LSH Auto (Sydney) Pty Ltd v Sherman

N/A Date of Decision: 12 February 2020 Before: P Smith File Number(s): MV 19/49966

Summary

1. In February 2019, the respondent, Mr Sherman, bought a new luxury vehicle (a Mercedes AMG E53 Cabriolet), from the appellant, who operates a motor vehicle dealership. The cost was approximately $200,000.00.
2. Mr Sherman encountered ongoing difficulties with the operation of the vehicle, including problems with the operation of the parking (proximity) sensors and the speed limit indicator. The vehicle also braked or slowed on occasion without apparent reason. There were faults in the cosmetic appearance of the vehicle, including a paint chip on the bonnet and a dent in the body work, together with other faults which have been resolved or taken on no significance in this appeal.
3. After several attempts to have the faults resolved with the appellant, Mr Sherman commenced proceedings in the Tribunal and, in September 2019, consent orders were made after a conciliation conference wherein the appellant consented to orders that it collect, inspect and repair the vehicle in respect of the identified faults ("the First Decision"). The orders provided for the parties to have leave to renew the proceedings if required.
4. The appellant collected the vehicle from the respondent on about 10 October 2019 to inspect and perform work on the vehicle. It subsequently returned the vehicle to the respondent. The respondent continued to experience problems with the vehicle's advisory speed warnings and parking sensors.
5. In November 2019, the respondent renewed the proceedings in the Consumer and Commercial Division.
6. In the renewed proceedings, the Tribunal made directions for the respondent to produce the vehicle to the appellant so that it could undertake any further testing and the preparation of any reports which it may require.
7. The matter proceeded to hearing on 12 February 2020.
8. At the hearing, the appellant relied only upon diagnostic program (XENTRY) reports and the vehicle's owner's manual.
9. The respondent relied on his own evidence and a report by a Mr Senz, an expert who had prepared a report in respect of the remaining faults with the vehicle.
10. Mr Senz was not required for cross-examination by the appellant.
11. The fact that several of the identified faults remained in the vehicle does not appear to have been disputed.
12. The Tribunal ordered that the respondent return the vehicle, and have it replaced with another vehicle of the same type. ("the Decision")
13. Whilst it is not explicit in the Tribunal's reasons, it is apparent that the Tribunal decided that Mr Sherman was entitled to reject the vehicle on the basis that it was not of acceptable quality in a way which constituted a major failure under the Australian Consumer Law (NSW) (ACL).
14. Relevantly, the Tribunal gave the following reasons for its decision: It is agreed fact that on 28 February, 2019 the applicant purchased from the respondent motor vehicle Mercedes Benz E Class E53 AMG 4 Matic Cabriolet Registered No [Registration redacted] at a price of $203,987.89. On 9 September, 2019 the applicant filed application 19/40744 to the Tribunal in respect is (scil of) issues with the vehicle. On 24 September, 2019 the Tribunal made the following orders by consent: 1. The applicant will make available for collection on 48 hours' notice in writing, his vehicle being a Mercedes [Registration redacted] for the respondent to investigate and inspect the vehicle. 2. The applicant will notify the respondent in writing or by text / SMS or email when and where it can be collected. 3. The respondent will provide the applicant with an equivalent vehicle for the applicant's personal use, pending the return of his vehicle. 4. The respondent will have a period 21 days to inspect the vehicle from the date of collection and in particular for the following named concerns: a. Random speed display b. Sensors not responding and randomly responding c. Underdash heating not working d. Concern with using auto functions for parking and cruise control. 5. The respondent will carry out such repairs as might be necessary and at its' own expense during the period of 21 days, or such longer period as may be reasonably agreed between them. 6. Either party may seek to renew these proceedings on or before 10 November, 2019, in the event these orders are not complied with the applicant remains of the view that the vehicle requires further repairs. The vehicle was returned to the applicant and taken for test drive in with the representative. The applicant submits that the issues were still present in this test drive and have not been resolved. The applicant notified the respondent by several e-mails but he states the problems continued with the vehicle including a Roadside Assistance Call-out. On 6 November, 2019 the applicant filed application to renew the proceedings and seeks an orders for replacement vehicle. In support of the application the applicant has filed an experts report prepared by Mr Senz of Geoff Senz and Associates dated 10 January, 2020. The respondent did not request the attendance of Mr Senz to be available for cross examination The report is in accordance with the requirements of Tribunal Practice Directions and sets out the qualifications and experience of the author. The findings of the relevant issues of Mr [Senz] are: - The advisory speed limit system does not operate in an acceptable manner - Proximity sensors are false[ly] tripped thereby hindering confidence in their usage. The evidence provided by respondent is the results of testing conducted at the workshop. This is "XENTRY Final Quick Test Log.' The test log is schedules of data without any reference of who conducted the tests or any explanation of the data disclosed. The respondent further provides documents from the Owner's Manual which sets out that the System has limitations and may not function in certain circumstances. The Tribunal acknowledges the limitations but notes the time of the malfunctions referred to by the applicant are often not within the limitations. There are no statements or evidence from an independent expert on behalf of the respondent or any statements by suitably qualified representatives of the respondent. The applicant's expectations are that vehicles of this qualify and price should not have these issues of unacceptable quality. He has raised the issues constantly since purchase and agreed at the Tribunal to allow the respondent the opportunity to inspect and rectify the matters. The applicant has advised the applicant in writing on two occasions that he considers the issues render the vehicle "Not of acceptable quality" and requested a replacement vehicle in accordance with Australian Consumer Law. Although not issues of roadworthiness they are issues of safety and the applicant should be entitled to confidence that they function in accordance in an acceptable manner. The Tribunal accepts the unchallenged independent expert evidence of the respondent and makes the orders sought.
15. There are two important aspects of the procedural history of this matter, which arise from the reasons: 1. First, the orders made in consequence of the First Decision for inspection and repair of the vehicle were made by consent. It is reasonable to infer from this at least a tacit acceptance by the appellant that the vehicle was not of acceptable quality in respect of those identified faults. 2. Second, on a renewal application after those orders were not complied with, the Tribunal was not required to adjudicate on issues such as the liability of the appellant to the respondent, for reasons we will deal with below.
16. The appellant acknowledges that the reasons indicate that: 1. the Tribunal accepted the unchallenged evidence of Mr Sherman's expert, Mr Senz, that: 1. the vehicle's advisory speed limit system did not operate in an acceptable manner; and 2. the vehicle's proximity sensors 'false tripped', hindering confidence in their usage; 1. the Tribunal did not consider that either of these faults affected the vehicle's roadworthiness; 2. the Tribunal nonetheless considered that the faults were 'issues of safety', that is, the Tribunal considered that the vehicle was not of acceptable quality within the meaning of s 54 of the ACL on the basis of safety; and 3. The Tribunal consequentially found that Mr Sherman was entitled to reject the vehicle pursuant to s 259(2) of the ACL.
17. The appellant says that the orders were made in error, and were inconsistent with the evidence and the factual findings the Tribunal made.
18. It also challenges an interlocutory decision of the Tribunal, made during the hearing but not reflected in the written reasons, to reject an application by the appellant to join the company which imports and distributes Mercedes Benz vehicles into Australia ("the Distributor").
19. The Appeal Panel ordered that the appeal be dealt with on the papers, and a hearing dispensed with.
20. For the reasons set out below, having reviewed the grounds of appeal, the evidence and the submissions of the parties, we have decided to deal with the appeal by way of new hearing and to make directions for that to occur.

Scope and nature of internal appeals

1. To succeed in an appeal, the appellant must demonstrate either an allegation of an error on a question of law, which, except in an appeal from an interlocutory decision, may be argued as of right; or that permission (that is, "leave") to appeal should be granted to bring the appeal: Civil and Administrative Tribunal Act 2013 (NSW) (NCAT Act), s 80(2).
2. The principles governing an application for leave to appeal under the NCAT Act are well-established and are repeated in many decisions of the Appeal Panel, often quoting Collins v Urban [2014] NSWCATAP 17. They are the same principles applied by the courts. It is enough as a summary to refer to the Secretary, Department of Family and Community Services v Smith [2017] NSWCA 206, where the Court said at [28] (citations omitted): Only if the decision is attended with sufficient doubt to warrant its reconsideration on appeal will leave be granted. Ordinarily, it is only appropriate to grant leave where there is an issue of principle, a question of general public importance, or an injustice which is reasonably clear, in the sense of going beyond what is merely arguable. It is well established that it is not sufficient merely to show that the trial judge was arguably wrong.
3. Where the appeal is from a decision made in the Consumer and Commercial Division (other than in respect of interlocutory decisions), there is a further qualification to the possible grant of leave in that we may only go on to consider grant of leave in the broader sense if we are first satisfied that the elements of cl 12(1) of Sch 4 of the NCAT Act are made out, in that the appellant may have suffered a substantial miscarriage of justice on the basis that: 1. the decision of the Tribunal under appeal was not fair and equitable; or 2. the decision of the Tribunal under appeal was against the weight of evidence; or 3. significant new evidence has arisen (being evidence that was not reasonably available at the time the proceedings under appeal were being dealt with).
4. We agree with the Appeal Panel in Collins v Urban where it said, at [76], that a substantial miscarriage of justice for the purposes of cl 12(1) of Sch 4 of the NCAT Act may have been suffered where: ... [T]here was a "significant possibility" or a "chance which was fairly open" that a different and more favourable result would have been achieved for the appellant had the relevant circumstance in para (a) or (b) not occurred or if the fresh evidence under para (c) had been before the Tribunal at first instance."

Ground 1 - The Joinder Ground

1. The appellant argues that the Tribunal erred in not allowing it to join the Distributor in the renewal proceedings. The appellant had made an interlocutory application for this to occur in writing prior to the hearing and the Tribunal rejected the application in the course of the hearing. As this was an interlocutory decision, the appellant requires leave to appeal on this ground.

Ground 2 - The Safety Ground

1. The appellant argues that it was not open to the Tribunal to find that the advisory speed limit system and proximity sensor faults rendered the vehicle unsafe, in circumstances where the Tribunal also found that the issues were not issues of roadworthiness.

Ground 3 - The Rejection Ground

1. This ground is related to Ground 1, and is argued on the basis that the reasons indicate that the sole basis in s 260 of the ACL for the rejection of the vehicle in the circumstances must have been as contained in subparagraph (e) of that section, in that "the goods are not of acceptable quality because they are unsafe" but that such a finding is inconsistent with the Tribunal's other findings that the vehicle is roadworthy.

Ground 4 - The Subsequent Damage Ground

1. In the alternative to the Rejection Ground, the appellant says that the appellant was precluded from rejecting the vehicle as it had been damaged after being delivered to him, for reasons not related to the state or condition of the vehicle at the time of supply: ACL, s 262(c).

Relevant legislation and legal concepts

1. Schedule 2 to the Competition and Consumer Act (CTH) 2010 contains the Australian Consumer Law, which provides guarantees to consumers in respect of goods acquired by them if certain conditions are met.
2. Section 28 of the Fair Trading Act 1987 (NSW) incorporates those guarantees into the law of New South Wales as the Australian Consumer Law (NSW).
3. There is no contest that the relevant conditions for application of the ACL were met, in that the respondent was a consumer who acquired the vehicle for personal, domestic or household use, the appellant was a supplier, the claim was for the supply of goods in NSW and was brought within time.
4. In those circumstances, there is a guarantee that the goods supplied are of acceptable quality (ACL, s 54). Where that guarantee is not complied with, the consumer has the right under s 259 of the ACL, in the case of a major failure, to reject the goods provided that such right to claim a refund is exercised within the "rejection period" and the exceptions to the consumers' right to reject the goods do not apply: ACL, s 262. Section 263(4) of the ACL provides that the supplier must, in accordance with an election made by the consumer, either refund the purchase price and the value of any other consideration provided by the consumer or replace the rejected goods with goods of the same type and of similar value if such goods are reasonably available to the supplier.
5. Again, there is no contest that the vehicle was rejected by the respondent on notice to the appellant during the rejection period or that the respondent sought replacement of the vehicle.
6. Section 54 of the ACL provides, relevantly: 54 Guarantee as to acceptable quality (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. …

The Joinder Ground

1. In determining the renewal application, the Tribunal was required to exercise a discretion under cls 8(4)(a) or (b) of Sch 4 of the NCAT Act to either: 1. make any other appropriate order under this Act or enabling legislation as it could have made when the matter was originally determined - par (a); or 2. refuse to make such an order - par (b).
2. In Blessed Sydney Constructions Pty Ltd v Vasudevan [2018] NSWCATAP 98, at [31], the Appeal Panel explained that: In the light of the terms in which cl 8(4)(a) is expressed, the Tribunal can make an order within par (a) if the following criteria are satisfied: (1) the order is "other" than the order originally made; (2) the order is "appropriate"; (3) the order is one that the Tribunal "may make … under [the NCAT] Act or enabling legislation"; and (4) the order is one "as [the Tribunal] could have made when the matter was originally determined".
3. In Akratos v Papadopoulos [2016] NSWCATAP 139, a differently constituted Appeal Panel explained, at [36], that: … the purpose of the renewal proceedings was to consider, in light of the fact that the original order was not complied with, what other appropriate orders it could have made when the matter was originally determined and not to reconsider the substantive merits of the … claim.
4. If the appellant sought the involvement of the Distributor in the proceedings, that should have occurred prior to the First Decision. Axiomatically, joining the Distributor was not an order the Tribunal could have made when the matter was originally determined by making the First Decision, as joining the Distributor would not have 'determined' the proceedings.
5. On that basis, it was not open to the appellant to seek to join the Distributor in the renewal proceedings. The Tribunal so found and made no error.

The Safety Ground

1. The primary thrust of the appellant's argument on this ground is that the Tribunal found that the vehicle was unsafe, as required by s 260(e) of the ACL, to ground its decision that there had been a major failure, but that this decision was perverse, where the Tribunal also found that the vehicle was 'roadworthy.'
2. The appellant focusses on the Tribunal's finding in the reasons for the Decision that: Although not issues of roadworthiness they are issues of safety and the applicant should be entitled to confidence that they function in accordance in an acceptable manner.
3. The appellant submits that it was not open to the Tribunal to find that the advisory speed limit system and proximity sensor faults rendered the vehicle unsafe, in circumstances where the Tribunal also found that they were not issues of roadworthiness as: 1. Section 54 of the ACL requires an assessment of whether the vehicle was safe for its intended use (as a vehicle on public roads): citing Vautin v BY Winddown Inc (2018) 362 ALR 702, 723; 2. The vehicle was safe for that use in light of the Tribunal's finding that the issues did not affect the vehicle's roadworthiness; 3. 'Roadworthiness' means 'fit for use on the roads' (citing the Macquarie Dictionary) and the term may effectively be treated as synonymous with 'safe': citing Mishra v Prestige Auto Centre Pty Ltd & Khan Motorcar Co Pty Ltd [2015] NSWCATCD 106, [35], [71]-[72]; Pittman v Central West Autos Pty Ltd [2018] NSWCATCD 10, [65]-[67]; Matumaini v Automobile Industries Pty Ltd [2017] NSWCATAP 93 at [58]; Meth v Moore (1982) 44 ALR 409, 421; Terry Turner v Australian Associated Motor Insurers Ltd and The Roads and Traffic Authority of NSW [2006] NSWSC 1292, [21]; 4. Notwithstanding the Tribunal's assertion that the respondent was entitled to confidence that the speed limit system and proximity sensor should have operated in an acceptable manner, the Tribunal did not make any findings as to what material risks would have arisen due to the issues with those systems; and 5. Despite reliance by the respondent on the Tribunal's acceptance of Mr Senz' unchallenged evidence that the unreliable speed limit indicator was "unsafe and could cause an accident" and the Tribunal's summary of the relevant aspects of the opinion of Mr Senz that "The advisory speed limit system does not operate in an acceptable manner"; and "Proximity sensors are false tripped thereby hindering confidence in their usage", those findings did not include a finding that the issues rendered the vehicle unsafe.

The Rejection Ground

1. For the reasons set out in respect of the Safety Ground, the appellant is correct to assert that the Tribunal erred in its decision in respect of ordering the replacement of the vehicle on the basis that it was unsafe.

The Subsequent Damage Ground

1. The appellant also argues that the Tribunal erred in making an order to give effect to the respondent's rejection of the vehicle because s 262 of the ACL was engaged, in that the vehicle had been damaged by the respondent after delivery for reasons not related to its state or condition at the time of supply.
2. The factual position in this regard is not in dispute. Whilst parking the vehicle, the respondent damaged the front bumper on a concrete car park wheel-stop.
3. His evidence was that he parked the vehicle cautiously, without incident and without any warning from the proximity sensors. On later reversing the vehicle, the front spoiler dragged on the wheel-stop, causing damage. The respondent claimed that the vehicles proximity sensors should have warned him of this risk, particularly as the vehicle apparently 'settles' into a lower position when sports mode is engaged. It is apparent from the transcript of the proceedings below that the respondent had the damage remedied through an insurance claim.
4. This argument was not raised in the proceedings below as disentitling the respondent from rejecting the vehicle, and, on that basis, we refuse to allow it to be raised on appeal for the first time: University of Wollongong v Metwally (No 2) (1985) 59 ALJR 481; 60 ALR 68, [1985] HCA 28), at [7]. This is particularly important where the respondent may have led more evidence as to the nature of the damage and thoroughness of the repair had he been challenged on this issue: Suttor v Gundowda Pty Ltd [1950] HCA 35; (1950) 81 CLR 418, at 438. The respondent may also have made submissions on the proper construction of s 262 of the ACL.
5. Further, as the appellant's submission could now be said to rise to the point that any damage to the vehicle occasioned by the respondent, even if competently repaired, prevented its rejection, that submission was first raised by the appellant in the appeal and the respondent had no proper opportunity to address it below.

Resolution of the Appeal

1. Having decided that the Tribunal erred in making its decision on a question of law, we need to consider how to dispose of the appeal.
2. We were assisted, in that regard, by extensive submissions by the parties on other grounds upon which the Tribunal could have based its order, other than the Safety Ground.
3. There are two other avenues of reasoning which could have led the Tribunal to the same orders it ultimately made, for the return and replacement of the vehicle.

The First Alternate Avenue

1. The first avenue is provided by s 259(2)(b)(ii) of the ACL, which provides an action for a remedy to consumers even where a breach of the guarantee can be remedied or is not a major failure, in circumstances where: 1. the consumer requests the supplier to remedy the failure within a reasonable time; and 2. the supplier fails to remedy the failure or fail to do so in a reasonable time.
2. If those criteria are made out, the consumer may reject the goods by notice to the supplier, subject to the provisions of s 262 of the ACL.
3. Prima facie, the appellant had proper and timely notice of the faults in the vehicle, and was requested by the respondent to remedy them. It failed to do so in the period between the respondent first raising the faults with the appellant and the end of the period provided for in the Tribunal's orders giving effect to the First Decision. There does not appear to be any dispute that the respondent gave notice that the vehicle was rejected and the grounds for the rejection.

The Second Alternate Avenue

1. The second alternate avenue which may have been available is provided for in s 260(a) of the ACL, if the vehicle would not have been acquired by a reasonable consumer fully acquainted with the nature and extent of the failure, as this would also constitute a major failure.
2. Of course, both of these avenues would be precluded if the appellant is correct in respect of its argument as to the application of s 262 of the ACL; however, other remedies would be available to the respondent.
3. As a consequence of the merit of the Safety Ground and the Rejection Ground, albeit not on the bases submitted by the appellant, we are satisfied that we should deal with the appeal by way of a new hearing.
4. Of course, that is a new hearing of the renewal application only. In conducting that hearing, we will need to consider the issues which were relevant to the Tribunal when it made the Decision, as outlined above.
5. In respect of any further evidence, there was no apparent challenge in the proceedings below that the damage to the front spoiler of the vehicle was repaired. In submissions, the respondent says it was repaired by an authorised Mercedes Benz vehicle repairer. Notwithstanding that, as the respondent was not challenged on this below, we will allow fresh evidence to be given and tested on this issue and the issue of whether the damage was caused by reasons not related to its state or condition at the time of supply, about which the respondent made a bare assertion below, and the Tribunal made no finding.
6. We note that the appellant submits that, having regard to the wording of s 262 of the ACL, the respondent is prima facie prevented from rejecting the goods where they have been subsequently damaged by him. The appellant makes no allowance for the subsequent repair of the spoiler as a relevant factor.
7. Neither party provided us with any prior authority on this issue.
8. We will need to construe the relevant aspects of s 262 of the ACL, that: A consumer is not entitled, under section 259, to notify a supplier of goods that the consumer rejects the goods if… the goods were damaged after being delivered to the consumer for reasons not related to their state or condition at the time of supply.
9. It does appear that the text of the section supports the appellant's contention; however, that is not necessarily determinative. The contemporary approach to statutory interpretation requires the provision to be construed purposively.

Orders 1. The appeal is to be dealt with by way of a new hearing. 2. The respondent has leave to lodge in the Appeal Registry and give to the appellant his submissions and any new evidence he relies upon having regard to our reasons for decision, in the form of statutory declaration, by 11 December 2020. 3. The appellant has leave to lodge in the Appeal Registry and give to the respondent its submissions and any new evidence it relies upon, having regard to our reasons for decision, in the form of statutory declaration, by 13 January 2021. 4. The new hearing is listed on 5 February 2021, at 2.15 pm, for a half-day, by telephone. 5. Each party is to advise the other whether any witnesses are required for cross-examination, at least seven days prior to the hearing. 6. Each party has liberty to apply in respect of a variation to these directions, within seven days.

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

Amendments 24 November 2020 - Paragraph [38] quote corrected. 24 November 2020 - Paragraph [34] corrected. "s 260" replaced with "s 259". 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: 24 November 2020