Campbell Stuart Smith v Family Auto Group Pty Ltd t/as Western Auto Group

THE CLAIM

1. The proceedings were filed with the Tribunal on 12 June 2014. The application seeks orders that the vehicle be returned to the respondent with a full refund to the applicant for the purchase of the vehicle.
2. During the course of the hearing, the applicant amended the relief sought to include an alternative order that the vehicle be repaired by the respondent. However, the primary submission of the applicant was that a return and refund order was the appropriate remedy.
3. The causes of action relied upon by the applicant are provisions of the Australian Consumer Law 2010 ('the ACL') in particular Sections 18; 54; and 260.

APPLICANT'S EVIDENCE

1. The applicant's evidence comprised of: 1. A written statement of the applicant which is undated; 2. Brief oral evidence at the hearing in addition to the written statement; 3. An invoice of Northern Rivers Towing Service dated 16 February 2014 for towing the vehicle from New Italy to Tintenbar in the sum of $220.00. 4. A vehicle inspection report of Pacific Garage dated 18 February 2014 and undated 1 page document from Jason Clemens, owner Pacific Garage regarding the condition of the vehicle; 5. An RTA inspection station E-Safety Check Report by Jamikka Pty Ltd of 1/17 Piper Drive Ballina NSW 2478 (the same address as Pacific Garage) dated 21 February 2014; 6. Photographs of the vehicle; 7. A 'screen shot' of the respondent's website relevantly stating "30 Day money back guarantee on all mechanical issues*. Customer Peace of Mind!"
2. In his written statement, the applicant asserted that he called the respondent in February 2014 to inquire about the vehicle. He spoke to "Andrew". He was told the vehicle came with "two full tanks of fuel, 6 months registration, and a 30 day money back guarantee". He travelled from his home to look at the vehicle with his brother at the respondent's premises. The applicant stated the vehicle "looked great", and he purchased the vehicle on 15 February 2014 for $39,000.00 the same day he inspected the vehicle.
3. The applicant states that, after driving for "about an hour or so" it began to rain and there was a water leak into the driver's side floor area. He stopped at Beresfield (near Newcastle) for fuel and food. After returning to the vehicle he noticed "a massive patch of oil underneath the car". This occurred at approximately 7.20 pm. The applicant states he called "Andrew" and left a number of messages.
4. The applicant and his brother left the vehicle for approximately 1 hour while they had dinner. When they went back to the vehicle to check the oil, they discovered the bonnet latch was broken and would not secure properly. The applicant checked the oil which was "low but had plenty in it". The applicant purchased some oil and a rope to secure the bonnet and recommenced the trip.
5. The applicant states that "Andrew" phone him "within an hour or so" of leaving Beresfield. The applicant told "Andrew" what was wrong, and he responded by saying not to panic as the vehicle was "fine".
6. The applicant stated that as he continued to drive, the vehicle "was losing power…kept getting sluggish… (and) was playing up". The engine warning light "was coming on and off". At one point the applicant pulled over and found there was no workshop manual or wheel brace for the vehicle. The applicant states that when he got to New Italy, he stopped the car and arranged for it to be towed to his parent's house at Tintenbar.
7. The applicant states the vehicle was towed to his parent's house on Monday 17 February 2014. The vehicle was then taken (but it is unclear from the applicant's evidence how it was transported) to "Repco" at Ballina (i.e. Pacific Garage). The applicant states he was orally told by the mechanic the vehicle had "major mechanical problems"; was "unroadworthy"; and the mechanic "wouldn't know where to fix it".
8. The applicant stated that when he called "Andrew" to tell him what the mechanic had said about the vehicle the conversation became "very heated". The applicant states "Andrew" told him he would pick the car up, take it back to Sydney, and repair the vehicle. The applicant states he refused this offer, and wanted a full refund for the vehicle.
9. In oral evidence to the Tribunal, the applicant stated that, when he inspected the vehicle at the respondent's premises prior to purchasing it, "Andrew" told him the vehicle was in "Mickey Mouse" (i.e. excellent) condition.

APPLICANT'S CROSS EXAMINATION

1. The applicant was cross examined by Mr Maatouk. The applicant agreed that he inspected the vehicle with his "brothers"; looked underneath the vehicle and in the engine bay; took the vehicle for a test drive; signed the contract of sale (although the applicant did not admit to understanding the terms); understood there was no dealer warranty with the vehicle; and understood that it was a term of the agreement that the respondent had 30 days to decide to repair the vehicle after it was purchased, and if the respondent decided not to repair the vehicle the applicant would be given a full refund. The applicant agreed that the vehicle was sold with a roadworthy certificate dated 15 February 2014.

APPLICANT'S EXPERT EVIDENCE

1. Other than photographs of the vehicle, the only expert evidence filed and served by the applicant are the brief reports of Pacific Garage (authored by Mr Jason Clemens, the owner of Pacific Garage). The reports state the vehicle is "unroadworthy". The "defects" with the vehicle are listed as follows: 1. Engine oil leaks; 2. Bonnet catch inoperative; 3. Brake proportion valve link bushes worn; 4. Brake proportioning valve rusted away from chassis; 5. Rear tailshaft too short; 6. Rear fuel tank leaking-Drain plug cross threaded; 7. Brake lines/pipes not secured to chassis; 8. Towbar bolts missing-Never drilled to accommodate bolts; 9. Welded/plated front lower control arm rear mounts; 10. LHF swivel hub leaking oil; 11. Extensive rust underneath vehicle; 12. Bolt missing from RHF swivel hub; 13. Oil pressure switch wire broken; 14. Gear selector high/ low range modified and inoperative; 15. Wiring for fuel gauge unsatisfactory; 16. RHR Backing plate rusted away; 17. Rear shock lower mounts damaged.

APPLICANT'S SUBMISSIONS

1. The applicant's submissions can be summarised as follows: 1. The vehicle was not of acceptable quality by reason of the faults identified in the Pacific Garage reports; and the fact that the engine leaked oil and there were engine problems on the drive from Sydney to Ballina. 2. The applicant and the persons who inspected the vehicle with him were not "mechanics" and could not be expected to be aware of the faults with the vehicle; 3. The vehicle was represented as being in excellent condition when it was not; 4. The faults in the vehicle were sufficient that there was a "major failure" giving the applicant the right to reject the goods and obtain a full refund; 5. In the alternative, if the Tribunal did not award a return and refund in respect of the vehicle, a repair order should be made in accordance with rectifying the faults identified by Pacific Garage.

RESPONDENT'S EVIDENCE

1. The respondent relied upon the following documents: 1. A written statement dated 12 August 2014 by Mr Andrew Maatouk; 2. The contract of sale and the terms and conditions; 3. The 'Form 8' and Notice of Sale for the vehicle; 4. Various emails between the parties.
2. Mr Maatouk is the person referred to as "Andrew" by the applicant. He was the representative of the respondent who the applicant dealt with at all relevant times. Mr Maatouk asserted that he spoke to the applicant about the vehicle and the applicant subsequently attended the respondent's premises on Saturday 15 February 2014 with his "brothers" to inspect the vehicle. Mr Maatouk asserted that the applicant and his brothers inspected the vehicle for "a good 1 hour" and the applicant test drove the vehicle with Mr Maatouk before deciding to purchase it.
3. Mr Maatouk asserted that the written contract between the parties contained a term that the respondent had 30 days from purchase of the vehicle to decide whether or not to repair any "major mechanical issues" and if it decided not to, then it was obliged to refund the purchase price. Mr Maatouk stated that the respondent has always been prepared to collect the vehicle; repair it; and return it to the applicant, but the applicant insisted upon a full refund.

RESPONDENT'S SUBMISSIONS

1. The respondent's submissions can be summarised as follows: 1. The vehicle was roadworthy when sold; 2. Many of the items identified in the report of Pacific Garage were minor, and could be rectified without significant cost or difficulty; 3. Nothing in the report of Pacific Garage indicated why the motor had lost power during the trip from Sydney to Ballina, nor why the engine warning light had come on and off; 4. The applicant had not given the respondent an opportunity to repair the vehicle.

JURISDICTION

1. Both parties are in NSW; the goods were supplied in NSW; and the contract was formed in NSW. The contract was for the supply of goods, in trade and commerce. The goods in question are a used motor vehicle. The applicant's cause of action occurred within the relevant 3 year limitation period prior to the proceedings being filed with the Tribunal. Accordingly, pursuant to Sections 3, 3A and 7 of the Consumer Claims Act 1998 (NSW) ('the CCA'), the Tribunal has jurisdiction. As the application was filed on 12 June 2014, and pursuant to the Consumer Claims Regulation 2014 and Section 14 of the CCA, the jurisdictional limit of the Tribunal is $40,000.00.

RELEVANT LEGAL PRINCIPLES

1. The vehicle was sold with a 'Form 8' under Section 24 of the Motor Dealers Act 1974, and by reason of Section 27 of the Motor Dealers Act 1974, there was no statutory obligation under that Act for the dealer to repair the vehicle. However, the provisions of the Australian Consumer Law 2010 ('the ACL' which was adopted in NSW pursuant to Section 28 of the Fair Trading Act 1987 (NSW)) apply to the proceedings separate and distinct from the existence of any dealer warranty under the Motor Dealers Act 1974 (Burton v Chad One Pty Limited [2013] NSWDC 301).
2. Under Section 18 of the ACL, a person "must not, in trade or commerce, engage in conduct that is misleading or deceptive, or likely to mislead or deceive". The conduct (by words, actions, or in certain circumstances, silence) must lead, or be likely to lead, persons to whom it is directed into error, and there is no requirement for an intention to mislead or deceive (Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 198). However, any misleading or deceptive conduct, or conduct likely to mislead or deceive, must cause the other party to sustain loss or damage, in the sense that there was reliance on the conduct (Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at [26]-[29]; Poulet Frais Pty Ltd v The Silver Fox Company Pty Ltd (2005) 220 ALR 211 at [77])
3. Under Section 54(1) of the ACL, there is a guarantee that goods supplied in trade or commerce are of "acceptable quality". Section 54(2) and (3) of the ACL states: "(2) Goods are of acceptable quality if they are: 1. fit for all the purposes for which the goods of that kind are commonly supplied; and 2. acceptable in appearance and finish; and 3. free from defects; 4. safe; and 5. durable as a reasonable consumer fully acquainted with the state and condition of the goods (including any hidden defects) would regard as acceptable, having regard to the matters in subsection (3). 3) The matters for the purposes of subsection (2) are: 1. the nature of the goods; and 2. the price of the goods (if relevant); and 3. any statements made about the goods on any packaging or label on the goods; 4. any representations made about the goods by the supplier or manufacturer of the goods; and 5. any other relevant circumstances relating to the supply of the goods." Pursuant to Section 54(7) of the ACL, goods do not fail to be of acceptable quality if the consumer acquiring the goods examines them before purchase, and the examination ought reasonably to have revealed the goods were not of acceptable quality. Under Part 5-4 Division 1 of the ACL (relevantly, Sections 259-263 of the ACL) a consumer has a right of refund if failure to comply with a consumer guarantee "cannot be remedied or is a major failure" ("major failure" being defined under Section 260 of the ACL); the consumer has notified the supplier that the goods have been rejected and the grounds for rejection (as defined in Sections 259(3)(a) and 262 of the ACL); and the consumer has returned the goods (as defined in Section 263 of the ACL). A number of decisions of the Tribunal have considered Section 259 of the ACL (e.g. Paul Masden v Agricon Pty Ltd [2014] NSWCATCD 79; Alex Pordage t/as Pattisserie Fe Fi Fo v Chrystal & Co Pty Ltd t/as Caterlink [2014] NSWCATCD 72).
4. Relevantly, Section 260 of the ACL defines "major failure" as: "(a) the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure: or … (c) the goods are substantially unfit for a purpose for which goods of the same kind are commonly supplied and they cannot, easily and within a reasonable period of time, be remedied to make them fit for such a purpose; or (d) the goods are unfit for a disclosed purpose and that was made known to: (i) the supplier of the goods; or (ii) a person by whom any prior negotiations or arrangements in relation to the acquisition of the goods were conducted or made; and they cannot easily, and within a reasonable period of time, be remedied to make them fit for such a purpose; or the goods are not of acceptable quality because they are unsafe."
5. If the applicant proves breach under Sections 18 and/or 54 of the ACL, the Tribunal must determine an appropriate remedy. The remedies available are set out in Section 8 of the CCA. Such remedies include an order that goods be repaired. Under Section 13(1) of the CCA, the Tribunal "must make such orders as, in its opinion, will be fair and equitable to all the parties of the claim".

APPLICATION OF FACTS TO LEGAL PRINCIPLES

1. The Tribunal finds that the applicant has proved to the requisite standard of proof that vehicle was not of acceptable quality when sold in breach of Section 54 of the ACL. The Tribunal accepts the evidence of the applicant that Mr Maatouk represented that the vehicle was in very good condition for a vehicle of its age and kilometres, even if the precise words "Mickey Mouse condition" were not said. Although the vehicle was sold with a 'Form 8' (i.e. there was no dealer warranty to repair under the Motor Dealers Act 1974), it was not an inexpensive vehicle, with a purchase price of $39,000.00. The Tribunal accepts the evidence of the applicant that there was evidence of an oil leak; the motor having inconsistent power; and the engine light coming on and off on the journey back to Ballina. The report of Pacific Garage supports the assertion of the applicant that the motor had an oil leak.
2. The Tribunal is not satisfied that the mechanical problems with the vehicle are so obvious that they should reasonably have been revealed in the inspection of the vehicle prior to the applicant purchasing the vehicle, and the provisions of Section 54(7) of the ACL do not apply.
3. However, there are significant deficiencies in the expert evidence of the applicant. The reports of Pacific Garage do not state why the engine is leaking oil, or why it had inconsistent power. The do not indicate there is any internal damage to the engine, such as damage to the pistons, crankshaft, or camshaft. They do not state what effect the "rear tailshaft too short" has on the vehicle, nor that the tailshaft requires replacement. The reports are exceedingly brief. The bonnet catch being "inoperative" should be capable of a simple repair. Wiring to the oil pressure switch and fuel gauge should also be capable of simple repair. In respect of their being "extensive rust under the vehicle" the photographs do not show "extensive" rust, and if there was "extensive rust" then such rust would have been apparent on inspection of the vehicle. The reports do not give any indication of how much it would cost to repair the vehicle.
4. The Tribunal is not satisfied the applicant has proved the vehicle had a "major failure" in breach of Section 259 of the ACL. In respect of Section 260 (a) of the ACL, the Tribunal is not satisfied the applicant's expert evidence identifies with sufficient detail "the nature and extent of the failure", and accordingly has not established that "the goods would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure". There is no evidence the vehicle cannot be repaired easily, and within a reasonable period of time within Sections 260 (c) and (d). There is insufficient evidence to conclude the vehicle is "unsafe", notwithstanding the assertion of the applicant that he did not feel safe in driving the vehicle, and that Pacific Garage was not prepared to certify the vehicle as roadworthy.
5. The applicant has not proved on the balance of probabilities that the respondent breached Section 18 of the ACL by reason of the representation that the vehicle was in very good condition, as the Tribunal is not satisfied the applicant relied on this representation, in circumstances where he inspected the vehicle thoroughly before purchase. The representation is, however, relevant in respect of Section 54 of the ACL, and has been taken into account in respect of the Tribunal's findings on that issue.
6. The Tribunal is not satisfied the applicant has proved any breach of Section 18 of the ACL by reason of the information on the respondent's website about a "30 day money back guarantee". It is certainly arguable that such a representation, if there is nothing to correct it or put it into context, may lead a consumer to believe that the consumer had the right to return the vehicle and receive a full refund within 30 days. However, there were limited submissions on this issue, and a concession by the applicant in cross examination that he was aware the terms and conditions of the contract referred to the respondent refunding the purchase price if it chose not to repair the vehicle. Accordingly, the Tribunal is not satisfied to the requisite standard, that the representation about a "30 day money back guarantee" was not corrected nor that the applicant relied on the representation in respect of the decision to purchase, particularly in circumstances where the vehicle was inspected by the applicant.
7. The respondent's submission about the terms of the contract giving the respondent a right to decide whether or not to repair, and that the purchaser relies upon its own inspection of the vehicle and does not rely on representations by the seller is rejected, as a party cannot contract out of its obligations under the ACL (Section 64 of the ACL).

REMEDIES

1. The Tribunal is not satisfied that it is fair and equitable to both parties to order the vehicle be returned and a full refund given. Rather, the Tribunal finds that the appropriate order is that the respondent pay compensation to the applicant for the cost of the towing of the vehicle and the inspection of the vehicle by Pacific Garage, and repair the vehicle (at no cost to the applicant) to rectify the faults identified in the Pacific Garage report. The exception to the repair order is the issue of "rust". The Tribunal is not satisfied the applicant has proved to the requisite standard that the vehicle has rust that requires repair. The Tribunal does not award compensation to the applicant in respect of registration or insurance costs on the vehicle, as these are costs the applicant would incur in any event.

CONCLUSION

1. For the reasons expressed above, the Tribunal awards the applicant as follows: Cost of towing $220.00 Inspection by Pacific Garage $130.00 Total $350.00
2. Additionally, the respondent is to repair the applicant's vehicle, at no cost to the applicant, in a proper and workmanlike manner, in respect of the defects of the vehicle as identified in the Pacific Garage inspection reports of 18 February 2014 and 21 February 2014 (with the exception of repair of rust) on or before 5 weeks from the date of this decision. The vehicle is to be collected by the respondent and returned to the applicant's premises after being repaired. The parties are to agree on a suitable date for when the vehicle can be collected. G J Sarginson General Member Civil and Administrative Tribunal of New South Wales 19 December 2014 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: 12 February 2015