Hillmarl Pty Ltd v Dovebeach Pty Ltd T/a Mandurah Combined Tyre and Battery Service

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL

LOCATION: PERTH

CITATION: HILLMARL PTY LTD -v- DOVEBEACH PTY LTD t/as MANDURAH COMBINED TYRE AND BATTERY SERVICE [2004] WADC 53

CORAM: COMMISSIONER GILES

HEARD: 21-25 OCTOBER 2002

DELIVERED : 31 MARCH 2004

FILE NO/S: CIV 780 of 1999

BETWEEN: HILLMARL PTY LTD (ACN 065 609 850)
Plaintiff
AND
DOVEBEACH PTY LTD t/as MANDURAH COMBINED TYRE AND BATTERY SERVICE
Defendant
MILLERS TYRE SERVICE (WA) PTY LTD (ACN 009 037 923)
Third Party

Catchwords:

Motor vehicle accident - Tyre blow out - Cause of accident not established - Negligence - Merchantable quality - Unfitness for purpose - Section 93(1)(b) and s 160(2a) Workers' Compensation and Rehabilitation Act 1981

Legislation:

Fair Trading Act 1987

Law Reform (Contributory Negligence and Tortsfeasors Contribution) Act 1947
Trade Practices Act 1974 (Clth)

Workers' Compensation and Rehabilitation Act 1981

Result:

Claim dismissed

Representation:

Counsel:

Plaintiff:     Mr M R Herron
Defendant:     Mr A S Stavrianou
Third Party                   :     Mr R J L McCormack

Solicitors:

Plaintiff:     McAuliffe Williams & Partners
Defendant:     Pynt & Partners
Third Party                   :     Srdarov Richards Burton

Case(s) referred to in judgment(s):

Cheong by her tutor The Protective Commissioner New South Wales v Wong [2001] NSWSC 881.
Hillmarl Pty Ltd v Dovebeach Pty Ltd & Anor (2002) 29 SR (WA) 244.
State Government Insurance Commission v Sinfein Pty Ltd (1996) 15 WAR 434.

Case(s) also cited:

Andrews v Nominal Defendant (1963) NSWR 359
Ashington Piggeries Ltd v Christopher Hill Ltd [1972] AC 441
Atkinson v Hastings Deering (Qld) (1985) 8 FLR 481
Bartlett v Sidney Marcus Ltd [1965] 1 WLR 1013
Business Application Specialists Ltd v Nationwide Credit Corporation Ltd [1988] RTR 332
Chapman v Hearse (1961) 106 CLR 112
Four Square Stores (Qld) Ltd v ABE Copiers Pty Ltd (1981) ATPR 40-232
George Wills & Co Ltd v Davids Pty Ltd (1957) 98 CLR 77
Grant v Australian Knitting Mills Ltd (1935) 54 CLR 49
Hadley v Baxendale 156 ER 145
Hardwick Game Farm v Suffolk Agricultural Poultry Producers Association [1969] 2 AC 31
Henry Kendall & Sons v William Lilico & Sons Ltd & Anor (1969) 2 AC 31
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
Jillawarra Grazing Co v John Shearer Ltd (1984) ATPR 40-441
Lambert v Lewis [1982] AC 225
Lexmeade (Basingstoke) Ltd v Lewis & Anor (1982) AC 225
Manners v Transfield Pty Ltd (1992) 8 WAR 111
March v E & MH Stramare Pty Ltd (1991) 171 CLR 506
Minchillo v Ford Motor Company of Australia (1952) 2 VR 594
Minnesota Mining & Manufacturing Company v Tyco Electronics Pty Ltd [2002] FCAFC 315
Moltoni Corporation Pty Ltd v QBE Insurance Ltd (2001) 205 CLR 149
Pollock v Wellington (1996) 15 WAR 1
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
Prast v Town of Cottesloe (2000) WASCA 274
Purkess v Crittenden (1965) 114 CLR 164
Ramsay v Watson (1961) 108 CLR 642
Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431
Steffen v Ruban (1966) 84 WN (pt 1) (NSW) 264
Tubemakers of Australia Pty Ltd v Fernandez (1976) 50 ALJR 720
Victorian Workcover Authority v ESSO Australia Ltd (2001) 207 CLR 520
Westralian Caterers Pty Ltd v Eastment Limited (1992) 8 WAR 139
Woods v Multi-Sport Holdings Pty Ltd (2000) WASCA 45
Woods v Multi-Sport Holdings Pty Ltd [2002] HCA 9
Wyong Shire Council v Shirt (1980) 146 CLR 40

COMMISSIONER GILES: These proceedings relate to the cause or causes of an accident on 1 March 1998 in which a prime mover vehicle veered off a road north of Geraldton and crashed, killing the driver, Roy William Chester. Mr Chester, together with his wife Yvonne, were directors of the plaintiff company, Hillmarl Pty Ltd.
Following the accident the plaintiff's insurer made payments to Yvonne Chester and their three children pursuant to the Workers' Compensation and Rehabilitation Act, 1981. The plaintiff company now seeks to recover those payments from the defendant, pursuant to s 93 of that Act.
On 20 December 1997, the defendant, Mandurah Combined Tyre and Battery Service supplied the plaintiff with a second‑hand tyre for use as a steerer (ie front) tyre on Mr Chester's prime mover Volvo truck. The plaintiff alleges that the tyre was not suitable for use as a steerer tyre because of its condition. The plaintiff contends that the tyre blew out while on the truck, during a journey to the north-west, on 1 March 1998 causing the truck to veer off the road, and resulting in Mr Chester's death. These events are alleged to constitute negligence, breaches of the Trade Practices Act 1975 (Clth) and the Fair Trading Act 1987.
The defendant is a franchise tyre retailer operating in Mandurah. It sold truck tyres to Mr Chester. The defendant admits that on 20 December 1997 it sold a tyre to the plaintiff, knowing that it was to be used as a front steerer tyre on a prime mover.
The defendant denies that the tyre was unfit for its purpose, or was not of merchantable quality. It contends that Mr Chester did not rely, nor was it reasonable for him to rely on the judgment of the defendant concerning the suitability of the tyre, given that Mr Chester examined the tyre and found it satisfied his requirements. It does not admit that the tyre blew out, or that this was the cause of the accident. It denies any negligence, and denies that there were terms implied into the contract of fitness for purpose or merchantable quality. It also contends that if the tyre was not of merchantable quality or fit for its purpose, it had fallen into that state after the tyre was sold to Mr Chester, and became unserviceable because of mechanical defects in his truck, or undue stress, or operation of the tyre in an under-inflated state.
The defendant joined Millers Tyre Service (WA) Pty Ltd as a third party. On 20 December 1997, this company sold a tyre to the defendant, which the defendant then sold to the plaintiff. The defendant claimed that if the tyre was found to have been unsuitable for its purpose, then the third party would be liable to the defendant for damages for breach of contract or a contribution pursuant to the Law Reform (Contributory Negligence and Tortfeasors Contribution) Act 1947 and costs.
The third party is principally engaged in re‑treading second‑hand tyres, but also occasionally sells second‑hand tyres. It admits that when it sold a tyre to the defendant on 20 December 1997, it knew that it would be immediately sold to the plaintiff for use on Mr Chester's prime mover as a steerer tyre. It does not admit that a failure by the tyre caused the accident. It does not admit that the tyre alleged to have blown out was the tyre it sold to the defendant. It says that if the tyre it sold is the one which is alleged to have blown out, that it did not in fact blow out. Further, or in the alternative, the third party says that if the tyre it sold, caused the accident, the tyre had been damaged since the third party sold the tyre, or it had became worn after it was sold, or had been subject to undue stress as a result of steering defects on the truck.

The plaintiff company and the Chester family

At the date of the accident Mr Chester was 32 years old. He and his wife Yvonne had three children aged 10, 12 and 13. The two older children were children from a previous relationship of Mrs Chester. They had adopted Mr Chester's name, and were his dependants at the date of the accident.
Prior to purchasing the prime mover, Mr Chester operated a business installing roller doors. For that purpose he had established the plaintiff company. When he decided to move into truck driving, he continued to use that company structure. The plaintiff is a company operating as a family trust. Mr and Mrs Chester were directors of the plaintiff.
Mr Chester purchased a Volvo prime mover in 1995. He purchased it from another truck driver who had worked exclusively for Grace Removals. The truck bore Grace Removals' insignia. Mr Chester entered into a contract with Grace Removals to transport furniture and other goods from Perth, usually on a northwest run, from Perth to Karratha, to Port Hedland, and sometimes to Darwin.
At the conclusion of each trip, the plaintiff sent an invoice to Grace Removals and the resulting payment was paid into the plaintiff's bank account. Mr and Mrs Chester withdrew money as required for their living expenses.
Mrs Chester, in her capacity as book keeper for the company, made the insurance arrangements for the company.

The accident

On 1 March 1998, Mr Chester left for his usual run to Karratha with a load of furniture. He travelled through Geraldton. At about 155 kilometres north of Geraldton something happened which caused the prime mover to veer to the right‑hand side of the road and then off the road into the bush where it crashed. Tragically, Mr Chester died in this accident.
There was a badly damaged super single tyre in court for most of the proceedings, upon which many witnesses were asked to comment. It was marked as an exhibit. The plaintiff alleged that this was the tyre that was on Mr Chester's vehicle, which blew out and caused the accident. This was vigorously disputed by the defendant and the third party. As will become clear later in these reasons, I am satisfied that the tyre in court was the tyre which failed on Mr Chester's vehicle on 1 March 1998.

The evidence

Mr West – Truck Driver

Mr West was a truck driver of 23 years' experience. He made weekly north‑west trips on the same route as Mr Chester. On 1 March 1998, at about 8.00 pm, he was on this route north of Geraldton when he stopped for what he described as "a pretty bad accident". He had heard over his radio other drivers ahead of him on the road talking about skid marks on the road. He pulled up his truck.
He also saw skid marks on the road and went to investigate. He found Mr Chester's trailer on its side with the cab upside down. He could not get to the driver who at the time was still conscious. He described the cab as "very squashed". Assistance from the police, ambulance, the SES, a crane driver and a doctor eventually arrived. He and another driver who also stopped disconnected the battery in Mr Chester's truck because Mr Chester complained that he was getting shocks through his back. Mr West said that a front steerer tyre on Mr Chester's prime mover had definitely blown. It had been a hot day and even at that time the temperature was still "warmish". He thought the truck had been in the bush for more than two minutes and possibly up to half an hour. He said this because the engine was not hissing.
Mr West did not recognise the tyre in court as being the tyre on Mr Chester's truck which had blown "but certainly that's the type of tyre that was on his truck".
Mr West tried to assist Mr Chester as much as possible but Mr Chester remained trapped in the upside down cab for a lengthy period of time. The cab was so damaged that it was necessary to dig a hole under the cab to get a hand up to the driver.
Mr West says that during his 23 year career as a truck driver he checked tyres on his own truck for inflation and tread wear every second truck bay he stopped at on a trip. He obtained up to 100,000 kilometres out of a steerer tyre, and travelled between 200,000 and 250,000 kilometres a year.
He agreed that the front tyres (that is, the steerer tyres) on a prime mover were the most important tyres in terms of safety. He never bought second-hand tyres. Once a steerer tyre had fulfilled its use and become worn, it could be recapped and rotated around on the trailer tyres which were not as important.
He admitted that on occasions he ran bald tyres on trailers, but not in the steerer position. He agreed that steerer tyres wear in an uneven fashion or "wear funny" if they are under‑inflated.
While Mr West did not use super single tyres as his steerer tyres he recognised this as being a common use. These are wider than normal tyres. The tyre in court was a super single tyre.
Mr West examined the tyre that was in court and agreed that at some places on the tyre there was no tread depth left. He said that he would not have let his steerer tyres get into that condition and would have taken it off a couple of trips before, that is up to 10,000 kilometres before the accident.
He agreed that the north‑west roads were in some cases rough, particularly the dirt roads.
Mr West agreed the king pins must be in good condition with no excessive wear or play. He always looked after his own king pins by regularly greasing them. This was because they were expensive to replace.
He agreed that the steering linkage was important to safety and that he would not drive with excessive wear in the king pins or steering linkage.

Mr Ireland – Truck Driver

Mr Ireland had been a truck driver for 18 years, including transporting dangerous and heavy goods. In March 1998 he was employed by Marsue Transport driving a Kenworth prime mover on a weekly run to Karratha and Port Hedland from Perth, carting gas cylinders.
He was on his normal route on 1 March 1998 travelling at the speed limit of 100 kilometres per hour. He travelled through Geraldton between 4.30 and 5.30 pm.
North of Geraldton between 7.00 and 7.30 pm, he found fresh skid marks on the road heading north and veering to the right‑hand side of the road. He also saw gravel on the road and caught a reflector out of the corner of his eye coming from the bush. He realised there was a vehicle in the bush. He was travelling approximately 90 kilometres per hour at the time.
Because of the size of his vehicle he could not pull up immediately but started pulling up and calling trucks behind him on his radio. He parked and caught a lift with a south bound prime mover back to the scene.
Mr Ireland had been following Mr Chester's truck all day. They had both left Perth around about the same time. He realised that the truck he had seen on the road during the trip was the one at the accident site. Like Mr West he described the prime mover cab as being upside down and the trailer on its side. He could hear the driver from the road. Other people also arrived including the police, ambulance and local station owners. Mr Ireland stayed until Mr Chester died later that night just before he was removed from the cab. During that time he heard Mr Chester complain of a buzzing feeling and assisted Mr West in disconnecting the battery of the truck.
It had been extremely hot that day. He had seen Mr Chester's truck on and off most of the day and he had been travelling between 80 and 85 kilometres per hour. On the day of the accident but prior to it, he saw the deceased's truck at Gingin and Dongara. He said that he always travelled slower in the heat because of the stress on the vehicle and on the tyres, from the heat.
He had seen the deceased's truck on many other occasions on the road and noted it had always been very cleanly presented.
He had experienced two blowouts of tyres as a truck driver. On one occasion he had been travelling at about 100 kilometres an hour when a left hand steerer tyre blew. He had managed to pull the truck up without veering off the road.
On another occasion a right hand steerer tyre had blown. He had been travelling at 60 kilometres an hour and had to fight to hold the truck on to his side of the road. The truck had pulled very hard to the right.
He was asked about the mileage one could expect from of a super single tyre. He said that this would vary and would depend on the truck. He had had 180,000 kilometres out of one but said that every truck is different.
Mr Ireland saw it as his responsibility as the driver to check the tyres – "a good driver will". He checked his tyres at every stop.
Mr Ireland confirmed that that tyre which was in court during the proceedings was similar to the tyre he had seen on Mr Chester's prime mover at the time of the accident.
He observed that there was no tread on some parts of the tyre that was in court and said that if it was on his truck he would change a tyre with such tread immediately.
He always used new tyres in the steerer position. This was because the steerer tyre is the most important tyre on a truck. His practice was that once it was worn down to 50 per cent of permissible tread it was then placed on the trailer. This was a safer position because trailer tyres are double tyres and if one of the double blows the other is likely to continue operating.
His view was that every tyre wears differently. He is happy with getting 130,000‑160,000 kilometres out of a tyre but could "destroy" a tyre in 50,000 kilometres on dirt roads.
Mr Ireland was asked what he would do in the event that he had two front steerers, one of which was damaged. He said he would buy two new steerer tyres and wear them together. He would not run tyres together of different tread depth, saying "a good operator won't do that". The tyres will not wear evenly and it would be a waste of money.
He routinely adjusts the air pressure on tyres to take account of the condition of the road. In particular he reduces the air pressure on dirt roads. He also slowed down to about 80 kilometres per hour from 100 kilometres per hour if the temperature was more than 35 degrees.
If he saw scalloping (a type of tread wear explained later in these reasons) he would have the tyre fixed immediately. If he thought that there was excessive play in the king pins he would have them fixed immediately because "it wears tyres funny". If he detected excessive play in the steering linkage he says he would get it fixed immediately although he had not experienced tread wear from this particular defect.
In his view the tyre in court was not in good condition. He said that "it wouldn't be on his truck, and that it was really badly worn".

Dr Adamson – Medical Practitioner

In March 1998 Dr Adamson was a medical practitioner working in Geraldton.
He arrived at the scene of the accident on 1 March 1998 at about midnight. Police officers, ambulance officers and the volunteer fire brigade were in attendance. He could not see the driver who was trapped deep inside the wrecked cab.
Dr Adamson described the efforts to release the driver. These efforts were complicated by the position of the driver in the (upside down) cab with the motor pressing down on him. Dr Adamson and others applied a tourniquet to both Mr Chester's legs fearing the onset of crush syndrome which could be fatal once he was eventually released from the wreckage. After some time Mr Chester's legs were extricated from the wreckage but one of his arms was still caught deep in the wreckage. During this time, but before his arm could be released, Mr Chester went into shock and died.
Dr Adamson declared that Mr Chester was dead at about 2.12 am on 2 March 1998.

Senior Constable Burrows

At the time of the accident, Senior Constable Burrows was stationed at Geraldton at the Traffic Operations Group. He arrived at the scene of the accident about 9.30 pm with another police officer.
Senior Constable Burrows noted that the front left‑hand steerer tyre of Mr Chester's truck was inflated and in good condition, but that the front right steerer had exploded. The drive tyres were in good condition.
Senior Constable Burrows arranged for the police to attend the scene and secure the property. Grace Removals removed the furniture and Mr Blakeney removed the truck and trailer as mentioned below.
Senior Constable Burrows remembered that the day of 1 March 1998 had been "excessively hot". He had been fishing that day and the temperature was 37 degrees on the water. It was hotter on shore. When he arrived at the scene of the accident at 9.30 pm he lifted the bonnet of his car to cool the engine and noted that an ambulance which was in attendance had a similar problem. There was no wind at all.
Senior Constable Burrows attended the scene again the following day and took photographs including photographs of the skid marks and the position of the wreck. He drew a plan of the accident site a few days after that. Senior Constable Burrows also took many photographs of the wreck at the yard where it was subsequently stored.

At the time of the accident, Senior Constable Burrows had served for 10 years in the police force. His job was to gather evidence for traffic matters and for the Coroner.
In his inspection of the actual crash site he marked the course of the vehicle across the road and into the bush based on the skid marks and the resting place of the vehicle.

Mr Blakeney – Haulage Contractor

Mr Blakeney, the owner of Geraldton Cranes and Haulage, is engaged in the business of hiring out cranes and general haulage. He was called by the police on the night of 1 March 1998 to the scene of the accident. Mr Blakeney stayed while attempts were made to remove the driver from the cab. After the driver died it was decided to wait until the light before attempting to move any part of the prime mover.
He assisted in lifting the prime mover onto a trailer with a crane and transporting it to Geraldton to his yard. He then returned to the scene of the accident and removed the trailer also taking it to his yard.
He observed that the right‑hand front steerer tyre of the prime mover at the scene of the accident had blown out. He gave evidence that tyre on the truck had been very similar to the tyre that was in court.
Mr Blakeney told the Court that the prime mover stayed in his yard until the police arrived to inspect it on 8 March 1998. Because it was raining, and to provide the police with some comfort during their inspection, the prime mover was moved inside the shed. He also assisted the police to remove the right front steerer tyre from the hub and from the rim.
At the time of the police examination Mr Bob Luck, insurance investigator, asked him to keep the tyre safely. As a consequence Mr Blakeney put a chain through the tyre and rim and locked both items in a padlocked room at his yard.
About a month after the police inspection Mr Luck arranged to have the rim and tyre collected from Mr Blakeney by a courier.
Mr Blakeney has been working in the transport industry since 1979, driving and operating road trains and cranes since 1989. He runs his own prime mover with three trailers, each of them with 76 tyres. He is accustomed to examining and using tyres.
He told the Court that a truck driver's three biggest expenses were wages, fuel and tyres. He examined the tyre in court observing that it was "not a legal tyre" when referring to the tread depth. His view was that it was more than ready for recapping but that he would put it on a trailer and try to flatten it off before recapping.
He wouldn't say that the tyre was dangerous as a steerer but he would certainly remove it from that position and put it on a trailer.
Mr Blakeney did not recall seeing a separate piece of the tyre which had torn from the tyre and was completely separate to it during his time at the accident site and afterwards while assisting the police with their inspection.
He said that a new super single tyre of the brand that was in Court would cost in the vicinity of $800, while the alternative steerer tyres that are available cost between $450 and $600.

Constable Fox – Vehicle Examiner

Constable Christopher James Fox was working as a vehicle examiner in the Western Australian Police Force at the time of the accident. He is a qualified mechanical fitter having completed an apprenticeship with Westrail. He joined the Police Force in 1995 and went straight into the vehicle examination section. During his four years in that section he became one of the most senior vehicle examiners. He estimated that in that time he conducted 800 vehicle examinations.
Constable Fox's duties at the time included examining tyres. He had completed a two day course in tyre inspection with Dunlop Tyres. Apart from that his knowledge of tyres came from his general experience as a vehicle examiner.
On 9 and 10 March 1998 Constable Fox examined Mr Chester's truck and trailer in the yard of Geraldton Crane and Haulage.
Constable Fox's qualifications as a mechanical fitter required an understanding of how bushes and pins worked, and linkages, springs, motor vehicle components and industrial components. It also required the study of manufacturer's tolerances and specifications.
Constable Fox described the king pin as a component that holds the wheel and the steering component onto the truck and allows the tyre to pivot on the pin. It provides a fulcrum for the turning of the wheel. It also allows the wheel to turn left and right.
The king pin is a large metal pin with a diameter of about one inch. The king pin sits inside a bush which allows the pin to turn sideways left and right.
The drag link transfers the turning motion of the steering wheel to moving the steerer wheel left and right. It acts as a fulcrum for the assembly to turn left and right.
He also described the tyre rod which is attached to the steering wheel and connects the wheel to the steering.
Constable Fox found that the rear drag link ball joint of Mr Chester's truck had excessive play and that the left and right front king pins were unserviceable.
He detected three to four millimetres play in the lower king pin bushes which was excessive compared to the manufacturer's tolerance of half a millimetre.
Constable Fox said that the rear drag link ball joint showed that play was evident when the steering column was operated.
Constable Fox said that excessive play on the rear drag link ball joint in a Volvo truck would have been evident to the driver because the truck would "wander" while being driven. The extent of the wear in this case was not to the point that the driver would have been fighting to keep the truck on the road.
He also said that the defect would have the effect that the tyre was not tracking on its true course and it would vibrate or "shimmy" from side to side.
Constable Fox examined the front steerer tyre which was on the Volvo at the Geraldton Cranes and Haulage yard. He found the tyre to be unserviceable because on the inner shoulder, 75 millimetres of the tread depth was worn to less than 1.5 millimetres. He also found the tread to be scalloped. In his opinion, this was caused by the tyre moving from left to right while being driven.
His view was that the wear in the bushes and drag link component were not so extreme as to effect the normal operation of the truck. However it would have had the effect that the steering was not as precise as it should be. His view was that that excessive play in the king pins would have some effect on tyre wear pattern. He found this to be evident on a tyre he examined.
In his opinion the wear pattern was due to the unserviceability of the king pin bushes.
Constable Fox gave his evidence by video. He described in detail the tyre that he examined in Geraldton in March 1998. Various features of the tyre which was present in Court were put to him, including a description of particular sites of damage on the tyre and the nature of the damage. Constable Fox said that the tyre he had examined, which at that time was in situ as the front steerer tyre of Mr Chester's Volvo, and was then removed by him for further examination, bore the same features as the tyre in court as described to him by counsel, including the particular features of damage and the sites of that damage.
Constable Fox said that the left front steerer tyre on the prime mover was still inflated when he examined it but was unserviceable due to inner and outer shoulder wear to a depth of less than 1.5 millimetres.

Mrs Yvonne Chester – Wife of Roy Chester, deceased truck driver

At the time of the trial Mrs Chester was 32 years of age. She married Roy Chester in March 1993 having lived with him for two years prior to that. Mrs Chester had two children from a previous marriage, Kane born on 11 January 1989 and Charmaine born on 13 April 1990. She and Roy Chester then had Michael, who was born on 4 December 1991.
When they first met, Mr Chester was working as a subcontractor installing garage doors for B & D Roller Doors. She and Mr Chester were partners in that business. At some point B & D Roller Doors required its subcontractors to incorporate. As a consequence Roy and Yvonne Chester purchased Hillmarl Pty Ltd and set it up as a trustee for the Chester Family Trust. Roy and Yvonne Chester were both directors and shareholders.
Mr Chester's business with B & D Roller Doors continued for about 12 to 18 months after the establishment of Hillmarl.
Mrs Chester said her husband then wanted a change in career. He purchased a truck from an owner driver with Grace Removals. Mr Chester spent some time working with this driver to learn the job. Grace Removals then took Mr Chester on as an owner driver. Grace Removals provided Mr Chester with a list of insurances that were required, including workers' compensation insurance. Mr Chester also completed a short course in furniture removal.
Mr Chester commenced with Grace Removals in late 1995. He wore a Grace Removals uniform and his vehicle had the Grace Removals' insignia on it.
Hillmarl rendered regular invoices to Grace Removals on the conclusion of a trip and a cheque was paid to Hillmarl by Grace Removals.
A hire purchase agreement was executed with Esanda Finance to allow Mr Chester to purchase the truck.
Mrs Chester accompanied her husband together with their three children on some trips. She said that on every occasion when they stopped either for refuelling or meals he always checked the tyres. She said that he treated his truck with great respect as it was their livelihood, and that maintenance was always attended to.
She recalled that the steering had been fixed about 12 months prior to the date of accident.
Mrs Chester's role in the company was to reconcile the bank statements, visit the accountant and provide him with documents, get quotes and generally manage the books.
She and her husband used the Hillmarl bank account for everything relating to both the business and personal affairs. At the end of the financial year the accountant and Mrs Chester determined which of those expenses were personal, and which were business related.
The Chester's used the services of insurance broker, GS Knight and Associates, and dealt with a Mr Warren Bisset of that firm. Mrs Chester followed Mr Bissett's advice regarding insurance.
The arrangements made by the plaintiff company in respect of workers' compensation insurance were the subject of considerable evidence by Mrs Chester. Mrs Chester's evidence was sometimes difficult to follow. She conceded that at the time she had little understanding of the "legalities" of documents she was signing, and relied very heavily on the family accountant and Mr Bissett for advice. However, it does appear from the documents and from Mrs Chester's evidence, that in the first year of Mr Chester taking on furniture delivery for Grace Removals, the plaintiff company took out workers' compensation insurance, insuring Mr Chester as a working director on the basis that he earned $30,000 per annum from the plaintiff company.
It then appears that Mrs Chester was advised that because of the existence of the family trust, that it was possible to substantially reduce the plaintiff's workers' compensation insurance premium by declaring that no wages had been earned by her and her husband from the company.
She thought this was correct because no wages, as she understood the term, were paid by the plaintiff either to her or her husband. They both simply drew on the company bank account as required for their living expenses. Mrs Chester then cancelled the plaintiff's workers' compensation insurance and reinsured the company for a considerably cheaper premium.
For subsequent years, including the year during which the accident occurred, wages declarations completed either by Mrs Chester or her accountant, recorded that no wages had been paid by the plaintiff company to either Mrs Chester or her husband.
Mrs Chester recalled purchasing two front steerer tyres in mid-1997 from the defendant. Normally she arranged such purchases by telephone. At that time she had been dealing with the defendant's tyre retail operation for between eight and nine months.
Later that year the prime mover was in the backyard of their home. It ran over a brick and split the left front steerer tyre. Her husband requested her to organise another tyre to replace the damaged one. She rang the defendant's office. She asked for a second‑hand tyre with three quarter's tread so that it would wear evenly with the undamaged tyre. All this was on the request of her husband. Someone from the defendant came the following day and fitted the tyre. At another time she also organised four back tyres for the prime mover.
Mrs Chester denied that the decision to purchase a second‑hand tyre, and the efforts made to reduce the workers' compensation premiums, were due to financial pressures. She agreed that the plaintiff company had been operating beyond its overdraft, and that on some occasions cheques had been dishonoured by the bank. However, she said that in early 1998, while the company was operating beyond its overdraft, the situation was improving.
Even at the time of the trial Mrs Chester was not aware that the front steerer tyre had shown significant signs of wear. She thought all the tyres were "legal". She was adamant that her husband always maintained the truck – "it was the priority". She had no recollection of her husband discussing with her any matters to do with wheel alignment or the steering linkage.
Mrs Chester was re-called to give evidence concerning some documents which were discovered during the course of the trial. During the course of this evidence she agreed that things were financially tough in the early part of 1998, and they needed to "watch their pennies".
She also said that prior to taking his last trip, Mr Chester had told her that the front tyres of the prime mover needed to be replaced. He told her that the tyres would be all right for that particular trip. This was significant evidence which is referred to later in these reasons.

Mr Luck – Insurance Investigator

At the time of the trial Mr Luck was a Trust Manager for the Public Trust Office. In March 1998, he was an investigator/assessor employed by Australia Wide Investigations.
He was instructed by the plaintiff's solicitors to conduct an investigation of the accident.
On 27 March 1998 he attended the yard of Geraldton Cranes and Haulage and spoke with Mr Blakeney. On 28 March 1998 he attended the scene of the accident, took photos and measurements and collected tyre debris from both sides of the road.
He had spoken to Mr Blakeney prior to going to Geraldton and Mr Blakeney had secured the tyre and rim. On 27 March 1998, he asked Mr Blakeney to remove the tyre and rim from storage. He went with Mr Blakeney to retrieve the tyre and rim from the locked room. They moved it with a trolley to the outside where Mr Luck took photographs.
Mr Luck assessed the tread depth to be between four to six millimetres.
Mr Luck then made arrangements with Mr Blakeney for the tyre and rim to be couriered to Perth, where to the best of his knowledge, it was stored for a period at an establishment called R & R Smash which was either in Perth or Midland. At some time R & R Smash changed hands. Mr Luck spoke with the new owner who agreed to secure the tyre and rim.
Mr Luck had no involvement with the storage of the tyre and rim after that time.
Mr Luck agreed that the tyre debris that he had collected from both sides of the road was not identifiable as having come from Mr Chester's truck. He simply collected everything that was there.
Mr Luck also interviewed Mr Anthony Sherry, Manager of the defendant. He took a statement which was sought to be tendered by the plaintiff. There was considerable argument about the admissibility of the statement and it was ruled admissible. Later in the proceedings Mr Sherry gave evidence and also commented on the written statement he had given.

Mr Hunter – Grace Removals

Mr Hunter is the International Manager of Grace Worldwide trading as Grace Removals. He has worked for 26 years with Grace Bros. In March 1998, he was the Operations Manager.
Mr Hunter said that Grace Removals had both sub‑contractor and employee truck drivers. In March 1998, it had between 12 and 15 sub-contractors and about 80 employees.
He said that Grace Removals distinguishes very carefully between employees and sub-contractors. Both employees and sub‑contractors are provided with uniforms. However, the method of payment is different. Sub‑contractors are paid a unit rate for loading and unloading and a flat rate for kilometres travelled. They provide their own vehicles, which they are responsible to maintain. On the other hand employees are paid according to an award, including overtime payments.
Mr Hunter recalled Mr Chester approaching him looking for work. He initially thought that Mr Chester was unsuitable and unqualified. He told Mr Chester that he needed accreditation from the Australian Furniture Removals Association. He was surprised by Mr Chester's tenacity. He recalled Mr Chester came back having paid for his own accreditation course and having taken out relevant insurances.
On 4 October 1995, Mr Hunter on behalf of Grace Removals, wrote to Mr Chester confirming Grace Removals' intention to engage his services as a sub‑contractor, subject to several conditions being met. The letter stated that Grace Removals was drafting sub‑contractors' agreements "which will be completed in the not too distant future". These documents were never prepared.
Mr Hunter received four certificates of currency of insurance provided by GS Knight & Associates, Insurance Brokers from Mr Chester. The first of these is of particular interest. It is set out in full below:
"CERTIFICATE OF CURRENCY
This is to confirm that the Insurance cover detailed as follows is current subject to the terms and conditions of the policy issued –
INSURED:  Hillmarl Pty Ltd
CLASS OF INSURANCE:     Workers Compensation
DUE DATE:  30 September 1996
SITUATION:  Anywhere in WA as per Act
INTEREST:Legal liability to all employees under the Workers Compensation and Assistance Act 1981 and amendments 1985
SUM INSURED:                   As per Act
INSURER:Mercantile Mutual Insurance Limited
POLICY NO:  To be advised
We trust that this letter is sufficient evidence that your interest is protected, however should you need further details would you please contact this office.
Yours faithfully"
This document was signed by Warren Bissett.
Mr Hunter said in cross‑examination by Mr McCormack for the third party, that he was not as prudent as he should have been in ensuring that Mr Chester kept his insurances up to date. There was no further information on his file concerning Hillmarl's insurance except for the four certificates of currency initially submitted to Grace Removals in October 1995, one of which is quoted in full above.
He would have been extremely concerned had he known that the workers' compensation insurance had been cancelled. It would have been sufficient to terminate the contract with the plaintiff.
While sub‑contractors were responsible for maintaining their own trucks, he would also have been very concerned to know that a sub‑contractor's truck had mechanical defects such as a loose king pin, problems with its steering linkage or worn tyres.
Between three to five per cent of the rate per kilometre paid by Grace Removals to sub‑contracting drivers was notionally allocated to replacement of tyres.
Grace Removals always fitted new tyres on its own vehicles particularly in the steerer position.
He would also expect sub‑contractors to only fit new tyres in the steerer position.
He wasn't sure that he would have stopped Mr Chester's contract had he known that Mr Chester was using second‑hand steerer tyres, but he would certainly have been concerned about it.
Mr Hunter described the inspection routine for the tyres on Grace Removals own vehicles. This involved an inspection by someone from Bridgestone Tyres at a minimum of one trip per week.

Warren Bissett – Insurance Broker

Mr Warren Bissett has worked in insurance since 1986 and has been an insurance broker since 1989. He has been employed by GS Knight & Associates, Insurance Brokers since December 1994.
On 27 September 1995, someone in Mr Bissett's office received a telephone call from Mr Chester asking for insurance cover for a sub‑contract arrangement with Grace Removals.
The inquiry was referred to Mr Bissett, who prepared a quotation which he relayed to Yvonne Chester by telephone on 27 September 1995. A quote had been requested for insurance cover for a 1985 Volvo prime mover valued at $40,000, public liability insurance, marine transit insurance and workers' compensation insurance for a proprietary limited company.
A request was made for cover for a working director of the proprietary limited company. He described this as being compulsory under s 160 of the Workers' Compensation and Rehabilitation Act 1981.
Mr Bissett was asked for a quote for an estimated $30,000 per annum wage roll for a working director of the proprietary limited company in the area of road freight transport.
On the basis of an estimated wage roll of $30,000 per annum, Mr Bissett calculated a premium, including stamp duty, of $1,674.78.
On 3 October 1995, Mr Chester rang Mr Bissett and accepted the quote for all four insurance policies mentioned above.
On 3 October 1995 a facsimile was sent from GS Knight & Co to Mercantile Mutual requesting a cover note for Hillmarl Pty Ltd for workers' compensation for one working director.
A number of documents were tendered relating to the first year of insurance for the plaintiff's contract with Grace Removals, that is October 1995 to October 1996. It appears that the Chesters were having difficulty in paying the premium. Insurance was finally issued on 2 April 1996.
At some point in 1996, Mrs Chester made an oral request to GS Knight & Co requesting the cancellation of the plaintiff's workers' compensation insurance. Mr Bissett had no recollection of personally taking this call but believed it was received by someone working under his supervision.
On 22 August 1996 Mr Bissett wrote to "The Manager, Hillmarl Pty Ltd" regarding "request to cancel Workers Compensation and Marine Transit policies". The letter acknowledged Mrs Chester's request for the cancellation of the policy. It advised as follows:
"In order to cancel the policies we require completion of the attached declaration together with a written request stating the reason you wish to cancel the Workers Compensation Policy.
The Workers Compensation Board then needs to confirm to the underwriters that it is in order to cancel the policy.
If any drawings or substitution for wages are received then the policy must remain in force."
On 18 September 1986 Mr Bissett met with the Chesters at their home. He took a note of this meeting. It stated in part:
"Has been advised that because of existence of family trust ‑ not required to insure its directors? Confirmed with Roy that prime contractor Grace Removals pay Hillmarl Pty Ltd not family trust. There are four beneficiaries of the family trust, Roy plus Yvonne plus children. Spoke with Alf accountant Alan Dwyer. He agreed Roy and Yvonne are working directors however, do not draw a wage as defined by the Act. Agreed to declare as working directors nil wages and charge for medical expenses only."
It appears that from this time on Roy and Yvonne Chester then completed, or had completed on their behalf by their accountant, a series of wages declarations which were provided to the broker and to the insurer, Mercantile Mutual, declaring that no wages were being drawn by the working directors. The immediate effect of this was that a large part of the premium payment for 1995‑1996 was refunded. Furthermore, the annual premium payment for 1996‑1997 and 1997‑1998 reduced to $185.40.
Mr Bissett said as far as he was concerned the insured in this case was Hillmarl Pty Ltd as trustee for the Chester Family Trust.
Mr Bissett produced a policy wording which he said was standard and was sent out at the time to all customers.
Mr Bissett said that while there had been a significant reduction in premiums as a consequence of the change in arrangements in 1996, in his view the scope of cover did not change and the insured was entitled to full benefits.
He agreed that the request by Mrs Chester to cancel the policy was a serious event. Mr Bissett said that there was nothing on his file to indicate that the declaration sent out with the letter of 22 August 1996 was ever completed and returned. There was nothing on his file to indicate that the Chesters ever provided written reasons for their request to cancel the policy as requested in the letter.
Mr Bissett agreed that if working directors were not named on the wages declaration then they would not be covered by the insurance policy that was then issued on the basis of that wages declaration. He agreed that neither of the names of Mr or Mrs Chester appeared under the heading "Working Directors" in the wages declaration completed and signed by the accountant on 16 September 1997.

Mr Bagetta - Accountant

Mr Bagetta gave evidence. He is an accountant and principal of accounting firm P J Bagetta & Co.
The Chesters were clients of Mr Bagetta between 1992 and 1995. At the time Mr Chester was working for B & D Roller Doors in his own business under the name of Security Roller Doors.
Mr Bagetta said that in 1994 the Chesters consulted him for advice because B & D Roller Doors required all of its contractors to be incorporated.
Mr Bagetta's advice to the Chesters at that time was that they ought to set up a family trust, which in his view was more flexible that the proprietary limited company. This is because drawing on income to a family trust by the beneficiaries did not create the tax complications that drawing down from a proprietary limited company created. Mr Bagetta, on Mr & Mrs Chester's instructions, then created the Chester Family Trust as trustee for Hillmarl Pty Ltd.
Mr Bagetta recalled some discussions with the Chesters in 1995 concerning Mr Chester's desire to purchase a truck. However, shortly after these discussions he ceased being their accountant.

Mr Sherry – Manager of the defendant

Mr Anthony Sherry was called. He has worked in the tyre industry ever since he left school in 1978. He commenced working with the defendant in 1997 as Manager of the Mandurah store. He supervises two employees. The owner of the business lives in Esperance and Mr Sherry made all the day‑to‑day decisions about the managing of the business.
He has worked with all kinds of tyres except motor bike tyres.
Mr Sherry met Roy Chester soon after he started working with the defendant.
He recalled Mr Chester buying a couple of Double Coin steerer tyres for the front of his vehicle in around 9 July 1997.
Around 20 December 1997 he received a call from Mr Chester or Mrs Chester saying that Mr Chester had driven over a brick in his driveway and had torn one of the new tyres that he had supplied, namely the front left-hand steerer tyre.
Mr Sherry was asked to supply him with a second-hand replacement tyre for the damaged tyre with approximately half the tread worn.
Mr Sherry remembers the call because it was a Saturday just before midday. Mr Chester wanted to get out on the road that afternoon. Notwithstanding the fact that the defendant's office was closing, Mr Sherry rang around and located a replacement tyre from Millers Tyre Service, the third party. He spoke to Mr Don Cassin, Manager of the third party, and arranged to pick up the tyre from his home at about 1.00 pm.
Mr Sherry said that he and Mr Cassin examined the tyre together. They both agreed that it fitted the bill in that it was about half worn and was suitable as a steerer tyre on a prime mover. He did not discuss with Mr Cassin any issues to do with storage, age or history of the tyre. He considered these matters irrelevant. Both he and Mr Cassin inspected the tyre and found it was undamaged and suitable for its intended purpose.
Mr Sherry then took the tyre to Mr Chester's home in Gosnells and fitted it to the truck in the left steerer position.
On Friday, 16 January 1998, Mrs Chester rang Mr Sherry and asked him to supply and fit four drive tyres for Roy's truck, which he did that day.
After fitting the tyres Mr Chester mentioned that he wanted to rotate the steerer tyres. Mr Sherry offered to do it for him as he had all the equipment available.
Mr Sherry, possibly with the help of Mr Chester, then moved the left steerer tyre to the right side and put the right steerer tyre on the left.
As a consequence, the left steerer tyre was now the original Double Coin tyre that he had supplied on 9 July 1997, while the right steerer tyre was the second‑hand Bridgestone tyre supplied to Mr Sherry by Millers and sold by Mr Sherry to Mr Chester in December 1997.
Mr Sherry could not recall the reason that Mr Chester wished to swap the front steerer tyres on 16 January 1998. The only reason he could think of was that there was some shoulder wear and Mr Chester wanted the tyres to wear evenly.
Mr Sherry said that Mr Chester looked like he was a good operator and that his gear was always in immaculate condition.
Mr Chester also seemed to him to be a person who knew something about tyres.
The reason that Mr Sherry went to the third party to purchase a second-hand tyre was because he knew that they were likely to have a second-hand tyre that matched the undamaged one on Mr Chester's truck. The brand was not important as long as the tread depth was roughly the same as the tyre remaining on the vehicle.
He recognised the term "ozone cracking". He described this as fine cracking appearing around the shoulder of the tyre. He recalled no ozone cracking on the tyre and would not have purchased it if he had seen such cracking.
He provided no warranty on the tyre.
Mr Sherry said that he had fitted thousands of tyres during his career. When he took the tyre to Mr Chester's house, he and Mr Chester examined it closely and Mr Chester seemed happy with it. If Mr Chester had not been happy with the tyre he would have been able to return it to the third party without incurring a fee.
When Mr Sherry gave evidence, he could not recall that Mr Chester had said anything to him about wanting to save money by buying a second-hand tyre. However, when his written statement, taken by Mr Luck on 24 March 1998, was put to him, he agreed that the following paragraph in that statement was correct:
"He could have brought a new tyre but it would have worn at a different rate, and the bottom line was that he did not want to spend the bucks."
His written statement also stated that the second-hand tyre that Mr Sherry put on Roy's truck had approximately eight millimetres of tread left on it and was approximately half worn.
I had no reason to disbelieve Mr Sherry's evidence. He appeared to me to be a witness of the truth.

Mr Cassin – Third party

Mr Cassin had been employed in the tyre industry since 1956 and has been the Manager of Millers Tyre Service (the third party) for about 13 years.
He had previously worked as the factory foreman in the same business.
The third party conducts a business retreading passenger vehicle and truck tyres. It holds a franchise for a retreading process known as "Bandag".
Mr Cassin previously had worked as Manager for the Dunlop factory in New South Wales. He has no formal technical qualifications, but all his workers are required to hold a Bandag ticket.
The third party purchases tyres principally from tyre dealers. It has no dealings with the general public. In 1987, its business was principally retreading motor vehicle passenger tyres, with truck tyres making up a smaller part of the business. At that time about 1,200 tyres per annum were processed from passenger cars and 480 from truck tyres.
The third party also runs a retreading service in which it retreads tyres which are placed with it by tyre dealers.
Mr Cassin said that he remembered Mr Sherry of the defendant telephoning him and asking him for a second‑hand tyre of a particular size with a legal tread depth in December 1997. He found one which fitted this description. He could not remember where that particular tyre came from. He may have recorded this in an exercise book kept at the factory at the time. Soon after the accident he had searched for the exercise book but it had already been disposed of.
Mr Cassin said that he inspected the tyre personally with Mr Sherry and that Mr Sherry and he were both happy with its condition. He knew that it was going to be used as a steerer tyre on a truck.
Mr Cassin thought that about a two millimetre tread depth was "legal". In his view when the tyre was worn down to the wear bar which appears between the tread of the tyres then it was no longer legal.
Mr Cassin identified the tyre in court as being a super single truck tyre. This was of the same kind that he had sold to Mr Sherry in December 1997.
He said that that particular tyre would have been worth about $120 as a trade-in. Once it had been retreaded through the Bandag process it would then be worth an additional $210.
Mr Cassin said that he received about two requests a year for second‑hand tyres, although he does not have a business in selling second‑hand tyres. The defendant was a regular customer of the third party and because of this he wanted to help Mr Sherry out. Mr Sherry had told him that he had a customer in trouble who needed a tyre.
Mr Cassin gave evidence concerning the usual process by which a tyre comes into his factory and is stored prior to being retreaded.
While he did his best to assist the Court, some of his evidence about the inspection of a tyre when it came into the yard was somewhat difficult to follow. It does appear however, that when a tyre initially came into the yard for retreading that a visual inspection was carried out as it was being rolled into the yard. If any obvious damage is detected then the tyre was rejected. It also appeared that tyres were kept by the third party for up to six weeks in a paddock adjacent to the factory before they were retreaded and sold. Because of the lack of available records, Mr Cassin was unable to say whether the tyre that he sold to Mr Sherry had been stored in the paddock, and if so, for how long. As this was a fairly popular brand of tyre it may well have come in and gone out in a very short period of time. He did not think that a tyre as popular as this would have spent up to six weeks in the paddock.
Mr Cassin has a tyre spreader. This is a machine which mechanically spreads the tyre allowing for a detailed internal examination, aided by lighting. Mr Cassin was positive that he inspected that particular tyre using the spreader. Initially he thought that he had done this with Mr Sherry. However, a statement that Mr Cassin had given to Mr Luck immediately after the accident, tended to indicate that Mr Cassin had inspected the tyre with the spreader by himself after he had received a telephone call from Mr Sherry and when Mr Sherry arrived to collect the tyre, that they had visually inspected the tyre together not using the spreader.
Mr Cassin gave a detailed explanation of how the spreader works and the kinds of defects which it detects. It allows the detection of nail holes, cracks, fractures, faults and separations. Certain defects such as nail holes of up to 3/8^thsof an inch deep could be repaired through the Bandag process but any split resulted in the tyre being immediately rejected. He was adamant that he inspected the tyre on the spreader and found no defects.
He recognised the expression "ozone cracking" as describing fine cracks around the shoulder of the tyre. He said that he found none on that particular tyre. He recalled that the tread depth was between 30 and 50 per cent and he considered the condition of the tyre overall to be "very good". In Mr Cassin's view the age and the storage history of the tyre were irrelevant. It really came down to whether the tyre looked, on inspection, to be in reasonable condition.
Mr Cassin said that Mr Sherry had not asked for a warranty, and that no warranty would have been provided. He warrants his retreads, but not the second‑hand tyres which he occasionally sells.
Mr Cassin said that he had seen plenty of irregular wear on tyres and that he saw no irregular wear on that particular tyre. He said that the tread area was the main part that was looked at.
He has also plenty of experience of truck tyres which have suffered impact damage. He described the kinds of splits and other damage that would appear on the inside of the tyre in such circumstances. "When it is on the machine (the spreader) it will open up as an aperture".
He said he would reject a tyre if it showed evidence of an impact. Mr Cassin said that he knew that Mr Sherry was relying on him for the inspection of the tyre. However, he also said that Mr Sherry was someone who knew about tyres and was capable of making his own judgment about the condition of the tyre. Mr Sherry or the defendant could have returned the tyre if the customer had been unhappy with it.
Mr Cassin agreed in cross‑examination that once a tyre is accepted for retreading it is not intended to be used as a tyre on a vehicle in that state as a general rule. However, he said in re-examination that in his view second‑hand tyres can be used as long as the tread depth is legal.
Notwithstanding Mr Cassin's uncertainty as to whether he inspected the tyre using the spreader with Mr Sherry or without Mr Sherry, I am satisfied from his evidence and his demeanour that he did inspect the tyre, including using the spreader and found no damage when he did so.

The expert evidence

Three experts were called during the proceedings. Each of them provided detailed written reports. Each of them gave evidence by reference to a close examination of the tyre in court.

Mr Robert McKinlay

Mr McKinlay has a consulting firm RNM Consultants. He was engaged by the plaintiff as an expert witness in the proceedings. The defendant and third party objected to Mr McKinlay giving evidence as an expert on the ground that he did not possess the necessary expertise. This was ruled on by the Court during the proceedings in reasons which were published in Hillmarl Pty Ltd v Dovebeach Pty Ltd & Anor (2002) 29 SR (WA) 244.
The tyre in court had obviously suffered a catastrophic blow-out. A long section of tread which was identified as having come from that tyre was completely separated from the tyre. The tyre also had numerous large and small radial cracks and splits around the side wall of the tyre. Where the tread had separated the steel cords and the belt edge packages were badly frayed. Around the shoulder of the tyre, throughout its circumference, there were many cracks particularly in the flutes (the regular pattern of depressions made in the manufacturing process) around the shoulder of the tyre.
The tread was badly worn, in some places being practically non-existent. These bald patches appeared at various points around the circumference of the tyre. There was significant shoulder wear of the tyre. There was also evidence of a phenomenon called "scalloping" in which patches of bald tyre appeared at regular intervals over parts of the surface.
As observed in the previously published judgment in this matter, Mr McKinlay has a trade certificate as an automotive mechanical engineer. He initially qualified in the United Kingdom. He completed a one or two year trade certificate course at Carlisle Technical College in 1983. He has been an examiner for the Institute of Automotive Mechanical Engineers and is an Associate of the Society of Automotive Engineers. He describes an automotive mechanical engineer as simply being "a mechanic". He is not himself an automotive engineer, describing that as more of a professional rather than a hands-on area of expertise.

If there was such a defect, it was a latent defect, unable to be detected through a prudent and proper inspection using appropriate equipment. The defendant was asked by Mr Chester to locate a second-hand tyre of a certain tread depth which it did. It provided no warranty to Mr Chester. It provided Mr Chester with exactly what he had asked for.
Mr Chester had a choice available to him. He could have purchased two new tyres. He chose not to, essentially for reasons for economy. He obtained exactly what it was that he had sought from the defendant – a second-hand tyre of appropriate size with about 50 per cent tread.
He was aware, according to his wife, before the accident, that the tyres would need changing after the fateful trip he took on 1 March 1998. He had had the front steerer tyres swapped, left to right and vice versa by Mr Sherry. The only possible reason for doing so was because the tyres were worn. He made a serious error of judgment in not replacing the steerer tyres before that trip.

Negligence

Having decided that it is not possible to determine the likely cause or causes of the tyre failing, the result must be that any argument based in negligence must fail. However, for the purposes of completeness, the plaintiff's argument based on negligence is considered below.
There is no doubt that the defendant owed the plaintiff a duty to take reasonable care to supply it with a tyre that was reasonably safe in all the circumstances. Whether one examines the claim from the perspective of whether that duty was breached by the defendant or whether any alleged breach caused the accident, the plaintiff's allegations are not made out.
The plaintiff particularises its allegation by alleging that the blow out was due to separation of the components of the tyre resulting from corrosion in the carcass wires of the tyre, which in turn, was due to matters particularised in the statement of claim, being that the time of the purchase of the tyre by the plaintiff from the defendant on 20 December 1997:
"(a)there was extensive and long standing ozone cracking of the tread rubber around the shoulder of the tyre at the time it was purchased from the defendant on 20 December 1997; and
(b)moisture had ingressed through the ozone cracking into the carcass wires of the tyre causing extensive corrosion and separation of the components of the tyre."
As to the first proposition, the evidence of Mr Sherry and Mr Cassin was that they saw no "ozone cracking" (as they understood the term) on the shoulders of the tyre at the time it was sold to the plaintiff. This was the only available evidence on the subject. I had absolutely no reason to disbelieve either witness.
Mr Mackinlay contended that the ozone cracking that he observed would have been apparent when the tyre was sold on 20 December 1997. However, he advanced no basis for this opinion and I do not think it was sufficiently established for me to accept it over the evidence of two credible eye witnesses who attested to the contrary.
Even if there was cracking evident at the point of sale, my findings in respect of the likely cause of the accident, and in particular my strong reservations concerning the theory advanced by Mr McKinlay, puts paid to the second proposition regarding moisture ingression.
In further and better particulars of the plaintiff's statement of claim, it advances two alternative particulars of negligence.
First, it proposes that the tyre had suffered impact damage in its earlier service life which caused separations within the tyre, which developed and grew in size such that by 20 December 1997, the tyre's carcass was "highly vulnerable to catastrophic failure". As indicated above, I do not think that it was established to the requisite standard that impact damage was the culprit, although I think it was certainly possible.
In the event that I am wrong on this, I proceed to consider the argument of negligence based on impact damage. The plaintiff argues that it is a matter of common‑sense that if impact damage was the primary cause of the tyre's failure that the damage was caused prior to 20 December 1997. With respect, I do not think that this is necessarily so. However, even if the tyre was damaged by impact damage prior to 20 December 1997, there would not in my opinion be a duty on the defendant to detect such damage (which on all accounts was hidden in the depths of the tyre) and to warn the plaintiff prior to supplying him with the tyre. This in my view imposes too onerous a duty on a retailer of second-hand tyres.
After all, how could such hidden damage have been detected by the defendant? What more could the defendant have done to inspect the tyre than it did? It was suggested, albeit rather faintly, that a more sophisticated test should have been conducted on the tyre than simply examining it under a spreader as was done by Mr Cassin. Suggestions were made concerning X‑rays and ultrasound examinations which apparently can be used to examine the interior structure of a tyre. However, in order to establish that such tests were required by the defendant, evidence would be required. No evidence was called about the availability, cost or reliability of such tests. None of the three experts who were called used these means of examination themselves. I do not think that the evidence justifies imposing a duty on the defendant to undertake such tests.
Secondly, it is argued that the defendant was negligent in supplying the tyre to the plaintiff as a steerer tyre when it had purchased the tyre at casing value from a retreading business and not at the higher price for a potential second-hand steerer tyre. As I understand this argument it is contended that the defendant ought to have expected corrosion damage in a tyre purchased at "casing value".
I do not think that this allegation is made out on the evidence.
In summary, it is my view the allegations of negligence against the defendant cannot be sustained.
The defendant owed the plaintiff a duty to provide it with a tyre that was reasonably safe in all the circumstances. Those circumstances included that the tyre that was sought was second-hand and by definition had received some wear. The circumstances also included the fact that Mr Chester examined the tyre closely himself and could have returned it at no cost to himself. The circumstances also included the fact that in addition to satisfying himself as to the suitability of the tyre, Mr Chester was also relying to some extent on the advice of Mr Sherry and Mr Cassin, both of whom possessed more experience and knowledge than he did about tyres.
The tyre was examined and no damage was found. There was no evidence that the form of the examination used by the defendant departed from the standard used in the industry at the time, nor that there were more reliable methods available. In my view the defendant properly discharged its duty of care to the plaintiff by selecting a tyre in accordance with the plaintiff's instructions, by examining the tyre prior to supplying it, and finding no observable defects.
The fact that the tyre had been placed with the third party for retreading may at first glance create an impression that the tyre was not fit for the purpose to which it was proposed to be put, that is as a front steerer tyre on a prime mover. However, this is precisely what Mr Chester sought. He had sought a second-hand, partly worn tyre to place in this position in order that it wear at the same rate as the other steerer tyre. There was nothing to indicate on a reasonable inspection that it was unsuitable, excessively worn, or had suffered damage.

(Trade Practices Act/Fair Trading Act) – Alleged breaches

The plaintiff alleges that the plaintiff's status was that of a consumer pursuant to the Trade Practices Act 1974 (Clth).
It further alleges that pursuant to those Acts, there was a term implied into the contract for the sale of the tyre:
"(a)that the goods supplied under the tyre contract were of merchantable quality; and
(b)a term that the goods supplied under the contract were to be reasonably fit for the purpose of use as a steerer tyre on a prime mover."
I accept that the defendant carries the onus of proving that the defect in the tyre did not exist at the time the tyre was supplied (Cheong by her tutor The Protective Commissioner New South Wales v Wong [2001] NSWSC 881 at par 70).
Section 71(1) of the Trade Practices Act 1974 (Clth) provides that:
"Where a corporation supplies (otherwise that by way of sale by auction) goods to a consumer in the course of business, there is an implied condition that the goods supplied under the contract for the supply of the goods are of merchantable quality, except that there is no such condition by virtue only of this section:
(a)as regards defects specifically drawn to the consumer's attention before the contract is made; or
(b)if the consumer examines the goods before the contract is made, as regards defects which that examination ought to reveal."
"Merchantable quality" is defined by s 66(2) of the Act as follows:
"Goods of any kind are of merchantable quality within the meaning of this Division if they are as fit for the purpose or purposes for which goods of that kind are commonly bought as it is reasonable to expect having regard to any description applied to them, the price (if relevant) and all the other relevant circumstances."
I was referred to many authorities on this section. However, my findings of fact make it unnecessary to examine them in detail. I repeat my previous observations concerning the state of Mr Chester's knowledge of the tyre at the time of its purchase. He expressly sought a worn tyre so that it would wear evenly with the other steerer tyre. He did so because of the greater cost of purchasing two new tyres which was the alternative course of action open to him. He paid less as a result. He inspected the tyre. He found no observable defect. It was inspected by two other people, both expert in tyres. They found no observable defect. The method of examination was reasonable. The tyre was, in my opinion, as fit for the purpose required by Mr Chester as was reasonable to expect having regard to its description (a second-hand tyre with half its tread depth worn), its price and the circumstances that I have described elsewhere in these reasons.
The tyre then travelled about 30,000 kilometres before failing. At some stage during these 30,000 kilometres, but before it commenced its final journey, its tread became worn below the minimum depth prescribed by the relevant road traffic regulation. Mr Chester knew that the tyres were worn. He intended to replace them because of this. He did not do so in time.
The plaintiff also relies on s 71(2) of the Trade Practices Act 1974 (Clth) which provides:
"Where a corporation supplies (otherwise by way of sale by auction) goods to a consumer in the course of a business and the consumer, expressly or by implication, makes known to the corporation or the person by whom any antecedent negotiations are conducted any particular purpose for which the goods are being acquired, there is an implied condition that the goods supplied under the contract for the supply of the goods are reasonably fit for that purpose, whether or not that is a purpose for which such goods are commonly supplied, except where the circumstances show that the consumer does not rely, or that it is unreasonable for him or her to reply, on the skill or judgment of the corporation or of that person."
For the reasons stated above, I consider that it has been established that at the time of sale of the tyre there was no observable defect in the tyre and no reason apparent on a reasonable examination of the tyre why the tyre could not be safely placed on the front steerer position of Mr Chester's vehicle. If it had a defect at that time (which fact in my opinion has never been established), it was latent and unable to be discovered by a reasonable examination.

Workers' Compensation and Rehabilitation Act 1981

The plaintiff alleges that Mr Chester's death was a disability within the meaning of the Workers' Compensation and Rehabilitation Act 1981 ("the WC & R Act") because he was injured in the course of his employment with Hillmarl Pty Ltd, the plaintiff.
It further alleges that as the accident was caused by the defendant's negligence, the plaintiff is entitled to be indemnified by the defendant to the full extent of its liability to pay workers' compensation in respect of Mr Chester's death, pursuant to s 93(1)(b) as it then was of the WC & R Act.
The defendant responds by contending that the plaintiff was not a worker within the meaning of the WC & R Act, because he had failed to comply with s 160(2a) of that Act.

Section 93(1)(b) of the WC & R Act provided at the time as follows:

"Where the disability for which compensation is payable under this Act was caused under circumstances creating a legal liability in some person other than the employer to pay damages in respect thereof but neither the employer nor any person for whose negligence the employer is legally responsible was negligent ‑
(a)….
(b)The employer is entitled to be indemnified by the person whose negligence caused the disability to the worker (in this section called 'the defendant') to the full extent of the employer's liability to pay compensation under this Act, whether or not the defendant has discharged his liability to pay damages to the worker by judgment or by settlement or otherwise."

This provision could only operate in circumstances in which the defendant had negligently caused the worker's disability. As I have found that the defendant was not negligent, it is not strictly speaking necessary for me to make any findings concerning this issue.
However, the insurance point does require some comment.
As previously observed, Mr and Mrs Chester, acting as directors of the plaintiff company, initially took out workers' compensation insurance on the basis that Mr Chester was earning $30,000 per annum from the plaintiff. Then in 1996, they changed the workers' compensation insurance arrangements by declaring that Mr Chester earned no wages from the company. I am satisfied this was done on advice, and in good faith by them, as a means of minimising their operating costs.
Over time, and particularly during the year leading up to the accident, the arrangements concerning insurance became more and more clouded. Whether indeed the plaintiff company was covered for workers' compensation insurance from the point in 1995 when the policy was substantially varied, is questionable. However, I do not think this matter was sufficiently argued before me to reach a concluded view on the matter.
It is clear that in the last year of insurance, that is 1997‑1998, the wages declaration submitted as part of the insurance documents, failed to nominate Mr or Mrs Chester as working directors for the purposes of s 160.
It is argued by the defendant that this failure had the effect of voiding the policy because of the combined operation of s 160 and s 10A of the Act.
Section 160(2a) of the W C and R Act 1981 as it was at that time, provided that:
"Where an employer applying to an approved insurance office under subs(2) is a company, that employer shall, in relation to each of its workers who is –
(a)a director of the company; and
(b)engaged or employed by or working for the company
furnish to that office, in addition to the information required to be furnished by that employer to that office under subsection 2 –
(c)the name of the worker; and
(d)in relation to that worker in particular, the information, verified as required under subsection 2, that the employer is required under that subsection to furnish in relation to the employer's workers."
Section 10A of the W C and R Act 1981 provides that a working director is not deemed to be a worker within the meaning of the Act if the company has not complied with the requirements of s 160.
The omission appears to have been that of an employee of the insurance broker who failed to complete the names of the directors prior to forwarding the wages declaration to the insurer. These details had been provided to the insurer in previous years. The plaintiff submits that the application was simply one for renewal of an existing policy and must be read in the context of earlier documents passing between the plaintiff, its insurance broker and the insurance company, all of which made the identity of the working directors clear. I was referred to various insurance law texts which offer the opinion that the duty of disclosure to insurers on renewal of a policy only require disclosure of facts of which the insured has become aware since the date of the original contract.
However, this is a statutory regime of compulsory insurance, regulated by quite detailed provisions. I also note the opening words of s 160(2) provide that:
"An employer obliged by this section to effect or renew a policy of insurance shall….." (emphasis added)
This would tend to rather strongly suggest that the requirements of s 160(2) and therefore s 160(2a) apply on the initial taking out and renewal of a policy.
I was not referred to any authorities on this section of the Act, nor could I locate any myself. These matters were not fully argued before me. Because of my findings in respect of negligence it is not necessary for me to reach a concluded position concerning the insurance position of the plaintiff. I would think before such a position could be reached, a thorough‑going examination of the history of the relevant sections, the policy behind them, and the role they play in the overall scheme of workers' compensation insurance would need to occur.

Conclusions

For the reasons stated above, I dismiss the claims of the plaintiff against the defendant.

[2004] WADC 53

31 March 2004