David Alexander Wright Webster v Spring Brown Sales Pty Ltd t/a Midway Sales Tractors and Machinery

NCAT Consumer and Commercial|2014-09-30|Before: Agrison P

SUMMARY

On 11 December 2010 the Applicant purchased a new tractor, including attaching front end loader, backhoe and forklift (the implements), from the Respondent for $33,400.00. The Applicant had informed the Respondent that the tractor and implements package was to be used for private purposes and general farm duties on his 40 acre property, of which 10 acres is a commercial olive farm. The manufacturer's warranty for private use was 2 years and for commercial use was 12 months.
Within one year of the purchase the tractor developed a major defects requiring attention. Within 2 years of purchase further problems arose in relation to the tractor and in relation to the implements which prevented them being used for basic farm duties and necessitated numerous repairs. Some of the repairs were carried out under warranty. A significant failure of the backhoe mounting plate occurring in mid-2013, after the expiry of the warranty.
The Applicant lodged a claim against the Respondent in late December 2013, seeking a full refund of the purchase price of the tractor and implements package based on breaches of manufacturer's warranties and statutory warranties under the Australian Consumer Law (ACL). This claim was later amended to include consequential damages for economic loss and repair costs. The Respondent lodged counterclaim for damages for costs incurred in defending the application and for injury to its commercial reputation.
After hearing the evidence of the parties and their engineers, the Tribunal determined that there had been no breaches of warranty in relation to the tractor itself, but breaches of both manufacturer's and statutory warranties existed in relation to the implements. Orders were made accordingly.
The case raised issued of the remedies that exist in relation to tractors and their implements and the jurisdiction of the Tribunal for claims of this size for these products.

BACKGROUND

The Applicant owns property at Gundaroo NSW. The property is 40 acres in size, of which 10 acres are commercially cultivated olive groves.
The Respondent supplies East Wind tractors in Australia. It is based in Queensland but also has an office in Camden NSW.
In mid-October 2010, at the Murrumbateman Field Days, the Applicant discussed the purchase of a tractor and implement package from the Respondent after making known his needs to the Respondent.
On 11 December 2010, in NSW, the Applicant purchased a tractor package from the Respondent for $33,400.00, in Camden NSW. The package consisted of an East Wind tractor (DFS-354, 35hp 4WD) and three attachments: a front end loader (SL-35), a backhoe (BHES-175) and a front fork attachment.
The warranty for the tractor was two (2) years for private use or one (1) year for commercial use. Certain specified claims were excluded, including for defects arising from misuse.
The Applicant took possession of the tractor on 16 December 2010.
The Applicant had major services on the East Wind Tractor carried out by Goulburn Farm Machinery, in Goulburn NSW. These services were undertaken at 50 hours (30 May 2011), 100 hours (31 August 2011) and 250 hours (29 October 2013) of use.
The Applicant owns two other tractors (Leyland 154 2WD, 30 years old; Kubota 28hp 4WD, 20 years old), which he intended to replace with the East Wind tractor. These tractors are used for landscaping, ploughing, slashing, spreading lime and in the olive harvest. The East Wind tractor has been used for landscaping (digging holes, constructing garden bed) and in a limited way in the olive grove (loading bins of olives onto a truck, and pushing prunings around). The Applicant has retained the other tractors as he found the East Wind has proven unreliable.
In February 2011 the East Wind Tractor began blowing smoke and leaking oil due to malfunctioning fuel injectors. This was fixed under warranty by Goulburn Farm Machinery on 3 May 2011; however the Applicant paid $201.00 in travel costs (134km round trip to Goulburn).
On 27 February 2012 the front end loader (FEL) bucket disconnected and damaged the hydraulic hose.
On 10 May 2012, Goulburn Farm Machinery undertook repairs on the tractor (including to the clutch, hydraulic pump and power steering) under warranty. Again, the Applicant paid $201.00 in travel costs.
In September 2012 the backhoe clamping cylinder failed twice when the Applicant attempted to dig a trench for a garden bed, and to dig holes for new olive trees.
In March 2013 the welded joint connecting the FEL bucket and the bracket/arm failed. The joint was repaired by Masterweld in Fyshwick ACT on 16 March 2013.
On 2 April 2012 the repaired joint of the FEL bucket failed immediately above the repair work. The FEL has not been used since.
In April 2013 the backhoe mounting plate split. The Applicant had this repaired and modified at a cost of $300.00, plus $55.00 for a broken joint bearing for the backhoe discovered during the repairs. In May 2013, the Applicant incurred a further cost of $235.00 from Hoses Direct Pty Ltd, who checked the hydraulics after the repair work.
Other defects noted by the Applicant which have arisen since purchase include: 1. Brass grease nipples have broken; 2. Clutch lever sticks and cannot be moved easily; clutch shudders when vehicle used in high range gears; 3. Condensation on the instrument panel; 4. Electrical faults (23 May 2014) - dashboard indicator lights come on when brakes applied. 5. Fan belt tensioner pulley bearing seized (repaired during 250 hour service); 6. Low oil pressure, and oil leaks; 7. Nuts and bolts work loose with minimal work, and require tightening every few hours;

The history of the application before the Tribunal

On 30 December 2013 the Applicant lodged an application with the NSW Consumer, Trader and Tenancy Tribunal (CTTT). The Applicant claimed that 'the continual breakdown and malfunction of the tractor and its attachments renders the tractor and implement package unusable for the purpose for which it was purchased', and were irreparably defective. The Applicant sought a full refund of the purchase price, $33,400.00.
On 5 February 2014 the Applicant and Mr White of the Respondent attended a conciliation hearing at the Tribunal, at which the Tribunal made the following procedural directions: 1. The hearing be adjourned to a date to be fixed by the Registrar; 2. The Applicant shall make the tractor and implements available for inspection by the Respondent upon reasonable notice being given; 3. By consent, the Applicant shall provide to the Respondent and the Tribunal, either in person or by post, a copy of all documents on which the Applicant intends to rely at the hearing by 26 February 2014; 4. By consent, the Respondent shall provide to the Applicant and the Tribunal, either in person or by post, a copy of all documents on which the Respondent intends to rely at the hearing by 26 March 2014; Note: for these purposes, 'document' means: expert reports, photographs, accounts or receipts, any other document. All documents must be legible and in colour if the original is in colour. 1. The parties are encouraged to obtain advice and to have further settlement discussions before the next hearing. 2. If either party requires a summons for production of documents or attendance of witnesses that request, in writing, must be made no later than 4:00pm on 9 April 2014.
On 27 February 2014 the time for compliance with Directions 3 and 4 was extended to 5 March 2014 and 2 April 2014, respectively; on 8 April 2014 the time for compliance with Direction 4 was again extended to 7 April 2014.
On 3 March 2014 the tractor was inspected by: Mr DA Webster (Applicant), Dr Alan McLucas (Applicant's expert, engineer), Mr Cameron Spring-Brown (Director of the Respondent), Mr Scott White (National Operations Manager of the Respondent), and Mr Russell K Findlay (Respondent's expert, engineer).
On 8 April 2014 the Applicant had the inner tube of the deflated left front tyre repaired. This tyre has/had a persistent slow leak, and requires re-inflation every few days.
On 21 May 2014 the Respondent's request (made 12 and 16 May 2014) for the location of the hearing to be moved from Queanbeyan to Campbelltown was refused. The Respondent's alternate request to attend by telephone was granted.
On 5 June 2014 the Applicant filed an updated version of his claim which explicitly invoked the Applicant's status and rights as a consumer, added a claim for consequential economic losses, particularised relevant losses, provided supporting documentation and annexed an expert engineering report.
On 10 June 2014 the Respondent lodged a counterclaim accompanied by supporting documentation and an expert report by Mr Russell K Findlay, engineer. This claim consists of: 1. $3,500.00 for the on-site inspection of the tractor on 3 March 2014 (including travel and accommodation costs of those attending); 2. $800.00 for the expert witness report of Mr Findlay; 3. $800.00 for the upcoming NCAT hearing of 18 June 2014 to be attended by phone conference by Mr White, Mr Spring Brown and Mr Findlay; 4. $3,500.00 for the upcoming NCAT hearing of 30 September 2014 (including flights, accommodation and meals for Mr White, Mr Spring Brown and Mr Findlay); and 5. An unspecified amount of damages for lost sales and custom arising from the Applicant's claim and negative comments from January 2014 to the date of the final hearing.
On 18 June 2014 the matter was heard by the Tribunal at Queanbeyan NSW. The Applicant appeared in person, accompanied by expert witness Dr Alan McLucas. The Respondent appeared by telephone, in the persons of Mr Cameron Spring-Brown and Mr Scott White; the Respondent's expert witness also appeared by telephone. The following orders were made: 1. By determination, the hearing was adjourned to a date to be fixed by the Registrar at Goulburn; 2. The Respondent's name Midway Sales Tractors and Machinery, is amended to Spring-Brown Sales Pty Ltd t/a Midway Sales Tractors and Machinery; 3. The Applicant's claim is now that formulated in the document filed on 10 June 2014 (Exhibit 2); 4. If the Applicant intends to reformulate his claim in any manner, including for any consequential losses, then he is to file and serve that reformulated claim [by] 30 June 2014 with full particulars. The Applicant [is] to make any submissions on the jurisdiction of the Tribunal to hear and determine the reformulated claim; 5. The Respondent is to file and serve any supplementary expert report and any reply to the Applicant's claim as set out in Exhibit 2 or any reformulated claim that is filed and served, by 14 July 2014. The Respondent is to file and serve any submissions on jurisdiction by 14 July 2014; 6. At the hearing the parties are to have their experts present to give concurrent evidence. Lay witnesses are to be present in person. Note: 1. The parties are encouraged to take advice on the terms of the Australian Consumer Law and may file any submissions on that law, whether under their own hand or that of their legal advisers. 2. The Tribunal notes that the parties have been determined not to seek legal representation; 3. A separate written notice of the new hearing date will be sent to you in the near future.
On 30 June 2014 the Applicant filed a letter particularising his losses, These amount to $40,863.55, consisting of: 1. $33,400.00 ($19,020.64 [tractor] + $6,177.60 [front end loader] + $6701.76 [backhoe] + $1,500.00 [front fork attachment]); 2. $7,463.55 (consequential losses, including travel and repair costs - individually specified in the letter - and for stress and inconvenience).
The Tribunal notes that the letter actually specified that the tractor package cost $34,400.00 and thus the total amount of the claim was $41,863.55. This is taken to be a typographic error.
On 30 September 2014 the final hearing occurred before the Tribunal. The Applicant appeared in person. The Respondent appeared in the persons of Mr Cameron Spring-Brown, Director, and Mr Scott White, Manager. Also present were Dr Alan McLucas and Mr Russell Findlay, expert witnesses.
The evidence given at the hearing is discussed below. After the hearing the matter was reserved for decision. Neither party had legal representation.

JURISDICTION

The NSW Civil and Administrative Tribunal ('NCAT', or 'the Tribunal') is a statutory body established on 1 January 2014 by the Civil and Administrative Tribunal Act 2013 (NSW) section 7(2)(a) ('NCAT Act').
This matter was initiated in the NSW Consumer, Trader and Tenancy Tribunal (CTTT), which was replaced by the Consumer and Commercial division of NCAT before the matter was heard. As such, the matter is taken to have been commenced in NCAT (NCAT Act schedule 1 clause 7(1)), which has and may exercise all the functions that the CTTT had prior to its abolition (clause 7(3)).
The Tribunal's Consumer and Commercial division has jurisdiction in relation to matters arising under various legislation including the Consumer Claims Act 1998 (NSW)(CCA) which in turn may raise issues rights under the Australian Consumer Law (ACL) and under the Motor Dealers and Repairers Act 2013 (NSW)(MDRA).

The application of the Australian Consumer Law to proceedings in the Tribunal

The ACL was incorporated into the law of New South Wales by section 28(1) of the Fair Trading Act 1987 (NSW) ('FTA'). The ACL (NSW) consists of Schedule 2 of the Competition and Consumer Act 2010 (Cth), and the regulations under section 139G of that Act (FTA section 27).
The ACL applies to create rights at law in consumers that fall within the terms of the ACL including the consumer guarantee provisions in sections 54-57 of Part 3-2 ACL. Whilst the ACL creates a cause of action at law and a range of remedies for parties, it does not of itself confer any jurisdiction on this Tribunal to hear those actions and provide those remedies.
In order for a party to rely upon rights created by the ACL in this Tribunal, the party must show how the Tribunal obtains the jurisdiction to entertain that action. This involves a two-step process: 1. Whether the subject matter of the claim falls within the ACL; and if so 2. Whether the Tribunal is vested with the jurisdiction to hear that claim.
In relation to the first issue, the ACL provides statutory rights and protection to consumers who have acquired 'goods' or services valued at $40,000.00 or less (section 2; Schedule 2 section 3).
'Goods' are defined in section 2 ACL to include 'vehicles' and 'accessories' to the vehicles (section 2). The term 'vehicle' is undefined in the ACL, FTA (NSW) or in the Interpretations Act 1987 (NSW) or the Acts Interpretation Act 1901 (Cth). There does not appear to have been any prior judicial consideration of the issue other than the decision of the presently constituted Tribunal in Paul Madsen v Agrison Pty Ltd [2014] NSWCATCD 79.
The term 'vehicle' is defined in other specific contexts, such as the Motor Dealers Act 1974 (NSW) and its replacement in the form of the MDRA which are addressed below, and include tractors. But these definitions are only relevant those statutes and not to the ACL.
The Tribunal sees no reason to read down the definition of 'vehicle' in the context of a remedial consumer protection statute such as the ACL. This conclusion is bolster by the observation that section 4B Competition and Consumer Act 2010 (Cth)(CCA) of which the ACL is a schedule, specifically refers to 'commercial road vehicle' when that limitation is intended.
Under section 32 of the FTA, the ACL (NSW) applies to and in relation to: (a) Persons carrying on business within this jurisdiction, or (b) Bodies corporate incorporated or registered under the law of this jurisdiction, or (c) Persons ordinarily resident in this jurisdiction, or (d) Persons otherwise connected with this jurisdiction.
In the present case the Applicant resides and carries out business in NSW; the Respondent supplies goods for sale within NSW from its sale office in Camden NSW.
The Applicant's purchase of a new tractor and implements for $33,400.00 meets the above description. The Applicant is therefore a consumer who may enjoy and enforce rights under the ACL.
Turning to the second issue at paragraph 41(b) above. Section 259 ACL provides: 259(1) A consumer may take action under this section if: (a) a person (the supplier) supplies, in trade or commerce, goods to the consumer; and (b) a guarantee that applies to the supply under Subdivision A of Division 1 of Part 3-2 (other than sections 58 and 59(1)) is not complied with.
Section 259(1) creates the right of action but it does not indicate what court or tribunal has jurisdiction to hear and determine the action. Other provisions in the CCA simply confer on the states and territories the jurisdiction that arises under the ACL to be exercised by the courts of the states and territories. The investment of federal jurisdiction in the courts or NSW via this method would no doubt be sufficient without more to confer jurisdiction in ACL matters on the Supreme Court and probably the District and Local Courts because they are courts with the power to hear any claims actionable at law (with some irrelevant exceptions in the case of the District Court and Local Court).
The mere fact that the Legislature of NSW has the power to legislate in relation to the ACL jurisdiction does not mean that the present Tribunal automatically obtains that power. This Tribunal does not stand in the same position as the Supreme, District and Local Courts. It is not a body that is vested with the power to hear any claim actionable at law. It has only those jurisdictions and powers that are specifically invested in it by the Legislature. It is therefore necessary to find that the NSW Legislature has in fact vested the ACL jurisdiction in the Tribunal. Nothing in the FTA (NSW) is to this effect.
The only means by which the Tribunal can obtain the jurisdiction over ACL matters appears to be via the Consumer Claims Act 1998 (NSW)(CCA).
Section 7 CCA gives the Tribunal jurisdiction to hear claims falling under the CCA. Section 3 of the CCA defines a 'consumer' to include a natural person to whom a supplier has supplied or agreed to supply goods or services, whether under a contract or not. The Applicant meets this description.
The claim arises from the supply of goods to the consumer (under a contract or not), and constitutes a claim by the consumer for the payment of a specified sum of money (CCA section 3A(1)(a)). The goods to which the claim relates were supplied in NSW (CCA section 7(1), (2)(a)).
The claim is therefore one maintainable under the CCA but as such is subject to the Tribunal's monetary jurisdiction which is limited by section 14(1) CCA to making orders for the payment of no more than the prescribed amount. Regulation 4(b) Consumer Claims Regulations 2014 fixes that limit for transitional matters of the present kind at $30,000 except in the circumstances where section 14(3) and (4) CCA apply, in which case there is no monetary limit.
It is important to note that section 14(1) only limits the amount of the orders that can be made by the Tribunal and not the amount of the claim that can be made by an Applicant.
The claim as presently made exceeds this $30,000 limit and the Applicant has not formally abandoned any excess over the limit.
Section 14(3) and (4) provide: (3) Subsections (1), (2) and (2A) do not apply in relation to a consumer claim arising from the supply of a new motor vehicle that is used substantially for private purposes within the meaning of the Motor Vehicles Taxation Act 1988. (4) For the purposes of subsection (3): "new motor vehicle" means a motor vehicle that is not a second-hand motor vehicle within the meaning of the Motor Dealers Act 1974.
Section 3 Motor Dealers Act 1974 (now repealed) expressly includes a tractor in the definition of a motor vehicle. The tractor in the present case was not a second hand vehicle and so it answers the description of a 'new motor vehicle' in section 14(4) CCA. It is not apparent to the Tribunal why regulation 14(4) CCR maintains a reference to the repealed Motor Dealers Act 1974, which might simply be a failure to update Austlii correctly. In any event the MDRA also catches tractors and so nothing would turn on the choice of the two pieces of legislation in section 14(4).
The next issue is whether the tractor is a motor vehicle that that is used substantially for private purposes within the meaning of the Motor Vehicles Taxation Act 1988.
Section 3 of Motor Vehicles Taxation Act 1988 includes a tractor in the definition of a motor vehicle. Section 3(2) defines the concept of private use in various terms and is anything but clear. In the case of standard domestic vehicle it may be that section 3(2)(d) applies to exempt their purchase from the Tribunal's jurisdictional monetary limit. But in the case of a tractor is not so clear. The only presently relevant term seems to be 3(2)(f): (2) For the purposes of this Act, a motor vehicle is not a motor vehicle used substantially for private purposes unless: (f) in any other case-it is used for social or domestic purposes or for pleasure, and, in the opinion of the Authority, its use for any other purpose is minimal.
If ordinary family cars are also caught by section 14(2)(f) then presumably the Authority has formed the requisite opinion. This assumption is made on the basis that this Tribunal regularly hears claims for defects to sedans and the like and it is always taken that there is no monetary limit, although there is no evidence on this point before the Tribunal. The case of a tractor is not so clear and there is also no evidence before the Tribunal that the Authority has formed any opinion on the status of the Applicant's tractor or similar tractors. It is thus not open to the Tribunal to find that section 14(3) and (4) apply to remove the monetary limit on the Tribunal's decision in relation to the tractor.
This nuance in the legislation was not recognised by the Tribunal during the proceedings nor was in raised by the unrepresented parties. In the circumstances of the existing delays in this case and the unrepresented status of both parties, the Tribunal determined to proceed with the adjudication on of the claim and address the monetary limit issue if it arises by seeking further submissions from the parties on their preferred courses of action.

Motor Dealers and Repairers Act 2013 (NSW)

The Motor Dealers Act 1974 (NSW) and its replacement the MDRA which came into force on 27 November 2013, both contained consumer protection provisions that create a right of action in a purchaser of a defector motor vehicle. But nothing in these Acts creates any direct remedy in the Tribunal. The remedy available to purchasers in the Tribunal for the rights created in these pieces of legislation is also via the CCA which then once more raises the monetary jurisdiction limit. Consequently the monetary limit of $30,000.00 would seem to apply to the tractor claim brought under the MDRA via the CCA.
The events in question in the present case span the transition period between the two Acts: the tractor was purchased, and certain issues arose, while the old 1974 Act applied, but the application was lodged after the new MDRA came into force.
The MDRA contains the following transitional provisions which would appear to apply the MDRA to the present case. Schedule 2 clause 3(1) MDRA states that: Any act, matter or thing done or omitted to be done under a provision of a former Act and having any force or effect immediately before the commencement of a provision of this Act that replaces that provision is, on that commencement, taken to have been done or omitted under the provision of this Act.
Further, clause 9 MDRA provides that: 'Unless the context otherwise indicates or requires, a provision of this Act extends to any act or omission occurring before the commencement of the provision.'
Under section 4 MDRA: 'motor vehicle' means any type of vehicle built to be propelled by a motor, not including vehicles used on railways, tramways, or aircraft.
Tractors would appear to be covered in this definition, and section 9(b) MDRA would fortify this view.
Under section 5 MDRA, 'motor dealer' means a person who carries on the business of dealing in motor vehicles as a retailer on a wholesale basis. 'Deal' in this case means to buy, sell or exchange (section 4).
Under section 67(1) MDRA a 'defective vehicle' means one in such condition that the supply of it would breach a guarantee under sections 54-57 of Part 3.2 of the ACL. In relation to defective vehicles, the term 'motor vehicle' is a reference to the vehicle complete with all accessories fitted to the vehicle (section 67(2)).
Section 68 MDRA provides that a motor dealer must, at their own expense, repair or make good a c motor vehicle sold by the dealer if it is a defective vehicle so as to place the vehicle in a reasonable condition having regard to its age. The purchaser has the benefit of this guarantee (section 68(2)) unless no limitation period is specified under this Division (section 68(4)). The vehicle must be defective before the end of the limitation period, whether or not it is known to be defective (section 68(5)).
Section 69 MDRA sets out limitation periods, which commence at the date the vehicle is sold by the dealer. For new vehicles the distance limit is 20,000 km after manufacture and the time limit is 12 months less 1 month for each 2,000 km that the vehicle was driven before it was sold (section 69(3)). While the regulations may prescribe different periods for specified vehicles (section 69(6)), as the draft regulations have yet to be enacted, section 69(3) is the only provision which applies to the Applicant's tractor.
In the present case the problems with the tractor (as opposed to its implements) first arose within this 12 month period.
Section 77 MDRA deals with the overlap between the above warranties contained in the MDRA and those in the ACL: A person who has enforced the dealer guarantee under this Division in respect of the condition of or a defect in a motor vehicle is not, if the dealer guarantee is fully complied with, entitled to take action against the motor dealer under the Australian Consumer Law (NSW) in respect of any aspect of the motor vehicle that is made good or repaired under this Division.
The warranties in section 67 MDRA incorporate by references sections 54-57 Part 3.2 ACL. These are the consumer guarantee provisions of the ACL. In this sense the warranty test to be applied under the MDRA is not different to that being applied directly to via the application of the CCA to the ACL (per paragraph 40 above save that there is no express time limit on the consumer guarantees under the ACL whereas the MDRA does contain the warranty periods set out above.
The fact that the ACL itself does not set time limits on consumer guarantees does not mean that a consumer can bring a claim to the Tribunal based on the ACL at any indefinitely time in the future. Because the claim comes to the Tribunal via the CCA it is subject to the time limits in section 7 CCA which limits claims to those made within 3 years of the supply of the goods. In the present case that will encompass the whole of the parties dealings including defects to the tractor and its implements.

CONSIDERATION OF ISSUES

The Applicant's claims ultimately rests upon whether the Respondent has complied with the consumer guarantees contained in Part 3.2 of the ACL. At issue are the guarantees in sections 54 and 55 that goods will be of acceptable quality and fit for a disclosed purpose.
The guarantee issue arises in respect to both the tractor and its implements (i.e. the FEL and backhoe). The forklift is not at issue. To avoid repetition of facts, the relevant evidence will be set out first, followed by the Tribunal's conclusions drawn from that evidence.
In determining this matter, the Tribunal bears in mind that the Applicant must establish on the balance of probabilities that the Respondent failed to comply with the guarantees.

Relevant Evidence

The Applicant acquired the tractor to use for general farm duties, including those described as appropriate for it on the Respondent's website and in the operator's manual. Such uses include grading, digging, and grabbing - illustrated with a fallen tree branch - up to the weight specified in the manual. The East Wind tractor has been used for landscaping (digging holes for trees, constructing garden beds) and in a limited way in the olive grove (loading bins of olives onto a truck, and pushing prunings around).
The Applicant states that he used the machines properly: he read and obeyed the operating manuals, and that he observed the maximum capacities of the machines during use. The Applicant also claims to have performed regular maintenance on the tractors himself, including pre-use checks and tightening bolts every few hours. The tractor had the requisite major services (at 50, 100 and 250 hours of use) undertaken by qualified professionals at Goulburn Farm Machinery.
At the hearing, the Applicant admitted that the machines have not been stored under cover since October 2013.
Mr Jason Gasparie, friend of the Applicant, gave evidence that he owned an East Wind tractor which was found by a differently constituted Tribunal to be defective on 12 August 2013. While this raises the potential that systemic faults exist in East Wind tractors, the evidence is insufficient to establish this. Mr Gasparie's tractor was a different model to the Applicant's, and the defects suffered were broadly but not specifically similar to those of the Applicant - for example Mr Gasparie's tractor had trouble with the hydraulics and the front bucket, but the actual defects were different to those of the Applicant's tractor. The divergent facts also mean that while Mr Gasparie's case is relevant, it does not bind this Tribunal.
Mr Mark Weatherstone of Goulburn Farm Machinery (GFM), in an email to the Respondent, corroborated the Applicant's claim that GFM performed major services on the Applicant's tractor at 50, 100 and 250 hours of use. GFM also undertook warranty repairs on the tractor, as described in the 'Background' section above. Mr Weatherstone gave his opinion that the services he carried out on the tractor were not the cause of the defects.
Dr Alan McLucas, engineer, gave testimony and a written report relating to the failures of the FEL and backhoe, dated 5 June 2014. In his report, Dr McLucas stated that the breakages were 'serious mechanical failures,' and that 'poor designs, inappropriate choice of materials and poor fabrication processes have resulted in these implements being unfit for purpose; they do not afford durability in service and are not safe for use in the undertaking of even moderately demanding fieldwork and hence are not of merchantable quality.' [1]
Dr McLucas stated that the poor design of the implements coupled with their construction from low carbon steel rendered them incapable of sustaining the high loads and pressures inherent in agricultural work, even if used within the manufacturer's specifications.
Dr Lucas pointed to photographic evidence of both implements in support of his opinion. The inadequate design of the FEL is clear when compared with that of the Applicant's Kubota tractor. The attachment of the Kubota's front bucket to the brackets, or side arms, is reinforced by a long steel side plate which extends to the front edge of the bucket; the side plate on the East Wind is much shorter and therefore provides far less stability and strength. Similarly, the design of the side-shift frame and backhoe result in inappropriate and variable load paths and distribution which the machine, as constructed, is unable to sustain. These flaws exist in both the original, as manufactured, condition as well as the modified condition. In Dr McLucas's opinion, neither implement had been misused.
At the hearing, Dr McLucas stated that the failures of the FEL and backhoe would have occurred whether the tractor and implements were properly used and maintained or not; while improper use could have contributed to the development of the defects, the fundamental cause of the failures was the inadequate design of the machines. [2]
The Respondent contends that the failures in the implements and the tractor itself arose from misuse and neglect by the Applicant. The Respondent relies on the experience and evidence of its representatives and of Mr Findlay, and claims that very few claims have been made against tractors it has supplied.
While the failure of the FEL could have occurred in various ways, Mr Cameron Spring-Brown suggested that the most probable cause was grabbing and dragging material such as concrete weighing in excess of the maximum load.
The Respondent alleges the failure of the backhoe, in particular the side-shift frame and back plate, was due to the Applicant improperly operating the machine, for instance driving and using the tractor and backhoe while the backhoe was not secured, or clamped, to the side-shift frame. The Respondent has three bases for this assertion.
Firstly, the side-shift frame clamps were in the 'off' position during the inspection in March 2014 - this was observed by Mr Spring-Brown, Mr White and Mr Findlay. Mr White stated that the clamps should only be in the 'off' position when the implement was being moved on the side-shift; at all other times, including during storage and use, the clamps should be in the 'on' position. Operating the tractor and backhoe with the clamps 'off' would result in excess and uncharacteristic movement and load shifting, causing damage to the machine such as the cracked back plate and bent hydraulic pins.
Secondly, the Respondent noted that the hydraulic pressure was set at 2450psi, rather than the preferred factory setting of 2300psi. 2450psi is at the 'high end of the range' for the tractor settings. The Applicant denies changing the setting from 2300 to 2450psi.
Thirdly, the Respondent indicated that one other tractor they sold suffered similar problems with the back plate and side-shift frame of the backhoe, and the owner admitted using it with the clamps in the 'off' position.
The Respondent alleges that the failures in the tractor itself, such as the shuddering clutch, the stuck second gear, and condensation and faulty readings in the dashboard panel, are due to the Applicant failing to properly look after the tractor. In particular, the Respondent claims the Applicant stored the tractor outside, exposed to the weather, and failed to properly conduct pre-use checks, including cleaning its components and filters and addressing any minor faults.
This claim is based on the condition of the tractor at inspection. The tractor was dirty, dusty, and numerous components needed lubrication or other attention, as did some of his other vehicles. The Respondent solved the East Wind's clutch problems with lubrication. It is noted that the Applicant admitted driving the tractor solely in second gear, four wheel drive; as he had been unable to change gear as it was stiff, but was reluctant to undertake further repairs on the vehicle. The Respondent also noted that the oil filters needed cleaning and proper fitting, that dust had entered the engine around the edge of the filter, and that the seal on the oil dipstick had been lost but not replaced, thus contaminating the engine oil.
Mr Russell Findlay, engineer, corroborated the observations of Mr Cameron Spring-Brown and Mr Scott White. At the hearing, Mr Findlay stated that he agreed with Dr McLucas in some points, namely that the design contributed to the failures. However, in his opinion the cause of the failures was misuse of the machines by the Applicant: 'there is no question that the machine, backhoe and FEL [sic] supplied when purchased have been misused and abused… it is obvious that the tractor has not be used or maintained according to the manufacturer's instructions.' [3]

Issue 1 Goods Guaranteed to be of Acceptable Quality (ACL Part 3.2 section 54)

Under section 54 ACL, suppliers such as the Respondent guarantee that goods supplied other than by auction are of acceptable quality: 54(1) If: (a) a person supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are of acceptable quality. (2) 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). (3) 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. (4) If: (a) goods supplied to a consumer are not of acceptable quality; and (b) the only reason or reasons why they are not of acceptable quality were specifically drawn to the consumer's attention before the consumer agreed to the supply; the goods are taken to be of acceptable quality. (6) Goods do not fail to be of acceptable quality if: (a) the consumer to whom they are supplied causes them to become of unacceptable quality, or fails to take reasonable steps to prevent them from becoming of unacceptable quality; and (b) they are damaged by abnormal use.
This means that the tractor supplied to the Applicant was guaranteed to be fit for the purpose for which such goods are commonly supplied, of acceptable appearance, free from defects, safe, and durable (section 54(2)).
This guarantee will not have been breached if the Applicant caused the defects in question or failed to prevent them arising, or if the damage was caused by abnormal use (s 54(6)).
The Tribunal is satisfied that the failures of the implements - the FEL and the backhoe, and their attachment mechanisms - are attributable to poor design and construction.
In reaching this conclusion the Tribunal accepts the opinion of Dr McLucas, and notes the partial agreement of Mr Findlay. The Tribunal also accepts the Applicant's evidence (written, verbal and photographic) that the implements were properly operated in accordance with the operating manual and online recommendations.
The Respondent has not produced any evidence that the implements themselves were misused. For instance, the allegation that the Applicant improperly used the tractor to pick up or drag large blocks of concrete is unsubstantiated. The photographic evidence supplied is of a small mound of earth and small pieces of concrete capable of being moved by a small machine such as a bobcat, if not by manpower, which would not have caused the damage to the FEL bucket and brackets. According to the Respondent's website, the FEL should have been capable of grabbing and moving objects of awkward size and weight, including medium-sized tree branches. Moreover, it is arguable that even if the FEL was damaged per the allegation, the fault was not with the attempted use, as it was in line with guidelines, but with the FEL's design and construction from low carbon steel.
The settings and loads carried were not in excess of the manufacturer's prescribed limits - the hydraulic setting, while at the 'high end of the range', was within the manufacturer's specifications.
The Tribunal also notes that there is no actual evidence that the Applicant operated the backhoe unsecured, and notes Dr McLucas' expert opinion that the failures would have occurred even if it had been so operated.
The Respondent's point out that the welding done to repair these defects was of poor quality is valid, again evident from the photographs. However this does not negate the fact that the defects arose in the first place.
Neither the FEL nor the backhoe are capable of operating without risk of failure when used in accordance with the manufacturer's requirements; their inadequate design and construction render them unsuitable for undertaking general farm work, for which such machines are commonly supplied.
The Respondent has therefore not complied with the guarantee in section 54 to supply goods of acceptable quality in relation to the FEL and backhoe.
However, this is not the case in relation to the tractor itself.
The Tribunal notes that Dr McLucas, whose evidence related only to the attachments, was tempted to infer that the design and construction of the tractor itself would be of similar quality to that of the attachments - although he did not comment specifically on this.
The Applicant has not established that the problems with the tractor, including the clutch, second gear and loose bolts, were due to inferior quality or systemic faults of East Wind tractors.
The Tribunal is satisfied that the tractor's defects arose as a consequence of the Applicant failing to perform adequate maintenance on the tractor. The Respondent's evidence (written, verbal and photographic) clearly indicates that the vehicle is in a state of disrepair.
The Applicant denied misusing the tractor, supporting this claim with the fact that his other tractors are in functioning condition.
However, the fact that lubrication and cleaning were necessary before the machine's operation could be demonstrated to those inspecting it indicate that the Applicant had not properly maintained the machine, as does his inability to specify how regularly and recently the last pre-use checks (as opposed to major services) were undertaken.
The Applicant's failure to store the tractor inside, or at least to use a protective covering when storing it outside, also supports this. The Tribunal notes that the warranty does not cover defects arising from exposure to weather, and that covered storage is recommended by the manufacturer.
The Tribunal accepts that faults such as the bolts working loose during operation are the result of wear and tear on the vehicle, and constitute a common and minor issue which can easily be identified and rectified. In fact, it is a requirement of the operating manual that these features be checked with every use; the Applicant must have been aware of this, as he had read the manual.
Had the Applicant conducted the requisite maintenance and pre-use checks the development of certain defects would have been detected and arrested. For instance, the cracking of the backhoe back plate and pending failure of the side-shift frame would arguably have been evident upon inspection.
A reasonable consumer would have conducted adequate pre-use checks, identified any issues and not used the machine until those issues were addressed. Operating the machine without having conducted such checks, or with knowledge of a fault - such as it being stuck in second gear, itself an issue due to inadequate maintenance - constitutes behaviour which significantly contributed to the development of the faults, and may have damaged the machine.
The Applicant's failure to have certain items repaired also counts in the Respondent's favour, in particular the persistently flat tyre, which it took the Applicant three years to have fixed properly, and the gear problem, which was only addressed and resolved (by the Respondent) at the inspection in March 2014.
The Tribunal is not satisfied on the balance of probabilities that the Respondent has breached the guarantee in section 54 ACL in relation to the tractor itself.

Issue 2 Goods Guaranteed to be Fit for Any Disclosed Purpose (Part 3.2 section 55)

Section 55(1) guarantees that goods supplied in trade and commerce, other than by auction, will be fit for any purpose disclosed by the consumer, or any purpose for which the supplier represents that they are reasonably fit: 55 Guarantee as to fitness for any disclosed purpose etc. (1) If: (a) a person (the supplier) supplies, in trade or commerce, goods to a consumer; and (b) the supply does not occur by way of sale by auction; there is a guarantee that the goods are reasonably fit for any disclosed purpose, and for any purpose for which the supplier represents that they are reasonably fit. (2) A disclosed purpose is a particular purpose (whether or not that purpose is a purpose for which the goods are commonly supplied) for which the goods are being acquired by the consumer and that: (a) 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 goods were conducted or made; or (b) the consumer makes known to the manufacturer of the goods either directly or through the supplier or the person referred to in paragraph (a)(ii). (3) This section does not apply if the circumstances show that the consumer did not rely on, or that it was unreasonable for the consumer to rely on, the skill or judgment of the supplier, the person referred to in subsection (2)(a)(ii) or the manufacturer, as the case may be.
This guarantee covers disclosures made expressly, and by implication by the consumer to the supplier or manufacturer (section 55(2)). However, it does not apply if the consumer did not rely, or relied unreasonably, upon the skill or judgment of the supplier (section 55(3)).
The Applicant claims to have purchased the tractor and implements he did on the basis of discussions he had with sales representatives of the Respondent at the Murrumbateman Field Days in October 2010. The Applicant claims to have informed the Respondent that he owed a 40acre property and olive farm, and that the tractor would be used predominantly for private purposes and general farm duties. The Tribunal accepts this evidence.
The Applicant claims that 90% of the usage was for private, mostly landscaping, purposes, and that only 10% of its use was on the olive farm - the Applicant used his other tractors in the olive grove.
Further, the Applicant states that the unreliability of the East Wind tractor has prevented him using it even for basic farm duties, and that due to the failures of the FEL and backhoe, the tractor is now unusable except as a forklift.
The Respondent claims that the tractor and attachments are suitable for the purpose which the Applicant disclosed, namely for private use on a small or hobby farm, but that the Applicant in fact used the machines for primary production purposes on a commercial farm.
It is noted that the Applicant did use the purchase to offset tax for his farm.
Any difference between the declared intended use of the machines and their actual use affects both the manufacturer's warranty, being two (2) years for private usage to one (1) year for commercial usage; and whether any guarantee exists under section 55 ACL.
The Applicant's property is 40 acres in area, of which merely 10 acres are cultivated as olive groves. This is a very small primary production at best. Moreover, the evidence before the Tribunal indicates that the tractor and implements were used for general farm duties in accordance with the recommended usage for that tractor.
The Respondent's point relates more to the Applicant misrepresenting his commercial status in order to gain the advantage of an additional year of warranty. Had the Applicant been classed as commercial usage, the repairs undertaken in May 2012, including to the clutch (valued at $616.00.00), and the spare hydraulic parts supplied in September 2012 (value unknown) would not have been provided under warranty.
The Tribunal finds that the tractor was primarily used for private purposes that imported a 2 year manufacturer's warranty that catches the failure of the tractor and the implements. However the defects themselves in the implements were inherent and were present from day one.
In terms of compliance with this guarantee the Tribunal is satisfied on the balance of probabilities that the Respondent failed to comply with the section 55 guarantee in relation to the implements, but not the tractor itself. The Applicant's inability to use the tractor as he wishes arises from the failure of the implements, not the tractor itself, and the defects in the tractor are attributable to the Applicant's own misuse.
These findings apply the Applicant's claim under both the ACL and MDRA.

FINDINGS

The Applicant has not proven that his East Wind tractor is of unacceptable quality, or unfit for its disclosed purpose, due to the Applicant's failure to maintain it in accordance with the manufacturer's standards.
However, it has been established that the FEL and backhoe are of such poor design and construction that they are defective, non-durable, and generally incapable of sustaining the pressures of normal agricultural usage. Both the FEL and backhoe are not of acceptable quality within the meaning of section 54 of the ACL, and are not fit for the purpose disclosed to the Respondent.
The Respondent's failure to comply with the guarantees in section 54 and 55 in relation to the implements entitles the Applicant to remedies under the ACL (section 259).
In this case, the failure constitutes a major failure within the meaning of section 260, as the implements are substantially unfit for normal use (including the uses disclosed to the Respondent) and cannot be remedied easily or in a timely manner. It is also doubtful that a reasonable consumer acquainted with the inadequate design and construction of the implements would acquire those machines.
As this is a major failure, the Applicant is entitled to choose between receiving a refund or replacement goods of the same type (section 263(4)). The Applicant has elected for a refund of the purchase price.
However, the Applicant's negligent maintenance of the tractor means that the Respondent has only breached the guarantees in relation to the implements. Therefore, the Applicant is only entitled to a refund of the purchase prices of the FEL and backhoe, respectively $6,177.60 and $6,701.76. Thus, the amount to be refunded is $12,879.36.
Due to the size and nature of the goods, the Respondent is responsible for collecting the FEL and backhoe from the Applicant's property at the Respondent's expense, within a reasonable time from the date of this decision (section 263(2)(b)(ii)).
Both parties are to negotiate the date and time for the goods to be collected.
The Applicant also claims consequential damages of $7,463.55 for reasonably foreseeable losses resulting from the Respondent's failure to comply with the guarantees (section 259(4)). These losses have been particularised, and are associated with travel and repair costs which would not have been necessary had the guarantees been complied with.
The Tribunal allows the Applicant $1,581.55 in damages for the following losses which arise from non-compliance with the guarantees in relation to the implements only: 1. $488.00 for repairs and travel in April 2011; 2. $59.50 for hydraulic hose to FEL bucket in February 2012; 3. $217.25 for backhoe slide locking cylinder in September 2012; 4. $26.80 for freight on second backhoe cylinder in September 2012; 5. $200.00 for welding repair to FEL bucket in March 2013; 6. $300.00 to modify backhoe mounting plate in April 2013; 7. $55.00 for backhoe joint bearing in April 2013; 8. $235.00 to reconnect and test backhoe hydraulics in May 2013;
The items listed by the Applicant that have not been allowed relate to the tractor itself or the Applicant's negligence (such as costs relating to repair of gear, clutch and tyre issues), as established above.
Neither party is allowed costs for travel or obtaining expert advice against the other party. Section 60 of the NCAT Act provides that parties are to pay their own costs unless special circumstances exist. The Tribunal is not satisfied that special circumstances exist, having regard to the considerations in section 60(3) including the relative strengths of each party's case and claims, and the fact that the costs claimed by each party are excessive.
The Applicant's claim for $5,050.00 for Dr McLucas to attend the inspection and hearing, and to prepare his expert report, is particularly excessive: expert reports typically cost about $900.00 and both the Applicant and Dr McLucas live approximately one hour's drive of the hearing location (Goulburn).
Despite the more onerous travel requirements faced by the Respondent, claiming $7000.00 to attend the inspection and the final hearing, in addition to $800.00 to attend the June hearing by phone, and another $800.00 for Mr Findlay's report (which is a reasonable amount in itself) is excessive.
There is no evidence of loss of commercial reputation and no basis for making an order for its compensation.
The Respondent's counterclaim for losses is dismissed.
The Applicant has only been partially successful in his claim and the Respondent has been partially successful in resisting the claims made. In these circumstances it is reasonable that both parties bear their own costs.
In summary, the Respondent is to refund the Applicant the sum of $14,460.91, which consists of the purchase price of the FEL and backhoe, and damages for losses arising from the Respondent's failure to comply with the ACL guarantees. A Anforth General Member Civil and Administrative Tribunal of New South Wales 4 December 2014

Endnotes

Alan McLucas, Expert Engineering Assessment (5 June 2014), 1.
Alan McLucas, Audio Recording of Hearing (30 September 2014), 11:59am, 12:02pm.
Russell Findlay, Consultant Engineering Report (17 March 2014), 13. 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

Australian Consumer Law Civil and Administrative Tribunal Act 2013(NSW)

Consumer Claims Act 1998(NSW)

Consumer Claims Regulation 2014(NSW)

Interpretations Act 1987(NSW)

Motor Dealers Act 1974(NSW)

At a glance

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