Federal Court of Australia

Torley v Hyundai Motor Company Australia Pty Limited [2023] FCA 591

ORDERS

THE COURT ORDERS THAT:

1.    By 13 June 2023, the parties bring in agreed draft orders giving effect to these reasons and providing for any other steps that should now be undertaken to progress the proceeding.

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

ORDERS

THE COURT ORDERS THAT:

1.    By 13 June 2023, the parties bring in agreed draft orders giving effect to these reasons and providing for any other steps that should now be undertaken to progress the proceeding.

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

REASONS FOR JUDGMENT

YATES J:

1    Proceeding NSD 131 of 2023 and proceeding NSD 132 of 2023 are being case-managed together.

2    On 23 May 2023, the respondents in each proceeding filed interlocutory applications seeking orders providing for inspection of the motor vehicles described as the “Applicant’s Vehicle” or “Applicants’ Vehicle” in paragraph 6 of the respective second amended statements of claim (the statements of claim).

3    Each interlocutory application is supported by affidavits sworn on 22 May 2023 and 30 May 2023 by Wen-Ts’ai Lim, the solicitor on the record for all the respondents.

4    Each statement of claim alleges that the vehicles the subject of that claim (referred to as “the Affected Vehicles”) were designed or manufactured with one or more defects that affect the operation of the engine’s crankshaft assembly. It is alleged that the defect(s) caused the Affected Vehicles to possess the propensity to exhibit one, some, or all the characteristics specified and described in the pleading. It is alleged that each of the applicants’ vehicles exhibited some of the specified characteristics.

5    The applicant’s vehicle in NSD 131 of 2023 (a Hyundai vehicle) is not being driven and is currently held in storage. The engine in the applicants’ vehicle in NSD 132 of 2023 (a Kia vehicle) was replaced under warranty and, having then been destroyed, is no longer available for inspection. However, it is alleged in that proceeding that the replacement engine also exhibits some of the specified characteristics.

6    The respondents accept that, due to a fault in the manufacturing process which increases the risk of defective manufacture, some, but not all, of the crankshaft assemblies in certain Hyundai and Kia motor vehicles may be defective. They say, however, that some vehicles brought into the workshop display crankshaft assembly faults from other causes, such as poor maintenance or lack of maintenance.

7    The respondents say that unless the engines in the applicants’ vehicles are inspected, the respondents cannot know whether or not the crankshaft assemblies in those vehicles are defective because of faulty manufacturing. The respondents say, further, that, unless they can inspect the crankshaft assemblies in the applicants’ vehicles, they will not be able to admit or deny many of the allegations made against them.

8    Each interlocutory application contains a schedule setting out a protocol for the inspection of the applicants’ vehicles. This protocol was prepared after consultation with Dr Robert Casey, an independent engineer retained by the respondents. There is no present challenge to Dr Casey’s expertise.

9    The evidence, based on information provided by Dr Casey, is that the proposed inspection protocol, if followed in each case, will enable Dr Casey to test whether the crankshaft in each engine contains metal debris and, if so, whether that debris has damaged the engine. In this regard, the protocol seeks to ensure that engine oil from the crankshaft assembly is not lost while the engine is being stripped down. This is because the oil may contain debris. The respondents contend that the strip down will be more efficiently performed by an experienced Hyundai or Kia technician (as the case might be) who is familiar with the engine in question, rather than by a third party who is less familiar with the engine.

10    Further, the respondents contend that the inspection protocol, if followed in each case, should allow Dr Casey to determine whether each engine is affected by a similar defect to that which is identified in the statements of claim as the “First Hyundai US Safety Recall Notice” (and other recall notices).

11    The respondents submit that the orders they seek will promote efficiency in the conduct of the proceedings, particularly in relation to the pleading of their respective defences.

12    The respondents in NSD 131 of 2023 submit that, absent inspection of the applicant’s vehicle, they will be unable to admit or deny whether the vehicle, as sold, possessed the defects that are alleged. Further, if upon inspection it be revealed that the applicant’s vehicle did not suffer from such a defect, the efficient conduct of the proceeding requires that matter to be brought to the fore sooner rather than later.

13    The respondents in NSD 132 of 2023 submit that, absent inspection of the applicants’ vehicle, they will be unable to determine whether to plead that the replacement of the engine in that vehicle cured any defect that might otherwise have affected the vehicle. This is in circumstances where the applicants plead that the alleged defect has not been remedied by those respondents in the period between 1 January 2011 and the filing of the originating application.

14    The applicants oppose the orders that are presently sought.

15    Correspondence before the Court reveals that the opposition was based originally on the following propositions:

(a)    The respondents did not inform the applicants or the Court that they required inspection of the applicants’ vehicles at the time that orders were made on 17 March 2023 requiring the respondents to file and serve their defences by 19 May 2023;

(b)    the statements of claim plead the allegations of fact regarding the applicants’ experiences (based upon what they saw and heard while driving their vehicles) and it is not necessary for the respondents to inspect the vehicles in order to plead their defences to those allegations; and

(c)    the proposed orders for inspection are premature.

16    As to the last-mentioned matter, the applicants contended that it is not possible to determine what type of inspection may be required until the respondents have filed their defences. They contended that the respondents will be further informed by the applicants’ lay evidence, which will set out in more detail what they saw and heard when they were driving their vehicles. They also contended that the respondents’ lay evidence will also inform the nature of any expert evidence that may be required, based upon the technical matters in dispute between the parties.

17    In their correspondence, the applicants’ solicitors made it clear that, after pleadings are closed and the lay evidence filed, the applicants will consider proposed orders for a protocol for inspection and testing of the applicants’ vehicles.

18    The applicants accepted that, in the meantime, it may be necessary for the respondents to plead that they “do not admit” certain allegations (namely, those in paragraphs 12, 14, 15 and 19 of the statement of claim in NSD 131 of 2023, and paragraphs 12, 16, 18, 24 and 25 of the statement of claim in proceeding NSD 132 of 2023) until inspection of the vehicles is given. The applicants’ solicitors said that the applicants would not oppose any amendments to the respondents’ proposed defences in respect of these paragraphs after inspection is given.

19    The applicants’ opposition, as advanced through their submissions, is formulated somewhat differently. They maintain the position that the inspections proposed by the respondents are premature. But, more importantly, they criticise the scope of the proposed inspections.

20    In this connection, they submit that the inspections proposed by the respondents are too narrowly focussed in that they are directed to one potential cause of engine failure when there are other potential causes for the defects that are alleged, including design defects. They submit that the inspection of the vehicles should be performed in a way that allows the proper investigation of the pleaded allegations, not just the investigation of the “potential explanation” for the alleged defects posited by the respondents. The applicants submit that it would be prudent for an agreed testing protocol to be designed to include steps that address not only the problems that the respondents have themselves identified through recall notices but “any other hypotheses that may be considered relevant by the experts”.

21    To this end, the applicants have engaged their own expert, Dr Brad Zigler. Dr Zigler has informed the applicants’ solicitors that he has a number of concerns with the protocols proposed by the respondents. These concerns are set out in an affidavit sworn by the applicants’ solicitor, Robert Guy Johnston, on 31 May 2023. One particular concern is that if the proposed protocols are implemented now, the composition of the engines, and some of their parts, may be altered in a way that would prevent a later inspection (with a broader scope) from identifying evidence of other potential failure modes.

22    Further, Dr Zigler has advised the applicants that, before any inspection takes place, he would be assisted by the opportunity to review certain categories of documents to: (a) formulate one or more causation hypotheses in relation to other failure modes; (b) design a testing and inspection protocol that tests those hypotheses; and (c) gather evidence in “a deliberative and incremental way” to support any identified hypotheses, without alteration of the engines or their parts, in a way that might foreclose further inquiry into any other potential failure modes.

23    Rule 14.01 of the Federal Court Rules 2011 (Cth) does not limit a party’s entitlement to apply for an order for inspection to a time after pleadings have closed. But, in circumstances where there does not seem to be any real dispute that the applicants’ vehicles will be inspected at some time, I see no significant advantage to be gained by the vehicles being inspected now, or any significant detriment that would be suffered if they were to be inspected after pleadings have closed.

24    In saying this, I accept that carrying out inspections now might assist the respondents to plead their defences more precisely. However, I do not consider this to be a decisive consideration, especially bearing in mind the applicants’ concession that there will be no opposition to the respondents amending their defences at a later time to plead, more specifically, to the allegations with the benefit of information gained as a result of the inspections.

25    I note that the applicants no longer advance the contention, made in their correspondence, that the inspections should await the filing of lay witness affidavits. The abandonment of that contention is sound. The case against each of the respondents is the case that is pleaded against them. That case should be fully and adequately pleaded, not left to what witnesses might say in their evidence. In this connection, I observe that there can be no doubt that each statement of claim makes clear that the Affected Vehicles suffer from one or more design or manufacturing defects that affect the operation of the vehicles’ engines’ crankshaft assemblies. At the present time, the specific cause(s) of the defects are not particularised, although the consequences of those defects are specified.

26    The contention that, at the time that orders were made on 17 March 2023 for the filing of defences, the respondents did not make clear that they wished inspection to take place before being required to plead to the allegations made, still appears to be made as a reason for not ordering inspection before the respondents have filed their defences. However, I do not think that that contention advances matters.

27    With hindsight, it may have been better had the respondents’ position in that regard been articulated at the time. I note, however, that, on 3 March 2023, the respondents in NSD 131 of 2023 first raised the prospect of inspecting the applicant’s vehicle and, on 21 March 2023, proposed that the parties approach the Court to make orders implementing a protocol for inspection. On 22 March 2023, the respondents in NSD 132 of 2023 also proposed that the parties in that proceeding make the same approach. These proposals were raised as a matter of principle well before the respondents were ordered to file their defences. Having received no response to those proposals, the solicitors for the respondents wrote again to the solicitors for the applicants on 5 April 2023, requesting a response.

28    A response by the applicants’ solicitors was only made on 14 April 2023, more than three weeks after the matter was raised by the respondents’ solicitors. Had the question of inspection raised by the respondents on 21 and 22 March 2023 been attended to in a more timely way, it is likely that the present dispute could have been raised with, and addressed by, the Court earlier than it has been. Therefore, to the extent that delay has any role to play in my determination of the applications for inspection, the applicants own delay should also be taken into account.

29    It seems to me that the critical consideration is the scope of the protocols currently proposed by the respondents. On the evidence presently before me, I accept the real possibility that, in their present form, the protocols might be inadequate and, if implemented now, may have the adverse consequences referred to in Mr Johnston’s affidavit and in the applicants’ submissions. In this connection, I am persuaded by the submission that the inspections might be a “once only opportunity” and that further thought should be given as to how the parties’ respective positions can be protected. I am not persuaded that the inspections should take place before the respondents’ defences are filed or before the pleadings are otherwise closed.

30    For these reasons, I am not prepared to accede to the respondents’ present applications insofar as they relate to orders for inspection. However, the parties should engage in constructive discussions to develop the substance of the protocols with a view to reaching an agreed position. This should also include consideration of the need for, and scope of, any discovery that will assist in formulating the protocols. I have no view as to whether early discovery, for this purpose, is necessary. Absent agreement, I would need to be persuaded of that fact.

31    These discussions should take place as soon as possible. This is not just for the efficient conduct of the proceedings. The vehicle of the applicants in NSD 132 of 2023 is currently being driven. In submissions, the respondents presented the need for an early inspection as an issue involving the preservation of evidence, warranting a degree of expedition.

32    So far as I can see, this particular point was not raised in correspondence between the parties. The vehicle, with its replacement engine, has been in operation since October 2022. There is no evidence before me as to how the continued operation of the vehicle will, or could, impede its proper inspection for the purposes of that proceeding. I would have thought that if there was a substantial risk of prejudice in that regard, then steps would have been taken well before now to preserve the evidentiary position. Be that as it may, I am of the view that the inspection of that vehicle should take place as soon as reasonably practicable. However, consistently with the view I have expressed above, that does not mean that the inspection needs to take place before the respondents’ defence is filed or pleadings are otherwise closed in that proceeding.

33    As matters have transpired, other issues have arisen which relate to the filing of the respondents’ defences. The evidence reveals that, since the middle of March 2023, the respondents have been engaged in the task of inspecting service records of vehicles presented for inspection and repair as a result of recall notices. Although somewhat meagre, the evidence is that the task of inspecting those records to determine the cause of any defect found in the crankshaft assembly of the vehicles is a time-consuming and labour-intensive one. The respondents say that this task will need to be completed to enable them to prepare their defences and that the extraction of the relevant information will take until 9 June 2023 to complete.

34    In the course of submissions, the respondents also raised a present problem concerning the provision and receipt of instructions, which Senior Counsel described as a “bottleneck”. The general nature of that problem has been explained to the Court. It is not necessary for me to say anything further about it.

35    In those circumstances, the respondents seek variations to the orders made on 17 March 2023 to enable them to file their defences by 30 June 2023 (if the Court is not persuaded that the proposed inspections should take place before defences are filed).

36    The applicants oppose the extensions that are sought on the basis that the records which the respondents wish to analyse for the purpose of preparing their defences relate only to recalled vehicles which represent, numerically, a very small subset of the Affected Vehicles covered by the two proceedings. That said, the applicants’ opposition on this basis was not advanced strongly. Further, they do not dispute that the problem referred to by Senior Counsel for the respondents concerning the provision and receipt of instructions is a circumstance to be taken into account in this regard.

37    The extensions that are sought are, in the scheme of things, relatively modest and I am persuaded that the time for filing the respondents’ defences should be extended to 30 June 2023.

38    The parties should now bring in orders giving effect to these reasons and providing for any other steps that should now be undertaken to progress the proceedings.

Associate:

Dated:    7 June 2023