mixed. 1. Judgment for the defendants. 2. Order the plaintiff to pay the costs of both defendants. 3. Judgment for the cross-claimant (BMW Australia Finance Limited) against the cross-defendant for...
Key principles
The brochure given to the purchaser constituted representations as to the car's present characteristics (safety, roadworthiness and performance) and as to future matters (timely...
A representation about the characteristics of goods, expressed as the product as manufactured, is not necessarily a representation with respect to a future matter; such a...
Where representations are as to future matters s 4(2) of the ACL places an evidentiary onus on the maker to adduce evidence that they had reasonable grounds for making the...
To establish misleading or deceptive conduct under s 18, the plaintiff must prove the impugned conduct existed and was misleading or deceptive in context; where defects manifest...
Issues before the court
Did BMW Sydney make the alleged representations relied upon by Mr Bailey?
Were the brochure representations 'with respect to future matters' for the purposes of s 4 ACL?
Plain English Summary
Bailey bought a BMW X5 and later alleged the dealer misled him by brochure statements about the car and about dealer servicing. The court found the brochure did make representations, but the statement that the car would be safe and high-performing described the car as made and was not shown to be false at time of sale. Promises about future servicing and parts were future matters, but BMW Sydney proved it had reasonable grounds to make them and had facilities and records showing it serviced and sourced parts. The consumer claim under the ACL therefore failed. The financier's cross-claim for unpaid amounts under the finance agreement succeeded; judgment was entered for $77,361.89 and costs were ordered against the plaintiff.
AI-generated legal information, not legal advice. Zoe can make mistakes. Check the cited source, and for advice about your situation consult a qualified Australian lawyer.
Were the brochure representations false, misleading or deceptive in context (s 18 ACL)?
Did the car suffer from the particularised defects pleaded by Mr Bailey?
Mr Bailey purchased a 2012 BMW X5 from BMW Sydney in April 2013, financed through BMW Australia Finance. He was given a BMW promotional brochure at the point of sale and later experienced a series of problems with the vehicle: a chronic internal noise that began after a tow bar was fitted, repeated battery drain events (fixed by dealer work in mid‑2014), occasions when the vehicle self‑locked with the keys inside (including an Oberon incident where a window was smashed), handbrake jamming incidents (Penrith 2015 and Rose Bay 2016), and a tyre pressure/monitoring failure on a freeway trip in November 2016. Mr Bailey sued BMW Sydney for misleading or deceptive conduct under ss 4 and 18 of the Australian Consumer Law (ACL), relying on three brochure representations: (a) the car would be safe, roadworthy and have first class capabilities, performance and efficiency; (b) the car would enjoy timely and convenient servicing which would maintain roadworthiness and safety; and (c) maintenance and replacement parts would be ready and performed as quickly as possible. BMW Finance cross‑claimed for unpaid finance amounts after Mr Bailey defaulted on the final residual payment; the vehicle was repossessed in December 2018.
At trial (District Court NSW, Russell SC DCJ), the judge found that no oral representations by the dealer employee were established, but the brochure (handed to Mr Bailey) did contain the three pleaded representations and so BMW Sydney had made them. The court treated (a) as a representation of present characteristics of the vehicle, and (b) and (c) as representations as to future matters. On the facts the judge accepted that some defects occurred post‑purchase (internal noise after tow bar, battery drain, self‑locking doors, handbrake incidents and a tyre warning failure) but concluded there was no evidence that these defects were present or latent at the time of sale. On the future representations, BMW Sydney adduced evidence of its service infrastructure, job cards and parts requisitions, and the court held BMW Sydney had reasonable grounds for the servicing and parts representations. The consumer claim under s 18 failed; BMW Finance’s cross‑claim for $77,361.89 succeeded. Costs were ordered against Mr Bailey.
Why the court decided this way
Two legal lenses dominated the judgment: the characterisation of the brochure statements (present characteristic vs future promise) and the statutory treatment of future‑oriented representations under s 4 ACL.
Characterisation of representations (present vs future): The court followed the principle applied in recent Federal Court authority (Kimberly‑Clark) that a statement framed as the characteristics of the product as manufactured does not automatically become a representation about a future matter simply because the consumer will only experience the product over time. Thus the representation that the X5 "would be safe, roadworthy and have first class capabilities, performance and efficiency" was treated as a statement about the car's condition as supplied and therefore assessable by reference to whether the car possessed those characteristics at the time of sale.
Future matters and evidentiary burden: The servicing and parts representations were by their nature prospective (they promise future services and parts availability). Section 4(2) shifts an evidentiary burden onto the representor to adduce evidence that they had reasonable grounds for making the future‑oriented representation. The court required BMW Sydney to put forward evidence to satisfy that evidential burden, which it did by producing records, job cards, evidence of a service department and examples of it providing service and sourcing parts when asked. Because BMW Sydney had reasonable grounds, s 4 treated the representations as not automatically misleading.
Causation and timing of defects: For the present‑characteristic representation, the plaintiff had to establish that the car lacked those characteristics at the time it was driven away from the showroom. The court found most problems manifested later and some (notably the internal noise) occurred after a non‑standard tow bar was fitted. The plaintiff's expert did not conclude defects were present at the time of sale. On that basis the court concluded the present‑characteristic representation was not misleading when made.
Remedies: Because the plaintiff failed to establish a contravention of s 18, there was no recoverable damage against BMW Sydney; accordingly BMW Finance’s contractual claim for unpaid finance amounts remained enforceable and succeeded.
Before and after state of the law
Before: The established framework for misleading or deceptive conduct claims under s 18 ACL was that the court must identify the impugned conduct and then determine whether the conduct was misleading or deceptive in its context (Campbell two‑step formulation and Butcher). Representations about future matters had been treated cautiously because of proof difficulties as to the representor’s state of mind, hence the special statutory treatment in s 4 ACL, which creates an evidential presumption that requires the representor to adduce evidence of reasonable grounds.
After: This decision reaffirms two important, practical principles:
Not every promotional statement about product qualities becomes a s 4 future‑matter representation simply because a consumer will only experience those qualities later. Statements couched as product characteristics can be investigated as present matters capable of being true or false at the time of sale (the court followed Kimberly‑Clark).
Where statutory shifting of evidential onus applies under s 4(2), a dealer can discharge that onus by adducing readily available operational evidence, dealership facilities, job cards, service records, parts orders and examples where it actually provided the promised service, to show reasonable grounds for its future‑oriented promises.
The case underscores the evidentiary importance of timing: proof that defects existed at the time of sale is often critical to succeed on advertising representations of product character. It also illustrates that broadly phrased marketing language may contain representations, but they must be evaluated against the concrete state of the goods at the time.
Key passages with plain-English translation
Court identifies representations (paraphrase of finding in the judgment): "I find the brochure contained the three pleaded representations" (the dealer made those promises).
Plain English: The judge accepted the brochure was not mere puffery in all respects, it did communicate specific claims about the car's condition and about the dealer's service arrangements. The brochure therefore formed part of what the buyer relied upon.
Characterisation of present vs future (paraphrase of court's legal analysis): "The representation that the car would be safe and roadworthy is a representation of a present matter; servicing statements are future matters."
Plain English: Saying "this car is safe" is a statement about the car as it is now; saying "we will service it quickly in future" is a promise about what will happen later. Different legal rules apply to these two kinds of statements.
Evidentiary burden under s 4(2): "Because s 4(2) applies to future representations, the dealer needed to show it had reasonable grounds to make those promises; it did so by pointing to its service facilities and records of providing service."
Plain English: The law makes it easier for buyers to say promises about future actions were misleading; but the dealer can rebut that by showing it truly had the ability and practice to provide timely service and parts.
On causation and timing: "There is no evidence that the defects were present or latent in the car when the representation was made, therefore the first representation was not misleading at the time."
Plain English: If the car had the defects before it left the showroom that would have been powerful evidence of misleading advertising. Here, most problems showed up later and some had other plausible causes, so the consumer could not show the brochure was false at the point of sale.
What fact patterns trigger this precedent
This judgment is most directly useful where a purchaser sues after acquiring a consumer good, relying on promotional literature with both statements of product characteristics and promises about post‑sale dealer servicing. The precedent is triggered where:
The brochure/advertising mixes present‑characteristic statements with forward‑looking service promises.
The consumer alleges multiple intermittent defects occurring after purchase, and the timing of defects relative to purchase is central.
The representor adduces records showing service capacity and actual servicing/parts supply on some occasions.
The claimant has limited expert evidence that defects were latent at the time of sale.
Practically, the decision will be useful to dealers facing ACL claims: it demonstrates that contemporaneous service records, job cards, parts requisitions and invitations to bring the vehicle in (plus evidence of actual remedying of issues when presented) are effective to meet s 4(2) evidentiary obligations. For purchasers, the decision highlights the evidentiary difficulty of proving that product‑quality representations were false at the time of sale where defects manifest later and where warranty remedies were not pursued during the warranty period.
How later courts have treated it
The judgment itself does not report subsequent appellate treatment. It follows established High Court and Federal Court lines (Campbell, Kimberly‑Clark, Audi, Holden, March v Stramare and Henville) and applies them to the facts. It therefore sits as a district court application of those precedents and provides a practical example of s 4 evidential burdens being discharged by a dealer's records. Users should perform up‑to‑date research to identify whether appellate courts have directly considered Bailey v BMW Sydney or have cited it; the current decision is persuasive at the trial level for similar fact patterns.
Still-open questions
Latency and expert proof: The judgment reinforces the importance of cogent expert evidence tying latent defects to the pre‑sale period. There remains the practical evidentiary question of what quality and form such expert evidence must take to prove a defect was present at sale, particularly for intermittent electronic faults.
Brochure language as puffery vs representation: The court accepted several brochure passages as representations. A line remains to be clarified in future authorities about when emotive or lifestyle marketing language crosses into actionable representation, particularly where images and generalised descriptions accompany specific technical claims.
Quantifying 'reasonable grounds' under s 4(2): This case illustrates the types of evidence that can discharge the s 4(2) evidentiary burden, but a precise taxonomy of what amount and quality of documentary/operational evidence is sufficient in different sectors (high‑volume consumer goods versus bespoke goods) is not exhaustively settled and will depend on context.
Remedies for distress: The judgment declined to award distress damages because of the state of authority and the pending High Court matter; the availability of non‑economic relief in ACL cases remains unsettled pending higher court resolution.
Practical takeaway for practitioners: When advancing an ACL claim based on representations in marketing material, ensure expert evidence addresses temporality (were defects latent at delivery?) and preserve warranty remedies contemporaneously; sellers should retain clear, contemporaneous service and parts records and evidence of service capacity to rebut s 4(2) evidentiary presumptions.
Catchwords
(2004) 218 CLR 592
Campbell v Backoffice Investments Pty Ltd [2009] HCA 25(2009) 238 CLR 304
Henville v Walker [2001] HCA 52(2001) 206 CLR 459
I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited [2002] HCA 41(2002) 210 CLR 109
March v Stramare E& Pty Limited [1991] HCA 12(1991) 171 CLR 506
Marks v GIO Australia Holdings Ltd [1998] HCA 69(1998) 196 CLR 494
Reiffel v ACN 075 839 226 Limited [2003] FCA 194
In April 2013 the plaintiff Mr Bailey bought a BMW X5 motor vehicle from the first defendant BMW Sydney Pty Limited (BMW Sydney). The purchase of the vehicle was financed by the second defendant BMW Australia Finance Limited (BMW Finance). Mr Bailey drove the car between April 2013 and December 2018 when it was repossessed by BMW Finance. He alleges that he was induced to purchase the car through misleading or deceptive conduct on the part of BMW Sydney. He alleges that the car suffered from a number of defects. He also alleges that BMW Sydney failed to promptly service and provide parts for the car. He claims damages arising from the alleged misleading or deceptive conduct.
The finance on the car provided by BMW Finance required Mr Bailey to pay 60 monthly payments. The last was a residual payment of $71,500. Mr Bailey did not make this payment. By a cross-claim BMW Finance sued Mr Bailey for damages for breach of the finance agreement.
[3]
The Pleadings
Mr Bailey sued on a Statement of Claim filed on 29 January 2018. The pleading was amended twice during the course of the hearing. In May 2012 the plaintiff had purchased a 2011 model BMW X5 motor vehicle. He had owned several BMWs over the years and had good experiences with his previous cars. Mr Bailey was the managing director of an interior and exterior design company. In early April 2013 representatives of BMW Sydney initiated a discussion with Mr Bailey suggesting that he might be interested in the 2012 model BMW X5. Mr Michael White of BMW Sydney spoke to and messaged Mr Bailey.
Paragraph 6 of the Statement of Claim alleges that in early to mid-April 2013, in the course of the negotiations, BMW Sydney made representations to Mr Bailey to the effect that:
"a. the car would be safe, roadworthy and have first class capabilities, performance and efficiency;
b. the car would enjoy timely and convenient servicing which would maintain the car's roadworthiness and safety; and
c. any maintenance including the replacement of parts would be ready to be performed by BMW as quickly as possible."
The particulars of those representations were that some were orally made by Mr White and some were outlined in a brochure entitled "The BMW X5".
The Statement of Claim in par 8 alleged that based on the satisfactory performance of the plaintiff's previous cars (said to be part of the "context" in which the representations were made), and in reliance on the representations made by BMW Sydney, the plaintiff agreed to purchase the car.
Mr Bailey alleged that the representations constituted conduct by BMW Sydney in trade and commerce. Further, par 11 of the Statement of Claim pleaded that the representations were with respect to a future matter, and the plaintiff thus relied on s 4 of the Australian Consumer Law (ACL) being Schedule 2 to the Competition and Consumer Act 2010 (Cth).
Mr Bailey alleged that acting in reliance upon the representations he entered into a contract dated 15 April 2013 to purchase the car. Further, he entered into a Chattel Mortgage on 15 April 2013 with BMW Finance which granted BMW Finance security over the car for repayment of a loan of $144,548.10. This was alleged to be a "linked credit contract" within the meaning of s 278(2) of the ACL.
On 20 April 2013 Mr Bailey collected the car.
Paragraph 24 of the Statement of Claim alleged that from about mid to late April 2013 onwards the car suffered from a number of defects. These were particularised as follows:
"i. Chronic and unexplained loud internal noise in the car;
ii. Short and unexplained battery life;
iii. Faulty digital diesel gauge system failing to correctly read fuel levels, leading to sudden and unexpected breakdowns;
iv. Self-locking doors with keys in the car from time to time;
v. Hand brake that repeatedly jammed or locked;
vi. Faulty digital system failing to identify deflating tyres; and
vii. Broken hand break [sic] switch."
Paragraph 26 of the Statement of Claim pleaded that "as a result" of those pleaded defects, the conduct of BMW Sydney in making the representations was misleading or deceptive, in contravention of ss 4 and 18 of the ACL.
[4]
The Law - Misleading or Deceptive Conduct
Section 18(1) of the ACL provides that:
"A person must not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive."
The ACL is "fundamentally remedial and protective legislation" giving effect to "matters of high public policy". It is to be construed so as to give the fullest relief which the fair meaning of the legislation will allow - Marks v GIO Australia Holdings Ltd [1998] HCA 69; (1998) 196 CLR 494.
The following principles in relation to s 18 are collected in par [ACL.18.20] in Millers Australian Competition and Consumer Law Annotated, 41st Edition, 2019 (Miller):
1. Section 18(1) applies to conduct that is misleading or deceptive or likely to mislead or deceive. Conduct can include a statement which is misleading or deceptive or likely to mislead or deceive. Many of the cases refer to representations.
2. The conduct must lead, or be capable of leading, a person into error and the error or misconception must result from conduct of the person and not from other circumstances for which the person is not responsible.
3. Conduct is likely to mislead or deceive if there is a real or not remote chance of possibility regardless of whether it is less or more than 50%.
4. The section is concerned with the effect or likely effect of conduct on the minds of those likely to be misled or deceived.
5. The test is objective and the court must determine the question for itself, but the section is not designed for the benefit of those who fail to take reasonable care of their own interests.
6. The relevant conduct must be identified and then consideration given to whether that conduct, considered as a whole and in context, is misleading or deceptive or likely to mislead or deceive. It is wrong to select particular words or acts which, although misleading in isolation, do not have that character when viewed in context.
7. A person's intention or its belief concerning the accuracy of the statement of fact is not relevant, unless the statement involves the maker's state of mind.
8. Conduct that exploits or feeds into and thereby reinforces the pre-existing mistaken views of members of the relevant class may be misleading or deceptive or likely to mislead or deceive.
Section 18 only applies to conduct in trade or commerce.
In Campbell v Backoffice Investments Pty Ltd [2009] HCA 25; (2009) 238 CLR 304 the High Court said that in considering whether the facts of a case disclosed misleading or deceptive conduct, a two-step analysis is required. The first step involves asking whether facts establish the conduct pleaded. The second step involves asking whether, as a question of fact, the conduct is false, misleading or deceptive or likely to mislead or deceive. It is necessary to have regard to the context in which the representation was made and to the relevant surrounding facts and circumstances - Butcher v Lachlan Elder Realty Pty Limited [2004] HCA 60; (2004) 218 CLR 592.
[5]
The Law - Misleading representations with respect to future matters
Section 4 of the ACL provides:
"4 Misleading representations with respect to future matters
(1) If:
(a) a person makes a representation with respect to any future matter (including the doing of, or the refusing to do, any act); and
(b) the person does not have reasonable grounds for making the representation;
the representation is taken, for the purposes of this Schedule, to be misleading.
(2) For the purposes of applying subsection (1) in relation to a proceeding concerning a representation made with respect to a future matter by:
(a) a party to the proceeding; or
(b) any other person;
the party or other person is taken not to have had reasonable grounds for making the representation, unless evidence is adduced to the contrary.
(3) To avoid doubt, subsection (2) does not:
(a) have the effect that, merely because such evidence to the contrary is adduced, the person who made the representation is taken to have had reasonable grounds for making the representation; or
(b) have the effect of placing on any person an onus of proving that the person who made the representation had reasonable grounds for making the representation.
(4) Subsection (1) does not limit by implication the meaning of a reference in this Schedule to:
(a) a misleading representation; or
(b) a representation that is misleading in a material particular; or
(c) conduct that is misleading or is likely or liable to mislead;
and, in particular, does not imply that a representation that a person makes with respect to any future matter is not misleading merely because the person has reasonable grounds for making the representation."
In Australian Competition and Consumer Commissioner v Kimberly-Clark Australia Pty Limited [2019] FCA 992, Justice Gleeson had to consider representations made in relation to a consumer product. The ACCC argued that the representations comprised predictions or forecasts of how the product would behave when purchased and used. It argued that the representations were about the characteristics of the product which would only become manifest at a future point in time after purchase and after use.
Her Honour at [284-285] was not satisfied that the representation about the characteristics of the product was a representation with respect to any future matter. Firstly, the representation was expressed as a representation about the characteristics of the product as manufactured. The representation was not couched in conditional terms, nor as a prediction. It did not depend upon whether or not some uncertain event occurred. Secondly, the fact that a consumer needed to buy and use the product was not grounds to give the representations a futuristic quality. If that was the effect of s 4 of the ACL, then any representation about the characteristics of goods sold in Australia would be taken to be with respect to a future matter. Her Honour characterised the representations as statements of the performance characteristics of the product as it had been manufactured. Each assertion was true or false whether or not the item was ever used as described. Thirdly, her Honour referred to the history of the section, which was enacted to overcome the difficulty in obtaining proof of dishonesty or recklessness in relation to statements, representations or predictions about future matters.
[6]
The Law - Damages
Section 236(1) of the ACL provides:
"If:
(a) a person (the claimant) suffers loss or damage because of the conduct of another person; and
(b) the conduct contravened a provision of Chapter 2 or 3;
the claimant may recover the amount of the loss or damage by action against that other person, or against any person involved in the contravention."
The relevant question is whether or not there is sufficient connection between the conduct and the damage suffered for the damage to be regarded as "because of" the contravention. The section requires application of the common law practical or common-sense concept of causation and remoteness - March v Stramare E&L Pty Limited [1991] HCA 12; (1991) 171 CLR 506; Henville v Walker [2001] HCA 52; (2001) 206 CLR 459. Whether or not that connection exists is essentially a question of fact to be determined by reference to common sense and experience and one into which policy considerations and value judgments necessarily enter.
The impugned cause does not have to be the sole cause - it must merely be a sufficient cause - Henville v Walker. As long as the breach materially contributed to the damage, a causal connection will ordinarily exist.
It is not necessary, in order to establish reliance, for a person to be able to explain with exact precision the mental process by which the person was induced to act. It is unrealistic to expect that fine shades of meaning of particular statements, and their effect upon the mind, will be particularly recalled when the person is required to give evidence - Reiffel v ACN 075 839 226 Limited [2003] FCA 194; (2003) 132 FCR 437. People are often swayed by several considerations, influencing them to varying extents, so the law attributes causality to one or more of those considerations, provided it has some substantial rather than negligible effect - I & L Securities Pty Limited v HTW Valuers (Brisbane) Pty Limited [2002] HCA 41; (2002) 210 CLR 109. The reference in the section to "loss or damage" includes economic or financial loss - Wardley Australia Limited v Western Australia [1992] HCA 55; (1992) 175 CLR 514.
One of the heads of damage claimed by Mr Bailey was damages for distress and anxiety. Counsel for Mr Bailey conceded that as a result of the decision of the Court of Appeal in Scenic Tours Pty Limited v Moore [2018] NSWCA 238, such damages were not available as a matter of law. It was pointed out that an appeal to the High Court was heard and reserved on 11 February 2020. In those circumstances, both sides took the sensible view that this court should assess damages for distress and anxiety, on a theoretical basis only.
[7]
The Issues
The issues for determination are:
1. Did BMW Sydney make the representations pleaded in par 6 of the Statement of Claim?
2. Were the representations made with respect to future matters?
3. Did the car suffer from the defects pleaded and particularised in par 24 of the Statement of Claim?
4. In the light of the answer to Issue 3, were the representations regarding the qualities of the car misleading or deceptive, as pleaded in par 26 of the Statement of Claim?
5. Was there a failure to promptly service the car and make parts available, as pleaded in par 30 of the Statement of Claim?
6. In the light of the answer to Issue 5, were the representations regarding servicing and parts misleading or deceptive?
7. If there was misleading or deceptive conduct, what damages can be recovered?
8. The Cross-Claim: Is BMW Finance entitled to a money judgment?
9. What are the appropriate costs orders?
[8]
Alleged oral representations
Mr Bailey gave his evidence-in-chief by an affidavit affirmed on 10 April 2019 (PX1, Tab 9). He said that on 25 March 2013 he received a text message from Michael White, a BMW Sydney service representative who told him about an "X5 40d demo" which might be of interest to him. He then had a telephone call from Mr White, who told him that he could give him a really good deal on the newest X5. In mid-April 2013 Mr Bailey went to the BMW Sydney dealership and looked at the car. He did not take it for a test drive as he already had the previous 2011 model. Mr White handed him some promotional literature, including a brochure entitled "THE BMW X5. BRED WITHOUT COMPROMISE".
Mr Bailey said that he took the brochure away and read it. He discussed with Mr White the features and specifications available for the car. On 15 April 2013 he received an email from Mr White which set out a proposal for finance and which listed the specifications for the new car.
Mr Bailey decided to buy the car and had some further discussions with Mr White about fitting a tow bar and roof boxes. On 24 April 2013 Mr Bailey went to BMW Sydney and signed the purchase contract and the Chattel Mortgage. He traded in his 2011 X5 which had travelled 46,532km.
None of the conversations with Mr White, as recounted by Mr Bailey, concerned the topics of the alleged representations.
Mr Bailey was cross-examined about the conversations with Mr White. In short, he acknowledged that Mr White had not made any of the statements pleaded as the representations in par 6 of the Statement of Claim. None of those matters were even discussed with Mr White. The plaintiff's case on representations thus depended upon written statements contained in the brochure.
I find that BMW Sydney did not make the alleged oral representations.
[9]
Alleged written representations
The brochure is an advertising document. It contains many glossy photos of BMW X5 motor vehicles. Some of the headings in the brochure indicate its nature:
A Modern Decathlete
Opposites Attract
True to Character. Breaking New Ground
Genuine Charisma is Instantly Recognisable
Controlled Roadholding for Unbridled Driving Pleasure
Metallic Colours Shimmer with Fabulous Fluidity
It All Revolves Around Joy
Modern Athleticism
Harmonious Exclusivity
All of these headings purport to describe the car, not the owners. However, all of the people in the photographs who are driving those vehicles appear to be smiling, as well as good-looking. Notwithstanding the grandiloquent prose of the brochure, it does contain representations. In par 18 of his affidavit, Mr Bailey reproduced two representations which he says he relied upon. The first is on p 7 of the brochure which says:
"Discover the world in an automobile that is the pioneer of a whole class. Take a spin in the BMW X5. Thanks to its unrivalled sense of self-confidence and an entire palette of innovative technologies, it brings sheer driving pleasure to life like no other vehicle. You'll instantly feel the perfect union of extremely precise steering and directional stability, coupled with the exceptionally direct handling afforded by the chassis. The refined power of the economical engine is instantly thrilling. Plus with a whole host of BMW EfficientDynamics technologies top it all off [sic], and impressive power to efficiency ratio."
The second passage in the brochure which Mr Bailey says he relied upon is at p 68 which reads:
"Service.
When you buy a BMW, you can look forward to superb service and comprehensive customer care, with a network of dealerships Australia-wide ready to assist you at any time. Your car informs you of its service requirement via the CBS (Condition Based Service) system. Then simply get in touch with your BMW Dealer, who will provide expert care for you and your car. Staffed by highly trained personnel, you BMW Dealership is also equipped with the latest computer-aided information and diagnostic tools. Important data such as chassis number, mileage and current service requirements are all stored on your car key, ensuring quick assessment of your vehicle's status, which gives staff even more time to help you. Naturally, your BMW Dealer has a comprehensive stock of Genuine BMW Parts for any eventuality. All in all, quality and safety are the essence of BMW Service. Find out more at bmw.com.au/service.
BMW Roadside Assistance & Accident Management.
To ensure your BMW delivers years of uninterrupted driving pleasure it comes with the most comprehensive roadside care program in Australia; BMW roadside Assistance and Accident Management. This is complimentary for three years, so you can rest assured in the knowledge that assistance is at hand 24 hours a day, 365 days a year.
In the event of a breakdown, our superior fleet of BMW Servicemobiles will do everything to put your BMW back on the road as soon as possible. The programme offers prompt support and reimbursement of your breakdown expenses such as rental cars, taxis or hotel accommodation (terms and conditions apply) and with the additional support of BMW Accident Management means you can be sure that the inconvenience of managing an incident is taken care of, professional and efficiently."
[10]
Were these representations with respect to future matters?
The Statement of Claim pleads that all three representations were made with respect to future matters.
Having regard to the principles derived from the Kimberly-Clark case, the representation pleaded in par 6(a) of the Statement of Claim is a representation of a present matter (i.e. this car as manufactured is safe, roadworthy and has first class capabilities, performance and efficiency).
The representations pleaded in par 6(b) and par 6(c) of the Statement of Claim are representations as to future matters. Servicing and replacement of parts will only happen in the future. While these representations could be construed as to present matters (i.e. BMW presently provides timely and convenient servicing and can replace parts quickly), in the context of communicating with a prospective buyer of a car, they are in effect saying "if you become the owner of the car, when the time comes in future to have it serviced, the servicing will be timely and convenient, and when it comes to having parts replaced, that will be done as quickly as possible".
Because of s 4(2) of the ACL, there is an evidentiary burden upon BMW Sydney to show that it had reasonable grounds for making the two representations which are made with respect to future matters. If there were no reasonable grounds, then the representations will be taken to be misleading - s 4(1). Whether BMW Sydney had reasonable grounds will be considered below, after dealing with the service history of the car.
[11]
Did the car have defects?
The factual issue to be determined is whether the car suffered from the defects pleaded and particularised in par 24 of the Statement of Claim. The pleaded defects will be dealt with one by one.
[12]
Internal Noise
The pleaded defect is "chronic and unexplained loud internal noise in the car".
Mr Bailey gave evidence in-chief by an affidavit affirmed on 10 April 2019 (PX1, Tab 9). Exhibited to his affidavit was a large bundle of documentation (PX1, Tab 10). Page 154 of PX1 is a written list of complaints dated 24 July 2017 given by Mr Bailey to BMW Sydney. In respect of the noise problem, those notes say:
"When tow bar was installed, the car started to make strange noises - possibility wasn't fitted correctly to chassis. Car makes lots of metal noises when going over bumps. Multiple complaints resulting at start - verdict which never fixed problems that seats weren't locked in enough… was never the problem."
At p 170 of PX1 is a list of faults which Mr Bailey identified with the car. In respect of the noise he said:
"Pick up car again has a noise, on first service mention noise and was told it was seats. This went on countless times."
BMW Sydney called no evidence to dispute the assertions made by Mr Bailey that the car had, since early days, made strange noises after the installation of the tow bar. BMW Sydney called no evidence to dispute Mr Bailey's assertions that he raised this problem many times but it was never fixed.
I find that the car did have an ongoing problem, from shortly after it was purchased, of chronic and unexplained loud internal noises in the car. I find that Mr Bailey raised complaint about these noises quite often with BMW Sydney but that the problem was still apparent in the car when it was repossessed by BMW Sydney. It was not fixed.
[13]
Battery Life
This defect was particularised as "short and unexplained battery life". Mr Bailey gave evidence about the battery going dead in pars 47-55, 59-71 and 138 of his affidavit.
In cross-examination Mr Bailey was not challenged regarding this evidence. That is understandable, since the car was left with BMW Sydney to deal specifically with the battery problem in June and July 2014, and Mr Bailey's complaints about the battery were borne out.
A folder of documents in chronological order was tendered for the defendants (DX1). At p 83 of DX1 was a BMW Sydney job card which recorded the problem as:
"Battery going flat overnight - vehicle drain
Has been jumpstarted by roadside numerous times."
The problem was finally solved by Mr McTeer of BMW Sydney who provided a 3-page report which is at pp 118-120 of DX1. The solution was to replace the fuel filter heater and the fuel filter. Somehow these were causing intermittent battery drain. After that work was done Mr Bailey had no further problems with the battery going flat and the car having to be jumpstarted. While BMW Sydney had the car for five weeks to sort this out, during those weeks Mr Bailey was overseas.
A document in relation to BMW Roadside Assistance showed that they had attended the car to assist when the battery was flat on 28 April 2014, 19 May 2014, 10 June 2014 and 23 June 2014. Mr Bailey said that there were many other times when the battery was flat and he had to jumpstart the car. He was not challenged about this evidence and I accept it. His evidence was that these occasions occurred between late April and early June 2014 (par 47 of his affidavit). There was no evidence that he took the car to BMW during that period, until it was left with them in the last week of June 2014, when Mr Bailey went overseas.
I find that in the period between late April 2014 and late June 2014, the particularised defect of "short and unexplained battery life" was present in the car. I also find that when the car was left with BMW Sydney, the problem was diagnosed and fixed.
[14]
Diesel Fuel Gauge
The particularised defect is "Faulty digital diesel gauge system failing to correctly read fuel levels, leading to sudden and unexpected breakdowns".
The evidence concerning this is contained in the affidavit of Mr Bailey's partner Mr Ruprecht. His affidavit was affirmed on 10 April 2019 and is at Tab 11 of PX1. Mr Ruprecht drove the car from his home towards a service station as it had a low fuel level. Mr Ruprecht said that the car's fuel gauge read that there was 80km worth of fuel still in the tank. After a short distance the car stopped suddenly in the middle of the street. Mr Ruprecht had to leave the car stranded as he was going to a dress rehearsal for a wedding. He called Mr Bailey's mother to bring a jerry can full of fuel to the car. He gave hearsay evidence that a member of Mr Bailey's staff had to use a screwdriver to lift the safety flap to pour in fuel so that the car could then be driven up the hill to the service station.
The records of BMW Roadside Assistance (PX1, Tab 10, p 77) record other events on 7 March 2014 and 29 July 2015 when the car ran out of diesel fuel and Roadside Assistance delivered fuel to the vehicle. These incidents were different to those set out in the affidavit of Mr Ruprecht, which occurred in August 2016, in that there was no evidence concerning the reading on the fuel gauge for the 2014 and 2015 incidents.
The only evidence to suggest that the fuel gauge was giving an incorrect reading was that contained in the affidavit of Mr Ruprecht. In the light of those matters, I find that the 2014 and 2015 incidents where the vehicle ran out of fuel had nothing to do with a faulty diesel fuel gauge.
There is some support for the allegation that the fuel gauge was faulty, arising from the affidavit of Mr Ruprecht. However, the vehicle was not taken to BMW Sydney for this to be rectified and there is no evidence that Mr Bailey ever complained to BMW Sydney about a faulty fuel gauge. That is surprising as the car was still in warranty and Mr Bailey could have had any such "defect" fixed at no cost. It was not a problem listed in the notes of 24 July 2017 (PX1, Tab 10, pp 154-155) and it was not in the list of problems set out at pp 170-171 of PX1, Tab 10. Against that background, I find that Mr Bailey has not proved that the digital fuel gauge was faulty. That allegation of defect has not been made out.
[15]
Self-locking Doors
The particularised defect is "self-locking doors with keys in the car from time to time".
Mr Bailey gave evidence of multiple occasions that he was locked out of the car, when he left the vehicle's keys on the centre console, and shut the doors. The vehicle then automatically locked and he could not get back in, as the keys were inside. He gave instances of this in pars 39-44, 72-74 and 89-92 of his affidavit. Mr Ruprecht confirmed the evidence about the occasion at Oberon, when dogs were locked in the car, at pars 24-35 of his affidavit.
Mr Bailey relied upon an affidavit of Lisa Fowler, Mr Bailey's sister. That affidavit was affirmed on 11 May 2019 and is at Tab 13 of PX1. In pars 7-19 and 24 of the affidavit Ms Fowler corroborates allegations regarding problems with the car locking itself with the keys inside.
At par 39 of Mr Bailey's affidavit, he gave evidence about the first instance when the keys became locked in the car. The incident occurred in mid-October 2013. He said:
"The car has a Comfort Key access system so that it will not lock when the keys are in the console which is located in between the driver's seat and the front passenger seat."
Mr Bailey referred to p 13 of the Owner's Handbook, which is to be found at p 64 of PX1, Tab 10.
That page of the Handbook says nothing to the effect that the keys can be left on the centre console without the doors locking. The previous page of the Handbook PX1, Tab 10, p 64) says, inter alia:
"The central locking is activated when the driver's door is closed.
…
Persons remaining in the car or pets left inside can lock the doors from the inside. You should therefore take the remote control with you when you get out of the vehicle so that the car can be opened from the outside."
The defendants tendered an expert report dated 20 November 2019 by Mr Ian Crane, a diagnostic, electronic and mechanical examiner of motor vehicles, specifically of BMWs. At pars 72-73 of his report he said:
"There are four ariels [sic] internal to the vehicle to sense if a key is in the vehicle. When a key is determined to be in the vehicle by the "CAS" (Comfort Access System) then the car cannot be locked from the outside."
Mr Crane said at pars 76-77:
"I accept that the vehicle has become locked with the key in the car, however it must be noted that the owner carries dogs in the car and has left the key in the vehicle with dogs inside, one would obviously assume due to the described circumstances that this has been done with the windows up. I suggest that this has been the sole cause of the issue and I see no evidence to show otherwise."
[16]
Handbrake Jammed
This defect is particularised as "Hand brake that repeatedly jammed or locked". In his affidavit Mr Bailey gave two instances of this. The first occurred on 8 April 2015 at Penrith (pars 81-84 of his affidavit). The handbrake jammed on and the car could not be moved. Mr Bailey had a telephone conversation with the Service Manager at BMW Sydney, who told him to turn the car off and wait for the computer to reset. Mr Bailey had to wait for an hour and a half. He was eventually able to resume his trip to a work engagement. From that I infer that the computer did reset and the car could be driven after those wasted 90 minutes.
There were no further handbrake problems until a second incident, which occurred at Rose Bay in November 2016 (pars 110-114 of the affidavit). Mr Bailey was driving the car when a handbrake warning light flashed red. He continued driving. Smoke billowed from the back of the car. He parked the car and waited for the computer to reset, but it did not. He caught an Uber home and left the car at Rose Bay for a few days. When he went back to the car it would not start so it was towed to BMW North Shore (a different dealer and a different entity to BMW Sydney). They carried out diagnostics on the car and found that a new handbrake actuator and a new handbrake switch were required. BMW covered the cost of the parts and Mr Bailey paid $2,000.80 for labour. By the time of the Rose Bay incident the warranty on the car had expired.
There was no expert evidence to explain why the handbrake jammed on during the Penrith incident. That resulted in inconvenience and distress for about 90 minutes. The car eventually became mobile.
There was evidence, provided by BMW North Shore documents, as to the problem which caused the Rose Bay incident. By the time of the Rose Bay incident the car was three and a half years old, out of warranty, and it would not be unusual for a part to fail and need to be replaced.
I am satisfied that the car had a handbrake which jammed on two occasions. It should not have jammed on at Penrith. The Rose Bay incident resulted from a breakage, which was fixed by another dealer.
[17]
Faulty digital system failing to identify deflating tyre
On 18 November 2016 Mr Bailey and Mr Ruprecht were travelling north on the Newcastle freeway intending to visit Taree. Just before the Warners Bay exit, while travelling at 110kph, the lights began to flash on the car's computer screen, cruise control was disengaged and the car suddenly swerved into the next lane. Mr Bailey pulled the car over as he thought there might be an issue with a tyre. He performed an electronic system check on the tyres, but green lights lit up on the screen, which indicated that there were no issues with the tyres. The car had an electronic system which should have showed a red light if one of the tyres had started to deflate.
Having checked the tyre deflation indicator, Mr Bailey pulled back onto the freeway but the car swerved again. He pulled over immediately and did another system check, which disclosed no problem with the tyres. He then got out of the car and looked underneath to investigate the issue. He saw that one of the back tyres had "shredded". He placed a call to BMW Roadside Assistance seeking assistance with the flat tyre. He then managed to drive slowly to a location off the freeway. The car was then towed to a tyre dealer in Newcastle, who replaced the tyre.
Mr Ruprecht gave evidence in his affidavit which was to the same effect. With the delay in having the car towed to Newcastle to get a new tyre, there was insufficient time to continue on to Taree, so the car was driven back to Sydney.
I accept the evidence of Mr Bailey and Mr Ruprecht concerning the green indicator light, which should have shown red, when the rear tyre deflated on the expressway. In particular, Mr Ruprecht was not challenged about his evidence concerning that event.
The tyre warning light failure is in the list of problems set out in the email dated 17 August 2017 (PX1, Tab 10, p 171). Mr Bailey gave no evidence that he raised the problem with BMW Sydney, nor did he ask them to fix it, before August 2017.
[18]
Broken handbrake switch
This defect is the Rose Bay incident, referred to above. There was a broken mechanical part, which Mr Bailey had replaced by a BMW dealer other than BMW Sydney.
[19]
Findings of Fact - Defects
I make the following findings of fact in relation to the alleged defects:
1. After the tow bar was fitted to the car, it started to make strange noises.
2. These noises were drawn to the attention of BMW Sydney, but the problem was never fixed.
3. The battery went flat on multiple occasions between April 2014 and June 2014, leading to the car needed to be jump started.
4. The car was taken to BMW Sydney and left there for five weeks from late June until the end of July 2014. During this time the problem of the battery going flat was investigated and fixed.
5. There was no proven defect in relation to the digital diesel fuel gauge.
6. There was a continuous and unsolved problem with the doors of the car self-locking when the keys were left in the car.
7. This problem simply should not have happened, as the car was designed not to self-lock if the keys were left in the car.
8. The handbrake jammed on for no reason on one occasion at Penrith.
9. The digital system for identifying a deflating tyre did not work in November 2016, when a tyre deflated and shredded while the car was being driven on the freeway.
10. In November 2016 the handbrake jammed on at Rose Bay, and the cause of that was a broken part, which was fixed by a different BMW dealer.
[20]
Was there a misleading or deceptive representation concerning the characteristics and performance of the car?
As previously recited, the first representation concerning the car was:
"The car would be safe, roadworthy and have first class capabilities, performance and efficiency."
It is important to note that, apart from the internal noise in the car, there was no evidence of Mr Bailey suffering from any problem or inconvenience prior to mid-October 2013, when the first instance occurred of the car self-locking with the keys inside the car. The internal noise in the car started after the tow bar was fitted. This was an additional item which was not part of the standard equipment on the car which Mr Bailey purchased. There is no evidence that the car in the form in which he purchased it caused any problems between picking it up in April 2013 and mid-October 2013 when the keys started self-locking in the vehicle. This is an important matter, relevant to whether or not the representation as to capabilities, performance and efficiency contained in the brochure was misleading or deceptive at the time it was made.
In other words, did the car have the characteristics represented in the brochure when Mr Bailey drove it away in April 2013, or was it a vehicle which had defects at that time?
Some previous cases concerning motor vehicles are instructive. In Australian Competition and Consumer Commission v Audi Australia Pty Limited [2007] FCA 1990 the Federal Court considered representations to the effect that the Audi Q7 3.6 SE motor vehicle was a "7 seat SUV" with "7 adult seats". The representations were made in advertisements, on the Audi Australia website, and in a brochure setting out the specifications of the Audi Q7 car. The fact was that seven seats were not a standard feature for that vehicle. Its standard seating was five seats. The Federal Court declared that the supplier of the vehicle had engaged in misleading or deceptive conduct in breach of s 52 of the Trade Practices Act 1974 (Cth), the precursor to s 18 of the ACL. Thus when an Audi Q7 motor vehicle was driven out of the showroom, it did not have the characteristics represented by the supplier.
To similar effect was the decision of the Federal Court in Australian Competition and Consumer Commission v GM Holden Limited [2008] FCA 1428. The seller of Saab motor vehicles represented that it had taken measures so that carbon dioxide emissions from any motor vehicle in the Saab range would be neutral over the life of the motor vehicle. It also represented that in the first year following the purchase of any Saab vehicle, it would plant 17 native trees on behalf of the purchaser, which would offset the carbon dioxide emissions for the life of the vehicle. Both of these representations were false, misleading or deceptive. The carbon dioxide emissions from the Saab would not be neutral over the life of a motor vehicle. Planting 17 trees would only provide a carbon dioxide offset for a single year's operation of a Saab. Once again, the minute a Saab was driven out of the showroom, it did not have the characteristics represented by the seller. Declarations were made that the seller had engaged in misleading or deceptive conduct in making the representations in print advertisements.
[21]
What caused the defects?
Mr Bailey himself could not give any evidence about the cause of the defects. The cause is a matter for expert evidence. The only report by an expert tendered on behalf of the plaintiff is that of Mr Greg Tanti (PX3). He commenced his report as follows:
"I have read through all of the information supplied to me in regards to the numerous issues this vehicle has incurred since purchased in 2013. In multiple discussions and information I received from Grace Hur, I found that the information I was receiving prior to my inspection to be odd. I have worked on a numerous amounts [sic] of these motor vehicles and I know the common and intricate faults that commonly occur with this type of vehicle and none of the complaints received matched anything I had ever seen before.
From the explanation and the problems raised, my suspicion was that something had been modified or that this vehicle was leaking internally wetting control units and wiring which is a common problem with this model of vehicle. Being involved in my line of work through insurance related claims, I have seen this type of issue and conducted repairs multiple times as a result."
Mr Tanti elaborated upon his theory that the vehicle had been leaking internally, which wet control units and wiring. He conducted an inspection of the vehicle on 1 August 2019. He found that the drain tubes in the sunroof and the plenum chamber had not been kept clear of debris such as dirt and leaves. In his view the blocking of the drains and the chamber could cause water to enter the car and get under the carpet. He made an inspection of the vehicle. He lifted the carpet and found that there was dampness under it, in an area where there were electrical wires and controls. The theory he expressed in the report was that water leaks had caused major electrical issues.
The opinion of Mr Tanti therefore related to lack of proper inspection and maintenance of the vehicle during its working life. No part of his opinion expressed the view that there was anything wrong with the safety, roadworthiness or characteristics of the vehicle at the time it was purchased.
That was the only expert evidence put forward for the plaintiff. In the light of that opinion, the plaintiff might have framed his claim as one which involved lack of proper inspection and maintenance by BMW Sydney, by alleging that they failed to clear the drains and the plenum chamber during regular servicing. However, the evidence showed that Mr Bailey rarely took the car to BMW Sydney to be serviced, and that most of the time he took it to third parties. That matter is dealt with in more detail below, in considering the second and third representations conveyed by the brochure.
[22]
Conclusion on the first representation: "The car would be safe, roadworthy and have first class capabilities, performance and efficiency"
There is no evidence to suggest that when the representation was made, the motor vehicle was anything other than safe and roadworthy, with first class capabilities, performance and efficiency. The only problem which manifested itself soon after Mr Bailey took possession of the car was the internal noise associated somehow with the fitting of the towbar. This equipment was not part of the car as supplied. It was not a standard inclusion on the car at the time the representation was made. The car functioned well, on Mr Bailey's own evidence, until mid-October 2013 which was the first time that the doors self-locked, while the keys were still in the car. There was no evidence that this was a defect present or latent in the car when the representation as to safety, roadworthiness and capabilities was made.
Mr Tanti, the expert called by the plaintiff, did not say that the car had any problems at the time the representation was made. In fact he said: "…none of the complaints received matched anything I have ever seen before". Thus this is not a case like the Audi and Saab cases referred to above, where the cars as supplied did not match the promises about their qualities. Further, Mr Tanti's theory about the cause of the problems, even if correct, suggests that events quite some time after purchase led to faults developing.
I find that the first representation, as pleaded in par 6(a) of the Statement of Claim, was not misleading or deceptive and was thus not in breach of s 18 of the ACL.
[23]
Servicing, maintenance and replacement of parts
As previously recited, these were representations as to future matters. The evidence concerning these matters is summarised below.
On 23 April 2013 a tax invoice was issued for the purchase of the vehicle by Mr Bailey (DX 1, p 67).
On 1 May 2013 a tax invoice was issued for the supply and fitting of a tow bar to the BMW (DX 1, p 72).
On 26 July 2013 a tax invoice was issued for fitting a roof box to the BMW (DX 1, p 74).
On 24 December 2013 the vehicle had been booked in for a service but Mr Bailey did not attend (DX 1, p 76).
On 24 January 2014 BP Castle Cove issued a tax invoice for servicing the vehicle (DX 1, p 78). BP Castle Cove carried out a "B Service". This involved changing the engine oil and filter, checking fluid levels and coolant, pressure testing, checking for oil leaks, hoses and clamps, inspecting the front and rear brakes, inspecting under the car and road testing the car.
On 20 May 2014 BP Castle Cove issued a tax invoice for work done on the vehicle (DX 1, p 80). BP Castle Cove supplied four tyres and did a wheel alignment.
On 12 June 2014 BMW Wagga issued a tax invoice for work done in an effort to deal with the problem of the battery going flat all the time. As the work done by BMW Wagga was ineffective, no charge was ultimately rendered (DX 1, p 81).
On 25 June 2014 the vehicle was taken to BMW Sydney for the problem of "battery going flat overnight" (DX 1, p 83). The vehicle stayed with BMW Sydney for five weeks. During this time Mr Bailey was overseas. As previously recited, the problem with the flat battery was cured by replacement of the fuel strainer and heater (DX 1, p 111).
On 15 August 2014 BP Castle Cove issued a tax invoice for work done on the vehicle (DX 1, p 130). The work done involved servicing the brakes.
On 10 December 2014 the vehicle was taken to BMW Sydney. The problems recorded on a job card (DX 1, p 137) were:
1. Interior light and dash light too dim.
2. Cigarette lighter inoperative.
3. Driver's door trim wood gloss bubbling.
4. Driver's door mat comes adrift.
5. Customer feels car has no power.
On 11 December 2014 BMW Sydney reported on those five problems. In relation to the complaint about the car being underpowered, BMW Sydney recorded the following (DX 1, p 141):
"Fault: Customer feels car is underpowered
Cause: No fault
Repair: Road test car, found ok. Carried out quick test, no faults stored. Advise cust demo."
[24]
Findings of facts in relation to servicing and supply of parts by BMW Sydney
According to the documentary material, the first time the car was taken back to BMW Sydney, after it was purchased in April 2013, was on 25 June 2014 to deal with the problem of the battery going flat overnight. The car stayed with BMW Sydney for five weeks while that problem was diagnosed and fixed. During this time Mr Bailey was overseas.
The next time the car went to BMW Sydney was on 10 December 2014, when four fairly minor problems were dealt with and the complaint of the car having no power was investigated. This is not one of the "defects" particularised in the Statement of Claim, or dealt with in the expert report of Mr Tanti.
The next visit to BMW Sydney was on 19 December 2014 when four wheel rims were polished.
In December 2015 Mr Bailey wrote to BMW Sydney referring to "a litany of disasters" with the car. However, the car was not taken in to BMW at that time.
In March 2016 Mr Tilley of BMW Sydney sent an email requesting that the car be brought in so that it could be looked at to sort out the parking brake issue. The vehicle was not brought in pursuant to that invitation.
The final visit to BMW Sydney was on 24 July 2017 when an inspection of the car was done which came up with a list of issues and concerns. A road test was performed. Mr Bailey was not happy with the BMW Sydney list and insisted in his correspondence that the car had other issues which had not been diagnosed or fixed.
While the car had a three year unlimited kilometre warranty, it was never taken to BMW Sydney for regular servicing. Servicing was carried out by third parties including BP Castle Cove, BMW North Shore and Top Tune Automotive at Mosman.
While the defendants admit that the second representation pleaded in par 6(b) of the Statement of Claim was made - that the car would enjoy timely and convenient servicing which would maintain the car's roadworthiness and safety - Mr Bailey did not bring the car in to BMW Sydney for servicing to maintain its roadworthiness and safety. Rather, he took it to third parties. By the time the car was repossessed it had travelled well over 100,000 kilometres.
Many of the problems which Mr Bailey experienced occurred during the three year warranty period. Curiously, he did not take the car back to BMW Sydney and insist that those problems be fixed under warranty (apart from the battery drain). He could have done so at no financial cost to himself.
[25]
Conclusion on second and third representations: servicing, maintenance and replacement of parts
The defendants admit that the second and third representations pleaded in par 6 of the Statement of Claim were made.
The evidence shows that BMW Sydney did have a service department and that on the few occasions when Mr Bailey took the car to them, the car was serviced. The evidence also shows that, apart from the grille (a non-essential item), parts were replaced as quickly as possible.
The second and third representations are representations in relation to future matters. In making the representations, s 4 of the ACL requires BMW Sydney to have had reasonable grounds to make the representation.
I infer from the brochure alone that BMW was a large worldwide supplier of cars. The evidence shows that when problems arose Mr Bailey took the car not only to BMW Sydney, but also to BMW Wagga and BMW North Shore. On several occasions Mr Bailey was invited to bring the car in to BMW Sydney to have it looked at, but he did not follow up on those invitations.
I accept the submission made by counsel for the defendants (MFI 9, par 3) that the representations in the brochure were made on reasonable grounds because:
1. the information about these matters was contained in the BMW brochure;
2. BMW Sydney did deliver and perform services, when Mr Bailey requested it to do so, over the period 2013-2018, as evidenced in the BMW Roadside Assist and the BMX Sydney servicing records for the car; and
3. BMW Sydney had the facilities to conduct servicing and maintenance at Rushcutters Bay and Alexandria, and was capable of sourcing parts for the BMW X5 as and when it was called upon by Mr Bailey to do so, as evidenced by the relevant invoices, job cards, parts requisitions and diagnostic testing proven in the documentary evidence (DX1).
Based on all those matters, I find that BMW Sydney did have reasonable grounds to make the second and third representations.
In light of the facts found above in relation to servicing, maintenance and parts, I find that the second and third representations pleaded in par 6 of the Statement of Claim were not misleading or deceptive and thus were not in breach of s 18 of the ACL.
Mr Bailey's claim based on s 18 of the ACL fails and there will be judgment for the defendants.
[26]
Theoretical assessment of damages
In case my conclusions above as to the failure of the claim based on s 18 of the ACL should be the subject of a successful appeal, I will set out the findings which I would have made on damages, if Mr Bailey had succeeded.
[27]
Repairs and maintenance costs
In the plaintiff's Schedule of Damages (MFI 2) item 3 claims the cost of "attempted repairs" by BMW Wagga Wagga. While $500 is claimed, the evidence shows that BMW Wagga Wagga gave Mr Bailey a refund when the repairs to fix the battery problem simply did not work. A claim is also made for the cost of transport of Mr Ruprecht back to Sydney by plane. That is an expense of Mr Ruprecht and not an expense of Mr Bailey.
Item 13 in MFI 2 relates to the Oberon incident when the keys were locked inside the car, when dogs were inside, and the window had to be smashed to rescue them. The Schedule claims that the cost of repair of the window was $900, and the cost of transport to and from the dealership arising from the incident was $180. The cost of replacing the smashed window was $921.80. The tax invoice for this work is at p 156 of DX1. If Mr Bailey had succeeded on his claim I would have allowed this amount as part of his damages. I would not have allowed the $180 claimed for the cost of transport to and from the dealership arising from the incident, as there was no evidence to support that.
The only other out-of-pocket expenses established by the evidence relate to the repair of the handbrake after a part broke, the shredded tyre and the towing costs to have the tyre replaced. The handbrake repair costs were incurred when a part broke after the car had been driven for several years. The car has not yet been invented which does not need parts replaced from time to time. The handbrake repair was so long after the purchase of the car that it cannot be regarded as arising from a "defect" as pleaded in the Statement of Claim. The tyre and towing costs would have arisen anyway. Even though the deflation warning system did not operate, a tyre blowout at speed on a freeway will shred a tyre, whether a warning light comes on or not.
If the plaintiff had succeeded on his claim for misleading or deceptive conduct, $921.80 would have been awarded for repairs and maintenance costs.
[28]
Loss of time and revenue
Mr Bailey's evidence was that he ran his business by means of a company Blanq Pty Limited. There was no evidence how much he earned as an employee, or in later years, as a director. The Schedule of Damages (MFI 2) asserted that his earnings were $195 per hour, but there was not a shred of evidence to support this figure. There was no evidence that Mr Bailey lost any income as an employee, or any income as a director or shareholder.
Further there was no evidence that there was any loss of income by the business or the company caused by the problems with the BMW. Some accounting documents (PX1, pp 397-403) were tendered which showed the income received year by year from one (of many) customers of the company. There was no evidence to tie the fluctuations in the receipts from that customer to any problems with the car.
The bulk of the claim ($225,000) for loss of revenue related to the period in mid-2014. Mr Bailey claims for three months. However BMW Sydney only had the car for 5 weeks and Mr Bailey was overseas in this time and could not have driven the car anyway. His belated assertion that some other (unnamed) employee could have driven the car in that time and thus earned income was extremely unconvincing.
In short, Mr Bailey failed to call any evidence to prove that there was any economic loss suffered by him as a result of the problems with the car.
[29]
Payments to BMW Finance
This head of damages was said to arise from payments made when the car was not safe or roadworthy, or was undergoing repairs by BMW Sydney. Mr Bailey claimed $106,882.66 (MFI 2, item 16) for reimbursement of all loan repayments and an initial $10,000 deposit. The car was driven for over 100,000 kilometres before it was repossessed. While it had the problems listed above, on most days it performed as it should have. The only significant time off the road was in mid-2014. This was at a time when Mr Bailey was overseas.
This head of damages has also not been proved.
[30]
Distress and anxiety
On the present state of the law such damages are not available. On a theoretical basis, if Mr Bailey had succeeded and if such damages could have been awarded, I would have found that he was entitled to $15,000. He was stranded by the roadside many times because of the flat battery and the keys self-locking. This not only resulted in inconvenience, but frustration and disappointment.
[31]
The BMW Finance Cross-Claim
BMW Finance claimed damages against Mr Bailey for breach of the Chattel Mortgage Agreement (Agreement) by which he financed the purchase of the car. The breach was failing to pay the final instalment of $71,500 when it fell due. Counsel for Mr Bailey conceded in final submissions that there was no defence to this claim, save that if Mr Bailey succeeded in obtaining damages for misleading or deceptive conduct against BMW Sydney, then such damages could be set-off against the amount owing to BMW Finance, because of the operation of s 278 of the ACL. I have found that Mr Bailey has failed on his claim, so there is no defence and BMW Finance is entitled to a judgment.
A prima facie evidence certificate pursuant to Clause 22 of the Agreement proved that the amount outstanding was $77,361.89. There will be judgment for BMW Finance against Mr Bailey for that amount.
[32]
Costs
Mr Bailey has failed on his claim and there will be a costs order in favour of both defendants. BMW Finance has succeeded on its cross-claim and there will be a costs order in its favour.
[33]
Orders
My orders are:
1. Judgment for the defendants.
2. Order the plaintiff to pay the costs of both defendants.
3. Judgment for the cross-claimant against the cross-defendant for $77,361.89.
4. Order the cross-defendant to pay the cross-claimant's costs.
[34]
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: 19 March 2020
1. Judgment for the defendants. 2. Order the plaintiff to pay the costs of both defendants. 3. Judgment for the cross-claimant (BMW Australia Finance Limited) against the cross-defendant for $77,361.89. 4. Order the cross-defendant to pay the cross-claimant's costs.
Further, it was pleaded that BMW Sydney was "in breach of the paragraph 6 representations" because it "failed to promptly service and make available parts for the car on a number of occasions". These were particularised in par 30 of the Statement of Claim as follows:
"a. Unexplained delays (up to 10 months) to order vehicle parts following which the wrong part had been ordered;
b. Taking possession of the vehicle for 2 to 3 months to perform repairs;
c. Unexplained lengthy wait times for service and maintenance of the car including an unexplained cancellation of service of car due to a failure of the first defendant to order car parts for the service;
d. Failure to respond to car service and maintenance enquiries including failure to make available staff to arrange appointments to install pre-paid parts into the car;
e. Repeated visits to repair a single issue; and
f. Failure to maintain client files with the result that parts were withheld from the plaintiff on the basis that they remained unpaid when in fact the parts had been fully pre-paid by the plaintiff."
Paragraph 31 of the Statement of Claim pleaded that Mr Bailey had suffered loss and damage particularised as:
"a. Repairs and maintenance costs.
b. Loss of time and revenue.
c. Payments made on the car when the car was not safe and was not roadworthy and undergoing repairs by the defendant.
d. Damages for distress and anxiety."
Paragraph 32 of the Statement of Claim pleaded that BMW Finance was jointly and severally liable with BMW Sydney, pursuant to s 278 of the ACL, for the damage suffered by Mr Bailey by reason of BMW Sydney's misleading or deceptive conduct.
The breakdown of the plaintiff's damages was set out in a Damages Schedule (MFI2).
In paragraph 6(a) of the Defence filed on 2 March 2018 both defendants admit that the brochure contained the three pleaded representations.
I find that BMW Sydney, through the brochure given by Mr White to Mr Bailey, did make the three representations pleaded in par 6 of the Statement of Claim as follows:
1. the car would be safe, roadworthy and have first class capabilities, performance and efficiency;
2. the car would enjoy timely and convenient servicing which would maintain the car's roadworthiness and safety; and
3. any maintenance including the replacement of parts would be performed by BMW Sydney as quickly as possible.
Mr Crane noted that in the plaintiff's affidavit there were five incidents with keys being locked in the vehicle. They occurred on 18 October 2013, 15 November 2013, 23 January 2015, 28 August 2015 and 8 November 2015. It was only on the last occasion that dogs were in the vehicle.
The incident involving dogs referred to above is the time at Oberon when the doors were shut, the windows were left down, the tailgate was left up, and the keys were left on the centre console. Mr Bailey's dogs were in the rear of the car, but could not get into the front of the car because of a security screen. The evidence shows that without human intervention the windows of the car wound up, the tailgate shut and the doors locked. The keys were on the centre console. Eventually Mr Bailey had to break a window to obtain access to the car to let the dogs out. There is no evidence to explain how such a bizarre sequence of events could have occurred. The defendant attempted to suggest in cross-examination that one of the dogs could have pressed a button which caused all of these things to happen, but in view of the fact that they were confined in the boot of the car, that could not have happened.
It is to be noted that when Mr Bailey took the car to have the smashed window replaced, he did not ask for any problem with the self-locking to be fixed by BMW Sydney. Further, the incident at Oberon occurred in late 2015. The car was still within the 3-year warranty period, and there would have been no cost or expense to Mr Bailey in taking the car to BMW Sydney and insisting that they must fix anything which he regarded as a defect.
Indeed there is no evidence that Mr Bailey ever complained to BMW Sydney, or took the car to BMW Sydney to have the key-locking issue fixed.
I accept the evidence of Mr Bailey about the key-locking incidents, and I accept the evidence of Mr Ruprecht and Ms Fowler which corroborates Mr Bailey on this topic. I find that the car had a defect from April 2014 onwards when keys became locked in the vehicle even though the BMW Comfort Access System should have ensured that this just did not happen.
These cases illustrate that where a product is sold in trade or commerce, and representations are made about the qualities and characteristics of that product, the representations will constitute misleading or deceptive conduct where they are misleading or deceptive at the time they are made.
Is there any evidence of this in the present case? In part, that depends upon the cause of the defects. If there was any evidence that the defects were present, even though latent, in the BMW X5 when it was purchased in April 2013, then the representations concerning the characteristics and performance of the car could well be misleading or deceptive conduct. If on the other hand there is no evidence that these defects were present or latent in the car when the vehicle was driven away from the showroom, but that they developed later, then there would be grounds for finding that there was nothing misleading or deceptive about the representation concerning capabilities, performance and efficiency of the car.
Counsel for the plaintiff put the case in that fashion in his factual findings submissions document (MFI 6) when he said at par 10:
"The representations and conduct misled Bailey to expect that 1D would not leave him suffering from the inherent characteristics of this particular car, which were revealed and uncovered progressively over time."
On 19 December 2014 the vehicle went back to BMW Sydney and four wheel rims were polished (DX 1, p 145).
On 8 March 2015 the car went to Bob Jane T-Marts at Bathurst where two new tyres were supplied and a wheel alignment was carried out (DX 1, p 150).
On 21 July 2015 the car went to Bob Jane T-Marts at Erina for two new tyres (DX 1, p 153).
On 29 October 2015 the car went to Top Tune Automotive at Mosman (DX 1, p 152). They carried out a service on the car. The service details included:
"Clean and drain sun roof rails and clean leaves and dirt from plenum chamber.
…
Remove and replace diesel fuel filter."
On 10 November 2015 the car was taken to BMW North Shore where a window was replaced. This window had been smashed in the Oberon incident (DX 1, p 156).
On 8 December 2015 Mr Bailey wrote to BMW Sydney referring to "a litany of disasters along with a corresponding failure to properly resolve my problems". (DX 1, p 157). He listed constant electrical faults, computer faults, flat battery, difficulty securing a servicing timeslot, no-one available to install parts which had been ordered six months before, a rattle and a creak.
On 19 March 2016 the car was taken to Tyre Pro Australia Pty Limited for replacement of two tyres (DX 1, p 163).
On 29 March 2016 Mr Kurt Tilley of BMW Sydney sent an email to "Jackie" on behalf of Mr Bailey. Mr Tilley said that the car was then out of warranty but that: "I am happy to look at what our options are in relation to coverage of replacement outside of warranty, but to do this I will need to see the car". He asked that the car be brought in "to look at the park brake issue".
There is no document indicating that the car was brought in as requested by Mr Tilley.
On 1 September 2016 the car was taken to Tyre Pro Australia Pty Limited for a service and brake pad replacement (DX 1, p 168).
On 19 November 2016 a tyre was replaced by Regional Tyres (DX 1, p 173). This was the tyre which shredded on the trip to Taree.
On 1 December 2016 the car was taken to BMW North Shore. They dealt with the parking brake failure by replacing the actuating unit with a control unit for the parking brake (DX 1, p 176).
On 1 February 2017 the car was taken to Tyre Pro Australia for brake servicing (DX 1, p 180).
On 24 July 2017 BMW Sydney created a job card for the car (DX 1, p 182). It asked for an inspection of the car "noting all issues and concerns" and a road test. A list of the problems found upon the inspection is set out at DX 1, p 183). In July and August 2017 there was a considerable volume of correspondence between BMW Sydney and Mr Bailey (DX 1, p 210-229). There was further correspondence in November 2017 (DX 1, p 230-242). This correspondence concerned attempts to settle the dispute between Mr Bailey and BMW Sydney on a financial basis, rather than any attempts to fix the problems that Mr Bailey said he had with the car.
In his evidence Mr Bailey said that there was a long wait for one part which was a replacement grille for the BMW X5. When the part finally arrived there was confusion as to whether he had pre-paid for it. BMW Sydney ascertained finally that he had already paid for the part and it was given to him. He installed it himself by clicking it into place. There is no evidence that any other parts ordered by BMW Sydney took an undue amount of time to arrive. The few services done by BMW Sydney involved the replacement of minor parts, but there is no evidence that there was any delay in obtaining those parts.