Breadner v Hall

Local Court of NSW|2018-05-18|Before: Tellamist P

Judgment

The plaintiff, Ms Breadner, was the owner of a 2014 BMW X5 sDrive 25D which was damaged in a collision on 1 August 2016 that was caused by the negligence of the defendant.
Ms Breadner's motor vehicle has been repaired and the insurer of the defendant's motor vehicle has settled Ms Breadner's claim for the cost of repairs to the motor vehicle.
The only issue in dispute is whether Ms Breadner is entitled to an award of damages for diminution to the value of her motor vehicle, notwithstanding, that the motor vehicle has been repaired.
Ms Breadner claims that in addition to the cost of repairs, she suffered a loss being diminution in the value of her motor vehicle in the sum of $10,000. The defendant disputes any diminution in value has been suffered after the repair of the motor vehicle.

Expert Evidence

Both parties rely on expert evidence regarding the value of the plaintiff's motor vehicle both prior to the collision and after repairs were carried out.
The plaintiff relies on a report prepared by Diva Reports. The report is authored by Mr Nicholas Karagiannis and Mr Pavel Meck. The report contains the following findings regarding the plaintiff's motor vehicle: 1. The Pre-Accident Value was assumed as $78,800 2. The assumed cost of repairs is $25,911 3. The Post-Accident Value after repairs were carried out was $64,239.81 4. Diminution in Value is $14,560.19 as a result of the collision 5. The vehicle suffered a diminution in value of between 17.56% and 19.40% as a result of the collision.
The report relies on a pre-accident valuation of the plaintiff's motor vehicle undertaken by Mr Ray Stambolis, a loss assessor from RnV Assessment Services. Mr Stambolis' report expresses the pre-accident value of the plaintiff's motor vehicle to be $78,800.
The report is prepared in two parts. Firstly, Mr Pavel Meck carries out an analysis of market research on how buyers' perceptions of the value of a motor vehicle are affected by accident history.
Mr Meck assumes that potential purchasers will be aware of the fact that the motor vehicle has previously been involved in a collision. Mr Meck also assumes that potential purchasers will be aware of the cost of the repairs to earlier accident damage. The report expresses the opinion that this knowledge will adversely impact potential buyer's perceptions of the value of the plaintiff's motor vehicle. In order to quantify these perceptions the report relies on market research results carried out on behalf of the report authors by Cint Australia Pty Ltd. Firstly, a control group was asked questions about the potential purchase of many different kinds of vehicles which include vehicles that feature a similar pre-accident value and cost of repairs similar to the plaintiff's motor vehicle. Secondly, a survey was carried out of a test group of who were asked questions about the potential purchase of the plaintiff's vehicle specifically. Finally, Mr Meck compares forecast valuation based on data from the control group with the actual market valuation provided by the test group.
Based on this data Mr Meck has created a model for quantifying diminution in value.
Mr Meck concludes that the plaintiff's motor vehicle experienced a diminished value of 18.48% and a loss in value of $14,560 as a direct result of having an accident history.
Mr Karagiannis provides the second part of the report assessing diminished value as a motor dealer and as general manager of Suttons Homebush NSW. Mr Karagiannis notes the obligations of disclosure upon motor dealers under the Competition and Consumer Act 2010 (Cth) and the Motor Dealers and Repairers Act 2013 (NSW).
Mr Karagiannis provides opinion on standard industry practice of motor dealers when carrying pre purchase inspections. Mr Karagiannis states that the typical pre-purchase inspection involves: 1. Vehicle Identification 2. Personal Property and Securities Register check/history searches 3. Road-test 4. Body inspection 5. Interior Inspection 6. Electrical Systems Inspection 7. Brake Systems inspection 8. Engine Compartment Inspection 9. Cooling System inspection. 10. Wheels, tyres, steering and suspension inspection 11. Underbody inspection 12. Transmission and drivelines inspection.
Mr Karagiannis states that it is also standard practice to ask the seller whether the motor vehicle has been involved in any prior collisions. Mr Karagiannis states that motor dealers are able to identify whether a motor vehicle has had an accident history by inspecting various issues including paintwork, panel alignment and weld seams.
Mr Karagiannis states: "As a buyer of second hand vehicles he would expect a smaller discount for refurbished standard vehicles and a higher discount for buying refurbished prestige cars. I would also expect a heavier discount for cars which have incurred significant prior damage and smaller discounts which have been involved in minor collisions".
Mr Karagiannis quantifies the discounts he would expect as follows: 1. Repaired minor damage on standard vehicles - devaluation of between 10-15% 2. Repaired heavier damage on standard vehicles - devaluation of between 15-20% 3. Repaired minor damage on prestige vehicles - devaluation of between 10-20% 4. Repaired heavier damage on prestige vehicles - devaluation of between 15-30%
In respect to the plaintiff's motor vehicle, being a prestige vehicle with repaired heavy damage, Mr Karagiannis would be prepared to purchase the motor vehicle with a discount of between 15 and 20%.
Overall both Mr Meck and Mr Karagiannis conclude that the plaintiff's motor vehicle suffered a diminution in value after repairs were carried out between $13,832.19 and $15,288.20.
The defendant relies on a report by Mr Peter Rizzuto, a loss assessor, from AAMC. Mr Rizzuto considers that the pre-accident value of the plaintiff's motor vehicle was $77,500. Mr Rizzuto based his valuation on the condition of the plaintiff's vehicle being average for its age and kilometres travelled.
The defendant does not provide any expert evidence on the post-repair value of the plaintiff's motor vehicle. Instead the defendant relies upon the actual trade in price obtained by Ms Breadner of $60,000 and the subsequent sale price to Mr Yang in January 2017 as evidence of the post-accident value. The defendant states that these amounts are within the range of what might be expected in respect of this age and model vehicle. The defendant relies on a guide from AutoEdge which discloses that as at August 2016 the plaintiff's vehicle would be expected to receive a trade in between $54,700 and $64,700 and a retail price of $74,400.
Before considering the expert evidence the Court refers to the legal principles relevant to assessing property damage and diminution of value.

Assessment of Property Damage

The starting point for the assessment of damages arising from a breach of a duty of care is that the plaintiff is entitled to an award for "that sum of money which will put the party who has been injured … in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation" (see Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 App Cas. 25 at 39).
Assessment of damages is ordinarily calculated as at the time that the loss is suffered. In Johnson v Perez (1988)166 CLR 351; [1988] HCA 64 Mason CJ reaffirmed the general rule: "There is a general rule that damages will be assessed as at the date of when the breach or when the cause of action arises. But this rule is not universal; it must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered."
Where damage occurs to property ordinarily damages are measured by either the amount of diminution in the value of the property or by the cost of reinstatement of the property. In Evans v Balog [1976] 1 NSWLR 36 Samuels JA said at 39-40: "In a case such as the present, involving tortious damage to a building, it cannot be said that the normal measure of damages is the amount of diminution in the value and improvements. I agree with the analysis of the cases contained in the 13th edition of McGregor on Damages, pp711-713, pars 1059-1062, and see Minter v Eacott (1952) 69 WN(NSW) 93. The view that an equally admissible measure is the cost of reinstatement and restoration is supported by Holebone v Midhurst and Fernhurst Builders Ltd [1968] 1 L1 R 38 and Harbutt's "Plasticine" Ltd v Wayne Tank and Pump Co Ltd [1970] 1AB 447. Mr Toomey endeavoured to distinguish Harbutt's case [1970] 1 QB 447 on the ground that there the building destroyed was a factory vital to the maintenance of the plaintiff's business. But it is in truth the controlling importance attributed to that fact in that case which establishes the validity of the reinstatement principle where the necessity of the case requires its application. Reliance was also placed upon Hutchison v Davidson 1945 SC 395. But there is nothing in that case which makes against allowing the cost of reinstatement where the circumstances are such that it is only by that means that fair compensation may be made. There is much indeed in the opinions of Lord Russell 1945 SC 395 at 403 et seq and Lord Moncreiff 1945 SC 395 at 409 et seq which supports it. As the learned authors of McGregor on Damages says at 713, the case sustains what I take to be the true criterion of the selection between diminution of value and the cost of reinstatement. What he says is this: "The test which appears to be the appropriate one is the reasonableness of the plaintiff's desire to reinstate the property; this will be judged in part by the advantages to him of reinstatement in relation to the extra cost to the defendant in having to pay damages for reinstatement rather than damages calculated by the diminution in value of the land".
The above passage identifies the cost of repairs or diminution in value as two alternative options available to a plaintiff for assessment of damages. The appropriate method of assessment will be determined by what course is reasonable in the circumstances.
In the present case the plaintiff seeks an award for diminution in value in addition to the cost of repairs. The approach goes against the general rule that prima facie cost of repairs will constitute the proper measure of damage. The plaintiff's claim is that she suffered an immediate loss being diminution of value of the motor vehicle as a result of the collision and although reasonable repairs were carried out the motor vehicle is now less valuable, as a repaired vehicle, than it was before the accident.
There is limited authority in support of the right to claim diminution in value in addition to the cost of reinstatement. No doubt the reason for the absence of extensive authority is that, at least in the usual case, the cost of reinstatement adequately achieves the objectives of an award of damages to "put the party who has been injured … in the same position as he would have been in if he had not sustained the wrong".
Notwithstanding this, there is authority which supports the view that a claim diminution of value may remain available even where appropriate steps have been taken to reinstate the property.
The plaintiff relies on obiter comments made by Lord Justice Aikens in Coles v Hetherton [2015] 1 WLR 160 that: "The 'reasonable cost of repair' is, as a rule of thumb, taken as representing the diminution in value of the chattel that has been suffered as a result of the damage caused by the negligence of the defendant. However, it may not always represent the full amount of the diminution in value, as this court made clear in Payton v Brooks [1974] RTR 169 at p 174 per Edmund Davies LJ; p 175 per Buckley LJ and p 176 per Roskill LJ".
In Payton v Brooks both Buckley LJ and Roskill LJ made obiter comments to the effect that where a plaintiff is able to prove diminished value in property, despite repairing the property. Buckley LJ went on to note the following qualification: "I would only add one word of caution. This conclusion is not a charter under which infuriated plaintiffs, who have the misfortune to have their cars damaged by careless drivers, acquire an unfettered right to recover diminution in value. I do not think in the ordinary case the burden of proof which rests on the plaintiff would be discharged merely by calling an individual to prove his idiosyncratic view of the particular loss in the particular case. The diminution in market value must be proved by appropriate evidence of the kind usually called when diminution in market value is sought to be proved as a head of damage. Subject to that qualification, it seems to me that this head of damage is recoverable".
Within Australia there are several authorities on point.
In Burgoyne v BGC (Australia) Pty Ltd (1998) 19 SR (WA) 101 Fenbury J sitting in the District Court of Western Australia awarded "that sum which amounts to the difference between the value of the BMW immediately prior to the accident and its value immediately after it had been repaired".
In State of NSW v Bitsikas; State of NSW v Pabi Holdings Pty Ltd [2010] NSWSC 773 involved proceedings where a Local Court magistrate awarded an amount for diminution in value after repairs were carried. Although the appeal against the decision was upheld on other grounds, no criticism was made in respect to the recoverability of such a loss.
In Roluke Pty Ltd v Lamaro Consultants Pty Ltd [2007] NSWSC 349 Nicholas J considered the obiter comments in both Coles v Hetherton and Payton v Brooks and concluded: "These statements, although obiter, show plainly enough that there is no rigid rule that ties a plaintiff to the cost of repair as the limit on the damages he may recover for injury to the chattel of which he is the owner."
In Yates v Mobile Marine Repairs Pty Ltd [2007] NSWSC 1463 Palmer J was dealing with the assessment of damages arising from the negligent repair of a luxury game fishing vessel known as the "Eagle". Although appropriate steps had been taken to replace the engines to reinstate the vessel the plaintiff claimed the sum of $360,000 for diminution in value. Palmer J accepted the opinion of a marine valuation expert that the vessel had been devalued as a result of the breach and allowed damages for diminution in value. The expert supported his opinion by having regard to a number of considerations including that the damage to the vessel was common knowledge within the marine industry. The report stated; "The value of "Eagle" in its original, undamaged condition, lay not only in its physical features and components but also in its reputation. "Eagle" was a high profile vessel with one of the best-possible pedigrees in Australia - custom built, one-off".
In the recent decision of the Local Court in Iconic Group Australia Pty Limited v Mirak-Ardestani (Unreported, Local Court of NSW, Bradd LCM, 8 March 2018) allowed an award for diminution in value of a motor vehicle after adequate repairs were carried out.
Although there is limited authority on the issue it is clear enough from those cases in which the issue has been considered that a plaintiff is entitled, upon proof by appropriate evidence, to recover damages for diminution of value notwithstanding the proper carrying out of repairs to reinstate the property. The recoverability of such a loss is consistent with the fundamental rule of damages being restitutio in integrum.

Assessing Diminution in Value

The question of what constitutes appropriate evidence to establish diminution in value was considered by the Court of Appeal in Port Stephens Shire Council v Tellamist P/L [2004] NSWCA 353. Ipp JA with whom Giles JA agreed affirmed Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82 that when assessing market value the relevant question to be determined is at which point a desirous purchaser and a not unwilling seller would come together.
Their Honours also considered the question of what knowledge is to be imputed to the "hypothetical purchaser and seller". Ipp JA considered relevant authorities and concluded at [489]: "In my view, the overwhelming thrust of these authorities is to the effect that the hypothetical seller and the purchaser are to be assumed, in the hypothetical situation postulated, to be aware of all information relevant to the market price, about which a prudent purchaser would inquire".
Ipp JA further held, at [491], that it must be assumed that the purchaser would be given truthful answers. In that way, the purchaser would gain access, either directly or indirectly, to information not in the public domain. Santow J although in dissent, on this point agreed with Ipp JA and further commented that the "hypothetical purchaser is not required to be omniscient or a seer. Its imputed knowledge is limited to what would be ascertained by a prudent purchaser on enquiry".

Assessment of Diminution of Value in Cases Relied upon by the Plaintiff

A number of authorities have been relied upon by the plaintiff in support of her claim for diminution in value. Several of those authorities involve obiter comments in support where the Court was not required to assess damages for diminution in value. The remaining cases where the Court was required to assess diminution in value after repairs were carried out shows the difficulty inherent in proving such a loss.
In both Roluke Pty Ltd v Lamaro Consultants Pty Ltd [2007] NSWSC 349 and Rolleston v Insurance Australia Ltd [2017] NSWCA 168 the Court accepted the recoverability of diminution in value in principle after repairs were carried out but rejected that the plaintiff had established such a loss.
In State of NSW v Bitsikas; State of NSW v Pabi Holdings Pty Ltd Davies J upheld an appeal against the decision of the Local Court on a number of grounds including the absence of any probative expert evidence to support a finding by the magistrate that the plaintiff's motor vehicle had suffered diminution in value after repairs had been carried out.
In respect to the few cases where the plaintiff succeeded in obtaining an award for damages for diminution in value after repairs two appear to have been decided on approaches inconsistent with the approach referred to in Port Stephens Shire Council & Anor v Tellamist.
In Iconic Group Australia Pty Limited v Miraki-Ardestani the magistrate accepted expert evidence on diminution in value, however, the magistrate did not turn his mind to the question of what knowledge was to be imputed to the hypothetical seller and purchaser when assessing diminution in value.
In Burgoyne v BGC (Australia) Pty Ltd the District Court of Western Australia was dealing with a near new motor vehicle that had been damaged two weeks after being purchased. The expert in that case reasoned that a prospective purchaser "would be likely to make enquiry about why the vehicle was being sold for $105,000 to $110,000 when a new vehicle was worth of the order of $122,000. The expert said "were Auto Classic to be the vendors" (that is, the expert's own employer) then "following the inevitable query there would be an obligation to disclose the fact that the vehicle had had an accident."
The District Court of Western Australia accepted the expert's opinion and assessed diminution in value on the basis that the knowledge of a "hypothetical seller and purchaser" should be equated with the knowledge of the expert's own employer being briefed with the entire circumstances of the case. In my view that approach is inconsistent with the objective hypothetical approach referred to in Port Stephens Shire Council & Anor v Tellamist.
The other authority where damages for diminution in value were awarded is the decision of Palmer J in Yates v Mobile Marine. In that case the Court was provided what his Honour considered to be impressive evidence by an expert in luxury vessels who gave compelling evidence of the unique nature of the vessel in question and that the vessel's reputation was known within the marine market and was adversely affected by the damage.
What is clear from the authorities is that while the loss claimed by the plaintiff is recoverable, it is a claim for damages which, in reality, is only awarded in exceptional circumstances.

Purchaser's Knowledge of Accident History in Present Case

The expert report of Mr Meck and Mr Karagiannis on the diminution of value of the plaintiff's motor vehicle is predicated on the assumption that a hypothetical purchaser is to be imputed with knowledge of the accident history. Indeed the assumptions go further than merely knowledge of a prior accident. The opinions expressed by Mr Meck are based on a matrix whereby the diminution increases by reference to the cost of repairs. The greater the cost of repairs the greater the diminution. It assumes that the hypothetical purchaser is aware of the actual cost of repairs. The opinions of Mr Karagiannis regarding the extent of diminution are based on the assumption that the hypothetical purchaser is to be imputed with knowledge of the accident history including whether the prior accident damage was minor or heavier.
In my view, those assumptions of imputed knowledge are simply unfounded.
In respect to the imputed knowledge of a hypothetical purchaser of a motor vehicle it is clear that a prudent purchaser will be likely to undertake a number of pre purchase checks prior to purchasing a motor vehicle. That would include obtaining a vehicle history report. The defendant has tendered a vehicle history report from RMS on the plaintiff's motor vehicle dated 1 February 2018. While the report indicates that there is no record of the plaintiff's vehicle being written off, it does not contain any record of the accident history.
The report provided by Mr Meck and Mr Karagiannis attaches at annexure T a sample car history report from a private company which includes additional details of reported insurance claims. It refers to the date of the claim and the amount of the claim. It does not disclose the nature of the claim or whether the claim amount bears any relationship to the cost of repairs to the motor vehicle the subject of the claim. It has little probative value as it is a sample report on a vehicle unrelated to the plaintiff. It does not provide a hypothetical purchaser with details of the accident history of the vehicle.
Another source of imputed knowledge to the hypothetical purchaser is the information that licensed motor dealers are obliged to disclose under the Motor Dealers and Repairers Act 2014. Section 63 of the Act requires licensed motor dealers to make certain disclosures to prospective purchasers of second hand vehicles in accordance with notice prescribed by the Motor Dealers and Repairers Regulation 2014. Form 5 of Schedule 2 of the Regulation is the prescribed form of notice. The notice requires the dealer to disclose certain information regarding the vehicle including: "This vehicle is, or has been, written off or wrecked (Yes or No) This vehicle has had significant damage caused by exposure to water (Yes or No) This vehicle has had major modifications and/or repairs, including the replacement or repair of any of any of the panels, structural members or components by cutting or welding (Yes or No) This vehicle has been checked against the Personal Property Securities Register and comes with clear title (insert PPSR Search Number here). (Yes or No)"
In the second reading speech to the Legislative Assembly on 24 October 2013 Mr Anthony Roberts, Minister for Fair Trading explained the legislative obligations contained in the Bill upon motor dealers to disclose material information to consumers: "The bill will also ensure that dealers must disclose all relevant material facts to a consumer prior to the sale of the vehicle. Consumer complaints about motor vehicle purchases often relate to matters about which they had not been properly informed. The sort of information required to be disclosed will be in the regulations to accompany the new legislation and industry will be involved in the development of this through the consultation process for the regulations. However, matters to be considered as part of the disclosure of material facts include such things consumers would consider vital to know before they make their decision to buy including: whether the vehicle has suffered any hail or flood damage, whether the vehicle had ever been written off, whether there is any indication of odometer interference, and whether the vehicle had major modification which might affect the future registration or insurance of the vehicle".
The fact sheet published by NSW Fair Trading in December 2014 regarding the new motor dealer disclosure obligations states: "New disclosure provides include: It is mandatory for motor dealers to disclose to consumers information that might affect a consumer's decision to buy a car or to buy a car at a certain price This includes information about any major modifications to a vehicle, past flood or hail damage, whether a vehicle has been written-off and whether there is any suspicion of odometer tampering".
The extent of the obligation upon motor vehicle dealers to make disclosures to prospective purchasers was considered in Purnell Motors Pty Ltd v Commission for Fair Trading [2007] NSWSC 19. In that case Davies J was dealing with an appeal against an adverse determination by the Commissioner against the motor vehicle dealer for failure to make disclosures required under the former Motor Dealers Act 1974 (repealed). The former Act distinguished between disclosures required for new and demonstrator vehicles as opposed to second hand vehicles. Section 24(7) of that Act required any prescribed damage to a new or demonstrator vehicle of which the dealer was reasonably aware to disclose that damage to prospective purchasers irrespective of whether the damage had been repaired. The obligation expressly did not extend to the sale of second hand motor vehicles. Davies J commented the "intention of section 24(7) of the Act is to ensure that prospective purchasers of damaged new or demonstrator vehicles are made aware of any damage, and advised whether it has been repaired or not, thus providing them with the opportunity to make an informed choice before purchasing the vehicle".
There is nothing to suggest that the new Motor Dealers and Repairers Act 2013 materially altered the obligations on disclosures.
It is clear that there is no legal obligation upon motor dealers to disclose the accident history of a motor vehicle. The obligation to disclose major modifications and/or repairs relates to matters that result in structural changes to a motor vehicle rather than reinstatement. A consumer will only have knowledge of a possible previous collision in circumstances where the motor vehicle is written off as a consequence of a collision.
The hypothetical purchaser cannot be imputed knowledge of the accident history of Ms Breadner's vehicle by reason of any disclosure required by a motor dealer.
In addition to obtaining pre purchase reports and relying on disclosures by a motor vehicle dealer a reasonably prudent hypothetical purchaser would also carry out a physical inspection of the motor vehicle. Certainly, that would include a personal inspection by the hypothetical purchaser. The hypothetical purchaser should be taken to be an ordinary lay person with experience in owning motor vehicles without formal mechanical or repair expertise. No doubt even a lay person would be capable of identifying poorly carried out repairs with patently mismatched paint on different panels or misalignment of panels. However, in the present case it is accepted that the repairs to Ms Breadner's vehicle were carried out to a professional standard. In those circumstances, a lay person would not be able to discern any repairs suggestive of a prior collision. Pre purchase inspections may also include inspections by qualified mechanics or assessors. The objective of such reports would be to ascertain whether there are any defects either mechanically or structurally with the motor vehicle. Given that Ms Breadner's motor vehicle was repaired professionally any report undertaken on the motor vehicle would presumably identify no defects.
In the context of the present case it is worthy to note that Ms Breadner gives evidence of volunteering information regarding the collision to an employee of BMW Sylvania when she sold her motor vehicle in November 2016. She was not requested to supply the information by the employee nor does she give evidence of the employee recording this information. There is no evidence of whether BMW Sylvania relied on that evidence when negotiating a purchaser price. BMW Sylvania purchased the plaintiff's motor vehicle for a sum of $60,000 which is within the range of what might be expected for a trade in of Ms Breadner's motor vehicle. According to a printout from AutoEdge the plaintiff's motor vehicle could be traded for between $53,600 and $63,400.
In any event, any assessment of diminution of value requires the Court to consider diminution as at the date of the loss rather than some months later in November 2016. Furthermore, assessment of diminution of value requires the Court to have regard to the "hypothetical purchaser and seller". Whatever Ms Breadner actually disclosed in November to BMW Sylvania is largely irrelevant to determining the imputed knowledge of the "hypothetical purchaser and seller". In my view a hypothetical seller who had his or her motor vehicle professionally reinstated so that no defects existed would not disclose the accident history unless specifically asked. Also in my view, a hypothetical purchaser would not ask about the accident history of the motor vehicle unless a purchaser suspected repair work has been undertaken. Given that there was no defective repair work to Ms Breadner's motor vehicle the "hypothetical purchaser" would not be alerted to the possibility of a prior collision to prompt the question being raised. The "hypothetical purchaser" cannot be imputed with knowledge of the accident history of the plaintiff's vehicle, much less, knowledge of the extent and cost of repairing the accident damage.
There is no doubt that there will be some circumstances in which a hypothetical purchaser would be aware of a motor vehicle's accident history, for example, where a plaintiff's vehicle has been previously written off, where repairs carried out were defective, or where the motor vehicle has unique qualities, such as a motor vehicle that is a collectible item and original parts may be relevant to the value of the vehicle.
Knowledge of a prior accident cannot be imputed to the "hypothetical purchaser" in the present circumstances.
Accordingly, on this basis alone, the plaintiff's claim for diminution in value fails.

Probative Value of Plaintiff's Expert Evidence

In light of the Court's findings above it is perhaps unnecessary for the Court to consider further the expert evidence relied upon by the plaintiff. However, given that submissions were made on behalf of the plaintiff that this Court should accept the report prepared by Mr Meck and Mr Karigiannis as their report was recently accepted by Magistrate Bradd in Iconic Group Australia Pty Ltd v Miraki-Ardestani, it is appropriate to further consider that expert evidence.
It is worthy of note that the assumed facts that form the basis of the expert report are incorrect. The Court does not accept that as at the 1 August 2016 the pre accident value of Ms Breadner's motor vehicle was $78,800 given that she purchased the motor vehicle more than a year earlier for $76,300 and had been driven nearly 30,000km since then. Furthermore, the evidence shows that an amount of $22,000 was paid by the defendant to settle the cost of repairs. There is no evidence to show that the repairer was actually paid an amount of $25,911.
While these incorrect assumptions would call into question the conclusions made by the experts, there are more serious deficiencies in the expert report which lead the Court to the view that it has no probative value.
Section 79 of the Evidence Act 1995 requires opinion evidence to be based on the person's training, study or experience. In Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at [743] Heydon JA stated that for expert opinion to be admissible the reasoning process to be exposed: "[The] opinion of an expert requires demonstration or examination of the scientific or other intellectual basis of the conclusions reached; that is, the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded. If all these matters are not made explicit, it is not possible to be sure whether the opinion is based wholly or substantially on the expert's specialised knowledge. If the court cannot be sure of that, the evidence is strictly speaking not admissible, and, so far as it is admissible, of diminished weight".
In Dasreef Pty Ltd v Hawchar (2011) 277 ALR 611 at [622] the High Court stated: "[I]t remains useful to record that it is ordinarily the case, as Heydon JA said in Makita, that 'the expert's evidence must explain how the field of 'specialised knowledge' in which the witness is expert by reason of 'training, study or experience', and on which the opinion is 'wholly or substantially based', applies to the facts assumed or observed so as to produce the opinion propounded".
In proceedings in the Small Claims Division, while the rules of evidence do not strictly apply, the considerations referred to in both Makita and Dasreef are relevant to considering the weight that should be accorded to expert reports.
In this instance, both Mr Meck and Mr Karigiannis fail to explain how their opinions are based on their specialised training, knowledge or experience.
Mr Meck has qualifications including a Bachelor in Business majoring in Business Econometrics. Mr Meck has worked within the automotive industry since 2010 primarily as a product manager and price specialist for various motor vehicle manufacturers. Mr Meck does not disclose any experience in carrying out the valuation of second hand motor vehicles.
Mr Meck identifies valuation methodologies disclosed in law reports within Australia and the United States. Mr Meck does not have any legal qualifications to express any opinion as to how the valuation in those cases is relevant to these proceedings. Mr Meck does not have access to the actual valuation reports relied upon in those cases. Mr Meck does not explain how, for example, a diminished valuation of between 10-15% for a $2.7-2.8 million luxury boat (as in Yates case) is relevant to assessing a diminished value of a motor vehicle with a value of less than $100,000. Mr Meck relies on valuation methodologies in the United States without explaining how the market within Australia is comparative to that within the United States.
Mr Meck's opinions also rely on market research. Mr Meck does not disclose any qualifications in market research. Mr Meck states that in carrying out a market research survey of control groups and test groups DIVA has engaged Cint Australia Pty Ltd. It appears that Cint Australia provides a technology platform for researchers to carry out surveys. There is no evidence to show how the methodology adopted by Mr Meck accords with professional standards in market research to ensure that a reliable account is provided of consumer opinions.
In Re Arnotts Limited; Arnotts Biscuits Limited; Fledspac Limited and the Dickens Corporation Pty Limited v Trade Practices Commission [1990] FCA 473; 97 ALR 555/2 the Full Court of the Federal Court considered that reliance upon market research surveys as evidence is a matter of some controversy and cited the Judicial Conference of the United States which adopted a Handbook of Recommended Procedures for Trial of Protracted Cases. Under the heading of "Proof of facts requiring resort to bulk underlying documents or to numerous witnesses, samples and polls" the Handbook emphasises the importance of a scientific methodology and outlines the preconditions for admissibility of such evidence: "The offeror has the burden of establishing that a proffered poll was conducted in accordance with accepted principles of survey research, ie, that the proper universe was examined, that a representative sample was drawn from that universe, and that the mode of questioning the interviewees was correct. He should be required to show that: the persons conducting the survey were recognized experts; the data gathered was accurately reported; the sample design, the questionnaire and the interviewing were in accordance with generally accepted standards of objective procedure and statistics in the field of such surveys; the sample design and the interviews were conducted independently of the attorneys; and the interviewers, trained in this field, had no knowledge of the litigation or the purpose for which the survey was to be used. Normally this showing will be made through the testimony of the persons responsible for the various parts of the survey".
The Federal Court concluded that the requirements listed in the Judicial Conference Handbook were equally appropriate for Australia.
The market research contained in Mr Meck's report fails to meet these requirements in numerous ways. There is no evidence as to how or by whom the interviews were conducted. There is no evidence as to whether interviewers were trained and independent from those preparing the report and with knowledge of its purpose. There is no evidence as to whether the questions asked of participants were appropriate for market research. There is no evidence that the report is prepared independently from the legal representatives of the plaintiff. On this issue, the defendant points out that a solicitor employed by the plaintiff's legal representative is the owner of 180055CARE telephone number that appears on the website for DIVA.
Based on various examples of diminished valuations and the market research results Mr Meck has prepared a valuation matrix where there is a corresponding increase in the diminution in value commensurate with any increase in the cost of repairs. Nowhere in the report does Mr Meck give any explanation as to how prospective purchasers will be aware of the exact cost of repairs to a prior collision.
Mr Karagiannis is a motor vehicle dealer employed as the General Manager at Suttons Homebush. Suttons Homebush is one of Australia's largest dealer networks. Suttons Homebush has over 30 employees. He was previously the General Manager at Larke Hoskins for more than 20 years. He has extensive experience in purchasing second hand motor vehicles.
Mr Karagiannis purports to give opinion evidence of motor vehicle dealer industry practices.
Mr Karagiannis gives evidence that dealers undertake a pre purchase inspection to identify defects with a motor vehicle. He states: "The pre purchase inspection allows dealers to identify issues which may affect the purchase value of the trade-in vehicle. In addition to the standard mechanical checks, as a matter of policy, we seek the vehicle's accident history. I am of the view that a vehicle's history directly affects the ultimate valuation of the vehicle".
Mr Karagiannis gives evidence regarding the methods he adopts to detect whether motor vehicles have been repaired. He refers to identifying matches in colour, paint overspray and excessive paint and paintwork being "too perfect" as being indicia of collision repair work. Mr Karagiannis inspects weld seams, and whether panels are flush. Mr Karagiannis also carries out an inspection of the bumper mounts and engine mounts to determine whether these components are newer than the surrounding components to show whether they have been replaced.
Mr Karagiannis, however, fails to give any evidence as to the knowledge, training or experience that he has gained in the smash repair or the paint repair industry. In my view he fails to demonstrate any specialised knowledge in this regard.
If a motor vehicle has been professionally repaired with no obvious defects it is difficult to accept that a person without formal training will have the skill to ascertain prior accident damage.
Mr Karagiannis further states: "As a matter of policy, we seek the vehicle's accident history. In that sense, I am of the view that a vehicle's prior accident history directly affects the ultimate valuation of the vehicle. As part of this process of recording a vehicle's accident history, my experience is the dealers do the following: 1. We ask the seller if they have been involved in any prior collision 2. Complete a pre purchase inspection 3. Order a report from Car History 4. Order a report from the Insurance Reference Service".
As noted earlier, unless a motor vehicle has been previously written off a Car History report will not identify whether the plaintiff's vehicle has been previously involved in a collision. While a report might identify prior insurance claims that does not provide meaningful information on whether the vehicle has been involved in a collision or, if it has, the extent of the damage.
In respect to the questioning of the seller as to whether the vehicle has been involved in any prior collision Mr Karagiannis does not attach any documents used within the motor vehicle dealer industry to record this information. The pre purchase inspection report at annexure S does not include any reference to collision history.
If it was standard policy then the Court would have expected there to be some internal document that reflected that policy so that other salespersons within Suttons Homebush would be aware of the policy. No policy document has been produced. In my view Mr Karagiannis gives nothing more than a subjective account of his methodology rather than expert opinion on industry practices.
There is also an internal inconsistency at paragraph 152 of Mr Karagiannis' report. He states: "Throughout my years in the industry, I have personally experienced multiple scenarios whereby potential customers have obtained a carhistory.com.au report revealing that the vehicle which I have offered for sale has been the subject of a prior insurance claim. Many customers have subsequently abandoned the sale in such circumstances, preferring to find an alternative vehicle for the same price without any accident history".
Given that Mr Karagiannis provides evidence of his practice to obtain such a report prior to purchasing a vehicle, and thereby presumably negotiates a lower purchase price in reliance of that history, it is not explained why such a vehicle would not be listed for sale by Mr Karagiannis at a discounted price so that prospective purchasers would not abandon the sale.
Mr Karagiannis fails to explain how his methodologies represent industry standards and practices. In the second reading speech introducing the Motor Dealers and Repairers Bill 2013 to Parliament, Minister Roberts estimates that there were, as at 2013, almost 4,000 licensed dealers within New South Wales.
Mr Karagiannis gives evidence of having worked at two dealerships for the past 20 years. He does not explain how that experience gives him knowledge on wider industry practices. There is no industry document which supports the view that motor vehicle dealers are expected to identify or disclose a second hand motor vehicle's collision history. There is no evidence of any publications within the Australian valuation industry such as Redbook or Glasses' Guide making reference to collision history as a factor to consider when valuing second hand motor vehicles. Industry publications such as the fact sheet from the Department of Fair Trading do not propose a practice of disclosing accident history. Mr Karagiannis's evidence is a subjective and idiosyncratic account of his own practices. It is not evidence that can be relied upon as industry practice.
In addition, there is nothing in Mr Karagiannis's evidence that explains how, as a motor vehicle dealer, he would be aware, with any degree of certainty or reliability of the collision history of a motor vehicle. The report provides no adequate process of reasoning or analysis as how he would become aware of the collision history or how he could discern whether the damage was minor or heavier. The report gives the Court no understanding of what Mr Karagiannis considers to be minor damage or heavier damage.
Finally, the reality of what occurred with Ms Breadner's vehicle does not align with the hypothesis of the plaintiff's case. The plaintiff's experts assume that as at 1 August 2016 Mr Breadner's vehicle had a pre accident value of $78,800. That is more than what Mrs Breadner purchased the motor vehicle for over a year earlier. Ms Breadner's vehicle was sold to BMW Sylvania in November 2016 for an amount of $60,000 which falls within the range of what AutoEdge suggests would be expected for a trade for this model vehicle. It was resold in January 2017 for $69,400 being a figure similar to the amount expected in the AutoEdge guide. Once professionally repaired, the accident damage appears to have had no impact upon the value of Ms Breadner's vehicle.
In my view the expert evidence of Mr Meck and Mr Karagiannis has no probative value. The plaintiff has failed to discharge the burden of proving diminution in value of her motor vehicle.
The plaintiff's claim fails. The Court will enter a verdict in favour of the defendant. Assessor Olischlager Local Court of New South Wales

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: 23 October 2018

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (9 paragraphs)

Parties

Legislation Cited (2)

Cases Cited (13)