessarily be almost a quarter of a century old. Second, his response in this respect was grasping at straws given he was unable to identify whether there was any standard that permitted the construction of the cored panel without the filling of the kerfs.

69    The failure of Mr Hutchings and Mr Stanyon to volunteer that they were not aware of any relevant standard to which the vessel complied is concerning. As experts they were entitled to advance the proposition that compliance with the ISO standards was not the only way to satisfy the CE Directive. However, that left the Court with the perception of the distinct possibility that the construction of the vessel might have complied with some other standard. Their failure to volunteer, or freely acknowledge when confronted, that there was no other standard of which they were aware and to which the building methods in fact complied, renders it less safe to rely upon their expressed views.

70    Whilst Mr Stanyon was otherwise mostly responsive to questions put to him, he tended to attempt to protect his client's interests where possible. In relation to the question of what conditions vessels, of the type of which Revive was one, were designed to be able to cope, Mr Stanyon's answer was evasive. He attempted to suggest they should be capable of coastal use in the normal levels of wind and wave that might be expected on the Eastern Australian Coast (ts.326). He ultimately accepted the vessel was designed as a “Category A” vessel under the CE Directive described as an "Ocean" vessel. That this was its design category should have been obvious to Mr Stanyon and his attempt to suggest otherwise gave the strong appearance that he was attempting to advance his client's case.

71    For these reasons and for the reasons which appear below, I prefer the evidence of Mr Dovell over the evidence of Mr Hutchings or Mr Stanyon where they disagree.

Compliance with relevant standards

72    As is identified above, all of the experts agreed that the best measure of fitness for purpose for vessels such as Revive, is its compliance or otherwise with an industry-accepted standard. The respondents were not able to identify any standard with which the sandwich core construction panels of Revive or the vessel in general complied.

73    In his second report Mr Dovell identified the European Union’s Recreational Craft Directive (RDC) as being an appropriate standard which should be followed in the design and construction of pleasure craft similar to the size and type of Revive. As its title suggests that document imposes EU requirements for the design and construction of pleasure craft. It was not suggested by the other experts that the application of this protocol would be inappropriate. Indeed, Bertram had caused the design and construction methods for the building of Bertram 700 series to be certified under that Directive. Such certification was not of the actual construction of Revive, but as to the design and proposed methods of construction of Bertram’s 70ft vessels.

74    A copy of the RDC is attached to Mr Dovell’s second report. The RDC provides at article 1(1) that it is applicable to the design and construction of, inter alia, recreational craft. Article 3 provides under the heading “Essential Requirements”:

The products referred to in Article 1(1) shall meet the essential safety, health, environmental protection and consumer protection requirements set out in Annex 1.

75    Item A of Annex 1 is entitled “Essential Safety Requirements for the Design and Construction of Recreational Craft” and it identifies that for the Boat Design Category of “Ocean vessels” (of which Revive is one) the vessel is to be able to accommodate a wind force (on the Beaufort scale) “exceeding 8” and “Significant wave height (H 1/3, metres) “exceeding 4”. The statement of explanation of what is encompassed by this is:

OCEAN: Designed for extended voyages where conditions may exceed wind force 8 (Beaufort scale) and significant wave heights of 4 m and above but excluding abnormal conditions, and vessels largely self sufficient.

The exclusion of abnormal conditions excludes hurricanes and tornadoes and extreme sea conditions or freak waves generated by abnormal conditions. As the notes to the article indicate, vessels of this category have to be able to meet extreme conditions as they reflect the type of conditions which might be encountered on long ocean voyages where conditions may change suddenly and dramatically.

76    Item A of Article 1 goes on to explain that:

Craft in each Category must be designed and constructed to withstand these parameters in respect of stability, buoyancy and other relevant essential requirements listed in Annex 1 and to have good handling characteristics.

77    Item 3 of Item A of Annex 1 is headed “Integrity and structural requirements”. Relevantly it provides:

3.1    Structure

The choice and combination of materials and its construction shall ensure that the craft is strong enough in all respects. Special attention shall be paid to the design category according to section 1, and the manufacturer’s maximum recommended load in accordance with section 3.6

Relevant Harmonised Standards:

…

EN ISO 12215-2:2000: Small craft – Hull construction and scantlings – Part 2: Materials: Core materials for sandwich construction, embedded materials (ISO 12215-2:2000)

…

EN ISO 12215-4:2000: Small craft – Hull construction and scantlings – Part 4: Workshop and manufacturing (ISO 12215-4:2000)

It was not contested that the meaning of the above was that the ISO Standard relating to Hull Construction and scantlings was an applicable standard for the construction of ocean going vessels.

78    That international standard is also annexed to the report of Mr Dovell. The scope of that Standard is identified as being:

This part of ISO 12215 specifies the requirements for core materials for structural use and materials that are embedded in sandwich construction. It is applicable to small craft with a hull length … of up to 24 metres.

NOTE    The underlying reason for preparing this part of ISO 12215 is that sandwich structures of small craft require careful selection of core materials from a multitude of choices, and that the manufacturing has to follow certain procedures to achieve the intended long-term durability under the expected loads and environmental conditions.

79    Part 2 of the Standard entitled, “Materials: Core materials for sandwich construction, embedded materials” the following appears in relation to Sandwich core properties:

3.1    Sandwich structure

A sandwich structure is a composite composed of lightweight core material to which two relatively thin, dense and high-strength functional laminate skins are adhered.

3.2    Structural requirements

3.2.1    Core materials for sandwich construction of small craft shall only be used if the following requirements of the final structure are fulfilled.

The material shall have adequate properties to enable the sandwich structure to fulfil the requirements specified in ISO 12215-5 for a normal service life in a marine environment, with special regard to

-    in-plane forces, acting in the direction of sandwich layers, e.g. tension, compression, shear;

-    out-of-plane forces, acting transversely to the sandwich layers, e.g. compression, tension, shear.

…

3.3    Material requirements, general

3.3.1    Core materials shall have stable mechanical properties consistent with the designated use of the craft.

3.3.2    Resin applied to the core material or its protective sheathing/coating shall be compatible with its surface.

3.3.3    Core materials forming part of a sandwich structure shall

-    limit the penetration of water beyond the area of a possible fracture of the skin laminate. This requirement does not apply for core materials that consist of a three-dimensional open structure bonded to both skin laminates, e.g. honeycomb or three-dimensional fabrics.

-    …

3.3.4    Core material shall be capable of transferring the shear loads specified in ISO 12215-5.

80    In Part 4 (Workshop and manufacturing) of that same standard the following appears:

3.7    Manufacturing requirements, sandwich construction

3.7.1    Sandwich construction using female moulds

3.7.1.1    Core surface cavities and other irregularities shall be removed or coated with filler, resin or sandwich adhesive according to the material manufacturer’s specification and depending on the following skin lay-up. When using scored core material, a sufficient amount of resin or adhesive shall be used in the bond to fill the gaps.

81    The matters in items 3.3.3 and 3.7.1.1 are particularly relevant for present purposes as they require the filling of any kerfs in the construction of the sandwich core structure. Where Item 3.3.3 is not complied with, if the kerfs are not filled, water which enters in the structure (whether due to holing or penetration) will spread throughout the structure.

82    All three expert witnesses agreed that the construction of the sandwich core structures of Revive did not meet the ISO standards, including because the kerfs were not filled.

83    Although it was submitted that the standard as a whole identified itself as setting requirements which were towards the minimum standard, it does not appear that the words used in Part 5 of the Standard necessarily have that effect. There, the reference is to “design standards” rather than “construction standards” although it can be accepted that the two are closely related. In any event, Mr Dovell and Mr Stayon (if not also Mr Hutchings) agreed that the ISO standard was appropriately identified as setting minimum standards for “all regulatory grounds” for the construction of vessels of this type (ts.338 – 339).

84    What can be taken from the above is that the actual construction of Revive did not comply with the ISO standard for the manufacture of vessels of that type. However, a point of difference arose as between the experts as to the relevance or consequence of that failure. Mr Hutchings and Mr Stanyon identified that the official guide to the application of the CE Directive noted that it was not necessary manufacturers comply with the ISO standard in order to meet the requirements of the Directive. They relied upon the following passage:

The “essential requirements” as referred to in Article 3 and detailed in Annex I have to be met by products referred to in Article 1(1) of the Directive. The application by a manufacturer of a harmonised standard in order to fulfil the essential requirements gives a presumption of conformity. However, application of a harmonised standard remains voluntary and is not the only method available to demonstrate conformity with the essential requirements. The manufacturer can choose whether or not he refers to harmonised standards, as long as his products fulfil the essential requirements. However, if a manufacturer chooses not to follow a harmonised standard, he has the obligation to prove that his product is in conformity with the essential requirements by the use of other means of his own choice (e.g. by means of any existing technical specifications).

85    The argument advanced by the respondents was that, whilst Mr Vautin has established the actual construction of Revive does not comply with the ISO standards, it has not shown that the essential requirements of the CE Directive have not otherwise been met. In essence, the arguments advanced by Mr Hutchings and Mr Stanyon on behalf of their clients (the respondents) were that there may have been some other standard with which the sandwich core construction undertaken by Bertram complied so as to satisfy the directive. In the light of the evidence as it emerged, I considered that these two witnesses dissembled somewhat by the advancing of this argument and in doing so they damaged their reliability as expert witnesses.

86    Mr Stanyon’s position appeared to be that the vessel may have met the requirements of the CE Directive because there may have been some other standard or standards which the construction satisfied. When questioned about this he acknowledged that he was not aware whether any of those permitted the construction of sandwich core structures in vessels without filling the kerfs. As I have mentioned, in attempting to suggest the construction of the Revive cored panels by Bertram somehow may have met an appropriate standard, he resorted to hypothesising about Czechoslovakian standards, although he was not aware of their content (ts 342-343).

87    The argument advanced by Mr Hutchings’ on this was that the CE directive, whilst identifying the ISO standards as being appropriate, also gave a builder the opportunity to build to an equal standard. He reasoned, therefore, that it could not be said the vessel was not built to an appropriate specification. Whilst his comments on this were, perhaps, technically accurate, he refrained from volunteering that he had not located any alternative specification which permitted sandwich core construction without filling the kerfs. He eventually admitted under cross-examination that he could not point to any such standard and that was despite his 20 years of knowledge and study and expertise in this area (ts.350). The standards with which he was familiar all required the filling of kerfs. This being the case, it is safe to conclude, as I do, that there is no relevant standard for the construction of sandwich core components for vessels to which the building of Revive complied.

88    The failure of Mr Hutchings and indeed, Mr Stanyon, to volunteer that they were not aware of any relevant standard to which the vessel complied is concerning. As experts they were entitled to advance the proposition that compliance with the ISO standards was not the only way to satisfy the specifications. However, their failure to volunteer that there was no other standard of which they were aware and to which the building methods in fact complied, was conduct below that expected of experts who appear in this Court and, as I have mentioned, that necessarily rendered it less safe to rely upon their expressed views.

89    Of course, the question of whether Revive was built to an appropriate standard could be resolved by reference to the construction drawings used to build it. They would indicate the existence of any relevant standards which needed to be complied with for the vessel’s construction. In the ordinary course such drawings would be in the possession of the manufacturer. In this case, that is Bertram. Although Mr Vautin issued a Notice to Produce in respect of them to Bertram, they were not produced. Bertram offered no excuse for the failure to produce them save to assert they were not available. No explanation was given as to why they were not available. Bertram chose not to call any witness to explain their non-production. That being so, it is possible to draw an inference that their production would not have assisted Bertram’s case in this respect (Jones v Dunkel (1959) 101 CLR 298).

90    Given the inability of either of Mr Hutchings or Mr Stanyon to identify any standard for the construction of sandwich core structures on vessels which did not require the filling of the kerfs or the priming of the core I find that, on the balance of probabilities, no such standard existed. I am comforted in reaching that finding by the fact that if there existed such a standard, it is extremely likely that Bertram would have known about it and produced it. Its failure to do so supports my conclusion.

91    It should be observed that no party suggested the vessel, as constructed, actually met the essential requirements of the CE Directive. As the following discussion shows, that is not surprising given failing to prime the core and fill the kerfs was unconventional, if not poor, boat building practice. As is discussed below, the consequence of the utilisation of those boat building practices meant that the shear strength of the panels was significantly reduced and the hull began to delaminate. That being so, the essential requirements of the CE Directive could not have been fulfilled.

92    It follows from the above that the construction of Revive did not comply with CE Directive under which the design methods of the model of vessel in question was certified.

The construction techniques were poor boat building practices

93    During the construction of Revive, Bertram did not fill the kerfs and so it did not comply with the ISO Standard and the CE Directive. Further, the method of construction was poor boat building practice. In his report Mr Stanyon said:

There is no doubt that kerfs should be entirely filled with core bond or thickened resin or resin. This is supported by Best Practice, manufacturer’s recommendations, classification society’s in-house procedure and technical manuals and hands-on experience. They dictate that the core is to be free of voids and discontinuities if it is to perform as per design calculations and to ensure longevity of the laminates structural life.

Both Mr Hutchings and Mr Dovell agreed with this statement.

94    It is also apparent that the panels on Revive were constructed without there being any or any adequate priming of the core before being affixed to the laminate skins. Mr Dovell identified that priming was vital to ensure the bonding between the core and the skin of the laminate was appropriately strong. In particular, Mr Dovell observed that Revive was constructed with the core installed onto a bed of adhesive paste without a sufficient resin content in the paste to completely wet its surface. This would result in a dry bond line with significant void content between the core and the adhesive paste. He identified this was evident in the photos of the hull of the vessel where delamination had occurred (see paragraphs 4.12 – 4.13 of the first report of Mr Dovell and the corresponding photo). The result was the “outside skin to core join” in the whole of the topside of the vessel had a significantly lower shear strength than it would have if the correct installation procedure had been followed (see paragraphs 4.16 of the first report of Mr Dovell). In his second report, Mr Dovell extended this opinion to cover all areas where the sandwich core construction had been used on the vessel, including the decking and superstructure.

95    Mr Stanyon, who was the expert engaged by Eagle Yachts, was adamant that the failure to prime the core was inappropriate in a sandwich core construction of such vessels. At ts.264 he said:

MR STANYON: Yes. Well, priming is an essential function and it’s something that you don’t scrimp on. You don’t – you don’t – you do it properly. You – you – you don’t worry about the quantity of resin you’re using. It’s just a job that is essential to the integral laminate

96    Mr Hutchings agreed that the failure to prime the core would result in reduced shear strength of the sandwich core construction (ts.264 - 265). He was reluctant to agree with the proposition that it was bad boat building practice not to prime the core before adhesion to the skins:

DR BELL: And you would agree with that, Mr Hutchings, wouldn’t you?

MR HUTCHINGS: I would agree it’s good boatbuilding practice

DR BELL: Well, you would agree it was essential, wouldn’t you?

MR HUTCHINGS: to actually – to actually do it. My belief is it’s good boatbuilding practice to do it. It’s rare for it – for it not to be done.

DR BELL: It’s not good boatbuilding practice not to do it.

MR HUTCHINGS: I believe that’s what I just said.

DR BELL: It’s bad boatbuilding practice not to do it, isn’t it?

MR HUTCHINGS: As I said, I believe it – it would be – it would be – it’s good boatbuilding practice to do it.

DR BELL: Yes. And I’m putting to you that it’s bad boatbuilding practice not to do it.

MR HUTCHINGS: Yes, I agree.

97    Subsequently, Mr Hutchings agreed that it “was deeply imprudent not to prime”. He also said that he would recommend priming as part of any relevant boat building exercise and he would never recommend not to do it (ts.265). He further agreed that to ensure that a vessel was able to withstand the roughest conditions (which Bertram had represented Revive was capable of doing) it would be prudent to prime the core in the construction process (ts.267).

98    The initial reluctance of Mr Hutchings to accept such relatively obvious propositions and his attempt to obfuscate them when they appeared to undermine his client’s case, further rendered his evidence less useful than it might otherwise have been.

99    Ultimately, the failure to fill the kerfs and the failure to prime the core with resin has resulted in the sandwich core construction in the vessel having a substantially reduced shear capacity. In his report, Mr Dovell considered the paper by Berger et al to the effect that failure to fill kerfs in the construction of sandwich core panels will result in a reduction in the shear capacity of the panels by more than 50% of what it would have been had those construction defects not been present. Indeed, the loss of strength in the panels is increased to 60% when fatigue is considered. Mr Dovell did not merely accept that the conclusions drawn in that paper applied to panels of the type in Revive. He undertook his own calculations to ensure that the critical parameters were appropriate to the dimensions on the Revive panels and satisfied himself that the reduction in shear strength of those panels would be in the order of 50% (ts.287 and exhibit 17). Mr Stanyon also accepted the conclusions of that paper and that it applied to the panels in Revive. Although Mr Hutchings asserted that he could not be sure that the reduction in shear strength was 50% and that destructive testing on the actual panels from Revive would be required, I prefer the evidence of Mr Dovell and Mr Stanyon on this part of the evidence and, in particular, the more carefully considered views of Mr Dovell who had taken the time to consider the applicability of the conclusions in the published paper to the physical dimensions of the sandwich core panels on the vessel.

Non-compliance with PVC foam manufacturer’s requirements

100    Mr Stanyon identified in his report that the PVC foam used in the construction of the Revive was of a brand called “Airex Divinicel H80”, which had GRP inner and outer skins. Mr Dovell could not be certain that this was the foam that was used in Revive’s construction, however, he did conclude that it was “almost certainly made from a PVC foam that is effectively identical to the “Airex PVC foam Core Product”. The processing guidelines for that product are attached to Mr Dovell’s first report and they identify that debonding and subsequent catastrophic failure can occur if the correct installation procedures are not followed. The installation instructions for the foam product in the production of sandwich core panels identified that optimal quality was obtained from obtaining a strong bond between laminate and foam and by filling up the slits (kerfs) with resin or putty. The instructions also identified that the surfaces of the foam should be primed with resin (including the inside faces of the kerfs) prior to bedding into the outside skin. Mr Dovell found that the failure by Bertram to comply with such installation instructions resulted in a dry bond line between the core and the inner and outer skins and represented a significant construction defect. There was no real disputation about this evidence and I find, on the balance of probabilities, that the foam core material was the Airex PVC foam Core Product and that it had not been installed as required by the manufacturer’s specifications.

The consequences of the manufacturing defects

The real question is whether Revive can be effectively repaired?

101    Revive cannot be used as a motor vessel save in the calmest of waters. The delamination of the topside means that it cannot be used in the open ocean even for short periods of time. The shear strength of the outer skin is all that presently protects the vessel at its prow (generally on the portside) and if that area sustained a significant impact it would, most likely, fail. That would inevitably lead to the entry of water and give rise to a risk that the vessel would sink. There seems to be no dispute between the parties that the vessel is not seaworthy in its present state. There is also no relevant dispute that the guarantees as to the quality of the vessel imposed by the ACL were not met.

102    The respondents assert the construction defects in the topsides in the area where the delamination has occurred can be repaired at a relatively low cost of approximately $106,200 plus GST. Alternatively, they say that the construction defects in the whole of the topsides can be repaired for somewhere between $856,054 and approximately $1.4m (based on Mr Acacich’s evidence). They say that the effect of those repairs would render the vessel seaworthy and, effectively, put the vessel in a condition such that it would comply with the guarantees as to fitness imposed by the ACL. As a result they contend that the former amount of money (or alternatively, the second) represents Mr Vautin’s damages.

103    Mr Vautin denies that such repairs to Revive would be effective to cause it to comply with the guarantees imposed by the ACL. In particular, he asserts that even if the topsides were rectified, the sandwich core components of the decking and the superstructure of Revive will still contain the defects such that the vessel will remain not fit for purpose. The total cost of these repairs would be in the order of $2.7m.

104    It follows that the real debate is whether the repairs which the respondents propose for Revive will render it compliant with the guarantees of fitness and quality as imposed by the ACL

The nature and extent of the defects

105    As has been determined, the sandwich core panels in Revive (being throughout the topsides, the decking and the superstructure) contained manufacturing defects consisting of unfilled kerfs and the core not adequately primed with resin. This created a dry bond line between the cores and skins and panels such that the panels had a substantially reduced shear capacity. This reduced capacity is of the order of 50% and had the consequence of delamination occurring in those areas of the vessel which met with constant impacts in the course of its use.

106    The experts, however, disagree with the consequences of the above. The respondents’ experts assert the vessel can be adequately repaired if the areas where the delamination has occurred are repaired (by the core being primed and the kerfs being filled). On the other hand, Mr Dovell asserts that will not be sufficient to cure the defects that have resulted in a substantial reduction in the shear capacity of all sandwich core panels.

Safety

107    Mr Vautin submits, relying on the evidence of Mr Dovell, that the construction defects which exist in all of the sandwich core panels throughout the vessel, have the result that the vessel is less safe than it would be had it been properly constructed. He submits that, even if the topsides were repaired, the deck and the superstructure would have about half the strength they should have. He also submits that, as constructed, the sandwich core panels in those areas would not prevent the permeation of water throughout the core as a consequence of penetrations. There is much force in these submissions. The sandwich core panels were not designed to 200% of their required capacity. There would be no reason for that to be the case. It follows that the reduction of shear capacity below 50% of what the panels should be renders them inadequate for their purposes. That is, their shear capacity is below that which is necessary and appropriate for a vessel of this type. This represents a serious safety concern in an ocean-going vessel such as the Revive. It is intended to be used for extended journeys on the open seas and that, necessarily, means it is intended for use in very heavy conditions (being wind force 8 on the Beaufort scale and significant wave height of in excess of 4m, but falling short of abnormal conditions such as hurricanes and tornadoes). In such conditions, the vessel may be buffeted on the deck and the superstructure by those sea conditions. That being so, there is a real risk that sandwich core panels, which have less than half the designed shear capacity, will fail with catastrophic consequences. In the result, I find that the effect of the construction defects is that the vessel is unsafe for use in all of the sea conditions for which it was intended. It is not safe to be used in conditions up to wind force 8 and seas with a wave height of in excess of 4m.

108    Even if it were the case that it was not possible to find that the vessel was actually unsafe for its intended use by reason of the construction defects, there can be little doubt that the construction defects create great uncertainty about its safety. Even Mr Hutchings was prepared to accept the existence of that uncertainty (ts.353) and he further accepted that this was something which an owner of a premium, high quality, very expensive vessel should not have to endure. By this, I understood Mr Hutchings to agree that vessels such as Revive, which are extremely expensive and are intended to be “top of the range” ocean going vessels, should be built to a standard which excludes safety concerns arising from the manner in which they are constructed. That is somewhat self-evident.

109    Mr Stanyon was slightly more forthright than Mr Hutchings when he agreed that, because of the construction defects, he would not use the vessel in conditions which he would if it did not have those defects. He agreed he would take a “more conservative approach” to the use of the vessel. From that, I understood Mr Stanyon accepted that the construction defects probably rendered it less safe for use in harsher conditions.

Durability

110    There was some agreement between the experts that the sandwich core panels on Revive were less durable than they would have been if the defects did not exist. Mr Dovell was of the opinion that the vessel was not durable because the panels might fail in rough conditions due to their reduced shear capacity, that the fatigue strength (the weakening of the panels which are exposed to the usual forces arising from use) of the panels was reduced by reason of their manner of construction, and that there is a risk of core degeneration because of the possibility of water entry and dispersal in the foam core. In this latter respect he said the entry of water into the core would spread widely due to the unfilled kerfs and would eventually reduce the life of the panel.

111    Mr Stanyon also seemed to accept that the absence of a homogeneous core material would hasten the consequence of a reduction in the strength of the panels (fatigue), which occurs as a result of the use of a vessel (ts.295). In this case it is undoubted that the construction defects caused the delamination in the bow areas of the port topside which were often exposed to waves whilst the vessel was in use. There seems to be no reason why that principle would not apply to all parts of the vessel which had the same construction defect even if the delamination or weakening may take longer as those parts are not exposed to the same regularity of impact. I apprehend that when Mr Stanyon said that if the Revive was his vessel he would monitor it and look for evidence of other issues, he intended to convey it was more than probable that the construction defects would generate delamination in other areas of the vessel (the decking and superstructure) if only the topside was rectified (ts.348-349).

112    Mr Stanyon also agreed that entry of water into the foam core would cause its deterioration in the sense of reducing the foam’s body and resilience (ts.254). Both Mr Hutchings and Mr Doveall agreed with Mr Stanyon’s report where he opined there was no doubt that the kerfs were required to be filled if the sandwich core structure is to perform in accordance with its design calculations and is to have the longevity it is supposed to (see section 4 of the report of Mr Stanyon and ts.285-296).

113    The evidence establishes that the failure to fill the kerfs will render the sandwich core structures on the vessel less durable than they would be if the kerfs were filled.

Fitness for purpose

114    There was substantial evidence from the experts as to whether the construction defects in the sandwich core panels on Revive rendered it “fit for purpose”. It is unfortunate, however, that there was not a great deal of commonality in the use of that expression. It did not appear the experts necessarily intended their opinions to relate to the requirement in s 55 of the ACL Schedule 2 that goods are to be “reasonably fit” for any disclosed purpose or to the requirement of “acceptable quality” in s 54. That renders some of their opinions in this respect slightly less valuable.

115    In relation to the issue of fitness for purpose, the question is not, directly, how the sandwich core panels were constructed. It is, what is the effect of the defective construction on the nature and quality of the vessel and the uses to which it might be put? If the vessel as constructed (or with the bow sections of the topsides rectified) was able to be used as an ocean-going vessel for all the purposes for which it was intended, then it is likely to be fit for purpose regardless of the extant construction defects. Of course, a determination to that effect would be difficult given the findings which have been made. It would also require a conclusion that the structure of the vessel was significantly “over designed” such that the construction defects that remained were inconsequential to the manner in which the vessel might be used.

116    In his supplementary report Mr Dovell concluded the best measure of “fitness for purpose” of a pleasure craft such as Revive, was compliance with design and construction with an appropriate set of standards. This was agreed to by all of the experts in the joint report who also agreed that the CE Directive 94/25/CE, as amended by directive 2003/44/CE, was an appropriate standard. Again, whether the vessel was or was not constructed to an accepted set of standards does not necessarily dictate the uses to which it might actually be put. However, the joint statement of the experts (in paragraph 21 of their report) seems to connote that “fitness for purpose” in relation to a vessel includes an element of assurance that the vessel will be known to be safe to use in intended conditions. They appear to agree that a vessel is fit for purpose if it is built in accordance with a recognised set of standards particular to that type of vessel. If that is so the experts agree a user can be confident the vessel can be used in the sea conditions appropriate to the type or class of vessel. Conversely, their view incorporates the supposition that a vessel will not be fit for purpose if it is not constructed in accordance with the recognised standards. This is because safe use of the vessel (in sea conditions relevant to its type) cannot be guaranteed. Given the catastrophic consequences that may follow from a vessel not being constructed in a manner which the industry recognises will render it safe for use, there is much sense in the collective views of the experts in this regard.

117    Mr Dovell also concluded the failure to fill the kerfs in this case would have resulted in a significant reduction of the shear strength of the sandwich core panels so as to render the vessel not fit for purpose. He concluded that, in order to render the vessel fit for purpose it would be necessary that all of the sandwich core components were rectified. He disagreed with the conclusions of the other experts that the vessel could be rendered fit for purpose if the remediation was limited to filling the kerfs in the topsides of the vessel.

118    Mr Stanyon and Mr Hutching expressed the view that the vessel would be fit for purpose regardless of the non-compliance with any standard. It is not clear how they reach that conclusion and it appears to be inconsistent with what they agreed to in paragraph 21 of the joint expert report.

119    In oral evidence, Mr Stanyon considered the topsides could be repaired in a manner which met the ISO standards and this would be sufficient to render the vessel fit for use. Mr Dovell, however, identified that the remainder of the vessel would have sandwich core components with substantially reduced shear strength (> 50%) such that the boat would not be safe to take out in a sea state of wind at Beaufort 8 or significant wave height of 4m. In this respect I accept Mr Dovell’s calculation that the shear capacity of the topside panels was approximately 106% of the minimum requirement and that indicated that they were deliberately designed although not with unfilled kerfs. I also accept that his conclusion the panels in the rest of the vessel were not designed with redundancies in excess of 100% of the minimum strength which would compensate for the unfilled kerfs. The other experts generally agreed with Mr Dovell’s conclusions in this latter respect (ts 273-274). Given that it is not only the forward part of the hull which might encounter significant forces in rough sea conditions, Mr Dovell considered that the decks would be defective as well because they were not likely to be able to withstand the pressures of waves breaking onto them. I accept that evidence and it seems that the other experts agreed that the decks and superstructure of Revive might encounter harsh punishment in rough seas.

120    On the basis of the evidence of Mr Stanyon and Mr Dovell, I have concluded the failure to prime the core of the sandwich components and the failure to fill the kerfs caused the shear strength of the panels to be substantially reduced such that they would not withstand all the conditions which vessels of this type should. There is good evidence that this is so as the bow sections of the topsides had failed even though they had not been used in any unusually rough conditions. The failure of these sections support Messrs Stanyon’s and Dovell’s evidence as to the essentiality of priming and confirms the shear strength of the panels was significantly lower than it ought to have been.

121    The respondents submitted the question of the suitability of the vessel (in terms of in what conditions it could be used) would be resolved by destructive testing of representative panels from the vessel. To this Mr Dovell identified that such a process would require unreasonable expense, although that topic was not further explored. He later identified that a panel of 750mm x 300mm would have to be tested but that the value of any results from tests undertaken by re-creation in the laboratory, would be questionable. Importantly, any test panel would have to be flat (and such panels are not easy to locate) and it would be necessary to take multiple samples from different parts of the vessel. He observed that many samples would have to be taken such that the vessel would essentially end up skinless. He also identified that destructive testing would not be the complete picture without the rest of the design information such that much guessing would still be required.

122    The value of the debate on the necessity or otherwise of destructive testing was negated to some extent when the experts, including Mr Hutchings, agreed it would be unreasonable for the purchaser of a $4.5m vessel to subject it to destructive testing so as to be able to ascertain whether it is fit for use in the conditions which a vessel of that type is usually used (ts.292). This is relevant to the issue of the degree of certainty which an owner of vessel of this type ought to be able to have in its inherent safety consequent upon its proper construction. Here, the failure of Bertram to construct the vessel in accordance with any known and accepted standard has rendered its sandwich core components defective. The defects have resulted in delamination and their existence throughout the vessel (even assuming that the topsides were repaired) gives rise to significant uncertainty as to whether the vessel is safe to use in conditions in which vessels of that nature are usually used, or intended to be used. Resolving that uncertainty would require the owner to undertake destructive testing of nearly all sandwich core panels on the vessel.

123    The experts all agreed that the Revive was designed as a Category A vessel, as per the CE Directive, and should have been capable to withstanding all but the most extreme conditions such as hurricanes and tornadoes. Clearly it could not be so used with delamination occurring in the topsides.

124    On the question of the use to which the vessel might be put if the topsides were repaired by the kerfs being filled, there was some difference of opinion.

125    In his evidence Mr Hutchings expressed the opinion that if the topside area around the anchor locker was satisfactorily repaired, the structural integrity of the vessel would be restored (ts.348). He reached this conclusion on the basis that there was no evidence of any structural failure anywhere else on the vessel. Subsequently, he retreated from that position by agreeing that, from a structural integrity point of view, he could not put his name to the proposition that the vessel would be fit for purpose (ts.353). He acknowledged that the construction defects in the vessel were of such a nature that there would be a level of uncertainty with the vessel into the future. He also agreed that the level of uncertainty was something which the owner of a premium, high quality, very expensive vessel should not have to endure (ts.353). By this I understood him to mean that vessels like Revive were not fit for purpose if there existed uncertainty as to their structural integrity.

126    Mr Stanyon also seemed to initially suggest Revive would be fit for purpose if the topsides were repaired, although he also said that he would be monitoring the vessel and the management of it, including voyaging plans, to look for evidence of other issues (ts 348 – 349). I understood this as indicating an acceptance that the constructions defects rendered the occurrence of future delamination more likely than would have been the case if they did not exist. Under cross-examination Mr Stanyon acknowledged that knowing what he knew about the construction of the vessel (presumably with the topsides repaired) he would be more careful in his use of the vessel than would otherwise be the case. He further agreed that he would take a more conservative approach to the use of the vessel than would otherwise have been the case (ts.350). This also appears to be an acceptance of the proposition that given the construction defects, even when the topsides are repaired, it should not be used to the full extent to which it might be used if the defects did not exist.

127    The evidence discloses that the sandwich core components of Revive were not constructed in accordance with the CE Directive under which the design of the vessel had been certified. The vessel ought to have been constructed to the standard of a Category A vessel. It was not. The construction of the components did not comply with the ISO standards or any other relevant standards principally because the kerfs were not filled and the core was not primed. None of the three experts knew of any standard which permitted the construction of such components with unfilled kerfs. They were only aware of standards that required the kerfs to be filled. Even if the sandwich core panels on the topsides of the vessel were repaired, the sandwich core components of the decks and the superstructure would not comply with any known standard and their construction would remain the result of the adoption of bad boat building practices.

128    Further, the construction defects in the sandwich core components had the effect of reducing their shear capacity by more than 50% from what it ought to have been and rendered them and the vessel less durable. Consequently, the owner of the vessel would have to be watchful of further damage arising in the future. They also created substantial uncertainty as to the structural integrity of the vessel. That meant the vessel could not be used to the full extent to which it would be able to be used if it did comply with an appropriate standard. This is true of the vessel in its present state and of the state it would be in if the topside area of the prow, where delamination had occurred, was repaired.

129    It follows that the vessel was not fit for purpose both because it was not constructed in accordance with any acceptable standard, and, because it is not fit to be used as a Category A vessel.

Claims under the Australian Consumer Law

130    Mr Vautin makes a number of claims under the ACL in relation to the supply of the vessel to it in respect of which the following provisions are relevant.

131    Section 54 provides:

54     Guarantee as to acceptable quality

(1)     If:

(a)     a person supplies, in trade or commerce, goods to a consumer; and

(b)     the supply does not occur by way of sale by auction;

there is a guarantee that the goods are of acceptable quality.

(2)     Goods are of acceptable quality if they are as:

(a)     fit for all the purposes for which goods of that kind are commonly supplied; and

(b)     acceptable in appearance and finish; and

(c)     free from defects; and

(d)     safe; and

(e)     durable;

as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3).

(3)     The matters for the purposes of subsection (2) are:

(a)     the nature of the goods; and

(b)     the price of the goods (if relevant); and

(c)     any statements made about the goods on any packaging or label on the goods; and

(d)     any representation made about the goods by the supplier or manufacturer of the goods; and

(e)     any other relevant circumstances relating to the supply of the goods.

132    Section 55 is also relied upon and it provides:

55     Guarantee as to fitness for any disclosed purpose etc.

(1)     If:

(a)     a person (the supplier) supplies, in trade or commerce, goods to a consumer; and

(b)     the supply does not occur by way of sale by auction;

there is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit.

(2)     A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that:

(a)     the consumer makes known, expressly or by implication, to:

(i)     the supplier; or

(ii)     a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; or

(b)     the consumer makes known to the manufacturer of the goods either directly or through the supplier or the person referred to in paragraph (a)(ii).

(3)     This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the manufacturer, as the case may be.

133    A guarantee of compliance of any express warranty given by a manufacturer is provided for in s 59, which provides:

59     Guarantee as to express warranties

(1)     If:

(a)     a person supplies, in trade or commerce, goods to a consumer; and

(b)     the supply does not occur by way of sale by auction;

there is a guarantee that the manufacturer of the goods will comply with any express warranty given or made by the manufacturer in relation to the goods.

134    Part 5-4 deals with remedies relating to guarantees. Division 1 of that Part concerns actions against suppliers and within that division s 259 provides:

259     Action against suppliers of goods

(1)     A consumer may take action under this section if:

(a)     a person (the supplier) supplies, in trade or commerce, goods to the consumer; and

(b)     a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with.

…

(3)     If the failure to comply with the guarantee cannot be remedied or is a major failure, the consumer may:

(a)     subject to section 262, notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection; or

(b)     by action against the supplier, recover compensation for any reduction in the value of the goods below the price paid or payable by the consumer for the goods.

(4)     The consumer may, by action against the supplier, recover damages for any loss or damage suffered by the consumer because of the failure to comply with the guarantee if it was reasonably foreseeable that the consumer would suffer such loss or damage as a result of such a failure.

135    For the purposes of s 259, s 260 identifies the occasions on which a failure to comply with a guarantee is a “major failure”:

260     When a failure to comply with a guarantee is a major failure

A failure to comply with a guarantee referred to in section 259(1)(b) that applies to a supply of goods is a major failure if:

(a)     the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure; or

(b)     the goods depart in one or more significant respects:

(i)     if they were supplied by description—from that description; or

(ii)     if they were supplied by reference to a sample or demonstration model—from that sample or demonstration model; or

(c)     the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(d)     the goods are unfit for a disclosed purpose that was made known to:

(i)     the supplier of the goods; or

(ii)     a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made;

and they cannot, easily and within a reasonable time, be remedied to make them fit for such a purpose; or

(e)     the goods are not of acceptable quality because they are unsafe.

136    Section 262 provides limitations upon the entitlement to reject the goods as provided for in s 259(3)(a):

262     When consumers are not entitled to reject goods

(1)     A consumer is not entitled, under section 259, to notify a supplier of goods that the consumer rejects the goods if:

(a)     the rejection period for the goods has ended; or

(b)     the goods have been lost, destroyed or disposed of by the consumer; or

(c)     the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply; or

(d)     the goods have been attached to, or incorporated in, any real or personal property and they cannot be detached or isolated without damaging them.

(2)     The rejection period for goods is the period from the time of the supply of the goods to the consumer within which it would be reasonable to expect the relevant failure to comply with a guarantee referred to in section 259(1)(b) to become apparent having regard to:

(a)     the type of goods; and

(b)     the use to which a consumer is likely to put them; and

(c)     the length of time for which it is reasonable for them to be used; and

(d)     the amount of use to which it is reasonable for them to be put before such a failure becomes apparent.

137    Division 2 of Chapter 5 provides for actions against manufacturers. Mr Vautin relies upon s 271 which affords consumers a right to enforce the guarantees imposed by s 54 against a manufacturer. That section provides:

271     Action for damages against manufacturers of goods

(1)     If:

(a)     the guarantee under section 54 applies to a supply of goods to a consumer; and

(b)     the guarantee is not complied with;

an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer.

…

(5)     If:

(a)     the guarantee under section 58 or 59(1) applies to a supply of goods to a consumer; and

(b)     the guarantee is not complied with;

an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer.

138    The above provisions apply in relation to the supply of goods to a consumer. The expression “consumer” is defined by s 3 as being:

3     Meaning of consumer

Acquiring goods as a consumer

(1)     A person is taken to have acquired particular goods as a consumer if, and only if:

(a)     the amount paid or payable for the goods, as worked out under subsections (4) to (9), did not exceed:

(i)     $40,000; or

(ii)     if a greater amount is prescribed for the purposes of this paragraph—that greater amount; or

(b)     the goods were of a kind ordinarily acquired for personal, domestic or household use or consumption; or

(c)     the goods consisted of a vehicle or trailer acquired for use principally in the transport of goods on public roads.

Application of the ACL

139    Ultimately, there was no dispute that the Revive was within the meaning of “goods” for the purposes of Division 1 of Part 3-2 of the ACL. The vessel, being a fishing / cruising vessel, was a recreational one acquired by Mr Vautin so that he may pursue his passion of boating and marlin fishing and he used it for those purposes when he could. There was no evidence to the contrary.

140    Bertram was, at all material times, incorporated under the laws of Delaware and was a foreign corporation. It constructed the vessel in the United States of America and it was sold to Eagle Yachts, which imported it to Australia. That being so, for his claim against Bertram, Mr Vautin, in part, relies upon the extended operation of the Competition and Consumer Act 2010 (Cth) (CCA) afforded by s 5(1) which, relevantly, provides:

5     Extended application of this Act to conduct outside Australia

(1)    Each of the following provisions:

(a)    Part IV;

(b)    Part XI;

(c)    the Australian Consumer Law (other than Part 5 3);

(f)    the remaining provisions of this Act (to the extent to which they relate to any of the provisions covered by paragraph (a), (b) or (c));

extends to the engaging in conduct outside Australia by:

(g)    bodies corporate incorporated or carrying on business within Australia; or

(h)    Australian citizens; or

(i)    persons ordinarily resident within Australia.

141    Mr Vautin asserts that Bertram was carrying on business in Australia such that, to the extent any offending conduct occurred outside of Australia, it will be caught by this provision. That said, his primary position is that the relevant conduct of Bertram occurred within Australia such that the ACL applied to it without recourse to the extraterritorial operation of the Act. This issue is considered in detail below.

Non-compliance with the guarantees imposed by the Australian Consumer Law

Guarantee as to acceptable quality

142    Mr Vautin asserts that the existence of the construction defects in the sandwich core panels of Revive means that the vessel is not of an “acceptable quality” within the meaning of the guarantee imposed by s 54 of the ACL. In determining whether the guarantee in that section is contravened the following matters are relevant:

(a)    The test as to whether goods are of an “acceptable quality” is an objective one; being taken from the perspective of a “reasonable consumer” (APS Satellite Pty Ltd (formerly known as “Sky Mesh Pty Ltd”) v Ipstar Australia Pty Ltd [2016] NSWSC 1898 at [57]; Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145).

(b)    The question for the “reasonable consumer” is whether the goods in question have the identified qualities enumerated in 54(2) to an “acceptable standard”. This requirement is derived from the words “as a reasonable consumer … would regard as acceptable”.

(c)    The “acceptable standard” is used as the yardstick against which the qualities of the goods are to be measured. It is ascertained by a consideration of the matters referred to in s 54(3); the nature of the goods, their price, any statement made about the goods on packaging or labels, any representations made about the goods by the supplier or manufacturer, and any other circumstance relating to their supply.

(d)    It is necessary the goods have all of the qualities identified in s 54(2) to the ascertained acceptable standard. Those qualities are that the goods are fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable.

(e)    In the assessment of whether the goods meet that relevant standard, the reasonable consumer is taken to be fully acquainted with the state and condition of the goods (including any hidden defects of the goods).

(f)    If the goods supplied do not have all of the identified qualities to the acceptable standard, they will not be of an “acceptable quality”.

143    In compendious terms, the issue is whether, objectively, the goods supplied (when taking into account their actual quality including any latent defects) are, to an acceptable standard, fit for all the purposes for which goods of that kind are commonly supplied, acceptable in appearance and finish, free from defects, safe and durable when measured by a standard which reflects the nature of the goods, their price, statements about the good as per their packaging, representations made about the goods and any other relevant circumstance. In Prestige Auto Traders Australia Ltd v Bonnefin [2017] NSWSC 149; [132] N Adams J identified the manner in which s 54 should be applied in the following way:

The relevant test in s 54(2) of the ACL of whether or not goods are of “acceptable quality” is an objective one based on whether a reasonable consumer who was aware of the “defects” in the goods at the time of the supply would have considered them to be of acceptable quality. There was no issue taken that the determination of what is objectively reasonable for a consumer to expect is to be made taking into account the relevant information known as at the time of the trial, including “after-acquired knowledge”: Medtel v Courtney at [66] and [70].

144    Whether this new regime had the effect of replacing the allegedly “archaic” or “ambiguous” concept of “merchantable quality” with modernised terms which are easier for consumers and businesses to understand (see the Explanatory Memorandum to the Trade Practices Amendment (Australian Consumer Law) Bill para.25.85) is yet to be determined. That said, the test of “acceptable quality” is not vastly dissimilar to the test of “merchantable quality” in s 74D of the TPA. It is, however, apparent that the scope of the concept of “acceptable quality” is wider than that of “merchantable quality”. An important difference is that s 54 specifically imposes an obligation that the goods in question are free from defects as well as being fit for all of the purposes for which they were commonly supplied (APS Satellite Pty Ltd (formerly known as “SkyMesh Pty Ltd”) v Ipstar Australia Pty Ltd [2016] NSWSC 1898, [59]). This affords a wider scope of protection for consumers.

145    The circumstances of this case have some similarities (in a legal sense) with issues which arose in Medtel Pty Ltd v Courtney (2003) 130 FCR 182, although the issues in that case arose by reference to whether the goods were of “merchantable quality” as that term was used in s 74D of the TPA. There, an action was brought on behalf of persons who had heart pace-makers fitted against the Australian distributor of the product. The design and construction of the pacemaker had given rise to an increased risk of short-circuiting. At first instance the trial judge had determined that the solder used in the manufacturing process had created a super-added risk of premature failure and, for that reason, the pacemakers were not of merchantable quality. The distributor appealed on the basis that the trial judge had erred in reaching that conclusion because the pacemaker in question had not, at that stage, short circuited and had continued to function. The issue before the Full Court was identified by Branson J at p 202, [54] as being:

whether a product which, at the time of trial, can be demonstrated to have performed, and to be continuing to perform, satisfactorily can nonetheless be found to be “not of merchantable quality” within the meaning of s 74D(1) of the Trade Practices Act 1974 (Cth)

In the present case the vessel, Revive, is obviously not performing. The delamination of the topside is evidence of that. However, the question which needs to be answered is whether the vessel would be of “acceptable quality” after that delamination has been repaired. The respondents say that it will so that Mr Vautin is entitled to an amount sufficient to achieve that.

146    In Medtel Pty Ltd v Courtney, Branson J observed (at pp 203-204, [58]) that s 74D was concerned with the quality of the goods supplied and, in particular, the quality of the goods at the date on which they were supplied. The trial judge, Sackville J, had found the pacemaker in question was not of merchantable quality due to the superadded risk of premature failure, but he also found it had always functioned as it ought to and, that on the balance of probabilities, it would not have ceased to function properly. The appellant argued the trial judge ought to have found the pacemaker was of merchantable quality and, that was particularly so given the “after-acquired information” to the effect that it had not suffered from premature battery depletion. In this respect Branson J held (at p 205, [64]) the requirement of “merchantable quality” is defined by what is objectively reasonable to expect at the time of the supply of the goods. It required a comparison between the goods in question and what would be reasonable to expect, in terms of fitness for purpose, in all of the relevant circumstances. That comparison would no doubt be affected by the type of goods in question as well as their price.

147    In her Honour’s reasons, at pp 206-207, [71]ff, an interesting discussion occurs concerning the merchantable quality of goods where there exists a risk they are defective. The discussion concerned the scenario of a case of 100 cartons of yoghurt sold to a grocer where three were contaminated with arsenic. Whilst the 100 cartons sold to the grocer may have been unmerchantable, it was argued that the uncontaminated 97 cartons to individual consumers would not be because they were not defective and the consumers would not have suffered any loss. That reasoning was rejected by her Honour who identified that it could not be said that the cartons of yoghurt were merchantable where there was a slight but appreciable risk of contamination by a deadly poison. Her Honour said at p 207, [73] – [74]:

[73] It seems to me that to deny that all, or any, of the purchasers in the above classes purchased goods of a kind that were not as fit for human consumption as it is reasonable to expect is to read into the test of merchantable quality a requirement concerning loss or damage. Section 74D(1)(c) is not concerned with loss or damage. It is s 74D(1)(d) that imports into the statutory cause of action created by s 74D the requirement that the consumer suffers loss and damage by reason that the goods are not of merchantable quality.

[74] I reject the argument that the mere fact that it was known at the time of trial that Mr Courtney's pacemaker had not failed prematurely meant that it could not be demonstrated that Mr Courtney's pacemaker was not of merchantable quality within the meaning of s 74D at the time of its supply to Mr Courtney.

148    The Full Court (Branson J with whom Jacobson J agreed) at pp 208-209, [78] could find no fault in the conclusion of the trial judge that a pacemaker which had only the ordinary or usual risk of premature failure is more fit for purpose than one which had, by reason of its manufacture, an appreciably higher risk of failure. It was reasonable to expect, at the time of its sale, that the pacemaker was manufactured in a way which gave rise to the ordinary or usual risk of failure. See also the observations of Moore J at [14].

149    It should be kept steadily in mind that the question for the Court in relation to s 54 (or s 74D) concerns the quality of the goods supplied. That includes issues as to their safety or durability and fitness. It is not concerned with reaching a conclusion that the goods in question will necessarily fail under any or particular circumstances. The section is also not concerned with loss or damage. In cases where the product in question has not failed, the issue which needs to be addressed is whether the product in question carries the “inherent risk” which renders it not of an acceptable quality (see APS Satellite Pty Ltd (formerly known as “SkyMesh Pty Ltd”) v Ipstar Australia Pty Ltd [2016] NSWSC 1898, [79]; Protec Pacific Pty Ltd v Steuler Services GmBH & Co KG [2014] VSCA 338 [528]). The discussion by the Court in Protec at [516] – [531] of the application of the principles identified in Medtel is useful and identifies the appropriate approach of establishing the unsuitability of a product which has not actually failed. Their Honours (Tate, Santamaria and Kyrou JJA) said at [528]:

While it follows from Medtel v Courtney that it is permissible to demonstrate unsuitability on the basis of an inherent risk associated with a type of product, without the particular product purchased having actually failed, it is first necessary to establish that the type of product carries the inherent risk alleged. In our opinion, this is what BHP has failed to do.

150    Although Medtel concerned the operation of s 74D of the TPA, the principles observed are useful to a consideration of s 54(2) of the ACL. If goods could not be described as being of merchantable quality, neither would they be of an acceptable quality (see APS Satellite Pty Ltd (formerly known as “SkyMesh Pty Ltd”) v Ipstar Australia Pty Ltd [2016] NSWSC 1898, [57]).

151    In the present case the respondents submitted Mr Vautin could not establish Revive was not of an acceptable quality (once the repairs to the topsides were complete) because other sandwich core panels had not failed at this point in time. This submission ought to also be rejected. At the very least, the evidence established before the Court indicates that those panels carry with them an added and unreasonable risk of failure.

Setting the standard of acceptable quality

152    In order to establish the standard of “acceptable quality” against which a reasonable consumer would measure the attributes of Revive, it is necessary to consider the matters identified in s 54(3); namely, the nature of the goods, their price, any statement made about the goods on packaging or labels, any representations made about the goods by the supplier or manufacturer, and any other circumstance relating to the supply of the goods.

153    In relation to the first matter, Revive was an ocean-going, cruising vessel. It was described as a Category A (Ocean) vessel in the CE Certificate relating to the model type and, importantly for present purposes, it was so described in the Owner’s Manual. If constructed to the requirements of that categorisation it would have been capable of being used in conditions which may exceed wind force 8 (Beaufort scale) and significant wave heights of 4 m and above, but excluding abnormal conditions, and be largely self-sufficient in such conditions. In effect, it ought to have been capable of being used in all conditions short of a hurricane or tornadoes and extreme sea conditions or freak waves.

154    It was also a large vessel, being in excess of 74ft, which was capable of carrying a maximum of 18 persons. It had a 7600 litre fuel tank capacity, which indicated it was intended to be capable of being used for extended voyages and, it follows, capable of handling all weather conditions which might arise on such voyages. The consequences of such a vessel failing at sea could include the loss of life, so Revive could only be of an acceptable quality if it was constructed to the safest standards possible and its components did not carry a risk of failure.

155    These above features, by themselves, suggest that, given the type of vessel, the overall structural integrity of Revive ought to have rendered it capable of successfully encountering extremely rough conditions. It did not meet this standard.

156    Had the Revive been constructed in accordance with any identified acceptable standard, it would have been a vessel which a manufacturer or seller might reasonably hold out as having substantial sea capabilities. In the promotional material which was provided to Mr Vautin it was asserted by Bertram that:

(a)    The Bertram vessels were “the most seaworthy collection of crafts on the water today” (Tab 24 of the Joint Bundle, p 97);

(b)    “Hardcore performance is at the heart of the Bertram legacy”, “every Bertram is engineered for strength” and Bertrams are built “for strength and hull performance” (Tab 24 of the Joint Bundle, p 99); and

(c)    Bertram produces “innovative yachts with remarkable performance, durability and beauty” (Tab 24 of the Joint Bundle, p 167).

157    More particularly, in a 2011 brochure produced by Bertram in relation to the Bertram 700 range of vessels, of which Revive was one, the following representations were made:

(a)    That Bertram boats “stand up to the test of time”, that they “are purpose-built for fishing under the most hostile conditions”, that “[t]hey hold up in rough conditions and stand the test of time”, and “[h]istorical tales of how owners and captains were thankful that their Bertrams got them through unexpected rogue seas are known across the world” (Tab 23 of the Joint Bundle, p 33);

(b)    “Bertram’s quest to reduce risk in unforeseen adverse sea conditions and make the best sea keeping vessel is a major part of Bertram’s 50-year legacy of legendary yacht building” (Tab 23 of the Joint Bundle, p 35);

(c)    competitors have not “matched the strength, rigidity and durability of a Bertram” (Tab 23 of the Joint Bundle, p 35);

(d)    Bertram builds “sport fishing machines; ‘battle wagons’ as they are commonly referred to. Getting you out where you need to be – even in the roughest conditions. … Running before a storm through high seas to reach safe harbor.” (Tab 23 of the Joint Bundle, p 35); and

(e)    the Bertram experience “will get you, your family and guests safely out and back, as you brave conditions that keep lesser vessels in port. That’s Bertram. That’s peace of mind.” (Tab 23 of the Joint Bundle, p 35).

158    In a 2012 brochure (which was apparently produced after the sales of Revive to Mr Vautin) the key selling points of Bertram vessels were identified as being that they were built to withstand the roughest conditions and every part of the vessel was structurally bonded to provide robustness including, but not limited to, furniture, soles and all bulkheads. Mr Rodgers, a former employee of Eagle Yachts, identified that these were the type of messages used by Bertram representatives to market the yachts in Australia. He confirmed (at ts.195) that the vessels were marketed as being constructed to withstand anything short of a hurricane.

159    Although Mr Vautin also relied upon other statements in the brochures which extoled the claimed virtues of the Bertram range of vessel and, in particular, the 700 series, the above is sufficient to identify that the vessel was sold as one being at the “top of the range” of vessels of that nature. The statements in the promotional material indicated Bertram vessels were constructed to ensure they were as safe as it was reasonably possible to make them, if not safer. The representations emphasised the vessel were of robust strength and design and close to statements the vessel are as safe as they might possibly be. The statements made in the marketing of Revive had the result that the “acceptable quality” of the attributes identified in s 54 must be towards the highest level capable of being reached by boat builders. Clearly, the actuality did not reflect the marketing statements.

160    In the above circumstances, it is not surprising that the price at which Revive was sold was in excess of $AUD4 million. The contract required the payment of $USD3 million and the trade-in of Mr Vautin’s previous vessel valued at $AUD1.275 million. At that time there was near parity between the USD and the AUD. On any view, that is a substantial amount of money to spend acquiring a pleasure craft. The price suggests the vessel is a “high end” vessel being constructed to a standard and finish at the higher end of vessels of that type. As Mr Rodgers accepted, it was “right at the top of the market” (ts.197). There does not appear to be any dispute about that in this case.

161    It might also be observed that at the time of acquiring Revive, Mr Vautin informed Eagle Yachts he intended to use the vessel for ocean going voyages. Again, that was not disputed and there was no suggestion it was not suitable for that type of use.

162    Again all these statements indicate that, for the purposes of s 54, the quality of the vessels’ attributes were necessarily to be at the highest level.

The expectations of a reasonable consumer

163    Mr Brad Rodgers, who had a history of dealing in vessels of this nature and who held a Masters Certificate, gave evidence as to his appreciation of what customers of vessels of the type under consideration would expect. He was well qualified to do so and there was no objection to his evidence in this respect. Indeed, it was he who had sold Revive to Mr Vautin. He gave evidence, which was not disputed, that owners of vessels of the type under consideration wanted a high degree of assurance as to safety and structural soundness (ts.195).

164    The manner vessels of this nature were held out to potential purchasers was important in relation to the expectations of reasonable customers. Mr Rodgers acknowledged the Bertram vessels were held out as being able to withstand the roughest conditions and, in the case of a Bertram 700, they were held out as being able to withstand gale force winds, including winds up to the Beaufort 8 scale. He accepted that persons who might be interested in acquiring such expensive vessels would wish to use them offshore and safety was a priority, particularly because sea conditions can change quickly. He further accepted that, for such potential purchasers, structural soundness was necessary and such persons would require that the vessel was built to specification and certified as such. He further acknowledged that vessels of the nature of Revive which are ocean going may encounter waves or swells of up to 4 to 5 metres. Such vessels are designed to go into such seas and he agreed the forces which might there impact on the vessel could be significant. Those forces would impact not just the hull of the vessel, but also upon the superstructure including the deck and the structure built above it. Mr Rodgers admitted that, for these reasons, the deck and the super structure required structural integrity and that purchasers who might acquire such vessels would insist on that integrity (ts.196 – 197).

165    Mr Rodgers also agreed that ocean going vessels, such as the Revive, would be subject to minor collisions at sea with, for example, flotsam and jetsam, whales or large fish. He acknowledged that part of the structural design of such a vessel was to localise the effect of any such impacts. This concept of localising the effect of impacts is important. If the consequence of an impact which pierces the outer skin of the vessel is that water will permeate throughout the hull, deck or super structure, the consequence can be deterioration in the foam core which can impact upon balance and performance as a result of adding weight to the vessel. It would also impact upon the durability of the vessel. Mr Rodgers agreed that these could be the sequela of water permeating throughout the sandwich core panels and that, in terms of both cost and the features of the vessel, such circumstances are not intended. The filling of kerfs in the construction of a sandwich core panel prevents water spreading throughout the structure such that the effect of any penetration is localised. For this reason, potential purchasers of vessels such as Revive would expect their manner of construction would prevent the dispersal of water which enters the structure through a penetration.

166    Mr Rodgers also accepted (at ts.198) that a purchaser of a vessel such as Revive would not consider it acceptable that:

(a)    the shear capacity of the material used in the core construction of the vessel was up to 50% less than it was designed to be;

(b)    the material used in the construction of the core had not been installed in accordance with the manufacturer’s specifications; and

(c)    the vessel had been constructed in a way that departed from accepted international maritime construction standards.

167    Mr Rodgers further agreed that, in terms of the safe use of the vessel, it would be imprudent to take a defective vessel such as Revive onto the ocean if an experienced naval architect had advised not to do so until it was completely repaired (ts.200). That evidence was not, however, sufficiently particular for the purposes of the issues in the present case, although it does reveal persons who use such vessels necessarily demand that the design and construction of their craft be extremely high. It is axiomatic that the structural failure of a vessel at sea and in heavy conditions, generates a great risk of loss of life. In that respect, he also agreed that, due to the extensive nature of its structural impairments, there was no market for a defective vessel like Revive in the state in which she is in as she could not be enjoyed in the way that it is intended she should be (ts.201).

168    Taking into account all of the above circumstances, in order for Revive to be of an “acceptable quality” it would need to have the characteristics identified in s 54(2)(a)-(e) to an extremely high standard.

Failure to comply with manufacturer’s specifications

169    Mr Vautin also relied upon the failure of the vessel to be constructed using materials (the PVC foam core) incorporated in accordance with the manufacturer’s specifications. Above I have concluded that there has been such a failure in this case in relation to the PVC foam core and I agree with the uncontested evidence of Mr Rodgers that purchasers of vessels like Revive would not find it acceptable for the vessel to have been so constructed.

Contraventions of the guarantee imposed by s 54 of the ACL

170    In light of the above, taking into account the after acquired knowledge, it is possible to make the following findings in relation to whether Revive was of an acceptable quality at the time it was supplied.

Revive was not of an acceptable quality at the time of supply

171    Revive was not of an acceptable quality at the time at which it was supplied by virtue of the defective construction of the sandwich core panels. By the time of trial, that was not seriously in dispute. It had been disputed on the pleadings however, in its final submissions Eagle Yachts expressly eschewed asserting the yacht complied with the guarantees in ss 54 or 59 of the ACL. Bertram did, however, contest that Mr Vautin had not established that the vessel was not fit for purpose within the meaning of s 55. Similarly, by the end of the trial the second respondent, Eagle Yachts, had also capitulated in relation to the non-compliance of the yacht with the statutorily imposed guarantees. It acknowledged that the vessel, when supplied, failed to comply with the guarantees found in ss 54, 55 or 59 of the ACL.

172    In the light of the evidence and, in particular, the joint experts’ report, the concessions made by the respondents were inevitable. The deficient method of manufacture for those sandwich core panels meant their shear strength was substantially reduced. I have accepted it was reduced by approximately 50%, as opined by Mr Stanyon and Mr Dovell. The presently appearing consequence of the defective construction is that the forward parts of the topsides which had been exposed to the most regular forces have delaminated and particularly on the port side. It was agreed between the experts that the vessel could not be used in the ocean in that condition. Were it to be so used the only shear strength of those parts of the topside would be in the laminate skins which was minimal and their failure would be catastrophic for the vessel. Necessarily, with those construction defects the vessel was not fit for all of the purposes for which it commonly supplied, it was not free from defects, it was not safe, and it was not durable. It was also not fit for purpose within s 55 of the ACL.

Revive was not of an acceptable quality even with some repairs being effected

173    The central question agitated in this case was whether Revive would be of an acceptable quality with the forward parts of the topside repaired. Those repairs were, in effect, the removal of the delaminated panels and their reconstruction using appropriate construction methods including priming the core and filling the kerfs. It was the respondents’ contention that this would have the effect of rendering the vessel of an acceptable quality and, thereby, putting Mr Vautin into the position which he ought to have been had there been compliance with the statutory guarantees when the vessel was supplied. In the context of the evidence as it emerged, the question became whether given the construction defects permeated all of the topsides, the decks and the superstructure, it could be said the vessel was of an acceptable quality once the delaminated portions had been repaired. Largely, this goes to the question of damages rather than liability given the initial finding that the vessel was not of an acceptable quality. An alternative case advanced by the respondents was that if all of the sandwich core panels on the topside were repaired, the vessel would then comply with the statutory warranties. Necessarily, in that scenario the cost of repairs would be substantially greater.

174    It follows that it is necessary to consider the hypothetical position that would exist if the hull or forward part of the hull was repaired.

Not fit for all the purposes for which goods of that kind are commonly supplied

175    All parties accept the defective construction extended to all parts of the vessel containing a sandwich core. I accept the defective method of construction resulted in the shear strength of those panels being reduced in the order of 50%. This defect created a heightened risk that those parts of the sandwich core panels which were not repaired might fail, or delaminate and then fail, if exposed to the forces they might expect to receive in conditions a Category A vessel should be able to withstand. The delamination would have the effect that the laminate skins would rupture under the pressure of further impact forces and the vessel would not remain watertight. That generates a risk of loss of life for passengers and crew and any such risk is, obviously, unacceptable.

176    Even if it could not be positively established the vessel was so defective it could not be used in all of the conditions which a Category A vessel should be able to withstand, the defective construction generates a significant risk that the vessel would not be able to withstand such conditions. This conclusion is supported by the experts to which I have referred. Mr Dovell, whom I have found to be reliable, said that he would not use the repaired vessel in the rough conditions which a Category A vessel should be able to withstand. Similarly, Mr Stanyon agreed he would not use the vessel in all the conditions that he would if the vessel did not contain the construction defects. Mr Hutchings accepted that even with the identified repairs there would be uncertainty in the use of the vessel (ts.353) and such uncertainty was unacceptable in relation to a high end vessel of this type.

177    The uncertainty surrounding the integrity of the vessel as a result of the defective construction (even with the delamination repaired) meant it would not be fit for all of the purposes it would be commonly used. Specifically, for ocean going voyages where it might encounter very heavy conditions. For this reason it would not be of an acceptable quality even if the identified repairs were carried out.

Free from defects

178    Even if the delaminated parts of the vessel were repaired, Revive would still contain defects in the form of the defectively manufactured sandwich core panels. Those panels have substantially reduced shear capacity from that which they ought to have, or were designed to have. Those defects are likely to lead to future delamination if the vessel is used for the purposes for which it was designed. I have accepted that Mr Stanyon indicated further delamination of the vessel is a distinct likelihood. Indeed, the defective panels on the deck and in the superstructure may fail in rough conditions. Moreover, the unfilled kerfs have the consequence that penetrations for the affixing of fittings and the like are likely to permit water to enter the core and permeate throughout it. Over time that would lead to imbalance if a sufficient amount of water entered and it is also likely to lead to the deterioration of the bonding or adhesion in the sandwich core panels. For this reason as well, even if the repairs identified were effected, Revive would not be of acceptable quality by reason of the continued existence of defects.

Safety

179    As appears from the above discussion, even if the existing delamination is remediated, the defective condition of the remaining sandwich core panels means that the vessel is not as safe as it should be. In particular, it is not safe for use in all conditions which a Category A vessel should be able to withstand. In this respect I accept the opinions of Mr Stanyon and Mr Dovell to the effect that, even with the defects repaired, they would not use the vessel in all of the conditions in which it could be used if the construction defects did not exist. Even Mr Hutchings accepted that the uncertainty surrounding the safety of the vessel was unacceptable in a high end vessel of this nature. Either because the vessel is unsafe, as I have found, or because there is a substantial risk that it is not safe for use in all relevant conditions, it is not of an acceptable quality.

Durability

180    It necessarily follows from the above that, even with the identified repairs being completed, Revive will not be as durable as it would have been in the absence of the construction defects. The panels that are not repaired have only half the shear strength of a properly constructed panel and are likely to fail in conditions which they are designed to encounter. Mr Dovell identified that the fatigue strength of the panels will be reduced. That seems to be supported by Mr Stanyon’s opinion that if he had the vessel (which was repaired) he would constantly inspect the vessel for further delamination. Mr Dovell further said that the unfilled kerfs would allow water entering the panels to permeate the whole panel and cause deterioration. On the evidence of the experts it is likely the sandwich core panels will deteriorate faster than if they were properly constructed. It must also be kept in mind that Revive is a very expensive vessel; being one that is sold as being at the “top of the market”. That being so a reasonable consumer would expect the vessel to be as durable as good boat building practice could make it. The defective construction has prevented it from meeting that standard. Therefore, even if the existing delamination was repaired, Revive would not be of an acceptable quality because it would not be as durable as a reasonable consumer would expect it to be.

Conclusion on non-compliance with s 54

181    It follows that for each of the above reasons, if the panels where the delamination had occurred were repaired, the vessel would still not be of an acceptable quality. As s 54 requires that the goods supplied have each of the identified attributes, the vessel is not of an acceptable quality for each of those reasons individually or any combination of them. The same conclusion is reached even if the topsides were completely repaired.

Non-compliance with the guarantee for fitness for purpose under s 55

182    As mentioned, Bertram did not admit that the vessel, as supplied, did not meet the guarantee imposed by s 55. The brief submissions made were to the effect that Mr Vautin had failed to establish the shear capacity of the un-remediated panels would be lower than the CE “essential requirements”, or that the construction did not comply with the construction plans approved by the Royal Institution of Naval Architects (RINA). It followed, so the argument went, that Mr Vautin had not established the vessel was not fit for purpose.

183    Pursuant to s 55, if certain conditions exist, the goods supplied must be reasonably fit for any disclosed purpose, and for any purpose for which the supplier has represented that they are reasonably fit. In the circumstances of this case it was accepted that the relevant “purpose” was that the vessel could be used as a Category A vessel capable of ocean travel and being able to withstand conditions that may exceed wind force 8 (Beaufort scale) and significant wave heights of 4 m and above, but excluding abnormal conditions, and being largely self-sufficient.

184    It is not clear whether Bertram’s position is that Revive is fit for purpose in its present state or that it would be if the delamination was repaired. In its present state, the fact the defective construction of the sandwich core panels resulted in delamination in those parts of the topside which, to date, have received the impact of repetitive forces occurring under ordinary operation, means the vessel is not reasonably fit for its disclosed purpose and that it was not so fit when supplied.

185    It follows that it must be Bertram’s contention that Mr Vautin has not established that, if the construction defects in the forward parts of the topsides are repaired, or the whole of the topside is repaired, the vessel is not reasonably fit for purpose. This seems to be founded on its submission that it has not been shown the panels are of inadequate shear strength or the vessel was not constructed in accordance with the RINA approved construction plans.

186    Bertram’s submissions in this respect must be rejected. As a matter of fact, the sandwich core panels have reduced shear capacity in the order of 50% compared to a panel constructed with the core primed and the kerfs filled. The consequence of that defective construction to date has been delamination in those areas which have received the most repeated impacts under normal conditions of usage. That evidence establishes that the shear strength of the sandwich core panels on the vessel is inadequate to withstand the forces encountered under normal or ordinary conditions. There is no reason to believe that other areas of the vessel made of the same sandwich core panels which have, as yet, not been subject to similar forces will not delaminate in time. There was no suggestion from any of the experts that this is not likely to occur and, indeed, it seemed implicit from Mr Stanyon’s evidence (ts 348 – 349). Further, there was no evidence to suggest that the panels on the vessel would perform any better in conditions which are harsher than those which have been experienced to date. The evidence before the Court was that in harsh sea conditions the vessel could be impacted across all areas including the decks and superstructure with substantial forces. Those conditions might involve large waves crashing onto the deck or against the superstructure. On the basis of Mr Dovell’s evidence which I accept, the shear capacity of the sandwich core panels are, on the balance of probabilities, well less than that which is adequate for such panels with the consequence that it is more likely than not they will fail when exposed to constant regular forces in ordinary use or to substantial forces in harsh conditions. It can be added that the lower standard of durability would also prevent the vessel being used for all of its usual purposes. Those conclusions render the vessel unfit for the purposes for which it is commonly used or for the purposes for which the supplier represented that it could be used. To that extent there was non-compliance with the statutory guarantee in s 55 of the ACL.

187    The issue of whether or not the vessel was “fit for purpose” was misdirected, to some extent, by the joint experts’ report. As I have set out above, the experts agreed upon the following statement in their report:

21.    The best measure of fitness for purpose for the design and construction of a pleasure boat similar to REVIVE is the application of an appropriate and accepted standard of which the CE Directive 94/25/CE as amended by directive 2003/44/CE is one. Agree PS, CCH, ACD

188    There is logic to the point of view expressed in that paragraph in that the standards which are incorporated into the CE Directive are carefully developed to provide appropriate methods and standards of construction which, when met, will ensure the safety and seaworthiness of the constructed craft. That is, a vessel constructed to the appropriate standard will be free from the risk that it is not seaworthy.

189    However, as a result of the approach adopted by the experts, much of the debate concerned whether it had been established that the construction of Revive did not comply with the requirements of the CE Directive or, the Bertram construction plans. In particular, the respondents alleged it had not been established the sandwich core construction did not comply with some standard which was consistent with the requirements of the CE Directive. Whilst it may be correct to conclude Mr Vautin was not able to prove directly and conclusively there was no standard to which construction of the sandwich core panels complied, it can be found, by way of inference, that such was the case. There was evidence before the Court from three marine experts who were naval architects, had other professional qualifications and, between them, had many years of experience. They were aware of the standard of construction which were required by the CE Directive and of the ISO standard. It was agreed by them that the ISO standard was, effectively, the minimum requirement for the construction of sandwich core laminates for vessels of the type under consideration. They also agreed, although Mr Hutchings did so reluctantly, that the failure to prime the core was bad boat building practice, that it was prudent to fill the kerfs, and that was something they would always advise a boat builder to do. In such circumstances, it was extremely unlikely there would exist a standard for the construction of sandwich core panels which did not require the priming or the filling of kerfs.

190    In order to make good their submission the respondents contend that, although the failure to prime the core would be bad boat building practice and the filling of the kerfs is something that should be done, there might be a standard acceptable to the CE Directive requirements which does not require both of those practices. Whilst that remote possibility cannot be excluded beyond all doubt, I find on the balance of probabilities that no such standard existed. Given that all of the experts agreed that priming the core and filling the kerfs were important manufacturing techniques, which should be done, the chances of their being some standard that does not require both is most improbable. Moreover, it is not likely that the experts, in preparing to give evidence in this case, would not have ascertained the existence of such a standard if one existed.

191    It follows that it is possible to infer that the construction of Revive did not comply with the ISO Standard (which is not disputed), nor any standard which might have been within the requirements of the CE Directive. It was, therefore, not constructed in accordance with that Directive.

192    The respondents further submitted that compliance with the ISO standard was not the only manner in which a manufacturer of vessels might comply with the CE Directive (see Article 5 of the CE Directive). They assert that the manufacturer can, if it chooses, not refer to a harmonised standard for the construction of a vessel with the result that Mr Vautin must establish the construction of the Revive did not meet the essential requirements of the CE Directive. That argument is misconceived. The entitlement of a manufacturer to refer to an alternative standard, for the purposes of obtaining compliance with the CE Directive, necessitates that the manufacturer prove their product is in conformity with the essential requirements of the Directive by use of the other means. If the vessel had been constructed in accordance with some other standard or the vessel as built did conform with the essential requirements, that would be something which would be peculiarly within the knowledge of Bertram and it has not produced any evidence of the existence of some other standard or evidence of the compliance of Revive with the essential requirements.

193    In Medtel Branson J referred to s 140 of the Evidence Act (Cth) concerning the standard of proof in civil proceedings and observed that it incorporated “the common law rule that evidence is to be weighed according to the proof which it was in the power of one party to produce and in the power of the other to contradict”. Her Honour referred to Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corp [1985] 1 NSWLR 561, 565 citing Blatch v Archer (1774) 1 Cowp 63 at 65; 98 ER 969 at 970. Here, if the construction of Revive does conform to the essential requirements of the CE Directive by reason of some special building technique that is something of which Bertram has peculiar knowledge, its failure to adduce any evidence of that lends support to the conclusion that the vessel does not so conform.

194    In support of his client’s case, Mr Hutchings asserted it was not possible to determine whether the vessel was fit for purpose by reason of its compliance with the directive without consideration of the construction plans. Such drawings would disclose the design of the sandwich core panels and it would be possible to ascertain whether the construction of the vessel conformed to that design. It was apparently within the power of Bertram to produce the construction plans for Revive. If it had it could have been determined whether the vessel was built in accordance with them and whether the vessel complied with the essential requirements. Bertram chose not to produce those plans. There was some evidence the “plans could not be produced”, but that rather vague statement was not elaborated upon. The cause of the inability was not clarified and no attempt was made by Bertram to call evidence in that respect or even to attempt to explain why no evidence was being called. Again, adopting the approach of Branson J in Medtel, it can be inferred that Bertram is not able to establish Revive was built in compliance with its construction plans or satisfied the essential requirements of the Directive.

195    I add that the above discussion is somewhat hypothetical or otiose in the circumstances of this case. It may be true that establishing that a vessel did not comply with any internationally accepted construction standard or the CE Directive, will establish that a vessel is not fit for purpose. However, that is not the only method of showing unfitness. In this case the construction defects in the sandwich core panels have been shown to have rendered them inadequate in a vessel such as Revive. Those defects prevent it from being used as a Category A vessel. That proposition is true whether the topsides are repaired or not. It has been established here, as a matter of fact, the vessel cannot be used for the purposes for which such vessels are commonly used and that establishes the breach of s 55.

Revive is not fit for purpose

196    In the result I conclude that Revive is not fit for its purpose of being used as an ocean going vessel.

Compliance with manufacturer’s warranty

197    Bertram provided a warranty in relation to Revive when Mr Vautin purchased it. That provided that Bertram “will repair or replace defects in (a) items manufactured by BERTRAM for two (2) years, and (b) the yacht’s hull and its fiberglass structural components for five (5) years.” If the provisions of s 59 of the ACL apply to Bertram, a statutory guarantee is created to the effect that Bertram will comply with that warranty.

198    For the purposes of that warranty and guarantee, the construction defects in the sandwich core panels are “defects” within the meaning of the warranty. The respondents do no assert to the contrary, at least to the extent to which they exist in the forward parts of the topside where the delamination has occurred. However, as appears from the above discussion, the construction defects also constitute defects in other sandwich core panels of the vessel because their existence in those other parts of the vessel render it unfit for purpose and not of an acceptable quality.

199    However, for Bertram to be liable under s 59, it is necessary that it is within the definition of “manufacturer” in s 7 of the ACL which provides:

7     Meaning of manufacturer

(1)     A manufacturer includes the following:

(a)     a person who grows, extracts, produces, processes or assembles goods;

(b)     a person who holds himself or herself out to the public as the manufacturer of goods;

(c)     a person who causes or permits the name of the person, a name by which the person carries on business or a brand or mark of the person to be applied to goods supplied by the person;

(d)     a person (the first person) who causes or permits another person, in connection with:

(i)     the supply or possible supply of goods by that other person; or

(ii)     the promotion by that other person by any means of the supply or use of goods;

to hold out the first person to the public as the manufacturer of the goods;

(e)     a person who imports goods into Australia if:

(i)     the person is not the manufacturer of the goods; and

(ii)     at the time of the importation, the manufacturer of the goods does not have a place of business in Australia.

200    It does not appear to be in doubt that, prima facie, Bertram would fall within each of sub-paragraphs (a) – (d) of subsection (1). It produced and assembled the vessel and held itself out as manufacturing it. Its branding is upon the vessel and, through the dealership agreement, it caused Eagle Yachts to hold it out as the manufacturer of the vessel.

201    However, here, the vessel was manufactured in the United States and sold there to Eagle Yachts. It was the latter which imported it to Australia. So the question which arises is whether Bertram is subject to the operation of the ACL and, in particular, the obligations imposed by s 59?

202    By s 131 of the CCA the provisions of the ACL apply to the conduct of corporations. That section provides:

131     Application of the Australian Consumer Law in relation to corporations etc.

(1)     Schedule 2 applies as a law of the Commonwealth to the conduct of corporations, and in relation to contraventions of Chapter 2, 3 or 4 of Schedule 2 by corporations.

Note: Sections 5 and 6 of this Act extend the application of this Part (and therefore extend the application of the Australian Consumer Law as a law of the Commonwealth).

203    Section 4(2)(b) and (c) of the CCA provides a definition of “conduct” as being:

(b)    a reference to conduct, when that expression is used as a noun otherwise than as mentioned in paragraph (a), shall be read as a reference to the doing of or the refusing to do any act, including the making of, or the giving effect to a provision of, a contract or arrangement, the arriving at, or the giving effect to a provision of, an understanding or the engaging in of a concerted practice;

(c)     a reference to refusing to do an act includes a reference to:

(i)     refraining (otherwise than inadvertently) from doing that act; or

(ii)     making it known that that act will not be done; …

204    Section 4 also defines the expression “corporation” as including a “foreign corporation” which, in turn, is defined as including a foreign corporation within the meaning of paragraph 51(xx) of the Constitution.

205    Although there is nothing in s 131 or in s 59 (or in the definition of “manufacturer” in s 7) to suggest that the operation of the Act is confined to persons or corporations within Australia, or who have some connection with Australia, as a matter of statutory construction, it is generally accepted that an enactment will be presumed to apply only to the territory or nationals over which the Australian Government has jurisdiction. In Meyer Heine Pty Ltd v The China Navigation Co Ltd (1966) 115 CLR 10, 23, Kitto J cited the relevant principle from the speech of Lord Russell of Killowen in Reg v Jameson [1896] 2 QB 425, 430 as being:

if any construction otherwise be possible, an Act will not be construed as applying to foreigners in respect to acts done by them outside the dominions of the sovereign power enacting

206    In Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1, 15 [47] Merkel J phrased that principle as, “a general canon of construction that an enactment will not be construed as applying to foreigners in respect of acts done by them outside the dominions of the sovereign power enacting” and identified it as being based on international comity whereby sovereign powers are bound to respect the subjects and the rights of all other sovereign powers outside its own territory. In both Bray and Meyer Heine it was recognised that the existence of a statutory provision extending the territorial operation of an enactment can usually only be accounted for on the basis that the Act, as a whole, has been framed upon the assumption that when conduct is made a contravention of the Act, such conduct is limited to that which occurs in Australia or to conduct to which the extraterritorial provisions apply.

207    In respect of the ACL, s 5 of the CCA identifies the extent of its extraterritorial operation such that, for conduct outside of Australia to contravene any of its provisions, that conduct must be within the scope of that section. That section indicates that, generally, the provisions of the legislation apply only to conduct in Australia or to conduct outside of Australia where there is a sufficient nexus between the relevant actor and Australia. It provides:

5     Extended application of this Act to conduct outside Australia

(1)    Each of the following provisions:

(a)     Part IV;

(b)     Part XI;

(c)     the Australian Consumer Law (other than Part 5-3);

…

(f)     the remaining provisions of this Act (to the extent to which they relate to any of the provisions covered by paragraph (a), (b) or (c));

extends to the engaging in conduct outside Australia by:

(g)     bodies corporate incorporated or carrying on business within Australia; or

(h)     Australian citizens; or

(i)     persons ordinarily resident within Australia.

208    The necessary implication of s 5 is that the Act, as a whole, applies to conduct in Australia by, inter alia, the entities mentioned in sub-paragraphs (g) to (i). If the Act expressly extends its scope to the conduct of those entities engaged in beyond Australian territorial limits, it is axiomatic that their conduct within Australia is also within the Act’s operational scope. It follows that if an entity is carrying on business within Australia its conduct, either within or outside of Australia, is subject to the liabilities imposed by the Act.

209    For the purposes of this matter the issue resolves to one of the application of the ACL to the conduct of Bertram in the manufacture of the vessel in the United States and as well as, or in the alternative, its provision of a warranty to Mr Vautin in respect of Revive. Bertram will be subject to the operation of the ACL if relevant conduct occurred in Australia or if, at the relevant time, it carried on business in Australia. Here Mr Vautin contends that both connections existed in 2011 and 2012 when the vessel was supplied to Mr Vautin.

Conduct in Australia

210    With respect to the submission that Bertram engaged in relevant “conduct” in Australia, Mr Vautin relies upon the terms of s 59 and s 271(5), the latter of which gives an affected person a cause of action where a guarantee is not complied with. It provides:

(5)     If:

(a)     the guarantee under section 58 or 59(1) applies to a supply of goods to a consumer; and

(b)     the guarantee is not complied with;

an affected person in relation to the goods may, by action against the manufacturer of the goods, recover damages from the manufacturer.

211    Mr Vautin’s first submission is that all that is required for Bertram to be subject to the operation of the ACL is that there has been a supply of goods to the consumer and that such a supply does not need to be a supply directly by the manufacturer (see Spittles v Michaels’ Appliance Services Pty Ltd (2008) 71 NSWLR 115, 118 per Handley JA at [14]). He submits that, here, that requirement has been satisfied by the supply of the vessel by Eagle Yachts to Mr Vautin.

212    That submission should not be accepted. The question is one of the liability of an overseas manufacturer who has sold goods in the USA to Eagle Yachts and the latter has imported them to Australia and supplied them to Mr Vautin. On a proper construction of the ACL the liability imposed on the manufacturer under s 271(5) does not arise merely by reason of the supply of the goods to a consumer by some third party (such as a retailer). That alone is insufficient and, as was identified in Bray v Hoffman-La Roche Ltd, the nexus with Australia must be, at least, conduct by the manufacturer. Moreover, that relevant conduct must be conduct in relation to the relevant contravention and, indeed, it is probably necessary that it relate to the gravamen of the statutory cause of action being pursued. In Australian Competition and Consumer Commission v Valve Corp (No 3) (2016) 337 ALR 647 (Valve Corp (No 3)) Edelman J considered (for the purposes of a misrepresentation claim under the ACL) whether statements made by the respondent on the internet was conduct in Australia. His Honour noted that in Bray, Merkel J had recourse to comparisons with the rules relating to the jurisdiction of a court when the question in issue concerned where a cause of action arose. The cases so considered, which included Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 567–8; Distillers Co (Bio-chemicals) Ltd v Thompson [1971] AC 458 and Jackson v Spittall (1870) LR5CP 542, supported the proposition that the test for determining whether a cause of action arose in the jurisdiction required ascertaining the place of “the act on the part of the defendant which gives the plaintiff his cause for complaint”. However, Edelman J rejected that as the test for determining whether there was relevant conduct in Australia. In relation to the matter before him (being one of misleading conduct) he agreed with French J in Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2) (1993) 44 FCR 485 at 493, that the question of whether there was relevant conduct in Australia would be answered by ascertaining “where the conduct relied upon took place”. His Honour concluded that the conduct in question, being the making of the representations, occurred in Australia. That conclusion was reached upon a consideration of all of the circumstances surrounding their making.

213    Although his Honour had rejected the proposition that the test in Voth should be automatically applied in determining whether relevant conduct occurred in Australia, he acknowledged that the common law approach which was applied in that case had occasionally informed the statutory approach. His Honour did not formulate any test for ascertaining the relevant conduct which must occur in Australia before the ACL applies. That said, his close consideration of the circumstances pertaining to the making of the misrepresentations indicates he was concerned with the conduct which was central to the contravention of the statutory prohibition, being the conduct which violated the statutory norms.

214    Under s 271(5) the liability of a manufacturer of goods arises where the guarantee imposed by s 59 is not complied with. It might be said, however, that a necessary precondition to that is that the express guarantee had been given by the manufacturer to the consumer so as to enliven the operation of s 59. Here Mr Vautin relies upon both the giving of the guarantee in Australia and the failure to perform it here as being the relevant connections which cause s 59 to have operative effect. He submits that either of these are a sufficient nexus for the operation of the Act.

215    In relation to the “giving” of the warranty, it was uncontested that the offer of a manufacturer’s warranty was one of the selling points in respect of the vessel (ts.190.43 – 191.4) and the warranty card was provided to Mr Vautin in Australia when the vessel was delivered. Under the purchase agreement Eagle Yachts was obliged to provide the purchaser with all the details of the manufacturer’s warranties and do all things to enable the buyer to have the benefit of such warranty. The undisputed evidence is that the warranty card was given to Mr Vautin by Mr Rodgers on 4 February 2012. Mr Vautin immediately completed it and returned it to Mr Rodgers who, in turn, returned it to Bertram. By its terms the warranty was to commence from the earlier of the transfer of title to the yacht, or its delivery. In this case that was apparently 4 February 2012 although the particular date is not relevant to the outcome.

216    The manner in which the warranty was given to Mr Vautin as customer was in accordance with the terms of the dealership agreement. By cl 6.4 of that agreement Bertram agreed it would furnish, through the dealer, its written limited warranty at the time of the delivery of the vessel to the dealer. The dealer agreed to make the warranty known to the purchaser.

217    Bertram submitted that the granting of the warranty occurred in the United States because the warranty would not come into effect unless and until the warranty card, as completed by the purchaser, was returned to it at its address in the United States. It is also said that the warranty was subject to the laws of Florida with the result that it was “given” in Florida. This, so the argument goes, has the consequence that there was no conduct by Bertram in Australia to bring it within the scope of s 59 or s 271.

218    It is noted that the terms of the warranty contemplate the repairs will be carried out by the dealer who sold the vessel to the customer. Under the heading “Procedures” the following words appear in relation to the effecting of repairs, “The dealer must obtain BERTRAM’s written approval before repairing the yacht and must follow all applicable BERTRAM procedures”. That is an indication, which accords with the practice of Bertram, that pursuant to the dealership agreements, the dealers would undertake the warranty repairs at the direction of Bertram and on its behalf. It was not suggested that Bertram would only perform its warranty if the vessel was returned to Florida. Although it is not express in the warranty, it seems to be necessarily implicit that Bertram would undertake the repairs through its dealers and return the remediated vessel to the owner where the owner is located.

219    On these facts the question to be answered is whether, within the meaning of s 59, any express warranty was made or given by Bertram to Mr Vautin in Australia? In this respect Bertram submitted that the proper law of the collateral agreement pursuant to which the warranty was given, is the law of Florida. Mr Vautin did not contend otherwise. It might also be accepted, as Bertram submitted, that the agreement was made in Florida where the condition requiring the receipt of the warranty card was fulfilled. However, the matter raised by the statute is where the warranty was “made or given”. Whilst it might be said that, in the circumstances, the making of the promise occurred where the agreement was finally completed, being Florida, it does not necessarily follow that that is also where the promise was “given”.

220    Section 59 refers to the manufacturer “giving” the warranty and that connotes the bestowing of the benefit of the obligation on the purchaser. In ordinary parlance the word “give” is associated with the placing of an item or thing in the possession or in the hands of another person with the added connotation that the recipient may keep the item as their own (see Strouds Judicial Dictionary of Words and Phrases (8th ed), 2012, p 1211 and Words and Phrases Judicially Defined, Lexis Nexis, 2007, p 1035). In the context of “giving a warranty” it would appear that the undertaking of the obligation of the person giving the warranty to act in accordance with a promise to repair or keep harmless etc gives the person receiving the warranty the concomitant right to enforce that obligation. In this way, to give a warranty appears to be to create and bestow on a person a right to enforce the obligation which is the subject of the warranty.

221    It follows that, when he purchased Revive from Eagle Yachts, Mr Vautin was “given” Bertram’s warranty in that he received or obtained the enforceable right to require Bertram to repair defects in the vessel. It is not doubted that, at all relevant times, Mr Vautin was relevantly in Australia and, in particular, when he received from Bertram the enforceable right to require the repair of any defects in the vessel. That being so, it is difficult to conclude other than that the vesting in him of a right to require performance of the warranty occurred in Australia. A conclusion that Mr Vautin was “given” the warranty in the United States has the obvious difficulty that he was not, when the warranty was given, in the United States. Whilst it may be the case that the right to enforce the warranty was delayed or did not crystallise until the Warranty Card was received in Florida, once it was so received, Bertram had “given” and Mr Vautin had received an enforceable right to require Bertram undertake repairs of any defects in the vessel. The vesting of that right in Mr Vautin does not alter merely because the arrangement which gave rise to its existence materialised in the United States or that the laws of Florida control or purport to control its exercise.

222    Whilst it was obviously within the contemplation of the parties that the warranty would be performed by Bertram in Australia through Eagle Yachts, that does not make any difference as to where the warranty was “given” to Mr Vautin within the meaning of the Act. Nor is it relevant where the Warranty Card was physically handed to Mr Vautin by Eagle Yachts on behalf of Bertram. The giving of the card to Mr Vautin merely afforded him the opportunity to perfect the warranty obligations of Bertram by sending the card back to it in Florida.

223    Although the parties made very limited submissions in relation to this important issue, on the basis of the matters referred to above, the warranty was “given” by Bertram to Mr Vautin in Australia. This conduct by Bertram had the effect of attracting the operation of the ACL and, it follows, that Bertram also became liable to Mr Vautin by reason of the statutorily imposed guarantee.

224    However, the conduct which gives rise to liability under the ACL and, in particular, s 271 is not the giving of the warranty by the manufacturer. All that does is generate the additional statutory guarantee. The conduct which gives rise to liability under s 271 is the non-compliance with that statutory guarantee and, necessarily, the express warranty. The statutory norm which is sought to be remedied by an award of damages under s 271 is the omission to comply with the obligations of the warranty which were given by the manufacturer and replicated as a statutory obligation. That non-compliance accords the consumer the right to recover damages from the manufacturer in respect of defectively manufactured goods. The nature and scope of damages available are identified in s 272(1) as the reduction in the value of the goods resulting from the failure to comply with the guarantee and any loss or damage arising as a consequence of the failure to comply with the guarantee.

225    Here, the warranty (or guarantee) was not complied with in Australia. The terms of the warranty contemplated that the repairs to any vessel would be undertaken by the dealer who had sold it and on behalf of Bertram. Further, the undisputed evidence from Mr Rodgers was that, at the relevant times, warranty repairs were, in fact, undertaken in Australia by or through Eagle Yachts on behalf of Bertram. It appears that Bertram accepted the warranty was to be performed in Australia by Eagle Yachts on its behalf. It follows that the conduct which was central to the violation of the statutory norms occurred in Australia and, consistently with the approach of Edelman J in Valve Corp (No 3), that conduct is sufficient to attract the operation of the ACL. Although the failure to comply with the warranty is a more surer foundation for the attraction of liability under the ACL, it does not follow that the “giving” of the warranty by the manufacturer was not, also, conduct which attracted its operation.

226    The above conclusion as to the operation of the ACL is coherent with the consumer protection objectives and a contrary construction would be likely to render nugatory the rights of consumers to enforce, in Australia, manufacturers’ warranties which are provided as part of the rights acquired on the acquisition of goods in Australia and, no doubt, offered to induce purchasers to acquire the products. Such a construction is also consistent with the observations of Mason CJ in Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32, 44 where the Chief Justice (although referring to other sections of the TPA) identified that legislation of a remedial character should be construed so as to give the fullest relief which the fair meaning of the words used will permit and that it is reasonable to assume that the Parliament intended that protective provisions should be accorded the widest scope possible. Those comments, although in a dissenting judgment, have been referred to with approval in subsequent decisions of the High Court such as Deal v Father Pius Kodakkathanath (2016) 258 CLR 281, 295 [36].

227    With appropriate respect to the careful and thoughtful submissions of the respondents on this point, it would be an unusual operation of the ACL to conclude that a manufacturer who gives to consumers in Australia a warranty in respect of their goods which are supplied in Australia that it will remedy in Australia any defects in the product and fails to do so, falls outside of the Act’s operation. The offering of a manufacturer’s warranty is no doubt an intended inducement to potential purchasers to acquire the product in question. That is more so in respect of goods which are marketed as “high end” or quality goods which have been produced by a manufacturer who propounds its own reputation. Sections 59 and 271 facilitate the enforcement of manufacturer’s warranties where the manufacturer has failed to comply with its agreement. Where that refusal to perform the warranty obligation has occurred in Australia, it is difficult to ascertain any reason why the CCA would be construed in such a way as not to attach to such conduct. That is so regardless of the fact that the warranty may have been generated by an agreement which was formed outside of Australia, given by a company which was outside of Australia and the warranty is governed by and enforceable under a foreign law. The failure to perform in Australia the promised obligations of warranty is sufficient conduct to cause the statutory regime to apply.

228    It should be noted that the above conclusion as to the operation of the CCA (and ACL) does not create any obvious unfairness for overseas manufacturers. On the above construction they will only become liable under s 59 if they choose to give to consumers of their products, warranties in relation to the goods supplied in Australia. The overseas manufacturer is not bound to offer Australian consumers any promise to repair any defects in the products which they have produced. They are able to avoid liability potential under s 59 and s 271 by simply not offering any warranty in relation to their goods which are supplied in Australia. However, once they do so, they cannot avoid the operation of the consumer protection provisions of the ACL by making the proper law of the warranty a foreign law or making it enforceable in a foreign jurisdiction.

Liability arising under ss 95 and 271

229    It follows that ss 95 and 271 are engaged in this case because Bertram gave the warranty to Mr Vautin in Australia and, or alternatively, it failed to comply with the terms of the warranty in Australia.

Whether Bertram carried on business in Australia?

230    In the alternative to the above, the CCA and ACL apply to the warranty given by Bertram because Bertram carried on business in Australia. The above discussion concerning the operation of s 5 of the CCA regarding the extraterritorial operation of the CCA shows the Act applies to a foreign corporation carrying on business here.

231    There was much dispute about whether Bertram carried on business in Australia during the course of the openings in this matter. However, the evidence of Mr Rodgers as to the conduct of Bertram’s employees and agents in Australia in negotiating the sale of their vessels, in controlling the advertising of Bertram’s products, and in controlling the performance of its warranty obligations tended to remove most of the doubt around this issue.

232    During the respective openings the submissions concerning the issue of whether Bertram carried on business in Australia were confined to those activities which appeared to be non-contentious, being those matters arising out of Bertram’s obligations under the exclusive dealership agreement with Eagle Yachts. In support of the submission that these facts were sufficient to establish that Bertram was carrying on business in Australia, reference was made to, first, the obligation imposed by Bertram on Eagle Yachts to furnish Bertram’s limited warranty card at the time of the delivery of the product to the customer (clause 6.4); second, the obligation of Eagle Yachts to provide service facilities under Bertram’s limited warranty to any Bertram yacht owner regardless of where in the world the yacht may have been purchased (see clauses 4.2 and 4.9); and, last, Eagle Yachts’ obligation to promote Bertram’s products in accordance with Bertram’s approved materials (see clause 4.1). These topics were the subject of the decision of Rares J in Vautin v BY Winddown Inc (No 2) [2016] FCA 1235 [42] (Vautin No 2) which concerned an application by Bertram to set aside the service of these proceedings on it or for a stay of them. Based upon these matters his Honour reached the conclusion that Bertram’s acts which were designed to advance its goodwill in Australia, amounted to the carrying on of business in Australia for the purposes of s 5(1)(g) of the CCA. It should be kept in mind that in that matter his Honour was only considering whether there existed a prima facie case that Bertram was carrying on business in Australia and, necessarily, his Honour’s conclusions were based upon limited information.

233    The facts as they have emerged at trial more solidly support the conclusion that Bertram relevantly carried on business in Australia. In this respect the evidence which was given by Mr Rodgers under cross-examination was rather compelling. For an extended period of time Mr Rodgers was a director of Eagle Yachts and aware of its business dealings with Bertram during the period of the exclusive dealership agreement and its continuation after the contractual expiry date. Amongst other matters relating to the activities of Bertram in Australia, Mr Rodgers identified the following:

(a)    that Bertram approved all advertisements and publications relating to Bertram Yachts in Australia. During the period of the exclusive dealership there were many and substantial advertising campaigns;

(b)    representatives of Bertram attended in Australia regularly, being yearly, to represent Bertram at annual boat shows. There were three main boat shows in Australia and they were located at the Gold Coast, Sydney and Perth. The Bertram representatives from the United States would, during the course of these boat shows, be located on or around the Bertram vessels and would engage in conversations with prospective purchasers and advise those persons of the benefits and attributes of the vessels. In essence they would promote the sale of Bertram vessels;

(c)    at the boat shows Bertram representatives would take the lead in attempting to sell the vessels to the clients. They would explain the variety of options that were available to prospective customers;

(d)    the pattern of attendance of the Bertram personnel at the three annual boat shows continued over the eight year period of the relationship between Bertram and Eagle Yachts;

(e)    representatives of Bertram would bring to Australia marketing material for use in marketing the vessels. Such materials included glossy brochures relating to particular models. Bertram also sent such brochures from the United States to Australia for use by Eagle Yachts;

(f)    at the boat shows and generally, Eagle Yachts’ obligation in relation to selling the vessel was to promote the benefit of the manufacturer’s warranty in relation to the vessel. Under the dealership agreement its obligations to purchasers of Bertram vessels was to bring the warranty to those purchasers’ attention and to provide them with the warranty cards;

(g)    apart from attending boat shows, Bertram representatives came to Australia for other purposes, including purposes relating to the fulfilment of Bertram’s warranty obligations. Mr Rodgers referred to occasions when Bertram representatives came to Australia to inspect hulls of vessels and, in particular, the hulls of the Bertram 630 models where delamination had occurred;

(h)    that he had regular contact with Bertram in the United States in relation to marketing issues, the notification of new models of boats and in relation to warranty claims and repairs;

(i)    in relation to contact with Bertram more generally, he was aware that Eagle Yachts was not able to undertake repair work pursuant to a warranty claim unless and until it was authorised by Bertram. He identified that over time there were many warranty claims made and acknowledged that at the end of the dealership agreement there were a number of outstanding warranty jobs to be fulfilled. Mr Rodgers gave evidence to the effect that there was regular contact between Bertram and Eagle Yachts to ensure that the latter had an entitlement to undertake repairs;

(j)    for the duration of the eight year relationship, Eagle Yachts was focussed exclusively on the sale of Bertram vessels. Indeed, he acknowledged that the name of Eagle Yachts was derived from Bertram’s symbol;

(k)    the sales and service manuals provided by Bertram to Eagle Yachts, a copy of which was tendered, was reissued periodically and it contained detailed instructions from Bertram as to how the Bertram products were to be marketed;

(l)    Bertram kept a tight control on marketing and repair services. Mr Rodgers also identified that the engagement of Eagle Yachts for the purposes of servicing Bertram Yachts was to ensure the development of goodwill for Bertram in Australia. He acknowledged that it was part of Eagle Yacht’s business to build up the Bertram brand in Australia.

234    As has been discussed above, Bertram gave to the purchasers of vessels a warranty in relation to defects in the vessel. Amongst other matters, the terms of the warranty included the following:

The Limited Warranty Bertram Yachts, Inc. (“BERTRAM”) warrants, subject to the limitations below, to the first retail purchaser of this yacht (“First Owner”) provided the First Owner completes, signs and returns the BERTRAM Warranty Registration Card to BERTRAM at the address below by certified mail, return receipt requested, within ten (10) days of the First Owner’s purchase of the yacht, and any properly registered subsequent owners, that it will repair or replace defects in (a) items manufactured by BERTRAM for two (2) years, and (b) the yacht’s hull and its fiberglass structural components for five (5) years. These warranties run from the earlier of the date title is transferred, or actual delivery of the yacht, to the First Owner. Unless prohibited by applicable state law, legal claims relating to any alleged problem with this yacht will be barred unless suit is commenced within one (1) year from the date the cause of action accrues, regardless of the time remaining in the applicable warranty period.

BERTRAM’s Obligation. BERTRAM’s obligation is solely and exclusively limited to repairing or replacing, at its option, any covered items found by BERTRAM to be defective at a facility designated by BERTRAM. The foregoing is the Owner’s SOLE and EXCLUSIVE REMEDY. Repaired or replaced items shall be warranted as provided herein for the remainder of the applicable warranty period. Defective parts or components that are replaced shall thereupon become BERTRAM’s property.

The authorities concerning “carrying on a business”

235    In Valve Corp (No 3) Edelman J also considered the alternative proposition that the CCA applied because Valve Corp was “carrying on business in Australia”. There, his Honour referred to the observations in Bray where Merkel J considered that the expression in s 5(1)(g), “carrying on business”, should be broadly interpreted in the light of its purposes of consumer protection. Merkel J identified that, for the purposes of the operation of the TPA, the legislature recognised that comity required that there be a nexus with Australia in relation to any acts occurring outside of Australia which were to be brought within the scope of the Act. That was in the form of citizenship, residence by a person or a corporation, or the carrying on of business by that corporation. Thereafter, Edelman J observed (at [197]):