Cairns v AHG Newcastle Pty Ltd

NCAT Appeal Panel|2020-04-29

Introduction

This is an internal appeal under s 80(2) of the Civil and Administrative Tribunal Act 2013 ( NCAT Act) against a decision made in the Consumer and Commercial Division of the Tribunal on 27 November 2019.
The appeal was brought by Mr Ben Cairns against AHG Newcastle Pty Ltd trading as Crossroads Subaru (AHG).
For the reasons set out below, we have decided to extend time to lodge the appeal until 21 February 2020 (the date the notice of appeal was lodged with the Tribunal) and to dismiss the appeal.

Background

The proceedings relate to a new Subaru WRX STI 6 motor vehicle purchased by Mr Cairns from AHG in November 2015 for $50,500 (vehicle). Mr Cairns sought a replacement of the vehicle on the ground that he had rejected it under section 259(3)(a) of the Australian Consumer Law (ACL), due a major failure by AHG to comply with the statutory guarantee of acceptable quality under section 54 of the ACL. Alternatively Mr Cairns sought to return the vehicle and obtain a refund of the purchase price.

Tribunal proceedings and decision

The application to the Tribunal was lodged on 20 July 2019 and orders were made by the Tribunal on 27 November 2019.
The Tribunal relevantly found that: 1. Mr Cairns was a consumer; 2. Mr Cairns purchased the vehicle from AHG, taking delivery on 3 November 2015. 3. Mr Cairns returned the vehicle to AHG on 6 November 2015 and reported a suspicious noise. 4. In accordance with the advice of AHG, Mr Cairns returned the vehicle for service on 23 November 2015. 5. Mr Cairns was advised by AHG that the vehicle needed a major repair. He objected and advised the manufacturer, Subaru, that he would not have purchased the vehicle if he had known of the fault. AHG advised him that repair of the vehicle was the only available course. 6. Mr Cairns returned the vehicle to AHG on 14 December 2015. The gearbox was removed to enable the repair to be effected. The clutch plate, clutch cover and flywheel were replaced "to rectify noise from throw out bearing". In the course of the repair the oil was drained from the gearbox and replaced. 7. On 7 July 2016, Mr Cairns reported to AHG that in the cooler months it was difficult to select first, second and fifth gear. Mr Cairns returned the vehicle to AHG for testing on 2 August 2016. Testing by the regional service manager found "gearbox to be all within specifications no concern on gear selection". 8. In the period from November 2016 until May 2019 the vehicle was regularly serviced by AHG and the transmission oil was regularly replaced. In this period Mr Cairns consistently complained that it was difficult to select gears ( especially second gear) in colder conditions. 9. Subaru recommend the use of GL - 5 75W - 90 oil for the vehicle and do not recommend the use of any other oil. AHG conceded that it did not use 75W - 90 grade oil in the oil changes which were made in the relevant period. 10. The problems which Mr Cairns had with the vehicle since its repair in 2015 were caused by the use of non-approved oil in the vehicle. 11. The Tribunal Member accepted expert evidence tendered by Mr Cairns which established that in 2019 after the transmission oil was drained and replaced with the manufacturer's approved oil, the vehicle was consistently operating in a sound and satisfactory manner.
The Tribunal Member treated the claim by Mr Cairns as being based on two separate causes of action. The Tribunal Member considered the first cause of action to be a claim in respect of the defective clutch requiring repairs to the vehicle in December 2015, involving replacement of the clutch plate, clutch cover and flywheel. The Tribunal Member considered the second cause of action to be a claim in respect of the use of non-approved oils when AHG serviced the vehicle.
The Tribunal Member concluded that the first cause of action was time-barred by section 79L of the Fair Trading Act 1987 (NSW) (FTA). Section 79L relevantly provides that the Tribunal does not have jurisdiction to hear and determine a consumer claim if the cause of action giving rise to the claim first accrued more than three years before the date on which the claim is lodged.
The Tribunal Member held that the Tribunal did not have jurisdiction to determine the claim in respect of the initial repairs to the vehicle, "that cause of action having arisen in November or December 2015". No reasoning was provided to explain that conclusion.
The Tribunal Member considered that the cause of action in relation to the use of non-approved oils arose either when the oils were used or when Mr Cairns became aware of that fact. The Tribunal Member treated this claim as being within time and then went on to analyse that claim.
The Tribunal Member considered that the use of non-approved oils by AHG involved a breach of one or more of the statutory guarantees contained in sub-sections 61(1) and (2) of the ACL in relation to services. Those subsections provide: (1) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer, expressly or by implication, makes known to the supply any particular purpose which the services are being acquired by the consumer; there is a guarantee that the services, and any product resulting from the services, will be reasonably fit for that purpose. (2) If: (a) a person (the supplier) supplies, in trade or commerce, services to a consumer; and (b) the consumer makes known, expressly or by implication, to: (i) the supplier; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the services were conducted or made; the result that the consumer wishes the services to achieve; there is a guarantee that the services, and any product resulting from the services, will be of such a nature, and quality, state or condition, that they might reasonably be expected to achieve that result.
The Tribunal Member held that AHG, by using oil which was not the oil recommended by the manufacturer, in circumstances where it had represented that it would use approved parts and consumables, breached section 61 of the ACL, although the Tribunal Member did not identify which of the guarantees in section 61 had been breached.
The Tribunal Member determined that the breach of section 61 of the ACL was a major failure in relation to the supply of services within the meaning of section 268 of the ACL, because a reasonable consumer would not have acquired the services knowing that non-recommended oils would be used.
The Tribunal Member then considered the remedies available under section 267(3) and (4) of the ACL to a consumer in those circumstances.
The Tribunal held that there was no remedy available to Mr Cairns under section 267(3) because there was no ongoing contract for the provision of services and no evidence which would support the making of an order for compensation for reduction in the value of the services. Nor was a remedy available under section 267(4) because there was no evidence that the use of non-approved oils had damaged the car or reduced its value. On the contrary, the expert evidence was that the transmission is now operating in a sound and satisfactory manner. Mr Cairns' application was accordingly dismissed.

Scope and nature of internal appeals

Internal appeals may be made as of right on a question of law, and otherwise with permission (that is, the "leave") of the Appeal Panel: s 80(2) NCAT Act.
In Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69 the Appeal Panel set out at [13] a non-exclusive list of questions of law: 1. Whether there has been a failure to provide proper reasons; 2. Whether the Tribunal identified the wrong issue or asked the wrong question; 3. Whether a wrong principle of law had been applied; 4. Whether there was a failure to afford procedural fairness; 5. Whether the Tribunal failed to take into account relevant (i.e., mandatory) considerations; 6. Whether the Tribunal took into account an irrelevant consideration; 7. Whether there was no evidence to support a finding of fact; and 8. Whether the decision is so unreasonable that no reasonable decision-maker would make it.
The circumstances in which the Appeal Panel may grant leave to appeal from decisions made in the Consumer and Commercial Division are limited to those set out in cl 12(1) of Schedule 4 of the NCAT Act. In such cases, the Appeal Panel must be satisfied that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
In Cominos v Di Rico [2016] NSWCATAP 5, the Appeal Panel stated at [13]: It may be difficult for self-represented appellants to clearly express their grounds of appeal. In such circumstances and having regard to the guiding principle, it is appropriate for the Appeal Panel to review an appellant's stated grounds of appeal, the material provided, and the decision of the Tribunal at first instance to examine whether it is possible to discern grounds that may either raise a question of law or a basis for leave to appeal. The Appeal Panel has taken such an approach in a number of cases, for instance, Khan v Kang [2014] NSWCATAP 48 and Prendergast v Western Murray Irrigation Ltd [2014] NSWCATAP 69. However, this must be balanced against the obligation to act fairly and impartially (Bauskis v Liew [2013] NSWCA 297 at [68] citing Hamod v State of New South Wales [2011] NSWCA 367 at [309]-[316]). Relevantly, s 38(2) provides that that Tribunal "may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice.

Extension of time

The Notice of Appeal was lodged on 21 February 2020 which is not within the 28 day time period specified in cl 25(4) of the Civil and Administrative Tribunal Rules 2014.
Mr Cairns provided a medical certificate which established that he had been suffering from a medical condition during the period in which an appeal was required to be filed. The delay was not extensive and there is no suggestion that AHG was prejudiced by the delay. In these circumstances we consider it appropriate to order an extension of time for Mr Cairns to lodge the Notice of Appeal until 21 February 2020.

Grounds of appeal

In his Notice of Appeal, Mr Cairns sought leave to appeal on the basis that the decision was not fair and equitable and was against the weight of evidence. The Notice of Appeal also asserted that significant new evidence was now available that was not reasonably available at the time of the hearing.
The grounds of appeal are somewhat discursive. However in essence they amount to a claim that the Tribunal should have found that there was a breach by AHG of the consumer guarantee of acceptable quality contained in section 54 of the ACL in relation to the vehicle, which would entitle Mr Cairns to return the vehicle and obtain a refund of the purchase price.
Although leave to appeal has been sought, we consider that the grounds of appeal in essence amount to a contention that the Tribunal Member made an error of law in the way in which Mr Cairns' claim was characterised and determined, including an error of law in relation to the determination of the issue of whether the claim to return the vehicle was time-barred. For this reason, we consider that leave to appeal is not required.

Submissions

In his oral submissions made to us at the hearing of the appeal on 29 April 2020, Mr Cairns emphasised that the only order he was seeking was a refund of the purchase price on the basis that he had notified AHG of his rejection of the motor vehicle due to a major failure to comply with the guarantee of acceptable quality. Mr Cairns made it clear that he had not, and was not seeking an order for compensation for loss or damage.
Mr W. Plancia, the Group Service Manager of AHG, made submissions on behalf of AHG. In the course of his submissions , we noted an undertaking by Mr Plancia on behalf of AHG to Mr Cairns that AHG agreed to extend the warranty on the gearbox of the motor vehicle for an additional period of three years from the date of expiry of the manufacturer's warranty in November 2018.

The cause of action giving rise to the claim

Part 6A of the FTA concerns the jurisdiction of the Tribunal in relation to consumer claims. Section 79E of the FTA defines a consumer claim to include a claim by a consumer for the return or replacement of specified goods. Section 79L provides, among other things, that the Tribunal does not have jurisdiction to hear and determine a consumer claim if the cause of action giving rise to the claim first accrued more than 3 years before the date on which the claim is lodged.
There is an imprecision in the meaning of the term " cause of action", which is sometimes used to mean the facts which support a right to judgment; sometimes to mean a right which has been infringed; and sometimes to mean the substance of an action as distinct from its form: Port of Melbourne Authority v Anshun Pty Ltd ( 1981) 147 CLR 589 at 610. In the context of section 79L of the FTA, "cause of action giving rise to the claim" refers to the set of facts which support a right to an order by the Tribunal.
In this case the claim by Mr Cairns was a claim against AHG as the supplier of the motor vehicle to reject the vehicle and obtain either a refund of the purchase price or a replacement vehicle, on the ground that AHG had failed to comply with the statutory guarantee under section 54 of the ACL that the vehicle be of acceptable quality.
In order to determine whether the Tribunal had jurisdiction to hear and determine the claim, it is necessary to identify each fact which Mr Cairns had to prove to succeed in that claim, so that the time when the cause of action first accrued can be ascertained.
If a supplier supplies, in trade or commerce, goods to a consumer and fails to comply with a relevant guarantee under Subdivision A of Division 1 of Part 3 - 2 of the ACL ( including the guarantee of acceptable quality under section 54 of the ACL), then if the failure to comply with the guarantee cannot be remedied or is a major failure, section 259 (3)(a) of the ACL provides that, subject to section 262 of the ACL, the consumer may notify the supplier that the consumer rejects the goods and of the ground or grounds for the rejection. If, under section 259, the consumer notifies the supplier that the consumer rejects the goods then section 263 (4) of the ACL provides that the supplier must, in accordance with an election made by the consumer, either refund the purchase price and the value of any other consideration provided by the consumer or replace the rejected goods with goods of the same type and of similar value if such goods are reasonably available to the supplier.
This analysis indicates that the facts which Mr Cairns had to prove to succeed in his claim against AHG were that : 1. he was a consumer; 2. AHG supplied, in trade or commerce, the vehicle to him; 3. the guarantee of acceptable quality in relation to the vehicle under section 54 of the ACL was not complied with; 4. the failure to comply with the guarantee could not be remedied or was a "major failure" within the meaning of section 260 of the ACL; 5. a notification by Mr Cairns to AHG that he rejected the vehicle and of the ground or grounds of the rejection (subject to section 262 ACL which required, among other things, that the notification be within the rejection period ).
It was found in the Tribunal that Mr Cairns was a consumer and it was clear that AHG supplied the motor vehicle to him in trade or commerce. It is necessary to consider the facts required to be proved to establish that the motor vehicle was not of acceptable quality.

Guarantee of acceptable quality under section 54 of the ACL

Subsection 54 (1) of the ACL provides that if a person supplies, in trade or commerce, goods to a consumer and the supply did not occur by way of sale by auction, there is a guarantee that the goods are of acceptable quality. Subsection 54 (2) provides: Goods are of acceptable quality if they are as: (a) fit for all the purposes for which goods of that kind are commonly supplied; and (b) acceptable in appearance and finish; and (c) free from defects; and (d) safe; and (e) durable; as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects of the goods), would regard as acceptable having regard to the matters in subsection (3)."
Subsection 54 (3) of the ACL provides: The matters for the purposes of subsection (2) are: (a) the nature of the goods; and (b) the price of the goods (if relevant); and (c) any statements made about the goods on any packaging or label on the goods; and (d) any representation made about the goods by the supplier or manufacturer of the goods; and (e) any other relevant circumstances relating to the supply of the goods.
It is apparent from the terms of section 54 ( including subsections (4),(5),(6) and (7) which we have not specifically set out) that the time at which the determination of whether or not goods are of acceptable quality is to be made is when the goods are supplied to the consumer, although information about the goods at that time not then known but discovered subsequently may be relevant. Facts learnt subsequently may establish a hidden defect existing at the time of supply.
This conclusion in supported by decisions of the Full Federal Court on the analogous provisions of former section 74D of the Trade Practices Act 1974( C'th) relating to the guarantee of merchantable quality: Medtel Pty Ltd v Courtney [ 2003] FCAFC 151;(2003) 130 FCR 182 ( in which it was common ground between the parties that the relevant time is the time when the goods are supplied to the consumer, see [38] and [57]); Merck Sharp & Dohme (Aust) Pty Ltd v Peterson [2011] FCAFC 128; (2011) 196 FCR 145 at [180 ].
Mr Cairns had two complaints about the vehicle. The first was the gearbox noise which he notified AHG about in November 2015 and which was repaired in December 2015. Mr Cairns' second complaint related to use of non-approved oils in the vehicle at the time of the repairs in December 2015 and in subsequent servicing of the vehicle in the period up till May 2019.
The use of non-approved oils in repairing and servicing the vehicle in the period after the motor vehicle had been supplied could not mean that the motor vehicle was not of acceptable quality, as it did not affect the quality of the vehicle at the time at which it was supplied to Mr Cairns or indicate a hidden defect existing at that time. It follows that the only complaint about the vehicle which could result in it not being of acceptable quality within the meaning of section 54 was the gearbox noise.

The time limitation under s79L of the FTA

The gearbox noise led to Mr Cairns returning the vehicle to AHG in December 2015 for repairs. At that time Mr Cairns notified AHG that he rejected the vehicle but that rejection was not accepted by AHG, which proceeded to repair the vehicle.
The Tribunal did not make a finding as to whether the gearbox noise meant that the guarantee of acceptable quality under section 54 of the ACL had not been complied with, nor, if so, whether it was a major failure to comply with that guarantee. However, even assuming that it did amount to a major failure to comply with the guarantee of acceptable quality under section 54, Mr Cairns notified AHG that he rejected the vehicle on those grounds in December 2015, which was more than three years before he lodged his claim on the Tribunal.
Even assuming all the necessary facts in Mr Cairns' favour, all of the facts supporting Mr Cairns' claim to reject and return the vehicle on the basis of a breach of the guarantee of acceptable quality in section 54 of the ACL occurred more than three years before Mr Cairns lodged his claim in the Tribunal. Accordingly, the cause of action giving rise to Mr Cairns' claim to reject the motor vehicle arose more than three years before he lodged his claim. The Tribunal was therefore prevented from hearing and determining that claim under section 79L of the FTA. This is consistent with the Tribunal Member's conclusion on this issue.

Using non-approved oils in repairing and servicing the motor vehicle after delivery

The cause of action identified by the Tribunal Member relating to the alleged breach of a statutory guarantee or guarantees under section 61 of the ACL in connection with the servicing of the vehicle by AHG using non-approved oils could not succeed for the reasons identified by the Tribunal Member. The major failure to comply with section 61 of the ACL found by the Tribunal Member could only in the circumstances provide a remedy under section 267 of the ACL by way of compensation or damages. No such remedy was sought or established by Mr Cairns. We doubt that the guarantees under section 61 of the ACL applied in the present circumstances. Those guarantees only apply to the extent that the consumer makes known to the supplier a particular purpose for which the services are being acquired or a result which the consumer wishes to achieve. No findings were made to the effect that Mr Cairns communicated a particular purpose or result which he wished to achieve. However it is not necessary to determine this issue as this claim could not succeed in any event.

Conclusion

For the reasons we have set out we consider that the Tribunal Member was correct to dismiss Mr Cairns' application. The appeal is dismissed.

Orders 1. Order that the time for the appellant to lodge the appeal be extended until 21/2/2020. 2. Appeal dismissed

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 02 June 2020

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