Vautin v BY Winddown, Inc (formerly Bertram Yachts) (No 4)
[2018] FCA 426
•10 April 2018
FEDERAL COURT OF AUSTRALIA
Vautin v BY Winddown, Inc. (formerly Bertram Yachts) (No 4) [2018] FCA 426
File number(s): NSD 546 of 2016 Judge(s): DERRINGTON J Date of judgment: 10 April 2018 Catchwords: CONSUMER LAW - Sale of goods – Acceptable quality – Motor vessel – Defective construction of hull and superstructure – Goods with latent risk not of an acceptable quality
CONSUMER LAW - Sale of goods – Acceptable quality – Right to reject – Whether rejection period expired – Whether nature and extent of breach of warranty had become “apparent” – Complexity of nature of defect
CONSUMER LAW - Sale of goods – Fitness for purpose – Defects generating risk in the use of a vessel – Not fit for purpose
CONSUMER LAW - Sale of goods – Manufacturer’s warranty – Statutory guarantee – Non-compliance
DAMAGES – Value of vessel at date of supply – Adequacy of evidence – Sale price less cost of repairs
DAMAGES – Loss of use of a vessel as part of general damages – Measure of loss – Rate of depreciation whilst vessel not able to be used
Legislation: Competition and Consumer Act 2010 (Cth)
Competition and Consumer Act 2010 (Cth) Sch 2 (Australian Consumer Law)
Trade Practices Act 1974 (Cth)
Consumer Guarantees Act 1993 (NZ)
Cases cited: Admiralty Commissioners v SS Chekiang [1926] AC 637
Admiralty Commissioners v SS Susquehanna [1926] AC 655
Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109
Anthanasopoulos v Moseley (2001) 52 NSWLR 262
Apollo Shower Screens Pty Ltd v Building and Construction Industry Long Service Payments Corp [1985] 1 NSWLR 561
APS Satellite Pty Ltd (formerly known as “Sky Mesh Pty Ltd”) v Ipstar Australia Pty Ltd [2016] NSWSC 1898
Australian Competition and Consumer Commission v Valve Corp (No 3) (2016) 337 ALR 647
Awad v Twin Creeks Properties Pty Ltd [2012] NSWCA 200
Baltic Shipping Co v Dillon (1993) 176 CLR 344
Baxter v Obacelo Pty Ltd (2001) 205 CLR 635
Blatch v Archer (1774) 1 Cowp 63
Bray v F Hoffman-La Roche Ltd (2002) 118 FCR 1
BY Winddown Inc v Vautin (2016) 249 FCR 262
Consort Express Lines Ltd v J-Mac Pty Ltd (No 2) (2006) 232 ALR 341
Currie v Dempsey (1967) 69 SR (NSW) 116
Deal v Father Pius Kodakkathanath (2016) 258 CLR 281
Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32
Dimond v Lovell [2002] 1 AC 384
Distillers Co (Bio-chemicals) Ltd v Thompson [1971] AC 458
Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575
Ferraro v DBN Holdings Aust Pty Ltd [2015] FCAA 1127
Fink v Fink (1946) 74 CLR 127
George Zaravinos v Dairy Farmers Co-operative Ltd (1985) 7 FCR 195
Hope v Bathurst City Council (1980) 144 CLR 1
Jackson v Spittall (1870) LR5CP 542
Jones v Dunkel (1959) 101 CLR 298
Leeks v FXC Corporation (2002) 118 FCR 299
Luckins (Receiver and Manager of Australia Trailways Pty Ltd) v Highway Motel (Carnarvon) Pty Ltd (1975) 133 CLR 164
McGowan v Hills Ltd [2015] VSC 674
Medtel Pty Ltd v Courtney (2003) 130 FCR 182
Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145
Meyer Heine Pty Ltd v The China Navigation Co Ltd (1966) 115 CLR 10
Murray’s Transport NSW Pty Ltd v CGU Insurance Ltd (2013) 118 SASR 11
Nesbit v Porter [2000] 2 NZLR 465
Owners of the Steamship “Mediana” v Owners, Master & Crew of Lightship “Comet” (“The Mediana”) [1900] AC 113
Paper Products Pty Ltd v Tomlinsons (Rochdale) Ltd (No 2) (1993) 44 FCR 485
Prestige Auto Traders Australia Ltd v Bonnefin [2017] NSWSC 149
Protec Pacific Pty Ltd v Steuler Services GmBH & Co KG [2014] VSCA 338
Reg v Jameson [1896] 2 QB 425
Spittles v Michaels’ Appliance Services Pty Ltd (2008) 71 NSWLR 115
Stone v Chappel (2017) 128 SASR 165
The Hebridean Coast [1961] AC 545
Vautin v BY Winddown Inc (No 2) [2016] FCA 1235
Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538
Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463
Date of hearing: 26-28 September, 25 October 2017 Registry: New South Wales Division: General Division National Practice Area: Admiralty and Maritime Category: Catchwords Number of paragraphs: 374 Counsel for the Applicant: Dr A Bell SC and Ms L Rich Solicitor for the Applicant: Banki Haddock Fiora Counsel for the First Respondent: Mr J Renwick SC and Mr J Emmett Solicitor for the First Respondent: Norton Rose Fulbright Counsel for the Second Respondent: Mr S Prince Solicitor for the Second Respondent: JHK Legal ORDERS
NSD 546 of 2016 BETWEEN: WILLIAM VAUTIN
Applicant
AND: BY WINDDOWN, INC. (FORMERLY BERTRAM YACHTS)
First Respondent
EAGLE YACHTS PTY LTD (ACN 108 311 404)
Second Respondent
JUDGE:
DERRINGTON J
DATE OF ORDER:
10 APRIL 2018
THE COURT ORDERS THAT:
1.The applicant have judgment against the first respondent in the sum of nine hundred and eighty-six thousand, four hundred and seventy-four four dollars and fifty-six cents ($986,474.56).
2.The applicant have judgment against the second respondent in the sum of five million two hundred and twenty thousand, two hundred and seventy-five dollars and fifty-nine cents ($5,220,275.59).
3.The second respondent have judgment on its cross-claim against the first respondent in the sum of five million two hundred and twenty thousand two hundred and seventy-five dollars and fifty-nine cents ($5,220,275.59).
4.The parties are to be heard as to the amount of interest to be awarded and on the question of costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
DERRINGTON J:
Introduction
The applicant, Mr Vautin, purchased a recreational fishing vessel in October 2011. As a pleasure craft it is of the larger type, being some 74 feet long. Vessels of this type are marketed and sold for ocean going travel and as being capable of withstanding all but the most extraordinary sea conditions. Mr Vautin paid a substantial amount of money for his vessel, specifically the combined sums of US$3,000,000 and AU$1,200,000 (this latter amount being the ascribed trade-in value of a vessel he previously owned). The vessel was sold to Mr Vautin by the second respondent, Eagle Yachts Pty Ltd (Eagle Yachts). It had been constructed by the first respondent whose name at the time was Bertram Yachts Inc (Bertram), a company incorporated under the laws of the State of Delaware in the United States of America and carrying on business in and from the State of Florida. All parties agree that the vessel acquired by Mr Vautin, which is named “Revive”, is defective. The defect had its origins in the manufacturing process as a result of which the laminated PVC foam core of the vessel (being the hull, the decks and the superstructure) were not constructed in accordance with any known specification or, as has been found, Bertram’s own specifications. To date, the consequence of the defective manufacture has been that those areas of the vessel’s hull which have been subject to the most buffeting, have “delaminated” (being the separation of the outer laminate layers from the PVC foam core). Necessarily, this renders the vessel unseaworthy and not capable of being used for the purposes for which it was acquired. It certainly cannot be used in the open seas. It is possible that other parts of the vessel will delaminate or fail in the future.
Mr Vautin is, understandably, unhappy with this situation. He brings this action against Bertram as the manufacturer of the vessel and against Eagle Yachts as the entity which sold it to him. Various causes of action are pursued, including a number which arise pursuant to the Australian Consumer Law (ACL) (Sch 2 to the Competition and Consumer Act 2010 (Cth)).
The respondents do not assert that Mr Vautin is not entitled to some form of remedy. However, they dispute the nature of the remedy to which he is entitled; the quantum of any damages payable; and, the identity of the respondent whom ought to be liable to Mr Vautin. A central issue is the extent to which the defective manufacture of the vessel has rendered it unfit for its intended purposes. Mr Vautin asserts that all of the defectively manufactured shell of the vessel requires rectification to make it comply with a relevant specification. The total cost of doing so is in the vicinity of $2.975m. The respondents, on the other hand, assert remediation need only occur in the areas of the vessel where the defects have, to date, resulted in delamination. As an alternative, they submit the remediation can be limited to the hull area of the vessel.
The facts
Some of the issues in this matter arise as a result of the residency of the parties. Mr Vautin is a resident of Australia. Eagle Yachts is incorporated in Australia and has carried on business as a seller of boats here. Bertram, on the other hand, is an American company, incorporated in Delaware and engaged in the manufacture of motor vessels in the State of Florida.
The relationship between Eagle Yachts and Bertram was, effectively, governed by an exclusive dealership agreement. In summary, that consisted of a written agreement entered into in May 2005 between Bertram and Eagle Yachts whereby the latter became the exclusive supplier in Australia of “pleasure yachts” manufactured by Bertram. That agreement was entitled “Bertram Yacht, Inc Dealer Agreement 2005-2008”. By its terms that agreement terminated on 31 August 2008. However, it is accepted as between Bertram and Eagle Yachts, that the parties continued to be bound by and continued to perform the terms of the agreement (exclusive of the termination clause) subsequent to that nominated termination date. On 28 October 2013, Eagle Yachts provided two months’ written notice to Bertram that it would terminate the agreement. Consequently, on 27 December 2013, the agreement came to an end. The terms of the exclusive dealership agreement and the manner in which they were carried out are important in the context of the question of whether Bertram was carrying on business in Australia. They are discussed in detail below.
Mr Vautin enjoys boating in motor yachts, including engaging in marlin fishing. Prior to acquiring Revive, he had been the owner of four other vessels, all of which were made by Bertram, the last of which was a 63ft vessel. He had purchased that vessel from Eagle Yachts and, at the time of buying it, he had indicated to Eagle Yachts that he wanted to use the vessel for recreational deep-sea fishing and to use it to fish for marlin during the North Queensland marlin season.
In or about mid July 2010, Mr Vautin received a telephone call from Mr Brad Rodgers who was the sales manager with Eagle Yachts and who had sold him the 63ft vessel. Mr Rodgers called to offer to Mr Vautin a larger vessel; being one in the Bertram 700 series. The particular vessel offered was especially attractive to Mr Vautin as it had an enclosed flybridge.
Subsequently, on or about 6 October 2011, Mr Vautin entered into the contract to purchase a Bertram 700 Enclosed Bridge motor yacht (hull #009). He agreed to pay a purchase price of the combined amounts of US$3,000,000 plus AUD$1,200,000, the latter amount being satisfied by the trading in of his existing vessel. He also agreed to pay the sum of US$75,000 representing the cost of having the vessel shipped to Australia.
At the time of purchasing the vessel, Mr Vautin also purchased from Bertram upgrades to the vessel which cost US$235,290. He has also spent a considerable amount of money making his own additions to the vessel, including the installation of a satellite telephone, a marlin tower and associated electronics, a tender on the bow, a duckboard on the stern, a fridge / freezer in the cockpit, and two monitors in the helm with connected boat cameras.
It is an agreed fact between the parties that, prior to and at the time that Mr Vautin purchased the vessel from Eagle Yachts, he disclosed to Eagle Yachts by implication that the purpose for which the vessel was being acquired by him was for motoring on the open ocean. It is also agreed that Eagle Yachts represented to him that the vessel was reasonably fit for the purpose of motoring on the open ocean. Given the size and type of vessel in question these matters are somewhat axiomatic.
Another agreed fact is that Mr Vautin paid the purchase price and the shipping costs in accordance with the terms of the agreement.
Pursuant to the dealership agreement, a vessel of the type required to fulfil the order placed by Mr Vautin was ordered by Eagle Yachts from Bertram. The latter manufactured the vessel at its factory in Florida. It did so using a hull constructed some years previously. The completed vessel was delivered to Eagle Yachts at Bertram’s Florida premises and it was shipped to Australia. It was received in Australia by Eagle Yachts in or around February 2012 and delivered to Mr Vautin on 5 March 2012.
On around 4 February 2012, Eagle Yachts, by Mr Rodgers, gave to Mr Vautin a Bertram Warranty Card in accordance with its obligations under the dealership agreement. Mr Vautin completed the card which was immediately returned to Mr Rodgers who forwarded it to Bertram in Florida. There is no dispute between the parties that Mr Vautin received the manufacturer’s warranty from Bertram as he was entitled to under the contract of purchase and there is no dispute that the warranty card was returned to Bertram.
After acquiring it, Mr Vautin used the vessel solely for the purposes of recreational motor cruising and game fishing. He has not used it for any other purpose. There is no evidence that it was used other than in accordance with its intended uses and within its intended capabilities. Mr Vautin employed a full time skipper for the vessel, being Mr Leigh Bradshaw. It has been part of Mr Bradshaw’s duties to maintain the vessel in first class condition and, apart from the damage to the vessel caused by the testing for the purposes of this litigation, it is apparent that he has fulfilled that obligation. Mr Bradshaw has incurred expenses for the maintenance and upkeep of the vessel from time to time on behalf of Mr Vautin.
Shortly after the vessel was acquired, Bertram undertook a number of warranty jobs on the vessel. When such work was required the warranty claims were made through Mr Rodgers at Eagle Yachts. Eagle Yachts undertook the required work to fulfil Bertram’s obligations under its warranty.
In November 2014, the vessel was sailed from Cairns to Brisbane after the completion of the marlin fishing season. In the course of that journey the skipper of the vessel, Mr Bradshaw, noticed damage occurring in the forward portside part of the hull. In particular, he observed that there was delamination of the inside skin in the topside of the bow. He immediately telephoned Mr Vautin who, the next day, travelled to the Gold Coast to inspect the damage.
Shortly after Mr Vautin arrived on the Gold Coast and inspected the damage to Revive, he telephoned Mr Rodgers and advised him of what had occurred. Within a day or so Mr Rodgers arrived on the Gold Coast also to inspect the damage. Mr Rodgers was the employee at Eagle Yachts who sold Revive to Mr Vautin. At this point in time, Eagle Yachts had ceased to be the exclusive dealer of Bertram Yachts in Australia. That said, it was apparently still handling warranty claims on Bertram’s behalf.
On 15 November 2014, and prior to leaving for the Gold Coast, Mr Rodgers sent an email to Bertram (by that time referred to as the Ferretti Group) and, in particular, to Mr Frederico Ferrando. In that email he advised that the vessel sold to Mr Vautin (referred to by its code 700/009) had started to delaminate on the port forward hull in an area of about 2 metres wide running down to just above the water line. Mr Rodgers advised that Mr Vautin would like to contact them to discuss a way forward to address the situation.
A reply email to Mr Rodgers came from Mr Ferrando on 17 November 2014 the effect of which was that he would discuss the matter with Mr Rodgers the following day.
It does not appear that Mr Ferrando did contact or communicate with Mr Rodgers on the following day as, on 19 November 2014, Mr Rodgers sent a further email to Mr Ferrando advising him that he was flying to Queensland to inspect the vessel and to review the damage and, further, that Mr Vautin was inquiring of Mr Rodgers as to what assistance would be provided by Bertram and/or the Ferretti Group in the future. Mr Rodgers sought information as to what steps would be taken and what assistance Ferretti would provide. He asked for an urgent response. Unfortunately there did not appear to be any response, urgent or otherwise, from Bertram, the Ferretti Group or from Mr Ferrando. Despite being entitled in this action to call evidence as it saw fit, Bertram remained completely silent as to why it did not respond to the requests for assistance in relation to the delamination on Revive.
On 4 December 2014, Bertram and Eagle Yachts were notified of the damage in a letter from Mr Vautin. The letter was directed to Mr Ferrando as the Logistic and Commissioning Manager Americas Ferretti Group in Ft Lauderdale, Florida. In the letter Mr Vautin formally advised of the defect in the hull of the Revive, that the defect appeared to fall within the scope of the Bertram warranty, that the vessel was unseaworthy and awaiting repair by Bertram or on its behalf. Mr Vautin sought an acknowledgment of the Notice of Defect as a matter of urgency together with advice as to how the repairs would be undertaken. The letter was sent by registered mail and, apparently, was received.
Bertram did not respond to that letter. Again, despite being a party to this action, it called no evidence as to why it did not reply to the letter or act to fulfil its warranty obligations. It has refused to fulfil its obligations under the warranty which it gave and has provided no justification for that refusal.
It appears that Mr Vautin’s insurers, Club Marine, engaged Marine & Leisure Assess Pty Ltd to undertake an assessment of the damage to the vessel. A report was produced on 24 November 2014. The report identified substantial delamination on the portside hull and on the portside deck above the gunwale. It also identified cracking in the gel-coat and the external port deck. The report identified that it was not possible to estimate the cost of rectification at that time; it also recommended that the vessel not be used until further investigations were conducted.
A subsequent report was undertaken by marine assessors, Navsafe Marine Pty Ltd. It is dated 9 December 2014. There were a number of inspections of the vessel for the purposes of this report, including one on 4 December 2014 where some removal of inner structural laminate occurred. That investigation revealed the core bonding had failed. Various photographs were taken of the removed panel and of the condition of the core. The evidence revealed “the core bonding between both the inner structural and outer structural laminates has failed in large areas of the portside hull topside matrix”. Navsafe reported that there was sufficient evidence to justify a conclusion that the structural integrity of the composite hull topside laminate matrix was compromised on the external portside in the vicinity of the anchor chain locker space. It postulated that the deficiencies might extend aft of the collision bulkhead on the forward cabin area. It pointed out that the nature and extent of the deficiencies could not be identified at that time. Most poignantly for present purposes is the conclusion in the report in relation to the delamination defect:
3.This will be an ongoing and increasing defect in cost and physical size and in time will cause a catastrophic failure of the hull structure if not immediately repaired.
On 15 February 2015, Mr Clive J Seares of Reanu Services Pty Ltd, a loss adjuster, sent further correspondence to the Ferretti Group and, in particular, to a Mr Brian Kelley. He advised that he was assisting Mr Vautin with the coordination of the warranty claim along with Mr Brad Rodgers. It appears that Mr Seares enclosed with the email a copy of the Navsafe Survey Report. In that email Mr Seares identified that there may be very extensive repairs as the surveyor had found delamination, or signs of delamination, in a number of areas of the yacht. He identified that the structural integrity of the hull topside had been compromised in a number of places and that further examination was required to determine the full extent of the affected areas. It was further identified that unless the hull areas were repaired there would be a catastrophic failure of the hull structure. Mr Seares identified that he looked forward to receiving an indication of any further information that Ferretti may require in order to proceed with the warranty repairs.
This letter apparently followed from an email of Mr Rodgers of 9 February 2015 to Mr Kelley about the matter and Mr Kelley’s response on 10 February 2015 requesting that Mr Rodgers submit the survey and repair quotes ASAP. It is not apparent that any response was provided to Mr Seares in respect of the email which he sent.
Subsequently, on 27 April 2015 Mr Seares wrote to Mr Kelley of the Ferretti Group (via an email) in which it was advised that a detailed draft “scope of work” and estimate/quote for warranty repairs to the yacht was attached. The work which was identified as being necessary was based on the recommendations of the Navsafe Marine Report and in the expectation that in undertaking repairs of the currently visible damage, further failures would be found to involve the entire port and starboard topsides. The quote was for repair of those areas and the total cost was $856,054. In his email Mr Seares requested that Mr Kelley provide him with full construction drawings, a detailed laminate schedule for the inner and outer hull shell laminate, information as to how all secondary internal bonding was achieved, and identification of the core material and bonding agents used. He also sought authorisation of the repairs under the warranty.
Again, Bertram did not respond to that email. Again, it chose not to call any evidence as to why it did not respond to the email nor comply with its warranty obligations.
On 26 June 2015, Mr Vautin sent by registered mail to Mr Ferrando a copy of the letter of Mr Seares together with the repair quote. Mr Vautin’s letter identified that there had been no response to the email of 27 April and that he looked forward to hearing from the Ferretti Group.
Bertram did not respond to that letter and has called no evidence as to why it did not.
As a consequence of the reports obtained by Mr Vautin as to the potential for the existence of substantial defects in the vessel, by letter of 23 July 2015, Mr Andrew Dovell was engaged to prepare an expert’s report in relation to the defects. For the purposes of preparing that report Mr Dovell inspected the Revive on a number of occasions. First, between 3 and 4 August 2015, and then on 31 August 2015. Mr Dovell obtained “cored” samples of the hull structure which he sent to the University of Southern Queensland for testing. A report was received from that University and it was considered by Mr Dovell for the purposes of his report.
On 9 December 2015, Mr Dovell completed his expert report in relation to the Revive. It is damning of the structure of the vessel.
On 16 March 2016 Mr Vautin, by his solicitors, Banki Haddock Fiora, sent a letter to Eagle Yachts in which Mr Vautin purported to reject the vessel on the basis that Revive was not reasonably fit to motor on the open seas and that Eagle Yachts had failed to comply with the guarantees in ss 54(1) and 55(1) of the ACL. Further, on the basis of the damage to the vessel and that, due to its size, it was incapable of being returned to Eagle Yachts which was now located in Western Australia, Eagle Yachts was informed of its obligation to collect the vessel.
That purported rejection of the vessel was not accepted by Eagle Yachts
On 18 April 2016, the present proceedings were commenced by Mr Vautin against Eagle Yachts and Bertram. In turn, Eagle Yachts has pursued a cross-claim against Bertram in reliance upon a right of indemnity under the dealership agreement.
The issues in dispute between the parties
Two central issues arise in relation to the defective construction of Revive. The first is as to the nature and extent of the defects that exist consequent upon the defective method of manufacture adopted by Bertram. The second is how that defect might be characterised for the purposes of the implied guarantees imposed by the ACL. The resolution of these issues will determine whether relief is available to Mr Vautin and, if so, to what extent.
In relation to Bertram only, the major issue concerns whether it is subject to liability under the operation of the ACL. To some extent that involves a question as to whether it carried on business in Australia. Mr Vautin has also brought a claim in negligence against Bertram, which responds by asserting that the relevant law to apply to such a claim is the law of Florida, which allegedly excludes such a claim.
Bertram appears to accept that it is liable to indemnify Eagle Yachts in relation to the valid claims of Mr Vautin. It asserts, however, that the totality of the quantum claimed by Mr Vautin cannot be sheeted home to it by reason of the contractual indemnity.
The defective construction of Revive
As mentioned, by the time of trial, the parties agreed that the vessel is defective. They and their experts agreed that the method by which the cored construction of the hull, decking and super structure was carried out was not in accordance with good boat building practices. Indeed, it appears that the method of constructing those areas of cored panels was not in compliance with Bertram’s own construction specifications, nor in accordance with an appropriate and accepted standard for this type of build. The parties also agreed that the CE Directive 94/25/CE, as amended by Directive 2003/44/CE, was an appropriate protocol for the construction of the cored panels of this vessel and that the construction did not meet the standards identified in that Directive. Despite that apparent agreement, the parties remain in dispute as to the nature and extent of the defects in the vessel.
The PVC foam core construction technique
The topsides (being that area of the hull above the waterline), the decking and the superstructure of Revive is largely constructed of a rigid, PVC foam core which is bonded onto internal and external fibreglass laminates. The layer of PVC core is approximately 30mm in thickness whereas the fibreglass laminates are about 5mm. The PVC core is bonded to the outer and inner skins by bonding paste and resin. This type of construction is referred to as a “sandwich core construction”. The hull below the waterline is constructed of solid fibreglass, but is not relevant for present purposes.
An important part of this sandwich core construction concerns the manner in which it is used to create the variable or curved surfaces necessary for constructing this type of boat in which very few parts are flat. The PVC core (which are manufactured as flat rectangular boards) must be adapted to meet the variety of shapes required. That is achieved by the introduction of what are known as “kerfs” into the foam core. A “kerf” is, in effect a cut or a groove which is made through the PVC core. They are made across the length and breadth of the core material through its depth at intervals of approximately 35mm. The result of making kerfs in the core material is that it ceases to be a continuous panel of foam and, instead, is turned into a series of rectangular prisms of approximately 35mm x 35mm x 30mm. The grid of pieces is held together by a light fibreglass “scrim” on the back of the sheet of core material. Kerfs allow the PVC core pieces to be manoeuvred relative to each other to create the contours required for the various parts of the vessel. It would appear that this general method is adapted for different parts of the vessel and, in some sections, there are two layers of core material instead of one.
In the reports of the various experts, and in their evidence, they occasionally refer to parts of the sandwich foam core laminate as being a “panel”. As it was explained, that term has no special meaning and, in this context, it is merely a convenient reference to a section of the vessel’s shell between two different boundaries of support. I adopt that expression such that in these reasons, the expression “sandwich core panel”, refers to a “panel” of sandwich core laminate construction.
A central issue in this case relating to the construction of Revive is the efficacy of the construction materials used to cause the adhesion of the PVC core material to the inner and outer fibreglass laminate skins. The existence of the gaps caused by the kerfs and the fact that the inner and outer skins form curved and molded surfaces, necessitates the adoption of certain construction techniques to ensure that the outer skins of the cored panel effectively adhere to the foam core. These require that:
(a)the kerfs (or the gaps created by the kerfs) in the PVC foam are completely filled up with resin or putty prior to the foam being affixed to the laminates;
(b)the surfaces of the kerfs of all of the cored construction are coated with resin; and
(c)the outside surface of the core is effectively primed with resin prior to being installed against the skins.
It is apparent that a significant benefit of filling the kerfs with putty, bonding paste or resin is that it ensures the curved surface of the foam core provides an even and continuous plane on which to adhere the outer skin. Further, if the kerfs are not filled, a penetration to the outer skin of the panel might allow the ingress of water, which may then flow through the unfilled kerfs and allow the accumulation of moisture within a wide area of the foam core. The existence of such moisture may subsequently cause deterioration and loss of balance in the vessel.
There is no disagreement as between the parties that Bertram did not apply the above identified techniques in the construction of the Revive.
The damage appearing in the vessel
There is also no argument between the parties as to the extent of the visible damage sustained to the vessel as a result of the techniques used in its construction. This is because the occasions on which the damage was first noted and through the investigations which followed, photographic records of the observations have been made.
The first instance of damage appearing in the hull was the identification, in around November 2014, of delamination in the forward section of the hull, both internally and externally in the area of the port-side anchor locker. That is an area on the forward part of the topside of the hull which, in the ordinary course, is exposed to regular wave impact. The inner side of the topside was removed by NavSafe Marine on its initial inspection and the photographs then taken have been viewed by the experts who gave evidence before the Court. There is no dispute that those photos show that there was a failure of the bond between the PVC core and skins. In particular, there were signs of gaps existing between the core and skins indicating a failure of the bond.
The photographic evidence reveals that the kerfs in the foam core used in the construction of the forward topside areas of the hull were not filled with adhesive paste or putty. They were left as voids. It also is not in doubt that, prior to being installed, the surfaces of the PVC core in the kerfs were neither primed nor resin coated.
Samples of other parts of the vessel were taken where the core construction technique was used and, again, there does not appear to be any dispute that the kerfs were not filled. Voids remained and little or no priming of the core took place prior to its installation as appears from the fact that the surfaces of all of the kerfs which were exposed were raw. The samples taken from the vessel were tendered as exhibits and they display the qualities which are identified.
The expert engaged by Mr Vautin, Mr Dovell, also undertook inspections of the deck and the superstructure of the vessel. His investigations disclosed that the sandwich core construction in these areas also suffered from the same deficiencies. Specifically, that the core was not primed as its surfaces were raw on inspection, there was no sign of resin being applied directly or of any drainage from the priming of the outer surface of the core prisms, and the kerfs were left unfilled. In these areas the manner of construction did not use a bonding paste between the foam core and the outer skin. Rather, a layer of chopped fibreglass with a bonding agent was used.
None of the experts called by the respondents suggested that the above observations were incorrect. Indeed, they are apparent from a consideration of the photographs attached to the expert report of Mr Dovell and the samples tendered in evidence.
The extent of the alleged deficient manner of construction
A number of experts have produced reports for the purposes of the trial in relation to the manner of the construction of the cored components of Revive. The central experts were Mr Andrew Dovell, Mr Christopher Hutchings and Mr Paul Stanyon. They have also produced a joint report dated 12 May 2017, which identifies the areas of agreement and disagreement. The experts agree that the topside of the vessel is of a sandwich cored construction using contoured foam throughout and also agree that the hull bottom, below the lower chine, is of single skin construction throughout. They also agree that the deck and superstructure are of cored construction using contoured foam throughout.
For present purposes the following agreed findings are important to the determination of this matter:
…
7.Based on all evidence the kerfs of all of the cored construction have remained unfilled. Agree CCH, PS, ACD.
8.Based on all evidence the surfaces of the kerfs of all of the cored construction were not coated with resin. Agree CCH, PS, ACD.
9.The evidence indicates that the outside surface, (the scrim side of the contour foam), of the core was not effectively primed with resin prior to being installed in the hull against the outside skin. Agree CCH, PS, ACD.
…
12.Very little of the applied core bonding paste has penetrated the kerfs of the core. Agree CCH, PS, ACD.
13.Based on the evidence it appears that the inside surface of the core has had sufficient resin applied to affect an adequate bond between it and the inside skins. Agree CCH, PS, ACD.
…
21.The best measure of fitness for purpose for the design and construction of a pleasure boat similar to REVIVE is the application of an appropriate and accepted standard of which the CE Directive 94/25/CE as amended by directive 2003/44/CE is one. Agree PS, CCH, ACD”
Central to this case are the consequences of the above identified deficient methods of construction to the integrity of Revive. At the very least, all of the experts agree that these methods of construction were inappropriate for those areas where delamination has already occurred. That would appear to be self-evident. All parties agree that these parts of the vessel require remediation work. What divides them is the qualitative impact of the use of this apparently defective construction method on those other parts of the vessel where delamination has not occurred, or not yet occurred.
Bertram’s own specifications - CE specifications
Consequences of defective construction
The joint experts agree that the consequence of the defective construction is that the sandwich core panels have a reduced shear capacity. In the briefest of terms, the shear capacity of the panel is its ability to withstand forces impacting perpendicularly upon it. Once the forces on a panel exceed the shear capacity the panel will rupture and fracture which may, but not necessarily, entail a complete breakage through the whole width of the panel, or the inner core. That will often involve the inner core separating from the laminate skins as occurred in this case. If that occurs, the only protection from external forces will be the outer laminate skin which has minimal shear capacity. If that outer skin fails the vessel ceases to be watertight and is liable to be seriously compromised.
Whilst the experts agree that the construction method used in this case meant the laminated core panels had a reduced shear capacity, they were not entirely ad idem as to the extent of that reduction. In considering this issue they all had reference to a scientific article by Berger, Loiselet, and Dransfeld entitled “Filling or Not Filling the Slits in Contourable Sandwich Cores With Resin? – Effect on the Properties of the Sandwich Construction”. In that article the authors identified that where the kerfs / groves in foam core laminate are not filled, the shear capacity is 50% less than where the kerfs / groves are filled. Additionally, fatigue tests showed that the unfilled kerf configuration had a substantially shorter life span than did a filled kerf configuration.
In their joint expert reports Messrs Dovell (ACD), Stanyon (PS) and Hutchings (CCH) recorded the following:
The cored panels as built will have a reduced shear capacity in the order of 50% as suggested by the paper of BERGER, LOISELET, and DRANSFELD due to the fact that the cored panels as built in REVIVE have unfilled kerfs per the paper. Agree PS, ACD. Disagree CCH.
CCH Disagrees with this statement for the following reasons:
a. The paper of BERGER, LOISELET, and DRANSFELD relies on the testing of a sandwich panel consisting of a 20mm core and 1.5mm thick inner and outer skins; whereas REVIVE consists of a sandwich panel that has a 30mm core, 7.5mm thick outer skin and 3mm thick inner skin. CCH believes that due to the significant difference in skin thickness between REVIVE and the test panel the magnitude of core shear failure could be different.
b. The cored panels as built will have reduced shear capacity relative to a panel built with the kerfs filled, however quantifying that loss would require testing of a panel cut from the vessel.
In other words, Mr Hutchings was of the opinion that the sandwich core panels, as built, has a reduced shear capacity relative to a panel built with kerfs filled. He asserts, however, that quantifying the level of reduction requires testing of a panel cut from the vessel. Messrs Dovell and Stanyon relied upon a scientific paper of Berger, Loiselet and Dransfeld to conclude that the shear capacity reduction of the panels on Revive was in the order of 50%. On the other hand, Mr Hutchings opined that the variation between the panels which were tested for the purposes of the article and those used in the construction of Revive, means that the magnitude of their reduced shear capacity could well be different. All of the experts agreed that the actual loss of shear capacity in the “as built” core panels of Revive may not directly correlate to the loss in the panels referred to in the Berger et al article because they were of a different construction. On the other hand, Messrs Dovell and Stanyon remained of the view that the article supported the conclusion that the panels in Revive had a loss of shear capacity in the order of 50%. All agreed that the most accurate quantification of the loss of shear capacity of the panels as built would require destructive testing of panels from the vessel.
The experts also agreed that, putting aside the loss of shear capacity, there were other deleterious effects of the kerfs not being filled. Those deleterious effects included:
a.If the kerfs are filled, water ingress due to damage is limited to the area of impact. Without the kerfs filled water can track away from the area of the damage potentially filling all of the kerfs below the waterline in the cored zone. Long term exposure of the unprotected foam and laminates to seawater will have a deleterious effect on the strength of the panel. Agree PS, CCH, ACD.
b.This is also the case of any penetration of the inside skin in associated of any fitting screwed to the inside skin surface or similar. These penetrations are not in association with damage. Agree PS, CCH, ACD.
The experts further agreed as to the best measure of fitness for purpose for the design and construction of a pleasure boat such as Revive in the following terms:
The best measure of fitness for purpose for the design and construction of a pleasure boat similar to REVIVE is the application of an appropriate and accepted standard of which the CE directive 94/25/CE as amended by directive 2003/44/CE is one. Agree PS, CCH. ACD.
Conclusions concerning the veracity of the expert opinions
There is no doubt that all of the experts who gave evidence concerning the defects in the sandwich core panels of Revive, Messrs Dovell, Stanyon and Hutchings, were qualified in the area of expertise. To the extent to which they differed in their opinions, I preferred the conclusions reached by Mr Dovell to those expressed by Messrs Stanyon and Hutchings.
Mr Dovell’s prepared report and evidence caused me to conclude that he was a more careful and thorough expert. He was more able to clearly explain his conclusions and his observations and assertions withstood cross-examination. In the “hot-tubbing” process he was, generally, prepared to give direct and clear answers and displayed a willingness to consider all views. Messrs Hutchings and Stanyon were far more reluctant to do this.
In his written and oral submissions, Mr Vautin was critical of Mr Hutchings and the manner in which he gave his evidence. Those criticisms are not without merit. Under cross-examination Mr Hutchings was somewhat evasive and sought to avoid making admissions which were contrary to Bertram’s contentions. He often did so by resorting to theoretical possibilities which were lacking in reality. For instance, it became apparent from the various inspections and testing on the vessel that it had not been constructed in accordance with any known standard for a vessel of a sandwich core construction. Mr Dovell identified in his report the manner in which the panels on Revive did not meet the standards required of the ISO Standard, which he identified as the reasonable minimum structural design and construction standard for this type of vessel. He opined that “boats designed and built in accordance with accepted good practice would, at a minimum, meet the ISO Standard”. There did not appear to be any serious disagreement with these points. In answer to this, Mr Hutchings suggested that the ISO Standard did not necessarily apply and that some other standard might be applicable (ts.283). Whilst it is theoretically possible the construction of the vessel might have complied with another standard, if one did exist, Mr Hutchings did not identify it. It appears that none of the experts were aware of any standard for the sandwich core construction of vessels that permitted leaving the kerfs unfilled and Mr Hutchings could not identify one despite applying his 20 years of knowledge, study and expertise which he drew upon for the purposes of giving evidence (ts.350). In the context of the ISO Standard being the minimum standard, Mr Hutchings hypothesis that the construction might satisfy another standard, without identifying it or even suggesting that one existed, was somewhat facetious. That response gave the appearance that he was not being entirely impartial in his answers nor attempting to assist the Court to reach the correct conclusions in relation to the factual matters under discussion.
Similarly, I considered that Mr Hutchings was somewhat dissembling when he sought to explain away Bertram’s omission to prime the core, prior to adhering it to the inner and outer skins, by suggesting the panel might be overdesigned and so strengthened in some other way (ts.264 – 267). There was no suggestion the sandwich core construction was “overdesigned” and nothing was pointed to that suggested it was. Certainly an expert in Mr Hutchings’ position ought to have been able to point to some factor to support that proposition. He did not do so and his answer appeared to be an attempt to obfuscate. That was particularly so because, while Mr Dovell calculated the panels on Revive were designed (if constructed properly) to have only 106% of the minimum shear strength capacity for that type of construction, Mr Hutchings made no detailed or effective analysis of that calculation. Moreover, even if the panels were otherwise overdesigned, there was nothing to suggest the redundancies in the design would be sufficient to counterbalance the reduction in shear capacity caused by the failure to fill the kerfs or to prime the core. The suggestion was also self-evidently false because, if the panels were “over-designed”, it is most unlikely they would have delaminated as they did.
Mr Hutchings’ attitude was also revealed when he opined that other standards, of which he was aware, did not specifically prohibit kerfs being left unfilled. That was a somewhat blatant attempt to diminish the import of standards that required kerfs to be filled. Eventually, he admitted that those other standards actually provided that the kerfs should be filled (ts.351). In these respects, Mr Hutchings answers tended to obfuscate rather than clarify the nature and extent of the consequences of the defects in the construction of the vessel. It is unfortunate his answers appeared to be attempts to minimise the impact of points in favour of Mr Vautin’s case, rather than to ensure that the Court was accurately apprised of the issues.
My perception of Mr Hutchings was that, whilst he is obviously intelligent and capable in his field of expertise, he appeared to attempt to agitate his client's cause rather than make appropriate concessions as and when required. Overall, I preferred the evidence of Mr Dovell to that of Mr Hutchings.
Mr Stanyon also revealed an inclination to advance the interests of his client, Eagle Yachts, in his reluctance to accept that the Revive was a category A vessel and, being such, was designed to withstand Beaufort eight winds and significant seas at four metres (ts.326). He, like Mr Hutchings, also sought to obscure the failure of the construction of Revive to comply with any known or accepted international standard by resorting to speculation that there might exist a standard to which the construction complied. In attempting to do so he made the following comment in relation to standards (at ts 342-343):
There may be a couple of smaller ones from other European countries, but - so this is issue of kerf filling, we would have to know intimately every single one of those standards. Like there are plenty of Czechoslovakian built production boats in - that are compliant with CE and may be they use their own national standard, I don't know. …
I considered that Mr Stanyon’s reference to Czechoslovakian standards was bordering upon disingenuousness. First, given the dissolution of Czechoslovakia in the early 1990's, any Czechoslovakian standards would necessarily be almost a quarter of a century old. Second, his response in this respect was grasping at straws given he was unable to identify whether there was any standard that permitted the construction of the cored panel without the filling of the kerfs.
The failure of Mr Hutchings and Mr Stanyon to volunteer that they were not aware of any relevant standard to which the vessel complied is concerning. As experts they were entitled to advance the proposition that compliance with the ISO standards was not the only way to satisfy the CE Directive. However, that left the Court with the perception of the distinct possibility that the construction of the vessel might have complied with some other standard. Their failure to volunteer, or freely acknowledge when confronted, that there was no other standard of which they were aware and to which the building methods in fact complied, renders it less safe to rely upon their expressed views.
Whilst Mr Stanyon was otherwise mostly responsive to questions put to him, he tended to attempt to protect his client's interests where possible. In relation to the question of what conditions vessels, of the type of which Revive was one, were designed to be able to cope, Mr Stanyon's answer was evasive. He attempted to suggest they should be capable of coastal use in the normal levels of wind and wave that might be expected on the Eastern Australian Coast (ts.326). He ultimately accepted the vessel was designed as a “Category A” vessel under the CE Directive described as an "Ocean" vessel. That this was its design category should have been obvious to Mr Stanyon and his attempt to suggest otherwise gave the strong appearance that he was attempting to advance his client's case.
For these reasons and for the reasons which appear below, I prefer the evidence of Mr Dovell over the evidence of Mr Hutchings or Mr Stanyon where they disagree.
Compliance with relevant standards
As is identified above, all of the experts agreed that the best measure of fitness for purpose for vessels such as Revive, is its compliance or otherwise with an industry-accepted standard. The respondents were not able to identify any standard with which the sandwich core construction panels of Revive or the vessel in general complied.
In his second report Mr Dovell identified the European Union’s Recreational Craft Directive (RDC) as being an appropriate standard which should be followed in the design and construction of pleasure craft similar to the size and type of Revive. As its title suggests that document imposes EU requirements for the design and construction of pleasure craft. It was not suggested by the other experts that the application of this protocol would be inappropriate. Indeed, Bertram had caused the design and construction methods for the building of Bertram 700 series to be certified under that Directive. Such certification was not of the actual construction of Revive, but as to the design and proposed methods of construction of Bertram’s 70ft vessels.
A copy of the RDC is attached to Mr Dovell’s second report. The RDC provides at article 1(1) that it is applicable to the design and construction of, inter alia, recreational craft. Article 3 provides under the heading “Essential Requirements”:
The products referred to in Article 1(1) shall meet the essential safety, health, environmental protection and consumer protection requirements set out in Annex 1.
Item A of Annex 1 is entitled “Essential Safety Requirements for the Design and Construction of Recreational Craft” and it identifies that for the Boat Design Category of “Ocean vessels” (of which Revive is one) the vessel is to be able to accommodate a wind force (on the Beaufort scale) “exceeding 8” and “Significant wave height (H 1/3, metres) “exceeding 4”. The statement of explanation of what is encompassed by this is:
OCEAN: Designed for extended voyages where conditions may exceed wind force 8 (Beaufort scale) and significant wave heights of 4 m and above but excluding abnormal conditions, and vessels largely self sufficient.
The exclusion of abnormal conditions excludes hurricanes and tornadoes and extreme sea conditions or freak waves generated by abnormal conditions. As the notes to the article indicate, vessels of this category have to be able to meet extreme conditions as they reflect the type of conditions which might be encountered on long ocean voyages where conditions may change suddenly and dramatically.
Item A of Article 1 goes on to explain that:
Craft in each Category must be designed and constructed to withstand these parameters in respect of stability, buoyancy and other relevant essential requirements listed in Annex 1 and to have good handling characteristics.
Item 3 of Item A of Annex 1 is headed “Integrity and structural requirements”. Relevantly it provides:
3.1 Structure
The choice and combination of materials and its construction shall ensure that the craft is strong enough in all respects. Special attention shall be paid to the design category according to section 1, and the manufacturer’s maximum recommended load in accordance with section 3.6
Relevant Harmonised Standards:
…
EN ISO 12215-2:2000: Small craft – Hull construction and scantlings – Part 2: Materials: Core materials for sandwich construction, embedded materials (ISO 12215-2:2000)
…
EN ISO 12215-4:2000: Small craft – Hull construction and scantlings – Part 4: Workshop and manufacturing (ISO 12215-4:2000)
It was not contested that the meaning of the above was that the ISO Standard relating to Hull Construction and scantlings was an applicable standard for the construction of ocean going vessels.
That international standard is also annexed to the report of Mr Dovell. The scope of that Standard is identified as being:
This part of ISO 12215 specifies the requirements for core materials for structural use and materials that are embedded in sandwich construction. It is applicable to small craft with a hull length … of up to 24 metres.
NOTE The underlying reason for preparing this part of ISO 12215 is that sandwich structures of small craft require careful selection of core materials from a multitude of choices, and that the manufacturing has to follow certain procedures to achieve the intended long-term durability under the expected loads and environmental conditions.
Part 2 of the Standard entitled, “Materials: Core materials for sandwich construction, embedded materials” the following appears in relation to Sandwich core properties:
3.1 Sandwich structure
A sandwich structure is a composite composed of lightweight core material to which two relatively thin, dense and high-strength functional laminate skins are adhered.
3.2 Structural requirements
3.2.1 Core materials for sandwich construction of small craft shall only be used if the following requirements of the final structure are fulfilled.
The material shall have adequate properties to enable the sandwich structure to fulfil the requirements specified in ISO 12215-5 for a normal service life in a marine environment, with special regard to
-in-plane forces, acting in the direction of sandwich layers, e.g. tension, compression, shear;
-out-of-plane forces, acting transversely to the sandwich layers, e.g. compression, tension, shear.
…
3.3 Material requirements, general
3.3.1 Core materials shall have stable mechanical properties consistent with the designated use of the craft.
3.3.2 Resin applied to the core material or its protective sheathing/coating shall be compatible with its surface.
3.3.3 Core materials forming part of a sandwich structure shall
-limit the penetration of water beyond the area of a possible fracture of the skin laminate. This requirement does not apply for core materials that consist of a three-dimensional open structure bonded to both skin laminates, e.g. honeycomb or three-dimensional fabrics.
-…
3.3.4 Core material shall be capable of transferring the shear loads specified in ISO 12215-5.
In Part 4 (Workshop and manufacturing) of that same standard the following appears:
3.7 Manufacturing requirements, sandwich construction
3.7.1 Sandwich construction using female moulds
3.7.1.1 Core surface cavities and other irregularities shall be removed or coated with filler, resin or sandwich adhesive according to the material manufacturer’s specification and depending on the following skin lay-up. When using scored core material, a sufficient amount of resin or adhesive shall be used in the bond to fill the gaps.
The matters in items 3.3.3 and 3.7.1.1 are particularly relevant for present purposes as they require the filling of any kerfs in the construction of the sandwich core structure. Where Item 3.3.3 is not complied with, if the kerfs are not filled, water which enters in the structure (whether due to holing or penetration) will spread throughout the structure.
All three expert witnesses agreed that the construction of the sandwich core structures of Revive did not meet the ISO standards, including because the kerfs were not filled.
Although it was submitted that the standard as a whole identified itself as setting requirements which were towards the minimum standard, it does not appear that the words used in Part 5 of the Standard necessarily have that effect. There, the reference is to “design standards” rather than “construction standards” although it can be accepted that the two are closely related. In any event, Mr Dovell and Mr Stayon (if not also Mr Hutchings) agreed that the ISO standard was appropriately identified as setting minimum standards for “all regulatory grounds” for the construction of vessels of this type (ts.338 – 339).
What can be taken from the above is that the actual construction of Revive did not comply with the ISO standard for the manufacture of vessels of that type. However, a point of difference arose as between the experts as to the relevance or consequence of that failure. Mr Hutchings and Mr Stanyon identified that the official guide to the application of the CE Directive noted that it was not necessary manufacturers comply with the ISO standard in order to meet the requirements of the Directive. They relied upon the following passage:
The “essential requirements” as referred to in Article 3 and detailed in Annex I have to be met by products referred to in Article 1(1) of the Directive. The application by a manufacturer of a harmonised standard in order to fulfil the essential requirements gives a presumption of conformity. However, application of a harmonised standard remains voluntary and is not the only method available to demonstrate conformity with the essential requirements. The manufacturer can choose whether or not he refers to harmonised standards, as long as his products fulfil the essential requirements. However, if a manufacturer chooses not to follow a harmonised standard, he has the obligation to prove that his product is in conformity with the essential requirements by the use of other means of his own choice (e.g. by means of any existing technical specifications).
The argument advanced by the respondents was that, whilst Mr Vautin has established the actual construction of Revive does not comply with the ISO standards, it has not shown that the essential requirements of the CE Directive have not otherwise been met. In essence, the arguments advanced by Mr Hutchings and Mr Stanyon on behalf of their clients (the respondents) were that there may have been some other standard with which the sandwich core construction undertaken by Bertram complied so as to satisfy the directive. In the light of the evidence as it emerged, I considered that these two witnesses dissembled somewhat by the advancing of this argument and in doing so they damaged their reliability as expert witnesses.
Mr Stanyon’s position appeared to be that the vessel may have met the requirements of the CE Directive because there may have been some other standard or standards which the construction satisfied. When questioned about this he acknowledged that he was not aware whether any of those permitted the construction of sandwich core structures in vessels without filling the kerfs. As I have mentioned, in attempting to suggest the construction of the Revive cored panels by Bertram somehow may have met an appropriate standard, he resorted to hypothesising about Czechoslovakian standards, although he was not aware of their content (ts 342-343).
The argument advanced by Mr Hutchings’ on this was that the CE directive, whilst identifying the ISO standards as being appropriate, also gave a builder the opportunity to build to an equal standard. He reasoned, therefore, that it could not be said the vessel was not built to an appropriate specification. Whilst his comments on this were, perhaps, technically accurate, he refrained from volunteering that he had not located any alternative specification which permitted sandwich core construction without filling the kerfs. He eventually admitted under cross-examination that he could not point to any such standard and that was despite his 20 years of knowledge and study and expertise in this area (ts.350). The standards with which he was familiar all required the filling of kerfs. This being the case, it is safe to conclude, as I do, that there is no relevant standard for the construction of sandwich core components for vessels to which the building of Revive complied.
The failure of Mr Hutchings and indeed, Mr Stanyon, to volunteer that they were not aware of any relevant standard to which the vessel complied is concerning. As experts they were entitled to advance the proposition that compliance with the ISO standards was not the only way to satisfy the specifications. However, their failure to volunteer that there was no other standard of which they were aware and to which the building methods in fact complied, was conduct below that expected of experts who appear in this Court and, as I have mentioned, that necessarily rendered it less safe to rely upon their expressed views.
Of course, the question of whether Revive was built to an appropriate standard could be resolved by reference to the construction drawings used to build it. They would indicate the existence of any relevant standards which needed to be complied with for the vessel’s construction. In the ordinary course such drawings would be in the possession of the manufacturer. In this case, that is Bertram. Although Mr Vautin issued a Notice to Produce in respect of them to Bertram, they were not produced. Bertram offered no excuse for the failure to produce them save to assert they were not available. No explanation was given as to why they were not available. Bertram chose not to call any witness to explain their non-production. That being so, it is possible to draw an inference that their production would not have assisted Bertram’s case in this respect (Jones v Dunkel (1959) 101 CLR 298).
Given the inability of either of Mr Hutchings or Mr Stanyon to identify any standard for the construction of sandwich core structures on vessels which did not require the filling of the kerfs or the priming of the core I find that, on the balance of probabilities, no such standard existed. I am comforted in reaching that finding by the fact that if there existed such a standard, it is extremely likely that Bertram would have known about it and produced it. Its failure to do so supports my conclusion.
It should be observed that no party suggested the vessel, as constructed, actually met the essential requirements of the CE Directive. As the following discussion shows, that is not surprising given failing to prime the core and fill the kerfs was unconventional, if not poor, boat building practice. As is discussed below, the consequence of the utilisation of those boat building practices meant that the shear strength of the panels was significantly reduced and the hull began to delaminate. That being so, the essential requirements of the CE Directive could not have been fulfilled.
It follows from the above that the construction of Revive did not comply with CE Directive under which the design methods of the model of vessel in question was certified.
The construction techniques were poor boat building practices
During the construction of Revive, Bertram did not fill the kerfs and so it did not comply with the ISO Standard and the CE Directive. Further, the method of construction was poor boat building practice. In his report Mr Stanyon said:
There is no doubt that kerfs should be entirely filled with core bond or thickened resin or resin. This is supported by Best Practice, manufacturer’s recommendations, classification society’s in-house procedure and technical manuals and hands-on experience. They dictate that the core is to be free of voids and discontinuities if it is to perform as per design calculations and to ensure longevity of the laminates structural life.
Both Mr Hutchings and Mr Dovell agreed with this statement.
It is also apparent that the panels on Revive were constructed without there being any or any adequate priming of the core before being affixed to the laminate skins. Mr Dovell identified that priming was vital to ensure the bonding between the core and the skin of the laminate was appropriately strong. In particular, Mr Dovell observed that Revive was constructed with the core installed onto a bed of adhesive paste without a sufficient resin content in the paste to completely wet its surface. This would result in a dry bond line with significant void content between the core and the adhesive paste. He identified this was evident in the photos of the hull of the vessel where delamination had occurred (see paragraphs 4.12 – 4.13 of the first report of Mr Dovell and the corresponding photo). The result was the “outside skin to core join” in the whole of the topside of the vessel had a significantly lower shear strength than it would have if the correct installation procedure had been followed (see paragraphs 4.16 of the first report of Mr Dovell). In his second report, Mr Dovell extended this opinion to cover all areas where the sandwich core construction had been used on the vessel, including the decking and superstructure.
Mr Stanyon, who was the expert engaged by Eagle Yachts, was adamant that the failure to prime the core was inappropriate in a sandwich core construction of such vessels. At ts.264 he said:
MR STANYON: Yes. Well, priming is an essential function and it’s something that you don’t scrimp on. You don’t – you don’t – you do it properly. You – you – you don’t worry about the quantity of resin you’re using. It’s just a job that is essential to the integral laminate
Mr Hutchings agreed that the failure to prime the core would result in reduced shear strength of the sandwich core construction (ts.264 - 265). He was reluctant to agree with the proposition that it was bad boat building practice not to prime the core before adhesion to the skins:
DR BELL: And you would agree with that, Mr Hutchings, wouldn’t you?
MR HUTCHINGS: I would agree it’s good boatbuilding practice
DR BELL: Well, you would agree it was essential, wouldn’t you?
MR HUTCHINGS: to actually – to actually do it. My belief is it’s good boatbuilding practice to do it. It’s rare for it – for it not to be done.
DR BELL: It’s not good boatbuilding practice not to do it.
MR HUTCHINGS: I believe that’s what I just said.
DR BELL: It’s bad boatbuilding practice not to do it, isn’t it?
MR HUTCHINGS: As I said, I believe it – it would be – it would be – it’s good boatbuilding practice to do it.
DR BELL: Yes. And I’m putting to you that it’s bad boatbuilding practice not to do it.
MR HUTCHINGS: Yes, I agree.
Subsequently, Mr Hutchings agreed that it “was deeply imprudent not to prime”. He also said that he would recommend priming as part of any relevant boat building exercise and he would never recommend not to do it (ts.265). He further agreed that to ensure that a vessel was able to withstand the roughest conditions (which Bertram had represented Revive was capable of doing) it would be prudent to prime the core in the construction process (ts.267).
The initial reluctance of Mr Hutchings to accept such relatively obvious propositions and his attempt to obfuscate them when they appeared to undermine his client’s case, further rendered his evidence less useful than it might otherwise have been.
Ultimately, the failure to fill the kerfs and the failure to prime the core with resin has resulted in the sandwich core construction in the vessel having a substantially reduced shear capacity. In his report, Mr Dovell considered the paper by Berger et al to the effect that failure to fill kerfs in the construction of sandwich core panels will result in a reduction in the shear capacity of the panels by more than 50% of what it would have been had those construction defects not been present. Indeed, the loss of strength in the panels is increased to 60% when fatigue is considered. Mr Dovell did not merely accept that the conclusions drawn in that paper applied to panels of the type in Revive. He undertook his own calculations to ensure that the critical parameters were appropriate to the dimensions on the Revive panels and satisfied himself that the reduction in shear strength of those panels would be in the order of 50% (ts.287 and exhibit 17). Mr Stanyon also accepted the conclusions of that paper and that it applied to the panels in Revive. Although Mr Hutchings asserted that he could not be sure that the reduction in shear strength was 50% and that destructive testing on the actual panels from Revive would be required, I prefer the evidence of Mr Dovell and Mr Stanyon on this part of the evidence and, in particular, the more carefully considered views of Mr Dovell who had taken the time to consider the applicability of the conclusions in the published paper to the physical dimensions of the sandwich core panels on the vessel.
Non-compliance with PVC foam manufacturer’s requirements
Mr Stanyon identified in his report that the PVC foam used in the construction of the Revive was of a brand called “Airex Divinicel H80”, which had GRP inner and outer skins. Mr Dovell could not be certain that this was the foam that was used in Revive’s construction, however, he did conclude that it was “almost certainly made from a PVC foam that is effectively identical to the “Airex PVC foam Core Product”. The processing guidelines for that product are attached to Mr Dovell’s first report and they identify that debonding and subsequent catastrophic failure can occur if the correct installation procedures are not followed. The installation instructions for the foam product in the production of sandwich core panels identified that optimal quality was obtained from obtaining a strong bond between laminate and foam and by filling up the slits (kerfs) with resin or putty. The instructions also identified that the surfaces of the foam should be primed with resin (including the inside faces of the kerfs) prior to bedding into the outside skin. Mr Dovell found that the failure by Bertram to comply with such installation instructions resulted in a dry bond line between the core and the inner and outer skins and represented a significant construction defect. There was no real disputation about this evidence and I find, on the balance of probabilities, that the foam core material was the Airex PVC foam Core Product and that it had not been installed as required by the manufacturer’s specifications.
The consequences of the manufacturing defects
The real question is whether Revive can be effectively repaired?
Revive cannot be used as a motor vessel save in the calmest of waters. The delamination of the topside means that it cannot be used in the open ocean even for short periods of time. The shear strength of the outer skin is all that presently protects the vessel at its prow (generally on the portside) and if that area sustained a significant impact it would, most likely, fail. That would inevitably lead to the entry of water and give rise to a risk that the vessel would sink. There seems to be no dispute between the parties that the vessel is not seaworthy in its present state. There is also no relevant dispute that the guarantees as to the quality of the vessel imposed by the ACL were not met.
The respondents assert the construction defects in the topsides in the area where the delamination has occurred can be repaired at a relatively low cost of approximately $106,200 plus GST. Alternatively, they say that the construction defects in the whole of the topsides can be repaired for somewhere between $856,054 and approximately $1.4m (based on Mr Acacich’s evidence). They say that the effect of those repairs would render the vessel seaworthy and, effectively, put the vessel in a condition such that it would comply with the guarantees as to fitness imposed by the ACL. As a result they contend that the former amount of money (or alternatively, the second) represents Mr Vautin’s damages.
Mr Vautin denies that such repairs to Revive would be effective to cause it to comply with the guarantees imposed by the ACL. In particular, he asserts that even if the topsides were rectified, the sandwich core components of the decking and the superstructure of Revive will still contain the defects such that the vessel will remain not fit for purpose. The total cost of these repairs would be in the order of $2.7m.
It follows that the real debate is whether the repairs which the respondents propose for Revive will render it compliant with the guarantees of fitness and quality as imposed by the ACL
The nature and extent of the defects
As has been determined, the sandwich core panels in Revive (being throughout the topsides, the decking and the superstructure) contained manufacturing defects consisting of unfilled kerfs and the core not adequately primed with resin. This created a dry bond line between the cores and skins and panels such that the panels had a substantially reduced shear capacity. This reduced capacity is of the order of 50% and had the consequence of delamination occurring in those areas of the vessel which met with constant impacts in the course of its use.
The experts, however, disagree with the consequences of the above. The respondents’ experts assert the vessel can be adequately repaired if the areas where the delamination has occurred are repaired (by the core being primed and the kerfs being filled). On the other hand, Mr Dovell asserts that will not be sufficient to cure the defects that have resulted in a substantial reduction in the shear capacity of all sandwich core panels.
Safety
Mr Vautin submits, relying on the evidence of Mr Dovell, that the construction defects which exist in all of the sandwich core panels throughout the vessel, have the result that the vessel is less safe than it would be had it been properly constructed. He submits that, even if the topsides were repaired, the deck and the superstructure would have about half the strength they should have. He also submits that, as constructed, the sandwich core panels in those areas would not prevent the permeation of water throughout the core as a consequence of penetrations. There is much force in these submissions. The sandwich core panels were not designed to 200% of their required capacity. There would be no reason for that to be the case. It follows that the reduction of shear capacity below 50% of what the panels should be renders them inadequate for their purposes. That is, their shear capacity is below that which is necessary and appropriate for a vessel of this type. This represents a serious safety concern in an ocean-going vessel such as the Revive. It is intended to be used for extended journeys on the open seas and that, necessarily, means it is intended for use in very heavy conditions (being wind force 8 on the Beaufort scale and significant wave height of in excess of 4m, but falling short of abnormal conditions such as hurricanes and tornadoes). In such conditions, the vessel may be buffeted on the deck and the superstructure by those sea conditions. That being so, there is a real risk that sandwich core panels, which have less than half the designed shear capacity, will fail with catastrophic consequences. In the result, I find that the effect of the construction defects is that the vessel is unsafe for use in all of the sea conditions for which it was intended. It is not safe to be used in conditions up to wind force 8 and seas with a wave height of in excess of 4m.
Even if it were the case that it was not possible to find that the vessel was actually unsafe for its intended use by reason of the construction defects, there can be little doubt that the construction defects create great uncertainty about its safety. Even Mr Hutchings was prepared to accept the existence of that uncertainty (ts.353) and he further accepted that this was something which an owner of a premium, high quality, very expensive vessel should not have to endure. By this, I understood Mr Hutchings to agree that vessels such as Revive, which are extremely expensive and are intended to be “top of the range” ocean going vessels, should be built to a standard which excludes safety concerns arising from the manner in which they are constructed. That is somewhat self-evident.
Mr Stanyon was slightly more forthright than Mr Hutchings when he agreed that, because of the construction defects, he would not use the vessel in conditions which he would if it did not have those defects. He agreed he would take a “more conservative approach” to the use of the vessel. From that, I understood Mr Stanyon accepted that the construction defects probably rendered it less safe for use in harsher conditions.
Durability
There was some agreement between the experts that the sandwich core panels on Revive were less durable than they would have been if the defects did not exist. Mr Dovell was of the opinion that the vessel was not durable because the panels might fail in rough conditions due to their reduced shear capacity, that the fatigue strength (the weakening of the panels which are exposed to the usual forces arising from use) of the panels was reduced by reason of their manner of construction, and that there is a risk of core degeneration because of the possibility of water entry and dispersal in the foam core. In this latter respect he said the entry of water into the core would spread widely due to the unfilled kerfs and would eventually reduce the life of the panel.
Mr Stanyon also seemed to accept that the absence of a homogeneous core material would hasten the consequence of a reduction in the strength of the panels (fatigue), which occurs as a result of the use of a vessel (ts.295). In this case it is undoubted that the construction defects caused the delamination in the bow areas of the port topside which were often exposed to waves whilst the vessel was in use. There seems to be no reason why that principle would not apply to all parts of the vessel which had the same construction defect even if the delamination or weakening may take longer as those parts are not exposed to the same regularity of impact. I apprehend that when Mr Stanyon said that if the Revive was his vessel he would monitor it and look for evidence of other issues, he intended to convey it was more than probable that the construction defects would generate delamination in other areas of the vessel (the decking and superstructure) if only the topside was rectified (ts.348-349).
Mr Stanyon also agreed that entry of water into the foam core would cause its deterioration in the sense of reducing the foam’s body and resilience (ts.254). Both Mr Hutchings and Mr Doveall agreed with Mr Stanyon’s report where he opined there was no doubt that the kerfs were required to be filled if the sandwich core structure is to perform in accordance with its design calculations and is to have the longevity it is supposed to (see section 4 of the report of Mr Stanyon and ts.285-296).
The evidence establishes that the failure to fill the kerfs will render the sandwich core structures on the vessel less durable than they would be if the kerfs were filled.
Fitness for purpose
There was substantial evidence from the experts as to whether the construction defects in the sandwich core panels on Revive rendered it “fit for purpose”. It is unfortunate, however, that there was not a great deal of commonality in the use of that expression. It did not appear the experts necessarily intended their opinions to relate to the requirement in s 55 of the ACL Schedule 2 that goods are to be “reasonably fit” for any disclosed purpose or to the requirement of “acceptable quality” in s 54. That renders some of their opinions in this respect slightly less valuable.
Mr Vautin also seeks to claim the cost of other upgrades to Revive in the sum of $68,860.63. Again, the evidence as to these matters was adduced by the provision of a bundle of documents such as invoices, receipts and the like without any explanation in the oral or written submissions. The evidence identifies a number of minor improvements which were done to the vessel including the upgrading of various lights (including navigation lights), underwater lights, meters, sound equipment, electrics, power boards, refrigeration facilities, additional plating and the like. These items, as identified in the Court Bundle, constitute minor improvements to the vessel and in most cases the cost of installing them appears to a major portion of the overall amount claimed. That indicates that it is likely that there would be a significant cost to remove them and restore the lesser quality items.
The cost of acquiring and installing these items will be lost because of the failure of Eagle Yachts and Bertram to comply with their respective guarantees under the ACL. The respondents made no substantive submissions in relation to this head of damage. That being so, I allow the amount of $68,860.63 in respect of these losses.
Repair costs
If it were the case that Mr Vautin had not rejected the vessel in accordance with the ACL, he would be entitled to recover damages in respect of the diminution in the value of the vessel or the cost of remediating the defects in it. If the consequence of remediating the vessel was still that its value was diminished, he would have been entitled to damages for diminution in value as well as the cost of remediation. Above I have indicated that the present value of the vessel as it is, is nil although the relevance of that conclusion would appear to be minimal. One basis on which that conclusion was reached was that the cost of repairing the vessel exceeded its diminished value. In reaching that conclusion I accepted the evidence of Mr Akacich who was called by Mr Vautin.
As I have already found, in order to remedy the construction defects in the vessel so as to render it of acceptable quality it would be necessary to rectify all of the sandwich core panels. As Eagle Yachts conceded in the course of argument (see paragraph 41 of its closing submissions) it was the scope of the repair which was at the heart of identifying the quantum of the remediation costs. That being so the only evidence which was available at trial as to the cost of undertaking the full remediation work was that of Mr Akacich and I accept that the primary cost of undertaking the same is in the amount of $2,425,792 as appears in his report. Other repairers did not quote or give evidence as to the repair of the entire vessel. The evidence from them was in relation to lesser repairs. I also accept that Mr Akacich’s proposed method of repairing the vessel would be necessary in order to ensure that the vessel met the standards of a Category A vessel. Mr Akacich’s evidence was not damaged in cross-examination.
I also accept that the nature of the work required to repair the vessel is substantial and, given the size of such a project, it would require extensive preparation requiring a large amount of planning. Mr Akacich gave evidence that the cost of undertaking that task is $297,395 and that sum ought to be allowed as an additional cost of undertaking the repairs. Again, there was no real contest as to the correctness of this evidence. Therefore, the total cost of putting Revive into an acceptable condition is $2,723,187.
Further, Mr Vautin is entitled to a margin of 10% of the total cost as a margin for unforeseen expenses. The margin amount would be $272,318.70. Given the size of the remediation project and the obvious difficulties associated with the preparation for and undertaking of the stripping the vessel and the reconstruction of the hull and all of the superstructure, a margin for unforeseen expenses is warranted. This amount was also not greatly disputed by the respondents.
It follows that the total costs which will be incurred to ensure that Revive is of an acceptable quality within the meaning of that term as it is used in s 54 of the ACL is $2,995,505.70. If Mr Vautin had not returned the vessel he would be entitled to that amount.
Operation of ss 64 and 64A of the ACL
Eagle Yachts submitted that any claim for damages by Mr Vautin was limited by cl 8.8 of the agreement for the purchase of Revive. That clause purported to limit Eagle Yacht’s liability for breach of a term or of a warranty to repair the vessel, to payment of the costs of repair, its replacement or paying the cost of replacement. However, s 64 of the ACL renders such contractual clauses void to the extent to which they might exclude, restrict or modify the effect of the remedies provided in the ACL. Eagle Yachts further submitted that the exclusion clause in the contract of sale was saved by the proviso in s 64A of the ACL. However, that proviso only applies in relation to goods which are other than those acquired for personal, domestic or household use or consumption. In this case Revive was acquired for personal use with the result that the agreement does not fall within the proviso. It follows that to the extent to which it might otherwise have applied, cl 8.8 is rendered void and the entitlements of Mr Vautin under the ACL are not diminished by it.
Damages entitlements against Bertram
Mr Vautin’s entitlement to damages against Bertram, which have been occasioned by the failure to comply with the statutory guarantees in s 54 and 59, is provided by s 272. That section provides:
272 Damages that may be recovered by action against manufacturers of goods
(1) In an action for damages under this Division, an affected person in relation to goods is entitled to recover damages for:
(a) any reduction in the value of the goods, resulting from the failure to comply with the guarantee to which the action relates, below whichever of the following prices is lower:
(i) the price paid or payable by the consumer for the goods;
(ii) the average retail price of the goods at the time of supply; and
(b) any loss or damage suffered by the affected person because of the failure to comply with the guarantee to which the action relates if it was reasonably foreseeable that the affected person would suffer such loss or damage as a result of such a failure.
(2) Without limiting subsection (1)(b), the cost of inspecting and returning the goods to the manufacturer is taken to be a reasonably foreseeable loss suffered by the affected person as a result of the failure to comply with the guarantee.
Reduction in value
As has been discussed above, Mr Vautin became entitled to reject the vessel and he did so. That being the case, title to it vested in Eagle Yachts and he became entitled to recover the full amount of the purchase price. On that basis, Mr Vautin is not entitled to recover damages from Bertram in respect of the diminution in the value of the vessel because he has not sustained any. As he is entitled to recover the purchase price the fact that Revive is worth less than the price he paid for it, causes him no loss.
If Mr Vautin had not been able to return the vessel and sought damages against Bertram for the diminution in the value of the vessel, the amount which Mr Vautin could recover for against Bertram would be the same amount as that which is recoverable against Eagle Yachts. I have found that to be in the amount of the cost of remediating the vessel in accordance with Mr Akacich’s evidence at $2,995,505.70. That is so because, in relation to the failure of the guarantee relating to acceptable quality, both Eagle Yachts and Bertram are liable. In any event, all of the defective construction work falls within the scope of the warranty provided by Bertram in respect of the hull and fibreglass shell. That being so Bertram is liable for damages for breach of the statutory guarantee imposed by s 59 of the ACL. There did not appear to be any assertion by Bertram to the contrary.
It follows that if Mr Vautin had not rejected the vessel, Bertram would have been liable for the reduction in value of Revive occurring by reason of the failure of the guarantees in the sum of $2,995,505.70.
Consequential losses
Pursuant to ss 272(1)(b) Mr Vautin is also entitled to recover damages from Bertram for the loss or damage suffered by him because of the failure to comply with the guarantee as to acceptable quality, as well as the failure to comply with the guarantee imposed by s 59. In that respect the quantum of the damage is the same as that for which Eagle Yachts is liable and the quantum will differ in the various scenarios identified above; being whether the vessel was rejected or not.
Summary of the established claims against the respondents
Claims against Eagle Yachts
It follows from the above that Mr Vautin has established that Eagle Yachts breached both the statutory guarantees in s 54 and 55 of the ACL. The failures of the guarantees were “major failures” and he was, therefore, entitled to reject the vessel, which he did. He is entitled to a refund of the purchase price in the amount of $4,233,801.03 as well as damages representing:
(a)the wasted cost of transporting the vessel to Australia in the sum of $75,000.00;
(b)the wasted cost of upgrades undertaken with respect to the vessel (aside from the Marlin tower) in the sum of $301,061.01 (in the Australian Dollar equivalent);
(c)the lost value of the installation of the Marlin tower in the sum of $130,000.00;
(d)the wasted cost of insuring the vessel whilst it was not able to be used in the sum of $89,580.10;
(e)the wasted cost of manning the vessel during the period for which it was not able to be used in the sum of $173,333.45; and
(f)the wasted costs of upkeep and maintenance of the vessel in the sum of $217,499.91.
Therefore Mr Vautin is entitled to recover the sum of $4,233,801.03 (as the refund) plus the sum of $986,474.56 or $5,220,275.59.
Were that entitlement to reject not been available or were it the case that Mr Vautin had not rejected the vessel within the rejection period he would have been entitled to damages against Eagle Yachts for:
(a)the diminution in the value of the vessel or the cost of undertaking repairs in the sum of $2,995,505.70;
(b)loss of use of the vessel in the sum of $1,270,140 (being the depreciation of the vessel for three years whilst it could not be used);
(c)the wasted cost of manning the vessel during the period for which it was not able to be used in the sum of $173,333.45;
(d)the wasted cost of insuring the vessel whilst it was not able to be used in the sum of $89,580.10; and
(e)the costs of upkeep and maintenance of the vessel in the sum of $217,499.91.
Therefore, if it were the case that Mr Vautin was not entitled to or did not effectively reject the vessel, he would be entitled to retain it and recover the sum of $4,746,059.06.
Claims against Bertram under the ACL
From the above it follows that if Mr Vautin has validly rejected the vessel, as I have found he did, he is entitled to recover damages against Bertram for breach of the guarantee as to acceptable quality and the statutorily entrenched express warranty in the following amounts:
(a)the wasted cost of transporting the vessel to Australia in the sum of $75,000.00;
(b)the wasted cost of upgrades undertaken with respect to the vessel (aside from the Marlin tower) in the sum of $301,061.01 (in the Australian Dollar equivalent);
(c)the lost value of the installation of the Marlin tower in the sum of $130,000.00;
(d)the wasted cost of insuring the vessel whilst it was not able to be used in the sum of $89,580.10;
(e)the wasted cost of manning the vessel during the period for which it was not able to be used in the sum of $173,333.45; and
(f)the wasted costs of upkeep and maintenance of the vessel in the sum of $217,499.91.
On that scenario he is entitled to recover from Bertram the sum of $986,474.56.
If the right to reject the goods had been lost, Mr Vautin would have been entitled to recover against Bertram damages in the sum of $4,746,059.06 comprising of the following:
(a)the diminution in the value of the vessel or the cost of undertaking repairs in the sum of $2,995,505.70;
(b)loss of use of the vessel in the sum of $1,270,140 (being the depreciation of the vessel for three years whilst it could not be used);
(c)the wasted cost of manning the vessel during the period for which it was not able to be used in the sum of $173,333.45;
(d)the wasted cost of insuring the vessel whilst it was not able to be used in the sum of $89,580.10; and
(e)the costs of upkeep and maintenance of the vessel in the sum of $217,499.91.
Interest on judgment sums
Mr Vautin is entitled to recover interest on the amounts for which judgment is given. As the quantum of the judgment granted does not accord with Mr Vautin’s submissions, it is appropriate to allow the parties to make submissions as to the appropriate order for interest.
Right to recover judgment against Eagle Yachts and Bertram
In these proceedings Eagle Yachts admits it breached the statutory guarantees in s 54 and 55 by reason of the existence of the construction defects. Its main defences concerned the extent of the damage and the cost of repairs. However, it also submits that judgment should not be entered against it because judgment might be entered against Bertram for the same losses. The basis for this submission was somewhat obscure. It seemed to be based upon a combination of the doctrine of implied repeal and the maxim, generalia specialibus non derogrant. It was submitted that the right to recover damages under s 259 against a supplier is a general remedy and that it “yields” to the more specific remedy against a manufacturer under s 270. It was further submitted that the inconsistency between s 259 and s 271 resulted in a consumer being able to recover 100% of their loss against the supplier and 100% of their damages against the manufacturer and there is no provision in the ACL that permits joint and several liability to apply in respect of damages awarded in favour of the consumer. This, it is alleged, is further supported by the fact that there are no provisions which permit an apportionment as between the manufacturer and the supplier.
Although Eagle Yachts relied upon the observations of Gleeson CJ, Gummow and Hayne JJ in the High Court in Alexander v Perpetual Trustees WA Ltd (2004) 216 CLR 109, 122 [27], that paragraph actually supports the opposite conclusion. There, the High Court recognised that the legislature often seeks to remediate the situation where two wrongdoers are severally liable to a plaintiff who chooses to pursue one of them with that person not being able to obtain contribution from the concurrent wrongdoer. The mere fact that some injustice may arise in relation to concurrent wrongdoers who are severally liable to a single consumer does not result in the Court not giving effect to the variety of relief which is available to the consumer under the ACL.
There is no conflict between the operation of ss 259 and 271. They are both statutory causes of action and they are given to the consumer against different entities in the supply chain. Even if it were the case that the breach of the statutory guarantees by the supplier and the manufacturer caused the same damage to the consumer, there is nothing in the ACL which suggests that the consumer is limited to pursuing the manufacturer only. On Eagle Yacht’s argument, if it were the case that both a supplier and manufacturer were liable to a consumer, the consumer might only proceed against the manufacturer even if the manufacturer were insolvent. That would be a most unusual construction of consumer protection legislation. There is nothing which was said by Lockhart J in George Zaravinos v Dairy Farmers Co-operative Ltd (1985) 7 FCR 195, 198 that alters the above conclusion. In that case his Honour considered Division 2A of the Trade Practices Act which concerned remedies against manufacturers and those comments do not touch upon the question of whether the consumer might pursue whichever remedy or remedies they consider appropriate. Moreover, there is nothing in the ACL which would support the restrictive construction which is advanced by Eagle Yachts and the authorities have not regarded the rights of consumers to be so restricted (see Leeks v FXC Corporation (2002) 118 FCR 299 which concerned proceedings against two manufacturers for the same damage).
It is also relevant that the causes of action and relief available against the supplier and the manufacturer are not identical. As the circumstances of this case reveals, the consumer is entitled to recover the purchase price as against the supplier if the goods are rejected although that relief does not appear to be available against the manufacturer. As a result, there will be differences in the amounts recoverable against each respondent.
The construction of the legislation which permits the consumer to pursue both the supplier and the manufacturer for their respective breaches of the statutory guarantees does not result in the consumer recovering more than the loss or damage suffered. It is well established that a party cannot recover twice in respect of the same damage, nor recover more that their actual loss (see Baxter v Obacelo Pty Ltd (2001) 205 CLR 635, 656 [46] – [47]). As was correctly submitted by Counsel for Mr Vautin, so long as an applicant does not recover more than his loss against one or more their respondents, he is entitled to pursue both in a proceedings and he is not required to elect before recovering judgment against any of the respondents.
It follows that Eagle Yacht’s submission that Mr Vautin may not recover judgment against both it and Bertram in the same action cannot succeed.
The negligence claim
Mr Vautin also advances a claim against Bertram in negligence, but only in the circumstance where Bertram is not liable to Mr Vautin under the ACL. Although I have found that Bertram is liable under the ACL, it remains necessary to consider this cause of action.
Given the evidence which I have assayed above there can be little doubt that Bertram’s manufacture of Revive was negligent. That conclusion can be derived from Bertram’s own expert, Mr Hutchings, to the effect that the construction of the sandwich core panels occurred without filling the kerfs, with minimal penetration of resin to the core to inner skin bond line and without an effective bond between the core bond and the laminate. Ultimately, all of the experts, in effect, agree that the construction of Revive involved “bad boat building practices”.
It was not disputed that, in the circumstances of this matter, Bertram owed a duty in the manufacture of Revive to Mr Vautin to exercise reasonable care in the construction. It would be difficult to see how that proposition could be disputed under Australian law in the circumstances of this case.
However, here, the manufacture of the vessel occurred in Florida. Although, Mr Vautin submitted to the contrary, in this case the lex loci delicti would appear to be the law of that State. As was identified in Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575, the question is where in substance did the cause of action arise. In cases of negligent manufacture, the place where the product was made is the usual or typical place where the cause of action arises. That is the place where the negligent act or omission occurred and that is so despite the fact that the damage manifested elsewhere (see McGowan v Hills Ltd [2015] VSC 674, [16]-[17]; see also Nye’s Conflict of Law para [20.9]). Here Bertram constructed the vessel for Mr Vautin in Florida. Its failure to meet any relevant construction specifications in the building of the vessel occurred in Florida. The failure to fills the kerfs and the failure to appropriately prime the core occurred in Florida. Once complete, the vessel had been negligently manufactured. It follows that the substance of Bertram’s negligence occurred in Florida.
It can be accepted that the vessel was intended to be supplied to Mr Vautin in Australia. However, pursuant to the agreement between Bertram and Eagle Yachts, Bertram supplied the vessel to Eagle Yachts in Florida. The vessel was delivered to Eagle Yachts “ex works” there. It follows that the answer to the question of where, in substance, did the cause of action arise, is Florida and that State’s law is the lex loci delicti.
There was ultimately no dispute as to the content of the law of Florida. It was contained in an expert report of Mr Allen Von Spiegelfeld dated 17 July 2017. Mr Spiegelfeld is an attorney based in Tampa, Florida. His summary of the law of Florida with respect to the issue of the entitlement of a consumer to recover damages in negligence from a manufacturer is set out at page 3 of his report. It is as follows:
Florida law is very clear on the issue of recoverable damages in a matter where the purchaser of a product asserts that the product is defective and the defect has damaged only the product, as opposed to causing personal injury or third party damages. Under Florida law, as set forth in the cases of Indemnity Insurance Co. v American Aviation, 891 So.2d 532 (Fla. 2004), Tiara Condominium Association v Marsh & McLennan, 110 So.3d 399 (Fla. 2013), citing and adopting East River Steamship Corporation v Transamerica Delaval, Inc, 476 U.S. 858,106 S.Ct. 2295 (1986) adopts the doctrine of Economic Loss Rule. Pursuant to the Economic Loss Rule, a manufacturer of a product, who issues a warranty, cannot be sued in tort for a defect in the property that does not damage anything other than itself, which is true whether there is privity between the owner of the product and the manufacturer or not.
I accept that this is an accurate statement of the law and it follows that Mr Vautin has no claim in negligence against Bertram in respect of the defective construction of Revive. He may only claim pursuant to the warranty which was given to him. In reaching this conclusion I am comforted by the analysis of Atkinson J in Tarangau Game Fishing Charters Pty Ltd v Eagle Yachts Pty Ltd [2017] QSC 306 [348]-[363]. In that case Atkinson J considered a similar claim against Eagle Yachts and Bertram. There too Bertram relied upon the law of Florida as being applicable to the claim against it in negligence. It would appear that in the reasons of Atkinson J, her Honour relied upon similar evidence by Mr Von Spiegelfeld. At [350] of her Honour’s reasons the almost exact same passage as that identified above was cited.
In the result, Mr Vautin’s claim in negligence against Bertram fails.
Eagle Yacht’s crossclaim against Bertram
Pursuant to its crossclaim, Eagle Yachts seeks indemnity from Bertram pursuant cl 5 of Addendum A to the dealership agreement. That clause provided:
Bertram shall indemnify, defend and hold harmless, Eagle Yachts from and against any loss, costs, or expense, including judgments, claims, demands and attorneys’ fees (collectively “Losses”) related to or arising out of any personal injuries or property damage sustained as a result of the defective manufacture of the Products.
The products, of course, were the Bertram constructed vessels. It was not disputed as between Bertram and Eagle Yachts that the dealership agreement operated when Eagle Yachts sold Revive to Mr Vautin.
In the course of the hearing Bertram acknowledged its liability to Eagle Yachts. It was said on behalf of Bertram that “there is no basis on which the first respondent would resist an indemnity in relation to any primary liability found against the second respondent. Costs may be a different matter”.
It is not contested that Bertram failed to respond to Eagle Yachts’ claim for indemnification of it under the indemnity in the dealership agreement.
Eagle Yachts tendered an expert report of Mr Steven Ellison, an attorney-at-law in Florida. He gave evidence relating to Eagle Yachts’ right to be indemnified by Bertram if orders are made against Eagle Yachts in the present proceedings. The factual background on which he bases his conclusion was established by the evidence. On that foundation he concluded that Eagle Yachts would be entitled to indemnity from Bertram for both any obligation imposed upon Eagle Yachts to pay money to Mr Vautin in this action, as well as its costs and expenses incurred in defending Mr Vautin’s claims.
Bertram did not cross examine Mr Ellison or adduce evidence to the contrary. I accept his evidence as to the effect of the law of Florida in relation to the indemnity claim against Bertram.
It follows that to the extent to which Eagle Yachts is liable to Mr Vautin, Eagle Yachts has a concomitant right to indemnity from Bertram. That includes any order as to costs.
An irrelevant issue
The handing down of these reasons was originally listed for 4 April 2018, however, on that occasion I raised with the parties a matter for their consideration. That was that on 28 September 2017, and after the hearing of the evidence, one of the experts who had given evidence had a chance encounter with my former Associate at Sydney airport. In that encounter the expert made an unsolicited, derogatory comment about the vessel. The comment was mentioned to me although I ignored it and it almost immediately passed from my mind. I had forgotten about it when the matter was resumed the following month when submissions were made. Had I recalled it on that occasion I would have made mention of it at that time. I expect that the comment was merely a matter of casual conversation and there was no intention on the part of the expert to seek to influence the outcome of the case. Nevertheless, it is of the greatest importance that actions be determined on the evidence which is made admissible at trial and presented in Court such that it is to be open to scrutiny and consideration by all parties. Information should not be communicated deliberately or even accidently to the Court about a case without the knowledge and consent of all persons who have an interest in the litigation. For this reason, on 4 April, I mentioned the occasion on which the comment was made and allowed the parties an opportunity to consider their position. The delivery of judgment was, subsequently, adjourned to 10 April. I requested that if any party wished to re-open the hearing they ought to inform my present Associate in sufficient time so that arrangements could be made to re-list the matter if that were needed. At the time of preparation of these reasons there was no indication from any party that they wish to reopen the case. That is appropriate since the comment has played no part in the determination of the issues in this case. It was an unsworn statement which was made out of Court. It had no evidentiary value or relevance whatsoever and was not considered for the purpose of making the findings on which the judgment is based.
Conclusion
It follows that there will be judgment for Mr Vautin against Eagle Yachts and Bertram in the terms of the orders.
The parties ought to be heard on the question of costs.
I certify that the preceding three hundred and seventy-four (374) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington. Associate:
Dated: 10 April 2018
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