Mistral International Pty Ltd v Polstead Pty Ltd - [2002] NSWCA 321

No judgment structure available for this case.

CITATION: MISTRAL INTERNATIONAL PTY LTD (Formerly known as Ringgrip Pty Ltd) v POLSTEAD PTY LTD [2002] NSWCA 321

FILE NUMBER(S): CA 41031/00

HEARING DATE(S): 26 August 2002, 27 August 2002

JUDGMENT DATE:
21 October 2002

PARTIES :

Mistral International Pty Ltd - Appellant
Polstead Pty Ltd - Respondent

JUDGMENT OF: Meagher JA at 1; Sheller JA at 2; Beazley JA at 124

LOWER COURT JURISDICTION : District Court

LOWER COURT
FILE NUMBER(S) : 5527/98

LOWER COURT
JUDICIAL OFFICER : Naughton DCJ

COUNSEL: J T Gleeson SC/S J Stanton - Appellant
D Cassidy QC/C K Stewart/N Potts - Respondent

SOLICITORS: Aitken McLachlan & Thorpe - Appellant
Dominic David Stamfords - Respondent

CATCHWORDS: SALE OF GOODS - merchantable quality - rejection of expert evidence - insufficient reasons given for rejection of evidence - apprehension of bias - new trial ordered

LEGISLATION CITED: Sale of Goods Act 1923
Suitors' Fund Act 1951

CASES CITED:
Moylan v Nutrasweet Company [2000] NSWCA 337
Australian Knitting Mills Limited & Anor v Grant (1933) 50 CLR 387
Grant v Australian Knitting Mills Limited [1936] AC 85
George Wills & Co Limited v Davids Pty Ltd (1957) 98 CLR 77
Lawry v West (1947) 73 CLR 289
Johnson v Johnson (2000) 201 CLR 488
Vakauta v Kelly (1989) 167 CLR 568

DECISION: 1. Appeal allowed; 2. Set aside the judgment and orders made by Judge Naughton on 14 December 2000; 3. Direct a new trial before a Judge of the District Court other than Judge Naughton; 4. The costs of the first trial to be in the discretion of the Judge hearing the new trial; 5. The respondent to pay the appellant's costs of this appeal.

CA 41031/00
DC 5527/98

MEAGHER JA
SHELLER JA
BEAZLEY JA

MISTRAL INTERNATIONAL PTY LTD (Formerly known as Ringgrip Pty Ltd) v POLSTEAD PTY LTD

The appeal was from two decisions of Judge Naughton QC of the District Court.

The plaintiff claimed approximately $280,000 from the defendant on account of goods sold and delivered. The plaintiff was the manufacturer, importer and wholesaler of goods which included cases designed to fit mobile telephones (phone cases). The defendant carried on the business of purchasing and re-selling accessories used in connection with mobile telephones, including phone cases.

When customers began returning phone cases as broken or defective, the defendant set aside and quarantined substantial numbers of phone cases. The defendant's employees conducted tests on the quarantined phone cases by the process of sampling in batches. Batches were also sent for testing by the defendant's expert.

The defendant filed a defence and cross-claim which alleged that the plaintiff had delivered phone cases to it which were unmerchantable because of a defect in the clip mechanism on the phone cases. The defendant claimed amounts which totalled approximately $755,000 (the price of 46% of phone cases provided by the plaintiff).

Judgment was entered for the plaintiff. The defendant recovered on its cross-claim the price paid for 200 phone cases which the trial Judge found to be of unmerchantable quality.

The defendant advanced 44 substantive grounds of appeal. It was claimed that the trial Judge proceeded on the basis of three fundamental propositions:

- A preference for the demeanour of the plaintiff's witnesses over the defendant's witnesses.

- A criticism of the manner of pleading and presentation of the defendant's case as a basis for adverse inferences against it.

- A rationalisation of deficiencies in the plaintiff's case in a way which was not sought by the plaintiff or the subject of cross-examination or debate.

Both the plaintiff and the defendant presented contrasting expert evidence at trial. The defendant's expert, an expert in design specification, conducted six tests of phone case samples. He ultimately expressed the opinion that many of the clip assemblies used in the phone cases tested were faulty either by design specification or manufacturing process and therefore were not of merchantable quality. The plaintiff's expert, a doctor of philosophy in engineering, criticised those conclusions on the basis that the tests were ill-conceived and not scientifically conducted. The trial Judge rejected the defendant's expert's evidence on the basis that his conclusions were either illogical or unacceptable.

The defendant argued on appeal that the trial Judge's findings that some of the phone cases were not of merchantable quality raised two possibilities:

- that there was something peculiar about the pin or clip in those 200 phone cases which made them defective whereas all the other phone cases were of merchantable quality, or

- that the defect in the pin or the clip in those 200 phone cases was a result of a defect in all the phone cases supplied.

If the second possibility was accepted, damages could not be limited to those phone cases which actually failed.

The defendant also appealed against the dismissal of their application to disqualify the trial Judge on the ground of ostensible bias.

HELD (per Sheller JA, Meagher JA and Beazley JA concurring):

1. If the trial Judge was to reject the evidence of the defendant's expert, it was necessary for him to detail his reasons for so finding: Moylan v Nutrasweet Company [2000] NSWCA 337. For a judge to find that there is a significant defect in the evidence of a witness with the qualification, history and experience in design and design failure analysis that the defendant's expert possessed without troubling to give any sensible reason for doing so is wrong. The trial Judge's finding that the defendant's expert's conclusion was unacceptable, vague and not logically demonstrated was one which could not be permitted to stand.

2. There was no rational basis upon which the trial Judge could limit his finding about merchantable quality to the 200 phone cases which actually failed. If sampling is insufficient to produce a reasonably certain result the further conclusion is inevitable that a fair sample was not taken: Lawry v West (1947) 73 CLR 289 at 299. However, the trial Judge never addressed that question if it was raised beyond quoting the plaintiff's expert's assertion that the entire batch cannot be condemned because a few samples from it failed in unrepresentative tests when the majority passed. The defendant's expert could not be brushed aside with such paucity of reasoning.

3. Consistent with the trial Judge's finding that some of the phone cases were not of merchantable quality was the conclusion that none of the phone cases sold was of merchantable quality. The trial Judge failed to appreciate that the case was not about the supply of damaged goods but about the supply of goods with a defective clip mechanism which made all of the phone cases of unmerchantable quality.

4. The trial Judge's rejection of the evidence of two of the defendant's lay witnesses could not be substantiated. The trial Judge seemed to find that one witness was unimpressive and his evidence on critical matters not believable because he referred in setting out his name at the end of a letter to the fact that he had gained an honours degree in law. Another witness's evidence was rejected in its entirety because the trial Judge found that he was impatient and aggressive when questioned as to detail. No sensible reason was advanced for giving no weight at all to the evidence of those witnesses, and as such a miscarriage of justice occurred.

5. The conduct of the trial Judge was such as might lead a fair minded lay observer reasonably to apprehend that the judgment itself was affected by bias against the defendant: Johnson v Johnson (2000) 201 CLR 488; Vakauta v Kelly (1989) 167 CLR 568. A new trial was ordered, but should not be conducted by the original trial Judge. The perception of bias would inevitably carry over into a new trial if the original trial Judge presided.

Legislation:
Sale of Goods Act 1923
Suitors’ Fund Act

1951

[2000] NSWCA 337

(1933) 50 CLR 387

[1936] AC 85

(1957) 98 CLR 77

(1947) 73 CLR 289

(2000) 201 CLR 488

(1989) 167 CLR 568

ORDERS

1. Appeal allowed;

2. Set aside the judgment and orders made by Judge Naughton on 14 December 2000;

3. Direct a new trial before a Judge of the District Court other than Judge Naughton;

4. The costs of the first trial to be in the discretion of the Judge hearing the new trial;

5. The respondent to pay the appellant’s costs of this appeal.

**********

CA 41031/00
DC 5527/98

MEAGHER JA

SHELLER JA

BEAZLEY JA

Monday, 21 October 2002

MISTRAL INTERNATIONAL PTY LTD (FORMERLY KNOWN AS RINGGRIP PTY LTD) v POLSTEAD PTY LTD

Judgment

1 MEAGHER JA: I agree with Sheller JA.

2 SHELLER JA:

Introduction

Statement of claim

3 The phone cases were of different sizes to suit different brands of mobile phones and could be described as leather mobile phone cases to the back of which was attached a plastic clip designed to enable them to be attached to clothing such as a belt or pocket. The clip assembly consisted of an injection moulded plastic clip, a metal pivot pin and a cantilever spring made from sprung steel. The spring was riveted to a pressed metal yoke. The function of the pivot pin was to retain the spring and plastic clip within the metal yoke which was firmly secured to the cover of the case by means of a sewn pocket. The clip was sprung in a normally closed position to provide a light clamping force.

4 Ringgrip carried on the business of purchasing and re-selling accessories used in connection with mobile telephones, including phone cases. Polstead alleged that from time to time after 28 November 1996 Ringgrip agreed to buy 222,210 leather phone cases from Polstead. There were two models, a premium model and an executive model. Ringgrip agreed to pay $6.75 for each premium model and $5.20 for each executive model. In the case of one order the price was $4.80. Polstead alleged it delivered the phone cases ordered. The total price was $1,381,987.50 of which Ringgrip paid $1,164,837.30. Polstead agreed to give a credit in respect of amounts totalling $15,941.75. Polstead alleged that Ringgrip had failed to pay the balance of $201,208.45. The total amount claimed was inflated by the sale and delivery by Polstead to Ringgrip of 12,000 neoprene phone cases for $6.75 per case which agreement, it was alleged, Ringgrip repudiated. For this, Polstead claimed damages in the sum of $81,000.

Defence

5 Ringgrip filed a notice of grounds of defence and a notice of cross-claim which ultimately became a further amended notice of grounds of defence and a further amended notice of cross-claim. In this form of the defence, Ringgrip alleged that Polstead delivered phone cases to it which were unmerchantable because of what was described as the defect of the faulty pin in the clip mechanism. Ringgrip set “up the said breaches of conditions and warranties in extinction of the price therefore claimed herein.” This alleged defect became the centrepiece of the defence. In its cross-claim Ringgrip said that the number of phone cases unfit for the purpose for which they were sold or unmerchantable amounted to 102,543 which were placed in quarantine in its warehouse so as to avoid supply to retailers. The amount allegedly paid to Polstead for these phone cases was $692,165.25. Ringgrip also claimed amounts owing under credit notes making its total cross-claim $755,312.40.

6 On its face, the claim was for a significant but not very substantial amount of money for goods sold and delivered. Sale and delivery were not in issue. The defence related to phone cases delivered which were said to be unmerchantable.

Hearing and decision

7 Despite the apparent narrowness of the issues involved, the case, which was heard by his Honour Judge Naughton QC, took over ten days. Polstead succeeded. Ringgrip appeals from two decisions of Judge Naughton, the first, of 8 December 2000, not to disqualify himself on Ringgrip’s application, and the second, the decision of 14 December 2000 which resulted in a judgment for Polstead in the sum of $319,586.45 and costs, the costs to be on an indemnity basis from and including 22 July 1999.

8 Ringgrip was not wholly unsuccessful. On its cross-claim it recovered the price paid, $6.75, for 200 phone cases, the clips of which Judge Naughton found to be defective with the consequence that those phone cases, so his Honour held, were of unmerchantable quality. Polstead does not challenge this conclusion. There were 44 substantive grounds of appeal. Ringgrip claimed that the trial Judge’s judgment proceeded on the basis of three fundamental propositions, a preference variously expressed but (with one exception) related to demeanour, for each of Polstead’s witnesses over Ringgrip’s witnesses, a criticism of the manner of pleading and presentation of Ringgrip’s case as the basis for adverse inferences against it and a rationalisation of deficiencies in Polstead’s case in a way which was not sought by Polstead, nor the subject of, relevantly, cross-examination or debate.

Summary of facts

9 Counsel for Ringgrip in their written submissions complained with some justification that the judgment of 14 December 2000 did not set out in chronological order or in any other convenient manner the evidence which Ringgrip led to support its cross-claim. Indeed one does not find in the judgment any but the barest outline of the facts of the case.

10 In November 1996 Ringgrip began ordering phone cases from Polstead. The sale and delivery of phone cases by Polstead to Ringgrip were in small numbers during the months up to and including July 1997 but accelerated in August 1997 and continued in substantial numbers until March 1998. Ringgrip’s initial sales of phone cases to its customers were slow. By January 1998 it held an excess of stock. It was said that because of the time taken for goods to be sold and delivered and for the customers then to sell phone cases on to consumers problems took time to emerge.

11 A sales representative, Jodie Messenger, was the first of Ringgrip’s employees to notice that complaints were coming in from customers about faulty clips or pins in phone cases. She said this happened in late 1997, early 1998. Her two main customers were Mobiletronics and Retrovision. In late 1997 to early 1998 phone cases were returned to her from Mobiletronics with various problems including clips broken off. As sales increased more phone cases began to come back particularly from Mobiletronics and Retrovision. She spoke with Phillip Foote and Theo Poursanidis, respectively the general manager and a sales representative from Mobiletronics. The problems which Ms Messenger saw with the clip included the pin coming out or the actual clip snapping. As the problem increased she told Neale Burgess, who had been appointed national business manager of Ringgrip in January 1998, that she was a bit concerned with how many phone cases she was getting back. Later she told him they were still getting faulty phone cases and they needed to do something about it because Mr Foote was ringing her and complaining. However, the minutes of quality meetings recorded no issue about clip malfunctions before 13 May 1998. Ms Messenger agreed that before that date it was a “slow issue” because she was not selling a lot. Mr Foote said that he had raised complaints with Ms Messenger about the clips before 7 April 1998. Judge Naughton found Ms Messenger’s evidence to be exaggerated, vague and in conflict with that of Bradley Quinn, who was employed by Ringgrip as a product manager from January 1997 to July 1998. He also found her to be vague, shifty and inconsistent.

12 Mr Burgess found that sales were low and there was an excess of stock. Ms Messenger was the sales person reporting to him. Between January and March 1998 she reported to him a variety of complaints from customers about leather phone cases. Some were about phone cases not fitting or the absence of cut-outs. Cut-outs in the phone case enabled various attachments to be fitted to the telephone. There were occasional complaints about the clips on the phone cases – they were bending or snapping or dropping off altogether. Mr Burgess agreed that the complaints about the clip reported to him before April 1998 were not seen as significant and were not documented or recorded in the minutes of the quality meetings before 13 May 1998.

13 On 6 April 1998 a meeting took place between officers of Ringgrip and of Polstead. Ringgrip’s witnesses said the problem with the pins was raised as one of several problems with the phone cases. They said that an assurance was given by Polstead’s officers that the problem would be fixed. Polstead’s witnesses denied that anything was said about faulty clips.

14 Mr Burgess gave evidence that the first part of the meeting occurred in Ringgrip’s factory. There was discussion about some phone cases not fitting well and some not having cut-outs. After that according to Mr Burgess he said to Rajnish Anand, the Company Secretary and General Manager of Polstead, “Raj, I believe we are having trouble with the clips on your leather cases”. Mr Anand replied “No, Neale we are not having any problems with our clips at all.” When that part of the meeting ended Mr Burgess asked Ms Messenger to call Josef McNamara at Tele Pacific to find out if he was having trouble with clips on the Polstead phone cases. About 15 or 20 minutes later Ms Messenger called Mr Burgess out of the meeting and said “McNamara was not having problems”. The second part of the meeting took place in the office of Ian Salek, the General Manager of Ringgrip. According to Mr Burgess, Mr Anand said he would attempt to move some of Ringgrip’s stock. Mr Burgess again asked about the clips. Mr Anand said they had had no problem with them and Mr Burgess agreed to pay what was then outstanding. Mr Burgess agreed that there had been no mention of pin problems but said that at the meeting he had been told there had been a problem with the clips. Ms Messenger corroborated Mr Burgess’s evidence about the phone call to Mr McNamara. Mr McNamara confirmed this call from Ms Messenger. He gave evidence that he reported this call that day to Mr Anand.

15 Mr Quinn was responsible for placing orders for Polstead’s phone cases from mid-1997 until February/March 1998. In April 1998 Mr Burgess told him that Mobiletronics had had customers complain of faulty cases – in particular one customer had his phone case fall off his belt onto the road because of a faulty clip. Mr Quinn himself did not see the faulty case. It was not part of his range of duties to handle complaints direct from customers. His initial recall of the 6 April meeting was poor. He did recall Mr Burgess raising the faulty clip mechanism. In cross-examination he resisted the suggestion that the faulty clips were not raised at all but agreed it was a secondary issue. He agreed that before April 1998 faulty phone cases had not come to his attention. In answer to further questions from Judge Naughton he re-affirmed that Mr Burgess had raised the issue of one faulty clip with Polstead at the meeting.

16 Judge Naughton accepted Mr Quinn’s evidence as the best evidence of 6 April meeting. Counsel for Ringgrip submitted that this was surprising because Mr Quinn said he had had a poor recollection of the meeting. However the evidence confirmed that clip problems were squarely raised at the meeting and did not support the conclusion that it was “virtually a non-issue at the meeting”.

17 Mr Salek reported to Mr Matthew Gerard, the managing director of Ringgrip. According to Mr Salek, Mr Gerard asked him to meet with Polstead and he caused Mr Quinn to convene the 6 April meeting. The meeting discussed poor fittings of phone cases, with Polstead asserting that the phone cases complied with the sample. Mr Burgess said that the clip appeared not to be functioning with reports of clips coming away from the case and the phone falling to the ground. Polstead’s officer replied that they were concerned that their product was one of quality and if there was a real problem they would assist. There was discussion about Polstead assisting Ringgrip to move its stock.

18 Mr Anand and Mr Shamshad Ahmed both officers of Polstead unequivocally denied that the clips were discussed at the meeting. Mr Anand was recalled towards the end of the evidence and said that he called the meeting of 6 April 1998 primarily over the concern that payments had slowed down.

19 After the meeting of 6 April 1998 Mr Quinn sent a message to Mr Anand referring to the meeting and seeking proposals to move stock of 58,622 phone cases. This message did not refer to faulty clips or pins.

20 On 7 April 1998 Mr Salek delivered to Mr Quinn a performance counselling memorandum. The memorandum mentioned some aspects of the 6 April 1998 meeting but did not refer to faulty clips or pins in the phone cases. Mr Burgess saw the memorandum. The absence of the mention of faulty clips or pins did not surprise him since it was a performance counselling letter. The problem of the clips did not require Mr Quinn to be counselled.

21 On 7 April 1998 Mr Ahmed wrote to Mr Salek with an offer to help Ringgrip move its over-supply of stock and demanding immediate payment. No reference was made to defective clips or pins. Ringgrip paid $209,025 to Polstead on 9 April and $163,292.45 on 1 May 1998. Mr Salek explained this by saying that the issue of clips was raised on 6 April meeting but the extent of the problem only became clear later.

22 Ms Messenger gave evidence that after 6 April meeting she continued to receive mobile phone cases back from clients in particular Mobiletronics. She started swapping mobile phone cases for a different brand, Scala. The main problems with the phone cases were broken clips and missing pins. Her evidence about this was not challenged.

23 Mr Burgess gave evidence that about a week or so after 6 April meeting Ms Messenger told him that the clips on the leather phone cases were continuing to fall off and Mobiletronics had warned Ringgrip that they would lose all their business if it continued. Mr Burgess examined some phone cases in the warehouse. He found the pin could be very easily removed either by pulling it from one end or pushing it with his fingernail from the other. He designed a leather case conformance sheet and arranged what became the 9 May stock check. Mr Salek gave evidence that after 6 April meeting the problem became more and more important as the phone cases were falling away from peoples’ belts. The extent of the problem was becoming clear. Mr Foote gave evidence that at a Mobiletronics managers’ meeting on 7 April 1998 issues were raised about faulty clips on phone cases. He observed on a couple of the units himself that the pin virtually slid in and out with nothing to hold it in. In the fortnight after 7 April the clip problem began to escalate.

24 Ringgrip carried out its inspection of phone cases on 9 May 1998. The evidence of its witnesses was that by a sampling process about ten out of every hundred phone cases were inspected. A record was made of the phone cases found to be defective. The record consisted of sixteen documents which became exhibits 17 and 20. Contrary to what the trial Judge found Ringgrip submitted that the sixteen documents showed not sixteen defective phone cases but were evidence of a sampling process which revealed all the phone cases (98,237) were defective.

25 Mr Williams was the quality assurance superintendent for Ringgrip. He was a fitter and turner by trade and a certified quality technician. He was responsible for quality related issues in Ringgrip’s manufacturing area. He organised and supervised the 9 May 1998 testing after being told by Ms Messenger there was a problem with the clips. Those involved in the testing were Mr Burgess, Ms Messenger, Ms Christine Burniston, Mr Robert Le Blanche and Mr Williams. Mr Williams arranged for approximately twenty-eight pallets of phone cases to be brought up to the manufacturing area. The twenty-eight pallets had 438 boxes of phone cases in them. Each box had about 250 – 300 mobile phone cases in it. In total there were about 100,000 phone cases. Mr Williams had previously inspected some of the phone cases that were returned to Ringgrip. He saw that the pin had either completely come out or had partly come out and remained at an angle which made the clip inoperative. In other instances the clip was all in pieces where the pin had completely come out. Mr Williams instructed those carrying out the inspection either to use the thumb to push out the pin or in the case of a couple of the female inspectors to use the end of a ball point pen to push out the pin. In these circumstances the pin worked loose.

26 It was Mr Williams’ opinion that the pin should have been riveted or spot knocked, that is to say splayed over the end without actual riveting. Mr Williams looked at many thousand phone cases himself on that day and he supervised the other inspections. He said that the purpose of the test he designed was that if he could move the pins out with his thumb then there was a likelihood that if the case was on a persons’ belt and moving around, hopping in and out of cars the pin would work itself loose. The object was to see if he could remove the pin with not a great deal of force. He was asked to take at random any phone case out of one of the exhibits and demonstrate his test. He pushed out the pin a certain distance and using his nail it could be pulled straight out. This phone case became exhibit T. The procedure that he asked the staff to follow was to try a sample of ten phone cases to start with:

“The procedure I was using if you got the ten, if you got five that passed they were to give me a yell. But in most cases it was more than that but we took another ten out after that and if they got faulty ones in that ten, we considered that box to be no good.”

27 He identified the performance sheets prepared by the team and prepared a summary work sheet. The boxes on the pallets were then shrink wrapped and quarantined. Later a further quantity of about 2,000 were discovered that had been put into blister packs and stored in the finished goods area. That brought the total quarantine to 102,453.

28 Ms Messenger gave evidence that during the inspection the product was found in bags in big boxes. They pulled out five to six phone cases from each bag to give a good testing percentage. Various tests were done on each case. They included giving the clips two or three good flicks to see whether the spring was okay. In respect of the pin one could see that they were not actually finished off on the ends so they very easily popped out. She flicked the clip to check the spring. That often meant the pin moved and became loose. Just simply putting the thumb on the edge meant that it moved over because it was not finished off. Mr Quinn gave brief evidence about the inspection identifying eight sheets he filled out. Mr Burgess’ evidence about the 9 May stock check was that ten of every hundred phone cases were checked and the pin was found to be faulty in all. Mr Burgess instructed Mr Quinn to quarantine all the executive leather phone cases. This largely occurred.

29 On 11 May 1998 Mr Williams prepared a memorandum which indicated that on inspection of the phone cases it was found the clip pin had faults in the spring and pin. He also said that the phone cases had been rejected for no cut-outs.

30 On 12 May 1998 Ringgrip ordered a further 210 phone cases from Polstead.

31 Mr Burgess said that after these results he consulted the managing director and drafted a letter to go to Polstead on 18 May 1998. He had it checked by Ringgrip’s solicitors and got it back on 28 May 1998 to issue. The letter dated on the first page 18 May and on the second page 28 May was not sent to Polstead until 1 June 1998. Mr Burgess acknowledged that in the letter no reference was made to other problems such as phone cases not fitting and absence of cut-outs because Ringgrip accepted it could not complain about these problems as they were evident in the sample approved by Mr Quinn. They made the phone cases less attractive but not useless. He also instructed Mr Quinn not to buy any further phone cases from Polstead. Mr Quinn agreed that this had been told to him.

32 On 2 June 1998 Polstead replied to Ringgrip’s letter of demand of 1 June 1998 stating that Ringgrip had never previously made any complaints about defects as recorded in that letter. Ringgrip’s demand was never met. Instead Polstead filed its statement of claim on 31 July 1998.

33 Some phone cases escaped the May quarantine and were delivered to Mobiletronics. This resulted in Mr Foote sending an email of 30 June 1998 saying that if they got one more case the business was finished. This referred to Mobiletronics stores receiving complaints from customers about broken plastic clips. It requested all problem stock be recalled. Mr Foote gave evidence that problems with the clip mechanism arose again at the Mobiletronics’ managers’ meeting of 30 June 1998. After the meeting Ringgrip agreed to replace all current stock of Polstead phone cases with the Scala brand.

34 Ms Messenger gave evidence that after 9 May 1998 she continued to monitor returns of phone cases. They were still coming back faulty. She could not remember the exact quantity but it was more than ten phone cases. After 9 May 1998 she did not sell any more of Polstead’s phone cases. After receiving 30 June 1998 email from Mr Foote, Ms Messenger went to every Mobiletronics store across Victoria and swapped Scala phone cases for Polstead phone cases. She agreed that the returns of Polstead’s phone cases would be a little more than five hundred. These were returns for any reason.

35 Mr Poursanidis was the store manager for Dandenong Mobiletronics. In the second half of 1998 he was demonstrating a phone case to a customer, Mr Thmistocles Demou, when the pin holding the clip fell to the ground. This phone case Judge Naughton found was not of merchantable quality. Similar instances occurred numbering between 70 and 100. There was a common trend that the pins were bent or not even lodged on the case. Mr Demou’s evidence supported the relevant part of Mr Poursanidis’ evidence and was accepted by Judge Naughton. Mr Poursanidis was asked about DOA (dead on arrival) forms. These were distinct from the cases where the customer of Mobiletronics returned the items. He said the DOAs were about 50 per cent of the returns. He was shown the DOA forms which had been produced by Mobiletronics on subpoena which numbered about five. It was submitted that those five forms were dated from September 1998 and clearly could not have represented the complete number of DOA forms.

36 Ringgrip’s goods returns documents ran from July 1998 to January 2000. Judge Naughton dismissed these business records which numbered 159 on the basis that it was not proved they were valid claims for defective goods. In any event they were “de minimis”. It was submitted that they were evidence that on repeated occasions consumers had returned phone cases to Ringgrip’s customers including Mobiletronics, Strathfield Car Radios, Retrovision and Century 21 on the ground that the clip was faulty, that Ringgrip’s customer had agreed with the assessment of the consumer and retained the goods for credit to Ringgrip and that Ringgrip had confirmed the assessment of its customer and provided a credit.

37 Robyn Johnston, a storeperson employed by Ringgrip, gave evidence that she was in charge of the warehouse and responsible for the processing of the goods returned dockets. She processed the goods return documents. She said there was a volume of phone cases with accompanying documents having been returned because of a fault with the clip mechanism. The volume of returns of the phone cases indicated that the consumers were not able to use the case because the clip mechanism, and in particular the instability of the pin contained therein coming away as it did, rendered the phone cases unusable.

38 In its submissions Ringgrip summarised what it said should be the factual conclusions:

“1. By the time of the 6 April 1998 meeting, [Ringgrip] had received some complaints from customers, particularly Mobiletronics, about faulty clips. The complaints were sufficient for the matter to be raised as an issue at the meeting but at that stage the problem was not seen as a major one.

2. [Ringgrip] received a reassuring response on this issue from [Polstead] at the 6 April meeting and was entitled then to believe that there was no major problem with the clips, or if there was, [Polstead] would make sure it was rectified.

3. Acting on this basis, and otherwise being satisfied that the other problems with the cases could not be blamed on [Polstead], [Ringgrip] quite properly resumed payment of its debts on 9 April and 1 May.

4. However, the complaints continued to come in from customers and the problem with the broken clips by the beginning of May was now seen by [Ringgrip] as much greater than before.

5. The inspection carried out on 9 May was a reasonably thorough, representative and careful way of testing whether there were problems with the clips. The results of the inspection recorded widespread problems with the clips which indicated that all of the clips had the potential to fail, especially through the pin coming out.

6. The action which [Ringgrip] then took of quarantining the 98,237 cases (subsequently found to be 102,453 cases) was a prudent response to the now evident deficiencies in the clips. To place those cases into commerce knowing there was a likelihood of failure would have been a reckless act.

7. Either each and every case quarantined was defective. Alternatively, it was a prudent step in mitigation of loss for [Ringgrip] to quarantine all cases.

8. The defects in the cases were confirmed because the complaints continued to come in from customers. There were a significant number of returns because of faulty clips. Mobiletronics required the entirety of its stock to be replaced by Scala products.

9. The above primary facts were confirmed by the expert evidence of Whittaker.”

Expert evidence

39 Ringgrip’s expert witness was Andrew Whittaker. Stating his qualifications and experience Mr Whittaker said that since 1985 he had held positions in design and industrial design up to the position of principal designer and had lectured at the University of South Australia in industrial design. He described his experience and involvement with the development and implementation of a quality system for design and as facilitator of a number of Design Failure Mode and Effect Analyses for automotive and medical products. He had been the recipient of design awards and co-authored a publication “Product Development Diagnostic”. He had served as a judge for Design Institute of Australia Design awards. He prepared two reports, one dated 23 December 1999 and the second dated 14 February 2000.

40 Mr Whittaker was provided with six separate batches of Polstead premium mobile phone cases on dates which extended from 2 February 1999 to 10 December 1999. The number of phone cases in each batch ranged from 8 to 90. He described the phone cases and referred to additional samples of mobile phone cases obtained from other manufacturers to be used as a comparison. He conducted tests numbered 1 to 6 which he described in detail in his report.

41 Test 1, “Categorisation of the pin”, involved dismantling the clip assembly on each of the 37 phone cases comprised in batch 1 by applying a force to one end of the pin. This revealed that three different types of pin had been used, namely, a plain pin, a pin knurled at one end and a pin knurled at both ends. A knurl is a ridge or series of ridges to assist in obtaining a firm grip. In test 2 Mr Whittaker dismantled and inspected in like manner each of the 58 phone cases comprising batch 2 which again revealed the use of three types of pins. It appeared to Mr Whittaker that the phone cases had been returned because the clip mechanism had failed. He stated that he believed that one of the reasons for this failure was that the pin had moved axially within the assembly due to inadequate retention. This in his view was a design fault in the method of pin retention.

42 The third test was a pin extraction force test. While it was unlikely that the pin would be exposed to this type of load in normal use, in Mr Whittaker’s view the test was an accurate and repeatable way of measuring just how securely the pin was held in the clip assembly. The results of the tests were set out in the report. In summary, the clip assemblies with “plain” pins required between 0.34 kg to 3.4 kg to extract the pin, the clip assemblies with knurling at one end required between 3.02 kg to exceeding 5 kg to extract the pin and the clip assemblies with knurling at both ends required between 1.34 kg to 4.4 kg to extract the pin. The same test method was applied by Mr Whittaker to five other brands of mobile phone cases obtained for comparison purposes. In each test the pin could not be dislodged with a force exceeding 50 kg. In Mr Whittaker’s opinion this test showed that the method used for pin retention in the premium Polstead phone cases was not only inconsistent and unreliable but also inferior to the method used for pin retention in the other comparable brands tested.

43 Test 4 was the same test repeated on 45 more phone cases comprising part of batch 6. The results were consistent with test 3, demonstrating three different pin types and pin retention forces ranging from 0.8 kg to more than 5 kg. Test 5 was a clip strength test whereby the end of the plastic clip was slowly pulled away from 36 phone cases part of the fifty-four phone cases in batch 5 and the force applied measured. In each case of failure the mode and load required was measured. Of the 36 tested, all but 17 failed at a force less than 100 Newtons (N) (10 kg) load. Four other brands of mobile phone cases using the same testing procedure were tested. All exceeded that force/load. Mr Whittaker said that the test was designed to simulate or be indicative of the type of forces the clip would be exposed to when the user was sitting in or getting out of a chair, brushing past a door frame or wall or getting into or out of a car. He estimated that that force would range from 2 to 5 kgs (20 to 50N force) in “normal” day to day use. The test showed that approximately 37 per cent of the plastic clip component of the clip assembly in the premium Polstead phone cases failed at a force of less than 5 kg (50N). There were, in his opinion, three reasons:

1. The primary reason was due to the poor design of the clip as described.

2. The second, and to a lesser degree, reason was the apparent inferior grade of material used in approximately 50 per cent of the moulded plastic clip components.

3. The third were voids in the plastic in the form of entrapped gas bubbles.

44 In conclusion, Mr Whittaker expressed his opinion that many of the clip assemblies used in the Polstead premium mobile phone cases tested were faulty either by design specification or manufacturing process and therefore were not of merchantable quality and/or fit for the purpose. The first identified problem was that the pin retention was inconsistent and consequently unreliable and might, in some circumstances, result in the mobile case detaching itself from the clip assembly causing the case to fall to the ground. The second identified problem was the sharp intersection or notch created where the yoke met the main body of the clip. The third identified problem was the thin wall section of the tip of the yoke pivot. The fourth identified problem was the material used in the injection moulded clip. Finally, gas entrapment within the moulded parts might also cause weakening. Mr Whittaker said:

“In summary, the purpose of the mobile case is to securely hold a mobile phone at belt height, by means of a spring-loaded plastic clip. Tests conducted by me on the supplied samples provided identified various problems with the design of the clip and clip assembly. Whilst not all samples failed, a very high proportion of phone cases tested failed what I believe to be an acceptable level of quality and robustness.

Accordingly, I conclude that the cases are not of merchantable quality and are not fit for their intended use.”

45 In his supplementary report of 14 February 2000 Mr Whittaker dealt with a number of questions directed to correcting defects existing in the clip assembly, to whether knurling could cause or contribute to the pins being easily removed and to greater detail about the pin extraction force test and clip strength test. He stated that in his opinion from observation testing of the 40 Scala phone cases supplied (despite similarities and design), there was a significant difference in reliability between the Polstead phone cases and Scala phone cases tested. He believed this was primarily because all of the Scala phone cases examined had clips moulded from a suitable grade of plastic. As already pointed out on receipt of complaints from Mobiletronics, Ms Messenger went to Mobiletronics customers and replaced Polstead’s phone cases with Scala phone cases. The other subtle yet significant difference was in the attention to detail and tolerance of the pin and mating holes. Without these characteristics and attention to detail it was his opinion that the Scala phone cases would also render a product that had a less than acceptable level of quality and robustness.

46 Mr Whittaker’s reports were admitted without objection. He gave oral evidence and was cross-examined. In evidence in chief he was asked about his experience with plastic in a professional capacity and said:

“My profession is industrial design, and pretty much most of my job is the design and detailing of plastic components for manufacture.”

47 He referred to a report obtained from Amdel about the materials used and expressed opinions about their suitability from his own experience. Asked about the failure rate of 37 per cent found in test 5, the clip strength test, Mr Whittaker said:

“I’ve documented in here that, I’ve drawn a line at a nominal figure of 5 kg, and from that figure I’ve deduced that 37 per cent would fail. I’ve actually – if you were to say that that was way too high, which is arguable, if we even dropped it down to say a 2 kg breaking force, that still means that at least 10 per cent have failed. I would normally expect in a product like this, that you would expect to get around about 100 per cent pass rate. I understand that in the automotive industry that it’s pretty common to reject more than ten failures per one million components.”

48 Judge Naughton refused to allow Mr Whittaker to give oral evidence commenting on the report of Dr Gary G Martin. No objection appears to have been taken to this course by Polstead’s counsel. His Honour disallowed the evidence because it was not in a written report.

49 The cross-examination proceeded without anything being put which undermined Mr Whittaker’s methodology or conclusions. However this interchange took place:

“Q. Now I think you tested 286 phone cases is that right? A. Yeah in that order yes.

Q. How did you obtain the particular 286 units that you tested? A. In each particular instance I was given them by Norman Waterhouse [Ringgrip’s Adelaide solicitors]. I believe that on some occasions they were couriered to me, on others I physically went around there and picked them up.

HIS HONOUR: Q. Can I just ask you this, on page 3 of your main report, at the top you’ve got a table which is headed ‘batch, number of samples and date received’, you see that? A. Yes.

Q. When you say ‘date received’, dated received by whom, is that by you? A. That’s by me.

Q. Do you know why you were given them in six batches spread over nearly a year? A. I guess--

Q. Well if you don’t know just say so, I don’t want you to speculate? A. No.

Q. You don’t know? A. I’ve requested extra on some occasions and then I’ve discovered different issues, and there’s been more requests, but I’m not exactly sure why it’s taken so long. There’s no particular reason.”

50 After some short further cross-examination by counsel the following occurred:

“HIS HONOUR: Q. Mr Whittaker, it must follow from the fact that these dates received by you that your instructions were earlier than 2 February 1999? A,. Sorry can you repeat the question?

Q. I said, it must follow from the fact that you got a batch on 2 February 1999 that your instructions were before that date? A. Right.

Q. Why is it then that we don’t get a report from you for nearly a year, 23 December 1999? Why did it take you nearly a year to complete your report in the matter? A. I believe that the--

Q. I’m not really interested in your belief, I’m interested in the fact. Why was it? A. Okay, that I didn’t [sic wasn’t] actually ask [sic asked] to finalise a report until nearly the end of that year.

Q. Well that’s a statement I’ve made to you, what I’m asking is the reason for it or don’t you have one? A. I’ve been – this job has been going for over a year – last year. I was getting small batches now and then, and I wasn’t actually required to submit a report until around about the end of last year, and I believe that the, well I know that this final report was submitted or completed by me on 14 February. For me it’s been very much a stop start process.”

51 Cross-examination then continued and the following occurred:

“Q. Sorry I withdraw that. Did you assemble a test rig for the application of extracting the pin as in test 3? A. No it wasn’t a test rig as such. It was a very simple test procedure to simply to determine, well if I can go back one step and just say that it was revealed to me that the pins were falling out, so I thought it would be sensible to try and determine what sort of force is required to push that pin out, in other words—“

52 A little later Mr Whittaker was asked whether he had calibrated the scales when conducting the force test 3. He said he had not and explained why. The cross-examination continued about the nature of the tests he conducted. Later he agreed that he had not done any fatigue analysis on the broken clips.

53 Polstead relied on a report prepared by ATTAR (Advance Technology Testing and Research) dated 6 April 2000. One of the signatories was Dr Martin, a technical director who gave evidence. That report was admitted without objection. Dr Martin is a doctor of philosophy in engineering from Monash University with 19 years experience in Failure Analysis and Non-Destructive Testing Groups, Materials Division, Aeronautical Research Laboratory. He has conducted failure analysis on a wide range of engineering materials and research into a number of non-destructive testing techniques in particular acoustic emission. He has conducted failure analysis of metals, polymers and ceramics. He is a chartered professional engineer and has been President of the Australian Institute for Non-Destructive Testing Federal Council. The ATTAR test was a materials failure analysis.

54 In the course of the report reference was made to Mr Whittaker’s report. Dr Martin expressed the view that the tests were ill-conceived and not scientifically conducted. He said that tests 3 and 4 were not relevant “as admitted by the author”. Here Dr Martin was being the advocate and not the impartial expert. This was a misleading comment. Mr Whittaker pointed out that the pin extraction force test was in his opinion an accurate and repeatable way of measuring just how securely the pin was held in the clip assembly. The fact that he accepted that it was unlikely that the pin would be exposed to this type of load in normal use, apart from being obvious, was not an admission that the test was irrelevant.

55 In Dr Martin’s opinion the appropriate test was a fatigue test. He developed a fatigue test which realistically simulated the forces subjected to a clip on the mobile phone case when used normally, that is, when placed on and removed from a belt. The test results were derived from a sample of 90 phone cases. When tested eight pins came out one end of the clip and in 11 phone cases spring tension was lost. Under the heading “Discussion” Dr Martin said:

“As indicated clips are easily removed from their holder on the back of the case and should failure occur it would be a simple matter to replace them.

Manufacturers of such low value items would not expect all of them to last for an indefinite time. A realistic life time for most mobile phones and their cases would be two to three years.”

56 Dr Martin said that the failure tests on the clips showed those most likely to fail because the pin worked out were those with unknurled pins. The tests applied only compression force. No tests applying tensile or twisting forces were used. Dr Martin dismissed Mr Whittaker’s report by saying that there was no evidence that the samples tested had been selected on a “representative” basis by an unbiased person and that the tests were not representative of service conditions. These comments are more those of the advocate than the impartial expert.

57 Dr Martin reported his fatigue test results on 90 samples of phone cases as follows:

Fatigue Test Results:

Initially, the first test (Test no 1) was commenced at approximately 170 cycles per minute for the first 5000 cycles. It was decided to slow this down to maximum of 60 cycles per minute to more realistically simulate normal operation and reduce any vibration and heat build-up that may occur with a higher speed.

Initially the first three tests were conducted to a minimum of 36000 cycles but it was decided to reduce this to 20000 cycles as only spring failures were occurring after this stage.

The results for the tests are as follows:

No of cycle	Number & Type of Failure
Test 1 Test 2 Test 3 Test 4 Test 5
<2000	1 P 1 P 000
2000<5000	01 P & 1 S 000
5000<10000	4 P & 2 S *1 P 1 S 3 S 0
>10000	5S & 6OK11S & 3OK16S &1OK15OK7S &11OK
TOTAL	5 P ,7 S & 6 OK 3 P , 12 S & 3 OK 17 S & 1 OK 3 S & 15 OK 7 S & 11 OK

P

S

OK

Table 3. Fatigue test results summary for all clips.

The results of the tests were interesting as the only pins that came out were from pins without any knurling. I have therefore tabulated the results for all the pins without knurling as follows:

No of Cycles	Number & Type of Failure For pins with no knurling
<2000	2 P
2000<5000	1 P & 1 S
5000<10000	5 P & 2 S
>10000	8 S & 2 OK
TOTAL	8 P , 11 S & 2 OK (35K cycles)

Table 4. Fatigue test results summary for clips with un-knurled pins.

58 These results show 54 failures as a result either of the pin coming out one end of the clip or spring tension being lost (broken spring). 19 were phone cases with un-knurled pins. From 90 samples this, on its face, is a significant failure rate.

59 Under cross-examination Dr Martin agreed that he did not profess a great experience but certainly some knowledge in design specification. Asked did he have any experience in detailing and tolerancing of injected moulded and plastic components he replied, “I certainly do not.” Asked whether he would design the band and the clasp of a watch to be just strong enough to take the weight of the watch or would he build in an appropriate safety factor or level of robustness he answered:

“I’m not a designer and it would depend on the specification that I was supplied with.”

60 Asked about normal industry practice in manufacture he said, “As you are aware I have had little to do with clips so I do not know what normal practice is.” Dr Martin was asked about the fatigue tests he had conducted and said that he did not believe multi-directional loads were required. After counsel had referred to the range of movements of the wearer of the belt with the phone case attached to it, including being caught when getting out of a car, Dr Martin gave the following answers:

“Q. Yes but you see Doctor what I’m saying to you sir is that it is a combination of tensile and compression forces as opposed to just a compression force? A. The predominate force would be compression. It may well go into tension if somebody keeps on going after they realise they’ve been caught.

Q. Now Doctor I want to suggest to you that if that’s the case that that could be better demonstrated by wearing the phone case and clipping it onto a belt as opposed to applying, and I use the stapler as an example, just force on the top of the lug and pressing the cycle a number of times? A. I don’t think that that’s going to occur very often whereas the moving of the clip is going to occur many more times and so that’s the more relevant test.

Q. But you see Doctor ultimately, you say that that’s what you think is the more common occurrence, however Doctor, you can’t rule out the fact that there are other movements such as I’ve indicated wearing at belt height or even in the short pocket? A. That’s correct.

Q. As some do or sticking it on as you see with some tradespersons or people who just feel the need to fix it to a stationary object like a post or a pole. In that regard Doctor that’s also a further combination of forces as opposed to just opening and closing the mechanism? A. There is absolutely no doubt.

Q. And you see Doctor I suppose it’s because of the infinitely wide range of functions that you just can’t be capable of selecting or deliberately selecting just one mechanism of open and closing the clip as being definitive? A. If you were flying an aeroplane you could afford to do the tests that you like to do. With low cost items as you’re going to do tests, then you need to keep them relatively simple because it because [sic] not cost effective.”

61 Counsel suggested to Dr Martin that the tensile test was one of several valid testing methods for quantifying failure. He said that was a matter of opinion. He gave the following answer:

Q. I know you have Doctor but bearing in mind you’ve conceded that it’s a combination of tensile and compression forces with some activities in the wearing of the belt, would you now also concede sir, that it is a matter of a valid testing method for quantifying failure to consider the tensile test as well? A. You should consider a tensile test yes.”

62 Dr Martin gave the following evidence:

“HIS HONOUR Q. Just going back to the second paragraph on page 9, where you say that the testing program conducted by Mr Whittaker showed considerable bias to a few types of cases, what types of cases were those please? A. Well I think the NEC Fido for example, where there were 39 tested and yet there were only twelve hundred of the unit sorry not the Fido, I beg you pardon, it’s on the wrong page, it’s the Motorola 6200 of which twelve hundred were available and 39 were tested. And indeed if you look at the table which summarises, on which is actually table 1, you can see the percentages of each case type that were tested and the Phillips Twist and the Nokia 8110--

Q. Just a moment the Phillips-- A. Twist, which is about two-thirds of the way down. The Nokia 8110.

Q. Are you looking at table 2? A. No table 1.

Q. Sorry would you explain that again to me please? A. The Phillips Twist which is about two-thirds of the way down, there are 3.48 per cent of those were tested.

Q. I see yes. A. The Nokia 8110 2.73 per cent were tested and a Motorola 6200, 3.24 per cent were tested and then you go to the other end of the scale for example the Nokia 3810 which is about one-third of the way down, only about .072 per cent were tested.

Q. What difference does this make in terms of the clips on the cases? A. I’m not sure because I don’t know what, which particular clips were used on all cases but if one was doing the testing you would like to test a representative sample of each clips.

STANTON: Q. Just on your Honour’s point, but if the clip is the same if it’s generic, it doesn’t matter what sort of model case it is, isn’t that the case? A. That’s correct if they’re generically the same that’s correct.

Q. And you can’t rule out that the clips on all the Polstead phones were generic can you? A. Were the same.

Q. Yes? A. I’m sorry but I thought we had evidence that some were made from polystyrene and others were made from nylon.

Q. Leaving aside the component of the plastic, the structure of the clip did not differ from case to case isn’t that the case in the samples you saw? A. The structure, yes the structure of the clip, that’s correct.

Q. That’s correct? A. That’s--

Q. So I come back to the bias point that I referred you to, there’s no bias if the clips are all the same? A. But she’s doing a tensile test. The tensile test is on the material not the clip.

Q. But you see sir what I’m suggesting to you is that the bias point loses some of its emphasis if the clips are all structurally the same in terms of the size. In other words if they’re generic? A. If you’re doing tensile tests you’re doing it on the material not the clip.

Q. But you see sir, you didn’t test the plastic did you? A. That’s right you’re correct, we didn’t test the plastic.

Q. So you didn’t do a tensile test? A. Absolutely correct.”

63 Counsel suggested to Dr Martin that his fatigue test was hardly representative of service conditions. Dr Martin did not agree. He conducted no tests on any brand of case other than Polstead and was not familiar with the Scala clip.

64 After Dr Martin’s re-examination he was questioned by the trial Judge as follows:

“HIS HONOUR: Q. Dr Martin, I’m particularly interested in the third paragraph of your conclusion. When tests conducted by Mr Whittaker were not representative of service conditions, that really interests me. A. Uh-huh.

Q. I was wondering if you could explain to me in as lay terms as simple terms as possible, as though you were telling a first year class what you mean by that. Can you elaborate it for me in very simple terms? Take your time, I’m very interested in it? A. Okay. Can we stick with the people who put them on and off belts.

Q. Yes? A. That’s probably where it’s most--

Q. Yep? A. Normal procedure is to put it on, press the thumb tab down so that you open the clip up and slide it on. Now some people do that lots and lots of times a day. Like, not labourers but tradesmen, trades people who always seem to be answering the phone and never available when you want them. And that’s the predominate loading that I see but certainly some people will walk into walls and get up from chairs and they will catch the phone. Now the problem is that if you walk into a wall, you don’t apply a tensile load to the phone, rather the phone twists, particularly if you’ve got it on the side, it twists on the belt and there might be a very small tensile component to that load but generally it will be twisting. If you stand up, then the phone clip actually gets pushed together, if you catch the phone. It pushes together so that it goes into compression. Certainly if you don’t realise that the phone is caught and you continue to stand up then you can put it into tension but I would expect that most people would recognise they’ve been caught before that really occurs and sit down. I’m sure some people have stood up and lifted the chair with them and it only happens in the ..(not transcribable).. cases. Hopping in and out of a car, I would see as the phone were behaving much the same way as walking up against a door. Very limited tensile load on it but rather a twisting load which actually tends to make the phone come off the belt, open up a little bit and ..(not transcribable).. tensile load and come open but is that clear enough.

A. Well I think that representative of the normal use has got to cover the forces that are applied most of the time. There’s no doubt that some people might, subject to do a very high tensile load and it may well fail and that could occur to any phone but that’s not normal use. Normal use is putting it on, taking it off. Perhaps it might get caught from time to time but I’m sure that if you count the number of times a tradesman takes it off and on and the number of times he catches it on the door, you’ll find that the on and off vastly outweighs the catching on the door.

Q. Yes? A. And so that is why we considered it to be normal use. And we could certainly try to apply sideways forces at the same time as we did opening and closing but it becomes a very expensive exercise.”

65 The only other expert evidence was a report by Harry Burn of H L Burn & Associates dated 22 December 1999 tendered on behalf of Polstead. However, the conclusions in that report were rejected and it is unnecessary to refer further to it.

Reasons for judgment

66 In his judgment of 14 December 2000 Judge Naughton said “the case was heard and determined without a transcript”. In fact the evidence was recorded and was transcribed for the purposes of the appeal. Judge Naughton referred to the expert evidence in various places in his reasons for judgment. At the beginning he said that Ringgrip appeared to have trouble formulating its cross-claim which went through four versions. In the first further amended cross-claim, which was the first amended cross-claim filed after Mr Whittaker’s report of 23 December 1999, specific reference was made to that report. The second further amended cross-claim withdrew that reference. By letter dated 18 April 2000 Ringgrip’s solicitors provided further and better particulars. The letter stated:

“It will be alleged by the defendant that the clip mechanism suffers from the following problems, in addition to the faulty pin, which render the cases unmerchantable and unfit for their intended purpose:

(i) the clip commonly fractures across its full width when subjected to load which is a result of the shaft intersection or notch created where the yoke meets the main body of the clip;

(ii) the clip breaks or fails as a result of the tearing of the material around the hole in the plastic yoke;

(iii) significant variation in strength between material types used in the injection moulded clip, particularly parts moulded from polypropylene;

(iv) weakening of the integrity of the clip due to gas entrapment within the mould parts.

On the basis of representative sampling and testing, it is alleged that all cases supplied by the plaintiff to the defendant suffer from the defects noted above.”

67 As his Honour observed, Ringgrip’s cross-claim claimed the price not of “all” the phone cases supplied to Ringgrip but 46 per cent of them. The trial Judge continued:

“The said further and better particulars were taken from the report of Mr Whittaker dated 23 December 1999 to which I have referred. In a later report, dated 14 February 2000, Mr Whittaker said (p2):

all

all’

It was not proved by the defendant that ‘all’ cases would have to be modified. Mr Whittaker was provided with 358 Polstead cases for testing. He made no tests on cases which had been returned broken whilst in the possession of an ultimate purchaser. He did not carry out any material failure analysis on any such cases. I find that to be a significant defect in his evidence.

The main problem I found with Mr Whittaker’s tests was that they were not representative of service conditions. In that regard I accept, and have preferred generally, the evidence of Dr G G Martin for the plaintiff. I considered him to have been relevantly better qualified, more logical and generally more persuasive than Mr Whittaker. I shall revisit the expert evidence later on.”

68 The trial Judge referred to the method of testing the pins that Mr Williams, Ringgrip’s factory quality assurance manager, devised for the staff on 9 May 1998. Mr Williams told the staff to push the pin with a bald point pen and the pen would move out. The trial Judge said:

“As I understand their evidence, both of the expert witnesses, Mr Whittaker and Dr Martin (certainly Dr Martin), considered that test to be inappropriate. I find that it was inappropriate.”

69 Towards the end of his reasons the trial Judge said:

“I shall now return to the evidence of Mr Whittaker, the defendant’s expert witness. His instructions were in leading form and framed as a request for a written opinion as to whether:

‘(a) the plastic clip attached to the back of the Polstead premium leather mobile phone cases tested is faulty either by design or manufacture, so that it is likely to detach itself from the case causing the case to fall to the ground.

(b) the pin mechanism which forms part of the plastic clip referred to in (a) above is faulty either by design or manufacture, so that it is likely to cause the clip to detach itself from the case causing the case to fall to the ground.

(c) there are any other reasons that would lead (him) to the conclusion that the Polstead premium leather mobile phone cases are not of merchantable quality.’

The above instructions went beyond the scope of the only written complaint from the defendant to the plaintiff. That was the letter from Mr Burgess dated 18/28 May 1998.

Mr Whittaker’s report of 23 December 1999 was nearly a year after he had received instructions to provide one. He recorded in his report that the first batch of cases which he received from the defendant for testing were received by him on 2 February 1999. He was unable to give any reason for the delay in providing his report other than that he was supplied with cases to test ‘only in small batches’ from the time of his original instructions through to 23 December 1999. That seems to be inconsistent with any major problem with the pins in all of the 102,543 cases which the defendant had quarantined in its warehouse since 9 May 1998.

In recording what his instructions were Mr Whittaker did not say that he had been instructed that the defendant had received any complaint about phone cases supplied by the plaintiff to the defendant. More particularly, he did not say what the complaint had been. He was in substance given carte blanche to try and find any problem he could with the defendant’s remaining stock of cases and to do so by reference only to ‘small batches’ of samples provided to him in six instalments spread out over nearly a year.

When asked in cross-examination what were the problems, in practice, with the cases which he tested Mr Whittaker said that someone wearing one of them on a belt, with a phone on it, might bump it against a door or over force it when getting out of a car. He did not refer to attaching and detaching the cases from a belt for the purpose of using the phone and putting it away after normal use. As previously noted Mr Whittaker did not carry out any tests on cases which had been returned to the defendant broken after sale to any end purchaser.

Mr Whittaker concluded that:

‘It is my opinion that many of the clip assemblies used in the Polstead mobile phone cases tested are faulty either by design specification or manufacturing process and therefore are not of merchantable quality and/or fit for the purpose.’

all

Overall, I found Mr Whittaker’s evidence to be unimpressive. I accept the evidence of Dr Martin that the tests conducted by Mr Whittaker were not representative of service conditions, and that:

‘There is no evidence that the cases, in general, were of unmerchantable quality. An entire batch cannot be condemned because a few samples from it failed in unrepresentative tests such as the pull test, when the majority passed.’

I find that some of the clips on mobile cases sold by the defendant to the plaintiff were defective and that consequently those cases were of unmerchantable quality. I find, however, that the number of such cases did not exceed 200. Giving the defendant the benefit of the doubt as to what was the precise number in a range of one up to 200 I award it 200 x $6.75, that is $1,350, in its cross-claim.”

70 It was not accurate to say that Mr Whittaker was unable to give any reason for the delay in providing his report from the time of his original instructions other than that he was supplied with phone cases to test only in small batches. Under aggressive cross-examination from the trial Judge he said that he was not asked to finalise a report until nearly the end of that year. This brought forth from the trial Judge the response, “Well that’s a statement I’ve made to you, what I am asking is the reason for it or don’t you have one?” Mr Whittaker repeated that he was not “actually required to submit a report until around about the end of last year”.

71 Ringgrip directed the following grounds of appeal to these conclusions:

“1. His Honour erred in holding that the Appellant’s expert, Mr Andrew Whittaker (‘Whittaker’) came to an illogical and unacceptable conclusion that all of the premium mobile telephone cases (‘the cases’) supplied by the Respondent in the order of 102,543 cases, on the basis that in so holding the learned trial judge did not take into account the following:

1.1 The manner in which Whittaker tested the cases both as to the plastic component and the pin mechanism;

1.2 The length of time taken and the industrial design experience of Whittaker in coming to the opinion the cases were defective;

1.3 The conclusion plausibly held despite cross examination that the cases were defective; and

1.4 The trial Judge’s finding that there were cases which were unmerchantable for the reasons found by Whittaker.

2. His Honour’s finding that Whittaker’s tests were not representative of service conditions was against the evidence called of Whittaker, and also of the witnesses of the Appellant such as Clive Williams, Neale Burgess, Jodie Messenger, Robyn Johnston, Phillip Foote, Theo Poursanidis, Themistocles [sic] Demou and the exhibits comprising the cases in evidence.

3. His Honour erred in holding that the evidence of Dr G G Martin, called by the Respondent should be preferred to Whittaker as he was better qualified, more logical and generally more persuasive, on the basis that there was evidence to the contrary viz;

3.1 Martin conceded he was not experienced in industrial design specification to any relevant degree;

3.2 He had not sighted the curriculum vitae of Whittaker, attached to his report Exhibit 7;

3.3 That Martin had not conducted or had carried out analysis by a chemist of the plastic components of the clips mechanism unlike Whittaker; and

3.4 Martin had not sighted the Amdel report attached to Exhibit 7 which investigated the plastic used in the clip mechanism of the cases examined.

…

36. The rejection of the instructions given to Whittaker to prepare his report, admitted without objection but found to be beyond the scope of the letter written 18/28 May 1998 by Burgess, constituted an error of law. In similar circumstances His Honour erred in attaching significance to the delay in the compiling of the report by Whittaker by up to a year from when it was requested as being indicative of the absence of a defect in the pins in the cases quarantined. It was a finding against the unchallenged evidence of Whittaker by way of explanation as to the time that had elapsed.

37. The rejection of Whittaker’s evidence and the reports prepared in preference to Dr Martin’s report were, as findings by His Honour, in error for the reason that no proper basis or foundation was made out to warrant the wholesale rejection of Whittaker’s evidence. His Honour further erred in law in failing to allow Whittaker to give oral evidence by way of answer to Martin’s report on the ground that such evidence would not be in the form of a written report and therefore inadmissible.”

72 In Moylan v Nutrasweet Company [2000] NSWCA 337 at 35 in a judgment with which both Beazley and Giles JJA agreed, I said:

Flannery v Halifax Estate Agencies Limited

‘a bare summary of the expert evidence given on behalf of each party, being introduced with the observation that the plaintiffs’ evidence was ‘entirely different’ from that called by the defendants. Ten lines or thereabouts is spent on the plaintiff’s case with the bare assertion of the conclusion ‘the property had suffered from significant structural movement’ without any supporting argument or detail beyond saying ‘They drew my attention to a number of features concerning the property which they said confirmed their opinion …’

Then just over a page is spent on the defendants’ case, with the conclusions from Mr Atkinson’s report of 4 March 1997 being expressly quoted. Again, assertion and not supporting evidence or argument is there set out.’

64 The conclusion of the trial judge in that case was expressed in a paragraph which opened with the hallowed statement (at 380):

‘I have had the advantage not only of hearing the various witnesses give evidence but also of seeing the way in which they reacted to the questions that they were asked. Having done so, I prefer the expert evidence that was given for the defendants to that which was given for the plaintiffs. I find, on the balance of probabilities, that the property was described reasonably accurately by Haining in his report and that the opinion expressed by Mr Atkinson is correct.’

65 There was a little more elaboration in the following dozen or so lines of the trial Judge’s reasoning process.

Eckersley v Binnie

Flannery

‘where the dispute involves something in the nature of an intellectual exchange, with reasons and analysis advanced on either side, the judge must enter into the issues canvassed before him and explain why he prefers one case over the other. This is likely to apply particularly in litigation where as here there is disputed expert evidence…’

With due respect I entirely agree.”

73 Ringgrip’s defence and cross-claim were based on a claim that the goods delivered were not reasonably fit for the known purpose for which they were required and were not of merchantable quality; s19 of the Sale of Goods Act 1923. In his judgment in Australian Knitting Mills Limited v Grant (1933) 50 CLR 387 at 418 Dixon J said:

“The condition that goods are of merchantable quality requires that they should be in such an actual state that a buyer fully acquainted with the facts and, therefore, knowing what hidden defects exist and not being limited to their apparent condition would buy them without abatement of the price obtainable for such goods if in reasonably sound order and condition and without special terms.”

74 His Honour’s statement has been widely referred to and discussed in subsequent cases and textbooks. For present purposes, the critical part is that which speaks of existing hidden defects. Ringgrip’s case was about hidden defects or weaknesses in the phone cases supplied.

75 In Grant v Australian Knitting Mills Limited [1936] AC 85 the Privy Council reversed the decision of the High Court. In George Wills & Co Limited v Davids Pty Ltd (1957) 98 CLR 77 five members of the High Court with Dixon CJ presiding, said at 88:

as goods of that description or character

Grant’s case

defects

in cases of this type

76 Having suffered the experience of phone cases being returned as broken or defective, Ringgrip set aside or quarantined substantial numbers of phone cases and had tests conducted on them. The phone cases quarantined were tested in batches by the process of sampling described by Mr Williams. Batches of phone cases were sent for testing by Mr Whittaker who concluded that the goods were not of merchantable quality. The trial Judge accepted that some of the phone cases, namely those which had actually broken in the hands of customers, were not of merchantable quality. As Ringgrip put it this finding raised two possibilities, the first that there was something peculiar about the pin or the clip in those two hundred phone cases which made them defective whereas all the other phone cases were of merchantable quality or, the second that the defect in the pin or the clip in those two hundred phone cases was a result of a defect in all the phone cases Polstead supplied. If the design and manufacture of the goods were such as to be defective, which according to Mr Whittaker they were, damages could not be limited to those cases which actually failed. No reputable wholesaler would accept and on-sale goods which stood a good chance of failing in the hands of the ultimate customer. There was no rational basis upon which the trial Judge could limit his finding about merchantable quality to the few phone cases which failed.

77 In Lawry v West (1947) 73 CLR 289 at 299 Dixon J said that he understood the word “sample”, “whether as a matter of law or as a matter of popular speech, to mean a part of a fluid or substance taken from some larger quantity because it is a fair representation of the whole.” Of course, as his Honour remarked, if the sampling is insufficient to produce a reasonably certain result the further conclusion is inevitable that a fair sample was not taken. Judge Naughton never addressed that question if it was raised beyond quoting Dr Martin’s assertion that an entire batch cannot be condemned because a few samples from it failed in unrepresentative tests such as the pool test, when the majority passed. Mr Whittaker’s conclusions could not be brushed aside with such paucity of reasoning.

96 Towards the end of his reasons for judgment Judge Naughton said:

“Mr Burgess said, and I accept, that he had been employed by the defendant in late January 1998 ‘to improve the situation as far as the business was concerned from a sales perspective’. He said that when he was employed ‘sales were very low but stock was greatly in excess’. He said that ‘there were a variety of complaints’, namely that cases were not fitting, lack of cut-outs and ‘occasional’ complaints about clips. I have found that his letter of 18/28 May 1998 was untrue. I found that I could not rely on the evidence of Mr Burgess on critical matters. He had tried to sell the defendant’s oversupply of phone cases to Dick Smith Electronics Pty Limited on the basis that there was nothing wrong with the clips on them. About three months later he asserted that there was a major problem with them. I found his evidence and that of Mr V M Lescai, the defendant’s company secretary, that the problem only arose as a significant matter between 6 April 1998 and 18/28 May 1998 to be inherently unlikely, especially in view of the unqualified payments by the defendant to the plaintiff of $209,025 on 9 April 1998 and $163,292.45 on 1 May 1998 and the further order for more of the cases on 12 May 1998. I find that there was no significant problem at all with the clips and/or pins in them up to June 1998 when the said letter was sent.

I find Mr Burgess’ version of what he said at the 6 April 1998 meeting to be inherently unlikely. That version was:

Burgess to Anand: ‘Is there any problem with the clips?’

Anand: ‘There’s no problem.’

Burgess: ‘We will pay the money.’

Mr Burgess’s employment with the defendant was terminated on 4 December 1998. The evidence did not disclose why.”

97 Nowhere outside the passages I have quoted does Judge Naughton explain why he could not believe Mr Burgess’s evidence on critical matters. I am left with the distinct impression that Mr Burgess’s signature above his name and the reference to his law degree played a significant part in Judge Naughton’s conclusion that he was an unimpressive witness whose evidence on critical matters the Judge could not believe.

98 Grounds 5 and 31 of Ringgrip’s grounds of appeal were as follows:

“5. His Honour’s finding that the witness Neale Burgess, called by the Appellant, was unimpressive and whose evidence on critical matters he could not believe, was a perverse and irrational finding for the reasons that:

5.1 His Honour wrongly assumed that because Burgess signed his name LLB(Hons) he was attempting to intimidate recipients of his correspondence – a view expressed by his Honour in the course of the trial;

5.2 His Honour failed to identify the manner in which Burgess was unimpressive nor did he delineate specifically the critical matters upon which he did not believe Burgess; and

5.3 His Honour never put to counsel in the course of his address the matters upon which he was concerned as to whether he could believe Burgess.

31. The reference to the termination of Burgess’ employment with the Appellant, insofar as it was referred to and relied upon by His Honour in assessing the credibility of Burgess, was an error in law because:

31.1 Burgess volunteered himself that he was terminated, and that he did not know, despite instituting proceedings following his dismissal, the reasons for his dismissal because the proceedings were settled without a reason being given; and

31.2 The finding that the evidence did not disclose a reason could not in the totality of the evidence on this matter be used to form of itself an adverse finding as ultimately formed by His Honour.”

99 In my opinion, these grounds are amply made out.

Mr Foote

100 Ringgrip called Mr Foote, the general manager and director of Mobiletronics Communications Aust Pty Ltd, a specialist retailer of communications equipment and accessories, which included mobile phone cases. His prime responsibility was to look after the retail arm of the business. Mobiletronics purchased phone cases from Ringgrip from late 1996 or early 1997 until about January 1999. Asked about issues of quality with the premium mobile phone cases supplied by Ringgrip to Mobiletronics, Mr Foote said there was an issue of quality with clips coming away or coming apart and pins falling out. The problem arose in March or April 1998. Mr Poursanidis, one of Mobiletronics store managers, raised the issue. He had found instances where pins were dropping out. Mr Foote observed a couple of units where the pins virtually slid in and out. There was nothing to hold them in. He raised the matter with Ms Messenger at Ringgrip. Mr Foote spoke to Mr Burgess. Ringgrip agreed to replace whatever goods needed to be replaced. After 7 April 1998 the clip problem escalated. Between April 1998 and June 1998 Mr Foote was still getting complaints about clips. He had put in place a monitoring system with his store managers who were required to report to him and he was receiving such reports, at the very least weekly. He gave evidence of Ringgrip replacing Polstead stock with another brand, Scala. In cross-examination Mr Foote was referred to other problems with Ringgrip products. The following took place during Mr Foote’s cross-examination:

“Q. Now you’ve got there in exhibit 13, a document of yours, ‘broke plastic clips’ is that right? A. Yep.

Q. Would you look at exhibit 3 for me please and tell me what part of the clip, the plastic part of the clip was broken? A. What I was referring to was the actual clip being loose. I can’t see a broken clip there but talking generically--

Q. Well you can’t see a plastic clip there except the large handle, clipped handle if I can call it that, isn’t that right? A. Well I would think it’s a plastic clip. If you tell me what it is other than the plastic clip, I’m happy to agree with you.

Q. You can see the clip is made of metal, the clip is part – the handle of the clip is plastic perhaps but the clip itself is – the rest of the clip is a metal? A. If that makes you happy yeah.

Q. There was no aspect of the plastic breaking was there in that clip? A. As such no.

STANTON: In the one in question that he’s got?

STEWART: No generally I’m talking.

WITNESS: Am I allowed to say something?

Q. Yes you are? A. I think what we need to understand here is that when I’m writing someone to confirm an issue or a problem, I’m not going to go into paragraph after paragraph about specific problems. We’d discuss this issue and I’ll follow that up so Neale Burgess would be in the loop.

HIS HONOUR: Q. Mr Foote just so that you can come back and understand the question, you were asked to explain to Mr Stewart and I don’t think you’ve done it yet-- A. Oh okay.

Q. –in what sense by reference to exhibit 3 were the plastic clips broken. Would you please explain, demonstrate that to him, I think that’s what he was trying to get you to do. A. Well I’m not going to demonstrate it but my issue was the clip being held on with that pin, the pin slides out.

Q. The which, the pin? A. That the pin slides out, that was the issue with the plastic clip.

Q. Did you see it sliding out? A. I didn’t see it so – well, actually yes I did, on a couple of samples sent to me from customers, yes I did--

Q. You don’t know how it had slid out? A. As I understood it is just--

Q. Do you know? A. No I don’t know.

STEWART: Q. Sir incidentally did you keep those examples that the clips you actually sighted with these pins sliding out? A. For a period of time I would yes.

Q. Where did you put them then, where did you send them off to? A. Jodie Messenger.

Q. With a note saying that customers had come back and told you these-- A. I can’t recall specifically--

Q. –pins were sliding out? A. I can’t recall specifically.

Q. So you may not have-- A. It has been three years.

Q. You may not have sent a note back at all? A. I do know discussing it with, in person.

Q. But can you answer my question if you would sir, you don’t recall sending back any written note with these two items, these two pouches? A. No, absolutely.

Q. When you say you saw them sliding out, what do you mean you saw them sliding? A. Well they just wouldn’t – the pin would not stay in like if you attempted to put it on your belt and moved it around or whatever, it would just eventually slide out.

HIS HONOUR: Q. How do you know that? A. Because we actually did it. We actually had a play with it and it was doing that.”

101 Exhibit 13 was a message from Mr Foote to Ms Messenger sent on 30 June 1998. It referred to issues raised by a number of stores in regard to the quality and reliability of some “GP products”.

“Item 1 Pouches:

Most stores are experiencing problems with pouches. Typically the complaint pertains to pouches ‘falling’ apart and broken plastic clips etc. Whilst I am aware that this problem is being overcome with the sourcing of pouches from Scala, the speed at which this is being implemented is not satisfactory. Looking through the minutes of past Managers meetings this particular problem was raised on April 28, May 26 and June 9 as well as at today’s meeting.

As this is beginning to erode confidence at some stores and is a general inconvenience to our customers it is imperative that this is addressed immediately.

On the basis of this it is requested that effective immediately all pouches that are shipped to Mobiletronics be Scala product and that the existing ‘problem’ stock be recalled.”

102 The re-examination was as follows:

“STANTON: Q. I take it Mr Foote since you stopped dealing with Ringgrip or Mistral as it’s now known in 1999 there’s been no further business contact between your company and theirs? A. No.

HIS HONOUR: Q. Mr Foote do you think it would be fair to describe your approach to your attitude to Ringgrip as being somewhat aggressive? A. You mean when we terminated our arrangements?

Q. Yes. A. It was a little ugly.

Q. Do you think perhaps you’re a little bit biased about this matter against Ringgrip? A. No, no I don’t think that’s really fair sir.

STANTON: Q. You’ve come here freely in terms – I mean with a subpoena but freely to give the evidence have you not? A. That’s correct yes.

Q. And there’s been no compulsion on you at any stage to come? A. No absolutely, no.

Q. Whatever may have been the problem with the product you’ve got nothing against the personnel at Ringgrip is that the case? A. No. This is business.

OBJECTION

STEWART: I had better object to the ‘no compulsion’. I mean if he’s got a subpoena he’s got to attend.

HIS HONOUR: Yes.

Q. Well did you request the subpoena sir? A. No I didn’t.

Q. And a subpoena was given to you nevertheless? A. Correct.

Q. And your convenience has been accommodated? A. Ringgrip have taken care of that yes.

Q. Your expenses have been paid? A. I hope so yes.

Q. And finally as I was saying, in terms of your attitude towards the Ringgrip personnel there’s been nothing of a personal nature? A. No. This is business.”

103 In his reasons for judgment of 14 December 2000 Judge Naughton referred to a memorandum of 30 June 1998 (Exhibit 13) described as one from Mr Foote to Mr Burgess. In fact it was from Mr Foote to Ms Messenger apparently sent on by her on the same day to Mr Burgess. His Honour said:

“Mr Foote’s evidence was based on hearsay. He was unable to refer to any supporting documentation. I found him to be impatient and aggressive when questioned as to detail. He conceded that some of the problems with cases were their failure to fit, and absence of cut-outs. He agreed that relations between he [sic] and the defendant were acrimonious in January 1999 when his company terminated its trading arrangements with the defendant. I find that he was disenchanted generally with the defendant for reasons going beyond alleged defective clips on phone cases. He attended court under subpoena from the defendant, having had to travel from Victoria to do so. I found him to have been somewhat biased and that his evidence needed to be treated with considerable caution. I am unable to make any findings of significant assistance to the defendant based on Mr Foote’s evidence.”

104 Grounds 33 to 35 of Ringgrip’s notice of appeal were as follows:

“33. The finding of his Honour that the appellant’s witness Phillip Foote was impatient and aggressive when questioned as to detail, was unwarranted and against the evidence and the weight of the evidence.

34. The finding of his Honour that Foote was disenchanted with the appellant for reasons going beyond the defective clips on phone cases for which his Honour relied on the following facts to support such a finding namely:

34.1 Attendance at court under subpoena from Victoria;

34.2 His being found to be biased without defining in which way he was thereby requiring his evidence to be treated with caution;

were each matters for which there was no evidential basis to warrant the finding being made. In the premises the rejection of his evidence and the refusal to make findings of significant assistance, which were properly open, was an error of law.

35. The rejection of the questions sought to be asked of Foote in his evidence as follows:

35.1 The quantum of sales figures;

35.2 The percentage of mobile phone accessories supplied by the appellant to Mobiletronics;

Evidence Act

35.4 The rejection of evidence as allegedly infringing the hearsay rule;

were all matters constituting errors of law resulting in a miscarriage of justice.”

105 One thing that emerged clearly from the evidence was that Mobiletronics had significant problems with the Polstead cases sold to it by Ringgrip. That this was so was amply supported by the admitted evidence of Mr Foote. Large parts of his evidence were rejected. Judge Naughton seems to have given no account to the fact that there were continuing complaints emanating from Mobiletronics stores about the clips on the cases. No account was given to the fact that they insisted that the cases be withdrawn and replaced by Scala cases. All the emphasis was put on Mr Foote’s impatience and aggression when questioned as to detail, to relations between him and Ringgrip being acrimonious, to his being disenchanted generally with Ringgrip for reasons “going beyond alleged defective clips on phone cases”, to his attending under subpoena [in fact he said that he attended voluntarily] and to his having to travel from Victoria to do so. To ignore his evidence about the defects in the clips on the phone cases on the basis that he was “somewhat biased” presumably against Ringgrip and to try and put aside his evidence by saying “I am unable to make any findings of significant assistance to the defendant based on Mr Foote’s evidence” in itself involves a miscarriage of justice. Mr Foote’s evidence gave powerful support to Ringgrip’s complaint, particularly if indeed his relationship with Ringgrip at the time had been acrimonious. No sensible reason was advanced for giving it no weight at all.

Bias

106 On 8 December 2000 Judge Naughton dismissed an application made on behalf of Ringgrip to disqualify himself on the ground of ostensible bias. His Honour said that counsel for Ringgrip, Mr S J Stanton, read out a long catalogue of complaints about matters going well back into the previous nine days of the hearing. At no earlier time had the application been in any way foreshadowed. Judge Naughton said:

“It seemed as though the lengthy catalogue of complaints had been deliberately saved up until after the defendant’s case had concluded.”

107 The trial Judge observed that on several occasions during the hearing he had intervened to disclose “my tentative views”. He said that he remained open to persuasion. He was intent to focus counsels’ attention on the matters which were provisionally of concern to him. “Counsel for both sides accepted that that was a worthwhile aim and that it was being pursued in an acceptable way.” Judge Naughton referred to several authorities, the latest of which is Johnson v Johnson (2000) 201 CLR 488 where five members of the High Court at 492 (para 11) stated the test to be applied in Australia

“in determining whether a judge is disqualified by reason of the appearance of bias (which, in the present case, was said to take the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.”

Johnson v Johnson

108 Ringgrip appealed against this order. Polstead’s counsel submitted that if Ringgrip wished to pursue the challenge it should have done so by seeking leave to appeal from the interlocutory order. With due respect, I think this is an unreal approach. Judgment on the application to disqualify was given on the second last day of the hearing which concluded on the following Monday, 11 December 2000.

109 Ringgrip presented to this Court extracts from the transcript which it was said gave rise to a reasonable perception of bias. Some of these I have already referred to. The first of them was on 28 November 2000, the second day of the hearing. Vakauta v Kelly (1989) 167 CLR 568 concerned remarks made by a trial judge, during the course of the trial of a personal injuries case without a jury, critical of evidence given by the defendant’s medical witnesses in previous cases. In the course of their judgment at 573 Brennan, Deane and Gaudron JJ said:

“If the above comments made by the trial judge in the course of the trial had stood alone, we would have been of the view that the appellant, having taken no clearly stated objection to them at the time and having stood by until the contents of his Honour’s judgment were known, could not now found upon them in order to have that judgment set aside on the grounds of a reasonable apprehension of bias.”

110 Their Honours went on to say that in that particular case the statements made by the judge about his preconceived views of a particular doctor were effectively revived by what he said in his reserved judgment. In the present case the matter was raised before Judge Naughton gave judgment in the proceedings. It is no doubt true that remarks made early in the trial, which alone were not such as to give rise to any perception of bias, may accumulate with remarks made later to give rise to such a perception. On that same day, while Mr Anand was giving evidence for Polstead, Mr Burgess’ letter variously dated of May 1998 was produced and the trial Judge made the comment: “One would have thought that a lawyer with honours as Mr Burgess is apparently keen to tell us he possesses would have got the date on this letter right.”

111 Later on the same day during the cross-examination of Mr Anand, an objection was taken that Ringgrip’s counsel was cross-examining the witness “on someone else’s statement”. There followed the interchanges already quoted about the expected reaction of “an Honours’ graduate in law”.

112 As the trial continued there were several interchanges during which the trial Judge made it apparent that he was not impressed with Ringgrip’s case, largely, it seems, because in his own words “the whole thing just depends on hearsay”. Arguably this involved a misconception of parts of the Evidence Act.

113 On 8 December 2000 when counsel for Ringgrip asked the trial Judge to disqualify himself he was interrupted by the trial Judge saying: “Yeah that often happens when things look as though they are going black for a party, I’ve noticed Mr Stanton. I’ll hear your application and I’ll adjourn to consider it, and then I’ll deal with it.”

114 The major problem that the trial Judge identified about Ringgrip’s case, that it was based on hearsay, was not referred to in the reasons for judgment except in the comment that “Mr Foote’s evidence was based on hearsay. He was unable to refer to any supporting documentation.” The conclusion in the reasons for judgment followed from his Honour’s decision not to accept any evidence which favoured Ringgrip’s case.

115 What his Honour said during the hearing about Mr Burgess gives legitimate cause for concern.

116 The trial Judge’s comments about Mr Burgess’ honours degree began when he read the May 1998 letter. It was not a comment suggested to him by counsel. At that time Mr Burgess had not given evidence. When he did he explained the reference to it as no more than a matter of personal pride and disposed of the suggestion that it was put there to “overawe” the recipient of the letter. At best it went to Mr Burgess’ credit but in light of his explanation had no weight at all on that ground. Yet it emerges again in the judgment as an immediate reason for rejecting his evidence on all critical matters. In the joint judgment in Vakauta v Kelly it was said that a lay observer would be likely to see the derogatory and wide-sweeping references to the doctor in question as indicating “that his Honour was concerned to vindicate his preconceived and very strong adverse views about the reliability” of the doctor “as a witness and had allowed those views to prejudice his whole approach to the case to the detriment of the defendant”. In the present case there must be added the statements Judge Naughton made about Ringgrip’s case being based on no more than hearsay and his particular interest when Dr Martin was giving evidence which might be thought to go to discredit Ringgrip’s evidence. Thus, on 7 December 2000, his Honour addressed the following question, already quoted, to Dr Martin:

“Just going back to the second paragraph on page 9, where you say that the testing programme conducted by Mr Whittaker showed considerable bias to a few types of cases, what types of cases were those please?”

117 On the same day his Honour put this question, again already quoted:

“Q. Dr Martin, I am particularly interested in the third paragraph of your conclusion. When tests conducted by Mr Whittaker were not representative of service conditions, that really interests me. A. Uh-huh.

Q. I was wondering if you could explain to me in as lay terms as simple terms as possible, as though you were telling a first year class what you mean by that. Can you elaborate it for me in very simple terms? Take your time, I’m very interested in it?”

118 Neither of these matters, that the testing programme conducted by Mr Whittaker showed considerable bias to a few types of phone cases or that the tests were not representative of service conditions, were put by the trial Judge or by Polstead’s counsel to Mr Whittaker when he had previously given evidence. As I have already pointed out the trial Judge gave no meaningful reasons for preferring Dr Martin’s evidence.

119 In my opinion, the matters to which I have referred were such as might lead a fair minded lay observer reasonably to apprehend that the judgment itself was affected by bias against Ringgrip.

Conclusion

120 For the reasons I have given, I am of opinion that the verdict and judgment must be set aside and a new trial ordered. The respondent, Polstead, must be ordered to pay Ringgrip’s costs of the appeal but should have the benefit of a certificate under the Suitors’ Fund Act 1951 if so qualified. The new trial should not be conducted by Judge Naughton. His Honour has acted in the previous trial in a way which might give rise to a perception of bias against Ringgrip. That perception will inevitably carry over into the new trial if Judge Naughton presides.

121 The result of this decision will be that in all probability whichever side loses in the new trial will carry the costs of two trials, the first of which ran for over ten days. It is a matter of public concern that what I regard as a straightforward commercial claim involving, in commercial terms, a relatively small amount of money should, because of the way the trial Judge conducted the first trial, ultimately cost the parties more than the amount in issue.

122 Polstead submitted that other orders should be made about the new trial, that a substituted verdict for a lesser amount should be entered for Polstead but judgment not entered until the conclusion of the new trial with a condition enabling Polstead to apply to the District Court for leave to sign judgment on the ground that Ringgrip had delayed the hearing of the new trial. The complexities of such a proposal are likely to impose even greater expense upon the parties. I see no basis in the submissions put for each party being ordered to pay its own costs of the appeal or for any other order than that Polstead having strenuously sought to support the judgment should now be ordered to pay Ringgrip’s costs of the appeal.

Orders

123 I propose the following orders:

1. Appeal allowed;

2. Set aside the judgment and orders made by Judge Naughton on 14 December 2000;

3. Direct a new trial before a Judge of the District Court other than Judge Naughton;

4. The costs of the first trial to be in the discretion of the Judge hearing the new trial;

5. The respondent to pay the appellant’s costs of this appeal.

124 BEAZLEY JA: I agree with Sheller JA.

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Citations

Mistral International Pty Ltd v Polstead Pty Ltd [2002] NSWCA 321

Most Recent Citation

Young v King (No 12) [2017] NSWLEC 150

Cases Citing This Decision

10

Stenning v Sanig [2015] NSWCA 214

Mackinnon v BlueScope Steel (AIS) Pty Ltd [2009] NSWCA 94

Young v Cesta-Incani [2007] NSWCA 229

Cases Cited

6

Statutory Material Cited

2

Moylan v Nutrasweet Co [2000] NSWCA 337

Lawry v West [1947] HCA 5

Johnson v Johnson [2000] HCA 48

CITATION:	MISTRAL INTERNATIONAL PTY LTD (Formerly known as Ringgrip Pty Ltd) v POLSTEAD PTY LTD [2002] NSWCA 321
FILE NUMBER(S):	CA 41031/00
HEARING DATE(S):	26 August 2002, 27 August 2002
JUDGMENT DATE:	21 October 2002
PARTIES :	Mistral International Pty Ltd - Appellant Polstead Pty Ltd - Respondent
JUDGMENT OF:	Meagher JA at 1; Sheller JA at 2; Beazley JA at 124

LOWER COURT JURISDICTION :	District Court
LOWER COURT FILE NUMBER(S) :	5527/98
LOWER COURT JUDICIAL OFFICER :	Naughton DCJ

COUNSEL:	J T Gleeson SC/S J Stanton - Appellant D Cassidy QC/C K Stewart/N Potts - Respondent
SOLICITORS:	Aitken McLachlan & Thorpe - Appellant Dominic David Stamfords - Respondent
CATCHWORDS:	SALE OF GOODS - merchantable quality - rejection of expert evidence - insufficient reasons given for rejection of evidence - apprehension of bias - new trial ordered
LEGISLATION CITED:	Sale of Goods Act 1923 Suitors' Fund Act 1951
CASES CITED:	Moylan v Nutrasweet Company [2000] NSWCA 337 Australian Knitting Mills Limited & Anor v Grant (1933) 50 CLR 387 Grant v Australian Knitting Mills Limited [1936] AC 85 George Wills & Co Limited v Davids Pty Ltd (1957) 98 CLR 77 Lawry v West (1947) 73 CLR 289 Johnson v Johnson (2000) 201 CLR 488 Vakauta v Kelly (1989) 167 CLR 568
DECISION:	1. Appeal allowed; 2. Set aside the judgment and orders made by Judge Naughton on 14 December 2000; 3. Direct a new trial before a Judge of the District Court other than Judge Naughton; 4. The costs of the first trial to be in the discretion of the Judge hearing the new trial; 5. The respondent to pay the appellant's costs of this appeal.