Aftanas v JCB Enterprises Pty Ltd t/as Beautcars

Jurisdiction

1. For the following reasons I am satisfied that the Tribunal has jurisdiction to hear and determine this application: 1. The applicant is a "consumer" pursuant to Section 79D of the Fair Trading Act 1987 (NSW) ("FTA"). This was not in contention (section 79H). 2. The claim involves the supply of goods to the applicant for consideration pursuant to s 2 (1) of the ACL (s 4(1) FTA); 3. The claim is for an amount which is within the jurisdictional limit of $100,000: (section 79S(7) and clause 13A Fair Trading Regulation 2019 (NSW)); 4. The supply of services was within New South Wales (section 79K); and 5. The claim is registered within 3 years of the cause of action. (section 79L).

Factual background

1. The following statement of the background to the proceedings either reflects factual matters which are not in dispute or documentary material received in evidence. Save to the extent that matters are said to be in dispute, the statement of the background to the proceedings represents my findings of fact.
2. On 13 May 2023 the applicant paid the respondent a $1000.00 deposit for a 2013 Hyundai iLoad van. The total purchase price was $16,700.00.
3. On 15 May 2023 the applicant paid the balance of the purchase price and took possession of the vehicle, registration DD68PM.
4. At the time of purchase the vehicle's odometer reading was 198,295 km.
5. The contract for sale included a 3 year Reliance Motor Vehicle Warranty issued by the respondent (AI, 51) and administered by Integrity Car Care Pty Ltd ('ICC').
6. On 31 May 2023 the vehicle's engine failed to start a number of times. The applicant was assisted by NRMA. He also telephoned his mechanic, Elvis Mechanical Repairs ('Elvis'). The applicant gave evidence, based on the applicant's description, the engine was 'having problems starting when the motor was already hot [and] that there was a coolant/overheating issue.' (A1, 6).
7. The applicant scheduled a service and diagnosis with Elvis for 8 June 2023.
8. On 3 June 2023 the applicant drove the vehicle from his home at Beverley Park, intending to travel to Wollongong in order to give the diesel engine 'a good run'. After about 20 km, the vehicle lost power and overheated. The applicant pulled over and turned off the engine. Upon inspection, there was no coolant in the engine. The applicant refilled the coolant and allowed the vehicle to cool down.
9. The applicant gave evidence that at that time NRMA advised him to 'slowly and safely' drive the vehicle home or to a mechanic, but that if it overheated, to pull over and tow the vehicle instead.
10. Mr Boutros challenged this evidence and contended that NRMA would be unlikely to advise to drive the vehicle in those circumstances. However, there is no direct evidence to contradict the applicant's sworn account of the advice received from NRMA. I therefore accept the applicant's evidence on this point.
11. Once the vehicle cooled down, the applicant drove it home.
12. On 4 June 2023 the applicant inspected the coolant and topped it up. He also noticed that the radiator was completely empty. When he began to fill it, he noticed cracks to the top and underneath of the radiator which caused significant leaking.
13. Later that afternoon, the applicant notified the respondent of the problems with the vehicle. The respondent advised him to contact ICC.
14. ICC informed the applicant that the radiator was not covered under the warranty and that he should provide a quotation for the other repair costs.
15. The vehicle was not driven for the next 10 days.
16. Between 14 June and 19 June 2023, the vehicle was repaired by Elvis who installed a new water pump and radiator at a total cost of $2230.74 (A1, 73, 75). At that time the odometer read 198,567 km.
17. After the applicant collected the vehicle from Elvis, the vehicle was not driven until 24 June 2023. On that day, the vehicle again overheated. Once it was cooled sufficiently, the applicant drove it slowly the short distance home.
18. On 26 June 2023 the applicant delivered the vehicle to Elvis for diagnosis and repair. This was completed on 3 July 2023. A new thermostat and EGR inlet hose were installed at a cost of $537.00 (AI, 77). At that time the odometer recorded 198,664 km.
19. The applicant made a claim to ICC regarding the water pump. This was refused by ICC on 27 June 2023 on the basis that Elvis was not a recognised ICC repairer.
20. On 4 July 2023 the applicant drove the vehicle 34km without incident.
21. On 5 July 2023 the applicant drove the vehicle 17 km to work without incident. On the return trip, after about 7.4 km, the vehicle lost power, made a high-pitched whistle noise, and blew white smoke. After moving to a safe location, the applicant stopped the vehicle.
22. Shortly thereafter, the vehicle was towed to Elvis' workshop. Elvis assessed that the vehicle required a new engine.
23. On 5 July 2023 the applicant notified the respondent that he required a full refund for the cost of the vehicle, plus repair expenses. The respondent refused. The vehicle was subsequently towed to the applicant's home and has not been repaired or driven since the last breakdown.

Expert evidence

1. The applicant relied on a report by Mr Erich Kannen dated 21 August 2023 (AI, 13). I am satisfied that Mr Kannen is a suitably qualified expert, being a motor vehicle assessor and valuer and qualified motor mechanic with over 50 years' of extensive experience.
2. He acknowledges the Tribunal's Experts' Code of Conduct and agrees to be bound by it.
3. Mr Kannen's report is based on an inspection of the vehicle on 31 July 2023. The report is detailed and thorough. It sets out in detail not just Mr Kannen's conclusions, but the factual basis of those conclusions. His oral evidence was careful and considered. There is no alternative expert evidence before the Tribunal to challenge Mr Kannen's evidence. I accept Mr Kannen's evidence.
4. Relevantly, Mr Kannen gave evidence that: 1. The engine to the vehicle has sustained damage that is beyond repair, and it must therefore be replaced; 2. The engine damage was caused by a defective cooling system (the water pump, radiator and thermostat) which allowed the engine to overheat and sustain damage to its major components (including the pistons, cylinders, head gasket); 3. The cooling system was 'compromised' and 'defective' at the time the applicant purchased the vehicle; 4. The cooling system deteriorated over a period of years, not suddenly, indicated by the fact that the water pump was 'full of rust'.
5. Mr Boutros challenged some aspects of Mr Kannen's evidence. Specifically, in response to Mr Boutros' questions, Mr Kannen stated that: 1. The fact that the vehicle had a 'blue slip' at the time of sale confirms it was road worthy, however, 'a blue slip has nothing to do with the cooling system'. 2. The vehicle could have been driven for 469 km by the respondent prior to the sale and without incident, even with the compromised cooling system: 'At some point pressure will reach a point where it is too much. It could have happened sooner, and it could have happened later. The cooling system was compromised when the vehicle was sold.' 1. At the time of the first inspection, Elvis should have checked the thermostat and conducted a pressure test on the cylinder head of the coolant system. 2. If Elvis had checked the thermostat and conducted a pressure test, 'probably' the engine would not have been damaged and its replacement would not have been required.

Relevant law

1. Section 54 of the ACL provides a consumer with a guarantee that goods sold will be of an acceptable quality i.e. if they are fit for purpose for which they are commonly supplied, are of an acceptable quality and finish, free from defects, safe and durable as a reasonable consumer fully acquainted with the state and condition of the goods would regard as acceptable.
2. Section 54 also sets out the criteria to determine acceptability having regard to their nature, the price and any statements made about the goods by a supplier or manufacturer.
3. The test as to whether goods are of an "acceptable quality" is an objective one, being taken from the perspective of a "reasonable consumer" (APS Satellite Pty Ltd (formerly known as Sky Mesh Pty Ltd) v Ipstar Australia Pty Ltd [2016] NSWSC 1898 at [57]; Merck Sharp & Dohme (Australia) Pty Ltd v Peterson (2011) 196 FCR 145).
4. The guarantee as to acceptable quality in section 54 applies at the time of supply of the goods (Volkswagen Group Australia Pty Ltd v Saad [2022] NSWCATAP 133).
5. Further, goods are not of unacceptable quality if the consumer is at fault. At section 54(6) goods do not fail to be of acceptable quality if the consumer causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality and they are damaged by abnormal use.
6. The applicant must prove his claim to the civil standard of proof, that is, on the balance of probabilities.

Consideration and findings

1. I am satisfied that a reasonable consumer, fully acquainted with the state and condition of the vehicle, would regard the vehicle as not of acceptable quality when sold because the vehicle: 1. Was not fit for all purposes for which a used motor vehicle would be expected to be used; 2. Was not free from defects; and 3. Was not durable.
2. In making this determination, I take the following into consideration: 1. The purchase price of $16,700.00 was a not insignificant amount; 2. The vehicle's odometer reading was 198,295 km at the time of purchase; 3. The vehicle was 10 years' old at the time of purchase; 4. The vehicle was sold with a 3 year warranty. This was a statement by the respondent of its confidence in the quality of the vehicle; 5. The cooling system was compromised and defective at the time of supply; 6. The vehicle experienced mechanical problems within 2 weeks of supply; 7. Around 21 days after supply, having been driven for approximately 272 kilometres by the applicant, the vehicle required significant repairs; 8. Around 41 days after supply, having been driven for another 97 kilometres, the vehicle required further significant repairs; 9. 52 days after supply, having been driven for another approximately 59 kilometres, the vehicle's engine failed completely.
3. Mr Boutros contended that the applicant had damaged the vehicle, for example, by driving it when the temperature was too hot. Beyond his subjective opinion, he did not provide any evidence, expert or otherwise, that this was a cause of the damage to the vehicle.
4. I am satisfied that the applicant did not by his own fault cause the vehicle to not be of acceptable quality (s 54(6)). I accept the applicant's evidence that he drove the vehicle in accordance with the advice of the NRMA. He took reasonable steps such as allowing the vehicle to cool when it overheated and he topped it up with water. He sought prompt repairs when required. There is no persuasive evidence of abnormal use by the applicant.
5. Therefore the respondent has breached the consumer guarantee pursuant to s 54 of the ACL.

Was the respondent's failure to comply with the guarantee of acceptable quality a major failure?

Relevant law

1. To obtain a full refund of the vehicle, the applicant must also prove that the respondent's failure to comply with the guarantee is a 'major' failure.
2. Section 260(a) provides that a failure to comply with a guarantee that applies to a supply of goods is a major failure if relevantly: 'the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure'.
3. In Safi v Heartland Motors Pty Ltd t/as Heartland Chrysler [2016] NSWCATAP 80 the Appeal Panel found that the following matters will be relevant to the question of whether a failure in a motor vehicle amounts to a "major failure" under section 260(a): '1. A major failure may be constituted by one defect or a series of specific or individual defects which, when taken as a whole, constitute a major failure; 2. The test of whether the goods "would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure" is an objective one; 3. A "reasonable consumer" would expect teething problems, even in a new vehicle; 4. The question to ask is whether the reasonable consumer, given the option of acquiring that particular good or alternatively purchasing either nothing or a different model, would not have acquired the good; 5. Defects which result in goods failing to comply with the guarantee of acceptable quality will not invariably be a major failure and it will depend on the nature and extent of the failure; and 6. The cost of repair, in proportion to the purchase price, and the question of whether the defects can be remedied easily in a timely manner are relevant considerations. In our view, the purchase price for the goods and the nature of the defect are also relevant considerations for a "reasonable consumer".'

Consideration and findings

1. Mr Boutros contended that Elvis was not a licensed motor mechanic. The applicant disputed this. The documents submitted by the parties in this regard were unclear. I cannot make a finding one way or another.
2. I accept the applicant's evidence that he believed Elvis was licensed because he saw a certificate to that effect at Elvis' repair premises. I am satisfied that the applicant acted reasonably in contracting Elvis to conduct the repairs.
3. Mr Boutros submitted that the cause of the vehicle's ultimate engine failure was not any breach by the respondent, but rather Elvis' failure to inspect the thermostat and conduct a pressure test on the cylinder head of the coolant system. As opined by Mr Kannen, if Elvis has done so, the engine would not have been damaged and its replacement would not have been required.
4. I do not agree with Mr Boutros' submission.
5. Causation is to be determined by looking at all the facts and circumstances to assess, as a matter of common sense, whether the breach was a cause of the loss, unless there is an intervening act or event which breaks the chain of causation and is thus the sole cause of the damage: Alexander v Cambridge Credit Pty Ltd (1987) 9 NSWLR 310 at 361; Chand v Commonwealth Bank of Australia [2015] NSWCA 181; Wardley Australia Ltd v Western Australia [1992] HCA 55.
6. In the different, but analogous, context of medical negligence, the courts have held that a mere error will not break the chain of causation i.e. the original 'wrong doer' will still be liable. The original wrong doer must establish, on the balance of probabilities, that the subsequent treatment was "grossly negligent" or "inexcusably bad" and therefore not a reasonably foreseeable consequence of the original damage: see, e.g. Aquilina v NSW Insurance Ministerial Corporation (1994) 157; Mahoney v J Kruschich (Demolitions) Pty Ltd (1985) 156 CLR 522; Liston v Liston (1981) 31 SASR 245.
7. I am not persuaded on the evidence before me that Elvis' failure to inspect the thermostat and conduct a pressure test was anything more than an error or lapse of judgment. The respondent has not proved that Elvis' failure was grossly negligent as to relieve the respondent of causal responsibility for the engine failure.
8. Nevertheless, taking on board Mr Boutros' submission, even disregarding the engine failure, I have no doubt that a reasonable consumer, given the option of acquiring the particular vehicle or alternatively purchasing either nothing or a different vehicle, would not have acquired the vehicle: 1. There were a series of significant defects that necessitated mechanical assistance and/or repairs on 3 separate occasions during the first 41 days after its purchase; 2. For half the time between the vehicle's supply and ultimate engine failure, the applicant was without use of the vehicle due to the repairs, approximately 22 days; 3. Although the vehicle was 10 years' old at the time of supply, with 198,295 km on the odometer, a reasonable consumer would not expect the vehicle to be supplied with a compromised coolant system; 4. Replacement of the water pump, radiator, thermostat and EGR valve are significant, time-consuming repairs. They are not mere 'teething problems'; 5. The cost of replacing the water pump, radiator, thermostat and EGR valve ($2767.00) was not insignificant, relative to the purchase price.
9. It should go without saying that when the engine failure is also considered, as I conclude it should, a reasonable consumer would most certainly never have acquired the vehicle, particularly given the replacement of the engine would cost almost $14,500.00 (Exhibit A1, page 83).
10. I find that the respondent's breach of the s 54 guarantee was a major failure.

What is the appropriate remedy?

1. Section 259(3) of the ACL provides that if the failure to comply with the consumer guarantee is a major failure, the consumer may notify the supplier that they reject the goods and of the grounds for the rejection.
2. The applicant notified the respondent that he rejected the vehicle and the reasons for that rejection on 7 July 2023. For the same reasons as outlined above, I am satisfied that he was entitled to do so and did so within the rejection period (s 262).
3. In such circumstances the applicant may elect for a refund of the money paid for the goods and must return the goods to the supplier (s 263(4)).
4. Further I find that: 1. The applicant incurred repair costs of $2767.00; 2. The cost of repairs was reasonable, based on Mr Kannen's oral evidence; 3. The repair costs were the reasonably foreseeable consequence of the respondent's failure to comply with the guarantee of acceptable quality; and 4. The applicant is therefore entitled to recover that amount as damages (s 259(4)).

Conclusion

1. The Tribunal therefore orders that on or before 13 January 2024: 1. The respondent shall pay the applicant the amount of $19,467.00; 2. The applicant, at his own expense, shall deliver the vehicle to the respondent; and 3. The applicant shall execute all necessary documents and registration papers to enable transfer of ownership of the vehicle into the respondent's name.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 August 2024