This is a tricky one.
In theory you entered into a verbal contract with the garage to solve a knocking noise from the front end, which they assured you was actually from the rear suspension.
In doing the work, you found that it was not, in fact, the rear suspension causing the noise as it was still present after the repair.
Certainly they should now go ahead and fix the knocking noise, which they now say is a drive shaft.
Were they negligent in misdiagnosing the fault initially? Probably not, as they must presumably have seen something that suggested the rear suspension was to blame.
The issue here within law is that you cannot be put back into a position where you are 'better off' than before any work was done. So no, you have no legal right to be reimbursed for the rear suspension repair
However, they did misdiagnose the fault, and I would be pushing for (a) the Labour cost for the rear suspension to be FOC or heavily discounted (i.e. you pay for the parts) and (b) A heavily discounted Labour rate for fixing the drive shaft.
This would seem to be fair to both parties.
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