Gergs v Arslan t/as B&D Car Gallery

NCAT Appeal Panel|2015-01-20

REASONS FOR DECISION

On 12 May 2014 the appellant purchased from the respondent a motor vehicle for an amount of $717.50. The vehicle had travelled 302,074 kilometres.
The appellant claimed he purchased the car on terms that he would receive an inspection report (also referred to as a road worthiness certificate).
The appellant commenced proceedings in the Consumer and Commercial Division by application MV 14/39339. The appellant claimed a refund of the purchase price being $717.50 together with damages. In the notice of appeal, the appellant identified his damages as totalling $358.50 being the costs of a battery ($100.00), cost of vehicle inspection ($59.00), cost of sparking plugs ($35.00) and cost of towing ($164.50).
The proceedings were heard by the Tribunal on 5 September 2014 at which time the appellants claim was dismissed. The Tribunal issued written reasons for its decision

Ground 1 - Failure to comply with section 58 of the Motor Dealers and Repairers Act, 2013 ("the Act") and provide a vehicle inspection report.

The appellant submitted that the vehicle was sold with number plates attached. The appellant relied on two photographs depicting the number plates attached to the motor vehicle in questions.
The appellant submitted that section 58 of the Act required a current inspection report to be provided for the motor vehicle.
The appellant submitted that either the contract was an illegal contract and therefore void by reason of the motor dealer failing to comply with section 68 or, alternatively, it was an implied term of the agreement that any inspection report would be provided.
Accordingly, the appellant said he was entitled to a refund of the price paid together with damages.

Ground 2 - Shifting the burden of proof

The second ground of appeal was that the Tribunal erred in concluding at paragraph 10 of the decision that the appellant had the burden of proving a current inspection report was required.
The appellant submitted that section 58 requires the motor dealer selling a vehicle with numberplates attached to provide a current inspection report and such a report should have been provided at the time of sale.
Accordingly, the appellant submits that the Tribunal failed to properly consider the operation of section 58.

Ground 3 - Advertising the motor vehicle as unregistered.

The appellant submitted that the fact the motor vehicle may have been advertised as unregistered did not remove the respondent's responsibility for providing a current inspection report. Again, the appellant relied on section 58 of the Act and that the sale of a motor vehicle with number plates mandated the motor dealer must provide a current inspection report.

Ground 4 - Failure to comply with section 59 of the Act.

In the alternative, the appellant submitted that if there were no number plates attached to the motor vehicle the respondent was still obliged to provide a certificate or receipt from the Roads and Maritime Services or a declaration setting out the reasons for the absence of any numberplate and the lack of such a certificate receipt. In this regard, the certificate or receipt is for the surrender of the numberplates, not an inspection report.

The hearing

At the hearing of the appeal, the appellant was represented by Mr McAuliffe, Solicitor. The respondent appeared in person.
It was common ground that the registration plates were attached to the vehicle and no inspection report was provided.
The appellant also made clear that he was not making a challenge to the factual findings of the Tribunal where the Tribunal concluded that it was not satisfied that the respondent had said to the appellant that "a road worthy certificate was to be supplied".
The appellant essentially repeated his submissions that the contract was illegal by reason of the failure of the respondent to comply with section 58 of the Act and that if an inspection report had been provided the respondent would not have entered into the contract. In essence, the appellant contended that, if the contract was not void, section 58 implied a term into the contract that an inspection report would be provided because the vehicle had been sold with numberplates attached.
In reply, the respondent submitted that section 58 did not affect the terms of the sale, that the vehicle had been sold as unregistered and the respondent said that the decision of the Tribunal was therefore correct.

Consideration

The determination of this appeal involves a consideration of the terms of the contact between the parties and whether or not that contract is rendered illegal and void by reason of section 58 of the Act and/or Section 59 of the Act.
The Tribunal made the following findings; 1. The appellant purchased the motor vehicle from the respondent on 12 May 2014. 2. The motor vehicle was unregistered and had travelled 302,074 kilometres. 3. The form 8, which was attached to the vehicle disclosed that the registration expired on 30 December 2013. 4. The motor vehicle had been advertised for sale as unregistered and there was therefore no requirement for a "road worthy certificate". 5. The Tribunal did not accept the appellant's evidence that a road worthy certificate was to be supplied as part of the sale of the motor vehicle.

Ground 1 - Failure to comply with section 58 of the Motor Dealers and Repairers Act, 2013 and provide a vehicle inspection report.

Section 58 of the Act provides as follows: 1. A motor dealer must not sell a motor vehicle to which a number-plate is attached unless the motor dealer gives to the purchaser at or before the sale a current inspection report for the motor vehicle. 2. Maximum penalty: 20 penalty unites. 3. This section does not apply to a sale by auction.
The question is whether or not this statutory provision renders the contract in question unlawful and therefore void.
The issues of whether or not a contact is rendered illegal by statue was considered by the High Court in Yango Pastoral Company Pty Ltd and Ors v First Chicago Australia Ltd [1978] 139 CLR 410. At page 413, Gibbs ACJ said: "There are four main ways in which the enforceability of a contact may be affected by a statutory provision which renders particular conduct unlawful: (1) The contract may be to do something which the statute forbids; (2) The contact may be one which the statute expressly or impliedly prohibits; (3) The contact, although lawful on its face, may be made in order to effect a purpose which the statue renders unlawful; or (4) The contact, although lawful according to its own terms, may be performed in a manner which the statue prohibits." The question is one of statutory construction. As said by Mason J in Yango,: "The question is whether the statute intends merely to penalise the person who contravenes the prohibition or whether it intends to go further and prohibit contracts… In deciding this question the court will take in to account the scope and purpose of the statute and the consequences of the suggested implication with a view to ascertaining whether it would conduce to, or frustrate, the object of the statute.": See Yango at page 426.
In Tonkin v Cooma-Monaro Shire Council [2006] NSWCA 50, Ipp JA said at paragraph 66: "66. There is no universal rule that can be applied to the construction of statutes in order to determine whether the effect of a failure to comply with a provision of a particular statute is to render a category of contracts (or an individual contact) to which that provision applied in valid or unenforceable. Each statue has to be considered as a whole and as a separate entity". His Honour then said at paragraph 71 and following: "71 The theory underlying the requirement that each case must be considered individually in accordance with its merits was stated by McHugh J in Nelson v Nelson at 612 to 613 as follows: If Courts withhold relief because of an illegal transaction, they necessarily impose a sanction on one of the parties to that transaction, a sanction that will deprive one party of his or her property rights and effectively vest them in another person who will almost always be a willing participant in the illegality. Leaving aside cases where the statute makes rights arising out of the transaction unenforceable in all circumstances, such a sanction can only be justified if two conditions are met. First, the sanction imposed should be proportionate to the seriousness of the illegality involved. It is not in accord with contemporaneous notions of justice that the penalty for breaching a law or frustrating its policy should be disproportionate to the seriousness of the breach. The seriousness of the illegality must be judged by reference to the statute whose terms or policy is contravened. It cannot be assessed in a vacuum. The statute must always be the reference point for determining the seriousness of the illegality; otherwise the Courts would embark on an assessment of moral turpitude independently of and potentially in conflict with the assessment made by the legislature. Secondly, the imposition of the civil sanction must further the purpose of the statute and must not impose a further sanction for the unlawful conduct if Parliament has indicated that the sanctions imposed by the statute are sufficient to deal with conduct that breaches or evades the operation of the statute and its policies. In most cases, the statute will provide some guidance, express or inferred, as to the policy of the legislature in respect of a transaction that contravenes the statute or its purpose. It is this policy that must guide the Courts in determining, consistent with their duty not to condone or encourage breaches of the statute, what the consequences of the illegality will be. Thus, the statute may disclose an intention, explicitly or implicitly, that a transaction contrary to its terms or its policy should be unenforceable. On the other hand, the statute may inferentially disclose an intention that the only sanctions for breach of the statute or its policy are to be those specifically provided for in the legislation. 72 See also Fitzgerald v F J Leonhardt Pty Ltd [1997] HCA 17; (1997) 189 CLR 215 where McHugh and Gummow JJ said at 227: "Regard is to be had primarily to the scope and purpose of the statute to consider whether the legislative purpose will be fulfilled without regarding the contract as void and unenforceable." 73 It follows that close attention must be given to the scope and purpose of the relevant statute in order to determine whether it discloses and intention that a transaction contrary to its terms or its policy should be unenforceable or whether the statue discloses an intention that the only sanctions for breach are to be those specifically provided for in the legislation."
Section 58 regulates the conduct of the motor dealer. It does not expressly prohibit contracts entered into in contravention of section 58. Rather, the only express sanction is the imposition of a penalty to a maximum of 20 penalty units or $2,200.00.
Section 3 of the Act provides as its objects the following: "(a) To provide consumer protection and remedies for consumers who purchase motor vehicles from motor dealers or obtain motor vehicle repair services, (b) To establish appropriate standards of conduct and transparency for motor dealers, motor vehicle repairers and motor vehicle recyclers, (c) To provide enforcement mechanisms to prevent misleading or dishonest conduct or illegal dealings with motor vehicles and parts, (d) To provide protection for motor dealers against unfair contract dealings by motor vehicle manufacturers."
While the consumer protection objects of the Act may suggest that it was intended a contract entered into in contravention of section 58 is rendered illegal and unenforceable, there are indications in the Act that such an interpretation is not the proper construction. The clearest indicator is found upon consideration of section 117 of the Act which provides as follows: "(1) A court may, on application by the Secretary, if it is satisfied that a ground for making the order has been made out, make an order that: (a) the sale of a motor vehicle by a motor dealer is rescinded and that the motor vehicle must be returned to the motor dealer, and (b) any amount paid or the value of other consideration given by the purchaser for the motor vehicle must be returned to the purchaser, subject to any financial adjustment between the motor dealer and the purchaser that the court thinks fit to make. (2) The court may also make any other ancillary or consequential orders it thinks fit, including an order as to payment of the costs of the application."
Relevantly, the grounds for making a rescission order are set out in Section 117(3) and include that: "(a) an inspection report, receipt or declaration required to be attached to the motor vehicle under Division 2 of Part 4 was not attached at all material times when the motor vehicle was offered or displayed for sale by the motor dealer, (b) a dealer's notice, or a copy of a dealer's notice, was not given to the purchaser in accordance with the applicable requirements of Division 3 of Part 4, (c) the particulars included in a dealer's notice relating to the motor vehicle were, in the opinion of the court, false or misleading in a material particular"
The power to make such an order resides in the Local Court, District Court or Supreme Court of NSW depending on the value of the claim: see section 116 of the Act.
As indicated in Section 117(3) one ground is the failure to attach an inspection report, required by Section 58, which is in Division 2 Part 4 of the Act.
In the opinion of the Appeal Panel, such an order could not be made if, as contended by the appellant, the contract was illegal and void by reason of a contravention of Section 58. This is because the making of a rescission order necessarily contemplates there was a valid sale of the motor vehicle in question.
Further, to conclude such contracts were illegal in all circumstances would lead to the result that a purchaser, who might otherwise wish to retain the vehicle and claim damages in respect of any breach would be unable to do so. This is because a contract rendered illegal is void and unenforceable by either party.
Finally inspection reports are issued by examiners authorised under clause 58 of the Road Transport (Vehicle Registration) Regulation 2007. The obligation of an examiner is to: "conduct inspections and tests of registrable vehicles at authorised inspection stations for the purpose of determining whether or not (emphases added) the vehicles are: 1. (i) Suitable for safe use, 2. Comply with requirements of the Act and this Regulation, … and: 1. (b) To issue inspection reports relating to those inspections.
As such, while the absence of an inspection report may deprive a prospective purchaser of a report on the current condition of a motor vehicle, the provision of a report would not have meant that in any contact for sale the motor dealer was thereby promising the vehicle was roadworthy, safe or free from defects.
These matters lead to the conclusion that upon the proper construction of section 58 of the Act a contract for the sale of a motor vehicle with number plates attached is not rendered illegal by reason of the failure to provide an inspection report.
Accordingly, this challenge fails.
An issue that also arose in connection with this ground was whether or not there is an implied term in the contract that an inspection report was to be provided or, in the absence of such a report being provided the purchaser was entitled to rescind the contract and receive a refund of monies paid.
No suggestion was made that there was any implied term by reason of trade usage or circumstances peculiar to the buying and selling or motor vehicles.
Other relevant circumstances where the implication of a term might occur in the sale of a motor vehicle are: 1. It is necessary so as to ensure one party receives the benefit of the bargain: see Secured Income Real Estate (Aust) Ltd v St Martins Investments Ltd (1979) 144 CLR 596 at 607 and following ; or 2. It is necessary to give business efficacy. In this regard the requirements of BP Refinery (Western port) Ltd v Shire of Hastings (1997) 180 CLR 266 (at 283) apply.
In relation to the former, the present contract was for the sale of an unregistered vehicle, the registration which had expired nearly six months earlier. The fact was disclosed to the appellant (purchaser) on the form 8. It was not an express term of the agreement that the vehicle would be registrable or that the motor dealer would secure its registration, or that the appellant (as purchaser) would receive a registered vehicle. Therefore the provision of an inspection report could not be said to be an essential obligation in order to provide to the appellant the benefit of the contract: cf Secured Income at p607 and following.
As to implication of a term on the basis of the decision in BP Refinery, the following criteria in respect of the implied term must be met: see BP Refinery at p383: 1. It must be reasonable and equitable; 2. It must be necessary to give business efficacy to the transaction; 3. It must be so obvious it goes without saying; 4. It must be capable of clear expression; 5. It must not contradict an express term of the contract
In the opinion of the Appeal Panel, a term of the contract that the respondent provide to the appellant an inspection report could not be said to be a term which was necessary to give business efficacy to the transaction. It is not a term that was so obvious it goes without saying. The sale of an unregistered vehicle did not require any such report to be provided and it was on these terms, as found by the Tribunal on page 2 of the decision, that the appellant contracted. There was no challenge to the Tribunal's finding that the vehicle was in fact unregistered or that it was sold on that basis. Therefore the term could not be said to be reasonable and equitable having regard to what was being sold.
This ground of appeal fails.

Ground 2 - Shifting the burden of proof.

The Tribunal concluded that it was not satisfied the appellant had proved it was a term of the contract for the respondent car dealer to provide an inspection report.
The appellant asserted section 58 required such a report and the decision of the Tribunal shifted the burden of proof.
The submission is incorrect for several reasons: 1. The claim relates to a contact for sale of a used motor vehicle. The applicant was required to prove the terms of the contract 2. The appellant asserted a contract in which there was a term of the contract that the respondent car dealer was to provide an inspection report. In so far as it was asserted by the appellant there was an oral term to the contract to this effect, the Tribunal rejected this assertion, a finding not challenged on appeal. 3. In so far as the term was said to arise because of the provisions in section 58 of the Act, section 58 does not expressly make the obligation to provide an inspection report a term of the contract for sale. Rather, section 58 prohibits the sale of a motor vehicle with number plates attached unless a current inspection report is provided at or before the sale. 4. Further, for the reasons set out above, a term requiring the provision of an inspection report should not be implied.
Accordingly, the decision of the Tribunal is not shown to be in error and this ground of appeal fails.

Ground 3 - Advertising the motor vehicle as unregistered.

As to the third ground of appeal, the vehicle was advertised as unregistered and was displaying number plates. While this may constitute a contravention of section 58 of the Act because there was no inspection report, as stated above section 58 does not otherwise give rise to a contractual obligation to provide an inspection report.
On the other hand, the fact the vehicle was advertised as unregistered is relevant to determining the terms of the offer made by the motor dealer in respect of the proposed sale and the condition of the motor vehicle at that time.
Accordingly this ground of appeal fails.

Ground 4 - Failure to comply with section 59 of the Act.

As to ground 4, the appellant suggests if the vehicle is unregistered, there was required a certificate, notice or other declaration as prescribed under section 59 of the Act. Section 59 provides: "59 Sale of motor vehicles without number-plates attached A motor dealer must not sell a motor vehicle without a number-plate attached unless one of the following is displayed with the vehicle: (a) a certificate or receipt for the surrender of the number-plates for the motor vehicle issued by Roads and Maritime Service or by a person authorised by a law of another State or Territory to issue the certificate or receipt, (b) a declaration by the motor dealer in the form (if any) prescribed by the regulations that sets out the reason for the absence of any number-plate and the lack of such a certificate or receipt. Maximum penalty: 20 penalty units.
None of these certificates, receipts or declarations are an inspection report and section 59 does not otherwise require an inspection report.
Further, for the reasons set out in paragraphs 24-33 above, the proper construction of the Act does not lead to the conclusion that a contract is void where entered into by a motor dealer who has contravened Section 59.
Finally, a certificate or declaration about surrender of the motor vehicle number plate would not have provided any information the about the condition of the car which was in fact sold as unregistered.
As such, there is no basis to suggest there was any relevant term in the contract which has been breached or that any breach arising from the failure to provide a document specified in section 59 would entitle the appellant to the remedy sought.
This ground also fails.

Conclusion and orders

The appellant has been unsuccessful on all grounds. The respondent represented himself. Costs would only be ordered in favour of the respondent in special circumstances: see Section 60 of the Civil and Administrative Tribunal Act, 2013. It seems unlikely that such an application would be made by the respondent. However the parties need to consider these reasons and decide if any application for costs should be made. The Appeal Panel makes the following orders: 1. Appeal dismissed 2. Each party is to pay their own costs of the appeal unless an application for costs is made in writing to the Tribunal within 7 days from the date of these orders. 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: 20 May 2015

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Judgment (13 paragraphs)

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Cases Cited (11)